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G.R. No.

L-40411

August 7, 1935

DAVAO SAW MILL CO., INC., plaintiff-appellant,


vs.
APRONIANO G. CASTILLO and DAVAO LIGHT & POWER CO., INC., defendants-appellees.
Arsenio Suazo and Jose L. Palma Gil and Pablo Lorenzo and Delfin Joven for appellant.
J.W. Ferrier for appellees.
MALCOLM, J.:
The issue in this case, as announced in the opening sentence of the decision in the trial court and as set forth by counsel
for the parties on appeal, involves the determination of the nature of the properties described in the complaint. The trial
judge found that those properties were personal in nature, and as a consequence absolved the defendants from the
complaint, with costs against the plaintiff.
The Davao Saw Mill Co., Inc., is the holder of a lumber concession from the Government of the Philippine Islands. It has
operated a sawmill in the sitio of Maa, barrio of Tigatu, municipality of Davao, Province of Davao. However, the land
upon which the business was conducted belonged to another person. On the land the sawmill company erected a building
which housed the machinery used by it. Some of the implements thus used were clearly personal property, the conflict
concerning machines which were placed and mounted on foundations of cement. In the contract of lease between the
sawmill company and the owner of the land there appeared the following provision:
That on the expiration of the period agreed upon, all the improvements and buildings introduced and erected by the party
of the second part shall pass to the exclusive ownership of the party of the first part without any obligation on its part to
pay any amount for said improvements and buildings; also, in the event the party of the second part should leave or
abandon the land leased before the time herein stipulated, the improvements and buildings shall likewise pass to the
ownership of the party of the first part as though the time agreed upon had expired: Provided, however, That the
machineries and accessories are not included in the improvements which will pass to the party of the first part on the
expiration or abandonment of the land leased.
In another action, wherein the Davao Light & Power Co., Inc., was the plaintiff and the Davao, Saw, Mill Co., Inc., was
the defendant, a judgment was rendered in favor of the plaintiff in that action against the defendant in that action; a writ of
execution issued thereon, and the properties now in question were levied upon as personalty by the sheriff. No third party
claim was filed for such properties at the time of the sales thereof as is borne out by the record made by the plaintiff
herein. Indeed the bidder, which was the plaintiff in that action, and the defendant herein having consummated the sale,
proceeded to take possession of the machinery and other properties described in the corresponding certificates of sale
executed in its favor by the sheriff of Davao.
As connecting up with the facts, it should further be explained that the Davao Saw Mill Co., Inc., has on a number of
occasions treated the machinery as personal property by executing chattel mortgages in favor of third persons. One of
such persons is the appellee by assignment from the original mortgages.
Article 334, paragraphs 1 and 5, of the Civil Code, is in point. According to the Code, real property consists of
1. Land, buildings, roads and constructions of all kinds adhering to the soil;
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5. Machinery, liquid containers, instruments or implements intended by the owner of any building or land for use in
connection with any industry or trade being carried on therein and which are expressly adapted to meet the requirements
of such trade of industry.
Appellant emphasizes the first paragraph, and appellees the last mentioned paragraph. We entertain no doubt that the trial
judge and appellees are right in their appreciation of the legal doctrines flowing from the facts.

In the first place, it must again be pointed out that the appellant should have registered its protest before or at the time of
the sale of this property. It must further be pointed out that while not conclusive, the characterization of the property as

chattels by the appellant is indicative of intention and impresses upon the property the character determined by the parties.
In this connection the decision of this court in the case of Standard Oil Co. of New York vs. Jaramillo ( [1923], 44 Phil.,
630), whether obiter dicta or not, furnishes the key to such a situation.
It is, however not necessary to spend overly must time in the resolution of this appeal on side issues. It is machinery
which is involved; moreover, machinery not intended by the owner of any building or land for use in connection
therewith, but intended by a lessee for use in a building erected on the land by the latter to be returned to the lessee on the
expiration or abandonment of the lease.
A similar question arose in Puerto Rico, and on appeal being taken to the United States Supreme Court, it was held that
machinery which is movable in its nature only becomes immobilized when placed in a plant by the owner of the property
or plant, but not when so placed by a tenant, a usufructuary, or any person having only a temporary right, unless such
person acted as the agent of the owner. In the opinion written by Chief Justice White, whose knowledge of the Civil Law
is well known, it was in part said:
To determine this question involves fixing the nature and character of the property from the point of view of the rights of
Valdes and its nature and character from the point of view of Nevers & Callaghan as a judgment creditor of the Altagracia
Company and the rights derived by them from the execution levied on the machinery placed by the corporation in the
plant. Following the Code Napoleon, the Porto Rican Code treats as immovable (real) property, not only land and
buildings, but also attributes immovability in some cases to property of a movable nature, that is, personal property,
because of the destination to which it is applied. "Things," says section 334 of the Porto Rican Code, "may be immovable
either by their own nature or by their destination or the object to which they are applicable." Numerous illustrations are
given in the fifth subdivision of section 335, which is as follows: "Machinery, vessels, instruments or implements intended
by the owner of the tenements for the industrial or works that they may carry on in any building or upon any land and
which tend directly to meet the needs of the said industry or works." (See also Code Nap., articles 516, 518 et seq. to and
inclusive of article 534, recapitulating the things which, though in themselves movable, may be immobilized.) So far as
the subject-matter with which we are dealing machinery placed in the plant it is plain, both under the provisions of
the Porto Rican Law and of the Code Napoleon, that machinery which is movable in its nature only becomes immobilized
when placed in a plant by the owner of the property or plant. Such result would not be accomplished, therefore, by the
placing of machinery in a plant by a tenant or a usufructuary or any person having only a temporary right. (Demolombe,
Tit. 9, No. 203; Aubry et Rau, Tit. 2, p. 12, Section 164; Laurent, Tit. 5, No. 447; and decisions quoted in Fuzier-Herman
ed. Code Napoleon under articles 522 et seq.) The distinction rests, as pointed out by Demolombe, upon the fact that one
only having a temporary right to the possession or enjoyment of property is not presumed by the law to have applied
movable property belonging to him so as to deprive him of it by causing it by an act of immobilization to become the
property of another. It follows that abstractly speaking the machinery put by the Altagracia Company in the plant
belonging to Sanchez did not lose its character of movable property and become immovable by destination. But in the
concrete immobilization took place because of the express provisions of the lease under which the Altagracia held, since
the lease in substance required the putting in of improved machinery, deprived the tenant of any right to charge against the
lessor the cost such machinery, and it was expressly stipulated that the machinery so put in should become a part of the
plant belonging to the owner without compensation to the lessee. Under such conditions the tenant in putting in the
machinery was acting but as the agent of the owner in compliance with the obligations resting upon him, and the
immobilization of the machinery which resulted arose in legal effect from the act of the owner in giving by contract a
permanent destination to the machinery.
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The machinery levied upon by Nevers & Callaghan, that is, that which was placed in the plant by the Altagracia Company,
being, as regards Nevers & Callaghan, movable property, it follows that they had the right to levy on it under the
execution upon the judgment in their favor, and the exercise of that right did not in a legal sense conflict with the claim of
Valdes, since as to him the property was a part of the realty which, as the result of his obligations under the lease, he could
not, for the purpose of collecting his debt, proceed separately against. (Valdes vs. Central Altagracia [192], 225 U.S., 58.)
Finding no reversible error in the record, the judgment appealed from will be affirmed, the costs of this instance to be paid
by the appellant.
Villa-Real, Imperial, Butte, and Goddard, JJ., concur.

G.R. No. L-41643

July 31, 1935

B.H.
BERKENKOTTER, plaintiff-appellant,
vs.
CU UNJIENG E HIJOS, YEK TONG LIN FIRE AND MARINE INSURANCE COMPANY, MABALACAT SUGAR
COMPANY and THE PROVINCE SHERIFF OF PAMPANGA, defendants-appellees.
Briones
and
Araneta,
Zaragoza
and
No appearance for the other appellees.

Araneta

Martinez
for

for
appellees

Cu

Unjieng

appellant.
Hijos.

VILLA-REAL, J.:
This is an appeal taken by the plaintiff, B.H. Berkenkotter, from the judgment of the Court of First Instance of Manila,
dismissing said plaintiff's complaint against Cu Unjiengs e Hijos et al., with costs.
In support of his appeal, the appellant assigns six alleged errors as committed by the trial court in its decision in question which
will be discussed in the course of this decision.
The first question to be decided in this appeal, which is raised in the first assignment of alleged error, is whether or not the
lower court erred in declaring that the additional machinery and equipment, as improvement incorporated with the central are
subject to the mortgage deed executed in favor of the defendants Cu Unjieng e Hijos.
It is admitted by the parties that on April 26, 1926, the Mabalacat Sugar Co., Inc., owner of the sugar central situated in
Mabalacat, Pampanga, obtained from the defendants, Cu Unjieng e Hijos, a loan secured by a first mortgage constituted on two
parcels and land "with all its buildings, improvements, sugar-cane mill, steel railway, telephone line, apparatus, utensils and
whatever forms part or is necessary complement of said sugar-cane mill, steel railway, telephone line, now existing or that may
in the future exist is said lots."
On October 5, 1926, shortly after said mortgage had been constituted, the Mabalacat Sugar Co., Inc., decided to increase the
capacity of its sugar central by buying additional machinery and equipment, so that instead of milling 150 tons daily, it could
produce 250. The estimated cost of said additional machinery and equipment was approximately P100,000. In order to carry out
this plan, B.A. Green, president of said corporation, proposed to the plaintiff, B.H. Berkenkotter, to advance the necessary
amount for the purchase of said machinery and equipment, promising to reimburse him as soon as he could obtain an additional
loan from the mortgagees, the herein defendants Cu Unjieng e Hijos. Having agreed to said proposition made in a letter dated
October 5, 1926 (Exhibit E), B.H. Berkenkotter, on October 9th of the same year, delivered the sum of P1,710 to B.A. Green,
president of the Mabalacat Sugar Co., Inc., the total amount supplied by him to said B.A. Green having been P25,750.
Furthermore, B.H. Berkenkotter had a credit of P22,000 against said corporation for unpaid salary. With the loan of P25,750 and
said credit of P22,000, the Mabalacat Sugar Co., Inc., purchased the additional machinery and equipment now in litigation.
On June 10, 1927, B.A. Green, president of the Mabalacat Sugar Co., Inc., applied to Cu Unjieng e Hijos for an additional loan
of P75,000 offering as security the additional machinery and equipment acquired by said B.A. Green and installed in the sugar
central after the execution of the original mortgage deed, on April 27, 1927, together with whatever additional equipment
acquired with said loan. B.A. Green failed to obtain said loan.
Article 1877 of the Civil Code provides as follows.
ART. 1877. A mortgage includes all natural accessions, improvements, growing fruits, and rents not collected when the
obligation falls due, and the amount of any indemnities paid or due the owner by the insurers of the mortgaged property
or by virtue of the exercise of the power of eminent domain, with the declarations, amplifications, and limitations
established by law, whether the estate continues in the possession of the person who mortgaged it or whether it passes
into the hands of a third person.

In the case of Bischoff vs. Pomar and Compaia General de Tabacos (12 Phil., 690), cited with approval in the case of Cea vs.
Villanueva (18 Phil., 538), this court laid shown the following doctrine:
1. REALTY; MORTGAGE OF REAL ESTATE INCLUDES IMPROVEMENTS AND FIXTURES. It is a rule,
established by the Civil Code and also by the Mortgage Law, with which the decisions of the courts of the United States
are in accord, that in a mortgage of real estate, the improvements on the same are included; therefore, all objects
permanently attached to a mortgaged building or land, although they may have been placed there after the mortgage
was constituted, are also included. (Arts. 110 and 111 of the Mortgage Law, and 1877 of the Civil Code; decision of
U.S. Supreme Court in the matter of Royal Insurance Co. vs. R. Miller, liquidator, and Amadeo [26 Sup. Ct. Rep., 46;
199 U.S., 353].)
2. ID.; ID.; INCLUSION OR EXCLUSION OF MACHINERY, ETC. In order that it may be understood that the
machinery and other objects placed upon and used in connection with a mortgaged estate are excluded from the
mortgage, when it was stated in the mortgage that the improvements, buildings, and machinery that existed thereon
were also comprehended, it is indispensable that the exclusion thereof be stipulated between the contracting parties.
The appellant contends that the installation of the machinery and equipment claimed by him in the sugar central of the
Mabalacat Sugar Company, Inc., was not permanent in character inasmuch as B.A. Green, in proposing to him to advance the
money for the purchase thereof, made it appear in the letter, Exhibit E, that in case B.A. Green should fail to obtain an
additional loan from the defendants Cu Unjieng e Hijos, said machinery and equipment would become security therefor, said
B.A. Green binding himself not to mortgage nor encumber them to anybody until said plaintiff be fully reimbursed for the
corporation's indebtedness to him.
Upon acquiring the machinery and equipment in question with money obtained as loan from the plaintiff-appellant by B.A.
Green, as president of the Mabalacat Sugar Co., Inc., the latter became owner of said machinery and equipment, otherwise B.A.
Green, as such president, could not have offered them to the plaintiff as security for the payment of his credit.
Article 334, paragraph 5, of the Civil Code gives the character of real property to "machinery, liquid containers, instruments or
implements intended by the owner of any building or land for use in connection with any industry or trade being carried on
therein and which are expressly adapted to meet the requirements of such trade or industry.
If the installation of the machinery and equipment in question in the central of the Mabalacat Sugar Co., Inc., in lieu of the other
of less capacity existing therein, for its sugar industry, converted them into real property by reason of their purpose, it cannot be
said that their incorporation therewith was not permanent in character because, as essential and principal elements of a sugar
central, without them the sugar central would be unable to function or carry on the industrial purpose for which it was
established. Inasmuch as the central is permanent in character, the necessary machinery and equipment installed for carrying on
the sugar industry for which it has been established must necessarily be permanent.
Furthermore, the fact that B.A. Green bound himself to the plaintiff B.H. Berkenkotter to hold said machinery and equipment as
security for the payment of the latter's credit and to refrain from mortgaging or otherwise encumbering them until Berkenkotter
has been fully reimbursed therefor, is not incompatible with the permanent character of the incorporation of said machinery and
equipment with the sugar central of the Mabalacat Sugar Co., Inc., as nothing could prevent B.A. Green from giving them as
security at least under a second mortgage.
As to the alleged sale of said machinery and equipment to the plaintiff and appellant after they had been permanently
incorporated with sugar central of the Mabalacat Sugar Co., Inc., and while the mortgage constituted on said sugar central to Cu
Unjieng e Hijos remained in force, only the right of redemption of the vendor Mabalacat Sugar Co., Inc., in the sugar central
with which said machinery and equipment had been incorporated, was transferred thereby, subject to the right of the defendants
Cu Unjieng e Hijos under the first mortgage.
For the foregoing considerations, we are of the opinion and so hold: (1) That the installation of a machinery and equipment in a
mortgaged sugar central, in lieu of another of less capacity, for the purpose of carrying out the industrial functions of the latter
and increasing production, constitutes a permanent improvement on said sugar central and subjects said machinery and
equipment to the mortgage constituted thereon (article 1877, Civil Code); (2) that the fact that the purchaser of the new
machinery and equipment has bound himself to the person supplying him the purchase money to hold them as security for the

payment of the latter's credit, and to refrain from mortgaging or otherwise encumbering them does not alter the permanent
character of the incorporation of said machinery and equipment with the central; and (3) that the sale of the machinery and
equipment in question by the purchaser who was supplied the purchase money, as a loan, to the person who supplied the money,
after the incorporation thereof with the mortgaged sugar central, does not vest the creditor with ownership of said machinery
and equipment but simply with the right of redemption.
Wherefore, finding no error in the appealed judgment, it is affirmed in all its parts, with costs to the appellant. So ordered.
G.R. Nos. L-10817-18

February 28, 1958

ENRIQUE
vs.
VICENTE OROSA, JR., and PLAZA THEATRE, INC., respondents.

LOPEZ, petitioner,

Nicolas
Belmonte
and
Benjamin
T.
de
Peralta
for
petitioner.
Tolentino & Garcia and D. R. Cruz for respondent Luzon Surety Co., Inc. Jose B. Macatangay for respondent Plaza Theatre,
Inc.
FELIX, J.:
Enrique Lopez is a resident of Balayan, Batangas, doing business under the trade name of Lopez-Castelo Sawmill. Sometime in
May, 1946, Vicente Orosa, Jr., also a resident of the same province, dropped at Lopez' house and invited him to make an
investment in the theatre business. It was intimated that Orosa, his family and close friends were organizing a corporation to be
known as Plaza Theatre, Inc., that would engage in such venture. Although Lopez expressed his unwillingness to invest of the
same, he agreed to supply the lumber necessary for the construction of the proposed theatre, and at Orosa's behest and assurance
that the latter would be personally liable for any account that the said construction might incur, Lopez further agreed that
payment therefor would be on demand and not cash on delivery basis. Pursuant to said verbal agreement, Lopez delivered the
lumber which was used for the construction of the Plaza Theatre on May 17, 1946, up to December 4 of the same year. But of
the total cost of the materials amounting to P62,255.85, Lopez was paid only P20,848.50, thus leaving a balance of P41,771.35.
We may state at this juncture that the Plaza Theatre was erected on a piece of land with an area of 679.17 square meters
formerly owned by Vicente Orosa, Jr., and was acquired by the corporation on September 25, 1946, for P6,000. As Lopez was
pressing Orosa for payment of the remaining unpaid obligation, the latter and Belarmino Rustia, the president of the
corporation, promised to obtain a bank loan by mortgaging the properties of the Plaza Theatre., out of which said amount of
P41,771.35 would be satisfied, to which assurance Lopez had to accede. Unknown to him, however, as early as November,
1946, the corporation already got a loan for P30,000 from the Philippine National Bank with the Luzon Surety Company as
surety, and the corporation in turn executed a mortgage on the land and building in favor of said company as counter-security.
As the land at that time was not yet brought under the operation of the Torrens System, the mortgage on the same was registered
on November 16, 1946, under Act No. 3344. Subsequently, when the corporation applied for the registration of the land under
Act 496, such mortgage was not revealed and thus Original Certificate of Title No. O-391 was correspondingly issued on
October 25, 1947, without any encumbrance appearing thereon.
Persistent demand from Lopez for the payment of the amount due him caused Vicente Orosa, Jr. to execute on March 17, 1947,
an alleged "deed of assignment" of his 420 shares of stock of the Plaza Theater, Inc., at P100 per share or with a total value of
P42,000 in favor of the creditor, and as the obligation still remained unsettled, Lopez filed on November 12, 1947, a complaint
with the Court of First Instance of Batangas (Civil Case No. 4501 which later became R-57) against Vicente Orosa, Jr. and Plaza
Theater, Inc., praying that defendants be sentenced to pay him jointly and severally the sum of P41,771.35, with legal interest
from the firing of the action; that in case defendants fail to pay the same, that the building and the land covered by OCT No. O391 owned by the corporation be sold at public auction and the proceeds thereof be applied to said indebtedness; or that the 420
shares of the capital stock of the Plaza Theatre, Inc., assigned by Vicente Orosa, Jr., to said plaintiff be sold at public auction for
the same purpose; and for such other remedies as may be warranted by the circumstances. Plaintiff also caused the annotation of
a notice of lis pendens on said properties with the Register of Deeds.
Defendants Vicente Orosa, Jr. and Plaza Theatre, Inc., filed separate answers, the first denying that the materials were delivered
to him as a promoter and later treasurer of the corporation, because he had purchased and received the same on his personal

account; that the land on which the movie house was constructed was not charged with a lien to secure the payment of the
aforementioned unpaid obligation; and that the 420 shares of stock of the Plaza Theatre, Inc., was not assigned to plaintiff as
collaterals but as direct security for the payment of his indebtedness. As special defense, this defendant contended that as the
420 shares of stock assigned and conveyed by the assignor and accepted by Lopez as direct security for the payment of the
amount of P41,771.35 were personal properties, plaintiff was barred from recovering any deficiency if the proceeds of the sale
thereof at public auction would not be sufficient to cover and satisfy the obligation. It was thus prayed that he be declared
exempted from the payment of any deficiency in case the proceeds from the sale of said personal properties would not be
enough to cover the amount sought to be collected.
Defendant Plaza Theatre, Inc., on the other hand, practically set up the same line of defense by alleging that the building
materials delivered to Orosa were on the latter's personal account; and that there was no understanding that said materials would
be paid jointly and severally by Orosa and the corporation, nor was a lien charged on the properties of the latter to secure
payment of the same obligation. As special defense, defendant corporation averred that while it was true that the materials
purchased by Orosa were sold by the latter to the corporation, such transactions were in good faith and for valuable
consideration thus when plaintiff failed to claim said materials within 30 days from the time of removal thereof from Orosa,
lumber became a different and distinct specie and plaintiff lost whatever rights he might have in the same and consequently had
no recourse against the Plaza Theatre, Inc., that the claim could not have been refectionary credit, for such kind of obligation
referred to an indebtedness incurred in the repair or reconstruction of something already existing and this concept did not
include an entirely new work; and that the Plaza Theatre, Inc., having been incorporated on October 14, 1946, it could not have
contracted any obligation prior to said date. It was, therefore, prayed that the complaint be dismissed; that said defendant be
awarded the sum P 5,000 for damages, and such other relief as may be just and proper in the premises.
The surety company, in the meantime, upon discovery that the land was already registered under the Torrens System and that
there was a notice of lis pendens thereon, filed on August 17, 1948, or within the 1-year period after the issuance of the
certificate of title, a petition for review of the decree of the land registration court dated October 18, 1947, which was made the
basis of OCT No. O-319, in order to annotate the rights and interests of the surety company over said properties (Land
Registration Case No. 17 GLRO Rec. No. 296). Opposition thereto was offered by Enrique Lopez, asserting that the amount
demanded by him constituted a preferred lien over the properties of the obligors; that the surety company was guilty of
negligence when it failed to present an opposition to the application for registration of the property; and that if any violation of
the rights and interest of said surety would ever be made, same must be subject to the lien in his favor.
The two cases were heard jointly and in a decision dated October 30, 1952, the lower Court, after making an exhaustive and
detailed analysis of the respective stands of the parties and the evidence adduced at the trial, held that defendants Vicente Orosa,
Jr., and the Plaza Theatre, Inc., were jointly liable for the unpaid balance of the cost of lumber used in the construction of
the building and the plaintiff thus acquired the materialman's lien over the same. In making the pronouncement that the lien was
merely confined to the building and did not extend to the land on which the construction was made, the trial judge took into
consideration the fact that when plaintiff started the delivery of lumber in May, 1946, the land was not yet owned by the
corporation; that the mortgage in favor of Luzon Surety Company was previously registered under Act No. 3344; that the codal
provision (Art. 1923 of the old Spanish Civil Code) specifying that refection credits are preferred could refer only to buildings
which are also classified as real properties, upon which said refection was made. It was, however, declared that plaintiff's lien
on the building was superior to the right of the surety company. And finding that the Plaza Theatre, Inc., had no objection to the
review of the decree issued in its favor by the land registration court and the inclusion in the title of the encumbrance in favor of
the surety company, the court a quo granted the petition filed by the latter company. Defendants Orosa and the Plaza Theatre,
Inc., were thus required to pay jointly the amount of P41,771.35 with legal interest and costs within 90 days from notice of said
decision; that in case of default, the 420 shares of stock assigned by Orosa to plaintiff be sold at public auction and the proceeds
thereof be applied to the payment of the amount due the plaintiff, plus interest and costs; and that the encumbrance in favor of
the surety company be endorsed at the back of OCT No. O-391, with notation I that with respect to the building, said mortgage
was subject to the materialman's lien in favor of Enrique Lopez.
Plaintiff tried to secure a modification of the decision in so far as it declared that the obligation of therein defendants was joint
instead of solidary, and that the lien did not extend to the land, but same was denied by order the court of December 23, 1952.
The matter was thus appealed to the Court of appeals, which affirmed the lower court's ruling, and then to this Tribunal. In this
instance, plaintiff-appellant raises 2 issues: (1) whether a materialman's lien for the value of the materials used in the
construction of a building attaches to said structure alone and does not extend to the land on which the building is adhered to;

and (2) whether the lower court and the Court of Appeals erred in not providing that the material mans liens is superior to the
mortgage executed in favor surety company not only on the building but also on the land.
It is to be noted in this appeal that Enrique Lopez has not raised any question against the part of the decision sentencing
defendants Orosa and Plaza Theatre, Inc., to pay jointly the sum of P41,771.35, so We will not take up or consider anything on
that point. Appellant, however, contends that the lien created in favor of the furnisher of the materials used for the construction,
repair or refection of a building, is also extended to the land which the construction was made, and in support thereof he relies
on Article 1923 of the Spanish Civil Code, pertinent law on the matter, which reads as follows:
ART. 1923. With respect to determinate real property and real rights of the debtor, the following are preferred:
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5. Credits for refection, not entered or recorded, with respect to the estate upon which the refection was made, and only
with respect to other credits different from those mentioned in four preceding paragraphs.
It is argued that in view of the employment of the phrase real estate, or immovable property, and inasmuch as said provision
does not contain any specification delimiting the lien to the building, said article must be construed as to embrace both the land
and the building or structure adhering thereto. We cannot subscribe to this view, for while it is true that generally, real estate
connotes the land and the building constructed thereon, it is obvious that the inclusion of the building, separate and distinct from
the land, in the enumeration of what may constitute real properties 1 could mean only one thing that a building is by itself an
immovable property, a doctrine already pronounced by this Court in the case of Leung Yee vs. Strong Machinery Co., 37 Phil.,
644. Moreover, and in view of the absence of any specific provision of law to the contrary, a building is an immovable property,
irrespective of whether or not said structure and the land on which it is adhered to belong to the same owner.
A close examination of the provision of the Civil Code invoked by appellant reveals that the law gives preference to
unregistered refectionary credits only with respect to the real estate upon which the refection or work was made. This being so,
the inevitable conclusion must be that the lien so created attaches merely to the immovable property for the construction or
repair of which the obligation was incurred. Evidently, therefore, the lien in favor of appellant for the unpaid value of the
lumber used in the construction of the building attaches only to said structure and to no other property of the obligors.
Considering the conclusion thus arrived at, i.e., that the materialman's lien could be charged only to the building for which the
credit was made or which received the benefit of refection, the lower court was right in, holding at the interest of the mortgagee
over the land is superior and cannot be made subject to the said materialman's lien.
Wherefore, and on the strength of the foregoing considerations, the decision appealed from is hereby affirmed, with costs
against appellant. It is so ordered.
Paras, C.J., Bengzon, Padilla, Montemayor, Reyes, A., Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L. and Endencia,
JJ., concur.

G.R. No. L-30173 September 30, 1971


GAVINO
A.
TUMALAD
and
GENEROSA
vs.
ALBERTA VICENCIO and EMILIANO SIMEON, defendants-appellants.

R.

TUMALAD, plaintiffs-appellees,

Castillo & Suck for plaintiffs-appellees.


Jose Q. Calingo for defendants-appellants.

REYES, J.B.L., J.:


Case certified to this Court by the Court of Appeals (CA-G.R. No. 27824-R) for the reason that only questions of law are
involved.
This case was originally commenced by defendants-appellants in the municipal court of Manila in Civil Case No. 43073, for
ejectment. Having lost therein, defendants-appellants appealed to the court a quo (Civil Case No. 30993) which also rendered a
decision against them, the dispositive portion of which follows:
WHEREFORE, the court hereby renders judgment in favor of the plaintiffs and against the defendants,
ordering the latter to pay jointly and severally the former a monthly rent of P200.00 on the house, subjectmatter of this action, from March 27, 1956, to January 14, 1967, with interest at the legal rate from April 18,
1956, the filing of the complaint, until fully paid, plus attorney's fees in the sum of P300.00 and to pay the
costs.
It appears on the records that on 1 September 1955 defendants-appellants executed a chattel mortgage in favor of plaintiffsappellees over their house of strong materials located at No. 550 Int. 3, Quezon Boulevard, Quiapo, Manila, over Lot Nos. 6-B
and 7-B, Block No. 2554, which were being rented from Madrigal & Company, Inc. The mortgage was registered in the
Registry of Deeds of Manila on 2 September 1955. The herein mortgage was executed to guarantee a loan of P4,800.00
received from plaintiffs-appellees, payable within one year at 12% per annum. The mode of payment was P150.00 monthly,
starting September, 1955, up to July 1956, and the lump sum of P3,150 was payable on or before August, 1956. It was also
agreed that default in the payment of any of the amortizations, would cause the remaining unpaid balance to
becomeimmediately due and Payable and
the Chattel Mortgage will be enforceable in accordance with the provisions of Special Act No. 3135, and for
this purpose, the Sheriff of the City of Manila or any of his deputies is hereby empowered and authorized to

sell all the Mortgagor's property after the necessary publication in order to settle the financial debts of
P4,800.00, plus 12% yearly interest, and attorney's fees... 2
When defendants-appellants defaulted in paying, the mortgage was extrajudicially foreclosed, and on 27 March 1956, the house
was sold at public auction pursuant to the said contract. As highest bidder, plaintiffs-appellees were issued the corresponding
certificate of sale. 3 Thereafter, on 18 April 1956, plaintiffs-appellant commenced Civil Case No. 43073 in the municipal court of
Manila, praying, among other things, that the house be vacated and its possession surrendered to them, and for defendants-appellants
to pay rent of P200.00 monthly from 27 March 1956 up to the time the possession is surrendered. 4 On 21 September 1956, the
municipal court rendered its decision
... ordering the defendants to vacate the premises described in the complaint; ordering further to pay monthly
the amount of P200.00 from March 27, 1956, until such (time that) the premises is (sic) completely vacated;
plus attorney's fees of P100.00 and the costs of the suit. 5
Defendants-appellants, in their answers in both the municipal court and court a quo impugned the legality of the chattel
mortgage, claiming that they are still the owners of the house; but they waived the right to introduce evidence, oral or
documentary. Instead, they relied on their memoranda in support of their motion to dismiss, predicated mainly on the grounds
that: (a) the municipal court did not have jurisdiction to try and decide the case because (1) the issue involved, is ownership, and
(2) there was no allegation of prior possession; and (b) failure to prove prior demand pursuant to Section 2, Rule 72, of the
Rules of Court. 6
During the pendency of the appeal to the Court of First Instance, defendants-appellants failed to deposit the rent for November,
1956 within the first 10 days of December, 1956 as ordered in the decision of the municipal court. As a result, the court granted
plaintiffs-appellees' motion for execution, and it was actually issued on 24 January 1957. However, the judgment regarding the
surrender of possession to plaintiffs-appellees could not be executed because the subject house had been already demolished on
14 January 1957 pursuant to the order of the court in a separate civil case (No. 25816) for ejectment against the present
defendants for non-payment of rentals on the land on which the house was constructed.
The motion of plaintiffs for dismissal of the appeal, execution of the supersedeas bond and withdrawal of deposited rentals was
denied for the reason that the liability therefor was disclaimed and was still being litigated, and under Section 8, Rule 72, rentals
deposited had to be held until final disposition of the appeal. 7
On 7 October 1957, the appellate court of First Instance rendered its decision, the dispositive portion of which is quoted earlier.
The said decision was appealed by defendants to the Court of Appeals which, in turn, certified the appeal to this Court.
Plaintiffs-appellees failed to file a brief and this appeal was submitted for decision without it.
Defendants-appellants submitted numerous assignments of error which can be condensed into two questions, namely: .
(a) Whether the municipal court from which the case originated had jurisdiction to adjudicate the same;
(b) Whether the defendants are, under the law, legally bound to pay rentals to the plaintiffs during the period of
one (1) year provided by law for the redemption of the extrajudicially foreclosed house.
We will consider these questions seriatim.
(a) Defendants-appellants mortgagors question the jurisdiction of the municipal court from which the case originated, and
consequently, the appellate jurisdiction of the Court of First Instance a quo, on the theory that the chattel mortgage is void ab
initio; whence it would follow that the extrajudicial foreclosure, and necessarily the consequent auction sale, are also void.
Thus, the ownership of the house still remained with defendants-appellants who are entitled to possession and not plaintiffsappellees. Therefore, it is argued by defendants-appellants, the issue of ownership will have to be adjudicated first in order to
determine possession. lt is contended further that ownership being in issue, it is the Court of First Instance which has
jurisdiction and not the municipal court.

Defendants-appellants predicate their theory of nullity of the chattel mortgage on two grounds, which are: (a) that, their
signatures on the chattel mortgage were obtained through fraud, deceit, or trickery; and (b) that the subject matter of the
mortgage is a house of strong materials, and, being an immovable, it can only be the subject of a real estate mortgage and not a
chattel mortgage.
On the charge of fraud, deceit or trickery, the Court of First Instance found defendants-appellants' contentions as not supported
by evidence and accordingly dismissed the charge, 8 confirming the earlier finding of the municipal court that "the defense of
ownership as well as the allegations of fraud and deceit ... are mere allegations." 9
It has been held in Supia and Batiaco vs. Quintero and Ayala 10 that "the answer is a mere statement of the facts which the party
filing it expects to prove, but it is not evidence; 11 and further, that when the question to be determined is one of title, the Court is given
the authority to proceed with the hearing of the cause until this fact is clearly established. In the case of Sy vs. Dalman, 12 wherein the
defendant was also a successful bidder in an auction sale, it was likewise held by this Court that in detainer cases the aim of ownership
"is a matter of defense and raises an issue of fact which should be determined from the evidence at the trial." What determines
jurisdiction are the allegations or averments in the complaint and the relief asked for. 13
Moreover, even granting that the charge is true, fraud or deceit does not render a contract void ab initio, and can only be a
ground for rendering the contract voidable or annullable pursuant to Article 1390 of the New Civil Code, by a proper action in
court. 14 There is nothing on record to show that the mortgage has been annulled. Neither is it disclosed that steps were taken to nullify
the same. Hence, defendants-appellants' claim of ownership on the basis of a voidable contract which has not been voided fails.
It is claimed in the alternative by defendants-appellants that even if there was no fraud, deceit or trickery, the chattel mortgage
was still null and void ab initio because only personal properties can be subject of a chattel mortgage. The rule about the status
of buildings as immovable property is stated in Lopez vs. Orosa, Jr. and Plaza Theatre Inc., 15 cited in Associated Insurance Surety
Co., Inc. vs. Iya, et al. 16 to the effect that
... it is obvious that the inclusion of the building, separate and distinct from the land, in the enumeration of
what may constitute real properties (art. 415, New Civil Code) could only mean one thing that a building is
by itself an immovable property irrespective of whether or not said structure and the land on which it is
adhered to belong to the same owner.
Certain deviations, however, have been allowed for various reasons. In the case of Manarang and Manarang vs. Ofilada, 17 this
Court stated that "it is undeniable that the parties to a contract may by agreement treat as personal property that which by nature would
be real property", citing Standard Oil Company of New York vs. Jaramillo. 18 In the latter case, the mortgagor conveyed and transferred
to the mortgagee by way of mortgage "the following described personal property."19 The "personal property" consisted of leasehold
rights and a building. Again, in the case of Luna vs. Encarnacion, 20 the subject of the contract designated as Chattel Mortgage was a
house of mixed materials, and this Court hold therein that it was a valid Chattel mortgage because it was so expressly designated and
specifically that the property given as security "is a house of mixed materials, which by its very nature is considered personal
property." In the later case of Navarro vs. Pineda, 21 this Court stated that
The view that parties to a deed of chattel mortgage may agree to consider a house as personal property for the
purposes of said contract, "is good only insofar as the contracting parties are concerned. It is based, partly,
upon the principle of estoppel" (Evangelista vs. Alto Surety, No. L-11139, 23 April 1958). In a case, a
mortgaged house built on a rented land was held to be a personal property, not only because the deed of
mortgage considered it as such, but also because it did not form part of the land (Evangelists vs. Abad, [CA];
36 O.G. 2913), for it is now settled that an object placed on land by one who had only a temporary right to the
same, such as the lessee or usufructuary, does not become immobilized by attachment (Valdez vs. Central
Altagracia, 222 U.S. 58, cited in Davao Sawmill Co., Inc. vs. Castillo, et al., 61 Phil. 709). Hence, if a house
belonging to a person stands on a rented land belonging to another person, it may be mortgaged as a personal
property as so stipulated in the document of mortgage. (Evangelista vs. Abad, Supra.) It should be noted,
however that the principle is predicated on statements by the owner declaring his house to be a chattel, a
conduct that may conceivably estop him from subsequently claiming otherwise. (Ladera vs. C.N. Hodges, [CA]
48 O.G. 5374): 22

In the contract now before Us, the house on rented land is not only expressly designated as Chattel Mortgage; it specifically
provides that "the mortgagor ... voluntarily CEDES, SELLS and TRANSFERS by way of Chattel Mortgage 23 the property
together with its leasehold rights over the lot on which it is constructed and participation ..." 24Although there is no specific statement
referring to the subject house as personal property, yet by ceding, selling or transferring a property by way of chattel
mortgage defendants-appellants could only have meant to convey the house as chattel, or at least, intended to treat the same as such,
so that they should not now be allowed to make an inconsistent stand by claiming otherwise. Moreover, the subject house stood on a
rented lot to which defendats-appellants merely had a temporary right as lessee, and although this can not in itself alone determine the
status of the property, it does so when combined with other factors to sustain the interpretation that the parties, particularly the
mortgagors, intended to treat the house as personalty. Finally unlike in the Iya cases, Lopez vs. Orosa, Jr. and Plaza Theatre,
Inc. 25 and Leung Yee vs. F. L. Strong Machinery and Williamson, 26 wherein third persons assailed the validity of the chattel
mortgage, 27 it is the defendants-appellants themselves, as debtors-mortgagors, who are attacking the validity of the chattel mortgage in
this case. The doctrine of estoppel therefore applies to the herein defendants-appellants, having treated the subject house as personalty.
(b) Turning to the question of possession and rentals of the premises in question. The Court of First Instance noted in its
decision that nearly a year after the foreclosure sale the mortgaged house had been demolished on 14 and 15 January 1957 by
virtue of a decision obtained by the lessor of the land on which the house stood. For this reason, the said court limited itself to
sentencing the erstwhile mortgagors to pay plaintiffs a monthly rent of P200.00 from 27 March 1956 (when the chattel
mortgage was foreclosed and the house sold) until 14 January 1957 (when it was torn down by the Sheriff), plus P300.00
attorney's fees.
Appellants mortgagors question this award, claiming that they were entitled to remain in possession without any obligation to
pay rent during the one year redemption period after the foreclosure sale, i.e., until 27 March 1957. On this issue, We must rule
for the appellants.
Chattel mortgages are covered and regulated by the Chattel Mortgage Law, Act No. 1508. 28 Section 14 of this Act allows the
mortgagee to have the property mortgaged sold at public auction through a public officer in almost the same manner as that allowed
by Act No. 3135, as amended by Act No. 4118, provided that the requirements of the law relative to notice and registration are
complied with. 29 In the instant case, the parties specifically stipulated that "the chattel mortgage will be enforceable in accordance
with the provisions of Special Act No. 3135 ... ." 30 (Emphasis supplied).
Section 6 of the Act referred to 31 provides that the debtor-mortgagor (defendants-appellants herein) may, at any time within one year
from and after the date of the auction sale, redeem the property sold at the extra judicial foreclosure sale. Section 7 of the same
Act 32 allows the purchaser of the property to obtain from the court the possession during the period of redemption: but the same
provision expressly requires the filing of a petition with the proper Court of First Instance and the furnishing of a bond. It is only upon
filing of the proper motion and the approval of the corresponding bond that the order for a writ of possession issues as a matter of
course. No discretion is left to the court. 33 In the absence of such a compliance, as in the instant case, the purchaser can not claim
possession during the period of redemption as a matter of right. In such a case, the governing provision is Section 34, Rule 39, of the
Revised Rules of Court 34 which also applies to properties purchased in extrajudicial foreclosure proceedings. 35 Construing the said
section, this Court stated in the aforestated case of Reyes vs. Hamada.
In other words, before the expiration of the 1-year period within which the judgment-debtor or mortgagor may
redeem the property, the purchaser thereof is not entitled, as a matter of right, to possession of the same. Thus,
while it is true that the Rules of Court allow the purchaser to receive the rentals if the purchased property is
occupied by tenants, he is, nevertheless, accountable to the judgment-debtor or mortgagor as the case may be,
for the amount so received and the same will be duly credited against the redemption price when the said
debtor or mortgagor effects the redemption.Differently stated, the rentals receivable from tenants, although
they may be collected by the purchaser during the redemption period, do not belong to the latter but still
pertain to the debtor of mortgagor. The rationale for the Rule, it seems, is to secure for the benefit of the
debtor or mortgagor, the payment of the redemption amount and the consequent return to him of his properties
sold at public auction. (Emphasis supplied)
The Hamada case reiterates the previous ruling in Chan vs. Espe. 36
Since the defendants-appellants were occupying the house at the time of the auction sale, they are entitled to remain in
possession during the period of redemption or within one year from and after 27 March 1956, the date of the auction sale, and to
collect the rents or profits during the said period.

It will be noted further that in the case at bar the period of redemption had not yet expired when action was instituted in the
court of origin, and that plaintiffs-appellees did not choose to take possession under Section 7, Act No. 3135, as amended,
which is the law selected by the parties to govern the extrajudicial foreclosure of the chattel mortgage. Neither was there an
allegation to that effect. Since plaintiffs-appellees' right to possess was not yet born at the filing of the complaint, there could be
no violation or breach thereof. Wherefore, the original complaint stated no cause of action and was prematurely filed. For this
reason, the same should be ordered dismissed, even if there was no assignment of error to that effect. The Supreme Court is
clothed with ample authority to review palpable errors not assigned as such if it finds that their consideration is necessary in
arriving at a just decision of the cases. 37
It follows that the court below erred in requiring the mortgagors to pay rents for the year following the foreclosure sale, as well
as attorney's fees.
FOR THE FOREGOING REASONS, the decision appealed from is reversed and another one entered, dismissing the complaint.
With costs against plaintiffs-appellees.
Concepcion, C.J., Dizon, Makalintal, Zaldivar, Castro, Fernando, Teehankee, Barredo, Villamor and Makasiar, JJ., concur.

G.R. Nos. L-10837-38

May 30, 1958

ASSOCIATED
INSURANCE
and
SURETY
vs.
ISABEL IYA, ADRIANO VALINO and LUCIA VALINO, defendants.

COMPANY,

INC., plaintiff,

ISABEL
IYA, plaintiff,
vs.
ADRIANO VALINO, LUCIA VALINO and ASSOCIATED INSURANCE and SURETY COMPANY. INC.,defendants.
Jovita
L.
de
Dios
for
defendant
M. Perez Cardenas and Apolonio Abola for defendant Associated Insurance and Surety Co., Inc.

Isabel

Iya.

FELIX, J.:
Adriano Valino and Lucia A. Valino, husband and wife, were the owners and possessors of a house of strong materials
constructed on Lot No. 3, Block No. 80 of the Grace Park Subdivision in Caloocan, Rizal, which they purchased on installment
basis from the Philippine Realty Corporation. On November 6, 1951, to enable her to purchase on credit rice from the NARIC,
Lucia A. Valino filed a bond in the sum of P11,000.00 (AISCO Bond No. G-971) subscribed by the Associated Insurance and

Surety Co., Inc., and as counter-guaranty therefor, the spouses Valino executed an alleged chattel mortgage on the
aforementioned house in favor of the surety company, which encumbrance was duly registered with the Chattel Mortgage
Register of Rizal on December 6, 1951. It is admitted that at the time said undertaking took place, the parcel of land on which
the house is erected was still registered in the name of the Philippine Realty Corporation. Having completed payment on the
purchase price of the lot, the Valinos were able to secure on October 18, 1958, a certificate of title in their name (T.C.T. No.
27884). Subsequently, however, or on October 24, 1952, the Valinos, to secure payment of an indebtedness in the amount of
P12,000.00, executed a real estate mortgage over the lot and the house in favor of Isabel Iya, which was duly registered and
annotated at the back of the certificate of title.
On the other hand, as Lucia A. Valino, failed to satisfy her obligation to the NARIC, the surety company was compelled to pay
the same pursuant to the undertaking of the bond. In turn, the surety company demanded reimbursement from the spouses
Valino, and as the latter likewise failed to do so, the company foreclosed the chattel mortgage over the house. As a result
thereof, a public sale was conducted by the Provincial Sheriff of Rizal on December 26, 1952, wherein the property was
awarded to the surety company for P8,000.00, the highest bid received therefor. The surety company then caused the said house
to be declared in its name for tax purposes (Tax Declaration No. 25128).
Sometime in July, 1953, the surety company learned of the existence of the real estate mortgage over the lot covered by T.C.T.
No. 26884 together with the improvements thereon; thus, said surety company instituted Civil Case No. 2162 of the Court of
First Instance of Manila naming Adriano and Lucia Valino and Isabel Iya, the mortgagee, as defendants. The complaint prayed
for the exclusion of the residential house from the real estate mortgage in favor of defendant Iya and the declaration and
recognition of plaintiff's right to ownership over the same in virtue of the award given by the Provincial Sheriff of Rizal during
the public auction held on December 26, 1952. Plaintiff likewise asked the Court to sentence the spouses Valino to pay said
surety moral and exemplary damages, attorney's fees and costs. Defendant Isabel Iya filed her answer to the complaint alleging
among other things, that in virtue of the real estate mortgage executed by her co-defendants, she acquired a real right over the
lot and the house constructed thereon; that the auction sale allegedly conducted by the Provincial Sheriff of Rizal as a result of
the foreclosure of the chattel mortgage on the house was null and void for non-compliance with the form required by law. She,
therefore, prayed for the dismissal of the complaint and anullment of the sale made by the Provincial Sheriff. She also
demanded the amount of P5,000.00 from plaintiff as counterclaim, the sum of P5,000.00 from her co-defendants as crossclaim,
for attorney's fees and costs.
Defendants spouses in their answer admitted some of the averments of the complaint and denied the others. They, however,
prayed for the dismissal of the action for lack of cause of action, it being alleged that plaintiff was already the owner of the
house in question, and as said defendants admitted this fact, the claim of the former was already satisfied.
On October 29, 1953, Isabel Iya filed another civil action against the Valinos and the surety company (Civil Case No. 2504 of
the Court of First Instance of Manila) stating that pursuant to the contract of mortgage executed by the spouses Valino on
October 24, 1952, the latter undertook to pay a loan of P12,000.00 with interest at 12% per annum or P120.00 a month, which
indebtedness was payable in 4 years, extendible for only one year; that to secure payment thereof, said defendants mortgaged
the house and lot covered by T.C.T. No. 27884 located at No. 67 Baltazar St., Grace Park Subdivision, Caloocan, Rizal; that the
Associated Insurance and Surety Co., Inc., was included as a party defendant because it claimed to have an interest on the
residential house also covered by said mortgage; that it was stipulated in the aforesaid real estate mortgage that default in the
payment of the interest agreed upon would entitle the mortgagee to foreclose the same even before the lapse of the 4-year
period; and as defendant spouses had allegedly failed to pay the interest for more than 6 months, plaintiff prayed the Court to
order said defendants to pay the sum of P12,000.00 with interest thereon at 12% per annum from March 25, 1953, until fully
paid; for an additional sum equivalent to 20% of the total obligation as damages, and for costs. As an alternative in case such
demand may not be met and satisfied plaintiff prayed for a decree of foreclosure of the land, building and other improvements
thereon to be sold at public auction and the proceeds thereof applied to satisfy the demands of plaintiff; that the Valinos, the
surety company and any other person claiming interest on the mortgaged properties be barred and foreclosed of all rights,
claims or equity of redemption in said properties; and for deficiency judgment in case the proceeds of the sale of the mortgaged
property would be insufficient to satisfy the claim of plaintiff.
Defendant surety company, in answer to this complaint insisted on its right over the building, arguing that as the lot on which
the house was constructed did not belong to the spouses at the time the chattel mortgage was executed, the house might be
considered only as a personal property and that the encumbrance thereof and the subsequent foreclosure proceedings made
pursuant to the provisions of the Chattel Mortgage Law were proper and legal. Defendant therefore prayed that said building be

excluded from the real estate mortgage and its right over the same be declared superior to that of plaintiff, for damages,
attorney's fees and costs.
Taking side with the surety company, defendant spouses admitted the due execution of the mortgage upon the land but assailed
the allegation that the building was included thereon, it being contended that it was already encumbered in favor of the surety
company before the real estate mortgage was executed, a fact made known to plaintiff during the preparation of said contract
and to which the latter offered no objection. As a special defense, it was asserted that the action was premature because the
contract was for a period of 4 years, which had not yet elapsed.
The two cases were jointly heard upon agreement of the parties, who submitted the same on a stipulation of facts, after which
the Court rendered judgment dated March 8, 1956, holding that the chattel mortgage in favor of the Associated Insurance and
Surety Co., Inc., was preferred and superior over the real estate mortgage subsequently executed in favor of Isabel Iya. It was
ruled that as the Valinos were not yet the registered owner of the land on which the building in question was constructed at the
time the first encumbrance was made, the building then was still a personality and a chattel mortgage over the same was proper.
However, as the mortgagors were already the owner of the land at the time the contract with Isabel Iya was entered into, the
building was transformed into a real property and the real estate mortgage created thereon was likewise adjudged as proper. It is
to be noted in this connection that there is no evidence on record to sustain the allegation of the spouses Valino that at the time
they mortgaged their house and lot to Isabel Iya, the latter was told or knew that part of the mortgaged property, i.e., the house,
had previously been mortgaged to the surety company.
The residential building was, therefore, ordered excluded from the foreclosure prayed for by Isabel Iya, although the latter could
exercise the right of a junior encumbrance. So the spouses Valino were ordered to pay the amount demanded by said mortgagee
or in their default to have the parcel of land subject of the mortgage sold at public auction for the satisfaction of Iya's claim.
There is no question as to appellant's right over the land covered by the real estate mortgage; however, as the building
constructed thereon has been the subject of 2 mortgages; controversy arise as to which of these encumbrances should receive
preference over the other. The decisive factor in resolving the issue presented by this appeal is the determination of the nature of
the structure litigated upon, for where it be considered a personality, the foreclosure of the chattel mortgage and the subsequent
sale thereof at public auction, made in accordance with the Chattel Mortgage Law would be valid and the right acquired by the
surety company therefrom would certainly deserve prior recognition; otherwise, appellant's claim for preference must be
granted. The lower Court, deciding in favor of the surety company, based its ruling on the premise that as the mortgagors were
not the owners of the land on which the building is erected at the time the first encumbrance was made, said structure partook of
the nature of a personal property and could properly be the subject of a chattel mortgage. We find reason to hold otherwise, for
as this Court, defining the nature or character of a building, has said:
. . . while it is true that generally, real estate connotes the land and the building constructed thereon, it is obvious that
the inclusion of the building, separate and distinct from the land, in the enumeration of what may constitute real
properties (Art. 415, new Civil Code) could only mean one thing that a building is byitself an immovable property . .
. Moreover, and in view of the absence of any specific provision to the contrary, a building is an immovable property
irrespective of whether or not said structure and the land on which it is adhered to belong to the same owner .
(Lopez vs. Orosa, G.R. Nos. supra, p. 98).
A building certainly cannot be divested of its character of a realty by the fact that the land on which it is constructed belongs to
another. To hold it the other way, the possibility is not remote that it would result in confusion, for to cloak the building with an
uncertain status made dependent on the ownership of the land, would create a situation where a permanent fixture changes its
nature or character as the ownership of the land changes hands. In the case at bar, as personal properties could only be the
subject of a chattel mortgage (Section 1, Act 3952) and as obviously the structure in question is not one, the execution of the
chattel mortgage covering said building is clearly invalid and a nullity. While it is true that said document was correspondingly
registered in the Chattel Mortgage Register of Rizal, this act produced no effect whatsoever for where the interest conveyed is
in the nature of a real property, the registration of the document in the registry of chattels is merely a futile act. Thus, the
registration of the chattel mortgage of a building of strong materials produce no effect as far as the building is concerned (Leung
Yee vs. Strong Machinery Co., 37 Phil., 644). Nor can we give any consideration to the contention of the surety that it has
acquired ownership over the property in question by reason of the sale conducted by the Provincial Sheriff of Rizal, for as this
Court has aptly pronounced:

A mortgage creditor who purchases real properties at an extrajudicial foreclosure sale thereof by virtue of a chattel
mortgage constituted in his favor, which mortgage has been declared null and void with respect to said real properties,
acquires no right thereto by virtue of said sale (De la Riva vs. Ah Keo, 60 Phil., 899).
Wherefore the portion of the decision of the lower Court in these two cases appealed from holding the rights of the surety
company, over the building superior to that of Isabel Iya and excluding the building from the foreclosure prayed for by the latter
is reversed and appellant Isabel Iya's right to foreclose not only the land but also the building erected thereon is hereby
recognized, and the proceeds of the sale thereof at public auction (if the land has not yet been sold), shall be applied to the
unsatisfied judgment in favor of Isabel Iya. This decision however is without prejudice to any right that the Associated
Insurance and Surety Co., Inc., may have against the spouses Adriano and Lucia Valino on account of the mortgage of said
building they executed in favor of said surety company. Without pronouncement as to costs. It is so ordered.
Paras, C.J., Bengzon, Montemayor, Reyes, A., Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., and Endencia, JJ., concur.

G.R. No. L-58469 May 16, 1983


MAKATI
LEASING
and
FINANCE
CORPORATION, petitioner,
vs.
WEAREVER TEXTILE MILLS, INC., and HONORABLE COURT OF APPEALS, respondents.
DE CASTRO, J.:
Petition for review on certiorari of the decision of the Court of Appeals (now Intermediate Appellate Court) promulgated on
August 27, 1981 in CA-G.R. No. SP-12731, setting aside certain Orders later specified herein, of Judge Ricardo J. Francisco, as

Presiding Judge of the Court of First instance of Rizal Branch VI, issued in Civil Case No. 36040, as wen as the resolution dated
September 22, 1981 of the said appellate court, denying petitioner's motion for reconsideration.
It appears that in order to obtain financial accommodations from herein petitioner Makati Leasing and Finance Corporation, the
private respondent Wearever Textile Mills, Inc., discounted and assigned several receivables with the former under a Receivable
Purchase Agreement. To secure the collection of the receivables assigned, private respondent executed a Chattel Mortgage over
certain raw materials inventory as well as a machinery described as an Artos Aero Dryer Stentering Range.
Upon private respondent's default, petitioner filed a petition for extrajudicial foreclosure of the properties mortgage to it.
However, the Deputy Sheriff assigned to implement the foreclosure failed to gain entry into private respondent's premises and
was not able to effect the seizure of the aforedescribed machinery. Petitioner thereafter filed a complaint for judicial foreclosure
with the Court of First Instance of Rizal, Branch VI, docketed as Civil Case No. 36040, the case before the lower court.
Acting on petitioner's application for replevin, the lower court issued a writ of seizure, the enforcement of which was however
subsequently restrained upon private respondent's filing of a motion for reconsideration. After several incidents, the lower court
finally issued on February 11, 1981, an order lifting the restraining order for the enforcement of the writ of seizure and an order
to break open the premises of private respondent to enforce said writ. The lower court reaffirmed its stand upon private
respondent's filing of a further motion for reconsideration.
On July 13, 1981, the sheriff enforcing the seizure order, repaired to the premises of private respondent and removed the main
drive motor of the subject machinery.
The Court of Appeals, in certiorari and prohibition proceedings subsequently filed by herein private respondent, set aside the
Orders of the lower court and ordered the return of the drive motor seized by the sheriff pursuant to said Orders, after ruling that
the machinery in suit cannot be the subject of replevin, much less of a chattel mortgage, because it is a real property pursuant to
Article 415 of the new Civil Code, the same being attached to the ground by means of bolts and the only way to remove it from
respondent's plant would be to drill out or destroy the concrete floor, the reason why all that the sheriff could do to enfore the
writ was to take the main drive motor of said machinery. The appellate court rejected petitioner's argument that private
respondent is estopped from claiming that the machine is real property by constituting a chattel mortgage thereon.
A motion for reconsideration of this decision of the Court of Appeals having been denied, petitioner has brought the case to this
Court for review by writ of certiorari. It is contended by private respondent, however, that the instant petition was rendered
moot and academic by petitioner's act of returning the subject motor drive of respondent's machinery after the Court of Appeals'
decision was promulgated.
The contention of private respondent is without merit. When petitioner returned the subject motor drive, it made itself
unequivocably clear that said action was without prejudice to a motion for reconsideration of the Court of Appeals decision, as
shown by the receipt duly signed by respondent's representative. 1 Considering that petitioner has reserved its right to question the
propriety of the Court of Appeals' decision, the contention of private respondent that this petition has been mooted by such return may
not be sustained.
The next and the more crucial question to be resolved in this Petition is whether the machinery in suit is real or personal
property from the point of view of the parties, with petitioner arguing that it is a personality, while the respondent claiming the
contrary, and was sustained by the appellate court, which accordingly held that the chattel mortgage constituted thereon is null
and void, as contended by said respondent.
A similar, if not Identical issue was raised in Tumalad v. Vicencio, 41 SCRA 143 where this Court, speaking through Justice
J.B.L. Reyes, ruled:
Although there is no specific statement referring to the subject house as personal property, yet by ceding,
selling or transferring a property by way of chattel mortgage defendants-appellants could only have meant to
convey the house as chattel, or at least, intended to treat the same as such, so that they should not now be
allowed to make an inconsistent stand by claiming otherwise. Moreover, the subject house stood on a rented lot
to which defendants-appellants merely had a temporary right as lessee, and although this can not in itself alone
determine the status of the property, it does so when combined with other factors to sustain the interpretation

that the parties, particularly the mortgagors, intended to treat the house as personality. Finally, unlike in the Iya
cases, Lopez vs. Orosa, Jr. & Plaza Theatre, Inc. & Leung Yee vs. F.L. Strong Machinery &
Williamson, wherein third persons assailed the validity of the chattel mortgage, it is the defendants-appellants
themselves, as debtors-mortgagors, who are attacking the validity of the chattel mortgage in this case. The
doctrine of estoppel therefore applies to the herein defendants-appellants, having treated the subject house as
personality.
Examining the records of the instant case, We find no logical justification to exclude the rule out, as the appellate court did, the
present case from the application of the abovequoted pronouncement. If a house of strong materials, like what was involved in
the above Tumalad case, may be considered as personal property for purposes of executing a chattel mortgage thereon as long
as the parties to the contract so agree and no innocent third party will be prejudiced thereby, there is absolutely no reason why a
machinery, which is movable in its nature and becomes immobilized only by destination or purpose, may not be likewise treated
as such. This is really because one who has so agreed is estopped from denying the existence of the chattel mortgage.
In rejecting petitioner's assertion on the applicability of the Tumalad doctrine, the Court of Appeals lays stress on the fact that
the house involved therein was built on a land that did not belong to the owner of such house. But the law makes no distinction
with respect to the ownership of the land on which the house is built and We should not lay down distinctions not contemplated
by law.
It must be pointed out that the characterization of the subject machinery as chattel by the private respondent is indicative of
intention and impresses upon the property the character determined by the parties. As stated inStandard Oil Co. of New York v.
Jaramillo, 44 Phil. 630, it is undeniable that the parties to a contract may by agreement treat as personal property that which by
nature would be real property, as long as no interest of third parties would be prejudiced thereby.
Private respondent contends that estoppel cannot apply against it because it had never represented nor agreed that the machinery
in suit be considered as personal property but was merely required and dictated on by herein petitioner to sign a printed form of
chattel mortgage which was in a blank form at the time of signing. This contention lacks persuasiveness. As aptly pointed out by
petitioner and not denied by the respondent, the status of the subject machinery as movable or immovable was never placed in
issue before the lower court and the Court of Appeals except in a supplemental memorandum in support of the petition filed in
the appellate court. Moreover, even granting that the charge is true, such fact alone does not render a contract void ab initio, but
can only be a ground for rendering said contract voidable, or annullable pursuant to Article 1390 of the new Civil Code, by a
proper action in court. There is nothing on record to show that the mortgage has been annulled. Neither is it disclosed that steps
were taken to nullify the same. On the other hand, as pointed out by petitioner and again not refuted by respondent, the latter has
indubitably benefited from said contract. Equity dictates that one should not benefit at the expense of another. Private
respondent could not now therefore, be allowed to impugn the efficacy of the chattel mortgage after it has benefited therefrom,
From what has been said above, the error of the appellate court in ruling that the questioned machinery is real, not personal
property, becomes very apparent. Moreover, the case of Machinery and Engineering Supplies, Inc. v. CA, 96 Phil. 70, heavily
relied upon by said court is not applicable to the case at bar, the nature of the machinery and equipment involved therein as real
properties never having been disputed nor in issue, and they were not the subject of a Chattel Mortgage. Undoubtedly, the
Tumalad case bears more nearly perfect parity with the instant case to be the more controlling jurisprudential authority.
WHEREFORE, the questioned decision and resolution of the Court of Appeals are hereby reversed and set aside, and the Orders
of the lower court are hereby reinstated, with costs against the private respondent.
SO ORDERED.

G.R. No. L-15334

January 31, 1964

BOARD OF ASSESSMENT APPEALS, CITY ASSESSOR and CITY TREASURER OF QUEZON CITY,petitioners,
vs.
MANILA ELECTRIC COMPANY, respondent.
Assistant
City
Attorney
Ross, Selph and Carrascoso for respondent.

Jaime

R.

Agloro

for

petitioners.

PAREDES, J.:
From the stipulation of facts and evidence adduced during the hearing, the following appear:
On October 20, 1902, the Philippine Commission enacted Act No. 484 which authorized the Municipal Board of Manila to grant
a franchise to construct, maintain and operate an electric street railway and electric light, heat and power system in the City of
Manila and its suburbs to the person or persons making the most favorable bid. Charles M. Swift was awarded the said franchise
on March 1903, the terms and conditions of which were embodied in Ordinance No. 44 approved on March 24, 1903.
Respondent Manila Electric Co. (Meralco for short), became the transferee and owner of the franchise.
Meralco's electric power is generated by its hydro-electric plant located at Botocan Falls, Laguna and is transmitted to the City
of Manila by means of electric transmission wires, running from the province of Laguna to the said City. These electric
transmission wires which carry high voltage current, are fastened to insulators attached on steel towers constructed by
respondent at intervals, from its hydro-electric plant in the province of Laguna to the City of Manila. The respondent Meralco
has constructed 40 of these steel towers within Quezon City, on land belonging to it. A photograph of one of these steel towers
is attached to the petition for review, marked Annex A. Three steel towers were inspected by the lower court and parties and the
following were the descriptions given there of by said court:
The first steel tower is located in South Tatalon, Espaa Extension, Quezon City. The findings were as follows: the
ground around one of the four posts was excavated to a depth of about eight (8) feet, with an opening of about one (1)
meter in diameter, decreased to about a quarter of a meter as it we deeper until it reached the bottom of the post; at the
bottom of the post were two parallel steel bars attached to the leg means of bolts; the tower proper was attached to the
leg three bolts; with two cross metals to prevent mobility; there was no concrete foundation but there was adobe stone
underneath; as the bottom of the excavation was covered with water about three inches high, it could not be determined
with certainty to whether said adobe stone was placed purposely or not, as the place abounds with this kind of stone;
and the tower carried five high voltage wires without cover or any insulating materials.
The second tower inspected was located in Kamuning Road, K-F, Quezon City, on land owned by the petitioner
approximate more than one kilometer from the first tower. As in the first tower, the ground around one of the four legs
was excavate from seven to eight (8) feet deep and one and a half (1-) meters wide. There being very little water at
the bottom, it was seen that there was no concrete foundation, but there soft adobe beneath. The leg was likewise
provided with two parallel steel bars bolted to a square metal frame also bolted to each corner. Like the first one, the
second tower is made up of metal rods joined together by means of bolts, so that by unscrewing the bolts, the tower
could be dismantled and reassembled.
The third tower examined is located along Kamias Road, Quezon City. As in the first two towers given above, the
ground around the two legs of the third tower was excavated to a depth about two or three inches beyond the outside
level of the steel bar foundation. It was found that there was no concrete foundation. Like the two previous ones, the
bottom arrangement of the legs thereof were found to be resting on soft adobe, which, probably due to high humidity,
looks like mud or clay. It was also found that the square metal frame supporting the legs were not attached to any
material or foundation.
On November 15, 1955, petitioner City Assessor of Quezon City declared the aforesaid steel towers for real property tax under
Tax declaration Nos. 31992 and 15549. After denying respondent's petition to cancel these declarations, an appeal was taken by
respondent to the Board of Assessment Appeals of Quezon City, which required respondent to pay the amount of P11,651.86 as
real property tax on the said steel towers for the years 1952 to 1956. Respondent paid the amount under protest, and filed a
petition for review in the Court of Tax Appeals (CTA for short) which rendered a decision on December 29, 1958, ordering the

cancellation of the said tax declarations and the petitioner City Treasurer of Quezon City to refund to the respondent the sum of
P11,651.86. The motion for reconsideration having been denied, on April 22, 1959, the instant petition for review was filed.
In upholding the cause of respondents, the CTA held that: (1) the steel towers come within the term "poles" which are declared
exempt from taxes under part II paragraph 9 of respondent's franchise; (2) the steel towers are personal properties and are not
subject to real property tax; and (3) the City Treasurer of Quezon City is held responsible for the refund of the amount paid.
These are assigned as errors by the petitioner in the brief.
The tax exemption privilege of the petitioner is quoted hereunder:
PAR 9. The grantee shall be liable to pay the same taxes upon its real estate, buildings, plant (not including poles,
wires, transformers, and insulators), machinery and personal property as other persons are or may be hereafter required
by law to pay ... Said percentage shall be due and payable at the time stated in paragraph nineteen of Part One
hereof, ... and shall be in lieu of all taxes and assessments of whatsoever nature and by whatsoever authority upon the
privileges, earnings, income, franchise, and poles, wires, transformers, and insulators of the grantee from which taxes
and assessments the grantee is hereby expressly exempted. (Par. 9, Part Two, Act No. 484 Respondent's Franchise;
emphasis supplied.)
The word "pole" means "a long, comparatively slender usually cylindrical piece of wood or timber, as typically the stem of a
small tree stripped of its branches; also by extension, a similar typically cylindrical piece or object of metal or the like". The
term also refers to "an upright standard to the top of which something is affixed or by which something is supported; as a
dovecote set on a pole; telegraph poles; a tent pole; sometimes, specifically a vessel's master (Webster's New International
Dictionary 2nd Ed., p. 1907.) Along the streets, in the City of Manila, may be seen cylindrical metal poles, cubical concrete
poles, and poles of the PLDT Co. which are made of two steel bars joined together by an interlacing metal rod. They are called
"poles" notwithstanding the fact that they are no made of wood. It must be noted from paragraph 9, above quoted, that the
concept of the "poles" for which exemption is granted, is not determined by their place or location, nor by the character of the
electric current it carries, nor the material or form of which it is made, but the use to which they are dedicated. In accordance
with the definitions, pole is not restricted to a long cylindrical piece of wood or metal, but includes "upright standards to the top
of which something is affixed or by which something is supported. As heretofore described, respondent's steel supports consists
of a framework of four steel bars or strips which are bound by steel cross-arms atop of which are cross-arms supporting five
high voltage transmission wires (See Annex A) and their sole function is to support or carry such wires.
The conclusion of the CTA that the steel supports in question are embraced in the term "poles" is not a novelty. Several courts of
last resort in the United States have called these steel supports "steel towers", and they denominated these supports or towers, as
electric poles. In their decisions the words "towers" and "poles" were used interchangeably, and it is well understood in that
jurisdiction that a transmission tower or pole means the same thing.
In a proceeding to condemn land for the use of electric power wires, in which the law provided that wires shall be constructed
upon suitable poles, this term was construed to mean either wood or metal poles and in view of the land being subject to
overflow, and the necessary carrying of numerous wires and the distance between poles, the statute was interpreted to
include towers or poles. (Stemmons and Dallas Light Co. (Tex) 212 S.W. 222, 224; 32-A Words and Phrases, p. 365.)
The term "poles" was also used to denominate the steel supports or towers used by an association used to convey its electric
power furnished to subscribers and members, constructed for the purpose of fastening high voltage and dangerous electric wires
alongside public highways. The steel supports or towers were made of iron or other metals consisting of two pieces running
from the ground up some thirty feet high, being wider at the bottom than at the top, the said two metal pieces being connected
with criss-cross iron running from the bottom to the top, constructed like ladders and loaded with high voltage electricity. In
form and structure, they are like the steel towers in question. (Salt River Valley Users' Ass'n v. Compton, 8 P. 2nd, 249-250.)
The term "poles" was used to denote the steel towers of an electric company engaged in the generation of hydro-electric power
generated from its plant to the Tower of Oxford and City of Waterbury. These steel towers are about 15 feet square at the base
and extended to a height of about 35 feet to a point, and are embedded in the cement foundations sunk in the earth, the top of
which extends above the surface of the soil in the tower of Oxford, and to the towers are attached insulators, arms, and other
equipment capable of carrying wires for the transmission of electric power (Connecticut Light and Power Co. v. Oxford, 101
Conn. 383, 126 Atl. p. 1).

In a case, the defendant admitted that the structure on which a certain person met his death was built for the purpose of
supporting a transmission wire used for carrying high-tension electric power, but claimed that the steel towers on which it is
carried were so large that their wire took their structure out of the definition of a pole line. It was held that in defining the word
pole, one should not be governed by the wire or material of the support used, but was considering the danger from any elevated
wire carrying electric current, and that regardless of the size or material wire of its individual members, any continuous series of
structures intended and used solely or primarily for the purpose of supporting wires carrying electric currents is a pole line
(Inspiration Consolidation Cooper Co. v. Bryan 252 P. 1016).
It is evident, therefore, that the word "poles", as used in Act No. 484 and incorporated in the petitioner's franchise, should not be
given a restrictive and narrow interpretation, as to defeat the very object for which the franchise was granted. The poles as
contemplated thereon, should be understood and taken as a part of the electric power system of the respondent Meralco, for the
conveyance of electric current from the source thereof to its consumers. If the respondent would be required to employ "wooden
poles", or "rounded poles" as it used to do fifty years back, then one should admit that the Philippines is one century behind the
age of space. It should also be conceded by now that steel towers, like the ones in question, for obvious reasons, can better
effectuate the purpose for which the respondent's franchise was granted.
Granting for the purpose of argument that the steel supports or towers in question are not embraced within the term poles, the
logical question posited is whether they constitute real properties, so that they can be subject to a real property tax. The tax law
does not provide for a definition of real property; but Article 415 of the Civil Code does, by stating the following are immovable
property:
(1) Land, buildings, roads, and constructions of all kinds adhered to the soil;
xxx

xxx

xxx

(3) Everything attached to an immovable in a fixed manner, in such a way that it cannot be separated therefrom without
breaking the material or deterioration of the object;
xxx

xxx

xxx

(5) Machinery, receptacles, instruments or implements intended by the owner of the tenement for an industry or works
which may be carried in a building or on a piece of land, and which tends directly to meet the needs of the said industry
or works;
xxx

xxx

xxx

The steel towers or supports in question, do not come within the objects mentioned in paragraph 1, because they do not
constitute buildings or constructions adhered to the soil. They are not construction analogous to buildings nor adhering to the
soil. As per description, given by the lower court, they are removable and merely attached to a square metal frame by means of
bolts, which when unscrewed could easily be dismantled and moved from place to place. They can not be included under
paragraph 3, as they are not attached to an immovable in a fixed manner, and they can be separated without breaking the
material or causing deterioration upon the object to which they are attached. Each of these steel towers or supports consists of
steel bars or metal strips, joined together by means of bolts, which can be disassembled by unscrewing the bolts and
reassembled by screwing the same. These steel towers or supports do not also fall under paragraph 5, for they are not
machineries, receptacles, instruments or implements, and even if they were, they are not intended for industry or works on the
land. Petitioner is not engaged in an industry or works in the land in which the steel supports or towers are constructed.
It is finally contended that the CTA erred in ordering the City Treasurer of Quezon City to refund the sum of P11,651.86, despite
the fact that Quezon City is not a party to the case. It is argued that as the City Treasurer is not the real party in interest, but
Quezon City, which was not a party to the suit, notwithstanding its capacity to sue and be sued, he should not be ordered to
effect the refund. This question has not been raised in the court below, and, therefore, it cannot be properly raised for the first
time on appeal. The herein petitioner is indulging in legal technicalities and niceties which do not help him any; for factually, it
was he (City Treasurer) whom had insisted that respondent herein pay the real estate taxes, which respondent paid under protest.
Having acted in his official capacity as City Treasurer of Quezon City, he would surely know what to do, under the
circumstances.

IN VIEW HEREOF, the decision appealed from is hereby affirmed, with costs against the petitioners.
Bengzon, C.J., Padilla, Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., Barrera and Regala, JJ., concur.
Makalintal,
J.,
concurs
in
the
result.
Dizon, J., took no part.

SECOND DIVISION
G.R. No. L-46245 May 31, 1982
MERALCO
SECURITIES
INDUSTRIAL
CORPORATION, petitioner,
vs.
CENTRAL BOARD OF ASSESSMENT APPEALS, BOARD OF ASSESSMENT APPEALS OF LAGUNA and
PROVINCIAL ASSESSOR OF LAGUNA, respondents.

AQUINO, J.:
In this special civil action of certiorari, Meralco Securities Industrial Corporation assails the decision of the Central Board of
Assessment Appeals (composed of the Secretary of Finance as chairman and the Secretaries of Justice and Local Government
and Community Development as members) dated May 6, 1976, holding that Meralco Securities' oil pipeline is subject to realty
tax.
The record reveals that pursuant to a pipeline concession issued under the Petroleum Act of 1949, Republic Act No. 387,
Meralco Securities installed from Batangas to Manila a pipeline system consisting of cylindrical steel pipes joined together and
buried not less than one meter below the surface along the shoulder of the public highway. The portion passing through Laguna
is about thirty kilometers long.
The pipes for white oil products measure fourteen inches in diameter by thirty-six feet with a maximum capacity of 75,000
barrels daily. The pipes for fuel and black oil measure sixteen inches by forty-eight feet with a maximum capacity of 100,000
barrels daily.
The pipes are embedded in the soil and are firmly and solidly welded together so as to preclude breakage or damage thereto and
prevent leakage or seepage of the oil. The valves are welded to the pipes so as to make the pipeline system one single piece of
property from end to end.
In order to repair, replace, remove or transfer segments of the pipeline, the pipes have to be cold-cut by means of a rotary hardmetal pipe-cutter after digging or excavating them out of the ground where they are buried. In points where the pipeline
traversed rivers or creeks, the pipes were laid beneath the bed thereof. Hence, the pipes are permanently attached to the land.
However, Meralco Securities notes that segments of the pipeline can be moved from one place to another as shown in the permit
issued by the Secretary of Public Works and Communications which permit provides that the government reserves the right to
require the removal or transfer of the pipes by and at the concessionaire's expense should they be affected by any road repair or
improvement.
Pursuant to the Assessment Law, Commonwealth Act No. 470, the provincial assessor of Laguna treated the pipeline as real
property and issued Tax Declarations Nos. 6535-6537, San Pedro; 7473-7478, Cabuyao; 7967-7971, Sta. Rosa; 9882-9885,
Bian and 15806-15810, Calamba, containing the assessed values of portions of the pipeline.
Meralco Securities appealed the assessments to the Board of Assessment Appeals of Laguna composed of the register of deeds
as chairman and the provincial auditor as member. That board in its decision of June 18, 1975 upheld the assessments (pp. 4749, Rollo).

Meralco Securities brought the case to the Central Board of Assessment Appeals. As already stated, that Board, composed of
Acting Secretary of Finance Pedro M. Almanzor as chairman and Secretary of Justice Vicente Abad Santos and Secretary of
Local Government and Community Development Jose Roo as members, ruled that the pipeline is subject to realty tax (p. 40,
Rollo).
A copy of that decision was served on Meralco Securities' counsel on August 27, 1976. Section 36 of the Real Property Tax
Code, Presidential Decree No. 464, which took effect on June 1, 1974, provides that the Board's decision becomes final and
executory after the lapse of fifteen days from the date of receipt of a copy of the decision by the appellant.
Under Rule III of the amended rules of procedure of the Central Board of Assessment Appeals (70 O.G. 10085), a party may ask
for the reconsideration of the Board's decision within fifteen days after receipt. On September 7, 1976 (the eleventh day),
Meralco Securities filed its motion for reconsideration.
Secretary of Finance Cesar Virata and Secretary Roo (Secretary Abad Santos abstained) denied the motion in a resolution
dated December 2, 1976, a copy of which was received by appellant's counsel on May 24, 1977 (p. 4, Rollo). On June 6, 1977,
Meralco Securities filed the instant petition for certiorari.
The Solicitor General contends that certiorari is not proper in this case because the Board acted within its jurisdiction and did
not gravely abuse its discretion and Meralco Securities was not denied due process of law.
Meralco Securities explains that because the Court of Tax Appeals has no jurisdiction to review the decision of the Central
Board of Assessment Appeals and because no judicial review of the Board's decision is provided for in the Real Property Tax
Code, Meralco Securities' recourse is to file a petition for certiorari.
We hold that certiorari was properly availed of in this case. It is a writ issued by a superior court to an inferior court, board or
officer exercising judicial or quasi-judicial functions whereby the record of a particular case is ordered to be elevated for review
and correction in matters of law (14 C.J.S. 121-122; 14 Am Jur. 2nd 777).
The rule is that as to administrative agencies exercising quasi-judicial power there is an underlying power in the courts to
scrutinize the acts of such agencies on questions of law and jurisdiction even though no right of review is given by the statute
(73 C.J.S. 506, note 56).
"The purpose of judicial review is to keep the administrative agency within its jurisdiction and protect substantial rights of
parties affected by its decisions" (73 C.J.S. 507, See. 165). The review is a part of the system of checks and balances which is a
limitation on the separation of powers and which forestalls arbitrary and unjust adjudications.
Judicial review of the decision of an official or administrative agency exercising quasi-judicial functions is proper in cases of
lack of jurisdiction, error of law, grave abuse of discretion, fraud or collusion or in case the administrative decision is corrupt,
arbitrary or capricious (Mafinco Trading Corporation vs. Ople, L-37790, March 25, 1976, 70 SCRA 139, 158; San Miguel
Corporation vs. Secretary of Labor, L-39195, May 16, 1975, 64 SCRA 56, 60, Mun. Council of Lemery vs. Prov. Board of
Batangas, 56 Phil. 260, 268).
The Central Board of Assessment Appeals, in confirming the ruling of the provincial assessor and the provincial board of
assessment appeals that Meralco Securities' pipeline is subject to realty tax, reasoned out that the pipes are machinery or
improvements, as contemplated in the Assessment Law and the Real Property Tax Code; that they do not fall within the
category of property exempt from realty tax under those laws; that articles 415 and 416 of the Civil Code, defining real and
personal property, have no application to this case; that even under article 415, the steel pipes can be regarded as realty because
they are constructions adhered to the soil and things attached to the land in a fixed manner and that Meralco Securities is not
exempt from realty tax under the Petroleum Law (pp. 36-40).
Meralco Securities insists that its pipeline is not subject to realty tax because it is not real property within the meaning of article
415. This contention is not sustainable under the provisions of the Assessment Law, the Real Property Tax Code and the Civil
Code.

Section 2 of the Assessment Law provides that the realty tax is due "on real property, including land, buildings, machinery, and
other improvements" not specifically exempted in section 3 thereof. This provision is reproduced with some modification in the
Real Property Tax Code which provides:
SEC. 38. Incidence of Real Property Tax. There shall be levied, assessed and collected in all provinces, cities
and municipalities an annual ad valorem tax on real property, such as land, buildings, machinery and other
improvements affixed or attached to real property not hereinafter specifically exempted. *
It is incontestable that the pipeline of Meralco Securities does not fall within any of the classes of exempt real property
enumerated in section 3 of the Assessment Law and section 40 of the Real Property Tax Code.
Pipeline means a line of pipe connected to pumps, valves and control devices for conveying liquids, gases or finely divided
solids. It is a line of pipe running upon or in the earth, carrying with it the right to the use of the soil in which it is placed (Note
21[10],54 C.J.S. 561).
Article 415[l] and [3] provides that real property may consist of constructions of all kinds adhered to the soil and everything
attached to an immovable in a fixed manner, in such a way that it cannot be separated therefrom without breaking the material
or deterioration of the object.
The pipeline system in question is indubitably a construction adhering to the soil (Exh. B, p. 39, Rollo). It is attached to the land
in such a way that it cannot be separated therefrom without dismantling the steel pipes which were welded to form the pipeline.
Insofar as the pipeline uses valves, pumps and control devices to maintain the flow of oil, it is in a sense machinery within the
meaning of the Real Property Tax Code.
It should be borne in mind that what are being characterized as real property are not the steel pipes but the pipeline system as a
whole. Meralco Securities has apparently two pipeline systems.
A pipeline for conveying petroleum has been regarded as real property for tax purposes (Miller County Highway, etc., Dist. vs.
Standard Pipe Line Co., 19 Fed. 2nd 3; Board of Directors of Red River Levee Dist. No. 1 of Lafayette County, Ark vs. R. F. C.,
170 Fed. 2nd 430; 50 C. J. 750, note 86).
The other contention of Meralco Securities is that the Petroleum Law exempts it from the payment of realty taxes. The alleged
exemption is predicated on the following provisions of that law which exempt Meralco Securities from local taxes and make it
liable for taxes of general application:
ART. 102. Work obligations, taxes, royalties not to be changed. Work obligations, special taxes and royalties
which are fixed by the provisions of this Act or by the concession for any of the kinds of concessions to which
this Act relates, are considered as inherent on such concessions after they are granted, and shall not be
increased or decreased during the life of the concession to which they apply; nor shall any other special
taxes or levies be applied to such concessions, nor shall 0concessionaires under this Act be subject to
any provincial, municipal or other local taxes or levies;nor shall any sales tax be charged on any petroleum
produced from the concession or portion thereof, manufactured by the concessionaire and used in the working
of his concession. All such concessionaires, however, shall be subject to such taxes as are of general
application in addition to taxes and other levies specifically provided in this Act.
Meralco Securities argues that the realty tax is a local tax or levy and not a tax of general application. This argument is
untenable because the realty tax has always been imposed by the lawmaking body and later by the President of the Philippines
in the exercise of his lawmaking powers, as shown in section 342 et seq. of the Revised Administrative Code, Act No. 3995,
Commonwealth Act No. 470 and Presidential Decree No. 464.
The realty tax is enforced throughout the Philippines and not merely in a particular municipality or city but the proceeds of the
tax accrue to the province, city, municipality and barrio where the realty taxed is situated (Sec. 86, P.D. No. 464). In contrast, a

local tax is imposed by the municipal or city council by virtue of the Local Tax Code, Presidential Decree No. 231, which took
effect on July 1, 1973 (69 O.G. 6197).
We hold that the Central Board of Assessment Appeals did not act with grave abuse of discretion, did not commit any error of
law and acted within its jurisdiction in sustaining the holding of the provincial assessor and the local board of assessment
appeals that Meralco Securities' pipeline system in Laguna is subject to realty tax.
WHEREFORE, the questioned decision and resolution are affirmed. The petition is dismissed. No costs.
SO ORDERED.
Barredo (Chairman), Guerrero, De Castro and Escolin, JJ., concur.
Justice Abad Santos, Concepcion, Jr., JJ., took no part.
G.R. No. L-47943 May 31, 1982
MANILA
ELECTRIC
COMPANY, petitioner,
vs.
CENTRAL BOARD OF ASSESSMENT APPEALS, BOARD OF ASSESSMENT APPEALS OF BATANGAS and
PROVINCIAL ASSESSOR OF BATANGAS, respondents.

AQUINO, J.:
This case is about the imposition of the realty tax on two oil storage tanks installed in 1969 by Manila Electric Company on a
lot in San Pascual, Batangas which it leased in 1968 from Caltex (Phil.), Inc. The tanks are within the Caltex refinery
compound. They have a total capacity of 566,000 barrels. They are used for storing fuel oil for Meralco's power plants.
According to Meralco, the storage tanks are made of steel plates welded and assembled on the spot. Their bottoms rest on a
foundation consisting of compacted earth as the outermost layer, a sand pad as the intermediate layer and a two-inch thick
bituminous asphalt stratum as the top layer. The bottom of each tank is in contact with the asphalt layer,
The steel sides of the tank are directly supported underneath by a circular wall made of concrete, eighteen inches thick, to
prevent the tank from sliding. Hence, according to Meralco, the tank is not attached to its foundation. It is not anchored or
welded to the concrete circular wall. Its bottom plate is not attached to any part of the foundation by bolts, screws or similar
devices. The tank merely sits on its foundation. Each empty tank can be floated by flooding its dike-inclosed location with water
four feet deep. (pp. 29-30, Rollo.)
On the other hand, according to the hearing commissioners of the Central Board of Assessment Appeals, the area where the two
tanks are located is enclosed with earthen dikes with electric steel poles on top thereof and is divided into two parts as the site of
each tank. The foundation of the tanks is elevated from the remaining area. On both sides of the earthen dikes are two separate
concrete steps leading to the foundation of each tank.
Tank No. 2 is supported by a concrete foundation with an asphalt lining about an inch thick. Pipelines were installed on the
sides of each tank and are connected to the pipelines of the Manila Enterprises Industrial Corporation whose buildings and
pumping station are near Tank No. 2.
The Board concludes that while the tanks rest or sit on their foundation, the foundation itself and the walls, dikes and steps,
which are integral parts of the tanks, are affixed to the land while the pipelines are attached to the tanks. (pp. 60-61, Rollo.) In
1970, the municipal treasurer of Bauan, Batangas, on the basis of an assessment made by the provincial assessor, required
Meralco to pay realty taxes on the two tanks. For the five-year period from 1970 to 1974, the tax and penalties amounted to

P431,703.96 (p. 27, Rollo). The Board required Meralco to pay the tax and penalties as a condition for entertaining its appeal
from the adverse decision of the Batangas board of assessment appeals.
The Central Board of Assessment Appeals (composed of Acting Secretary of Finance Pedro M. Almanzor as chairman and
Secretary of Justice Vicente Abad Santos and Secretary of Local Government and Community Development Jose Roo as
members) in its decision dated November 5, 1976 ruled that the tanks together with the foundation, walls, dikes, steps, pipelines
and other appurtenances constitute taxable improvements.
Meralco received a copy of that decision on February 28, 1977. On the fifteenth day, it filed a motion for reconsideration which
the Board denied in its resolution of November 25, 1977, a copy of which was received by Meralco on February 28, 1978.
On March 15, 1978, Meralco filed this special civil action of certiorari to annul the Board's decision and resolution. It contends
that the Board acted without jurisdiction and committed a grave error of law in holding that its storage tanks are taxable real
property.
Meralco contends that the said oil storage tanks do not fall within any of the kinds of real property enumerated in article 415 of
the Civil Code and, therefore, they cannot be categorized as realty by nature, by incorporation, by destination nor by analogy.
Stress is laid on the fact that the tanks are not attached to the land and that they were placed on leased land, not on the land
owned by Meralco.
This is one of those highly controversial, borderline or penumbral cases on the classification of property where strong divergent
opinions are inevitable. The issue raised by Meralco has to be resolved in the light of the provisions of the Assessment Law,
Commonwealth Act No. 470, and the Real Property Tax Code, Presidential Decree No. 464 which took effect on June 1, 1974.
Section 2 of the Assessment Law provides that the realty tax is due "on real property, including land, buildings, machinery, and
other improvements" not specifically exempted in section 3 thereof. This provision is reproduced with some modification in the
Real Property Tax Code which provides:
Sec. 38. Incidence of Real Property Tax. They shall be levied, assessed and collected in all provinces, cities
and municipalities an annual ad valorem tax on real property, such as land, buildings, machinery and
other improvements affixed or attached to real property not hereinafter specifically exempted.
The Code contains the following definition in its section 3:
k) Improvements is a valuable addition made to property or an amelioration in its condition, amounting to
more than mere repairs or replacement of waste, costing labor or capital and intended to enhance its value,
beauty or utility or to adapt it for new or further purposes.
We hold that while the two storage tanks are not embedded in the land, they may, nevertheless, be considered as improvements
on the land, enhancing its utility and rendering it useful to the oil industry. It is undeniable that the two tanks have been installed
with some degree of permanence as receptacles for the considerable quantities of oil needed by Meralco for its operations.
Oil storage tanks were held to be taxable realty in Standard Oil Co. of New Jersey vs. Atlantic City, 15 Atl. 2nd 271.
For purposes of taxation, the term "real property" may include things which should generally be regarded as personal
property(84 C.J.S. 171, Note 8). It is a familiar phenomenon to see things classed as real property for purposes of taxation
which on general principle might be considered personal property (Standard Oil Co. of New York vs. Jaramillo, 44 Phil. 630,
633).
The case of Board of Assessment Appeals vs. Manila Electric Company, 119 Phil. 328, wherein Meralco's steel towers were
held not to be subject to realty tax, is not in point because in that case the steel towers were regarded as poles and under its
franchise Meralco's poles are exempt from taxation. Moreover, the steel towers were not attached to any land or building. They
were removable from their metal frames.

Nor is there any parallelism between this case and Mindanao Bus Co. vs. City Assessor, 116 Phil. 501, where the tools and
equipment in the repair, carpentry and blacksmith shops of a transportation company were held not subject to realty tax because
they were personal property.
WHEREFORE, the petition is dismissed. The Board's questioned decision and resolution are affirmed. No costs.
SO ORDERED.
Barredo (Chairman), Guerrero, De Castro and Escolin, JJ., concur.
Concepcion, Jr., J., is on leave.
Justice Abad Santos, J., took no part.

G.R. No. L-50466 May 31, 1982


CALTEX
(PHILIPPINES)
vs.
CENTRAL BOARD OF ASSESSMENT APPEALS and CITY ASSESSOR OF PASAY, respondents.

INC., petitioner,

AQUINO, J.:
This case is about the realty tax on machinery and equipment installed by Caltex (Philippines) Inc. in its gas stations located on
leased land.
The machines and equipment consists of underground tanks, elevated tank, elevated water tanks, water tanks, gasoline pumps,
computing pumps, water pumps, car washer, car hoists, truck hoists, air compressors and tireflators. The city assessor described
the said equipment and machinery in this manner:
A gasoline service station is a piece of lot where a building or shed is erected, a water tank if there is any is
placed in one corner of the lot, car hoists are placed in an adjacent shed, an air compressor is attached in the
wall of the shed or at the concrete wall fence.
The controversial underground tank, depository of gasoline or crude oil, is dug deep about six feet more or
less, a few meters away from the shed. This is done to prevent conflagration because gasoline and other
combustible oil are very inflammable.
This underground tank is connected with a steel pipe to the gasoline pump and the gasoline pump is commonly
placed or constructed under the shed. The footing of the pump is a cement pad and this cement pad is
imbedded in the pavement under the shed, and evidence that the gasoline underground tank is attached and
connected to the shed or building through the pipe to the pump and the pump is attached and affixed to the
cement pad and pavement covered by the roof of the building or shed.

The building or shed, the elevated water tank, the car hoist under a separate shed, the air compressor, the
underground gasoline tank, neon lights signboard, concrete fence and pavement and the lot where they are all
placed or erected, all of them used in the pursuance of the gasoline service station business formed the entire
gasoline service-station.
As to whether the subject properties are attached and affixed to the tenement, it is clear they are, for the
tenement we consider in this particular case are (is) the pavement covering the entire lot which was constructed
by the owner of the gasoline station and the improvement which holds all the properties under question, they
are attached and affixed to the pavement and to the improvement.
The pavement covering the entire lot of the gasoline service station, as well as all the improvements, machines,
equipments and apparatus are allowed by Caltex (Philippines) Inc. ...
The underground gasoline tank is attached to the shed by the steel pipe to the pump, so with the water tank it is
connected also by a steel pipe to the pavement, then to the electric motor which electric motor is placed under
the shed. So to say that the gasoline pumps, water pumps and underground tanks are outside of the service
station, and to consider only the building as the service station is grossly erroneous. (pp. 58-60, Rollo).
The said machines and equipment are loaned by Caltex to gas station operators under an appropriate lease agreement or receipt.
It is stipulated in the lease contract that the operators, upon demand, shall return to Caltex the machines and equipment in good
condition as when received, ordinary wear and tear excepted.
The lessor of the land, where the gas station is located, does not become the owner of the machines and equipment installed
therein. Caltex retains the ownership thereof during the term of the lease.
The city assessor of Pasay City characterized the said items of gas station equipment and machinery as taxable realty. The realty
tax on said equipment amounts to P4,541.10 annually (p. 52, Rollo). The city board of tax appeals ruled that they are personalty.
The assessor appealed to the Central Board of Assessment Appeals.
The Board, which was composed of Secretary of Finance Cesar Virata as chairman, Acting Secretary of Justice Catalino
Macaraig, Jr. and Secretary of Local Government and Community Development Jose Roo, held in its decision of June 3, 1977
that the said machines and equipment are real property within the meaning of sections 3(k) & (m) and 38 of the Real Property
Tax Code, Presidential Decree No. 464, which took effect on June 1, 1974, and that the definitions of real property and personal
property in articles 415 and 416 of the Civil Code are not applicable to this case.
The decision was reiterated by the Board (Minister Vicente Abad Santos took Macaraig's place) in its resolution of January 12,
1978, denying Caltex's motion for reconsideration, a copy of which was received by its lawyer on April 2, 1979.
On May 2, 1979 Caltex filed this certiorari petition wherein it prayed for the setting aside of the Board's decision and for a
declaration that t he said machines and equipment are personal property not subject to realty tax (p. 16, Rollo).
The Solicitor General's contention that the Court of Tax Appeals has exclusive appellate jurisdiction over this case is not correct.
When Republic act No. 1125 created the Tax Court in 1954, there was as yet no Central Board of Assessment Appeals. Section
7(3) of that law in providing that the Tax Court had jurisdiction to review by appeal decisions of provincial or city boards of
assessment appeals had in mind the local boards of assessment appeals but not the Central Board of Assessment Appeals which
under the Real Property Tax Code has appellate jurisdiction over decisions of the said local boards of assessment appeals and is,
therefore, in the same category as the Tax Court.
Section 36 of the Real Property Tax Code provides that the decision of the Central Board of Assessment Appeals shall become
final and executory after the lapse of fifteen days from the receipt of its decision by the appellant. Within that fifteen-day period,
a petition for reconsideration may be filed. The Code does not provide for the review of the Board's decision by this Court.
Consequently, the only remedy available for seeking a review by this Court of the decision of the Central Board of Assessment
Appeals is the special civil action of certiorari, the recourse resorted to herein by Caltex (Philippines), Inc.

The issue is whether the pieces of gas station equipment and machinery already enumerated are subject to realty tax. This issue
has to be resolved primarily under the provisions of the Assessment Law and the Real Property Tax Code.
Section 2 of the Assessment Law provides that the realty tax is due "on real property, including land, buildings, machinery, and
other improvements" not specifically exempted in section 3 thereof. This provision is reproduced with some modification in the
Real Property Tax Code which provides:
SEC. 38. Incidence of Real Property Tax. There shall be levied, assessed and collected in all provinces, cities
and municipalities an annual ad valorem tax on real property, such as land, buildings, machinery and other
improvements affixed or attached to real property not hereinafter specifically exempted.
The Code contains the following definitions in its section 3:
k) Improvements is a valuable addition made to property or an amelioration in its condition, amounting to
more than mere repairs or replacement of waste, costing labor or capital and intended to enhance its value,
beauty or utility or to adapt it for new or further purposes.
m) Machinery shall embrace machines, mechanical contrivances, instruments, appliances and apparatus
attached to the real estate. It includes the physical facilities available for production, as well as the installations
and appurtenant service facilities, together with all other equipment designed for or essential to its
manufacturing, industrial or agricultural purposes (See sec. 3[f], Assessment Law).
We hold that the said equipment and machinery, as appurtenances to the gas station building or shed owned by Caltex (as to
which it is subject to realty tax) and which fixtures are necessary to the operation of the gas station, for without them the gas
station would be useless, and which have been attached or affixed permanently to the gas station site or embedded therein, are
taxable improvements and machinery within the meaning of the Assessment Law and the Real Property Tax Code.
Caltex invokes the rule that machinery which is movable in its nature only becomes immobilized when placed in a plant by the
owner of the property or plant but not when so placed by a tenant, a usufructuary, or any person having only a temporary right,
unless such person acted as the agent of the owner (Davao Saw Mill Co. vs. Castillo, 61 Phil 709).
That ruling is an interpretation of paragraph 5 of article 415 of the Civil Code regarding machinery that becomes real property
by destination. In the Davao Saw Mills case the question was whether the machinery mounted on foundations of cement and
installed by the lessee on leased land should be regarded as real property forpurposes of execution of a judgment against the
lessee. The sheriff treated the machinery as personal property. This Court sustained the sheriff's action. (Compare with
Machinery & Engineering Supplies, Inc. vs. Court of Appeals, 96 Phil. 70, where in a replevin case machinery was treated as
realty).
Here, the question is whether the gas station equipment and machinery permanently affixed by Caltex to its gas station and
pavement (which are indubitably taxable realty) should be subject to the realty tax. This question is different from the issue
raised in the Davao Saw Mill case.
Improvements on land are commonly taxed as realty even though for some purposes they might be considered personalty (84
C.J.S. 181-2, Notes 40 and 41). "It is a familiar phenomenon to see things classed as real property for purposes of taxation
which on general principle might be considered personal property" (Standard Oil Co. of New York vs. Jaramillo, 44 Phil. 630,
633).
This case is also easily distinguishable from Board of Assessment Appeals vs. Manila Electric Co., 119 Phil. 328, where
Meralco's steel towers were considered poles within the meaning of paragraph 9 of its franchise which exempts its poles from
taxation. The steel towers were considered personalty because they were attached to square metal frames by means of bolts and
could be moved from place to place when unscrewed and dismantled.
Nor are Caltex's gas station equipment and machinery the same as tools and equipment in the repair shop of a bus company
which were held to be personal property not subject to realty tax (Mindanao Bus Co. vs. City Assessor, 116 Phil. 501).

The Central Board of Assessment Appeals did not commit a grave abuse of discretion in upholding the city assessor's is
imposition of the realty tax on Caltex's gas station and equipment.
WHEREFORE, the questioned decision and resolution of the Central Board of Assessment Appeals are affirmed. The petition
for certiorari is dismissed for lack of merit. No costs.
SO ORDERED.
Barredo (Chairman), Guerrero, De Castro and Escolin, JJ., concur.
Concepcion, Jr. and Abad Santos, JJ., took no part.

G.R. No. 106041 January 29, 1993


BENGUET
CORPORATION, petitioner,
vs.
CENTRAL BOARD OF ASSESSMENT APPEALS, BOARD OF ASSESSMENT APPEALS OF ZAMBALES,
PROVINCIAL ASSESSOR OF ZAMBALES, PROVINCE OF ZAMBALES, and MUNICIPALITY OF SAN
MARCELINO, respondents.
Romulo, Mabanta, Buenaventura, Sayoc & De los Angeles for petitioner.

CRUZ, J.:
The realty tax assessment involved in this case amounts to P11,319,304.00. It has been imposed on the petitioner's tailings dam
and the land thereunder over its protest.
The controversy arose in 1985 when the Provincial Assessor of Zambales assessed the said properties as taxable improvements.
The assessment was appealed to the Board of Assessment Appeals of the Province of Zambales. On August 24, 1988, the appeal
was dismissed mainly on the ground of the petitioner's "failure to pay the realty taxes that fell due during the pendency of the
appeal."
The petitioner seasonably elevated the matter to the Central Board of Assessment Appeals, 1 one of the herein respondents. In its
decision dated March 22, 1990, the Board reversed the dismissal of the appeal but, on the merits, agreed that "the tailings dam and the
lands submerged thereunder (were) subject to realty tax."

For purposes of taxation the dam is considered as real property as it comes within the object mentioned in
paragraphs (a) and (b) of Article 415 of the New Civil Code. It is a construction adhered to the soil which
cannot be separated or detached without breaking the material or causing destruction on the land upon which it
is attached. The immovable nature of the dam as an improvement determines its character as real property,
hence taxable under Section 38 of the Real Property Tax Code. (P.D. 464).
Although the dam is partly used as an anti-pollution device, this Board cannot accede to the request for tax
exemption in the absence of a law authorizing the same.
xxx xxx xxx
We find the appraisal on the land submerged as a result of the construction of the tailings dam, covered by Tax
Declaration
Nos.
002-0260 and 002-0266, to be in accordance with the Schedule of Market Values for Zambales which was
reviewed and allowed for use by the Ministry (Department) of Finance in the 1981-1982 general revision. No
serious attempt was made by Petitioner-Appellant Benguet Corporation to impugn its reasonableness, i.e., that
the P50.00 per square meter applied by Respondent-Appellee Provincial Assessor is indeed excessive and
unconscionable. Hence, we find no cause to disturb the market value applied by Respondent Appellee
Provincial Assessor of Zambales on the properties of Petitioner-Appellant Benguet Corporation covered by Tax
Declaration Nos. 002-0260 and 002-0266.
This petition for certiorari now seeks to reverse the above ruling.
The principal contention of the petitioner is that the tailings dam is not subject to realty tax because it is not an "improvement"
upon the land within the meaning of the Real Property Tax Code. More particularly, it is claimed
(1) as regards the tailings dam as an "improvement":
(a) that the tailings dam has no value separate from and independent of the mine; hence, by
itself it cannot be considered an improvement separately assessable;
(b) that it is an integral part of the mine;
(c) that at the end of the mining operation of the petitioner corporation in the area, the tailings
dam will benefit the local community by serving as an irrigation facility;
(d) that the building of the dam has stripped the property of any commercial value as the
property is submerged under water wastes from the mine;
(e) that the tailings dam is an environmental pollution control device for which petitioner
must be commended rather than penalized with a realty tax assessment;
(f) that the installation and utilization of the tailings dam as a pollution control device is a
requirement imposed by law;
(2) as regards the valuation of the tailings dam and the submerged lands:
(a) that the subject properties have no market value as they cannot be sold independently of
the mine;
(b) that the valuation of the tailings dam should be based on its incidental use by petitioner as
a water reservoir and not on the alleged cost of construction of the dam and the annual buildup expense;

(c) that the "residual value formula" used by the Provincial Assessor and adopted by
respondent CBAA is arbitrary and erroneous; and
(3)
as
regards
the
petitioner's
liability
for
non-declaration of the tailings dam and the submerged lands for realty tax purposes:

penalties

for

(a) that where a tax is not paid in an honest belief that it is not due, no penalty shall be
collected in addition to the basic tax;
(b) that no other mining companies in the Philippines operating a tailings dam have been
made to declare the dam for realty tax purposes.
The petitioner does not dispute that the tailings dam may be considered realty within the meaning of Article 415. It insists,
however, that the dam cannot be subjected to realty tax as a separate and independent property because it does not constitute an
"assessable improvement" on the mine although a considerable sum may have been spent in constructing and maintaining it.
To support its theory, the petitioner cites the following cases:
1. Municipality of Cotabato v. Santos (105 Phil. 963), where this Court considered the dikes and gates constructed by the
taxpayer in connection with a fishpond operation as integral parts of the fishpond.
2. Bislig Bay Lumber Co. v. Provincial Government of Surigao (100 Phil. 303), involving a road constructed by the timber
concessionaire in the area, where this Court did not impose a realty tax on the road primarily for two reasons:
In the first place, it cannot be disputed that the ownership of the road that was constructed by appellee belongs
to the government by right of accession not only because it is inherently incorporated or attached to the timber
land . . . but also because upon the expiration of the concession said road would ultimately pass to the national
government. . . . In the second place, while the road was constructed by appellee primarily for its use and
benefit, the privilege is not exclusive, for . . . appellee cannot prevent the use of portions of the concession for
homesteading purposes. It is also duty bound to allow the free use of forest products within the concession for
the personal use of individuals residing in or within the vicinity of the land. . . . In other words, the government
has practically reserved the rights to use the road to promote its varied activities. Since, as above shown, the
road in question cannot be considered as an improvement which belongs to appellee, although in part is for its
benefit, it is clear that the same cannot be the subject of assessment within the meaning of Section 2 of C.A.
No. 470.
Apparently, the realty tax was not imposed not because the road was an integral part of the lumber concession but because the
government had the right to use the road to promote its varied activities.
3. Kendrick v. Twin Lakes Reservoir Co. (144 Pacific 884), an American case, where it was declared that the reservoir dam went
with and formed part of the reservoir and that the dam would be "worthless and useless except in connection with the outlet
canal, and the water rights in the reservoir represent and include whatever utility or value there is in the dam and headgates."
4. Ontario Silver Mining Co. v. Hixon (164 Pacific 498), also from the United States. This case involved drain tunnels
constructed by plaintiff when it expanded its mining operations downward, resulting in a constantly increasing flow of water in
the said mine. It was held that:
Whatever value they have is connected with and in fact is an integral part of the mine itself. Just as much so as
any shaft which descends into the earth or an underground incline, tunnel, or drift would be which was used in
connection with the mine.
On the other hand, the Solicitor General argues that the dam is an assessable improvement because it enhances the value and
utility of the mine. The primary function of the dam is to receive, retain and hold the water coming from the operations of the
mine, and it also enables the petitioner to impound water, which is then recycled for use in the plant.

There is also ample jurisprudence to support this view, thus:


. . . The said equipment and machinery, as appurtenances to the gas station building or shed owned by Caltex
(as to which it is subject to realty tax) and which fixtures are necessary to the operation of the gas station, for
without them the gas station would be useless and which have been attached or affixed permanently to the gas
station site or embedded therein, are taxable improvements and machinery within the meaning of the
Assessment Law and the Real Property Tax Code. (Caltex [Phil.] Inc. v. CBAA, 114 SCRA 296).
We hold that while the two storage tanks are not embedded in the land, they may, nevertheless, be considered
as improvements on the land, enhancing its utility and rendering it useful to the oil industry. It is undeniable
that the two tanks have been installed with some degree of permanence as receptacles for the considerable
quantities of oil needed by MERALCO for its operations. (Manila Electric Co. v. CBAA, 114 SCRA 273).
The pipeline system in question is indubitably a construction adhering to the soil. It is attached to the land in
such a way that it cannot be separated therefrom without dismantling the steel pipes which were welded to
form the pipeline. (MERALCO Securities Industrial Corp. v. CBAA, 114 SCRA 261).
The tax upon the dam was properly assessed to the plaintiff as a tax upon real estate. (Flax-Pond Water Co. v.
City of Lynn, 16 N.E. 742).
The oil tanks are structures within the statute, that they are designed and used by the owner as permanent
improvement of the free hold, and that for such reasons they were properly assessed by the respondent taxing
district as improvements. (Standard Oil Co. of New Jersey v. Atlantic City, 15 A 2d. 271)
The Real Property Tax Code does not carry a definition of "real property" and simply says that the realty tax is imposed on "real
property, such as lands, buildings, machinery and other improvements affixed or attached to real property." In the absence of
such a definition, we apply Article 415 of the Civil Code, the pertinent portions of which state:
Art. 415. The following are immovable property.
(1) Lands, buildings and constructions of all kinds adhered to the soil;
xxx xxx xxx
(3) Everything attached to an immovable in a fixed manner, in such a way that it cannot be separated therefrom
without breaking the material or deterioration of the object.
Section 2 of C.A. No. 470, otherwise known as the Assessment Law, provides that the realty tax is due "on the real property,
including land, buildings, machinery and other improvements" not specifically exempted in Section 3 thereof. A reading of that
section shows that the tailings dam of the petitioner does not fall under any of the classes of exempt real properties therein
enumerated.
Is the tailings dam an improvement on the mine? Section 3(k) of the Real Property Tax Code defines improvement as follows:
(k) Improvements is a valuable addition made to property or an amelioration in its condition, amounting to
more than mere repairs or replacement of waste, costing labor or capital and intended to enhance its value,
beauty or utility or to adopt it for new or further purposes.
The term has also been interpreted as "artificial alterations of the physical condition of the ground that arereasonably permanent
in character." 2
The Court notes that in the Ontario case the plaintiff admitted that the mine involved therein could not be operated without the
aid of the drain tunnels, which were indispensable to the successful development and extraction of the minerals therein. This is
not true in the present case.

Even without the tailings dam, the petitioner's mining operation can still be carried out because the primary function of the dam
is merely to receive and retain the wastes and water coming from the mine. There is no allegation that the water coming from
the dam is the sole source of water for the mining operation so as to make the dam an integral part of the mine. In fact, as a
result of the construction of the dam, the petitioner can now impound and recycle water without having to spend for the building
of a water reservoir. And as the petitioner itself points out, even if the petitioner's mine is shut down or ceases operation, the
dam may still be used for irrigation of the surrounding areas, again unlike in the Ontario case.
As correctly observed by the CBAA, the Kendrick case is also not applicable because it involved water reservoir dams used for
different purposes and for the benefit of the surrounding areas. By contrast, the tailings dam in question is being
used exclusively for the benefit of the petitioner.
Curiously, the petitioner, while vigorously arguing that the tailings dam has no separate existence, just as vigorously contends
that at the end of the mining operation the tailings dam will serve the local community as an irrigation facility, thereby implying
that it can exist independently of the mine.
From the definitions and the cases cited above, it would appear that whether a structure constitutes an improvement so as to
partake of the status of realty would depend upon the degree of permanence intended in its construction and use. The
expression "permanent" as applied to an improvement does not imply that the improvement must be used perpetually but only
until the purpose to which the principal realty is devoted has been accomplished. It is sufficient that the improvement is
intended to remain as long as the land to which it is annexed is still used for the said purpose.
The Court is convinced that the subject dam falls within the definition of an "improvement" because it is permanent in character
and it enhances both the value and utility of petitioner's mine. Moreover, the immovable nature of the dam defines its character
as real property under Article 415 of the Civil Code and thus makes it taxable under Section 38 of the Real Property Tax Code.
The Court will also reject the contention that the appraisal at P50.00 per square meter made by the Provincial Assessor is
excessive and that his use of the "residual value formula" is arbitrary and erroneous.
Respondent Provincial Assessor explained the use of the "residual value formula" as follows:
A 50% residual value is applied in the computation because, while it is true that when slime fills the dike, it
will then be covered by another dike or stage, the stage covered is still there and still exists and since only one
face of the dike is filled, 50% or the other face is unutilized.
In sustaining this formula, the CBAA gave the following justification:
We find the appraisal on the land submerged as a result of the construction of the tailings dam, covered by Tax
Declaration
Nos.
002-0260 and 002-0266, to be in accordance with the Schedule of Market Values for San Marcelino, Zambales,
which is fifty (50.00) pesos per square meter for third class industrial land (TSN, page 17, July 5, 1989) and
Schedule of Market Values for Zambales which was reviewed and allowed for use by the Ministry
(Department) of Finance in the 1981-1982 general revision. No serious attempt was made by PetitionerAppellant Benguet Corporation to impugn its reasonableness, i.e, that the P50.00 per square meter applied by
Respondent-Appellee Provincial Assessor is indeed excessive and unconscionable. Hence, we find no cause to
disturb the market value applied by Respondent-Appellee Provincial Assessor of Zambales on the properties of
Petitioner-Appellant Benguet Corporation covered by Tax Declaration Nos. 002-0260 and 002-0266.
It has been the long-standing policy of this Court to respect the conclusions of quasi-judicial agencies like the CBAA, which,
because of the nature of its functions and its frequent exercise thereof, has developed expertise in the resolution of assessment
problems. The only exception to this rule is where it is clearly shown that the administrative body has committed grave abuse of
discretion calling for the intervention of this Court in the exercise of its own powers of review. There is no such showing in the
case at bar.

We disagree, however, with the ruling of respondent CBAA that it cannot take cognizance of the issue of the propriety of the
penalties imposed upon it, which was raised by the petitioner for the first time only on appeal. The CBAA held that this "is an
entirely new matter that petitioner can take up with the Provincial Assessor (and) can be the subject of another protest before the
Local Board or a negotiation with the local sanggunian . . ., and in case of an adverse decision by either the Local Board or the
local sanggunian, (it can) elevate the same to this Board for appropriate action."
There is no need for this time-wasting procedure. The Court may resolve the issue in this petition instead of referring it back to
the local authorities. We have studied the facts and circumstances of this case as above discussed and find that the petitioner has
acted in good faith in questioning the assessment on the tailings dam and the land submerged thereunder. It is clear that it has
not done so for the purpose of evading or delaying the payment of the questioned tax. Hence, we hold that the petitioner is not
subject
to
penalty
for
its
non-declaration of the tailings dam and the submerged lands for realty tax purposes.
WHEREFORE, the petition is DISMISSED for failure to show that the questioned decision of respondent Central Board of
Assessment Appeals is tainted with grave abuse of discretion except as to the imposition of penalties upon the petitioner which
is hereby SET ASIDE. Costs against the petitioner. It is so ordered.
Narvasa, C.J., Gutierrez, Jr., Padilla, Bidin, Grio-Aquino, Regalado, Davide, Jr., Romero, Nocon, Bellosillo, Melo and
Campos, Jr., JJ., concur.
Feliciano, J., took no part.

[G.R. No. 152115. January 26, 2005]

NIMFA USERO, petitioner, vs. COURT OF APPEALS and SPS. HERMINIGILDO & CECILIA POLINAR, respondents.
[G.R. No. 155055. January 26, 2005]

LUTGARDA R. SAMELA, petitioner, vs. COURT OF APPEALS and SPS. HERMINIGILDO & CECILIA POLINAR,
respondents.
DECISION
CORONA, J.:

Before this Court are two consolidated petitions for review on certiorari under Rule 45 of the Rules of Court. The first
petition, docketed as G.R. No. 152115, filed by Nimfa Usero, assails the September 19, 2001 decision[1] of the Court of
Appeals in CA-GR SP No. 64718. The second petition, docketed as G.R. No. 155055, filed by Lutgarda R. Samela, assails
the January 11, 2002 decision[2] of the Court of Appeals in CA-GR SP NO. 64181.

The undisputed facts follow.

Petitioners Lutgarda R. Samela and Nimfa Usero are the owners respectively of lots 1 and 2, Block 5, Golden Acres
Subdivision, Barrio Almanza, Las Pias City.

Private respondent spouses Polinar are the registered owners of a parcel of land at no. 18 Anahaw St., Pilar Village, Las
Pias City, behind the lots of petitioners Samela and Usero.

Situated between the lots of the parties is a low-level strip of land, with a stagnant body of water filled with floating water
lilies; abutting and perpendicular to the lot of petitioner Samela, the lot of the Polinars and the low-level strip of land is
the perimeter wall of Pilar Village Subdivision.

Apparently, every time a storm or heavy rains occur, the water in said strip of land rises and the strong current passing
through it causes considerable damage to the house of respondent Polinars. Frustrated by their predicament, private
respondent spouses, on July 30, 1998, erected a concrete wall on the bank of the low-level strip of land about three meters
from their house and rip-rapped the soil on that portion of the strip of land.

Claiming ownership of the subject strip of land, petitioners Samela and Usero demanded that the spouses Apolinar stop
their construction but the spouses paid no heed, believing the strip to be part of a creek. Nevertheless, for the sake of
peace, the Polinars offered to pay for the land being claimed by petitioners Samela and Usero. However, the parties failed
to settle their differences.

On November 9, 1998, petitioners filed separate complaints for forcible entry against the Polinars at the Metropolitan
Trial Court of Las Pias City. The case filed by petitioner Samela was docketed as Civil Case No. 5242, while that of
petitioner Usero was docketed as Civil Case No. 5243.

In Civil Case No. 5242, petitioner Samela adduced in evidence a copy of her Transfer Certificate of Title, plan of
consolidation, subdivision survey, the tax declaration in her name, and affidavits of petitioner Usero and a certain Justino
Gamela whose property was located beside the perimeter wall of Pilar Village.

The spouses Polinar, on the other hand, presented in evidence their own TCT; a barangay certification as to the existence
of the creek; a certification from the district engineer that the western portion of Pilar Village is bound by a tributary of
Talon Creek throughout its entire length; boundary and index map of Pilar Village showing that the village is surrounded
by a creek and that the Polinar property is situated at the edge of said creek; and pictures of the subject strip of land filled
with water lilies.

On March 22, 1999, the trial court rendered a decision in favor of petitioner Samela:

WHEREFORE, the Court hereby renders judgment ordering the defendants to vacate and remove at their expense the
improvements made on the subject lot; ordering the defendants to pay the plaintiff P1,000.00 a month as reasonable
compensation for the use of the portion encroached from the filing of the complaint until the same is finally vacated; and
to pay plaintiff P10,000.00 as reasonable attorneys fees plus costs of suit.[3]

In a parallel development, the Metropolitan Trial Court, in Civil Case No. 5243, issued an order on February 29, 2000,
directing petitioner Usero and the Polinar spouses to commission a professional geodetic engineer to conduct a relocation
survey and to submit the report to the trial court.

On April 24, 2000, Mariano Flotilde, a licensed geodetic engineer, conducted a relocation survey of Useros property
covered by TCT No. T- 29545. The result of the said relocation survey, as stated in his affidavit, was as follows:

1. That I executed a relocation survey of Lot 2, Block 5, (LRC) PCS-4463 covered by TCT No. T-29545 registered in the
name of Nimfa O. Usero;

2. That according to my survey, I found out that there is no existing creek on the boundary of the said lot;

3. That based on the relocation plan surveyed by the undersigned, attached herewith, appearing is the encroachment on the
above-mentioned lot by Spouses Herminigildo and Cecilia Polinar with an area of FORTY THREE (43) SQUARE
METERS;

4. That this affidavit was made in compliance with Court Order dated February 23, 2000 of Metropolitan Trial Court, Las
Pias City, Branch LXXIX.[4]

On August 25, 2000, the Metropolitan Trial Court decided in favor of petitioner Usero:

WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendants ordering them:

a) To vacate and remove at their expense the improvement made on the subject lot;

b) To pay the plaintiff P1,000.00 a month as reasonable compensation for the portion encroached from the time of the
filing of the complaint until the same is finally vacated;

c) To pay plaintiff P10,000.00 as reasonable attorneys fees plus costs of suit.

SO ORDERED.[5]

The Polinar spouses appealed the decisions of the two Municipal Trial Courts to the Regional Trial Court of Las Pias,
Branch 253 which heard the appeals separately.

On December 20, 2000, the Regional Trial Court, deciding Civil Case No. 5242, reversed the decision of the trial court
and ordered the dismissal of the complaint. It confirmed the existence of the creek between the northwestern portion of
the lot of petitioner Samela and the southwestern portion of the lot of the spouses Polinar:

Finding the existence of a creek between the respective properties of the parties, plaintiff-appellee cannot therefore lay
claim of lawful ownership of that portion because the same forms part of public dominion. Consequently, she cannot
legally stop the defendants-appellants from rip-rapping the bank of the creek to protect the latters property from soil
erosion thereby avoiding danger to their lives and damage to property.

Absent a lawful claim by the plaintiff-appellee over the subject portion of that lot, defendants-appellants are not duty
bound to pay the former compensation for the use of the same. As a result, they may maintain the said improvements
introduced thereon subject to existing laws, rules and regulations and/or ordinances appurtenant thereto.

WHEREFORE, premises considered, the Decision rendered by Branch 79 of the Metropolitan Trial Court, Las Pias is
REVERSED. Accordingly, the instant complaint is DISMISSED.

SO ORDERED.[6]

On March 16, 2001, the Regional Trial Court, in Civil Case No. 5243, also reversed the finding of the Municipal Trial
Court:

From the foregoing, defendants-appellants may maintain the improvements introduced on the subject portion of the lot
subject to existing laws, rules and regulations and/or ordinances pertaining thereto. Consequently, no compensation may
be awarded in favor of the plaintiff-appellee.

WHEREFORE, premises considered, the above-mentioned Decision rendered by Branch 79 of the Las Pias City
Metropolitan Trial Court is REVERSED. Accordingly, the instant complaint is DISMISSED.

From the adverse decisions of the Regional Trial Court, petitioners filed their respective petitions for review on certiorari
to the Court of Appeals. Petitioner Samelas case was docketed as CA-G.R. SP 64181 while that of petitioner Usero was
docketed as CA-G.R. SP 64718.

Both petitions failed in the CA. Thus the instant consolidated petitions.

The pivotal issue in the case at bar is whether or not the disputed strip of land, allegedly encroached upon by the spouses
Polinar, is the private property of petitioners or part of the creek and therefore part of the public domain. Clearly this an
issue which calls for a review of facts already determined by the Court of Appeals.

The jurisdiction of the Court in petitions for review on certiorari under Rule 45 of the Rules of Court is limited to
reviewing only errors of law, not of fact, unless the factual findings complained of are devoid of support by the evidence
on record or the assailed judgment is based on a misapprehension of facts.[7] This is obviously not the case here.

A careful scrutiny of the records reveals that the assailed decisions are founded on sufficient evidence. That the subject
strip of land is a creek is evidenced by: (1) a barangay certification that a creek exists in the disputed strip of land; (2) a
certification from the Second Manila Engineering District, NCR-DPWH, that the western portion of Pilar Village where
the subject strip of land is located is bounded by a tributary of Talon Creek and (3) photographs showing the abundance of
water lilies in the subject strip of land. The Court of Appeals was correct: the fact that water lilies thrive in that strip of
land can only mean that there is a permanent stream of water or creek there.

In contrast, petitioners failed to present proof sufficient to support their claim. Petitioners presented the TCTs of their
respective lots to prove that there is no creek between their properties and that of the Polinars. However, an examination
of said TCTs reveals that the descriptions thereon are incomplete. In petitioner Samelas TCT No. T-30088, there is no
boundary description relative to the northwest portion of the property pertaining to the site of the creek. Likewise in TCT
No. T-22329-A of the spouses Polinar, the southeast portion which pertains to the site of the creek has no described
boundary. Moreover the tax declaration presented by petitioner is devoid of any entry on the west boundary vis-a-vis the
location of the creek. All the pieces of evidence taken together, we can only conclude that the adjoining portion of these
boundaries is in fact a creek and belongs to no one but the state.

Property is either of public dominion or of private ownership.[8] Concomitantly, Article 420 of the Civil Code provides:

ART. 420. The following things are property of public dominion:

(1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the State, banks,
shores, roadsteads, and others of similar character;

The phrase others of similar character includes a creek which is a recess or an arm of a river. It is property belonging to
the public domain which is not susceptible to private ownership.[9] Being public water, a creek cannot be registered under
the Torrens System in the name of any individual[10].

Accordingly, the Polinar spouses may utilize the rip-rapped portion of the creek to prevent the erosion of their property.

WHEREFORE, the consolidated petitions are hereby denied. The assailed decisions of the Court of Appeals in CA-G.R.
SP 64181 and CA-G.R. SP 64718 are affirmed in toto.

SO ORDERED.

Panganiban, (Chairman), Sandoval-Gutierrez, Carpio-Morales, and Garcia, JJ., concur.

G.R. No. L-24950

March 25, 1926

VIUDA
DE
TAN
vs.
THE MUNICIPAL COUNCIL OF ILOILO, defendant-appellee.
Arroyo
&
Provincial Fiscal Borromeo Veloso for appelle.

Evangelista

TOCO, plaintiff-appellant,

for

appellant.

VILLAMOR, J.:
It appears from the record that the widow of Tan Toco had sued the municipal council of Iloilo for the amount of P42,966.40,
being the purchase price of two strips of land, one on Calle J. M. Basa consisting of 592 square meters, and the other on Calle
Aldiguer consisting of 59 square meters, which the municipality of Iloilo had appropriated for widening said street. The Court
of First Instance of Iloilo sentenced the said municipality to pay the plaintiff the amount so claimed, plus the interest, and the
said judgment was on appeal affirmed by this court.1

On account of lack of funds the municipality of Iloilo was unable to pay the said judgment, wherefore plaintiff had a writ of
execution issue against the property of the said municipality, by virtue of which the sheriff attached two auto trucks used for
street sprinkling, one police patrol automobile, the police stations on Mabini street, and in Molo and Mandurriao and the
concrete structures, with the corresponding lots, used as markets by Iloilo, Molo, and Mandurriao.
After notice of the sale of said property had been made, and a few days before the sale, the provincial fiscal of Iloilo filed a
motion which the Court of First Instance praying that the attachment on the said property be dissolved, that the said attachment
be declared null and void as being illegal and violative of the rights of the defendant municipality.
Plaintiffs counsel objected o the fiscal's motion but the court, by order of August 12, 1925, declared the attachment levied upon
the aforementioned property of the defendant municipality null and void, thereby dissolving the said attachment.
From this order the plaintiff has appealed by bill of exceptions. The fundamental question raised by appellant in her four
assignments of error is whether or not the property levied upon is exempt from execution.
The municipal law, section 2165 of the Administrative Code, provides that:
Municipalities are political bodies corporate, and as such are endowed with the faculties of municipal corporations, to
be exercised by and through their respective municipal government in conformity with law.
It shall be competent for them, in their proper corporate name, to sue and be sued, to contract and be contracted with, to
acquire and hold real and personal property for municipal purposes, and generally to exercise the powers hereinafter
specified or otherwise conferred upon them by law.
For the purposes of the matter here in question, the Administrative Code does not specify the kind of property that a
municipality may acquire. However, article 343 of the Civil Code divides the property of provinces and towns (municipalities)
into property for public use and patrimonial property. According to article 344 of the same Code, provincial roads and foot-path,
squares, streets, fountains and public waters, drives and public improvements of general benefit built at the expense of the said
towns or provinces, are property for public use.
All other property possessed by the said towns and provinces is patrimonial and shall be subject to the provisions of the Civil
Code except as provided by special laws.
Commenting upon article 344, Mr. Manresa says that "In accordance with administrative legislation" (Spanish) we must
distinguish, as to the patrimonial property of the towns, "between that a common benefit and that which is private property of
the town. The first differs from property for public use in that generally its enjoyment is less, as it is limited to neighbors or to a
group or class thereof; and, furthermore, such use, more or less general, is not intrinsic with this kind of property, for by its very
nature it may be enjoyed as though it were private property. The third group, that is, private property, is used in the name of the
town or province by the entities representing it and, like and private property, giving a source of revenue."
Such distinction, however, is of little practical importance in this jurisdiction in view of the different principles underlying the
functions of a municipality under the American rule. Notwithstanding this, we believe that the principle governing property of
the public domain of the State is applicable to property for public use of the municipalities as said municipal is similar in
character. The principle is that the property for public use of the State is not within the commerce of man and, consequently, is
inalienable and not subject to prescription. Likewise, property for public of the municipality is not within the commerce of man
so long as it is used by the public and, consequently, said property is also inalienable.
The American Law is more explicit about this matter as expounded by Mcquilin in Municipal Corporations, volume 3,
paragraph 1160, where he says that:
States statutes often provide the court houses, jails and other buildings owned by municipalities and the lots on which
they stand shall be exempt from attachment and execution. But independent of express statutory exemption, as a
general proposition, property, real and personal, held by municipal corporations, in trust for the benefit of their
inhabitants, and used for public purposes, is exempt.

For example, public buildings, school houses, streets, squares, parks, wharves, engines and engine houses, and the like,
are not subject to execution. So city waterworks, and a stock of liquors carried in a town dispensary, are exempt. The
reason for the exemption is obvious. Municipal corporations are created for public purposes and for the good of the
citizens in their aggregate or public capacity. That they may properly discharge such public functions corporate
property and revenues are essential, and to deny them these means the very purpose of their creation would be
materially impeded, and in some instances practically destroy it. Respecting this subject the Supreme Court of
Louisiana remarked: "On the first view of this question there is something very repugnant to the moral sense in the idea
that a municipal corporation should contract debts, and that, having no resources but the taxes which are due to it, these
should not be subjected by legal process to the satisfaction of its creditors. This consideration, deduced from the
principles of moral equity has only given way to the more enlarged contemplation of the great and paramount interests
of public order and the principles of government."
It is generally held that property owned by a municipality, where not used for a public purpose but for quasi private
purposes, is subject to execution on a judgment against the municipality, and may be sold. This rule applies to shares of
stock owned by a municipal corporation, and the like. But the mere fact that corporate property held for public uses is
being temporarily used for private purposes does not make it subject execution.
If municipal property exempt from execution is destroyed, the insurance money stands in lieu thereof and is also
exempt.
The members or inhabitants of a municipal corporation proper are not personally liable for the debts of the
municipality, except that in the New England States the individual liability of the inhabitant is generally maintained.
In Corpus Juris, vol 23, page 355, the following is found:
Where property of a municipal or other public corporation is sough to be subjected to execution to satisfy judgments
recovered against such corporation, the question as to whether such property is leviable or not is to be determined by
the usage and purposes for which it is held. The rule is that property held for public uses, such as public buildings,
streets, squares parks, promenades, wharves, landing places fire engines, hose and hose carriages, engine houses, public
markets, hospitals, cemeteries, and generally everything held for governmental purposes, is not subject to levy and sale
under execution against such corporation. The rule also applies to funds in the hands of a public officer. Likewise it has
been held that taxes due to a municipal corporation or country cannot be seized under execution by a creditor of such
corporation. But where a municipal corporation or country owns in its proprietary, as distinguished from its public or
governmental capacity, property not useful or used for a public purpose but for quasi private purposes, the general rule
is that such property may be seized and sold under execution against the corporation, precisely as similar property of
individuals is seized and sold. But property held for public purposes is not subject to execution merely because it is
temporarily used for private purposes, although if the public use is wholly abandoned it becomes subject to execution.
Whether or not property held as public property is necessary for the public use is a political, rather than a judicial
question.
In the case of City of New Orleans vs. Louisiana Construction Co., Ltd. (140 U. S., 654; 35 Law. ed., 556), it was held that a
wharf for unloading sugar and molasses, open to the public, was property for the public use of the City of New Orleans and was
not subject to attachment for the payment of the debts of the said city.
In that case it was proven that the said wharf was a parcel of land adjacent to the Mississippi River where all shipments of sugar
and molasses taken to New Orleans were unloaded.
That city leased the said wharf to the Louisiana Construction Company, Ltd., in order that it might erect warehouses so that the
merchandise upon discharge might not be spoiled by the elements. The said company was given the privilege of charging
certain fees for storing merchandise in the said warehouses and the public in general had the right to unload sugar and molasses
there by paying the required fees, 10 per cent of which was turned over to the city treasury.
The United States Supreme Court on an appeal held that the wharf was public property, that it never ceased to be such in order
to become private property of the city; wherefore the company could not levy execution upon the wharf in order to collect the
amount of the judgment rendered in favor thereof.

In the case of Klein vs. City of New Orleans (98 U. S., 149; 25 Law. ed., 430), the Supreme Court of the United States that a
public wharf on the banks of the Mississippi River was public property and not subject to execution for the payment of a debt of
the City of New Orleans where said wharf was located.
In this case a parcel of land adjacent to the Mississippi River, which formerly was the shore of the river and which later enlarged
itself by accession, was converted into a wharf by the city for public use, who charged a certain fee for its use.
It was held that the land was public property as necessary as a public street and was not subject to execution on account of the
debts of the city. It was further held that the fees collected where also exempt from execution because they were a part of the
income of the city.
In the case of Tufexis vs. Olaguera and Municipal Council of Guinobatan (32 Phil., 654), the question raised was whether for
the payment of a debt to a third person by the concessionaire of a public market, the said public market could be attached and
sold at public auction. The Supreme Court held that:
Even though a creditor is unquestionably entitled to recover out of his debtor's property, yet when among such property
there is included the special right granted by the Government of usufruct in a building intended for a public service, and
when this privilege is closely related to a service of a public character, such right of the creditor to the collection of a
debt owed him by the debtor who enjoys the said special privilege of usufruct in a public market is not absolute and
may be exercised only through the action of court of justice with respect to the profits or revenue obtained under the
special right of usufruct enjoyed by debtor.
The special concession of the right of usufruct in a public market cannot be attached like any ordinary right, because
that would be to permit a person who has contracted with the state or with the administrative officials thereof to
conduct and manage a service of a public character, to be substituted, without the knowledge and consent of the
administrative authorities, by one who took no part in the contract, thus giving rise to the possibility of the regular
course of a public service being disturbed by the more or less legal action of a grantee, to the prejudice of the state and
the public interests.
The privilege or franchise granted to a private person to enjoy the usufruct of a public market cannot lawfully be
attached and sold, and a creditor of such person can recover his debt only out of the income or revenue obtained by the
debtor from the enjoyment or usufruct of the said privilege, in the same manner that the rights of such creditors of a
railroad company can be exercised and their credit collected only out of the gross receipts remaining after deduction
has been made therefrom of the operating expenses of the road. (Law of November 12, 1896, extended to the overseas
provinces by the royal order of August 3, 1886.)
For the reasons contained in the authorities above quoted we believe that this court would have reached the same conclusion if
the debtor had been municipality of Guinobatan and the public market had been levied upon by virtue of the execution.
It is evident that the movable and immovable property of a municipality, necessary for governmental purpose, may not be
attached and sold for the payment of a judgment against the municipality. The supreme reason for this rule is the character of the
public use to which such kind of property is devoted. The necessity for government service justifies that the property of public
of the municipality be exempt from execution just as it is necessary to exempt certain property of private individuals in
accordance with section 452 of the Code of Civil Procedure.
Even the municipal income, according to the above quoted authorities, is exempt from levy and execution. In volume 1, page
467, Municipal Corporations by Dillon we find that:
Municipal corporations are instituted by the supreme authority of a state for the public good. They exercise, by
delegation from the legislature, a portion of the sovereign power. The main object of their creation is to act as
administrative agencies for the state, and to provide for the police and local government of certain designated civil
divisions of its territory. To this end they are invested with certain governmental powers and charged with civil,
political, and municipal duties. To enable them beneficially to exercise these powers and discharge these duties, they
are clothed with the authority to raise revenues, chiefly by taxation, and subordinately by other modes as by licenses,
fines, and penalties. The revenue of the public corporation is the essential means by which it is enabled to perform its

appointed work. Deprived of its regular and adequate supply of revenue, such a corporation is practically destroyed and
the ends of its erection thwarted. Based upon considerations of this character, it is the settled doctrine of the law that
only the public property but also the taxes and public revenues of such corporations cannot be seized under execution
against them, either in the treasury or when in transit to it. Judgments rendered for taxes, and the proceeds of such
judgments in the hands of officers of the law, are not subject to execution unless so declared by statute. The doctrine of
the inviolability of the public revenues by the creditor is maintained, although the corporation is in debt, and has no
means of payment but the taxes which it is authorized to collect.
Another error assigned by counsel for appellant is the holding of the court a quo that the proper remedy for collecting the
judgment in favor of the plaintiff was by way or mandamus.
While this question is not necessarily included in the one which is the subject of this appeal, yet we believe that the holding of
the court, assigned as error by appellant's counsel, is true when, after a judgment is rendered against a municipality, it has no
property subject to execution. This doctrine is maintained by Dillon (Municipal Corporations, vol. 4, par. 1507, 5th ed.) based
upon the decisions of several States of the Union upholding the same principle and which are cited on page 2679 of the
aforesaid work. In this sense this assignment of error, we believe, is groundless.
By virtue of all the foregoing, the judgment appealed from should be and is hereby affirmed with costs against the appellant. So
ordered.
Avancea, C. J., Street, Malcolm, Ostrand, Johns, Romualdez and Villa-Real., JJ., concur.

G.R. No. L-24440

March 28, 1968

THE
PROVINCE
OF
ZAMBOANGA
DEL
NORTE, plaintiff-appellee,
vs.
CITY OF ZAMBOANGA, SECRETARY OF FINANCE and COMMISSIONER OF INTERNAL REVENUE,defendantsappellants.

Fortugaleza,
Lood,
Sarmiento,
M.
T.
Office of the Solicitor General for defendants-appellants.

Yap

&

Associates

for

plaintiff-appellee.

BENGZON, J.P., J.:


Prior to its incorporation as a chartered city, the Municipality of Zamboanga used to be the provincial capital of the then
Zamboanga Province. On October 12, 1936, Commonwealth Act 39 was approved converting the Municipality of Zamboanga
into Zamboanga City. Sec. 50 of the Act also provided that
Buildings and properties which the province shall abandon upon the transfer of the capital to another place will
be acquired and paid for by the City of Zamboanga at a price to be fixed by the Auditor General.
The properties and buildings referred to consisted of 50 lots and some buildings constructed thereon, located in the City
of Zamboanga and covered individually by Torrens certificates of title in the name of Zamboanga Province. As far as can be
gleaned from the records, 1 said properties were being utilized as follows
No. of Lots
1
3
3
3
1
1
2
2
9
1
1
23

Use
................................................ Capitol Site
................................................ School Site
................................................ Hospital Site
................................................ Leprosarium
................................................ Curuan School
................................................ Trade School
................................................ Burleigh School
................................................ High School Playground
................................................ Burleighs
................................................ Hydro-Electric Site (Magay)
................................................ San Roque
................................................ vacant

It appears that in 1945, the capital of Zamboanga Province was transferred to Dipolog. 2 Subsequently, or on June 16,
1948, Republic Act 286 was approved creating the municipality of Molave and making it the capital of Zamboanga Province.
On May 26, 1949, the Appraisal Committee formed by the Auditor General, pursuant to Commonwealth Act 39, fixed the
value of the properties and buildings in question left by Zamboanga Province in Zamboanga City at P1,294,244.00. 3
On June 6, 1952, Republic Act 711 was approved dividing the province of Zamboanga into two (2): Zamboanga del Norte
and Zamboanga del Sur. As to how the assets and obligations of the old province were to be divided between the two new ones,
Sec. 6 of that law provided:
Upon the approval of this Act, the funds, assets and other properties and the obligations of the province of
Zamboanga shall be divided equitably between the Province of Zamboanga del Norte and the Province of Zamboanga
del Sur by the President of the Philippines, upon the recommendation of the Auditor General.
Pursuant thereto, the Auditor General, on January 11, 1955, apportioned the assets and obligations of the defunct Province
of Zamboanga as follows: 54.39% for Zamboanga del Norte and 45.61% for Zamboanga del Sur. Zamboanga del Norte
therefore became entitled to 54.39% of P1,294,244.00, the total value of the lots and buildings in question, or P704,220.05
payable by Zamboanga City.
On March 17, 1959, the Executive Secretary, by order of the President, issued a ruling 4 holding that Zamboanga del Norte
had a vested right as owner (should be co-owner pro-indiviso) of the properties mentioned in Sec. 50 of Commonwealth Act 39,
and is entitled to the price thereof, payable by Zamboanga City. This ruling revoked the previous Cabinet Resolution of July 13,
1951 conveying all the said 50 lots and buildings thereon to Zamboanga City for P1.00, effective as of 1945, when the
provincial capital of the then Zamboanga Province was transferred to Dipolog.

The Secretary of Finance then authorized the Commissioner of Internal Revenue to deduct an amount equal to 25% of the
regular internal revenue allotment for the City of Zamboanga for the quarter ending March 31, 1960, then for the quarter ending
June 30, 1960, and again for the first quarter of the fiscal year 1960-1961. The deductions, all aggregating P57,373.46, was
credited to the province of Zamboanga del Norte, in partial payment of the P764,220.05 due it.
However, on June 17, 1961, Republic Act 3039 was approved amending Sec. 50 of Commonwealth Act 39 by providing
that
All buildings, properties and assets belonging to the former province of Zamboanga and located within the City
of Zamboanga are hereby transferred, free of charge, in favor of the said City of Zamboanga. (Stressed for emphasis).
Consequently, the Secretary of Finance, on July 12, 1961, ordered the Commissioner of Internal Revenue to stop from
effecting further payments to Zamboanga del Norte and to return to Zamboanga City the sum of P57,373.46 taken from it out of
the internal revenue allotment of Zamboanga del Norte. Zamboanga City admits that since the enactment of Republic Act 3039,
P43,030.11 of the P57,373.46 has already been returned to it.
This constrained plaintiff-appellee Zamboanga del Norte to file on March 5, 1962, a complaint entitled "Declaratory
Relief with Preliminary Mandatory Injunction" in the Court of First Instance of Zamboanga del Norte against defendantsappellants Zamboanga City, the Secretary of Finance and the Commissioner of Internal Revenue. It was prayed that: (a)
Republic Act 3039 be declared unconstitutional for depriving plaintiff province of property without due process and just
compensation; (b) Plaintiff's rights and obligations under said law be declared; (c) The Secretary of Finance and the Internal
Revenue Commissioner be enjoined from reimbursing the sum of P57,373.46 to defendant City; and (d) The latter be ordered to
continue paying the balance of P704,220.05 in quarterly installments of 25% of its internal revenue allotments.
On June 4, 1962, the lower court ordered the issuance of preliminary injunction as prayed for. After defendants filed their
respective answers, trial was held. On August 12, 1963, judgment was rendered, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered declaring Republic Act No. 3039 unconstitutional insofar as it
deprives plaintiff Zamboanga del Norte of its private properties, consisting of 50 parcels of land and the improvements
thereon under certificates of title (Exhibits "A" to "A-49") in the name of the defunct province of Zamboanga; ordering
defendant City of Zamboanga to pay to the plaintiff the sum of P704,220.05 payment thereof to be deducted from its
regular quarterly internal revenue allotment equivalent to 25% thereof every quarter until said amount shall have been
fully paid; ordering defendant Secretary of Finance to direct defendant Commissioner of Internal Revenue to deduct
25% from the regular quarterly internal revenue allotment for defendant City of Zamboanga and to remit the same to
plaintiff Zamboanga del Norte until said sum of P704,220.05 shall have been fully paid; ordering plaintiff Zamboanga
del Norte to execute through its proper officials the corresponding public instrument deeding to defendant City of
Zamboanga the 50 parcels of land and the improvements thereon under the certificates of title (Exhibits "A" to "A-49")
upon payment by the latter of the aforesaid sum of P704,220.05 in full; dismissing the counterclaim of defendant City
of Zamboanga; and declaring permanent the preliminary mandatory injunction issued on June 8, 1962, pursuant to the
order of the Court dated June 4, 1962. No costs are assessed against the defendants.
It is SO ORDERED.
Subsequently, but prior to the perfection of defendants' appeal, plaintiff province filed a motion to reconsider praying that
Zamboanga City be ordered instead to pay the P704,220.05 in lump sum with 6% interest per annum. Over defendants'
opposition, the lower court granted plaintiff province's motion.
The defendants then brought the case before Us on appeal.
Brushing aside the procedural point concerning the property of declaratory relief filed in the lower court on the assertion
that the law had already been violated and that plaintiff sought to give it coercive effect, since assuming the same to be true, the
Rules anyway authorize the conversion of the proceedings to an ordinary action, 5 We proceed to the more important and
principal question of the validity of Republic Act 3039.
The validity of the law ultimately depends on the nature of the 50 lots and buildings thereon in question. For, the matter
involved here is the extent of legislative control over the properties of a municipal corporation, of which a province is one. The
principle itself is simple: If the property is owned by the municipality (meaning municipal corporation) in its public and

governmental capacity, the property is public and Congress has absolute control over it. But if the property is owned in its
private or proprietary capacity, then it is patrimonial and Congress has no absolute control. The municipality cannot be deprived
of it without due process and payment of just compensation. 6
The capacity in which the property is held is, however, dependent on the use to which it is intended and devoted. Now,
which of two norms, i.e., that of the Civil Code or that obtaining under the law of Municipal Corporations, must be used in
classifying the properties in question?
The Civil Code classification is embodied in its Arts. 423 and 424 which provide:

1wph1.t

ART. 423. The property of provinces, cities, and municipalities is divided into property for public use and
patrimonial property.
ART. 424. Property for public use, in the provinces, cities, and municipalities, consists of the provincial roads,
city streets, municipal streets, the squares, fountains, public waters, promenades, and public works for public service
paid for by said provinces, cities, or municipalities.
All other property possessed by any of them is patrimonial and shall be governed by this Code, without prejudice to the
provisions of special laws. (Stressed for emphasis).
Applying the above cited norm, all the properties in question, except the two (2) lots used as High School playgrounds,
could be considered as patrimonial properties of the former Zamboanga province. Even the capital site, the hospital and
leprosarium sites, and the school sites will be considered patrimonial for they are not for public use. They would fall under the
phrase "public works for public service" for it has been held that under theejusdem generis rule, such public works must be
for free and indiscriminate use by anyone, just like the preceding enumerated properties in the first paragraph of Art 424. 7 The
playgrounds, however, would fit into this category.
This was the norm applied by the lower court. And it cannot be said that its actuation was without jurisprudential
precedent for in Municipality of Catbalogan v. Director of Lands, 8 and in Municipality of Tacloban v. Director of Lands, 9 it was
held that the capitol site and the school sites in municipalities constitute their patrimonial properties. This result is
understandable because, unlike in the classification regarding State properties, properties for public service in the municipalities
are not classified as public. Assuming then the Civil Code classification to be the chosen norm, the lower court must be affirmed
except with regard to the two (2) lots used as playgrounds.
On the other hand, applying the norm obtaining under the principles constituting the law of Municipal Corporations, all
those of the 50 properties in question which are devoted to public service are deemed public; the rest remain patrimonial. Under
this norm, to be considered public, it is enough that the property be held and, devoted for governmental purposes like local
administration, public education, public health, etc. 10
Supporting jurisprudence are found in the following cases: (1) HINUNANGAN V. DIRECTOR OF LANDS, 11where it
was stated that "... where the municipality has occupied lands distinctly for public purposes, such as for the municipal court
house, the public school, the public market, or other necessary municipal building, we will, in the absence of proof to the
contrary, presume a grant from the States in favor of the municipality; but, as indicated by the wording, that rule may be
invoked only as to property which is used distinctly for public purposes...." (2) VIUDA DE TANTOCO V. MUNICIPAL
COUNCIL OF ILOILO 12 held that municipal properties necessary for governmental purposes are public in nature. Thus, the
auto trucks used by the municipality for street sprinkling, the police patrol automobile, police stations and concrete structures
with the corresponding lots used as markets were declared exempt from execution and attachment since they were not
patrimonial properties. (3) MUNICIPALITY OF BATANGAS VS. CANTOS 13 held squarely that a municipal lot which had
always been devoted to school purposes is one dedicated to public use and is not patrimonial property of a municipality.
Following this classification, Republic Act 3039 is valid insofar as it affects the lots used as capitol site, school sites and
its grounds, hospital and leprosarium sites and the high school playground sites a total of 24 lots since these were held by
the former Zamboanga province in its governmental capacity and therefore are subject to the absolute control of Congress. Said
lots considered as public property are the following:
TCT Number
2200

Lot Number
......................................

4-B

Use
......................................

Capitol Site

2816
3281
3282
3283
3748
5406
5564
5567
5583
6181
11942
11943
11944
5557
5562
5565
5570
5571
5572
5573
5585
5586
5587

......................................
......................................
......................................
......................................
......................................
......................................
......................................
......................................
......................................
......................................
......................................
......................................
......................................
......................................
......................................
......................................
......................................
......................................
......................................
......................................
......................................
......................................
......................................

149
1224
1226
1225
434-A-1
171
168
157 & 158
167
(O.C.T.)
926
927
925
170
180
172-B
171-A
172-C
174
178
171-B
173
172-A

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......................................
......................................
......................................
......................................
......................................
......................................

School Site
Hospital Site
Hospital Site
Hospital Site
School Site
School Site
High School Play-ground
Trade School
High School Play-ground
Curuan School
Leprosarium
Leprosarium
Leprosarium
Burleigh School
Burleigh School
Burleigh
Burleigh
Burleigh
Burleigh
Burleigh
Burleigh
Burleigh
Burleigh

We noticed that the eight Burleigh lots above described are adjoining each other and in turn are between the two lots
wherein the Burleigh schools are built, as per records appearing herein and in the Bureau of Lands. Hence, there is sufficient
basis for holding that said eight lots constitute the appurtenant grounds of the Burleigh schools, and partake of the nature of the
same.
Regarding the several buildings existing on the lots above-mentioned, the records do not disclose whether they were
constructed at the expense of the former Province of Zamboanga. Considering however the fact that said buildings must have
been erected even before 1936 when Commonwealth Act 39 was enacted and the further fact that provinces then had no power
to authorize construction of buildings such as those in the case at bar at their own expense, 14 it can be assumed that said
buildings were erected by the National Government, using national funds. Hence, Congress could very well dispose of said
buildings in the same manner that it did with the lots in question.
But even assuming that provincial funds were used, still the buildings constitute mere accessories to the lands, which are
public in nature, and so, they follow the nature of said lands, i.e., public. Moreover, said buildings, though located in the city,
will not be for the exclusive use and benefit of city residents for they could be availed of also by the provincial residents. The
province then and its successors-in-interest are not really deprived of the benefits thereof.
But Republic Act 3039 cannot be applied to deprive Zamboanga del Norte of its share in the value of the rest of the 26
remaining lots which are patrimonial properties since they are not being utilized for distinctly, governmental purposes. Said lots
are:
TCT Number
5577
......................................
13198
......................................
5569
......................................
5558
......................................
5559
......................................
5560
......................................
5561
......................................
5563
......................................

Lot Number
177
......................................
127-0
......................................
169
......................................
175
......................................
188
......................................
183
......................................
186
......................................
191
......................................

Use
Mydro, Magay
San Roque
Burleigh 15
Vacant
"
"
"
"

5566
5568
5574
5575
5576
5578
5579
5580
5581
5582
5584
5588
5589
5590
5591
5592
5593
7379

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......................................
......................................
......................................
......................................
......................................
......................................
......................................
......................................
......................................
......................................
......................................
......................................
......................................
......................................
......................................
......................................

176
179
196
181-A
181-B
182
197
195
159-B
194
190
184
187
189
192
193
185
4147

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......................................

"
"
"
"
"
"
"
"
"
"
"
"
"
"
"
"
"
"

Moreover, the fact that these 26 lots are registered strengthens the proposition that they are truly private in nature. On the
other hand, that the 24 lots used for governmental purposes are also registered is of no significance since registration cannot
convert public property to private. 16
We are more inclined to uphold this latter view. The controversy here is more along the domains of the Law of Municipal
Corporations State vs. Province than along that of Civil Law. Moreover, this Court is not inclined to hold that municipal
property held and devoted to public service is in the same category as ordinary private property. The consequences are dire. As
ordinary private properties, they can be levied upon and attached. They can even be acquired thru adverse possession all
these to the detriment of the local community. Lastly, the classification of properties other than those for public use in the
municipalities as patrimonial under Art. 424 of the Civil Code is "... without prejudice to the provisions of special laws." For
purpose of this article, the principles, obtaining under the Law of Municipal Corporations can be considered as "special laws".
Hence, the classification of municipal property devoted for distinctly governmental purposes as public should prevail over the
Civil Code classification in this particular case.
Defendants' claim that plaintiff and its predecessor-in-interest are "guilty of laches is without merit. Under
Commonwealth Act 39, Sec. 50, the cause of action in favor of the defunct Zamboanga Province arose only in 1949 after the
Auditor General fixed the value of the properties in question. While in 1951, the Cabinet resolved transfer said properties
practically for free to Zamboanga City, a reconsideration thereof was seasonably sought. In 1952, the old province was
dissolved. As successor-in-interest to more than half of the properties involved, Zamboanga del Norte was able to get a
reconsideration of the Cabinet Resolution in 1959. In fact, partial payments were effected subsequently and it was only after the
passage of Republic Act 3039 in 1961 that the present controversy arose. Plaintiff brought suit in 1962. All the foregoing,
negative laches.
It results then that Zamboanga del Norte is still entitled to collect from the City of Zamboanga the former's 54.39% share
in the 26 properties which are patrimonial in nature, said share to computed on the basis of the valuation of said 26 properties as
contained in Resolution No. 7, dated March 26, 1949, of the Appraisal Committee formed by the Auditor General.
Plaintiff's share, however, cannot be paid in lump sum, except as to the P43,030.11 already returned to defendant City.
The return of said amount to defendant was without legal basis. Republic Act 3039 took effect only on June 17, 1961 after a
partial payment of P57,373.46 had already been made. Since the law did not provide for retroactivity, it could not have validly
affected a completed act. Hence, the amount of P43,030.11 should be immediately returned by defendant City to plaintiff
province. The remaining balance, if any, in the amount of plaintiff's 54.39% share in the 26 lots should then be paid by
defendant City in the same manner originally adopted by the Secretary of Finance and the Commissioner of Internal Revenue,
and not in lump sum. Plaintiff's prayer, particularly pars. 5 and 6, read together with pars. 10 and 11 of the first cause of action
recited in the complaint 17 clearly shows that the relief sought was merely the continuance of the quarterly payments from the
internal revenue allotments of defendant City. Art. 1169 of the Civil Code on reciprocal obligations invoked by plaintiff to

justify lump sum payment is inapplicable since there has been so far in legal contemplation no complete delivery of the lots in
question. The titles to the registered lots are not yet in the name of defendant Zamboanga City.
WHEREFORE, the decision appealed from is hereby set aside and another judgment is hereby entered as follows:.
(1) Defendant Zamboanga City is hereby ordered to return to plaintiff Zamboanga del Norte in lump sum the amount of
P43,030.11 which the former took back from the latter out of the sum of P57,373.46 previously paid to the latter; and
(2) Defendants are hereby ordered to effect payments in favor of plaintiff of whatever balance remains of plaintiff's
54.39% share in the 26 patrimonial properties, after deducting therefrom the sum of P57,373.46, on the basis of Resolution No.
7 dated March 26, 1949 of the Appraisal Committee formed by the Auditor General, by way of quarterly payments from the
allotments of defendant City, in the manner originally adopted by the Secretary of Finance and the Commissioner of Internal
Revenue. No costs. So ordered.
Reyes, J.B.L., Actg. C.J., Dizon, Makalintal, Zaldivar, Sanchez, Castro, Angeles and Fernando, JJ., concur.
Concepcion, C.J., is on leave.

G.R. No. L-29788 August 30, 1972


RAFAEL S. SALAS, in his capacity as Executive Secretary; CONRADO F. ESTRELLA, in his capacity as Governor of
the Land Authority; and LORENZO GELLA, in his capacity as Register of Deeds of Manila, petitioners-appellants,
vs.
HON. HILARION U. JARENCIO, as Presiding Judge of Branch XXIII, Court of First Instance of Manila; ANTONIO
J. VILLEGAS, in his capacity as Mayor of the City of Manila; and the CITY OF MANILA,respondents-appellees.

Office of the Solicitor General Felix V. Makasiar, Assistant Solicitor-General Antonio A. Torres, Solicitor Raul I. Goco and
Magno B. Pablo & Cipriano A. Tan, Legal Staff, Land Authority for petitioners-appellants.
Gregorio A. Ejercito and Felix C. Chavez for respondents-appellees.

ESGUERRA, J.:p
This is a petition for review of the decision of the Court of First Instance of Manila, Branch XXIII, in Civil Case No. 67946,
dated September 23, 1968, the dispositive portion of which is as follows:
WHEREFORE, the Court renders judgment declaring Republic Act No. 4118 unconstitutional and invalid in
that it deprived the City of Manila of its property without due process and payment of just compensation.
Respondent Executive Secretary and Governor of the Land Authority are hereby restrained and enjoined from
implementing the provisions of said law. Respondent Register of Deeds of the City of Manila is ordered to
cancel Transfer Certificate of Title No. 80876 which he had issued in the name of the Land Tenure
Administration and reinstate Transfer Certificate of Title No. 22547 in the name of the City of Manila which he
cancelled, if that is feasible, or issue a new certificate of title for the same parcel of land in the name of the
City of Manila. 1
The facts necessary for a clear understanding of this case are as follows:
On February 24, 1919, the 4th Branch of the Court of First Instance of Manila, acting as a land registration court, rendered
judgment in Case No. 18, G.L.R.O. Record No. 111, declaring the City of Manila the owner in fee simple of a parcel of land
known as Lot No. 1, Block 557 of the Cadastral Survey of the City of Mani1a, containing an area of 9,689.8 square meters,
more or less. Pursuant to said judgment the Register of Deeds of Manila on August 21, 1920, issued in favor of the City of
Manila, Original Certificate of Title No. 4329 covering the aforementioned parcel of land. On various dates in 1924, the City of
Manila sold portions of the aforementioned parcel of land in favor of Pura Villanueva. As a consequence of the transactions
Original Certificate of Title No. 4329 was cancelled and transfer certificates of title were issued in favor of Pura Villanueva for
the portions purchased by her. When the last sale to Pura Villanueva was effected on August 22, 1924, Transfer Certificate of
Title No. 21974 in the name of the City of Manila was cancelled and in lieu thereof Transfer Certificate of Title (TCT) No.
22547 covering the residue thereof known as Lot 1-B-2-B of Block 557, with an area of 7,490.10 square meters, was issued in
the name of the City of Manila.
On September 21, 1960, the Municipal Board of Manila, presided by then Vice-Mayor Antono J. Villegas, adopted a resolution
requesting His Excellency, the President of the Philippines to consider the feasibility of declaring the City property bounded by
Florida, San Andres, and Nebraska Streets, under Transfer Certificate of Title Nos. 25545 and 22547, containing a total area of
7,450 square meters as a patrimonial property of the City of Manila for the purpose of reselling these lots to the actual
occupants thereof. 2
The said resolution of the Municipil Board of the City of Manila was officially transmitted to the President of the Philippines by
then Vice-Mayor Antonio J. Villegas on September 21, 1960, with the information that the same resolution was, on the same
date, transmitted to the Senate and House of Representatives of the Congress of the Philippines. 3
During the First Session of the Fifth Congress of the Philippines, House Bill No. 191 was filed in the House of Representatives
by then Congressman Bartolome Cabangbang seeking to declare the property in question as patrimonial property of the City of
Manila, and for other purposes. The explanatory note of the Bill gave the grounds for its enactment, to wit:
In the particular case of the property subject of this bill, the City of Manila does not seem to have use thereof
as a public communal property. As a matter of fact, a resolution was adopted by the Municipal Board of Manila
at its regular session held on September 21, 1960, to request the feasibility of declaring the city property
bounded by Florida, San Andres and Nebraska Streets as a patrimonial property of the City of Manila for the
purpose of reselling these lots to the actual occupants thereof. Therefore, it will be to the best interest of

society that the said property be used in one way or another. Since this property has been occupied for a long
time by the present occupants thereof and since said occupants have expressed their willingness to buy the said
property, it is but proper that the same be sold to them. 4
Subsequently, a revised version of the Bill was introduced in the House of Representatives by Congressmen Manuel Cases,
Antonio Raquiza and Nicanor Yiguez as House Bill No. 1453, with the following explanatory note:
The accompanying bill seeks to convert one (1) parcel of land in the district of Malate, which is reserved as
communal property into a disposable or alienable property of the State and to provide its subdivision and sale
to bona fide occupants or tenants.
This parcel of land in question was originally an aggregate part of a piece of land with an area of 9,689.8
square meters, more or less. ... On September 21, 1960, the Municipal Board of Manila in its regular session
unanimously adopted a resolution requesting the President of the Philippines and Congress of the Philippines
the feasibility of declaring this property into disposable or alienable property of the State. There is therefore a
precedent that this parcel of land could be subdivided and sold to bona fide occupants. This parcel of land will
not serve any useful public project because it is bounded on all sides by private properties which were formerly
parts of this lot in question.
Approval of this bill will implement the policy of the Administration of land for the landless and the Fifth
Declaration of Principles of the Constitution, which states that the promotion of Social Justice to insure the
well-being and economic security of all people should be the concern of the State. We are ready and willing to
enact legislation promoting the social and economic well-being of the people whenever an opportunity for
enacting such kind of legislation arises.
In view of the foregoing consideration and to insure fairness and justice to the present bona fide occupants thereof, approval of
this Bill is strongly urged. 5
The Bill having been passed by the House of Representatives, the same was thereafter sent to the Senate where it was
thoroughly discussed, as evidenced by the Congressional Records for May 20, 1964, pertinent portion of which is as follows:
SENATOR FERNANDEZ: Mr. President, it will be re called that when the late Mayor Lacson was still alive,
we approved a similar bill. But afterwards, the late Mayor Lacson came here and protested against the
approval, and the approval was reconsidered. May I know whether the defect in the bill which we approved,
has already been eliminated in this present bill?
SENATOR TOLENTINO: I understand Mr. President, that that has already been eliminated and that is why the
City of Manila has no more objection to this bill.
SENATOR FERNANDEZ: Mr. President, in view of that manifestation and considering that Mayor Villegas
and Congressman Albert of the Fourth District of Manila are in favor of the bill. I would not want to pretend to
know more what is good for the City of Manila.
SENATOR TOLENTINO: Mr. President, there being no objection, I move that we approve this bill on second
reading.
PRESIDENT PRO-TEMPORE: The biII is approved on second reading after several Senetors said aye and
nobody said nay.
The bill was passed by the Senate, approved by the President on June 20, 1964, and became Republic Act No. 4118. It reads as
follows:
Lot I-B-2-B of Block 557 of the cadastral survey of the City of Manila, situated in the District of Malate, City
of Manila, which is reserved as communal property, is hereby converted into disposal or alienable land of the

State, to be placed under the disposal of the Land Tenure Administration. The Land Tenure Administration
shall subdivide the property into small lots, none of which shall exceed one hundred and twenty square meters
in area and sell the same on installment basis to the tenants or bona fide occupants thereof and to individuals ,
in the order mentioned: Provided, That no down payment shall be required of tenants or bona fide occupants
who cannot afford to pay such down payment: Provided, further, That no person can purchase more than one
lot: Provided, furthermore, That if the tenant or bona fide occupant of any given lot is not able to purchase the
same, he shall be given a lease from month to month until such time that he is able to purchase the
lot: Provided, still further, That in the event of lease the rentals which may be charged shall not exceed eight
per cent per annum of the assessed value of the property leased: And provided, finally, That in fixing the price
of each lot, which shall not exceed twenty pesos per square meter, the cost of subdivision and survey shall not
be included.
Sec. 2. Upon approval of this Act no ejectment proceedings against any tenant or bona fide occupant of the
above lots shall be instituted and any ejectment proceedings pending in court against any such tenant or bona
fide occupant shall be dismissed upon motion of the defendant: Provided, That any demolition order directed
against any tenant or bona fide occupant shall be lifted.
Sec. 3. Upon approval of this Act, if the tenant or bona fide occupant is in arrears in the payment of any
rentals, the amount legally due shall be liquidated and shall be payable in twenty-four equal monthly
installments from the date of liquidation.
Sec. 4. No property acquired by virtue of this Act shall be transferred, sold, mortgaged, or otherwise disposed
of within a period of five years from the date full ownership thereof has been vested in the purchaser without
the consent of the Land Tenure Administration.
Sec. 5. In the event of the death of the purchaser prior to the complete payment of the price of the lot
purchased by him, his widow and children shall succeed in all his rights and obligations with respect to his lot.
Sec. 6. The Chairman of the Land Tenure Administration shall implement and issue such rules and regulations
as may be necessary to carry out the provisions of this Act.
Sec. 7. The sum of one hundred fifty thousand pesos is appropriated out of any funds in the National Treasury
not otherwise appropriated, to carry out the purposes of this Act.
Sec. 8. All laws or parts of laws inconsistent with this Act are repealed or modified accordingly.
Sec. 9. This Act shall take effect upon its approval.
Approved, June 20, 1964.
To implement the provisions of Republic Act No. 4118, and pursuant to the request of the occupants of the property involved,
then Deputy Governor Jose V. Yap of the Land Authority (which succeeded the Land Tenure Administration) addressed a letter,
dated February 18, 1965, to Mayor Antonio Villegas, furnishing him with a copy of the proposed subdivision plan of said lot as
prepared for the Republic of the Philippines for resale of the subdivision lots by the Land Authority to bona fide applicants. 6
On March 2, 1965, the City Mayor of Manila, through his Executive and Technical Adviser, acknowledged receipt of the
proposed subdivision plan of the property in question and informed the Land Authority that his office would interpose no
objection to the implementation of said law, provided that its provisions be strictly complied with. 7
With the above-mentioned written conformity of the City of Manila for the implementation of Republic Act No. 4118, the Land
Authority, thru then Deputy Governor Jose V. Yap, requested the City Treasurer of Manila, thru the City Mayor, for the
surrender and delivery to the former of the owner's duplicate of Transfer Certificate of Title No. 22547 in order to obtain title
thereto in the name of the Land Authority. The request was duly granted with the knowledge and consent of the Office of the
City Mayor. 8

With the presentation of Transfer Certificate of Title No. 22547, which had been yielded as above stated by the, City authorities
to the Land Authority, Transfer Certificate of Title (T.C.T. No. 22547) was cancelled by the Register of Deeds of Manila and in
lieu thereof Transfer Certificate of Title No. 80876 was issued in the name of the Land Tenure Administration (now Land
Authority)
pursuant
to
the
provisions
of
Republic
Act
No.
4118. 9
But due to reasons which do not appear in the record, the City of Manila made a complete turn-about, for on December 20,
1966, Antonio J. Villegas, in his capacity as the City Mayor of Manila and the City of Manila as a duly organized public
corporation, brought an action for injunction and/or prohibition with preliminary injunction to restrain, prohibit and enjoin the
herein appellants, particularly the Governor of the Land Authority and the Register of Deeds of Manila, from further
implementing Republic Act No. 4118, and praying for the declaration of Republic Act No. 4118 as unconstitutional.
With the foregoing antecedent facts, which are all contained in the partial stipulation of facts submitted to the trial court and
approved by respondent Judge, the parties waived the presentation of further evidence and submitted the case for decision. On
September 23, 1968, judgment was rendered by the trial court declaring Republic Act No. 4118 unconstitutional and invalid on
the ground that it deprived the City of Manila of its property without due process of law and payment of just compensation. The
respondents were ordered to undo all that had been done to carry out the provisions of said Act and were restrained from further
implementing the same.
Two issues are presented for determination, on the resolution of which the decision in this case hinges, to wit:
I. Is the property involved private or patrimonial property of the City of Manila?
II. Is Republic Act No. 4118 valid and not repugnant to the Constitution?
I.
As regards the first issue, appellants maintain that the land involved is a communal land or "legua comunal" which is a portion
of the public domain owned by the State; that it came into existence as such when the City of Manila, or any pueblo or town in
the Philippines for that matter, was founded under the laws of Spain, the former sovereign; that upon the establishment of a
pueblo, the administrative authority was required to allot and set aside portions of the public domain for a public plaza, a church
site, a site for public buildings, lands to serve as common pastures and for streets and roads; that in assigning these lands some
lots were earmarked for strictly public purposes, and ownership of these lots (for public purposes) immediately passed to the
new municipality; that in the case of common lands or "legua comunal", there was no such immediate acquisition of ownership
by the pueblo, and the land though administered thereby, did not automatically become its property in the absence of an express
grant from the Central Government, and that the reason for this arrangement is that this class of land was not absolutely needed
for the discharge of the municipality's governmental functions.
It is argued that the parcel of land involved herein has not been used by the City of Manila for any public purpose and had not
been officially earmarked as a site for the erection of some public buildings; that this circumstance confirms the fact that it was
originally "communal" land alloted to the City of Manila by the Central Government not because it was needed in connection
with its organization as a municipality but simply for the common use of its inhabitants; that the present City of Manila as
successor of the Ayuntamiento de Manila under the former Spanish sovereign merely enjoys the usufruct over said land, and its
exercise of acts of ownership by selling parts thereof did not necessarily convert the land into a patrimonial property of the City
of Manila nor divest the State of its paramount title.
Appellants further argue that a municipal corporation, like a city is a governmental agent of the State with authority to govern a
limited portion of its territory or to administer purely local affairs in a given political subdivision, and the extent of its authority
is strictly delimited by the grant of power conferred by the State; that Congress has the exclusive power to create, change or
destroy municipal corporations; that even if We admit that legislative control over municipal corporations is not absolute and
even if it is true that the City of Manila has a registered title over the property in question, the mere transfer of such land by an
act of the legislature from one class of public land to another, without compensation, does not invade the vested rights of the
City.

Appellants finally argue that Republic Act No. 4118 has treated the land involved as one reserved for communal use, and this
classification is conclusive upon the courts; that if the City of Manila feels that this is wrong and its interests have been thereby
prejudiced, the matter should be brought to the attention of Congress for correction; and that since Congress, in the exercise of
its wide discretionary powers has seen fit to classify the land in question as communal, the Courts certainly owe it to a
coordinate branch of the Government to respect such determination and should not interfere with the enforcement of the law.
Upon the other hand, appellees argue by simply quoting portions of the appealed decision of the trial court, which read thus:
The respondents (petitioners-appellants herein) contend, among other defenses, that the property in question is
communal property. This contention is, however, disproved by Original Certificate of Title No. 4329 issued on
August 21, 1920 in favor of the City of Manila after the land in question was registered in the City's favor. The
Torrens Title expressly states that the City of Manila was the owner in 'fee simple' of the said land. Under Sec.
38 of the Land Registration Act, as amended, the decree of confirmation and registration in favor of the City of
Manila ... shall be conclusive upon and against all persons including the Insular Government and all the
branches there ... There is nothing in the said certificate of title indicating that the land was 'communal' land as
contended by the respondents. The erroneous assumption by the Municipal Board of Manila that the land in
question was communal land did not make it so. The Municipal Board had no authority to do that.
The respondents, however, contend that Congress had the power and authority to declare that the land in
question was 'communal' land and the courts have no power or authority to make a contrary finding. This
contention is not entirely correct or accurate. Congress has the power to classify 'land of the public domain',
transfer them from one classification to another and declare them disposable or not. Such power does not,
however, extend to properties which are owned by cities, provinces and municipalities in their 'patrimonial'
capacity.
Art. 324 of the Civil Code provides that properties of provinces, cities and municipalities are divided into
properties for public use and patrimonial property. Art. 424 of the same code provides that properties for public
use consist of provincial roads, city streets, municipal streets, the squares, fountains, public waters,
promenades and public works for public service paid for by said province, cities or municipalities. All other
property possessed by any of them is patrimonial. Tested by this criterion the Court finds and holds that the
land in question is patrimonial property of the City of Manila.
Respondents contend that Congress has declared the land in question to be 'communal' and, therefore, such
designation is conclusive upon the courts. The Courts holds otherwise. When a statute is assailed as
unconstitutional the Courts have the power and authority to inquire into the question and pass upon it. This has
long ago been settled in Marbury vs. Madison, 2 L. ed. 60, when the United States Supreme Court speaking
thru Chief Justice Marshall held:
... If an act of the legislature, repugnant to the constitution, is void, does it, notwithstanding its
validity, bind the courts, and oblige them to give effect? It is emphatically the province and
duty of the judicial department to say what the law is ... So if a law be in opposition to the
constitution; if both the law and the constitution apply to a particular case, so that the court
must either decide that case conformable to the constitution, disregarding the law, the court
must determine which of these conflicting rules governs the case. This is of the very essence
of unconstitutional judicial duty.
Appellees finally concluded that when the courts declare a law unconstitutional it does not mean that the judicial power is
superior to the legislative power. It simply means that the power of the people is superior to both and that when the will of the
legislature, declared in statutes, stands in opposition to that of the people, declared in the Constitution, the judges ought to be
governed by the Constitution rather than by the statutes.
There is one outstanding factor that should be borne in mind in resolving the character of the land involved, and it is that the
City of Manila, although declared by the Cadastral Court as owner in fee simple, has not shown by any shred of evidence in
what manner it acquired said land as its private or patrimonial property. It is true that the City of Manila as well as its
predecessor, the Ayuntamiento de Manila, could validly acquire property in its corporate or private capacity, following the

accepted doctrine on the dual character public and private of a municipal corporation. And when it acquires property in its
private capacity, it acts like an ordinary person capable of entering into contracts or making transactions for the transmission of
title or other real rights. When it comes to acquisition of land, it must have done so under any of the modes established by law
for the acquisition of ownership and other real rights. In the absence of a title deed to any land claimed by the City of Manila as
its own, showing that it was acquired with its private or corporate funds, the presumption is that such land came from the State
upon the creation of the municipality (Unson vs. Lacson, et al., 100 Phil. 695). Originally the municipality owned no
patrimonial property except those that were granted by the State not for its public but for private use. Other properties it owns
are acquired in the course of the exercise of its corporate powers as a juridical entity to which category a municipal corporation
pertains.
Communal lands or "legua comunal" came into existence when a town or pueblo was established in this country under the laws
of Spain (Law VII, Title III, Book VI, Recopilacion de las Leyes de Indios). The municipalities of the Philippines were not
entitled, as a matter of right, to any part of the public domain for use as communal lands. The Spanish law provided that the
usufruct of a portion of the public domain adjoining municipal territory might be granted by the Government for communal
purposes, upon proper petition, but, until granted, no rights therein passed to the municipalities, and, in any event, the ultimate
title remained in the sovereign (City of Manila vs. Insular Government, 10 Phil. 327).
For the establishment, then, of new pueblos the administrative authority of the province, in representation of
the Governor General, designated the territory for their location and extension and the metes and bounds of the
same; and before alloting the lands among the new settlers, a special demarcation was made of the places
which were to serve as the public square of the pueblo, for the erection of the church, and as sites for the public
buildings, among others, the municipal building or the casa real, as well as of the lands whick were to
constitute the common pastures, and propios of the municipality and the streets and roads which were to
intersect the new town were laid out, ... . (Municipality of Catbalogan vs. Director of Lands, 17 Phil. 216, 220)
(Emphasis supplied)
It may, therefore, be laid down as a general rule that regardless of the source or classification of land in the possession of a
municipality, excepting those acquired with its own funds in its private or corporate capacity, such property is held in trust for
the State for the benefit of its inhabitants, whether it be for governmental or proprietary purposes. It holds such lands subject to
the paramount power of the legislature to dispose of the same, for after all it owes its creation to it as an agent for the
performance of a part of its public work, the municipality being but a subdivision or instrumentality thereof for purposes of
local administration. Accordingly, the legal situation is the same as if the State itself holds the property and puts it to a different
use (2 McQuilin,Municipal Corporations, 3rd Ed., p. 197, citing Monagham vs. Armatage, 218 Minn. 27, 15 N. W. 2nd 241).
True it is that the legislative control over a municipal corporation is not absolute even when it comes to its property devoted to
public use, for such control must not be exercised to the extent of depriving persons of their property or rights without due
process of law, or in a manner impairing the obligations of contracts. Nevertheless, when it comes to property of the
municipality which it did not acquire in its private or corporate capacity with its own funds, the legislature can transfer its
administration and disposition to an agency of the National Government to be disposed of according to its discretion. Here it did
so in obedience to the constitutional mandate of promoting social justice to insure the well-being and economic security of the
people.
It has been held that a statute authorizing the transfer of a Municipal airport to an Airport Commission created by the legislature,
even without compensation to the city, was not violative of the due process clause of the American Federal Constitution. The
Supreme Court of Minnessota in Monagham vs. Armatage, supra, said:
... The case is controlled by the further rule that the legislature, having plenary control of the local
municipality, of its creation and of all its affairs, has the right to authorize or direct the expenditures of money
in its treasury, though raised, for a particular purpose, for any legitimate municipal purpose, or to order and
direct a distribution thereof upon a division of the territory into separate municipalities ... . The local
municipality has no such vested right in or to its public funds, like that which the Constitution protects in the
individual as precludes legislative interferences. People vs. Power, 25 Ill. 187; State Board (of Education) vs.
City, 56 Miss. 518. As remarked by the supreme court of Maryland in Mayor vs. Sehner, 37 Md. 180: "It is of
the essence of such a corporation, that the government has the sole right as trustee of the public interest, at its
own good will and pleasure, to inspect, regulate, control, and direct the corporation, its funds, and franchises."

We therefore hold that c.500, in authorizing the transfer of the use and possession of the municipal airport to
the commission without compensation to the city or to the park board, does not violate the Fourteenth
Amendment to the Constitution of the United States.
The Congress has dealt with the land involved as one reserved for communal use (terreno comunal). The act of classifying State
property calls for the exercise of wide discretionary legislative power and it should not be interfered with by the courts.
This brings Us to the second question as regards the validity of Republic Act No. 4118, viewed in the light of Article III,
Sections 1, subsection (1) and (2) of the Constitution which ordain that no person shall be deprived of his property without due
process of law and that no private property shall be taken for public use without just compensation.
II .
The trial court declared Republic Act No. 4118 unconstitutional for allegedly depriving the City of Manila of its property
without due process of law and without payment of just compensation. It is now well established that the presumption is always
in favor of the constitutionality of a law (U S. vs. Ten Yu, 24 Phil. 1; Go Ching, et al. vs. Dinglasan, et al., 45 O.G. No. 2, pp.
703, 705). To declare a law unconstitutional, the repugnancy of that law to the Constitution must be clear and unequivocal, for
even if a law is aimed at the attainment of some public good, no infringement of constitutional rights is allowed. To strike down
a law there must be a clear showing that what the fundamental law condemns or prohibits, the statute allows it to be done
(Morfe vs. Mutuc, et al., G.R. No. L-20387, Jan. 31, 1968; 22 SCRA 424). That situation does not obtain in this case as the law
assailed does not in any manner trench upon the constitution as will hereafter be shown. Republic Act No. 4118 was intended to
implement the social justice policy of the Constitution and the Government program of "Land for the Landless". The
explanatory note of House Bill No. 1453 which became Republic Act No. 4118, reads in part as follows:
Approval of this bill will implement the policy of the administration of "land for the landless" and the Fifth
Declaration of Principles of the Constitution which states that "the promotion of social justice to insure the
well-being and economic security of all people should be the concern of the State." We are ready and willing to
enact legislation promoting the social and economic well-being of the people whenever an opportunity for
enacting such kind of legislation arises.
The respondent Court held that Republic Act No. 4118, "by converting the land in question which is the patrimonial property
of the City of Manila into disposable alienable land of the State and placing it under the disposal of the Land Tenure
Administration violates the provisions of Article III (Secs. 1 and 2) of the Constitution which ordain that "private property
shall not be taken for public use without just compensation, and that no person shall be deprived of life, liberty or property
without due process of law". In support thereof reliance is placed on the ruling in Province of Zamboanga del Norte vs. City of
Zamboanga, G.R. No. 2440, March 28, 1968; 22 SCRA 1334, which holds that Congress cannot deprive a municipality of its
private or patrimonial property without due process of law and without payment of just compensation since it has no absolute
control thereof. There is no quarrel over this rule if it is undisputed that the property sought to be taken is in reality a private or
patrimonial property of the municipality or city. But it would be simply begging the question to classify the land in question as
such. The property, as has been previously shown, was not acquired by the City of Manila with its own funds in its private or
proprietary capacity. That it has in its name a registered title is not questioned, but this title should be deemed to be held in trust
for the State as the land covered thereby was part of the territory of the City of Manila granted by the sovereign upon its
creation. That the National Government, through the Director of Lands, represented by the Solicitor General, in the cadastral
proceedings did not contest the claim of the City of Manila that the land is its property, does not detract from its character as
State property and in no way divests the legislature of its power to deal with it as such, the state not being bound by the mistakes
and/or negligence of its officers.
One decisive fact that should be noted is that the City of Manila expressly recognized the paramount title of the State over said
land when by its resolution of September 20, 1960, the Municipal Board, presided by then Vice-Mayor Antonio Villegas,
requested "His Excellency the President of the Philippines to consider the feasibility of declaring the city property bounded by
Florida, San Andres and Nebraska Streets, under Transfer Certificate of Title Nos. 25545 and 25547, containing an area of 7,450
square meters, as patrimonial property of the City of Manila for the purpose of reselling these lots to the actual occupants
thereof." (See Annex E, Partial Stipulation of Facts, Civil Case No. 67945, CFI, Manila, p. 121, Record of the Case) [Emphasis
Supplied]

The alleged patrimonial character of the land under the ownership of the City of Manila is totally belied by the City's own
official act, which is fatal to its claim since the Congress did not do as bidden. If it were its patrimonial property why should the
City of Manila be requesting the President to make representation to the legislature to declare it as such so it can be disposed of
in favor of the actual occupants? There could be no more blatant recognition of the fact that said land belongs to the State and
was simply granted in usufruct to the City of Manila for municipal purposes. But since the City did not actually use said land for
any recognized public purpose and allowed it to remain idle and unoccupied for a long time until it was overrun by squatters, no
presumption of State grant of ownership in favor of the City of Manila may be acquiesced in to justify the claim that it is its
own private or patrimonial property (Municipality of Tigbauan vs. Director of Lands, 35 Phil. 798; City of Manila vs. Insular
Government, 10 Phil. 327; Municipality of Luzuriaga vs. Director of Lands, 24 Phil. 193). The conclusion of the respondent
court that Republic Act No. 4118 converted a patrimonial property of the City of Manila into a parcel of disposable land of the
State and took it away from the City without compensation is, therefore, unfounded. In the last analysis the land in question
pertains to the State and the City of Manila merely acted as trustee for the benefit of the people therein for whom the State can
legislate in the exercise of its legitimate powers.
Republic Act No. 4118 was never intended to expropriate the property involved but merely to confirm its character as
communal land of the State and to make it available for disposition by the National Government: And this was done at the
instance or upon the request of the City of Manila itself. The subdivision of the land and conveyance of the resulting subdivision
lots to the occupants by Congressional authorization does not operate as an exercise of the power of eminent domain without
just compensation in violation of Section 1, subsection (2), Article III of the Constitution, but simply as a manifestation of its
right and power to deal with state property.
It should be emphasized that the law assailed was enacted upon formal written petition of the Municipal Board of Manila in the
form of a legally approved resolution. The certificate of title over the property in the name of the City of Manila was
accordingly cancelled and another issued to the Land Tenure Administration after the voluntary surrender of the City's duplicate
certificate of title by the City Treasurer with the knowledge and consent of the City Mayor. To implement the provisions of
Republic Act No. 4118, the then Deputy Governor of the Land Authority sent a letter, dated February 18, 1965, to the City
Mayor furnishing him with a copy of the "proposed subdivision plan of the said lot as prepared for the Republic of the
Philippines for subdivision and resale by the Land Authority to bona fide applicants." On March 2, 1965, the Mayor of Manila,
through his Executive and Technical Adviser, acknowledged receipt of the subdivision plan and informed the Land Authority
that his Office "will interpose no objection to the implementation of said law provided that its provisions are strictly complied
with." The foregoing sequence of events, clearly indicate a pattern of regularity and observance of due process in the reversion
of the property to the National Government. All such acts were done in recognition by the City of Manila of the right and power
of the Congress to dispose of the land involved.
Consequently, the City of Manila was not deprived of anything it owns, either under the due process clause or under the eminent
domain provisions of the Constitution. If it failed to get from the Congress the concession it sought of having the land involved
given to it as its patrimonial property, the Courts possess no power to grant that relief. Republic Act No. 4118 does not,
therefore, suffer from any constitutional infirmity.
WHEREFORE, the appealed decision is hereby reversed, and petitioners shall proceed with the free and untrammeled
implementation of Republic Act No. 4118 without any obstacle from the respondents. Without costs.
Concepcion, C.J., Makalintal, Zaldivar, Castro, Fernando, Teehankee and Antonio, JJ., concur.
Barredo and Makasiar, JJ., took no part.

G.R. No. L40474 August 29, 1975


CEBU
OXYGEN
&
ACETYLENE
CO.,
INC., petitioner,
vs.
HON. PASCUAL A. BERCILLES Presiding Judge, Branch XV, 14th Judicial District, and JOSE L. ESPELETA,
Assistant Provincial Fiscal, Province of Cebu, representing the Solicitor General's Office and the Bureau of
Lands, respondents.
Jose Antonio R Conde for petitioner.
Office of the Acting Solicitor General Hugo E. Gutierrez, Jr., Assistant Solicitor General Octavio R. Ramirez and Trial Attorney
David R. Hilario for respondents. .

CONCEPCION, Jr., J.:


This is a petition for the review of the order of the Court of First Instance of Cebu dismissing petitioner's application for
registration of title over a parcel of land situated in the City of Cebu.
The parcel of land sought to be registered was only a portion of M. Borces Street, Mabolo, Cebu City. On September 23, 1968,
the City Council of Cebu, through Resolution No. 2193, approved on October 3, 1968, declared the terminal portion of M.
Borces Street, Mabolo, Cebu City, as an abandoned road, the same not being included in the City Development
Plan. 1 Subsequently, on December 19, 1968, the City Council of Cebu passed Resolution No. 2755, authorizing the Acting City
Mayor to sell the land through a public bidding. 2 Pursuant thereto, the lot was awarded to the herein petitioner being the highest bidder
and on March 3, 1969, the City of Cebu, through the Acting City Mayor, executed a deed of absolute sale to the herein petitioner for a
total consideration of P10,800.00. 3 By virtue of the aforesaid deed of absolute sale, the petitioner filed an application with the Court of
First instance of Cebu to have its title to the land registered. 4
On June 26, 1974, the Assistant Provincial Fiscal of Cebu filed a motion to dismiss the application on the ground that the
property sought to be registered being a public road intended for public use is considered part of the public domain and
therefore outside the commerce of man. Consequently, it cannot be subject to registration by any private individual. 5

After hearing the parties, on October 11, 1974 the trial court issued an order dismissing the petitioner's application for
registration of title. 6 Hence, the instant petition for review.
For the resolution of this case, the petitioner poses the following questions:
(1) Does the City Charter of Cebu City (Republic Act No. 3857) under Section 31, paragraph 34, give the City
of Cebu the valid right to declare a road as abandoned? and
(2) Does the declaration of the road, as abandoned, make it the patrimonial property of the City of Cebu which
may be the object of a common contract?
(1) The pertinent portions of the Revised Charter of Cebu City provides:
Section 31. Legislative Powers. Any provision of law and executive order to the contrary notwithstanding, the
City Council shall have the following legislative powers:
xxx xxx xxx
(34) ...; to close any city road, street or alley, boulevard, avenue, park or square. Property thus withdrawn from
public servitude may be used or conveyed for any purpose for which other real property belonging to the City
may be lawfully used or conveyed.
From the foregoing, it is undoubtedly clear that the City of Cebu is empowered to close a city road or street. In the case of Favis
vs. City of Baguio, 7 where the power of the city Council of Baguio City to close city streets and to vacate or withdraw the same from
public use was similarly assailed, this court said:
5. So it is, that appellant may not challenge the city council's act of withdrawing a strip of Lapu-Lapu Street at
its dead end from public use and converting the remainder thereof into an alley. These are acts well within the
ambit of the power to close a city street. The city council, it would seem to us, is the authority competent to
determine whether or not a certain property is still necessary for public use.
Such power to vacate a street or alley is discretionary. And the discretion will not ordinarily be controlled or
interfered with by the courts, absent a plain case of abuse or fraud or collusion. Faithfulness to the public trust
will be presumed. So the fact that some private interests may be served incidentally will not invalidate the
vacation ordinance.
(2) Since that portion of the city street subject of petitioner's application for registration of title was withdrawn from public use,
it follows that such withdrawn portion becomes patrimonial property which can be the object of an ordinary contract.
Article 422 of the Civil Code expressly provides that "Property of public dominion, when no longer intended for public use or
for public service, shall form part of the patrimonial property of the State."
Besides, the Revised Charter of the City of Cebu heretofore quoted, in very clear and unequivocal terms, states that: "Property
thus withdrawn from public servitude may be used or conveyed for any purpose for which other real property belonging to the
City may be lawfully used or conveyed."
Accordingly, the withdrawal of the property in question from public use and its subsequent sale to the petitioner is valid. Hence,
the petitioner has a registerable title over the lot in question.
WHEREFORE, the order dated October 11, 1974, rendered by the respondent court in Land Reg. Case No. N-948, LRC Rec.
No. N-44531 is hereby set aside, and the respondent court is hereby ordered to proceed with the hearing of the petitioner's
application for registration of title.
SO ORDERED.

Makalintal, C.J, Fernando, Barredo and Aquino, JJ., concur.

G.R. No. L-61744 June 25, 1984


MUNICIPALITY
OF
SAN
MIGUEL,
BULACAN, petitioner,
vs.
HONORABLE OSCAR C. FERNANDEZ, in his capacity as the Presiding Judge, Branch IV, Baliuag, Bulacan, The
PROVINCIAL SHERIFF of Bulacan, MARGARITA D. VDA. DE IMPERIO, ADORACION IMPERIO, RODOLFO
IMPERIO, CONRADO IMPERIO, ERNESTO IMPERIO, ALFREDO IMPERIO, CARLOS IMPERIO, JR., JUAN
IMPERIO and SPOUSES MARCELO PINEDA and LUCILA PONGCO, respondents.
Pascual C. Liatchko for petitioner.
The Solicitor General and Marcelo Pineda for respondents.

RELOVA, J.:
In Civil Case No. 604-B, entitled "Margarita D. Vda. de Imperio, et al. vs. Municipal Government of San Miguel, Bulacan, et
al.", the then Court of First Instance of Bulacan, on April 28, 1978, rendered judgment holding herein petitioner municipality
liable to private respondents, as follows:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiffs and against the
defendant Municipal Government of San Miguel Bulacan, represented by Mayor Mar Marcelo G. Aure and its
Municipal Treasurer:
1. ordering the partial revocation of the Deed of Donation signed by the deceased Carlos Imperio in favor of
the Municipality of San Miguel Bulacan, dated October 27, 1947 insofar as Lots Nos. 1, 2, 3, 4 and 5, Block 11
of Subdivision Plan Psd-20831 are concerned, with an aggregate total area of 4,646 square meters, which lots
are among those covered and described under TCT No. T-1831 of the Register of Deeds of Bulacan in the
name of the Municipal Government of San Miguel Bulacan,

2. ordering the defendant to execute the corresponding Deed of Reconveyance over the aforementioned five
lots in favor of the plaintiffs in the proportion of the undivided one-half () share in the name of plaintiffs
Margarita D. Vda. de Imperio, Adoracion, Rodolfo, Conrado, Ernesto, Alfredo, Carlos, Jr. and Juan, all
surnamed Imperio, and the remaining undivided one-half () share in favor of plaintiffs uses Marcelo E.
Pineda and Lucila Pongco;
3. ordering the defendant municipality to pay to the plaintiffs in the proportion mentioned in the immediately
preceding paragraph the sum of P64,440.00 corresponding to the rentals it has collected from the occupants for
their use and occupation of the premises from 1970 up to and including 1975, plus interest thereon at the legal
rate from January 1970 until fully paid;
4. ordering the restoration of ownership and possession over the five lots in question in favor of the plaintiffs
in the same proportion aforementioned;
5. ordering the defendant to pay the plaintiffs the sum of P3,000.00 for attomey's fees; and to pay the cost of
suit.
The counterclaim of the defendant is hereby ordered dismissed for lack of evidence presented to substantiate
the same.
SO ORDERED. (pp. 11-12, Rollo)
The foregoing judgment became final when herein petitioner's appeal was dismissed due to its failure to file the record on
appeal on time. The dismissal was affirmed by the then Court of Appeals in CA-G.R. No. SP-12118 and by this Court in G.R.
No. 59938. Thereafter, herein private respondents moved for issuance of a writ of execution for the satisfaction of the judgment.
Respondent judge, on July 27, 1982, issued an order, to wit:
Considering that an entry of judgment had already been made on June 14, 1982 in G. R. No. L-59938 and;
Considering further that there is no opposition to plaintiffs' motion for execution dated July 23, 1983;
Let a writ of execution be so issued, as prayed for in the aforestated motion. (p. 10, Rollo)
Petitioner, on July 30, 1982, filed a Motion to Quash the writ of execution on the ground that the municipality's property or
funds are all public funds exempt from execution. The said motion to quash was, however, denied by the respondent judge in an
order dated August 23, 1982 and the alias writ of execution stands in full force and effect.
On September 13, 1982, respondent judge issued an order which in part, states:
It is clear and evident from the foregoing that defendant has more than enough funds to meet its judgment
obligation. Municipal Treasurer Miguel C, Roura of San Miguel, Bulacan and Provincial Treasurer of Bulacan
Agustin O. Talavera are therefor hereby ordered to comply with the money judgment rendered by Judge
Agustin C. Bagasao against said municipality. In like manner, the municipal authorities of San Miguel,
Bulacan are likewise ordered to desist from plaintiffs' legal possession of the property already returned to
plaintiffs by virtue of the alias writ of execution.
Finally, defendants are hereby given an inextendible period of ten (10) days from receipt of a copy of this order
by the Office of the Provincial Fiscal of Bulacan within which to submit their written compliance, (p. 24,
Rollo)
When the treasurers (provincial and municipal) failed to comply with the order of September 13, 1982, respondent judge issued
an order for their arrest and that they will be release only upon compliance thereof.

Hence, the present petition on the issue whether the funds of the Municipality of San Miguel, Bulacan, in the hands of the
provincial and municipal treasurers of Bulacan and San Miguel, respectively, are public funds which are exempt from execution
for the satisfaction of the money judgment in Civil Case No. 604-B.
Well settled is the rule that public funds are not subject to levy and execution. The reason for this was explained in the case of
Municipality of Paoay vs. Manaois, 86 Phil. 629 "that they are held in trust for the people, intended and used for the
accomplishment of the purposes for which municipal corporations are created, and that to subject said properties and public
funds to execution would materially impede, even defeat and in some instances destroy said purpose." And, in Tantoco vs.
Municipal Council of Iloilo, 49 Phil. 52, it was held that "it is the settled doctrine of the law that not only the public property but
also the taxes and public revenues of such corporations Cannot be seized under execution against them, either in the treasury or
when in transit to it. Judgments rendered for taxes, and the proceeds of such judgments in the hands of officers of the law, are
not subject to execution unless so declared by statute." Thus, it is clear that all the funds of petitioner municipality in the
possession of the Municipal Treasurer of San Miguel, as well as those in the possession of the Provincial Treasurer of Bulacan,
are also public funds and as such they are exempt from execution.
Besides, Presidential Decree No. 477, known as "The Decree on Local Fiscal Administration", Section 2 (a), provides:
SEC. 2. Fundamental Principles. Local government financial affairs, transactions, and operations shall be
governed by the fundamental principles set forth hereunder:
(a) No money shall be paid out of the treasury except in pursuance of a lawful appropriation or other specific
statutory authority.
xxx xxx xxx
Otherwise stated, there must be a corresponding appropriation in the form of an ordinance duly passed by the Sangguniang
Bayan before any money of the municipality may be paid out. In the case at bar, it has not been shown that the Sangguniang
Bayan has passed an ordinance to this effect.
Furthermore, Section 15, Rule 39 of the New Rules of Court, outlines the procedure for the enforcement of money judgment:
(a) By levying on all the property of the debtor, whether real or personal, not otherwise exempt from
execution, or only on such part of the property as is sufficient to satisfy the judgment and accruing cost, if he
has more than sufficient property for the purpose;
(b) By selling the property levied upon;
(c) By paying the judgment-creditor so much of the proceeds as will satisfy the judgment and accruing costs;
and
(d) By delivering to the judgment-debtor the excess, if any, unless otherwise, directed by judgment or order of
the court.
The foregoing has not been followed in the case at bar.
ACCORDINGLY, the petition is granted and the order of respondent judge, dated July 27, 1982, granting issuance of a writ of
execution; the alias writ of execution, dated July 27, 1982; and the order of respondent judge, dated September 13, 1982,
directing the Provincial Treasurer of Bulacan and the Municipal Treasurer of San Miguel, Bulacan to comply with the money
judgments, are SET ASIDE; and respondents are hereby enjoined from implementing the writ of execution.
SO ORDERED.
Teehankee (Chairman), Melencio-Herrera, Plana, Gutierrez, Jr., and De la Fuente, JJ,. concur.

G.R. No. L-28379

March 27, 1929

THE
GOVERNMENT
OF
THE
vs.
CONSORCIA CABANGIS, ET AL., claimants-appellees.
Attorney-General
Jaranilla
Abad Santos, Camus & Delgado for appellees.

PHILIPPINE

for

ISLANDS, applicant-appellant,

appellant.

VILLA-REAL, J.:
The Government of the Philippine Islands appeals to this court from the judgment of the Court of First Instance of Manila in
cadastral proceeding No. 373 of the Court of First Instance of Manila, G. L. R. O. Cadastral Record No. 373, adjudicating the
title and decreeing the registration of lots Nos. 36, 39 and 40, block 3055 of the cadastral survey of the City of Manila in favor
of Consuelo, Consorcia, Elvira and Tomas, surnamed Cabangis, in equal parts, and dismissing the claims presented by the
Government of the Philippine Islands and the City of Manila.
In support of its appeal, the appellant assigns the following alleged errors as committed by the trial court in its judgment, to wit:
1. The lower court erred in not holding that the lots in question are of the public domain, the same having been gained
from the sea (Manila Bay) by accession, by fillings made by the Bureau of Public Works and by the construction of the
break-water (built by the Bureau of Navigation) near the mouth of Vitas Estero.

2. The lower court erred in holding that the lots in question formed part of the big parcel of land belonging to the
spouses Maximo Cabangis and Tita Andres, and in holding that these spouses and their successors in interest have been
in continuous, public, peaceful and uninterrupted possession of said lots up to the time this case came up.
3. The lower court erred in holding that said lots existed before, but that due to the current of the Pasig River and to the
action of the big waves in Manila Bay during the south-west monsoons, the same disappeared.
4. The lower court erred in adjudicating the registration of the lands in question in the name of the appellees, and in
denying the appellant's motion for a new trial.
A preponderance of the evidence in the record which may properly be taken into consideration in deciding the case, proves the
following facts:
Lots 36, 39 and 40, block 3035 of cadastral proceeding No. 71 of the City of Manila, G. L. R. O. Record No. 373, were
formerly a part of a large parcel of land belonging to the predecessor of the herein claimants and appellees. From the year 1896
said land began to wear away, due to the action of the waves of Manila Bay, until the year 1901 when the said lots became
completely submerged in water in ordinary tides, and remained in such a state until 1912 when the Government undertook the
dredging of Vitas Estuary in order to facilitate navigation, depositing all the sand and silt taken from the bed of the estuary on
the low lands which were completely covered with water, surrounding that belonging to the Philippine Manufacturing
Company, thereby slowly and gradually forming the lots, the subject matter of this proceeding.
Up to the month of February, 1927 nobody had declared lot 39 for the purposes of taxation, and it was only in the year 1926 that
Dr. Pedro Gil, in behalf of the claimants and appellees, declared lot No. 40 for such purpose.
In view of the facts just stated, as proved by a preponderance of the evidence, the question arises: Who owns lots 36, 39 and 40
in question?
The claimants-appellees contend that inasmuch as the said lots once formed a part of a large parcel of land belonging to their
predecessors, whom they succeeded, and their immediate predecessor in interest, Tomas Cabangis, having taken possession
thereof as soon as they were reclaimed, giving his permission to some fishermen to dry their fishing nets and deposit
their bancas thereon, said lots belong to them.
Article 339, subsection 1, of the Civil Code, reads:
Article 339. Property of public ownership is
1. That devoted to public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the State,
riverbanks, shorts, roadsteads, and that of a similar character.
xxx

xxx

xxx

Article 1, case 3, of the Law of Waters of August 3, 1866, provides as follows:


ARTICLE 1. The following are part of the national domain open to public use:
xxx

xxx

xxx

3. The Shores. By the shore is understood that space covered and uncovered by the movement of the tide. Its interior or
terrestrial limit is the line reached by the highest equinoctial tides. Where the tides are not appreciable, the shore begins
on the land side at the line reached by the sea during ordinary storms or tempests.
In the case of Aragon vs. Insular Government (19 Phil., 223), with reference to article 339 of the Civil Code just quoted, this
court said:
We should not be understood, by this decision, to hold that in a case of gradual encroachment or erosion by the ebb and flow of
the tide, private property may not become 'property of public ownership,' as defined in article 339 of the code, where it appears

that the owner has to all intents and purposes abandoned it and permitted it to be totally destroyed, so as to become a part of the
'playa' (shore of the seas), 'rada' (roadstead), or the like. . . .
In the Enciclopedia Juridica Espanola, volume XII, page 558, we read the following:
With relative frequency the opposite phenomenon occurs; that is, the sea advances and private properties are
permanently invaded by the waves, and in this case they become part of the shore or beach. They then pass to the
public domain, but the owner thus dispossessed does not retain any right to the natural products resulting from their
new nature; it is a de facto case of eminent domain, and not subject to indemnity.
Now then , when said land was reclaimed, did the claimants-appellees or their predecessors recover it as their original property?
As we have seen, the land belonging to the predecessors of the herein claimants-appellees began to wear way in 1896, owing to
the gradual erosion caused by the ebb and flow of the tide, until the year 1901, when the waters of Manila Bay completely
submerged a portion of it, included within lots 36, 39 and 40 here in question, remaining thus under water until reclaimed as a
result of certain work done by the Government in 1912. According to the above-cited authorities said portion of land, that is,
lots 36, 39 and 40, which was private property, became a part of the public domain. The predecessors of the herein claimantsappellees could have protected their land by building a retaining wall, with the consent of competent authority, in 1896 when the
waters of the sea began to wear it away, in accordance with the provisions of Article 29 of the aforecited Law of Waters of
August 3, 1866, and their failure to do so until 1901, when a portion of the same became completely covered by said waters,
remaining thus submerged until 1912, constitutes abandonment.
Now then: The lots under discussion having been reclaimed from the seas as a result of certain work done by the Government,
to whom do they belong?
The answer to this question is found in article 5 of the aforementioned Law of Waters, which is as follows:

ART. 5. Lands reclaimed from the sea in consequence of works constructed by the State, or by the provinces, pueblos
or private persons, with proper permission, shall become the property of the party constructing such works, unless
otherwise provided by the terms of the grant of authority.
The fact that from 1912 some fishermen had been drying their fishing nets and depositing their bancas on lots 36, 39 and 40, by
permission of Tomas Cabangis, does not confer on the latter or his successors the ownership of said lots, because, as they were
converted into public land, no private person could acquire title thereto except in the form and manner established by the law.
In the case of Buzon vs. Insular Government and City of Manila (13 Phil., 324), cited by the claimants-appellees, this court,
admitting the findings and holdings of the lower court, said the following:
If we heed the parol evidence, we find that the seashore was formerly about one hundred brazas distant from the land in
question; that, in the course of time, and by the removal of a considerable quantity of sand from the shore at the back of
the land for the use of the street car company in filling in Calle Cervantes, the sea water in ordinary tides now covers
part of the land described in the petition.
The fact that certain land, not the bed of a river or of the sea, is covered by sea water during the period of ordinary high
tide, is not a reason established by any law to cause the loss thereof, especially when, as in the present case, it becomes
covered by water owing to circumstances entirely independent of the will of the owner.
In the case of Director of Lands vs. Aguilar (G.R. No. 22034), 1 also cited by the claimants-appellees, wherein the Government
adduced no evidence in support of its contention, the lower court said in part:
The contention of the claimants Cabangis is to the effect that said lots are a part of the adjoining land adjudicated to
their deceased father, Don Tomas Cabangis, which, for over fifty years had belonged to their deceased grandmother,
Tita Andres, and that, due to certain improvements made in Manila Bay, the waters of the sea covered a large part of the
lots herein claimed.

The Government of the Philippine Islands also claims the ownership of said lots, because, at ordinary high tide, they
are covered by the sea.
Upon petition of the parties, the lower court made an ocular inspection of said lots on September 12, 1923, and on said
inspection found some light material houses built thereon, and that on that occasion the waters of the sea did not reach
the aforesaid lots.
From the evidence adduced at the trial of this cause, it may be inferred that Tita Andres, during her lifetime was the
owner of a rather large parcel of land which was adjudicated by a decree to her son Tomas Cabangis; the lots now in
question are contiguous to that land and are covered by the waters of the sea at extraordinary high tide; some 50 years
before the sea did not reach said strip of land, and on it were constructed, for the most part, light material houses,
occupied by the tenants of Tita Andres, to whom they paid rent. Upon her death, her son Tomas Cabangis succeeded to
the possession, and his children succeeded him, they being the present claimants, Consuelo, Jesus, Tomas, and
Consorcia Cabangis.
The Government of the Philippine Islands did not adduce any evidence in support of its contention, with the exception
of registry record No. 8147, to show that the lots here in question were not excluded from the application presented in
said proceeding.
It will be seen that in the case of Buzon vs. Insular Government and City of Manila, cited above, the rise of the waters of the sea
that covered the lands there in dispute, was due not to the action of the tide but to the fact that a large quantity of sand was taken
from the sea at the side of said land in order to fill in Cervantes Street, and this court properly held that because of this act,
entirely independent of the will of the owner of said land, the latter could not lose the ownership thereof, and the mere fact that
the waters of the sea covered it as a result of said act, is not sufficient to convert it into public land, especially, as the land was
high and appropriate for building purposes.
In the case of the Director of Lands vs. Aguilar also cited by the claimants-appellees, the Insular Government did not present
any evidence in support of its contention, thus leaving uncontradicted the evidence adduced by the claimants Aguilar et al., as to
the ownership, possession and occupation of said lots.
In the instant case the evidence shows that from 1896, the waves of Manila Bay had been gradually and constantly washing
away the sand that formed the lots here in question, until 1901, when the sea water completely covered them, and thus they
remained until the year 1912. In the latter year they were reclaimed from the sea by filling in with sand and silt extracted from
the bed of Vitas Estuary when the Government dredged said estuary in order to facilitate navigation. Neither the herein
claimants-appellees nor their predecessors did anything to prevent their destruction.
In conclusion, then, we hold that the lots in question having disappeared on account of the gradual erosion due to the ebb and
flow of the tide, and having remained in such a state until they were reclaimed from the sea by the filling in done by the
Government, they are public land. (Aragon vs. Insular Government, 19 Phil., 223; Francisco vs. Government of the Philippine
Islands, 28 Phil., 505).
By virtue whereof, the judgment appealed from is reversed and lots Nos. 36, 39 and 40 of cadastral proceeding No. 373 of the
City of Manila are held to be public land belonging to the Government of the United States under the administration and control
of the Government of the Philippine Islands. So ordered.
Johnson, Street, Malcolm, Ostrand, Johns and Romualdez, JJ., concur.

[G. R. No. 133250. May 6, 2003]

FRANCISCO I. CHAVEZ, petitioner, vs. PUBLIC ESTATES AUTHORITY and AMARI COASTAL BAY DEVELOPMENT
CORPORATION, respondents.
RESOLUTION
CARPIO, J.:

For resolution of the Court are the following motions: (1) Motion to Inhibit and for Re-Deliberation filed by respondent Amari
Coastal Bay Development Corporation (Amari for brevity) on September 13, 2002; (2) Motion to Set Case for Hearing on Oral
Argument filed by Amari on August 20, 2002; (3) Motion for Reconsideration and Supplement to Motion for Reconsideration
filed by Amari on July 26, 2002 and August 20, 2002, respectively; (4) Motion for Reconsideration and Supplement to Motion
for Reconsideration filed by respondent Public Estates Authority (PEA for brevity) on July 26, 2002 and August 8, 2002,
respectively; and (5) Motion for Reconsideration and/or Clarification filed by the Office of the Solicitor General on July 25,
2002. Petitioner Francisco I. Chavez filed on November 13, 2002 his Consolidated Opposition to the main and supplemental
motions for reconsideration.

To recall, the Courts decision of July 9, 2002 (Decision for brevity) on the instant case states in its summary:
We can now summarize our conclusions as follows:
1. The 157.84 hectares of reclaimed lands comprising the Freedom Islands, now covered by certificates of title in the name of
PEA, are alienable lands of the public domain. PEA may lease these lands to private corporations but may not sell or transfer
ownership of these lands to private corporations. PEA may only sell these lands to Philippine citizens, subject to the ownership
limitations in the 1987 Constitution and existing laws.
2. The 592.15 hectares of submerged areas of Manila Bay remain inalienable natural resources of the public domain until
classified as alienable or disposable lands open to disposition and declared no longer needed for public service. The government
can make such classification and declaration only after PEA has reclaimed these submerged areas. Only then can these lands
qualify as agricultural lands of the public domain, which are the only natural resources the government can alienate. In their
present state, the 592.15 hectares of submerged areas are inalienable and outside the commerce of man.
3. Since the Amended JVA seeks to transfer to AMARI, a private corporation, ownership of 77.34 hectares of the Freedom
Islands, such transfer is void for being contrary to Section 3, Article XII of the 1987 Constitution which prohibits private
corporations from acquiring any kind of alienable land of the public domain.
4. Since the Amended JVA also seeks to transfer to AMARI ownership of 290.156 hectares of still submerged areas of Manila
Bay, such transfer is void for being contrary to Section 2, Article XII of the 1987 Constitution which prohibits the alienation of
natural resources other than agricultural lands of the public domain. PEA may reclaim these submerged areas. Thereafter, the
government can classify the reclaimed lands as alienable or disposable, and further declare them no longer needed for public
service. Still, the transfer of such reclaimed alienable lands of the public domain to AMARI will be void in view of Section 3,
Article XII of the 1987 Constitution which prohibits private corporations from acquiring any kind of alienable land of the public
domain.
Clearly, the Amended JVA violates glaringly Sections 2 and 3, Article XII of the 1987 Constitution. Under Article 1409 of the
Civil Code, contracts whose object or purpose is contrary to law, or whose object is outside the commerce of men, are inexistent
and void from the beginning. The Court must perform its duty to defend and uphold the Constitution, and therefore declares the
Amended JVA null and void ab initio.

Amari seeks the inhibition of Justice Antonio T. Carpio, ponente of the Decision, on the ground that Justice Carpio, before his
appointment to the Court, wrote in his Manila Times column of July 1, 1997, I have always maintained that the law requires the
public bidding of reclamation projects. Justice Carpio, then a private law practitioner, also stated in the same column, The
Amari-PEA reclamation contract is legally flawed because it was not bid out by the PEA. Amari claims that because of these
statements Justice Carpio should inhibit himself on the grounds of bias and prejudgment and that the instant case should be redeliberated after being assigned to a new ponente.
The motion to inhibit Justice Carpio must be denied for three reasons. First, the motion to inhibit came after Justice Carpio had
already rendered his opinion on the merits of the case. The rule is that a motion to inhibit must be denied if filed after a member
of the Court had already given an opinion on the merits of the case,[1] the rationale being that a litigant cannot be permitted to
speculate upon the action of the Court xxx (only to) raise an objection of this sort after a decision has been rendered. Second, as
can be readily gleaned from the summary of the Decision quoted above, the absence of public bidding is not one of the ratio
decidendi of the Decision which is anchored on violation of specific provisions of the Constitution. The absence of public
bidding was not raised as an issue by the parties. The absence of public bidding was mentioned in the Decision only to complete
the discussion on the law affecting reclamation contracts for the guidance of public officials. At any rate, the Office of the
Solicitor General in its Motion for Reconsideration concedes that the absence of public bidding in the disposition of the
Freedom Islands rendered the Amended JVA null and void.[2] Third, judges and justices are not disqualified from participating
in a case just because they have written legal articles on the law involved in the case. As stated by the Court in Republic v.
Cocofed,[3] -

The mere fact that, as a former columnist, Justice Carpio has written on the coconut levy will not disqualify him, in the same
manner that jurists will not be disqualified just because they may have given their opinions as textbook writers on the question
involved in a case.
Besides, the subject and title of the column in question was The CCP reclamation project and the column referred to the AmariPEA contract only in passing in one sentence.
Amaris motion to set the case for oral argument must also be denied since the pleadings of the parties have discussed
exhaustively the issues involved in the case.
The motions for reconsideration reiterate mainly the arguments already discussed in the Decision. We shall consider in this
Resolution only the new arguments raised by respondents.
In its Supplement to Motion for Reconsideration, Amari argues that the Decision should be made to apply prospectively, not
retroactively to cover the Amended JVA. Amari argues that the existence of a statute or executive order prior to its being
adjudged void is an operative fact to which legal consequences are attached, citing De Agbayani v. PNB,[4] thus:
x x x. It does not admit of doubt that prior to the declaration of nullity such challenged legislative or executive act must have
been in force and had to be complied with. This is so as until after the judiciary, in an appropriate case, declares its invalidity, it
is entitled to obedience and respect. Parties may have acted under it and may have changed their positions. What could be more
fitting than that in a subsequent litigation regard be had to what has been done while such legislative or executive act was in
operation and presumed to be valid in all respects. It is now accepted as a doctrine that prior to its being nullified, its existence
as a fact must be reckoned with. This is merely to reflect awareness that precisely because the judiciary is the governmental
organ which has the final say on whether or not a legislative or executive measure is valid, a period of time may have elapsed
before it can exercise the power of judicial review that may lead to a declaration of nullity. It would be to deprive the law of its
quality of fairness and justice then, if there be no recognition of what had transpired prior to such adjudication.
In the language of an American Supreme Court decision: "The actual existence of a statute, prior to such a determination [of
unconstitutionality], is an operative fact and may have consequences which cannot justly be ignored. The past cannot always be
erased by a new judicial declaration. The effect of the subsequent ruling as to invalidity may have to be considered in various
aspects, - with respect to particular relations, individual and corporate, and particular conduct, private and official." This
language has been quoted with approval in a resolution in Araneta v. Hill and the decision in Manila Motor Co., Inc. v. Flores. x
x x.
x x x That before the decision they were not constitutionally infirm was admitted expressly. There is all the more reason then to
yield assent to the now prevailing principle that the existence of a statute or executive order prior to its being adjudged void is
an operative fact to which legal consequences are attached.

Amari now claims that assuming arguendo that Presidential Decree Nos. 1084 and 1085, and Executive Order Nos. 525 and 654
are inconsistent with the 1987 Constitution, the limitation imposed by the Decision on these decrees and executive orders
should only be applied prospectively from the finality of the Decision.
Amari likewise asserts that a new doctrine of the Court cannot operate retroactively if it impairs vested rights. Amari maintains
that the new doctrine embodied in the Decision cannot apply retroactively on those who relied on the old doctrine in good faith,
citing Spouses Benzonan v. Court of Appeals,[5] thus:
At that time, the prevailing jurisprudence interpreting section 119 of R.A. 141 as amended was that enunciated in Monge and
Tupas cited above. The petitioners Benzonan and respondent Pe and the DBP are bound by these decisions for pursuant to
Article 8 of the Civil Code "judicial decisions applying or interpreting the laws or the Constitution shall form a part of the legal
system of the Philippines." But while our decisions form part of the law of the land, they are also subject to Article 4 of the Civil
Code which provides that "laws shall have no retroactive effect unless the contrary is provided." This is expressed in the
familiar legal maxim lex prospicit, non respicit, the law looks forward not backward. The rationale against retroactivity is easy

to perceive. The retroactive application of a law usually divests rights that have already become vested or impairs the
obligations of contract and hence, is unconstitutional (Francisco v. Certeza, 3 SCRA 565 [1961]).
The same consideration underlies our rulings giving only prospective effect to decisions enunciating new doctrines. Thus, we
emphasized in People v. Jabinal, 55 SCRA 607 [1974] "x x x when a doctrine of this Court is overruled and a different view is
adopted, the new doctrine should be applied prospectively and should not apply to parties who had relied on the old doctrine
and acted on the faith thereof.
There may be special cases where weighty considerations of equity and social justice will warrant a retroactive application of
doctrine to temper the harshness of statutory law as it applies to poor farmers or their widows and orphans. In the present
petitions, however, we find no such equitable considerations. Not only did the private respondent apply for free agricultural land
when he did not need it and he had no intentions of applying it to the noble purposes behind the law, he would now repurchase
for only P327,995.00, the property purchased by the petitioners in good faith for P1,650,000.00 in 1979 and which, because of
improvements and the appreciating value of land must be worth more than that amount now.
The buyers in good faith from DBP had a right to rely on our rulings in Monge and Tupas when they purchased the property
from DBP in 1979 or thirteen (13) years ago. Under the rulings in these two cases, the period to repurchase the disputed lot
given to respondent Pe expired on June 18, 1982. He failed to exercise his right. His lost right cannot be revived by relying on
the 1988 case of Belisario. The right of petitioners over the subject lot had already become vested as of that time and cannot be
impaired by the retroactive application of the Belisario ruling.
Amaris reliance on De Agbayani and Spouses Benzonan is misplaced. These cases would apply if the prevailing law or doctrine
at the time of the signing of the Amended JVA was that a private corporation could acquire alienable lands of the public domain,
and the Decision annulled the law or reversed this doctrine. Obviously, this is not the case here.
Under the 1935 Constitution, private corporations were allowed to acquire alienable lands of the public domain. But since the
effectivity of the 1973 Constitution, private corporations were banned from holding, except by lease, alienable lands of the
public domain. The 1987 Constitution continued this constitutional prohibition. The prevailing law before, during and after the
signing of the Amended JVA is that private corporations cannot hold, except by lease, alienable lands of the public domain. The
Decision has not annulled or in any way changed the law on this matter. The Decision, whether made retroactive or not, does
not change the law since the Decision merely reiterates the law that prevailed since the effectivity of the 1973 Constitution.
Thus, De Agbayani, which refers to a law that is invalidated by a decision of the Court, has no application to the instant case.
Likewise, Spouses Benzonan is inapplicable because it refers to a doctrine of the Court that is overruled by a subsequent
decision which adopts a new doctrine. In the instant case, there is no previous doctrine that is overruled by the Decision. Since
the case of Manila Electric Company v. Judge Castro-Bartolome,[6] decided on June 29, 1982, the Court has applied
consistently the constitutional provision that private corporations cannot hold, except by lease, alienable lands of the public
domain. The Court reiterated this in numerous cases, and the only dispute in the application of this constitutional provision is
whether the land in question had already become private property before the effectivity of the 1973 Constitution.[7] If the land
was already private land before the 1973 Constitution because the corporation had possessed it openly, continuously,
exclusively and adversely for at least thirty years since June 12, 1945 or earlier, then the corporation could apply for judicial
confirmation of its imperfect title. But if the land remained public land upon the effectivity of the 1973 Constitution, then the
corporation could never hold, except by lease, such public land. Indisputably, the Decision does not overrule any previous
doctrine of the Court.

The prevailing doctrine before, during and after the signing of the Amended JVA is that private corporations cannot hold, except
by lease, alienable lands of the public domain. This is one of the two main reasons why the Decision annulled the Amended
JVA. The other main reason is that submerged areas of Manila Bay, being part of the sea, are inalienable and beyond the
commerce of man, a doctrine that has remained immutable since the Spanish Law on Waters of 1886. Clearly, the Decision
merely reiterates, and does not overrule, any existing judicial doctrine.
Even on the characterization of foreshore lands reclaimed by the government, the Decision does not overrule existing law or
doctrine. Since the adoption of the Regalian doctrine in this jurisdiction, the sea and its foreshore areas have always been part of

the public domain. And since the enactment of Act No. 1654 on May 18, 1907 until the effectivity of the 1973 Constitution,
statutory law never allowed foreshore lands reclaimed by the government to be sold to private corporations. The 1973 and 1987
Constitution enshrined and expanded the ban to include any alienable land of the public domain.
There are, of course, decisions of the Court which, while recognizing a violation of the law or Constitution, hold that the sale or
transfer of the land may no longer be invalidated because of weighty considerations of equity and social justice.[8] The
invalidation of the sale or transfer may also be superfluous if the purpose of the statutory or constitutional ban has been
achieved. But none of these cases apply to Amari.
Thus, the Court has ruled consistently that where a Filipino citizen sells land to an alien who later sells the land to a Filipino, the
invalidity of the first transfer is corrected by the subsequent sale to a citizen.[9] Similarly, where the alien who buys the land
subsequently acquires Philippine citizenship, the sale is validated since the purpose of the constitutional ban to limit land
ownership to Filipinos has been achieved.[10] In short, the law disregards the constitutional disqualification of the buyer to hold
land if the land is subsequently transferred to a qualified party, or the buyer himself becomes a qualified party. In the instant
case, however, Amari has not transferred the Freedom Islands, or any portion of it, to any qualified party. In fact, Amari admits
that title to the Freedom Islands still remains with PEA.[11]
The Court has also ruled consistently that a sale or transfer of the land may no longer be questioned under the principle of res
judicata, provided the requisites for res judicata are present.[12] Under this principle, the courts and the parties are bound by a
prior final decision, otherwise there will be no end to litigation. As the Court declared in Toledo-Banaga v. Court of Appeals,
[13] once a judgement has become final and executory, it can no longer be disturbed no matter how erroneous it may be. In the
instant case, there is no prior final decision adjudicating the Freedom Islands to Amari.
There are, moreover, special circumstances that disqualify Amari from invoking equity principles. Amari cannot claim good
faith because even before Amari signed the Amended JVA on March 30, 1999, petitioner had already filed the instant case on
April 27, 1998 questioning precisely the qualification of Amari to acquire the Freedom Islands. Even before the filing of this
petition, two Senate Committees[14] had already approved on September 16, 1997 Senate Committee Report No. 560. This
Report concluded, after a well-publicized investigation into PEAs sale of the Freedom Islands to Amari, that the Freedom
Islands are inalienable lands of the public domain. Thus, Amari signed the Amended JVA knowing and assuming all the
attendant risks, including the annulment of the Amended JVA.
Amari has also not paid to PEA the full reimbursement cost incurred by PEA in reclaiming the Freedom Islands. Amari states
that it has paid PEA only P300,000,000.00[15] out of the P1,894,129,200.00 total reimbursement cost agreed upon in the
Amended JVA. Moreover, Amari does not claim to have even initiated the reclamation of the 592.15 hectares of submerged
areas covered in the Amended JVA, or to have started to construct any permanent infrastructure on the Freedom Islands. In
short, Amari does not claim to have introduced any physical improvement or development on the reclamation project that is the
subject of the Amended JVA. And yet Amari claims that it had already spent a whopping P9,876,108,638.00 as its total
development cost as of June 30, 2002.[16] Amari does not explain how it spent the rest of the P9,876,108,638.00 total project
cost after paying PEA P300,000,000.00. Certainly, Amari cannot claim to be an innocent purchaser in good faith and for value.
In its Supplement to Motion for Reconsideration, PEA claims that it is similarly situated as the Bases Conversion Development
Authority (BCDA) which under R.A. No. 7227 is tasked to sell portions of the Metro Manila military camps and other military
reservations. PEAs comparison is incorrect. The Decision states as follows:

As the central implementing agency tasked to undertake reclamation projects nationwide, with authority to sell reclaimed lands,
PEA took the place of DENR as the government agency charged with leasing or selling reclaimed lands of the public domain.
The reclaimed lands being leased or sold by PEA are not private lands, in the same manner that DENR, when it disposes of
other alienable lands, does not dispose of private lands but alienable lands of the public domain. Only when qualified private
parties acquire these lands will the lands become private lands. In the hands of the government agency tasked and authorized to
dispose of alienable or disposable lands of the public domain, these lands are still public, not private lands.
PEA is the central implementing agency tasked to undertake reclamation projects nationwide. PEA took the place of Department
of Environment and Natural Resources (DENR for brevity) as the government agency charged with leasing or selling all

reclaimed lands of the public domain. In the hands of PEA, which took over the leasing and selling functions of DENR,
reclaimed foreshore lands are public lands in the same manner that these same lands would have been public lands in the hands
of DENR. BCDA is an entirely different government entity. BCDA is authorized by law to sell specific government lands that
have long been declared by presidential proclamations as military reservations for use by the different services of the armed
forces under the Department of National Defense. BCDAs mandate is specific and limited in area, while PEAs mandate is
general and national. BCDA holds government lands that have been granted to end-user government entities the military
services of the armed forces. In contrast, under Executive Order No. 525, PEA holds the reclaimed public lands, not as an enduser entity, but as the government agency primarily responsible for integrating, directing, and coordinating all reclamation
projects for and on behalf of the National Government.
In Laurel v. Garcia,[17] cited in the Decision, the Court ruled that land devoted to public use by the Department of Foreign
Affairs, when no longer needed for public use, may be declared patrimonial property for sale to private parties provided there is
a law authorizing such act. Well-settled is the doctrine that public land granted to an end-user government agency for a specific
public use may subsequently be withdrawn by Congress from public use and declared patrimonial property to be sold to private
parties. R.A. No. 7227 creating the BCDA is a law that declares specific military reservations no longer needed for defense or
military purposes and reclassifies such lands as patrimonial property for sale to private parties.
Government owned lands, as long they are patrimonial property, can be sold to private parties, whether Filipino citizens or
qualified private corporations. Thus, the so-called Friar Lands acquired by the government under Act No. 1120 are patrimonial
property[18] which even private corporations can acquire by purchase. Likewise, reclaimed alienable lands of the public domain
if sold or transferred to a public or municipal corporation for a monetary consideration become patrimonial property in the
hands of the public or municipal corporation. Once converted to patrimonial property, the land may be sold by the public or
municipal corporation to private parties, whether Filipino citizens or qualified private corporations.
We reiterate what we stated in the Decision is the rationale for treating PEA in the same manner as DENR with respect to
reclaimed foreshore lands, thus:
To allow vast areas of reclaimed lands of the public domain to be transferred to PEA as private lands will sanction a gross
violation of the constitutional ban on private corporations from acquiring any kind of alienable land of the public domain. PEA
will simply turn around, as PEA has now done under the Amended JVA, and transfer several hundreds of hectares of these
reclaimed and still to be reclaimed lands to a single private corporation in only one transaction. This scheme will effectively
nullify the constitutional ban in Section 3, Article XII of the 1987 Constitution which was intended to diffuse equitably the
ownership of alienable lands of the public domain among Filipinos, now numbering over 80 million strong.
This scheme, if allowed, can even be applied to alienable agricultural lands of the public domain since PEA can acquire x x x
any and all kinds of lands. This will open the floodgates to corporations and even individuals acquiring hundreds, if not
thousands, of hectares of alienable lands of the public domain under the guise that in the hands of PEA these lands are private
lands. This will result in corporations amassing huge landholdings never before seen in this country - creating the very evil that
the constitutional ban was designed to prevent. This will completely reverse the clear direction of constitutional development in
this country. The 1935 Constitution allowed private corporations to acquire not more than 1,024 hectares of public lands. The
1973 Constitution prohibited private corporations from acquiring any kind of public land, and the 1987 Constitution has
unequivocally reiterated this prohibition.
Finally, the Office of the Solicitor General and PEA argue that the cost of reclaiming deeply submerged areas is enormous and it
would be difficult for PEA to accomplish such project without the participation of private corporations.[19] The Decision does
not bar private corporations from participating in reclamation projects and being paid for their services in reclaiming lands.
What the Decision prohibits, following the explicit constitutional mandate, is for private corporations to acquire reclaimed lands
of the public domain. There is no prohibition on the directors, officers and stockholders of private corporations, if they are
Filipino citizens, from acquiring at public auction reclaimed alienable lands of the public domain. They can acquire not more
than 12 hectares per individual, and the land thus acquired becomes private land.

Despite the nullity of the Amended JVA, Amari is not precluded from recovering from PEA in the proper proceedings, on a
quantum meruit basis, whatever Amari may have incurred in implementing the Amended JVA prior to its declaration of nullity.

WHEREFORE, finding the Motions for Reconsideration to be without merit, the same are hereby DENIED with FINALITY.
The Motion to Inhibit and for Re-Deliberation and the Motion to Set Case for Hearing on Oral Argument are likewise DENIED.
SO ORDERED.

[G.R. No. 160384. April 29, 2005]

CESAR T. HILARIO, for himself and as Attorney-in-Fact of IBARRA, NESTOR, LINA and PRESCILLA, all surnamed
HILARIO, petitioners, vs. ALLAN T. SALVADOR, respondent.
HEIRS OF SALUSTIANO SALVADOR, namely, REGIDOR M. SALVADOR and VIRGINIA SALVADOR-LIM,
respondents-intervenors.
DECISION
CALLEJO, SR., J.:

This is a petition for review on certiorari under Rule 45 of the Revised Rules of Court of the Decision[1] of the Court of
Appeals (CA) in CA-G.R. CV No. 63737 as well as its Resolution[2] denying the motion for the reconsideration of the
said decision.

The Antecedents

On September 3, 1996, petitioners Cesar, Ibarra, Nestor, Lina and Prescilla, all surnamed Hilario, filed a complaint with
the Regional Trial Court (RTC) of Romblon, Romblon, Branch 71, against private respondent Allan T. Salvador. They
alleged therein, inter alia, as follows:

2. That, the plaintiffs are co-owners by inheritance from Concepcion Mazo Salvador of a parcel of land designated as Cad.
Lot No. 3113-part, located at Sawang, Romblon, Romblon, which property was [adjudged] as the hereditary share of their
father, Brigido M. Hilario, Jr. when their father was still single, and which adjudication was known by the plaintiffs[]
fathers co-heirs;

3. That, sometime in 1989, defendant constructed his dwelling unit of mixed materials on the property of the plaintiffs
father without the knowledge of the herein plaintiffs or their predecessors-in-interest;

4. That, demands have been made of the defendant to vacate the premises but the latter manifested that he have (sic) asked
the prior consent of their grandmother, Concepcion Mazo Salvador;

5. That, to reach a possible amicable settlement, the plaintiffs brought the matter to the Lupon of Barangay Sawang, to no
avail, evidenced by the CERTIFICATE TO FILE ACTION hereto attached as ANNEX B;

6. That, the unjustified refusal of the defendant to vacate the property has caused the plaintiffs to suffer shame,
humiliation, wounded feelings, anxiety and sleepless nights;

7. That, to protect their rights and interest, plaintiffs were constrained to engage the services of a lawyer.[3]

The petitioners prayed that, after due proceedings, judgment be rendered in their favor, thus:

WHEREFORE, it is prayed of this Honorable Court that after due process (sic), an order be issued for the defendant to
vacate and peacefully turn over to the plaintiffs the occupied property and that defendant be made to pay plaintiffs:

a. actual damages, as follows:

a.1. transportation expenses in connection with the projected settlement of the case amounting to P1,500.00 and for the
subsequent attendance to the hearing of this case at P1,500.00 each schedule;

a.2. attorneys fees in the amount of P20,000.00 and P500.00 for every court appearance;

b. moral and exemplary damages in such amount incumbent upon the Honorable Court to determine; and

c. such other relief and remedies just and equitable under the premises.[4]

The private respondent filed a motion to dismiss the complaint on the ground of lack of jurisdiction over the nature of the
action, citing Section 33 of Batas Pambansa (B.P.) Blg. 129, as amended by Section 3(3) of Republic Act (R.A.) No. 7691.
[5] He averred that

(1) the complaint failed to state the assessed value of the land in dispute;
(2) the complaint does not sufficiently identify and/or describe the parcel of land referred to as the subject-matter of this
action;

both of which are essential requisites for determining the jurisdiction of the Court where the case is filed. In this case,
however, the assessed value of the land in question is totally absent in the allegations of the complaint and there is nothing
in the relief prayed for which can be picked-up for determining the Courts jurisdiction as provided by law.

In the face of this predicament, it can nevertheless be surmised by reading between the lines, that the assessed value of the
land in question cannot exceed P20,000.00 and, as such, it falls within the jurisdiction of the Municipal Trial Court of
Romblon and should have been filed before said Court rather than before the RTC. [6]

The petitioners opposed the motion.[7] They contended that the RTC had jurisdiction over the action since the court can
take judicial notice of the market value of the property in question, which was P200.00 per square meter and considering
that the property was 14,797 square meters, more or less, the total value thereof is P3,500,000.00. Besides, according to
the petitioners, the motion to dismiss was premature and the proper time to interpose it is when the [petitioners]
introduced evidence that the land is of such value.

On November 7, 1996, the RTC issued an Order[8] denying the motion to dismiss, holding that the action was incapable
of pecuniary estimation, and therefore, cognizable by the RTC as provided in Section 19(1) of B.P. Blg. 129, as amended.

After the denial of the motion to dismiss, the private respondent filed his answer with counterclaim.[9] Traversing the
material allegations of the complaint, he contended that the petitioners had no cause of action against him since the
property in dispute was the conjugal property of his grandparents, the spouses Salustiano Salvador and Concepcion MazoSalvador.

On April 8, 1997, Regidor and Virginia Salvador filed their Answer-in-Intervention[10] making common cause with the
private respondent. On her own motion, however, Virginia Salvador was dropped as intervenor.[11]

During trial, the petitioners adduced in evidence Tax Declaration No. 8590-A showing that in 1991 the property had an
assessed value of P5,950.00.[12]

On June 3, 1999, the trial court rendered judgment finding in favor of the petitioners. The dispositive portion of the
decision reads:

WHEREFORE, as prayed for, judgment is rendered:

Ordering the defendant to vacate and peacefully turn over to the plaintiffs the occupied property; and

Dismissing defendants counterclaim.

SO ORDERED.[13]

Aggrieved, the private respondent and respondent-intervenor Regidor Salvador appealed the decision to the CA, which
rendered judgment on May 23, 2003 reversing the ruling of the RTC and dismissing the complaint for want of jurisdiction.
The fallo of the decision is as follows:

IN VIEW OF THE FOREGOING, the appealed decision is REVERSED, and the case DISMISSED, without prejudice to
its refilling in the proper court.

SO ORDERED.[14]

The CA declared that the action of the petitioners was one for the recovery of ownership and possession of real property.
Absent any allegation in the complaint of the assessed value of the property, the Municipal Trial Court (MTC) had
exclusive jurisdiction over the action, conformably to Section 33[15] of R.A. No. 7691.

The petitioners filed a motion for reconsideration of the said decision, which the appellate court denied.[16] Hence, they
filed the instant petition, with the following assignment of errors:

THE HONORABLE COURT OF APPEALS COMMITTED GRAVE REVERSIBLE ERROR IN HOLDING THAT THE
INSTANT CASE, ACCION REINVINDICATORIA, FALLS WITHIN THE EXCLUSIVE ORIGINAL JURISDICTION

OF THE MUNICIPAL TRIAL COURT OF ROMBLON, AND NOT WITH THE REGIONAL TRIAL COURT OF
ROMBLON.

II

THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS REVERSIBLE ERROR IN ORDERING THE
REFILING OF THE CASE IN THE [PROPER] COURT, INSTEAD OF DECIDING THE CASE ON THE MERITS
BASED ON THE COMPLETE RECORDS ELEVATED BEFORE SAID APPELLATE COURT AND IN NOT
AFFIRMING IN TOTO THE DECISION OF THE TRIAL COURT.[17]

The Ruling of the Court

The lone issue for our resolution is whether the RTC had jurisdiction over the action of the petitioners, the plaintiffs in the
RTC, against the private respondent, who was the defendant therein.

The petitioners maintain that the RTC has jurisdiction since their action is an accion reinvindicatoria, an action incapable
of pecuniary estimation; thus, regardless of the assessed value of the subject property, exclusive jurisdiction falls within
the said court. Besides, according to the petitioners, in their opposition to respondents motion to dismiss, they made
mention of the increase in the assessed value of the land in question in the amount of P3.5 million. Moreover, the
petitioners maintain that their action is also one for damages exceeding P20,000.00, over which the RTC has exclusive
jurisdiction under R.A. No. 7691.

The petition has no merit.

It bears stressing that the nature of the action and which court has original and exclusive jurisdiction over the same is
determined by the material allegations of the complaint, the type of relief prayed for by the plaintiff and the law in effect
when the action is filed, irrespective of whether the plaintiffs are entitled to some or all of the claims asserted therein.[18]
The caption of the complaint is not determinative of the nature of the action. Nor does the jurisdiction of the court depend
upon the answer of the defendant or agreement of the parties or to the waiver or acquiescence of the parties.

We do not agree with the contention of the petitioners and the ruling of the CA that the action of the petitioners in the RTC
was an accion reinvindicatoria. We find and so rule that the action of the petitioners was an accion publiciana, or one for
the recovery of possession of the real property subject matter thereof. An accion reinvindicatoria is a suit which has for its
object the recovery of possession over the real property as owner. It involves recovery of ownership and possession based
on the said ownership. On the other hand, an accion publiciana is one for the recovery of possession of the right to
possess. It is also referred to as an ejectment suit filed after the expiration of one year after the occurrence of the cause of
action or from the unlawful withholding of possession of the realty.[19]

The action of the petitioners filed on September 3, 1996 does not involve a claim of ownership over the property. They
allege that they are co-owners thereof, and as such, entitled to its possession, and that the private respondent, who was the
defendant, constructed his house thereon in 1989 without their knowledge and refused to vacate the property despite
demands for him to do so. They prayed that the private respondent vacate the property and restore possession thereof to
them.

When the petitioners filed their complaint on September 3, 1996, R.A. No. 7691 was already in effect. Section 33(3) of
the law provides:

Sec. 33. Jurisdiction of Metropolitan Trial Courts, Municipal Trial Courts and Municipal Circuit Trial Courts in Civil
Cases. Metropolitan Trial Courts, Municipal Trial Courts and Municipal Circuit Trial Courts shall exercise:

(3) Exclusive original jurisdiction in all civil actions which involve title to, or possession of, real property, or any interest
therein where the assessed value of the property or interest therein does not exceed Twenty Thousand Pesos (P20,000.00)
or, in civil actions in Metro Manila, where such assessed value does not exceed Fifty Thousand Pesos (P50,000.00)
exclusive of interest, damages of whatever kind, attorneys fees, litigation expenses and costs: Provided, That in cases of
land not declared for taxation purposes, the value of such property shall be determined by the assessed value of the
adjacent lots.

Section 19(2) of the law, likewise, provides that:

Sec. 19. Jurisdiction in civil cases. The Regional Trial Court shall exercise exclusive original jurisdiction:

(2) In all civil actions, which involve the title to, or possession of, real property, or any interest therein, where the assessed
value of the property involved exceeds Twenty Thousand Pesos (P20,000.00) or, for civil actions in Metro Manila, where
such value exceeds Fifty Thousand Pesos (P50,000.00) except actions for forcible entry into and unlawful detainer of
lands or buildings, original jurisdiction over which is conferred upon the Metropolitan Trial Courts, Municipal Trial
Courts, and Municipal Circuit Trial Courts.

The jurisdiction of the court over an action involving title to or possession of land is now determined by the assessed
value of the said property and not the market value thereof. The assessed value of real property is the fair market value of
the real property multiplied by the assessment level. It is synonymous to taxable value.[20] The fair market value is the
price at which a property may be sold by a seller, who is not compelled to sell, and bought by a buyer, who is not
compelled to buy.

Even a cursory reading of the complaint will show that it does not contain an allegation stating the assessed value of the
property subject of the complaint.[21] The court cannot take judicial notice of the assessed or market value of lands.[22]
Absent any allegation in the complaint of the assessed value of the property, it cannot thus be determined whether the
RTC or the MTC had original and exclusive jurisdiction over the petitioners action.

We note that during the trial, the petitioners adduced in evidence Tax Declaration No. 8590-A, showing that the assessed
value of the property in 1991 was P5,950.00. The petitioners, however, did not bother to adduce in evidence the tax
declaration containing the assessed value of the property when they filed their complaint in 1996. Even assuming that the
assessed value of the property in 1991 was the same in 1995 or 1996, the MTC, and not the RTC had jurisdiction over the
action of the petitioners since the case involved title to or possession of real property with an assessed value of less than
P20,000.00.[23]

We quote with approval, in this connection, the CAs disquisition:

The determining jurisdictional element for the accion reinvindicatoria is, as RA 7691 discloses, the assessed value of the
property in question. For properties in the provinces, the RTC has jurisdiction if the assessed value exceeds P20,000, and
the MTC, if the value is P20,000 or below. An assessed value can have reference only to the tax rolls in the municipality
where the property is located, and is contained in the tax declaration. In the case at bench, the most recent tax declaration
secured and presented by the plaintiffs-appellees is Exhibit B. The loose remark made by them that the property was
worth 3.5 million pesos, not to mention that there is absolutely no evidence for this, is irrelevant in the light of the fact
that there is an assessed value. It is the amount in the tax declaration that should be consulted and no other kind of value,
and as appearing in Exhibit B, this is P5,950. The case, therefore, falls within the exclusive original jurisdiction of the
Municipal Trial Court of Romblon which has jurisdiction over the territory where the property is located, and not the court
a quo.[24]

It is elementary that the tax declaration indicating the assessed value of the property enjoys the presumption of regularity
as it has been issued by the proper government agency.[25]

Unavailing also is the petitioners argumentation that since the complaint, likewise, seeks the recovery of damages
exceeding P20,000.00, then the RTC had original jurisdiction over their actions. Section 33(3) of B.P. Blg. 129, as
amended, quoted earlier, explicitly excludes from the determination of the jurisdictional amount the demand for interest,
damages of whatever kind, attorneys fees, litigation expenses, and costs. This Court issued Administrative Circular No.
09-94 setting the guidelines in the implementation of R.A. No. 7691, and paragraph 2 thereof states that

2. The exclusion of the term damages of whatever kind in determining the jurisdictional amount under Section 19(8) and
Section 33(1) of B.P. Blg. 129, as amended by R.A. 7691, applies to cases where the damages are merely incidental to or a
consequence of the main cause of action. However, in cases where the claim for damages is the main cause of action, or
one of the causes of action, the amount of such claim shall be considered in determining the jurisdiction of the court.

Neither may the petitioners find comfort and solace in Section 19(8) of B.P. Blg. 129, as amended, which states:

SEC. 19. Jurisdiction in civil cases. Regional Trial Courts shall exercise exclusive original jurisdiction:

(8) In all other cases in which the demand, exclusive of interest, damages of whatever kind, attorney's fees, litigation
expenses, and costs or the value of the property in controversy exceeds One Hundred Thousand Pesos (P100,000.00) or, in
such other cases in Metro Manila, where the demand, exclusive of the above-mentioned items exceeds Two Hundred
Thousand Pesos (P200,000.00).

The said provision is applicable only to all other cases other than an action involving title to, or possession of real
property in which the assessed value is the controlling factor in determining the courts jurisdiction. The said damages are
merely incidental to, or a consequence of, the main cause of action for recovery of possession of real property.[26]

Since the RTC had no jurisdiction over the action of the petitioners, all the proceedings therein, including the decision of
the RTC, are null and void. The complaint should perforce be dismissed.[27]

WHEREFORE, the petition is DENIED. The assailed Decision and Resolution of the Court of Appeals in CA-G.R. CV
No. 63737 are AFFIRMED. Costs against the petitioners.

SO ORDERED.
[G.R. No. 156360. January 14, 2005]

CESAR SAMPAYAN, petitioner, vs. The HONORABLE COURT OF APPEALS, CRISPULO VASQUEZ and
FLORENCIA VASQUEZ GILSANO, respondents.
DECISION
GARCIA, J.:

In this verified petition for review on certiorari under Rule 45 of the Rules of Court, petitioner Cesar Sampayan seeks the
annulment and setting aside of the following issuances of the Court of Appeals in CA-G.R. SP No. 43557, to wit:

1. Decision dated May 16, 2002, denying his petition for review and affirming an earlier decision of the Regional Trial
Court at Agusan del Sur, Branch VII, which in turn reversed on appeal a favorable judgment of the Municipal Circuit Trial
Court (MCTC) of Bayugan and Sibagat, Agusan del Sur in a forcible entry case thereat commenced against him by herein
private respondents, the brother-and-sister Crispulo Vasquez and Florencia Vasquez-Gilsano; and

2. Resolution dated November 7, 2002, which denied his motion for reconsideration.

From the pleadings and memoranda respectively filed by the parties, the Court gathers the following factual antecedents:

On July 8, 1992, in the MCTC of Bayugan and Sibagat, Agusan del Sur, the siblings Crispulo Vasquez and Florencia
Vasquez-Gilsano filed complaint for forcible entry against Cesar Sampayan for allegedly having entered and occupied a
parcel of land, identified as Lot No. 1959, PLS-225, and built a house thereon without their knowledge, consent or
authority, the entry having been supposedly effected through strategy and stealth.

In their complaint, the plaintiffs (now private respondents), substantially alleged that their mother Cristita Quita was the
owner and actual possessor of Lot No. 1959; that after their mothers death on January 11, 1984, they became co-owners
pro-indiviso and lawful possessors of the same lot; that on June 1, 1992, while they were temporarily absent from the lot
in question, defendant Cesar Sampayan, through strategy and stealth, entered the lot and built a house thereon, to their
exclusion; and that, despite their repeated demands for Sampayan to vacate the lot and surrender the possession thereof to
them, the latter failed and refused to do so.

In his answer, defendant Sampayan denied the material allegations of the complaint and averred that neither the plaintiffs
nor their mother have ever been in possession of Lot No. 1959 and that he does not even know plaintiffs identities or their
places of residence. He claimed that he did not enter the subject lot by stealth or strategy because he asked and was given
permission therefor by Maria Ybaez, the overseer of the lots true owners, Mr. and Mrs. Anastacio Terrado who were then
temporarily residing in Cebu City for business purposes. In the same answer, Sampayan alleged that the plaintiffs claim
has long prescribed for the reason that the lot in dispute had been possessed and declared for taxation purposes by the
spouses Felicisimo Oriol and Concordia Balida-Oriol in 1960, and that in 1978, the Oriol spouses sold one-half (1/2) of
the lot to the spouses Mr. and Mrs. Anastacio Terrado, while the other half, to the couple Manolito Occida and Juliana
Sambale-Occida in 1979. Both vendees, so Sampayan averred, have actually possessed the respective portions purchased
by them up to the present. He thus prayed for the dismissal of the complaint.

In the ensuing proceedings following the joinder of issues, the plaintiffs, to prove that they have been in actual possession
of Lot No. 1959 when defendant Sampayan effected his entry thereto, submitted in evidence the following documents:

1. Tax Declaration No. 3180 in the name of Cristita Quita;

2. Certificate of Death showing the date of death of Cristita Quita on January 11, 1984;

3. Certificate issued by Fermina R. Labonete, Land Management Officer-III of CENRO X-3-E, DENR-X-3-9, Bayugan,
Agusan del Sur showing that Lot 1959, PLS-225 is covered by a Miscellaneous Sales Application of Cristita Quita;

4. Affidavit of one Emiliano G. Gatillo to the effect that he was the one who gave the lot in question to Cristita Quita
sometime in 1957 and that since then the latter had been occupying the lot;

Plaintiffs also filed a Supplemental Position Paper dated July 13, 1994 for the purpose of showing that Cristita Quita is
one of the oppositors in Cadastral Case No. 149. Together with said position paper, they submitted a copy of the
Answer/Opposition earlier filed in Cadastral Case No. 149. In said cadastral case, Cristita Quita was claiming Lot 1959,
thus her name appeared in the list of oppositors therein.

5. The decision in the said Cadastral Case No. 149 showing that the then Court of First Instance of Agusan del Sur
declared Lot No. 1959 as one of the lots subject of the same cadastral case.

For his part, defendant Sampayan, to prove the allegations in his answer, offered in evidence the following:

1. Tax Declaration No. A-11698 in the name of Felicisimo Oriol, which cancels Tax Declaration 8103;

2. Tax Declaration No. GRB-01-930 in the name of Felicisimo Oriol which cancels Tax Declaration No. A-11698;

3. Deed of Absolute Sale of Portion of Land, dated April 30, 1979, executed by Jesus Oriol for and in behalf of the
spouses Felicisimo Oriol and Concordia Balida-Oriol, conveying the one-half (1/2) portion of Lot No. 1959 to the couple
Manolito Occida and Juliana Sambale-Occida who possessed the one-half (1/2) portion and introduced improvements
thereon, such as coconut and caimito trees;

4. Deed of Relinquishment of Rights of Portion of Land, executed by the spouses Oriol in favor of the same couple
Manolito Occida and Juliana Sambale-Occida, to further strengthen the transfer of possession and whatever possessory
rights the Oriols had in the lot in question;

5. Deed of Absolute Sale of Land executed by Concordia Balida-Oriol with the conformity of Teodosio Mosquito (another
claimant), to prove that the other half of Lot No. 1959 was sold in 1978 to Mr. and Mrs. Anastacio Terrado whose overseer
allowed Sampayan to enter and occupy the premises;

6. Protest filed with the CENRO, Agusan del Sur by the vendee Juliana Sambale-Occida against the Miscellaneous Sales
Application of Cristita Quita;

7. Affidavit of Dionesia Noynay attesting to the fact that she is residing in Lot No. 1957, a lot adjacent to the lot in
question, since 1960 up to the present. In the same affidavit, Dionisia claimed that neither Cristita Quita, much less the
plaintiffs, had ever possessed Lot No. 1959. She claimed that it was the Occida couple who possessed said lot and
introduced improvements thereon; and

8. Affidavit of Juliana Occida and Maria Ybaez to show the impossibility of plaintiffs possession of the same lot.

Meanwhile, on March 21, 1996, while the case was pending with the MCTC, the presiding judge thereof personally
conducted an ocular inspection of the contested lot in the presence of the parties and/or their counsels. Among those found
in the area during the inspection are: the house of defendant Sampayan; the dilapidated house of a certain Peter Siscon;
and a portion of the house of Macario Noynay, husband of Dionisia Noynay, one of Sampayans witnesses.

Based on his ocular findings, the judge concluded that the improvements he saw in the premises could never have been
introduced by the plaintiffs nor by their mother Cristita Quita but by the vendees of the same lot. Reproduced by petitioner
Jose Sampayan in the instant petition as well as in the Memorandum he subsequently filed with this Court, the MCTC
judges findings and observations during the ocular inspection, about which the herein private respondents took no
exception whatsoever, are hereunder quoted, as follows:

Noted inside the land are the house of the defendant, Cesar Sampayan, of Peter Siscon, which appears to be dilapidated,
and part of the house of Macario Noynay which encroached to the land in question. Planted on the land are five (5)
coconut trees, fruit bearing, three (3) not fruit bearing coconut trees, and three (3) star apple or caimito trees. Defendant
Sampayan admitted that he started occupying the land since 1992. It is admitted by the parties during the ocular inspection
that one-half (1/2) portion of the land was bought by a certain Occida from certain Mr. and Mrs. Felicisimo Oriol.

The findings in the ocular inspection have confirmed the allegation of the defendant that his predecessors-in-interest have
introduced improvements by planting caimito trees, coconut trees, and others on the land in question.

Nothing can be seen on the land that plaintiffs had once upon a time been in possession of the land. The allegation that
Cristita Quita, the predecessor-in-interest of the plaintiffs had been in possession of the said property since 1957, openly,
exclusively, continuously, adversely and in the concept of an owner is a naked claim, unsupported by any evidence.

Clearly, from the appearance of the improvements introduced by the predecessors-in-interest of the defendant, it is
showed that they have been in possession of the land for more than one (1) year. Hence, the action of the plaintiffs, if any,
is accion publiciana or plenaria de possession[1] (Emphasis supplied).

In time, the MCTC rendered judgment dismissing the compliant for lack of merit.

Therefrom, the plaintiffs appealed to the Regional Trial Court (RTC) at Agusan del Sur, which appeal was raffled to
Branch VII thereof. In a decision dated December 5, 1996, said court reversed that of the MCTC, taking note of the fact
that Cristita Quita was among the oppositors in Cadastral Case No. 149 and that she filed a Miscellaneous Sales

Application over the lot. On the basis of such finding, the RTC concluded that it was Cristita Quita, predecessor-ininterest of the herein private respondents, who was in actual prior physical possession of Lot No. 1959.

Unable to accept the RTC judgment, Sampayan went to the Court of Appeals on a petition for review, thereat docketed as
CA-G.R. SP No. 43557.

As stated at the threshold hereof, the Court of Appeals, in the herein assailed Decision dated May 16, 2002,[2] denied
Sampayans petition. His motion for reconsideration having been similarly denied by that court in its Resolution of
November 7, 2002,[3] Sampayan is now with us via the present recourse, it being his submissions -

I.

THAT THE COURT OF APPEALS ERRED IN RULING THAT THE MUNICIPAL CIRCUIT TRIAL COURT OF
BAYUGAN, AGUSAN DEL SUR, HAS JURISDICTION OVER THE CASE, CONSIDERING THAT DURING THE
HEARING THEREOF IT WAS FOUND OUT BY THE SAID MUNICIPAL COURT THAT ACCION PUBLICIANA OR
PLENARIA DE POSESION, AND NOT FORCIBLE ENTRY, IS THE PROPER ACTION;

II.

THAT THE CONCLUSION OF THE HONORABLE COURT OF APPEALS THAT PRIVATE RESPONDENTS HAVE
BEEN IN PRIOR ACTUAL POSSESSION IS CONTRADICTED BY EVIDENCE ON RECORD, AND
CONSIDERING THAT THE POSSESSION TO BE LEGALLY SUFFICIENT, CONSIST (SIC) IN THE EXERCISE OF
DOMINIUM OVER IT, SUCH AS FENCING, CULTIVATING OR OTHER UNMISTAKABLE ACTS OF EXCLUSIVE
CUSTODY AND CONTROL FACTS WHICH THE PRIVATE RESPONDENTS HAVE NEVER DONE - IS
CONTRARY TO LAW.[4]

In the main, petitioner maintains that based on the pieces of evidence on record, he had sufficiently proven his prior
physical possession of the subject lot. Upon this premise, he argues that private respondents complaint for forcible entry
has no leg to stand on, adding that the proper remedy available to the latter is accion publiciana or plenaria de posesion
which falls under the original jurisdiction of Regional Trial Courts and not of Municipal Circuit Trial Courts.

As we see it, the arguments put forward by the petitioner crystallize to one pivotal question: will the complaint for forcible
entry in this case prosper? To resolve this, however, we must first determine as to who between the herein parties was in
prior actual physical possession of the subject lot at the time the complaint was filed in the MCTC. For, as we have said in
Gaza vs. Lim[5],

xxx In an action for forcible entry, the plaintiff must prove that he was in prior possession of the land or building and that
he was deprived thereof by means of force, intimidation, threat, strategy or stealth. xxx

We emphasize, absence of prior physical possession by the plaintiff in a forcible entry case warrants the dismissal of his
complaint.

Undoubtedly, the issue of prior physical possession is one of fact, and settled is the rule that this Court is not a trier of
facts and does not normally embark on a re-examination of the evidence adduced by the parties during trial. Of course, the
rule admits of exceptions. So it is that in Insular Life Assurance Company, Ltd. vs. CA,[6] we wrote:

[i]t is a settled rule that in the exercise of the Supreme Court's power of review, the Court is not a trier of facts and does
not normally undertake the re-examination of the evidence presented by the contending parties' during the trial of the case
considering that the findings of facts of the CA are conclusive and binding on the Court. However, the Court had
recognized several exceptions to this rule, to wit: (1) when the findings are grounded entirely on speculation, surmises or
conjectures; (2) when the inference made is manifestly mistaken, absurd or impossible; (3) when there is grave abuse of
discretion; (4) when the judgment is based on a misapprehension of facts; (5) when the findings of facts are conflicting;
(6) when in making its findings the Court of Appeals went beyond the issues of the case, or its findings are contrary to the
admissions of both the appellant and the appellee; (7) when the findings are contrary to the trial court; (8) when the
findings are conclusions without citation of specific evidence on which they are based; (9) when the facts set forth in the
petition as well as in the petitioner's main and reply briefs are not disputed by the respondent; (10) when the findings of
fact are premised on the supposed absence of evidence and contradicted by the evidence on record; and (11) when the
Court of Appeals manifestly overlooked certain relevant facts not disputed by the parties, which, if properly considered,
would justify a different conclusion.

To our mind, exceptions (5) and (11) are present in this case.

However, before delving into the question of who as between the petitioner and private respondents had prior physical
possession of the subject lot, we deem it best to first resolve the issue of whether or not the MCTC had jurisdiction over
the complaint filed in this case, an issue also raised by the petitioner.

Relying on the conclusion of the MCTC that private respondents proper remedy is accion publiciana or plenaria de
posesion, and not forcible entry, petitioner would deny the MCTCs jurisdiction over the case.

Petitioner is in error.

In Sarmiento vs. CA[7], we held:

[t]o give the court jurisdiction to effect the ejectment of an occupant or deforciant on the land, it is necessary that the
complaint should embody such a statement of facts as brings the party clearly within the class of cases for which the
statutes provide a remedy, as these proceedings are summary in nature. The complaint must show enough on its face to
give the court jurisdiction without resort to parol testimony. The jurisdictional facts must appear on the face of the
complaint. x x x

Clear it is from the above that for the MCTC to acquire jurisdiction over a forcible entry case, it is enough that the
complaint avers the jurisdictional facts, i.e. that the plaintiff had prior physical possession and that he was deprived
thereof by the defendant through force, intimidation, threats, strategy and stealth.[8] The complaint in this case makes
such an averment. Hence, the irrelevant circumstance that the evidence adduced during the hearing rendered improper an
action for forcible entry is of no moment and cannot deprive the MCTC of its jurisdiction over the case. The MCTC
continues to have that jurisdiction.

We shall now address the more decisive question of prior physical possession.

After a careful evaluation of the evidence at hand, we find for the petitioner.

To begin with, we are at once confronted by the uncontested findings of the MCTC judge himself during his ocular
inspection of the premises in dispute that what he saw thereat confirmed the allegations of the defendant [now petitioner
Sampayan] that his predecessors-in-interest have introduced improvements by planting caimito trees, coconut trees, and
others on the land in question, adding that [N]othing can be seen on the land that plaintiff had once upon a time been in
possession of the land, and categorically stating that [T]he allegation that Cristita Quita, the predecessor-in-interest of the
plaintiffs had been in possession of the said property since 1957, openly, exclusively, continuously, adversely and in the
concept of an owner is a naked claim, unsupported by any evidence.

Then, too, there is the sworn affidavit of Dionesia Noynay to the effect that she had been residing since 1960 onward on
Lot No. 1957, the lot adjacent to Lot No. 1959, and that neither the private respondents nor their mother had ever
possessed Lot No. 1959. Coming as it does from an immediate neighbor, Dionesias statement commands great weight and
respect. Incidentally, the MCTC judge himself found during the ocular inspection that a portion of the house of Macario
Noynay, husband of Dionesia, protruded on Lot No. 1959.

We note that in the herein assailed decision, the Court of Appeals attached much significance to the fact that private
respondents mother Cristita Quita was an oppositor in Cadastral Case No. 149. We rule and so hold that the mothers being
an oppositor in said cadastral case does not, by itself, establish prior physical possession because not all oppositors in
cadastral cases are actual possessors of the lots or lands subject thereof.

WHEREFORE, the instant petition is hereby GRANTED and the Decision and Resolution, respectively dated May 16,
2002 and November 7, 2002, of the Court of Appeals REVERSED and SET ASIDE.

SO ORDERED.

Panganiban, (Chairman), Sandoval-Gutierrez, and Corona, Carpio-Morales, JJ., concur.

[G.R. No. 137013. May 6, 2005]

RUBEN SANTOS, petitioner, vs. SPOUSES TONY AYON and MERCY AYON, respondents.
DECISION
SANDOVAL-GUTIERREZ, J.:

For our resolution is the petition for review on certiorari assailing the Decision[1] of the Court of Appeals dated October
5, 1998 in CA-G.R. SP No. 4735 and its Resolution[2] dated December 11, 1998 denying the motion for reconsideration.

The petition alleges that on November 6, 1996, Ruben Santos, petitioner, filed with the Municipal Trial Court in Cities
(MTCC), Branch 2, Davao City a complaint for illegal detainer against spouses Tony and Mercy Ayon, respondents,
docketed as Civil Case No. 3506-B-96.

In his complaint, petitioner averred that he is the registered owner of three lots situated at Lanzona Subdivision, Matina,
Davao City, covered by Transfer Certificates of Title (TCT) Nos. 108174, 108175, and 108176. Respondent spouses are
the registered owners of an adjacent parcel of land covered by TCT No. T-247792. The previous occupant of this property
built a building which straddled both the lots of the herein parties. Respondents have been using the building as a
warehouse.

Petitioner further alleged in his complaint that in 1985, when he bought the three lots, he informed respondents that the
building occupies a portion of his land. However, he allowed them to continue using the building. But in 1996, he needed
the entire portion of his lot, hence, he demanded that respondents demolish and remove the part of the building
encroaching his property and turn over to him their possession. But they refused. Instead, they continued occupying the
contested portion and even made improvements on the building. The dispute was then referred to the barangay lupon, but
the parties failed to reach an amicable settlement. Accordingly, on March 27, 1996, a certification to file action was
issued.

In their answer, respondents sought a dismissal of this case on the ground that the court has no jurisdiction over it since
there is no lessor-lessee relationship between the parties. Respondents denied they were occupying petitioners property by
mere tolerance, claiming they own the contested portion and have been occupying the same long before petitioner
acquired his lots in 1985.

On July 31, 1997, the MTCC rendered its Decision in favor of petitioner, thus:

WHEREFORE, judgment is rendered in favor of the plaintiff and against the defendants ordering the latter, their
successors-in-interest and other persons acting in their behalf to vacate the portion of the subject properties and peacefully
surrender possession thereof to plaintiff as well as dismantle/remove the structures found thereon.

Defendants are further ordered to pay reasonable value for the use and occupation of the encroached area in the amount of
One Thousand Pesos (P1,000.00) a month beginning September 1996 and the subsequent months thereafter until premises
are vacated; to pay attorneys fees of Ten Thousand Pesos (P10,000.00); and to pay the costs of suit.

SO ORDERED.[3]

On appeal, the Regional Trial Court (RTC), Branch 11, Davao City, in its Decision dated February 12, 1998 in Civil Case
No. 25, 654-97, affirmed in toto the MTCC judgment.[4] The RTC upheld the finding of the MTCC that respondents
occupation of the contested portion was by mere tolerance. Hence, when petitioner needed the same, he has the right to
eject them through court action.

Respondents then elevated the case to the Court of Appeals through a petition for review. In its Decision dated October 5,
1988 now being challenged by petitioner, the Court of Appeals held that petitioners proper remedy should have been an
accion publiciana before the RTC, not an action for unlawful detainer, thus:

In this case, petitioners were already in possession of the premises in question at the time private respondent bought three
(3) lots at the Lanzona Subdivision in 1985, a portion of which is occupied by a building being used by the former as a
bodega. Apart from private respondents bare claim, no evidence was alluded to show that petitioners possession was
tolerated by (his) predecessor-in-interest. The fact that respondent might have tolerated petitioners possession is not
decisive. What matters for purposes of determining the proper cause of action is the nature of petitioners possession from
its inception. And in this regard, the Court notes that the complaint itself merely alleges that defendants-petitioners have
been occupying a portion of the above properties of the plaintiff for the past several years by virtue of the tolerance of the
plaintiff. Nowhere is it alleged that his predecessor likewise tolerated petitioners possession of the premises. x x x.

Consequently, x x x, respondent should present his claim before the Regional Trial Court in an accion publiciana and not
before the Municipal Trial Court in a summary proceeding of unlawful detainer.

WHEREFORE, the decision under review is hereby REVERSED and SET ASIDE. Accordingly, the complaint for
unlawful detainer is ordered DISMISSED.[5]

Petitioner filed a motion for reconsideration, but was denied by the Appellate Court in its Resolution dated December 11,
1998.

Hence, the instant petition for review on certiorari ascribing to the Court of Appeals the following errors:

THE HONORABLE COURT OF APPEALS MISAPPLIED THE LAW IN DISMISSING THE INSTANT CASE ON
THE GROUND THAT PETITIONER SHOULD PRESENT HIS CLAIM BEFORE THE REGIONAL TRIAL COURT IN
AN ACCION PUBLICIANA.

II

THE FINDINGS OF THE HONORABLE COURT OF APPEALS IS NOT IN CONSONANCE WITH EXISTING
LAWS AND JURISPRUDENCE.

The sole issue here is whether the Court of Appeals committed a reversible error of law in holding that petitioners
complaint is within the competence of the RTC, not the MTCC.

Petitioner contends that it is not necessary that he has prior physical possession of the questioned property before he could
file an action for unlawful detainer. He stresses that he tolerated respondents occupancy of the portion in controversy until
he needed it. After his demand that they vacate, their continued possession became illegal. Hence, his action for unlawful
detainer before the MTCC is proper.

Respondents, in their comment, insisted that they have been in possession of the disputed property even before petitioner
purchased the same on April 10, 1985. Hence, he cannot claim that they were occupying the property by mere tolerance
because they were ahead in time in physical possession.

We sustain the petition.

It is an elementary rule that the jurisdiction of a court over the subject matter is determined by the allegations of the
complaint and cannot be made to depend upon the defenses set up in the answer or pleadings filed by the defendant.[6]
This rule is no different in an action for forcible entry or unlawful detainer.[7] All actions for forcible entry or unlawful
detainer shall be filed with the proper Metropolitan Trial Courts, the Municipal Trial Courts and the Municipal Circuit
Trial Courts, which actions shall include not only the plea for restoration of possession but also all claims for damages and
costs arising therefrom.[8] The said courts are not divested of jurisdiction over such cases even if the defendants therein
raises the question of ownership over the litigated property in his pleadings and the question of possession cannot be
resolved without deciding the issue of ownership.[9]

Section 1, Rule 70 on forcible entry and unlawful detainer of the 1997 Rules of Civil Procedure, as amended, reads:

Section 1. Who may institute proceedings, and when. Subject to the provisions of the next succeeding section, a person
deprived of the possession of any land or building by force, intimidation, threat, strategy, or stealth, or a lessor, vendor,
vendee, or other person against whom the possession of any land or building is unlawfully withheld after the expiration or
termination of the right to hold possession, by virtue of any contract, express or implied, or the legal representatives or
assigns of any such lessor, vendor, vendee or other person may, at any time within one (1) year after such unlawful
deprivation or withholding of possession, bring an action in the proper Municipal Trial Court against the person or persons
unlawfully withholding or depriving of possession, or any person or persons claiming under them, for the restitution of
such possession, together with damages and costs.

Under the above provision, there are two entirely distinct and different causes of action, to wit: (1) a case for forcible
entry, which is an action to recover possession of a property from the defendant whose occupation thereof is illegal from
the beginning as he acquired possession by force, intimidation, threat, strategy or stealth; and (2) a case for unlawful
detainer, which is an action for recovery of possession from defendant whose possession of the property was inceptively
lawful by virtue of a contract (express or implied) with the plaintiff, but became illegal when he continued his possession
despite the termination of his right thereunder.[10]

Petitioners complaint for unlawful detainer in Civil Case No. 3506-B-96 is properly within the competence of the MTCC.
His pertinent allegations in the complaint read:

4. That defendants (spouses) have constructed an extension of their residential house as well as other structures and have
been occupying a portion of the above PROPERTIES of the plaintiff for the past several years by virtue of the tolerance of
the plaintiff since at the time he has no need of the property;

5. That plaintiff needed the property in the early part of 1996 and made demands to the defendants to vacate and turn over
the premises as well as the removal (of) their structures found inside the PROPERTIES of plaintiff; that without any
justifiable reasons, defendants refused to vacate the portion of the PROPERTIES occupied by them to the damage and
prejudice of the plaintiff.

6. Hence, plaintiff referred the matter to the Office of the Barangay Captain of Matina Crossing 74-A, Davao City for a
possible settlement sometime in the latter part of February 1996. The barangay case reached the Pangkat but no settlement
was had. Thereafter, a Certification To File Action dated March 27, 1996 was issued x x x;

x x x.[11] (underscoring ours)

Verily, petitioners allegations in his complaint clearly make a case for an unlawful detainer. We find no error in the MTCC
assuming jurisdiction over petitioners complaint. A complaint for unlawful detainer is sufficient if it alleges that the
withholding of the possession or the refusal to vacate is unlawful without necessarily employing the terminology of the
law.[12] Here, there is an allegation in petitioners complaint that respondents occupancy on the portion of his property is
by virtue of his tolerance. Petitioners cause of action for unlawful detainer springs from respondents failure to vacate the
questioned premises upon his demand sometime in 1996. Within one (1) year therefrom, or on November 6, 1996,
petitioner filed the instant complaint.

It bears stressing that possession by tolerance is lawful, but such possession becomes unlawful when the possessor by
tolerance refuses to vacate upon demand made by the owner. Our ruling in Roxas vs. Court of Appeals[13] is applicable in
this case: A person who occupies the land of another at the latters tolerance or permission, without any contract between
them, is necessarily bound by an implied promise that he will vacate upon demand, failing which, a summary action for
ejectment is the proper remedy against him.

WHEREFORE, the petition is GRANTED. The assailed Decision and Resolution of the Court of Appeals in CA-G.R. SP
No. 47435 are hereby REVERSED and SET ASIDE. The Decision dated February 12, 1998 of the Regional Trial Court,
Branch 11, Davao City in Civil Case No. 25, 654-97, affirming the Decision dated July 31, 1997 of the Municipal Trial
Court in Cities, Branch 2, Davao City in Civil Case No. 3506-B-96, is hereby REINSTATED.

SO ORDERED.
Panganiban, (Chairman), Corona, Carpio-Morales, and Garcia, JJ., concur.
[G.R. No. 150755. June 28, 2005]

RENE GANILA,* EDUARDO DUMADA-OG, SR., RAFAEL GANILA, JOSE PASTRANA, LOURDES GANILA,
FLORENTINO GANILA, SERAFIN GANILA, LORETO ARELLANO, CONRADO GANILA, VIVENCIO ALVIOR,
EDUARDO GANTALA, AMPARO VILLANUEVA, ELEUTERIO SILVA, ADELINA GANILA, FELIZARDO

GANILA, SR., ENRIQUE GANILA, ABRAHAM TANONG, EMILIO ALFARAS, JR., BAPTIST CHRISTIAN
LEARNING CENTER, petitioners, vs. HON. COURT OF APPEALS AND VIOLETA C. HERRERA, respondents.
DECISION
QUISUMBING, J.:

For review on certiorari are the Decision[1] dated March 30, 2001 of the Court of Appeals in CA-G.R. SP No. 58191, and
its Resolution[2] dated October 18, 2001 denying the motion for reconsideration. The assailed decision denied the petition
to set aside the Resolution[3] of the Regional Trial Court (RTC) of San Miguel, Jordan, Guimaras, Branch 65, affirming
the Order of the Municipal Circuit Trial Court (MCTC) for the 19 petitioners to vacate the contested parcel of land.

The facts are as follows:

On March 19, 1997, private respondent Violeta Herrera filed 21 ejectment Complaints[4] before the 16th MCTC, JordanBuenavista-Nueva Valencia, Jordan, Guimaras. Private respondent alleged that she owns Lot 1227 of the Cadastral Survey
of Jordan, Guimaras, with an area of 43,210 square meters; that she inherited the lot from her parents; and that she only
tolerated petitioners to construct residential houses or other improvements on certain portions of the lot without rental.
Sometime in September or October 1996, private respondent demanded that the petitioners vacate the lot and remove their
houses and other improvements thereon. Petitioners refused, despite offer of money by way of assistance to them. After
the barangay conciliation failed, private respondent filed the complaints.

In their Answers,[5] eight[6] of the petitioners claimed that Lot 1227 was formerly a shoreline which they developed
when they constructed their respective houses. Another eight[7] maintained that their houses stood on Lot 1229 of the
Cadastral Survey of Jordan, Guimaras. The other three[8] asserted that Lot 1227 is a social forest area.

At the preliminary conference, the parties agreed to designate two geodetic engineers as commissioners of the MCTC to
conduct a relocation survey of Lot 1227 and to identify who among the petitioners have houses within the lot.[9]

The commissioners reported that: (1) the house of Henry Gabasa, defendant in Civil Case No. 288-J, is almost outside Lot
1227; (2) the house of Ludovico Amatorio, defendant in Civil Case No. 289-J, diagonally traversed the boundary; and (3)
the houses of the 19 petitioners are inside Lot 1227.[10]

Eight months after herein petitioners failure to comment on the manifestation of private respondent to terminate the
preliminary conference, the MCTC terminated the preliminary conference.[11] Thereafter, petitioners counsel Atty. Nelia
Jesusa L. Gonzales failed to file her clients position papers and affidavits, even after they sought a 30-day extension to file
the same.[12]

Consequently, the MCTC decided the cases as follows:

WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff whereby each of the twentyone (21) defendants are hereby ordered:

1. To vacate Lot 1227 of the Cadastral Survey of Jordan, Guimaras;

2. To pay Two Hundred Pesos (P200.00) per month from October, 1996 as compensation for the use of the property until
the same is vacated; and

3. To pay Two Thousand Pesos (P2,000.00) as attorneys fees and litigation expenses.

SO ORDERED.[13]

Petitioners appealed to the RTC, Branch 65, at Jordan, Guimaras, which decided as follows:

WHEREFORE, premises considered, the decision in Civil Cases Nos. 0270-J, 0272-J, 0273-J, 0274-J, 0275-J, 0276-J,
0277-J, 0278-J, 0279-J, 0280-J, 0281-J, 0282-J, 0283-J, 0284-J, 0285-J, 0286-J, 0287-J, 0291-J and 0292-J are hereby
affirmed.

The decision of the court below in Civil Cases Nos. 0288-J and 0289-J are set aside. Civil Cases Nos. 0288-J and 0289-J
are hereby DISMISSED.

SO ORDERED.[14]

The RTC ruled that the evidence showed the better right of private respondent to possess Lot 1227. Private respondents
position paper, affidavit and tax declaration supported her allegations. In addition, the commissioners report and sketch
plan showed that indeed petitioners occupy Lot 1227. On the other hand, according to the RTC, the petitioners failed to
present evidence which would show that they are entitled to possess the lot.

Based on the sketch plan, the RTC dismissed the cases against Gabasa and Amatorio since their houses occupy only a
small area of Lot 1227. It declared that Gabasa and Amatorio believed in good faith that the whole area they occupied was
part of the seashore.

The 19 petitioners, who were ordered to vacate the lot, filed a joint petition for review with the Court of Appeals. The
appellate court denied the petition. Petitioners moved for reconsideration and filed an amended petition. The Court of
Appeals, however, affirmed the factual findings and conclusions arrived at by the trial courts and denied the amended
petition for lack of merit.[15] It also denied the motion for reconsideration.

Petitioners are now before us, on a petition for review, alleging that:

The Honorable Court of Appeals, with due respect and deference, committed a reversible error in the
interpretation/application of the law in the instant case and in the appreciation of the facts and evidence presented. The
Court of Appeals gravely abused its discretion when it denied and dismissed the petition filed by the petitioners.[16]

After considering the parties submissions, we find three basic issues: (1) Did the MCTC err in taking jurisdiction over and
deciding the cases? (2) Did the RTC err in sustaining the MCTCs judgment? (3) Did the CA err in denying the petition for
review filed by the 19 petitioners ordered to be ejected?

Petitioners insist that private respondent should have filed an action to recover possession de jure, not a mere complaint
for ejectment, for two reasons. One, they possessed Lot 1227 in good faith for more than 30 years in the concept of
owners. And two, there was no withholding of possession since private respondent was not in prior possession of the lot.

Private respondent states in her Comment before us that the allegations in her Complaints make out a clear case of
unlawful detainer which is cognizable by the MCTC. We are in agreement with her stance. There was no error in the
choice of the complainants remedy, a matter left to her determination as the suitor. And the complaint itself is defined by
the allegations therein, not the allegations of the defendants.

At the outset, we note that petitioners question the MCTCs jurisdiction yet they admit in their preliminary statement that
the Complaints filed are indeed for unlawful detainer, and that the only issue to be determined is mere physical possession
(possession de facto) and not juridical possession (possession de jure), much less ownership.[17]

While petitioners assert that this case involves only deprivation of possession, they confuse the remedy of an action for
forcible entry with that of unlawful detainer. In unlawful detainer, prior physical possession by the plaintiff is not
necessary. It is enough that plaintiff has a better right of possession. Actual, prior physical possession of a property by a
party is indispensable only in forcible entry cases. In unlawful detainer cases, the defendant is necessarily in prior lawful
possession of the property but his possession eventually becomes unlawful upon termination or expiration of his right to
possess.[18] Thus, the fact that petitioners are in possession of the lot does not automatically entitle them to remain in
possession. And the issue of prior lawful possession by the defendants does not arise at all in a suit for unlawful detainer,
simply because prior lawful possession by virtue of contract or other reasons is given or admitted. Unlike in forcible entry
where defendants, by force, intimidation, threat, strategy or stealth, deprive the plaintiff or the prior physical possessor of
possession. Here there is no evidence to show that petitioners entered the lot by any of these acts.

If only to stress the fundamental principles related to present controversy, jurisdiction over unlawful detainer suits is
vested in municipal trial courts.[19] And in ejectment cases, the jurisdiction of the court is determined by the allegations
of the complaint.[20]

In this case for ejectment, private respondents allegations sufficiently present a case of unlawful detainer. She alleged that
(1) she owns Lot 1227; (2) she tolerated petitioners to construct their houses thereon; (3) she withdrew her tolerance; and
(4) petitioners refused to heed her demand to vacate the lot. The Complaints were also filed within one year from the date
of her demand. The cause of action for unlawful detainer between the parties springs from the failure of petitioners to
vacate the lot upon lawful demand of the private respondent. When they refused to vacate the lot after her demand,
petitioners continued possession became unlawful. Her complaint for ejectment against respondent, to put it simply, is not
without sufficient basis.

Petitioners contention that private respondent should have filed an action to recover possession de jure with the RTC is not
supported by law or jurisprudence. The distinction between a summary action of ejectment and a plenary action for
recovery of possession and/or ownership of the land is settled in our jurisprudence.

What really distinguishes an action for unlawful detainer from a possessory action (accion publiciana) and from a
reinvindicatory action (accion reinvindicatoria) is that the first is limited to the question of possession de facto. An

unlawful detainer suit (accion interdictal) together with forcible entry are the two forms of an ejectment suit that may be
filed to recover possession of real property. Aside from the summary action of ejectment, accion publiciana or the plenary
action to recover the right of possession and accion reinvindicatoria or the action to recover ownership which includes
recovery of possession, make up the three kinds of actions to judicially recover possession.[21]

It is not up to defendants, now petitioners herein, to dictate upon plaintiff, now the private respondent, what her initial
recourse should be. Her choice of an action for ejectment against so-called squatters is well within her rights.

Petitioners cite the case of Bayubay v. Court of Appeals,[22] and argue that the MCTCs decision was without
jurisdictional or legal basis because the MCTC did not issue a preliminary conference order. They assert that the 10-day
period to file position papers and affidavits only starts after the parties had received a preliminary conference order. They
insist they were denied due process when the MCTC decided the cases based merely on private respondents Complaints
and affidavit, without considering their Answers.

For her part, private respondent maintains that there was substantial compliance with the rules in the MCTCs conduct of
the preliminary conference, hence there was no violation of due process nor disregard of its proper jurisdiction.

Petitioners present contention was first raised only in their appeal to the RTC. Raising it before the appellate tribunal is
barred by estoppel.[23] They should have raised it in the proceedings before the MCTC. In our view, this issue is a mere
afterthought, when the MCTC decided against them. Basic rules of fair play, justice and due process require that as a rule
an issue cannot be raised by the petitioners for the first time on appeal.[24]

Besides, petitioners did not question initially the MCTCs Order dated February 19, 1999, when they moved for an
extension of time to file their position papers and affidavits. They wanted another 30 days on top of the 30 days set by the
MCTC, which strictly should have been 10 days only. In this regard, petitioners could not claim that they were denied
sufficient time to file their position papers and affidavits before the trial court. Further, they cannot validly invoke our
ruling[25] in Bayubay, for in that case there was no order at all terminating the preliminary conference and requiring the
parties to submit position papers and affidavits.

We note with dismay petitioners insistence that we order the MCTC to conduct the requisite preliminary conference. The
summary character of ejectment suits will be disregarded if we allow petitioners to further delay this case by allowing a
second preliminary conference. Ejectment by way of forcible entry and unlawful detainer cases are summary proceedings,
designed to provide an expeditious means of protecting actual possession or the right to possession over the property
involved. It is a timely procedure designed to remedy the delay in the resolution of such cases.[26]

Lastly, petitioners aver that private respondent failed to prove her allegation of ownership of Lot 1227 as it is only based
on a tax declaration which is not an evidence of ownership. They also claim that their possession of the lot was not and
could not be by mere tolerance. However, this is a factual matter best left to the trial courts.

What we have now is sufficient evidence showing that private respondent has a better right to possess Lot 1227. The
commissioners report and sketch plan show that the 19 petitioners occupy the lot, which corroborate private respondents
allegation and disprove petitioners defense that Lot 1227 is a shoreline; or that Lot 1227 is a social forest area. While not a
conclusive evidence of ownership, private respondents tax declaration constitutes proof that she has a claim of title over
the lot. It has been held that:

Although tax declarations or realty tax payment of property are not conclusive evidence of ownership, nevertheless, they
are good indicia of possession in the concept of owner for no one in his right mind would be paying taxes for a property
that is not in his actual or at least constructive possession. They constitute at least proof that the holder has a claim of title
over the property. The voluntary declaration of a piece of property for taxation purposes manifests not only ones sincere
and honest desire to obtain title to the property and announces his adverse claim against the State and all other interested
parties, but also the intention to contribute needed revenues to the Government. Such an act strengthens ones bona fide
claim of acquisition of ownership.[27]

The lower courts did not err in adjudicating the issue of possession. Mere absence of title over the lot is not a ground for
the courts to withhold relief from the parties in an ejectment case. Plainly stated, the trial court has validly exercised its
jurisdiction over the ejectment cases below. The policy behind ejectment suits is to prevent breaches of the peace and
criminal disorder, and to compel the party out of possession to respect and resort to the law alone to obtain what she
claims is hers. The party deprived of possession must not take the law into his or her own hands.[28] For their part, herein
petitioners could not be barred from defending themselves before the court adequately, as a matter of law and right.

However, petitioners in their defense should show that they are entitled to possess Lot 1227. If they had any evidence to
prove their defenses, they should have presented it to the MCTC with their position papers and affidavits. But they
ignored the courts order and missed the given opportunity to have their defenses heard, the very essence of due process.
[29] Their allegations were not only unsubstantiated but were also disproved by the plaintiffs evidence.

In sum, we find no reversible error much less any grave abuse of discretion committed by the Court of Appeals. A person
who occupies the land of another at the latters tolerance or permission, without any contract between them, is necessarily
bound by an implied promise that he will vacate upon demand, failing which a summary action for ejectment is the proper
remedy against him.[30] His status is analogous to that of a lessee or tenant whose term of lease has expired but whose
occupancy continued by tolerance of the owner. In such a case, the date of unlawful deprivation or withholding of
possession is to be counted from the date of the demand to vacate.[31]

WHEREFORE, the instant petition is DENIED for lack of merit. The Decision of the Court of Appeals dated March 30,
2001 and its Resolution dated October 18, 2001 are AFFIRMED.

Costs against petitioners.

SO ORDERED.

Davide, Jr., C.J., (Chairman), Ynares-Santiago, Carpio, and Azcuna, JJ., concur.

ROSS RICA SALES CENTER, G.R. No. 132197


INC. and JUANITO KING &
SONS, INC., Present:
Petitioners,
PUNO, J.,
Chairman,
AUSTRIA-MARTINEZ,
- versus - CALLEJO, SR.,
TINGA, and
CHICO-NAZARIO, JJ.
SPOUSES GERRY ONG and
ELIZABETH ONG, Promulgated:
Respondents.
August 16, 2005

x-------------------------------------------------------------------x

DECISION

TINGA, J.:

In a Decision[1] dated 6 January 1998, the Former First Division of the Court of Appeals overturned the decisions of the
Municipal Trial Court (MTC) and the Regional Trial Court (RTC) of Mandaue City, ruling instead that the MTC had no
jurisdiction over the subject complaint for unlawful detainer. This petition for review prays for the reversal of the
aforesaid Court of Appeals Decision.

The case originated from a complaint for ejectment filed by petitioners against respondents, docketed as Civil Case No.
2376, before the MTC of Mandaue City, Branch I. In the complaint, petitioners alleged the fact of their ownership of three
(3) parcels of land covered by Transfer Certificates of Title (TCT) Nos. 36466, 36467 and 36468. Petitioners likewise
acknowledged respondent Elizabeth Ongs ownership of the lots previous to theirs. On 26 January 1995, Atty. Joseph M.
Baduel, representing Mandaue Prime Estate Realty, wrote respondents informing them of its intent to use the lots and

asking them to vacate within thirty (30) days from receipt of the letter. But respondents refused to vacate, thereby
unlawfully withholding possession of said lots, so petitioners alleged.

Ross Rica Sales Center, Inc. and Juanito King and Sons, Inc. (petitioners) had acquired the lands from Mandaue Prime
Estate Realty through a sale made on 23 March 1995. In turn, it appears that Mandaue Prime Estate Realty had acquired
the properties from the respondents through a Deed of Absolute Sale dated 14 July 1994. However, this latter deed of sale
and the transfers of title consequential thereto were subsequently sought to be annulled by respondents in a complaint
filed on 13 February 1995 before the Mandaue RTC against Mandaue Prime Estate Realty.[2] Per record, this case is still
pending resolution.

Meanwhile, the MYC resolved the ejectment case on 24 April 1996, with the decision ordering respondents to vacate the
premises in question and to peacefully turn over possession thereof to petitioners.

On appeal, the RTC rendered on 1 March 1997 a judgment affirming the MTCs decision in its entirety.

On 8 May 1997, respondents filed a notice of appeal. However, on the following day, they filed a motion for
reconsideration.

On 23 June 1997, the RTC issued an Order which concurrently gave due course to respondents notice of appeal filed on 8
May 1997; denied their motion for reconsideration dated 9 May 1997,[3] and granted petitioners motion for immediate
execution pending appeal.

In a Petition for Certiorari with Injunction filed with the Court of Appeals and treated as a Petition for Review, the
appellate court ruled that the MTC had no jurisdiction over said case as there was no contract between the parties, express
or implied, as would qualify the same as one for unlawful detainer. Thus, the assailed Orders of the MTC and RTC were
set aside.

Petitioners then took this recourse via Petition for Review under Rule 45 of the Rules of Court. The principal issues raised
before this Court are: (i) whether the RTC decision has already become final and executory at the time the petition for
review was filed; (ii) whether the allegations in the complaint constitute a case for unlawful detainer properly cognizable
by the MTC; and, (iii) whether petitioners, as registered owners, are entitled to the possession of the subject premises.

We resolve the first argument to be without merit.

The following sequence of events is undisputed:

(1)
MTC.

On 1 March 1997, the RTC rendered the questioned decision affirming the judgment of the

(2)

On 28 April 1997, respondents received a copy of the aforementioned decision.

(3)

On 8 May 1997, respondents filed a Notice of Appeal with the RTC.

(4)
On 9 May 1997, respondents filed likewise with the RTC a Motion for Reconsideration of the
aforementioned 1 March 1997 decision.

(5)
Reconsideration.
(6)

On 23 June 1997, the RTC of Mandaue issued an Order denying respondents Motion for
On 9 July 1997, respondents received a copy of the aforementioned 23 June 1997 Order.

(7)
On 24 July 1997, respondents filed with the Court of Appeals their motion for an additional
period of ten (10) days within which to file their Petition for Review.
(8)

On 30 July 1997, respondents filed with the Court of Appeals their Petition for Review.

Petitioners assert that the Petition for Review was filed beyond the fifteen (15)-day period for appeal. They theorize that
the period started running on 28 April 1995, the date of receipt of the RTC decision, and ended on 13 May 1997.
According to them, this reglementary period could not have been interrupted by the filing on 9 May 1997 of the Motion
for Reconsideration because of the filing one day earlier of the Notice of Appeal. This Notice of Appeal dated 8 May
1997, albeit the wrong mode of appeal, expressly manifested their intention to file a petition for review to either the Court
of Appeals or the Supreme Court.[4]

Petitioners further argue that respondents, after having filed the Notice of Appeal which was given due course by the RTC,
cannot take an inconsistent stand such as filing a Motion for Reconsideration. Such filing, therefore, did not toll the fifteen
(15)-day period which started running from the date of receipt of the RTC decision on 28 April 1997 and ended on 13
May 1997.

Respondents, in their Comment,[5] submit that the filing of the Notice of Appeal dated 8 May 1997 was improper, and as
such did not produce any legal effect. Therefore, the filing of the Motion for Reconsideration immediately on the
following day cured this defect. The RTC refused to subscribe respondents position. It justified the denial of the Motion
for Reconsideration on the ground that the respondents had already filed a Notice of Appeal. The Order dated 23 June
1997 stated:

On record is a Notice of Appeal by Certiorari filed by Defendants on May 8, 1997.

Likewise filed by Defendants on May 9, 1997 is a Motion for Reconsideration.

Considering the Notice of Appeal filed earlier which the court hereby approves, the Motion for Reconsideration is
DENIED.

The Motion for Immediate Execution Pending Appeal being meritorious, is GRANTED.[6] (Emphasis in the original.)
Strangely enough, the Court of Appeals passed no comment on this point when it took cognizance of respondents position
and reversed the RTC. But does this necessarily mean that the RTC was correct when it declared that the Motion for
Reconsideration was barred by the filing of the Notice of Appeal, no matter how erroneous the latter mode was?

Rule 42 governs the mode of appeal applicable in this case. Sec. 1 provides:

Section 1. How appeal taken; time for filing. -- A party desiring to appeal from a decision of the RTC rendered in the
exercise of its appellate jurisdiction may file a verified petition for review with the Court of Appeals, paying at the same
time to the clerk of said court the corresponding docket and other lawful fees, depositing the amount of P500.00 for costs,

and furnishing the Regional Trial Court and the adverse party with a copy of the petition. The petition shall be filed and
served within fifteen (15) days from notice of the decision sought to be reviewed or of the denial of petitioners motion for
new trial or reconsideration filed in due time after judgment. Upon proper motion and the payment of the full amount of
the docket and other lawful fees and the deposit for costs before the expiration of the reglementary period, the Court of
Appeals may grant an additional period of fifteen (15) days only within which to file the petition for review. No further
extension shall be granted except for the most compelling reason and in no case to exceed fifteen (15) days.
Since the unlawful detainer case was filed with the MTC and affirmed by the RTC, petitioners should have filed a
Petition for Review with the Court of Appeals and not a Notice of Appeal with the RTC. However, we consider this to
have been remedied by the timely filing of the Motion for Reconsideration on the following day. Section 3, Rule 50 of the
Rules of Court allows the withdrawal of appeal at any time, as a matter of right, before the filing of the appellees brief.
Applying this rule contextually, the filing of the Motion for Reconsideration may be deemed as an effective withdrawal of
the defective Notice of Appeal.

Perforce, the period of appeal was tolled by the Motion for Reconsideration and started to run again from the receipt of
the order denying the Motion for Reconsideration. A Motion for Additional Time to File the Petition was likewise filed
with the Court of Appeals. Counting fifteen (15) days from receipt of the denial of the Motion for Reconsideration and the
ten (10)-day request for additional period, it is clear that respondents filed their Petition for Review on time.

Petitioners invoke to the ruling in People v. De la Cruz[7] that once a notice of appeal is filed, it cannot be validly
withdrawn to give way to a motion for reconsideration. The factual circumstances in the two cases are different.

De la Cruz is a criminal case, governed by criminal procedure. Section 3, Rule 122 of the Rules of Court provides that the
proper mode of appeal from a decision of the RTC is a notice of appeal and an appeal is deemed perfected upon filing of
the notice of appeal.
In the case at bar, a petition for review before the Court of Appeals is the proper mode of appeal from a decision of the
RTC. Since the filing of the notice of appeal is erroneous, it is considered as if no appeal was interposed.
Now on the second and more important issue raised by petitioners: whether the Complaint satisfies the jurisdictional
requirements for a case of unlawful detainer properly cognizable by the MTC.
The MTC considered itself as having jurisdiction over the ejectment complaint and disposed of the same in favor of
petitioners. Said ruling was affirmed by the RTC. The Court of Appeals reversed the lower courts and found the complaint
to be one not for unlawful detainer based on two (2) grounds, namely: that the allegations fail to show that petitioners
were deprived of possession by force, intimidation, threat, strategy or stealth; and that there is no contract, express or
implied, between the parties as would qualify the case as one of unlawful detainer.

We disagree with the Court of Appeals.

The complaint for unlawful detainer contained the following material allegations:

....
3.
That plaintiffs are the owners of Lot No. 2, which is covered by T.C.T. No. 36466 of the Register of Deeds of
Mandaue City, Lot No. 1-A which is covered by T.C.T. No. 36467 of the Register of Deeds of Mandaue City and Lot No.
86-A which is covered by T.C.T. No. 36468 of the Register of Deeds of Mandaue City, all situated in the City of Mandaue.
Copies of said Transfer Certificate of Titles are hereto attached as Annexes A, B, and C respectively and made an integral
part hereof;
4.

That defendant Elizabeth Ong is the previous registered owner of said lots;

5.
That as the previous registered owner of said lots, defendant Elizabeth Ong and her husband and co-defendant Jerry
Ong have been living in the house constructed on said lots;
6.
That on May 6, 1995, plaintiffs, through the undersigned counsel, wrote defendants a letter informing them or their
intent to use said lots and demanded of them to vacate said lots within 30 days from receipt of said letter. Copy of said
letter is hereto attached as Annex D and made an integral part thereof;
7.
That despite demand to vacate, the defendants have refused and still refuse to vacate said lots, thus, unlawfully
withholding possession of said lots from plaintiffs and depriving plaintiffs of the use of their lots;
8.
That in unlawfully withholding the possession of said lots from the plaintiffs, plaintiffs have suffered damages in
the form of unearned rentals in the amount of P10,000.00 a month

. . . .[8]

Well-settled is the rule that what determines the nature of an action as well as which court has jurisdiction over it are the
allegations of the complaint and the character of the relief sought.[9]
Respondents contend that the complaint did not allege that petitioners possession was originally lawful but had ceased to
be so due to the expiration of the right to possess by virtue of any express or implied contract.
The emphasis placed by the Court of Appeals on the presence of a contract as a requisite to qualify the case as one of
unlawful detainer contradicts the various jurisprudence dealing on the matter.
In Javelosa v. Court of the Appeals,[10] it was held that the allegation in the complaint that there was unlawful
withholding of possession is sufficient to make out a case for unlawful detainer. It is equally settled that in an action for
unlawful detainer, an allegation that the defendant is unlawfully withholding possession from the plaintiff is deemed
sufficient, without necessarily employing the terminology of the law.[11]
Hence, the phrase "unlawful withholding" has been held to imply possession on the part of defendant, which was legal in
the beginning, having no other source than a contract, express or implied, and which later expired as a right and is being
withheld by defendant.[12] In Rosanna B. Barba v. Court of Appeals,[13] we held that a simple allegation
that the defendant is unlawfully withholding possession from plaintiff is sufficient.
Based on this premise, the allegation in the Complaint that:
. . . . despite demand to vacate, the defendants have refused and still refuse to vacate said lots, thus, unlawfully
withholding possession of said lots from plaintiffs and depriving plaintiffs of the use of their lots;[14]

is already sufficient to constitute an unlawful detainer case.

In the subject complaint, petitioners alleged that they are the registered owners of the lots covered by TCT Nos. 36466,
36467 and 36468. By their implied tolerance, they have allowed respondents, the former owners of the properties, to
remain therein. Nonetheless, they eventually sent a letter to respondents asking that the latter vacate the said lots.
Respondents refused, thereby depriving petitioners of possession of the lots. Clearly, the complaint establishes the basic
elements of an unlawful detainer case, certainly sufficient for the purpose of vesting jurisdiction over it in the MTC.
Respondents would like to capitalize on the requisites as cited in the case of Raymundo dela Paz v. Panis.[15] But the
citation is a mere reiteration of Sec. 1, Rule 70[16] of the Rules of Court. The case doesid not provide for rigid standards
in the drafting of the ejectment complaint. The case of Co Tiamco v. Diaz[17] justifies a more liberal approach, thus:
. . . The principle underlying the brevity and simplicity of pleadings in forcible entry and unlawful detainer cases rests
upon considerations of public policy. Cases of forcible entry and detainer are summary in nature, for they involve
perturbation of social order which must be restored as promptly as possible and, accordingly, technicalities or details of
procedure should be carefully avoided.[18]

Moreover, petitioners fail to mention any of the incidents of the pending case involving the annulment of deed of sale and
title over said property. Petitioners know better than to question this in an ejectment proceeding, which brings us to the
nature of the action in this case.
Respondents insist that the RTC, and not the MTC, had jurisdiction over the action, it being an accion reivindicatoria
according to them, on the ground that petitioners were constantly claiming ownership over the lands in the guise of filing
an action for ejectment. In their Comment,[19] respondents maintain that they occupy the subject lots as the legal owners.
Petitioners, on the other hand, are seeking recovery of possession under a claim of ownership which is tantamount to
recovery of possession based on alleged title to the lands, and therefore is within the original jurisdiction of the RTC, so
respondents conclude.
This contention is not tenable.
The issue involved in accion reivindicatoria is the recovery of ownership of real property. This differs from accion
publiciana where the issue is the better right of possession or possession de jure, and accion interdictal where the issue is
material possession or possession de facto. In an action for unlawful detainer, the question of possession is primordial
while the issue of ownership is generally unessential.[20]
Neither the allegation in petitioners complaint for ejectment nor the defenses thereto raised by respondents sufficiently
convert this case into an accion reivindicatoria which is beyond the province of the MTC to decide. Petitioners did not
institute the complaint for ejectment as a means of claiming or obtaining ownership of the properties. The
acknowledgment in their pleadings of the fact of prior ownership by respondents does not constitute a recognition of
respondents present ownership. This is meant only to establish one of the necessary elements for a case of unlawful
detainer, specifically the unlawful withholding of possession. Petitioners, in all their pleadings, only sought to recover
physical possession of the subject property. The mere fact that they claim ownership over the parcels of land as well did
not deprive the MTC of jurisdiction to try the ejectment case.

Even if respondents claim ownership as a defense to the complaint for ejectment, the conclusion would be the same for
mere assertion of ownership by the defendant in an ejectment case will not therefore oust the municipal court of its
summary jurisdiction.[21] This Court in Ganadin

v. Ramos[22] stated that if what is prayed for is ejectment or recovery of possession, it does not matter if ownership is
claimed by either party. Therefore, the pending actions for declaration of nullity of deed of sale and Transfer Certificates
of Title and quieting of title in Civil Case No. MAN-2356 will not abate the ejectment case.
In Drilon v. Gaurana,[23] this Court ruled that the filing of an action for reconveyance of title over the same property or
for annulment of the deed of sale over the land does not divest the MTC of its jurisdiction to try the forcible entry or
unlawful detainer case before it, the rationale being that, while there may be identity of parties and subject matter in the
forcible entry case and the suit for annulment of title and/or reconveyance, the rights asserted and the relief prayed for are
not the same.[24]
In Oronce v. Court of Appeals,[25] this Court held that the fact that respondents had previously filed a separate action for
the reformation of a deed of absolute sale into one of pacto de retro sale or equitable mortgage in the same
Court of First Instance is not a valid reason to frustrate the summary remedy of ejectment afforded by law to the plaintiff.
Consequently, an adjudication made in an ejectment proceeding regarding the issue of ownership should be regarded as
merely provisional and, therefore, would not bar or prejudice an action between the same parties involving title to the
land. The foregoing doctrine is a necessary consequence of the nature of forcible entry and unlawful detainer cases where
the only issue to be settled is the physical or material possession over the real property, that is, possession de facto and not
possession de jure.
The Court reiterated this in the case of Tecson v. Gutierrez[26] when it ruled:
We must stress, however, that before us is only the initial determination of ownership over the lot in dispute, for the
purpose of settling the issue of possession, although the issue of ownership is inseparably linked thereto. As such, the
lower court's adjudication of ownership in the ejectment case is merely provisional, and our affirmance of the trial courts'

decisions as well, would not bar or prejudice an action between the same parties involving title to the property, if and
when such action is brought seasonably before the proper forum.
The long settled rule is that the issue of ownership cannot be subject of a collateral attack.
In Apostol v. Court of Appeals,[27] this Court had the occasion to clarify this:
. . Under Section 48 of Presidential Decree No. 1529, a certificate of title shall not be subject to collateral attack. It
cannot be altered, modified or cancelled, except in a direct proceeding for that purpose in accordance with law. The issue
of the validity of the title of the respondents can only be assailed in an action expressly instituted for that purpose.
Whether or not the petitioners have the right to claim ownership over the property is beyond the power of the court a quo
to determine in an action for unlawful detainer.[28]
With the conclusion of the second issue in favor of petitioners, there is no need to discuss the third assignment of error
which is related to the second issue.
WHEREFORE, the Petition is GRANTED. The Decision of the Court of Appeals dated 6 January 1998 is REVERSED
and SET ASIDE and the Decision dated 24
April 1996 of the Municipal Trial Court of Mandaue City REINSTATED and AFFIRMED. Costs against respondents.
sO ORDERED.

FIRST DIVISION
LILIA V. PERALTA-LABRADOR, G.R. No. 165177
Petitioner,
Present:
Davide, Jr., C.J. (Chairman),
- versus - Quisumbing,
Ynares-Santiago,
Carpio, and
Azcuna, JJ.
SILVERIO BUGARIN,
substituted by his widow, Promulgated:
CONSOLACION BUGARIN,[1]
Respondent. August 25, 2005

DECISION

YNARES-SANTIAGO, J.:

Challenged in this petition for review on certiorari is the March 12, 2004 decision[2] of the Court of Appeals in CA-G.R.
SP No. 57475, which affirmed with modification the January 26, 2000 judgment[3] of the Regional Trial Court (RTC) of
Iba, Zambales, Branch 71, in Civil Case No. RTC-1590-I, which in turn affirmed the decision[4] dated May 16, 1999 of
the Municipal Trial Court (MTC) of San Felipe, Zambales, in Civil Case No. 328, and its September 6, 2004 resolution[5]
denying reconsideration thereof.

On January 18, 1996, petitioner Lilia V. Peralta-Labrador filed a case for Recovery of Possession and Ownership,
docketed as Civil Case No. 328, with the MTC of San Felipe, Zambales. She alleged that she is the owner of Cadastral
Lot No. 2650, with an area of 400 sq. m. located at Sitio Caarosipan, Barangay Manglicmot, San Felipe, Zambales, having
purchased the same in 1976 from spouses Artemio and Angela Pronto. In 1977, she was issued Tax Declaration No. 10462
and paid the taxes due thereon.[6]

In 1990, the Department of Public Works and Highways constructed a road which traversed Cadastral Lot No. 2650
thereby separating 108 sq. m. from the rest of petitioners lot, for which she was issued Tax Declaration No. 02-2460R in
1991.[7]

Sometime in 1994, respondent Silverio Bugarin forcibly took possession of the 108 sq. m. lot and refused to vacate the
same despite the pleas of petitioner. Hence, on January 18, 1996, she instituted a complaint for recovery of possession and
ownership against respondent.

In his Answer with Counterclaims,[8] respondent contended that the area claimed by petitioner is included in the 4,473
square meter lot, covered by the Original Certificate of Title (OCT) No. P-13011; and that he has been in continuous
possession and occupation thereof since 1955. In his Amended Answer with Counterclaim,[9] however, respondent failed
to allege that the questioned lot is covered by the OCT No. P-13011, and instead asserted that he planted fruit bearing
trees in the property. Respondent further pleaded the defenses of lack of cause of action and prescription.

On May 16, 1999, the court a quo ruled in favor of respondent declaring him as the owner of the controverted lot on the
basis of the OCT No. P-13011. The complaint was dismissed for failure of petitioner to prove prior physical possession
and ownership thereof. The dispositive portion thereof, reads:

WHEREFORE, all the foregoing premises considered and for failure on the part of the plaintiff to establish the
preponderance of evidence of prior actual physical possession and present title over the lot in her favor, let the instant case
be ordered DISMISSED, and the defendant be awarded the rightful possession and ownership of the same and the plaintiff
is hereby ordered to pay FIFTEEN THOUSAND (P15,000.00) PESOS as reasonable Attorneys fee and FIVE
THOUSAND (P5,000.00) PESOS as appearance fee plus costs.
SO ORDERED.[10]

The RTC affirmed the assailed decision,[11] hence petitioner filed a petition for review before the Court of Appeals which
was however denied for insufficiency of evidence to prove ownership or prior actual physical possession. The appellate
court deleted the monetary awards in favor of respondent as well as the declaration of the MTC that respondent is the
owner of the questioned lot on the ground that the OCT No. P-13011, relied upon by said court was not formally offered
in evidence, hence, cannot be considered by the court. The decretal portion thereof, states:

WHEREFORE, in view of the foregoing discussion, the instant petition is hereby PARTIALLY GRANTED. The assailed
Decision dated January 26, 2000, in Civil Case No. RTC 1590 I of the Regional Trial Court (RTC), Branch 71, Iba,
Zambales, and Decision dated May 16, 1999, in Civil Case No. 328 of the Municipal Trial Court of San Felipe, Zambales
are MODIFIED by deleting the declaration of ownership as to the disputed 108 square meters and the monetary award in
favor of respondent Silverio Bugarin. However, the dismissal of the complaint is AFFIRMED.

SO ORDERED.[12]
The motion for reconsideration filed by petitioner was denied. Hence the instant petition.
Pertinent portion of Section 1, Rule 70 of the Revised Rules of Civil Procedure, provides:
SECTION 1. Who may institute proceedings, and when. a person deprived of the possession of any land or building by
force, intimidation, threat, strategy, or stealth, may at any time within one (1) year after such unlawful deprivation or
withholding of possession, bring an action in the proper Municipal Trial Court against the person or persons unlawfully
withholding or depriving of possession, or any person or persons claiming under them, for the restitution of such
possession, together with the damages and costs. (Emphasis supplied)

In Lopez v. David Jr.,[13] it was held that an action for forcible entry is a quieting process and the one year time bar for
filing a suit is in pursuance of the summary nature of the action. Thus, we have nullified proceedings in the MTCs when it
improperly assumed jurisdiction of a case in which the unlawful deprivation or withholding of possession had exceeded
one year. After the lapse of the one year period, the suit must be commenced in the RTC via an accion publiciana, a suit
for recovery of the right to possess. It is an ordinary civil proceeding to determine the better right of possession of realty
independently of title. It also refers to an ejectment suit filed after the expiration of one year from the accrual of the cause
of action or from the unlawful withholding of possession of the realty independently of title. Likewise, the case may be
instituted before the same court as an accion reivindicatoria, which is an action to recover ownership as well as
possession.[14]

Corrollarily, jurisdiction of a court is determined by the allegations of the complaint. Thus, in ascertaining whether or not
the action falls within the exclusive jurisdiction of the inferior courts, the averments of the complaint and the character of
the relief sought are to be examined.[15]

In the instant case, petitioners complaint alleges that:


2. That plaintiff is the owner of a parcel of land denominated as Cadastral lot No. 2650, San Felipe Cadastre, situated at
sitio Caarosipan, Barangay Manglicmot, San Felipe, Zambales which she bought in 1976 from Spouses Artemio Pronto
and Angela Merano when she was still a widow, with the following boundaries: North, Alipio Abad, East, Antonio Cueva,
South, Juan Borja, and West, Old Provincial Road, containing an area of 108 square meters, declared under Tax
Declaration No. 002-1860R and assessed at P1,120.00;

3. That plaintiff has been in open, continuous, exclusive and adverse as well as notorious possession of the said lot and in
the concept of an owner since she [acquired] it in 1976 until the time when defendant took possession forcibly, two years
ago;
4. That in or before 1990 the land was traversed by a new National Highway and the land was segregated from a bigger
portion of the land, the western portion is now the land in question and since the new provincial road which traversed the
whole land of the plaintiff, the old highway which is west of Lot 2650 shall belong to the plaintiff in compensation of the
portion of her lot traversed by the new highway, said old highway is also taken by defendant unlawfully;[16]
It is clear that petitioners averment make out a case for forcible entry because she alleged prior physical possession of the
subject lot way back in 1976, and the forcible entry thereon by respondent. Considering her allegation that the unlawful
possession of respondent occurred two years[17] prior to the filing of the complaint on January 18, 1996, the cause of
action for forcible entry has prescribed and the MTC had no jurisdiction to entertain the case. Petitioners complaint
therefore should have been filed with the proper RTC.
It is settled that jurisdiction over the subject matter cannot be waived by the parties or cured by their silence,
acquiescence or even express consent.[18] Hence, the failure of respondent to insist on the defenses of lack of cause of
action and prescription stated in his Amended Answer with Counterclaim will not vest the MTC with jurisdiction over the
case.
On this point, the Court held in Bongato v. Malvar[19] that:
It is wise to be reminded that forcible entry is a quieting process, and that the restrictive time bar is prescribed to
complement the summary nature of such process. Indeed, 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 plaintiff learned about it. After the lapse of the one-year period, the party
dispossessed of a parcel of land may file either an accion publiciana, which is a plenary action to recover the right of
possession; or an accion reivindicatoria, which is an action to recover ownership as well as possession.
On the basis of the foregoing facts, it is clear that the cause of action for forcible entry filed by respondents had already
prescribed when they filed the Complaint for ejectment on July 10, 1992. Hence, even if Severo Malvar may be the owner
of the land, possession thereof cannot be wrested through a summary action for ejectment of petitioner, who had been

occupying it for more than one (1) year. Respondents should have presented their suit before the RTC in an accion
publiciana or an accion reivindicatoria, not before the MTCC in summary proceedings for forcible entry. Their cause of
action for forcible entry had prescribed already, and the MTCC had no more jurisdiction to hear and decide it.
Further, a courts lack of jurisdiction over the subject matter cannot be waived by the parties or cured by their silence,
acquiescence or even express consent. A party may assail the jurisdiction of the court over the action at any stage of the
proceedings and even on appeal. That the MTCC can take cognizance of a motion to dismiss on the ground of lack of
jurisdiction, even if an answer has been belatedly filed we likewise held in Bayog v. Natino[.]
Moreover, even if the MTC has jurisdiction over the subject matter, the complaint should still be dismissed because
petitioner failed to prove that the controverted 108 sq. m. lot is part of Cadastral Lot No. 2650. Petitioner admitted that she
has never seen the Cadastral Map of San Felipe, Zambales, and relied only on the Survey Notification Card[20] from the
Bureau of Lands,[21] with a sketch of Cadastral Lot No. 2650. Said card, however, does not reflect the 108 sq. m. lot
subject of this case. Neither did petitioner cause the survey of Cadastral Lot No. 2650 after the construction of a new road
to prove that the segregated portion on the western side is part thereof. Ei incumbit probotio qui dicit, non qui negat. He
who asserts, not he who denies, must prove.[22] Failing to discharge this burden, the dismissal of the complaint is proper.
In the same vein, ownership of the lot in question cannot be awarded to respondent considering that OCT No. P-13011,
[23] and the Survey Plan[24] were not formally offered in evidence. While the issue of ownership may be passed upon in
ejectment cases for the sole purpose of determining the nature of possession,[25] no evidence conclusively show that the
lot in question is covered by said OCT No. P-13011 or any other title of respondent.
WHEREFORE, the May 16, 1999 decision of the Municipal Trial Court of San Felipe, Zambales, the January 26, 2000
decision of the Regional Trial Court, Branch 71, Iba, Zambales, and the March 12, 2004 decision of the Court of Appeals,
are ANNULLED and SET ASIDE for lack of jurisdiction. The complaint in Civil Case No. 328 is DISMISSED.

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