[G.R. No. 80298. April 26, 1990.] Leonor Santos with prosecution for buying stolen property.
cution for buying stolen property. They seized the 120 books without
EDCA PUBLISHING & DISTRIBUTING CORP., petitioner, vs. THE SPOUSES
LEONOR and GERARDO SANTOS, doing business under the name and style of
"SANTOS BOOKSTORE," and THE COURT OF APPEALS, respondents.
The case before us calls for the interpretation of Article 559 of the Civil Code and raises the
particular question of when a person may be deemed to have been "unlawfully deprived" of
movable property in the hands of another. The article runs in full as follows:
ART. 559. The possession of movable property acquired in good faith is
equivalent to a title. Nevertheless, one who has lost any movable or has
been unlawfully deprived thereof, may recover it from the person in
possession of the same.
If the possessor of a movable lost or of which the owner has been
unlawfully deprived has acquired it in good faith at a public sale, the
owner cannot obtain its return without reimbursing the price paid therefor.
The movable property in this case consists of books, which were bought from the petitioner by
an impostor who sold it to the private respondents. Ownership of the books was recognized in
the private respondents by the Municipal Trial Court, 1 which was sustained by the Regional
Trial Court, 2 which was in turn sustained by the Court of Appeals. 3 The petitioner asks us to
declare that all these courts have erred and should be reversed.
This case arose when on October 5, 1981, a person identifying himself as
Professor Jose Cruz placed an order by telephone with the petitioner company for
406 books, payable on delivery. 4 EDCA prepared the corresponding invoice and
delivered the books as ordered, for which Cruz issued a personal check covering the
purchase price of P8,995.65. 5 On October 7, 1981, Cruz sold 120 of the books to
private respondent Leonor Santos who, after verifying the seller's ownership from
the invoice he showed her, paid him P1,700.00. 6
Meanwhile, EDCA having become suspicious over a second order placed by Cruz even before
clearing of his first check, made inquiries with the De la Salle College where he had claimed to
be a dean and was informed that there was no such person in its employ. Further verification
revealed that Cruz had no more account or deposit with the Philippine Amanah Bank, against
which he had drawn the payment check. 7 EDCA then went to the police, which set a trap and
arrested Cruz on October 7, 1981. Investigation disclosed his real name as Tomas de la Peña and
his sale of 120 of the books he had ordered from EDCAto the private respondents. 8
On the night of the same date, EDCA sought the assistance of the police in Precinct 5 at the UN
Avenue, which forced their way into the store of the private respondents and threatened
warrant, loading them in a van belonging to EDCA, and thereafter turned them over to the
petitioner. 9
Protesting this high-handed action, the private respondents sued for recovery of the books after
demand for their return was rejected by EDCA. A writ of preliminary attachment was issued and
the petitioner, after initial refusal, finally surrendered the books to the private respondents. 10 As
previously stated, the petitioner was successively rebuffed in the three courts below and now
hopes to secure relief from us.
To begin with, the Court expresses its disapproval of the arbitrary action of the petitioner in
taking the law into its own hands and forcibly recovering the disputed books from the private
respondents. The circumstance that it did so with the assistance of the police, which should have
been the first to uphold legal and peaceful processes, has compounded the wrong even more
deplorably. Questions like the one at bar are decided not by policemen but by judges and with
the use not of brute force but of lawful writs.
Now to the merits.
It is the contention of the petitioner that the private respondents have not established their
ownership of the disputed books because they have not even produced a receipt to prove they
had bought the stock. This is unacceptable. Precisely, the first sentence of Article 559 provides
that "the possession of movable property acquired in good faith is equivalent to a title," thus
dispensing with further proof.
The argument that the private respondents did not acquire the books in good faith has been
dismissed by the lower courts, and we agree. Leonor Santos first ascertained the ownership of
the books from the EDCA invoice showing that they had been sold to Cruz, who said he was
selling them for a discount because he was in financial need. Private respondents are in the
business of buying and selling books and often deal with hard-up sellers who urgently have to
part with their books at reduced prices. To Leonor Santos, Cruz must have been only one of the
many such sellers she was accustomed to dealing with. It is hardly bad faith for any one in the
business of buying and selling books to buy them at a discount and resell them for a profit.
But the real issue here is whether the petitioner has been unlawfully deprived of the books
because the check issued by the impostor in payment therefor was dishonored.
In its extended memorandum, EDCA cites numerous cases holding that the owner who has been
unlawfully deprived of personal property is entitled to its recovery except only where the
property was purchased at a public sale, in which event its return is subject to reimbursement of
the purchase price. The petitioner is begging the question. It is putting the cart before the horse.
Unlike in the cases invoked, it has yet to be established in the case at bar that EDCAhas been
unlawfully deprived of the books.
1
The petitioner argues that it was, because the impostor acquired no title to the books that he
could have validly transferred to the private respondents. Its reason is that as the payment check
bounced for lack of funds, there was a failure of consideration that nullified the contract of sale
between it and Cruz.
The contract of sale is consensual and is perfected once agreement is reached between the
parties on the subject matter and the consideration. According to the Civil Code:
ART. 1475. The contract of sale is perfected at the moment there is a meeting of
minds upon the thing which is the object of the contract and upon the price.
From that moment, the parties may reciprocally demand performance, subject to
the provisions of the law governing the form of contracts.
ART. 1477. The owner ship of the thing sold shall be transferred to the vendee
upon the actual or constructive delivery thereof.
ART. 1478. The parties may stipulate that ownership in the thing shall not pass to
the purchaser until he has fully paid the price.
It is clear from the above provisions, particularly the last one quoted, that ownership in the thing
sold shall not pass to the buyer until full payment of the purchase price only if there is a
stipulation to that effect. Otherwise, the rule is that such ownership shall pass from the vendor to
the vendee upon the actual or constructive delivery of the thing sold even if the purchase price
has not yet been paid.
Non-payment only creates a right to demand payment or to rescind the contract, or to criminal
prosecution in the case of bouncing checks. But absent the stipulation above noted, delivery of
the thing sold will effectively transfer ownership to the buyer who can in turn transfer it to
another.
In Asiatic Commercial Corporation v. Ang, 11 the plaintiff sold some cosmetics to Francisco
Ang, who in turn sold them to Tan Sit Bin. Asiatic not having been paid by Ang, it sued for the
recovery of the articles from Tan, who claimed he had validly bought them from Ang, paying
for the same in cash. Finding that there was no conspiracy between Tan and Ang to deceive
Asiatic, the Court of Appeals declared:
Yet the defendant invoked Article 464 12 of the Civil Code providing, among other
things that "one who has been unlawfully deprived of personal property may
recover it from any person possessing it." We do not believe that the plaintiff has
been unlawfully deprived of the cartons of Gloco Tonic within the scope of this
legal provision. It has voluntarily parted with them pursuant to a contract of
purchase and sale. The circumstance that the price was not subsequently paid did
not render illegal a transaction which was valid and legal at the beginning.
In Tagatac v. Jimenez, 13 the plaintiff sold her car to Feist, who sold it to Sanchez, who sold it
to Jimenez. When the payment check issued to Tagatac by Feist was dishonored, the plaintiff
sued to recover the vehicle from Jimenez on the ground that she had been unlawfully deprived
of it by reason of Feist's deception. In ruling for Jimenez, the Court of Appeals held:
The point of inquiry is whether plaintiff-appellant Trinidad C. Tagatac has
been unlawfully deprived of her car. At first blush, it would seem that she was
unlawfully deprived thereof, considering that she was induced to part with it by
reason of the chicanery practiced on her by Warner L. Feist. Certainly, swindling,
like robbery, is an illegal method of deprivation of property. In a manner of
speaking, plaintiff-appellant was "illegally deprived" of her car, for the way by
which Warner L. Feist induced her to part with it is illegal and is punished by law.
But does this "unlawful deprivation" come within the scope of Article 559 of the
New Civil Code?
. . . The fraud and deceit practiced by Warner L. Feist earmarks this sale as a
voidable contract (Article 1390 N.C.C.). Being a voidable contract, it is susceptible
of either ratification or annulment. If the contract is ratified, the action to annul it is
extinguished (Article 1392, N.C.C.) and the contract is cleansed from all its defects
(Article 1396, N.C.C.); if the contract is annulled, the contracting parties are
restored to their respective situations before the contract and mutual restitution
follows as a consequence (Article 1398, N.C.C.).
However, as long as no action is taken by the party entitled, either that of
annulment or of ratification, the contract of sale remains valid and binding. When
plaintiff-appellant Trinidad C. Tagatac delivered the car to Feist by virtue of said
voidable contract of sale, the title to the car passed to Feist. Of course, the title that
Feist acquired was defective and voidable. Nevertheless, at the time he sold the car
to Felix Sanchez, his title thereto had not been avoided and he therefore conferred a
good title on the latter, provided he bought the car in good faith, for value and
without notice of the defect in Feist's title (Article 1506, N.C.C.). There being no
proof on record that Felix Sanchez acted in bad faith, it is safe to assume that he
acted in good faith.
The above rulings are sound doctrine and reflect our own interpretation of Article 559 as applied
to the case before us.
Actual delivery of the books having been made, Cruz acquired ownership over the books which
he could then validly transfer to the private respondents. The fact that he had not yet paid for
them to EDCA was a matter between him and EDCA and did not impair the title acquired by the
private respondents to the books.
One may well imagine the adverse consequences if the phrase "unlawfully deprived" were to be
interpreted in the manner suggested by the petitioner. A person relying on the seller's title who
buys a movable property from him would have to surrender it to another person claiming to be
2
the original owner who had not yet been paid the purchase price therefor. The buyer in the
second sale would be left holding the bag, so to speak, and would be compelled to return the
thing bought by him in good faith without even the right to reimbursement of the amount he had
paid for it.
It bears repeating that in the case before us, Leonor Santos took care to ascertain first that the
books belonged to Cruz before she agreed to purchase them. The EDCA invoice Cruz showed
her assured her that the books had been paid for on delivery. By contrast, EDCA was less than
cautious — in fact, too trusting — in dealing with the impostor. Although it had never transacted
with him before, it readily delivered the books he had ordered (by telephone) and as readily
accepted his personal check in payment. It did not verify his identity although it was easy
enough to do this. It did not wait to clear the check of this unknown drawer. Worse, it indicated
in the sales invoice issued to him, by the printed terms thereon, that the books had been paid for
on delivery, thereby vesting ownership in the buyer.
Surely, the private respondent did not have to go beyond that invoice to satisfy herself that the
books being offered for sale by Cruz belonged to him; yet she did. Although the title of Cruz
was presumed under Article 559 by his mere possession of the books, these being movable
property, Leonor Santosnevertheless demanded more proof before deciding to buy them.
It would certainly be unfair now to make the private respondents bear the prejudice sustained
by EDCA as a result of its own negligence. We cannot see the justice in transferring EDCA's
loss to the Santoses who had acted in good faith, and with proper care, when they bought the
books from Cruz.
While we sympathize with the petitioner for its plight, it is clear that its remedy is not against the
private respondents but against Tomas de la Peña, who has apparently caused all this trouble.
The private respondents have themselves been unduly inconvenienced, and for merely
transacting a customary deal not really unusual in their kind of business. It is they and
not EDCA who have a right to complain.
WHEREFORE, the challenged decision is AFFIRMED and the petition is DENIED, with costs
against the petitioner.
[G.R. No. L-20264. January 30, 1971.]
CONSUELO S. DE GARCIA and ANASTACIO GARCIA, petitioners, vs. HON.
COURT OF APPEALS, ANGELINA D. GUEVARA and JUAN B.
GUEVARA, respondents.
This petition for certiorari to review a decision of respondent Court of Appeals was
given due course because it was therein vigorously asserted that legal questions of gravity and
of moment, there being allegations of an unwarranted departure from and a patent misreading
of applicable and controlling decisions, called for determination by this Tribunal. The brief
for petitioners-spouses, however, failed to substantiate such imputed failings of respondent
Court. The performance did not live up to the promise. On the basis of the facts as duly found
by respondent Court, which we are not at liberty to disregard, and the governing legal
provisions, there is no basis for reversal. We affirm.
The nature of the case presented before the lower court by private respondent Angelina D.
Guevara, assisted by her spouse, Juan B. Guevara, as plaintiffs, was noted in the decision of
respondent Court of Appeals thus: "Plaintiff seeks recovery of 'one (1) lady's diamond ring 18
cts. white gold mounting, with one (1) 2.05 cts. diamond-solitaire, and four (4) brills 0.10 cts.
total weight' which she bought on October 27, 1947 from R. Rebullida, Inc." 1 Then came a
summary of now respondent Guevara of her evidence: "Plaintiff's evidence tends to show that
around October 11, 1953 plaintiff while talking to Consuelo S. de Garcia, owner of La Bulakeña
restaurant recognized her ring in the finger of Mrs. Garcia and inquired where she bought it,
which the defendant answered from hercomadre. Plaintiff explained that that ring was stolen
from her house in February, 1952. Defendant handed the ring to plaintiff and it fitted her finger.
Two or three days later, at the request of plaintiff, plaintiff, her husband Lt. Col. Juan Guevara,
Lt. Cementina of Pasay PD, defendant and her attorney proceeded to the store of Mr. Rebullida
to whom they showed the ring in question. Mr. Rebullida examined the ring with the aid of high
power lens and after consulting the stock card thereon, concluded that it was the very ring that
plaintiff bought from him in 1947. The ring was returned to defendant who despite a written
request therefor failed to deliver the ring to plaintiff. Hence, this case. Later on when the sheriff
tried to serve the writ of seizure (replevin), defendant refused to deliver the ring which had been
examined by Mr. Rebullida, claiming it was lost." 2
How the defendant, Consuelo S. de Garcia, the present petitioner before us, along with her
husband Anastacio Garcia, sought to meet plaintiff's claim was narrated thus: "On the other
hand, defendant denied having made any admission before plaintiff or Mr. Rebullida or the
sheriff. Her evidence tends to show that the ring (Exhibit 1) was purchased by her from Mrs.
Miranda who got it from Miss Angelita Hinahon who in turn got it from the owner. Aling
Petring, who was hoarding in her house; that the ring she bought could be similar to, but not the
same ring plaintiff purchased from Mr. Rebullida which was stolen; that according to a pawn-
shop owner the big diamond on Exhibit 1 was before the trial never dismantled. When
dismantled, defendant's diamond was found to weigh 2.57 cts." 3
Plaintiff lost in the lower court. She elevated the matter to respondent Court of Appeals with the
judgment of the lower court being reversed. It is this decision now under review.
These are the facts as found by respondent Court of Appeals: "That the ring brought by the
parties for examination by Rafael Rebullida on December 14, 1958 was the same ring purchased
by plaintiff from B. Rebullida, Inc. on October 27, 1947 and stolen in February, 1962 has been
abundantly established by plaintiff's evidence. Before plaintiff lost the ring, she had been
wearing it for six years and became familiar with it. Thus, when she saw the missing ring in the
finger of defendant, she readily and definitely identified it. Her identification was confirmed by
3
Mr. Rafael Rebullida, whose candid testimony is entitled to great weight, with his 30 years
experience behind him in the jewelry business and being a disinterested witness since both
parties are his customers. Indeed, defendant made no comment when in her presence Rebullida
alter examining the ring and stock card told plaintiff that that was her ring, nor did she answer
plaintiff's letter of demand, . . . asserting ownership. Further confirmation may be found in the
extra-judicial admissions, contained in defendant's original and first amended answers . . ." 4
These further facts likewise appear therein: "The foregoing proof is not counter-balanced by the
denial on the part of defendant or the presentation of the ring, Exhibit I, which has a diamond-
solitaire weighing 2.57 cts., or much heavier than the lost diamond weighing 2.05 cts. only. It is
noteworthy that defendant gave a rather dubious source of her ring. Aling Petring from whom
the ring supposedly came turned out to be a mysterious and ephemeral figure. Miss Hinahon did
not ever know her true and full name, nor her forwarding address. She appeared from nowhere,
boarded three months in the house of Miss Hinahon long enough to sell her diamond ring,
disappearing from the scene a week thereafter. Indeed, the case was terminated without any
hearing the third-party and fourth-party complaints, which would have shown up the falsity of
defendant's theory. Moreover, Mrs. Baldomera Miranda, third-party defendant, who tried to
corroborate defendant on the latter's allege attempt to exchange the ring defendant bought
through is [belied] by her judicial admission in her Answer that appellee 'suggested that she
would make alterations to the mounting and structural design of the ring to hide the true identity
and appearance of the original one' (Cunanan vs. Amparo, 45 O.G. 3796). Finally, defendant is
refuted by her own extra-judicial admissions . . . although made by defendant's counsel. For an
attorney who acts as counsel of record and is permitted to act such, has the authority to manage
the cause, and this includes the authority to make admission for the purpose of the litigation. . . .
Her proffered explanation that her counsel misunderstood her is puerile because the liability to
error as to the identity of the vendor and the exchange of the ring with another ring of the same
value was rather remote." 5
It is in the light of the above facts as well as the finding that the discrepancy as to the weight
between the diamond-solitaire in Exhibit I and the lost diamond was due to defendant having
"substituted a diamond-solitaire of plaintiff with a heavier stone" that the decision was rendered,
respondent Court reversing the lower court and ordering defendant, now petitioner Consuelo S.
de Garcia, to return plaintiff's ring or fact value of P1,000.00 and costs, as well as to pay
plaintiff P1,000.00 as attorney's fee and P1,000.00 as exemplary damages. Hence this appeal.
To repeat, there is no occasion to reverse respondent Court. It correctly applied the law to the
facts as found.
1. The controlling provision is Article 559 of the Civil Code. It reads thus: "The possession of
movable property acquired in good faith is equivalent to a title. Nevertheless, one who has lost
any movable or has been unlawfully deprived thereof may recover it from the person in
possession of the same. If the possessor of a movable lost of which the owner has been
unlawfully deprived, has acquired it in good faith at a public sale, the owner cannot obtain its
return without reimbursing the price paid therefor." Respondent Angelina D. Guevara, having
been unlawfully deprived of the diamond ring in question, was entitled to recover it from
petitioner Consuelo S. de Garcia who was found in possession of the same. The only exception
the law allows is when there is acquisition in good faith of the possessor at a public sale, in
which case the owner cannot obtain its return without reimbursing the price. As authoritatively
interpreted in Cruz v. Pahati, 6 the right of the owner cannot be defeated even by proof that there
was good faith in the acquisition by the possessor. There is a reiteration of this principle in
Aznar v. Yapdiangco. 7 Thus: "Suffice it to say in this regard that the right of the owner to
recover personal property acquired in good faith by another, is based on his being dispossessed
without his consent. The common law principle that where one of two innocent persons must
suffer by a fraud perpetrated by another, the law imposes the loss upon the party who, by his
misplaced confidence, has enabled the fraud to be committed, cannot be applied in a case which
is covered by an express provision of the new Civil Code, specifically Article 559. Between a
common law principle and a statutory provision, the latter must prevail in this jurisdiction." 8
2. It is thus immediately apparent that there is no merit to the contention raised in the first
assigned error that her possession in good faith, equivalent to title, sufficed to defeat respondent
Guevara's claim. As the above cases demonstrate, even on that assumption the owner can
recover the same once she can show illegal deprivation. Respondent Court of Appeals was so
convinced from the evidence submitted that the owner of the ring in litigation is such
respondent. That is a factual determination to which we must pay heed. Instead of proving any
alleged departure from legal norms by respondent Court, petitioner would stress Article 541 of
the Civil Code, which provides: 'A possessor in the concept of owner has in his favor the legal
presumption that he possesses with a just title and he cannot be obliged to show or prove it." She
would accord to it a greater legal significance than that to which under the controlling doctrines
it is entitled. The brief for respondents did clearly point out why petitioner's assertion is lacking
in support not only from the cases but even from commentators. Thus: "Actually, even under the
first clause, possession in good faith does not really amount to title, for the reason that Art. 1132
of the Code provides for a period of acquisitive prescription for movables through 'uninterrupted
possession for four years in good faith' (Art. 1955 of the old Spanish Code, which provided a
period of three years), so that many Spanish writers, including Manresa, Sanchez Roman,
Scaevola, De Buen, and Ramos, assert that under Art. 464 of the Spanish Code (Art. 559 of the
New Civil Code), the title of the possessor in good faith is not that of ownership, but is merely a
presumptive title sufficient to serve as a basis for acquisitive prescription (II Tolentino, Civil
Code of the Phil., p. 258: IV Manresa, Derecho Civil Español, 6th Ed., p. 380). And it is for the
very reason that the title established by the first clause of Art. 559 is only a presumptive title
sufficient to serve as a basis for acquisitive prescription, that the clause immediately following
provides that 'one who has lost any movable or has been unlawfully deprived thereof, may
recover it from the person in possession of the same.' As stated by the Honorable Justice Jose B.
L. Reyes of this Court in Sotto vs. Enage (C.A.), 43 Off. Gaz. 5075, Dec. 1947: 'Article 559 in
fact assumes that possessor is as yet not the owner; for it is obvious that where the possessor has
come to acquire indefeasible title by, let us say, adverse possession for the necessary period, no
proof of loss or illegal deprivation could avail the former owner of the chattel. He would no
longer be entitled to recover it under any condition.'
4
The second assigned error is centered on the alleged failure to prove the identity of the diamond
ring. Clearly the question raised is one of fact. What the Court of Appeals found is conclusive.
Again, petitioner could not demonstrate that in reaching such a conclusion the Court of Appeals
acted in an arbitrary manner. As made mention of in the brief for respondents two disinterested
witnesses, Mr. Rafael Rebullida as well as Lt. Reynaldo Cementina of the Pasay City Police
Department, both of whom could not be accused of being biased in favor of respondent
Angelina D. Guevara, did testify as to the identity of the ring.
The third assigned error of petitioners would find fault with respondent Court relying "on the
weakness of the title or evidence" of petitioner Consuelo S. de Garcia. It is true, in the decision
under review, mention was made of petitioner Consuelo S. de Garcia making no comment when
in her presence Rebullida, after examining the ring and the stock card, told respondent Angelina
D. Guevara that that was her ring, nor did petitioner answer a letter of the latter asserting
ownership. It was likewise stated in such decision that there were extra-judicial admissions in
the original and first amended answers of petitioner. In the appraisal of her testimony,
respondent Court likewise spoke of her giving a rather dubious source of her ring the person
from whom she allegedly bought it turning out "to be a mysterious and ephemeral figure." As a
matter of fact, as set forth a few pages back, respondent Court did enumerate the flaws in the
version given by petitioner. From the weakness of the testimony offered which, as thus made
clear, petitioner, did not even seek to refute, she would raise the legal question that respondent
Court relied on the "weakness of [her] title or evidence" rather than on the proof justifying
respondent Angelina D. Guevara's claim of ownership. Petition here would ignore the finding of
fact of respondent Court that such ownership on her part "has been abundantly established" by
her evidence. Again here, in essence, the question raised is one of fact, and there is no
justification for us to reserve respondent Court.
The legal question raised in the fourth assignment of error is that the matter of the substitution of
the diamond on the ring was a question raised for the first time on appeal as it was never put in
issue by the pleadings nor the subject of reception of evidence by both parties and not touched
upon in the decision of the lower court. Why no such question could be raised in the pleadings
of respondent Angelina D. Guevara was clarified by the fact that the substitution came after it
was brought for examination to Mr. Rebullida. After the knowledge of such substitution was
gained, however, the issue was raised at the trial according to the said respondent resulting in
that portion of the decision where the lower court reached a negative conclusion. As a result, in
the motion for reconsideration, one of the points raised as to such decision being contrary to the
evidence is the finding that there was no substitution. It is not necessary to state that respondent
Court, exercising its appellate power reversed the lower court. What was held by it is
controlling. What is clear is that there is no factual basis for the legal arguments on which the
fourth assigned error is predicated.
What is said takes care of the fifth assigned error that respondent Court was mistaken in its
finding that there was such a substitution. Again petitioner would have us pass on a question of
credibility which is left to respondent Court of Appeals, The sixth assigned error would
complain against the reversal of the lower court judgment as well as petitioner Consuelo S. de
Garcia being made to pay respondent Angelina D. Guevara exemplary damages, attorney's fees
and costs. The reversal is called for in the light of the appraisal of the evidence of record as
meticulously weighed by respondent Court. As to the attorney's fees and exemplary damages,
this is what respondent Court said in the decision under review: "Likewise, plaintiff is entitled to
recover reasonable attorney's fees in the sum of P1,000, it being just and equitable under the
circumstances, and another P1,000 as exemplary damages for the public good to discourage
litigants from resorting to fraudulent devices to frustrate the ends of justice, as defendant herein
tried to substitute the ring, Exhibit 1, for plaintiff's ring." 10Considering the circumstances, the
cursory discussion of the sixth assigned error on the matter by petitioner fails to demonstrate that
respondent Court's actuation is blemished by legal defects.
WHEREFORE, the decision of respondent Court of Appeals of August 6, 1962 is hereby
affirmed. With costs.
[G.R. No. L-30817. September 29, 1972.]
DOMINADOR DIZON, doing business under the firm name "Pawnshop of
Dominador Dizon", petitioner, vs. LOURDES G. SUNTAY,respondent.
In essence there is nothing novel in this petition for review of a decision of the Court of Appeals
affirming a lower court judgment sustaining the right of an owner of a diamond ring, respondent
Lourdes G. Suntay, as against the claim of petitioner Dominador Dizon, who owns and operates
a pawnshop. The diamond ring was turned over to a certain Clarita R. Sison, for sale on
commission, along with other pieces of jewelry of respondent Suntay. It was then pledged to
petitioner. Since what was done was violative of the terms of the agency, there was an attempt
on her part to recover possession thereof from petitioner, who refused. She had to file an action
then for its recovery. She was successful, as noted above, both in the lower court and thereafter
in the Court of Appeals. She prevailed as she had in her favor the protection accorded by
Articles 559 of the Civil Code. 1 The matter was then elevated to us by the petitioner.
Ordinarily, our discretion would have been exercised against giving due course to such petition
for review. The vigorous plea however, grounded on estoppel, by his counsel, Atty. Andres T.
Velarde, persuaded us to act otherwise. After a careful perusal of the respective contentions of
the parties, we fail to perceive any sufficient justification for a departure from the literal
language of the applicable codal provision as uniformly interpreted by this Court in a number of
decisions. The invocation of estoppel is therefore unavailing. We affirm.
The statement of the case as well as the controlling facts may be found in the Court of Appeals
decision penned by Justice Perez. Thus: "Plaintiff is the owner of a three-carat diamond ring
valued at P5,500.00. On June 13, 1962, the plaintiff and Clarita R. Sison entered into a
transaction wherein the plaintiff's ring was delivered to Clarita R. Sison for sale on commission.
Upon receiving the ring, Clarita R. Sison executed and delivered to the plaintiff the receipt . . .
The plaintiff had already previously known Clarita R. Sison as the latter is a close friend of the
5
plaintiff's cousin and they had frequently met each other at the place of the plaintiff's said
cousin. In fact, about one year before their transaction of June 13, 1962 took place, Clarita R.
Sison received a piece of jewelry from the plaintiff to be sold for P500.00, and when it was sold,
Clarita R. Sison gave the price to the plaintiff the latter's ring, the plaintiff made demands on
Clarita R. Sison for the return of her ring but the latter could not comply with the demands
because, without the knowledge of the plaintiff, on June 15, 1962 or three days after the ring
above-mentioned was received by Clarita R. Sison from the plaintiff, said ring was pledge by
Melia Sison, niece of the husband of Clarita R. Sison, evidently in connivance with the latter,
with the defendant's pawnshop for P2,600.00 . . ." 2 Then came this portion of the decision
under review: "Since the plaintiff insistently demanded from Clarita R. Sison the return of her
ring, the latter finally delivered to the former the pawnshop ticket . . . which is the receipt of the
pledge, with the defendant's pawnshop of the plaintiff's ring. When the plaintiff found out that
Clarita R. Sison pledged, she took steps to file a case of estafa against the latter with the fiscal's
office. Subsequently thereafter, the plaintiff, through her lawyer, wrote a letter . . . date
September 22, 1962, to the defendant asking for the delivery to the plaintiff of her ring pledged
with defendant's pawnshop under pawnshop receipt serial-B No. 65606, dated June 15, 1962 . . .
Since the defendant refused to return the ring, the plaintiff filed the present action with the Court
of First Instance of Manila for the recovery of said ring, with P500.00 as attorney's fees and
costs. The plaintiff asked for the provisional remedy of replevin by the delivery of the ring to
her, upon her filing the requisite bond, pending the final determination of the action. The lower
court issued the writ of replevin prayed for by plaintiff and the latter was able to take possession
of the ring during the pendency of the action upon her filing the requisite bond." 3 It was then
noted that the lower court rendered judgment declaring that plaintiff, now respondent Suntay,
had the right to the possession, of the ring in question. Petitioner Dizon, as defendant, sought to
have the judgment reversed by the Court of Appeals. It did him no good. The decision of May
19, 1969, now on review, affirmed the decision of the lower court.
In the light of the facts as thus found by the Court of Appeals, well-nigh conclusive on use , with
the applicable law being what it is, this petition for review cannot prosper. To repeat, the
decision of the Court of Appeals stands.
1. There is a fairly recent restatement of the force and affect of the governing codal norm in De
Gracia v. Court of Appeals. 4 Thus: "The controlling provision is Article 559 of the Civil
Code.It reads thus: "The possession of movable property acquired in good faith is equivalent to a
title. Nevertheless, one who has lost any movable or has been unlawfully deprived thereof may
recover it from the person in possession of the same. If the possessor of a movable lost of which
the owner has been unlawfully deprived, has acquired nit in good faith at a public sale, the
owner cannot obtain its return without reimbursing the price paid therefor.' Respondent
Angelina D. Guevarra, having been unlawfully deprived of the diamond ring in question, was
entitled to recover it from petitioner Consuelo S. de Gracia who was found in possession of the
same. The only exception the law allows is when there is acquisition in faith of the possessor at
a public sale, in which case the owner cannot obtain its return without reimbursing the price. As
authoritatively interpreted in Cruz v. Pahati, the right of the owner cannot be defeated even by
proof that there was good faith in the acquisition by the possessor. There is a reiteration of this
principle in Azinar v. Yapdiangco. Thus: 'Suffice it to say in this regard that the right of the
owner to recover personal property acquired in good faith by another, is based on his being
dispossessed without his consent. The common law principle that were one of two innocent
persons must suffer by a fraud perpetrated by another, the law imposes the loss upon the party
who, by his misplaced confidence,, has enabled the fraud to be committed, cannot be applied in
a case which is covered by an express provision of the new Civil Code, specifically Article 559.
Between a common law principle and a statutory provision, the latter must prevail in this
jurisdiction.'"
2. It must have been a recognition of the compulsion exerted by the above authoritative
precedents that must have caused petitioner to invoke the principle of estoppel. There is clearly a
misapprehension. Such a contention is devoid of any persuasive force.
Estoppel as known to the Rules of Court 6 and prior to that to the Court of Civil
Procedure, 7 has its roots in equity. Good faith is its basis. 8 It is a response to the demands of
moral right and natural justice. 9 For estoppel to exist though, it is indispensable that there be a
declaration, act or omission by the party who is sought to be bound. Nor is this all. It is equally a
requisite that he, who would claim the benefits of such a principle, must have altered his
position, having been so intentionally and deliberately led to comport himself thus, by what was
declared or what was done or failed to be done. If thereafter a litigation arises, the former would
not be allowed to disown such act, declaration or omission. The principle comes into full play. It
may successfully be relied upon. A court is to see to it then that there is no turning back on one's
word or a repudiation of one's act. So it has been from our earliest decisions. As Justice Mapa
pointed out in the first case, a 1905 decision, Rodriguez v. Martinez, 10 a party should not be
permitted "to go against his own acts to the prejudice of[another]. Such a holding would be
contrary to the most rudimentary principles of justice and law." 11 He is not, in the language of
Justice Torres, in Irlandav. Pitargue, promulgated in 1912 "allowed to gainstay [his] own acts or
deny rights which [he had] previously recognized." 13 Some of the later cases are to the effect
that an unqualified and unconditional acceptance of an agreement forecloses a claim for interest
not therein provided. 14 Equally so the circumstances that about a month after the date of the
conveyance, one of the parties informed the other of his being a minor, according to Chief
Justice Paras, "is of no moment had already estopped him from disavowing the contract." 15 It is
easily understandable why, under the circumstances disclosed, estoppel is a frail reed to hang on
to. There was clearly the absence of an act or omission, as a result of which a position had been
assumed by petitioner, who if such elements were not lacking, could not thereafter in law be
prejudiced by his relief in what had been misrepresented to him. 16 As was put by Justice
Labrador, "a person claimed to be estopped must have knowledge of the fact that his voluntary
acts would deprive him of some rights because said voluntary acts are inconsistent with said
rights. 17 To recapitulate, there is this pronouncement not so long ago, from the pen of Justice
Makalintal, who reaffirmed that estoppel "has its origin in equity and, being based on moral
right and natural whenever the special circumstances of a case so demand.”
How then can petitioner in all seriousness assert that his appeal finds support in the doctrine of
estoppel? Neither the prompting of equity not the mandates of moral right and natural justice
6
come to his rescue. He is engaged in a business where presumably ordinary prudence would
manifest itself to ascertain whether or not an individual who is offering a jewelry by way of a
pledge is entitled to do so. If no such care be taken, perhaps because of the difficulty of resisting
opportunity for profit, he should be the last to complain if thereafter the right of the true owner
of such jewelry should be recognized. The law for this sound reason accords the latter
protection. So it has always been since Varela v. Finnick, 19 a 1907 decision. According to
Justice Torres: "In the present case not only has the ownership and the origin of the jewels
misappropriated been unquestionably proven but also that the accused, acting fraudulently and
in bad faith,, disposed of them and pledged them contrary to agreement, with no right of
ownership, and to the prejudice of the injured party, who was thereby illegally deprived of said
jewels; therefore, in accordance with the provisions of article 464, the owner has an absolute
right to recover the jewel the jewels from the possession of whosoever holds them, . .
." 20 There have been many other decisions to the same effect since then. At least nine may be
cited.21 Nor could any other outcome be expected, considering the civil code provisions both in
the former Spanish legislation 22 and in the present Code. 23Petitioner ought to have been on
his guard before accepting the pledge in question. Evidently there was no such precaution
availed of. He therefore, has only himself to blame for the fix he is now. It would be to stretch
the concept of estoppel to the breaking point if his contention were to prevail. Moreover, there
should have been a realization on his part that courts are not likely to be impressed with a cry of
distress authorized to impose a higher rate of interest precisely due to the greater risk assumed
by him. A predicament of this nature then does not suffice to call for less than undeviating
adherence to the literal terms of a codal provision. Moreover, while the activity he is engaged in
is no doubt legal, it is not to be lost sight of that it thrives on taking advantage of the necessities
precisely of that element of our population whose lives are blighted by extreme poverty. From
whatever angle the question is viewed then, estoppel certainly cannot be justly invoked.
WHEREFORE, the decision of the Court of Appeals of May 19, 1969 is affirmed, with cost
against petitioner.
[G.R. No. 86051. September 1, 1992.]
JAIME LEDESMA, petitioner, vs. THE
HONORABLE COURT OF APPEALS and CITIWIDE MOTORS,
INC., respondents.
Petitioner impugns the Decision of 22 September 1988 of respondent Court of Appeals 1 in
C.A.-G.R. CV No. 05955 2 reversing the decision of then Branch XVIII-B (Quezon City) of the
then Court of First Instance (now Regional Trial Court) of Rizal in a replevin case, Civil Case
No. Q-24200, the dispositive portion ofwhich reads:
"Accordingly, the Court orders the plaintiff to return the repossessed
Isuzu Gemini, 1977 Model vehicle, subject of this case to the
defendant Ledesma. The incidental claim (sic) for damages professed by
the plaintiff are dismissed for lack of merit. On defendant's
counterclaim, Court (sic) makes no pronouncement as to any
form of damages, particularly, moral, exemplary and nominal in
view of the fact that Citiwide has a perfect right to litigate its claim, albeit
by this pronouncement, it did not succeed." 3
which was supplemented by a Final Order dated 26 June 1980, the dispositive
portion of which reads:
"IN VIEW OF THE FOREGOING, the Court grants
defendant Ledesma the sum of P35,000.00 by way of actual damages
recoverable upon plaintiff's replevin bond. Plaintiff and its surety, the
Rizal Surety and Insurance Co., are hereby ordered jointly and severally
to pay defendant Jaime Ledesma the sum ofP10,000.00 as damages for
the wrongful issue of the writ of seizure, in line with Rule 57, Sec. 20,
incorporated in Rule 60, Sec. 10.
In conformity with the rules adverted to, this final order shall form
part of the judgment of this Court on September 5, 1979.
The motion for reconsideration of the judgment filed by the plaintiff is
hereby DENIED for lack of merit. No costs at this instance." 4
The decision of the trial court is anchored on its findings that (a) the proof on record is not
persuasive enough to show that defendant, petitioner herein, knew that the vehicle in question
was the object of a fraud and a swindle 5 and (b) that plaintiff, private respondent herein, did not
rebut or contradictLedesma's evidence that valuable consideration was paid for it.
The antecedent facts as summarized by the respondent Court of Appeals are as follows:
"On September 27, 1977, a person representing himself to be Jojo
Consunji, purchased purportedly for his father, a certain Rustico T.
Consunji, two (2) brand new motor vehicles from plaintiff-appellant
Citiwide Motors, Inc., more particularly described as follows: llcd
a) One (1) 1977 Isuzu Gemini, 2-door Model PF
50ZIK, with Engine No. 751214 valued at P42,200.00; and
b) One (1) 1977 Holden Premier Model 8V41X with
Engine No. 198-1251493, valued at P58,800.00.
Said purchases are evidenced by Invoices Nos. 3054 and 3055,
respectively. (See Annexes A and B).
7
 On September 28, 1977, plaintiff-appellant delivered the two-above
described motor vehicles to the person who represented himself as Jojo
Consunji, allegedly the son of the purported buyers Rustico T. Consunji,
and said person in turn issued to plaintiff-appellant Manager's Check No.
066-110-0638 of the Philippine Commercial and Industrial Bank dated
September 28, 1977 for the amount of P101,000.00 as full payment of the
value of the two (2) motor vehicles.
However, when plaintiff-appellant deposited the said check, it was
dishonored by the bank on the ground that it was tampered with, the
correct amount ofP101.00 having been raised to P101,000.00 per the
bank's notice of dishonor (Annexes F and G).
On September 30, 1977, plaintiff-appellant reported to the Philippine
Constabulary the criminal act perpetrated by the person who
misrepresented himself as Jojo Consunji and in the course of the
investigation, plaintiff-appellant learned that the real identity of the
wrongdoer/impostor is Armando Suarez who has a long line of criminal
cases against him for estafa using this similar modus operandi.
On October 17, 1977, plaintiff-appellant was able to recover the Holden
Premier vehicle which was found abandoned somewhere in Quezon City.
On the other hand, plaintiff-appellant learned that the 1977 Isuzu Gemini
was transferred by Armando Suarez to third persons and was in the
possession ofone Jaime Ledesma at the time plaintiff-appellant instituted
this action for replevin on November 16, 1977.
In his defense, Jaime Ledesma claims that he purchases (sic) and paid for
the subject vehicle in good faith from its registered owner, one Pedro
Neyra, as evidenced by the Land Transportation Commission Registration
Certificate No. RCO1427249.
After posting the necessary bond in the amount double the value of the
subject motor vehicle, plaintiff-appellant was able to recover
possession of the 1977 Isuzu Gemini as evidenced by the Sheriff's Return
dated January 23, 1978." 6
After trial on the merits, the lower court rendered the decision and subsequently issued the Final
Order both earlier adverted to, which plaintiff (private respondent herein) appealed to the
respondent Court of Appeals; it submitted the following assignment of errors:
"The trial court erred.
I
IN HOLDING THAT THE DEFENDANT IS ENTITLED TO THE
POSSESSION OF THE CAR;
II
IN HOLDING THAT THE DEFENDANT IS AN INNOCENT
PURCHASER IN GOOD FAITH AND FOR VALUE;
III
IN RULING THAT THE PLAINTIFF SHOULD RETURN THE CAR
TO DEFENDANT, DISMISSING ITS CLAIM FOR DAMAGES, AND
GRANTING DEFENDANT P35,000.00 DAMAGES RECOVERABLE
AGAINST THE REPLEVIN BOND AND P101,000.00 DAMAGES
FOR ALLEGED WRONGFUL SEIZURE;
IV
IN RENDERING THE DECISION DATED SEPTEMBER 3, 1979 AND
THE FINAL ORDER DATED JUNE 26, 1980." 7
In support of its first and second assigned errors, private respondent cites Article 559 of the Civil
Code which provides:
"ARTICLE 559. The possession of movable property acquired in good
faith is equivalent to a title. Nevertheless, one who has lost any movable
or has been unlawfully deprived thereof, may recover it from the person
in possession of the same.
If the possessor of a movable lost or of which the owner has been
unlawfully deprived, has acquired it in good faith at a public sale, the
owner cannot obtain its return without reimbursing the price paid
therefor."
Without in any way reversing the findings of the trial court that herein petitioner was a
buyer in good faith and for valuable consideration, the respondentCourt ruled that:
"'Under Article 559, Civil Code, the rule is to the effect that if the owner
has lost a thing, or if he has been unlawfully deprived of it, he has a right
to recover it not only from the finder, thief or robber, but also from third
persons who may have acquired it in good faith from such finder, thief or
robber. The said article establishes two (2) exceptions to the general
rule of irrevendicability (sic), to wit: when the owner (1) has lost the
thing, or (2) has been unlawfully deprived thereof. In these cases, the
possessor cannot retain the thing as against the owner who may recover it
without paying any indemnity, except when the possessor acquired it in a
public sale.' (Aznar vs. Yapdiangco, 13 SCRA 486).
8
 Put differently, where the owner has lost the thing or has been unlawfully
deprived thereof, the good faith of the possessor is not a bar to
recovery of the movable unless the possessor acquired it in a public
sale of which there is no pretense in this case. Contrary to the court's
assumption, the issue is not primarily the good faith of Ledesma for even
if this were true, this may not be invoked as a valid defense, if it be shown
that Citiwide was unlawfully deprived of the vehicle.
In the case of Dizon vs. Suntay, 47 SCRA 160, the Supreme Court had
occasion to define the phrase unlawfully deprived, to wit:
'. . . it extends to all cases where there has been no
valid transmission of ownership including depositary or lessee
who has sold the same. It is believed that the owner in such a
case is undoubtedly unlawfully deprived of his property and
may recover the same from a possessor in good faith.'
In the case at bar, the person who misrepresented himself to be the
son of the purported buyer, Rustico T. Consunji, paid for the two (2)
vehicles using a check whose amount has been altered from P101.00 to
P101,000.00. There is here a case of estafa. Plaintiff was unlawfully
deprived of the vehicle by false pretenses executed simultaneously with
the commission of fraud (Art. 315 2(a) R.P.C.). Clearly, Citiwide would
not have parted with the two (2) vehicles were it not for the false
representation that the check issued in payment thereupon (sic) is in the
amount of P101,000.00, the actual value of the two (2) vehicles."8
In short, said buyer never acquired title to the property; hence, the Court rejected the
claim of herein petitioner that at least, Armando Suarez had a voidable title to the property.
His motion for reconsideration having been denied in the resolution of the respondent Court of
Dec. 12, 1988, 9 petitioner filed this petition alleging therein that:
"A
THE HONORABLE COURT OF APPEALS ERRED IN APPLYING ARTICLE
559 OF THE NEW CIVIL CODE TO THE INSTANT CASE DESPITE THE
FACT THAT PRIVATE RESPONDENT CITIWIDE MOTORS, INC. WAS NOT
UNLAWFULLY DEPRIVED OF THE SUBJECT CAR, AS IN FACT CITIWIDE
VOLUNTARILY PARTED WITH THE TITLE AND POSSESSION OR (sic)
THE SAME IN FAVOR OF ITS IMMEDIATE TRANSFEREE.
B and the original vendee. The former voluntarily caused the transfer of the
THE FACTUAL MILIEU OF THE INSTANT CASE FALLS WITHIN THE
OPERATIVE EFFECTS OF ARTICLES 1505 AND 1506 OF THE NEW CIVIL
CODE CONSIDERING THAT THE IMMEDIATE TRANSFEREE OF THE
PRIVATE RESPONDENT CITIWIDE MOTORS, INC., ACQUIRED A
VOIDABLE TITLE OVER THE CAR IN QUESTION WHICH TITLE WAS
NOT DECLARED VOID BY A COMPETENT COURT PRIOR TO THE
ACQUISITION BY THE PETITIONER OF THE SUBJECT CAR AND ALSO
BECAUSE PRIVATE RESPONDENT, BY ITS OWN CONDUCT, IS NOW
PRECLUDED FROM ASSAILING THE TITLE AND POSSESSION BY THE
PETITIONER OF THE SAID CAR." 10
There is merit in the petition. The assailed decision must be reversed.
The petitioner successfully proved that he acquired the car in question from his vendor in good
faith and for valuable consideration. According to the trialcourt, the private respondent's
evidence was not persuasive enough to establish that petitioner had knowledge that the car was
the object of a fraud and a swindle and that it did not rebut or contradict petitioner's
evidence of acquisition for valuable consideration. The respondent Court concedes to such
findings but postulates that the issue here is not whether petitioner acquired the vehicle in that
concept but rather, whether private respondent was unlawfully deprived of it so as to make
Article 559, Civil Code apply.
It is quite clear that a party who (a) has lost any movable or (b) has been unlawfully deprived
thereof can recover the same from the present possessor even if the latter acquired it in good
faith and has, therefore, title thereto for under the first sentence of Article 559, such
manner of acquisition is equivalent to a title. There are three (3) requisites to make
possession of movable property equivalent to title, namely: (a) the possession should be in good
faith; (b) the owner voluntarily parted with the possession of the thing; and (c) the possession is
in the concept of owner. 11
Undoubtedly, one who has lost a movable or who has been unlawfully deprived of it cannot be
said to have voluntarily parted with the possession thereof. This is the justification for the
exceptions found under the second sentence of Article 559 of the Civil Code.
The basic issue then in this case is whether private respondent was unlawfully deprived of the
cars when it sold the same to Rustico Consunji, through a person who claimed to be Jojo
Consunji, allegedly the latter's son, but who nevertheless turned out to be Armando Suarez, on
the faith of a Manager's Check with a face value of P101,000.00, dishonored for being altered,
the correct amount being only P101.
Under this factual milieu, the respondent Court was of the opinion, and thus held, that private
respondent was unlawfully deprived of the car by false pretenses.
We disagree. There was a perfected unconditional contract of sale between private respondent
certificate of registration of the vehicle in the name of the first vendee — even if the said vendee
was represented by someone who used a fictitious name — and likewise voluntarily delivered
9
the cars and the certificate of registration to the vendee's alleged representative. Title thereto was
forthwith transferred to the vendee. The subsequent dishonor of the check because of the
alteration merely amounted to a failure of consideration which does not render the contract of
sale void, but merely allows the prejudiced party to sue for specific performance or
rescission of the contract, and to prosecute the impostor for estafa under Article 315 of the
Revised Penal Code. This is the rule enunciated in EDCA Publishing and Distributing Corp. vs.
Santos, 12 the facts of which do not materially and substantially differ from those obtaining in
the instant case. In said case, a person identifying himself as Professor Jose Cruz, dean of the De
la Salle College, placed an order by telephone with petitioner for 406 books, payable upon
delivery. Petitioner agreed, prepared the corresponding invoice and delivered the books as
ordered, for which Cruz issued a personal check covering the purchase price. Two (2) days later,
Cruz sold 120 books to private respondent Leonor Santos who, after verifying the seller's
ownership from the invoice the former had shown her, paid the purchase price of P1,700.00.
Petitioner became suspicious over a second order placed by Cruz even before his first check had
cleared, hence, it made inquiries with the De la Salle College. The latter informed the petitioner
that Cruz was not in its employ. Further verification revealed that Cruz had no more account or
deposit with the bank against which he drew the check. Petitioner sought the assistance of the
police which then set a trap and arrested Cruz. Investigation disclosed his real name, Tomas de
la Peña, and his sale of 120 of the books to Leonor Santos. On the night of the arrest; the
policemen whose assistance the petitioner sought, forced their way into the store of Leonor and
her husband, threatened her with prosecution for the buying of stolen property, seized the 120
books without a warrant and thereafter turned said books over to the petitioner. The Santoses
then sued for recovery of the books in the Municipal Trial Court which decided in their favor;
this decision was subsequently affirmed by the Regional Trial Court and sustained by
the Court ofAppeals. Hence, the petitioner came to this Court by way of a petition for review
wherein it insists that it was unlawfully deprived of the books because as the check bounced for
lack of funds, there was failure of consideration that nullified the contract of sale between it and
the impostor who then acquired no title over the books. We rejected said claim in this wise:
"The contract of sale is consensual and is perfected once agreement is reached
between the parties on the subject matter and the consideration. According to the
Civil Code:
ART. 1475. The contract of sale is perfected at the moment
there is a meeting of minds upon the thing which is the object of the
contract and upon the price.
From that moment, the parties may reciprocally demand
performance, subject to the provisions of the law governing the
form of contracts. prcd
xxx xxx xxx
ART. 1477. The ownership of the thing sold shall be
transferred to the vendee upon the actual or constructive delivery thereof.
ART. 1478. The parties may stipulate that ownership in the
thing shall not pass to the purchaser until he has fully paid the price.
It is clear from the above provisions, particularly the last one quoted, that
ownership in the thing sold shall not pass to the buyer until full payment of the
purchase price only if there is a stipulation to that effect. Otherwise, the rule is that
such ownership shall pass from the vendor to the vendee upon the actual or
constructive delivery of the thing sold even if the purchase price has not yet been
paid.
Non-payment only creates a right to demand payment or to rescind the contract, or
to criminal prosecution in the case of bouncing checks. But absent the stipulation
above noted, delivery of the thing sold will effectively transfer ownership to the
buyer who can in turn transfer it to another." 13
In the early case of Chua Hai vs. Hon. Kapunan, 14 one Roberto Soto purchased from the
Youngstown Hardware, owned by private respondent, corrugated galvanized iron sheets and
round iron bars for P6,137.70, in payment thereof, he issued a check drawn against the Security
Bank and Trust Co. without informing Ong Shu that he (Soto) had no sufficient funds in said
bank to answer for the same. In the meantime, however, Soto sold the sheets to, among others,
petitioner Chua Hai. In the criminal case filed against Soto, upon motion of the offended party,
the respondent Judge ordered petitioner to return the sheets which were purchased from Soto.
Petitioner's motion for reconsideration having been denied, he came to this Court alleging grave
abuse of discretion and excess of jurisdiction. In answer to the petition, it is claimed that inter
alia, even if the property was acquired in good faith, the owner who has been unlawfully
deprived thereof may recover it from the person in possession of the same unless the property
was acquired in good faith at a public sale. 15Resolving this specific issue, this Court ruled that
Ong Shu was not illegally deprived of the possession of the property:
". . . It is not denied that Ong Shu delivered the sheets to Soto upon a
perfected contract of sale, and such delivery transferred title or ownership
to the purchaser. Says Art. 1496:
'Art. 1496. The ownership of the thing sold is acquired by the
vendee from the moment it is delivered to him in any of the ways
specified in articles 1497 to 1501, or in any other manner signifying an
agreement that the possession is transferred from the vendor to the
vendee.'
The failure of the buyer to make good the price does not, in law, cause the
ownership to revest in the seller until and unless the bilateral
10
 contract of sale is first rescinded or resolved pursuant to Article
1191 of the new Civil Code.
And, assuming that the consent of Ong Shu to the sale in favor of Soto
was obtained by the latter through fraud or deceit, the contract was not
thereby rendered void ab initio, but only voidable by reason of the fraud,
and Article 1390 expressly provides that:
'ART. 1390. The following contracts are voidable or
annullable, even though there may have been no damage to the
contracting parties:
(1) Those where one of the parties is incapable of giving
consent to a contract;
(2) Those where the consent is vitiated by mistake, violence,
intimidation, undue influence or fraud.
These contracts are binding, unless they are annulled by a
proper action in court. They are susceptible of ratification.'
Agreeably to this provision, Article 1506 prescribes:
'ARTICLE 1506. Where the seller of goods has a voidable title
thereto, but his title has not been avoided at the time of the sale, the buyer
acquires a good title to the goods, provided he buys them in good faith,
for value, and without notice of the seller's defect of title.' (C.C.)
Hence, until the contract of Ong Shu with Soto is set aside by a
competent court (assuming that the fraud is established to its satisfaction),
the validity ofappellant's claim to the property in question can not be
disputed, and his right to the possession thereof should be respected." 16
It was therefore erroneous for the respondent Court to declare that the private respondent was
illegally deprived of the car simply because the check in payment therefor was subsequently
dishonored; said Court also erred when it divested the petitioner, a buyer in good faith who paid
valuable consideration therefor, of his possession thereof.
WHEREFORE, the challenged decision of the respondent Court of Appeals of 22 September
1988 and its Resolution of 12 December 1988 in C.A.-G.R. CV No. 05955 are hereby SET
ASIDE and the Decision of the trial court of 3 September 1979 and its Final Order of 26 June
1980 in Civil Case No. Q-24200 are hereby REINSTATED, with costs against private
respondent Citiwide Motors, Inc. SO ORDERED.
[G.R. No. 193426. September 29, 2014.]
SUBIC BAY LEGEND RESORTS AND CASINOS, INC., petitioner, vs.
BERNARD C. FERNANDEZ, respondent.
This Petition for Review on Certiorari 1 assails the April 27, 2010 Decision 2 and
August 24, 2010 Resolution 3 of the Court of Appeals (CA) in CA-G.R. CV No. 91758, entitled
"Bernard C. Fernandez, Plaintiff-Appellee, versus Subic Bay Legend Resorts and Casinos, Inc.,
Defendant Appellant," which affirmed in totothe May 17, 2006 Decision 4 of the Regional Trial
Court (RTC) of Olongapo City, Branch 74, in Civil Case No. 237-0-97.
Factual Antecedents
Petitioner Subic Bay Legend Resorts and Casinos, Inc., a duly organized and existing
corporation operating under Philippine laws, operates the Legenda Hotel and Casino (Legenda)
located in the Subic Bay Freeport Zone in Zambales. On the other hand, respondent Bernard
C. Fernandez is the plaintiff in Civil Case No. 237-0-97 prosecuted against petitioner in
Olongapo RTC.
As determined by the CA, the facts of the case are as follows:
At around eleven o'clock in the evening of 6 June 1997, the
appellee's 5 brother[,] Ludwin Fernandez[,] visited the Legenda Hotel and Casino .
. . owned and operated by the appellant 6 and located along the Waterfront
Road, Subic Bay Freeport Zone. Legenda had strategically installed several closed-
circuit television (CCTV) cameras as part of security measures required by its
business. The monitors revealed that Ludwin changed . . . $5,000.00 worth of chips
into smaller denominations. Legenda admitted in its brief that its surveillance staff
paid close attention to Ludwin simply because it was "unusual" for a Filipino to
play using dollar-denominated chips. After Ludwin won $200.00 in a game of
baccarat, he redeemed the value of chips worth $7,200.00. A review of the CCTV
recordings showed that the incident was not the first time Ludwin visited the
Casino, as he had also been there on 5 June 1997.
An operation was launched by Legenda to zero-in on Ludwin whose
picture was furnished its security section. Thus, unbeknownst to him, he was
already closely watched on 13 June 1997 when he went with another brother,
Deoven[,] to the casino at around the same time or at 11:17 p.m. After playing (and
losing $100.00) only one round of baccarat, the siblings had their chips encashed at
two separate windows. Since the cashiers were apprised of a supposed irregularity,
they "froze" the transaction.
Shortly thereafter, Legenda's internal security officers accosted Ludwin
and Deoven and ordered them to return the cash and they complied without ado
because they were being pulled away. The two were eventually escorted to private
rooms where they were separately interrogated about the source of the chips they
11
 brought. They were held for about seven hours until the wee hours of the morning,
without food or sleep. The ultimatum was simple: they confess that the chips were
given by a certain employee, Michael Cabrera, or they would not be released from
questioning. The same line of questioning confronted them when they were later
turned-over for blotter preparation to the Intelligence and Investigation Office of
the Subic Bay Metropolitan Authority (IIO SBMA). Finally, the brothers
succumbed to Legenda's instruction to execute a joint statement implicating
Cabrera as the illegal source of the chips. Due to hunger pangs and fatigue, they did
not disown the statement even when they subscribed the same before the prosecutor
in whose office they were [later] brought. On the other hand, they signed for
basically the same reason a document purporting to show that they were "released
to [their] brother's custody in good condition." At the time, Deoven was about 21
years old, in his second year of engineering studies and was not familiar with the
so-called "estafa" with which the security personnel threatened to sue him for;
although he was quite aware of the consequences of a crime such as direct assault
because he had previously been convicted thereof. About two weeks later, Deoven
executed a retraction in Baguio City where he took up his engineering course. 7
On July 1, 1997, respondent filed Civil Case No. 237-0-97 for recovery of sum of
money with damages against petitioner, on the premise that on June 13, 1997, he went to
Legenda with his brothers Ludwin and Deoven; that he handed over Legenda casino chips worth
US$6,000.00, which belonged to him, to his brothers for the latter to use at the casino; that
petitioner accosted his brothers and unduly and illegally confiscated his casino chips equivalent
to US$5,900.00; and that petitioner refused and continues to refuse to return the same to him
despite demand. His Complaint 8 prayed for the return of the casino chips and an award of
P50,000.00 moral damages, P50,000.00 exemplary damages, P30,000.00 attorney's fees,
P20,000.00 litigation expenses, and costs.
Petitioner's Answer with Compulsory Counterclaim 9 essentially alleged that right
after Ludwin and Deoven's transactions with the Legenda cashier were frozen on June 13, 1997,
they voluntarily agreed to proceed to the Legenda security office upon invitation, where Ludwin
voluntarily informed security officers that it was a certain Michael Cabrera (Cabrera) — a
Legenda table inspector at the time — who gave him the casino chips for encashment, taught
him how to play baccarat and thereafter encash the chips, and rewarded him with P1,000.00 for
every $1,000.00 he encashed; that Ludwin pointed to a picture of Cabrera in a photo album of
casino employees shown to him; that Ludwin and Deoven were then brought to the IIO SBMA,
where they reiterated their statements made at the Legenda security office; that they volunteered
to testify against Cabrera; that respondent himself admitted that it was Cabrera who gave him
the casino chips; that Ludwin and Deoven voluntarily executed a joint affidavit before the
Olongapo City Prosecutor's Office, which they subsequently recanted; that respondent had no
cause of action since the confiscated casino chips worth US$5,900.00 were stolen from it, and
thus it has the right to retain them. By way of counterclaim, petitioner sought an award of P1
million moral damages, P1 million exemplary damages, and P.5 million attorney's fees and
litigation expenses.
Respondent filed his Answer 10 to petitioner's counterclaim.
Ruling of the Regional Trial Court
After pre-trial and trial, the trial court rendered its May 17, 2006 Decision, which
decreed as follows:
WHEREFORE, finding that the evidence preponderates in favor of the
plaintiff, judgment is rendered against the defendant ordering it to:
1) Return to plaintiff casino chips worth USD$5,900.00 or its equivalent
in Philippine Peso at the rate of P38.00 to USD$1 in 1997. DHIETc
2) Pay plaintiff attorney's fees in the amount of P30,000.00.
3) [Pay] [c]ost of this suit.
SO DECIDED. 11
In arriving at the above conclusion, the trial court held:
The primordial issue is whether or not plaintiff can be considered the
lawful owner of the USD$5,900 worth of casino chips that were confiscated.
There is no dispute that the subject chips were in the possession of the
plaintiff. He claims he got hold of them as payment for car services he rendered to
a Chinese individual. Defendant however, contends that said chips were stolen
from the casino and it is the lawful owner of the same.
The onus fell on defendant to prove that the casino chips were stolen. The
proof adduced however, is wanting. The statements of Deoven and Ludwin
C. Fernandez, confessing to the source of the chips were recanted hence, have little
probative value. The testimony of defendant's witnesses narrated defendant's action
responding to the suspicious movements of the Fernandez brothers based on
surveillance tapes. The tapes, however, do not show how these persons got hold of
the chips. The alleged source in the person of Mike Cabrera, a table inspector of the
casino[,] was based on the recanted declarations of the brothers. No criminal charge
was shown to have been filed against him nor the plaintiff and his brothers. Neither
was there an explanation given as to how those chips came into the possession of
Mike Cabrera much less that he passed them on to the brothers for the purpose of
encashing and dividing the proceeds amongst themselves. All told therefore, there
is no direct evidence to prove the theory of the defendant and the circumstantial
evidence present is, to the mind of the court, not sufficient to rebut the legal
presumption that a person in possession of personal property is the lawful owner of
the same (Art. 559, Civil Code of the Philippines). 12
Ruling of the Court of Appeals
12
 Petitioner appealed the May 17, 2006 Decision of the trial court, arguing that Ludwin
and Deoven's admission in their joint affidavit before the Olongapo City Prosecutor's Office that
it was Cabrera who gave them the casino chips strongly indicates that the chips were stolen from
Legenda; that the subsequent recantation by Ludwin and Deoven of their joint affidavit should
be looked upon with disfavor, given that recanted testimony is unreliable and recantations can be
easily secured from poor and ignorant witnesses and for monetary consideration or through
intimidation; that respondent's explanation that he gave the chips to his brothers Ludwin and
Deoven for them to play in the casino is highly doubtful; that the true purpose of Ludwin and
Deoven was to encash the stolen chips; that no force or intimidation attended the treatment
accorded Ludwin and Deoven when they were accosted and asked to explain their possession of
the chips; and that the trial court erred in awarding attorney's fees and costs for the filing of a
baseless suit solely aimed at unjustly enriching respondent at petitioner's expense.
On April 27, 2010, the CA issued the assailed Decision which affirmed the trial court's
May 17, 2006 Decision. Petitioner's Motion for Reconsideration was rebuffed as well. AEDISC
In deciding against petitioner, the CA held that, applying Article 559 of the Civil
Code, 13 respondent had the legal presumption of title to or ownership of the casino chips. This
conclusion springs from respondent's admission during trial that the chips represented payment
by a Chinese customer for services he rendered to the latter in his car shop. The CA added that
since respondent became the owner of the chips, he could very well have given them to Ludwin
and Deoven, who likewise held them as "possessors in good faith and for value" and with
"presumptive title" derived from the respondent. On the other hand, petitioner failed to
convincingly show that the chips were stolen; for one, it did not even file a criminal case against
the supposed mastermind, Cabrera — nor did it charge Ludwin or Deoven — for the alleged
theft or taking of its chips.
The CA likewise held that Ludwin's and Deoven's statements and admissions at the
Legenda security office are inadmissible because they were obtained in violation of their
constitutional rights: they were held in duress, denied the right to counsel and the opportunity to
contact respondent, and deprived of sleep, which is one of the "more subtler [sic] techniques of
physical and psychological torture to coerce a confession." 14 It found that the actions and
methods of the Legenda security personnel in detaining and extracting confessions from Ludwin
and Deoven were illegal and in gross violation of Ludwin's and Deoven's constitutional
rights. 15
Finally, the CA held that petitioner was guilty of bad faith in advancing its theory and
claim against respondent by unduly accusing him of dealing in stolen casino chips, which thus
entitles respondent to the reduced award of attorney's fees in the amount of P30,000.00.
Issues
Petitioner raises the following issues:
a) The Honorable Court seriously erred in ruling that the recanted
statements of Deoven Fernandez and Ludwin C. Fernandez have [no] probative
value;
b) The Honorable Court seriously erred in ruling that the circumstantial
evidence present is not sufficient to rebut the legal presumption that a person in
possession of personal property is the lawful owner of the same;
c) The Honorable Court seriously erred in finding that the evidence
preponderates in favor of the herein respondent; [and]
d) The Honorable Court seriously erred in awarding attorney's fees and
costs of suit in favor of the respondent. 16
Petitioner's Arguments
In its Petition and Reply, 17 petitioner mainly argues that the assailed dispositions are
grounded entirely on speculation, and the inferences made are manifestly mistaken and based on
a misappreciation of the facts and law; that the CA failed to consider the testimonial and
documentary evidence it presented to prove the fact that the casino chips were missing and were
stolen by Cabrera, who thereafter gave them to respondent's brothers, Ludwin and Deoven.
Petitioner maintains that the presumption of title under Article 559 cannot extend to respondent's
brothers, who admitted during the investigation at the Legenda security office and in their Joint
Affidavit 18 that the chips came from Cabrera, and not respondent; that the subsequent Sworn
Statement 19recanting the Joint Affidavit should not be given credence, as affidavits of
recantation can easily be secured — which thus makes them unreliable; and that no duress
attended the taking of the brothers' Joint Affidavit, which was prepared by Henry Marzo of the
Intelligence and Investigation Office (IIO) of the Subic Bay Metropolitan Authority (SBMA).
Petitioner asserts that it is unbelievable that respondent would give US$6,000.00
worth of casino chips to his brothers with which to play at the casino; that with the attending
circumstances, the true intention of respondent's brothers was to encash the stolen chips which
Cabrera handed to them, and not to play at the casino. Petitioner thus concludes that no coercion
could have attended the investigation of Ludwin and Deoven; that their subsequent recantation
should not be given weight; and that for suing on a baseless claim, respondent is not entitled to
attorney's fees and costs of litigation.
Petitioner thus prays for the reversal of the assailed dispositions and the corresponding
dismissal of Civil Case No. 237-0-97.
Respondent's Arguments
In his Comment, 20 respondent generally echoes the pronouncement of the CA. He
likewise notes that petitioner has raised only questions of fact; that the Petition is being
prosecuted to delay the proceedings; that the trial and appellate courts are correct in finding that
petitioner failed to prove its case and show that the casino chips were stolen; that petitioner
13
failed to rebut the presumption that a person in possession of personal property is the lawful
owner of the same, pursuant to Article 559 of the Civil Code; and that the P30,000.00 award of
attorney's fees should be increased to P100,000.00.
Our Ruling
The Petition is denied.
Petitioner's underlying theory is that the subject casino chips were in fact stolen by its
employee Cabrera, then handed over to respondent's brothers, Ludwin and Deoven, for
encashment at the casino; that Ludwin and Deoven played at the casino only for show and to
conceal their true intention, which is to encash the chips; that respondent's claim that he owned
the chips, as they were given to him in payment of services he rendered to a Chinese client, is
false. These arguments require the Court to examine in greater detail the facts involved.
However, this may not be done because the Court is not a trier of facts and does not normally
undertake the re-examination of the evidence presented during trial; the resolution of factual
issues is the function of lower courts, whose findings thereon are received with respect and are
binding on the Court subject only to specific exceptions. 21 In turn, the factual findings of the
Court of Appeals carry even more weight when they are identical to those of the trial court's.
Besides, a question of fact cannot properly be raised in a petition for review
on certiorari. 23
Moreover, if petitioner should stick to its theory that Cabrera stole the subject casino
chips, then its failure to file a criminal case against the latter — including Ludwin and Deoven
for that matter — up to this point certainly does not help to convince the Court of its position,
especially considering that the supposed stolen chips represent a fairly large amount of money.
Indeed, for purposes of this proceeding, there appears to be no evidence on record — other than
mere allegations and suppositions — that Cabrera stole the casino chips in question; such
conclusion came unilaterally from petitioner, and for it to use the same as foundation to the
claim that Ludwin, Deoven and respondent are dealing in stolen chips is clearly irregular and
unfair.
Thus, there should be no basis to suppose that the casino chips found in Ludwin's and
Deoven's possession were stolen; petitioner acted arbitrarily in confiscating the same without
basis. Their Joint Affidavit — which was later recanted — does not even bear such fact; it
merely states that the chips came from Cabrera. If it cannot be proved, in the first place, that
Cabrera stole these chips, then there is no more reason to suppose that Ludwin and Deoven were
dealing in or possessed stolen goods; unless the independent fact that Cabrera stole the chips can
be proved, it cannot be said that they must be confiscated when found to be in Ludwin's and
Deoven's possession.
It is not even necessary to resolve whether Ludwin's and Deoven's Joint Affidavit was
obtained by duress or otherwise; the document is irrelevant to petitioner's cause, as it does not
suggest at all that Cabrera stole the subject casino chips. At most, it only shows that Cabrera
gave Ludwin and Deoven casino chips, if this fact is true at all — since such statement has since
been recanted.
The fact that Ludwin and Deoven appear to be indecisive as to who gave them the
casino chips does not help petitioner at all. It cannot lead to the conclusion that Cabrera stole the
chips and then gave them to the two; as earlier stated, petitioner had to prove this fact apart from
Ludwin's and Deoven's claims, no matter how incredible they may seem.
Though casino chips do not constitute legal tender, 24 there is no law which prohibits
their use or trade outside of the casino which issues them. In any case, it is not unusual — nor is
it unlikely — that respondent could be paid by his Chinese client at the former's car shop with
the casino chips in question; said transaction, if not common, is nonetheless not unlawful. These
chips are paid for anyway; petitioner would not have parted with the same if their corresponding
representative equivalent — in legal tender, goodwill, or otherwise — was not received by it in
return or exchange. Given this premise — that casino chips are considered to have been
exchanged with their corresponding representative value — it is with more reason that this Court
should require petitioner to prove convincingly and persuasively that the chips it confiscated
from Ludwin and Deoven were indeed stolen from it; if so, any Tom, Dick or Harry in
possession of genuine casino chips is presumed to have paid for their representative value in
exchange therefor. If petitioner cannot prove its loss, then Article 559 cannot apply; the
presumption that the chips were exchanged for value remains.
Finally, the Court sustains the award of attorney's fees. Under Article 2208 of the Civil
Code, 25 attorney's fees may be recovered when the defendant acted in gross and evident bad
faith in refusing to satisfy the plaintiff's plainly valid, just and demandable claim, or in any other
case where the court deems it just and equitable that attorney's fees and expenses of litigation
should be recovered. Petitioner's act of arbitrarily confiscating the casino chips and treating
Ludwin and Deoven the way it did, and in refusing to satisfy respondent's claim despite the fact
that it had no basis to withhold the chips, confirm its bad faith, and should entitle respondent to
an award.
With the foregoing view of the case, a discussion of the other issues raised is deemed
irrelevant and unnecessary.
WHEREFORE, the Petition is DENIED. The assailed April 27, 2010 Decision and
August 24, 2010 Resolution of the Court of Appeals in CA-G.R. CV No. 91758
are AFFIRMED. SO ORDERED.
[G.R. No. L-11977. April 29, 1959.]
LEONARDO AZARCON, MANUEL AZARCON and
ESTEBAN ABOBO, petitioners, vs. VICTOR EUSEBIO, respondent.
14
 Appeal from an order of the Court of Appeals, Fourth Division, in CA-G. R. No.
15444-R, promulgated September 5, 1956, finding Leonardo Azarcon,
Manuel Azarcon and Esteban Abobo guilty of contempt of court, ordering each of them to
pay a fine of P100, to remove certain improvements that they have constructed on the land
etc.
The record discloses that respondent Victor Eusebio and petitioners herein had a
dispute over the possesion of a certain parcel of public land in the year 1954.
Victor Eusebio had filed a lease application, No. V-79, for a parcel of land known as lot
No. 3807, containing an area of about 349 hectares. A portion thereof was occupied by
petitioners herein, Leonardo L. Azarcon and his companions, under a homestead
application. The conflict between the lessee and the homesteaders was ordered to be
investigated on May 25, 1955 by the Director of Lands and again on August 3, 1955 by the
Secretary of Agriculture and Natural Resources.
Before the dispute could be settled and on April 28, 1954, Victor Eusebio filed a
complaint in the Court of First Instance of Nueva Ecija, alleging that he had acquired a big
parcel of land, 349 hectares in area, by lease from the Bureau of Lands (lease application
No. V-79); that while he was in possession thereof defendants occupied a portion, known
as lot No. 2807, containing an area of six hectares more or less. He, therefore, prayed that
defendants be ordered to vacate the six hectares occupied by them and pay damages.
Defendant Leonardo Azarcon answered the complaint alleging that he is in actual
possession of a portion of 24 hectares since 1941 by virtue of a homestead application,
No. V-42995; that the lease application of plaintiff is subsequent to said homestead
application of Leonardo Azarcon; that Azarcon had occupied the land since 1941 with
interruptions during the war and again in 1950 up to the time of the filing of the action. He,
therefore, prayed that the action be dismissed. The answer was filed on June 2, 1954 and on
motion of plaintiffs dated March 15, 1955, the defendants were declared in default. A
motion to set aside the default was denied, and a judgment by default was entered by the
court on April 26, 1955. It ordered defendants to restore possession of the land to plaintiff.
Having failed to obtain a reconsideration of the above decision, defendants appealed to the
Court of Appeals.
While the case was pending in the Court of Appeals, a writ for the execution of
the judgment of the lower court was issued on October 3, 1955. On October 8, 1955,
defendants moved and the court on October 21 ordered that the said writ of execution be
stayed upon defendants' depositing of a supersedeas bond of P1,000. The writ of execution
was actually served on the defendants on October 7, 1955. Various petitions were
submitted by the parties, and among them was that of defendants-appellants asking for the
lifting of the writ of execution. This petition, dated October 14, 1955, was granted on
November 1, 1955, and the court again fixed the supersedeas bond to stay execution in the
amount of P1,000 to be filed with and approved by the Court of First Instance of Nueva
Ecija as to its sufficiency. In the same order of November 7, the Court of Appeals denied a
petition of the plaintiff-appellee to file a counter-supersedeas bond as well as plaintiff
appellee's motion for injunction. In the meanwhile the defendants-appellants had presented
on November 21, 1955 the supersedeas bond required for the approval of the Court of First
Instance of Nueva Ecija and the said bond was filed and approved on November 21, 1955.
This fact was certified to by the clerk of the Court of First Instance of Nueva Ecija on
November 14, 1955.
On December 2, 1955 the Court of Appeals on motion of plaintiff, reconsidered
its order or resolution of November 7, 1955 authorizing the stay of execution upon the
filing of the bond by the defendants-appellants, on the ground that the defendants-
appellants have not filed any supersedeas bond as required. On January 19, 1956, the Court
of Appeals denied a petition of defendants-appellants to reconsider said order of December
2, 1955 on the ground that the writ of execution issued on October 3, 1955 had already
been executed.
The following appear to be clear: (a) the writ of execution dated October 3, 1955
was furnished the defendants on October 7, 1955; (b) said order of execution was set aside
in an order of October 21, 1955, which order authorized the defendants-appellants to file a
supersedeas bond in the amount of P1,000, the same to be approved by the Court of First
Instance of Nueva Ecija; (c) said supersedeas bond was filed with the Court of First
Instance on November 21, 1955, but the certificate showing such filing of the bond was
issued by the clerk of the Court of First Instance of Nueva Ecija only on December 14,
1955; and the Court of Appeals, not having been notified of the fact that the defendants
have already secured the approval of their supersedeas bond, set aside the order to stay
execution on December 2, 1955.
The evidence shows that in spite of the receipt by the defendants of the notice of
the writ of execution of October 3, 1955, which writ of execution commanded defendants
"to forthwith remove from said premises and that plaintiff have restitution of the same,"
defendants-appellants nevertheless entered the land to gather palay which was then pending
harvest. We gather further from the record that the rice found on the disputed land at the
time of the service of the order of execution had been planted by defendants-appellants,
who appear to have been in possession of the land from 1951. While the court order of
October 3, 1955 ordered the defendant-appellant to move out from the premises, it did not
prohibit them from gathering the crop then existing thereon. Under the law a person who is
in possession and who is being ordered to leave a parcel of land while products thereon are
pending harvest, has the right to a part of the net harvest, as expressly provided by Article
545 of the Civil Code.
"ART. 545. If at the time the good faith ceases, there should be
any natural or industrial fruits, the possessor shall have a right to a part of
the expenses of cultivation, and to a part of the net harvest, both in
proportion to the time of the possession."
xxx xxx xxx
As the order of execution did not expressly prohibit the defendants-appellants
from gathering the pending fruits, which fruits were the result of their possession and
15
 cultivation of the land, it cannot be said that the defendants-appellants committed an act
which is a clear violation of the courts' order. Besides, the defendants-appellants had
presented, after receipt of the order of execution, a motion to set aside the said order of
execution, and this motion to stay execution was granted. Defendants furthermore
presented a bond in accordance with the order of the court and had it approved by the Court
of First Instance. It was perhaps in expectation of this resolution of the court setting aside
the order of execution that defendants-appellants may have felt justified in entering the land
and harvesting the fruits existing thereon.
Again the order of the court setting aside its order to stay execution was issued in
the belief that the defendants-appellants had not presented their bond to stay execution
(which they had actually presented before the Court of First Instance of Nueva Ecija and
which said court actually approved). Under the circumstances above stated, we are not
ready to conclude that the defendants-appellants can be held to have committed a clear
defiance of the order of the court. Their act in harvesting the pending fruits was not only
justified by law but was not expressly prohibited by the court's order, and was even ratified
when the court ordered the suspension of the execution. There was, therefore, no open,
clear and contumacious refusal to obey a definite order of the court such as would
constitute contempt. Furthermore, a person who has been ordered to leave certain premises
is ordinarily not prohibited from taking with him his own effects and possession, unless
there is an express prohibition to this effect. No such prohibition was contained in the order
for the defendants to leave the land. There may have been a technical violation of an order
not to enter the premises, but not of one prohibiting them from removing anything
therefrom. Such technical violation of the order cannot be considered as one amounting to a
defiance of the court's authority, punishable as contempt.
For the foregoing considerations, the order appealed from should be, as it is
hereby, set aside, and the defendants-appellants acquitted of the charge against them.
Without costs.
[G.R. No. L-36789. July 25, 1983.]
FELIPA CORDERO (Deceased) MAURO OCAMPO, CASIMIRO OCAMPO
and ELISEA OCAMPO, petitioners, vs. VICTORIA P. CABRAL, ALEJANDRO
BERBOSO, DALMACIO MONTAOS and HONORABLE COURT OF
APPEALS, respondents.
Petition to review a decision of the defunct Court of Appeals.
In Civil Case No. 2323 of the defunct Court of First Instance of Bulacan, Felipa Cordero and her
children Mauro, Casimiro and Elisea all surnamed Ocampo sued Victoria Cabral, Alejandro
Berboso and Dalmacio Montaos in a Complaint which reads as follows:
"1. That the plaintiffs are all of legal age, all residing and with postal address at
Meycauayan, Bulacan; Felipa Cordero is a widow while Elisea Ocampo is single;
and the defendants are all of legal age, Victoria P. Cabral is married but she is
living apart and separate from her husband so the latter is not included herein as
party defendant, and all of them are residing and with postal address at
Meycauayan, Bulacan, where they may be served with summons;
2. That Mr. Gregorio Z. Ocampo of Meycauayan, Bulacan, husband of the plaintiff
Felipa Cordero and father of the other plaintiffs surnamed Ocampo, died on May
17, 1958, and that said deceased left several properties, which were inherited by the
plaintiffs, one of which is a parcel of land described as follows:
A parcel of land (Lot No. 5, plan Psu. 43302), with the improvements thereon,
situated in the barrio of Saluysoy, Municipality of Meycauayan. Bounded on the N.
by Sapa and properties of Pedro Dazo and Catalino Exaltacion; on the NE. by
property of Trinidad Rodriguez & Mateo Mistica; on the SE. by properties of
Vicente Mistica, Antonio Rodriguez, Hermogenes Blanco, Lucio Sulbera and Pablo
Francia; on the SW. by properties of Concepcion Rodriguez and Alejandro de la
Cruz; and on NW. by a Sapa . . .; containing an area of Seventy-eight thousand one
hundred and eighty-one square meters (78,181), more or less. With TRANSFER
CERTIFICATE OF TITLE NO. 14513 in the name of Gregorio Z. Ocampo and has
Tax Declaration No. 2819 and is assessed at P4,290.00.
which parcel of land was originally registered in accordance with the Land
Registration Act on December 14, 1933, and was registered and/or transferred in
the name of Mr. Gregorio Z. Ocampo on July 31, 1934;
3. That after the death of the said Mr. Gregorio Z. Ocampo the plaintiffs herein
took possession of the properties left by him, among others is the afore-described
parcel of land which is a riceland, but they found out that the southern portion of
the same with an area 4,303 square meters, more or less, upon verification, was
possessed by the defendants herein, Victoria P. Cabral, Alejandro Berboso and
Dalmacio Montaos; and that the defendant Victoria P.Cabral claimed to be the
owner of said portion while her co-defendants co-possessed the same as her
tenants;
4. That the plaintiffs demanded of the defendants to surrender to the former
possession of the afore-mentioned portion of land and/or vacate it but they refused
and failed to do so, and the defendant Victoria P. Cabral continued claiming to be
the owner of the same while her co-defendants continued recognizing her as the
owner thereof instead of the plaintiffs; that the plaintiffs had the afore-described
parcel of land (with T.C.T. No. 14513) relocated in the presence of the defendants'
representatives and it was found and/or determined that the afore-said portion of
land with the area of 4,303 square meters, more or less, was a part of the plaintiffs'
land with T.C.T. No. 14513; that even after the said relocation the defendant
16
 Victoria P. Cabral persisted and still persist in her claim of ownership over the said
portion and her co-defendants persisted and still persist in recognizing her as the
owner thereof instead of the plaintiffs; that the defendants continue in possession of
the same; and that the defendants still refuse and fail to surrender and/or vacate said
portion of land inspite of demands made on them by the plaintiffs;
5. That because of the defendants' occupancy of the afore-mentioned plaintiffs'
portion of land with the area of 4,303 square meters, more or less, to the exclusion
of the latter, the said plaintiffs failed to realize a yearly harvest of at least ten (10)
cavanes of palay at the rate of P10.00 per cavan, from the harvest-time of 1958 up
And by way of SPECIAL DEFENSE, defendants allege:
to the present;
6. That because of the defendants' refusal to recognize plaintiffs' ownership over
the afore-mentioned portion of land and also because of their refusal and failure to
surrender and/or vacate the same the plaintiffs were forced to employ the services
of the undersigned counsel to institute this action at an agreed fees of P500.00.
WHEREFORE, premises considered, the plaintiffs herein respectfully pray of this
Hon. Court to render judgment in favor of the plaintiffs and against the defendants
thus ordering them:
a) To recognize the ownership of the plaintiffs over the afore-mentioned portion of
land with an area of 4,303 square meters, more or less, and to surrender it to the
plaintiffs or vacate the same;
b) To deliver, jointly and severally, to the plaintiffs palay in the amount of ten (10)
cavanes or pay their market price at the rate of P10.00 per cavan per harvest-time
beginning the year 1958 up to the time of their delivery or payment.
c) To pay, jointly and severally, the plaintiffs' lawyer's fees in the amount of
P500.00; and
d) To pay the costs of this suit.
And to grant any remedy and relief just and equitable in the premises." (Record on
Appeal, pp. 2-6.).
And by way of COUNTER CLAIM, defendants allege:
The Answer of the defendants contains the following allegations:
"I. That defendants have no knowledge or information sufficient to form a belief as
to the truth of the allegations in paragraph 2 of the complaint;
II. That defendants admit being in possession of the portion of land alleged in
paragraph 3 of the complaint, as said portion of land belongs to defendant Victoria
P. Cabral;
III. That defendants deny the allegation in paragraph 4 of the complaint to the
effect that the said portion of 4,303 square meters, more or less, is a part of the
plaintiffs' land;
IV. That defendants have no knowledge or information sufficient to form a belief
as to the truth of the allegations in paragraph 5 of the complaint;
V. That defendants likewise have no knowledge or information sufficient to form a
belief as to the truth of the allegations in paragraph 5 of the complaint;
VI. That defendant Victoria P. Cabral and her predecessors in interest before her
are the real owners, and have been in actual, adverse, peaceful and continuous
possession, of that portion of land claimed by the plaintiffs in their complaint,
which portion is more particularly described as Lot 5-B of plan Psd-11496, duly
approved by the Director of Lands on December 21, 1935;
VII. That the deceased Gregorio Z. Ocampo and/or his heirs, the herein plaintiffs,
have admitted, acknowledged and recognized the defendant Cabraland her
predecessors in said portion of land, as the real owners thereof;
VIII. That the deceased Gregorio Z. Ocampo and his predecessors in interest, as
well as the defendant Cabral and her predecessors in interest, have always
recognized as the boundary between their respective properties, a barrio road which
has existed since the Spanish regime and has continued to exist up to the present
time; and all the residents of the rural areas using said barrio road know for a fact
that, with respect to the respective properties of the parties hereto, said road is the
boundary between said properties;
IX. That the inclusion of that portion claimed by the plaintiffs in their complaint in
the original registration of their property was obtained thru error or fraud by the
original applicant, but was never possessed by him nor by his successors in interest,
as they have always openly recognized the ownership of said portion as belonging
to defendant Cabral and her predecessors in interest before her;
X. That all the foregoing paragraphs are pleaded herein and made parts hereof;
XI. That the defendant Victoria P. Cabral is the real owner of Lot No. 5-B, plan
Psd-11496, with an area of 4,303 square meters, more or less, erroneously or
fraudulently included in the property described in Transfer Certificate of Title No.
14513 of the Register of Deeds of the Province of Bulacan, registered in the name
of the deceased Gregorio Z. Ocampo and now claimed by the herein plaintiffs;
17

XII. That defendant Cabral and her predecessors in interest have been in possession
of said portion of land for more than fifty years, their possession being actual,
adverse, peaceful and continuous, as owners thereof;
XIII. That said deceased Gregorio Z. Ocampo and/or his heirs, and their
predecessors in interest have openly admitted, acknowledged and recognized the
defendant Victoria P. Cabral and her predecessors in interest as the real owners of
said portion of land, Lot 5-B plan Psd-11496, and said Gregorio Z. Ocampo and/or
his heirs and their predecessors in interest have never been in possession of said
portion of land;
XIV. That the plaintiffs, claiming to be the heirs of the deceased Gregorio Z.
Ocampo, are therefore under obligation to execute a deed of transfer of said portion
of land in favor of the true owner thereof, the herein defendant Victoria P. Cabral,
in accordance with law;
XV. That because of the present action filed by the plaintiffs, the defendants have
suffered damages in the amount of P1,000.00;
WHEREFORE:, defendants pray that judgment be rendered:
(a) dismissing the complaint, with costs against the plaintiffs;
(b) declaring the defendant Victoria P. Cabral as the owner of Lot-5-B, plan Psd-
11496, which has been erroneously included in the property of the deceased
Gregorio Z. Ocampo covered by Transfer Certificate of Title No. 14513, Bulacan,
and ordering the herein plaintiffs to execute a deed of transfer of said Lot No. 5-B,
plan Psd-11496 in favor of the defendant Victoria P. Cabral; and
(c) ordering the plaintiffs to pay to the defendants the sum of P1,000.00.
Defendants further pray for such other reliefs and remedies which may be proper
and just under the premises." (R.A., pp. 8-13.)
The plaintiffs filed a Reply and Answer to Counterclaim as follows:
"1. That the plaintiffs deny the allegation in paragraph II of the Answer that the
portion of land now under litigation belongs to the defendant Victoria P.Cabral, and
likewise deny the allegations in paragraphs VI and XI of the same that the
defendant Victoria P. Cabral and her predecessors in interest are the real owners of
this portion (under litigation) with an area of 4,303 square meters, Lot 5-B of plan
Psd-11496 with Transfer Certificate of Title No. 14513 in the name of Mr.
Gregorio Z. Ocampo, because the truth is that the said Mr. Ocampo and his
successors in interest, the plaintiffs herein, are the real owners thereof; and that said
portion is a part and is included in the plaintiffs' big parcel of land known as Lot 5,
Psu-43302, and covered by the afore-mentioned Certificate;
That the defendant Victoria P. Cabral and her predecessors in interest were never
the owners of the said portion of land and in fact none of them, much less Victoria
P. Cabral, has been in possession or in possession of any title or any document
either public or private, showing his or her ownership, and not even a Tax
Declaration for taxation purposes; the truth is that when the late Mr. Antonio
Rodriguez, original owner of the land with plan Psu-100536, adjacent to that of the
plaintiffs, sold said land to his successor Segunda Prodon he did not include in the
said sale this portion, under litigation, Lot 5-B, of plan Psd-11496 with an area of
4,303 square meters, more or less, knowing that it did not belong to him; and
because of Segunda Prodon has not acquired this portion of land with an area of
4,303 square meters, more or less, it is clear, therefore, that she could not have
transmitted it to her successors including the herein defendant, Victoria P. Cabral;
2. That the plaintiffs deny the defendants' allegations in paragraphs VI and XII of
their Answer that the defendant Victoria P. Cabral and her predecessors in interest
have been in actual, adverse, peaceful and continuous possession of this portion of
land for a period of more than 50 years because the truth is that, if they were ever in
possession of the same, their possession was 'not adverse' and 'not continuous'.
When Mr. Gregorio Z. Ocampo bought the parcel of land known as Lot 5, Psu-
43302 with an area of 78,181 square meters, more or less, in 1934, (wherein this
portion under litigation is included) the said Mr. Ocampo took possession of this
whole land. In the year 1935 the adjoining owner of the said property, the late Mr.
Antonio Rodriguez and predecessor of the defendant Victoria P. Cabral, requested
Mr. Ocampo to sell to him a portion of said land with an area of 4,303 square
meters, more or less, to which Mr. Ocampo agreed. As there was already a meeting
of the mind Mr. Rodriguez requested Mr. Ocampo that he be allowed to possess the
said portion as they were going to make the formal deed of sale, to which
proposition Mr. Ocampo likewise agreed. This proposed sale never materialized so
if Mr. Rodriguez ever possessed the said portion of land, now under litigation, he
did not possess it as owner but only as a 'prospective owner'. His possession cannot,
therefore, be termed 'adverse'. Such possession cannot also be termed 'continuous'
for 50 years because Mr. Ocampo was in possession of the same in 1934 before Mr.
Rodriguez came in possession of the same, first, with the consent and later by
toleration of Mr. Ocampo.
Granting but without admitting, that the defendant Cabral and her predecessors in
interest have been in possession of this portion of land with an area of 4,303 square
meters, more or less for more than 50 years, does she mean to imply now that she
acquires ownership over the same by virtue of 'prescription'? She must remember
that this property is titled under Act 496 and, therefore, 'imprescriptible',
18
3. That the plaintiffs deny the defendants' allegations in paragraphs VI and IX of
their Answer that the plaintiffs have admitted, acknowledged and recognized the
defendant Cabral and her predecessors in said land as the real owners thereof,
because the truth is that the plaintiffs are the real owners of the same, and that they
have never admitted, acknowledged nor recognized the defendant Cabral nor any of
her predecessors in interest as the owners of said portion of land;
4. That the plaintiffs admit the allegation in paragraph VIII of the Answer that the
defendant Victoria P. Cabral owns an adjoining property which is described in her
plan Psu-100536 but they deny there is a 'barrio road' between her land and that of
the plaintiffs which serves as the boundary and that there has never been any road
much less a barrio road between their properties.
That, if the defendants are referring to Lot 5-B, plan Psd-11496, and the rest of the
land of the plaintiffs Lot No. 5, Psu-43302, which said Lot 5-B is a part, the
plaintiffs deny the existence of such road much less a barrio road, and that there has
never been a road therein. With the permission of the Hon. Court the existence or
non-existence of a road can be verified by an ocular inspection and if need be with
the aid of a licensed surveyor;
5. That the plaintiffs deny the allegations in paragraphs IX and XIII of the Answer
that Mr. Gregorio Z. Ocampo and his successors in interest have never been in
possession of this portion of land now under litigation. Mr. Gregorio Z. Ocampo
took possession of said property after he bought it in 1934 and if the predecessors
in interest of the defendant Cabral happened to be in its possession it was, first,
with the consent of Mr. Ocampo and later by his toleration as we have already
explained in paragraph 2 of this Reply;
6. That the plaintiffs deny the allegation in paragraph IX of the Answer that the
inclusion of this portion of property under litigation was 'obtained thru error or
fraud' by the original applicant, and they likewise deny the allegation in paragraph
XI of the Answer that this portion with an area of 4,303 square meters, more or
less, was erroneously and fraudulently included in the property described in
Transfer Certificate of Title No. 14513 of the Register of Deeds of the Province of
Bulacan, because in truth and in fact there was no such error or fraud. The title of
this property was granted and obtained in a regular proceeding. If there was any
error or fraud the predecessor in interest of the defendant Victoria P. Cabral would
have filed a petition for review or would have sued for damages. Or the said
defendant or any of her predecessors in interest would have resorted to some legal
remedy.
The fact is that the defendant Victoria P. Cabral or any of her predecessors in
interest did not sincerely and honestly believe that they were the owners of this
portion of property. In fact they did not have and do not have any kind of title or
any kind of document, either public or private, over this property and they did not
even have this property declared in their names for taxation purposes.
Granting, but without admitting, that the title to this property was obtained either
by error or fraud yet the defendant Victoria P. Cabral can have no valid claim
against the plaintiffs because she has never been the owner of said property and
also because the plaintiffs' predecessor, Mr. Gregorio Z. Ocampo, acquired this
property as 'an innocent purchaser, in good faith and for value.'
7. That the plaintiffs deny the allegation in paragraph XIV of the Answer that the
plaintiffs are under obligation to execute a deed of transfer of the portion of land in
favor of the defendant Victoria P. Cabral because, first, the title to this land was
obtained in a regular proceeding where there was neither error nor fraud; second,
said defendant or her predecessors in interest are not the owners of said land much
less said defendant Cabral who has nothing at all in her possession to show any
kind of right over said portion of land, and third, Mr. Gregorio Z. Ocampo, the
predecessor in interest of the plaintiffs, acquire this property as an 'innocent
purchaser, in good faith and for value', and
8. That the plaintiffs have no knowledge or information sufficient to form a belief
as to the truth of the allegation in paragraph XV of the defendants' Answer
(Counterclaim).
WHEREFORE, it is respectfully prayed of this Hon. Court to grant the plaintiffs'
Petition in their Complaint." (R.A., pp. 14-21.)
It can be seen that the thrust of the Complaint is that a piece of land covered by T.C.T. No.
14513 in the name of Gregorio Z. Ocampo was illegally possessed by the defendants. Upon the
other hand, the thrust of the Answer is that "the defendant Victoria P. Cabral is the real owner of
Lot No. 5-B, plan Psd-11496, with an area of 4,303 square meters, more or less, erroneously or
fraudulently included in the property described in Transfer Certificate of Title No. 14513 of the
Register of Deeds of the Province of Bulacan, registered in the name of the deceased Gregorio
Z. Ocampo and now claimed by the herein plaintiffs." (Answer, par. XI.)
The decision of the trial court is not clear as to whether or not the disputed lot is included in
T.C.T. No. 14513. However, the decision contains the following statement: "if it is included in
their title, such title is void insofar as the portion of the Pandayan road is concerned." (R.A., p.
30.).
The trial court gave the following judgment:
"WHEREFORE, plaintiffs' complaint is hereby DISMISSED, without
costs. For lack of proof that plaintiffs were in bad faith in the filing of the
present action, defendants' counter-claim is likewise dismissed." (R.A., p.
30.)
19
The plaintiffs appealed to the Court of Appeals and made the following assignment of errors:
"I. THE LOWER COURT ERRED IN HOLDING THAT THE
PANDAYAN ROAD IS LOCATED INSIDE THE PROPERTY
DESCRIBED IN T.C.T. NO. 14513 AND INCONSEQUENTLY
HOLDING THAT THE SAME CONSTITUTES THE BOUNDARY
LINE BETWEEN THE PROPERTIES OF PLAINTIFFS-APPELLANTS
AND DEFENDANT-APPELLEE VICTORIA CABRAL.
II. THE LOWER COURT ERRED IN HOLDING THAT T.C.T. NO.
14513 IS 'VOID INSOFAR AS THE PORTION FROM THE
PANDAYAN ROAD IS CONCERNED', AND IN NOT HOLDING
THAT SAID T.C.T. IS INCONTROVERTIBLE.
III. THE LOWER COURT ERRED IN GIVING IMPORTANCE TO
DEFENDANTS-APPELLEES' ALLEGED 'OPEN, CONTINUOUS
AND ADVERSE POSSESSION' AND IN DISMISSING PLAINTIFFS-
APPELLANTS' COMPLAINT." (Brief, pp. a-b.)
The Court of Appeals found as a fact: "That disputed portion Lot 5-a is admittedly part of the
land originally registered in the name of plaintiff's predecessor in interest, there should be no
question that that title had become imprescriptible and original registrant as well as his
successors had the right to vindicate their ownership against any body else." (Rollo, p. 54.)
But the Court of Appeals went further. Seizing a statement in the Reply and Answer to
Counterclaim filed by the plaintiffs, it held that Gregorio Z. Ocampo had by an oral contract
sold the disputed land to Antonio Rodriguez the defendant's predecessor in interest. The Court
of Appeals further said "that agreement oral albeit, became binding upon Ocampo, it was even
executed in part by the actual delivery of possession, it amounted to a supervening fact,
posterior to the title, and the fact that Ocampo's title was not afterwards cancelled can not at all
mean that the title could be used as a weapon to annul that posterior agreement by Ocampo
voluntarily entered into and by reason of which he had delivered possession unto defendant's
predecessor; of course, no deed of sale was formalized for a reason not clear in the evidence,
but whether or not formalized, it was a binding personal agreement upon Ocampo." (Rollo, pp.
56-57.)
The statement upon which the Court of Appeals built its decision is as follows:
"When Mr. Gregorio Z. Ocampo bought the parcel of land known as Lot
5, Psu-43302 with an area of 78,181 square meters, more or less, in 1934,
(wherein this portion under litigation is included), the said Mr. Ocampo
took possession of this whole land. In the year 1935 the adjoining owner
of the said property, the late Mr. Antonio Rodriguez and predecessor of
the defendant Victoria P. Cabral, requested Mr. Ocampo to sell to him a
portion of said land with an area of 4,303 square meters, more or less, to
which Mr. Ocampo agreed. As there was already a meeting of the mind
Mr. Rodriguez requested Mr. Ocampo that he be allowed to possess the
said portion as they were going to make the formal deed of sale, to which
proposition Mr. Ocampo likewise agreed. This proposed sale never
materialized so if Mr. Rodriguez ever possessed the said portion of land,
now under litigation, he did not possess it as owner but only as a
'prospective owner'. His possession cannot, therefore, be termed 'adverse'.
Such possession cannot also be termed 'continuous' for 50 years because
Mr. Ocampo was in possession of the same in 1934 before Mr. Rodriguez
came to possession of the same, first, with the consent and later by
toleration of Mr. Ocampo." (R.A. pp. 15-16.)
It passes understanding why the plaintiffs mentioned a non-consummated transaction between
Gregorio Z. Ocampo and Antonio Rodriguez when the defendants made no claim of such
transaction nor was the name of Antonio Rodriguez even mentioned in their Answer.
Even as the Court of Appeals found that the disputed piece of land is registered in the name of
the plaintiffs but because of the supposed oral sale of the same to the predecessors of the
defendants, it affirmed the judgment of the trial court dismissing the complaint for the recovery
of the land.
The instant petition assails the Court of Appeals for rendering a decision based on a ground
which was never raised nor discussed whether in the trial court or before it by any of the parties.
The ground to be sure, is the supposed oral contract of sale made to the predecessors of the
defendants covering the disputed piece of land.
The petition is highly impressed with merit.
It is a well-settled rule that, except questions on jurisdiction, no question will be entertained on
appeal unless it has been raised in the court below and it is within the issues made by the parties
in their pleadings. (See cases cited in II Moran, Rules of Court, pp. 504-505 [1970].)
In this case, the Court of Appeals erred when it rendered a decision based on a ground which
was not litigated in the trial court and which could not have been raised on appeal. That the
supposed oral contract of sale was never an issue is demonstrated by the following:
1. The pleadings of the parties have been purposely reproduced in full above. It can be seen
therefrom that no issue in respect of the supposed oral sale actually emerged.
2. The decision of the trial court is absolutely silent on the supposed oral contract of sale.
3. The plaintiffs who appealed the decision of the trial court to the Court of Appeals did not
make an assignment of error in respect of the supposed oral sale.
The Court of Appeals found as a fact that the disputed piece of land is registered in the name of
the plaintiffs' predecessor.
20
The defendants claimed in their answer that they and their predecessors are the owners of the
land in dispute but that the plaintiffs' predecessor was able to register the same in his name
through error or fraud.
However, the trial court made no categorical finding on this claim of the defendants otherwise it
would have granted the affirmative relief which they asked, namely: "(b) declaring the defendant
Victoria P. Cabral as the owner of Lot 5-B, plan Psd-11496, which has been erroneously
included in the property of the deceased Gregorio Z. Ocampo covered by Transfer Certificate of
Title No. 14513, Bulacan, and ordering the herein plaintiffs to execute a deed of transfer of said
Lot No. 5-B, plan Psd-11496 in favor of the defendant Victoria P. Cabral." The Court of
Appeals did not deal with this issue because there was no appeal made by the defendants.
The following conclusions have to be made.
1. The disputed land is included in T.C.T. No. 14513 issued to Gregorio Z. Ocampo, the
predecessor of the plaintiffs.
2. The original registration which includes the disputed land was not vitiated by error or fraud.
3. The Court of Appeals erred when it held that Gregorio Z. Ocampo had orally sold the
disputed land to the predecessors of the defendants.
4. The defendants, by their own admission, are in possession of the disputed land. There is no
evidence that they were possessors in bad faith. However, their good faith ceased when they
were served with summons to answer the complaint. (Art. 528, Civil Code; Tacas vs. Tobon, 53
Phil. 356 [1929].) As possessors in bad faith from the service of the summons they "shall
reimburse the fruits received and those which the legitimate possessor could have received, . . ."
(Art. 549, Civil Code.)
WHEREFORE, the judgment of the Court of Appeals is hereby reversed and another one
rendered in that the defendants shall vacate and surrender the land in question to the plaintiffs;
and the defendants shall also account for the fruits thereof pursuant to Article 549 of the Civil
Code from the service of the summons. Costs against the defendants. SO ORDERED.
[G.R. No. 28721. October 5, 1928.]
MARTIN MENDOZA and NATALIO ENRIQUEZ, plaintiffs-appellees, vs.
MANUEL DE GUZMAN, defendant-appellant. MAX. B. SOLIS, intervenor-
appellant.
This case calls for the application of articles 361, 453, and 454 of the Civil Code
to the proven facts.
On November 6, 1916, Leandra Solis and her husband Bernardo Solis brought an
action in the Court of First Instance of Tayabas against Martin Mendoza for the recovery of
a certain piece of land. Judgment was rendered in that case absolving Mendoza from the
complaint, and this judgment was subsequently affirmed by the Supreme Court. 1 When the
case was remanded to the court of origin, the trial judge issued an order requiring the
provincial sheriff immediately to dissolve the preliminary writ of injunction and to put
Mendoza in the possession of the land. By virtue of this order, Mendoza was in fact put in
possession of the property.
In the cadastral proceedings of the municipality of Sariaya, Tayabas, the piece of
land above-mentioned was identified as lot No. 687. In the decision rendered in the
cadastral case, this lot was adjudicated in favor of Martin Mendoza and Natalio Enriquez in
equal parts pro indiviso subject to the right of retention on the part of Manuel de Guzman
until he shall have been indemnified for the improvements existing on the land. By virtue
of this judgment, De Guzman presented a motion requesting the issuance of a writ of
possession for lot No. 687 in his favor which was granted on June 25, 1924. From the time
Leandra Solis and Bernardo Solis, as well as Manuel de Guzman who was working on the
land, were ejected therefrom, Martin Mendoza possessed it until June 25, 1924, when De
Guzman obtained the writ of possession abovementioned. Since then De Guzman has had
dominion over the land.
Being unable to come to an agreement as to the amount which should be allowed
for the improvements made on the land, Martin Mendoza and Natalio Enriquez began an
action requesting the court to (a) fix the value of the necessary and useful expenses incurred
by Manuel de Guzman in introducing the improvements; (b) require the defendant to render
an accounting of the fruits received by him and order that the value of the fruits be applied
to the payment of the necessary and useful expenses; and (c) decree the restitution of the
possession to the plaintiffs. To the complaint, the defendant filed an answer in the form of a
general denial with special defenses and appended a counterclaim and crosscomplaint, in
which a total of P6,000 was asked. During the pendency of the case, Bernardo Solis, or
Max. B. Solis, one of the persons who was ejected from the land, asked leave to intervene,
alleging, among other things, that De Guzman, in consideration of the sum of P5,000, had
transferred all his rights in the improvements and in the lot to him with the exception of two
hundred coconut trees. This petition was granted by the trial court.
When the case was called for trial, the parties entered into the following
stipulation:
"1. That the plaintiffs are the owners and proprietors of the land
described in the second paragraph of the complaint.
"2. That a decree of registration has been issued on said land in the
terms set forth in paragraph 3 of the complaint.
"3. That the defendant Manuel de Guzman is the one who has been in
possession and enjoyment of the land from June 25, 1924, up to the present time
21
 by virtue of a writ of possession obtained by him from the Court of Land
Registration.
"4. That the defendant has made improvements on said land by planting
coconut trees thereon.
"5. That the plaintiff Martin Mendoza is the one who has been in
possession and enjoyment of said property and its improvements since December
16, 1916, by virtue of a writ of possession in civil case No. 356 until said
possession was transferred to the defendant Manuel de Guzman.
"6. That from March 20, 1920, the plaintiff Natalio Enriquez has been
in possession and enjoyment of a portion of the land, the subject matter of the
complaint herein, by virtue of a deed of sale executed in his favor by Attorney
Agustin Alvarez, who, in turn, acquired it from the other plaintiff Martin
Mendoza, until June 25, 1924.
"The parties desire to submit, as they do submit, under this stipulation
of facts the following questions:
"(a) The amount of the indemnity to be paid to the defendant for the
improvements made by him on said lot and the basis upon which said amount
shall be fixed.
"(b) Whether or not the defendant is obliged to render an account of the
fruits received by him from June 25, 1924, until the improvements are delivered
after same have been paid for.
"(c) Whether the value of said fruits and products received by the
defendant shall be applied to the indemnity to which he is entitled, or whether
said defendant is obliged to deliver to the plaintiffs the remainder in case of
excess.
"(d) Whether or not the defendant has the right to be paid by the
plaintiffs in whole or in part for the value of the fruits received by Martin
Mendoza and Natalio Enriquez from the respective dates that they were in
possession and enjoyment of the land until June 25, 1924.
"The parties at the same time that they submit to the court for decision
the questions presented in the above stipulation reserve to themselves, whatever
said decision may be, the right to present later their evidence in support of their
respective views with respect to the amount of the indemnity.
"After the preliminary questions have been decided, the parties request
that commissioners be appointed to receive said evidence with respect to the
amount of the indemnity in accordance with the views of both parties."
The trial court resolved the questions presented by holding (1) that in accordance
with the provisions of articles 453 and 454 in relation with article 361 of the Civil Code,
the value of the "indemnizacion" to be paid to the defendant should be fixed according to
the necessary and useful expenses incurred by him in introducing "las plantaciones en
cuestion"; (2) that the plaintiffs as the owner of the property have the right to make their
own "las plantaciones hechas por el demandado" upon payment in the form indicated in
No. 1, the defendant having the right to retain the land until the expenditures have been
refunded; (3) that the defendant is obliged to render a detailed and just account of the fruits
and other profits received by him from the property for their due application; and (4) that
the value of the fruits received by the defendant should first be applied to the payment of
the "indemnizacion," and in case that it exceeds the value of the "indemniza-cion," the
excess shall be returned to the plaintiffs With respect to the last question as to whether or
not the plaintiffs are obliged to return to the defendant the value of the fruits received by
them before the defendant took possession of the land, the trial court abstained from
making any pronouncement for the reason that the circumstances under which the plaintiffs
acquired possession and the defendant again acquired it were not before him, the parties
needing to submit their evidence with respect to this point.
At the trial which followed and at the instance of the parties, two commissioners
were appointed with instructions to inspect the land and to count the number of coconut
trees planted thereon, determining the number of fruitbearing trees and those that are not
fruit-bearing as well as the condition of the same. After trial, Judge of First Instance Gloria
rendered judgment declaring (a) that the defendant Manuel de Guzman and the intervenor
Bernardo Solis have the right to collect from the plaintiffs Martin Mendoza and Natalio
Enriquez the sum of P2,046 as compensation for the necessary and useful expenditures in
the proportion of 20 per cent for Manuel de Guzman and 80 per cent for Bernardo Solis;
and (b) that Manuel de Guzman and Bernardo Solis are obliged to pay to the plaintiffs the
sum of P666.93 per annum from June 25, 1924, one-fifth of this amount to be paid by
Manuel de Guzman and the other four-fifths by Bernardo Solis. As on the date when this
judgment was rendered, that is on September 23, 1927, the amount that the plaintiffs were
required to pay to the defendant and intervenor exceeded the amount that the latter were to
pay the former, the defendant and intervenor were ordered to deliver the land and its
improvements as soon as the plaintiffs have paid the difference, without special
pronouncement as to costs.
The appeal of the defendant and intervenor is based on fourteen assigned errors
relating to both questions of fact and of law. The question of fact mainly concerns the
amount to be paid as "indemnizacion" in the form of necessary and useful expenditures
incurred by the defendant. The question of law mainly concerns the interpretation of
articles 361, 453, and 454 of the Civil Code. Counsel for the appellants has presented a
learned brief divided into three chapters. Counsel for the appellees has countered with an
equally helpful brief in which the fourteen assigned errors are reduced for purposes of
argument to four fundamental questions. It would not be profitable and it is not necessary
to follow opposing counsel into all of their refinements of fact and law.
As to the facts, the findings of the trial judge should be given effect. An
examination of the evidence shows that these findings are fully substantiated. Our only
22
 doubt has been as to the just value for each coconut tree now found on the land. However,
everything considered, we have at last determined that we would not be justified in
changing the value per tree of P2 as fixed in the trial court. With respect to the fruits
received by the defendant while the land was in his possession, the finding in the trial court
is correct.
With the facts as above indicated, little time need be taken to discuss the points of
law. Article 361 of the Civil Code in the original Spanish text uses the word
"indemnizacion." However one may speculate as to the true meaning of the term
"indemnizacion" whether correctly translated as "compensation" or "indemnity," the
amount of the "indemnizacion" is the amount of the expenditures mentioned in articles 453
and 454 of the Civil Code, which in the present case is the amount of the necessary and
useful expenditures incurred by the defendant. Necessary expenses have been variously
described by the Spanish commentators as those made for the preservation of the thing (4
Manresa's Comentarios al Codigo Civil, p. 258); as those without which the thing would
deteriorate or be lost (Scaevola's Comentarios al Codigo Civil, p. 408); as those that
augment the income of the things upon which they are expended (4 Manresa's Comentarios
al Codigo Civil, p. 261; 8 Scævola's Comentarios al Codigo Civil, p. 416). Among the
necessary expenditures are those incurred for cultivation, production, upkeep, etc. (4
Manresa's Comentarios al Codigo Civil, p. 257). Here the plaintiffs have chosen to take the
improvements introduced on the land and are disposed to pay the amount of the necessary
and useful expenses incurred by the defendant. Inasmuch as the retentionist, who is not
exactly a possessor in good faith within the meaning of the law, seeks to be reimbursed for
the necessary and useful expenditures, it is only just that he should account to the owners of
the estate for any rents, fruits, or crops he has gathered from it.
In brief, therefore, and with special reference to the decision appealed from, the
errors assigned on appeal, and the argument of counsel as addressed to the decision in the
lower court and the assignment of errors, we may say that we are content to make the
findings of fact and law of Judge Gloria in the lower court the findings of fact and law in
the appellate court.
Based on the foregoing considerations, the judgment appealed from will be
affirmed, with the costs of this instance against the appellants.
[G.R. No. 16736. December 22, 1921.]
EVARISTA ROBLES and her husband ENRIQUE MARTIN, plaintiff-
appellees, vs. LIZARRAGA HERMANOS, defendant-appellant.
[G.R. No. 16661. December 22, 1921]
SOCIEDAD LIZARRAGA HERMANOS, vs. EVARISTA ROBLES DE MARTIN and ENRIQUE MARTIN,
[G.R. No. 16662. December 22, 1921]
EVARISTA ROBLES and her husband ENRIQUE MARTIN, vs. LIZARRAGA HERMANOS and THE
REGISTER OF DEEDS OF ILOILO
Owing to the character of the facts in the three above entitled cases and the
intimate connection existing between them, they were, by agreement of the parties, tried
together in the court below, and on appeal this court was requested to try them at the same
time, which was done, and these three cases are jointly adjudged in the present decision.
The following facts are undisputed:
Anastasia de la Rama died on the 17th of October, 1916, leaving six children, to
wit, Magdalena, Jose, Evarista, Zacarias, Felix, and Purificacion, surnamed Robles, and
some properties, among which is house No. 4 on Iznart Street in the city of Iloilo,
concerning which a controversy arose which developed into the three cases now under
consideration.
The children and heirs of Anastasia de la Rama entered into partnership with
Lizarraga Hermanos in liquidation and settlement of their accounts, by virtue of which the
competent court awarded to said partnership the properties left by the deceased, including
the aforesaid house No. 4 on Iznart Street.
Evarista Robles, one of the aforesaid heirs, since before the death of her mother
Anastasia de la Rama, has been with her husband occupying the aforesaid house No. 4 on
Iznart Street, at the beginning, by permission of her mother, later on by the consent of her
coheirs, and lastly by agreement with the partnership, Lizarraga Hermanos, to whom it had
been awarded, having made some improvements on the house, the value of which is fixed
at four thousand five hundred pesos (P4,500), and paying to said partnership forty pesos
(P40) monthly as rent of the upper story.
On March 18, 1918, Lizarraga Hermanos notified Evarista Robles (Exhibit J) that
beginning April next the rent of the upper story of the house would be raised to sixty pesos
(P60) a month, and that, if she did not agree to the new rate of rent, she might vacate the
house. Evarista Robles refused to pay such a new rate of rent and to vacate the house, and
Lizarraga Hermanos brought suit against her for ejectment. Evarista Robles sued Lizarraga
Hermanos afterwards to recover the value of the improvements, and demanded, in another
action, that said value be noted on the certificate of title as an encumbrance.
Evarista Robles contends that the understanding with Lizarraga Hermanos by
virtue of which she continued to occupy the house and made the improvements, was a
contract whereby it was agreed to sell her the said building on Iznart Street, the deed of sale
to be executed as soon as the title deeds of the property were transferred to the name of said
partnership; that by virtue of this contract she remained in the occupation of the building
and made the improvements; that, as one of the stipulations in the contract of sale of the
estate, Evarista Robles assumed the liability of an encumbrance of fourteen thousand pesos
(P14,000) on the estate and another one in favor of the Agricultural Bank and its successor,
23
the National Bank, paying the interest thereon as well as the land tax and the premiums of
the fire insurance, all of which payments were made through the same firm of Lizarraga
Hermanos who, as a result of the liquidation of accounts, held funds in their possession
belonging to Evarista Robles. These payments are evidenced by Exhibits A, B, C, F, H, and
I. It should here be noted that Evarista Robles does not seek the execution of the proper
instrument to evidence this contract of sale, nor the performance thereof. She only claims
the cost of the improvements made at her expense and that this be recorded in the
corresponding certificate of title.
While the firm of Lizarraga Hermanos does not question the fact that said
improvements have been made and that their value amounts to four thousand five hundred
pesos (P4,500), it denies, however, having entered into any agreement with Evarista Robles
for the sale of the building in question. In deciding the case No. 16736 of this court, the
court a quo found such a verbal contract of sale to have been proven not only by Exhibit A,
which leads to such a conclusion, but by the oral evidence, which, in its opinion, had a
preponderance in favor thereof, and by the corroborative evidence consisting in the fact of
Lizarraga Hermanos having executed the deed of sale of the warehouse mentioned in the
said Exhibit A. This firm questions the right of Evarista Robles to the improvements under
consideration.
The fundamental questions upon which hinges the controversy in these three
cases are: First, whether Evarista Robles is the owner of the aforesaid improvements and
has the right to demand payment of their value (case No. 16736); second, whether she has
any right to retain the building until the said value is paid to her (case No. 16661); and
third, whether a note for the four thousand five hundred pesos (P4,500), the value of the
above-mentioned improvements, as an encumbrance on this estate (case No. 16662), should
be made on the title deeds thereof.
Regarding the controversy in the case No. 16736, attention is called to article 453
of the Civil Code which reads:
"Necessary expenditures shall be refunded to every possessor,
but only the possessor in good faith may retain the thing until they are
repaid to him.
"Useful expenditures shall be paid the possessor in good faith
with the same right of retention, the person who has defeated him in his
possession having the option of refunding the amount of such
expenditures or paying him the increase in value which the thing has
acquired by reason thereof."
This provision of law is in force and applies to personal as well as real property.
The expenditures incurred in these improvements were not necessary inasmuch
as without them the house would have continued to stand just as before, but were useful,
inasmuch as with them the house better serves the purpose for which it was intended, being
used as a residence, and the improvements consisting of the addition of a dining room,
kitchen, closet, and bathroom in the lower and upper stories of the house, and a stable,
suitable as a coach house and dwelling, it is beyond doubt that such improvements are
useful to the building. One of the chiefs of the firm of Lizarraga Hermanos, on the occasion
of a luncheon in the house, on noting the improvements, could not refrain from expressing
that such improvements added much to the value of the building (folio 25, stenographic
notes).
Now then, was Evarista Robles a possessor in good faith when she made those
improvements? Article 434 provides that "good faith is always presumed and the burden of
proving bad faith on the part of the possessor rests upon the person alleging it." Lizarraga
Hermanos did not allege, nor prove in the first instance the bad faith characterizing Evarista
Robles' possession, who, as shown in the records and heretofore stated, began to occupy the
house by permission of the former owner, her mother Anastasia de la Rama, and continued
later in the occupation by the consent of her coheirs, and afterwards by considering herself
the future owner of the building by virtue of the contract with the present owner, Lizarraga
Hermanos. The evidence shows that said improvements were begun about the end of
December, 1916, after the agreement with Lizarraga Hermanos for the sale thereof to
Evarista Robles. (Folios 23, 24, 25, stenographic notes.)
We find that in the court below the presumption of good faith in favor of Evarista
Robles' possession at the time she made the improvements on the property was neither
disputed nor discussed, but on the contrary, there is positive evidence sufficient to support
the conclusion that when she made the improvements on the aforesaid building she was
possessing it in good faith.
If the improvements are useful and Evarista Robles' possession was in good faith,
the conclusion set out in article 453 of the Civil Code, supra, is inevitable; Evarista Robles
is the owner of such improvements, and entitled to reimbursement therefor, and to retain
the building until the same is made.
One of the proofs establishing the fact that Evarista Robles' possession was in
good faith is found in Exhibit A, which textually is as follows:
"Value of house} For Evarista
"Value of warehouse} For Evarista P16,500.00
"Evarista pays them in this way
—
"Balance in h/f owing from L.
Hnos. P1,424.35
Legacy to Evarista 500.00
Legacy to J. Robles 500.00
Legacy to Ambrosio 100.00
Credit Agricultural Bank 14,000.00
Paid by Zacarias 16,524.35
Cash balance carried forward 24.35
________

24
 "Liquidation 16,500.00"
Severiano Lizarraga acknowledged having drawn this document and admitted it
to be in his own hand-writing (folios 6-8, transcript of stenographic notes taken in case No.
16661 at the trial held December 6, 1919). Taking into consideration the explanation he
gives of the contents of this exhibit, there is the inevitable conclusion which is obviously
inferred from the phrases "Value of house — of warehouse — For Evarista P16,500 —
Evarista pays them in this way," that Evarista Robles was to become the owner of the house
(which is the one in question) and the warehouse for sixteen thousand five hundred pesos
(P16,500), which sum she was to pay by assuming the liability of all the amounts
enumerated in the said memorandum all the way through.
But the admissibility of this document as evidence is disputed by reference to
section 335, case No. 5, of the Code of Civil Procedure, which in the English text, which is
clearer on this point, reads:
"SEC. 335.Agreements invalid unless made in writing. — In the
following cases an agreement hereafter made shall
be unenforceable (Italics ours) by action unless the same, or some note or
memorandum thereof, be in writing, and subscribed by the party charged,
or by his agent; evidence, therefore, of the agreement cannot be received
without the writing, or secondary evidence of its contents:
"No. 5. An agreement for … sale of real property, etc."
It should be noted, first of all, that this rule of evidence does not go to the extent
of rendering invalid any verbal contract for the sale of real property (Conlu vs. Araneta and
Guanko, 15 Phil., 387), but declares inadmissible any evidence of such a contract other
than the document itself of the sale or some memorandum signed by the party charged, in
so far as the object of the action instituted is to enforce performance of said contract of sale.
But we are not dealing with that phase in any of the cases now before us. This document
was introduced only to reinforce the proofs relative to the good faith characterizing the
possession of Evarista Robles when she made the improvements in question, to the effect
that if she made them, it was because she entertained the well-founded, any certain belief
that she was making them on a building that was to become her property by virtue of the
verbal contract of sale.
In the action wherein Evarista Robles and her husband ask that they be adjudged
owners of these improvements and that their value be paid to them, Lizarraga Hermanos
filed a general denial and a counterclaim and cross-complaint for nineteen thousand pesos
(P19,000) as compensation for damages alleged to have been sustained by them on account
of their inability to sell the house and the warehouse, due to the fact that the buyer imposed
the condition that the house should be vacated, which the plaintiffs refused to do.
It is a fact that the value of the improvements in question has not as yet been paid
by Lizarraga Hermanos. Wherefore, if Evarista Robles and her husband are entitled to
retain the building until the value of such improvements is paid them, Lizarraga Hermanos
have not yet any right to oust them from the building, nor, therefore, to be indemnified for
any damages caused by the refusal of the plaintiffs founded on their legitimate rights.
In regard to the ejectment sought in the case No. 16661, the suit was brought by
Lizarraga Hermanos in the justice of the peace court of Iloilo on May 6, 1918, based on the
failure of Evarista Robles and her husband to pay the rent of the upper story of the house in
question for the month of April of that year, amounting to sixty pesos (P60), and on the
refusal of said spouses to quit the building. These spouses in their answer alleged as special
defense that they had never been the tenants of Lizarraga Hermanos until November, 1917,
when they became so "under the special circumstances" under which the plaintiff
partnership sold the building, whereon they later made, with the latter's consent,
improvements amounting to four thousand five hundred pesos (P4,500), setting out the
other stipulations and conditions hereinabove stated, which were incorporated into the
contract of sale, and prayed, under their counterclaim, that Lizarraga Hermanos be
sentenced to pay the sum of four thousand five hundred pesos (P4,500), the value of the
improvements referred to, and under their cross-complaint, that said partnership be ordered
to pay ten thousand pesos (P10,000) as compensation for damages alleged to have been
sustained by the aforesaid spouses due to the aforesaid partnership's act, praying lastly, in
view of the questions raised, that the case be regarded not as one of unlawful detainer, but
for the recovery of title to real property, and that the court of the justice of the peace abstain
from taking cognizance thereof for want of jurisdiction.
The case having been appealed to the Court of First Instance, these allegations
were reproduced.
In the Court of First Instance, Lizarraga Hermanos demurred to this counterclaim
and cross-complaint, and the demurrer was sustained by the court in its decision on the
merits of the case, whereby the defendants are sentenced to return to Lizarraga Hermanos
the possession of the building, to pay the rents thereof due from April, 1918, until they
vacate the house, at the rate of sixty pesos (P60) per month, and the costs.
From this judgment Evarista Robles and her husband have appealed, assigning as
errors of the court a quo in finding that Lizarraga Hermanos were entitled to bring action
for unlawful detainer, and ordering them to return the possession of the building.
If Evarista Robles and her husband were mere lessees of this building, the
plaintiff's action for unlawful detainer is obvious and must prosper. But, were Evarista
Robles and her husband mere lessees?
As above stated, we hold that there existed a contract of sale of this building
executed by Lizarraga Hermanos in favor of Evarista Robles about November, 1916, the
performance of which is not, however, sought to be enforced, nor would it be enforceable if
the evidence offered in the action instituted for the purpose be not the document itself of
25
the sale, or a memorandum thereof, signed by the party bound by the contract and required
in the action to fulfill it, and objection be made to said evidence, as was done here.
The possession of these spouses was in no way begun by virtue of any lease
whatever, since it is not disputed, and is a proven fact, that they came to occupy the
building by permission of the mother of Evarista Robles. Upon said mother's death, they
continued to occupy the property by the consent of the coheirs. After the assignment of the
property to Lizarraga Hermanos was concluded, but before the title deeds were transferred
to the name of this partnership, an agreement was made for the sale of the building to
Evarista Robles and her husband, the latter agreeing in the meantime to pay to Lizarraga
Hermanos a certain sum per month — forty pesos (P40) — by way of compensation for the
occupation of the building until the execution of the deed of sale in favor of the occupants.
Considering abstractly the naked fact that these spouses occupied the house by
paying a certain sum for its occupation, it would seem that this is indeed a case of lease.
But such was not the contract. It was simply the sense of justice of the parties that led them
to make the stipulation that, while the conveyance of the building was being carried into
effect in due form, the future owners should pay a certain sum for its possession. This
peculiar situation continued for all the time in which the said spouses made and completed
the improvements in question until Lizarraga Hermanos changed their resolution to sell the
building to Evarista Robles and her husband. But then all the improvements in question had
already been made, and when these spouses were requested to vacate the building, they
answered, and gave it to understand, that they would do so as soon as the value of the
improvements was paid to them. Up to that time they were not lessees strictly speaking.
Did they become so afterwards? Neither; for since that moment they have been, as are at
present, in possession of the building by virtue of the right that they had, and do have, to
retain it until the value of the improvements is paid to them. And it was after these spouses
had manifested their intention not to leave the building until they were reimbursed for the
improvements made thereon that this action for unlawful detainer was instituted.
Before these improvements were made, or before these spouses demanded
payment of their value, that is, while the possession was partly based on the stipulation with
color of lease, an action for unlawful detainer might have, in a sense, been justifiable,
though not entirely maintainable, owing to the fact that such possession was based
primarily on the well-founded belief of the occupants that they were to become the owners
of the house in their possession, that the monthly payment being a provisional arrangement,
an incidental and peremptory stipulation, while the solemn formalities of the conveyance
were being complied with.
But after the improvements had been made and Lizarraga Hermanos had
manifested their resolution to rescind the contract of sale and not to pay for them, then the
possession of the aforesaid spouses lost all color of lease, and turns out to be a possession
based only upon the latter's right to retain the building. And these were all the attending
circumstances of said possession when the action for unlawful detainer was commenced.
We are, therefore, of opinion, and so hold, that Lizarraga Hermanos were not,
and are not, entitled to maintain any action for unlawful detainer so long as they do not pay
the value of the improvements in question.
We will now take up the case No. 16662 wherein Evarista Robles and her
husband ask that these improvements be noted on the proper certificate of title as an
encumbrance.
These spouses pray in their complaint for the cancellation of the said certificate
of title, which is the transfer certificate No. 526, a substitute of the original No. 32 of the
office of the register of deeds of Iloilo.
If the object of these spouses is, as it cannot be otherwise, to have such an
encumbrance noted, the cancellation is not necessary, and, of course, not justifiable. At any
rate, the fraud alleged in this last action to have been committed precisely to secure such a
transfer certificate cannot be held proven.
But it having been decided that these spouses are entitled to demand payment of
the value of the improvements and to retain the building until such value is paid them, it
only remains for us to determine whether this right of retention has the character of a real
right to be regarded as one of the encumbrances referred to in section 70 and the following
sections of the Land Registration Act.
It being a burden on the building to the extent of being inseparably attached to the
possession thereof, this right of retention must necessarily be a real one. If so, as we regard,
and find, it to be, it is but just that such an encumbrance should be noted on the transfer
certificate No. 526 issued by the register of deeds of Iloilo in favor of Lizarraga Hermanos,
or on any substitute thereof.
As a consequence of all the foregoing, we affirm the judgments appealed from in
the three cases in so far as they are in harmony with the conclusions herein set out, and
reverse them in so far as they are in conflict therewith, and it is hereby adjudged and
decreed:
First. That Lizarraga Hermanos pay to the spouses Evarista Robles and Enrique
Martin the sum of four thousand five hundred pesos (P4,500), the value of the
improvements referred to in these cases, with right on the part of said spouses to retain the
building in question until the payment hereby ordered is made.
Second. That said spouses Evarista Robles and Enrique Martin vacate the
aforesaid building immediately after the receipt, or the legal tender, of the payment hereby
decreed.
Third. That the said spouses Evarista Robles and Enrique Martin pay to Lizarraga
Hermanos a compensation for the occupation of the building at the rate of forty pesos (P40)
a month, beginning with the month of April, 1918, until they vacate the aforesaid building
as it is ordered herein.
26
 Fourth. That upon payment of his lawful fees, the register of deeds note said right
of retention on the back of the transfer certificate No. 526 issued in favor of Lizarraga
Hermanos, or of any other certificate standing in lieu thereof, concerning the said building,
which note will remain in force until the payment of the aforesaid improvements is made as
above ordered. Without pronouncement as to costs in this instance, so ordered.
[G.R. No. L-54526. August 25, 1986.]
METROPOLITAN WATERWORKS AND SEWERAGE SYSTEM, petitioner, vs. THE
COURT OF APPEALS and THE CITY OF DAGUPAN, respondents.
This is a petition for review on certiorari of the decision of the Court of Appeals which affirmed
the decision of the then Court of First Instance of Pangasinan. The lower court had declared
respondent City of Dagupan the lawful owner of the Dagupan Waterworks System and held that
the National Waterworks and Sewerage Authority, now petitioner Metropolitan Waterworks and
Sewerage System, was a possessor in bad faith and hence not entitled to indemnity for the useful
improvements it had introduced.
Before proceeding further, it may be necessary to invite attention to the common error of joining
the court (be it a Regional Trial Court, the Intermediate Appellate Court, or the Sandiganbayan)
as a party respondent in an appeal by certiorari to this Court under Rule 45 of the Rules of
Court. The only parties in an appeal by certiorari are the appellant as petitioner and the appellee
as respondent. (Cf. Elks Club vs. Rovira, 80 Phil. 272) The court which rendered the judgment
appealed from is not a party in said appeal. It is in the special civil action of certiorari under
Section 5 of Rule 65 of the Rules of Court where the court or judge is required to be joined as
party defendant or respondent. The joinder of the Intermediate Appellate Court or the
Sandiganbayan as party respondent in an appeal by certiorari is necessary in cases where the
petitioner-appellant claims that said court acted without or in excess of its jurisdiction or with
grave abuse of discretion. An example of this is a case where the petitioner-appellant claims that
the Intermediate Appellate Court or the Sandiganbayan acted with grave abuse of discretion in
making its findings of fact, thus justifying the review by this court of said findings of fact. (See
the exceptions to the rule of conclusiveness of the findings of fact of the Intermediate Appellate
Court or the Sandiganbayan in the case of Sacay vs. Sandiganbayan, G.R. Nos. 66497-98, July
10, 1986.) In such a case, the petition for review on certiorari under Rule 45 of the Rules of
Court is at the same time a petition for certiorari under Rule 65, and the joinder of the
Intermediate Appellate Court or the Sandiganbayan becomes necessary. (Cf. Lianga Lumber
Company vs. Lianga Timber Co., Inc., March 31, 1977, 76 SCRA 197).
The City of Dagupan (hereinafter referred to as the CITY) filed a complaint against the former
National Waterworks and Sewerage Authority (hereinafter referred to as the NAWASA), now
the Metropolitan Waterworks and Sewerage System (hereinafter referred to as MWSS), for
recovery of the ownership and possession of the Dagupan Waterworks System. NAWASA
interposed as one of its special defenses R.A. 1383 which vested upon it the ownership,
possession and control of all waterworks systems throughout the Philippines and as one of its
counterclaims the reimbursement of the expenses it had incurred for necessary and useful
improvements amounting to P255,000.00. Judgment was rendered by the trial court in favor of
the CITY on the basis of a stipulation of facts. The trial court found NAWASA to be a possessor
in bad faith and hence not entitled to the reimbursement claimed by it. NAWASA appealed to
the then Court of Appeals and argued in its lone assignment of error that the CITY should have
been held liable for the amortization of the balance of the loan secured by NAWASA for the
improvement of the Dagupan Waterworks System. The appellate court affirmed the judgment of
the trial court and ruled as follows:
"However, as already found above, these useful expenses were made in
utter bad faith for they were instituted after the complaint was filed and
after numerous Supreme Court decisions were promulgated declaring
unconstitutional the taking by NAWASA of the patrimonial waterworks
systems of cities, municipalities and provinces without just compensation.
"Under Article 546 of the New Civil Code cited by the appellant, it is
clear that a builder or a possessor in bad faith is not entitled to indemnity
for any useful improvement on the premises. (Santos vs. Mojica, L-
25450, Jan. 31, 1969). In fact, he is not entitled to any right regarding the
useful expenses (II Paras (1971) 387). He shall not have any right
whatsoever. Consequently, the owner shall be entitled to all of the useful
improvements without any obligation on his part (Jurado, Civil Law
Reviewer (1974) 223)."
Petitioner-Appellant MWSS, successor-in-interest of the NAWASA, appealed to this Court
raising the sole issue of whether or not it has the right to remove all the useful improvements
introduced by NAWASA to the Dagupan Waterworks System, notwithstanding the fact that
NAWASA was found to be a possessor in bad faith. In support of its claim for removal of said
useful improvements, MWSS argues that the pertinent laws on the subject, particularly Articles
546, 547 and 549 of the Civil Code of the Philippines, do not definitely settle the question of
whether a possessor in bad faith has the right to remove useful improvements. To bolster its
claim MWSS further cites the decisions in the cases of Mindanao Academy, Inc. vs. Yap (13
SCRA 190) and Carbonell vs. Court of Appeals (69 SCRA 99).
The CITY in its brief questions the raising of the issue of the removal of useful improvements
for the first time in this Court, inasmuch as it was not raised in the trial court, much less assigned
as an error before the then Court of Appeals. The CITY further argues that petitioner, as a
possessor in bad faith, has absolutely no right to the useful improvements; that the rulings in the
cases cited by petitioner are not applicable to the case at bar; that even assuming that petitioner
has the right to remove the useful improvements, such improvements were not actually
identified, and hence a rehearing would be required which is improper at this stage of the
27
proceedings; and finally, that such improvements, even if they could be identified, could not be
separated without causing substantial injury or damage to the Dagupan Waterworks System.
The procedural objection of the CITY is technically correct. NAWASA should have alleged its
additional counterclaim in the alternative - for the reimbursement of the expenses it had incurred
for necessary and useful improvements or for the removal of all the useful improvements it had
introduced.
Petitioner, however, argues that although such issue of removal was never pleaded as a
counterclaim, nevertheless it was joined with the implied consent of the CITY, because the latter
never filed a counter-manifestation or objection to petitioner's manifestation wherein it stated
that the improvements were separable from the system, and quotes the first part of Sec. 5 of Rule
10 of the Rules of Court to support its contention. Said provision reads as follows:
"SEC. 5. Amendment to conform to or authorize presentation of evidence.
— When issues not raised by the pleadings are tried by express or implied
consent of the parties, they shall be treated in all respects, as if they bad
been raised in the pleadings. Such amendment of the pleadings as may be
necessary to cause them to conform to the evidence and to raise these
issues may be made upon motion of any party at any time, even after
judgment; but failure so to amend does not affect the result of the trial of
these issues . . . "
This argument is untenable because the above-quoted provision is premised on the fact that
evidence had been introduced on an issue not raised by the pleadings without any objection
thereto being raised by the adverse party. In the case at bar, no evidence whatsoever had been
introduced by petitioner on the issue of removability of the improvements and the case was
decided on a stipulation of facts. Consequently, the pleadings could not be deemed amended to
conform to the evidence.
However, We shall overlook this procedural defect and rule on the main issue raised in this
appeal, to wit: Does a possessor in bad faith have the right to remove useful improvements? The
answer is clearly in the negative. Recognized authorities on the subject are agreed on this
point.**
Article 449 of the Civil Code of the Philippines provides that "he who builds, plants or sows in
bad faith on the land of another, loses what is built, planted or sown without right to indemnity."
As a builder in bad faith, NAWASA lost whatever useful improvements it had made without
right to indemnity (Santos vs. Mojica, Jan. 31, 1969, 26 SCRA 703).
Moreover, under Article 546 of said code, only a possessor in good faith shall be refunded for
useful expenses with the right of retention until reimbursed; and under Article 547 thereof, only
a possessor in good faith may remove useful improvements if the can be done without damage
to the principal thing and if the person who recovers the possession does not exercise the option
of reimbursing the useful expenses. The right given a possessor in bad faith is to remove
improvements applies only to improvements for pure luxury or mere pleasure, provided the
thing suffers no injury thereby and the lawful possessor does not prefer to retain them by paying
the value they have at the time he enters into possession (Article 549, Id.).
The decision in the case of Mindanao Academy, Inc. vs. Yap (13 SCRA 190) cited by petitioner
does not support its stand. On the contrary, this Court ruled in said case that "if the defendant
constructed a new building, as he alleges, he cannot recover its value because the construction
was done after the filing of the action for annulment, thus rendering him a builder in bad faith
who is denied by law any right of reimbursement." What this Court allowed appellant Yap to
remove were the equipment, books, furniture and fixtures brought in by him, because they were
outside of the scope of the judgment and may be retained by him.
Neither may the decision in the case of Carbonell vs. Court of Appeals (69 SCRA 99), also cited
by petitioner, be invoked to modify the clear provisions of theCivil Code of the Philippines that
a possessor in bad faith is not entitled to reimbursement of useful expenses or to removal of
useful improvements.
In said case, both the trial court and the Court of Appeals found that respondents Infantes were
possessors in good faith. On appeal, the First Division of this Court reversed the decision of the
Court of Appeals and declared petitioner Carbonell to have the superior right to the land in
question. On the question of whether or not respondents Infantes were possessors in good faith,
four Members ruled that they were not, but as a matter of equity allowed them to remove the
useful improvements they had introduced on the land. Justice Teehankee (now Chief Justice)
concurred on the same premise as the dissenting opinion of Justice Muñoz Palma that both the
conflicting buyers of the real property in question, namely petitioner Carbonell as the first buyer
and respondents Infantes as the second buyer, may be deemed purchasers in good faith at the
respective dates of their purchase. Justice Muñoz Palma dissented on the ground that since both
purchasers were undoubtedly in good faith, respondents Infantes' prior registration of the sale in
good faith entitled them to the ownership of the land. Inasmuch as only four Members concurred
in ruling that respondents Infantes were possessors in bad faith and two Members ruled that they
were possessors in good faith, said decision does not establish a precedent. Moreover, the
equitable consideration present in said case are not present in the case at bar.
WHEREFORE, the decision of the appellate court is affirmed with costs against petitioner.
SO ORDERED.
28