G.R. No. L-17587 September 12, 1967 Rizal.
67 Rizal. It appears, however, that this application for naturalization was withdrawn when it was discovered
PHILIPPINE BANKING CORPORATION, representing the estate of JUSTINA SANTOS Y CANON
FAUSTINO, deceased, plaintiff-appellant,
vs.
LUI SHE in her own behalf and as administratrix of the intestate estate of Wong Heng,
deceased, defendant-appellant.
Nicanor S. Sison for plaintiff-appellant.
Ozaeta, Gibbs & Ozaeta for defendant-appellant.
CASTRO, J.:
Justina Santos y Canon Faustino and her sister Lorenzo were the owners in common of a piece of land
in Manila. This parcel, with an area of 2,582.30 square meters, is located on Rizal Avenue and opens
into Florentino Torres street at the back and Katubusan street on one side. In it are two residential
houses with entrance on Florentino Torres street and the Hen Wah Restaurant with entrance on Rizal
Avenue. The sisters lived in one of the houses, while Wong Heng, a Chinese, lived with his family in the
restaurant. Wong had been a long-time lessee of a portion of the property, paying a monthly rental of
P2,620.
On September 22, 1957 Justina Santos became the owner of the entire property as her sister died with
no other heir. Then already well advanced in years, being at the time 90 years old, blind, crippled and
an invalid, she was left with no other relative to live with. Her only companions in the house were her 17
dogs and 8 maids. Her otherwise dreary existence was brightened now and then by the visits of Wong's
four children who had become the joy of her life. Wong himself was the trusted man to whom she
delivered various amounts for safekeeping, including rentals from her property at the corner of Ongpin
and Salazar streets and the rentals which Wong himself paid as lessee of a part of the Rizal Avenue
property. Wong also took care of the payment; in her behalf, of taxes, lawyers' fees, funeral expenses,
masses, salaries of maids and security guard, and her household expenses.
"In grateful acknowledgment of the personal services of the lessee to her," Justina Santos executed on
November 15, 1957 a contract of lease (Plff Exh. 3) in favor of Wong, covering the portion then already
leased to him and another portion fronting Florentino Torres street. The lease was for 50 years,
although the lessee was given the right to withdraw at any time from the agreement; the monthly rental
was P3,120. The contract covered an area of 1,124 square meters. Ten days later (November 25), the
contract was amended (Plff Exh. 4) so as to make it cover the entire property, including the portion on
which the house of Justina Santos stood, at an additional monthly rental of P360. For his part Wong
undertook to pay, out of the rental due from him, an amount not exceeding P1,000 a month for the food
of her dogs and the salaries of her maids.
On December 21 she executed another contract (Plff Exh. 7) giving Wong the option to buy the leased
premises for P120,000, payable within ten years at a monthly installment of P1,000. The option, written
in Tagalog, imposed on him the obligation to pay for the food of the dogs and the salaries of the maids
in her household, the charge not to exceed P1,800 a month. The option was conditioned on his
obtaining Philippine citizenship, a petition for which was then pending in the Court of First Instance of
PROPERTY ARTS. 419-
that he was not a resident of Rizal. On October 28, 1958 she filed a petition to adopt him and his
children on the erroneous belief that adoption would confer on them Philippine citizenship. The error
was discovered and the proceedings were abandoned.
On November 18, 1958 she executed two other contracts, one (Plff Exh. 5) extending the term of the
lease to 99 years, and another (Plff Exh. 6) fixing the term of the option of 50 years. Both contracts are
written in Tagalog.
In two wills executed on August 24 and 29, 1959 (Def Exhs. 285 & 279), she bade her legatees to
respect the contracts she had entered into with Wong, but in a codicil (Plff Exh. 17) of a later date
(November 4, 1959) she appears to have a change of heart. Claiming that the various contracts were
made by her because of machinations and inducements practiced by him, she now directed her
executor to secure the annulment of the contracts.
On November 18 the present action was filed in the Court of First Instance of Manila. The complaint
alleged that the contracts were obtained by Wong "through fraud, misrepresentation, inequitable
conduct, undue influence and abuse of confidence and trust of and (by) taking advantage of the
helplessness of the plaintiff and were made to circumvent the constitutional provision prohibiting aliens
from acquiring lands in the Philippines and also of the Philippine Naturalization Laws." The court was
asked to direct the Register of Deeds of Manila to cancel the registration of the contracts and to order
Wong to pay Justina Santos the additional rent of P3,120 a month from November 15, 1957 on the
allegation that the reasonable rental of the leased premises was P6,240 a month.
In his answer, Wong admitted that he enjoyed her trust and confidence as proof of which he volunteered
the information that, in addition to the sum of P3,000 which he said she had delivered to him for
safekeeping, another sum of P22,000 had been deposited in a joint account which he had with one of
her maids. But he denied having taken advantage of her trust in order to secure the execution of the
contracts in question. As counterclaim he sought the recovery of P9,210.49 which he said she owed him
for advances.
Wong's admission of the receipt of P22,000 and P3,000 was the cue for the filing of an amended
complaint. Thus on June 9, 1960, aside from the nullity of the contracts, the collection of various
amounts allegedly delivered on different occasions was sought. These amounts and the dates of their
delivery are P33,724.27 (Nov. 4, 1957); P7,344.42 (Dec. 1, 1957); P10,000 (Dec. 6, 1957); P22,000 and
P3,000 (as admitted in his answer). An accounting of the rentals from the Ongpin and Rizal Avenue
properties was also demanded.
In the meantime as a result of a petition for guardianship filed in the Juvenile and Domestic Relations
Court, the Security Bank & Trust Co. was appointed guardian of the properties of Justina Santos, while
Ephraim G. Gochangco was appointed guardian of her person.
In his answer, Wong insisted that the various contracts were freely and voluntarily entered into by the
parties. He likewise disclaimed knowledge of the sum of P33,724.27, admitted receipt of P7,344.42 and
P10,000, but contended that these amounts had been spent in accordance with the instructions of
Justina Santos; he expressed readiness to comply with any order that the court might make with
respect to the sums of P22,000 in the bank and P3,000 in his possession.
The case was heard, after which the lower court rendered judgment as follows:
Page 1 of 50
 [A]ll the documents mentioned in the first cause of action, with the exception of the first which
is the lease contract of 15 November 1957, are declared null and void; Wong Heng is
condemned to pay unto plaintiff thru guardian of her property the sum of P55,554.25 with legal
interest from the date of the filing of the amended complaint; he is also ordered to pay the sum
of P3,120.00 for every month of his occupation as lessee under the document of lease herein
sustained, from 15 November 1959, and the moneys he has consigned since then shall be
imputed to that; costs against Wong Heng.
From this judgment both parties appealed directly to this Court. After the case was submitted for
decision, both parties died, Wong Heng on October 21, 1962 and Justina Santos on December 28,
1964. Wong was substituted by his wife, Lui She, the other defendant in this case, while Justina Santos
was substituted by the Philippine Banking Corporation.
Justina Santos maintained — now reiterated by the Philippine Banking Corporation — that the lease
contract (Plff Exh. 3) should have been annulled along with the four other contracts (Plff Exhs. 4-7)
because it lacks mutuality; because it included a portion which, at the time, was in custodia legis;
because the contract was obtained in violation of the fiduciary relations of the parties; because her
consent was obtained through undue influence, fraud and misrepresentation; and because the lease
contract, like the rest of the contracts, is absolutely simulated.
Paragraph 5 of the lease contract states that "The lessee may at any time withdraw from this
agreement." It is claimed that this stipulation offends article 1308 of the Civil Code which provides that
"the contract must bind both contracting parties; its validity or compliance cannot be left to the will of
one of them."
We have had occasion to delineate the scope and application of article 1308 in the early case of Taylor
v. Uy Tieng Piao.1 We said in that case:
Article 1256 [now art. 1308] of the Civil Code in our opinion creates no impediment to the
insertion in a contract for personal service of a resolutory condition permitting the cancellation
of the contract by one of the parties. Such a stipulation, as can be readily seen, does not make
either the validity or the fulfillment of the contract dependent upon the will of the party to whom
is conceded the privilege of cancellation; for where the contracting parties have agreed that
such option shall exist, the exercise of the option is as much in the fulfillment of the contract as
any other act which may have been the subject of agreement. Indeed, the cancellation of a
contract in accordance with conditions agreed upon beforehand is fulfillment.2
And so it was held in Melencio v. Dy Tiao Lay 3 that a "provision in a lease contract that the lessee, at
any time before he erected any building on the land, might rescind the lease, can hardly be regarded as
a violation of article 1256 [now art. 1308] of the Civil Code."
The case of Singson Encarnacion v. Baldomar 4 cannot be cited in support of the claim of want of
mutuality, because of a difference in factual setting. In that case, the lessees argued that they could
occupy the premises as long as they paid the rent. This is of course untenable, for as this Court said, "If
this defense were to be allowed, so long as defendants elected to continue the lease by continuing the
payment of the rentals, the owner would never be able to discontinue it; conversely, although the owner
should desire the lease to continue the lessees could effectively thwart his purpose if they should prefer
to terminate the contract by the simple expedient of stopping payment of the rentals." Here, in contrast,
the right of the lessee to continue the lease or to terminate it is so circumscribed by the term of the
PROPERTY ARTS. 419-
contract that it cannot be said that the continuance of the lease depends upon his will. At any rate, even
if no term had been fixed in the agreement, this case would at most justify the fixing of a period5 but not
the annulment of the contract.
Nor is there merit in the claim that as the portion of the property formerly owned by the sister of Justina
Santos was still in the process of settlement in the probate court at the time it was leased, the lease is
invalid as to such portion. Justina Santos became the owner of the entire property upon the death of her
sister Lorenzo on September 22, 1957 by force of article 777 of the Civil Code. Hence, when she leased
the property on November 15, she did so already as owner thereof. As this Court explained in upholding
the sale made by an heir of a property under judicial administration:
That the land could not ordinarily be levied upon while in custodia legis does not mean that
one of the heirs may not sell the right, interest or participation which he has or might have in
the lands under administration. The ordinary execution of property in custodia legis is
prohibited in order to avoid interference with the possession by the court. But the sale made by
an heir of his share in an inheritance, subject to the result of the pending administration, in no
wise stands in the way of such administration.6
It is next contended that the lease contract was obtained by Wong in violation of his fiduciary
relationship with Justina Santos, contrary to article 1646, in relation to article 1941 of the Civil Code,
which disqualifies "agents (from leasing) the property whose administration or sale may have been
entrusted to them." But Wong was never an agent of Justina Santos. The relationship of the parties,
although admittedly close and confidential, did not amount to an agency so as to bring the case within
the prohibition of the law.
Just the same, it is argued that Wong so completely dominated her life and affairs that the contracts
express not her will but only his. Counsel for Justina Santos cites the testimony of Atty. Tomas S. Yumol
who said that he prepared the lease contract on the basis of data given to him by Wong and that she
told him that "whatever Mr. Wong wants must be followed."7
The testimony of Atty. Yumol cannot be read out of context in order to warrant a finding that Wong
practically dictated the terms of the contract. What this witness said was:
Q Did you explain carefully to your client, Doña Justina, the contents of this document before
she signed it?
A I explained to her each and every one of these conditions and I also told her these conditions
were quite onerous for her, I don't really know if I have expressed my opinion, but I told her
that we would rather not execute any contract anymore, but to hold it as it was before, on a
verbal month to month contract of lease.
Q But, she did not follow your advice, and she went with the contract just the same?
A She agreed first . . .
Q Agreed what?
Page 2 of 50
 A Agreed with my objectives that it is really onerous and that I was really right, but after that, I
was called again by her and she told me to follow the wishes of Mr. Wong Heng.
xxx xxx xxx
Q So, as far as consent is concerned, you were satisfied that this document was perfectly
proper?
xxx xxx xxx
A Your Honor, if I have to express my personal opinion, I would say she is not, because, as I
said before, she told me — "Whatever Mr. Wong wants must be followed."8
Wong might indeed have supplied the data which Atty. Yumol embodied in the lease contract, but to say
this is not to detract from the binding force of the contract. For the contract was fully explained to
Justina Santos by her own lawyer. One incident, related by the same witness, makes clear that she
voluntarily consented to the lease contract. This witness said that the original term fixed for the lease
was 99 years but that as he doubted the validity of a lease to an alien for that length of time, he tried to
persuade her to enter instead into a lease on a month-to-month basis. She was, however, firm and
unyielding. Instead of heeding the advice of the lawyer, she ordered him, "Just follow Mr. Wong
Heng."9 Recounting the incident, Atty. Yumol declared on cross examination:
Considering her age, ninety (90) years old at the time and her condition, she is a wealthy
woman, it is just natural when she said "This is what I want and this will be done." In particular
reference to this contract of lease, when I said "This is not proper," she said — "You just go
ahead, you prepare that, I am the owner, and if there is any illegality, I am the only one that
can question the illegality."10
Atty. Yumol further testified that she signed the lease contract in the presence of her close friend,
Hermenegilda Lao, and her maid, Natividad Luna, who was constantly by her side.11 Any of them could
have testified on the undue influence that Wong supposedly wielded over Justina Santos, but neither of
them was presented as a witness. The truth is that even after giving his client time to think the matter
over, the lawyer could not make her change her mind. This persuaded the lower court to uphold the
validity of the lease contract against the claim that it was procured through undue influence.
Indeed, the charge of undue influence in this case rests on a mere inference12 drawn from the fact that
Justina Santos could not read (as she was blind) and did not understand the English language in which
the contract is written, but that inference has been overcome by her own evidence.
Nor is there merit in the claim that her consent to the lease contract, as well as to the rest of the
contracts in question, was given out of a mistaken sense of gratitude to Wong who, she was made to
believe, had saved her and her sister from a fire that destroyed their house during the liberation of
Manila. For while a witness claimed that the sisters were saved by other persons (the brothers Edilberto
and Mariano Sta. Ana)13 it was Justina Santos herself who, according to her own witness, Benjamin C.
Alonzo, said "very emphatically" that she and her sister would have perished in the fire had it not been
for Wong.14 Hence the recital in the deed of conditional option (Plff Exh. 7) that "[I]tong si Wong Heng
ang siyang nagligtas sa aming dalawang magkapatid sa halos ay tiyak na kamatayan", and the equally
emphatic avowal of gratitude in the lease contract (Plff Exh. 3).
PROPERTY ARTS. 419-
As it was with the lease contract (Plff Exh. 3), so it was with the rest of the contracts (Plff Exhs. 4-7) —
the consent of Justina Santos was given freely and voluntarily. As Atty. Alonzo, testifying for her, said:
[I]n nearly all documents, it was either Mr. Wong Heng or Judge Torres and/or both. When we
had conferences, they used to tell me what the documents should contain. But, as I said, I
would always ask the old woman about them and invariably the old woman used to tell me:
"That's okay. It's all right."15
But the lower court set aside all the contracts, with the exception of the lease contract of November 15,
1957, on the ground that they are contrary to the expressed wish of Justina Santos and that their
considerations are fictitious. Wong stated in his deposition that he did not pay P360 a month for the
additional premises leased to him, because she did not want him to, but the trial court did not believe
him. Neither did it believe his statement that he paid P1,000 as consideration for each of the contracts
(namely, the option to buy the leased premises, the extension of the lease to 99 years, and the fixing of
the term of the option at 50 years), but that the amount was returned to him by her for safekeeping.
Instead, the court relied on the testimony of Atty. Alonzo in reaching the conclusion that the contracts
are void for want of consideration.
Atty. Alonzo declared that he saw no money paid at the time of the execution of the documents, but his
negative testimony does not rule out the possibility that the considerations were paid at some other time
as the contracts in fact recite. What is more, the consideration need not pass from one party to the other
at the time a contract is executed because the promise of one is the consideration for the other.16
With respect to the lower court's finding that in all probability Justina Santos could not have intended to
part with her property while she was alive nor even to lease it in its entirety as her house was built on it,
suffice it to quote the testimony of her own witness and lawyer who prepared the contracts (Plff Exhs. 4-
7) in question, Atty. Alonzo:
The ambition of the old woman, before her death, according to her revelation to me, was to
see to it that these properties be enjoyed, even to own them, by Wong Heng because Doña
Justina told me that she did not have any relatives, near or far, and she considered Wong
Heng as a son and his children her grandchildren; especially her consolation in life was when
she would hear the children reciting prayers in Tagalog.17
She was very emphatic in the care of the seventeen (17) dogs and of the maids who helped
her much, and she told me to see to it that no one could disturb Wong Heng from those
properties. That is why we thought of the ninety-nine (99) years lease; we thought of adoption,
believing that thru adoption Wong Heng might acquire Filipino citizenship; being the adopted
child of a Filipino citizen.18
This is not to say, however, that the contracts (Plff Exhs. 3-7) are valid. For the testimony just quoted,
while dispelling doubt as to the intention of Justina Santos, at the same time gives the clue to what we
view as a scheme to circumvent the Constitutional prohibition against the transfer of lands to aliens.
"The illicit purpose then becomes the illegal causa"19 rendering the contracts void.
Taken singly, the contracts show nothing that is necessarily illegal, but considered collectively, they
reveal an insidious pattern to subvert by indirection what the Constitution directly prohibits. To be sure, a
lease to an alien for a reasonable period is valid. So is an option giving an alien the right to buy real
Page 3 of 50
property on condition that he is granted Philippine citizenship. As this Court said in Krivenko v. Register
of Deeds:20
[A]liens are not completely excluded by the Constitution from the use of lands for residential
purposes. Since their residence in the Philippines is temporary, they may be
granted temporary rights such as a lease contract which is not forbidden by the Constitution.
Should they desire to remain here forever and share our fortunes and misfortunes, Filipino
citizenship is not impossible to acquire.
But if an alien is given not only a lease of, but also an option to buy, a piece of land, by virtue of which
the Filipino owner cannot sell or otherwise dispose of his property,21 this to last for 50 years, then it
becomes clear that the arrangement is a virtual transfer of ownership whereby the owner divests
himself in stages not only of the right to enjoy the land ( jus possidendi, jus utendi, jus fruendi and jus
abutendi) but also of the right to dispose of it ( jus disponendi) — rights the sum total of which make up
ownership. It is just as if today the possession is transferred, tomorrow, the use, the next day, the
disposition, and so on, until ultimately all the rights of which ownership is made up are consolidated in
an alien. And yet this is just exactly what the parties in this case did within the space of one year, with
the result that Justina Santos' ownership of her property was reduced to a hollow concept. If this can be
done, then the Constitutional ban against alien landholding in the Philippines, as announced in Krivenko
v. Register of Deeds,22 is indeed in grave peril.
It does not follow from what has been said, however, that because the parties are in pari delicto they will
be left where they are, without relief. For one thing, the original parties who were guilty of a violation of
the fundamental charter have died and have since been substituted by their administrators to whom it
would be unjust to impute their guilt.23 For another thing, and this is not only cogent but also important,
article 1416 of the Civil Code provides, as an exception to the rule on pari delicto, that "When the
agreement is not illegal per se but is merely prohibited, and the prohibition by law is designed for the
protection of the plaintiff, he may, if public policy is thereby enhanced, recover what he has paid or
delivered." The Constitutional provision that "Save in cases of hereditary succession, no private
agricultural land shall be transferred or assigned except to individuals, corporations, or associations
qualified to acquire or hold lands of the public domain in the Philippines"24 is an expression of public
policy to conserve lands for the Filipinos. As this Court said in Krivenko:
It is well to note at this juncture that in the present case we have no choice. We are construing
the Constitution as it is and not as we may desire it to be. Perhaps the effect of our
construction is to preclude aliens admitted freely into the Philippines from owning sites where
they may build their homes. But if this is the solemn mandate of the Constitution, we will not
attempt to compromise it even in the name of amity or equity . . . .
For all the foregoing, we hold that under the Constitution aliens may not acquire private or
public agricultural lands, including residential lands, and, accordingly, judgment is affirmed,
without costs.25
That policy would be defeated and its continued violation sanctioned if, instead of setting the contracts
aside and ordering the restoration of the land to the estate of the deceased Justina Santos, this Court
should apply the general rule of pari delicto. To the extent that our ruling in this case conflicts with that
laid down in Rellosa v. Gaw Chee Hun 26 and subsequent similar cases, the latter must be considered
as pro tanto qualified.
PROPERTY ARTS. 419-
The claim for increased rentals and attorney's fees, made in behalf of Justina Santos, must be denied
for lack of merit.
And what of the various amounts which Wong received in trust from her? It appears that he kept two
classes of accounts, one pertaining to amount which she entrusted to him from time to time, and
another pertaining to rentals from the Ongpin property and from the Rizal Avenue property, which he
himself was leasing.
With respect to the first account, the evidence shows that he received P33,724.27 on November 8,
1957 (Plff Exh. 16); P7,354.42 on December 1, 1957 (Plff Exh. 13); P10,000 on December 6, 1957 (Plff
Exh. 14) ; and P18,928.50 on August 26, 1959 (Def. Exh. 246), or a total of P70,007.19. He claims,
however, that he settled his accounts and that the last amount of P18,928.50 was in fact payment to
him of what in the liquidation was found to be due to him.
He made disbursements from this account to discharge Justina Santos' obligations for taxes, attorneys'
fees, funeral services and security guard services, but the checks (Def Exhs. 247-278) drawn by him for
this purpose amount to only P38,442.84.27 Besides, if he had really settled his accounts with her on
August 26, 1959, we cannot understand why he still had P22,000 in the bank and P3,000 in his
possession, or a total of P25,000. In his answer, he offered to pay this amount if the court so directed
him. On these two grounds, therefore, his claim of liquidation and settlement of accounts must be
rejected.
After subtracting P38,442.84 (expenditures) from P70,007.19 (receipts), there is a difference of P31,564
which, added to the amount of P25,000, leaves a balance of P56,564.3528 in favor of Justina Santos.
As to the second account, the evidence shows that the monthly income from the Ongpin property until
its sale in Rizal Avenue July, 1959 was P1,000, and that from the Rizal Avenue property, of which Wong
was the lessee, was P3,120. Against this account the household expenses and disbursements for the
care of the 17 dogs and the salaries of the 8 maids of Justina Santos were charged. This account is
contained in a notebook (Def. Exh. 6) which shows a balance of P9,210.49 in favor of Wong. But it is
claimed that the rental from both the Ongpin and Rizal Avenue properties was more than enough to pay
for her monthly expenses and that, as a matter of fact, there should be a balance in her favor. The lower
court did not allow either party to recover against the other. Said the court:
[T]he documents bear the earmarks of genuineness; the trouble is that they were made only by
Francisco Wong and Antonia Matias, nick-named Toning, — which was the way she signed the
loose sheets, and there is no clear proof that Doña Justina had authorized these two to act for
her in such liquidation; on the contrary if the result of that was a deficit as alleged and sought
to be there shown, of P9,210.49, that was not what Doña Justina apparently understood for as
the Court understands her statement to the Honorable Judge of the Juvenile Court . . . the
reason why she preferred to stay in her home was because there she did not incur in any
debts . . . this being the case, . . . the Court will not adjudicate in favor of Wong Heng on his
counterclaim; on the other hand, while it is claimed that the expenses were much less than the
rentals and there in fact should be a superavit, . . . this Court must concede that daily
expenses are not easy to compute, for this reason, the Court faced with the choice of the two
alternatives will choose the middle course which after all is permitted by the rules of proof, Sec.
69, Rule 123 for in the ordinary course of things, a person will live within his income so that the
conclusion of the Court will be that there is neither deficit nor superavit and will let the matter
rest here.
Page 4 of 50
Both parties on appeal reiterate their respective claims but we agree with the lower court that both
claims should be denied. Aside from the reasons given by the court, we think that the claim of Justina
Santos totalling P37,235, as rentals due to her after deducting various expenses, should be rejected as
the evidence is none too clear about the amounts spent by Wong for food29 masses30 and salaries of her
maids.31 His claim for P9,210.49 must likewise be rejected as his averment of liquidation is belied by his
own admission that even as late as 1960 he still had P22,000 in the bank and P3,000 in his possession.
ACCORDINGLY, the contracts in question (Plff Exhs. 3-7) are annulled and set aside; the land subject-
matter of the contracts is ordered returned to the estate of Justina Santos as represented by the
Philippine Banking Corporation; Wong Heng (as substituted by the defendant-appellant Lui She) is
ordered to pay the Philippine Banking Corporation the sum of P56,564.35, with legal interest from the
date of the filing of the amended complaint; and the amounts consigned in court by Wong Heng shall be
applied to the payment of rental from November 15, 1959 until the premises shall have been vacated by
his heirs. Costs against the defendant-appellant.
Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Bengzon, J.P., Zaldivar, Sanchez and Angeles, JJ.,
concur.
G..R. No. 132424 May 2, 2006
SPOUSES BONIFACIO R. VALDEZ, JR. and VENIDA M. VALDEZ, Petitioners,
vs.
HON. COURT OF APPEALS, SPOUSES GABRIEL FABELLA and FRANCISCA
FABELLA, Respondents.
DECISION
PROPERTY ARTS. 419-
CHICO-NAZARIO, J.:
This petition for review under Rule 45 of the Rules of Court, filed by petitioners spouses Bonifacio R.
Valdez, Jr. and Venida M. Valdez, seeks to nullify and set aside the 22 April 1997 decision1 and 30
January 1998 resolution of the Court of Appeals in CA-G.R. SP No. 43492, which reversed the
judgment, dated 8 January 1997, of the Regional Trial Court of Antipolo, Rizal, Branch 74, in Civil Case
No. 3607, which, in turn, affirmed in toto the decision rendered by the Municipal Trial Court of Antipolo,
Rizal, Branch II, in Civil Case No. 2547.
This case originated from a complaint for unlawful detainer filed by petitioners Bonifacio and Venida
Valdez against private respondents Gabriel and Francisca Fabella before the Municipal Trial Court of
Antipolo, Rizal. The complaint alleges these material facts:
2. That plaintiffs are the registered owner[s] of a piece of residential lot denominated as Lot
[N]o. 3 Blk 19 located at Carolina Executive Village, Brgy. Sta. Cruz, Antipolo, Rizal which
[they] acquired from Carolina Realty, Inc. Sometime [i]n November 1992 by virtue of Sales
Contract, xerox copy of which is hereto attached marked as Annex "A" and the xerox copy of
the Torrens Certificate of Title in her name marked as Annex "B";
3. That defendants, without any color of title whatsoever occupie[d] the said lot by building their
house in the said lot thereby depriving the herein plaintiffs rightful possession thereof;
4. That for several times, plaintiffs orally asked the herein defendants to peacefully surrender
the premises to them, but the latter stubbornly refused to vacate the lot they unlawfully
occupied;
5. That despite plaintiffs’ referral of the matter to the Barangay, defendants still refused to heed
the plea of the former to surrender the lot peacefully;
6. That because of the unfounded refusal of the herein defendants to settle the case amicably,
the Barangay Captain was forced to issue the necessary Certification to File Action in favor of
the herein plaintiffs in order that the necessary cause of action be taken before the proper
court, xerox copy of which is hereto attached marked as Annex "C";
7. That by reason of the deliberate, malicious and unfounded refusal of the defendants to
vacate/surrender the premises in question, the herein plaintiffs were constrained to engage the
professional services of counsel thus incurring expenses amounting to TEN THOUSAND
PESOS (P10,000.00) representing acceptance fee and additional ONE THOUSAND PESOS
(P1,000.00) per appearance, who on July 12, 1994 sent a formal demand was likewise
ignored, (sic) copy of which is hereto attached as Annex "D";
8. That likewise by virtue of the adamant refusal of the defendants to vacate/surrender the said
premises in question, plaintiff[s] suffered serious anxiety, sleepless nights, mental torture and
moral erosion; x x x2
In their answer, private respondents contended that the complaint failed to state that petitioners had
prior physical possession of the property or that they were the lessors of the former. In the alternative,
private respondents claimed ownership over the land on the ground that they had been in open,
Page 5 of 50
continuous, and adverse possession thereof for more than thirty years, as attested by an ocular
inspection report from the Department of Environment and Natural Resources. They also stressed that
the complaint failed to comply with Supreme Court Circular No. 28-91 regarding affidavits against non-
forum shopping.
The Municipal Trial Court (MTC) rendered a decision in favor of the petitioners, ordering private
respondents to vacate the property and to pay rent for the use and occupation of the same plus
attorney’s fees.
Private respondents appealed the MTC’s decision to the Regional Trial Court (RTC). The RTC, in a
decision dated 8 January 1997, affirmed in toto the decision of the MTC.
Undeterred, the private respondents filed a petition for review with the Court of Appeals on 10 March
1997 questioning the decision of the RTC.
In a decision dated 22 April 1997, the Court of Appeals reversed and set aside the decision of the RTC.
It held that petitioners failed to make a case for unlawful detainer because they failed to show that they
had given the private respondents the right to occupy the premises or that they had tolerated private
respondents’ possession of the same, which is a requirement in unlawful detainer cases. It added that
the allegations in petitioners’ complaint lack jurisdictional elements for forcible entry which requires an
allegation of prior material possession. The Court of Appeals ratiocinated thus:
An examination of the complaint reveals that key jurisdictional allegations that will support an action for
ejectment are conspicuously lacking. In particular, an allegation of prior material possession is
mandatory in forcible entry, xxx and the complaint is deficient in this respect. On the other hand, neither
does there appear to be a case of unlawful detainer, since the private respondents failed to show that
they had given the petitioners the right to occupy the premises, which right has now [been]
extinguished.
xxx
In light of the foregoing, the conclusion is inevitable that the Municipal Trial Court before which the
action for ejectment was filed had no jurisdiction over the case. Consequently, the dismissal thereof is in
order.
WHEREFORE, the Petition is hereby GIVEN DUE COURSE, and GRANTED. The decision dated 08
January 1997 rendered by the respondent court is hereby REVERSED and SET ASIDE, and judgment
is hereby rendered DISMISSING the complaint in Civil Case No. 2547 of the Municipal Trial Court of
Antipolo, Rizal for lack of jurisdiction.3
Petitioners filed a motion for reconsideration which was denied in a resolution dated 30 January 1998.4
Hence, the instant petition.
Petitioners submit the following issues for the Court’s consideration5:
PROPERTY ARTS. 419-
A. WHETHER OR NOT THE ALLEGATIONS OF THE COMPLAINT CLEARLY MADE OUT A CASE
FOR UNLAWFUL DETAINER.
B. WHETHER OR NOT BASED ON THE ALLEGATION(S) OF THE COMPLAINT, THE MUNICIPAL
TRIAL COURT OF ANTIPOLO, RIZAL, CLEARLY HAS ORIGINAL JURISDICTION OVER THE
INSTANT COMPLAINT FILED BEFORE IT.
Since the two issues are closely intertwined, they shall be discussed together.
In the main, petitioners claim that the averments of their complaint make out a case for unlawful
detainer having alleged that private respondents unlawfully withheld from them the possession of the
property in question, which allegation is sufficient to establish a case for unlawful detainer. They further
contend that the summary action for ejectment is the proper remedy available to the owner if another
occupies the land at the former’s tolerance or permission without any contract between the two as the
latter is bound by an implied promise to vacate the land upon demand by the owner.
The petition is not meritorious.
Under existing law and jurisprudence, there are three kinds of actions available to recover possession
of real property: (a) accion interdictal; (b) accion publiciana; and (c) accion reivindicatoria.6
Accion interdictal comprises two distinct causes of action, namely, forcible entry (detentacion) and
unlawful detainer (desahuico).7 In forcible entry, one is deprived of physical possession of real property
by means of force, intimidation, strategy, threats, or stealth whereas in unlawful detainer, one illegally
withholds possession after the expiration or termination of his right to hold possession under any
contract, express or implied.8 The two are distinguished from each other in that in forcible entry, the
possession of the defendant is illegal from the beginning, and that the issue is which party has prior de
facto possession while in unlawful detainer, possession of the defendant is originally legal but became
illegal due to the expiration or termination of the right to possess.9
The jurisdiction of these two actions, which are summary in nature, lies in the proper municipal trial
court or metropolitan trial court.10 Both actions must be brought within one year from the date of actual
entry on the land, in case of forcible entry, and from the date of last demand, in case of unlawful
detainer.11 The issue in said cases is the right to physical possession.
Accion publiciana is the plenary action to recover the right of possession which should be brought in the
proper regional trial court when dispossession has lasted for more than one year.12 It is an ordinary civil
proceeding to determine the better right of possession of realty independently of title.13 In other words, if
at the time of the filing of the complaint more than one year had elapsed since defendant had turned
plaintiff out of possession or defendant’s possession had become illegal, the action will be, not one of
the forcible entry or illegal detainer, but an accionpubliciana. On the other hand, accion reivindicatoria is
an action to recover ownership also brought in the proper regional trial court in an ordinary civil
proceeding.14
To justify an action for unlawful detainer, it is essential that the plaintiff’s supposed acts of tolerance
must have been present right from the start of the possession which is later sought to be
recovered.15 Otherwise, if the possession was unlawful from the start, an action for unlawful detainer
would be an improper remedy.16 As explained in Sarona v. Villegas17:
Page 6 of 50
But even where possession preceding the suit is by tolerance of the owner, still, distinction should be
made.
If right at the incipiency defendant’s possession was with plaintiff’s tolerance, we do not doubt that the
latter may require him to vacate the premises and sue before the inferior court under Section 1 of Rule
70, within one year from the date of the demand to vacate.
xxxx
A close assessment of the law and the concept of the word "tolerance" confirms our view heretofore
expressed that such tolerance must be present right from the start of possession sought to be
recovered, to categorize a cause of action as one of unlawful detainer - not of forcible entry. Indeed, to
hold otherwise would espouse a dangerous doctrine. And for two reasons: First. Forcible entry into the
land is an open challenge to the right of the possessor. Violation of that right authorizes the speedy
redress – in the inferior court - provided for in the rules. If one year from the forcible entry is allowed to
lapse before suit is filed, then the remedy ceases to be speedy; and the possessor is deemed to have
waived his right to seek relief in the inferior court. Second, if a forcible entry action in the inferior court is
allowed after the lapse of a number of years, then the result may well be that no action of forcible entry
can really prescribe. No matter how long such defendant is in physical possession, plaintiff will merely
make a demand, bring suit in the inferior court – upon a plea of tolerance to prevent prescription to set
in - and summarily throw him out of the land. Such a conclusion is unreasonable. Especially if we bear
in mind the postulates that proceedings of forcible entry and unlawful detainer are summary in nature,
and that the one year time-bar to suit is but in pursuance of the summary nature of the
action.18 (Underlining supplied)
It is the nature of defendant’s entry into the land which determines the cause of action, whether it is
forcible entry or unlawful detainer. If the entry is illegal, then the action which may be filed against the
intruder is forcible entry. If, however, the entry is legal but the possession thereafter becomes illegal, the
case is unlawful detainer.
Indeed, to vest the court jurisdiction to effect the ejectment of an occupant, it is necessary that the
complaint should embody such a statement of facts as brings the party clearly within the class of cases
for which the statutes provide a remedy, as these proceedings are summary in nature.19 The complaint
must show enough on its face the court jurisdiction without resort to parol testimony.20
The jurisdictional facts must appear on the face of the complaint. When the complaint fails to aver facts
constitutive of forcible entry or unlawful detainer, as where it does not state how entry was affected or
how and when dispossession started, the remedy should either be an accion publiciana or an accion
reivindicatoria in the proper regional trial court.21 Thus, in Go, Jr. v. Court of Appeals,22 petitioners filed
an unlawful detainer case against respondent alleging that they were the owners of the parcel of land
through intestate succession which was occupied by respondent by mere tolerance of petitioners as
well as their deceased mother. Resolving the issue on whether or not petitioners’ case for unlawful
detainer will prosper, the court ruled23:
Petitioners alleged in their complaint that they inherited the property registered under TCT No. C-32110
from their parents; that possession thereof by private respondent was by tolerance of their mother, and
after her death, by their own tolerance; and that they had served written demand on December, 1994,
but that private respondent refused to vacate the property. x x x
PROPERTY ARTS. 419-
It is settled that one whose stay is merely tolerated becomes a deforciant illegally occupying the land
the moment he is required to leave. It is essential in unlawful detainer cases of this kind, that plaintiff’s
supposed acts of tolerance must have been present right from the start of the possession which is later
sought to be recovered. This is where petitioners’ cause of action fails. The appellate court, in full
agreement with the MTC made the conclusion that the alleged tolerance by their mother and after her
death, by them, was unsubstantiated. x x x
The evidence revealed that the possession of defendant was illegal at the inception and not merely
tolerated as alleged in the complaint, considering that defendant started to occupy the subject lot and
then built a house thereon without the permission and consent of petitioners and before them, their
mother. xxx Clearly, defendant’s entry into the land was effected clandestinely, without the knowledge of
the owners, consequently, it is categorized as possession by stealth which is forcible entry. As explained
in Sarona vs. Villegas, cited in Muñoz vs. Court ofAppeals [224 SCRA 216 (1992)] tolerance must be
present right from the start of possession sought to be recovered, to categorize a cause of action as
one of unlawful detainer not of forcible entry x x x.
And in the case of Ten Forty Realty and Development Corp. v. Cruz,24 petitioner’s complaint for unlawful
detainer merely contained the bare allegations that (1) respondent immediately occupied the subject
property after its sale to her, an action merely tolerated by petitioner; and (2) her allegedly illegal
occupation of the premises was by mere tolerance. The court, in finding that the alleged tolerance did
not justify the action for unlawful detainer, held:
To justify an action for unlawful detainer, the permission or tolerance must have been present at the
beginning of the possession. x x x
xxxx
In this case, the Complaint and the other pleadings do not recite any averment of fact that would
substantiate the claim of petitioner that it permitted or tolerated the occupation of the property by
Respondent Cruz. The complaint contains only bare allegations that 1) respondent immediately
occupied the subject property after its sale to her, an action merely tolerated by petitioner; and 2) her
allegedly illegal occupation of the premises was by mere tolerance.
These allegations contradict, rather than support, petitioner’s theory that its cause of action is for
unlawful detainer. First, these arguments advance the view that respondent’s occupation of the property
was unlawful at its inception. Second, they counter the essential requirement in unlawful detainer cases
that petitioner’s supposed act of sufferance or tolerance must be present right from the start of a
possession that is later sought to be recovered.25
In the instant case, the allegations in the complaint do not contain any averment of fact that would
substantiate petitioners’ claim that they permitted or tolerated the occupation of the property by
respondents. The complaint contains only bare allegations that "respondents without any color of title
whatsoever occupies the land in question by building their house in the said land thereby depriving
petitioners the possession thereof." Nothing has been said on how respondents’ entry was effected or
how and when dispossession started. Admittedly, no express contract existed between the parties. This
failure of petitioners to allege the key jurisdictional facts constitutive of unlawful detainer is fatal.26 Since
the complaint did not satisfy the jurisdictional requirement of a valid cause for unlawful detainer, the
municipal trial court had no jurisdiction over the case.27 It is in this light that this Court finds that the
Court of Appeals correctly found that the municipal trial court had no jurisdiction over the complaint.
Page 7 of 50
WHEREFORE, the petition is DENIED and the judgment of the Court of Appeals dismissing the
complaint in Civil Case No. 2547 of the MTC Antipolo, Rizal for lack of jurisdiction is hereby AFFIRMED.
No pronouncement as to costs.
SO ORDERED.
G.R. No. 194880 June 20, 2012
REPUBLIC OF THE PHILIPPINES and NATIONAL POWER CORPORATION, both represented by
the PRIVATIZATION MANAGEMENT OFFICE, Petitioners,
vs.
SUNVAR REALTY DEVELOPMENT CORPORATION, Respondent.
DECISION
SERENO, J.:
This is a Rule 45 Petition questioning the Decision of the Regional Trial Court (RTC) of Makati City,
which ordered the dismissal of the Complaint for unlawful detainer filed by petitioners herein with the
Metropolitan Trial Court.
Petitioners Republic of the Philippines (Republic) and National Power Corporation (NPC) are registered
co-owners of several parcels of land located along Pasong Tamo Extension and Vito Cruz in Makati
City, and covered by four Transfer Certificates of Title (TCTs).1 The main subject matter of the instant
Petition is one of these four parcels of land covered by TCT No. 458365, with an area of approximately
22,294 square meters (hereinafter, the subject property). Eighty percent (80%) of the subject property is
owned by petitioner Republic, while the remaining twenty percent (20%) belongs to petitioner
NPC.2 Petitioners are being represented in this case by the Privatization Management Office (PMO),
which is the agency tasked with the administration and disposal of government assets.3Meanwhile,
PROPERTY ARTS. 419-
respondent Sunvar Realty Development Corporation (Sunvar) occupied the subject property by virtue of
sublease agreements, which had in the meantime expired.
The factual antecedents of the case are straightforward. On 26 December 1977,4 petitioners leased the
four parcels of land, including the subject property, to the Technology Resource Center Foundation, Inc.,
(TRCFI) for a period of 25 years beginning 01 January 1978 and ending on 31 December 2002.5 Under
the Contract of Lease (the main lease contract), petitioners granted TRCFI the right to sublease any
portion of the four parcels of land.6
Exercising its right, TRCFI consequently subleased a majority of the subject property to respondent
Sunvar through several sublease agreements (the sublease agreements).7 Although these agreements
commenced on different dates, all of them contained common provisions on the terms of the sublease
and were altogether set to expire on 31 December 2002, the expiration date of TRCFI’s main lease
contract with petitioners, but subject to renewal at the option of respondent:8
The term of the sublease shall be for an initial period of [variable] years and [variable] months
commencing on [variable], renewable for another twenty-five (25) years at SUNVAR’s exclusive option.9
According to petitioners, in all the sublease agreements, respondent Sunvar agreed "to return or
surrender the subleased land, without any delay whatsoever upon the termination or expiration of the
sublease contract or any renewal or extension thereof."10
During the period of its sublease, respondent Sunvar introduced useful improvements, consisting of
several commercial buildings, and leased out the spaces therein.11 It also profitably utilized the other
open spaces on the subject property as parking areas for customers and guests.12
In 1987, following a reorganization of the government, TRCFI was dissolved. In its stead, the Philippine
Development Alternatives Foundation (PDAF) was created, assuming the functions previously
performed by TRCFI.13
On 26 April 2002, less than a year before the expiration of the main lease contract and the sublease
agreements, respondent Sunvar wrote to PDAF as successor of TRCFI. Respondent expressed its
desire to exercise the option to renew the sublease over the subject property and proposed an
increased rental rate and a renewal period of another 25 years.14 On even date, it also wrote to the
Office of the President, Department of Environment and Natural Resources and petitioner NPC. The
letters expressed the same desire to renew the lease over the subject property under the new rental
rate and renewal period.15
On 10 May 2002, PDAF informed respondent that the notice of renewal of the lease had already been
sent to petitioners, but that it had yet to receive a response.16 It further explained that the proposal of
respondent for the renewal of the sublease could not yet be acted upon, and neither could the proposed
rental payments be accepted.17 Respondent acknowledged receipt of the letter and requested PDAF to
apprise the former of any specific actions undertaken with respect to the said lease arrangement over
the subject property.18
On 03 June 2002, six months before the main contract of lease was to expire, petitioner NPC – through
Atty. Rainer B. Butalid, Vice-President and General Counsel – notified PDAF of the former’s decision
not to renew the contract of lease.19 In turn, PDAF notified respondent of NPC’s decision.20
Page 8 of 50
On the other hand, petitioner Republic through then Senior Deputy Executive Secretary Waldo Q.
Flores likewise notified PDAF of the former’s decision not to renew the lease contract.21 The Republic
reasoned that the parties had earlier agreed to shorten the corporate life of PDAF and to transfer the
latter’s assets to the former for the purpose of selling them to raise funds.22 On 25 June 2002, PDAF
duly informed respondent Sunvar of petitioner Republic’s decision not to renew the lease and quoted
the Memorandum of Senior Deputy Executive Secretary Flores.23
On 31 December 2002, the main lease contract with PDAF, as well as its sublease agreements with
respondent Sunvar, all expired. Hence, petitioners recovered from PDAF all the rights over the subject
property and the three other parcels of land. Thereafter, petitioner Republic transferred the subject
property to the PMO for disposition. Nevertheless, respondent Sunvar continued to occupy the property.
On 22 February 2008, or six years after the main lease contract expired, petitioner Republic, through
the Office of the Solicitor General (OSG), advised respondent Sunvar to completely vacate the subject
property within thirty (30) days.24 The latter duly received the Notice from the OSG through registered
mail,25 but failed to vacate and remained on the property.26
On 03 February 2009, respondent Sunvar received from respondent OSG a final notice to vacate within
15 days.27When the period lapsed, respondent Sunvar again refused to vacate the property and
continued to occupy it.
On 02 April 2009, the PMO issued an Inspection and Appraisal Report to determine the fair rental value
of the subject property and petitioners’ lost income – a loss arising from the refusal of respondent
Sunvar to vacate the property after the expiration of the main lease contract and sublease
agreements.28 Using the market comparison approach, the PMO determined that the fair rental value of
the subject property was ₱ 10,364,000 per month, and that respondent Sunvar owed petitioners a total
of ₱ 630,123,700 from 01 January 2002 to 31 March 2009.29
On 23 July 2009, petitioners filed the Complaint dated 26 May 2009 for unlawful detainer with the
Metropolitan Trial Court (MeTC) of Makati City. Petitioners prayed that respondent Sunvar be ordered to
vacate the subject property and to pay damages for the illegal use and lost income owing to them:
WHEREFORE, PREMISES CONSIDERED, it is most respectfully prayed that after proper proceedings,
judgment be rendered:
1. Ordering defendant SUNVAR REALTY DEVELOPMENT CORPORATION and all persons,
natural and juridical, claiming rights under it, to vacate the subject property and peacefully
surrender the same, with the useful improvements therein, to the plaintiffs or to their authorized
representative; and
2. Ordering defendant SUNVAR REALTY DEVELOPMENT CORPORATION to pay plaintiffs
damages in the amount of SIX HUNDRED THIRTY MILLION ONE HUNDRED TWENTY
THREE THOUSAND SEVEN HUNDRED PESOS (₱ 630,123,700.00) for the illegal and
unauthorized use and occupation of the subject property from January 1, 2003 to March 31,
2009, and the amount of TEN MILLION THREE HUNDRED SIXTY-FOUR THOUSAND
PESOS (₱ 10,364,000.00) per month from April 1, 2008 until the subject property, together
with its improvements, are completely vacated and peacefully surrendered to the plaintiffs or to
their authorized representative.30
PROPERTY ARTS. 419-
Respondent Sunvar moved to dismiss the Complaint and argued that the allegations of petitioners in
the Complaint did not constitute an action for unlawful detainer, since no privity of contract existed
between them.31 In the alternative, it also argued that petitioners’ cause of action was more properly an
accion publiciana, which fell within the jurisdiction of the RTC, and not the MeTC, considering that the
petitioners’ supposed dispossession of the subject property by respondent had already lasted for more
than one year.
In its Order dated 16 September 2009, the MeTC denied the Motion to Dismiss and directed respondent
Sunvar to file an answer to petitioners’ Complaint.32 The lower court likewise denied the Motion for
Reconsideration33 filed by respondent.34 Respondent later on filed its Answer35 to the Complaint.36
Despite the filing of its Answer in the summary proceedings for ejectment, respondent Sunvar filed a
Rule 65 Petition for Certiorari with the RTC of Makati City to assail the denial by the MeTC of
respondent’s Motion to Dismiss.37
In answer to the Rule 65 Petition of respondent, petitioners placed in issue the jurisdiction of the RTC
and reasoned that the Rules on Summary Procedure expressly prohibited the filing of a petition for
certiorari against the interlocutory orders of the MeTC.38 Hence, they prayed for the outright dismissal of
the certiorari Petition of respondent Sunvar.
The RTC denied the motion for dismissal and ruled that extraordinary circumstances called for an
exception to the general rule on summary proceedings.39 Petitioners filed a Motion for
Reconsideration,40 which was subsequently denied by the RTC.41 Hence, the hearing on the certiorari
Petition of respondent proceeded, and the parties filed their respective Memoranda.42
In the assailed Order dated 01 December 2010, which discussed the merits of the certiorari Petition, the
RTC granted the Rule 65 Petition and directed the MeTC to dismiss the Complaint for unlawful detainer
for lack of jurisdiction.43 The RTC reasoned that the one-year period for the filing of an unlawful detainer
case was reckoned from the expiration of the main lease contract and the sublease agreements on 31
December 2002. Petitioners should have then filed an accion publiciana with the RTC in 2009, instead
of an unlawful detainer suit.
Hence, the instant Rule 45 Petition filed by petitioners.44
I
Petitioners’ Resort to a Rule 45 Petition
Before the Court proceeds with the legal questions in this case, there are procedural issues that merit
preliminary attention.
Respondent Sunvar argued that petitioners’ resort to a Rule 45 Petition for Review on Certiorari before
this Court is an improper mode of review of the assailed RTC Decision. Allegedly, petitioners should
have availed themselves of a Rule 65 Petition instead, since the RTC Decision was an order of
dismissal of the Complaint, from which no appeal can be taken except by a certiorari petition.
The Court is unconvinced of the arguments of respondent Sunvar and holds that the resort by
petitioners to the present Rule 45 Petition is perfectly within the bounds of our procedural rules.
Page 9 of 50
As respondent Sunvar explained, no appeal may be taken from an order of the RTC dismissing an
action without prejudice,45 but the aggrieved party may file a certiorari petition under Rule
65.46 Nevertheless, the Rules do not prohibit any of the parties from filing a Rule 45 Petition with this
Court, in case only questions of law are raised or involved.47 This latter situation was one that petitioners
found themselves in when they filed the instant Petition to raise only questions of law.
In Republic v. Malabanan,48 the Court clarified the three modes of appeal from decisions of the RTC, to
wit: (1) by ordinary appeal or appeal by writ of error under Rule 41, whereby judgment was rendered in
a civil or criminal action by the RTC in the exercise of its original jurisdiction; (2) by a petition for review
under Rule 42, whereby judgment was rendered by the RTC in the exercise of its appellate jurisdiction;
and (3) by a petition for review on certiorari before the Supreme Court under Rule 45. "The first mode of
appeal is taken to the [Court of Appeals] on questions of fact or mixed questions of fact and law. The
second mode of appeal is brought to the CA on questions of fact, of law, or mixed questions of fact and
law. The third mode of appeal is elevated to the Supreme Court only on questions of law."49 (Emphasis
supplied.)
There is a question of law when the issue does not call for an examination of the probative value of the
evidence presented or of the truth or falsehood of the facts being admitted, and the doubt concerns the
correct application of law and jurisprudence on the matter.50 The resolution of the issue must rest solely
on what the law provides on the given set of circumstances.51
In the instant case, petitioners raise only questions of law with respect to the jurisdiction of the RTC to
entertain a certiorari petition filed against the interlocutory order of the MeTC in an unlawful detainer
suit. At issue in the present case is the correct application of the Rules on Summary Procedure; or,
more specifically, whether the RTC violated the Rules when it took cognizance and granted the
certiorari petition against the denial by the MeTC of the Motion to Dismiss filed by respondent Sunvar.
This is clearly a question of law that involves the proper interpretation of the Rules on Summary
Procedure. Therefore, the instant Rule 45 Petition has been properly lodged with this Court.
II
Propriety of a Rule 65 Petition in Summary Proceedings
Proceeding now to determine that very question of law, the Court finds that it was erroneous for the
RTC to have taken cognizance of the Rule 65 Petition of respondent Sunvar, since the Rules on
Summary Procedure expressly prohibit this relief for unfavorable interlocutory orders of the MeTC.
Consequently, the assailed RTC Decision is annulled.
Under the Rules on Summary Procedure, a certiorari petition under Rule 65 against an interlocutory
order issued by the court in a summary proceeding is a prohibited pleading.52 The prohibition is plain
enough, and its further exposition is unnecessary verbiage.53 The RTC should have dismissed outright
respondent Sunvar’s Rule 65 Petition, considering that it is a prohibited pleading. Petitioners have
already alerted the RTC of this legal bar and immediately prayed for the dismissal of the certiorari
Petition.54 Yet, the RTC not only refused to dismiss the certiorari Petition,55 but even proceeded to hear
the Rule 65 Petition on the merits.
Respondent Sunvar’s reliance on Bayog v. Natino56 and Go v. Court of Appeals57 to justify a certiorari
review by the RTC owing to "extraordinary circumstances" is misplaced. In both cases, there were
peculiar and specific circumstances that justified the filing of the mentioned prohibited pleadings under
PROPERTY ARTS. 419-
the Revised Rules on Summary Procedure – conditions that are not availing in the case of respondent
Sunvar.
In Bayog, Alejandro Bayog filed with the Municipal Circuit Trial Court (MCTC) of Patnongon-Bugasong-
Valderama, Antique an ejectment case against Alberto Magdato, an agricultural tenant-lessee who had
built a house over his property. When Magdato, an illiterate farmer, received the Summons from the
MCTC to file his answer within 10 days, he was stricken with pulmonary tuberculosis and was able to
consult a lawyer in San Jose, Antique only after the reglementary period. Hence, when the Answer of
Magdato was filed three days after the lapse of the 10-day period, the MCTC ruled that it could no
longer take cognizance of his Answer and, hence, ordered his ejectment from Bayog’s land. When his
house was demolished in January 1994, Magdato filed a Petition for Relief with the RTC-San Jose,
Antique, claiming that he was a duly instituted tenant in the agricultural property, and that he was
deprived of due process. Bayog, the landowner, moved to dismiss the Petition on the ground of lack of
jurisdiction on the part of the RTC, since a petition for relief from judgment covering a summary
proceeding was a prohibited pleading. The RTC, however, denied his Motion to Dismiss and remanded
the case to the MCTC for proper disposal.
In resolving the Rule 65 Petition, we ruled that although a petition for relief from judgment was a
prohibited pleading under the Revised Rules on Summary Procedure, the Court nevertheless allowed
the filing of the Petition pro hac vice, since Magdato would otherwise suffer grave injustice and
irreparable injury:
We disagree with the RTC’s holding that a petition for relief from judgment (Civil Case No. 2708) is not
prohibited under the Revised Rule on Summary Procedure, in light of the Jakihaca ruling. When Section
19 of the Revised Rule on Summary Procedure bars a petition for relief from judgment, or a petition for
certiorari, mandamus, or prohibition against any interlocutory order issued by the court, it has in mind no
other than Section 1, Rule 38 regarding petitions for relief from judgment, and Rule 65 regarding
petitions for certiorari, mandamus, or prohibition, of the Rules of Court, respectively. These petitions are
cognizable by Regional Trial Courts, and not by Metropolitan Trial Courts, Municipal Trial Courts, or
Municipal Circuit Trial Courts. If Section 19 of the Revised Rule on Summary Procedure and Rules 38
and 65 of the Rules of Court are juxtaposed, the conclusion is inevitable that no petition for relief from
judgment nor a special civil action of certiorari, prohibition, or mandamus arising from cases covered by
the Revised Rule on Summary Procedure may be filed with a superior court. This is but consistent with
the mandate of Section 36 of B.P. Blg. 129 to achieve an expeditious and inexpensive determination of
the cases subject of summary procedure.
Nevertheless, in view of the unusual and peculiar circumstances of this case, unless some form of relief
is made available to MAGDATO, the grave injustice and irreparable injury that visited him through no
fault or negligence on his part will only be perpetuated. Thus, the petition for relief from judgment which
he filed may be allowed or treated, pro hac vice, either as an exception to the rule, or a regular appeal
to the RTC, or even an action to annul the order (decision) of the MCTC of 20 September 1993. As an
exception, the RTC correctly held that the circumstances alleged therein and the justification pleaded
worked in favor of MAGDATO, and that the motion to dismiss Civil Case No. 2708 was without merit.
xxx 58 (Emphasis supplied.)
On the other hand, in Go v. Court of Appeals, the Court was confronted with a procedural void in the
Revised Rules of Summary Procedure that justified the resort to a Rule 65 Petition in the RTC. In that
case, the preliminary conference in the subject ejectment suit was held in abeyance by the Municipal
Trial Court in Cities (MTCC) of Iloilo City until after the case for specific performance involving the same
parties shall have been finally decided by the RTC. The affected party appealed the suspension order to
Page 10 of 50
the RTC. In response, the adverse party moved to dismiss the appeal on the ground that it concerned
an interlocutory order in a summary proceeding that was not the subject of an appeal. The RTC denied
the Motion to Dismiss and subsequently directed the MTCC to proceed with the hearing of the
ejectment suit, a ruling that was upheld by the appellate court.
In affirming the Decisions of the RTC and CA, the Supreme Court allowed the filing of a petition for
certiorari against an interlocutory order in an ejectment suit, considering that the affected party was
deprived of any recourse to the MTCC’s erroneous suspension of a summary proceeding. Retired Chief
Justice Artemio V. Panganiban eloquently explained the procedural void in this wise:
Indisputably, the appealed [suspension] order is interlocutory, for "it does not dispose of the case but
leaves something else to be done by the trial court on the merits of the case." It is axiomatic that an
interlocutory order cannot be challenged by an appeal. Thus, it has been held that "the proper remedy
in such cases is an ordinary appeal from an adverse judgment on the merits incorporating in said
appeal the grounds for assailing the interlocutory order. Allowing appeals from interlocutory orders
would result in the ‘sorry spectacle’ of a case being subject of a counterproductive ping-pong to and
from the appellate court as often as a trial court is perceived to have made an error in any of its
interlocutory rulings. However, where the assailed interlocutory order is patently erroneous and the
remedy of appeal would not afford adequate and expeditious relief, the Court may allow certiorari as a
mode of redress."
Clearly, private respondent cannot appeal the order, being interlocutory. But neither can it file a petition
for certiorari, because ejectment suits fall under the Revised Rules on Summary Procedure, Section
19(g) of which considers petitions for certiorari prohibited pleadings:
xxx xxx xxx
Based on the foregoing, private respondent was literally caught "between Scylla and Charybdis" in the
procedural void observed by the Court of Appeals and the RTC. Under these extraordinary
circumstances, the Court is constrained to provide it with a remedy consistent with the objective of
speedy resolution of cases.
As correctly held by Respondent Court of Appeals, "the purpose of the Rules on Summary Procedure is
‘to achieve an expeditious and inexpensive determination of cases without regard to technical rules.’
(Section 36, Chapter III, BP Blg. 129)" Pursuant to this objective, the Rules prohibit petitions for
certiorari, like a number of other pleadings, in order to prevent unnecessary delays and to expedite the
disposition of cases. In this case, however, private respondent challenged the MTCC order delaying the
ejectment suit, precisely to avoid the mischief envisioned by the Rules.
Thus, this Court holds that in situations wherein a summary proceeding is suspended indefinitely, a
petition for certiorari alleging grave abuse of discretion may be allowed. Because of the extraordinary
circumstances in this case, a petition for certiorari, in fact, gives spirit and life to the Rules on Summary
Procedure. A contrary ruling would unduly delay the disposition of the case and negate the rationale of
the said Rules.59 (Emphasis supplied.)
Contrary to the assertion of respondent Sunvar, the factual circumstances in these two cases are not
comparable with respondents’ situation, and our rulings therein are inapplicable to its cause of action in
the present suit. As this Court explained in Bayog, the general rule is that no special civil action for
certiorari may be filed with a superior court from cases covered by the Revised Rules on Summary
PROPERTY ARTS. 419-
Procedure. Respondent Sunvar filed a certiorari Petition in an ejectment suit pending before the MeTC.
Worse, the subject matter of the Petition was the denial of respondent’s Motion to Dismiss, which was
necessarily an interlocutory order, which is generally not the subject of an appeal. No circumstances
similar to the situation of the agricultural tenant-lessee in Bayog are present to support the relaxation of
the general rule in the instant case. Respondent cannot claim to have been deprived of reasonable
opportunities to argue its case before a summary judicial proceeding.
Moreover, there exists no procedural void akin to that in Go v. Court of Appeals that would justify
respondent’s resort to a certiorari Petition before the RTC. When confronted with the MeTC’s adverse
denial of its Motion to Dismiss in the ejectment case, the expeditious and proper remedy for respondent
should have been to proceed with the summary hearings and to file its answer. Indeed, its resort to a
certiorari Petition in the RTC over an interlocutory order in a summary ejectment proceeding was not
only prohibited. The certiorari Petition was already a superfluity on account of respondent’s having
already taken advantage of a speedy and available remedy by filing an Answer with the MeTC.
Respondent Sunvar failed to substantiate its claim of extraordinary circumstances that would constrain
this Court to apply the exceptions obtaining in Bayog and Go. The Court hesitates to liberally dispense
the benefits of these two judicial precedents to litigants in summary proceedings, lest these exceptions
be regularly abused and freely availed of to defeat the very goal of an expeditious and inexpensive
determination of an unlawful detainer suit. If the Court were to relax the interpretation of the prohibition
against the filing of certiorari petitions under the Revised Rules on Summary Procedure, the RTCs may
be inundated with similar prayers from adversely affected parties questioning every order of the lower
court and completely dispensing with the goal of summary proceedings in forcible entry or unlawful
detainer suits.
III
Reckoning the One-Year Period in Unlawful Detainer Cases
We now come to another legal issue underlying the present Petition – whether the Complaint filed by
petitioners is properly an action for unlawful detainer within the jurisdiction of the MeTC or an accion
publiciana lodged with the RTC. At the heart of the controversy is the reckoning period of the one-year
requirement for unlawful detainer suits.
Whether or not petitioners’ action for unlawful detainer was brought within one year after the unlawful
withholding of possession will determine whether it was properly filed with the MeTC. If, as petitioners
argue, the one-year period should be counted from respondent Sunvar’s receipt on 03 February 2009 of
the Final Notice to Vacate, then their Complaint was timely filed within the one-year period and
appropriately taken cognizance of by the MeTC. However, if the reckoning period is pegged from the
expiration of the main lease contract and/or sublease agreement, then petitioners’ proper remedy
should have been an accion publiciana to be filed with the RTC.
The Court finds that petitioners correctly availed themselves of an action for unlawful detainer and,
hence, reverses the ruling of the RTC.
Under the Rules of Court, lessors against whom possession of any land is unlawfully withheld after the
expiration of the right to hold possession may – by virtue of any express or implied contract, and within
one year after the unlawful deprivation – bring an action in the municipal trial court against the person
unlawfully withholding possession, for restitution of possession with damages and costs.60 Unless
otherwise stipulated, the action of the lessor shall commence only after a demand to pay or to comply
Page 11 of 50
with the conditions of the lease and to vacate is made upon the lessee; or after a written notice of that
demand is served upon the person found on the premises, and the lessee fails to comply therewith
within 15 days in the case of land or 5 days in the case of buildings.61
In Delos Reyes v. Spouses Odenes,62 the Court recently defined the nature and scope of an unlawful
detainer suit, as follows:
Unlawful detainer is an action to recover possession of real property from one who illegally withholds
possession after the expiration or termination of his right to hold possession under any contract,
express or implied. The possession by the defendant in unlawful detainer is originally legal but became
illegal due to the expiration or termination of the right to possess. The proceeding is summary in nature,
jurisdiction over which lies with the proper MTC or metropolitan trial court. The action must be brought
up within one year from the date of last demand, and the issue in the case must be the right to physical
possession. (Emphasis supplied.)
Hence, a complaint sufficiently alleges a cause of action for unlawful detainer if it states the following
elements:
1. Initially, the possession of the property by the defendant was by contract with or by tolerance
of the plaintiff.
2. Eventually, the possession became illegal upon the plaintiff’s notice to the defendant of the
termination of the latter’s right of possession.
3. Thereafter, the defendant remained in possession of the property and deprived the plaintiff
of the latter’s enjoyment.
4. Within one year from the making of the last demand on the defendant to vacate the property,
the plaintiff instituted the Complaint for ejectment.63
"On the other hand, accion publiciana is the plenary action to recover the right of possession which
should be brought in the proper regional trial court when dispossession has lasted for more than one
year. It is an ordinary civil proceeding to determine the better right of possession of realty independently
of title. In other words, if at the time of the filing of the complaint, more than one year had elapsed since
defendant had turned plaintiff out of possession or defendant’s possession had become illegal, the
action will be, not one of forcible entry or illegal detainer, but an accion publiciana."64
There are no substantial disagreements with respect to the first three requisites for an action for
unlawful detainer. Respondent Sunvar initially derived its right to possess the subject property from its
sublease agreements with TRCFI and later on with PDAF. However, with the expiration of the lease
agreements on 31 December 2002, respondent lost possessory rights over the subject property.
Nevertheless, it continued occupying the property for almost seven years thereafter. It was only on 03
February 2009 that petitioners made a final demand upon respondent Sunvar to turn over the property.
What is disputed, however, is the fourth requisite of an unlawful detainer suit.
The Court rules that the final requisite is likewise availing in this case, and that the one-year period
should be counted from the final demand made on 03 February 2009.
PROPERTY ARTS. 419-
Contrary to the reasoning of the RTC,65 the one-year period to file an unlawful detainer case is not
counted from the expiration of the lease contract on 31 December 2002. Indeed, the last demand for
petitioners to vacate is the reckoning period for determining the one-year period in an action for unlawful
detainer. "Such one year period should be counted from the date of plaintiff’s last demand on defendant
to vacate the real property, because only upon the lapse of that period does the possession become
unlawful."66
In case several demands to vacate are made, the period is reckoned from the date of the last
demand.67 In Leonin v. Court of Appeals,68 the Court, speaking through Justice Conchita Carpio Morales,
reckoned the one-year period to file the unlawful detainer Complaint – filed on 25 February 1997 – from
the latest demand letter dated 24 October 1996, and not from the earlier demand letter dated 03 July
1995:
Prospero Leonin (Prospero) and five others were co-owners of a 400-square meter property located at
K-J Street, East Kamias, Quezon City whereon was constructed a two-storey house and a three-door
apartment identified as No. 1-A, B, and C.
Prospero and his co-owners allowed his siblings, herein petitioners, to occupy Apartment C without
paying any rentals.
xxx xxx xxx
Petitioners further contend that respondent’s remedy is accion publiciana because their possession is
not de facto, they having been authorized by the true and lawful owners of the property; and that one
year had elapsed from respondent’s demand given on "July 3, 1995" when the unlawful detainer
complaint was filed.
The petition fails.
Contrary to petitioners’ contention, the allegations in the complaint make out a case for unlawful
detainer. Thus, respondent alleged, inter alia, that she is the registered owner of the property and that
petitioners, who are tenants by tolerance, refused to vacate the premises despite the notice to vacate
sent to them.
Likewise, contrary to petitioners’ contention, the one-year period for filing a complaint for unlawful
detainer is reckoned from the date of the last demand, in this case October 24, 1996, the reason being
that the lessor has the right to waive his right of action based on previous demands and let the lessee
remain meanwhile in the premises. Thus, the filing of the complaint on February 25, 1997 was well
within the one year reglementary period.69(Emphasis supplied.)
From the time that the main lease contract and sublease agreements expired (01 January 2003),
respondent Sunvar no longer had any possessory right over the subject property. Absent any express
contractual renewal of the sublease agreement or any separate lease contract, it illegally occupied the
land or, at best, was allowed to do so by mere tolerance of the registered owners – petitioners herein.
Thus, respondent Sunvar’s possession became unlawful upon service of the final notice on 03 February
2009. Hence, as an unlawful occupant of the land of petitioners, and without any contract between
them, respondent is "necessarily bound by an implied promise" that it "will vacate upon demand, failing
which a summary action for ejectment is the proper remedy against them."70 Upon service of the final
notice of demand, respondent Sunvar should have vacated the property and, consequently, petitioners
Page 12 of 50
had one year or until 02 February 2010 in which to resort to the summary action for unlawful detainer. In
the instant case, their Complaint was filed with the MeTC on 23 July 2009, which was well within the
one-year period.
The Court is aware that petitioners had earlier served a Notice to Vacate on 22 February 2008, which
could have possibly tolled the one-year period for filing an unlawful detainer suit. Nevertheless, they can
be deemed to have waived their right of action against respondent Sunvar and continued to tolerate its
occupation of the subject property. That they sent a final Notice to Vacate almost a year later gave
respondent another opportunity to comply with their implied promise as occupants by mere tolerance.
Consequently, the one-year period for filing a summary action for unlawful detainer with the MeTC must
be reckoned from the latest demand to vacate.
In the past, the Court ruled that subsequent demands that are merely in the nature of reminders of the
original demand do not operate to renew the one-year period within which to commence an ejectment
suit, considering that the period will still be reckoned from the date of the original demand.71 If the
subsequent demands were merely in the nature of reminders of the original demand, the one-year
period to commence an ejectment suit would be counted from the first demand.72 However, respondent
failed to raise in any of the proceedings below this question of fact as to the nature of the second
demand issued by the OSG. It is now too late in the proceedings for them to argue that the 2009 Notice
to Vacate was a mere reiteration or reminder of the 2008 Notice to Vacate. In any event, this factual
determination is beyond the scope of the present Rule 45 Petition, which is limited to resolving
questions of law.
The Court notes that respondent Sunvar has continued to occupy the subject property since the
expiration of its sublease on 31 December 2002. The factual issue of whether respondent has paid
rentals to petitioners from the expiration of the sublease to the present was never raised or sufficiently
argued before this Court. Nevertheless, it has not escaped the Court’s attention that almost a decade
has passed without any resolution of this controversy regarding respondent’s possession of the subject
property, contrary to the aim of expeditious proceedings under the Revised Rules on Summary
Procedure. With the grant of the instant Petition and the remand of the case to the MeTC for continued
hearing, the Court emphasizes the duty of the lower court to speedily resolve this matter once and for
all, especially since this case involves a prime property of the government located in the country’s
business district and the various opportunities for petitioners to gain public revenues from the property.
WHEREFORE, the Court GRANTS the Petition for Review on Certiorari dated 14 February 2011, filed
by petitioners Republic and National Power Corporation, which are represented here by the
Privatization Management Office. The assailed Decision dated 01 December 2010 of the Regional Trial
Court of Makati City, Branch 134, is hereby REVERSED and SET ASIDE. The Metropolitan Trial Court
of Makati City, Branch 63, is DIRECTED to proceed with the summary proceedings for the unlawful
detainer case in Civil Case No. 98708.
SO ORDERED.
PROPERTY ARTS. 419-
G.R. No. 157536 May 16, 2005
MELCHOR CARO, petitioner,
vs.
SUSANA SUCALDITO, respondent.
DECISION
CALLEJO, SR., J.:
This is a petition for review on certiorari under Rule 45 of the Rules of Court, assailing the Decision1 of
the Court of Appeals (CA) in CA-G.R. CV No. 45503, affirming the dismissal of Civil Case No. 15529 by
the Regional Trial Court (RTC) of Iloilo City, Branch 39, as well as the resolution denying the motion for
reconsideration thereof.
The antecedent facts are as follows:
Gregorio Caro bought a parcel of land known as Assessor’s Lot No. 160 from Ruperto Gepilano as
evidenced by a Deed of Sale2 dated October 21, 1953. The said lot was situated
in Sitio Bangyan, Barrio Calaya, Municipality of Nueva Valencia, Iloilo City, consisting more or less of
17.9849 hectares. Thereafter, Gregorio Caro sold a portion of the said lot to his son Melchor Caro,
consisting of 70,124 square meters, and now identified as Lot No. 4512 of the Cadastral survey of
Nueva Valencia, Pls-775. Father and son executed a Deed of Definite Sale3 dated January 31, 1973
covering Lot No. 4512.
On August 1, 1974, Melchor Caro applied for a free patent before the Bureau of Lands, District Land
Office No. 6-1, covering the said area of the property which he bought from his father. The application
was, however, opposed by Deogracias de la Cruz. On November 6, 1980, the Regional Director
rendered a Decision4 canceling the said application, thusly:
This is a claim of Deogracias de la Cruz to Lot No. 4512, Pls-775 of Calaya, Nueva Valencia,
Guimaras, covered by the above-noted application of Melchor Caro.
In the investigation, respondent claims preferential rights over the land as he acquired it
through sale from his father Gregorio Caro who had likewise bought the land from Ruperto
Cepellano (sic) in 1953. On the other hand, protestant De la Cruz testified that the land in
controversy was bought by him from Cipriano Gallego in 1965; that he thereafter occupied,
Page 13 of 50
 possessed and improved the land by planting coconut trees; and that in 1968 he was forcibly
driven out by Gregorio Caro from the land in question.
Verification of the records disclosed that the land which was actually sold to Gregorio Caro by
Ruperto Gepellano (sic) is Assessor’s Lot No. 160. The description and physical identity of Lot
No. 160 is basically different and distinct from Lot No. 4512, the land in question. This could be
clearly seen in the Certified True Copy of the Sketch Plan from the Assessor’s Office of
Assessor’s Lot No. 160 and the Sketch Plan marked as Exhibit 9 of the Respondent-Applicant.
It has been established that Assessor’s Lot No. 160 corresponds to Lot No. 4511 and not Lot
No. 4512 claimed by the protestant. Moreover, Ruperto Cepellano (sic) in his affidavit testified
that what he sold to Gregorio Caro is a land distinct and different from the land in question.
IN VIEW OF THE FOREGOING FINDINGS, it is ordered that the F.P.A. No. (VI-1)8548 of
applicant-respondent Melchor Caro be, as hereby it is, cancelled. Protestant Deogracias de la
Cruz if qualified, is given one hundred twenty (120) days from the finality of this decision to file
an appropriate public land application otherwise he shall lose his preferential right thereto.
SO ORDERED.5
Caro filed a notice of appeal before the Regional Land Office in Iloilo City, docketed as MNR Case No.
5207. However, the appeal was dismissed in an Order6 dated June 29, 1982, on the ground of failure to
file an appeal memorandum within the reglementary period therefor.
On August 29, 1982, Susana R. Sucaldito, as the buyer of Lot No. 4512, filed an Application for a Free
Patent7covering the said lot, and was issued Free Patent No. 597599. Consequently, the Register of
Deeds of Iloilo City issued Original Certificate of Title (OCT) No. F-27162 in her favor. Sucaldito then
filed a Petition for Writ of Possession8 before the RTC of Iloilo City, which was granted in an
Order9 dated May 7, 1984.
10
Thereafter, on February 20, 1984, Caro filed a Complaint against Sucaldito for "Annulment of Title,
Decision, Free Patent and/or Recovery of Ownership and/or Possession with Damages" before the RTC
of Iloilo City. He later filed an amended complaint,11 alleging that he was the owner of the subject lot,
and had been in possession of the same "since 1953 and/or even prior thereto in the concept of owner,
adversely, openly, continuously and notoriously." He further alleged that the said lot had been declared
for tax purposes in his name and that of his predecessors-in-interest, and that the corresponding land
taxes had been paid therefor. He claimed that Assessor’s Lot No. 160 had actually been divided into
two lots, namely, Lot No. 4511 and Lot No. 4512; Sucaldito had actually been claiming Lot No. 989 (Lot
No. 4512), which was located two kilometers away. He lamented that despite the overwhelming
evidence proving his ownership and possession of the said property, the Bureau of Lands did not award
it to him.
Caro further alleged that since the issuance of the free patent over the subject lot in favor of Sucaldito
was wrongful and fraudulent, she had no right whatsoever over the subject lot. Hence, as a "trustee of a
constructive trust," she was obliged to return the same to him as the lawful owner. The complaint
contained the following prayer:
WHEREFORE, it is prayed that judgment be rendered:
PROPERTY ARTS. 419-
1. Ordering the annulment and voiding of the decision of the Bureau of Lands, the free patent
and the Original Certificate of Title No. F-27162 or in the alternative;
2. Ordering defendant to reconvey the ownership and in the event she wrests possession from
plaintiff then, also the possession of Lot 4512 PLS-775 of Nueva Valencia, Guimaras Cadastre,
back to plaintiff;
3. Declaring plaintiff as the lawful owner and possessor of Lot 4512 PLS-775 of Nueva
Valencia, Guimaras Cadastre and ordering the issuance of a free patent or a torrens title in
favor of plaintiff;
4. Ordering defendant to pay the plaintiff P50,000.00 as moral damages, P2,000.00 as
attorney’s fees and P2,000.00 as expenses on litigation plus exemplary damages in an amount
at the discretion of this Court.
Plaintiff further prays for such other relief just and equitable in the premises.12
In her answer with counterclaim, Sucaldito interposed, as a special affirmative defense, the fact that she
intervened in the proceedings on Caro’s application for a free patent over Lot No. 4512 before the
Bureau of Lands having bought the subject land from De la Cruz. Moreover, contrary to the allegations
of the petitioner, Lot No. 989 and Lot No. 4512 were one and the same lot, as per the findings of the
Bureau of Lands.
The parties thereafter presented evidence to prove their respective claims. In a Decision13 dated
December 7, 1993, the trial court ruled in favor of the respondent and dismissed the petitioner’s
complaint. The dispositive portion reads:
WHEREFORE, premises considered, the complaint filed by plaintiff is dismissed. The
counterclaim of defendant which is merely the result of the filing of the complaint, is likewise
dismissed.
Costs against the plaintiff.
SO ORDERED.14
Citing the case of Maximo v. Court of First Instance of Capiz, Br. III,15 the trial court ruled that Caro had
no personality to file the action for the annulment of the free patent issued in favor of Sucaldito, which
could only be brought by the Solicitor General. It held that "an applicant for a free patent who is not the
owner of a parcel of land cannot bring an action in court to recover the land, for the court may not usurp
the authority of the Director of Lands and the Secretary of Agriculture to dispose lands of the public
domain through administrative proceedings under the Public Land Act,"16 or Commonwealth Act No.
141, as amended. The trial court further stressed that the remedy of a rival-applicant for a free patent
over the same land was through administrative channels, not judicial, because even if the oppositor
succeeds in annulling the title of the applicant, the former does not thereby become the owner of the
land in dispute.17
The trial court also declared that contrary to Caro’s claims, the evidence clearly showed that Lot No.
4512, with an area of 70,677 square meters, was not included in Assessor’s Lot No. 160, thus:
Page 14 of 50
 Assessor’s Lot 160 is Cadastral Lot 4511, which has an original area of around 17 hectares,
more or less, later on, increased to 21 hectares. If we add Lot 4512 to Lot 4511 following the
contention of the plaintiff, then the area would be more than 28 hectares. Thus, belying the
claim of plaintiff that Lot 4512 was formerly a part of Assessor’s Lot 160.
The contention of the plaintiff that the defendant is claiming Lot 989 which is owned by Felix
Galabo and located at Brgy. Olacon, is not well taken, because the identification of the lot as
stated in the tax declaration is not binding and conclusive. What is binding and conclusive is
what is stated in the title of the land and its technical description. In the technical description as
found in the title of the defendant [Sucaldito], it is clearly stated therein that the lot is Lot 4512
and is located at Brgy. Calaya and not Brgy. Olacon, Nueva Valencia, Guimaras.18
Aggrieved by the trial court’s ruling, Caro elevated the case to the CA on the following grounds:
I In her comment, the respondent points out that the decision of the Bureau of Lands itself would show
THE COURT A QUO ERRED IN RULING THAT PLAINTIFF HAS NO PERSONALITY TO
BRING THE ACTION;
II
THE COURT A QUO ERRED IN RULING THAT EVEN IF THE PLANTIFF HAS THE
PERSONALITY TO BRING THE ACTION STILL HE CANNOT RECOVER THE LOT IN
QUESTION, CAD. LOT NO. 4512;
III
THE COURT ERRED IN NOT ORDERING THE DEFENDANT TO RECONVEY THE LAND IN
QUESTION TO PLAINTIFF AND TO PAY DAMAGES.19
The CA dismissed the petition in its Decision20 dated July 31, 2002. The appellate court agreed with the
ruling of the RTC that the petitioner had no personality to file the action under Section 101 of
Commonwealth Act No. 141, considering further that he was a mere applicant for a free patent. Citing
several cases,21 the appellate court ruled that the findings of fact made by administrative agencies
which are supported by substantial evidence must be respected, particularly where the question
demands the exercise of sound administrative discretion requiring special knowledge and experience.22
Caro filed a motion for reconsideration of the said decision, which the appellate court denied in a
Resolution23 dated February 7, 2003.
Caro, now the petitioner, assails the ruling of the appellate court on the following grounds:
THAT THE HONORABLE APPELLATE COURT COMMITTED AN ERROR IN HOLDING THAT
PETITIONER HAS NO LEGAL PERSONALITY TO FILE THIS ACTION;
PROPERTY ARTS. 419-
THAT THE HONORABLE APPELLATE COURT ERRED IN DISMISSING THE APPEAL
INTERPOSED BY PETITIONER ON THE GROUND THAT ONLY THE SOLICITOR GENERAL
CAN FILE AN ACTION FOR RECONVEYANCE OF PROPERTY ACQUIRED BY PATENT. 24
The petitioner insists that contrary to the ruling of the CA, he has the legal personality to bring and
institute the present action against the respondent, considering that title issued on the basis of a patent
is annullable on the ground of fraud. Furthermore, the one-year period within which to file an action to
cancel a torrens title under Section 32 of Presidential Decree No. 1529 does not apply where the
registered owner, or the successor-in-interest, knew that the property described in the title actually
belongs to another, as in this case. The petitioner cites Vital v. Anore, et al.25 to bolster his claim. The
petitioner also cites Director of Lands v. Abanilla26 where the Court stressed that any false statement in
the application, which is an essential condition of the patent or title under Section 91 of Commonwealth
Act No. 141, "shall ipso facto produce the cancellation of the concession, title or permit granted."
that the petitioner is not the true and lawful owner of the subject lot; as such, the argument that he has
the legal personality to file the action for annulment of patent based on constructive trust is untenable.
The respondent further contends that the CA did not err in upholding the ruling of the RTC.
The petitioner merely reiterated his previous arguments in his Reply dated December 30, 2003.
The Court agrees with the ruling of the RTC and the CA, and holds that the petitioner has no personality
to file a suit for reconveyance of the subject property.
The Court notes that the petitioner’s complaint before the RTC prays for the annulment of the free
patent issued in the respondent’s favor. Considering that the ultimate relief sought is for the respondent
to "return" the subject property to him, it is in reality an action for reconveyance. In De Guzman v. Court
of Appeals,27 the Court held that "[t]he essence of an action for reconveyance is that the decree of
registration is respected as incontrovertible but what is sought instead is the transfer of the property
which has been wrongfully or erroneously registered in another person’s name, to its rightful owner or to
one with a better right."28 Indeed, in an action for reconveyance filed by a private individual, the property
does not go back to the State.29
Reversion, on the other hand, is an action where the ultimate relief sought is to revert the land back to
the government under the Regalian doctrine. Considering that the land subject of the action originated
from a grant by the government, its cancellation is a matter between the grantor and the grantee.30
Under Section 2, Rule 3 of the Rules of Court,31 every action must be prosecuted or defended in the
name of the real party-in-interest, or one "who stands to be benefited or injured by the judgment in the
suit." Corollarily, legal standing has been defined as a personal and substantial interest in the case,
such that the party has sustained or will sustain direct injury as a result of the challenged act. Interest
means a material interest in issue that is affected by the questioned act or instrument, as distinguished
from a mere incidental interest in the question involved.32
Clearly then, a suit filed by one who is not a party-in-interest must be dismissed. In this case, the
petitioner, not being the owner of the disputed property but a mere applicant for a free patent, cannot
thus be considered as a party-in-interest with personality to file an action for reconveyance. The Court,
citing several of its holdings, expounded on this doctrine in Tankiko v. Cezar33 as follows:
Page 15 of 50
 … Thus, in Lucas v. Durian [102 Phil. 1157 (1957)], the Court affirmed the dismissal of a
Complaint filed by a party who alleged that the patent was obtained by fraudulent means and,
consequently, prayed for the annulment of said patent and the cancellation of a certificate of
title. The Court declared that the proper party to bring the action was the government, to which
the property would revert. Likewise affirming the dismissal of a Complaint for failure to state a
cause of action, the Court in Nebrada v. Heirs of Alivio [104 Phil. 126 (1958)] noted that the
plaintiff, being a mere homestead applicant, was not the real party-in-interest to institute an
action for reconveyance. …
...
Verily, the Court stressed that " … [i]f the suit is not brought in the name of or against the real
party-in-interest, a motion to dismiss may be filed on the ground that the complaint states no
cause of action [Travel Wide v. CA, 199 SCRA 205, 209 (1991), per Cruz, J. See
also Suguister v. Tamayo, 176 SCRA 579, August 21, 1989]. In fact, a final judgment may be
invalidated if the real parties-in-interest are not included. This was underscored by the Court
in Arcelona v. CA [280 SCRA 20, October 2, 1997], in which a final judgment was nullified
because indispensable parties were not impleaded.
In the present dispute, only the State can file a suit for reconveyance of a public land.
Therefore, not being the owners of the land but mere applicants for sales patents thereon,
respondents have no personality to file the suit. Neither will they be directly affected by the
judgment in such suit.34
In De la Peña v. Court of Appeals,35 the Court, in dismissing the petitioner’s imputation of fraud in
securing a free patent and title over a parcel of land, declared that reconveyance is a remedy granted
only to the owner of the property alleged to be erroneously titled in another’s name.36 The Court further
expounded:
the same. It is settled that a suit filed by a person who is not a party-in-interest must be
dismissed.39
In fact, Section 101 of Commonwealth Act No. 141 states –
Section 101. All actions for the reversion to the government of lands of the public domain or
improvements thereon shall be instituted by the Solicitor General or the officer acting in his
stead, in the proper courts, in the name of the Commonwealth [now Republic] of the
Philippines.
This provision was applied and discussed in Sumail v. Judge of the Court of First Instance of Cotabato,
et al.,40 a case on all fours with the present one, as follows:
Under Section 101 of the above reproduced, only the Solicitor General or the officer acting in
his stead may bring the action for reversion. Consequently, Sumail may not bring such action
or any action which would have the effect of cancelling a free patent and the corresponding
certificate of title issued on the basis thereof, with the result that the land covered thereby will
again form part of the public domain. Furthermore, there is another reason for withholding legal
personality from Sumail. He does not claim the land to be his private property. In fact, by his
application for a free patent, he had formally acknowledged and recognized the land to be a
part of the public domain; this, aside from the declaration made by the cadastral court that lot
3633 was public land. Consequently, even if the parcel were declared reverted to the public
domain, Sumail does not automatically become the owner thereof. He is a mere public land
applicant like others who may apply for the same.
To reiterate, the petitioner is not the proper party to file an action for reconveyance that would result in
the reversion of the land to the government.41 The petitioner has no personality to "recover" the property
as he has not shown that he is the rightful owner thereof.42

Persons who have not obtained title to public lands could not question the titles legally issued WHEREFORE, premises considered, the petition is DENIED for lack of merit. The Decision of the Court
by the State [Reyes v. Rodriguez, 62 Phil. 771, 776 (1936)]. In such cases, the real party-in- of Appeals in CA-G.R. CV No. 45503 and the Resolution dated February 7, 2003 are AFFIRMED.
interest is the Republic of the Philippines to whom the property would revert if it is ever
established, after appropriate proceedings, that the free patent issued to the grantee is indeed
vulnerable to annulment on the ground that the grantee failed to comply with the conditions SO ORDERED.
imposed by the law. Not being an applicant, much less a grantee, petitioner cannot ask for
reconveyance.37

In VSC Commercial Enterprises, Inc. v. Court of Appeals,38 where the private respondents therein were
mere lessees of the property in question, the Court ruled that as mere lessees, they had "no present
substantial and personal interest with respect to issues involving ownership of the disputed property."
The Court went on to declare:

… The only interest they have, in the event the petitioner’s title over the subject property is
cancelled and ownership reverts to the State, is the hope that they become qualified buyers of
the subject parcel of land. Undoubtedly, such interest is a mere expectancy. Even the private
respondents themselves claim that in case of reversion of ownership to the State, they only
have "pre-emptive rights" to buy the subject property; that their real interest over the said
property is contingent upon the government’s consideration of their application as buyers of

PROPERTY ARTS. 419- Page 16 of 50

G.R. No. 179334 April 21, 2015
SECRETARY OF THE DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS and DISTRICT
ENGINEER CELESTINO R. CONTRERAS, Petitioners,
vs.
SPOUSES HERACLEO and RAMONA TECSON, Respondents.
RESOLUTION
PERALTA, J.:
For resolution is the Motion for Reconsideration1 filed by respondents-movants spouses Heracleo and
Ramona Tecson imploring the Court to take a second look at its July 1, 2013 Decision, the dispositive
portion of which reads:
WHEREFORE, premises considered, the petition is PARTIALLY GRANTED. The Court of Appeals
Decision dated July 31, 2007 in CAG.R. CV No. 77997 is MODIFIED, in that the valuation of the subject
property owned by respondents shall be P0.70 instead of ₱1,500.00 per square meter, with interest at
six percent (6%) per annum from the date of taking in 1940 instead of March 17, 1995, until full
payment.2
In view of the contrasting opinions of the members of the Third Division on the instant motion, and the
transcendental importance of the issue raised herein, the members of the Third Division opted to refer
the issue to the En Banc for resolution.
For a proper perspective, we briefly state the factual background of the case.
In 1940, the Department of Public Works and Highways (DPWH) took respondents-movants' subject
property without the benefit of expropriation proceedings for the construction of the MacArthur Highway.
In a letter dated December 15, 1994,respondents-movants demanded the payment of the fair market
value of the subject parcel of land. Celestino R. Contreras (Contreras), then District Engineer of the
First Bulacan Engineering District of the DPWH, offered to pay for the subject land at the rate of
Seventy Centavos (P0.70) per square meter, per Resolution of the Provincial Appraisal Committee
(PAC) of Bulacan. Unsatisfied with the offer, respondents-movants demanded the return of their
property, or the payment of compensation at the current fair market value.3 Hence, the complaint for
recovery of possession with damages filed by respondents-movants. Respondents-movants were able
to obtain favorable decisions in the Regional Trial Court (RTC) and the Court of Appeals (CA), with the
subject property valued at One Thousand Five Hundred Pesos (₱1,500.00) per square meter, with
interest at six percent (6%) per annum.
Petitioners thus elevated the matter to this Court in a petition for review on certiorari. The only issue
resolved by the Court in the assailed decision is the amount of just compensation which respondents-
movants are entitled to receive from the government for the taking of their property. Both the RTC and
the CA valued the property at One Thousand Five Hundred Pesos (₱1,500.00) per square meter, plus
six percent (6%) interest from the time of the filing of the complaint until full payment. We, however, did
not agree with both courts and ruled instead that just compensation should be based on the value of the
property at the time of taking in 1940, which is Seventy Centavos (P0.70) per square meter.4 In addition,
and by way of compensation, we likewise awarded an interest of six percent (6%) per annum from 1940
until full payment.5
PROPERTY ARTS. 419-
Aggrieved, respondents-movants hereby move for the reconsideration of said decision on the following
grounds:
A. THE HONORABLE COURT MAY LOOK INTO THE "JUSTNESS" OF THE MISERABLE
AMOUNT OF COMPENSATION BEING AWARDED TO THE HEREIN RESPONDENTS; and
B. THE HONORABLE COURT MAY SETTLE FOR A HAPPY MIDDLE GROUND IN THE
NAME OF DOCTRINAL PRECISION AND SUBSTANTIAL JUSTICE.6
Citing the views of Justices Presbitero J. Velasco, Jr. and Marvic Mario Victor F. Leonen in their
Dissenting and Concurring Opinion and Separate Opinion, respectively, respondents-movants insist that
gross injustice will result if the amount that will be awarded today will be based simply on the value of
the property at the time of the actual taking. Hence, as proposed by Justice Leonen, they suggest that a
happy middle ground be achieved by meeting the need for doctrinal precision and the thirst for
substantial justice.7
We maintain our conclusions in the assailed July 1, 2013 Decision with modification on the amount of
interest awarded, as well as the additional grant of exemplary damages and attorney's fees.
At the outset, it should be stressed that the matter of the validity of the State's exercise of the power of
eminent domain has long been settled. In fact, in our assailed decision, We have affirmed the ruling of
the CA that the pre-trial order issued on May 17, 2001 has limited the issues as follows: (1) whether or
not the respondents-movants are entitled to just compensation; (2) whether or not the valuation would
be based on the corresponding value at the time of the taking or at the time of the filing of the action;
and (3) whether or not the respondents-movants are entitled to damages.8 Moreover, it was held that for
failure of respondents-movants to question the lack of expropriation proceedings for a long period of
time, they are deemed to have waived and are estopped from assailing the power of the government to
expropriate or the public use for which the power was exercised.9 What is, therefore, left for
determination in the instant Motion for Reconsideration, in accordance with our Decision dated July 1,
2013, is the propriety of the amount awarded to respondents as just compensation.
At this juncture, We hold that the reckoning date for property valuation in determining the amount of just
compensation had already been addressed and squarely answered in the assailed decision. To be sure,
the justness of the award had been taken into consideration in arriving at our earlier conclusion.
We have in the past been confronted with the same issues under similar factual and procedural
circumstances. We find no reason to depart from the doctrines laid down in the earlier cases as we
adopted in the assailed decision. In this regard, we reiterate the doctrines laid down in the cases
of Forfom Development Corporation (Forfom) v. Philippine National Railways (PNR),10 Eusebio v.
Luis,11 Manila International Airport Authority v. Rodriguez,12 and Republic v. Sarabia.13
In Forfom, PNR entered the property of Forfom in January 1973 for railroad tracks, facilities and
appurtenances for use of the Carmona Commuter Service without initiating expropriation proceedings.
In 1990, Forfom filed a complaint for recovery of possession of real property and/or damages against
PNR. In Eusebio, respondent's parcel of land was taken in 1980 by the City of Pasig and used as a
municipal road without the appropriate expropriation proceedings. In1996, respondent filed a complaint
for reconveyance and/or damages against the city government and the mayor. In MIAA, in the early
1970s, petitioner implemented expansion programs for its runway, necessitating the acquisition and
occupation of some of the properties surrounding its premises. As to respondent's property, no
Page 17 of 50
expropriation proceedings were initiated. In 1997, respondent initiated a case for accion
reivindicatoriawith damages against petitioner. In Republic, sometime in 1956, the Air Transportation
Office (ATO) took possession and control of a portion of a lot situated in Aklan, registered in the name of
respondent, without initiating expropriation proceedings. Several structures were erected thereon,
including the control tower, the Kalibo crash fire rescue station, the Kalibo airport terminal, and the
Headquarters of the PNP Aviation Security Group. In 1995,several stores and restaurants were
constructed on the remaining portion of the lot. In 1997, respondent filed a complaint for recovery of
possession with damages against the storeowners wherein ATO intervened claiming that the
storeowners were its lessees.
These cases stemmed from similar background, that is, government took control and possession of the
subject properties for public use without initiating expropriation proceedings and without payment of just
compensation; while the landowners failed for a long period of time to question such government act
and later instituted actions for recovery of possession with damages. In these cases, the Court has
uniformly ruled that the fair market value of the property at the time of taking is controlling for purposes
of computing just compensation.
In Forfom, the payment of just compensation was reckoned from the time of taking in 1973;
in Eusebio, the Court fixed the just compensation by determining the value of the property at the time of
taking in 1980; in MIAA, the value of the lot at the time of taking in 1972 served as basis for the award
of compensation to the owner; and, in Republic,the Court was convinced that the taking occurred in
1956 and was thus the basis in fixing just compensation.
As in the aforementioned cases, just compensation due respondents-movants in this case should,
therefore, be fixed not as of the time of payment but at the time of taking in 1940 which is Seventy
Centavos (P0.70) per square meter, and not One Thousand Five Hundred Pesos (₱1,500.00) per
square meter, as valued by the RTC and CA.
While disparity in the above amounts is obvious and may appear inequitable to respondents-movants
as they would be receiving such outdated valuation after a very long period, it should be noted that the
purpose of just compensation is not to reward the owner for the property taken but to compensate him
for the loss thereof. As such, the true measure of the property, as upheld by a plethora of cases, is the
market value at the time of the taking, when the loss resulted. This principle was plainly laid down
in Apo Fruits Corporation and Hijo Plantation, Inc. v. Land Bank of the Philippines,14 to wit:
x x x In Land Bank of the Philippines v. Orilla, a valuation case under our agrarian reform law, this Court
had occasion to state:
Constitutionally, "just compensation" is the sum equivalent to the market value of the property, broadly
described as the price fixed by the seller in open market in the usual and ordinary course of legal action
and competition, or the fair value of the property as between the one who receives and the one who
desires to sell, it being fixed at the time of the actual taking by the government. Just
compensation is defined as the full and fair equivalent of the property taken from its owner by
the expropriator. It has been repeatedly stressed by this Court that the true measure is not the
taker's gain but the owner's loss. The word "just" is used to modify the meaning of the word
"compensation" to convey the idea that the equivalent to be given for the property to be taken shall
be real, substantial, full and ample. [Emphasis supplied.]15
PROPERTY ARTS. 419-
Indeed, the State is not obliged to pay premium to the property owner for appropriating the latter's
property; it is only bound to make good the loss sustained by the landowner, with due consideration of
the circumstances availing at the time the property was taken. More, the concept of just compensation
does not imply fairness to the property owner alone. Compensation must also be just to the public,
which ultimately bears the cost of expropriation.16
Notwithstanding the foregoing, we recognize that the owner's loss is not only his property but also its
income-generating potential.17 Thus, when property is taken, full compensation of its value must
immediately be paid to achieve a fair exchange for the property and the potential income
lost.18 Accordingly, in Apo, we held that the rationale for imposing the interest is to compensate the
petitioners for the income they would have made had they been properly compensated for their
properties at the time of the taking.19 Thus:
We recognized in Republic v. Court of Appeals the need for prompt payment and the necessity of the
payment of interest to compensate for any delay in the payment of compensation for property already
taken. We ruled in this case that:
The constitutional limitation of "just compensation" is considered to be the sum equivalent to the market
value of the property, broadly described to be the price fixed by the seller in open market in the usual
and ordinary course of legal action and competition or the fair value of the property as between one who
receives, and one who desires to sell, i[f] fixed at the time of the actual taking by the government.
Thus, if property is taken for public use before compensation is deposited with the court having
jurisdiction over the case, the final compensation must include interest[s] on its just value to be
computed from the time the property is taken to the time when compensation is actually paid or
deposited with the court. In fine, between the taking of the property and the actual payment,
legal interest[s] accrue in order to place the owner in a position as good as (but not better than)
the position he was in before the taking occurred.[Emphasis supplied]20
In other words, the just compensation due to the landowners amounts to an effective forbearance on
the part of the State-a proper subject of interest computed from the time the property was taken until the
full amount of just compensation is paid-in order to eradicate the issue of the constant variability of the
value of the currency over time.21 In the Court's own words:
The Bulacan trial court, in its 1979 decision, was correct in imposing interests on the zonal value of the
property to be computed from the time petitioner instituted condemnation proceedings and "took" the
property in September 1969. This allowance of interest on the amount found to be the value of the
property as of the time of the taking computed, being an effective forbearance, at 12% per
annum should help eliminate the issue of the constant fluctuation and inflation of the value of
the currency over time x x x.22
On this score, a review of the history of the pertinent laws, rules and regulations, as well as the
issuances of the Central Bank (CB)or Bangko Sentral ng Pilipinas (BSP)is imperative in arriving at the
proper amount of interest to be awarded herein.
On May 1, 1916, Act No. 265523 took effect prescribing an interest rate of six percent (6%) or such rate
as may be prescribed by the Central Bank Monetary Board (CB-MB)for loans or forbearance of money,
in the absence of express stipulation as to such rate of interest, to wit:
Page 18 of 50
Section 1. The rate of interest for the loan or forbearance of any money goods, or credits and the rate
allowed in judgments, in the absence of express contract as to such rate of interest, shall be six per
centum per annum or such rate as may be prescribed by the Monetary Board of the Central
Bank of the Philippines for that purpose in accordance with the authority hereby granted.
Sec. 1-a. The Monetary Board is hereby authorized to prescribe the maximum rate or rates of interest
for the loan or renewal thereof or the forbearance of any money, goods or credits, and to change such
rate or rates whenever warranted by prevailing economic and social conditions.
Section 2. In view of the above, Subsection X305.1 of the Manual of Regulations for Banks and
Sections 4305Q.1, 4305S.3 and 4303P.1 of the Manual of Regulations for Non-Bank Financial
Institutions are hereby amended accordingly.
This Circular shall take effect on 01 July 2013.29
Accordingly, the prevailing interest rate for loans and forbearance of money is six percent (6%) per
annum, in the absence of an express contract as to such rate of interest.

In the exercise of the authority herein granted, the Monetary Board may prescribe higher maximum In summary, the interest rates applicable to loans and forbearance of money, in the absence of an
rates for loans of low priority, such as consumer loans or renewals thereof as well as such loans made express contract as to such rate of interest, for the period of 1940 to present are as follows:
by pawnshops finance companies and other similar credit institutions although the rates prescribed for
these institutions need not necessarily be uniform. The Monetary Board is also authorized to prescribe
different maximum rate or rates for different types of borrowings, including deposits and deposit Law, Rule and Regulations, Date of Effectivity Interest Rate
substitutes, or loans of financial intermediaries.24 BSP Issuance
Act No. 2655 May 1, 1916 6%
Under the aforesaid law, any amount of interest paid or stipulated to be paid in excess of that fixed by
law is considered usurious, therefore unlawful.25 CB Circular No. 416 July 29, 1974 12%
CB Circular No. 905 December 22, 1982 12%
On July 29, 1974, the CB-MB, pursuant to the authority granted to it under the aforequoted provision,
issued Resolution No. 1622.1âwphi1 On even date, Circular No. 416 was issued, implementing MB CB Circular No. 799 July 1, 2013 6%
Resolution No. 1622, increasing the rate of interest for loans and forbearance of money to twelve
percent (12%) per annum, thus:
It is important to note, however, that interest shall be compounded at the time judicial demand is made
By virtue of the authority granted to it under Section 1 of Act No. 2655, as amended, otherwise known pursuant to Article 221230 of the Civil Code of the Philippines, and sustained in Eastern Shipping Lines
as the "Usury Law," the Monetary Board, in its Resolution No. 1622 dated July 29, 1974, has prescribed v. Court of Appeals,31then later on in Nacar v. Gallery Frames,32 save for the reduction of interest rate to
that the rate of interest for the loan or forbearance of any money, goods or credits and the rate 6% for loans or forbearance of money, thus:
allowed in judgments, in the absence of express contract as to such rate of interest, shall be
twelve per cent (12%) per annum.26 1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a
loan or forbearance of money, the interest due should be that which may have been
The foregoing rate was sustained in CB Circular No. 90527 which took effect on December 22, 1982, stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the
particularly Section 2 thereof, which states: time it is judicially demanded. In the absence of stipulation, the rate of interest shall be 6%
per annum to be computed from default, i.e., from judicial or extrajudicial demand under and
subject to the provisions of Article 1169 of the Civil Code.33
Sec. 2. The rate of interest for the loan or forbearance of any money, goods or credits and the rate
allowed in judgments, in the absence of express contract as to such rate of interest, shall continue to
be twelve per cent (12%) per annum.28 Applying the foregoing law and jurisprudence, respondents-movants are entitled to interest in the
amount of One Million Seven Hundred Eighteen Thousand Eight Hundred Forty-Eight Pesos and
Thirty-Two Centavos (₱1,718,848.32) as of September 30, 2014,34 computed as follows:
Recently, the BSP Monetary Board (BSP-MB),in its Resolution No. 796 dated May 16, 2013, approved
the amendment of Section 2 of Circular No. 905, Series of 1982, and accordingly, issued Circular No.
799, Series of 2013, effective July 1, 2013, the pertinent portion of which reads: January 1, 194035 to July 28, 1974 P 10,553.4937
July 29, 1974 to March 16, 1995 26,126.3138
The Monetary Board, in its Resolution No. 796 dated 16 May 2013, approved the following revisions
governing the rate of interest in the absence of stipulation in loan contracts, thereby amending Section 2 March 17, 199536to June 30, 2013 232,070.3339
of Circular No. 905, Series of 1982:
July 1, 2013 to September 30, 2014 250,098.1940
Section 1. The rate of interest for the loan or forbearance of any money, goods or credits and
the rate allowed in judgments, in the absence of an express contract as to such rate of interest,
shall be six percent (6%) per annum.

PROPERTY ARTS. 419- Page 19 of 50

 Market Value of the Property at the time of
taking including interest
P 518,848.32
Market value of the property at the time of
taking including interest P 518,848.32
Add: Exemplary damages 1,000.000.00
Attorney's fees 200,000.00
Total Amount of Interest due to Respondents-
Movants as of September 30, 2014 ₱1,718,848.16
Considering that respondents-movants only resorted to judicial demand for the payment of the fair
market value of the land on March 17, 1995, it is only then that the interest earned shall itself earn
interest.
Lastly, from finality of the Court's Resolution on reconsideration until full payment, the total amount due
to respondents-movants shall earn a straight six percent (6%) legal interest, pursuant to Circular No.
799 and the case of Nacar. Such interest is imposed by reason of the Court's decision and takes the
nature of a judicial debt.
Clearly, the award of interest on the value of the land at the time of taking in 1940 until full payment is
adequate compensation to respondents-movants for the deprivation of their property without the benefit
of expropriation proceedings. Such interest, however meager or enormous it may be, cannot be
inequitable and unconscionable because it resulted directly from the application of law and
jurisprudence-standards that have taken into account fairness and equity insetting the interest rates due
for the use or forbearance of money.41 Thus, adding the interest computed to the market value of the
property at the time of taking signifies the real, substantial, full and ample value of the property. Verily,
the same constitutes due compliance with the constitutional mandate on eminent domain and serves as
a basic measure of fairness. In addition to the foregoing interest, additional compensation shall be
awarded to respondents-movants by way of exemplary damages and attorney's fees in view of the
government's taking without the benefit of expropriation proceedings. As held in Eusebio v. Luis,42 an
irregularity in an expropriation proceeding cannot ensue without consequence. Thus, the Court held that
the government agency's illegal occupation of the owner's property for a very long period of time surely
resulted in pecuniary loss to the owner, to wit:
However, in taking respondents' property without the benefit of expropriation proceedings and without
payment of just compensation, the City of Pasig clearly acted in utter disregard of respondents'
proprietary rights. Such conduct cannot be countenanced by the Court. For said illegal taking, the
City of Pasig should definitely be held liable for damages to respondents. Again, in Manila
International Airport Authority v. Rodriguez, the Court held that the government agency's illegal
occupation of the owner's property for a very long period of time surely resulted in pecuniary loss to the
owner. The Court held as follows:
Such pecuniary loss entitles him to adequate compensation in the form of actual or
compensatory damages, which in this case should be the legal interest (6%) on the value of the
land at the time of taking, from said point up to full payment by the MIAA. This is based on the
PROPERTY ARTS. 419-
principle that interest "runs as a matter of law and follows from the right of the landowner to be placed in
as good position as money can accomplish, as of the date of the taking."
The award of interest renders unwarranted the grant of back rentals as extended by the courts
below. In Republic v. Lara, et al., the Court ruled that the indemnity for rentals is inconsistent with a
property owner's right to be paid legal interest on the value of the property, for if the condemn or is to
pay the compensation due to the owners from the time of the actual taking of their property, the
payment of such compensation is deemed to retro act to the actual taking of the property; and, hence,
there is no basis for claiming rentals from the time of actual taking. More explicitly, the Court held
in Republic v. Garcellano that:
The uniform rule of this Court, however, is that this compensation must be, not in the form of
rentals, but by way of 'interest from the date that the company [or entity] exercising the right of
eminent domain take possession of the condemned lands, and the amounts granted by the
court shall cease to earn interest only from the moment they are paid to the owners or deposited
in court x x x.
xxxx
For more than twenty (20) years, the MIAA occupied the subject lot without the benefit of expropriation
proceedings and without the MIAA exerting efforts to ascertain ownership of the lot and negotiating with
any of the owners of the property. To our mind, these are wanton and irresponsible acts which
should be suppressed and corrected. Hence, the award of exemplary damages and attorneys
fees is in order. However, while Rodriguez is entitled to such exemplary damages and attorney's fees,
the award granted by the courts below should be equitably reduced. We hold that Rodriguez is entitled
only to ₱200,000.00 as exemplary damages, and attorney's fees equivalent to one percent (1%) of the
amount due.43
Similarly, in Republic v. CA,44 We held that the failure of the government to initiate an expropriation
proceeding to the prejudice of the landowner may be corrected with the awarding of exemplary
damages, attorney's fees and costs of litigation. Thus:
The Court will not award attorney's fees in light of respondent's choice not to appeal the CA Decision
striking down the award. However, we find it proper to award temperate and exemplary damages
in light of NIA's misuse of its power of eminent domain. Any arm of the State that exercises the
delegated power of eminent domain must wield that power with circumspection and utmost regard for
procedural requirements. A government instrumentality that fails to observe the constitutional
guarantees of just compensation and due process abuses the authority delegated to it, and is liable to
the property owner for damages.
Temperate or moderate damages may be recovered if pecuniary loss has been suffered but the amount
cannot be proved with certainty from the nature of the case.1âwphi1 Here, the trial and appellate courts
found that the owners were unable to plant palay on 96,655 square meters of the Property for an
unspecified period during and after NIA's construction of the canals in 1972. The passage of time,
however, has made it impossible to determine these losses with any certainty. NIA also deprived the
owners of the Property of possession of a substantial portion of their land since 1972. Considering the
particular circumstances of this case, an award of ₱150,000 as temperate damages is reasonable.
Page 20 of 50
NIA's irresponsible exercise of its eminent domain powers also deserves censure. For more than three
decades, NIA has been charging irrigation fees from respondent and other landowners for the use of the
canals built on the Property, without reimbursing respondent a single cent for the loss and damage. NIA
exhibits a disturbingly cavalier attitude towards respondent's property rights, rights to due process of
law and to equal protection of the laws. Worse, this is not the first time NIA has disregarded the rights of
private property owners by refusing to pay just compensation promptly. To dissuade NIA from continuing
this practice and to set an example for other agencies exercising eminent domain powers, NIA is
directed to pay respondent exemplary damages of ₱250,000.45
Applying the aforequoted doctrines to the present case, considering that respondents-movants were
deprived of beneficial ownership over their property for more than seventy (70) years without the benefit
of a timely expropriation proceedings, and to serve as a deterrent to the State from failing to institute
such proceedings within the prescribed period under the law, a grant of exemplary damages in the
amount of One Million Pesos (₱1,000,000.00) is fair and reasonable. Moreover, an award for attorney's
fees in the amount of Two Hundred Thousand Pesos (₱200,000.00) in favor of respondents-movants is
in order.
In sum, respondents-movants shall be entitled to an aggregate amount of One Million Seven Hundred
Eighteen Thousand Eight Hundred Forty-Eight Pesos and Thirty-Two Centavos
(₱1,718,848.32) as just compensation as of September 30, 2014, computed as follows:
Market value of the property at the time P 518,848.32
of taking in 1940 including interest
Add: Exemplary Damages 1,000,000.00
Attorney's fees 200,000.00
Total Amount due to Respondents-
movants as of September 30, 2014 ₱1,718,848.32
This Court is not unaware that at present, stringent laws and rules are put in place to ensure that
owners of real property acquired for national government infrastructure projects are promptly paid just
compensation. Specifically, Section 4 of Republic Act No. 8974 (R.A. 8974),46 which took effect on
November 26, 2000, provides sufficient guidelines for implementing an expropriation proceeding, to wit:
Section 4. Guidelines for Expropriation Proceedings. - Whenever it is necessary to acquire real property
for the right-of-way or location for any national government infrastructure project through expropriation,
the appropriate implementing agency shall initiate the expropriation proceedings before the proper court
under the following guidelines:
(a) Upon the filing of the complaint, and after due notice to the defendant, the implementing
agency shall immediately pay the owner of the property the amount equivalent to the sum of
(1) one hundred percent (100%) of the value of the property based on the current relevant
zonal valuation of the Bureau of Internal Revenue (BIR); and (2) the value of the improvements
and/or structures as determined under Section 7 hereof;
PROPERTY ARTS. 419-
(b) In provinces, cities, municipalities and other areas where there is no zonal valuation, the
BIR is hereby mandated within the period of sixty (60) days from the date of the expropriation
case, to come up with a zonal valuation for said area; and
(c) In case the completion of a government infrastructure project is of utmost urgency and
importance, and there is no existing valuation of the area concerned, the implementing agency
shall immediately pay the owner of the property its proffered value taking into consideration the
standards prescribed in Section 5 hereof.
Upon compliance with the guidelines abovementioned, the court shall immediately issue to the
implementing agency an order to take possession of the property and start the implementation of the
project.
Before the court can issue a Writ of Possession, the implementing agency shall present to the court a
certificate of availability of funds from the proper official concerned.
In the event that the owner of the property contests the implementing agency's proffered value, the
court shall determine the just compensation to be paid the owner within sixty (60) days from the date of
filing of the expropriation case. When the decision of the court becomes final and executory, the
implementing agency shall pay the owner the difference between the amount already paid and the just
compensation as determined by the court.
Failure to comply with the foregoing directives shall subject the government official or employee
concerned to administrative, civil and/or criminal sanctions, thus:
Section 11. Sanctions. - Violation of any provisions of this Act shall subject the government official or
employee concerned to appropriate administrative, civil and/or criminal sanctions, including suspension
and/or dismissal from the government service and forfeiture of benefits. While the foregoing provisions,
being substantive in nature or disturbs substantive rights, cannot be retroactively applied to the present
case, We trust that this established mechanism will surely deter hasty acquisition of private properties in
the future without the benefit of immediate payment of the value of the property in accordance with
Section 4 of R.A. 8974. This effectively addresses J. Velasco's concerns that sustaining our earlier
rulings on the matter would be licensing the government to dispense with constitutional requirements in
taking private properties. Moreover, any gap on the procedural aspect of the expropriation proceedings
will be remedied by the aforequoted provisions.
In effect, R.A. 8974 enshrines a new approach towards eminent domain that reconciles the inherent
unease attending expropriation proceedings with a position of fundamental equity.47
Despite the foregoing developments, however, We emphasize that the government's failure, to initiate
the necessary expropriation proceedings prior to actual taking cannot simply invalidate the State's
exercise of its eminent domain power, given that the property subject of expropriation is indubitably
devoted for public use, and public policy imposes upon the public utility the obligation to continue its
services to the public. To hastily nullify said expropriation in the guise of lack of due process would
certainly diminish or weaken one of the State's inherent powers, the ultimate objective of which is to
serve the greater good. Thus, the non-filing of the case for expropriation will not necessarily lead to the
return of the property to the landowner. What is left to the landowner is the right of compensation.48
Page 21 of 50
All told, We hold that putting to rest the issue on the validity of the exercise of eminent domain is neither
tantamount to condoning the acts of the DPWH in disregarding the property rights of respondents-
movants nor giving premium to the government's failure to institute an expropriation proceeding. This
Court had steadfastly adhered to the doctrine that its first and fundamental duty is the application of the
law according to its express terms, interpretation being called for only when such literal application is
impossible.49 To entertain other formula for computing just compensation, contrary to those established
by law and jurisprudence, would open varying interpretation of economic policies - a matter which this
Court has no competence to take cognizance of. Time and again, we have held that no process of
interpretation or construction need be resorted to where a provision of law peremptorily calls for
application.50 Equity and equitable principles only come into full play when a gap exists in the law and
jurisprudence.51 As we have shown above, established rulings of this Court are in place for full
application to the case at bar, hence, should be upheld.
WHEREFORE, the motion for reconsideration is hereby DENIED for lack of merit.
SO ORDERED.
G.R. No. 223366
NATIONAL TRANSMISSION CORPORATION, Petitioner,
vs.
OROVILLE DEVELOPMENT CORPORATION, Respondent
DECISION
MENDOZA, J.:
This is a petition for review on certiorari seeking to reverse and set aside the September 18, 2015
Decision1 and January 25, 2016 Resolution2 of the Court of Appeals (CA) in CA-G.R. CV No. 03571,
which affirmed with modification the December 12, 2012 Decision3 of the Regional Trial Court, Branch
17, Misamis Oriental (RTC) in Civil Case No. 2007-85, a case for expropriation.
PROPERTY ARTS. 419-
The Antecedents
The present case involves two (2) parcels of land located in Puerto, Cagayan de Oro City, which
originally belonged to Alfredo Reyes (Reyes) and Grace Calingasan (Calingasan), covered by Original
Certificate of Title (OCT) No. P-3 and OCT No. P-13, respectively.
In 1983, petitioner National Transmission Corporation (TransCo) constructed a power transmission line
on these properties, known as the Tagoloan-Pulangi 138 kV transmission line.
At some point, Reyes sold his land to Antonio Navarette, who later sold the same property to
respondent Oroville Development Corporation (Oroville), which is now covered by Transfer Certificate of
Title (TCT) No. T-85121. Likewise, Calingasan sold her land to Oroville, now registered under TCT No.
T-104365. Thus, in 1995, Oroville became the registered owner of these properties with a total area of
13 ,904 square meters traversed by the existing Tagoloan-Pulangi 138 kV transmission line.
On November 17, 2006, Transco offered to buy these properties from Oroville to be used for the
construction of the Abaga-Kirahon 230 kV transmission line in Mindanao.
During the negotiation, Oroville, through its representative Antonio Tiu (Tiu), requested to reroute the
Abaga-Kirahon 230 kV transmission line because the Tagoloan-Pulangi 138 kV transmission line is
already traversing its properties. Tiu also informed Transco that Oroville has not been paid just
compensation for the constn1ction of the Tagoloan-Pulangi 138 kV transmission line in its property.
Transco, however, refused to reroute the proposed Abaga-Kirahon 230 kV transmission line because it
planned to construct the said transmission line parallel to the existing Tagoloan-Pulangi 138 kV
transmission line.
Consequently, on April 20, 2007, Oroville filed a complaint for injunction and damages with prayer for
issuance of a temporary restraining order against Transco, seeking to enjoin the construction of the
Abaga-Kirahon 230 kV transmission line.
On May 9, 2007, Transco filed its Answer denying the allegations in Oroville's complaint. It also
manifested that it would file the required expropriation proceedings against Oroville in order to acquire
the latter's properties for the Abaga-Kirahon 230 kV transmission line project.
During trial, the parties agreed to have the subject properties surveyed for purposes of fixing the just
compensation. As a result, the trial court suspended the proceedings and directed Transco to conduct a
survey of the properties.
Subsequently, Oroville filed an omnibus motion to convert the proceedings into an expropriation case
and to require Transco to pay the Bureau of Internal Revenue (BIR) the zonal value of the subject
properties. Transco made no objections to the motion.
On May 17, 2010, the trial court directed Transco to make a provisional deposit of ₱7,647,200.00 as just
compensation for Oroville's properties consisting of 13,904 square meters and affected by the existing
Tagoloan-Pulangi 138 kV transmission line. Transco complied after the trial court denied its objections.
On February 4, 2011, the trial court directed the Land Bank of the Philippines, NAPOCOR Branch, to
release the aforesaid deposit to Tiu.
Page 22 of 50
On March 21, 2011, the trial court issued a writ of possession directing Oroville to surrender possession it was established by the landowners that entry into their property was without their knowledge.
of the properties to Transco. The falloreads:

Subsequently, on August 8, 2011, per nomination of the parties, the trial court appointed three (3)
Commissioners, namely, Engr. Marilyn P. Legaspi, Engr. Norberto Badelles and Atty. Avelino Pakino, to
determine the just compensation of the properties affected by the Abaga-Kirahon 230 kV transmission
line.
A summary of the Commissioners' report reads as follows:
1. Engr. Marilyn Legaspi (Court-appointed Commissioner)
Date of Taking: 1983 per Transmission Line Data and Information
(Tagoloan-Pulangi 138 kV Transmission Line)
Valuation of the Property: ₱78.65 per square meter or a total of ₱5,924,772.48 inclusive of
interests4
2. Engr. Norberto Badelles (engaged by Transco)
WHEREFORE, in view of the foregoing premises, judgment is hereby rendered as follows:
1) FIXING the just compensation of the affected area of 13,904 square meters at
₱1,520.oo per square meter reckoned from April 20, 2007, the date the complaint was
filed, at interest rate of 12% per annum until the liability is fully paid
2) ORDERING defendant TRANSCO to pay plaintiff the just compensation in the
amount of ₱1,520.00 per square meter for the 13,904 square meters the affected
area at the rate of 12% per annum reckoned from April 20, 2007, the data of filing the
complaint minus the amount of ₱7,647,200.oo representing the amount paid by
TRANSCO as provisional payments
3) ORDERING defendant TRANSCO to pay plaintiff the interest of 12% per
annum based on the deficiency amount;
4) ORDERING Plaintiff and Defendant to pay the Commissioners' fee in the amount
of ₱10,000.00 each within 15 days from receipt of this Order.

The Court will leave to the parties the correct mathematical computation as to what is due to plaintiff
Date of Taking: 1983 per Transmission Line Data and Information
based on the foregoing premises.
(Tagoloan-Pulangi 138 kV Transmission Line)

SO ORDERED.7
Valuation of the Property: ₱1.20 per square meter or a total of ₱45,716.35 inclusive of
interests5
Aggrieved, Transco elevated an appeal before the CA.

3. Atty. Avelino Pakino (nominated by Oroville)

The CA Ruling

Date of Taking: 1983 per Transmission Line Data and Information In its assailed Decision, dated September 18, 2015, the CA ruled that TransCo's entry into Oroville's lots
(Tagoloan-Pulangi 138 kV Transmission Line) in 1983 was made without warrant or color of authority because at the time Transco constructed the
Tagoloan-Pulangi 138 kV transmission line over the disputed properties in 1983, it was made without
intent to expropriate. It added that Transco constructed the transmission line without bothering to
Valuation of the Property: ₱2,000.00 per square meter or a total of ₱27,808,000.00 inclusive of
negotiate with the owner to purchase or expropriate the disputed lots.
interests6

The RTC Ruling
In its Decision, dated December 12, 2012, the RTC set aside the Commissioners' report and fixed the
just compensation at the rate of ₱1,520.00 per square meter with legal interest of 12%
per annum reckoned from April 20, 2007, the date of filing of the complaint. It held that the said amount
was based on the fair market value of lots along the national highway of Barangay Puerto, Cagayan de
Oro City in accordance with the schedule of values under City Ordinance No. 10425-2006 otherwise
known as An Ordinance Prescribing the Revised Schedule of Fair Market Values of Real Property in
Cagayan de Oro and in accordance with the BIR Comparative Value of Zonal Fair Market Values. The
RTC opined that the just compensation should not be reckoned from 1983, the time of taking, because
Further, the CA adjudged that the construction of the Tagoloan-Pulangi 138 kV transmission line did not
oust or deprive Oroville or its previous owners of the beneficial enjoyment of their properties as they
continued to possess the same. It observed that the previous owners were able to sell the properties to
Oroville; and that after acquiring them, Oroville considered developing the lots for residential subdivision
purposes, but the subject properties were later on classified as agricultural lands covered by the
Comprehensive Agrarian Reform Program (CARP) of the government.
The CA concluded that there was no actual taking of the subject properties in 1983 when Transco
constructed the Tagoloan-Pulangi 138 kV transmission line.1âwphi1 Accordingly, the computation of the
just compensation should be reckoned at the time of the filing of the complaint in 2007. The dispositive
portion reads:

PROPERTY ARTS. 419- Page 23 of 50

WHEREFORE, the Judgment dated 12 December 2012 of the Regional Trial Court, (Branch 17), 10th
Judicial Region, Cagayan de Oro City, is MODIFIED. Appellant National Transmission Corporation is
hereby ORDERED to pay appellee Oroville Corporation the unpaid balance of the just compensation in
the sum of P13,486,880.oo with legal interest of TWELVE PERCENT (12%) per annum computed from
21 March 2011 to 30 June 2013 and SIX PERCENT (6%) per annum from 1 July 2013 until its full
payment. Both parties are DIRECTED to pay the Commissioners' fee in the amount of ₱10,000.00 each
within 15 days from notice.
SO ORDERED.8
Transco moved for reconsideration, but the same was denied by the CA in its assailed Resolution,
dated January 25, 2016.
Hence, this petition.
ISSUES
WHETHER THE COMPUTATION OF JUST COMPENSATION FOR THE EXPROPRIATED
PROPERTY SHOULD BE BASED ON ITS VALUE AT THE TIME OF THE TAKING OF THE
PROPERTY
WHETHER THE IMPOSITION OF A LEGAL INTEREST OF 12% IS UNJUSTIFIED 9
Petitioner argues that Section 4, Rule 67 of the Rules of Court and applicable jurisprudence are explicit
in saying that just compensation for expropriated property shall be determined based on its fair market
value at the time of its taking; that Oroville could not claim lack of knowledge to the construction of the
transmission line since it is in plain view, considering its height and the huge space that it occupied; that
Oroville should not be allowed to benefit from its failure to question such construction more than a
decade after its completion; and that it should not be made to pay 12% interest per annum in the nature
of damages for delay as it complied with the RTC's directive to make provisional deposit for the subject
property.
In its Comment,10 dated August 5, 2016, Oroville averred that to sustain the argument of Transco that
the basis of the payment for just compensation is the value of the property at the time of taking would
sow immeasurable injustice; that the P78.65 per square meter valuation as recommended by
Commissioner Legaspi and the ₱1.20 per square meter recommended by Commissioner Badelles
would not be enough to reimburse Oroville for the realty taxes it paid from the year 1983 up to the
present; that while it paid these annual taxes, Transco had been earning billions of pesos from
transmission charges; that as held in Napocor v. Campos, Jr., there were instances when Transco
removed transmission lines from the affected properties due to diversion of its lines, thus, upon entry,
Transco did not have intent to expropriate the property because there might be a change of plans; that
Transco would initiate expropriation proceedings only when it was certain of its transmission plans; that
the earlier entry into and/or possession of Transco of the subject properties was patently without any
color of legal authority as it did not have the slightest intention to acquire ownership of the subject
properties either by voluntary purchase or by exercise of eminent domain; and that the delay in the
payment of just compensation justified the payment of 12% interest per annum.
In its Reply,11 dated November 25, 2016, Transco contended that this case is not an exception to the
settled rule that just compensation should be based on the property's value at the time of its taking; that
PROPERTY ARTS. 419-
the value and classification of the subject property at the time of its taking in 1983 should be the basis
for the computation of just compensation; that it informed Oroville of the construction of the new
transmission line over its properties and readily agreed to the conversion of its complaint for injunctive
relief into an expropriation case; and that the landowner should also bear the cost of being remiss in
guarding against the effects of a belated claim.
The Court's Ruling
The petition is meritorious.
Eminent domain is the right or power of a sovereign state to appropriate private property to particular
uses to promote public welfare. It is an indispensable attribute of sovereignty; a power grounded in the
primary duty of government to serve the common need and advance the general welfare.12 The power
of eminent domain is inseparable in sovereignty being essential to the existence of the State and
inherent in government. But the exercise of such right is not unlimited, for two mandatory requirements
should underlie the Government's exercise of the power of eminent domain, namely: (1) that it is for a
particular public purpose; and (2) that just compensation be paid to the property owner.13 These
requirements partake the nature of implied conditions that should be complied with to enable the
condemnor to keep the property expropriated.14
Taking of Oroville's property
occurred in 1983 upon construction of
the transmission lines
The landmark case of Republic v. Vda. De Castellvi15 provides an enlightening discourse on the
requisites of taking.
First, The expropriator must enter a private property; Second, the entrance into private property must be
for more than a momentary period; Third, the entry into the property should be under warrant or color of
legal authority; Fourth, the property must be devoted to a public use or otherwise informally
appropriated or injuriously affected; and Fifth, the utilization of the property for public use must be in
such a way as to oust the owner and deprive him of all beneficial enjoyment of the property.16
The Court rules that there is taking of the property for purposes of eminent domain in 1983.
The first and fourth requisites are present in this case. Transco took possession of Oroville's property in
order to construct transmission lines to be used in generating electricity for the benefit of the public.
The second requisite is likewise present as there can be no question that the construction of
transmission lines meant an indefinite stay in the property of Oroville. Further, Trans Co's exercise of
eminent domain is pursuant to its authority granted under Section 8 of Republic Act (R.A.) No. 9136 or
the Electric Power Industry Reform Act of 2001.17
Finally, Oroville has been deprived of the beneficial enjoyment of its property. In several rulings,
notably National Power Corporation v. Spouses Zabala,18 Republic v. Spouses Libunao,19 and National
Power Corporation v. Tuazon20 this Court has already declared that "since the high-tension electric
current passing through the transmission lines will perpetually deprive the property owners of the nonnal
Page 24 of 50
use of their land, it is only just and proper to require Napocor to recompense them for the full market
value of their property."
Just compensation reckoned from the
date of actual taking
The next question to be resolved is whether just compensation should be reckoned from 1983 when the
taking took place.
Just compensation is defined as the full and fair equivalent of the property taken from its owner by the
expropriator. The measure is not the taker's gain, but the owner's loss. The word "just" is used to
intensify the meaning of the word "compensation" and to convey thereby the idea that the equivalent to
be rendered for the property to be taken shall be real, substantial, full, and ample.21
In addition, Section 4, Rule 67 of the Rules of Court provides:
Section 4. Order of expropriation. - If the objections to and the defenses against the right of the plaintiff
to expropriate the property are overruled, or when no party appears to defend as required by this Rule,
the court may issue an order of expropriation declaring that the plaintiff has a lawful right to take the
property sought to be expropriated, for the public use or purpose described in the complaint, upon the
payment of just compensation to be determined as of the date of the taking of the property or
the filing of the complaint, whichever came first. xxxx[Emphasis supplied]
The case of Secretary of the Department of Public Works and Highways v. Spouses Tecson
(Tecson)22 provides a discussion of cases wherein the Court conformed to the abovementioned rule and
held that payment of just compensation should be reckoned from the date of taking when such
preceded the filing of the complaint for expropriation, to wit:
In Forfom Development Corporation [Forlorn] v. Philippine National Railways [PNR], PNR entered the
property of Forfom in January 1973 for public use, that is, for railroad tracks, facilities and
appurtenances for use of the Carmona Commuter Service without initiating expropriation proceedings.
In 1990, Forlorn filed a complaint for recovery of possession of real property and/ or damages against
PNR. In Eusebio v. Luis, respondent's parcel of land was taken in 1980 by the City of Pasig and used as
a municipal road now known as A Sandoval Avenue in Pasig City without the appropriate expropriation
proceedings. In 1994, respondent demanded payment of the value of the property, but they could not
agree on its valuation prompting respondent to file a complaint for reconveyance and/ or damages
against the city government and the mayor. In Manila International Airport Authority v. Rodriguez, in the
early 1970s, petitioner implemented expansion programs for its runway necessitating the acquisition
and occupation of some of the properties surrounding its premises. AB to respondent's property, no
expropriation proceedings were initiated. In 1997, respondent demanded the payment of the value of
the property, but the demand remained unheeded prompting him to institute a case for accion
reivindicatoria with damages against petitioner. In Republic v. Sarabia, sometime in 1956, the Air
Transportation Office (ATO) took possession and control of a portion of a lot situated in Aldan,
registered in the name of respondent, without initiating expropriation proceedings. Several structures
were erected thereon including the control tower, the Kalibo crash fire rescue station, the Kalibo airport
terminal and the headquarters of the PNP Aviation Security Group. In 1995, several stores and
restaurants were constructed on the remaining portion of the lot. In 1997, respondent filed a complaint
for recovery of possession with damages against the storeowners where ATO intervened claiming that
the storeowners were its lessees.
PROPERTY ARTS. 419-
The Court in the above-mentioned cases was confronted with common factual circumstances
where the government took control and possession of the subject properties for public use
without initiating expropriation proceedings and without payment of just compensation, while
the landowners failed for a long period of time to question such government act and later instituted
actions for recovery of possession with damages. The Court thus determined the landowners' right to
the payment of just compensation and, more importantly, the amount of just compensation. The Court
has uniformly ruled that just compensation is the value of the property at the time of taking that
is controlling for purposes of compensation. In Forlorn, the payment of just compensation was
reckoned from the time of taking in 1973; in Eusebio, the Court fixed the just compensation by
determining the value of the property at the time of taking in 1980; in MIAA, the value of the lot at the
time of taking in 1972 served as basis for the award of compensation to the owner; and in Republic, the
Court was convinced that the taking occurred in 1956 and was thus the basis in fixing just
compensation.23 [Citations omitted and emphases supplied]
As further pointed out in Republic v. Lara, et al.,24 thus:
x x x "The value of the property should be fixed as of the date when it was taken and not the date of the
filing of the proceedings." For where property is taken ahead of the filing of the condemnation
proceedings, the value thereof may be enhanced by the public purpose for which it is taken; the entry
by the plaintiff upon the property may have depreciated its value thereby; or, there may have been a
natural increase in the value of the property from the time it is taken to the time the complaint is filed,
due to general economic conditions. The owner of private property should be compensated only for
what he actually loses; it is not intended that his compensation shall extend beyond his loss or injury.
And what he loses is only the actual value of his property at the time it is taken x x x.25
Indeed, the State is only obliged to make good the loss sustained by the landowner, with due
consideration of the circumstances availing at the time the property was taken. The concept of just
compensation does not imply fairness to the property owner alone. Compensation must also be just to
the public, which ultimately bears the cost of expropriation.26
The sequence of events in all of these cited cases as well as in Tecson is similar to that obtaining in the
case at bench, that is, the government took possession of private properties without initiating
expropriation proceedings and later on, the property owners demanded either the return of their
properties or the payment of just compensation. Thus, pursuant to the Rules of Court and in accordance
with prevailing jurisprudence, the Court rules that just compensation must be ascertained as of the year
1983 when Transco commenced construction of the transmission lines. Just compensation is therefore
fixed at ₱78.65 per square meter, which is the fair market value of the property at the time of taking. As
will be discussed later on, the imposition of interest would adequately compensate the property owner
for the delay in the payment of just compensation considering that more often than not, the amount of
interest to be paid is higher than the increase in the property's market value.
The rulings in Macabangkit
Sangkay and Saludares are
mere exceptions
The Court is not unaware of the rulings in National Power Corporation v. Heirs of Macabangkit Sangkay
(Macabangkit Sangkay)27 and National Power Corporation v. Spouses Saludares (Saludares) 28 wherein
it was held that just compensation should be reckoned from the time the property owners initiated
inverse condemnation proceedings notwithstanding that the taking of the properties occurred earlier.
Page 25 of 50
In Macabangkit Sangkay, NAPOCOR, in the 1970s, undertook the construction of several underground
tunnels to be used in diverting the water flow from the Agus River to the hydroelectric plants. On
November 21, 1997, respondents therein sued NAPOCOR for recovery of property and damages,
alleging that they belatedly discovered that one of the underground tunnels of NPC traversed their
land.29 In that case, the Court adjudged that the value of the property at the time the property owners
initiated inverse condemnation proceedings should be considered for purposes of just compensation for
the following reasons, viz:
Compensation that is reckoned on the market value prevailing at the time either when NPC entered or
when it completed the tunnel, as NPC submits, would not be just, for it would compound the gross
unfairness already caused to the owners by NPC's entering without the intention of formally
expropriating the land, and without the prior knowledge and consent of the Heirs of Macabangkit. NPC's
entry denied elementary due process of law to the owners since then until the owners commenced the
inverse condemnation proceedings. The Court is more concerned with the necessity to prevent NPC
from unjustly profiting from its deliberate acts of denying due process of law to the owners. As a
measure of simple justice and ordinary fairness to them, therefore, reckoning just compensation on the
value at the time the owners commenced these inverse condemnation proceedings is entirely
warranted.30
On the other hand, in Saludares, respondents therein filed a complaint for the payment of just
compensation against NAPOCOR, averring that it had entered and occupied their property by erecting
high-tension transmission lines and failed to reasonably compensate them for the intrusion. For its part,
NAPOCOR countered that it had already paid just compensation for the establishment of the
transmission lines by virtue of its compliance with the final and executory decision in National Power
Corporation v. Pereyras.31 In ruling that the reckoning value of just compensation is that prevailing at the
time of the filing of the inverse condemnation proceedings, the Court declared:
x x x To reiterate, NAPOCOR should have instituted eminent domain proceedings before it occupied
respondent spouses' property.1âwphi1 Because it failed to comply with this duty, respondent spouses
were constrained to file the instant Complaint for just compensation before the trial court. From the
1970s until the present, they were deprived of just compensation, while NAPOCOR continuously
burdened their property with its transmission lines. This Court cannot allow petitioner to profit from its
failure to comply with the mandate of the law. We therefore rule that, to adequately compensate
respondent spouses from the decades of burden on their property, NAPOCOR should be made to pay
the value of the property at the time of the filing of the instant Complaint when respondent spouses
made a judicial demand for just compensation.32
These rulings, however, are exceptions to the general rule that just compensation must be reckoned
from the time of taking or filing of the complaint, whichever came first. The special circumstances of the
aforementioned cases called for the valuation of just compensation at the time the landowners initiated
inverse condemnation proceedings notwithstanding that taking of the properties occurred first.
In Macabangkit Sangkay, NAPOCOR did not even inform the property owners of the construction of the
underground tunnels. Hence, it could be said that NAPOCOR employed stealth instead of complying
with the legal process of expropriation. Further, considering that the tunnels were constructed
underground, the property owners came to know thereof only when the purchaser of the property
refused to proceed with the sale upon discovery of the underground tunnels. In this case, however, the
transmission lines are visible, such that Oroville could not deny knowledge of its construction in 1983. In
Saludares, NAPOCOR refused to acknowledge the respondents' claim and insisted that it already paid
just compensation because the respondents' property was the same one involved in the Pereyra case.
PROPERTY ARTS. 419-
Thus, NAPOCOR had no intention to pay just compensation. This circumstance does not exist in the
case at bench.
The rulings in Macabangkit Sangkay and Saludares are more in consonance with the rules of equity
than with the Rules of Court, specifically Rule 67 on expropriation. Indeed, the practice of construct first,
expropriate later is reprehensible and must not be countenanced. The Court, however, must not lose
sight of Section 4, Rule 67 which mandates that just compensation must be determined "as of the date
of the taking of the property or the filing of the complaint, whichever came first." This provision is, first
and foremost, part of the Rules which the Court itself promulgated for purposes of uniformity, among
others.
Further, the doctrine of stare decisis constrains the Court to follow the ruling laid down in Tecson and
similar cases. "Time and again, the court has held that it is a very desirable and necessary judicial
practice that when a court has laid down a principle of law as applicable to a certain state of facts, it will
adhere to that principle and apply it to all future cases in which the facts are substantially the
same. Stare decisis et non quieta movere. Stand by the decisions and disturb not what is settled. Stare
decisis simply means that for the sake of certainty, a conclusion reached in one case should be applied
to those that follow if the facts are substantially the same, even though the parties may be different. It
proceeds from the first principle of justice that, absent any powerful countervailing considerations, like
cases ought to be decided alike."33
To reiterate, the facts of the instant case are substantially the same with Tecson and similar cases cited
therein. A government agency took possession of private property for the benefit of the public without,
however, initiating expropriation proceedings, which thus, constrained the landowner to file actions to
recover their properties or to demand payment of just compensation. Hence, in the absence of any
compelling reason to deviate from the rulings in the aforecited cases, the Court, in the case at bench,
must adhere to the doctrines established therein.
Amount of interest to be paid
The owner's loss, of course, is not only his property but also its income-generating potential.34 Thus,
when property is taken, full compensation of its value must immediately be paid to achieve a fair
exchange for the property and the potential income lost.35 Thus, the rationale for imposing the interest is
to compensate the landowners for the income they would have made had they been properly
compensated for their properties at the time of the taking.36
The Court, in Republic v. Court of Appeals,37 further enunciated on the necessity of the payment of
interest to compensate for delay in the payment of just compensation, viz:
The constitutional limitation of "just compensation" is considered to be the sum equivalent to the market
value of the property, broadly described to be the price fixed by the seller in open market in the usual
and ordinary course of legal action and competition or the fair value of the property as between one who
receives, and one who desires to sell, if fixed at the time of the actual taking by the government. Thus, if
property is taken for public use before compensation is deposited with the court having jurisdiction over
the case, the final compensation must include interest [s] on its just value to be computed from
the time the property is taken to the time when compensation is actually paid or deposited with
the court. In fine, between the taking of the property and the actual payment, legal interest [s]
accrue in order to place the owner in a position as good as (but not better than) the position he
was in before the taking occurred.38 [Emphasis supplied]
Page 26 of 50
Tecson also clarified the amount of interest due the landowners, to wit:
x x x In other words, the just compensation due to the landowners amounts to an effective forbearance
on the part of the State - a proper subject of interest computed from the time the property was taken
until the full amount of just compensation is paid - in order to eradicate the issue of the constant
variability of the value of the currency over time.
it must first file an action for eminent domain43and deposit with the authorized government depositary an
amount equivalent to the assessed value of the property.44
Transco should first file an expropriation case before it proceeds to construct transmission lines or any
other infrastructure on any private property. The practice of construct first, expropriate later must be put
to a stop.

x x xx
It is important to note, however, that interest shall be compounded at the time judicial demand is made
pursuant to Article 2212 of the Civil Code of the Philippines, and sustained in Eastern Shipping Lines v.
Court of Appeals, then later on in Nacar v. Gallery Frames, save for the reduction of interest rate to 6%
for loans or forbearance of money.39 x x x
WHEREFORE, the petition is GRANTED. The September 18, 2015 Decision and January 25, 2016
Resolution of the Court of Appeals in CAG.R. CV No. 03571, are REVERSED and SETASIDE. The
valuation of the subject property owned by respondent Oroville shall be ₱78.65 per square meter, with
interest at twelve percent (12%) per annum from January 1983 until January 21, 2011. Petitioner
Transco is also ordered to pay respondent Oroville exemplary damages in the amount of ₱1,000,000.00
and attorney's fees in the amount of ₱200,000.00.

In the case at bench, Transco made a provisional deposit of ₱7,647,200.00 on January 21, 2011. SO ORDERED.
Consequently, from 1983 to January 21, 2011, Oroville is entitled to twelve percent (12%) interest
per annum which is the prevailing rate during such period pursuant to Central Bank Circular No.
905,40 effective from December 22, 1982 to June 30, 2013.

Oroville is also awarded additional compensation by way of exemplary damages and attorney's fees.
In Republic v. CA,41 the Court held that the failure of the government to initiate an expropriation
proceeding to the prejudice of the landowner may be corrected with the awarding of exemplary
damages, attorney's fees and costs of litigation. Thus:

x x x However, we find it proper to award temperate and exemplary damages in light of NIA's
misuse of its power of eminent domain. Any arm of the State that exercises the delegated power of
eminent domain must wield that power with circumspection and utmost regard for procedural
requirements. A government instrumentality that fails to observe the constitutional guarantees of
just compensation and due process abuses the authority delegated to it, and is liable to the
property owner for damages.42 x x x

Hence, considering that Oroville was deprived of beneficial ownership over their property without the G.R. No. 71169 December 22, 1988
benefit of a timely expropriation proceeding, and to serve as a deterrent to the State from failing to
institute such proceedings, a grant of exemplary damages in the amount of One Million Pesos JOSE D. SANGALANG and LUTGARDA D. SANGALANG, petitioners, FELIX C. GASTON and
(₱1,000,000.00) is fair and reasonable. Moreover, an award for attorney's fees in the amount of Two DOLORES R. GASTON, JOSE V. BRIONES and ALICIA R. BRIONES, and BEL-AIR VILLAGE
Hundred Thousand Pesos (₱200,000.00) in favor of Oroville is in order. ASSOCIATION, INC., intervenors-petitioners,
vs.
To recapitulate, Transco is liable to pay Oroville ₱78.65 per square meter representing the fair market INTERMEDIATE APPELLATE COURT, and AYALA CORPORATION, respondents.
value of the property at the time of taking in 1983 and 12% interest per annum on the total fair market
value, computed from 1983 to January 21, 2011, the date when Transco made a provisional deposit in G.R. No. 74376 December 22, 1988
favor of Oroville. Considering that the actual date of taking cannot be determined from the records of
the case, the date of taking is pegged on January 1, 1983. Oroville is also awarded exemplary damages BEL-AIR VILLAGE ASSOCIATION, INC., petitioner,
in the amount of ₱1,000,000.00 and attorney's fees in the amount of ₱200,000.00. vs.
THE INTERMEDIATE APPELLATE COURT, ROSARIO DE JESUS TENORIO, and CECILIA
On a final note, there are several cases which reached this Court in which Transco and even other GONZALVEZ, respondents.
government agencies constructed transmission lines, tunnels and other infrastructures before it decided
to expropriate the private properties upon which they built the same. The Court reminds the government G.R. No. 76394 December 22,1988
and its agencies that it is their obligation to initiate eminent domain proceedings whenever they intend
to take private property for any public purpose. Before the expropriating power enters a private property,
PROPERTY ARTS. 419- Page 27 of 50
BEL-AIR VILLAGE ASSOCIATION, INC., petitioner,
vs.
THE COURT OF APPEALS, and EDUARDO and BUENA ROMUALDEZ respondents. SARMIENTO, J.:

G.R. No. 78182 December 22, 1988 Before the Court are five consolidated petitions, 1 docketed as G.R. Nos. 71169, 74376, 76394, 78182,
and 82281 hereof, in the nature of appeals (by certiorari under Rule 45 of the Rules of Court) from five
BEL-AIR VILLAGE ASSOCIATION, INC., petitioner, decisions of the Court of Appeals, denying specific performance and damages.
vs.
COURT OF APPEALS, DOLORES FILLEY, and J. ROMERO & ASSOCIATES, respondents. The proceedings were commenced at the first instance by Jose Sangalang, joined by his wife Lutgarda
Sangalang, both residents of No. 110 Jupiter Street, Makati, Metro Manila (G.R. No. 71169) to enforce
G.R. No. 82281 December 22, 1988 by specific performance restrictive easement upon property, specifically the Bel- Air Village subdivision
in Makati, Metro Manila, pursuant to stipulations embodied in the deeds of sale covering the
BEL-AIR VILLAGE ASSOCIATION, INC, petitioner, subdivision, and for damages. Later, the Sangalangs were joined by Felix Gaston, a resident of No. 64
vs. Jupiter Street of the same municipality, and by Mr. and Mrs. Jose and Alicia Briones, both of No. 66
COURT OF APPEALS, VIOLETA MONCAL, and MAJAL DEVELOPMENT Jupiter Street. Pending further proceedings, the Bel-Air Village Association, Inc. (BAVA), an
CORPORATION, respondents. incorporated homeowners' association, entered its appearance as plaintiff-in-intervention.

Sangco, Anastacio, Castaneda & Duran Law Office for petitioners & private intervenors- petitioners. BAVA itself had brought its own complaints, four in number, likewise for specific performance and
damages to enforce the same 'deed restrictions.' (See G.R. Nos. 74376, 76394, 78182, and 82281.)
Raul S. Sison Law Offices for intervenor-petitioner Bel-Air Village Association, Inc. Renato L. Dela
Fuente for respondent Ayala Corporation. ANTECEDENTS FACTS

G.R. No. L-74376: I. G.R. No. 71169

Raul S. Sison Law Offices for petitioner. The facts are stated in the decision appealed from. We quote:

Sergio L. Guadiz for private respondents. xxxxxxxxx

G.R. No. L-76394: (1) Bel-Air Village is located north of Buendia Avenue extension (now Sen. Gil J.
Puyat Ave.) across a stretch of commercial block from Reposo Street in the west up
to Zodiac Street in the east, When Bel-Air Village was planned, this block between
Raul S. Sison Law Offices for petitioner. Reposo and Zodiac Streets adjoining Buendia Avenue in front of the village was
designated as a commercial block. (Copuyoc TSN, p. 10, Feb. 12, 1982).
Gruba, Tanlimco Lamso and Apuhin Law Offices for respondents.
(2) Bel-Air Village was owned and developed into a residential subdivision in the
G.R. No. L-78182: 1950s by Makati Development Corporation (hereinafter referred to as MDC), which in
1968 was merged with appellant Ayala Corporation.
Funk & Associates for petitioners.
(3) Appellees-spouses Sangalang reside at No. 11O Jupiter Street between Makati
Tee Tomas & Associates for respondents. Avenue and Reposo Street; appellees-spouses Gaston reside at No. 64 Jupiter Street
between Makati Avenue and Zodiac Street; appellees-spouses Briones reside at No.
66 Jupiter Street also between Makati Avenue and Zodiac Street; while appellee Bel-
G.R. No. L-82281: Air Village Association, Inc. (hereinafter referred to as BAVA) is the homeowners'
association in Bel-Air Village which takes care of the sanitation, security, traffic
Funk & Associates for petitioner. regulations and general welfare of the village.

Castillo, Laman, Tan & Associates for private respondents.

PROPERTY ARTS. 419- Page 28 of 50

(4) The lots which were acquired by appellees Sangalang and spouse Gaston and
spouse and Briones and spouse in 1960, 1957 and 1958, respectively, were all sold
by MDC subject to certain conditions and easements contained in Deed Restrictions
which formed a part of each deed of sale. The pertinent provisions in said Deed
Restrictions, which are common to all lot owners in Bel-Air Village, are as follows:
I-BEL-AIR ASSOCIATION
The owner of this lot/s or his successors in interest is required to be and is
automatically a member of the Bel-Air Association and must abide by such rules and
regulations laid down by the Association in the interest of the sanitation, security and
the general welfare of the community.
The association will also provide for and collect assessments, which will constitute as
a lien on the property junior only to liens of the government for taxes and to voluntary
mortgages for sufficient consideration entered into in good faith.
II-USE OF LOTS
Subject to such amendments and additional restrictions, reservations, servitudes,
etc., as the Bel- Air Association may from time to time adopt and prescribe, this lot is
subject to the following restrictions:
a. This lot/s shall not be subdivided. However, three or more lots may be consolidated
and subdivided into a lesser number of lots provided that none of the resulting lots be
smaller in area than the smallest lot before the consolidation and that the
consolidation and subdivision plan be duly approved by the governing body of the
Bel-Air Association.
b. This lot/s shall only be used for residential purposes.
c. Only one single family house may be constructed on a single lot, although separate
servants' quarters or garage may be built.
d. Commercial or advertising signs shall not be placed, constructed, or erected on this
lot. Name plates and professional signs of homeowners are permitted so long as they
do not exceed 80 x 40 centimeters in size.
e. No cattle, pigs, sheep, goats, ducks, geese, roosters or rabbits shall be maintained
in the lot, except that pets may be maintained but must be controlled in accordance
with the rulings of the Association. The term "pets' includes chickens not in
commercial quantities.
f. The property is subject to an easement of two (2) meters within the lot and adjacent
to the rear and sides thereof not fronting a street for the purpose of drainage, sewage,
water and other public facilities as may be necessary and desirable; and the owner,
lessee or his representative shall permit access thereto by authorized representatives
PROPERTY ARTS. 419-
of the Bel-Air Association or public utility entities for the purposes for which the
easement is created.
g. This lot shall not be used for any immoral or illegal trade or activity.
h. The owner and/or lessee of this lot/s shall at all times keep the grass cut and
trimmed to reduce the fire hazard of the property.
xxx xxx xxx
VI-TERM OF RESTRICTIONS
The foregoing restrictions shall remain in force for fifty years from January 15, 1957,
unless sooner cancelled in its entirety by two thirds vote of members in good standing
of the Bel-Air Association. However, the Association may, from time to time, add new
ones, amend or abolish particular restrictions or parts thereof by majority rule.
VII--ENFORCEMENT OF RESTRICTIONS
The foregoing restrictions may be enjoined and/or enforced by court action by the
Bel-Air Association, or by the Makati Development Corporation or its assigns, or by
any registered owner of land within the boundaries of the Bel-Air Subdivision (Sub-
division plan PSD-49226 and Lot 7-B, Psd-47848) or by any member in good
standing of the Bel-Air association." (Exh. 1 -b; Exh. 22, Annex "B"). (Appellant's
Brief, pp. 4- 6)
(5) When MDC sold the above-mentioned lots to appellees' predecessors-in-interest,
the whole stretch of the commercial block between Buendia Avenue and Jupiter
Street, from Reposo Street in the west to Zodiac Street in the east, was still
undeveloped. Access, therefore, to Bel-Air Village was opened to all kinds of people
and even animals. So in 1966, although it was not part of the original plan, MDC
constructed a fence or wall on the commercial block along Jupiter Street. In 1970, the
fence or wall was partly destroyed by typhoon "Yoling." The destroyed portions were
subsequently rebuilt by the appellant. (Copuyoc TSN, pp. 31-34, Feb. 12, 1982).
When Jupiter Street was widened in 1972 by 3.5 meters, the fence or wall had to be
destroyed. Upon request of BAVA, the wall was rebuilt inside the boundary of the
commercial block. (Copuyoc TSN, pp. 4447, Feb. 12,1982).
(6) When the appellant finally decided to subdivide and sell the lots in the commercial
block between Buendia and Jupiter, BAVA wrote the appellant on May 9, 1972,
requesting for confirmation on the use of the commercial lots. The appellant replied
on May 16, 1972, informing BAVA of the restrictions intended to be imposed in the
sale and use of the lots. Among these restrictions are: that the building shall have a
set back of 19 meters; and that with respect to vehicular traffic along Buendia Avenue,
entrance only will be allowed, and along Jupiter Street and side streets, both entrance
and exit will be allowed.
Page 29 of 50
(7) On June 30, 1972, appellant informed BAVA that in a few months it shall subdivide
and sell the commercial lots bordering the north side of Buendia Avenue Extension
from Reposo Street up to Zodiac Street. Appellant also informed BAVA that it had
taken all precautions and will impose upon the commercial lot owners deed
restrictions which will harmonize and blend with the development and welfare of Bel-
Air Village. Appellant further applied for special membership in BAVA of the
commercial lot owners. A copy of the deed restrictions for the commercial lots was
also enclosed. The proposed deed restrictions shall include the 19 meter set back of
buildings from Jupiter Street, the requirement for parking space within the lot of one
(1) parking slot for every seventy five (75) meters of office space in the building and
the limitation of vehicular traffic along Buendia to entrance only, but allowing both
vehicular entrance and vehicular exit through Jupiter Street and any side street.
In its letter of July 10, 1972, BAVA acknowledged the above letter of appellant and
informed the latter that the application for special membership of the commercial lot
owners in BAVA would be submitted to BAVA's board of governors for decision.
(8) On September 25, 1972, appellant notified BAVA that, after a careful study, it was
finally decided that the height limitation of buildings on the commercial lots shall be
increased from 12.5 meters to 15 meters. Appellant further informed BAVA that Jupiter
Street shall be widened by 3.5 meters to improve traffic flow in said street. BAVA did
not reply to said letter, but on January 22, 1973, BAVA wrote a letter to the appellant
informing the latter that the Association had assessed the appellant, as special
member of the association, the amount of P40,795.00 (based on 81,590 square
meters at P.50 per square meter) representing the membership dues to the
commercial lot owners for the year 1973, and requested the appellant to remit the
amount which its board of governors had already included in its current budget. In
reply, appellant on January 31, 1973 informed BAVA that due to the widening of
Jupiter Street, the area of the lots which were accepted by the Association as
members was reduced to 76,726 square meters. Thus, the corresponding dues at
P.50 per square meter should be reduced to P38,363.00. This amount, therefore, was
remitted by the appellant to BAVA. Since then, the latter has been collecting
membership dues from the owners of the commercial lots as special members of the
Association. As a matter of fact, the dues were increased several times. In 1980, the
commercial lot owners were already being charged dues at the rate of P3.00 per
square meter. (Domingo, TSN, p. 36, March 19, 1980). At this rate, the total
membership dues of the commercial lot owners amount to P230,178. 00 annually
based on the total area of 76,726 square meters of the commercial lots.
(9) Meantime, on April 4, 1975, the municipal council of Makati enacted its ordinance
No. 81, providing for the zonification of Makati (Exh. 18). Under this Ordinance, Bel-
Air Village was classified as a Class A Residential Zone, with its boundary in the
south extending to the center line of Jupiter Street (Exh. 18-A).
Thus, Chapter III, Article 1, Section 3.03, par. F. of the Ordinance provides:
F. Bel-Air Village area, as bounded on the N by Polaris and Mercedes streets and on
the NE by Estrella Street; on the SE by Epifanio de los Santos Avenue and on the SW
by the center line of Jupiter Street. Then bounded on the N by the abandoned MRR
PROPERTY ARTS. 419-
Pasig Line; on the E by Makati Avenue; on the S by the center line of Jupiter Street
and on the W by the center line of Reposo Street." (Exh. 18-A)
Similarly, the Buendia Avenue Extension area was classified as Administrative Office
Zone with its boundary in the North-North East Extending also up to the center line of
Jupiter Street (Exh. 18b).
Thus, Chapter III, Article I, Section 3.05, par. C. of the Ordinance provides:
C. The Buendia Avenue Extension areas, as bounded on the N-NE by the center line
of Jupiter Street, on the SE by Epifanio de los Santos Avenue; on the SW by Buendia
Avenue and on the NW by the center line of Reposo Street, then on the NE by
Malugay Street; on the SE by Buendia Avenue and on the W by Ayala Avenue
Extension." (Exh. 18-B)
The Residential Zone and the Administrative Office Zone, therefore, have a common
boundary along the center line of Jupiter Street.
The above zoning under Ordinance No. 81 of Makati was later followed under the
Comprehensive Zoning Ordinance for the National Capital Region adopted by the
Metro Manila Commission as Ordinance 81 -01 on March 14, 1981 (Exh. 19).
However, under this ordinance, Bel-Air Village is simply bounded in the South-
Southeast by Jupiter Street-not anymore up to the center line of Jupiter Street (Exh.
B). Likewise, the blockdeep strip along the northwest side of Buendia Avenue
Extension from Reposo to EDSA was classified as a High Intensity Commercial Zone
(Exh. 19-c).
Thus, the Zoning District Boundaries -Makati, in Annex B of the Ordinance provides:
R-I-Low Intensity Residential
xxxxxxxxx
4. Bel-Air 1, 3, 4
Bounded on the North -- J.P. Rizal and Amapola St.
South - Rockwell
Northwest - P. Burgos
Southeast - Jupiter
Southwest - Epifanio de los Santos Ave. (EDSA)
5. Bel-Air 2
Page 30 of 50
Bounded on the Northwest - J.P. Rizal
Southwest - Makati Avenue
South --- Jupiter
Southeast -- Pasig Line
East - South Avenue" (Exh. 19-b)
xxxxxxxxx
C-3-High Intensity Commercial Zone
2. A block deep strip along the northwest side of Buendia Ave. Ext. from Reposo to
EDSA." (Exh, 19-c)
Under the above zoning classifications, Jupiter Street, therefore, is a common
boundary of Bel-Air Village and the commercial zone.
(10) Meanwhile, in 1972, BAVA had installed gates at strategic locations across
Jupiter Street which were manned and operated by its own security guards who were
employed to maintain, supervise and enforce traffic regulations in the roads and
streets of the village. (Villavicencio, TSN, pp, 22-25, Oct. 30, 1980; BAVA Petition,
par. 11, Exh. 17).
Then, on January 17, 1977, the Office of the Mayor of Makati wrote BAVA directing
that, in the interest of public welfare and for the purpose of easing traffic congestion,
the following streets in Bel-Air Village should be opened for public use:
Amapola Street - from Estrella Street to Mercedes Street
Amapola Street -junction of Palma Street gate going to J. Villena Street
Mercedes Street -- from EDSA to Imelda Avenue and Amapola junction
Zodiac Street - from Mercedes Street to Buendia Avenue
Jupiter Street -- from Zodiac Street to Reposo Street connecting Metropolitan Avenue
to Pasong Tamo and V. Cruz Extension intersection
Neptune Street - from Makati Avenue to Reposo Street Orbit Street - from F. Zobel-
Candelaria intersection to Jupiter Street
Paseo de Roxas - from Mercedes Street to Buendia Avenue (Exh. 17, Annex A, BAVA
Petition)
PROPERTY ARTS. 419-
On February 10, 1977, BAVA wrote the Mayor of Makati, expressing the concern of
the residents about the opening of the streets to the general public, and requesting
specifically the indefinite postponement of the plan to open Jupiter Street to public
vehicles. (Exh. 17, Annex B, BAVA Petition).
However, BAVA voluntarily opened to the public Amapola, Mercedes, Zodiac, Neptune
and Paseo de Roxas streets. (Exh. 17-A, Answer of Makati par. 3-7).
Later, on June 17,1977, the Barangay Captain of Bel-Air Village was advised by the
Office of the Mayor that, in accordance with the agreement entered into during the
meeting on January 28, 1 977, the Municipal Engineer and the Station Commander of
the Makati Police were ordered to open for public use Jupiter Street from Makati
Avenue to Reposo Street. Accordingly, he was requested to advise the village
residents of the necessity of the opening of the street in the interest of public welfare.
(Exh. 17, Annex E, BAVA Petition).
Then, on June 10, 1977, the Municipal Engineer of Makati in a letter addressed to
BAVA advised the latter to open for vehicular and pedestrian traffic the entire portion
of Jupiter Street from Makati Avenue to Reposo Street (Exh. 17, BAVA Petition, par.
14).
Finally, on August 12, 1977, the municipal officials of Makati concerned allegedly
opened, destroyed and removed the gates constructed/located at the corner of
Reposo Street and Jupiter Street as well as the gates/fences located/constructed at
Jupiter Street and Makati Avenue forcibly, and then opened the entire length of Jupiter
Street to public traffic. (Exh. 17, BAVA Petition, pars. 16 and 17).
(11) Before the gates were-removed, there was no parking problem or traffic problem
in Jupiter Street, because Jupiter Street was not allowed to be used by the general
public (Villavicencio, TSN, pp. 24-25, Oct. 30, 1980). However, with the opening of
Zodiac Street from Estrella Street to Jupiter Street and also the opening to the public
of the entire length of Jupiter Street, there was a tremendous increase in the volume
of traffic passing along Jupiter Street coming from EDSA to Estrella Street, then to
Zodiac Street to Jupiter Street, and along the entire length of Jupiter Street to its other
end at Reposo Street. (Villavicencio, TSN, pp. 30-32, Oct. 30, 1980).
In the meantime, the purchasers of the commercial lots between Jupiter Street and
Buendia Avenue extension had started constructing their respective buildings in 1974-
1975. They demolished the portions of the fence or wall standing within the boundary
of their lots. Many of the owners constructed their own fences or walls in lieu of the
wall and they employed their own security guards. (TSN, p. 83, Feb. 20,1981; TSN,
pp. 53-54; 72-74, March 20,1981; TSN, pp. 54-55, July 23, 1981).
(12) Then, on January 27, 1978, appellant donated the entire Jupiter Street from
Metropolitan Avenue to Zodiac Street to BAVA (Exh. 7)- However, even before 1978,
the Makati Police and the security force of BAVA were already the ones regulating the
traffic along Jupiter Street after the gates were opened in 1977. Sancianco TSN, pp.
26-30, Oct. 2,1981).
Page 31 of 50
In October, 1979, the fence at the corner of Orbit and Neptune Streets was opened 3. The sum of P500,000.00 as exemplary damages;
and removed (BAVA Petition, par. 22, Exh. 17). The opening of the whole stretch of
Orbit Street from J.P. Rizal Avenue up to Imelda Avenue and later to Jupiter Street 4. The sum of P100,000.00 as attorney's fees; and
was agreed to at the conference attended by the President of BAVA in the office of the
Station Commander of Makati, subject to certain conditions, to wit:
5. The costs of suit.
That, maintenance of Orbit St. up to Jupiter St. shall be shouldered by the
Municipality of Makati. ON INTERVENORS FELIX and DOLORES GASTON'S COMPLAINT:

That, street lights will be installed and maintenance of the same along Orbit St. from Defendant is ordered to pay to the spouses Felix and Dolores Gaston, the following
J.P. Rizal Ave. up to Jupiter St. shall be undertaken by the Municipality. damages:

That for the security of the residents of San Miguel Village and Bel-Air Village, as a 1 . The sum of P400,000.00 as consequential damages;
result of the opening of Orbit Street, police outposts shall be constructed by the
Municipality of Makati to be headed by personnel of Station No. 4, in close 2 The sum of P500,000.00 as moral damages;
coordination with the Security Guards of San Miguel Village and Bel-Air Village." (CF.
Exh. 3 to Counter-Affidavit, of Station Commander, Ruperto Acle p. 253, records)" 3 The sum of P500,000.00 as exemplary damages:
(Order, Civil Case No. 34948, Exh. 17-c).

4 The sum of P50,000.00 as attorney's fees; and

(13) Thus, with the opening of the entire length of Jupiter Street to public traffic, the
different residential lots located in the northern side of Jupiter Street ceased to be
used for purely residential purposes. They became, for all purposes, commercial in 5 The costs of suit.
character.
ON INTERVENORS JOSE and ALICIA BRIONES' COMPLAINT:
(14) Subsequently, on October 29, 1979, the plaintiffs-appellees Jose D. Sangalang
and Lutgarda D. Sangalang brought the present action for damages against the Defendant is ordered to pay to the spouses Jose and Alicia Briones, the following
defendant-appellant Ayala Corporation predicated on both breach of contract and on damages:
tort or quasi-delict A supplemental complaint was later filed by said appellees seeking
to augment the reliefs prayed for in the original complaint because of alleged
1 . The sum of P400,000.00 as consequential damages;
supervening events which occurred during the trial of the case. Claiming to be
similarly situated as the plaintiffs-appellees, the spouses Felix C. Gaston and Dolores
R. Gaston, Jose V. Briones and Alicia R. Briones, and the homeowners' association 2 The sum of P500,000.00 as moral damages;
(BAVA) intervened in the case.
3 The sum of P500,000.00 as exemplary damages;
(15) After trial on the merits, the then Court of First Instance of Rizal, Pasig, Metro
Manila, rendered a decision in favor of the appellees the dispositive portion of which 4 The sum of P50,000.00 as attorney's fees; and
is as follows:
5 The costs of suit.
WHEREFORE, judgment is hereby accordingly rendered as follows:
ON INTERVENOR BAVA'S COMPLAINT:
ON PLAINTIFFS' COMPLAINT:
Defendant is ordered to pay intervenor BAVA, the following damages:
Defendant is ordered to pay to the plaintiffs-spouses Sangalang the following
damages:
1. The sum of P400,000.00 as consequential damages;

1. The sum of P500,000.00 as actual and consequential damages;

2. The sum of P500,000.00 as exemplary damages;

2. The sum of P2,000,000.00 as moral damages;

PROPERTY ARTS. 419- Page 32 of 50
 3. The sum of P50,000.00 as attorney's fees; and
4. The costs of suit.
The above damages awarded to the plaintiffs and intervenors shall bear legal interest
from the filing of the complaint.
Defendant is further ordered to restore/reconstruct the perimeter wall at its original
position in 1966 from Reposo Street in the west to Zodiac Street in the east, at its
own expense, within SIX (6) MONTHS from finality of judgment.
SO ORDERED.
(Record on Appeal, pp. 400-401) 2
xxxxxxxxx
On appeal, the Court of Appeals 3 rendered a reversal, and disposed as follows:
ACCORDINGLY, finding the decision appealed from as not supported by the facts and
the law on the matter, the same is hereby SET ASIDE and another one entered
dismissing the case for lack of a cause of action. Without pronouncement as to costs.
SO ORDERED. 4
II. G.R. No. 74376
This petition was similarly brought by BAVA to enforce the aforesaid restrictions stipulated in the deeds
of sale executed by the Ayala Corporation. The petitioner originally brought the complaint in the
Regional Trial Court of Makati, 5 principally for specific performance, plaintiff [now, petitioner] alleging
that the defendant [now, private respondent] Tenorio allowed defendant [Tenorio's co-private
respondent] Gonzalves to occupy and convert the house at 50 Jupiter Street, Bel-Air Village, Makati,
Metro Manila, into a restaurant, without its knowledge and consent, and in violation of the deed
restrictions which provide that the lot and building thereon must be used only for residential purposes
upon which the prayed for main relief was for 'the defendants to permanently refrain from using the
premises as commercial and to comply with the terms of the Deed Restrictions." 6 The trial court
dismissed the complaint on a procedural ground, i.e., pendency of an Identical action, Civil Case No.
32346, entitled "Bel-Air Village Association, Inc. v. Jesus Tenorio." The Court of Appeals 7 affirmed, and
held, in addition, that Jupiter Street "is classified as High density commercial (C-3) zone as per
Comprehensive Zoning Ordinance No. 81-01 for National Capital Region," 8 following its own ruling in
AC-G.R. No. 66649, entitled "Bel-Air Village Association, Inc. vs. Hy-Land Realty & Development
Corporation, et al."
III. G.R. No. 76394
xxxxxxxxx
PROPERTY ARTS. 419-
Defendants-spouses Eduardo V. Romualdez, Jr. and Buena Tioseco are the owners
of a house and lot located at 108 Jupiter St., Makati, Metro Manila as evidenced by
Transfer Certificate of Title No. 332394 of the Registry of Deeds of Rizal. The fact is
undisputed that at the time the defendants acquired the subject house and lot, several
restrictions were already annotated on the reverse side of their title; however, for
purposes of this appeal we shall quote hereunder only the pertinent ones, to wit:
(b,) This lot/shall be used only for residential purposes.
xxxxxxxxx
IV. Term of Restriction
The foregoing restriction(s) shall remain in force for fifty years from January 15, 1957,
unless sooner cancelled in its entirety by two-thirds vote of the members in good
standing of the Bel-Air Association. However, the Association may from time to time,
add new ones, amend or abolish particular restrictions or parts thereof by majority
rule.
During the early part of 1979, plaintiff noted that certain renovations and constructions
were being made by the defendants on the subject premises, for which reason the
defendants were advised to inform the plaintiff of the kind of construction that was
going on. Because the defendants failed to comply with the request of the plaintiff, the
latter's chief security officer visited the subject premises on March 23, 1979 and found
out that the defendants were putting up a bake and coffee shop, which fact was
confirmed by defendant Mrs. Romualdez herself. Thereafter, the plaintiff reminded
defendants that they were violating the deed restriction. Despite said reminder, the
defendants proceeded with the construction of the bake shop. Consequently, plaintiff
sent defendants a letter dated April 30, 1979 warning them that if they will not desist
from using the premises in question for commercial purposes, they will be sued for
violations of the deed restrictions.
Despite the warning, the defendants proceeded with the construction of their bake
shop. 9
xxxxxxxxx
The trial court 10 adjudged in favor of BAVA. On appeal, the Court of Appeals 11 reversed, on the strength
of its holding in AC-G.R. No. 66649 earlier referred to.
BAVA then elevated the matter to the Court by a petition for review on certiorari. The Court 12 initially
denied the petition "for lack of merit, it appearing that the conclusions of the respondent Court of
Appeals that private respondents' bake and coffee shop lies within a commercial zone and that said
private respondents are released from their obligations to maintain the lot known as 108 Jupiter Street
for residential purposes by virtue of Ordinance No. 81 of the Municipality of Makati and Comprehensive
Zoning Ordinance No. 81-01 of the Metropolitan Manila Commission, are in accord with law and
jurisprudence," 13 for which BAVA sought a reconsideration. Pending resolution, the case was referred to
the Second Division of this Court, 14 and thereafter, to the Court En Banc en consulta. 15 Per our
Resolution, dated April 29, 1988, we consolidated this case with G.R. Nos. 74376 and 82281. 16
Page 33 of 50
 IV. G.R. No. 78182.
xxxxxxxxx
The case stemmed from the leasing by defendant Dolores Filley of her building and
lot situated at No. 205 Reposo Street, Bel-Air Village Makati, Metro Manila to her co-
defendant, the advertising firm J. Romero and Associates, in alleged violation of deed
restrictions which stipulated that Filley's lot could only be used for residential
purposes. Plaintiff sought judgment from the lower court ordering the defendants to
"permanently refrain" from using the premises in question "as commercial" and to
comply with the terms of the deed restrictions.
After the proper proceedings, the court granted the plaintiff the sought for relief with
the additional imposition of exemplary damages of P50,000.00 and attorney's fees of
P10,000.00. The trial court gave emphasis to the restrictive clauses contained in
Filley's deed of sale from the plaintiff, which made the conversion of the building into
a commercial one a violation.
Defendants now seek review and reversal on three (3) assignments of errors, namely:
I.
THE TRIAL COURT ERRED IN NOT FINDING THAT THE REGULATIONS
PROMULGATED BY THE MUNICIPAL AUTHORITIES IN MAKATI AND THE
MINISTRY OF HUMAN SETTLEMENT'S CHANGING THE CHARACTER OF THE
AREAS IN QUESTION HAD RENDERED THE RESTRICTIVE EASEMENT ON THE
TITLE OF THE APPELLANTS VACATED.
II.
THE COURT ERRED IN NOT RULING THAT BECAUSE THE APPELLEE(S) HAD
ALLOWED THE USE OF THE PROPERTY WITHIN THE VILLAGE FOR NON-
RESIDENTIAL PURPOSES, IT IS NOW ESTOPPED FROM ENFORCING THE
RESTRICTIVE PROHIBITIONS SUBJECT MATTER OF THIS CASE.
III.
THE COURT ERRED IN NOT FINDING THAT THERE EXISTED A BILATERAL
CONTRACT BETWEEN THE PARTIES AND THAT SINCE APPELLEE HAD NOT
PERFORMED ITS OBLIGATIONS UNDER THIS ARRANGEMENT THE APPELLANT
IN TURN WAS UNDER NO OBLIGATION TO ANNOTATE THE RESTRICTIVE
PROHIBITIONS ON THE BACK OF THE TITLE.
Appellants anchor their appeal on the proposition that the Bel-Air Village area,
contrary to plaintiff- appellee's pretension of being a strictly residential zone, is in fact
commercial and characterize the restrictions contained in appellant Filley's deed of
sale from the appellee as completely outmoded, which have lost all relevance to the
present-day realities in Makati, now the premier business hub of the nation, where
PROPERTY ARTS. 419-
there is a proliferation of numerous commercial enterprises established through the
years, in fact even within the heart of so-called "residential" villages. Thus, it may be
said that appellants base their position on the inexorable march of progress which
has rendered at naught the continued efficacy of the restrictions. Appellant on the
other hand, relies on a rigid interpretation of the contractual stipulations agreed upon
with appellant Filley, in effect arguing that the restrictions are valid ad infinitum.
The lower court quite properly found that other commercial establishments exist in the
same area (in fact, on the same street) but ignored it just the same and said-
The fact that defendants were able to prove the existence of several commercial
establishments inside the village does not exempt them from liability for violating
some of the restrictions evidently choosing to accord primacy to contractual
stipulation. 17
xxxxxxxxx
The Court of Appeals 18 overturned the lower court, 19 likewise based on AC-G.R. No. 66649. The
respondent Court observed also that J. Romero & Associates had been given authority to open a
commercial office by the Human Settlements Regulatory Commission.
V. G.R. No. 82281
The facts of this case have been based on stipulation. We quote:
COMES NOW, the Parties, assisted by their respective counsel and to this Honorable
Court, respectfully enter into the following stipulations of facts, to wit:
1. The parties admit the personal circumstances of each other as well as their
capacities to sue and be sued.
2. The parties admit that plaintiff BAVA for short) is the legally constituted
homeowners' association in Bel-Air Subdivision, Makati, Metro Manila.
3. The parties admit that defendant Violets Moncal is the registered owner of a parcel
of land with a residential house constructed thereon situated at No. 104 Jupiter
Street, Bel-Air Village, Makati, Metro Manila; that as such lot owner, she is a member
of the plaintiff association.
4. The parties admit that defendant Majal Development Corporation (Majal for short)
is the lessee of defendant Moncal's house and lot located at No. 104 Jupiter Street.
5. The parties admit that a deed restrictions is annotated on the title of defendant
Moncal, which provides, among others, that the lot in question must be used only for
residential purposes;' that at time Moncal purchased her aforesaid lot in 1959 said
deed restrictions was already annotated in the said title.
Page 34 of 50
 6. The parties admit that when Moncal leased her subject property to Majal, she did
not secure the consent of BAVA to lease the said house and lot to the present lessee.
7. The parties admit that along Jupiter Street and on the same side where Moncal's
property is located, there are restaurants, clinics placement or employment agencies
and other commercial or business establishments. These establishments, however,
were sued by BAVA in the proper court.
8. The parties admit that at the time Moncal purchased the subject property from the
Makati Development Corporation, there was a perimeter wall, running along Jupiter
Street, which wall was constructed by the subdivision owner; that at that time the
gates of the entrances to Jupiter Street were closed to public traffic. In short, the
entire length of Jupiter which was inside the perimeter wall was not then open to
public traffic
9. The parties admit that subsequent thereto, Ayala tore down the perimeter wall to
give way to the commercial building fronting Buendia Avenue (now Gil J. Puyat
Avenue).
10. The parties admit that on August 12, 1977, the Mayor of Makati forcibly opened
and removed the street gates constructed on Jupiter Street and Reposo Street,
thereby opening said streets to the public.
11. The parties admit plaintiffs letters of October 10, 23 and 31, 1984; as well as
defendants' letters-reply dated October 17 and 29, 1984. 20
xxxxxxxxx
The trial court 21 dismissed the petitioner's complaint, a dismissal affirmed on appeal, 22 According to the
appellate court, the opening of Jupiter Street to human and vehicular traffic, and the commercialization
of the Municipality of Makati in general, were circumstances that had made compliance by Moncal with
the aforesaid "deed restrictions" "extremely difficult and unreasonable," 23 a development that had
excused compliance altogether under Article 1267 of the Civil Code.
VI. The cases before the Court; the Court's decision.
In brief, G.R. Nos. 74376, 76394, 78182, and 82281 are efforts to enforce the "deed restrictions" in
question against specific residents (private respondents in the petitions) of Jupiter Street and with
respect to G.R. No. 78182, Reposo Street. The private respondents are alleged to have converted their
residences into commercial establishments (a restaurant in G.R. No. 74376, a bakery and coffee shop
in G.R. No. 76394, an advertising firm in G.R. No. 78182; and a construction company, apparently, in
G.R. No. 82281) in violation of the said restrictions. 24
Their mother case, G. R. No. 71169 is, on the other hand, a petition to hold the vendor itself, Ayala
Corporation (formerly Makati Development Corporation), liable for tearing down the perimeter wall along
Jupiter Street that had therefore closed its commercial section from the residences of Bel-Air Village
and ushering in, as a consequence, the full "commercialization" of Jupiter Street, in violation of the very
restrictions it had authored.
PROPERTY ARTS. 419-
As We indicated, the Court of Appeals dismissed all five appeals on the basis primarily of its ruling in
AC-G.R. No. 66649, "Bel-Air Village, Inc. v. Hy-Land Realty Development Corporation, et al.," in which
the appellate court explicitly rejected claims under the same 'deed restrictions" as a result of Ordinance
No. 81 enacted by the Government of the Municipality of Makati, as well as Comprehensive Zoning
Ordinance No. 8101 promulgated by the Metropolitan Manila Commission, which two ordinances
allegedly allowed the use of Jupiter Street both for residential and commercial purposes. It was likewise
held that these twin measures were valid as a legitimate exercise of police power.
The Court of Appeals' reliance on Ordinance Nos. 81. and 8101 is now assailed in these petitions,
particularly the Sangalang, et al. petition.
Aside from this fundamental issue, the petitioners likewise raise procedural questions. G.R. No. 71169,
the mother case, begins with one.
1. G.R. No. 71169
In this petition, the following questions are specifically put to the Court:
May the Honorable Intermediate Appellate Court reverse the decision of the trial court
on issues which were neither raised by AYALA in its Answers either to the Complaint
or Supplemental Complaint nor specifically assigned as one of the alleged errors on
appeal? 25
May the Honorable Intermediate Appellate Court arbitrarily ignore the decisive
findings of fact of the trial court, even if uncontradicted and/or documented, and
premised mainly on its own unsupported conclusions totally reverse the trial court's
decision? 26
May the Honorable Intermediate Appellate Court disregard the trial court's
documented findings that respondent Ayala for its own self-interest and commercial
purposes contrived in bad faith to do away with the Jupiter Street perimeter wall it put
up three times which wall was really intended to separate the residential from the
commercial areas and thereby insure the privacy and security of Bel Air Village
pursuant to respondent Ayala's express continuing representation and/or covenant to
do so? 27
a.
The first question represents an attack on the appellate court's reliance on Ordinances Nos. 81 and 81-
01, a matter not supposedly taken up at the trial or assigned as an error on appeal. As a rule, the Court
of Appeals (then the Intermediate Appellate Court) may determine only such questions as have been
properly raised to it, yet, this is not an inflexible rule of procedure. In Hernandez v. Andal, 28 it was stated
that "an unassigned error closely related to an error properly assigned, or upon which the determination
of the question raised by the error properly assigned is dependent, will be considered by the appellate
court notwithstanding the failure to assign it as error." 29
In Baquiran v. Court of Appeals, 30 we referred to the " modern trend of procedure . . . according] the
courts broad discretionary power" 31 and in which we allowed consideration of matters "having some
Page 35 of 50
bearing on the issue submitted which the parties failed to raise or the lower court ignore[d]. 32 And in
Vda. de Javellana v. Court of Appeals, 33 we permitted the consideration of a 'patent error' of the trial
court by the Court of Appeals under Section 7, of Rule 51, of the Rules of Court, 34 although such an
error had not been raised in the brief. But what we note is the fact that the Ayala Corporation did raise
the zoning measures as affirmative defenses, first in its answers 35 and second, in its brief, 36 and
submitted at the trial as exhibits. 37 There is accordingly no cause for complaint on the part of the
petitioners for Ayala's violation of the Rules. But while there was reason for the consideration, on
appeal, of the said zoning ordinances in question, this Court nevertheless finds as inaccurate the Court
of Appeals' holding that such measures, had "in effect, [made] Jupiter Street ... a street which could be
used not only for residential purposes," 38 and that "[It lost its character as a street for the exclusive
benefit of those residing in Bel-Air Village completely." 39
Among other things, there is a recognition under both Ordinances Nos. 81 and 8 1-01 that Jupiter Street
lies as the boundary between Bel-Air Village and Ayala Corporation's commercial section. And since
1957, it had been considered as a boundary not as a part of either the residential or commercial zones
of Ayala Corporation's real estate development projects. Thus, the Bel-Air Village Association's articles
of incorporation state that Bel-Air Village is 'bounded on the NE., from Amapola St., to de los Santos
Ave., by Estrella St., on the SE from Extrella St., to Pedestrian Lane by E. De los Santos Ave., on the
SW., from Pedestrian Lane to Reposo St., by Jupiter Street
. . . . 40 Hence, it cannot be said to have been "for the exclusive benefit" of Bel-Air Village residents.
We come to the perimeter wall then standing on the commercial side of Jupiter Street the destruction of
which opened the street to the public. The petitioners contend that the opening of the thoroughfare had
opened, in turn, the floodgates to the commercialization of Bel-Air Village. The wall, so they allege, was
designed precisely to protect the peace and privacy of Bel-Air Village residents from the din and uproar
of mercantile pursuits, and that the Ayala Corporation had committed itself to maintain it. It was the
opinion of the Court of Appeals, as we said, that Ayala's liability therefor, if one existed, had been
overtaken by the passage of Ordinances Nos. 81 and 82-01, opening Jupiter Street to commerce.
It is our ruling, we reiterate, that Jupiter Street lies as a mere boundary, a fact acknowledged by the
authorities of Makati and the National Government and, as a scrutiny of the records themselves reveals,
by the petitioners themselves, as the articles of incorporation of Bel-Air Village Association itself would
confirm. As a consequence, Jupiter Street was intended for the use by both -the commercial and
residential blocks. It was not originally constructed, therefore, for the exclusive use of either block, least
of all the residents of Bel-Air Village, but, we repeat, in favor of both, as distinguished from the general
public.
When the wall was erected in 1966 and rebuilt twice, in 1970 and 1972, it was not for the purpose of
physically separating the two blocks. According to Ayala Corporation, it was put up to enable the Bel-Air
Village Association "better control of the security in the area, 41 and as the Ayala Corporation's "show of
goodwill " 42 a view we find acceptable in the premises. For it cannot be denied that at that time, the
commercial area was vacant, "open for [sic] animals and people to have access to Bel-Air
Village." 43 There was hence a necessity for a wall.
In any case, we find the petitioners' theory, that maintaining the wall was a matter of a contractual
obligation on the part of Ayala, to be pure conjecture. The records do not establish the existence of such
a purported commitment. For one, the subdivision plans submitted did not mention anything about it.
For another, there is nothing in the "deed restrictions" that would point to any covenant regarding the
construction of a wall. There is no representation or promise whatsoever therein to that effect.
PROPERTY ARTS. 419-
With the construction of the commercial buildings in 1974, the reason for which the wall was built- to
secure Bel-Air Village from interlopers had naturally ceased to exist. The buildings themselves had
provided formidable curtains of security for the residents. It should be noted that the commercial lot
buyers themselves were forced to demolish parts of the wall to gain access to Jupiter Street, which they
had after all equal right to use.
In fine, we cannot hold the Ayala Corporation liable for damages for a commitment it did not make,
much less for alleged resort to machinations in evading it. The records, on the contrary, will show that
the Bel-Air Village Association had been informed, at the very outset, about the impending use of
Jupiter Street by commercial lot buyers. We quote:
xxxxxxxxx
1. Exh. I of appellee, the memorandum of Mr. Carmelo Caluag, President of BAVA,
dated May 10, 1972, informing the BAVA Board of Governors and Barrio Council
members about the future use of Jupiter Street by the lot owners fronting Buendia
Avenue. The use of Jupiter Street by the owners of the commercial lots would
necessarily require the demolition of the wall along the commercial block adjoining
Jupiter Street.
2. Exh. J of appellee, the minutes of the joint meeting of BAVA Board of Governors
and the Bel-Air Barrio Council where the matter that "Buendia lot owners will have
equal rights to use Jupiter Street," and that Ayala's "plans about the sale of lots and
use of Jupiter Street" were precisely taken up. This confirms that from the start BAVA
was informed that the commercial lot owners will use Jupiter Street and that
necessarily the wall along Jupiter Street would be demolished.
3. Exh. 10, the letter of Mr. Demetrio Copuyoc to the President of BAVA, dated May
16, 1972, expressly stating that vehicular entrance and exit to the commercial lots
would be allowed along Jupiter and side streets.
4. Exhs. 27, 27-A, 27-B, the letter of Atty. Salvador J. Lorayes dated June 30, 1972,
with enclosed copy of proposed restriction for the commercial lots to BAVA. He
proposed restriction again expressly stated that "Vehicular entrances and exits are
allowed thru Jupiter and any side streets."
5. Exh. L of appellee, the minutes of the meeting of the members of BAVA, dated
August 26, 1972, where it is stated "Recently, Ayala Corporation informed the Board
that the lots fronting Buendia Avenue will soon be offered for sale, and that future lot
owners will be given equal rights to use Jupiter Street as well as members of the
Association."
6. Exh. 25, the letter of Atty. Lorayes dated September 25, 1972, informing BAVA of
the widening of Jupiter Street by 3.5 meters to improve traffic flow in said street to
benefit both the residents of Bel-Air and the future owners of the commercial lots. 44
The petitioners cannot successfully rely on the alleged promise by Demetrio Copuyoc, Ayala's manager,
to build a "[f]ence along Jupiter with gate for entrance and/or exit 45 as evidence of Ayala's alleged
continuing obligation to maintain a wall between the residential and commercial sections. It should be
Page 36 of 50
observed that the fence referred to included a "gate for entrance and or exit" which would have
defeated the purpose of a wall, in the sense the petitioners would put in one, that is to say, an
impenetrable barrier. But as Ayala would point out subsequently, the proposed fence was not
constructed because it had become unnecessary when the commercial lot owners commenced
constructions thereon.
Be that as it may, the Court cannot visualize any purported obligation by Ayala Corporation to keep the
wall on the strength of this supposed promise alone. If truly Ayala promised anything assuming that
Capuyoc was authorized to bind the corporation with a promise it would have been with respect to the
fence. It would not have established the pre-existing obligation alleged with respect to the wall.
Obligations arise, among other things, from contract. 46 If Ayala, then, were bound by an obligation, it
would have been pursuant to a contract. A contract, however, is characterized by a "meeting of minds
between two persons . 47As a consensual relation, it must be shown to exist as a fact, clearly and
convincingly. But it cannot be inferred from a mishmash of circumstances alone disclosing some kind of
an "understanding," when especially, those disparate circumstances are not themselves incompatible
with contentions that no accord had existed or had been reached. 48
The petitioners cannot simply assume that the wall was there for the purpose with which they now give
it, by the bare coincidence that it had divided the residential block from the commercial section of Bel-
Air. The burden of proof rests with them to show that it had indeed been built precisely for that objective,
a proof that must satisfy the requirements of our rules of evidence. It cannot be made to stand on the
strength of plain inferences.
b.
This likewise answers the petitioners' second query, whether or not the Court of Appeals had "arbitrarily
ignore(d) the decisive findings of the trial court."49 i.e., findings pointing to alleged acts performed by the
Ayala Corporation proving its commitment to maintain the wall abovesaid. Specifically, the petitioners
refer to, among other things: (1) Ayala's alleged announcement to Bel- Air Village Association members
that "[the perimeter wall along Jupiter Street will not be demolished," 50 (2) Ayala's alleged commitment
"during the pendency of the case in the trial court" to restore the wall; (3) alleged assurances by
Copuyoc that the wall will not be removed; (4) alleged contrivances by the corporation to make the
association admit as members the commercial lot buyers which provided them equal access to Jupiter
Street; and (5) Ayala's donation to the association of Jupiter Street for "private use" of Bel-Air
residents. 51
682 (1903), where it was held that "whether the plaintiffs services were solicited or whether they were
offered to the defendant for his assistance, inasmuch as these services were accepted and made use of
by the latter, we must consider that there was a tacit and mutual consent as to the rendition of services."
(At 686.) In that case, the defendant had enormously benefitted from the services that entitled the
plaintiff to compensation on the theory that no one may unjustly enrich himself at the expense of
another (Solutio indebiti) The facts of this case differ.
As we stated, the Ayala Corporation's alleged conduct prior to or during the proceedings below are not
necessarily at war with claims that no commitment had been in fact made.
With respect to Ayala's alleged announcement before the association, the Court does not agree that
Ayala had categorically assumed as an obligation to maintain the wall "perpetually," i.e., until the year
PROPERTY ARTS. 419-
2007 (the expiration date under the "deed restrictions.") There is nothing in its statement that would
bare any commitment. In connection with the conference between the parties "during the pendency" of
the trial, it is to be noted that the Ayala Corporation denies having warranted the restoration of the said
wall therein. What, on the other hand, appears in the records is the fact that Ayala did make that
promise, but provided that the Mayor allowed it. It turned out, however, that the Mayor balked at the
Idea. 52 But assuming that Ayala did promise to rebuild the wall (in that conference), it does not seem to
us that it did consequently promise to maintain it in perpetuity.
It is unfair to say, as the trial court did, that the Ayala had "contrived to make future commercial lot
owners special members of BAVA and thereby acquire equal right with the regular members thereof to
use Jupiter Street 53 since, as we stated, the commercial lot buyers have the right, in any event, to make
use of Jupiter Street, whether or not they are members of the association. It is not their memberships
that give them the right to use it. They share that right with Bel-Air residents from the outset.
The objective of making the commercial lot owners special members of the Bel-Air Village Association
was not to accord them equal access to Jupiter Street and inferentially, to give them the right to knock
down the perimeter wall. It was, rather, to regulate the use of the street owing precisely to the "planned"
nature of Ayala's development project, and real estate development in general, and this could best be
done by placing the commercial lot owners under the association's jurisdiction.
Moreover, Ayala's overtures with the association concerning the membership of commercial lot buyers
therein have been shown to be neither perfidious nor unethical nor devious (paraphrasing the lower
court). We quote anew:
xxxxxxxxx
(7) On June 30, 1972, appellant informed BAVA that in a few months it shall subdivide
and sell the commercial lots bordering the north side of Buendia Avenue Extension
from Reposo Street up to Zodiac Street. Appellant also informed BAVA that it had
taken all precautions and will impose upon the commercial lot owners deed
restrictions which will harmonize and blend with the development and welfare of Bel-
Air Village. Appellant further applied for special membership in BAVA of the
commercial lot owners. A copy of the deed restrictions for the commercial lots was
also enclosed. The proposed deed restrictions shall include the 19 meter set back of
buildings from Jupiter Street, the requirement for parking space within the lot of one
(1) parking slot for every seventy five (75) meters of office space in the building and
the limitation of vehicular traffic along Buendia to entrance only, but allowing both
vehicular entrance and vehicular exit through Jupiter Street and any side street.
In its letter of July 10, 1972, BAVA acknowledged the above letter of appellant and informed the latter
that the application for special membership of the commercial lot owners in BAVA would be submitted to
BAVA's board of governors for decision.
(8) On September 25,1972, appellant notified BAVA that, after a careful study, it was
finally decided that the height limitation of buildings on the commercial lots shall be
increased from 12.5 meters to 15 meters. Appellant further informed BAVA that Jupiter
Street shall be widened by 3.5 meters to improve traffic flow in said street. BAVA did
not reply to said letter, but on January 22, 1973, BAVA wrote a letter to the appellant
informing the latter that the Association had assessed the appellant, as special
Page 37 of 50
 member of the association, the amount of P40,795.00 (based on 81,590 square
meters at P.50 per square meter) representing the membership dues of the
commercial lot owners for the year 1973, and requested the appellant to remit the
amount which its board of governors had already included in its current budget. In
reply, appellant on January 31, 1973 informed BAVA that due to the widening of
Jupiter Street, the area of the lots which were accepted by the Association as
members was reduced to 76,726 square meters. Thus, the corresponding due at P.50
per square meter should be reduced to P38,363.00. This amount, therefore, was
remitted by the appellant to BAVA. Since then, the latter has been collecting
membership dues from the owners of the commercial lots as special members of the
Association. As a matter of fact, the dues were increased several times. In 1980, the
commercial lot owners were already being charged dues at the rate of P3.00 per
square meter. (Domingo, TSN, p. 36, March 19, 1980). At this rate, the total
membership dues of the commercial lot owners amount to P230,178.00 annually
based on the total area of 76,726 square meters of the commercial lots. 54
xxxxxxxxx
The alleged undertaking, finally, by Ayala in the deed of donation (over Jupiter Street) to leave Jupiter
Street for the private use of Bel-Air residents is belied by the very provisions of the deed. We quote:
xxxxxxxxx
IV. That the offer made by the DONOR had been accepted by the DONEE subject to
the condition that the property will be used as a street for the use of the members of
the DONEE, their families, personnel, guests, domestic help and, under certain
reasonable conditions and restrictions, by the general public, and in the event that
said lots or parts thereof cease to be used as such, ownership thereof shall
automatically revert to the DONOR. The DONEE shall always have Reposo Street,
Makati Avenue, and Paseo de Roxas open for the use of the general public. It is also
understood that the DONOR shall continue the maintenance of the street at its
expense for a period of three years from date hereof." (Deed of Donation, p. 6, Exh.
7) 55
xxxxxxxxx
The donation, on the contrary, gave the general public equal right to it.
The Court cannot then say, accepting the veracity of the petitioners' facts" enumerated above, that the
Ayala Corporation may be held liable for specific performance of a demandable obligation, let alone
damages.
The Court adds that Ayala can hardly be held responsible for the alleged deterioration of "living and
environmental conditions" 56 of the Bel-Air area, as a consequence of "Ayala's authorized demolition of
the Jupiter perimeter wall in 1974-1975. " 57 We agree with Ayala that until 1976, "there was peace and
quiet" at Jupiter Street, as the petitioners' (Sangalang, Gaston, and Briones) complaints admit. Hence,
the degeneration of peace and order in Bel-Air cannot be ascribed to the destruction of the wall in 1974
and 1975.
PROPERTY ARTS. 419-
What Ayala submits as the real cause was the opening of Jupiter Street to vehicular traffic in
1977., 58 But this was upon orders of the Mayor, and for which the homeowners' association had
precisely filed suit (Civil Case No. 34998) 59 to contest the act of the Mayor.
c.
This likewise disposes of the third question presented. The petitioners' reliance on Ayala's alleged
conduct (proving its alleged commitment), so we have ruled, is not well-taken. Ayala's alleged acts do
not, by themselves, reflect a commitment to maintain the wall in dispute. It cannot be therefore said that
the Court of Appeals "arbitrarily ignore(d]" 60 the lower court's findings. Precisely, it is the duty of the
appellate court to review the findings of the trial judge, be they of fact or law. 61 It is not bound by the
conclusions of the judge, for which reason it makes its own findings and arrives at its own conclusions.
Unless a grave abuse of discretion may be imputed to it, it may accept or reject the lower tribunal's
determinations and rely solely on the records.
Accordingly, the Court affirms the Court of Appeals' holding that the Ayala Corporation, in its dealings
with the petitioners, the Bel-Air Village Association in particular, had "acted with justice, gave the
appellees [petitioners] their due and observed honesty and good faith." 62 "Therefore, under both
Articles 19 and 21 of the Civil Code, the appellant [Ayala] cannot be held liable for damages." 63
2. G.R. Nos. 74376, 76394, 78182, & 82281
Our decision also resolves, quite anticlimactically, these companion cases. But we do so for various
other reasons. In the Sangalang case, we absolve the Ayala Corporation primarily owing to our finding
that it is not liable for the opening of Jupiter Street to the general public. Insofar as these petitions are
concerned, we likewise exculpate the private respondents, not only because of the fact that Jupiter
Street is not covered by the restrictive easements based on the "deed restrictions" but chiefly because
the National Government itself, through the Metro Manila Commission (MMC), had reclassified Jupiter
Street into high density commercial (C-3) zone, 64 pursuant to its Ordinance No. 81-01. Hence, the
petitioners have no cause of action on the strength alone of the said "deed restrictions.
In view thereof, we find no need in resolving the questions raised as to procedure, since this disposition
is sufficient to resolve these cases.
It is not that we are saying that restrictive easements, especially the easements herein in question, are
invalid or ineffective. As far as the Bel-Air subdivision itself is concerned, certainly, they are valid and
enforceable. But they are, like all contracts, subject to the overriding demands, needs, and interests of
the greater number as the State may determine in the legitimate exercise of police power. Our
jurisdiction guarantees sanctity of contract and is said to be the "law between the contracting
parties, 65 but while it is so, it cannot contravene 'law, morals, good customs, public order, or public
policy. 66 Above all, it cannot be raised as a deterrent to police power, designed precisely to promote
health, safety, peace, and enhance the common good, at the expense of contractual rights, whenever
necessary. In Ortigas & Co., Limited Partnership v. Feati Bank and Trust Co., 67 we are told:
xxxxxxxxx
2. With regard to the contention that said resolution cannot nullify the contractual
obligations assumed by the defendant-appellee referring to the restrictions
incorporated in the deeds of sale and later in the corresponding Transfer Certificates
Page 38 of 50
 of Title issued to defendant-appellee it should be stressed, that while non-impairment
of contracts is constitutionally guaranteed, the rule is not absolute, since it has to be
reconciled with the legitimate exercise of police power, i.e., "the power to prescribe
regulations to promote the health, morals, peace, education, good order or safety and
general welfare of the people.' Invariably described as "the most essential, insistent,
and illimitable of powers" and "in a sense, the greatest and most powerful attribute of
government," the exercise of the power may be judicially inquired into and corrected
only if it is capricious, whimsical, unjust or unreasonable, there having been a denial
of due process or a violation of any other applicable constitutional guarantee. As this
Court held through Justice Jose P. Bengson in Philippine Long Distance Company vs.
City of Davao, et al. police power 'is elastic and must be responsive to various social
conditions; it is not confined within narrow circumscriptions of precedents resting on
past conditions; it must follow the legal progress of a democratic way of life.' We were
even more emphatic in Vda. de Genuino vs. The Court of agrarian Relations, et al.,
when We declared: "We do not see why public welfare when clashing with the
individual right to property should not be made to prevail through the state's exercise
of its police power."

G.R. No. 152766 June 20, 2003

Resolution No. 27, 1960 declaring the western part of High way 54, now E. de los
Santos Avenue (EDSA, for short) from Shaw Boulevard to the Pasig River as an
industrial and commercial zone, was obviously passed by the Municipal Council of LILIA SANCHEZ, Petitioner,
Mandaluyong, Rizal in the exercise of police power to safeguard or promote the vs.
health, safety, peace, good order and general welfare of the people in the locality. COURT OF APPEALS, HON. VICTORINO S. ALVARO as Presiding Judge, RTC-Br. 120, Caloocan
Judicial notice may be taken of the conditions prevailing in the area, especially where City, and VIRGINIA TERIA, Respondents.
Lots Nos. 5 and 6 are located. The lots themselves not only front the highway;
industrial and commercial complexes have flourished about the place. EDSA, a main DECISION
traffic artery which runs through several cities and municipalities in the Metro Manila
area, supports an endless stream of traffic and the resulting activity, noise and
pollution are hardly conducive to the health, safety or welfare of the residents in its BELLOSILLO, J.:
route. Having been expressly granted the power to adopt zoning and subdivision
ordinances or regulations, the municipality of Mandaluyong, through its Municipal This is a Special Civil Action for Certiorari under Rule 65 of the Rules of Court to annul and set aside
Council, was reasonably, if not perfectly, justified under the circumstances, in passing the Decision of the Court of Appeals dated 23 May 2001 as well as its Resolution dated 8 January 2002
the subject resolution. 68 in CA-G.R. SP No. 59182.

xxxxxxxxx
Undoubtedly, the MMC Ordinance represents a legitimate exercise of police power. The petitioners
have not shown why we should hold otherwise other than for the supposed "non-impairment" guaranty
of the Constitution, which, as we have declared, is secondary to the more compelling interests of
general welfare. The Ordinance has not been shown to be capricious or arbitrary or unreasonable to
warrant the reversal of the judgments so appealed. In that connection, we find no reversible error to
have been committed by the Court of Appeals.
WHEREFORE, premises considered, these petitions are DENIED No pronouncement as to costs.
IT IS SO ORDERED.
Lilia Sanchez, petitioner, constructed a house on a 76-square meter lot owned by her parents-in-law.
The lot was registered under TCT No. 263624 with the following co-owners: Eliseo Sanchez married to
Celia Sanchez, Marilyn Sanchez married to Nicanor Montalban, Lilian Sanchez, widow, Nenita
Sanchez, single, Susana Sanchez married to Fernando Ramos, and Felipe Sanchez.1 On 20 February
1995, the lot was registered under TCT No. 289216 in the name of private respondent Virginia Teria by
virtue of a Deed of Absolute Sale supposed to have been executed on 23 June 19952 by all six (6) co-
owners in her favor.3 Petitioner claimed that she did not affix her signature on the document and
subsequently refused to vacate the lot, thus prompting private respondent Virginia Teria to file an action
for recovery of possession of the aforesaid lot with the Metropolitan Trial Court (MeTC) of Caloocan City
sometime in September 1995, subsequently raffled to Br. 49 of that court.
On 12 February 1998, the MeTC-Br. 49 of Caloocan City ruled in favor of private respondent declaring
that the sale was valid only to the extent of 5/6 of the lot and the other 1/6 remaining as the property of
petitioner, on account of her signature in the Deed of Absolute Sale having been established as a
forgery.

PROPERTY ARTS. 419- Page 39 of 50

Petitioner then elevated her appeal to the Regional Trial Court of Caloocan City, subsequently assigned
to Br. 120, which ordered the parties to file their respective memoranda of appeal. Counsel for petitioner
did not comply with this order, nor even inform her of the developments in her case. Petitioner not
having filed any pleading with the RTC of Caloocan City, the trial court affirmed the 27 July 1998
decision of the MeTC.
On 4 November 1998, the MeTC issued an order for the issuance of a writ of execution in favor of
private respondent Virginia Teria, buyer of the property. On 4 November 1999 or a year later, a Notice to
Vacate was served by the sheriff upon petitioner who however refused to heed the Notice.
On 28 April 1999 private respondent started demolishing petitioner’s house without any special permit
of demolition from the court.
Due to the demolition of her house which continued until 24 May 1999 petitioner was forced to inhabit
the portion of the premises that used to serve as the house’s toilet and laundry area.
On 29 October 1999 petitioner filed her Petition for Relief from Judgment with the RTC on the ground
that she was not bound by the inaction of her counsel who failed to submit petitioner’s appeal
memorandum. However the RTC denied the Petition and the subsequent Motion for Reconsideration.
On 14 June 2000 petitioner filed her Petition for Certiorari with the Court of Appeals alleging grave
abuse of discretion on the part of the court a quo.
On 23 May 2001 the appellate court dismissed the petition for lack of merit.1âwphi1 On 18 June 2001
petitioner filed a Motion for Reconsideration but the Court of Appeals denied the motion in its Resolution
of 8 January 2002.
The only issue in this case is whether the Court of Appeals committed grave abuse of discretion in
dismissing the challenged case before it.
As a matter of policy, the original jurisdiction of this Court to issue the so-called extraordinary writs
should generally be exercised relative to actions or proceedings before the Court of Appeals or before
constitutional or other tribunals or agencies the acts of which for some reason or other are not
controllable by the Court of Appeals. Where the issuance of the extraordinary writ is also within the
competence of the Court of Appeals or the Regional Trial Court, it is either of these courts that the
specific action for the procurement of the writ must be presented. However, this Court must be
convinced thoroughly that two (2) grounds exist before it gives due course to a certiorari petition under
Rule 65: (a) The tribunal, board or officer exercising judicial or quasi-judicial functions has acted without
or in excess of its or his jurisdiction; and (b) There is no appeal nor any plain, speedy and adequate
remedy in the ordinary course of law.
Despite the procedural lapses present in this case, we are giving due course to this petition as there are
matters that require immediate resolution on the merits to effect substantial justice.
The Rules of Court should be liberally construed in order to promote their object of securing a just,
speedy and inexpensive disposition of every action or proceeding.4
PROPERTY ARTS. 419-
The rules of procedure should be viewed as mere tools designed to aid the courts in the speedy, just
and inexpensive determination of the cases before them. Liberal construction of the rules and the
pleadings is the controlling principle to effect substantial justice.5 Litigations should, as much as
possible, be decided on their merits and not on mere technicalities.6
Verily, the negligence of petitioner’s counsel cannot be deemed as negligence of petitioner herself in the
case at bar. A notice to a lawyer who appears to have been unconscionably irresponsible cannot be
considered as notice to his client.7 Under the peculiar circumstances of this case, it appears from the
records that counsel was negligent in not adequately protecting his client’s interest, which necessarily
calls for a liberal construction of the Rules.
The rationale for this approach is explained in Ginete v. Court of Appeals - 8
This Court may suspend its own rules or exempt a particular case from its operation where the
appellate court failed to obtain jurisdiction over the case owing to appellant’s failure to perfect an
appeal. Hence, with more reason would this Court suspend its own rules in cases where the appellate
court has already obtained jurisdiction over the appealed case. This prerogative to relax procedural
rules of the most mandatory character in terms of compliance, such as the period to appeal has been
invoked and granted in a considerable number of cases x x x x
Let it be emphasized that the rules of procedure should be viewed as mere tools designed to facilitate
the attainment of justice. Their strict and rigid application, which would result in technicalities that tend
to frustrate rather than promote substantial justice, must always be eschewed. Even the Rules of Court
reflect this principle. The power to suspend or even disregard rules can be so pervasive and compelling
as to alter even that which this Court itself has already declared to be final, as we are now constrained
to do in the instant case x x x x
The emerging trend in the rulings of this Court is to afford every party litigant the amplest opportunity for
the proper and just determination of his cause, free from the constraints of technicalities. Time and
again, this Court has consistently held that rules must not be applied rigidly so as not to override
substantial justice.
Aside from matters of life, liberty, honor or property which would warrant the suspension of the Rules of
the most mandatory character and an examination and review by the appellate court of the lower court’s
findings of fact, the other elements that should be considered are the following: (a) the existence of
special or compelling circumstances, (b) the merits of the case, (c) a cause not entirely attributable to
the fault or negligence of the party favored by the suspension of the rules, (d) a lack of any showing that
the review sought is merely frivolous and dilatory, and (e) the other party will not be unjustly prejudiced
thereby.9
The suspension of the Rules is warranted in this case since the procedural infirmity was not entirely
attributable to the fault or negligence of petitioner. Besides, substantial justice requires that we go into
the merits of the case to resolve the present controversy that was brought about by the absence of any
partition agreement among the parties who were co-owners of the subject lot in question. Hence, giving
due course to the instant petition shall put an end to the dispute on the property held in common.
In People’s Homesite and Housing Corporation v. Tiongco10 we held:
Page 40 of 50
There should be no dispute regarding the doctrine that normally notice to counsel is notice to parties,
and that such doctrine has beneficent effects upon the prompt dispensation of justice. Its application to
a given case, however, should be looked into and adopted, according to the surrounding
circumstances; otherwise, in the court’s desire to make a short-cut of the proceedings, it might foster,
wittingly or unwittingly, dangerous collusions to the detriment of justice. It would then be easy for one
lawyer to sell one’s rights down the river, by just alleging that he just forgot every process of the court
affecting his clients, because he was so busy. Under this circumstance, one should not insist that a
notice to such irresponsible lawyer is also a notice to his clients.
to protect her right to her definite share and determine the boundaries of her property. Such partition
must be done without prejudice to the rights of private respondent Virginia Teria as buyer of the 5/6
portion of the lot under dispute.
WHEREFORE, the Petition is GRANTED. The Decision of the Court of Appeals dated 23 May 2001 as
well as its Resolution dated 8 January 2002 in CA-G.R. SP No. 59182 is ANNULLED and SET ASIDE. A
survey of the questioned lot with TCT No. 289216 (formerly TCT No. 263624) by a duly licensed
geodetic engineer and the PARTITION of the aforesaid lot are ORDERED.

Thus, we now look into the merits of the petition. Let the records of this case be REMANDED to MeTC-Br. 49, Caloocan City to effect the aforementioned
survey and partition, as well as segregate the 1/6 portion appertaining to petitioner Lilia Sanchez.
This case overlooks a basic yet significant principle of civil law: co-ownership. Throughout the
proceedings from the MeTC to the Court of Appeals, the notion of co-ownership11 was not sufficiently The Deed of Absolute Sale by the other co-owners to Virginia Teria shall be RESPECTED insofar as the
dealt with. We attempt to address this controversy in the interest of substantial justice. Certiorari should other undivided 5/6 portion of the property is concerned.
therefore be granted to cure this grave abuse of discretion.
SO ORDERED.
Sanchez Roman defines co-ownership as "the right of common dominion which two or more persons
have in a spiritual part of a thing, not materially or physically divided.12 Manresa defines it as the
"manifestation of the private right of ownership, which instead of being exercised by the owner in an
exclusive manner over the things subject to it, is exercised by two or more owners and the undivided
thing or right to which it refers is one and the same."13

The characteristics of co-ownership are: (a) plurality of subjects, who are the co-owners, (b) unity of or
material indivision, which means that there is a single object which is not materially divided, and which
is the element which binds the subjects, and, (c) the recognition of ideal shares, which determines the
rights and obligations of the co-owners.14

In co-ownership, the relationship of such co-owner to the other co-owners is fiduciary in character and
attribute. Whether established by law or by agreement of the co-owners, the property or thing held pro-
indiviso is impressed with a fiducial nature so that each co-owner becomes a trustee for the benefit of
his co-owners and he may not do any act prejudicial to the interest of his co-owners.15

Thus, the legal effect of an agreement to preserve the properties in co-ownership is to create an
express trust among the heirs as co-owners of the properties. Co-ownership is a form of trust and every
co-owner is a trustee for the others.16
G.R. No. 182839 June 2, 2014

Before the partition of a land or thing held in common, no individual or co-owner can claim title to any
PHILIPPINE NATIONAL BANK, Petitioner,
definite portion thereof. All that the co-owner has is an ideal or abstract quota or proportionate share in
vs.
the entire land or thing.17
JOSE GARCIA and CHILDREN NORA GARCIA, JOSE GARCIA, JR., BOBBY GARCIA and JIMMY
GARCIA and HEIRS OF ROGELIO GARCIA NAMELY: CELEDONIO GARCIA, DANILO GARCIA,
Article 493 of the Civil Code gives the owner of an undivided interest in the property the right to freely ELSA GARCIA, FERMIN GARCIA, HEHERSON GARCIA, GREGORIO GARCIA, IMELDA GARCIA
sell and dispose of it, i.e., his undivided interest. He may validly lease his undivided interest to a third and JANE GARCIA,Respondents.
party independently of the other co-owners.18 But he has no right to sell or alienate a concrete, specific
or determinate part of the thing owned in common because his right over the thing is represented by a
DECISION
quota or ideal portion without any physical adjudication.19

BRION, J.:
Although assigned an aliquot but abstract part of the property, the metes and bounds of petitioner’s lot
has not been designated. As she was not a party to the Deed of Absolute Sale voluntarily entered into
by the other co-owners, her right to 1/6 of the property must be respected. Partition needs to be effected
PROPERTY ARTS. 419- Page 41 of 50
We resolve this petition for review on certiorari1 assailing the decision2 dated September 26, 2007 and
the resolution3 dated May 6, 2008 of the Court of Appeals (CA) in CA-G.R. CV No. 71356.
These challenged CA rulings reversed and set aside the decision of the Regional Trial Court (RTC),
Branch 23, Roxas, Isabela, dismissing Civil Case No. Branch 23-500-96 for lack of cause of action.
The Factual Background
The facts of the case, gathered from the records, are briefly summarized below.
The subject of the present case is a parcel of residential land with all its improvements (subject
property) located in Barrio Olango, Mallig, Isabela. The land is covered by Transfer Certificate of Title
(TCT) No. T-44422 under the name of Jose Garcia Sr. (Jose Sr.) who acquired the subject property
during his marriage with Ligaya Garcia. Ligaya died on January 21, 1987.
The marriage of Jose Sr. and Ligaya produced the following children: Nora, Jose Jr., Bobby and Jimmy,
all surnamed Garcia, who are the respondents in the present case.
Sometime in 1989, the spouses Rogelio and Celedonia Garcia (Spouses Garcia) obtained a loan facility
from the petitioner, Philippine National Bank (petitioner bank), initially for ₱150,000.00. The loan was
secured by a Real Estate Mortgage over their property covered by TCT No. 177585. The spouses
Garcia increased their loan to ₱220,000.00 and eventually to ₱600,000.00. As security for the increased
loan, they offered their property covered by TCT No. 75324 and the subject property covered by TCT
No. T-44422.
Jose Sr. agreed to accommodate the spouses Garcia by offering the subject property as additional
collateral security for the latter’s increased loan. For this purpose, Jose Sr. executed Special Powers of
Attorney (SPAs) dated April 14, 1992 and October 6, 1993, respectively, expressly authorizing the
Spouses Garcia to apply for, borrow, or secure any loan from the petitioner bank, and to convey and
transfer the subject property by way of mortgage. Jose Sr. also executed an Amendment of Real Estate
Mortgage in favor of the petitioner bank. The SPAs and the Amendment of Real Estate Mortgage are
both inscribed on TCT No. T-44422. All of these transactions, however, were without the knowledge and
consent of Jose Sr.’s children.
On maturity of the loan on April 20,1994, the spouses Garcia failed to pay their loan to the petitioner
bank despite repeated demands.
On January 12, 1996, the respondents filed before the RTC a Complaint for Nullity of the Amendment of
Real Estate Mortgage, Damages with Preliminary Injunction against the spouses Garcia and the
petitioner bank. They claimed that the Amendment of Real Estate Mortgage was null and void as to
respondents Nora, Jose Jr., Bobby and Jimmy as they were not parties to the contract.
The respondents alleged that the subject property was a conjugal property of Jose Sr. and his deceased
spouse, Ligaya, as they acquired the subject property during their marriage; that upon Ligaya’s death,
Jose Sr., together with his children Nora, Jose Jr., Bobby and Jimmy, by law, became owners pro
indiviso of the subject property; that the petitioner bank was at fault for not including Jose Sr. as payee
to the check representing the loan despite its knowledge that Jose Sr. was a signatory to the real estate
mortgage; that the real estate mortgage executed by Jose Sr. could not bind his children as they did not
PROPERTY ARTS. 419-
give their consent or approval to the encumbrance; and that the real estate mortgage was also void as
to Jose Sr. since he never benefitted from the loan.
In their answer, the Spouses Garcia alleged that Jose Sr. was indebted to them in the amount of
₱133,800.00. To settle this indebtedness, Jose Sr. volunteered to give the subject property as additional
security for their (the Garcias’) loan to the petitioner bank.
The petitioner bank, on the other hand, claimed that the mortgage was made in good faith and for value,
and maintained that the respondents’ complaint stated no cause of action against it. It alleged that the
real estate mortgage over the properties was duly registered and inscribed on their titles and was thus
binding on the whole world.
In the course of the proceedings, Nora, Jose Jr., Bobby and Jimmy executed an SPA dated May 31,
1996 authorizing Jose Sr. to act as their attorney-in-fact during the pretrial of the case.
The Ruling of the RTC
The RTC dismissed the complaint for lack of cause of action. The court held that the subject property
was a conjugal property since it was acquired by Jose Sr. during his marriage with his now deceased
wife. As a conjugal property, it is presumed that upon the death of his spouse, one-half of the property
passed on to Jose Sr., while the other half went to Jose and his children as co-owners and as forced
heirs of his deceased spouse. Without the consent of the children, the trial court ruled that the conjugal
property could only be transferred or encumbered to the extent of Jose Sr.’s share in the conjugal
partnership, plus his share as an heir in the other half pertaining to the estate of his deceased spouse.
The RTC nevertheless declared that by virtue of the SPA executed by Nora, Jose Jr., Bobby and Jimmy
in this suit, they are already estopped from questioning the mortgage and from alleging lack of consent
or knowledge in the transaction. It held Jose Sr. liable as an accommodation party and upheld the
petitioner bank’s right to collect the debt.
The respondents disagreed with the RTC ruling and elevated the case to the CA via an ordinary appeal.
The Ruling of the CA
On September 26, 2007, the CA upheld the trial court’s finding that the subject property was conjugal,
but reversed and set aside its ruling in so far as it declared valid and binding the Amendment of Real
Estate Mortgage between the petitioner bank, on one hand, and the spouses Garcia and Jose Sr., on
the other hand, with respect to respondents Nora, Jose Jr., Bobby and Jimmy. Relying on the Court’s
ruling in Nufable v. Nufable,4 the CA ruled that the encumbrance Jose Sr. made over the entire conjugal
property, without his children’s conformity, was null and void because a mere part owner could not
alienate the shares of the other co-owners.
The CA also declared that the conjugal property could only be liable to the extent of Jose Sr.’s shares;
Jose Sr.’s acts could not affect his children’s pro-indiviso shares in the subject property. It disagreed
with the trial court’s estoppel theory and held that their execution of the SPA should not be construed as
acquiescence to the mortgage transaction. Lastly, it ruled that Jose Sr. could not escape liability from
the mortgage since he voluntarily bound himself as the Spouses Garcia’s accommodation mortgagor.
Page 42 of 50
 The petition
The petitioner bank disputes the CA’s finding that the subject property was conjugal in nature. It argues
that, as can be gleaned from TCT No. T-44422, the subject property was registered in the name of Jose
Sr. alone, who was described in the title as "widower" and not "married." The petitioner bank posits that
as a mortgagee in good faith, it had the right to rely on the mortgagor’s certificate of title; in the absence
of any indication that could arouse suspicion, it had no obligation to undertake further investigation and
verify whether the property was conjugal or was acquired during marriage or thereafter.
Since the subject property belonged to Jose Sr., insofar as petitioner bank as mortgagee was
concerned, Jose Sr. had the right under Article 428 of the Civil Code to mortgage it without the consent
of his children. Accordingly, the mortgage in its entirety should be declared valid.
The Comment
The respondents state that the issues raised by petitioner bank are essentially factual; hence, they are
beyond the competence of this Court in a petition for review. They submit that in a certiorari petition
under Rule 45 of the Rules of Court, only questions of law may be entertained because the Court is not
a trier of facts.
The Court’s Ruling
We deny the petition for lack of merit.
The petition before us raises both questions of fact and of law. Whether petitioner bank is a mortgagee
in good faith and for value and whether the subject property was conjugal, are factual issues that this
Court cannot look into as our examination would entail going into factual matters and records of the
case. In Rule 45 petitions, only questions of law may be put into issue. Questions of fact cannot be
entertained.5
Although there are exceptions to the rule that only questions of law may be raised in a petition for
certiorari, the petitioner bank failed to show that this case falls under any of the established exceptions.
Too, since the CA partially affirmed the findings of the trial court and absent any indication that these
courts committed a serious error in its findings, this Court is bound by these courts’ findings.6
Moreover, even if we were to review the factual issues raised by the petitioner bank, we still find no
reason to depart from the CA’s ruling.
The Subject Property is Conjugal
a. All property acquired during marriage is presumed conjugal
Since Jose Sr. and Ligaya were married prior to the effectivity of the Family Code, their property
relations were governed by the conjugal partnership of gains as provided under Article 119 of the Civil
Code. Under Article 160 of the Civil Code, "all property of the marriage is presumed to belong to the
conjugal partnership, unless it can be proven that it pertains exclusively to the husband or to the wife."
PROPERTY ARTS. 419-
In his testimony, Jose Sr. admitted that at the time he acquired the land through sale, he was already
married. The material portion of his testimony is as follows:
Q: Upon the death of your wife did you and your wife ever own a piece of land?
A: Yes, sir.
Q: Where is that land situated?
A: In Centro, District 2, Mallig[,] Isabela.
Q: Is that land titled in your names?
A:Yes, sir.
xxxx
Q: You and your wife acquired that piece of land?
A: Yes, sir.
xxxx
Q: May we know from you[,] Mr. Witness, how did you acquire this parcel of land presently embraced
and covered by TCT No. T-44422?
A: I purchased that piece of land from the Baniqued Family during my incumbency as Municipal Mayor,
sir.
Q: What was your civil status at the time you purchased that piece of land?
A: I was already married, sir.(Emphasis ours, TSN, July 24, 1997, Jose Garcia Sr.)7
Because of the petitioner bank’s failure to rebut the allegation that the subject property was acquired
during the former’s marriage to Ligaya, the legal presumption of the conjugal nature of the property, in
line with Article 160 of the Civil Code, applies to this property. Proof of the subject property’s acquisition
during the subsistence of marriage suffices to render the statutory presumption operative.8
b. Registration of the subject property in the name of one spouse does not destroy the presumption that
the property is conjugal
The petitioner bank claims that the CA failed to consider that the subject property was registered in the
name of Jose Sr. alone.1a\^/phi1 Likewise, it raises the argument that Jose Sr.’s change of status in the
subject property’s title from "married" to "widower" prior to the constitution of the real estate mortgage
showed that the property was no longer conjugal.
Page 43 of 50
We do not consider this argument persuasive.
Registration of a property alone in the name of one spouse does not destroy its conjugal nature. What is
material is the time when the property was acquired.9 The registration of the property is not conclusive
evidence of the exclusive ownership of the husband or the wife. Although the property appears to be
registered in the name of the husband, it has the inherent character of conjugal property if it was
acquired for valuable consideration during marriage.10
It retains its conjugal nature.
In order to rebut the presumptive conjugal nature of the property, the petitioner must present strong,
clear and convincing evidence of exclusive ownership of one of the spouses.11 The burden of proving
that the property belongs exclusively to the wife or to the husband rests upon the party asserting it.
In the present case, aside from its allegation that the subject property is no longer conjugal and its
assertion that it is a mortgagee in good faith, the petitioner bank offered no evidence, convincing to this
Court, that the subject property exclusively belonged to Jose Sr. As stated earlier, the petitioner bank
failed to overcome the legal presumption that the disputed property was conjugal.1âwphi1 Thus, the
conclusion of both lower courts that the subject property was conjugal property holds. Factual findings
of the CA affirming those of the trial court are binding on this Court unless there is a clear showing that
such findings are tainted with arbitrariness, capriciousness or palpable error.12
The conjugal partnership was converted into an implied ordinary co-ownership upon the death of Ligaya
Upon the death of Ligaya on January 21, 1987, the conjugal partnership was automatically dissolved
and terminated pursuant to Article 175(1) of the Civil Code,13 and the successional rights of her heirs
vest, as provided under Article 777 of the Civil Code, which states that"[t]he rights to the succession are
transmitted from the moment of the death of the decedent."
Consequently, the conjugal partnership was converted into an implied ordinary co-ownership between
the surviving spouse, on the one hand, and the heirs of the deceased, on the other.14 This resulting
ordinary co-ownership among the heirs is governed by Article 493 of the Civil Code which reads:
Art. 493. Each co-owner shall have the full ownership of his part and of the fruits and benefits pertaining
thereto, and he may therefore alienate, assign or mortgage it, and even substitute another person in its
enjoyment, except when personal rights are involved. But the effect of the alienation of the mortgage,
with respect to the co-owners shall be limited to the portion which may be allotted to him in the division
upon the termination of the co-ownership." (Emphasis supplied)
Under this provision, each co-owner has the full ownership of his part or share in the co-ownership and
may, therefore, alienate, assign or mortgage it except when personal rights are involved. Should a co-
owner alienate or mortgage the co-owned property itself, the alienation or mortgage shall remain valid
but only to the extent of the portion which may be allotted to him in the division upon the termination of
the co-ownership.15 In Carvajal v. Court of Appeals,16 the Court said:
While under Article 493 of the New Civil Code, each co-owner shall have the full ownership of his part
and of the fruits and benefits pertaining thereto and he may alienate, assign or mortgage it, and even
substitute another person in its enjoyment, the effect of the alienation or the mortgage with respect to
PROPERTY ARTS. 419-
the co-owners, shall be limited, by mandate of the same article, to the portion which may be allotted to
him in the division upon the termination of the co-ownership. He has no right to sell or alienate a
concrete, specific, or determinate part of the thing in common to the exclusion of the other co-owners
because his right over the thing is represented by an abstract or Ideal portion without any physical
adjudication.3 An individual co- owner cannot adjudicate to himself or claim title to any definite portion of
the land or thing owned in common until its actual partition by agreement or judicial decree. Prior to that
time all that the co-owner has is an Ideal or abstract quota or proportionate share in the entire thing
owned in common by all the co-owners.4 What a co owner may dispose of is only his undivided aliquot
share, which shall be limited to the portion that may be allotted to him upon partition. [emphasis
supplied].
In the present case, Jose Sr. constituted the mortgage over the entire subject property after the death of
Ligaya, but before the liquidation of the conjugal partnership. While under Article 493 of the Civil Code,
even if he had the right to freely mortgage or even sell his undivided interest in the disputed property, he
could not dispose of or mortgage the entire property without his children’s consent. As correctly
emphasized by the trial court, Jose Sr.’s right in the subject property is limited only to his share in the
conjugal partnership as well as his share as an heir on the other half of the estate which is his deceased
spouse’s share. Accordingly, the mortgage contract is void insofar as it extends to the undivided shares
of his children (Nora, Jose Jr., Bobby and Jimmy) because they did not give their consent to the
transaction.17
Accordingly, the Amendment of Real Estate Mortgage constituted by Jose Sr. over the entire property
without his co-owners' consent is not necessarily void in its entirety. The right of the petitioner bank as
mortgagee is limited though only to the portion which may be allotted to Jose Sr. in the event of a
division and liquidation of the subject property.
WHEREFORE, in view of the foregoing, we hereby AFFIRM the Decision dated September 26, 2007of
the Court of Appeals in CA-G.R. CV No. 71356. Costs against petitioner Philippine National Bank.
SO ORDERED.
G.R. No. 178044 January 19, 2011
Page 44 of 50
ALAIN M. DIÑO , Petitioner,
vs.
MA. CARIDAD L. DIÑO, Respondent.
DECISION
CARPIO, J.:
The Case
Before the Court is a petition for review1 assailing the 18 October 2006 Decision2 and the 12 March
2007 Order3 of the Regional Trial Court of Las Piñas City, Branch 254 (trial court) in Civil Case No. LP-
01-0149.
The Antecedent Facts
Alain M. Diño (petitioner) and Ma. Caridad L. Diño (respondent) were childhood friends and
sweethearts. They started living together in 1984 until they decided to separate in 1994. In 1996,
petitioner and respondent decided to live together again. On 14 January 1998, they were married before
Mayor Vergel Aguilar of Las Piñas City.
On 30 May 2001, petitioner filed an action for Declaration of Nullity of Marriage against respondent,
citing psychological incapacity under Article 36 of the Family Code. Petitioner alleged that respondent
failed in her marital obligation to give love and support to him, and had abandoned her responsibility to
the family, choosing instead to go on shopping sprees and gallivanting with her friends that depleted the
family assets. Petitioner further alleged that respondent was not faithful, and would at times become
violent and hurt him.
Extrajudicial service of summons was effected upon respondent who, at the time of the filing of the
petition, was already living in the United States of America. Despite receipt of the summons, respondent
did not file an answer to the petition within the reglementary period. Petitioner later learned that
respondent filed a petition for divorce/dissolution of her marriage with petitioner, which was granted by
the Superior Court of California on 25 May 2001. Petitioner also learned that on 5 October 2001,
respondent married a certain Manuel V. Alcantara.
On 30 April 2002, the Office of the Las Piñas prosecutor found that there were no indicative facts of
collusion between the parties and the case was set for trial on the merits.
Dr. Nedy L. Tayag (Dr. Tayag), a clinical psychologist, submitted a psychological report establishing that
respondent was suffering from Narcissistic Personality Disorder which was deeply ingrained in her
system since her early formative years. Dr. Tayag found that respondent’s disorder was long-lasting and
by nature, incurable.
In its 18 October 2006 Decision, the trial court granted the petition on the ground that respondent was
psychologically incapacited to comply with the essential marital obligations at the time of the celebration
of the marriage.
PROPERTY ARTS. 419-
The Decision of the Trial Court
The trial court ruled that based on the evidence presented, petitioner was able to establish respondent’s
psychological incapacity. The trial court ruled that even without Dr. Tayag’s psychological report, the
allegations in the complaint, substantiated in the witness stand, clearly made out a case of
psychological incapacity against respondent. The trial court found that respondent committed acts
which hurt and embarrassed petitioner and the rest of the family, and that respondent failed to observe
mutual love, respect and fidelity required of her under Article 68 of the Family Code. The trial court also
ruled that respondent abandoned petitioner when she obtained a divorce abroad and married another
man.
The dispositive portion of the trial court’s decision reads:
WHEREFORE, in view of the foregoing, judgment is hereby rendered:
1. Declaring the marriage between plaintiff ALAIN M. DIÑO and defendant MA. CARIDAD L.
DIÑO on January 14, 1998, and all its effects under the law, as NULL and VOID from the
beginning; and
2. Dissolving the regime of absolute community of property.
A DECREE OF ABSOLUTE NULLITY OF MARRIAGE shall only be issued upon compliance with
Article[s] 50 and 51 of the Family Code.
Let copies of this Decision be furnished the parties, the Office of the Solicitor General, Office of the City
Prosecutor, Las Piñas City and the Office of the Local Civil Registrar of Las Piñas City, for their
information and guidance.
SO ORDERED.4
Petitioner filed a motion for partial reconsideration questioning the dissolution of the absolute
community of property and the ruling that the decree of annulment shall only be issued upon
compliance with Articles 50 and 51 of the Family Code.
In its 12 March 2007 Order, the trial court partially granted the motion and modified its 18 October 2006
Decision as follows:
WHEREFORE, in view of the foregoing, judgment is hereby rendered:
1) Declaring the marriage between plaintiff ALAIN M. DIÑO and defendant MA. CARIDAD L.
DIÑO on January 14, 1998, and all its effects under the law, as NULL and VOID from the
beginning; and
2) Dissolving the regime of absolute community of property.
A DECREE OF ABSOLUTE NULLITY OF MARRIAGE shall be issued after liquidation, partition and
distribution of the parties’ properties under Article 147 of the Family Code.
Page 45 of 50
Let copies of this Order be furnished the parties, the Office of the Solicitor General, the Office of the City
Prosecutor of Las Piñas City and the Local Civil Registrar of Las Piñas City, for their information and
guidance.5
Hence, the petition before this Court.
The Issue
The sole issue in this case is whether the trial court erred when it ordered that a decree of absolute
nullity of marriage shall only be issued after liquidation, partition, and distribution of the parties’
properties under Article 147 of the Family Code.
The Ruling of this Court
The petition has merit.
Petitioner assails the ruling of the trial court ordering that a decree of absolute nullity of marriage shall
only be issued after liquidation, partition, and distribution of the parties’ properties under Article 147 of
the Family Code. Petitioner argues that Section 19(1) of the Rule on Declaration of Absolute Nullity of
Null Marriages and Annulment of Voidable Marriages6 (the Rule) does not apply to Article 147 of the
Family Code.
We agree with petitioner.
The Court has ruled in Valdes v. RTC, Branch 102, Quezon City that in a void marriage, regardless of
its cause, the property relations of the parties during the period of cohabitation is governed either by
Article 147 or Article 148 of the Family Code.7 Article 147 of the Family Code applies to union of parties
who are legally capacitated and not barred by any impediment to contract marriage, but whose
marriage is nonetheless void,8 such as petitioner and respondent in the case before the Court.
Article 147 of the Family Code provides:
Article 147. When a man and a woman who are capacitated to marry each other, live exclusively with
each other as husband and wife without the benefit of marriage or under a void marriage, their wages
and salaries shall be owned by them in equal shares and the property acquired by both of them through
their work or industry shall be governed by the rules on co-ownership.
In the absence of proof to the contrary, properties acquired while they lived together shall be presumed
to have been obtained by their joint efforts, work or industry, and shall be owned by them in equal
shares. For purposes of this Article, a party who did not participate in the acquisition by the other party
of any property shall be deemed to have contributed jointly in the acquisition thereof if the former’s
efforts consisted in the care and maintenance of the family and of the household.
Neither party can encumber or dispose by acts inter vivos of his or her share in the property acquired
during cohabitation and owned in common, without the consent of the other, until after the termination of
their cohabitation.
PROPERTY ARTS. 419-
When only one of the parties to a void marriage is in good faith, the share of the party in bad faith in the
co-ownership shall be forfeited in favor of their common children. In case of default of or waiver by any
or all of the common children or their descendants, each vacant share shall belong to the respective
surviving descendants. In the absence of descendants, such share shall belong to the innocent party. In
all cases, the forfeiture shall take place upon termination of the cohabitation.
For Article 147 of the Family Code to apply, the following elements must be present:
1. The man and the woman must be capacitated to marry each other;
2. They live exclusively with each other as husband and wife; and
3. Their union is without the benefit of marriage, or their marriage is void.9
All these elements are present in this case and there is no question that Article 147 of the Family Code
applies to the property relations between petitioner and respondent.
We agree with petitioner that the trial court erred in ordering that a decree of absolute nullity of marriage
shall be issued only after liquidation, partition and distribution of the parties’ properties under Article 147
of the Family Code. The ruling has no basis because Section 19(1) of the Rule does not apply to cases
governed under Articles 147 and 148 of the Family Code. Section 19(1) of the Rule provides:
Sec. 19. Decision. - (1) If the court renders a decision granting the petition, it shall declare therein that
the decree of absolute nullity or decree of annulment shall be issued by the court only after compliance
with Articles 50 and 51 of the Family Code as implemented under the Rule on Liquidation, Partition and
Distribution of Properties.
The pertinent provisions of the Family Code cited in Section 19(1) of the Rule are:
Article 50. The effects provided for in paragraphs (2), (3), (4) and (5) of Article 43 and in Article 44 shall
also apply in proper cases to marriages which are declared void ab initio or annulled by final judgment
under Articles 40 and 45.10
The final judgment in such cases shall provide for the liquidation, partition and distribution of the
properties of the spouses, the custody and support of the common children, and the delivery of their
presumptive legitimes, unless such matters had been adjudicated in previous judicial proceedings.
All creditors of the spouses as well as of the absolute community of the conjugal partnership shall be
notified of the proceedings for liquidation.
In the partition, the conjugal dwelling and the lot on which it is situated, shall be adjudicated in
accordance with the provisions of Articles 102 and 129.
Article 51. In said partition, the value of the presumptive legitimes of all common children, computed as
of the date of the final judgment of the trial court, shall be delivered in cash, property or sound
securities, unless the parties, by mutual agreement judicially approved, had already provided for such
matters.
Page 46 of 50
The children of their guardian, or the trustee of their property, may ask for the enforcement of the
judgment.

The delivery of the presumptive legitimes herein prescribed shall in no way prejudice the ultimate
successional rights of the children accruing upon the death of either or both of the parents; but the value
of the properties already received under the decree of annulment or absolute nullity shall be considered
as advances on their legitime.

It is clear from Article 50 of the Family Code that Section 19(1) of the Rule applies only to marriages
which are declared void ab initio or annulled by final judgment under Articles 40 and 45 of the Family
Code. In short, Article 50 of the Family Code does not apply to marriages which are declared void ab
initio under Article 36 of the Family Code, which should be declared void without waiting for the
liquidation of the properties of the parties.

Article 40 of the Family Code contemplates a situation where a second or bigamous marriage was
contracted.1avvphilUnder Article 40, "[t]he absolute nullity of a previous marriage may be invoked for
purposes of remarriage on the basis solely of a final judgment declaring such previous marriage void."
Thus we ruled: G.R. No. 165427 March 21, 2011

x x x where the absolute nullity of a previous marriage is sought to be invoked for purposes of BETTY B. LACBAYAN, Petitioner,
contracting a second marriage, the sole basis acceptable in law, for said projected marriage to be free vs.
from legal infirmity, is a final judgment declaring a previous marriage void.11 BAYANI S. SAMOY, JR., Respondent.

Article 45 of the Family Code, on the other hand, refers to voidable marriages, meaning, marriages DECISION
which are valid until they are set aside by final judgment of a competent court in an action for
annulment.12 In both instances under Articles 40 and 45, the marriages are governed either by absolute VILLARAMA, JR., J.:
community of property13 or conjugal partnership of gains14 unless the parties agree to a complete
separation of property in a marriage settlement entered into before the marriage. Since the property
This settles the petition for review on certiorari filed by petitioner Betty B. Lacbayan against respondent
relations of the parties is governed by absolute community of property or conjugal partnership of gains,
Bayani S. Samoy, Jr. assailing the September 14, 2004 Decision1 of the Court of Appeals (CA) in CA-
there is a need to liquidate, partition and distribute the properties before a decree of annulment could be
G.R. CV No. 67596. The CA had affirmed the February 10, 2000 Decision2 of the Regional Trial Court
issued. That is not the case for annulment of marriage under Article 36 of the Family Code because the
(RTC), Branch 224, of Quezon City declaring respondent as the sole owner of the properties involved in
marriage is governed by the ordinary rules on co-ownership.
this suit and awarding to him ₱100,000.00 as attorney’s fees.

In this case, petitioner’s marriage to respondent was declared void under Article 3615 of the Family Code
and not under Article 40 or 45. Thus, what governs the liquidation of properties owned in common by
petitioner and respondent are the rules on co-ownership. In Valdes, the Court ruled that the property
relations of parties in a void marriage during the period of cohabitation is governed either by Article 147
or Article 148 of the Family Code.16 The rules on co-ownership apply and the properties of the spouses
should be liquidated in accordance with the Civil Code provisions on co-ownership. Under Article 496 of
the Civil Code, "[p]artition may be made by agreement between the parties or by judicial proceedings. x
x x." It is not necessary to liquidate the properties of the spouses in the same proceeding for declaration
of nullity of marriage.
WHEREFORE, we AFFIRM the Decision of the trial court with the MODIFICATION that the decree of
absolute nullity of the marriage shall be issued upon finality of the trial court’s decision without waiting
for the liquidation, partition, and distribution of the parties’ properties under Article 147 of the Family
Code.
This suit stemmed from the following facts.
Petitioner and respondent met each other through a common friend sometime in 1978. Despite
respondent being already married, their relationship developed until petitioner gave birth to
respondent’s son on October 12, 1979.3
During their illicit relationship, petitioner and respondent, together with three more incorporators, were
able to establish a manpower services company.4 Five parcels of land were also acquired during the
said period and were registered in petitioner and respondent’s names, ostensibly as husband and wife.
The lands are briefly described as follows:
1. A 255-square meter real estate property located at Malvar St., Quezon City covered by TCT
No. 303224 and registered in the name of Bayani S. Samoy, Jr. "married to Betty Lacbayan."5

SO ORDERED.
PROPERTY ARTS. 419- Page 47 of 50
 2. A 296-square meter real estate property located at Main Ave., Quezon City covered by TCT
No. 23301 and registered in the name of "Spouses Bayani S. Samoy and Betty Lacbayan."6
3. A 300-square meter real estate property located at Matatag St., Quezon City covered by
TCT No. RT-38264 and registered in the name of Bayani S. Samoy, Jr. "married to Betty
Lacbayan Samoy."7
4. A 183.20-square meter real estate property located at Zobel St., Quezon City covered by
TCT No. 335193 and registered in the name of Bayani S. Samoy, Jr. "married to Betty L.
Samoy."8
5. A 400-square meter real estate property located at Don Enrique Heights, Quezon City
covered by TCT No. 90232 and registered in the name of Bayani S. Samoy, Jr. "married to
Betty L. Samoy."9
Initially, petitioner lived with her parents in Mapagbigay St., V. Luna, Quezon City. In 1983, petitioner left
her parents and decided to reside in the property located in Malvar St. in Project 4, Quezon City. Later,
she and their son transferred to Zobel St., also in Project 4, and finally to the 400-square meter property
in Don Enrique Heights.10
Eventually, however, their relationship turned sour and they decided to part ways sometime in 1991. In
1998, both parties agreed to divide the said properties and terminate their business partnership by
executing a Partition Agreement.11 Initially, respondent agreed to petitioner’s proposal that the properties
in Malvar St. and Don Enrique Heights be assigned to the latter, while the ownership over the three
other properties will go to respondent.12However, when petitioner wanted additional demands to be
included in the partition agreement, respondent refused.13 Feeling aggrieved, petitioner filed a complaint
for judicial partition14 of the said properties before the RTC in Quezon City on May 31, 1999.
In her complaint, petitioner averred that she and respondent started to live together as husband and
wife in 1979 without the benefit of marriage and worked together as business partners, acquiring real
properties amounting to ₱15,500,000.00.15 Respondent, in his Answer,16 however, denied petitioner’s
claim of cohabitation and said that the properties were acquired out of his own personal funds without
any contribution from petitioner.17
During the trial, petitioner admitted that although they were together for almost 24 hours a day in 1983
until 1991, respondent would still go home to his wife usually in the wee hours of the
morning.18 Petitioner likewise claimed that they acquired the said real estate properties from the income
of the company which she and respondent established.19
Respondent, meanwhile, testified that the properties were purchased from his personal funds, salaries,
dividends, allowances and commissions.20 He countered that the said properties were registered in his
name together with petitioner to exclude the same from the property regime of respondent and his legal
wife, and to prevent the possible dissipation of the said properties since his legal wife was then a heavy
gambler.21 Respondent added that he also purchased the said properties as investment, with the
intention to sell them later on for the purchase or construction of a new building.22
On February 10, 2000, the trial court rendered a decision dismissing the complaint for lack of merit.23 In
resolving the issue on ownership, the RTC decided to give considerable weight to petitioner’s own
PROPERTY ARTS. 419-
admission that the properties were acquired not from her own personal funds but from the income of the
manpower services company over which she owns a measly 3.33% share.24
Aggrieved, petitioner elevated the matter to the CA asserting that she is the pro indiviso owner of one-
half of the properties in dispute. Petitioner argued that the trial court’s decision subjected the certificates
of title over the said properties to collateral attack contrary to law and jurisprudence. Petitioner also
contended that it is improper to thresh out the issue on ownership in an action for partition.25
Unimpressed with petitioner’s arguments, the appellate court denied the appeal, explaining in the
following manner:
Appellant’s harping on the indefeasibility of the certificates of title covering the subject realties is, to say
the least, misplaced. Rather than the validity of said certificates which was nowhere dealt with in the
appealed decision, the record shows that what the trial court determined therein was the ownership of
the subject realties – itself an issue correlative to and a necessary adjunct of the claim of co-ownership
upon which appellant anchored her cause of action for partition. It bears emphasizing, moreover, that
the rule on the indefeasibility of a Torrens title applies only to original and not to subsequent registration
as that availed of by the parties in respect to the properties in litigation. To our mind, the inapplicability
of said principle to the case at bench is even more underscored by the admitted falsity of the
registration of the selfsame realties in the parties’ name as husband and wife.
The same dearth of merit permeates appellant’s imputation of reversible error against the trial court for
supposedly failing to make the proper delineation between an action for partition and an action involving
ownership. Typically brought by a person claiming to be co-owner of a specified property against a
defendant or defendants whom the plaintiff recognizes to be co-owners, an action for partition may be
seen to present simultaneously two principal issues, i.e., first, the issue of whether the plaintiff is indeed
a co-owner of the property sought to be partitioned and, second – assuming that the plaintiff
successfully hurdles the first – the issue of how the property is to be divided between plaintiff and
defendant(s). Otherwise stated, the court must initially settle the issue of ownership for the simple
reason that it cannot properly issue an order to divide the property without first making a determination
as to the existence of co-ownership. Until and unless the issue of ownership is definitely resolved, it
would be premature to effect a partition of the properties. This is precisely what the trial court did when
it discounted the merit in appellant’s claim of co-ownership.26
Hence, this petition premised on the following arguments:
I. Ownership cannot be passed upon in a partition case.
II. The partition agreement duly signed by respondent contains an admission against
respondent’s interest as to the existence of co-ownership between the parties.
III. An action for partition cannot be defeated by the mere expedience of repudiating co-
ownership based on self-serving claims of exclusive ownership of the properties in dispute.
IV. A Torrens title is the best evidence of ownership which cannot be outweighed by
respondent’s self-serving assertion to the contrary.
Page 48 of 50
 V. The properties involved were acquired by both parties through their actual joint contribution
of money, property, or industry.27
Noticeably, the last argument is essentially a question of fact, which we feel has been squarely threshed
out in the decisions of both the trial and appellate courts. We deem it wise not to disturb the findings of
the lower courts on the said matter absent any showing that the instant case falls under the exceptions
to the general rule that questions of fact are beyond the ambit of the Court’s jurisdiction in petitions
under Rule 45 of the 1997 Rules of Civil Procedure, as amended. The issues may be summarized into
only three:
I. Whether an action for partition precludes a settlement on the issue of ownership;
II. Whether the Torrens title over the disputed properties was collaterally attacked in the action
for partition; and
III. Whether respondent is estopped from repudiating co-ownership over the subject realties.
We find the petition bereft of merit.
Our disquisition in Municipality of Biñan v. Garcia28 is definitive. There, we explained that the
determination as to the existence of co-ownership is necessary in the resolution of an action for
partition. Thus:
The first phase of a partition and/or accounting suit is taken up with the determination of whether or not
a co-ownership in fact exists, and a partition is proper (i.e., not otherwise legally proscribed) and may be
made by voluntary agreement of all the parties interested in the property. This phase may end with a
declaration that plaintiff is not entitled to have a partition either because a co-ownership does not exist,
or partition is legally prohibited. It may end, on the other hand, with an adjudgment that a co-ownership
does in truth exist, partition is proper in the premises and an accounting of rents and profits received by
the defendant from the real estate in question is in order. x x x
The second phase commences when it appears that "the parties are unable to agree upon the partition"
directed by the court. In that event[,] partition shall be done for the parties by the [c]ourt with the
assistance of not more than three (3) commissioners. This second stage may well also deal with the
rendition of the accounting itself and its approval by the [c]ourt after the parties have been accorded
opportunity to be heard thereon, and an award for the recovery by the party or parties thereto entitled of
their just share in the rents and profits of the real estate in question. x x x29 (Emphasis supplied.)
While it is true that the complaint involved here is one for partition, the same is premised on the
existence or non-existence of co-ownership between the parties. Petitioner insists she is a co-owner pro
indiviso of the five real estate properties based on the transfer certificates of title (TCTs) covering the
subject properties. Respondent maintains otherwise. Indubitably, therefore, until and unless this issue of
co-ownership is definitely and finally resolved, it would be premature to effect a partition of the disputed
properties.30 More importantly, the complaint will not even lie if the claimant, or petitioner in this case,
does not even have any rightful interest over the subject properties.31
Would a resolution on the issue of ownership subject the Torrens title issued over the disputed realties
to a collateral attack? Most definitely, it would not.
PROPERTY ARTS. 419-
There is no dispute that a Torrens certificate of title cannot be collaterally attacked,32 but that rule is not
material to the case at bar. What cannot be collaterally attacked is the certificate of title and not the title
itself.33 The certificate referred to is that document issued by the Register of Deeds known as the TCT.
In contrast, the title referred to by law means ownership which is, more often than not, represented by
that document.34 Petitioner apparently confuses title with the certificate of title. Title as a concept of
ownership should not be confused with the certificate of title as evidence of such ownership although
both are interchangeably used.35
Moreover, placing a parcel of land under the mantle of the Torrens system does not mean that
ownership thereof can no longer be disputed. Ownership is different from a certificate of title, the latter
only serving as the best proof of ownership over a piece of land. The certificate cannot always be
considered as conclusive evidence of ownership.36In fact, mere issuance of the certificate of title in the
name of any person does not foreclose the possibility that the real property may be under co-ownership
with persons not named in the certificate, or that the registrant may only be a trustee, or that other
parties may have acquired interest over the property subsequent to the issuance of the certificate of
title.37 Needless to say, registration does not vest ownership over a property, but may be the best
evidence thereof.1avvphi1
Finally, as to whether respondent’s assent to the initial partition agreement serves as an admission
against interest, in that the respondent is deemed to have admitted the existence of co-ownership
between him and petitioner, we rule in the negative.
An admission is any statement of fact made by a party against his interest or unfavorable to the
conclusion for which he contends or is inconsistent with the facts alleged by him.38 Admission against
interest is governed by Section 26 of Rule 130 of the Rules of Court, which provides:
Sec. 26. Admissions of a party. – The act, declaration or omission of a party as to a relevant fact may
be given in evidence against him.
To be admissible, an admission must (a) involve matters of fact, and not of law; (b) be categorical and
definite; (c) be knowingly and voluntarily made; and (d) be adverse to the admitter’s interests, otherwise
it would be self-serving and inadmissible.39
A careful perusal of the contents of the so-called Partition Agreement indicates that the document
involves matters which necessitate prior settlement of questions of law, basic of which is a
determination as to whether the parties have the right to freely divide among themselves the subject
properties. Moreover, to follow petitioner’s argument would be to allow respondent not only to admit
against his own interest but that of his legal spouse as well, who may also be lawfully entitled co-
ownership over the said properties. Respondent is not allowed by law to waive whatever share his
lawful spouse may have on the disputed properties. Basic is the rule that rights may be waived, unless
the waiver is contrary to law, public order, public policy, morals, good customs or prejudicial to a third
person with a right recognized by law.40
Curiously, petitioner herself admitted that she did not assent to the Partition Agreement after seeing the
need to amend the same to include other matters. Petitioner does not have any right to insist on the
contents of an agreement she intentionally refused to sign.
As to the award of damages to respondent, we do not subscribe to the trial court’s view that respondent
is entitled to attorney’s fees. Unlike the trial court, we do not commiserate with respondent’s
Page 49 of 50
predicament. The trial court ruled that respondent was forced to litigate and engaged the services of his
counsel to defend his interest as to entitle him an award of ₱100,000.00 as attorney’s fees. But we note
that in the first place, it was respondent himself who impressed upon petitioner that she has a right over
the involved properties. Secondly, respondent’s act of representing himself and petitioner as husband
and wife was a deliberate attempt to skirt the law and escape his legal obligation to his lawful wife.
Respondent, therefore, has no one but himself to blame the consequences of his deceitful act which
resulted in the filing of the complaint against him.

WHEREFORE, the petition is DENIED. The September 14, 2004 Decision of the Court of Appeals in
CA-G.R. CV No. 67596 is AFFIRMED with MODIFICATION. Respondent Bayani S. Samoy, Jr. is hereby
declared the sole owner of the disputed properties, without prejudice to any claim his legal wife may
have filed or may file against him. The award of ₱100,000.00 as attorney’s fees in respondent’s favor is
DELETED.

No costs.

SO ORDERED.

PROPERTY ARTS. 419- Page 50 of 50