III. Right to Accession favorable judgment is fully satisfied.
—Every prevailing party to a suit enjoys the corollary right to the
Accession – Art. 440, NCC
 
G.R. No. 190106. January 15, 2014.
MAGDALENA T. VILLASI, petitioner, vs. FILOMENO GARCIA, substituted by his heirs,
namely, ERMELINDA H. GARCIA, LIZA GARCIA-GONZALEZ, THERESA GARCIA-
TIANGSON, MARIVIC H. GARCIA, MARLENE GARCIAMOMIN, GERARDO H. GARCIA,
GIDEON H. GARCIA and GENEROSO H. GARCIA, ERMELINDA H. GARCIA,
respondents.
Remedial Law; Civil Procedure; Judgments; It is a basic principle of law that money judgments
are enforceable only against the property incontrovertibly belonging to the judgment debtor, and if the
property belonging to any third person is mistakenly levied upon to answer for another man’s
indebtedness, such person has all the right to challenge the levy through any of the remedies provided
for under the Rules of Court.—It is a basic principle of law that money judgments are enforceable only
against the property incontrovertibly belonging to the judgment debtor, and if the property belonging to
any third person is mistakenly levied upon to answer for another man’s indebtedness, such person has
all the right to challenge the levy through any of the remedies provided for under the Rules of Court.
Section 16, Rule 39 specifically provides that a third person may avail himself of the remedies of
either terceria, to determine whether the sheriff has rightly or wrongly taken hold of the property not
belonging to the judgment debtor or obligor, or an independent “separate action” to vindicate his claim
of ownership and/or possession over the foreclosed property. However, the person other than the
judgment debtor who claims ownership or right over levied properties is not precluded from taking other
legal remedies to prosecute his claim.
Same; Same; Third-Party Claims; Terceria; For a third-party claim or a terceria to prosper, the
claimant must first sufficiently establish his right on the property.—The right of a third-party claimant to
file a terceria is founded on his title or right of possession. Corollary thereto, before the court can
exercise its supervisory power to direct the release of the property mistakenly levied and the restoration
thereof to its rightful owner, the claimant must first unmistakably establish his ownership or right of
possession thereon. In Spouses Sy v. Hon. Discaya, 181 SCRA 378 (1990), we declared that for a
third-party claim or a terceria to prosper, the claimant must first sufficiently establish his right on the
property.
Civil Law; Property; Ownership; Tax Declarations; Evidence; While it is true that tax receipts and
tax declarations are not incontrovertible evidence of ownership, they constitute credible proof of claim
of title over the property.—While it is true that tax receipts and tax declarations are not incontrovertible
evidence of ownership, they constitute credible proof of claim of title over the property. In Buduhan v.
Pakurao, 483 SCRA 116 (2006), we underscored the significance of a tax declaration as proof that a
holder has claim of title, and, we gave weight to the demonstrable interest of the claimant holding a tax
receipt: Although tax declarations or realty tax payment of property are not conclusive evidence of
ownership, nevertheless, they are good indicia of possession in the concept of owner for no one in his
right mind would be paying taxes for a property that is not in his actual or at least constructive
possession. They constitute at least proof that the holder has a claim of title over the property. The
voluntary declaration of a piece of property for taxation purposes manifests not only one’s sincere and
honest desire to obtain title to the property and announces his adverse claim against the State and all
other interested parties, but also the intention to contribute needed revenues to the Government. Such
an act strengthens one’s bona fide claim of acquisition of ownership.
Remedial Law; Civil Procedure; Judgments; Every prevailing party to a suit enjoys the corollary
right to the fruits of the judgment and, thus, court rules provide a procedure to ensure that every
fruits of the judgment and, thus, court rules provide a procedure to ensure that every favorable
judgment is fully satisfied. It is almost trite to say that execution is the fruit and end of the suit. Hailing it
as the “life of the law,” ratio legis est anima, this Court has zealously guarded against any attempt to
thwart the rigid rule and deny the prevailing litigant his right to savour the fruit of his victory. A
judgment, if left unexecuted, would be nothing but an empty triumph for the prevailing party.
Civil Law; Property; Accession; While it is a hornbook doctrine that the accessory follows the
principal, that is, the ownership of the property gives the right by accession to everything which is
produced thereby, or which is incorporated or attached thereto, either naturally or artificially, such rule
is not without exception.—While it is a hornbook doctrine that the accessory follows the principal, that
is, the ownership of the property gives the right by accession to everything which is produced thereby,
or which is incorporated or attached thereto, either naturally or artificially, such rule is not without
exception. In cases where there is a clear and convincing evidence to prove that the principal and the
accessory are not owned by one and the same person or entity, the presumption shall not be applied
and the actual ownership shall be upheld. In a number of cases, we recognized the separate ownership
of the land from the building and brushed aside the rule that accessory follows the principal.
Same; Same; Same; When there are factual and evidentiary evidence to prove that the building
and the lot on which it stands are owned by different persons, they shall be treated separately.—The
rule on accession is not an iron-clad dictum. On instances where this Court was confronted with cases
requiring judicial determination of the ownership of the building separate from the lot, it never hesitated
to disregard such rule. The case at bar is of similar import. When there are factual and evidentiary
evidence to prove that the building and the lot on which it stands are owned by different persons, they
shall be treated separately. As such, the building or the lot, as the case may be, can be made liable to
answer for the obligation of its respective owner.
PEREZ, J.:
This is a Petition for Review on Certiorari filed pursuant to Rule 45 of the Revised Rules
of Court, assailing the 19 May 2009 Decision rendered by the Sixth Division of the Court of
Appeals in CA-G.R. SP No. 92587. The appellate court affirmed the Order of the Regional
Trial Court (RTC) of Quezon City, Branch 77, directing the Deputy Sheriff to suspend the
conduct of the execution sale of the buildings levied upon by him.
The Facts
Sometime in 1990, petitioner Magdalena T. Villasi (Villasi) engaged the services of
respondent Fil-Garcia Construction, Inc. (FGCI) to construct a seven-storey condominium
building located at Aurora Boulevard corner N. Domingo Street, Cubao, Quezon City. For
failure of Villasi to fully pay the contract price despite several demands, FGCI initiated a suit
for collection of sum of money before the RTC of Quezon City, Branch 77. In its action
docketed as Civil Case No. Q-91-8187, FGCI prayed, among others, for the payment of the
amount of P2,865,000.00, representing the unpaid accomplishment billings. Served with
summons, Villasi filed an answer specifically denying the material allegations of the
complaint. Contending that FGCI has no cause of action against her, Villasi averred that
she delivered the total amount of P7,490,325.10 to FGCI but the latter accomplished only
28% of the project. After the pre-trial conference was terminated without the parties having
reached an amicable settlement, trial on the merits ensued.
Finding that FGCI was able to preponderantly establish by evidence its right to the
unpaid accomplishment billings, the RTC rendered a Decision dated 26 June 1996 in
FGCI’s favor. While the trial court brushed aside the allegation of Villasi that an excess
payment was made, it upheld the claim of FGCI to the unpaid amount of the contract price
and, thus, disposed:
   WHEREFORE, judgment is hereby rendered:
1. Ordering [Villasi] to pay [FGCI] the sum of P2,865,000.00 as actual damages and
unpaid accomplishment billings;
2. Ordering [Villasi] to pay [FGCI] the amount of P500,000.00 representing the value
of unused building materials;
3. Ordering [Villasi] to pay [FGCI] the amount of P100,000.00, as moral damages and
P100,000.00 as attorney’s fees.
Elevated on appeal and docketed as CA-GR CV No. 54750, the Court of Appeals
reversed the disquisition of the RTC in its Decision dated 20 November 2000. The appellate
court ruled that an overpayment was made by Villasi and thereby directed FGCI to return
the amount that was paid in excess, viz.:
WHEREFORE, premises considered, the present appeal is hereby GRANTED and
the appealed decision in Civil Case No. Q-91-8187 is hereby REVERSED and SET
ASIDE and judgment is hereby rendered ordering the [FGCI] to return to [Villasi] the
sum of P1,244,543.33 as overpayment under their contract, and the further sum of
P425,004.00 representing unpaid construction materials obtained by it from [Villasi].
[FGCI] is likewise hereby declared liable for the payment of liquidated damages in the
sum equivalent to 1/10 of 1% of the contract price for each day of delay computed from
March 6, 1991.
No pronouncement as to costs.
Unrelenting, FGCI filed a Petition for Review on Certiorari  before this Court, docketed
as G.R. No. 147960, asseverating that the appellate court erred in rendering the 20
November 2000 Decision. This Court, however, in a Resolution dated 1 October 2001,
denied the appeal for being filed out of time. The said resolution became final and executory
on 27 November 2001, as evidenced by the Entry of Judgment made herein.
To enforce her right as prevailing party, Villasi filed a Motion for Execution of the 20
November 2000 Court of Appeals Decision, which was favorably acted upon by the RTC. A
Writ of Execution was issued on 28 April 2004, commanding the Sheriff to execute and
make effective the 20 November 2000 Decision of the Court of Appeals.
To satisfy the judgment, the sheriff levied on a building located at No. 140 Kalayaan
Avenue, Quezon City, covered by Tax Declaration No. D-021-01458, and built in the lots
registered under Transfer Certificates of Title (TCT) Nos. 379193 and 379194. While the
building was declared for taxation purposes in the name of FGCI, the lots in which it was
erected were registered in the names of the Spouses Filomeno Garcia and Ermelinda Halili-
Garcia (Spouses Garcia). After the mandatory posting and publication of notice of sale on
execution of real property were complied with, a public auction was scheduled on 25
January 2006.
To forestall the sale on execution, the Spouses Garcia filed an Affidavit of Third Party
Claim and a Motion to Set Aside Notice of Sale on Execution, claiming that they are the
lawful owners of the property which was erroneously levied upon by the sheriff. To
persuade the court a quo to grant their motion, the Spouses Garcia argued that the building
covered by the levy was mistakenly assessed by the City Assessor in the name of FGCI.
The motion was opposed by Villasi who insisted that its ownership belongs to FGCI and not
to the Spouses Garcia as shown by the tax declaration.
After weighing the arguments of the opposing parties, the RTC issued on 24 February
2005 an Order directing the Sheriff to hold in abeyance the conduct of the sale on
execution, to wit:
WHEREFORE, premises considered, the Court hereby orders Deputy Sheriff
Angel Doroni to suspend or hold in abeyance the conduct of the sale on execution of
the buildings levied upon by him, until further orders from the Court.
The motion for reconsideration of Villasi was denied by the trial court in its 11 October
2005 Order.
Arguing that the RTC gravely abused its discretion in ordering the suspension of the
sale on execution, Villasi timely filed a Petition for Certiorari  before the Court of Appeals. In
a Decision dated 19 May 2009, the appellate court dismissed the petition. In a
Resolution16 dated 28 October 2009, the Court of Appeals refused to reconsider its
decision.
Villasi is now before this Court via this instant Petition for Review on Certiorari assailing
the adverse Court of Appeals Decision and Resolution and raising the following issues:
The Issues
I.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS GRIEVOUSLY
ERRED IN UPHOLDING THE DECISION OF THE TRIAL COURT TO SUSPEND AND
HOLD IN ABEYANCE THE SALE ON EXECUTION OF THE BUILDINGS LEVIED
UPON ON THE BASIS OF RESPONDENTS’ AFFIDAVIT OF THIRD-PARTY CLAIM[;]
II.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS GRIEVOUSLY
ERRED WHEN IT HELD THAT THERE IS NO REASON TO PIERCE THE VEIL OF
[FGCI’S] CORPORATE FICTION IN THE CASE AT BAR[;] [AND]
III.
WHETHER OR NOT THE BRANCH SHERIFF OF THE REGIONAL TRIAL COURT OF
QUEZON CITY,
BRANCH 77 SHOULD BE DIRECTED TO FILE THE APPROPRIATE NOTICE OF
LEVY WITH THE REGISTER OF DEEDS OF QUEZON CITY.
The Court’s Ruling
It is a basic principle of law that money judgments are enforceable only against the
property incontrovertibly belonging to the judgment debtor, and if the property belonging to
any third person is mistakenly levied upon to answer for another man’s indebtedness, such
person has all the right to challenge the levy through any of the remedies provided for under
the Rules of Court. Section 16, Rule 39 specifically provides that a third person may avail
himself of the remedies of either terceria, to determine whether the sheriff has rightly or
wrongly taken hold of the property not belonging to the judgment debtor or obligor, or an
independent “separate action” to vindicate his claim of ownership and/or possession over
the foreclosed property. However, the person other than the judgment debtor who claims
ownership or right over levied properties is not precluded from taking other legal remedies
to prosecute his claim.
Indeed, the power of the court in executing judgments extends only to properties
unquestionably belonging to the judgment debtor alone. An execution can be issued only
against a party and not against one who did not have his day in court. The duty of the sheriff
is to levy the property of the judgment debtor not that of a third person. For, as the saying
goes, one man’s goods shall not be sold for another man’s debts.
Claiming that the sheriff mistakenly levied the building that lawfully belongs to them, the
Spouses Garcia availed themselves of the remedy of terceria under Section 16, Rule 39 of
the Revised Rules of Court. To fortify their position, the Spouses Garcia asserted that as
the owners of the land, they would be deemed under the law as owners of the building
standing thereon. The Spouses Garcia also asserted that the construction of the building
was financed thru a loan obtained from Metrobank in their personal capacities, and they
merely contracted FGCI to construct the building. Finally, the Spouses Garcia argued that
the tax declaration, based on an erroneous assessment by the City Assessor, cannot be
made as basis of ownership.
For her part, Villasi insists that the levy effected by the sheriff was proper since the
subject property belongs to the judgment debtor and not to third persons. To dispute the
ownership of the Spouses Garcia, Villasi pointed out that the levied property was declared
for tax purposes in the name of FGCI. A Certification issued by the Office of the City
Engineering of Quezon City likewise showed that the building permit of the subject property
was likewise issued in the name of FGCI.
We grant the petition.
The right of a third-party claimant to file a terceria is founded on his title or right of
possession. Corollary thereto, before the court can exercise its supervisory power to direct
the release of the property mistakenly levied and the restoration thereof to its rightful owner,
the claimant must first unmistakably establish his ownership or right of possession thereon.
In Spouses Sy v. Hon. Discaya, we declared that for a third-party claim or a terceria to
prosper, the claimant must first sufficiently establish his right on the property:
[A] third person whose property was seized by a sheriff to answer for the obligation of
the judgment debtor may invoke the supervisory power of the court which authorized
such execution. Upon due application by the third person and after summary hearing,
the court may command that the property be released from the mistaken levy and
restored to the rightful owner or possessor. What said court can do in these instances,
however, is limited to a determination of whether the sheriff has acted rightly or wrongly
in the performance of his duties in the execution of judgment, more specifically, if he
has indeed taken hold of property not belonging to the judgment debtor.
The court does not and cannot pass upon the question of title to the property, with any
character of finality. It can treat of the matter only insofar as may be necessary to
decide if the sheriff has acted correctly or not. It can require the sheriff to restore the
property to the claimant’s possession if warranted by the evidence. However, if the
claimant’s proofs do not persuade the court of the validity of his title or right of
possession thereto, the claim will be denied. Emphasis and underscoring supplied).
Our perusal of the record shows that, as the party asserting their title, the Spouses
Garcia failed to prove that they have a bona fidetitle to the building in question. Aside from
their postulation that as title holders of the land, the law presumes them to be owners of the
improvements built thereon, the Spouses Garcia were unable to adduce credible evidence
to prove their ownership of the property. In contrast, Villasi was able to satisfactorily
establish the ownership of FGCI thru the pieces of evidence she appended to her
opposition. Worthy to note is the fact that the building in litigation was declared for taxation
purposes in the name of FGCI and not in the Spouses Garcias’. While it is true that tax
receipts and tax declarations are not incontrovertible evidence of ownership, they constitute
credible proof of claim of title over the property. In Buduhan v. Pakurao, we underscored the
significance of a tax declaration as proof that a holder has claim of title, and, we gave
weight to the demonstrable interest of the claimant holding a tax receipt:
Although tax declarations or realty tax payment of property are not conclusive
evidence of ownership, nevertheless, they are good indicia of possession in the
concept of owner for no one in his right mind would be paying taxes for a property that
is not in his actual or at least constructive possession. They constitute at least proof
that the holder has a claim of title over the property. The voluntary declaration of a
piece of property for taxation purposes manifests not only one’s sincere and honest
desire to obtain title to the property and announces his adverse claim against the State
and all other interested parties, but also the intention to contribute needed revenues to
the Government. Such an act strengthens one’s bona fide claim of acquisition of
ownership.
It likewise failed to escape our attention that FGCI is in actual possession of the building
and as the payment of taxes coupled with actual possession of the land covered by tax
declaration strongly supports a claim of ownership.26 Quite significantly, all the court
processes in an earlier collection suit between FGCI and Villasi were served, thru the
former’s representative Filomeno Garcia, at No. 140 Kalayaan Avenue, Quezon City, where
the subject property is located. This circumstance is consistent with the tax declaration in
the name of FGCI.
The explanation proffered by the Spouses Garcia, that the City Assessor merely
committed an error when it declared the property for taxation purposes in the name of
FGCI, appears to be suspect in the absence of any prompt and serious effort on their part to
have it rectified before the onset of the instant controversy. The correction of entry belatedly
sought by the Spouses Garcia is indicative of its intention to put the property beyond the
reach of the judgment creditor. Every prevailing party to a suit enjoys the corollary right to
the fruits of the judgment and, thus, court rules provide a procedure to ensure that every
favorable judgment is fully satisfied. It is almost trite to say that execution is the fruit and end
of the suit. Hailing it as the “life of the law,” ratio legis est anima, this Court has zealously
guarded against any attempt to thwart the rigid rule and deny the prevailing litigant his right
to savour the fruit of his victory. A judgment, if left unexecuted, would be nothing but an
empty triumph for the prevailing party.
While it is a hornbook doctrine that the accessory follows the principal, that is, the
ownership of the property gives the right by accession to everything which is produced
thereby, or which is incorporated or attached thereto, either naturally or artificially,32such
rule is not without exception. In cases where there is a clear and convincing evidence to
prove that the principal and the accessory are not owned by one and the same person or
entity, the presumption shall not be applied and the actual ownership shall be upheld. In a
number of cases, we recognized the separate ownership of the land from the building and
brushed aside the rule that accessory follows the principal.
In Carbonilla v. Abiera, we denied the claim of petitioner that, as the owner of the land,
he is likewise the owner of the building erected thereon, for his failure to present evidence
to buttress his position:
To set the record straight, while petitioner may have proven his ownership of the
land, as there can be no other piece of evidence more worthy of credence than a
Torrens certificate of title, he failed to present any evidence to substantiate his claim of
ownership or right to the possession of the building. Like the CA, we cannot accept the
Deed of Extrajudicial Settlement of Estate (Residential Building) with Waiver and
 Quitclaim of Ownership executed by the Garcianos as proof that petitioner acquired
ownership of the building. There is no showing that the Garcianos were the owners of
the building or that they had any proprietary right over it. Ranged against respondents’
proof of possession of the building since 1977, petitioner’s evidence pales in
comparison and leaves us totally unconvinced.

In Caltex (Phil.) Inc. v. Felias, we ruled that while the building is a conjugal property and
therefore liable for the debts of the conjugal partnership, the lot on which the building was
constructed is a paraphernal property and could not be the subject of levy and sale:
x x x. In other words, when the lot was donated to Felisa by her parents, as owners of
the land on which the building was constructed, the lot became her paraphernal
property. The donation transmitted to her the rights of a landowner over a building
constructed on it. Therefore, at the time of the levy and sale of the sheriff, Lot No. 107
did not belong to the conjugal partnership, but it was paraphernal property of Felisa. As
such, it was not answerable for the obligations of her husband which resulted in the
judgment against him in favor of Caltex.

The rule on accession is not an iron-clad dictum. On instances where this Court was
confronted with cases requiring judicial determination of the ownership of the building
separate from the lot, it never hesitated to disregard such rule. The case at bar is of similar
import. When there are factual and evidentiary evidence to prove that the building and the
lot on which it stands are owned by different persons, they shall be treated separately. As
such, the building or the lot, as the case may be, can be made liable to answer for the
obligation of its respective owner.

Finally, the issue regarding the piercing of the veil of corporate fiction is irrelevant in this
case. The Spouses Garcia are trying to protect FGCI from liability by asserting that they, not
FGCI, own the levied property. The Spouses Garcia are asserting their separation from
FGCI. FGCI, the judgment debtor, is the proven owner of the building. Piercing FGCI’s
corporate veil will not protect FGCI from its judgment debt. Piercing will result in the
identification of the Spouses Garcia as FGCI itself and will make them liable for FGCI’s
judgment debt.

WHEREFORE, premises considered, the petition is GRANTED. The assailed Decision

and Resolution of the Court of Appeals in CA-G.R. SP No. 92587 are
hereby REVERSED and SET ASIDE. The Deputy Sheriff is hereby directed to proceed with
the conduct of the sale on execution of the levied building.
SO ORDERED.

Notes.—Apart from the remedy of terceria available to a third-party claimant or to a stranger to the

foreclosure suit against the sheriff or officer effecting the writ by serving on him an affidavit of his title
and a copy thereof upon the judgment creditor, a third-party claimant may also resort to an independent
separate action, the object of which is the recovery of ownership or possession of the property seized
by the sheriff, as well as damages arising from wrongful seizure and detention of the property. (Buado
vs. Court of Appeals, 586 SCRA 397 [2009])

The remedy of terceria or a separate action under Section 16, Rule 39 is no longer available to
Sina Imani because he is not deemed a stranger to the case filed against petitioner. (Imani vs.
Metropolitan Bank & Trust Company, 635 SCRA 357 [2010])

——o0o——
 III. Right to Accession
C. Accession Discreta
c.1 Right to everything produced – Art. 441, 442, NCC
Exception
G.R. No. 172410. April 14, 2008.
REPUBLIC OF THE PHILIPPINES, REPRESENTED BY THE TOLL REGULATORY
BOARD (TRB), petitioner, vs. HOLY TRINITY REALTY DEVELOPMENT CORP.,
respondent.
Eminent Domain; Just Compensation; Republic Act No. 8974; There are at least two crucial
differences between the respective procedures under Rep. Act No. 8974 and Rule 67—under the
statute, the Government is required to make immediate payment to the property owner upon the filing
of the complaint to be entitled to a writ of possession, whereas in Rule 67, the Government is required
only to make an initial deposit with an authorized government depositary, and, Rule 67 prescribes that
the initial deposit be equivalent to the assessed value of the property for purposes of taxation, unlike
Rep. Act No. 8974 which provides, as the relevant standard for initial compensation, the market value
of the property as stated in the tax declaration or the current relevant zonal valuation of the Bureau of
Internal Revenue (BIR), whichever is higher, and the value of the improvements and/or structures using
the replacement cost method.—At the outset, we call attention to a significant oversight in the TRB’s
line of reasoning. It failed to distinguish between the expropriation procedures under Republic Act No.
8974 and Rule 67 of the Rules of Court. Republic Act No. 8974 and Rule 67 of the Rules of Court
speak of different procedures, with the former specifically governing expropriation proceedings for
national government infrastructure projects. Thus, in Republic v. Gingoyon, 478 SCRA 474 (2005), we
held: There are at least two crucial differences between the respective procedures under Rep. Act No.
8974 and Rule 67. Under the statute, the Government is required to make immediate payment to the
property owner upon the filing of the complaint to be entitled to a writ of possession, whereas in Rule
67, the Government is required only to make an initial deposit with an authorized government
depositary. Moreover, Rule 67 prescribes that the initial deposit be equivalent to the assessed value of
the property for purposes of taxation, unlike Rep. Act No. 8974 which provides, as the relevant
standard for initial compensation, the market value of the property as stated in the tax declaration or the
current relevant zonal valuation of the Bureau of Internal Revenue (BIR), whichever is higher, and the
value of the improvements and/or structures using the replacement cost method.
Same; Same; Same; The owner of the deposited amount is the one entitled to the interest which
accrued thereon.—Since the Court of Appeals found that the HTRDC is the owner of the deposited
amount, then the latter should also be entitled to the interest which accrued thereon. We agree with the
Court of Appeals, and find no merit in the instant Petition. The deposit was made in order to comply
with Section 4 of Republic Act No. 8974, which requires nothing less than the immediate payment of
100% of the value of the property, based on the current zonal valuation of the BIR, to the property
owner.
Same; Same; Same; Under Section 4 of Republic Act No. 8974, the implementing agency of the
government pays just compensation twice: (1) immediately upon the filing of the complaint, where the
amount to be paid is 100% of the value of the property based on the current relevant zonal valuation of
the Bureau of Internal Revenue (BIR) (initial payment); and (2) when the decision of the court in the
determination of just compensation becomes final and executory, where the implementing agency shall
pay the owner the difference between the amount already paid and the just compensation as
determined by the court (final payment).—Under Section 4 of Republic Act No. 8974, the implementing
agency of the government pays just compensation twice: (1) immediately upon the filing of the
complaint, where the amount to be paid is 100% of the value of the property based on the current
relevant zonal valuation of the BIR (initial payment); and (2) when the decision of the court in the
determination of just compensation becomes final and executory, where the implementing agency shall
pay the owner the difference between the amount already paid and the just compensation as
determined by the court (final payment). HTRDC never alleged that it was seeking interest because of
delay in either of the two payments enumerated above. In fact, HTRDC’s cause of action is based on
the prompt initial payment of just compensation, which effectively transferred the ownership of the
amount paid to HTRDC. Being the owner of the amount paid, HTRDC is claiming, by the right of
accession, the interest earned by the same while on deposit with the bank.
Obligations; The effects of a conditional obligation to give, once the condition has been fulfilled,
shall retroact to the day of the constitution of the obligation.—TRB does not object to HTRDC’s
withdrawal of the amount of P22,968,000.00 from the expropriation account, provided that it is able to
show (1) that the property is free from any lien or encumbrance and (2) that it is the absolute owner
thereof. The said conditions do not put in abeyance the constructive delivery of the said amount to
HTRDC pending the latter’s compliance therewith. Article 1187 of the Civil Code provides that the
“effects of a conditional obligation to give, once the condition has been fulfilled, shall retroact to the day
of the constitution of the obligation.” Hence, when HTRDC complied with the given conditions, as
determined by the RTC in its Order dated 21 April 2003, the effects of the constructive delivery
retroacted to the actual date of the deposit of the amount in the expropriation account of DPWH.
CHICO-NAZARIO, J.:
This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, seeking
to set aside the Decision dated 21 April 2006 of the Court of Appeals in CA-G.R. SP No.
90981 which, in turn, set aside two Orders dated 7 February 2005 and 16 May 2005 of the
Regional Trial Court (RTC) of Malolos, Bulacan, in Civil Case No. 869-M-2000.
The undisputed factual and procedural antecedents of this case are as follows:
On 29 December 2000, petitioner Republic of the Philippines, represented by the Toll
Regulatory Board (TRB), filed with the RTC a Consolidated Complaint for Expropriation
against landowners whose properties would be affected by the construction, rehabilitation
and expansion of the North Luzon Expressway. The suit was docketed as Civil Case No.
869-M-2000 and raffled to Branch 85, Malolos, Bulacan. Respondent Holy Trinity Realty
and Development Corporation (HTRDC) was one of the affected landowners.
On 18 March 2002, TRB filed an Urgent Ex-Parte Motion for the issuance of a Writ of
Possession, manifesting that it deposited a sufficient amount to cover the payment of 100%
of the zonal value of the affected properties, in the total amount of P28,406,700.00, with the
Land Bank of the Philippines, South Harbor Branch (LBP-South Harbor), an authorized
government depository. TRB maintained that since it had already complied with the
provisions of Section 4 of Republic Act No. 8974 in relation to Section 2 of Rule 67 of the
Rules of Court, the issuance of the writ of possession becomes ministerial on the part of the
RTC.
The RTC issued, on 19 March 2002, an Order for the Issuance of a Writ of Possession,
as well as the Writ of Possession itself. HTRDC thereafter moved for the reconsideration of
the 19 March 2002 Order of the RTC.
On 7 October 2002, the Sheriff filed with the RTC a Report on Writ of Possession
stating, among other things, that since none of the landowners voluntarily vacated the
properties subject of the expropriation proceedings, the assistance of the Philippine
National Police (PNP) would be necessary in implementing the Writ of Possession.
Accordingly, TRB, through the Office of the Solicitor General (OSG), filed with the RTC an
Omnibus Motion praying for an Order directing the PNP to assist the Sheriff in the
implementation of the Writ of Possession. On 15 November 2002, the RTC issued an Order
directing the landowners to file their comment on TRB’s Omnibus Motion.
On 3 March 2003, HTRDC filed with the RTC a Motion to Withdraw Deposit, praying
that the respondent or its duly authorized representative be allowed to withdraw the amount
of P22,968,000.00, out of TRB’s advance deposit of P28,406,700.00 with LBP-South
Harbor, including the interest which accrued thereon. Acting on said motion, the RTC issued
an Order dated 21 April 2003, directing the manager of LBP-South Harbor to release in
favor of HTRDC the amount of P22,968,000.00 since the latter already proved its absolute
ownership over the subject properties and paid the taxes due thereon to the government.
According to the RTC, “(t)he issue however on the interest earned by the amount deposited
in the bank, if there is any, should still be threshed out.”
On 7 May 2003, the RTC conducted a hearing on the accrued interest, after which, it
directed the issuance of an order of expropriation, and granted TRB a period of 30 days to
inquire from LBP-South Harbor “whether the deposit made by DPWH with said bank relative
to these expropriation proceedings is earning interest or not.”
The RTC issued an Order, on 6 August 2003, directing the appearance of LBP
Assistant Vice-President Atty. Rosemarie M. Osoteo and Department Manager Elizabeth
Cruz to testify on whether the Department of Public Works and Highways’ (DPWH’s)
expropriation account with the bank was earning interest. On 9 October 2003, TRB instead
submitted a Manifestation to which was attached a letter dated 19 August 2003 by Atty.
Osoteo stating that the DPWH Expropriation Account was an interest bearing current
account.
On 11 March 2004, the RTC issued an Order resolving as follows the issue of
ownership of the interest that had accrued on the amount deposited by DPWH in its
expropriation current account with LBP-South Harbor:
“WHEREFORE, the interest earnings from the deposit of P22,968,000.00
respecting one hundred (100%) percent of the zonal value of the affected properties in
this expropriation proceedings under the principle of accession are considered as fruits
and should properly pertain to the herein defendant/property owner [HTRDC].
Accordingly, the Land Bank as the depositary bank in this expropriation proceedings is
(1) directed to make the necessary computation of the accrued interest of the amount of
P22,968,000.00 from the time it was deposited up to the time it was released to Holy
Trinity Realty and Development Corp. and thereafter (2) to release the same to the
defendant Holy Trinity Realty Development Corporation through its authorized
representative.”
TRB filed a Motion for Reconsideration of the afore-quoted RTC Order, contending that
the payment of interest on money deposited and/or consigned for the purpose of securing a
writ of possession was sanctioned neither by law nor by jurisprudence.
TRB filed a Motion to Implement Order dated 7 May 2003, which directed the issuance
of an order of expropriation. On 5 November 2004, the RTC issued an Order of
Expropriation.
On 7 February 2005, the RTC likewise granted TRB’s Motion for Reconsideration. The
RTC ruled that the issue as to whether or not HTRDC is entitled to payment of interest
should be ventilated before the Board of Commissioners which will be created later for the
determination of just compensation.
Now it was HTRDC’s turn to file a Motion for Reconsideration of the latest Order of the
RTC. The RTC, however, denied HTRDC’s Motion for Reconsideration in an Order dated
16 May 2005.
HTRDC sought recourse with the Court of Appeals by filing a Petition for Certiorari,
docketed as CA-G.R. SP No. 90981. In its Decision, promulgated on 21 April 2006, the
Court of Appeals vacated the Orders dated 7 February 2005 and 16 May 2005 of the RTC,
and reinstated the Order dated 11 March 2004 of the said trial court wherein it ruled that the
interest which accrued on the amount deposited in the expropriation account belongs to
HTRDC by virtue of accession. The Court of Appeals thus declared:
“WHEREFORE, the foregoing premises considered, the assailed Orders dated 07
February and 16 May 2005 respectively of the Regional Trial Court of Malolos, Bulacan
(Branch 85) are hereby VACATED and SET ASIDE. Accordingly, the Order dated 11
March 2004 is hereby reinstated.”
From the foregoing, the Republic, represented by the TRB, filed the present Petition for
Review on Certiorari, steadfast in its stance that HTRDC is “entitled only to an amount
equivalent to the zonal value of the expropriated property, nothing more and nothing less.”
According to the TRB, the owner of the subject properties is entitled to an exact amount as
clearly defined in both Section 4 of Republic Act No. 8974, which reads:
“Section 4. Guidelines for Expropriation Proceedings.—Whenever it is necessary
to acquire real property for the right-of-way, site 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 (100%) percent 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.
and Section 2, Rule 67 of the Rules of Court, which provides:
Sec. 2. Entry of plaintiff upon depositing value with authorized government
depositary.—Upon the filing of the complaint or at anytime thereafter and after due
notice to the defendant, the plaintiff shall have the right to take or enter upon the
possession of the real property involved if he deposits with the authorized government
depositary an amount equivalent to the assessed value of the property for
purposes of taxation to be held by such bank subject to the orders of the court. Such
deposit shall be in money, unless in lieu thereof the court authorizes the deposit of a
certificate of deposit of a government bank of the Republic of the Philippines payable on
demand to the authorized government depositary.”
The TRB reminds us that there are two stages in expropriation proceedings, the
determination of the authority to exercise eminent domain and the determination of just
compensation. The TRB argues that it is only during the second stage when the court will
appoint commissioners and determine claims for entitlement to interest, citing Land Bank of
the Philippines v. Wycoco and National Power Corporation v. Angas.

The TRB further points out that the expropriation account with LBP-South Harbor is not
in the name of HTRDC, but of DPWH. Thus, the said expropriation account includes the
compensation for the other landowners named defendants in Civil Case No. 869-M-2000,
and does not exclusively belong to respondent.
At the outset, we call attention to a significant oversight in the TRB’s line of reasoning. It
failed to distinguish between the expropriation procedures under Republic Act No. 8974 and
Rule 67 of the Rules of Court. Republic Act No. 8974 and Rule 67 of the Rules of Court
speak of different procedures, with the former specifically governing expropriation
proceedings for national government infrastructure projects. Thus, in Republic v. Gingoyon,
we held:
“There are at least two crucial differences between the respective procedures under
Rep. Act No. 8974 and Rule 67. Under the statute, the Government is required to
make immediate payment to the property owner upon the filing of the complaint
to be entitled to a writ of possession, whereas in Rule 67, the Government is
required only to make an initial deposit with an authorized government
depositary.Moreover, Rule 67 prescribes that the initial deposit be equivalent to the
assessed value of the property for purposes of taxation, unlike Rep. Act No. 8974 which
provides, as the relevant standard for initial compensation, the market value of the
property as stated in the tax declaration or the current relevant zonal valuation of the
Bureau of Internal Revenue (BIR), whichever is higher, and the value of the
improvements and/or structures using the replacement cost method.
xxxx
Rule 67 outlines the procedure under which eminent domain may be exercised by
the Government. Yet by no means does it serve at present as the solitary guideline
through which the State may expropriate private property. For example, Section 19 of
the Local Government Code governs as to the exercise by local government units of the
power of eminent domain through an enabling ordinance. And then there is Rep. Act
No. 8974, which covers expropriation proceedings intended for national government
infrastructure projects.
Rep. Act No. 8974, which provides for a procedure eminently more favorable to the
property owner than Rule 67, inescapably applies in instances when the national
government expropriates property “for national government infrastructure projects.”
Thus, if expropriation is engaged in by the national government for purposes other than
national infrastructure projects, the assessed value standard and the deposit mode
prescribed in Rule 67 continues to apply.”
There is no question that the proceedings in this case deal with the expropriation of
properties intended for a national government infrastructure project. Therefore, the RTC
correctly applied the procedure laid out in Republic Act No. 8974, by requiring the deposit of
the amount equivalent to 100% of the zonal value of the properties sought to be
expropriated before the issuance of a writ of possession in favor of the Republic.
The controversy, though, arises not from the amount of the deposit, but as to the
ownership of the interest that had since accrued on the deposited amount.
Whether the Court of Appeals was correct in holding that the interest earned by the
deposited amount in the expropriation account would accrue to HRTDC by virtue of
accession, hinges on the determination of who actually owns the deposited amount, since,
under Article 440 of the Civil Code, the right of accession is conferred by ownership of the
principal property:
“Art. 440. The ownership of property gives the right by accession to everything
which is produced thereby, or which is incorporated or attached thereto, either naturally
or artificially.”
The principal property in the case at bar is part of the deposited amount in the
expropriation account of DPWH which pertains particularly to HTRDC. Such amount,
determined to be P22,968,000.00 of the P28,406,700.00 total deposit, was already ordered
by the RTC to be released to HTRDC or its authorized representative. The Court of Appeals
further recognized that the deposit of the amount was already deemed a constructive
delivery thereof to HTRDC:
“When the [herein petitioner] TRB deposited the money as advance payment for the
expropriated property with an authorized government depositary bank for purposes of
obtaining a writ of possession, it is deemed to be a “constructive delivery” of the amount
corresponding to the 100% zonal valuation of the expropriated property. Since [HTRDC]
is entitled thereto and undisputably the owner of the principal amount deposited by
[herein petitioner] TRB, conversely, the interest yield, as accession, in a bank deposit
should likewise pertain to the owner of the money deposited.”
Since the Court of Appeals found that the HTRDC is the owner of the deposited
amount, then the latter should also be entitled to the interest which accrued thereon.
We agree with the Court of Appeals, and find no merit in the instant Petition.
The deposit was made in order to comply with Section 4 of Republic Act No. 8974,
which requires nothing less than the immediate payment of 100% of the value of the
property, based on the current zonal valuation of the BIR, to the property owner. Thus,
going back to our ruling in Republic v. Gingoyon:
“It is the plain intent of Rep. Act No. 8974 to supersede the system of
deposit under Rule 67 with the scheme of “immediate payment” in cases
involving national government infrastructure projects. The following portion of
the Senate deliberations, cited by PIATCO in its Memorandum, is worth
quoting to cogitate on the purpose behind the plain meaning of the law:
THE CHAIRMAN (SEN. CAYETANO). “x x x Because the Senate believes that,
you know, we have to pay the landowners immediately not by treasury
bills but by cash.
Since we are depriving them, you know, upon payment, ‘no, of possession, we
might as well pay them as much, ‘no, hindi lang 50 percent.
xxxx
THE CHAIRMAN (REP. VERGARA). Accepted.
xxxx
THE CHAIRMAN (SEN. CAYETANO). Oo. Because this is really in favor of the
landowners, e.
THE CHAIRMAN (REP. VERGARA). That’s why we need to really secure the
availability of funds.
xxxx
THE CHAIRMAN (SEN. CAYETANO). No, no. It’s the same. It says here: iyong
first paragraph, diba? Iyong zonal—talagang magbabayad muna. In other
words, you know, there must be a payment kaagad. (TSN, Bicameral
Conference on the Disagreeing Provisions of House Bill 1422 and Senate
Bill 2117, August 29, 2000, pp. 14-20)
xxxx
THE CHAIRMAN (SEN. CAYETANO). Okay, okay, ‘no. Unang-una, it is not
deposit, ‘no. It’s payment.”
REP. BATERINA. It’s payment, ho, payment.”
 The critical factor in the different modes of effecting delivery which gives legal effect to
the act is the actual intention to deliver on the part of the party making such delivery. The
intention of the TRB in depositing such amount through DPWH was clearly to comply with
the requirement of immediate payment in Republic Act No. 8974, so that it could already
secure a writ of possession over the properties subject of the expropriation and commence
implementation of the project. In fact, TRB did not object to HTRDC’s Motion to Withdraw
Deposit with the RTC, for as long as HTRDC shows (1) that the property is free from any
lien or encumbrance and (2) that respondent is the absolute owner thereof.
A close scrutiny of TRB’s arguments would further reveal that it does not directly
challenge the Court of Appeals’ determinative pronouncement that the interest earned by
the amount deposited in the expropriation account accrues to HTRDC by virtue of
accession. TRB only asserts that HTRDC is “entitled only to an amount equivalent to the
zonal value of the expropriated property, nothing more and nothing less.”
We agree in TRB’s statement since it is exactly how the amount of the immediate
payment shall be determined in accordance with Section 4 of Republic Act No. 8974, i.e.,
an amount equivalent to 100% of the zonal value of the expropriated properties. However,
TRB already complied therewith by depositing the required amount in the expropriation
account of DPWH with LBP-South Harbor. By depositing the said amount, TRB is already
considered to have paid the same to HTRDC, and HTRDC became the owner thereof. The
amount earned interest after the deposit; hence, the interest should pertain to the owner of
the principal who is already determined as HTRDC. The interest is paid by LBP-South
Harbor on the deposit, and the TRB cannot claim that it paid an amount more than what it is
required to do so by law.
Nonetheless, we find it necessary to emphasize that HTRDC is determined to be the
owner of only a part of the amount deposited in the expropriation account, in the sum
of P22,968,000.00. Hence, it is entitled by right of accession to the interest that had accrued
to the said amount only.
We are not persuaded by TRB’s citation of National Power Corporation v.
Angas and Land Bank of the Philippines v. Wycoco, in support of its argument that the issue
on interest is merely part and parcel of the determination of just compensation which should
be determined in the second stage of the proceedings only. We find that neither case is
applicable herein.
The issue in Angas is whether or not, in the computation of the legal rate of interest on
just compensation for expropriated lands, the applicable law is Article 2209 of the Civil Code
which prescribes a 6% legal interest rate, or Central Bank Circular No. 416 which fixed the
legal rate at 12% per annum. We ruled in Angas that since the kind of interest involved
therein is interest by way of damages for delay in the payment thereof, and not as earnings
from loans or forbearances of money, Article 2209 of the Civil Code prescribing the 6%
interest shall apply. In Wycoco, on the other hand, we clarified that interests in the form of
damages cannot be applied where there is prompt and valid payment of just compensation.
The case at bar, however, does not involve interest as damages for delay in payment of
just compensation. It concerns interest earned by the amount deposited in the expropriation
account.
Under Section 4 of Republic Act No. 8974, the implementing agency of the government
pays just compensation twice: (1) immediately upon the filing of the complaint, where the
amount to be paid is 100% of the value of the property based on the current relevant zonal
valuation of the BIR (initial payment); and (2) when the decision of the court in the
determination of just compensation becomes final and executory, where the implementing
agency shall pay the owner the difference between the amount already paid and the just
compensation as determined by the court (final payment).
HTRDC never alleged that it was seeking interest because of delay in either of the two
payments enumerated above. In fact, HTRDC’s cause of action is based on the prompt
initial payment of just compensation, which effectively transferred the ownership of the
amount paid to HTRDC. Being the owner of the amount paid, HTRDC is claiming, by the
right of accession, the interest earned by the same while on deposit with the bank.
That the expropriation account was in the name of DPWH, and not of HTRDC, is of no
moment. We quote with approval the following reasoning of the Court of Appeals:
“Notwithstanding that the amount was deposited under the DPWH account,
ownership over the deposit transferred by operation of law to the [HTRDC] and
whatever interest, considered as civil fruits, accruing to the amount of
Php22,968,000.00 should properly pertain to [HTRDC] as the lawful owner of the
principal amount deposited following the principle of accession. Bank interest partake
the nature of civil fruits under Art. 442 of the New Civil Code. And since these are
considered fruits, ownership thereof should be due to the owner of the principal.
Undoubtedly, being an attribute of ownership, the [HTRDC’s] right over the fruits (jus
fruendi), that is the bank interests, must be respected.”
Considering that the expropriation account is in the name of DPWH, then, DPWH
should at most be deemed as the trustee of the amounts deposited in the said accounts
irrefragably intended as initial payment for the landowners of the properties subject of the
expropriation, until said landowners are allowed by the RTC to withdraw the same.
As a final note, TRB does not object to HTRDC’s withdrawal of the amount of
P22,968,000.00 from the expropriation account, provided that it is able to show (1) that the
property is free from any lien or encumbrance and (2) that it is the absolute owner thereof.
The said conditions do not put in abeyance the constructive delivery of the said amount to
HTRDC pending the latter’s compliance therewith. Article 1187 of the Civil Code provides
that the “effects of a conditional obligation to give, once the condition has been fulfilled,
shall retroact to the day of the constitution of the obligation.” Hence, when HTRDC complied
with the given conditions, as determined by the RTC in its Order dated 21 April 2003, the
effects of the constructive delivery retroacted to the actual date of the deposit of the amount
in the expropriation account of DPWH.
WHEREFORE, the Petition is DENIED. The Court of Appeals Decision dated 21 April
2006 in CA-G.R. SP No. 90981, which set aside the 7 February 2005 and 16 May 2005
Orders of the Regional Trial Court of Malolos, Bulacan, is AFFIRMED. No costs.
SO ORDERED.
——o0o——
 III. Right to Accession
C. Accession Discreta
c.3 Who owns the fruits which are still pending (growing) at
the time possession is recovered by the owner from mere
possessor who did the planting and sowing
Art. 546, 549, NCC
- BF+ x Delivery
G.R. No. 133879. November 21, 2001
EQUATORIAL REALTY DEVELOPMENT, INC., petitioner, vs. MAYFAIR THEATER, INC.,
respondent.
Ownership; Leases; Rent is a civil fruit that belongs to the owner of the property producing it by
the right of accession.—To better understand the peculiarity of the instant case, let us begin with some
basic parameters. Rent is a civil fruit that belongs to the owner of the property producing it by right of
accession. Consequently and ordinarily, the rentals that fell due from the time of the perfection of the
sale to petitioner until its rescission by final judgment should belong to the owner of the property during
that period.
Same; Sales; Ownership of the thing sold is a real right, which the buyer acquires only upon
delivery of the thing to him “in any of the ways specified in articles 1497 to 1501, or in any other
manner signifying an agreement that the possession is transferred from the vendor to the vendee;”
While the execution of a public instrument of sale is recognized by law as equivalent to the delivery of
the thing sold, such constructive or symbolic delivery, being merely presumptive, is deemed negated by
the failure of the vendee to take actual possession of the land sold.—Ownership of the thing sold is a
real right, which the buyer acquires only upon delivery of the thingto him “in any of the ways specified in
articles 1497 to 1501, or in any other manner signifying an agreement that the possession is
transferred from the vendor to the vendee.” This right is transferred, not merely by contract, but also by
tradition or delivery. Non nudis pactis sed traditione dominia rerum transferantur. And there is said to
be delivery if and when the thing sold “is placed in the control and possession of the vendee.” Thus, it
has been held that while the execution of a public instrument of sale is recognized by law as equivalent
to the delivery of the thing sold, such constructive or symbolic delivery, being merely presumptive, is
deemed negated by the failure of the vendee to take actual possession of the land sold.
Same; Same; Words and Phrases; “Delivery”, Explained; In the Law on Sales, delivery may be
either actual or constructive, but both forms of delivery contemplate “the absolute giving up of the
control and custody of the property on the part of the vendor, and the assumption of the same by the
vendee.”—Delivery has been described as a composite act, a thing in which both parties must join and
the minds of both parties concur. It is an act by which one party parts with the title to and the
possession of the property, and the other acquires the right to and the possession of the same. In its
natural sense, delivery means something in addition to the delivery of property or title; it means transfer
of possession. In the Law on Sales, delivery may be either actual or constructive, but both forms of
delivery contemplate “the absolute giving up of the control and custody of the property on the part of
the vendor, and the assumption of the same by the vendee.”
Same; Same; The execution of a contract of sale as a form of constructive delivery is a legal
fiction—it holds true only when there is no impediment that may prevent the passing of the property
from the hands of the vendor into those of the vendee, and when there is such impediment, “fiction
yields to reality—the delivery has not been effected.”—Let us now apply the foregoing discussion to the
present issue. From the peculiar facts of this case, it is clear that petitioner never took actual
control and possession of the property sold, in view of respondent’s timely objection to the sale and the
continued actual possession of the property. The objection took the form of a court action impugning
the sale which, as we know, was rescinded by a judgment rendered by this Court in the mother case. It
has been held that the execution of a contract of sale as a form of constructive delivery is a legal fiction.
It holds true only when there is no impediment that may prevent the passing of the property from the
hands of the vendor into those of the vendee. When there is such impediment, “fiction yields to reality—
the delivery has not been effected.”
Same; Same; Rescission; Since rescission creates the obligation to return the things which
were the object of the contract, together with their fruits, and the price with its interests, not only the
land and building sold, but also the rental payments paid, if any, has to be returned to the buyer.—
However, the point may be raised that under Article 1164 of the Civil Code, Equatorial as buyer
acquired a right to the fruits of the thing sold from the time the obligation to deliver the property to
petitioner arose. That time arose upon the perfection of the Contract of Sale on July 30, 1978, from
which moment the laws provide that the parties to a sale may reciprocally demand performance. Does
this mean that despite the judgment rescinding the sale, the right to the fruits belonged to, and
remained enforceable by, Equatorial? Article 1385 of the Civil Code answers this question in the
negative, because “[rescission creates the obligation to return the things which were the object of the
contract, together with their fruits, and the price with its interest; x x x.” Not only the land and building
sold, but also the rental payments paid, if any, had to be returned by the buyer.
Same; Same; Same; Bad Faith; Even assuming that there was valid delivery, the guilty party is
not entitled to any benefits from a “rescinded” Deed of Absolute Sale where it was guilty of bad faith.—
Furthermore, assuming for the sake of argument that there was valid delivery, petitioner is not entitled
to any benefits from the “rescinded” Deed of Absolute Sale because of its bad faith. This being the law
of the mother case decided in 1996, it may no longer be changed because it has long become final and
executory.
Judgments; Res Judicata; Bar by Prior Judgment; A final judgment on the merits rendered by a
court of competent jurisdiction is conclusive as to the rights of the parties and their privies and
constitutes an absolute bar to subsequent actions involving the same claim, demand, or cause of
action.—Under the doctrine of res judicata or bar by prior judgment, a matter that has been adjudicated
by a court of competent jurisdiction must be deemed to have been finally and conclusively settled if it
arises in any subsequent litigation between the same parties and for the same cause. Thus, “[a] final
judgment on the merits rendered by a court of competent jurisdiction is conclusive as to the rights of the
parties and their privies and constitutes an absolute bar to subsequent actions involving the same
claim, demand, or cause of action.” Res judicata is based on the ground that “the party to be affected,
or some other with whom he is in privity, has litigated the same matter in a former action in a court of
competent jurisdiction, and should not be permitted to litigate it again.”
PANGANIBAN, J.:
General propositions do not decide specific cases. Rather, laws are interpreted in the
context of the peculiar factual situation of each proceeding. Each case has its own flesh and
blood and cannot be ruled upon on the basis of isolated clinical classroom principles.
While we agree with the general proposition that a contract of sale is valid until
rescinded, it is equally true that ownership of the thing sold is not acquired by mere
agreement, but by tradition or delivery. The peculiar facts of the present controversy as
found by this Court in an earlier relevant Decision show that delivery was not actually
effected; in fact, it was prevented by a legally effective impediment. Not having been the
owner, petitioner cannot be entitled to the civil fruits of ownership like rentals of the thing
sold. Furthermore, petitioner’s bad faith, as again demonstrated by the specific factual
milieu of said Decision, bars the grant of such benefits. Otherwise, bad faith would be
rewarded instead of punished.
The Case
Filed before this Court is a Petition for Review under Rule 45 of the Rules of Court,
challenging the March 11, 1998 Order of the Regional Trial Court of Manila (RTC), Branch
8, in Civil Case No. 97-85141. The dispositive portion of the assailed Order reads as
follows:
“WHEREFORE, the motion to dismiss filed by defendant Mayfair is hereby GRANTED,
and the complaint filed by plaintiff Equatorial is hereby DISMISSED.”
Also questioned is the May 29, 1998 RTC Order denying peti-tioner’s Motion for
Reconsideration.
The Facts
The main factual antecedents of the present Petition are matters of record, because it arose
out of an earlier case decided by this Court on November 21, 1996, entitled Equatorial
Realty Development, Inc. v. Mayfair Theater, Inc.  (henceforth referred to as the “mother
case”), docketed as GR No. 106063.
Carmelo & Bauermann, Inc. (“Carmelo”) used to own a parcel of land, together with two 2-
storey buildings constructed thereon, located at Claro M. Recto Avenue, Manila, and
covered by TCT No. 18529 issued in its name by the Register of Deeds of Manila.
On June 1, 1967, Carmelo entered into a Contract of Lease with Mayfair Theater, Inc.
(“Mayfair”) for a period of 20 years. The lease covered a portion of the second floor and
mezzanine of a two-storey building with about 1,610 square meters of floor area, which
respondent used as a movie house known as Maxim Theater.
Two years later, on March 31, 1969, Mayfair entered into a second Contract of Lease
with Carmelo for the lease of another portion of the latter’s property—namely, a part of the
second floor of the two-storey building, with a floor area of about 1,064 square meters; and
two store spaces on the ground floor and the mezzanine, with a combined floor area of
about 300 square meters. In that space, Mayfair put up another movie house known as
Miramar Theater. The Contract of Lease was likewise for a period of 20 years.
Both leases contained a provision granting Mayfair a right of first refusal to purchase the
subject properties. However, on July 30, 1978—within the 20-year-lease term—the subject
properties were sold by Carmelo to Equatorial Realty Development, Inc. (“Equatorial”) for
the total sum of P11,300,000, without their first being offered to Mayfair.
As a result of the sale of the subject properties to Equatorial, Mayfair filed a Complaint
before the Regional Trial Court of Manila (Branch 7) for (a) the annulment of the Deed of
Absolute Sale between Carmelo and Equatorial, (b) specific performance, and (c) damages.
After trial on the merits, the lower court rendered a Decision in favor of Carmelo and
Equatorial. This case, entitled “Mayfair Theater, Inc. v. Carmelo and Bauermann, Inc., et
al.,” was docketed as Civil Case No. 118019.
On appeal (docketed as CA-GR CV No. 32918), the Court of Appeals (CA) completely
reversed and set aside the judgment of the lower court.
The controversy reached this Court via GR No. 106063. In this mother case, it denied
the Petition for Review in this wise:
“WHEREFORE, the petition for review of the decision of the Court of Appeals, dated
June 23, 1992, in CA-G.R. CV No. 32918, is HEREBY DENIED. The Deed of Absolute
Sale between petitioners Equatorial Realty Development, Inc. and Carmelo &
Bauermann, Inc. is hereby deemed rescinded; Carmelo & Bauermann is ordered to
return to petitioner Equatorial Realty Development the purchase price. The latter is
directed to execute the deeds and documents necessary to return ownership to
Carmelo & Bauermann of the disputed lots. Carmelo & Bauermann is ordered to allow
Mayfair Theater, Inc. to buy the aforesaid lots for P11,300,000.00.”
The foregoing Decision of this Court became final and executory on March 17, 1997. On
April 25, 1997, Mayfair filed a Motion for Execution, which the trial court granted.
However, Carmelo could no longer be located. Thus, following the order of execution of
the trial court, Mayfair deposited with the clerk of court a quo its payment to Carmelo in the
sum of P11,300,000 less P847,000 as withholding tax. The lower court issued a Deed of
Reconveyance in favor of Carmelo and a Deed of Sale in favor of Mayfair. On the basis of
these documents, the Registry of Deeds of Manila cancelled Equatorial’s titles and issued
new Certificates of Title7 in the name of Mayfair.
Ruling on Equatorial’s Petition for Certiorari and Prohibition contesting the foregoing
manner of execution, the CA in its Resolution of November 20, 1998, explained that Mayfair
had no right to deduct the P847,000 as withholding tax. Since Carmelo could no longer be
located, the appellate court ordered Mayfair to deposit the said sum with the Office of the
Clerk of Court, Manila, to complete the full amount of P11,300,000 to be turned over to
Equatorial.
Equatorial questioned the legality of the above CA ruling before this Court in GR No.
136221 entitled “Equatorial Realty Development, Inc. v. Mayfair Theater, Inc.” In a Decision
promulgated on May 12, 2000, this Court directed the trial court to follow strictly the
Decision in GR No. 106063, the mother case. It explained its ruling in these words:
“We agree that Carmelo and Bauermann is obliged to return the entire amount of eleven
million three hundred thousand pesos (P11,300,000.00) to Equatorial. On the other
hand, Mayfair may not deduct from the purchase price the amount of eight hundred
forty-seven thousand pesos (P847,000.00) as withholding tax. The duty to withhold
taxes due, if any, is imposed on the seller, Carmelo and Bauermann, Inc.”
Meanwhile, on September 18, 1997—barely five months after Mayfair had submitted its
Motion for Execution before the RTC of Manila, Branch 7—Equatorial filed with the Regional
Trial Court of Manila, Branch 8, an action for the collection of a sum of money against
Mayfair, claiming payment of rentals or reasonable compensation for the defendant’s use of
the subject premises afterits lease contracts had expired. This action was the progenitor of
the present case.
In its Complaint, Equatorial alleged among other things that the Lease Contract
covering the premises occupied by Maxim Theater expired on May 31, 1987, while the
Lease Contract covering the premises occupied by Miramar Theater lapsed on March 31,
1989. Representing itself as the owner of the subject premises by reason of the Contract of
Sale on July 30, 1978, it claimed rentals arising from Mayfair’s occupation thereof.

Ruling of the RTC Manila, Branch 8
As earlier stated, the trial court dismissed the Complaint via the herein assailed Order and
denied the Motion for Reconsideration filed by Equatorial.
The lower court debunked the claim of petitioner for unpaid back rentals, holding that
the rescission of the Deed of Absolute Sale in the mother case did not confer on Equatorial
any vested or residual proprietary rights, even in expectancy.
In granting the Motion to Dismiss, the court a quo held that the critical issue was
whether Equatorial was the owner of the subject property and could thus enjoy the fruits or
rentals therefrom. It declared the rescinded Deed of Absolute Sale as “void at its inception
as though it did not happen.”
The trial court ratiocinated as follows:
“The meaning of rescind in the aforequoted decision is to set aside. In the case
of Ocampo v. Court of Appeals, G.R. No. 97442, June 30, 1994, the Supreme Court
held that, ‘to rescind is to declare a contract void in its inception and to put an end as
though it never were. It is not merely to terminate it and release parties from further
obligations to each other but to abrogate it from the beginning and restore parties to
relative positions which they would have occupied had no contract ever been made.’
“Relative to the foregoing definition, the Deed of Absolute Sale between Equatorial
and Carmelo dated July 31, 1978 is void at its inception as though it did not happen.
“The argument of Equatorial that this complaint for backrentals as ‘reasonable
compensation for use of the subject property after expiration of the lease
contracts presumes that the Deed of Absolute Sale dated July 30, 1978 from whence
the fountain of Equatorial’s alleged property rights flows is still valid and existing.
x x x     x x x     x x x
“The subject Deed of Absolute Sale having been rescinded by the Supreme Court,
Equatorial is not the owner and does not have any right to demand backrentals from the
subject property, x x x.”
The trial court added: “The Supreme Court in the Equatorial case, G.R. No. 106063, has
categorically stated that the Deed of Absolute Sale dated July 31, 1978 has been rescinded
subjecting the present complaint to res judicata.”
Hence, the present recourse.
Issues
Petitioner submits, for the consideration of this Court, the following issues:
“A.
The basis of the dismissal of the Complaint by the Regional Trial Court not only
disregards basic concepts and principles in the law on contracts and in civil law,
especially those on rescission and its corresponding legal effects, but also ignores the
dispositive portion of the Decision of the Supreme Court in G.R. No. 106063 entitled
‘Equatorial Realty Development, Inc. & Carmelo & Bauermann, Inc. vs. Mayfair Theater,
Inc.’
“B.
The Regional Trial Court erred in holding that the Deed of Absolute Sale in favor of
petitioner by Carmelo & Bauermann, Inc., dated July 31, 1978, over the premises used
and occupied by respondent, having been ‘deemed rescinded’ by the Supreme Court
in G.R. No. 106063, is ‘void at its inception as though it did not happen.’
“C.
The Regional Trial Court likewise erred in holding that the aforesaid Deed of
Absolute Sale, dated July 31, 1978, having been ‘deemed rescinded’ by the Supreme
Court in G.R. No. 106063, petitioner ‘is not the owner and does not have any right to
demand backrentals from the subject property,’ and that the rescission of the Deed of
Absolute Sale by the Supreme Court does not confer to petitioner ‘any vested right nor
any residual proprietary rights even in expectancy.’
“D.
The issue upon which the Regional Trial Court dismissed the civil case, as stated in
its Order of March 11, 1998, was not raised by respondent in its Motion to Dismiss.
“E.
The sole ground upon which the Regional Trial Court dismissed Civil Case No. 97-
85141 is not one of the grounds of a Motion to Dismiss under Sec. 1 of Rule 16 of the
1997 Rules of Civil Procedure.”
Basically, the issues can be summarized into two: (1) the substantive issue of whether
Equatorial is entitled to back rentals; and (2) the procedural issue of whether the court a
quo’s dismissal of Civil Case No. 97-85141 was based on one of the grounds raised by
respondent in its Motion to Dismiss and covered by Rule 16 of the Rules of Court.
This Court’s Ruling
The Petition is not meritorious.
First Issue: Ownership of Subject Properties
We hold that under the peculiar facts and circumstances of the case at bar, as found by this
Court en banc in its Decision promulgated in 1996 in the mother case, no right of ownership
was transferred from Carmelo to Equatorial in view of a patent failure to deliver the property
to the buyer.
Rental—a Civil Fruit of Ownership
To better understand the peculiarity of the instant case, let us begin with some basic
parameters. Rent is a civil fruit that belongs to the owner of the property producing it by right
of accession. Consequently and ordinarily, the rentals that fell due from the time of the
perfection of the sale to petitioner until its rescission by final judgment should belong to the
owner of the property during that period.
By a contract of sale, “one of the contracting parties obligates himself to transfer
ownership of and to deliver a determinate thing and the other to pay therefor a price certain
in money or its equivalent.”
Ownership of the thing sold is a real right, which the buyer acquires only upon delivery
of the thing to him “in any of the ways specified in articles 1497 to 1501, or in any other
manner signifying an agreement that the possession is transferred from the vendor to the
vendee.” This right is transferred, not merely by contract, but also by tradition or delivery.
Non nudis pactis sed traditione dominia rerum transferantur. And there is said to be delivery
if and when the thing sold “is placed in the control and possession of the vendee.” Thus, it
has been held that while the execution of a public instrument of sale is recognized by law as
equivalent to the delivery of the thing sold, such constructive or symbolic delivery, being
merely presumptive, is deemed negated by the failure of the vendee to take actual
possession of the land sold.
Delivery has been described as a composite act, a thing in which both parties must join
and the minds of both parties concur. It is an act by which one party parts with the title to
and the possession of the property, and the other acquires the right to and the possession
of the same. In its natural sense, delivery means something in addition to the delivery of
property or title; it means transfer of possession. In the Law on Sales, delivery may be either
actual or constructive, but both forms of delivery contemplate “the absolute giving up of the
control and custody of the property on the part of the vendor, and the assumption of the
same by the vendee.”
Possession Never Acquired by Petitioner
Let us now apply the foregoing discussion to the present issue. From the peculiar facts of
this case, it is clear that petitioner never took actual control and possession of the property
sold, in view of respondent’s timely objection to the sale and the continued actual
possession of the property. The objection took the form of a court action impugning the sale
which, as we know, was rescinded by a judgment rendered by this Court in the mother
case. It has been held that the execution of a contract of sale as a form of constructive
delivery is a legal fiction. It holds true only when there is no impediment that may prevent
the passing of the property from the hands of the vendor into those of the vendee. When
there is such impediment, “fiction yields to reality—the delivery has not been effected.”
Hence, respondent’s opposition to the transfer of the property by way of sale to
Equatorial was a legally sufficient impediment that effectively prevented the passing of the
property into the latter’s hands.
This was the same impediment contemplated in Vda. de Sarmiento v.Lesaca, in which
the Court held as follows:
“The question that now arises is: Is there any stipulation in the sale in question from
which we can infer that the vendor did not intend to deliver outright the possession of
the lands to the vendee? We find none. On the contrary, it can be clearly seen therein
that the vendor intended to place the vendee in actual possession of the lands
immediately as can be inferred from the stipulation that the vendee ‘takes actual
possession thereof x x x with full rights to dispose, enjoy and make use thereof in such
manner and form as would be most advantageous to herself.’ The possession referred
to in the contract evidently refers to actual possession and not merely symbolical
inferable from the mere execution of the document.
“Has the vendor complied with this express commitment? she did not. As provided
in Article 1462, the thing sold shall be deemed delivered when the vendee is placed in
the control and possession thereof, which situation does not here obtain because from
the execution of the sale up to the present the vendee was never able to take
possession of the lands due to the insistent refusal of Martin Deloso to surrender them
claiming ownership thereof. And although it is postulated in the same article that the
execution of a public document is equivalent to delivery, this legal fiction only holds true
when there is no impediment that may prevent the passing of the property from the
hands of the vendor into those of the vendee. x x x.”
The execution of a public instrument gives rise, therefore, only to a prima facie presumption
of delivery. Such presumption is destroyed when the instrument itself expresses or implies
that delivery was not intended; or when by other means it is shown that such delivery was
not effected, because a third person was actually in possession of the thing. In the latter
case, the sale cannot be considered consummated.
However, the point may be raised that under Article 1164 of the Civil Code, Equatorial
as buyer acquired a right to the fruits of the thing sold from the time the obligation to deliver
the property to petitioner arose. That time arose upon the perfection of the Contract of Sale
on July 30, 1978, from which moment the laws provide that the parties to a sale may
reciprocally demand performance.
Does this mean that despite the judgment rescinding the sale, the right to the fruits
belonged to, and remained enforceable by, Equatorial?
Article 1385 of the Civil Code answers this question in the negative, because
“[rescission creates the obligation to return the things which were the object of the contract,
together with their fruits, and the price with its interest; x x x.” Not only the land and building
sold, but also the rental payments paid, if any, had to be returned by the buyer.
Another point. The Decision in the mother case stated that “Equatorial x x x has
received rents” from Mayfair “during all the years that this controversy has been litigated.”
The Separate Opinion of Justice Teodoro Padilla in the mother case also said that
Equatorial was “deriving rental income” from the disputed property. Even
herein ponente’s Separate Concurring Opinion in the mother case recognized these rentals.
The question now is: Do all these statements concede actual delivery?
The answer is “No.” The fact that Mayfair paid rentals to Equatorial during the litigation
should not be interpreted to mean either actual delivery or ipso facto recognition of
Equatorial’s title.
The CA Records of the mother case show that Equatorial—as alleged buyer of the
disputed properties and as alleged successorin-interest of Carmelo’s rights as lessor—
submitted two ejectment suits against Mayfair. Filed in the Metropolitan Trial Court of
Manila, the first was docketed as Civil Case No. 121570 on July 9, 1987; and
the second, as Civil Case No. 131944 on May 28, 1990. Mayfair eventually won them both.
However, to be able to maintain physical possession of the premises while awaiting the
outcome of the mother case, it had no choice but to pay the rentals.
The rental payments made by Mayfair should not be construed as a recognition of
Equatorial as the new owner. They were made merely to avoid imminent eviction. It is in this
context that one should understand the aforequoted factual statements in the ponencia in
the mother case, as well as the Separate Opinion of Mr. Justice Padilla and the Separate
Concurring Opinion of the herein ponente.
At bottom, it may be conceded that, theoretically, a rescissible contract is valid until
rescinded. However, this general principle is not decisive to the issue of whether Equatorial
ever acquired the right to collect rentals. What is decisive is the civil law rule that ownership
is acquired, not by mere agreement, but by tradition or delivery. Under the factual
environment of this controversy as found by this Court in the mother case, Equatorial was
never put in actual and effective control or possession of the property because of Mayfair’s
timely objection.
As pointed out by Justice Holmes, general propositions do not decide specific cases.
Rather, “laws are interpreted in the context of the peculiar factual situation of each case.
Each case has its own flesh and blood and cannot be decided on the basis of isolated
clinical classroom principles.”
 In short, the sale to Equatorial may have been valid from inception, but it was judicially
rescinded before it could be consummated. Petitioner never acquired ownership, not
because the sale was void, as erroneously claimed by the trial court, but because the sale
was not consummated by a legally effective delivery of the property sold.
Benefits Precluded by Petitioner’s Bad Faith
Furthermore, assuming for the sake of argument that there was valid delivery, petitioner is
not entitled to any benefits from the “rescinded” Deed of Absolute Sale because of its bad
faith. This being the law of the mother case decided in 1996, it may no longer be changed
because it has long become final and executory. Petitioner’s bad faith is set forth in the
following pertinent portions of the mother case:
“First and foremost is that the petitioners acted in bad faith to render Paragraph 8
‘inutile.’
x x x     x x x     x x x
“Since Equatorial is a buyer in bad faith, this finding renders the sale to it of the
property in question rescissible. We agree with respondent Appellate Court that the
records bear out the fact that Equatorial was aware of the lease contracts because its
lawyers had, prior to the sale, studied the said contracts. As such, Equatorial cannot
tenably claim to be a purchaser in good faith, and, therefore, rescission lies.
x x x     x x x     x x x
“As also earlier emphasized, the contract of sale between Equatorial and Carmelo
is characterized by bad faith, since it was knowingly entered into in violation of the rights
of and to the prejudice of Mayfair. In fact, as correctly observed by the Court of Appeals,
Equatorial admitted that its lawyers had studied the contract of lease prior to the sale.
Equatorial’s knowledge of the stipulations therein should have cautioned it to look
further into the agreement to determine if it involved stipulations that would prejudice its
own interests.
x x x     x x x     x x x
“On the part of Equatorial, it cannot be a buyer in good faith because it bought the
property with notice and full knowledge that Mayfair had a right to or interest in the
property superior to its own. Carmelo and Equatorial took unconscientious advantage of
Mayfair.” (Italics supplied)
Thus, petitioner was and still is entitled solely to the return of the purchase price it paid to
Carmelo; no more, no less. This Court has firmly ruled in the mother case that neither of
them is entitled to any consideration of equity, as both “took unconscientious advantage of
Mayfair.”
In the mother case, this Court categorically denied the payment of interest, a fruit of
ownership. By the same token, rentals, another fruit of ownership, cannot be granted
without mocking this Court’s en banc Decision, which has long become final.
Petitioner’s claim of reasonable compensation for respondent’s use and occupation of the
subject property from the time the lease expired cannot be countenanced. If it suffered any
loss, petitioner must bear it in silence, since it had wrought that loss upon itself. Otherwise,
bad faith would be rewarded instead of punished.
We uphold the trial court’s disposition, not for the reason it gave, but for (a) the patent
failure to deliver the property and (b) petitioner’s bad faith, as above discussed.
Second Issue: Ground in Motion to Dismiss
Procedurally, petitioner claims that the trial court deviated from the accepted and usual
course of judicial proceedings when it dismissed Civil Case No. 97-85141 on a ground not
raised in respondent’s Motion to Dismiss. Worse, it allegedly based its dismissal on a
ground not provided for in a motion to dismiss as enunciated in the Rules of Court.
We are not convinced. A review of respondent’s Motion to Dismiss Civil Case No. 97-
85141 shows that there were two grounds invoked, as follows:
“(A)
Plaintiff is guilty of forum-shopping.
“(B)
Plaintiff’s cause of action, if any, is barred by prior judgment.”
The court a quo ruled, inter alia, that the cause of action of petitioner (plaintiff in the case
below) had been barred by a prior judgment of this Court in GR No. 106063, the mother
case.
Although it erred in its interpretation of the said Decision when it argued that the
rescinded Deed of Absolute Sale was “void,” we hold, nonetheless, that petitioner’s cause
of action is indeed barred by a prior judgment of this Court. As already discussed, our
Decision in GR No. 106063 shows that petitioner is not entitled to back rentals, because it
never became the owner of the disputed properties due to a failure of delivery. And even
assuming arguendo that there was a valid delivery, petitioner’s bad faith negates its
entitlement to the civil fruits of ownership, like interest and rentals.
Under the doctrine of res judicata or bar by prior judgment, a matter that has been
adjudicated by a court of competent jurisdiction must be deemed to have been finally and
conclusively settled if it arises in any subsequent litigation between the same parties and for
the same cause. Thus, “[a] final judgment on the merits rendered by a court of competent
jurisdiction is conclusive as to the rights of the parties and their privies and constitutes an
absolute bar to subsequent actions involving the same claim, demand, or cause of action.”
Res judicata is based on the ground that “the party to be affected, or some other with whom
he is in privity, has litigated the same matter in a former action in a court of competent
jurisdiction, and should not be permitted to litigate it again.”
It frees the parties from undergoing all over again the rigors of unnecessary suits and
repetitive trials. At the same time, it prevents the clogging of court dockets. Equally
important, it stabilizes rights and promotes the rule of law.
We find no need to repeat the foregoing disquisitions on the first issue to show
satisfaction of the elements of res judicata. Suffice it to say that, clearly, our ruling in the
mother case bars petitioner from claiming back rentals from respondent. Although the
court a quoerred when it declared “void from inception” the Deed of Absolute Sale between
Carmelo and petitioner, our foregoing discussion supports the grant of the Motion to
Dismiss on the ground that our prior judgment in GR No. 106063 has already resolved the
issue of back rentals.
On the basis of the evidence presented during the hearing of Mayfair’s Motion to Dismiss,
the trial court found that the issue of ownership of the subject property has been decided by
this Court in favor of Mayfair. We quote the RTC:
 “The Supreme Court in the Equatorial case, G.R. No. 106063 has categorically stated
that the Deed of Absolute Sale dated July 31, 1978 has been rescinded subjecting the
present complaint to res judicata.” (Emphasis in the original)

Hence, the trial court decided the Motion to Dismiss on the basis of res judicata, even if it
erred in interpreting the meaning of “rescinded” as equivalent to “void.” In short, it ruled on
the ground raised; namely, bar by prior judgment. By granting the Motion, it disposed
correctly, even if its legal reason for nullifying the sale was wrong. The correct reasons are
given in this Decision.

WHEREFORE, the Petition is hereby DENIED. Costs against petitioner.

SO ORDERED.

Notes.—Article 1385 of the Civil Code refers to contracts that are rescissible for causes specified
in Articles 1381 and 1382 of the Civil Code but it does not refer to contracts that are dissolved by
mutual consent of the parties. (Floro Enterprises, Inc. vs. Court of Appeals, 249 SCRA 354 [1995])

There can be no rescission of an obligation that is still nonexistent, the suspensive condition not
having happened. (Rillo vs. Court of Appeals, 274 SCRA 461 [1997])

——o0o——
 III. Right to Accession
D. Accession Continua
d.1 With regard to immovable property
d.1.a Accession (continua) industrial
Building, Planting, Sowing
Rights and obligations of the parties when ...
- The builder, planter, sower uses material of another and
builds, plants or sows on the land of another - Art. 455, NCC
G.R. No. 211170. July 3, 2017.*
 
SPOUSES MAXIMO ESPINOZA and WINIFREDA DE VERA, petitioners, vs. SPOUSES
ANTONIO MAYANDOC and ERLINDA CAYABYAB MAYANDOC, respondents.
Remedial Law; Civil Procedure; Findings of Fact; The findings of facts of the Court of Appeals
(CA) conclusive and binding on the Supreme Court (SC) and they carry even more weight when the
said court affirms the factual findings of the trial court.—The findings of facts of the Court of Appeals
are conclusive and binding on this Court and they carry even more weight when the said court affirms
the factual findings of the trial court. Stated differently, the findings of the Court of Appeals, by itself,
which are supported by substantial evidence, are almost beyond the power of review by this Court.
Although this rule is subject to certain exceptions, this Court finds none that is applicable in this case.
Nevertheless, the petition still fails granting that an exception obtains.
Civil Law; Builders in Good Faith; To be deemed a builder in good faith, it is essential that a
person asserts title to the land on which he builds, i.e., that he be a possessor in the concept of owner,
and that he be unaware that there exists in his title or mode of acquisition any flaw which invalidates it.
—To be deemed a builder in good faith, it is essential that a person asserts title to the land on which he
builds, i.e., that he be a possessor in the concept of owner, and that he be unaware that there exists in
his title or mode of acquisition any flaw which invalidates it.
Same; Bad Faith; The settled rule is bad faith should be established by clear and convincing
evidence since the law always presumes good faith.—The settled rule is bad faith should be
established by clear and convincing evidence since the law always presumes good faith. In this
particular case, petitioners were not able to prove that respondents were in bad faith in constructing the
house on the subject land. Bad faith does not simply connote bad judgment or negligence. It imports a
dishonest purpose or some moral obliquity and conscious doing of a wrong. It means breach of a
known duty through some motive, interest or ill will that partakes of the nature of fraud. For anyone who
claims that someone is in bad faith, the former has the duty to prove such. Hence, petitioners err in
their argument that respondents failed to prove that they are builders in good faith in spite of the
findings of the RTC and the CA that they are.
Same; Builders in Good Faith; In Tuatis v. Spouses Escol, et al., 604 SCRA 471 (2009), the
Supreme Court (SC) ruled that the seller (the owner of the land) has two (2) options under Article 448:
(1) he may appropriate the improvements for himself after reimbursing the buyer (the title he has the
right to build thereon, builder in good faith) the necessary and useful expenses under Articles 546 and
548 of the Civil Code; or (2) he may sell the land to the buyer, unless its value is considerably more
than that of the improvements, in which case, the buyer shall pay reasonable rent.—Article 448 of the
Civil Code must be applied. It applies when the builder believes that he is the owner of the land or that
by some title he has the right to build thereon, or that, at least, he has a claim of title thereto. In Tuatis
v. Spouses Escol, et al., 604 SCRA 471 (2009), this Court ruled that the seller (the owner of the land)
has two options under Article 448: (1) he may appropriate the improvements for himself after
reimbursing the buyer (the builder in good faith) the necessary and useful expenses under Articles 546
and 548 of the Civil Code; or (2) he may sell the land to the buyer, unless its value is considerably more
than that of the improvements, in which case, the buyer shall pay reasonable rent, thus: The rule that
the choice under Article 448 of the Civil Code belongs to the owner of the land is in accord with the
principle of accession, i.e., that the accessory follows the principal and not the other way around. Even
as the option lies with the landowner, the grant to him, nevertheless, is preclusive. The landowner
cannot refuse to exercise either option and compel instead the owner of the building to remove it from
the land. The raison d’être for this provision has been enunciated thus: Where the builder, planter or
sower has acted in good faith, a conflict of rights arises between the owners, and it becomes necessary
to protect the owner of the improvements without causing injustice to the owner of the land. In view of
the impracticability of creating a state of forced co-ownership, the law has provided a just solution by
giving the owner of the land the option to acquire the improvements after payment of the proper
indemnity, or to oblige the builder or planter to pay for the land and the sower the proper rent. He
cannot refuse to exercise either option. It is the owner of the land who is authorized to exercise the
option, because his right is older, and because, by the principle of accession, he is entitled to the
ownership of the accessory thing.
Remedial Law; Civil Procedure; Res Judicata; The well-settled rule is that the principle or rule
of res judicata is primarily one of public policy. It is based on the policy against multiplicity of suits,
whose primary objective is to avoid unduly burdening the dockets of the courts.—The well-settled rule
is that the principle or rule of res judicata is primarily one of public policy. It is based on the policy
against multiplicity of suits, whose primary objective is to avoid unduly burdening the dockets of the
courts. In this case, however, such principle is inapplicable.
PERALTA, J.:
 
Before this Court is the Petition for Review on Certiorari under Rule 45, dated March 21,
2014, of petitioners-spouses Maximo Espinoza and Winifreda De Vera, that seeks to
reverse and set aside the Decision1 dated September 17, 2013 and Resolution dated
January 28, 2014, both of the Court of Appeals (CA) which, in turn, affirmed with
modifications the Decision2 dated February 18, 2011 of the Regional Trial Court (RTC),
Branch 42, Dagupan City, in a complaint for useful expenses under Articles 4483 and 546 of
the New Civil Code of the Philippines.
The facts follow.
A parcel of land located in Dagupan City was originally owned by Eusebio Espinoza.
After the death of Eusebio, the said parcel of land was divided among his heirs, namely:
Pastora Espinoza, Domingo Espinoza and Pablo Espinoza. Petitioner Maximo is the son of
Domingo Espinoza, who died on November 3, 1965, and Agapita Cayabyab, who died on
August 11, 1963.
Thereafter, on May 25, 1972, Pastora Espinoza executed a Deed of Sale conveying her
share of the same property to respondents and Leopoldo Espinoza. However, on that same
date, a fictitious deed of sale was executed by petitioner Maximo’s father, Domingo
Espinoza, conveying the three-fourth (3/4) share in the estate in favor of respondent Erlinda
Cayabyab Mayandoc’s parents; thus, TCT No. 28397 was issued in the names of the latter.
On July 9, 1977, a fictitious deed of sale was executed by Nemesio Cayabyab, Candida
Cruz, petitioners-spouses Maximo Espinoza and Winifreda De Vera and Leopoldo Espinoza
over the land in favor of respondents-spouses Antonio and Erlinda Mayandoc; thus, TCT
No. 37403 was issued under the names of the latter.
As a result of the foregoing, petitioners filed an action for annulment of document with
prayer for the nullification of TCT No. 37403 and, on August 16, 1999, the RTC, Branch 40,
Dagupan City rendered a Decision in favor of petitioners and ordering respondents to
reconvey the land in dispute and to pay attorney’s fees and the cost of the suit.
Respondents appealed, but the CA, in its Decision dated February 6, 2004, affirmed the
RTC with modifications that the award of attorney’s fees and litigation expenses be deleted
for lack of factual basis. The said CA Decision became final and executory on March 8,
2004.
Thus, respondents filed a complaint for reimbursement for useful expenses, pursuant to
Articles 448 and 546 of the New Civil Code, alleging that the house in question was built on
the disputed land in good faith sometime in 1995 and was finished in 1996. According to
respondents, they then believed themselves to be the owners of the land with a claim of title
thereto and were never prevented by the petitioners in constructing the house. They added
that the new house was built after the old house belonging to respondent Erlinda
Mayandoc’s father was torn down due to termite infestation and would not have
reconstructed the said house had they been aware of the defect in their title. As such, they
claimed that they are entitled to reimbursement of the construction cost of the house in the
amount of P800,000.00. They further asserted that at the time that their house was
constructed, they were possessors in good faith, having lived over the land in question for
many years and that petitioners questioned their ownership and possession only in 1997
when a complaint for nullity of documents was filed by the latter.
Petitioners, in their Answer, argued that respondents can never be considered as
builders in good faith because the latter were aware that the deeds of sale over the land in
question were fictitious and, therefore, null and void; thus, as builders in bad faith, they lose
whatever has been built over the land without right to indemnity.
Respondents, on January 5, 2011, manifested their option to buy the land where the
house stood, but petitioners expressed that they were not interested to sell the land or to
buy the house in question.
The RTC, on February 18, 2011, rendered its Decision with the following dispositive
portion:
WHEREFORE, judgment is hereby rendered requiring the defendants to sell the
land, where the plaintiffs’ house stands, to the latter at a reasonable price based on the
zonal value determined by the Bureau of Internal Revenue (BIR).
SO ORDERED.
 
Petitioners appealed to the CA, but the latter, in its Decision dated September 17, 2013,
affirmed the decision of the RTC with modifications. The dispositive portion of the Decision
reads:
WHEREFORE, the Decision dated February 18, 2011 by the Regional Trial Court,
Branch 42 of Dagupan City, in Civil Case No. 2005-0271-D is hereby AFFIRMED with
MODIFICATIONS.
Let the case be REMANDED to the aforementioned trial court for further
proceedings consistent with the proper application of Articles 448, 546 and 548 of the
New Civil Code and to render a complete judgment of the case.
SO ORDERED.
The motion for reconsideration of petitioners were subsequently denied by the CA in its
Resolution dated January 28, 2014.
Hence, the present petition.
Petitioners raise the following issues:
I.
WHETHER THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT THE
PETITIONERS WERE NOT ABLE TO PROVE BAD FAITH ON THE PART OF THE
RESPONDENTS.
II.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN RULING
THAT RES JUDICATA DOES NOT APPLY IN THE INSTANT CASE.
According to petitioners, whether or not respondents were in bad faith in introducing
improvements on the subject land is already moot, since the judgment rendered by the RTC
of Dagupan City, Branch 40 and affirmed by the CA, that declared the two Deeds of
Definite/Absolute Sale dated May 25, 1972 and July 9, 1977 as null and void, had long
become final and executory on March 8, 2004. They also argue that respondents had not
successfully shown any right to introduce improvements on the said land as their claim of
laches and acquisitive prescription have been rejected by the CA on appeal; thus, it follows
that the respondents were builders in bad faith because knowing that the land did not
belong to them and that they had no right to build thereon, they still caused the house to be
erected. They further insist that respondents are deemed builders in bad faith because their
house has been built and reconstructed into a bigger one after respondent Erlinda’s parents
forged a fictitious sale. Finally, they claim that the principle of res judicata in the mode of
‘conclusiveness of judgment’ applies in this case.
The petition lacks merit.
The findings of facts of the Court of Appeals are conclusive and binding on this Court
and they carry even more weight when the said court affirms the factual findings of the trial
court. Stated differently, the findings of the Court of Appeals, by itself, which are supported
by substantial evidence, are almost beyond the power of review by this Court. Although this
rule is subject to certain exceptions, this Court finds none that is applicable in this case.
Nevertheless, the petition still fails granting that an exception obtains.
To be deemed a builder in good faith, it is essential that a person asserts title to the land
on which he builds, i.e., that he be a possessor in the concept of owner, and that he be
unaware that there exists in his title or mode of acquisition any flaw which invalidates it. The
RTC, as affirmed by the CA, found respondents to be builders in good faith, thus:
The plaintiffs are builders in good faith. As asserted by plaintiffs and not rebutted by
defendants, the house of plaintiffs was built on the lot owned by defendants in 1995.
The complaint for nullity of documents and reconveyance was filed in 1997, about two
years after the subject conjugal house was constructed. Defendants-spouses believed
that at the time when they constructed their house on the lot of defendants, they have a
 claim of title. Art. 526, New Civil Code, states that a possessor in good faith is one who
has no knowledge of any flaw or defect in his title or mode of acquisition. This
determines whether the builder acted in good faith or not. Surely, plaintiffs would not
have constructed the subject house which plaintiffs claim to have cost them
P800,000.00 to build if they knew that there is a flaw in their claim of title. Nonetheless,
Art. 527, New Civil Code, states clearly that good faith is always presumed, and upon
him who alleges bad faith on the part of the possessor lies the burden of proof. The
records do not show that the burden of proof was successfully discharged by the
defendants.
x x x x
Plaintiffs are in good faith in building their conjugal house in 1995 on the lot they
believed to be their own by purchase. They also have in their favor the legal
presumption of good faith. It is the defendants who had the burden to prove otherwise.
They failed to discharge such burden until the Regional Trial Court, Br. 40, Dagupan
City, promulgated an adverse ruling in Civil Case No. 97-0187-D. Thus, Art. 448 comes
in to protect the plaintiffs-owners of their improvement without causing injustice to the lot
owner. Art. 448 provided a just resolution of the resulting ‘forced-ownership’ by giving
the defendants lot owners the option to acquire the conjugal house after payment of the
proper indemnity or to oblige the builder plaintiffs to pay for the lot. It is the defendants-
lot owners who are authorized to exercise the option as their right is older, and under
the principle of accession where the accessory (house) follows the principal. x x x.
 
The settled rule is bad faith should be established by clear and convincing evidence
since the law always presumes good faith. In this particular case, petitioners were not able
to prove that respondents were in bad faith in constructing the house on the subject land.
Bad faith does not simply connote bad judgment or negligence. It imports a dishonest
purpose or some moral obliquity and conscious doing of a wrong. It means breach of a
known duty through some motive, interest or ill will that partakes of the nature of fraud. For
anyone who claims that someone is in bad faith, the former has the duty to prove such.
Hence, petitioners err in their argument that respondents failed to prove that they are
builders in good faith in spite of the findings of the RTC and the CA that they are.
As such, Article 44816 of the Civil Code must be applied. It applies when the builder
believes that he is the owner of the land or that by some title he has the right to build
thereon, or that, at least, he has a claim of title thereto. In Tuatis v. Spouses Escol, et al.,
this Court ruled that the seller (the owner of the land) has two options under Article 448: (1)
he may appropriate the improvements for himself after reimbursing the buyer (the builder in
good faith) the necessary and useful expenses under Articles 546 and 548 of the Civil Code;
or (2) he may sell the land to the buyer, unless its value is considerably more than that of
the improvements, in which case, the buyer shall pay reasonable rent, thus:
The rule that the choice under Article 448 of the Civil Code belongs to the owner of
the land is in accord with the principle of accession, i.e., that the accessory follows the
principal and not the other way around. Even as the option lies with the landowner, the
grant to him, nevertheless, is preclusive. The landowner cannot refuse to exercise either
option and compel instead the owner of the building to remove it from the land.
The raison d’être for this provision has been enunciated thus: Where the builder,
planter or sower has acted in good faith, a conflict of rights arises between the owners,
and it becomes necessary to protect the owner of the improvements without causing
injustice to the owner of the land. In view of the impracticability of creating a state of
forced co-ownership, the law has provided a just solution by giving the owner of the land
the option to acquire the improvements after payment of the proper indemnity, or to
oblige the builder or planter to pay for the land and the sower the proper rent. He cannot
refuse to exercise either option. It is the owner of the land who is authorized to exercise
the option, because his right is older, and because, by the principle of accession, he is
entitled to the ownership of the accessory thing.
 
The CA, therefore, did not err in its ruling that instead of requiring the petitioners to sell
the land, the RTC must determine the option which the petitioners would choose. As aptly
ruled by the CA:
The rule that the right of choice belongs to the owner of the land is in accordance
with the principle of accession. However, even if this right of choice is exclusive to the
landowner, he cannot refuse to exercise either option and demand, instead for the
removal of the building.
Instead of requiring defendants-appellants to sell the land, the court a quo must
determine the option which they would choose. The first option, to appropriate the
building upon payment of indemnity or the second option, to sell the land to the
plaintiffs-appellees. Moreover, the court a quo should also ascertain: (a) under the first
option, the amount of indemnification for the building; or (b) under the second option,
the value of the subject property vis-à-vis that of the building, and depending thereon,
the price of, or the reasonable rent for, the subject property.
Hence, following the ruling in the recent case of Briones v. Macabagdal, this case
must be remanded to the court a quo for the conduct of further proceedings to assess
the current fair market of the kind and to determine other matters necessary for the
proper application of Article 448, in relation to Articles 546 and 548 of the New Civil
Code.
 
Therefore, this Court agrees with the CA that there is a need to remand the case to the
RTC for further proceedings, specifically, in assessing the current fair market value of the
subject land and other matters that are appropriate in the application of Article 448, in
relation to Articles 546 and 548 of the New Civil Code.
As to the issue of res judicata, the CA is correct in its ruling that there is no identity of
subject matter and cause of action between the prior case of annulment of document and
the present case, thus:
In the instant case, res judicata will not apply since there is no identity of subject
matter and cause of action. The first case is for annulment of document, while the
instant case is for reimbursement of useful expenses as builders in good faith under
article 448 in relation to Articles 546 and 548 of the New Civil Code.
Moreover, We are not changing or reversing any findings of the RTC and by this
Court in Our 6 February 2004 decision. The Court is still bound by this judgment insofar
as it found the Deeds of Absolute Sale null and void, and that defendants-appellants are
the rightful owners of the lot in question.
However, if the court a quo did not take cognizance of the instant case, plaintiffs-
appellees shall lose ownership of the building worth Php316,400.00 without any
compensation. While, the defendants-appellants not only will recover the land but will
also acquire a house without payment of indemnity. The fairness of the rules enunciated
in Article 448 is explained by the Supreme Court in the case of Depra v. Dumlao, viz.:
Where the builder, planter or sower has acted in good faith, a conflict of
rights arises between the owners, and it becomes necessary to protect the
owner of the improvements without causing injustice to the owner of the land. In
view of the impracticability of creating a state of forced ownership, the law has
provided a just solution by giving the owner of the land the option to acquire the
improvements after payment of the proper indemnity, or to oblige the builder or
planter to pay for the land and the sower to pay the proper rent. It is the owner of
the land who is authorized to exercise the option, because his right is older, and
because, by the principle of accession, he is entitled to the ownership of the
accessory thing.
 Finally, “the decision of the court a quo should not be viewed as a denigration of
the doctrine of immutability of final judgments, but a recognition of the equally
sacrosanct doctrine that a person should not be allowed to profit or enrich himself
inequitably at another’s expense.”

The well-settled rule is that the principle or rule of res judicata is primarily one of public
policy. It is based on the policy against multiplicity of suits,25 whose primary objective is to
avoid unduly burdening the dockets of the courts.26 In this case, however, such principle is
inapplicable.

WHEREFORE, the Petition for Review on Certiorari under Rule 45, dated March 21,
2014, of petitioners-spouses Maximo Espinoza and Winifreda De Vera, is DENIED.
Consequently, the Decision dated September 17, 2013 and Resolution dated January 28,
2014, both of the Court of Appeals are AFFIRMED.
SO ORDERED.

Notes.—To be deemed a builder in good faith, it is essential that a person asserts title
to the land on which he builds, i.e., that he be a possessor in the concept of owner, and that
he be unaware that there exists in his title or mode of acquisition any flaw which invalidates
it. (Department of Education vs. Casibang, 782 SCRA  326 [2016])

It is provided under Article 448 of the Civil Code that the builder cannot be obliged to
buy the land if its value is considerably more than that of the improvements and buildings.
(Id.)
 
——o0o——
 
 III. Right to Accession
D. Accession Continua
d.1 With regard to immovable property
d.1.b Accession Natural
d.1.b.4. Formation of island
b.4.a. - Who owns the island formed on a body of water
G.R. No. 178411. June 23, 2010.
OFFICE OF THE CITY MAYOR OF PARAÑAQUE CITY, OFFICE OF THE CITY
ADMINISTRATOR OF PARAÑAQUE CITY, OFFICE OF THE CITY ENGINEER OF
PARAÑAQUE CITY, OFFICE OF THE CITY PLANNING AND DEVELOPMENT
COORDINATOR, OFFICE OF THE BARANGAY CAPTAIN AND SANGGUNIANG
PAMBARANGAY OF BARANGAY VITALEZ, PARAÑAQUE CITY, TERESITA A.
GATCHALIAN, ENRICO R. ESGUERRA, ERNESTO T. PRACALE, JR., MANUEL M.
ARGOTE, CONRADO M. CANLAS, JOSEPHINE S. DAUIGOY, ALLAN L. GONZALES,
ESTER C. ASEHAN, MANUEL A. FUENTES, and MYRNA P. ROSALES,
petitioners, vs. MARIO D. EBIO AND HIS CHILDREN/HEIRS namely, ARTURO V. EBIO,
EDUARDO V. EBIO, RENATO V. EBIO, LOURDES E. MAGTANGOB, MILA V. EBIO, and
ARNEL V. EBIO, respondents.
Actions; Injunction; An action for injunction is brought specifically to restrain or command the
performance of an act.—An action for injunction is brought specifically to restrain or command the
performance of an act. It is distinct from the ancillary remedy of preliminary injunction, which cannot
exist except only as part or as an incident to an independent action or proceeding. Moreover, in an
action for injunction, the auxiliary remedy of a preliminary prohibitory or mandatory injunction may
issue.
Ownership; Accretion; Alluvial deposits along the banks of a creek do not form part of the public
domain as the alluvial property automatically belongs to the owner of the estate to which it may have
been added.—It is an uncontested fact that the subject land was formed from the alluvial deposits that
have gradually settled along the banks of Cut-cut creek. This being the case, the law that governs
ownership over the accreted portion is Article 84 of the Spanish Law of Waters of 1866, which remains
in effect, in relation to Article 457 of the Civil Code. Article 84 of the Spanish Law of Waters of
1866specifically covers ownership over alluvial deposits along the banks of a creek. It reads: ART. 84.
Accretions deposited gradually upon lands contiguous to creeks, streams, rivers, and lakes, by
accessions or sediments from the waters thereof, belong to the owners of such lands. Interestingly,
Article 457 of the Civil Code states: Art. 457. To the owners of lands adjoining the banks of rivers
belong the accretion which they gradually receive from the effects of the current of the waters. It is
therefore explicit from the foregoing provisions that alluvial deposits along the banks of a creek do not
form part of the public domain as the alluvial property automatically belongs to the owner of the estate
to which it may have been added. The only restriction provided for by law is that the owner of the
adjoining property must register the same under the Torrens system; otherwise, the alluvial property
may be subject to acquisition through prescription by third persons.
Parties; The State is not a necessary party to an action where no positive act shall be required
from it or where no obligation shall be imposed upon it, and neither would it be an indispensable party if
none of its properties shall be divested nor any of its rights infringed.—An indispensable party is one
whose interest in the controversy is such that a final decree would necessarily affect his/her right, so
that the court cannot proceed without their presence. In contrast, a necessary party is one whose
presence in the proceedings is necessary to adjudicate the whole controversy but whose interest is
separable such that a final decree can be made in their absence without affecting them. In the instant
case, the action for prohibition seeks to enjoin the city government of Parañaque from proceeding with
its implementation of the road construction project. The State is neither a necessary nor an
indispensable party to an action where no positive act shall be required from it or where no obligation
shall be imposed upon it, such as in the case at bar. Neither would it be an indispensable party if none
of its properties shall be divested nor any of its rights infringed.
Injunction; Words and Phrases; A right in esse means a clear and unmistakable right.—A right in
esse means a clear and unmistakable right. A party seeking to avail of an injunctive relief must prove
that he or she possesses a right in esse or one that is actual or existing. It should not be contingent,
abstract, or future rights, or one which may never arise.
Land Registration; The purpose of land registration is not the acquisition of lands, but only the
registration of title which the applicant already possessed over the land—registration was never
intended as a means of acquiring ownership.—From these findings of fact by both the trial court and
the Court of Appeals, only one conclusion can be made: that for more than thirty (30) years, neither
Guaranteed Homes, Inc. nor the local government of Parañaque in its corporate or private capacity
sought to register the accreted portion. Undoubtedly, respondents are deemed to have acquired
ownership over the subject property through prescription. Respondents can assert such right despite
the fact that they have yet to register their title over the said lot. It must be remembered that the
purpose of land registration is not the acquisition of lands, but only the registration of title which the
applicant already possessed over the land. Registration was never intended as a means of acquiring
ownership. A decree of registration merely confirms, but does not confer, ownership.
Same; Confirmation of Imperfect Title; Confirmation of an imperfect title over a parcel of land
may be done either through judicial proceedings or through administrative process; The State does not
have any authority to convey a property through the issuance of a grant or a patent if the land is no
longer a public land.—Confirmation of an imperfect title over a parcel of land may be done either
through judicial proceedings or through administrative process. In the instant case, respondents
admitted that they opted to confirm their title over the property administratively by filing an application
for sales patent. Respondents’ application for sales patent, however, should not be used to prejudice or
derogate what may be deemed as their vested right over the subject property. The sales patent
application should instead be considered as a mere superfluity particularly since ownership over the
land, which they seek to buy from the State, is already vested upon them by virtue of acquisitive
prescription. Moreover, the State does not have any authority to convey a property through the
issuance of a grant or a patent if the land is no longer a public land. Nemo dat quod dat non habet. No
one can give what he does not have. Such principle is equally applicable even against a sovereign
entity that is the State.
VILLARAMA, JR., J.:
Before us is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil
Procedure, as amended, assailing the January 31, 2007 Decision and June 8, 2007
Resolution of the Court of Appeals (CA) in CA-G.R. SP No. 91350 allegedly for being
contrary to law and jurisprudence. The CA had reversed the Order of the Regional Trial
Court (RTC) of Parañaque City, Branch 196, issued on April 29, 2005 in Civil Case No. 05-
0155.
Below are the facts.
Respondents claim that they are the absolute owners of a parcel of land consisting of
406 square meters, more or less, located at 9781 Vitalez Compound in Barangay Vitalez,
Parañaque City and covered by Tax Declaration Nos. 01027 and 01472 in the name of
respondent Mario D. Ebio. Said land was an accretion of Cut-cut creek. Respondents assert
that the original occupant and possessor of the said parcel of land was their great
grandfather, Jose Vitalez. Sometime in 1930, Jose gave the land to his son, Pedro Vitalez.
From then on, Pedro continuously and exclusively occupied and possessed the said lot. In
1966, after executing an affidavit declaring possession and occupancy, Pedro was able to
obtain a tax declaration over the said property in his name. Since then, respondents have
been religiously paying real property taxes for the said property.
Meanwhile, in 1961, respondent Mario Ebio married Pedro’s daughter, Zenaida. Upon
Pedro’s advice, the couple established their home on the said lot. In April 1964 and in
October 1971, Mario Ebio secured building permits from the Parañaque municipal office for
the construction of their house within the said compound. On April 21, 1987, Pedro
executed a notarized Transfer of Rights ceding his claim over the entire parcel of land in
favor of Mario Ebio. Subsequently, the tax declarations under Pedro’s name were cancelled
and new ones were issued in Mario Ebio’s name.
On March 30, 1999, the Office of the Sangguniang Barangay of Vitalez passed
Resolution No. 08, series of 1999 seeking assistance from the City Government of
Parañaque for the construction of an access road along Cut-cut Creek located in the
said barangay. The proposed road, projected to be eight (8) meters wide and sixty (60)
meters long, will run from Urma Drive to the main road of Vitalez Compound traversing the
lot occupied by the respondents. When the city government advised all the affected
residents to vacate the said area, respondents immediately registered their opposition
thereto. As a result, the road project was temporarily suspended.
In January 2003, however, respondents were surprised when several officials from
the barangay and the city planning office proceeded to cut eight (8) coconut trees planted
on the said lot. Respondents filed letter-complaints before the Regional Director of the
Bureau of Lands, the Department of Interior and Local Government and the Office of the
Vice Mayor. On June 29, 2003, the Sangguniang Barangay of Vitalez held a meeting to
discuss the construction of the proposed road. In the said meeting, respondents asserted
their opposition to the proposed project and their claim of ownership over the affected
property. On November 14, 2003, respondents attended another meeting with officials from
the city government, but no definite agreement was reached by and among the parties.
On March 28, 2005, City Administrator Noli Aldip sent a letter to the respondents
ordering them to vacate the area within the next thirty (30) days, or be physically evicted
from the said property. Respondents sent a letter to the Office of the City Administrator
asserting, in sum, their claim over the subject property and expressing intent for a further
dialogue. The request remained unheeded.
Threatened of being evicted, respondents went to the RTC of Parañaque City on April
21, 2005 and applied for a writ of preliminary injunction against petitioners. In the course of
the proceedings, respondents admitted before the trial court that they have a pending
application for the issuance of a sales patent before the Department of Environment and
Natural Resources (DENR).
On April 29, 2005, the RTC issued an Order denying the petition for lack of merit. The
trial court reasoned that respondents were not able to prove successfully that they have an
established right to the property since they have not instituted an action for confirmation of
title and their application for sales patent has not yet been granted. Additionally, they failed
to implead the Republic of the Philippines, which is an indispensable party.
Respondents moved for reconsideration, but the same was denied.
Aggrieved, respondents elevated the matter to the Court of Appeals. On January 31,
2007, the Court of Appeals issued its Decision in favor of the respondents. According to the
Court of Appeals—
“The issue ultimately boils down to the question of ownership of the lands adjoining
Cutcut Creek particularly Road Lot No. 8 (hereinafter RL 8) and the accreted portion
beside RL 8.
The evidentiary records of the instant case, shows that RL 8 containing an area of
291 square meters is owned by Guaranteed Homes, Inc. covered by TCT No. S-62176.
The same RL 8 appears to have been donated by the Guaranteed Homes to the City
Government of Parañaque on 22 March 1966 and which was accepted by the then
Mayor FLORENCIO BERNABE on 5 April 1966. There is no evidence however, when
RL 8 has been intended as a road lot.
On the other hand, the evidentiary records reveal that PEDRO VITALEZ possessed
the accreted property since 1930 per his Affidavit dated 21 March 1966 for the purpose
of declaring the said property for taxation purposes. The property then became the
subject of Tax Declaration No. 20134 beginning the year 1967 and the real property
taxes therefor had been paid for the years 1966, 1967, 1968, 1969, 1970, 1972, 1973,
1974, 1978, 1980, 1995, 1996, 1997, 1998, 1999, 2000, 2001, 2002, 2003, and 2004.
Sometime in 1964 and 1971, construction permits were issued in favor of Appellant
MARIO EBIO for the subject property. On 21 April 1987, PEDRO VITALEZ transferred
his rights in the accreted property to MARIO EBIO and his successors-in-interest.
Applying [Article 457 of the Civil Code considering] the foregoing documentary
evidence, it could be concluded that Guaranteed Homes is the owner of the accreted
property considering its ownership of the adjoining RL 8 to which the accretion attached.
However, this is without the application of the provisions of the Civil Code on acquisitive
prescription which is likewise applicable in the instant case.
x x x x
The subject of acquisitive prescription in the instant case is the accreted portion
which [was] duly proven by the Appellants. It is clear that since 1930, Appellants
together with their predecessor-in-interest, PEDRO VITALEZ[,] have been in exclusive
possession of the subject property and starting 1964 had introduced improvements
thereon as evidenced by their construction permits. Thus, even by extraordinary
acquisitive prescription[,] Appellants have acquired ownership of the property in
question since 1930 even if the adjoining RL 8 was subsequently registered in the name
of Guaranteed Homes. x x x.
x x x x
Further, it was only in 1978 that Guaranteed Homes was able to have RL 8
registered in its name, which is almost fifty years from the time PEDRO VITALEZ
occupied the adjoining accreted property in 1930. x x x.
x x x x
We likewise note the continuous payment of real property taxes of Appellants which
bolster their right over the subject property. x x x.
x x x x
In sum, We are fully convinced and so hold that the Appellants [have] amply proven
their right over the property in question.
WHEREFORE, premises considered, the instant appeal is hereby GRANTED. The
challenged Order of the court a quo is REVERSED and SET ASIDE.
SO ORDERED.”
 On June 8, 2007, the appellate court denied petitioners’ motion for reconsideration.
Hence, this petition raising the following assignment of errors:
I. WHETHER OR NOT THE DECISION AND RESOLUTION OF THE HONORABLE
COURT OF APPEALS THAT RESPONDENTS HAVE A RIGHT IN ESSE IS IN
ACCORD WITH THE LAW AND ESTABLISHED JURISPRUDENCE[;]
II. WHETHER OR NOT THE DECISION AND RESOLUTION OF THE HONORABLE
COURT OF APPEALS THAT THE SUBJECT LOT IS AVAILABLE FOR
ACQUISITIVE PRESCRIPTION IS IN ACCORD WITH THE LAW AND
ESTABLISHED JURISPRUDENCE[;] AND
III. WHETHER OR NOT THE STATE IS AN INDISPENSABLE PARTY TO THE
COMPLAINT … FILED BY RESPONDENTS IN THE LOWER COURT.
The issues may be narrowed down into two (2): procedurally, whether the State is an
indispensable party to respondents’ action for prohibitory injunction; and substantively,
whether the character of respondents’ possession and occupation of the subject property
entitles them to avail of the relief of prohibitory injunction.
The petition is without merit.
An action for injunction is brought specifically to restrain or command the performance
of an act. It is distinct from the ancillary remedy of preliminary injunction, which cannot exist
except only as part or as an incident to an independent action or proceeding. Moreover, in
an action for injunction, the auxiliary remedy of a preliminary prohibitory or mandatory
injunction may issue.
In the case at bar, respondents filed an action for injunction to prevent the local
government of Parañaque City from proceeding with the construction of an access road that
will traverse through a parcel of land which they claim is owned by them by virtue of
acquisitive prescription.
Petitioners, however, argue that since the creek, being a tributary of the river, is
classified as part of the public domain, any land that may have formed along its banks
through time should also be considered as part of the public domain. And respondents
should have included the State as it is an indispensable party to the action.
We do not agree.
It is an uncontested fact that the subject land was formed from the alluvial deposits that
have gradually settled along the banks of Cut-cut creek. This being the case, the law that
governs ownership over the accreted portion is Article 84 of the Spanish Law of Waters of
1866, which remains in effect, in relation to Article 457 of the Civil Code.
Article 84 of the Spanish Law of Waters of 1866 specifically covers ownership over
alluvial deposits along the banks of a creek. It reads:
“ART. 84. Accretions deposited gradually upon lands contiguous to creeks,
streams, rivers, and lakes, by accessions or sediments from the waters thereof, belong
to the owners of such lands.”
Interestingly, Article 457 of the Civil Code states:
“Art. 457. To the owners of lands adjoining the banks of rivers belong the
accretion which they gradually receive from the effects of the current of the waters.”
It is therefore explicit from the foregoing provisions that alluvial deposits along the banks
of a creek do not form part of the public domain as the alluvial property automatically
belongs to the owner of the estate to which it may have been added. The only restriction
provided for by law is that the owner of the adjoining property must register the same under
the Torrens system; otherwise, the alluvial property may be subject to acquisition through
prescription by third persons.
In contrast, properties of public dominion cannot be acquired by prescription. No matter
how long the possession of the properties has been, there can be no prescription against
the State regarding property of public domain. Even a city or municipality cannot acquire
them by prescription as against the State.
Hence, while it is true that a creek is a property of public dominion, the land which is
formed by the gradual and imperceptible accumulation of sediments along its banks does
not form part of the public domain by clear provision of law.
Moreover, an indispensable party is one whose interest in the controversy is such that a
final decree would necessarily affect his/her right, so that the court cannot proceed without
their presence. In contrast, a necessary party is one whose presence in the proceedings is
necessary to adjudicate the whole controversy but whose interest is separable such that a
final decree can be made in their absence without affecting them.
In the instant case, the action for prohibition seeks to enjoin the city government of
Parañaque from proceeding with its implementation of the road construction project. The
State is neither a necessary nor an indispensable party to an action where no positive act
shall be required from it or where no obligation shall be imposed upon it, such as in the
case at bar. Neither would it be an indispensable party if none of its properties shall be
divested nor any of its rights infringed.
We also find that the character of possession and ownership by the respondents over
the contested land entitles them to the avails of the action.
A right in esse means a clear and unmistakable right. A party seeking to avail of an
injunctive relief must prove that he or she possesses a right in esse or one that is actual or
existing. It should not be contingent, abstract, or future rights, or one which may never arise.
In the case at bar, respondents assert that their predecessor-in-interest, Pedro Vitalez,
had occupied and possessed the subject lot as early as 1930. In 1964, respondent Mario
Ebio secured a permit from the local government of Parañaque for the construction of their
family dwelling on the said lot. In 1966, Pedro executed an affidavit of possession and
occupancy allowing him to declare the property in his name for taxation purposes.
Curiously, it was also in 1966 when Guaranteed Homes, Inc., the registered owner of Road
Lot No. 8 (RL 8) which adjoins the land occupied by the respondents, donated RL 8 to the
local government of Parañaque.
From these findings of fact by both the trial court and the Court of Appeals, only one
conclusion can be made: that for more than thirty (30) years, neither Guaranteed Homes,
Inc. nor the local government of Parañaque in its corporate or private capacity sought to
register the accreted portion. Undoubtedly, respondents are deemed to have acquired
ownership over the subject property through prescription. Respondents can assert such
right despite the fact that they have yet to register their title over the said lot. It must be
remembered that the purpose of land registration is not the acquisition of lands, but only the
registration of title which the applicant already possessed over the land. Registration was
never intended as a means of acquiring ownership. A decree of registration merely
confirms, but does not confer, ownership.

Did the filing of a sales patent application by the respondents, which remains pending
before the DENR, estop them from filing an injunction suit?

We answer in the negative.

Confirmation of an imperfect title over a parcel of land may be done either through
judicial proceedings or through administrative process. In the instant case, respondents
admitted that they opted to confirm their title over the property administratively by filing an
application for sales patent.

Respondents’ application for sales patent, however, should not be used to prejudice or
derogate what may be deemed as their vested right over the subject property. The sales
patent application should instead be considered as a mere superfluity particularly since
ownership over the land, which they seek to buy from the State, is already vested upon
them by virtue of acquisitive prescription. Moreover, the State does not have any authority
to convey a property through the issuance of a grant or a patent if the land is no longer a
public land.

Nemo dat quod dat non habet. No one can give what he does not have. Such principle
is equally applicable even against a sovereign entity that is the State.

WHEREFORE, the petition is DENIED for lack of merit. The January 31, 2007 Decision,
as well as the July 8, 2007 Resolution, of the Court of Appeals in CA-G.R. SP No. 91350
are hereby AFFIRMED.
With costs against petitioners.
SO ORDERED.

Notes.—The rationale for the period “since time immemorial or since June 12, 1945” lies in the
presumption that the land applied for pertains to the State, and that the occupants or possessors claim
an interest thereon only by virtue of their imperfect title as continuous, open and notorious possession.
(Republic vs. Jacob, 495 SCRA 529 [2006])

The more reasonable interpretation of Section 14(1) of P.D. No. 1529 is that it merely requires the
property sought to be registered as already alienable and disposable at the time the application for
registration of title is filed. (Republic vs. Bibonia, 525 SCRA 268 [2007])

——o0o——
 G.R. No. 147340. December 13, 2007.
CYNTHIA CRUZ KHEMANI and SHANKER N. KHEMANI, petitioners, vs. THE HEIRS OF
ANASTACIO TRINIDAD, represented by NAPOLEON and ROLANDO TRINIDAD,
respondents.
Actions; Interlocutory Orders; Motion to Dismiss; Certiorari; An order denying a motion to
dismiss is an interlocutory order, and, as a general rule, cannot be questioned in a special civil action
for certiorari.—It has long been settled that an order denying a motion to dismiss is an interlocutory
order. It neither terminates nor finally disposes of a case, as it leaves something to be done by the
court before the case is finally decided on the merits. As such, the general rule is that the denial of a
motion to dismiss cannot be questioned in a special civil action for certiorari. However, there are
exceptions to the general rule. In Velarde v. Lopez, Jr., 419 SCRA 422 (2004), the Court held that
resort to a special civil action for certiorari is allowed when the ground for the motion to dismiss is
improper venue, lack of jurisdiction, or res judicata as in the case at bar. Thus, petitioner did not commit
a procedural error in filing a petition for certiorari before the Court of Appeals.
Same; Judgments; Res Judicata; Requisites; Words and Phrases; Res judicata literally means
“a matter adjudged; a thing judicially acted upon or decided; a thing or matter settled by judgment,” and
lays the rule that an existing final judgment or decree rendered on the merits, and without fraud or
collusion, by a court of competent jurisdiction, upon any matter within its jurisdiction, is conclusive of
the rights of the parties or their privies, in all other actions or suits in the same or any other judicial
tribunal of concurrent jurisdiction on the points and matters in issue in the first suit.—In Oropeza
Marketing Corp. v. Allied Banking Corp., 393 SCRA 278 (2002), we held that res judicata literally
means “a matter adjudged; a thing judicially acted upon or decided; a thing or matter settled by
judgment.” It lays the rule that an existing final judgment or decree rendered on the merits, and without
fraud or collusion, by a court of competent jurisdiction, upon any matter within its jurisdiction, is
conclusive of the rights of the parties or their privies, in all other actions or suits in the same or any
other judicial tribunal of concurrent jurisdiction on the points and matters in issue in the first suit. A case
is barred by prior judgment or res judicata when the following requisites concur: (1) the former
judgment is final; (2) it is rendered by a court having jurisdiction over the subject matter and the parties;
(3) it is a judgment or an order on the merits; and (4) there is—between the first and the second actions
—identity of parties, subject matter, and causes of action.
Same; Same; Same; Parties; There is substantial identity of parties only when the “additional”
party acts in the same capacity or is in privity with the parties in the former action.—True, res
judicata does not require absolute but only substantial identity of parties. However, there is substantial
identity only when the “additional” party acts in the same capacity or is in privity with the parties in the
former action. This is not so in the present case. It must be emphasized that respondents are not
asserting rights under Mendoza. Indeed, the records will show that the parties in the two cases have
their own rights and interests in relation to the subject matter in litigation.
Same; Same; Same; The test of identity of causes of action lies not in the form of action but in
whether the same facts or evidence would support and establish the former and present causes of
action.—As correctly found by the Court of Appeals, the basis of re-spondents’ action was different
from that of Mendoza; the evidence necessary to sustain the latter’s claim is separate and distinct from
that required to establish respondents’ cause of action. While Men-doza relied on the Miscellaneous
Sales Application as evidence to support his claim, herein respondents would have to present proof of
their alleged continuous possession of the Disputed Property as well as fraud in the issuance of the
patent and title in favor of the Peña Heirs. In Morato v. Court of Appeals, 436 SCRA 438 (2004), we
held that the test of identity of causes of action lies not in the form of action but in whether the same
facts or evidence would support and establish the former and present causes of action.
Same; Same; Same; The public policy underlying the principle of res judicata must be
considered together with the policy that a party shall not be deprived of a fair adversary proceeding
wherein to present his case.—Res judicata does not apply in the instant case there being no identity of
parties and causes of action. Nevertheless, the public policy underlying the principle of res
judicata must be considered together with the policy that a party shall not be deprived of a fair
adversary proceeding wherein to present his case. It bears stressing that respondents’ action for review
of decree of registration is sanctioned under Section 32 of Presidential Decree No. 1529, which
provides that a person deprived of his land through actual fraud may institute an action to reopen or
review a decree of registration within one year from entry of such decree.
Same; Reconveyance; Prescription; Trusts; An aggrieved party may file an action for
reconveyance based on implied or constructive trust, which prescribes in ten years from the date of the
issuance of the certificate of title over the property provided that the property has not been acquired by
an innocent purchaser for value.—Even assuming arguendo that respondents filed their action after
one year, they may still be entitled to relief. An aggrieved party may file an action for reconveyance
based on implied or constructive trust, which prescribes in ten years from the date of the issuance of
the certificate of title over the property provided that the property has not been acquired by an innocent
purchaser for value. Respondents clearly asserted in their complaint that they and their predecessors-
in-interest have long been the owners of the Disputed Property and that they were fraudulently
deprived of ownership thereof when the Peña Heirs obtained a patent and certificate of title in their
favor. These allegations certainly measure up to the requisite statement of facts to constitute an action
for reconveyance.
Same; Land Titles and Deeds; Accretions to the original lot awarded by the Government to a
private individual do not belong to the Government—the Bureau of Lands does not have authority to
subdivide and allocate the same to other individuals.—It appears from the records that after our ruling
in the Assistant Executive Secretary case in 1989, the BOL issued a Patent on September 20, 1993 in
favor of the Peña Heirs which became the basis for the issuance of OCT No. P-33658 covering Lot No.
107. However, as held in the Assistant Executive Secretary case, Lot No. 107—as accretions to the
original lot (Lot No. 355) awarded to Larrabaster on July 10, 1950—“no longer belonged to the
Government[,] the subdivision thereof by the Bureau of Lands into three lots (Lot No. 107, Lot No. 108
and Lot No. 109), as well as the allocation of said lots to two other individuals, was beyond the scope of
its authority.” As a result, while Lot No. 107 may no longer be acquired under the provisions of the
Public Land Act, it does not absolutely foreclose the possibility that, as a private property, a portion
thereof (the Disputed Property) may have been acquired by respondents through acquisitive
prescription under the Civil Code. These matters, however, are the proper subject of a separate action
should one be filed subject, of course, to such claims and defenses that either party may have under
relevant laws.
YNARES-SANTIAGO, J.:
This petition for review on certiorari assails the July 31, 2000 Decision of the Court of
Appeals in CA-G.R. SP No. 55581, which affirmed the May 24, 1999 Order of the Regional
Trial Court, Branch 24, Koronadal, South Cotabato in Civil Case No. 1122, entitled “Heirs of
Anastacio and Francisca Trinidad, et al. v. Heirs of Jose Peña, et al.” Also assailed is the
January 8, 2001 Resolution denying the motion for reconsideration.
The factual antecedents are as follows:
Petitioner Cynthia Cruz Khemani is the registered owner of Lot No. 107, Ts-1032 (Lot
No. 107), which is covered by Transfer Certificate of Title (TCT) No. 58976 issued on March
10, 1994. Khemani purchased the lot from the heirs of Jose B. Peña (the Peña Heirs) on
February 17, 1994. Shanker N. Khemani is her brother-in-law and duly authorized
representative.
Subject of the instant case is a 340 square meter portion (the Disputed Property) of Lot
No. 107 over which respondents Heirs of Anastacio Trinidad, represented by Napoleon and
Rolando Trinidad, are claiming ownership. Respondents allege that they and their
predecessors-in-interest, Spouses Anastacio and Francisca Trinidad, have openly,
peacefully, publicly and adversely possessed the Disputed Property in the concept of owner
since 1950.
Lot No. 107 and Lot Nos. 108 and 109, constitute Lot No. 355 which was part of the
public domain. On July 10, 1950, Lot No. 355 with an original area of 1,500 square meters
was awarded to Jesus M. Larrabaster by the National Land Settlement Administration
(NLSA) who subsequently sold his rights and interests over the said property to Jose B.
Peña (Peña) on June 29, 1956.
Thereafter, the original area of Lot No. 355 which was 1,500 square meters increased to
3,616.93 square meters due to accretion. Peña then requested the Bureau of Lands (BOL)
to adjust the area of the lot awarded to him but the BOL denied the request on the ground
that the accretion belonged to the government.
Aggrieved, Peña appealed to the Office of the President. The BOL recommended that
Lot No. 355 be subdivided into three parts, to wit, Lot Nos. 107, 108 and 109, and that Lot
No. 108 with an area of 1,500 square meters, be awarded to Peña, instead of the whole of
Lot No. 355. Meanwhile, Lot Nos. 107 and 109 would be allocated to Basilio Mendoza
(Mendoza) and Arturo Roxas, respectively.
The Office of the President initially adopted the recommendation of the BOL. Upon
reconsideration, however, it modified its decision and held that the entire area of Lot No.
355, including the accretion, belonged to Peña and not to the government. Thus, Lot Nos.
107, 108, and 109 were awarded to him.
On January 27, 1970, Mendoza filed a special civil action for certiorari against the
Assistant Executive Secretary for Legal Affairs of the Office of the President, the BOL, the
Director of Lands, and Peña before Branch 24 of the Court of First Instance of South
Cotabato, which was docketed as Civil Case No. 98. Claiming that he was denied due
process, Men-doza assailed the decision of the Office of the President awarding the entire
area of Lot No. 355 to Peña. He asserted ownership over Lot No. 107 on the strength of a
Miscellaneous Sales Application he allegedly filed with the BOL on No-vember 6, 1962.
On May 10, 1985, the trial court rendered a decision dismissing Mendoza’s petition
for certiorari but the same was reversed by the Court of Appeals on appeal. Hence,
Mendoza filed a petition for review on certiorari before the Supreme Court.
In the case of Assistant Executive Secretary for Legal Affairs of the Office of the
President v. Court of Appeals  which was decided on January 9, 1989, the Supreme Court
rejected Mendoza’s claim over Lot No. 107 and found the Miscellaneous Sales Application
without legal force and effect since the object thereof was no longer public land. Thus,
Peña’s right of ownership over the entire area of Lot No. 355, which consists of Lot Nos.
107, 108 and 109, was affirmed.
On September 20, 1993, the Peña Heirs were awarded a patent by the Department of
Environment and Natural Resources (DENR), and on September 21, 1993, Original
Certificate of Title No. P-33658  covering Lot No. 107 was issued in their name.
On January 27, 1994, respondents filed with the Regional Trial Court, Branch 24,
Koronadal, South Cotabato a verified complaint against the Peña Heirs, the DENR Region
IX Office, and the BOL for “Review of Decree of Registration and/or Reconveyance with
Prayer for Issuance of Writ of Preliminary Prohibitory Injunction and Temporary Restraining
Order,” which was docketed as Civil Case No. 1122. Respondents filed the complaint on the
strength of their own and their predecessors’ open, peaceful, public and adverse
possession of the Disputed Property in the concept of owner since 1950.
Respondents also claimed that on July 16, 1976, their predecessor-in-interest,
Anastacio, applied for a Miscellaneous Sales Application over the Disputed Property which
was designated as a portion of Lot No. 107, Ts-1032. On March 2, 1979, the BOL allegedly
issued Certification No. 3445 certifying that the Disputed Property was awarded to
Anastacio and that the transfer had been duly investigated and approved per Board
Resolution No. 133, Series of 1979.
Instead of an answer, the Peña Heirs filed a Motion to Dismiss alleging that the
Regional Trial Court lacks jurisdiction over the nature of the action or the suit; that
respondents have no legal capacity to sue as only the government may seek nullification of
the land grant in their favor; and that the cause of action is barred by prior judgment or the
statute of limitations. They asserted that the issue of ownership over the Disputed Property
has long been settled in the Assistant Executive Secretary case. Further, they argued that
respondents’ predecessor-in-interest, Anastacio, was a mere squatter who had been
allowed by Mendoza to occupy a portion of Lot No. 107 sometime in 1960.
In respondents’ Comment/Opposition, they claimed that the Disputed Property had long
ceased to be public land by virtue of their open, public, continuous, adverse and exclusive
possession in the concept of owner for more than 40 years, and that they were never
parties in the Assistant Executive Secretary case involving Mendoza.
On September 3, 1997, Judge Rodolfo C. Soledad (Judge Soledad) granted petitioner’s
motion to dismiss and held that respondents are bound by the ruling of this Court in
the Assistant Executive Secretary case.
Respondents filed a motion for reconsideration alleging that res judicata does not apply
and that their action is not barred by the Assistant Executive Secretary case. They argued
that neither they, nor Anastacio, were parties in the said case and that there is no identity of
causes of action.
In 1998, Judge Soledad died without resolving the motion for reconsideration filed by
respondents. Judge Francisco S. Ampig (Judge Ampig) was designated Acting Judge. On
May 24, 1999, Judge Ampig granted the motion for reconsideration, reinstated Civil Case
No. 1122, and directed the Peña Heirs to file an answer.
The Peña Heirs, together with herein petitioner as the new owner of Lot No. 107, filed a
petition for certiorari before the Court of Appeals which was docketed as CA-G.R. SP No.
55581.
On July 31, 2000, the Court of Appeals rendered the assailed decision dismissing the
petition. It ruled that a petition for certiorariis not the proper remedy against an order
denying a motion to dismiss. Further, it held that there is no res judicata. Thus:
“Moreover, petitioners have plain, speedy and adequate remedy in the ordinary course
of law. The remedy against an adverse interlocutory order, such as the assailed orders,
 is not certiorari but to continue with the case in due course and, when an unfavorable
verdict is handed down, to take an appeal in the manner authorized by law. x x x
With the denial of the motion to dismiss and reinstatement of the case, petitioners
will still answer the complaint. Upon joinder of issues, the parties will enter into trial,
after which, the lower court will render a verdict. And if adverse to them, petitioners may
appeal the decision together with the assailed orders. The case at bench does not fall
under any of the exceptional circumstances where the extraordinary writ of certiorari
may be resorted to despite availability of appeal.
xxxx
Private respondents are not parties in the first action. Neither are they the
successors-in-interest of any of the parties therein. The first action is in personam. The
final judgment in said action is only binding and conclusive upon the parties therein and
their successors-in-interest.
xxxx
Mendoza, the petitioner in the first action, laid claim in Lot 107 on the basis of his
possession thereof and Miscellaneous Sales Application. On the other hand, private
respondents’ interest in the contested property is anchored on their own possession and
Miscellaneous Sales Application. In other words, private respondents are not asserting
rights under Mendoza. Consequently, they have no community of interests in the
contested property; in fact, their interests are antagonistic to each other.
On the other hand, “the test often used in determining whether causes of action are
identical is to ascertain whether the same evidence which is necessary to sustain the
second action would have been sufficient to authorize recovery in the first, even if the
forms or nature of the two actions be different” (Carlet vs. Court of Appeals, 275 SCRA
97). Considering that the foundation of private respondents’ action is different from that
of Mendoza, the evidence necessary to sustain the latter’s claim in the first action would
be separate and distinct from that required to establish private respondents’ cause of
action.
Since not all requisites of res judicata are present, respondent judge acted rightly in
issuing the assailed orders. In short, he committed no abuse of discretion.
WHEREFORE, the petition is DISMISSED for lack of merit.
SO ORDERED.”
The motion for reconsideration of the foregoing decision was denied hence, this petition.
Petitioner claims that the case of Assistant Executive Secretarybars the filing of Civil
Case No. 1122, and that a petition for certiorari under Rule 65 of the Rules of Court is the
proper remedy in assailing the order of the Regional Trial Court denying the motion to
dismiss.
Respondents argue that they have been in open, peaceful, public and adverse possession
of the Disputed Property in the concept of owner since 1950; that the patent and original
certificate of title were fraudulently issued in favor of the Peña Heirs; and that their action for
review of decree of registration and/or reconveyance is not barred by the Court’s ruling
in Assistant Executive Secretary.
The issues for resolution are as follows: 1) whether a petition for certiorari under Rule
65 is the proper remedy in as-sailing an order denying a motion to dismiss; and 2) whether
Judge Ampig committed grave abuse of discretion in denying petitioner’s motion to dismiss
and reinstating Civil Case No. 1122.
The petition lacks merit.
It has long been settled that an order denying a motion to dismiss is an interlocutory
order. It neither terminates nor finally disposes of a case, as it leaves something to be done
by the court before the case is finally decided on the merits. As such, the general rule is that
the denial of a motion to dismiss cannot be questioned in a special civil action for certiorari.
However, there are exceptions to the general rule. In Ve-larde v. Lopez, Jr., the Court
held that resort to a special civil action for certiorari is allowed when the ground for the
motion to dismiss is improper venue, lack of jurisdiction, or res judicata as in the case at
bar. Thus, petitioner did not commit a procedural error in filing a petition for certiorari before
the Court of Appeals.
Nevertheless, as to the substantive issue raised herein, the petition must fail. We find
that Judge Ampig did not commit grave abuse of discretion in denying petitioner’s motion to
dismiss and reinstating Civil Case No. 1122.
In Oropeza Marketing Corp. v. Allied Banking Corp., we held that res judicata literally means
“a matter adjudged; a thing judicially acted upon or decided; a thing or matter settled by
judgment.” It lays the rule that an existing final judgment or decree rendered on the merits,
and without fraud or collusion, by a court of competent jurisdiction, upon any matter within
its jurisdiction, is conclusive of the rights of the parties or their privies, in all other actions or
suits in the same or any other judicial tribunal of concurrent jurisdiction on the points and
matters in issue in the first suit.
A case is barred by prior judgment or res judicata when the following requisites concur:
(1) the former judgment is final; (2) it is rendered by a court having jurisdiction over the
subject matter and the parties; (3) it is a judgment or an order on the merits; and (4) there is
—between the first and the second actions—identity of parties, subject matter, and causes
of action.
In this case, it is not disputed that the first three elements are present. Likewise, there is
no controversy regarding the identity of the subject matter. The question, therefore, is
whether there is identity of parties and causes of action. We find that there is none.
Civil Case No. 98 was a special civil action for certiorari filed by Mendoza against the
Assistant Executive Secretary for Legal Affairs of the Office of the President, the BOL, the
Director of Lands, and Peña. On the other hand, Civil Case No. 1122 is an action for review
of decree of registration and/or reconveyance. The parties are respondents Trinidad, the
Peña Heirs, the DENR Region IX Office, and the BOL.
Mendoza’s action in Civil Case No. 98 was based on alleged grave abuse of discretion
of the Office of the President in awarding the entire area of Lot No. 355 to Peña. He claimed
ownership over Lot No. 7 and in support thereof, presented the Miscellaneous Sales
Application he filed with the BOL on November 6, 1962. Meanwhile, respondents’ action
in Civil Case No. 1122 was based on their continued possession of the Disputed Property in
the concept of owner for over 40 years, and the alleged fraudulent issuance of a patent and
certificate of title to the Peña Heirs.
True, res judicata does not require absolute but only substantial identity of parties.
However, there is substantial identity only when the “additional” party acts in the same
capacity or is in privity with the parties in the former action. This is not so in the present
case. It must be emphasized that respondents are not asserting rights under Mendoza.
Indeed, the records will show that the parties in the two cases have their own rights and
interests in relation to the subject matter in litigation.
Moreover, as correctly found by the Court of Appeals, the basis of respondents’ action
was different from that of Men-doza; the evidence necessary to sustain the latter’s claim is
separate and distinct from that required to establish respondents’ cause of action.
While Mendoza relied on the Miscellaneous Sales Application as evidence to support his
claim, herein respondents would have to present proof of their alleged continuous
possession of the Disputed Property as well as fraud in the issuance of the patent and title
in favor of the Peña Heirs. In Morato v. Court of Appeals, we held that the test of identity of
causes of action lies not in the form of action but in whether the same facts or evidence
would support and establish the former and present causes of action.
Thus, res judicata does not apply in the instant case there being no identity of parties
and causes of action. Nevertheless, the public policy underlying the principle of res
judicata must be considered together with the policy that a party shall not be deprived of a
fair adversary proceeding wherein to present his case. It bears stressing that respondents’
action for review of decree of registration is sanctioned under Section 32 of Presidential
Decree No. 1529, which provides that a person deprived of his land through actual fraud
may institute an action to reopen or review a decree of registration within one year from
entry of such decree. It states:
“Section 32. Review of decree of registration; Innocent purchaser for value.—The
decree of registration shall not be reopened or revised by reason of absence, minority,
or other disability of any person adversely affected thereby, nor by any proceeding in
any court for reversing judgments, subject, however, to the right of any person, including
the government and the branches thereof, deprived of land or of any estate or interest
therein by such adjudication or confirmation of title obtained by actual fraud, to file in the
proper Court of First Instance a petition for reopening and review of the decree of
registration not later than one year from and after the date of the entry of such decree of
registration, but in no case shall such petition be entertained by the court where an
innocent purchaser for value has acquired the land or an interest therein, whose rights
may be prejudiced. Whenever the phrase “innocent purchaser for value” or an
equivalent phrase occurs in this Decree, it shall be deemed to include an innocent
lessee, mortgagee, or other encumbrancer for value.
The Court has repeatedly applied the foregoing provision of law to a patent issued by the
Director of Lands, approved by the Secretary of Natural Resources, under the signature of
the President of the Philippines. The date of the issuance of the patent corresponds to the
date of the issuance of the decree in ordinary cases.
In this case, the patent was issued in favor of the Peña Heirs on September 20, 1993.
Respondents filed Civil Case No. 1122 for “Review of Decree of Registration and/or
Reconveyance with Prayer for Issuance of Writ of Preliminary Pro-hibitory Injunction and
Temporary Restraining Order” on January 27, 1994, or well within the prescribed one-year
period. Likewise, records show that TCT No. 58976 under petitioner’s name bears a Notice
of Lis Pendens. Thus, it cannot be said that petitioner is an innocent purchaser for value as
she was well aware of respondents’ claim over the Disputed Property.
Further, even assuming arguendo that respondents filed their action after one year, they
may still be entitled to relief. An aggrieved party may file an action for reconveyance based
on implied or constructive trust, which prescribes in ten years from the date of the issuance
of the certificate of title over the property provided that the property has not been acquired
by an innocent purchaser for value.
Respondents clearly asserted in their complaint that they and their predecessors-in-
interest have long been the owners of the Disputed Property and that they were fraudulently
deprived of ownership thereof when the Peña Heirs obtained a patent and certificate of title
in their favor. These allegations certainly measure up to the requisite statement of facts to
constitute an action for reconveyance.
A final note. It appears from the records that after our ruling in the Assistant Executive
Secretary case in 1989, the BOL issued a Patent on September 20, 1993 in favor of the
Peña Heirs which became the basis for the issuance of OCT No. P-33658 covering Lot No.
107. However, as held in the Assistant Executive Secretary case, Lot No. 107—as
accretions to the original lot (Lot No. 355) awarded to Larrabaster on July 10, 1950—“no
longer belonged to the Government[,] the subdivision thereof by the Bureau of Lands into
three lots (Lot No. 107, Lot No. 108 and Lot No. 109), as well as the allocation of said lots
to two other individuals, was beyond the scope of its authority.” As a result, while Lot No.
107 may no longer be acquired under the provisions of the Public Land Act, it does not
absolutely foreclose the possibility that, as a private property, a portion thereof (the
Disputed Property) may have been acquired by respondents through acquisitive
prescription under the Civil Code. These matters, however, are the proper subject of a
separate action should one be filed subject, of course, to such claims and defenses that
either party may have under relevant laws.
All told, it would be premature to order the dismissal of re-spondents’ complaint as they
have yet to be given an opportunity to substantiate their claims. We note that respondents
are in actual physical possession of the Disputed Property up to this date, and the fact of
their physical possession over many years is not disputed by petitioner. Under the
circumstances, it would be more in keeping with the standards of fairness to have a full-
blown trial where the evidentiary matters are threshed out.
WHEREFORE, the petition is DENIED. The July 31, 2000 Decision, and the January 8,
2001 Resolution of the Court of Appeals in CA-G.R. SP No. 55581 are AFFIRMED. The trial
court is ORDERED to resume trial in Civil Case No. 1122 and to resolve the same with
dispatch.
SO ORDERED.
——o0o——
 G.R. No. 40399. February 6, 1990.
MARCELINO C. AGNE, FELIX ORIANE, AGATON TAGA-NAS, HILARIO ESCORPIZO,
ISABELO MAURICIO, HEIRS OF ROMAN DAMASO, NAMELY: JORGE DAMASO and
ALEJANDRO DAMASO, HEIRS OF FRANCISCO RAMOS, NAMELY: ENCARNACION R.
LEANO and DOMINGA R. MEDRANO, HEIRS OF SABINA GELACIO AGAPITO,
NAMELY: SERAPIO AGAPITO, and NICOLASA AGAPITO, FELISA DICCION AGNE,
ESTANISLAO GOROSPE, LI-BRADO BADUA, NICOLAS VILLANUEVA, HEIRS OF
CAR-LOS PALADO, NAMELY: FORTUNATA PALADO and ISABELITA PALADO,
PRIMITIVO TAGANAS, PANFILO SOINGCO, BERNARDO PALATTAO, MARCELINO S.
SANTOS and PAULINO D. AGNE, JR. (Minor), represented by his mother FELISA
DICCION AGNE, petitioners, vs. THE DIRECTOR OF LANDS, PRESENTACION AGPOON
GASCON, JOAQUIN GASCON and HON. ROSALIO C. SEGUNDO, Presiding Judge,
Court of First Instance of Pangasinan, Branch V, respondents.
G.R. No. 72255. February 6, 1990.
MARCELINO C. AGNE, FELIX ORIANE, AGATON TAGA-NAS (deceased), represented
by FLORENTINO C. TAGANAS, FELISA DICCION AGNE, HILARIO ESCORPIZO,
NICOLAS VILLANUEVA, ISABELO MAURICIO, ESTANISLAO GOROS-PE (deceased),
represented by ELIZABETH G. BADUA and SILVINA G. VALERIO, LIBRADO BADUA,
JOSE ALSISTO, SERAPIO AGAPITO, NICOLASA AGAPITO, JORGE DAMASO,
ALEJANDRO DAMASO, ENCARNACION RAMOS, DOMINGA RAMOS and CARLOS
PALADO, petitioners, vs. HON. INTERMEDIATE APPELLATE COURT, PRESEN-TACION
AGPOON GASCON and JOAQUIN GASCON, respondents.
Land Registration; Torrens Title; Public Lands; Indefeasibility of a Torrens title issued pursuant
to a patent may be invoked only when the land involved originally formed part of the public domain, not
when the land is of private ownership.—If the said averments are true, and the factual recitals thereon
have been admitted in the stipulation of facts hereinbefore quoted, then the land in question was and is
of private ownership and, therefore, beyond the jurisdiction of the Director of Lands. The free patent
and subsequent title issued pursuant thereto are null and void. The indefeasibility and imprescriptibility
of a Torrens title issued pursuant to a patent may be invoked only when the land involved originally
formed part of the public domain. If it was a private land, the patent and certificate of title issued upon
the patent are a nullity.
Same; Same; The rule on incontrovertibility of a certificate of title after one year from entry, not
applicable when the ground for cancellation is the nullity of the patent and the title issued pursuant
thereto.—The rule on the incontrovertibility of a certificate of title upon the expiration of one year, after
the entry of the decree, pursuant to the provisions of the Land Registration Act, does not apply where
an action for the cancellation of a patent and a certificate of title issued pursuant thereto is instituted on
the ground that they are null and void because the Bureau of Lands had no jurisdiction to issue them at
all, the land in question having been withdrawn from the public domain prior to the subsequent award of
the patent and the grant of a certificate of title to another person. Such an action is different from a
review of the decree of title on the ground of fraud.
Same; Same; Property; Reconveyance; Prescription; Actions for reconveyance, grounded on
the nullity of the conveyance of the subject property, are imprescriptible.—Although a period of one
year has already expired from the time a certificate of title was issued pursuant to a public grant, said
title does not become incontrovertible but is null and void if the property covered thereby is originally of
private ownership, and an action to annul the same does not prescribe. Moreover, since herein
petitioners are in possession of the land in dispute, an action to quiet title is imprescriptible. Their action
for reconveyance which, in effect, seeks to quiet title to property in one’s possession is imprescriptible.
Their undisturbed possession for a number of years gave them a continuing right to seek the aid of a
court of equity to determine the nature of the adverse claims of a third party and the effect on her title.
As held in Caragay-Layno vs. Court of Appeals, et al.,an adverse claimant of a registered land,
undisturbed in his possession thereof for a period of more than fifty years and not knowing that the land
he actually occupied had been registered in the name of another, is not precluded from filing an action
for reconveyance which, in effect, seeks to quiet title to property as against the registered owner who
was relying upon a Torrens title which could have been fraudulently acquired. To such adverse
claimant, the remedy of an action to quiet title is imprescriptible. In actions for reconveyance of property
predicated on the fact that the conveyance complained of was void ab initio, a claim of prescription of
the action would be unavailing.
Same; Same; Same; Accretion; Riparian owner acquires automatic ownership of the
abandoned bed without need of any formal act of acquisition.—It is thus clear under this provision that
once the river bed has been abandoned, the riparian owners become the owners of the abandoned bed
to the extent provided by this article. The acquisition of ownership is automatic. There need be no act
on the part of the riparian owners to subject the accession to their ownership, as it is subject
thereto ipso jure from the moment the mode of acquisition becomes evident, without the need of any
formal act of acquisition. Such abandoned river bed had fallen to the private ownership of the owner of
the riparian land even without any formal act of his will and any unauthorized occupant thereof will be
considered as a trespasser. The right in re to the principal is likewise a right in re to the accessory, as it
is a mode of acquisition provided by law, as the result of the right of accretion. Since the accessory
follows the nature of the principal, there need not be any tendency to the thing or manifestation of the
purpose to subject it to our ownership, as it is subject thereto ipso jure from the moment the mode of
acquisition becomes evident.
Same; Same; Free Patents; Act 2874; Patent and certificate of title issued by Director of Lands
covering private lands, null and void.—Under the provisions of Act No. 2874 pursuant to which the title
of private respondents’ predecessor in interest was issued, the President of the Philippines or his alter
ego, the Director of Lands, has no authority to grant a free patent for land that has ceased to be a
public land and has passed to private ownership, and a title so issued is null and void. The nullity
arises, not from the fraud or deceit, but from the fact that the land is not under the jurisdiction of the
Bureau of Lands. The jurisdiction of the Director of Lands is limited only to public lands and does not
cover lands privately owned. The purpose of the Legislature in adopting the former Public Land Act, Act
No. 2874, was and is to limit its application to lands of the public domain, and lands held in private
ownership are not included therein and are not affected in any manner whatsoever thereby. Land held
in freehold or free title, or of private ownership, constitute no part of the public domain and cannot
possibly come within the purview of said Act No. 2874, inasmuch as the “subject” of such freehold or
private land is not embraced in any manner in the title of the Act and the same are excluded from the
provisions or text thereof.
Same; Same; Land Registration Act and Cadastral Act cannot give anybody a better title than
what he lawfully has.—A free patent which purports to convey land to which the Government did not
have any title at the time of its issuance does not vest any title in the patentee as against the true
owner. The Court has previously held that the Land Registration Act and the Cadastral Act do not give
anybody who resorts to the provisions thereof a better title than what he really and lawfully has. “x x x
The Land Registration Act as well as the Cadastral Act protects only the holders of a title in good faith
and does not permit its provisions to be used as a shield for the commission of fraud, or that one
should enrich himself at the expense of another (Gustilo vs. Maravilla, 48 Phil. 838). The above-stated
Acts do not give anybody, who resorts to the provisions thereof, a better title than he really and lawfully
has. If he happened to obtain it by mistake or to secure, to the prejudice of his neighbor, more land
than he really owns, with or without bad faith on his part, the certificate of title, which may have been
issued to him under the circumstances, may and should be cancelled or corrected (Legarda and Prieto
vs. Saleeby, 31 Phil., 590). x x x.” We have, therefore, to arrive at the unavoidable conclusion that the
title of herein petitioners over the land in dispute is superior to the title of the registered owner which is
a total nullity. The long and continued possession of petitioners under a valid claim of title cannot be
defeated by the claim of a registered owner whose title is defective from the beginning.
Same; Same; Laches; The registered owner’s long inaction and inexcusable neglect converted
their right to recover possession, a stale demand.—Moreover, the failure of herein private respondents
to assert their claim over the disputed property for almost thirty 30 years constitute laches and bars an
action to recover the same. The registered owners’ right to recover possession of the property and title
thereto from petitioners has, by long inaction or inexcusable neglect, been converted into a stale
demand.
REGALADO, J.:
Before us are two separate petitions for review on certiorari of the order of the defunct Court
of First Instance of Pangasinan, Branch V, in Civil Case No. 2649, entitled “Marcelino Agne,
et al. vs. The Director of Lands, et al.,” dismissing the complaint filed by herein petitioners in
said case; and the decision of the then Intermediate Appellate Court in AC-G.R. CV No.
60388-R, entitled “Presentacion Agpoon Gascon vs. Marcelino C. Agne, et al.,”
promulgated on January 30, 1985, affirming in toto the decision of the trial court in favor of
herein private respondents, which cases are docketed herein as G.R. No. L-40399 and G.R.
No. 72255, respectively.
These two petitions, arising from the same facts and involving the same parties and
common questions of law, were ordered consolidated in our resolution of August 9, 1989.
As found by respondent court and disclosed by the records, the land subject matter of
this case was originally covered by Free Patent No. 23263 issued on April 17, 1937 in the
name of Herminigildo Agpoon. On May 21, 1937, pursuant to the said patent, the Register
of Deeds of Pangasinan issued to said Herminigildo Agpoon Original Certificate of Title No.
2370. Presentacion Agpoon Gascon inherited the said parcel of land upon the death of her
father, Herminigildo, and was issued Transfer Certificate of Title No. 32209 on April 6, 1960.
Respondent Presentacion declared the said land for taxation purposes in her name under
Tax Declaration No. 11506 and taxes were paid thereon in her name.
On April 13, 1971, private respondent spouses filed Civil Case No. U-2286 in the then
Court of First Instance of Pangasinan for recovery of possession and damages against
petitioners. Their complaint states that they are the registered owners under the aforesaid
Transfer Certificate of Title No. 32209 of the parcel of land situated in Barrio Bantog,
Asingan, Pangasinan which is now in the possession of petitioners; that during the
Japanese occupation, petitioners, taking advantage of the abnormal conditions then
obtaining, took possession of said land by means of fraud, stealth, strategy and intimidation;
that private respondents repeatedly demanded the surrender of the physical possession of
said property but the latter refused.5
Petitioners, in answer to said complaint, alleged that the land in question was formerly a
part of the river bed of the AgnoChico River; that in the year 1920, a big flood occurred
which caused the said river to change its course and abandon its original bed; that by virtue
of the provisions of Article 370 of the Spanish Civil Code which was then the law in force,
petitioners, by operation of law, became the owners by accession or accretion of the
respective aliquot parts of said river bed bordering their properties; that since 1920, they
and their predecessors in interest occupied and exercised dominion openly and adversely
over said portion of the abandoned river bed in question abutting their respective riparian
lands continuously up to the present to the exclusion of all other persons, particularly
Herminigildo Agpoon; that they have introduced improvements thereon by constructing
irrigation canals and planting trees and agricultural crops thereon and converted the land
into a productive area.
In their joint stipulation of facts, the parties agreed as follows:
“1. That the parties admit the identity and area of the land in question, which forms part
of the river bed of the Agno-Chico River, and further admit that the said river bed was
abandoned as a result of a flood in 1920 and opened a new bed. The location and
course of the aforesaid abandoned river bed as well as the relative position of the lands
bordering the same can be gleaned from Cadastral Survey Plan of Asingan,
Pangasinan, Street No. 49 thereof, as approved by the Director of Lands on October 12,
1912, a photostat copy of which is hereto attached and made an integral part hereof as
Annex ‘A’.
“2. That the parties admit that the defendants are the riparian owners of the area in
question and further admit that the defendants are in possession thereof but that each
of them is in possession only of an aliquot part of the said area proportionate to the
length of their respective lands. (As amended).
“3. That the parties likewise admit that a Free Patent No. 23263 in the name of
Herminigildo Agpoon covering the area in question was issued on April 17, 1937 and
that they admit O.C.T. No. 2370 of the Register of Deeds of Pangasinan covering the
same parcel of land was issued to the same Herminigildo Agpoon on May 21, 1937, a
photostat copy of said O.C.T. is hereto attached as Annex ‘B’.
“4. That the parties admit that the property in controversy is now covered by T.C.T.
No. 32209 in the name of Presentacion Agpoon Gascon and by Tax Declaration No.
11506 in the name of said Presentacion Agpoon Gascon, a photostat reproduction of
said T.C.T. No. and Tax Declaration are hereto attached and marked as Annexes ‘C’
and ‘F’, respectively.”
On March 6, 1974, while the above-mentioned case was still pending, petitioners filed a
complaint against the respondents Director of Lands and spouses Agpoon with the former
Court of First Instance of Pangasinan for annulment of title, reconveyance of and/or action
to clear title to a parcel of land, which action was docketed as Civil Case No. U-2649.
Petitioners alleged in their said complaint that the land in question, which was formerly a
portion of the bed of Agno-Chico river which was abandoned as a result of the big flood in
1920, belongs to them pursuant to the provision of Article 370 of the old Civil Code; that it
was only on April 13, 1971, when respondent spouses filed a complaint against them, that
they found out that the said land was granted by the Government to Herminigildo Agpoon
under Free Patent No. 23263, pursuant to which Original Certificate of Title No. 2370 was
issued in the latter’s name; and that the said patent and subsequent titles issued pursuant
thereto are null and void since the said land, an abandoned river bed, is of private
ownership and, therefore, cannot be the subject of a public land grant.
On June 21, 1974, the trial court rendered a decision in Civil Case No. U-2286, the
dispositive part of which reads as follows:
“WHEREFORE, IN VIEW OF ALL THE FOREGOING, the Court renders judgment:
1. Ordering the defendants to surrender to the plaintiffs the physical possession of
the land in question described in paragraph 3 of the amended complaint;
2. Ordering the defendants to pay jointly and severally to the plaintiff the produce of
the land in question in the total sum of P5,000.00 per year from the date of the filing of
the present action at the rate of 6% interest per annum until fully paid;
 3. Ordering the defendants to pay jointly and severally the amount of P800.00
representing attorney’s fees;
4. And to pay the costs.
SO ORDERED.”
Not satisfied with said decision, petitioners appealed to respondent court. As earlier stated,
on January 30, 1985 the former Intermediate Appellate Court affirmed in toto in AC-G.R. CV
No. 60388-R the said decision of the court a quo, and with the denial of petitioner’s motion
for reconsideration, the case came up to us as G.R. No. 72255.
On June 24, 1974, the aforesaid Court of First Instance of Pangasinan, acting on the
motion to dismiss filed by respondents Director of Lands and spouses Agpoon, issued an
order dismissing Civil Case No. U-2649 for annulment of title by merely citing the statement
in the case of Antonio, et al. vs. Barroga, et al. that an action to annul a free patent many
years after it had become final and indefeasible states no cause of action. Petitioners’
motion for the reconsideration of said order was denied on September 11, 1974, hence the
recourse to us in G.R. No. L-40399.
In these petitions, petitioners raise the following issues:
1. Whether or not the lower court is justified in dismissing the complaint by simply
invoking the ruling in the aforestated case of Antonio although the facts and
circumstances set forth in the complaint show that the land in question was private land
under Article 370 of the old Civil Code and that the subsequent derivative certificates of
title in question were null and void ab initio because the said land was not within the
authority of the government to dispose of in favor of any party and must be ordered
annulled, cancelled or rescinded;15
2. Whether or not the trial court and the former Intermediate Appellate Court were
justified in not basing their judgments on the judicial admissions of private respondents
in the stipulation of facts of the parties, since such admissions have the legal force and
effect of precluding private respondents from disputing such admission;
3. Whether or not respondent court can presume that private respondents or their
predecessor had prior possession of the land in dispute in the light of provisions of law
which oblige them to prove such possession, as well as the stipulated facts and other
facts and circumstances on record showing that private respondents or their
predecessor were not in actual occupancy of the said land, and without appreciating the
evidence put up by petitioners to prove their prior possession thereof;
4. Whether or not respondent court was justified in its application of Section 41 of
the Code of Civil Procedure in favor of private respondents, although the private
respondents did not invoke said law in this case and did not adduce any evidence or
proof that all the essential requisites of acquisitive prescription under the said law were
present in their favor;
5. Whether or not the Government had the right to convey by way of free patent to
any party the land in dispute which belonged to the riparian owners as decreed by
Article 370 of the old Civil Code, the law then in force, and despite the fact that the
patentee herein never occupied the said land during the period prescribed by Act No.
2874; and
6. Whether or not private respondents are guilty of laches for not having attempted
to file suit to recover the land in dispute during an interval of 50 or 30 years.
The issues and arguments raised by the proponents in these petitions are well taken.
We agree with petitioners that the lower court erred in ordering the dismissal of Civil
Case No. U-2649. The aforesaid case of Antonio relied upon by the lower court in its
dismissal order is not controlling. In that case, the complaint was dismissed for failure to
state a cause of action, not only because of the delay in the filing of the complaint but
specifically since the ground relied upon by the plaintiff therein, that is, that the land was
previously covered by a titulo real, even if true, would not warrant the annulment of the free
patent and the subsequent original certificate of title issued to defendant. Thus:
“It is true that by filing the application for a free patent Borroga impliedly admitted either
the invalidity or insufficiency of Titulo Real No. 12479 issued in the name of his
predecessor in interest on July 22, 1894, but neither the allegation made in his answer
that his aforesaid predecessor in interest was the absolute owner of the property
covered by said Titulo Real nor his implied admission of the latter’s invalidity or
insufficiency are grounds for the annulment of the free patent and original certificate of
title in question. Evidently, it was Barroga’s privilege to rely or not to rely upon his claim
of private ownership in favor of his predecessor in interest and of whatever the latter’s
Titulo Real was worth. He decided not to rely upon them and to consider that the
property covered by the Titulo Real was still part of the public domain. Acting
accordingly he applied for a free patent and was successful. It must be borne in mind
that the Titulo Real was not an indefeasible title and that its holder still had to prove that
he had possessed the land covered by it without interruption during a period of ten
years by virtue of a good title and in good faith (Royal Decree of June 25, 1880). We
may well presume that Barroga felt that he had no sufficient evidence to prove this, for
which reason he decided to acquire the land as part of the public domain.”
In the case at bar, the facts alleged in the complaint, which are deemed hypothetically
admitted upon the filing of the motion to dismiss, constitute a sufficient cause of action
against private respondents. Petitioners in their complaint in Civil Case No. U-2649 alleged,
among others, that the disputed area was formerly an abandoned river bed formed due to
natural causes in 1920; that the riparian owners of the lands abutting said abandoned river
bed were the plaintiffs and/or their predecessors in interest; that since then and up to the
present, they have been occupying and cultivating aliquot portions of the said land
proportionate to the respective lengths of their riparian lands; that they are the real and
lawful owners of the said land as decreed by Article 370 of the old Civil Code, the law then
in force; that since the said area was a private land, the same could not have been the
subject matter of an application for free patent; and that all these facts were known to the
private respondents and their predecessor in interest.
If the said averments are true, and the factual recitals thereon have been admitted in
the stipulation of facts hereinbefore quoted, then the land in question was and is of private
ownership and, therefore, beyond the jurisdiction of the Director of Lands. The free patent
and subsequent title issued pursuant thereto are null and void. The indefeasibility and
imprescriptibility of a Torrens title issued pursuant to a patent may be invoked only when the
land involved originally formed part of the public domain. If it was a private land, the patent
and certificate of title issued upon the patent are a nullity.
The rule on the incontrovertibility of a certificate of title upon the expiration of one year,
after the entry of the decree, pursuant to the provisions of the Land Registration Act, does
not apply where an action for the cancellation of a patent and a certificate of title issued
pursuant thereto is instituted on the ground that they are null and void because the Bureau
of Lands had no jurisdiction to issue them at all, the land in question having been withdrawn
from the public domain prior to the subsequent award of the patent and the grant of a
certificate of title to another person. Such an action is different from a review of the decree
of title on the ground of fraud.
 Although a period of one year has already expired from the time a certificate of title was
issued pursuant to a public grant, said title does not become incontrovertible but is null and
void if the property covered thereby is originally of private ownership, and an action to annul
the same does not prescribe. Moreover, since herein petitioners are in possession of the
land in dispute, an action to quiet title is imprescriptible. Their action for reconveyance
which, in effect, seeks to quiet title to property in one’s possession is imprescriptible. Their
undisturbed possession for a number of years gave them a continuing right to seek the aid
of a court of equity to determine the nature of the adverse claims of a third party and the
effect on her title. As held in Caragay-Layno vs. Court of Appeals, et al., an adverse
claimant of a registered land, undisturbed in his possession thereof for a period of more
than fifty years and not knowing that the land he actually occupied had been registered in
the name of another, is not precluded from filing an action for reconveyance which, in effect,
seeks to quiet title to property as against the registered owner who was relying upon a
Torrens title which could have been fraudulently acquired. To such adverse claimant, the
remedy of an action to quiet title is imprescriptible. In actions for reconveyance of property
predicated on the fact that the conveyance complained of was void ab initio, a claim of
prescription of the action would be unavailing.
The resolution of the other assigned errors hinges on the issue of who, as between the
riparian owner presently in possession and the registered owner by virtue of a free patent,
has a better right over the abandoned river bed in dispute.
We rule in favor of petitioners.
The claim of ownership of herein petitioners is based on the old Civil Code, the law then
in force, which provides:
“The beds of rivers which remain abandoned because the course of the water has
naturally changed belong to the owners of the riparian lands throughout their respective
lengths. If the abandoned bed divided estates belonging to different owners, the new
dividing line shall run at equal distance therefrom.”
It is thus clear under this provision that once the river bed has been abandoned, the riparian
owners become the owners of the abandoned bed to the extent provided by this article. The
acquisition of ownership is automatic. There need be no act on the part of the riparian
owners to subject the accession to their ownership, as it is subject thereto ipso jure from the
moment the mode of acquisition becomes evident, without the need of any formal act of
acquisition. Such abandoned river bed had fallen to the private ownership of the owner of
the riparian land even without any formal act of his will and any unauthorized occupant
thereof will be considered as a trespasser. The right in re to the principal is likewise a
right in re to the accessory, as it is a mode of acquisition provided by law, as the result of
the right of accretion. Since the accessory follows the nature of the principal, there need not
be any tendency to the thing or manifestation of the purpose to subject it to our ownership,
as it is subject thereto ipso jure from the moment the mode of acquisition becomes evident.
The right of the owner of land to additions thereto by accretion has been said to rest in
the law of nature, and to be analogous to the right of the owner of a tree to its fruits, and the
owner of flocks and herds to their natural increase. Petitioners herein became owners of
aliquot portions of said abandoned river bed as early as 1920, when the Agno River
changed its course, without the necessity of any action or exercise of possession on their
part, it being an admitted fact that the land in dispute, prior to its registration, was an
abandoned bed of the Agno River and that petitioners are the riparian owners of the lands
adjoining the said bed.
The failure of herein petitioners to register the accretion in their names and declare it for
purposes of taxation did not divest it of its character as a private property. Although we take
cognizance of the rule that an accretion to registered land is not automatically registered
and therefore not entitled or subject to the protection of imprescriptibility enjoyed by
registered property under the Torrens system. The said rule is not applicable to this case
since the title claimed by private respondents is not based on acquisitive prescription but is
anchored on a public grant from the Government, which presupposes that it was inceptively
a public land. Ownership over the accession is governed by the Civil Code. Imprescriptibility
of registered land is a concern of the Land Registration Act.
Under the provisions of Act No. 2874 pursuant to which the title of private respondents’
predecessor in interest was issued, the President of the Philippines or his alter ego, the
Director of Lands, has no authority to grant a free patent for land that has ceased to be a
public land and has passed to private ownership, and a title so issued is null and void. The
nullity arises, not from the fraud or deceit, but from the fact that the land is not under the
jurisdiction of the Bureau of Lands. The jurisdiction of the Director of Lands is limited only to
public lands and does not cover lands privately owned. The purpose of the Legislature in
adopting the former Public Land Act, Act No. 2874, was and is to limit its application to
lands of the public domain, and lands held in private ownership are not included therein and
are not affected in any manner whatsoever thereby. Land held in freehold or fee title, or of
private ownership, constitute no part of the public domain and cannot possibly come within
the purview of said Act No. 2874, inasmuch as the “subject” of such freehold or private land
is not embraced in any manner in the title of the Act and the same are excluded from the
provisions or text thereof.
We reiterate that private ownership of land is not affected by the issuance of a free
patent over the same land because the Public Land Act applies only to lands of the public
domain. Only public land may be disposed of by the Director of Lands. Since as early as
1920, the land in dispute was already under the private ownership of herein petitioners and
no longer a part of the lands of the public domain, the same could not have been the
subject matter of a free patent. The patentee and his successors in interest acquired no
right or title to the said land. Necessarily, Free Patent No. 23263 issued to Herminigildo
Agpoon is null and void and the subsequent titles issued pursuant thereto cannot become
final and indefeasible. Hence, we ruled in Director of Lands vs. Sisican, et al. that if at the
time the free patents were issued in 1953 the land covered therein were already private
property of another and, therefore, not part of the disposable land of the public domain, then
applicants patentees acquired no right or title to the land.
Now, a certificate of title fraudulently secured is null and void ab initio if the fraud
consisted in misrepresenting that the land is part of the public domain, although it is not. As
earlier stated, the nullity arises, not from the fraud or deceit but, from the fact that the land is
not under the jurisdiction of the Bureau of Lands. Being null and void, the free patent
granted and the subsequent titles produce no legal effects whatsoever. Quod nullum est,
nullum producit effectum.
A free patent which purports to convey land to which the Government did not have any
title at the time of its issuance does not vest any title in the patentee as against the true
owner. The Court has previously held that the Land Registration Act and the Cadastral Act the expeditious administration of justice will be subserved by such a resolution and thereby
do not give anybody who resorts to the provisions thereof a better title than what he really obviate the needless protracted proceedings consequent to the remand of the case of the
and lawfully has. trial court. On these considerations, as well as the fact that these cases have been pending
“x x x The Land Registration Act as well as the Cadastral Act protects only the holders for a long period of time, we see no need for remanding Civil Case No. 2649 for further
of a title in good faith and does not permit its provisions to be used as a shield for the proceedings, and we hold that the facts and the ends of justice in this case require the
commission of fraud, or that one should enrich himself at the expense of another reconveyance by private respondents to petitioners of the disputed lot.
(Gustilo vs. Maravilla, 48 Phil. 838). The above-stated Acts do not give anybody, who
resorts to the provisions thereof, a better title than he really and lawfully has. If he
happened to obtain it by mistake or to secure, to the prejudice of his neighbor, more WHEREFORE, the assailed decision of respondent court in its AC-G.R. CV No. 60388-
land than he really owns, with or without bad faith on his part, the certificate of title, R and the questioned order of dismissal of the trial court in its Civil Case No. 2649 are
which may have been issued to him under the circumstances, may and should be hereby REVERSED and SET ASIDE and judgment is hereby rendered ORDERING private
cancelled or corrected (Legarda and Prieto vs. Saleeby, 31 Phil., 590). x x x.” respondents to reconvey the aforesaid parcel of land to petitioners.
SO ORDERED.
We have, therefore, to arrive at the unavoidable conclusion that the title of herein petitioners
over the land in dispute is superior to the title of the registered owner which is a total nullity. Note.—The requisites for land accretion to take place for the benefit of riparian owner are: (1) that
The long and continued possession of petitioners under a valid claim of title cannot be the deposit be gradual and imperceptible; (2) that it be made through the effects of the current of the
defeated by the claim of a registered owner whose title is defective from the beginning. water; and (3) that the land where accretion takes place is adjacent to the bank of rivers. (Republic vs.
Court of Appeals, 132 SCRA 514.)
The quality of conclusiveness of a Torrens title is not available for use to perpetrate
fraud and chicanery. To paraphrase from Angeles vs. Samia, supra, the Land Registration ——o0o——
Act does not create or vest title. It only confirms and records title already existing and
vested. It does not protect a usurper from the true owner. It cannot be a shield for the
commission of fraud. It does not permit one to enrich himself at the expense of another.
Stated elsewise, the Torrens system was not established as a means for the acquisition of
title to private land. It is intended merely to confirm and register the title which one may
already have on the land. Where the applicant possesses no title or ownership over the
parcel of land, he cannot acquire one under the Torrens system of registration. Resort to the
provisions of the Land Registration Act does not give one a better title than he really and
lawfully has. Registration does not vest title. It is not a mode of acquiring property. It is
merely evidence of such title over a particular property. It does not give the holder any
better title than what he actually has, especially if the registration was done in bad faith. The
effect is that it is as if no registration was made at all.

Moreover, the failure of herein private respondents to assert their claim over the
disputed property for almost thirty 30 years constitute laches and bars an action to recover
the same. The registered owners’ right to recover possession of the property and title
thereto from petitioners has, by long inaction or inexcusable neglect, been converted into a
stale demand.

Considering that petitioners were well within their rights in taking possession of the lot in
question, the findings of respondent court that herein petitioners took advantage of the
infirmities and weakness of the preceding claimant, Herminigildo Agpoon, in taking
possession of said land during the Japanese occupation is neither tenable in law nor
sustained by preponderant evidence in fact.

Where the evidence show that the plaintiff is the true owner of the land subject of the
free patent and title granted to another and that the defendant and his predecessor in
interest were never in possession thereof, the Court, in the exercise of its equity jurisdiction
and without ordering the cancellation of said title issued upon the patent, may direct the
defendant registered owner to reconvey the property to the plaintiff. Further, if the
determinative facts are before the Court and it is in a position to finally resolve the dispute,