G.R. No. 76217; G.R. No. L-76216 September 14, 1989 intimidation, in violation of P.D.
intimidation, in violation of P.D. 1038 and (3) trespassing, coercing and threatening to
GERMAN MANAGEMENT & SERVICES, INC., petitioner,
vs.
HON. COURT OF APPEALS, et al, respondents.
Spouses Cynthia Cuyegkeng Jose and Manuel Rene Jose, residents of Pennsylvania,
Philadelphia, USA are the owners of a parcel of land situated in Sitio Inarawan, San
Isidro, Antipolo, Rizal, with an area of 232,942 square meters and covered by TCT
No. 50023 of the Register of Deeds of the province of Rizal issued on September 11,
1980 which canceled TCT No. 56762/ T-560. The land was originally registered on
August 5, 1948 in the Office of the Register of Deeds of Rizal as OCT No. 19,
pursuant to a Homestead Patent granted by the President of the Philippines on July 27,
1948, under Act No. 141.
On February 26, 1982, the spouses Jose executed a special power of attorney
authorizing petitioner German Management Services to develop their property covered
by TCT No. 50023 into a residential subdivision. Consequently, petitioner on February
9,1983 obtained Development Permit No. 00424 from the Human Settlements
Regulatory Commission for said development. Finding that part of the property was
occupied by private respondents and twenty other persons, petitioner advised the
occupants to vacate the premises but the latter refused. Nevertheless, petitioner
proceeded with the development of the subject property which included the portions
occupied and cultivated by private respondents.
Private respondents filed an action for forcible entry against petitioner before the
Municipal Trial Court of Antipolo, Rizal, alleging that they are mountainside farmers
of Sitio Inarawan, San Isidro, Antipolo, Rizal and members of the Concerned Citizens
of Farmer's Association; that they have occupied and tilled their farmholdings some
twelve to fifteen years prior to the promulgation of P.D. No. 27; that during the first
week of August 1983, petitioner, under a permit from the Office of the Provincial
Governor of Rizal, was allowed to improve the Barangay Road at Sitio Inarawan, San
Isidro, Antipolo, Rizal at its expense, subject to the condition that it shag secure the
needed right of way from the owners of the lot to be affected; that on August 15, 1983
and thereafter, petitioner deprived private respondents of their property without due
process of law by: (1) forcibly removing and destroying the barbed wire fence
enclosing their farmholdings without notice; (2) bulldozing the rice, corn fruit bearing
trees and other crops of private respondents by means of force, violence and
harass, remove and eject private respondents from their respective farmholdings in
violation of P.D. Nos. 316, 583, 815, and 1028. 1
On January 7,1985, the Municipal Trial Court dismissed private respondents'
complaint for forcible entry. 2 On appeal, the Regional Trial Court of Antipolo, Rizal,
Branch LXXI sustained the dismissal by the Municipal Trial Court. 3
Private respondents then filed a petition for review with the Court of Appeals. On July
24,1986, said court gave due course to their petition and reversed the decisions of the
Municipal Trial Court and the Regional Trial Court. 4
The Appellate Court held that since private respondents were in actual possession of
the property at the time they were forcibly ejected by petitioner, private respondents
have a right to commence an action for forcible entry regardless of the legality or
illegality of possession. 5 Petitioner moved to reconsider but the same was denied by
the Appellate Court in its resolution dated September 26, 1986. 6
Hence, this recourse.
The issue in this case is whether or not the Court of Appeals denied due process to
petitioner when it reversed the decision of the court a quo without giving petitioner the
opportunity to file its answer and whether or not private respondents are entitled to file
a forcible entry case against petitioner. 7
We affirm. The Court of Appeals need not require petitioner to file an answer for due
process to exist. The comment filed by petitioner on February 26, 1986 has sufficiently
addressed the issues presented in the petition for review filed by private respondents
before the Court of Appeals. Having heard both parties, the Appellate Court need not
await or require any other additional pleading. Moreover, the fact that petitioner was
heard by the Court of Appeals on its motion for reconsideration negates any violation
of due process.
Notwithstanding petitioner's claim that it was duly authorized by the owners to
develop the subject property, private respondents, as actual possessors, can commence
a forcible entry case against petitioner because ownership is not in issue. Forcible
1
entry is merely a quieting process and never determines the actual title to an estate.
Title is not involved. 8
In the case at bar, it is undisputed that at the time petitioner entered the property,
private respondents were already in possession thereof . There is no evidence that the
spouses Jose were ever in possession of the subject property. On the contrary, private
respondents' peaceable possession was manifested by the fact that they even planted
rice, corn and fruit bearing trees twelve to fifteen years prior to petitioner's act of
destroying their crops.
Although admittedly petitioner may validly claim ownership based on the muniments
of title it presented, such evidence does not responsively address the issue of prior
actual possession raised in a forcible entry case. It must be stated that regardless of the
actual condition of the title to the property, the party in peaceable quiet possession
shall not be turned out by a strong hand, violence or terror. 9 Thus, a party who can
prove prior possession can recover such possession even against the owner himself.
Whatever may be the character of his prior possession, if he has in his favor priority in
time, he has the security that entitles him to remain on the property until he is lawfully
ejected by a person having a better right by accion publiciana or accion
reivindicatoria. 10
Both the Municipal Trial Court and the Regional Trial Court have rationalized
petitioner's drastic action of bulldozing and destroying the crops of private respondents
on the basis of the doctrine of self-help enunciated in Article 429 of the New Civil
Code. 11 Such justification is unavailing because the doctrine of self-help can only be
exercised at the time of actual or threatened dispossession which is absent in the case
at bar. When possession has already been lost, the owner must resort to judicial
process for the recovery of property. This is clear from Article 536 of the Civil Code
which states, "(I)n no case may possession be acquired through force or intimidation as
long as there is a possessor who objects thereto. He who believes that he has an action
or right to deprive another of the holding of a thing, must invoke the aid of the
competent court, if the holder should refuse to deliver the thing."
WHEREFORE, the Court resolved to DENY the instant petition. The decision of the
Court of Appeals dated July 24,1986 is hereby AFFIRMED. Costs against petitioner.
SO ORDERED.
G.R. No. L-28716 November 18, 1970
FELIX CAISIP, IGNACIO ROJALES and FEDERICO
VILLADELREY, petitioners,
vs.
THE PEOPLE OF THE PHILIPPINES and THE COURT OF
APPEALS, respondents.
This case is before Us upon petition of defendants Felix Caisip, Ignacio Rojales and
Federico Villadelrey, for review on certiorari of a decision of the Court of Appeals
which affirmed that of the Court of First Instance of Batangas, convicting them of the
crime of Grave Coercion, with which they are charged, and sentencing each to four (4)
months and one (1) day of arresto mayor and to pay a fine of P200.00, with subsidiary
imprisonment in case of insolvency, not to exceed one-third of the principal penalty, as
well as one-third of the costs.
As set forth in the trial court's decision, the background of the present case is this:
The complainant Gloria Cabalag is the wife of Marcelino Guevarra who
cultivated a parcel of land known as Lot 105-A of Hacienda Palico situated in
sitio Bote-bote, barrio Tampisao, Nasugbu, Batangas. The said parcel of land
used to be tenanted by the deceased father of the complainant. Hacienda Palico
is owned by Roxas y Cia. and administered by Antonio Chuidian. The overseer
of the said hacienda is Felix Caisip, one of the accused herein. Even before the
occurrence of the incident presently involved, there had been a series of
misunderstandings and litigations involving the complainant and her husband,
on one hand, and the men of Hacienda Palico on the other.
It appears that on December 23, 1957, Marcelino Guevarra filed an action with
the Court of Agrarian Relations seeking recognition as a lawful tenant of Roxas
y Cia. over lot No. 105-A of Hacienda Palico. In a decision dated February 22,
1958, the Court of Agrarian Relations declared it has no jurisdiction over the
case, inasmuch as Guevarra is not a tenant on the said parcel of land. An appeal
was taken by Guevarra to the Supreme Court, but the appeal was dismissed in a
resolution dated April 10, 1958.
2
 On May 17, 1958, Roxas y Cia. filed an action against Marcelino Guevarra in
the justice of the peace court of Nasugbu, Batangas, for forcible entry, praying
therein that Guevarra be ejected from the premises of Lot No. 105-A. After due
hearing, the said Court in a decision dated May 2, 1959 ordered Guevarra to
vacate the lot and to pay damages and accrued rentals. A writ of execution was
issued by Justice of the Peace Rodolfo A. Castillo of Nasugbu, which was
served on Guevarra on June 6, 1959, and the return of which was made by
Deputy Sheriff Leonardo R. Aquino of this Court on June 23, 1959 (Exhibit
"10"). The writ recites among other things that the possession of the land was
delivered to the Roxas y Cia. thru Felix Caisip, the overseer, and Guevarra was
given twenty days from June 6, 1959 within which to leave the premises.
The record before Us does not explain why said decision was executed. According to
the complainant, her husband's counsel had appealed from said decision. The justice of
the peace who rendered it, Hon. Rodolfo Castillo, said that there really had been an
attempt to appeal, which was not given due course because the reglementary period
therefor had expired; that a motion to reconsider his order to this effect was denied by
him; and that a second motion for reconsideration was "still pending consideration,"
and it was October 19, 1959 when such testimony was given.
Continuing the narration of the antecedent facts, His Honor, the Trial Judge, added:
On June 15, 1959, some trouble occurred between the complainant and Caisip
regarding the cutting of sugar cane on Lot 105-A. The following day June 16,
1959, the complainant allegedly again entered the premises of Lot 105-A and
refused to be driven out by Felix Caisip. Due to the aforementioned incidents,
Gloria Cabalag was charged in the justice of the peace court of Nasugbu,
Batangas, with grave coercion for the incident of June 15, 1959, docketed in the
said court as Criminal Case No. 968 (Exhibit "3"); and with the crime of unjust
vexation for the incident of June 16, 1959, docketed in the said court as
Criminal Case No. 970. Both cases, however, were filed only on June 25, 1959.
In other words, these criminal cases, Nos. 968 and 970, against Gloria Cabalag, were
filed eight (8) days after the incident involved in the case at bar. It is, also, noteworthy
that both cases were — on motion of the prosecution, filed after a reinvestigation
thereof — provisionally dismissed, on November 8, 1960, by the Court of First
Instance of Batangas, upon the ground "that the evidence of record ... are insufficient
to prove the guilt of the accused beyond reasonable doubt." The decision of said court,
in the case at bar, goes on to say:
It further appears that due to the tenacious attitude of Gloria Cabalag to remain
in the premises, Caisip sought the help of the chief of police of Nasugbu who
advised him to see Deputy Sheriff Aquino about the matter. The latter,
however, informed Caisip that he could not act on the request to eject Gloria
Cabalag and to stop her from what she was doing without a proper court order.
Caisip then consulted Antonio Chuidian, the hacienda administrator, who, in
turn, went to the chief of police and requested for the detail of policemen in
sitio Bote-bote. The chief of police, acting on said request, assigned the accused
Ignacio Rojales and Federico Villadelrey, police sergeant and police corporal,
respectively, of the Nasugbu Police Force, to sitio Bote-bote.1
On June 17, 1959, at about 5:00 p.m., Gloria Cabalag was seen weeding the portion of
Lot 105-A which was a ricefield. Appellant Caisip approached her and bade her to
leave, but she refused to do so, alleging that she and her husband had the right to stay
there and that the crops thereon belong to them. She having stuck to this attitude, even
when he threatened to call the police, Caisip went to his co-defendants, Sgt. Rojales
and Cpl. Villadelrey, both of the local police, who were some distance away, and
brought them with him. Rojales told Gloria, who was then in a squatting position, to
stop weeding. As Gloria insisted on her right to stay in said lot, Rojales grabbed her
right hand and, twisting the same, wrested therefrom the trowel she was holding.
Thereupon, Villadelrey held her left hand and, together with Rojales, forcibly dragged
her northward — towards a forested area, where there was a banana plantation — as
Caisip stood nearby, with a drawn gun.
Inasmuch as Gloria shouted "Ina ko po! Ina ko po!" 2her neighbors, Librada Dulutan,
followed, soon later, by Francisca Andino, came and asked the policemen why they
were dragging her. The policemen having answered that they would take Gloria to
town which was on the west — Francisca Andino pleaded that Gloria be released,
saying that, if their purpose was as stated by them, she (Gloria) would willingly go
with them. By this time, Gloria had already been dragged about eight meters and her
dress, as well as her blouse3 were torn. She then agreed to proceed westward to the
municipal building, and asked to be allowed to pass by her house, within Lot 105-A, in
order to breast-feed her nursing infant, but, the request was turned down. As they
passed, soon later, near the house of Zoilo Rivera, head of the tenant organization to
which she was affiliated, in the barrio of Camachilihan, Gloria called out for him,
3
whereupon, he went down the house and accompanied them to the municipal building.
Upon arrival thereat, Rojales and Villadelrey turned her over to the policeman on duty,
and then departed. After being interrogated by the chief of police, Gloria was, upon
representations made by Zoilo Rivera, released and allowed to go home.
The foregoing is the prosecution's version. That of the defense is to the effect that,
upon being asked by the policemen to stop weeding and leave the premises, Gloria, not
only refused to do so, but, also, insulted them, as well as Caisip. According to the
defense, she was arrested because of the crime of slander then committed by her.
Appellants Rojales and Villadelrey, moreover, testified that, as they were heading
towards the barrio of Camachilihan, Gloria proceeded to tear her clothes.
His Honor, the Trial Judge, accepted, however, the version of the prosecution and
found that of the defense unworthy of credence. The findings of fact of the Court of
Appeals, which fully concurred in this view, are "final," and our authority to review
on certiorari its appealed decision is limited to questions purely of law. 4 Appellants
maintain that the Court of Appeals has erred: (1) in not finding their acts "justified
under Article 429 of the New Civil Code"; (2) in holding that the 20-day period of
grace given to Marcelino Guevarra and his wife, Gloria Cabalag, by the sheriff, to
vacate Lot 105-A, was valid and lawful; (3) in finding that the elements of the crime of
grave coercion are present in the case at bar; and (4) in finding appellants guilty as
charged. This pretense is clearly untenable.
Art. 429 of our Civil Code, reading:
The owner or lawful possessor of a thing has the right to exclude any person
from the enjoyment and disposal thereof. For this purpose, he may use such
force as may be reasonably necessary to repel or prevent an actual or threatened
unlawful physical invasion or usurpation of his property.
upon which appellants rely is obviously inapplicable to the case at bar, for,
having been given 20 days from June 6, 1959, within which to vacate Lot 105-
A, complainant did not, on June 17, 1959 — or within said period — invade or
usurp said lot. She had merely remained in possession thereof, even though the
hacienda owner may have become its co-possessor. Appellants did not
"repel or prevent in actual or threatened ... physical invasion or usurpation."
They expelled Gloria from a property of which she and her husband were in
possession even before the action for forcible entry was filed against them on
May 17, 1958, despite the fact that the Sheriff had explicitly authorized them to
stay in said property up to June 26, 1959, and had expressed the view that he
could not oust them therefrom on June 17, 1959, without a judicial order
therefor.
It is urged, that, by weeding and refusing to leave Lot 105-A, Gloria had committed a
crime in the presence of the policemen, despite the aforementioned 20-day period,
which, appellants claim, the sheriff had no authority to grant. This contention is
manifestly untenable, because: (1) said period was granted in the presence of the
hacienda owner's representative, appellant Caisip, who, by not objecting thereto, had
impliedly consented to or ratified the act performed by the sheriff; (2) Gloria and her
husband were thereby allowed to remain, and had, in fact, remained, in possession of
the premises, perhaps together with the owner of the hacienda or his representative,
Caisip; (3) the act of removing weeds from the ricefield was beneficial to its owner
and to whomsoever the crops belonged, and, even if they had not authorized it, does
not constitute a criminal offense; and (4) although Gloria and her husband had been
sentenced to vacate the land, the judgment against them did not necessarily imply that
they, as the parties who had tilled it and planted thereon, had no rights, of any kind
whatsoever, in or to the standing crops, inasmuch as "necessary expenses shall be
refunded to every possessor," 5 and the cost of cultivation, production and upkeep has
been held to partake of the nature of necessary expenses.6
It is, accordingly, clear that appellants herein had, by means of violence, and without
legal authority therefor, prevented the complainant from "doing something not
prohibited by law," (weeding and being in Lot 105-A), and compelled her "to do
something against" her will (stopping the weeding and leaving said lot), "whether it be
right or wrong," thereby taking the law into their hands, in violation of Art. 286 of the
Revised Penal Code.7
Appellant Caisip argues that, not having used violence against the complaining
witness, he should be acquitted of the charge. In this connection, His Honor, the Trial
Judge, correctly observed:
... While it is true that the accused Caisip did not lay hands on the complainant,
unlike the accused Rojales and Villadelrey who were the ones who used force
against Gloria, and while the Court is also inclined to discredit the claim of the
complainant that Felix Caisip drew a gun during the incident, it sufficiently
appears from the record that the motivation and inducement for the coercion
4
 perpetrated on the complainant came from the accused Caisip. It was his
undisguised and particular purpose to prevent Gloria from entering the land and
working on the same. He was the one who first approached Gloria with this
objective in mind, and tried to prevent her from weeding the land. He had tried
to stop Gloria from doing the same act even the day previous to the present
incident. It was Caisip who fetched the policemen in order to accomplish his
purpose of preventing Gloria from weeding the land and making her leave the
premises. The policemen obeyed his bidding, and even when the said
policemen were already over-asserting their authority as peace officers, Caisip
simply stood by without attempting to stop their abuses. He could be hardly
said to have disapproved an act which he himself induced and initiated.8
In other words, there was community of purpose between the policemen and Caisip, so
that the latter is guilty of grave coercion, as a co-conspirator, apart from being a
principal by induction.9
In the commission of the offense, the aggravating circumstances of abuse of superior
strength 10 and disregard of the respect due the offended party, by reason of her
sex, 11 were present, insofar as the three appellants herein are concerned. As regards
appellants Rojales and Villadelrey, there was the additional aggravating circumstance
of having taken advantage of their positions as members of the local police force.
Hence, the penalty of imprisonment meted out to appellants herein, which is the
minimum of the maximum prescribed in said Art. 286, 12 and the fine imposed upon
them, are in accordance with law.
WHEREFORE, the decision appealed from is hereby affirmed, with costs against the
defendants-appellants. It is so ordered.
[G.R. NO. 192999 - July 18, 2012]
DIAMOND FARMS, INC., Petitioner, v. DIAMOND FARM WORKERS
MULTI-PURPOSE COOPERATIVE, ELlSEO EMANEL, VOLTAIRE LOPEZ,
RUEL ROMERO, PATRICIO CAPRICIO, ERNESTO FATALLO, ZOSIMO
GOMEZ AND 100 JOHN DOES, Respondents.
Petitioner Diamond Farms, Inc. appeals the Decision1 dated December 17, 2009 and
Resolution 2 dated July 15, 2010 of the Court of Appeals (CA) in CA-G.R. SP No.
101384.
The facts of the case are as follows:
Petitioner is a corporation engaged m commercial farming of bananas. 3 It owned
1,023.8574 hectares of land in Carmen, Davao. A big portion of this land measuring
958.8574 hectares (958-hectare land) was initially deferred for acquisition and
distribution under the Comprehensive Agrarian Reform Program (CARP). 4 On
November 3, 1992, Secretary Ernesto D. Garilao of the Department of Agrarian
Reform (DAR) likewise approved the Production and Profit Sharing (PPS) Scheme
proposed by the Philippine Banana Growers and Exporters Association as the mode of
compliance with the required production sharing under Section 32 of Republic Act No.
6657, otherwise known as the Comprehensive Agrarian Reform Law (CARL).5ςrνll
Later, on February 14, 1995, the Deferment Order was lifted and the aforesaid 958-
hectare land was placed under CARP coverage. Thereafter, 698.8897 hectares of the
958-hectare land were awarded to members of the Diamond Agrarian Reform
Beneficiaries Multi-Purpose Cooperative (DARBMUPCO). Petitioner, however,
maintained management and control of 277.44 hectares of land, including a portion
measuring 109.625 hectares (109-hectare land).
On November 23, 1999, petitioner s certificates of title over the 109-hectare land were
cancelled. In lieu thereof, Transfer Certificates of Title (TCT) Nos. T-154155 to T-
154160 were issued in the name of the Republic of the Philippines. On August 5,
2000, the DAR identified 278 CARP beneficiaries of the 109-hectare land, majority of
whom are members of respondent Diamond Farm Workers Multi-Purpose Cooperative
(DFWMPC). On October 26, 2000, the DAR issued six Certificates of Land
Ownership Award (CLOAs) collectively in favor of the 278 CARP beneficiaries.6ςrνll
Subsequently, on July 2, 2002, petitioner filed a complaint 7 for unlawful occupation,
damages and attorney s fees against respondents. Petitioner alleged that as of
November 1995, it was the holder of TCT Nos. 112068 and 112073 covering two
parcels of land within the 109-hectare land. It alleged that it had been in possession for
a long time of the two lands, which had a total area of 74.3393 hectares (74-hectare
land), and grew thereon export-quality banana, producing on average 11,000 boxes per
week worth P1.46 million. It alleged that the DAR s August 5, 2000
5
Order distributing the 109-hectare land to 278 CARP beneficiaries was not yet final on
account of appeals, and therefore petitioner remains the lawful possessor of the subject
land (109-hectare land) and owner of the improvements thereon. But while the CARP
beneficiaries have not been finally designated and installed, respondents its farm
workers refused to do their work from June 10, 2002, forcibly entered and occupied
the 74-hectare land, and prevented petitioner from harvesting and introducing
agricultural inputs. Thus, petitioner prayed that respondents be ordered to vacate the
subject land; that it be allowed to harvest on the 74-hectare land; and that respondents
be ordered to pay it lost income of P1.46 million per week from June 10, 2002 until
farm operation normalizes, exemplary damages of P200,000, attorney s fees of
P200,000, appearance fees, incidental expenses of P100,000 and costs.
In their answer with compulsory counterclaim,8 respondents admitted that petitioner
was the holder of TCT Nos. 112068 and 112073, covering the 74-hectare land and that
the said land produces 11,000 boxes of export-quality bananas per week. Respondents
added that besides the 74-hectare land, petitioner owned four other parcels of land
covered by TCT Nos. 112058, 112059, 112062 and 112063 having a total area of
35.2857 hectares (35-hectare land). These six parcels, which altogether have a total
area of 109.625 hectares (109-hectare land), were acquired by the government upon
the issuance of TCTs in the name of the Republic of the Philippines. But even after
CLOAs were issued to the 278 CARP beneficiaries, petitioner continued to manage the
109-hectare land, paying wages to respondents as farm workers. Since 1995 they had
been demanding from petitioner payment of their production share to no avail.
Respondents further claimed that petitioner conspired with 67 CARP beneficiaries to
occupy and cultivate the 35-hectare land. Petitioner tried to allow alleged beneficiaries
to occupy portions of the 74-hectare land, but respondents guarded it to protect their
own rights, so the intruders were able to occupy only the pumping structure.
Thereafter, petitioner stopped farm operation on the 74-hectare land and refused their
request to resume farm operation. By way of relief, respondents prayed that their rights
as CARP beneficiaries of the 109-hectare land be recognized and that their
counterclaims for production share, profit share, accrued income and interest be
granted.
Petitioner filed a reply9 and alleged that respondents initiated the commission of
premature and unlawful entry into the 35-hectare land and did nothing to curb the
unlawful entry of other parties. Petitioner also admitted that respondents recently
allowed it to harvest and perform essential farm operations.
In their rejoinder,10 respondents denied that they illegally entered the 35-hectare land.
They averred that petitioner promoted the entry of third parties and cited petitioner s
agreements with third parties for the harvest of fruits thereon.
During the proceedings before the Office of the Regional Adjudicator, petitioner
submitted its computation of respondents production and profit share from the 109-
hectare land for the years 1995 to 1999 and accordingly deposited the amount of P2.51
million. Respondents were required to submit a project of distribution, and the parties
were ordered to submit position papers. Upon compliance by respondents with the
order to submit a project of distribution, the Office of the Regional Adjudicator
ordered the release of the amount deposited by petitioner to respondents. Respondents
thereafter submitted their position paper,12 wherein they reiterated that they had to
guard the land to protect their rights. They confirmed petitioner s acceptance of their
request to resume normal farm operation, and manifested that a precarious peace and
harmony thereafter reigned on the 109-hectare land. They also repeated their prayers in
their answer. Petitioner, on the other hand, failed to file its position paper despite
several requests for extension of time to file the same. 13ςrνll
In his Decision,14 the Regional Agrarian Reform Adjudicator ruled that petitioner lost
its ownership of the subject land when the government acquired it and CLOAs were
issued in favor of the 278 CARP beneficiaries. The appeals from the Distribution
Order will not alter the fact that petitioner is no longer the owner of the subject land.
Also, respondents have been identified as CARP beneficiaries; hence, they are not
unlawfully occupying the land. The Adjudicator added that petitioner is unlawfully
occupying the land since it has no contract with the CARP beneficiaries. Thus, the
Adjudicator denied petitioner s prayers in its complaint and granted respondents
counterclaims.
Aggrieved, petitioner appealed to the DARAB, but the DARAB denied petitioner s
appeal in a Decision15dated December 11, 2006. The DARAB ruled that petitioner is
unlawfully occupying the subject land; hence, its complaint against respondents for
unlawful occupation lacks merit. It also ruled that petitioner is no longer entitled to
possess the subject land; that petitioner lost its ownership thereof; that ownership was
transferred to the 278 CARP beneficiaries; that the appeals from the Distribution Order
concern distribution and will not restore petitioner s ownership; that the 278 CARP
beneficiaries can now exercise their rights of ownership and possession; and that
petitioner should have delivered possession of the 109-hectare land to the CARP
6
beneficiaries on August 5, 2000 instead of remaining in possession and in control of
farm operations.
In awarding production and profit share, the DARAB held that Section 32 of the
CARL requires petitioner to distribute said share to respondents. The DARAB
computed the production and profit share based on the PPS Scheme proposed by the
Philippine Banana Growers and
Exporters Association and approved by DAR Secretary Ernesto D. Garilao. The
dispositive portion of the DARAB s December 11, 2006 Decision reads:
WHEREFORE, premises considered, the Appeal is hereby DENIED for lack of merit.
The assailed Decision is hereby MODIFIED to read as follows:ς
1. DENYING the reliefs prayed for in the complaint;
2. ORDERING the [petitioner] to turn over to the respondents the possession of the
subject landholding and respect the respondents peaceful possession thereof;
3. ORDERING the [petitioner] to pay the respondents the following amount:
A. P27,553,703.25 less P2,511,786.00 as Production and Profit Share (PPS) from 15
February 1995 to 31 December 2005;
b. P17,796,473.43 as lease rental for the use of the land of petitioner from 26 October
2000 up to 31 December 2005;
c. P6,205,011.89 as accrued interest on the unpaid PPS from 01 March 1996 to 01
March 2006; and d. P2,241,930.90 as accrued interest on the unpaid lease rental from
01 January 2001 to 01 January 2006.
4. ENCOURAGING the parties to enter into an agribusiness venture over the subject
landholding, if feasible.
SO ORDERED.16ςrνll
Its motion for reconsideration having been denied, petitioner appealed to the CA
raising the following arguments: (1) respondents are not the lawful possessors of the
subject land as well as the valuable improvements thereon, prior to receipt by
petitioner of the corresponding payment for the land from the government, or upon
deposit in favor of petitioner of the compensation for the same in cash or in Land Bank
of the Philippines (LBP) bonds; (2) not being lawful possessors of the subject land,
respondents are not entitled to production share in the amount of P25.04 million and
interest thereon in the amount of P6.21 million; and (3) not being lawful possessors of
the subject land, respondents are not entitled to lease rentals as well as accrued interest
thereon.17ςrνll
As afore-stated, the CA in the assailed Decision affirmed the DARAB decision. The
CA, however, deleted the award of lease rentals and interest thereon, to wit:
WHEREFORE, the assailed December 11, 2006 Decision and August 29, 2007
Resolution are MODIFIED to delete the DARAB s award of lease rentals and interests
thereon in favor of respondents. The rest is AFFIRMED in toto.
SO ORDERED.18ςrνll
The CA agreed with the DARAB in rejecting petitioner s bare and belated allegation
that it has not received just compensation. The alleged nonpayment of just
compensation is also a collateral attack against the TCTs issued in the name of the
Republic of the Philippines. The CA found that petitioner has never sought the
nullification of the Republic s TCTs. Further, the CA found no credible evidence
relating to proceedings for payment of just compensation. The CA held that the
issuance of the Republic s TCTs and CLOAs in favor of the 278 CARP beneficiaries
implies the deposit in cash or LBP bonds of the amount initially determined as
compensation for petitioner s land or the actual payment of just compensation due to
petitioner. Additionally, the appeals over the Distribution Order cannot justify
petitioner s continued possession since the appeals concern only the manner of
distribution.
The CA held that petitioner became liable for respondents production share when the
Deferment Order was lifted. The CA noted that the DARAB computed the production
share based on the approved PPS Scheme. The CA also noted petitioner s deposit of
P2.51 million as petitioner s recognition of respondents right to production share.
7
Aggrieved, petitioner filed a motion for partial reconsideration contending that the CA
erred when it affirmed the DARAB in ordering petitioner to (1) turn over possession of
the subject land to respondents and respect their possession thereof and (2) pay
respondents production and profit share of P25.04 million and interest of P6.21
million.19 The CA, however, denied petitioner s motion for partial reconsideration.
Hence, petitioner filed the present appeal. Respondents, on the other hand, no longer
appealed the CA Decision and Resolution.
In its petition, petitioner argues that:
I.
WITH ALL DUE RESPECT, THE HONORABLE COURT OF APPEALS, IN
COMPLETE DEROGATION OF THE PETITIONER S CONSTITUTIONAL RIGHT
TO RECEIVE JUST COMPENSATION FOR THE TAKING OF ITS PROPERTY,
COMMITTED A SERIOUS
ERROR OF LAW WHEN IT AFFIRMED THE PORTION OF THE DECISION OF
THE DARAB BASED ON ITS REASONING THAT THE ISSUE OF NON-
PAYMENT OF JUST COMPENSATION TO THE PETITIONER IS AN ISSUE
RAISED ONLY AT THE DARAB LEVEL; THIS RULING IS SIMPLY NOT IN
ACCORD WITH LAW AND PERTINENT JURISPRUDENCE
II.
WITH ALL DUE RESPECT, THE HONORABLE COURT OF APPEALS
COMMITTED SERIOUS ERROR OF LAW IN CONSIDERING THE PETITIONER
S ASSERTION OF ITS CONSTITUTIONAL RIGHT TO JUST COMPENSATION
AS A COLLATERAL ATTACK ON THE REPUBLIC S TITLE20ςrνll
Essentially, the issues for our resolution are: (1) whether respondents are guilty of
unlawful occupation and liable to petitioner for damages and attorney s fees, (2)
whether petitioner should turn over possession of the subject land to respondents and
respect their possession thereof, and (3) whether the award of production share and
interest was proper.
Petitioner insists that prior to its receipt of the corresponding payment for the land
from the government or deposit in its favor of the compensation for the land in cash or
in LBP bonds, respondents cannot be deemed lawful possessors of the subject land and
the valuable improvements thereon, citing Section 16 (e) of the CARL. According to
petitioner, "it has yet to receive any compensation for the lands acquired by the
government."21Petitioner also contends that the CA erred in ruling that the issue of
nonpayment of just compensation was raised only at the DARAB level, such being an
unavoidable issue intertwined with its cause of action. Petitioner further avers that the
CA erred in ruling that petitioner s assertion of its constitutional right to just
compensation is a collateral attack on the TCTs of the Republic of the Philippines.
Petitioner maintains that the Republic s TCTs which are derived from its TCTs
pursuant to the CARL are neither attacked nor assailed in this case. Petitioner thus
prays that it be declared as the lawful owner and possessor of the subject land until its
actual receipt of just compensation.
In their comment, respondents claim that petitioner is just trying to mislead this Court
that it has not been paid compensation for its property. Respondents cite two
Certifications22 of Deposit (CARP Form No. 17) showing that the LBP deposited
P9.92 million in cash and agrarian reform bonds as compensation for 91.3925 hectares
of land and another 18.2325 hectares of land, or for 109.625 hectares of land (109-
hectare land), owned by petitioner and covered by TCT Nos. T-112058, 112059,
112062, 112063, 112068, and 112073. Respondents also cite a DAR
Memorandum23 dated November 22, 1999 (CARP Form No. 18) requesting the
Register of Deeds to issue TCTs in the name of the Republic of the Philippines.
Respondents then summarized the consequent cancellations of the TCTs by attaching
certified true copies of:
xxx
4. [TCT Nos.] T-112058, T-112059, T-112062, T-112063, T-112073 and T-112068 of
petitioner which show that LBP Certificates of Deposit and DAR Memorandum-
Request were duly annotated at the back thereof, and that the same were cancelled on
23 November 1999 upon issuance of TCTs in favor [of] the Republic of the
Philippines;
5. [TCT Nos.] T-154159, T-154160, T-154157, T-154156, T-154155 issued in favor of
the Republic of the Philippines showing that the same were cancelled on 30 October
2000 upon issuance of TCT[s] in favor of herein respondents;
8
6. [TCT Nos.] C-14005, C-14006, C-15311, C-15526, C-15527, C-14007, C-14004
issued infavor of herein respondents showing THAT THE FARM/HOMELOT
DESCRIBED IN THIS CERTIFICATE OF LANDOWNERSHIP AWARD IS
ENCUMBERED IN FAVOR OF THE LAND BANK OF THE PHILIPPINES TO
SECURE FULL PAYMENT OF ITS VALUE UNDER [THE CARL] BY THE
FARMER-BENEFICIARY NAMED HEREIN, and that the same were already
cancelled on April 30, 2009 upon issuance of TCTs in favor of herein respondent
cooperative now Davao Farms Agrarian Reform Beneficiaries Multi-Purpose
Cooperative DFARBEMPCO.24ςrνll
In its reply, petitioner states that to "set the record straight, the documents presented by
respondents refer to the deposit of the initial valuation of the land" as determined by
the LBP. This is not the just compensation for the land which is required to be
determined by a court of justice.25 According to petitioner, Sections 56 and 57 of the
CARL provides that the Regional Trial Court (RTC), acting as a Special Agrarian
Court (SAC), has the original and exclusive jurisdiction over all petitions for the
determination of just compensation to landowners. Petitioner also states that the issue
of just compensation may be easily gleaned at least from the submissions of the parties
in their pleadings and one that had therefore been tried under the parties implicit
agreement. We find petitioner s contentions bereft of merit. On the first issue, we agree
that respondents are not guilty of unlawful occupation and that there exists no basis to
award damages and attorney s fees to petitioner as respondents are agrarian reform
beneficiaries who have been identified as such, and in whose favor CLOAs have been
issued. We thus uphold the ruling denying petitioner s prayers in its complaint for
unlawful occupation, damages and attorney s fees. However, we note significant facts
which dispute some findings of the Adjudicator, DARAB and CA, and make the
necessary clarification or correction as appropriate.
It is beyond doubt that petitioner is the farm operator and manager while respondents
are the farm workers. Both parties enjoyed possession of the land. Together, they
worked thereon. Before CARP, petitioner was the landowner, farm operator and
manager. Respondents are its farm workers. After the deferment period, CARP finally
dawned. Petitioner lost its status as landowner, but not as farm operator and manager.
Respondents remained as petitioner s farm workers and received wages from
petitioner.
Now, the unrebutted claim of respondents in their answer and position paper is that
they guarded the 74-hectare land to protect their rights as farm workers and CARP
beneficiaries. They were compelled to do so when petitioner attempted to install other
workers thereon, after it conspired with 67 CARP beneficiaries to occupy the 35-
hectare land. They were fairly successful since the intruders were able to occupy the
pumping structure. The government, including this Court, cannot condone petitioner s
act to thwart the CARP s implementation. Installing workers on a CARP-covered land
when the DAR has already identified the CARP beneficiaries of the land and has
already ordered the distribution of the land to them serves no other purpose than to
create an impermissible roadblock to installing the legitimate beneficiaries on the land.
We also find the action taken by respondents to guard the land as reasonable and
necessary to protect their legitimate possession and prevent precisely what petitioner
attempted to do. Such course was justified under Article 429 of the Civil Code which
reads:
ART. 429. The owner or lawful possessor of a thing has the right to exclude any
person from the enjoyment and disposal thereof. For this purpose, he may use such
force as may be reasonably necessary to repel or prevent an actual or threatened
unlawful physical invasion or usurpation of his property.
Being legitimate possessors of the land and having exercised lawful means to protect
their possession, respondents were not guilty of unlawful occupation.
As to the immediate resumption of farm operations, petitioner admitted that
respondents have already allowed it to harvest and perform essential activities.
Respondents have confirmed that petitioner accepted their request to resume normal
farm operations such that a precarious peace and harmony reigned on the 109-hectare
land. That farm operations resumed is evident from petitioner s claim of lost income
amounting to P1.46 million a week for four weeks, from June 10, 2002 to July 7,
2002.26 Due to the parties quick and voluntary agreement, farm operation and the
parties relationship normalized within five days from the filing of the complaint on
July 2, 2002. We thus agree that petitioner must respect respondents possession.
However, we disagree with the finding of the Adjudicator and DARAB that petitioner
is guilty of unlawful occupation. Since respondents themselves have asked petitioner
to resume its farm operation, petitioner s possession cannot be said to be illegal and
unjustified.
9
This notwithstanding, we sustain the order for petitioner to turn over possession of the
109-hectare land. The DARAB and the DAR shall ensure that possession of the land is
turned over to qualified CARP beneficiaries.
The procedure for acquisition of private lands under Section 16 (e) of the CARL is that
upon receipt by the landowner of the corresponding payment or, in case of rejection or
no response from the landowner, upon deposit with an accessible bank designated by
the DAR of the compensation in cash or in LBP bonds, the DAR shall take immediate
possession of the land and request the proper Register of Deeds to issue a TCT in the
name of the Republic of the Philippines. Thereafter, the DAR shall proceed with the
redistribution of the land to the qualified beneficiaries, to wit:ςrαlαω
SEC. 16. Procedure for Acquisition of Private Lands. For purposes of acquisition of
private lands, the following procedures shall be followed:ςrαlαω
xxxx
(e) Upon receipt by the landowner of the corresponding payment or in case of rejection
or no response from the landowner, upon the deposit with an accessible bank
designated by the DAR of the compensation in cash or in LBP bonds in accordance
with this Act, the DAR shall take immediate possession of the land and shall request
the proper Register of Deeds to issue a Transfer Certificate of Title (TCT) in the name
of the Republic of the Philippines. The DAR shall thereafter proceed with the
redistribution of the land to the qualified beneficiaries.
xxx
Petitioner eventually acknowledged that there was indeed a deposit of the initial
valuation of the land. There were two deposits of cash and agrarian reform bonds as
compensation for the 109-hectare land owned by petitioner and covered by TCT Nos.
T-112058, 112059, 112062, 112063, 112068 and 112073. Notably, petitioner also
manifested that the Republic s TCTs which are derived from its TCTs pursuant to the
CARL are neither attacked nor assailed in this case. Petitioner even argued that the
transfer of possession and ownership of the land to the government is conditioned
upon the receipt by the landowner of the corresponding payment or deposit by the
DAR of the compensation with an accessible bank.27 Following petitioner s own
reasoning, petitioner has already lost its possession and ownership when the condition
was fulfilled. Likewise undisputed is that in 2000, CLOAs had been issued collectively
in favor of the 278 CARP beneficiaries of the 109-hectare land. These CLOAs
constitute evidence of ownership by the beneficiaries under the then provisions of
Section 2428 of the CARL, to wit:ςrαlαω
SEC. 24. Award to Beneficiaries. The rights and responsibilities of the beneficiary
shall commence from the time the DAR makes an award of the land to him, which
award shall be completed within one hundred eighty (180) days from the time the
DAR takes actual possession of the land. Ownership of the beneficiary shall be
evidenced by a Certificate of Land Ownership Award, x x x. (Underscoring ours.)
In the light of the foregoing, this Court cannot grant petitioner s plea that it be declared
as the lawful owner of the 109-hectare land. It is also to be noted that in its complaint,
petitioner did not even claim ownership of the 109-hectare land. Petitioner could only
state that as of November 1995, it was the holder of the TCTs covering the 74-hectare
land and that pending resolution of the appeals from the distribution orders, it remains
in the meantime as the lawful possessor of the 109-hectare land. Nothing therefore
supports petitioner s claim that it is the lawful owner of the 109-hectare land.
To reiterate, petitioner had lost its ownership of the 109-hectare land and ownership
thereof had been transferred to the CARP beneficiaries. Respondents themselves have
requested petitioner to resume its farm operations and this fact has given petitioner a
temporary right to enjoy possession of the land as farm operator and manager.
We, however, agree that petitioner must now turn over possession of the 109-hectare
land.
The matter has already been settled in Hacienda Luisita, Incorporated, etc. v.
Presidential Agrarian Reform Council, et al.,29 when we ruled that the Constitution and
the CARL intended the farmers, individually or collectively, to have control over
agricultural lands, otherwise all rhetoric about agrarian reform will be for naught. We
stressed that under Section 4, Article XIII of the 1987 Constitution and Section 2 of
the CARL, the agrarian reform program is founded on the right of farmers and regular
farm workers who are landless to own directly or collectively the lands they till. The
policy on agrarian reform is that control over the agricultural land must always be in
the hands of the farmers.
10
Under Section 16 (e) of the CARL, the DAR is mandated to proceed with the
redistribution of the land to the qualified beneficiaries after taking possession of the
land and requesting the proper Register of Deeds to issue a TCT in the name of the
Republic of the Philippines. Section 24 of the CARL is yet another mandate to
complete the award of the land to the beneficiary within 180 days from the time the
DAR takes actual possession of the land.30 And under Section 20 of DAR
Administrative Order No. 9, Series of 1998, also known as the Rules and Regulations
on the Acquisition, Valuation, Compensation and Distribution of Deferred
Commercial Farms, CLOAs shall be registered immediately upon generation, and the
Provincial Agrarian Reform Officer (PARO) shall install or cause the installation of
the beneficiaries in the commercial farm within seven days from registration of the
CLOA. Section 20 of the Rules provides:ςrαlαω
SEC. 20. Registration of CLOAs and Installation of Beneficiaries CLOAs shall be
registered immediately upon generation. The PARO shall install or cause the
installation of the beneficiaries in the commercial farm within seven (7) days from
registration of the CLOA.
We hold that the 109-hectare land must be distributed to qualified CARP beneficiaries.
They must be installed on the land and have possession and control thereof.
A problem that emerged in this case is the identification of qualified CARP
beneficiaries. Respondents own evidence does not definitively show who are the
legitimate CARP beneficiaries in the 109-hectare land. TCT Nos. 112058, 112059,
112062, 112063, 112068, and 112073, issued in the name of petitioner, were cancelled
by TCT Nos. 154155 to 154160 issued in the name of the Republic of the Philippines.
The Republic s TCTs were cancelled by TCT Nos. C-14002 to C-14007.31 Notably,
TCT Nos. C-14004,32 C-14006,33 and C-1400734 show that they were respectively
cancelled by TCT Nos. C-27342, C-27344, and C-27345, all in favor of
DFARBEMPCO. It must be verified however if DFARBEMPCO is the legitimate
successor of DFWMPC, herein respondent cooperative. As regards TCT No. C-
14005,35 there was a partial cancellation by TCT No. C-27110 in favor of
DARBMUPCO and total cancellation by TCT No. C-27343 in favor of
DFARBEMPCO. Nothing is shown about TCT Nos. C-14002 to C-14003.
Neither can TCT Nos. C-15311,36 C-15526,37 and C-1552738 provide clarity. These
TCTs cited by respondents contain entries of partial or total cancellation by TCT Nos.
C-27346, C-27115 and C-27114, in favor of DFARBEMPCO or DARBMUPCO. The
areas covered by TCT Nos. C-15311, C-15526, and C-15527 also appear to be
different than those covered by the cancelled TCTs in the name of petitioner and the
Republic of the Philippines. Hence, it is imperative that the DAR and PARO assist the
DARAB so that the 109-hectare land may be properly turned over to qualified CARP
beneficiaries, whether individuals or cooperatives. Needless to stress, the DAR and
PARO have been given the mandate to distribute the land to qualified beneficiaries and
to install them thereon.
To fully address petitioner s allegations, we move on to its claim that the issue of just
compensation is an issue that may easily be gleaned at least from the submissions of
the parties in their pleadings and one that had therefore been tried under the parties
implicit agreement.
Petitioner s claim is unfounded. Even the instant appeal39 is silent on the factors to be
considered40 in determining just compensation. These factors are enumerated in
Section 1741 of the CARL which reads:ςrαlαω
SECTION 17. Determination of Just Compensation. In determining just compensation,
the cost of acquisition of the land, the current value of like properties, its nature, actual
use and income, the sworn valuation by the owner, the tax declarations, and the
assessment made by government assessors shall be considered. The social and
economic benefits contributed by the farmers and the farmworkers and by the
Government to the property as well as the nonpayment of taxes or loans secured from
any government financing institution on the said land shall be considered as additional
factors to determine its valuation.
What petitioner stressed before us and before the CA to assail respondents possession
is its less-than-candid claim that it has yet to receive any compensation for the lands
acquired by the government.42Petitioner s cause of action in its complaint for unlawful
occupation with prayer that respondents be ordered to vacate and pay damages and
attorney s fees cannot also be mistaken as one for determination of just compensation.
Thus, just compensation was never an issue in this case.
Sections 56 and 57 of the CARL likewise provides that the RTC, acting as SAC, has
original and exclusive jurisdiction over all petitions for the determination of just
compensation to landowners, to wit:ςrαlαω
11
SEC. 56. Special Agrarian Court. - The Supreme Court shall designate at least one (1)
branch of the Regional Trial Court (RTC) within each province to act as a Special
Agrarian Court.
xxx
SEC. 57. Special Jurisdiction. The Special Agrarian Courts shall have original and
exclusive jurisdiction over all petitions for the determination of just compensation to
landowners, x x x.
We said that the DAR s land valuation is only preliminary and is not, by any means,
final and conclusive upon the landowner. The landowner can file an original action
with the RTC acting as SAC to determine just compensation. The court has the right to
review with finality the determination in the exercise of what is admittedly a judicial
function.43ςrνll
This case however was not brought before the SAC on determination of just
compensation. No reversible error was therefore committed by the CA when it did not
rule on just compensation.
On the third issue, petitioner contends that respondents are not entitled to production
share as well as interest since they are not lawful possessors of the subject land.
Petitioner asserts that the 3% production share under Section 32 of the CARL may
only be given if there are sales from the production of the land. Petitioner however
claims that it has incurred losses and that respondents admitted that farm operations in
the subject land have not normalized. Petitioner thus submits that there is no factual
basis in the production share from the sale of agricultural products in the subject land.
The contention has no merit.
We have already ruled that respondents possession is legitimate. On petitioner s claim
that it incurred losses, Section 32 of the CARL clearly states that the 3% production
share of the farm workers is based on "gross sales from the production of such lands,"
to wit:ςrαlαω
SEC. 32. Production-Sharing. Pending final land transfer, individuals or entities
owning, or operating under lease or management contract, agricultural lands are
hereby mandated to execute a production-sharing plan with their farmworkers or
farmworkers organization, if any, whereby three percent (3%) of the gross sales from
the production of such lands are distributed within sixty (60) days of the end of the
fiscal year as compensation to regular and other farmworkers in such lands over and
above the compensation they currently receive: Provided, That these individuals or
entities realize gross sales in excess of five million pesos per annum unless the DAR,
upon proper application, determines a lower ceiling. (Underscoring ours.)
Petitioner cites its net losses, computed after deductions were made on the amount of
its sales. These losses however, have no bearing in computing the production share
which is based on gross sales. And petitioner s own allegation of weekly production
worth P1.46 million the same amount used by petitioner as basis of its claim for
damages debunks its claim that no basis exists that there were sales from agricultural
products of the subject land. Likewise supporting the existence of sales is petitioner s
own computation of respondents production share and its deposit of the amount of
P2.51 million before the Office of the Regional Adjudicator. It must be noted also that
farm operations normalized within five days from the filing of the complaint.
In sum, petitioner failed to show any reversible error committed by the CA in
affirming the DARAB s computation of respondents production share based on the
approved PPS Scheme. Notably, petitioner has admitted the fact of approval of the
PPS Scheme.44ςrνll
WHEREFORE, we DENY the petition for lack of merit and AFFIRM the Decision
dated December 17, 2009 and Resolution dated July 15, 2010 of the Court of Appeals
in CA-G.R. SP No. 101384.
We also DIRECT the Department of Agrarian Reform and the Provincial Agrarian
Reform Officer to assist the Department of Agrarian Reform Adjudication Board in
the distribution of the I 09-hectare land to the qualified agrarian reform beneficiaries,
whether individuals or cooperatives.
Let a copy of this Decision be served upon the Department of Agrarian Reform.
With costs against the petitioner. SO ORDERED.
G.R. No. 178902 April 21, 2010
12
MANUEL O. FUENTES and LETICIA L. FUENTES, Petitioners,
vs.
CONRADO G. ROCA, ANNABELLE R. JOSON, ROSE MARIE R.
CRISTOBAL and PILAR MALCAMPO,Respondents.
This case is about a husband’s sale of conjugal real property, employing a challenged
affidavit of consent from an estranged wife. The buyers claim valid consent, loss of
right to declare nullity of sale, and prescription.
The Facts and the Case
Sabina Tarroza owned a titled 358-square meter lot in Canelar, Zamboanga City. On
October 11, 1982 she sold it to her son, Tarciano T. Roca (Tarciano) under a deed of
absolute sale.1 But Tarciano did not for the meantime have the registered title
transferred to his name.
Six years later in 1988, Tarciano offered to sell the lot to petitioners Manuel and
Leticia Fuentes (the Fuentes spouses). They arranged to meet at the office of Atty.
Romulo D. Plagata whom they asked to prepare the documents of sale. They later
signed an agreement to sell that Atty. Plagata prepared2 dated April 29, 1988, which
agreement expressly stated that it was to take effect in six months.
The agreement required the Fuentes spouses to pay Tarciano a down payment of
₱60,000.00 for the transfer of the lot’s title to him. And, within six months, Tarciano
was to clear the lot of structures and occupants and secure the consent of his estranged
wife, Rosario Gabriel Roca (Rosario), to the sale. Upon Tarciano’s compliance with
these conditions, the Fuentes spouses were to take possession of the lot and pay him an
additional ₱140,000.00 or ₱160,000.00, depending on whether or not he succeeded in
demolishing the house standing on it. If Tarciano was unable to comply with these
conditions, the Fuentes spouses would become owners of the lot without any further
formality and payment.
The parties left their signed agreement with Atty. Plagata who then worked on the
other requirements of the sale. According to the lawyer, he went to see Rosario in one
of his trips to Manila and had her sign an affidavit of consent. 3 As soon as Tarciano
met the other conditions, Atty. Plagata notarized Rosario’s affidavit in Zamboanga
City. On January 11, 1989 Tarciano executed a deed of absolute sale 4 in favor of the
Fuentes spouses. They then paid him the additional ₱140,000.00 mentioned in their
agreement. A new title was issued in the name of the spouses 5 who immediately
constructed a building on the lot. On January 28, 1990 Tarciano passed away, followed
by his wife Rosario who died nine months afterwards.
Eight years later in 1997, the children of Tarciano and Rosario, namely, respondents
Conrado G. Roca, Annabelle R. Joson, and Rose Marie R. Cristobal, together with
Tarciano’s sister, Pilar R. Malcampo, represented by her son, John Paul M. Trinidad
(collectively, the Rocas), filed an action for annulment of sale and reconveyance of the
land against the Fuentes spouses before the Regional Trial Court (RTC) of Zamboanga
City in Civil Case 4707. The Rocas claimed that the sale to the spouses was void since
Tarciano’s wife, Rosario, did not give her consent to it. Her signature on the affidavit
of consent had been forged. They thus prayed that the property be reconveyed to them
upon reimbursement of the price that the Fuentes spouses paid Tarciano. 6
The spouses denied the Rocas’ allegations. They presented Atty. Plagata who testified
that he personally saw Rosario sign the affidavit at her residence in Paco, Manila, on
September 15, 1988. He admitted, however, that he notarized the document in
Zamboanga City four months later on January 11, 1989.7 All the same, the Fuentes
spouses pointed out that the claim of forgery was personal to Rosario and she alone
could invoke it. Besides, the four-year prescriptive period for nullifying the sale on
ground of fraud had already lapsed.
Both the Rocas and the Fuentes spouses presented handwriting experts at the trial.
Comparing Rosario’s standard signature on the affidavit with those on various
documents she signed, the Rocas’ expert testified that the signatures were not written
by the same person. Making the same comparison, the spouses’ expert concluded that
they were.8
On February 1, 2005 the RTC rendered judgment, dismissing the case. It ruled that the
action had already prescribed since the ground cited by the Rocas for annulling the
sale, forgery or fraud, already prescribed under Article 1391 of the Civil Code four
years after its discovery. In this case, the Rocas may be deemed to have notice of the
fraud from the date the deed of sale was registered with the Registry of Deeds and the
new title was issued. Here, the Rocas filed their action in 1997, almost nine years after
the title was issued to the Fuentes spouses on January 18, 1989. 9
13
Moreover, the Rocas failed to present clear and convincing evidence of the fraud.
Mere variance in the signatures of Rosario was not conclusive proof of forgery. 10 The
RTC ruled that, although the Rocas presented a handwriting expert, the trial court
could not be bound by his opinion since the opposing expert witness contradicted the
same. Atty. Plagata’s testimony remained technically unrebutted.11
Finally, the RTC noted that Atty. Plagata’s defective notarization of the affidavit of
consent did not invalidate the sale. The law does not require spousal consent to be on
the deed of sale to be valid. Neither does the irregularity vitiate Rosario’s consent. She
personally signed the affidavit in the presence of Atty. Plagata. 12
On appeal, the Court of Appeals (CA) reversed the RTC decision. The CA found
sufficient evidence of forgery and did not give credence to Atty. Plagata’s testimony
that he saw Rosario sign the document in Quezon City. Its jurat said differently. Also,
upon comparing the questioned signature with the specimen signatures, the CA noted
significant variance between them. That Tarciano and Rosario had been living
separately for 30 years since 1958 also reinforced the conclusion that her signature had
been forged.
Since Tarciano and Rosario were married in 1950, the CA concluded that their
property relations were governed by the Civil Code under which an action for
annulment of sale on the ground of lack of spousal consent may be brought by the wife
during the marriage within 10 years from the transaction. Consequently, the action that
the Rocas, her heirs, brought in 1997 fell within 10 years of the January 11, 1989 sale.
Considering, however, that the sale between the Fuentes spouses and Tarciano was
merely voidable, the CA held that its annulment entitled the spouses to reimbursement
of what they paid him plus legal interest computed from the filing of the complaint
until actual payment. Since the Fuentes spouses were also builders in good faith, they
were entitled under Article 448 of the Civil Code to payment of the value of the
improvements they introduced on the lot. The CA did not award damages in favor of
the Rocas and deleted the award of attorney’s fees to the Fuentes spouses. 13
Unsatisfied with the CA decision, the Fuentes spouses came to this court by petition
for review.14
The Issues Presented
The case presents the following issues:
1. Whether or not Rosario’s signature on the document of consent to her
husband Tarciano’s sale of their conjugal land to the Fuentes spouses was
forged;
2. Whether or not the Rocas’ action for the declaration of nullity of that sale
to the spouses already prescribed; and
3. Whether or not only Rosario, the wife whose consent was not had, could
bring the action to annul that sale.
The Court’s Rulings
First. The key issue in this case is whether or not Rosario’s signature on the document
of consent had been forged. For, if the signature were genuine, the fact that she gave
her consent to her husband’s sale of the conjugal land would render the other issues
merely academic.
The CA found that Rosario’s signature had been forged. The CA observed a marked
difference between her signature on the affidavit of consent 15 and her specimen
signatures.16 The CA gave no weight to Atty. Plagata’s testimony that he saw Rosario
sign the document in Manila on September 15, 1988 since this clashed with his
declaration in the jurat that Rosario signed the affidavit in Zamboanga City on January
11, 1989.
The Court agrees with the CA’s observation that Rosario’s signature strokes on the
affidavit appears heavy, deliberate, and forced. Her specimen signatures, on the other
hand, are consistently of a lighter stroke and more fluid. The way the letters "R" and
"s" were written is also remarkably different. The variance is obvious even to the
untrained eye.
Significantly, Rosario’s specimen signatures were made at about the time that she
signed the supposed affidavit of consent. They were, therefore, reliable standards for
comparison. The Fuentes spouses presented no evidence that Rosario suffered from
any illness or disease that accounted for the variance in her signature when she signed
the affidavit of consent. Notably, Rosario had been living separately from Tarciano for
14
30 years since 1958. And she resided so far away in Manila. It would have been quite
tempting for Tarciano to just forge her signature and avoid the risk that she would not
give her consent to the sale or demand a stiff price for it.
What is more, Atty. Plagata admittedly falsified the jurat of the affidavit of consent.
That jurat declared that Rosario swore to the document and signed it in Zamboanga
City on January 11, 1989 when, as Atty. Plagata testified, she supposedly signed it
about four months earlier at her residence in Paco, Manila on September 15, 1988.
While a defective notarization will merely strip the document of its public character
and reduce it to a private instrument, that falsified jurat, taken together with the marks
of forgery in the signature, dooms such document as proof of Rosario’s consent to the
sale of the land. That the Fuentes spouses honestly relied on the notarized affidavit as
proof of Rosario’s consent does not matter. The sale is still void without an authentic
consent.
Second. Contrary to the ruling of the Court of Appeals, the law that applies to this case
is the Family Code, not the Civil Code. Although Tarciano and Rosario got married in
1950, Tarciano sold the conjugal property to the Fuentes spouses on January 11, 1989,
a few months after the Family Code took effect on August 3, 1988.
When Tarciano married Rosario, the Civil Code put in place the system of conjugal
partnership of gains on their property relations. While its Article 165 made Tarciano
the sole administrator of the conjugal partnership, Article 166 17 prohibited him from
selling commonly owned real property without his wife’s consent. Still, if he sold the
same without his wife’s consent, the sale is not void but merely voidable. Article 173
gave Rosario the right to have the sale annulled during the marriage within ten years
from the date of the sale. Failing in that, she or her heirs may demand, after dissolution
of the marriage, only the value of the property that Tarciano fraudulently sold. Thus:
Art. 173. The wife may, during the marriage, and within ten years from the transaction
questioned, ask the courts for the annulment of any contract of the husband entered
into without her consent, when such consent is required, or any act or contract of the
husband which tends to defraud her or impair her interest in the conjugal partnership
property. Should the wife fail to exercise this right, she or her heirs, after the
dissolution of the marriage, may demand the value of property fraudulently alienated
by the husband.
But, as already stated, the Family Code took effect on August 3, 1988. Its Chapter 4 on
Conjugal Partnership of Gains expressly superseded Title VI, Book I of the Civil Code
on Property Relations Between Husband and Wife. 18Further, the Family Code
provisions were also made to apply to already existing conjugal partnerships without
prejudice to vested rights.19 Thus:
Art. 105. x x x The provisions of this Chapter shall also apply to conjugal partnerships
of gains already established between spouses before the effectivity of this Code,
without prejudice to vested rights already acquired in accordance with the Civil Code
or other laws, as provided in Article 256. (n)
Consequently, when Tarciano sold the conjugal lot to the Fuentes spouses on January
11, 1989, the law that governed the disposal of that lot was already the Family Code.
In contrast to Article 173 of the Civil Code, Article 124 of the Family Code does not
provide a period within which the wife who gave no consent may assail her husband’s
sale of the real property. It simply provides that without the other spouse’s written
consent or a court order allowing the sale, the same would be void. Article 124 thus
provides:
Art. 124. x x x In the event that one spouse is incapacitated or otherwise unable to
participate in the administration of the conjugal properties, the other spouse may
assume sole powers of administration. These powers do not include the powers of
disposition or encumbrance which must have the authority of the court or the written
consent of the other spouse. In the absence of such authority or consent, the disposition
or encumbrance shall be void. x x x
Under the provisions of the Civil Code governing contracts, a void or inexistent
contract has no force and effect from the very beginning. And this rule applies to
contracts that are declared void by positive provision of law, 20 as in the case of a sale
of conjugal property without the other spouse’s written consent. A void contract is
equivalent to nothing and is absolutely wanting in civil effects. It cannot be validated
either by ratification or prescription.21
But, although a void contract has no legal effects even if no action is taken to set it
aside, when any of its terms have been performed, an action to declare its inexistence
15
is necessary to allow restitution of what has been given under it. 22 This action,
according to Article 1410 of the Civil Code does not prescribe. Thus:
Art. 1410. The action or defense for the declaration of the inexistence of a contract
does not prescribe.
Here, the Rocas filed an action against the Fuentes spouses in 1997 for annulment of
sale and reconveyance of the real property that Tarciano sold without their mother’s
(his wife’s) written consent. The passage of time did not erode the right to bring such
an action.
Besides, even assuming that it is the Civil Code that applies to the transaction as the
CA held, Article 173 provides that the wife may bring an action for annulment of sale
on the ground of lack of spousal consent during the marriage within 10 years from the
transaction. Consequently, the action that the Rocas, her heirs, brought in 1997 fell
within 10 years of the January 11, 1989 sale. It did not yet prescribe.
The Fuentes spouses of course argue that the RTC nullified the sale to them based on
fraud and that, therefore, the applicable prescriptive period should be that which
applies to fraudulent transactions, namely, four years from its discovery. Since notice
of the sale may be deemed given to the Rocas when it was registered with the Registry
of Deeds in 1989, their right of action already prescribed in 1993.
But, if there had been a victim of fraud in this case, it would be the Fuentes spouses in
that they appeared to have agreed to buy the property upon an honest belief that
Rosario’s written consent to the sale was genuine. They had four years then from the
time they learned that her signature had been forged within which to file an action to
annul the sale and get back their money plus damages. They never exercised the right.
If, on the other hand, Rosario had agreed to sign the document of consent upon a false
representation that the property would go to their children, not to strangers, and it
turned out that this was not the case, then she would have four years from the time she
discovered the fraud within which to file an action to declare the sale void. But that is
not the case here. Rosario was not a victim of fraud or misrepresentation. Her consent
was simply not obtained at all. She lost nothing since the sale without her written
consent was void. Ultimately, the Rocas ground for annulment is not forgery but the
lack of written consent of their mother to the sale. The forgery is merely evidence of
lack of consent.
Third. The Fuentes spouses point out that it was to Rosario, whose consent was not
obtained, that the law gave the right to bring an action to declare void her husband’s
sale of conjugal land. But here, Rosario died in 1990, the year after the sale. Does this
mean that the right to have the sale declared void is forever lost?
The answer is no. As stated above, that sale was void from the beginning.
Consequently, the land remained the property of Tarciano and Rosario despite that
sale. When the two died, they passed on the ownership of the property to their heirs,
namely, the Rocas.23 As lawful owners, the Rocas had the right, under Article 429 of
the Civil Code, to exclude any person from its enjoyment and disposal.1avvphi1
In fairness to the Fuentes spouses, however, they should be entitled, among other
things, to recover from Tarciano’s heirs, the Rocas, the ₱200,000.00 that they paid
him, with legal interest until fully paid, chargeable against his estate.
Further, the Fuentes spouses appear to have acted in good faith in entering the land and
building improvements on it. Atty. Plagata, whom the parties mutually entrusted with
closing and documenting the transaction, represented that he got Rosario’s signature
on the affidavit of consent. The Fuentes spouses had no reason to believe that the
lawyer had violated his commission and his oath. They had no way of knowing that
Rosario did not come to Zamboanga to give her consent. There is no evidence that
they had a premonition that the requirement of consent presented some difficulty.
Indeed, they willingly made a 30 percent down payment on the selling price months
earlier on the assurance that it was forthcoming.
Further, the notarized document appears to have comforted the Fuentes spouses that
everything was already in order when Tarciano executed a deed of absolute sale in
their favor on January 11, 1989. In fact, they paid the balance due him. And, acting on
the documents submitted to it, the Register of Deeds of Zamboanga City issued a new
title in the names of the Fuentes spouses. It was only after all these had passed that the
spouses entered the property and built on it. He is deemed a possessor in good faith,
said Article 526 of the Civil Code, who is not aware that there exists in his title or
mode of acquisition any flaw which invalidates it.
16
As possessor in good faith, the Fuentes spouses were under no obligation to pay for
their stay on the property prior to its legal interruption by a final judgment against
them.24 What is more, they are entitled under Article 448 to indemnity for the
improvements they introduced into the property with a right of retention until the
reimbursement is made. Thus:
Art. 448. The owner of the land on which anything has been built, sown or planted in
good faith, shall have the right to appropriate as his own the works, sowing or
planting, after payment of the indemnity provided for in Articles 546 and 548, or to
oblige the one who built or planted to pay the price of the land, and the one who
sowed, the proper rent. However, the builder or planter cannot be obliged to buy the
land if its value is considerably more than that of the building or trees. In such case, he
shall pay reasonable rent, if the owner of the land does not choose to appropriate the
building or trees after proper indemnity. The parties shall agree upon the terms of the
lease and in case of disagreement, the court shall fix the terms thereof. (361a)
The Rocas shall of course have the option, pursuant to Article 546 of the Civil
Code,25 of indemnifying the Fuentes spouses for the costs of the improvements or
paying the increase in value which the property may have acquired by reason of such
improvements.
WHEREFORE, the Court DENIES the petition and AFFIRMS WITH
MODIFICATION the decision of the Court of Appeals in CA-G.R. CV 00531 dated
February 27, 2007 as follows:
1. The deed of sale dated January 11, 1989 that Tarciano T. Roca executed in
favor of Manuel O. Fuentes, married to Leticia L. Fuentes, as well as the
Transfer Certificate of Title T-90,981 that the Register of Deeds of
Zamboanga City issued in the names of the latter spouses pursuant to that
deed of sale are DECLARED void;
2. The Register of Deeds of Zamboanga City is DIRECTED to reinstate
Transfer Certificate of Title 3533 in the name of Tarciano T. Roca, married to
Rosario Gabriel;
3. Respondents Gonzalo G. Roca, Annabelle R. Joson, Rose Marie R.
Cristobal, and Pilar Malcampo are ORDERED to pay petitioner spouses
Manuel and Leticia Fuentes the ₱200,000.00 that the latter paid Tarciano T.
Roca, with legal interest from January 11, 1989 until fully paid, chargeable
against his estate;
4. Respondents Gonzalo G. Roca, Annabelle R. Joson, Rose Marie R.
Cristobal, and Pilar Malcampo are further ORDERED, at their option, to
indemnify petitioner spouses Manuel and Leticia Fuentes with their expenses
for introducing useful improvements on the subject land or pay the increase in
value which it may have acquired by reason of those improvements, with the
spouses entitled to the right of retention of the land until the indemnity is
made; and
5. The RTC of Zamboanga City from which this case originated is
DIRECTED to receive evidence and determine the amount of indemnity to
which petitioner spouses Manuel and Leticia Fuentes are entitled.
SO ORDERED.
G.R. No. 74761 November 6, 1990
NATIVIDAD V. ANDAMO and EMMANUEL R. ANDAMO, petitioners,
vs.
INTERMEDIATE APPELLATE COURT (First Civil Cases Division) and
MISSIONARIES OF OUR LADY OF LA SALETTE, INC., respondents.
The pivotal issue in this petition for certiorari, prohibition and mandamus is whether a
corporation, which has built through its agents, waterpaths, water conductors and
contrivances within its land, thereby causing inundation and damage to an adjacent
land, can be held civilly liable for damages under Articles 2176 and 2177 of the Civil
Code on quasi-delicts such that the resulting civil case can proceed independently of
the criminal case.
The antecedent facts are as follows:
Petitioner spouses Emmanuel and Natividad Andamo are the owners of a parcel of
land situated in Biga (Biluso) Silang, Cavite which is adjacent to that of private
respondent, Missionaries of Our Lady of La Salette, Inc., a religious corporation.
17
Within the land of respondent corporation, waterpaths and contrivances, including an
artificial lake, were constructed, which allegedly inundated and eroded petitioners'
land, caused a young man to drown, damaged petitioners' crops and plants, washed
away costly fences, endangered the lives of petitioners and their laborers during rainy
and stormy seasons, and exposed plants and other improvements to destruction.
In July 1982, petitioners instituted a criminal action, docketed as Criminal Case No.
TG-907-82, before the Regional Trial Court of Cavite, Branch 4 (Tagaytay City),
against Efren Musngi, Orlando Sapuay and Rutillo Mallillin, officers and directors of
herein respondent corporation, for destruction by means of inundation under Article
324 of the Revised Penal Code.
Subsequently, on February 22, 1983, petitioners filed another action against
respondent corporation, this time a civil case, docketed as Civil Case No. TG-748, for
damages with prayer for the issuance of a writ of preliminary injunction before the
same court. 1
On March 11, 1983, respondent corporation filed its answer to the complaint and
opposition to the issuance of a writ of preliminary injunction. Hearings were
conducted including ocular inspections on the land. However, on April 26, 1984, the
trial court, acting on respondent corporation's motion to dismiss or suspend the civil
action, issued an order suspending further hearings in Civil Case No, TG-748 until
after judgment in the related Criminal Case No. TG-907-82.
Resolving respondent corporation's motion to dismiss filed on June 22, 1984, the trial
court issued on August 27, 1984 the disputed order dismissing Civil Case No. TG-748
for lack of jurisdiction, as the criminal case which was instituted ahead of the civil
case was still unresolved. Said order was anchored on the provision of Section 3 (a),
Rule III of the Rules of Court which provides that "criminal and civil actions arising
from the same offense may be instituted separately, but after the criminal action has
been commenced the civil action cannot be instituted until final judgment has been
rendered in the criminal action." 2
Petitioners appealed from that order to the Intermediate Appellate Court. 3
On February 17, 1986, respondent Appellate Court, First Civil Cases Division,
promulgated a decision 4 affirming the questioned order of the trial court. 5 A motion
for reconsideration filed by petitioners was denied by the Appellate Court in its
resolution dated May 19, 1986. 6
Directly at issue is the propriety of the dismissal of Civil Case No. TG-748 in
accordance with Section 3 (a) of Rule 111 of the Rules of Court. Petitioners contend
that the trial court and the Appellate Court erred in dismissing Civil Case No. TG-748
since it is predicated on a quasi-delict. Petitioners have raised a valid point.
It is axiomatic that the nature of an action filed in court is determined by the facts
alleged in the complaint as constituting the cause of action. 7 The purpose of an action
or suit and the law to govern it, including the period of prescription, is to be
determined not by the claim of the party filing the action, made in his argument or
brief, but rather by the complaint itself, its allegations and prayer for relief. 8 The
nature of an action is not necessarily determined or controlled by its title or heading
but the body of the pleading or complaint itself. To avoid possible denial of substantial
justice due to legal technicalities, pleadings as well as remedial laws should be
liberally construed so that the litigants may have ample opportunity to prove their
respective claims. 9
Quoted hereunder are the pertinent portions of petitioners' complaint in Civil Case No.
TG-748:
4) That within defendant's land, likewise located at Biga (Biluso), Silang,
Cavite, adjacent on the right side of the aforesaid land of plaintiffs, defendant
constructed waterpaths starting from the middle-right portion thereof leading to
a big hole or opening, also constructed by defendant, thru the lower portion of
its concrete hollow-blocks fence situated on the right side of its cemented gate
fronting the provincial highway, and connected by defendant to a man height
inter-connected cement culverts which were also constructed and lain by
defendant cross-wise beneath the tip of the said cemented gate, the left-end of
the said inter-connected culverts again connected by defendant to a big hole or
opening thru the lower portion of the same concrete hollowblocks fence on the
left side of the said cemented gate, which hole or opening is likewise connected
by defendant to the cemented mouth of a big canal, also constructed by
defendant, which runs northward towards a big hole or opening which was also
built by defendant thru the lower portion of its concrete hollow-blocks fence
which separates the land of plaintiffs from that of defendant (and which serves
as the exit-point of the floodwater coming from the land of defendant, and at
18
 the same time, the entrance-point of the same floodwater to the land of
plaintiffs, year after year, during rainy or stormy seasons.
5) That moreover, on the middle-left portion of its land just beside the land of
plaintiffs, defendant also constructed an artificial lake, the base of which is soil,
which utilizes the water being channeled thereto from its water system thru
inter-connected galvanized iron pipes (No. 2) and complimented by rain water
during rainy or stormy seasons, so much so that the water below it seeps into,
and the excess water above it inundates, portions of the adjoining land of
plaintiffs.
6) That as a result of the inundation brought about by defendant's
aforementioned water conductors, contrivances and manipulators, a young man
was drowned to death, while herein plaintiffs suffered and will continue to
suffer, as follows:
a) Portions of the land of plaintiffs were eroded and converted to deep,
wide and long canals, such that the same can no longer be planted to any
crop or plant.
b) Costly fences constructed by plaintiffs were, on several occasions,
washed away.
c) During rainy and stormy seasons the lives of plaintiffs and their
laborers are always in danger.
d) Plants and other improvements on other portions of the land of
plaintiffs are exposed to destruction. ... 10
A careful examination of the aforequoted complaint shows that the civil action is one
under Articles 2176 and 2177 of the Civil Code on quasi-delicts. All the elements of a
quasi-delict are present, to wit: (a) damages suffered by the plaintiff, (b) fault or
negligence of the defendant, or some other person for whose acts he must respond; and
(c) the connection of cause and effect between the fault or negligence of the defendant
and the damages incurred by the plaintiff. 11
Clearly, from petitioner's complaint, the waterpaths and contrivances built by
respondent corporation are alleged to have inundated the land of petitioners. There is
therefore, an assertion of a causal connection between the act of building these
waterpaths and the damage sustained by petitioners. Such action if proven constitutes
fault or negligence which may be the basis for the recovery of damages.
In the case of Samson vs. Dionisio, 12 the Court applied Article 1902, now Article 2176
of the Civil Code and held that "any person who without due authority constructs a
bank or dike, stopping the flow or communication between a creek or a lake and a
river, thereby causing loss and damages to a third party who, like the rest of the
residents, is entitled to the use and enjoyment of the stream or lake, shall be liable to
the payment of an indemnity for loss and damages to the injured party.
While the property involved in the cited case belonged to the public domain and the
property subject of the instant case is privately owned, the fact remains that petitioners'
complaint sufficiently alleges that petitioners have sustained and will continue to
sustain damage due to the waterpaths and contrivances built by respondent
corporation. Indeed, the recitals of the complaint, the alleged presence of damage to
the petitioners, the act or omission of respondent corporation supposedly constituting
fault or negligence, and the causal connection between the act and the damage, with no
pre-existing contractual obligation between the parties make a clear case of a quasi
delict or culpa aquiliana.
It must be stressed that the use of one's property is not without limitations. Article 431
of the Civil Code provides that "the owner of a thing cannot make use thereof in such a
manner as to injure the rights of a third person." SIC UTERE TUO UT ALIENUM
NON LAEDAS. Moreover, adjoining landowners have mutual and reciprocal duties
which require that each must use his own land in a reasonable manner so as not to
infringe upon the rights and interests of others. Although we recognize the right of an
owner to build structures on his land, such structures must be so constructed and
maintained using all reasonable care so that they cannot be dangerous to adjoining
landowners and can withstand the usual and expected forces of nature. If the structures
cause injury or damage to an adjoining landowner or a third person, the latter can
claim indemnification for the injury or damage suffered.
Article 2176 of the Civil Code imposes a civil liability on a person for damage caused
by his act or omission constituting fault or negligence, thus:
19
 Article 2176. Whoever by act or omission causes damage to another, there
being fault or negligence, is obliged to pay for the damage done. Such fault or
negligence, if there is no pre-existing contractual relation between the parties, is
called a quasi-delict and is governed by the provisions of this chapter.
Article 2176, whenever it refers to "fault or negligence", covers not only acts "not
punishable by law" but also acts criminal in character, whether intentional and
voluntary or negligent. Consequently, a separate civil action lies against the offender
in a criminal act, whether or not he is criminally prosecuted and found guilty or
acquitted, provided that the offended party is not allowed, (if the tortfeasor is actually
charged also criminally), to recover damages on both scores, and would be entitled in
such eventuality only to the bigger award of the two, assuming the awards made in the
two cases vary. 13
The distinctness of quasi-delicta is shown in Article 2177 of the Civil Code, which
states:
Article 2177. Responsibility for fault or negligence under the preceding article
is entirely separate and distinct from the civil liability arising from negligence
under the Penal Code. But the plaintiff cannot recover damages twice for the
same act or omission of the defendant.
According to the Report of the Code Commission "the foregoing provision though at
first sight startling, is not so novel or extraordinary when we consider the exact nature
of criminal and civil negligence. The former is a violation of the criminal law, while
the latter is a distinct and independent negligence, which is a "culpa aquiliana" or
quasi-delict, of ancient origin, having always had its own foundation and individuality,
separate from criminal negligence. Such distinction between criminal negligence and
"culpa extra-contractual" or "cuasi-delito" has been sustained by decisions of the
Supreme Court of Spain ... 14
In the case of Castillo vs. Court of Appeals, 15 this Court held that a quasi-delict or
culpa aquiliana is a separate legal institution under the Civil Code with a substantivity
all its own, and individuality that is entirely apart and independent from a delict or
crime — a distinction exists between the civil liability arising from a crime and the
responsibility for quasi-delicts or culpa extra-contractual. The same negligence
causing damages may produce civil liability arising from a crime under the Penal
Code, or create an action for quasi-delicts or culpa extra-contractual under the Civil
Code. Therefore, the acquittal or conviction in the criminal case is entirely irrelevant in
the civil case, unless, of course, in the event of an acquittal where the court has
declared that the fact from which the civil action arose did not exist, in which case the
extinction of the criminal liability would carry with it the extinction of the civil
liability.
In Azucena vs. Potenciano, 16 the Court declared that in quasi-delicts, "(t)he civil
action is entirely independent of the criminal case according to Articles 33 and 2177 of
the Civil Code. There can be no logical conclusion than this, for to subordinate the
civil action contemplated in the said articles to the result of the criminal prosecution —
whether it be conviction or acquittal — would render meaningless the independent
character of the civil action and the clear injunction in Article 31, that his action may
proceed independently of the criminal proceedings and regardless of the result of the
latter."
WHEREFORE, the assailed decision dated February 17, 1986 of the then Intermediate
Appellate Court affirming the order of dismissal of the Regional Trial Court of Cavite,
Branch 18 (Tagaytay City) dated August 17, 1984 is hereby REVERSED and SET
ASIDE. The trial court is ordered to reinstate Civil Case No. TG-748 entitled
"Natividad V. Andamo and Emmanuel R. Andamo vs. Missionaries of Our Lady of La
Salette Inc." and to proceed with the hearing of the case with dispatch. This decision is
immediately executory. Costs against respondent corporation. SO ORDERED.
G. R. No. 185124 January 25, 2012
REPUBLIC OF THE PHILIPPINES, represented by the NATIONAL
IRRIGATION ADMINISTRATION (NIA),Petitioner,
vs.
RURAL BANK OF KABACAN, INC., LITTIE SARAH A. AGDEPPA, LEOSA
NANETTE AGDEPPA and MARCELINO VIERNES, MARGARITA
TABOADA, PORTIA CHARISMA RUTH ORTIZ, represented by LINA
ERLINDA A. ORTIZ and MARIO ORTIZ, JUAN MAMAC and GLORIA
MATAS, Respondents.
Before the Court is a Petition for Review on Certiorari under Rule 45 of the Rules of
Court, seeking the reversal of the 12 August 2008 Court of Appeals (CA) Decision and
22 October 2008 Resolution in CA-G.R. CV No. 65196.
20
The assailed issuances affirmed with modification the 31 August 1999 "Judgment"
promulgated by the Regional Trial Court (RTC), Branch 22, Judicial Region, Kabacan,
Cotabato. The RTC had fixed the just compensation for the value of the land and
improvements thereon that were expropriated by petitioner, but excluded the value of
the excavated soil. Petitioner Republic of the Philippines is represented in this case by
the National Irrigation Authority (NIA).
The Facts
NIA is a government-owned-and-controlled corporation created under Republic Act
No. (R.A.) 3601 on 22 June 1963. It is primarily responsible for irrigation
development and management in the country. Its charter was amended by Presidential
Decree (P.D.) 552 on 11 September 1974 and P.D. 1702 on 17 July 1980. To carry out
its purpose, NIA was specifically authorized under P.D. 552 to exercise the power of
eminent domain.1
NIA needed some parcels of land for the purpose of constructing the Malitubog-
Marigadao Irrigation Project. On 08 September 1994, it filed with the RTC of
Kabacan, Cotabato a Complaint for the expropriation of a portion of three (3) parcels
of land covering a total of 14,497.91 square meters. 2 The case was docketed as Special
Civil Case No. 61 and was assigned to RTC-Branch 22. The affected parcels of land
were the following:
1) Lot No. 3080 – covered by Transfer Certificate of Title (TCT) No. T-
61963 and registered under the Rural Bank of Kabacan
2) Lot No. 455 – covered by TCT No. T-74516 and registered under the
names of RG May, Ronald and Rolando, all surnamed Lao
3) Lot No. 3039 – registered under the name of Littie Sarah Agdeppa3
On 11 July 1995, NIA filed an Amended Complaint to include Leosa Nanette A.
Agdeppa and Marcelino Viernes as registered owners of Lot No. 3039. 4
On 25 September 1995, NIA filed a Second Amended Complaint to allege properly the
area sought to be expropriated, the exact address of the expropriated properties and the
owners thereof. NIA further prayed that it be authorized to take immediate possession
of the properties after depositing with the Philippine National Bank the amount of ₱
19,246.58 representing the provisional value thereof. 5
On 31 October 1995, respondents filed their Answer with Affirmative and Special
Defenses and Counterclaim.6 They alleged, inter alia, that NIA had no authority to
expropriate portions of their land, because it was not a sovereign political entity; that it
was not necessary to expropriate their properties, because there was an abandoned
government property adjacent to theirs, where the project could pass through; that Lot
No. 3080 was no longer owned by the Rural Bank of Kabacan; that NIA’s valuation of
their expropriated properties was inaccurate because of the improvements on the land
that should have placed its value at ₱ 5 million; and that NIA never negotiated with the
landowners before taking their properties for the project, causing permanent and
irreparable damages to their properties valued at ₱ 250,000. 7
On 11 September 1996, the RTC issued an Order forming a committee tasked to
determine the fair market value of the expropriated properties to establish the just
compensation to be paid to the owners. The committee was composed of the Clerk of
Court of RTC Branch 22 as chairperson and two (2) members of the parties to the
case.8
On 20 September 1996, in response to the expropriation Complaint, respondents-
intervenors Margarita Tabaoda, Portia Charisma Ruth Ortiz, Lina Erlinda Ortiz, Mario
Ortiz, Juan Mamac and Gloria Matas filed their Answer-in-Intervention with
Affirmative and Special Defenses and Counter-Claim. They essentially adopted the
allegations in the Answer of the other respondents and pointed out that Margarita
Tabaoda and Portia Charisma Ruth Ortiz were the new owners of Lot No. 3080, which
the two acquired from the Rural Bank of Kabacan. They further alleged that the four
other respondents-intervenors were joint tenants-cultivators of Lot Nos. 3080 and
3039.9
On 10 October 1996, the lower court issued an Order stating it would issue a writ of
possession in favor of NIA upon the determination of the fair market value of the
properties, subject of the expropriation proceedings. 10 The lower court later amended
its ruling and, on 21 October 1996, issued a Writ of Possession in favor of NIA.11
On 15 October 1996, the committee submitted a Commissioners’ Report 12 to the RTC
stating the following observations:
21
In the process of ocular inspection, the following were jointly observed:
1) The area that was already occupied is 6x200 meters which is equivalent to
1,200 square meters;
2) The area which is to be occupied is 18,930 square meters, more or less;
3) That the area to be occupied is fully planted by gmelina trees with a
spacing of 1x1 meters;
4) That the gmelina tress found in the area already occupied and used for [the]
road is planted with gmelina with spacing of 2x2 and more or less one (1)
year old;
5) That the gmelina trees found in the area to be occupied are already four (4)
years old;
6) That the number of banana clumps (is) two hundred twenty (220);
7) That the number of coco trees found (is) fifteen (15). 13
The report, however, stated that the committee members could not agree on the market
value of the subject properties and recommended the appointment of new independent
commissioners to replace the ones coming from the parties only. 14 On 22 October
1996, the RTC issued an Order15 revoking the appointments of Atty. Agdeppa and
Engr. Mabang as members of the committee and, in their stead, appointed Renato
Sambrano, Assistant Provincial Assessor of the Province of Cotabato; and Jack
Tumacmol, Division Chief of the Land Bank of the Philippines–Kidapawan Branch.16
On 25 November 1996, the new committee submitted its Commissioners’ Report to
the lower court. The committee had agreed that the fair market value of the land to be
expropriated should be ₱ 65 per square meter based on the zonal valuation of the
Bureau of Internal Revenue (BIR). As regards the improvement on the properties, the
report recommended the following compensation:
a. ₱ 200 for each gmelina tree that are more than four (4) years old
b. ₱ 150 for each gmelina tree that are more than one (1) year old
c. ₱ 164 for each coco tree
d. ₱ 270 for each banana clump17
On 03 December 1997, the committee submitted to the RTC another report, which had
adopted the first Committee Report, as well as the former’s 25 November 1996 report.
However, the committee added to its computation the value of the earthfill excavated
from portions of Lot Nos. 3039 and 3080. 18 Petitioner objected to the inclusion of the
value of the excavated soil in the computation of the value of the land. 19
The Ruling of the Trial Court
On 31 August 1999, the RTC promulgated its "Judgment," 20 the dispositive portion of
which reads:
WHEREFORE, IN VIEW of all the foregoing considerations, the court finds and so
holds that the commissioners have arrived at and were able to determine the fair
market value of the properties. The court adopts their findings, and orders:
1. That 18,930 square meters of the lands owned by the defendants is hereby
expropriated in favor of the Republic of the Philippines through the National
Irrigation Administration;
2. That the NIA shall pay to the defendants the amount of ₱ 1,230,450 for the
18,930 square meters expropriated in proportion to the areas so expropriated;
3. That the NIA shall pay to the defendant-intervenors, owners of Lot No.
3080, the sum of ₱ 5,128,375.50, representing removed earthfill;
4. That the NIA shall pay to the defendants, owners of Lot No. 3039, the sum
of P1,929,611.30 representing earthfill;
5. To pay to the defendants the sum of ₱ 60,000 for the destroyed G-melina
trees (1 year old);
22
 6. To pay to the defendants the sum of ₱ 3,786,000.00 for the 4-year old G-
melina trees;
7. That NIA shall pay to the defendants the sum of ₱ 2,460.00 for the coconut
trees;
8. That all payments intended for the defendant Rural Bank of Kabacan shall
be given to the defendants and intervenors who have already acquired
ownership over the land titled in the name of the Bank.21
NIA, through the Office of the Solicitor General (OSG), appealed the Decision of the
RTC to the CA, which docketed the case as CA-G.R. CV No. 65196. NIA assailed the
trial court’s adoption of the Commissioners’ Report, which had determined the just
compensation to be awarded to the owners of the lands expropriated. NIA also
impugned as error the RTC’s inclusion for compensation of the excavated soil from
the expropriated properties. Finally, it disputed the trial court’s Order to deliver the
payment intended for the Rural Bank of Kabacan to defendants-intervenors, who
allegedly acquired ownership of the land still titled in the name of the said rural bank. 22
The Ruling of the Court of Appeals
On 12 August 2008, the CA through its Twenty-First (21st) Division, promulgated a
Decision23 affirming with modification the RTC Decision. It ruled that the committee
tasked to determine the fair market value of the properties and improvements for the
purpose of arriving at the just compensation, properly performed its function. The
appellate court noted that the committee members had conducted ocular inspections of
the area surrounding the expropriated properties and made their recommendations
based on official documents from the BIR with regard to the zonal valuations of the
affected properties.24 The CA observed that, as far as the valuation of the
improvements on the properties was concerned, the committee members took into
consideration the provincial assessor’s appraisal of the age of the trees, their
productivity and the inputs made.25 The appellate court further noted that despite the
Manifestation of NIA that it be allowed to present evidence to rebut the
recommendation of the committee on the valuations of the expropriated properties,
NIA failed to do so.26
The assailed CA Decision, however, deleted the inclusion of the value of the soil
excavated from the properties in the just compensation. It ruled that the property
owner was entitled to compensation only for the value of the property at the time of
the taking.27 In the construction of irrigation projects, excavations are necessary to
build the canals, and the excavated soil cannot be valued separately from the land
expropriated. Thus, it concluded that NIA, as the new owner of the affected properties,
had the right to enjoy and make use of the property, including the excavated soil,
pursuant to the latter’s objectives.28
Finally, the CA affirmed the trial court’s ruling that recognized defendants-intervenors
Margarita Tabaoda and Portia Charisma Ruth Ortiz as the new owners of Lot No. 3080
and held that they were thus entitled to just compensation. The appellate court based
its conclusion on the non-participation by the Rural Bank of Kabacan in the
expropriation proceedings and the latter’s Manifestation that it no longer owned Lot
No. 3080.29
On 11 September 2008, the NIA through the OSG filed a Motion for Reconsideration
of the 12 August 2008 Decision, but that motion was denied.30
Aggrieved by the appellate court’s Decision, NIA now comes to this Court via a
Petition for Review on Certiorari under Rule 45.
The Issues
The following are the issues proffered by petitioner:
The Court of appeals seriously erred in affirming the trial court’s finding of just
compensation of the land and the improvements thereon based on the report of the
commissioners.
The court of appeals erred in ruling that the payment of just compensation for lot no.
3080 should be made to respondents margarita taboada and Portia charisma ruth
Ortiz.31
The Court’s Ruling
On the first issue, the Petition is not meritorious.
23
In expropriation proceedings, just compensation is defined as the full and fair
equivalent of the property taken from its owner by the expropriator. The measure is not
the taker's gain, but the owner's loss. The word "just" is used to intensify the meaning
of the word "compensation" and to convey thereby the idea that the equivalent to be
rendered for the property to be taken shall be real, substantial, full and ample. 32 The
constitutional limitation of "just compensation" is considered to be a sum equivalent to
the market value of the property, broadly defined as the price fixed by the seller in
open market in the usual and ordinary course of legal action and competition; or the
fair value of the property; as between one who receives and one who desires to sell it,
fixed at the time of the actual taking by the government. 33
In the instant case, we affirm the appellate court’s ruling that the commissioners
properly determined the just compensation to be awarded to the landowners whose
properties were expropriated by petitioner.
The records show that the trial court dutifully followed the procedure under Rule 67 of
the 1997 Rules of Civil Procedure when it formed a committee that was tasked to
determine the just compensation for the expropriated properties. The first set of
committee members made an ocular inspection of the properties, subject of the
expropriation. They also determined the exact areas affected, as well as the kinds and
the number of improvements on the properties.34 When the members were unable to
agree on the valuation of the land and the improvements thereon, the trial court
selected another batch of disinterested members to carry out the task of determining
the value of the land and the improvements.
The new committee members even made a second ocular inspection of the
expropriated areas. They also obtained data from the BIR to determine the zonal
valuation of the expropriated properties, interviewed the adjacent property owners, and
considered other factors such as distance from the highway and the nearby town
center.35 Further, the committee members also considered Provincial Ordinance No.
173, which was promulgated by the Province of Cotabato on 15 June 1999, and which
provide for the value of the properties and the improvements for taxation purposes. 36
We can readily deduce from these established facts that the committee members
endeavored a rigorous process to determine the just compensation to be awarded to the
owners of the expropriated properties. We cannot, as petitioner would want us to,
oversimplify the process undertaken by the committee in arriving at its
recommendations, because these were not based on mere conjectures and unreliable
data.
In National Power Corporation v. Diato-Bernal,37 this Court emphasized that the
"just"-ness of the compensation could only be attained by using reliable and actual
data as bases for fixing the value of the condemned property. The reliable and actual
data we referred to in that case were the sworn declarations of realtors in the area, as
well as tax declarations and zonal valuation from the BIR. In disregarding the
Committee Report assailed by the National Power Corporation in the said case, we
ruled thus:
It is evident that the above conclusions are highly speculative and devoid of any actual
and reliable basis. First, the market values of the subject property’s neighboring lots
were mere estimates and unsupported by any corroborative documents, such as sworn
declarations of realtors in the area concerned, tax declarations or zonal valuation from
the Bureau of Internal Revenue for the contiguous residential dwellings and
commercial establishments. The report also failed to elaborate on how and by how
much the community centers and convenience facilities enhanced the value of
respondent’s property. Finally, the market sales data and price listings alluded to in the
report were not even appended thereto.
As correctly invoked by NAPOCOR, a commissioners’ report of land prices which is
not based on any documentary evidence is manifestly hearsay and should be
disregarded by the court.
The trial court adopted the flawed findings of the commissioners hook, line, and
sinker. It did not even bother to require the submission of the alleged "market sales
data" and "price listings." Further, the RTC overlooked the fact that the recommended
just compensation was gauged as of September 10, 1999 or more than two years after
the complaint was filed on January 8, 1997. It is settled that just compensation is to be
ascertained as of the time of the taking, which usually coincides with the
commencement of the expropriation proceedings. Where the institution of the action
precedes entry into the property, the just compensation is to be ascertained as of the
time of the filing of the complaint. Clearly, the recommended just compensation in the
commissioners’ report is unacceptable.38
24
In the instant case, the committee members based their recommendations on reliable
data and, as aptly noted by the appellate court, considered various factors that affected
the value of the land and the improvements.39
Petitioner, however, strongly objects to the CA’s affirmation of the trial court’s
adoption of Provincial Ordinance No. 173. The OSG, on behalf of petitioner, strongly
argues that the recommendations of the committee formed by the trial court were
inaccurate. The OSG contends that the ordinance reflects the 1999 market values of
real properties in the Province of Cotabato, while the actual taking was made in
1996.40
We are not persuaded.
We note that petitioner had ample opportunity to rebut the testimonial, as well as
documentary evidence presented by respondents when the case was still on trial. It
failed to do so, however. The issue raised by petitioner was adequately addresses by
the CA’s assailed Decision in this wise:
A thorough scrutiny of the records reveals that the second set of Commissioners, with
Atty. Marasigan still being the Chairperson and Mr. Zambrano and Mr. Tomacmol as
members, was not arbitrary and capricious in performing the task assigned to them.
We note that these Commissioners were competent and disinterested persons who
were handpicked by the court a quo due to their expertise in appraising the value of the
land and the improvements thereon in the province of Cotabato. They made a careful
study of the area affected by the expropriation, mindful of the fact that the value of the
land and its may be affected by many factors. The duly appointed Commissioners
made a second ocular inspection of the subject area on 4 September 1997; went to the
BIR office in order to get the BIR zonal valuation of the properties located in Carmen,
Cotabato; interviewed adjacent property owners; and took into consideration various
factors such as the location of the land which is just less than a kilometer away from
the Poblacion and half a kilometer away from the highway and the fact that it is near a
military reservation. With regard to the improvements, the Commissioners took into
consideration the valuation of the Provincial Assessor, the age of the trees, and the
inputs and their productivity.
Thus, it could not be said that the schedule of market values in Ordinance No. 173 was
the sole basis of the Commissioners in arriving at their valuation. Said ordinance
merely gave credence to their valuation which is comparable to the current price at that
time. Besides, Mr. Zambrano testified that the date used as bases for Ordinance No.
173 were taken from 1995 to 1996.41
Moreover, factual findings of the CA are generally binding on this Court. The rule
admits of exceptions, though, such as when the factual findings of the appellate court
and the trial court are contradictory, or when the findings are not supported by the
evidence on record.42 These exceptions, however, are not present in the instant case.
Thus, in the absence of contrary evidence, we affirm the findings of the CA, which
sustained the trial court’s Decision adopting the committee’s recommendations on the
just compensation to be awarded to herein respondents.
We also uphold the CA ruling, which deleted the inclusion of the value of the
excavated soil in the payment for just compensation. There is no legal basis to separate
the value of the excavated soil from that of the expropriated properties, contrary to
what the trial court did. In the context of expropriation proceedings, the soil has no
value separate from that of the expropriated land. Just compensation ordinarily refers
to the value of the land to compensate for what the owner actually loses. Such value
could only be that which prevailed at the time of the taking.
In National Power Corporation v. Ibrahim, et al., 43 we held that rights over lands are
indivisible, viz:
[C]onsequently, the CA’s findings which upheld those of the trial court that
respondents owned and possessed the property and that its substrata was possessed by
petitioner since 1978 for the underground tunnels, cannot be disturbed. Moreover, the
Court sustains the finding of the lower courts that the sub-terrain portion of the
property similarly belongs to respondents. This conclusion is drawn from Article 437
of the Civil Code which provides:
ART. 437. The owner of a parcel of land is the owner of its surface and of everything
under it, and he can construct thereon any works or make any plantations and
excavations which he may deem proper, without detriment to servitudes and subject to
special laws and ordinances. He cannot complain of the reasonable requirements of
aerial navigation.
Thus, the ownership of land extends to the surface as well as to the subsoil under it.
25
 xxx xxx xxx
Registered landowners may even be ousted of ownership and possession of their
properties in the event the latter are reclassified as mineral lands because real
properties are characteristically indivisible. For the loss sustained by such owners, they
are entitled to just compensation under the Mining Laws or in appropriate
expropriation proceedings.
Moreover, petitioner’s argument that the landowners’ right extends to the sub-soil
insofar as necessary for their practical interests serves only to further weaken its case.
The theory would limit the right to the sub-soil upon the economic utility which such
area offers to the surface owners. Presumably, the landowners’ right extends to such
height or depth where it is possible for them to obtain some benefit or enjoyment, and
it is extinguished beyond such limit as there would be no more interest protected by
law.
Hence, the CA correctly modified the trial court’s Decision when it ruled thus:
We agree with the OSG that NIA, in the construction of irrigation projects, must
necessarily make excavations in order to build the canals. Indeed it is preposterous that
NIA will be made to pay not only for the value of the land but also for the soil
excavated from such land when such excavation is a necessary phase in the building of
irrigation projects. That NIA will make use of the excavated soil is of no moment and
is of no concern to the landowner who has been paid the fair market value of his land.
As pointed out by the OSG, the law does not limit the use of the expropriated land to
the surface area only. Further, NIA, now being the owner of the expropriated property,
has the right to enjoy and make use of the property in accordance with its mandate and
objectives as provided by law. To sanction the payment of the excavated soil is to
allow the landowners to recover more than the value of the land at the time when it
was taken, which is the true measure of the damages, or just compensation, and would
discourage the construction of important public improvements. 44
On the second issue, the Petition is meritorious.
The CA affirmed the ruling of the trial court, which had awarded the payment of just
compensation – intended for Lot No. 3080 registered in the name of the Rural Bank of
Kabacan – to the defendants-intervenors on the basis of the non-participation of the
rural bank in the proceedings and the latter’s subsequent Manifestation that it was no
longer the owner of that lot. The appellate court erred on this matter.
It should be noted that eminent domain cases involve the expenditure of public
funds.45 In this kind of proceeding, we require trial courts to be more circumspect in
their evaluation of the just compensation to be awarded to the owner of the
expropriated property.46 Thus, it was imprudent for the appellate court to rely on the
Rural Bank of Kabacan’s mere declaration of non-ownership and non-participation in
the expropriation proceeding to validate defendants-intervenors’ claim of entitlement
to that payment.
The law imposes certain legal requirements in order for a conveyance of real property
to be valid. It should be noted that Lot No. 3080 is a registered parcel of land covered
by TCT No. T-61963. In order for the reconveyance of real property to be valid, the
conveyance must be embodied in a public document47 and registered in the office of
the Register of Deeds where the property is situated. 48
We have scrupulously examined the records of the case and found no proof of
conveyance or evidence of transfer of ownership of Lot No. 3080 from its registered
owner, the Rural Bank of Kabacan, to defendants-intervenors. As it is, the TCT is still
registered in the name of the said rural bank. It is not disputed that the bank did not
participate in the expropriation proceedings, and that it manifested that it no longer
owned Lot No. 3080. The trial court should have nevertheless required the rural bank
and the defendants-intervenors to show proof or evidence pertaining to the conveyance
of the subject lot. The court cannot rely on mere inference, considering that the
payment of just compensation is intended to be awarded solely owner based on the
latter’s proof of ownership.
The trial court should have been guided by Rule 67, Section 9 of the 1997 Rules of
Court, which provides thus:
SEC. 9. Uncertain ownership; conflicting claims. — If the ownership of the property
taken is uncertain, or there are conflicting claims to any part thereof, the court may
order any sum or sums awarded as compensation for the property to be paid to the
court for the benefit of the person adjudged in the same proceeding to be entitled
thereto. But the judgment shall require the payment of the sum or sums awarded to
either the defendant or the court before the plaintiff can enter upon the property, or
retain it for the public use or purpose if entry has already been made.
26
Hence, the appellate court erred in affirming the trial court’s Order to award payment
of just compensation to the defendants-intervenors. There is doubt as to the real owner
of Lot No. 3080. Despite the fact that the lot was covered by TCT No. T-61963 and
was registered under its name, the Rural Bank of Kabacan manifested that the owner
of the lot was no longer the bank, but the defendants-intervenors; however, it presented
no proof as to the conveyance thereof. In this regard, we deem it proper to remand this
case to the trial court for the reception of evidence to establish the present owner of
Lot No. 3080 who will be entitled to receive the payment of just compensation.
WHEREFORE, the Petition is PARTLY GRANTED. The 12 August 2008 CA
Decision in CA-G.R. CV No. 65196, awarding just compensation to the defendants as
owners of the expropriated properties and deleting the inclusion of the value of the
excavated soil, is hereby AFFIRMED with MODIFICATION. The case is hereby
REMANDED to the trial court for the reception of evidence to establish the present
owner of Lot No. 3080. No pronouncements as to cost. SO ORDERED.
G.R. No. 35223 September 17, 1931
THE BACHRACH MOTOR CO., INC., plaintiff-appellee,
vs.
TALISAY-SILAY MILLING CO., ET AL., defendants-appellees.
THE PHILIPPINE NATIONAL BANK, intervenor-appellant.
This proceeding originated in a complaint filed by the Bachrach Motor Co., Inc.,
against the Talisay-Silay Milling Co., Inc., for the delivery of the amount P13,850 or
promissory notes or other instruments or credit for that sum payable on June 30, 1930,
as bonus in favor of Mariano Lacson Ledesma; the complaint further prays that the
sugar central be ordered to render an accounting of the amounts it owes Mariano
Lacson Ledesma by way of bonus, dividends, or otherwise, and to pay the plaintiff a
sum sufficient to satisfy the judgment mentioned in the complaint, and that the sale
made by said Mariano Lacson Ledesma be declared null and void.
The Philippine National Bank filed a third party claim alleging a preferential right to
receive any amount which Mariano Lacson Ledesma might be entitled to from the
Talisay-Silay Milling Co. as bonus, because that would be civil fruits of the land
mortgaged to said bank by said debtor for the benefit of the central referred to, and by
virtue of a deed of assignment, and praying that said central be ordered to delivered
directly to the intervening bank said sum on account of the latter's credit against the
aforesaid Mariano Lacson Ledesma.
The corporation Talisay-Silay Milling Co., Inc., answered the complaint stating that of
Mariano Lacson Ledesma's credit, P7,500 belonged to Cesar Ledesma because he had
purchased it, and praying that it be absolved from the complaint and that the proper
party be named so that the remainder might be delivered.
Cesar Ledesma, in turn, claiming to be the owner by purchase in good faith an for a
reconsideration of the P7,500 which is a part of the credit referred to above, answered
praying that he be absolved from the complaint.
The plaintiff Bachrach Motor Co., Inc., answered the third party claim alleging that its
credit against Mariano Lacson Ledesma was prior and preferential to that of the
intervening bank, and praying that the latter's complaint be dismissed.
At the trial all the parties agreed to recognize and respect the sale made in favor of
Cesar Ledesma of the P7,500 part of the credit in question, for which reason the trial
court dismissed the complaint and cross-complaint against Cesar Ledesma authorizing
the defendant central to deliver to him the aforementioned sum of P7,500. And upon
conclusion of the hearing, the court held that the Bachrach Motor Co., Inc., had a
preferred right to receive the amount of P11,076.02 which was Mariano Lacson
Ledesma's bonus, and it ordered the defendant central to deliver said sum to the
plaintiff.
The Philippine National Bank appeals, assigning the following alleged errors as
committed by the trial court:
1. In holding that the bonus which the Talisay-Silay Milling Co., Inc., bound
itself to pay the planters who had mortgaged their land to the Philippine
National Bank to secure the payment of the debt of said central to said bank is
not civil fruits of said land.
2. In not holding that said bonus became subject to the mortgage executed by
the defendant Mariano Lacson Ledesma to the Philippine National Bank to
secure the payment of his personal debt to said bank when it fell due.
27
 3. In holding that the assignment (Exhibit 9, P.N.B.) of said bonus made on
March 7, 1930, by Mariano Lacson Ledesma to the Philippine National Bank
to be applied to the payment of his debt to said Philippine National Bank is
fraudulent.
4. In holding that the Bachrach Motor Co. Inc., in civil case No. 31597 of the
Court of First Instance of Manila levied a valid attachment upon the bonus in
question.
5. In admitting and considering the supplementary complaint filed by the
Bachrach Motor Co., Inc., alleging as a cause of action the attachment of the
bonus in question which said Bachrach Motor Co., Inc., in civil case No.
31821 of the Court of First Instance of Manila levied after the filing of the
original complaint in this case, and after Mariano Lacson Ledesma in this
case had been declared in default.
6. In holding that the Bachrach Motor Co., Inc., has a preferential right to
receive from the Talisay-Silay Milling Co., Inc., the amount of P11,076.02
which is in the possession of said corporation as the bonus to be paid to
Mariano Lacson Ledesma, and in ordering the Talisay-Silay Milling Co., Inc.,
to deliver said amount to the Bachrach Motor Co., Inc.
7. In not holding that the Philippine National Bank has a preferential right to
receive from the Talisay-Silay Milling Co., Inc., the amount of P11,076.02
held by said corporation as Mariano Lacson Ledesma's bonus, and in not
ordering said Talisay-Silay Milling Co., Inc., to deliver said amount to the
Philippine National Bank.
8. In not holding that the amended complaint and the supplementary
complaint of the Bachrach Motor Co., Inc., do not state facts sufficient to
constitute a cause of action in favor of the Bachrach Motor Co., Inc., and
against the Talisay-Silay Milling Co., Inc., or against the Philippine National
Bank.
The appellant bank bases its preferential right upon the contention that the bonus in
question is civil fruits of the lands which the owners had mortgaged for the benefit of
the central giving the bonus, and that, as civil fruits of said land, said bonus was
assigned by Mariano Lacson Ledesma on March 7, 1930, by virtue of the document
Exhibit 9 of said intervening institution, which admitted in its brief that "if the bonus
in question is not civil fruits or rent which became subject to the mortgage in favor of
the Philippine National Bank when Mariano Lacson Ledesma's personal obligation fell
due, the assignment of March 7, 1930 (Exhibit 9, P.N.B.), is null and void, not because
it is fraudulent, for there was no intent of fraud in executing the deed, but that the
cause or consideration of the assignment was erroneous, for it was based upon the
proposition that the bonus was civil fruits of the land mortgaged to the Philippine
National Bank." (P. 31.)
The fundamental question, then, submitted to our consideration is whether or not the
bonus in question is civil fruits.
This is how the bonus came to be granted: On December 22, 1923, the Talisay-Silay
Milling Co., Inc., was indebted to the Philippine National Bank. To secure the
payment of its debt, it succeeded in inducing its planters, among whom was Mariano
Lacson Ledesma, to mortgage their land to the creditor bank. And in order to
compensate those planters for the risk they were running with their property under the
mortgage, the aforesaid central, by a resolution passed on that same date, i.e.,
December 22, 1923, undertook to credit the owners of the plantation thus mortgaged
every year with a sum equal to two per centum of the debt secured according to yearly
balance, the payment of the bonus being made at once, or in part from time to time, as
soon as the central became free of its obligations to the aforesaid bank, and of those
contracted by virtue of the contract of supervision, and had funds which might be so
used, or as soon as it obtained from said bank authority to make such payment.
(Exhibits 5, 6; P.N.B.)
Article 355 of the Civil Code considers three things as civil fruits: First, the rents of
buildings; second, the proceeds from leases of lands; and, third, the income from
perpetual or life annuities, or other similar sources of revenue. It may be noted that
according to the context of the law, the phrase "u otras analogas" refers only to rent or
income, for the adjectives "otras" and "analogas" agree with the noun "rentas," as do
also the other adjectives "perpetuas"and "vitalicias." That is why we say that by "civil
fruits" the Civil Code understands one of three and only three things, to wit: the rent of
a building, the rent of land, and certain kinds of income.
As the bonus in question is not rent of a building or of land, the only meaning of "civil
fruits" left to be examined is that of "income."
28
Assuming that in broad juridical sense of the word "income" it might be said that the
bonus in question is "income" under article 355 of the Civil Code, it is obvious to
inquire whether it is derived from the land mortgaged by Mariano Lacson Ledesma to
the appellant bank for the benefit of the central; for it is not obtained from that land but
from something else, it is not civil fruits of that land, and the bank's contention is
untenable.
It is to be noted that the said bonus bears no immediate, but only a remote accidental
relation to the land mentioned, having been granted as compensation for the risk of
having subjected one's land to a lien in favor of the bank, for the benefit of the entity
granting said bonus. If this bonus be income or civil fruits of anything, it is income
arising from said risk, or, if one chooses, from Mariano Lacson Ledesma's generosity
in facing the danger for the protection of the central, but certainly it is not civil fruits
or income from the mortgaged property, which, as far as this case is concerned, has
nothing to do with it. Hence, the amount of the bonus, according to the resolution of
the central granting it, is not based upon the value, importance or any other
circumstance of the mortgaged property, but upon the total value of the debt thereby
secured, according to the annual balance, which is something quite distinct from and
independent of the property referred to.
Finding no merit in this appeal, the judgment appealed from is affirmed, without
express finding as to costs. So ordered.
G.R. No. 133879 November 21, 2001
EQUATORIAL REALTY DEVELOPMENT, INC., petitioner,
vs.
MAYFAIR THEATER, INC., respondent.
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 Review1 under Rule 45 of the Rules of Court,
challenging the March 11, 1998 Order2 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."3
Also questioned is the May 29, 1998 RTC Order 4 denying petitioner'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.5(henceforth
referred to as the "mother case"), docketed as G.R No. 106063.
Carmelo & Bauermann, Inc. ("Camelo" ) 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.
29
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 G.R 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." 6
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 canceled
Equatorial's titles and issued new Certificates of Title7 in the name of Mayfair.
Ruling on Equatorial's Petition for Certiorari and Petition 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 G.R No.
136221 entitled "Equatorial Realty Development, Inc. v. Mayfair Theater, Inc." In a
Decision promulgated on May 12, 2000,8 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." 9
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 after its lease contracts had expired. This
action was the progenitor of the present case.
30
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, 1989.10 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.11
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 avoid 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 back rentals 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 all rights flows is still valid
and existing.
xxx xxx xxx
"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. . .12
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."13
Hence, the present recourse.14
Issues
Petitioner submits, for the consideration of this Court, the following issues: 15
"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.'
31
 "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 fruit16 that belongs to the owner of the property producing
it17 by right of accession.18 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." 19
Ownership of the thing sold is a real right,20 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."21 This right is transferred, not merely by contract, but also by
tradition or delivery.22 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."23 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,24 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.25
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. 26 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." 27
Possession Never Acquired by Petitioner
32
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.28 When there is such impediment, "fiction yields to reality —
the delivery has not been effected."29
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,30 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 . . . 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." 31
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.32 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.33 Does this mean that despite
the judgment rescinding the sale, the right to the fruits34 belonged to, and remained
enforceable by, Equatorial?
Article 1385 of the Civil Code answers this question in the negative, because
"[r]escission 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 35 show that Equatorial — as alleged buyer of the
disputed properties and as alleged successor-in-interest of Carmelo's rights as lessor —
submitted two ejectment suits against Mayfair. Filed in the Metropolitan Trial Court of
33
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 generalprinciple 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."36
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.'
xxx xxx xxx
"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.
xxx xxx xxx
"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.
xxx xxx xxx
"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."37 (Italics supplied)
Thus, petitioner was and still is entitled solely to he 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."38
34
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.@lawphil.net
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." 39
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 G.R 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 avoid," 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 G.R 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.40 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."41 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.42
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 quo erred 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 G.R 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
35
 been rescinded subjecting the present complaint to res judicata."43(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.
G.R. No. 219811; April 6, 2016
REX DACLISON, Petitioner,
vs.
EDUARDO BAYTION, Respondent.
Assailed in this petition for review 1 are the February 5, 2015 Decision2 and the August
3, 2015 Resolution3 of the Court of Appeals (CA) in CA-G.R. CV No. 99627, which
affirmed in toto the April 27, 2012 Decision 4 rendered by the Regional Trial Court,
Branch 224, Quezon City (RTC) in Civil Case No. Q-09-66145, a case for forcible
entry.
The Antecedents
On January 27, 2009, respondent Eduardo Baytion (Baytion) filed a Complaint5 for
Forcible Entry and Damages with Prayer for Issuance of Preliminary Mandatory
Injunction with the Metropolitan Trial Court, Branch 43, Quezon City (MeTC) against
petitioner Rex Daclison (Daclison), which was docketed as Civil Case No. 39225.
In the complaint, Baytion alleged that he was a co-owner of a parcel of land consisting
of 1,500 square meters, covered by Transfer Certificate Title (TCT) No. 221507. The
said property was inherited by him and his siblings from their parents and, as agreed
upon, was being administered by him. As administrator, he leased portions of the
property to third persons.
Erected on the said property was a one-storey building which was divided into seven
units or stalls. One of the stalls was leased to a certain Leonida Dela Cruz
(Leonida) who used it for her business of selling rocks, pebbles and similar
construction materials.
When the lease of Nida expired sometime in May 2008, Daclison and other persons
acting under her took possession of the portion leased and occupied by Leonida
without the prior knowledge and consent of Baytion. Since then, Daclison had been
occupying the contested portion and using it for his business of selling marble and
other finishing materials without paying anything to Baytion.
Upon learning of Daclison’s unauthorized entry into the subject portion of the
property, sometime in June 2008, Baytion demanded that he vacate it. Despite oral and
written demands to vacate, Daclison refused to do so. This prompted Baytion to file
the complaint for forcible entry and damages.
Daclison, in his answer, averred that sometime in 1978, Baytion leased the subject
portion to Antonio dela Cruz (Antonio) where the latter started a business; that ten or
fifteen years later, a stone walling, called a riprap, was erected at the creek lying
beside Baytion’s property, leaving a deep down-sloping area; that Antonio negotiated
with a certain engineer so he could be in possession of the said down-slope; that
Antonio had the down-slope filled up until it was leveled with the leased portion; that
Antonio paid for the right to possess the same; that in 2000, Antonio’s business was
taken over by Leonida, who suffered a stroke in December 2007; that after her death,
the business was taken over by Ernanie Dela Cruz (Ernanie); that in February 2008, he
(Daclison) entered into a business venture with Ernanie in the same leased property
and he took over the management of the business; that he received a letter from
Baytion addressed to Ernanie requesting the latter to vacate the subject premises; that
Baytion and Ernanie came to an agreement that the latter would continue the lease of
the property; that he issued a check in the amount of ₱100,000.00 as payment for the
rental arrears; that two weeks thereafter, Baytion returned the check and demanded
that Ernanie vacate the property; that Baytion promised that he would no longer bother
them if they would just transfer to the filled-up and plane-leveled property; that on
account of the said promise, he and Ernanie vacated the leased area and transferred
their business to the filled-up portion; that despite the fact that they already vacated the
leased portion of the property, Baytion still filed a complaint with the barangay
claiming that the filled-up portion was part of his property; that the executive officer of
36
the barangay who conducted the investigation made a report indicating that
a mojon was placed by him (Daclison) which showed the boundary of Baytion’s
property; that Baytion acknowledged the said report and agreed to put an end to the
controversy; and that despite Baytion’s agreement to put an end to the dispute, he still
sent a demand letter to vacate. 6
On August 25, 2009, the MeTC dismissed the case on the ground that Baytion failed to
include his siblings or his co-owners, as plaintiffs in the case. The dismissal, however,
was without prejudice.
Baytion appealed the case to the RTC, which ruled that the MeTC lacked jurisdiction
to decide the case because the allegations in the complaint failed to constitute a case of
forcible entry. Pursuant to Section 8, Rule 40 of the Rules of Court, however, the RTC
did not dismiss the case and, instead, exercised its original jurisdiction over the same.
The RTC then decided that Baytion had a better right of possession over the property.
The dispositive portion of its decision reads:
WHEREFORE, premises considered, judgment is hereby rendered ordering:
1) The defendant and other persons claiming under him to vacate and to turn
over the possession of the subject property to the plaintiff; and,
2) The defendant to pay plaintiff the amount of ₱20,000.00/monthly for the
use of the premises commencing from May 2008 until the subject premises is
vacated.
SO ORDERED.7
Aggrieved, Daclison filed an appeal with the CA.
The CA tackled two issues, namely: a) whether the RTC committed a reversible error
when it exercised original jurisdiction of the case and decided the same on its merits
pursuant to Section 8, Rule 40 of the Rules of Court; and, b) who, between Baytion
and Daclison, had a better right to possess the subject property.
The CA ruled that the MeTC had no jurisdiction to hear and decide the case in a
summary proceeding for forcible entry because Baytion failed to allege that he was in
prior physical possession of the property and that he was deprived of his possession
under Section 1, Rule 70 of the Revised Rules of Court. It was of the view that the
present action for forcible entry had actually ripened into one for recovery of the right
to possess or accion publiciana, which was an action in an ordinary civil proceeding in
the Regional Trial Court. The action was aimed at determining who among the parties
had a better right of possession of realty independent of the issue of ownership or title.
It was an ejectment suit filed after the expiration of one year from the accrual of the
cause of action or from the unlawful withholding of possession of the realty. 8 Thus, it
agreed with the RTC when the latter correctly assumed jurisdiction over the case
following the mandate of Section 8, Rule 40 of the Revised Rules of Court. 9
As to the issue of possession, the CA concluded that Baytion, as co-owner of the
subject property, had a better right to possess. It wrote:
Xxx, it is clear that Antonio, Leonida and Ernanie were all lessees of the subject
property and its improvements owned by the plaintiff. Ernanie, who is a sub-lessee of
the subject property, again sub-leased the same to appellant, without authority or
consent from appellee. Thus, since appellant have been possessing the subject property
in his capacity as a mere sub-lessee, he cannot own the subject property and its
improvements through open, continuous and adverse possession of the property. It
follows then that appellee has the right to repossess the subject property.10
On February 5, 2015, the CA rendered the assailed decision, disposing in this wise:
WHEREFORE, the instant appeal is hereby DISMISSED for lack of merit, and the
Decision 27 April 2012 rendered by Branch 224 of the RTC of Quezon City in Civil
Case No. Q-09-66145 is AFFIRMED in toto. SO ORDERED
G.R. No. 166884 June 13, 2012
LAND BANK OF THE PHILIPPINES, Petitioner,
vs.
LAMBERTO C. PEREZ, NESTOR C. KUN, MA. ESTELITA P. ANGELES-
PANLILIO, and NAPOLEON O. GARCIA, Respondents.
37
Before this Court is a petition for review on certiorari, 1 under Rule 45 of the Rules of
Court, assailing the decision2dated January 20, 2005 of the Court of Appeals in CA-
G.R. SP No. 76588. In the assailed decision, the Court of Appeals dismissed the
criminal complaint for estafa against the respondents, Lamberto C. Perez, Nestor C.
Kun, Ma. Estelita P. Angeles-Panlilio and Napoleon Garcia, who allegedly violated
Article 315, paragraph 1(b) of the Revised Penal Code, in relation with Section 13 of
Presidential Decree No. (P.D.) 115 – the "Trust Receipts Law."
Petitioner Land Bank of the Philippines (LBP) is a government financial institution
and the official depository of the Philippines.3 Respondents are the officers and
representatives of Asian Construction and Development Corporation (ACDC), a
corporation incorporated under Philippine law and engaged in the construction
business.4
On June 7, 1999, LBP filed a complaint for estafa or violation of Article 315,
paragraph 1(b) of the Revised Penal Code, in relation to P.D. 115, against the
respondents before the City Prosecutor’s Office in Makati City. In the affidavit-
complaint5 of June 7, 1999, the LBP’s Account Officer for the Account Management
Development, Edna L. Juan, stated that LBP extended a credit accommodation to
ACDC through the execution of an Omnibus Credit Line Agreement
(Agreement)6 between LBP and ACDC on October 29, 1996. In various instances,
ACDC used the Letters of Credit/Trust Receipts Facility of the Agreement to buy
construction materials. The respondents, as officers and representatives of ACDC,
executed trust receipts7 in connection with the construction materials, with a total
principal amount of ₱52,344,096.32. The trust receipts matured, but ACDC failed to
return to LBP the proceeds of the construction projects or the construction materials
subject of the trust receipts. LBP sent ACDC a demand letter, 8 dated May 4, 1999, for
the payment of its debts, including those under the Trust Receipts Facility in the
amount of ₱66,425,924.39. When ACDC failed to comply with the demand letter, LBP
filed the affidavit-complaint.
The respondents filed a joint affidavit9 wherein they stated that they signed the trust
receipt documents on or about the same time LBP and ACDC executed the loan
documents; their signatures were required by LBP for the release of the loans. The
trust receipts in this case do not contain (1) a description of the goods placed in trust,
(2) their invoice values, and (3) their maturity dates, in violation of Section 5(a) of
P.D. 115. Moreover, they alleged that ACDC acted as a subcontractor for government
projects such as the Metro Rail Transit, the Clark Centennial Exposition and the
Quezon Power Plant in Mauban, Quezon. Its clients for the construction projects,
which were the general contractors of these projects, have not yet paid them; thus,
ACDC had yet to receive the proceeds of the materials that were the subject of the
trust receipts and were allegedly used for these constructions. As there were no
proceeds received from these clients, no misappropriation thereof could have taken
place.
On September 30, 1999, Makati Assistant City Prosecutor Amador Y. Pineda issued a
Resolution10 dismissing the complaint. He pointed out that the evidence presented by
LBP failed to state the date when the goods described in the letters of credit were
actually released to the possession of the respondents. Section 4 of P.D. 115 requires
that the goods covered by trust receipts be released to the possession of the entrustee
after the latter’s execution and delivery to the entruster of a signed trust receipt. He
adds that LBP’s evidence also fails to show the date when the trust receipts were
executed since all the trust receipts are undated. Its dispositive portion reads:
WHEREFORE, premises considered, and for insufficiency of evidence, it is
respectfully recommended that the instant complaints be dismissed, as upon approval,
the same are hereby dismissed.11
LBP filed a motion for reconsideration which the Makati Assistant City Prosecutor
denied in his order of January 7, 2000.12
On appeal, the Secretary of Justice reversed the Resolution of the Assistant City
Prosecutor. In his resolution of August 1, 2002, 13 the Secretary of Justice pointed out
that there was no question that the goods covered by the trust receipts were received by
ACDC. He likewise adopted LBP’s argument that while the subjects of the trust
receipts were not mentioned in the trust receipts, they were listed in the letters of credit
referred to in the trust receipts. He also noted that the trust receipts contained maturity
dates and clearly set out their stipulations. He further rejected the respondents’ defense
that ACDC failed to remit the payments to LBP due to the failure of the clients of
ACDC to pay them. The dispositive portion of the resolution reads:
WHEREFORE, the assailed resolution is REVERSED and SET ASIDE. The City
Prosecutor of Makati City is hereby directed to file an information for estafa under Art.
315 (1) (b) of the Revised Penal Code in relation to Section 13, Presidential Decree
No. 115 against respondents Lamberto C. Perez, Nestor C. Kun, [Ma. Estelita P.
38
Angeles-Panlilio] and Napoleon O. Garcia and to report the action taken within ten
(10) days from receipt hereof.14
The respondents filed a motion for reconsideration of the resolution dated August 1,
2002, which the Secretary of Justice denied.15 He rejected the respondents’ submission
that Colinares v. Court of Appeals16 does not apply to the case. He explained that in
Colinares, the building materials were delivered to the accused before they applied to
the bank for a loan to pay for the merchandise; thus, the ownership of the merchandise
had already been transferred to the entrustees before the trust receipts agreements were
entered into. In the present case, the parties have already entered into the Agreement
before the construction materials were delivered to ACDC.
Subsequently, the respondents filed a petition for review before the Court of Appeals.
After both parties submitted their respective Memoranda, the Court of Appeals
promulgated the assailed decision of January 20, 2005. 17 Applying the doctrine in
Colinares, it ruled that this case did not involve a trust receipt transaction, but a mere
loan. It emphasized that construction materials, the subject of the trust receipt
transaction, were delivered to ACDC even before the trust receipts were executed. It
noted that LBP did not offer proof that the goods were received by ACDC, and that the
trust receipts did not contain a description of the goods, their invoice value, the amount
of the draft to be paid, and their maturity dates. It also adopted ACDC’s argument that
since no payment for the construction projects had been received by ACDC, its
officers could not have been guilty of misappropriating any payment. The dispositive
portion reads:
WHEREFORE, in view of the foregoing, the Petition is GIVEN DUE COURSE. The
assailed Resolutions of the respondent Secretary of Justice dated August 1, 2002 and
February 17, 2003, respectively in I.S. No. 99-F-9218-28 are hereby REVERSED and
SET ASIDE.18
LBP now files this petition for review on certiorari, dated March 15, 2005, raising the
following error:
THE COURT OF APPEALS GRAVELY ERRED WHEN IT REVERSED AND SET
ASIDE THE RESOLUTIONS OF THE HONORABLE SECRETARY OF JUSTICE
BY APPLYING THE RULING IN THE CASE OF COLINARES V. COURT OF
APPEALS, 339 SCRA 609, WHICH IS NOT APPLICABLE IN THE CASE AT
BAR.19
On April 8, 2010, while the case was pending before this Court, the respondents filed a
motion to dismiss.20 They informed the Court that LBP had already assigned to
Philippine Opportunities for Growth and Income, Inc. all of its rights, title and
interests in the loans subject of this case in a Deed of Absolute Sale dated June 23,
2005 (attached as Annex "C" of the motion). The respondents also stated that Avent
Holdings Corporation, in behalf of ACDC, had already settled ACDC’s obligation to
LBP on October 8, 2009. Included as Annex "A" in this motion was a
certification21 issued by the Philippine Opportunities for Growth and Income, Inc.,
stating that it was LBP’s successor-in-interest insofar as the trust receipts in this case
are concerned and that Avent Holdings Corporation had already settled the claims of
LBP or obligations of ACDC arising from these trust receipts.
We deny this petition.
The disputed transactions are not trust receipts.
Section 4 of P.D. 115 defines a trust receipt transaction in this manner:
Section 4. What constitutes a trust receipt transaction. A trust receipt transaction,
within the meaning of this Decree, is any transaction by and between a person referred
to in this Decree as the entruster, and another person referred to in this Decree as
entrustee, whereby the entruster, who owns or holds absolute title or security interests
over certain specified goods, documents or instruments, releases the same to the
possession of the entrustee upon the latter's execution and delivery to the entruster of a
signed document called a "trust receipt" wherein the entrustee binds himself to hold
the designated goods, documents or instruments in trust for the entruster and to sell or
otherwise dispose of the goods, documents or instruments with the obligation to turn
over to the entruster the proceeds thereof to the extent of the amount owing to the
entruster or as appears in the trust receipt or the goods, documents or instruments
themselves if they are unsold or not otherwise disposed of, in accordance with the
terms and conditions specified in the trust receipt, or for other purposes substantially
equivalent to any of the following:
39
1. In the case of goods or documents, (a) to sell the goods or procure their sale; or (b)
to manufacture or process the goods with the purpose of ultimate sale: Provided, That,
in the case of goods delivered under trust receipt for the purpose of manufacturing or
processing before its ultimate sale, the entruster shall retain its title over the goods
whether in its original or processed form until the entrustee has complied fully with his
obligation under the trust receipt; or (c) to load, unload, ship or tranship or otherwise
deal with them in a manner preliminary or necessary to their sale[.]
There are two obligations in a trust receipt transaction. The first is covered by the
provision that refers to money under the obligation to deliver it (entregarla) to the
owner of the merchandise sold. The second is covered by the provision referring to
merchandise received under the obligation to return it (devolvera) to the owner. Thus,
under the Trust Receipts Law,22 intent to defraud is presumed when (1) the entrustee
fails to turn over the proceeds of the sale of goods covered by the trust receipt to the
entruster; or (2) when the entrustee fails to return the goods under trust, if they are not
disposed of in accordance with the terms of the trust receipts. 23
In all trust receipt transactions, both obligations on the part of the trustee exist in the
alternative – the return of the proceeds of the sale or the return or recovery of the
goods, whether raw or processed.24 When both parties enter into an agreement
knowing that the return of the goods subject of the trust receipt is not possible even
without any fault on the part of the trustee, it is not a trust receipt transaction penalized
under Section 13 of P.D. 115; the only obligation actually agreed upon by the parties
would be the return of the proceeds of the sale transaction. This transaction becomes a
mere loan,25 where the borrower is obligated to pay the bank the amount spent for the
purchase of the goods.
Article 1371 of the Civil Code provides that "[i]n order to judge the intention of the
contracting parties, their contemporaneous and subsequent acts shall be principally
considered." Under this provision, we can examine the contemporaneous actions of the
parties rather than rely purely on the trust receipts that they signed in order to
understand the transaction through their intent.
We note in this regard that at the onset of these transactions, LBP knew that ACDC
was in the construction business and that the materials that it sought to buy under the
letters of credit were to be used for the following projects: the Metro Rail Transit
Project and the Clark Centennial Exposition Project. 26 LBP had in fact authorized the
delivery of the materials on the construction sites for these projects, as seen in the
letters of credit it attached to its complaint.27 Clearly, they were aware of the fact that
there was no way they could recover the buildings or constructions for which the
materials subject of the alleged trust receipts had been used. Notably, despite the
allegations in the affidavit-complaint wherein LBP sought the return of the
construction materials,28 its demand letter dated May 4, 1999 sought the payment of
the balance but failed to ask, as an alternative, for the return of the construction
materials or the buildings where these materials had been used. 29
The fact that LBP had knowingly authorized the delivery of construction materials to a
construction site of two government projects, as well as unspecified construction sites,
repudiates the idea that LBP intended to be the owner of those construction materials.
As a government financial institution, LBP should have been aware that the materials
were to be used for the construction of an immovable property, as well as a property of
the public domain. As an immovable property, the ownership of whatever was
constructed with those materials would presumably belong to the owner of the land,
under Article 445 of the Civil Code which provides:
Article 445. Whatever is built, planted or sown on the land of another and the
improvements or repairs made thereon, belong to the owner of the land, subject to the
provisions of the following articles.
Even if we consider the vague possibility that the materials, consisting of cement, bolts
and reinforcing steel bars, would be used for the construction of a movable property,
the ownership of these properties would still pertain to the government and not remain
with the bank as they would be classified as property of the public domain, which is
defined by the Civil Code as:
Article 420. The following things are property of public dominion:
(1) Those intended for public use, such as roads, canals, rivers, torrents, ports
and bridges constructed by the State, banks, shores, roadsteads, and others of
similar character;
(2) Those which belong to the State, without being for public use, and are
intended for some public service or for the development of the national
wealth.
40
In contrast with the present situation, it is fundamental in a trust receipt transaction that
the person who advanced payment for the merchandise becomes the absolute owner of
said merchandise and continues as owner until he or she is paid in full, or if the goods
had already been sold, the proceeds should be turned over to him or to her. 30
Thus, in concluding that the transaction was a loan and not a trust receipt, we noted in
Colinares that the industry or line of work that the borrowers were engaged in was
construction. We pointed out that the borrowers were not importers acquiring goods
for resale.31 Indeed, goods sold in retail are often within the custody or control of the
trustee until they are purchased. In the case of materials used in the manufacture of
finished products, these finished products – if not the raw materials or their
components – similarly remain in the possession of the trustee until they are sold. But
the goods and the materials that are used for a construction project are often placed
under the control and custody of the clients employing the contractor, who can only be
compelled to return the materials if they fail to pay the contractor and often only after
the requisite legal proceedings. The contractor’s difficulty and uncertainty in claiming
these materials (or the buildings and structures which they become part of), as soon as
the bank demands them, disqualify them from being covered by trust receipt
agreements.
Based on these premises, we cannot consider the agreements between the parties in
this case to be trust receipt transactions because (1) from the start, the parties were
aware that ACDC could not possibly be obligated to reconvey to LBP the materials or
the end product for which they were used; and (2) from the moment the materials were
used for the government projects, they became public, not LBP’s, property.
Since these transactions are not trust receipts, an action for estafa should not be
brought against the respondents, who are liable only for a loan. In passing, it is useful
to note that this is the threat held against borrowers that Retired Justice Claudio
Teehankee emphatically opposed in his dissent in People v. Cuevo, 32 restated in Ong v.
CA, et al.:33
The very definition of trust receipt x x x sustains the lower court’s rationale in
dismissing the information that the contract covered by a trust receipt is merely a
secured loan. The goods imported by the small importer and retail dealer through the
bank’s financing remain of their own property and risk and the old capitalist
orientation of putting them in jail for estafa for non-payment of the secured loan
(granted after they had been fully investigated by the bank as good credit risks)
through the fiction of the trust receipt device should no longer be permitted in this day
and age.
As the law stands today, violations of Trust Receipts Law are criminally punishable,
but no criminal complaint for violation of Article 315, paragraph 1(b) of the Revised
Penal Code, in relation with P.D. 115, should prosper against a borrower who was not
part of a genuine trust receipt transaction.
Misappropriation or abuse of confidence is absent in this case.
Even if we assume that the transactions were trust receipts, the complaint against the
respondents still should have been dismissed. The Trust Receipts Law punishes the
dishonesty and abuse of confidence in the handling of money or goods to the prejudice
of another, regardless of whether the latter is the owner or not. The law does not
singularly seek to enforce payment of the loan, as "there can be no violation of [the]
right against imprisonment for non-payment of a debt."34
In order that the respondents "may be validly prosecuted for estafa under Article 315,
paragraph 1(b) of the Revised Penal Code,35 in relation with Section 13 of the Trust
Receipts Law, the following elements must be established: (a) they received the
subject goods in trust or under the obligation to sell the same and to remit the proceeds
thereof to [the trustor], or to return the goods if not sold; (b) they misappropriated or
converted the goods and/or the proceeds of the sale; (c) they performed such acts with
abuse of confidence to the damage and prejudice of Metrobank; and (d) demand was
made on them by [the trustor] for the remittance of the proceeds or the return of the
unsold goods."36
In this case, no dishonesty or abuse of confidence existed in the handling of the
construction materials.
In this case, the misappropriation could be committed should the entrustee fail to turn
over the proceeds of the sale of the goods covered by the trust receipt transaction or
fail to return the goods themselves. The respondents could not have failed to return the
proceeds since their allegations that the clients of ACDC had not paid for the projects
it had undertaken with them at the time the case was filed had never been questioned
or denied by LBP. What can only be attributed to the respondents would be the failure
to return the goods subject of the trust receipts.
41
We do not likewise see any allegation in the complaint that ACDC had used the
construction materials in a manner that LBP had not authorized. As earlier pointed out,
LBP had authorized the delivery of these materials to these project sites for which they
were used. When it had done so, LBP should have been aware that it could not
possibly recover the processed materials as they would become part of government
projects, two of which (the Metro Rail Transit Project and the Quezon Power Plant
Project) had even become part of the operations of public utilities vital to public
service. It clearly had no intention of getting these materials back; if it had, as a
primary government lending institution, it would be guilty of extreme negligence and
incompetence in not foreseeing the legal complications and public inconvenience that
would arise should it decide to claim the materials. ACDC’s failure to return these
materials or their end product at the time these "trust receipts" expired could not be
attributed to its volition. No bad faith, malice, negligence or breach of contract has
been attributed to ACDC, its officers or representatives. Therefore, absent any abuse of
confidence or misappropriation on the part of the respondents, the criminal
proceedings against them for estafa should not prosper.
In Metropolitan Bank,37 we affirmed the city prosecutor’s dismissal of a complaint for
violation of the Trust Receipts Law. In dismissing the complaint, we took note of the
Court of Appeals’ finding that the bank was interested only in collecting its money and
not in the return of the goods. Apart from the bare allegation that demand was made
for the return of the goods (raw materials that were manufactured into textiles), the
bank had not accompanied its complaint with a demand letter. In addition, there was
no evidence offered that the respondents therein had misappropriated or misused the
goods in question.
The petition should be dismissed because the OSG did not file it and the civil liabilities
have already been settled.
The proceedings before us, regarding the criminal aspect of this case, should be
dismissed as it does not appear from the records that the complaint was filed with the
participation or consent of the Office of the Solicitor General (OSG). Section 35,
Chapter 12, Title III, Book IV of the Administrative Code of 1987 provides that:
Section 35. Powers and Functions. — The Office of the Solicitor General shall
represent the Government of the Philippines, its agencies and instrumentalities and its
officials and agents in any litigation, proceedings, investigation or matter requiring the
services of lawyers. x x x It shall have the following specific powers and functions:
(1) Represent the Government in the Supreme Court and the Court of Appeals in all
criminal proceedings; represent the Government and its officers in the Supreme Court,
the Court of Appeals and all other courts or tribunals in all civil actions and special
proceedings in which the Government or any officer thereof in his official capacity is a
party. (Emphasis provided.)
In Heirs of Federico C. Delgado v. Gonzalez, 38 we ruled that the preliminary
investigation is part of a criminal proceeding. As all criminal proceedings before the
Supreme Court and the Court of Appeals may be brought and defended by only the
Solicitor General in behalf of the Republic of the Philippines, a criminal action
brought to us by a private party alone suffers from a fatal defect. The present petition
was brought in behalf of LBP by the Government Corporate Counsel to protect its
private interests. Since the representative of the "People of the Philippines" had not
taken any part of the case, it should be dismissed.1âwphi1
On the other hand, if we look at the mandate given to the Office of the Government
Corporate Counsel, we find that it is limited to the civil liabilities arising from the
crime, and is subject to the control and supervision of the public prosecutor. Section 2,
Rule 8 of the Rules Governing the Exercise by the Office of the Government
Corporate Counsel of its Authority, Duties and Powers as Principal Law Office of All
Government Owned or Controlled Corporations, filed before the Office of the National
Administration Register on September 5, 2011, reads:
Section 2. Extent of legal assistance – The OGCC shall represent the complaining
GOCC in all stages of the criminal proceedings. The legal assistance extended is not
limited to the preparation of appropriate sworn statements but shall include all aspects
of an effective private prosecution including recovery of civil liability arising from the
crime, subject to the control and supervision of the public prosecutor.
Based on jurisprudence, there are two exceptions when a private party complainant or
offended party in a criminal case may file a petition with this Court, without the
intervention of the OSG: (1) when there is denial of due process of law to the
prosecution, and the State or its agents refuse to act on the case to the prejudice of the
State and the private offended party;39 and (2) when the private offended party
questions the civil aspect of a decision of the lower court. 40
In this petition, LBP fails to allege any inaction or refusal to act on the part of the
OSG, tantamount to a denial of due process. No explanation appears as to why the
42
OSG was not a party to the case. Neither can LBP now question the civil aspect of this
decision as it had already assigned ACDC’s debts to a third person, Philippine
Opportunities for Growth and Income, Inc., and the civil liabilities appear to have
already been settled by Avent Holdings Corporation, in behalf of ACDC. These facts
have not been disputed by LBP. Therefore, we can reasonably conclude that LBP no
longer has any claims against ACDC, as regards the subject matter of this case, that
would entitle it to file a civil or criminal action.

WHEREFORE, we DENY the petition and AFFIRM the January 20, 2005 decision of
the Court of Appeals in CA-G.R. SP No. 76588. No costs.

SO ORDERED.

43