594 SUPREME COURT REPORTS ANNOTATED

Crisologo-Jose vs. Court of Appeals

*
G.R. No. 80599.September 15, 1989.

ERNESTINA CRISOLOGO-JOSE, petitioner, vs. COURT OF APPEALS

and RICARDO S. SANTOS, JR. in his own behalf and as Vice-President for
Sales of Mover Enterprises, Inc., respondents.

Negotiable Instruments Law; Corporations; Rule that an accommodation party

liable on the instrument to a holder for value does not apply to corporations which
are accommodation parties; Reasons.—The aforequoted provision of the Negotiable
Instruments Law which holds an accommodation party liable on the instrument to a
holder for value, although such holder at the time of taking the instrument knew him
to be only an accommodation party, does not include nor apply to corporations
which are accommodation parties. This is because the issue or indorsement of
negotiable paper by a corporation without consideration and for the accommodation
of another is ultra vires. Hence, one who has taken the instrument with knowledge
of the accommodation nature thereof cannot recover against a corporation where it
is only an accommodation party. If the form of the instrument, or the nature of the
transaction, is such as to charge the indorsee with knowledge that the issue or
indorsement of the instrument by the corporation is for the accommodation of
another, he cannot recover against the corporation thereon.

Same; Same; Same; Same; Exception; An officer or agent of a corporation

shall have the power to execute or indorse a negotiable paper in the name of the
corporation for accommodation only if specifically authorized to do so; Personal
liability of signatories in the instrument.—By way of exception, an officer or agent
of a corporation shall have the power to execute or indorse a negotiable paper in the
name of the corporation for the accommodation of a third person only if specifically
authorized to do so. Corollarily, corporate officers, such as the president and vice-
president, have no power to execute for mere

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* SECOND DIVISION.
 VOL. 177, SEPTEMBER 15 ,1989 595

Crisologo-Jose vs. Court of Appeals

accommodation a negotiable instrument of the corporation for their individual debts

or transactions arising from or in relation to matters in which the corporation has no
legitimate concern. Since such accommodation paper cannot thus be enforced
against the corporation, especially since it is not involved in any aspect of the
corporate business or operations, the inescapable conclusion in law and in logic is
that the signatories thereof shall be personally liable therefor, as well as the
consequences arising from their acts in connection therewith.

Same; Same; Same; Same; Consignation; Payment; Remedy of consignation,

proper; Case at bar; Effects of consignation.—We interpose the caveat,however,
that by holding that the remedy of consignation is proper under the given
circumstances, we do not thereby rule that all the operative facts for consignation
which would produce the effect of payment are present in this case. Those are
factual issues that are not clear in the records before us and which are for the
Regional Trial Court of Quezon City to ascertain in Civil Case No. Q-33160, for
which reason it has advisedly been directed by respondent court to give due course
to the complaint for consignation, and which would be subject to such issues or
claims as may be raised by defendant and the counterclaim filed therein which is
hereby ordered similarly revived.

Checks; B.P. 22; Presumptive rule to determine whether or not there was
insufficiency of funds in or credit with the drawee bank.—These are aside the
considerations that the disputed period involved in the criminal case is only a
presumptive rule, juris tantum at that, to determine whether or not there was
knowledge of insufficiency of funds in or credit with the drawee bank; that payment
of civil liability is not a mode for extinguishment of criminal liability; and that the
requisite quantum of evidence in the two types of cases are not the same.

PETITION to review the decision of the Court of Appeals. Torres, Jr., J.

The facts are stated in the opinion of the Court.

Melquiades P. de Leon for petitioner.
Rogelio A. Ajes for private respondent.
596 SUPREME COURT REPORTS ANNOTATED
Crisologo-Jose vs. Court of Appeals

REGALADO, J.:
1
Petitioner seeks the annulment of the decision of respondent Court of Appeals,
promulgated
2
on September 8, 1987, which reversed the decision of the trial
court dismissing the complaint for consignation filed by therein plaintiff Ricardo
S. Santos, Jr.
The parties are substantially agreed on the following facts as found by both
lower courts:

“In 1980, plaintiff Ricardo S. Santos, Jr. was the vice-president of Mover
Enterprises, Inc. incharge of marketing and sales; and the president of the said
corporation was Atty. Oscar Z. Benares. On April 30, 1980, Atty. Benares, in
accommodation of his clients, the spouses Jaime and Clarita Ong, issued Check No.
093553 drawn against Traders Royal Bank, dated June 14, 1980, in the amount of
P45,000.00 (Exh. ‘1’) payable to defendant Ernestina Crisologo-Jose. Since the
check was under the account of Mover Enterprises, Inc., the same was to be signed
by its president, Atty. Oscar Z. Benares, and the treasurer of the said corporation.
However, since at that time, the treasurer of Mover Enterprises was not available,
Atty. Benares prevailed upon the plaintiff, Ricardo S. Santos, Jr., to sign the
aforesaid check as an alternate signatory. Plaintiff Ricardo S. Santos, Jr. did sign the
check.
“It appears that the check (Exh. ‘1’) was issued to defendant Ernestina
Crisologo-Jose in consideration of the waiver or quitclaim by said defendant over a
certain property which the Government Service Insurance System (GSIS) agreed to
sell to the clients of Atty. Oscar Benares, the spouses Jaime and Clarita Ong, with
the understanding that upon approval by the GSIS of the compromise agreement
with the spouses Ong, the check will be encashed accordingly. However, since the
compromise agreement was not approved within the expected period of time, the
aforesaid check for P45,000.00 (Exh. ‘1’) was replaced by Atty. Benares with
another Traders Royal Bank check bearing No. 379299 dated August 10, 1980, in
the same amount of P45,000.00 (Exhs. ‘A’ and ‘2’), also payable to the defendant
Jose. This replacement check was also signed by Atty. Oscar Z. Benares and

_______________

1 Penned by Justice Justo P. Torres, Jr. and concurred in by Associate Justices Leonor Ines
Luciano and Oscar M . Herrera; Rollo, 18.
2 Civil Case No. Q-33160, Regional Trial Court of Quezon City , Branch XCVI.
 VOL. 177, SEPTEMBER 15, 1989 597
Crisologo-Jose vs. Court of Appeals

by the plaintiff Ricardo S. Santos, Jr. When defendant deposited this replacement
check (Exhs. ‘A’ and ‘2’) with her account at Family Savings Bank, Mayon Branch,
it was dishonored for insufficiency of funds. A subsequent redepositing of the said
check was likewise dishonored by the bank for the same reason. Hence, defendant
through counsel was constrained to file a criminal complaint for violation of Batas
Pambansa Blg. 22 with the Quezon City Fiscal’s Office against Atty. Oscar Z.
Benares and plaintiff Ricardo S. Santos, Jr. The investigating Assistant City Fiscal,
Alfonso Llamas, accordingly filed an amended information with the court charging
both Oscar Benares and Ricardo S. Santos, Jr., for violation of Batas Pambansa Blg.
22 docketed as Criminal Case No. Q-14867 of then Court of First Instance of Rizal,
Quezon City.
“Meanwhile, during the preliminary investigation of the criminal charge against
Benares and the plaintiff herein, before Assistant City Fiscal Alfonso T. Llamas,
plaintiff Ricardo S. Santos, Jr. tendered cashier’s check No. CC 160152 for
P45,000.00 dated April 10, 1981 to the defendant Ernestina Crisologo-Jose, the
complainant in that criminal case. The defendant refused to receive the cashier’s
check in payment of the dishonored check in the amount of P45,000.00. Hence,
plaintiff encashed the aforesaid cashier’s check and subsequently deposited said
amount of P45,000.00 with the Clerk of Court on August 14, 1981 (Exhs. ‘D’ and
‘E’). Incidentally, the cashier’s check adverted to above was purchased by Atty.
Oscar Z. Benares and3
given to the plaintiff herein to be applied in payment of the
dishonored check.”

After trial, the court a quo, holding that it was “not persuaded to believe that
consignation referred to in Article 1256 of the Civil Code is applicable to this
case,” rendered4
judgment dismissing plaintiff’s complaint and defendant’s
counterclaim.
As earlier stated, respondent court reversed and set aside said judgment of
dismissal and revived the complaint for consignation, directing the trial court to
give due course thereto. Hence, the instant petition, the assignment of errors
wherein are prefatorily stated and discussed seriatim.
1. Petitioner contends that respondent Court of Appeals erred in holding that
private respondent, one of the signatories of the check issued under the account
of Mover Enterprises, Inc., is an accommodation party under the Negotiable
Instru-

_______________

3 Rollo, 19-20.
4 Rollo, 18.
598 SUPREME COURT REPORTS ANNOTATED
Crisologo-Jose vs. Court of Appeals

amount of said check.

Petitioner avers that the accommodation party in this case is Mover
Enterprises, Inc. and not private respondent who merely signed the check in
question in a representative capacity, that is, as vice-president of said
corporation, hence he is not liable thereon under the Negotiable Instruments
Law.
The pertinent provision of said law referred to provides:

“Sec. 29. Liability of accommodation party.—An accommodation party is one who

has signed the instrument as maker, drawer, acceptor, or indorser, without receiving
value therefor, and for the purpose of lending his name to some other person. Such
a person is liable on the instrument to a holder for value, notwithstanding such
holder, at the time of taking the instrument, knew him to be only an accommodation
party.”

Consequently, to be considered an accommodation party, a person must (1) be

a party to the instrument, signing as maker, drawer, acceptor, or indorser, (2)
not receive value therefor, and (3) sign for the purpose of lending his name for
the credit of some other person.
Based on the foregoing requisites, it is not a valid defense that the
accommodation party did not receive any valuable consideration when he
executed the instrument. From the standpoint of contract law, he differs from the
ordinary concept of a debtor therein in the sense that he has not received any
valuable consideration for the instrument he signs. Nevertheless, he5 is liable to a
holder for value as if the contract was not for accommodation, in whatever
capacity such accommodation party signed the instrument, whether primarily or
secondarily. Thus, it has been held that in lending his name to the
accommodated party, the accommodation party is in effect a surety for the
6
latter.
Assuming arguendo that Mover Enterprises, Inc. is the accommodation
party in this case, as petitioner suggests, the inevitable question is whether or not
it may be held liable on

_______________

5 Ang Tiong vs. Ting, et al., 22 SCRA 713 (1968).

6 Philipine Bank of Commerce vs. Aruego, 102 SCRA 530 (1981).
 VOL. 177, SEPTEMBER 15, 1989 599
Crisologo-Jose vs. Court of Appeals

the accommodation instrument, that is, the check issued in favor of herein
petitioner.
We hold in the negative.
The aforequoted provision of the Negotiable Instruments Law which holds
an accommodation party liable on the instrument to a holder for value, although
such holder at the time of taking the instrument knew him to be only an
accommodation party, does 7
not include nor apply to corporations which are
accommodation parties. This is because the issue or indorsement of negotiable
paper by a corporation 8without consideration and for the accommodation of
another is ultra vires. Hence, one who has taken the instrument with
knowledge of the accommodation nature thereof cannot recover against a
corporation where it is only an accommodation party. If the form of the
instrument, or the nature of the transaction, is such as to charge the indorsee
with knowledge that the issue or indorsement of the instrument by the
corporation is for the9 accommodation of another, he cannot recover against the
corporation thereon.
By way of exception, an officer or agent of a corporation shall have the
power to execute or indorse a negotiable paper in the name of the corporation
for 10the accommodation of a third person only if specifically authorized to do
so. Corollarily, corporate officers, such as the president and vice-president,
have no power to execute for mere accommodation a negotiable instrument of
the corporation for their individual debts or transactions arising from or in
relation to matters in which the corporation has no legitimate concern. Since
such accommodation paper cannot thus be enforced against the corporation,
especially since it is not involved in any aspect of the corporate business or
operations, the inescapable conclusion in law and in logic is that the signatories
thereof shall be personally liable therefor, as well as the consequences arising
from their acts in connection therewith.

_______________

7 11 C.J.S. 309.
8 14A C.J. 732.
9 Oppenheim vs. Simon Reigel Cigar Co., 90 N.Y.S. 355, cited in 11 C.J.S. 309.
10 In re Wrentham Mfg. Co., 2 Low. 119; Hall vs. Auburn Turnp. Co., 27 Cal. 255, cited
in 14A C.J. 461.
600 SUPREME COURT REPORTS ANNOTATED
Crisologo-Jose vs. Court of Appeals

The instant case falls squarely within the purview of the aforesaid decisional
rules. If we indulge petitioner in her aforesaid postulation, then she is effectively
barred from recovering from Mover Enterprises, Inc. the value of the check. Be
that as it may, petitioner is not without recourse.
The fact that for lack of capacity the corporation is not bound by an
accommodation paper does not thereby absolve, but should render personally
liable, the signatories of said instrument where the facts show that the
accommodation involved was for their personal account, undertaking or
purpose and the creditor was aware thereof.
Petitioner, as hereinbefore explained, was evidently charged with the
knowledge that the check was issued at the instance and for the personal
account of Atty. Benares who merely prevailed upon respondent Santos to act
as co-signatory in accordance with the arrangement of the corporation with its
depository bank. That it was a personal undertaking of said corporate officers
was apparent to petitioner by reason of her personal involvement in the financial
arrangement and the fact that, while it was the corporation’s check which was
issued to her for the amount involved, she actually had no transaction directly
with said corporation.
There should be no legal obstacle, therefore, to petitioner’s claims being
directed personally against Atty. Oscar Z. Benares and respondent Ricardo S.
Santos, Jr., president and vice-president, respectively, of Mover Enterprises,
Inc.

2. On her second assignment of error, petitioner argues that the Court of

Appeals erred in holding that the consignation of the sum of
P45,000.00, made by private respondent after his tender of payment
was refused by petitioner, was proper under Article 1256 of the Civil
Code.

Petitioner’s submission is that no creditor-debtor relationship exists between the

parties, hence consignation is not proper. Concomitantly, this argument was
premised on the assumption that private respondent Santos is not an
accommodation party.
As previously discussed, however, respondent Santos is an accommodation
party and is, therefore, liable for the value of the check. The fact that he was
only a co-signatory does not detract from his personal liability. A co-maker or
co-drawer under the circumstances in this case is as much an accommoda-
 VOL. 177, SEPTEMBER 15, 1989 601
Crisologo-Jose vs. Court of Appeals

tion party as the other co-signatory or, for that matter, as a lone signatory in an
accommodation instrument. Under the doctrine in Philippine Bank of
Commerce vs. Aruego, supra, he is in effect a co-surety for the
accommodated party with whom he and his co-signatory, as the other co-
surety, assume solidary liabilityex lege for the debt involved. With the dishonor
of the check, there was created a debtor-creditor relationship, as between Atty.
Benares and respondent Santos, on the one hand, and petitioner, on the other.
This circumstance enables respondent Santos to resort to an action of
consignation where his tender of payment had been refused by petitioner.
We interpose the caveat,however, that by holding that the remedy of
consignation is proper under the given circumstances, we do not thereby rule
that all the operative facts for consignation which would produce the effect of
payment are present in this case. Those are factual issues that are not clear in
the records before us and which are for the Regional Trial Court of Quezon City
to ascertain in Civil Case No. Q-33160, for which reason it has advisedly been
directed by respondent court to give due course to the complaint for
consignation, and which would be subject to such issues or claims as may be
raised by defendant and the counterclaim filed therein which is hereby ordered
similarly revived.
3. That respondent court virtually prejudged Criminal Case No. Q-14687 of
the Regional Trial Court of Quezon City filed against private respondent for
violation of Batas Pambansa Blg. 22, by holding that no criminal liability had yet
attached to private respondent when he deposited with the court the amount of
P45,000.00 is the final plaint of petitioner.
We sustain petitioner on this score.
Indeed, respondent court went beyond the ratiocination called for in the
appeal to it in CA-G.R. CV. No. 05464. In its own decision therein, it declared
that “(t)he lone issue dwells in the question of whether an accommodation party
can validly consign the amount of the debt due with the court after his tender of
payment was refused by the creditor.” Yet, from the commercial and civil law
aspects determinative of said issue, it digressed into the merits of the aforesaid
Criminal Case No. Q-14867, thus:
602 SUPREME COURT REPORTS ANNOTATED
Crisologo-Jose vs. Court of Appeals

“Section 2 of B.P. 22 establishes the prima facie evidence of knowledge of such

insufficiency of funds or credit. Thus, the making, drawing and issuance of a
check, payment of which is refused by the drawee because of insufficient funds in
or credit with such bank is prima facie evidence of knowledge of insufficiency of
funds or credit, when the check is presented within 90 days from the date of the
check.
“It will be noted that the last part of Section 2 of B.P. 22 provides that the
element of knowledge of insufficiency of funds or credit is not present and,
therefore, the crime does not exist, when the drawer pays the holder the amount due
or makes arrangements for payment in full by the drawee of such check within five
(5) banking days after receiving notice that such check has not been paid by the
drawee.
“Based on the foregoing consideration, this Court finds that the plaintiff-appellant
acted within his legal rights when he consigned the amount of P45,000.00 on August
14, 1981, between August 7, 1981, the date when plaintiff-appellant receive (sic) the
notice of non-payment, and August 14, 1981, the date when the debt due was
deposited with the Clerk of Court (a Saturday and a Sunday which are not banking
days) intervened. The fifth banking day fell on August 14, 1981. Hence, no criminal
liability has yet attached to plaintiff-appellant when 11he deposited the amount of
P45,000.00 with the Court a quo on August 14, 1981.”

That said observations made in the civil case at bar and the intrusion into the
merits of the criminal case pending in another court are improper do not have to
be belabored. In the latter case, the criminal trial court has to grapple with such
factual issues as, for instance, whether or not the period of five banking days
had expired, in the process determining whether notice of dishonor should be
reckoned from any prior notice if any has been given or from receipt by private
respondents of the subpoena therein with supporting affidavits, if any, or from
the first day of actual preliminary investigation; and whether there was a
justification for not making the requisite arrangements for payment in full of such
check by the drawee bank within the said period. These are matters alien to the
present controversy on tender and consignation of payment, where no such
period and its legal effects are involved.
These are aside from the considerations that the disputed

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11 Rollo, 21-22.
 VOL. 177, SEPTEMBER 15, 1989 603
Crisologo-Jose vs. Court of Appeals

period involved in the criminal case is only a presumptive rule, juris tantum at
that, to determine whether or not there was knowledge of insufficiency of funds
in or credit with the drawee bank; that payment of civil liability is not a mode for
extinguishment of criminal liability; and that the requisite quantum of evidence in
the two types of cases are not the same.
To repeat, the foregoing matters are properly addressed to the trial court in
Criminal Case No. Q-14867, the resolution of which should not be interfered
with by respondent Court of Appeals at the present posture of said case, much
less preempted by the inappropriate and unnecessary holdings in the
aforequoted portion of the decision of said respondent court. Consequently, we
modify the decision of respondent court in CA-G.R. CV No. 05464 by setting
aside and declaring without force and effect its pronouncements and findings
insofar as the merits of Criminal Case No. Q-14867 and the liability of the
accused therein are concerned.
WHEREFORE, subject to the aforesaid modifications, the judgment of
respondent Court of Appeals is AFFIRMED.
SO ORDERED.

Paras, Padilla and Sarmiento, JJ., concur.

Melencio-Herrera J., No part. Did not participate in deliberations.

Judgment affirmed with modifications.

Notes.—In order that consignation may be effective, the debtor must first
comply with certain requirements prescribed by law. (Soco vs. Militante, 123
SCRA 160.)
Without prior notice, consignation is void as payment. (Soco vs. Militante,
123 SCRA 160.)

——o0o——
604 SUPREME COURT REPORTS ANNOTATED
Guzman vs. Court of Appeals

*
G.R. No. 81949.September 15, 1989.

SPOUSES EMETERIO and LOLITA GUZMAN, petitioners, vs.

HONORABLE COURT OF APPEALS and SPOUSES GUILLERMO and
GERARDA EVANGELISTA, respondents.

Agrarian Reform; Urban Land Reform Law; Right of First Refusal; Only
legitimate tenants who have resided for ten years or more on specific parcels of land
in declared urban land reform zones or urban zones, and who have built their houses
thereon, have the right of first refusal.—It is clear from the language of the law that
only legitimate tenants who have resided for ten years or more on specific parcels of
land situated in declared Urban Land Reform Zones or Urban Zones, and who have
built their homes thereon, have the right not to be dispossessed therefrom and the
“right of first refusal” to purchase the property under reasonable terms and
conditions to be determined by the appropriate government agency. At the time of
the sale of the subject property to petitioners, Proclamation No. 1967 [Amending
Proclamation No. 1893 by specifying 244 sites in Metropolitan Manila as Areas for
Priority Development (APDs) and Urban Land Reform Zones], promulgated on May
14, 1980, was the prevailing law enumerating the parcels of land affected by Pres.
Dec. Nos. 1517, 1640 and 1642, and LOI No. 935. A simple reading of the list of
244 sites described in the annex to Proclamation No. 1967 reveals that the subject
property was not among the APDs or Urban Land Reform Zones in Navotas. Thus,
when the subject property was sold to petitioners, it was neither covered by, nor
subject, to the conditions set forth in, the Urban Land Reform Law.

Same; Same; Tenants, Defined; Tenants, as defined in Pres. Decree No. 1517
does not include those whose possession of the property is under litigation.—
Secondly, private respondents are not even “tenants” within the purview of Pres.
Dec. No. 1517. Section 3 (f) of this decree, which defines the term “tenant,”
provides: Tenant refers to the rightful occupant of land and its structures, but does
not include those whose presence on the land is merely tolerated and without the
benefit of contract, those who enter the land by force or deceit, or those whose
possession is under litigation [italics supplied.] It cannot be denied that at the time
the subject property was declared an APD in December 1987, the right of private
respondents to occupy and possess the subject property was then an issue under
litigation in the action

_______________
* THIRD DIVISION.
 VOL. 177, SEPTEMBER 15, 1989 605

Guzman vs. Court of Appeals

for ejectment filed against them by petitioners.

Civil Law; Contracts; Lease; Suspension of Rental Payments; Private

respondent’s belief that the subject property should have been sold to them, does not
justify the unilateral withholding of rental payments due the new owner.—Upon the
purchase of the leased property and proper notice by the vendee to the lessee, the
latter must pay the agreed monthly rentals to the new owner since, by virtue of the
sale, the vendee steps into the shoes of the original lessor to whom the lessee bound
himself to pay [Mirasol v. Magsuci, G.R. No. L-17125, November 28, 1966, 18
SCRA 801]. In the instant case, despite their receipt of the demand letter dated
March 21, 1986 informing them of the change of property ownership, private
respondents unjustifiably failed to pay the monthly rentals which accrued for the
account of the new owner. Their belief that the subject property should have been
sold to them does not justify the unilateral withholding of rental payments due to
Lolita Guzman as new owner of the property. Private respondents must be reminded
that Article 1658 of the New Civil Code provides only two instances wherein the
lessee may suspend payment of rent, namely, in case the lessor fails to make the
necessary repairs or to maintain the lessee in peaceful and adequate enjoyment of the
property leased [See Reyes v. Arca, G.R. No. L-21447, November 29, 1965, 15
SCRA 442].

Same; Same; Same; Ejectment; Private respondents’ continued stay in the

property without having paid a single monthly rental is a sufficient cause for
ejectment.—Private respondents should have at the very least replied to Lolita
Guzman’s letter and tendered payment of the monthly rentals which accrued in her
favor beginning March 1986, and if such were to be refused by her, then private
respondents should have made a consignation thereof or deposited the rentals due
pending the resolution of their alleged claim against the administratrix of the estate of
the late Mercedes Policarpio [SeeIpapo v. IAC, G.R. No. 72740, January 27, 1987,
147 SCRA 342]. Instead, they opted to take a hard-line stance in refusing to
acknowledge Lolita Guzman as owner and lessor, and, in so doing, gave cause to be
declared in default in their obligation to pay rentals due her. [SeeLandicho v.
Tensuan, G.R. No. 51216, June 30, 1987, 151 SCRA 410]. Thus, when petitioners
filed their action for ejectment, the rentals (which were payable in advance within
the first five days of each month) corresponding to the months of March, April and
May, 1986 had not been paid. And the glaring situation to date is that private
respondents continue to occupy the subject property without having paid a single
monthly rental which accrued pending litigation. Under these circumstances,
606 SUPREME COURT REPORTS ANNOTATED

Guzman vs. Court of Appeals

the Court finds that sufficient cause for their ejectment under Section 5 (b) of Batas
Pambansa Blg. 877 has been established. [SeeRoxas v. IAC, G.R. Nos. 74279 and
74801-03, January 20, 1988, 157 SCRA 166].

Civil Procedure; Prejudicial Question; Ejectment; Possession; Mere allegation

of ownership by the defendant in an ejectment case or the pendency of an action for
reconveyance does not divest the inferior court of jurisdiction over the ejectment
suit; Exceptions.—Finally, the Court is not unaware of Civil Case No. 957-MN
pending in the Regional Trial Court of Malabon. This action was instituted by private
respondents on July 1, 1987 against petitioners and administratrix Rufina Samaniego
for the annulment of the sale and the reconveyance of the subject property in favor
of private respondents. As correctly held by respondent appellate court, Civil Case
No. 957-MN poses no prejudicial question to the resolution of the instant petition.
Well settled is the rule that the mere allegation of ownership of the property in
dispute by the defendant in an ejectment suit or the pendency of an action for
reconveyance of title over the same property does not divest the inferior court of its
jurisdiction over the ejectment suit [Alilaya v. Espanola, G.R. No. L-36208,
September 18, 1981, 107 SCRA 564; De la Cruz v. Court of Appeals, G.R. No.
57454, November 29, 1984, 133 SCRA 520; Drilon v. Gaurana, G.R. No. L-35482,
April 30, 1987, 149 SCRA 342]. The only exception to this rule is where the
question of de facto possession cannot be determined properly without settling that
of de jure possession and ownership because the latter is inseparably linked with the
former [Andres v. Soriano, 101 Phil. 848 (1957); Castro v. de los Reyes, 109 Phil.
64 (1960); Alvir v. Vera, G.R. No. L-39338, July 16, 1984, 130 SCRA 357; De la
Santa v. Court of Appeals, G.R. Nos. L-30560 and L-31078, November 18, 1985,
140 SCRA 44].

Contracts; Lease; Right of Removal; Useful Improvements; Private

respondents have the right to remove their house and other useful improvements
should petitioner refuse to reimburse the amount thereof; ornamental objects may be
removed if no damage shall be caused to the principal and that the owner of the
principal do not choose to retain them by paying their value.—Moreover, since
private respondents had built in good faith their house on the leased subject property,
it is appropriate to mention that Article 1678 of the New Civil Code governs the
parties’ rights thereto. As the new lessors, petitioners have the option to appropriate
the house and other useful improvements made by private respondents by paying
one-half of their value. But private respondents do not have the right to compel
petitioners to appropriate the improvements and make reimbursement, nor to retain
possession
 VOL. 177, SEPTEMBER 15, 1989 607

Guzman vs. Court of Appeals

of the subject property until such reimbursement. Their right under the law is the
removal of the house and other useful improvements in the event that petitioners
refuse to reimburse the above amount [Lapena v. Morfe, 101 Phil. 997 (1957);
Balucanag v. Francisco, G.R. No. L-33422, May 30, 1983, 122 SCRA 498].
Incidentally, as regards ornamental objects, private respondents may remove the
same provided that no damage is caused to the principal thing and petitioners do not
choose to retain them by paying their value at the time the lease is extinguished.

PETITION for certiorari to review the decision of the Court of Appeals.

The facts are stated in the opinion of the Court.

Eleazar S. Calasan for petitioners.
Bienvenido J. Medel for private respondents.

CORTÉS, J.:

This is a petition for review on certiorari which seeks the reversal of the decision
of the Court of Appeals rendered in CA-G.R. SP No. 13475 setting aside the
decisions of the Regional Trial Court and Metropolitan Trial Court, and
dismissing the complaint for ejectment filed by petitioners against private
respondents.
The facts of the case are as follows:
Since 1937, private respondents have been in possession of a 184 sq. m.
parcel of land situated at M. Policarpio Street, Bagong Barrio, Navotas, Metro
Manila by virtue of an oral lease agreement with the late Mercedes Policarpio
whereby the former agreed to pay a monthly rental of thirty eight pesos
(P38.00), payable in advance within the first five (5) days of each month.
Petitioner Lolita Guzman, on the other hand, is presently the registered
owner of the same property, having acquired the same from the Estate of the
late Mercedes Policarpio by virtue of a Deed of Absolute Sale dated March 3,
1986 executed in her favor by the administratrix Rufina Samaniego. This sale
was judicially approved by the probate court in Special Proceedings No. 2640
entitled “Testate Estate of Mercedes Policarpio.” Lolita Guzman’s ownership is
evidenced by TCT No. T-134078 issued by the Register of Deeds of Caloocan
City on March 17, 1986. Soon after the sale, Lolita Guzman, through her
counsel, sent
608 SUPREME COURT REPORTS ANNOTATED
Guzman vs. Court of Appeals

private respondents a letter dated March 21, 1986 informing them that she is
the new owner of the subject property and demanding that they vacate it in view
of their failure to pay the monthly rentals since October 1983 despite previous
demands by the former owner and pay the rentals in arrears.
Due to the failure of private respondents to reply to, or comply with, the
above demand, peitioner spouses brought their complaint before the Barangay
Chairman, but no amicable settlement was reached. Petitioners then filed on
May 7, 1986 a complaint for ejectment against private respondents in the
Metropolitan Trial Court, invoking Section 5(b) of Batas Pambansa Blg. 877.
The case was docketed as Civil Case No. 2839.
Private respondents, in their verified answer, alleged that they had been
religiously paying their monthly rentals for the subject property upon which they
constructed their home until the middle part of 1984 when they were advised by
the administratrix Rufina Samaniego to cease making payments because the
estate was then being partitioned and the subdivided units were to be offered for
sale to the respective occupants at twentyfive thousand pesos (P25,000.00).
They had offered to pay the amount in cash on the condition that a clear title
would be given, but were informed that it would be sometime before titles could
be issued for the individual units. But in violation of their “right of first refusal”
under Pres. Dec. No. 1517 [otherwise known as the Urban Land Reform
Law], the administratrix executed an absolute deed of sale over the property in
favor of petitioner Lolita Guzman. They finally concluded that petitioners had no
cause of action against them in view of the nullity of this deed of sale.
On May 5, 1987, the court rendered judgment against private respondents
ordering them to vacate the subject property and to pay the sum of one
thousand one hundred seventy-eight pesos (P1,178.00) representing unpaid
rentals from October 1983 until April 1986 and the sum of thirty-eight pesos
(P38.00) for every month thereafter until they have completely surrendered
possession of the property to the petitioners. The court held that:

xxx
The defendant admitted in his answer (par. 3) that he received
 VOL. 177, SEPTEMBER 15, 1989 609
Guzman vs. Court of Appeals

the letter of demand dated March 17, 1986 (sic) sent by the plaintiffs’ counsel, but
there is (sic) no reply or answer was made by the defendant to the aforesaid letter of
demand, to explain why he should not pay the rentals claimed by the plaintiffs. Thus,
the plaintiffs were constrained to file the present action under Section 5 (b) of BP
877.
The plaintiffs being the registered owner of the property in question, as evidence
(sic) by TCT No. T-134078, they have the better right of possession as adverse to
the defendant. Moreover, the defendant cannot be considered as a legitimate tenant
as contemplated by the Urban Land Reform Act, he having failed to comply
religiously with his obligation to pay the agreed rentals on time, he became a
possessor in bad faith and his ejectment from the premises is allowed by BP 877 and
therefore not entitled to the protection of P.D. No. 1517 as amended and its
implemented (sic) proclamations of the Rental Control Law.
xxx

[MTC Decision, p. 3; Rollo, p. 52.]

On Appeal, this decision was affirmed in toto by the Regional Trial Court on
October 16, 1987 in Appealed Civil Case No. 262-MN.
Private respondents then filed on December 11, 1987 a petition for review
with the Court of Appeals. In a decision promulgated on January 28, 1988, the
1
Court of Appeals set aside the decisions of the lower courts and dismissed for
lack of merit petitioners complaint for ejectment. The Court of Appeals held that
the ejectment of private respondents from the subject property on the ground of
non-payment of rentals was baseless and improper, finding that:

xxx
... [private respondents] have been leasing and actually occupying subject lot
since 1937 at a meager rental of P38.00 a month, and did even offer to pay cash of
P25,000.00 therefor, it is simply unbelievable that they defaulted or failed to pay the
measly rental of P38.00 a month as [petitioners] would like the court to understand.
[Private respondents’] theory that they were told to stop paying their rents sometime
in October 1984 is more in accord with reason and human experience. If they were
really told by the administratrix of the estate

_______________

1 Penned by Fidel P. Purisima with Segundino G. Chua and Nicolas P. Lap ena, Jr. concurring.
610 SUPREME COURT REPORTS ANNOTATED
Guzman vs. Court of Appeals

of the deceased owner-lessor to hold or defer their rental payments, it stands to

reason that [they] never defaulted in the payment of their rental for the lot in
question. Indeed, if they were not advised to pay their rents, why should [they]
falter in their rental payments when they have their house thereon, are actually
residing therein and have the financial capacity to buy the lot in dispute on spot cash
basis?
... If they stopped paying the monthly rental therefor since October 1984, it was
not due to inability or refusal on their part to pay; but was upon the advice of the
administratrix of the estate of the late owner-lessor Mercedes Policarpio. The latter
unequivocably [sic] told [private respondents] not to pay their rents anymore
because the area would be subdivided and sold to the actual occupants, including the
[private respondents] with respect to the lot in question which they have been
renting and occupying for around fifty (50) years already. With the foregoing
explanation of [private respondents] for their failure to pay their rental starting
October 1984, an assertion inducing faith and reliance and which has not been
effectively controverted, [their] ejectment on the ground of non-payment of rental is
improper and cannot be sanctioned.
xxx

[CA Decision, pp. 5-6; Rollo, pp. 18-19.]

Moreover, the Court of Appeals upheld private respondents’ contention that

they have the “right of first refusal” to purchase the property pursuant to Section
6 of Pres. Dec. No. 1517.
Hence, petitioners filed the instant petition, assigning the following as errors:

I. THE HONORABLE COURT OF APPEALS ERRED IN

APPLYING SECTION 6 OF PRESIDENTIAL DECREE NO.
1517, OTHERWISE KNOWN AS URBAN LAND REFORM
LAW IN FAVOR OF PRIVATE RESPONDENTS IN UTTER
DISREGARD OF THE EXPRESS PROVISIONS OF
PROCLAMATION NO. 1967 WHICH SPECIFIES THE AREAS
OF APPLICABILITY OF THE “URBAN ZONES” MENTIONED
IN SAID SECTION 6 OF P.D. NO. 1517;
II. THE HONORABLE COURT OF APPEALS ERRED IN
HOLDING THAT PRIVATE RESPONDENTS WERE NOT
GUILTY OF NON-PAYMENT OF RENTALS [Petition, p. 5;
Rollo, p. 6.]

After a careful consideration of the issues raised in the pleadings and the various
laws applicable to the case at hand, this Court finds merit in the instant petition.
 VOL. 177, SEPTEMBER 15, 1989 611
Guzman vs. Court of Appeals

I.

The Court holds that there is no basis to the claim that the sale of the subject
property between the estate of the late Mercedes Policarpio and petitioner
Lolita Guzman is null and void for being violative of the “right of first refusal”
granted to tenants under Section 6 of Pres. Dec. No. 1517.
Section 6 of Pres. Dec. No. 1517 reads as follows:

SECTION 6. Land Tenancy in Urban Land Reform Areas.—Within the Urban

Zones, legitimate tenants who have resided on the land for ten years or more, who
have built their homes on the land, and residents who have legally occupied the lands
by contract continuously for the last ten years shall not be dispossessed of the land
and shall be allowed the right of first refusal to purchase the same within a
reasonable time and at reasonable prices, under terms and conditions to be
determined by the Urban Zone Expropriation and Land Management Committee
created by Section 8 of this Decree.

It is clear from the language of the law that only legitimate tenants who have
resided for ten years or more on specific parcels of land situated in declared
Urban Land Reform Zones or Urban Zones, and who have built their homes
thereon, have the right not to be dispossessed therefrom and the “right of first
refusal” to purchase the property under reasonable terms and conditions to be
determined by the appropriate government agency.
At the time of the sale of the subject property to petitioners, Proclamation
No. 1967 [Amending Proclamation No. 1893 by specifying 244 sites in
Metropolitan Manila as Areas for Priority Development (APDs) and Urban
Land Reform Zones], promulgated on May 14, 1980, was the prevailing2 law
enumerating
3
the parcels of land affected by Pres. Dec. Nos. 1517, 1640 and
1642, and LOI No. 935. A simple reading of the list of 244 sites described in
the annex to Proclamation No. 1967 reveals that

_______________

2 Freezing the prices of land in Metropolitan Manila at current value. (1979)

3 Freezing the rates of rental, above three hundred pesos a month, of residential and
commercial buildings, houses, apartments, and dwelling units in Metropolitan Manila at
current levels. (1979)
612 SUPREME COURT REPORTS ANNOTATED
Guzman vs. Court of Appeals

Reform Zones in Navotas. Thus, when the subject property was sold to
petitioners, it was neither covered by, nor subject, to the conditions set forth in,
the Urban Land Reform Law.
This is made all the more obvious by the fact that Resolution No. 1369 of
the National Housing Authority Board of Directors which proclaimed the Estate
of the late Mercedes Policarpio in Navotas an APD was passed only on
December 18, 1987 [Rollo, p. 81], long after the sale was executed between
administratrix Rufina Samaniego and petitioners and judicially approved by the
probate court. Private respondents, therefore, have no basis in claiming that the
sale violated the “right of first refusal” granted to tenants by Pres. Dec. No.
1517.
Furthermore, notwithstanding the fact that, as provided by the above
resolution, the subject property is presently an APD or Urban Land Reform
Zone, private respondents still do not enjoy the protective mantle of Pres. Dec.
No. 1517.
In the first place, petitioners’ cause of action to evict private respondents
accrued, and the complaint on the basis thereof was filed, while the subject
property had not yet been declared an APD and subject to Pres. Dec. No.
1517. In addition, prior to the issuance of Resolution No. 1369, the
Metropolitan Trial Court in Civil Case No. 2839 had already rendered a
decision in favor of petitioners ordering private respondents to vacate the
property for non-payment of rentals pursuant to Section 5 (b) of Batas
Pambansa Blg. 877.
Secondly, private respondents are not even “tenants” within the purview of
Pres. Dec. No. 1517, Section 3 (f) of this decree, which defines the term
“tenant,” provides:

Tenant refers to the rightful occupant of land and its structures, but does not include
those whose presence on the land is merely tolerated and without the benefit of
contract, those who enter the land by force or deceit, or those whose possession is
under litigation [Italics supplied.]

It cannot be denied that at the time the subject property was declared an APD
in December 1987, the right of private respondents to occupy and possess the
subject property was then an issue under litigation in the action for ejectment
filed against them by petitioners.
 VOL. 177, SEPTEMBER 15, 1989 613
Guzman vs. Court of Appeals

Thirdly, private respondents are not the “legitimate tenants” envisaged in Section
6 of Pres. Dec. No. 1517 considering that their possession of the subject
property has been rendered illegal by their stubborn and unjustifiable4 refusal to
comply with their obligation to pay their monthly rentals to petitioners.
Consequently, the Court holds that respondent appellate court committed a
reversible error in applying the provisions of Pres. Dec. No. 1517 to sustain
private respondents’ defense in the action for ejectment.

II.

Anent the second error raised, the record of the case does not support
respondent appellate court’s conclusion that private respondents’ were not in
default in the payment of their monthly rentals due to petitioners.
While discussion was made concerning private respondents’ explanation for
non-payment of the rentals due to the estate of the late Mercedes Policarpio,
this is irrelevant to the issue at hand. What is palpably clear from the record of
the case is the fact that private respondents had failed to pay the monthly rentals
which accrued from the time petitioner Lolita Guzman acquired ownership of the
subject property in March 1986.
Upon the purchase of the leased property and proper notice by the vendee
to the lessee, the latter must pay the agreed monthly rentals to the new owner
since, by virtue of the sale, the vendee steps into the shoes of the original lessor
to whom the lessee bound himself to pay [Mirasol v. Magsuci, G.R. No. L-
17125, November 28, 1966, 18 SCRA 801]. In the instant case, despite their
receipt of the demand letter dated March 21, 1986 informing them of the
change of property ownership, private respondents unjustifiably failed to pay the
monthly rentals which accrued for the account of the new owner. Their belief
that the subject property should have been sold to them does not justify the
unilateral withholding of rental payments due to Lolita Guzman as new owner of
the property. Private respondents

_______________

4 This point will be discussed in length in the following section of this decision.
614 SUPREME COURT REPORTS ANNOTATED
Guzman vs. Court of Appeals

provides only two instances wherein the lessee may suspend payment of rent,
namely, in case the lessor fails to make the necessary repairs or to maintain the
lessee in peaceful and adequate enjoyment of the property leased [See Reyes v.
Arca, G.R. No. L-21447, November 29, 1965, 15 SCRA 442].
Private respondents should have, at the very least, replied to Lolita
Guzman’s letter and tendered payment of the monthly rentals which accrued in
her favor beginning March 1986, and if such were to be refused by her, then
private respondents should have made a consignation thereof or deposited the
rentals due pending the resolution of their alleged claim against the administratrix
of the estate of the late Mercedes Policarpio [See Ipapo v. IAC, G.R. No.
72740, January 27, 1987, 147 SCRA 342]. Instead, they opted to take a
hard-line stance in refusing to acknowledge Lolita Guzman as owner and lessor,
and, in so doing, gave cause to be declared in default in their obligation to pay
rentals due her. [See Landicho v. Tensuan, G.R. No. 51216, June 30, 1987,
151 SCRA 410]. Thus, when petitioners filed their action for ejectment, the
rentals (which were payable in advance within the first five days of each month)
corresponding to the months of March, April and May, 1986 had not been
paid. And the glaring situation to date is that private respondents continue to
occupy the subject property without having paid a single monthly rental which
accrued pending litigation. Under these circumstances, the Court finds that
sufficient
5
cause for their ejectment under Section 5 (b) of Batas Pambansa Blg.
877

_______________

5 SEC. 5. Grounds For Judicial Ejectment.—Ejectment shall be allowed on the

following grounds:
xxx
(b) Arrears in payment of rent for a total of three (3) months: Provided, That in case of
refusal by the lessor to accept payment of the rental agreed upon, the lessee may either
deposit, by way of consignation, the amount in court, or with the city or municipal
treasurer, as the case may be, or in a bank in the name of and with notice to the lessor,
within one month after the refusal of the lessor to accept payment.
The lessee shall thereafter deposit the rental within ten days of every current month.
Failure to deposit rentals for three months shall constitute a ground for ejectment. x x x
 VOL. 177, SEPTEMBER 15, 1989 615
Guzman vs. Court of Appeals

has been established. [See Roxas v. IAC, G.R. Nos. 74279 and 74801-03,
January 20, 1988, 157 SCRA 166].
It might be argued that petitioners’ action for ejectment was prematurely
filed on May 7, 1986 because less than three (3) months had elapsed since
private respondents failed to tender payment of the March 1986 rental in favor
of the new lessor Lolita Guzman.
However, this point was never raised as an issue in the proceedings below
by private respondents, and, therefore, cannot be passed upon for the first time
on appeal [Matienzo v. Servidad, G.R. No. L-28135, September 10, 1981,
107 SCRA 276; Dulos Realty & Development Corporation v. Court of
Appeals, G.R. No. 76668, January 28, 1988, 157 SCRA 425]. And, even
assuming that the action for ejectment was indeed prematurely filed in the court
a quo, such will not in anyway change the conclusion reached by this Court that
petitioners have established a right to evict private respondents from the subject
property for non-payment of rentals. For if the Court were to dismiss
petitioners’ complaint based on this point, there would be more than sufficient
basis for petitioners to file another complaint for ejectment against private
respondents as delinquent lessees under Section 5(b) Batas Pambansa Blg. 877
in view of the latter’s inexcusable failure to pay, deposit or consign for the
account of petitioners monthly rentals since March 1986 up to the present. It
must be borne in mind that ejectment cases must be expeditiously resolved and
terminated. Certainly, it will serve the ends of justice for the Court to promptly
settle the issue of non-payment of rentals in the case at bar, rather than to
require the parties to litigate anew. Otherwise, as the Court has had occasion to
state, “further proceedings will undoubtedly be only a waste of effort and time
and to the continuing, prejudice of the petitioners. It will only prolong the
already unjustified stay of the private respondent[s] and provide [them] an
unwarranted excuse to remain in the leased premises, notwithstanding her non-
payment of the corresponding rentals for the past several years” [Ipapo v. IAC,
supra].
Finally, the Court is not unaware of Civil Case No. 957-MN pending in the
Regional Trial Court of Malabon. This action was instituted by private
respondents on July 1, 1987 against petitioners and administratrix Rufina
Samaniego for the annul-
616 SUPREME COURT REPORTS ANNOTATED
Guzman vs. Court of Appeals

favor of private respondents.

As correctly held by respondent appellate court, Civil Case No. 957-MN
poses no prejudicial question to the resolution of the instant petition. Well settled
is the rule that the mere allegation of ownership of the property in dispute by the
defendant in an ejectment suit or the pendency of an action for reconveyance of
title over the same property does not divest the inferior court of its jurisdiction
over the ejectment suit [Alilaya v. Espanola, G.R. No. L-36208, September 18,
1981, 107 SCRA 564; De la Cruz v. Court of Appeals, G.R. No. 57454,
November 29, 1984, 133 SCRA 520; Drilon v. Gaurana, G.R. No. L-35482,
April 30, 1987, 149 SCRA 342]. The only exception to this rule is where the
question of de facto possession cannot be determined properly without settling
that of de jure possession and ownership because the latter is inseparably linked
with the former [Andres v. Soriano, 101 Phil. 848 (1957); Castro v. de los
Reyes, 109 Phil. 64 (1960); Alvir v. Vera, G.R. No. L-39338, July 16, 1984,
130 SCRA 357; De la Santa v. Court of Appeals, G.R. Nos. L-30560 and L-
31078, November 18, 1985, 140 SCRA 44].
Such exception is unavailing in the case at bar. Petitioner Lolita Guzman was
at the time of the institution of the ejectment suit the titled owner of the property,
having acquired the same by absolute deed of sale which was judicially
approved by the probate court. Private respondents’ claim of preference, on the
other hand, rests on the mere allegation that an agreement to purchase and sell
existed between them and the administratrix Rufina Samaniego. Yet, no written
document evidencing this agreement has been presented by them to enforce,
much less support, their claim. From the facts thus presented, the claim of
preference is without concrete basis in fact and in law and does not preclude the
courts from assuming, and continuing to exercise, jurisdiction over the ejectment
suit [De la Cruz v. Court of Appeals, supra].
Premises considered, the Court finds that petitioners have established a
cause of action for the ejectment of private respondents for non-payment of
rentals pursuant to Section 5(b) of Batas Pambansa Blg. 877.
But inasmuch as no evidence has been presented by petitioners to the effect
that the original owner or vendor of the subject
 VOL. 177, SEPTEMBER 15, 1989 617
Guzman vs. Court of Appeals

property had assigned to them her rights under the lease agreement with the
lessees, i.e. the collection of rentals in arrears, there is no legal basis for ordering
private respondents to pay monthly rentals which accrued prior to March 1986.
Moreover, since private respondents had built in good faith their house on
the leased subject6 property, it is appropriate to mention that Article 1678 of the
New Civil Code governs the parties’ rights thereto. As the new lessors,
petitioners have the option to appropriate the house and other useful
improvements made by private respondents by paying one-half of their value.
But private respondents do not have the right to compel petitioners to
appropriate the improvements and make reimbursement, nor to retain
possession of the subject property until such reimbursement. Their right under
the law is the removal of the house and other useful improvements in the event
that petitioners refuse to reimburse the above amount [Lapena v. Morfe, 101
Phil. 997 (1957); Balucanag v. Francisco, G.R. No. L-33422, May 30, 1983,
122 SCRA 498]. Incidentally, as regards ornamental objects, private
respondents may remove the same provided that no damage is caused to the
principal thing and petitioners do not choose to retain them by paying their value
at the time the lease is extinguished.
WHEREFORE, the judgment of respondent appellate court rendered in
CA-G.R. SP No. 13475 is REVERSED. Private respondents and all persons
claiming rights under them are hereby ordered to immediately vacate the subject
property and

_______________

6 ARTICLE 1678. If the lessee makes, in good faith, useful improvements which are
suitable to the use for which the lease is intended, without altering the form or substance
of the property leased, the lessor upon the termination of the lease shall pay the lessee
onehalf of the value of the improvements at that time. Should the lessor refuse to
reimburse said amount, the lessee may remove the improvements, even though the
principal thing may suffer damage thereby. He shall not, however, cause any more
impairment upon the property leased than is necessary.
With regard to ornamental expenses, the lessee shall not be entitled to any
reimbursement, but he may remove the ornamental objects, provided no damage is caused
to the principal thing, and the lessor does not choose to retain them by paying their value
at the time the lease is extinguished.
618 SUPREME COURT REPORTS ANNOTATED
Andres vs. Manufacturers Hanover & Trust Corporation

surrender possession thereof to petitioners, and to pay petitioners rentals in

arrears in the monthly sum of thirty-eight pesos (P38.00) to be computed only
from March 1986 until they have completely vacated the subject property, the
further sum of two thousand pesos (P2,000.00) as attorney’s fees, and costs of
the suit. This case is REMANDED to the Regional Trial Court for the
determination of the value of the improvements made by private respondents on
the subject property, in accordance with Article 1678 of the New Civil Code.
SO ORDERED.

Fernan, (C.J.), Gutierrez, Jr., and Bidin, JJ., concur. Feliciano, J.,
on leave.

Judgment reversed. Case remanded to trial court for determination of

the value of improvements made by private respondents on the subject
property.

Note.—Persons who are not tenants on the property are not covered by
Pres. Decree No. 316 which prohibits the ejectment of tenant farmers in
agricultural lands primarily devoted to rice and corn. (Geronimo vs. Court of
Appeals, 121 SCRA 859.)

——o0o——