Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. 35223

September 17, 1931

THE BACHRACH MOTOR CO., INC., plaintiffappellee,

vs.
TALISAY-SILAY MILLING CO., ET
AL., defendants-appellees.
THE PHILIPPINE NATIONAL BANK, intervenorappellant.
Roman J. Lacson for intervenor-appellant.
Mariano Ezpeleta for plaintiff-appellee.
Nolan and Hernaez for defendants-appellees
Talisay-Silay Milling Co. and Cesar Ledesma.
ROMUALDEZ, J.:
This proceeding originated in a complaint filed by
the Bachrach Motor Co., Inc., against the TalisaySilay 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.
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 TalisaySilay 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."
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. L-44606
1938

November 28,

VICENTE STO. DOMINGO

BERNARDO, Plaintiff-Appellant,
vs. CATALINO BATACLAN,DefendantAppellant.
TORIBIO TEODORO, purchaser-appellee.
Pedro de Leon for plaintiff-appellant.
Angel H. Mojica and Francisco Lavides for
defendant appellant.
Jose Y. Garde for appellee.
chanrobles virtual law library
LAUREL, J.: chanrobles virtual law library
This is an appeal taken by both the plaintiff
and the defendant from the order of
September 26, 1935, hereinabove referred
to, of the Court of First Instance of Cavite in
Civil Case No.

2428.chanroblesvirtualawlibrary chanrobles
virtual law library
There is no controversy as to the facts. By a
contract of sale executed from Pastor
Samonte and others ownership of a parcel of
land of about 90 hectares situated in sitio
Balayunan, Silang, Cavite. To secure
possession of the land from the vendors the
said plaintiff, on July 20, 1929, instituted
Civil Case No. 1935 in the Court of First
Instance of Cavite. The trial court found for
the plaintiff in a decision which was affirmed
by this Supreme Court on appeal (G.R. No.
33017). 1 When plaintiff entered upon the
premises, however, he found the defendant
herein, Catalino Bataclan, who appears to
have been authorized by former owners, as
far back as 1922, to clear the land and make
improvements thereon. As Bataclan was not
a party in Case No. 1935, plaintiff, on June
11, 1931, instituted against him, in the
Court of First Instance of Cavite, Civil Case
No. 2428. In this case, plaintiff was declared
owner but the defendant was held to be a
possessor in good faith, entitled to
reimbursement in the total sum of P1,642,
for work done and improvements made. The
dispositive part of the decision reads:
Por las consideraciones expuestas, se
declara al demandante Vicente Santo
Domingo Bernardo dueo con derecho a la
posesion del terreno que se describe en la
demanda, y al demandado Catalino Bataclan
con derecho a que del demandante le pague
la suma de P1,642 por gastos utiles hechos
de buena fe en el terreno, y por el cerco y
ponos de coco y abaca existentes en el
mismo, y con derecho, ademas a retener la
posesion del terreno hasta que se le pague
dicha cantidad. Al demandante puede optar,
en el plazo de treinta dias, a partir de la
fecha en que fuere notificado de la presente,
por pagar esa suma al demandado, haciendo
asi suyos el cerco y todas las plantaciones
existentes en el terreno, u obligar al
demandado a pagarle el precio terreno, a
razon de trescientos pesos la hectarea. En el
caso de que el demandante optara por que el
demandado le pagara el precio del terreno,
el demandado efectuara el pago en el plazo

convenientes por las partes o que sera fijado

por el Juzgado. Sin costas.
Both parties appealed to this court (G. R. No.
37319). 2 The decision appealed from was
modified by allowing the defendant to
recover compensation amounting to P2,212
and by reducing the price at which the
plaintiff could require the defendant to
purchase the land in question from P300 to
P200 per hectare. Plaintiff was given by this
court 30 days from the date when the
decision became final within which to
exercise his option, either to sell the land to
the defendant or to buy the improvements
from him. On January 9, 1934, the plaintiff
manifested to the lower court his desire "to
require the defendant to pay him the value
of the land at the rate of P200 per hectare or
a total price of P18,000 for the whole tract of
land." The defendant informed the lower
court that he was unable to pay the land
and, on January 24, 1934, an order was
issued giving the plaintiff 30 days within
which to pay the defendant the sum of
P2,212 stating that, in the event of failure to
make such payment, the land would be
ordered sold at public auction " Para hacer
pago al demandante de la suma de P2,212 y
el remanente despues de deducidos los
gastos legales de la venta en publica subasta
sera entregado al demandante." On February
21, 1934, plaintiff moved to reconsider the
foregoing order so that he would have
preference over the defendant in the order of
payment. The motion was denied on March
1, 1934 but on March 16 following the court
below, motu proprio modified its order of
January 24, " en el sentido de que el
demandante tiene derecho preferente al
importe del terreno no se vendiere en
publica subasta, a razon de P200 por
hectares y el remanente, si acaso lo hubiere
se entregara al demandado en pago de la
cantidad de P2,212 por la limpieza del
terreno y las mejoras introducidas en el
mismo por el citado demandado." On April
24, 1934, the court below, at the instance of
the plaintiff and without objection on the
part of the defendant, ordered the sale of
the land in question at public auction. The
land was sold on April 5, 1935 to Toribio
Teodoro, the highest bidder, for P8,000. In

the certificate of sale issued to said

purchaser on the very day of sale, it was
stated that the period of redemption of the
land sold was to expire on April 5, 1936.
Upon petition of Toribio Teodoro the court
below ordered the provincial sheriff to issue
another certificate not qualified by any
equity of redemption. This was complied with
by the sheriff on July 30, 1935. On
September 18, 1935, Teodoro moved that he
be placed in possession of the land
purchased by him. The motion was granted
by order of September 26, 1935, the
dispositive part of which is as follows:
Por tanto, se ordena al Sheriff Provincial de
Cavite ponga a Toribio Teodoro en posesion
del terreno comprado por el en subasta
publica y por el cual se le expidio certificado
de venta definitiva, reservando al
demandado su derecho de ejercitar una
accion ordinaria para reclamar del
demandante la cantidad de P2,212 a que
tiene derecho por la limpieza y mejoras del
terreno y cuya suma, en justicia y equidad,
debe ser descontada y deducida de la suma
de P8,000 que ya ha recibido el
demandante.
The Civil Code confirms certain time-honored
principles of the law of property. One of
these is the principle of accession whereby
the owner of property acquires not only that
which it produces but that which is united to
it either naturally or artificially. (Art. 353.)
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 (art. 358). Where, however, the
planter, builder, or sower has acted in good
faith, a conflict of rights arises between the
owners and it becomes necessary to protect
the owner of the improvements without
causing injustice to the owner of the land. In
view of the impracticability of creating what
Manresa calls a state of "forced coownership"
(vol. 3, 4th ed., p. 213), the law has
provided a just and equitable solution by
giving the owner of the land the option to
acquire the improvements after payment of
the proper indemnity or to oblige the builder
or planter to pay for the land and the sower
to pay the proper rent (art. 361). It is the

owner of the land who is allowed to exercise

the option because his right is older and
because, by the principle of accession, he is
entitled to the ownership of the accessory
thing (3 Manresa, 4th ed., p. 213). In the
case before us, the plaintiff, as owner of the
land, chose to require the defendant, as
owner of the improvements, to pay for the
land.chanroblesvirtualawlibrary chanrobles
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The judgment of the lower court is

accordingly modified by eliminating
therefrom the reservation made in favor of
the defendant-appellant to recover from the
plaintiff the sum of P2,212. In all the
respects, the same is affirmed, without
pronouncement regarding costs. So ordered.

The defendant states that he is a possessor

in good faith and that the amount of P2,212
to which he is entitled has not yet been paid
to him. Therefore, he says, he has a right to
retain the land in accordance with the
provisions of article 453 of the Civil Code.
We do not doubt the validity of the premises
stated. " Considera la ley tan saarada y
legitima la deuda, que, hasta que sea
pagada, no consiente que la cosa se
restituya all vencedor." (4 Manresa, 4th ed,
p., 304.) We find, however, that the
defendant has lost his right of retention. In
obedience to the decision of this court in
G.R. No. 37319, the plaintiff expressed his
desire to require the defendant to pay for
the value of the land. The said defendant
could have become owner of both land and
improvements and continued in possession
thereof. But he said he could not pay and the
land was sold at public auction to Toribio
Teodoro. The law, as we have already said,
requires no more than that the owner of the
land should choose between indemnifying
the owner of the improvements or requiring
the latter to pay for the land. When he failed
to pay for the land, the defendant herein lost
his right of
retention.chanroblesvirtualawlibrary chanrobl
es virtual law library
The sale at public auction having been asked
by the plaintiff himself (p. 22, bill of
exceptions) and the purchase price of P8,000
received by him from Toribio Teodoro, we
find no reason to justify a rapture of the
situation thus created between them, the
defendant-appellant not being entitled, after
all, to recover from the plaintiff the sum of
P2,212.chanroblesvirtualawlibrary chanroble
s virtual law library

G.R. No. L-175 April 30, 1946

DAMIAN IGNACIO, FRANCISCO

IGNACIO and LUIS IGNACIO Petitioners,
vs. ELIAS HILARIO and his wife
DIONISIA DRES, and FELIPE
NATIVIDAD, Judge of First Instance of
Pangasinan, Respondents.
Leoncio R. Esliza for petitioners.
Mauricio M. Monta for respondents.
MORAN, C.J.: chanrobles virtual law library
This is a petition for certiorari arising from a
case in the Court of First Instance of
Pangasinan between the herein respondents
Elias Hilario and his wife Dionisia Dres as
plaintiffs, and the herein petitioners Damian,
Francisco and Luis, surnamed Ignacio, as
defendants, concerning the ownership of a
parcel of land, partly rice-land and partly
residential. After the trial of the case, the
lower court, presided over by Hon. Alfonso
Felix, rendered judgment holding plaintiffs as
the legal owners of the whole property but
conceding to defendants the ownership of
the houses and granaries built by them on
the residential portion with the rights of a
possessor in good faith, in accordance with
article 361 of the Civil Code. The dispositive
part of the decision, hub of this controversy,
follows:
Wherefore, judgment is hereby rendered
declaring:chanrobles virtual law library
(1) That the plaintiffs are the owners of the
whole property described in transfer
certificate of title No. 12872 (Exhibit A)
issued in their name, and entitled to the
possession of the same;chanrobles virtual
law library
(2) That the defendants are entitled to hold
the position of the residential lot until after
they are paid the actual market value of
their houses and granaries erected thereon,
unless the plaintiffs prefer to sell them said
residential lot, in which case defendants shall
pay the plaintiffs the proportionate value of
said residential lot taking as a basis the price
paid for the whole land according to Exhibit
B; and chanrobles virtual law library

(3) That upon defendant's failure to

purchase the residential lot in question, said
defendants shall remove their houses and
granaries after this decision becomes final
and within the period of sixty (60) days from
the date that the court is informed in writing
of the attitude of the parties in this
respect.chanroblesvirtualawlibrary chanroble
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No pronouncement is made as to damages
and
costs.chanroblesvirtualawlibrary chanrobles
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Once this decision becomes final, the
plaintiffs and defendants may appear again
before this court for the purpose of
determining their respective rights under
article 361 of the Civil Code, if they cannot
come to an extra-judicial settlement with
regard to said rights.
Subsequently, in a motion filed in the same
Court of First Instance but now presided over
by the herein respondent Judge Hon. Felipe
Natividad, the plaintiffs prayed for an order
of execution alleging that since they chose
neither to pay defendants for the buildings
nor to sell to them the residential lot, said
defendants should be ordered to remove the
structure at their own expense and to
restore plaintiffs in the possession of said lot.
Defendants objected to this motion which,
after hearing, was granted by Judge
Natividad. Hence, this petition by defendants
praying for (a) a restraint and annulment of
the order of execution issued by Judge
Natividad; (b) an order to compel plaintiffs
to pay them the sum of P2,000 for the
buildings, or sell to them the residential lot
for P45; or (c), a rehearing of the case for a
determination of the rights of the parties
upon failure of extra-judicial
settlement.chanroblesvirtualawlibrary chanro
bles virtual law library
The judgment rendered by Judge Felix is
founded on articles 361 and 453 of the Civil
Code which are as follows:
ART. 361. The owner of land on which
anything has been built, sown or planted in

good faith, shall have the right to

appropriate as his own the work, sowing or
planting, after the payment of the indemnity
stated in articles 453 and 454, or to oblige
the one who built or planted to pay the price
of the land, and the one who sowed, the
proper
rent.chanroblesvirtualawlibrary chanrobles
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ART. 453. Necessary expenses shall be
refunded to every possessor; but only the
possessor in good faith may retain the thing
until such expenses are made good to
him.chanroblesvirtualawlibrary chanrobles
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Useful expenses shall be refunded to the
possessor in good faith with the same right
of retention, the person who has defeated
him in the possession having the option of
refunding the amount of the expenses or
paying the increase in value which the thing
may have acquired in consequence thereof.
The owner of the building erected in good
faith on a land owned by another, is entitled
to retain the possession of the land until he
is paid the value of his building, under article
453. The owner of the land, upon the other
hand, has the option, under article 361,
either to pay for the building or to sell his
land to the owner of the building. But he
cannot, as respondents here did, refuse both
to pay for the building and to sell the land
and compel the owner of the building to
remove it from the land where it is erected.
He is entitled to such remotion only when,
after having chosen to sell his land, the
other party fails to pay for the same. But this
is not the case before
us.chanroblesvirtualawlibrary chanrobles
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We hold, therefore, that the order of Judge
Natividad compelling defendants-petitioners
to remove their buildings from the land
belonging to plaintiffs-respondents only
because the latter chose neither to pay for
such buildings not to sell the land, is null and
void, for it amends substantially the
judgment sought to be executed and is,
furthermore, offensive to articles 361 and

453 of the Civil

Code.chanroblesvirtualawlibrary chanrobles
virtual law library
There is, however, in the decision of Judge
Felix a question of procedure which calls for
the clarification, to avoid uncertainty and
delay in the disposition of cases. In that
decision, the rights of both parties are well
defined under articles 361 and 453 of the
Civil Code, but it fails to determine the value
of the buildings and of the lot where they are
erected as well as the periods of time within
which the option may be exercised and
payment should be made, these particulars
having been left for determination
apparently after the judgment has become
final. This procedure is erroneous, for after
the judgment has become final, no additions
can be made thereto and nothing can be
done therewith except its execution. And
execution cannot be had, the sheriff being
ignorant as to how, for how much, and
within what time may the option be
exercised, and certainly no authority is
vested in him to settle these matters which
involve exercise of judicial discretion. Thus
the judgment rendered by Judge Felix has
never become final, it having left matters to
be settled for its completion in a subsequent
proceeding, matters which remained
unsettled up to the time the petition is filed
in the instant
case.chanroblesvirtualawlibrary chanrobles
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For all the foregoing, the writ of execution
issued by Judge Natividad is hereby set aside
and the lower court ordered to hold a
hearing in the principal case wherein it must
determine the prices of the buildings and of
the residential lot where they are erected, as
well as the period of time within which the
plaintiffs-respondents may exercise their
option either to pay for the buildings or to
sell their land, and, in the last instance, the
period of time within which the defendantspetitioners may pay for the land, all these
periods to be counted from the date the
judgment becomes executory or
unappealable. After such hearing, the court
shall render a final judgment according to
the evidence presented by the

parties.chanroblesvirtualawlibrary chanrobles
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The costs shall be paid by plaintiffsrespondents.chanroblesvirtualawlibrary

G.R. No. L-57348 May 16, 1985

FRANCISCO DEPRA, plaintiff-appellee,
vs.
AGUSTIN DUMLAO, defendant-appellant.
Roberto D. Dineros for plaintiff-appellee.
Veil D. Hechanova for defendant-appellant.

MELENCIO-HERRERA, J.:
This is an appeal from the Order of the former
Court of First Instance of Iloilo to the then Court of
Appeals, which the latter certified to this instance
as involving pure questions of law
Plaintiff-appellee, Francisco Depra, is the owner of
a parcel of land registered under Transfer
Certificate of Title No. T3087, known as Lot No.
685, situated in the municipality of Dumangas,
Iloilo, with an area of approximately 8,870 square
meters. Agustin Dumlao, defendant-appellant,
owns an adjoining lot, designated as Lot No. 683,
with an approximate area of 231 sq. ms.
Sometime in 1972, when DUMLAO constructed his
house on his lot, the kitchen thereof had
encroached on an area of thirty four (34) square
meters of DEPRA's property, After the
encroachment was discovered in a relocation
survey of DEPRA's lot made on November 2,1972,
his mother, Beatriz Depra after writing a demand
letter asking DUMLAO to move back from his
encroachment, filed an action for Unlawful Detainer
on February 6,1973 against DUMLAO in the
Municipal Court of of Dumangas, docketed as Civil
Case No 1, Said complaint was later amended to
include DEPRA as a party plain. plaintiff.
After trial, the Municipal Court found that DUMLAO
was a builder in good faith, and applying Article 448
of the Civil Code, rendered judgment on September
29, 1973, the dispositive portion of which reads:
Ordering that a forced lease is
created between the parties with the
plaintiffs, as lessors, and the
defendants as lessees, over the

disputed portion with an area of

thirty four (34) square meters, the
rent to be paid is five (P5.00) pesos
a month, payable by the lessee to
the lessors within the first five (5)
days of the month the rent is due;
and the lease shall commence on
the day that this decision shall have
become final.
From the foregoing judgment, neither party appeal
so that, ff it were a valid judgment, it would have
ordinarily lapsed into finality, but even then, DEPRA
did not accept payment of rentals so that DUMLAO
deposited such rentals with the Municipal Court.
On July 15,1974, DEPRA filed a Complaint for
Quieting of Title against DUMLAO before the then
Court of First Instance of Iloilo, Branch IV (Trial
Court), involving the very same 34 square meters,
which was the bone of contention in the Municipal
Court. DUMLAO, in his Answer, admitted the
encroachment but alleged, in the main, that the
present suit is barred by res judicata by virtue of the
Decision of the Municipal Court, which had become
final and executory.
After the case had been set for pre-trial, the parties
submitted a Joint Motion for Judgment based on
the Stipulation of Facts attached thereto. Premised
thereon, the Trial Court on October 31, 1974,
issued the assailed Order, decreeing:
WHEREFORE, the Court finds and
so holds that the thirty four (34)
square meters subject of this
litigation is part and parcel of Lot 685
of the Cadastral Survey of
Dumangas of which the plaintiff is
owner as evidenced by Transfer
Certificate of Title No. 3087 and
such plaintiff is entitled to possess
the same.
Without pronouncement as to costs.
SO ORDERED.
Rebutting the argument of res judicata relied upon
by DUMLAO, DEPRA claims that the Decision of
the Municipal Court was null and void ab
initio because its jurisdiction is limited to the sole
issue of possession, whereas decisions affecting
lease, which is an encumbrance on real property,
may only be rendered by Courts of First Instance.

Addressing out selves to the issue of validity of the

Decision of the Municipal Court, we hold the same
to be null and void. The judgment in a detainer
case is effective in respect of possession only (Sec.
7, Rule 70, Rules of Court). 1 The Municipal Court
over-stepped its bounds when it imposed upon the
parties a situation of "forced lease", which like
"forced co-ownership" is not favored in law.
Furthermore, a lease is an interest in real property,
jurisdiction over which belongs to Courts of First
Instance (now Regional Trial Courts) (Sec. 44(b),
Judiciary Act of 1948; 2 Sec. 19 (2) Batas
Pambansa Blg. 129). 3 Since the Municipal Court,
acted without jurisdiction, its Decision was null and
void and cannot operate as res judicata to the
subject complaint for Queting of Title. Besides,
even if the Decision were valid, the rule on res
judicata would not apply due to difference in cause
of action. In the Municipal Court, the cause of
action was the deprivation of possession, while in
the action to quiet title, the cause of action was
based on ownership. Furthermore, Sec. 7, Rule 70
of the Rules of Court explicitly provides that
judgment in a detainer case "shall not bar an action
between the same parties respecting title to the
land. " 4
Conceded in the Stipulation of Facts between the
parties is that DUMLAO was a builder in good faith.
Thus,
8. That the subject matter in the
unlawful detainer case, Civil Case
No. 1, before the Municipal Court of
Dumangas, Iloilo involves the same
subject matter in the present case,
the Thirty-four (34) square meters
portion of land and built thereon in
good faith is a portion of defendant's
kitchen and has been in the
possession of the defendant since
1952 continuously up to the present;
... (Emphasis ours)
Consistent with the principle that our Court system,
like any other, must be a dispute resolving
mechanism, we accord legal effect to the
agreement of the parties, within the context of their
mutual concession and stipulation. They have,
thereby, chosen a legal formula to resolve their
dispute to appeal ply to DUMLAO the rights of a
"builder in good faith" and to DEPRA those of a
"landowner in good faith" as prescribed in Article
448. Hence, we shall refrain from further examining
whether the factual situations of DUMLAO and
DEPRA conform to the juridical positions

respectively defined by law, for a "builder in good

faith" under Article 448, a "possessor in good faith"
under Article 526 and a "landowner in good faith'
under Article 448.
In regards to builders in good faith, Article 448 of
the Civil Code provides:
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 (Paragraphing
supplied)
Pursuant to the foregoing provision, DEPRA has
the option either to pay for the encroaching part of
DUMLAO's kitchen, or to sell the encroached 34
square meters of his lot to DUMLAO. He cannot
refuse to pay for the encroaching part of the
building, and to sell the encroached part of his
land, 5 as he had manifested before the Municipal
Court. But that manifestation is not binding because
it was made in a void proceeding.
However, the good faith of DUMLAO is part of the
Stipulation of Facts in the Court of First Instance. It
was thus error for the Trial Court to have ruled that
DEPRA is "entitled to possession," without more, of
the disputed portion implying thereby that he is
entitled to have the kitchen removed. He is entitled
to such removal only when, after having chosen to
sell his encroached land, DUMLAO fails to pay for
the same. 6 In this case, DUMLAO had expressed

his willingness to pay for the land, but DEPRA

refused to sell.
The owner of the building erected in
good faith on a land owned by
another, is entitled to retain the
possession of the land until he is
paid the value of his building, under
article 453 (now Article 546). The
owner of the land, upon the other
hand, has the option, under article
361 (now Article 448), either to pay
for the building or to sell his land to
the owner of the building. But he
cannot as respondents here
did refuse both to pay for the
building and to sell the land and
compel the owner of the building to
remove it from the land where it
erected. He is entitled to such
remotion only when, after having
chosen to sell his land. the other
party fails to pay for the same (italics
ours).
We hold, therefore, that the order of
Judge Natividad compelling
defendants-petitioners to remove
their buildings from the land
belonging to plaintiffs-respondents
only because the latter chose neither
to pay for such buildings nor to sell
the land, is null and void, for it
amends substantially the judgment
sought to be executed and is.
furthermore, offensive to articles 361
(now Article 448) and 453 (now
Article 546) of the Civil Code.
(Ignacio vs. Hilario, 76 Phil. 605,
608[1946]).
A word anent the philosophy behind Article 448 of
the Civil rode.
The original provision was found in Article 361 of
the Spanish Civil Code; which provided:
ART. 361. The owner of land on
which anything has been built, sown
or planted in good faith, shall have
the right to appropriate as his own
the work, sowing or planting, after
the payment of the indemnity stated
in Articles 453 and 454, or to oblige
the one who built or planted to pay

the price of the land, and the one

who sowed, the proper rent.
As will be seen, the Article favors the owner of the
land, by giving him one of the two options
mentioned in the Article. Some commentators have
questioned the preference in favor of the owner of
the land, but Manresa's opinion is that the Article is
just and fair.
. . . es justa la facultad que el codigo
da al dueno del suelo en el articulo
361, en el caso de edificacion o
plantacion? Algunos comentaristas
la conceptuan injusta, y como un
extraordinario privilegio en favor de
la propiedad territorial. Entienden
que impone el Codigo una pena al
poseedor de buena fe y como
advierte uno de los comentaristas
aludidos 'no se ve claro el por que
de tal pena . . . al obligar al que obro
de buena fe a quedarse con el
edificio o plantacion, previo el pago
del terreno que ocupa, porque si
bien es verdad que cuando edifico o
planto demostro con este hecho,
que queria para si el edificio o
plantio tambien lo es que el que
edifico o planto de buena fe lo hizo
en la erronea inteligencia de creerse
dueno del terreno Posible es que, de
saber lo contrario, y de tener noticia
de que habia que comprar y pagar el
terreno, no se hubiera decidido a
plantar ni a edificar. La ley
obligandole a hacerlo fuerza su
voluntad, y la fuerza por un hecho
inocente de que no debe ser
responsable'. Asi podra suceder
pero la realidad es que con ese
hecho voluntario, aunque sea
inocente, se ha enriquecido
torticeramente con perjuicio de otro
a quien es justo indemnizarle,
En nuestra opinion, el Codigo ha
resuelto el conflicto de la manera
mas justa y equitativa y respetando
en lo possible el principio que para
la accesion se establece en el art.
358. 7
Our own Code Commission must have taken
account of the objections to Article 361 of the
Spanish Civil Code. Hence, the Commission

provided a modification thereof, and Article 448 of

our Code has been made to provide:
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.
Additional benefits were extended to the builder but
the landowner retained his options.
The fairness of the rules in Article 448 has also
been explained as follows:
Where the builder, planter or sower
has acted in good faith, a conflict of
rights arises between the owners,
and it becomes necessary to protect
the owner of the improvements
without causing injustice to the
owner of the land. In view of the
impracticability of creating a state of
forced co-ownership, the law has
provided a just solution by giving the
owner of the land the option to
acquire the improvements after
payment of the proper indemnity, or
to oblige the builder or planter to pay
for the land and the sower to pay for
the proper rent. It is the owner of the
land who is authorized to exercise
the option, because his right is older,
and because, by the principle of
accession, he is entitled to the
ownership of the accessory thing. (3
Manresa 213; Bernardo vs.
Bataclan, 37 Off. Gaz. 1382; Co Tao
vs. Chan Chico, G.R. No. 49167,

April 30, 1949; Article applied: see

Cabral, et al vs. Ibanez [S.C.] 52 Off.
Gaz. 217; Marfori vs. Velasco, [C.A.]
52 Off. Gaz. 2050).8
WHEREFORE, the judgment of the trial Court is
hereby set aside, and this case is hereby ordered
remanded to the Regional Trial Court of Iloilo for
further proceedings consistent with Articles 448 and
546 of the Civil Code, as follows:
1. The trial Court shall determine
a) the present fair price of DEPRA's
34 square meter area of land;
b) the amount of the expenses spent
by DUMLAO for the building of the
kitchen;
c) the increase in value ("plus
value") which the said area of 34
square meters may have acquired
by reason thereof, and
d) whether the value of said area of
land is considerably more than that
of the kitchen built thereon.
2. After said amounts shall have been determined
by competent evidence, the Regional, Trial Court
shall render judgment, as follows:
a) The trial Court shall grant DEPRA
a period of fifteen (15) days within
which to exercise his option under
the law (Article 448, Civil Code),
whether to appropriate the kitchen
as his own by paying to DUMLAO
either the amount of tile expenses
spent by DUMLAO f or the building
of the kitchen, or the increase in
value ("plus value") which the said
area of 34 square meters may have
acquired by reason thereof, or to
oblige DUMLAO to pay the price of
said area. The amounts to be
respectively paid by DUMLAO and
DEPRA, in accordance with the
option thus exercised by written
notice of the other party and to the
Court, shall be paid by the obligor
within fifteen (15) days from such
notice of the option by tendering the
amount to the Court in favor of the
party entitled to receive it;

b) The trial Court shall further order

that if DEPRA exercises the option
to oblige DUMLAO to pay the price
of the land but the latter rejects such
purchase because, as found by the
trial Court, the value of the land is
considerably more than that of the
kitchen, DUMLAO shall give written
notice of such rejection to DEPRA
and to the Court within fifteen (15)
days from notice of DEPRA's option
to sell the land. In that event, the
parties shall be given a period of
fifteen (15) days from such notice of
rejection within which to agree upon
the terms of the lease, and give the
Court formal written notice of such
agreement and its provisos. If no
agreement is reached by the parties,
the trial Court, within fifteen (15)
days from and after the termination
of the said period fixed for
negotiation, shall then fix the terms
of the lease, provided that the
monthly rental to be fixed by the
Court shall not be less than Ten
Pesos (P10.00) per month, payable
within the first five (5) days of each
calendar month. The period for the
forced lease shall not be more than
two (2) years, counted from the
finality of the judgment, considering
the long period of time since 1952
that DUMLAO has occupied the
subject area. The rental thus fixed
shall be increased by ten percent
(10%) for the second year of the
forced lease. DUMLAO shall not
make any further constructions or
improvements on the kitchen. Upon
expiration of the two-year period, or
upon default by DUMLAO in the
payment of rentals for two (2)
consecutive months, DEPRA shall
be entitled to terminate the forced
lease, to recover his land, and to
have the kitchen removed by
DUMLAO or at the latter's expense.
The rentals herein provided shall be
tendered by DUMLAO to the Court
for payment to DEPRA, and such
tender shall constitute evidence of
whether or not compliance was
made within the period fixed by the
Court.

c) In any event, DUMLAO shall pay

DEPRA an amount computed at Ten
Pesos (P10.00) per month as
reasonable compensation for the
occupancy of DEPRA's land for the
period counted from 1952, the year
DUMLAO occupied the subject area,
up to the commencement date of the
forced lease referred to in the
preceding paragraph;
d) The periods to be fixed by the trial
Court in its Precision shall be
inextendible, and upon failure of the
party obliged to tender to the trial
Court the amount due to the obligee,
the party entitled to such payment
shall be entitled to an order of
execution for the enforcement of
payment of the amount due and for
compliance with such other acts as
may be required by the prestation
due the obligee.

and Rebecca Lorenzo. For the facts, therefore, we

have to look to the evidence presented by the
parties at the original level.
It appears that while ERNESTO was still courting
his wife, the latter's mother had told him the couple
could build a RESIDENTIAL HOUSE on a lot of 145
sq. ms., being Lot D of a subdivision in Paranaque
(the LAND, for short). In 1967, ERNESTO did
construct a RESIDENTIAL HOUSE on the LAND at
a cost of P8,000.00 to P10,000.00. It was probably
assumed that the wife's mother was the owner of
the LAND and that, eventually, it would somehow
be transferred to the spouses.

G.R. No. L-57288 April 30, 1984

It subsequently turned out that the LAND had been

titled in the name of Mr. & Mrs. Jose C. Santo, Jr.
who, on September 7 , 1974, sold the same to
petitioner SARMIENTO. The following January 6,
1975, SARMIENTO asked ERNESTO and wife to
vacate and, on April 21, 1975, filed an Ejectment
suit against them. In the evidentiary hearings
before the Municipal Court, SARMIENTO submitted
the deed of sale of the LAND in her favor, which
showed the price to be P15,000.00. On the other
hand, ERNESTO testified that the then cost of the
RESIDENTIAL HOUSE would be from P30,000.00
to P40,000.00. The figures were not questioned by
SARMIENTO.

LEONILA SARMINETO, petitioner,

vs.
HON. ENRIQUE A. AGANA, District Judge,
Court of First Instance of Rizal, Seventh
Judicial District, Branch XXVIII, Pasay City, and
SPOUSES ERNESTO VALENTINO and
REBECCA LORENZO-VALENTINO,respondents.

The Municipal Court found that private respondents

had built the RESIDENTIAL HOUSE in good faith,
and, disregarding the testimony of ERNESTO, that
it had a value of P20,000.00. It then ordered
ERNESTO and wife to vacate the LAND after
SARMIENTO has paid them the mentioned sum of
P20,000.00.

Mercedes M. Respicio for petitioner.

The Ejectment suit was elevated to the Court of

First Instance of Pasay where, after the submission
of memoranda, said Court rendered a modifying
Decision under Article 448 of the Civil Code.
SARMIENTO was required, within 60 days, to
exercise the option to reimburse ERNESTO and
wife the sum of 40,000.00 as the value of the
RESIDENTIAL HOUSE, or the option to allow them
to purchase the LAND for P25,000.00.
SARMIENTO did not exercise any of the two
options within the indicated period, and ERNESTO
was then allowed to deposit the sum of P25,000.00
with the Court as the purchase price for the LAND.
This is the hub of the controversy. SARMIENTO
then instituted the instant certiorari proceedings.

No costs,
SO ORDERED.

Romulo R. Bobadilla for private respondents.

MELENCIO-HERRERA, J.:+.wph!1
This Petition for certiorari questions a March 29,
1979 Decision rendered by the then Court of First
Instance of Pasay City. The Decision was one
made on memoranda, pursuant to the provisions of
RA 6031, and it modified, on October 17, 1977, a
judgment of the then Municipal Court of Paranaque,
Rizal, in an Ejectment suit instituted by herein
petitioner Leonila SARMIENTO against private
respondents, the spouses ERNESTO Valentino

We agree that ERNESTO and wife were builders in

good faith in view of the peculiar circumstances

under which they had constructed the

RESIDENTIAL HOUSE. As far as they knew, the
LAND was owned by ERNESTO's mother-in-law
who, having stated they could build on the property,
could reasonably be expected to later on give them
the LAND.
In regards to builders in good faith, Article 448 of
the Code provides:t.hqw
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. (Paragraphing
supplied)
The value of the LAND, purchased for P15,000.00
on September 7, 1974, could not have been very
much more than that amount during the following
January when ERNESTO and wife were asked to
vacate. However, ERNESTO and wife have not
questioned the P25,000.00 valuation determined by
the Court of First Instance.
In regards to the valuation of the RESIDENTIAL
HOUSE, the only evidence presented was the
testimony of ERNESTO that its worth at the time of
the trial should be from P30,000.00 to P40,000.00.
The Municipal Court chose to assess its value at
P20,000.00, or below the minimum testified by
ERNESTO, while the Court of First Instance chose
the maximum of P40,000.00. In the latter case, it

cannot be said that the Court of First Instance had

abused its discretion.
The challenged decision of respondent Court,
based on valuations of P25,000.00 for the LAND
and P40,000.00 for the RESIDENTIAL HOUSE,
cannot be viewed as not supported by the
evidence. The provision for the exercise by
petitioner SARMIENTO of either the option to
indemnify private respondents in the amount of
P40,000.00, or the option to allow private
respondents to purchase the LAND at P25,000.00,
in our opinion, was a correct decision.t.hqw
The owner of the building erected in
good faith on a land owned by
another, is entitled to retain the
possession of the land until he is
paid the value of his building, under
article 453 (now Article 546). The
owner, of the land. upon, the other
hand, has the option, under article
361 (now Article 448), either to pay
for the building or to sell his land to
the owner of the building. But he
cannot, as respondents here
did, refuse both to pay for the
building and to sell the land and
compel the owner of the building to
remove it from the land where it is
erected. He is entitled to such
remotion only when, after having
chosen to sell his land, the other
party fails to pay for the same.
(Emphasis ours)
We hold, therefore, that the order of
Judge Natividad compelling
defendants-petitioners to remove
their buildings from the land
belonging to plaintiffs-respondents
only because the latter chose neither
to pay for such buildings nor to sell
the land, is null and void, for it
amends substantially the judgment
sought to be executed and is,
furthermore, offensive to articles 361
(now Article 448) and 453 (now
Article 546) of the Civil Code.
(Ignacio vs. Hilario, 76 Phil. 605, 608
[1946]).
WHEREFORE, the Petition for Certiorari is hereby
ordered dismissed, without pronouncement as to
costs.

SO ORDERED.1wph

G.R. No. L-12812

September 29, 1959

FILIPINAS COLLEGES, INC., plaintiff-appellee,

vs.
MARIA GARCIA TIMBANG, ET AL., defendants.
-----------------------------G.R. No. L-12813

September 29, 1959

MARIA GARCIA TIMBANG, ET AL., plaintiffs.

MARIA GARICA TIMBANG, plaintiff-appellant,
vs.
MARIA GERVACIO BLAS, defendant-appellee.
De Guzman and Fernandez for appellee Filipinas
Colleges, Inc.
San Huan, Africa and Benedicto for appellant Maria
Garcia Timbang.
Nicanor S. Sison for appellee Maria Gervacio Blas.
BARRERA, J.:
This is an appeal taken from an order of the Court
of First Instance of Manila dated May 10, 1957 (a)
declaring the Sheriff's certificate of sale covering a
school building sold at public auction null and void
unless within 15 days from notice of said order the
successful bidders, defendants-appellants spouses
Maria Garcia Timbang and Marcelino Timbang,
shall pay to, appellee Maria Gervacio Blas directly
or through the Sheriff of Manila the sum of
P5,750.00 that the spouses Timbang had bid for
the building at the Sheriff's sale; (b) declaring the
other appellee Filipinas Colleges, Inc. owner of
24,500/3,285,934 undivided interest in Lot No. 2-a
covered by certificate of tile No 45970, on which the
building sold in the auction sale is situated; and (c)
ordering the sale in public auction of the said
undivided interest of the Filipinas Colleges, Inc., in
lot No. 2-a aforementioned to satisfy the unpaid
portion of the judgment in favor of appellee Blas
and against Filipinas Colleges, Inc. in the amount of
P8,200.00 minus the sum of P5,750.00 mentioned
in (a) above.

The order appealed from is the result of three

motions filed in the court a quo in the course of the
execution of a final judgment of the Court of
Appeals rendered in 2 cases appealed to it in which
the spouses Timbang, the Filipinas Colleges, Inc.,
and Maria Gervacio Blas were the parties. IN that
judgment of the Court of Appeals, the respective
rights of the litigants have been adjudicated as
follows:1wphl.nt
(1) Filipinas Colleges, Inc. was declared to
have acquired the rights of the spouses
Timbang in and to lot No. 2-a mentioned
above and in consideration thereof, Filipinas
Colleges, Inc., was ordered to pay the
spouses Timbang the amount of
P15,807.90 plus such other amounts which
said spouses might have paid or had to pay
after February, 1953, to Hoskins and Co.
Inc., agent of the Urban Estates, Inc.,
original vendor of the lot. Filipinas Colleges,
Inc. original vendor of the total amount with
the court within 90 days after the decision
shall have become final.
(2) Maria Gervacio Blas was declared to be
a builder in good faith of the school building
constructed on the lot in question and
entitled to be paid the amount of
P19,000.00 for the same. Filipinas Colleges,
Inc., purchaser of the said building was
ordered to deliver to Blas stock certificate
(Exh. C) for 108 shares of Filipinas
Colleges, Inc. with a par value of
P10,800.00 and to pay Blas the sum of
P8,200.00 of the house.
(3) In case Filipinas Colleges, Inc. failed to
deposit the value of the land, which after
liquidation was fixed at P32,859.34, within
the 90-day period set by the court, Filipinas
Colleges would lose all its rights to the land
and the spouses Timbang would then
become the owners thereof. In that
eventuality, the Timbangs would make
known to the court their option under Art.
448 of the Civil Code whether they would
appropriate the building in question, in
which even they would have to pay Filipinas
Colleges, Inc. the sum of P19,000.00, or
would compel the latter to acquire the land
and pay the price thereof.
Filipinas Colleges, Inc. having failed to pay or
deposit the sum of P32,859.34 within the time
prescribed, the spouses Timbang, in compliance

with the judgment of the Court of Appeals, on

September 28, 1956, made known to the court their
decision that they had chosen not of appropriate
the building but to compel Filipinas Colleges, Inc.,
for the payment of the sum of P32,859,34. The
motion having been granted, a writ of execution
was issued on January 8, 1957.
On January 16, 1957, appellee Blas in turn filed a
motion for execution of her judgment of P8,200.00
representing the unpaid portion of the price of the
house sold to Filipinas Colleges, Inc. Over the
object of the Timbangs, the court grated the motion
and the corresponding writ of execution was issued
on January 30, 1957, date of the granting of the
motion for execution, Blas through counsel, sent a
letter to the Sheriff of Manila advising him of her
preferential claim or lien on the house to satisfy the
unpaid balance of the purchase price thereof under
Article 2242 of the Civil Code, and to withhold from
the proceed of the auction sale the sum of
P8,200.00. Levy having been made on the house in
virtue of the writs of execution, the Sheriff of Manila
on March 5, 1957, sold the building in public
auction in favor of the spouses Timbang, as the
highest bidders, in the amount of P5,750.00.
Personal properties of Filipinas Colleges, Inc. were
also auctioned for P245.00 in favor of the spouses
Timbang.
As a result of these actuation, three motion were
subsequently filed before the lower court:
(1) By appellee Blas, praying that the Sheriff
of Manila and/or the Timbang spouses be
ordered to pay and deliver to her the sum of
P5,750.00 representing the proceeds of the
auction sale of the building of Filipinas
Colleges, Inc. over which she has a lien of
P8,200.00 for the unpaid balance of the
purchase price thereof;.
(2) Also by the appellee Bals, praying that
there being still two unsatisfied executions,
one for the sum of P32,859.34 in favor the
land involved, Lot No. 2-a, be sold at public
auction; and (3) By Filipinas Colleges, Inc.
praying that because its properties, the
house and some personal properties, have
been auctioned for P5,750.00 and P245.00
respectively in favor of the Timbang
spouses who applied the proceeds to the
partial payment of the sum of P32,859.34
value of the land, Lot No. 2-a, it (Filipinas
Colleges, Inc.) be declared part owner of
said lot to the extent of the total amount

realized from the execution sale of its

properties.1wphl.nt
The Timbang spouses presented their opposition to
each and all of these motion. After due hearing the
lower court rendered its resolution in the manner
indicated at the beginning of this decision, from
which the Timbangs alone have appealed.
In assailing the order of the court a quo directing
the appellants to pay appellee Blas the amount of
their bid (P5,750.00) made at the public auction,
appellants' counsel has presented a novel, albeit
ingenious, argument. It is contended that because
the builder in good faith has failed to pay the price
of the land after the owners thereof exercised their
option under Article 448 of the Civil Code, the
builder lost his right of retention provided in Article
546 and by operation of Article 445, the appellants
as owners of the land automatically became the
owners ipso facto, the execution sale of the house
in their favor was superfluous. Consequently, they
are not bound to make good their bid of P5,750.00
as that would be to make goods to pay for their own
property. By the same token, Blas claim for
preference on account of the unpaid balance of the
purchase price of the house does not apply
because preference applies only with respect to the
property of the debtor, and the Timbangs, owners
of the house, are not the debtors of Blas.
This Court cannot accept this oversimplification of
appellants' position. Article 448 and 546 of the Civil
Code defining the right of the parties in case a
person in good faith builds, sows or plants on the
land of another, respectively provides:
ART. 448. The owner of the land on which
anything has been built, sown or plated in
good faith shall have the right to appropriate
as his own the works, sowing or planting,
after payment of the indemnify provided for
in article 546 and 548, or to obligate 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.

ART. 546. Necessary expenses shall be

refunded to every possessor; but only the
possessor in good faith may retain the thing
until he has reimbursed therefor.
Useful expenses shall be refunded only to
the possessor in good faith with the same
right of retention the person who has
defeated him in the possession having to
option of refunding the amount of expenses
or of paying the case in value which thing
may have acquired by reason thereof.
Under the terms of these article, it is true that the
owner of the land has the right to choose between
appropriating the building by reimbursing the
builder of the value thereof or compelling the
builder in good faith to pay for his land. Even this
second right cannot be exercised if the value of the
land is considerably more than that of the building.
In addition to the right of the builder to be paid the
value of his improvement, Article 546 gives him the
corollary right of retention of the property until he is
indemnified by the owner of the land. There is
nothing in the language of these two article, 448
and 546, which would justify the conclusion of
appellants that, upon the failure of the builder to
pay the value of the land, when such is demanded
by the land-owner, the latter becomes automatically
the owner of the improvement under Article 445.
The case of Bernardo vs. Bataclan, 66 Phil., 590
cited by appellants is no authority for this
conclusion. Although it is true it was declared
therein that in the event of the failure of the builder
to pay the land after the owner thereof has chosen
this alternative, the builder's right of retention
provided in Article 546 is lost, nevertheless there
was nothing said that as a consequence thereof,
the builder loses entirely all rights over his own
building. The question is; what is the recourse or
remedy left to the parties in such eventuality where
the builder fails to pay the value of the land? While
the Code is silent on this Court in the cases
of Miranda vs. Fadullon, et al., 97 Phil., 801; 51 Off.
Gaz., [12] 6226; Ignacio vs. Hilario, 76 Phil., 605
and the cited case of Bernardo vs. Bataclan, supra.
In the first case, this Court has said:
A builder in good faith not be required to
pay rentals. he has right to retain the land
on which he has built in good faith until he is
reimbursed the expenses incurred by
him. Possibly he might be made to pay
rental only when the owner of the land
chooses not to appropriate the improvement

and requires the builder in good faith to pay

for the land but that the builder is unwilling
or unable to pay the land, and then they
decide to leave things as they are and
assume the relation of lessor and lessee,
and should they disagree as to the amount
of rental then they can go to the court to fix
that amount. (Emphasis supplied)
Should the parties not agree to leave things as they
are and to assume the relation of lessor and
lessee, another remedy is suggested in the case
of Ignacio vs. Hilario, supra, wherein the court has
ruled that the owner of the land in entitled to have
the improvement removed when after having
chosen to sell his land to the other party, i.e., the
builder in good faith fails to pay for the same.
A further remedy is indicated in the case
of Bernardo vs. Bataclan, supra, where this Court
approved the sale of the land and the improvement
in a public auction applying the proceeds thereof
first to the payment of the value of the land and the
excess, if any, to be delivered to the owner of the
house in payment thereof.
The appellants herein, owners o the land, instead
of electing any of the alternative above indicated
chose to seek recovery of the value of their land by
asking for a writ of execution; levying on the house
of the builder; and selling the same in public
auction. Sand because they are the highest bidder
in their own auction sale, they now claim they
acquired title to the building without necessity of
paying in cash on account of their bid. In other
words, they in effect pretend to retain their land and
acquire the house without paying a cent therefor.
This contention is without merit. This Court has
already held in Matias vs. The Provincial Sheriff of
Nueva Ecija(74 Phil., 326) that while it is the
inveriable practice, dictated by common sense, that
where the successful bidder is the execution
creditor himself, he need not pay down the amount
of the bid if it does not exceed the amount of his
judgement, nevertheless, when their is a claim by a
third-party, to the proceeds of the sale superior to
his judgment credit, the execution creditor, as
successful bidder, must pay in cash the amount of
his bid as a condition precedent to the issuance to
him of the certificate of sale. In the instant case, the
Court of Appeals has already adjudged that
appellee Blas is entitled to the payment of the
unpaid balance of the purchase price of the school
building. Blas is actually a lien on the school
building are concerned. The order of the lower

court directing the Timbang spouses, as successful

bidders, to pay in cash the amount of their bid in
the sum of P5,750.00 is therefore correct.

Salonga, Ordo;ez, Yap, Sicat & Associates and

Salvador, Ulgado & Carbon for petitioner.
Jose A. Cusi for private respondents.

With respect to the order of the court declaring

appellee Filipinas Colleges, Inc. part owner of the
land to the extent of the value of its personal
properties sold at public auction in favor of the
Timbang, this Court Likewise finds the same as
justified, for such amount represents, in effect, a
partial payment of the value of the land. If this
resulted in the continuation of the so-called
involuntary partnership questioned by the
difference between P8,200.00 the unpaid
balance of the purchase price of the building and
the sum of P5,750.00 amount to be paid by the
Timbangs, the order of the court directing the sale
of such undivided interest of the Filipinas Colleges,
Inc. is likewise justified to satisfy the claim of the
appellee Blas.
Considering that the appellant spouses Marcelino
Timbang and Maria Garcia Timbang may not
voluntarily pay the sum of P5,750.00 as ordered,
thereby further delaying the final termination of this
case, the first part of the dispositive portion of the
order appealed from is modified in the sense that
upon failure of the Timbang spouses to pay to the
Sheriff or to Manila Gervacio Blas said sum of
P5,750.00 within fifteen (15) days from notice of the
final judgment, an order of execution shall issue in
favor of Maria Gervasio Blas to be levied upon all
properties of the Timbang spouses not exempt from
execution for the satisfaction of the said amount.
In all other respects, the appealed order of the
court a quo is hereby affirmed, with costs against
the appellants.
It is so ordered.

G.R. No. L-32974 July 30, 1979

BARTOLOME ORTIZ, petitioner,
vs.
HON. UNION C. KAYANAN, in his capacity as
Judge of the Court of First Instance of Quezon,
Branch IV; ELEUTERIO ZAMORA, QUIRINO
COMINTAN, VICENTE FERRO, AND GREGORIO
PAMISARAN,respondents.

ANTONIO, J.:1wph1.t
Petition for certiorari and Prohibition with
Preliminary Injunction to nullify the Order of
respondent Judge directing the execution of the
final judgment in Civil Case No. C-90, entitled
"Bartolome Ortiz vs. Secretary of Agriculture and
Natural Resources, et al.," and the Writ of
Execution issued to implement said Order,
allegedly for being inconsistent with the judgment
sought to be enforced.
Civil Case No. C-90 was filed by Bartolome Ortiz
who sought the review and/or annulment of the
decision of the Secretary of Agriculture and Natural
Resources, giving preference to the sales
applications of private respondents Quirino
Comintan and Eleuterio Zamora over Lot No. 5785,
PLS-45, located at Barrio Cabuluan, Calauag,
Quezon.
I
The factual background of the case, as found by
respondent Court, is as follows:t.hqw
... The lot in controversy was
formerly the subject of Homestead
Application No. 122417 of Martin
Dolorico II, plaintiff's ward who died
on August 20, 1931; that since then
it was plaintiff who continued the
cultivation and possession of the
property, without however filing any
application to acquire title thereon;
that in the Homestead Application
No. 122417, Martin Dolorico II
named his uncle, Martin Dolorico I
as his heir and successor in interest,
so that in 1951 Martin Dolorico I
executed an affidavit relinquishing
his rights over the property in favor
of defendants Quirino Comintan and
Eleuterio Zamora, his grandson and
son-in-law, respectively, and
requested the Director of Lands to
cancel the homestead application;
that on the strength of the affidavit,
Homestead Application No. 122417

was cancelled and thereafter,

defendants Comintan and Zamora
filed their respective sales
applications Nos. 8433 and 9258;
that plaintiff filed his protest on
November 26, 1951 alleging that he
should be given preference to
purchase the lot inasmuch as he is
the actual occupant and has been in
continuous possession of the same
since 1931; and inspite of plaintiff's
opposition, "Portion A" of the
property was sold at public auction
wherein defendant Comintan was
the only bidder; that on June 8,
1957, investigation was conducted
on plaintiff's protest by Assistant
Public Lands Inspector Serapion
Bauzon who submitted his report to
the Regional Land Officer, and who
in turn rendered a decision on April
9, 1958, dismissing plaintiff's claim
and giving due course to defendants'
sales applications on the ground that
the relinquishment of the homestead
rights of Martin Dolorico I in favor of
Comintan and Zamora is proper, the
former having been designated as
successor in interest of the original
homestead applicant and that
because plaintiff failed to participate
in the public auction, he is forever
barred to claim the property; that
plaintiff filed a motion for
reconsideration of this decision
which was denied by the Director of
Lands in his order dated June 10,
1959; that, finally, on appeal to the
Secretary of Agriculture and Natural
Resources, the decision rendered by
the Regional Land Officer was
affirmed in toto. 1
On March 22, 1966, respondent Court rendered
judgment in the afore-mentioned civil case, the
dispositive portion of which reads as
follows:t.hqw
IN VIEW OF THE FOREGOING
CONSIDERATIONS, judgment is
hereby rendered awarding Lot No.
5785-A of PLS-45, (Calauag Public
Land Subdivision) one-half portion of
the property in litigation located at
Bo. Cabuluan, Calauag, Quezon, in
favor of defendant QUIRINO

COMINTAN, being the successful

bidder in the public auction
conducted by the bureau of Lands
on April 18, 1955, and hereby giving
due course to the Sales Application
No. 9258 of defendant Eleuterio
Zamora over the other half, Lot No.
5785-B of PLS-45, Calauag, without
prejudice to the right of plaintiff
BARTOLOME ORTIZ to participate
in the public bidding of the same to
be announced by the Bureau of
Lands, Manila. However, should
plaintiff Bartolome Ortiz be not
declared the successful bidder
thereof, defendants Quirino
Comintan and Eleuterio Zamora are
ordered to reimburse jointly said
plaintiff the improvements he has
introduced on the whole property in
the amount of THIRTEEN
THOUSAND SIX HUNDRED
THIRTY-TWO (P13,632.00) PESOS,
the latter having the right to retain
the property until after he has been
fully paid therefor, without interest
since he enjoys the fruits of the
property in question, with prejudice
and with costs again the plaintiff. 2
Plaintiff appealed the decision to the Court of
Appeals.
Two (2) years after the rendition of the judgment by
the court a quo, while the case was pending appeal
and upon petition of private respondents Quirino
Comintan and Eleuterio Zamora, respondent Court
appointed respondent Vicente Ferro, Clerk of
Court, as Receiver to collect tolls on a portion of the
property used as a diversion road. On August 19,
1969, the Court of Appeals issued a Resolution
annulling the Order appointing the Receiver.
Subsequently, on February 19, 1970, the Appellate
Court affirmed the decision of the trial court. A
petition for review on certiorari of the decision of the
Court of Appeals was denied by this Court on April
6, 1970. At this point, private respondents filed a
petition for appointment of a new receiver with the
court a quo. This petition was granted and the
receiver was reappointed. Petitioner sought the
annulment of this Order with the Court of Appeals,
but said Court ruled that its decision had already
become final and that the records of the case were
to be remanded to the trial court.

Not satisfied with such denial, petitioner filed a

petitioner for certiorari, prohibition and mandamus
with preliminary injunction before this
Court, 3 praying for the annulment of the Order
reappointing the Receiver. On July 13, 1970, the
petition was dismissed by this Court on the ground
of insufficient showing of grave abuse of discretion.
II
The judgment having become final and executory
private respondents filed a motion for the execution
of the same, praying as follows:t.hqw
WHEREFORE, it is respectfully
prayed of this Honorable Court to
order the issuance of a writ of
execution in accordance with the
judgment of this Honorable Court,
confirmed by the Court of Appeals
and the Supreme Court,
commanding any lawful officer to
deliver to defendants Comintan and
Zamora the land subject of the
decision in this case but allowing
defendants to file a bond in such
amount as this Honorable Court may
fix, in lieu of the P13,632.00 required
to be paid to plaintiff, conditioned
that after the accounting of the tools
collected by plaintiff, there is still an
amount due and payable to said
plaintiff, then if such amount is not
paid on demand, including the legal
interests, said bond shall be held
answerable.
Ordering further the plaintiff to
render an accounting of the tolls he
collected from March of 1967 to
December 31, 1968 and from
September 1969 to March 31, 1970,
and deliver said tolls collected to the
receiver and if judgment is already
executed, then to Quirino Comintan
and Eleuterio Zamora; and,
Finally, to condemn plaintiff to pay
moral damages for withholding the
tools which belong to your movant in
an amount this Court may deem just
in the premises. 4
Acting upon the foregoing motion, respondent
Judge issued an Order, dated September 23, 1970,
stating, among others, the following: t.hqw

The records further disclosed that

from March 1967 to December 31,
1968, piaintiff Bartolome Ortiz
collected tolls on a portion of the
propertv in question wherein he has
not introduced anv improvement
particularlv on Lot No. 5785-A; PLS45 awarded to defendant Quirino
Comintan, thru which vehicular
traffic was detoured or diverted, and
again from September 1969 to
March 31, 1970, the plaintiff
resumed the collection of tools on
the same portion without rendering
any accounting on said tolls to the
Receiver, who, was reappointed
after submitting the required bond
and specifically authorized only to
collect tolls leaving the harvesting of
the improvements to the plaintiff.
xxx xxx xxx
ln virtue of he findings of this Court
as contained in the dispositive
portion of its decision, the
defendants are jointly obligated to
pay the plaintiff in the amount of
P13,632.00 as reasonable value of
the improvements he introduced on
the whole property in question, and
that he has the right of retention until
fully paid. It can be gleaned from the
motion of the defendants that if
plaintiff submits an accounting of the
tolls he collected during the periods
above alluded to, their damages of
about P25,000.00 can more than
offset their obligation of P13,362.00
in favor of the plaintiff, thereafter the
possession of the land be delivered
to the defendants since the decision
of the Supreme Court has already
become final and executory, but in
the interregnum pending such
accounting and recovery by the
Receiver of the tolls collected by the
plaintiff, the defendants pray that
they allowed to put up a bond in lieu
of the said P13,632.00 to answer for
damages of the former, if any.
On the other hand, plaintiff contends
in his opposition, admitting that the
decision of the Supreme Court has
become final and executory; (1) the

offer of a bond in lieu of payment of

P13,632.00 does not, and cannot,
satisfy the condition imposed in the
decision of this Court which was
affirmed in toto; (2) the public sale of
Portion "B" of the land has still to
take place as ordained before the
decision could be executed; and, (3)
that whatever sums plaintiff may
derive from the property cannot be
set off against what is due him for
the improvements he made, for
which he has to be reimbursed as
ordered.
xxx xxx xxx
Let it be known that plaintiff does not
dispute his having collected tolls
during the periods from March 1967
to December 31, 1968 and from
September 1969 to March 31, 1970.
The Supreme Court affirmed the
decision of this Court its findings that
said tolls belong to the defendant,
considering that the same were
collected on a portion of the land
question where the plaintiff
didnot introduce any improvement.
The reimbursement to the plaintiff
pertains only to the value of the
improvements, like coconut trees
and other plants which he introduced
on the whole property. The tolls
collected by the plaintiff on an
unimproved portion naturally belong
to the defendants, following the
doctrine on accretion. Further, the
reappointment of a Receiver by this
Court was upheld by the Supreme
Court when it denied the petition for
certiorari filed by the plaintiff,
bolstering the legal claim of
defendants over said tolls. Thus, the
decision of the Supreme Court
rendered the decision of this Court
retroactive from March 22, 1966
although pending accounting of the
tolls collected by the plaintiff is
justified and will not prejudice
anybody, but certainly would
substantially satisfy the conditions
imposed in the decision. However,
insofar as the one-half portion "B" of
the property, the decision may be
executed only after public sale by

the Bureau of Lands shall be

accomplished.
WHEREFORE, finding the Motion
for Execution filed by the defendants
to be meritorious, the same is
granted; provided, however, that
they put up a bond equal the
adjudicated amount of P13,632.00
accruing in favor of the plaintiff, from
a reputable or recognized bonding or
surety company, conditioned that
after an accounting of the tolls
collected by the plaintiff should there
be found out any balance due and
payable to him after reckoning said
obligation of P13,632.00 the bond
shall be held answerable therefor. 5
Accordingly, a Writ of Execution was issued after
private respondent Quirino Comintan had filed the
required bond. The writ directed the Sheriff to
enforce the decision of the Court, and stated, part
in, the following:t.hqw
But should there be found any
amount collectible after accounting
and deducting the amount of
P3,632.00, you are hereby ordered
that of the goods and chattels of
Bartolome Ortiz of Bo. Kabuluan,
Calauag, Quezon, be caused to be
made any excess in the abovemetioned amount together with your
lawful fees and that you render
same to defendant Quirino
Comintan. If sufficient personal
property cannot be found thereof to
satisfy this execution and lawful fees
thereon, then you are commanded
that of the lands and buildings of the
said BARTOLOME ORTIZ you make
the said excess amount in the
manner required by the Rules of
Court, and make return of your
proceedings within this Court within
sixty (60) days from date of service.
You are also ordered to cause
Bartolome Ortiz to vacate the
property within fifteen (15) days after
service thereof the defendant
Quirino Comintan having filed the
required bond in the amount of
THIRTEEN THOUSAND SIX

HUNDRED THIRTY-TWO
(P13,632.00) PESOS. 6

patent, a perfected homestead or

sales application is a property right
in the fullest sense, unaffectcd by
the fact that the paramount title is
still in the Government and no
subsequent law can deprive him of
that vested right The question of the
actual damages suffered by
defendant Comintan by reason of
the unaccounted tolls received by
plaintiff had already been fully
discussed in the order of September
23, 1970 and the Court is honestly
convinced and believes it to be
proper and regular under the
circumstances.

On October 12, 1970, petitioner filed a Motion for

Reconsideration of the aforesaid Order and Writ of
Execution, alleging:t.hqw
(a) That the respondent judge has
no authority to place respondents in
possession of the property;
(b) That the Supreme Court has
never affirmed any decision of the
trial court that tolls collected from the
diversionary road on the property,
which is public land, belong to said
respondents;

Incidentally, the Court stands to

correct itself when in the same
order, it directed the execution of he
decision with respect to the one-half
portion "B" of the property only after
the public sale by the Bureau of
Lands, the same being an oversight,
it appearing that the Sales
Application of defendant Eleuterio
Zamora had already been
recognized and full confirmed by the
Supreme Court.

(c) That to assess petitioner a

P25,000.00 liability for damages is
purely punitive imposition without
factual or legal justification.
The foregoing Motion for Reconsideration was
denied by respondent Judge per Order dated
November 18, 1970. Saod Order states, in
part:t.hqw
It goes without saying that defendant
Comintan is entitled to be placed in
possession of lot No. 5785-A of
PLS-45 (Calauag Public Land
Subdivision) and enjoyment of the
tolls from March, 1967 to March,
1968 and from September, 1969 to
March 31, l970 which were received
by plaintiff Bartolome Ortiz, collected
from the property by reason of the
diversion road where vehicular traffic
was detoured. To defendant
Comintan belongs the tolls thus
collected from a portion of the land
awarded to him used as a
diversionary road by the doctrine of
accretion and his right over the
same is ipso jure, there being no
need of any action to possess said
addition. It is so because as
consistently maintained by the
Supreme Court, an applicant who
has complied with all the terms and
conditions which entitle him to a
patent for a particular tract of publlic
land, acquires a vested right therein
and is to be regarded as equitable
owner thereof so that even without a

In view thereof, finding the motion

filed by plaintiff to be without merit,
the Court hereby denies the same
and the order of September 23,
1970 shall remain in full force
subject to the amendment that the
execution of the decision with
respect to the one-half portion "B"
shall not be conditioned to the public
sale by the Bureau of Lands.
SO ORDERED. 7
III
Petitioner thus filed the instant petition, contending
that in having issued the Order and Writ of
Execution, respondent Court "acted without or in
excess of jurisdiction, and/or with grave abuse of
discretion, because the said order and writ in effect
vary the terms of the judgment they purportedly
seek to enforce." He argued that since said
judgment declared the petitioner a possessor in
good faith, he is entitled to the payment of the value
of the improvements introduced by him on the
whole property, with right to retain the land until he

has been fully paid such value. He likewise averred

that no payment for improvements has been made
and, instead, a bond therefor had been filed by
defendants (private respondents), which, according
to petitioner, is not the payment envisaged in the
decision which would entitle private respondents to
the possession of the property. Furthermore, with
respect to portion "B", petitioner alleges that, under
the decision, he has the right to retain the same
until after he has participated and lost in the public
bidding of the land to be conducted by the Bureau
of Lands. It is claimed that it is only in the event that
he loses in the bidding that he can be legally
dispossessed thereof.
It is the position of petitioner that all the fruits of the
property, including the tolls collected by him from
the passing vehicles, which according to the trial
court amounts to P25,000.00, belongs to petitioner
and not to defendant/private respondent Quirino
Comintan, in accordance with the decision itself,
which decreed that the fruits of the property shall
be in lieu of interest on the amount to be paid to
petitioner as reimbursement for improvements. Any
contrary opinion, in his view, would be tantamount
to an amendment of a decision which has long
become final and executory and, therefore, cannot
be lawfully done.
Petitioner, therefore, prayed that: (1) a Writ of
Preliminary Injunction be issued enjoining the
enforcement of the Orders of September 23, 1970
and November 18, 1970, and the Writ of Execution
issued thereto, or restoring to petitioner the
possession of the property if the private
respondents had been placed in possession
thereof; (2) annulling said Orders as well as the
Writ of Execution, dissolving the receivership
established over the property; and (3) ordering
private respondents to account to petitioner all the
fruits they may have gathered or collected from the
property in question from the time of petitioiier's
illegal dispossession thereof.
On January 29, 1971, this Court issued the Writ of
Preliminary Injunction. On January 30, 1971,
private respondents filed a Motion for
Reconsideration and/or Modification of the Order
dated January 29, 1971. This was followed by a
Supplemental Motion for Reconsideration and
Manifestation on February 3, 1971. In the latter
motion, private respondents manifested that the
amount of P14,040.96, representing the amount
decreed in the judgment as reimbursement to
petitioner for the improvements, plus interest for six
months, has already been deposited by them in

court, "with the understanding that said amount

shall be turned over to the plaintiff after the court a
quo shall have determined the improvement on Lot
5785-A, and subsequently the remaining balance of
the deposit shall be delivered to the petitioner
(plaintiff therein) in the event he loses the bid for
Lot 5785-B in favor of private respondent Eleuterio
Zamora." 8 The deposit is evidenced by a
certification made by the Clerk of the Court a
quo. 9 Contending that said deposit was a faithful
compliance with the judgment of the trial court,
private respondent Quirino Comintan prayed for the
dissolution of the Writ of Injunction.
It appears that as a consequence of the deposit
made by private respondents, the Deputy, Sheriff of
Calauag, Quezon ousted petitioner's representative
from the land in question and put private
respondents in possession thereof. 10
On March 10, 1971, petitioner filed a "Comment on
Respondents' 'Motion for Reconsideration' dated
January 29, 1971' and 'Supplemental Motion for
Reconsideration and Manifestation,'" contending
that the tender of deposit mentioned in the
Suplemental Motion was not really and officially
made, "inasmuch as the same is not supported by
any official receipt from the lower court, or from its
clerk or cashier, as required by law;" that said
deposit does not constitute sufficient compliance
with the judgment sought to be enforced, neither
was it legally and validly made because the
requisites for consignation had not been complied
with; that the tender of legal interest for six months
cannot substitute petitioner's enjoyment of the fruits
of the property as long as the judgment in Civil
Case No. C-90 has not been implemented in the
manner decreed therein; that contrary to the
allegations of private respondents, the value of the
improvements on the whole property had been
determined by the lower court, and the segregation
of the improvements for each lot should have been
raised by them at the opportune moment by asking
for the modification of the decision before it became
final and executory; and that the tolls on the
property constituted "civil fruits" to which the
petitioner is entitled under the terms of the decision.
IV
The issue decisive of the controvery isafter the
rendition by the trial court of its judgment in Civil
Case No. C-90 on March 22, 1966 confirming the
award of one-half of the property to Quirino
Comintanwhether or not petitioner is still entitled
to retain for his own exclusive benefit all the fruits of

the property, such as the tolls collected by him from

March 1967 to December 1968, and September
1969 to March 31, 1970, amounting to about
P25,000.00. In other words, petitioner contends
that so long as the aforesaid amount of P13,632,00
decreed in the judgment representing the expenses
for clearing the land and the value of the coconuts
and fruit trees planted by him remains unpaid, he
can appropriate for his exclusive benefit all the
fruits which he may derive from the property,
without any obligation to apply any portion thereof
to the payment of the interest and the principal of
the debt.

by the creditor, according to Scaevola, in the light

of the provisions of Article 502 of the Spanish Civil
Code, 16 is considered not a coercive measure to
oblige the debtor to pay, depriving him temporarily
of the enjoyment of the fruits of his property, but as
a means of obtainitig compensation for the debt.
The right of retention in this case is analogous to a
contract of antichresis and it cati be considered as
a means of extinguishing the obligation, inasmuch
as the right to retain the thing lasts only for the
period necessary to enable the creditor to be
reimbursed from the fruits for the necessary and
useful expenses. 17

We find this contention untenable.

According to Manresa, the right of retention is,

therefore, analogous to that of a pledge, if the
property retained is a movable, and to that of
antichresis, if the property held is
immovable. 18 This construction appears to be in
harmony with similar provisions of the civil law
which employs the right of retention as a means or
device by which a creditor is able to obtain the
payment of a debt. Thus, under Article 1731 of the
New Civil Code, any person who has performed
work upon a movable has a right to retain it by way
of pledge until he is paid. Similarly, under Article
1914 of the same Code, the agent may retain in
pledge the things which are the object of the
agency until the principal effects reimbursement of
the funds advanced by the former for the execution
of the agency, or he is indemnified for all damages
which he may have suffered as a consequence of
the execution of the agency, provided he is free
from fault. To the same effect, the depositary,
under Article 1994 of the same Code, may retain
the thing in pledge until the full payment of what
may be due him by reason of the deposit. The
usufructuary, pursuant to Article 612 of the same
Code, may retain the property until he is
reimbursed for the amount paid for taxes levied on
the capital (Article 597) and tor extraordinary
repairs (Article 594).

There is no question that a possessor in good faith

is entitled to the fruits received before the
possession is legally interrupted. 11 Possession in
good faith ceases or is legally interrupted from the
moment defects in the title are made known to the
possessor, by extraneous evidence or by the filing
of an action in court by the true owner for the
recovery of the property. 12 Hence, all the fruits that
the possessor may receive from the time he is
summoned in court, or when he answers the
complaint, must be delivered and paid by him to the
owner or lawful possessor. 13
However, even after his good faith ceases, the
possessor in fact can still retain the property,
pursuant to Article 546 of the New Civil Code, until
he has been fully reimbursed for all the necessary
and useful expenses made by him on the property.
This right of retention has been considered as one
of the conglomerate of measures devised by the
law for the protection of the possessor in good faith.
Its object is to guarantee the reimbursement of the
expenses, such as those for the preservation of the
property, 14 or for the enhancement of its utility or
productivity. 15 It permits the actual possessor to
remain in possession while he has not been
reimbursed by the person who defeated him in the
possession for those necessary expenses and
useful improvements made by him on the thing
possessed. The principal characteristic of the right
of retention is its accessory character. It is
accessory to a principal obligation. Considering that
the right of the possessor to receive the fruits
terminates when his good faith ceases, it is
necessary, in order that this right to retain may be
useful, to concede to the creditor the right to secure
reimbursement from the fruits of the property by
utilizing its proceeds for the payment of the interest
as well as the principal of the debt while he remains
in possession. This right of retention of the property

In all of these cases, the right of retention is used

as a means of extinguishing the obligation. As
amply observed by Manresa: "El derecho de
retencion, lo hemos dicho, es el derecho de prenda
o el de anticresis constituido por la ley con
independencia de las partes." 19 In a pledge, if the
thing pledged earns or produces fruits, income,
dividends or interests, the creditor shall
compensate what he receives with those which are
owing him. 20 In the same manner, in a contract of
antichresis, the creditor acquires the right to receive
the fruits of an immovable of his debtor with the
obligation to apply them to payment of the interest,

if owing, and thereafter to the principal of his

credit. 21 The debtor can not reacquire enjoyment of
the immovable until he has actually paid what he
owes the creditor. 22
Applying the afore-cited principles to the case at
bar, petitioner cannot appropriate for his own
exclusive benefit the tolls which he collected from
the property retained by him. It was his duty under
the law, after deducting the necessary expenses for
his administration, to apply such amount collected
to the payment of the interest, and the balance to
the payment of the obligation.
We hold, therefore, that the disputed tolls, after
deducting petitioner's expenses for administration,
belong to Quirino Comintan, owner of the land
through which the toll road passed, further
considering that the same was on portions of the
property on which petitioner had not introduced any
improvement. The trial court itself clarified this
matter when it placed the toll road under
receivership. The omission of any mention of the
tolls in the decision itself may be attributed to the
fact that the tolls appear to have been collected
after the rendition of the judgment of the trial court.
The records further reveal that earnest efforts have
been made by private respondents to have the
judgment executed in the most practicable manner.
They deposited in court the amount of the judgment
in the sum of P13,632.00 in cash, subject only to
the accounting of the tolls collected by the
petitioner so that whatever is due from him may be
set off with the amount of reimbursement. This is
just and proper under the circumstances and, under
the law, compensation or set off may take place,
either totally or partially. Considering that petitioner
is the creditor with respect to the judgment
obligation and the debtor with respect to the tolls
collected, Comintan being the owner thereof, the
trial court's order for an accounting and
compensation is in accord with law. 23
With respect to the amount of reimbursement to be
paid by Comintan, it appears that the dispositive
portion of the decision was lacking in specificity, as
it merely provided that Comintan and Zamora are
jointly liable therefor. When two persons are liable
under a contract or under a judgment, and no
words appear in the contract or judgment to make
each liable for the entire obligation, the
presumption is that their obligation is joint
ormancomunada, and each debtor is liable only for
a proportionate part of the obligation. 24 The

judgment debt of P13,632.00 should, therefore, be

pro-rated in equal shares to Comintan and Zamora.
Regarding Lot 5785-B, it appears that no public
sale has yet been conducted by the Bureau of
Lands and, therefore, petitioner is entitled to remain
in possession thereof. This is not disputed by
respondent Eleuterio Zamora. 25 After public sale is
had and in the event that Ortiz is not declared the
successful bidder, then he should be reimbursed by
respondent Zamora in the corresponding amount
for the improvements on Lot 5785-B.
WHEREFORE, in view hereof, the Order of
respondent Court of November 18, 1970 is hereby
modified to conform to the foregoing judgment. The
Writ of Preliminary Injunction, dated January 29,
1971, is hereby dissolved. Without special
pronouncement as to costs.

1.t

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G.R. No. L-32974 July 30, 1979

BARTOLOME ORTIZ, petitioner,
vs.
HON. UNION C. KAYANAN, in his capacity as
Judge of the Court of First Instance of Quezon,

Branch IV; ELEUTERIO ZAMORA, QUIRINO

COMINTAN, VICENTE FERRO, AND GREGORIO
PAMISARAN,respondents.
Salonga, Ordo;ez, Yap, Sicat & Associates and
Salvador, Ulgado & Carbon for petitioner.
Jose A. Cusi for private respondents.

ANTONIO, J.:

1wph1.t

Petition for certiorari and Prohibition with Preliminary

Injunction to nullify the Order of respondent Judge
directing the execution of the final judgment in Civil
Case No. C-90, entitled "Bartolome Ortiz vs.
Secretary of Agriculture and Natural Resources, et
al.," and the Writ of Execution issued to implement
said Order, allegedly for being inconsistent with the
judgment sought to be enforced.
Civil Case No. C-90 was filed by Bartolome Ortiz who
sought the review and/or annulment of the decision of
the Secretary of Agriculture and Natural Resources,
giving preference to the sales applications of private
respondents Quirino Comintan and Eleuterio Zamora
over Lot No. 5785, PLS-45, located at Barrio
Cabuluan, Calauag, Quezon.
I
The factual background of the case, as found by
respondent Court, is as follows:
t.hqw

... The lot in controversy was formerly

the subject of Homestead Application
No. 122417 of Martin Dolorico II,
plaintiff's ward who died on August 20,
1931; that since then it was plaintiff
who continued the cultivation and
possession of the property, without
however filing any application to
acquire title thereon; that in the
Homestead Application No. 122417,
Martin Dolorico II named his uncle,
Martin Dolorico I as his heir and
successor in interest, so that in 1951
Martin Dolorico I executed an affidavit
relinquishing his rights over the
property in favor of defendants Quirino
Comintan and Eleuterio Zamora, his
grandson and son-in-law, respectively,
and requested the Director of Lands to
cancel the homestead application; that
on the strength of the affidavit,
Homestead Application No. 122417
was cancelled and thereafter,

defendants Comintan and Zamora

filed their respective sales applications
Nos. 8433 and 9258; that plaintiff filed
his protest on November 26, 1951
alleging that he should be given
preference to purchase the lot
inasmuch as he is the actual occupant
and has been in continuous
possession of the same since 1931;
and inspite of plaintiff's opposition,
"Portion A" of the property was sold at
public auction wherein defendant
Comintan was the only bidder; that on
June 8, 1957, investigation was
conducted on plaintiff's protest by
Assistant Public Lands Inspector
Serapion Bauzon who submitted his
report to the Regional Land Officer,
and who in turn rendered a decision
on April 9, 1958, dismissing plaintiff's
claim and giving due course to
defendants' sales applications on the
ground that the relinquishment of the
homestead rights of Martin Dolorico I
in favor of Comintan and Zamora is
proper, the former having been
designated as successor in interest of
the original homestead applicant and
that because plaintiff failed to
participate in the public auction, he is
forever barred to claim the property;
that plaintiff filed a motion for
reconsideration of this decision which
was denied by the Director of Lands in
his order dated June 10, 1959; that,
finally, on appeal to the Secretary of
Agriculture and Natural Resources,
the decision rendered by the Regional
Land Officer was affirmed in toto. 1
On March 22, 1966, respondent Court rendered
judgment in the afore-mentioned civil case, the
dispositive portion of which reads as follows:
t.hqw

IN VIEW OF THE FOREGOING

CONSIDERATIONS, judgment is
hereby rendered awarding Lot No.
5785-A of PLS-45, (Calauag Public
Land Subdivision) one-half portion of
the property in litigation located at Bo.
Cabuluan, Calauag, Quezon, in favor
of defendant QUIRINO COMINTAN,
being the successful bidder in the
public auction conducted by the
bureau of Lands on April 18, 1955,
and hereby giving due course to the
Sales Application No. 9258 of
defendant Eleuterio Zamora over the
other half, Lot No. 5785-B of PLS-45,

Calauag, without prejudice to the right

of plaintiff BARTOLOME ORTIZ to
participate in the public bidding of the
same to be announced by the Bureau
of Lands, Manila. However, should
plaintiff Bartolome Ortiz be not
declared the successful bidder
thereof, defendants Quirino Comintan
and Eleuterio Zamora are ordered to
reimburse jointly said plaintiff the
improvements he has introduced on
the whole property in the amount of
THIRTEEN THOUSAND SIX
HUNDRED THIRTY-TWO
(P13,632.00) PESOS, the latter
having the right to retain the property
until after he has been fully paid
therefor, without interest since he
enjoys the fruits of the property in
question, with prejudice and with costs
again the plaintiff. 2
Plaintiff appealed the decision to the Court of
Appeals.
Two (2) years after the rendition of the judgment by
the court a quo, while the case was pending appeal
and upon petition of private respondents Quirino
Comintan and Eleuterio Zamora, respondent Court
appointed respondent Vicente Ferro, Clerk of Court,
as Receiver to collect tolls on a portion of the property
used as a diversion road. On August 19, 1969, the
Court of Appeals issued a Resolution annulling the
Order appointing the Receiver. Subsequently, on
February 19, 1970, the Appellate Court affirmed the
decision of the trial court. A petition for review on
certiorari of the decision of the Court of Appeals was
denied by this Court on April 6, 1970. At this point,
private respondents filed a petition for appointment of
a new receiver with the court a quo. This petition was
granted and the receiver was reappointed. Petitioner
sought the annulment of this Order with the Court of
Appeals, but said Court ruled that its decision had
already become final and that the records of the case
were to be remanded to the trial court.
Not satisfied with such denial, petitioner filed a
petitioner for certiorari, prohibition and mandamus
with preliminary injunction before this Court, 3 praying
for the annulment of the Order reappointing the
Receiver. On July 13, 1970, the petition was dismissed
by this Court on the ground of insufficient showing of
grave abuse of discretion.

II
The judgment having become final and executory
private respondents filed a motion for the execution of
the same, praying as follows:
t.hqw

WHEREFORE, it is respectfully
prayed of this Honorable Court to
order the issuance of a writ of
execution in accordance with the
judgment of this Honorable Court,
confirmed by the Court of Appeals and
the Supreme Court, commanding any
lawful officer to deliver to defendants
Comintan and Zamora the land
subject of the decision in this case but
allowing defendants to file a bond in
such amount as this Honorable Court
may fix, in lieu of the P13,632.00
required to be paid to plaintiff,
conditioned that after the accounting
of the tools collected by plaintiff, there
is still an amount due and payable to
said plaintiff, then if such amount is
not paid on demand, including the
legal interests, said bond shall be held
answerable.
Ordering further the plaintiff to render
an accounting of the tolls he collected
from March of 1967 to December 31,
1968 and from September 1969 to
March 31, 1970, and deliver said tolls
collected to the receiver and if
judgment is already executed, then to
Quirino Comintan and Eleuterio
Zamora; and,
Finally, to condemn plaintiff to pay
moral damages for withholding the
tools which belong to your movant in
an amount this Court may deem just in
the premises. 4
Acting upon the foregoing motion, respondent Judge
issued an Order, dated September 23, 1970, stating,
among others, the following:
t.hqw

The records further disclosed that

from March 1967 to December 31,
1968, piaintiff Bartolome Ortiz
collected tolls on a portion of the
propertv in question wherein he has
not introduced anv improvement
particularlv on Lot No. 5785-A; PLS-45
awarded to defendant Quirino
Comintan, thru which vehicular traffic
was detoured or diverted, and again
from September 1969 to March 31,
1970, the plaintiff resumed the
collection of tools on the same portion
without rendering any accounting on
said tolls to the Receiver, who, was
reappointed after submitting the

required bond and specifically

authorized only to collect tolls leaving
the harvesting of the improvements to
the plaintiff.

December 31, 1968 and from

September 1969 to March 31, 1970.
The Supreme Court affirmed the
decision of this Court its findings that
said tolls belong to the defendant,
considering that the same were
collected on a portion of the land
question where the plaintiff
didnot introduce any improvement.
The reimbursement to the plaintiff
pertains only to the value of the
improvements, like coconut trees and
other plants which he introduced on
the whole property. The tolls collected
by the plaintiff on an unimproved
portion naturally belong to the
defendants, following the doctrine on
accretion. Further, the reappointment
of a Receiver by this Court was upheld
by the Supreme Court when it denied
the petition for certiorari filed by the
plaintiff, bolstering the legal claim of
defendants over said tolls. Thus, the
decision of the Supreme Court
rendered the decision of this Court
retroactive from March 22, 1966
although pending accounting of the
tolls collected by the plaintiff is justified
and will not prejudice anybody, but
certainly would substantially satisfy
the conditions imposed in the
decision. However, insofar as the onehalf portion "B" of the property, the
decision may be executed only after
public sale by the Bureau of Lands
shall be accomplished.

xxx xxx xxx

ln virtue of he findings of this Court as
contained in the dispositive portion of
its decision, the defendants are jointly
obligated to pay the plaintiff in the
amount of P13,632.00 as reasonable
value of the improvements he
introduced on the whole property in
question, and that he has the right of
retention until fully paid. It can be
gleaned from the motion of the
defendants that if plaintiff submits an
accounting of the tolls he collected
during the periods above alluded to,
their damages of about P25,000.00
can more than offset their obligation of
P13,362.00 in favor of the plaintiff,
thereafter the possession of the land
be delivered to the defendants since
the decision of the Supreme Court has
already become final and executory,
but in the interregnum pending such
accounting and recovery by the
Receiver of the tolls collected by the
plaintiff, the defendants pray that they
allowed to put up a bond in lieu of the
said P13,632.00 to answer for
damages of the former, if any.
On the other hand, plaintiff contends
in his opposition, admitting that the
decision of the Supreme Court has
become final and executory; (1) the
offer of a bond in lieu of payment of
P13,632.00 does not, and cannot,
satisfy the condition imposed in the
decision of this Court which was
affirmed in toto; (2) the public sale of
Portion "B" of the land has still to take
place as ordained before the decision
could be executed; and, (3) that
whatever sums plaintiff may derive
from the property cannot be set off
against what is due him for the
improvements he made, for which he
has to be reimbursed as ordered.
xxx xxx xxx
Let it be known that plaintiff does not
dispute his having collected tolls
during the periods from March 1967 to

WHEREFORE, finding the Motion for

Execution filed by the defendants to
be meritorious, the same is granted;
provided, however, that they put up a
bond equal the adjudicated amount of
P13,632.00 accruing in favor of the
plaintiff, from a reputable or
recognized bonding or surety
company, conditioned that after an
accounting of the tolls collected by the
plaintiff should there be found out any
balance due and payable to him after
reckoning said obligation of
P13,632.00 the bond shall be held
answerable therefor. 5
Accordingly, a Writ of Execution was issued after
private respondent Quirino Comintan had filed the
required bond. The writ directed the Sheriff to enforce
the decision of the Court, and stated, part in, the
following:
t.hqw

But should there be found any amount

collectible after accounting and
deducting the amount of P3,632.00,
you are hereby ordered that of the
goods and chattels of Bartolome Ortiz
of Bo. Kabuluan, Calauag, Quezon, be
caused to be made any excess in the
above-metioned amount together with
your lawful fees and that you render
same to defendant Quirino Comintan.
If sufficient personal property cannot
be found thereof to satisfy this
execution and lawful fees thereon,
then you are commanded that of the
lands and buildings of the said
BARTOLOME ORTIZ you make the
said excess amount in the manner
required by the Rules of Court, and
make return of your proceedings
within this Court within sixty (60) days
from date of service.
You are also ordered to cause
Bartolome Ortiz to vacate the property
within fifteen (15) days after service
thereof the defendant Quirino
Comintan having filed the required
bond in the amount of THIRTEEN
THOUSAND SIX HUNDRED THIRTYTWO (P13,632.00) PESOS. 6
On October 12, 1970, petitioner filed a Motion for
Reconsideration of the aforesaid Order and Writ of
Execution, alleging:
t.hqw

(a) That the respondent judge has no

authority to place respondents in
possession of the property;
(b) That the Supreme Court has never
affirmed any decision of the trial court
that tolls collected from the
diversionary road on the property,
which is public land, belong to said
respondents;
(c) That to assess petitioner a
P25,000.00 liability for damages is
purely punitive imposition without
factual or legal justification.
The foregoing Motion for Reconsideration was denied
by respondent Judge per Order dated November 18,
1970. Saod Order states, in part:
t.hqw

It goes without saying that defendant

Comintan is entitled to be placed in
possession of lot No. 5785-A of PLS-

45 (Calauag Public Land Subdivision)

and enjoyment of the tolls from March,
1967 to March, 1968 and from
September, 1969 to March 31, l970
which were received by plaintiff
Bartolome Ortiz, collected from the
property by reason of the diversion
road where vehicular traffic was
detoured. To defendant Comintan
belongs the tolls thus collected from a
portion of the land awarded to him
used as a diversionary road by the
doctrine of accretion and his right over
the same is ipso jure, there being no
need of any action to possess said
addition. It is so because as
consistently maintained by the
Supreme Court, an applicant who has
complied with all the terms and
conditions which entitle him to a
patent for a particular tract of publlic
land, acquires a vested right therein
and is to be regarded as equitable
owner thereof so that even without a
patent, a perfected homestead or
sales application is a property right in
the fullest sense, unaffectcd by the
fact that the paramount title is still in
the Government and no subsequent
law can deprive him of that vested
right The question of the actual
damages suffered by defendant
Comintan by reason of the
unaccounted tolls received by plaintiff
had already been fully discussed in
the order of September 23, 1970 and
the Court is honestly convinced and
believes it to be proper and regular
under the circumstances.
Incidentally, the Court stands to
correct itself when in the same order,
it directed the execution of he decision
with respect to the one-half portion "B"
of the property only after the public
sale by the Bureau of Lands, the same
being an oversight, it appearing that
the Sales Application of defendant
Eleuterio Zamora had already been
recognized and full confirmed by the
Supreme Court.
In view thereof, finding the motion filed
by plaintiff to be without merit, the
Court hereby denies the same and the
order of September 23, 1970 shall
remain in full force subject to the
amendment that the execution of the
decision with respect to the one-half

portion "B" shall not be conditioned to

the public sale by the Bureau of
Lands.

gathered or collected from the property in question

from the time of petitioiier's illegal dispossession
thereof.

SO ORDERED. 7

On January 29, 1971, this Court issued the Writ of

Preliminary Injunction. On January 30, 1971, private
respondents filed a Motion for Reconsideration and/or
Modification of the Order dated January 29, 1971.
This was followed by a Supplemental Motion for
Reconsideration and Manifestation on February 3,
1971. In the latter motion, private respondents
manifested that the amount of P14,040.96,
representing the amount decreed in the judgment as
reimbursement to petitioner for the improvements,
plus interest for six months, has already been
deposited by them in court, "with the understanding
that said amount shall be turned over to the plaintiff
after the court a quo shall have determined the
improvement on Lot 5785-A, and subsequently the
remaining balance of the deposit shall be delivered to
the petitioner (plaintiff therein) in the event he loses
the bid for Lot 5785-B in favor of private respondent
Eleuterio Zamora." 8 The deposit is evidenced by a

III
Petitioner thus filed the instant petition, contending
that in having issued the Order and Writ of Execution,
respondent Court "acted without or in excess of
jurisdiction, and/or with grave abuse of discretion,
because the said order and writ in effect vary the
terms of the judgment they purportedly seek to
enforce." He argued that since said judgment
declared the petitioner a possessor in good faith, he is
entitled to the payment of the value of the
improvements introduced by him on the whole
property, with right to retain the land until he has been
fully paid such value. He likewise averred that no
payment for improvements has been made and,
instead, a bond therefor had been filed by defendants
(private respondents), which, according to petitioner,
is not the payment envisaged in the decision which
would entitle private respondents to the possession of
the property. Furthermore, with respect to portion "B",
petitioner alleges that, under the decision, he has the
right to retain the same until after he has participated
and lost in the public bidding of the land to be
conducted by the Bureau of Lands. It is claimed that it
is only in the event that he loses in the bidding that he
can be legally dispossessed thereof.
It is the position of petitioner that all the fruits of the
property, including the tolls collected by him from the
passing vehicles, which according to the trial court
amounts to P25,000.00, belongs to petitioner and not
to defendant/private respondent Quirino Comintan, in
accordance with the decision itself, which decreed
that the fruits of the property shall be in lieu of interest
on the amount to be paid to petitioner as
reimbursement for improvements. Any contrary
opinion, in his view, would be tantamount to an
amendment of a decision which has long become
final and executory and, therefore, cannot be lawfully
done.
Petitioner, therefore, prayed that: (1) a Writ of
Preliminary Injunction be issued enjoining the
enforcement of the Orders of September 23, 1970
and November 18, 1970, and the Writ of Execution
issued thereto, or restoring to petitioner the
possession of the property if the private respondents
had been placed in possession thereof; (2) annulling
said Orders as well as the Writ of Execution,
dissolving the receivership established over the
property; and (3) ordering private respondents to
account to petitioner all the fruits they may have

certification made by the Clerk of the Court a

quo. 9 Contending that said deposit was a faithful
compliance with the judgment of the trial court, private
respondent Quirino Comintan prayed for the dissolution
of the Writ of Injunction.

It appears that as a consequence of the deposit made

by private respondents, the Deputy, Sheriff of
Calauag, Quezon ousted petitioner's representative
from the land in question and put private respondents
in possession thereof. 10
On March 10, 1971, petitioner filed a "Comment on
Respondents' 'Motion for Reconsideration' dated
January 29, 1971' and 'Supplemental Motion for
Reconsideration and Manifestation,'" contending that
the tender of deposit mentioned in the Suplemental
Motion was not really and officially made, "inasmuch
as the same is not supported by any official receipt
from the lower court, or from its clerk or cashier, as
required by law;" that said deposit does not constitute
sufficient compliance with the judgment sought to be
enforced, neither was it legally and validly made
because the requisites for consignation had not been
complied with; that the tender of legal interest for six
months cannot substitute petitioner's enjoyment of the
fruits of the property as long as the judgment in Civil
Case No. C-90 has not been implemented in the
manner decreed therein; that contrary to the
allegations of private respondents, the value of the
improvements on the whole property had been
determined by the lower court, and the segregation of
the improvements for each lot should have been
raised by them at the opportune moment by asking for
the modification of the decision before it became final
and executory; and that the tolls on the property

constituted "civil fruits" to which the petitioner is

entitled under the terms of the decision.
IV
The issue decisive of the controvery isafter the
rendition by the trial court of its judgment in Civil Case
No. C-90 on March 22, 1966 confirming the award of
one-half of the property to Quirino Comintan
whether or not petitioner is still entitled to retain for his
own exclusive benefit all the fruits of the property,
such as the tolls collected by him from March 1967 to
December 1968, and September 1969 to March 31,
1970, amounting to about P25,000.00. In other words,
petitioner contends that so long as the aforesaid
amount of P13,632,00 decreed in the judgment
representing the expenses for clearing the land and
the value of the coconuts and fruit trees planted by
him remains unpaid, he can appropriate for his
exclusive benefit all the fruits which he may derive
from the property, without any obligation to apply any
portion thereof to the payment of the interest and the
principal of the debt.
We find this contention untenable.
There is no question that a possessor in good faith is
entitled to the fruits received before the possession is
legally interrupted. 11 Possession in good faith ceases
or is legally interrupted from the moment defects in the
title are made known to the possessor, by extraneous
evidence or by the filing of an action in court by the true
owner for the recovery of the property. 12 Hence, all the
fruits that the possessor may receive from the time he is
summoned in court, or when he answers the complaint,
must be delivered and paid by him to the owner or lawful
possessor. 13

However, even after his good faith ceases, the

possessor in fact can still retain the property, pursuant
to Article 546 of the New Civil Code, until he has been
fully reimbursed for all the necessary and useful
expenses made by him on the property. This right of
retention has been considered as one of the
conglomerate of measures devised by the law for the
protection of the possessor in good faith. Its object is
to guarantee the reimbursement of the expenses,
such as those for the preservation of the property, 14 or
for the enhancement of its utility or productivity. 15 It
permits the actual possessor to remain in possession
while he has not been reimbursed by the person who
defeated him in the possession for those necessary
expenses and useful improvements made by him on the
thing possessed. The principal characteristic of the right
of retention is its accessory character. It is accessory to
a principal obligation. Considering that the right of the
possessor to receive the fruits terminates when his good
faith ceases, it is necessary, in order that this right to
retain may be useful, to concede to the creditor the right

to secure reimbursement from the fruits of the property

by utilizing its proceeds for the payment of the interest
as well as the principal of the debt while he remains in
possession. This right of retention of the property by the
creditor, according to Scaevola, in the light of the
provisions of Article 502 of the Spanish Civil Code, 16 is
considered not a coercive measure to oblige the debtor
to pay, depriving him temporarily of the enjoyment of the
fruits of his property, but as a means of obtainitig
compensation for the debt. The right of retention in this
case is analogous to a contract of antichresis and it cati
be considered as a means of extinguishing the
obligation, inasmuch as the right to retain the thing lasts
only for the period necessary to enable the creditor to be
reimbursed from the fruits for the necessary and useful
expenses. 17

According to Manresa, the right of retention is,

therefore, analogous to that of a pledge, if the
property retained is a movable, and to that of
antichresis, if the property held is immovable. 18 This
construction appears to be in harmony with similar
provisions of the civil law which employs the right of
retention as a means or device by which a creditor is
able to obtain the payment of a debt. Thus, under Article
1731 of the New Civil Code, any person who has
performed work upon a movable has a right to retain it
by way of pledge until he is paid. Similarly, under Article
1914 of the same Code, the agent may retain in pledge
the things which are the object of the agency until the
principal effects reimbursement of the funds advanced
by the former for the execution of the agency, or he is
indemnified for all damages which he may have suffered
as a consequence of the execution of the agency,
provided he is free from fault. To the same effect, the
depositary, under Article 1994 of the same Code, may
retain the thing in pledge until the full payment of what
may be due him by reason of the deposit. The
usufructuary, pursuant to Article 612 of the same Code,
may retain the property until he is reimbursed for the
amount paid for taxes levied on the capital (Article 597)
and tor extraordinary repairs (Article 594).

In all of these cases, the right of retention is used as a

means of extinguishing the obligation. As amply
observed by Manresa: "El derecho de retencion, lo
hemos dicho, es el derecho de prenda o el de
anticresis constituido por la ley con independencia de
las partes." 19 In a pledge, if the thing pledged earns or
produces fruits, income, dividends or interests, the
creditor shall compensate what he receives with those
which are owing him. 20 In the same manner, in a
contract of antichresis, the creditor acquires the right to
receive the fruits of an immovable of his debtor with the
obligation to apply them to payment of the interest, if
owing, and thereafter to the principal of his credit. 21 The
debtor can not reacquire enjoyment of the immovable
until he has actually paid what he owes the creditor. 22

Applying the afore-cited principles to the case at bar,

petitioner cannot appropriate for his own exclusive

benefit the tolls which he collected from the property

retained by him. It was his duty under the law, after
deducting the necessary expenses for his
administration, to apply such amount collected to the
payment of the interest, and the balance to the
payment of the obligation.
We hold, therefore, that the disputed tolls, after
deducting petitioner's expenses for administration,
belong to Quirino Comintan, owner of the land
through which the toll road passed, further
considering that the same was on portions of the
property on which petitioner had not introduced any
improvement. The trial court itself clarified this matter
when it placed the toll road under receivership. The
omission of any mention of the tolls in the decision
itself may be attributed to the fact that the tolls appear
to have been collected after the rendition of the
judgment of the trial court.
The records further reveal that earnest efforts have
been made by private respondents to have the
judgment executed in the most practicable manner.
They deposited in court the amount of the judgment in
the sum of P13,632.00 in cash, subject only to the
accounting of the tolls collected by the petitioner so
that whatever is due from him may be set off with the
amount of reimbursement. This is just and proper
under the circumstances and, under the law,
compensation or set off may take place, either totally
or partially. Considering that petitioner is the creditor
with respect to the judgment obligation and the debtor
with respect to the tolls collected, Comintan being the
owner thereof, the trial court's order for an accounting
and compensation is in accord with law. 23
With respect to the amount of reimbursement to be
paid by Comintan, it appears that the dispositive
portion of the decision was lacking in specificity, as it
merely provided that Comintan and Zamora are jointly
liable therefor. When two persons are liable under a
contract or under a judgment, and no words appear in
the contract or judgment to make each liable for the
entire obligation, the presumption is that their
obligation is joint ormancomunada, and each debtor is
liable only for a proportionate part of the
obligation. 24 The judgment debt of P13,632.00 should,
therefore, be pro-rated in equal shares to Comintan and
Zamora.

Regarding Lot 5785-B, it appears that no public sale

has yet been conducted by the Bureau of Lands and,
therefore, petitioner is entitled to remain in possession
thereof. This is not disputed by respondent Eleuterio
Zamora. 25 After public sale is had and in the event that
Ortiz is not declared the successful bidder, then he
should be reimbursed by respondent Zamora in the
corresponding amount for the improvements on Lot
5785-B.

WHEREFORE, in view hereof, the Order of

respondent Court of November 18, 1970 is hereby
modified to conform to the foregoing judgment. The
Writ of Preliminary Injunction, dated January 29,
1971, is hereby dissolved. Without special
pronouncement as to costs.
G.R. No. L-25462 February 21, 1980
MARIANO FLOREZA, petitioner,
vs.
MARIA D. de EVANGELISTA and SERGIO
EVANGELISTA, respondents.
R.D. Hipolito & B. P. Fabir for petitioner.
E.G. Tanjuatco & Associates for respondents.

MELENCIO-HERRERA, J:
This is a Petition for Review on certiorari of the
Decision of the Court of Appeals (CA-G.R. No. 23516R) promulgated on November 4, 1965, entitled "Maria
de Evangelista and Sergio Evangelists, (now the
respondents) vs. Mariano Floreza (petitioner herein),"
reversing the judgment of the Court of First Instance
of Rizal rendered on July 17, 1957, and instead
ordering petitioner to vacate respondents' residential
lot, to remove his house at his own expenses and to
pay rental from May 5, 1956.
Plaintiffs Maria de Evangelista and Sergio
Evangelista, who are mother and son, (the
EVANGELISTAS, for short) are the owners of a
residential lot located at Sumilang St., Tanay, Rizal,
with an area of 204.08 sq. ms., assessed at P410.00.
In May 1945, the EVANGELISTAS borrowed from
FLOREZA the amount of P100.00. On or about
November 1945, with the consent of the
EVANGELISTAS, FLOREZA occupied the above
residential lot and built thereon a house of light
materials (barong- barong) without any agreement as
to payment for the use of said residential lot owing to
the fact that the EVANGELISTAS has then a standing
loan of P100.00 in favor of FLOREZA. 1
On the following dates, the EVANGELISTAS again
borrowed the indicated amounts: September 16, 1946
P100.00; 2 August 17, 1947 P200,00; 3 January
30, 1949 P200.00; 4 April 1, 1949 P140.00, 5 or a
total of P740.00 including the first loan. The last three
items are evidenced by private documents stating that
the residential lot stands as security therefor and that the
amounts covered thereunder are payable within six

years from date, without mention of interest. The

document executed on September 16, 1946 stated
specifically that the loan was without interest "walang
anumang patubo."

the transaction between the parties is one of

mortgage or pacto de retro is no longer material as
the indebtedness of P1,000.00 of the
EVANGELISTAS to FLOREZA had already been fully
paid. And, applying Article 448 of the Civil Code, 10 it

On January 10, 1949, FLOREZA demolished this

house of light materials and in its place constructed
one of strong materials assessed in his name at
P1,410.00 under Tax Declaration No. 4448.
FLOREZA paid no rental as before. 6

rendered a decision dispositively decreeing:

On August 1, 1949, the EVANGELISTAS, for and in

consideration of P1,000.00 representing the total
outstanding loan of P740.00 plus P260.00 in cash,
sold their residential lot to FLOREZA, with a right to
repurchase within a period of 6 years from date, or up
to August 1, 1955, as evidenced by a notarial
document, Exh. B, registered under Act 3344 on
December 6, 1949, as Inscription No. 2147. 7
On January 2, 1955, or seven months before the
expiry of the repurchase period, the EVANGELISTAS
paid in full the repurchase price of P1,000.00.
On April 25, 1956, the EVANGELISTAS, through their
counsel, wrote FLOREZA a letter 8 asking him to
vacate the premises as they wanted to make use of their
residential lot besides the fact that FLOREZA had
already been given by them more than one year within
which to move his house to another site. On May 4,
1956, the EVANGELISTAS made a formal written
demand to vacate, within five days from notice,
explaining that they had already fully paid the
consideration for the repurchase of the lot. 9 FLOREZA
refused to vacate unless he was first reimbursed the
value of his house. Hence, the filing of this Complaint on
May 18, 1956 by the EVANGELISTAS.

The EVANGELISTAS prayed that: 1) they be

declared the owners of the house of strong materials
built by FLOREZA on their residential lot, without
payment of indemnity; or, in the alternative to order
FLOREZA to remove said house; 2) that FLOREZA
pay them the sum of P10.00 per month as the
reasonable value for the use and occupation of the
same from January 2, 1955 (the date the repurchase
price was paid) until FLOREZA removes the house
and delivers the lot to them; and 3) to declare the
transaction between them and FLOREZA as one of
mortgage and not of pacto de retro.
In his Answer, FLOREZA admitted the repurchase but
controverted by stating that he would execute a deed
of repurchase and leave the premises upon payment
to him of the reasonable value of the house worth
P7,000.00.
In a Decision dated July 17, 1957, the Court of First
Instance of Rizal opined that the question of whether

FOR ALL THE FOREGOING

CONSIDERATIONS, the Court hereby
renders judgment granting the
plaintiffs the right to elect, as owners
of the land, to purchase the house
built, on the said lot in question by the
defendant for P2,500 or to sell their
said land to e defendant for P1,500. In
the event that the plaintiffs shall
decide not to purchase the house in
question the defendant should be
allowed to remain in plaintiffs'
premises by, paying a monthly rental
of P10.00 which is the reasonable
value for the use of the same per
month as alleged by plaintiffs in their
complaint. The Court also orders the
defendant to pay a monthly rental of
P10.00 for the use of the land in
question from May 18, 1956, the date
of the commencement of this action.
The counterclaim of the defendant is
hereby ordered dismissed. Without
pronouncement as to costs.
SO ORDERED. 11
Both parties appealed to the Court of Appeals.
On November 4, 1965, the Court of Appeals
concluded that Article 448 of the Civil Code, supra,
was inapplicable; that FLOREZA was not entitled to
reimbursement for his house but that he could remove
the same at his expense; and accordingly rendered
judgment thus:
WHEREFORE, judgment is hereby
rendered: (1) adjudging the defendantappellant Mariano Floreza to vacate
plaintiffs' residential lot described in
the complaint and to pay rental of
P10.00 a month from May 5, 1956,
until he (defendant) shall have
vacated the premises; (2) ordering
defendant to remove his house from
the land in question within 30 days
from the time this decision becomes
final and executory; (3) ordering the
Register of Deeds of Rizal to cancel
inscription No. 2147, Page 210, Vol.
36, in the Registration Book under Act

3344 upon payment of his lawful fees;

and (4) taxing the costs in both
instances against defendant-appellant
Mariano Floreza. 12
Hence, this Petition for Review on certiorari by
FLOREZA, seeking a reversal of the aforestated
judgment and ascribing the following errors:
1) That the Court of Appeals erred in
holding that petitioner Floreza was a
builder in bad faith without likewise
holding that respondents as owners of
the land in dispute, were likewise in
bad faith and therefore both parties
should in accordance with Art. 453 of
the New Civil Code be considered as
having acted in good faith.
2) That the Court of Appeals erred in
completely ignoring the issue raised
on appeal as to whether or not
respondents as owners of the
questioned lot, were in bad faith in the
sense that they had knowledge of and
acquiseced to the construction of the
house of petitioner on their lot.
3) That the Court of Appeals erred in
not applying Art. 448 of the New Civil
Code in the adjudication of the rights
of petitioner and respondent.
4) That the Court of Appeals erred in
declaring that petitioner is not entitled
to reimbursement for the value of his
house and that he should instead
remove the same at his expense.
5) That the Court of Appeals erred in
adjudging petitioner to vacate
respondents' lot in question and to pay
rentals commencing from May 5,
1956, until he shall have vacated the
premises, notwithstanding that
petitioner is entitled under Arts. 448
and 546 of the New Civil Code, to
retention without payment of rental
while the corresponding indemnity of
his house had not been paid.
6) That the Court of Appeals erred in
taxing costs against petitioner.
7) That the Court of Appeals erred in
not awarding petitioner's counterclaim.

During the pendency of this appeal, petitioner Maria

D. de Evangelista died and was ordered substituted
by her son, petitioner Sergio, as her legal
representative, in a Resolution dated May 14, 1976.
On October 20, 1978. the EVANGELISTAS filed a
Motion to Dismiss stating that FLOREZA had since
died and that his heirs had voluntarily vacated the
residential lot in question. The date FLOREZA passed
away and the date his heirs had voluntarily vacated
the property has not been stated. Required to
comment, "petitioner (represented by his heirs)",
through counsel, confirmed his death and the removal
of the house and manifested that thereby the question
of reimbursement had moot and academic. He
objected to the dismissal of the case, however, on the
ground that the issue of rentals still pends. On
January 21, 1980, complying with a Resolution of 'his
Court, the EVANGELISTAS clarified that the
dismissal they were praying for was not of the entire
case but only of this Petition for Review on Certiorari.
We are not in agreement that the question of
reimbursement of the value of the improvement
erected on the subject property has become moot.
Petitioner's right of retention of subject property until
he is reimbursed for the value of his house, as he had
demanded, is inextricably linked with the question of
rentals. For if petitioner has the right to indemnity, he
has the right of retention and no rentals need be paid.
Conversely, if no right of retention exists, damages in
the form of rentals for the continued use and
occupation of the property should be allowed.
We uphold the Court of Appeals in its conclusion that
Article 448 of the Civil Code is inapplicable to the
factual milieu herein. Said codal provision applies only
when the builder, planter, or sower believes he had
the right so to build, plant or sow because he thinks
he owns the land or believes himself to have a claim
of title. 13 In this case, petitioner makes no pretensions
of ownership whatsoever.

Petitioner concedes that he was a builder in bad faith

but maintains that' the EVANGELISTAS should also
be held in bad faith, so that both of them being in bad
faith, Article 453 of the Civil Code 14 should apply. By
the same token, however, that Article 448 of the same
Code is not applicable, neither is Article 453 under the
ambiance of this case.

Would petitioner, as vendee a retro, then be entitled

to the rights grant
ed iii Article 1616 of the Civil Code (Art. 1518 of the
old Code)? To quote:

Art. 1616. The vendor cannot avail

himself of the right of repurchase
without returning to the vendee the
price of the sale, and in addition:

ordered substituted for him, shall commence on

January 3, 1955 until the date that the residential lot
in question was vacated.
Costs against petitioner.

(1) The expenses of the contract, and

any other legitimate payments made
by reason of the sale;
(2) The necessary and useful
expenses made on the thing sold.
The question again calls for a negative answer. It
should be noted that petitioner did not construct his
house as a vendee a retro. The house had already
been constructed as far back as 1949 (1945 for the
house of light materials) even before the pacto de
retro sale in 1949. Petitioner incurred no useful
expense, therefore, after that sale. The house was
already there at the tolerance of the EVANGELISTAS
in consideration of the several loans extended to
them. Since petitioner cannot be classified as a
builder in good faith within the purview of Article 448
of the Civil Code, nor as a vendee a retro, who made
useful improvements during the lifetime of thepacto
de retro, petitioner has no right to reimbursement of
the value of the house which he had erected on the
residential lot of the EVANGELISTAS, much less to
retention of the premises until he is reimbursed.The
rights of petitioner are more akin to those of a
usufructuary who, under Article 579 of the Civil (Art.
487 of the old Code), may make on the property
useful improvements but with no right to be
indemnified therefor. He may, however, remove such
improvements should it be possible to do so without
damage to the property: For if the improvements
made by the usufructuary were subject to indemnity,
we would have a dangerous and unjust situation in
which the usufructuary could dispose of the owner's
funds by compelling him to pay for improvements
which perhaps he would not have made. 15
We come now to the issue of rentals. It is clear that
from the date that the redemption price had been paid
by the EVANGELISTAS on January 2, 1955,
petitioner's right to the use of the residential lot
without charge had ceased. Having retained the
property although a redemption had been made, he
should be held liable for damages in the form of
rentals for the continued use of the subject residential
lot 16 at the rate of P10.00 monthly from January 3, 1955,
and not merely from the date of demand on May 4,
1956, as held by the Court of Appeals, until the house
was removed and the property vacated by petitioner or
his heirs.

WHEREFORE, the judgment appealed from is hereby

affirmed, with the modification that payment of rentals
by the heir, of Mariano Floreza, who are hereby

SO ORDERED.

SPOUSES CONCEPCION FERNANDEZ DEL

CAMPO and ESTANISLAO DEL
CANTO, plaintiffs-appellees,
vs.
BERNARDA FERNANDEZ ABESIA, defendantappellant.
Geronimo Creer, Jr. for plaintiffs-appellees.
Benedicto G. Cobarde for defendant, defendantappellant

GANCAYCO, J.:
In this appeal from the decision of the Court of First
Instance (CFI) of Cebu, certified to this Court by the
Court of Appeals on account of the question of law
involved, the sole issue is the applicability of the
provisions of Article 448 of the Civil Code relating to a
builder in good faith when the property involved is
owned in common.
This case involves a parcel of land, Lot No. 1161 of
the Cadastral Survey of Cebu, with an area of only
about 45 square meters, situated at the corner of F.
Flores and Cavan Streets, Cebu City covered by TCT
No. 61850. An action for partition was filed by
plaintiffs in the CFI of Cebu. Plaintiffs and defendants
are co-owners pro indiviso of this lot in the proportion
of and 1/3 share each, respectively. The trial court
appointed a commissioner in accordance with the
agreement of the parties. ,the Id commissioner
conducted a survey, prepared a sketch plan and
submitted a report to the trial court on May 29, 1976,
recommending that the property be divided into two
lots: Lot 1161-A with an area of 30 square meters for
plaintiffs and Lot No. 1161-B with an area of 15
square meters for the defendants. The houses of
plaintiffs and defendants were surveyed and shown
on the sketch plan. The house of defendants
occupied the portion with an area of 5 square meters
of Lot 1161-A of plaintiffs. The parties manifested
their conformity to the report and asked the trial court
to finally settle and adjudicate who among the parties
should take possession of the 5 square meters of the
land in question.

In solving the issue the trial court held as follows:

The Court believed that the plaintiffs
cannot be obliged to pay for the value
of the portion of the defendants' house
which has encroached an area of five
(5) sq. meters of the land alloted to
them. The defendants cannot also be
obliged to pay for the price of the said
five (5) square meters. The rights of a
builder in good faith under Article 448
of the New Civil Code does (sic) not
apply to a case where one co-owner
has built, planted or sown on the land
owned in common. "Manresa agreeing
with Sanchez Roman, says that as a
general rule this article is not
applicable because the matter should
be governed more by the provisions
on co-ownership than on accession.
Planiol and Ripert are also of the
opinion that this article is not
applicable to a co-owner who
constructs, plants or sows on the
community property, even if the land
where the construction, planting or
sowing is made is a third person under
the circumstances, and the situation is
governed by the rules of coownership. Our Court of Appeals has
held that this article cannot be invoked
by one co-owner against another who
builds, plants or sows upon their land,
since the latter does not do so on land
not belonging to him. (C.A.), O.G.
Supp., Aug. 30, 194, p. 126). In the
light of the foregoing authorities and
considering that the defendants have
expressed their conformity to the
partition that was made by the
commissioner as shown in the sketch
plan attached to the commissioner's
report, said defendants have no other
alternative except to remove and
demolish part of their house that has
encroached an area of five (5) sq.
meters of the land allotted to the
plaintiffs.
WHEREFORE, judgment is hereby
rendered assigning Lot 1161-A with an
area of thirty (30) sq. meters to the
plaintiffs spouses Concepcion
Fernandez Abesia, Lourdes
Fernandez Rodil, Genaro Fernandez
and Dominga A. Fernandez, in the
respective metes and bounds as
shown in the subdivision sketch plan
attached to the Commissioner's

Report dated may 29, 1976 prepared

by the Commissioner, Geodetic
Engineer Espiritu Bunagan. Further,
the defendants are hereby ordered at
their expense to remove and demolish
part of their house which has
encroached an area of five (5) square
meters from Lot 1161-A of the
plaintiffs; within sixty (60) days from
date hereof and to deliver the
possession of the same to the
plaintiffs. For the Commissioner's fee
of P400.00, the defendants are
ordered to pay, jointly and severally,
the sum of P133.33 and the balance
thereof to be paid by the plaintiffs. The
costs of suit shall be paid by the
plaintiffs and the defendants in the
proportion of two-thirds (2/3) and onethird (1/3) shares respectively. A
certified copy of this judgment shall be
recorded in the office of the Register
of Deeds of the City of Cebu and the
expense of such recording shall be
taxed as a part of the costs of the
action.
Hence, this appeal interposed by the defendants with
the following assignments of errors:
I
THE TRIAL COURT ERRED IN NOT
APPLYING THE RIGHTS OF A
BUILDER IN GOOD FAITH UNDER
ART. 448 OF THE NEW CIVIL CODE
TO DEFENDANTS-APPELLANTS
WITH RESPECT TO THAT PART OF
THEIR HOUSE OCCUPYING A
PROTION OF THE LOT ASSIGNED
TO PLAINTIFFS-APPELLEES.
II
THE TRIAL COURT ERRED IN
ORDERING DEFENDANTSAPPELLANTS TO REMOVE AND
DEMOLISH AT THEIR EXPENSE,
THAT PART OF THEIR HOUSE
WHICH HAS ENCROACHED ON AN
AREA OF FIVE SQUARE METERS
OF LOT 1161-A OF PLAINTIFFSAPPELLEES.
Article 448 of the New Civil Code provides as follows:
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.
The court a quo correctly held that Article 448 of the
Civil Code cannot apply where a co-owner builds,
plants or sows on the land owned in common for then
he did not build, plant or sow upon land that
exclusively belongs to another but of which he is a coowner. The co-owner is not a third person under the
circumstances, and the situation is governed by the
rules of co-ownership. 1
However, when, as in this case, the co-ownership is
terminated by the partition and it appears that the
house of defendants overlaps or occupies a portion of
5 square meters of the land pertaining to plaintiffs
which the defendants obviously built in good faith,
then the provisions of Article 448 of the new Civil
Code should apply. Manresa and Navarro Amandi
agree that the said provision of the Civil Code may
apply even when there was co-ownership if good faith
has been established. 2
Applying the aforesaid provision of the Civil Code, the
plaintiffs have the right to appropriate said portion of
the house of defendants upon payment of indemnity
to defendants as provided for in Article 546 of the Civil
Code. Otherwise, the plaintiffs may oblige the
defendants to pay the price of the land occupied by
their house. However, if the price asked for is
considerably much more than the value of the portion
of the house of defendants built thereon, then the
latter cannot be obliged to buy the land. The
defendants shall then pay the reasonable rent to the
plaintiff upon such terms and conditions that they may
agree. In case of disagreement, the trial court shall fix
the terms thereof. Of course, defendants may
demolish or remove the said portion of their house, at
their own expense, if they so decide.

WHEREFORE, the decision appealed from is hereby

MODIFIED by ordering plaintiff to indemnify
defendants for the value of the Id portion of the house
of defendants in accordance with Article 546 of the
Civil Code, if plaintiffs elect to appropriate the same.
Otherwise, the defendants shall pay the value of the 5
square meters of land occupied by their house at
such price as may be agreed upon with plaintiffs and
if its value exceeds the portion of the house that
defendants built thereon, the defendants may choose
not to buy the land but defendants must pay a
reasonable rental for the use of the portion of the land
of plaintiffs As may be agreed upon between the
parties. In case of disagreement, the rate of rental
shall be determined by the trial court. Otherwise,
defendants may remove or demolish at their own
expense the said portion of their house. No costs.
SO ORDERED.
G.R. No. 72876 January 18, 1991
FLORENCIO IGNAO, petitioner,
vs.
HON. INTERMEDIATE APPELLATE COURT, JUAN
IGNAO, substituted by his Legal Heirs, and
ISIDRO IGNAO, respondents.
Dolorfino and Dominguez Law Offices for petitioner.
Ambrosio Padilla, Mempin & Reyes Law Offices for
private respondents.

FERNAN, C.J.:p
In this petition for review by certiorari, petitioner seeks
the reversal of the decision of the Intermediate
Appellate Court (now Court of Appeals) affirming in
toto the decision of the Court of First Instance of
Cavite, ordering petitioner Florencio Ignao to sell to
private respondents Juan and Isidro Ignao, that part
of his property where private respondents had built a
portion of their houses.
The antecedent facts are as follows:
Petitioner Florencio Ignao and his uncles private
respondents Juan Ignao and Isidro Ignao were coowners of a parcel of land with an area of 534 square
meters situated in Barrio Tabon, Municipality of Kawit,
Cavite. Pursuant to an action for partition filed by
petitioner docketed as Civil Case No. N-1681, the
then Court of First Instance of Cavite in a decision
dated February 6, 1975 directed the partition of the
aforesaid land, alloting 133.5 square meters or 2/8
thereof to private respondents Juan and Isidro, and

giving the remaining portion with a total area of 266.5

square meters to petitioner Florencio. However, no
actual partition was ever effected. 1
On July 17, 1978, petitioner instituted a complaint for
recovery of possession of real property against
private respondents Juan and Isidro before the Court
of First Instance of Cavite, docketed as Civil Case No.
2662. In his complaint petitioner alleged that the area
occupied by the two (2) houses built by private
respondents exceeded the 133.5 square meters
previously alloted to them by the trial court in Civil
Case No. N-1681.

Appeals, 4 where the Supreme Court had advanced a

more "workable solution". Thus, it ordered Florencio to
sell to Juan and Isidro those portions of his land
respectively occupied by the latter. The dispositive
portion of said decision reads as follows:

WHEREFORE, judgment is hereby

rendered in favor of the defendants
and
(a) Ordering the plaintiff Florencio
Ignao to sell to the defendants Juan
and Isidro Ignao that portion of his
property with an area of 101 square
meters at P40.00 per square meter,
on which part the defendants had built
their houses; and

Consequently, the lower court conducted an ocular

inspection. It was found that the houses of Juan and
Isidro actually encroached upon a portion of the land
belonging to Florencio. Upon agreement of the
parties, the trial court ordered a licensed geodetic
engineer to conduct a survey to determine the exact
area occupied by the houses of private respondents.
The survey subsequently disclosed that the house of
Juan occupied 42 square meters while that of Isidro
occupied 59 square meters of Florencio's land or a
total of 101 square meters.
In its decision, the trial court (thru Judge Luis L.
Victor) ruled that although private respondents
occupied a portion of Florencio's property, they should
be considered builders in good faith. The trial court
took into account the decision of the Court of First
Instance of Cavite in the action for partition 2 and
quoted:

. . . . Hence, it is the well-considered

opinion of the Court that although it
turned out that the defendants had,
before partition, been in possession of
more than what rightfully belongs to
them,their possession of what is in
excess of their rightful share can at
worst be possession in good faith
which exempts them from being
condemned to pay damages by
reason thereof. 3
Furthermore, the trial court stated that pursuant to
Article 448 of the Civil Code, the owner of the land
(Florencio) should have the choice to either
appropriate that part of the house standing on his land
after payment of indemnity or oblige the builders in
good faith (Juan and Isidro) to pay the price of the
land. However, the trial court observed that based on
the facts of the case, it would be useless and
unsuitable for Florencio to exercise the first option
since this would render the entire houses of Juan and
Isidro worthless. The trial court then applied the ruling
in the similar case of Grana vs. Court of

(b) Ordering the said plaintiff to

execute the necessary deed of
conveyance to the defendants in
accordance with paragraph (a) hereof.
Without pronouncement as to costs. 5
Petitioner Florencio Ignao appealed to the
Intermediate Appellate Court. On August 27, 1985,
the Appellate Court, Second Civil Cases Division,
promulgated a decision, 6 affirming the decision of the
trial court.

Hence the instant petition for review which attributes

to the Appellate Court the following errors:
1. That the respondent Court has
considered private respondents
builders in good faith on the land on
question, thus applying Art. 448 of the
Civil Code, although the land in
question is still owned by the parties in
co-ownership, hence, the applicable
provision is Art. 486 of the Civil Code,
which was not applied.
2. That, granting for the sake of
argument that Art. 448 . . . is
applicable, the respondent Court has
adjudged the working solution
suggested in Grana and Torralba vs.
CA. (109 Phil. 260), which is just an
opinion by way of passing, and not the
judgment rendered therein, which is in
accordance with the said provision of
the Civil Code, wherein the owner of
the land to buy (sic) the portion of the
building within 30 days from the
judgment or sell the land occupied by
the building.

3. That, granting that private

respondents could buy the portion of
the land occupied by their houses, the
price fixed by the court is unrealistic
and pre-war price. 7

dispute used to be owned in common by the

contending parties.
Article 448 provides:

The records of the case reveal that the disputed land

with an area of 534 square meters was originally
owned by Baltazar Ignao who married twice. In his
first marriage, he had four children, namely Justo (the
father of petitioner Florencio), Leon and private
respondents Juan and Isidro. In his second marriage,
Baltazar had also four children but the latter waived
their rights over the controverted land in favor of
Justo. Thus, Justo owned 4/8 of the land which was
waived by his half-brothers and sisters plus his 1/8
share or a total of 5/8. Thereafter, Justo acquired the
1/8 share of Leon for P500.00 which he later sold to
his son Florencio for the same amount. When Justo
died, Florencio inherited the 5/8 share of his father
Justo plus his 1/8 share of the land which he bought
or a total of 6/8 (representing 400.5 square meters).
Private respondents, Juan and Isidro, on the other
hand, had 1/8 share (66.75 square meters) each of
the land or a total of 133.5 square meters.

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.

Before the decision in the partition case was

promulgated, Florencio sold 134 square meters of his
share to a certain Victa for P5,000.00 on January 27,
1975. When the decision was handed down on
February 6,1975, the lower court alloted 2/8 of the
land to private respondents Juan and Isidro, or a total
of 133.5 square meters.

Whether or not the provisions of Article 448 should

apply to a builder in good faith on a property held in
common has been resolved in the affirmative in the
case of Spouses del Campo vs. Abesia, 10 wherein the

It should be noted that prior to partition, all the coowners hold the property in common dominion but at
the same time each is an owner of a share which is
abstract and undetermined until partition is effected.
As cited inEusebio vs. Intermediate Appellate
Court, 8 "an undivided estate is co-ownership by the
heirs."

As co-owners, the parties may have unequal shares

in the common property, quantitatively speaking. But
in a qualitative sense, each co-owner has the same
right as any one of the other co-owners. Every coowner is therefore the owner of the whole, and over
the whole he exercises the right of dominion, but he is
at the same time the owner of a portion which is truly
abstract, because until division is effected such
portion is not concretely determined. 9
Petitioner Florencio, in his first assignment of error,
asseverates that the court a quo erred in applying
Article 448 of the Civil Code, since this article
contemplates a situation wherein the land belongs to
one person and the thing built, sown or planted
belongs to another. In the instant case, the land in

Court ruled that:

The court a quo correctly held that

Article 448 of the Civil Code cannot
apply where a co-owner builds, plants
or sows on the land owned in common
for then he did not build, plant or sow
upon land that exclusively belongs to
another but of which he is a co-owner.
The co-owner is not a third person
under the circumstances, and the
situation is governed by the rules of
co-ownership.
However, when, as in this case, the
ownership is terminated by the
partition and it appears that the home
of defendants overlaps or occupies a
portion of 5 square meters of the land
pertaining to plaintiffs which the
defendants obviously built in good
faith, then the provisions of Article 448
of the new Civil Code should apply.
Manresa and Navarro Amandi agree
that the said provision of the Civil
Code may apply even when there is a

co-ownership if good faith has been

established. 11

SO ORDERED.
G.R. No. 115814 May 26, 1995

In other words, when the co-ownership is terminated

by a partition and it appears that the house of an
erstwhile co-owner has encroached upon a portion
pertaining to another co-owner which was however
made in good faith, then the provisions of Article 448
should apply to determine the respective rights of the
parties.
Petitioner's second assigned error is however well
taken. Both the trial court and the Appellate Court
erred when they peremptorily adopted the "workable
solution" in the case of Grana vs. Court of
appeals, 12 and ordered the owner of the land, petitioner
Florencio, to sell to private respondents, Juan and Isidro,
the part of the land they intruded upon, thereby depriving
petitioner of his right to choose. Such ruling contravened
the explicit provisions of Article 448 to the effect that
"(t)he owner of the land . . . shall have the right to
appropriate . . .or to oblige the one who built . . . to pay
the price of the land . . . ." The law is clear and
unambiguous when it confers the right of choice upon
the landowner and not upon the builder and the courts.

Thus, in Quemuel vs. Olaes, 13 the Court categorically

ruled that the right to appropriate the works or
improvements or to oblige the builder to pay the price of
the land belongs to the landowner.

As to the third assignment of error, the question on

the price to be paid on the land need not be
discussed as this would be premature inasmuch as
petitioner Florencio has yet to exercise his option as
the owner of the land.
WHEREFORE, the decision appealed from is hereby
MODIFIED as follows: Petitioner Florencio Ignao is
directed within thirty (30) days from entry of judgment
to exercise his option to either appropriate as his own
the portions of the houses of Juan and Isidro Ignao
occupying his land upon payment of indemnity in
accordance with Articles 546 and 548 of the Civil
Code, or sell to private respondents the 101 square
meters occupied by them at such price as may be
agreed upon. Should the value of the land exceed the
value of the portions of the houses that private
respondents have erected thereon, private
respondents may choose not to buy the land but they
must pay reasonable rent for the use of the portion of
petitioner's land as may be agreed upon by the
parties. In case of disagreement, the rate of rental
and other terms of the lease shall be determined by
the trial court. Otherwise, private respondents may
remove or demolish at their own expense the said
portions of their houses encroaching upon petitioner's
land. 14 No costs.

PEDRO P. PECSON, petitioner,

vs.
COURT OF APPEALS, SPOUSES JUAN NUGUID
and ERLINDA NUGUID, respondents.

DAVIDE, JR., J.:

This petition for review on certiorari seeks to set aside
the decision 1 of the Court of Appeals in CA-G.R. SP No.
32679 affirming in part the order 2 of the Regional Trial
Court (RTC) of Quezon City, Branch 101, in Civil Case
No. Q-41470.

The factual and procedural antecedents of this case

as gathered from the record are as follows:
Petitioner Pedro P. Pecson was the owner of a
commercial lot located in Kamias Street, Quezon City,
on which he built a four-door two-storey apartment
building. For his failure to pay realty taxes amounting
to twelve thousand pesos (P12,000.00), the lot was
sold at public auction by the city Treasurer of Quezon
City to Mamerto Nepomuceno who in turn sold it on
12 October 1983 to the private respondents, the
spouses Juan Nuguid and Erlinda Tan-Nuguid, for
one hundred three thousand pesos (P103,000.00).
The petitioner challenged the validity of the auction
sale in Civil Case No. Q-41470 before the RTC of
Quezon City. In its decision of 8 February 1989, the
RTC dismissed the complaint, but as to the private
respondents' claim that the sale included the
apartment building, it held that the issue concerning it
was "not a subject of the . . . litigation." In resolving
the private respondents' motion to reconsider this
issue, the trial court held that there was no legal basis
for the contention that the apartment building was
included in the sale. 3
Both parties then appealed the decision to the Court
of Appeals. The case was docketed as CA-G.R. CV
No. 2931. In its decision of 30 April 1992, 4 the Court of
Appeals affirmed in toto the assailed decision. It also
agreed with the trial court that the apartment building
was not included in the auction sale of the commercial
lot. Thus:

Indeed, examining the record we are

fully convinced that it was only the
land without the apartment building
which was sold at the auction sale,
for plaintiff's failure to pay the taxes

due thereon. Thus, in the Certificate of

Sale of Delinquent Property To
Purchaser (Exh. K, p. 352, Record)
the property subject of the auction
sale at which Mamerto Nepomuceno
was the purchaser is referred to as Lot
No. 21-A, Block No. K-34, at Kamias,
Barangay Piahan, with an area of
256.3 sq. m., with no mention
whatsoever, of the building thereon.
The same description of the subject
property appears in the Final Notice
To Exercise The Right of Redemption
(over subject property) dated
September 14, 1981 (Exh. L, p. 353,
Record) and in the Final Bill of Sale
over the same property dated April 19,
1982 (Exh. P, p. 357, Record).
Needless to say, as it was only the
land without any building which
Nepomuceno had acquired at the
auction sale, it was also only that land
without any building which he could
have legally sold to the
Nuguids. Verily, in the Deed of
Absolute Sale of Registered Land
executed by Mamerto Nepomuceno in
favor of the Nuguids on October 25,
1983 (Exh. U, p. 366, Record) it
clearly appears that the property
subject of the sale for P103,000.00
was only the parcel of land, Lot 21-A,
Blk. K-34 containing an area of 256.3
sq. meters, without any mention of any
improvement, much less any building
thereon. (emphases supplied)
The petition to review the said decision was
subsequently denied by this Court. 5 Entry of judgment
was made on 23 June 1993. 6

On November 1993, the private respondents filed with

the trial court a motion for delivery of possession of
the lot and the apartment building, citing article 546 of
the Civil Code. 7 Acting thereon, the trial court issued on
15 November 1993 the challenged order 8 which reads
as follows:

Submitted for resolution before this

Court is an uncontroverted [sic] for the
Delivery of Possession filed by
defendants Erlinda Tan, Juan Nuguid,
et al. considering that despite personal
service of the Order for plaintiff to file
within five (5) days his opposition to
said motion, he did not file any.

In support of defendant's motion,

movant cites the law in point as Article
546 of the Civil Code . . .
Movant agrees to comply with the
provisions of the law considering that
plaintiff is a builder in good faith and
he has in fact, opted to pay the cost of
the construction spent by plaintiff.
From the complaint itself the plaintiff
stated that the construction cost of the
apartment is much more than the lot,
which apartment he constructed at a
cost of P53,000.00 in 1965 (par. 8
complaint). This amount of
P53,000.00 is what the movant is
supposed to pay under the law before
a writ of possession placing him in
possession of both the lot and
apartment would be issued.
However, the complaint alleges in
paragraph 9 that three doors of the
apartment are being leased. This is
further confirmed by the affidavit of the
movant presented in support of the
motion that said three doors are being
leased at a rental of P7,000.00 a
month each. The movant further
alleges in his said affidavit that the
present commercial value of the lot is
P10,000.00 per square meter or
P2,500,000.00 and the reasonable
rental value of said lot is no less than
P21,000.00 per month.
The decision having become final as
per Entry of Judgment dated June 23,
1993 and from this date on, being the
uncontested owner of the property, the
rents should be paid to him instead of
the plaintiff collecting them. From June
23, 1993, the rents collected by
plaintiff amounting to more than
P53,000.00 from tenants should be
offset from the rents due to the lot
which according to movant's affidavit
is more than P21,000.00 a month.
WHEREFORE, finding merit in the
Motion, the Court hereby grants the
following prayer that:
1. The movant shall
reimburse plaintiff the
construction cost of
P53,000.00.

2. The payment of
P53,000.00 as
reimbursement for the
construction cost,
movant Juan Nuguid is
hereby entitled to
immediate issuance of
a writ of possession
over the Lot and
improvements thereon.
3. The movant having
been declared as the
uncontested owner of
the Lot in question as
per Entry of Judgment
of the Supreme Court
dated June 23, 1993,
the plaintiff should pay
rent to the movant of
no less than
P21,000.00 per month
from said date as this
is the very same
amount paid monthly
by the tenants
occupying the lot.
4. The amount of
P53,000.00 due from
the movant is hereby
offset against the
amount of rents
collected by the
plaintiff from June 23,
1993, to September
23, 1993.
SO ORDERED.
The petitioner moved for the reconsideration of the
order but it was not acted upon by the trial court.
Instead, on 18 November 1993, it issued a writ of
possession directing the deputy sheriff "to place said
movant Juan Nuguid in possession of subject
property located at No. 79 Kamias Road, Quezon
City, with all the improvements thereon and to eject
therefrom all occupants therein, their agents,
assignees, heirs and representatives." 9
The petitioner then filed with the Court of Appeals a
special civil action for certiorari and prohibition
assailing the order of 15 November 1993, which was
docketed as CA-G.R. SP No. 32679. 10 In its decision
of 7 June 1994, the Court of Appeals affirmed in part the
order of the trial court citing Article 448 of the Civil Code.
In disposing of the issues, it stated:

As earlier pointed out, private

respondent opted to appropriate the
improvement introduced by petitioner
on the subject lot, giving rise to the
right of petitioner to be reimbursed of
the cost of constructing said
apartment building, in accordance with
Article 546 of the . . . Civil Code, and
of the right to retain the improvements
until he is reimbursed of the cost of
the improvements, because, basically,
the right to retain the improvement
while the corresponding indemnity is
not paid implies the tenancy or
possession in fact of the land on which
they are built . . . [2 TOLENTINO,
CIVIL CODE OF THE PHILIPPINES
(1992) p. 112]. With the facts extant
and the settled principle as guides, we
agree with petitioner that respondent
judge erred in ordering that "the
movant having been declared as the
uncontested owner of the lot in
question as per Entry of Judgment of
the Supreme Court dated June 23,
1993, the plaintiff should pay rent to
the movant of no less than P21,000
per month from said date as this is the
very same amount paid monthly by
the tenants occupying the lot.
We, however, agree with the finding of
respondent judge that the amount of
P53,000.00 earlier admitted as the
cost of constructing the apartment
building can be offset from the amount
of rents collected by petitioner from
June 23, 1993 up to September 23,
1993 which was fixed at P7,000.00
per month for each of the three doors.
Our underlying reason is that during
the period of retention, petitioner as
such possessor and receiving the
fruits from the property, is obliged to
account for such fruits, so that the
amount thereof may be deducted from
the amount of indemnity to be paid to
him by the owner of the land, in line
with Mendoza vs. De Guzman, 52
Phil. 164 . . . .
The Court of Appeals then ruled as follows:
WHEREFORE, while it appears that
private respondents have not yet
indemnified petitioner with the cost of
the improvements, since Annex I
shows that the Deputy Sheriff has
enforced the Writ of Possession and

the premises have been turned over to

the possession of private respondents,
the quest of petitioner that he be
restored in possession of the premises
is rendered moot and academic,
although it is but fair and just that
private respondents pay petitioner the
construction cost of P53,000.00; and
that petitioner be ordered to account
for any and all fruits of the
improvements received by him starting
on June 23, 1993, with the amount of
P53,000.00 to be offset therefrom.
IT IS SO ORDERED.
G.R. No. L-62943 July 14, 1986
METROPOLITAN WATERWORKS AND
SEWERAGE SYSTEM, petitioner,
vs.
COURT OF APPEALS (Now INTERMEDIATE
APPELLATE COURT) and THE PHILIPPINE
NATIONAL BANK,respondents.
Juan J. Diaz and Cesar T. Basa for respondent PNB.
San Juan, Africa, Gonzales & San Agustin Law
Offices for respondent PCIB.

GUTIERREZ, JR., J.:

This petition for review asks us to set aside the
October 29, 1982 decision of the respondent Court of
Appeals, now Intermediate Appellate Court which
reversed the decision of the Court of First Instance of
Manila, Branch XL, and dismissed the plaintiff's
complaint, the third party complaint, as well as the
defendant's counterclaim.
The background facts which led to the filing of the
instant petition are summarized in the decision of the
respondent Court of Appeals:
Metropolitan Waterworks and
Sewerage System (hereinafter
referred to as MWSS) is a government
owned and controlled corporation
created under Republic Act No. 6234
as the successor-in- interest of the
defunct NWSA. The Philippine
National Bank (PNB for short), on the
other hand, is the depository bank of
MWSS and its predecessor-in-interest
NWSA. Among the several accounts
of NWSA with PNB is NWSA Account

No. 6, otherwise known as Account

No. 381-777 and which is presently
allocated No. 010-500281. The
authorized signature for said Account
No. 6 were those of MWSS treasurer
Jose Sanchez, its auditor Pedro
Aguilar, and its acting General
Manager Victor L. Recio. Their
respective specimen signatures were
submitted by the MWSS to and on file
with the PNB. By special arrangement
with the PNB, the MWSS used
personalized checks in drawing from
this account. These checks were
printed for MWSS by its printer, F.
Mesina Enterprises, located at 1775
Rizal Extension, Caloocan City.
During the months of March, April and
May 1969, twenty-three (23) checks
were prepared, processed, issued and
released by NWSA, all of which were
paid and cleared by PNB and debited
by PNB against NWSA Account No. 6,
to wit:
Check No. Date Payee Amount Date
Paid
By PNB
1. 59546 8-21-69 Deogracias P
3,187.79 4-2-69
Estrella
2. 59548 3-31-69 Natividad 2,848.86
4-23 69
Rosario
3. 59547 3-31-69 Pangilinan 195.00
Unreleased
Enterprises
4. 59549 3-31-69 Natividad 3,239.88
4-23-69
Rosario
5. 59552 4-1-69 Villarama 987.59 5-669
& Sons

6. 59554 4-1-69 Gascom 6,057.60 416 69

18. 59587 4-8-69 Delfin 120,000.00 411-69

Engineering

Santiago

7. 59558 4-2-69 The Evening 112.00

Unreleased

19. 59589 4-10-69 Deogracias

1,257.49 4-16 69

News

Estrella

8. 59544 3-27-69 Progressive

18,391.20 4-18 69

20. 59594 4-14-69 Philam Ac- 33.03

4-29 69

Const.

cident Inc.

9. 59564 4-2-69 Ind. Insp. 594.06 4-18

69

21. 59577 4-8-69 Esla 9,429.78 4-29

69

Int. Inc.

22. 59601 4-16-69 Justino 20,000.00

4-18-69

10. 59568 4-7-69 Roberto 800.00 422-69

Marsan
11. 59570 4-7-69 Paz Andres 200.00
4-22-69
12. 59574 4-8-69 Florentino
100,000.00 4-11-69
Santos
13. 59578 4-8-69 Mla. Daily 95.00
Unreleased
Bulletin
14. 59580 4-8-69 Phil. Herald 100.00
5-9-69

Torres
23. 59595 4-14-69 Neris Phil.
4,274.00 5-20-69
Inc. -------------------P 320,636.26
During the same months of March,
April and May 1969, twenty-three (23)
checks bearing the same numbers as
the aforementioned NWSA checks
were likewise paid and cleared by
PNB and debited against NWSA
Account No. 6, to wit:
Check Date Payee Amount Date Paid
No. Issued By PNB

15. 59582 4-8-69 Galauran 7,729.09

5-6-69

1. 59546 3-6-69 Raul Dizon P

84,401.00 3-16-69

& Pilar
16. 59581 4-8-69 Manila 110.00 5-12
69

2. 59548 3-11-69 Raul Dizon

104,790.00 4-1-69

Chronicle

3. 59547 3-14-69 Arturo Sison

56,903.00 4-11-69

17. 59588 4-8-69 Treago 21,583.00 411 69

4. 59549 3-20-69 Arturo Sison

48,903.00 4-15-69

Tunnel

5. 59552 3-24-69 Arturo Sison

63,845.00 4-16-69

6. 59544 3-26-69 Arturo Sison

98,450.00 4-17-69

23.59595 4-28-69 Arturo Sison

190,800.00 5-21-69

7. 59558 3-28-69 Arturo Sison

114,840.00 4-21-69

--------------P3,457,903.00

8. 59544 3-16-69 Antonio 38,490.00

4-22-69 Mendoza
9. 59564 3-31-69 Arturo Sison
180,900.00 4-23-69
10.59568 4-2-69 Arturo Sison
134,940.00 4- 5-69
11.59570 4-1-69 Arturo Sison
64,550.00 4-28-69
12.59574 4-2-69 Arturo Sison
148,610.00 4-29-69
13.59578 4-10-69 Antonio 93,950.00
4-29-69
Mendoza
14.59580 4-8-69 Arturo Sison
160,000.00 5-2-69
15.59582 4-10-69 Arturo Sison
155,400.00 5-5-69
16.59581 4-8-69 Antonio 176,580.00
5-6-69
Mendoza
17.59588 4-16-69 Arturo Sison
176,000.00 5-8-69
18.59587 4-16-69 Arturo Sison
300,000.00 5-12-69
19.59589 4-18-69 Arturo Sison
122,000.00 5-14-69
20.59594 4-18-69 Arturo Sison
280,000.00 5-15-69
21.59577 4-14-69 Antonio 260,000.00
5-16-69

The foregoing checks were deposited

by the payees Raul Dizon, Arturo
Sison and Antonio Mendoza in their
respective current accounts with the
Philippine Commercial and Industrial
Bank (PCIB) and Philippine Bank of
Commerce (PBC) in the months of
March, April and May 1969. Thru the
Central Bank Clearing, these checks
were presented for payment by PBC
and PCIB to the defendant PNB, and
paid, also in the months of March,
April and May 1969. At the time of
their presentation to PNB these
checks bear the standard indorsement
which reads 'all prior indorsement
and/or lack of endorsement
guaranteed.'
Subsequent investigation however,
conducted by the NBI showed that
Raul Dizon, Arturo Sison and Antonio
Mendoza were all fictitious persons.
The respective balances in their
current account with the PBC and/or
PCIB stood as follows: Raul Dizon
P3,455.00 as of April 30, 1969;
Antonio Mendoza P18,182.00 as of
May 23, 1969; and Arturo Sison
Pl,398.92 as of June 30, 1969.
On June 11, 1969, NWSA addressed
a letter to PNB requesting the
immediate restoration to its Account
No. 6, of the total sum of
P3,457,903.00 corresponding to the
total amount of these twenty-three
(23) checks claimed by NWSA to be
forged and/or spurious checks. "In
view of the refusal of PNB to credit
back to Account No. 6 the said total
sum of P3,457,903.00 MWSS filed the
instant complaint on November 10,
1972 before the Court of First Instance
of Manila and docketed thereat as
Civil Case No. 88950.

Mendoza
22.59601 4-18-69 Arturo Sison
400,000.00 5-19-69

In its answer, PNB contended among

others, that the checks in question
were regular on its face in all respects,
including the genuineness of the

signatures of authorized NWSA

signing officers and there was nothing
on its face that could have aroused
any suspicion as to its genuineness
and due execution and; that NWSA
was guilty of negligence which was
the proximate cause of the loss.
PNB also filed a third party complaint
against the negotiating banks PBC
and PCIB on the ground that they
failed to ascertain the Identity of the
payees and their title to the checks
which were deposited in the
respective new accounts of the
payees with them.
xxx xxx xxx
On February 6, 1976, the Court of First Instance of
Manila rendered judgment in favor of the MWSS. The
dispositive portion of the decision reads:
WHEREFORE, on the COMPLAINT
by a clear preponderance of evidence
and in accordance with Section 23 of
the Negotiable Instruments Law, the
Court hereby renders judgment in
favor of the plaintiff Metropolitan
Waterworks and Sewerage System
(MWSS) by ordering the defendant
Philippine National Bank (PNB) to
restore the total sum of THREE
MILLION FOUR HUNDRED FIFTY
SEVEN THOUSAND NINE
HUNDRED THREE PESOS
(P3,457,903.00) to plaintiff's Account
No. 6, otherwise known as Account
No. 010-50030-3, with legal interest
thereon computed from the date of the
filing of the complaint and until as
restored in the said Account No. 6.
On the THIRD PARTY COMPLAINT,
the Court, for lack of evidence, hereby
renders judgment in favor of the third
party defendants Philippine Bank of
Commerce (PBC) and Philippine
Commercial and Industrial Bank
(PCIB) by dismissing the Third Party
Complaint.
The counterclaims of the third party
defendants are likewise dismissed for
lack of evidence.
No pronouncement as to costs.

As earlier stated, the respondent court reversed the

decision of the Court of First Instance of Manila and
rendered judgment in favor of the respondent
Philippine National Bank.
A motion for reconsideration filed by the petitioner
MWSS was denied by the respondent court in a
resolution dated January 3, 1983.
The petitioner now raises the following assignments
of errors for the grant of this petition:
I. IN NOT HOLDING THAT AS THE
SIGNATURES ON THE CHECKS
WERE FORGED, THE DRAWEE
BANK WAS LIABLE FOR THE LOSS
UNDER SECTION 23 OF THE
NEGOTIABLE INSTRUMENTS LAW.
II. IN FAILING TO CONSIDER THE
PROXIMATE NEGLIGENCE OF PNB
IN ACCEPTING THE SPURIOUS
CHECKS DESPITE THE OBVIOUS
IRREGULARITY OF TWO SETS OF
CHECKS BEARING IdENTICAL
NUMBER BEING ENCASHED
WITHIN DAYS OF EACH OTHER.
III. IN NOT HOLDING THAT THE
SIGNATURES OF THE DRAWEE
MWSS BEING CLEARLY FORGED,
AND THE CHECKS SPURIOUS,
SAME ARE INOPERATIVE AS
AGAINST THE ALLEGED DRAWEE.
The appellate court applied Section 24 of the
Negotiable Instruments Law which provides:
Every negotiable instrument is
deemed prima facie to have been
issued for valuable consideration and
every person whose signature
appears thereon to have become a
party thereto for value.
The petitioner submits that the above provision does
not apply to the facts of the instant case because the
questioned checks were not those of the MWSS and
neither were they drawn by its authorized signatories.
The petitioner states that granting that Section 24 of
the Negotiable Instruments Law is applicable, the
same creates only a prima facie presumption which
was overcome by the following documents, to wit: (1)
the NBI Report of November 2, 1970; (2) the NBI
Report of November 21, 1974; (3) the NBI Chemistry
Report No. C-74891; (4) the Memorandum of Mr.
Juan Dino, 3rd Assistant Auditor of the respondent
drawee bank addressed to the Chief Auditor of the

petitioner; (5) the admission of the respondent bank's

counsel in open court that the National Bureau of
Investigation found the signature on the twenty-three
(23) checks in question to be forgeries; and (6) the
admission of the respondent bank's witness, Mr.
Faustino Mesina, Jr. that the checks in question were
not printed by his printing press. The petitioner
contends that since the signatures of the checks were
forgeries, the respondent drawee bank must bear the
loss under the rulings of this Court.
A bank is bound to know the
signatures of its customers; and if it
pays a forged check it must be
considered as making the payment
out of its obligation funds, and cannot
ordinarily charge the amount so paid
to the account of the depositor whose
name was forged.

finding in these documents that the twenty-three (23)

questioned checks were indeed signed by persons
other than the authorized MWSS signatories. On the
contrary, the findings of the National Bureau of
Investigation in its Report dated November 2, 1970
show that the MWSS fraud was an "inside job" and
that the petitioner's delay in the reconciliation of bank
statements and the laxity and loose records control in
the printing of its personalized checks facilitated the
fraud. Likewise, the questioned Documents Report
No. 159-1074 dated November 21, 1974 of the
National Bureau of Investigation does not declare or
prove that the signatures appearing on the questioned
checks are forgeries. The report merely mentions the
alleged differences in the type face, checkwriting, and
printing characteristics appearing in the standard or
submitted models and the questioned typewritings.
The NBI Chemistry Report No. C-74-891 merely
describes the inks and pens used in writing the
alleged forged signatures.

xxx xxx xxx

The signatures to the checks being
forged, under Section 23 of the
Negotiable Instruments Law they are
not a charge against plaintiff nor are
the checks of any value to the
defendant.
It must therefore be held that the
proximate cause of loss was due to
the negligence of the Bank of the
Philippine Islands in honoring and
cashing the two forged checks. (San
Carlos Milling Co. v. Bank of the P. I.,
59 Phil. 59)
It is admitted that the Philippine
National Bank cashed the check upon
a forged signature, and placed the
money to the credit of Maasim, who
was the forger. That the Philippine
National Bank then endorsed the
chock and forwarded it to the
Shanghai Bank by whom it was paid.
The Philippine National Bank had no
license or authority to pay the money
to Maasim or anyone else upon a
forged signature. It was its legal duty
to know that Malicor's endorsement
was genuine before cashing the
check. Its remedy is against Maasim
to whom it paid the money. (Great
Eastern Life Ins. Co. v. Hongkong &
Shanghai Bank, 43 Phil. 678).
We have carefully reviewed the documents cited by
the petitioner. There is no express and categorical

It is clear that these three (3) NBI Reports relied upon

by the petitioner are inadequate to sustain its
allegations of forgery. These reports did not touch on
the inherent qualities of the signatures which are
indispensable in the determination of the existence of
forgery. There must be conclusive findings that there
is a variance in the inherent characteristics of the
signatures and that they were written by two or more
different persons.
Forgery cannot be presumed (Siasat, et al. v.
Intermediate Appellate Court, et al, 139 SCRA 238). It
must be established by clear, positive, and convincing
evidence. This was not done in the present case.
The cases of San Carlos Milling Co. Ltd. v. Bank of
the Philippine Islands, et al. (59 Phil. 59) and Great
Eastern Life Ins., Co. v. Hongkong and Shanghai
Bank (43 Phil. 678) relied upon by the petitioner are
inapplicable in this case because the forgeries in
those cases were either clearly established or
admitted while in the instant case, the allegations of
forgery were not clearly established during trial.
Considering the absence of sufficient security in the
printing of the checks coupled with the very close
similarities between the genuine signatures and the
alleged forgeries, the twenty-three (23) checks in
question could have been presented to the petitioner's
signatories without their knowing that they were
bogus checks. Indeed, the cashier of the petitioner
whose signatures were allegedly forged was unable
to ten the difference between the allegedly forged
signature and his own genuine signature. On the
other hand, the MWSS officials admitted that these
checks could easily be passed on as genuine.

The memorandum of Mr. A. T. Tolentino, no,

Assistant Chief Accountant of the drawee Philippine
National Bank to Mr. E. Villatuya, Executive VicePresident of the petitioner dated June 9, 1969 cites an
instance where even the concerned NWSA officials
could not ten the differences between the genuine
checks and the alleged forged checks.
At about 12:00 o'clock on June 6,
1969, VP Maramag requested me to
see him in his office at the Cashier's
Dept. where Messrs. Jose M.
Sanchez, treasurer of NAWASA and
Romeo Oliva of the same office were
present. Upon my arrival I observed
the NAWASA officials questioning the
issue of the NAWASA checks
appearing in their own list, xerox copy
attached.
For verification purposes, therefore,
the checks were taken from our file.
To everybody there present namely
VIP Maramag, the two
abovementioned NAWASA officials,
AVP, Buhain, Asst. Cashier Castelo,
Asst. Cashier Tejada and Messrs. A.
Lopez and L. Lechuga, both C/A
bookkeepers, no one was able to point
out any difference on the signatures of
the NAWASA officials appearing on
the checks compared to their official
signatures on file. In fact 3 checks,
one of those under question, were
presented to the NAWASA treasurer
for verification but he could not point
out which was his genuine signature.
After intent comparison, he pointed on
the questioned check as bearing his
correct signature.
xxx xxx xxx
Moreover, the petitioner is barred from setting up the
defense of forgery under Section 23 of the Negotiable
Instruments Law which provides that:
SEC. 23. FORGED SIGNATURE;
EFFECT OF.- When the signature is
forged or made without authority of the
person whose signature it purports to
be, it is wholly inoperative, and no
right to retain the instrument, or to give
a discharge therefor, or to enforce
payment thereof against any party
thereto can be acquired through or
under such signature unless the party
against whom it is sought to enforce

such right is precluded from setting up

the forgery or want of authority.
because it was guilty of negligence not only before
the questioned checks were negotiated but even after
the same had already been negotiated. (See Republic
v. Equitable Banking Corporation, 10 SCRA 8) The
records show that at the time the twenty-three (23)
checks were prepared, negotiated, and encashed, the
petitioner was using its own personalized checks,
instead of the official PNB Commercial blank checks.
In the exercise of this special privilege, however, the
petitioner failed to provide the needed security
measures. That there was gross negligence in the
printing of its personalized checks is shown by the
following uncontroverted facts, to wit:
(1) The petitioner failed to give its printer, Mesina
Enterprises, specific instructions relative to the
safekeeping and disposition of excess forms, check
vouchers, and safety papers;
(2) The petitioner failed to retrieve from its printer all
spoiled check forms;
(3) The petitioner failed to provide any control
regarding the paper used in the printing of said
checks;
(4) The petitioner failed to furnish the respondent
drawee bank with samples of typewriting, cheek
writing, and print used by its printer in the printing of
its checks and of the inks and pens used in signing
the same; and
(5) The petitioner failed to send a representative to
the printing office during the printing of said checks.
This gross negligence of the petitioner is very evident
from the sworn statement dated June 19, 1969 of
Faustino Mesina, Jr., the owner of the printing press
which printed the petitioner's personalized checks:
xxx xxx xxx
7. Q: Do you have any
business transaction
with the National
Waterworks and
Sewerage Authority
(NAWASA)?
A: Yes, sir. I have a
contract with the
NAWASA in printing
NAWASA Forms such
as NAWASA Check

xxx xxx xxx

15. Q: Were you given
any ingtruction by the
NAWASA in
connection with the
printing of these check
vouchers?
A: There is none, sir.
No instruction
whatsoever was given
to me.
16. Q: Were you not
advised as to what
kind of paper would be
used in the check
vouchers?
A: Only as per sample,
sir.
xxx xxx xxx
20. Q: Where did you
buy this Hammermill
Safety check paper?
A: From Tan Chiong, a
paper dealer with store
located at Juan Luna,
Binondo, Manila. (In
front of the
Metropolitan Bank).

A: Approximately four
hundred (400) sheets,
sir. I cannot determine
the proportion of the
excess and spoiled
because the final act of
perforating these
check vouchers has
not yet been done and
spoilage can only be
determined after this
final act of printing.
26. Q: What did you do
with these excess
check vouchers?
A: I keep it under lock
and key in my firing
cabinet.
xxx xxx xxx
28. Q: Were you not
instructed by the
NAWASA authorities
to bum these excess
check vouchers?
A: No, sir. I was not
instructed.
29. Q: What do you
intend to do with these
excess printed check
vouchers?

xxx xxx xxx

24. Q: Were all these
check vouchers printed
by you submitted to
NAWASA?

A: I intend to use them

for future orders from
the
xxx xxx xxx

A: Not all, sir. Because

we have to make
reservations or
allowances for
spoilage.

32. Q: In the process

of printing the check
vouchers ordered by
the NAWASA, how
many sheets were
actually spoiled?

25. Q: Out of these

vouchers printed by
you, how many were
spoiled and how many
were the excess
printed check
vouchers?

A: I cannot
approximate, sir. But
there are spoilage in
the process of printing
and perforating.

33. Q: What did you do

with these spoilages?
A: Spoiled printed
materials are usually
thrown out, in the
garbage can.
34. Q: Was there any
representative of the
NAWASA to supervise
the printing or watch
the printing of these
check vouchers?
A: None, sir.
xxx xxx xxx
39. Q: During the
period of printing after
the days work, what
measures do you
undertake to safeguard
the mold and other
paraphernalia used in
the printing of these
particular orders of
NAWASA?
A: Inasmuch as I have
an employee who
sleeps in the printing
shop and at the same
time do the guarding,
we just leave the mold
attached to the
machine and the other
finished or unfinished
work check vouchers
are left in the rack so
that the work could be
continued the following
day.
The National Bureau of Investigation Report dated
November 2, 1970 is even more explicit. Thus
xxx xxx xxx
60. We observed also
that there is some
laxity and loose control
in the printing of
NAWASA cheeks. We
gathered from
MESINA
ENTERPRISES, the

printing firm that

undertook the printing
of the check vouchers
of NAWASA that
NAWASA had no
representative at the
printing press during
the process of the
printing and no
particular security
measure instructions
adopted to safeguard
the interest of the
government in
connection with
printing of this
accountable form.
Another factor which facilitated the fraudulent
encashment of the twenty-three (23) checks in
question was the failure of the petitioner to reconcile
the bank statements with its own records.
It is accepted banking procedure for the depository
bank to furnish its depositors bank statements and
debt and credit memos through the mail. The records
show that the petitioner requested the respondent
drawee bank to discontinue the practice of mailing the
bank statements, but instead to deliver the same to a
certain Mr. Emiliano Zaporteza. For reasons known
only to Mr. Zaporteza however, he was unreasonably
delayed in taking prompt deliveries of the said bank
statements and credit and debit memos. As a
consequence, Mr. Zaporteza failed to reconcile the
bank statements with the petitioner's records. If Mr.
Zaporteza had not been remiss in his duty of taking
the bank statements and reconciling them with the
petitioner's records, the fraudulent encashments of
the first checks should have been discovered, and
further frauds prevented. This negligence was,
therefore, the proximate cause of the failure to
discover the fraud. Thus,
When a person opens a checking
account with a bank, he is given blank
checks which he may fill out and use
whenever he wishes. Each time he
issues a check, he should also fill out
the check stub to which the check is
usually attached. This stub, if properly
kept, will contain the number of the
check, the date of its issue, the name
of the payee and the amount thereof.
The drawer would therefore have a
complete record of the checks he
issues. It is the custom of banks to
send to its depositors a monthly
statement of the status of their
accounts, together with all the

cancelled checks which have been

cashed by their respective holders. If
the depositor has filled out his check
stubs properly, a comparison between
them and the cancelled checks will
reveal any forged check not taken
from his checkbook. It is the duty of a
depositor to carefully examine the
bank's statement, his cancelled
checks, his check stubs and other
pertinent records within a reasonable
time, and to report any errors without
unreasonable delay. If his negligence
should cause the bank to honor a
forged check or prevent it from
recovering the amount it may have
already paid on such check, he cannot
later complain should the bank refuse
to recredit his account with the amount
of such check. (First Nat. Bank of
Richmond v. Richmond Electric Co.,
106 Va. 347, 56 SE 152, 7 LRA, NS
744 [1907]. See also Leather
Manufacturers' Bank v. Morgan, 117
US 96, 6 S. Ct. 657 [1886]; Deer
Island Fish and Oyster Co. v. First
Nat. Bank of Biloxi, 166 Miss. 162,
146 So. 116 [1933]). Campos and
Campos, Notes and Selected Cases
on Negotiable Instruments Law, 1971,
pp. 267-268).
This failure of the petitioner to reconcile the bank
statements with its cancelled checks was noted by the
National Bureau of Investigation in its report dated
November 2, 1970:
58. One factor which facilitate this
fraud was the delay in the
reconciliation of bank (PNB)
statements with the NAWASA bank
accounts. x x x. Had the NAWASA
representative come to the PNB early
for the statements and had the bank
been advised promptly of the reported
bogus check, the negotiation of
practically all of the remaining checks
on May, 1969, totalling P2,224,736.00
could have been prevented.
The records likewise show that the petitioner failed to
provide appropriate security measures over its own
records thereby laying confidential records open to
unauthorized persons. The petitioner's own Fact
Finding Committee, in its report submitted to their
General manager underscored this laxity of records
control. It observed that the "office of Mr. Ongtengco
(Cashier No. VI of the Treasury Department at the
NAWASA) is quite open to any person known to him

or his staff members and that the check writer is

merely on top of his table."
When confronted with this report at the Anti-Fraud
Action Section of the National Bureau of Investigation.
Mr. Ongtengco could only state that:
A. Generally my order
is not to allow anybody
to enter my office. Only
authorized persons are
allowed to enter my
office. There are some
cases, however, where
some persons enter
my office because they
are following up their
checks. Maybe, these
persons may have
been authorized by Mr.
Pantig. Most of the
people entering my
office are changing
checks as allowed by
the Resolution of the
Board of Directors of
the NAWASA and the
Treasurer. The check
writer was never
placed on my table.
There is a place for the
check write which is
also under lock and
key.
Q. Is Mr. Pantig
authorized to allow
unauthorized persons
to enter your office?
A. No, sir.
Q. Why are you
tolerating Mr. Pantig
admitting unauthorized
persons in your office?
A. I do not want to
embarrass Mr. Pantig.
Most of the people
following up checks
are employees of the
NAWASA.
Q. Was the authority
given by the Board of
Directors and the
approval by the

Treasurer for
employees, and other
persons to encash
their checks carry with
it their authority to
enter your office?
A. No, sir.
xxx xxx xxx
Q. From the answers
that you have given to
us we observed that
actually there is laxity
and poor control on
your part with regards
to the preparations of
check payments
inasmuch as you allow
unauthorized persons
to follow up their
vouchers inside your
office which may
leakout confidential
informations or your
books of account. After
being apprised of all
the shortcomings in
your office, as head of
the Cashiers' Office of
the Treasury
Department what
remedial measures do
you intend to
undertake?
A. Time and again the
Treasurer has been
calling our attention
not to allow interested
persons to hand carry
their voucher checks
and we are trying our
best and if I can do it
to follow the
instructions to the
letter, I will do it but
unfortunately the
persons who are
allowed to enter my
office are my coemployees and
persons who have
connections with our
higher ups and I can
not possibly
antagonize them. Rest

assured that even

though that everybody
will get hurt, I win do
my best not to allow
unauthorized persons
to enter my office.
xxx xxx xxx
Q. Is it not possible
inasmuch as your
office is in charge of
the posting of check
payments in your
books that leakage of
payments to the banks
came from your office?
A. I am not aware of it
but it only takes us a
couple of minutes to
process the checks.
And there are cases
wherein every
information about the
checks may be
obtained from the
Accounting
Department, Auditing
Department, or the
Office of the General
Manager.
Relying on the foregoing statement of Mr. Ongtengco,
the National Bureau of Investigation concluded in its
Report dated November 2, 1970 that the fraudulent
encashment of the twenty-three (23)cheeks in
question was an "inside job". ThusWe have all the reasons to believe
that this fraudulent act was an inside
job or one pulled with inside
connivance at NAWASA. As pointed
earlier in this report, the serial
numbers of these checks in question
conform with the numbers in current
use of NAWASA, aside from the fact
that these fraudulent checks were
found to be of the same kind and
design as that of NAWASA's own
checks. While knowledge as to such
facts may be obtained through the
possession of a NAWASA check of
current issue, an outsider without
information from the inside can not
possibly pinpoint which of NAWASA's
various accounts has sufficient
balance to cover all these fraudulent

checks. None of these checks, it

should be noted, was dishonored for
insufficiency of funds. . .
Even if the twenty-three (23) checks in question are
considered forgeries, considering the petitioner's
gross negligence, it is barred from setting up the
defense of forgery under Section 23 of the Negotiable
Instruments Law.
Nonetheless, the petitioner claims that it was the
negligence of the respondent Philippine National
Bank that was the proximate cause of the loss. The
petitioner relies on our ruling in Philippine National
Bank v. Court of Appeals (25 SCRA 693) that.
Thus, by not returning the cheek to the
PCIB, by thereby indicating that the
PNB had found nothing wrong with the
check and would honor the same, and
by actually paying its amount to the
PCIB, the PNB induced the latter, not
only to believe that the check was
genuine and good in every respect,
but, also, to pay its amount to Augusto
Lim. In other words, the PNB was the
primary or proximate cause of the
loss, and, hence, may not recover
from the PCIB.
The argument has no merit. The records show that
the respondent drawee bank, had taken the
necessary measures in the detection of forged checks
and the prevention of their fraudulent encashment. In
fact, long before the encashment of the twenty-three
(23) checks in question, the respondent Bank had
issued constant reminders to all Current Account
Bookkeepers informing them of the activities of
forgery syndicates. The Memorandum of the Assistant
Vice-President and Chief Accountant of the Philippine
National Bank dated February 17, 1966 reads in part:
SUBJECT: ACTIVITIES OF
FORGERY SYNDICATE
From reliable information we have
gathered that personalized checks of
current account depositors are now
the target of the forgery syndicate. To
protect the interest of the bank, you
are hereby enjoined to be more
careful in examining said checks
especially those coming from the
clearing, mails and window
transactions. As a reminder please be
guided with the following:

1. Signatures of drawers should be

properly scrutinized and compared
with those we have on file.
2. The serial numbers of the checks
should be compared with the serial
numbers registered with the Cashier's
Dept.
3. The texture of the paper used and
the printing of the checks should be
compared with the sample we have on
file with the Cashier's Dept.
4. Checks bearing several
indorsements should be given a
special attention.
5. Alteration in amount both in figures
and words should be carefully
examined even if signed by the
drawer.
6. Checks issued in substantial
amounts particularly by depositors
who do not usually issue checks in big
amounts should be brought to the
attention of the drawer by telephone or
any fastest means of communication
for purposes of confirmation.
and your attention is also invited to
keep abreast of previous circulars and
memo instructions issued to
bookkeepers.
We cannot fault the respondent drawee Bank for not
having detected the fraudulent encashment of the
checks because the printing of the petitioner's
personalized checks was not done under the
supervision and control of the Bank. There is no
evidence on record indicating that because of this
private printing the petitioner furnished the respondent
Bank with samples of checks, pens, and inks or took
other precautionary measures with the PNB to
safeguard its interests.
Under the circumstances, therefore, the petitioner
was in a better position to detect and prevent the
fraudulent encashment of its checks.
WHEREFORE, the petition for review on certiorari is
hereby DISMISSED for lack of merit. The decision of
the respondent Court of Appeals dated October 29,
1982 is AFFIRMED. No pronouncement as to costs.
SO ORDERED.

G.R. No. 73418 September 20, 1988

PELICULA SABIDO and MAXIMO
RANCES, petitioners,
vs.
THE HONORABLE INTERMEDIATE APPELLATE
COURT and DOMINADOR STA. ANA, respondents.

GUTIERREZ, JR., J.:

This petition for review on certiorari seeks to set aside
the decision of the then Intermediate Appellate Court
which nullified the orders of the trial court for the
issuance of the writs of execution and demolition in
favor of the petitioners and which ordered the trial
court to assess the value of the demolished properties
of the private respondent for the purposes of set-off
against respondent's liability to the petitioners.
This case originated from an action for quieting of title
which was filed by the spouses Victor Dasal and
Maria Pecunio against herein petitioners, Maximo
Rances and Pelicula Sabido on the question of
ownership over two parcels of land otherwise known
as Lots "B" and "D".
On October 7, 1969, the trial court presided by Judge
Delfin Sunga declared the petitioners as owners of
Lots "B" and "D". The decision became final.
However, when the decision was being carried out to
put the petitioners in possession of Lot "B", the
Provincial Sheriff found three (3) persons occupying
portions of Lot "B". One of them was private
respondent Dominador Sta. Ana.
The petitioners filed a motion to require the private
respondent to show cause why he should not be
ejected from the portion of Lot "B". In his answer, Sta.
Ana claimed ownership by purchase from one
Prudencio Lagarto, of a bigger area of which Lot "B"
is a part. He stated that the two other persons
occupying the disputed portion are his tenants.
Subsequently, an order of demolition was issued by
the trial court against the private respondent. This
order was challenged by the private respondent and
upon his filing of certiorari proceedings, this Court on
November 26, 1973, set aside the order of the trial
court and remanded the case to the latter for further
reception of evidence to determine: 1) Whether or not
the private respondent is privy to the spouses Victor
Dasal and Maria Pecunio as the losing parties in the
action below; and 2) Whether or not the petitioners
and the private respondent are litigating over the
same parcel of land or whether there is overlapping of
boundaries of their respective lands.

On December 12, 1974, after conducting an ocular

inspection and hearing, Judge Sunga issued an order
for the private respondent to vacate Lot "B" upon
finding that there is no proof that what the respondent
allegedly purchased from Lagarto covers a portion of
Lot "B" but on the contrary, the deed of sale and tax
declaration show that what was sold to the
respondent was bounded on the south by Tigman
river and therefore, the respondent's ownership could
not have extended to Lot "B" which was separated by
the Tigman river and mangrove swamps from the
portion he purchased.
Before the order of December 12, 1974, could be
executed, however, Judge Sunga inhibited himself
from the case so the same was transferred to the then
Court of First Instance (now Branch M, Regional Trial
Court) of Naga City presided by Judge Mericia B.
Palma.
The execution of the order met with some further
delay when the records were reconstituted. Judge
Palma, feeling the need for a clearer understanding of
the facts and issues involved in the case, proceeded
to hear and received evidence.
On May 16, 1983, Judge Palma issued a resolution
finding that there was privity between the private
respondent and the spouses Victor Dasal and Maria
Pecunio as to the ownership of Lot "C" and as to the
possession over the western portion of the private
road and the disputed Lot "B"; and that Lot "B" and
the private road are not included in the land
purchased by the respondent from Lagarto.
According to the trial court, the private respondent
was in the company of Dasal (from whom he was
renting Lot "C' and who was also the brother-in-law of
Lagarto) and was present when Commissioner
Tubianosa inspected the land in question in 1953
supporting the claim that the respondent knew that
the land was already in dispute between Dasal and
the petitioners; and if the respondent really believed
that he owns the entire Lot "B" and the private road,
he should have raised his claim of ownership when
Tubianosa inspected the land. The respondent also
failed to include the land in dispute in the survey of his
purchased lot with the flimsy excuse that the surveyor
failed to return to finish the survey and include the
disputed land.
Before arriving at the above findings, however, the
trial court clarified the issues involved in the case. It
said:
WE NOW come to the RESOLUTION
OF THE TWO ISSUES: (1) Was there
privity between Petitioner Sta. Ana

and Plaintiffs Dasal? and (2) Is the

disputed area Identified in paragraph 1
of the foregoing enumeration, part of
the land purchased by Petitioner from
Prudencio Lagarto?
If there is a privity between the
Petitioner and Dasal, then the
Petitioner is bound by the final
decision in this CC No. R-396 (2040)
against Dasal and therefore Petitioner
is subject to the order of execution
and is bound to vacate the land in
question or subject a portion of his
house and the surrounding walls to
demolition. If there is no privity then he
is not bound by said final decision.
(Rollo, pp. 48-49).
In the dispositive portion, however, the trial court held:
WHEREFORE, premises considered,
the Court finds:
1.) That there is privity between the
petitioner and the plaintiffs spouses
Victor Dasal and Maria Pecunio as to
ownership of Lot C and as to the
possession over the western portion of
the private road and the disputed Lot
B as so Identified in Exhibit 5;
2.) That the private road Identified as
within points 1, 2, 3, 4, 5, 6 and 1 in
Exh. 5 is owned by the respondents
as already decided in CC No. 1103,
and the same private road and the Lot
B in Exhibit 5 are both owned by the
respondents as already decided in this
CC No. R-396 (2040);
3.) That the balcony of the present
house of the petitioner is located in the
disputed Lot B and its southern (or
southeastern) part of the western
portion of the 'private road';
xxx xxx xxx
6.) That therefore, this Court
recommends to the Honorable
Supreme Court, that the petitioner be
ordered to remove the entire balcony
and the northern portion of the main
house to the extent of about one
meter found to be standing on the
private road, as well as the northern
extension of the hollow block walls on

the eastern boundary of Lot C that

stand on the private road and to the
northern end of Lot B which wall
measures to a total length of about 15
meters from the northern boundary of
Lot B to the southern edge of the
private road; or in the alternative to
require the petitioner to pay the
respondents the value of the western
portion of the disputed area which is
now enclosed in the wall constructed
by the petitioner;
7.) And to hold the petitioner liable to
the respondents for reasonable
attorney's fees and damages. (Rollo,
p. 52)
On June 7, 1983, the private respondent filed with this
Court a pleading captioned "Notice of Appeal for
Review." Said petition was denied in this Court's
resolution on October 26,1983, to wit:
L-32642 (Dominador Sta. Ana v. Hon.
Delfin Vir, Sunga, etc., et al.).
Considering the petition of petitioner
for review of trial court resolution
dated May 16, 1983, the Court
Resolved to DENY the petition, said
resolution of May 16, 1983, being in
accord with the decision of November
26, 1973 (Rec., p. 438) and the
resolution of May 16, 1975 (idem, p.
595) as well as the order of December
12,1974 (idem, p. 500) which ordered
the petitioner to vacate the premises
(which is presumably final). As stated
in the aforesaid resolution of May 16,
1975, any review has to be sought by
timely appeal to the appellate court
and cannot be sought in this case.
(Rollo, p. 65).
A series of resolutions were subsequently issued by
this Court denying the private respondent's motion to
reconsider the above-quoted resolution. Finally, on
February 27, 1984, this Court issued a resolution
ordering "the Chief of the Judgment Division of this
Court to RETURN the records thereof to the
respondent court for execution of judgment."
On August 9, 1984, the petitioners filed motion for
execution of judgment, accompanied by a bill of costs,
as follows: 1) Attorney's fees P 25,000.00; 2) Cost
of litigation P7,000.00; 3) Expenses for transcript of
record P600.00; 4) Expenses for xeroxing of
important papers and documents-P 500.00; 5)
Accrued rentals for the lot in question P11,800.00 and

6) Legal interest of accrued rentals at 12% a year

P1,436.00 for a total of P46,336.00.
On October 5, 1984, the trial court issued an order
granting the petitioners' motion for execution and
application for a writ of attachment and approving the
bill of costs. In said order, the trial court ordered the
demolition of any part of the private respondent's
building and all other construction within Lot "B" and
the private road. The demolition was effected.
The private respondent appealed to the then
Intermediate Appellate Court, contending that the
order of the trial court departed from the intention of
the Supreme Court's resolution ordering execution of
the judgment, for it thereby deprived him of the
alternative choice of paying the value of the disputed
area which was allowed in the trial court's resolution
of May 16, 1983, which the Supreme Court found to
be in accord with, among others, its decision in G.R.
No. L-32642 (Sta. Ana v. Sunga, 54 SCRA 36).
On September 20, 1985, the appellate court rendered
the assailed decision, the dispositive portion of which
provided;
WHEREFORE, the writs of certiorari
and prohibition applied for are
granted. The Order of October 5, 1984
approving the bill of courts and
granting execution of 'previous orders',
as well as the order/writ of demolition
are hereby set aside, Respondent
Court is ordered to forthwith determine
the value of the demolished portion of
petition of petitioner's residential
building and other structures affected
by the demolition and also, to assess
the value of the disputed area for
purposes of set off and whatever is
the excess in value should be paid to
the party entitled thereto. (Rollo, pp.
40-41)
In its decision, the appellate court explained the
rationale behind the dispositive portion. It said:
xxx xxx xxx
The unqualified affirmance of said
resolution of May 16, 1983, to Our
Mind, carried with it the approval of
the above recommendation. The fact
that the Supreme Court was silent on
the recommended alternative choice
of demolition and payment of the
disputed area and merely returned the
records for execution of judgment, did

not indicate that the recommended

demolition was preferred. The
sufficiency and efficacy of the
resolution of May 16, 1983, as the
judgment to be enforced or executed,
cannot be doubted considering its
substance rather than its form. The
aforequoted recommendation, itself
the dispositive portion, can be
ascertained as to its meaning and
operation. Thereby, the petitioner is
given the option to pay the value of
the western portion of the disputed
area which is enclosed in the wall
constructed by said petitioner. It is
petitioner who is given the alternative
choice since if he does not pay, then
he can be ordered to remove
whatever structure he had introduced
in the questioned premises. Notably,
petitioner indicated his willingness to
pay the price of the disputed area or
otherwise exercised that option.
Respondent Court therefore acted
with grave abuse of discretion
tantamount to lack or excess of
jurisdiction in abandoning the
alternative choice of payment of the
value of the area in dispute, which it
authorized in its final resolution of May
16, 1983, when it ordered execution of
its 'previous orders' for the petitioner
to vacate the land in question and for
demolition, which was set aside when
the case was remanded for hearing
pursuant to the Supreme Court
decision of November 26, 1973. The
previous orders referred to have not
been specified by the respondent
Court in its Order of October 6, 1984.
If it is the Order of December 12, 1974
which is being referred to by
respondent Court, it should have so
specified; however, it did not
presumably because it was
reconsidered as can be deduced from
the fact that thereafter, respondent
Court further heard the parties and
received their respective evidence in
compliance with the decision of
November 26, 1973, or which
proceedings, the respondent Court
issued its resolution of May 16, 1983.
(Rollo, p. 38)
In the petition before us, the petitioners maintain that
the appellate court committed grave abuse of
discretion when it granted the private respondent the

option of exercising the alternative choice of staying in

the disputed land when it has been established that
the private respondent was in privy with the spouses
Victor Dasal and Maria Pecunio and, therefore, he
could not be considered a builder in good faith as to
entitle him to the alternative choice of retention; and
that the demolition of the private respondent's
construction on Lot "B" and on the private road is a
logical consequence of the finding that he was privy to
the losing parties who were also the adversaries of
the petitioners in the original case.
We agree.
When this Court ordered the remand of the case
between the petitioners and the private respondent in
our decision of November 26, 1973 (see Sta. Ana v.
Sunga, supra), it was precisely to determine whether
herein respondent was privy to the spouses Dasals as
to make the decision against the latter and in favor of
the petitioners over Lot "B" binding upon him. And this
fact was clearly pointed out by Judge Palma in her
resolution of May 16, 1983 stating that if there is
privity between the private respondent and the
spouses Dasals, then the former is bound by the final
decision in CC No. R-396 (2040) which is the case
between the Dasals and the petitioners. However, an
apparent confusion was brought about by the
dispositive portion of the aforementioned resolution
when it recommended to this Court either to order the
respondent to remove all his constructions over Lot
"B" or to require said respondent to pay the
petitioners the value of the disputed area which was
already enclosed by a wall constructed by the
respondent. This, nevertheless, was rectified when
we issued the series of resolutions denying the
respondent's petition and motions for reconsideration
before this Court wherein we stated that the resolution
of May 16, 1983 was in accord, among others, with
the order of December 12, 1974 "which ordered the
petitioner (private respondent) to vacate the premises
(which is presumably final)."
Hence, it is clear that the private respondent has to
remove all his constructions over Lot "B" and vacate
the premises. This is his only option. Being adjudged
in privy with the spouses Dasals, he cannot avail
himself of the rights granted to a builder in good faith.
He, therefore, must remove all his useful
improvements over Lot "B" at his own expense and if
the same have already been removed, he cannot be
entitled to the right of retention or to any
reimbursement. Thus, in the case of Metropolitan
Waterworks and Sewarage System v. Court of
Appeals, (143 SCRA 623, 629), we ruled:
Article 449 of the Civil Code of the
Philippines provides that "he who

builds, plants or sows in bad faith on

the land of another, loses what is built,
planted or sown without right to
indemnity." As a builder in bad faith,
NAWASA lost whatever useful
improvements it had made without
right to indemnity (Santos v. Mojica,
Jan. 31, 1969, 26 SCRA 703)
Moreover, under Article 546 of said
code, only a possessor in good faith
shall be refunded for useful expenses
with the right of retention until
reimbursed; and under Article 547
thereof, only a possessor in good faith
may remove useful improvements if
this can be done without damage to
the principal thing and if the person
who recovers the possession does not
exercise the option of reimbursing the
useful expenses. The right given a
possessor in bad faith to remove
improvements applies only to
improvements for pure luxury or mere
pleasure, provided the thing suffers no
injury thereby and the lawful
possessor does not prefer to retain
them by paying the value they have at
the time he enters into possession
(Article 549, Id.).
We, therefore, find that the appellate court committed
reversible error in holding that the private respondent
is entitled to exercise the option to pay the value of
the disputed area of Lot "B" and to reimbursement for
the value of the demolished portion of his building.
We, however, affirm its ruling that the petitioner's bill
of costs must be set aside and that while the
resolution of May 16, 1983 included attorney's fees
and damages, the necessity of proof cannot be
dispensed with. Since no proof was presented before
the trial regarding any of these claims, they cannot be
awarded.
WHEREFORE, the petition is GRANTED and the
decision of the court of Appeals dated September 20,
1985 is ANNULED and SET ASIDE. The writ of
attachment issued by the trial court for the purpose of
satisfying the award for damages and the bill of costs
is, however, permanently SET ASIDE.
SO ORDERED.