Property Cases Day 6 Atty. Santiago

8/11/2019 Property Cases Day 6 Atty. Santiago

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BORGY AMBULO Property CasesFIRST DIVISION

[G.R. No. 180683. June 1, 2011.]AURORA L. TECSON, SPOUSES JOSE L. TECSON and LEONILA TECSON, petitioners, vs.

MINERVA, MARIA, FRANCISCO, AGUSTINA, JOSE, ROMUALDO, ELIZABETH and VICTOR, allsurnamed FAUSTO, and ISABEL VDA. DE FAUSTO, respondents.

DECISIONPEREZ, J p:For Review 1 are the Decision 2 dated 12 December 2006 and Resolution 3 dated 2 October 2007 ofthe Court of Appeals in CA-G.R. CV No. 70303. In t he said decision and resolution, the Court ofAppeals reversed the Regional Trial Court (RTC), Branch 19 of Pagadian City 4 thereby allowing the

respondents to recover four hundred fifty-seven (457) square meters of land from Transfer Certificate ofTitle (TCT) No. T-4,342 in the name of petitioner Jose Tecson. The decretal portion of the decision ofthe appellate court reads: 5WHEREFORE, in the light of the foregoing, the appeal is hereby GRANTED. The assailed decision ishereby REVERSED and SET ASIDE.Defendant-appellee Atty. Jose L. Tecson is entitled only to 507 square meters under Lot 2189-A; he isDIRECTED to reconvey, within thirty (30) days from notice, the excess of 457 square meters thereof toherein plaintiff-appellants in order to restore the latter's original area of 508 square meters under Lot2189-B pursuant to Exhibit "B" (Subdivision Plan Psd-09-06-000110 dated March 25, 1974) and Exhibit"C" (the Agreement of Partition dated April 15, 1974). Failure on his part to reconvey the aforesaid 457square meters within the period prescribed thereto, the Clerk of Court of RTC, Branch 19, PagadianCity, is hereby directed to cause the transfer of the same in favor of herein plaintiff-appellants pursuantto Section 10, Rule 39 of the Rules of Court. THCSAEDefendant-appellees Aurora L. Tecson and Atty. Jose L. Tecson are directed to pay, jointly andseverally, plaintiff-appellants the f ollowing:a.) P200,000 as moral damages;

b.) P10,000 as exemplary damages; andc.) P20,000 as attorney's fees.The antecedents of this case are as follows:Sometime in 1945, Atty. Agustin Fausto (Atty. Fausto) acquired in co-ownership with his sister,Waldetrudes Fausto-Nadela (Waldetrudes), Lot 2189 a one thousand fifteen (1,015) square meterparcel of land situated at Jose Zulueta Street corner National Highway in Pagadian City, ZamboangaDel Sur. 6 In 1953, Atty. Fausto constructed his house on a portion of the said lot. 7In 1970, f ollowing a cadastral proceeding, Atty. Fausto and Waldetrudes were recognized as co-ownersof Lot 2189. Consequently, Original Certificate of Title (OCT) No. 734 8 covering Lot 2189 was issuedin the names of:[I]n undivided shares, Waldetrudes Fausto, married to Leon Nadela; and Agustin Fausto, married toIsabel Pareja, . . . .Not long after, Atty. Fausto and Waldetrudes decided to partition Lot 2189. For this purpose,Waldetrudes hired one Engr. Ernesto D. Aguilar (Engr. Aguilar) to prepare a subdivision plan for the lot.On 25 March 1974, Engr. Aguilar prepared subdivision plan Psd-09-06-000110 (First Plan) 9 thatdivided Lot 2189 into two (2) lots, i.e., Lot 2189-A with an area of 507 square meters, and Lot 2189-B

with an area of 508 square meters. An illustration of the First Plan shows this division: cEHITAAn illustration of the First Plan will further highlight these changes:

On 6 April 1974, the Regional Director of the Bureau of Lands approved the First Plan.On 15 April 1974, Atty. Fausto and Waldetrudes formalized their decision to subdivide Lot 2189 byexecuting an Agreement of Partition. 10 Under this agreement (First Partition Agreement), Waldetrudeswas to be given absolute ownership over Lot 2189-A, while Atty. Fausto was to be conferred separatedominion over Lot 2189-B. 11 The First Partition Agreement, however, was never registered with theRegister of Deeds.On 14 March 1975, Atty. Fausto died. He was survived by herein respondents, who are his wife 12 andchildren. 13

On 7 July 1977, however, Waldetrudes entered into a Contract to Sell 14 with herein petitioner AuroraL. Tecson (Aurora). In it, Waldetrudes undertook to sell, among others, her "ideal share" in Lot 2189 toAurora upon full payment of the purchase price. 15On 28 July 1977, Engr. Aguilar prepared a second subdivision plan (Second Plan) 16 for Lot 2189. TheSecond Plan, designated as Psd-268803, drastically altered the division of Lot 2189 under the FirstPlan. 17 It introduced the following changes:1. Waldetrudes' Lot 2189-A with an area of 507 square meters under the First Plan was now Lot2189-B with an increased area of 964 square meters. 182. Atty. Fausto's Lot 2189-B with an area of 508 square meters under the First Plan was nowLot 2189-A with a decreased area of 51 square meters. 19

An illustration of the Second Plan will further highlight these changes:

The Second Plan was approved by the Land Registration Commission on 12 August 1977.On 28 September 1977, a second partition over Lot 2189 (Second Partition Agreement) 20 wasexecuted between the respondents in their capacity as heirs of Atty. Fausto on one hand, andWaldetrudes on the other. Presumably with the Second Plan as a new basis, the agreement namedWaldetrudes as the owner of Lot 2189-B while the respondents were allocated Lot 2189-A.On 8 May 1978, Waldetrudes sold Lot 2189-B, with an area of nine hundred sixty-four (964) squaremeters, to Aurora. 21 TAIEcSMeanwhile, it would seem that the Register of Deeds had refused registration of the Second PartitionAgreement in view of the fact that several of the respondents, namely Jose, Romualdo, Elizabeth andVictor were still minors. 22 Hence, a guardianship proceeding was commenced by respondent IsabelVda. de Fausto (Isabel)the wife of Atty. Fausto to secure her appointment as the legal guardianof her minor children in connection with the Second Partition Agreement. 23On 28 July 1978, the guardianship court granted Isabel's Petition 24 and, on 17 January 1980, issuedan Order approving the Second Partition Agreement. 25

On 19 February 1980, the following events transpired:1. The Second Partition Agreement was finally registered with the Register of Deeds. As aconsequence, OCT No. 734 covering Lot 2189 was cancelled and, in lieu thereof, were issued thefollowing titles:a. Transfer Certificate of Title (TCT) No. T-4,335 covering Lot 2189-A in the name of Atty.Fausto; andb. TCT No. T-4,336 for Lot 2189-B in the name of Waldetrudes. 262. The sale of Lot 2189-B in favor of Aurora was likewise registered with the Register of Deeds.27 Accordingly, the newly issued TCT No. T-4,336 was immediately cancelled and replaced by TCTNo. T-4,338 28 in the name of Aurora.3. Aurora executed a Deed of Absolute Sale, 29 conveying Lot 2189-B to her brother, hereinpetitioner Atty. Jose L. Tecson (Atty. Tecson). TcHEaI4. On the very same day, the above deed was registered with the Register of Deeds. 30On 20 February 1980, TCT No. T-4,338 was cancelled. In its place, TCT No. T-4,342 31 was issued,this time, in the name of Atty. Tecson.Seven (7) years after, or on 28 May 1987, the respondents filed a Complaint 32 for the Declaration of

Nullity of Documents, Titles, Reconveyance and Damages against Waldetrudes and the petitionersbefore the Regional Trial Court (RTC) of Pagadian City. In essence, the respondents seek the recoveryof four hundred fifty-seven (457) square meters of land from TCT No. T-4,342, which they believe wasunlawfully taken from the lawful share of their predecessor-in-interest, Atty. Fausto, in Lot 2189. 33The respondents allege that Atty. Fausto and Waldetrudes are, in actual fact, co-owners in equal shareof Lot 2189. 34 They insist on the First Partition Agreement as the only true, correct and bindingdivision of Lot 2189. 35 Hence, Atty. Fausto is entitled not merely to the meager fifty-one (51) squaremeter lot actually given to him under the Second Plan and Second Partition Agreement, but to the fivehundred eight (508) square meters of land allotted for him under the original partition. 36Verily, Waldetrudes could not have sold more than her rightful share of only five hundred seven (507)square meters. 37 The respondents, thus, ask for the nullification of the sale of Lot 2189-B to thepetitioners, at least with respect to the excess amounting to four hundred fifty-seven (457) squaremeters. 38


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BORGY AMBULO Property CasesIn the same vein, the respondents impugn the validity and binding effect of the Second Plan and theensuing Second Partition Agreement. 39 They denounce the said plan and agreement as merehandiworks of respondent Atty. Tecson himself in a fraudulent scheme to get a lion's share of Lot 2189.40 More particularly, the respondents claim that:1. Atty. Tecson was the one who deceived them into signing the Second Partition Agreement.41 The respondents say that they were not involved in the preparation of the Second PartitionAgreement. 42 It was only respondent Atty. Tecson who presented them with the said agreement andwho misleadingly told them that it was required to facilitate the sale of Waldetrudes' share. 43 Therespondents explain that they believed Atty. Tecson because he was their long-time neighbor, a closefamily friend and, not the least, a respected member of the community being a former governor of the

province. 442. The respondents also point out that the Second Partition Agreement did not specify the exactareas allotted for each component lot, and that they were never furnished with copies of the SecondPlan. 453. The Second Plan, which supposedly supplants the First Plan and divides Lot 2189 into two(2) vastly unequal portions, was prepared without the respondents' knowledge or consent. 46 For whichreason, the Second Plan could not be binding upon them. TacSAE4. The guardianship proceeding purportedly initiated in the name of respondent Isabel wasactually orchestrated and financed by Atty. Tecson. 47 Atty. Tecson was the one who hired Atty. FaustoM. Lingating, his former legal adviser during his term as governor, to handle the guardianship case forand on behalf of Isabel. 48On 20 October 1988, Waldetrudes, who was originally sued by the respondents as a defendant in theRTC, executed an affidavit 49 expressing her intent to join the respondents in their cause. In thementioned affidavit, Waldetrudes confirmed the allegations of the respondents as follows:xxx xxx xxx4. That the truth of the matter is that, my brother the late Agustin Fausto and I are co-owners of

a parcel of land covered by Original Certificate of Title No. 734 of Lot 2189, situated at Gatas District,Pagadian City, containing an area of 1,015 square meters, more or less, in equal share pro indiviso;5. That sometimes (sic) in 1974 the late Agustin Fausto and myself agreed to terminate our co-ownership and have the area surveyed and the same was approved and designated as PSD-09-06-000110, of which we have executed an agreement of partition on April 15, 1974 apportioning Lot No.2189-A with an area of 508 square meters in favor of my late brother Agustin Fausto and Lot No. 2189-B with an area of 507 square meters in my favor;6. That the aforestated documents were not registered in the Office of the Register of Deedsuntil the death of my brother Agustin Fausto on March 14, 1975, however, the papers or documentsinvolving Lot No. 2189 was kept by me;7. That due to financial problem especially I am already very old and sickly, I thought of sellingmy portion which is Lot 2189-B in favor of Jose L. Tecson, however, in the document the vendeeappears to be the sister of Jose L. Tecson in the person of Aurora L. Tecson;8. That I do not know later on how Jose L. Tecson maneuvered to have the parcel of land againsurveyed reducing the area of my brother to only 51 square meters, when in truth and in fact the portionof my late brother has an area of 508 square meters;

9. That while it is true that I sold Jose L. Tecson my portion of Lot 2189-B but the area sold isonly 507 square meters and there is no intention on my part to sell to Jose L. Tecson more than thatarea;10. That several occasion in the past I was made to sign documents by Jose L. Tecson inrelation to the portion sold in his favor, t rusting him to be closed (sic) to the family, not knowing later onthat he maneuvered to change the area of my portion from 507 square meters to 964 square metersencroaching the share of my late brother Atty. Agustin Fausto thereby reducing his area to 51 squaremeters;11. That because of the illegal maneuvering which does not reflect to be my true intention inselling my share to Jose L. Tecson, I am informing the Honorable Court that I am joining as partyplaintiff in Civil Case No. 2692 in order that the truth will come out and justice will prevail. cDTCIAOn 18 August 1992, the trial court ordered Waldetrudes to be dropped as a party-defendant from thecase and, instead, be impleaded therein as a party-plaintiff. 50

During the trial, Waldetrudes 51 and respondents Romualdo, 52 Minerva 53 and Isabel 54 were able totestify.In its decision dated 8 December 2000, the RTC dismissed the complaint of the respondents. 55 Thetrial court found no merit in the position of the respondents and considered the petitioners to beinnocent purchasers for value of Lot 2189-B. 56 The dispositive portion of the ruling of the trial courtreads: 57WHEREFORE, judgment is hereby rendered dismissing the case, and placing defendants spousesJose Tecson and Leonila F. Tecson in physical possession of Lot No. 2189-B, with an area of 964square meters in accordance with the approved subdivision plan on August 12, 1977 of the then LandRegistration Commission; and ordering the plaintiffs to pay defendants:

a. Moral damages in the amount of P30,000.00;b. Attorney's fee in the amount of P15,000.00;c. And the cost of litigation expenses in the amount of P5,000.00.As earlier mentioned, the Court of Appeals reversed the ruling of the trial court on appeal. 58 Hence,the present appeal by the petitioners.The primary issue in this appeal is whether the respondents may recover the four hundred fifty-seven(457) square meters of land from TCT No. T-4,342, registered in the name of petitioner Atty. Tecson.The petitioners would like this Court to answer in the negative.The claim of petitioner Atty. Tecson over the entire nine hundred sixty-four (964) square meters of landcovered by TCT No. T-4,342 is intricately linked with the validity of the Second Plan and the SecondPartition Agreement. As a perusal of the f acts reveal, TCT No. T-4,342, along with its precursors TCTNos. T-4,338 and T-4,336, are but derivates of the division of Lot 2189 fixed by the Second Plan andthe Second Partition Agreement.Understandably, the petitioners argue in favor of the validity of the Second Plan and the SecondPartition Agreement. 59 They deny Atty. Tecson's participation in the preparation of the saidinstruments. 60 The petitioners insist that the Second Plan and the Second Partition Agreement were

voluntary and intelligent deeds of Waldetrudes and the respondents themselves. 61The petitioners also claim that the Second Plan and the Second Partition Agreement present a moreaccurate reflection of the true nature of the co -ownership between Atty. Fausto and Waldetrudes.Contrary to what the respondents profess, Waldetrudes and Atty. Fausto were not actually co-owners inequal share of Lot 2189. 62 In truth, the siblings were not even co -owners at all. 63 SEHaDIAccording to the petitioners, Lot 2189 was originally the conjugal property of Waldetrudes and her latehusband, Leon Nadela. 64 At the inception, Atty. Fausto was never a co-owner of Lot 2189. 65Suitably, it was only Waldetrudes who initially declared Lot 2189 for taxation purposes per TaxDeclaration No. 6521. 66During the cadastral proceedings in 1970, however, Waldetrudes allowed Lot 2189 to be registered inher name and the name of Atty. Fausto as co-owners. 67 The petitioners claim that Waldetrudesconsented to such a registration only because Atty. Fausto had already constructed his house on aportion of Lot 2189. 68 The registered co-ownership between Waldetrudes and Atty. Fausto is,therefore, based merely on the siblings' actual occupancy of Lot 2189. 69The petitioners point out that the interest of Atty. Fausto in Lot 2189 was only limited to the house heconstructed thereonwhich, as it happened, lies evenly on the fifty-one (51) square meter portion

eventually assigned to him under the Second Plan and Second Partition Agreement. 70 Hence, theSecond Plan and the Second Partition Agreement must be sustained as perfectly valid instruments.We are not convinced.Waldetrudes and Atty. Fausto are Co-owners in Equal ShareAfter reviewing the arguments and evidence presented in this case, We rule that Waldetrudes and Atty.Fausto are, indeed, co-owners of Lot 2189. Moreover, We hold that the siblings have equal shares inthe said lot.First. The mother title of Lot 2189, OCT No. 734, states in no unclear terms that Waldetrudes and Atty.Fausto were co-owners of the subject lot. The inscription in the original title for Lot 2189 carries morethan sufficient weight to prove the existence of a co -ownership between Waldetrudes and Atty. Fausto.Second. Other than the bare assertion of the petitioners, there is absolutely no proof on record thatWaldetrudes was the sole beneficial owner of Lot 2189. Tax Declaration No. 6521 simply cannot prevailover OCT No. 734 as conclusive evidence of the true ownership of Lot 2189. 71


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BORGY AMBULO Property CasesThird. During the cadastral proceeding involving Lot 2189, Waldetrudes herself stated that Atty. Faustowas a co-owner of the subject lot. The transcript taken from the proceeding shows: 72Commissioner:

What is your relation with Waldetrudes Fausto who is the claimant of Lot No. 2189 (portion)of a parcel of land located at Pagadian City and more particularly bounded as follows: On the North byLot No. 2190, on the East by Zulueta St., on the South by National Highway and on the West by GatasCreek with an area of 1015 sq. meters and a house as a permanent improvement.A: I am the very one sir.Q: How did you acquire the said land?A: I purchase (sic) it from Sofia Vda. Claro in the year 1945 but a copy of the document was

lost.xxx xxx xxxQ: Who is your co-owner of this land? IADCESA: My co-owner is my brother Atty. Agustin Fausto.Fourth. There was likewise no evidence behind the petitioners' allegation that the registered co-ownership between Waldetrudes and Atty. Fausto was based on their actual occupancy of Lot 2189.On the contrary, OCT No. 734 categorically states that Waldetrudes and Atty. Fausto are co-owners "inundivided share" of Lot 2189. The conspicuous silence of OCT No. 734 as to the definite extent of therespective shares of Atty. Fausto and Waldetrudes in Lot 2189 gives rise to a presumption that they arein equal measure. We are at once reminded of Article 485 of the Civil Code, 73 to wit:Article 485. . . . .The portions belonging to the co-owners in the co-ownership shall be presumed equal, unless thecontrary is proved.Fifth. The equality in terms of share in Lot 2189, was affirmed by Waldetrudes when she testified inopen court, to wit: 74DIRECT EXAMINATION

ATTY. PERALTAQ: Now considering that you are, you owned that parcel of land jointly with your younger brotherAtty. Agustin Fausto, what is the extent of your ownership?A: We have co-equal shares sir.Clearly, the evidence preponderates in favor of the position that Waldetrudes and Atty. Fausto were co-owners in equal share of Lot 2189.Second Plan and Second Partition Agreement is InvalidHaving settled the existence and extent of the co-ownership between Waldetrudes and Atty. Fausto,We next inquire into the validity of the Second Plan and Second Partition Agreement.We find the Second Plan and Second Partition Agreement to be invalid.We agree with the findings of the Court of Appeals that Atty. Tecson was behind the execution of theSecond Partition Agreement. 75 It was Atty. Tecson who misled Waldetrudes and the respondents intosigning the Second Partition Agreement without giving them notice of the existence of a Second Plan.76 As a consequence, Waldetrudes and the respondents were misinformed as to the true nature of theSecond Partition Agreement. These factual findings are adequately supported by the positivetestimonies of respondents Romualdo Fausto, 77 Minerva Fausto 78 and Isabel, 79 to wit:

ROMUALDO'S DIRECT EXAMINATIONATTY. PERALTA:Q: Will you please go over if this is the machine copy of the Deed of partition which was broughtto you by Atty. Tecson and requested you to sign the same?A: Yes sir that is the one. DcTaEHxxx xxx xxxQ: When was that Deed of Partition marked as Exhibit "G" presented to you by Atty. Tecson?A: Early part of 1977. I was already connected with the Provincial Assessor that was the time Ihave seen so many Deed of Sale and the area is specified so before I signed I asked Atty. Tecsonwhere is the area and he told me never mind the area it will be surveyed and I did not insist because Itrusted him very much.Q: By the time this was presented to you by Atty. Tecson there was no survey of 2189?A: There was no survey.

xxx xxx xxxCOURT:

This document which you said you were present during the signing of your brothers andsisters but you cannot remember whether you were present for the others where did you sign thisdocument?A: At our house.COURT:

Who delivered this document to you[r] house?A: Atty. Tecson.COURT:

You want to impress this court that when you affixed your signatures in your house Atty.Tecson was present?A: Yes sir.COURT:

After signing what was done to this document?A: We are not aware of that but we just waited for the survey because Atty. Tecson told us thatthe survey follows later.COURT:

Who kept this document?A: My Auntie Waldetrudes Nadela.COURT:

It is clear now that this document was signed in your house and it was kept by your Auntie?A: Yes, sir. IADaSExxx xxx xxxATTY. PERALTA:Q: When Atty. Tecson went your house to request you to sign how did he tell you?

A: He told us just to sign the document and the survey will just follow we just sign the documentwithout the area and he told us that the area will just follow later.Q: When you signed the document with your mother, brothers and sisters Atty. Tecson broughtthe documents?A: Yes, sir.MINERVA FAUSTO'S DIRECT EXAMINATIONATTY. PERALTA:Q: Why, at the time whenwho brought this deed of partition for signature?A: Jose L. Tecson.Q: You are referring to one of the defendants, Jose L. Tecson?A: Yes, sir.Q: Now, when this was brought by Jose L. Tecson, the defendant Jose L. Tecson, where did heCOURT:

For a moment.Q: You said that defendant Jose L. Tecson brought that deed of partition. Were you there whendefendant Jose L. Tecson brought that deed of partition?

A: Yes, your Honor.Q: Where was it brought?A: In the house.COURT:

Proceed.ATTY. PERALTA:Q: Who were present in your house when this was brought by defendant Jose L. Tecson?A: Myself, Neneth or Agustin, Romualdo and Jose Fausto. There were four (4) of us when thatdeed of partition was brought to the house, myself, my sister Agustina, my brothers Romualdo andJose.Q: Do you want to convey to the Court that when this was brought to you Francisco Fausto,Victor Fausto and your sister Elizabeth, Maria Fausto were not around when this was brought by JoseL. Tecson for signature in your house?


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BORGY AMBULO Property CasesA: Yes, sir.xxx xxx xxxQ: Why did you sign above the typewritten name of Francisco Fausto knowing that he was notaround?A: Because defendant Jose L. Tecson told me to affix the signature of Francisco Faustobecause this deed of partition is just to facilitate the transferring (sic) of the title of the land.xxx xxx xxxQ: Who signed for her, for and behalf of Maria Lilia Fausto?A: I signed myself.Q: Why did you sign for Maria Lilia Fausto?

A: Because Jose L. Tecson told me to sign the document in order that the deed of partitioncould be accomplished.xxx xxx xxxQ: Now, how about the residence certificates appearing after the name of Agustina Fausto, withher own residence certificate 3976584 to have been issued January 6, 1977, Pagadian City, and theResidence Certificate of Jose Fausto which has the same number 3976584 issued on January 6, 1977,Pagadian City, who placed this residence certificate?A: All of us sir never exhibited our residence certificates. It was the Tecsons who supplied theresidence certificate numbers. HcSETIISABEL'S DIRECT EXAMINATIONATTY. PERALTA:Q: Do you remember having signed a Deed of Partition together with some of your children?A: Yes sir[.] I can remember.Q: Who brought that Deed of Partition for signature together with some of your children?A: Governor Tecson.Q: Were you able to sign the Deed of Partition?

A: I signed that Deed of Partition because according to him "just sign this for purposes ofsubdividing the property."xxx xxx xxxQ: Do you recall if you have filed guardianship proceeding?A: I have not remembered having filed a guardianship proceeding.Q: Have you heard that there was guardianship proceeding?A: All I can remember about that guardianship proceeding was that when Gov. Tecson let mesign a guardianship because some of my children were not around.Q: Do you want to convey to this court that personally you have not filed guardianshipproceeding but it was Governor Tecson who let you sign some documents regarding guardianship?A: It was Governor Tecson who explained to me to sign that guardianship proceeding becauseaccording to him it will facilitate and I thought that guardianship was only for purposes of being guardianto my children as a mother.Indeed, the lack of a plausible explanation why a co-owner would gratuitously cede a very substantialportion of his rightful share to another co-owner in partition renders the foregoing testimonies morecredible as against the plain general denial of Atty. Tecson. On this point, We find no reversible error on

the part of the Court of Appeals.The established facts have several legal consequences:First. The Second Plan, having been prepared without the knowledge and consent of any of the co-owners of Lot 2189, have no binding effect on them.Second. The Second Partition Agreement is null and void as an absolute simulation, 80 albeit inducedby a third party. The fraud perpetrated by Atty. Tecson did more than to vitiate the consent ofWaldetrudes and the respondents. It must be emphasized that Waldetrudes and the respondents neverhad any intention of entering into a new partition distinct from the First Partition Agreement. Theestablished facts reveal that Waldetrudes and the respondents assented to the Second PartitionAgreement because Atty. Tecson told them that the instrument was merely required to expedite thesale of Waldetrudes' share. 81 aDcEIHIn other words, the deceit employed by Atty. Tecson goes into the very nature of the Second PartitionAgreement and not merely to its object or principal condition. Evidently, there is an absence of a

genuine intent on the part of the co-owners to be bound under a new partition proposing a new divisionof Lot 2189. The apparent consent of Waldetrudes and the respondents to the Second PartitionAgreement is, in reality, totally wanting. For that reason, the Second Partition Agreement is null andvoid.Third. The Second Partition Agreement being a complete nullity, it cannot be ratified either by the lapseof time or by its approval by the guardianship court. 82Fourth. The First Plan and the First Partition Agreement remain as the valid and binding division of Lot2189. Hence, pursuant to the First Partition Agreement, Waldetrudes is the absolute owner of Lot 2189-A with an area of only five hundred seven (507) square meters. Atty. Fausto, on the other hand, hasdominion over Lot 2189-B with an area of five hundred eight (508) square meters.

Fifth. Inevitably, Waldetrudes can only sell her lawful share of five hundred seven (507) square meters.The sales in favor of Aurora and, subsequently, Atty. Tecson, are thereby null and void insofar as itexceeded the 507 square meter share of Waldetrudes in Lot 2189. Nemo dat quod non habet. 83Atty. Tecson is not an innocent purchaser for valueThe remaining bar to the recovery by the respondents of the excess area held by Atty. Tecson is theprinciple of an innocent purchaser for value of land under the Torrens System of Registration.The petitioners claim that they are bona fide purchasers of the entire nine hundred sixty-four (964)square meters of land covered by Lot 2189-B with Aurora merely relying on the strength of TCT No.T-4,336 in the name of Waldetrudes, while Atty. Tecson placing confidence in TCT No. T-4,338 in thename of Aurora. Both TCT Nos. T-4,336 and T-4,338 define the area of Lot 2189-B as nine hundredsixty-four (964) square meters. 84 The petitioners allege that at the time they made their respectivepurchase, they did not know of the existing partition of Lot 2189 per the First Plan and the First PartitionAgreement. 85We disagree. The proven facts indicate that Atty. Tecson knew or, at the very least, should have knownthat Atty. Fausto and Waldetrudes were co-owners in equal share of Lot 2189. We must be reminded ofthe following circumstances:

1. Atty. Tecson was a long-time friend and neighbor of the Faustos. 86 Atty. Tecson himselftestified that he considered Atty. Fausto as a good friend and even admitted that he would sometimesvisit the latter in his house to play mahjong. 87 By this, Atty. Tecson knew that Atty. Fausto has anactual interest in Lot 2189.2. Atty. Tecson was the one who presented the Second Partition Agreement to Waldetrudesand the respondents; 883. Waldetrudes and the respondents were not involved in the preparation of the SecondPartition Agreement and, at the time they signed the said agreement, had no knowledge of theexistence of the Second Plan; 89 and4. The Second Partition Agreement failed to state the specific areas allotted for eachcomponent of Lot 2189 and made no mention of the division proposed by the Second Plan. 90Being the one behind the execution of the Second Partition Agreement, there is no doubt that Atty.Tecson knew that Lot 2189 was owned in common by Waldetrudes and Atty. Fausto. This, takentogether with the instrument's unusual silence as to the definite area allotted for each component lotand the Second Plan, reveals a deliberate attempt on the part of Atty. Tecson to conceal fromWaldetrudes and the respondents the unequal division of Lot 2189.

The necessity to conceal the disproportionate division of Lot 2189 can only be explained by Atty.Tecson's prior knowledge that such a partition is inherently defective for being contrary to the actualsharing between Waldetrudes and Atty. Fausto. Atty. Tecson is clearly in bad faith.Verily, Atty. Tecson cannot be considered as an innocent purchaser of the excess area of Lot 2189-B.Based on the facts and circumstances prevailing in this case, Atty. Tecson may be charged with actualnotice of the defect plaguing the Second Partition Agreement. The respondents may, therefore,recover.WHEREFORE, the petition is hereby DENIED. Accordingly, the appealed Court of Appeals decision inCA-G.R. CV No. 70303 dated 12 December 2006 is hereby AFFIRMED.Costs against petitioner. TAIEcSSO ORDERED.


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BORGY AMBULO Property Cases

FIRST DIVISION

[G.R. No. 168732. June 29, 2007.]NATIONAL POWER CORPORATION, petitioner, vs. LUCMAN G. IBRAHIM, OMAR G. MARUHOM,ELIAS G. MARUHOM, BUCAY G. MARUHOM, FAROUK G. MARUHOM, HIDJARA G. MARUHOM,

ROCANIA G. MARUHOM, POTRISAM G. MARUHOM, LUMBA G. MARUHOM, SINAB G.MARUHOM, ACMAD G. MARUHOM, SOLAYMAN G. MARUHOM, MOHAMAD M. IBRAHIM, and

CAIRONESA M. IBRAHIM, respondents.D E C I S I O NAZCUNA, J p:This is a petition for review on certiorari under Rule 45 of the Rules of Court seeking to annul theDecision 1 dated June 8, 2005 rendered by t he Court of Appeals (CA) in C.A.-G.R. CV No. 57792.aSTAcHThe facts are as follows:On November 23, 1994, respondent Lucman G. Ibrahim, in his personal capacity and in behalf of hisco-heirs Omar G. Maruhom, Elias G. Maruhom, Bucay G. Maruhom, Mamod G. Maruhom, Farouk G.Maruhom, Hidjara G. Maruhom, Rocania G. Maruhom, Potrisam G. Maruhom, Lumba G. Maruhom,Sinab G. Maruhom, Acmad G. Maruhom, Solayman G. Maruhom, Mohamad M. Ibrahim and Caironesa

M. Ibrahim, instituted an action against petitioner National Power Corporation (NAPOCOR) for recoveryof possession of land and damages before the Regional Trial Court (RTC) of Lanao del Sur. ADSTCIIn their complaint, Ibrahim and his co-heirs claimed that they were owners of several parcels of landdescribed in Survey Plan FP (VII-5) 2278 consisting of 70,000 square meters, divided into three (3) lots,i.e. Lots 1, 2, and 3 consisting of 31,894, 14,915, and 23,191 square meters each respectively.Sometime in 1978, NAPOCOR, through alleged stealth and without respondents' knowledge and priorconsent, took possession of the sub-terrain area of their lands and constructed therein undergroundtunnels. The existence of the tunnels was only discovered sometime in July 1992 by respondents andthen later confirmed on November 13, 1992 by NAPOCOR itself through a memorandum issued by thelatter's Acting Assistant Project Manager. The t unnels were apparently being used by NAPOCOR insiphoning the water of Lake Lanao and in the operation of NAPOCOR's Agus II, III, IV, V, VI, VIIprojects located in Saguiran, Lanao del Sur; Nangca and Balo-i in Lanao del Norte; and Ditucalan andFuentes in Iligan City. ECAaTSOn September 19, 1992, respondent Omar G. Maruhom requested the Marawi City Water District for apermit to construct and/or install a motorized deep well in Lot 3 located in Saduc, Marawi City but hisrequest was turned down because the construction of the deep well would cause danger to lives and

property. On October 7, 1992, respondents demanded that NAPOCOR pay damages and vacate thesub-terrain portion of their lands but the latter refused to vacate much less pay damages. Respondentsfurther averred that the construction of the underground tunnels has endangered their lives andproperties as Marawi City lies in an area of local volcanic and tectonic activity. Further, these illegallyconstructed tunnels caused them sleepless nights, serious anxiety and shock thereby entitling them torecover moral damages and that by way of example for the public good, NAPOCOR must be held liablefor exemplary damages.Disputing respondents' claim, NAPOCOR filed an answer with counterclaim denying the materialallegations of the complaint and interposing affirmative and special defenses, namely that (1) there is afailure to state a cause of action since respondents seek possession of the sub-terrain portion whenthey were never in possession of the same, (2) respondents have no cause of action because theyfailed to show proof that they were the owners of the property, and (3) the tunnels are a government

project for the benefit of all and all private lands are subject to such easement as may be necessary forthe same. 2 DIESHTOn August 7, 1996, the RTC rendered a Decision, the decretal portion of which reads as follows:WHEREFORE, judgment is hereby rendered:1. Denying plaintiffs' [private respondents'] prayer for defendant [petitioner] National PowerCorporation to dismantle the underground tunnels constructed between the lands of plaintiffs in Lots 1,2, and 3 of Survey Plan FP (VII-5) 2278;2. Ordering defendant to pay to plaintiffs the fair market value of said 70,000 square meters ofland covering Lots 1, 2, and 3 as described in Survey Plan FP (VII-5) 2278 less the area of 21,995square meters at P1,000.00 per square meter or a total of P48,005,000.00 for the remaining unpaid

portion of 48,005 square meters; with 6% interest per annum from the filing of this case until paid;3. Ordering defendant to pay plaintiffs a reasonable monthly rental of P0.68 per square meter ofthe total area of 48,005 square meters effective from its occupancy of the foregoing area in 1978 or atotal of P7,050,974.40.4. Ordering defendant to pay plaintiffs the sum of P200,000.00 as moral damages; and5. Ordering defendant to pay the further sum of P200,000.00 as attorney's fees and the costs.DIESaCSO ORDERED. 3On August 15, 1996, Ibrahim, joined by his co-heirs, filed an Urgent Motion for Execution of JudgmentPending Appeal. On the other hand, NAPOCOR filed a Notice of Appeal by registered mail on August19, 1996. Thereafter, NAPOCOR filed a vigorous opposition to the motion for execution of judgmentpending appeal with a motion for reconsideration of the Decision which it had received on August 9,1996.On August 26, 1996, NAPOCOR filed a Manifestation and Motion withdrawing its Notice of Appealpurposely to give way to the hearing of its motion for reconsideration.On August 28, 1996, the RTC issued an Order granting execution pending appeal and denying

NAPOCOR's motion for reconsideration, which Order was received by NAPOCOR on September 6,1996.On September 9, 1996, NAPOCOR filed its Notice of Appeal by registered mail which was denied bythe RTC on the ground of having been filed out of time. Meanwhile, the Decision of the RTC wasexecuted pending appeal and funds of NAPOCOR were garnished by respondents Ibrahim and his co-heirs. AHDaETOn October 4, 1996, a Petition for Relief from Judgment was filed by respondents Omar G. Maruhom,Elias G. Maruhom, Bucay G. Maruhom, Mamod G. Maruhom, Farouk G. Maruhom, Hidjara G.Maruhom, Potrisam G. Maruhom and Lumba G. Maruhom asserting as follows:1) they did not file a motion to reconsider or appeal the decision within the reglementary periodof fifteen (15) days from receipt of judgment because they believed in good faith that the decision wasfor damages and rentals and attorney's fees only as prayed for in the complaint;2) it was only on August 26, 1996 that they learned that the amounts awarded to the plaintiffsrepresented not only rentals, damages and attorney's fees but the greatest portion of which waspayment of just compensation which in effect would make the defendant NPC the owner of the parcelsof land involved in the case;

3) when they learned of the nature of the judgment, the period of appeal has already expired;4) they were prevented by fraud, mistake, accident, or excusable negligence from taking legalsteps to protect and preserve their rights over their parcels of land in so far as the part of the decisiondecreeing just compensation for petitioners' properties;5) they would never have agreed to the alienation of their property in favor of anybody,considering the fact that the parcels of land involved in this case were among the valuable propertiesthey inherited from their dear father and they would rather see their land crumble to dust than sell it toanybody. 4 cHCIDEThe RTC granted the petition and rendered a modified judgment dated September 8, 1997, thus:WHEREFORE, a modified judgment is hereby rendered:1) Reducing the judgment award of plaintiffs for the fair market value of P48,005,000.00 by9,526,000.00 or for a difference by P38,479,000.00 and by the further sum of P33,603,500.00 subjectof the execution pending appeal leaving a difference of 4,878,500.00 which may be the subject of


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BORGY AMBULO Property Casesexecution upon the finality of this modified judgment with 6% interest per annum from the filing of thecase until paid.2) Awarding the sum of P1,476,911.00 to herein petitioners Omar G. Maruhom, Elias G.Maruhom, Bucay G. Maruhom, Mahmod G. Maruhom, Farouk G. Maruhom, Hidjara G. Maruhom,Portrisam G. Maruhom and Lumba G. Maruhom as reasonable rental deductible from the awarded sumof P7,050,974.40 pertaining to plaintiffs.3) Ordering defendant embodied in the August 7, 1996 decision to pay plaintiffs the sum ofP200,000.00 as moral damages; and further sum of P200,000.00 as att orney's fees and costs.SO ORDERED. 5 AEcTaSSubsequently, both respondent Ibrahim and NAPOCOR appealed to the CA.

In the Decision dated June 8, 2005, the CA set aside the modified judgment and reinstated the originalDecision dated August 7, 1996, amending it further by deleting the award of moral damages andreducing the amount of rentals and attorney's fees, thus:WHEREFORE, premises considered, herein Appeals are hereby partially GRANTED, the ModifiedJudgment is ordered SET ASIDE and rendered of no force and effect and the original Decision of thecourt a quo dated 7 August 1996 is hereby RESTORED with the MODIFICATION that the award ofmoral damages is DELETED and the amounts of rentals and attorney's fees are REDUCED toP6,888,757.40 and P50,000.00, respectively.In this connection, the Clerk of Court of RTC Lanao del Sur is hereby directed to reassess anddetermine the additional filing fee that should be paid by Plaintiff-Appellant IBRAHIM taking intoconsideration the total amount of damages sought in the complaint vis--vis the actual amount ofdamages awarded by this Court. Such additional filing fee shall constitute a lien on the judgment.SO ORDERED. 6 AacSTEHence, this petition ascribing the following errors to the CA:(a) RESPONDENTS WERE NOT DENIED THE BENEFICIAL USE OF THEIR SUBJECTPROPERTIES TO ENTITLE THEM TO JUST COMPENSATION BY WAY OF DAMAGES;

(b) ASSUMING THAT RESPONDENTS ARE ENTITLED TO JUST COMPENSATION BY WAYOF DAMAGES, NO EVIDENCE WAS PRESENTED ANENT THE VALUATION OF RESPONDENTS'PROPERTY AT THE TIME OF ITS TAKING IN THE YEAR 1978 TO JUSTIFY THE AWARD OF ONETHOUSAND SQUARE METERS (P1000.00/SQ. M.) EVEN AS PAYMENT OF BACK RENTALS ISITSELF IMPROPER.This case revolves around the propriety of paying just compensation to respondents, and, by extension,the basis for computing the same. The threshold issue of whether respondents are entitled to justcompensation hinges upon who owns the sub-terrain area occupied by petitioner. EcIaTAPetitioner maintains that the sub-terrain portion where the underground tunnels were constructed doesnot belong to respondents because, even conceding the fact that respondents owned the property, theirright to the subsoil of the same does not extend beyond what is necessary to enable t hem to obtain allthe utility and convenience that such property can normally give. In any case, petitioner asserts thatrespondents were still able to use the subject property even with the existence of the tunnels, citing asan example the fact that one of the respondents, Omar G. Maruhom, had established his residence ona part of the property. Petitioner concludes that the underground tunnels 115 meters belowrespondents' property could not have caused damage or prejudice to respondents and their claim to

this effect was, therefore, purely conjectural and speculative. 7The contention lacks merit.Generally, in an appeal by certiorari under Rule 45 of the Rules of Court, the Court does not pass uponquestions of fact. Absent any showing that the trial and appellate courts gravely abused their discretion,the Court will not examine the evidence introduced by the parties below to determine if they correctlyassessed and evaluated the evidence on record. 8 The jurisdiction of the Court in cases brought t o itfrom the CA is limited to reviewing and revising the errors of law imputed to it, its findings of fact beingas a rule conclusive and binding on the Court. cHTCaIIn the present case, petitioner failed to point to any evidence demonstrating grave abuse of discretionon the part of the CA or to any other circumstances which would call for the application of theexceptions to the above rule. Consequently, the CA's findings which upheld those of the t rial court thatrespondents owned and possessed the property and that its substrata was possessed by petitionersince 1978 for the underground tunnels, cannot be disturbed. Moreover, the Court sustains the finding

of the lower courts that the sub-terrain portion of the property similarly belongs to respondents. Thisconclusion is drawn from Article 437 of the Civil Code which provides:ART. 437. The owner of a parcel of land is the owner of its surface and of everything under it,and he can construct thereon any works or make any plantations and excavations which he may deemproper, without detriment to servitudes and subject to special laws and ordinances. He cannot complainof the reasonable requirements of aerial navigation. HaTAEcThus, the ownership of land extends to the surface as well as to the subsoil under it. In Republic of thePhilippines v. Court of Appeals, 9 this principle was applied to show that rights over lands are indivisibleand, consequently, require a definitive and categorical classification, thus:The Court of Appeals justified this by saying there is "no conflict of interest" between the owners of the

surface rights and the owners of the sub-surface rights. This is rather strange doctrine, for it is a well-known principle that the owner of a piece of land has rights not only to its surface but also to everythingunderneath and the airspace above it up to a reasonable height. Under the aforesaid ruling, the land isclassified as mineral underneath and agricultural on the surface, subject to separate claims of title. Thisis also difficult to understand, especially in its practical application.Under the theory of the respondent court, the surface owner will be planting on the land while themining locator will be boring tunnels underneath. The farmer cannot dig a well because he mayinterfere with the mining operations below and the miner cannot blast a tunnel lest he destroy the cropsabove. How deep can the farmer, and how high can the miner go without encroaching on each othersrights? Where is the dividing line between the surface and the sub-surface rights? HcDSaTThe Court feels that the rights over the land are indivisible and that the land itself cannot be halfagricultural and half mineral. The classification must be categorical; the land must be either completelymineral or completely agricultural.Registered landowners may even be ousted of ownership and possession of their properties in theevent the latter are reclassified as mineral lands because real properties are characteristicallyindivisible. For the loss sustained by such owners, they are entitled to just compensation under the

Mining Laws or in appropriate expropriation proceedings. 10Moreover, petitioner's argument that the landowners' right extends to the sub -soil insofar as necessaryfor their practical interests serves only to further weaken its case. The theory would limit the right to thesub-soil upon the economic utility which such area offers to the surface owners. Presumably, thelandowners' right extends to such height or depth where it is possible for them to obtain some benefit orenjoyment, and it is extinguished beyond such limit as there would be no more interest protected bylaw. 11 ACTEHIIn this regard, the trial court found that respondents could have dug upon their property motorized deepwells but were prevented from doing so by the authorities precisely because of the construction andexistence of the tunnels underneath the surface of their property. Respondents, therefore, still had alegal interest in the sub-terrain portion insofar as they could have excavated the same for t heconstruction of the deep well. The fact that they could not was appreciated by the RTC as proof that thetunnels interfered with respondents' enjoyment of their property and deprived them of its full use andenjoyment, thus:Has it deprived the plaintiffs of the use of their lands when from the evidence they have already existingresidential houses over said tunnels and it was not shown that the tunnels either destroyed said houses

or disturb[ed] the possession thereof by plaintiffs? From the evidence, an affirmative answer seems tobe in order. The plaintiffs and [their] co-heirs discovered [these] big underground tunnels in 1992. Thiswas confirmed by the defendant on November 13, 1992 by the Acting Assistant Project Manager, Agus1 Hydro Electric Project (Exh. K). On September 16, 1992, Atty. Omar Maruhom (co-heir) requested theMarawi City Water District for permit to construct a motorized deep well over Lot 3 for his residentialhouse (Exh. Q). He was refused the permit "because the construction of the deep well as (sic) theparcels of land will cause danger to lives and property." He was informed that "beneath your lands areconstructed the Napocor underground tunnel in connection with Agua Hydroelectric plant" (Exh. Q-2).There in fact exists ample evidence that this construction of the tunnel without the prior consent ofplaintiffs beneath the latter's property endangered the lives and properties of said plaintiffs. It has beenproved indubitably that Marawi City lies in an area of local volcanic and tectonic activity. Lake Lanaohas been formed by extensive earth movements and is considered to be a drowned basin ofvolcano/tectonic origin. In Marawi City, there are a number of former volcanoes and an extensive


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BORGY AMBULO Property Casesamount of faulting. Some of these faults are still moving. (Feasibility Report on Marawi City WaterDistrict by Kampsa-Kruger, Consulting Engineers, Architects and Economists, Exh. R). Moreover, it hasbeen shown that the underground tunnels [have] deprived the plaintiffs of t he lawful use of the land andconsiderably reduced its value. On March 6, 1995, plaintiffs applied for a two-million peso loan with theAmanah Islamic Bank for the expansion of the operation of the Ameer Construction and IntegratedServices to be secured by said land (Exh. N), but the application was disapproved by the bank in itsletter of April 25, 1995 (Exh. O) stating that: 2005jur"Apropos to this, we regret to inform you that we cannot consider your loan application due to thefollowing reasons, to wit:That per my actual ocular inspection and verification, subject property offered as collateral has an

existing underground tunnel by the NPC for the Agus I Project, which tunnel is traversing underneathyour property, hence, an encumbrance. As a matter of bank policy, property with an existingencumbrance cannot be considered neither accepted as collateral for a loan."All the foregoing evidence and findings convince this Court that preponderantly plaintiffs haveestablished the condemnation of their land covering an area of 48,005 sq. meters located at Saduc,Marawi City by the defendant National Power Corporation without even the benefit of expropriationproceedings or the payment of any just compensation and/or reasonable monthly rental since 1978. 12In the past, the Court has held that if the government takes property without expropriation and devotesthe property to public use, after many years, the property owner may demand payment of justcompensation in the event restoration of possession is neither convenient nor feasible. 13 This is inaccordance with the principle that persons shall not be deprived of their property except by competentauthority and for public use and always upon payment of just compensation. 14 SIcTACPetitioner contends that the underground tunnels in this case constitute an easement upon the propertyof respondents which does not involve any loss of title or possession. The manner in which theeasement was created by petitioner, however, violates the due process rights of respondents as it waswithout notice and indemnity to them and did not go through proper expropriation proceedings.

Petitioner could have, at any time, validly exercised the power of eminent domain to acquire theeasement over respondents' property as this power encompasses not only the taking or appropriationof title to and possession of the expropriated property but likewise covers even the imposition of a mereburden upon the owner of the condemned property. 15 Significantly, though, landowners cannot bedeprived of their right over their land until expropriation proceedings are instituted in court. The courtmust then see to it that the taking is for public use, that there is payment of just compensation and thatthere is due process of law. 16In disregarding this procedure and f ailing to recognize respondents' ownership of the sub-terrainportion, petitioner took a risk and exposed itself to greater liability with the passage of time. It must beemphasized that the acquisition of the easement is not without expense. The underground tunnelsimpose limitations on respondents' use of the property for an indefinite period and deprive them of itsordinary use. Based upon the foregoing, respondents are clearly entitled to the payment of justcompensation. 17 Notwithstanding the fact that petitioner only occupies the sub-terrain portion, it isliable to pay not merely an easement fee but rather the full compensation for land. This is so because inthis case, the nature of the easement practically deprives the owners of its normal beneficial use.Respondents, as the owners of the property thus expropriated, are entitled to a just compensation

which should be neither more nor less, whenever it is possible to make the assessment, than themoney equivalent of said property. 18 CHcTIAThe entitlement of respondents to just compensation having been settled, the issue now is on themanner of computing the same. In this regard, petitioner claims that the basis for the computation of thejust compensation should be the value of the property at the time it was taken in 1978. Petitioner alsoimpugns the reliance made by the CA upon National Power Corporation v. Court of Appeals andMacapanton Mangondato 19 as the basis for computing the amount of just compensation in this action.The CA found that "the award of damages is not excessive because the P1000 per square meter as thefair market value was sustained in a case involving a lot adjoining the property in question which caseinvolved an expropriation by [petitioner] of portion of Lot 1 of the subdivision plan (LRC) PSD 116159which is adjacent to Lots 2 and 3 of the same subdivision plan which is the subject of the instantcontroversy." 20

Just compensation has been understood to be the just and complete equivalent of the loss 21 and isordinarily determined by referring to the value of the land and its character at the time it was taken bythe expropriating authority. 22 There is a "taking" in this sense when the owners are actually deprivedor dispossessed of their property, where there is a practical destruction or a material impairment of thevalue of their property, or when they are deprived of t he ordinary use thereof. There is a "taking" in thiscontext when the expropriator enters private property not only for a momentary period but for morepermanent duration, for the purpose of devoting the property to a public use in such a manner as tooust the owner and deprive him of all beneficial enjoyment thereof. 23 Moreover, "taking" of theproperty for purposes of eminent domain entails that the entry into the property must be under warrantor color of legal authority. 24 SHTcDE

Under the factual backdrop of this case, the last element of taking mentioned, i.e., that the entry into theproperty is under warrant or color of legal authority, is patently lacking. Petitioner justified itsnonpayment of the indemnity due respondents upon its mistaken belief that the property formed part ofthe public dominion.This situation is on all fours with that in t he Mangondato case. NAPOCOR in that case took the propertyof therein respondents in 1979, using it to build its Aqua I Hydroelectric Plant Project, without payingany compensation, allegedly under the mistaken belief that it was public land. It was only in 1990, aftermore than a decade of beneficial use, that NAPOCOR recognized therein respondents' ownership andnegotiated for the voluntary purchase of the property.In Mangondato, this Court held:The First Issue: Date of Taking or Date of Suit?The general rule in determining "just compensation" in eminent domain is the value of the property as ofthe date of the filing of the complaint, as follows: TCaSAH"Sec. 4. Order of Condemnation. When such a motion is overruled or when any party fails to defendas required by this rule, the court may enter an order of condemnation declaring that the plaintiff has alawful right to take the property sought to be condemned, for the public use or purpose described in the

complaint, upon the payment of just compensation to be determined as of the date of the filing of thecomplaint. . . ." (Italics supplied).Normally, the time of the taking coincides with the filing of the complaint for expropriation. Hence, manyruling of this Court have equated just compensation with the value of the property as of the time of filingof the complaint consistent with the above provision of the Rules. So too, where the institution of theaction precedes entry to the property, the just compensation is to be ascertained as of the time o f filingof the complaint.The general rule, however, admits of an exception: where this Court fixed the value of the property asof the date it was taken and not the date of the commencement of the expropriation proceedings.In the old case of Provincial Government of Rizal vs. Caro de Araullo, the Court ruled that ". . . theowners of the land have no right to recover damages for this unearned increment resulting from theconstruction of the public improvement (lengthening of Taft Avenue from Manila to Pasay) from whichthe land was taken. To permit them to do so would be to allow them to recover more than the value ofthe land at the time it was taken, which is the true measure of the damages, or just compensation, andwould discourage the construction of important public improvements." SHaATCIn subsequent cases, the Court, following the above doctrine, invariably held that the time of taking is

the critical date in determining lawful or just compensation. Justifying this stance, Mr. Justice (laterChief Justice) Enrique Fernando, speaking for the Court in Municipality of La Carlota vs. The SpousesFelicidad Baltazar and Vicente Gan, said, ". . . the owner as is the constitutional intent, is paid what heis entitled to according to the value of the property so devoted to public use as of the date of taking.From that time, he had been deprived thereof. He had no choice but to submit. He is not, however, tobe despoiled of such a right. No less than the fundamental law guarantees just compensation. It wouldbe injustice to him certainly if from such a period, he could not recover the value of what was lost. Therecould be on the other hand, injustice to the expropriator if by a delay in the collection, the increment inprice would accrue to the owner. The doctrine to which this Court has been committed is intendedprecisely to avoid either contingency fraught with unfairness."Simply stated, the exception finds the application where the owner would be given undue incrementaladvantages arising from the use to which the government devotes the property expropriatedas forinstance, the extension of a main thoroughfare as was in the case in Caro de Araullo. In the instant


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BORGY AMBULO Property Casescase, however, it is difficult to conceive of how there could have been an extra-ordinary increase in thevalue of the owner's land arising from the expropriation, as indeed the records do not show anyevidence that the valuation of P1,000.00 reached in 1992 was due to increments directly caused bypetitioner's use of the land. Since the petit ioner is claiming an exception to Rule 67, Section 4, it has theburden in proving its claim that its occupancy and use not ordinary inflation and increase in landvalueswas the direct cause of the increase in valuation from 1978 to 1992. CIScaASide Issue: When is there "Taking" of Property?But there is yet another cogent reason why this petition should be denied and why the respondentCourt should be sustained. An examination of the undisputed factual environment would show that the"taking" was not really made in 1978.

This Court has defined the elements of "taking" as the main ingredient in the exercise of power ofeminent domain, in the following words:"A number of circumstances must be present in "taking" of property for purposes of eminent domain: (1)the expropriator must enter a private property; (2) the entrance into private property must be for morethan a momentary period; (3) the entry into the property should be under warrant or color of legalauthority; (4) the property must be devoted to a public use or otherwise informally appropriated orinjuriously affected; and (5) the utilization of the property for public use must be in such a way to oustthe owner and deprive him of all beneficial enjoyment of the property." (Italics supplied) AECcTSIn this case, the petitioner's entrance in 1978 was without intent to expropriate or was not made underwarrant or color of legal authority, for it believed the property was public land covered by ProclamationNo. 1354. When the private respondent raised his claim of ownership sometime in 1979, the petitionerflatly refused the claim for compensation, nakedly insisted that the property was public land andwrongly justified its possession by alleging it had already paid "financial assistance" to Marawi City inexchange for the rights over the property. Only in 1990, after more than a decade of beneficial use, didthe petitioner recognize private respondent's ownership and negotiate for the voluntary purchase of theproperty. A Deed of Sale with provisional payment and subject to negotiations for the correct price was

then executed. Clearly, this is not the intent nor t he expropriation contemplated by law. This is a simpleattempt at a voluntary purchase and sale. Obviously, the petitioner neglected and/or refused to exercisethe power of eminent domain.Only in 1992, after the private respondent sued to recover possession and petitioner filed its Complaintto expropriate, did petitioner manifest its intention to exercise the power of eminent domain. Thus therespondent Court correctly held: ASDCaI"If We decree that the fair market value of the land be determined as of 1978, then We would besanctioning a deceptive scheme whereby NAPOCOR, for any reason other than for eminent domainwould occupy another's property and when later pressed for payment, first negotiate for a low price andthen conveniently expropriate the property when the land owner refuses to accept its offer claiming thatthe taking of the property for the purpose of the eminent domain should be reckoned as of the datewhen it started to occupy the property and that the value of the property should be computed as of thedate of the taking despite the increase in the meantime in the value of the property."In Noble vs. City of Manila, the City entered into a lease-purchase agreement of a building constructedby the petitioner's predecessor-in-interest in accordance with the specifications of the former. The Courtheld that being bound by the said contract, the City could not expropriate the building. Expropriation

could be resorted to "only when it is made necessary by the opposition of the owner to the sale or bythe lack of any agreement as to the price." Said the Court: SHTaID"The contract, therefore, in so far as it refers to the purchase of the building, as we have interpreted it,is in force, not having been revoked by the parties or by judicial decision. This being the case, the citybeing bound to buy the building at an agreed price, under a valid and subsisting contract, and theplaintiff being agreeable to its sale, the expropriation thereof, as sought by the defendant, is baseless.Expropriation lies only when it is made necessary by the opposition of the owner to the sale or by thelack of any agreement as to the price. There being in the present case a valid and subsisting contract,between the owner of the building and t he city, for the purchase thereof at an agreed price, there is noreason for the expropriation." (Italics supplied)In the instant case, petitioner effectively repudiated the deed of sale it entered into with the privaterespondent when it passed Resolution No. 92-121 on May 25, 1992 authorizing its president tonegotiate, inter alia, that payment "shall be effective only after Agus I HE project has been placed in

operation." It was only then that petitioner's intent to expropriate became manifest as privaterespondent disagreed and, barely a month, filed suit. 25 SCDaETIn the present case, to allow petitioner to use the date it constructed the tunnels as th e date of valuationwould be grossly unfair. First, it did not enter the land under warrant or color of legal authority or withintent to expropriate the same. In fact, it did not bother to notify the owners and wrongly assumed it hadthe right to dig those tunnels under their property. Secondly, the "improvements" introduced bypetitioner, namely, the tunnels, in no way contributed to an increase in the value of the land. The trialcourt, therefore, as affirmed by the CA, rightly computed the valuation of the property as of 1992, whenrespondents discovered the construction of the huge underground tunnels beneath their lands andpetitioner confirmed the same and started negotiations for their purchase but no agreement could be

reached. 26As to the amount of the valuation, the RTC and the CA both used as basis the value of the adjacentproperty, Lot 1 (the property involved herein being Lots 2 and 3 of the same subdivision plan), whichwas valued at P1,000 per sq. meter as of 1990, as sustained by this Court in Mangondato, thus:DAEaTSThe Second Issue: ValuationWe now come to the issue of valuation.The fair market value as held by the respondent Court, is the amount of P1,000.00 per square meter. Inan expropriation case where the principal issue is the determination of just compensation, as is thecase here, a trial before Commissioners is indispensable to allow the parties to present evidence on theissue of just compensation. Inasmuch as the determination of just compensation in eminent domaincases is a judicial function and factual findings of the Court of Appeals are conclusive on the partiesand reviewable only when the case falls within the recognized exceptions, which is not the situationobtaining in this petition, we see no reason t o disturb the factual findings as to valuation of the subjectproperty. As can be gleaned from the records, the court-and-the-parties-appointed commissioners didnot abuse their authority in evaluating the evidence submitted to them nor misappreciate the clear

preponderance of evidence. The amount fixed and agreed to by the respondent appellate Court is notgrossly exorbitant. To quote: SHTaID"Commissioner Ali comes from the Office of the Register of Deeds who may well be considered anexpert, with a general knowledge of the appraisal of real estate and the prevailing prices of land in thevicinity of the land in question so that his opinion on the valuation of the property cannot be lightlybrushed aside."The prevailing market value of the land is only one of the determinants used by the commissioners'report the other being as herein shown:xxx xxx xxx"Commissioner Doromal's report, recommending P300.00 per square meter, differs from the 2commissioners only because his report was based on the valuation as of 1978 by the City AppraisalCommittee as clarified by the latter's chairman in response to NAPOCOR's general counsel's query."In sum, we agree with the Court of Appeals that petitioner has failed to show why it should be grantedan exemption from the general rule in determining just compensation provided under Section 4 of Rule67. On the contrary, private respondent has convinced us that, indeed, such general rule should in factbe observed in this case. 27

Petitioner has not shown any error on the part of the CA in reaching such a valuation. Furthermore,these are factual matters that are not within the ambit of the present review.WHEREFORE, the petition is DENIED and the Decision of the Court of Appeals in C.A.-G.R. CV No.57792 dated June 8, 2005 is AFFIRMED. SCEDAI


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BORGY AMBULO Property Cases

FIRST DIVISION[G.R. No. L-57348. May 16, 1985.]

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

Neil D. Hechanova for defendant-appellant.D E C I S I O N

MELENCIO-HERRERA, J p:This is an appeal from the Order of the former Court of First Instance of Iloilo to the then Court ofAppeals, 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 Certificateof Title No. T-3087, known as Lot No. 685, situated in the municipality of Dumangas, Iloilo, with an areaof 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 hadencroached on an area of thirty four (34) square meters of DEPRA's property. After the encroachmentwas discovered in a relocation survey of DEPRA's lot made on November 2, 1972, his mother, BeatrizDerla, after writing a demand letter asking DUMLAO to move back from his encroachment, filed anaction for Unlawful Detainer on February 6, 1973 against DUMLAO in the Municipal Court ofDumangas, docketed as Civil Case No. I. Said complaint was later amended to include DEPRA as aparty plaintiff.After trial the Municipal Court found that DUMLAO was a builder in good faith, and applying Article 448of the Civil Code, rendered judgment on September 29, 1973, the dispositive portion of which reads:Cdpr"Ordering that a forced lease is created between the parties with the plaintiffs, as lessors, and thedefendants as lessees, over the disputed portion with an area of thirty four (34) square meters, the rentto be paid is five (P5.00) pesos a month, payable by the lessee t o the lessors within the first five (5)days of the month the rent is due; and the lease shall commence on that day that this decision shallhave become final."

From the foregoing judgment, neither party appealed so that, if it were a valid judgment, it would haveordinarily lapsed into finality, but even then, DEPRA did not accept payment of rentals so that DUMLAOdeposited such rentals with the Municipal Court.On July 15, 1974, DEPRA filed a Complaint for Quieting of Title against DUMLAO before the then Courtof First Instance of Iloilo, Branch IV (Trial Court), involving the very same 34 square meters, which wasthe bone of contention in t he Municipal Court. DUMLAO, in his Answer, admitted the encroachment butalleged, in the main, that the present suit is barred by res judicata by virtue of the Decision of theMunicipal 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 theStipulation of Facts attached thereto. Premised thereon, the Trial Court on October 31, 1974, issued theassailed Order, decreeing:"WHEREFORE, the Court finds and so holds that the thirty four (34) square meters subject of thislitigation 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 thesame."Without pronouncement as to costs."SO ORDERED."Rebutting the argument of res judicata relied upon by DUMLAO, DEPRA claims that the Decision of theMunicipal Court was null and void ab initio because its jurisdiction is limited to the sole issue ofpossession, whereas decisions affecting lease, which is an encumbrance on real property, may only berendered by Courts of First Instance.Addressing ourselves to the issue of validity of the Decision of the Municipal Court, we hold the same tobe 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 overstepped its bounds when it imposed upon t heparties 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 (nowRegional Trial Courts) (Sec. 44(b), Judiciary Act of 1948; 2 Sec. 19 (2) Batas Pambansa Blg. 129). 3Since the Municipal Court, acted without jurisdiction, its Decision was null and void and cannot operateas res judicata to the subject complaint for Queting of Title. Besides, even if the Decision were valid, therule on res judicata would not apply due to difference in cause of action. In the Municipal Court, thecause of action was the deprivation of possession, while in the action to quiet title, the cause of actionwas based on ownership. Furthermore, Sec. 7, Rule 70 of the Rules of Court explicitly provides thatjudgment in a detainer case "shall not bar an action between the same parties respecting title to theland." 4Conceded in the Stipulation of Facts between the parties is that DUMLAO was a builder in good faith.Thus, LLpr"8. That the subject matter in the unlawful detainer case, Civil Case No. 1, before the MunicipalCourt 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; . . ." (Italics ours)Consistent with the principles that our Court system, like any other, must be a dispute resolvingmechanism, we accord legal effect to the agreement of the parties, within the context of their mutualconcession and stipulation. They have, thereby, chosen a legal formula to resolve their disputetoapply to DUMLAO the rights of a "builder in good faith" and to DEPRA those of a "landowner in goodfaith" as prescribed in Article 448. Hence, we shall refrain from further examining whether the factualsituations of DUMLAO and DEPRA conform to the juridical positions respectively defined law, for a"builder in good faith" under Article 448, a "possessor in good faith" under Article 526 and a "landownerin 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 goodfaith.shall have the right.to appropriate as his own the works, sowing or planting, after payment of the indemnity provided for inarticles 546 and 548, orto 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 thanthat of the building or trees. In such case, he shall pay reasonable rent, if the owner of the land doesnot choose to appropriate the building or trees after proper indemnity. The parties shall agree upon theterms of the lease and in case of disagreement, the court shall fix the terms thereof." (Paragraphingsupplied)Pursuant to the foregoing provision, DEPRA has the option either to pay for the encroaching part ofDUMLAO's kitchen, or to sell the encroached 34 square meters of his lot to DUMLAO. He cannot refuseto pay for the encroaching part of the building, and to sell the encroached part of his land, 5 as he hadmanifested before the Municipal Court. But that manifestation is not binding because it was made in avoid proceeding.However, the good faith of DUMLAO. is part of the Stipulation of Facts in the Court of First Instance. Itwas thus error for the Trial Court to have ruled that DEPRA is "entitled to possession," without more, of


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BORGY AMBULO Property Casesthe disputed portion implying thereby that he is entitled to have the kitchen removed. He is entitled tosuch removal only when, after having chosen to sell his encroached land, DUMLAO fails to pay for thesame. 6 In this case, DUMLAO had expressed his willingness to pay for the land, but DEPRA refusedto sell."The owner of the building erected in good faith on a land owned by another, is entitled to retain thepossession of the land until he is paid the value of his building, under article 453 (now Article 546). Theowner of the land, upon the other hand, has the option, under article 361 (now Article 448), either to payfor the building or to sell his land to the owner of the building. But he cannot, as respondents here didrefuse both to pay for the building and to sell the land and compel the owner of the building to remove itfrom 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 theirbuildings from the land belonging to plaintiffs-respondents only because the latter chose neither to payfor such buildings nor to sell the land, is null and void, for it amends substantially the judgment soughtto be executed and is, f urthermore, 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 Code.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 theindemnity stated in Articles 453 and 454, or to oblige the one who built or planted to pay the price of theland, 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 mentionedin the Article. Some commentators have questioned the preference in favor of the owner of the land, butManresa's opinion is that the Article is just and fair. LLpr". . . es justa la facultad que el codigo da al dueo del suelo en el articulo 361, en el caso de edificacion

o plantacion? Algunos comentaristas la conceptuan injusta, y como un extraordinario privilegio en favorde la propiedad territorial. Entienden que impone el Codigo una pena al poseedor de buena fe; y comoadvierte uno de los comentaristas aludidos, 'no se ve claro el por que de tal pena . . . al obligar al queobro de buena fe a quedarse con el edificio o plantacion, previo el pago del terreno que ocupa, porquesi bien es verdad que cuando edifico o planto demostro con este hecho, que queria para si el edificio oplantio, tambien lo es que el que edifico o planto de buena fe lo hizo en la erronea inteligencia decreerse dueo del terreno. Posible es que, de saber lo contrario, y de tener noticia de que habia quecomprar y pagar el terreno, no se hubiera decidido a plantar ni a eddficar. La ley, obligandole a hacerlo,fuerza su voluntad, y la fuerza por un hecho inocente de que no debe ser responsable'. Asi podrasuceder; pero la realidad es que con ese hecho voluntario, aunque sea inocente, se ha eniquecidotorticeramente 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, yrespetando en lo posible el principio que para la accesion se establece en el art. 358." 7Our own Code Commission must have taken account of the objections to Article 361 of the SpanishCivil Code. Hence, the Commission provided a modification thereof, and Article 448 of our Code hasbeen made to provide:

"ART. 448. The owner of the land on which has been built, sown or planted in good faith, shallhave the right to appropriate as his own the works, sowing or planting, after payment of the indemnityprovided for in articles 546 and 548, or to oblige the one who built or planted to pay the price of theland, and the one who sowed, the proper rent. However, the builder or planter cannot be obliged to buythe land if its value is considerably more than that of the building or trees. In such case, he shall payreasonable rent, if the owner of the land does not choose to appropriate the building or trees afterproper indemnity. The parties shall agree upon the terms of the lease and in case of disagreement, thecourt 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 theowners, and it becomes necessary to protect the owner of the improvements without causing injusticeto the owner of the land. In view of the impracticability of creating a state of f orced co-ownership, the

law has provided a just solution by giving the owner of the land the option to acquire the improvementsafter payment of the proper indemnity, or to oblige the builder or planter to pay for the land and thesower 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 ofthe accessory thing. (3 Manresa 213; Bernardo vs. Bataclan, 37 Off. Gaz. 1382; Co Tao vs. ChanChico, G.R. No. 49167, April 30, 1949; Article applied: see Cabral, et al vs. Ibaez [S.C.] 52 Off. Gaz.217; Marfori vs. Velasco, [C.A.] 52 Off. Gaz. 2050)." 8WHEREFORE, the judgment of the trial Court is hereby set aside, and this case is hereby orderedremanded to the Regional Trial Court of Iloilo for further proceedings consistent with Articles 448 and546 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 haveacquired by reason thereof, andd) whether the value of said area of land is considerably more than that of the kitchen builtthereon.2. After said amounts shall have been determined by competent evidence, the Regional TrialCourt shall render judgment, as follows:a) The trial Court shall grant DEPRA a period of fifteen (15) days within which to exercise hisoption under the law (Article 448, Civil Code), whether to appropriate the kitchen a his own by paying toDUMLAO either the amount of the expenses spent by DUMLAO for the building of the kitchen, or theincrease in value ("plus value") which the said area of 34 square meters may have acquired by reasonthereof, or to oblige DUMLAO to pay the price of said area. The amounts to be respectively paid byDUMLAO and DEPRA, in accordance with the option thus exercised by written notice of the other partyand 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 topay the price of the land but the latter rejects such purchase because, as found by the trial Court, thevalue of the land is considerably more than that of the kitchen, DUMLAO shall give written notice ofsuch rejection to DEPRA and to the Court within fifteen (15) days from notice of DEPRA's option to sellthe land. In that event, the parties shall be given a period of fifteen (15) days from such notice ofrejection within which to agree upon the terms of the lease, and give the Court formal written notice ofsuch 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 termsof the lease, provided that the monthly rental to be fixed by t he 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 theforced lease shall not be more than two (2) years, counted from the finality of the judgment, consideringthe long period of time since 1952 that DUMLAO has occupied the subject area. The rental thus fixedshall be increased by ten percent (10%) for the second year of the forced lease. DUMLAO shall notmake 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 DUMLAOor at the latter's expense. The rentals herein provided shall be tendered by DUMLAO to the Court forpayment to DEPRA, and such tender shall constitute evidence of whether or not compliance was madewithin the period fixed by the Court. LLphilc) In any event, DUMLAO shall pay DEPRA an amount computed at Ten Pesos (P10.00) permonth as reasonable compensation for the occupancy of DEPRA's land for the period counted from1952, the year DUMLAO occupied the subject area, up to the commencement date of the forced leasereferred to in the preceding paragraph;d) The periods to be fixed by the trial Court in its Decision shall be inextendible, and upon failureof the party obliged to tender to the trial Court the amount due to the obligee, the party entitled to suchpayment shall be entitled to an order of execution for the enforcement of payment of the amount dueand for compliance with such other acts as may be required by the prestation due the obligee.No costs.


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BORGY AMBULO Property CasesSO ORDERED.

EN BANC[G.R. No. L-2659. October 12, 1950.]

In the matter of the testate estate of Emil Maurice Bachrach, deceased. MARY MCDONALDBACHRACH, petitioner-appellee, vs. SOPHIE SEIFERT and ELISA ELIANOFF, oppositors-

appellants.Ross, Selph, Carrascoso & Janda, for appellants.

Delgado & Flores, for appellee.SYLLABUS

1. USUFRUCT; STOCK DIVIDED CONSIDERED CIVIL FRUIT AND BELONGS TOUSUFRUCTUARY. Under the Massachusetts rule, a stock dividend is considered part of the capitaland belongs to the remainderman; while under the Pennsylvania rule, all earnings of a corporation,when declared as dividends in whatever form, made during the lifetime of the usufructuary, belong tothe latter.2. ID.; ID.The Pennsylvania rule is more in accord with our statutory laws than theMassachusetts rule. Under section 16 of our Corporation Law, no corporation may make or declarefrom its business. Any dividend, therefore, whether cash or stock, represent surplus profits. Article 471of the Civil Code provides that the usufructuary shall be entitled to receive all the natural, industrial, andcivil fruits of the property in the usufruct. The stock dividend in question in this case is a civil fruit of theoriginal investment. The shares of stock issued in payment of said dividend may be sold independentlyof the original shares just as the offspring of a domestic animal may be sold independently of itsmother.D E C I S I O NOZAETA, J p:Is a stock dividend fruit or income, which belongs to the usufructuary, or is it capital or part of thecorpus of the estate, which pertains to the remainderman? That is the question raised in this appeal.The deceased E. M. Bachrach, who left no forced heir except his widow Mary McDonald Bachrach, inhis last will and testament made various legacies in cash and willed the remainder of his estate asfollows:"Sixth: It is my will and do herewith bequeath and devise to my beloved wife Mary McDonald Bachrachfor life all the fruits and usufruct of the remainder of all my estate after payment of the legacies,bequests, and gifts provided for above; and she may enjoy said usufruct and use or spend such fruitsas she may in any manner wish."The will further provided that upon the death of Mary McDonald Bachrach, one-half of all his estate"shall be divided share and share alike by and between my legal heirs, to the exclusion of my brothers."The estate of E. M. Bachrach, as owner of 108,000 shares of stock of the Atok-Big Wedge Mining Co.,Inc., received from the latter 54,000 shares representing 50 per cent stock dividend on the said 108,000shares. On June 10, 1948, Mary McDonald Bachrach, as usufructuary or life tenant of the estate,

petitioned the lower court to authorize the Peoples Bank and Trust Company, as administrator of theestate of E. M. Bachrach, to transfer to her the said 54,000 shares of stock dividend by indorsing anddelivering to her the corresponding certificate of stock, claiming that said dividend, although paid out inthe form of stock, is fruit or income and therefore belonged to her as usufructuary or life tenant. SophieSiefert and Elisa Elianoff, le