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G.R. No. 79688 February 1, 1996

PLEASANTVILLE DEVELOPMENT CORPORATION, petitioner,

vs.

COURT OF APPEALS, WILSON KEE, C.T. TORRES ENTERPRISES, INC.

and ELDRED JARDINICO,respondents.

D E C I S I O N

PANGANIBAN, J .:

Is a lot buyer who constructs improvements on the wrong property

erroneously delivered by the owner's agent, a builder in good faith?

This is the main issue resolved in this petition for review

on certiorari to reverse the Decision1 of the Court of Appeals

2 in CA-

G.R. No. 11040, promulgated on August 20, 1987.

By resolution dated November 13, 1995, the First Division of this

Court resolved to transfer this case (along with several others) to the

Third Division. After due deliberation and consultation, the Court

assigned the writing of this Decision to the undersigned ponente.

The Facts

The facts, as found by respondent Court, are as follows:

Edith Robillo purchased from petitioner a parcel of land designated

as Lot 9, Phase II and located at Taculing Road, Pleasantville

Subdivision, Bacolod City. In 1975, respondent Eldred Jardinico

bought the rights to the lot from Robillo. At that time, Lot 9 was

vacant.

Upon completing all payments, Jardinico secured from the Register

of Deeds of Bacolod City on December 19, 1978 Transfer Certificate

of Title No. 106367 in his name. It was then that he discovered that

improvements had been introduced on Lot 9 by respondent Wilson

Kee, who had taken possession thereof.

It appears that on March 26, 1974, Kee bought on installment Lot 8

of the same subdivision from C.T. Torres Enterprises, Inc. (CTTEI), the

exclusive real estate agent of petitioner. Under the Contract to Sell

on Installment, Kee could possess the lot even before the

completion of all installment payments. On January 20, 1975, Kee

paid CTTEI the relocation fee of P50.00 and another P50.00 on

January 27, 1975, for the preparation of the lot plan. These amounts

were paid prior to Kee's taking actual possession of Lot 8. After the

preparation of the lot plan and a copy thereof given to Kee, CTTEI

through its employee, Zenaida Octaviano, accompanied Kee's wife,

Donabelle Kee, to inspect Lot 8. Unfortunately, the parcel of land

pointed by Octaviano was Lot 9. Thereafter, Kee proceeded toconstruct his residence, a store, an auto repair shop and other

improvements on the lot.

After discovering that Lot 9 was occupied by Kee, Jardinico

confronted him. The parties tried to reach an amicable settlement,

but failed.

On January 30, 1981, Jardinico's lawyer wrote Kee, demanding that

the latter remove all improvements and vacate Lot 9. When Kee

refused to vacate Lot 9, Jardinico filed with the Municipal Trial Court

in Cities, Branch 3, Bacolod City (MTCC), a complaint for ejectment

with damages against Kee.

Kee, in turn, filed a third-party complaint against petitioner and

CTTEI.

The MTCC held that the erroneous delivery of Lot 9 to Kee was

attributable to CTTEI. It further ruled that petitioner and CTTEI could

not successfully invoke as a defense the failure of Kee to give notice

of his intention to begin construction required under paragraph 22

of the Contract to Sell on Installment and his having built a sari-sar

store without the prior approval of petitioner required under

paragraph 26 of said contract, saying that the purpose of these

requirements was merely to regulate the type of improvements tobe constructed on the Lot.

3

However, the MTCC found that petitioner had already rescinded its

contract with Kee over Lot 8 for the latter's failure to pay the

installments due, and that Kee had not contested the rescission. The

rescission was effected in 1979, before the complaint was instituted

The MTCC concluded that Kee no longer had any right over the lot

subject of the contract between him and petitioner. Consequently

Kee must pay reasonable rentals for the use of Lot 9, and

furthermore, he cannot claim reimbursement for the improvements

he introduced on said lot.

The MTCC thus disposed:

IN VIEW OF ALL THE FOREGOING, judgment is hereby

rendered as follows:

1. Defendant Wilson Kee is ordered to vacate the premises

of Lot 9, covered by TCT No. 106367 and to remove al

structures and improvements he introduced thereon;

2. Defendant Wilson Kee is ordered to pay to the plaintif

rentals at the rate of P15.00 a day computed from the

time this suit was filed on March 12, 1981 until he actually

vacates the premises. This amount shall bear interests ( sic

at the rate of 12 per cent (sic) per annum.

3. Third-Party Defendant C.T. Torres Enterprises, Inc. and

Pleasantville Subdivision are ordered to pay the plaintif

jointly and severally the sum of P3,000.00 as attorney's

fees and P700.00 as cost and litigation expenses.4

On appeal, the Regional Trial Court, Branch 48, Bacolod City (RTC

ruled that petitioner and CTTEI were not at fault or were not

negligent, there being no preponderant evidence to show that they

directly participated in the delivery of Lot 9 to Kee5. It found Kee a

builder in bad faith. It further ruled that even

assuming arguendo that Kee was acting in good faith, he was

nonetheless, guilty of unlawfully usurping the possessory right of

Jardinico over Lot 9 from the time he was served with notice to

vacate said lot, and thus was liable for rental.

The RTC thus disposed:

WHEREFORE, the decision appealed from is affirmed with

respect to the order against the defendant to vacate the

premises of Lot No. 9 covered by Transfer Certificate of

Title No. T-106367 of the land records of Bacolod City; the

removal of all structures and improvements introduced

thereon at his expense and the payment to plaintiff ( sic

the sum of Fifteen (P15.00) Pesos a day as reasonable

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rental to be computed from January 30, 1981, the date of

the demand, and not from the date of the filing of the

complaint, until he had vacated (sic) the premises, with

interest thereon at 12% per annum. This Court further

renders judgment against the defendant to pay the

plaintiff the sum of Three Thousand (P3,000.00) Pesos as

attorney's fees, plus costs of litigation.

The third-party complaint against Third-Party Defendants

Pleasantville Development Corporation and C.T. Torres

Enterprises, Inc. is dismissed. The order against Third-PartyDefendants to pay attorney's fees to plaintiff and costs of

litigation is reversed.6

Following the denial of his motion for reconsideration on October

20, 1986, Kee appealed directly to the Supreme Court, which

referred the matter to the Court of Appeals.

The appellate court ruled that Kee was a builder in good faith, as he

was unaware of the "mix-up" when he began construction of the

improvements on Lot 8. It further ruled that the erroneous delivery

was due to the negligence of CTTEI, and that such wrong delivery

was likewise imputable to its principal, petitioner herein. The

appellate court also ruled that the award of rentals was withoutbasis.

Thus, the Court of Appeals disposed:

WHEREFORE, the petition is GRANTED, the appealed

decision is REVERSED, and judgment is rendered as

follows:

1. Wilson Kee is declared a builder in good faith with

respect to the improvements he introduced on Lot 9, and

is entitled to the rights granted him under Articles 448,

546 and 548 of the New Civil Code.

2. Third-party defendants C.T. Torres Enterprises, Inc. and

Pleasantville Development Corporation are solidarily liable

under the following circumstances:

A. If Eldred Jardinico decides to appropriate

the improvements and, thereafter, remove these

structures, the third-party defendants shall

answer for all demolition expenses and the value

of the improvements thus destroyed or rendered

useless;

b. If Jardinico prefers that Kee buy the land, the

third-party defendants shall answer for theamount representing the value of Lot 9 that Kee

should pay to Jardinico.


Pleasantville Development Corporation are ordered to

pay in solidum the amount of P3,000.00 to Jardinico as

attorney's fees, as well as litigation expenses.

4. The award of rentals to Jardinico is dispensed with.

Furthermore, the case is REMANDED to the court of origin

for the determination of the actual value of the

improvements and the property (Lot 9), as well as fo

further proceedings in conformity with Article 448 of the

New Civil Code.7

Petitioner then filed the instant petition against Kee, Jardinico and

CTTEI.

The Issues

The petition submitted the following grounds to justify a review othe respondent Court's Decision, as follows:

1. The Court of Appeals has decided the case in a way

probably not in accord with law or the the (sic) applicable

decisions of the Supreme Court on third-party complaints

by ordering third-party defendants to pay the demolition

expenses and/or price of the land;

2. The Court of Appeals has so far departed from the

accepted course of judicial proceedings, by granting to

private respondent-Kee the rights of a builder in good faith

in excess of what the law provides, thus enriching private

respondent Kee at the expense of the petitioner;

3. In the light of the subsequent events or circumstances

which changed the rights of the parties, it becomes

imperative to set aside or at least modify the judgment o

the Court of Appeals to harmonize with justice and the

facts;

4. Private respondent-Kee in accordance with the findings

of facts of the lower court is clearly a builder in bad faith,

having violated several provisions of the contract to sell on

installments;

5. The decision of the Court of Appeals, holding the

principal, Pleasantville Development Corporation (liable

for the acts made by the agent in excess of its authority is

clearly in violation of the provision of the law;

6. The award of attorney's fees is clearly without basis and

is equivalent to putting a premium in (sic) court litigation.

From these grounds, the issues could be re-stated as follows:

(1) Was Kee a builder in good faith?

(2) What is the liability, if any, of petitioner and its agent

C.T. Torres Enterprises, Inc.? and

(3) Is the award of attorney's fees proper?

The First Issue: Good Faith

Petitioner contends that the Court of Appeals erred in reversing the

RTC's ruling that Kee was a builder in bad faith.

Petitioner fails to persuade this Court to abandon the findings and

conclusions of the Court of Appeals that Kee was a builder in good

faith. We agree with the following observation of the Court o

Appeals:

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The roots of the controversy can be traced directly to the

errors committed by CTTEI, when it pointed the wrong

property to Wilson Kee and his wife. It is highly improbable

that a purchaser of a lot would knowingly and willingly

build his residence on a lot owned by another, deliberately

exposing himself and his family to the risk of being ejected

from the land and losing all improvements thereon, not to

mention the social humiliation that would follow.

Under the circumstances, Kee had acted in the manner of

a prudent man in ascertaining the identity of his property.Lot 8 is covered by Transfer Certificate of Title No. T-

69561, while Lot 9 is identified in Transfer Certificate of

Title No. T-106367. Hence, under the Torrens system of

land registration, Kee is presumed to have knowledge of

the metes and bounds of the property with which he is

dealing. . . .

xxx xxx xxx

But as Kee is a layman not versed in the technical

description of his property, he had to find a way to

ascertain that what was described in TCT No. 69561

matched Lot 8. Thus, he went to the subdivisiondeveloper's agent and applied and paid for the relocation

of the lot, as well as for the production of a lot plan by

CTTEI's geodetic engineer. Upon Kee's receipt of the map,

his wife went to the subdivision site accompanied by

CTTEI's employee, Octaviano, who authoritatively declared

that the land she was pointing to was indeed Lot 8. Having

full faith and confidence in the reputation of CTTEI, and

because of the company's positive identification of the

property, Kee saw no reason to suspect that there had

been a misdelivery. The steps Kee had taken to protect his

interests were reasonable. There was no need for him to

have acted ex-abundantia cautela, such as being present

during the geodetic engineer's relocation survey or hiring

an independent geodetic engineer to countercheck forerrors, for the final delivery of subdivision lots to their

owners is part of the regular course of everyday business

of CTTEI. Because of CTTEI's blunder, what Kee had hoped

to forestall did in fact transpire. Kee's efforts all went to

naught.8

Good faith consists in the belief of the builder that the land he is

building on is his and his ignorance of any defect or flaw in his title 9.

And as good faith is presumed, petitioner has the burden of proving

bad faith on the part of Kee 10

.

At the time he built improvements on Lot 8, Kee believed that said

lot was what he bought from petitioner. He was not aware that the

lot delivered to him was not Lot 8. Thus, Kee's good faith. Petitioner

failed to prove otherwise.

To demonstrate Kee's bad faith, petitioner points to Kee's violation

of paragraphs 22 and 26 of the Contract of Sale on Installment.

We disagree. Such violations have no bearing whatsoever on

whether Kee was a builder in good faith, that is, on his state of mind

at the time he built the improvements on Lot 9. These alleged

violations may give rise to petitioner's cause of action against Kee

under the said contract (contractual breach), but may not be bases

to negate the presumption that Kee was a builder in good faith.

Petitioner also points out that, as found by the trial court, the

Contract of Sale on Installment covering Lot 8 between it and Kee

was rescinded long before the present action was instituted. This

has no relevance on the liability of petitioner, as such fact does not

negate the negligence of its agent in pointing out the wrong lot. to

Kee. Such circumstance is relevant only as it gives Jardinico a cause

of action for unlawful detainer against Kee.

Petitioner next contends that Kee cannot "claim that another lot was

erroneously pointed out to him" because the latter agreed to the

following provision in the Contract of Sale on installment, to wit:

13. The Vendee hereby declares that prior to the execution

of his contract he/she has personally examined o

inspected the property made subject-matter hereof, as to

its location, contours, as well as the natural condition o

the lots and from the date hereof whatever consequentia

change therein made due to erosion, the said Vendee shal

bear the expenses of the necessary fillings, when the same

is so desired by him/her. 11

The subject matter of this provision of the contract is the change of

the location, contour and condition of the lot due to erosion. I

merely provides that the vendee, having examined the propertyprior to the execution of the contract, agrees to shoulder the

expenses resulting from such change.

We do not agree with the interpretation of petitioner that Kee

contracted away his right to recover damages resulting from

petitioner's negligence. Such waiver would be contrary to public

policy and cannot be allowed. "Rights may be waived, unless the

waiver is contrary to law, public order, public policy, morals, or good

customs, or prejudicial to a third person with a right recognized by

law." 12

The Second Issue: Petitioner's Liability

Kee filed a third-party complaint against petitioner and CTTEI, which

was dismissed by the RTC after ruling that there was no evidence

from which fault or negligence on the part of petitioner and CTTE

can be inferred. The Court of Appeals disagreed and found CTTE

negligent for the erroneous delivery of the lot by Octaviano, its

employee.

Petitioner does not dispute the fact that CTTEI was its agent. But it

contends that the erroneous delivery of Lot 9 to Kee was an act

which was clearly outside the scope of its authority, and

consequently, CTTEI I alone should be liable. It asserts that "while

[CTTEI] was authorized to sell the lot belonging to the herein

petitioner, it was never authorized to deliver the wrong lot to

Kee" 13.

Petitioner's contention is without merit.

The rule is that the principal is responsible for the acts of the agent,

done within the scope of his authority, and should bear the damage

caused to third persons 14

. On the other hand, the agent who

exceeds his authority is personally liable for the damage 15

CTTEI was acting within its authority as the sole real estate

representative of petitioner when it made the delivery to Kee. In

acting within its scope of authority, it was, however, negligent. It is

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this negligence that is the basis of petitioner's liability, as principal of

CTTEI, per Articles 1909 and 1910 of the Civil Code.

Pending resolution of the case before the Court of Appeals, Jardinico

and Kee on July 24, 1987 entered into a deed of sale, wherein the

former sold Lot 9 to Kee. Jardinico and Kee did not inform the Court

of Appeals of such deal.

The deed of sale contained the following provision:

1. That Civil Case No. 3815 entitled "Jardinico vs. Kee"

which is now pending appeal with the Court of Appeals,

regardless of the outcome of the decision shall be mutually

disregarded and shall not be pursued by the parties herein

and shall be considered dismissed and without effect

whatso-ever; 16

Kee asserts though that the "terms and conditions in said deed of

sale are strictly for the parties thereto" and that "(t)here is no waiver

made by either of the parties in said deed of whatever favorable

judgment or award the honorable respondent Court of Appeals may

make in their favor against herein petitioner Pleasantville

Development Corporation and/or private respondent C.T. Torres

Enterprises; Inc." 17

Obviously, the deed of sale can have no effect on the liability of

petitioner. As we have earlier stated, petitioner's liability is

grounded on the negligence of its agent. On the other hand, what

the deed of sale regulates are the reciprocal rights of Kee and

Jardinico; it stressed that they had reached an agreement

independent of the outcome of the case.

Petitioner further assails the following holding of the Court of

Appeals:


Pleasantville Development Corporation are solidarily liableunder the following circumstances:

a. If Eldred Jardinico decides to appropriate the

improvements and, thereafter, remove these

structures, the third-party defendants shall

answer for all demolition expenses and the value

of the improvements thus destroyed or rendered

useless;

b. If Jardinico prefers that Kee buy the land, the

third-party defendants shall answer for the

amount representing the value of Lot 9 that Kee

should pay to Jardinico.

18

Petitioner contends that if the above holding would be carried out,

Kee would be unjustly enriched at its expense. In other words, Kee

would be able to own the lot, as buyer, without having to pay

anything on it, because the aforequoted portion of respondent

Court's Decision would require petitioner and CTTEI jointly and

solidarily to "answer" or reimburse Kee therefor.

We agree with petitioner.

Petitioner' s liability lies in the negligence of its agent CTTEI. For such

negligence, the petitioner should be held liable for damages. Now

the extent and/or amount of damages to be awarded is a factua

issue which should be determined after evidence is adduced

However, there is no showing that such evidence was actually

presented in the trial court; hence no damages could flow be

awarded.

The rights of Kee and Jardinico vis-a-vis each other, as builder in

good faith and owner in good faith, respectively, are regulated by

law (i.e., Arts. 448, 546 and 548 of the Civil Code). It was error forthe Court of Appeals to make a "slight modification" in the

application of such law, on the ground of "equity". At any rate, as it

stands now, Kee and Jardinico have amicably settled through their

deed of sale their rights and obligations with regards to Lot 9. Thus

we delete items 2 (a) and (b) of the dispositive portion of the Court

of Appeals' Decision [as reproduced above] holding petitioner and

CTTEI solidarily liable.

The Third Issue: Attorney's Fees

The MTCC awarded Jardinico attorney's fees and costs in the

amount of P3,000.00 and P700.00, respectively, as prayed for in his

complaint. The RTC deleted the award, consistent with its ruling thatpetitioner was without fault or negligence. The Court of Appeals

however, reinstated the award of attorney's fees after ruling tha

petitioner was liable for its agent's negligence.

The award of attorney's fees lies within the discretion of the cour

and depends upon the circumstances of each case 19

. We shall no

interfere with the discretion of the Court of Appeals. Jardinico was

compelled to litigate for the protection of his interests and for the

recovery of damages sustained as a result of the negligence of

petitioner's agent 20

.

In sum, we rule that Kee is a builder in good faith. The disposition of

the Court of Appeals that Kee "is entitled to the rights granted him

under Articles 448, 546 and 548 of the New Civil Code" is deleted, in

view of the deed of sale entered into by Kee and Jardinico, which

deed now governs the rights of Jardinico and Kee as to each other

There is also no further need, as ruled by the appellate Court, to

remand the case to the court of origin "for determination of the

actual value of the improvements and the property (Lot 9), as well as

for further proceedings in conformity with Article 448 of the New

Civil Code."

WHEREFORE , the petition is partially GRANTED. The Decision of the

Court of Appeals is hereby MODIFIED as follows:

(1) Wilson Kee is declared a builder in good faith;

(2) Petitioner Pleasantville Development Corporation and

respondent C.T. Torres Enterprises, Inc. are declared

solidarily liable for damages due to negligence; however

since the amount and/or extent of such damages was not

proven during the trial, the same cannot now be

quantified and awarded;

(3) Petitioner Pleasantville Development Corporation and

respondent C.T. Torres Enterprises, Inc. are ordered to

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pay in solidum the amount of P3,000.00 to Jardinico as

attorney's fees, as well as litigation expenses; and

(4) The award of rentals to Jardinico is dispensed with.

SO ORDERED.

Navasa, C.J., Davide, Jr. and Melo, JJ., concur.

Francisco, J., took no part.

HEIRS OF THE LATE JOAQUIN LIMENSE, namely: CONCESA

LIMENSE, Surviving Spouse; and DANILO and JOSELITO, both

surnamed Limense, children,

Petitioners,

- versus -

RITA VDA. DE RAMOS, RESTITUTO RAMOS, VIRGILIO DIAZ,

IRENEO RAMOS, BENJAMIN RAMOS, WALDYTRUDES RAMOS-

BASILIO, TRINIDAD RAMOS-BRAVO, PAZ RAMOS-PASCUA,

FELICISIMA RAMOS-REYES, and JACINTA RAMOS,

Respondents.

G.R. No. 152319

Present:

QUISUMBING,* J.,

CARPIO, J., Chairperson,

CHICO-NAZARIO,

PERALTA, and

ABAD,**

JJ.

Promulgated:

October 28, 2009

X-- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

- - - - - - - -X

D E C I S I O N

PERALTA, J .,

This is a petition for review on certiorari under Rule 45 of the

Rules of Court seeking to annul and set aside the Decision[1]

of the

Court of Appeals dated December 20, 2001 in CA-G.R. CV No. 33589

affirming in toto the Decision[2]

of the Regional Trial Court of Manila,

Branch 15, dated September 21, 1990 in Civil Case No. 83-16128.

The antecedent facts are as follows:

Dalmacio Lozada was the registered owner of a parcel of land

identified as Lot No. 12, Block No. 1074 of the cadastral survey of

the City of Manila covered by Original Certificate of Title (OCT) No.

7036 issued at the City of Manila on June 14, 1927,[3]

containing an

area of 873.80 square meters, more or less, located in Beata Street,

Pandacan, Manila.

Dalmacio Lozada subdivided his property into five (5) lots,

namely: Lot Nos. 12-A, 12-B, 12-C, 12-D and 12-E. Through a Deed of

Donation dated March 9, 1932,[4]

he donated the subdivided lots to

his daughters, namely: Isabel, Salud, Catalina, and Felicidad, al

surnamed Lozada. The Deed of Donation was registered with the

office of the Register of Deeds of Manila on March 15, 1932.

Under the said Deed of Donation, the lots were

adjudicated to Dalmacio's daughters in the following manner:

a. Lot No. 12-A in favor of Isabel Lozada, married to

Isaac Limense;

b. Lot No. 12-B in favor of Catalina Lozada, married to

Sotero Natividad;

c. Lot No. 12-C in favor of Catalina Lozada, married to

Sotero Natividad; Isabel Lozada, married to Isaac Limense; and

Salud Lozada, married to Francisco Ramos, in equal parts;

d. Lot No. 12-D in favor of Salud Lozada, married to

Francisco Ramos; and

e. Lot No. 12-E in favor of Isabel Lozada, married to

Isaac Limense, and Felicidad Lozada, married to Galicano

Centeno.

By virtue of the Deed of Donation executed by Dalmacio

Lozada, OCT No. 7036, which was registered in his name, was

cancelled and, in lieu thereof, Transfer Certificates of Title (TCTs

bearing Nos. 40041, 40042, 40043, 40044, and 40045 were issued in

favor of the donees, except TCT No. 40044, which remained in his

name. These new TCTs were annotated at the back of OCT No

7036.[5]

TCT No. 40043, which covered Lot No. 12-C, was issued in the

name of its co-owners Catalina Lozada, married to Sotero Natividad

Isabel Lozada, married to Isaac Limense; and Salud Lozada, married

to Francisco Ramos. It covered an area of 68.60 square meters, more

or less, was bounded on the northeast by Lot No. 12-A, on the

southwest by Calle Beata, and on the northwest by Lot No. 12-D o

the subdivision plan. In 1932, respondents' predecessor-in-interes

constructed their residential building on Lot No. 12-D, adjacent to

Lot No. 12-C.

On May 16, 1969, TCT No. 96886[6]

was issued in the name o

Joaquin Limense covering the very same area of Lot No. 12-C.

On October 1, 1981, Joaquin Limense secured a building permit

for the construction of a hollow block fence on the boundary line

between his aforesaid property and the adjacent parcel of land

located at 2759 Beata Street, Pandacan, Manila, designated as Lot

No. 12-D, which was being occupied by respondents. The fence

however, could not be constructed because a substantial portion o

respondents' residential building in Lot No. 12-D encroached upon

portions of Joaquin Limense's property in Lot No. 12-C.

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Joaquin Limense demanded the removal of the encroached

area; however, respondent ignored both oral and written

demands. The parties failed to amicably settle the differences

between them despite referral to the barangay . Thus, on March 9,

1983, Joaquin Limense, duly represented by his Attorney-in-Fact,

Teofista L. Reyes, instituted a Complaint[7]

against respondents

before the Regional Trial Court (RTC) of Manila, Branch 15, for

removal of obstruction and damages.

Joaquin Limense prayed that the RTC issue an order directing

respondents, jointly and severally, to remove the portion which

illegally encroached upon his property on Lot No. 12-C and, likewise,

prayed for the payment of damages, attorney’s fees and costs of

suit.

Respondents, on the other hand, averred in their Answer[8]

that

they were the surviving heirs of Francisco Ramos,[9]

who, during his

lifetime, was married to Salud Lozada, one of the daughters ofDalmacio Lozada, the original owner of Lot No. 12. After subdividing

the said lot, Dalmacio Lozada donated Lot No. 12-C in favor of his

daughters Catalina, married to Sotero Natividad; Isabel, married to

Isaac Limense; and Salud, married to Francisco Ramos. Being the

surviving heirs of Francisco Ramos, respondents later became co-

owners of Lot No. 12-C. Lot No. 12-C has served as right of way or

common alley of all the heirs of Dalmacio Lozada since 1932 up to

the present. As a common alley, it could not be closed or fenced by

Joaquin Limense without causing damage and prejudice to

respondents.

After trial on the merits, the RTC rendered a

Decision[10]

dated September 21, 1990 dismissing the complaint of

Joaquin Limense. It ruled that an apparent easement of right of way

existed in favor of respondents. Pertinent portions of the decision

read as follows:

The Court finds that an apparent

easement of right of way exists in favor of the

defendants under Article 624 of the Civil Code. It

cannot be denied that there is an alley which

shows its existence. It is admitted that this alleywas established by the original owner of Lot 12

and that in dividing his property, the alley

established by him continued to be used actively

and passively as such. Even when the division of

the property occurred, the non-existence of the

easement was not expressed in the

corresponding titles nor were the apparent sign

of the alley made to disappear before the

issuance of said titles.

The Court also finds that when plaintiff

acquired the lot (12-C) which forms the alley, he

knew that said lot could serve no other purpose

than as an alley. That is why even after he

acquired it in 1969, the lot continued to be used

by defendants and occupants of the other

adjoining lots as an alley. The existence of the

easement of right of way was therefore known

to plaintiff who must respect the same in spite of

the fact that his transfer certificate of title does

not mention the lot of defendants as among

those listed therein as entitled to such right of

way. It is an established principle that actualnotice or knowledge is as binding as

registration.[11]

Aggrieved by said decision, Joaquin Limense filed a notice of

appeal. The records of the case were transmitted to the Court of

Appeals (CA). During the pendency of the appeal with the CA,

Joaquin Limense died in 1999.[12]

The CA, Seventh Division, in CA-G.R. CV No. 33589, in its

Decision[13]

dated December 20, 2001 dismissed the appeal and

affirmed in toto the decision of the RTC.

Frustrated by this turn of events, petitioners, as surviving heirs

of Joaquin Limense, elevated the case to this Court via a Petition fo

Review on Certiorar i [14]

raising the following issues:

1. DID THE HONORABLE COURT OF APPEALS

COMMIT A GRAVE ABUSE OF DISCRETION

AMOUNTING TO LACK OF JURISDICTION, IN

HOLDING, LIKE THE TRIAL COURT DID, THAT

RESPONDENTS' LOT 12-D HAS AN

EASEMENT OF RIGHT OF WAY OVER

JOAQUIN LIMENSE'S LOT 12-C?

2. DID THE HONORABLE COURT OF APPEALS

COMMIT A GRAVE ABUSE OF DISCRETION

AMOUNTING TO LACK OF JURISDICTION, IN

FAILING TO HOLD, LIKE THE TRIAL COURT

DID, THAT THE PROTRUDING PORTIONS OF

RESPONDENTS' HOUSE ON LOT 12-D

EXTENDING INTO JOAQUIN LIMENSE'S LOT

12-C CONSTITUTE A NUISANCE AND, AS

SUCH, SHOULD BE REMOVED?

Petitioners aver that the CA erred in ruling that since Lot No

12-C was covered by two TCT's, i.e., TCT Nos. 40043 and 96886, and

there was no evidence on record to show how Joaquin Limense was

able to secure another title over an already titled property, then one

of these titles must be of dubious origin. According to the CA, TCT

No. 96886, issued in the name of Joaquin Limense, was spurious

because the Lozada sisters never disposed of the said property

covered by TCT No. 40043. The CA further ruled that a co-ownership

existed over Lot No. 12-C between petitioners and respondents

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Petitioners countered that TCT No. 96886, being the only and best

legitimate proof of ownership over Lot No. 12-C, must prevail over

TCT No. 40043.

Respondents allege that it was possible that TCT No. 96886, in

the name of Joaquin Limense, was obtained thru fraud,

misrepresentation or falsification of documents because the donees

of said property could not possibly execute any valid transfer of titleto Joaquin Limense, as they were already dead prior to the issuance

of TCT No. 96886 in 1969. Respondents further allege that

petitioners failed to produce proof substantiating the issuance of

TCT No. 96886 in the name of Joaquin Limense.

Apparently, respondents are questioning the legality of TCT

No. 96886, an issue that this Court cannot pass upon in the present

case. It is a rule that the validity of a torrens title cannot be assailed

collaterally.

[15]

Section 48 of Presidential Decree (PD) No.1529 provides that:

[a] certificate of title shall not be subject to

collateral attack. It cannot be altered, modified,

or cancelled except in a direct proceeding in

accordance with law.

In the case at bar, the action filed before the RTC against

respondents was an action for removal of obstruction and

damages. Respondents raised the defense that Joaquin Limense's

title could have been obtained through fraud and misrepresentation

in the trial proceedings before the RTC. Such defense is in the nature

of a collateral attack, which is not allowed by law.

Further, it has been held that a certificate of title, once

registered, should not thereafter be impugned, altered, changed,

modified, enlarged or diminished, except in a direct proceeding

permitted by law. Otherwise, the reliance on registered titles would

be lost. The title became indefeasible and incontrovertible after the

lapse of one year from the time of its registration and issuance.

Section 32 of PD 1529 provides that “upon the expiration of said

period of one year, the decree of registration and the certificate of

title shall become incontrovertible. Any person aggrieved by such

decree of registration in any case may pursue his remedy by action

for damages against the applicant or other persons responsible for

the fraud.”[16]

It has, therefore, become an ancient rule that the

issue on the validity of title, i.e., whether or not it was fraudulently

issued, can only be raised in an action expressly instituted for that

purpose.[17]

In the present case, TCT No. 96886 was registered in

1969 and respondents never instituted any direct proceeding or

action to assail Joaquin Limense's title.

Additionally, an examination of TCT No. 40043 would

readily show that there is an annotation that it has

been“CANCELLED.” [18]

A reading of TCT No. 96886 would also revea

that said title is a transfer from TCT No. 48866[19]

and not TCT

40043. Thus, it is possible that there was a series of transferseffected from TCT No. 40043 prior to the issuance of TCT No

96886. Hence, respondents' position that the issuance of TCT No

96886 in the name of Joaquin Limense is impossible, because the

registered owners of TCT No. 40043 were already dead prior to

1969 and could not have transferred the property to Joaquin

Limense, cannot be taken as proof that TCT No. 96886 was obtained

through fraud, misrepresentation or falsification of documents.

Findings of fact of the CA, although generally deemed

conclusive, may admit review by this Court if the CA failed to noticecertain relevant facts that, if properly considered, would justify a

different conclusion, and if the judgment of the CA is premised on a

misapprehension of facts.[20]

As with the present case, the CA'

observation that TCT No. 96886 is of dubious origin, as

TCT No.40043 does not appear to have been disposed of by Catalina

Isabel and Salud Lozada, is improper and constitutes an

indirect attack on TCT No. 96886. As we see it, TCT No. 96886, a

present, is the best proof of Joaquin Limense’s ownership over Lot

No. 12-C. Thus, the CA erred in ruling that respondents and

petitioners co-owned Lot No. 12-C, as said lot is now registered

exclusively in the name of Joaquin Limense.

Due to the foregoing, Joaquin Limense, as the registered owner

of Lot 12-C, and his successors-in-interest, may enclose or fence his

land or tenements by means of walls, ditches, live or dead hedges

or by any other means without detriment to servitudes constituted

thereon.[21]

However, although the owner of the property has the right to

enclose or fence his property, he must respect servitudes

constituted thereon. The question now is whether respondents are

entitled to an easement of right of way.

Petitioners contend that respondents are not entitled to an

easement of right of way over Lot No. 12-C, because their Lot No

12-D is not duly annotated at the back of TCT No. 96886 which

would entitle them to enjoy the easement, unlike Lot Nos. 12-A-1

12-A-2, 12-A-3, 12-A-4, 12-A-5, and 12-A-6. Respondents, on the

other hand, allege that they are entitled to an easement of right o

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way over Lot No. 12-C, which has been continuously used as an alley

by the heirs of Dalmacio Lozada, the residents in the area and the

public in general from 1932 up to the present. Since petitioners are

fully aware of the long existence of the said alley or easement of

right of way, they are bound to respect the same.

As defined, an easement is a real right on another's property,

corporeal and immovable, whereby the owner of the latter mustrefrain from doing or allowing somebody else to do or something to

be done on his property, for the benefit of another person or

tenement.[22]

Easements may be continuous or discontinuous, apparent or

non-apparent.

Continuous easements are those the use of which is or may be

incessant, without the intervention of any act of man. Discontinuous

easements are those which are used at intervals and depend uponthe acts of man. Apparent easements are those which are made

known and are continually kept in view by external signs that reveal

the use and enjoyment of the same. Non-apparent easements are

those which show no external indication of their existence.[23]

In the present case, the easement of right of way is

discontinuous and apparent. It is discontinuous, as the use depends

upon the acts of respondents and other persons passing through

the property. Being an alley that shows a permanent path going to

and from Beata Street, the same is apparent.

Being a discontinuous and apparent easement, the same

can be acquired only by virtue of a title.[24]

In the case at bar, TCT No. 96886, issued in the name of

Joaquin Limense, does not contain any annotation that Lot No. 12-D

was given an easement of right of way over Lot No. 12-C. However,

Joaquin Limense and his successors-in-interests are fully aware that

Lot No. 12-C has been continuously used and utilized as an alley by

respondents and residents in the area for a long period of time.

Joaquin Limense's Attorney-in-Fact, Teofista L. Reyes, testified

that respondents and several other residents in the area have been

using the alley to reach Beata Street since 1932. Thus:

Atty. Manuel B. Tomacruz:

Q: Mrs. Witness, by virtue of that Deed of

Donation you claim that titles were

issued to the children of Dalmacio

Lozada namely Salud Lozada, Catalina

Lozada and Isabel Lozada, is that right?

A: Yes, sir.

Q: And after the said property was

adjudicated to his said children the

latter constructed their houses on

their lots.

A: Yes, sir.

Q: As a matter of fact, the herein defendantshave constructed their houses on the

premises alloted to them since the

year 1932?

A: Yes, sir, they were able to construct their

house fronting Beata Street.

Q: And that house they have constructed on

their lot in 1932 is still existing today?

A: Yes, sir and they still used the alley in

question and they are supposed to

use Beata Street but they are not

using Beata Street.

Q: They are using the alley?A: Yes, sir, they are using the alley and they

do not pass through Beata Street.

Q: And they have been using the alley since

1932 up to the present?

A: Yes, sir they have been using the alley

since that time. That was their mistake

and they should be using Beata

Street because they are fronting Beata

Strret.

Q: As a matter of fact, it is not only herein

defendants who have been using that

alley since 1932 up to the present?A: Yes, sir they are using the alley up to now.

Q: As a matter of fact, in this picture marked

as Exh. “C-1” the alley is very apparent.

This is the alley?

A: Yes, sir.

Q: And there are houses on either side of

this alley?

A: Yes, sir.

Q: As a matter of fact, all the residents on

either side of the alley are passing

through this alley?A: Yes, sir, because the others have permit

to use this alley and they are now

allowed to use the alley but the

Ramos's family are now [not] allowed

to use this alley.[25]

In Mendoza v. Rosel ,[26]

this Court held that:

Petitioners claim that inasmuch as their

transfer certificates of title do not mention any

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lien or encumbrance on their lots, they are

purchasers in good faith and for value, and as

such have a right to demand from respondents

some payment for the use of the alley. However,

the Court of Appeals found, as a fact, that when

respondents acquired the two lots which form

the alley, they knew that said lots could serve no

other purpose than as an alley. The existence of

the easement of right of way was therefore

known to petitioners who must respect the

same, in spite of the fact that their transfercertificates of title do not mention any burden

or easement. It is an established principle that

actual notice or knowledge is as binding as

registration.

Every buyer of a registered land who takes a certificate of

title for value and in good faith shall hold the same free of all

encumbrances except those noted on said certificate. It has been

held, however, that “where the party has knowledge of a prior

existing interest that was unregistered at the time he acquired a

right to the same land, his knowledge of that prior unregistered

interest has the effect of registration as to him.”[27]

In the case at bar, Lot No. 12-C has been used as an alley

ever since it was donated by Dalmacio Lozada to his heirs. It is

undisputed that prior to and after the registration of TCT No. 96886,

Lot No. 12-C has served as a right of way in favor of respondents

and the public in general. We quote from the RTC's decision:

x x x It cannot be denied that there is an alley

which shows its existence. It is admitted that this

alley was established by the original owner

of Lot 12 and that in dividing his property the

alley established by him continued to be used

actively and passively as such. Even when the

division of the property occurred, the non-

existence of the easement was not expressed in

the corresponding titles nor were the apparent

sign of the alley made to disappear before the

issuance of said titles.

The Court also finds that when plaintiff

acquired the lot (12-C) which forms the alley, he

knew that said lot could serve no other purpose

than as an alley. That is why even after he

acquired it in 1969 the lot continued to be used

by defendants and occupants of the other

adjoining lots as an alley. x x x[28]

Thus, petitioners are bound by the easement of right of way

over Lot No. 12-C, even though no registration of the servitude has

been made on TCT No. 96886.

However, respondents’ right to have access to the property of

petitioners does not include the right to continually encroach upon

the latter’s property. It is not disputed that portions of respondents'

house on Lot No. 12-D encroach upon Lot No. 12-C. Geodetic

Engineer Jose Agres, Jr. testified on the encroachment of

respondents' house on Lot No. 12-C, which he surveyed.[29]

In orde

to settle the rights of the parties relative to the encroachment, We

should determine whether respondents were builders in good faith.

Good faith is an intangible and abstract quality with no

technical meaning or statutory definition; and it encompassesamong other things, an honest belief, the absence of malice and the

absence of a design to defraud or to seek an unconscionable

advantage. An individual’s personal good faith is a concept of his

own mind and, therefore, may not conclusively be determined by his

protestations alone. It implies honesty of intention, and freedom

from knowledge of circumstances which ought to put the holder

upon inquiry. The essence of good faith lies in an honest belief in

the validity of one’s right, ignorance of a superior claim, and absence

of intention to overreach another. Applied to possession, one i

considered in good faith if he is not aware that there exists in histitle or mode of acquisition any flaw which invalidates it .

[30]

Good faith is always presumed, and upon him who alleges bad

faith on the part of the possessor rests the burden of proof .[31]

It is a

matter of record that respondents' predecessor-in-interes

constructed their residential building on Lot No. 12-D, adjacent to

Lot No. 12-C, in 1932.[32]

Respondents' predecessor-in-interes

owned the 1/3 portion of Lot No. 12-C at the time the property was

donated to them by Dalmacio Lozada in 1932. The Deed of Donation

executed by the late Dalmacio Lozada, dated March 9, 1932

specifically provides that:

I hereby grant, cede and donate in

favor of Catalina Lozada married to Sotero

Natividad, Isabel Lozada married to Isaac

Simense and Salud Lozada married to Francisco

Ramos, all Filipinos, of legal age, the parcel of

land known as Lot No. 12-C, in equal parts.[33]

The portions of Lot No. 12-D, particularly the overhang

covering 1 meter in width and 17 meters in length; the stairs; and

the concrete structures are all within the 1/3 share alloted to them

by their donor Dalmacio Lozada and, hence, there was absence of a

showing that respondents acted in bad faith when they built

portions of their house on Lot No. 12-C.

Using the above parameters, we are convinced tha

respondents' predecessors-in-interest acted in good faith when they

built portions of their house on Lot 12-C. Respondents being

builders in good faith, we shall now discuss the respective rights of

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the parties relative to the portions encroaching upon respondents'

house.

Articles 448 and 546 of the New Civil Code 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, afterpayment 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.

Art. 546. Necessary expenses shall be

refunded to every possessor; but only the

possessor in good faith may retain the thing until

he has been 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 the option of

refunding the amount of the expenses or of

paying the increase in value which the thing may

have acquired by reason thereof.

In Spouses Del Campo v. Abesia,[34]

this provision was applied

to one whose house, despite having been built at the time he was

still co-owner, overlapped with the land of another. In that case, this

Court ruled:

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 the 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 governedby the rules of co-ownership.

However, when, as in this case, the

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.

x x x[35]

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, but the

encroachment was in good faith, then the provisions of Article 448

should apply to determine the respective rights of the parties. In this

case, the co-ownership was terminated due to the transfer of the

title of the whole property in favor of Joaquin Limense.

Under the foregoing provision, petitioners have the right to

appropriate said portion of the house of respondents upon payment

of indemnity to respondents, as provided for in Article 546 of the

Civil Code. Otherwise, petitioners may oblige respondents 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 respondents built thereon, then the latter cannot be

obliged to buy the land. Respondents shall then pay the reasonable

rent to petitioners upon such terms and conditions that they may

agree. In case of disagreement, the trial court shall fix the termsthereof. Of course, respondents may demolish or remove the said

portion of their house, at their own expense, if they so decide.[36]

The choice belongs to the owner of the land, a rule tha

accords with the principle of accession that the accessory follows

the principal and not the other way around.[37]

Even as the option

lies with the landowner, the grant to him, nevertheless, is preclusive

He must choose one. He cannot, for instance, compel the owner of

the building to instead remove it from the land.[38]

The obvious benefit to the builder under this article is that,

instead of being outrightly ejected from the land, he can compel the

landowner to make a choice between two options: (1) to

appropriate the building by paying the indemnity required by law, or

(2) to sell the land to the builder.[39]

The raison d’etre for this provision has been enunciated, thus:

Where the builder, planter or sower

has acted in good faith, a conflict of rights arises

between the owners, and it becomes necessary

to protect the owner of the improvements

without causing injustice to the owner of the

land. In view of the impracticability of creating a

state of forced co-ownership, the law has

provided a just solution by giving the owner of

the land the option to acquire the improvements

after payment of the proper indemnity, or to

oblige the builder or planter to pay for the land

and the sower the proper rent. He cannot refuse

to exercise either option. It is the owner of the

land who is authorized to exercise the option,

because his right is older, and because, by the

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principle of accession, he is entitled to the

ownership of the accessory thing.[40]

In accordance with Depra v. Dumlao,[41]

this case must be

remanded to the trial court to determine matters necessary for the

proper application of Article 448 in relation to Article 546. Such

matters include the option that petitioners would take and the

amount of indemnity that they would pay, should they decide to

appropriate the improvements on the lots.

Anent the second issue, although it may seem that the

portions encroaching upon respondents' house can be considered a

nuisance, because it hinders petitioners' use of their property, it

cannot simply be removed at respondents' expense, as prayed for by

petitioner. This is because respondents built the subject

encroachment in good faith, and the law affords them certain rights

as discussed above.

WHEREFORE, the petition is DENIED, the Decision of the

Court of Appeals dated December 20, 2001 in CA-G.R. CV No. 33589

is AFFIRMED with the following MODIFICATIONS:

1. No co-ownership exists over Lot No. 12-C, covered by

TCT No. 96886, between petitioners and respondents.

2. The case is REMANDED to the Regional Trial Court,

Branch 15, Manila, for further proceedings without further delay to

determine the facts essential to the proper application of Articles

448 and 546 of the Civil Code.

SO ORDERED.

DIOSDADO M.

PERALTA

Associate Justice

WE CONCUR:

LEONARDO A. QUISUMBING

Associate Justice

ANTONIO T. CARPIO MINITA V. CHICO-NAZARIO

Associate Justice Associate Justice

Chairperson

ROBERTO A. ABAD

Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been

reached in consultation before the case was assigned to the writer

of the opinion of the Court’s Division.

ANTONI

O T.

CARPIO

Associat

e Justice

Third

Division,

Chairperson

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution and the

Division Chairperson’s Attestation, I certify that the conclusions in

the above Decision were reached in consultation before the case

was assigned to the writer of the opinion of the Court’s Division.

REYNATO S. PUNO

Chief Justice

* Designated to sit as an additional member in lieu of

Associate Justice Antonio Eduardo B. Nachura per Special Order No

755 dated October 12, 2009.**

Designated to sit as an additional member in lieu of

Associate Justice Presbitero J. Velasco, Jr. per Special Order No. 753

dated October 12, 2009.[1]

Penned by Associate Justice Rebecca de Guia-Salvador

with Associate Justices Eugenio S. Labitoria and Teodoro P. Regino

concurring; rollo, pp. 29-35.[2]

Id. at 52-55.[3]

Records, p. 231.[4]

Id. at 14-19.[5]

Id. at 231.

[6] Id . at 183.[7]

Id . at 1-5.[8]

Id . at 10-13.[9]

In their answer, respondents referred to Francisco Ramos

as “Francisco Ramos, Sr.” [10]

Records, pp. 311-314.[11]

Id . at 314.[12]

Rollo, p. 27.[13]

Id. at 29-35.[14]

Id. at 9-25.[15]

Vda. de Gualberto v. Go, G.R. No. 139843, July 21, 2005,

463 SCRA 671, 677.

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[16] Seville v. National Development Company , 403 Phil. 843,

859 (2001).[17]

Tanenglian v. Lorenzo, G.R. No. 173415, March 28, 2008,

550 SCRA 348, 380.[18]

Records, p. 239.[19]

Id. at 183.[20]

Fuentes v. Court of Appeals, 335 Phil. 1163, 1168 (1997).[21]

New Civil Code, Art. 430.[22]

Quimen v. Court of Appeals, 326 Phil. 969, 976 (1996),

citing 3 Sanchez Roman 472.[23]

New Civil Code, Art. 615.[24] New Civil Code, Art. 622.

[25] TSN, May 9, 1990, pp. 13-15.

[26] 74 Phil. 84 (1943). (Emphasis supplied).

[27] Private Development Corporation of the Philippines v.

Court of Appeals, G.R. No. 136897, November 22, 2005, 475 SCRA

591, 607.[28]

Rollo, p. 55.[29]

TSN, May 21, 1986.[30]

Elvira T. Arangote v. Spouses Martin and Lourdes S.

Documents

cases in right of accession.docx