Property Cases 12-05

8/10/2019 Property Cases 12-05

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Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

G.R. No. 121597 June 29, 2001

PHILIPPINE NATIONAL BANK, petitioner,vs.HON. COURT OF APPEALS, ALLAN M. CHUA as Special Administrator of the Intestate Estateof the late ANTONIO M. CHUA and Mrs. ASUNCION M. CHUA, respondents.

QUISUMBING, J.:

This petition assails the decision1of the Court of Appeals dated July 25, 1995 in CA-G.R. CV No.36546, affirming the decision dated September 4, 1991 of the Regional Trial Court of Balayan,Batangas, Branch 10 in Civil Case No. 1988.

The facts, as found by the trial court and by the Court of Appeals, are not disputed.

The spouses Antonio M. Chua and Asuncion M. Chua were the owners of a parcel of land coveredby Transfer Certificate of Title No. P-142 and registered in their names. Upon Antonios death, theprobate court appointed his son, private respondent Allan M. Chua, special administrator of

Antonios intestate estate. The court also authorized Allan to obtain a loan accommodation of fivehundred fifty thousand (P550,000.00) pesos from petitioner Philippine National Bank to be securedby a real estate mortgage over the above-mentioned parcel of land.

On June 29, 1989, Allan obtained a loan of P450,000.00 from petitioner PNB evidenced by apromissory note, payable on June 29, 1990, with interest at 18.8 percent per annum. To secure the

loan, Allan executed a deed of real estate mortgage on the aforesaid parcel of land.

On December 27, 1990, for failure to pay the loan in full, the bank extrajudicially foreclosed the realestate mortgage, through the Ex-Officio Sheriff, who conducted a public auction of the mortgagedproperty pursuant to the authority provided for in the deed of real estate mortgage. During theauction, PNB was the highest bidder with a bid price P306,360.00. Since PNBs total claim as of thedate of the auction sale was P679,185.63, the loan had a payable balance of P372,825.63. To claimthis deficiency, PNB instituted an action with the RTC, Balayan, Batangas, Branch 10, docketed asCivil Case No. 1988, against both Mrs. Asuncion M. Chua and Allan Chua in his capacity as specialadministrator of his fathers intestate estate.

Despite summons duly served, private respondents did not answer the complaint. The trial courtdeclared them in default and received evidence ex parte.

On September 4, 1991, the RTC rendered its decision, ordering the dismissal of PNBs complaint.2

On appeal, the Court of Appeals affirmed the RTC decision by dismissing PNBs appeal for lack ofmerit.3

Hence, the present petition for review on certiorari under Rule 45 of the Rules of Court. Petitionercites two grounds:


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I

THE CA ERRED IN HOLDING THAT PNB CAN NO LONGER PURSUE ITS DEFICIENCYCLAIM AGAINST THE ESTATE OF DECEASED ANTONIO M. CHUA, HAVING ELECTEDONE OF ITS ALTERNATIVE RIGHT PURSUANT TO SECTION 7 RULE 86 OF THE RULESOF COURT DESPITE A SPECIAL ENACTMENT (ACT. NO. 3135) COVERING

EXTRAJUDICIAL FORECLOSURE SALE ALLOWING RECOURSE FOR A DEFICIENCYCLAIM AS SUPPORTED BY CONTEMPORARY JURISPRUDENCE.

II

THE CA ERRED IN HOLDING THAT ALLAN M. CHUA, AS SPECIAL ADMINISTRATOR OFTHE INTESTATE ESTATE OF HIS DECEASED FATHER ANTONIO M. CHUA ON ONEHAND, AND HIM AND HIS MOTHER ASUNCION CHUA AS HEIRS ON THE OTHER HAND

ARE NO LONGER LIABLE FOR THE DEBTS OF THE ESTATE.4

The primary issue posed before us is whether or not it was error for the Court of Appeals to rule thatpetitioner may no longer pursue by civil action the recovery of the balance of indebtedness after

having foreclosed the property securing the same. A resolution of this issue will also resolve thesecondary issue concerning any further liability of respondents and of the decedents estate.

Petitioner contends that under prevailing jurisprudence, when the proceeds of the sale areinsufficient to pay the debt, the mortgagee has the right to recover the deficiency from the debtor.5Italso contends that Act 3135, otherwise known as "An Act to Regulate the Sale of Property underSpecial Powers Inserted in or Annexed to Real Estate Mortgages," is the law applicable to this caseof foreclosure sale and not Section 7 of Rule 86 of the Revised Rules of Court 6as held by the Courtof Appeals.7

Private respondents argue that having chosen the remedy of extrajudicial foreclosure of themortgaged property of the deceased, petitioner is precluded from pursuing its deficiency claimagainst the estate of Antonio M. Chua. This they say is pursuant to Section 7, Rule 86 of the Rulesof Court, which states that:

Sec. 7. Rule 86. Mortgage debt due from estate.A creditor holding a claim against thedeceased secured by mortgage or other collateral security, may abandon the security andprosecute his claim in the manner provided in this rule, and share in the general distributionof the assets of the estate; or he may foreclose his mortgage or realize upon his security, byaction in court, making the executor or administrator a party defendant, and if there is a

judgment for a deficiency, after the sale of the mortgaged premises, or the property pledged,in the foreclosure or other proceeding to realize upon the security, he may claim hisdeficiency judgment in the manner provided in the preceding section; or he may rely upon hismortgage or other security alone and foreclose the same at any time within the period of thestatute of limitations, and in that event he shall not be admitted as a creditor, and shall

receive no share in the distribution of the other assets of the estate; but nothing hereincontained shall prohibit the executor or administrator from redeeming the propertymortgaged or pledged by paying the debt for which it is hold as security, under the directionof the court if the court shall adjudge it to be for the interest of the estate that suchredemption shall be made.

Pertinent to the issue at bar, according to petitioner, are our decisions he cited.8Prudential Bank v.Martinez, 189 SCRA 612, 615 (1990),is particularly cited by petitioner as precedent for holding that


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in extrajudicial foreclosure of mortgage, when the proceeds of the sale are insufficient to pay thedebt, the mortgagee has the right to recover the deficiency from the mortgagor.

However, it must be pointed out that petitioners cited cases involve ordinary debts secured by amortgage. The case at bar, we must stress, involves a foreclosure of mortgage arising out of asettlement of estate, wherein the administrator mortgaged a property belonging to the estate of the

decedent, pursuant to an authority given by the probate court. As the Court of Appeals correctlystated, the Rules of Court on Special Proceedings comes into play decisively.

To begin with, it is clear from the text of Section 7, Rule 89, that once the deed of real estatemortgage is recorded in the proper Registry of Deeds, together with the corresponding court orderauthorizing the administrator to mortgage the property, said deed shall be valid as if it has beenexecuted by the deceased himself. Section 7 provides in part:

Sec. 7. Rule 89. Regulations for granting authority to sell, mortgage, or otherwise encumberestateThe court having jurisdiction of the estate of the deceased may authorize theexecutor or administrator to sell personal estate, or to sell, mortgage, or otherwise encumberreal estate, in cases provided by these rules when it appears necessary or beneficial under

the following regulations:

x x x

(f) There shall be recorded in the registry of deeds of the province in which the real estatethus sold, mortgaged, or otherwise encumbered is situated, a certified copy of the order ofthe court, together with the deed of the executor or administrator for such real estate, whichshall be valid as if the deed had been executed by the deceased in his lifetime.

In the present case, it is undisputed that the conditions under the aforecited rule have been compliedwith. It follows that we must consider Sec. 7 of Rule 86, appropriately applicable to the controversyat hand.

Case law now holds that this rule grants to the mortgagee three distinct, independent and mutuallyexclusive remedies that can be alternatively pursued by the mortgage creditor for the satisfaction ofhis credit in case the mortgagor dies, among them:

(1) to waive the mortgage and claim the entire debt from the estate of the mortgagor as anordinary claim;

(2) to foreclose the mortgage judicially and prove any deficiency as an ordinary claim; and

(3) to rely on the mortgage exclusively, foreclosing the same at any time before it is barredby prescriptionwithout right to file a claim for any deficiency.9

In Perez v. Philippine National Bank,10reversing Pasno vs. Ravina,11we held:

The ruling in Pasno vs. Ravinanot having been reiterated in any other case, we havecarefully reexamined the same, and after mature deliberation have reached the conclusionthat the dissenting opinion is more in conformity with reason and law. Of the three alternativecourses that section 7, Rule 87 (now Rule 86), offers the mortgage creditor, to wit, (1) towaive the mortgage and claim the entire debt from the estate of the mortgagor as an ordinaryclaim; (2) foreclose the mortgage judicially and prove any deficiency as an ordinary claim;


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and (3) to rely on the mortgage exclusively, foreclosing the same at any time before it isbarred by prescription, without right to file a claim for any deficiency, the majority opinionin Pasno vs. Ravina, in requiring a judicial foreclosure, virtually wipes out the third alternativeconceded by the Rules to the mortgage creditor, and which would precisely include extra-

judicial foreclosuresby contrast with the second alternative.

The plain result of adopting the last mode of foreclosure is that the creditor waives his right torecover any deficiency from the estate.12Following the Perezruling that the third mode includesextrajudicial foreclosure sales, the result of extrajudicial foreclosure is that the creditor waives anyfurther deficiency claim. The dissent inPasno, as adopted in Perez, supports this conclusion, thus:

When account is further taken of the fact that a creditor who elects to foreclose byextrajudicial salewaives all right to recover against the estate of the deceased debtor for anydeficiency remaining unpaid after the saleit will be readily seen that the decision in this case(referring to the majority opinion)will impose a burden upon the estates of deceased personswho have mortgaged real property for the security of debts, without any compensatoryadvantage.

Clearly, in our view, petitioner herein has chosen the mortgage-creditors option of extrajudiciallyforeclosing the mortgaged property of the Chuas. This choice now bars any subsequent deficiencyclaim against the estate of the deceased, Antonio M. Chua. Petitioner may no longer avail of thecomplaint for the recovery of the balance of indebtedness against said estate, after petitionerforeclosed the property securing the mortgage in its favor. It follows that in this case no furtherliability remains on the part of respondents and the late Antonio M. Chuas estate.

WHEREFORE, finding no reversible error committed by respondent Court of Appeals, the instantpetition is hereby DENIED. The assailed decision of the Court of Appeals in CA-G.R. CV No. 36546is AFFIRMED. Costs against petitioner.1wphi1.nt

SO ORDERED.

Bellosillo, Mendoza, Buena, and De Leon, Jr., JJ.,concur.


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Manila

FIRST DIVISION

G.R. No. L-40771 January 29, 1986

ANGELINA SAMSON, petitioner,vs.COURT OF APPEALS and HEIRS OF PRESBITERO VELASCO, respondents.

Fidel Manalo for petitioner.

Presbiterio J. Velasco, Jr. for respondents.

GUTIERREZ, JR., J:

This is a petition to review the decision of the Court of Appeals, now the Intermediate AppellateCourt, which reversed and set aside the decision of the Court of First Instance of Cavite in LandRegistration Case No. TM-35.

Petitioner Angelina M. Samson filed an application for registration of title in the Court of FirstInstance of Cavite of three parcels of land all located in Ternate, Cavite. These were (l) a parcel ofland with an area of 605,936 square meters more or less located in Sitio Caynipa covered by PlanPSU-199064 (Exhibit "K"); (2) a parcel of land with an area of 199,120 square meters more or lesslocated in Barrio Cayugno-Paniman covered by Plan PSU-202594 (Exhibit "G") and (3) a parcel ofland with an area of 313,675 square meters more or less located in Barrio Cayladme covered by

Plan PSU 200554 (Exhibit "A").

The application for registration was premised on Section 48 of the Public Land Law, CommonwealthAct No. 141 as amended by Republic Act 1942, which entities a person to obtain a certificate of titleif he and his predecessors-in- interest had been in open, continuous, exclusive and notoriouspossession and occupation of agricultural lands of the public domain under a bona fide claim ofacquisition or ownership for at least thirty (30) years immediately preceding the filing of theapplication for confirmation of title, except when prevented by war or force majeure.

The applicant alleged that she and her predecessors-in-interest had occupied and possessed theproperties openly, continuously, and in the concept of the owner for more than 60 years prior to thefiling of the application for registration.

With regard to the parcel of land covered by Plan PSU-200554 (Exhibit "A"), the petitioner stated thatshe bought the northern portion from Melanio Martinez through a deed of sale executed on February12, 1963 (Exhibit "P-1"). She claimed to have purchased the southern portion from HilarionVillacarlos and the latter's children as shown by a document entitled extra-judicial partition and saleexecuted on August 20,1963 (Exhibit "P").

With regard to the parcel of land covered by Plan PSU-202594 (Exhibit "G"), the petitioner allegedthat she bought the northern portion from Generoso Distor by virtue of a deed of absolute sale


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executed on February 25, 1963 (Exhibit "Q"), and the southern portion from Bonifacio Tampis byvirtue of a deed of absolute sale executed on October 1, 1963 (Exhibit "R").

No opposition was filed against the application for registration of the parcel of land covered by PlanPSU-199064 (Exhibit "K"). Hence, in a partial decision dated July 9, 1964, the trial court, ordered theregistration of this parcel of land in favor of the applicant.

The application for the registration of the two parcels covered by Plan PSU-200554 (Exhibit "A") andPlan PSU-202594 (Exhibit "G") was opposed by the Director of Lands, Felicisima Rielo and Jaime T.

Alberto. Of the three, only Rielo pursued her opposition. The Director of Lands withdrew hisopposition while Alberto did not present evidence in his favor.

Rielo died during the pendency of the proceedings. She was substituted by her sons, oppositorsPresbitero R. Velasco and Pedro R. Velasco, to whom the aforementioned parcels of land wereadjudicated pursuant to an extra-judicial partition dated May 2, 1967 of the estate of their deceaseparents Eustaquio Velasco and Felicisima Rielo.

The Velasco's claimed ownership over the two parcels of land on the basis of their alleged open and

continuous possession in the concept of owner for more than thirty (30) years. The two parcels arealleged to form part of a large parcel of land covered by Plan PSU-217187 (Exhibit "I") consisting ofsix (6) lots with a combined area of 2,964,206 square meters located in the sitios of Paniman andCayugno barrio of Sapang Ternate, Cavite owned by the heirs of Eustaquio Velasco. They allegedthat Lots 2 and 4 of Plan PSU-217187 correspond to the parcels of land covered by Plan PSU-202594 (Exhibit "G") and Plan PSU-200554 (Exhibit "A") respectively.

After trial on the merits, the lower court ruled in favor of the applicant and the subject parcels oflands were ordered registered in her name.

The oppositors appealed the decision to the Court of Appeals. As earlier stated, the appellate courtreversed and set aside the decision. The dispositive portion of the decision reads:

WHEREFORE, the judgment appealed from is hereby reversed. In its place, anotherone is hereby rendered dismissing the application for registration filed by applicant-appellee, and ordering the registration of the parcel of land known as Lot No. 4 inPSU-217187 in the name of Pedro R. Velasco, married, of legal age, a resident ofTernate, Cavite; and the parcel of land known as Lot No. 2 in the same Plan PSU-217187 in the name of Presbitero R. Velasco, married, of legal age, a resident ofTernate, Cavite, in accordance with the provisions of Section 48 of Commonwealth

Act No. 141 as amended by Republic Act No. 1942. The applicant-appellee shall paythe costs.

A motion for reconsideration filed by the applicant-appellee was denied by the appellate court. Afterher second motion for reconsideration was denied, the applicant-appellee filed a motion for new trial

based on newly discovered evidence. The motion was also denied for lack of merit.

Hence, this petition.

The issues raised by the petitioner are two-fold. The first issue is anchored on the appellate court'sfactual findings which the petitioner contends are not supported by the evidence on record. Thisissue is anchored on the appellate court's having allegedly erred when it denied the motion for newtrial.


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Considering that the factual findings of the appellate court are diametrically opposed to those of thetrial court, we have scrutinized the bases of the respondent court's factual findings and given extracareful review to the parties' allegations on appeal to determine if there is any merit in the petitioner'scontentions (Cruz v. Court of Appeals, 129 SCRA 222; Legaspi v. Court of Appeals, 69 SCRA 360;Tolentino v. De Jesus, 56 SCRA 167).

It is to be noted that the petitioner's alleged possession of the two subject parcels of landcommenced only in 1963 and that she filed her application for registration of title over the same in1964. Under these circumstances, her right to register the subject parcels of land depends onwhether or not her predecessors-in-interest had occupied and possessed The same openly,continuously, and in the concept of owner within the required thirty-year period prior to the time shefiled the application for registration pursuant to Section 48 of the Public Land Act.

We find the petitioner's contention as regards the factual findings of the appellate court unfounded.

We agree with the appellate court's factual findings to the effect that not one of the petitioner'spredecessors-in-interest was able to submit convincing proof of actual, peaceful, and adversepossession in the concept of owner over the subject parcels of land sought to be registered within

the period contemplated by law. As the appellate court said:

Melanio Martinez declared that he possessed the land sold by him to the applicantonly since 1936. When asked who was in possession prior to 1936, he answered 'Ido not know' (T.S.N., p. 8 August 11, 1970). Even if his possession since 1936 weretacked to that of the applicant, it did not amount to thirty (30) years prior to the filingof the application for registration on May 7, 1964. Martinez even admitted that hispossession was not continuous, he having left the property during the Japanese timeand returned to the same only in 1946 after the war. Moreover, he only visited theland about three times a week in 1961 to 1964 to visit his cows, inasmuch as he wasthen the chief of police of Ternate, Cavite. ... Melanio Martinez stated that he usedthe land merely as a pasturage of his cows which numbered four at that time. He didnot fence the land or construct an enclosure so as to indicate ownership of the

portion claimed to be his own. He further admitted that aside from himself, there wereseveral other people who had their huts in the same area which he was using as agrazing land for his cows (Tsn., p. 18, September 17, 1970). Although he claimed tobe possessing the property since 1936, the earliest tax declaration that could bepresented to show that it was declared for tax purposes in his name was only for theyear 1961 (Exhibit P-2).

The testimony of Hilarion Villacarlos is similarly sketchy and unreliable. lie claimedthat the property he sold to the applicant was inherited by him from his mother, butlater declared that he bought the same (Tsn., p. 78, May 26, 1970). He admitted thathe started possessing the property only since 1945 (Ibid, p. 3) which is only about 19years prior to the filing of this application for registration. Although he claimed that he

paid taxes on the land, he could not present any tax declaration in his name nor anyreceipt of his payment of taxes. He stated that he had tenants but did not know theirnames. . . .

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The testimony of Generoso Distor as to his possession and ownership of thenorthern portion of the lot covered by PSU-202594 sold by him to the applicant alsofails to inspire belief. He claim to have possessed the land from the time he bought it


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from a certain Rufino Tibayan in 1956 or 1957. He cannot remember the exact dateof the sale nor produce the alleged document of sale. He could not remember thenotary public who notarized the same, nor the price he paid. He does not know hisimmediate neighbors, except Tecla Tampis. He had not introduced any improvementon the land nor paid the taxes on the same. The first time he declared it for taxpurposes in his name was on February 5, 1963 or 20 days before he sold the

property to the applicant on February 25, 1963 pursuant to the deed of sale (ExhibitQ) While the property he supposedly bought from Tibayan was only 4 hectares inarea, the parcel of land he sold to the applicant pursuant to Exhibit Q had an area of14 hectares. . . .

The fourth predecessor-in-interest of the applicant, a certain Bonifacio Tampis, wasnot made to testify. According to the Court a quo, the failure of Bonifacio Tampis totestify in his stead was because ho was insane at that time. . . .

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. . . It is to be noted that the tax receipt, Exhibit S-4, in the name of Bonifacio Tampis

shows that the tax was paid on June 25, 1962 not only for that particular year but forall the years starting 1953 to 1961. At the time the said taxes were paid, the applicanthad already been laying cassava over the property subject matter of the instantapplication for registration. It had been testified to by oppositors' witness GorgonioVelasco that the applicant manifested a claim of ownership over the land in questionsince 1959. This assertion was not denied by the applicant, and is in fact sustainedby the contents of Tax Declaration No. 369 which the applicant secured in her nameon July 6, 1964, but which she made to retroact starting with the year 1961 exhibit S-1). On the face of the said tax declaration, it appears that the applicant declared inher name the area of the lot shown in PSU-202594 consisting of 199,120 squaremeters. If the applicant wanted to make it appear that she was already possessingthe land shown in PSU-202594 since 1961, it is not understood why she had topurchase the same property from Generoso Distor and Bonifacio Tampis in 1963. By

said act, applicant showed not only lack of sincerity of her claim of ownership overthe property in question manifested since 1959, so much so she had to acknowledgeher own lack of basis to acquire said land on the ground of possession by purchasingthe lands from the supposed possessors of the same.

On the other hand, the factual findings of the appellate court that the respondents were able tosubmit competent evidence to show acts of possession over the subject parcels of land since 1910are convincing. The court stated:

Gorgonio Velasco, Benjamin Velasco and oppositor Pedro Velasco testified as to the possession bythe Velascos of the parcel of land in question by their deceased father Eustaquio Velasco and, afterthe latter's death in 1922, by their mother Felicisima Rielo. They declared that since the time they

came to the age of reason, they knew that the lands shown in PSU-217187 had been occupied byEustaquio Velasco who planted the same with mango trees and bamboos; that they had a Titulo dePossession Informatoria dated 1895 but said papers were burned during the war; that although theland was declared as part of the military reservation by the Americans for military practices, theirmother continued cultivating and gathering fruits from the land with the consent of the militaryauthorities; that nobody disturbed them in the possession of the land up to the year 1959, when theylearned that an adverse claim over the land was being manifested by a certain Samson; that theyhave been paying the land taxes of the land in question; that the tax declarations corresponding tothe period before the war were burned during the war; that Generoso Distor and Hilarion Villacarlos


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had no properties in the vicinity; that Rufino Tibayan from whom Generoso Distor allegedlypurchased the land that he sold to the applicant did not own any property in that area and wasmerely a tenant of Gorgonio Velasco in Paniman; and that the overseer of the land was a certainMiguel Macaraig who was succeeded in said position by his nephew, oppositors' witness EmilianoMacaraig.

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. . . Even disregarding the testimonial evidence coming from the mouths of oppositor Pedro R.Velasco, his brothers Gorgonio and Benjamin and their overseer Emiliano Macaraig, thedocumentary proofs presented by the oppositor show adequately the veracity of their claim ofpossession. They presented tax receipts showing that, as early as 1910, their father EustaquioVelasco had been paying taxes for lands located in Sapang, Ternate (Exhibits 3, 3-A to 3-1). Whilethe said tax receipts refer to lands located in Barrio Sapang, Ternate, it was explained that theproperties in question are actually located in Barrio Sapang, and that Cayladme and Cayugno-Paniman where the lands shown in PSU-200554 and PSU-202594 are located according to theplans submitted by the applicant, are merely sitios of Barrio Sapang, as indicated in the oppositors'Plan' PSU-217187, Exhibit 1. Applicant was not able to show that the said tax receipts refer to otherparcels of land belonging to Eustaquio Velasco in Ternate, Cavite.

The testimonies of the witnesses for the oppositor may not be disbelieved on the ground that theyare more biased and interested, as compared with the witnesses of the applicant. While Gorgonioand Benjamin Velasco are brothers of oppositors Presbiterio and Pedro Velasco and are expected totestify favorably for the latter, the same thing may be said of applicant's witnesses Melanio Martinez,Hilarion Villacarlos and Generoso Distor whose interest may be said to be more direct and personal,inasmuch as they were the ones who sold the lands which the applicant is seeking to register in hername. The failure of the oppositors to reconstitute the tax declarations in their names until 1961 issimilarly true with the applicant and her predecessors-in-interest none of whose tax declarations andtax receipts covering the lands in question date earlier than 1961. While Gorgonio Velasco might beunfamiliar with the land, he is not the oppositor herein, and the possession of the Velascos over theproperty was not claimed to be by Gorgonio Velasco alone. With respect to the relative credibility of

the witnesses for the oppositors and the applicant based on their social standing and officialpositions, the witnesses of the oppositors do not suffer by the comparison. While it is true thatMelanio Martinez was at one time chief of police of Ternate, Gorgonio Velasco is the internal auditorof UP-Los Banos, while Benjamin Velasco is a physician who was formerly the district health officerof Palawan. oppositor Pedro R. Velasco himself is the chief of the Bureau of Internal Revenue officefor the province of Cavite. Appellant's witness Generoso Distor, contrary to the finding of the trialJudge, was not the municipal treasurer of Ternate, Cavite but only a son of Municipal Treasurer

Alejandro Distor (Tsn., p. 13, July 7, 1970).

It is not true that the testimony of respondent Pedro Velasco concerning the tax receipts is hearsay,hazy vague and not worthy of evidence. It was clearly shown that the questioned tax receiptsbeginning the year 1910 were actually issued for the payment of taxes on the lands in question.Hence, on direct examination, Velasco stated.

xxx xxx xxx

Q Do you know if the said properties has been declared for taxationpurposes?


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A Well on my personal knowledge because my mother entrusted thebundles of document to me, there were land taxes paid sometimes in1903 up to 1923.

Q About the tax declaration, do you know if there is a tax declarationover the property in question?

A Yes sir, there are.

Q I am showing to you this declaration of Real Property No. 1608, willyou please go over the same and tell us what relation has this withthe tax declaration you have mentioned a while ago?

A Yes, sir this is the Tax Declaration I was saying a while ago.

Q Do you have any tax declaration over the said lot before the war?

A Well I could not remember well because I was still a minor at that

time, (Tsn., July 30, 1971, pp. 12-13)

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Q You made mention of the giving by your mother of the tax receiptsregarding the payment of taxes over the lot in question. I am showingto you a bunch of tax receipts, will you please tell us what relationhave these tax receipts over the property in question?

A This Tax Receipt No. 4109383 is one of those given to me by mymother.

Q As well as these tax receipts Nos. 170413, 403389, 9406649,7441543, 5047068, 3871908, 3133061, 1497755, 1436347,3132598?

A These are the receipts which my mother gave me.

Q I observed in this receipt that there is mentioned of properties inSapang Ternate, Cavite. Win you please tell us what barrio coversthis property which you said was owned by your father?

A All the properties are beyond the river except Barrio Bocana andBarrio Sapang up to the boundary line of Batuhan, Margondon,

Cavite. (Tsn., July 30, 1971, pp. 17-18)

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Q I have observed Mr. Velasco in this Tax Receipt which you haveIdentified payment for the properties located in Sapang, TernateCavite. Win you please ten that relation has this payment for theSabang in relation to this property which you said is also in the

jurisdiction of Sapang, Ternate, Cavite?


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A According to my mother those are the payments made on thisproperty located at Cayugno, Ternate, Cavite.

Q Aside from this property in Cayugno, and Paniman which you saidis in the jurisdiction of Barrio Sapang, there are no other properties ordo you know if your parents have another property in Barrio Sapang?

A There no other property. (Tsn., July 30, 1971, pp. 24-26)

On cross-examination, Velasco reiterated his earlier testimony that the tax payment receipts pertainto the two subject parcels of land.

The appellate court's findings that the oppositors had a better right to the registration of the twosubject parcels of land are based on substantial evidence. It is obvious that the appellate court'sfindings are based not only on the tax receipts submitted by the oppositors but the oral testimoniesof the oppositors and their witnesses who testified on the open and continuous possession of theoppositors and their predecessor-in-interest beginning the year 1910 to the present. We see nocompelling reason to deviate from the nile that factual findings of the Court of Appeals based on

substantial evidence cannot be reviewed in a petition for review on certiorari (Montesa v. Court ofAppeals 117 SCRA 700) and that the Court of Appeals, as a rule, is the final arbiter on questions offacts. (Enriquez v. Court of Appeals, 104 SCRA 658). The contention of the petitioner that the caseat bar fails within the known and recognized exceptions to the general rule is not meritorious.

The tax receipts accompanied by actual and continuous possession of the subject parcels of land bythe respondents and their parents before them for more than thirty years qualify them to register titleto the said subject parcels of land. We ruled in the case of Republic v. Court of Appeals,(131 SCRA533) that.

While it is true that by themselves tax receipts and declarations of ownership fortaxation purposes are not incontrovertible evidence of ownership they become strongevidence of ownership acquired by prescription when accompanied by proof of actualpossession. of the property.

With regard to the petitioner's contention that the oppositors did not present documentary proof ofownership sufficient to warrant registration of the subject parcels of land in their favor, we restate ourruling in the case ofZuniga v. Court of Appeals(95 SCRA 740) to wit:

The purpose of the applicant is to prove that he has an absolute or simple title overthe property sought to be registered, otherwise his application will be denied. Anabsolute oppositor claims a dominical right totally adverse to that of the applicant. Ifsuccessful, registration will be decreed in favor of the oppositor. As to whether or notprivate respondents have absolute or fee simple title over the property sought to beregistered necessarily requires a resolution of the question as to whether or not the

oppositors had a dominical right totally adverse to that of the applicants.

The respondents' documents were not only deemed sufficient by the appellate court for registrationof title in their names but they are more convincing proof than the exhibits adduced for the petitioner.

We also find no error in the appellate court's denying the petitioner's motion for new trial based onnewly discovered evidence.


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The newly discovered evidence sought to be presented by petitioner consist of two "ancient"documents and the testimonies of Rufino Tibayan, Petronilo Gulpo, Segunda Fabis and DemetrioZapanta. The "ancient" documents are: (1) Receipt No. 01436276 dated August 9, 1910 in the nameof Emiliana Villacarlos which shows that taxes were paid for 3 parcels of land in the amounts ofP1.75, P4.00 and P l.66; and (2) Escritura de Particion de Fincas Rusticas executed on April 20,1920 by descendants of Luis Villacarlos. By themselves, the supposed newly discovered evidence

would not show that they refer to the land in question.

Section 1, Rule 53 of the Revised Rules of Court provides:

Section 1. Petition. Before a final order or judgment rendered by the Court ofAppeals becomes executory, a motion for new trial may be filed on the ground ofnewly discovered evidence which could not have been discovered prior to the trial inthe court below by the exercise of due diligence and which is of such a character aswould probably change the result. The motion shall be accompanied by affidavitsshowing the facts constituting the gounds therefore and the newly discoveredevidence.

In the instant case, there is no showing that Rufino Tibayan, Petronilo Gulpo, Segunda Fabis andDemetrio Zapanta could not have been discovered and produced during the trial. Hence theirtestimonies would not constitute newly discovered evidence.

The sincerity of the petitioner in producing the two documents after so long a time is doubtful, Thecase was filed on May 7, 1964 and had been pending in court for 11 years before the petitionerdiscovered the said documents and filed the motion for new trial. In fact, it was only after the denialof her second motion for reconsideration and the oral arguments held in the appellate court that shefiled the said motion. The records do not show that the petitioner could not have discovered the twodocuments prior to the trial by use of due diligence. Moreover, granting that the two documents canbe considered as newly discovered evidence, a new trial would only be useless and ineffective.There is no showing that these documents would be sufficient proof to overthrow the appellatecourt's findings that Hilarion Villacarlos and his predecessors-in-interest did not possess the disputed

parcel of land for the required number of years to qualify the petitioner for a certificate of titlepursuant to Section 48 of the Public Land Law as amended. Mere tax declarations do not vestownership of the property in the declarant (Province of Camarines Sur v. Director of Lands, 64 Phil.600, citing the earlier cases of Evangelista v. Tabayuyong, 7 Phil. 607; Casimiro v. Fernandez, 9Phil. 567; Elumbaring v. Elumbaring, 12 Phil. 384).

WHEREFORE, the instant petition is hereby DISMISSED for lack of merit. The appellate court'squestioned decision is AFFIRMED.

SO ORDERED.

Teehankee, Melencio-Herrera, Plana and Patajo, JJ., concur.

De la Fuente, J., took no part.


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Manila

FIRST DIVISION

G.R. No. L-43938 April 15, 1988

REPUBLIC OF THE PHILIPPINES (DIRECTOR OF FOREST DEVELOPMENT), petitioner,vs.HON. COURT OF APPEALS (THIRD DIVISION) and JOSE Y. DE LA ROSA, respondents.

G.R. No. L-44081 April 15, 1988

BENGUET CONSOLIDATED, INC., petitioner,vs.HON. COURT OF APPEALS, JOSE Y. DE LA ROSA, VICTORIA, BENJAMIN and EDUARDO, allsurnamed DE LA ROSA, represented by their father JOSE Y. DE LA ROSA, respondents.

G.R. No. L-44092 April 15, 1988

ATOK-BIG WEDGE MINING COMPANY, petitioner,vs.HON. COURT OF APPEALS, JOSE Y. DE LA ROSA, VICTORlA, BENJAMIN and EDUARDO, allsurnamed DE LA ROSA, represented by their father, JOSE Y. DE LA ROSA, respondents.

CRUZ, J .:

The Regalian doctrine reserves to the State all natural wealth that may be found in the bowels of theearth even if the land where the discovery is made be private. 1In the cases at bar, which have beenconsolidated because they pose a common issue, this doctrine was not correctly applied.

These cases arose from the application for registration of a parcel of land filed on February 11,1965, by Jose de la Rosa on his own behalf and on behalf of his three children, Victoria, Benjaminand Eduardo. The land, situated in Tuding, Itogon, Benguet Province, was divided into 9 lots andcovered by plan Psu-225009. According to the application, Lots 1-5 were sold to Jose de la Rosaand Lots 6-9 to his children by Mamaya Balbalio and Jaime Alberto, respectively, in 1964. 2

The application was separately opposed by Benguet Consolidated, Inc. as to Lots 1-5, Atok BigWedge Corporation, as to Portions of Lots 1-5 and all of Lots 6-9, and by the Republic of the

Philippines, through the Bureau of Forestry Development, as to lots 1-9.3

In support of the application, both Balbalio and Alberto testified that they had acquired the subjectland by virtue of prescription Balbalio claimed to have received Lots 1-5 from her father shortly afterthe Liberation. She testified she was born in the land, which was possessed by her parents underclaim of ownership. 4Alberto said he received Lots 6-9 in 1961 from his mother, Bella Alberto, whodeclared that the land was planted by Jaime and his predecessors-in-interest to bananas, avocado,nangka and camote, and was enclosed with a barbed-wire fence. She was corroborated by Felix Marcos,67 years old at the time, who recalled the earlier possession of the land by Alberto's father. 5Balbalio


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presented her tax declaration in 1956 and the realty tax receipts from that year to 1964, 6Alberto his taxdeclaration in 1961 and the realty tax receipts from that year to 1964. 7

Benguet opposed on the ground that the June Bug mineral claim covering Lots 1-5 was sold to it onSeptember 22, 1934, by the successors-in-interest of James Kelly, who located the claim inSeptember 1909 and recorded it on October 14, 1909. From the date of its purchase, Benguet had

been in actual, continuous and exclusive possession of the land in concept of owner, as evidencedby its construction of adits, its affidavits of annual assessment, its geological mappings, geologicalsamplings and trench side cuts, and its payment of taxes on the land. 8

For its part, Atok alleged that a portion of Lots 1-5 and all of Lots 6-9 were covered by the Emmaand Fredia mineral claims located by Harrison and Reynolds on December 25, 1930, and recordedon January 2, 1931, in the office of the mining recorder of Baguio. These claims were purchasedfrom these locators on November 2, 1931, by Atok, which has since then been in open, continuousand exclusive possession of the said lots as evidenced by its annual assessment work on theclaims, such as the boring of tunnels, and its payment of annual taxes thereon. 9

The location of the mineral claims was made in accordance with Section 21 of the Philippine Bill of

1902 which provided that:

SEC. 21. All valuable mineral deposits in public lands in the philippine Islands bothsurveyed and unsurveyed are hereby declared to be free and open to exploration,occupation and purchase and the land in which they are found to occupation andpurchase by the citizens of the United States, or of said islands.

The Bureau of Forestry Development also interposed its objection, arguing that the land sought to beregistered was covered by the Central Cordillera Forest Reserve under Proclamation No. 217 datedFebruary 16, 1929. Moreover, by reason of its nature, it was not subject to alienation under theConstitutions of 1935 and 1973. 10

The trial court *denied the application, holding that the applicants had failed to prove their claim of possession and ownership of theland sought to be registered. 11The applicants appealed to the respondent court, *which reversed the trial court andrecognized the claims of the applicant, but subject to the rights of Benguet and Atok respecting their mining claims.

12In other words,the Court of Appeals affirmed the surface rights of the de la Rosas over the land while at the same timereserving the sub-surface rights of Benguet and Atok by virtue of their mining claims.

Both Benguet and Atok have appealed to this Court, invoking their superior right of ownership. TheRepublic has filed its own petition for review and reiterates its argument that neither the privaterespondents nor the two mining companies have any valid claim to the land because it is notalienable and registerable.

It is true that the subject property was considered forest land and included in the Central CordilleraForest Reserve, but this did not impair the rights already vested in Benguet and Atok at that time.

The Court of Appeals correctly declared that:

There is no question that the 9 lots applied for are within the June Bug mineral claimsof Benguet and the "Fredia and Emma" mineral claims of Atok. The June Bugmineral claim of plaintiff Benguet was one of the 16 mining claims of James E. Kelly,

American and mining locator. He filed his declaration of the location of the June Bugmineral and the same was recorded in the Mining Recorder's Office on October 14,1909. All of the Kelly claims ha subsequently been acquired by BenguetConsolidated, Inc. Benguet's evidence is that it had made improvements on the June


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Bug mineral claim consisting of mine tunnels prior to 1935. It had submitted therequired affidavit of annual assessment. After World War II, Benguet introducedimprovements on mineral claim June Bug, and also conducted geological mappings,geological sampling and trench side cuts. In 1948, Benguet redeclared the "JuneBug" for taxation and had religiously paid the taxes.

The Emma and Fredia claims were two of the several claims of Harrison registered in1931, and which Atok representatives acquired. Portions of Lots 1 to 5 and all of Lots6 to 9 are within the Emma and Fredia mineral claims of Atok Big Wedge MiningCompany.

The June Bug mineral claim of Benguet and the Fredia and Emma mineral claims ofAtok having been perfected prior to the approval of the Constitution of the Philippinesof 1935, they were removed from the public domain and had become privateproperties of Benguet and Atok.

It is not disputed that the location of the mining claim underconsideration was perfected prior to November 15, 1935, when the

Government of the Commonwealth was inaugurated; and accordingto the laws existing at that time, as construed and applied by thiscourt in McDaniel v. Apacible and Cuisia (42 Phil. 749), a validlocation of a mining claim segregated the area from the publicdomain. Said the court in that case: The moment the locatordiscovered a valuable mineral deposit on the lands located, andperfected his location in accordance with law, the power of the UnitedStates Government to deprive him of the exclusive right to thepossession and enjoyment of the located claim was gone, the landshad become mineral lands and they were exempted from lands thatcould be granted to any other person. The reservations of publiclands cannot be made so as to include prior mineral perfectedlocations; and, of course, if a valid mining location is made upon

public lands afterwards included in a reservation, such inclusion orreservation does not affect the validity of the former location. By suchlocation and perfection, the land located is segregated from the publicdomain even as against the Government. (Union Oil Co. v. Smith,249 U.S. 337; Van Mess v. Roonet, 160 Cal. 131; 27 Cyc. 546).

"The legal effect of a valid location of a mining claim is not only tosegregate the area from the public domain, but to grant to the locatorthe beneficial ownership of the claim and the right to a patent thereforupon compliance with the terms and conditions prescribed by law.Where there is a valid location of a mining claim, the area becomessegregated from the public domain and the property of the locator."(St. Louis Mining & Milling Co. v. Montana Mining Co., 171 U.S. 650;655; 43 Law ed., 320, 322.) "When a location of a mining claim isperfected it has the effect of a grant by the United States of the rightof present and exclusive possession, with the right to the exclusiveenjoyment of all the surface ground as well as of all the mineralswithin the lines of the claim, except as limited by the extralateral rightof adjoining locators; and this is the locator's right before as well asafter the issuance of the patent. While a lode locator acquires avested property right by virtue of his location made in compliance withthe mining laws, the fee remains in the government until patent


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issues."(18 R.C.L. 1152) (Gold Creek Mining Corporation v. Hon.Eulogio Rodriguez, Sec. of Agriculture and Commerce, and Quirico

Abadilla, Director of the Bureau of Mines, 66 Phil. 259, 265-266)

It is of no importance whether Benguet and Atok had secured a patent for as held inthe Gold Creek Mining Corp. Case, for all physical purposes of ownership, the owner

is not required to secure a patent as long as he complies with the provisions of themining laws; his possessory right, for all practical purposes of ownership, is as goodas though secured by patent.

We agree likewise with the oppositors that having complied with all the requirementsof the mining laws, the claims were removed from the public domain, and not eventhe government of the Philippines can take away this right from them. The reason isobvious. Having become the private properties of the oppositors, they cannot bedeprived thereof without due process of law. 13

Such rights were not affected either by the stricture in the Commonwealth Constitution against thealienation of all lands of the public domain except those agricultural in nature for this was made

subject to existing rights. Thus, in its Article XIII, Section 1, it was categorically provided that:

SEC. 1. All agricultural, timber and mineral lands of the public domain, waters,minerals, coal, petroleum and other mineral oils, all forces of potential energy andother natural resources of the Philipppines belong to the State, and their disposition,exploitation, development, or utilization shall be limited to citizens of the Philippinesor to corporations or associations at least 60% of the capital of which is owned bysuch citizens, subject to any existing right, grant, lease or concession at the time ofthe inauguration of the government established under this Constitution. Naturalresources with the exception of public agricultural lands, shall not be alienated, andno license, concession, or lease for the exploitation, development or utilization of anyof the natural resources shall be granted for a period exceeding 25 years, except asto water rights for irrigation, water supply, fisheries, or industrial uses other than the

development of water power, in which case beneficial use may be the measure andthe limit of the grant.

Implementing this provision, Act No. 4268, approved on November 8, 1935, declared:

Any provision of existing laws, executive order, proclamation to the contrarynotwithstanding, all locations of mining claim made prior to February 8, 1935 withinlands set apart as forest reserve under Sec. 1826 of the Revised AdministrativeCode which would be valid and subsisting location except to the existence of saidreserve are hereby declared to be valid and subsisting locations as of the date oftheir respective locations.

The perfection of the mining claim converted the property to mineral land and under the laws then inforce removed it from the public domain. 14By such act, the locators acquired exclusive rights over theland, against even the government, without need of any further act such as the purchase of the land orthe obtention of a patent over it. 15As the land had become the private property of the locators, they hadthe right to transfer the same, as they did, to Benguet and Atok.

It is true, as the Court of Appeals observed, that such private property was subject to the"vicissitudes of ownership," or even to forfeiture by non-user or abandonment or, as the private


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respondents aver, by acquisitive prescription. However, the method invoked by the de la Rosas isnot available in the case at bar, for two reasons.

First, the trial court found that the evidence of open, continuous, adverse and exclusive possessionsubmitted by the applicants was insufficient to support their claim of ownership. They themselveshad acquired the land only in 1964 and applied for its registration in 1965, relying on the earlier

alleged possession of their predecessors-in-interest.16

The trial judge, who had the opportunity toconsider the evidence first-hand and observe the demeanor of the witnesses and test their credibility wasnot convinced. We defer to his judgment in the absence of a showing that it was reached with graveabuse of discretion or without sufficient basis. 17

Second, even if it be assumed that the predecessors-in-interest of the de la Rosas had really been inpossession of the subject property, their possession was not in the concept of owner of the miningclaimbut of the property as agricultural land, which it was not. The property was mineral land, andthey were claiming it as agricultural land. They were not disputing the lights of the mining locatorsnor were they seeking to oust them as such and to replace them in the mining of the land. In fact,Balbalio testified that she was aware of the diggings being undertaken "down below" 18but she didnot mind, much less protest, the same although she claimed to be the owner of the said land.

The Court of Appeals justified this by saying there is "no conflict of interest" between the owners ofthe surface rights and the owners of the sub-surface rights. This is rather doctrine, for it is a well-known principle that the owner of piece of land has rights not only to its surface but also toeverything underneath and the airspace above it up to a reasonable height. 19Under the aforesaidruling, the land is classified as mineral underneath and agricultural on the surface, subject to separateclaims of title. This is 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 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 eachother's rights? Where is the dividing line between the surface and the sub-surface rights?

The 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 eithercompletely mineral or completely agricultural. In the instant case, as already observed, the landwhich was originally classified as forest land ceased to be so and became mineral and completelymineral once the mining claims were perfected. 20As long as mining operations were beingundertaken thereon, or underneath, it did not cease to be so and become agricultural, even if only partlyso, because it was enclosed with a fence and was cultivated by those who were unlawfully occupying thesurface.

What must have misled the respondent court is Commonwealth Act No. 137, providing as follows:

Sec. 3. All mineral lands of the public domain and minerals belong to the State, andtheir disposition, exploitation, development or utilization, shall be limited to citizens ofthe Philippines, or to corporations, or associations, at least 60% of the capital ofwhich is owned by such citizens, subject to any existing right, grant, lease orconcession at the time of the inauguration of government established under theConstitution.

SEC. 4. The ownership of, and the right to the use of land for agricultural, industrial,commercial, residential, or for any purpose other than mining does not include the


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ownership of, nor the right to extract or utilize, the minerals which may be found on orunder the surface.

SEC. 5. The ownership of, and the right to extract and utilize, the minerals includedwithin all areas for which public agricultural land patents are granted are excludedand excepted from all such patents.

SEC. 6. The ownership of, and the right to extract and utilize, the minerals includedwithin all areas for which Torrens titles are granted are excluded and excepted fromall such titles.

This is an application of the Regalian doctrine which, as its name implies, is intended for the benefitof the State, not of private persons. The rule simply reserves to the State all minerals that may befound in public and even private land devoted to "agricultural, industrial, commercial, residential or(for) any purpose other than mining." Thus, if a person is the owner of agricultural land in whichminerals are discovered, his ownership of such land does not give him the right to extract or utilizethe said minerals without the permission of the State to which such minerals belong.

The flaw in the reasoning of the respondent court is in supposing that the rights over the land couldbe used for both mining and non-mining purposes simultaneously. The correct interpretation is thatonce minerals are discovered in the land, whatever the use to which it is being devoted at the time,such use may be discontinued by the State to enable it to extract the minerals therein in the exerciseof its sovereign prerogative. The land is thus converted to mineral land and may not be used by anyprivate party, including the registered owner thereof, for any other purpose that will impede themining operations to be undertaken therein, For the loss sustained by such owner, he is of courseentitled to just compensation under the Mining Laws or in appropriate expropriation proceedings. 21

Our holding is that Benguet and Atok have exclusive rights to the property in question by virtue oftheir respective mining claims which they validly acquired before the Constitution of 1935 prohibitedthe alienation of all lands of the public domain except agricultural lands, subject to vested rightsexisting at the time of its adoption. The land was not and could not have been transferred to the

private respondents by virtue of acquisitive prescription, nor could its use be shared simultaneouslyby them and the mining companies for agricultural and mineral purposes.

WHEREFORE, the decision of the respondent court dated April 30, 1976, is SET ASIDE and that ofthe trial court dated March 11, 1969, is REINSTATED, without any pronouncement as to costs.

SO ORDERED.

Teehankee, C.J., Narvasa, Gancayco and Grio-Aquino, JJ., concur.


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Manila

EN BANC

G.R. No. L-6610 August 24, 1912

ELEUTERIA VILLANUEVA, ET AL.,plaintiffs-appellees,vs.VALERIANO CLAUSTRO,defendant-appellant.

ARELLANO, C.J.:

The subject matter in this suit is a piece of land formerly covered by the water of the river that runsbetween Vigan and Bantay, pueblos of the Province of Ilocos Sur, and now dry, for the river haschanged its course toward the north of the town of Vigan. The plaintiffs, as successors in interest ofMariano Villanueva, now deceased, claim that the said land, which comprises approximately 13 ares

and is occupied by Valeriano Claustro, belongs to them and demand ownership or possessionthereof. At first, suit was also brought against Victoriana de la Cruz, but as she recognized theplaintiffs' ownership, the action was maintained only against Valeriano Claustro.

Valeriano Claustro, in his written answer under date of March 21, 1940, alleged as a special defensethat he and his wife, Isabel Rivera, had been in possession of the said land publicly and peaceablyfor twenty years, without interruption.

Mariano Aete, a man 62 years old, a witness for the defendant, testified that the lot in question hadformerly been covered with water, but was gradually converted into dry land as the result of floods,then shrubs and castor-oil plants grew on it and as soon as it could be occupied, the defendant tookit and built his house on it. Witness did not know why the latter occupied the lands, nor under whatconditions he went there, and further stated that the lot of the Villanuevas, plaintiffs, lay south of it.

Two other witnesses of the defendant, as well as his wife, Isabel Rivera, testified that the land inquestion was the bed of the river that ran behind the masonry wall of the house of the Villanuevasand that about thirty years ago (they testified on April 28, 1910) it had become dry, because the riverhad taken a more northerly course. Isabel Rivera herself, wife of the defendant, testified that as sheand her husband had no lot they occupied the land mentioned and built there house, which wasseveral times washed away by the water during the freshets of the river, and that at the time thehouse of the other defendant, Victorina de La Cruz (excluded from the complaint, as aforestated)was next to hers. All these witnesses testified to a possession of some twenty-three years on thepart of the defendant, and his wife specifically stated that they considered themselves owners of thelot, merely because they had cleared it.

The defendant, however, in a complaint filed before the justice of the peace court against AgustinTeao for recovery of possession, averred on May 11, 1905, that he had been in possession of the

land for ten years; so that, in March, 1910, he could only establish a possession of fifteen years.The following facts are admitted and well proved: (1) That the plaintiffs are the legitimate successorsin interest of Mariano Villanueva; and (2) that Mariano Villanueva is the recognized owner of the realproperty which was bounded on the north by the river that runs between Vigan and Bantay, and nowby the land in question, which was abandoned by the river on account channel has now been formore than thirty years.

It is superfluous to consider which the plaintiffs have presented by means of three witnesses, relativeto the possession, claimed by them to be precarious, of the defendant, through mere tolerance on


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the part of Mariano Villanueva, it being sufficient that the plaintiffs presented the ownership title oftheir land adjoining the river, acquired on December 2,, 1968, which states "that the said land isbounded on the north by the river which runs through this part of the town."

The Court of First Instance of Ilocos Sur decided the suit by finding the plaintiffs to be the legitimateowners of the tract of land claimed and described in the complaint, and by sentencing the defendant,Valeriano Claustro, to quit the land and deliver it to the plaintiffs, without special finding as to costs.

Having heard the appeal raised by the defendant with a statement of the errors assigned to thejudgment appealed from, the following considerations arise:

First. The law provides that the beds of rivers which remain abandoned because the course of thewater has naturally changed belong to the owners of the riparian lands throughout their respectivelengths (Civ. Cod., art. 370). If, according to the defendant's witnesses, the land disputed was theold bed of the river, which remained abandoned because the course of water had naturally changed,it belongs to the owner of the riparian land that bordered on the river, who, according to these samewitnesses, was Mariano Villanueva, and whose lot, inclosed by a wall, was bounded on the north bythe said river on the date the land was acquired, December 2, 1868.

Second. The right in re to the principal is likewise a right in re to the accessory, as it is a mode ofacquisition, provided by law, as the result of the right of accretion, since the accessory follows the

nature of the principal, and there need not be any tendency to the thing or manifestation of thepurpose to subject it to our ownership, as it is subject thereto ipso jure from the moment the mode ofacquisition becomes evident. If, according to the defendant's witnesses, more than thirty years hadelapsed since the river had abandoned river bed had fallen to the private ownership of MarianoVillanueva, even without any formal act of his will; no one else since then could occupy it except as atrespasser.

Third. The occupation of a thing belonging to another may lead to another mode of acquisition,which is the prescription of ownership, whenever the possession of such thing under ordinaryprescription, which is that alleged of twenty years, is accompanied by the other requisites prescribedby law, such as good faith, proper title and legal period of time (Civ. Cod., art. 1940). But in thepresent case a proper title for possession is entirely lacking, inasmuch as the only one alleged bythe defendant's wife, to wit that the had no other lot than they cleared the land in questions, is not a

proper title, nor any title at all. Mere occupation is not a title of acquisition except when it concerns"things which can be appropriated by reason of their nature, which have no owners, such as animalswhich are the object of hunting and fishing, hidden treasure and abandoned property." (Civ. Cod.,art. 610.)

Fourth. If, pursuant to section 41 of Act No. 190, Code of Civil Procedure, occupation of real propertymay constitute a title of procedure, occupation of real property may constitute a title of ownership byprescription after the lapse of ten years, yet these ten years must be "after this Act comes into effect"(Id., sec., 38) ; and for the purposes of the enforcement of the Act, it is not understood to have comeinto effect until October 1, 1901, though it really appears to have been passed on August 31, 1901,and from then, 1901, to August 20, 1909, when this suit was commenced, the said ten years did notelapse.

By no mode or title of acquisition whatever has the defendant been able to acquire ownership of theland in question, which, by express provision of the law, belonged to the plaintiffs as the legitimatesuccessors in interest of Mariano Villanueva.

The judgment appealed from is affirmed, with costs of this instance upon the appellant. So ordered.

Torres, Mapa, Johnson, Carson and Trent, JJ.,concur.


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Republic of the Philippines

SUPREME COURT

Manila

EN BANC

November 27, 1929

G.R. No. 31339

THOS. N. POWELL, plaintiff-appellant,

vs.

THE PHILIPPINE NATIONAL BANK, defendant-appellant.

Roman J. Lacson for appellant.

Alva J. Hill for appellee.

VILLA-REAL, J.:

The present appeal was taken by the Philippine National Bank from a judgment of the Court of First

Instance of Iloilo ordering it to pay the sum of P7,926.18 to the plaintiff, Thomas N. Powell, together

with the legal interest thereon from October 9, 1928 until fully paid, with the costs of the trial.

In support of its appeal, the bank assigns the following alleged errors as committed by the lower court in

its decision, to wit:

The lower court erred:

1. In not holding that the fact that the fertilizer purchased by Severino Aldeguer of Felipe Gomez was

used on the sugar cane planted on the land in question, has created a lien upon said sugar cane to

secure the payment of the promissory notes issued for the fertilizers.


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2. In holding that there is no legal provision in force in these Islands applicable to said lien.

3. In not holding that the provisions of articles 356 and 1922 of the Civil Code are applicable to the

instant case.

4. In not absolving the Philippine National Bank from the complaint with costs against plaintiff.

The following facts, agreed upon by the parties, are pertinent and necessary to the solution of the

questions raised in this appeal:

On December 17, 1920, in order to secure the payment of the sum of P17,000 with 12 per cent interest

per annum, Severino P. Aldeguer executed a mortgage deed in favor of the Philippine national Bank on

lots Nos. 1318 and 470 of the cadastral survey of Pontevedra, Occidental Negros, appearing upon the

original certificates of title Nos. 10977 and 10978, issued by the register of deeds of said Province of

Occidental Negros (Exhibit E).

On July 5, 1923, after a liquidation of accounts between Severino P. Aldeguer and the Philippine

National Bank, from which it appeared that the former owed the latter the sum of P33,348.75, the

former mortgage deed (Exhibit E) was amended making the mortgage property liable for the new

amount with 8 per cent interest per annum, and retaining the other conditions of the contract (Exhibit

F).

On July 6, 1923, in order to secure the payment to the Philippine National Bank of the additional sum of

P12,000 with interest, Severino P. Aldeguer executed a second mortgage in favor of said bank on the

said lots, Nos. 1318 and 470 of the Pontevedra cadastre, and a first mortgage on the sugar-cane harvest

of 1923-1924 on said land, as well as on twenty-two head of labor cattle (Exhibit G).

On February 23, 1925, in pursuance of a writ of execution issued by the Court of First Instance of Manila,

dated October 31, 1924, in civil case No. 25663 of said court, wherein the Asia Banking Corporation was

the plaintiff, and Severino P. Aldeguer and others were the defendants, the sheriff of the Province ofOccidental Negros levied execution on the aforementioned lots, Nos. 1318 and 470, mortgaged to the

Philippine National Bank (Exhibit B).

Following the procedure prescribed by law, the provincial sheriff of Occidental Negros on March 30,

1925 sold at public auction, all Severino P. Adeguer's rights, title and interest in said lots Nos. 1318 and


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470 to the Asia Banking Corporation, as the highest bidder for the sum of P4,000. The writ of execution

was for the sum of P4,625 with interest at 9 per centum per annum from September 20, 1920, plus the

costs, which amounted to P58.52 (Exhibits C and D). The sheriff a deed of sale of said lands, which were

described in certificates of title Nos. 10977 and 10978, in favor of the Asia Banking Corporation and sent

it to the register of deeds of Occidental Negros by registered mail on May 29, 1925, having been

recorded upon receipt thereof in Bacolod.

On March 28, 1925, Severino P. Aldeguer bought 40 tons of fertilizer from Felipe Gomez for use in the

cultivation of the two parcels of land mortgaged by him to the Philippine National Bank, executing a

promissory note for P5,200 payable on February 28, 1926.

On February 15, 1926, Severino P. Aldeguer again bought 3 tons of fertilizer from Felipe Gomez for use

upon the said land, executing a promissory note for P390, payable on January 15, 1927.

These promissory notes were endorsed by Felipe Gomez to the Philippine National Bank.

For some reason or other Severino P. Aldeguer failed to exercise his right of repurchase, and on April 23,

1928, the provincial sheriff of Occidental Negros executed the final deed of sale of Severino P.

Aldeguer's land mortgaged to the Philippine National Bank, in favor of the Asia Banking Corporation

(Exhibit 1).

On April 25, 1928, the Asia Banking Corporation sold said lots Nos. 1318 and 470 to Urquijo Hermanos

for P45,000, after undertaking to liberate them from all liens (Exhibit J).

On April 25, 1928, the Philippine National Bank furnished the Asia Banking Corporation the following

statement of Severino P. Aldeguer's account up to April 25, 1928:

To remaining balance of P/Note signed by

Mr. Severino P. Aldeguer on July 5, 1923

for P32,373.64 P29,500.00

To interest unpaid up to August 31, 1924 756.18

To interest due on P29,500 from September 1,

1924 to April 25, 1928, at 8% per annum

(3 yrs. 7 months and 25 days) 8,636.24


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9,392.42

Less: Payment made on April 4, 1928 2,074.06

7,318.36

Total 36,818.35

On April 26, 1928, the Asia Banking Corporation, through its attorneys tendered the Philippine National

Bank a check for P29,307 in payment of Severino P. Aldeguer's debt to the latter, secured by the

mortgage of the lands above-mentioned.

On April 27, 1928, the Philippine National Bank returned the check to the Asia Banking Corporation withthe following statement of Severino Corporation with the it:

To remaining balance of P/Note signed by

Mr. Severino P. Aldeguer on July 5, 1923

for P32,373.64 P29,500.00

To interest unpaid up to August 31, 1924 P756.18

To interest on P29,500 from September 1,

1924 to February 28, 1926 at 8% per an-

num (1 yr. and 6 months) 3,540.00

To interest on P29,500 from March 1, 1926 to

April 27, 1928, at 9% per annum (2 yrs. 1

month and 27 days) 5,737.75

10,033.93

Less: Payment made on April 4, 1926 2,074.06

7,959.87

Total 37,459.87


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Upon receipt of said statement, and on the same day, April 27, 1928, the attorneys of the Asia Banking

Corporation addressed a letter to the Philippine National Bank requesting the reconsideration thereof.

The Philippine national Bank declined to make the reconsideration but expressed its willingness to

accept an additional sum of P7,511.36 in full payment.

In order to comply with its obligation to Urquijo Hermanos, the Asia Banking Corporation was forced to

pay the Philippine National Bank the amount of P7,511.36 under protest, made in a letter dated April 28,

1928.

On receipt of said amount, the Philippine National Bank, on May 3, 1928, executed in favor of the Asia

Banking Corporation a release of the mortgages on the lands in question (Exhibit H).

The real and exact state of accounts of Severino P. Aldeguer with the Philippine National Bank from

September 4, 1924 to April 25, 1928, is as follows:

1. Unpaid balance, as of April 11, 1924, of his B/Note, of July 5, 1923, for P32,373.64 P29,500.00

Unpaid interest due thereon at 8 % to April 25, 1928 9,392.42 P38,892.42

2. His promissory note, dated March 28, 1925, signed in favor of Felipe Gomez, payable on February 28,

1926, negotiated with us on September 8, 1925 5,200.00 Unpaid interest due thereon at 10 % from

February 28, 1926 to April 25, 1928 1,122.33 6,322.33

3. His promissory note, dated February 15, 1926, signed in favor of Felipe Gomez, payable on January

15, 1927, negotiated with us on June 30, 1926 300.00 Unpaid interest due thereon at 10 % from

February 15, 1927 to April 25, 1928 49.93 439.93

Total 45,654.68

LESS PAYMENTS MADE:

September 4, 1924 from his 1923/24

C/Loan 239.37

August 5, 1925 from his 1924/25 C/Loan 756.18

August 5, 1925 from his 1924/25 C/Loan 1,010.68


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September 5, 1925 from his 1924/25

C/Loan 27.18

October 24, 1925 from his 1924/25 C/Loan 129.96

November 25, 1925 from his 1924/25

C/Loan 1,209.07

April 22, 1927 from Ynchausti & Co.

surplus of his 1926/27 C/Loan a/c

with said Company 2,166.75

May 24, 1927 do 1,193.50

June 24, 1927 do 1,193.49

April 4, 1928 from Ynchausti & Co 2,074.06 10,000.24

Balance, April 25, 1928 35,654.44

With respect to the first assignment of error, the pertinent part of article 1922 of the Civil code states:

ART. 1922. With respect to determinate personal property of the debtor, the following are preferred:

x x x x x x x x x

6. Credits for seed and expenses of cultivation and harvesting, advanced to the debtor, with respect to

the fruits of the crops which they were used to produce;

x x x x x x x x x

If the personal property, with respect to which the preference is allowed, has been removed, the

creditor may claim it from the person who has the same, within the term of thirty days counted from

the time it was so removed.

According to this legal provision, the Philippine National Bank, having acquired the promissory notes

executed by Severino P. Aldeguer in payment of the fertilizer used in the cultivation of the two parcels

of land mortgaged to said Bank, had a preferred right to the crops harvested on said lands from

February 28, 1926 and January 15, 1927, on which dates the promissory notes fell due, and also the

dates in which the crops produced by the fertilizer were presumably harvested. According to the agreed

statement of facts, Ynchausti & Co. delivered to the Philippine National Bank sugar milled in its central

from the cane grown upon Severino P. Aldeguer's land mortgaged to said bank. Instead of applying that

sugar to the payment of the promissory notes acquired by it from Felipe Gomez, applied it to the

payment of its credit against Severino P. Aldeguer secured by the two parcels of land that produced said

crops. In doing so, it waived its preferred right to said sugar for the payment of said promissory notes,

because that preferred right subsisted in so far as the sugar continued to belong to the debtor. From the


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time the Philippine National Bank applied it to the payment of its credit against Severino P. Aldeguer,

with the latter's consent, said sugar ceased to belong to said Severino P. Aldeguer, and became the

property of the aforesaid Philippine National Bank. (12 Manresa, 685.)

With regard to the defendant-appellant's contention that Severino P. Aldeguer had a right to compel the

Philippine National Bank to apply said sugar to the payment of the promissory notes for the fertilizer,

such debts being the most burdensome to him, in accordance with the provisions of articles 1172 and

1174 of the Civil Code, suffice it to say that such application should have been made at the time of

payment, and not afterwards, when his account with the bank had already been credited.

The second question to be decided in this appeal is whether the Asia Banking Corporation had any right

to the fruits and rents of the lands purchased at public auction, up to the 25th of April, 1928, when the

sheriff of Occidental Negros issued the final deed of sale of said lands in its favor.

The pertinent part of the English text of section 463 of the Code of Civil Procedure, says:

SEC. 463. Sale of real property and certificate thereof. Upon a sale of real property, the purchaser

shall be substituted, to, and acquire all the right, interest, title, and claim of the judgment debtor

thereto, subject to the right of redemption as hereinafter provided. . . . .

In the case of Riosa vs. Verzosa and Bulan (26 Phil., 86), this court laid down the following doctrine:

SALE OR REALTY UNDER EXECUTION: RIGHT OF OWNER TO RETAIN POSSESSION DURING PERIOD OF

EQUITY OF REDEMPTION; EJECTMENT OF OWNER BY PURCHASER. When real estate is sold under an

execution and the owner is in possession thereof, he is entitled to remain in possession of the property

sold and to collect the rents and profits of the same during the period of the equity of redemption.

(Sections 464, 465, 468, and 469 of Act No. 190; De la Rosa vs. Santos, 10 Phil., 148.) By virtue of the

provisions of section 469 (Act No. 190) where the land is in possession of a tenant at the time of the sale

under execution, a different rule prevails.

In the case of Velasco vs. Rosenberg's Incorporated (32 Phil., 72), this court likewise laid down the

following doctrine:

EXECUTION SALE; RIGHT OF PURCHASE TO COLLECT RENT DURING PERIOD OF REDEMPTION. The

judgment debtor who is in possession of property sold under execution cannot be required to pay the

purchaser rent for such property, during the period of redemption.


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And in the case of Pabico vs. Ong Pauco (43 Phil., 572), this court also laid down the following doctrine:

1. SHERIFFS; EXECUTION SALES, PLACING PURCHASER IN POSSESSION. The doctrine of coveat emptor

applies to execution sales and the sheriff has no authority to place a purchaser of land under such a sale

in possession. In attempting to do so he becomes a trespasser and an action for forcible entry and

detainer may be maintained against the person so placed in possession.

2. TRANSLATION. Correction of the Spanish translation of section 463 of the code of Civil Procedure.

Section 465 of the Code of Civil Procedure, provides as follows:

SEC. 465. Time and manner of redemption. The judgment debtor, or redemptioner, may redeem the

property from the purchaser, at any time within twelve months after the sale, on paying the purchaser

the amount of his purchase, with one per cent per month interest thereon in addition, up to the time of

redemption, together with the amount of any assessments or taxes which the purchaser may have paid

thereon after purchase, and interest on such last-named amount at the same rate. . . .

According to the doctrines quoted above, the purchaser of a debtor's property at public auction by

virtue of a writ of execution of a judgment, has no right to collect the rents or receive the products

thereof during the period of legal redemption when said debtor is in possession of them. Nothing couldbe more just or equitable; for, if by section 465 of the Code of Civil Procedure quoted above, the debtor

must pay 1 per centum monthly interest on the purchase price, at the time of the redemption, the

purchaser would profit twice, if in addition to said interest he were entitled to the rents and fruits of the

land sold which remained in the possession of the debtor. If the debtor is unable to make the

repurchaser, the interest on the purchaser's capital during the period of redemption, is compensated by

the difference between the true value of the land sold and the purchase price; for, it is well-known that

the price obtained at judicial sales for land subject to execution is usually less than the market value.

Now then, from time is the purchaser entitled to the fruits and rents of the real property purchased

remaining in possession of the debtor in case the debtor failed to take advantage of his right to

repurchase?

Section 465 of the Code of Civil Procedure, quoted above, provides that the judgment debtor may

redeem the thing sold from the purchaser within twelve months following the day of the sale, by paying

the selling price plus interest at the rate of one per centum per month; and section 466 of the same law


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provides that if within the twelve months following the sale no redemption is made, the purchaser of his

successor in interest is entitled to the proper deed of conveyance, or, what amounts to the same thing,

the purchaser becomes the owner of the property purchased, otherwise he would not be entitled to the

proper deed of conveyance. As absolute owner of the land, the purchaser is entitled to its possession

and to receive the rents and fruits thereof, and the judgment debtor is obliged to deliver said land,

together with the fruits and rents collected since the ownership was consolidated by reason of failure ofredemption, except that he is entitled to reimbursement for expenses of cultivation, harvesting, and

preservation, according to article 356 of the Civil Code.

In the instant case, while it is true that the judgment debtor Severino P. Aldeguer was entitled to retain

possession of the parcels of land acquired by the Asia Banking Corporation at public auction by virtue of

execution, and to collect the fruits and rents pending the expiration of the period of redemption,

inasmuch as he failed to exercise his right of redemption within the twelve months following the day of

sale, which took place on March 30, 1925, the ownership of the same became consolidated in the

purchaser, the Asia Banking Corporation, and from March 30, 1926, said bank was entitled to collect thefruits and rents of said lands, until the final delivery of the latter to it on April 23, 1928, when the final

deed of sale of the lands was executed in favor of said Asia Banking Corporation.

According to the statement of Severino P. Aldeguer's account with the Philippine National Bank,

submitted by the latter to the Asia Banking Corporation, all the products of said lands up to April 4,

19928 were delivered by Ynchausti & Co. to said Philippine National Bank, and credited to said Severino

P. Aldeguer's account with the latter. When said Philippine National Bank, then, applied the products of

the lands mortgaged to it to secure the payment of Severino P. Aldeguer's mortgage debt, from 1927 to

1928, said products already belonged to the Asia Banking Corporation.

Summarizing, then: (1) When the Philippine National Bank, as mortgage creditor of Severino P. Aldeguer

and assignee of Felipe Gomez's rights to the promissory notes for the fertilizer used by Severino P.

Aldeguer in the cultivation of the lands mortgaged to said bank, applied the products of said lands to the

payment of its mortgage credit, it waived its preferential right over said products for the amount of the

aforesaid promissory notes; (2) from March 30, 1925 when Severino P. Aldeguer's right of redemption of

the two parcels of land in question was sold at public auction to the Asia Banking Corporation by virtue

of execution, until March 30, 1926, when the period redemption expired, the fruits and rents collected

from sad lands belonged to said Severino P. Aldeguer as judgment debtor in possession thereof; and (3)that from March 30, 1926, when the ownership of the Asia Banking Corporation was consolidated, the

latter being the purchaser at public auction of Severino P. Aldeguer's right of redemption, until April 23,

1928, when the final deed of sale of the fruits and rents was issued in favor of said Asia Banking

Corporation, the said fruits and rents from said lands, belonged to the last mentioned banking

corporation.


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Wherefore, we are of opinion and so hold: (1) That a mortgage who, at the same time, is a holder or

promissory notes for the value of fertilizer used in the cultivation of the mortgaged lands, and who

collects said products and applies them to his mortgage credit, waives the preferential right granted to

him by article 1922, case 6, of the Civil Code, upon said products, the amount of said promissory notes

becoming an ordinary credit; (2) that the judgment debtor in possession of land by virtue of execution is

entitled to collect its fruits and rents during the year fixed by the law for the redemption (Riosa vs.Verzosa and Bulan, 26 Phil., 86; Velasco vs. Rosenberg's Incorporated, 32 Phil., 72); and (3) that if the

period for redemption expires without the judgment debtor having made use of his right, the ownership

of the land sold becomes consolidated in the purchaser, who thereupon becomes entitled to collect its

fruits and rents, paying the judgment debtor the expenses of cultivation, harvesting and preservation

(article 356, Civil Code).

As to the question of procedure raised by the defendant-appellant, who contends that to affirm the

judgment appealed from would amount to ordering Severino P. Aldeguer, who is not a party in this case,

to pay the amount of said judgment, we hold that there is no merit in such contention, because, as he isnot a party to this case, the decision cannot affect him; and, furthermore, as he is not a necessary party

for the final solution of the questions raised by the parties herein between themselves, he need not

impleaded.

For the considerations, and finding no error in the judgment appealed from, the same is affirmed in its

dispositive part, with costs against the appellant. So ordered.

Johnson, Street, Villamor and Romualdez, JJ., concur.Johns, J., concurs in the result.

Separate Opinions

AVANCEA, C.J., dissenting:

Certain realty was sold at public auction by virtue of a writ of execution of a judgment rendered against

the debtor. One year elapsed after this sale during which the debtor failed to exercise the right of

redemption granted to him by section 463 of the Code of Civil Procedure. The majority holds that

notwithstanding such failure to exercise the right of redemption, the purchaser is not entitled to the

fruits of the property purchased by him from the time the sale is made, but only after the lapse of the

one year fixed by the law for redemption.


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I differ with the majority upon this point.

Section 463 of the Code of Civil Procedure, the Spanish transla

Documents

Property Cases 12-05