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EQUATORIAL REALTY DEVELOPMENT, INC., petitioner, vs.

MAYFAIR THEATER,
INC., respondent.
PANGANIBAN, J.:
General propositions do not decide specific cases. Rather, laws are interpreted in the
context of the peculiar factual situation of each proceeding. Each case has its own flesh
and blood and cannot be ruled upon on the basis of isolated clinical classroom
principles.
While we agree with the general proposition that a contract of sale is valid until
rescinded, it is equally true that ownership of the thing sold is not acquired by mere
agreement, but by tradition or delivery. The peculiar facts of the present controversy as
found by this Court in an earlier relevant Decision show that delivery was not actually
effected; in fact, it was prevented by a legally effective impediment. Not having been the
owner, petitioner cannot be entitled to the civil fruits of ownership like rentals of the
thing sold. Furthermore, petitioner's bad faith, as again demonstrated by the specific
factual milieu of said Decision, bars the grant of such benefits. Otherwise, bad faith
would be rewarded instead of punished.
The Case
Filed before this Court is a Petition for Review1 under Rule 45 of the Rules of Court,
challenging the March 11, 1998 Order2 of the Regional Trial Court of Manila (RTC),
Branch 8, in Civil Case No. 97-85141. The dispositive portion of the assailed Order
reads as follows:
"WHEREFORE, the motion to dismiss filed by defendant Mayfair is hereby GRANTED,
and the complaint filed by plaintiff Equatorial is hereby DISMISSED."3
Also questioned is the May 29, 1998 RTC Order 4 denying petitioner's Motion for
Reconsideration.
The Facts
The main factual antecedents of the present Petition are matters of record, because it
arose out of an earlier case decided by this Court on November 21, 1996, entitled
Equatorial Realty Development, Inc. v. Mayfair Theater, Inc.5 (henceforth referred to as
the "mother case"), docketed as G.R No. 106063.
Carmelo & Bauermann, Inc. ("Camelo" ) used to own a parcel of land, together with two
2-storey buildings constructed thereon, located at Claro M. Recto Avenue, Manila, and
covered by TCT No. 18529 issued in its name by the Register of Deeds of Manila.

Both leases contained a provision granting Mayfair a right of first refusal to purchase
the subject properties. However, on July 30, 1978 within the 20-year-lease term
the subject properties were sold by Carmelo to Equatorial Realty Development, Inc.
("Equatorial") for the total sum of P11,300,000, without their first being offered to
Mayfair.
As a result of the sale of the subject properties to Equatorial, Mayfair filed a Complaint
before the Regional Trial Court of Manila (Branch 7) for (a) the annulment of the Deed
of Absolute Sale between Carmelo and Equatorial, (b) specific performance, and (c)
damages. After trial on the merits, the lower court rendered a Decision in favor of
Carmelo and Equatorial. This case, entitled "Mayfair" Theater, Inc. v. Carmelo and
Bauermann, Inc., et al.," was docketed as Civil Case No. 118019.
On appeal (docketed as CA-GR CV No. 32918), the Court of Appeals (CA) completely
reversed and set aside the judgment of the lower court.
The controversy reached this Court via G.R No. 106063. In this mother case, it denied
the Petition for Review in this wise:
"WHEREFORE, the petition for review of the decision of the Court of Appeals, dated
June 23, 1992, in CA-G.R. CV No. 32918, is HEREBY DENIED. The Deed of Absolute
Sale between petitioners Equatorial Realty Development, Inc. and Carmelo &
Bauermann, Inc. is hereby deemed rescinded; Carmelo & Bauermann is ordered to
return to petitioner Equatorial Realty Development the purchase price. The latter is
directed to execute the deeds and documents necessary to return ownership to
Carmelo & Bauermann of the disputed lots. Carmelo & Bauermann is ordered to allow
Mayfair Theater, Inc. to buy the aforesaid lots for P11,300,000.00."6
The foregoing Decision of this Court became final and executory on March 17, 1997.
On April 25, 1997, Mayfair filed a Motion for Execution, which the trial court granted.
However, Carmelo could no longer be located. Thus, following the order of execution of
the trial court, Mayfair deposited with the clerk of court a quo its payment to Carmelo in
the sum of P11,300,000 less; P847,000 as withholding tax. The lower court issued a
Deed of Reconveyance in favor of Carmelo and a Deed of Sale in favor of Mayfair. On
the basis of these documents, the Registry of Deeds of Manila canceled Equatorial's
titles and issued new Certificates of Title7 in the name of Mayfair.

On June 1, 1967, Carmelo entered into a Contract of Lease with Mayfair Theater Inc.
("Mayfair") for a period of 20 years. The lease covered a portion of the second floor and
mezzanine of a two-storey building with about 1,610 square meters of floor area, which
respondent used as a movie house known as Maxim Theater.

Ruling on Equatorial's Petition for Certiorari and Petition contesting the foregoing
manner of execution, the CA in its Resolution of November 20, 1998, explained that
Mayfair had no right to deduct the P847,000 as withholding tax. Since Carmelo could no
longer be located, the appellate court ordered Mayfair to deposit the said sum with the
Office of the Clerk of Court, Manila, to complete the full amount of P11,300,000 to be
turned over to Equatorial.

Two years later, on March 31, 1969, Mayfair entered into a second Contract of Lease
with Carmelo for the lease of another portion of the latter's property namely, a part of
the second floor of the two-storey building, with a floor area of about 1,064 square
meters; and two store spaces on the ground floor and the mezzanine, with a combined
floor area of about 300 square meters. In that space, Mayfair put up another movie
house known as Miramar Theater. The Contract of Lease was likewise for a period of
20 years.

Equatorial questioned the legality of the above CA ruling before this Court in G.R No.
136221 entitled "Equatorial Realty Development, Inc. v. Mayfair Theater, Inc." In a
Decision promulgated on May 12, 2000,8 this Court directed the trial court to follow
strictly the Decision in GR. No. 106063, the mother case. It explained its ruling in these
words:
"We agree that Carmelo and Bauermann is obliged to return the entire amount of

eleven million three hundred thousand pesos (P11,300,000.00) to Equatorial. On the


other hand, Mayfair may not deduct from the purchase price the amount of eight
hundred forty-seven thousand pesos (P847,000.00) as withholding tax. The duty to
withhold taxes due, if any, is imposed on the seller Carmelo and Bauermann, Inc."9

The trial court added: "The Supreme Court in the Equatorial case, G.R No. 106063, has
categorically stated that the Deed of Absolute Sale dated July 31, 1978 has been
rescinded subjecting the present complaint to res judicata."13
Hence, the present recourse.14

Meanwhile, on September 18, 1997 barely five months after Mayfair had submitted
its Motion for Execution before the RTC of Manila, Branch 7 Equatorial filed with the
Regional Trial Court of Manila, Branch 8, an action for the collection of a sum of money
against Mayfair, claiming payment of rentals or reasonable compensation for the
defendant's use of the subject premises after its lease contracts had expired. This
action was the progenitor of the present case.

Issues
Petitioner submits, for the consideration of this Court, the following issues:15

In its Complaint, Equatorial alleged among other things that the Lease Contract
covering the premises occupied by Maxim Theater expired on May 31, 1987, while the
Lease Contract covering the premises occupied by Miramar Theater lapsed on March
31, 1989.10 Representing itself as the owner of the subject premises by reason of the
Contract of Sale on July 30, 1978, it claimed rentals arising from Mayfair's occupation
thereof.
Ruling of the RTC Manila, Branch 8
As earlier stated, the trial court dismissed the Complaint via the herein assailed Order
and denied the Motion for Reconsideration filed by Equatorial.11
The lower court debunked the claim of petitioner for unpaid back rentals, holding that
the rescission of the Deed of Absolute Sale in the mother case did not confer on
Equatorial any vested or residual proprietary rights, even in expectancy.
In granting the Motion to Dismiss, the court a quo held that the critical issue was
whether Equatorial was the owner of the subject property and could thus enjoy the fruits
or rentals therefrom. It declared the rescinded Deed of Absolute Sale as avoid at its
inception as though it did not happen."
The trial court ratiocinated as follows:
"The meaning of rescind in the aforequoted decision is to set aside. In the case of
Ocampo v. Court of Appeals, G.R. No. 97442, June 30, 1994, the Supreme Court held
that, 'to rescind is to declare a contract void in its inception and to put an end as though
it never were. It is not merely to terminate it and release parties from further obligations
to each other but to abrogate it from the beginning and restore parties to relative
positions which they would have occupied had no contract ever been made.'

"A
The basis of the dismissal of the Complaint by the Regional Trial Court not only
disregards basic concepts and principles in the law on contracts and in civil law,
especially those on rescission and its corresponding legal effects, but also ignores the
dispositive portion of the Decision of the Supreme Court in G.R. No. 106063 entitled
'Equatorial Realty Development, Inc. & Carmelo & Bauermann, Inc. vs. Mayfair Theater,
Inc.'
"B.
The Regional Trial Court erred in holding that the Deed of Absolute Sale in favor of
petitioner by Carmelo & Bauermann, Inc., dated July 31, 1978, over the premises used
and occupied by respondent, having been 'deemed rescinded' by the Supreme Court in
G.R. No. 106063, is 'void at its inception as though it did not happen.'
"C.
The Regional Trial Court likewise erred in holding that the aforesaid Deed of Absolute
Sale, dated July 31, 1978, having been 'deemed rescinded' by the Supreme Court in
G.R. No. 106063, petitioner 'is not the owner and does not have any right to demand
backrentals from the subject property,' and that the rescission of the Deed of Absolute
Sale by the Supreme Court does not confer to petitioner 'any vested right nor any
residual proprietary rights even in expectancy.'
"D.
The issue upon which the Regional Trial Court dismissed the civil case, as stated in its
Order of March 11, 1998, was not raised by respondent in its Motion to Dismiss.
"E.
The sole ground upon which the Regional Trial Court dismissed Civil Case No. 9785141 is not one of the grounds of a Motion to Dismiss under Sec. 1 of Rule 16 of the
1997 Rules of Civil Procedure."
Basically, the issues can be summarized into two: (1) the substantive issue of whether
Equatorial is entitled to back rentals; and (2) the procedural issue of whether the court a
quo's dismissal of Civil Case No. 97-85141 was based on one of the grounds raised by
respondent in its Motion to Dismiss and covered by Rule 16 of the Rules of Court.

"Relative to the foregoing definition, the Deed of Absolute Sale between Equatorial and
Carmelo dated July 31, 1978 is void at its inception as though it did not happen.

This Court's Ruling


The Petition is not meritorious.

"The argument of Equatorial that this complaint for back rentals as 'reasonable
compensation for use of the subject property after expiration of the lease contracts
presumes that the Deed of Absolute Sale dated July 30, 1978 from whence the fountain
of Equatorial's all rights flows is still valid and existing.

First Issue:Ownership of Subject Properties


We hold that under the peculiar facts and circumstances of the case at bar, as found by
this Court en banc in its Decision promulgated in 1996 in the mother case, no right of
ownership was transferred from Carmelo to Equatorial in view of a patent failure to
deliver the property to the buyer.

xxx
xxx
xxx
"The subject Deed of Absolute Sale having been rescinded by the Supreme Court,
Equatorial is not the owner and does not have any right to demand backrentals from the
subject property. . .12

Rental a CivilFruit of Ownership


To better understand the peculiarity of the instant case, let us begin with some basic
parameters. Rent is a civil fruit16 that belongs to the owner of the property producing it 17

by right of accession.18 Consequently and ordinarily, the rentals that fell due from the
time of the perfection of the sale to petitioner until its rescission by final judgment
should belong to the owner of the property during that period.
By a contract of sale, "one of the contracting parties obligates himself to transfer
ownership of and to deliver a determinate thing and the other to pay therefor a price
certain in money or its equivalent."19
Ownership of the thing sold is a real right, 20 which the buyer acquires only upon delivery
of the thing to him "in any of the ways specified in articles 1497 to 1501, or in any other
manner signifying an agreement that the possession is transferred from the vendor to
the vendee."21 This right is transferred, not merely by contract, but also by tradition or
delivery.22 Non nudis pactis sed traditione dominia rerum transferantur. And there is said
to be delivery if and when the thing sold "is placed in the control and possession of the
vendee."23 Thus, it has been held that while the execution of a public instrument of sale
is recognized by law as equivalent to the delivery of the thing sold, 24 such constructive
or symbolic delivery, being merely presumptive, is deemed negated by the failure of the
vendee to take actual possession of the land sold.25
Delivery has been described as a composite act, a thing in which both parties must join
and the minds of both parties concur. It is an act by which one party parts with the title
to and the possession of the property, and the other acquires the right to and the
possession of the same. In its natural sense, delivery means something in addition to
the delivery of property or title; it means transfer of possession. 26 In the Law on Sales,
delivery may be either actual or constructive, but both forms of delivery contemplate
"the absolute giving up of the control and custody of the property on the part of the
vendor, and the assumption of the same by the vendee."27
Possession NeverAcquired by Petitioner
Let us now apply the foregoing discussion to the present issue. From the peculiar facts
of this case, it is clear that petitioner never took actual control and possession of the
property sold, in view of respondent's timely objection to the sale and the continued
actual possession of the property. The objection took the form of a court action
impugning the sale which, as we know, was rescinded by a judgment rendered by this
Court in the mother case. It has been held that the execution of a contract of sale as a
form of constructive delivery is a legal fiction. It holds true only when there is no
impediment that may prevent the passing of the property from the hands of the vendor
into those of the vendee. 28 When there is such impediment, "fiction yields to reality
the delivery has not been effected."29
Hence, respondent's opposition to the transfer of the property by way of sale to
Equatorial was a legally sufficient impediment that effectively prevented the passing of
the property into the latter's hands.

possession thereof . . . with full rights to dispose, enjoy and make use thereof in such
manner and form as would be most advantageous to herself.' The possession referred
to in the contract evidently refers to actual possession and not merely symbolical
inferable from the mere execution of the document.
"Has the vendor complied with this express commitment? she did not. As provided in
Article 1462, the thing sold shall be deemed delivered when the vendee is placed in the
control and possession thereof, which situation does not here obtain because from the
execution of the sale up to the present the vendee was never able to take possession of
the lands due to the insistent refusal of Martin Deloso to surrender them claiming
ownership thereof. And although it is postulated in the same article that the execution of
a public document is equivalent to delivery, this legal fiction only holds true when there
is no impediment that may prevent the passing of the property from the hands of the
vendor into those of the vendee. x x x."31
The execution of a public instrument gives rise, therefore, only to a prima facie
presumption of delivery. Such presumption is destroyed when the instrument itself
expresses or implies that delivery was not intended; or when by other means it is
shown that such delivery was not effected, because a third person was actually in
possession of the thing. In the latter case, the sale cannot be considered
consummated.
However, the point may be raised that under Article 1164 of the Civil Code, Equatorial
as buyer acquired a right to the fruits of the thing sold from the time the obligation to
deliver the property to petitioner arose. 32 That time arose upon the perfection of the
Contract of Sale on July 30, 1978, from which moment the laws provide that the parties
to a sale may reciprocally demand performance.33 Does this mean that despite the
judgment rescinding the sale, the right to the fruits 34 belonged to, and remained
enforceable by, Equatorial?
Article 1385 of the Civil Code answers this question in the negative, because
"[r]escission creates the obligation to return the things which were the object of the
contract, together with their fruits, and the price with its interest; x x x" Not only the land
and building sold, but also the rental payments paid, if any, had to be returned by the
buyer.
Another point. The Decision in the mother case stated that "Equatorial x x x has
received rents" from Mayfair "during all the years that this controversy has been
litigated." The Separate Opinion of Justice Teodoro Padilla in the mother case also said
that Equatorial was "deriving rental income" from the disputed property. Even herein
ponente's Separate Concurring Opinion in the mother case recognized these rentals.
The question now is: Do all these statements concede actual delivery?

This was the same impediment contemplated in Vda. de Sarmiento v. Lesaca,30 in


which the Court held as follows:

The answer is "No." The fact that Mayfair paid rentals to Equatorial during the litigation
should not be interpreted to mean either actual delivery or ipso facto recognition of
Equatorial's title.

"The question that now arises is: Is there any stipulation in the sale in question from
which we can infer that the vendor did not intend to deliver outright the possession of
the lands to the vendee? We find none. On the contrary, it can be clearly seen therein
that the vendor intended to place the vendee in actual possession of the lands
immediately as can be inferred from the stipulation that the vendee 'takes actual

The CA Records of the mother case 35 show that Equatorial as alleged buyer of the
disputed properties and as alleged successor-in-interest of Carmelo's rights as lessor
submitted two ejectment suits against Mayfair. Filed in the Metropolitan Trial Court of
Manila, the first was docketed as Civil Case No. 121570 on July 9, 1987; and the
second, as Civil Case No. 131944 on May 28, 1990. Mayfair eventually won them both.

However, to be able to maintain physical possession of the premises while awaiting the
outcome of the mother case, it had no choice but to pay the rentals.

property superior to its own. Carmelo and Equatorial took unconscientious advantage of
Mayfair."37 (Italics supplied)

The rental payments made by Mayfair should not be construed as a recognition of


Equatorial as the new owner. They were made merely to avoid imminent eviction. It is in
this context that one should understand the aforequoted factual statements in the
ponencia in the mother case, as well as the Separate Opinion of Mr. Justice Padilla and
the Separate Concurring Opinion of the herein ponente.

Thus, petitioner was and still is entitled solely to he return of the purchase price it paid
to Carmelo; no more, no less. This Court has firmly ruled in the mother case that neither
of them is entitled to any consideration of equity, as both "took unconscientious
advantage of Mayfair."38

At bottom, it may be conceded that, theoretically, a rescissible contract is valid until


rescinded. However, this general principle is not decisive to the issue of whether
Equatorial ever acquired the right to collect rentals. What is decisive is the civil law rule
that ownership is acquired, not by mere agreement, but by tradition or delivery. Under
the factual environment of this controversy as found by this Court in the mother case,
Equatorial was never put in actual and effective control or possession of the property
because of Mayfair's timely objection.
As pointed out by Justice Holmes, general propositions do not decide specific cases.
Rather, "laws are interpreted in the context of the peculiar factual situation of each
case. Each case has its own flesh and blood and cannot be decided on the basis of
isolated clinical classroom principles."36
In short, the sale to Equatorial may have been valid from inception, but it was judicially
rescinded before it could be consummated. Petitioner never acquired ownership, not
because the sale was void, as erroneously claimed by the trial court, but because the
sale was not consummated by a legally effective delivery of the property sold.
Benefits Precluded byPetitioner's Bad Faith
Furthermore, assuming for the sake of argument that there was valid delivery, petitioner
is not entitled to any benefits from the "rescinded" Deed of Absolute Sale because of its
bad faith. This being the law of the mother case decided in 1996, it may no longer be
changed because it has long become final and executory. Petitioner's bad faith is set
forth in the following pertinent portions of the mother case:
"First and foremost is that the petitioners acted in bad faith to render Paragraph 8
'inutile.'
xxx
xxx
xxx
"Since Equatorial is a buyer in bad faith, this finding renders the sale to it of the property
in question rescissible. We agree with respondent Appellate Court that the records bear
out the fact that Equatorial was aware of the lease contracts because its lawyers had,
prior to the sale, studied the said contracts. As such, Equatorial cannot tenably claim to
be a purchaser in good faith, and, therefore, rescission lies.
xxx
xxx
xxx
"As also earlier emphasized, the contract of sale between Equatorial and Carmelo is
characterized by bad faith, since it was knowingly entered into in violation of the rights
of and to the prejudice of Mayfair. In fact, as correctly observed by the Court of Appeals,
Equatorial admitted that its lawyers had studied the contract of lease prior to the sale.
Equatorial's knowledge of the stipulations therein should have cautioned it to look
further into the agreement to determine if it involved stipulations that would prejudice its
own interests.
xxx
xxx
xxx
"On the part of Equatorial, it cannot be a buyer in good faith because it bought the
property with notice and full knowledge that Mayfair had a right to or interest in the

In the mother case, this Court categorically denied the payment of interest, a fruit of
ownership. By the same token, rentals, another fruit of ownership, cannot be granted
without mocking this Court's en banc Decision, which has long become final.
Petitioner's claim of reasonable compensation for respondent's use and occupation of
the subject property from the time the lease expired cannot be countenanced. If it
suffered any loss, petitioner must bear it in silence, since it had wrought that loss upon
itself. Otherwise, bad faith would be rewarded instead of punished.
We uphold the trial court's disposition, not for the reason it gave, but for (a) the patent
failure to deliver the property and (b) petitioner's bad faith, as above discussed.
Second Issue:itc-alfGround in Motion to Dismiss
Procedurally, petitioner claims that the trial court deviated from the accepted and usual
course of judicial proceedings when it dismissed Civil Case No. 97-85141 on a ground
not raised in respondent's Motion to Dismiss. Worse, it allegedly based its dismissal on
a ground not provided for in a motion to dismiss as enunciated in the Rules of Court.
We are not convinced A review of respondent's Motion to Dismiss Civil Case No. 9785141 shows that there were two grounds invoked, as follows:
"(A)
Plaintiff is guilty of forum-shopping.itc-alf
"(B)
Plaintiff's cause of action, if any, is barred by prior judgment."39
The court a quo ruled, inter alia, that the cause of action of petitioner plaintiff in the case
below) had been barred by a prior judgment of this Court in G.R No. 106063, the
mother case.
Although it erred in its interpretation of the said Decision when it argued that the
rescinded Deed of Absolute Sale was avoid," we hold, nonetheless, that petitioner's
cause of action is indeed barred by a prior judgment of this Court. As already
discussed, our Decision in G.R No. 106063 shows that petitioner is not entitled to back
rentals, because it never became the owner of the disputed properties due to a failure
of delivery. And even assuming arguendo that there was a valid delivery, petitioner's
bad faith negates its entitlement to the civil fruits of ownership, like interest and rentals.
Under the doctrine of res judicata or bar by prior judgment, a matter that has been
adjudicated by a court of competent jurisdiction must be deemed to have been finally
and conclusively settled if it arises in any subsequent litigation between the same
parties and for the same cause. 40 Thus, "[a] final judgment on the merits rendered by a
court of competent jurisdiction is conclusive as to the rights of the parties and their
privies and constitutes an absolute bar to subsequent actions involving the same claim,
demand, or cause of action."41 Res judicata is based on the ground that the "party to be
affected, or some other with whom he is in privity, has litigated the same matter in a

former action in a court of competent jurisdiction, and should not be permitted to litigate
it again.42
It frees the parties from undergoing all over again the rigors of unnecessary suits and
repetitive trials. At the same time, it prevents the clogging of court dockets. Equally
important, it stabilizes rights and promotes the rule of law.
We find no need to repeat the foregoing disquisitions on the first issue to show
satisfaction of the elements of res judicata. Suffice it to say that, clearly, our ruling in the
mother case bars petitioner from claiming back rentals from respondent. Although the
court a quo erred when it declared "void from inception" the Deed of Absolute Sale
between Carmelo and petitioner, our foregoing discussion supports the grant of the
Motion to Dismiss on the ground that our prior judgment in G.R No. 106063 has already
resolved the issue of back rentals.
On the basis of the evidence presented during the hearing of Mayfair's Motion to
Dismiss, the trial court found that the issue of ownership of the subject property has
been decided by this Court in favor of Mayfair. We quote the RTC:
"The Supreme Court in the Equatorial case, G.R. No. 106063 has categorically stated
that the Deed of Absolute Sale dated July 31, 1978 has been rescinded subjecting the
present complaint to res judicata."43 (Emphasis in the original)
Hence, the trial court decided the Motion to Dismiss on the basis of res judicata, even if
it erred in interpreting the meaning of "rescinded" as equivalent to "void" In short, it
ruled on the ground raised; namely, bar by prior judgment. By granting the Motion, it
disposed correctly, even if its legal reason for nullifying the sale was wrong. The correct
reasons are given in this Decision.
WHEREFORE, the Petition is hereby DENIED. Costs against petitioner.itc-alf
SO ORDERED.

G.R. No. 107737 October 1, 1999


JUAN L. PEREZ, LUIS KEH, CHARLIE LEE and ROSENDO G. TANSINSIN, JR.,
petitioners, vs. COURT OF APPEALS, LUIS CRISOSTOMO and VICENTE
ASUNCION, respondents.
GONZAGA-REYES, J.:
This is a petition for review on certiorari of the Decision 1 of the Court of Appeals
affirming the decision of the Regional Trial Court of Bulacan, Branch 9 2 that disposed of
Civil Case No. 5610-M (Luis Crisostomo v. Luis Keh, Juan Perez, Charlie Kee and Atty.
Rosendo G. Tansinsin, Jr.) as follows:
WHEREFORE, premises considered, judgment is hereby rendered:
a) directing defendant JUAN PEREZ to allow plaintiff LUIS CRISOSTOMO to occupy
and operate the "Papaya Fishpond" for a period of 5 1/2 years at the rental rates of
P150,000.00 for the first six months and P175,000.00 for the remaining five years (the
same rates provided for in Exh. 4);
b) ordering defendants LUIS KEH, CHARLIE LEE, JUAN PEREZ and Atty. ROSENDO
TANSINSIN, JR. to pay unto the plaintiff the amounts of P150,000.00 as actual
damages; P20,000.00 as moral damages; P20,000.00 as exemplary damages; and
P10,000.00 as attorney's fees, plus the costs of the suit;
c) directing the release, delivery or payment directly to plaintiff LUIS CRISOSTOMO of
the amounts of P128,572.00 and P123,993.85, including the interests which may have
already accrued thereon, deposited with the Paluwagan ng Bayan Savings Bank
(Paombong, Bulacan Branch) in the name of the Clerk of Court and/or Deputy Clerk of
Court Rodrigo C. Libunao under this Court's Order dated February 14, 1980; however,
the plaintiff is required to pay defendant Perez the corresponding rental on the fishpond
for the period June 1979-January 1980 based on the rate of P150,000.00 per annum,
deducting therefrom the amount of P21,428.00 already paid to and received by then cousufructuary Maria Perez (Exh. E);
d) dismissing the defendants' separate counter-claims for damages, for lack of merit;
and
e) dismissing the Pleading in Intervention Pro Interesse Suo filed by VICENTE
ASUNCION on the ground of lis pendens.
SO ORDERED.
The facts upon which the Court of Appeals based its Decision are the following:
Along with Maria Perez, Fructuosa Perez, Victoria Perez, Apolonio Lorenzo and Vicente
Asuncion, petitioner Juan Perez is a usufructuary of a parcel of land popularly called the
"Papaya Fishpond." Covered by Transfer Certificate of Title No. 8498 of the Registry of
Deeds for the Province of Bulacan, the fishpond is located in Sto. Rosario, Hagonoy,
Bulacan and has an area of around 110 hectares. On June 5, 1975, the usufructuaries
entered into a contract leasing the fishpond to Luis Keh for a period of five (5) years and
renewable for another five (5) years by agreement of the parties, under the condition
that for the first five-year period the annual rental would be P150,000.00 and for the
next five years, P175,000.00. Paragraph 5 of the lease contract states that the lessee
"cannot sublease" the fishpond "nor assign his rights to anyone." 3
Private respondent Luis Crisostomo, who reached only the 5th grade, is a businessman
engaged in the operation of fishponds. On September 20, 1977, while he was at his
fishpond in Almazar, Hermosa, Bataan, his bosom friend named Ming Cosim arrived
with petitioner Charlie Lee. The two persuaded private respondent to take over the

operation of "Papaya Fishpond" as petitioner Lee and his partner, petitioner Luis Keh,
were allegedly losing money in its operation. Private respondent having acceded to the
proposal, sometime in December of that year, he and petitioners Lee and Keh executed
a written agreement denominated as "pakiao buwis" whereby private respondent would
take possession of the "Papaya Fishpond" from January 6, 1978 to June 6, 1978 in
consideration of the amount of P128,000.00 broken down as follows: P75,000.00 as
rental, P50,000.00 for the value of milkfish in the fishpond and P3,000 for labor
expenses. Private respondent paid the P75,000.00 to petitioner Keh at the house of
petitioner Lee in Sta. Cruz, Hagonoy, Bulacan in the presence of Lee's wife, brother-inlaw and other persons. He paid the balance to petitioner Lee sometime in February or
March 1978 because he was uncertain as to the right of petitioners Keh and Lee to
transfer possession over the fishpond to him. Private respondent made that payment
only after he had received a copy of a written agreement dated January 9, 1978 4
whereby petitioner Keh ceded, conveyed and transferred all his "rights and interests"
over the fishpond to petitioner Lee, "up to June 1985." From private respondent's point
of view, that document assured him of continuous possession of the property for as long
as he paid the agreed rentals of P150,000.00 until 1980 and P.175,000.00 until 1985.
For the operation of the fishpond from June 1978 to May 1979, private respondent,
accompanied by Ming Cosim and Ambrocio Cruz, paid the amount of P150,000.00 at
the Malabon, Metro Manila office of petitioner Keh. The following receipt was issued to
him:
RECEIPT
June 6, 1978
P150.000,00
Received from Mr. LUIS KEH the sum of ONE HUNDRED FIFTY THOUSAND PESOS
(P150,000.00), Philippine Currency, as full payment of the yearly leased rental of the
Papaya Fishpond for the year beginning June 1978 and ending on May 1979. The next
payment shall be made on June 6, 1979.
Said sum was paid in Producers Bank of the Philippines Check No. (illegible) 164595
dated June 6, 1978.
Mr. Luis Keh has not transferred his rights over the fishpond to any person.
Caloocan City, June 6, 1978.
JUAN L. PEREZ ET AL.
By:
(Sgd.)
Rosendo G. Tansinsin, Jr.
CONFORME TO THE ABOVE:
(Sgd.)
LUIS KEH
Handwritten below that receipt but above the signature of petitioner Charlie Lee, are the
following: "Rec'd from Luis Crisostomo sum of one hundred fifty-four thousand
P154,000.00 for above payment. 5
Private respondent incurred expenses for repairs in and improvement of the fishpond in

the total amount of P486,562.65. 6 However, sometime in June 1979, petitioners


Tansinsin and Juan Perez, in the company of men bearing armalites, went to the
fishpond and presented private respondent with a letter dated June 7, 1979 showing
that petitioner Luis Keh had surrendered possession of the fishpond to the
usufructuaries.
Because of the threat to deprive him of earnings of around P700,000.00 that the
700,000 milkfish in the fishpond would yield, and the refusal of petitioners Keh, Juan
Perez and Lee to accept the rental for June 5, 1979 to June 6, 1980, private respondent
filed on June 14, 1979 with the then Court of First Instance of Bulacan an action for
injunction and damages. He prayed for the issuance of a restraining order enjoining
therein defendants Keh, Perez and Lee from entering the premises and taking
possession of the fishpond. He also prayed for actual damages of P50,000.00, moral
damages of P20,000.00, exemplary damages in an amount that the court might award,
and attorney's fees of P10,000.00. 7
That same day, June 14, 1979, the lower court granted the prayer for a restraining
order. On November 13, 1979, Crisostomo paid one of the usufructuaries, Maria Perez
(who died in 1984), the amount of P21,428.00 as her 1/7 share of the annual rental of
the fishpond for 1979-80. Maria Perez issued a notarized receipt for that amount. 8
On January 11, 1980, the court lifted the restraining order thereby effectively depriving
private respondent of possession over the fishpond. On February 14, 1980, the parties
submitted a partial compromise agreement with the following stipulations:
1. The amount of P128,572.00 that private respondent deposited as rental with the
Office of the Clerk of Court under O.R. No. 21630 dated November 15, 1979 be
withdrawn from that office and deposited with the Paluwagan ng Bayan Savings & Loan
Association, Inc. (Paombong, Bulacan branch) and which deposit shall not be
withdrawn unless authorized by the court; and
2. The plaintiff could personally harvest milkfish "with commercial value" in the presence
of Perez and under the supervision of the deputy clerk of court within the appointed
period and that the net proceeds of the sale (P123,993.85 per the Report dated March
4, 1980 of the deputy clerk of court) be deposited in the name of the deputy clerk of
court of Branch 6 of the then Court of First Instance of Bulacan with the same branch of
the Paluwagan ng Bayan Savings & Loan Association, Inc. and which deposit shall not
be withdrawn unless upon order of the court after hearing.
The court approved that agreement on that same date.
Thereafter, the usufructuaries entered into a contract of lease with Vicente Raymundo
and Felipe Martinez for the six-year period of June 1, 1981 to May 30, 1987 in
consideration of the annual rentals of P550,000.00 for the first two years and
P400,000.00 for the next four years. Upon expiration of that lease, the same property
was leased to Pat Laderas for P1 million a year.
The complaint was later amended to include petitioner Tansinsin, the alleged
administrator of the fishpond, as one of the defendants. 9 Except in the joint answer that
the defendants had filed, petitioners Keh and Lee did not appear before the court.
Neither did they testify.

In their defense, petitioners Juan Perez and Tansinsin presented evidence to prove that
they had negotiated for the lease of the property with Benito Keh in 1975. However,
they averred, for reasons unknown to petitioner Perez, in the contract of lease that
petitioner Tansinsin prepared, petitioner Luis Keh was named as lessee. Petitioner
Perez had never met Keh or Lee but according to petitioner Tansinsin, petitioner Luis
Keh was substituted for Benito Keh because the latter was preoccupied with his other
businesses. Sometime in 1979, petitioner Keh's agent named Catalino Alcantara
relayed to petitioner Perez, Keh's intention to surrender possession of the fishpond to
the usufructuaries. Because petitioner Perez demanded that said intention should be
made in writing, on June 5, 1979, Perez received from Keh a letter to that effect.
When private respondent received a copy of that letter of petitioner Keh, he took the
position that petitioner Perez had no right to demand possession of the fishpond from
him because Perez had no contract with him. Private respondent was allowed four (4)
months within which to vacate the premises but he immediately filed the complaint for
injunction and damages. Thereafter, private respondent's counsel, Atty. Angel Cruz and
other persons tried to prevail upon petitioner Perez to allow private respondent to
occupy the property for three (3) more years. Petitioner Perez declined that proposition.
On September 6, 1989, the lower court rendered the aforesaid decision. It arrived at the
conclusion that the defendants therein "conspired with one another to exploit the
plaintiff's naivete and educational inadequacies and, in the process, to defraud him by
inducing him into taking possession of the "Papaya Fishpond" in their fond hope that, as
soon as the plaintiff applying his known expertise as a successful fishpond operator
shall have considerably improved the fishpond, they will regain possession of the
premises and offer the lease thereof to other interested parties at much higher rental
rates as laid bare by supervening realities." That conclusion was founded on the
following:
1. The plaintiffs (private respondent Crisostomo's) testimony bears the "hallmarks of
truth: candid, straightforward and uncontrived." He had proven himself a "much more
credible witness than his opponents."
2. The notarized receipt of Maria Perez of her share as a usufructuary in the rental for
1979-80 is a "clear avowal of plaintiffs legitimate operation of the "Papaya Fishpond" as
assignee or transferee thereof." It was impossible for the other usufructuaries,
especially Juan Perez who was residing in the same locality and actively involved in the
"affairs of the fishpond," not to have known that plaintiff occupied the fishpond for one
and a half years as assignee of Keh and Lee. It was unbelievable that both Tansinsin
and Perez would only perceive the plaintiff as a mere encargado of Keh and Lee.
3. The receipt whereby Tansinsin acknowledged payment of P150,000.00 as rental for
June 1978-May 1979 bears "tell-tale signs" of the conspiracy. Firstly, the statement "Mr.
Luis Keh has not transferred his rights over the fishpond to any person" is entirely
irrelevant to that receipt unless it was intended "to preempt plaintiff's claim of rights and
interests over the said property as either sub-lessee or assignee." Secondly, Keh's
having signified "Conforme to the above" is a gratuitous notation as it actually indicates
that the money came from the plaintiff. Thirdly, Atty. Tansinsin's receipt of the amount
for and in behalf of "JUAN L. PEREZ ET AL." illustrates his "active and dominant role in
the affairs" of the fishpond whether as administrator thereof or as beneficiary of a share
from its fruits.

4. Service upon plaintiff of Keh's letter surrendering possession of the fishpond implied
that defendants knew that plaintiff was in possession thereof. That they resorted to the
intimidating presence of armed men is proof that they expected the plaintiff to refuse to
give up possession of the property. These circumstances "completely belie the
protestations of Perez and Tansinsin of lack of knowledge of the contract entered into"
between the plaintiff, and Lee and Keh.
5. The nonpresentation of Lee and Keh on the witness stand by Atty. Tansinsin "can
very well be construed as a smart maneuver to cover up the sinister cabal for deception
inferrable from the attendant facts and circumstances." In their joint answer, Keh and
Lee tried to relieve Perez of any liability in favor of the plaintiff. That is understandable
"because, should the Court disregard the reliance of Perez on the prohibition against
sub-lease or assignment of the "Papaya Fishpond", then all the defendants shall have
exposed themselves to unavoidable liability for the acts complained of by the plaintiff."
6. Atty. Tansinsin was the common legal counsel of all the defendants and, by his
testimony, even the plaintiff. Atty. Tansinsin's denial that he was plaintiffs counsel was
his way of "deflecting plaintiffs imputations of professional improprieties against him."
Plaintiff must have assumed that Atty. Tansinsin was also his lawyer considering that
they were "on very friendly terms" and therefore Atty. Tansinsin might have been
instrumental in dispelling whatever fears plaintiff had entertained as regards the
business transactions involved.
7. The fact that the fishpond was subsequently rented out for astronomical amounts is
proof that the plaintiff had considerably improved the fishpond. 10
The lower court added:
Bluntly yet succinctly put, the foregoing circumstances when viewed collectively with
other cogent aspects of the instant case inexorably lead to the Court's well-considered
view that the defendants tempted by the bright prospect of a lucrative business coup
embarked themselves in an egregious scheme to take undue advantage of the
gullibility of the plaintiff who, as borne by ensuing events, proved himself an ideal victim
to prey upon: pathetically unsuspecting yet only too eager to invest his material
resources and self-acquired technical know-how to redeem what was then a dwindling
business enterprise from total collapse. Plaintiffs impressive performance, alas, only
redounded ultimately to the supreme benefit exclusively of the defendants. A classic
case of "ako ang nagsaing, iba ang kumain!"
The defendants elevated the case to the Court of Appeals which, as earlier mentioned,
affirmed the decision of the trial court and disposed of the appeal on February 18, 1992
as follows:
WHEREFORE, in view of all the foregoing, judgment appealed from, is hereby
AFFIRMED.
However, intervenor-appellant is hereby declared co-usufructuary of the Papaya
fishpond, and is, therefore, entitled to all rights and interest due to the usufructuaries of
the said fishpond.
SO ORDERED.
On the defendant-appellants' contention that the principle of res judicata should be
applied because the Court of Appeals had ruled on the issue of possession in CA-G.R.
No. 10415-R, a petition for certiorari and injunction with preliminary mandatory

injunction, the Court of Appeals held that said principle was unavailing. The petition in
CA-G.R. No. 10415-R involved a writ of injunction "which presupposes the pendency of
a principal or main action." Moreover, the decision in that case did not resolve the issue
of who should be in possession of the Papaya Fishpond as findings of fact of the trial
court cannot be reviewed in a certiorari proceeding.
The Court of Appeals ruled further that appellee Crisostomo "cannot be considered a
possessor in bad faith, considering that he took possession of the fishpond when
appellants Keh and Lee assigned to him appellant Keh's leasehold right." It held that
appellant Perez knew of the transfer of possession of the fishpond to appellee and that
the receipt evidencing payment of the 1978-1979 rental even bears an expressed
admission by Lee that the payment came from appellee Crisostomo.
Agreeing with the court a quo that "defendants-appellants employed fraud to the
damage and prejudice of plaintiff-appellee," the Court of Appeals held that appellants
should be held liable for damages. As regards the intervention pro interesse suo, the
appellate court ruled that the same should be allowed because, even if the litigation
would not be technically binding upon him, complications might arise that would
prejudice his rights. Pointing out that a usufruct may be transferred, assigned or
disposed of, the Court of Appeals ruled that the intervenor cannot be excluded as a
usufructuary because he had acquired his right as such from a sale in execution of the
share of Jorge Lorenzo, one of the usufructuaries of the fishpond.
Herein petitioners filed a motion for the reconsideration of that Decision of the Court of
Appeals. They alleged that the Decision was premature because it was rendered when
they had not yet even received a copy of the intervenor's brief wherein assignments of
errors that directly affected their rights and interests were made. They insisted that the
principle of res judicata was applicable because in G.R. No. 64354, this Court upheld
the Decision of the Court of Appeals in CA-G.R. No. 10415. They added that appellee
Crisostomo was guilty of forum shopping because the issue of possession had been
"squarely decided" in CA-G.R. No. 10415. They stressed that the contract of lease
between Keh and the usufructuaries prohibited subleasing of the fishpond; that by the
receipt dated June 6, 1978, it was Keh who paid the rental; that appellee Crisostomo
was a perjured witness because in the notebook showing his expenses, the amount of
P150,000.00 for rentals does not appear; that the term of the contract had expired and
there was no renewal thereof, and that the consideration of P150,000.00 was grossly
inadequate. They averred that the Court of Appeals erred in awarding damages that
were not prayed for in the second amended complaint and that amounts not specified in
the complaint were awarded as damages. They disclaimed that Atty. Tansinsin was the
administrator of the fishpond.
On October 30, 1992, the Court of Appeals denied the motion for reconsideration for
lack of merit. It ruled that the Decision was not prematurely promulgated "considering
that the intervention proceeding is solely between intervenor and defendantsappellants, which is completely separable and has nothing to do with the merits of the
appeal."
In the instant petition for review on certiorari, petitioners raise six (6) grounds for giving
due course to it. 11 Those grounds may be distilled into the following: (a) the applicability
of the principle of res judicata; (b) the premature promulgation of the Decision of the
Court of Appeals, and (c) private respondent was not a sublesee of the fishpond under
the law.
In arguing that the principle of res judicata applies in this case, petitioners rely on the

portion of the Decision 12 of the Court of Appeals in CA-G.R. No. 10415 that states:
We find no basis for declaring respondent Judge guilty of grave abuse of discretion on
this regard. The trial court's finding that petitioner does not appear entitled to any
contract or law to retain possession of the fishpond in question since he is neither an
assignee or sub-lessee and, therefore, merely a stranger to the contract of lease is a
finding of fact review of which is not proper in a certiorari proceedings. Not only is
petitioner not a party to the lease agreement over the fishpond in question but also the
very authority upon which he predicates his possession over the fishpond that the
leasehold right of Luis Keh had been assigned to him undoubtedly lacks basis for
the very contract between Luis Keh and the lessors expressly provides
That the lessee cannot sub-lease above-described fishpond nor assign his rights to
anyone.
xxx xxx xxx
(Emphasis supplied by petitioners.) 13
Petitioners assert that said Decision of the Court of Appeals which was in effect upheld
by this Court when it denied the petition for review on certiorari in G.R. No. 64354 (Luis
Crisostomo v. Intermediate Appellate Court), 14 is "res judicata to the issue of
possession in this case." 15 However, as expressed in that quoted portion of the
Decision in CA-G.R. No. 10415, the issue of whether private respondent is an assignee
or a sub-lessee "is a finding of fact review of which is not proper in a certiorari
proceeding" or the proceeding in that case.
CA-G.R. No. 10415 was spawned by the lifting on January 11, 1980 of the restraining
order previously issued by the trial court on June 14, 1979. Private respondent filed a
special civil action of certiorari and injunction with preliminary mandatory injunction
and/or mandatory restraining order to question the order of January 11, 1980. Thus, the
issue in that petition was whether or not the trial court gravely abused its discretion in
lifting the restraining order. The statement in that Decision of the Court of Appeals that a
writ of preliminary injunction may be denied "if the party applying for it has insufficient
title or interest to sustain it and no claim to an ultimate relief (is) sought" by no means
resolved the issue of who is entitled to possess the fishpond. In denying the petition for
certiorari, the Court of Appeals was simply saying that there was no reason to restore
private respondent to the possession of the fishpond pursuant to the restraining order
that he had earlier obtained. The issue of possession was collaterally discussed only to
resolve the propriety of the lifting of the restraining order based on evidence available at
that time. Hence, there was no judgment on the merits in the main case or in Civil Case
No. 5610-M. Simply put, the Decision in CA-G.R. No. 10415 involves an interlocutory
order on the propriety of the lifting of the restraining order and not a judgment on the
merits of Civil Case No. 5610-M.
For res judicata to apply, the following requisites must concur: (a) the former judgment
must be final; (b) the court which rendered it had jurisdiction over the subject matter and
the parties; (c) the judgment must be on the merits, and (d) there must be between the
first and second actions identity of parties, subject matter and causes of action. 16 The
Decision in CA-G.R. No. 10415 having resolved only an interlocutory matter, the
principle of res judicata cannot be applied in this case. There can be no res judicata
where the previous order in question was not an order or judgment determinative of an
issue of fact pending before the court but was only an interlocutory order because it
required the parties to perform certain acts for final adjudication. 17 In this case, the

lifting of the restraining order paved the way for the possession of the fishpond on the
part of petitioners and/or their representatives pending the resolution of the main action
for injunction. In other words, the main issue of whether or not private respondent may
be considered a sublessee or a transferee of the lease entitled to possess the fishpond
under the circumstances of the case had yet to be resolved when the restraining order
was lifted.
Petitioners assail the Court of Appeals' Decision as "premature" and therefore null and
void, because prior to the promulgation of that Decision, private respondent-intervenor
Vicente Asuncion failed to furnish them with a copy of his brief the assignment of errors
of which allegedly "directly" affected their rights and interests. 18 While it is true that
petitioners were deprived of the opportunity to contravene the allegations of the
intervenor in his brief, that fact can not result in the nullity of the Decision of the Court of
Appeals. 19 Vicente Asuncion intervened pro interesse suo or "according to his interest."
20

Intervention pro interessse suo is a mode of intervention in equity wherein a stranger


desires to intervene for the purpose of asserting a property right in the res, or thing,
which is the subject matter of the litigation, without becoming a formal plaintiff or
defendant, and without acquiring control over the course of a litigation, which is
conceded to the main actors therein. 21 In this case, intervenor Vicente Asuncion aimed
to protect his right as a usufructuary. Inasmuch as he has the same rights and interests
as petitioner Juan Perez, any judgment rendered in the latter's favor entitled him to
assert his right as such usufructuary against his co-usufructuary. Should said intervenor
claim his share in the usufruct, no rights of the petitioners other than those of Juan
Perez would be prejudiced thereby.
Worth noting is the fact that after the trial court had allowed Vicente Asuncion's
intervention pro interesse suo, petitioner Juan Perez filed a petition for certiorari
docketed as CA-G.R. No. 13519 to set aside the order denying his motion to dismiss
the pleading in intervention. In its Decision of January 27, 1988, the Seventh Division of
the Court of Appeals 22 denied the petition for certiorari for lack of merit. It upheld the
trial court's ruling to allow the intervention pro interesse suo to protect Vicente
Asuncion's right as a co-usufructuary in the distribution or disposition of the amounts
representing the rentals that were deposited with the court. That Vicente Asuncion had
filed Civil Case No. 8215-M seeking recovery of his alleged share in the fruits of the
Papaya Fishpond from 1978 would not be a reason for the dismissal of the motion for
intervention pursuant to Rule 16, Sec. 1 (e) of the Rules of Court. 23 The Court of
Appeals explained as follows:
Indeed, if by means of intervention a stranger to a lawsuit is permitted to intervene
without thereby becoming a formal plaintiff or defendant (Joaquin v. Herrera, 37 Phil.
705, 723 [1918]), then there is in the case at bar no identity of parties to speak of. Lis
pendens as a ground for a motion to dismiss requires as a first element identity of
parties in the two cases.
Nor is there an identity of relief sought. Civil Case No. 8295-M seeks an accounting of
the proceeds of the fishpond while Civil Case No. 5610-M is for injunction to prevent the
petitioner from retaking the fishpond from Luis Crisostomo. The herein private
respondent sought to intervene in the latter case simply to protect his right as
usufructuary in the money deposited in the court by the plaintiff Luis Crisostomo. We
hold that in allowing the intervention in this case the trial court acted with prudence and
exercised its discretion wisely. 24

Unconvinced by the Court of Appeals' Decision in CA-G.R. SP No. 13519, petitioner


Juan Perez filed a petition for review on certiorari with this Court under G.R. No. 82096.
On May 9, 1988, this Court denied the petition on the grounds that the issues raised are
factual and that there is no sufficient showing that the findings of the respondent court
are not supported by substantial evidence or that the court had committed any
reversible error in the questioned judgment. 25 The Resolution of the Court dated May 9,
1988 became final and executory on August 26, 1988. 26
Moreover, granting that the intervention be considered as Vicente Asuncion's "appeal,"
a litigant's failure to furnish his opponent with a copy of his appeal does not suffice to
warrant dismissal of that appeal. In such an instance, all that is needed is for the court
to order the litigant to furnish his opponent with a copy of his appeal. 27 This is precisely
what happened in this case. On May 13, 1992, the Court of Appeals issued a
Resolution directing counsel for intervenor to furnish herein petitioners with a copy of
intervenor Vicente Asuncion's brief within a 10-day period. It also granted petitioners an
opportunity to file a reply-brief or memorandum and the intervenor, a reply to said
memorandum. 28 That Resolution is proper under the premises because, by the nature
of an intervention pro interesse suo, it can proceed independently of the main action.
Thus, in the Resolution of October 30, 1992, in resolving the issue of the alleged
prematurity of its Decision, the Court of Appeals held that "the proceeding is solely
between intervenor and defendants-appellants, which is completely separable and has
nothing to do with the merits of the appeal." 29
At the hearing of Civil Case No. 5610-M, petitioner Juan Perez attempted to establish
the death on October 14, 1979 of Jorge Lorenzo, 30 the usufructuary from whom Vicente
Asuncion derived his right to intervene pro interesse suo. Since under Article 603 of the
Civil Code a usufruct is extinguished "by the death of the usufructuary, unless a
contrary intention clearly appears," there is no basis by which to arrive at the conclusion
that the usufruct originally exercised by Jorge Lorenzo has indeed been extinguished
or, on the contrary, has survived Lorenzo's demise on account of provisions in the
document constituting the usufruct. That matter is best addressed in Civil Case No.
8215-M wherein Vicente Asuncion seeks his share as a transferee of the usufruct
established for Jorge Lorenzo. All that is discussed here is the matter of intervention
pro interesse suo vis-a-vis the issue of prematurity of the Decision of the Court of
Appeals.
Petitioners' principal argument against the Court of Appeals' Decision in favor of private
respondent Crisostomo is that he could not have been an assignee or sub-lessee of the
fishpond because no contract authorized him to be so. Petitioners' argument is
anchored on factual issues that, however, have no room for discussion before this
Court. It is well-entrenched doctrine that questions of fact are not proper subjects of
appeal by certiorari under Rule 45 of the Rules of Court as this mode of appeal is
confined to questions of law. 31 Factual findings of the Court of Appeals are conclusive
on the parties and carry even more weight when said court affirms the factual findings
of the trial
court. 32 Accordingly, this review shall be limited to questions of law arising from the
facts as found by both the Court of Appeals and the trial court.
Admittedly, the contract between the usufructuaries and petitioner Keh has a provision
barring the sublease of the fishpond. However, it was petitioner Keh himself who
violated that provision in offering the operation of the fishpond to private respondent.

Apparently on account of private respondent's apprehensions as regards the right of


petitioners Keh and Lee to transfer operation of the fishpond to him, on January 9,
1978, petitioner Keh executed a document ceding and transferring his rights and
interests over the fishpond to petitioner Lee. That the same document might have been
a ruse to inveigle private respondent to agree to their proposal that he operate the
fishpond is of no moment. The fact is, petitioner Keh did transfer his rights as a lessee
to petitioner Lee in writing and that, by virtue of that document, private respondent
acceded to take over petitioner Keh's rights as a lessee of the fishpond.
Although no written contract to transfer operation of the fishpond to private respondent
was offered in evidence, 33 the established facts further show that petitioner Juan Perez
and his counsel, petitioner Tansinsin, knew of and acquiesced to that arrangement by
their act of receiving from the private respondent the rental for 1978-79. By their act of
receiving rental from private respondent through the peculiarly written receipt dated
June 6, 1978, petitioners Perez and Tansinsin were put in estoppel to question private
respondent's right to possess the fishpond as a lessee. Estoppel in pais arises when
one, by his acts, representations or admissions, or by his own silence when he ought to
speak out, intentionally or through culpable negligence, induces another to believe
certain facts to exist and such other rightfully relies and acts on such belief, so that he
will be prejudiced if the former is permitted to deny the existence of such facts. 34
Nevertheless, we hesitate to grant private respondent's prayer that he should be
restored to the possession of the fishpond as a consequence of his unjustified
ejectment therefrom. To restore possession of the fishpond to him would entail violation
of contractual obligations that the usufructuaries have entered into over quite a long
period of time now. Supervening events, such as the devaluation of the peso as against
the dollar as well as the addition of improvements in the fishpond that the succeeding
lessees could have introduced, have contributed to the increase in rental value of the
property. To place private respondent in the same position he was in before the lifting of
the restraining order in 1980 when he was deprived the right to operate the fishpond
under the contract that already expired in 1985 shall be to sanction injustice and
inequity. This Court, after all, may not supplant the right of the usufructuaries to enter
into contracts over the fishpond through this Decision. Nonetheless, under the
circumstances of the case, it is but proper that private respondent should be properly
compensated for the improvements he introduced in the fishpond.
Art. 1168 of the Civil Code provides that when an obligation "consists in not doing and
the obligor does what has been forbidden him, it shall also be undone at his expense."
The lease contract prohibited petitioner Luis Keh, as lessee, from subleasing the
fishpond. In entering into the agreement for pakiao-buwis with private respondent, not
to mention the apparent artifice that was his written agreement with petitioner Lee on
January 9, 1978, petitioner Keh did exactly what was prohibited of him under the
contract to sublease the fishpond to a third party. That the agreement for pakiaobuwis was actually a sublease is borne out by the fact that private respondent paid
petitioners Luis Keh and Juan Perez, through petitioner Tansinsin the amount of annual
rental agreed upon in the lease contract between the usufructuaries and petitioner Keh.
Petitioner Keh led private respondent to unwittingly incur expenses to improve the
operation of the fishpond. By operation of law, therefore, petitioner Keh shall be liable to
private respondent for the value of the improvements he had made in the fishpond or
for P486,562.65 with interest of six percent (6%) per annum from the rendition of the
decision of the trial court on September 6, 1989. 35

The law supports the awards of moral and exemplary damages in favor of private
respondent and against the petitioners. Their conspiratorial scheme to utilize private
respondent's expertise in the operation of fishponds to bail themselves out of financial
losses has been satisfactorily established to warrant a ruling that they violated Article 21
of the Civil Code and therefore private respondent should be entitled to an award of
moral damages. Article 21 states that "(a)ny person who wilfully causes loss or injury to
another in a manner that is contrary to morals, good customs or public policy shall
compensate the latter for the damage." Exemplary damages shall likewise be awarded
pursuant to Article 2229 of the Civil Code. 36 Because private respondent was
compelled to litigate to protect his interest, attorney's fees shall also be awarded. 37
WHEREFORE, in light of the foregoing premises, the decision of the Court of Appeals is
AFFIRMED insofar as it (a) directs the release to private respondent of the amounts of
P128,572.00 and P123,993.85 deposited with the Paluwagan ng Bayan Savings Bank
in Paombong, Bulacan and (b) requires private respondent Crisostomo to pay petitioner
Juan Perez the rental for the period June 1979 to January 1980 at the rate of
P150,000.00 per annum less the amount of P21,428.00 already paid to usufructuary
Maria Perez. It should, however, be subject to the MODIFICATIONS that:
1. Petitioner Luis Keh shall pay private respondent Luis Crisostomo in the amount of
P486,562.25 with legal interest from the rendition of the judgment in Civil Case No.
5610-M or on September 6, 1989, and
2. Petitioners be made liable jointly and severally liable for moral damages of
P50,000.00, exemplary damages of P20,000 and attorney's fees of P10,000.00.
No costs.
SO ORDERED.

G.R. No. 182567


July 13, 2009
GUILLERMO M. TELMO, Petitioner, vs. LUCIANO M. BUSTAMANTE, Respondent.
DECISION

converted into a national road. He also alleged that if he allowed the enclosures erected
by the respondent, other residents would be denied ingress to and egress from their
own properties.

NACHURA, J.:
For our consideration is a Petition1 for Review on Certiorari under Rule 45 of the Rules
of Court in relation to Section 27, paragraph 3 of the Ombudsman Act of 1989 (Republic
Act No. 6770). Subject of the Petition is the Decision 2 dated October 13, 2005 and the
Order3 dated March 17, 2006 of the Office of the Deputy Ombudsman for Luzon.
This case arose from the Verified Complaint4 filed by respondent Luciano M.
Bustamante before the Office of the Deputy Ombudsman for Luzon against petitioner
Guillermo Telmo, Municipal Engineer of Naic, Cavite, Danilo Consumo, Barangay
(Brgy.) Chairman, Brgy. Halang, Naic, Cavite, and Elizalde Telmo, a private individual.

In his own counter-affidavit, Consumo denied collusion with petitioner in not recording in
the barangay blotter the subject incident. He explained that on May 10, 2005 at around
5:00 p.m., he was summoned by petitioner to intercede, because the respondent and
his men were fencing the subject property. Consumo obliged, personally saw the fence
being built, and observed that even the trucks owned by petitioner were enclosed
therein. When he asked respondent if he had the necessary permit and the proper
barangay clearance to do so, respondents lawyer, Atty. San Gaspar, replied that there
was no need for the permit and clearance since respondent was just fencing his own
property. Thus, Consumo could not prevent the ongoing fencing, but told respondent
and company to wait for petitioner to decide the matter.

The complaint alleged that respondent is a co-owner of a real property of 616 square
meters in Brgy. Halang, Naic, Cavite, known as Lot 952-A and covered by Transfer
Certificate of Title No. T-957643 of the Register of Deeds of Cavite. Petitioner and
Elizalde Telmo (Telmos) are the owners of the two (2) parcels of land denominated as
Lot 952-B and 952-C, respectively, located at the back of respondents lot. When his lot
was transgressed by the construction of the Noveleta-Naic-Tagaytay Road, respondent
offered for sale the remaining lot to the Telmos. The latter refused because they said
they would have no use for it, the remaining portion being covered by the roads 10meter easement.

Consumo further alleged that after putting up the fence, respondent and his
companions left without waiting for the arrival of petitioner. When petitioner arrived, he
explained to the people present that the property enclosed by respondent is owned by
the government and that no one is allowed to construct any fence without a permit from
him, as the Municipal Engineer, or from any building official of the local government of
Naic, Cavite. Consumo said that the residents affected by the fence constructed by
respondent were the ones who pulled out the concrete posts in order to provide access
to the national road. These residents included the petitioner, whose trucks used for
delivering sand and hollow blocks were enclosed and also denied access.

The complaint further alleged that, on May 8, 2005, respondent caused the resurvey of
Lot 952-A in the presence of the Telmos. The resurvey showed that the Telmos
encroached upon respondents lot. Petitioner then uttered, "Hanggat ako ang municipal
engineer ng Naic, Cavite, hindi kayo makakapagtayo ng anuman sa lupa nyo; hindi ko
kayo bibigyan ng building permit."

In his Counter-Affidavit,14 Elizalde Telmo denied having encroached, occupied or taken


possession of respondents property. He claimed that, on May 10, 2005, he was merely
an onlooker to the altercation between petitioner and respondent. He said that
petitioner, his brother, insisted that respondent could not enclose the property in
question unless the latter obtains a building permit from the Office of the Municipal
Engineer/Building Official, since it appeared that the subject property was no longer a
property of respondent but was converted into government property by virtue of the 30meter road set-back imposed by the Zoning Ordinance of the Municipality of Naic,
Cavite. Elizalde Telmo stated that he did not offer any resistance to the fencing of the
property in question. He observed, though, that when they learned that petitioner was
arriving at the place, respondent and his companions just left the vicinity.

On May 10, 2005, respondent put up concrete poles on his lot. However, around 7:00
p.m. of the same day, the Telmos and their men allegedly destroyed the concrete poles.
The following day, respondents relatives went to Brgy. Chairman Consumo to report the
destruction of the concrete poles. Consumo told them that he would not record the
same, because he was present when the incident occurred. Consumo never recorded
the incident in the barangay blotter.
Respondent complained that he and his co-owners did not receive any just
compensation from the government when it took a portion of their property for the
construction of the Noveleta-Naic-Tagaytay Road. Worse, they could not enjoy the use
of the remaining part of their lot due to the abusive, Illegal, and unjust acts of the
Telmos and Consumo. Respondent charged the latter criminallyfor violation of Article
3125 of the Revised Penal Code and Section 3(e) 6 of Republic Act No. 30197 and
administrativelyfor violation of Section 4 (a) 8, (b)9, (c)10, and (e)11 of Republic Act No.
6713.12
In his Counter-Affidavit,13 petitioner denied having uttered the words attributed to him by
respondent, and claimed that he only performed his official duties in requiring an
application for a building permit before any structure can be erected on government
property. He said that respondent insisted on enclosing with barbed wire and concrete
posts the lot that already belonged to the national government, which had now been

Later, petitioner and respondent filed their respective position papers 15 upon the
directive of the Graft Investigating and Prosecuting Officer. Their position papers
reiterated the allegations made in their respective affidavits earlier submitted.
In the Decision16 dated October 13, 2005, the Office of the Deputy Ombudsman for
Luzon found petitioner and Danilo Consumo administratively liable, but dismissed the
charge against Elizalde Telmo for lack of jurisdiction over his person, he being a private
individual. The dispositive portion of the Decision states
WHEREFORE, premises considered, the undersigned investigator respectfully
recommends the following, to wit:
(1) That the administrative complaint against respondent Elizalde Telmo be DISMISSED
for lack of jurisdiction;
(2) That respondent Guillermo Telmo be meted the PENALTY OF FINE EQUIVALENT
TO SIX (6) MONTHS SALARY for violation of Section 4 of Republic Act No. 6713; and

(3) That respondent Danilo Consumo be meted the PENALTY OF FINE EQUIVALENT
TO THREE (3) MONTHS HONORARIA for violation of Section 4 of Republic Act No.
6713.
SO DECIDED.17
Petitioner filed a Motion for Reconsideration,18 wherein he elaborated that he just
performed his official duties when he summarily removed the concrete posts erected by
respondent to enclose the property.
In the Order19 dated March 17, 2006, the Office of the Deputy Ombudsman for Luzon
denied the Motion for Reconsideration for lack of merit.
Hence, this petition anchored on the following grounds:
A. THE HONORABLE DEPUTY OMBUDSMAN FOR LUZON SERIOUSLY ERRED
WHEN HE DECLARED THAT THERE WAS NO VALID TAKING OF RESPONDENTS
LOT BY MEANS OF EXPROPRIATION.
B. THE HONORABLE DEPUTY OMBUDSMAN FOR LUZON SERIOUSLY ERRED
WHEN HE DECLARED THAT PETITIONER SHOULD BE AUTHORIZED BY THE
MUNICIPAL MAYOR OR BY THE COURT TO ABATE PUBLIC NUISANCE OR
NUISANCE PER SE.
C. THE HONORABLE DEPUTY OMBUDSMAN FOR LUZON ERRED WHEN HE
METED THE PENALTY OF FINE EQUIVALENT TO SIX (6) MONTHS SALARY FOR
VIOLATION OF SECTION 4 OF REPUBLIC ACT NO. 6713. 20
In essence, petitioner contends that the property claimed and enclosed with concrete
posts by respondent was validly taken by the National Government through its power of
eminent domain, pursuant to Executive Order No. 113, as amended by Executive Order
No. 253, creating the Noveleta-Naic-Tagaytay Road. In this context, petitioner contends
that the concrete posts erected by respondent were a public nuisance under Article 694
(4)21 of the Civil Code, more particularly a nuisance per se, which may be summarily
abated under Article 699 (3)22 of the same Code. Petitioner says that as the Municipal
Engineer, he is also the Building Official of Naic, Cavite; and thus, it was well within his
authority, pursuant to Section 214, paragraph two (2) of the National Building Code, to
order the removal of the concrete posts. Petitioner likewise claims that Section 23 of
Revised Philippine Highway Act (Presidential Decree No. 17) 23 mandated him to
remove respondents concrete posts. Petitioner concludes that since he merely
performed his official duties in removing the concrete posts erected by petitioner from
the property, which is already owned by the government, he must be absolved of any
administrative liability.
Instead of filing his comment on the petition, respondent manifested through counsel
that he is no longer interested in pursuing this case, submitting therewith his Affidavit of
Desistance24 dated December 5, 2007. Respondent alleged in the affidavit that the
administrative charges he lodged against petitioner were brought about by a
misunderstanding between them, which differences have already been settled.
Consequently, this case should now be dismissed.
We disagree.
The desistance of the complainant does not necessarily result in the dismissal of the
administrative complaint because the Court attaches no persuasive value to a
desistance, especially when executed as an afterthought. 25 It should be remembered

that the issue in an administrative case is not whether the complaint states a cause of
action against the respondent, but whether the public officials have breached the norms
and standards of the public service. 26 Considering that petitioner admitted in his
pleadings that he summarily removed the concrete posts erected by respondent,
allegedly within the parameters of his authority as Municipal Engineer of Naic, Cavite, it
is only proper that this case be decided on its merits rather than on the basis of the
desistance of respondent.
It cannot be denied that respondents property was taken by the National Government
thru the Department of Public Works and Highways when it constructed the NoveletaNaic-Tagaytay Road. What is not clear from the records of this case is whether
respondents property was taken as part of the national road itself or only as part of the
right-of-way easement therefor. We observe that the re-survey plan 27 of his property
attached by respondent to his complaint and the survey plan28 of the Noveleta-NaicTagaytay Road submitted by petitioner appear to be different. Nevertheless, it is evident
from the sketch plans that respondent could not enclose his property because it is now
being used by the National Government. Therefore, whatever cause of action
respondent may have in his claim for just compensation for the taking of his property,
the same should be lodged against the National Government.
While it is settled that respondent does not have the legal right to enclose the property,
we should now determine whether petitioner indeed performed his official functions
properly.
First. Petitioner claims that his act of summarily removing respondents concrete posts
was authorized under the National Building Code (Presidential Decree No. 1096). The
provision he cites correctly pertains to Section 215, which reads
Sec. 215. Abatement of Dangerous Buildings.When any building or structure is found
or declared to be dangerous or ruinous, the Building Official shall order its repair,
vacation or demolition depending upon the decree of danger to life, health, or safety.
This is without prejudice to further action that may be taken under the provisions of
Articles 482 and 694 to 707 of the Civil Code of the Philippines.
To better understand this provision, we refer to Section 214 of the same law, which
defines what are dangerous and ruinous buildings or structures susceptible of
abatement. It provides
Sec. 214. Dangerous and Ruinous Buildings or Structures. Dangerous buildings are
those which are herein declared as such or are structurally unsafe or not provided with
safe egress, or which constitute a fire hazard, or are otherwise dangerous to human life,
or which in relation to existing use, constitute a hazard to safety or health or public
welfare because of inadequate maintenance, dilapidation, obsolescence, or
abandonment, or which otherwise contribute to the pollution of the site or the
community to an intolerable degree.
A careful reading of the foregoing provisions would readily show that they do not apply
to the respondents situation. Nowhere was it shown that the concrete posts put up by
respondent in what he believed was his and his co-owners property were ever declared
dangerous or ruinous, such that they can be summarily demolished by petitioner.

What is more, it appears that the concrete posts do not even fall within the scope of the
provisions of the National Building Code. The Code does not expressly define the word
"building." However, we find helpful the dictionary definition of the word "building," viz:
[A] constructed edifice designed usually covered by a roof and more or less completely
enclosed by walls, and serving as a dwelling, storehouse, factory, shelter for animals, or
other useful structure distinguished from structures not designed for occupancy (as
fences or monuments) and from structures not intended for use in one place (as boats
or trailers) even though subject to occupancy.29
The provisions of the National Building Code would confirm that "building" as used
therein conforms to this definition. Thus, applying the statutory construction principle of
ejusdem generic,30 the word "structure" should be construed in the context of the
definition of the word "building." The concrete posts put up by respondent on the
property are not properly covered by the definition of the word "building" nor is it
embraced in the corresponding interpretation of the word "structure."
Second. Petitioner contends that respondents concrete posts were in the nature of a
nuisance per se, which may be the subject of summary abatement sans any judicial
proceedings. Again, we disagree.
A nuisance per se is that which affects the immediate safety of persons and property
and may be summarily abated under the undefined law of necessity.31 Evidently, the
concrete posts summarily removed by petitioner did not at all pose a hazard to the
safety of persons and properties, which would have necessitated immediate and
summary abatement. What they did, at most, was to pose an inconvenience to the
public by blocking the free passage of people to and from the national road.
Third. Petitioner likewise maintains that his authority to perform the assailed official act
sprang from Section 23 of the Revised Philippine Highway Act. He posits that this
provision is particularly implemented by Department Order No. 52, 32 Series of 2003 of
the Department of Public Works and Highways for the Removal of Obstructions and
Prohibited Uses within the Right-of-Way of National Roads.
Department Order No. 52 directs all District Engineers to immediately remove or cause
the removal of all obstructions and prohibited uses within the right-of-way of all national
roads in their respective jurisdictions. These obstructions and prohibited uses include,
among others, all kinds of private, temporary and permanent structures, such as
buildings, houses, shanties, stores, shops, stalls, sheds, posts, canopies, billboards,
signages, advertisements, fences, walls, railings, basketball courts, garbage

receptacles, and the like. The Department Order requires the District Engineers to issue
notices to the concerned persons to remove the obstructions and prohibited uses within
the right-of-way, and shall follow through prompt compliance with these notices and full
implementation of the Order. It further provides that appropriate sanctions will be taken
against those who fail to comply with its provisions.
Gauging the action of petitioner based on the guidelines set by Department Order No.
52, from which he claims his authority, we cannot but conclude that petitioner went
beyond the scope of his official power because it is the concerned District Engineer of
the Department of Public Works and Highways who should have ordered respondent to
remove the concrete posts. The petitioner failed to show that he was duly authorized by
the District Engineer to implement the Department Order in Naic, Cavite. More
importantly, even assuming that petitioner had been duly authorized to order the
removal of the concrete posts of respondent, he failed to prove that he issued the
required notice to respondent to remove the said structures before he did the removal
himself. Note that petitioner, in fact, admitted in his pleadings that he summarily
removed the said posts.
The Revised Philippine Highway Act and Department Order No. 52 do not expressly
provide for the administrative sanction to be taken against public officials violating their
provisions. Hence, we must refer to the Uniform Rules on Administrative Cases in the
Civil Service. We believe that the administrative offense committed by petitioner
through the questioned act was only Discourtesy in the Course of Official Duties, which
is a light offense under Rule IV, Section 52 of the said Rules. The penalties imposable
for such an offense are a reprimand for the first offense, a suspension from 1 day to 30
days for the second offense, and dismissal from public service for the third offense.
Since this appears to be petitioners first offense, his action warrants only a
REPRIMAND.
WHEREFORE, the Decision dated October 13, 2005 and the Order dated March 17,
2006 of the Office of the Deputy Ombudsman for Luzon finding petitioner Guillermo M.
Telmo, Municipal Engineer of Naic, Cavite, administratively culpable for violation of
Section 4 of Republic Act No. 6713, imposing upon him the penalty of fine equivalent to
his six 6-month salary, must be MODIFIED. Guillermo M. Telmo is instead found
administratively guilty of DISCOURTESY IN THE COURSE OF OFFICIAL DUTIES and
is hereby REPRIMANDED. Costs against petitioner.
SO ORDERED.

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