Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 194538 November 27, 2013

MORETO MIRALLOSA and all persons claiming rights and interests under him,
Petitioner,
vs.
CARMEL DEVELOPMENT INC., Respondent.

DECISION

SERENO, CJ:

This is an appeal by way of a Petition for Review on Certiorari1 dated 6 December 2010
assailing the Decision2 and Resolution3 of the Court of Appeals CA) in C.A.-G.R. SP No.
105190, which reversed the Decision4 and Order5 of the Regional Trial Court RTC), Branch
121, Caloocan City in Civil Case No. C-22018. The RTC had reversed the Decision6 of the
Metropolitan Trial Court MeTC), Branch 52, Caloocan City in Civil Case No. 03-27114,
ordering petitioner to vacate the subject property in this case for ejectment.

The antecedent facts are as follows:

Respondent Carmel Development, Inc. was the registered owner of a Caloocan property known
as the Pangarap Village located at Barrio Makatipo, Caloocan City.7 The property has a total
land area of 156 hectares and consists of three parcels of land registered in the name of Carmel
Farms, Inc. under Transfer Certificate of Title (TCT) Nos. (62603) 15634, (62605) 15632 and
(64007) 15807.8 The lot that petitioner presently occupies is Lot No. 32, Block No. 73 covered
by the titles above-mentioned.9

On 14 September 1973, President Ferdinand Marcos issued Presidential Decree No. 293 (P.D.
293),10 which invalidated the titles of respondent and declared them open for disposition to the
members of the Malacañang Homeowners Association, Inc. (MHAI), to wit:

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of

the powers vested in me by the Constitution as Commander-in-Chief of all the Armed Forces of
the Philippines, and pursuant to Proclamation 1081, dated September 21, 1972 and General
Order No. 1 dated September 22, 1972 do hereby order and decree that any and all sales
contracts between the Government and the original purchasers, are hereby cancelled, and those
between the latter and the subsequent transferees, and any and all transfers thereafter, covering
lots 979, 981, 982, 985, 988, 989, 990, 991-new, 1226, 1228, 1230, and 980-C-2 (LRC PSD-
1730), all of Tala Estate, Caloocan City are hereby declared invalid and null and void ab initio as
against the Government; that Transfer Certificates of Title Nos. 62603, 6204, 6205, covering lots
1, 2, and 3., PCS-4383, all in the name of Carmel Farms, Inc., which are a consolidation and
subdivision survey of the lots hereinbefore enumerated, are declared invalid and considered
cancelled as against the Government; and that said lots are declared open for disposition and sale
to the members of the Malacañang Homeowners Association, Inc., the present bona fide
occupants thereof, pursuant to Commonwealth Act No. 32, as amended. (Emphasis supplied)

By virtue of P.D. 293, a Memorandum11 was inscribed on the last page of respondent’s title, as
follows:

Memorandum – Pursuant to Presidential Decree No. 293, this Certificate of Title is declared
invalid and null and void ab initio and considered cancelled as against the government and the
property described herein is declared open for disposition and sale to the members of the
Malacañang Homeowners Association, Inc.

On the basis of P.D. 293, petitioner’s predecessor-in-interest, Pelagio M. Juan, a member of the
MHAI, occupied Lot No. 32 and subsequently built houses there.12 On the other hand,
respondent was constrained to allow the members of MHAI to also occupy the rest of Pangarap
Village.13

On 29 January 1988, the Supreme Court promulgated Roman Tuason and Remedio V. Tuason,
Attorney-in-fact, Trinidad S. Viado v. The Register of Deeds, Caloocan City, Ministry of Justice
and the National Treasurer14 (Tuason), which declared P.D. 293 as unconstitutional and void ab
initio in all its parts. The dispositive portion is herein quoted as follows:

WHEREFORE, Presidential Decree No. 293 is declared to be unconstitutional and void ab initio
in all its parts. The public respondents are commanded to cancel the inscription on the titles of
the petitioners and the petitioners in intervention of the memorandum declaring their titles null
and void and declaring the property therein respectively described open for disposition and sale
to the members of the Malacañang Homeowners Association, Inc. to do whatever else is needful
to restore the titles to full effect and efficacy; and henceforth to refrain, cease and desist from
implementing any provision or part of said Presidential Decree No. 293. No pronouncement as to
costs.

On 17 February 1988, the Register of Deeds then cancelled the Memorandum inscripted on
respondent’s title,15 eventually restoring respondent’s ownership of the entire property.
Meanwhile, sometime in 1995, petitioner took over Lot No. 32 by virtue of an Affidavit executed
by Pelagio M. Juan in his favor.16

As a consequence of Tuason, respondent made several oral demands on petitioner to vacate the
premises, but to no avail.17 A written demand letter which was sent sometime in April 2002 also
went unheeded.18

On 14 January 2003, respondent filed a Complaint for Unlawful Detainer19 before the MeTC.
After due hearing on 9 November 2007, the trial court rendered a Decision20 in the following
manner:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff and
against the defendant, in the following manner:

1. Ordering the defendant to vacate the subject property located at Lot No. 32, Block 73,
Gregorio Araneta Ave., Makatipo, Caloocan City, together with all persons claiming
right under her;

2. To pay the sum of ₱10,000.00 as Attorney’s fees;

3. To pay the costs of suit.

SO ORDERED. (Emphases in the original)

In so ruling, the trial court stated that respondent was the registered owner of the property until
its title was voided by P.D. 293.21 It had no alternative but to allow petitioner’s occupancy of the
premises.22 Since the latter’s occupation was only by mere tolerance of respondent, petitioner
was necessarily bound by an implied promise that he would vacate the property upon demand.23
Failure to do so would render him liable for unlawful detainer.

Aggrieved, petitioner appealed to the RTC. On 30 April 2008, it rendered a Decision24 reversing
the findings of the MTC, as follows:

WHEREFORE, premises considered, the decision appealed from is hereby REVERSED AND
SET ASIDE and the complaint is accordingly DISMISSED. With costs against plaintiff-
appellee.

SO ORDERED. (Emphasis in the original)

In the opinion of the RTC, respondent’s Complaint did not make out a case for unlawful
detainer.25 It maintained that respondent’s supposed acts of tolerance must have been present
right from the start of petitioner’s possession.26 Since the possession was sanctioned by the
issuance of P.D. 293, and respondent’s tolerance only came after the law was declared
unconstitutional, petitioner thus exercised possession under color of title.27 This fact necessarily
placed the Complaint outside the category of unlawful detainer.28

On 24 September 2008, respondent appealed to the CA.29 The appellate court rendered a
Decision30 on 25 May 2010, the dispositive portion of which states:

WHEREFORE, in view of the foregoing, the petition is GRANTED. The assailed decision dated
April 30, 2008 of the RTC (Branch 121) of Caloocan City in Civil Case No. C-22018 is
REVERSED and SET ASIDE and the Decision dated November 9, 2007 of the MTC (Branch
52) of Caloocan City in Civil Case No. 03-27114 is hereby REINSTATED.

SO ORDERED. (Emphases in the original)

In disposing of the issues, the CA observed that petitioner’s arguments could not be upheld.31
The question of whether tolerance had been exercised before or after the effectivity of P.D. 293
would only matter if what was at issue was the timeliness of the Complaint or whether the
Complaint was one for unlawful detainer or forcible entry.32 Since the Complaint specifically
alleged that the possession of respondent was by petitioner’s tolerance, and that respondent’s
dispossession had not lasted for more than one year, it then follows that the MeTC rightly
acquired jurisdiction over the Complaint.33

Moreover, with the determination of who was the lawful and registered owner of the property in
question, the owner necessarily enjoyed or had a better right to the possession and enjoyment
there.34 Hence, petitioner had no right to the continued possession of the property.35

Neither could he be considered a builder in good faith who could avail himself of the benefits
under Article 448 of the Civil Code.36 From the moment P.D. 293 was declared unconstitutional
and the title to the property restored to respondent, petitioner could no longer claim good faith.37
Thus, as provided under Article 449, petitioner loses what he would be building, planting, or
sowing without right of indemnity from that time.38

On 25 May 2010, petitioner filed a Motion for Reconsideration, but it was denied in a
Resolution39 issued by the CA on 15 October 2010. Hence, the instant Petition.

On 2 May 2011, respondent filed a Comment40 on the Petition for Review; and on 17 May
2011, petitioner filed a Reply.41

ISSUES

From the foregoing, we reduce the issues to the following:

1. Whether or not the MeTC had jurisdiction over the case;

2. Whether or not Tuason may be applied here, despite petitioner not being a party to the
case; and

3. Whether or not petitioner is a builder in good faith.

THE COURT’S RULING

We shall discuss the issues seriatim.

The MeTC rightly exercised
jurisdiction, this case being one of
unlawful detainer.

Petitioner alleges that the MeTC had no jurisdiction over the subject matter, because respondent
had filed the Complaint beyond the one-year prescriptive period for ejectment cases. Despite
losing ownership and possession of the property as early as 14 September 1973 when P.D. 293
took effect, respondent allegedly still failed to take the necessary action to recover it.42
Petitioner also insists that tolerance had not been present from the start of his possession of the
property, as respondent extended its tolerance only after P.D. 293 was declared
unconstitutional.43 This situation necessarily placed respondent’s cause of action outside the
category of unlawful detainer44 Consequently, the presence of an ownership dispute should have
made this case either an accion publiciana or an accion reivindicatoria.45

Unfortunately, petitioner’s contentions are without merit. The MeTC rightly exercised
jurisdiction, this case being one of unlawful detainer.

An action for unlawful detainer exists when a person unlawfully withholds possession of any
land or building against or from a lessor, vendor, vendee or other persons, after the expiration or
termination of the right to hold possession by virtue of any contract, express or implied.46 Here,
possession by a party was originally legal, as it was permitted by the other party on account of an
express or implied contract between them.47 However, the possession became illegal when the
other party demanded that the possessor vacate the subject property because of the expiration or
termination of the right to possess under the contract, and the possessor refused to heed the
demand.48

The importance of making a demand cannot be overemphasized, as it is jurisdictional in

nature.49 The one-year prescriptive period for filing a case for unlawful detainer is tacked from
the date of the last demand, the reason being that the other party has the right to waive the right
of action based on previous demands and to let the possessor remain on the premises for the
meantime.50

In this case, it is clear from the facts that what was once a legal possession of petitioner,
emanating from P.D. 293, later became illegal by the pronouncement in Tuason that the law was
unconstitutional. While it is established that tolerance must be present at the start of the
possession,51 it must have been properly tacked after P.D. 293 was invalidated. At the time the
decree was promulgated, respondent had no option but to allow petitioner and his predecessor-in-
interest to enter the property. This is not the "tolerance" envisioned by the law. As explained in
Tuason, the decree "was not as claimed a licit instance of the application of social justice
principles or the exercise of police power. It was in truth a disguised, vile stratagem deliberately
resorted to favor a few individuals, in callous and disdainful disregard of the rights of others. It
was in reality a taking of private property without due process and without compensation
whatever, from persons relying on the indefeasibility of their titles in accordance with and as
explicitly guaranteed by law."52

When respondent sent petitioner a demand letter in April 2002 and subsequently filed the
Complaint in January 2003, it did so still within the one-year prescriptive period imposed by the
rules. It matters not whether there is an ownership issue that needs to be resolved, for as we have
previously held, a determination of the matter would only be provisional. In Heirs of Ampil v.
Manahan,53 we said:

In an unlawful detainer case, the physical or material possession of the property involved,
independent of any claim of ownership by any of the parties, is the sole issue for resolution. But
where the issue of ownership is raised, the courts may pass upon said issue in order to determine
who has the right to possess the property. This adjudication, however, is only an initial
determination of ownership for the purpose of settling the issue of possession, the issue of
ownership being inseparably linked thereto. As such, the lower court’s adjudication of ownership
in the ejectment case is merely provisional and would not bar or prejudice an action between the
same parties involving title to the property.

Tuason may be applied despite

petitioner not being a party to that
case, because an unconstitutional
law produces no effect and confers
no right upon any person.

Petitioner argues that respondent has no cause of action against him, because under the doctrine
of operative fact and the doctrine of res inter alios judicatae nullum aliis praejudicium faciunt,
petitioner should not be prejudiced by Tuason; the declaration of the unconstitutionality of P.D.
293 should not affect the rights of other persons not party to the case.54

Again, petitioner’s argument deserves scant consideration. In declaring a law null and void, the
real issue is whether the nullity should have prospective, not retroactive, application.55 Republic
v. Court of Appeals56 is instructive on the matter:

The strict view considers a legislative enactment which is declared unconstitutional as being, for
all legal intents and purposes, a total nullity, and it is deemed as if had never existed. x x x.

A judicial declaration of invalidity, it is also true, may not necessarily obliterate all the effects
and consequences of a void act occurring prior to such a declaration. Thus, in our decisions on
the moratorium laws, we have been constrained to recognize the interim effects of said laws prior
to their declaration of unconstitutionality, but there we have likewise been unable to simply
ignore strong considerations of equity and fair play. x x x.

As a general rule, a law declared as unconstitutional produces no effect whatsoever and confers
no right on any person. It matters not whether the person is a party to the original case, because
"not only the parties but all persons are bound by the declaration of unconstitutionality, which
means that no one may thereafter invoke it nor may the courts be permitted to apply it in
subsequent cases. It is, in other words, a total nullity."57 Thus, petitioner’s invocation of the
doctrine of res inter alios judicatae nullum aliis praejudicium faciunt cannot be countenanced.
We have categorically stated that the doctrine does not apply when the party concerned is a
"successor in interest by title subsequent to the commencement of the action, or the action or
proceeding is in rem, the judgment in which is binding against him."58 While petitioner may not
have been a party to Tuason, still, the judgment is binding on him because the declaration of P.D.
293 as a nullity partakes of the nature of an in rem proceeding.

Neither may petitioner avail himself of the operative fact doctrine, which recognizes the interim
effects of a law prior to its declaration of unconstitutionality.59 The operative fact doctrine is a
rule of equity. As such, it must be applied as an exception to the general rule that an
unconstitutional law produces no effects.60 The doctrine is applicable when a declaration of
unconstitutionality will impose an undue burden on those who have relied on the invalid law,61
but it can never be invoked to validate as constitutional an unconstitutional act.62

In this case, petitioner could not be said to have been unduly burdened by reliance on an invalid
law. Petitioner merely anchored his right over the property to an Affidavit allegedly issued by
Pelagio M. Juan, a member of the MHIA, authorizing petitioner to occupy the same.63 However,
this Affidavit was executed only sometime in 1995, or approximately seven years after the
Tuason case was promulgated.64 At the time petitioner built the structures on the premises, he
ought to have been aware of the binding effects of the Tuason case and the subsequent
unconstitutionality of P.D. 293. These circumstances necessarily remove him from the ambit of
the operative fact doctrine.

Petitioner may not be deemed to be a builder in good faith. Petitioner also argues that he is a
builder in good faith for want of knowledge of any infirmity in the promulgation of P.D. 293.65
Being a builder in good faith, he believes that he is entitled to the reimbursement of his useful
expenses and that he has a right to retain possession of the premises, pending reimbursement of
the value of his improvements to be proven during trial, in accordance with Article 545 of the
Civil Code.66

Upon perusal of the records, however, we hold that petitioner is not a builder in good faith. A
builder in good faith is one who builds with the belief that the land he is building on is his, or
that by some title one has the right to build thereon, and is ignorant of any defect or flaw in his
title.67 Since petitioner only started occupying the property sometime in 1995 (when his
predecessor-in-interest executed an Affidavit in his favor), or about seven years after Tuason was
promulgated, he should have been aware of the binding effect of that ruling. Since all judicial
decisions form part of the law of the land, its existence should be on one hand, x x x matter of
mandatory judicial notice; on the other, ignorantia. legis non excusat.68 He thus loses whatever
he has built on the property, without right to indemnity, in accordance with Article 449 of the
Civil Code.69

WHEREFORE, the Petition for Review on Certiorari is hereby DISMISSED. The assailed
Decision and Resolution of the Court of Appeals in CA-G.R. SP No. 105190 are AFFIRMED.

SO ORDERED.

MARIA LOURDES P. A. SERENO

Chief Justice, Chairperson

WE CONCUR:

TERESITA J. LEONARDO-DE CASTRO

Associate Justice

LUCAS P. BERSAMIN MARTIN S. VILLARAMA, JR.

Associate Justice Associate Justice
 BIENVENIDO L. REYES
Associate Justice

CERTIFICATION

Pursuant to Section 13 Article VIII of the Constitution, I certify that the conclusions in the above
Decision had been reached in consultation before the case was assigned to the writer of the
opinion of the Court’s Division.

MARIA LOURDES P. A. SERENO

Chief Justice

Footnotes

1 Rollo, pp. 28-55.

2 Id. at 7-19; CA Decision dated 25 May 2010, penned by Associate Justice Jose C.
Reyes, Jr. and concurred in by Associate Justices Antonio L. Villamor and Fiorito S.
Macalino.

3 Id. at 20; CA Resolution dated 15 October 2010.

4 Id. at 112-114; RTC Decision dated 30 April 2008, penned by Presiding Judge
Adoracion G. Angeles.

5 Id. at 115; RTC Order dated 11 August 2008.

6 Id. at 187-190; MeTC Order dated 9 November 2007, penned by Acting Presiding
Judge Josephine M. Advento-Vito Cruz.

7 Id. at 8.

8 Id.

9 Id.

10 See Presidential Decree No. 293 otherwise known as "Cancelling the Sale Certificates
and/or Transfer Certificates of Title Numbers 62603, 62604, And 62605, covering Lots 1,
2, and 3, respectively, Pcs-4383, all in the name of Carmel Farms, Inc., which is a
consolidation and subdivision of Lots 979, 981, 982, 985, 988, 989, 990, 991-New, 1226,
1230, and 980-C-2 (Lrc Psd-1730), All of Tala Estate, Caloocan City, and Declaring the
same open for disposition to the Malacañang Homeowners Association, Inc., the present
occupants, pursuant to the provisions of Commonwealth Act Number 32, as amended."
11 Rollo, p. 8.

12 Id.

13 Id. at 8-9.

14 241 Phil. 650, 663 (1988).

15 Rollo, p. 9.

16 Id. at 408.

17 Id. at 10.

18 Id. at 9-10.

19 Id. at 117-120.

20 Supra note 6.

21 Id. at 188.

22 Id.

23 Id. at 189.

24 Supra note 4.

25 Id. at 114.

26 Id.

27 Id.

28 Id.

29 Id. at 56-108.

30 Supra note 2.

31 Id. at 15.

32 Id.

33 Id. at 15-16.
34 Id. at 17.

35 Id.

36 Id.

37 Id.

38 Id. at 18.

39 Supra note 3.

40 Id. at 395-414.

41 Id. at 451-463.

42 Id. at 37.

43 Id. at 45-46.

44 Id.

45 Id. at 37.

46 Samelo v. Manotok Services, Inc., G.R. No. 170509, 27 June 2012, 675 SCRA 132,
citing Racaza v. Gozum, 523 Phil. 694, 707 (2006).

47 Jose v. Alfuerte, G.R. No. 169380, 26 November 2012, 686 SCRA 323, citing Estate
of Soledad Manantan v. Somera, G.R. No. 145867, 7 April 2009, 584 SCRA 81, 89-90.

48 Id.

49 Cajayon v. Sps. Batuyong, 517 Phil. 648 (2006), citing Muñoz v. Court of Appeals,
G.R. No. 102693, 23 September 1992, 214 SCRA 216.

50 Leonin v. Court of Appeals, 534 Phil. 544 (2006), citing Cañiza v. CA, 335 Phil.
1107, 1117 (1997); Penas, Jr. v. Court of Appeals, G.R. No. 112734, 7 July 1994, 233
SCRA 744, 747.

51 Sarona v. Villegas, 131 Phil. 365, 372 (1968).

52 Supra note 14, at 662-663.

53 G.R. No. 175990, 11 October 2012, 684 SCRA 130, 139.

54 Rollo, pp. 46-48.

55 Republic of the Philippines v. Court of Appeals, G.R. No. 79732, 8 November 1993,
227 SCRA 509.

56 Id. at 512.

57 Id. at 511.

58 Dar Adventure Farm Corp., v. Court of Appeals, G.R. No. 161122, 24 September
2012, 681 SCRA 580, 583.

59 Supra note 55, at 512.

60 League of Cities of the Philippines v. COMELEC, G.R. No. 176951, 24 August 2010,
628 SCRA 819.

61 Chavez v. JBC, G.R. No. 202242, 17 July 2012, 676 SCRA 579, citing Planters
Products, Inc. v. Fertiphil Corporation, G.R. No. 166006, 14 March 2008, 548 SCRA
485, 516-517.

62 Supra note 61.

63 Rollo, pp. 408-409.

64 Id.

65 Id. at 460.

66 Id.

67 Rosales v. Castelltort 509 Phil. 137, 47 (2005). citing Macasaet v. Macasaet 482 Phil.
853, 87 (2004) (citation omitted).

68 Lapid v. Laurea, 439 Phil. 887, 896-897 (2002).

69 Civil Code Art. 449. He who builds, plams or sows in bad faith on the land of another,
loses what is built, planted or sown without right to indemnity.