FIRST DIVISION[G.R. No. 146262. January 21, 2005]HEIRS OF EUGENIO LOPEZ, SR.,petitioners,vs.HON. ALFREDO R. ENRIQUEZ, in his capacity as Administrator of the Land Registration Authority and the REGISTER OF DEEDS OF MARIKINA CITY,respondents.D E C I S I O NCARPIO,J.:The CaseThis is a petition for review[1]to reverse the Decision[2]dated 29 November 2000 of the Court of Appeals (appellate court) in CA-G.R. SP No. 55993. The appellate court affirmed the Resolution[3]dated 21 May 1999 issued by the Land Registration Authority (LRA) in Consulta No. 2879. The LRA ruled that a notice oflis pendensbased on a motion is not registrable.The FactsAlfonso Sandoval (Sandoval) and Roman Ozaeta, Jr. (Ozaeta) filed an application for registration of title before the Regional Trial Court of Pasig City, Branch 152 (land registration court), docketed as Case No. 2858, Land Registration Case No. N-18887 (LRC No. N-18887). The land registration court issued an order of general default and hearings on the application followed. On 31 May 1966, the land registration court granted the application. The decision became final and executory, and the land registration court issued a certificate of finality dated 8 March 1991.[4]The National Land Titles and Deeds Administration (now LRA) issued on 20 October 1977 Decree Nos. N-217643 and N-217644 in the names of Sandoval and his wife Rosa Ruiz, and Ozaeta and his wife Ma. Salome Lao.[5]On 16 July 1997, petitioners Eugenio Lopez, Jr., Manolo Lopez, Oscar Lopez, and Presentacion L. Psinakis (petitioners), heirs of Eugenio Lopez, Sr., filed a motion[6]in LRC No. N-18887. The motion alleged that Sandoval and Ozaeta sold the lots subject of the application to the late Eugenio Lopez, Sr. on 23 September 1970. Petitioners prayed that the court consider in the land registration case the Deed of Absolute Sale[7]over the lots executed by Sandoval and Ozaeta and their respective spouses in favor of Eugenio Lopez, Sr. Invoking Section 22 of Presidential Decree No. 1529 (PD 1529),[8]petitioners also prayed that the court issue the decree of registration in their names as the successors-in-interest of Eugenio Lopez, Sr.The land registration court gave due course to the motion and conducted hearings.[9]The Register of Deeds of Marikina City issued the corresponding OCT Nos. O-1603 and O-1604 in favor of Sandoval and Ozaeta and their spouses only on 18 August 1998.[10]The pertinent entries[11]in the Decrees read:This Decree is issued pursuant to the Decision dated 31stday ofMay, 1966of the Hon. Pedro C. Navarro, Judge of [Court of First Instance of Rizal, Branch II, Pasig, Rizal], and the Honorable Briccio C. Ygaa, this3rdday of July, 1998.Issued at the National Land Titles and Deeds Registration Administration, Quezon City, this20thday of October, in the year of Our Lord nineteen hundred and ninety-sevenat 8:01 a.m.(signed)ALFREDO R. ENRIQUEZADMINISTRATORNational Land Titles and DeedsRegistration AdministrationEntered in the Registration Book for Marikina, pursuant to the provisions of section 39 of PD No. 1529, on the18thday of August nineteen hundred and ninety-eight,at 1:16 p.m.(signed)EDGAR D. SANTOSRegister of Deeds (Emphasis added)Petitioners filed another motion on 25 November 1998 to declare void Decree Nos. N-217643 and N-217644 and Original Certificate of Title (OCT) Nos. O-1603 and O-1604. Petitioners pointed out that the OCTs show that incumbent Administrator Alfredo R. Enriquez signed the Decrees on 20 October 1997, before he assumed office on 8 July 1998 and even before Hon. Briccio C. Ygaa issued the Order of 3 July 1998.[12]Petitioners questioned the inconsistencies in the dates and requested the LRA to recall the decrees. The LRA Administrator denied the request and explained the inconsistencies in the dates in a letter[13]dated 1 December 1998. The entire letter states:Republic of the PhilippinesDepartment of JusticeLAND REGISTRATION AUTHORITYQuezon City1 December 1998Atty. Crisostomo A. QuizonQuiason Makalintal Barot Torres & Ibarra Law Offices2ndFloor Benpres BuildingExchange Road corner Meralco Ave.Ortigas Center, Pasig CitySir:This concerns your letter requesting the recall of Decree Nos. N-217643 and N-217644 issued in Land Registration Case No. N-2858, LRC Record No. N-18887, both in the names of Alfonso Sandoval and his wife, Rosa Ruiz, and Roman Ozaeta, Jr., and his wife, Ma. Salome Lao.Records of this Authority show that aforesaid decrees of registration were prepared on October 20, 1977 pursuant to the decision of the court dated May 31, 1966 and the order for issuance of decree dated August 24, 1993. Said decrees were forwarded to the Office of the Administrator on August 8, 1998 and was [sic] released therefrom on August 13, 1998. Consequently, said decrees were signed sometime between August 8 and 13 1998 and definitely not on October 20, 1997 as what is reflected thereon because the undersigned Administrator assumed office only on July 8, 1998. Apparently, at the time the decrees were signed it was not noticed, through oversight, that they were dated October 20, 1977. It is therefore hereby clarified that Decree Nos. N-217643 and N-217644 were actually issued sometime between August 8 and 13 1998 and not on October 20, 1997.Regarding the claim that these decrees were prematurely issued as the motion for the issuance of the decrees in favor of the Heirs of Eugenio Lopez, the properties involved having been sold to him by the applicants, is still pending with the court, it is informed that no copy of said motion nor of the order directing this Office to comment thereon appears on file in the records of the case. Hence, these matters could not have been taken into consideration in the issuance of the decrees. Had the Administration been apprised of these incidents, perhaps the issuance of the decrees could have been held in abeyance until the court has resolved the same.As to the recall of the decrees of registration, we regret to inform you that since the certificates of title transcribed pursuant to said decrees have already been issued and released by the Registrar of Deeds concerned, it is now beyond our authority to recall them unless duly authorized by the court.We hope that we have satisfactorily disposed of the concerns raised in your letter.Very truly yours,(signed)ALFREDO R. ENRIQUEZAdministratorOn 25 November 1998, petitioners filed with the Register of Deeds of Marikina City an application to annotate the notice oflis pendensat the back of OCT Nos. O-1603 and O-1604 on the ground that petitioners have filed with the land registration court a motion to declare OCT Nos. O-1603 and O-1604 void.[14]Petitioners attached to the application a copy of the 25 November 1998 motion and the pertinent OCTs.In a letter[15]dated 15 December 1998, the Register of Deeds of Marikina City denied the application to annotate the notice oflis pendens. The entire letter states:Republic of the PhilippinesDepartment of JusticeLAND REGISTRATION AUTHORITYRegistry of Deeds, Marikina City15 December 1998Atty. Crisostomo A. Quizon2ndFloor, Benpres Bldg.Exchange Road cor. Meralco AvenuePasig CitySir:This is in connection to [sic] your application to have a Notice of Lis Pendens [annotated] at the back of OCT Nos. O-1603 and O-1604 issued in the name of ALFONSO SANDOVAL AND SPOUSE.Pursuant to Sec. 76, PD No. 1529[,] the contents of the notice are the name[s] of the parties, the court where the action is pending, the date the action was instituted and a copy of the compalint [sic] in order to determine if the person named in the title is impleaded.We regret to inform you that the application, bereft of the original petition or compaint [sic] upon which this office will base its action, is DENIED.If you do not agree with our findings, you can, without withdrawing the documents you submitted, elevate the matter en consulta five (5) days from receipt hereof to the Office of the Administrator, Land Registration Authority, East Avenue cor. NIA Road, Quezon City.Very truly yours,(signed)EDGAR D. SANTOSRegister of DeedsOn 14 January 1999, three days after receipt of the letter, petitioners elevated the denial inconsultato the LRA. The case was docketed as Consulta No. 2879.The Ruling of the Land Registration AuthorityIn its resolution[16]dated 21 May 1999, the LRA stated that the sole question for resolution is whether a notice oflis pendensis registrable based on a motion to declare void the decrees and titles. The LRA agreed with the Register of Deeds that a notice of lis pendens based on a motion is not registrable. Relying on Section 24, Rule 14 of the Rules of Court, the LRA ruled that only a party to a case has the legal personality to file a notice oflis pendensrelative to the pending case.The LRA focused on petitioners standing in LRC No. N-18887. The LRA declared that petitioners are not parties in LRC No. N-18887. Since a land registration case is a proceedingin rem, an order of general default binds the whole world as a party in the case. Petitioners are mere movants whose personality the court has not admitted. Based on Section 26 of PD 1529, the LRA ruled that petitioners should have filed a motion to lift the order of general default. Pertinent portions of the LRA decision read:Until and after the Order of General Default in LRC Case No. 18887 is lifted, petitioners cannot be clothed with personality as oppositors in said land registration case by merely filing a motion after a judgement has been rendered. Such being the case, a notice oflis pendenson the basis of the motion filed by petitioners cannot be admitted for registration. To rule otherwise would preempt the judgment of the Court in so far as the personalities of the movants as oppositors in the land registration case is concerned.WHEREFORE, premises considered, this Authority is of the opinion and so holds that the notice oflis pendensis not registrable.SO ORDERED.[17]The Ruling of the Court of AppealsUndaunted, petitioners filed before the appellate court a petition for review of the LRAs decision. Petitioners filed the petition on the ground of manifest error and grave abuse of discretion on the part of the LRA Administrator when he ruled in Consulta No. 2879 that the notice oflis pendensis not registrable.The appellate court dismissed the petition for lack of merit. The appellate court reiterated the LRAs ruling that only a party to a case has the legal personality to file a notice oflis pendens. Petitioners have no legal personality because they failed to file a motion to lift the order of general default in the land registration case.IssuesPetitioners present the following issues for resolution of this Court:1. WHETHER PETITIONERS MOTION TO DECLARE VOID THE DECREES ISSUED BY THE LAND REGISTRATION AUTHORITY IS A PROPER BASIS FOR FILING THE NOTICE OFLIS PENDENS, and2. WHETHER PETITIONERS CAN FILE THE MOTION TO DECLARE VOID THE DECREES ISSUED BY THE LAND REGISTRATION COURT IN LRC CASE NO. N-18887 DESPITE THE FACT THAT THE COURT HAS NOT LIFTED THE GENERAL ORDER OF DEFAULT.[18]The Ruling of the CourtThe petition has no merit.We agree with the observation of the appellate court that the pleadings filed by petitioners, public respondents and the Office of the Solicitor General cite more or less the same provisions of the laws as applicable in support of their respective contentions but differ x x x only with respect to their interpretation thereof.[19]With this observation in mind, we quote the pertinent provisions of the 1997 Rules of Civil Procedure and of PD 1529.Section 14, Rule 13 of the 1997 Rules of Civil Procedure provides:SECTION 14.Notice of lis pendens. In an action affecting the title or the right of possession of real property, the plaintiff and the defendant, when affirmative relief is claimed in his answer, may record in the office of the registry of deeds of the province in which the property is situated a notice of the pendency of the action. Said notice shall contain the names of the parties and the object of the action or defense, and a description of the property in that province affected thereby. Only from the time of filing such notice for record shall a purchaser, or encumbrancer of the property affected thereby, be deemed to have constructive notice of the pendency of the action, and only of its pendency against the parties designated by their real names.The notice oflis pendenshereinabove mentioned may be cancelled only upon order of the court, after proper showing that the notice is for the purpose of molesting the adverse party, or that it is not necessary to protect the rights of the party who caused it to be recorded.Section 76 of PD 1529 states:SECTION 76.Notice of lis pendens. No action to recover possession of real estate, or to quiet title thereto, or to remove clouds upon the title thereof, or for partition or other proceedings of any kind in court directly affecting the title to land or the use or occupation thereof or the buildings thereon, and no judgment, and no proceeding to vacate or reverse any judgment, shall have any effect upon registered land as against persons other than the parties thereto, unless a memorandum or notice stating the institution of such action or proceeding and the court wherein the same is pending, as well as the date of the institution thereof, together with a reference to the number of the certificate of title, and an adequate description of the land affected and the registered owner thereof, shall have been filed and registered.Notice of Lis PendensLis pendensliterally means a pending suit. The doctrine oflis pendensrefers to the jurisdiction, power or control which a court acquires over property involved in a suit, pending the continuance of the action, and until final judgment.[20]The purposes oflis pendensare (1) to protect the rights of the party causing the registration of thelis pendens, and (2) to advise third persons who purchase or contract on the subject property that they do so at their peril and subject to the result of the pending litigation.[21]The filing of a notice oflis pendenshas a two-fold effect. First, it keeps the subject matter of the litigation within the power of the court until the entry of the final judgment to prevent the defeat of the final judgment by successive alienations. Second, it binds a purchaser,bona fideor not, of the land subject of the litigation to the judgment or decree that the court will promulgate subsequently. However, the filing of a notice oflis pendensdoes not create a right or lien that previously did not exist.[22]Without a notice oflis pendens, a third party who acquires the property after relying only on the certificate of title is a purchaser in good faith. Against such third party, the supposed rights of a litigant cannot prevail, because the former is not bound by the property owners undertakings not annotated in the transfer certificate of title.[23]Thus, we have consistently held thatThe notice oflis pendensx x x is ordinarily recorded without the intervention of the court where the action is pending. The notice is but an incident in an action, an extrajudicial one, to be sure. It does not affect the merits thereof. It is intended merely to constructively advise, or warn, all people who deal with the property that they so deal with it at their own risk, and whatever rights they may acquire in the property in any voluntary transaction are subject to the results of the action, and may well be inferior and subordinate to those which may be finally determined and laid down therein. The cancellation of such a precautionary notice is therefore also a mere incident in the action, and may be ordered by the Court having jurisdiction of it at any given time. And its continuance or removal x x x is not contingent on the existence of a final judgment in the action, and ordinarily has no effect on the merits thereof.[24]A notice oflis pendensmay involve actions that deal not only with title or possession of a property, but also with the use or occupation of a property.[25]The litigation must directly involve a specific property which is necessarily affected by the judgment.Magdalena Homeowners Association, Inc. v. Court of Appeals[26]enumerated the cases where a notice oflis pendensis appropriate:[A] notice oflis pendensis proper in the following cases,viz:a) An action to recover possession of real estate;b) An action to quiet title thereto;c) An action to remove clouds thereon;d) An action for partition; ande) Any other proceedings of any kind in Court directly affecting the title to the land or the use or occupation thereof or the buildings thereon.On the other hand, the doctrine of lis pendens has no application in the following cases:a) Preliminary attachments;b) Proceedings for the probate of wills;c) Levies on execution;d) Proceedings for administration of estate of deceased persons; ande) Proceedings in which the only object is the recovery of a money judgment.[27]As decreed by Section 76 of PD 1529, a notice oflis pendensshould contain a statement of the institution of an action or proceeding, the court where the same is pending, and the date of its institution. A notice oflis pendensshould also contain a reference to the number of the certificate of title of the land, an adequate description of the land affected and its registered owner.The Register of Deeds denied registration of the notice of lis pendens because the application was bereft of the original petition or complaint upon which this office will base its action.[28]Inconsultato the LRA, petitioners pointed out that they have complied with the requirements for the registration of the notice oflis pendens, as follows:7.2.1 The Notice of Lis Pendens contains a statement of the filing by the Heirs of Eugenio Lopez of a motion to declare Original Certificates of Title Nos. O-1603 and O-1604 null and void;7.2.2 It contains the name of the court wherein the motion is pending which is the registration court, Regional Trial Court, Branch 152, Pasig City. The date of the filing of the motion is shown on the motion itself wherein the receipt of said motion by the land registration court onNovember 25, 1998is duly stamped;7.2.3 The numbers of the Original Certificates of Title Nos. O-1603 and O-1604 are clearly indicated in the notice;7.2.4 There is adequate description of the land affected in the Notice of Lis Pendens;7.2.5 The names of the registered owners are indicated in Paragraph 4 of the Motion attached to the Notice;7.2.6 A copy of the motion to declare OCT Nos. O-1603 and O-1604 null and void, dated November 25, 1998 upon which the Register of Deeds of the Province of Rizal will base its action is attached as Annex A of the Notice of Lis Pendens. (Emphasis in the original)[29]Petitioners enumeration readily reveals that they have not complied with the requisites. Both the LRA and the appellate court denied the application for a notice oflis pendensbecause petitioners are mere movants, and not original parties, in LRC No. N-18887. As petitioners are not parties to an action as contemplated in Section 76 of PD 1529, they failed to present the requisite pleading to the Register of Deeds of Marikina City. We hold that the Register of Deeds correctly denied the application for a notice oflis pendens.ReconveyancePetitioners committed a fatal procedural error when they filed a motion in LRC No. N-18887 on 16 July 1997. The remedy of petitioners is an action for reconveyance against Sandoval, Ozaeta and their spouses. Reconveyance is based on Section 55 of Act No. 496, as amended by Act No. 3322, which states that xxx in all cases of registration procured by fraud the owner may pursue all his legal and equitable remedies against the parties to such fraud, without prejudice, however, to the rights of any innocent holder for value of a certificate of title xxx.An action for reconveyance is an actionin personamavailable to a person whose property has been wrongfully registered under the Torrens system in anothers name. Although the decree is recognized as incontrovertible and no longer open to review, the registered owner is not necessarily held free from liens. As a remedy, an action for reconveyance is filed as an ordinary action in the ordinary courts of justice and not with the land registration court.[30]Reconveyance is always available as long as the property has not passed to an innocent third person for value. A notice of lis pendens may thus be annotated on the certificate of title immediately upon the institution of the action in court. The notice of lis pendens will avoid transfer to an innocent third person for value and preserve the claim of the real owner.[31]Necessity of a Motion to Lift the Order of General DefaultIn its comment,[32]the LRA states that under Section 26 of PD 1529 the order of default includes petitioners. Therefore, petitioners failure to move to lift the default order did not give them standing in the case. As long as the court does not lift the order of general default, petitioners have no legal standing to file the motion to declare void the decrees of registration issued to the applicant. Section 26 of PD 1529 provides thus:Sec. 26.Order of default; effect. If no person appears and answers within the time allowed, the court shall, upon motion of the applicant, no reason to the contrary appearing, order a default to be recorded and require the applicant to present evidence. By the description in the notice To All Whom It May Concern, all the world are made parties defendant and shall be concluded by the default order.Where an appearance has been entered and an answer filed, a default order shall be entered against persons who did not appear and answer.Petitioners justification for filing a motion to annul the decrees and titles, as opposed to filing a motion to lift the order of general default, rests on two related assumptions. First, with the filing of the 16 July 1997 motion and giving of due course to the motion by the land registration court, petitioners assert that they acquired legal standing in the registration proceedings. Second, buyer Eugenio Lopez, Sr. stepped into the shoes of the sellers-applicants Sandoval and Ozaeta when applicants sold the property to him. As successors-in-interest of the buyer, petitioners contend that they are not strangers to the proceedings.To justify their two assumptions, petitioners traced the antecedent of Section 22 of PD 1529 to Section 29 of Act 496[33]and its judicial interpretation inMendoza v. Court of Appeals.[34]Section 22 of PD 1529 provides:SECTION 22.Dealings with land pending original registration.After the filing of the application and before the issuance of the decree of registration, the land therein described may still be the subject of dealings in whole or in part, in which case the interested party shall present to the court the pertinent instruments together with the subdivision plan approved by the Director of Lands in case of transfer of portions thereof, and the court, after notice to the parties, shall order such land registered subject to the conveyance or encumbrance created by said instruments, or order that the decree of registration be issued in the name of the person to whom the property has been conveyed by said instruments.The pertinent portion of Section 29 of Act 496 provides:SECTION 29. After the filing of the application and before the issuance of the decree of title by the Chief of the General Land Registration Office, the land therein described may be dealt with and instruments relating thereto shall be recorded in the office of the register of deeds at any time before issuance of the decree of title, in the same manner as if no application had been made. The interested party may, however, present such instruments to the Court of First Instance instead of presenting them to the office of the Register of Deeds, together with a motion that the same be considered in relation with the application, and the court, after notice to the parties shall order such land registered subject to the encumbrance created by said instruments, or order the decree of registration issued in the name of the buyer or of the person to whom the property has been conveyed by said instruments. x x xMendoza v. Court of Appeals[35]explains the procedure in cases of conveyance of the land subject of a registration proceeding by an instrument executed between the time of filing of the application for registration and the issuance of the decree of title.The law does not require that the application for registration be amended by substituting the buyer or the person to whom the property has been conveyed for the applicant. Neither does it require that the buyer or the person to whom the property has been conveyed be a party to the case. He may thus be a total stranger to the land registration proceedings. The only requirements of the law are: (1) that the instrument be presented to the court by the interested party together with a motion that the same be considered in relation with the application; and (2) that prior notice be given to the parties to the case xxx.[36]Petitioners also assert that they do not dispute the judgment of the land registration court. However, this position is in conflict with their 25 November 1998 motion to have the decree and the titles declared void. Petitioners now assume the roles of both successors-in-interest and oppositors. This confusion of roles brought about petitioners grave error in procedure.The land registration court granted the application in LRC No. N-18887 on 31 May 1966 and issued a certificate of finality dated 8 March 1991. Petitioners filed their motion to consider the deed of sale in the registration on 16 July 1997. Petitioners filed their motion to have the decrees and the corresponding certificates of title declared void on 25 November 1998. Petitioners filed both motions long after the decision in LRC No. N-18887 became final and executory. Neither petitioners nor even the applicants from whom they base their claim presented the Deed of Sale before the land registration court while the action was pending.Considering the facts and arguments as presented above, we hold that the motion filed by petitioners is insufficient to give them standing in the land registration proceedings for purposes of filing an application of a notice oflis pendens. However, we disagree with the LRA and the appellate courts observation that petitioners need to file a motion to lift the order of general default. A motion to lift the order of general default should be filed before entry of final judgment. The land registration court granted the application for registration of title on 31 May 1966 and issued a certificate of finality on 8 March 1991. Petitioners filed their motion on 16 July 1997. Thus, even if petitioners filed a motion to lift the order of general default, the order of default could not be set aside because the motion was filed out of time.InLim Toco v. Go Fay,[37]this Court explained the effect of an order of default to the party defaulted. A party declared in default loses his standing in court. As a result of his loss of standing, a party in default cannot appear in court, adduce evidence, be heard, or be entitled to notice. A party in default cannot even appeal from the judgment rendered by the court, unless he files a motion to set aside the order of default under the grounds provided in what is now Section 3, Rule 9 of the 1997 Rules of Civil Procedure.Indeed, in its comment before this Court, the LRA stated thus:Under Section 26, PD 1429, petitioners are deemed to have been included by the default order. Those who did not file an answer should be considered as having lost their standing in court from that stage (Republic v. Dela Rosa, 173 SCRA 12) except when they file a motion to set aside the order [of] default on the grounds mentioned in Section 3, Rule 18 of the Rules of Court (Toco v. Fay, 80 Phil. 166).In land registration cases (as in the said LRC No. N-18887), an order of general default was deemed to have been issued based on the presumption of regularity in judicial proceedings (Pascual, et al. v. Ortega, et al., 58 O.G. 12 March 1962 C.A.). Petitioners failed to adduce any evidence showing that the order of general default was lifted. Records disclosed that without first filing a motion to lift the order of general default, petitioners filed a motion to declare as null and void the decrees and titles. Until the order of general default is lifted by the court, petitioner could not be considered as a party to the action. They are deemed movants whose personality as far as the case is concerned is not yet admitted by the court considering that the order of default has not been lifted.[38]One should be careful, however, to distinguish between movants as mere interested parties prescribed under Section 22 of PD 1529 and movants as intervenors-oppositors to the land registration proceedings. It is only in the latter case that a motion to lift the order of general default is required. It is only in the latter case that the doctrine pronounced inSerrano v. Palacio,[39]as repeatedly invoked by the LRA and OSG, is applicable:x x x [P]etitioners committed an error of procedure when they filed a motion to intervene in the x x x land registration case for the proper procedure would have been for them to ask first for the lifting of the order of general default, and then, if lifted, to file an opposition to the application of the applicants. This is so because proceedings in land registration are inrem, and notin personam, the sole object being the registration applied for, and not the determination of any right not connected with the registration (Estila vs. Alvero, 37 Phil. 498).Petitioners are not mere interested parties in this case. By filing their motion to have the decrees and the corresponding certificates of title declared void, they took the role of oppositors to the application for land registration.The appellate court stated that in as much as it would want to oblige to the plea of petitioners to hasten or expedite the proceedings and to avoid further expenses on the part of the petitioners, however[,] (it) could not.[40]Indeed, it requires a delicate balancing act between the objective of the Rules of Court to secure a just, speedy and inexpensive disposition of every action and proceeding[41]and the strict requirements for a notice oflis pendens. The facts in this case show that petitioners have not complied with the requirements.WHEREFORE, we DENY the petition. We AFFIRM the Decision of the Court of Appeals in CA-G.R. SP No. 55993 dated 29 November 2000.SO ORDERED.Quisumbing, (Acting Chairman), Ynares-Santiago,andAzcuna, JJ.,concur.Davide, Jr., C.J., (Chairman),on leave.

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G.R. No. 126275 November 11, 2004JOHANNE J. PEA & ERLANA G. VDA. DE INOCENCIO, doing business under the name and style of LARGESTONE ENTERPRISES,petitioners,vs.THE HONORABLE COURT OF APPEALS and DURA-TIRE & RUBBER INDUSTRIES, INC.,respondents.

D E C I S I O NCALLEJO, SR.,J.:Before us is a petition for review on certiorari of the Decision1of the Court of Appeals (CA) in CA-G.R. CV No. 42383 affirming the Decision2of the Regional Trial Court (RTC) of Manila, Branch 10, in Civil Case No. 92-61507 and its Resolution dated August 19, 1996 denying the motion for reconsideration of the said decision.The AntecedentsRespondent Dura-Tire & Rubber Industries, Incorporated (Dura-Tire for brevity) is a corporation engaged in the business of manufacturing and sale of vehicle tires and other rubber products. Among the customers of the respondent were petitioners Johanne J. Pea and Erlana G. Vda. de Inocencio who, by themselves, were also engaged in the business of buying rubber products from the respondent and of selling the same to their customers under the business name Largestone Enterprises (Largestone). Largestone was also the authorized sales agent of respondent Dura-Tire. The petitioners would purchase rubber products from the respondent on credit for delivery to their customers, after which the petitioners would pay the respondent for the said purchases.On May 8, 1991, the respondent and petitioner Inocencio entered a surety agreement in which the latter bound and obliged herself, jointly and solidarily, with petitioner Pea to pay to the respondent, when due, all money indebtedness or obligation of any kind incurred by petitioner Pea in the past and/or thereafter, arising from or growing out of any sale, whether on credit and/or forwarding on consignment, for sale or return goods and deliveries, as well as customers accounts guaranteed by petitioner Pea, and to pay on demand any said indebtedness upon his default.3Petitioner Pea signed the agreement as a witness.As shown by the sales invoices prepared by the respondent, Largestone delivered rubber products to the following business firms during the period of November 17, 1990 to December 10, 1991:SOLD TOSALES INVOICE NO.TERMDATEAMOUNTSALESMAN

Aboitiz Transport System96864COD/DMMNovember 17, 1990P92,997.00R. Lee (Joe Pea)4

Alma Cuilleta c/o Erlana Inocencio18563COD/DMMSeptember 13, 19915,614.00E. Inocencio5

Golden Rays Taxi c/o Erlana Inocencio97871COD/DMMAugust 14, 19914,474.15E.I.6

Golden Rays Taxi c/o Erlana Inocencio17969COD/DMMAugust 17, 199129,149.50E.I.7

LT Transport Care Trading19064November 4, 199124,044.47

LT Transport Care Trading19077November 4, 199117,521.82

LT Transport Care Trading19075November 4, 199133,579.06

LT Transport Care Trading18932November 4, 199129876.808

Inland Trailways c/o Joe Pea97487COD/DMMMay 8, 19912,156.00J.A. Flores9

Ipodca Cooperative18524COD/DMMSeptember 10, 19911,527.60Erlana Inocencio10

Ipodca Cooperative18525COD/PUSeptember 10, 199115,496.80Erlana Inocencio11

Largestone Enterprises9784730D/DMMAugust 7, 199119,426.23Joe Pea12

Largestone Enterprises9789030D/PUAugust 17, 199112,591.00Joe Pea13

Largestone Enterprises9789430D/PUAugust 19, 19913,231.00Joe Pea14

Largestone Enterprises9792130D/DMMAugust 27, 19911,299.51Joe Pea15

Largestone Enterprises9794230D/DMM PUSeptember 4, 19919,618.83Joe Pea16

Largestone Enterprises9796730D/DMMSeptember 10, 19915,379.05Joe Pea17

Largestone Enterprises9802530 Days/DMMSeptember 25, 19916,425.00Joe Pea18

Largestone Enterprises18414CODSeptember 4, 19914,546.69Joe Pea19

*Largestone Enterprises42336COD/DMMNovember 21, 19913,400.00Joe Pea20

*Largestone Enterprises42194December 10, 1991971.76Joe Pea21

Pandacan Coop c/o Erlana Inocencio17942COD/PUAugust 16, 199123,174.93E.I.22

Pandacan Coop c/o Erlana Inocencio18305COD/DMMAugust 27, 19916,871.40Erlana I.23

Pandacan Cooperative18433COD/DMMSeptember 25, 199114,824.16Erlana Inocencio24

Pandacan Coop c/o Erlana Inocencio18643COD/DMMSeptember 18, 19911,176.00E. Inocencio25

Pandacan Cooperative18786CODSeptember 26, 199113,567.40Erlana Inocencio26

Pandacan Cooperative18789CODSeptember 26, 19913,230.17Erlana27

Phil. World Characters & Travel Service Corporation17089CODJune 14, 19916,400.00Joe Pea28

Project 4 Cooperative17807COD/DMMAugust 7, 19913,538.48E.E. Inocencio29

Project 4 Cooperative17809COD/DMMAugust 7, 1991226.16E. Inocencio30

Project 4 Cooperative18785CODSeptember 26, 19912,920.35Erlana31

Tire King Goodyear Servitic18312COD/PUAugust 28, 19915,497.12Joe Pea32

* Delivery Receipt of Massive Sales Inc. c/o Dura-Tire Rubber Industries, Inc.In partial payment of the said purchases from the respondent, petitioner Inocencio issued the following Philbanking Checks: Check No. 847401 dated November 21, 1991; Check No. 847402 dated December 10,1991; Check No. 847404 dated December 29, 1991; and Check No. 847403 dated January 2, 1992. Petitioner Pea also drew and issued to the respondent Philippine National Bank Check No. 224391 dated November 25, 1991, in the amounts of P37,456.91, P29,771.10, P19,544.57, P46,431.67, and P14,063.58.33However, these checks were returned by the drawee banks for either of the following reasons: "closed account," "payment stopped," or "drawn against insufficient funds." The petitioners, likewise, failed to pay for the balance of their account.The respondent sent letters on January 22 and 28, 1992 to the petitioners demanding the payment of their account which, according to the respondent, had amounted to P455,742.97, exclusive of interest, as shown in the statement of account appended thereto.34The petitioners promised to pay their account to the respondent, but reneged thereon.On June 10, 1992, the respondent filed a Complaint with the RTC of Manila against the petitioners for the collection of their account, plus interests and attorneys fees. The respondent prayed that, after due proceedings, judgment be rendered in its favor and against the petitioners, thus:Wherefore, Plaintiff prays that after due hearings, judgment be rendered in favor of Plaintiff and against the Defendants, ordering the latter to pay, jointly and severally, the following amounts:A. P477,212.33 with 14% Int. P.A. from Jan. 20, 1992;B. P100,000.00 as Attorneys Fee;C. Cost of suit and other incidental expensesSuch other reliefs and remedies which may be just and equitable under the premises, are likewise prayed for.35The respondent appended to its complaint the surety agreement executed by it and petitioner Inocencio, the sales invoices issued to Aboitiz Transport, Alma Cuilleta, Golden Rays Taxi, ILT Transport Care Trading, Inland Con Carrier, Inland Trailways, Ipodca Cooperative, Largestone Enterprises, Pandacan Cooperative and Phil. World Charters and Travel Service Corporation, marked as Annexes "B" to "BB" thereof. It also appended to its complaint, as Annex "CC" thereof, the Delivery Receipt to Philtranco and the Sales Invoices to Project 4 Cooperative and Tire King Goodyear Service, as Annexes "DD" to "HH." It further appended to its complaint, as Annexes "II" to "LL" thereof, the five (5) checks drawn and issued by the petitioners in its favor; and, as Annexes "NN" to "OO" thereof, the respondents letters of demand to the petitioners duly acknowledged by the latter.In their verified answer to the complaint, the petitioners admitted all the transactions alleged in the complaint in the form of "direct buy" and "commission basis," but denied that the transactions remained wholly or partly unpaid. The petitioners further alleged that:1. They were not responsible for the collection of the amounts as well as agency covering those transactions covered by Annexes "F," "I,"36and "HH."37Petitioner Inocencio admitted the agency only over the transactions covered by Annexes "J,"38"K,"39"X,"40"Z,"41"AA,"42and "GG,"43and that, with the assistance of petitioner Pea, the amounts covered by Annexes "I,"44"J,"45"K,"46"X,"47"Z,"48"AA,"49"DD,"50"GG,"51and "HH"52had been collected and paid to the respondent;2. Petitioner Inocencio admitted the agency and responsibility for the collection of the amounts appearing in Annexes "C" to "E,"53"V,"54"W,"55"Y,"56"EE,"57and "FF,"58and averred that the amounts covered by Annexes "D,"59"E,"60"V,"61"W,"62"Y,"63"EE,"64and "FF"65had already been collected by her and paid to the respondent;3. Petitioner Pea admitted the agency and her responsibility for the collection of the amounts covered by Annexes "B,"66"G,"67"H,"68"BB,"69and "DD,"70and averred that the amount covered by Annex "CC"71had been collected by her and paid to the respondent;4. Petitioner Pea admitted her purchases of the goods covered by Annexes "L" to "U,"72that the same were still unpaid and expressed her willingness to pay the same to the respondent;5. The goods covered by Annexes "B,"73"G,"74and "H"75was of poor quality; consequently, the customers of the petitioners rejected the goods and refused to pay for the same;6. Petitioner Inocencio admitted that she issued the checks, Annexes "II," "JJ," "KK," and "LL," but averred that she did so only in blank and delivered the same to petitioner Pea, and only to show the same to the respondent to prove that petitioner Inocencio had a checking account; that without the knowledge and consent of petitioner Inocencio, petitioner Pea delivered the checks to the respondent in payment of her purchases from the latter; and that petitioner Inocencio did not issue Check No. 224391, Annex "MM."On August 3, 1992, the trial court issued an Order setting the pre-trial at 8:30 a.m. on September 11, 1992 and requiring the parties to submit their respective pre-trial brief at least three days before the pre-trial date. There is no showing in the records that the petitioners were served with copies of the said order; however, their counsel received a copy of the same on August 14, 1992 and failed to file any pre-trial brief. The respondent filed its pre-trial brief on September 1, 1992. By agreement of the parties, through counsel, pre-trial was reset by the court on October 16, 1992 at 8:30 a.m. Petitioner Inocencio received a copy of the trial courts Order dated September 11, 1992. The parties failed to appear for the pre-trial on October 16, 1992. Consequently, the court dismissed the complaint. The court granted the respondents motion for reconsideration of the order of dismissal and issued an Order on January 4, 1993 setting the pre-trial at 8:30 a.m. on February 19, 1993. The copies of the order addressed to the petitioners were returned to the court for their failure to claim the same from the post office. As per the notation on the face of the envelope containing the order addressed to the petitioners, the latter had vacated the houses indicated therein.When the case was called for pre-trial on February 19, 1993, the petitioners and their counsel failed to appear before the court. On motion of the counsel for the respondent, the petitioners were declared as in default for their failure to appear before the court for pre-trial, and for their failure to file their pre-trial brief. The motion of the respondent to adduce its evidence ex parte against the petitioners was granted. The respondent presented Lydia C. Lao whose testimony was completed, and formally offered in evidence as Exhibits "A," "B" to "B-32," "C" to "C-5," "D," and "E" to "E-1," all of which the trial court admitted. The court then issued an order declaring the case submitted for decision. The copy of the said order addressed to the counsel of the petitioners was returned to the court for the reason that the said counsel had apparently transferred his office without notifying the court of his new address. Furthermore, the copy of the order addressed to the petitioners was returned to the court for the reason that the latter had moved to another address.On April 16, 1993, the trial court rendered a decision in favor of the respondent, the decretal portion of which reads:WHEREFORE, in view of the foregoing, judgment is hereby rendered ordering defendants Johanne J. Pea and Erlana G. Vda. de Inocencio, doing business under the name and style of Largestone Enterprises, to pay, jointly and severally, plaintiff Dura-Tire and Rubber Industries, Inc. as follows:a) the sum of P477,212.33 with legal interest per annum from January 28, 1992 until fully paid;b) the sum of P15,000.00 as and by way of attorneys fees; andc) costs of this suit.SO ORDERED.76The petitioners did not file any motion for reconsideration of the decision, nor a motion for new trial, and appealed the decision instead, contending that:I THE TRIAL COURT ERRED IN DECLARING THAT FROM THE UNDISPUTED EVIDENCE AT HAND, PLAINTIFF APPEARS TO HAVE INDUBITABLY ESTABLISHED THE ALLEGATION IN THE COMPLAINT, THUS, ENTITLING THE PLAINTIFF TO COLLECT FROM DEFENDANTS, JOINTLY AND SEVERALLY, THE AMOUNT OF P477,212.33.II THE TRIAL COURT ERRED IN DECLARING THE DEFENDANTS AS IN DEFAULT AND IN ALLOWING PLAINTIFF TO PRESENT EVIDENCE EX PARTE.77On March 19, 1996, the CA promulgated a decision affirming the decision of the RTC. The petitioners filed a motion for reconsideration of the decision, but the CA denied the same.The Present PetitionThe petitioners forthwith filed their petition for review on certiorari, contending as follows:1. THAT THE HONORABLE COURT OF APPEALS ERRED IN AFFIRMING THE FINDINGS OF THE LOWER COURT DECLARING DEFENDANT-APPELLANT, ERLANA VDA. DE INOCENCIO, JOINTLY AND SEVERALLY, LIABLE TO DEFENDANT JOHANNED (SIC) PEA, REFERRED TO AS "CUSTOMER" IN THE SURETY AGREEMENT, IN VIOLATION OF THE VERY ESSENCE OF A CONTRACT OF GUARANTY UNDER ART. 2058 OF THE NEW CIVIL CODE, AS WELL AS TO OTHER DELIVERIES AS EVIDENCED BY INVOICES (EXHIBITS B, B-1 TO B-32), WHICH WERE NOT PROVEN TO BE DELIVERIES OF WHICH JOHANNE PEA HAD INCURRED IN DEBTEDNESS TO PLAINTIFF (SIC).2. THAT THE HONORABLE COURT HAD ERRED IN DECLARING THAT EVEN IF IT WERE CONCEDED THAT THE DEFENDANTS DID NOT RECEIVED (SIC) THE NOTICE OF PRE-TRIAL CONFERENCE WHICH WAS RETURNED TO THE TRIAL COURT UNCLAIMED, THEIR FAILURE TO FILE A PRE-TRIAL BRIEF AT LEAST THREE DAYS BEFORE THE DATE OF PRE-TRIAL CONFERENCE AS REQUIRED IN CIRCULAR NO. 1-89 OF THE SUPREME COURT (JAN. 19, 1989) IN RELATION TO ADMINISTRATIVE CIRCULAR NO. 3-90 (JAN. 31, 1990) JUSTIFIED THE TRIAL COURT IN DECLARING THEM AS IN DEFAULT.3. THAT THE COURT OF APPEALS HAD ERRED IN DECLARING THAT FOR FAILURE OF THE DEFENDANTS TO AVAIL THE REMEDY OF NEW TRIAL UNDER SEC. 1(a) OF RULE 37 OR IN THE ALTERNATIVE, A PETITION FOR RELIEF FROM SAID ORDER AND JUDGMENT, IT IS ABSURB (SIC) FOR THE DEFENDANT (SIC) TO QUESTION THE DEFAULT ORDER IN THE PRESENT APPEAL.78The issues for resolution are procedural and substantive. On the procedural issue, the petitioners assert that the trial court erred in declaring them in default for their failure to file their pre-trial brief within three days from their receipt of the Order of the trial court dated August 3, 1992 which set the pre-trial at 8:30 a.m. on September 11, 1992, and for their failure to appear before the court for the pre-trial on February 19, 1993. The petitioners assert that they never received copies of the August 3, 1992 Order of the trial court. They argue that although their counsel received on January 14, 1993 a copy of the trial courts Order dated January 4, 1993 setting the pre-trial on February 19, 1993, they cannot be faulted for their non-appearance for pre-trial on the said date. The petitioners assert that while the face of the envelope addressed to them containing the January 4, 1993 Order of the trial court states that the mail matter was not claimed by them, there is no proof on record that the requisite number of notices of registered matter were sent to and received by them before the same was returned to the court. The petitioners submit that before they could be properly declared as in default for their failure to file their pre-trial brief and for non-appearance during the pre-trial scheduled for February 19, 1993, there must be incontrovertible proof on record that they were notified of the scheduled pre-trial. The petitioners cite the ruling of this court in Vecino v. Court of Appeals.79The respondent, for its part, contends that the petitioners have themselves to blame for their failure to claim their mail matter despite notice thereof to them. The respondent asserts that to substantiate the petitioners pose would be to allow them to profit from their own negligence and that of their counsel. The petitioners faulted the CA for holding that they had waived their right to assail the trial courts order of default merely because they failed to file a motion for reconsideration of the decision of the trial court or for a new trial.The Ruling of the CourtWe agree with the petitioners that the trial court erred in declaring them as in default for their failure to file a pre-trial brief at least three days before the scheduled pre-trial set on February 19, 1993 and to appear before the trial court on said date and time.Under Section 1, Rule 2080of the Rules of Court,81the parties and their counsel are mandated to appear before the court for pre-trial and if the defendants fail to do so despite due notice and without any justifiable reason therefor, they may be declared as in default, conformably to Section 2, Rule 20 of the said Rules.82The parties are also mandated under Circular No. 1-89 dated January 19, 198983to file their respective pre-trial briefs at least three days before the pre-trial conference and if the defendants fail to do so, they may be declared as in default. The parties and their counsel must be served with copies of the order of the court setting the case for pre-trial, either by personal delivery or by mail under Sections 3, 4, and 5, Rule 1384of the Rules of Court, or by substituted service under Section 6, Rule 1385of the Rules of Court.The rule is that service by registered mail is complete upon actual receipt thereof by the addressee, except when the addressee does not claim his mail within five days from the date of the first notice of the postmaster, in which case, the service shall take effect within the said period. The certification from the postmaster would be the best evidence to prove that the notice had been validly made. However, if there is nothing on record showing how, when, and to whom, the delivery of the registry notices of the registered mail was made, the court should not rely on the notation "return to sender: unclaimed" to support the presumption of constructive service.86As admitted by the petitioners, a copy of the January 4, 1993 Order of the trial court was sent to and received by their counsel on January 14, 1993. A copy of the same order was placed on a sealed brown envelope, addressed to the petitioners. The records also contain a registry notice addressed to the petitioners at "Pandacan, Manila." There is no showing that the notice was sent to or received by the petitioners. In fact, the respondent even failed to submit to the trial court a certificate from the postmaster stating that the clerk of court sent a notice of registered mail to the petitioners counsel and that the latter received the same. And yet, the trial court declared the petitioners as in default for their counsels failure to appear for pre-trial and to file their brief three days before February 19, 1993.We are, thus, convinced that the trial court erred in declaring the petitioners as in default, in allowing the respondent to adduce its evidence ex parte, and in rendering judgment by default against the petitioners.However, it must be stressed that the petitioners failed to file a motion for new trial under Section 1(a), Rule 37 of the Rules of Court despite receipt of notice of the trial courts decision. The petitioners had the right to appeal the judgment by default on the ground that the said judgment was contrary to law or the evidence. They were, however, proscribed from assailing the trial courts Order dated February 19, 1993 declaring them as in default.On the substantial as well as the other procedural aspects, petitioner Inocencio avers that the respondent failed to adduce preponderant evidence to prove its claim for the principal amount of P477,212.33. She posits that she is not liable for the checks issued by petitioner Pea with respect to those purchases made by the latters customers. She insists that she merely guaranteed the payment of the said purchases, and that the respondent had to first exhaust all the payments to be made by petitioner Pea before suing her. The petitioners assert that Lydia Lao, the lone witness of the respondent, failed to prove that they were privies to the sales invoices,87or were involved in the transactions covered by the same. They contend that there is no preponderant evidence that the transactions involving the said sales invoices were covered by the surety agreement executed by and between petitioner Inocencio and the respondent.The burden of proof is on the petitioners to establish their defenses by a preponderance of evidence while the burden of proof is on the respondent, as plaintiff, to prove by a preponderance of evidence the material allegations of its complaint.88If the defendants admit the material allegations of the complaint, the plaintiff is then relieved of its burden.In this case, the respondent alleged in its complaint that during the period of November 1990 to August 1991, it delivered to the petitioners or to their designated buyers, or upon their orders, credit or on consignment, tires and rubber products evidenced by the sales invoices appended to its complaint,89and that the petitioners still had an outstanding account for products covered by the said sales invoices in the total amount of P329,944.50, inclusive of the total amount of P147,267.83 of the dishonored checks, all of which amounted to P477,212.33. The respondent was, thus, burdened to prove these allegations.However, petitioner Pea admitted liability for the products/deliveries to Largestone Enterprises covered by the sales invoices, Annexes "B-10" to "B-19"90in the total amount of P66,789.07, and the sales invoice, Annex "CC" of the complaint,91in the amount of P27,235.00. Petitioner Inocencio, likewise, admitted liability for the tires and rubber products covered by the sales invoices, Annexes "I," "J," "K," "W," "X," "Z," "AA," "DD," "GG," "HH," "D," "E," "V," "W," "Y," "EE," and ""FF" in the total amount of P186,706.46. While petitioner Inocencio claimed that the aforesaid amount of P186,706.46 had already been remitted by her to the respondent, there is no record of any receipt which was issued by the respondent to serve as evidence of such payment. Neither did petitioner Pea adduce any receipt that was issued by the respondent for the amount of P27,235.00. In fine then, petitioner Peas total admitted accountability amounted to P94,024.07, while that of petitioner Inocencio amounted to P186,706.46, or the total amount of P280,730.53.The petitioners claim that they are not liable for the value of the merchandise covered by the other sales invoices on the ground that on the face of the said sales invoices, they had no involvement in the transactions covered by the same. Such contention of the petitioners lacks merit.Although it appears in the other sales invoices that the petitioners were the salespersons who brokered the sales of the products covered by the said sales invoices to the vendees therein named, the said entries are not conclusive of the extent and the nature of the involvement of the petitioners in the sales of the products under the said sales invoices which are not absolutely binding. They may be explained and put to silence by all the facts and circumstances characterizing the true import of the dealings to which they refer.92The facts contained in the said sales invoices may be contradicted by oral testimony.93Instead, while petitioner Pea appears to be the salesperson in the sales invoices in favor of Largestone, she, however, admitted that she was in fact the purchaser of the said products. Moreover, Lao testified that the petitioners purchased the merchandise described in the said sales invoices from the respondent, to be delivered to their respective customers as shown therein, and that the petitioners even promised to pay the same but reneged on their promise, prompting the respondent to send letters of demand to the petitioners. There is no evidence on record to controvert the evidence of the respondent. Furthermore, under the surety contract, petitioner Inocencio bound and obliged herself, jointly and severally, with petitioner Pea to pay for the merchandise sold and delivered to the customers of the latter or growing out of the said sales or deliveries.94The petitioners even drew and issued checks in partial payment of the said purchases, which checks were, however, dishonored by the drawee banks. The petitioners cannot escape liability for the transactions covered by the sales invoices.We do not agree with the contention of the respondent that the petitioners drew and issued the checks to it in payment of obligations separate from those covered by the sales invoices appended to its complaint. The respondent failed to adduce any sales invoice issued by it showing sales and deliveries of the products to the petitioners or to their customers for which the latter drew and delivered the checks. We are convinced that the said checks were drawn and issued by the petitioners to the respondent in partial payment of the products covered by the said sales invoices.95In fine, the petitioners are jointly and severally liable to the respondent in the principal amount of P329,944.50.WHEREFORE, the petition is PARTIALLY GRANTED. The Decision of the Court of Appeals in CA-G.R. CV No. 42383, and its Resolution dated August 19, 1996, are hereby AFFIRMED with the modification that the petitioners are ordered to pay, jointly and severally, to the private respondent the principal amount of P329,944.50.SO ORDERED.THIRD DIVISION[G.R. No. 148482. August 12, 2005]JOSEPH DORMAN D. TAMAYO, LAUREANA D. TAMAYO and LINAFLOR D. TAMAYO,petitioners, vs. JOSE D. TAMAYO, JR., FLORITS TAMAYO-MAGNO, LUZMINDA TAMAYO-ANTHONY and FORTUNA TAMAYO-ENRIQUEZ,respondents.D E C I S I O NSANDOVAL-GUTIERREZ,J.:For our resolution is the instant petition for review oncertiorariunder Rule 45 of the 1997 Rules of Court, as amended, assailing the (a) Resolution[1]dated April 5, 2001 of the Court of Appeals in CA-G.R. CV No. UDK-6185 dismissing petitioners appeal for their failure to pay the docket and other lawful fees; and (b) Resolution dated June 8, 2001 denying their motion for reconsideration, thus:The failure of the appellants to pay the appellate docket fee within the period to perfect the appeal is fatal. This Court cannot accept the excuse proffered by appellants in their Motion for Reconsideration that they were not aware of the rule that they were supposed to pay said fees with the Clerk of Court of the courta quowithin the time for taking an appeal pursuant to Sec. 14, Rule 41 of the Rules of Civil Procedure because these Rules have been in existence for almost four (4) years now.WHEREFORE, for lack of merit, the Court DENIES the appellants Motion for Reconsideration.[2]A brief factual background of the case follows:Petitioners and respondents are half-blood siblings. Their mother is Dorothela Dayanghirang-Tamayo. Respondents are Dorothelas legitimate children with Dr. Jose Tamayo, Sr. Petitioners, on the other hand, are her illegitimate children with Jose Matuco.Dorothela eventually separated from Jose Matuco. Respondents thereafter took care of Dorothela and petitioners. Respondents sent petitioners to school and even caused the issuance of their birth certificates, allowing them to use the surname Tamayo.On November 15, 1977, spouses Tamayo executed, in favor of respondents, a Deed of DonationInter Vivosof their two parcels of land covered by Transfer Certificates of Title Nos. 830 and 5868 of the Registry of Deeds, Davao City. Thus, these titles were cancelled and in lieu thereof, Transfer Certificates of Title Nos. T-61159 and T-61160 were issued in their names on April 5, 1978.On October 7, 1990, Dr. Jose Tamayo, Sr. died. Thereafter, or on June 13, 1996, petitioners filed with the Regional Trial Court, Branch 11, Davao City, a complaint for the revocation of the said donation, alleging they were preterited from the estate of Dr. Tamayo; and that respondents fraudulently caused the execution of the Deed of DonationInter Vivos.The trial court dismissed the complaint, holding that:1. Plaintiffs (petitioners now) never offered any evidence of the subject document (Donation Inter Vivos) which they seek to nullify. Neither documentary nor testimonial evidence of the plaintiffs show that, indeed, there was such a document and they, the plaintiffs, were omitted therefrom. Plaintiffs concentrated on offering evidence to prove their legitimacy and filiation to Dr. Jose Tamayo, Sr.x x x2. Assuming arguendo that the subject document was properly offered and proven by plaintiffs, this Court cannot resolve the issue of preterition since there has been no determination of heirs yet of Dr. Jose Tamayo, Sr. No settlement of his estate had been instituted, in which forum, issue like determination of heirs, preterition, and collation may be properly addressed.3. Again, assuming arguendo that plaintiffs properly offered and proved that there was such a donation and that, as they claimed, fraud was present, the right to bring the case of revocation or reduction of an inofficious donation must be brought within five (5) years from the donors death, in this case, Dr. Jose Tamayo, Sr., who died in October 1990. This case was filed in June 1996 way beyond the five-year period. The action for revocation on the ground of fraud had prescribed.Feeling aggrieved, petitioners interposed an appeal to the Court of Appeals, but failed to pay the corresponding docket fees. Hence, their appeal was dismissed. Petitioners filed a motion for reconsideration and tendered two managers checks both dated April 23, 2001, one in the amount ofP452.00, and another in the sum ofP73.00. They explained that they failed to pay the docket fees because they were not advised by the trial court and the Court of Appeals when to pay the docket fees, thus:x x x neither the courta quonor this Honorable Court advised or gave notice to plaintiffs-appellants or their counsel when the docket fee for the appeal of the subject case be paid. Unlike previously, when this Honorable Court, after taking cognizance of an appealed case, gave notice to the appellant when the docket fee will have to be paid x x x.[3]The Court of Appeals denied petitioners motion for reconsideration.Hence, the present petition.Petitioners contend that the Court of Appeals should have considered the merits of this case, not the technical rules of procedures. The nonpayment of the docket fees does not automatically result in the dismissal of the appeal, as the word may under Section 1(c), Rule 50 of the 1997 Rules of Civil Procedure, as amended, indicates that the dismissal is merely directory, not mandatory.The right to appeal is a statutory privilege and must be exercised only in the manner and in accordance with the provisions of the law.[4]Section 4, Rule 41 of the 1997 Rules of Civil Procedure, as amended, provides:SEC. 4.Appellate court docket and other lawful fees. Within the period for taking an appeal, the appellant shall pay to the clerk of court which rendered the judgment or final order appealed from, the full amount of the appellate court docket and other lawful fees. Proof of payment of said fees shall be transmitted to the appellate court together with the original record or the record on appeal.In relation thereto, Section 1(c), Rule 50 of the same Rules, states:SECTION 1.Grounds for dismissal of appeal. An appeal may be dismissed by the Court of Appeals, on its own motion or on that of the appellee, on the following grounds:x x x(c) Failure of the appellant to pay the docket and other lawful fees as provided in section 4 of Rule 41. x x xIt is a doctrinal rule that the perfection of appeals in the manner and within the period permitted by law is not only mandatory but also jurisdictional. Thus, the payment of docket fees within the prescribed period for taking an appeal is mandatory for the perfection of an appeal.[5]Anyone seeking exemption from the application of this Rule has the burden of proving that exceptionally meritorious instances exist which warrant such departure.[6]However, the Court of Appeals did not find any compelling reason to relax the rules. Neither we.Petitioners only justification for their failure to pay the docket fees is the lower courts failure to advise them when the fees shall be paid. Obviously, they are blaming the courts for their counsels negligence. This, we cannot tolerate.The 1997 Rules of Civil Procedure, as amended, took effect about three years prior to the filing of their appeal on July 14, 2000. Verily, to grant their petition would be putting a premium on their counsels ignorance or lack of knowledge of existing Rules. He should be reminded that it is his duty to keep abreast of legal developments and of prevailing laws, rules and legal principles.[7]Unfortunately, his negligence binds his clients, herein petitioners.[8]Consequently, we cannot grant their plea considering that the loss of their remedy was due to their own negligence.[9]The bitter consequence of such grave inadvertence is to render the trial courts Decision final and executory. We thus rule that the Court of Appeals did not err in dismissing petitioners appeal.WHEREFORE, the instant petition is hereby DENIED. Costs against petitioners.SO ORDERED.Panganiban, (Chairman), Carpio-Morales,andGarcia, JJ.,concur.Corona, J.,on leave.

Digest:BALLATAN v. CA

-Land Owner in Good faith, Builder in Good faith scenario -The right to choose between appropriating the improvement or selling the land on which the improvement of the builder, planter or sower stands, is given to the owner.-If the option chooses is to sell the lot, the price must be fixed at the prevailing market value at the time of payment.

FACTS:Eden Ballatan, together with other petitioners, is living in and registered owners of Lot No. 24. Respondent Winston Go is living in and registered owners of Lot No. 25 and 26. And Li Ching Yao is living in and the registered owner of Lot. 27. The Lots are adjacent to each other.

When Ballatan constructed her house in her lot, she noticed that the concrete fence and side pathway of the adjoining house of respondent Winston Go encroached on the entire length of the eastern side of her property. She was informed by her contractor of this discrepancy, who then told respondent Go of the same. Respondent, however, claims that his house was built within the parameters of his fathers lot; and that this lot was surveyed by engineer Jose Quedding, the authorized surveyor of Araneta Institute of Agriculture (AIA). Petitioner called the attention of AIA on the matter and so the latter authorized another survey of the land by Engineer Quedding. The latter then did the survey twice which led to the conclusion that Lots Nos 25, 26 (owned by respondent Go) and 27 (owned by Li Ching Yao) moved westward to the eastern boundary of Lot 24 (owned by petitioner Ballatan.) (it was later on discovered by the courts that Go encroached 42 square meters from the property of Ballatan and Yao encroached 37 square meters on Gos property, all of which were in GOOD FAITH) Ballatan made written demands to the respondent to dismantle and move their improvements and since the latter wasnt answering the petitioner filed accion publiciana in court. Gos filed their Answer with Third-Party Complaint impleading as third party defendants respondents Li Ching Yao, the AIA and Engineer Quedding.

RTC ruled in favor of the petitioner ordering respondent Go to demolish their improvements and pay damages to Petitioner but dismissing the third-party complaint. CA affirmed the dismissal of the third party-complaint as to AIA but reinstated the the complaint against Yao and the Engineer. CA also affirmed the demolition and damages awarded to petitioner and added that Yao should also pay respondent for his encroachment of respondent Gos property. Jose Quedding was also ordered to pay attorneys fees for his negligence which caused all this fuzz.

ISSUE: What is the proper remedy in this situation (everyone was in good faith)?

RULING:Art 448 is the proper remedy (Lower Courts are wrong in awarding the damages). It was established in the case that the parties had no knowledge of the encroachment until Ballatan noticed it there all of them were builders in Good faith. In that scenario they have two options. 1st option is that the land owner will buy the improvements and the 2nd option is to oblige the builders to buy the land given that the value of the land is not considerably more than the buildings or tree; other wise the owner may remove the improvements thereon.

The builder, planter or sower, however, is not obliged to purchase the land if its value is considerably more than the building, planting or sowing. In such case, the builder, planter or sower must pay rent to the owner of the land. If the parties cannot come to terms over the conditions of the lease, the court must fix the terms thereof. The right to choose between appropriating the improvement or selling the land on which the improvement of the builder, planter or sower stands, is given to the owner. If the option chooses is to sell the lot, the price must be fixed at the prevailing market value at the time of payment.

Petitioner was given by SC 30 days to decide on what to do or which right to exercise. Likewise, Go was also given time to do the regarding Yaos encroachment. Engineer Quedding was still asked to pay attorneys fees.

Full text:SECOND DIVISION[G.R. No. 125683.March 2, 1999]EDEN BALLATAN and SPS. BETTY MARTINEZ and CHONG CHY LING,petitioners, vs.COURT OF APPEALS, GONZALO GO, WINSTON GO, LI CHING YAO, ARANETA INSTITUTE OF AGRICULTURE and JOSE N. QUEDDING,respondents.D E C I S I O NPUNO,J.:This is a petition for review oncertiorariof the decision of the Court of Appeals dated March 25, 1996 in CA-G.R. CV No. 32472 entitled "Eden Ballatan,et. al., plaintiffs-appelleesv. Gonzalo Go and Winston Go, appellants and third-party plaintiffs-appellantsv. Li Ching Yao,et.al., third-party defendants."[1]The instant case arose from a dispute over forty-two (42) square meters of residential land belonging to petitioners.The parties herein are owners of adjacent lots located at Block No. 3, Poinsettia Street, Araneta University Village, Malabon, Metro Manila.Lot No. 24, 414square meters in area, is registered in the name of petitioners Eden Ballatan and spouses Betty Martinez and Chong Chy Ling.[2]Lots Nos. 25 and 26,with an area of 415 and 313 square meters respectively, are registered in the name of respondent Gonzalo Go, Sr.[3]On Lot No. 25, respondent Winston Go, son of Gonzalo Go, Sr., constructed his house.Adjacent to Lot No. 26 isLot No. 27, 417 square meters in area, and is registered in the name of respondent Li Ching Yao.[4]In 1985, petitioner Ballatan constructed her house on Lot No. 24.During the construction, she noticed that the concrete fence and side pathway of the adjoining house of respondent Winston Go encroached on the entire length of the eastern side of her property.[5]Her building contractor informed her that the area of her lot was actually less than that described in the title.Forthwith, Ballatan informed respondent Go of this discrepancy and his encroachment on her property.Respondent Go, however, claimed that his house, including its fence and pathway, were built within the parameters of his father's lot; and that this lot was surveyed by Engineer Jose Quedding, the authorized surveyor of the Araneta Institute of Agriculture (AIA), the owner-developer of the subdivision project.Petitioner Ballatan called the attention of the AIA to the discrepancy of the land area in her title and the actual land area received from them. The AIA authorized another survey of the land by Engineer Jose N. Quedding.In a report dated February 28, 1985, Engineer Quedding found that the lot area of petitioner Ballatan was less by a fewmeters and that of respondent Li Ching Yao, which was three lots away, increased by two (2) meters. Engineer Quedding declared that he made a verification survey of Lots Nos. 25 and 26 of respondents Go in 1983 and allegedly found the boundaries to have been in their proper position.He, however, could not explain the reduction in Ballatan's area since he was not present at the time respondents Go constructed their boundary walls.[6]On June 2, 1985, Engineer Quedding made a third relocation survey upon request of the parties.He found that Lot No. 24 lost approximately 25 square meters on its eastern boundary, that Lot No. 25, although found to have encroached on Lot No. 24, did not lose nor gain any area; that Lot No. 26 lost some three (3) square meters which, however, were gained by Lot No. 27 on its western boundary.[7]In short, Lots Nos. 25, 26 and 27 moved westward to the eastern boundary of Lot No. 24.On the basis of this survey, on June 10, 1985, petitioner Ballatan made a written demand on respondents Go to remove and dismantle their improvements on Lot No. 24.Respondents Go refused.The parties, including Li Ching Yao, however, met several times to reach an agreement on the matter.Failing to agree amicably, petitioner Ballatan brought the issue before the barangay.Respondents Go did not appear. Thus, on April 1, 1986, petitioner Ballatan instituted against respondents Go Civil Case No. 772-MN for recovery of possession before the Regional Trial Court, Malabon, Branch 169.The Go's filed their "Answer with Third-Party Complaint" impleading as third-party defendants respondents Li Ching Yao, the AIA and Engineer Quedding.On August 23, 1990, the trial court decided in favor of petitioners.It ordered the Go's to vacate the subject portion of Lot No. 24, demolish their improvements and pay petitioner Ballatan actual damages, attorney's fees and the costs of the suit.It dismissed the third-party complaint against: (1) AIA after finding that the lots sold to the parties were in accordance with the technical description and verification plan covered by their respective titles; (2) Jose N. Quedding, there being no privity of relation between him and respondents Go and his erroneous survey having been made at the instance of AIA, not the parties; and (3) Li Ching Yao for failure to prove that he committed any wrong in the subject encroachment.[8]The court made the following disposition:"WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the defendants, ordering the latter:1. To demolish and remove all improvements existing and encroaching on plaintiff's lot;2. To clear, vacate and deliver possession of the encroached area to the plaintiffs;3. To pay plaintiffs jointly and severally the following:a)P7,800.00 for the expenses paid to the surveyors;b)P5,000.00 for plaintiffs' transportation;4. To pay plaintiffs, jointly and severally, attorney's fees equivalent to 25% of the currentmarket value of the subject matter in litigation at the time of execution; and5. To pay the costs of suit.The third-party complaint filed by third-party plaintiff Gonzalo Go and Winston Go against third-party defendants Araneta Institute of Agriculture, Jose N. Quedding and Li Ching Yao is hereby DISMISSED, without pronouncement as to costs.SO ORDERED."Respondents Go appealed.On March 25, 1996, the Court of Appeals modified the decision of the trial court. It affirmed the dismissal of the third-party complaint against the AIA but reinstated the complaint against Li Ching Yao and Jose Quedding.Instead of ordering respondents Go to demolish their improvements on the subject land, the appellate court ordered them to pay petitioner Ballatan, and respondent Li Ching Yao to pay respondents Go, a reasonable amount for that portion of the lot which they encroached, the value to be fixed at the time of taking.It also ordered Jose Quedding to pay respondents Go attorney's fees ofP5,000.00 for his erroneous survey.The dispositive portion of the decision reads:"WHEREFORE, premises considered, the decision appealed from is hereby AFFIRMED insofar as the dismissal of the third-party complaint against Araneta Institute of Agriculture is concerned but modified in all other aspects as follows:1) Defendants-appellants are hereby ordered to pay plaintiffs-appellees the reasonable value of the forty-two (42) square meters of their lot at the time of its taking;2) Third-party defendant Li Ching Yao is hereby ordered to pay defendants-appellants the reasonable value of the thirty-seven (37) square meters of the latter's lot at the time of its taking; and3) Third-party defendant Jose N. Quedding is hereby ordered to pay to defendants-appellants the amount ofP5,000.00. as attorney's fees.LET THE RECORD of the case be remanded to the Regional Trial Court of Malabon for further proceedings and reception of evidence for the determination of the reasonable value of Lots Nos. 24 and 26.SO ORDERED."[9]Hence, this petition.Petitioners allege that:"RESPONDENT COURT OF APPEALS ERRED ON QUESTIONS OF LAW AND GRAVELY ABUSED ITS DISCRETION AMOUNTING TO LACK OF JURISDICTION WHEN:1. IT APPLIED EQUITY OR EQUITABLE SOLUTIONS TO THE INSTANT CASE IN UTTER DISREGARD AND IN VIOLATION OR GROSS IGNORANCE OF EXISTING LAWS AND JURISPRUDENCE VESTING BASIC PROPERTY RIGHTS TO HEREIN PETITIONERS. RESPONDENT COURT HAS NO POWER TO APPLY/USE EQUITY IN THE PRESENCE OF EXISTING LAWS TO THE CONTRARY.2.UNDER THE GUISE OF APPLYING EQUITY BUT IN EFFECT A VERY APPARENT PARTIALITY AND FAVOR TO RESPONDENTS GO, IT ORDERED PAYMENT OF THE ENCROACHED AREA AT THE VALUE AT THE TIME OF ITS TAKING AND NOTTHE VALUE AT THE TIME OF PAYMENT, THEREBY ENRICHING THE GO'S BUT DEPRIVING PETITIONERS OF THE FRUITS OR INCREASE IN VALUE OF THEIR PROPERTY TO WHICH THEY ARE ENTITLED UNDER THE LAW AS THE REGISTERED OWNERS WITH TORRENS TITLE IN THEIR NAMES.3.WHEN IT DID NOT DISMISS THE THIRD-PARTY COMPLAINT DUE TO NON-PAYMENT OF ANY FILINGOR DOCKET FEE.4.WHEN IT DENIED PETITIONERS THE RECOVERY OF THE NECESSARY EXPENSES IN PROTECTING THEIR RIGHTS IN THIS CASE."[10]Petitioners question the admission by respondent Court of Appeals of the third-party complaint by respondents Go against the AIA, Jose Quedding and Li Ching Yao. Petitioners claim that the third-party complaint should not have been considered by the Court of Appeals for lack of jurisdiction due to third-party plaintiffs' failure to pay the docket and filing fees before the trial court.The third-party complaint in the instant case arose from the complaint of petitioners against respondents Go. The complaint filed was foraccion publiciana, i.e., the recovery of possession of real property which is a real action.The rule in this jurisdiction is that when an action is filed in court, the complaint must be accompanied by the payment of the requisite docket and filing fees.[11]In real actions, the docket and filing fees are based on the value of the property and the amount of damages claimed, if any.[12]If the complaint is filed but the fees are not paid at the time of filing, the court acquires jurisdiction upon full payment of the fees within a reasonable time as the court may grant, barring prescription.[13]Where the fees prescribed for the real action have been paid but the fees of certain related damages are not, the court, although having jurisdiction over the real action, may not have acquired jurisdiction over the accompanying claim for damages.[14]Accordingly, the court may expunge those claims for damages, or allow, on motion, a reasonable time for amendment of the complaint so as to allege the precise amount of damages and accept payment of the requisite legal fees.[15]If there are unspecified claims, the determination of which may arise after the filing of the complaint or similar pleading, the additional filing fee thereon shall constitute a lien on the judgment award.[16]The same rule also applies to third-party claims and other similar pleadings.[17]In the case at bar, the third-party complaint filed by respondents Go was incorporated in their answer to the complaint. The third-party complaint sought the same remedy as the principal complaint but added a prayer for attorney's fees and costs without specifying their amounts, thus:"ON THE THIRD PARTY COMPLAINT1. That summons be issued against Third-Party Defendants Araneta Institute of Agriculture, Jose N. Quedding and Li Ching Yao;2. That after hearing, they be sentenced to indemnify the Third-Party Plaintiffs for whatever is adjudged against the latter in favor of the Plaintiffs;3. That Third-Party Defendants be ordered to pay attorney's fees as may be proved during trial;4. That Third-Party Defendants be ordered to pay the costs.Other just and equitable reliefs are also prayed for."[18]The Answer with Third-Party Complaint was admitted by the trial court without the requisite payment of filing fees, particularly on the Go's prayer for damages.[19]The trial court did not award the Go's any damages.It dismissed the third-party complaint.The Court of Appeals, however, granted the third-party complaint in part by ordering third-party defendant Jose N. Quedding to pay the Go's the sum ofP5,000.00 as attorney's fees.Contrary to petitioners' claim, the Court of Appeals did not err in awarding damages despite the Go's failure to specify the amount prayed for and pay the corresponding additional filing fees thereon.The claim for attorney's fees refers to damages arisingafterthe filing of the complaint against the Go's.The additional filing fee on this claim is deemed to constitute a lien on the judgment award.[20]The Court of Appeals found that the subject portion is actually forty-two (42) square meters in area, not forty-five (45), as initially found by the trial court; that this forty-two (42) square meter portion is on the entire eastern side of Lot No. 24 belonging to petitioners; that on this said portion is found the concrete fence and pathway that extends from respondent Winston Go's house on adjacent Lot No. 25; that inclusive of the subject portion, respondents Go did not gain nor lose any portion of Lots Nos. 25 and 26; that instead, Lot No. 27, on which respondent Li Ching Yao built his house,encroached on the land of respondents Go, gaining in the process thirty-seven (37) square meters of the latter's land.[21]We hold that the Court of Appeals correctly dismissed the third-party complaint against AIA. The claim that the discrepancy in the lot areas was due to AIA's fault was not proved.The appellate court, however, found that it was the erroneous survey by Engineer Quedding that triggered these discrepancies.And it was this survey that respondent Winston Go relied upon in constructing his house on his father's land. He built his house in the belief that it was entirely within the parameters of his father's land.In short, respondents Go had no knowledge that they encroached on petitioners' lot.They are deemed builders in good faith[22]until the time petitioner Ballatan informed them of their encroachment on her property.[23]Respondent Li Ching Yao built his house on his lot before any of the other parties did.[24]He constructed his house in 1982, respondents Go in 1983, and petitioners in 1985.[25]There is no evidence, much less, any allegation that respondent Li Ching Yao was aware that when he built his house he knew that a portion thereof encroached on respondents Go's adjoining land.Good faith is always presumed, and upon him who alleges bad faith on the part of a possessor rests the burden of proof.[26]All the parties are presumed to have acted in good faith.Their rights must, therefore, be determined in accordance with the appropriate provisions of the Civil Code on property.Article 448 of the Civil Code provides:"Art. 448. The owner of the land on which anything has been built, sown or planted in good faith, shall have the right to appropriate as his own the works, sowing or planting, after payment of the indemnity provided for in Articles 546 and 548,[27]or to oblige the one who built or planted to pay the price of the land, and the one who sowed the proper rent.However, the builder or planter cannot be obliged to buy the land if its value is considerably more than that of the building or trees.In such case, he shall pay reasonable rent, if the owner of the land does not choose to appropriate the building or trees after proper indemnity.The parties shall agree upon the terms of the lease and in case of disagreement, the court shall fix the terms thereof."The owner of the land on which anything has been built, sown or planted in good faith shall have the right to appropriate as his own the building, planting or sowing, after payment to the builder, planter or sower of the necessary and useful expenses, and in the proper case, expenses for pure luxury or mere pleasure.The owner of the land may also oblige the builder, planter or sower to purchase and pay the price of the land.If the owner chooses to sell his land, the builder, planter or sower must purchase the land, otherwise the owner may remove the improvements thereon.The builder, planter or sower, however, is not obliged to purchase the land if its value is considerably more than the building, planting or sowing.In such case, the builder, planter or sower must pay rent to the owner of the land.If the parties cannot come to terms over the conditions of the lease, the court must fix the terms thereof.The right to choose between appropriating the improvement or selling the land on which the improvement stands to the builder, planter or sower, is given to the owner of the land.[28]Article 448 has been applied to improvements or portions of improvements built by mistaken belief on land belonging to the adjoining owner.[29]The facts of the instant case are similar to those inCabral v. Ibanez,[30]to wit:"[P]laintiffs Geronima Zabala and her husband Justino Bernardo, constructed their house in the belief that it was entirely within the area of their own land without knowing at that time that part of their house was occupying a 14-square meter portion of the adjoining lot belonging to the defendants, and that the defendants Bernardo M. Cabral and Mamerta M. Cabral were likewise unaware of the fact that a portion of plaintiff's house was extending and occupying a portion of their lot with an area of 14 square meters.The parties came to know of the fact that part of the plaintiff's house was occupying part of defendant's land when the construction of plaintiff's house was about to be finished, after a relocation of the monuments of the two properties had been made by the U.S. Army through the Bureau of Lands, according to their 'Stipulation of Facts,' dated August 17, 1951.On the basis of these facts, we held that:"The Court, therefore, concludes that the plaintiffs are builders in good faith and the relative rights of the defendant Mamerta Cabral as owner of the land and of the plaintiffs as owners of the building is governed by Article 361 of the Civil Code (Co Tao v. Joaquin Chan Chico, 46 Off. Gaz.5514).Article 361 of the old Civil Code has been reproduced with an additional provision in Article 448 of the new Civil Code, approved June 18, 1949."[31]Similarly, in Grana andTorralba v. Court of Appeals,[32]weheld that:"Although without any legal and valid claim over the land in question, petitioners, however, were found by the Court of Appeals to have constructed a portion of their house thereon in good faith.Under Article 361 of the old Civil Code (Article 448 of the new), the owner of the land on which anything has been built in good faith shall have the right to appropriate as his own the building, after payment to the builder of necessary or useful expenses, and in the proper case, expenses for pure luxury or mere pleasure, or to oblige the builder to pay the price of the land.Respondents, as owners of the land, have therefore the choice of either appropriating the portion of petitioners' house which is on their land upon payment of the proper indemnity to petitioners, or selling to petitioners that part of their land on which stands the improvement.It may here be pointed out that it would be impractical for respondents to choose to exercise the first alternative, i.e., buy that portion of the house standing on their land, for in that event the whole building might be rendered useless.The more workable solution, it would seem, is for respondents to sell to petitioners that part of their land on which was constructed a portion of the latter's house. If petitioners are unwilling or unable to buy, then they must vacate the land and must pay rentals until they do so.Of course, respondents cannot oblige petitioners to buy the land if its value is considerably more than that of the aforementioned portion of the house.If such be the case, then petitioners must pay reasonable rent.The parties must come to an agreement as to the conditions of the lease, and should they fail to do so, then the court shall fix the same."[33]In light of these rulings, petitioners, as owners of Lot No. 24, may choose to purchase the improvement made by respondents Go on their land, or sell to respondents Go the subject portion.If buying the improvement is impractical as it may render the Go's house useless, then petitioners may sell to respondents Go that portion of Lot No. 24 on which their improvement stands.If the Go's are unwilling or unable to buy the lot, then they must vacate the land and, until they vacate, they must pay rent to petitioners. Petitioners, however, cannot compel respondents Go to buy the land if its value is considerably more than the portion of their house constructed thereon.If the value of the land is much more than the Go's improvement, then respondents Go must pay reasonable rent.If they do not agree on the terms of the lease, then they may go to court to fix the same.In the event that petitioners elect to sell to respondents Go the subject portion of their lot, the price must be fixed at the prevailing market value at the time of payment.The Court of Appeals erred in fixing the price at the time of taking, which is the time the improvements were built on the land.The time of taking is determinative of just compensation in expropriation proceedings.The instant case is not for expropriation.It is not a taking by the state of private prop