THIRD DIVISION

[G.R. No. 136456. October 24, 2000.]

HEIRS OF RAMON DURANO, SR., RAMON DURANO III, AND

ELIZABETH HOTCHKISS DURANO, petitioners, vs. SPOUSES
ANGELES SEPULVEDA UY AND EMIGDIO BING SING UY,
SPOUSES FAUSTINO ALATAN AND VALERIANA GARRO,
AURELIA MATA, SILVESTRE RAMOS, HERMOGENES TITO,
TEOTIMO GONZALES, PRIMITIVA GARRO, JULIAN GARRO,
ISMAEL GARRO, BIENVENIDO CASTRO, GLICERIO BARRIGA,
BEATRIZ CALZADA, ANDREA MATA DE BATULAN, TEOFISTA
ALCALA, FILEMON LAVADOR, CANDELARIO LUMANTAO,
GAVINO QUIMBO, JUSTINO TITO, MARCELINO GONZALES,
SALVADOR DAYDAY, VENANCIA REPASO, LEODEGARIO
GONZALES, and RESTITUTA GONZALES, respondents.

Rodrigo Berenguer & Guno for petitioners.

Batiguin & Batiguin Law Office for respondents.

SYNOPSIS

This action stemmed from an action for damages filed by petitioners

against respondents. In that case, petitioners accused respondents of
officiating a "hate campaign" against them by lodging complaints over
petitioners' so-called invasion of respondents' alleged properties. Later
however, the petitioners moved to dismiss their complaint. The trial court
granted the motion to dismiss and trial proceeded only on the counterclaim. In
their counterclaim, respondents demanded damages arising from petitioners'
act of depriving them of their possession and property. On March 8, 1990, the
trial court rendered a decision upholding respondents' counterclaim and
ordered the return of several of the subject properties. The trial court's decision
was appealed to the Court of Appeals which, in turn, affirmed the said decision
and ordered the return of the property to all the respondents-claimants. Hence
this petition.

The Court of Appeals is imbued with sufficient discretion to review

matters, not otherwise assigned as errors on appeal, if it finds that their
consideration is necessary in arriving at a complete and just resolution of this
case. In this case, the Court of Appeals ordered the return of the properties to
respondents merely as a legal consequence of the finding that respondents had
a better right of possession than petitioners over the disputed properties, the
former being possessors in the concept of owner. The return of the properties
to several of the respondents was premised upon the factual finding that these
lands were outside the properties claimed by petitioners. In respect of the other
properties, the records indicate that respondents' possession has ripened into
ownership by acquisitive prescription. The properties were conveyed to
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 respondents by purchase or inheritance, and in each case the respondents
were in actual, continuous, open and adverse possession of the properties.
They exercised rights of ownership over the lands and were unaware of anyone
claiming to be the owner of these lands. Each of them had already completed
the ten-year prescriptive period.

SYLLABUS

1. REMEDIAL LAW; CIVIL PROCEDURE; APPEAL; APPELLATE COURT,

IMBUED WITH SUFFICIENT DISCRETION TO REVIEW MATTERS INCLUDING
UNASSIGNED ERRORS. — The Court of Appeals is not limited to reviewing only
those errors assigned by appellant, but also those that are closely related to or
dependent on an assigned error. In other words, the Court of Appeals is imbued
with sufficient discretion to review matters, not otherwise assigned as errors on
appeal, if it finds that their consideration is necessary in arriving at a complete
and just resolution of the case.
2. ID.; EVIDENCE; FRAUD IN ISSUANCE OF CERTIFICATE OF TITLE
CANNOT BE COLLATERALLY ATTACKED IN AN ACTION FOR RECONVEYANCE AND
DAMAGES. — Fraud in the issuance of a certificate of title may be raised only in
an action expressly instituted for that purpose, and not collaterally as in the
instant case which is an action for reconveyance and damages.
3. ID.; EVIDENCE; FACTUAL FINDINGS OF TRIAL COURT, SUSTAINED
ON APPEAL, IS FINAL AND BINDING UPON REVIEWING COURT. — The return of
the properties to respondents Repaso, Tito and Gonzales was premised upon
the factual finding that these lands were outside the properties claimed by
petitioners under TCT Nos. T-103 and T-104. Such factual finding of the RTC,
sustained by the Court of Appeals, is now final and binding upon this Court.
4. ID.; ID.; DISPUTABLE PRESUMPTIONS; EVIDENCE WILLFULLY
SUPPRESSED WOULD BE ADVERSE IF PRODUCED; CASE AT BAR. — Non-
production of the alleged reconstituted titles of Cepoc despite demand therefor
gives rise to a presumption (unrebutted by petitioners) that such evidence, if
produced, would be adverse to petitioners.
5. CIVIL LAW; PROPERTY; ORDINARY ACQUISITIVE PRESCRIPTION;
POSSESSION OF THING IN GOOD FAITH AND WITH JUST TITLE FOR TEN YEARS,
REQUIRED; IN COMPUTING TEN YEAR PERIOD, CLAIMANT MAY TACK HIS
POSSESSION TO THAT OF HIS PREDECESSOR-IN-INTEREST. — Ordinary
acquisitive prescription, in the case of immovable property, requires possession
of the thing in good faith and with just title, for a period of ten years. A
possessor is deemed to be "in good faith" when he is not aware of any flaw in
his title or mode of acquisition of the property. On the other hand, there is "just
title" when the adverse claimant came into possession of the property through
one of the modes for acquiring ownership recognized by law, but the grantor
was not the owner or could not transmit any right. The claimant by prescription
may compute the ten-year period by tacking his possession to that of his
grantor of predecessor-in-interest.
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 6. ID.; ID.; ID.; ID.; QUESTION OF WHETHER PREDECESSOR-IN-
INTEREST HAD TITLE TO CONVEY, IRRELEVANT. — Whether respondents'
predecessors-in-interest in fact had title to convey is irrelevant under the
concept of just title and for purposes of prescription.

7. ID.; ID.; ALTERNATIVE RIGHTS OF OWNER AGAINST BUILDERS IN

BAD FAITH; RIGHTS OF OWNER. — Since petitioners knew fully well the defect
in their titles, they were correctly held by the Court of Appeals to be builders in
bad faith. The owner of the land has three alternative rights: (1) to appropriate
what has been built without any obligation to pay indemnity therefor, or (2) to
demand that the builder remove what he had built, or (3) to compel the builder
to pay the value of the land. In any case, the landowner is entitled to damages
under Article 451, abovecited.
8. ID.; ID.; ID.; BASIS OF DAMAGES. — The right of the owner of the
land to recover damages from a builder in bad faith is clearly provided for in
Article 451 of the Civil Code. Although said Article 451 does not elaborate on
the basis for damages, the Court perceives that it should reasonably
correspond with the value of the properties lost or destroyed as a result of the
occupation in bad faith, as well as the fruits (natural, industrial or civil) from
those properties that the owner of the land reasonably expected to obtain.
9. ID.; SALES; PURCHASERS OF LAND IN ADVERSE POSSESSION OF
ANOTHER, DUTY-BOUND TO EXERCISE REASONABLE CAUTION; WHERE THERE
IS FAILURE TO EXERCISE SAID CAUTION, BUYER MAY BE CONSIDERED BUYER IN
BAD FAITH. — A purchaser of a parcel of land cannot close his eyes to facts
which should put a reasonable man upon his guard, such as when the property
subject of the purchase is in the possession of persons other than the seller. A
buyer who could not have failed to know or discover that the land sold to him
was in the adverse possession of another is a buyer in bad faith.
10. ID.; ID.; ID.; ID.; ACTS CONSTITUTING A PURCHASE IN BAD FAITH.
— The purchase of the property by petitioner Ramon Durano III from Durano &
Co. could not be said to have been in good faith. It is not disputed that Durano
III acquired the property with full knowledge of respondents' occupancy
thereon. There even appears to be undue haste in the conveyance of the
property to Durano III, as the bulldozing operations by Durano & Co. were still
underway when the deed of sale to Durano III was executed on September 15,
1970.
11. ID.; LAND REGISTRATION AND TITLES; NOTARIZATION OF DEED OF
SALE, ESSENTIAL TO ITS REGISTRABILITY AND THE VALIDITY OF CERTIFICATES
OF TITLE. — The unregistrability of the deed of sale is a serious defect that
should affect the validity of the certificates of title. Notarization of the deed of
sale is essential to its registrability, and the action of the Register of Deeds in
allowing the registration of the unacknowledged deed of sale was unauthorized
and did not render validity to the registration of the document.
12. ID.; ID.; GENERALLY, TORRENS TITLES CAN BE ATTACKED ONLY
WITHIN A YEAR FROM ISSUANCE OF DECREE OF REGISTRATION; THEREAFTER,
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 AGGRIEVED PARTY MAY BRING AN ACTION FOR RECONVEYANCE AND/OR
DAMAGES. — The rule on indefeasibility of title, i.e., that Torrens titles can be
attacked for fraud only within one year from the date of issuance of the decree
of registration, does not altogether deprive an aggrieved party of a remedy at
law. As clarified by the Court in Javier vs. Court of Appeals — The decree (of
registration) becomes incontrovertible and can no longer be reviewed after one
(1) year from the date of the decree so that the only remedy of the landowner
whose property has been wrongfully or erroneously registered in another's
name is to bring an ordinary action in court for reconveyance, which is an
action in personam and is always available as long as the property has not
passed to an innocent third party for value. If the property has passed into the
hands of an innocent purchaser for value, the remedy is an action for damages.
13. ID.; DAMAGES; GUIDING PRINCIPLES. — We sustain the view of the
lower courts that the disparity between respondents' affidavits and their tax
declarations on the amount of damages claimed should not preclude or defeat
respondents' right to damages, which is guaranteed by Article 451. Under
Article 2224 of the Civil Code: Temperate or moderate damages, which are
more than nominal but less than compensatory damages, may be recovered
when the court finds that some pecuniary loss has been suffered but its
amount cannot, from the nature of the case, be proved with certainty. We also
uphold the award of litigation expenses and attorney's fees, it being clear that
petitioners' acts compelled respondents to litigate and incur expenses to regain
rightful possession and ownership over the disputed property. SaAcHE

14. COMMERCIAL LAW; CORPORATIONS; PIERCING THE VEIL OF

CORPORATE FICTION; TEST IN DETERMINING APPLICABILITY; CASE AT BAR. —
The test in determining the applicability of the doctrine of piercing the veil of
corporate fiction is a follows: 1. Control, not mere majority or complete stock
control, but complete domination, not only of finances but of policy and
business practice in respect to the transaction attacked so that the corporate
entity as to this transaction had at the time no separate mind, will or existence
of its own; 2. Such control must have been used by the defendant to commit
fraud or wrong, to perpetuate the violation of a statutory or other positive legal
duty, or dishonest and unjust acts in contravention of plaintiffs legal rights; and
3. The aforesaid control and breach of duty must proximately cause the injury
or unjust loss complained of. The absence of any one of these elements
prevents "piercing the corporate veil." In applying the "instrumentality" or
"alter ego" doctrine, the courts are concerned with reality and not form, with
how the corporation operated and the individual defendant's relationship to
that operation. The facts show that shortly after the purported sale by Cepco to
Durano & Co., the latter sold the property to petitioner Ramon Durano III, who
immediately procured the registration of the property in his name. Obviously,
Durano & Co. was used by petitioners merely as an instrumentality to
appropriate the disputed property for themselves.

DECISION

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 GONZAGA-REYES, J : p

Petitioners seek the reversal of the decision of the First Division of the
Court of Appeals dated November 14, 1997 in CA-G.R. CV No. 27220, entitled
"Heirs of Ramon Durano, Sr., et. al. versus Spouses Angeles Supelveda Uy, et.
al.," and the resolution of the Court of Appeals dated October 29, 1998 which
denied petitioners' motion for reconsideration.
The antecedents of this case may be traced as far back as August 1970; it
involves a 128-hectare parcel of land located in the barrios of Dunga and
Cahumayhumayan, Danao City. On December 27, 1973, the late Congressman
Ramon Durano, Sr., together with his son Ramon Durano III, and the latter's
wife, Elizabeth Hotchkiss Durano (petitioners in the herein case), instituted an
action for damages against spouses Angeles Supelveda Uy and Emigdio Bing
Sing Uy, spouses Faustino Alatan and Valeriana Garro, spouses Rufino Lavador
and Aurelia Mata, Silvestre Ramos, Hermogenes Tito, Teotimo Gonzales,
Primitiva Garro, Julian Garro, Ismael Garro, Bienvenido Castro, Glicerio Barriga,
Beatriz Calzada, Andrea Mata de Batulan, Teofista Alcala, Filemon Lavador,
Candelario Lumantao, Gavino Quimbo, Justino Tito, Marcelino Gonzales,
Salvador Dayday, Venancia Repaso, Leodegario Gonzales, Jose de la Calzada,
Restituta Gonzales, and Cosme Ramos (herein respondents 1 ) before Branch
XVII of the then Court of First Instance of Cebu, Danao City.

In that case, docketed as Civil Case No. DC-56, petitioners accused

respondents of officiating a "hate campaign" against them by lodging
complaints in the Police Department of Danao City in August 1970, over
petitioners' so-called "invasion" of respondents' alleged properties in
Cahumayhumayan, Danao City. This was followed by another complaint sent by
respondents to the President of the Philippines in February 1971, which
depicted petitioners as "oppressors," "landgrabbers" and "usurpers" of
respondents' alleged rights. Upon the direction of the President, the
Department of Justice through City Fiscal Jesus Navarro and the Philippine
Constabulary of Cebu simultaneously conducted investigations on the matter.
Respondents' complaints were dismissed as "baseless," and they appealed the
same to the Secretary of Justice, who called for another investigation to be
jointly conducted by the Special Prosecutor and the Office of the City Fiscal of
Danao City. During the course of said joint investigation, respondents
Hermogenes Tito and Salvador Dayday again lodged a complaint with the Office
of the President, airing the same charges of "landgrabbing." The investigations
on this new complaint, jointly conducted by the 3rd Philippine Constabulary
Zone and the Citizens Legal Assistance Office resulted in the finding that "
(petitioners) should not be held answerable therefor." 2

Petitioners further alleged in their complaint before the CFI that during
the course of the above investigations, respondents kept spreading false
rumors and damaging tales which put petitioners into public contempt and
ridicule. 3
In their Answer, respondents lodged their affirmative defenses, demanded
the return of their respective properties, and made counterclaims for actual,
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 moral and exemplary damages. Respondents stated that sometime in the early
part of August 1970 and months thereafter they received mimeographed
notices dated August 2, 1970 and signed by the late Ramon Durano, Sr.,
informing them that the lands which they are tilling and residing in, formerly
owned by the Cebu Portland Cement Company (hereafter, "Cepoc"), had been
purchased by Durano & Co., Inc. The notices also declared that the lands were
needed by Durano & Co. for planting to sugar and for roads or residences, and
directed respondents to immediately turn over the said lands to the
representatives of the company. Simultaneously, tall bamboo poles with
pennants at the tops thereof were planted in some areas of the lands and metal
sheets bearing the initials "RMD" were nailed to posts.
As early as the first week of August 1970, and even before many of the
respondents received notices to vacate, men who identified themselves as
employees of Durano & Co. proceeded to bulldoze the lands occupied by
various respondents, destroying in their wake the plantings and improvements
made by the respondents therein. On some occasions, respondents alleged,
these men fired shots in the air, purportedly acting upon the instructions of
petitioner Ramon Durano III and/or Ramon Durano, Jr. On at least one instance,
petitioners Ramon Durano III and Elizabeth Hotchkiss Durano were seen on the
site of the bulldozing operations.

On September 15, 1970, Durano & Co. sold the disputed property to
petitioner Ramon Durano III, who procured the registration of these lands in his
name under TCT No. T-103 and TCT No. T-104.
Respondents contended that the display of force and the known power
and prestige of petitioners and their family restrained them from directly
resisting this wanton depredation upon their property. During that time, the
mayor of Danao City was Mrs. Beatriz Durano, wife of Ramon Durano, Sr. and
mother of petitioner Ramon Durano III. Finding no relief from the local police,
who respondents said merely laughed at them for daring to complain against
the Duranos, they organized themselves and sent a letter to then President
Ferdinand Marcos reporting dispossession of their properties and seeking a
determination of the ownership of the land. This notwithstanding, the bulldozing
operations continued until the City Fiscal was requested by the Department of
Justice to conduct an investigation on the matter. When, on July 27, 1971, the
City Fiscal announced that he would be unable to conduct a preliminary
investigation, respondents urged the Department of Justice to conduct the
preliminary investigation. This was granted, and the investigations which
spanned the period March 1972 to April 1973 led to the conclusion that
respondents' complaint was untenable. 4

In their counterclaim, respondents alleged that petitioners' acts deprived

most of them of their independent source of income and have made destitutes
of some of them. Also, petitioners have done serious violence to respondents'
spirit, as citizens and human beings, to the extent that one of them had been
widowed by the emotional shock that the damage and dispossession has
caused. 5 Thus, in addition to the dismissal of the complaint, respondents
demanded actual damages for the cost of the improvements they made on the
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 land, together with the damage arising from the dispossession itself; moral
damages for the anguish they underwent as a result of the high-handed display
of power by petitioners in depriving them of their possession and property; as
well as exemplary damages, attorney's fees and expenses of litigation. ETISAc

Respondents' respective counterclaims — referring to the improvements

destroyed, their values, and the approximate areas of the properties they
owned and occupied — are as follows:
a) TEOFISTA ALCALA — Tax Declaration No. 00223; .2400 ha.;
bulldozed on August, 10, 1970. Improvements destroyed consist
of 47 trees, 10 bundles beatilis firewood and 2 sacks of cassava,
all valued at P5,437.00. (Exh. B, including submarkings)
b) FAUSTINO ALATAN and VALERIANA GARRO — Tax Declaration
No. 30758; .2480 ha.; Tax Declaration No. 32974; .8944 ha.; Tax
Declaration No. 38908; .8000 ha.; Bulldozed on September 9,
1970; Improvements destroyed consist of 682 trees, a cornfield
with one cavan per harvest 3 times a year, valued at P71,770.00;
Bulldozed on March 13, 1971; 753 trees, 1,000 bundles beatilis
firewood every year, valued at P29,100.00; Cut down in the later
part of March, 1971 — 22 trees, 1,000 bundles beatilis firewood
every year, 6 cavans corn harvest per year, valued at P1,940.00
or a total value of P102,810.00. (Exh. C, including submarkings)
c) ANDREA MATA DE BATULAN — Tax Declaration No. 33033; .4259
has.; bulldozed on September 11, 1970. Improvements
destroyed consist of 512 trees and 15 sacks cassava all valued at
P79,425.00. (Exh. D, including submarkings)
d) GLICERIO BARRIGA — Tax Declaration No. 32290; .4000 ha.;
bulldozed on September 10, 1990. Improvements destroyed
consist of 354 trees, cassava field if planted with corn good for
one liter, 30 cavans harvest a year of corn, and one resthouse, all
valued at P35,500.00. (Exh. E, including submarkings)
e) BEATRIZ CALZADA — Tax Declaration No. 03449; .900 ha.;
Bulldozed on June 16, 1971. Improvements destroyed consist of
2,864 trees, 1,600 bundles of beatilis firewood, 12 kerosene cans
cassava every year and 48 cavans harvest a year of corn all
valued at P34,800.00. (Exh. F, including submarkings)

f) BIENVENIDO CASTRO — Tax Declaration No. 04883; .6000 ha.;

bulldozed on September 10, 1970. Improvements destroyed
consist of 170 trees, 10 sacks cassava every year, 500 bundles
beatilis firewood every year, 60 cavans corn harvest per year, all
valued at (5,550.00. (Exh. G, including submarkings) cSTDIC

g) ISMAEL GARRO — Tax Declaration No. 7185; 2 has. Bulldozed in

August, 1970. Improvements destroyed consist of 6 coconut
trees valued at P1,800.00. Bulldozed on February 3, 1971 —
improvements destroyed consist of 607 trees, a corn field of 5
cavans produce per harvest thrice a year, all valued at
P67,890.00. (Exh. H, including submarkings)

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 h) JULIAN GARRO — Tax Declaration No. 28653; 1 ha.; Bulldozed in
the latter week of August, 1970. Improvements destroyed
Consist of 365 trees, 1 bamboo grove, 1 tisa, 1,000 bundles of
beatilis firewood, 24 cavans harvest a year of corn, all valued at
P46,060.00. (Exh I, including submarkings)
i) PRIMITIVA GARRO — Tax Declaration No. 28651; .3000 ha.;
Bulldozed on September 7, 1970. Improvements destroyed
consist of 183 trees, 10 pineapples, a cassava field, area if
planted with corn good for 1/2 liter, sweet potato, area if planted
with corn good for 1/2 liter all valued at P10,410.00. (Exh. J,
including submarkings)
j) TEOTIMO GONZALES — Tax Declaration No. 38159; .8644 ha.;
Tax Declaration No. 38158; .8000 ha.; Bulldozed on September
10, 1970 — improvements destroyed consist of 460 trees valued
at P20,000.00. Bulldozed on December 10, 1970 —
Improvements destroyed consist of 254 trees valued at
P65,600.00 — or a total value of P85,600.00. (Exh. K, including
submarkings)

k) LEODEGARIO GONZALES — Tax Declaration No. 36884;

Bulldozed on February 24, 1971. Improvements destroyed
consist of 946 trees, 40 ubi, 15 cavans harvest a year of corn, all
valued at P72,270.00. (Exh. L, including submarkings)
l) FILEMON LAVADOR — Tax Declaration No. 14036; 1 ha.;
Bulldozed on February 5, 1971. Improvements destroyed consist
of 675 trees and 9 cavans harvest a year of corn all valued at
P63,935.00. (Exh. M, including submarkings)
m) CANDELARIO LUMANTAO — Tax Declaration No. 18791; 1.660
ha. Bulldozed on the second week of August, 1970 —
Improvements destroyed consist of 1,377 trees, a cornfield with
3 cavans per harvest thrice a year and a copra dryer all valued at
P193,960.00. Bulldozed on February 26, 1971 — Improvements
destroyed consist of 44 trees, one pig pen and the fence thereof
and the chicken roost all valued at P12,650.00. Tax Declaration
No. 33159; 3.500 has. Bulldozed in the last week of March, 1971
— Improvements destroyed consist of 13 trees valued at
P1,550.00. Bulldozed in the latter part consist of 6 Bamboo
groves and Ipil-Ipil trees valued at P700.00 with total value of
P208,860.00. (Exh. N, including submarkings)

n) AURELIA MATA — Tax Declaration No. 38071; .3333 ha.;

Bulldozed sometime in the first week of March, 1971 —
Improvements destroyed consist of 344 trees and 45 cavans corn
harvest per year valued at P30,965.00. (Exh. Q, including
submarkings)

o) GAVINO QUIMBO — Tax Declaration No. 33231; 2.0978 has.; Tax

Declaration No. 24377; .4960 ha. (.2480 ha. Belonging to your
defendant) Bulldozed on September 12, 1970 — Improvements
destroyed consist of 200 coconut trees and 500 banana fruit
trees valued at P68,500.00. Bulldozed on consist of 59 trees, 20
sacks cassava and 60 cavans harvest a year of corn valued at
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 P9,660.00 or a total value of P78,160.00. (Exh. R, including
submarkings) HEDSIc

p) SILVESTRE RAMOS — Tax Declaration No. 24288; 1.5568 has.;

Bulldozed on February 23, 1971. — Improvements destroyed
consist of 737 trees, a cornfield with 3 cavans per harvest 3
times a year and 50 bundles of beatilis firewood, all valued at
P118,170.00. (Exh. S, including submarkings)
q) MARCELINO GONZALES — Tax Declaration No. 34057; .4049 ha.
Bulldozed on March 20, 1972 — Improvements destroyed consist
of 5 coconut trees and 9 cavans harvest a year of corn valued at
P1,860.00. Bulldozed on July 4, 1972 — destroying 19 coconut
trees valued at P5,700.00 or a total value of P7,560.00. (Exh. U,
including submarkings)
r) JUSTINO TITO — Tax Declaration No. 38072; .2000 has.;
Bulldozed on February 25, 1971 — Improvements destroyed
consist of 338 trees and 5 kamongay all valued at P29,650.00.
(Exh. T, including submarkings)
s) EMIGDIO BING SING UY and ANGELES SEPULVEDA UY — Transfer
Certificate of Title No. T-35 (Register of Deeds of Danao City);
140.4395 has.; Area bulldozed — 20.000 has. Bulldozed on
August 5, 6 and 7, 1970 — destroying 565 coconut trees, 2-1/2
yrs. old, 65,422 banana groves with 3,600 mango trees, 3 years
old, grafted and about to bear fruit valued at P212,260.00.
Bulldozed on November 24, 1970 and on February 16, 1971 —
destroying 8,520 madri-cacao trees and 24 cylindrical cement
posts boundaries valued at P18,540.00. Bulldozed on November
24, 1970 — destroying 90 coconut trees, 3 years old cornfield at
40 cavans per harvest and at 3 harvests a year (120 cavans)
valued at P31,800.00. Bulldozed on February 16, 1971 —
destroying 25,727 trees and sugarcane field value P856,725.00
or a total value of P1,123,825.00. (Exh. V, including submarkings)
t) SALVADOR DAYDAY — Tax Declaration No. (unnumbered) dated
September 14, 1967; 4.000 has. Bulldozed on May 6, 1971 —
destroying 576 trees, 9 cavans yearly of corn, 30 kerosene cans
of cassava yearly valued at P4,795.00. Bulldozed from March 26,
1973 to the first week of April, 1973 — destroying 108 trees and
cornland, 6 cavans harvest per year valued at P53,900.00 or a
total value of P58,695.00. (Exh. A, including submarkings)
u) VENANCIA REPASO — Tax Declaration No. 18867; 1.1667 has.
Bulldozed on April 15, 1971 — Improvements destroyed were
775 trees, 500 abaca, about to be reaped, and being reaped 3
times a year 2 bamboo groves all valued at P47,700.00. (Exh. O,
including submarkings)
v) HERMOGENES TITO — Tax Declaration No. 38009; over one (1)
ha. Bulldozed in the latter part of September, 1970 — destroying
1 coconut tree, 18 sacks of corn per year valued at P1,020.00.
Bulldozed on March 15, 1973 — destroying 2 coconut trees, 5
buri trees, 1 bamboo grove valued at P1,400.00. Bulldozed on
March 26, 1974 — destroying 3 coconut trees valued at
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 P1,500.00 with a total value of P3,920.00. (Exh. P, including
submarkings). 6

On April 22, 1975, petitioners moved to dismiss their complaint with the
trial court. The trial court granted the motion to dismiss, without prejudice to
respondents' right to proceed with their counterclaim.

Hence, the trial proceeded only on the counterclaim.

On September 23, 1980, this Court issued a resolution in Administrative
Matter No. 6290 changing the venue of trial in Civil Case No. DC-56 to the
Regional Trial Court of Cebu City. The change was mainly in line with the
transfer of Judge Bernardo Ll. Salas, who presided over the case in Danao City,
to Cebu City.
The parties agreed to dispense with pre-trial, and for the evidence-in-chief
to be submitted by way of affidavits together with a schedule of documentary
exhibits, subject to additional direct examination, cross examination and
presentation of rebuttal evidence by the parties.
The trial court and later, the Court of Appeals, took note of the following
portions of affidavits submitted by petitioners:
. . . City Fiscal Jesus Navarro said that in August, 1967, he issued
subpoenas to several tenants in Cahumayhumayan upon
representation by Cepoc, the latter protesting failure by the tenants to
continue giving Cepoc its share of the corn produce. He learned from
the tenants that the reason why they were reluctant and as a matter of
fact some defaulted in giving Cepoc its share, was that Uy Bing
Sepulveda made similar demands to them for his share in the produce,
and that they did not know to whom the shares should be given.
xxx xxx xxx

Jesus Capitan said that he is familiar with the place

Cahumayhumayan and that the properties in said locality were
acquired by Durano and Company and Ramon Durano III, but formerly
owned by Cepoc.
When the properties of Ramonito Durano were cultivated, the
owners of the plants requested him that they be given something for
their effort even if the properties do not belong to them but to Cepoc,
and that he was directed by Ramonito Durano to do a listing of the
improvements as well as the owners. After he made a listing, this was
given to Ramonito who directed Benedicto Ramos to do payment.
When he was preparing the list, they did not object to the
removal of the plants because the counterclaimants understood that
the lands did not belong to them, but later and because of politics a
complaint was filed, and finally that when he was doing the listing, the
improvements were even pointed to him by the counterclaimants
themselves. (Exh. 48, Records, p. 385-386).

xxx xxx xxx

Ruperto Rom said that he had an occasion to work at Cepoc from
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 1947 to 1950 together with Benedicto and Tomas Ramos, the latter a
capataz of the Durano Sugar Mills. Owner of the properties, subject of
the complaint, was Cepoc.
The persons who eventually tilled the Cepoc properties were
merely allowed to do cultivation if planted to corn, and for Cepoc to be
given a share, which condition was complied with by all including the
counterclaimants. He even possessed one parcel which be planted to
coconuts, jackfruit trees and other plants. (Exh. 51, Records, pp. 383-
384)
xxx xxx xxx
Co-defendant Ramon Durano III said that he agreed with the
dismissal of the complaint because his father's wish was reconciliation
with the defendants following the death of Pedro Sepulveda, father of
Angeles Sepulveda Uy, but inspite of the dismissal of the complaint,
the defendants still prosecuted their counterclaim.DAEIHT

The disputed properties were owned formerly by Cepoc, and then

of the latter selling the properties to Durano and Company and then by
the latter to him as of September 15, 1970. As a matter of fact, TCT T-
103 and T-104 were issued to him and that from that time on, he paid
the taxes.

At the time he purchased the properties, they were not occupied

by the defendants. The first time he learned about the alleged
bulldozing of the improvements was when the defendants filed the
complaint of land grabbing against their family with the Office of the
President and the attendant publicity. Precisely his family filed the
complaint against them. (Exh. 57, Records, pp. 723-730)

xxx xxx xxx

Congressman Ramon Durano said he is familiar with the
properties, being owned originally by Cepoc. Thereafter they were
purchased by Durano and Company and then sold to Ramon Durano III,
the latter now the owner. He filed a motion to dismiss the case against
Angeles Sepulveda et al. as a gesture of respect to the deceased Pedro
Sepulveda, father of Angeles Sepulveda, and as a Christian, said Pedro
Sepulveda being the former Mayor of Danao, if only to stop all
misunderstanding between their families.

xxx xxx xxx

He was the one who did the discovery of the properties that
belonged to Cepoc, which happened when he was doing mining work
near Cahumayhumayan and without his knowledge extended his
operation within the area belonging to Cepoc. After Cepoc learned of
the substantial coal deposits, the property was claimed by Cepoc and
then a survey was made to relocate the muniments. Eventually he
desisted doing mining work and limited himself within the confines of
his property that was adjacent to Cepoc's property. All the claimants
except Sepulveda Uy were occupants of the Cepoc properties. Durano
and Company purchased the property adjacent to Cepoc, developed
the area, mined the coal and had the surveyed area planted with sugar
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 cane, and finally the notices to the occupants because of their intention
to plant sugar cane and other crops (T.S.N. December 4, 1985, pp. 31-
32, 44-54, RTC Decision, pp. 16-19, Records, pp. 842-845). 7

Petitioners also presented Court Commissioner, Engineer Leonidas Gicain,

who was directed by the trial court to conduct a field survey of the disputed
property. Gicain conducted surveys on the areas subjected to bulldozing,
including those outside the Cepoc properties. The survey — which was based
on TCT No. T-103 and TCT No. T-104, titled in the name of Ramon Durano III,
and TCT No. 35, in the name of respondent Emigdio Bing Sing Uy — was paid
for by petitioners. 8

Respondents, for their part, also presented their affidavits and supporting
documentary evidence, including tax declarations covering such portions of the
property as they formerly inhabited and cultivated.

On March 8, 1990, the RTC issued a decision upholding respondents'

counterclaim. The dispositive portion of said decision reads:
"THE FOREGOING CONSIDERED, judgment is hereby rendered in
favor of the counter claimants and against the plaintiffs directing the
latter to pay the former:

a) With respect to Salvador Dayday P14,400.00

b) With respect to Teofista Alcala 4,400.00
c) With respect to Faustino Alatan 118,400.00
d) With respect to Andrea Mata de 115,050.00
Batulan
e) With respect to Glicerio Barriga 35,500.00
f) With respect to Beatriz Calzada 70,300.00
g) With respect to Bienvenido Castro 5,000.00
h) With respect to Ismael Garro 66,060.00
i) With respect to Julian Garro 48,600.00
j) With respect to Primitiva Garro 13,000.00
k) With respect to Teotimo Gonzales 63,200.00
l) With respect to Leodegario Gonzales 85,300.00
m) With respect to Filemon Lavador 70,860.00
n) With respect to Venancia Repaso 101,700.00
o) With respect to Candelario Lumantao 192,550.00
p) With respect to Hermogenes Tito 1,200.00
q) With respect to Aurelia Mata 28,560.00
r) With respect to Gavino Quimbo 81,500.00
s) With respect to Silvestre Ramos 101,700.00
t) With respect to Justino Tito 27,800.00
u) With respect to Marcelino Gonzales 2,360.00
v) With respect to Angeles Supelveda 902,840.00

P120,000.00 should be the figure in terms of litigation expenses and a separate

amount of P100,000.00 as attorney's fees.

Return of the properties to Venancia Repaso, Hermogenes Tito

and Marcelino Gonzales is hereby directed.

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 With respect to counter claimant Angeles Sepulveda Uy, return of
the property to her should be with respect to the areas outside of the
Cepoc property, as mentioned in the sketch, Exhibit 56-A.

Finally with costs against the plaintiffs.

SO ORDERED. 9 EHCcIT

The RTC found that the case preponderated in favor of respondents, who
all possessed their respective portions of the property covered by TCT Nos. T-
103 and T-104 thinking that they were the absolute owners thereof. A number
of these respondents alleged that they inherited these properties from their
parents, who in turn inherited them from their own parents. Some others came
into the properties by purchase from the former occupants thereof. They and
their predecessors were responsible for the plantings and improvements on the
property. They were the ones who sought for the properties to be tax-declared
in their respective names, and they continually paid the taxes thereto.
Respondents maintained that they were unaware of anyone claiming adverse
possession or ownership of these lands until the bulldozing operations in 1970.
As for Venancia Repaso, Hermogenes Tito and Marcelino Gonzales, the
Court found that the properties they laid claim to were not part of the land that
was purchased by Durano & Co. from Cepoc. Thus, it found the bulldozing of
these lands by petitioners totally unjustified and ordered not only the total
reimbursement of useful and necessary expenses on the properties but also the
return of these properties to Repaso, Tito and Gonzales, respectively. As for all
the other respondents, the RTC found their possession of the properties to be in
the concept of owner and adjudged them to be builders in good faith.
Considering that petitioners in the instant case appropriated the improvements
on the areas overran by the bulldozers, the RTC ruled that "(t)he right of
retention to the improvements necessarily should be secured (in favor of
respondents) until reimbursed not only of the necessary but also useful
expenses." 10

On the matter of litigation expenses and attorney's fees, the RTC

observed that the trial period alone consisted of forty (40) trial dates spread
over a period of sixteen (16) years. At the time, respondents were represented
by counsel based in Manila, and the trial court took into consideration the
travel, accommodation and miscellaneous expenses of their lawyer that
respondents must have shouldered during the trial of the case.

Dissatisfied, petitioners appealed the RTC decision to the Court of

Appeals, which, in turn, affirmed the said decision and ordered the return of the
property to all the respondents-claimants, in effect modifying the RTC decision
which allowed return only in favor of respondents Repaso, Tito and Gonzales.
In its decision, the Court of Appeals upheld the factual findings and
conclusions of the RTC, including the awards for actual damages, attorney's
fees and litigation expenses, and found additionally that the issuance of TCT
Nos. T-103 and T-104 in the name of Ramon Durano III was attended by fraud.
Evaluating the evidence before it, the Court of Appeals observed that the
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 alleged reconstituted titles of Cepoc over the property, namely, TCT No. (RT-38)
(T-14457)-4 and TCT No. (RT-39) (T-14456)-3 (Exhibits "19" and "20" of this
case), which were claimed to be the derivative titles of TCT Nos. T-103 and T-
104, were not submitted in evidence before the RTC. Thus, in an Order dated
June 15, 1988, the RTC ordered Exhibits "19" and "20" deleted from petitioners'
Offer of Exhibits. The Court of Appeals further noted that even among the
exhibits subsequently produced by petitioners before the RTC, said Exhibits
"19" and "20" were still not submitted. 11 Moreover, Cepoc had no registered
title over the disputed property as indicated in TCT Nos. T-103 and T-104. Thus:
TRANSFER CERTIFICATE OF TITLE NO.
— 103 —

xxx xxx xxx

IT IS FURTHER CERTIFIED that said land was originally registered

on the N.A. day of N.A., in the year nineteen hundred and N.A. in
Registration Book No. N A. page N.A. of the Office of the Register of
Deeds of N A., as Original Certificate of Title No. N.A., pursuant to a
N.A. patent granted by the President of the Philippines, on the N.A. day
of N.A., in the year nineteen hundred and N.A., under Act No. N.A.

This certificate is a transfer from Transfer Certificate of Title No.

(RT-39) (T-14456)-3 which is cancelled by virtue hereof in so far as the
above described land is concerned.

xxx xxx xxx

TRANSFER CERTIFICATE OF TITLE

NO. T — 104 —

xxx xxx xxx

IT IS FURTHER CERTIFIED that said land was originally registered
on the N.A. day of N.A., in the year nineteen hundred and N.A. in
Registration Book No. N.A., page N.A., of the Office of the Register of
Deeds of N.A., as Original Certificate of Title No. N.A., pursuant to a
N.A., patent granted by the President of the Philippines, on the N.A.,
day of N.A., in the year nineteen hundred and N.A , under Act No. N.A.
This certificate is a transfer from Transfer Certificate of Title No.
(RT-38) (T-14457 )-4 which is cancelled by virtue hereof in so far as the
above described land is concerned. 12

From the foregoing, the Court of Appeals concluded that the issuance of
the TCT Nos. T-103 and T-104 in favor of petitioner Ramon Durano III was
attended by fraud; hence, petitioners could not invoke the principle of
indefeasibility of title. Additionally, the Court of Appeals found that the alleged
Deed of Absolute Sale, undated, between Cepoc Industries, Inc. and Durano &
Co. was not notarized and thus, unregistrable.
The Court of Appeals went on to state that while, on the one hand, no
valid issuance of title may be imputed in favor of petitioners from the private
Deed of Sale and the alleged reconstituted titles of Cepoc that were not
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 presented in evidence, respondents, in contrast — who although admittedly
had no registered titles in their names — were able to demonstrate possession
that was public, continuous and adverse — or possession in the concept of
owner, and which was much prior (one or two generations back for many of
respondents) to the claim of ownership of petitioners.

Thus, the Court of Appeals ordered the return of the properties covered by
TCT Nos. T-103 and T-104 to all respondents who made respective claims
thereto. Corollarily, it declared that petitioners were possessors in bad faith,
and were not entitled to reimbursement for useful expenses incurred in the
conversion of the property into sugarcane lands. It also gave no merit to
petitioners' allegation that the actual damages awarded by the trial court were
excessive, or to petitioners' argument that they should not have been held
personally liable for any damages imputable to Durano & Co.

Following is the dispositive portion of the decision of the Court of Appeals:

WHEREFORE, the appealed decision of the lower court in Civil
Case No. DC-56 is hereby AFFIRMED with MODIFICATION ordering the
return of the respective subject properties to all the defendants-
appellees, without indemnity to the plaintiffs-appellants as regards
whatever improvements made therein by the latter. In all other
respects, said decision in affirmed.
Costs against plaintiffs-appellants.

SO ORDERED. 13

On October 29, 1998, the Court of Appeals denied petitioners' motion for
reconsideration for lack of merit. Hence, this petition. ASaTHc

Petitioners assign the following errors from the CA decision:

1. The Court of Appeals erred in granting relief to the respondents
who did not appeal the decision of the lower court.

2. The Court of Appeals erred in collaterally attacking the validity of

the title of petitioner Ramon Durano III.
3. The respondents should not have been adjudged builders in
good faith.

4. The petitioners should not be held personally liable for damages

because of the doctrine of separate corporate personality. cCSEaA

5. It was an error to hold that the respondents had proved the

existence of improvements on the land by preponderance of
evidence, and in awarding excessive damages therefor.

6. It was error to direct the return of the properties to respondents

Venancia Repaso, Hermogenes Tito and Marcelino Gonzales.
7. The award of litigation expenses and attorney's fees was
erroneous.

8. The petitioners are not possessors in bad faith.

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 On their first assignment of error, petitioners contend that before the
Court of Appeals, they only questioned that portion of the RTC decision which
directed the return of the properties to respondents Repaso, Tito and Gonzales.
They argued that the return of the properties to all the other respondents by
the Court of Appeals was erroneous because it was not among the errors
assigned or argued by petitioners on appeal. Besides, since respondents
themselves did not appeal from the RTC decision on the issue of return of the
physical possession of the property, it is understood that judgment as to them
has already become final by operation of law. To support its argument,
petitioners cited the cases of Madrideo vs. Court of Appeals 14 and Medida vs.
Court of Appeals, 15 which held that "whenever an appeal is taken in a civil
case an appellee who has not himself appealed cannot obtain from the
appellate court any affirmative relief other than the ones granted in the
decision of the court below." TIaDHE

Rule 51 of the New Rules of Civil Procedure provides:

Sec. 8. Questions that may be decided. — No error which does
not affect the jurisdiction over the subject matter or the validity of the
judgment appealed from or the proceedings therein will be considered
unless stated in the assignment of errors, or closely related to or
dependent on an assigned error and properly argued in the brief, save
as the court may pass upon plain errors and clerical errors.

We find untenable petitioners' argument that since no party (whether

petitioners or respondents) appealed for the return of the properties to
respondents other than Repaso, Tito and Gonzales, that portion of the RTC
decision that awards damages to such other respondents is final and may no
longer be altered by the Court of Appeals. A reading of the provisions of Section
8, Rule 51, aforecited, indicates that the Court of Appeals is not limited to
reviewing only those errors assigned by appellant, but also those that are
closely related to or dependent on an assigned error. 16 In other words, the
Court of Appeals is imbued with sufficient discretion to review matters, not
otherwise assigned as errors on appeal, if it finds that their consideration is
necessary in arriving at a complete and just resolution of the case. In this case,
the Court of Appeals ordered the return of the properties to respondents merely
as a legal consequence of the finding that respondents had a better right of
possession than petitioners over the disputed properties, the former being
possessors in the concept of owner. Thus, it held —
Plaintiffs-appellants have to return possession of the subject
property, not only to defendants-appellees Venancia Repaso,
Hermogenes Tito and Marcelino Gonzales but to all other defendants-
appellees herein, by virtue of the latter's priority in time of declaring
the corresponding portions of the subject properties in their name
and/or their predecessors-in-interest coupled with actual possession of
the same property through their predecessors-in-interest in the
concept of an owner. Plaintiffs-appellants who had never produced in
court a valid basis by which they are claiming possession or ownership
over the said property cannot have a better right over the subject
properties than defendants-appellees. 17
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 Moreover, petitioners' reliance on the Madrideo and Medida cases is
misplaced. In the Madrideo case, the predecessors-in-interest of the Llorente
Group sold the disputed property to the Alcala Group, who in turn sold the same
to the spouses Maturgo. The RTC adjudged the spouses Maturgo purchasers in
good faith, such that they could retain their title to the property, but held that
the Llorente Group was unlawfully divested of its ownership of the property by
the Alcala Group. The Alcala Group appealed this decision to the Court of
Appeals, who denied the appeal and ordered the reinstatement in the records
of the Registry of Deeds of the Original Certificates of Title of the predecessors-
in-interest of the Llorente Group. In setting aside the decision of the Court of
Appeals, this Court held that no relief may be afforded in favor of the Llorente
Group to the prejudice of the spouses Maturgo, who — the Court carefully
emphasized — were third parties to the appeal, being neither appellants nor
appellees before the Court of Appeals, and whose title to the disputed property
was confirmed by the RTC. The application of the ruling in Madrideo to the
instant case bears no justification because it is clear that petitioners, in
appealing the RTC decision, impleaded all the herein respondents.

Meanwhile, in the Medida case, petitioners (who were the appellees

before the Court of Appeals) sought the reversal of a finding of the RTC before
the Supreme Court. The Court explained that since petitioners failed to appeal
from the RTC decision, they — as appellees before the Court of Appeals —
"could only argue for the purpose of sustaining the judgment in their favor, and
could not ask for any affirmative relief other than that granted by the court
below. The factual milieu in Medida is different from that of the instant case,
where the return of the properties to respondents was not an ''affirmative
relief" sought by respondents but an independent determination of the Court of
Appeals proceeding from its findings that respondents were long-standing
possessors in the concept of owner while petitioners were builders in bad faith.
Certainly, under such circumstances, the Court of Appeals is not precluded from
modifying the decision of the RTC in order to accord complete relief to
respondents.

Moving now to the other errors assigned in the petition, the return of the
properties to respondents Repaso, Tito and Gonzales was premised upon the
factual finding that these lands were outside the properties claimed by
petitioners under TCT Nos. T-103 and T-104. Such factual finding of the RTC,
sustained by the Court of Appeals, is now final and binding upon this Court.
In respect of the properties supposedly covered by TCT Nos. T-103 and T-
104, the Court of Appeals basically affirmed the findings of the RTC that
respondents have shown prior and actual possession thereof in the concept of
owner, whereas petitioners failed to substantiate a valid and legitimate
acquisition of the property — considering that the alleged titles of Cepoc from
which TCT Nos. T-103 and T-104 were supposed to have derived title were not
produced, and the deed of sale between Cepoc and Durano & Co. was
unregistrable.
The records clearly bear out respondents' prior and actual possession;
more exactly, the records indicate that respondents' possession has ripened
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 into ownership by acquisitive prescription.

Ordinary acquisitive prescription, in the case of immovable property,

requires possession of the thing in good faith and with just title, 18 for a period
of ten years. 19 A possessor is deemed to be "in good faith" when he is not
aware of any flaw in his title or mode of acquisition of the property. 20 On the
other hand, there is "just title" when the adverse claimant came into possession
of the property through one of the modes for acquiring ownership recognized
by law, but the grantor was not the owner or could not transmit any right. 21
The claimant by prescription may compute the ten-year period by tacking his
possession to that of his grantor or predecessor-in-interest. 22 ATEHDc

The evidence shows that respondents successfully complied with all the
requirements for acquisitive prescription to set in. The properties were
conveyed to respondents by purchase or inheritance, and in each case the
respondents were in actual, continuous, open and adverse possession of the
properties. They exercised rights of ownership over the lands, including the
regular payment of taxes and introduction of plantings and improvements.
They were unaware of anyone claiming to be the owner of these lands other
than themselves until the notices of demolition in 1970 — and at the time each
of them had already completed the ten-year prescriptive period either by their
own possession or by obtaining from the possession of their predecessors-in-
interest. Contrary to the allegation of petitioners that the claims of all twenty-
two (22) respondents were lumped together and indiscriminately sustained, the
lower courts (especially the RTC) took careful consideration of the claims
individually, taking note of the respective modes and dates of acquisition.
Whether respondents' predecessors-in-interest in fact had title to convey is
irrelevant under the concept of just title and for purposes of prescription.

Thus, respondents' counterclaim for reconveyance and damages before

the RTC was premised upon a claim of ownership as indicated by the following
allegations:
(Y)our defendants are owners and occupants of different parcels
of land located in Barrio Cahumayhumayan, your defendants having
occupied these parcels of land for various periods by themselves or
through their predecessors-in-interest, some for over fifty years, and
some with titles issued under the Land Registration Act; . . . . 23

Respondents' claim of ownership by acquisitive prescription (in respect of

the properties covered by TCT Nos. T-103 and T-104) having been duly alleged
and proven, the Court deems it only proper that such claim be categorically
upheld. Thus, the decision of the Court of Appeals insofar as it merely declares
those respondents possessors in the concept of owner is modified to reflect the
evidence on record which indicates that such possession had been converted to
ownership by ordinary prescription.
Turning now to petitioners' claim to ownership and title, it is uncontested
that their claim hinges largely on TCT Nos. T-103 and T-104, issued in the name
of petitioner Ramon Durano III. However, the validity of these certificates of
title was put to serious doubt by the following: (1) the certificates reveal the
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 lack of registered title of Cepoc to the properties; 24 (2) the alleged
reconstituted titles of Cepoc were not produced in evidence; and (3) the deed of
sale between Cepoc and Durano & Co. was unnotarized and thus, unregistrable.

It is true that fraud in the issuance of a certificate of title may be raised

only in an action expressly instituted for that purpose, 25 and not collaterally as
in the instant case which is an action for reconveyance and damages. While we
cannot sustain the Court of Appeals' finding of fraud because of this
jurisdictional impediment, we observe that the above-enumerated
circumstances indicate none too clearly the weakness of petitioners' evidence
on their claim of ownership. For instance, the non-production of the alleged
reconstituted titles of Cepoc despite demand therefor gives rise to a
presumption (unrebutted by petitioners) that such evidence, if produced, would
be adverse to petitioners. 26 Also, the unregistrability of the deed of sale is a
serious defect that should affect the validity of the certificates of title.
Notarization of the deed of sale is essential to its registrability, 27 and the
action of the Register of Deeds in allowing the registration of the
unacknowledged deed of sale was unauthorized and did not render validity to
the registration of the document. 28
Furthermore, a purchaser of a parcel of land cannot close his eyes to facts
which should put a reasonable man upon his guard, such as when the property
subject of the purchase is in the possession of persons other than the seller. 29
A buyer who could not have failed to know or discover that the land sold to him
was in the adverse possession of another is a buyer in bad faith. 30 In the herein
case, respondents were in open possession and occupancy of the properties
when Durano & Co. supposedly purchased the same from Cepoc. Petitioners
made no attempt to investigate the nature of respondents' possession before
they ordered demolition in August 1970.

In the same manner, the purchase of the property by petitioner Ramon

Durano III from Durano & Co. could not be said to have been in good faith. It is
not disputed that Durano III acquired the property with full knowledge of
respondents' occupancy thereon. There even appears to be undue haste in the
conveyance of the property to Durano III, as the bulldozing operations by
Durano & Co. were still underway when the deed of sale to Durano III was
executed on September 15, 1970. There is not even an indication that Durano
& Co. attempted to transfer registration of the property in its name before it
conveyed the same to Durano III.

In the light of these circumstances, petitioners could not justifiably invoke

the defense of indefeasibility of title to defeat respondents' claim of ownership
by prescription. The rule on indefeasibility of title, i.e ., that Torrens titles can be
attacked for fraud only within one year from the date of issuance of the decree
of registration, does not altogether deprive an aggrieved party of a remedy at
law. As clarified by the Court in Javier vs. Court of Appeals 31 —
The decree (of registration) becomes incontrovertible and can no longer be
reviewed after one (1) year from the date of the decree so that the only remedy of
the landowner whose property has been wrongfully or erroneously registered in
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 another's name is to bring an ordinary action in court for reconveyance, which is an
action in personam and is always available as long as the property has not passed to
an innocent third party for value. If the property has passed into the hands of an
innocent purchaser for value, the remedy is an action for damages.

In the instant case, respondents' action for reconveyance will prosper, it

being clear that the property, wrongfully registered in the name of petitioner
Durano III, has not passed to an innocent purchaser for value.

Since petitioners knew fully well the defect in their titles, they were
correctly held by the Court of Appeals to be builders in bad faith.

The Civil Code provides:

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

Art. 450. The owner of the land on which anything has been built, planted or
sown in bad faith may demand the demolition of the work, or that the planting or
sowing be removed, in order to replace things in their former condition at the
expense of the person who built, planted or sowed; or he may compel the builder or
planter to pay the price of the land, and the sower the proper rent.

Art. 451. In the cases of the two preceding articles, the landowner is entitled to
damages from the builder, planter or sower.

Based on these provisions, the owner of the land has three alternative
rights: (1) to appropriate what has been built without any obligation to pay
indemnity therefor, or (2) to demand that the builder remove what he had built,
or (3) to compel the builder to pay the value of the land. 32 In any case, the
landowner is entitled to damages under Article 451, abovecited.

We sustain the return of the properties to respondents and the payment

of indemnity as being in accord with the reliefs under the Civil Code.
On petitioners' fifth assignment of error that respondents had not proved
the existence of improvements on the property by preponderance of evidence,
and that the damages awarded by the lower courts were excessive and not
actually proved, the Court notes that the issue is essentially factual. Petitioners,
however, invoke Article 2199 of the Civil Code which requires actual damages
to be duly proved. Passing upon this matter, the Court of Appeals cited with
approval the decision of the RTC which stated:
The counter claimants made a detail of the improvements that
were damaged. Then the query, how accurate were the listings,
supposedly representing damaged improvements. The Court notes,
some of the counter claimants' improvements in the tax declarations
did not tally with the listings as mentioned in their individual affidavits.
Also, others did not submit tax declarations supporting identity of the
properties they possessed. The disparity with respect to the former and
absence of tax declarations with respect to the latter, should not be a
justification for defeating right of reimbursement. As a matter of fact,
no controverting evidence was presented by the plaintiffs that the
improvements being mentioned individually in the affidavits did not
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 reflect the actual improvements that were overran by the bulldozing
operation. Aside from that, the City Assessor, or any member of his
staff, were not presented as witnesses. Had they been presented by
the plaintiffs, the least that can be expected is that they would have
enlightened the Court the extent of their individual holdings being
developed in terms of existing improvements. This, the plaintiffs
defaulted. It might be true that there were tax declarations, then
presented as supporting documents by the counter claimants, but then
mentioning improvements but in variance with the listings in the
individual affidavits. This disparity similarly cannot be accepted as a
basis for the setting aside of the listing of improvements being
adverted to by the counter claimants in their affidavits. This Court is
not foreclosing the possibility that the tax declarations on record were
either table computations by the Assessor or his deputy, or tax
declarations whose entries were merely copied from the old tax
declarations during the period of revision. (RTC Decision, p. 36,
Records, p. 862) 33

The right of the owner of the land to recover damages from a builder in
bad faith is clearly provided for in Article 451 of the Civil Code. Although said
Article 451 does not elaborate on the basis for damages, the Court perceives
that it should reasonably correspond with the value of the properties lost or
destroyed as a result of the occupation in bad faith, as well as the fruits
(natural, industrial or civil) from those properties that the owner of the land-
reasonably expected to obtain. We sustain the view of the lower courts that the
disparity between respondents' affidavits and their tax declarations on the
amount of damages claimed should not preclude or defeat respondents' right
to damages, which is guaranteed by Article 451. Moreover, under Article 2224
of the Civil Code:
Temperate or moderate damages, which are more than nominal
but less than compensatory damages, may be recovered when the
court finds that some pecuniary loss has been suffered but its amount
cannot, from the nature of the case, be proved with certainty.

We also uphold the award of litigation expenses and attorney's fees, it

being clear that petitioners' acts compelled respondents to litigate and incur
expenses to regain rightful possession and ownership over the disputed
property. 34

The last issue presented for our resolution is whether petitioners could
justifiably invoke the doctrine of separate corporate personality to evade
liability for damages. The Court of Appeals applied the well-recognized principle
of "piercing the corporate veil," i.e ., the law will regard the act of the
corporation as the act of its individual stockholders when it is shown that the
corporation was used merely as an alter ego by those persons in the
commission of fraud or other illegal acts.
The test in determining the applicability of the doctrine of piercing the veil
of corporate fiction is as follows:

1. Control, not mere majority or complete stock control, but

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 complete domination, not only of finances but of policy and
business practice in respect to the transaction attacked so
that the corporate entity as to this transaction had at the
time no separate mind, will or existence of its own;

2. Such control must have been used by the defendant to

commit fraud or wrong, to perpetuate the violation of a
statutory or other positive legal duty, or dishonest and unjust
acts in contravention of plaintiff's legal rights; and

3. The aforesaid control and breach of duty must proximately

cause the injury or unjust loss complained of.

The absence of any one of these elements prevents "piercing the

corporate veil." In applying the "instrumentality" or "alter ego" doctrine, the
courts are concerned with reality and not form, with how the corporation
operated and the individual defendant's relationship to that operation. 35

The question of whether a corporation is a mere alter ego is purely one of

fact. 36 The Court sees no reason to reverse the finding of the Court of Appeals.
The facts show that shortly after the purported sale by Cepco to Durano & Co.,
the latter sold the property to petitioner Ramon Durano III, who immediately
procured the registration of the property in his name. Obviously, Durano & Co.
was used by petitioners merely as an instrumentality to appropriate the
disputed property for themselves.

WHEREFORE, the instant petition is DENIED. The decision of the Court of

Appeals is MODIFIED to declare respondents with claims to the properties
covered by Transfer Certificate of Title Nos. T-103 and T-104 owners by
acquisitive prescription to the extent of their respective claims. In all other
respects, the decision of the Court of Appeals is AFFIRMED Costs against
petitioners.

SO ORDERED.

Melo, Vitug and Panganiban, JJ., concur.

Purisima, J., took no part.

Footnotes

1. With the exception of Rufino Lavador, Jose de Calzada and Cosme Ramos,
who respondents in their Answer before the trial court declared were only
witnesses for respondents, not claimants to the disputed property. RTC
Decision, 3; Records of the Case.
2. CA Decision; Rollo, 48-49.
3. RTC Decision, 2; Records of the Case.
4. CA Decision; Rollo, 49-55.

5. Ibid., 55.
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 6. Ibid., 50-54.
7. CA Decision; Rollo, 56-58.
8. Ibid.; Rollo , 58.
9. RTC Decision: Rollo, 114.

10. Ibid., 111.

11. "Submission of Copies of Some Missing Exhibits of Plaintiffs" dated June 29,
1988 (Records of the Case, 774-775) cited in CA Decision; Rollo , 60.
12. CA Decision; Rollo , 60.
13. Ibid.; Rollo, 67. Written by Associate Justice B. A. Adefuin-de la Cruz, with
Acting Presiding Justice Fidel P. Purisima and Associate Justice Ricardo P.
Galvez concurring.

14. 137 SCRA 797.

15. 208 SCRA 887.
16. Philippine Commercial and Industrial Bank vs. Court of Appeals, 159 SCRA
24.
17. CA Decision; Rollo , 64-65.

18. Civil Code, Art. 1117.

19. Id., Art. 1134.
20. Id., Art. 526.
21. Id., Art. 1129.
22. Id., Art. 1138.
23. RTC Decision; Rollo , 80.
24. See note 12.

25. Mallilin vs. Castillo, G.R. No. 136803, June 16, 2000; Eduarte vs. Court of
Appeals, 311 SCRA 18; P.D. 1529, Sec. 48.
26. Rules of Court, Rule 131, Sec. 3(e).
27. P.D. 1529 Sec. 112.

28. Gallardo vs. Intermediate Appellate Court, 155 SCRA 248.

29. Republic vs. de Guzman, G.R. No. 105630, February 23, 2000; Embrado vs.
Court of Appeals, 233 SCRA 355.
30. St. Peter Memorial Park, Inc. vs. Cleofas, 92 SCRA 389.
31. 231 SCRA 498; reiterated in Heirs of Pedro Lopez vs. de Castro, G.R. No.
112905, February 3, 2000; Millena vs. Court of Appeals, G.R. No. 127797,
January 31, 2000.

32. De Vera vs. Court of Appeals, 305 SCRA 624.

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 33. CA Decision; Rollo, 65-66.

34. Civil Code, Art. 2208.

35. Lim vs. Court of Appeals, G.R. No. 124715, January 24, 2000; Concept
Builders, Inc. vs. NLRC, 257 SCRA 149.
36. Concept Builders, Inc. vs. NLRC, supra.

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