NATY CASTILLO AND ISABELO CASTILLO, PETITIONERS, VS. HON. COURT OF APPEALS AND LAMBERTO L. MANALO, RESPONDENTS.

This is an appeal by way
of certiorari from the decision of respondent Court of Appeals, now
Intermediate Appellate Court, dated January 31, 1978 and from its resolution
dated May 16, 1979, reversing the judgment of the CFI of Manila, Branch XVI in
an unlawful detainer case docketed as Civil Case No.
90719, and affirming the decision of the City Court of Manila, Branch II.

In the City Court of
Manila, Branch II, private res­pondent Lamberto L. Manalo filed a complaint for unlawful detainer
against the petitioners, Naty Castillo and Isabelo Castillo, in Civil Case No. 209267, plaintiff
alleging that he is the true and lawful owner of a two-story house situated at
921-A R. Papa Extension, Sampaloc, Manila; that
herein parties entered into an oral contract of lease whereby plaintiff leased
unto defendants the ground floor and mezzanine of his aforementioned house for
a monthly rental of P70.00; that on or about December 29, 1971, plaintiff
personally and orally notified defendants that he is terminating the said
contract of lease for the reason that he is going to make some repairs in said
premises where he and his family will transfer and reside; that upon request of
herein defendants, plaintiff allowed them and their family to stay and reside
in the subject premises until January 31, 1972 so as to afford them time to
look for another residence where they can transfer; that despite the lapse of
the grace period and demands made upon them to vacate the subject premises,
they failed and refused to vacate the premises to
plaintiff’s prejudice and damages at the rate of P70.00 a month, representing
the fair rental value of the premises. 
He further prayed for moral damages, exemplary damages and attorney’s
fees.

On February 15, 1972,
defendants Castillos filed their Answer with
Affirmative Defenses and Counterclaim wherein defendants alleged that they have
no knowledge sufficient to form a belief as to the truth of the material
averments in par. 2 of the complaint and specifically deny the same, the truth
of the matter is that plaintiff is not the owner of the two-story house as well as the lot where said house now stands,
as the aforesaid house was built and constructed by defendants out of the loose
materials and debris of the last World War II and made it fit for human
habitation, till the present; the land is a public land under the Bureau of
Buildings and Real Property Management of the government.  They further alleged no knowledge sufficient
to form a belief as to the truth of the material averments in par. 3, 4, 5, 6,
7, 8, 9 and 10 of the complaint and, therefore, specifically denied the
same.  The truth of the matter are stated
in the affirmative defenses that plaintiff has misrepresented to the Bureau of
Buildings and Real Property Management that he is the present occupant; that he
bought his right from another person; and that he is qualified to acquire the
same.  They further claim that they have
a preferential right to acquire the land and that the award to the plaintiff is
under protest and investigation, hence the complaint is pre­mature.  As counterclaim, defendants sought damages
and attorney’s fees.

After trial, the City
Court made the following findings of facts:

“From the evidence adduced, it was shown that plaintiff is the
owner of a two-storey house situated at 921-A R. Papa Extension, Sampaloc, Manila.  The said house was erected on a lot
identified as Lot No. 1-b-3 of the C. Lerma and R.
Papa Subdivision, subdivision plan Psd-98921. 
Adjacent to the house of the plaintiff is another two-storey house
belong­ing to Federico Verzosa and identified as No.
921 R. Papa Extension, Sampaloc, Manila.  This house belonging to Federico Verzosa is situated on Lot No. 1-B-5 and at the same time
encroaches on a portion of Lot
No. 1-B-3 which is occupied by the plaintiff.

Then the Philippine Government awarded Lot
1-B-3 to the plaintiff.  Federico Verzosa sold that portion of his house which encroached Lot 1-B-3 to the plaintiff
as evidenced by Exhibit “A”. 
Thereafter, that portion of Federico Verzosa’s
house which was sold to the plaintiff became part and parcel of that house
owned by the plaintiff.  Defendants came
to occupy the ground floor, the
mezzanine as well as the portion bought from Federico Verzosa
by the plaintiff at a monthly rental of P70.00.

On December 29, 1971,
plaintiff verbally notified the defendants that he wanted the premises leased
to them vacated, because he wanted to make repairs, thereon preparatory to his
moving in together with his family. 
Defendants pleaded to the plaintiff to allow them to stay until the end
of January, 1972 to enable them to look for another place to transfer.  Such request on the part of the defendants
was granted by the plaintiff.

When January 31, 1972
came, however, de­fendants refused to vacate the aforesaid pre­mises as well as
pay rentals thereon from January, 1972 up to the present.  Hence, this case is filed before this Court
thru counsel on whom plaintiff obligated himself to pay the amount of P1,000.00 as attorney’s fees.

Upon the other hand, defendants claim that sometime in 1946,
Federico Verzosa built a house on the one-half
portion of his lot.  The other half was
left vacant.  Sometime in 1957, they
sought permission from Verzosa to build a house on
the vacant lot.  Verzosa
consented to defendants’ request to build on the vacant portion of his lot at a
monthly rental of P20.00.  Later on, this
house constructed by the defendants was demolished as Mr. Verzosa
made an extension which overlapped the house built by the defendants.  The defendants contend that what they leased
from Federico Verzosa was the use of the one-half
vacant lot belonging to Verzosa while the house which
they constructed thereon was theirs.

The Court cannot agree with the posture taken by the
defendants.  In the first place, Exhibit
“A” clearly shows that what Federico Verzosa
conveyed in favor of the plaintiff was that portion of the house ‘encroaching
on Lot No. 1-B-3 of subdivision plan Psd-98921, free from all liens and
encumbrances,’ (Vide:  1st par., page 2
of Exh. “A”).  If so, and as claimed by the defendants that
they were the owners of the house, why did they not charge Verzosa
criminally in court?  Why did they not
hold Verzosa on his warranty against eviction?

In the second place, Federico Verzosa’s
testimony the first time he testified before this Court is very clear.  Thus:

‘ATTY. MANALO:

xxx            xxx                   xxx

Q
– And what portion of your house was being occupied by the defendants?

A
– The ground floor and the mezzanine and also the extension of the house.

Q
– And what is the relation of this house of yours, the ground floor, the mezzanine
and the extension which are being occupied by the defendants, to that portion
of your house which you sold to Mr. Lamberto Manalo?

xxx            xxx                   xxx

COURT:

They are occupying the portion of the house sold to the plaintiff?

A – Yes.

COURT:

Is that clear?

A
– Yes, very clear, Your Honor.’

(tsn,
pp. 3-4; 12-13, Hearing of July 11, 1972).

So it is clear that the defendants were oc­cupying that portion of
the house belonging to Verzosa which the latter sold
to the plaintiff per Exhibit “A”.

In the third place – and this is quite important – the defendants
waived the cross examination of the plaintiff! 
Why?  Is it because the plaintiff
was telling the truth and that cross-examination of the witness would prove damaging
to the cause of the defendants?

In the fourth place, the turn-about made by the witness, Federico Verzosa, on July
13, 1972 weakens rather than strengthens the case for the
defendants.  For instance, note the
surprising turn-about of the witness the second time he was placed on the
witness stand.  When asked, he answered
thus –

‘Q – Mr. and Mrs.
Castillo, the defendants were occupying the ground floor of your 2-storey
house?

A – Yes.

Q – And they are occupying the ground
floor as your lessee?

A – Yes, of course.’

This later version of the witness could not be believed by this
Court, as very probably that the witness had conferred with the de­fendants which actuated him to make a turnabout.  Moreover, his testimony on July 11, 1972 was more in conformity
and in consonance with Exhibit “A”. 
(El Hogar Filipino vs. Olviga,
60 Phil. 17).

Again, the defendants interposed the defense that the house claimed
by the plaintiff is theirs.  However, there is the
judicial admission of defendants that the lot whereon the house leased
by them from the plaintiff has been awarded by the government to the herein
plaintiff.  (Answer,
par. 2 of Affirmative
Defenses).  Moreover, the cogent
and simple explanation of the plaintiff as to the ownership of the
house belongs to the plaintiff.”

Based on the above findings of facts, the City Court rendered judgment
in favor of the plaintiff and against the defendants, in the following wise and manner:

“IN VIEW OF THE FOREGOING, judgment is hereby rendered in favor of the plaintiff and against the defendants, to wit:

(1) Ordering the
defendants or any person claiming right under them to vacate the premises and
restore possession of the same to the plaintiff;

2)  Ordering the defendants to pay plaintiff the
sum of P840.00 representing the accrued rentals from
January to December, 1972 with legal rate of interest from the time said amount became due and demandable
until the same is fully paid and satisfied; and the further sum of P700.00 a
month thereafter until said defendants or any person or persons claiming right
under them vacate the premises in question;

(3) Ordering the
defendants to pay attorney’s fees in the amount of P200.00 and to pay the costs
of suit.

SO ORDERED.

Manila, January 17, 1973.

 s/ Jose B. Herrera

t/ JOSE B. HERRERA

Judge”

On January
21, 1974, the Court
of First Instance rendered its Decision dismissing plaintiff’s case without
finding as to damages and attorney’s fees and costs.  The Court said:

“There is no question that in a document executed between
Federico Verzosa and the plaintiff, Lamberto L. Manalo, Verzosa sold his house
to plaintiff.  The records of this case
show that the lot on which the house is located
belongs to the government and that Verzosa was a
lessee or an awardee from the government of said lot,
the other portion remaining vacant.

On August 1957 the evidence shows that the defendant-spouses Castillos asked per­mission from Verzosa
to build a barong-­barong on the vacant portion.  This was granted and the barong-barong was
constructed with the help of a carpenter Pedro Peredo, and for the
occupancy defendants were paying Federico Verzosa a
monthly rental of P20.00.

During the trial of this case before the lower Court, Federico Verzosa was pre­sented as a witness for the plaintiff.  He admitted having sold the house to the
plain­tiff in accordance with the deed of sale exe­cuted on September 30, 1971.

Verzosa also was a witness for the de­fendants.  In his testimony he clarified his declaration
as plaintiff’s witness to the effect that what he sold to the plaintiff was
only the extension of his house that covered the roof of the barong-barong of
the defendants.  He described how, during
the negotiations with Francisco Manalo, father of the
plaintiff, he definitely indi­cated to the buyer the portion or the subject
matter of the deed of sale which Verzosa was selling
to Manalo.

In this connection, it should be mentioned that Verzosa
extended his house over the roof­ing of the barong-barong constructed by the
defendants.  When this happened, the
defendants demolished their barong-barong and constructed their own, the
present groundfloor and the mezzanine.  The same carpenter who testified constructing
the barong-barong also testified that he constructed the mezzanine.

The plaintiff now claims that what he bought was part of the upper
storey and the ground floor.  The
defendants claim that the groundfloor and the
mezzanine belong to them and were not included in the transaction bet­ween Verzosa and Manalo.

The Court, after reviewing the records of this case including the
transcript of steno­graphic notes and the memoranda submitted by the parties,
is convinced that what was sold by Verzosa was only
the upper second storey over hanging the barong-barong constructed by the Castillos.  Verzosa made this very clear during his testimony as defendants’ witness and even during the
cross-examination when the first testified as plaintiff’s witness that what he
sold was just the portion of the extension of his house overwhelming the roof
of the barong-barong of the defendants. 
He made it clear to Francisco Manalo, father
of the plaintiff, that the groundfloor and the
mezzanine did not belong to him but to the Castillos.

The Court, on reading the testimony of Verzosa,
specifically the portion regarding his explanation as to the matter of the nego­tiation,
sale and indication to the buyer of what he was selling, is convinced that the
truth is that what he sold was only the exten­sion above the house and that the
groundfloor and the mezzanine constructed by the
defendants were not included.”

Plaintiff moved to
reconsider the decision which was opposed by the defendants.  On March 20, 1974, the court denied the Motion for
Reconsideration, the court saying:

“The Court is convinced that its con­clusion and findings in
the decision men­tioned above
are correct and justified.  The crucial
testimony of Federico Verzosa, vendor of the one-half
(1/2) portion of the house to Lamberto Manalo convinces this Court that what was sold by Verzosa was the other half of the house and the extension
thereof under which the defendant Castillos had the
ground floor and the mezzanine.  That Verzosa first testified for the plain­tiff and made some statements upon which plaintiff
relies very heavily was sufficiently clarified and explained by the said
witness when he testified also for the defendant, stating that what he sold was
only the half portion of his house and the extension, but not the land.  He did not sell the groundfloor
occupied by the Castillos because said groundfloor and the mezzanine do not belong to him.  This was sufficiently and clearly conveyed to
Francisco Manalo who was acting as representative of Lamberto Manalo during the
several occasions of inspection before the execution of the deed of sale.”

Plaintiff appealed to the
Court of Appeals, assigning the following
errors:  I.  The Court of First Instance of Manila, Branch
XVI erred in disturbing the finding of facts of
the trial court, the City Court of Manila, Branch II; II.  The Court of First Instance of Manila, Branch
XVI erred in holding that what was sold by F. Verzosa
to plaintiff-appellant was only
the upper second-storey overhanging the barong-barong constructed by the Castillos excluding the ground floor and mezzanine subject
matter of this case; III.  The Court of
First Instance of Manila, Branch XVI erred in giving credence to the
testimonies of F. Verzosa given on July 13,
1972.

After the respondent
court considered the procedural deviation from the prescribed procedure for
appeals under R.A. 6031 (which required petition for review) instead of the
ordinary appeal taken by plaintiff-appellant Manalo
in the case at bar, as waived since it was never questioned, the court said:

“The decisive issue is whether the premises in dispute which
is the ground floor and mezzanine of a two storey house owned by Federico Verzosa was sold by the latter to the herein appellant, it
being the claim of appellees that they own said
premises and were therefore not included in the sale, evidenced by a deed of
absolute sale (Exh. A) executed
by Verzosa in favor of appellant Lamberto
L. Manalo.

The main evidence of appellant consisted of the deed of sale (Exh. A), and the testimony of Federico Verzosa given on July 11, 1972.

The deed of sale contains the following stipulation:

‘That for and in consideration of the sum of THREE THOUSAND EIGHT
HUNDRED SEVENTY EIGHT PESOS & 20/100 (P3,878.20), Philippine Currency,
receipt of which in full by herein VENDOR from the VENDEE is hereby
acknowledged, the VENDOR hereby SELLS, TRANSFERS and CONVEYS, by way of
absolute sale, unto and in favor of the VENDEE, his heirs, successors and
assigns, all his rights, interests, and participations over the whole por­tion
of his above-mentioned house en­croaching on Lot No. 1-B-3 of subdivi­sion plan
Psd-98921 free from all liens and encumbrances.’

Relevant portions of the testimony of Federico Verzosa is quoted as follows:

‘Q.   And on September 13, 1971, do you remember
having executed a deed of absolute sale, which I am showing to you which was
marked as Exhibit ‘A’?

A.    Yes, I do.

Q.   And this is the deed of
absolute sale?

A.    Yes.

ATTY. MANALO:

I would like to make of record, Your Honor,
that this deed of absolute sale which was identified by Mr. Verzosa
as the deed of absolute sale he executed on September 13, 1971 in favor of Lamberto
Manalo, was already marked as Exhibit A, Your Honor,
during the first hearing, Your Honor.

Q.   And you own the house . .
. the subject matter of this deed of absolute sale is a portion of the house
situated at R. Papa, Manila?

A.    One-half of my house.

Q.   And that portion of your
house is that which is as stated in this absolute sale is erected on Lot No.
1-B-3?

A.    Yes.

Q.   Plan Psd-98921?

A.    Yes.

Q.   Now, do you know
defendants Mr. Isabelo Castillo and Mrs. Naty Castillo?

A.    Yes, sir, I know them.

Q.   And this Naty Castillo . . . How did you come to know them?

A.    Well, they had been
occupying my house for the last 15 years.

Q.   And what portion of your
house was being occupied by the defendants?

A.    The ground floor and the
mezzanine and also the extension of the house.

A.    And what is the relation of this house of yours, the ground floor,
the mezzanine and also the extension which are being occupied by the de­fendants
to that portion of your house which you sold to Mr. Lamberto
Manalo?

A.   That is within the
portion of the house I sold . . . inside of the portion of the house I sold to Lamberto Manalo.

x x
x

COURT:

Did that make the ground floor the property
of defendant-spouses?

A.    No, I would like to
clarify this matter, Your Honor.  Since I
own the house of course, the ground floor is mine, since I was the one who
owned the house.  Now later on, because
these streets were flooded, Mr. & Mrs. Castillo elevated the ground floor
by cementing them.

COURT:

And
why were the spouses there at that time?  Were they the tenants in the property?

A.    Yes, they have been renting my house.

COURT:

You
mean to say the house mentioned in this Exhibit
“A”?

A.    Yes, I am referring
to this portion of the house which I sold to Mr. Lamberto
Manalo.  Now,
that portion . . .  For example my house
is as big as this (referring to the entire session room or
courtroom), it was divided into two.  I
sold the half portion of the house of Mr. Lamberto Manalo and I retained the ownership of the other part of
the house.  So what I was referring now,
Your Honor, is this portion, not that one.  This ground floor.

COURT:

They
are occupying the portion of the house sold to the plaintiff?

A.    Yes.

Is
that clear?

A.    Yes, very clear, Your Honor.  (t.s.n., July 11,
1972, pp. 3-4, 8-9 and 12-13, Civil Case No. 209267, Lamberto
Manalo vs. Naty Castillo,
et al. City Court of Manila, Branch II)’

From the deed of sale and
Verzosa’s testi­mony, there can hardly be any doubt
that the ‘whole portion’ of the house standing on Lot 1-B-3 the right to buy
which was awarded to appellant by the Bureau of Buildings and Real Property
Management, was sold by appellant.  This
means the entire two-storey house of Ver­zosa, the
vendor, including the ground floor and mezzanine of said house which are the
premises claimed by appellees as not included in the
sale because they do not belong to the vendor but to them.

As may be seen from Verzosa’s
testimony, the premises in dispute, the ground floor mezzanine floor, has been
occupied by appellees for the last 15 years, as
tenants of Verzosa, paying rentals therefor.  Verzosa referred to them as portions of his house.  Thus –

‘And what portions of your house was being occupied by the
defendants?

‘The ground floor and the mezzanine and also
the extension of the house.’

That the parties to the sale knew the exact extent of the
property sold, and the intent to sell the same, on the part of the vendor, and
to buy it, on the part of the vendee, could also be easily inferred from the
evident purpose of the vendee in buying the house, standing on the lot awarded
to him by the Government.  He could not
have wished to buy only the upper portion, excluding the lower portions, as what appellees
want the court to believe, through the sub­sequent testimony of Verzosa which was, in effect,
a recantation of his earlier testimony given when called as appellant’s
witness.  For in his testimony as
defendant’s witness, he disclaims ownership of the disputed premises, pointing
to appellees as the owners, in direct contradiction
to what he stated earlier that ‘the ground floor and mezzanine’ are portions of
his house.”

The court further noted that in their Answer, the Cas­tillos did not deny directly and specifically par. 3 of
the complaint wherein it is alleged that the parties entered into an oral
contract of lease of the ground floor and mezzanine of the house for a monthly
rental of P70.00 as they merely averred having “no knowledge sufficient to
form as to the truth thereof”.  They
should have made a specific denial of the lease contract with respect to the
ground floor and mezzanine because they own said premises.  This circumstance tends strongly to negate
the Castillos‘ claim of ownership of the disputed
premises, especially con­sidering that when asked to vacate the premises, they
asked for a grace period of more than a month, that is, up to January 31, 1972
for them to look for another residence, which the plaintiff Manalo
granted.  The appellate court further
relied on the rule that where the witness makes two conflicting testimonies,
the trial court’s appraisal as to
which is more credible is as a
rule strongly persuasive upon the appellate court for having had the
opportunity to personally observe the witness’ demeanor and deportment while testifying,
which appellate courts do not have.

Petitioners (defendants-appellees
below) filed a Motion for Reconsideration on the following grounds:  (1) The true and genuine issue is whether or not defendants-appellees
are the owners of the premises in question which appears to have been included
in the deed of sale (Exhibit A) and not whether or not the premises in question
are included in said deed of sale (Exh. A) and (2) The testimony of Federico Verzosa
when he testified as witness for the defendants-appellees
is more credible and probable under the circumstances than the testimony of
said Federico Verzosa when he testified as witness
for plaintiff-appellant.

In a minute resolution dated April
25, 1978, respondent
Court of Appeals denied the Motion for Reconsideration.

A Second Motion for
Reconsideration was then filed May 22, 1978, followed with a Supplement and/or Addenda
to the Second Motion for Reconsideration.

In the Resolution dated May 16,
1979, the respondent
appellate court again denied the Second Motion for Reconsideration, and We quote the rationale of the Resolution, to wit:

“As stated in our
decision, the decisive issue is whether the ground floor and mezzanine of a two
storey house owned by Federico Verzosa was sold by
him to the appellant.  We held in the
affirmative upon the following considerations: 
(1) from the deed of sale and Verzosa’s
testimony it is clear that the ground floor and mezzanine of Verzosa’s house were included in the sale to the appellant;
(2) Verzosa testified that the appellees
have been his tenants on the ground floor and mezzanine for fifteen (15) years;
(3) the parties to the sale knew the exact extent of the property sold, and the intent to sell the ground floor and the mezzanine, on the part
of the vendor, and to buy it, on the part of the vendee, could also be easily
inferred from the evident purpose of the vendee in buying the house, standing
on the lot awarded to him by the Government; (4) in their answer appellees did not directly and specifically deny the allegation
in the complaint that after the appellant had
bought Verzosa’s house they ‘entered into an oral
contract of lease whereby plaintiff leased unto
defendants the ground floor and mezzanine of his aforementioned house for a
monthly rental of seventy pesos (P70.00)’; (5) in their motion to dismiss filed
after the filing of their answer, appellees admitted
the existence of the oral contract of lease with the appellant; (6) the undenied allegation and proof show that when asked to
vacate the premises, appellees asked for a grace
period of more than a month, that is, up to January 31, 1972, for them to look
for another residence, which appellant granted. 
Our decision rejected the testimony of Verzosa on July 13, 1972, recanting his testimony on July 11,
1972 and saying that
he did not sell to the appellant the ground floor and mezzanine in question.

In their first motion for
reconsideration, appellees urged upon this Court the
discredited testimony of Verzosa to the effect that
his sale to the appellant did not include the questioned ground floor and
mezzanine.  We rejected said testimony
and denied the first motion for reconsideration.  Appellees admit in
their second motion for reconsideration that they are just repeating the
arguments in their first motion for reconsideration, which is anchored on the
twice-discredited testimony of Verzosa.  No new argument is advanced to justify a
reversal of our decision.  The findings
which are enumerated above, on which our decision was based, have not been
assailed either in the first or in the second motion for reconsideration.

The view of the minority
is that the decision of the Court of First Instance is irreviewable,
and the same has attained finality, because it is presumably supported by
substantial evidence.  We cannot adopt
this view.  Substantial evidence has been
defined to be such relevant evidence as a reasonable mind might accept as
adequate to support a conclusion.  (Picardal vs. Lladas,
21 SCRA 1483).  The factual
finding of the court below, which our decision reversed, is not sup­ported by
substantial evidence because the tes­timony on which it was based is
untrue.”

As indicated above, the
minority view is articulated in the dissenting opinion of Justice Corazon Juliano Agrava with the
concurrence of Justice Oscar R. Victoriano wherein
two basic principles were set forth:  (1)
That even if the case is resolved by the court through a Record on Appeal,
instead of by Petition for Review, still the appeal should be substantially
considered as if it were a proceeding where plaintiff’s petition for review has
been given due course; and (2) That in accordance with the philosophy of R.A.
6031, the decision of the Court of First Instance should not be disturbed in
the appellate tribunal if it is supported by substantial evidence and is not
contrary to law.

We find the recital of
the facts and issue and the evi­dence clearly and simply explained that it is
well and useful in Our review to quote the pertinent
dissent:

“3.
FACTS AND ISSUE.  – The
factual background of this case may be explained as follow:  In a subdivision in Manila
owned by the Government, and which is to be sold to private citizens, there are
two contiguous lots, 1-B-3 (Lot 3) and 1-B-5 (Lot
5).  About 1957, Lot
5 had already been awarded to Federico Verzosa, and
he had built a house of two stories thereon, one side of which was on the
border line between Lot 5 and Lot
3.  Lot 3 was then
vacant, and had not yet been awarded to
anybody.  Defendants approached Verzosa and, with his permission, built a barong-barong on Lot
3 adjoining the side of Verzosa’s house.  The barong-barong did not rise beyond the
first storey of Verzosa’s house.  Later on, Verzosa
extended the second floor of his house into Lot 3 over
the barong-barong.  Still later on,
defendants improved the barong-barong by cementing the ground floor and
building a mezzanine (hereinafter called the STRUCTURE).

Lot 3 was subsequently awarded to plain­tiff,
and on September 13, 1971,
he purchased the part of the house built by Verzosa
on Lot 3 (Exh. A).  What was sold was
the ‘portion of (Verzosa’s) house encroaching on (Lot
3)’ (ROA, p. 48).  On February 8, 1972, plaintiff filed suit
for ejectment against defendants, alleging that he
himself wanted to reside in what he had purchased from Verzosa.

The real issue between the parties was whether the STRUCTURE was
owned by defendants and, hence, could not be sold by Verzosa
to plaintiff.

4. THE EVIDENCE.  – The
evidence of defendants was to the effect that they are the owners of the
STRUCTURE.  On the other hand, plaintiff
relied on the sale made to him by Verzosa of the part
of the latter’s house built on Lot 3.

Plaintiff, having the burden of proof in the unlawful detainer case, placed Verzosa on
the witness stand and the latter testified on July 11, 1972 that what he had
sold to plain­tiff was the entire part of his house built on Lot 3; that is, inclusive of
the STRUCTURE.  Two days
afterwards, on July 13, 1972,
when it came to defendants’ turn to present evi­dence, they also presented Verzosa on the wit­ness stand.  This time, ‘Verzosa
declared that the STRUCTURE was really owned by defendants which he did not
sell to plaintiff.

x x x                                  x x x                             x x x

6. BASIS OF THIS COURT’S JUDGMENT.  – The writer believes
that the decision of this Court of January 31, 1978 was erroneous, as Justice
de Castro had finally realized, and it should be set aside.  The judgment of
the Court of First Instance is supported by substantial evidence and is not
against the law.

The testimony of Verzosa in favor of plaintiff was as follow:

‘Q.   And
what is the relation of this house of yours, the ground floor, the mezzanine
and the extension which are being occupied by the defendants, to that portion
of your house which you sold to
Mr. Lamberto Manalo?

A.    That
is within the portion of the house I
sold . . . inside of the por­tion of the house I sold to Lam­berto
Manalo.’ (ROA, p. 31).

The testimony of Verzosa in favor of
defendants was as follow:

‘Q.
  Now, after those improvements in the
ground floor, with the mezzanine, the extension of Mrs. Cas­tillo, do you
consider that portion still belongs to you?

A.
   Ever since 1957 I considered them the
owner of this ground floor.

Q.
  How about the mezzanine?

A.    Of
course, and those improvements.  (Tsn, p. 30, July 13, 1972, F. Verzosa)’ (ROA, pp. 55-56).

A.
   Long before I signed the deed of sale,
I have stated before, I had the occasion of meeting Mr. Francisco Manalo, pointing to him all those improvements made by the Castillos, that the ground floor, the mezzanine, the
walling and the extension of the mezzanine in front below to the Castillos‘ ground floor and showed to him per­sonally that
these are not mine but belongs to the Castillos.’ (ROA, p. 56).

Q.
  And you even mentioned this portion of Exh. 1-B.  You testified before that Exhibit B-1 is the
whole por­tion you sold to Mr. Lamberto Manalo is that true?

A.    No.  I was referring to the second floor.

Q.
  You mean to stay after two days, after
testifying before this Honorable Court last July 11, now you are changing your
stand after the lapse of 2 days?

Atty.
Reyes:        

I think there was no inconsistency.

A.    I
am not denying that I did not sell the house but I am referring that I only sold the second storey in the
amount of P3,878.20. 
Other­wise, I would not have agreed to this amount had I sold all of the
ground floor.’ (Tsn, p. 35,
Federico Verzosa, July 13, 1972).’ (ROA, pp. 57-58).

Q.
  And as you testified before, what you
sold to Lamberto Manalo is
the 2 storey house occupying Lot 1-B-3, isn’t it?

A.
   I am referring only, your Honor, to the
upper portion.  Because
I have been pointing to him already before I signed the deed of sale, to Mr.
Francisco Manalo that the ground floor does not
belong to me.  It belongs to the Castillos.  So when I
signed the deed of sale, I was referring to the whole upper portion of the
second floor.  How could I sell the thing
which does not belong to me?’ (Tsn,
p. 37, F. Verzosa, July 13, 1972).’ (ROA, p. 58).

In view of the above testimony of Verzosa,
it cannot be said that the judgment of the Court of First Instance is not
supported by substantial evidence.  It is
not for this appellate tribunal to re-weigh the conflicting evidence.  And if We could
re-weigh, We should find in favor of defendants.

Moreover, it should be clear that the testimony of Verzosa, as a witness for plaintiff, can be deemed as having
been given on direct examination.  Verzosa’s testimony, as a witness for de­fendants, should
be viewed as given on cross examination. 
Evidence given on direct examination as a rule, cannot prevail over that
given on cross examination.

Defendants, as owners of the STRUCTURE can be proceeded against,
not through unlawful detainer, but through an action
against a possessor in good faith who has a right of retention until proper reimbursement
is made.”

Petitioners having appealed to Us by way
of certiorari, We required comment from private respondents which was
com­plied accordingly.  Petitioners then
filed their reply (Rollo, pp. 191-193), attaching
thereto as Annex “A” a joint affidavit of Justice Corazon Juliano-Agrava and Justice Pacifico
P. de Castro in connection with the comment of private respondent, which is
self-explanatory, reading as follows:

“REPUBLIC OF THE
PHILIPPINES) S.S.

 CITY OF MANILA                 )

JOINT AFFIDAVIT

WE, Justice CORAZON JULIANO AGRAVA and Justice PACIFICO P. DE
CASTRO, Filipinos, married and residents of Metro Manila, after haying been
duly sworn to in accordance with law, herein-below depose and state:

1. We are executing this Joint Affidavit
in connection with the Comment of private respondent in G.R. No. L-48290, ‘Naty Castillo, et
al. vs. Court of Appeals, et al.’ We refer in
particular to that part of the Comment which reads as follows:

Petitioners likewise at the outset, kept on repeating the
observation of Honorable Justice Corazon Juliano Agrava to the effect that Justice Pacifico
de Castro, then one of the justices of the Court of Appeals, reconsiders his
original stand in the case at bar.  With
due respect to Honorable Justice Agrava, it refers
only to her own observation, not the stand itself of Justice de Castro.  Justice de Castro never positively stated
that he is reconsidering his position on the case.  It was Justice Agrava
who said that Justice de Castro changed his stand, not Justice de Castro
himself.

Thus, it becomes necessary to set the
record straight and affirm the truth as to the posi­tions taken by Justice Pacifico P. de Castro while the Castillo case was
still in the Court of Appeals.

2.     
Justice Pacifico P. de
Castro was the ponente in CA-G. R. No.
55692-R, “Manalo vs. Castillo, et al.”, in
the Court of Appeals.  At first, Justice
de Castro took the position that the judgment of the Court of First Instance of
Manila may and should be reversed, and that the decision of the City Court may
and should be affirmed, which position of Justice de Castro is reflected in the
Decision of January 31, 1978
in CA-G.R. No. 55692-R.

3.      However,
on second motion for reconsideration of defendants-appellees
in CA-G.R. No. 55692-R, Justice de Castro changed his previous position.  In fact, he prepared a draft opinion in favor
of granting such second motion for reconsideration, upon the premise, among
others, that the judgment of the Court of First Instance is supported by
substantial evidence and is not against the law.  Justice de Castro’s aforementioned draft
opinion was accordingly attached to the rollo
or expediente of CA-G.R. No. 55692-R.  Justice
Corazon Juliano Agrava
(who had taken the place of Justice Vicente M. Santiago, Jr.) concurred with
Justice de Castro, but Presiding Justice Reyes dissented.  A Division of Five was created with Associate
Justices Crisolito Pascual
and Mariano Serrano being selected to be the additional Justices.  When Justice de Castro was elevated to the Supreme Court, he was substituted in the
Division of Five by Justice Oscar R. Victoriano.  It then turned out that Justices Andres
Reyes, Mariano Serrano and Crisolito Pascual were in favor of denying the second motion for
reconsideration, as reflected in the Resolution of May 16, 1979. 
Justice Victoriano voted, along with Justice Agrava, to grant the second motion for recon­sideration.  Necessarily, Justice Agrava
had to write her own separate dissenting opinion with which Justice Victoriano concurred. 
As for the draft opinion of Justice de Castro which he had prepared
before the creation of the Division of Five and before he was elevated to the
Supreme Court, it seems that the same could no longer be found in the rollo or expediente of CA-G.R. No. 55692-R in the Court of
Appeals.

4.      It is clear, therefore, that Justice de
Castro reconsidered his original stand in the Court of Appeals in CA-G.R. No.
55692-R, and the observations of Justice Agrava on
the history of the case, as set forth in the Dis­senting Opinion, are true and
correct.

AFFIANTS FURTHER SAYETH NAUGHT.

(Sgd.) PACIFICO P. DE CASTRO

Affiant

(Sgd.) CORAZON JULIANO AGRAVA

Affiant”

(Subscription omitted)

In Our Resolution of June 18,
1980, We gave due course to the petition and required both parties
to submit simultaneous memoranda and thereafter, We resolved to declare the
case submitted for decision.

In their appeal to Us, petitioners submit the following assignment of error:

I

THE COURT OF APPEALS ERRED GRAVELY IN
ASSUMING AND EXERCISING APPELLATE JURISDICTION OVER THE CASE DESPITE THE FACT
THAT NO APPEAL WAS PROPERLY TAKEN TO IT.

II

THE MAJORITY OF THREE OF THE SPECIAL
DIVISION OF FIVE OF THE COURT OF APPEALS ERRED GRAVELY IN HOLDING THAT THE
DECISION OF THE COURT OF FIRST INSTANCE IN FAVOR OF PETITIONERS IS NOT
SUPPORTED BY SUBSTANTIAL EVIDENCE.

III

ASSUMING
ARGUENDO THAT THE
EVIDENCE IN THE CASE AT BAR COULD BE REWEIGHED,
THE MAJORITY OF THREE ERRED GRAVELY IN NOT FINDING IN FAVOR OF
DEFENDANTS-APPELLEES IN CA-G.R. NO. 55692-R, PETITIONERS
HEREIN.

Since the third assigned
error goes into the merits of the ease, We accord to
it preferential attention and resolution first.

We agree with petitioners
that respondent appellate court committed grave misapprehension of the evidence
and facts on record in reversing the decision of the Court of First Instance of
Manila, which error warrants and justifies the Supreme Court to review said
evidence, it being an excep­tion to the general rule that only questions of law
may be raised in an appeal by certiorari proceedings.  In holding that “there can
hardly any doubt that the ‘whole portion’ of the house standing on Lot
1-B-3 the right to buy which was awarded to appellant by the Bureau of
Buildings and Real Property Management, was sold by appellant.  This means the entire two-storey house of Verzosa, the vendor, inclu­ding the ground floor and
mezzanine of said house which are the premises claimed by appellees
as not included in the sale because they do not belong to the vendor but to
them,” the appellate court gravely erred and abused its discretion.  The conclusion of respondent Court of Appeals
that private respondent was the owner of the disputed premises because he
bought the same from Francisco Verzosa is not correct
in the light of the latter’s clarification that the ground floor and the
mezzanine were not included in the sale as petitioners had built these
improvements and were the owners thereof.

The evidence on record fully
establish that petitioners built their barong-barong
on Lot 3 with the permission from Verzosa.  The barong-barong was constructed with the
help of a carpenter, Pedro Peredo, and for the
occupancy, petitioners were
paying Verzosa a monthly rental of P20.00.  This was in August, 1957.  When Verzosa
extended the house over the roofing of the barong-barong constructed by the
petitioners, the latter demolished their barong-barong and constructed their
own, the present ground floor and the mezzanine.  The same carpenter who testified constructing
the barong-barong also testified that he constructed the mezzanine.  These facts are not disputed, and to Us this evidence is the most vital and material evidence in
determining the ownership of the disputed premises because they prove
petitioners’ right or title by virtue of manual construction and fabrication.

It may be true that Verzosa in his
first testimony as witness for private respondent declared that the ground
floor was his because he own the house but his reasoning and con­clusion was
not correct since petitioners were the ones who constructed or caused the
construction of these improvements with their own funds.

It may also be true that Verzosa in his
reply to the question:  “What is the
relation of this house of yours, the ground floor, the mezzanine and also the
extension which are being occupied by the defendants to that portion which you
sold to Mr. Lamberto Manalo?”
gave this answer:  “This is within
the portion of the house I sold . . . inside of the por­tion of the house I
sold to Lamberto Manalo.”
From this testimony, the respondent Court of Appeals ruled that “the
‘whole portion’ of the house standing on Lot 1-B-3 was sold by appellant.”

Again this is a grave error of misapprehension of the evidence
because Verzosa’s answer is vague, for it may refer
to the physical fact that indeed the disputed premises are inside or within the
portion of the house sold, which is, of
course, true.  Moreover, Verzosa had declared in his tes­timony that before the execution
of the deed of sale and in the inspection of the premises, he explained to Manalo’s representative that the ground floor and mezzanine
were not his and that they were excluded from the sale since they belong to the
Castillos, petitioners herein, and which dec­laration
is not disputed or denied.  Finally,
respondent court simply rejected the clarification made by Verzosa
without attempting to reconcile his two testimonies which are not entirely
inconsistent.  Indeed, it is the duty of
the court to reconcile discrepancies or differences in the statements of a
witness, or where one statement is plainly a correction of the other.  Contradictory statements should be considered
in the light of explanations and attending circumstances,
and it should be considered whether incon­sistencies or incongruities result
from misconception of an innocent witness or wilful
and corrupt misrepresentation.  (The
Revised Rules of Court, Evidence, Vol. VII, p. 613, by Vicente J. Francisco).

We rule that petitioners are the owners of the disputed premises
and being builders in good faith, are entitled to
payment of the indemnity under Article 448 and the right of retention under
Article 546 of the New Civil Code.

Having resolved the
question of ownership in favor of petitioners, We find
it pointless and without any useful purpose to discuss and resolve the other
assignments of errors.

WHEREFORE, IN VIEW OF ALL THE FOREGOING, the decision
appealed from is hereby REVERSED and SET ASIDE. 
The judg­ment of the defunct Court of First Instance of Manila, Branch
XVI in Civil Case No. 90719, now Regional Trial Court, National Capital
Judicial Region, is hereby reinstated.

Costs
against private respondent.

Petition granted.

SO ORDERED.

Makasiar, (Chairman), Concepcion, Jr., and
Escolin, JJ., concur.

Aquino, J., see
concurring opinion.

Abad Santos, J., vote for the affirmance of the decision.

De Castro, J., no part.