G.R. No.
L-175 April 30, 1946
DAMIAN IGNACIO, FRANCISCO IGNACIO and LUIS IGNACIO, petitioners,
vs.
ELIAS HILARIO and his wife DIONISIA DRES, and FELIPE NATIVIDAD,
Judge of First Instance of Pangasinan, respondents.
This is a petition for certiorari arising from a case in the Court of First Instance of
Pangasinan between the herein respondents Elias Hilario and his wife Dionisia Dres as
plaintiffs, and the herein petitioners Damian, Francisco and Luis, surnamed Ignacio, as
defendants, concerning the ownership of a parcel of land, partly rice-land and partly
residential. After the trial of the case, the lower court, presided over by Hon. Alfonso
Felix, rendered judgment holding plaintiffs as the legal owners of the whole property
but conceding to defendants the ownership of the houses and granaries built by them
on the residential portion with the rights of a possessor in good faith, in accordance
with article 361 of the Civil Code. The dispositive part of the decision, hub of this
controversy, follows:
Wherefore, judgment is hereby rendered declaring:
(1) That the plaintiffs are the owners of the whole property described in
transfer certificate of title No. 12872 (Exhibit A) issued in their name, and
entitled to the possession of the same;
(2) That the defendants are entitled to hold the position of the residential lot
until after they are paid the actual market value of their houses and granaries
erected thereon, unless the plaintiffs prefer to sell them said residential lot, in
which case defendants shall pay the plaintiffs the proportionate value of said
residential lot taking as a basis the price paid for the whole land according to
Exhibit B; and
(3) That upon defendant's failure to purchase the residential lot in question,
said defendants shall remove their houses and granaries after this decision
becomes final and within the period of sixty (60) days from the date that the
court is informed in writing of the attitude of the parties in this respect.
No pronouncement is made as to damages and costs.
Once this decision becomes final, the plaintiffs and defendants may appear
again before this court for the purpose of determining their respective rights
under article 361 of the Civil Code, if they cannot come to an extra-judicial
settlement with regard to said rights.
Subsequently, in a motion filed in the same Court of First Instance but now presided
over by the herein respondent Judge Hon. Felipe Natividad, the plaintiffs prayed for an
order of execution alleging that since they chose neither to pay defendants for the
buildings nor to sell to them the residential lot, said defendants should be ordered to
remove the structure at their own expense and to restore plaintiffs in the possession of
said lot. Defendants objected to this motion which, after hearing, was granted by Judge
Natividad. Hence, this petition by defendants praying for (a) a restraint and annulment
of the order of execution issued by Judge Natividad; (b) an order to compel plaintiffs
to pay them the sum of P2,000 for the buildings, or sell to them the residential lot for
P45; or (c), a rehearing of the case for a determination of the rights of the parties upon
failure of extra-judicial settlement.
The judgment rendered by Judge Felix is founded on articles 361 and 453 of the Civil
Code which are as follows:
ART. 361. The owner of land on which anything has been built, sown or
planted in good faith, shall have the right to appropriate as his own the work,
sowing or planting, after the payment of the indemnity stated in articles 453
and 454, or to oblige the one who built or planted to pay the price of the land,
and the one who sowed, the proper rent.
ART. 453. Necessary expenses shall be refunded to every possessor; but only
the possessor in good faith may retain the thing until such expenses are made
good to him.
Useful expenses shall be refunded to the possessor in good faith with the
same right of retention, the person who has defeated him in the possession
having the option of refunding the amount of the expenses or paying the
increase in value which the thing may have acquired in consequence thereof.
The owner of the building erected in good faith on a land owned by another, is entitled
to retain the possession of the land until he is paid the value of his building, under
1
article 453. The owner of the land, upon the other hand, has the option, under article
361, either to pay for the building or to sell his land to the owner of the building. But
he cannot, as respondents here did, refuse both to pay for the building and to sell the
land and compel the owner of the building to remove it from the land where it is
erected. He is entitled to such remotion only when, after having chosen to sell his land,
the other party fails to pay for the same. But this is not the case before us.
We hold, therefore, that the order of Judge Natividad compelling defendants-
petitioners to remove their buildings from the land belonging to plaintiffs-respondents
only because the latter chose neither to pay for such buildings not to sell the land, is
null and void, for it amends substantially the judgment sought to be executed and is,
furthermore, offensive to articles 361 and 453 of the Civil Code.
There is, however, in the decision of Judge Felix a question of procedure which calls
for the clarification, to avoid uncertainty and delay in the disposition of cases. In that
decision, the rights of both parties are well defined under articles 361 and 453 of the
Civil Code, but it fails to determine the value of the buildings and of the lot where they
are erected as well as the periods of time within which the option may be exercised
and payment should be made, these particulars having been left for determination
apparently after the judgment has become final. This procedure is erroneous, for after
the judgment has become final, no additions can be made thereto and nothing can be
done therewith except its execution. And execution cannot be had, the sheriff being
ignorant as to how, for how much, and within what time may the option be exercised,
and certainly no authority is vested in him to settle these matters which involve
exercise of judicial discretion. Thus the judgment rendered by Judge Felix has never
become final, it having left matters to be settled for its completion in a subsequent
proceeding, matters which remained unsettled up to the time the petition is filed in the
instant case.
For all the foregoing, the writ of execution issued by Judge Natividad is hereby set
aside and the lower court ordered to hold a hearing in the principal case wherein it
must determine the prices of the buildings and of the residential lot where they are
erected, as well as the period of time within which the plaintiffs-respondents may
exercise their option either to pay for the buildings or to sell their land, and, in the last
instance, the period of time within which the defendants-petitioners may pay for the
land, all these periods to be counted from the date the judgment becomes executory or
unappealable. After such hearing, the court shall render a final judgment according to
the evidence presented by the parties. The costs shall be paid by plaintiffs-respondents.
G.R. No. 72876 January 18, 1991
FLORENCIO IGNAO, petitioner,
vs.
HON. INTERMEDIATE APPELLATE COURT, JUAN IGNAO, substituted by
his Legal Heirs, and ISIDRO IGNAO, respondents.
In this petition for review by certiorari, petitioner seeks the reversal of the decision of
the Intermediate Appellate Court (now Court of Appeals) affirming in toto the decision
of the Court of First Instance of Cavite, ordering petitioner Florencio Ignao to sell to
private respondents Juan and Isidro Ignao, that part of his property where private
respondents had built a portion of their houses.
The antecedent facts are as follows:
Petitioner Florencio Ignao and his uncles private respondents Juan Ignao and Isidro
Ignao were co-owners of a parcel of land with an area of 534 square meters situated in
Barrio Tabon, Municipality of Kawit, Cavite. Pursuant to an action for partition filed
by petitioner docketed as Civil Case No. N-1681, the then Court of First Instance of
Cavite in a decision dated February 6, 1975 directed the partition of the aforesaid land,
alloting 133.5 square meters or 2/8 thereof to private respondents Juan and Isidro, and
giving the remaining portion with a total area of 266.5 square meters to petitioner
Florencio. However, no actual partition was ever effected. 1
On July 17, 1978, petitioner instituted a complaint for recovery of possession of real
property against private respondents Juan and Isidro before the Court of First Instance
of Cavite, docketed as Civil Case No. 2662. In his complaint petitioner alleged that the
area occupied by the two (2) houses built by private respondents exceeded the 133.5
square meters previously alloted to them by the trial court in Civil Case No. N-1681.
Consequently, the lower court conducted an ocular inspection. It was found that the
houses of Juan and Isidro actually encroached upon a portion of the land belonging to
Florencio. Upon agreement of the parties, the trial court ordered a licensed geodetic
engineer to conduct a survey to determine the exact area occupied by the houses of
private respondents. The survey subsequently disclosed that the house of Juan
occupied 42 square meters while that of Isidro occupied 59 square meters of
Florencio's land or a total of 101 square meters.
2
In its decision, the trial court (thru Judge Luis L. Victor) ruled that although private
respondents occupied a portion of Florencio's property, they should be considered
builders in good faith. The trial court took into account the decision of the Court of
First Instance of Cavite in the action for partition2 and quoted:
. . . . Hence, it is the well-considered opinion of the Court that although it
turned out that the defendants had, before partition, been in possession of
more than what rightfully belongs to them, their possession of what is in
excess of their rightful share can at worst be possession in good faith which
exempts them from being condemned to pay damages by reason thereof. 3
Furthermore, the trial court stated that pursuant to Article 448 of the Civil Code, the
owner of the land (Florencio) should have the choice to either appropriate that part of
the house standing on his land after payment of indemnity or oblige the builders in
good faith (Juan and Isidro) to pay the price of the land. However, the trial court
observed that based on the facts of the case, it would be useless and unsuitable for
Florencio to exercise the first option since this would render the entire houses of Juan
and Isidro worthless. The trial court then applied the ruling in the similar case
of Grana vs. Court of Appeals,4 where the Supreme Court had advanced a more
"workable solution". Thus, it ordered Florencio to sell to Juan and Isidro those portions
of his land respectively occupied by the latter. The dispositive portion of said decision
reads as follows:
WHEREFORE, judgment is hereby rendered in favor of the defendants and—
(a) Ordering the plaintiff Florencio Ignao to sell to the defendants Juan and
Isidro Ignao that portion of his property with an area of 101 square meters at
P40.00 per square meter, on which part the defendants had built their houses;
and
(b) Ordering the said plaintiff to execute the necessary deed of conveyance to
the defendants in accordance with paragraph (a) hereof.
Without pronouncement as to costs.5
Petitioner Florencio Ignao appealed to the Intermediate Appellate Court. On August
27, 1985, the Appellate Court, Second Civil Cases Division, promulgated a
decision,6 affirming the decision of the trial court.
Hence the instant petition for review which attributes to the Appellate Court the
following errors:
1. That the respondent Court has considered private respondents builders in
good faith on the land on question, thus applying Art. 448 of the Civil Code,
although the land in question is still owned by the parties in co-ownership,
hence, the applicable provision is Art. 486 of the Civil Code, which was not
applied.
2. That, granting for the sake of argument that Art. 448 . . . is applicable, the
respondent Court has adjudged the working solution suggested in Grana and
Torralba vs. CA. (109 Phil. 260), which is just an opinion by way of passing,
and not the judgment rendered therein, which is in accordance with the said
provision of the Civil Code, wherein the owner of the land to buy (sic) the
portion of the building within 30 days from the judgment or sell the land
occupied by the building.
3. That, granting that private respondents could buy the portion of the land
occupied by their houses, the price fixed by the court is unrealistic and pre-
war price.7
The records of the case reveal that the disputed land with an area of 534 square meters
was originally owned by Baltazar Ignao who married twice. In his first marriage, he
had four children, namely Justo (the father of petitioner Florencio), Leon and private
respondents Juan and Isidro. In his second marriage, Baltazar had also four children
but the latter waived their rights over the controverted land in favor of Justo. Thus,
Justo owned 4/8 of the land which was waived by his half-brothers and sisters plus his
1/8 share or a total of 5/8. Thereafter, Justo acquired the 1/8 share of Leon for P500.00
which he later sold to his son Florencio for the same amount. When Justo died,
Florencio inherited the 5/8 share of his father Justo plus his 1/8 share of the land which
he bought or a total of 6/8 (representing 400.5 square meters). Private respondents,
Juan and Isidro, on the other hand, had 1/8 share (66.75 square meters) each of the
land or a total of 133.5 square meters.
3
Before the decision in the partition case was promulgated, Florencio sold 134 square
meters of his share to a certain Victa for P5,000.00 on January 27, 1975. When the
decision was handed down on February 6,1975, the lower court alloted 2/8 of the land
to private respondents Juan and Isidro, or a total of 133.5 square meters.
It should be noted that prior to partition, all the co-owners hold the property in
common dominion but at the same time each is an owner of a share which is abstract
and undetermined until partition is effected. As cited in Eusebio vs. Intermediate
Appellate Court,8 "an undivided estate is co-ownership by the heirs."
As co-owners, the parties may have unequal shares in the common property,
quantitatively speaking. But in a qualitative sense, each co-owner has the same right as
any one of the other co-owners. Every co-owner is therefore the owner of the whole,
and over the whole he exercises the right of dominion, but he is at the same time the
owner of a portion which is truly abstract, because until division is effected such
portion is not concretely determined.9
Petitioner Florencio, in his first assignment of error, asseverates that the court a
quo erred in applying Article 448 of the Civil Code, since this article contemplates a
situation wherein the land belongs to one person and the thing built, sown or planted
belongs to another. In the instant case, the land in dispute used to be owned in
common by the contending parties.
Article 448 provides:
Art. 448. The owner of the land on which anything has been built, sown or
planted in good faith, shall have the right to appropriate as his own the works,
sowing or planting, after payment of the indemnity provided for in articles
546 and 548, or to oblige the one who built or planted to pay the price of the
land, and the one who sowed, the proper rent. However, the builder or planter
cannot be obliged to buy the land if its value is considerably more than that of
the building or trees. In such case, he shall pay reasonable rent, if the owner
of the land does not choose to appropriate the building or trees after proper
indemnity. The parties shall agree upon the terms of the lease and in case of
disagreement, the court shall fix the terms thereof.
Whether or not the provisions of Article 448 should apply to a builder in good faith on
a property held in common has been resolved in the affirmative in the case of Spouses
del Campo vs. Abesia,10 wherein the Court ruled that:
The court a quo correctly held that Article 448 of the Civil Code cannot apply
where a co-owner builds, plants or sows on the land owned in common for
then he did not build, plant or sow upon land that exclusively belongs to
another but of which he is a co-owner. The co-owner is not a third person
under the circumstances, and the situation is governed by the rules of co-
ownership.
However, when, as in this case, the ownership is terminated by the partition
and it appears that the home of defendants overlaps or occupies a portion of
5 square meters of the land pertaining to plaintiffs which the defendants
obviously built in good faith, then the provisions of Article 448 of the new
Civil Code should apply. Manresa and Navarro Amandi agree that the said
provision of the Civil Code may apply even when there is a co-ownership if
good faith has been established.11
In other words, when the co-ownership is terminated by a partition and it appears that
the house of an erstwhile co-owner has encroached upon a portion pertaining to
another co-owner which was however made in good faith, then the provisions of
Article 448 should apply to determine the respective rights of the parties.
Petitioner's second assigned error is however well taken. Both the trial court and the
Appellate Court erred when they peremptorily adopted the "workable solution" in the
case of Grana vs. Court of appeals,12 and ordered the owner of the land, petitioner
Florencio, to sell to private respondents, Juan and Isidro, the part of the land they
intruded upon, thereby depriving petitioner of his right to choose. Such ruling
contravened the explicit provisions of Article 448 to the effect that "(t)he owner of the
land . . . shall have the right to appropriate . . .or to oblige the one who built . . . to pay
the price of the land . . . ." The law is clear and unambiguous when it confers the right
of choice upon the landowner and not upon the builder and the courts.
Thus, in Quemuel vs. Olaes,13 the Court categorically ruled that the right to appropriate
the works or improvements or to oblige the builder to pay the price of the land belongs
to the landowner.
4
As to the third assignment of error, the question on the price to be paid on the land
need not be discussed as this would be premature inasmuch as petitioner Florencio has
yet to exercise his option as the owner of the land.
WHEREFORE, the decision appealed from is hereby MODIFIED as follows:
Petitioner Florencio Ignao is directed within thirty (30) days from entry of judgment to
exercise his option to either appropriate as his own the portions of the houses of Juan
and Isidro Ignao occupying his land upon payment of indemnity in accordance with
Articles 546 and 548 of the Civil Code, or sell to private respondents the 101 square
meters occupied by them at such price as may be agreed upon. Should the value of the
land exceed the value of the portions of the houses that private respondents have
erected thereon, private respondents may choose not to buy the land but they must pay
reasonable rent for the use of the portion of petitioner's land as may be agreed upon by
the parties. In case of disagreement, the rate of rental and other terms of the lease shall
be determined by the trial court. Otherwise, private respondents may remove or
demolish at their own expense the said portions of their houses encroaching upon
petitioner's land.14 No costs. SO ORDERED.
Filipinas College Inc. v. Garcia Timbang, et al.
This is an appeal taken from an order of the Court of First Instance of Manila dated
May 10, 1957 (a) declaring the Sheriff's certificate of sale covering a school building
sold at public auction null and void unless within 15 days from notice of said order the
successful bidders, defendants-appellants spouses Maria Garcia Timbang and
Marcelino Timbang, shall pay to, appellee Maria Gervacio Blas directly or through the
Sheriff of Manila the sum of P5,750.00 that the spouses Timbang had bid for the
building at the Sheriff's sale; (b) declaring the other appellee Filipinas Colleges, Inc.
owner of 24,500/3,285,934 undivided interest in Lot No. 2-a covered by certificate of
tile No 45970, on which the building sold in the auction sale is situated; and (c)
ordering the sale in public auction of the said undivided interest of the Filipinas
Colleges, Inc., in lot No. 2-a aforementioned to satisfy the unpaid portion of the
judgment in favor of appellee Blas and against Filipinas Colleges, Inc. in the amount
of P8,200.00 minus the sum of P5,750.00 mentioned in (a) above.
The order appealed from is the result of three motions filed in the court a quo in the
course of the execution of a final judgment of the Court of Appeals rendered in 2 cases
appealed to it in which the spouses Timbang, the Filipinas Colleges, Inc., and Maria
Gervacio Blas were the parties. IN that judgment of the Court of Appeals, the
respective rights of the litigants have been adjudicated as follows:
(1) Filipinas Colleges, Inc. was declared to have acquired the rights of the
spouses Timbang in and to lot No. 2-a mentioned above and in consideration
thereof, Filipinas Colleges, Inc., was ordered to pay the spouses Timbang the
amount of P15,807.90 plus such other amounts which said spouses might
have paid or had to pay after February, 1953, to Hoskins and Co. Inc., agent
of the Urban Estates, Inc., original vendor of the lot. Filipinas Colleges, Inc.
original vendor of the total amount with the court within 90 days after the
decision shall have become final.
(2) Maria Gervacio Blas was declared to be a builder in good faith of the
school building constructed on the lot in question and entitled to be paid the
amount of P19,000.00 for the same. Filipinas Colleges, Inc., purchaser of the
said building was ordered to deliver to Blas stock certificate (Exh. C) for 108
shares of Filipinas Colleges, Inc. with a par value of P10,800.00 and to pay
Blas the sum of P8,200.00 of the house.
(3) In case Filipinas Colleges, Inc. failed to deposit the value of the land,
which after liquidation was fixed at P32,859.34, within the 90-day period set
by the court, Filipinas Colleges would lose all its rights to the land and the
spouses Timbang would then become the owners thereof. In that eventuality,
the Timbangs would make known to the court their option under Art. 448 of
the Civil Code whether they would appropriate the building in question, in
which even they would have to pay Filipinas Colleges, Inc. the sum of
P19,000.00, or would compel the latter to acquire the land and pay the price
thereof.
Filipinas Colleges, Inc. having failed to pay or deposit the sum of P32,859.34 within
the time prescribed, the spouses Timbang, in compliance with the judgment of the
Court of Appeals, on September 28, 1956, made known to the court their decision that
they had chosen not of appropriate the building but to compel Filipinas Colleges, Inc.,
for the payment of the sum of P32,859,34. The motion having been granted, a writ of
execution was issued on January 8, 1957.
On January 16, 1957, appellee Blas in turn filed a motion for execution of her
judgment of P8,200.00 representing the unpaid portion of the price of the house sold to
5
Filipinas Colleges, Inc. Over the object of the Timbangs, the court grated the motion
and the corresponding writ of execution was issued on January 30, 1957, date of the
granting of the motion for execution, Blas through counsel, sent a letter to the Sheriff
of Manila advising him of her preferential claim or lien on the house to satisfy the
unpaid balance of the purchase price thereof under Article 2242 of the Civil Code, and
to withhold from the proceed of the auction sale the sum of P8,200.00. Levy having
been made on the house in virtue of the writs of execution, the Sheriff of Manila on
March 5, 1957, sold the building in public auction in favor of the spouses Timbang, as
the highest bidders, in the amount of P5,750.00. Personal properties of Filipinas
Colleges, Inc. were also auctioned for P245.00 in favor of the spouses Timbang.
As a result of these actuation, three motion were subsequently filed before the lower
court:
(1) By appellee Blas, praying that the Sheriff of Manila and/or the Timbang
spouses be ordered to pay and deliver to her the sum of P5,750.00
representing the proceeds of the auction sale of the building of Filipinas
Colleges, Inc. over which she has a lien of P8,200.00 for the unpaid balance
of the purchase price thereof;.
(2) Also by the appellee Bals, praying that there being still two unsatisfied
executions, one for the sum of P32,859.34 in favor the land involved, Lot No.
2-a, be sold at public auction; and (3) By Filipinas Colleges, Inc. praying that
because its properties, the house and some personal properties, have been
auctioned for P5,750.00 and P245.00 respectively in favor of the Timbang
spouses who applied the proceeds to the partial payment of the sum of
P32,859.34 value of the land, Lot No. 2-a, it (Filipinas Colleges, Inc.) be
declared part owner of said lot to the extent of the total amount realized from
the execution sale of its properties.
The Timbang spouses presented their opposition to each and all of these motion. After
due hearing the lower court rendered its resolution in the manner indicated at the
beginning of this decision, from which the Timbangs alone have appealed.
In assailing the order of the court a quo directing the appellants to pay appellee Blas
the amount of their bid (P5,750.00) made at the public auction, appellants' counsel has
presented a novel, albeit ingenious, argument. It is contended that because the builder
in good faith has failed to pay the price of the land after the owners thereof exercised
their option under Article 448 of the Civil Code, the builder lost his right of retention
provided in Article 546 and by operation of Article 445, the appellants as owners of
the land automatically became the owners ipso facto, the execution sale of the house in
their favor was superfluous. Consequently, they are not bound to make good their bid
of P5,750.00 as that would be to make goods to pay for their own property. By the
same token, Blas claim for preference on account of the unpaid balance of the
purchase price of the house does not apply because preference applies only with
respect to the property of the debtor, and the Timbangs, owners of the house, are not
the debtors of Blas.
This Court cannot accept this oversimplification of appellants' position. Article 448
and 546 of the Civil Code defining the right of the parties in case a person in good
faith builds, sows or plants on the land of another, respectively provides:
ART. 448. The owner of the land on which anything has been built, sown or
plated in good faith shall have the right to appropriate as his own the works,
sowing or planting, after payment of the indemnify provided for in article 546
and 548, or to obligate the one who built or planted to pay the price of the
land, and the one who sowed, the proper rent. However, the builder or planter
cannot be obliged to buy the land if its value is considerably more than that of
the building or trees. In such case, he shall pay reasonable rent, if the owner
of the land does not choose to appropriate the building or trees after proper
indemnity. The parties shall agree upon the terms of the lease and in case of
disagreement, the court shall fix the terms thereof.
ART. 546. Necessary expenses shall be refunded to every possessor; but only
the possessor in good faith may retain the thing until he has reimbursed
therefor.
Useful expenses shall be refunded only to the possessor in good faith with the
same right of retention the person who has defeated him in the possession
having to option of refunding the amount of expenses or of paying the case in
value which thing may have acquired by reason thereof.
Under the terms of these article, it is true that the owner of the land has the right to
choose between appropriating the building by reimbursing the builder of the value
thereof or compelling the builder in good faith to pay for his land. Even this second
right cannot be exercised if the value of the land is considerably more than that of the
6
building. In addition to the right of the builder to be paid the value of his improvement,
Article 546 gives him the corollary right of retention of the property until he is
indemnified by the owner of the land. There is nothing in the language of these two
article, 448 and 546, which would justify the conclusion of appellants that, upon the
failure of the builder to pay the value of the land, when such is demanded by the land-
owner, the latter becomes automatically the owner of the improvement under Article
445. The case of Bernardo vs. Bataclan, 66 Phil., 590 cited by appellants is no
authority for this conclusion. Although it is true it was declared therein that in the
event of the failure of the builder to pay the land after the owner thereof has chosen
this alternative, the builder's right of retention provided in Article 546 is lost,
nevertheless there was nothing said that as a consequence thereof, the builder loses
entirely all rights over his own building. The question is; what is the recourse or
remedy left to the parties in such eventuality where the builder fails to pay the value of
the land? While the Code is silent on this Court in the cases of Miranda vs. Fadullon,
et al., 97 Phil., 801; 51 Off. Gaz., [12] 6226; Ignacio vs. Hilario, 76 Phil., 605 and the
cited case of Bernardo vs. Bataclan, supra.
In the first case, this Court has said:
A builder in good faith not be required to pay rentals. he has right to retain the
land on which he has built in good faith until he is reimbursed the expenses
incurred by him. Possibly he might be made to pay rental only when the
owner of the land chooses not to appropriate the improvement and requires
the builder in good faith to pay for the land but that the builder is unwilling
or unable to pay the land, and then they decide to leave things as they are and
assume the relation of lessor and lessee, and should they disagree as to the
amount of rental then they can go to the court to fix that amount. (Emphasis
supplied)
Should the parties not agree to leave things as they are and to assume the relation of
lessor and lessee, another remedy is suggested in the case of Ignacio vs. Hilario,
supra, wherein the court has ruled that the owner of the land in entitled to have the
improvement removed when after having chosen to sell his land to the other party, i.e.,
the builder in good faith fails to pay for the same.
A further remedy is indicated in the case of Bernardo vs. Bataclan, supra, where this
Court approved the sale of the land and the improvement in a public auction applying
the proceeds thereof first to the payment of the value of the land and the excess, if any,
to be delivered to the owner of the house in payment thereof.
The appellants herein, owners o the land, instead of electing any of the alternative
above indicated chose to seek recovery of the value of their land by asking for a writ of
execution; levying on the house of the builder; and selling the same in public auction.
Sand because they are the highest bidder in their own auction sale, they now claim
they acquired title to the building without necessity of paying in cash on account of
their bid. In other words, they in effect pretend to retain their land and acquire the
house without paying a cent therefor.
This contention is without merit. This Court has already held in Matias vs. The
Provincial Sheriff of Nueva Ecija (74 Phil., 326) that while it is the inveriable practice,
dictated by common sense, that where the successful bidder is the execution creditor
himself, he need not pay down the amount of the bid if it does not exceed the amount
of his judgement, nevertheless, when their is a claim by a third-party, to the proceeds
of the sale superior to his judgment credit, the execution creditor, as successful bidder,
must pay in cash the amount of his bid as a condition precedent to the issuance to him
of the certificate of sale. In the instant case, the Court of Appeals has already adjudged
that appellee Blas is entitled to the payment of the unpaid balance of the purchase price
of the school building. Blas is actually a lien on the school building are concerned. The
order of the lower court directing the Timbang spouses, as successful bidders, to pay in
cash the amount of their bid in the sum of P5,750.00 is therefore correct.
With respect to the order of the court declaring appellee Filipinas Colleges, Inc. part
owner of the land to the extent of the value of its personal properties sold at public
auction in favor of the Timbang, this Court Likewise finds the same as justified, for
such amount represents, in effect, a partial payment of the value of the land. If this
resulted in the continuation of the so-called involuntary partnership questioned by the
difference between P8,200.00 — the unpaid balance of the purchase price of the
building and the sum of P5,750.00 — amount to be paid by the Timbangs, the order of
the court directing the sale of such undivided interest of the Filipinas Colleges, Inc. is
likewise justified to satisfy the claim of the appellee Blas.
Considering that the appellant spouses Marcelino Timbang and Maria Garcia Timbang
may not voluntarily pay the sum of P5,750.00 as ordered, thereby further delaying the
final termination of this case, the first part of the dispositive portion of the order
appealed from is modified in the sense that upon failure of the Timbang spouses to pay
7
to the Sheriff or to Manila Gervacio Blas said sum of P5,750.00 within fifteen (15)
days from notice of the final judgment, an order of execution shall issue in favor of
Maria Gervasio Blas to be levied upon all properties of the Timbang spouses not
exempt from execution for the satisfaction of the said amount.
In all other respects, the appealed order of the court a quo is hereby affirmed, with
costs against the appellants. It is so ordered.
G.R. No. L-47475 August 19, 1988
MANOTOK REALTY, INC., petitioner,
vs.
THE HONORABLE JOSE H. TECSON, Judge of the Court of First Instance of
Manila and NILO MADLANGAWA, respondents.
In a complaint filed by the petitioner for recovery of possession and damages against
the private respondent, the then Court of First Instance of Manila rendered judgment,
the dispositive portion of which provides inter alia:
WHEREFORE, judgment is hereby rendered:
xxx xxx xxx
(c) In Civil Case No. 72872, declaring the defendant Nilo Madlangawa as a
builder or possessor in good faith; ordering the plaintiff to recognize the right of
said defendant to remain in Lot No. 345, Block 1, of the Clara Tambunting
Subdivision until after he shall have been reimbursed by the plaintiff the sum of
P7,500.00, without pronouncement as to costs. (p. 24, Rollo)
Not satisfied with the trial court's decision, the petitioner appealed to the Court of
Appeals and upon affirmance by the latter of the decision below, the petitioner
elevated its case to this Court.
On July 13, 1977, we issued a resolution dated July 11, 1977 denying the petitioner's
petition for lack of merit. Hence, on August 5, 1977, the petitioner filed with the trial
court, presided over by respondent Judge Jose H. Tecson, a motion for the approval of
petitioner's exercise of option and for satisfaction of judgment, praying that the court
issue an order: a) approving the exercise of petitioner's option to appropriate the
improvements introduced by the private respondent on the property; b) thereafter,
private respondent be ordered to deliver possession of the property in question to the
petitioner.
On October 7, 1977, the respondent judge issued the disputed order, to wit:
Acting on the motion for approval of plaintiffs exercise of option and for
satisfaction of judgment filed by the plaintiff, and the opposition thereto
interposed by the defendant, both through counsels, and after a judicious review
of all the facts and circumstances obtaining in this case, in the light of statutory
provisions (Art. 6, New Civil Code) and jurisprudential doctrines (Vide,
Benares v. Capitol Subdivision, Inc., L-7330 (Nov. 29, 1960), and considering
further the definitive ruling of our Supreme Tribunal in the case of Jose C.
Cristobal v. Alejandro Melchor, G.R. No. L-43203 promulgated on July 29,
1977, wherein the Court says:
"This Court, applying the principle of equity, need not be bound to a rigid
application of the law but rather its action should conform to the conditions or
exigencies of a given problem or situation in order to grant relief that it will
serve the ends of justice."
the Court is of the considered view that under the peculiar circumstances which
supervened after the institution of this case, like, for instance, the introduction of
certain major repairs of and other substantial improvements on the controverted
property, the instant motion of the plaintiff is not well-taken and therefore not legally
proper and tenable.
WHEREFORE, and for lack of merit, the instant motion for approval of the
plaintiff's fai-rn of option and for satisfaction of judgment should be, as hereby
it is, denied. (pp. 45-46, Rollo)
After a denial of its motion for reconsideration, the petitioner filed the present petition
for mandamus alleging that the respondent judge committed grave abuse of discretion
in denying his motion to exercise option and for execution of judgment on the grounds
that under Articles 448 and 546 of the Civil Code, the exercise of option belongs to the
owner of the property, who is the petitioner herein, and that upon finality of judgment,
8
the prevailing party is entitled, as a matter of right, to its execution which is only a
ministerial act on the part of the respondent judge.
On April 15, 1978, the private respondent filed his comment on the petition alleging
that the same has already become moot and academic for two reasons: first, fire gutted
not only the house of the private respondent but the majority of the houses in
Tambunting Estate; and second, as a result of the said fire, the then First Lady and
Metro Manila Governor Imelda R. Marcos has placed the disputed area under her
Zonal Improvement Project, thereby allowing the victims of the fire to put up new
structures on the premises, so that the willingness and readiness of the petitioner to
exercise the alleged option can no longer be exercised since the subject-matter thereof
has been extinguished by the fire. Furthermore, the President of the Philippines has
already issued a Presidential Decree for the expropriation of certain estates in Metro
Manila including the Tambunting Estate. Therefore, the beneficient and humanitarian
purpose of the Zonal Improvement Project and the expropriation proceeding would be
defeated if petitioner is allowed to exercise an option which would result in the
ejectment of the private respondent.
On December 28, 1980, Presidential Decree (P.D.) No. 1669 was issued providing for
the expropriation of the Tambunting Estate. However, this decree was challenged
before this Court in G.R. No, 55166 entitled The "Elisa R. Manotok, et al. v. National
Housing Authority, et al." Hence, we decided to hold the decision on this petition
pending the resolution of the above entitled case.
On May 21, 1987, the Court rendered a decision in the Elisa Manotok case (Manotok
v. National Housing Authority, 150 SCRA 89) ruling that P.D. 1669 is
unconstitutional for being violative of the due process clause. Thus, since the present
petition has not been rendered moot and academic by the decision in said case, we will
now decide on its merits.
As stated earlier, the petitioner argues that since the judgment of the trial court has
already become final, it is entitled to the execution of the same and that moreover,
since the house of the private respondent was gutted by fire, the execution of the
decision would now involve the delivery of possession of the disputed area by the
private respondent to the petitioner.
We find merit in these arguments.
When the decision of the trial court became final and executory, it became incumbent
upon the respondent judge to issue the necessary writ for the execution of the same.
There is, therefore, no basis for the respondent judge to deny the petitioner's motion to
avail of its option to approriate the improvements made on its property.
In the case of Duenas v. Mandi (151 SCRA 530, 545), we said:
...Likewise settled is the rule that after a judgment has become final, no
additions can be made thereto, and nothing can be done therewith except its
execution, otherwise there would be no end to legal processes. (Fabular v.
Court of Appeals, 11 9 SCRA 329)
Neither can the respondent judge deny the issuance of a writ of execution because the
private respondent was adjudged a builder in good faith or on the ground of "peculiar
circumstances which supervened after the institution of this case, like, for instance, the
introduction of certain major repairs of and other substantial improvements..." because
the option given by law either to retain the premises and pay for the improvements
thereon or to sell the said premises to the builder in good faith belongs to the owner of
the property. As we have in Quemel v. Olaes (1 SCRA 1159,1163):
...The plaintiffs claim that their second cause of action is based on Article 448
in connection with Art. 546, of the new Civil Code. A cursory reading of these
provisions, however, will show that they are not applicable to plaintiff's case.
Under Article 448, the right to appropriate the works or improvements or to
oblige the one who built or planted to pay the price of the land' belongs to the
owner of the land. The only right given to the builder in good faith is the right
to reimbursement for the improvements; the builder, cannot compel the owner
of the land to sell such land to the former. ...
Again, in the recent case of Paz Mercado, et al. v. Hon. Court of Appeals, et al., (G.R.
No. L- 44001, June 10, 1988), we said:
... To be deemed a builder in good faith, it is essential that a person assert title
to the land on which he builds; i.e., that he be a possessor in concept of owner
(Art. 525, Civil Code; Lopez, Inc. v. Phil. Eastern Trading Co., Inc., 98 Phil.
348) and that he be unaware 'that there exists in his title or mode of acquisition
any flaw which invalidates it.' (Art. 526, Civil Code; Granados v. Monton, 86
9
 Phil. 42; Arriola v. Gomez de la Serna, 14 Phil. 627; See also Manotok Realty,
Inc. v. C.A., 134 SCRA 329, citing Caram v. Laureta, 103 SCRA 7) It is such a
builder in good faith who is given the 1ight to retain the thing, even as against
the real owner, until he has been reimbursed in full not only for the necessary
expenses but also for useful expenses. (Art. 546, Civil Code; Policarpio v. CA.,
129 SCRA 51; Sarmiento v. Agana, 129 SCRA 1221; cf, Queto v. C.A., 122
SCRA 206) ...
Furthermore, the private respondent's good faith ceased after the filing of the
complaint below by the petitioner. In the case of Mindanao Academy, Inc. v. Yap (13
SCRA 190,196), we ruled:
...Although the bad faith of one party neutralizes that of the other and hence as
between themselves their rights would be as if both of them had acted in good
faith at the time of the transaction, this legal fiction of Yap's good faith ceased
when the complaint against him was filed, and consequently the court's
declaration of liability for the rents thereafter is correct and proper . A
possessor in good faith is entitled to the fruits only so long as his possession is
not legally interrupted, and such interruption takes place upon service of
judicial summons (Arts. 544 and 1123, Civil Code).
Thus, the repairs and improvements introduced by the said respondents after the
complaint was filed cannot be considered to have been built in good faith, much less,
justify the denial of the petitioner's fai-rn of option.
Since the improvements have been gutted by fire, and therefore, the basis for private
respondent's right to retain the premises has already been extinguished without the
fault of the petitioner, there is no other recourse for the private respondent but to
vacate the premises and deliver the same to herein petitioner.
WHEREFORE, IN VIEW OF THE FOREGOING, the petition is GRANTED and the
respondent judge is hereby ordered to immediately issue a writ of execution ordering
the private respondent to vacate the disputed premises and deliver possession of the
same to the petitioner. SO ORDERED.
G.R. No. L-44606 November 28, 1938
VICENTE STO. DOMINGO BERNARDO, plaintiff-appellant,
vs.
CATALINO BATACLAN, defendant-appellant.
TORIBIO TEODORO, purchaser-appellee.
This is an appeal taken by both the plaintiff and the defendant from the order of
September 26, 1935, hereinabove referred to, of the Court of First Instance of Cavite in
Civil Case No. 2428.
There is no controversy as to the facts. By a contract of sale executed from Pastor
Samonte and others ownership of a parcel of land of about 90 hectares situated in sitio
Balayunan, Silang, Cavite. To secure possession of the land from the vendors the said
plaintiff, on July 20, 1929, instituted Civil Case No. 1935 in the Court of First Instance
of Cavite. The trial court found for the plaintiff in a decision which was affirmed by
this Supreme Court on appeal (G.R. No. 33017). 1 When plaintiff entered upon the
premises, however, he found the defendant herein, Catalino Bataclan, who appears to
have been authorized by former owners, as far back as 1922, to clear the land and
make improvements thereon. As Bataclan was not a party in Case No. 1935, plaintiff,
on June 11, 1931, instituted against him, in the Court of First Instance of Cavite, Civil
Case No. 2428. In this case, plaintiff was declared owner but the defendant was held to
be a possessor in good faith, entitled to reimbursement in the total sum of P1,642, for
work done and improvements made. The dispositive part of the decision reads:
*Spanish*
Both parties appealed to this court (G. R. No. 37319). 2 The decision appealed from
was modified by allowing the defendant to recover compensation amounting to P2,212
and by reducing the price at which the plaintiff could require the defendant to purchase
the land in question from P300 to P200 per hectare. Plaintiff was given by this court 30
days from the date when the decision became final within which to exercise his option,
either to sell the land to the defendant or to buy the improvements from him. On
January 9, 1934, the plaintiff manifested to the lower court his desire "to require the
defendant to pay him the value of the land at the rate of P200 per hectare or a total
price of P18,000 for the whole tract of land." The defendant informed the lower court
that he was unable to pay the land and, on January 24, 1934, an order was issued
giving the plaintiff 30 days within which to pay the defendant the sum of P2,212
stating that, in the event of failure to make such payment, the land would be ordered
sold at public auction "Para hacer pago al demandante de la suma de P2,212 y el
10
remanente despues de deducidos los gastos legales de la venta en publica subasta sera
entregado al demandante." On February 21, 1934, plaintiff moved to reconsider the
foregoing order so that he would have preference over the defendant in the order of
payment. The motion was denied on March 1, 1934 but on March 16 following the
court below, motu proprio modified its order of January 24, "en el sentido de que el
demandante tiene derecho preferente al importe del terreno no se vendiere en publica
subasta, a razon de P200 por hectares y el remanente, si acaso lo hubiere se entregara
al demandado en pago de la cantidad de P2,212 por la limpieza del terreno y las
mejoras introducidas en el mismo por el citado demandado." On April 24, 1934, the
court below, at the instance of the plaintiff and without objection on the part of the
defendant, ordered the sale of the land in question at public auction. The land was sold
on April 5, 1935 to Toribio Teodoro, the highest bidder, for P8,000. In the certificate
of sale issued to said purchaser on the very day of sale, it was stated that the period of
redemption of the land sold was to expire on April 5, 1936. Upon petition of Toribio
Teodoro the court below ordered the provincial sheriff to issue another certificate not
qualified by any equity of redemption. This was complied with by the sheriff on July
30, 1935. On September 18, 1935, Teodoro moved that he be placed in possession of
the land purchased by him. The motion was granted by order of September 26, 1935,
the dispositive part of which is as follows:
*Spanish*
The Civil Code confirms certain time-honored principles of the law of property. One
of these is the principle of accession whereby the owner of property acquires not only
that which it produces but that which is united to it either naturally or artificially. (Art.
353.) Whatever is built, planted or sown on the land of another, and the improvements
or repairs made thereon, belong to the owner of the land (art. 358). Where, however,
the planter, builder, or sower has acted in good faith, a conflict of rights arises between
the owners and it becomes necessary to protect the owner of the improvements without
causing injustice to the owner of the land. In view of the impracticability of creating
what Manresa calls a state of "forced coownership" (vol. 3, 4th ed., p. 213), the law
has provided a just and equitable solution by giving the owner of the land the option to
acquire the improvements after payment of the proper indemnity or to oblige the
builder or planter to pay for the land and the sower to pay the proper rent (art. 361). It
is the owner of the land who is allowed to exercise the option because his right is older
and because, by the principle of accession, he is entitled to the ownership of the
accessory thing (3 Manresa, 4th ed., p. 213). In the case before us, the plaintiff, as
owner of the land, chose to require the defendant, as owner of the improvements, to
pay for the land.
The defendant states that he is a possessor in good faith and that the amount of P2,212
to which he is entitled has not yet been paid to him. Therefore, he says, he has a right
to retain the land in accordance with the provisions of article 453 of the Civil Code.
We do not doubt the validity of the premises stated. "Considera la ley tan saarada y
legitima la deuda, que, hasta que sea pagada, no consiente que la cosa se restituya all
vencedor." (4 Manresa, 4th ed, p., 304.) We find, however, that the defendant has lost
his right of retention. In obedience to the decision of this court in G.R. No. 37319, the
plaintiff expressed his desire to require the defendant to pay for the value of the land.
The said defendant could have become owner of both land and improvements and
continued in possession thereof. But he said he could not pay and the land was sold at
public auction to Toribio Teodoro. The law, as we have already said, requires no more
than that the owner of the land should choose between indemnifying the owner of the
improvements or requiring the latter to pay for the land. When he failed to pay for the
land, the defendant herein lost his right of retention.
The sale at public auction having been asked by the plaintiff himself (p. 22, bill of
exceptions) and the purchase price of P8,000 received by him from Toribio Teodoro,
we find no reason to justify a rapture of the situation thus created between them, the
defendant-appellant not being entitled, after all, to recover from the plaintiff the sum of
P2,212.
The judgment of the lower court is accordingly modified by eliminating therefrom the
reservation made in favor of the defendant-appellant to recover from the plaintiff the
sum of P2,212. In all the respects, the same is affirmed, without pronouncement
regarding costs. So ordered.
G.R. No. 136456 October 24, 2000
HEIRS OF RAMON DURANO, SR., RAMON DURANO III, AND
ELIZABETHHOTCHKISS DURANO, petitioners,
vs.
SPOUSES ANGELES SEPULVEDA UY AND EMIGDIO BING SING UY, et
al, respondents.
11
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 respondents1 )
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, 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
12
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 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.
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)
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)
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 ½ liter, sweet
13
potato, area if planted with corn good for ½ 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 P9,660.00 or a total value of P78,160.00. (Exh. R, including
submarkings)
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)
14
 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
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:
xxx 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 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 he planted to coconuts, jackfruit trees and other plants. (Exh. 51, Records, pp.
383-384)
15
 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.
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 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 ₱ 14,400.00
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 Batulan 115,050.00
e) With respect to Glicerio Barriga 35,500.00
f) With respect to Beatriz Galzada 70,300.00
g) With respect to Bienvenido Castro 5,000.00
16
 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
₱120,000.00 should be the figure in terms of litigation expenses and a separate amount
of ₱100,000.00 as attorney’s fees.
Return of the properties to Venancia Repaso, Hermogenes Tito and Marcelino
Gonzales is hereby directed.
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
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.
17
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 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
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
TRANSFER CERTIFICATE OF TITLE
NO. T - 104 -
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 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
18
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.
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.
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.
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 Appeals14 and Medida
vs. Court of Appeals15 , 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."
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
19
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
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 Lllorente 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 into ownership by
acquisitive prescription.
Ordinary acquisitive prescription, in the case of immovable property, requires
possession of the thing in good faithand 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
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
20
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; xxxxx 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 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. 29A 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 Appeals31 ---
21
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 personamand
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.1âwphi1 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 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
22
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 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.
G.R. No. 125683 March 2, 1999
EDEN BALLATAN and SPS. BETTY MARTINEZ and CHONG CHY
LING, petitioners,
vs.
COURT OF APPEALS, GONZALO GO, WINSTON GO, LI CHING YAO,
ARANETA INSTITUTE OF AGRICULTURE and JOSE N.
QUEDDING, respondents.
This is a petition for review on certiorari of the decision of the Court of Appeals dated
March 25, 1996 in CA-G.R. CV No. 32472 entitled "Eden Ballatan., et. al., plaintiffs-
appellees v. Gonzalo Go and Winston Go, appellants and third-party plaintiffs-
appellants v. Li Ching Yao, et. al., third-party defendants."1
The instant case arose from a dispute over forty-two (42) square meters of residential
land belonging to petitioners. The parties herein are owners of adjacent lots located at
Block No. 3, Poinsettia Street, Araneta University Village, Malabon, Metro Manila.
Lot No. 24, 414 square meters in area, is registered in the name of petitioners Eden
Ballatan and spouses Betty Martinez and Chong Chy Ling. 2 Lots Nos. 25 and 26, with
an area of 415 and 313 square meters respectively, are registered in the name of
respondent Gonzalo Go, Sr. 3 On Lot No. 25, respondent Winston Go, son of Gonzalo
23
Go, Sr., constructed his house. Adjacent to Lot No. 26 is Lot No. 27, 417 square
meters in area, and is registered in the name of respondent Li Ching Yao. 4
In 1985, petitioner Ballatan constructed her house on Lot No. 24. During the
construction, she noticed that the concrete fence and side pathway of the adjoining
house of respondent Winston Go encroached on the entire length of the eastern side of
her property. 5 Her building contractor formed her that the area of her lot was actually
less than that described in the title. Forthwith, Ballatan informed respondent Go of this
discrepancy and his encroachment on her property. Respondent Go, however, claimed
that his house, including its fence and pathway, were built within the parameters of his
father's lot; and that this lot was surveyed by Engineer Jose Quedding, the authorized
surveyor of the Araneta Institute of Agriculture (AIA), the owner-developer of the
subdivision project.
Petitioner Ballatan called the attention of the IAI to the discrepancy of the land area in
her title and the actual land area received from them. The AIA authorized another
survey of the land by Engineer Jose N. Quedding.
In a report dated February 28, 1985, Engineer Quedding found that the lot area of
petitioner Ballatan was less by few meters and that of respondent Li Ching Yao, which
was three lots away, increased by two (2) meters. Engineer Quedding declared that he
made a verification survey of Lots Nos. 25 and 26 of respondents Go in 1983 and
allegedly found the boundaries to have been in their proper position. He, however,
could not explain the reduction in Ballatan's area since he was not present at the time
respondents Go constructed their boundary walls. 6
On June 2, 1985, Engineer Quedding made a third relocation survey upon request of
the parties. He found that Lot No. 24 lost approximately 25 square meters on its
eastern boundary that Lot No. 25, although found to have encroached on Lot No. 24,
did not lose nor gain any area; that Lot No. 26 lost some three (3) square meters which,
however, were gained by Lot No. 27 on its western boundary. 7 In short, Lots Nos. 25,
26 and 27 moved westward to the eastern boundary of Lot No. 24.
On the basis of this survey, on June 10, 1985, petitioner Ballatan made a written
demand on respondents Go to remove and dismantle their improvements on Lot No.
24. Respondents Go refused. The parties including Li Ching Yao, however, met
several times to reach an agreement one matter.
Failing to agree amicably, petitioner Ballatan brought the issue before the barangay.
Respondents Go did not appear. Thus, on April 1, 1986, petitioner Ballatan instituted
against respondents Go Civil Case No. 772-MN for recovery of possession before the
Regional Trial Court, Malabon, Branch 169. The Go' s filed their "Answer with Third-
Party Complaint" impleading as third-party defendants respondents Li Ching Yao, the
AIA and Engineer Quedding.
On August 23, 1990, the trial court decided in favor of petitioners. It ordered the Go's
to vacate the subject portion of Lot No. 24, demolish their improvements and pay
petitioner Ballatan actual damages, attorney's fees and the costs of the suit. It
dismissed the third-party complaint against: (1) AIA after finding that the lots sold to
the parties were in accordance with the technical description a verification plan
covered by their respective titles; (2) Jose N. Quedding, there being no privity of
relation between him and respondents Go and his erroneous survey having been made
at the instance of AIA, not the parties; and (3) Li Ching Yao for failure to prove that he
committed any wrong in the subject encroachment. 8 The court made the following
disposition:
WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and
against the defendants, ordering the latter:
1. To demolish and remove all improvements existing and encroaching on
plaintiff's lot;
2. To clear, vacate and deliver possession of the encroached area to the
plaintiffs;
3. To pay plaintiffs jointly and severally the following:
a) P7,800.00 for the expenses paid to the surveyors;
b) P5,000.00 for plaintiffs' transportation;
4. To pay plaintiffs, jointly and severally, attorney's fees equivalent to 25% of
the current market value of the subject matter in litigation at the time of
execution; and
24
 5. To pay the costs of suit.
The third-party complaint filed by third-party plaintiff Gonzalo Go and
Winston Go against third-party defendants Araneta Institute of Agriculture,
Jose N. Quedding and Li Ching Yao is hereby DISMISSED, without
pronouncement as to costs.
Hence, this petition. Petitioners allege that:
SO ORDERED.
Respondents Go appealed. On March 25, 1996, the Court of Appeals modified the
decision of the trial court. It affirmed the dismissal of the third-party complaint against
the AIA but reinstated the complaint against Li Ching Yao and Jose Quedding. Instead
of ordering respondents Go to demolish their improvements on the subject land, the
appellate court ordered them to pay petitioner Ballatan, and respondent Li Ching Yao
to pay respondents Go, a reasonable amount for that portion of the lot which they
encroached, the value to be fixed at the time of taking. It also ordered Jose Quedding
to pay respondents Go attorney's fees of P5,000.00 for his erroneous survey. The
dispositive portion of the decision reads:
WHEREFORE, premises considered, the decision appealed from is hereby
AFFIRMED insofar as the dismissal of the third-party complaint against
Araneta Institute of Agriculture is concerned but modified in all other aspects
as follows:
1) Defendants-appellants are hereby ordered to pay plaintiffs-appellees the
reasonable value of the forty-two (42) square meters of their lot at the time of
its taking;
2) Third-party defendant Li Ching Yao is hereby ordered to pay defendants-
appellants the reasonable value of the thirty-seven (37) square meters of the
latter's lot at the time of its taking; and
3) Third-party defendant Jose N. Quedding is hereby ordered to pay to
defendants-appellants the amount of P5,000.00 as attorney's fees.
Petitioners question the admission by respondent Court of Appeals of the third-party
complaint by respondents Go against the AIA, Jose Quedding and Li Ching Yao.
LET THE RECORD of the case be remanded to the Regional Trial Court of
Malabon for further proceedings and reception of evidence for the
determination of the reasonable value of Lots Nos. 24 and 26.
SO ORDERED.9
RESPONDENT COURT OF APPEALS ERRED ON QUESTIONS OF LAW
AND GRAVELY ABUSED ITS DISCRETION AMOUNTING TO LACK OF
JURISDICTION WHEN:
1. IT APPLIED EQUITY OR EQUITABLE SOLUTIONS TO THE INSTANT
CASE IN UTTER DISREGARD AND IN VIOLATION OR GROSS
IGNORANCE OF EXISTING LAWS AND JURISPRUDENCE VESTING
BASIC PROPERTY RIGHTS TO HEREIN PETITIONERS. RESPONDENT
COURT HAS NO POWER TO APPLY/USE EQUITY IN THE PRESENCE
OF EXISTING LAWS TO THE CONTRARY.
2. UNDER THE GUISE OF APPLYING EQUITY BUT IN EFFECT A VERY
APPARENT PARTIALITY AND FAVOR TO RESPONDENTS GO, IT
ORDERED PAYMENT OF THE ENCROACHED AREA AT THE VALUE
AT THE TIME OF ITS TAKING AND NOT THE VALUE AT THE TIME
OF PAYMENT, THEREBY ENRICHING THE GO'S BUT DEPRIVING
PETITIONERS OF THE FRUITS OR INCREASE IN VALUE OF THEIR
PROPERTY TO WHICH THEY ARE ENTITLED UNDER THE LAW AS
THE REGISTERED OWNERS WITH TORRENS TITLE IN THEIR NAMES.
3. WHEN IT DID NOT DISMISS THE THIRD-PARTY COMPLAINT DUE
TO NON-PAYMENT OF ANY FILING OR DOCKET FEE.
4. WHEN IT DENIED PETITIONERS THE RECOVERY OF THE
NECESSARY EXPENSES IN PROTECTING THEIR RIGHTS IN THIS
CASE. 10
25
Petitioners claim that the third-party complaint should not have been considered by the
Court of Appeals for lack of jurisdiction due to third-party plaintiffs' failure to pay the
docket and filing fees before the trial court.
The third-party complaint in the instant case arose from the complaint of petitioners
against respondents Go. The complaint filed was for accion publiciana, i.e., the
recovery of possession of real property which is a real action. The rule in this
jurisdiction is that when an action is filed in court, the complaint must be accompanied
the payment of the requisite docket and filing fees. 11 In real actions, the docket and
filing fees are based on the value of the property and the amount of damages claimed,
if any 12 If the complaint is filed but the fees are not paid at the time of filing, the court
acquires jurisdiction upon full payment of the fees within a reasonable time as the
court may grant, barring prescription. 13 Where the fees prescribed for the real action
have been paid but the fees of certain related damages are not, the court, although
having jurisdiction over the real action, may not have acquired jurisdiction over the
accompnying claim for damages. 14 Accordingly, the court may expunge those claims
for damages, or allow, on motion, a reasonable time for amendment of the complaint
so as to allege the precise amount of damages and accept payment of the requisite legal
fee. 15 If there are unspecified claims, the determination of which may arise after the
filing of the complaint or similar pleading, the additional filing fee thereon shall
constitute a lien on the judgment award. 16 The same rule also applies to third-party
claims and other similar pleadings. 17
In the case at bar, the third-party complaint filed by respondents Go was incorporated
in their answer to the complaint. The third-party complaint sought the same remedy as
the principal complaint but added a prayer for attorney's fees and costs without
specifying their amounts, thus:
ON THE THIRD PARTY COMPLAINT
1. That summons be issued against Third-Party Defendants Araneta Institute of
Agriculture, Jose N. Quedding and Li Ching Yao;
2. That after hearing, they be sentenced to indemnify the Third-Party Plaintiffs
for whatever is adjudged against the latter in favor of the Plaintiffs;
3. That Third-Party Defendants be ordered to pay attorney's fees as may be
proved during trial;
4. That Third-Party Defendants be ordered to pay the costs.
Other just and equitable reliefs are also prayed for. 18
The Answer with Third-Party Complaint was admitted by the trial court without the
requisite payment of filing fees, particularly on the Go's prayer for damages. 19 The
trial court did not award the Go's any damages. It dismissed the third-party complaint.
The Court of Appeals, however, granted the third-party complaint in part by ordering
third-party defendant Jose N. Quedding to pay the Go's the sum of P5,000.00 as
attorney's fees.
Contrary to petitioners' claim, the Court of Appeal did not err in awarding damages
despite the Go's failure to specify the amount prayed for and pay the corresponding
additional filing fees thereon. The claim for attorney's fees refers to damages arising
after the filing of the complaint against the Go's. The additional filing fee on this claim
is deemed to constitute a lien on the judgment award. 20
The Court of Appeals found that the subject portion is actually forty-two (42) square
meters in area, not forty-five (45), as initially found by the trial court; that this forty-
two (42) square meter portion is on the entire eastern side of Lot No. 24 belonging to
petitioners; that this said portion is found the concrete fence and pathway that extends
from respondent Winston Go's house on adjacent Lot No. 25; that inclusive of the
subject portion, respondents Go did not gain nor lose any portion of Lots Nos. 25 and
26; that instead, Lot No. 27, on which respondent Li Ching Yao built his house,
encroached on the land of respondents Go, gaining in the process thirty-seven (37)
square meters of the latter's land.21
We hold that the Court of Appeals correctly dismissed the third-party complaint
against AIA.. The claim that the discrepancy in the lot areas was due to AIA's fault
was not proved. The appellate court, however, found that it was the erroneous survey
by Engineer Quedding that triggered these discrepancies. And it was this survey that
respondent Winston Go relied upon in constructing his house on his father's land. He
built his house in the belief that it was entirely within the parameters of his father's
land. In short, respondents Go had no knowledge that they encroached petitioners' lot.
26
They are deemed builders in good faith 22 until the time petitioner Ballatan informed
them of their encroachment on her property.23
Respondent Li Ching Yao built his house on his lot before any of the other parties
did. 24 He constructed his house in 1982, respondents Go in 1983, and petitioners in
1985. 25 There is no evidence, much less, any allegation that respondent Li Ching Yao
was aware that when he built his house he knew that a portion thereof encroached on
respondents Go's adjoining land. Good faith is always presumed, and upon him who
alleges bad faith on the part of a possessor rests the burden of proof. 26
All the parties are presumed to have acted in good faith. Their rights must, therefore,
be determined in accordance with the appropriate provisions of the Civil Code on
property.
Art. 448 of the Civil Code provides:
Art. 448. The owner of the land on which anything has been built, sown or
planted in good faith, shall have the right to appropriate as his own the works,
sowing or planting, after payment of the indemnity provided for in Articles 546
and 548, 27 or to oblige the one who built or planted to pay the price of the land,
and the one who sowed the proper rent. However, the builder or planter cannot
be obliged to buy the land if its value is considerably more than that of the
building or trees. In such case, he shall pay reasonable rent, if the owner of the
land does not choose to appropriate the building or trees after proper indemnity.
The parties shall agree upon the terms of the lease and in case of disagreement,
the court shall fix the terms thereof.
The owner of the land on which anything has been built, sown or planted in
good faith shall have the right to appropriate as his own the building, planting
or sowing, after payment to the builder, planter or sower of the necessary and
useful expenses, and in the proper case, expenses for pure luxury or mere
pleasure. The owner of the land may also oblige the builder, planter or sower to
purchase and pay the price of the land. If the owner chooses to sell his land, the
builder, planter or sower must purchase the land, otherwise the owner may
remove the improvements thereon. The builder, planter or sower, however, is
not obliged to purchase the land if its value considerably more than the
building, planting or sowing. In such case, the builder, planter or sower must
pay rent to the owner of the land. If the parties cannot come to terms over the
conditions of the lease, the court must fix the terms thereof. The right to choose
between appropriating the improvement or selling the land on which the
improvement stands to the builder, planter or sower, is given to the owner of
the land. 28
Art. 448 has been applied to improvements or portions of improvements built by
mistaken belief on land belonging to the adjoining owner. 29 The facts of the instant
case are similar to those in Cabral v. Ibanez, 30 to wit:
[P]laintiffs Geronima Zabala and her husband Justino Bernardo, constructed
their house in the belief that it was entirely within the area of their own land
without knowing at that time that part of their house was occupying a 14-square
meter portion of the adjoining lot belonging to the defendants, and that the
defendants Bernardo M. Cabral and Mamerta M. Cabral were likewise unaware
of the fact that a portion of plaintiff's house was extending and occupying a
portion of their lot with an area of 14 square meters. The parties came to know
of the fact that part of the plaintiff's house was occupying part of defendant's
land when the construction of plaintiff's house was about to be finished, after a
relocation of the monuments of the two properties had been made by the U.S.
Army through the Bureau of Lands, according to their "Stipulation of Facts,"
dated August 17, 1951.
On the basis of these facts, we held that:
The court, therefore, concludes that the plaintiffs are builders in good faith and
the relative rights of the defendant Mamerta Cabral as owner of the land and of
the plaintiffs as owners of the building is governed by Article 361 of the Civil
Code (Co Tao v. Joaquin Chan Chico, 46 Off. Gaz.5514). Article 361 of the old
Civil Code has been reproduced with an additional provision in Article 448 of
the new Civil Code, approved June 18, 1949. 31
Similarly, in Grana and Torralba v. Court of Appeals,32 we held that:
Although without any legal and valid claim over the land in question,
petitioners, however, were found by the Court of Appeals to have constructed a
portion of their house thereon in good faith. Under Article 361 of the old Civil
Code (Article 448 of the new), the owner of the land on which anything has
27
 been built in good faith shall have the right to appropriate as his own the
building, after payment to the builder of necessary or useful expenses, and in
the proper case, expenses for pure luxury or mere pleasure, or to oblige the
builder to pay the price of the land. Respondents, as owners of the land, have
therefore the choice of either appropriating the portion of petitioners' house
which is on their land upon payment of the proper indemnity to petitioners, or
selling to petitioners that part of their land on which stands the improvement. It
may here be pointed out that it would be impractical for respondents to choose
to exercise the first alternative, i.e., buy that portion of the house standing on
their land, for in that event the whole building might be rendered useless. The
more workable solution, it would seem, is for respondents to sell to petitioners
that part of their land on which was constructed a portion of the latter's house. If
petitioners are unwilling or unable to buy, then they must vacate the land and
must pay rentals until they do so. Of course, respondents cannot oblige
petitioners to buy the land if its value is considerably more than that of the
aforementioned portion of the house. If such be the case, then petitioners must
pay reasonable rent. The parties must come to an agreement as to the conditions
of the lease, and should they fail to do so, then the court shall fix the same. 33
In light of these rulings, petitioners, as owners of Lot No. 24, may choose to purchase
the improvement made by respondents Go on their land, or sell to respondents Go the
subject portion. If buying the improvement is impractical as it may render the Go's
house useless, then petitioners may sell to respondents Go that portion of Lot No. 24
on which their improvement stands. If the Go's are unwilling or unable to buy the lot,
then they must vacate the land and, until they vacate, they must pay rent to petitioners.
Petitioners, however, cannot compel respondents Go to buy the land if its value is
considerably more than the portion of their house constructed thereon. If the value of
the land is much more than the Go's improvement, the respondents Go must pay
reasonable rent. If they do not agree on the terms of the lease, then they may go to
court to fix the same.
In the event that petitioners elect to sell to respondents Go the subject portion of their
lot, the price must be fixed at the prevailing market value at the time of payment. The
Court of Appeals erred in fixing the price at the time of taking, which is the time the
improvements were built on the land. The time of taking is determinative of just
compensation in expropriation proceedings. The instant case is not for expropriation. It
is not a taking by the state of private property for a public purpose upon payment of
just compensation. This is a case of an owner who has been paying real estate taxes on
his land but has been deprived of the use of a portion of this land for years. It is but fair
and just to fix compensation at the time of payment.34
Art. 448 and the same conditions abovestated also apply to respondents Go as owners
and possessors of their land and respondent Li Ching Yao as builder of the
improvement that encroached on thirty-seven (37) square meters of respondents Go's
land.
IN VIEW WHEREOF, the decision of respondent Court of Appeals is modified as
follows:
(1) Petitioners are ordered to exercise within thirty (30) days from finality of this
decision their option to either buy the portion of respondents Go's improvement on
their Lot No. 24, or sell to said respondents the portion of their land on which the
improvement stands. If petitioners elect to sell the land or buy the improvement, the
purchase price must be at the prevailing market price at the time of payment. If buying
the improvement will render respondents Go's house useless, then petitioners should
sell the encroached portion of their land to respondents Go. If petitioners choose to sell
the land but respondents Go are unwilling or unable to buy, then the latter must vacate
the subject portion and pay reasonable rent from the time petitioners made their choice
up to the time they actually vacate the premises. But if the value of the land is
considerably more than the value of the improvement, then respondents Go may elect
to lease the land, in which case the parties shall agree upon the terms, the lease. Should
they fail to agree on said terms, the court of origin is directed to fix the terms of the
lease.
From the moment petitioners shall have exercised their option, respondents Go shall
pay reasonable monthly rent up to the time the parties agree on the terms of the lease
or until the court fixes such terms.
(2) Respondents Go are likewise directed to exercise their rights as owners of Lots
Nos. 25 and 26, vis-a-visrespondent Li Ching Yao as builder of the improvement that
encroached on thirty seven (37) square meters of respondents Go 's land in accordance
with paragraph one abovementioned.
28
(3) The Decision of the Court of Appeals ordering Engineer Quedding, as third-party
defendant, to pay attorney's fees of P5,000.00 to respondents Go is affirmed. The
additional filing fee on the damages constitutes a lien on this award.
(4) The Decision of the Court of Appeals dismissing third-party complaint against
Araneta Institute of Agriculture is affirmed. SO ORDERED.
MANUEL O. FUENTES and LETICIA L. FUENTES, Petitioners,
vs.
CONRADO G. ROCA, ANNABELLE R. JOSON, ROSE MARIE R.
CRISTOBAL and PILAR MALCAMPO,Respondents.
This case is about a husband’s sale of conjugal real property, employing a challenged
affidavit of consent from an estranged wife. The buyers claim valid consent, loss of
right to declare nullity of sale, and prescription.
The Facts and the Case
Sabina Tarroza owned a titled 358-square meter lot in Canelar, Zamboanga City. On
October 11, 1982 she sold it to her son, Tarciano T. Roca (Tarciano) under a deed of
absolute sale.1 But Tarciano did not for the meantime have the registered title
transferred to his name.
Six years later in 1988, Tarciano offered to sell the lot to petitioners Manuel and
Leticia Fuentes (the Fuentes spouses). They arranged to meet at the office of Atty.
Romulo D. Plagata whom they asked to prepare the documents of sale. They later
signed an agreement to sell that Atty. Plagata prepared 2 dated April 29, 1988, which
agreement expressly stated that it was to take effect in six months.
The agreement required the Fuentes spouses to pay Tarciano a down payment of
₱60,000.00 for the transfer of the lot’s title to him. And, within six months, Tarciano
was to clear the lot of structures and occupants and secure the consent of his estranged
wife, Rosario Gabriel Roca (Rosario), to the sale. Upon Tarciano’s compliance with
these conditions, the Fuentes spouses were to take possession of the lot and pay him an
additional ₱140,000.00 or ₱160,000.00, depending on whether or not he succeeded in
demolishing the house standing on it. If Tarciano was unable to comply with these
conditions, the Fuentes spouses would become owners of the lot without any further
formality and payment.
The parties left their signed agreement with Atty. Plagata who then worked on the
other requirements of the sale. According to the lawyer, he went to see Rosario in one
of his trips to Manila and had her sign an affidavit of consent. 3 As soon as Tarciano
met the other conditions, Atty. Plagata notarized Rosario’s affidavit in Zamboanga
City. On January 11, 1989 Tarciano executed a deed of absolute sale 4 in favor of the
Fuentes spouses. They then paid him the additional ₱140,000.00 mentioned in their
agreement. A new title was issued in the name of the spouses 5 who immediately
constructed a building on the lot. On January 28, 1990 Tarciano passed away, followed
by his wife Rosario who died nine months afterwards.
Eight years later in 1997, the children of Tarciano and Rosario, namely, respondents
Conrado G. Roca, Annabelle R. Joson, and Rose Marie R. Cristobal, together with
Tarciano’s sister, Pilar R. Malcampo, represented by her son, John Paul M. Trinidad
(collectively, the Rocas), filed an action for annulment of sale and reconveyance of the
land against the Fuentes spouses before the Regional Trial Court (RTC) of Zamboanga
City in Civil Case 4707. The Rocas claimed that the sale to the spouses was void since
Tarciano’s wife, Rosario, did not give her consent to it. Her signature on the affidavit
of consent had been forged. They thus prayed that the property be reconveyed to them
upon reimbursement of the price that the Fuentes spouses paid Tarciano. 6
The spouses denied the Rocas’ allegations. They presented Atty. Plagata who testified
that he personally saw Rosario sign the affidavit at her residence in Paco, Manila, on
September 15, 1988. He admitted, however, that he notarized the document in
Zamboanga City four months later on January 11, 1989. 7 All the same, the Fuentes
spouses pointed out that the claim of forgery was personal to Rosario and she alone
could invoke it. Besides, the four-year prescriptive period for nullifying the sale on
ground of fraud had already lapsed.
Both the Rocas and the Fuentes spouses presented handwriting experts at the trial.
Comparing Rosario’s standard signature on the affidavit with those on various
documents she signed, the Rocas’ expert testified that the signatures were not written
by the same person. Making the same comparison, the spouses’ expert concluded that
they were.8
29
On February 1, 2005 the RTC rendered judgment, dismissing the case. It ruled that the
action had already prescribed since the ground cited by the Rocas for annulling the
sale, forgery or fraud, already prescribed under Article 1391 of the Civil Code four
years after its discovery. In this case, the Rocas may be deemed to have notice of the
fraud from the date the deed of sale was registered with the Registry of Deeds and the
new title was issued. Here, the Rocas filed their action in 1997, almost nine years after
the title was issued to the Fuentes spouses on January 18, 1989. 9
Moreover, the Rocas failed to present clear and convincing evidence of the fraud.
Mere variance in the signatures of Rosario was not conclusive proof of forgery. 10 The
RTC ruled that, although the Rocas presented a handwriting expert, the trial court
could not be bound by his opinion since the opposing expert witness contradicted the
same. Atty. Plagata’s testimony remained technically unrebutted. 11
Finally, the RTC noted that Atty. Plagata’s defective notarization of the affidavit of
consent did not invalidate the sale. The law does not require spousal consent to be on
the deed of sale to be valid. Neither does the irregularity vitiate Rosario’s consent. She
personally signed the affidavit in the presence of Atty. Plagata. 12
On appeal, the Court of Appeals (CA) reversed the RTC decision. The CA found
sufficient evidence of forgery and did not give credence to Atty. Plagata’s testimony
that he saw Rosario sign the document in Quezon City. Its jurat said differently. Also,
upon comparing the questioned signature with the specimen signatures, the CA noted
significant variance between them. That Tarciano and Rosario had been living
separately for 30 years since 1958 also reinforced the conclusion that her signature had
been forged.
Since Tarciano and Rosario were married in 1950, the CA concluded that their
property relations were governed by the Civil Code under which an action for
annulment of sale on the ground of lack of spousal consent may be brought by the wife
during the marriage within 10 years from the transaction. Consequently, the action that
the Rocas, her heirs, brought in 1997 fell within 10 years of the January 11, 1989 sale.
Considering, however, that the sale between the Fuentes spouses and Tarciano was
merely voidable, the CA held that its annulment entitled the spouses to reimbursement
of what they paid him plus legal interest computed from the filing of the complaint
until actual payment. Since the Fuentes spouses were also builders in good faith, they
were entitled under Article 448 of the Civil Code to payment of the value of the
improvements they introduced on the lot. The CA did not award damages in favor of
the Rocas and deleted the award of attorney’s fees to the Fuentes spouses. 13
Unsatisfied with the CA decision, the Fuentes spouses came to this court by petition
for review.14
The Issues Presented
The case presents the following issues:
1. Whether or not Rosario’s signature on the document of consent to her
husband Tarciano’s sale of their conjugal land to the Fuentes spouses was
forged;
2. Whether or not the Rocas’ action for the declaration of nullity of that sale
to the spouses already prescribed; and
3. Whether or not only Rosario, the wife whose consent was not had, could
bring the action to annul that sale.
The Court’s Rulings
First. The key issue in this case is whether or not Rosario’s signature on the document
of consent had been forged. For, if the signature were genuine, the fact that she gave
her consent to her husband’s sale of the conjugal land would render the other issues
merely academic.
The CA found that Rosario’s signature had been forged. The CA observed a marked
difference between her signature on the affidavit of consent 15 and her specimen
signatures.16 The CA gave no weight to Atty. Plagata’s testimony that he saw Rosario
sign the document in Manila on September 15, 1988 since this clashed with his
declaration in the jurat that Rosario signed the affidavit in Zamboanga City on January
11, 1989.
The Court agrees with the CA’s observation that Rosario’s signature strokes on the
affidavit appears heavy, deliberate, and forced. Her specimen signatures, on the other
hand, are consistently of a lighter stroke and more fluid. The way the letters "R" and
30
"s" were written is also remarkably different. The variance is obvious even to the
untrained eye.
Significantly, Rosario’s specimen signatures were made at about the time that she
signed the supposed affidavit of consent. They were, therefore, reliable standards for
comparison. The Fuentes spouses presented no evidence that Rosario suffered from
any illness or disease that accounted for the variance in her signature when she signed
the affidavit of consent. Notably, Rosario had been living separately from Tarciano for
30 years since 1958. And she resided so far away in Manila. It would have been quite
tempting for Tarciano to just forge her signature and avoid the risk that she would not
give her consent to the sale or demand a stiff price for it.
What is more, Atty. Plagata admittedly falsified the jurat of the affidavit of consent.
That jurat declared that Rosario swore to the document and signed it in Zamboanga
City on January 11, 1989 when, as Atty. Plagata testified, she supposedly signed it
about four months earlier at her residence in Paco, Manila on September 15, 1988.
While a defective notarization will merely strip the document of its public character
and reduce it to a private instrument, that falsified jurat, taken together with the marks
of forgery in the signature, dooms such document as proof of Rosario’s consent to the
sale of the land. That the Fuentes spouses honestly relied on the notarized affidavit as
proof of Rosario’s consent does not matter. The sale is still void without an authentic
consent.
Second. Contrary to the ruling of the Court of Appeals, the law that applies to this case
is the Family Code, not the Civil Code. Although Tarciano and Rosario got married in
1950, Tarciano sold the conjugal property to the Fuentes spouses on January 11, 1989,
a few months after the Family Code took effect on August 3, 1988.
When Tarciano married Rosario, the Civil Code put in place the system of conjugal
partnership of gains on their property relations. While its Article 165 made Tarciano
the sole administrator of the conjugal partnership, Article 166 17 prohibited him from
selling commonly owned real property without his wife’s consent. Still, if he sold the
same without his wife’s consent, the sale is not void but merely voidable. Article 173
gave Rosario the right to have the sale annulled during the marriage within ten years
from the date of the sale. Failing in that, she or her heirs may demand, after dissolution
of the marriage, only the value of the property that Tarciano fraudulently sold. Thus:
Art. 173. The wife may, during the marriage, and within ten years from the transaction
questioned, ask the courts for the annulment of any contract of the husband entered
into without her consent, when such consent is required, or any act or contract of the
husband which tends to defraud her or impair her interest in the conjugal partnership
property. Should the wife fail to exercise this right, she or her heirs, after the
dissolution of the marriage, may demand the value of property fraudulently alienated
by the husband.
But, as already stated, the Family Code took effect on August 3, 1988. Its Chapter 4 on
Conjugal Partnership of Gains expressly superseded Title VI, Book I of the Civil Code
on Property Relations Between Husband and Wife. 18Further, the Family Code
provisions were also made to apply to already existing conjugal partnerships without
prejudice to vested rights.19 Thus:
Art. 105. x x x The provisions of this Chapter shall also apply to conjugal partnerships
of gains already established between spouses before the effectivity of this Code,
without prejudice to vested rights already acquired in accordance with the Civil Code
or other laws, as provided in Article 256. (n)
Consequently, when Tarciano sold the conjugal lot to the Fuentes spouses on January
11, 1989, the law that governed the disposal of that lot was already the Family Code.
In contrast to Article 173 of the Civil Code, Article 124 of the Family Code does not
provide a period within which the wife who gave no consent may assail her husband’s
sale of the real property. It simply provides that without the other spouse’s written
consent or a court order allowing the sale, the same would be void. Article 124 thus
provides:
Art. 124. x x x In the event that one spouse is incapacitated or otherwise unable to
participate in the administration of the conjugal properties, the other spouse may
assume sole powers of administration. These powers do not include the powers of
disposition or encumbrance which must have the authority of the court or the written
consent of the other spouse. In the absence of such authority or consent, the disposition
or encumbrance shall be void. x x x
Under the provisions of the Civil Code governing contracts, a void or inexistent
contract has no force and effect from the very beginning. And this rule applies to
31
contracts that are declared void by positive provision of law, 20 as in the case of a sale
of conjugal property without the other spouse’s written consent. A void contract is
equivalent to nothing and is absolutely wanting in civil effects. It cannot be validated
either by ratification or prescription.21
But, although a void contract has no legal effects even if no action is taken to set it
aside, when any of its terms have been performed, an action to declare its inexistence
is necessary to allow restitution of what has been given under it. 22 This action,
according to Article 1410 of the Civil Code does not prescribe. Thus:
Art. 1410. The action or defense for the declaration of the inexistence of a contract
does not prescribe.
Here, the Rocas filed an action against the Fuentes spouses in 1997 for annulment of
sale and reconveyance of the real property that Tarciano sold without their mother’s
(his wife’s) written consent. The passage of time did not erode the right to bring such
an action.
Besides, even assuming that it is the Civil Code that applies to the transaction as the
CA held, Article 173 provides that the wife may bring an action for annulment of sale
on the ground of lack of spousal consent during the marriage within 10 years from the
transaction. Consequently, the action that the Rocas, her heirs, brought in 1997 fell
within 10 years of the January 11, 1989 sale. It did not yet prescribe.
The Fuentes spouses of course argue that the RTC nullified the sale to them based on
fraud and that, therefore, the applicable prescriptive period should be that which
applies to fraudulent transactions, namely, four years from its discovery. Since notice
of the sale may be deemed given to the Rocas when it was registered with the Registry
of Deeds in 1989, their right of action already prescribed in 1993.
But, if there had been a victim of fraud in this case, it would be the Fuentes spouses in
that they appeared to have agreed to buy the property upon an honest belief that
Rosario’s written consent to the sale was genuine. They had four years then from the
time they learned that her signature had been forged within which to file an action to
annul the sale and get back their money plus damages. They never exercised the right.
If, on the other hand, Rosario had agreed to sign the document of consent upon a false
representation that the property would go to their children, not to strangers, and it
turned out that this was not the case, then she would have four years from the time she
discovered the fraud within which to file an action to declare the sale void. But that is
not the case here. Rosario was not a victim of fraud or misrepresentation. Her consent
was simply not obtained at all. She lost nothing since the sale without her written
consent was void. Ultimately, the Rocas ground for annulment is not forgery but the
lack of written consent of their mother to the sale. The forgery is merely evidence of
lack of consent.
Third. The Fuentes spouses point out that it was to Rosario, whose consent was not
obtained, that the law gave the right to bring an action to declare void her husband’s
sale of conjugal land. But here, Rosario died in 1990, the year after the sale. Does this
mean that the right to have the sale declared void is forever lost?
The answer is no. As stated above, that sale was void from the beginning.
Consequently, the land remained the property of Tarciano and Rosario despite that
sale. When the two died, they passed on the ownership of the property to their heirs,
namely, the Rocas.23 As lawful owners, the Rocas had the right, under Article 429 of
the Civil Code, to exclude any person from its enjoyment and disposal.1avvphi1
In fairness to the Fuentes spouses, however, they should be entitled, among other
things, to recover from Tarciano’s heirs, the Rocas, the ₱200,000.00 that they paid
him, with legal interest until fully paid, chargeable against his estate.
Further, the Fuentes spouses appear to have acted in good faith in entering the land and
building improvements on it. Atty. Plagata, whom the parties mutually entrusted with
closing and documenting the transaction, represented that he got Rosario’s signature
on the affidavit of consent. The Fuentes spouses had no reason to believe that the
lawyer had violated his commission and his oath. They had no way of knowing that
Rosario did not come to Zamboanga to give her consent. There is no evidence that
they had a premonition that the requirement of consent presented some difficulty.
Indeed, they willingly made a 30 percent down payment on the selling price months
earlier on the assurance that it was forthcoming.
Further, the notarized document appears to have comforted the Fuentes spouses that
everything was already in order when Tarciano executed a deed of absolute sale in
their favor on January 11, 1989. In fact, they paid the balance due him. And, acting on
32
the documents submitted to it, the Register of Deeds of Zamboanga City issued a new
title in the names of the Fuentes spouses. It was only after all these had passed that the
spouses entered the property and built on it. He is deemed a possessor in good faith,
said Article 526 of the Civil Code, who is not aware that there exists in his title or
mode of acquisition any flaw which invalidates it.
As possessor in good faith, the Fuentes spouses were under no obligation to pay for
their stay on the property prior to its legal interruption by a final judgment against
them.24 What is more, they are entitled under Article 448 to indemnity for the
improvements they introduced into the property with a right of retention until the
reimbursement is made. Thus:
Art. 448. The owner of the land on which anything has been built, sown or planted in
good faith, shall have the right to appropriate as his own the works, sowing or
planting, after payment of the indemnity provided for in Articles 546 and 548, or to
oblige the one who built or planted to pay the price of the land, and the one who
sowed, the proper rent. However, the builder or planter cannot be obliged to buy the
land if its value is considerably more than that of the building or trees. In such case, he
shall pay reasonable rent, if the owner of the land does not choose to appropriate the
building or trees after proper indemnity. The parties shall agree upon the terms of the
lease and in case of disagreement, the court shall fix the terms thereof. (361a)
The Rocas shall of course have the option, pursuant to Article 546 of the Civil
Code,25 of indemnifying the Fuentes spouses for the costs of the improvements or
paying the increase in value which the property may have acquired by reason of such
improvements.
WHEREFORE, the Court DENIES the petition and AFFIRMS WITH
MODIFICATION the decision of the Court of Appeals in CA-G.R. CV 00531 dated
February 27, 2007 as follows:
1. The deed of sale dated January 11, 1989 that Tarciano T. Roca executed in
favor of Manuel O. Fuentes, married to Leticia L. Fuentes, as well as the
Transfer Certificate of Title T-90,981 that the Register of Deeds of
Zamboanga City issued in the names of the latter spouses pursuant to that
deed of sale are DECLARED void;
2. The Register of Deeds of Zamboanga City is DIRECTED to reinstate
Transfer Certificate of Title 3533 in the name of Tarciano T. Roca, married to
Rosario Gabriel;
3. Respondents Gonzalo G. Roca, Annabelle R. Joson, Rose Marie R.
Cristobal, and Pilar Malcampo are ORDERED to pay petitioner spouses
Manuel and Leticia Fuentes the ₱200,000.00 that the latter paid Tarciano T.
Roca, with legal interest from January 11, 1989 until fully paid, chargeable
against his estate;
4. Respondents Gonzalo G. Roca, Annabelle R. Joson, Rose Marie R.
Cristobal, and Pilar Malcampo are further ORDERED, at their option, to
indemnify petitioner spouses Manuel and Leticia Fuentes with their expenses
for introducing useful improvements on the subject land or pay the increase in
value which it may have acquired by reason of those improvements, with the
spouses entitled to the right of retention of the land until the indemnity is
made; and
5. The RTC of Zamboanga City from which this case originated is
DIRECTED to receive evidence and determine the amount of indemnity to
which petitioner spouses Manuel and Leticia Fuentes are entitled.
SO ORDERED.
G.R. No. 176791 November 14, 2012
COMMUNITIES CAGAYAN, INC., Petitioner,
vs.
SPOUSES ARSENIO (Deceased) and ANGELES NANOL AND ANYBODY
CLAIMING RIGHTS UNDER THEM,Respondents.
LAWS fill the gap in a contract.
This Petition for Review on Certiorari1 under Rule 45 of the Rules of Court assails the
December 29. 2006 Decision2and the February 12, 2007 Order3 of the Regional Trial
Court (RTC), Cagayan De Oro City, Branch 18, in Civil Case No. 2005-158.
33
Factual Antecedents
Sometimes in 1994, respondent-spouses Arsenio and Angeles Nanol entered into a
Contract to Sell4 with petitioner Communities Cagayan, Inc.,5 whereby the latter agreed
to sell to respondent-spouses a house and Lots 17 and 196located at Block 16, Camella
Homes Subdivision, Cagayan de Oro City, 7 for the price of P368,000.00.8 Respondent-
spouses, however, did not avail of petitioner’s inhouse financing due to its high
interest rates.9 Instead, they obtained a loan from Capitol Development Bank, a sister
company of petitioner, using the property as collateral. 10 To facilitate the loan, a
simulated sale over the property was executed by petitioner in favor of respondent-
spouses.11Accordingly, titles were transferred in the names of respondent-spouses
under Transfer Certificates of Title (TCT) Nos. 105202 and 105203, and submitted to
Capitol Development Bank for loan processing.12 Unfortunately, the bank collapsed
and closed before it could release the loan.13
Thus, on November 30, 1997, respondent-spouses entered into another Contract to
Sell14 with petitioner over the same property for the same price of P368,000.00. 15 This
time, respondent-spouses availed of petitioner’s in-house financing16 thus, undertaking
to pay the loan over four years, from 1997 to 2001. 17
Sometime in 2000, respondent Arsenio demolished the original house and constructed
a three-story house allegedly valued at P3.5 million, more or less. 18
In July 2001, respondent Arsenio died, leaving his wife, herein respondent Angeles, to
pay for the monthly amortizations.19
On September 10, 2003, petitioner sent respondent-spouses a notarizedNotice of
Delinquency and Cancellation of Contract to Sell20 due to the latter’s failure to pay the
monthly amortizations.
In December 2003, petitioner filed before Branch 3 of the Municipal Trial Court in
Cities of Cagayan de Oro City, an action for unlawful detainer, docketed as C3-Dec-
2160, against respondent-spouses.21 When the case was referred for mediation,
respondent Angeles offered to pay P220,000.00 to settle the case but petitioner refused
to accept the payment.22 The case was later withdrawn and consequently dismissed
because the judge found out that the titles were already registered under the names of
respondent-spouses.23
Unfazed by the unfortunate turn of events, petitioner, on July 27, 2005, filed before
Branch 18 of the RTC, Cagayan de Oro City, a Complaint for Cancellation of Title,
Recovery of Possession, Reconveyance and Damages,24docketed as Civil Case No.
2005-158, against respondent-spouses and all persons claiming rights under them.
Petitioner alleged that the transfer of the titles in the names of respondent-spouses was
made only in compliance with the requirements of Capitol Development Bank and that
respondent-spouses failed to pay their monthly amortizations beginning January
2000.25 Thus, petitioner prayed that TCT Nos. T-105202 and T-105203 be cancelled,
and that respondent Angeles be ordered to vacate the subject property and to pay
petitioner reasonable monthly rentals from January 2000 plus damages. 26
In her Answer,27 respondent Angeles averred that the Deed of Absolute Sale is valid,
and that petitioner is not the proper party to file the complaint because petitioner is
different from Masterplan Properties, Inc.28 She also prayed for damages by way of
compulsory counterclaim.29
In its Reply,30 petitioner attached a copy of its Certificate of Filing of Amended
Articles of Incorporation31 showing that Masterplan Properties, Inc. and petitioner are
one and the same. As to the compulsory counterclaim for damages, petitioner denied
the same on the ground of "lack of knowledge sufficient to form a belief as to the truth
or falsity of such allegation."32
Respondent Angeles then moved for summary judgment and prayed that petitioner be
ordered to return the owner’s duplicate copies of the TCTs. 33
Pursuant to Administrative Order No. 59-2005, the case was referred for
mediation.34 But since the parties failed to arrive at an amicable settlement, the case
was set for preliminary conference on February 23, 2006. 35
On July 7, 2006, the parties agreed to submit the case for decision based on the
pleadings and exhibits presented during the preliminary conference. 36
Ruling of the Regional Trial Court
On December 29, 2006, the RTC rendered judgment declaring the Deed of Absolute
Sale invalid for lack of consideration.37 Thus, it disposed of the case in this wise:
34
WHEREFORE, the Court hereby declares the Deed of Absolute Sale VOID.
Accordingly, Transfer Certificates of Title Nos. 105202 and 105203 in the names of
the [respondents], Arsenio (deceased) and Angeles Nanol, are ordered CANCELLED.
The [respondents] and any person claiming rights under them are directed to turn-over
the possession of the house and lot to [petitioner], Communities Cagayan, Inc., subject
to the latter’s payment of their total monthly installments and the value of the new
house minus the cost of the original house.
SO ORDERED.38
Not satisfied, petitioner moved for reconsideration of the Decision but the
Motion39 was denied in an Order40 dated February 12, 2007.
Issue
Instead of appealing the Decision to the Court of Appeals (CA), petitioner opted to file
the instant petition directly with this Court on a pure question of law, to wit:
WHETHER X X X THE ACTION OF THE RTC BRANCH 18 X X X IN
ORDERING THE RECOVERY OF POSSESSION BY PETITIONER ‘subject to the
latter’s payment of their total monthly installments and the value of the new house
minus the cost of the original house’ IS CONTRARY TO LAW AND
JURISPRUDENCE X X X.41
Petitioner’s Arguments
Petitioner seeks to delete from the dispositive portion the order requiring petitioner to
reimburse respondent-spouses the total monthly installments they had paid and the
value of the new house minus the cost of the original house. 42 Petitioner claims that
there is no legal basis for the RTC to require petitioner to reimburse the cost of the
new house because respondent-spouses were in bad faith when they renovated and
improved the house, which was not yet their own.43 Petitioner further contends that
instead of ordering mutual restitution by the parties, the RTC should have applied
Republic Act No. 6552, otherwise known as the Maceda Law, 44 and that instead of
awarding respondent-spouses a refund of
all their monthly amortization payments, the RTC should have ordered them to pay
petitioner monthly rentals.45
Respondent Angeles’ Arguments
Instead of answering the legal issue raised by petitioner, respondent Angeles asks for a
review of the Decision of the RTC by interposing additional issues.46 She maintains
that the Deed of Absolute Sale is valid.47 Thus, the RTC erred in cancelling TCT Nos.
105202 and 105203.
Our Ruling
The petition is partly meritorious.
At the outset, we must make it clear that the issues raised by respondent Angeles may
not be entertained. For failing to file an appeal, she is bound by the Decision of the
RTC. Well entrenched is the rule that "a party who does not appeal from a judgment
can no longer seek modification or reversal of the same. He may oppose the appeal of
the other party only on grounds consistent with the judgment."48 For this reason,
respondent Angeles may no longer question the propriety and correctness of the
annulment of the Deed of Absolute Sale, the cancellation of TCT Nos. 105202 and
105203, and the order to vacate the property.
Hence, the only issue that must be resolved in this case is whether the RTC erred in
ordering petitioner to reimburse respondent-spouses the "total monthly installments
and the value of the new house minus the cost of the original house." 49 Otherwise
stated, the issues for our resolution are:
1) Whether petitioner is obliged to refund to respondent-spouses all the
monthly installments paid; and
2) Whether petitioner is obliged to reimburse respondent-spouses the value of
the new house minus the cost of the original house.
Respondent-spouses are entitled to the
cash surrender value of the payments
35
on the property equivalent to 50% of the
total payments made.
Considering that this case stemmed from a Contract to Sell executed by the petitioner
and the respondent-spouses, we agree with petitioner that the Maceda Law, which
governs sales of real estate on installment, should be applied.
Sections 3, 4, and 5 of the Maceda Law provide for the rights of a defaulting buyer, to
wit:
Section 3. In all transactions or contracts involving the sale or financing of real estate
on installment payments, including residential condominium apartments but excluding
industrial lots, commercial buildings and sales to tenants under Republic Act
Numbered Thirty-eight hundred forty-four, as amended by Republic Act Numbered
Sixty-three hundred eighty-nine, where the buyer has paid at least two years of
installments, the buyer is entitled to the following rights in case he defaults in the
payment of succeeding installments:
(a) To pay, without additional interest, the unpaid installments due within the
total grace period earned by him which is hereby fixed at the rate of one
month grace period for every one year of installment payments made:
Provided, That this right shall be exercised by the buyer only once in every
five years of the life of the contract and its extensions, if any.
(b) If the contract is canceled, the seller shall refund to the buyer the cash
surrender value of the payments on the property equivalent to fifty
percent of the total payments made, and, after five years of installments, an
additional five per cent every year but not to exceed ninety per cent of the
total payments made: Provided, That the actual cancellation of the contract
shall take place after thirty days from receipt by the buyer of the notice of
cancellation or the demand for rescission of the contract by a notarial act and
upon full payment of the cash surrender value to the buyer.
Down payments, deposits or options on the contract shall be included in the
computation of the total number of installment payments made. (Emphasis supplied.)
Section 4. In case where less than two years of installments were paid, the seller shall
give the buyer a grace period of not less than sixty days from the date the installment
became due.
If the buyer fails to pay the installments due at the expiration of the grace period, the
seller may cancel the contract after thirty days from receipt by the buyer of the notice
of cancellation or the demand for rescission of the contract by a notarial act.
Section 5. Under Sections 3 and 4, the buyer shall have the right to sell his rights or
assign the same to another person or to reinstate the contract by updating the account
during the grace period and before actual cancellation of the contract. The deed of sale
or assignment shall be done by notarial act.
In this connection, we deem it necessary to point out that, under the Maceda Law, the
actual cancellation of a contract to sell takes place after 30 days from receipt by the
buyer of the notarized notice of cancellation,50 and upon full payment of the cash
surrender value to the buyer.51 In other words, before a contract to sell can be validly
and effectively cancelled, the seller has (1) to send a notarized notice of cancellation to
the buyer and (2) to refund the cash surrender value. 52 Until and unless the seller
complies with these twin mandatory requirements, the contract to sell between the
parties remains valid and subsisting.53 Thus, the buyer has the right to continue
occupying the property subject of the contract to sell, 54 and may "still reinstate the
contract by updating the account during the grace period and before the actual
cancellation"55 of the contract.
In this case, petitioner complied only with the first condition by sending a notarized
notice of cancellation to the respondent-spouses. It failed, however, to refund the cash
surrender value to the respondent-spouses. Thus, the Contract to Sell remains valid and
subsisting and supposedly, respondent-spouses have the right to continue occupying
the subject property. Unfortunately, we cannot reverse the Decision of the RTC
directing respondent-spouses to vacate and turnover possession of the subject property
to petitioner because respondent-spouses never appealed the order. The RTC Decision
as to respondent-spouses is therefore considered final.
In addition, in view of respondent-spouses’ failure to appeal, they can no longer
reinstate the contract by updating the account. Allowing them to do so would be unfair
to the other party and is offensive to the rules of fair play, justice, and due process.
Thus, based on the factual milieu of the instant case, the most that we can do is to
36
order the return of the cash surrender value. Since respondent-spouses paid at least two
years of installment,56 they are entitled to receive the cash surrender value of the
payments they had made which, under Section 3(b) of the Maceda Law, is equivalent
to 50% of the total payments made.
Respondent-spouses are entitled to
reimbursement of the improvements
made on the property.
Petitioner posits that Article 448 of the Civil Code does not apply and that respondent-
spouses are not entitled to reimbursement of the value of the improvements made on
the property because they were builders in bad faith. At the outset, we emphasize that
the issue of whether respondent-spouses are builders in good faith or bad faith is a
factual question, which is beyond the scope of a petition filed under Rule 45 of the
Rules of Court.57 In fact, petitioner is deemed to have waived all factual issues since it
appealed the case directly to this Court,58 instead of elevating the matter to the CA. It
has likewise not escaped our attention that after their failed preliminary conference, the
parties agreed to submit the case for resolution based on the pleadings and exhibits
presented. No trial was conducted. Thus, it is too late for petitioner to raise at this stage
of the proceedings the factual issue of whether respondent-spouses are ilders in bad
faith. Hence, in view of the special circumstances obtaining in this case, we are
constrained to rely on the presumption of good faith on the part of the respondent-
spouses which the petitioner failed to rebut. Thus, respondent-spouses being presumed
builders in good faith, we now rule on the applicability of Article 448 of the Civil
Code.
As a general rule, Article 448 on builders in good faith does not apply where there is a
contractual relation between the parties,59 such as in the instant case. We went over the
records of this case and we note that the parties failed to attach a copy of the Contract
to Sell. As such, we are constrained to apply Article 448 of the Civil Code, which
provides viz:
ART. 448. The owner of the land on which anything has been built, sown or planted in
good faith, shall have the right to appropriate as his own the works, sowing or
planting, after payment of the indemnity provided for in Articles 546 and 548, or to
oblige the one who built or planted to pay the price of the land, and the one who
sowed, the proper rent. However, the builder or planter cannot be obliged to buy the
land if its value is considerably more than that of the building or trees. In such case, he
shall pay reasonable rent, if the owner of the land does not choose to appropriate the
building or trees after proper indemnity. The parties shall agree upon the terms of the
lease and in case of disagreement, the court shall fix the terms thereof.
Article 448 of the Civil Code applies when the builder believes that he is the owner of
the land or that by some title he has the right to build thereon, 60 or that, at least, he has
a claim of title thereto.61 Concededly, this is not present in the instant case. The subject
property is covered by a Contract to Sell hence ownership still remains with petitioner
being the seller. Nevertheless, there were already instances where this Court applied
Article 448 even if the builders do not have a claim of title over the property. Thus:
This Court has ruled that this provision covers only cases in which the builders, sowers
or planters believe themselves to be owners of the land or, at least, to have a claim of
title thereto. It does not apply when the interest is merely that of a holder, such as a
mere tenant, agent or usufructuary. From these pronouncements, good faith is
identified by the belief that the land is owned; or that – by some title – one has the
right to build, plant, or sow thereon.
However, in some special cases, this Court has used Article 448 by recognizing good
faith beyond this limited definition. Thus, in Del Campo v. Abesia, this provision was
applied to one whose house – despite having been built at the time he was still co-
owner – overlapped with the land of another. This article was also applied to cases
wherein a builder had constructed improvements with the consent of the owner. The
Court ruled that the law deemed the builder to be in good faith. In Sarmiento v. Agana,
the builders were found to be in good faith despite their reliance on the consent of
another, whom they had mistakenly believed to be the owner of the land. 62
The Court likewise applied Article 448 in Spouses Macasaet v. Spouses
Macasaet63 notwithstanding the fact that the builders therein knew they were not the
owners of the land. In said case, the parents who owned the land allowed their son and
his wife to build their residence and business thereon. As found by this Court, their
occupation was not by mere tolerance but "upon the invitation of and with the
complete approval of (their parents), who desired that their children would occupy the
premises. It arose from familial love and a desire for family solidarity x x x." 64 Soon
after, conflict between the parties arose. The parents demanded their son and his wife
to vacate the premises. The Court thus ruled that as owners of the property, the parents
have the right to possession over it. However, they must reimburse their son and his
wife for the improvements they had introduced on the property because they were
37
considered builders in good faith even if they knew for a fact that they did not own the
property, thus:
Based on the aforecited special cases, Article 448 applies to the present factual milieu.
The established facts of this case show that respondents fully consented to the
improvements introduced by petitioners. In fact, because the children occupied the lots
upon their invitation, the parents certainly knew and approved of the construction of
the improvements introduced thereon. Thus, petitioners may be deemed to have been
in good faith when they built the structures on those lots.
The instant case is factually similar to Javier v. Javier. In that case, this Court deemed
the son to be in good faith for building the improvement (the house) with the
knowledge and consent of his father, to whom belonged the land upon which it was
built. Thus, Article 448 was applied.65
In fine, the Court applied Article 448 by construing good faith beyond its limited
definition. We find no reason not to apply the Court’s ruling in Spouses Macasaet v.
Spouses Macasaet in this case. We thus hold that Article 448 is also applicable to the
instant case. First, good faith is presumed on the part of the respondent-spouses.
Second, petitioner failed to rebut this presumption. Third, no evidence was presented
to show that petitioner opposed or objected to the improvements introduced by the
respondent-spouses. Consequently, we can validly presume that petitioner consented to
the improvements being constructed. This presumption is bolstered by the fact that as
the subdivision developer, petitioner must have given the respondent-spouses permits
to commence and undertake the construction. Under Article 453 of the Civil Code, "it
is understood that there is bad faith on the part of the landowner whenever the act was
done with his knowledge and without opposition on his part."
In view of the foregoing, we find no error on the part of the RTC in requiring
petitioner to pay respondent-spouses the value of the new house minus the cost of the
old house based on Article 448 of the Civil Code, subject to succeeding discussions.
Petitioner has two options under Article
448 and pursuant to the ruling in
Tuatis v. Escol.66
In Tuatis, we ruled that the seller (the owner of the land) has two options under Article
448: (1) he may appropriate the improvements for himself after reimbursing the buyer
(the builder in good faith) the necessary and useful expenses under Articles 546 67 and
54868 of the Civil Code; or (2) he may sell the land to the buyer, unless its value is
considerably more than that of the improvements, in which case, the buyer shall pay
reasonable rent.69 Quoted below are the pertinent portions of our ruling in that case:
Taking into consideration the provisions of the Deed of Sale by Installment and Article
448 of the Civil Code, Visminda has the following options:
Under the first option, Visminda may appropriate for herself the building on the
subject property after indemnifying Tuatis for the necessary and useful expenses
the latter incurred for said building, as provided in Article 546 of the Civil Code.
It is worthy to mention that in Pecson v. Court of Appeals, the Court pronounced that
the amount to be refunded to the builder under Article 546 of the Civil Code
should be the current market value of the improvement, thus:
xxxx
Until Visminda appropriately indemnifies Tuatis for the building constructed by the
latter, Tuatis may retain possession of the building and the subject property.
Under the second option, Visminda may choose not to appropriate the building
and, instead, oblige Tuatis to pay the present or current fair value of the
land. The P10,000.00 price of the subject property, as stated in the Deed of Sale on
Installment executed in November 1989, shall no longer apply, since Visminda will be
obliging Tuatis to pay for the price of the land in the exercise of Visminda’s rights
under Article 448 of the Civil Code, and not under the said Deed. Tuatis’ obligation
will then be statutory, and not contractual, arising only when Visminda has chosen her
option under Article 448 of the Civil Code.
Still under the second option, if the present or current value of the land, the subject
property herein, turns out to be considerably more than that of the building built
thereon, Tuatis cannot be obliged to pay for the subject property, but she must
pay Visminda reasonable rent for the same. Visminda and Tuatis must agree on
the terms of the lease; otherwise, the court will fix the terms.
38
Necessarily, the RTC should conduct additional proceedings before ordering the
execution of the judgment in Civil Case No. S-618. Initially, the RTC should
determine which of the aforementioned options Visminda will choose. Subsequently,
the RTC should ascertain: (a) under the first option, the amount of indemnification
Visminda must pay Tuatis; or (b) under the second option, the value of the subject
property vis-à-vis that of the building, and depending thereon, the price of, or the
reasonable rent for, the subject property, which Tuatis must pay Visminda.
The Court highlights that the options under Article 448 are available to Visminda, as
the owner of the subject property. There is no basis for Tuatis’ demand that, since the
value of the building she constructed is considerably higher than the subject property,
she may choose between buying the subject property from Visminda and selling the
building to Visminda for P502,073.00. Again, the choice of options is for Visminda,
not Tuatis, to make. And, depending on Visminda’s choice, Tuatis’ rights as a builder
under Article 448 are limited to the following: (a) under the first option, a right to
retain the building and subject property until Visminda pays proper indemnity; and (b)
under the second option, a right not to be obliged to pay for the price of the subject
property, if it is considerably higher than the value of the building, in which case, she
can only be obliged to pay reasonable rent for the same.
The rule that the choice under Article 448 of the Civil Code belongs to the owner of
the land is in accord with the principle of accession, i.e., that the accessory follows the
principal and not the other way around. Even as the option lies with the landowner, the
grant to him, nevertheless, is preclusive. The landowner cannot refuse to exercise
either option and compel instead the owner of the building to remove it from the land.
The raison d’etre for this provision has been enunciated thus: Where the builder,
planter or sower has acted in good faith, a conflict of rights arises between the owners,
and it becomes necessary to protect the owner of the improvements without causing
injustice to the owner of the land. In view of the impracticability of creating a state of
forced co-ownership, the law has provided a just solution by giving the owner of the
land the option to acquire the improvements after payment of the proper indemnity, or
to oblige the builder or planter to pay for the land and the sower the proper rent. He
cannot refuse to exercise either option. It is the owner of the land who is authorized to
exercise the option, because his right is older, and because, by the principle of
accession, he is entitled to the ownership of the accessory thing.
Visminda’s Motion for Issuance of Writ of Execution cannot be deemed as an
expression of her choice to recover possession of the subject property under the first
option, since the options under Article 448 of the Civil Code and their respective
consequences were also not clearly presented to her by the 19 April 1999 Decision of
the RTC. She must then be given the opportunity to make a choice between the options
available to her after being duly informed herein of her rights and obligations under
both.70 (Emphasis supplied.)
In conformity with the foregoing pronouncement, we hold that petitioner, as
landowner, has two options. It may appropriate the new house by reimbursing
respondent Angeles the current market value thereof minus the cost of the old house.
Under this option, respondent Angeles would have "a right of retention which negates
the obligation to pay rent."71 In the alternative, petitioner may sell the lots to
respondent Angeles at a price equivalent to the current fair value thereof. However, if
the value of the lots is considerably more than the value of the improvement,
respondent Angeles cannot be compelled to purchase the lots. She can only be obliged
to pay petitioner reasonable rent.
In view of the foregoing disquisition and in accordance with Depra v. Dumlao 72 and
Technogas Philippines Manufacturing Corporation v. Court of Appeals,73 we find it
necessary to remand this case to the court of origin for the purpose of determining
matters necessary for the proper application of Article 448, in relation to Articles 546
and 548 of the Civil Code.
WHEREFORE, the petition is hereby PARTIALLY GRANTED. The assailed
Decision dated December 29, 2006 and the Order dated February 12, 2007 of the
Regional Trial Court, Cagayan de Oro City, Branch 18, in Civil Case No. 2005-158
are hereby AFFIRMED with MODIFICATION that petitioner Communities
Cagayan, Inc. is hereby ordered to RETURN the cash surrender value of the payments
made by respondent-spouses on the properties, which is equivalent to 50% of the total
payments made, in ccordance with Section 3(b) of Republic Act No. 6552, otherwise
known as the Maceda Law.
The case is hereby REMANDED to the Regional Trial Court, Cagayan de Oro City,
Branch 18, for further proceedings consistent with the proper application of Articles
448, 546 and 548 of the Civil Code, as follows:
1. The trial court shall determine:
39
 a) the present or current fair value of the lots;
b) the current market value of the new house;
c) the cost of the old house; and
d) whether the value of the lots is considerably more than the current market
value of the new house minus the cost of the old house.
2. After said amounts shall have been determined by competent evidence, the trial
court shall render judgment as follows:
a) Petitioner shall be granted a period of 15 days within which to exercise its
option under the law (Article 448, Civil Code), whether to appropriate the
new house by paying to respondent Angeles the current market value of the
new house minus the cost of the old house, or to oblige respondent Angeles to
pay the price of the lots. The amounts to be respectively paid by the parties, in
accordance with the option thus exercised by written notice to the other party
and to the court, shall be paid by the obligor within 15 days from such notice
of the option by tendering the amount to the trial court in favor of the party
entitled to receive it.
b) If petitioner exercises the option to oblige respondent Angeles to pay the
price of the lots but the latter rejects such purchase because, as found by the
trial court, the value of the lots is considerably more than the value of the new
house minus the cost of the old house, respondent Angeles shall give written
notice of such rejection to petitioner and to the trial court within 15 days from
notice of petitioner’s option to sell the land. In that event, the parties shall be
given a period of 15 days from such notice of rejection within which to agree
upon the terms of the lease, and give the trial court formal written notice of
the agreement and its provisos. If no agreement is reached by the parties, the
trial court, within 15 days from and after the termination of the said period
fixed for negotiation, shall then fix the period and terms of the lease,
including the monthly rental, which shall be payable within the first five days
of each calendar month. Respondent Angeles shall not make any further
constructions or improvements on the building. Upon expiration of the
period, or upon default by respondent Angeles in the payment of rentals for
two consecutive months, petitioner shall be entitled to terminate the forced
lease, to recover its land, and to have the new house removed by respondent
Angeles or at the latter’s expense.
c) In any event, respondent Angeles shall pay petitioner reasonable
compensation for the occupancy of the property for the period counted from
the time the Decision dated December 29, 2006 became final as to respondent
Angeles or 15 days after she received a copy of the said Decision up to the
date petitioner serves notice of its option to appropriate the encroaching
structures, otherwise up to the actual transfer of ownership to respondent
Angeles or, in case a forced lease has to be imposed, up to the
commencement date of the forced lease referred to in the preceding
paragraph.1âwphi1
d) The periods to be fixed by the trial court in its decision shall be
nonextendible, and upon failure of the party obliged to tender to the trial court
the amount due to the obligee, the party entitled to such payment shall be
entitled to an order of execution for the enforcement of payment of the
amount due and for compliance with such other acts as may be required by
the prestation due the obligee.
SO ORDERED.
G.R. No. 157150 September 21, 2011
PEDRO ANGELES , Represented by ADELINA T. ANGELES, Attorney-in
Fact, Petitioner,
vs.
ESTELITA B. PASCUAL, MARIA THERESA PASCUAL, NERISSA
PASCUAL, IMELDA PASCUAL, MA. LAARNI PASCUAL and EDWIN
PASCUAL, Respondents.
Under appeal is the decision promulgated on January 31, 2002 in CA- G.R. CV No.
61600,1 which involved a dispute about the true location of the respective lots of the
parties, with the respondents claiming that the petitioner had encroached on their lot
but the latter denying the encroachment.
40
 Antecedents
Neighbors Regidor Pascual (Pascual) and Pedro Angeles (Angeles) were registered
owners of adjacent parcels of land located in Cabanatuan City. Pascual owned Lot 4,
Block 2 (Lot 4) of the consolidation-subdivision plan (LRC) Psd-951, a portion of the
consolidation of Lots 1419-B-2B-3, 1419-B-2-B-4 and 1419-B-2-B-5, Psd- 9016, LGC
(GLRO) Cadastral Record No. 94 covered by Transfer Certificate Title No. T-43707
of the Registry of Deeds of Nueva Ecija;2 Angeles owned Lot 5, Block 2 (Lot 5) of the
same consolidation-subdivision plan covered by TCT No. T-9459 of the Registry of
Deeds of Nueva Ecija.3 Each of them built a house on his respective lot, believing all
the while that his respective lot was properly delineated. It was not until Metropolitan
Bank and Trust Company (Metrobank), as the highest bidder in the foreclosure sale of
the adjacent Lot 3, Block 2 (Lot 3), caused the relocation survey of Lot 3 that the
geodetic engineer discovered that Pascual’s house had encroached on Lot 3. As a
consequence, Metrobank successfully ejected Pascual.
In turn, Pascual caused the relocation survey of his own Lot 4 and discovered that
Angeles’ house also encroached on his lot. Of the 318 square meters comprising Lot 4,
Angeles occupied 252 square meters, leaving Pascual with only about 66 square
meters. Pascual demanded rentals for the use of the encroached area of Lot 4 from
Angeles, or the removal of Angeles’ house. Angeles refused the demand. Accordingly,
Pascual sued Angeles for recovery of possession and damages in the Regional Trial
Court (RTC) in Cabanatuan City.
In the course of the trial, Pascual presented Clarito Fajardo, the geodetic engineer who
had conducted the relocation survey and had made the relocation plan of Lot
4.4 Fajardo testified that Angeles’ house was erected on Lot 4. On the other hand,
Angeles presented Juan Fernandez, the geodetic engineer who had prepared the sketch
plan relied upon by Angeles to support his claim that there had been no
encroachment.5 However, Fernandez explained that he had performed only a "table
work," that is, he did not actually go to the site but based the sketch plan on the
descriptions and bearings appearing on the TCTs of Lot 4, Lot 5 and Lot 6; and
recommended the conduct of a relocation survey.6
In its decision of November 3, 1998,7 the RTC held that there was no dispute that
Pascual and Angeles were the respective registered owners of Lot 4 and Lot 5; that
what was disputed between them was the location of their respective lots; that Pascual
proved Angeles’ encroachment on Lot 4 by preponderant evidence; and that Pascual
was entitled to relief. The RTC thus disposed:
WHEREFORE, premises considered, judgment is rendered in favor of the plaintiff and
against the defendant as follows:
1) ordering the defendant or persons claiming right through him to cause the
removal of his house insofar as the same occupies the portion of Lot 4, Block
2 (TCT No. T-43707), of an area of 252 square meters, as particularly
indicated in the Sketch Plan (Exhibit C-1); and
2) and without pronouncement to damages in both the complainant and
counterclaim.
With Costs.
SO ORDERED.8
Angeles appealed to the CA.
On January 31, 2002, the CA affirmed the RTC,9 and held that as between the findings
of the geodetic engineer (Fajardo) who had actually gone to the site and those of the
other (Fernandez) who had based his findings on the TCTs of the owners of the three
lots, those of the former should prevail. However, the CA, modifying the RTC’s
ruling, applied Article 448 of the Civil Code (which defined the rights of a builder,
sower and planter in good faith). The decision decreed thus: 10
WHEREFORE, the decision appealed from is MODIFIED. Plaintiffs-appellees are
ordered to exercise within thirty (30) days from the finality of this decision their option
to either buy the portion of defendant-appellant’s house on their Lot. No. 4, or to sell
to defendant-appellant the portion of their land on which his house stands. If plaintiffs-
appellees elect to sell the land or buy the improvement, the purchase price must be at
the prevailing market price at the time of payment. If buying the improvement will
render the defendant-appellant’s house useless, then plaintiffs-appellees should sell the
encroached portion of their land to defendant-appellant. If plaintiffs-appellees choose
to sell the land but defendant-appellant is unwilling or unable to buy, then the latter
must vacate the subject portion and pay reasonable rent from the time plaintiffs-
41
appellees made their choice up to the time they actually vacate the premises. But if the
value of the land is considerably more than the value of the improvement, then
defendant-appellant may elect to lease the land, in which case the parties shall agree
upon the terms of the lease. Should they fail to agree on said terms, the court of origin
is directed to fix the terms of the lease. From the moment plaintiffs-appellees shall
have exercised their option, defendant-appellant shall pay reasonable monthly rent up
to the time the parties agree on the terms of the lease or until the court fixes such
terms. This is without prejudice to any future compromise which may be agreed upon
by the parties.
SO ORDERED.
Angeles expectedly sought reconsideration, but the CA denied his motion on February
13, 2003.
Issues
Hence, Angeles appeals, assailing: (a) the credence the CA accorded to the testimony
and relocation plan of Fajardo as opposed to the survey plan prepared by Fernandez;
and (b) the options laid down by the CA, i.e., for Pascual either to buy the portion of
Angeles’ house or to sell to Angeles the portion of his land occupied by Angeles were
contrary to its finding of good faith.
Ruling
The petition lacks merit.
I specific evidence on which they are based; (i) when the facts set forth in the petition as
The Court, not being a trier of facts, cannot review factual issues
Section 1, Rule 45 of the Rules of Court explicitly states that the petition for review on
certiorari "shall raise only questions of law, which must be distinctly set forth." In
appeal by certiorari, therefore, only questions of law may be raised, because the
Supreme Court is not a trier of facts and does not normally undertake the re-
examination of the evidence presented by the contending parties during the trial. The
resolution of factual issues is the function of lower courts, whose findings thereon are
received with respect and are binding on the Supreme Court subject to certain
exceptions.11 A question, to be one of law, must not involve an examination of the
probative value of the evidence presented by the litigants or any of them. There is a
question of law in a given case when the doubt or difference arises as to what the law
is on certain state of facts; there is a question of fact when the doubt or difference
arises as to the truth or falsehood of alleged facts.12
Whether certain items of evidence should be accorded probative value or weight, or
should be rejected as feeble or spurious; or whether or not the proofs on one side or the
other are clear and convincing and adequate to establish a proposition in issue; whether
or not the body of proofs presented by a party, weighed and analyzed in relation to
contrary evidence submitted by adverse party, may be said to be strong, clear and
convincing; whether or not certain documents presented by one side should be
accorded full faith and credit in the face of protests as to their spurious character by the
other side; whether or not inconsistencies in the body of proofs of a party are of such
gravity as to justify refusing to give said proofs weight – all these are issues of fact.
Questions like these are not reviewable by the Supreme Court whose review of cases
decided by the CA is confined only to questions of law raised in the petition and
therein distinctly set forth.13
Nonetheless, the Court has recognized several exceptions to the rule, including: (a)
when the findings are grounded entirely on speculation, surmises or conjectures; (b)
when the inference made is manifestly mistaken, absurd or impossible; (c) when there
is grave abuse of discretion; (d) when the judgment is based on a misapprehension of
facts; (e) when the findings of facts are conflicting; (f) when in making its findings the
Court of Appeals went beyond the issues of the case, or its findings are contrary to the
admissions of both the appellant and the appellee; (g) when the findings are contrary to
those of the trial court; (h) when the findings are conclusions without citation of
well as in the petitioner’s main and reply briefs are not disputed by the respondent; (j)
when the findings of fact are premised on the supposed absence of evidence and
contradicted by the evidence on record; and (k) when the Court of Appeals manifestly
overlooked certain relevant facts not disputed by the parties, which, if properly
considered, would justify a different conclusion.14The circumstances of this case
indicate that none of such exceptions is attendant herein.
The credence given by the RTC to the testimony and relocation plan of Fajardo was
conclusive upon this Court especially by virtue of the affirmance by the CA of the
42
RTC. Resultantly, the fact of Angeles’ encroachment on Pascual’s Lot 4 was proved
by preponderant evidence.
It is noteworthy to point out, too, that the argument of Angeles based on the
indefeasibility and incontrovertibility of Torrens titles pursuant to Presidential Decree
No. 1529 (The Property Registration Decree) is inapplicable considering that the
ownership of Lot 4 and Lot 5 was not the issue. Nor were the metes and bounds of the
lots as indicated in the respective TCTs being assailed, for the only issue concerned the
exact and actual location of Lot 4 and Lot 5.
II
Angeles was a builder in good faith
To be next determined is whether the CA’s application of Article 448 of the Civil
Code was correct and proper.
Article 448 of the Civil Code provides thusly:
Article 448. The owner of the land on which anything has been built, sown or planted
in good faith, shall have the right to appropriate as his own the works, sowing or
planting, after payment of the indemnity provided for in articles 546 and 548, or to
oblige the one who built or planted to pay the price of the land, and the one who
sowed, the proper rent. However, the builder or planter cannot be obliged to buy the
land if its value is considerably more than that of the building or trees. In such case, he
shall pay reasonable rent, if the owner of the land does not choose to appropriate the
building or trees after proper indemnity.1âwphi1 The parties shall agree upon the
terms of the lease and in case of disagreement, the court shall fix the terms thereof.
The provision contemplates a person building, or sowing, or planting in good faith on
land owned by another. The law presupposes that the land and the building or plants
are owned by different persons, like here. The RTC and CA found and declared
Angeles to be a builder in good faith. We cannot veer away from their unanimous
conclusion, which can easily be drawn from the fact that Angeles insists until now that
he built his house entirely on his own lot. Good faith consists in the belief of the
builder that the land he is building on is his and in his ignorance of a defect or flaw in
his title.15
With the unassailable finding that Angeles’ house straddled the lot of Pascual, and that
Angeles had built his house in good faith, Article 448 of the Civil Code, which spells
out the rights and obligations of the owner of the land as well as of the builder, is
unquestionably applicable. Consequently, the land being the principal and the building
the accessory, preference is given to Pascual as the owner of the land to make the
choice as between appropriating the building or obliging Angeles as the builder to pay
the value of the land. Contrary to the insistence of Angeles, therefore, no inconsistency
exists between the finding of good faith in his favor and the grant of the reliefs set
forth in Article 448 of the Civil Code.
WHEREFORE, the Court DENIES the petition for review on certiorari; and
AFFIRMS the decision promulgated on January 31, 2002 by the Court of Appeals in
C.A.-G.R. CV No. 61600. No pronouncement on costs of suit. SO ORDERED.
G.R. No. 170923 January 20, 2009
SULO SA NAYON, INC. and/or PHILIPPINE VILLAGE HOTEL, INC. and
JOSE MARCEL E. PANLILIO,Petitioners,
vs.
NAYONG PILIPINO FOUNDATION, Respondent.
On appeal are the Court of Appeals’ (CA’s) October 4, 2005 Decision 1 in CA-G.R. SP
No. 74631 and December 22, 2005 Resolution,2 reversing the November 29, 2002
Decision3 of the Regional Trial Court (RTC) of Pasay City in Civil Case No. 02-0133.
The RTC modified the Decision4 of the Metropolitan Trial Court (MeTC) of Pasay
City which ruled against petitioners and ordered them to vacate the premises and pay
their arrears. The RTC declared petitioners as builders in good faith and upheld their
right to indemnity.
The facts are as follows:
Respondent Nayong Pilipino Foundation, a government-owned and controlled
corporation, is the owner of a parcel of land in Pasay City, known as the Nayong
Pilipino Complex. Petitioner Philippine Village Hotel, Inc. (PVHI), formerly called
Sulo sa Nayon, Inc., is a domestic corporation duly organized and existing under
Philippine laws. Petitioner Jose Marcel E. Panlilio is its Senior Executive Vice
President.
43
On June 1, 1975, respondent leased a portion of the Nayong Pilipino Complex,
consisting of 36,289 square meters, to petitioner Sulo sa Nayon, Inc. for the
construction and operation of a hotel building, to be known as the Philippine Village
Hotel. The lease was for an initial period of 21 years, or until May 1996. It is
renewable for a period of 25 years under the same terms and conditions upon due
notice in writing to respondent of the intention to renew at least 6 months before its
expiration. Thus, on March 7, 1995, petitioners sent respondent a letter notifying the
latter of their intention to renew the contract for another 25 years. On July 4, 1995, the
parties executed a Voluntary Addendum to the Lease Agreement. The addendum was
signed by petitioner Jose Marcel E. Panlilio in his official capacity as Senior Executive
Vice President of the PVHI and by Chairman Alberto A. Lim of the Nayong Pilipino
Foundation. They agreed to the renewal of the contract for another 25 years, or until
2021. Under the new agreement, petitioner PVHI was bound to pay the monthly rental
on a per square meter basis at the rate of ₱20.00 per square meter, which shall be
subject to an increase of 20% at the end of every 3-year period. At the time of the
renewal of the lease contract, the monthly rental amounted to ₱725,780.00.
Beginning January 2001, petitioners defaulted in the payment of their monthly rental.
Respondent repeatedly demanded petitioners to pay the arrears and vacate the
premises. The last demand letter was sent on March 26, 2001.
On September 5, 2001, respondent filed a complaint for unlawful detainer before the
MeTC of Pasay City. The complaint was docketed as Civil Case No. 708-01.
Respondent computed the arrears of petitioners in the amount of twenty-six million
one hundred eighty-three thousand two hundred twenty-five pesos and fourteen
centavos (₱26,183,225.14), as of July 31, 2001.
On February 26, 2002, the MeTC rendered its decision in favor of respondent. It ruled,
thus:
. . . . The court is convinced by the evidence that indeed, defendants defaulted in the
payment of their rentals. It is basic that the lessee is obliged to pay the price of the
lease according to the terms stipulated (Art. 1657, Civil Code). Upon the failure of the
lessee to pay the stipulated rentals, the lessor may eject (sic) and treat the lease as
rescinded and sue to eject the lessee (C. Vda[.] De Pamintuan v. Tiglao, 53 Phil. 1).
For non-payment of rentals, the lessor may rescind the lease, recover the back rentals
and recover possession of the leased premises. . .
xxx
. . . . Improvements made by a lessee such as the defendants herein on leased premises
are not valid reasons for their retention thereof. The Supreme Court has occasion to
address a similar issue in which it ruled that: "The fact that petitioners allegedly made
repairs on the premises in question is not a reason for them to retain the possession of
the premises. There is no provision of law which grants the lessee a right of retention
over the leased premises on that ground. Article 448 of the Civil Code, in relation to
Article 546, which provides for full reimbursement of useful improvements and
retention of the premises until reimbursement is made, applies only to a possessor in
good faith, i.e., one who builds on a land in the belief that he is the owner thereof. This
right of retention does not apply to a mere lessee, like the petitioners, otherwise, it
would always be in his power to "improve" his landlord out of the latter’s property
(Jose L. Chua and Co Sio Eng vs. Court of Appeals and Ramon Ibarra, G.R. No.
109840, January 21, 1999)."
Although the Contract of Lease stipulates that the building and all the improvements in
the leased premises belong to the defendants herein, such will not defeat the right of
the plaintiff to its property as the defendants failed to pay their rentals in violation of
the terms of the contract. At most, defendants can only invoke [their] right under
Article 1678 of the New Civil Code which grants them the right to be reimbursed one-
half of the value of the building upon the termination of the lease, or, in the alternative,
to remove the improvements if the lessor refuses to make reimbursement.
The dispositive portion of the decision reads as follows:
WHEREFORE, premises considered, judgment is hereby rendered in favor of Nayong
Pilipino Foundation, and against the defendant Philippine Village Hotel, Inc[.], and all
persons claiming rights under it, ordering the latter to:
1. VACATE the subject premises and surrender possession thereof to
plaintiff;
2. PAY plaintiff its rental arrearages in the sum of TWENTY SIX MILLION
ONE HUNDRED EIGHTY THREE THOUSAND TWO HUNDRED
TWENTY FIVE PESOS AND 14/100 (P26,183,225.14) incurred as of July
31, 2001;
44
 3. PAY plaintiff the sum of SEVEN HUNDRED TWENTY FIVE
THOUSAND SEVEN HUNDRED EIGHTY PESOS (P725,780.00) per
month starting from August 2001 and every month thereafter by way of
reasonable compensation for the use and occupation of the premises;
4. PAY plaintiff the sum of FIFTY THOUSAND PESOS (P50,000.00) by
way of attorney’s fees[; and]
5. PAY the costs of suit.
The complaint against defendant Jose Marcel E. Panlilio is hereby dismissed for lack
of cause of action. The said defendant’s counterclaim however is likewise dismissed as
the complaint does not appear to be frivolous or maliciously instituted.
SO ORDERED.5
Petitioners appealed to the RTC which modified the ruling of the MeTC. It held that:
. . . it is clear and undisputed that appellants-lessees were expressly required to
construct a first-class hotel with complete facilities. The appellants were also
unequivocally declared in the Lease Agreement as the owner of the improvements so
constructed. They were even explicitly allowed to use the improvements and building
as security or collateral on loans and credit accommodations that the Lessee may
secure for the purpose of financing the construction of the building and other
improvements (Section 2; pars. "A" to "B," Lease Agreement). Moreover, a time frame
was setforth (sic) with respect to the duration of the lease initially for 21 years and
renewable for another 25 years in order to enable the appellants-lessees to recoup their
huge money investments relative to the construction and maintenance of the
improvements.
xxx
Considering therefore, the elements of permanency of the construction and substantial
value of the improvements as well as the undispute[d] ownership over the land
improvements, these, immensely engender the application of Art. 448 of the Civil
Code. The only remaining and most crucial issue to be resolved is whether or not the
appellants as builders have acted in good faith in order for Art. 448 in relation to Art.
546 of the Civil Code may apply with respect to their rights over improvements.
xxx
. . . it is undeniable that the improvement of the hotel building of appellants (sic) PVHI
was constructed with the written consent and knowledge of appellee. In fact, it was
precisely the primary purpose for which they entered into an agreement. Thus, it could
not be denied that appellants were builders in good faith.
Accordingly, and pursuant to Article 448 in relation to Art. 546 of the Civil Code,
plaintiff-appellee has the sole option or choice, either to appropriate the building, upon
payment of proper indemnity consonant to Art. 546 or compel the appellants to
purchase the land whereon the building was erected. Until such time that plaintiff-
appellee has elected an option or choice,
it has no right of removal or demolition against appellants unless after having selected
a compulsory sale, appellants fail to pay for the land (Ignacio vs. Hilario; 76 Phil.
605). This, however, is without prejudice from the parties agreeing to adjust their
rights in some other way as they may mutually deem fit and proper.
The dispositive portion of the decision of the RTC reads as follows:
WHEREFORE, and in view of the foregoing, judgment is hereby rendered modifying
the decision of [the] MTC, Branch 45 of Pasay City rendered on February 26, 2002 as
follows:
1. Ordering plaintiff-appellee to submit within thirty (30) days from receipt of
a copy of this decision a written manifestation of the option or choice it
selected, i.e., to appropriate the improvements upon payment of proper
indemnity or compulsory sale of the land whereon the hotel building of PVHI
and related improvements or facilities were erected;
2. Directing the plaintiff-appellee to desist and/or refrain from doing acts in
the furtherance or exercise of its rights and demolition against appellants
unless and after having selected the option of compulsory sale and appellants
failed to pay [and] purchase the land within a reasonable time or at such time
as this court will direct;
45
 3. Ordering defendants-appellants to pay plaintiff-appellee [their] arrears in
rent incurred as of July 31, 2001 in the amount of P26,183,225.14;
4. Ordering defendants-appellants to pay to plaintiff-appellee the unpaid
monthly rentals for the use and occupation of the premises pending this
appeal from July to November 2002 only at P725,780.00 per month;
5. The fourth and fifth directives in the dispositive portion of the trial court’s
decision including that the last paragraph thereof JME Panlilio’s complaint is
hereby affirmed;
6. The parties are directed to adjust their respective rights in the interest of
justice as they may deem fit and proper if necessary.
SO ORDERED.6
Respondent appealed to the CA which held that the RTC erroneously applied the rules
on accession, as found in Articles 448 and 546 of the Civil Code when it held that
petitioners were builders in good faith and, thus, have the right to indemnity. The CA
held:
By and large, respondents are admittedly mere lessees of the subject premises and as
such, cannot validly claim that they are builders in good faith in order to solicit the
application of Articles 448 and 546 of the Civil Code in their favor. As it is, it is
glaring error on the part of the RTC to apply the aforesaid legal provisions on the
supposition that the improvements, which are of substantial value, had been introduced
on the leased premises with the permission of the petitioner. To grant the respondents
the right of retention and reimbursement as builders in good faith merely because of
the valuable and substantial improvements that they introduced to the leased premises
plainly contravenes the law and settled jurisprudential doctrines and would, as stated,
allow the lessee to easily "improve" the lessor out of its property.
. . . . Introduction of valuable improvements on the leased premises does not strip the
petitioner of its right to avail of recourses under the law and the lease contract itself in
case of breach thereof. Neither does it deprive the petitioner of its right under Article
1678 to exercise its option to acquire the improvements or to let the respondents
remove the same.
Petitioners’ Motion for Reconsideration was denied.
Hence, this appeal.7
Petitioners assign the following errors:
I
THE HONORABLE COURT OF APPEALS COMMITTED A GRAVE
REVERSIBLE ERROR IN NOT HOLDING THAT PETITIONERS WERE
BUILDERS IN GOOD FAITH OVER THE SUBSTANTIAL AND VALUABLE
IMPROVEMENTS WHICH THEY HAD INTRODUCED ON THE SUBJECT
PROPERTY, THUS COMPELLING THE APPLICATION OF ARTICLE 448 OF
THE CIVIL CODE IN RELATION TO ARTICLE 546 OF THE SAME CODE,
INSTEAD OF ARTICLE 1678 OF THE CIVIL CODE.
II
THE HONORABLE COURT OF APPEALS COMMITTED A SERIOUS
REVERSIBLE ERROR WHEN IT DISREGARDED THE FACT THAT THE LEASE
CONTRACT GOVERNS THE RELATIONSHIP OF THE PARTIES AND
CONSEQUENTLY THE PARTIES MAY BE CONSIDERED TO HAVE
IMPLIEDLY WAIVED THE APPLICATION OF ARTICLE 1678 OF THE CIVIL
CODE TO THE INSTANT CASE.
III
ASSUMING ARGUENDO THAT THE PETITIONERS ARE NOT BUILDERS IN
GOOD FAITH, THE HONORABLE COURT OF APPEALS COMMITTED A
GRAVE REVERSIBLE ERROR WHEN IT OVERLOOKED THE FACT THAT
RESPONDENT ALSO ACTED IN BAD FAITH WHEN IT DID NOT HONOR AND
INSTEAD BREACHED THE LEASE CONTRACT BETWEEN THE PARTIES,
THUS BOTH PARTIES ACTED AS IF THEY ARE IN GOOD FAITH.
IV
46
TO SANCTION THE APPLICATION OF ARTICLE 1678 OF THE CIVIL CODE
INSTEAD OF ARTICLE 448 OF THE CIVIL CODE IN RELATION TO ARTICLE
546 OF THE SAME CODE WOULD NOT ONLY WREAK HAVOC AND CAUSE
SUBSTANTIAL INJURY TO THE RIGHTS AND INTERESTS OF PETITIONER
PHILIPPINE VILLAGE HOTEL, INC. WHILE RESPONDENT NAYONG
PILIPINO FOUNDATION, IN COMPARISON THERETO, WOULD SUFFER
ONLY SLIGHT OR INCONSEQUENTIAL INJURY OR LOSS, BUT ALSO
WOULD CONSTITUTE UNJUST ENRICHMENT ON THE PART OF
RESPONDENT AT GREAT EXPENSE AND GRAVE PREJUDICE OF
PETITIONERS.
V
THE HONORABLE COURT OF APPEALS COMMITTED A GRAVE
REVERSIBLE ERROR IN NOT HOLDING THAT THE COURTS A QUO DID
NOT ACQUIRE JURISDICTION OVER THE UNLAWFUL DETAINER CASE
FOR NON-COMPLIANCE WITH JURISDICTIONAL REQUIREMENTS DUE TO
THE ABSENCE OF A NOTICE TO VACATE UPON PETITIONERS.8
First, we settle the issue of jurisdiction. Petitioners argue that the MeTC did not
acquire jurisdiction to hear and decide the ejectment case because they never received
any demand from respondent to pay rentals and vacate the premises, since such
demand is a jurisdictional requisite. We reiterate the ruling of the MeTC, RTC and
CA. Contrary to the claim of petitioners, documentary evidence proved that a demand
letter dated March 26, 2001 was sent by respondent through registered mail to
petitioners, requesting them "to pay the rental arrears or else it will be constrained to
file the appropriate legal action and possess the leased premises."
Further, petitioners’ argument that the demand letter is "inadequate" because it
contained no demand to vacate the leased premises does not persuade. We have ruled
that:
. . . . The word "vacate" is not a talismanic word that must be employed in all notices.
The alternatives in this case are clear cut. The tenants must pay rentals which are fixed
and which became payable in the past, failing which they must move out. There can be
no other interpretation of the notice given to them. Hence, when the petitioners
demanded that either he pays ₱18,000 in five days or a case of ejectment would be
filed against him, he was placed on notice to move out if he does not pay. There was,
in effect, a notice or demand to vacate.9
In the case at bar, the language of the demand letter is plain and simple: respondent
demanded payment of the rental arrears amounting to ₱26,183,225.14 within ten days
from receipt by petitioners, or respondent will be constrained to file an appropriate
legal action against petitioners to recover the said amount. The demand letter further
stated that respondent will possess the leased premises in case of petitioners’ failure to
pay the rental arrears within ten days. Thus, it is clear that the demand letter is
intended as a notice to petitioners to pay the rental arrears, and a notice to vacate the
premises in case of failure of petitioners to perform their obligation to pay.
Second, we resolve the main issue of whether the rules on accession, as found in
Articles 448 and 546 of the Civil Code, apply to the instant case.
Article 448 and Article 546 provide:
Art. 448. The owner of the land on which anything has been built, sown or planted in
good faith, shall have the right to appropriate as his own the works, sowing or
planting, after payment of the indemnity provided for in Articles 546 and 548, or to
oblige the one who built or planted to pay the price of the land, and the one who
sowed, the proper rent. However, the builder or planter cannot be obliged to buy the
land if its value is considerably more than that of the building or trees. In such case, he
shall pay reasonable rent, if the owner of the land does not choose to appropriate the
building or trees after proper indemnity. The parties shall agree upon the terms of the
lease and in case of disagreement, the court shall fix the terms thereof.
Art. 546. Necessary expenses shall be refunded to every possessor; but only the
possessor in good faith may retain the thing until he has been reimbursed therefor.
Useful expenses shall be refunded only to the possessor in good faith with the same
right of retention, the person who has defeated him in the possession having the option
of refunding the amount of the expenses or of paying the increase in value which the
thing may have acquired by reason thereof.
We uphold the ruling of the CA.
47
The late Senator Arturo M. Tolentino, a leading expert in Civil Law, explains:
This article [Article 448] is manifestly intended to apply only to a case where one
builds, plants, or sows on land in which he believes himself to have a claim of
title,10 and not to lands where the only interest of the builder, planter or sower is that of
a holder, such as a tenant.11
In the case at bar, petitioners have no adverse claim or title to the land. In fact, as
lessees, they recognize that the respondent is the owner of the land. What petitioners
insist is that because of the improvements, which are of substantial value, that they
have introduced on the leased premises with the permission of respondent, they should
be considered builders in good faith who have the right to retain possession of the
property until reimbursement by respondent.
We affirm the ruling of the CA that introduction of valuable improvements on the
leased premises does not give the petitioners the right of retention and reimbursement
which rightfully belongs to a builder in good faith. Otherwise, such a situation would
allow the lessee to easily "improve" the lessor out of its property. We reiterate the
doctrine that a lessee is neither a builder in good faith nor in bad faith 12 that would call
for the application of Articles 448 and 546 of the Civil Code. His rights are governed
by Article 1678 of the Civil Code, which reads:
Art. 1678. If the lessee makes, in good faith, useful improvements which are suitable
to the use for which the lease is intended, without altering the form or substance of the
property leased, the lessor upon the termination of the lease shall pay the lessee one-
half of the value of the improvements at that time. Should the lessor refuse to
reimburse said amount, the lessee may remove the improvements, even though the
principal thing may suffer damage thereby. He shall not, however, cause any more
impairment upon the property leased than is necessary.
With regard to ornamental expenses, the lessee shall not be entitled to any
reimbursement, but he may remove the ornamental objects, provided no damage is
caused to the principal thing, and the lessor does not choose to retain them by paying
their value at the time the lease is extinguished.
Under Article 1678, the lessor has the option of paying one-half of the value of the
improvements which the lessee made in good faith, which are suitable for the use for
which the lease is intended, and which have not altered the form and substance of the
land. On the other hand, the lessee may remove the improvements should the lessor
refuse to reimburse.
Petitioners argue that to apply Article 1678 to their case would result to sheer injustice,
as it would amount to giving away the hotel and its other structures at virtually bargain
prices. They allege that the value of the hotel and its appurtenant facilities amounts to
more than two billion pesos, while the monetary claim of respondent against them only
amounts to a little more than twenty six-million pesos. Thus, they contend that it is the
lease contract that governs the relationship of the parties, and consequently, the parties
may be considered to have impliedly waived the application of Article 1678.
We cannot sustain this line of argument by petitioners. Basic is the doctrine that laws
are deemed incorporated in each and every contract. Existing laws always form part of
any contract. Further, the lease contract in the case at bar shows no special kind of
agreement between the parties as to how to proceed in cases of default or breach of the
contract. Petitioners maintain that the lease contract contains a default provision which
does not give respondent the right to appropriate the improvements nor evict
petitioners in cases of cancellation or termination of the contract due to default or
breach of its terms. They cite paragraph 10 of the lease contract, which provides that:
10. DEFAULT. - . . . Default shall automatically take place upon the failure of the
LESSEE to pay or perform its obligation during the time fixed herein for such
obligations without necessity of demand, or, if no time is fixed, after 90 days from the
receipt of notice or demand from the LESSOR. . .
In case of cancellation or termination of this contract due to the default or breach of its
terms, the LESSEE will pay all reasonable attorney’s fees, costs and expenses of
litigation that may be incurred by the LESSOR in enforcing its rights under this
contract or any of its provisions, as well as all unpaid rents, fees, charges, taxes,
assessment and others which the LESSOR may be entitled to.
Petitioners assert that respondent committed a breach of the lease contract when it filed
the ejectment suit against them. However, we find nothing in the above quoted
provision that prohibits respondent to proceed the way it did in enforcing its rights as
lessor. It can rightfully file for ejectment to evict petitioners, as it did before the court a
quo.
48
IN VIEW WHEREOF, petitioners’ appeal is DENIED. The October 4, 2005 Decision
of the Court of Appeals in CA-G.R. SP No. 74631 and its December 22, 2005
Resolution are AFFIRMED. Costs against petitioners. SO ORDERED.
G.R. No. 165907 July 27, 2009
SPS. DOMINADOR R. NARVAEZ and LILIA W. NARVAEZ, Petitioners,
vs.
SPS. ROSE OGAS ALCISO and ANTONIO ALCISO, Respondents.
The Case
This is a petition1 for review on certiorari under Rule 45 of the Rules of Court. The
petition challenges the 29 October 2004 Decision2 of the Court of Appeals in CA-G.R.
CV No. 63757. The Court of Appeals affirmed with modification the 6 April 1998
Decision3 of the Regional Trial Court (RTC), Judicial Region 1, Branch 8, La
Trinidad, Benguet, in Civil Case No. 84-CV-0094.
The Facts
Larry A. Ogas (Ogas) owned a 1,329-square meter parcel of land situated in Pico, La
Trinidad, Benguet. The property was covered by Transfer Certificate of Title (TCT)
No. T-1068, and a portion was subject to a 30-year lease agreement4 with Esso
Standard Eastern, Inc. Ogas sold the property to his daughter Rose O. Alciso (Alciso).
TCT No. T-1068 was cancelled and TCT No. T-124225 was issued in the name of
Alciso.
On 25 August 1979, Alciso entered into a Deed of Sale with Right to
Repurchase,6 selling the property to Jaime Sansano (Sansano) for ₱10,000. Alciso later
repurchased the property from Sansano and, on 28 March 1980, she entered into
another Deed of Absolute Sale,7 this time selling the property to Celso S. Bate (Bate)
for ₱50,000. The Deed stated that:
The SELLER warrants that her title to and ownership of the property herein conveyed
are free from all liens and encumbrances except those as appear on the face of the title,
specifically, that lease over the said property in favor of ESSO STANDARD
EASTERN, INC., the rights over which as a lessor the SELLER likewise hereby
transfers in full to the buyer.8
TCT No. T-12422 was cancelled and TCT No. T-160669 was issued in the name of
Bate. On 14 August 1981, Bate entered into a Deed of Sale of Realty, 10 selling the
property to the spouses Dominador R. Narvaez and Lilia W. Narvaez (Spouses
Narvaez) for ₱80,000. TCT No. T-16066 was cancelled and TCT No. T-1652811 was
issued in the name of the Spouses Narvaez. In 1982, the Spouses Narvaez built a
commercial building on the property amounting to ₱300,000.
Alciso demanded that a stipulation be included in the 14 August 1981 Deed of Sale of
Realty allowing her to repurchase the property from the Spouses Narvaez. In
compliance with Alciso’s demand, the Deed stated that, "The SELLER (Bate) carries
over the manifested intent of the original SELLER of the property (Alciso) to buy back
the same at a price under such conditions as the present BUYERS (Spouses Narvaez)
may impose." The Spouses Narvaez furnished Alciso with a copy of the Deed.
Alciso alleged that she informed the Spouses Narvaez that she wanted to repurchase
the property. The Spouses Narvaez demanded ₱300,000, but Alciso was willing to pay
only ₱150,000. Alciso and the Spouses Narvaez failed to reach an agreement on the
repurchase price.
In a Complaint12 dated 15 June 1984 and filed with the RTC, Alciso prayed that (1) the
25 August 1979 Deed of Sale with Right to Repurchase, the 28 March 1980 Deed of
Absolute Sale, and the 14 August 1981 Deed of Sale of Realty be annulled; (2) the
Register of Deeds be ordered to cancel TCT Nos. T-16066 and T-16528; (3) the
Spouses Narvaez be ordered to reconvey the property; and (4) Sansano, Bate, and the
Spouses Narvaez be ordered to pay damages, attorney’s fees and expenses of
litigation. Alciso claimed that the intention of the parties was to enter into a contract of
real estate mortgage and not a contract of sale with right of repurchase. She stated that:
[C]ontrary to the clear intention and agreement of the parties, particularly the plaintiffs
herein, defendant JAIME SANSANO, taking advantage of the good faith and financial
predicament and difficulties of plaintiffs at the time, caused to be prepared and
induced with insidous [sic] words and machinations, prevailed upon plaintiff to sign a
contract denominated as "Sale With Right to Repurchase", instead of Deed of Real
Estate Mortgage as was the clear intention and agreement of the parties.
49
xxxx
Defendant JAIME SANSANO caused to be prepared a contract denominated as DEED
OF ABSOLUTE SALE, covering the lot in question, contrary to the clear intention
and understanding of plaintiff who was inveigled into signing said contract under the
impression that what she was executing was a real estate mortgage. 13
The RTC’s Ruling
In its 6 April 1998 Decision, the RTC held that (1) the 25 August 1979 Deed of Sale
with Right to Repurchase became functus officio when Alciso repurchased the
property; (2) the action to annul the 28 March 1980 Deed of Absolute Sale had
prescribed; (3) Alciso had no legal personality to annul the 14 August 1981 Deed of
Sale of Realty; (4) the 14 August 1981 Deed of Sale of Realty contained a
stipulation pour autrui in favor of Alciso — Alciso could repurchase the property; (5)
Alciso communicated to the Spouses Narvaez her acceptance of the favor contained in
the stipulation pour autrui; (6) the repurchase price was ₱80,000; (7) Alciso could
either appropriate the commercial building after payment of the indemnity equivalent
to one-half of its market value when constructed or sell the land to the Spouses
Narvaez; and (8) Alciso was entitled to ₱100,000 attorney’s fees and ₱20,000 nominal
damages.
The Spouses Narvaez appealed to the Court of Appeals. In their Appellants
Brief14 dated 21 November 2000, the Spouses Narvaez claimed that (1) the 14 August
1981 Deed of Sale of Realty did not contain a stipulation pour autrui — not all
requisites were present; (2) the RTC erred in setting the repurchase price at ₱80,000;
(3) they were purchasers for value and in good faith; and (4) they were builders in
good faith.
The Court of Appeals’ Ruling
In its 29 October 2004 Decision, the Court of Appeals held that (1) the 14 August 1981
Deed of Sale of Realty contained a stipulation pour autrui; (2) Alciso accepted the
favor contained in the stipulation pour autrui; (3) the RTC erred in setting the
repurchase price at ₱80,000; (4) the 14 August 1981 Deed of Sale of Realty involved a
contract of sale with right of repurchase and not real estate mortgage; (5) the Spouses
Narvaez were builders in good faith; and (6) Alciso could either appropriate the
commercial building after payment of the indemnity or oblige the Spouses Narvaez to
pay the price of the land, unless the price was considerably more than that of the
building. The Court of Appeals remanded the case to the RTC for determination of the
property’s reasonable repurchase price.
The Issue
The Spouses Narvaez elevated the case to the Court. In their Petition dated 15
December 2004, the Spouses Narvaez claimed that Alciso did not communicate her
acceptance of the favor contained in the stipulation pour autrui; thus, she could not
repurchase the property.
The Court’s Ruling
The petition is unmeritorious.
Article 1311, paragraph 2, of the Civil Code states the rule on stipulations pour autrui:
If a contract should contain some stipulation in favor of a third person, he may demand
its fulfillment provided he communicated his acceptance to the obligor before its
revocation. A mere incidental benefit or interest of a person is not sufficient. The
contracting parties must have clearly and deliberately conferred a favor upon a third
person.
In Limitless Potentials, Inc. v. Quilala,15 the Court laid down the requisites of a
stipulation pour autrui: (1) there is a stipulation in favor of a third person; (2) the
stipulation is a part, not the whole, of the contract; (3) the contracting parties clearly
and deliberately conferred a favor to the third person — the favor is not an incidental
benefit; (4) the favor is unconditional and uncompensated; (5) the third person
communicated his or her acceptance of the favor before its revocation; and (6) the
contracting parties do not represent, or are not authorized by, the third party.
All the requisites are present in the instant case: (1) there is a stipulation in favor of
Alciso; (2) the stipulation is a part, not the whole, of the contract; (3) Bate and the
Spouses Narvaez clearly and deliberately conferred a favor to Alciso; (4) the favor is
unconditional and uncompensated; (5) Alciso communicated her acceptance of the
favor before its revocation — she demanded that a stipulation be included in the 14
50
August 1981 Deed of Sale of Realty allowing her to repurchase the property from the
Spouses Narvaez, and she informed the Spouses Narvaez that she wanted to
repurchase the property; and (6) Bate and the Spouses Narvaez did not represent, and
were not authorized by, Alciso.
The Spouses Narvaez claim that Alciso did not communicate her acceptance of the
favor. They state that:
A perusal of the provision of the Deed of Sale of Realty between Celso Bate and the
spouses Dominador R. Narvaez and Lilia W. Narvaez (Annex "B") which clearly
provides that "the third person" (Rose O. Alciso) must have communicated her
acceptance to the obligors (spouses Dominador R. Narvaez and Lilia W. Narvaez)
before its revocation was not complied with. The acceptance is at best by mere
inference.
xxxx
Petitioner Narvaez clearly stated that while the contract (Deed of Sale of Realty,
Annex "D") contained an [sic] stipulation in favor of a third person (Rose O. Alciso),
she did not demand its fulfillment and communicate her acceptance to the obligors
before its revocation.
xxxx
We maintain that the stipulation aforequoted is not a stipulation pour autrui. Let the
following be emphasized:
1.While the contract contained a stipulation in favor of a third person (Rose Alciso)
she did not demand its fulfillment and she never communicated her acceptance to the
obligors (Spouses Narvaez) before its revocation (Uy Tam vs. Leonard, 30 Phil. 471;
Coquia vs. Fieldmen’s Insurance Co., Inc., 26 SCRA 178)
2.Granting arguendo that the stipulation is a pour autrui yet in the three meetings Rose
Alciso had with Mrs. Narvaez she never demanded fulfillment of the alleged
stipulation pour autrui and, what is worse, she did not communicate her acceptance to
the obligors before it is revoked.16
A petition for review on certiorari under Rule 45 of the Rules of Court should include
only questions of law — questions of fact are not reviewable. A question of law exists
when the doubt centers on what the law is on a certain set of facts, while a question of
fact exists when the doubt centers on the truth or falsity of the alleged facts. There is a
question of law if the issue raised is capable of being resolved without need of
reviewing the probative value of the evidence. Once the issue invites a review of the
evidence, the question is one of fact.17
Whether Alciso communicated to the Spouses Narvaez her acceptance of the favor
contained in the stipulation pour autrui is a question of fact. It is not reviewable.
The factual findings of the trial court, especially when affirmed by the Court of
Appeals, are binding on the Court.18In its 6 April 1998 Decision, the RTC found that
Alciso communicated to the Spouses Narvaez her acceptance of the favor contained in
the stipulation pour autrui. The RTC stated that:
Rose Alciso communicated her acceptance of such favorable stipulation when she
went to see defendant Lillia [sic] Narvaez in their house. Under the foregoing
circumstances, there is no question that plaintiff Rose Alciso can maintain her instant
action for the enforcement and/or fulfillment of the aforestated stipulation in her favor
to by [sic] back the property in question.19 (Emphasis supplied)
In Florentino v. Encarnacion, Sr.,20 the Court held that the acceptance may be made at
any time before the favorable stipulation is revoked and that the acceptance may be
in any form — it does not have to be formal or express but may be implied. During
the trial, Alciso testified that she informed the Spouses Narvaez that she wanted to
repurchase the property:
q – What was your proposal to Mrs. Narvaez by way of settlement?
a – I tried to go to her and asked her if I could redeem the property and Mrs.
Narvaez told me why not, you could redeem the property but not our price.
xxxx
q – Now, when you went back to her, what if any did you propose to her or
tell her, Madam witness?
51
 a – I just asked for the redemption for the property, sir and she just told me
wa [sic] the price that I could only redeem the property.
q – Three Hundred thousand pesos?
a – Yes, sir.
q – Did you make any counter proposal?
a – Yes, for the third time I want [sic] back again your Honor...21
The exceptions to the rule that the factual findings of the trial court are binding on the
Court are (1) when there is grave abuse of discretion; (2) when the findings are
grounded on speculations; (3) when the inference made is manifestly mistaken; (4)
when the judgment of the Court of Appeals is based on a misapprehension of facts; (5)
when the factual findings are conflicting; (6) when the Court of Appeals went beyond
the issues of the case and its findings are contrary to the admissions of the parties; (7)
when the Court of Appeals overlooked undisputed facts which, if properly considered,
would justify a different conclusion; (8) when the findings of the Court of Appeals are
contrary to those of the trial court; (9) when the facts set forth by the petitioners are not
disputed by the respondents; and (10) when the findings of the Court of Appeals are
premised on the absence of evidence and are contradicted by the evidence on
record.22 The Spouses Narvaez did not show that the instant case falls under any of the
exceptions.
In its 29 October 2004 Decision, the Court of Appeals held that Bate and the Spouses
Narvaez entered into a sale with right of repurchase and that, applying Article 448 of
the Civil Code, Alciso could either appropriate the commercial building after payment
of the indemnity or oblige the Spouses Narvaez to pay the price of the land, unless the
price was considerably more than that of the building. Article 448 states:
Art. 448. The owner of the land on which anything has been built, sown or planted in
good faith, shall have the right to appropriate as his own the works, sowing or
planting, after payment of the indemnity provided for in Articles 546 and 548, or to
oblige the one who built or planted to pay the price of the land, and the one who
sowed, the proper rent. However, the builder or planter cannot be obliged to buy the
land if its value is considerably more than that of the building or the trees. In such
case, he shall pay reasonable rent, if the owner of the land does not choose to
appropriate the building or trees after proper indemnity. The parties shall agree upon
the terms of the lease and in case of disagreement, the court shall fix the terms thereof.
The Court of Appeals stated that:
[T]he contract between defendants-appellants Bate and Narvaez spouses is a contract
of sale with a stipulation granting plaintiffs-appellees the right to repurchase the
property at a reasonable price. Being the absolute owners of the property in question,
defendants-appellants Narvaez spouses have the undisputed right to use, enjoy and
build thereon.
Having built the improvement on the land they own and registered in their names, they
are likened to builders in good faith and their rights over the improvement shall be
governed by Article 448 of the Civil Code which provides:
ART. 448. The owner of the land on which anything has been built, sown or planted in
good faith, shall have the right to appropriate as his own the works, sowing or
planting, after payment of the indemnity provided for in articles 546 and 548, or to
oblige the one who built or planted to pay the price of the land, and the one who
sowed, the proper rent. However, the builder or planter cannot be obliged to buy the
land if its value is considerably more than that of the building or tress. In such case, he
shall pay reasonable rent, if the owner of the land does not choose to appropriate the
building or trees after proper indemnity. The parties shall agree upon the terms of the
lease and in case of disagreement, the court shall fix the terms thereof.
Applying said Article, plaintiffs-appellees, after repurchasing the land, will have the
following options:
(1) to appropriate for themselves the building upon payment of its value to
defendants-appellants Narvaez spouses; OR
(2) to compel the defendants-appellants Narvaez spouses to buy the land,
unless the value of thereof [sic] be considerably more than that of the
building, in which case, said spouses may lease the land instead. The parties
shall agree upon the terms of the lease and in case of disagreement, the courts
shall fix the terms thereof.23
52
The Court disagrees.
The rule is that only errors specifically assigned and properly argued in the appellant’s
brief will be considered, except jurisdictional and clerical errors.24 However, the Court
is clothed with ample authority to review matters not assigned as errors if their
consideration is necessary in arriving at a just decision.25
Article 448 is inapplicable in cases involving contracts of sale with right of repurchase
— it is inapplicable when the owner of the land is the builder, sower, or planter.
In Pecson v. Court of Appeals,26 the Court held that:
Article 448 does not apply to a case where the owner of the land is the builder,
sower, or planter who then later loses ownership of the land by sale or donation. This
Court said so in Coleongco v. Regalado:
Article 361 of the old Civil Code is not applicable in this case, for Regalado
constructed the house on his own land before he sold said land to
Coleongco. Article 361 applies only in cases where a person constructs a building
on the land of another in good or in bad faith, as the case may be. It does not
apply to a case where a person constructs a building on his own land, for then
there can be no question as to good or bad faith on the part of the builder.
Elsewise stated, where the true owner himself is the builder of the works on his
own land, the issue of good faith or bad faith is entirely irrelevant. (Emphasis
supplied)
Article 448 is inapplicable in the present case because the Spouses Narvaez built the
commercial building on the land that they own. Besides, to compel them to buy the
land, which they own, would be absurd.
As the Court of Appeals correctly observed, the terms of the 14 August 1981 Deed of
Sale of Realty show that Bate and the Spouses Narvaez entered into a sale with right of
repurchase, where Bate transferred his right of repurchase to Alciso. The Deed states
that, "The SELLER (Bate) carries over the manifested intent of the original SELLER
of the property (Alciso) to buy back the same at a price under such conditions as the
present BUYERS (Spouses Narvaez) may impose." Article 1601 of the Civil Code
states that, "Conventional redemption shall take place when the vendor reserves the
right to repurchase the thing sold, with the obligation to comply with the provisions of
Article 1616 and other stipulations which may have been agreed upon." In Gallar v.
Husain,27 the Court held that "the right of repurchase may be exercised only by the
vendor in whom the right is recognized by contract or by any person to whom the right
may have been transferred."
In a sale with right of repurchase, the applicable provisions are Articles 1606 and 1616
of the Civil Code, not Article 448. Articles 1606 and 1616 state:
Art. 1606. The right referred to in Article 1601, in the absence of an express
agreement, shall last four years from the date of the contract.lawph!l
Should there be an agreement, the period cannot exceed ten years.
However, the vendor may still exercise the right to repurchase within thirty days from
the time final judgment was rendered in a civil action on the basis that the contract was
a true sale with right to repurchase.
Art. 1616. The vendor cannot avail himself of the right of repurchase without returning
to the vendee the price of the sale, and in addition:
(1) The expenses of the contract, and any other legitimate payments made by
reason of the sale;
(2) The necessary and useful expenses made on the thing sold.
Under Article 1616, Alciso may exercise her right of redemption by paying the
Spouses Narvaez (1) the price of the sale, (2) the expenses of the contract, (3)
legitimate payments made by reason of the sale, and (4) the necessary and useful
expenses made on the thing sold. In the present case, the cost of the building
constitutes a useful expense. Useful expenses include improvements which augment
the value of the land.28
Under the first paragraph of Article 1606, Alciso had four years from 14 August 1981
to repurchase the property since there was no express agreement as to the period when
the right can be exercised. Tender of payment of the repurchase price is necessary in
the exercise of the right of redemption. Tender of payment is the seller’s manifestation
53
of his or her desire to repurchase the property with the offer of immediate
performance.29
Alciso’s intimation to the Spouses Narvaez that she wanted to repurchase the property
was insufficient. To have effectively exercised her right of repurchase, Alciso should
have tendered payment. In Lee v. Court of Appeals,30the Court held that:
The rule that tender of payment of the repurchase price is necessary to exercise the
right of redemption finds support in civil law. Article 1616 of the Civil Code of the
Philippines x x x furnishes the guide, to wit: "The vendor cannot avail himself of the
right of repurchase without returning to the vendee the price of the sale..."1avvphi1
Thus, in the case of Angao vs. Clavano, 17 Phil. 152, it was held that "it is not
sufficient for the vendor to intimate or to state to the vendee that the former desires to
redeem the thing sold, but he must immediately thereupon offer to repay the price..."
Likewise, in several other cases decided by the Supreme Court (Fructo vs. Fuentes, 15
Phil. 362; Retes vs. Suelto, 20 Phil. 394; Rosales vs. Reyes, et al., 25 Phil. 495; Canuto
vs. Mariano, 37 Phil. 840; De la Cruz, et al. vs. Resurreccion, et al., 98 Phil. 975; and
other cases) where the right to repurchase was held to have been properly exercised,
there was a definite finding of tender of payment having been made by the vendor.
(Emphasis supplied)
Nevertheless, under the third paragraph of Article 1606, Alciso has 30 days from the
finality of this Decision to exercise her right of repurchase. In Laserna v. Javier,31 the
Court held that:
The new Civil Code in Article 1606, thereof gives the vendors a retro "the right to
repurchase within thirty days from the time final judgment was rendered in a civil
action, on the basis that the contract was a true sale with the right to repurchase." This
provision has been construed to mean that "after the courts have decided by a final or
executory judgment that the contract was a pacto de retro and not a mortgage, the
vendor (whose claim as mortgagor had definitely been rejected) may still have the
privilege of repurchasing within 30 days." (Perez, et al. vs. Zulueta, 106 Phil., 264.)
The third paragraph of Article 1606 allows sellers, who considered the transaction they
entered into as mortgage, to repurchase the property within 30 days from the time they
are bound by the judgment finding the transaction to be one of sale with right of
repurchase.
WHEREFORE, the Court DENIES the petition. The Court AFFIRMS the 29
October 2004 Decision of the Court of Appeals in CA-G.R. CV No. 63757
with MODIFICATION. Respondent Rose O. Alciso may exercise her right of
redemption by paying the petitioners Spouses Dominador R. Narvaez and Lilia W.
Narvaez (1) the price of the sale, (2) the expenses of the contract, (3) legitimate
payments made by reason of the sale, and (4) the necessary and useful expenses made
on the subject property. The Court DIRECTS the Regional Trial Court, Judicial
Region 1, Branch 8, La Trinidad, Benguet, to determine the amounts of the expenses
of the contract, the legitimate expenses made by reason of the sale, and the necessary
and useful expenses made on the subject property.
After such determination, respondent Rose O. Alciso shall have 30 days to pay the
amounts to petitioners Spouses Dominador R. Narvaez and Lilia W. Narvaez. SO
ORDERED.
G.R. No. 205664 June 9, 2014
DEPARTMENT OF EDUCATION, represented by its REGIONAL DIRECTOR
TERESITA DOMALANTA,Petitioner,
vs.
MARIANO TULIAO, Respondent.
This petition for review on certiorari under Rule 45 of the Rules of Court filed by the
Department of Education (DepEd) assails the January 31, 2013 Decision 1 of the Court
of Appeals (CA) in G.R. SP No. 123450 which dismissed DepEd's petition for review.
The Factual Antecedents:
On October 8, 2002, Mariano Tuliao (Tuliao) filed an action for recovery of
possession and removal of structure with damages against the Department of
Education (DepEd) with the Municipal Trial Court in Cities of Tuguegarao City
(MTCCJ. He alleged that he was the registered owner of the subject parcel of land and
that a portion of the said property was allowed by his predecessors-in-interest to be
used by the Atulayan Elementary School (AES) as an access road for the
54
schoolchildren in going to and from the school. In March 2000, upon discovering that
a structure was being constructed on the land, he demanded that the DepED cease and
desist and vacate the property. The respondent, however, refused. Tuliao likewise
demanded payment for reasonable rent, but his demand was also ignored.
In its defense, the DepEd denied the material allegations of the complaint and averred
that it did not state a cause of action. Even if there was, the same was already barred
by prescription and/or laches. Its occupation of the subject land was adverse, peaceful,
continuous, and in the concept of an owner for more than fifty (50) years. It also
alleged that it did not receive a notice to cease and desist or notice to vacate. As owner
of the school site, it could not be compelled to pay rent or its reasonable value.
On January 26, 2010, the MTCC rendered its decision, ruling that Tuliao was the
registered owner of the subject property and, thus, had a right of action against the
holder and possessor of the said property. Further, it found that respondent’s
possession of the subject property was merely tolerated by Tuliao. For said reason, his
right to recover it was never barred by laches.
As to the structures, the MTCC stated that it could not allow the immediate removal
thereof in view of the provisions of Article 448 2 of the New Civil Code and directed
Tuliao to exercise his options under said article. Pertinent portions of the MTCC
decision, including the fallo reads:
Plaintiff’s prayer that the structures built on his lot be removed immediately cannot be
allowed in view of the provision of Article 448.
WHEREFORE, premises considered, judgment is hereby rendered by:
1. Declaring the plaintiff to be the lawful possessor of the lot in suit;
2. Directing the plaintiff to exercise his option under the law (Article 448,
Civil Code) whether to appropriate the structures built on the lot in suit as his
own by paying to the defendant the amount of the expenses spent for the
structures or to oblige the defendant to pay the price of the land, and said
option must be exercised and relayed to this court formally within 30 days
from receipt of this decision and a copy of such notice must be furnished to
the defendant.
a. If in case the plaintiff exercises the option to appropriate the
structures built on the lot in suit, the defendant is hereby directed to
submit to this court the amount of the expenses spent for the
structures within 15 days from receipt of the notice of the plaintiff of
his desired option.
b. If the plaintiff decides to oblige the defendant to pay the price of
the land, the current market value of the land including its
improvements as determined by the City Assessor’s Office shall be
the basis for the price thereof.
c. In case the plaintiff exercises the option to oblige the defendant to
pay the price of the land but the latter rejects such purchase because
the value of the land is considerably more than that of the structures,
the parties shall agree upon the terms of a forced lease, and give the
court a formal written notice of such agreement and its provisos.
d. If no formal agreement shall be entered into within a reasonable
period, the court shall fix the terms of the forced lease.
3. Directing the defendant to pay the plaintiff the amount of five hundred
pesos (₱500.00) as reasonable compensation for the occupancy of the
encroached property from the time the complaint was filed until such time the
possession of the property is delivered to the plaintiff subject to the
reimbursement of the aforesaid expenses in favor of the defendant or until
such time the payment of the purchase price of the lot be made by the
defendant in favor of the plaintiff in case the latter opts for the compulsory
sale of the same;
4. Directing the defendant to pay the plaintiff the amount of ₱20,000.00 as
attorney’s fees and to pay the costs of the suit.
So Ordered.3
On appeal to the RTC, aside from the issue of inaction, the DepEd argued that Tuliao
failed to sufficiently and competently prove the identity of the property – the exact
location, area and boundaries. The DepEd further claimed that the material allegations
55
of the complaint established one of accion reivindicatoria, and not accion publiciana,
because Tuliao raised the issue of ownership and made it the anchor of his claim for
juridical possession.
Acting thereon, the RTC dismissed the appeal and affirmed the MTCC decision. It
stated that "[i]f a party in accion publiciana alleges that he owns the property in
question, it is not ex sequitur that the action is a reinvindicatory one," and that a
claimant could assert ownership as basis of his claim of possession. 4 The RTC also
wrote that Tuliao was able to present evidence establishing a definite and unmistakable
identification of the land and its ownership over the subject property. Moreover, the
DepEd’s possession was with the acquiescence of Tuliao’s predecessors-in-interest,
thus, the defense of laches was found weak.5
Interestingly, despite having affirmed the MTCC decision, the RTC opined that the
case was impressed with public interest6 and it was the paramount interest of the pupils
who would be prejudiced by the finality and execution of the appealed decision. 7 The
RTC strongly suggested that the DepEd, or if unable, the City Government of
Tuguegarao City, be requested to pay Tuliao the just compensation of the land in
question the amount of which to be determined by a panel of three commissioners
appointed by the court and whose determination was to be approved by the said court. 8
Aggrieved, the DepEd elevated the case to the CA via a petition for review under Rule
42. Finding no merit, the CA affirmed the RTC decision. It stated that the DepEd’s
reliance on the case of Bote vs. San Pedro Cineplex Properties Corporation 9 in arguing
that Tuliao’s certificate of title alone was inadequate to hand over possession of an
unidentified parcel of land was misplaced. In Bote, both parties asserted ownership
and possession of the land and presented their respective titles as evidence thereof.
Hence, it was ruled therein that geodetic survey was necessary to determine whose title
actually covered the disputed property.10
In this case, however, only Tuliao presented a certificate of title as well as tax
declaration and real property tax receipts for the years 2003-2005.11 The pieces of
evidence Tuliao presented resolved the issue of who had the better right of possession
and dispensed with the need for the testimony of an expert witness. 12
Hence, the present petition.
ISSUES:
I.
WHETHER THE COURT OF APPEALS ERRED IN AFFIRMING THE
REGIONAL TRIAL COURT AND HOLDING THAT THERE IS A SUFFICIENT
DESCRIPTION OF THE LAND IN DISPUTE.
II.
WHETHER THE COURT OF APPEALS ERRED IN AFFIRMING THE
REGIONAL TRIAL COURT AND HOLDING THAT PETITIONER’S
POSSESSION WAS ONLY DUE TO THE ACQUIESCENCE OR TOLERANCE OF
HEREIN RESPONDENT.
III.
WHETHER THE COURT OF APPEALS ERRED IN FAILING TO CONSIDER
THAT RESPONDENT’S CLAIM IS BARRED BY LACHES DUE TO THE
UNINTERRUPTED POSSESSION OF ATULAYAN ELEMENTARY SCHOOL
FOR AT LEAST THIRTYTWO (32) YEARS.13
Firstly, the DepEd has argued that Tuliao failed to discharge the burden of proving
ownership over the disputed property. It asserts that presentation of a certificate of title
does not automatically entitle the claimant to possession; that he has to first prove, by
competent and reliable evidence, that the land he is claiming falls within his title; that
the allegations and declarations of a party with a certificate of title are inadequate; and
that where a claimant asserts ownership over a disputed property, it is essential that the
boundaries of his title be correlated with the area claimed as this might be a case of an
owner mistaking another’s property as one’s own.
Secondly, the DepEd avers that its witness, Caridad Soriano, who was a retired teacher
of AES and who had taught at the said school for more than 30 years, testified that its
possession of the subject land was open, continuous, exclusive, notorious, and in the
concept of an owner since 1970. AES has delineated its possession by fencing its
campus. Thus, whatever is within this fence is part of AES.14
56
Thirdly, the DepEd declares that Tuliao has lost his right to recover by his inaction for
thirty two (32) years.15 After a scrutiny of the records, the Court is not swayed by
DepEd’s arguments.
It has been consistently held that the Court is not a trier of facts.
Moreover, the factual findings of the trial court, when affirmed by the CA, are
generally binding on this Court.16Subject to certain exceptions, the Court will not
review, analyze and weigh all over again evidence already considered in the
proceedings below.
From the records, it appears that there is no necessity to disturb the factual findings
and conclusions of law by the CA. Time and again, it has been ruled that he who
alleges the affirmative of the issue has the burden of proof. 17Upon the plaintiff in a
civil case, the burden of proof never parts. Once the plaintiff makes out a prima facie
case in his favor in the course of the trial, however, the duty or the burden of evidence
shifts to defendant to controvert plaintiff’s prima facie case, otherwise, a verdict must
be returned in favor of plaintiff.18
Here, Tuliao, as the registered owner, filed a complaint for recovery of possession and
removal of structure. To support his claim, he presented not only tax declarations and
tax receipts, but also a certificate of title. The Court agrees with the CA that the said
pieces of evidence were sufficient to resolve the issue of who had the better right of
possession. That being the case, the burden was shifted to the DepEd to prove
otherwise. Unfortunately, the DepEd only presented testimonial evidence and nothing
more to prove its defense and refute Tuliao’s claim. Its lone witness was all that the
DepEd had to prove its right of possession. As between a certificate of title, which is
an incontrovertible proof of ownership,19 accompanied with a tax declaration and a tax
receipt on one hand, and a testimony of a lone witness who is a retired teacher on the
other, the former prevails in establishing who has a better right of possession over the
property, following the rule that testimonial evidence cannot prevail over documentary
evidence.20
As regards the DepEd 's defense of ]aches, it has no merit either. It avers that its
possession of the subject land was open, continuous, exclusive, adverse, notorious and
in the concept of an owner for at least thirty-two (32) years already at the time Tuliao
filed the complaint. It must be noted, however, that Tuliao's claim that the DepEd's
possession of a portion of his land to be used as a passageway for the students was
mere tolerance was not refuted. Thus, the same is deemed admitted. This means that
the DepEd 's possession was not truly adverse.
The Court once ruled that mere material possession of the land was not adverse as
against the owner and W8S insufficient to vest title, unless such possession was
accompanied by the intent to possess as an owner.21Accordingly, the DepEd 's
possession can only be considered as adverse from the time the gymnasium was being
constructed in 1999 on the subject portion of Tuliao's property. In March 2000, Tuliao
discovered the construction and demanded that the DepEd cease and desist from
continuing the same. When DepEd refused, Tuliao filed a complaint for recovery of
possession of the subject lot in 2002. Thus, only two (2) years had elapsed from the
time the DepEd resisted Tuliao's claims. Clearly, he did not sleep on his rights. There
was no prolonged inaction that barred him from prosecuting his claims.
At any rate, the MTCC was fair when it stated that it could not order the immediately
removal of the structures and directed Tuliao to exercise his option under Article 448.
If that would not be feasible or practical for DepEd, its remedy is to file an action for
expropriation.
WHEREFORE, the petition is DENIED. SO ORDERED.
G.R. No. 192268
DEPARTMENT OF EDUCATION, represented by its Regional
Director, Petitioner,
vs.
DELFINA C. CASIBANG, ANGELINA C. CANAPI, ERLINDA C. BAJAN,
LORNA G. GUMABAY, DIONISIA C. ALONZO, MARIA C. BANGA YAN and
DIGNA C. BINAYUG, Respondents.
For resolution of this Court is the Petition for Review on Certiorari, dated June 18,
2010, of petitioner Department of Education (DepEd), represented by its Regional
Director seeking to reverse and set aside the Decision1 dated April 29, 2010 of the
Court of Appeals (CA) affirming the Decision2 dated January l 0, 2008 of the Regional
Trial Court (RTC) of Tuguegarao City, Cagayan, Branch 5, declaring the respondents
57
the owners of property in controversy and ordering the DepEd to pay the value of the
property.
The antecedents follow:
The property in controversy is a seven thousand five hundred thirty-two (7,532) square
meter portion of Lot 115 covered by Original Certificate of Title (OCT) No. 0-627
registered under the name of Juan Cepeda, the respondents' late father.3
Sometime in 1965, upon the request of the then Mayor Justo Cesar Caronan, Cepeda
allowed the construction and operation of a school on the western portion of his
property. The school is now known as Solana North Central School, operating under
the control and supervision of the petitioner DepEd.4
Despite Cepeda's death in 1983, the herein respondents and other descendants of
Cepeda continued to tolerate the use and possession of the property by the school. 5
Sometime between October 31, 2000 and November 2, 2000, the respondents entered
and occupied a portion of the property. Upon discovery of the said occupation, the
teachers of the school brought the matter to the attention of the barangay captain. The
school officials demanded the respondents to vacate the property.6 However, the
respondents refused to vacate the property, and asserted Cepeda's ownership of the
lot.7
On June 21, 2001, the DepEd filed a Complaint for Forcible Entry and Damages
against respondents before the Municipal Circuit Trial Court (MCTC) of Solana-
Enrile. The MCTC ruled in favor of the petitioner and directed respondents to vacate
the premises.8 On appeal, the R TC affirmed the decision of the MCTC.9
Thereafter, respondents demanded the petitioner to either pay rent, purchase the area
occupied, or vacate the premises. DepEd did not heed the demand and refused to
recognize the ownership of the respondents over the property. 10
On March 16, 2004, the respondents filed an action for Recovery of Possession and/or
Sum of Money against the DepEd.11 Respondents averred that since their late father
did not have any immediate need of the land in 1965, he consented to the building of
the temporary structure and allowed the conduct of classes in the premises. They
claimed that they have been deprived of the use and the enjoyment of the portion of
the land occupied by the school, thus, they are entitled to just compensation and
reasonable rent for the use of property.12
In its Answer, the DepEd alleged that it owned the subject property because it was
purchased by civic-minded residents of Solana, Cagayan from Cepeda. It further
alleged that contrary to respondents' claim that the occupation is by mere tolerance, the
property has always been occupied and used adversely, peacefully, continuously and in
the concept of owner for almost forty (40) years. 13 It insisted that the respondents had
lost whatever right they had over the property through laches. 14
During the trial, respondents presented, inter alia, the OCT No. O-627 registered in the
name of Juan Cepeda; Tax Declarations also in his name and the tax receipts showing
that they had been paying real property taxes on the property since 1965. 15 They also
presented the Technical Description of the lot by the Department of Environment and
Natural Resources Land Management Services showing that the subject property was
surveyed in the name of Cepeda and a certification from the Municipal Trial Court of
Solana, Cagayan declaring that Lot 115 was the subject of Cad Case No. N-13 in LRC
Cad. Record No. N-200 which was adjudicated to Cepeda.16
On the other hand, despite notice and reset of hearing, the DepEd failed to present its
evidence or witness to substantiate its defense.17
Consequently, the RTC considered the case submitted for decision and rendered a
Decision dated January 10, 2008, finding that the respondents are the owners of the
subject property, thus:
WHEREFORE, judgment is hereby rendered.
1. Declaring plaintiffs as the owner of Lot 115 covered by Original Certificate
of Title No. 0-627.
2. Ordering the reconveyance of the portion of the subject property occupied
by the Solana North Central School, Solana, Cagayan. However, since
restoration of possession of said portion by the defendant Department of
Education is no longer feasible or convenient because it is now used for the
58
 school premises, the only relief available is for the government to pay due
compensation which should have [been] done years ago.
2.1 To determine due compensation for the Solana North Central
School the basis should be the price or value of the property at the
time of taking.
3. No pronouncement as to cost.
SO ORDERED.18
The DepEd, through the Office of the Solicitor General (OSG), appealed the case
before the CA. In its appeal, the DepEd insisted that the respondents have lost their
right over the subject property for their failure to assert the same for more than thirty
(30) years, starting in 1965, when the Mayor placed the school in possession thereof. 19
The CA then affirmed the decision of the RTC. The dispositive portion of the said
decision reads:
WHEREFORE, the appeal is DISMISSED, and the Decision dated 10 January 2008,
of the Regional Trial Court, Branch 5, Tuguegarao, Cagayan in Civil Case No. 6336
for Recovery of Possession and/or Sum of Money; declaring plaintiffs as the owners of
the property in controversy, and ordering the Department of Education to pay them the
value of the property taken is AFFIRMED in toto.
SO ORDERED.20
Aggrieved, the DepEd, through the OSG, filed before this Court the present petition
based on the sole ground that:
THE COURT OF APPEALS ERRED IN AFFIRMING THE TRIAL COURT'S
DECISION THAT THE RESPONDENTS' RIGHT TO RECOVER THE
POSSESSION OF THE SUBJECT PROPERTY IS NOT BARRED BY
PRESCRIPTION AND/OR LACHES.21
This Court finds the petition without merit.
Laches, in a general sense, is the failure or neglect for an unreasonable and
unexplained length of time, to do that which, by exercising due diligence, could or
should have been done earlier; it is negligence or omission to assert a right within a
reasonable time, warranting a presumption that the party entitled to assert it either has
abandoned it or declined to assert it.22
There is no absolute rule as to what constitutes laches or staleness of demand; each
case is to be determined according to its particular circumstances. The question of
laches is addressed to the sound discretion of the court, and since laches is an equitable
doctrine, its application is controlled by equitable considerations. It cannot work to
defeat justice or to perpetrate fraud and injustice.23
Laches is evidentiary in nature, a fact that cannot be established by mere allegations in
the pleadings.24 The following elements, as prescribed in the case of Go Chi Gun, et al.
v. Co Cho, et al.,25 must be present to constitute laches:
x x x (1) conduct on the part of the defendant, or of one under whom he claims, giving
rise to the situation of which complaint is made for which the complaint seeks a
remedy; (2) delay in asserting the complainant's rights, the complainant having had
knowledge or notice, of the defendant's conduct and having been afforded an
opportunity to institute a suit; (3) lack of knowledge or notice on the part of the
defendant that the complainant would assert the right on which he bases his suit; and
(4) injury or prejudice to the defendant in the event relief is accorded to the
complainant, or the suit is not held to be barred. 26
To refute the respondents' claim that its possession of the subject lot was merely
tolerated, the DepEd averred that it owned the subject property because the land was
purchased by the civic-minded residents of Solana.27 It further alleged that since it was
the then Mayor who convinced Cepeda to allow the school to occupy the property and
use the same, it believed in good faith that the ownership of the property was already
transferred to it.28
However, the DepEd did not present, in addition to the deed of sale, a duly-registered
certificate of title in proving the alleged transfer or sale of the property. Aside from its
allegation, the DepEd did not adduce any evidence to the transfer of ownership of the
lot, or that Cepeda received any consideration for the purported sale.
59
On the other hand, to support their claim of ownership of the subject lot, respondents
presented the following: (1) the OCT No. 0-627 registered in the name of Juan
Cepeda;29 (2) Tax Declarations in the name of Cepeda and the tax receipts showing the
payment of the real property taxes on the property since 1965; 30 (3) Technical
Description of the lot by the Department of Environment and Natural Resources Land
Management Services, surveyed in the name of Cepeda;31 and (4) Certification from
the Municipal Trial Court of Solana, Cagayan declaring that Lot 115 was adjudicated
to Cepeda.32
After a scrutiny of the records, this Court finds that the above were sufficient to
resolve the issue on who had better right of possession. That being the case, it is the
burden of the DepEd to prove otherwise. Unfortunately, the DepEd failed to present
any evidence to support its claim that the disputed land was indeed purchased by the
residents. By the DepEd's admission, it was the fact that the then Mayor of Solana,
Cagayan convinced Cepeda to allow the school to occupy the property for its school
site that made it believe that the ownership of the property was already transferred to
it. We are not swayed by the DepEd's arguments. As against the DepEd's
unsubstantiated self-serving claim that it acquired the property by virtue of a sale, the
Torrens title of respondents must prevail.
It is undisputed that the subject property is covered by OCT No. O-627, registered in
the name of the Juan Cepeda.33 A fundamental principle in land registration under the
Torrens system is that a certificate of title serves as evidence of an indefeasible and
incontrovertible title to the property in favor of the person whose name appears
therein.34 Thus, the certificate of title becomes the best proof of ownership of a parcel
of land.35
As registered owners of the lots in question, the respondents have a right to eject any
person illegally occupying their property. This right is imprescriptible. Even if it be
supposed that they were aware of the petitioner's occupation of the property, and
regardless of the length of that possession, the lawful owners have a right to demand
the return of their property at any time as long as the possession was unauthorized or
merely tolerated, if at all. This right is never barred by laches. 36
Case law teaches that those who occupy the land of another at the latter's tolerance or
permission, without any contract between them, are necessarily bound by an implied
promise that the occupants will vacate the property upon demand.37
In the case of Sarona, et al. v. Villegas, et al.,38 this Court described what tolerated acts
mean, in this language:
Professor Arturo M. Tolentino states that acts merely tolerated are "those which by
reason of neighborliness or familiarity, the owner of property allows his neighbor or
another person to do on the property; they are generally those particular services or
benefits which one's property can give to another without material injury or prejudice
to the owner, who permits them out of friendship or courtesy." x x x. and, Tolentino
continues, even though "this is continued for a long time, no right will be acquired
by prescription." x x x39
It was out of respect and courtesy to the then Mayor who was a distant relative that
Cepeda consented to the building of the school.40 The occupancy of the subject
property by the DepEd to conduct classes therein arose from what Professor Arturo
Tolentino refers to as the sense of "neighborliness or familiarity" of Cepeda to the then
Mayor that he allowed the said occupation and use of his property.
Professor Tolentino, as cited in the Sarona case, adds that tolerated acts are acts of
little disturbances which a person, in the interest of neighborliness or friendly
relations, permits others to do on his property, such as passing over the land, tying a
horse therein, or getting some water from a well.41 In tolerated acts, the said
permission of the owner for the acts done in his property arises from an "impulse of
sense of neighborliness or good familiarity with persons" 42 or out of "friendship or
courtesy,"43 and not out of duty or obligation. By virtue of tolerance that is considered
as an authorization, permission, or license, acts of possession are realized or
performed.44
Thus, in light of the DepEd' s admission that it was the then Mayor who convinced
Cepeda to allow its use of his property and in the absence of evidence that the same
was indeed sold to it, the occupation and use as school site of the subject lot by the
DepEd upon Cepeda's permission is considered a tolerated act. Cepeda allowed the use
of his property out of his respect, courtesy and familiarity with the then Mayor who
convinced him to allow the use of his property as a school site.
Considering that the occupation of the subject lot is by mere tolerance or permission of
the respondents, the DepEd, without any contract between them, is bound by an
implied promise that it will vacate the same upon demand. Hence, until such demand
to vacate was communicated by the respondents to the DepEd, respondents are not
60
required to do any act to recover the subject land, precisely because they knew of the
nature of the DepEd's possession which is by mere tolerance.
Therefore, respondents are not guilty of failure or neglect to assert a right within a
reasonable time. The nature of that possession by the DepEd has never changed from
1965 until the filing of the complaint for forcible entry against the respondents on June
21, 2001. It was only then that the respondents had knowledge of the adverse claim of
the DepEd over the property. The respondents filed the action for recovery of
possession on March 16, 2004 after they lost their appeal in the forcible entry case and
upon the continued refusal of the DepEd to pay rent, purchase the lot or vacate the
premises.45
Lastly, the DepEd maintains that the respondents' inaction for more than 30 years
reduced their right to recover the subject property into a stale demand. It cited the case
of Eduarte v. CA,46 Catholic Bishop of Balanga v. CA,47Mactan-Cebu International
Airport Authority (MCIAA) v. Heirs of Marcelina L. Sero, et al. 48 and DepEd Division
of Albay v. Oñate49 to bolster its claim that a registered owner may lose his right to
recover the possession of his registered property by reason of laches. It alleged that the
fact that the respondents possess the certificate of title of the property is of no moment
since a registered landowner, like the respondents, lost their right to recover the
possession of the registered property by reason of laches.
In the Eduarte case, the respondents therein knew of Eduarte's adverse possession of
the subject lot as evidenced by their Joint Affidavit dated March 18, 1959. In the case
of Catholic Bishop of Balanga v. CA, the petitioner, by its own admission, was aware
of private respondent's occupation in the concept of owner of the lot donated in its
behalf to private respondent's predecessor-in-interest in 1936. The subject lot in the
case of Mactan-Cebu International Airport Authority was obtained through
expropriation proceedings and registered in the name of the petitioner. In
the Oñate case, no evidence was presented to show that the respondent or his
predecessor-in-interest protested against the adverse possession of the disputed lot by
the Municipality of Daraga and, subsequently, by the petitioner.
Unlike the cases cited by the DepEd, there was no solid evidentiary basis to establish
that laches existed in the instant case. The DepEd failed to substantiate its claim of
possession in the concept of an owner from the time it occupied the lot after Cepeda
allowed it to use the same for a school site in 1965. The possession by the DepEd of
the subject lot was clearly by mere tolerance, since it was not proven that it laid an
adverse claim over the property by virtue of the purported sale.
Moreover, the trial court ruled that the DepEd is a builder in good faith. To be deemed
a builder in good faith, it is essential that a person asserts title to the land on which he
builds, i.e., that he be a possessor in the concept of owner, and that he be unaware that
there exists in his title or mode of acquisition any flaw which invalidates it. 50However,
there are cases where Article 448 of the Civil Code was applied beyond the recognized
and limited definition of good faith, e.g., cases wherein the builder has constructed
improvements on the land of another with the consent of the owner. 51 The Court ruled
therein that the structures were built in good faith in those cases that the owners knew
and approved of the construction of improvements on the property. 52
Despite being a possessor by mere tolerance, the DepEd is considered a builder in
good faith, since Cepeda permitted the construction of building and improvements to
conduct classes on his property. Hence, Article 448 may be applied in the case at bar.
Article 448, in relation to Article 546 of the Civil Code, provides for the rights of
respondents as landowners as against the DepEd, a builder in good faith. The
provisions respectively read:
Article 448. The owner of the land on which anything has been built, sown or planted
in good faith, shall have the right to appropriate as his own the works, sowing, or
planting, after payment of the indemnity provided for in Articles 546 and 548, or to
oblige the one who built or planted to pay the price of the land, and the one who
sowed, the proper rent. However, the builder or planter cannot be obliged to buy the
land if its value is considerably more than that of the building or trees. In such case, he
shall pay reasonable rent, if the owner of the land does not choose to appropriate the
building or trees after proper indemnity. The parties shall agree upon the terms of the
lease and in case of disagreement, the court shall fix the terms thereof.
Article 546. Necessary expenses shall be refunded to every possessor; but only the
possessor in good faith may retain the thing until he has been reimbursed therefor.
Useful expenses shall be refunded only to the possessor in good faith with the same
right of retention, the person who has defeated him in the possession having the option
61
of refunding the amount of the expenses or of paying the increase in value which the
thing may have acquired by reason thereof.
In the case of Bernardo v. Bataclan,53 the Court explicated that Article 448 provides a
just and equitable solution to the impracticability of creating "forced co-ownership" by
giving the owner of the land the option to acquire the improvements after payment of
the proper indemnity or to oblige the builder or planter to pay for the land and the
sower to pay the proper rent.54 The owner of the land is allowed to exercise the said
options because his right is older and because, by the principle of accession, he is
entitled to the ownership of the accessory thing.55
Thus, the two options available to the respondents as landowners are: (a) they may
appropriate the improvements, after payment of indemnity representing the value of
the improvements introduced and the necessary and useful expenses defrayed on the
subject lots; or (b) they may oblige the DepEd to pay the price of the land. However, it
is also provided under Article 448 that the builder cannot be obliged to buy the land if
its value is considerably more than that of the improvements and buildings. If that is
the case, the DepEd is not duty-bound to pay the price of the land should the value of
the same be considerably higher than the value of the improvement introduced by the
DepEd on the subject property. In which case, the law provides that the parties shall
agree on the terms of the lease and, in case of disagreement, the court shall fix the
terms thereof.
The RTC, as affirmed by the CA, ruled that the option of the landowner to appropriate
after payment of the indemnity representing the value of the improvements introduced
and the necessary and useful expenses defrayed on the subject lots is no longer feasible
or convenient because it is now being used as school premises. Considering that the
appropriation of improvements upon payment of indemnity pursuant to Article 546 by
the respondents of the buildings being used by the school is no longer practicable and
feasible, the respondents are thus left with the second option of obliging the DepEd to
pay the price of the land or to require the DepEd to pay reasonable rent if the value of
the land is considerably more than the value of the buildings and improvements.
Since the determination of the value of the subject property is factual in nature, this
Court finds a need to remand the case to the trial court to determine its value. In case
the trial court determines that the value of the land is considerably more than that of
the buildings and improvements introduced, the DepEd may not be compelled to pay
the value of the land, instead it shall pay reasonable rent upon agreement by the parties
of the terms of the lease. In the event of a disagreement between the parties, the trial
court shall fix the terms of lease.
Lastly, the RTC ruled that the basis of due compensation for the respondents should be
the price or value of the property at the time of the taking. In the case of Ballatan v.
CA,56 the Court has settled that the time of taking is determinative of just
compensation in expropriation proceedings but not in a case where a landowner has
been deprived of the use of a portion of this land for years due to the encroachment of
another.57
In such instances, the case of Vda. de Roxas v. Our Lady's foundation, Inc. 58 is
instructive. The Court elucidated therein that the computation of the value of the
property should be fixed at the prevailing market value. 59 The reckoning period for
valuing the property in case the landowner exercised his rights in accordance with
Article 448 shall be at the time the landowner elected his choice. 60 Therefore, the basis
for the computation of the value of the subject property in the instant case should be its
present or current fair market value.
WHEREFORE, the Petition for Review on Certiorari, dated June 18, 20 I 0, of
petitioner Department of Education, represented by its Regional Director, is
hereby DENIED. Accordingly, the Decision dated April 29, 2010 of the Court of
Appeals in CA-G.R. CV No. 90633, affirming the Decision dated January 10, 2008 of
the Regional Trial Court of Tuguegarao City, Cagayan, Branch 5, which declared the
respondents the owners of property in controversy, is hereby AFFIRMED.
Accordingly, this case is REMANDED to the court of origin to determine the value of
the subject property. If the value of the property is less than the value of the buildings
and improvements, the Department of Education is ordered to pay such amount. If the
value of the property is greater than the value of the buildings and improvements, the
DepEd is ordered to pay reasonable rent in accordance with the agreement of the
parties. In case of disagreement, the trial court shall fix the amount of reasonable rent.
SO ORDERED.
G.R. No. 150666 August 3, 2010
LUCIANO BRIONES and NELLY BRIONES, Petitioners,
vs.
62
JOSE MACABAGDAL, FE D. MACABAGDAL and VERGON REALTY
INVESTMENTS CORPORATION,Respondents.
On appeal under Rule 45 of the 1997 Rules of Civil Procedure, as amended, is the
Decision1 dated December 11, 2000 of the Court of Appeals (CA) in CA-G.R. CV No.
48109 which affirmed the September 29, 1993 Decision2 of the Regional Trial Court
(RTC) of Makati City, Branch 135, ordering petitioners Luciano and Nelly Briones to
remove the improvements they have made on the disputed property or to pay
respondent-spouses Jose and Fe Macabagdal the prevailing price of the land as
compensation.
The undisputed factual antecedents of the case are as follows:
Respondent-spouses purchased from Vergon Realty Investments Corporation (Vergon)
Lot No. 2-R, a 325-square-meter land located in Vergonville Subdivision No. 10 at
Las Piñas City, Metro Manila and covered by Transfer Certificate of Title No. 62181
of the Registry of Deeds of Pasay City. On the other hand, petitioners are the owners
of Lot No. 2-S, which is adjacent to Lot No. 2-R.
Sometime in 1984, after obtaining the necessary building permit and the approval of
Vergon, petitioners constructed a house on Lot No. 2-R which they thought was Lot
No. 2-S. After being informed of the mix up by Vergon’s manager, respondent-
spouses immediately demanded petitioners to demolish the house and vacate the
property. Petitioners, however, refused to heed their demand. Thus, respondent-
spouses filed an action to recover ownership and possession of the said parcel of land
with the RTC of Makati City.3
Petitioners insisted that the lot on which they constructed their house was the lot which
was consistently pointed to them as theirs by Vergon’s agents over the seven (7)-year
period they were paying for the lot. They interposed the defense of being buyers in
good faith and impleaded Vergon as third-party defendant claiming that because of the
warranty against eviction, they were entitled to indemnity from Vergon in case the suit
is decided against them.4
The RTC ruled in favor of respondent-spouses and found that petitioners’ house was
undoubtedly built on Lot No. 2-R. The dispositive portion of the trial court’s decision
reads as follows:
PREMISES CONSIDERED, let judgment be rendered declaring, to wit:
1. That plaintiffs are the owners of Lot No. 2-R of subdivision plan (LRC)
Psd-147392 at Vergonville Subdivision, No. 10, Las Piñas, Metro Manila
covered by TCT No. 62181 of the Registry of Deeds of Pasay City on which
defendants have constructed their house;
2. Defendants, jointly and severally, are ordered to demolish their house and
vacate the premises and return the possession of the portion of Lot No. 2-R as
above-described to plaintiffs within thirty (30) days from receipt of this
decision, or in the alternative, plaintiffs should be compensated by
defendants, jointly and severally, by the payment of the prevailing price of the
lot involved as Lot No. 2-R with an area of 325 square meters which should
not be less than ₱1,500.00 per square meter, in consideration of the fact that
prices of real estate properties in the area concerned have increased rapidly;
3. Defendants, jointly and severally, pay to plaintiffs for moral damages with
plaintiffs’ plans and dreams of building their own house on their own lot
being severely shattered and frustrated due to defendants’ incursion as
interlopers of Lot No. 2-R in the sum of ₱50,000.00;
4. Defendants, jointly and severally, to pay plaintiffs in the amount of
₱30,000.00 as attorney’s fees; and,
5. to pay the costs of the proceedings.
Defendants’ counterclaim against plaintiffs is dismissed for lack of merit and with no
cause of action.
Defendants’ third-party complaint against third-party defendant Vergonville Realty
and Investments Corporation is likewise ordered dismissed for lack of cause of action
and evidently without merit.
On the other hand, defendants, jointly and severally, are liable for the litigation
expenses incurred by Vergonville Realty by way of counterclaim, which is also proven
by the latter with a mere preponderance of evidence, and are hereby ordered to pay the
63
sum of ₱20,000.00 as compensatory damage; and attorney’s fees in the sum of
₱10,000.00
SO ORDERED.5
On appeal, the CA affirmed the RTC’s finding that the lot upon which petitioners built
their house was not the one (1) which Vergon sold to them. Based on the documentary
evidence, such as the titles of the two (2) lots, the contracts to sell, and the survey
report made by the geodetic engineer, petitioners’ house was built on the lot of the
respondent-spouses.6 There was no basis to presume that the error was Vergon’s fault.
Also the warranty against eviction under Article 1548 of the Civil Code was not
applicable as there was no deprivation of property: the lot on which petitioners built
their house was not the lot sold to them by Vergon, which remained vacant and ready
for occupation.7 The CA further ruled that petitioners cannot use the defense of
allegedly being a purchaser in good faith for wrongful occupation of land. 8
Aggrieved, petitioners filed a motion for reconsideration, but it was denied by the
appellate court.9 Hence, this petition for review on certiorari.
Petitioners raise the following assignment of errors:
I.
THE COURT OF APPEALS DECIDED A QUESTION OF SUBSTANCE
CONTRARY TO LAW AND APPLICABLE DECISIONS OF THE SUPREME
COURT IN AFFIRMING THE DECISION OF THE TRIAL COURT ORDERING
PETITIONERS TO DEMOLISH THEIR ONLY HOUSE AND VACATE THE LOT
AND TO PAY MORAL AND COMPENSATORY DAMAGES AS WELL AS
ATTORNEY’S FEE IN THE TOTAL AMOUNT OF PS[₱] 110,000; AND
II.
THE COURT OF APPEALS SANCTIONED THE DEPARTURE OF THE LOWER
COURT FROM THE ACCEPTED AND USUAL COURSE OF JUDICIAL
PROCEEDINGS AS TO CALL FOR AN EXERCISE OF THE POWER OF
SUPERVISION.10
In the main, it is petitioners’ position that they must not bear the damage alone.
Petitioners insist that they relied with full faith and confidence in the reputation of
Vergon’s agents when they pointed the wrong property to them. Even the President of
Vergon, Felix Gonzales, consented to the construction of the house when he signed the
building permit.11 Also, petitioners are builders in good faith.12
The petition is partly meritorious.
At the outset, we note that petitioners raise factual issues, which are beyond the scope
of a petition for review on certiorari under Rule 45 of the Rules. Well settled is the rule
that the jurisdiction of this Court in cases brought to it from the CA via a petition for
review on certiorari under Rule 45 is limited to the review of errors of law. The Court
is not bound to weigh all over again the evidence adduced by the parties, particularly
where the findings of both the trial court and the appellate court coincide. The
resolution of factual issues is a function of the trial court whose findings on these
matters are, as a general rule, binding on this Court, more so where these have been
affirmed by the CA.13 We note that the CA and RTC did not overlook or fail to
appreciate any material circumstance which, when properly considered, would have
altered the result of the case. Indeed, it is beyond cavil that petitioners mistakenly
constructed their house on Lot No. 2-R which they thought was Lot No. 2-S.
However, the conclusiveness of the factual findings notwithstanding, we find that the
trial court nonetheless erred in outrightly ordering petitioners to vacate the subject
property or to pay respondent spouses the prevailing price of the land as compensation.
Article 52714 of the Civil Code presumes good faith, and since no proof exists to show
that the mistake was done by petitioners in bad faith, the latter should be presumed to
have built the house in good faith.
When a person builds in good faith on the land of another, Article 448 of the Civil
Code governs. Said article provides,
ART. 448. The owner of the land on which anything has been built, sown or planted in
good faith, shall have the right to appropriate as his own the works, sowing or
planting, after payment of the indemnity provided for in Articles 546 and 548, or to
oblige the one who built or planted to pay the price of the land, and the one who
sowed, the proper rent. However, the builder or planter cannot be obliged to buy the
land if its value is considerably more than that of the building or trees. In such case, he
shall pay reasonable rent, if the owner of the land does not choose to appropriate the
64
building or trees after proper indemnity. The parties shall agree upon the terms of the
lease and in case of disagreement, the court shall fix the terms thereof. (Emphasis
ours.)
The above-cited article covers cases in which the builders, sowers or planters believe
themselves to be owners of the land or, at least, to have a claim of title thereto. 15 The
builder in good faith can compel the landowner to make a choice between
appropriating the building by paying the proper indemnity or obliging the builder to
pay the price of the land. The choice belongs to the owner of the land, a rule that
accords with the principle of accession, i.e., that the accessory follows the principal
and not the other way around. However, even as the option lies with the landowner,
the grant to him, nevertheless, is preclusive. He must choose one. 16 He cannot, for
instance, compel the owner of the building to remove the building from the land
without first exercising either option. It is only if the owner chooses to sell his land,
and the builder or planter fails to purchase it where its value is not more than the value
of the improvements, that the owner may remove the improvements from the land. The
owner is entitled to such remotion only when, after having chosen to sell his land, the
other party fails to pay for the same.17
Moreover, petitioners have the right to be indemnified for the necessary and useful
expenses they may have made on the subject property. Articles 546 and 548 of
the Civil Code provide,
ART. 546. Necessary expenses shall be refunded to every possessor; but only the
possessor in good faith may retain the thing until he has been reimbursed therefor.
Useful expenses shall be refunded only to the possessor in good faith with the same
right of retention, the person who has defeated him in the possession having the option
of refunding the amount of the expenses or of paying the increase in value which the
thing may have acquired by reason thereof.
ART. 548. Expenses for pure luxury or mere pleasure shall not be refunded to the
possessor in good faith; but he may remove the ornaments with which he has
embellished the principal thing if it suffers no injury thereby, and if his successor in
the possession does not prefer to refund the amount expended.
Consequently, the respondent-spouses have the option to appropriate the house on the
subject land after payment to petitioners of the appropriate indemnity or to oblige
petitioners to pay the price of the land, unless its value is considerably more than the
value of the structures, in which case petitioners shall pay reasonable rent.
In accordance with Depra v. Dumlao,18 this case must be remanded to the RTC which
shall conduct the appropriate proceedings to assess the respective values of the
improvement and of the land, as well as the amounts of reasonable rentals and
indemnity, fix the terms of the lease if the parties so agree, and to determine other
matters necessary for the proper application of Article 448, in relation to Articles 546
and 548, of the Civil Code.
As to the liability of Vergon, petitioners failed to present sufficient evidence to show
negligence on Vergon’s part. Petitioners’ claim is obviously one (1) for tort, governed
by Article 2176 of the Civil Code, which provides:
ART. 2176. Whoever by act or omission causes damage to another, there being fault or
negligence, is obliged to pay for the damage done. Such fault or negligence, if there is
no preexisting contractual relation between the parties, is called a quasi-delict and is
governed by the provisions of this Chapter. (Emphasis ours.)
Under this provision, it is the plaintiff who has to prove by a preponderance of
evidence: (1) the damages suffered by the plaintiff; (2) the fault or negligence of the
defendant or some other person for whose act he must respond; and (3) the connection
of cause and effect between the fault or negligence and the damages incurred.19 This
the petitioners failed to do. The President of Vergon signed the building permit as a
precondition for its approval by the local government, but it did not guarantee that
petitioners were constructing the structure within the metes and bounds of petitioners’
lot. The signature of the President of Vergon on the building permit merely proved that
petitioners were authorized to make constructions within the subdivision project of
Vergon. And while petitioners acted in good faith in building their house on Lot No. 2-
R, petitioners did not show by what authority the agents or employees of Vergon were
acting when they pointed to the lot where the construction was made nor was
petitioners’ claim on this matter corroborated by sufficient evidence.
One (1) last note on the award of damages. Considering that petitioners acted in good
faith in building their house on the subject property of the respondent-spouses, there is
no basis for the award of moral damages to respondent-spouses. Likewise, the Court
65
deletes the award to Vergon of compensatory damages and attorney’s fees for the
litigation expenses Vergon had incurred as such amounts were not specifically prayed
for in its Answer to petitioners’ third-party complaint. Under Article 220820 of
the Civil Code, attorney’s fees and expenses of litigation are recoverable only in the
concept of actual damages, not as moral damages nor judicial costs. Hence, such must
be specifically prayed for—as was not done in this case—and may not be deemed
incorporated within a general prayer for "such other relief and remedy as this court
may deem just and equitable."21 It must also be noted that aside from the following, the
body of the trial court’s decision was devoid of any statement regarding attorney’s
fees. In Scott Consultants & Resource Development Corporation, Inc. v. Court of
Appeals,22 we reiterated that attorney’s fees are not to be awarded every time a party
wins a suit. The power of the court to award attorney’s fees under Article 2208 of
the Civil Code demands factual, legal, and equitable justification; its basis cannot be
left to speculation or conjecture. Where granted, the court must explicitly state in the
body of the decision, and not only in the dispositive portion thereof, the legal reason
for the award of attorney’s fees.1avvphi1
WHEREFORE, the Decision dated December 11, 2000 of the Court of Appeals in
CA-G.R. CV No. 48109 is AFFIRMED WITH MODIFICATION. The award of moral
damages in favor of respondent-spouses Jose and Fe Macabagdal and the award of
compensatory damages and attorney’s fees to respondent Vergon Realty Investments
Corporation are DELETED. The case is REMANDED to the Regional Trial Court of
Makati City, Branch 135, for further proceedings consistent with the proper
application of Articles 448, 546 and 548 of the Civil Code, as follows:
1. The trial court shall determine:
a. the present fair price of the respondent-spouses’ lot;
b. the amount of the expenses spent by petitioners for the building of their
house;
c. the increase in value ("plus value") which the said lot may have acquired
by reason thereof; and
d. whether the value of said land is considerably more than that of the house
built thereon.
2. After said amounts shall have been determined by competent evidence, the
Regional Trial Court shall render judgment, as follows:
a. The trial court shall grant the respondent-spouses a period of fifteen (15)
days within which to exercise their option under Article 448 of the Civil
Code, whether to appropriate the house as their own by paying to petitioners
either the amount of the expenses spent by petitioners for the building of the
house, or the increase in value ("plus value") which the said lot may have
acquired by reason thereof, or to oblige petitioners to pay the price of said
land. The amounts to be respectively paid by the respondent-spouses and
petitioners, in accordance with the option thus exercised by written notice of
the other party and to the Court, shall be paid by the obligor within fifteen
(15) days from such notice of the option by tendering the amount to the
Court in favor of the party entitled to receive it;
b. The trial court shall further order that if the respondent-spouses exercises
the option to oblige petitioners to pay the price of the land but the latter
rejects such purchase because, as found by the trial court, the value of the
land is considerably more than that of the house, petitioners shall give
written notice of such rejection to the respondent-spouses and to the Court
within fifteen (15) days from notice of the respondent-spouses’ option to
sell the land. In that event, the parties shall be given a period of fifteen (15)
days from such notice of rejection within which to agree upon the terms of
the lease, and give the Court formal written notice of such agreement and its
provisos. If no agreement is reached by the parties, the trial court, within
fifteen (15) days from and after the termination of the said period fixed for
negotiation, shall then fix the terms of the lease, payable within the first five
(5) days of each calendar month. The period for the forced lease shall not be
more than two (2) years, counted from the finality of the judgment,
considering the long period of time since petitioners have occupied the
subject area. The rental thus fixed shall be increased by ten percent (10%)
for the second year of the forced lease. Petitioners shall not make any
further constructions or improvements on the house. Upon expiration of the
two (2)-year period, or upon default by petitioners in the payment of rentals
for two (2) consecutive months, the respondent-spouses shall be entitled to
terminate the forced lease, to recover their land, and to have the house
removed by petitioners or at the latter’s expense. The rentals herein
provided shall be tendered by petitioners to the Court for payment to the
66
 respondent-spouses, and such tender shall constitute evidence of whether or
not compliance was made within the period fixed by the Court.
c. In any event, petitioners shall pay the respondent-spouses reasonable
compensation for the occupancy of the respondent-spouses’ land for the
period counted from the year petitioners occupied the subject area, up to the
commencement date of the forced lease referred to in the preceding
paragraph;
d. The periods to be fixed by the trial court in its Decision shall be
inextendible, and upon failure of the party obliged to tender to the trial court
the amount due to the obligee, the party entitled to such payment shall be
entitled to an order of execution for the enforcement of payment of the
amount due and for compliance with such other acts as may be required by
the prestation due the obligee.
No costs. SO ORDERED.
G.R. Nos. 154391-92 September 30, 2004
Spouses ISMAEL and TERESITA MACASAET, petitioners,
vs.
Spouses VICENTE and ROSARIO MACASAET, respondents.
The present case involves a dispute between parents and children. The children were
invited by the parents to occupy the latter’s two lots, out of parental love and a desire
to foster family solidarity. Unfortunately, an unresolved conflict terminated this
situation. Out of pique, the parents asked them to vacate the premises. Thus, the
children lost their right to remain on the property. They have the right, however, to be
indemnified for the useful improvements that they constructed thereon in good faith
and with the consent of the parents. In short, Article 448 of the Civil Code applies.
The Case
Before us is a Petition for Review1 under Rule 45 of the Rules of Court, assailing the
March 22, 2002 Decision2 and the June 26, 2002 Resolution3 of the Court of Appeals
(CA) in CA-GR SP Nos. 56205 & 56467. The challenged Decision disposed as
follows:
"WHEREFORE, the assailed Decision is AFFIRMED with the following
MODIFICATIONS:
‘1. Vicente and Rosario should reimburse Ismael and Teresita one-
half of the value of the useful improvements introduced in the
premises prior to demand, which is equivalent to ₱475,000.00. In
case the former refuse to reimburse the said amount, the latter may
remove the improvements, even though the land may suffer damage
thereby. They shall not, however, cause any more impairment upon
the property leased than is necessary.
‘2. The award of attorney’s fees is DELETED.
‘3. The records of these consolidated cases are REMANDED to the
Court of origin for further proceedings to determine the option to be
taken by Vicente and Rosario and to implement the same with
dispatch."4
The assailed Resolution denied petitioners’ Motion for Reconsideration.
The Facts
Petitioners Ismael and Teresita5 Macasaet and Respondents Vicente and Rosario
Macasaet are first-degree relatives. Ismael is the son of respondents, and Teresita is his
wife.6
On December 10, 1997, the parents filed with the Municipal Trial Court in Cities
(MTCC) of Lipa City an ejectment suit against the children. 7 Respondents alleged that
they were the owners of two (2) parcels of land covered by Transfer Certificate of Title
(TCT) Nos. T-78521 and T-103141, situated at Banay-banay, Lipa City; that by way
of a verbal lease agreement, Ismael and Teresita occupied these lots in March 1992
and used them as their residence and the situs of their construction business; and that
despite repeated demands, petitioners failed to pay the agreed rental of ₱500 per
week.8
67
Ismael and Teresita denied the existence of any verbal lease agreement. They claimed
that respondents had invited them to construct their residence and business on the
subject lots in order that they could all live near one other, employ Marivic (the sister
of Ismael), and help in resolving the problems of the family. 9 They added that it was
the policy of respondents to allot the land they owned as an advance grant of
inheritance in favor of their children. Thus, they contended that the lot covered by
TCT No. T-103141 had been allotted to Ismael as advance inheritance. On the other
hand, the lot covered by TCT No. T-78521 was allegedly given to petitioners as
payment for construction materials used in the renovation of respondents’ house. 10
The MTCC11 ruled in favor of respondents and ordered petitioners to vacate the
premises. It opined that Ismael and Teresita had occupied the lots, not by virtue of a
verbal lease agreement, but by tolerance of Vicente and Rosario.12As their stay was by
mere tolerance, petitioners were necessarily bound by an implied promise to vacate the
lots upon demand.13 The MTCC dismissed their contention that one lot had been
allotted as an advance inheritance, on the ground that successional rights were
inchoate. Moreover, it disbelieved petitioners’ allegation that the other parcel had been
given as payment for construction materials.14
On appeal, the regional trial court15 (RTC) upheld the findings of the MTCC.
However, the RTC allowed respondents to appropriate the building and other
improvements introduced by petitioners, after payment of the indemnity provided for
by Article 448 in relation to Articles 546 and 548 of the Civil Code. 16 It added that
respondents could oblige petitioners to purchase the land, unless its value was
considerably more than the building. In the latter situation, petitioners should pay rent
if respondents would not choose to appropriate the building. 17
Upon denial of their individual Motions for Reconsideration, the parties filed with the
CA separate Petitions for Review, which were later consolidated. 18
Ruling of the Court of Appeals
The CA sustained the finding of the two lower courts that Ismael and Teresita had
been occupying the subject lots only by the tolerance of Vicente and Rosario. 19 Thus,
possession of the subject lots by petitioners became illegal upon their receipt of
respondents’ letter to vacate it.20
Citing Calubayan v. Pascual,21 the CA further ruled that petitioners’ status was
analogous to that of a lessee or a tenant whose term of lease had expired, but whose
occupancy continued by tolerance of the owner. 22Consequently, in ascertaining the
right of petitioners to be reimbursed for the improvements they had introduced on
respondents’ properties,23 the appellate court applied the Civil Code’s provisions on
lease. The CA modified the RTC Decision by declaring that Article 448 of the Civil
Code was inapplicable. The CA opined that under Article 1678 of the same Code,
Ismael and Teresita had the right to be reimbursed for one half of the value of the
improvements made.24
Not satisfied with the CA’s ruling, petitioners brought this recourse to this Court. 25
The Issues
Petitioners raise the following issues for our consideration:
"1. a) Whether or not Section 17[,] Rule 70 of the Rules of Court on
Judgment should apply in the rendition of the decision in this case;
b) Whether or not the Complaint should have been dismissed;
c) Whether or not damages including attorney’s fees should have
been awarded to herein petitioners;
"2. a) Whether or not the rule on appearance of parties during the Pretrial
should apply on appearance of parties during Preliminary Conference in an
unlawful detainer suit;
b) Whether or not the case of Philippine Pryce Assurance
Corporation vs. Court of Appeals (230 SCRA 164) is applicable to
appearance of parties in an unlawful detainer suit;
"3. Whether or not Article 1678 of the Civil Code should apply to the case on
the matters of improvements, or is it Article 447 of the Civil Code in relation
to the Article 453 and 454 thereof that should apply, if ever to apply the Civil
Code;
68
 "4. Whether or not the [D]ecision of the Court of Appeals is supported by
evidence, appropriate laws, rules and jurisprudence;
"5. Whether or not Assisting Judge Norberto Mercado of the MTCC Lipa
City should be held accountable in rendering the MTCC [D]ecision;
"6. Whether or not Atty. Glenn Mendoza and Atty. Andrew Linatoc of the
same [l]aw office should be held accountable for pursuing the [e]jectment
case[.]"26
The Court’s Ruling
The Petition is partly meritorious.
First Issue:
Ejectment
Who is entitled to the physical or material possession of the premises? At the outset,
we stress that this is the main issue in ejectment proceedings.27 In the present case,
petitioners failed to justify their right to retain possession of the subject lots, which
respondents own. Since possession is one of the attributes of ownership, 28 respondents
clearly are entitled to physical or material possession.
Allegations of the Complaint
Petitioners allege that they cannot be ejected from the lots, because respondents based
their Complaint regarding the nonpayment of rentals on a verbal lease agreement,
which the latter failed to prove.29 Petitioners contend that the lower courts erred in
using another ground (tolerance of possession) to eject them.
In actions for unlawful detainer, possession that was originally lawful becomes
unlawful upon the expiration or termination of the defendant’s right to possess, arising
from an express or implied contract.30 In other words, the plaintiff’s cause of action
comes from the expiration or termination of the defendant’s right to continue
possession.31The case resulting therefrom must be filed within one year from the date
of the last demand.
To show a cause of action in an unlawful detainer, an allegation that the defendant is
illegally withholding possession from the plaintiff is sufficient. The complaint may lie
even if it does not employ the terminology of the law, provided the said pleading is
couched in a language adequately stating that the withholding of possession or the
refusal to vacate has become unlawful.32 It is equally settled that the jurisdiction of the
court, as well as the nature of the action, is determined from the averments of the
complaint.33
In the present case, the Complaint alleged that despite demands, petitioners "refused to
pay the accrued rentals and [to] vacate the leased premises." 34 It prayed that judgment
be rendered "[o]rdering [petitioners] and all those claiming rights under them to vacate
the properties x x x and remove the structures x x x constructed thereon." 35Effectively
then, respondents averred that petitioners’ original lawful occupation of the subject
lots had become unlawful.
The MTCC found sufficient cause to eject petitioners. While it disbelieved the
existence of a verbal lease agreement, it nevertheless concluded that petitioners’
occupation of the subject lots was by mere tolerance of respondents. Basing its
conclusion on the fact that the parties were close relatives, the MTCC ruled thus:
"x x x [T]he parties herein are first degree relatives. Because of this
relationship, this Court takes judicial notice of the love, care, concern and
protection imbued upon the parents towards their [children], i.e., in the instant
case, the love, care, concern and protection of the [respondents] to the
[petitioners]. With this in mind, this Court is inclined to believe the position
of the [petitioners] that there was no such verbal lease agreement between the
parties herein that took place in 1992. x x x.
"From the allegations of the [petitioners], this Court is convinced that their
stay and occupancy of the subject premises was by mere tolerance of the
[respondents], and not by virtue of a verbal lease agreement between them." 36
Having found a cause of action for unlawful detainer, the MTCC (as well as the RTC
and the CA) did not err in ordering the ejectment of petitioners as prayed for by
respondents. There was no violation of Section 17 of Rule 7037 of the Rules of Court.
As earlier explained, unlawful detainer was sufficiently alleged in the Complaint and
duly proven during the trial. Significantly, the issue of whether there was enough
ground to eject petitioners was raised during the preliminary conference.38
69
 Not Merely Tolerated
Possession
Petitioners dispute the lower courts’ finding that they occupied the subject lots on the
basis of mere tolerance. They argue that their occupation was not under such
condition, since respondents had invited, offered and persuaded them to use those
properties.39
This Court has consistently held that those who occupy the land of another at the
latter’s tolerance or permission, without any contract between them, are necessarily
bound by an implied promise that the occupants will vacate the property upon
demand.40 A summary action for ejectment is the proper remedy to enforce this
implied obligation.41The unlawful deprivation or withholding of possession is to be
counted from the date of the demand to vacate.42
Toleration is defined as "the act or practice of permitting or enduring something not
wholly approved of."43 Sarona v. Villegas44 described what tolerated acts means, in
this language:
"Professor Arturo M. Tolentino states that acts merely tolerated are ‘those
which by reason of neighborliness or familiarity, the owner of property
allows his neighbor or another person to do on the property; they are
generally those particular services or benefits which one’s property can give
to another without material injury or prejudice to the owner, who permits
them out of friendship or courtesy.’ x x x. And, Tolentino continues, even
though ‘this is continued for a long time, no right will be acquired by
prescription." x x x. Further expounding on the concept, Tolentino writes:
‘There is tacit consent of the possessor to the acts which are merely tolerated.
Thus, not every case of knowledge and silence on the part of the possessor
can be considered mere tolerance. By virtue of tolerance that is considered as
an authorization, permission or license, acts of possession are realized or
performed. The question reduces itself to the existence or non-existence of the
permission."45
We hold that the facts of the present case rule out the finding of possession by mere
tolerance. Petitioners were able to establish that respondents had invited them to
occupy the subject lots in order that they could all live near one other and help in
resolving family problems.46 By occupying those lots, petitioners demonstrated their
acceptance of the invitation. Hence, there was a meeting of minds, and an agreement
regarding possession of the lots impliedly arose between the parties.
The occupancy of the subject lots by petitioners was not merely "something not wholly
approved of" by respondents. Neither did it arise from what Tolentino refers to as
"neighborliness or familiarity." In point of fact, their possession was upon the
invitation of and with the complete approval of respondents, who desired that their
children would occupy the premises. It arose from familial love and a desire for family
solidarity, which are basic Filipino traits.
Right to Use the Lots Terminated
That Ismael and Teresita had a right to occupy the lots is therefore clear. The issue is
the duration of possession. In the absence of a stipulation on this point, Article 1197 of
the Civil Code allows the courts to fix the duration or the period.
"Article 1197. If the obligation does not fix a period, but from its nature and
the circumstances it can be inferred that a period was intended, the courts may
fix the duration thereof.
"The courts shall also fix the duration of the period when it depends upon the
will of the debtor.
"In every case the courts shall determine such period as may under the
circumstances have been probably contemplated by the parties. Once fixed by
the courts, the period cannot be changed by them."
Article 1197, however, applies to a situation in which the parties intended a period.
Such qualification cannot be inferred from the facts of the present case.
To repeat, when Vicente and Rosario invited their children to use the lots, they did so
out of parental love and a desire for solidarity expected from Filipino parents. No
period was intended by the parties. Their mere failure to fix the duration of their
agreement does not necessarily justify or authorize the courts to do so. 47
70
Based on respondents’ reasons for gratuitously allowing petitioners to use the lots, it
can be safely concluded that the agreement subsisted as long as the parents and the
children mutually benefited from the arrangement. Effectively, there is a resolutory
condition in such an agreement.48 Thus, when a change in the condition existing
between the parties occurs -- like a change of ownership, necessity, death of either
party or unresolved conflict or animosity -- the agreement may be deemed terminated.
Having been based on parental love, the agreement would end upon the dissipation of
the affection.
When persistent conflict and animosity overtook the love and solidarity between the
parents and the children, the purpose of the agreement ceased. 49 Thus, petitioners no
longer had any cause for continued possession of the lots. Their right to use the
properties became untenable. It ceased upon their receipt of the notice to vacate. And
because they refused to heed the demand, ejectment was the proper remedy against
them. Their possession, which was originally lawful, became unlawful when the
reason therefor -- love and solidarity -- ceased to exist between them.
No Right to Retain
Possession
Petitioners have not given this Court adequate reasons to reverse the lower courts’
dismissal of their contention that Lots T-78521 and T-103141, respectively, were
allegedly allotted to them as part of their inheritance and given in consideration for
past debts.
The right of petitioners to inherit from their parents is merely inchoate and is vested
only upon the latters’ demise. Indisputably, rights of succession are transmitted only
from the moment of death of the decedent.50 Assuming that there was an "allotment"
of inheritance, ownership nonetheless remained with respondents. Moreover, an
intention to confer title to certain persons in the future is not inconsistent with the
owners’ taking back possession in the meantime for any reason deemed
sufficient.51 Other than their self-serving testimonies and their affidavits, petitioners
offered no credible evidence to support their outlandish claim of inheritance
"allocation."
We also agree with the lower courts that petitioners failed to prove the allegation that,
through a dation in payment, Lot T-78521 had been transferred to the latter as payment
for respondents’ debts.52 The evidence presented by petitioners related only to the
alleged indebtedness of the parents arising from the latter’s purported purchases and
advances.53 There was no sufficient proof that respondents had entered into a contract
of dation to settle the alleged debt. Petitioners even stated that there was a
disagreement in the accounting of the purported debt,54 a fact that disproves a meeting
of the minds with the parents.
Petitioners also admitted that a portion of the alleged debt is the subject matter of a
collection case against respondents (Civil Case No. 0594-96).55 Thus, the former’s
allegation that the indebtedness has been paid through a dation cannot be given
credence, inconsistent as it is with their action to recover the same debt.
Despite their protestations, petitioners recognized the right of the parents to recover the
premises when they admitted in their Position Paper filed with the MTCC that
respondents had a title to the lots.
"The [respondents] want to get their property because the title is theirs, the
[petitioners] do not object but what is due the [petitioners] including the
reparation for the tarnish of their dignity and honor must be given the
[petitioners] for the benefits of their children before the premises will be
turned over."56
As a rule, the right of ownership carries with it the right of possession.
Second Issue:
Appearance at the Preliminary Conference
Section 8 of Rule 70 of the Rules of Court requires the appearance of the plaintiff and
the defendant during the preliminary conference. On the basis of this provision,
petitioners claim that the MTCC should have dismissed the case upon the failure of
respondents to attend the conference. However, petitioners do not dispute that an
attorney-in-fact with a written authorization from respondents appeared during the
preliminary conference.57 The issue then is whether the rules on ejectment allow a
representative to substitute for a party’s personal appearance.
71
Unless inconsistent with Rule 70, the provisions of Rule 18 on pretrial applies to the
preliminary conference.58Under Section 4 of this Rule, the nonappearance of a party
may be excused by the showing of a valid cause; or by the appearance of a
representative, who has been fully authorized in writing to enter into an amicable
settlement, to submit to alternative modes of dispute resolution, and to enter into
stipulations or admissions of facts and of documents.59
Section 4 of Rule 18 may supplement Section 8 of Rule 70. Thus, the spirit behind the
exception to personal appearance under the rules on pretrial is applicable to the
preliminary conference. If there are valid reasons or if a representative has a "special
authority," a party’s appearance may be waived. As petitioners are challenging only
the applicability of the rules on pretrial to the rule on preliminary conference, the
written authorization from respondents can indeed be readily considered as a "special
authorization."
Third Issue:
Rights of a Builder in Good Faith
As applied to the present case, accession refers to the right of the owner to everything
that is incorporated or attached to the property.60 Accession industrial -- building,
planting and sowing on an immovable -- is governed by Articles 445 to 456 of the
Civil Code.
Articles 447 and 1678 of the
Civil Code Inapplicable
To buttress their claim of reimbursement for the improvements introduced on the
property, petitioners cite Article 447.61 They allege that the CA erred in applying
Article 1678, since they had no lease agreement with respondents.
We clarify. Article 447 is not applicable, because it relates to the rules that apply when
the owner of the property uses the materials of another. It does not refer to the instance
when a possessor builds on the property of another, which is the factual milieu here.
In view of the unique factual setting of the instant case, the contention of petitioners
regarding the inapplicability of Article 1678 deserves attention. The CA applied the
provisions on lease, because it found their possession by mere tolerance comparable
with that of a lessee, per the pronouncement in Calubayan v. Pascual, 62 from which we
quote:
"x x x. It has been held that a person who occupies the land of another at the
latter’s tolerance or permission, without any contract between them, is
necessarily bound by an implied promise that he will vacate upon demand,
failing which a summary action for ejectment is the proper remedy against
them. The status of defendant is analogous to that of a lessee or tenant whose
term of lease has expired but whose occupancy continued by tolerance of the
owner. In such a case, the unlawful deprivation or withholding of possession
is to be counted from the date of the demand to vacate." 63 (Emphasis in the
original.)
As explained earlier, Ismael and Teresita’s possession of the two lots was not by mere
tolerance, a circumstance that negates the applicability of Calubayan.
Article 448 Applicable
On the other hand, when a person builds in good faith on the land of another, the
applicable provision is Article 448, which reads:64
"Article 448. The owner of the land on which anything has been built, sown
or planted in good faith, shall have the right to appropriate as his own the
works, sowing or planting, after payment of the indemnity provided for in
Articles 546 and 548, or to oblige the one who built or planted to pay the
price of the land, and the one who sowed, the proper rent. However, the
builder or planter cannot be obliged to buy the land if its value is considerably
more than that of the building or trees. In such case, he shall pay reasonable
rent, if the owner of the land does not choose to appropriate the building or
trees after proper indemnity. The parties shall agree upon the terms of the
lease and in case of disagreement, the court shall fix the terms thereof."
This Court has ruled that this provision covers only cases in which the builders, sowers
or planters believe themselves to be owners of the land or, at least, to have a claim of
72
title thereto.65 It does not apply when the interest is merely that of a holder, such as a
mere tenant, agent or usufructuary.66 From these pronouncements, good faith is
identified by the belief that the land is owned; or that -- by some title -- one has the
right to build, plant, or sow thereon.67
However, in some special cases, this Court has used Article 448 by recognizing good
faith beyond this limited definition. Thus, in Del Campo v. Abesia,68 this provision
was applied to one whose house -- despite having been built at the time he was still co-
owner -- overlapped with the land of another.69 This article was also applied to cases
wherein a builder had constructed improvements with the consent of the owner. The
Court ruled that the law deemed the builder to be in good faith. 70 In Sarmiento v.
Agana,71 the builders were found to be in good faith despite their reliance on the
consent of another, whom they had mistakenly believed to be the owner of the land.72
Based on the aforecited special cases, Article 448 applies to the present factual milieu.
The established facts of this case show that respondents fully consented to the
improvements introduced by petitioners. In fact, because the children occupied the lots
upon their invitation, the parents certainly knew and approved of the construction of
the improvements introduced thereon.73 Thus, petitioners may be deemed to have been
in good faith when they built the structures on those lots.
The instant case is factually similar to Javier v. Javier.74 In that case, this Court
deemed the son to be in good faith for building the improvement (the house) with the
knowledge and consent of his father, to whom belonged the land upon which it was
built. Thus, Article 44875 was applied.
Rule on Useful Expenses
The structures built by petitioners were "useful" improvements, because they
augmented the value or income of the bare lots.76 Thus, the indemnity to be paid by
respondents under Article 448 is provided for by Article 546, which we quote:
"Art. 546. Necessary expenses shall be refunded to every possessor; but only
the possessor in good faith may retain the thing until he has been reimbursed
therefor.
"Useful expenses shall be refunded only to the possessor in good faith with
the same right of retention, the person who has defeated him in the possession
having the option of refunding the amount of the expenses or of paying the
increase in value which the thing may have acquired by reason thereof."
Consequently, respondents have the right to appropriate -- as their own -- the building
and other improvements on the subject lots, but only after (1) refunding the expenses
of petitioners or (2) paying the increase in value acquired by the properties by reason
thereof. They have the option to oblige petitioners to pay the price of the land, unless
its value is considerably more than that of the structures -- in which case, petitioners
shall pay reasonable rent.
In accordance with Depra v. Dumlao,77 this case must be remanded to the trial court to
determine matters necessary for the proper application of Article 448 in relation to
Article 546. Such matters include the option that respondents would take and the
amount of indemnity that they would pay, should they decide to appropriate the
improvements on the lots. We disagree with the CA’s computation of useful expenses,
which were based only on petitioners’ bare allegations in their Answer. 78
Ruling on Improvement Justified
While, ordinarily, the jurisdiction of the MTCC on ejectment proceedings is limited to
the issue of physical or material possession of the property in question, this Court finds
it necessary to abbreviate the issue on the improvements in relation to Article 448.
First, the determination of the parties’ right to those improvements is intimately
connected with the MTCC proceedings in the light of the ejectment of petitioners.
Second, there is no dispute that while they constructed the improvements, respondents
owned the land. Third, both parties raised no objection when the RTC and the CA
ruled accordingly on this matter.
Equitable considerations compel us to settle this point immediately, pro hoc vice, to
avoid needless delay. Both parties have already been heard on this issue; to dillydally
or equivocate would not serve the cause of substantial justice.
Other Issues Raised
73
Given the foregoing rulings, it is no longer necessary to address petitioners’ allegation
that the MTCC judge and respondents’ lawyers should be respectively held personally
accountable for the Decision and for filing the case.79The insinuation of petitioners that
the lawyers manipulated the issuance of a false barangay certification is
unavailing.80 Their contention that respondents did not attend the barangay conciliation
proceedings was based solely on hearsay, which has little or no probative value. 81
WHEREFORE, the assailed Decision and Resolution of the Court of Appeals
are AFFIRMED with the following MODIFICATIONS:
1. The portion requiring Spouses Vicente and Rosario Macasaet to reimburse
one half of the value of the useful improvements, amounting to ₱475,000, and
the right of Spouses Ismael and Rosita Macasaet to remove those
improvements (if the former refuses to reimburse) is DELETED.
2. The case is REMANDED to the court of origin for further proceedings to
determine the facts essential to the proper application of Articles 448 and 546
of the Civil Code, specifically to the following matters:
a. Spouses Vicente and Rosario Macasaet’s option to appropriate --
as their own -- the improvements on the lots, after paying the
indemnity, as provided under Article 546 in relation to Article 448 of
the Civil Code; or in requiring Spouses Ismael and Rosita Macasaet
to pay for the value of the lots, unless it is considerably more than
that of the improvements, in which case petitioners shall pay
reasonable rent based upon the terms provided under the Civil Code
b. The value of the useful expenses incurred by Spouses Ismael and
Rosita Macasaet in the construction of the improvements on the lots
c. The increase in value acquired by the lots by reason of the useful
improvements
d. Spouses Vicente and Rosario Macasaet’s choice of type of
indemnity to be paid (whether b or c)
e. Whether the value of the lots is considerably more than that of the
improvements built thereon
No pronouncement as to costs. SO ORDERED.
G.R. No. 182754 June 29, 2015
SPOUSES CRISPIN AQUINO and TERESA V. AQUINO, herein represented by
their Attorney-in-Fact, AMADOR D. LEDESMA, Petitioners,
vs.
SPOUSES EUSEBIO AGUILAR and JOSEFINA V. AGUILAR, Respondents.
In this Petition for Review on Certiorari1 filed under Rule 45 of the Rules of Court,
Petitioner spouses Crispin and Teresa Aquino (petitioners) assail the Court of Appeals
(CA) Decision dated 25 April 20082 in CA-GR SP No. 92778. The CA modified the
Decisions of both the Metropolitan Trial Court (MeTC) and the Regional Trial Court
(RTC). The CA ruled that although respondent spouses Eusebio and Josefina Aguilar
(respondents) cannot be considered builders in good faith, they should still be
reimbursed for the improvements they have introduced on petitioners' property. 3
THE FACTS
Teresa Vela Aquino (Teresa) and her husband, Crispin Aquino, are the owners of a
house and lot located at No. 6948, Rosal Street, Guadalupe
Since 1981, this property has been occupied by Teresa's sister, Josefina Vela Aguilar;
Josefina's spouse Eusebio; and their family.5 It appears from the record that
respondents stayed on the property with the consent and approval of petitioners, who
were then residing in the United States.6
While respondents were in possession of the property, the house previously
constructed therein was demolished, and a three-storey building built in its
place.7 Respondents occupied half of the third floor of this new building)for the next
20 years without payment of rental.8
On 22 September 2003, petitioners sent a letter to respondents informing them that an
immediate family member needed to use the premises and demanding the surrender of
74
the property within 10 days from notice.9 Respondents failed to heed this demand,
prompting petitioners to file a Complaint for ejectment against them before the office
of the barangay captain of Guadalupe Viejo.10 The parties attempted to reach an
amicable settlement in accordance with Section 412 of the Local Government Code,
but these efforts proved unsuccessful.11
On 19 November 2003, petitioner spouses Aquino filed a Complaint 12 with the MeTC
of Makati City praying that respondents be ordered to (a) vacate the portion of the
building they were then occupying; and (b) pay petitioner a reasonable amount for the
use and enjoyment of the premises from the time the formal demand to vacate was
made.13
14
In their Answer with Counterclaim, respondents claimed that they had contributed to
the improvement of the property and the construction of the building, both in terms of
money and management/supervision services. Petitioners purportedly agreed to let
them contribute to the costs of construction in exchange for the exclusive use of a
portion of the building. Respondents averred:
2.3 That the construction of the three (3) storey building was also at the
uncompensated supervision of defendant Eusebio Aguilar, of which only r 2
Million was spent by plaintiffs while defendants spent around r 1 Million as
contribution to the construction cost. It was defendants who introduced
improvements on subject lot because at the time plaintiffs bought the property
it was marshy which was filled up by defendants (sic) truck load with
builders, adobe and scumbro that elevated the ground;
2.4 The original agreement was for my client to contribute his share so that
they will have the portion of the subject building for their own exclusive use.
It turned out later that the agreement they had was disowned by plaintiffs
when they saw the totality of the building constructed thereon coupled by the
fact, that the value of the lot has tremendously appreciated due to the
commercialization of the vicinity which will command higher price and
windfall profits should plaintiffs sell the property which they are now
contemplating on (sic);
2.5 The portion which plaintiffs want defendants to vacate is a portion which
the latter built with their own money upon your clients agreement and consent
whom they built in good faith knowing and hoping that later on the same will
be theirs exclusively. It was never an act of generosity, liberality and
tolerance. Conversely, it was one of the implied co-ownership or partnership,
because aside from the fact that defendants, who were then peacefully
residing in Laguna, made unquantifiable contributions in terms of money and
services arising from his uncompensated management and supervision over
the entire subject property while plaintiffs are abroad. By legal implications
he is an industrial partner responsible for the development and improvements
of the subject property. His contribution was never without the consent of
plaintiffs. Whatever contribution defendants introduced over the said property
was made and built in good faith;15
Since they were allegedly co-owners of the building and builders in good faith,
respondents claimed that they had the right to be compensated for the current value of
their contribution.16 Accordingly, they prayed for the dismissal of the Complaint and
the award of ₱5 million as compensation for their contributions to the construction of
the building, as well as moral damages, attorney's fees and costs of litigation. 17
THE RULING OF THE METC
In a Decision18 dated 12 November 2004, the MeTC ruled in favor of petitioners,
stating that they had the right to enjoy possession of the property as the registered
owners thereof.19 Since the case was merely one for ejectment, the court held that it
was no longer proper to resolve respondents' claim of co-ownership over the
building.20
The MeTC also declared that respondents were builders in bad faith who were not
entitled to recover their purported expenses for the construction of the building.21 It
emphasized that their occupation of the property was by mere tolerance of petitioners
and, as such, could be terminated at any time.22 The court further noted that in a letter
dated 15 July 1983, petitioners had already asked respondents to refrain from
constructing improvements on the property because it was intended to be sold. 23
The dispositive portion of the MeTC Decision, which ordered respondents to vacate
the property, reads:
WHEREFORE, premises considered, judgment is hereby rendered ordering defendants
Eusebio & Josefina Aguilar and all persons claiming rights under them to immediately
75
vacate the subject property, and deliver peaceful possession thereof to the plaintiffs.
Defendants are likewise ordered to pay plaintiffs ₱7,000.00 monthly rental
commencing 22 October 2003 until such time that defendant finally vacate the
premises, ₱10,000.00 as and by way of attorney's fees, and the cost of suit. 24
On 14 September 2005, respondents appealed the MeTC's Decision to the RTC. 25
THE RULING OF THE RTC
In their Memorandum on Appeal26 before the R TC, respondents assailed the MeTC's
finding that petitioners, as the registered owners of the land, were also the owners of
the improvement constructed thereon.27 Respondents asserted that they were co-
owners of the building since they built a portion thereof using their own funds, as
evidenced by various receipts they presented before the MeTC. 28
Respondents also maintained that they were builders in good faith. They pointed out
that petitioners never objected to the construction of the improvement on their
property.29 According to respondents, petitioners' letter dated 15 July 1983 was written
at a time when an old dilapidated house was still standing on the
property.30 Subsequently however, the house was demolished and the new building
was constructed thereon by respondents, with petitioners' knowledge and consent. 31
In a Decision32 dated 3 January 2006, the RTC denied the appeal and affirmed the
MeTC's Decision. According to the court, respondents did not become co-owners of
the property although they may have contributed to the construction of the building
thereon.33 Hence, their stay in the premises remained to be by mere tolerance of the
petitioners.34
The RTC also ruled that respondents cannot be considered builders in good faith. 35 The
court found that as early as 1983, petitioners had informed respondents of the intention
to eventually dispose of the property.36 The RTC concluded that petitioners never
consented to the construction of any form of structure on the property. 37 Since
respondents participated in the construction of the building even after they had been
notified that their occupation may be terminated anytime, the R TC ruled that they did
not build the structures in good faith.38 The RTC likewise noted that "the
improvements in question as well as other personal belongings of the appellants were
removed from the premises through a writ of demolition, and these properties are now
in their possession."39
THE RULING OF THE CA
Aggrieved by the RTC Decision, respondents elevated the matter to the CA. They
reiterated that they owned one-half of the third floor of the building on the property,
having spent their own funds for the construction thereof. Respondents also asserted
that because they built that portion in good faith, with no objection from petitioners,
they were entitled to reimbursement of all necessary and useful expenses incurred in
the construction.
On 25 April 2008, the CA affirmed the conclusion of the lower courts that respondents
could not be considered co-owners of the property or builders in good
faith.40 According to the appellate court, respondents were aware that their right to
possess the property had a limitation, because they were not the owners thereof. They
knew that their occupation of the building was by mere tolerance or permission of
petitioners, who were the registered owners of the property. The CA likewise noted
that respondents failed to prove the alleged agreement between the parties with respect
to the ownership of one-half of the third floor of the improvement. There being no
contract between them, respondents are necessarily bound to vacate the property upon
demand.41 The CA ruled:
The Supreme Court has consistently held that those who occupy the land of another at
the latter's tolerance or permission, without any contract between them, are necessarily
bound by an implied promise that the occupants will vacate the property upon demand.
Based on the principles enunciated in Calubayan v. Pascual, the status of petitioners is
analogous to that of a lessee or a tenant whose term of lease has expired but whose
occupancy continued by tolerance of the owner. In such a case, the unlawful
deprivation or withholding of possession is to be reckoned from the date of the
demand to vacate.42 (Citations omitted)
Nevertheless, the CA declared that respondents should be reimbursed for the necessary
and useful expenses they had introduced on petitioners' property, pursuant to Articles
1678 and 548 of the Civil Code.43 The dispositive portion of the CA Decision dated 25
April 200844 reads:
76
WHEREFORE, the assailed Decision is AFFIRMED with the following
MODIFICATIONS:
1. The case is REMANDED to the court of origin for further proceedings to
determine the facts essential to the application of Article 1678 and Article 546
of the Civil Code, specifically on the following matters:
a) To determine the cost of necessary expenses incurred by
petitioners during their period of possession.
b) To determine the cost of useful improvements introduced by
petitioners in the construction of the building.
2. After said amounts shall have been determined by competent evidence:
a) Respondents Aquino are ordered to pay petitioners the costs of
necessary improvements incurred during the period of their
occupation.
b) Petitioners Aguilar are to be reimbursed one half (1/2) of the
amount they expended on the construction of the building should
respondents decided to appropriate the same. Should respondents
refuse to reimburse the costs of the improvements, petitioners may
remove the improvements even though the principal thing may
suffer damage thereby.
c) In both instances, petitioners shall have no right of retention over
the subject premises.
d) In any event, petitioners shall pay respondents the amount of
Php7,000.00 as monthly rental commencing 22 October 2003 until
such time that petitioners finally vacate the premises. No
pronouncement as to costs.
SO ORDERED.45
Respondents no longer appealed the Decision of the CA. This time, petitioners
elevated the matter to this Court through the instant Petition for Review46 under Rule
45 of the Rules of Court.
PROCEEDINGS BEFORE THIS COURT
In their Petition, petitioners allege that the CA seriously erred in remanding the case to
the court of origin for the purpose of ascertaining the right of respondents to be
reimbursed for the improvements introduced on the property. 47 They emphasize that
respondents were builders in bad faith, and, as such, are not entitled to reimbursement
under Articles 449, 450 and 451 of the Civil Code.
In their Comment,48 respondents assert that the CA correctly ruled that their status is
akin to that of a lessee or tenant whose term of lease has expired, but whose occupancy
continues by virtue of the tolerance of the owner. They aver that the CA properly
upheld their entitlement to reimbursement pursuant to Articles 167849 and 54650 of the
Civil Code.51
In their Reply,52 petitioners argue against supposed improvements constructed by
respondents from 1999 to 2003 amounting to ₱995,995.94. Petitioners say this claim is
highly ridiculous and unbelievable.53
OUR RULING
Since respondents no longer appealed the Decision of the CA, 54 they are considered
bound by its findings and conclusions. These include its affirmation of the earlier
findings of the MeTC and the RTC that respondents cannot be considered builders in
good faith:
Both the MeTC and the RTC have rejected the idea that petitioners are builders in
good faith. We agree. The resolution of the issues at bar calls for the application of the
rules on accession under the Civil Code. The term "builder in good faith" as used in
reference to Article 448 of the Civil Code, refers to one who, not being the owner of
the land, builds on that land believing himself to be its owner and unaware of the land,
builds on that land, believing himself to be its owner and unaware of the defect in h is
title or mode of acquisition. The essence of good faith lies in an honest belief in the
77
validity of one's right, ignorance of a superior claim, and absence of intention to
overreach another.
In the instant case, the Spouses Aguilar cannot be considered as builders in good faith
on account of their admission that the subject lot belonged to the Spouses Aquino
when they constructed the building. At the onset, petitioners were aware of a flaw in
their title and a limit to their right to possess the property. By law, one is considered in
good faith if he is not aware that there exists in his title or mode of acquisition any
flaw which invalidates it.55
Respondents are deemed to have acquiesced to the foregoing findings when they failed
to appeal the CA Decision. A party who does not appeal from a judgment can no
longer seek the modification or reversal thereof.56 Accordingly, the only issue left for
this Court to determine is that which is now raised by petitioners - whether the CA
erred in remanding this case to the court of origin for the determination of the
necessary and useful expenses to be reimbursed to respondents pursuant to Articles
1678 and 546 of the Civil Code.
We resolve to PARTLY GRANT the Petition and modify the ruling of the CA.
Article 1678 is not applicable to this case.
In its Decision, the CA found that respondents were occupants of the property by mere
tolerance or generosity of petitioners and were bound by an implied promise to vacate
the premises upon demand.57
Based on this finding, the CA held that "the status of petitioners is analogous to that of
a lessee or a tenant whose term of lease has expired but whose occupancy continued by
tolerance of owner"58 pursuant to this Court's ruling in Calubayan v. Pascual, 59 As a
result, the CA concluded that Articles 1678 and 546 of the Civil Code must be applied
to allow respondents to be reimbursed for their necessary and useful expenses.
We disagree. By its express provision, Article 1678 of the Civil Code applies only to
lessees who build useful improvements on the leased property. It does not apply to
those who possess property by mere tolerance of the owners, without a contractual
right.
A careful reading of the statement made by this Court in Calubayan would show that it
did not, as it could not, modify the express provision in Article 1678, but only noted an
"analogous" situation. According to the Court, the analogy between a tenant whose
term of lease has expired and a person who occupies the land of another at the latter's
tolerance lies in their implied obligation to vacate the premises upon demand of the
owner. The Court stated:
To begin with, it would appear that although the defendant is regarded by the plaintiffs
as a "squatter" his occupancy of the questioned premises had been permitted or
tolerated even before the Philippine Realty Corporation sold the lots to the plaintiffs.
Otherwise, the latter would not have found him on the premises. It may be true that
upon their acquisition of the parcels of land in 1957, plaintiffs notified and .requested
defendant to see them, but despite defendant's failure to heed these requests, plaintiffs
did not choose to bring an action in court but suffered the defendant instead to remain
in the premises for almost six years. Only on February 2, 1963, did the plaintiffs for
the first time notify the defendant that "they now need the two parcels of land in
question" and requested him to vacate the same. In allowing several years to pass
without requiring the occupant to vacate the premises nor filing an action to eject him,
plaintiffs have acquiesced to defendant's possession and use of the premises. It has
been held that a person who occupies the land of another at the latter's tolerance or
permission, without any contract between them, is necessarily bound by an implied
promise that he will vacate upon demand, failing which a summary action for
ejectment is the proper remedy against them. The status of defendant is analogous to
that of a lessee or tenant whose term of lease has expired but whose occupancy
continued by tolerance of the owner. In such a case, the unlawful deprivation or
withholding of possession is to be counted from the date of the demand to
vacate.60(Emphasis in the original)
It is clear from the above that Calubayan is not sufficient basis to confer the status and
rights of a lessee on those who occupy property by mere tolerance of the owner.
In this case, there is absolutely no evidence of any lease contract between the parties.
In fact, respondents themselves never alleged that they were lessees of the lot or the
building in question. Quite the opposite, they insisted that they were co-owners of the
building and builders in good faith under Article 448 of the Civil Code. For that
reason, respondents argue that it was erroneous for the CA to consider them as lessees
and to determine their rights in accordance with Article 1678.
78
As builders in bad faith, respondents are
not entitled to reimbursement of useful expenses.
Furthermore, even if we were to subscribe to the CA' s theory that the situation of
respondents is "analogous to that of a lessee or tenant whose term of lease has expired
but whose occupancy continued by tolerance," the absence of good faith on their part
prevents them from invoking the provisions of Article 1678.
As discussed above, the MeTC, the RTC and the CA all rejected the claims of
respondents that they were builders in good faith. This pronouncement is considered
conclusive upon this Court, in view of respondents' failure to appeal from the CA
decision. This rule bars the application of Article 1678 as well as Articles 448 and 576
of the Civil Code and all other provisions requiring good faith on the part of the
builder.
We are aware that in some instances, this Court has allowed the application of Article
448 to a builder who has constructed improvements on the land of another with the
consent of the owner.61 In those cases, the Court found that the owners knew and
approved of the construction of improvements on the property. Hence, we ruled
therein that the structures were built in good faith, even though the builders knew that
they were constructing the improvement on land owned by another.
Although the factual circumstances in the instant case are somewhat similar, there is
one crucial factor that warrants a departure from the above-described rulings: the
presence of evidence that petitioners prohibited respondents from building their own
structure on a portion of the property. Based on the findings of fact of the MeTC and
the RTC, petitioners had already warned respondents not to build a structure on the
property as early as 1983. The MeTC explained: Likewise, in a letter dated 15 July
1983 sent by plaintiffs to the defendants marked as Exhibit "2" of defendants' Position
Paper, Teresa Aquino made known to the defendants not to construct on the premises
as she planned to sell the same when the value of the property shall increase (sic).
Defendants are undoubtedly builders in bad faith for despite the prohibition made upon
them, they continued their construction activities upon respondents' property.62
This ruling was affirmed by the R TC in its Decision dated 3 January 2006, which
reads:
An examination of appellants' Exhibit "2" which is a letter dated July 15, 1983, sent to
appellant Josefina Aguilar, the sister of appellee Teresa Aquino, abundantly shows that
their occupancy of the premises in question is by tolerance of the appellees. Thus, the
letter expressly states that the appellants are advised not to put up a shop, as the
appellees had plan (sic) then of disposing the property (the land) in question for a
reasonable profit after a period of three or four years, thereby placing on notice them
(appellants) that their possession of the said property is temporary in nature and by
mere generosity of the appellees, they being sisters.
The letter likewise advised them to apply for a housing project so that by the time the
property in question is sold, they have a place to transfer to. All these undisputed
antecedents which can be considered as judicially admitted by the appellants being
their own evidence marked as Exhibit "2", coupled with the fact that since the time
they occupied the premises in 1983 up to the time when the complaint was filed, they
were not asked to pay any monthly rental for the use, enjoyment and occupancy of the
said property, ineluctably established the fact that their possession of the said property
is by mere tolerance of the appellees.63
xxxx
Their contention that pursuant to Article 453 of the Civil Code, they should be
considered builders in good faith even if they have acted in bad faith, since their act of
introducing improvements to one-half of the third floor of the three storey building
was with knowledge and without opposition on the part of the appellants, cannot be
sustained, principally on the ground that as stated earlier, their Exhibit "2" is very
limpid on the act that they were already forewarned as early as 1983 not to introduce
any improvements thereon as the property is slated to be sold as it was only bought for
investment purposes. The fact that the appellees did not thereafter remind them of this,
is of no moment, as this letter was not likewise withdrawn by a subsequent one or
modified by the appellees.64
We find no reason to depart from the conclusions of the trial courts. Respondents were
evidently prohibited by petitioners from building improvements on the land because
the latter had every intention of selling it. That this sale did not materialize is
irrelevant. What is crucial is that petitioners left respondents clear instructions not to
build on the land.
79
We also agree with the RTC's ruling that the lack of constant reminders from
petitioners about the "prohibition" expressed in the 1983 letter was immaterial. The
prohibition is considered extant and continuing since there is no evidence that this
letter was ever withdrawn or modified. Moreover, no evidence was presented to show
that petitioners were aware of what was happening: that respondents were constructing
a portion of the building with their own funds and for their exclusive use and
ownership. Neither were respondents able to present evidence that petitioners had
agreed to share the expenses with them, or that the former had given consent to the
latter's contribution, if any.
In view of the foregoing, this Court's previous rulings on Article 448 cannot be applied
to this case. Hence, we hold that petitioners, as the owners of the land, have the right to
appropriate what has been built on the property, without any obligation to pay
indemnity therefor;65 and that respondents have no right to a refund of any
improvement built therein,66 pursuant to Articles 449 and 450 of the Civil Code:
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.
Respondents may recover the
necessary expenses incurred for the
preservation of the property but
without the right of retention.
Pursuant to Article 452 of the Civil Code, a builder in bad faith is entitled to recoup
the necessary expenses incurred for the preservation of the land.67 The CA correctly
ruled that respondents in this case are similarly entitled to this reimbursement.
However, being builders in bad faith, they do not have the right of retention over the
premises.68
While the evidence before this Court does not establish the amount of necessary
expenses incurred by respondents during their stay in the property, we note that even
petitioners do not deny that such expenses were incurred. In fact, in a letter dated 15
July 1983, petitioners acknowledged that respondents had spent personal money for
the maintenance of the property. Petitioners even promised to reimburse them for those
expenses.69 In this light, we find it proper to order the remand of this case to the court a
quo for the purpose of determining the amount of necessary expenses to be reimbursed
to respondents.
With respect to the award of actual damages to petitioners, we find no reason to
reverse or modify the ruling of the CA.1âwphi1 This Court has consistently held that
those who occupy the land of another at the latter's tolerance or permission, even
without any contract between them, are necessarily bound by an implied promise that
the occupants would vacate the property upon demand. 70 Failure to comply with this
demand renders the possession unlawful and actual damages may be awarded to the
owner from the date of the demand to vacate 71 until the actual surrender of the
property.
Accordingly, we affirm the CA's award of actual damages to petitioners in the amount
of ₱7 ,000 per month from the date of demand (22 October 2003) until the subject
properties are vacated. This amount represents a reasonable compensation for the use
and occupation of respondents' property72 as determined by the RTC and the MeTC.
As to petitioners' prayer for attorney's fees, we find no cogent basis for the award.
WHEREFORE, the Petition is PARTLY GRANTED.
The Court of Appeals Decision dated 25 April 2008 is REVERSED insofar as it
ordered: (a) the reimbursement of the useful expenses incurred by respondents while in
possession of the property; and (b) the determination of the cost of these useful
improvements by the court of origin. The rest of the Decision of the Court of Appeals
is hereby AFFIRMED.
Accordingly, this case is REMANDED to the court of origin for the determination of
the necessary expenses of preservation of the land, if any, incurred by respondent
80
spouses Eusebio and Josefina Aguilar while they were in possession of the property,
which expenses shall be reimbursed to them by petitioner spouses Crispin and Teresa
Aquino.
On the other hand, respondents and all persons claiming rights under them are ordered,
upon finality of this Decision without awaiting the resolution of the matter of
necessary expenses by the trial court, to immediately VACATE the subject property
and DELIVER its peaceful possession to petitioners. Respondents are likewise ordered
to PAY petitioners ₱7 ,000 as monthly rental plus interest thereon at the rate of 6% per
annum, to be computed from 22 October 2003 until the finality of this Decision.
No pronouncement as to costs. SO ORDERED.
G.R. No. 152423 December 15, 2010
SPOUSES MARCOS R. ESMAQUEL and VICTORIA
SORDEVILLA, Petitioners,
vs.
MARIA COPRADA, Respondent.
Before this Court is a petition for review on certiorari under Rule 45 of the Rules of
Court seeking to set aside the Decision1 and the Resolution2 of the Court of Appeals,
dated April 6, 2001 and February 15, 2002, respectively, (CA) in CA-G.R. SP No.
49994.
The antecedents are as follows:
On February 24, 1997, petitioners, spouses Marcos Esmaquel and Victoria Sordevilla
(Victoria) filed an ejectment case3 against respondent Maria V. Coprada before the 2nd
Municipal Circuit Trial Court (MCTC) of Magdalena, Liliw and Majayjay Laguna.
Petitioners claimed that they are the registered owners of a parcel of land situated in
M.H. Del Pilar St., Barangay San Miguel, Majayjay, Laguna, containing an area of
Two Hundred Fifty-Three (253) square meters and covered by Transfer Certificate of
Title (TCT) No. T-93542. In 1945, respondent was able to persuade the petitioners to
allow her and her family to use and occupy the land for their residence, under the
condition that they will vacate the premises should petitioners need to use the same.
Respondent and her family were allowed to construct their residential house. Since
then, the petitioners never made an attempt to drive them away out of pity, knowing
that respondent and her eight children have no other place to live in. Also, respondent
and her family have been occupying the subject premises free of rent, including
payment of realty taxes. Respondent's present circumstances have completely
improved, i.e., some of her children are already working; they are regularly sending
her financial assistance; and she has acquired her own residential house at Barangay
Panglan, Majayjay, Laguna. Because of this, petitioners verbally demanded that
respondent vacate the subject land, but the latter refused. Thus, petitioners were forced
to send a demand letter dated August 22, 1996, giving respondent until November 30,
1996 to vacate the subject premises. However, respondent still ignored said demand,
which prompted petitioners to bring a complaint before the barangay authorities. No
settlement was reached, hence, a certification to file action in Court was issued.
Petitioners were, therefore, constrained to lodge an ejectment case against the
respondent before the MCTC.
Respondent admitted that petitioners are the registered owners of the subject land.
However, she averred that in 1945, it was Emiliana Coprada (petitioner Victoria
Sordevilla's mother and original owner of the subject land) and not the petitioners who
gave permission to her late husband Brigido Coprada to use the subject lot. Emiliana
allowed her nephew Brigido and his family to occupy the lot as their permanent abode,
because of her love and affection for her nephew, and also, due to the fact that the said
lot is virtually a wasteland. Thereafter, Brigido and his family cleared the area and
built therein a nipa hut to dwell in. When Emiliana died, the ownership of the property
was inherited by her only child, petitioner Victoria Sordevilla. Respondent alleged that
sometime in the early 1960's, petitioner Victoria offered the said lot for sale for
₱2,000.00 to respondent, who readily agreed. The purchase price was paid in
installments and was fully paid in 1962. Due to their close relationship, the agreement
was never reduced to writing. Respondent further maintained that since the execution
of the oral sale of the subject lot, she has been the one paying the realty taxes due on
the property. After the sale, respondent built on the subject land a semi-concrete
structure. Respondent stated that petitioners' claim is barred by laches. Even granting,
without admitting, that respondent's claim of ownership over the property is improper
because petitioners are the registered owners thereof, respondent argued that she is a
builder in good faith, because she was able to build the structure on the subject lot with
the prior permission of the owner.
81
In its Decision4 dated September 11, 1997, the MCTC rendered judgment dismissing
the complaint. It held that laches had already set in which prevented petitioners from
questioning the validity of the purported sale between Victoria and Maria.
On appeal, the Regional Trial Court (RTC) reversed the MCTC’s judgment. The RTC
ruled that respondent's occupation of the subject property was by virtue of petitioners'
tolerance and permission. Hence, respondent is bound by an implied promise that she
will vacate the property upon demand. Thus, her possession over the subject property
became unlawful after the petitioners demanded her to vacate the property. The RTC
found that respondent failed to prove the alleged oral sale and that petitioners have
adequately proven that they are entitled to the possession of the subject land as
registered owners thereof. The RTC ordered the respondent and all other persons
claiming rights under her to vacate and surrender the possession of the subject land to
the petitioners and to remove any and all improvements she introduced on the parcel of
land.5
Respondent filed a Motion for Reconsideration, which was denied by the RTC in an
Order6 dated November 24, 1998. Obviously dissatisfied by the Decision, respondent
filed with the CA a petition for review with prayer for temporary restraining order and
preliminary injunction.7
In its Decision dated April 6, 2001, the CA granted respondent's petition, reversed the
Decision of the RTC and affirmed in toto the Decision of the MCTC. Petitioners filed
a Motion for Reconsideration, which was denied by the CA in a Resolution8 dated
February 15, 2002. Hence, the instant petition raising the following grounds:
I any contract, express or implied, or the legal representatives or assigns of any such
THE RIGHT OF THE REGISTERED OWNERS TO RECOVER POSSESSION IS
NEVER BARRED BY LACHES AND/OR THE PERSON WHO HAS A TORRENS
TITLE OVER A PARCEL OF LAND IS ENTITLED TO THE POSSESSION
THEREOF.
II
THE OWNERSHIP AND RIGHT OF PETITIONERS TO RECOVER POSSESSION
OF THE SUBJECT PROPERTY CANNOT BE DEFEATED BY UNPROVEN
ORAL SALE.
III
LACHES HAD SET IN AGAINST [RESPONDENT].
IV
THE CERTIFICATE OF TITLE IS NOT SUBJECT TO COLLATERAL ATTACK. 9
The petition is meritorious.
The pertinent point of inquiry in this case is whether or not petitioners have a valid
ground to evict respondent from the subject property.
An action for forcible entry or unlawful detainer is governed by Section 1, Rule 70 of
the Rules of Court, which provides:
SECTION 1. Who may institute proceedings, and when. - Subject to the provisions of
the next succeeding section, a person deprived of the possession of any land or
building by force, intimidation, threat, strategy, or stealth, or a lessor, vendor, vendee,
or other person against whom the possession of any land or building is unlawfully
withheld after the expiration or termination of the right to hold possession by virtue of
lessor, vendor, vendee, or other person, may, at any time within one (1) year after such
unlawful deprivation or withholding of possession, bring an action in the proper
Municipal Trial Court against the person or persons unlawfully withholding or
depriving of possession, or any person or persons claiming under them, for the
restitution of such possession, together with damages and costs.
In unlawful detainer cases, the possession of the defendant was originally legal, as his
possession was permitted by the plaintiff on account of an express or implied contract
between them. However, defendant's possession became illegal when the plaintiff
demanded that defendant vacate the subject property due to the expiration or
82
termination of the right to possess under their contract, and defendant refused to heed
such demand.10
The sole issue for resolution in an unlawful detainer case is physical or material
possession of the property involved, independent of any claim of ownership by any of
the parties. Where the issue of ownership is raised by any of the parties, the courts may
pass upon the same in order to determine who has the right to possess the property.
The adjudication is, however, merely provisional and would not bar or prejudice an
action between the same parties involving title to the property.11 Since the issue of
ownership was raised in the unlawful detainer case, its resolution boils down to which
of the parties' respective evidence deserves more weight.
In the case at bar, petitioners' cause of action for unlawful detainer is based on their
ownership of the land covered by TCT No. T-93542 and on their claim that they
merely tolerated respondent's stay thereat. Respondent's possession, as well as those
persons claiming right under her, became unlawful upon her refusal to vacate the
premises. Petitioners contend that since they are the registered owners of the subject
land, they are entitled to the possession thereof and their right to recover possession
over it is never barred by laches. They maintain that respondent's claim of ownership is
based on an unproven oral sale, which does not exist. Further, respondent cannot rely
on the Tax Declarations as she was paying taxes in the petitioners' name, as the
declared owners of the property. Moreover, she started paying the taxes only in 1984
despite her claim that the property was sold to her in 1962. Even assuming that the sale
took place in 1962, respondent is guilty of laches as she failed to take any positive
action for the delivery and conveyance to her of the portion of the property she is
occupying. Finally, respondent cannot collaterally attack the title of the petitioners to
the subject land.
On her part, respondent, although admitting that the property is registered in
petitioners' name, claimed that the 100-square-meters portion of the property, where
her house was erected, was already sold to her by petitioner Victoria. Thus, by virtue
of the sale, she and her family have the right to possess the said property. The non-
presentation of receipt and deed of sale, non-delivery of the owner's certificate of title,
and her payment of the real property taxes in the name of the petitioners were due to
the close relationship between the parties and the existing practice of palabra de
honor in their day to day transactions. Respondent further alleged that she is not guilty
of laches; rather, it is the registered owners' right to recover possession of their
property which is barred by laches.
In the present case, respondent failed to present evidence to substantiate her allegation
that a portion of the land was sold to her in 1962. In fact, when petitioners sent a
letter12 to the respondent, demanding her to vacate the subject property, the
respondent, in reply13 to the said letter, never mentioned that she purchased the subject
land in 1962. If the sale really took place, the respondent should have immediately and
categorically claimed that in her letter response. Clearly therefore, respondent's
submission that there was an oral sale is a mere afterthought.
On the other hand, it is undisputed that the subject property is covered by Transfer
Certificate of Title No. T-93542, registered in the name of the petitioners. As against
the respondent's unproven claim that she acquired a portion of the property from the
petitioners by virtue of an oral sale, the Torrens title of petitioners must prevail.
Petitioners' title over the subject property is evidence of their ownership thereof. It is a
fundamental principle in land registration that the certificate of title serves as evidence
of an indefeasible and incontrovertible title to the property in favor of the person
whose name appears therein. Moreover, the age-old rule is that the person who has a
Torrens title over a land is entitled to possession thereof. 14
Further, respondent's argument that petitioners are no longer the owners of a portion of
the subject land because of the sale in her favor is a collateral attack on the title of the
petitioners, which is not allowed. The validity of petitioners' certificate of title cannot
be attacked by respondent in this case for ejectment. Under Section 48 of Presidential
Decree No. 1529, a certificate of title shall not be subject to collateral attack. It cannot
be altered, modified or canceled, except in a direct proceeding for that purpose in
accordance with law. The issue of the validity of the title of the petitioners can only be
assailed in an action expressly instituted for that purpose. Whether or not the
respondent has the right to claim ownership over the property is beyond the power of
the trial court to determine in an action for unlawful detainer. 15
In Rodriguez v. Rodriguez,16 citing the case of Co v. Militar,17 the Court held that:
[T]he Torrens System was adopted in this country because it was believed to be the
most effective measure to guarantee the integrity of land titles and to protect their
indefeasibility once the claim of ownership is established and recognized.
It is settled that a Torrens Certificate of title is indefeasible and binding upon the
whole world unless and until it has been nullified by a court of competent jurisdiction.
Under existing statutory and decisional law, the power to pass upon the validity of
83
such certificate of title at the first instance properly belongs to the Regional Trial
Courts in a direct proceeding for cancellation of title.
As the registered owner, petitioner had a right to the possession of the property, which
is one of the attributes of ownership. x x x
Anent the issue on laches, the CA's ruling that petitioners' long inaction to assert their
rights over the subject land bars them from recovering the same is without basis. Also,
the doctrine invoked by the appellate court that a registered owner may loose his right
to recover its possession by reason of laches is not applicable here.
Laches is the failure or neglect, for an unreasonable and unexplained length of time, to
do that which, by exercising due diligence, could or should have been done earlier; it is
negligence or omission to assert a right within a reasonable time, warranting the
presumption that the party entitled to assert it either has abandoned or declined to
assert it.18 There is no absolute rule as to what constitutes laches or staleness of
demand; each case is to be determined according to its particular circumstances, with
the question of laches addressed to the sound discretion of the court. Because laches is
an equitable doctrine, its application is controlled by equitable considerations and
should not be used to defeat justice or to perpetuate fraud or injustice. 19
Respondent first acquired possession of the subject lot by mere tolerance. From 1945
until the filing of the complaint for ejectment in 1997, the nature of that possession has
never changed. Petitioners allowed the respondent to possess the property with the
knowledge that the respondent will vacate the same upon demand. Hence, until such
demand to vacate was communicated by the petitioners to the respondent, petitioners
are not required to do any act to recover the subject land, precisely because they knew
of the nature of the respondent's possession, i.e., possession by mere tolerance. Thus, it
cannot be said that petitioners are guilty of failure or neglect to assert a right within a
reasonable time. Further, after the petitioners gave a demand letter to the respondent
giving the latter until November 30, 1996 to vacate the subject premises, which
respondent failed to heed, they immediately filed a complaint before the barangay
authorities and, thereafter, lodged an ejectment case before the MCTC on February 24,
1997. In sum, We find that petitioners are not guilty of laches as would bar their claim
to the property in question.
In contrast, respondent, who is claiming that a portion of the property was sold to her
in 1962, has herself failed within a long period of time to have that portion transferred
in her name. Respondent had to wait for almost 35 years since 1962, and were it not
for the filing of the ejectment suit in 1997, she would not have bothered to assert her
rights under the alleged sale. Respondent's failure to assert that right only goes to
prove that no sale ever transpired between the parties.
Moreover, as the registered owners, petitioners' right to eject any person illegally
occupying their property is not barred by laches. In Gaudencio Labrador, represented
by Lulu Labrador Uson, as Attorney-in-Fact v. Spouses Ildefonso Perlas and Pacencia
Perlas and Spouse Rogelio Pobre and Melinda Fogata Pobre, 20 the Court held that:
x x x As a registered owner, petitioner has a right to eject any person illegally
occupying his property. This right is imprescriptible and can never be barred by
laches. In Bishop v. Court of Appeals, we held, thus:
As registered owners of the lots in question, the private respondents have a right to
eject any person illegally occupying their property. This right is imprescriptible. Even
if it be supposed that they were aware of the petitioners' occupation of the property,
and regardless of the length of that possession, the lawful owners have a right to
demand the return of their property at any time as long as the possession was
unauthorized or merely tolerated, if at all. This right is never barred by laches.
Since respondent's occupation of the subject lot is by mere tolerance or permission of
the petitioners, without any contract between them, respondent is bound by an implied
promise that she will vacate the same upon demand, failing which a summary action
for ejectment is the proper remedy against her.21
In respondent's Answer filed before the MCTC, she claimed that since she was able to
build a structure on the subject lot with the prior permission from the owner, she is a
builder in good faith and thus entitled to be reimbursed the necessary and useful
expenses under Articles 546 and 548 of the Civil Code of the Philippines. Without
such reimbursement, she has the right of retention over the property and she cannot
just be ejected from the premises.
Respondent's argument does not hold water. Since respondent's occupation of the
subject property was by mere tolerance, she has no right to retain its possession under
Article 448 of the Civil Code. She is aware that her tolerated possession may be
terminated any time and she cannot be considered as builder in good faith. 22 It is well
84
settled that both Article 44823 and Article 54624 of the New Civil Code, which allow
full reimbursement of useful improvements and retention of the premises until
reimbursement is made, apply only to a possessor in good faith, i.e., one who builds on
land with the belief that he is the owner thereof. Verily, persons whose occupation of a
realty is by sheer tolerance of its owners are not possessors in good faith. 25 At the time
respondent built the improvements on the premises in 1945, she knew that her
possession was by mere permission and tolerance of the petitioners; hence, she cannot
be said to be a person who builds on land with the belief that she is the owner thereof.

Respondent's reliance on her payment of realty taxes on the property is unavailing. She
started paying taxes only in 1984 despite her claim that she bought the property in
1962. Further, aside from the rule that tax declarations and corresponding tax receipts
cannot be used to prove title to or ownership of a real property inasmuch as they are
not conclusive evidence of the same,26 the RTC found that although the payment for
said taxes were received from respondent, the declared owner was petitioner Victoria.

It must be stressed, however, that the court's adjudication of ownership in an ejectment

case is merely provisional, and affirmance of the RTC's decision would not bar or
prejudice an action between the same parties involving title to the property, if and
when such action is brought seasonably before the proper forum. 27

WHEREFORE, the petition is GRANTED. The Decision and the Resolution of the
Court of Appeals, dated April 6, 2001 and February 15, 2002, respectively, in CA-
G.R. SP No. 49994, affirming the Decision of the 2nd Municipal Circuit Trial Court in
Civil Case No. 1875, are REVERSED and SET ASIDE. The Decision of the
Regional Trial Court of Santa Cruz, Laguna, Branch 26, in Civil Case No. SC-3580,
is REINSTATED. SO ORDERED.

85