Builder in good faith; how Civil Code provision implemented

LUCIANO BRIONES and NELLY BRIONES vs.

JOSE MACABAGDAL, FE D. MACABAGDAL and
VERGON REALTY INVESTMENTS CORPORATION,
G.R. No. 150666
August 3, 2010


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 527 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 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. 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. 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.

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, 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.

X x x.

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 attorneys 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 latters expense. The rentals herein provided shall be tendered by petitioners to the Court for payment to the
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.
























Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 167680 November 30, 2006
SAMUEL PARILLA, CHINITA PARILLA and DEODATO PARILLA, Petitioners,
vs.
DR. PROSPERO PILAR, Respondent.
D E C I S I O N
CARPIO MORALES, J.:
Assailed via Petition for Review on Certiorari is the Court of Appeals Decision
1
of January 19, 2005 reversing that of the Regional Trial
Court (RTC) of Vigan City, Branch 20
2
which affirmed the Decision
3
of February 3, 2003 of the Municipal Trial Court (MTC) of Bantay,
Ilocos Sur.
Petitioner-spouses Samuel and Chinita Parilla and their co-petitioner-son Deodato Parilla, as dealers
4
of Pilipinas Shell Petroleum
Corporation (Pilipinas Shell), have been in possession of a parcel of land (the property) located at the poblacion of Bantay, Ilocos Sur
which was leased to it by respondent Dr. Prospero Pilar under a 10-year Lease Agreement
5
entered into in 1990.
When the lease contract between Pilipinas Shell and respondent expired in 2000, petitioners remained in possession of the property on
which they built improvements consisting of a billiard hall and a restaurant, maintained a sari-sari store managed by Leonardo Dagdag,
Josefina Dagdag and Edwin Pugal, and allowed Flor Pelayo, Freddie Bringas and Edwin Pugal to use a portion thereof as parking lot.
6

Despite demands to vacate, petitioners
7
and the other occupants
8
remained in the property.
Hence, respondent who has been residing in the United States,
9
through his attorney-in-fact Marivic Paz Padre, filed on February 4,
2002 a complaint for ejectment before the Bantay MTC with prayer for the issuance of a writ of preliminary injunction with
damages
10
against petitioners and the other occupants of the property.
After trial, the MTC, by Decision of February 3, 2003, ordered herein petitioners and their co-defendants and all persons claiming rights
under them to vacate the property and to pay the plaintiff-herein respondent the amount ofP50,000.00 as reasonable compensation for
the use of the property and P10,000.00 as attorneys fees and to pay the cost of suit. And it ordered the plaintiff-herein respondent to
reimburse defendants Samuel Parilla, Chinita Parilla and Deodato Parilla the amount of Two Million Pesos (P2,000,000.00) representing
the value of the improvements introduced on the property.
Respondent appealed to the RTC of Vigan City that portion of the trial courts decision ordering him to reimburse petitioners the
amount of Two Million Pesos. The RTC affirmed the MTC Decision, however.
11

On respondents petition for review, the Court of Appeals set aside the questioned order for respondent to reimburse petitioners Two
Million Pesos.
12
In setting aside the questioned order, the appellate court, applying Article 546 of the New Civil Code which provides:
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[,]
held that "[herein petitioners] tolerated occupancy . . . could not be interpreted to mean . . . that they are builders or possessors in
good faith"
13
and that for one to be a builder in good faith, it is assumed that he claims title to the property which is not the case of
petitioners.
Hence, the present petition which faults the appellate court to have erred
I
. . . WHEN IT SET ASIDE THE DECISIONS OF THE TRIAL COURTS WHICH ORDERED THE RESPONDENT TO REIMBURSE
PETITIONERS THE AMOUNT OF TWO MILLION (P2,000,000.00) PESOS FOR THE SUBSTANTIAL IMPROVEMENTS
INTRODUCED BY THEM ON THE SUBJECT PREMISES.
II
. . . IN NOT HOLDING THAT PETITIONERS ARE BUILDERS IN GOOD FAITH OF THE SUBSTANTIAL IMPROVEMENTS THEY
HAD INTRODUCED ON THE PREMISES, HENCE, THEY ARE ENTITLED TO REIMBURSEMENT OF SUCH IMPROVEMENTS.
III
. . . IN NOT HOLDING THAT THE BUILDING WHICH PETITIONERS ERECTED ON THE PREMISES WAS WORTH, AND THAT
THE PETITIONERS ACTUALLY SPENT, THE AMOUNT OF TWO MILLION (P2,000,000.00) PESOS.
IV
. . . IN NOT HOLDING THAT PETITIONERS HAVE THE RIGHT OF RETENTION OF THE PREMISES UNTIL THEY ARE
REIMBURSED OF THE SAID AMOUNT ADJUDGED IN THEIR FAVOR BY THE COURTS A QUO.
14

Petitioners, proffering that neither respondent nor his agents or representatives performed any act to prevent them from introducing
the improvements,
15
contend that the appellate court should have applied Article 453 of the New Civil Code which provides that "[i]f
there was bad faith not only on the part of the person who built, planted or sowed on the land of another, but also on the part of the
owner of such land, the rights of one and the other shall be the same as though both had acted in good faith."
16

Petitioners thus conclude that being builders in good faith, until they are reimbursed of the Two Million Peso-value of the improvements
they had introduced on the property, they have the right of retention or occupancy thereof pursuant to Article 448, in relation to Article
546, of the New Civil Code,
17
otherwise, respondent would be unjustly enriched at their expense.
The petition fails in light of the following discussions.
The evidence shows that in 1960, a lease contract over the property was forged between Shell Company of the Philippines Limited and
respondents predecessors-in-interest. In 1990, the lease contract was renewed by Pilipinas Shell and respondent.
Petitioners, being dealers of Pilipinas Shells petroleum products, were allowed to occupy the property. Petitioners are thus considered
agents
18
of Pilipinas Shell. The factual milieu of the instant case calls then for the application of the provisions on lease under the New
Civil Code.
The right of the lessor upon the termination of a lease contract with respect to useful improvements introduced on the leased property
by a lessee is covered by Article 1678 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.
x x x x (Emphasis supplied)
The foregoing provision is a modification of the old Code under which the lessee had no right at all to be reimbursed for the
improvements introduced on the leased property, he being entitled merely to the rights of a usufructuary right of removal and set-
off, but not of reimbursement.
19

The modification introduced in the above-quoted paragraph of Article 1678 on partial reimbursement was intended to prevent unjust
enrichment of the lessor which now has to pay one-half of the value of the improvements at the time the lease terminates because the
lessee has already enjoyed the same, whereas the lessor could enjoy them indefinitely thereafter.
20

As the law on lease under the New Civil Code has specific rules concerning useful improvements introduced by a lessee on the property
leased, it is erroneous on the part of petitioners to urge this Court to apply Article 448, in relation to Article 546, regarding their claim
for reimbursement and to invoke the right of retention before reimbursement is made. Article 448 and Article 546 read:
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.
Jurisprudence is replete with cases
21
which categorically declare that Article 448 covers only cases in which the builders, sowers or
planters believe themselves to be owners of the land or, at least, have a claim of title thereto, but not when the interest is merely
that of a holder, such as a mere tenant, agent or usufructuary. A tenant cannot be said to be a builder in good faith as he has no
pretension to be owner.
22

In a plethora of cases,
23
this Court has held that Articles 448 of the Civil Code, in relation to Article 546 of the same Code, which allows
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 land with the belief that he is the owner thereof. It does not apply where ones only interest is that
of a lessee under a rental contract; otherwise, it would always be in the power of the tenant to "improve" his landlord out of his
property.
24
(Underscoring supplied)
Sia v. Court of Appeals,
25
which cites Cabangis v. Court of Appeals,
26
exhaustively explains the applicability of Article 1678 on disputes
relating to useful improvements introduced by a lessee on leased premises, viz:
x x x x
Second. Petitioner stubbornly insists that he may not be ejected from private respondent's land because he has the right, under Articles
448 and 546 of the New Civil Code, to retain possession of the leased premises until he is paid the full fair market value of the building
constructed thereon by his parents. Petitioner is wrong, of course. The Regional Trial Court and the Court of Appeals correctly held that
it is Article 1678 of the New Civil Code that governs petitioner's right vis-a-vis the improvements built by his parents on private
respondent's land.
In the 1991 case of Cabangis v. Court of Appeals where the subject of the lease contract was also a parcel of land and the lessee's
father constructed a family residential house thereon, and the lessee subsequently demanded indemnity for the improvements built on
the lessor's land based on Articles 448 and 546 of the New Civil Code, we pointed out that reliance on said legal provisions was
misplaced.
"The reliance by the respondent Court of Appeals on Articles 448 and 546 of the Civil Code of the Philippines is misplaced. These
provisions have no application to a contract of lease which is the subject matter of this controversy. Instead, Article 1678 of the Civil
Code applies. . . .
x x x x
On the other hand, Article 448 governs the right of accession while Article 546 pertains to effects of possession. The very language of
these two provisions clearly manifest their inapplicability to lease contracts. . . .
x x x x
Thus, the improvements that the private respondent's father had introduced in the leased premises were done at his own risk as
lessee. The right to indemnity equivalent to one-half of the value of the said improvements the house, the filling materials, and the
hollow block fence or wall is governed, as earlier adverted to, by the provisions of Art. 1678, first paragraph of the Civil Code above
quoted. But this right to indemnity exists only if the lessor opts to appropriate the improvements (Alburo v. Villanueva, supra, note 10
at 279-280; Valencia v. Ayala de Roxas, supra, note 10 at 46). The refusal of the lessor to pay the lessee one-half of the value of the
useful improvements gives rise to the right of removal. On this score, the commentary of Justice Paras is enlightening.
'Note that under the 1st paragraph of Art. 1678, the law on the right of REMOVAL says that 'should the lessor refuse to reimburse said
amount, the lessee may remove the improvements, even though the principal thing may suffer thereby.' While the phrase 'even
though' implies that Art. 1678 always applies regardless of whether or not the improvements can be removed without injury to the
leased premises, it is believed that application of the Article cannot always be done. The rule is evidently intended for cases where a
true accession takes place as when part of the land leased is, say, converted into a fishpond; and certainly not where as easily
removable
thing (such as a wooden fence) has been introduced. There is no doubt that in a case involving such a detachable fence, the lessee
can take the same away with him when the lease expires (5 E. Paras, Civil Code of the Philippines Annotated 345 [11th ed., 1986]).'
x x x x
Clearly, it is Article 1678 of the New Civil Code which applies to the present case.1wphi1
Petitioners claim for reimbursement of the alleged entire value of the improvements does not thus lie under Article 1678. Not even for
one-half of such alleged value, there being no substantial evidence, e.g., receipts or other documentary evidence detailing costs of
construction. Besides, by petitioners admission, of the structures they originally built the billiard hall, restaurant, sari-sari store and
a parking lot, only the "bodega-like" sari-sari store and the parking lot now exist.
27

At all events, under Article 1678, it is the lessor who is given the option, upon termination of the lease contract, either to appropriate
the useful improvements by paying one-half of their value at that time, or to allow the lessee to remove the improvements. This option
solely belongs to the lessor as the law is explicit that "[s]hould the lessor refuse to reimburse said amount, the lessee may remove the
improvements, even though the principal thing may suffer damage thereby." It appears that the lessor has opted not to reimburse.
WHEREFORE, the petition is DENIED. The Court of Appeals Decision of January 19, 2005 is AFFIRMED in light of the foregoing
discussions.
Costs against petitioners.
SO ORDERED.
CONCHITA CARPIO MORALES
Associate Justice
WE CONCUR:














SPOUSES JESUS and
EVANGELINE PASCO,
Petitioners,


- versus -



PISON-ARCEO AGRICULTURAL
AND DEVELOPMENT
CORPORATION,
Respondent.

G.R. No. 165501

Present:

QUISUMBING, J., Chairperson,
CARPIO,
CARPIO MORALES, and
TINGA, JJ.


Promulgated:

March 28, 2006

x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x


D E C I S I O N


CARPIO MORALES, J.:

From the Court of Appeals August 27, 2003
[1]
decision which denied their petition for review of the decision of the Bacolod City
Regional Trial Court (RTC) affirming with modification that of the June 30, 2000 of the Talisay City Municipal Trial Court in Cities
(MTCC), Spouses Jesus and Evangeline Pasco (petitioners) brought the case to this Court on a Petition for Review on Certiorari.

Respondent, Pison-Arceo Agricultural and Development Corporation, is the registered owner of a parcel of land containing more
than 100 hectares covered by Transfer Certificate of Title (TCT) No. T-88078 of the Register of Deeds of Negros Occidental.

Constructed on respondents parcel of land are houses which are occupied by its workers.

Petitioners, among other workers, used to work for respondent until 1987. They having ceased to be employed by respondent,
petitioners were asked to vacate the house they were occupying but they refused, hence, respondent filed a complaint for unlawful
detainer against them before the MTCC in Talisay City.

In their Answer to the Complaint,
[2]
petitioners claimed that, inter alia, they built the house occupied by them at their own
expense and their stay on the land was upon the tolerance of respondent.

In their Position Paper,
[3]
petitioners claimed that respondent constructed houses for its workers but the house they were
occupying was destroyed by a typhoon, forcing them to build their house; respondents demand was merely for them to vacate the
house, as they had paid rentals thru salary/wage deductions; and their refusal to vacate the house is justified, they being the owners
and actual possessors thereof.

By Decision of June 30, 2000,
[4]
the MTCC of Talisay rendered judgment in favor of respondent upon the following findings:


As adduced, it is explicitly clear that [respondent] provided housing facilities to every worker in its
hacienda without a requiring payment of rentals, however, with an implied promise that the same be vacated upon
their cessation from work. . . .

On the issue that [petitioners] were responsible in building their own houses is devoid of merit. . . .
However, [petitioners] made repairs on their houses when [the] same were destroyed by typhoon sometime in 1975.
These are repairs badly needed at that time there being no however express authority from [respondent].

x x x x

As to the contention of [petitioners] in Civil Case No. 677, [respondent] is amenable to remove
whatever improvements they have introduced thereto including the trees they planted. . . .

x x x x (Underscoring supplied)
[5]




Accordingly, the MTCC disposed as follows:


WHEREFORE, judgment is hereby rendered for [respondent] and herein [petitioners in Civil Case
No. 677], spouses Jesus Pasco and Evangeline Pasco . . .and those persons claiming under their names are hereby
ordered:

1. To vacate the premises of [respondents] Lot 707, Talisay Cadastre covered by Transfer Certificate of
Title No. T-88078 and to remove whatever improvements they introduced thereon;

2. To pay [respondent] the sum of P50.00 a month as rental payment from the time of the filing of the
herein complaint until they have vacated the premises; and

3. To pay the sum of P5,000.00 as attorneys fees.

SO ORDERED.
[6]
(Underscoring supplied)



After the promulgation on June 30, 2000 of the MTCC decision or on August 23, 2000, the Municipal Agrarian Reform Office
(MARO) of Talisay City sent a Notice of Coverage and Field Investigation
[7]
(Notice of Coverage) advising respondent that its parcel of
land is now covered under Republic Act 6657 otherwise known as the Comprehensive Agrarian Reform Law (CARL), and inviting the
presence of a representative to a field investigation to be conducted on September 12, 2000 during which it (respondent) may pinpoint
its retained area in accordance with Section 6 of the CARL.

In the meantime, as petitioners appealed the MTCC decision in the Unlawful Detainer Case to the RTC, they, on August 24, 2000,
filed a Memorandum of Appeal
[8]
contending that the MTCC:


I. . . . . ERRED IN FINDING THE [PETITIONERS] TO BE BUILDERS, PLANTERS OR SOWERS IN BAD FAITH.

II. . . . . ERRED IN NOT FINDING [RESPONDENT] TO BE OWNERS IN BAD FAITH.

III. . . . . ERRED IN APPLYING ARTICLES 449 TO 451 OF THE CIVIL CODE.

IV. . . . . HAS NO JURISDICTION OVER THE COMPLAINT UNTIL [PETITIONERS] RIGHT OF RETENTION UNTIL
ARTICLE 546 OF THE CIVIL CODE HAS EXPIRED.

x x x x
[9]



In their Memorandum, petitioners argued that respondents hacienda is covered by the CARL and they are qualified beneficiaries
thereunder; whether they are qualified beneficiaries is material to the determination of whether they are planters or builders or sowers
in bad faith; upon knowledge that the land subject of the unlawful detainer case is a[n] hacienda, it is within the sound discretion of
the judge to clarify from the parties whether or not the subject land is covered by [CARL] and whether or not the defendants are
qualified agrarian reform beneficiaries; it is mandatory on the part of the courts to take judicial notice of agrarian laws; and the
unlawful detainer case, at all events, was prematurely filed as respondents right to eject them would arise only after they are
reimbursed of their expenses in repairing the house and, therefore, the MTCC has no jurisdiction yet to order their ejectment.

By Decision of December 5, 2000,
[10]
the RTC of Bacolod City affirmed the June 30, 2000 decision of MTCC Talisay, with
modification, disposing as follows:

WHEREFORE, the decision rendered by the Municipal Trial Court in Cities, dated June 30, 2000 is hereby
modified as follows:

WHEREFORE, judgment is hereby rendered for [respondent] . . . . against spouses Jesus
Pasco and Evangeline Pasco and the persons claiming under their names are hereby ordered:

1. To vacate the premises of [respondents] Lot 707, Talisay Cadastre covered by Transfer
Certificate of Title No. T-88078 and to remove the house they constructed thereon;

2. To pay [respondent] the sum of P50.00 a month as rental payment from the time of
the filing of the herein complaint until they have vacated the premises; and

3. To pay the sum of P5,000.00 as attorneys fees.

With costs against the [petitioners].
[11]
(Underscoring supplied)


Petitioners moved to reconsider
[12]
the RTC decision, they contending that the MTCC had no jurisdiction over the complaint for
unlawful detainer in view of the agrarian dispute between them and respondent; and by Order
[13]
of June 8, 2001, petitioners motion
for reconsideration was denied. Hence, they elevated the case to the Court of Appeals
[14]
before which they raised, in the main, the
issues of:


I. . . .

A. Whether or not the Notice of Coverage issued by DAR and which was ADMITTED by
[respondents] sufficient evidence to prove that [respondents] land is covered by CARP.

B. Whether or not [petitioners] evidence to prove that they are potential agrarian reform beneficiaries has
been existing at the time of the filing of the complaint for ejectment against them.

II. WHETHER OR NOT THERE IS AN AGRARIAN DISPUTE BETWEEN THE PARTIES IN CIVIL CASE NO. 677 SO AS
TO NULLIFY THE PROCEEDINGS IN THE MUNICIPAL TRIAL COURT IN CITIES FOR LACK OF JURISDICTION.

x x x x

AND

WHETHER OR NOT THE APPELLATE COURT ERRED IN NOT DISMISSING RESPONDENTS COMPLAINT FOR
EJECTMENT, HAVING BEEN BROUGHT BY A PARTY WHO IS NOT THE REAL PARTY-IN-INTEREST.
[15]
(Underscoring
supplied)


To their petition before the appellate court, petitioners attached a copy of the Notice of Coverage and Field Investigation sent
by the MARO, Talisay City to respondent.

In the meantime, the MARO of Talisay City issued on August 24, 2004 a Certification
[16]
that herein petitioner Jesus Pasco is
registered as potential Comprehensive Agrarian Reform Program (CARP) beneficiary in the land owned by respondent.

By the assailed Decision of August 27, 2003,
[17]
the appellate court denied petitioners petition, ratiocinating as follows:

Well settled is the rule that the only issue in ejectment cases is the physical possession of the
premises, independent of any claim of ownership by the parties, and this must be so because the issue of ownership
cannot be definitely decided in an ejectment case. Considering that the petitioners were in possession of the subject
property by sheer tolerance of its owners, they knew that their occupation of the premises may be terminated any
time. Persons who occupy the land of another at the latters tolerance or permission, without any contract between
them is necessarily bound by an implied promise that they will vacate the same upon demand, failing in which a
summary action for ejectment is the proper remedy against them. In the instant case, the petitioners admitted in
their Answer almost all the allegations in the complaint. Since the petitioners occupy the subject land at the owners
tolerance, they are bound to vacate the same, failing which, an ejectment suit is the proper remedy against them.

We agree with the allegations of the respondent corporation that the petitioners defenses: (1) that
the subject land is covered by CARP; (2) that there is an agrarian dispute; and (3) that the case is not brought by
a real party-in-interest are mere afterthoughts to muddle the case and win at all costs. These issues were not
raised before the trial court. The fact is that the petitioners had admitted from the very start that the respondent
is the owner of the lot in question. They are therefore in estoppel if they deny the fact the complaint was brought by
the real party-in-interest. In the same manner, the defense that the court has no jurisdiction over the ejectment case
because of an agrarian dispute or the land is covered by CARP is likewise untenable. Basic is the rule that the
material averments in the complaint, which in this case is for ejectment, determine the jurisdiction of
the court. And, jurisprudence dictates that the court does not lose its jurisdiction over an ejectment
case by the simple expedient of a party raising as a defense therein the alleged existence of a tenancy
relationship between the parties. Moreover, it is a settled rule that no question will be raised on appeal unless it
has been raised in the court below.

Anent the allegation that the respondent is not the real party in interest, the same deserves scant
consideration. Even granting that there is indeed a co-ownership over a portion of the subject land, the law says that
anyone of the co-owners may bring an action in ejectment. Thus, the respondent (plaintiff) is unquestionable a real
party in interest.
[18]
(Emphasis and underscoring supplied)


Hence, the petition at bar
[19]
assailing the appellate courts decision upon the following issues:

1. Whether or not one who has been identified by the Department of Agrarian Reform (DAR) as potential agrarian
reform beneficiary may be ejected from the land where he is identified as such, by the landowner, who has
already been notified by the DAR of the coverage of his land by the Comprehensive Agrarian Reform Program of
the government.

2. Whether or not the foregoing issue involves an issue affecting the jurisdiction of the court over the nature of the
action or it involves primary jurisdiction.

3. Whether or not the matters involving jurisdiction of the court over the nature of the action could be raised for
the first time on appeal.
[20]
(Underscoring supplied)

As reflected above, the theory of petitioner before the MTCC is different from that proffered before the RTC. Thus, before the
MTCC, they claimed that the house they are occupying was built at their own expense.

Before the RTC, they raised for the first time that, they being qualified beneficiaries of the CARP, the same should be
considered in determining whether they are builders, planters, or sowers in good faith. And, for the first time too, they assailed the
MTCCs lack of jurisdiction over the action due to prematurity, they contending that respondents right to eject them would accrue only
after they are reimbursed of their expenses in the repair of the house.

In their motion for reconsideration of the RTC decision, petitioners this time argued that the MTCC had no jurisdiction
over the case in view of the agrarian dispute between them and respondent.

As a rule, a party who deliberately adopts a certain theory upon which the case is tried and decided by the lower court will
not be permitted to change theory on appeal. Points of law, theories, issues and arguments not brought to the attention of the lower
court need not be, and ordinarily will not be, considered by a reviewing court, as these cannot be raised for the first time at such late
stage. Basic considerations of due process underlie this rule.
[21]


The aforecited rule is not without exception, however. As correctly argued by petitioners, though not raised below, the issue of
lack of jurisdiction over the subject matter may be considered by the reviewing court as it may be raised at any stage of the
proceedings.
[22]


The issuance during the pendency of the case of a Notice of Coverage to respondent does not, however, automatically make
the ejectment case an agrarian dispute over which the Department of Agrarian Reform Adjudication Board (DARAB) has
jurisdiction.
[23]
The issuance of a Notice of Coverage is merely a preliminary step for the States acquisition of the land for agrarian
reform purposes and it does not automatically vest title or transfer the ownership of the land to the government. The purpose of a
Notice of Coverage is explained by this Court, thus:

. . . The Notice of Coverage shall also invite the landowner to attend the field investigation to be scheduled at least
two weeks from notice. The field investigation is for the purpose of identifying the landholding and determining its
suitability for agriculture and its productivity. . . . The date of the field investigation shall also be sent by the DAR
Municipal Office to representatives of the L[and] B[ank] [of the] P[hilippines], BARC, DENR and prospective farmer
beneficiaries. The field investigation shall be conducted on the date set with the participation of the landowner and
the various representatives. . . . Should there be a variance between the findings of the DAR and the LBP as to
whether the land be placed under agrarian reform, the land's suitability to agriculture, the degree or development of
the slope,etc., the conflict shall be resolved by a composite team of the DAR, LBP, DENR and DA which shall jointly
conduct further investigation. . . .

Clearly then, the notice requirements under the CARL are not confined to the Notice of Acquisition set forth
in Section 16 of the law. They also include the Notice of Coverage first laid down in DAR A.O. No. 12, Series of 1989
and subsequently amended in DAR A.O. No. 9, Series of 1990 and DAR A.O. No. 1, Series of 1993. This Notice of
Coverage does not merely notify the landowner that his property shall be placed under CARP and that he is entitled
to exercise his retention right; it also notifies him, pursuant to DAR A.O. No. 9, Series of 1990, that a public hearing
shall be conducted where he and representatives of the concerned sectors of society may attend to discuss the
results of the field investigation, the land valuation and other pertinent matters. Under DAR A.O. No. 1, Series of
1993, the Notice of Coverage also informs the landowner that a field investigation of his landholding shall be
conducted where he and the other representatives may be present.

x x x x
[24]
(Underscoring supplied)

Since during a field investigation the DAR and Land Bank of the Philippines would make a determination as to whether, among
other things, the land will be placed under agrarian reform, the lands suitability to agriculture, a Notice of Coverage does not ipso
facto render the land subject thereof a land reform area. The owner retains its right to eject unlawful possessors of his land, as what
respondent did in the present case.

As for the registration of petitioners as potential CARP beneficiaries, the same does not help their cause. As potential CARP
beneficiaries, they are included in the list of those who may be awarded land under the CARP. Nothing in the records of the case
shows that the DAR has made an award in favor of petitioners, hence, no rights over the land they occupy can be considered to have
vested in their favor in accordance with Section 24 of the CARL which reads:

Section 24. Award to Beneficiaries. The rights and responsibilities of the beneficiary shall
commence from the time the DAR makes an award of the land to him, which award shall be completed
within one hundred eighty (180) days from the time the DAR takes actual possession of the land. Ownership of the
beneficiary shall be evidenced by a Certificate of Land Ownership Award, which shall contain the restrictions and
conditions provided for in this Act, and shall be recorded in the Register of Deeds concerned and annotated on the
Certificate of Title. (Emphasis and underscoring supplied)

Moreover, to allow petitioners to continue to stay in respondents land on the ground that they are potential CARP beneficiaries
would give them preferential treatment over other potential CARP reform beneficiaries who are not occupying the premises and still
awaiting the award to be made by the DAR in their favor. Worse, to further tolerate petitioners occupancy of respondents land might
give other potential CARP beneficiaries the wrong signal that they too can occupy the land which may be awarded to them even before
they are chosen or before an award is made in their favor.

WHEREFORE, the petition is DENIED for lack of merit.

No pronouncement as to costs.

SO ORDERED.