Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. L-57348 May 16, 1985

FRANCISCO DEPRA, plaintiff-appellee,

vs.
AGUSTIN DUMLAO, defendant-appellant.

Roberto D. Dineros for plaintiff-appellee.

Veil D. Hechanova for defendant-appellant.

MELENCIO-HERRERA, J.:

This is an appeal from the Order of the former Court of First Instance of Iloilo to the then Court of Appeals, which the
latter certified to this instance as involving pure questions of law

Plaintiff-appellee, Francisco Depra, is the owner of a parcel of land registered under Transfer Certificate of Title No.
T3087, known as Lot No. 685, situated in the municipality of Dumangas, Iloilo, with an area of approximately 8,870
square meters. Agustin Dumlao, defendant-appellant, owns an adjoining lot, designated as Lot No. 683, with an
approximate area of 231 sq. ms.

Sometime in 1972, when DUMLAO constructed his house on his lot, the kitchen thereof had encroached on an area
of thirty four (34) square meters of DEPRA's property, After the encroachment was discovered in a relocation survey
of DEPRA's lot made on November 2,1972, his mother, Beatriz Depra after writing a demand letter asking DUMLAO
to move back from his encroachment, filed an action for Unlawful Detainer on February 6,1973 against DUMLAO in
the Municipal Court of of Dumangas, docketed as Civil Case No 1, Said complaint was later amended to include
DEPRA as a party plain. plaintiff.

After trial, the Municipal Court found that DUMLAO was a builder in good faith, and applying Article 448 of the Civil
Code, rendered judgment on September 29, 1973, the dispositive portion of which reads:

Ordering that a forced lease is created between the parties with the plaintiffs, as lessors, and the
defendants as lessees, over the disputed portion with an area of thirty four (34) square meters, the
rent to be paid is five (P5.00) pesos a month, payable by the lessee to the lessors within the first five
(5) days of the month the rent is due; and the lease shall commence on the day that this decision
shall have become final.

From the foregoing judgment, neither party appeal so that, ff it were a valid judgment, it would have ordinarily lapsed
into finality, but even then, DEPRA did not accept payment of rentals so that DUMLAO deposited such rentals with
the Municipal Court.

On July 15,1974, DEPRA filed a Complaint for Quieting of Title against DUMLAO before the then Court of First
Instance of Iloilo, Branch IV (Trial Court), involving the very same 34 square meters, which was the bone of
contention in the Municipal Court. DUMLAO, in his Answer, admitted the encroachment but alleged, in the main, that
the present suit is barred by res judicata by virtue of the Decision of the Municipal Court, which had become final
and executory.

After the case had been set for pre-trial, the parties submitted a Joint Motion for Judgment based on the Stipulation
of Facts attached thereto. Premised thereon, the Trial Court on October 31, 1974, issued the assailed Order,
decreeing:

WHEREFORE, the Court finds and so holds that the thirty four (34) square meters subject of this
litigation is part and parcel of Lot 685 of the Cadastral Survey of Dumangas of which the plaintiff is
owner as evidenced by Transfer Certificate of Title No. 3087 and such plaintiff is entitled to possess
the same.

Without pronouncement as to costs.

SO ORDERED.
Rebutting the argument of res judicata relied upon by DUMLAO, DEPRA claims that the Decision of the Municipal
Court was null and void ab initio because its jurisdiction is limited to the sole issue of possession, whereas decisions
affecting lease, which is an encumbrance on real property, may only be rendered by Courts of First Instance.

Addressing out selves to the issue of validity of the Decision of the Municipal Court, we hold the same to be null and
void. The judgment in a detainer case is effective in respect of possession only (Sec. 7, Rule 70, Rules of
Court). 1The Municipal Court over-stepped its bounds when it imposed upon the parties a situation of "forced lease",
which like "forced co-ownership" is not favored in law. Furthermore, a lease is an interest in real property,
jurisdiction over which belongs to Courts of First Instance (now Regional Trial Courts) (Sec. 44(b), Judiciary Act of
1948; 2 Sec. 19 (2) Batas Pambansa Blg. 129). 3 Since the Municipal Court, acted without jurisdiction, its Decision
was null and void and cannot operate as res judicata to the subject complaint for Queting of Title. Besides, even if
the Decision were valid, the rule on res judicata would not apply due to difference in cause of action. In the
Municipal Court, the cause of action was the deprivation of possession, while in the action to quiet title, the cause of
action was based on ownership. Furthermore, Sec. 7, Rule 70 of the Rules of Court explicitly provides that judgment
in a detainer case "shall not bar an action between the same parties respecting title to the land. " 4

Conceded in the Stipulation of Facts between the parties is that DUMLAO was a builder in good faith. Thus,

8. That the subject matter in the unlawful detainer case, Civil Case No. 1, before the Municipal Court
of Dumangas, Iloilo involves the same subject matter in the present case, the Thirty-four (34) square
meters portion of land and built thereon in good faith is a portion of defendant's kitchen and has
been in the possession of the defendant since 1952 continuously up to the present; ... (Emphasis
ours)

Consistent with the principle that our Court system, like any other, must be a dispute resolving mechanism, we
accord legal effect to the agreement of the parties, within the context of their mutual concession and stipulation.
They have, thereby, chosen a legal formula to resolve their dispute to appeal ply to DUMLAO the rights of a "builder
in good faith" and to DEPRA those of a "landowner in good faith" as prescribed in Article 448. Hence, we shall
refrain from further examining whether the factual situations of DUMLAO and DEPRA conform to the juridical
positions respectively defined by law, for a "builder in good faith" under Article 448, a "possessor in good faith"
under Article 526 and a "landowner in good faith' under Article 448.

In regards to builders in good faith, Article 448 of the Civil Code provides:

ART. 448. The owner of the land on which anything has been built sown or planted in good faith,

shall have the right

to appropriate as his own the works, sowing or planting, after payment of the indemnity provided for
in articles 546 and 548, 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
(Paragraphing supplied)

Pursuant to the foregoing provision, DEPRA has the option either to pay for the encroaching part of DUMLAO's
kitchen, or to sell the encroached 34 square meters of his lot to DUMLAO. He cannot refuse to pay for the
encroaching part of the building, and to sell the encroached part of his land, 5 as he had manifested before the
Municipal Court. But that manifestation is not binding because it was made in a void proceeding.

However, the good faith of DUMLAO is part of the Stipulation of Facts in the Court of First Instance. It was thus error
for the Trial Court to have ruled that DEPRA is "entitled to possession," without more, of the disputed portion
implying thereby that he is entitled to have the kitchen removed. He is entitled to such removal only when, after
having chosen to sell his encroached land, DUMLAO fails to pay for the same. 6 In this case, DUMLAO had
expressed his willingness to pay for the land, but DEPRA refused to sell.

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 article 453 (now Article 546).
The owner of the land, upon the other hand, has the option, under article 361 (now Article 448),
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 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 (italics ours).
 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 nor 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 (now Article 448) and
453 (now Article 546) of the Civil Code. (Ignacio vs. Hilario, 76 Phil. 605, 608[1946]).

A word anent the philosophy behind Article 448 of the Civil rode.

The original provision was found in Article 361 of the Spanish Civil Code; which provided:

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.

As will be seen, the Article favors the owner of the land, by giving him one of the two options mentioned in the
Article. Some commentators have questioned the preference in favor of the owner of the land, but Manresa's
opinion is that the Article is just and fair.

. . . es justa la facultad que el codigo da al dueno del suelo en el articulo 361, en el caso de
edificacion o plantacion? Algunos comentaristas la conceptuan injusta, y como un extraordinario
privilegio en favor de la propiedad territorial. Entienden que impone el Codigo una pena al poseedor
de buena fe y como advierte uno de los comentaristas aludidos 'no se ve claro el por que de tal
pena . . . al obligar al que obro de buena fe a quedarse con el edificio o plantacion, previo el pago
del terreno que ocupa, porque si bien es verdad que cuando edifico o planto demostro con este
hecho, que queria para si el edificio o plantio tambien lo es que el que edifico o planto de buena fe
lo hizo en la erronea inteligencia de creerse dueno del terreno Posible es que, de saber lo contrario,
y de tener noticia de que habia que comprar y pagar el terreno, no se hubiera decidido a plantar ni a
edificar. La ley obligandole a hacerlo fuerza su voluntad, y la fuerza por un hecho inocente de que
no debe ser responsable'. Asi podra suceder pero la realidad es que con ese hecho voluntario,
aunque sea inocente, se ha enriquecido torticeramente con perjuicio de otro a quien es justo
indemnizarle,

En nuestra opinion, el Codigo ha resuelto el conflicto de la manera mas justa y equitativa y

respetando en lo possible el principio que para la accesion se establece en el art. 358. 7

Our own Code Commission must have taken account of the objections to Article 361 of the Spanish Civil Code.
Hence, the Commission provided a modification thereof, and Article 448 of our Code has been made to 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.

Additional benefits were extended to the builder but the landowner retained his options.

The fairness of the rules in Article 448 has also been explained as follows:

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 to pay for the proper rent. 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. (3 Manresa 213; Bernardo vs. Bataclan, 37 Off.
Gaz. 1382; Co Tao vs. Chan Chico, G.R. No. 49167, April 30, 1949; Article applied: see Cabral, et al
vs. Ibanez [S.C.] 52 Off. Gaz. 217; Marfori vs. Velasco, [C.A.] 52 Off. Gaz. 2050). 8

WHEREFORE, the judgment of the trial Court is hereby set aside, and this case is hereby ordered remanded to the
Regional Trial Court of Iloilo for further proceedings consistent with Articles 448 and 546 of the Civil Code, as
follows:

1. The trial Court shall determine

 a) the present fair price of DEPRA's 34 square meter area of land;

b) the amount of the expenses spent by DUMLAO for the building of the kitchen;

c) the increase in value ("plus value") which the said area of 34 square meters may have acquired by
reason thereof, and

d) whether the value of said area of land is considerably more than that of the kitchen 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 DEPRA a period of fifteen (15) days within which to exercise his option
under the law (Article 448, Civil Code), whether to appropriate the kitchen as his own by paying to
DUMLAO either the amount of tile expenses spent by DUMLAO f or the building of the kitchen, or
the increase in value ("plus value") which the said area of 34 square meters may have acquired by
reason thereof, or to oblige DUMLAO to pay the price of said area. The amounts to be respectively
paid by DUMLAO and DEPRA, 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 DEPRA exercises the option to oblige DUMLAO 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 kitchen, DUMLAO shall give written notice of such
rejection to DEPRA and to the Court within fifteen (15) days from notice of DEPRA's 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, provided that the monthly rental to be fixed by the Court shall not be less than
Ten Pesos (P10.00) per month, 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 1952 that DUMLAO has occupied the subject
area. The rental thus fixed shall be increased by ten percent (10%) for the second year of the forced
lease. DUMLAO shall not make any further constructions or improvements on the kitchen. Upon
expiration of the two-year period, or upon default by DUMLAO in the payment of rentals for two (2)
consecutive months, DEPRA shall be entitled to terminate the forced lease, to recover his land, and
to have the kitchen removed by DUMLAO or at the latter's expense. The rentals herein provided
shall be tendered by DUMLAO to the Court for payment to DEPRA, and such tender shall constitute
evidence of whether or not compliance was made within the period fixed by the Court.

c) In any event, DUMLAO shall pay DEPRA an amount computed at Ten Pesos (P10.00) per month
as reasonable compensation for the occupancy of DEPRA's land for the period counted from 1952,
the year DUMLAO 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 Precision 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.
 Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. L-49219 April 15, 1988

SPOUSES CONCEPCION FERNANDEZ DEL CAMPO and ESTANISLAO DEL CANTO, plaintiffs-appellees,
vs.
BERNARDA FERNANDEZ ABESIA, defendant-appellant.

Geronimo Creer, Jr. for plaintiffs-appellees.

Benedicto G. Cobarde for defendant, defendant-appellant

GANCAYCO, J.:

In this appeal from the decision of the Court of First Instance (CFI) of Cebu, certified to this Court by the Court of
Appeals on account of the question of law involved, the sole issue is the applicability of the provisions of Article 448
of the Civil Code relating to a builder in good faith when the property involved is owned in common.

This case involves a parcel of land, Lot No. 1161 of the Cadastral Survey of Cebu, with an area of only about 45
square meters, situated at the corner of F. Flores and Cavan Streets, Cebu City covered by TCT No. 61850. An
action for partition was filed by plaintiffs in the CFI of Cebu. Plaintiffs and defendants are co-owners pro indiviso of
this lot in the proportion of and 1/3 share each, respectively. The trial court appointed a commissioner in accordance
with the agreement of the parties. ,the Id commissioner conducted a survey, prepared a sketch plan and submitted a
report to the trial court on May 29, 1976, recommending that the property be divided into two lots: Lot 1161-A with
an area of 30 square meters for plaintiffs and Lot No. 1161-B with an area of 15 square meters for the defendants.
The houses of plaintiffs and defendants were surveyed and shown on the sketch plan. The house of defendants
occupied the portion with an area of 5 square meters of Lot 1161-A of plaintiffs. The parties manifested their
conformity to the report and asked the trial court to finally settle and adjudicate who among the parties should take
possession of the 5 square meters of the land in question.

In solving the issue the trial court held as follows:

The Court believed that the plaintiffs cannot be obliged to pay for the value of the portion of the
defendants' house which has encroached an area of five (5) sq. meters of the land alloted to them.
The defendants cannot also be obliged to pay for the price of the said five (5) square meters. The
rights of a builder in good faith under Article 448 of the New Civil Code does (sic) not apply to a case
where one co-owner has built, planted or sown on the land owned in common. "Manresa agreeing
with Sanchez Roman, says that as a general rule this article is not applicable because the matter
should be governed more by the provisions on co-ownership than on accession. Planiol and Ripert
are also of the opinion that this article is not applicable to a co-owner who constructs, plants or sows
on the community property, even if the land where the construction, planting or sowing is made is a
third person under the circumstances, and the situation is governed by the rules of co-ownership.
Our Court of Appeals has held that this article cannot be invoked by one co-owner against another
who builds, plants or sows upon their land, since the latter does not do so on land not belonging to
him. (C.A.), O.G. Supp., Aug. 30, 194, p. 126). In the light of the foregoing authorities and
considering that the defendants have expressed their conformity to the partition that was made by
the commissioner as shown in the sketch plan attached to the commissioner's report, said
defendants have no other alternative except to remove and demolish part of their house that has
encroached an area of five (5) sq. meters of the land allotted to the plaintiffs.

WHEREFORE, judgment is hereby rendered assigning Lot 1161-A with an area of thirty (30) sq.
meters to the plaintiffs spouses Concepcion Fernandez Abesia, Lourdes Fernandez Rodil, Genaro
Fernandez and Dominga A. Fernandez, in the respective metes and bounds as shown in the
subdivision sketch plan attached to the Commissioner's Report dated may 29, 1976 prepared by the
Commissioner, Geodetic Engineer Espiritu Bunagan. Further, the defendants are hereby ordered at
their expense to remove and demolish part of their house which has encroached an area of five (5)
square meters from Lot 1161-A of the plaintiffs; within sixty (60) days from date hereof and to deliver
the possession of the same to the plaintiffs. For the Commissioner's fee of P400.00, the defendants
are ordered to pay, jointly and severally, the sum of P133.33 and the balance thereof to be paid by
the plaintiffs. The costs of suit shall be paid by the plaintiffs and the defendants in the proportion of
two-thirds (2/3) and one-third (1/3) shares respectively. A certified copy of this judgment shall be
recorded in the office of the Register of Deeds of the City of Cebu and the expense of such
recording shall be taxed as a part of the costs of the action.
Hence, this appeal interposed by the defendants with the following assignments of errors:

THE TRIAL COURT ERRED IN NOT APPLYING THE RIGHTS OF A BUILDER IN GOOD FAITH
UNDER ART. 448 OF THE NEW CIVIL CODE TO DEFENDANTS-APPELLANTS WITH RESPECT
TO THAT PART OF THEIR HOUSE OCCUPYING A PROTION OF THE LOT ASSIGNED TO
PLAINTIFFS-APPELLEES.

II

THE TRIAL COURT ERRED IN ORDERING DEFENDANTS-APPELLANTS TO REMOVE AND

DEMOLISH AT THEIR EXPENSE, THAT PART OF THEIR HOUSE WHICH HAS ENCROACHED
ON AN AREA OF FIVE SQUARE METERS OF LOT 1161-A OF PLAINTIFFS-APPELLEES.

Article 448 of the New Civil Code provides as follows:

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.

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. 1

However, when, as in this case, the co-ownership is terminated by the partition and it appears that the house 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 was co-
ownership if good faith has been established. 2

Applying the aforesaid provision of the Civil Code, the plaintiffs have the right to appropriate said portion of the
house of defendants upon payment of indemnity to defendants as provided for in Article 546 of the Civil Code.
Otherwise, the plaintiffs may oblige the defendants to pay the price of the land occupied by their house. However, if
the price asked for is considerably much more than the value of the portion of the house of defendants built thereon,
then the latter cannot be obliged to buy the land. The defendants shall then pay the reasonable rent to the plaintiff
upon such terms and conditions that they may agree. In case of disagreement, the trial court shall fix the terms
thereof. Of course, defendants may demolish or remove the said portion of their house, at their own expense, if they
so decide.

WHEREFORE, the decision appealed from is hereby MODIFIED by ordering plaintiff to indemnify defendants for the
value of the Id portion of the house of defendants in accordance with Article 546 of the Civil Code, if plaintiffs elect to
appropriate the same. Otherwise, the defendants shall pay the value of the 5 square meters of land occupied by
their house at such price as may be agreed upon with plaintiffs and if its value exceeds the portion of the house that
defendants built thereon, the defendants may choose not to buy the land but defendants must pay a reasonable
rental for the use of the portion of the land of plaintiffs As may be agreed upon between the parties. In case of
disagreement, the rate of rental shall be determined by the trial court. Otherwise, defendants may remove or
demolish at their own expense the said portion of their house. No costs.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. L-44001 June 10, 1988

PAZ MERCADO, CAROLINA S. CHICO, LUCIANA CABRERA, JOAQUIN IGNACIO, ELMER FLORES, AVELINA
C. NUCOM, et al., petitioners,
vs.
HON. COURT OF APPEALS, HON. BENIGNO PUNO, LOLITA C. BULAONG, FLORENTINO AGULTO,
SEVERINO SALAYSAY, SUSANA BERNARDINO, et al., respondents.

NARVASA, J.:

The question presented by this appeal is whether or not the special civil action of certiorari may be properly resorted
to by a party aggrieved by a judgment of a Regional Trial Court (or Court of First Instance)—which became final
because not appealed within the reglementary period — to bring about its reversal on the ground that the Court had
applied the wrong provision of the Civil Code, and had rendered summary judgment at the instance of the
defendants without receiving evidence on the issue of damages allegedly suffered by the plaintiffs, thereby denying
them due process.

The private respondents, hereafter simply referred to as the Bulaong Group, had for many years been individual
lessees of stalls in the public market of Baliuag, Bulacan; from 1956 to 1972, to be more precise. The market was
destroyed by fire on February 17, 1956; the members of the Bulaong Group constructed new stalls therein at their
expense; and they thereafter paid rentals thereon to the Municipality of Baliuag.

Sometime in 1972, the members of the group sub-leased their individual stalls to other persons, hereafter simply
referred to as the Mercado Group. After the Mercado Group had been in possession of the market stlls for some
months, as sub-lessees of the Bulaong Group, the municipal officials of Baliuag cancelled the long standing leases
of the Bulaong Group and declared the persons comprising the Mercado Group as the rightful lessees of the stalls in
question, in substitution of the former. The municipal authorities justified the cancellation of the leases of the
Bulaong Group by invoking the provisions of Municipal Ordinance No. 14, dated December 14, 1964, which
prohibited the sub-leasing of stalls by the lessees thereof, as well as a directive of the Office of the President
(contained in a letter of Executive Secretary R. Zamora dated May 29,1973) requiring enforcement of said
Ordinance No. 14. Recognition of the Mercado Group's rights over the stalls was subsequently manifested in
Municipal Ordinance No. 49, approved on July 5,1973.

The members of the Bulaong Group sued. They filed several individual complaints with the Court of First Instance
seeking recovery of their stalls from the Mercado Group as well as damages. 1 Their theory was anchored on their
claimed ownership of the stalls constructed by them at their own expense, and their resulting right, as such owners,
to sub-lease the stalls, and necessarily, to recover them from any person withholding possession thereof from them.
Answers were seasonably filed in behalf of the defendants, including the Municipality of Baliuag,2 after which a pre-
trial was held in the course of which the parties stipulated upon practically all the facts.

The Mercado Group thereafter filed motions for summary judgment, asserting that in light of the admissions made at
the pre-trial and in the pleadings, no issue remained under genuine controversion. The Bulaong Group filed an
opposition which, while generally stating that there were "other material allegations in the amended complaint(s)"
upon which proof was needful, actually identified only one issue of fact requiring "formal submission of evidence,"
i.e., the claim for actual damages " ... the exact amount of which shall be proven at the trial." The Bulaong Group
then filed a "Motion to Accept Affidavits and Photographs as Annexes to the Opposition to the Motion for Summary
Judgment," which affidavits and photographs tended to establish the character and value of the improvements they
had introduced in the market stalls. As far as the records show, no objection whatever was presented to this motion
by the Mercado Group (movants for summary judgment), and the affidavits and photographs were admitted by the
Trial Court. Specifically, the Mercado Group never asked, either in their motion for summary judgment or at any time
after having received a copy of the motion to accept affidavits and photographs, etc., that a hearing be scheduled for
the reception of evidence on the issue of the Bulaong Group's claimed actual damages.

On October 24,1975, respondent Judge rendered a summary judgment in all the cases. 3 It rejected the claim of the
Municipality of Baliuag that it had automatically acquired ownership of the new stalls constructed after the old stalls
had been razed by fire, declaring the members of the Bulaong Group to be builders in good faith, entitled to retain
possession of the stalls respectively put up by them until and unless indemnified for the value thereof. The decision
also declared that the Bulaong and Mercado Groups had executed the sub-letting agreements with full awareness
that they were thereby violating Ordinance No. 14; they were thus in pari delicto, and hence had no cause of action
one against the other and no right to recover whatever had been given or demand performance of anything
undertaken. The judgment therefore decreed (1) the annulment of the leases between the Municipality and the
individuals comprising the Mercado Group (the defendants who had taken over the original leases of the Bulaong
Group); and (2) the payment to the individual members of the Bulaong Group (the plaintiffs) of the stated,
adjudicated value of the stalls, with interest IF —

... the Municipality ... would insist in its right rescind or annul its contracts of leases with the said plaintiffs over the
lots on which the stalls in question are erected; for this purpose, since the private defendants become immediate
beneficiaries to a transfer of possession over the stalls in question, the Municipality .. may require said private
defendants .. to pay the plaintiffs the aforesaid amounts in the event that said private defendants and the
Minucipality .. the lots on which said stalls are contracted; however, unless the plaintiffs shall have been fully paid of
the value of their stalls in the amounts mentioned above, they shall have the right to remain in their respective stalls
and in case the private defendants shall refuse to pay for the value of the stalls in this event, the ejectment of the
said private defendants from the stalls in question shall be ordered .....

The Mercado Group and the Municipality filed on November 14, 1975, motions for reconsideration of the summary
judgment, notice of which had been served on them on November 3, 1975. These were denied, and notice of the
order of denial was received by them on December 18, 1975. On January 7, 1976, the Mercado Group filed a notice
of appeal, an appeal bond and a motion for extension of time to file their record on appeal. But by Order dated
January 9, 1976, the Trial Court directed inter alia the execution of the judgment, at the instance of the Bulaong
Group and despite the opposition of that Mercado Group, adjudging that its decision had become final because the
appeal documents had "not been seasonably filed." The writ was issued, and the Mercado Group's motion to quash
the same and to re-open the case was denied.

The Group went to the Court of Appeals, instituting in that court a special civil action of certiorari and prohibition4 "to
annul that portion of the summary judgment . . awarding damages to private respondents (the Bulaong Group), and
to restrain the respondent Judge and the Provincial Sheriff of Bulacan from enforcing the same." That Court
rendered judgment on May 14, 1976, 5 holding that (1) the summary judgment was properly rendered, respondent
Judge (having) merely adhered to the procedure set forth by the . . . Rule (34);" and if "he committed error in the
appreciation of the probative values of the affidavits and counter-affidavits submitted by the parties, such error is
merely one of judgment, and not of jurisdiction;" (2) the Mercado Group had not been denied due process "for failure
of respondent Judge to conduct a formal trial . . (to receive) evidence on the question of damages," since the parties
were afforded the right, in connection with the motion for summary judgment, to speak and explain their side of the
case by means of affidavits and counter-affidavits; and (3) since the Mercado Group had attempted to perfect an
appeal from the summary judgment which was however futile because their appeal papers "were filed beyond the
reglementary period," the judgment had become final and certiorari or prohibition could not be availed of as a
substitute for the group's lost appeal. Once again, the Mercado Group moved for reconsideration of an adverse
judgment, and once again were rebuffed.

The members of the Mercado Group are now before this Court on an appeal by certiorari, this time timely taken,
assailing the above rulings of the Court of Appeals. Their appeal must fail for lack of merit. No error can be ascribed
to the judgment of the Court of Appeals which is hereby affirmed in toto.

Upon the factual findings of the Court of Appeals, by which this court is bound, and taking account of well
established precedent from which there is no perceivable reason in the premises to depart, there is no question that
the petitioners (the Mercado Group) had failed to perfect an appeal from the summary judgement within the
reglementary period fixed by the Rules of Court. According to the Appellate Court-

The summary judgment rendered by respondent Judge, being a final adjudication on the merits of
the said cases, could have been appealed by the petitioners. In point of fact, petitioners did attempt
to perfect an appeal from said judgment, but the attempt proved futile because their notice of appeal,
appeal bond and motion for extension of time file record on appeal were filed beyond the
reglementary period. The record discloses that they received copy of the summary judgment on
November 3, 1975; that on November 14, 1975, or after the lapse of eleven (11) days from receipt of
said decision, they filed their motion for reconsideration of said decision; that on December 18, 1975,
they received copy of the order denying their motion for reconsideration; and that they did not file
their notice of appeal, appeal bond and motion for extension of time until January 7, 1976, or twenty
(20) days after receipt of the order denying their motion for reconsideration. The notice of appeal,
appeal bond and motion for extension were, therefore, presented one (1) day after the expiration of
the 30-day period to perfect an appeal. Thus, respondent Judge correctly disallowed the appeal.

The Appellate Court's computation of the period is correct, and is in accord with Section 3, Rule 41 of the Rules of
Court providing that from the 30-day reglementary period of appeal shall be deducted the "time during which a
motion to set aside the judgment or order or for a new trial has been pending."6

Significantly, the petitioners have made no serious effort to explain and excuse the tardiness of their appeal. What
they have done and continue to do is to insist that the special civil action of certiorari is in truth the proper remedy
because the judgment is void. The judgment is void, they say, because they were denied due process, as
"respondent Judge granted exorbitant damages, without reliable proof, and without giving petitioners the chance to
prove their claim that private respondents are not entitled to damages, and conceding that they are, the damages
are much lower than that awarded by the respondent Judge." 7 According to them, since the matter of damages was
clearly a controverted fact, the Court had absolutely no jurisdiction to determine it on mere affidavits.
There can be no debate about the proposition that under the law, the Trial Court validly acquired jurisdiction not only
over the persons of the parties but also over the subject matter of the actions at bar. The parties composing the
Mercado Group cannot dispute this; they recognized the Court's competence when they filed their answers to the
complaints without questioning the Court's jurisdiction of the subject-matter; indeed neither at that time nor at any
other time thereafter did any one of them ever raise the question.

Now, jurisdiction, once acquired, is not lost by any error in the exercise thereof that might subsequently be
committed by the court. Where there is jurisdiction over the subject matter, the decision of all other questions arising
in the case is but an exercise of that jurisdiction . 8 And when a court exercises its jurisdiction, an error committed
while engaged in that exercise does not deprive it of the jurisdiction being exercise when the error is committed. If it
did, every error committed by a court would deprive it of jurisdiction and every erroneous judgment would be a void
judgment. This, of course, can not be allowed. The administration of justice would not survive such a rule.
9 Moreover, any error that the Court may commit in the exercise of its jurisdiction, being merely an error of
judgment, is reviewable only by appeal, not by the special civil action of certiorari or prohibition. 10

The petitioners do not dispute the propriety of the rendition of a summary judgment by the Court a quo, a remedy
that they themselves had in fact asked for. What they challenge is the inclusion in that judgment of an award of
damages on the basis merely of affidavits, without actual reception of evidence thereon at a hearing set for the
purpose.

The challenge is not however justified by the peculiar circumstances of the case at bar. The petitioners, to repeat,
were the parties who, as defendants, had moved for summary judgment . They knew or were supposed to know
that, as stated by the Rules, their motion would be granted if "the pleadings, depositions, and admissions on file,
together with the affidavits show that, except as to the amount of damages, there is no genuine issue as to any
material fact and that ... (they are) entitled to a judgment as a matter of law." 11 They knew that the private
respondents, as plaintiffs, had in fact opposed their motion and had pointed out precisely the need for a hearing on
the controverted matter of damages. That they did not join in the move to have a hearing on the issue of damages is
an indication that they considered it unnecessary, When the respondents (plaintiffs)—apparently in view of the
Court's and the defendants' indifference to the notion of having a hearing on the matter of damages, implicitly
indicating the belief of the superfluity of a hearing—presented affidavits and depositions to prove the value of the
improvements, for which they were seeking reimbursement, the petitioners (defendants) did not ask that the matter
be ventilated at a hearing, or submit counter-affidavits, as was their right. They made no response whatever. They
were evidently quite confident of obtaining a favorable judgment, and that such an eventuality would preclude the
claimed reimbursement or recovery of damages. As it turned out, they were wrong in their prognostication.

In any event, even assuming error on the Court's part in relying on the unopposed affidavits and photographs as
basis for an award of damages, it was, as the Appellate Court has opined, not an error of jurisdiction under the
circumstances, but one in the exercise of jurisdiction, to correct which the prescribed remedy is appeal. This is not to
say that where a Court determines the propriety of a summary judgment— which it may do on the basis of the
pleadings, depositions, admissions and affidavits submitted by the parties—and discovers that there are genuine
issues of fact, these genuine issues may nonetheless be adjudicated on the basis of depositions, admissions or
affidavits and not of evidence adduced at a formal hearing or trial. This is not the rule. 12 The rule is that it is only the
ascertainment of the character of the issues raised in the pleadings—as genuine, or sham or fictitious—which can
be done by depositions, admissions, or affidavits; the resolution of such issues as are found to be genuine should
be made upon proof proferred at a formal hearing. The peculiar circumstances of the case at bar, already pointed
out, operate to exclude it from the scope of the rule. It is an exception that should however be taken, as affirming
and not eroding the rule.

The petitioners' other theory is more tenable, but will not appreciably advance their cause. They suggest that it was
a mistake for the Trial Court to have accorded to the individuals of the Bulaong Group the stalls and builders in good
faith in accordance with Article 526 of the Civil Code. They are correct. It was indeed error for the Court to have so
ruled. The members of this group were admittedly lessees of space in the public market; they therefore could not,
and in truth never did make the claim, that they were owners of any part of the land occupied by the market so that
in respect of any new structure put up by them thereon, they could be deemed builders in good faith. 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,13 and that he be unaware "that there exists in his title or mode of acquisition any
flaw which invalidates it. 14 It is such a builder in good faith who is given the right 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.15On the other hand, unlike the builder in good faith, a lessee who "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," can only claim payment of "one-half of the value of the improvements" or, "should the lessor
refuse to reimburse said amount, ... remove the improvements, even though the principal thing may suffer damage
thereby." 16

But this error does not go to the Trial Court's jurisdiction. It is an error in the exercise of jurisdiction, which may be
corrected by the ordinary recourse of appeal, not by the extraordinary remedy of certiorari. It is an error that in the
premises can no longer be set aright

The summary judgment rendered by respondent Judge on October 24, 1975 was not an interlocutory disposition or
order but a final judgment within the meaning of Section 2, Rule 41 of the Rules of Court. By that summary judgment
the Court finally disposed of the pending action, leaving nothing more to be done by it with respect to the merits,
thus putting an end to the litigation as its level .17

The remedy available to the petitioners against such a final judgment, as repeatedly stated, was an appeal in
accordance with the aforementioned Rule 41 of the Rules of Court 18 But as observed in an analogous case recently
resolved by this Court.19

. . instead of resorting to ordinary remedy of appeal, ... (the petitioners) availed of the extraordinary remedy of a
special civil action of certiorari in the ... (Court of Appeals), under Rule 65 of the Rules of Court. The choice was
clearly wrong. The availability of the right of appeal obviously precluded recourse to the special civil action of
certiorari. This is axiomatic. It is a proposition made plain by Section 1 of Rule 65 which lays down as a condition for
the filing of a certiorari petition that there be 'no appeal, nor any plain, speedy and adequate remedy in the ordinary
course of law.

In the case at bar, the petitioners lost their right to appeal by failing to avail of it seasonably. To remedy that loss,
they have resorted to the extraordinary remedy of certiorari, as a mode of obtaining reversal of the judgment from
which they failed to appeal. This cannot be done. The judgment was not in any sense null and void ab initio,
incapable of producing any legal effects whatever, which could never become final, and execution of which could be
resisted at any time and in any court it was attempted. 20 It was a judgment which might and probably did suffer from
some substantial error in procedure or in findings of fact or of law, and could on that account have been reversed or
modified on appeal. But since it was not appealed, it became final and has thus gone beyond the reach of any court
to modify in any substantive aspect. The remedy to obtain a reversal or modification of the judgment on the merits is
appeal. This is true even if the error, or one of the errors, ascribed to the Court rendering the judgment is its lack of
jurisdiction of the subject matter, or the exercise of power in excess thereof, or grave abuse of discretion in the
findings of fact or of law set out in its decision. The existence and availability of the right of appeal prescribes a
resort to certiorari, one of the requisites for availment of the latter remedy being precisely that "there should be no
appeal. 21 There may to be sure, be instances when certiorari may exceptionally be permitted in lieu of appeal, as
when their appeal would be inadequate, slow, insufficient, and will not promptly relieve a party from the injurious
effect of the judgment complained of, or to avoid future litigations, 22 none of which situations obtains in the case at
bar. And certain it is that the special civil action of certiorari cannot be a substitute for appeal, specially where the
right to appeal has been lost through a party's fault or excusable negligence.23

That the judgment of the Trial Court applied the wrong provision of the law in the resolution of the controversy has
ceased to be of any consequence. As already discussed, instead of the legal provision governing lessees' rights
over improvements on leased realty, the judgment invoked that relative to the rights of builders in good faith .24 But
the error did not render the judgment void. A judgment contrary to the express provisions of a statute is of course
erroneous, but it is not void; and if it becomes final and executory, it becomes as binding and effective as any valid
judgment; and though erroneous, will henceforth be treated as valid, and will be enforced in accordance with its
terms and dispositions. 25

WHEREFORE, the petition is dismissed, with costs against the petitioners.

 FIRST DIVISION

[G.R. No. 149295. September 23, 2003]

PHILIPPINE NATIONAL BANK, petitioner, vs. GENEROSO DE JESUS, represented by his Attorney-in-Fact,
CHRISTIAN DE JESUS, respondent.

DECISION
VITUG, J.:

Petitioner Philippine National Bank disputes the decision handed down by the Court of Appeals promulgated on
23 March 2001 in CA-G.R. CV No. 56001, entitled Generoso De Jesus, represented by his Attorney-in-Fact,
Christian De Jesus, versus Philippine National Bank. The assailed decision has affirmed the judgment rendered by
the Regional Trial Court, Branch 44, of Mamburao, Occidental Mindoro, declaring respondent Generoso de Jesus
as being the true and lawful owner of the 124-square-meter portion of the land covered by Transfer Certificate of
Title (TCT) No. T-17197 and ordering petitioner bank to vacate the premises, to deliver possession thereof to
respondent, and to remove the improvement thereon.
It would appear that on 10 June 1995, respondent filed a complaint against petitioner before the Regional Trial
Court of Occidental Mindoro for recovery of ownership and possession, with damages, over the questioned
property. In his complaint, respondent stated that he had acquired a parcel of land situated in Mamburao, Occidental
Mindoro, with an area of 1,144 square meters covered by TCT No. T-17197, and that on 26 March 1993, he had
caused a verification survey of the property and discovered that the northern portion of the lot was being
encroached upon by a building of petitioner to the extent of 124 square meters. Despite two letters of demand sent
by respondent, petitioner failed and refused to vacate the area.
Petitioner, in its answer, asserted that when it acquired the lot and the building sometime in 1981 from then
Mayor Bienvenido Ignacio, the encroachment already was in existence and to remedy the situation, Mayor Ignacio
offered to sell the area in question (which then also belonged to Ignacio) to petitioner at P100.00 per square meter
which offer the latter claimed to have accepted. The sale, however, did not materialize when, without the knowledge
and consent of petitioner, Mayor Ignacio later mortgaged the lot to the Development Bank of the Philippines.
The trial court decided the case in favor of respondent declaring him to be the rightful owner of the disputed
124-square-meter portion of the lot and ordering petitioner to surrender possession of the property to respondent
and to cause, at its expense, the removal of any improvement thereon.
The Court of Appeals, on appeal, sustained the trial court but it ordered to be deleted the award to respondent
of attorneys fees, as well as moral and exemplary damages, and litigation expenses.
Petitioner went to this Court, via a petition for review, after the appellate court had denied the banks motion for
reconsideration, here now contending that -

1. THE COURT OF APPEALS GRAVELY ERRED IN LAW IN ADJUDGING PNB A BUILDER IN BAD FAITH OVER
THE ENCROACHED PROPERTY IN QUESTION;

2. THE COURT OF APPEALS GRAVELY ERRED IN LAW IN NOT APPLYING IN FAVOR OF PNB THE
PROVISION OF ARTICLE 448 OF THE CIVIL CODE AND THE RULING IN TECNOGAS PHILIPPINES
MANUFACTURING CORP. VS. COURT OF APPEALS, G.R. No. 108894, February 10, 1997, 268 SCRA 7.[1]

The Regional Trial Court and the Court of Appeals have both rejected the idea that petitioner can be considered
a builder in good faith. In the context that such term is used in particular reference to Article 448, et seq., of the Civil
Code, a builder in good faith is one who, not being the owner of the land, builds on that land believing himself to be
its owner and unaware of any defect in his title or mode of acquisition.
The various provisions of the Civil Code, pertinent to the subject, 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 a 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 449. He who builds, plants, or sows in bad faith on the land of another, loses what is built, planted or sown
without right to indemnity.
Article 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.

A builder in good faith can, under the foregoing provisions, 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.[2] Even as the option lies with the landowner, the grant to him,
nevertheless, is preclusive. He much choose one. He cannot, for instance, compel the owner of the building to
instead remove it from the land.[3] In order, however, that the builder can invoke that accruing benefit and enjoy his
corresponding right to demand that a choice be made by the landowner, he should be able to prove good faith on
his part.
Good faith, here understood, is an intangible and abstract quality with no technical meaning or statutory
definition, and it encompasses, among other things, an honest belief, the absence of malice and the absence of
design to defraud or to seek an unconscionable advantage. An individuals personal good faith is a concept of his
own mind and, therefore, may not conclusively be determined by his protestations alone. It implies honesty of
intention, and freedom from knowledge of circumstances which ought to put the holder upon inquiry.[4] The essence
of good faith lies in an honest belief in the validity of ones right, ignorance of a superior claim, and absence of
intention to overreach another.[5] Applied to possession, 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.[6]
Given the findings of both the trial court and the appellate court, it should be evident enough that petitioner
would fall much too short from its claim of good faith.Evidently, petitioner was quite aware, and indeed advised, prior
to its acquisition of the land and building from Ignacio that a part of the building sold to it stood on the land not
covered by the land conveyed to it.
Equally significant is the fact that the building, constructed on the land by Ignacio, has in actuality been part of
the property transferred to petitioner. Article 448, of the Civil Code refers to a piece of land whose ownership is
claimed by two or more parties, one of whom has built some works (or sown or planted something) and not 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 otherwise for, elsewise stated, where the true owner himself is the builder of works on his own
land, the issue of good faith or bad faith is entirely irrelevant. [7]
In fine, petitioner is not in a valid position to invoke the provisions of Article 448 of the Civil Code. The Court
commiserates with petitioner in its present predicament; upon the other hand, respondent, too, is entitled to his
rights under the law, particularly after having long been deprived of the enjoyment of his property.Nevertheless, the
Court expresses hope that the parties will still be able to come up with an arrangement that can be mutually suitable
and acceptable to them.
WHEREFORE, the decision of the Court of Appeals in CA-G.R. CV No. 56001 is AFFIRMED. No costs.
SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. L-2659 October 12, 1950

In the matter of the testate estate of Emil Maurice Bachrach, deceased. MARY McDONALD
BACHRACH,petitioner-appellee,
vs.
SOPHIE SEIFERT and ELISA ELIANOFF, oppositors-appellants.

Ross, Selph, Carrascoso and Janda for appellants.

Delgado and Flores for appellee.

OZAETA, J.:

Is a stock dividend fruit or income, which belongs to the usufructuary, or is it capital or part of the corpus of the
estate, which pertains to the remainderman? That is the question raised in the appeal.

The deceased E. M. Bachrach, who left no forced heir except his widow Mary McDonald Bachrach, in his last will
and testament made various legacies in cash and willed the remainder of his estate as follows:

Sixth: It is my will and do herewith bequeath and devise to my beloved wife Mary McDonald Bachrach for life
all the fruits and usufruct of the remainder of all my estate after payment of the legacies, bequests, and gifts
provided for above; and she may enjoy said usufruct and use or spend such fruits as she may in any
manner wish.

The will further provided that upon the death of Mary McDonald Bachrach, one-half of the all his estate "shall be
divided share and share alike by and between my legal heirs, to the exclusion of my brothers."

The estate of E. M. Bachrach, as owner of 108,000 shares of stock of the Atok-Big Wedge Mining Co., Inc., received
from the latter 54,000 shares representing 50 per cent stock dividend on the said 108,000 shares. On June 10,
1948, Mary McDonald Bachrach, as usufructuary or life tenant of the estate, petitioned the lower court to authorize
the Peoples Bank and Trust Company as administrator of the estate of E. M. Bachrach, to her the said 54,000 share
of stock dividend by endorsing and delivering to her the corresponding certificate of stock, claiming that said
dividend, although paid out in the form of stock, is fruit or income and therefore belonged to her as usufructuary or
life tenant. Sophie Siefert and Elisa Elianoff, legal heirs of the deceased, opposed said petition on the ground that
the stock dividend in question was not income but formed part of the capital and therefore belonged not to the
usufructuary but to the remainderman. And they have appealed from the order granting the petition and overruling
their objection.

While appellants admits that a cash dividend is an income, they contend that a stock dividend is not, but merely
represents an addition to the invested capital. The so-called Massachusetts rule, which prevails in certain
jurisdictions in the United States, supports appellants' contention . It regards cash dividends, however large, as
income, and stock dividends, however made, as capital. (Minot vs. Paine, 99 Mass., 101; 96 Am. Dec., 705.) It holds
that a stock dividend is not in any true sense any true sense any dividend at all since it involves no division or
severance from the corporate assets of the dividend; that it does not distribute property but simply dilutes the shares
as they existed before; and that it takes nothing from the property of the corporation, and nothing to the interests of
the shareholders.

On the other hand, so called Pennsylvania rule, which prevails in various other jurisdictions in the United States,
supports appellee's contention. This rule declares that all earnings of the corporation made prior to the death of the
testator stockholder belong to the corpus of the estate, and that all earnings, when declared as dividends in
whatever form, made during the lifetime of the usufructuary or life tenant. (Earp's Appeal, 28 Pa., 368.)

. . . It is clear that testator intent the remaindermen should have only the corpus of the estate he left in trust,
and that all dividends should go the life tenants. It is true that profits realized are not dividends until declared
by the proper officials of the corporation, but distribution of profits, however made, in dividends, and the form
of the distribution is immaterial. (In re Thompson's Estate, 262 Pa., 278; 105 Atl. 273, 274.)

In Hite vs. Hite (93 Ky., 257; 20 S. W., 778, 780), the Court of Appeals of Kentucky, speaking thru its Chief Justice,
said:
 . . . Where a dividend, although declared in stock, is based upon the earnings of the company, it is in reality,
whether called by one name or another, the income of the capital invested in it. It is but a mode of
distributing the profit. If it be not income, what is it? If it is, then it is rightfully and equitably the property of the
life tenant. If it be really profit, then he should have it, whether paid in stock or money. A stock dividend
proper is the issue of new shares paid for by the transfer of a sum equal to their par value from the profits
and loss account to that representing capital stock; and really a corporation has no right to a dividend, either
in cash or stock, except from its earnings; and a singular state of case — it seems to us, an unreasonable
one — is presented if the company, although it rests with it whether it will declare a dividend, can bind the
courts as to the proper ownership of it, and by the mode of payment substitute its will for that of that of the
testator, and favor the life tenants or the remainder-men, as it may desire. It cannot, in reason, be
considered that the testator contemplated such a result. The law regards substance, and not form, and such
a rule might result not only in a violation of the testator's intention, but it would give the power to the
corporation to beggar the life tenants, who, in this case, are the wife and children of the testator, for the
benefit of the remainder-men, who may perhaps be unknown to the testator, being unborn when the will was
executed. We are unwilling to adopt a rule which to us seems so arbitrary, and devoid of reason and justice.
If the dividend be in fact a profit, although declared in stock, it should be held to be income. It has been so
held in Pennsylvania and many other states, and we think it the correct rule. Earp's Appeal, 28 Pa. St. 368;
Cook, Stocks & S. sec. 554. . . .

We think the Pennsylvania rule is more in accord with our statutory laws than the Massachusetts rule. Under section
16 of our Corporation Law, no corporation may make or declare any dividend except from the surplus profits arising
from its business. Any dividend, therefore, whether cash or stock, represents surplus profits. Article 471 of the Civil
Code provides that the usufructuary shall be entitled to receive all the natural, industrial, and civil fruits of the
property in usufruct. And articles 474 and 475 provide as follows:

ART. 474. Civil fruits are deemed to accrue day by day, and belong to the usufructuary in proportion to the
time the usufruct may last.

ART. 475. When a usufruct is created on the right to receive an income or periodical revenue, either in
money or fruits, or the interest on bonds or securities payable to bearer, each matured payment shall be
considered as the proceeds or fruits such right.

When it consists of the enjoyment of the benefits arising from an interest in an industrial or commercial
enterprise, the profits of which are not distributed at fixed periods, such profits shall have the same
consideration.lawphil.net

In either case they shall be distributed as civil fruits, and shall be applied in accordance with the rules
prescribed by the next preceding article.

The 108,000 shares of stock are part of the property in usufruct. The 54,000 shares of stock dividend are civil fruits
of the original investment. They represent profits, and the delivery of the certificate of stock covering said dividend is
equivalent to the payment of said profits. Said shares may be sold independently of the original shares, just as the
offspring of a domestic animal may be sold independently of its mother.

The order appealed from, being in accordance with the above-quoted provisions of the Civil Code, his hereby
affirmed, with costs against the appellants.

Moran, C. J., Paras, Feria, Pablo, Bengzon, Tuason, Montemayor and Reyes, JJ., concur.
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. 35223 September 17, 1931

THE BACHRACH MOTOR CO., INC., plaintiff-appellee,

vs.
TALISAY-SILAY MILLING CO., ET AL., defendants-appellees.
THE PHILIPPINE NATIONAL BANK, intervenor-appellant.

Roman J. Lacson for intervenor-appellant.

Mariano Ezpeleta for plaintiff-appellee.
Nolan and Hernaez for defendants-appellees Talisay-Silay Milling Co. and Cesar Ledesma.

ROMUALDEZ, J.:

This proceeding originated in a complaint filed by the Bachrach Motor Co., Inc., against the Talisay-Silay Milling Co.,
Inc., for the delivery of the amount P13,850 or promissory notes or other instruments or credit for that sum payable
on June 30, 1930, as bonus in favor of Mariano Lacson Ledesma; the complaint further prays that the sugar central
be ordered to render an accounting of the amounts it owes Mariano Lacson Ledesma by way of bonus, dividends, or
otherwise, and to pay the plaintiff a sum sufficient to satisfy the judgment mentioned in the complaint, and that the
sale made by said Mariano Lacson Ledesma be declared null and void.

The Philippine National Bank filed a third party claim alleging a preferential right to receive any amount which
Mariano Lacson Ledesma might be entitled to from the Talisay-Silay Milling Co. as bonus, because that would be
civil fruits of the land mortgaged to said bank by said debtor for the benefit of the central referred to, and by virtue of
a deed of assignment, and praying that said central be ordered to delivered directly to the intervening bank said sum
on account of the latter's credit against the aforesaid Mariano Lacson Ledesma.

The corporation Talisay-Silay Milling Co., Inc., answered the complaint stating that of Mariano Lacson Ledesma's
credit, P7,500 belonged to Cesar Ledesma because he had purchased it, and praying that it be absolved from the
complaint and that the proper party be named so that the remainder might be delivered.

Cesar Ledesma, in turn, claiming to be the owner by purchase in good faith an for a reconsideration of the P7,500
which is a part of the credit referred to above, answered praying that he be absolved from the complaint.

The plaintiff Bachrach Motor Co., Inc., answered the third party claim alleging that its credit against Mariano Lacson
Ledesma was prior and preferential to that of the intervening bank, and praying that the latter's complaint be
dismissed.

At the trial all the parties agreed to recognize and respect the sale made in favor of Cesar Ledesma of the P7,500
part of the credit in question, for which reason the trial court dismissed the complaint and cross-complaint against
Cesar Ledesma authorizing the defendant central to deliver to him the aforementioned sum of P7,500. And upon
conclusion of the hearing, the court held that the Bachrach Motor Co., Inc., had a preferred right to receive the
amount of P11,076.02 which was Mariano Lacson Ledesma's bonus, and it ordered the defendant central to deliver
said sum to the plaintiff.

The Philippine National Bank appeals, assigning the following alleged errors as committed by the trial court:

1. In holding that the bonus which the Talisay-Silay Milling Co., Inc., bound itself to pay the planters who had
mortgaged their land to the Philippine National Bank to secure the payment of the debt of said central to said
bank is not civil fruits of said land.

2. In not holding that said bonus became subject to the mortgage executed by the defendant Mariano
Lacson Ledesma to the Philippine National Bank to secure the payment of his personal debt to said bank
when it fell due.

3. In holding that the assignment (Exhibit 9, P.N.B.) of said bonus made on March 7, 1930, by Mariano
Lacson Ledesma to the Philippine National Bank to be applied to the payment of his debt to said Philippine
National Bank is fraudulent.

4. In holding that the Bachrach Motor Co. Inc., in civil case No. 31597 of the Court of First Instance of Manila
levied a valid attachment upon the bonus in question.
 5. In admitting and considering the supplementary complaint filed by the Bachrach Motor Co., Inc., alleging
as a cause of action the attachment of the bonus in question which said Bachrach Motor Co., Inc., in civil
case No. 31821 of the Court of First Instance of Manila levied after the filing of the original complaint in this
case, and after Mariano Lacson Ledesma in this case had been declared in default.

6. In holding that the Bachrach Motor Co., Inc., has a preferential right to receive from the Talisay-Silay
Milling Co., Inc., the amount of P11,076.02 which is in the possession of said corporation as the bonus to be
paid to Mariano Lacson Ledesma, and in ordering the Talisay-Silay Milling Co., Inc., to deliver said amount
to the Bachrach Motor Co., Inc.

7. In not holding that the Philippine National Bank has a preferential right to receive from the Talisay-Silay
Milling Co., Inc., the amount of P11,076.02 held by said corporation as Mariano Lacson Ledesma's bonus,
and in not ordering said Talisay-Silay Milling Co., Inc., to deliver said amount to the Philippine National
Bank.

8. In not holding that the amended complaint and the supplementary complaint of the Bachrach Motor Co.,
Inc., do not state facts sufficient to constitute a cause of action in favor of the Bachrach Motor Co., Inc., and
against the Talisay-Silay Milling Co., Inc., or against the Philippine National Bank.

The appellant bank bases its preferential right upon the contention that the bonus in question is civil fruits of the
lands which the owners had mortgaged for the benefit of the central giving the bonus, and that, as civil fruits of said
land, said bonus was assigned by Mariano Lacson Ledesma on March 7, 1930, by virtue of the document Exhibit 9
of said intervening institution, which admitted in its brief that "if the bonus in question is not civil fruits or rent which
became subject to the mortgage in favor of the Philippine National Bank when Mariano Lacson Ledesma's personal
obligation fell due, the assignment of March 7, 1930 (Exhibit 9, P.N.B.), is null and void, not because it is fraudulent,
for there was no intent of fraud in executing the deed, but that the cause or consideration of the assignment was
erroneous, for it was based upon the proposition that the bonus was civil fruits of the land mortgaged to the
Philippine National Bank." (P. 31.)

The fundamental question, then, submitted to our consideration is whether or not the bonus in question is civil fruits.

This is how the bonus came to be granted: On December 22, 1923, the Talisay-Silay Milling Co., Inc., was indebted
to the Philippine National Bank. To secure the payment of its debt, it succeeded in inducing its planters, among
whom was Mariano Lacson Ledesma, to mortgage their land to the creditor bank. And in order to compensate those
planters for the risk they were running with their property under the mortgage, the aforesaid central, by a resolution
passed on that same date, i.e., December 22, 1923, undertook to credit the owners of the plantation thus mortgaged
every year with a sum equal to two per centum of the debt secured according to yearly balance, the payment of the
bonus being made at once, or in part from time to time, as soon as the central became free of its obligations to the
aforesaid bank, and of those contracted by virtue of the contract of supervision, and had funds which might be so
used, or as soon as it obtained from said bank authority to make such payment. (Exhibits 5, 6; P.N.B.)

Article 355 of the Civil Code considers three things as civil fruits: First, the rents of buildings; second, the proceeds
from leases of lands; and, third, the income from perpetual or life annuities, or other similar sources of revenue. It
may be noted that according to the context of the law, the phrase "u otras analogas" refers only to rent or income,
for the adjectives "otras" and "analogas" agree with the noun "rentas," as do also the other
adjectives "perpetuas"and "vitalicias." That is why we say that by "civil fruits" the Civil Code understands one of
three and only three things, to wit: the rent of a building, the rent of land, and certain kinds of income.

As the bonus in question is not rent of a building or of land, the only meaning of "civil fruits" left to be examined is
that of "income."

Assuming that in broad juridical sense of the word "income" it might be said that the bonus in question is "income"
under article 355 of the Civil Code, it is obvious to inquire whether it is derived from the land mortgaged by Mariano
Lacson Ledesma to the appellant bank for the benefit of the central; for it is not obtained from that land but from
something else, it is not civil fruits of that land, and the bank's contention is untenable.

It is to be noted that the said bonus bears no immediate, but only a remote accidental relation to the land mentioned,
having been granted as compensation for the risk of having subjected one's land to a lien in favor of the bank, for
the benefit of the entity granting said bonus. If this bonus be income or civil fruits of anything, it is income arising
from said risk, or, if one chooses, from Mariano Lacson Ledesma's generosity in facing the danger for the protection
of the central, but certainly it is not civil fruits or income from the mortgaged property, which, as far as this case is
concerned, has nothing to do with it. Hence, the amount of the bonus, according to the resolution of the central
granting it, is not based upon the value, importance or any other circumstance of the mortgaged property, but upon
the total value of the debt thereby secured, according to the annual balance, which is something quite distinct from
and independent of the property referred to.

Finding no merit in this appeal, the judgment appealed from is affirmed, without express finding as to costs. So
ordered.
 Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 104828 January 16, 1997

SPOUSES RAFAEL BENITEZ AND AVELINA BENITEZ, petitioners,

vs.
COURT OF APPEALS, SPOUSES RENATO MACAPAGAL and ELIZABETH MACAPAGAL, respondents.

PANGANIBAN, J.:

May possession of a lot encroached upon by a part of another's house be recovered in an action for ejectment?

This is the main question raised by the petition for review on certiorari assailing the Resolution 1 of the Court of
Appeals, Sixth Division, 2 dated March 24, 1992, in CA-G.R. SP No. 26853 denying due course to petitioner's
appeal and affirming the decision of the Regional Trial Court of Pasig in Civil Case No. 61004, which in turn affirmed
the decision of the Metropolitan Trial Court of San Juan, Metro Manila, Branch 58.

The Facts

On January 22, 1986, petitioners Rafael and Avelina Benitez purchased a 303-square-meter parcel of land with
improvement from the Cavite Development Bank, covered by Transfer Certificate of Title No. 41961 (now, TCT No.
55864).

Subsequently, private respondents Renato and Elizabeth Macapagal bought a 361-square-meter lot covered by
TCT No. 40155. On September 18, 1986, they filed Civil Case No. 53835 with the Regional Trial Court of Pasig,
Branch 157 against petitioners for the recovery of possession of an encroached portion of the lot they purchased.
The parties were able to reach a compromise in which private respondents sold the encroached portion to
petitioners at the acquisition cost of One Thousand Pesos (P1,000.00) per square meter.

On July 17, 1989, private respondents purchased still another property, a 285.70 square-meter-lot covered by TCT
No. 3249-R, adjacent to that of petitioners. After a relocation survey was conducted, private respondents discovered
that some 46.50 square meters of their property was occupied by petitioners' house. Despite verbal and written
demands, petitioners refused to vacate. A last notice to vacate was sent to petitioners on October 26, 1989.

On January 18, 1990, private respondents filed with the Metropolitan Trial Court of San Juan, Branch 58, Civil Case
No. 61004 for ejectment against petitioners. The MeTC of San Juan decided in favor of the former, with the following
disposition: 3

WHEREFORE, in view of all the foregoing, judgment is hereby rendered for the plaintiffs and against the
defendants ordering them and all persons claiming rights under them to vacate and surrender possession of
the subject premises to the plaintiffs as well as to pay the following:

1. The amount of P930.00 a month starting July 17, 1989 until they finally vacate the subject
premises;

2. The amount of P5,000.00 for and as attorney's fees; and

3. Cost of suit.

On appeal, the Regional Trial Court of Pasig, Branch 167, affirmed said decision. 4 The RTC said: 5

The controversy in this case is not an encroachment or overlapping of two (2) adjacent properties owned by
the parties. It is a case where a part of the house of the defendants is constructed on a portion of the
property of the plaintiffs. So that as new owner of the real property, who has a right to the full enjoyment and
possession of the entire parcel covered by Transfer Certificate of Title No. 41961, plaintiffs have the right to
demand that defendants remove the portion of the house standing on plaintiff's realty. . .

The dispositive portion thereof reads: 6

 WHEREFORE, finding no reversible error in the decision appealed from, it being more consistent with the
facts and the law applicable, the same is hereby AFFIRMED in toto. Costs against the defendant-appellants.

SO ORDERED.

On further appeal, the respondent Court found no merit in petitioners' plea. In a Resolution dated March 24, 1992,
the Sixth Division of said Court found the petition to be a mere rehash of the issues and arguments presented
before the lower courts. It ruled in part that: 7

3) Petitioners were fully aware that part of their house encroached on their neighbor's property, while
respondents became aware of it only after purchasing said property. Petitioners cannot claim good faith as
against the respondents.

4) Since petitioners are not builders in good faith, they cannot demand that respondents sell the disputed
portion; what the law provides is that the builders in bad faith can be ordered to dismantle said structure at
their own expense. In the interim period that petitioners' structure remains, they should pay reasonable rent
until they remove the structure.

The dispositive portion thereof reads: 8

For reasons indicated, We find the appeal without merit and deny it due course, with costs against the
petitioners.

SO ORDERED.

Hence, this petition.

The Issues

The main issue is whether the possession of the portion of the private respondents' land encroached by petitioners'
house can be recovered through an action of ejectment, not accion publiciana. Corollarily, petitioners question (a)
the validity of the imposition of "rental" for the occupancy of the encroached portion, (b) the denial of their claimed
pre-emptive right to purchase the encroached portion of the private respondents' land, and (c) the propriety of a
factual review of the CA's finding of bad faith on the part of petitioners.

In a nutshell, petitioners insist that the MeTC had no jurisdiction over the case at bar because its real nature
is accion publiciana or recovery of possession, not unlawful detainer. It is not forcible entry because private
respondents did not have prior possession of the contested property as petitioners possessed it ahead of private
respondents. It is not unlawful detainer because petitioners were not the private respondents' tenants nor vendee
unlawfully withholding possession thereof. Said court also has no jurisdiction to impose payment of "rentals" as
there is no lessor-lessee relationship between the parties. They pray for a review of the factual finding of bad faith,
insisting that the facts uphold their position. Due to their alleged good faith, they claim the pre-emptive right to
purchase the litigated portion as a matter of course. Finally, they insist that the award of attorney's fees is
unwarranted as private respondents allegedly had knowledge of the encroachment prior to their acquisition of said
land.

Private respondents counter that petitioners are estopped from questioning the jurisdiction of the MeTC after they
voluntarily participated in the trial on the merits and lost; that there is no law giving petitioners the option to buy the
encroached property; and that petitioners acted in bad faith because they waived in their deed of sale the usual
seller's warranty as to the absence of any and all liens and encumbrances on the property, thereby implying they
had knowledge of the encroachment at the time of purchase.

The Court's Ruling

The petition lacks merit and should be denied.

First Issue: MeTC Has Jurisdiction

The jurisdictional requirements for ejectment, as borne out by the facts, are: after conducting a relocation survey,
private respondents discovered that a portion of their land was encroached by petitioners' house; notices to vacate
were sent to petitioners, the last one being dated October 26, 1989; and private respondents filed the ejectment suit
against petitioners on January 18, 1990 or within one (1) year from the last demand.

Private respondents' cause of action springs from Sec. 1, Rule 70 of the Revised Rules of Court, which provides:

Sec. 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 landlord, 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 any
contract, express or implied, or the legal representatives or assigns of any such landlord, 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 inferior 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. . .

That petitioners occupied the land prior to private respondents' purchase thereof does not negate the latter's case
for ejectment. Prior possession is not always a condition sine qua non in ejectment. 9 This is one of the distinctions
between forcible entry and unlawful detainer. In forcible entry, the plaintiff is deprived of physical possession of his
land or building by means of force, intimidation, threat, strategy or stealth; thus, he must allege and prove prior
possession. But in unlawful detainer, the defendant unlawfully withholds possession after the expiration or
termination of his right thereto under any contract, express or implied. In such a case, prior physical possession is
not required. 10

Possession can also be acquired, not only by material occupation, but also by the fact that a thing is subject to the
action of one's will or by the proper acts and legal formalities established for acquiring such right. 11 Possession of
land can be acquired upon the execution of the deed of sale thereof by its vendor. Actual or physical occupation is
not always necessary.

In the case before us, considering that private respondents are unlawfully deprived of possession of the encroached
land and that the action for the recovery of possession thereof was made within the one-year reglementary period,
ejectment is the proper remedy. 12 The MeTC of San Juan had jurisdiction.

In addition, after voluntarily submitting themselves to its proceedings, petitioners are estopped from assailing the
jurisdiction of the MeTC. 13 This Court will not allow petitioners to attack the jurisdiction of the trial court after
receiving a decision adverse to their position.

Second Issue: Compensation For Occupancy

Petitioners erroneously construed the order of the MeTC to pay private respondents Nine Hundred Pesos (P930.00)
a month starting July 17, 1989 until they (petitioners) finally vacate the subject premises as "rentals". Technically,
such award is not rental, but damages. Damages are recoverable in ejectment cases under Section 8, Rule 70 of
the Revised Rules of Court. 14 These damages arise from the loss of the use and occupation of the property, and
not the damages which private respondents may have suffered but which have no direct relation to their loss of
material possession. 15 Damages in the context of Section 8, Rule 70 is limited to "rent" or "fair rental value" for the
use and occupation of the property. 16

There is no question that petitioners benefited from their occupation of a portion of private respondents' property.
Such benefit justifies the award of the damages of this kind. Nemo cum alterius, detrimenti locupletari potest. No
one shall enrich himself at the expense of another.

Third Issue: Option To Sell Belongs To Owner

Article 448 of the Civil Code 17 is unequivocal that the option to sell the land on which another in good faith builds,
plants or sows on, belongs to the landowner.

The option is to sell, not to buy, and it is the landowner's choice. Not even a declaration of the builder, planter, or
sower's bad faith shifts this option to him per Article 450 of the Civil Code. 18 This advantage in Article 448 is
accorded the landowner because "his right is older, and because, by the principle of accession, he is entitled to the
ownership of the accessory thing."19 There can be no pre-emptive right to buy even as a compromise, as this
prerogative belongs solely to the landowner. No compulsion can be legally forced on him, contrary to what
petitioners asks from this Court. Such an order would certainly be invalid and illegal. Thus, the lower courts were
correct in rejecting the petitioners' offer to buy the encroached land.

Fourth Issue: A Review of Factual Findings Is Unwarranted

Petitioners ask this Court to review the alleged error of the respondent Court in appreciating bad faith on their part.
According to them, this is contradictory to the fact that private respondents acquired their lot and discovered the
encroachment after petitioners bought their house. After careful deliberation on this issue, this Court finds this
petition for review inadequate as it failed to show convincingly a reversible error on the part of the respondent Court
in this regard. Thus, for very good reasons, this Court has consistently and emphatically declared that review of the
factual findings of the Court of Appeals is not a function that is normally undertaken in petitions for review under
Rule 45 of the Rules of Court. Such findings, as a general rule, are binding and conclusive. 20 The jurisdiction of this
Court is limited to reviewing errors of law unless there is a showing that the findings complained of are totally devoid
of support in the records or that they are so glaringly erroneous as to constitute reversible error. 21

Even respondent Court has taken note of the inadequacy of the petition before it, as it wryly said: 22
 The Petition for Review is not certainly a manifestation of clarity nor an example of a well-organized
summation of petitioners' cause of action. . .

xxx xxx xxx

A careful scrutiny of the above issues discloses that they are mere repetitions in a rehashed form of the
same issues with the same supporting arguments raised by petitioners when they appealed from the
decision of the (MeTC) to the RTC. . .

This petition is no different. We share the foregoing sentiments of the respondent Court. In essence, respondent
Court merely affirmed the decision of the MeTC. The Court of Appeal's finding of petitioners' bad faith did not alter
nor affect the MeTC's disposition. Petitioners want this Court to declare them in good faith and to determine their
rights under Article 448, Civil Code. However, the mere fact that they bought their property ahead of the private
respondents does not establish this point. Nor does it prove that petitioners had no knowledge of the encroachment
when they purchased their property. Reliance on the presumption in Article 526 of the Code is misplaced in view of
the declaration of the respondent Court that petitioners are not builders in good faith.

What petitioners presented are mere allegations and arguments, without sufficient evidence to support them. As
such, we have no ground to depart from the general rule against factual review.

In sum, the petition has not shown cogent reasons and sufficient grounds to reverse the unanimous ruling of the
three lower courts. The MeTC, RTC and the Court of Appeals were all in agreement in sustaining private
respondents' rights. And we uphold them.

WHEREFORE, the petition is DENIED. The assailed Resolution is hereby AFFIRMED.

SO ORDERED.

Narvasa, C.J., Davide, Jr., Melo and Francisco, JJ., concur.

 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. L-12812 September 29, 1959

FILIPINAS COLLEGES, INC., plaintiff-appellee,

vs.
MARIA GARCIA TIMBANG, ET AL., defendants.

------------------------------

G.R. No. L-12813 September 29, 1959

MARIA GARCIA TIMBANG, ET AL., plaintiffs.

MARIA GARICA TIMBANG, plaintiff-appellant,
vs.
MARIA GERVACIO BLAS, defendant-appellee.

De Guzman and Fernandez for appellee Filipinas Colleges, Inc.

San Huan, Africa and Benedicto for appellant Maria Garcia Timbang.
Nicanor S. Sison for appellee Maria Gervacio Blas.

BARRERA, J.:

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:1âwphïl.nêt

(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 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.1âwphïl.nêt

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 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 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.
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. L-44606 November 28, 1938

VICENTE STO. DOMINGO BERNARDO, plaintiff-appellant,

vs.
CATALINO BATACLAN, defendant-appellant.
TORIBIO TEODORO, purchaser-appellee.

Pedro de Leon for plaintiff-appellant.

Angel H. Mojica and Francisco Lavides for defendant appellant.
Jose Y. Garde for appellee.

LAUREL, J.:

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:

Por las consideraciones expuestas, se declara al demandante Vicente Santo Domingo Bernardo dueño con
derecho a la posesion del terreno que se describe en la demanda, y al demandado Catalino Bataclan con
derecho a que del demandante le pague la suma de P1,642 por gastos utiles hechos de buena fe en el
terreno, y por el cerco y ponos de coco y abaca existentes en el mismo, y con derecho, ademas a retener la
posesion del terreno hasta que se le pague dicha cantidad. Al demandante puede optar, en el plazo de
treinta dias, a partir de la fecha en que fuere notificado de la presente, por pagar esa suma al demandado,
haciendo asi suyos el cerco y todas las plantaciones existentes en el terreno, u obligar al demandado a
pagarle el precio terreno, a razon de trescientos pesos la hectarea. En el caso de que el demandante optara
por que el demandado le pagara el precio del terreno, el demandado efectuara el pago en el plazo
convenientes por las partes o que sera fijado por el Juzgado. Sin costas.

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 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:

Por tanto, se ordena al Sheriff Provincial de Cavite ponga a Toribio Teodoro en posesion del terreno
comprado por el en subasta publica y por el cual se le expidio certificado de venta definitiva, reservando al
demandado su derecho de ejercitar una accion ordinaria para reclamar del demandante la cantidad de
P2,212 a que tiene derecho por la limpieza y mejoras del terreno y cuya suma, en justicia y equidad, debe
ser descontada y deducida de la suma de P8,000 que ya ha recibido el demandante.

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. lawphi1.net

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.

Avanceña, C.J., Villa-Real, Imperial and Diaz, JJ., concur.

 Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. L-57288 April 30, 1984

LEONILA SARMINETO, petitioner,

vs.
HON. ENRIQUE A. AGANA, District Judge, Court of First Instance of Rizal, Seventh Judicial District, Branch
XXVIII, Pasay City, and SPOUSES ERNESTO VALENTINO and REBECCA LORENZO-
VALENTINO, respondents.

Mercedes M. Respicio for petitioner.

Romulo R. Bobadilla for private respondents.

MELENCIO-HERRERA, J.:ñé+.£ªwph!1

This Petition for certiorari questions a March 29, 1979 Decision rendered by the then Court of First Instance of
Pasay City. The Decision was one made on memoranda, pursuant to the provisions of RA 6031, and it modified, on
October 17, 1977, a judgment of the then Municipal Court of Paranaque, Rizal, in an Ejectment suit instituted by
herein petitioner Leonila SARMIENTO against private respondents, the spouses ERNESTO Valentino and Rebecca
Lorenzo. For the facts, therefore, we have to look to the evidence presented by the parties at the original level.

It appears that while ERNESTO was still courting his wife, the latter's mother had told him the couple could build a
RESIDENTIAL HOUSE on a lot of 145 sq. ms., being Lot D of a subdivision in Paranaque (the LAND, for short). In
1967, ERNESTO did construct a RESIDENTIAL HOUSE on the LAND at a cost of P8,000.00 to P10,000.00. It was
probably assumed that the wife's mother was the owner of the LAND and that, eventually, it would somehow be
transferred to the spouses.

It subsequently turned out that the LAND had been titled in the name of Mr. & Mrs. Jose C. Santo, Jr. who, on
September 7 , 1974, sold the same to petitioner SARMIENTO. The following January 6, 1975, SARMIENTO asked
ERNESTO and wife to vacate and, on April 21, 1975, filed an Ejectment suit against them. In the evidentiary
hearings before the Municipal Court, SARMIENTO submitted the deed of sale of the LAND in her favor, which
showed the price to be P15,000.00. On the other hand, ERNESTO testified that the then cost of the RESIDENTIAL
HOUSE would be from P30,000.00 to P40,000.00. The figures were not questioned by SARMIENTO.

The Municipal Court found that private respondents had built the RESIDENTIAL HOUSE in good faith, and,
disregarding the testimony of ERNESTO, that it had a value of P20,000.00. It then ordered ERNESTO and wife to
vacate the LAND after SARMIENTO has paid them the mentioned sum of P20,000.00.

The Ejectment suit was elevated to the Court of First Instance of Pasay where, after the submission of memoranda,
said Court rendered a modifying Decision under Article 448 of the Civil Code. SARMIENTO was required, within 60
days, to exercise the option to reimburse ERNESTO and wife the sum of 40,000.00 as the value of the
RESIDENTIAL HOUSE, or the option to allow them to purchase the LAND for P25,000.00. SARMIENTO did not
exercise any of the two options within the indicated period, and ERNESTO was then allowed to deposit the sum of
P25,000.00 with the Court as the purchase price for the LAND. This is the hub of the controversy. SARMIENTO
then instituted the instant certiorari proceedings.

We agree that ERNESTO and wife were builders in good faith in view of the peculiar circumstances under which
they had constructed the RESIDENTIAL HOUSE. As far as they knew, the LAND was owned by ERNESTO's
mother-in-law who, having stated they could build on the property, could reasonably be expected to later on give
them the LAND.

In regards to builders in good faith, Article 448 of the Code provides:têñ.£îhqwâ£

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.
(Paragraphing supplied)

The value of the LAND, purchased for P15,000.00 on September 7, 1974, could not have been very much more
than that amount during the following January when ERNESTO and wife were asked to vacate. However,
ERNESTO and wife have not questioned the P25,000.00 valuation determined by the Court of First Instance.

In regards to the valuation of the RESIDENTIAL HOUSE, the only evidence presented was the testimony of
ERNESTO that its worth at the time of the trial should be from P30,000.00 to P40,000.00. The Municipal Court
chose to assess its value at P20,000.00, or below the minimum testified by ERNESTO, while the Court of First
Instance chose the maximum of P40,000.00. In the latter case, it cannot be said that the Court of First Instance had
abused its discretion.

The challenged decision of respondent Court, based on valuations of P25,000.00 for the LAND and P40,000.00 for
the RESIDENTIAL HOUSE, cannot be viewed as not supported by the evidence. The provision for the exercise by
petitioner SARMIENTO of either the option to indemnify private respondents in the amount of P40,000.00, or the
option to allow private respondents to purchase the LAND at P25,000.00, in our opinion, was a correct
decision.têñ.£îhqwâ£

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 article 453 (now Article 546).
The owner, of the land. upon, the other hand, has the option, under article 361 (now Article 448),
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. (Emphasis ours)

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 nor 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 (now Article 448) and
453 (now Article 546) of the Civil Code. (Ignacio vs. Hilario, 76 Phil. 605, 608 [1946]).

WHEREFORE, the Petition for Certiorari is hereby ordered dismissed, without pronouncement as to costs.

SO ORDERED.1äwphï1.ñët

Teehankee (Chairman), Plana, Relova, Gutierrez, Jr. and De la Fuente, JJ., concur.
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. L-43345 July 29, 1976

JOSEFINA S. DE LAUREANO, petitioner,

vs.
HON. MIDPANTAO L. ADIL, in his capacity as Presiding Judge, Court of First Instance of Iloilo, Branch II,
and ONG CU, respondents.

Celso Ed. T. Unson for petitioner.

Rolando Magbanua Antiquiera for private respondent.

AQUINO, J.:

Josefina S. de Laureano in this special civil action of certiorari assails the interlocutory orders of the Court of First
Instance of Iloilo, denying her motions for execution and for a preliminary mandatory injunction in an ejectment suit
which was decided in her favor by the city court of Iloilo City and which was appealed by the lessee, Ong Cu (Civil
Case No. 10370).

Mrs. Laureano is the registered owner of Lots 996 and 1004-B with a total area of 3,107 square meters located at
the corner of Iznart and Solis Streets, Iloilo City. The lots were leased to Ong Cu for fifteen year period which
allegedly expired on August 31, 1974.

In view of Ong Cu's failure to vacate the lots and remove his improvements thereon. Mrs. Laureano filed against him
an ejectment suit in October, 1974 in the city court of Iloilo City.

After trial, the city court on September 23, 1975 rendered a judgment ordering Ong Cu to vacate the lots, to restore
their possession to Mrs. Laureano, to remove his buildings and other improvements thereon and to pay P12,428
monthly as compensation for the use and occupation of the lots from September 1, 1974 up to the time he vacates
them, with interest at twelve percent per annum from the date of accrual plus P10,000 as moral and exemplary
damages and attorney's fees.

Ong Cu appealed to the Court of Fist Instance of Iloilo. Instead of filing a supersedeas bond based on the findings of
the city court in its decision, Ong Cu asked the city court ex parte to approve his supersedeas bond in the sum of
P22,000 and to fix the rental value of the two lots at P1,200 a month. The city court granted that ex parte motion in
its order of October 8, 1975. Thereafter, the record was elevated to the Court of First Instance. The case was
assigned to the sala of respondent Judge.

On November 4 Mrs. Laureano received a notice from the clerk of court that Ong Cu's appeal had been docketed.
On November 13 she filed a motion in the lower court praying for a preliminary mandatory injunction to restore her
to the possession of the said lots. Invoking article 1674 of the Civil Code and section 9, Rule 70 of the Rules of
Court, she alleged that Ong Cu's appeal was frivolous and dilatory.

She also asked for immediate execution of the city court's judgment on the ground that Ong Cu's supersedeas bond
was inadequate and that he had failed to deposit the sum of P12,428 monthly as reasonable value of the use and
occupation of the lots adjudged by the city court.

Ong Cu opposed the two motions. The lower court in its order of December 9, 1975 upheld the city court's order
fixing the supersedeas bond and the amount to be deposited by Ong Cu.

After the lower court's attention was called to its failure to resolve Mrs. Laureano's other motion for a mandatory
injunction, it ruled in its order of February 12, 1976 that the writ could not be granted because it had already
sanctioned Ong Cu's supersedeas bond, the purpose of which was to stay execution pending appeal. The lower
court reasoned out that it would be absurd to stay execution and at the same time restore possession to the plaintiff
by granting the mandatory injunction. It regarded Ong Cu as a possessor in good faith entitled to reimbursement of
his necessary and useful expenses.

The instant certiorari action was filed on March 25, 1976. The issue is whether the lower court acted. with grave
abuse of discretion in denying Mrs. Laureano's motions for execution and a mandatory injunction.

The motion for execution. — Rule 70 of the Rules of Court provides:

 SEC. 8. Immediate execution of judgment. Haw to stay same. If judgment is rendered against the
defendant, execution shall issue immediately, unless an appeal has been perfected and the
defendant to stay execution files a sufficient bond, approved by the municipal or city court and
executed to the plaintiff to enter the action in the Court of First Instance and to pay the rents,
damages, and costs accruing down to the time of the judgment appealed from, and unless, during
the pendency of the appeal, he deposits with the appellate court the amount of rent due from time to
time under the contract, if any, as found by the judgment of the municipal or city court to exist. In the
absence of a contract, he shall deposit with the court the reasonable value of the use and
occupation of the premises for the preceding month or period at the rate determined by the
judgment, on or before the tenth day of each succeeding month or period. The supersedeas bond
shall be transmitted by the municipal or city court, with the other papers, to the clerk of the Court of
First Instance to which the action is appealed.

All moneys so paid to the appellate court shall be deposited in the provincial or city treasury, and
shall be held there until the final disposition of the appeal, unless the court, by agreement of the
interested parties, or in the absence of reasonable grounds of opposition to a motion to withdraw, or
for justifiable reasons, shall decree otherwise. Should the defendant fail to make the payments
above prescribed from time to time during the pendency of the appeal, the appellate court, upon
motion of the plaintiff, of which the defendant shall have notice, and upon proof of such failure, shall
order the execution of the judgment appealed from with respect to the restoration of possession, but
such execution shall not be a bar to the appeal taking its course until the final disposition thereof on
its merits.

xxx xxx xxx

As explicitly provided in section 8, the judgment of tile inferior court in plaintiff's favor in an ejectment case is
immediately executory. Thus, where the city court on the day it rendered the judgment ordered the execution thereof
and the defendant did not perfect his appeal and did not post a supersedeas bond, it was held that certiorari would
not lie to set aside the execution. Section 8 of Rule 70 is an exception to the general rule as to the execution of the
judgment of an inferior court which is found in section 18, Rule 5 of the Rules of Court (Pascua vs. Nable, 71 Phil.
186).

The inferior court's judgment is immediately executory in order to prevent further damages to the plaintiff should the
defendant continue to deprive him of the possession of the premises in litigation (Yu Tiong Tay vs. Barrios, 79 Phil.
'597, 601).

The defendant may stay execution by (a) perfecting an appeal and filing a supersedeas bond and (b) paying from
time to time either to the plaintiff or to the Court of First Instance during the pendency of the appeal the rentals or the
reasonable value Of the use and occupation of the property as fixed by the inferior in its judgment (Sison vs. Hon.
Bayona, 109 Phil. 567, 561; Vda. de Palanca vs. Chua Keng Kian, L-26430, March 11, 1969, 27 SCRA 356).

The reasonable value of the use and occupation of the premises is that fixed by the inferior court in its
judgmentbecause the rental stipulated in the lease contract that had expired might no longer be the reasonable
value for the use and occupation of the premises by the reason of the change or rise in value (Aylon vs. Jugo, 78
Phil. 816).

The purpose of the supersedeas bond is to secure payment of the rents and damages adjudged in the appealed
judgment. Hence, the bond is not n if the defendant deposits in court the amount of back rentals as fixed in the
judgment. In other words, the supersedeas bond answers only for rentals was in the judgment and not for those that
may accrue during the pendency of the appeal which are guaranteed by the periodical deposits to be made by the
defendant. (Sison vs. Hon. Bayona, supra). The appeal bond answers for the costs (Sanchez vs. Zosa, L-27043,
November 28, 1975, 68 SCRA 171, 174; Contreras vs. Dinglasan 79 Phil. 42).

The damages contemplated in section 8 of Rule 70 refer to the reasonable compensation for the use and
occupation of the property which is generally measured by its fair rental value. It cannot refer to other damages
which are foreign to the enjoyment or material possession of the property. Consequently attorney's fees cannot be
considered as damages (Castueras vs. Bayona, 106 Phil. 340).

In the instant case, the city court found that Ong Cu's lease expired on August 31, 1974 and that the reasonable
value of the use and occupation of the two lots is four pesos a square meter or P12,428 monthly. To stay execution,
Ong Cu should have filed, and the city court should have required, a supersedeas bond in the total amount of the
reasonable value of the use and occupation of the two lots for the period from September 1, 1974 to September,
1975, or for thirteen months, at the rate fixed in the city court's judgment which is P12,428.

The supersedeas bond should be in the total sum of P161,564.00. And the amount to be deposited monthly
beginning October, 1975 is that same amount of P12,428. The deposit should be made on or before the tenth day of
the succeeding month.
The city court erred in issuing ex parte an order granting Ong Cu's motion fixing the supersedeas bond at P22,000
and the monthly deposit at P1,200 which was the rental stipulated in the lease contract that had already expired.
The city court should not have allowed Ong Cu to dictate the amount of the supersedeas bond and the amount of
the monthly payments to be deposited in court.

The reasonable value of the use and occupation of the two lots was already fixed in its judgment. That value is the
value to be deposited in court. Ong Cu's motion that it be fixed at P1,200 was uncalled for and was in contravention
of the mandatory provisions of section 8 of Rule 70.

Also contrary to the peremptory provisions of section 8 was Ong Cu's act of fixing his supersedas bond at P22,000
instead of at the amount equivalent to the total compensation or rentals Is that had accumulated up to the rendition
of the city court's judgment. That is the amount of the supersedeas bond unalterably fixed in section 8.

The lower court theorized that the city court's order of October 8, 1975 approving Ong Cu's supersedeas bond in the
sum of P22,000 and provisionally fixing the monthly rental deposited at P1,200 was a valid amendment of the city
court's decision of September 23. That theory is untenable. It distorts the meaning of an amendment. Ong Cu did
not move. that the decision be amended. The order according to its letter and tenor can in no sense be interpreted
as amendment of the city court's decision. It makes no reference to the decision.

At the time the order was issued, Ong Cu had already riled his notice of appeal. He did not rile a new notice of
appeal by indicating therein that he was appealing from the city court's ,decision as supposedly amended by its
order of October 8. He could not have done so because the October 8 order in its face does not purport to amend
the decision.

It results that Ong Cu's supersedeas bond was inadequate and that he did not deposit the compensation for the use
and occupation of the two lots which wits fixed in the city court judgment. His supersedeas bond and his deposits
were not sufficient to stay execution.

If this were a case where the defendant did not file any supersedeas bond or did not make any monthly deposit,
then Mrs. Laureano would be entitled as a matter of right to the immediate execution of the city court's judgment
both as to the restoration of possession and the payment of the accrued rentals or compensation for the use and
occupation of the premises (De Pages and Vda. de Rodriguez vs. Hon. Canonoy, 116 Phil. 898, 901; Paulino, Sr.
vs. Hon. Surtida, 109 Phil. 621, 626).

In such a case ' the execution is mandatory. The only exceptions are the existence of fraud, accident, mistake or
execusable negligence which prevented the defendant from posting the supersedeas bond or making the monthly
deposit, or the occurrence of supervening events which brought about a material change in the situation of the
parties and which would make the execution inequitable (Cunanan vs. Rodas, 78 Phil. 800; Laurel vs. Abalos, L-
26098, October 31, 1969, 30 SCRA 281).

This is a case where there was a supersedeas bond and where monthly de sits were made but the bond and the
deposit were inadequate or were not in conformity with the city court's judgment. Ong Cu committed a mistake
because he followed the erroneous order of the city court which fixed the supersedeas bond and the monthly
deposit in contravention of its own decision and, consequently, in violation of section 8 of Rule 70. Because of that
mistake, immediate execution under Rule 70 would not be warranted (See Yu Phil. Khim vs. Amparo, 86 Phil. 441,
445, Bantug vs. Montinola, 73 Phil. 13, 20; Kraut vs. Encarnacion, 96 Phil. 986; Tagulimot vs. Makalintal, 85 Phil.
40; De la Cruz vs. Burgos, L-28095, July 30, 1969, 28 SCRA 977). The Court of First Instance has discretion to
order the execution of a new supersedeas bond to replace a defective one (Zamora vs. Dinglasan and Hilario, 77
Phil. 46, 53).

Ong Cu should be given a thirty-day period from notice within which to file a new supersedeas bond in the sum of
P161,564 and to deposit the value of the use and occupation of the two lots at the rate of P12,428 beginning
October, 1975 less the amounts already deposited by him. Execution should issue if he fails to file a new
supersedeas bond and to make up for the deficiency in his monthly deposits.

Motion for mandatory injunction. — The Civil Code provides:

ART. 1674. In ejectment cases where an appeal is taken the remedy granted in article 539, second
paragraph, shall also apply, if the higher court is satisfied that the lessee's appeal is frivolous or
dilatory, or that the lessor's appeal is prima facie meritorious. The period of ten days referred to in
said article shall be counted from the time the appeal is perfected. (n)

Article 1674 is reproduced in section 9 of Rule 70. Article 539 of the Civil Code in its second paragraph grants to the
possessor, who was deprived of the possession of his real property through forcible entry, the right to secure from
an inferior court in the action for forcible entry a writ of preliminary mandatory injunction to restore him in his
possession.

Article 1674 gives to the plaintiff in an unlawful detainer case originating in the inferior court and appealed to the
Court of First Instance the remedy which article 539 gives to the plaintiff in a forcible entry case. It is designed to
eliminate the injustice of the old rule which allowed the lessee to continue in possession during an appeal even if the
owner or plaintiff has an immediate right to the premises in litigation (pp. 98,143, Report of Code Commission).

Article 1674 is in consonance with the summary character of an ejectment suit which is an expeditious means for
recovering possession of real property (Deveza vs. Montecillo, L-23942, March 28, 1969, 27 SCRA 822; Mara, Inc.
vs. Estrella, L40511, July 25, 1975, 65 SCRA 471) but the effectiveness of which was often frustrated by
defendant's dilatory tactics which were tolerated by inferior courts (Vda. de Palanca vs. Chua Keng Kian L-26430,
March 11, 1969, 27 SCRA 3.56, 365-6).

The decisive issue is whether the pleadings, the city court's decision and Ong Cu's contentions show that his appeal
is manifestly frivolous and dilatory.

There is no question that Mrs. Laureano is the registered owner of the two lots and that they were leased to Ong Cu
for a fifteen year period counted from September 1, 1959 and expiring on August 31, 1974. Ong Cu in his answer to
the ejectment complaint unmistakably admitted that the lease expired on that date. He alleged that there were
negotiations for his purchase of the two lots.

His defenses were that the ejectment action was premature because he was still considering Mrs. Laureano's
proposal to sell the lots; that the removal of his buildings and iniprovements allegedly worth P1,800,000 would
prejudice him and entail considerable expenses; that there is difficulty in looking for another site during the short
period granted to him by Mrs. Laureano; that he is willing to buy the lots at a reasonable price, and that the price
fixed by Mrs. Laureano is excessive.

Those defenses cannot defeat the ejectment suit. The expiration of lease and Mrs. Laureano's refusal to renew it
made Ong Cu a deforciant or an unlawful with holder of the possession of the lots. He has become a possessor in
bad faith. The Civil Code provides:

ART. 1669. If the lease was made for a determinate time, it ceases upon the day fixed, without the
need of a demand. (1565)

ART. 1671. If the lessee continues enjoying the thing after the expiration of the contract over the
lessor's objection, the former shall be subject to the responsibilities of a possessor in bad faith. (n)

ART. 1673. The lessor may judicially eject the lessee for any of the following causes:

(1) When the period agreed upon, ... has expired.

xxx xxx xxx

(1569a)

The rule is that if after the termination of the lease contract the lessee prolongs his occupation of the premises, there
is unlawful detainer and article 1674 applies. For the purpose of that article, it is enough that the plaintiff is the owner
of the land and that the defendant is in temporary occupation thereof whether under a lease contract or on mere
tolerance or under a temporary permit. (De la Cruz vs. Bocar, 99 Phil. 491).

The lower court assumed that Ong Cu in constructing his building on the leased lots is a possessor in good faith
entitled to reimbursement of the necessary and useful expenses incurred by him and with a right of retention, as
contemplated in articles 546 and 547 of the Civil Code.

That assumption is erroneous. As a lessee, who constructed a building on the leased land, Ong Cu cannot be
characterized as a builder in good faith. Under article 448 of the Civil Code the owner of the land on which anything
has been built in good faith may appropriate the building after payment of the indemnity provided in articles 546 and
548 of the Civil Code.

Article 448 applies to a case where one builds on land of which he honestly claims to be the owner and not to lands
wherein one's only interest is that of a lessee under a rental contract. A contrary rule would place it within the power
of the lessee "to improve his landlord out of his property" (Alburo vs. Villanueva, 7 Phil. 277, 280; Cortes vs. Ramos,
46 Phil. 184; Fojas vs. Velasco, 51 Phil. 520; Bantug vs. Montinola, 73 Phil. 13).

In other words, article 448 refers to a possessor who occupied the land in the belief that he was the owner thereof. It
does not apply to the lessee because the lessee knows at the outset that he is not the owner of the land (Lopez, Inc.
vs. Philippine & Eastern Traiding Co., Inc., 98 Phil. 348). The tenant has no pretension to being the owner of the
land (Rivera vs. Trinidad, 48 Phil. 396, 401).

As noted by the city court, Ong Cu's rights with respect to the improvements made by him on the leased land are
governed by the following provisions of the Civil Code:
 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. (n)

Under article 1678 it is the lessor who has the option to pay for one-half of the value of the improvements which the
lessee has 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 (Philippine National Bank vs. Pineda, L-29748, August 29, 1969, 29
SCRA 262; Lapeña and Pineda vs. Morfe, 101 Phil. 997; Sto. Domingo vs. Chua Man, 105 Phil. 220; Bacaling vs.
Laguda, 70 O. G. 2694, 54 SCRA 243).

Contrary to the lower courts impression, the lessee has no right of retention because article 546 of the Civil Code
does not apply to the improvements made by him. Only the possessor in good faith has a right of retention under
article 546. As already noted, article 1671 regards an overstaying lessee as a possessor in bad faith.

The lower court discerned an absurdity or incongruency in allowing a defendant in an ejectment case to stay
execution of the inferior court's decision, by filing a supersedeas bond and making monthly deposits, and at the
same time granting a mandatory injunction to restore possession on the theory that the defendant's appeal is
frivolous and mandatory.

The absurdity is more apparent than real. The execution in an ejectment case has two espects: (a) possession and
(b) the rentals or reasonable value of the use of the premises, The mandatory injunction refers to the possession of
the premises in litigation.

On the other hand, the supersedeas bond and the monthly deposits are primarily designed to insure that the plaintiff
would be paid the back rentals or the compensation for the use and occupation of the premises should the inferior
court's decision in his favor be affirmed on appeal. Hence, if no bond was filed or no monthly deposit was made, the
plaintiff is entitled to the possession of the premises. To allow the defendant to continue his possession without any
security for the rentals would be prejudicial to the plaintiff. He might not be able to recover the back rentals when the
judgment in his favor becomes final and executory. In that event, his claim for rentals would be illusory or ineffectual.

If the mandatory injunction is granted, defendant's possession would cease but the supersedeas bond and the
deposits already made would subsist as security for the accrued pecuniary liability of the defendant to the plaintiff.
The execution as to the rentals or compensation for the use of the premises would be stayed.

It results that the lower court gravely abused its discretion in not granting the writ of mandatory injunction. Its
questioned orders were predicated on erroneous assumptions.

Generally, certiorari does not lie to question the propriety of an interlocutory order of the trial court. Interlocutory
orders ordinarily should be reviewed when an appeal is taken from the trial court's judgment. Not every procedural
error or erroneous legal or factual conclusion amounts to a grave abuse of discretion. An error of judgment is not
necessarily a jurisdictional error.

But when a grave abuse of discretion was patently committed, such as when the lower court acted capriciously and
whimsically, or petitioner's contention appears to be clearly tenable, or the broader interests of justice or public
policy require the setting aside of the interlocutory order, then it devolves upon this Court in a certiorari proceeding
to exercise its supervisory authority and to correct the error committed which in such a case is equivalent to lack of
jurisdiction (Sanchez vs. Zosa, L-27043, November 28, 1975, 68 SCRA 171, 175; Pacheco vs. Tumangday and
Fernando, 108 Phil. 238; Manila Electric Co. and Sheriff of Quezon City vs. Hon. Enriquez, etc. and Espinosa, 110
Phil. 499).

The immediate possession to be granted to Mrs. Laureano under the writ of mandatory injunction would embrace
the portions of the two lots not occupied by Ong Cu's improvements.

As to the portions of the lots occupied by Ong Cu's improvements, their demolition would be necessary in order to
deliver the possession thereof to Mrs. Laureano. In such a case, the provisions of section 14, Rule 39 of the Rules
of Court should be observed. A special order of demolition should be issued only after r notice and hearing a. c g
and after giving Ong Cu a reasonable time effect the removal.

The disposition of the appeal in the lower court should proceed in accordance. with section 45 of the Judiciary Law
as amended. The grant of the mandatory injunction constitutes a prejudgment of the appeal with respect to the
possession of the two lots. The main point to be resolved in the lower court's disposition of the appeal is the
correctness of the city court's finding on the reasonable value of the use and occupation of the two lots after the
lease expired on August 31, 1974.

In filing the ejectment suit Mrs. Laureano opted not to reimburse Ong Cu for his improvements. Consequently, there
is no issue as to the reimbursement to be made under article 1678. What period should be given to Ong Cu for the
removal of his improvements is a matter that should be judiciously resolved by the lower court in the light of the
evidence introduced in the city court and the evidence that will be presented during the hearing on the petition for a
special order of demolition. Ong Cu's rights under the law should be respected. Nothing oppressive or arbitrary
should be perpetrated in connection with the removal of his improvements.

WHEREFORE, the lower court's orders of December 9, 1975 and February 12, 1976 are set aside.

(1) The lower court is directed to require Ong Cu (a) to file within thirty (30) days from notice a new
supersedeas bond in the amount of P161,564 representing the reasonable compensation for the use
and occupation of the two lots, at the rate found by the city court, from September 1, 1974 to
September, 1975, when the city court rendered its judgment, and (b) to deposit in court within the
same period the compensation for the use and occupation of the lots for the period from October 1,
1975 to June, 1976 at the rate of P12,428 a month, the amount fixed in the inferior court's judgment,
less the amounts already deposited by Ong Cu at the rate of P1,200 a month.

(2) If after June, 1976 he has not restored to Mrs. Laureano the portions of the two lots not occupied
by his buildings, then h should deposit in court on or before the tenth day of each month, as
prescribed in section 8, Rule 70 of the Rules of Court, the same sum of P12,428 until he has
complied with the mandatory injunction decreed herein.

(3) The lower court is further directed to issue a writ of preliminary mandatory injunction requiring
Ong Cu to vacate the two lots in question, to deliver the possession thereof to Mrs. Laureano and to
remove his buildings and improvements after the court has passed upon the corresponding petition
for demolition.

(4) After Ong Cu has complied with the mandatory injunction with respect to the portions of the lots
not occupied by his buildings and improvements, he should deposit in court the value of the use and
occupation of the portions of the two lots occupied by his buildings at the rate of four pesos a square
meter. Costs against respondent Ong Cu.

SO ORDERED.

Fernando (Chairman), Antonio and Martin, JJ., concur.

Concepcion, Jr., is on leave.

Martin J., was designated to sit in the Second Division.

 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. L-33422 May 30, 1983

ROSENDO BALUCANAG, petitioner,

vs.
HON. JUDGE ALBERTO J. FRANCISCO and RICHARD STOHNER, respondents.

Alfredo C. Estrella for petitioner.

Pascual C. Garcia for respondents.

ESCOLIN, J.:

This petition for review of the decision of the Court of First Instance of Manila in Civil Case No. 67503 calls for a
determination of the respective rights of the lessor and the lessee over the improvements introduced by the latter in
the leased premises.

Cecilia dela Cruz Charvet was the owner of a 177.50 square meter lot located in Zamora Street, Pandacan, Manila,
covered by Transfer Certificate of Title No. 25664. On August 31, 1952, Mrs. Charvet leased said lot to respondent
Richard Stohner for a period of five [5] years at the monthly rental of 2140.00, payable in advance within the first ten
[10] days of each month. The lease contract 1 provided, among others, that:

IV. The lessee may erect such buildings upon and make such improvements to the leased land as
he shag see fit. All such buildings and improvements shall remain the property of the lessee and he
may remove them at any nine, it being agreed, however, that should he not remove the said
buildings and improvements within a period of two months after the expiration of this Agreement, the
Lessor may remove the said buildings and improvements or cause them to be removed at the
expense of the Lessee.

During the existence of the lease, Stohner made fillings on the land and constructed a house thereon, said
improvements being allegedly valued at P35,000.00.

On March 8, 1966, Mrs. Charvet sold the said lot to petitioner Rosendo Balucanag.2

For Stohner's failure to pay the rents, Balucanag, thru counsel, wrote Stohner a letter demanding that he vacate the
premises. 3 In reply thereto, Stohner, also thru counsel, claimed that he was a builder in good faith of the residential
house erected in the land. He offered the following proposals for a possible compromise, to wit:

[a] Mr. Stohner will purchase the said lot from your client with the interest of 12% per annum on the
value, or

[b] Your client Mr. Rosendo Balucanag will reimburse our client in the total amount of P35,000.00 for
the improvements and construction he has made on the lot in question.

As no agreement was reached, Balucanag instituted in the City Court of Manila an ejectment suit against Stohner
and, after due trial, the court rendered a decision, the decretal portion of which reads as follows:

IN VIEW OF THE FOREGOING CONSIDERATIONS, judgment is hereby rendered, ordering the

defendant to pay the plaintiff the sum of P360.00 as back rentals from December, 1965 to August
1966 at the rate of P40.00 a month and to vacate the premises. The defendant is further ordered to
pay the sum of P100.00 as Attomey's fees which is considered reasonable within the premises.

On appeal, the Court of First Instance of Manila, Branch IX, presided by respondent Judge Alberto J. Francisco,
after conducting a trial de novo, rendered a decision, setting aside the judgment of the city court and dismissing the
petitioner's complaint. Respondent judge held that Stohner was a builder in good faith because he had constructed
the residential house with the consent of the original lessor, Mrs. Charvet, and also because the latter, after the
expiration of the lease contract on August 31, 1957, had neither sought Stohner's ejectment from the premises, nor
the removal of his house therefrom. Invoking Articles 448 and 546 of the Civil Code. 4 respondent judge concluded
that Stohner, being a builder in good faith, cannot be ejected until he is reimbursed of the value of the
improvements.
Frustrated in his effort to have the decision reconsidered, Balucanag filed the instant petition for review.

We find the petition impressed with merit. Paragraph IV of the lease contract entered into by Stohner with Mrs.
Charvet specifically provides that "... such buildings and improvements shan remain the property of the lessee and
he may remove them at any time, it being agreed, however, that should he not remove the said buildings and
improvements within a period of two months after the expiration of this Agreement, the Lessor may remove the said
buildings and improvements or cause them to be removed at the expense of the Lessee." Respondent Stohner does
not assail the validity of this stipulation, Neither has he advanced any reason why he should not be bound by it.

But even in the absence of said stipulation, respondent Stohner cannot be considered a builder in good faith. Article
448 of the Civil Code, relied upon by respondent judge, applies only to a case where one builds on land in the belief
that he is the owner thereof and it does not apply where one's only interest in the land is that of a lessee under a
rental contract. In the case at bar, there is no dispute that the relation between Balucanag and Stohner is that of
lessor and lessee, the former being the successor in interest of the original owner of the lot. As we ruled in Lopez,
Inc. vs. Phil. and Eastern Trading Co., Inc., 5 "... the principle of possessor in good faith refers only to a party who
occupies or possess property in the belief that he is the owner thereof and said good faith ends only when he
discovers a flaw in his title so as to reasonably advise or inform him that after all he may not be the legal owner of
said property. It cannot apply to a lessee because as such lessee he knows that he is not the owner of he leased
premises. Neither can he deny the ownership or title of his lessor. ... A lessee who introduces improvements in the
leased premises, does so at his own risk in the sense that he cannot recover their value from the lessor, much less
retain the premises until such reimbursement. ..."

The law applicable to the case at bar is Article 1678 of the Civil Code, which We quote:

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
the 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. ...

This article gives the lessor the option to appropriate the useful improvements by paying one-half of their
value, 6And the lessee cannot compel the lessor to appropriate the improvements and make reimbursement, for the
lessee's right under the law is to remove the improvements even if the leased premises may suffer damage thereby.
But he shall not cause any more damage upon the property than is necessary.

One last point. It appears that while the lease contract entered into by Stohner and Mrs. Charvet had expired on
August 31, 1957, he nevertheless continued in possession of the premises with the acquiescence of Mrs. Charvet
and later, of Balucanag. An implied new lease or tacita reconduccion was thus created between the parties, the
period of which is established by Article 1687 of the Civil Code thus:

Art. 1687. If the period for the lease has not been fixed, it is understood to be from year to year, if the
rent agreed upon is annual; from month to month, if it is monthly: from week to week, if the rent is
weekly: and from day to day, if the rent is to be paid daily. ...

Under the above article, the duration of the new lease must be deemed from month to month, the agreed rental in
the instant case being payable on a monthly basis. The lessor may thus terminate the lease after each month with
due notice upon the lessee. After such notice, the lessee's right to continue in possession ceases and his
possession becomes one of detainer. Furthermore, Stohner's failure to pay the stipulated rentals entities petitioner
to recover possession of the premises.

WHEREFORE, the decision in Civil Case No. 67503 is hereby set aside, with costs against respondent Stohner.
The latter is ordered to vacate the premises in question and to pay Rogelio Balucanag the rentals due from March
1969 up to the time he surrenders the premises, at the rate of P40.00 a month.

SO ORDERED.

Makasiar (Chairman), Aquino, Concepcion, Jr., and Guerrero, JJ., concur.

De Castro, J., took no part.

 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. L-33422 May 30, 1983

ROSENDO BALUCANAG, petitioner,

vs.
HON. JUDGE ALBERTO J. FRANCISCO and RICHARD STOHNER, respondents.

Alfredo C. Estrella for petitioner.

Pascual C. Garcia for respondents.

ESCOLIN, J.:

This petition for review of the decision of the Court of First Instance of Manila in Civil Case No. 67503 calls for a
determination of the respective rights of the lessor and the lessee over the improvements introduced by the latter in
the leased premises.

Cecilia dela Cruz Charvet was the owner of a 177.50 square meter lot located in Zamora Street, Pandacan, Manila,
covered by Transfer Certificate of Title No. 25664. On August 31, 1952, Mrs. Charvet leased said lot to respondent
Richard Stohner for a period of five [5] years at the monthly rental of 2140.00, payable in advance within the first ten
[10] days of each month. The lease contract 1 provided, among others, that:

IV. The lessee may erect such buildings upon and make such improvements to the leased land as
he shag see fit. All such buildings and improvements shall remain the property of the lessee and he
may remove them at any nine, it being agreed, however, that should he not remove the said
buildings and improvements within a period of two months after the expiration of this Agreement, the
Lessor may remove the said buildings and improvements or cause them to be removed at the
expense of the Lessee.

During the existence of the lease, Stohner made fillings on the land and constructed a house thereon, said
improvements being allegedly valued at P35,000.00.

On March 8, 1966, Mrs. Charvet sold the said lot to petitioner Rosendo Balucanag.2

For Stohner's failure to pay the rents, Balucanag, thru counsel, wrote Stohner a letter demanding that he vacate the
premises. 3 In reply thereto, Stohner, also thru counsel, claimed that he was a builder in good faith of the residential
house erected in the land. He offered the following proposals for a possible compromise, to wit:

[a] Mr. Stohner will purchase the said lot from your client with the interest of 12% per annum on the
value, or

[b] Your client Mr. Rosendo Balucanag will reimburse our client in the total amount of P35,000.00 for
the improvements and construction he has made on the lot in question.

As no agreement was reached, Balucanag instituted in the City Court of Manila an ejectment suit against Stohner
and, after due trial, the court rendered a decision, the decretal portion of which reads as follows:

IN VIEW OF THE FOREGOING CONSIDERATIONS, judgment is hereby rendered, ordering the

defendant to pay the plaintiff the sum of P360.00 as back rentals from December, 1965 to August
1966 at the rate of P40.00 a month and to vacate the premises. The defendant is further ordered to
pay the sum of P100.00 as Attomey's fees which is considered reasonable within the premises.

On appeal, the Court of First Instance of Manila, Branch IX, presided by respondent Judge Alberto J. Francisco,
after conducting a trial de novo, rendered a decision, setting aside the judgment of the city court and dismissing the
petitioner's complaint. Respondent judge held that Stohner was a builder in good faith because he had constructed
the residential house with the consent of the original lessor, Mrs. Charvet, and also because the latter, after the
expiration of the lease contract on August 31, 1957, had neither sought Stohner's ejectment from the premises, nor
the removal of his house therefrom. Invoking Articles 448 and 546 of the Civil Code. 4 respondent judge concluded
that Stohner, being a builder in good faith, cannot be ejected until he is reimbursed of the value of the
improvements.
Frustrated in his effort to have the decision reconsidered, Balucanag filed the instant petition for review.

We find the petition impressed with merit. Paragraph IV of the lease contract entered into by Stohner with Mrs.
Charvet specifically provides that "... such buildings and improvements shan remain the property of the lessee and
he may remove them at any time, it being agreed, however, that should he not remove the said buildings and
improvements within a period of two months after the expiration of this Agreement, the Lessor may remove the said
buildings and improvements or cause them to be removed at the expense of the Lessee." Respondent Stohner does
not assail the validity of this stipulation, Neither has he advanced any reason why he should not be bound by it.

But even in the absence of said stipulation, respondent Stohner cannot be considered a builder in good faith. Article
448 of the Civil Code, relied upon by respondent judge, applies only to a case where one builds on land in the belief
that he is the owner thereof and it does not apply where one's only interest in the land is that of a lessee under a
rental contract. In the case at bar, there is no dispute that the relation between Balucanag and Stohner is that of
lessor and lessee, the former being the successor in interest of the original owner of the lot. As we ruled in Lopez,
Inc. vs. Phil. and Eastern Trading Co., Inc., 5 "... the principle of possessor in good faith refers only to a party who
occupies or possess property in the belief that he is the owner thereof and said good faith ends only when he
discovers a flaw in his title so as to reasonably advise or inform him that after all he may not be the legal owner of
said property. It cannot apply to a lessee because as such lessee he knows that he is not the owner of he leased
premises. Neither can he deny the ownership or title of his lessor. ... A lessee who introduces improvements in the
leased premises, does so at his own risk in the sense that he cannot recover their value from the lessor, much less
retain the premises until such reimbursement. ..."

The law applicable to the case at bar is Article 1678 of the Civil Code, which We quote:

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
the 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. ...

This article gives the lessor the option to appropriate the useful improvements by paying one-half of their
value, 6And the lessee cannot compel the lessor to appropriate the improvements and make reimbursement, for the
lessee's right under the law is to remove the improvements even if the leased premises may suffer damage thereby.
But he shall not cause any more damage upon the property than is necessary.

One last point. It appears that while the lease contract entered into by Stohner and Mrs. Charvet had expired on
August 31, 1957, he nevertheless continued in possession of the premises with the acquiescence of Mrs. Charvet
and later, of Balucanag. An implied new lease or tacita reconduccion was thus created between the parties, the
period of which is established by Article 1687 of the Civil Code thus:

Art. 1687. If the period for the lease has not been fixed, it is understood to be from year to year, if the
rent agreed upon is annual; from month to month, if it is monthly: from week to week, if the rent is
weekly: and from day to day, if the rent is to be paid daily. ...

Under the above article, the duration of the new lease must be deemed from month to month, the agreed rental in
the instant case being payable on a monthly basis. The lessor may thus terminate the lease after each month with
due notice upon the lessee. After such notice, the lessee's right to continue in possession ceases and his
possession becomes one of detainer. Furthermore, Stohner's failure to pay the stipulated rentals entities petitioner
to recover possession of the premises.

WHEREFORE, the decision in Civil Case No. 67503 is hereby set aside, with costs against respondent Stohner.
The latter is ordered to vacate the premises in question and to pay Rogelio Balucanag the rentals due from March
1969 up to the time he surrenders the premises, at the rate of P40.00 a month.

SO ORDERED.

Makasiar (Chairman), Aquino, Concepcion, Jr., and Guerrero, JJ., concur.

De Castro, J., took no part.

 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. L-45038 April 30, 1987

MANOTOK REALTY, INC., petitioner,

vs.
THE HON. COURT OF APPEALS and FELIPE MADLANGAWA, respondents.

Romeo J. Calejo for petitioner.

Mantanggot C. Gunigundo for private respondent.

GUTIERREZ, JR., J.:

This is a petition for certiorari by way of appeal seeking to set aside the decision of the Court of Appeals which
upheld the dismissal of the petitioner's complaint for reinvidicatory action with damages against the private
respondent and ordered the petitioner to accept the payment of the balance of P2,551.85 from said respondent, and
thereafter, to execute the corresponding deed of sale of Lot 227, Block I in favor of the latter.

The private respondent Felipe Madlangawa claims that he has been occupying a parcel of land in the Clara de
Tambunting de Legarda Subdivision since 1949 upon permission being obtained from Andres Ladores, then an
overseer of the subdivision, with the understanding that the respondent would eventually buy the lot.

On April 2, 1950, the owner of the lot, Clara Tambunting, died and her entire estate, including her paraphernal
properties which covered the lot occupied by the private respondent were placed under custodia legis.

On April 22, 1950, the private respondent made a deposit for the said lot in the sum of P1,500.00 which was
received by Vicente Legarda, husband of the late owner. As evidenced by the receipt issued by Vicente Legarda,
the lot consisted of an area of 240 square meters and was sold at P30.00 per square meter. There, thus, remained
an unpaid balance of P5,700.00 but the private respondent did not pay or was unable to pay this balance because
after the death of the testatrix, Clara Tambunting de Legarda, her heirs could not settle their differences. Apart from
the initial deposit, no further payments were made from 1950.

On April 28, 1950, Don Vicente Legarda was appointed as a special administrator of the estate. Meanwhile the
private respondent remained in possession of the lot in question.

Subsequently, the petitioner became the successful bidder and vendee of the Tambunting de Legarda Subdivision
consisting of 44 parcels of land spread out in the districts of Tondo and Sta. Cruz, Manila, pursuant to the deeds of
sale executed in its favor by the Philippine Trust Company on March 13 and 20, 1959, as administrator of the
Testate Estate of Clara Tambunting de Legarda, in Special Proceeding No. 10809 of the Manila probate court. The
lot in dispute was one of those covered by the sale. The Deed of Sale, among others, provided for the following
terms and conditions:

1. — The VENDEE assumes the risk and expenses of ejecting the tenants or squatters on the said
parcels of land if it decides to eject them. Any rentals or damages that may be due or collectible from
the said tenants or squatters for the period subsequent to the date of this deed of sale shall belong
to the VENDEE but rentals due from the said tenants or squatters prior to the execution of this deed
of sale shall belong to the VENDOR.

xxx xxx xxxx x x

3. — The VENDEE renounces the right to warranty in case of eviction with the knowledge of the
risks of eviction and assumes its consequences with respect not only to the lots subject-of the above
mentioned cases and claims but also with respect to any other lots subject of contracts of sale or
promises to sell that may have been executed by the deceased, Clara Tambunting de Legarda
and/or Vicente L. Legarda, and it hereby relieves the estate of Clara Tambunting de Legarda and the
Philippine Trust Company, in its capacity as Administrator thereof, of any and all liability with respect
thereto in case of eviction. All sums of money that have been paid to the deceased Clara
Tambunting de Legarda and/or Vicente L. Legarda and/or the administrator of Clara Tambunting de
Legarda on account of the purchase price of said lots shall belong to the estate, but any sums of
money that are or may be due as the balance of the purchase price of said lots shall belong to the
VENDEE. (pp. 27-28, Rollo).
 xxx xxx xxx

In its effort to clear the Tambunting Subdivision of its squatters and occupants, the petitioner caused the publication
of several notices in the Manila Times issues of January 1, 1966 and the Taliba issues of January 2, and March 16,
1966, advising the occupants to vacate their respective premises, otherwise, court action with damages would
follow. In addition to these notices by publication, the petitioner sent circulars to the occupants to vacate.

The private respondent was one of the many occupants who refused to vacate the lots they were occupying, so that
on April 26, 1968, the petitioner filed the action below to recover the said lot.

The trial court dismissed the petitioner's action after finding that the Identity of the parcel of land described in the
complaint had not been sufficiently established as the very same piece of land in the material and physical
possession of the private respondent.

On appeal, the respondent Court of Appeals found the Identity of the lot sought to be recovered by the petitioner to
be the same as that in the physical possession of the private respondent and ruled that the only right remaining to
the petitioner is to enforce the collection of the balance because accordingly, it stepped into the shoes of its
predecessor; and that since the area now in possession of the petitioner which is that involved in the present case is
only 115 square meters, the balance after deducting the deposit of P1,500.00 is P2,551.85, and as per order of the
Court of First Instance of Manila, the said balance should be paid in 18 equal monthly installments.

In this petition, the petitioner maintains that the Court of Appeals committed a reversible error in holding that the sale
by Don Vicente Legarda in favor of the private respondent is valid, binding, and enforceable against the petitioner.

The petitioner contends that since there is no dispute that the property in question was the paraphernal property of
Clara Tambunting, who died on April 2, 1950, Vicente Legarda had no authority whatsoever to sell the said property
to the private respondent on May 12, 1950 since the former was appointed as administrator of the estate of Clara
Tambunting only on August 28, 1950. Therefore, the questioned sale could not have bound Clara Tambunting's
estate because the vendor Vicente Legarda neither acted as the owner nor the administrator of the subject property
when the alleged sale took place. As regards the provision in the deed of sale which it executed with the Philippine
Trust Company wherein it bound itself to respect the contracts of sale or promises to sell that may have been
executed by Vicente Legarda and renounced the right to warranty in case of eviction, the petitioner argues that this
re-required respect only for those valid sales executed by the deceased Clara Tambunting and by persons vested
with authority to act on behalf of the estate.

On the other hand, the private respondent contends that the aforequoted provisions of the deed of sale are a
declaration or admission against the interest of the petitioner, and shows that the acts of Vicente Legarda had been
ratified by the Philippine Trust Company and approved by the probate court. The petitioner, therefore, is allegedly
estopped from questioning the authority of Vicente Legarda in selling the property in dispute.

It is an undisputed fact that the lot in dispute is the paraphernal property of Dona Clara Tambunting and that at the
time of the sale thereof, the owner was already dead. Thus, the only question to be resolved in this petition is: in
what capacity did the husband of the deceased, Don Vicente Legarda, dispose of the lot?

Articles 136 and 137 of the Civil Code of the Philippines provide:

Art. 136. The wife retains the ownership of the paraphernal property.

Art. 137. The wife shall have the administration of the paraphernal property, unless she delivers the
same to the husband by means of a public instrument empowering him to administer it.

In this case, the public instrument shall be recorded in the Registry of Property. As for the movables,
the husband shall give adequate security.

There is nothing in the records that wig show that Don Vicente Legarda was the administrator of the paraphernal
properties of Dona Clara Tambunting during the lifetime of the latter. Thus, it cannot be said that the sale which was
entered into by the private respondent and Don Vicente Legarda had its inception before the death of Dona Clara
Tambunting and was entered into by the former for and on behalf of the latter, but was only consummated after her
death. Don Vicente Legarda, therefore, could not have validly disposed of the lot in dispute as a continuing
administrator of the paraphernal properties of Dona Clara Tambunting.

It is also undisputed that the probate court appointed Don Vicente Legarda as administrator of the estate only on
August 28, 1950, more than three months after the questioned sale had taken place.

We are, therefore, led to the inevitable conclusion that the sale between Don Vicente Legarda and the private
respondent is void ab initio, the former being neither an owner nor administrator of the subject property. Such being
the case, the sale cannot be the subject of the ratification by the Philippine Trust Company or the probate court. As
was held in the case of Arsenal v. Intermediate Appellate Court (143 SCRA 40, 49):
 Under the provisions of the Civil Code, a void contract is inexistent from the beginning. It cannot be
ratified neither can the right to set up the defense of its illegality be waived. (Art. 1409, Civil Code .

To further distinguish this contract from the other kinds of contract, a commentator has stated that.

The right to set up the nullity of a void or non-existent contract is not limited to the
parties as in the case of annuable or voidable contracts, it is extended to third
persons who are directly affected by the contract. (Tolentino, Civil Code of the
Philippines, Vol. IV, p. 604, [1973]).

Any person may invoke the inexistence of the contract whenever juridical affects
founded thereon are asserted against him. (Id. P. 595).

Section 1, Rule 89 of the Revised Rules of Court provides for the procedure on how a property in custodia legis can
be disposed of by sale:

Order of sale of personalty. — Upon the application of the executor or administrator, and on written
notice to the heirs and other persons interested, the court may order the whole or a part of the
personal estate to be sold, if it appears necessary for the purpose of paying debts, expenses of
administration, or legacies, or for the preservation of the property.

After the appointment of Don Vicente Legarda as administrator of the estate of Dona Clara Tambunting, he should
have applied before the probate court for authority to sell the disputed property in favor of the private respondent. If
the probate court approved the request, then Don Vicente Legarda would have been able to execute a valid deed of
sale in favor of the respondent. Unfortunately, there was no effort on the part of the administrator to comply with the
above-quoted rule of procedure nor on that of the respondent to protect his interests or to pay the balance of the
installments to the court appointed administrator.

As was held in Kline v. Shoup (226 Pacific Reporter 729, 731), which we find applicable in the case at bar:

There are, however, certain steps to be taken in the administration of an estate which the law deems
of sufficient importance to have placed without the power of the probate court to effect under the
jurisdiction acquired over the general subject matter by law and over the estate and those interested
therein, by the filing and due service of the petition for the appointment of an administrator and the
order of appointment and issuance of letters, and at least one of such steps is the sale of the real
property of an estate for the payment of the debts of the deceased. C.S. 7603, provides that —

No sale of any property of an estate of a decedent is valid unless made under order of the probate
court. ...

From the foregoing, it cannot be denied that the law recognizes the issuance of an order of sale as
an indispensable requisite in effecting a valid sale of the property of a decedent's estate. ...

Considering the location of the disputed lot, we find a monthly rental of Twenty Centavos (P0.20) per square meter
to be more than fair to the private respondent for his use of the premises. The petitioner, however, should return the
P 1,500.00 received by Mr. Legarda, with legal interest, to the respondent.

WHEREFORE, IN VIEW OF THE FOREGOING, the decision appealed from is hereby REVERSED and SET
ASIDE. The private respondent is ordered to SURRENDER the material and physical possession of Lot No. 277,
Block I to the petitioner and to pay the latter the rentals as stated above from May, 1950 until he surrenders the said
lot. The petitioner shall reimburse the private respondent the amount of P1,500.00 with legal interest from May,
1950 or offset said amount from the rentals due to it. Costs against the private respondent.

SO ORDERED.

Fernan (Chairman), Paras, Padilla, Bidin and Cortes, JJ , concur.