G.R. No.
L-22006 July 28, 1975 Montalbo to her daughter Margarita Macalalad on the occasion of her marriage to Nicolas
BASILIO PEREZ and PETRA MONTALBO, petitioners,
vs.
NICOLAS MENDOZA, MARGARITA MACALALAD and the HONORABLE COURT OF
APPEALS, respondents.
MUNOZ PALMA, J.:
Civil Case 689 of the Court of First Instance of Batangas was an action to quiet title over a
piece of land filed on March 20, 1959, by spouses Basilio Perez and Petra Montalbo with
spouses Nicolas Mendoza and Margarita Macalalad as defendants. According to the
complaint, the land in controversy is located in barrio Dagatan, municipality of Taysan,
Batangas, with an area of approximately 4,765 sq. meters, declared for taxation purposes in
the name of the "Heirs of Estanislao Montalbo", and is "bounded on the north by a school
site, on the east by Calixto Flores, on the south by a creek, and on the west by a creek and
the land of Gregorio Mendoza." On the basis of evidence adduced by the parties, the trial
court then presided by Hon. Lorenzo Relova rendered judgment on February 19, 1962,
dismissing the complaint and declaring the spouses Mendoza "to have a better right to the
property in question."1
Spouses Perez elevated the Relova decision to the Court of Appeals which, however,
affirmed in toto the findings of the court a quo, and declared that "upon the evidence it has
been shown by a great preponderance that the land in question belongs to the
defendants."2
The case is now before Us on a petition for certiorari filed by spouses Perez.
The findings of fact both of the trial court and the Court of Appeals may be briefly
summarized as follows:
The litigated parcel of land was originally part of a bigger tract owned by Estanislao
Montalbo. When Estanislao died in 1918, his properties passed on to his children Petra,
Felisa, and Pedro all surnamed Montalbo, and because Pedro died single the two women
remained as the only heirs. By mutual agreement Petra and Felisa divided between
themselves the lands of their father and the parcel of which the litigated land was a part was
assigned to Felisa. Sometime in 1922 Felisa exchanged the above-mentioned parcel with a
land belonging to her aunt. Andrea Montalbo, a sister of her father. The reason for the
exchange was that Andrea wanted to donate a piece of land to the municipality for use as a
school site and the land of Felisa was what the municipality preferred as it was adjacent to
other properties of the municipality. (Exh. 5 for defendants Mendoza) Upon her acquisition
of Felisa's aforementioned land, Andrea donated to the municipality the northern portion
thereof which constituted almost one-half of the entire parcel, and since then that portion
was declared for taxation purposes by the municipality together with its adjoining properties
(Exhs. 6, 6-A, 6-B).1äwphï1.ñët In 1927 the remainder of the lot was given by Andrea
Mendoza, and from the time of their marriage the couple possessed the said property. That
donation was confirmed subsequently in a public instrument dated August 15, 1951 (Exh. 2
for the Mendozas). Nicolas Mendoza sought to transfer the tax declaration of the property to
his name and of his wife and for that purpose he submitted a deed of exchange of property
dated January 14, 1922, allegedly executed by Felisa Montalbo and Andrea Montalbo in the
presence of the municipal secretary Rafael Manahan (Exh. 5). When Basilio Perez came to
know about the supposed deed of exchange, he had it investigated and upon discovering
that the signature of Rafael Manahan appearing on the document was forged, he filed a
criminal complaint before the Fiscal's office which led to an accusation for falsification of
private document against Andrea Montalbo and Nicolas Mendoza. Only Nicolas Mendoza
was arraigned and tried and was convicted by the Court of First Instance of Batangas, but
on appeal he was acquitted by the Court of Appeals for insufficiency of evidence to show
that he participated in affixing the signature of Rafael Manahan or that he was aware of the
falsity of the document in question when he presented it to the tax assessor's
office.3 Notwithstanding the forged signature of Rafael Manahan on the document Exhibit 5,
there is sufficient evidence to prove that an exchange of property did in fact occur in 1922
between Andrea and Felisa Montalbo, and that Felisa's land passed on to Andrea who in
turn gave part of it to the municipality and part to her daughter, Margarita; hence, the
decision in favor of the spouses Mendoza.
On the other hand, petitioners contend that the disputed property was inherited by Petra
and Felisa Montalbo from their father Estanislao who died in 1918 and since that date the
two sisters were in possession of said land. In 1934 a deed of partition of the various
properties of Estanislao was executed between Petra and the heirs of Felisa, and the land
in question was divided equally, between them; among those who signed as witnesses to
that agreement was Andrea Montalbo(Exh. D for petitioners). In 1952 Felisa's husband,
Jose Ortega, and children sold their one-half share to spouses Petra Montalbo and Basilio
Perez, now petitioners, but the deed of sale was lost a year after. Sometime in 1946
petitioners leased the property to the Mendozas and when the lease expired in 1951 they
demanded for the return of the land but the Mendozas refused and so petitioners had to file
an ejectment suit before the justice of the peace court of Taysan which was still pending at
the time of the trial of the civil case in 1960. (tsn. witness Basilio Perez, December 15, 1960,
pp. 16-34)
For not giving credit to the foregoing evidence, petitioners now assail the adverse decision
of respondent court on four assigned errors.
1. Petitioners contend that respondent court erred in considering the criminal case for
falsification res adjudicata on the matter of ownership of the land in litigation when the
"question of ownership was not actually and directly in issue in the criminal case and the
latter was not the proper vehicle for the determination of the ownership of the land." (p. 9,
petitioners brief) Petitioners refer to portions in the decision of respondent court, viz:
The land in question, together with that portion that was acquired by the
municipality of Taysan, the identity of which is admitted by the parties,
1
 belonged to Felisa Montalbo, as held in the decision of the Court of
Appeals, thus — "The said parcel of land previously belonged to Felisa
Montalbo (married to Jose Ortega), who inherited it from her deceased
father, the aforecited Estanislao Montalbo;", and the land in question was
donated propter nuptias by Andrea Montalbo to Margarita Macalalad and
Nicolas Mendoza, the defendants, (Margarita Macalalad is the daughter
of Andrea Montalbo) on the occasion of their marriage on February 27,
1927, as found and held in the decision of the Court of Appeals, thus —
"and this land was acquired by the donor (Andrea Montalbo) by means of
a barter with her own parcel of land planted with bamboos and mango
trees"
Upon the basis of the findings of fact and conclusion arrived at in the
decision of the Court of Appeals, it clearly appears that although the
document of exchange of the lands was found to be falsified,
nevertheless the Court found upon the facts as demonstrated by the
evidence that the land in question "previously belonged to Felisa
Montalbo (married to Jose Ortega), who inherited it from her deceased
father, the aforesaid Estanislao Montalbo ..."; that said land was
donated propter nuptias by Andrea Montalbo to the defendants on the
occasion of their marriage on February 27, 1927; and that "this land was
acquired by the donor by means of a barter with her own parcel of land
planted with bamboos and mango trees". From the context of the decision
the natural and logical inference is that factually the exchange of the
lands had been consummated.... (pp. 6-7, CA decision at pp. 20-21, rollo;
emphasis supplied to indicate disputed statements)
Undoubtedly, there is merit to the contention of petitioners that the pronouncements or
findings of fact made by the Court of Appeals in the criminal case concerning the
possession and ownership of the land now in litigation in the civil case, do not constitute the
law on the matter and cannot be taken or adopted as a basis for deciding the question of
ownership of said land in this civil case. Since there is no identity of parties in the two cases
— the petitioners here not being parties in the criminal case — and the object or subject
matter in the criminal prosecution is different, the latter being concerned with the guilt or
innocence of accused Nicolas Mendoza for falsification of private document, it follows that
the judgment in the criminal action cannot be used as evidence in the civil case where the
issue is ownership of a piece of land. It is the rule that the plea of res judicata generally
cannot be interposed except where the parties, facts, and questions are the
same,4 hence, the judgment in a criminal case cannot be pleaded as res judicata in a civil
action.5
But whatever error was committed by respondent court in this regard, the same is not
sufficient to nullify the appealed decision.
Analyzing the decision of respondent court. We see that the latter made its own appraisal
and evaluation of the evidence existing in the record relative to the possession and
ownership of the land in question. Thus it said that the conclusions arrived at by the Court of
Appeals in the criminal case to wit(1) that there was an exchange of lands consummated
between Andrea and Felisa and (2) that the exchanged land was later donated by Andrea to
her daughter Margarita in 1927, "can hardly be doubted if we take account of the undisputed
fact that the defendants have been in possession of the land since 1927, and the
plaintiffs (meaning spouses Perez) have not attempted to disturb defendants' possession of
the land until 1952 when said plaintiffs filed an action of unlawful detainer against the
defendants." (p. 7 of appealed decision at p. 21, SC rollo; emphasis supplied) Continuing,
respondent court expounded:
Contrary to the allegation in the complaint — "That plaintiffs were in
possession of the land prior and up to January, 1946, when the same was
leased to the defendants ...", and the testimony of Basilio Perez to the
same tenor, the evidence has conclusively shown that the defendants
have been in continuous possession of the land since 1927 to the present
time, and they have built a house on the land in 1928 where they have
resided and lived to the present, as testified to by the defendant
Mendoza, ....
The plaintiffs have contended, however, with the support of the testimony
of Basilio Perez, that the possession of the defendants since 1946 was
that of a mere lessee of the land. On this matter, the trial court said, "the
records do not show any documentary evidence to support such
contention. Nor is any document, say receipts of payment of rentals
presented to bolster their theory. On the contrary their averment has been
strongly denied by the defendants and the records show that it was only
in 1952 that a civil action was instituted by the plaintiffs against the
defendants in the Justice of the Peace Court of Taysan, Batangas, for
detainer and damages", and said allegation of possession of the
defendants as lessees of the land "is not supported by positive and
convincing evidence". We find no reason to disagree with the foregoing
findings of fact and conclusion of the trial court because the same is
supported by the preponderance of evidence, and the plaintiffs have not
pointed to us any fact of significance or influence which have been
disregarded by the court, other than the testimony of Basilio Perez who
testified about the supposed contract of lease. (pp. 21-22, 23, ibid.;
emphasis supplied)
Digging further into the evidence of herein petitioners, respondent court found for itself that
the agreement of partition dated May 27, 1934, Exhibit D, is not incontrovertible proof that in
1934 the litigated property belonged in common to Petra and the heirs of Felisa Montalbo
both of whom may have been guided by the fact that the property was still declared for
taxation purposes in the name of Estanislao Montalbo, and that the document of partition
"did not overcome the evidence on record that Andrea Montalbo became the owner of the
land, and that since 1927 the defendants have been in continuous possession of the land,
2
openly, adversely and in the concept of owners thereby acquiring ownership of the land
through acquisitive prescription." (p. 10 of CA decision at p. 24, SC rollo)
Independently therefore of the pronouncements of the Court of Appeals in the criminal case,
respondent court examined the evidence in this civil case and made its own findings of fact
on the basis of which it affirmed the decision of the trial court.
We could have stopped here and resolved this petition under well-entrenched precepts in
Philippine jurisprudence that findings of fact of the Court of Appeals are as a rule conclusive
and binding upon this Court;6 nonetheless, to set our mind at rest that the conclusions of
respondent court were not grounded on speculation, surmises or conjectures, 7 We went
over the evidence before Us.
Certain salient facts strongly support the claim of respondents Mendoza over the property in
dispute:
First, the northern boundary of the land in controversy is undisputably a school site which
originally was part of a bigger tract belonging to Estanislao Montalbo. This is admitted by
petitioner Basilio Perez who to a question propounded by his counsel, Atty. Panganiban,
declared:
Mr. Panganiban: (Counsel of petitioners)
Q. According to these tax declarations which you said
covers the land in question, the boundaries on the
north, school site; on the east, land of Calixto Flores; on
the south, estero; and on the west, estero and Gregoria
Mendoza, why is it that there is a discrepancy?
A. Because from the whole parcel of land a portion was
taken for the school site, and that which remains now is
the land in question, sir. (tsn December 15, 1960, pp.
22-23)
No explanation however was offered by Perez as to how that portion became a school site.
On the other hand, there is evidence of respondent Mendoza that because Andrea
Montalbo wanted to donate a piece of land to be used as a school site and the municipality
preferred the location of the land inherited by Felisa from her father, the two women
exchanged lands after which Andrea gave one-half of the property to the municipality while
the remaining portion which is the land now in litigation was donated propter nuptias to her
daughter Margarita way back in 1927. (tsn October 24, 1961, pp. 14-18) This donation of
Andrea was not disproved by any evidence of petitioners. On the part of respondents
Mendoza, their documentary evidence, Exhibits 6, 6-A and 6-B, show that the municipality
of Taysan declared the donated property in its name as early as July, 1925, which supports
respondents' claim that the exchange of properties between Andrea and Felisa Montalbo
took place sometime in 1922.
Second, the provincial authorities authorities dealt with the Mendozas for the widening of
the provincial road which traverses the land in question. Nicolas Mendoza testified that the
land covered by the complaint actually consists of two lots which he described in his sketch,
Exhibit 1, with letters "A" and "B" respectively, separated by a provincial road leading to the
municipality of Lobo; that lot "A" which is the bigger parcel is the one donated to his wife,
Margarita, by Andrea Montalbo on the occasion of their marriage in 1927 (Exh. 2); while lot
"B" was bought from Donata Mendoza in 1951 as shown by the deed of sale, Exhibit 7; that
sometime in 1937-38, the province widened the provincial road traversing the two lots, and
he and his wife were approached by the provincial authorities more particularly, Engineer
Ramirez, for them to give without compensation from lot "A" a stretch of land of one meter in
width to widen said road, and they agreed. At that time Donata Mendoza still owned lot "B"
and she was also asked to give part of her land for the road but she was paid for the value
of the plants destroyed in the process.(tsn October 24, 1961, pp. 32-34) For his part,
petitioner Perez admitted during the cross-examination conducted by the opposite counsel,
Atty. Julio Enriquez, that the provincial authorities did not deal with him at all during the
widening of that particular road. (tsn September 25, 1961, p. 34) This is of marked
significance, because if it were true as claimed by petitioners that they were in possession
of the property since the death of Estanislao Montalbo in 1918 or even after the deed of
partition in 1934, they would have been the persons approached by the authorities for the
widening of the road. The fact that the Mendozas were the ones who gave away part of the
land for the widening of the Lobo road shows that they were in possession of the property
and were living there at the time.
Third, respondents Mendoza have been in possession of the property since 1927 in concept
of owners thereof. We have the testimony of respondent Nicolas Mendoza that after the
land was donated to his wife in 1927 they built a house on it and lived there continuously,
witness referring particularly to what he described as lot "A" in his sketch Exhibit 1. (tsn
October 24, 1961, pp. 7, .30-31) Respondent's testimony was found both by the trial and
appellate courts credible because (1) petitioner Basilio Perez himself admitted during cross-
examination that even before the last world war the Mendozas had constructed a house on
the land in litigation (tsn September 25, 1971, pp. 37-39; see Exh. E-3) which admission
disproves the allegation in the complaint and Perez' testimony that it was only in 1946 when
the Mendozas occupied the property as lessees; (2) the testimony of Nicolas Mendoza was
corroborated by witness Adriano Gonzales, a retired justice of the peace of Taysan,
Batangas, who declared that he knew the Mendozas since 1937 and he saw them living on
the land in question and they have not changed residence at all since he had known them
(tsn December 6, 1961, pp. 5-6); and (3) the respondents Mendoza were the ones who
were living on the property and not the petitioners at the time the provincial government in
1937 widened the Lobo road which crosses said land.
The court a quo and the respondent appellate court did not err when they upheld the claim
of ownership of the Mendozas principally on the ground that the latter were in actual
3
possession of the property since 1927 and were sought to be dispossessed by petitioners
herein only in 1952 when an ejectment suit was filed against them.
Possession is an indicium of ownership of the thing possessed and to the possessor goes
the presumption that he holds the thing under a claim of ownership. 8 Article 433 of the Civil
Code provides that "(A)ctual possession under claim of ownership raises a disputable
presumption of ownership. The true owner must resort to judicial process for the recovery of
the property." In Chan vs. Court of Appeals, et al., L-27488, June 30, 1970, 33 SCRA 737,
this Court upheld the finding of the Court of Appeals that the litigated property belonged to
the private respondents therein based on their possession of the property, not only because
such findings of fact of the appellate court are conclusive and binding on this Court but
because the conclusion is in accordance with Articles 433 and 531 of the Civil Code. 9
As we have here conflicting claims of possession by the parties over the land in controversy
and because the fact of possession cannot be recognized at the same time in two different
personalities except in cases of co-possession, the present possessor is to be preferred
pursuant to Article 538 of the Civil Code which We quote:
Possession as a fact cannot be recognized at the same time in two
different personalities except in the cases of co-possession. Should a
question arise regarding the fact of possession, the present possessor
shall be preferred; if there are two possessors, the one longer in
possession; if the dates of the possession are the same, the one who
presents a title; and if all these conditions are equal, the thing shall be
placed in judicial deposit pending determination of its possession or
ownership through proper proceedings." 10
The pretension of petitioners that the possession of the Mendozas is that of a mere lessee
was not believed by the trial judge and the appellate court not only because of the absence
of any written or oral evidence on the matter other than the bare testimony of petitioner
Basilio Perez, but also due to the circumstances present in the case which We indicated
and enumerated at pages 7 to 9 of this decision. In fine, it is a fact that the Mendozas are
presently in possession of the property and the presumption of ownership in their favor has
not been successfully rebutted by evidence that they are mere lessees of the land in their
possession as claimed by petitioners.
2. In their second assigned error, petitioners contend that respondent court should not have
given weight to the evidence of respondent Mendoza because the latter's Exhibit 5 was
proven to be a falsified document.
To recall, Exhibit 5 is the alleged deed of exchange or barter of lands between Andrea and
Felisa Montalbo dated January 14, 1922. On this point, petitioners overlook the fact that
Exhibit 5 was made the basis of a criminal accusation of falsification of private document
solely on the allegation that the signature of Rafael Manahan, the person before whom the
parties to the document allegedly appeared, was not his. There was no finding in that
criminal case as per decision rendered therein that the barter or exchange of lands between
Andrea and Felisa Montalbo did not in effect take place. On the contrary, what appears in
said decision offered by petitioners as their Exhibit J are the following findings of the Court
of Appeals, viz: that the land donated by Andrea Montalbo to her daughter Margarita
Macalalad "was acquired by the donor by means of a barter with her own parcel of land
planted with bamboos and mango trees"; that while it is true that because of this
presentation of the falsified document appellant (now respondent Nicolas Mendoza) was
able to secure the declaration of the property donated in his name, no criminal liability
should be imposed upon him in the absence of any evidence that he presented said exhibit
with the knowledge that it was forged "especially if we take into consideration the fact that
he and his wife were and are still in possession of the land donated since 1927"; that in fact,
the color and appearance of the document in question show that it is not a new document
but an old one thus confirming Mendoza's theory that it was executed in or about the year
1922 as appearing in the document or five years before his marriage. (pp. 1, 5, 6 of Exh. J,
folder of exhibits) Thus, if the document Exhibit 5 was held to be forged, it was simply
because the municipal secretary, Rafael Manahan, did not sign it and not for any other
reason. What is material and relevant to the civil case is that both the trial court and
respondent appellate court found for a fact that there was an exchange of lands between
Andrea and Felisa Montalbo on the basis of evidence other than the disputed Exhibit 5. As
to what the evidence is, has been discussed above.
Petitioners cite Gonzales vs. Mauricio, 53 Phil. 728 where this Court stated inter alia that the
introduction of a forged instrument by a witness renders the testimony of the latter
practically worthless. That statement however is not applicable to the situation before Us
because in Gonzalez the particular document or receipt referred to was found to be entirely
false as to its contents, handwriting, and signature, whereas here all that was found to be
false is the signature of a witnessing official.
3. The last argument of petitioners is the object of the third assigned error. It is contended
that the appellate court erred in not giving effect to the deed of partition, Exhibit D,
notwithstanding the fact that the name of Andrea Montalbo appears in the document as one
of the witnesses thereto.
Exhibit D appears to be a document dated May 27, 1934, wherein certain properties
allegedly belonging to Estanislao Montalbo were divided between Petra Montalbo and Jose
Ortega, husband of deceased Felisa Montalbo. Petitioner Basilio Perez declared that one of
the parcels of land mentioned in the document is the land now in litigation which is
particularly marked as Exhibit D-1. He also testified that Exhibit D was signed by him and
his wife, Petra Montalbo, by Jose Ortega, husband of deceased Felisa Montalbo, and
thumbmarked by the latter's children all in his presence. (tsn December 15,1960, pp. 19-24)
Surprisingly, however, Basilio Perez did not at all mention during the course of his testimony
that the old woman, Andrea Montalbo, signed the deed of partition as a witness. We have
gone over the transcript of Basilio Perez' declaration on direct and cross-examination (tsn
December 15, 1960, pp. 15-34; September 25, 1961, pp. 3-40) and at no instance did he
ever state that Andrea Montalbo was present during the preparation of the document, that
she read or knew the contents thereof which by the way consists of six handwritten pages,
4
and that she signed her name on the document. It was incumbent upon petitioners to
identify the signature of Andrea Montalbo on the document if her signature was truly there.
As a matter of fact, examining the document Exhibit D We entertain doubts whether the
name referred to by petitioners is "Andrea Montalbo", for, as written, it also can read "Maria
Montalbo". At any rate, whatever is the import of said deed of partition, the same binds only
the parties thereto but does not affect third persons such as Andrea Montalbo or the herein
Mendozas in the absence of proof that they participated in one way or another in the
preparation and execution of thedocument. As it is, Andrea Montalbo was a stranger to that
deed of partition and any recital therein concerning the property under litigation cannot be
used as evidence to prejudice her and her successors-in-interest or place her in estoppel as
to her claims over the property. Res inter alios acta alteri nocere non debet. A transaction
between two parties ought not to operate to the prejudice of a third person or stranger. 11
4. In the fourth assignment of error, petitioners claim that the appellate court should have
rendered a decision in their favor. That both the trial court and respondent appellate court
have correctly evaluated the evidence, has been clearly demonstrated by Us.
IN VIEW OF ALL THE ABOVE CONSIDERATIONS, We find no reversible error in the
decision under review and We AFFIRM the same with costs against petitioners.
So Ordered.
G.R. No. 101929 January 6, 1993
GREGORIA MENDOZA, ELEUTERIA BAUTISTA, PEDRO ATIENZA, BENITA
SAMANIEGO, NENE SAMANIEGO (representing FLAVIANA GALANG), LETICIA
REYES, MANUEL REYES (representing MARCIANA GALANG), CARMEN ROQUE
VDA. DE DIMABUYU, PORFIRIO R. DIMABUYU, CARMEN R. DIMABUYU, CARIDAD R.
DIMABUYU, PEDRO R. DIMABUYU, MARCOS DIMABUYU (representing GERTRUDES
GALANG), respondents.
Heminio Z. Canlas for petitioners.
Lagunzad, Juan, Rubin & Cabaron Law Office for respondents.
PADILLA, J.:
In this petition for review on certiorari, petitioners seek to nullify the decision ** of the Court
of Appeals, dated 29 April 1991, in CA-G.R. CV. No. 14312, the dispositive portion of which
reads as follows:
WHEREFORE, the appealed judgment is hereby REVERSED; and the
Deed of Extra-Judicial Settlement of the estate of the deceased Dionisio
Galang (Exh. "D"), in so far as it relates to Lots 3548 and 3562 the
Bacolor Cadastre, and Transfer Certificates of Title Nos. 182670-R and
182671-R issued by virtue thereof are hereby declared null and void.

Conformably, the Register of Deeds concerned is hereby ordered to

BENJAMIN DIZON, ZACARIAS DIZON, AFRICA DIZON, PERFECTO DIZON, CARMEN cancel the said titles; and subject Lots 3548 and 3562 are hereby
DIZON (Heirs of Paula Galang), JULIA GALANG, CONSOLACION TABORA, adjudicated to the heirs of the deceased co-owners to be partitioned
ABELARDO TABORA, CECILIA TABORA, AVELINA TABORA, TRINIDAD TABORA, among them as follows:
REMEDIOS TABORA, VIRGINIA TABORA, DELFIN TABORA, PENINA TABORA,
FRANCISCO TABORA, CIPRIANA GALANG, RUFINO DELOS SANTOS, PEPITO
DELOS SANTOS (Heirs of Donata Vergara), ARNEO VERGARA, BENIGNO VERGARA, a. one-sixth to the Heirs of Marciana Galang;
JOSE VERGARA, SCION VERGARA, DEMETRIA VERGARA (all heirs of Dionisio
Galang), petitioners, b. one-sixth to the Heirs of Dionisio Galang;
vs.
COURT OF APPEALS, AUREO REYES, AURELIO SAMIA, ALFONSO SAMIA, c. one-sixth to the Heirs of Flaviana Galang;
POTENCIANO GALANG, LEONCIA GARCIA, BIENVENIDO TAPNIO, LYDIA BALINGIT
VDA. DE GARCIA, BENEDICTO GARCIA, ROMULADO GARCIA, AMY GARCIA,
ALEXANDER GARCIA, LUDIVINA GARCIA, MONTANO GUEVARRA, CORAZON d. one-sixth to the Heirs of Gertrudes Galang;
LAMPA, RUDY LAMPA, EDUARDO LAMPA, ILLUMINADA GUEVARRA, CARMELITA
MASANQUE VDA. DE GARCIA, MA. CONCEPCION AQUINO VDA. DE GUEVARRA, e. one-sixth to the Heirs of Potenciana Galang;
HONZAI GUEVARRA, RODA REBECCA GUEVARRA, RUTH GUEVARRA, minors
represented by their mother Ma. Concepcion Vda. de Guevarra, PRIMITIVA
f. one-sixth to the Heirs of Leoncia Galang.
GUEVARRA, JOSIAS N. GARCIA, LUCITA M. GARCIA, VICTOR M. GARCIA, LUTERO
M. GARCIA, SAMSON M. GARCIA, FELIXBERTO M. GARCIA, JR., HERMENIGILDA
GARCIA, CONSTANCIO GARCIA, REYNALDO GARCIA, AGAPITA GARCIA, ERNESTO Costs against defendants-appellees.SO ORDERED. 1
GARCIA, NORICO GARCIA, PACIFICO GARCIA, NORMANDO GARCIA, ARTURO
GARCIA, ESTELLA GARCIA, DIOSDADO GARCIA (representing LEONCIA GARCIA),
5
It appears that on 21 August 1984, Aureo Reyes, et al. (hereafter "respondents") filed an
amended complaint before the Regional Trial Court of San Fernando, Pampanga, docketed
as Civil Case No. 6752, for the annulment of a deed of extra-judicial settlement and partition
of the estate of Dionisio Galang, claiming to have been deprived thereby of their shares, as
co-owners, in Lot Nos. 3548 and 3562 Bacolor cadastre, and that OCT Nos. 9010 and
9102, issued in the name of Dionisio Galang, covering said lots, are fraudulent and should
therefore be annulled and cancelled.
The facts of the case, as culled from the Court of Appeals decision, are as follows:
The spouses Hilario Galang and Martina Laxamana owned two (2) lots located in San
Agustin, Potrero, Municipality of Bacolor, Province of Pampanga. They had six (6) children,
namely, Dionisio, Marciana, Potenciana, Flaviana, Leonora and Gertrudes.
The spouses (Hilario and Martina) mortgaged the aforesaid lots to Camilo Angeles. It is
alleged by the respondents that Dionisio Galang redeemed these lots in his own name,
despite the fact that part of the funds used for the redemption came from his sisters. 2 A
cadastral survey involving the two (2) lots was conducted, and on 19 May 1919, the Court of
First Instance ordered the issuance in Cadastral Case No. 14, of OCT Nos. 9010 (for lot
3548) and 9102 (for lot 3562) in the name solely of Dionisio Galang ( hereafter Galang).
Respondents, who are heirs of Galang's sisters, claim that Galang and his five (5) sisters
had partitioned the subject lots on 27 June 1920, as embodied in an unnotarized affidavit
executed by Galang (Exh. "C"). As a consequence thereof, Galang's sisters constructed
their houses on Lot 3548. The structures passed on from generation to generation, with
each of Galang's sisters and their descendants enjoying the benefits therefrom. No one
questioned or disturbed them until the petitioners (heirs of Galang), informed them that the
lots in question were titled in Galang's name and had been partitioned, on the basis of a
Deed of Extrajudicial Partition (Exh. "D"), into three (3) equal parts corresponding to his
(Galang's) three (3) children; that petitioners had succeeded in subdividing the lots and in
obtaining titles thereto in their name (TCT Nos. 182670-R and 182671-R) despite their
(respondents') earlier demands for an extrajudicial settlement of their dispute.
Petitioners, on the other hand, contend that the cadastral case which culminated in the
issuance of the original certificates of title over the subject lots in the sole name of Galang,
was a proceeding in rem, thus binding on the whole world; that when original certificates of
title (OCT Nos. 9010 and 9102) were issued on 9 January 1922 to Galang, respondents did
not raise any objection until March 1983 when they filed the complaint in Civil Case No.
6752, or after a lapse of sixty-one (61) years.
The trial court3 upheld Galang's titles over the lots which, as aforestated, had been issued
as early as 1922 in his name. The trial court further held that respondents' action had long
prescribed, having been filed only on 24 March 1983, or after a lapse of sixty-one (61) long
years from the issuance of said titles. The court also noted respondents' failure to establish
their relationship to Galang's five (5) sisters, premising their claim solely on an
unsubstantiated assertion that they are descendants of the deceased Galang sisters.4 The
presence or construction of the houses on Lot No. 3548 was also not considered as
evidence in respondents' favor, since no proof was submitted establishing respondents'
right to occupy the place. The documentary evidence (Exh. "C" and "C-1") allegedly
showing co-ownership among Dionisio and his co-heirs, was likewise ignored by the trial
court as this did not specifically refer to the disputed Lots 3548 and 3562.
On appeal by the respondents, respondent Court of Appeals reversed the trial court by
upholding respondents' rights. It focused on two (2) issues.
Thus —
Are the properties in question owned in common by the predecessors-in-
interest of appellants and appellees? And has appellants' present action
for partition prescribed?5
The appellate court declared that co-ownership existed between respondents'
predecessors-in-interest and those of petitioners, on the basis of Galang's affidavit which,
although unnotarized, was nonetheless an ancient document, pursuant to Sec. 22, Rule 132
of the Rules of Court, since it was executed on 27 June 1920. As such, proof of its due
execution and authentication could be dispensed with, according to the appellate court.
Hence, this recourse in turn by the petitioners.
We find the petition impressed with merit.
It is a fact that Dionisio Galang's ownership over the disputed lots (3548 and 3562) had
been judicially confirmed on 19 May 1919 in Cadastral Case No. 14, G.L.R.O. No. 51, which
is a proceeding in rem and hence binding "on the whole world." OCT No. 1056 (9010) and
OCT No. 1057 (9102) were, as a consequence, issued on 9 January 1922. None of
Galang's co-heirs objected to or protested their issuance. These titles became indefeasible
and incontrovertible. Then it was only after sixty-one (61) years or on 24 March 1983 that
the descendants of Galang's co-heirs asserted co-ownership claims over the subject lots.
It is true that Galang executed an affidavit, unnotarized at that, on 27 June 1920 which
states in part as follows (per English translation [Exh.
"C-1"]):6
That on this date, I have received from all my sisters and nephews who
are my co-heirs, namely Potenciana Galang, Flaviana Galang, Gertrudes
Galang, who are my sisters, and Silverio Garcia and Hilarion Samia, in
their own names and for their brothers and sisters who are also co-heirs,
the sum of ONE HUNDRED AND SIX PESOS (P106.00), Philippine
Currency, as complete payment for the discharge of the land we co-
inherited, which is the one we partitioned this date also, which was
mortgaged to the Angeles family.7
6
However, as can be gleaned from the foregoing, there is no reference to Lot Nos. 3548 and
3562. Said affidavit is not therefore a sufficient basis or support for what is alleged by
respondents as a partition among Dionisio and his now deceased sisters. It does not, as
correctly stated by the trial court, amount to anything insofar as the two (2) lots involved in
this case are concerned:
Even their presentation of the document purportedly executed by Dionisio
Galang on June 27, 1910 (Exh. "C" and "C-1") where the latter
acknowledges that he and his co-heirs named therein as co-owners of a
certain property which they had mortgaged to a certain family surnamed
Angeles does not amount to anything for nothing in this document shows
that it pertains to the two lots involved herein. It merely referred to a
certain "land" which Dionisio Galang and his co-heirs "co-inherited" and
partitioned without any indication as to which property is being referred
to.8
We likewise agree with the trial court that in the absence of definite proof establishing
respondents' link/relationship to their alleged predecessors-in-interest, i.e., the Galang
sisters, they do not have any cause of action, and the suit for partition must necessarily fall.
The trial court aptly observed:
. . . the plaintiffs thru their witnesses Bienvenido Tapnio, Marcos
Dimabuyu, Pedro Atienza, and Carmelita Galang, tried to prove that all
the plaintiffs herein are heirs and direct descendants, respectively, of
Marciana Galang, Potenciana Galang, Flaviana Galang, Leoncia Galang
and Gertrudes Galang who, in their lifetime, together with their late
brother Dionisio Galang, are the co-owners of these two lots, namely,
Lots Nos. 3548 and 3562. Lamentably, all that was proved in the process
by the plaintiffs thru these witnesses despite several proddings and
suggestions made by the court toward this end was that each of these
plaintiffs are just related to one another in varying degrees of relationship.
They failed to establish their connection or relationship with any of these
five sisters save for their unfounded averment that they are indeed
descendants and heirs of these deceased individuals. 9
WHEREFORE, the petition is GRANTED. The appealed decision of the Court of Appeals is
hereby SET ASIDE and the decision of the trial court dated 3 October 1986 in Civil Case
No. 6752 is hereby REINSTATED. No costs. SO ORDERED.
G.R. No. 137013 May 6, 2005
RUBEN SANTOS, petitioner,
vs.
SPOUSES TONY AYON and MERCY AYON, respondents.
DECISION
SANDOVAL-GUTIERREZ, J.:
For our resolution is the petition for review on certiorari assailing the Decision1 of the Court
of Appeals dated October 5, 1998 in CA-G.R. SP No. 4735 and its Resolution2 dated
December 11, 1998 denying the motion for reconsideration.
The petition alleges that on November 6, 1996, Ruben Santos, petitioner, filed with the
Municipal Trial Court in Cities (MTCC), Branch 2, Davao City a complaint for illegal detainer
against spouses Tony and Mercy Ayon, respondents, docketed as Civil Case No. 3506-B-
96.
In his complaint, petitioner averred that he is the registered owner of three lots situated at
Lanzona Subdivision, Matina, Davao City, covered by Transfer Certificates of Title (TCT)
Nos. 108174, 108175, and 108176. Respondent spouses are the registered owners of an
adjacent parcel of land covered by TCT No. T-247792. The previous occupant of this
property built a building which straddled both the lots of the herein parties. Respondents
have been using the building as a warehouse.
Petitioner further alleged in his complaint that in 1985, when he bought the three lots, he
informed respondents that the building occupies a portion of his land. However, he allowed
them to continue using the building. But in 1996, he needed the entire portion of his lot,
hence, he demanded that respondents demolish and remove the part of the building
encroaching his property and turn over to him their possession. But they refused. Instead,
they continued occupying the contested portion and even made improvements on the
building. The dispute was then referred to the barangay lupon, but the parties failed to reach
an amicable settlement. Accordingly, on March 27, 1996, a certification to file action was
issued.
In their answer, respondents sought a dismissal of this case on the ground that the court
has no jurisdiction over it since there is no lessor-lessee relationship between the parties.
Respondents denied they were occupying petitioner's property by mere tolerance, claiming
they own the contested portion and have been occupying the same long before petitioner
acquired his lots in 1985.
On July 31, 1997, the MTCC rendered its Decision in favor of petitioner, thus:
"WHEREFORE, judgment is rendered in favor of the plaintiff and against the
defendants ordering the latter, their successors-in-interest and other persons
acting in their behalf to vacate the portion of the subject properties and peacefully
surrender possession thereof to plaintiff as well as dismantle/remove the structures
found thereon.
7
 Defendants are further ordered to pay reasonable value for the use and occupation
of the encroached area in the amount of One Thousand Pesos (P1,000.00) a
month beginning September 1996 and the subsequent months thereafter until
premises are vacated; to pay attorney's fees of Ten Thousand Pesos
(P10,000.00); and to pay the costs of suit. SO ORDERED."3
On appeal, the Regional Trial Court (RTC), Branch 11, Davao City, in its Decision dated
February 12, 1998 in Civil Case No. 25, 654-97, affirmed in toto the MTCC judgment.4 The
RTC upheld the finding of the MTCC that respondents' occupation of the contested portion
was by mere tolerance. Hence, when petitioner needed the same, he has the right to eject
them through court action.
Respondents then elevated the case to the Court of Appeals through a petition for review. In
its Decision dated October 5, 1988 now being challenged by petitioner, the Court of Appeals
held that petitioner's proper remedy should have been an accion publiciana before the RTC,
not an action for unlawful detainer, thus:
"In this case, petitioners were already in possession of the premises in question at
the time private respondent bought three (3) lots at the Lanzona Subdivision in
1985, a portion of which is occupied by a building being used by the former as a
bodega. Apart from private respondent's bare claim, no evidence was alluded to
show that petitioners' possession was tolerated by (his) predecessor-in-interest.
The fact that respondent might have tolerated petitioners' possession is not
decisive. What matters for purposes of determining the proper cause of action is
the nature of petitioners' possession from its inception. And in this regard, the
Court notes that the complaint itself merely alleges that defendants-petitioners
have been 'occupying a portion of the above properties of the plaintiff for the past
several years by virtue of the tolerance of the plaintiff.' Nowhere is it alleged that
his predecessor likewise tolerated petitioners' possession of the premises. x x x.
Consequently, x x x, respondent should present his claim before the Regional Trial
Court in an accion publiciana and not before the Municipal Trial Court in a
summary proceeding of unlawful detainer.
WHEREFORE, the decision under review is hereby REVERSED and SET ASIDE.
Accordingly, the complaint for unlawful detainer is ordered DISMISSED."5
Petitioner filed a motion for reconsideration, but was denied by the Appellate Court in its
Resolution dated December 11, 1998.
Hence, the instant petition for review on certiorari ascribing to the Court of Appeals the
following errors:
"I
THE HONORABLE COURT OF APPEALS MISAPPLIED THE LAW IN
DISMISSING THE INSTANT CASE ON THE GROUND THAT PETITIONER
SHOULD PRESENT HIS CLAIM BEFORE THE REGIONAL TRIAL COURT IN
AN ACCION PUBLICIANA.
II
THE FINDINGS OF THE HONORABLE COURT OF APPEALS IS NOT IN
CONSONANCE WITH EXISTING LAWS AND JURISPRUDENCE."
The sole issue here is whether the Court of Appeals committed a reversible error of law in
holding that petitioner's complaint is within the competence of the RTC, not the MTCC.
Petitioner contends that it is not necessary that he has prior physical possession of the
questioned property before he could file an action for unlawful detainer. He stresses that he
tolerated respondents' occupancy of the portion in controversy until he needed it. After his
demand that they vacate, their continued possession became illegal. Hence, his action for
unlawful detainer before the MTCC is proper.
Respondents, in their comment, insisted that they have been in possession of the disputed
property even before petitioner purchased the same on April 10, 1985. Hence, he cannot
claim that they were occupying the property by mere tolerance because they were ahead in
time in physical possession.
We sustain the petition.
It is an elementary rule that the jurisdiction of a court over the subject matter is determined
by the allegations of the complaint and cannot be made to depend upon the defenses set up
in the answer or pleadings filed by the defendant. 6 This rule is no different in an action for
forcible entry or unlawful detainer.7 All actions for forcible entry or unlawful detainer shall be
filed with the proper Metropolitan Trial Courts, the Municipal Trial Courts and the Municipal
Circuit Trial Courts, which actions shall include not only the plea for restoration of
possession but also all claims for damages and costs arising therefrom. 8 The said courts
are not divested of jurisdiction over such cases even if the defendants therein raises the
question of ownership over the litigated property in his pleadings and the question of
possession cannot be resolved without deciding the issue of ownership.9
Section 1, Rule 70 on forcible entry and unlawful detainer of the 1997 Rules of Civil
Procedure, as amended, reads:
"Section 1. Who may institute proceedings, and when. – Subject to the provisions
of the next succeeding section, a person deprived of the possession of any land or
building by force, intimidation, threat, strategy, or stealth, or a lessor, vendor,
vendee, or other person against whom the possession of any land or building is
8
 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 lessor, vendor, vendee or other person
may, at any time within one (1) year after such unlawful deprivation or withholding
of possession, bring an action in the proper Municipal Trial Court against the
person or persons unlawfully withholding or depriving of possession, or any person
or persons claiming under them, for the restitution of such possession, together
with damages and costs."
Under the above provision, there are two entirely distinct and different causes of action, to
wit: (1) a case for forcible entry, which is an action to recover possession of a property from
the defendant whose occupation thereof is illegal from the beginning as he acquired
possession by force, intimidation, threat, strategy or stealth; and (2) a case for unlawful
detainer, which is an action for recovery of possession from defendant whose possession of
the property was inceptively lawful by virtue of a contract (express or implied) with the
plaintiff, but became illegal when he continued his possession despite the termination of his
right thereunder.10
Petitioner's complaint for unlawful detainer in Civil Case No. 3506-B-96 is properly within the
competence of the MTCC. His pertinent allegations in the complaint read:
"4. That defendants (spouses) have constructed an extension of their residential
house as well as other structures and have been occupying a portion of the above
PROPERTIES of the plaintiff for the past several years by virtue of the tolerance
of the plaintiff since at the time he has no need of the property;
5. That plaintiff needed the property in the early part of 1996 and made
demands to the defendants to vacate and turn over the premises as well as
the removal (of) their structures found inside the PROPERTIES of plaintiff;
that without any justifiable reasons, defendants refused to vacate the portion
of the PROPERTIES occupied by them to the damage and prejudice of the
plaintiff.
6. Hence, plaintiff referred the matter to the Office of the Barangay Captain of
Matina Crossing 74-A, Davao City for a possible settlement sometime in the latter
part of February 1996. The barangay case reached the Pangkat but no settlement
was had. Thereafter, a 'Certification To File Action' dated March 27, 1996 was
issued x x x;
x x x."11 (underscoring ours)
Verily, petitioner's allegations in his complaint clearly make a case for an unlawful detainer.
We find no error in the MTCC assuming jurisdiction over petitioner's complaint. A complaint
for unlawful detainer is sufficient if it alleges that the withholding of the possession or the
refusal to vacate is unlawful without necessarily employing the terminology of the
law.12 Here, there is an allegation in petitioner's complaint that respondents occupancy on
the portion of his property is by virtue of his tolerance. Petitioner's cause of action for
unlawful detainer springs from respondents' failure to vacate the questioned premises upon
his demand sometime in 1996. Within one (1) year therefrom, or on November 6, 1996,
petitioner filed the instant complaint.
It bears stressing that possession by tolerance is lawful, but such possession becomes
unlawful when the possessor by tolerance refuses to vacate upon demand made by the
owner. Our ruling in Roxas vs. Court of Appeals13 is applicable in this case: "A person who
occupies the land of another at the latter's tolerance or permission, without any contract
between them, is necessarily bound by an implied promise that he will vacate upon
demand, failing which, a summary action for ejectment is the proper remedy against him."
WHEREFORE, the petition is GRANTED. The assailed Decision and Resolution of the
Court of Appeals in CA-G.R. SP No. 47435 are hereby REVERSED and SET ASIDE. The
Decision dated February 12, 1998 of the Regional Trial Court, Branch 11, Davao City in
Civil Case No. 25, 654-97, affirming the Decision dated July 31, 1997 of the Municipal Trial
Court in Cities, Branch 2, Davao City in Civil Case No. 3506-B-96, is hereby REINSTATED.
SO ORDERED.
G.R. No. 150755 June 28, 2005
RENE GANILA,* EDUARDO DUMADA-OG, SR., RAFAEL GANILA, JOSE PASTRANA,
LOURDES GANILA, FLORENTINO GANILA, SERAFIN GANILA, LORETO ARELLANO,
CONRADO GANILA, VIVENCIO ALVIOR, EDUARDO GANTALA, AMPARO
VILLANUEVA, ELEUTERIO SILVA, ADELINA GANILA, FELIZARDO GANILA, SR.,
ENRIQUE GANILA, ABRAHAM TANONG, EMILIO ALFARAS, JR., BAPTIST CHRISTIAN
LEARNING CENTER, petitioners,
vs.
HON. COURT OF APPEALS AND VIOLETA C. HERRERA, respondents.
DECISION
QUISUMBING, J.:
For review on certiorari are the D E C I S I O N1 dated March 30, 2001 of the Court of
Appeals in CA-G.R. SP No. 58191, and its Resolution2 dated October 18, 2001 denying
the motion for reconsideration. The assailed decision denied the petition to set aside
the Resolution3 of the Regional Trial Court (RTC) of San Miguel, Jordan, Guimaras,
Branch 65, affirming the Order of the Municipal Circuit Trial Court (MCTC) for the 19
petitioners to vacate the contested parcel of land.
The facts are as follows:
9
On March 19, 1997, private respondent Violeta Herrera filed 21
ejectment Complaints4 before the 16th MCTC, Jordan-Buenavista-Nueva Valencia, Jordan,
Guimaras. Private respondent alleged that she owns Lot 1227 of the Cadastral Survey of
Jordan, Guimaras, with an area of 43,210 square meters; that she inherited the lot from her
parents; and that she only tolerated petitioners to construct residential houses or other
improvements on certain portions of the lot without rental. Sometime in September or
October 1996, private respondent demanded that the petitioners vacate the lot and remove
their houses and other improvements thereon. Petitioners refused, despite offer of money
by way of assistance to them. After the barangay conciliation failed, private respondent filed
the complaints.
In their Answers,5 eight6 of the petitioners claimed that Lot 1227 was formerly a shoreline
which they developed when they constructed their respective houses. Another
eight7 maintained that their houses stood on Lot 1229 of the Cadastral Survey of Jordan,
Guimaras. The other three8 asserted that Lot 1227 is a social forest area.
At the preliminary conference, the parties agreed to designate two geodetic engineers as
commissioners of the MCTC to conduct a relocation survey of Lot 1227 and to identify who
among the petitioners have houses within the lot.9
The commissioners reported that: (1) the house of Henry Gabasa, defendant in Civil Case
No. 288-J, is almost outside Lot 1227; (2) the house of Ludovico Amatorio, defendant in
Civil Case No. 289-J, diagonally traversed the boundary; and (3) the houses of the 19
petitioners are inside Lot 1227.10
Eight months after herein petitioners’ failure to comment on the manifestation of private
respondent to terminate the preliminary conference, the MCTC terminated the preliminary
conference.11 Thereafter, petitioners’ counsel Atty. Nelia Jesusa L. Gonzales failed to file
her clients’ position papers and affidavits, even after they sought a 30-day extension to file
the same.12
Consequently, the MCTC decided the cases as follows:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff
whereby each of the twenty-one (21) defendants are hereby ordered:
1. To vacate Lot 1227 of the Cadastral Survey of Jordan, Guimaras;
2. To pay Two Hundred Pesos (₱200.00) per month from October, 1996 as
compensation for the use of the property until the same is vacated; and
3. To pay Two Thousand Pesos (₱2,000.00) as attorney’s fees and litigation
expenses.
SO ORDERED.13
Petitioners appealed to the RTC, Branch 65, at Jordan, Guimaras, which decided as
follows:
WHEREFORE, premises considered, the decision in Civil Cases Nos. 0270-J, 0272-J,
0273-J, 0274-J, 0275-J, 0276-J, 0277-J, 0278-J, 0279-J, 0280-J, 0281-J, 0282-J, 0283-J,
0284-J, 0285-J, 0286-J, 0287-J, 0291-J and 0292-J are hereby affirmed.
The decision of the court below in Civil Cases Nos. 0288-J and 0289-J are set aside. Civil
Cases Nos. 0288-J and 0289-J are hereby DISMISSED. SO ORDERED.14
The RTC ruled that the evidence showed the better right of private respondent to possess
Lot 1227. Private respondent’s position paper, affidavit and tax declaration supported her
allegations. In addition, the commissioners’ report and sketch plan showed that indeed
petitioners occupy Lot 1227. On the other hand, according to the RTC, the petitioners failed
to present evidence which would show that they are entitled to possess the lot.
Based on the sketch plan, the RTC dismissed the cases against Gabasa and Amatorio
since their houses occupy only a small area of Lot 1227. It declared that Gabasa and
Amatorio believed in good faith that the whole area they occupied was part of the seashore.
The 19 petitioners, who were ordered to vacate the lot, filed a joint petition for review with
the Court of Appeals. The appellate court denied the petition. Petitioners moved for
reconsideration and filed an amended petition. The Court of Appeals, however, affirmed the
factual findings and conclusions arrived at by the trial courts and denied the amended
petition for lack of merit.15 It also denied the motion for reconsideration.
Petitioners are now before us, on a petition for review, alleging that:
The Honorable Court of Appeals, with due respect and deference, committed a reversible
error in the interpretation/application of the law in the instant case and in the appreciation of
the facts and evidence presented. The Court of Appeals gravely abused its discretion when
it denied and dismissed the petition filed by the petitioners. 16
After considering the parties’ submissions, we find three basic issues: (1) Did the MCTC err
in taking jurisdiction over and deciding the cases? (2) Did the RTC err in sustaining the
MCTC’s judgment? (3) Did the CA err in denying the petition for review filed by the 19
petitioners ordered to be ejected?
Petitioners insist that private respondent should have filed an action to recover possession
de jure, not a mere complaint for ejectment, for two reasons. One, they possessed Lot 1227
in good faith for more than 30 years in the concept of owners. And two, there was no
withholding of possession since private respondent was not in prior possession of the lot.
10
Private respondent states in her Comment before us that the allegations in
her Complaints make out a clear case of unlawful detainer which is cognizable by the
MCTC. We are in agreement with her stance. There was no error in the choice of the
complainant’s remedy, a matter left to her determination as the suitor. And the complaint
itself is defined by the allegations therein, not the allegations of the defendants.
At the outset, we note that petitioners question the MCTC’s jurisdiction yet they admit in
their preliminary statement that the Complaints filed are indeed for unlawful detainer, and
that the only issue to be determined is mere physical possession (possession de facto) and
not juridical possession (possession de jure), much less ownership.17
While petitioners assert that this case involves only deprivation of possession, they confuse
the remedy of an action for forcible entry with that of unlawful detainer. In unlawful detainer,
prior physical possession by the plaintiff is not necessary. It is enough that plaintiff has a
better right of possession. Actual, prior physical possession of a property by a party is
indispensable only in forcible entry cases. In unlawful detainer cases, the defendant is
necessarily in prior lawful possession of the property but his possession eventually
becomes unlawful upon termination or expiration of his right to possess.18 Thus, the fact that
petitioners are in possession of the lot does not automatically entitle them to remain in
possession. And the issue of prior lawful possession by the defendants does not arise at all
in a suit for unlawful detainer, simply because prior lawful possession by virtue of contract or
other reasons is given or admitted. Unlike in forcible entry where defendants, by force,
intimidation, threat, strategy or stealth, deprive the plaintiff or the prior physical possessor of
possession. Here there is no evidence to show that petitioners entered the lot by any of
these acts.
If only to stress the fundamental principles related to present controversy, jurisdiction over
unlawful detainer suits is vested in municipal trial courts. 19 And in ejectment cases, the
jurisdiction of the court is determined by the allegations of the complaint.20
In this case for ejectment, private respondent’s allegations sufficiently present a case of
unlawful detainer. She alleged that (1) she owns Lot 1227; (2) she tolerated petitioners to
construct their houses thereon; (3) she withdrew her tolerance; and (4) petitioners refused
to heed her demand to vacate the lot. The Complaints were also filed within one year from
the date of her demand. The cause of action for unlawful detainer between the parties
springs from the failure of petitioners to vacate the lot upon lawful demand of the private
respondent. When they refused to vacate the lot after her demand, petitioners’ continued
possession became unlawful. Her complaint for ejectment against respondent, to put it
simply, is not without sufficient basis.
Petitioners’ contention that private respondent should have filed an action to
recover possession de jure with the RTC is not supported by law or jurisprudence. The
distinction between a summary action of ejectment and a plenary action for recovery of
possession and/or ownership of the land is settled in our jurisprudence.
What really distinguishes an action for unlawful detainer from a possessory action (accion
publiciana) and from a reinvindicatory action (accion reinvindicatoria) is that the first is
limited to the question of possession de facto. An unlawful detainer suit (accion interdictal)
together with forcible entry are the two forms of an ejectment suit that may be filed to
recover possession of real property. Aside from the summary action of ejectment, accion
publiciana or the plenary action to recover the right of possession and accion
reinvindicatoria or the action to recover ownership which includes recovery of possession,
make up the three kinds of actions to judicially recover possession. 21
It is not up to defendants, now petitioners herein, to dictate upon plaintiff, now the private
respondent, what her initial recourse should be. Her choice of an action for ejectment
against so-called squatters is well within her rights.
Petitioners cite the case of Bayubay v. Court of Appeals,22 and argue that the MCTC’s
decision was without jurisdictional or legal basis because the MCTC did not issue a
preliminary conference order. They assert that the 10-day period to file position papers and
affidavits only starts after the parties had received a preliminary conference order. They
insist they were denied due process when the MCTC decided the cases based merely on
private respondent’s Complaints and affidavit, without considering their Answers.
For her part, private respondent maintains that there was substantial compliance with the
rules in the MCTC’s conduct of the preliminary conference, hence there was no violation of
due process nor disregard of its proper jurisdiction.
Petitioners’ present contention was first raised only in their appeal to the RTC. Raising it
before the appellate tribunal is barred by estoppel. 23 They should have raised it in the
proceedings before the MCTC. In our view, this issue is a mere afterthought, when the
MCTC decided against them. Basic rules of fair play, justice and due process require that as
a rule an issue cannot be raised by the petitioners for the first time on appeal. 24
Besides, petitioners did not question initially the MCTC’s Order dated February 19, 1999,
when they moved for an extension of time to file their position papers and affidavits. They
wanted another 30 days on top of the 30 days set by the MCTC, which strictly should have
been 10 days only. In this regard, petitioners could not claim that they were denied sufficient
time to file their position papers and affidavits before the trial court. Further, they cannot
validly invoke our ruling25 in Bayubay, for in that case there was no order at all terminating
the preliminary conference and requiring the parties to submit position papers and affidavits.
We note with dismay petitioners’ insistence that we order the MCTC "to conduct the
requisite preliminary conference." The summary character of ejectment suits will be
disregarded if we allow petitioners to further delay this case by allowing a second
preliminary conference. Ejectment by way of forcible entry and unlawful detainer cases are
summary proceedings, designed to provide an expeditious means of protecting actual
possession or the right to possession over the property involved. It is a timely procedure
designed to remedy the delay in the resolution of such cases.26
11
Lastly, petitioners aver that private respondent failed to prove her allegation of ownership of
Lot 1227 as it is only based on a tax declaration which is not an evidence of ownership.
They also claim that their possession of the lot was not and could not be by mere tolerance.
However, this is a factual matter best left to the trial courts.
What we have now is sufficient evidence showing that private respondent has a better right
to possess Lot 1227. The commissioners’ report and sketch plan show that the 19
petitioners occupy the lot, which corroborate private respondent’s allegation and disprove
petitioners’ defense that Lot 1227 is a shoreline; or that Lot 1227 is a social forest area.
While not a conclusive evidence of ownership, private respondent’s tax declaration
constitutes proof that she has a claim of title over the lot. It has been held that:
Although tax declarations or realty tax payment of property are not conclusive evidence of
ownership, nevertheless, they are good indicia of possession in the concept of owner for no
one in his right mind would be paying taxes for a property that is not in his actual or at least
constructive possession. They constitute at least proof that the holder has a claim of title
over the property. The voluntary declaration of a piece of property for taxation purposes
manifests not only one’s sincere and honest desire to obtain title to the property and
announces his adverse claim against the State and all other interested parties, but also the
intention to contribute needed revenues to the Government. Such an act strengthens
one’s bona fide claim of acquisition of ownership.27
The lower courts did not err in adjudicating the issue of possession. Mere absence of title
over the lot is not a ground for the courts to withhold relief from the parties in an ejectment
case. Plainly stated, the trial court has validly exercised its jurisdiction over the ejectment
cases below. The policy behind ejectment suits is to prevent breaches of the peace and
criminal disorder, and to compel the party out of possession to respect and resort to the law
alone to obtain what she claims is hers. The party deprived of possession must not take the
law into his or her own hands.28For their part, herein petitioners could not be barred from
defending themselves before the court adequately, as a matter of law and right.
However, petitioners in their defense should show that they are entitled to possess Lot
1227. If they had any evidence to prove their defenses, they should have presented it to the
MCTC with their position papers and affidavits. But they ignored the court’s order and
missed the given opportunity to have their defenses heard, the very essence of due
process.29 Their allegations were not only unsubstantiated but were also disproved by the
plaintiff’s evidence.
In sum, we find no reversible error much less any grave abuse of discretion committed by
the Court of Appeals. A person who occupies the land of another at the latter’s tolerance or
permission, without any contract between them, is necessarily bound by an implied promise
that he will vacate upon demand, failing which a summary action for ejectment is the proper
remedy against him.30 His status is analogous to that of a lessee or tenant whose term of
lease has expired but whose occupancy continued by tolerance of the owner. In such a
case, the date of unlawful deprivation or withholding of possession is to be counted from the
date of the demand to vacate.31
WHEREFORE, the instant petition is DENIED for lack of merit. The Decision of the Court of
Appeals dated March 30, 2001 and its Resolution dated October 18, 2001 are AFFIRMED.
Costs against petitioners. SO ORDERED.
United States Supreme Court
UNITED STATES v. CAUSBY, (1946)
No. 630
Argued: May 1, 1946 Decided: May 27, 1946
Military airplanes are subject to rules of Civil Aeronautics Board where there are no army or
navy regulations to the contrary. [328 U.S. 256, 257] Mr. Walter J. Cummings, Jr., of
Washington, D.C., for petitioner.
Mr. William E. Comer, of Greensboro, N.C., for respondent.
[328 U.S. 256, 258]
Mr. Justice DOUGLAS delivered the opinion of the Court.
This is a case of first impression. The problem presented is whether respondents' property
was taken within the meaning of the Fifth Amendment by frequent and regular flights of
army and navy aircraft over respondents' land at low altitudes. The Court of Claims held that
there was a taking and entered judgment for respondent, one judge dissenting. 60 F.Supp.
751. The case is here on a petition for a writ of certiorari which we granted becuase of the
importance of the question presented.
Respondents own 2.8 acres near an airport outside of Greensboro, North Carolina. It has on
it a dwelling house, and also various outbuildings which were mainly used for raising
chickens. The end of the airport's northwest-southeast runway is 2,220 feet from
respondents' barn and 2,275 feet from their house. The path of glide to this runway passes
directly over the property-which is 100 feet wide and 1,200 feet long. The 30 to 1 safe glide
angle1 approved by the Civil Aeronautics Authority2 passes over this property at 83 feet,
which is 67 feet above the house, 63 feet above the barn and 18 feet above the highest
tree. 3 The use by the United States of this airport is pursuant to a lease executed in May,
1942, for a term commencing June 1, 1942 and ending June 30, 1942, with a provision for
renewals until June 30, 1967, or six [328 U.S. 256, 259] months after the end of the
national emergency, whichever is the earlier.
Various aircraft of the United States use this airport-bombers, transports and fighters. The
direction of the prevailing wind determines when a particular runway is used. The north-
west-southeast runway in question is used about four per cent of the time in taking off and
about seven per cent of the time in landing. Since the United States began operations in
May, 1942, its four-motored heavy bombers, other planes of the heavier type, and its fighter
planes have frequently passed over respondents' land buildings in considerable numbers
and rather close together. They come close enough at times to appear barely to miss the
tops of the trees and at times so close to the tops of the trees as to blow the old leaves off.
The noise is startling. And at night the glare from the planes brightly lights up the place. As
a result of the noise, respondents had to give up their chicken business. As many as six to
12
ten of their chickens were killed in one day by flying into the walls from fright. The total
chickens lost in that manner was about 150. Production also fell off. The result was the
destruction of the use of the property as a commercial chicken farm. Respondents are
frequently deprived of their sleep and the family has become nervous and frightened.
Although there have been no airplane accidents on respondents' property, there have been
several accidents near the airport and close to respondents' place. These are the essential
facts found by the Court of Claims. On the basis of these facts, it found that respondents'
property had depreciated in value. It held that the United States had taken an easement
over the property on June 1, 1942, and that the value of the property destroyed and the
easement taken was $2,000. [328 U.S. 256, 260] I. The United States relies on the Air
Commerce Act of 1926, 44 Stat. 568, 49 U.S.C. 171 et seq., 49 U.S.C.A. 171 et seq., as
amended by the Civil Aeronautics Act of 1938, 52 Stat. 973, 49 U.S.C. 401 et seq., 49 U.
S.C.A. 401 et seq. Under those statutes the United States has 'complete and exclusive
national sovereignty in the air space' over this country. 49 U.S.C. 176(a), 49 U.S.C.A.
176(a). They grant any citizen of the United States 'a public right of freedom of transit in air
commerce4 through the navigable air space of the United States.' 49 U.S.C. 403, 49
U.S.C.A. 403. And 'navigable air space' is defined as 'airspace above the minimum safe
altitudes of flight prescribed by the Civil Aeronautics Authority.' 49 U.S.C. 180, 49 U.S.C.A.
180. And it is provided that 'such navigable airspace shall be subject to a public right of
freedom of interstate and foreign air navigation.' Id. It is, therefore, argued that since these
flights were within the minimum safe altitudes of flight which had been prescribed, they were
an exercise of the declared right of travel through the airspace. The United States
concludes that when flights are made within the navigable airspace without any physical
invasion of the property of the landowners, there has been no taking of property. It says that
at most there was merely incidental damage occurring as a consequence of authorized air
navigation. It also argues that the landowner does not own superadjacent airspace which he
has not subjected to possession by the erection of structures or other occupancy. Moreover,
it is argued that even if the United States took airspace owned by respondents, no
compensable damage was shown. Any damages are said to be merely consequential for
which no compensation may be obtained under the Fifth Amendment.
It is ancient doctrine that at common law ownership of the land extended to the periphery of
the universe-Cujus [328 U.S. 256, 261] est solum ejus est usque ad coelum. 5 But that
doctrine has no place in the modern world. The ai is a public highway, as Congress has
declared. Were that not true, every transcontinental flight would subject the operator to
countless trespass suits. Common sense revolts at the idea. To recognize such private
claims to the airspace would clog these highways, seriously interfere with their control and
development in the public interest, and transfer into private ownership that to which only the
public has a just claim.
But that general principle does not control the present case. For the United States conceded
on oral argument that if the flights over respondents' property rendered it uninhabitable,
there would be a taking compensable under the Fifth Amendment. It is the owner's loss, not
the taker's gain, which is the measure of the value of the property taken. United States v.
Miller, 317 U.S. 369 , 63 S.Ct. 276, 147 A.L. R. 55. Market value fairly determined is the
normal measure of the recovery. Id. And that value may reflect the use to which the land
could readily be converted, as well as the existing use. United States v. Powelson, 319 U.S.
266, 275 , 63 S.Ct. 1047, 1053, and cases cited. If, by reason of the frequency and altitude
of the flights, respondents could not use this land for any purpose, their loss would be
complete. 6 It would be as complete as if the United States had entered upon the surface of
the land and taken exclusive possession of it.
We agree that in those circumstances there would be a taking. Though it would be only an
easement of flight[328 U.S. 256, 262] which was taken, that easement, if permanent and
not merely temporary, normally would be the equivalent of a fee interest. It would be a
definite exercise of complete dominion and control over the surface of the land. The fact that
the planes never touched the surface would be as irrelevant as the absence in this day of
the feudal livery of seisin on the transfer of real estate. The owner's right to possess and
exploit the land-that is to say, his beneficial ownership of it-would be destroyed. It would not
be a case of incidental damages arising from a legalized nuisance such as was involved in
Richards v. Washington Terminal Co., 233 U.S. 546 , 34 S.Ct. 654, L.R.A.1915A, 887. In
that case property owners whose lands adjoined a railroad line were denied recovery for
damages resulting from the noise, vibrations, smoke and the like, incidental to the
operations of the trains. In the supposed case the line of flight is over the land. And the land
is appropriated as directly and completely as if it were used for the runways themselves.
There is no material difference between the supposed case and the present one, except
that here enjoyment and use of the land are not completely destroyed. But that does not
seem to us to be controlling. The path of glide for airplanes might reduce a valuable factory
site to grazing land, an orchard to a vegetable patch, a residential section to a wheat field.
Some value would remain. But the use of the airspace immediately above the land would
limit the utility of the land and cause a diminution in its value. 7 That was the philosophy of
Portsmouth Harbor Land & Hotel Co. v. [328 U.S. 256, 263] United States, 260 U.S. 327 ,
43 S.Ct. 135. In that case the petition alleged that the United States erected a fort on nearby
land, established a battery and a fire control station there, and fired guns over petitioner's
land. The Court, speaking through Mr. Justice Holmes, reversed the Court of Claims which
dismissed the petition on a demurrer, olding that 'the specific facts set forth would warrant a
finding that a servitude has been imposed.' 8 260 U.S. at page 330, 43 S.Ct. at page 137.
And see Delta Air Corp. v. Kersey, 193 Ga. 862, 20 S.E.2d 245, 140 A.L.R. 1352. Cf. United
States v. 357.25 Acres of Land, D.C., 55 F.Supp. 461.
The fact that the path of glide taken by the planes was that approved by the Civil
Aeronautics Authority does not change the result. The navigable airspace which Congress
has placed in the public domain is 'airspace above the minimum safe altitudes of flight
prescribed by the Civil Aeronautics Authority.' 49 U.S.C. 180, 49 U.S.C.A. 180. If that
agency prescribed 83 feet as the minimum safe altitude, then we would have presented the
question of the validity of the regulation. But nothing of the sort has been done. The path of
glide governs the method of operating- of landing or taking off. The altitude required for that
operation is not the minimum safe altitude of flight which is the downward reach of the
navigable airspace. The minimum prescribed by the authority is 500 feet during the day and
1000 feet at night for air carriers (Civil Air Regulations, Pt. 61, 61.7400, 61.7401, Code
Fed.Reg.Cum.Supp., Tit. 14, ch. 1) and from 300 to 1000 feet for [328 U.S. 256, 264] other
aircraft depending on the type of plane and the character of the terrain. Id., Pt. 60, 60.350-
60.3505, Fed.Reg.Cum.Supp., supra. Hence, the flights in question were not within the
navigable airspace which Congress placed within the public domain. If any airspace needed
for landing or taking off were included, flights which were so close to the land as to render it
13
uninhabitable would be immune. But the United States concedes, as we have said, that in
that event there would be a taking. Thus, it is apparent that the path of glide is not the
minimum safe altitude of flight within the meaning of the statute. The Civil Aeronautics
Authority has, of course, the power to prescribe air traffic rules. But Congress has defined
navigable airspace only in terms of one of them-the minimum safe altitudes of flight.
We have said that the airspace is a public highway. Yet it is obvious that if the landowner is
to have full enjoyment of the land, he must have exclusive control of the immediate reaches
of the enveloping atmosphere. Otherwise buildings could not be erected, trees could not be
planted, and even fences could not be run. The principle is recognized when the law gives a
remedy in case overhanging structures are erected on adjoining land. 9 The landowner
owns at least as much of the space above the ground as the can occupy or use in
connection with the land. See Hinman v. Pacific Air Transport, 9 Cir., 84 F.2d 755. The fact
that he does not occupy it in a physical sense-by the erection of buildings and the like-is not
material. As we have said, the flight of airplanes, which skim the surface but do not touch it,
is as much an appropriation of the use of the land as a more conventional entry upon it. We
would not doub that if the United States erected [328 U.S. 256, 265] an elevated railway
over respondents' land at the precise altitude where its planes now fly, there would be a
partial taking, even though none of the supports of the structure rested on the land. 10 The
reason is that there would be an intrusion so immediate and direct as to subtract from the
owner's full enjoyment of the property and to limit his exploitation of it. While the owner does
not in any physical manner occupy that stratum of airspace or make use of it in the
conventional sense, he does use it in somewhat the same sense that space left between
buildings for the purpose of light and air is used. The superadjacent airspace at this low
altitude is so close to the land that continuous invasions of it affect the use of the surface of
the land itself. We think that the landowner, as an incident to his ownership, has a claim to it
and that invasions of it are in the same category as invasions of the surface. 11
In this case, as in Portsmouth Harbor Land & Hotel Co. v. United States, supra, the
damages were not merely consequential. They were the product of a direct invasion of
respondents' do- [328 U.S. 256, 266] main. As stated in United States v. Cress, 243 U.S.
316, 328 , 37 S.Ct. 380, 385, '... it is the character of the invasion, not the amount of
damage resulting from it, so long as the damage is substantial, that determines the question
whether it is a taking.'
We said in United States v. Powelson, supra, 319 U.S. at page 279, 63 S.Ct. at page 1054,
that while the meaning of 'property' as used in the Fifth Amendment was a federal question,
'it will normally obtain its content by reference to local law.' If we look to North Carolina law,
we reach the same result. Sovereignty in the airspace rests in the State 'except where
granted to and assumed by the United States.' Gen.Stats. 1943, 63-11. The flight of aircraft
is lawful 'unless at such a low altitude as to interfere with the then existing use to which the
land or water, or the space over the land or water, is put by the owner, or unless so
conducted as to be imminently dangerous to persons or property lawfully on the land or
water beneath.' Id., 63-13. Subject to that right of flight, 'ownership of the space above the
lands and waters of this State is declared to be vested in the several owners of the surface
beneath.' Id. 63-12. Our holding that there was an invasion of respondents' property is thus
not inconsistent with the local law governing a landowner's claim to the immediate reaches
of the superadjacent airspace.
The airplane is part of the modern environment of life, and the inconveniences which it
causes are normally not compensable under the Fifth Amendment. The airspace, apart from
the immediate reaches above the land, is part of the public domain. We need not determine
at this time what those precise limits are. Flights over private land are not a taking, unless
they are so low and so frequent as to be a direct and immediate interference with the
enjoyment and use of the land. We need not speculate on that phase of the present case.
For the findings of the Court [328 U.S. 256, 267] of Claims plainly establish that there was
a diminution in value of the property and that the frequent, low-level flights were the direct
and immediate cause. We agree with the Court of Claims that a servitude has been
imposed upon the land.
II. By 145(1) of the Judicial Code, 28 U.S.C. 250(1), 28 U.S.C.A . 250(1), the Court of
Claims has jurisdiction to hear and determine 'All claims (except for pensions) founded upon
the Constitution of the United States or ... upon any contract, express or implied, with the
Government of the United States.'
We need not decide whether repeated trespasses might give rise to an implied contract. Cf.
Portsmouth Harbor Land & Hotel Co. v. United States, supra. If there is a taking, the claim is
'founded upon the Constitution' and within the jurisdiction of the Court of Claims to hear and
determine. See Hollister v. Benedict & Burnham Mfg. Co., 113 U.S. 59, 67 , 5 S.Ct. 717,
721; Hurley v. Kincaid, 285 U.S. 95, 104 , 52 S.Ct. 267, 269; Yearsley v. W. A. Ross
Construction Co., 309 U.S. 18, 21 , 60 S.Ct. 413, 415. Thus, the jurisdiction of the Court of
Claims in this case is clear.
III. The Court of Claims held, as we have noted, that an easement was taken. But the
findings of fact contain no precise description as to its nature. It is not described in terms of
frequency of flight, permissible altitude, or type of airplane. Nor is there a finding as to
whether the easement taken was temporary or permanent. Yet an accurate description of
the property taken is essential, since that interest vests in the United States. United States
v. Cress, supra, 243 U.S. 328, 329 , 37 S.Ct. 385, 386, and cases cited. It is true that the
Court of Claims stated in its opinion that the easement taken was permanent. But the
deficiency in findings cannot be rectified by statements in the opinion. United States v.
Esnault-Pelterie, 299 U.S. 201, 205 , 206 S., 57 S.Ct. 159, 161, 162; United States v.
Seminole Nation, 299 U.S. 417, 422 , 57 S.Ct. 283, 287. Findings of fact on every 'material
issue' are a statutory [328 U.S. 256, 268] requirement. 53 Stat. 752, 28 U.S.C. 288, 28
U.S.C.A. 288. The importance of findings of fact based on evidence is emphasized here by
the Court of Claims' treatment of the nature of the easement. It stated in its opinion that the
easement was permanent because the United States 'no doubt intended to make some sort
of arrangement whereby it could use the airport for its military planes whenever it had
occasion to do so.' (60 F. Supp. 758.) That sounds more like conjecture rather than a
conclusion from evidence; and if so, it would not be a proper foundation for liability of the
United States. We do not stop to examine the evidence to determine whether it would
support such a finding, if made. For that is not our function. United States v. Esnault-
Pelterie, supra, 299 U.S. at page 206, 57 S.Ct. at page 162.
Since on this record it is not clear whether the easement taken is a permanent or a
temporary one, it would be premature for us to consider whether the amount of the award
made by the Court of Claims was proper.
14
The judgment is reversed and the cause is remanded to the Court of Claims so that it may
make the necessary findings in conformity with this opin on.
REVERSED.
Mr. Justice JACKSON took no part in the consideration or decision of this case.
Mr. Justice BLACK, dissenting.
The Fifth Amendment provides that 'private property' shall not 'be taken for public use,
without just compensation.' The Court holds today that the Government has 'taken'
respondents' property by repeatedly flying Army bombers directly above respondents' land
at a height of eighty-three feet where the light and noise from these planes caused
respondents to lose sleep and their chickens to be killed. Since the effect of the Court's
decision is [328 U.S. 256, 269] to limit, by the imposition of relatively absolute
Constitutional barriers, possible future adjustments through legislation and regulation which
might become necessary with the growth of air transportation, and since in my view the
Constitution does not contain such barriers, I dissent.
The following is a brief statement of the background and of the events that the Court's
opinion terms a 'taking' within the meaning of the Fifth Amendment: Since 1928 there has
been an airfield some eight miles from Greensboro, North Carolina. In April, 1942, this
airport was taken over by the Greensboro-High Point Municipal Airport Authority and it has
since then operated as a municipal airport. In 1942 the Government, by contract, obtained
the right to use the field 'concurrently, jointly, and in common' with other users. Years
before, in 1934, respondents had bought their property, located more than one-third of a
mile from the airport. Private planes from the airport flew over their land and farm buildings
from 1934 to 1942 and are still doing so. But though these planes disturbed respondents to
some extent, Army bombers, which started to fly over the land in 1942 at a height of eighty-
three feet, disturbed them more because they were larger, came over more frequently,
made a louder noise, and at night a greater glare was caused by their lights. This noise and
glare disturbed respondents' sleep, frightened them, and made them nervous. The noise
and light also frightened respondents' chickens so much that many of them flew against
buildings and were killed.
The Court's opinion seems to indicate that the mere flying of planes through the column of
air directly above respondents' land does not constitute a 'taking'. Consequently, it appears
to be noise and glare, to the extent and under the circumstances shown here, which make
the government a seizer of private property. But the allegation [328 U.S. 256, 270] of noise
and glare resulting in damages, constitutes at best an action in tort where there might be
recovery if the noise and light constituted a nuisance, a violation of a statute,1 or were the
result of negligence. 2 But the Government has not consented to be sued in the Court of
Claims except in actions based on express or implied contract. And there is no implied
contract here, unless by reason of the noise and glare caused by the bombers the
Government can be said to have 'taken' respondents' property in a Constitutional sense.
The concept of taking property as used in the Constitution has heretofore never been given
so sweeping a meaning. The Court's opinion presents no case where a man who makes
noise or shines light onto his neighbor's property has been ejected from that property for
wrongfully taking possession of it. Nor would anyone take seriously a claim that noisy
automobiles passing on a highway are taking wrongful possession of the homes located
thereon, or that a city elevated train which greatly interferes with the sleep of those who live
next to it wrongfully takes their property. Even the one case in this Court which in
considering the sufficiency of a complaint gave the most elastic meaning to the phrase
'private property be taken' as used in the Fifth Amendment, did not go so far. Portsmouth
Harbor Land & Hotel Co. v. United States, 260 U.S. [328 U.S. 256, 271] 327, 43 S.Ct. 135.
I am not willing, nor do I think the Constitution and the decisions authorize me to extend that
phrase so as to guarantee an absolute Constitutional right to relief not subject to legislative
change, which is based on averments that at best show mere torts committed by
Government agents while flying over land. The future adjustment of the rights and remedies
of property owners, which might be found necessary because of the flight of planes at safe
altitudes, should, especially in view of the imminent expansion of air navigation, be left
where I think the Constitution left it, with Congress.
Nor do I reach a different conclusion because of the fact that the particular circumstance
which under the Court's opinion makes the tort here absolutely actionable, is the passing of
planes through a column of air at an elevation of eighty-three feet directly over respondents'
property. It is inconceivable to me that the Constitution guarantees that the airspace of this
Nation needed for air navigation, is owned by the particular persons who happen to own the
land beneath to the same degree as they own the surface below. 3 No rigid Constitutional
rule, in my judgment, commands that the air must be considered as marked off into
separate compartments by imaginary metes and bounds in order to synchronize air
ownership with land ownership. I think that the Constitution entrusts Congress with full
power to control all navigable airspace. Congress has already acted under that power. It
has by statute, 44 Stat. 568, 52 Stat. 973, provided that 'the United States of America is ...
to possess and exercise complete and exclusive national sovereignty in the [328 U.S. 256,
272] air space (over) the United States.' This was done under the assumption that the
Commerce Clause of the Constitution gave Congress the same plenary power to control
navigable airspace as its plenary power over navigable waters. H. Rep. No. 572, 69th
Cong., 1st Sess., p. 10; H. Rep. No. 1162, 69th Cong., 1st Sess., p. 14; United States v.
Commodore Park, Inc., 324 U.S. 386 , 65 S.Ct. 803. To make sure that the airspace used
for air navigation would remain free, Congress further declared that 'navigable airspace
shall be subject to a public right of freedom of interstate and foreign air navigation,' and
finally stated emphatically that there exists 'a public right of freedom of transit ... through the
navigable airspace of the United States.' Congress thus declared that the air is free, not
subject to private ownership, and not subject to delimitation by the courts. Congress and
those acting under its authority were the only ones who had power to control and regulate
the flight of planes. 'Navigable air-space' was defined as 'airspace above the minimum safe
altitudes of flight prescribed by the Civil Aeronautics Authority.' 49 U.S.C. 180, 49 U.S.C.A.
180. Thus, Congress has given the Civil Aeronautics Authority exclusive power to determine
what is navigable airspace subject to its exclusive control. This power derives specifically
from the Section which authorizes the Authority to prescribe 'air traffic rules governing the
flight of, and for the navigation, protection, and identification of, aircraft, including rules as to
safe altitudes of flight and rules for the prevention of collisions between aircraft, and
between aircraft and land or water vehicles.' 49 U.S.C.A. 551. Here there was no showing
that the bombers flying over respondents' land violated any rule or regulation of the Civil
Aeronautics Authority. Yet, unless we hold the Act unconstitutional, at least such a showing
15
would be necessary before the courts could act without interfering with the exclusive
authority which Congress gave to the administrative agency. Not even a [328 U.S. 256,
273] showing that the Authority has not acted at all would be sufficient. For in that event,
were the courts to have any authority to act in this case at all, they should stay their hand till
the Authority has acted.
The broad provisions of the Congressional statute cannot properly be circumscribed by
making a distinction as the Court's opinion does between rules of safe altitude of flight while
on the level of cross-country flight and rules of safe altitude during landing and taking off.
First, such a distinction can not be maintained from the practical standpoint. It is unlikely
that Congress intended that the Authority prescribe safe altitudes for planes making cross-
country flights, while at the same time it left the more hazardous landing and take-off
operations unregulated. The legislative history, moreover, clearly shows that the Authority's
power to prescribe air traffic rules includes the power to make rules governing landing and
take-off. Nor is the Court justified in ignoring that history by labeling rules of safe altitude
while on the level of cross-country flight as rules prescribing the safe altitude proper and
rules governing take-off and landing as rules of operation. For the Conference Report
explicitly states that such distinctions were purposely eliminated from the original House Bill
in order that the Section on air traffic rules 'might be given the broadest construction by the
... ( Civil Aeronautics Authority) ... and the courts.' 4 In construing the statute narrowly the
Court [328 U.S. 256, 274] thwarts the intent of Congress. A proper broad construction,
such as Congress commanded, would not permit the Court to decide what it has today
without declaring the Act of Congress unconstitutional. I think the Act given the broad
construction intended is constitutional.
No greater confusion could be brought about in the coming age of air transportation than
that which would result were courts by Constitutional interpretation to hamper Congress in
its efforts to keep the air free. Old concepts of private ownership of land should not be
introduced into the field of air regulation. I have no doubt that Congress will, if not
handicapped by judicial interpretations of the Constitution, preserve the freedom of the air,
and at the same time, satisfy the just claims of aggrieved persons. The noise of newer,
larger, and more powerful planes may grow louder and louder and disturb people more and
more. But the solution of the problems precipitated by these technological advances and
new ways of living cannot come about through the application of rigid Constitutional
restraints formulated and enforced by the courts. What adjustments may have to be made,
only the future can reveal. It seems certain, however, [328 U.S. 256, 275] the courts do not
possess the techniques or the personnel to consider and act upon the complex
combinations of factors entering into the problems. The contribution of courts must be made
through the awarding of damages for injuries suffered from the flying of planes, or by the
granting of injunctions to prohibit their flying. When these two simple remedial devices are
elevated to a Constitutional level under the Fifth Amendment, as the Court today seems to
have done, they can stand as obstacles to better adapted techniques that might be offered
by experienced experts and accepted by Congress. Today's opinion is, I fear, an opening
wedge for an unwarranted judicial interference with the power of Congress to develop
solutions for new and vital and national problems. In my opinion this case should be
reversed on the ground that there has been no 'taking' in the Constitutional sense.
G.R. No. 4223 August 19, 1908
NICOLAS LUNOD, ET AL., plaintiffs-appellees,
vs.
HIGINO MENESES, defendant-appellant.
TORRES, J.:
On the 14th of March, 1904, Nicolas Lunod, Juan de la Vega, Evaristo Rodriguez, Fernando
Marcelo, Esteban Villena, Benito Litao, Ventura Hernandez, and Casimiro Pantanilla,
residents of the town of Bulacan, province of the same name, filed a written complaint
against Higino Meneses, alleging that they each owned and possessed farm lands, situated
in the places known as Maytunas and Balot, near a small lake named Calalaran; that the
defendant is the owner of a fish-pond and a strip of land situated in Paraanan, adjoining the
said lake on one side, and the River Taliptip on the other; that from time immemorial, and
consequently for more than twenty years before 1901, there existed and still exists in favor
of the rice fields of the plaintiffs a statutory easement permitting the flow of water over the
said land in Paraanan, which easement the said plaintiffs enjoyed until the year 1901 and
consisted in that the water collected upon their lands and in the Calalaran Lake flow through
Paraanan into the Taliptip River. From that year however, the defendant, without any right
or reason, converted the land in Paraanan into a fishpond and by means of a dam and a
bamboo net, prevented the free passage of the water through said place into the Taliptip
River, that in consequence the lands of the plaintiff became flooded and damaged by the
stagnant waters, there being no outlet except through the land in Paraanan; that their
plantation were destroyed, causing the loss and damages to the extent of about P1,000,
which loss and damage will continue if the obstructions to the flow of the water are allowed
to remain, preventing its passage through said land and injuring the rice plantations of the
plaintiffs. They therefore asked that judgment be entered against the defendant, declaring
that the said tract of land in Paraanan is subject to a statutory easement permitting the flow
of water from the property of the plaintiffs, and that, without prejudice to the issuing of a
preliminary injunction, the defendant be ordered to remove and destroy the obstructions that
impede the passage of the waters through Paraanan, and that in future, and forever, he
abstain from closing in any manner the aforesaid tract of land; that, upon judgment being
entered, the said injunction be declared to be final and that the defendant be sentenced to
pay to the plaintiffs an indemnity of P1,000, and the costs in the proceedings; that they be
granted any other and further equitable or proper remedy in accordance with the facts
alleged and proven.
In view of the demurrer interposed by the plaintiffs to the answer of the defendant, the latter,
on the 29th of August, 1904, filed an amended answer, denying each and everyone of the
allegations of the complaint, and alleged that no statutory easement existed nor could exist
in favor of the lands described in the complaint, permitting the waters to flow over the fish
pond that he, together with his brothers, owned in the sitio of Bambang, the area and
boundaries of which were stated by him, and which he and his brothers had inherited from
their deceased mother.
16
Apolinara de Leon; that the same had been surveyed by a land surveyor in September,
1881, he also denied that he had occupied or converted any land in the barrio of Bambang
into a fishpond; therefore, and to sentence the plaintiffs to pay the costs and corresponding
damages.
Upon the evidence adduced by both parties to the suit, the court, on the 13th of March,
1907, entered judgment declaring that the plaintiffs were entitled to a decision in their favor,
and sentenced the defendant to remove the dam placed on the east of the Paraanan
passage on the side of the Taliptip River opposite the old dam in the barrio of Bambang, as
well as to remove and destroy the obstacles to the free passage of the waters through the
strip of land in Paraanan; to abstain in future, and forever, from obstructing or closing in any
manner the course of the waters through the said strip of land. The request that the
defendant be sentenced to pay an indemnity was denied, and no ruling was made as to
costs.
The defendant excepted to the above judgment and furthermore asked for a new trial which
was denied and also excepted to, and, upon approval of the bill of exceptions, the question
was submitted to this court.
Notwithstanding the defendant's denial in his amended answer, it appears to have been
clearly proven in this case that the lands owned by the plaintiffs in the aforesaid barrio, as
well as the small adjoining lake, named Calalaran, are located in places relatively higher
than the sitio called Paraanan where the land and fish pond of the defendant are situated,
and which border on the Taliptip River; that during the rainy season the rain water which
falls on he land of the plaintiffs, and which flows toward the small Calalaran Lake at flood
time, has no outlet to the Taliptip River other than through the low land of Paraanan: that the
border line between Calalaran and Paraanan there has existed from time immemorial a
dam, constructed by the community for the purpose of preventing the salt waters from the
Taliptip River, at high tide, from flooding the land in Calalaran, passing through the lowlands
of Paraanan; but when rainfall was abundant, one of the residents was designated in his
turn by the lieutenant or justice of the barrio to open the sluice gate in order to let out the
water that flooded the rice fields, through the land of Paraanan to the above-mentioned
river, that since 1901, the defendant constructed another dam along the boundary of this
fishpond in Paraanan, thereby impeding the outlet of the waters that flood the fields of
Calalaran, to the serious detriment of the growing crops.
According to article 530 of the Civil Code, an easement is charge imposed upon one estate
for the benefit of another estate belonging to a different owner, and the realty in favor of
which the easement is established is called the dominant estate, and the one charged with it
the servient estate.
The lands of Paraanan being the lower are subject to the easement of receiving and giving
passage to the waters proceeding from the higher lands and the lake of Calalaran; this
easement was not constituted by agreement between the interested parties; it is of a
statutory nature, and the law had imposed it for the common public utility in view of the
difference in the altitude of the lands in the barrio Bambang.
Article 552 of the Civil code provides:
Lower estates must receive the waters which naturally and without the intervention
of man descend from the higher estates, as well as the stone or earth which they
carry with them.
Neither may the owner of the lower estates construct works preventing this
easement, nor the one of the higher estate works increasing the burden.
Article 563 of the said code reads also:
The establishment, extent, form, and conditions of the easements of waters to
which this section refers shall be governed by the special law relating thereto in
everything not provided for in this code.
The special law cited in the Law of Waters of August 3, 1866, article 111 of which, treating
of natural easements relating to waters, provides:
Lands situated at a lower level are subject to receive the waters that flow naturally,
without the work of man, from the higher lands together with the stone or earth
which they carry with them.
Hence, the owner of the lower lands can not erect works that will impede or prevent such an
easement or charge, constituted and imposed by the law upon his estate for the benefit of
the higher lands belonging to different owners; neither can the latter do anything to increase
or extend the easement.
According to the provisions of law above referred to, the defendant, Meneses, had no right
to construct the works, nor the dam which blocks the passage, through his lands and the
outlet to the Taliptip River, of the waters which flood the higher lands of the plaintiffs; and
having done so, to the detriment of the easement charged on his estate, he has violated the
law which protects and guarantees the respective rights and regulates the duties of the
owners of the fields in Calalaran and Paraanan.
It is true that article 388 of said code authorizes every owner to enclose his estate by means
of walls, ditches fences or any other device, but his right is limited by the easement imposed
upon his estate.
The defendant Meneses might have constructed the works necessary to make and maintain
a fish pond within his own land, but he was always under the strict and necessary obligation
to respect the statutory easement of waters charged upon his property, and had no right to
close the passage and outlet of the waters flowing from the lands of the plaintiffs and the
lake of Calalaran into the Taliptip River. He could not lawfully injure the owners of the
17
dominant estates by obstructing the outlet to the Taliptip River of the waters flooding the
upper lands belonging to the plaintiffs.
It is perhaps useful and advantageous to the plaintiffs and other owners of high lands in
Calalaran, in addition to the old dike between the lake of said place and the low lands in
Paraanan, to have another made by the defendant at the border of Paraanan adjoining the
said river, for the purpose of preventing the salt waters of the Taliptip River flooding, at high
tide, not only the lowlands in Paraanan but also the higher ones of Calalaran and its lake,
since the plaintiffs can not prevent the defendant from protecting his lands against the influx
of salt water; but the defendant could never be permitted to obstruct the flow of the waters
through his lands to the Taliptip River during the heavy rains, when the high lands in
Calalaran and the lake in said place are flooded, thereby impairing the right of the owners of
the dominant estates.
For the above reasons, and accepting the findings of the court below in the judgment
appealed from in so far as they agree with the terms of this decision, we must and do
hereby declare that the defendant, Higino Meneses, as the owner of the servient estate, is
obliged to give passage to and allow the flow of the waters descending from the Calalaran
Lake and from the land of the plaintiffs through his lands in Paraanan for their discharge into
the Taliptip River; and he is hereby ordered to remove any obstacle that may obstruct the
free passage of the waters whenever there may be either a small or large volume of running
water through his lands in the sitio of Paraanan for their discharge into the Taliptip River;
and in future to abstain from impeding, in any manner, the flow of the waters coming from
the higher lands. The judgment appealed from is affirmed, in so far as it agrees with
decision, and reversed in other respects, with the costs of this instance against the
appellants. So ordered.
Carson, Willard and Tracey, JJ., concur.
G.R. No. L-2659 October 12, 1950
In the matter of the testate estate of Emil Maurice Bachrach, deceased. MARY
McDONALDBACHRACH,petitioner-appellee,
vs.
SOPHIE SEIFERT and ELISA ELIANOFF, oppositors-appellants.
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.)
18
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.
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.
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.
19
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
20
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.
G.R. No. L-43456 May 6, 1935
CATALINO BATACLAN, petitioner,
vs.
THE COURT OF FIRST INSTANCE OF CAVITE and VICENTE SANTO DOMINGO
BERNARDO, respondents.
VICKERS, J.:
This is a petition for a writ of certiorari to annul an order of the Court of First Instance of
Cavite issued on April 24, 1934 for the sale at public auction of the land which was the
subject of civil case No. 2428 of said court between the respondent, Vicente Santo Domingo
Bernardo, as plaintiff, and the petitioner herein, Catalino Bataclan, as defendant.
The dispositive part of the decision in that case is as follows:
Por las consideraciones expuestas, se declara al demandante Vicente Santo
Domingo Bernardo dueño y con derecho a la posesion del terreno que se describe
en la demanda, y al demandado Catalino Bataclan con derecho a que el
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 abca existentes en el mismo, y con
derecho, ademas, a retener la posesion del terreno hasta que se le pague dicha
cantidad. El 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 la demandado,
haciendo asi suyos el cerco y todas las plantaciones existentes en el terreno, u
obligar al demandado a pagarle el precio del terreno, a eazon 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
convenido por las partes o que sera fijado por el Juzgado. Sin costas.
On appeal to this court the value of the land containing 90 hectares was reduced from P300
to P200 a hectare, and the value of the improvements made by the defendant thereon was
increased from P1,642 to P2,212. The decision of the lower court was affrimed in all other
respects. (G.R. No. 37319.)1
The plaintiff in that case, Vicente Santo Domingo Bernardo, elected to compel the
defendant, Catalino Bataclan, to pay him the value of the land, P18,000. Petitioner alleges
that he filed a motion on January 12, 1934 praying that he be granted a period of fifteen
years in which to pay said sum of P18,000; that said motion was never granted or denied,
but on April 24, 1934 the court issued an order directing that the land be sold at public
auction and that out of the proceeds of the sale the sum of P18,000 be paid to the plaintiff in
addition to the legal expenses of the sale, and that the remainder to the amount of P2,212
be paid to the defendant.
It appears, however, from the order of Judge Leopoldo Rovira of January 24, 1934 that the
plaintiff informed the court that he elected to compel the defendant to pay him the value of
the land, and that the defendant appeared in court and stated that he did not have any
money; that the court then granted the plaintiff thirty days in which to pay the defendant the
sum of P2,212, and ordered that if said payment was not made the land should be sold at
public auction of the payment of said sum to the defendant, the balance after deducting the
expenses of the sale to be delivered to the plaintiff.
On March 16, 1934 Judge Rovira modified his order of January 24th, and ordered that from
the proceeds of the sale the plaintiff should be paid for the land at the rate of P200 a
hectare, and that the balance, if any, should be delivered to the defendant.
On April 24, 1934 Judge Sixto de la Costa issued an order for the sale of the land at public
auction in order that the plaintiff might be paid from the proceeds the sum of P18,000 and
21
the legal expenses of the sale, and that from the balance, if any, P2,212 should be paid to
the defendant. This is the order complained of.
The decision of the lower court was based on article 361 of the Civil Code, which reads as
follows:
Any owner of land on which anything has been built, sown, or planted, in good
faith, shall be entitled to appropriate the thing so built, sown, or planted, upon
paying the compensation mentioned in articles 453 and 454, or to compel the
person who has built or planted to pay him the value of the land or, to require the
person who sowed thereon to pay the proper rent therefore.
The contention of the petitioner is that in issuing the order of April 24, 1934 the court
exceeded its jurisdiction because it constituted an amendment to a final judgment of said
court, which had been affirmed by this court.
It is true that in the decision in question it was provided that in case the plaintiff elected to
compel the defendant to pay him the value of the land, the payment should be made within
the period agreed upon by the parties or that it would be fixed by the court; but, according to
the petitioner, he asked for a period of fifteen years in which to pay the owner of the land the
value thereof; and when he appeared in court he informed the court that he had no money
with which to pay for the land. Under those circumstances, it would have been futile for the
court to grant the defendant a reasonable period of thirty or sixty days in which to pay the
plaintiff the sum of P18,000, and if there was any irregularity in the court's ordering the sale
of the property at public auction under the conditions stated in the orders of March 16, 1934
and April 24, 1934, it was not prejudicial but favorable to the petitioner, because his only
right was to purchase the land for the sum of P18,000.
Furthermore the petitioner could have appealed from the order in question, and his right to
appeal was an adequate remedy. For the foregoing reasons, the petition is denied, with the
costs against the petitioner.
G.R. No. L-175 April 30, 1946
DAMIAN IGNACIO, FRANCISCO IGNACIO and LUIS IGNACIO, petitioners,
vs.
ELIAS HILARIO and his wife DIONISIA DRES, and FELIPE NATIVIDAD, Judge of First
Instance of Pangasinan, respondents.
MORAN, C.J.:
This is a petition for certiorari arising from a case in the Court of First Instance of
Pangasinan between the herein respondents Elias Hilario and his wife Dionisia Dres as
plaintiffs, and the herein petitioners Damian, Francisco and Luis, surnamed Ignacio, as
defendants, concerning the ownership of a parcel of land, partly rice-land and partly
residential. After the trial of the case, the lower court, presided over by Hon. Alfonso Felix,
rendered judgment holding plaintiffs as the legal owners of the whole property but
conceding to defendants the ownership of the houses and granaries built by them on the
residential portion with the rights of a possessor in good faith, in accordance with article 361
of the Civil Code. The dispositive part of the decision, hub of this controversy, follows:
Wherefore, judgment is hereby rendered declaring:
(1) That the plaintiffs are the owners of the whole property described in transfer
certificate of title No. 12872 (Exhibit A) issued in their name, and entitled to the
possession of the same;
(2) That the defendants are entitled to hold the position of the residential lot until
after they are paid the actual market value of their houses and granaries erected
thereon, unless the plaintiffs prefer to sell them said residential lot, in which case
defendants shall pay the plaintiffs the proportionate value of said residential lot
taking as a basis the price paid for the whole land according to Exhibit B; and
(3) That upon defendant's failure to purchase the residential lot in question, said
defendants shall remove their houses and granaries after this decision becomes
final and within the period of sixty (60) days from the date that the court is informed
in writing of the attitude of the parties in this respect.
No pronouncement is made as to damages and costs.
Once this decision becomes final, the plaintiffs and defendants may appear again
before this court for the purpose of determining their respective rights under article
361 of the Civil Code, if they cannot come to an extra-judicial settlement with
regard to said rights.
Subsequently, in a motion filed in the same Court of First Instance but now presided over by
the herein respondent Judge Hon. Felipe Natividad, the plaintiffs prayed for an order of
execution alleging that since they chose neither to pay defendants for the buildings nor to
sell to them the residential lot, said defendants should be ordered to remove the structure at
their own expense and to restore plaintiffs in the possession of said lot. Defendants
objected to this motion which, after hearing, was granted by Judge Natividad. Hence, this
petition by defendants praying for (a) a restraint and annulment of the order of execution
issued by Judge Natividad; (b) an order to compel plaintiffs to pay them the sum of P2,000
for the buildings, or sell to them the residential lot for P45; or (c), a rehearing of the case for
a determination of the rights of the parties upon failure of extra-judicial settlement.
The judgment rendered by Judge Felix is founded on articles 361 and 453 of the Civil Code
which are as follows:
22
 ART. 361. The owner of land on which anything has been built, sown or planted in
good faith, shall have the right to appropriate as his own the work, sowing or
planting, after the payment of the indemnity stated in articles 453 and 454, or to
oblige the one who built or planted to pay the price of the land, and the one who
sowed, the proper rent.
ART. 453. Necessary expenses shall be refunded to every possessor; but only the
possessor in good faith may retain the thing until such expenses are made good to
him.
Useful expenses shall be refunded to the possessor in good faith with the same
right of retention, the person who has defeated him in the possession having the
option of refunding the amount of the expenses or paying the increase in value
which the thing may have acquired in consequence thereof.
The owner of the building erected in good faith on a land owned by another, is entitled to
retain the possession of the land until he is paid the value of his building, under article 453.
The owner of the land, upon the other hand, has the option, under article 361, either to pay
for the building or to sell his land to the owner of the building. But he cannot, as respondents
here did, refuse both to pay for the building and to sell the land and compel the owner of the
building to remove it from the land where it is erected. He is entitled to such remotion only
when, after having chosen to sell his land, the other party fails to pay for the same. But this
is not the case before us.
We hold, therefore, that the order of Judge Natividad compelling defendants-petitioners to
remove their buildings from the land belonging to plaintiffs-respondents only because the
latter chose neither to pay for such buildings not to sell the land, is null and void, for it
amends substantially the judgment sought to be executed and is, furthermore, offensive to
articles 361 and 453 of the Civil Code.
There is, however, in the decision of Judge Felix a question of procedure which calls for the
clarification, to avoid uncertainty and delay in the disposition of cases. In that decision, the
rights of both parties are well defined under articles 361 and 453 of the Civil Code, but it
fails to determine the value of the buildings and of the lot where they are erected as well as
the periods of time within which the option may be exercised and payment should be made,
these particulars having been left for determination apparently after the judgment has
become final. This procedure is erroneous, for after the judgment has become final, no
additions can be made thereto and nothing can be done therewith except its execution. And
execution cannot be had, the sheriff being ignorant as to how, for how much, and within
what time may the option be exercised, and certainly no authority is vested in him to settle
these matters which involve exercise of judicial discretion. Thus the judgment rendered by
Judge Felix has never become final, it having left matters to be settled for its completion in a
subsequent proceeding, matters which remained unsettled up to the time the petition is filed
in the instant case.
For all the foregoing, the writ of execution issued by Judge Natividad is hereby set aside
and the lower court ordered to hold a hearing in the principal case wherein it must
determine the prices of the buildings and of the residential lot where they are erected, as
well as the period of time within which the plaintiffs-respondents may exercise their option
either to pay for the buildings or to sell their land, and, in the last instance, the period of time
within which the defendants-petitioners may pay for the land, all these periods to be counted
from the date the judgment becomes executory or unappealable. After such hearing, the
court shall render a final judgment according to the evidence presented by the parties.
The costs shall be paid by plaintiffs-respondents.
G.R. No. 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.
MELENCIO-HERRERA, 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.
23
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:
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.
G.R. No. L-35648 February 27, 1987
PERSHING TAN QUETO, petitioner,
vs.
COURT OF APPEALS, JUAN POMBUENA and RESTITUTA TACALINAR GUANGCO
DE POMBUENA, respondents.
RESOLUTION
24

PARAS, J.:
This is a Motion for Reconsideration of the decision dated May 16,1983 of this Court * in the
above-entitled case, asking for the reversal of said decision on the following grounds:
1. Decison erred in disregarding the fact that Lot No. 304-B was
registered in the name of the husband, Juan Pombuena, as per OCT. No.
0-1160 issued pursuant to the November 22, 1938 Decision (Exhibit 3) of
the Cadastral Court in Cadastral Case No. 12, G.L.R.O. Cad. Rec. No.
1638, and that petitioner had the right to rely on said OCT;
2. The Decision erred in misinterpreting the admission in the Answer of
petitioner to the complaint in the unlawful detainer Case No. 448 (City
Court of Ozamiz City) as his admission that Lot 304-B is the paraphernal
property of the wife, Restituta Tacalinar;
3. The Decision erred in reforming the Contract of Sale (Exh. B) of Lot
304-B from Basilides Tacalinar (mother) to the respondent, Restituta
Tacalinar Guangco de Pombuena, from a sale to a conveyance of the
share of the wife Restituta Tacalinar (daughter) in the future hereditary
estate of her parents;
4. The Decision erred in over-looking that the barter agreement is an
onerous contract of exchange, whereby private respondents-spouses
received valuable consideration, concessions and other benefits therefor
and in concluding that 'the barter agreement has no effect;
5. The Decision erred in disregarding the fact that petitioner constructed
his concrete building on Lot No. 304-B in good faith relying OCT No. 0-
1160, after the dismissal of the ejectment case and only after the
execution of said barter agreement;
6. The Decision erred in confusing the conclusion of law that petitioner is
a builder in bad faith with a finding of fact. The rule is that questions of law
are reviewable on appeal or by certiorari. Moreover, the rule on finding of
fact is subject to well-settled exceptions. (pp. 257-258, Rollo)
It wig be recalled that the undisputed relevant facts indicate:
(1) that Restituta Tacalinar Guanaco de Pombuena (RESTITUTA, for
short) received the questioned lot (no. 304-B), of the Cadastre Survey of
the Municipality of Centro, Mizamis Occidental, either as a purported
donation or by way of purchase on (February 11, 1927) (with P50.00) as
the alleged consideration thereof;
(2) that the transaction took place during her mother's lifetime, her father
having predeceased the mother;
(3) that the donation or sale was consummated while RESTITUTA was
already married to her husband Juan Pombuena (JUAN, for short);
(4) that on January 22, 1935, JUAN filed for himself and his supposed co-
owner RESTITUTA an application for a Torrens Title over the land;
(5) that under date of November 22, 1938 a decision was promulgated in
GLRC No. 1638 (Cadastral Case No. 12) pronouncing JUAN ('married to
RESTITUTA') as the owner of the land;
(6) that on September 22, 1949 a contract of lease over the lot was
entered into between Pershing Tan Queto (TAN QUETO, for short, the
herein petitioner) and RESTITUTA (with the consent of her husband
JUAN) for a period of ten (10) years;
(7) that on December 27, 1960 RESTITUTA sued TAN QUETO for
unlawful detainer (the lease contract having expired) before the Municipal
Court of Ozamis City;
(8) that as a consequence of the cadastral case, an Original Certificate of
Title (Exh. 10) was issued in JUAN's name ("married to RESTITUTA") on
April 22, 1962;
(9) that the unlawful detainer case was won by the spouses in the
Municipal Court; but on appeal in the Court of First Instance, the entire
case was DISMISSED because of an understanding (barter) whereby
TAN QUETO became the owner of the disputed lot, and the spouses
RESTITUTA and JUAN in turn became the owners of a parcel of land
(with the house constructed thereon) previously owned (that is, before the
barter) by TAN QUETO;
(10) that after the barter agreement dated October 10, 1962 between
JUAN and TAN QUETO, the latter constructed (See p. 257, Rollo, Vol. II)
on the disputed land a concrete building, without any objection on the part
of RESTITUTA;
25
 (11) that later, RESTITUTA sued both JUAN and TAN QUETO for
reconveyance of the title over the registered but disputed lot, for
annulment of the barter, and for recovery of the land with damages.
The two principal issues are clearly the following:
(1) Is the questioned lot paraphernal or conjugal?
(2) In having constructed the building on the lot, should TAN QUETO be regarded as a
builder in good faith (and hence entitled to reimbursement) or a builder in bad faith (with no
right to reimbursement)?
The finding by both the Court of First Instance and the Court of Appeals that the disputed lot
is paraphernal and that TAN QUETO is a builder in bad faith were regarded by Us in Our
assailed decision as findings of facts and thus ordinarily conclusive on Us. Assuming they
are factual findings, still if they are erroneous inferences from certain facts, they cannot bind
this Court.
A second hard look at the circumstances of the case has constrained Us to rule as follows:
(1) The land is conjugal, not paraphernal. How was ownership transferred, if at all, from her
mother to RESTITUTA? The oral donation of the lot cannot be a valid
donation interviews because it was not executed in a public instrument (Art. 749, Civil
Code), nor as a valid donation mortis causa for the formalities of a will were not complied
with. The allegation that the transfer was a conveyance to RESTITUTA of her hereditary
share in the estate of her mother (or parents) cannot be sustained for the contractual
transmission of future inheritance is generally prohibited.
The fact is ownership was acquired by both JUAN and RESTITUTA by tradition (delivery) as
a consequence of the contract of sale (See Art. 712, Civil Code) with P50.00 (then a
considerable amount) as the cause or consideration of the transaction. The lot is
therefore conjugal, having been acquired by the spouses thru onerous title (the money used
being presumably conjugal there being no proof that RESTITUTA had paraphernal funds of
her own). The contention that the sale was fictitious or simulated (and therefore void) is
bankrupt. Firstly, there was a valid consideration therefor. Secondly, assuming that there
had indeed been a simulation, the parties thereto cannot use said simulation to prejudice a
stranger to said stratagem (like petitioner herein).
One nagging question has been posed. But did not TAN QUETO admit in his Answer that
RESTITUTA was the owner of the lot. This is not so. He admitted RESTITUTA
was an owner" (not the owner) of the lot, and this is true, for she was a co-owner (with
JUAN, and therefore "an owner. " Surely, there is no admission of RESTITUTA's exclusive
ownership. And yet this is the basis of the trial court's conclusion that the lot was indeed
paraphernal.
(2) Was Tan Queto a possessor and builder in good faith or in bad faith?
Even assuming that despite registration of the lot as conjugal, Tan Queto nursed the belief
that the lot was actually RESTITUTA's (making him in bad faith), still RESTITUTA's failure
to prohibit him from building despite her knowledge that construction was actually being
done, makes her also in bad faith. The net resultant of mutual bad faith would entitle TAN
QUETO to the rights of a builder in good faith (Art. 448, Civil Code), ergo, reimbursement
should be given him if RESTITUTA decides to appropriate the building for herself (Art. 448,
Civil Code).
However, as already previously intimated, TAN QUETO having bartered his own lot and
small house with the questioned lot with JUAN (who has been adverted to by a court
decision and by the OCT a conjugal owner) may be said to be the OWNER-POSSESSOR
of the lot. Certainly he is not merely a possessor or builder in good faith (this phrase
presupposes ownership in another); much less is he a builder in bad faith. He is a builder-
possessor jus possidendi because he is the OWNER himself. Please note that the Chapter
on Possession (jus possesionis, not jus possidendi) in the Civil Code refers to a
possessor other than the owner. Please note further that the difference between a builder
(or possessor) in good faith and one in bad faith is that the former is NOT AWARE of the
defect or flaw in his title or mode of acquisition while the latter is AWARE of such defect or
flaw (Art. 526, Civil Code). But in either case there is a flaw or defect. In the case of TAN
QUETO there is no such flaw or defect because it is he himself (not somebody else) who is
the owner of the property.
WHEREFORE, Our decision promulgated on May 16,1983 is hereby SET ASIDE, and a
new one is hereby rendered declaring the questioned lot together with the building
thereone, as TAN QUETO's exclusive property. No costs..
SO ORDERED.
G.R. No. 115814 May 26, 1995
PEDRO P. PECSON, petitioner,
vs.
COURT OF APPEALS, SPOUSES JUAN NUGUID and ERLINDA NUGUID, respondents.
DAVIDE, JR., J.:
This petition for review on certiorari seeks to set aside the decision1 of the Court of Appeals
in CA-G.R. SP No. 32679 affirming in part the order 2 of the Regional Trial Court (RTC) of
Quezon City, Branch 101, in Civil Case No. Q-41470.
The factual and procedural antecedents of this case as gathered from the record are as
follows:
26
Petitioner Pedro P. Pecson was the owner of a commercial lot located in Kamias Street,
Quezon City, on which he built a four-door two-storey apartment building. For his failure to
pay realty taxes amounting to twelve thousand pesos (P12,000.00), the lot was sold at
public auction by the city Treasurer of Quezon City to Mamerto Nepomuceno who in turn
sold it on 12 October 1983 to the private respondents, the spouses Juan Nuguid and Erlinda
Tan-Nuguid, for one hundred three thousand pesos (P103,000.00).
The petitioner challenged the validity of the auction sale in Civil Case No. Q-41470 before
the RTC of Quezon City. In its decision of 8 February 1989, the RTC dismissed the
complaint, but as to the private respondents' claim that the sale included the apartment
building, it held that the issue concerning it was "not a subject of the . . . litigation." In
resolving the private respondents' motion to reconsider this issue, the trial court held that
there was no legal basis for the contention that the apartment building was included in the
sale.3
Both parties then appealed the decision to the Court of Appeals. The case was docketed as
CA-G.R. CV No. 2931. In its decision of 30 April 1992, 4 the Court of Appeals affirmed in
toto the assailed decision. It also agreed with the trial court that the apartment building was
not included in the auction sale of the commercial lot. Thus:
Indeed, examining the record we are fully convinced that it was only the
land — without the apartment building — which was sold at the auction
sale, for plaintiff's failure to pay the taxes due thereon. Thus, in the
Certificate of Sale of Delinquent Property To Purchaser (Exh. K, p. 352,
Record) the property subject of the auction sale at which Mamerto
Nepomuceno was the purchaser is referred to as Lot No. 21-A, Block No.
K-34, at Kamias, Barangay Piñahan, with an area of 256.3 sq. m., with no
mention whatsoever, of the building thereon. The same description of the
subject property appears in the Final Notice To Exercise The Right of
Redemption (over subject property) dated September 14, 1981 (Exh. L, p.
353, Record) and in the Final Bill of Sale over the same property dated
April 19, 1982 (Exh. P, p. 357, Record). Needless to say, as it was only
the land without any building which Nepomuceno had acquired at the
auction sale, it was also only that land without any building which he could
have legally sold to the Nuguids. Verily, in the Deed of Absolute Sale of
Registered Land executed by Mamerto Nepomuceno in favor of the
Nuguids on October 25, 1983 (Exh. U, p. 366, Record) it clearly appears
that the property subject of the sale for P103,000.00 was only the parcel
of land, Lot 21-A, Blk. K-34 containing an area of 256.3 sq. meters,
without any mention of any improvement, much less any building thereon.
(emphases supplied)
The petition to review the said decision was subsequently denied by this Court.5 Entry of
judgment was made on 23 June 1993.6
On November 1993, the private respondents filed with the trial court a motion for delivery of
possession of the lot and the apartment building, citing article 546 of the Civil Code. 7 Acting
thereon, the trial court issued on 15 November 1993 the challenged order 8 which reads as
follows:
Submitted for resolution before this Court is an uncontroverted [sic] for the
Delivery of Possession filed by defendants Erlinda Tan, Juan Nuguid, et
al. considering that despite personal service of the Order for plaintiff to file
within five (5) days his opposition to said motion, he did not file any.
In support of defendant's motion, movant cites the law in point as Article
546 of the Civil Code . . .
Movant agrees to comply with the provisions of the law considering that
plaintiff is a builder in good faith and he has in fact, opted to pay the cost
of the construction spent by plaintiff. From the complaint itself the plaintiff
stated that the construction cost of the apartment is much more than the
lot, which apartment he constructed at a cost of P53,000.00 in 1965 (par.
8 complaint). This amount of P53,000.00 is what the movant is supposed
to pay under the law before a writ of possession placing him in
possession of both the lot and apartment would be issued.
However, the complaint alleges in paragraph 9 that three doors of the
apartment are being leased. This is further confirmed by the affidavit of
the movant presented in support of the motion that said three doors are
being leased at a rental of P7,000.00 a month each. The movant further
alleges in his said affidavit that the present commercial value of the lot is
P10,000.00 per square meter or P2,500,000.00 and the reasonable rental
value of said lot is no less than P21,000.00 per month.
The decision having become final as per Entry of Judgment dated June
23, 1993 and from this date on, being the uncontested owner of the
property, the rents should be paid to him instead of the plaintiff collecting
them. From June 23, 1993, the rents collected by plaintiff amounting to
more than P53,000.00 from tenants should be offset from the rents due to
the lot which according to movant's affidavit is more than P21,000.00 a
month.
WHEREFORE, finding merit in the Motion, the Court hereby grants the
following prayer that:
1. The movant shall reimburse plaintiff the construction
cost of P53,000.00.
27
 2. The payment of P53,000.00 as reimbursement for
the construction cost, movant Juan Nuguid is hereby
entitled to immediate issuance of a writ of possession
over the Lot and improvements thereon.
3. The movant having been declared as the
uncontested owner of the Lot in question as per Entry
of Judgment of the Supreme Court dated June 23,
1993, the plaintiff should pay rent to the movant of no
less than P21,000.00 per month from said date as this
is the very same amount paid monthly by the tenants
occupying the lot.
4. The amount of P53,000.00 due from the movant is
hereby offset against the amount of rents collected by
the plaintiff from June 23, 1993, to September 23, 1993.
SO ORDERED.
The petitioner moved for the reconsideration of the order but it was not acted upon by the
trial court. Instead, on 18 November 1993, it issued a writ of possession directing the deputy
sheriff "to place said movant Juan Nuguid in possession of subject property located at No.
79 Kamias Road, Quezon City, with all the improvements thereon and to eject therefrom all
occupants therein, their agents, assignees, heirs and representatives." 9
The petitioner then filed with the Court of Appeals a special civil action for certiorari and
prohibition assailing the order of 15 November 1993, which was docketed as CA-G.R. SP
No. 32679. 10 In its decision of 7 June 1994, the Court of Appeals affirmed in part the order
of the trial court citing Article 448 of the Civil Code. In disposing of the issues, it stated:
As earlier pointed out, private respondent opted to appropriate the
improvement introduced by petitioner on the subject lot, giving rise to the
right of petitioner to be reimbursed of the cost of constructing said
apartment building, in accordance with Article 546 of the . . . Civil Code,
and of the right to retain the improvements until he is reimbursed of the
cost of the improvements, because, basically, the right to retain the
improvement while the corresponding indemnity is not paid implies the
tenancy or possession in fact of the land on which they are built . . . [2
TOLENTINO, CIVIL CODE OF THE PHILIPPINES (1992) p. 112]. With
the facts extant and the settled principle as guides, we agree with
petitioner that respondent judge erred in ordering that "the movant having
been declared as the uncontested owner of the lot in question as per
Entry of Judgment of the Supreme Court dated June 23, 1993, the plaintiff
should pay rent to the movant of no less than P21,000 per month from
said date as this is the very same amount paid monthly by the tenants
occupying the lot.
We, however, agree with the finding of respondent judge that the amount
of P53,000.00 earlier admitted as the cost of constructing the apartment
building can be offset from the amount of rents collected by petitioner
from June 23, 1993 up to September 23, 1993 which was fixed at
P7,000.00 per month for each of the three doors. Our underlying reason
is that during the period of retention, petitioner as such possessor and
receiving the fruits from the property, is obliged to account for such fruits,
so that the amount thereof may be deducted from the amount of
indemnity to be paid to him by the owner of the land, in line with Mendoza
vs. De Guzman, 52 Phil. 164 . . . .
The Court of Appeals then ruled as follows:
WHEREFORE, while it appears that private respondents have not yet
indemnified petitioner with the cost of the improvements, since Annex I
shows that the Deputy Sheriff has enforced the Writ of Possession and
the premises have been turned over to the possession of private
respondents, the quest of petitioner that he be restored in possession of
the premises is rendered moot and academic, although it is but fair and
just that private respondents pay petitioner the construction cost of
P53,000.00; and that petitioner be ordered to account for any and all fruits
of the improvements received by him starting on June 23, 1993, with the
amount of P53,000.00 to be offset therefrom. IT IS SO ORDERED.11
Aggrieved by the Court of Appeals' decision, the petitioner filed the instant petition.
The parties agree that the petitioner was a builder in good faith of the apartment building on
the theory that he constructed it at the time when he was still the owner of the lot, and that
the key issue in this case is the application of Articles 448 and 456 of the Civil Code.
The trial court and the Court of Appeals, as well as the parties, concerned themselves with
the application of Articles 448 and 546 of the Civil Code. These articles read 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. (361a)
28
 xxx xxx xxx
Art. 546. Necessary expenses shall be refunded to every possessor; but
only the possessor in good faith may retain the thing until he has been
reimbursed therefor.
Useful expenses shall be refunded only to the possessor in good faith
with the same right of retention, the person who has defeated him in the
possession having the option of refunding the amount of the expenses or
of paying the increase in value which the thing may have acquired by
reason thereof. (453a)
By its clear language, Article 448 refers to a land whose ownership is claimed by two or
more parties, one of whom has built some works, or sown or planted something. The
building, sowing or planting may have been made in good faith or in bad faith. The rule on
good faith laid down in Article 526 of the Civil Code shall be applied in determining whether
a builder, sower or planter had acted in good faith. 12
Article 448 does not apply to a case where the owner of the land is the builder, sower, or
planter who then later loses ownership of the land by sale or donation. This Court said so
in Coleongco vs. Regalado: 13
Article 361 of the old Civil Code is not applicable in this case, for
Regalado constructed the house on his own land before he sold said land
to Coleongco. Article 361 applies only in cases where a person constructs
a building on the land of another in good or in bad faith, as the case may
be. It does not apply to a case where a person constructs a building on
his own land, for then there can be no question as to good or bad faith on
the part of the builder.
Elsewise stated, where the true owner himself is the builder of works on his own land, the
issue of good faith or bad faith is entirely irrelevant.
Thus in strict point of law, Article 448 is not apposite to the case at bar. Nevertheless, we
believe that the provision therein on indemnity may be applied by analogy considering that
the primary intent of Article 448 is to avoid a state of forced co-ownership and that the
parties, including the two courts below, in the main agree that Articles 448 and 546 of the
Civil Code are applicable and indemnity for the improvements may be paid although they
differ as to the basis of the indemnity.
Article 546 does not specifically state how the value of the useful improvements should be
determined. The respondent court and the private respondents espouse the belief that the
cost of construction of the apartment building in 1965, and not its current market value, is
sufficient reimbursement for necessary and useful improvements made by the petitioner.
This position is, however, not in consonance with previous rulings of this Court in similar
cases. In Javier vs. Concepcion, Jr., 14 this Court pegged the value of the useful
improvements consisting of various fruits, bamboos, a house and camarin made of strong
material based on the market value of the said improvements. In Sarmiento
vs. Agana, 15 despite the finding that the useful improvement, a residential house, was built
in 1967 at a cost of between eight thousand pesos (P8,000.00) to ten thousand
pesos(P10,000.00), the landowner was ordered to reimburse the builder in the amount of
forty thousand pesos (P40,000.00), the value of the house at the time of the trial. In the
same way, the landowner was required to pay the "present value" of the house, a useful
improvement, in the case of De Guzman vs. De la Fuente, 16 cited by the petitioner.
The objective of Article 546 of the Civil Code is to administer justice between the parties
involved. In this regard, this Court had long ago stated in Rivera vs. Roman Catholic
Archbishop of Manila 17 that the said provision was formulated in trying to adjust the rights of
the owner and possessor in good faith of a piece of land, to administer complete justice to
both of them in such a way as neither one nor the other may enrich himself of that which
does not belong to him. Guided by this precept, it is therefore the current market value of
the improvements which should be made the basis of reimbursement. A contrary ruling
would unjustly enrich the private respondents who would otherwise be allowed to acquire a
highly valued income-yielding four-unit apartment building for a measly amount.
Consequently, the parties should therefore be allowed to adduce evidence on the present
market value of the apartment building upon which the trial court should base its finding as
to the amount of reimbursement to be paid by the landowner.
The trial court also erred in ordering the petitioner to pay monthly rentals equal to the
aggregate rentals paid by the lessees of the apartment building. Since the private
respondents have opted to appropriate the apartment building, the petitioner is thus entitled
to the possession and enjoyment of the apartment building, until he is paid the proper
indemnity, as well as of the portion of the lot where the building has been constructed. This
is so because the right to retain the improvements while the corresponding indemnity is not
paid implies the tenancy or possession in fact of the land on which it is built, planted or
sown. 18 The petitioner not having been so paid, he was entitled to retain ownership of the
building and, necessarily, the income therefrom.
It follows, too, that the Court of Appeals erred not only in upholding the trial court's
determination of the indemnity, but also in ordering the petitioner to account for the rentals
of the apartment building from 23 June 1993 to 23 September 1993.
WHEREFORE, the decision of the Court of Appeals in CA-G.R. SP No. 32679 and the
Order of 15 November 1993 of the Regional Trial Court, Branch 101, Quezon City in Civil
Case No. Q-41470 are hereby SET ASIDE.
The case is hereby remanded to the trial court for it to determine the current market value of
the apartment building on the lot. For this purpose, the parties shall be allowed to adduce
evidence on the current market value of the apartment building. The value so determined
shall be forthwith paid by the private respondents to the petitioner otherwise the petitioner
29
shall be restored to the possession of the apartment building until payment of the required
indemnity. No costs. SO ORDERED.
G.R. No. L-57348 May 16, 1985
FRANCISCO DEPRA, plaintiff-appellee,
vs.
AGUSTIN DUMLAO, 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,
30
 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
31
 '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
32
 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.
G.R. No. 108894 February 10, 1997
TECNOGAS PHILIPPINES MANUFACTURING CORPORATION, petitioner,
vs.
COURT OF APPEALS (FORMER SPECIAL SEVENTEENTH DIVISION) and EDUARDO
UY, respondents.
PANGANIBAN, J.:
The parties in this case are owners of adjoining lots in Parañaque, Metro Manila. It was
discovered in a survey, that a portion of a building of petitioner, which was presumably
constructed by its predecessor-in-interest, encroached on a portion of the lot owned by
private respondent. What are the rights and obligations of the parties? Is petitioner
considered a builder in bad faith because, as held by respondent Court, he is "presumed to
know the metes and bounds of his property as described in his certificate of title"? Does
petitioner succeed into the good faith or bad faith of his predecessor-in-interest which
presumably constructed the building?
These are the questions raised in the petition for review of the Decision 1 dated August 28,
1992, in CA-G.R. CV No. 28293 of respondent Court2 where the disposition reads:3
WHEREFORE, premises considered, the Decision of the Regional Trial
Court is hereby reversed and set aside and another one entered —
1. Dismissing the complaint for lack of cause of action;
2. Ordering Tecnogas to pay the sum of P2,000.00 per month as
reasonable rental from October 4, 1979 until appellee vacates the land;
3. To remove the structures and surrounding walls on the encroached
area;
4. Ordering appellee to pay the value of the land occupied by the two-
storey building;
5. Ordering appellee to pay the sum of P20,000.00 for and as attorney's
fees;
6. Costs against appellee.
Acting on the motions for reconsideration of both petitioner and private respondent,
respondent Court ordered the deletion of paragraph 4 of
the dispositive portion in an Amended Decision dated February 9, 1993, as follows: 4
WHEREFORE, premises considered, our decision of August 28, 1992 is
hereby modified deleting paragraph 4 of the dispositive portion of our
decision which reads:
4. Ordering appellee to pay the value of the land
occupied by the two-storey building.
33
 The motion for reconsideration of appellee is hereby DENIED for lack of criminal complaint for malicious mischief against defendant and his wife
merit. which ultimately resulted into the conviction in court of defendant's wife for
the crime of malicious mischief; that while trial of the case was in
The foregoing Amended Decision is also challenged in the instant petition. progress, plaintiff filed in Court a formal proposal for settlement of the
case but said proposal, however, was ignored by defendant.
The Facts
After trial on the merits, the Regional Trial Court6 of Pasay City, Branch 117, in Civil Case
No. PQ-7631-P, rendered a decision dated December 4, 1989 in favor of petitioner who was
The facts are not disputed. Respondent Court merely reproduced the factual findings of the the plaintiff therein. The dispositive portion
trial court, as follows: 5 reads: 7

That plaintiff (herein petitioner) which is a corporation duly organized and WHEREFORE, judgment is hereby rendered in favor of plaintiff and
existing under and by virtue of Philippine laws is the registered owner of a against defendant and ordering the latter to sell to plaintiff that portion of
parcel of land situated in Barrio San Dionisio, Parañaque, Metro Manila land owned by him and occupied by portions of plaintiff's buildings and
known as Lot 4331-A (should be 4531-A) of Lot 4531 of the Cadastral wall at the price of P2,000.00 per square meter and to pay the former:
Survey of Parañaque, Metro Manila, covered by Transfer Certificate of
Title No. 409316 of the Registry of Deeds of the Province of Rizal; that
said land was purchased by plaintiff from Pariz Industries, Inc. in 1970, 1. The sum of P44,000.00 to compensate for the losses
together with all the buildings and improvements including the wall in materials and properties incurred by plaintiff through
existing thereon; that the defendant (herein private respondent) is the thievery as a result of the destruction of its wall;
registered owner of a parcel of land known as Lot No. 4531-B of Lot 4531
of the Cadastral Survey of Parañaque, LRC (GLRO) Rec. No. 19645 2. The sum of P7,500.00 as and by way of attorney's
covered by Transfer Certificate of Title No. 279838, of the Registry of fees; and
Deeds for the Province of Rizal; that said land which adjoins plaintiff's
land was purchased by defendant from a certain Enrile Antonio also in 3. The costs of this suit.
1970; that in 1971, defendant purchased another lot also adjoining
plaintiffs land from a certain Miguel Rodriguez and the same was
registered in defendant's name under Transfer Certificate of Title No. Appeal was duly interposed with respondent Court, which as previously stated, reversed
31390, of the Registry of Deeds for the Province of Rizal; that portions of and set aside the decision of the Regional Trial Court and rendered the assailed Decision
the buildings and wall bought by plaintiff together with the land from Pariz and Amended Decision. Hence, this recourse under Rule 45 of the Rules of Court.
Industries are occupying a portion of defendant's adjoining land; that upon
learning of the encroachment or occupation by its buildings and wall of a The Issues
portion of defendant's land, plaintiff offered to buy from defendant that
particular portion of defendant's land occupied by portions of its buildings The petition raises the following issues:8
and wall with an area of 770 square meters, more or less, but defendant,
however, refused the offer. In 1973, the parties entered into a private
agreement before a certain Col. Rosales in Malacañang, wherein plaintiff (A)
agreed to demolish the wall at the back portion of its land thus giving to
defendant possession of a portion of his land previously enclosed by Whether or not the respondent Court of Appeals erred in holding the
plaintiff's wall; that defendant later filed a complaint before the office of petitioner a builder in bad faith because it is "presumed to know the metes
Municipal Engineer of Parañaque, Metro Manila as well as before the and bounds of his property."
Office of the Provincial Fiscal of Rizal against plaintiff in connection with
the encroachment or occupation by plaintiff's buildings and walls of a
(B)
portion of its land but said complaint did not prosper; that defendant dug
or caused to be dug a canal along plaintiff's wall, a portion of which
collapsed in June, 1980, and led to the filing by plaintiff of the Whether or not the respondent Court of Appeals erred when it used the
supplemental complaint in the above-entitled case and a separate amicable settlement between the petitioner and the private respondent,

34
 where both parties agreed to the demolition of the rear portion of the
fence, as estoppel amounting to recognition by petitioner of respondent's
right over his property including the portions of the land where the other
structures and the building stand, which were not included in the
settlement.
(C)
Whether or not the respondent Court of Appeals erred in ordering the
removal of the "structures and surrounding walls on the encroached area"
and in withdrawing its earlier ruling in its August 28, 1992 decision for the
petitioner "to pay for the value of the land occupied" by the building, only
because the private respondent has "manifested its choice to demolish" it
despite the absence of compulsory sale where the builder fails to pay for
the land, and which "choice" private respondent deliberately deleted from
its September 1, 1980 answer to the supplemental complaint in the
Regional Trial Court.
In its Memorandum, petitioner poses the following issues:
A.
The time when to determine the good faith of the builder under Article 448
of the New Civil Code, is reckoned during the period when it was actually
being built; and in a case where no evidence was
presented nor introduced as to the good faith or bad faith of the builder at
that time, as in this case, he must be presumed to be a "builder in good
faith," since "bad faith cannot be presumed."9
B.
In a specific "boundary overlap situation" which involves a builder in good
faith, as in this case, it is now well settled that the lot owner, who builds
on the adjacent lot is not charged with "constructive notice" of the
technical metes and bounds contained in their torrens titles to determine
the exact and precise extent of his boundary perimeter. 10
C.
The respondent court's citation of the twin cases of Tuason &
Co. v. Lumanlan and Tuason & Co. v. Macalindong is not the "judicial
authority" for a boundary dispute situation between adjacent torrens titled
lot owners, as the facts of the present case do not fall within nor square
with the involved principle of a dissimilar case. 11
D.
Quite contrary to respondent Uy's reasoning, petitioner Tecnogas
continues to be a builder in good faith, even if it subsequently
built/repaired the walls/other permanent structures thereon while the
case a quo was pending and even while respondent sent the petitioner
many letters/filed cases thereon. 12
D.(E.)
The amicable settlement between the parties should be interpreted as a
contract and enforced only in accordance with its explicit terms,
and not over and beyond that agreed upon; because the courts
do not have the power to create a contract nor expand its scope. 13
E.(F.)
As a general rule, although the landowner has the option to choose
between: (1) "buying the building built in good faith", or (2) "selling the
portion of his land on which stands the building" under Article 448 of the
Civil Code; the first option is not absolute, because an exception thereto,
once it would be impractical for the landowner to choose to exercise the
first alternative, i.e. buy that portion of the house standing on his land, for
the whole building might be rendered useless. The workable solution is
for him to select the second alternative, namely, to sell to the builder that
part of his land on which was constructed a portion of the house. 14
Private respondent, on the other hand, argues that the petition is "suffering from the
following flaws: 15
1. It did not give the exact citations of cases decided by the Honorable
Supreme Court that allegedly contradicts the ruling of the Hon. Court of
Appeals based on the doctrine laid down in Tuason vs. Lumanlan case
citing also Tuason vs. Macalindong case (Supra).
2. Assuming that the doctrine in the alleged Co Tao vs. Chico case is
contradictory to the doctrine in Tuason vs. Lumanlan and Tuason
vs. Macalindong, the two cases being more current, the same should
prevail.
Further, private respondent contends that the following "unmistakably" point to the bad faith
of petitioner: (1) private respondent's purchase of the two lots, "was ahead of the purchase
by petitioner of the building and lot from Pariz Industries"; (2) the declaration of the General
Manager of Tecnogas that the sale between petitioner and Pariz Industries "was not
35
registered" because of some problems with China Banking Corporation; and (3) the Deed of
Sale in favor of petitioner was registered in its name only in "the month of May 1973." 16
The Court's Ru1ing
The petition should be granted.
Good Faith or Bad Faith
Respondent Court, citing the cases of J.M. Tuason & Co., Inc. vs. Vda. de
Lumanlan 17 and J.M. Tuason & Co., Inc. vs. Macalindong, 18 ruled that petitioner "cannot be
considered in good faith" because as a land owner, it is "presumed to know the metes and
bounds of his own property, specially if the same are reflected in a properly issued
certificate of title. One who erroneously builds on the adjoining lot should be considered a
builder in (b)ad (f)aith, there being presumptive knowledge of the Torrens title, the area, and
the extent of the boundaries." 19
We disagree with respondent Court. The two cases it relied upon do not support its main
pronouncement that a registered owner of land has presumptive knowledge of the metes
and bounds of its own land, and is therefore in bad faith if he mistakenly builds on an
adjoining land. Aside from the fact that those cases had factual moorings radically different
from those obtaining here, there is nothing in those cases which would suggest, however
remotely, that bad faith is imputable to a registered owner of land when a part of his building
encroaches upon a neighbor's land, simply because he is supposedly presumed to know
the boundaries of his land as described in his certificate of title. No such doctrinal statement
could have been made in those cases because such issue was not before the Supreme
Court. Quite the contrary, we have rejected such a theory in Co Tao vs. Chico, 20 where we
held that unless one is versed in the science of surveying, "no one can determine the
precise extent or location of his property by merely examining his paper title."
There is no question that when petitioner purchased the land from Pariz Industries, the
buildings and other structures were already in existence. The record is not clear as to who
actually built those structures, but it may well be assumed that petitioner's predecessor-in-
interest, Pariz Industries, did so. Article 527 of the Civil Code presumes good faith, and
since no proof exists to show that the encroachment over a narrow, needle-shaped portion
of private respondent's land was done in bad faith by the builder of the encroaching
structures, the latter should be presumed to have built them in good faith. 21 It is presumed
that possession continues to be enjoyed in the same character in which it was acquired,
until the contrary is proved. 22 Good faith consists in the belief of the builder that the land he
is building on is his, and his ignorance of any defect or flaw in his title. 23 Hence, such good
faith, by law, passed on to Pariz's successor, petitioner in this case. Further, "(w)here one
derives title to property from another, the act, declaration, or omission of the latter, while
holding the title, in relation to the property, is evidence against the former." 24 And
possession acquired in good faith does not lose this character except in case and from the
moment facts exist which show that the possessor is not unaware that he possesses the
thing improperly or wrongfully. 25The good faith ceases from the moment defects in the title
are made known to the possessor, by extraneous evidence or by suit for recovery of the
property by the true owner. 26
Recall that the encroachment in the present case was caused by a very slight deviation of
the erected wall (as fence) which was supposed to run in a straight line from point 9 to point
1 of petitioner's lot. It was an error which, in the context of the attendant facts, was
consistent with good faith. Consequently, the builder, if sued by the aggrieved landowner for
recovery of possession, could have invoked the provisions of Art. 448 of the Civil Code,
which reads:
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 obvious benefit to the builder under this article is that, instead of being
outrightly ejected from the land, he can compel the landowner to make a choice
between the two options: (1) to appropriate the building by paying the indemnity
required by law, or (2) sell the land to the builder. The landowner cannot refuse to
exercise either option and compel instead the owner of the building to remove it
from the land. 27
The question, however, is whether the same benefit can be invoked by petitioner who, as
earlier stated, is not the builder of the offending structures but possesses them as buyer.
We answer such question in the affirmative.
In the first place, there is no sufficient showing that petitioner was aware of the
encroachment at the time it acquired the property from Pariz Industries. We agree with the
trial court that various factors in evidence adequately show petitioner's lack of awareness
thereof. In any case, contrary proof has not overthrown the presumption of good faith under
Article 527 of the Civil Code, as already stated, taken together with the disputable
presumptions of the law on evidence. These presumptions state, under Section 3 (a) of
Rule 131 of the Rules of Court, that the person is innocent of a crime or wrong; and under
Section 3 (ff) of Rule 131, that the law has been obeyed. In fact, private respondent
Eduardo Uy himself was unaware of such intrusion into his property until after 1971 when
he hired a surveyor, following his purchase of another adjoining lot, to survey all his newly
36
acquired lots. Upon being apprised of the encroachment, petitioner immediately offered to
buy the area occupied by its building — a species of conduct consistent with good faith.
In the second place, upon delivery of the property by Pariz Industries, as seller, to the
petitioner, as buyer, the latter acquired ownership of the property. Consequently and as
earlier discussed, petitioner is deemed to have stepped into the shoes of the seller in regard
to all rights of ownership over the immovable sold, including the right to compel the private
respondent to exercise either of the two options provided under Article 448 of the Civil
Code.
Estoppel
Respondent Court ruled that the amicable settlement entered into between petitioner and
private respondent estops the former from questioning the private respondent's "right" over
the disputed property. It held that by undertaking to demolish the fence under said
settlement, petitioner recognized private respondent's right over the property, and "cannot
later on compel" private respondent "to sell to it the land since" private respondent "is under
no obligation to sell." 28
We do not agree. Petitioner cannot be held in estoppel for entering into the amicable
settlement, the pertinent portions of which read: 29
That the parties hereto have agreed that the rear portion of the fence that
separates the property of the complainant and respondent shall be
demolished up to the back of the building housing the machineries which
demolision (sic) shall be undertaken by the complainant at anytime.
That the fence which serve(s) as a wall housing the electroplating
machineries shall not be demolished in the mean time which portion shall
be subject to negotiation by herein parties.
From the foregoing, it is clear that petitioner agreed only to the demolition of a portion of the
wall separating the adjoining properties of the parties — i.e. "up to the back of the building
housing the machineries." But that portion of the fence which served as the wall housing the
electroplating machineries was not to be demolished. Rather, it was to "be subject to
negotiation by herein parties." The settlement may have recognized the ownership of private
respondent but such admission cannot be equated with bad faith. Petitioner was only trying
to avoid a litigation, one reason for entering into an amicable settlement.
As was ruled in Osmeña vs. Commission on Audit, 30
A compromise is a bilateral act or transaction that is expressly
acknowledged as a juridical agreement by the Civil Code and is therein
dealt with in some detail. "A compromise," declares Article 2208 of said
Code, "is a contract whereby the parties, by making reciprocal
concessions, avoid a litigation or put an end to one already commenced."
xxx xxx xxx
The Civil Code not only defines and authorizes compromises, it in fact
encourages them in civil actions. Art. 2029 states that "The Court shall
endeavor to persuade the litigants in a civil case to agree upon some fair
compromise." . . .
In the context of the established facts, we hold that petitioner did not lose its rights under
Article 448 of the Civil Code on the basis merely of the fact that some years after acquiring
the property in good faith, it learned about — and aptly recognized — the right of private
respondent to a portion of the land occupied by its building. The supervening awareness of
the encroachment by petitioner does not militate against its right to claim the status of a
builder in good faith. In fact, a judicious reading of said Article 448 will readily show that the
landowner's exercise of his option can only take place after the builder shall have come to
know of the intrusion — in short, when both parties shall have become aware of it. Only
then will the occasion for exercising the option arise, for it is only then that both parties will
have been aware that a problem exists in regard to their property rights.
Options of Private Respondent
What then is the applicable provision in this case which private respondent may invoke as
his remedy: Article 448 or Article 450 31 of the Civil Code?
In view of the good faith of both petitioner and private respondent, their rights and
obligations are to be governed by Art. 448. The essential fairness of this codal provision has
been pointed out by Mme. Justice Ameurfina Melencio-Herrera, citing Manresa and
applicable precedents, in the case of Depra vs. Dumlao, 32 to wit:
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 impracticality 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 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).
37
The private respondent's insistence on the removal of the encroaching structures as the
proper remedy, which respondent Court sustained in its assailed Decisions, is thus legally
flawed. This is not one of the remedies bestowed upon him by law. It would be available
only if and when he chooses to compel the petitioner to buy the land at a reasonable price
but the latter fails to pay such price. 33 This has not taken place. Hence, his options are
limited to: (1) appropriating the encroaching portion of petitioner's building after payment of
proper indemnity, or (2) obliging the latter to buy the lot occupied by the structure. He
cannot exercise a remedy of his own liking.
Neither is petitioner's prayer that private respondent be ordered to sell the land 34 the proper
remedy. While that was dubbed as the "more workable solution" in Grana and Torralba
vs. The Court of Appeals, et al., 35 it was not the relief granted in that case as the
landowners were directed to exercise "within 30 days from this decision their option to either
buy the portion of the petitioners' house on their land or sell to said petitioners the portion of
their land on which it stands." 36 Moreover, in Grana and Torralba, the area involved was
only 87 square meters while this case involves 520 square meters 37. In line with the case
of Depra vs. Dumlao, 38 this case will have to be remanded to the trial court for further
proceedings to fully implement the mandate of Art. 448. It is a rule of procedure for the
Supreme Court to strive to settle the entire controversy in a single proceeding leaving no
root or branch to bear the seeds of future
litigation. 39
Petitioner, however, must also pay the rent for the property occupied by its building as
prescribed by respondent Court from October 4, 1979, but only up to the date private
respondent serves notice of its option upon petitioner and the trial court; that is, if such
option is for private respondent to appropriate the encroaching structure. In such event,
petitioner would have a right of retention which negates the obligation to pay rent. 40 The
rent should however continue if the option chosen is compulsory sale, but only up to the
actual transfer of ownership.
The award of attorney's fees by respondent Court against petitioner is unwarranted since
the action appears to have been filed in good faith. Besides, there should be no penalty on
the right to litigate. 41
WHEREFORE, premises considered, the petition is hereby GRANTED and the assailed
Decision and the Amended Decision are REVERSED and SET ASIDE. In accordance with
the case of Depra vs. Dumlao, 42 this case is REMANDED to the Regional Trial Court of
Pasay City, Branch 117, for further proceedings consistent with Articles 448 and 546 43 of
the Civil Code, as follows:
The trial court shall determine:
a) the present fair price of private respondent's 520 square-meter area of
land;
b) the increase in value ("plus value") which the said area of 520 square
meters may have acquired by reason of the existence of the portion of the
building on the area;
c) the fair market value of the encroaching portion of the building; and
d) whether the value of said area of land is considerably more than the
fair market value of the portion of the building thereon.
2. After said amounts shall have been determined by competent evidence, the regional trial
court shall render judgment as follows:
a) The private respondent shall be granted a period of fifteen (15) days
within which to exercise his option under the law (Article 448, Civil
Code), whether to appropriate the portion of the building as his own by
paying to petitioner its fair market value, or to oblige petitioner to pay the
price of said area. The amounts to be respectively paid by petitioner and
private respondent, 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 trial court in favor of the party entitled to receive it;
b) If private respondent exercises the option to oblige petitioner 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
portion of the building, petitioner shall give written notice of such rejection
to private respondent and to the trial court within fifteen (15) days from
notice of private respondent'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
trial court formal written notice of the 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 two thousand pesos (P2,000.00)
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 1970 that petitioner has occupied the subject area. The rental
thus fixed shall be increased by ten percent (10%) for the second year of
the forced lease. Petitioner shall not make any further constructions or
improvements on the building. Upon expiration of the two-year period, or
upon default by petitioner in the payment of rentals for two (2)
consecutive months, private respondent shall be entitled to terminate the
forced lease, to recover his land, and to have the portion of the building
removed by petitioner or at latter's expense. The rentals herein provided
38
 shall be tendered by petitioner to the trial court for payment to private
respondent, and such tender shall constitute evidence of whether or not
compliance was made within the period fixed by the said court.
c) In any event, petitioner shall pay private respondent an amount
computed at two thousand pesos (P2,000.00) per month as reasonable
compensation for the occupancy of private respondent's land for the
period counted from October 4, 1979, up to the date private respondent
serves notice of its option to appropriate the encroaching structures,
otherwise up to the actual transfer of ownership to petitioner or, in case a
forced lease has to be imposed, up to the commencement date of the
forced lease referred to in the preceding paragraph;
d) The periods to be fixed by the trial court in its decision shall be non-
extendible, and upon failure of the party obliged to tender to the trial court
the amount due to the obligee, the party entitled to such payment shall be
entitled to an order of execution for the enforcement of payment of the
amount due and for compliance with such other acts as may be required
by the prestation due the obligee. No costs. SO ORDERED.
G.R. No. L-32974 July 30, 1979
BARTOLOME ORTIZ, petitioner,
vs.
HON. UNION C. KAYANAN, in his capacity as Judge of the Court of First Instance of
Quezon, Branch IV; ELEUTERIO ZAMORA, QUIRINO COMINTAN, VICENTE FERRO,
AND GREGORIO PAMISARAN, respondents.
ANTONIO, J.:
Petition for certiorari and Prohibition with Preliminary Injunction to nullify the Order of
respondent Judge directing the execution of the final judgment in Civil Case No. C-90,
entitled "Bartolome Ortiz vs. Secretary of Agriculture and Natural Resources, et al.," and the
Writ of Execution issued to implement said Order, allegedly for being inconsistent with the
judgment sought to be enforced.
Civil Case No. C-90 was filed by Bartolome Ortiz who sought the review and/or annulment
of the decision of the Secretary of Agriculture and Natural Resources, giving preference to
the sales applications of private respondents Quirino Comintan and Eleuterio Zamora over
Lot No. 5785, PLS-45, located at Barrio Cabuluan, Calauag, Quezon.
I being the successful bidder in the public auction conducted by the bureau
The factual background of the case, as found by respondent Court, is as
follows:têñ.£îhqwâ£
... The lot in controversy was formerly the subject of Homestead
Application No. 122417 of Martin Dolorico II, plaintiff's ward who died on
August 20, 1931; that since then it was plaintiff who continued the
cultivation and possession of the property, without however filing any
application to acquire title thereon; that in the Homestead Application No.
122417, Martin Dolorico II named his uncle, Martin Dolorico I as his heir
and successor in interest, so that in 1951 Martin Dolorico I executed an
affidavit relinquishing his rights over the property in favor of defendants
Quirino Comintan and Eleuterio Zamora, his grandson and son-in-law,
respectively, and requested the Director of Lands to cancel the
homestead application; that on the strength of the affidavit, Homestead
Application No. 122417 was cancelled and thereafter, defendants
Comintan and Zamora filed their respective sales applications Nos. 8433
and 9258; that plaintiff filed his protest on November 26, 1951 alleging
that he should be given preference to purchase the lot inasmuch as he is
the actual occupant and has been in continuous possession of the same
since 1931; and inspite of plaintiff's opposition, "Portion A" of the property
was sold at public auction wherein defendant Comintan was the only
bidder; that on June 8, 1957, investigation was conducted on plaintiff's
protest by Assistant Public Lands Inspector Serapion Bauzon who
submitted his report to the Regional Land Officer, and who in turn
rendered a decision on April 9, 1958, dismissing plaintiff's claim and
giving due course to defendants' sales applications on the ground that the
relinquishment of the homestead rights of Martin Dolorico I in favor of
Comintan and Zamora is proper, the former having been designated as
successor in interest of the original homestead applicant and that
because plaintiff failed to participate in the public auction, he is forever
barred to claim the property; that plaintiff filed a motion for reconsideration
of this decision which was denied by the Director of Lands in his order
dated June 10, 1959; that, finally, on appeal to the Secretary of
Agriculture and Natural Resources, the decision rendered by the Regional
Land Officer was affirmed in toto. 1
On March 22, 1966, respondent Court rendered judgment in the afore-mentioned civil case,
the dispositive portion of which reads as follows:têñ.£îhqwâ£
IN VIEW OF THE FOREGOING CONSIDERATIONS, judgment is hereby
rendered awarding Lot No. 5785-A of PLS-45, (Calauag Public Land
Subdivision) one-half portion of the property in litigation located at Bo.
Cabuluan, Calauag, Quezon, in favor of defendant QUIRINO COMINTAN,
of Lands on April 18, 1955, and hereby giving due course to the Sales
Application No. 9258 of defendant Eleuterio Zamora over the other half,
39
 Lot No. 5785-B of PLS-45, Calauag, without prejudice to the right of
plaintiff BARTOLOME ORTIZ to participate in the public bidding of the
same to be announced by the Bureau of Lands, Manila. However, should
plaintiff Bartolome Ortiz be not declared the successful bidder thereof,
defendants Quirino Comintan and Eleuterio Zamora are ordered to
reimburse jointly said plaintiff the improvements he has introduced on the
whole property in the amount of THIRTEEN THOUSAND SIX HUNDRED
THIRTY-TWO (P13,632.00) PESOS, the latter having the right to retain
the property until after he has been fully paid therefor, without interest
since he enjoys the fruits of the property in question, with prejudice and
with costs again the plaintiff.2
Plaintiff appealed the decision to the Court of Appeals.
Two (2) years after the rendition of the judgment by the court a quo, while the case was
pending appeal and upon petition of private respondents Quirino Comintan and Eleuterio
Zamora, respondent Court appointed respondent Vicente Ferro, Clerk of Court, as Receiver
to collect tolls on a portion of the property used as a diversion road. On August 19, 1969,
the Court of Appeals issued a Resolution annulling the Order appointing the Receiver.
Subsequently, on February 19, 1970, the Appellate Court affirmed the decision of the trial
court. A petition for review on certiorari of the decision of the Court of Appeals was denied
by this Court on April 6, 1970. At this point, private respondents filed a petition for
appointment of a new receiver with the court a quo. This petition was granted and the
receiver was reappointed. Petitioner sought the annulment of this Order with the Court of
Appeals, but said Court ruled that its decision had already become final and that the records
of the case were to be remanded to the trial court.
Not satisfied with such denial, petitioner filed a petitioner for certiorari, prohibition and
mandamus with preliminary injunction before this Court, 3 praying for the annulment of the
Order reappointing the Receiver. On July 13, 1970, the petition was dismissed by this Court
on the ground of insufficient showing of grave abuse of discretion.
II
The judgment having become final and executory private respondents filed a motion for the
execution of the same, praying as follows:têñ.£îhqwâ£
WHEREFORE, it is respectfully prayed of this Honorable Court to order
the issuance of a writ of execution in accordance with the judgment of this
Honorable Court, confirmed by the Court of Appeals and the Supreme
Court, commanding any lawful officer to deliver to defendants Comintan
and Zamora the land subject of the decision in this case but allowing
defendants to file a bond in such amount as this Honorable Court may fix,
in lieu of the P13,632.00 required to be paid to plaintiff, conditioned that
after the accounting of the tools collected by plaintiff, there is still an
amount due and payable to said plaintiff, then if such amount is not paid
on demand, including the legal interests, said bond shall be held
answerable.
Ordering further the plaintiff to render an accounting of the tolls he
collected from March of 1967 to December 31, 1968 and from September
1969 to March 31, 1970, and deliver said tolls collected to the receiver
and if judgment is already executed, then to Quirino Comintan and
Eleuterio Zamora; and,
Finally, to condemn plaintiff to pay moral damages for withholding the
tools which belong to your movant in an amount this Court may deem just
in the premises.4
Acting upon the foregoing motion, respondent Judge issued an Order, dated September 23,
1970, stating, among others, the following: têñ.£îhqwâ£
The records further disclosed that from March 1967 to December 31,
1968, piaintiff Bartolome Ortiz collected tolls on a portion of the propertv
in question wherein he has not introduced anv improvement particularlv
on Lot No. 5785-A; PLS-45 awarded to defendant Quirino Comintan, thru
which vehicular traffic was detoured or diverted, and again from
September 1969 to March 31, 1970, the plaintiff resumed the collection of
tools on the same portion without rendering any accounting on said tolls
to the Receiver, who, was reappointed after submitting the required bond
and specifically authorized only to collect tolls leaving the harvesting of
the improvements to the plaintiff.
xxx xxx xxx
ln virtue of he findings of this Court as contained in the dispositive portion
of its decision, the defendants are jointly obligated to pay the plaintiff in
the amount of P13,632.00 as reasonable value of the improvements he
introduced on the whole property in question, and that he has the right of
retention until fully paid. It can be gleaned from the motion of the
defendants that if plaintiff submits an accounting of the tolls he collected
during the periods above alluded to, their damages of about P25,000.00
can more than offset their obligation of P13,362.00 in favor of the plaintiff,
thereafter the possession of the land be delivered to the defendants since
the decision of the Supreme Court has already become final and
executory, but in the interregnum pending such accounting and recovery
by the Receiver of the tolls collected by the plaintiff, the defendants pray
that they allowed to put up a bond in lieu of the said P13,632.00 to
answer for damages of the former, if any.
40
 On the other hand, plaintiff contends in his opposition, admitting that the
decision of the Supreme Court has become final and executory; (1) the
offer of a bond in lieu of payment of P13,632.00 does not, and cannot,
satisfy the condition imposed in the decision of this Court which was
affirmed in toto; (2) the public sale of Portion "B" of the land has still to
take place as ordained before the decision could be executed; and, (3)
that whatever sums plaintiff may derive from the property cannot be set
off against what is due him for the improvements he made, for which he
has to be reimbursed as ordered.
xxx xxx xxx
Let it be known that plaintiff does not dispute his having collected tolls
during the periods from March 1967 to December 31, 1968 and from
September 1969 to March 31, 1970. The Supreme Court affirmed the
decision of this Court its findings that said tolls belong to the defendant,
considering that the same were collected on a portion of the land question
where the plaintiff did not introduce any improvement. The reimbursement
to the plaintiff pertains only to the value of the improvements, like coconut
trees and other plants which he introduced on the whole property. The
tolls collected by the plaintiff on an unimproved portion naturally belong to
the defendants, following the doctrine on accretion. Further, the
reappointment of a Receiver by this Court was upheld by the Supreme
Court when it denied the petition for certiorari filed by the plaintiff,
bolstering the legal claim of defendants over said tolls. Thus, the decision
of the Supreme Court rendered the decision of this Court retroactive from
March 22, 1966 although pending accounting of the tolls collected by the
plaintiff is justified and will not prejudice anybody, but certainly would
substantially satisfy the conditions imposed in the decision. However,
insofar as the one-half portion "B" of the property, the decision may be
executed only after public sale by the Bureau of Lands shall be
accomplished.
WHEREFORE, finding the Motion for Execution filed by the defendants to
be meritorious, the same is granted; provided, however, that they put up a
bond equal the adjudicated amount of P13,632.00 accruing in favor of the
plaintiff, from a reputable or recognized bonding or surety company,
conditioned that after an accounting of the tolls collected by the plaintiff
should there be found out any balance due and payable to him after
reckoning said obligation of P13,632.00 the bond shall be held
answerable therefor.5
Accordingly, a Writ of Execution was issued after private respondent Quirino Comintan had
filed the required bond. The writ directed the Sheriff to enforce the decision of the Court,
and stated, part in, the following:têñ.£îhqwâ£
But should there be found any amount collectible after accounting and
deducting the amount of P3,632.00, you are hereby ordered that of the
goods and chattels of Bartolome Ortiz of Bo. Kabuluan, Calauag, Quezon,
be caused to be made any excess in the above-metioned amount
together with your lawful fees and that you render same to defendant
Quirino Comintan. If sufficient personal property cannot be found thereof
to satisfy this execution and lawful fees thereon, then you are
commanded that of the lands and buildings of the said BARTOLOME
ORTIZ you make the said excess amount in the manner required by the
Rules of Court, and make return of your proceedings within this Court
within sixty (60) days from date of service.
You are also ordered to cause Bartolome Ortiz to vacate the property
within fifteen (15) days after service thereof the defendant Quirino
Comintan having filed the required bond in the amount of THIRTEEN
THOUSAND SIX HUNDRED THIRTY-TWO (P13,632.00) PESOS. 6
On October 12, 1970, petitioner filed a Motion for Reconsideration of the aforesaid Order
and Writ of Execution, alleging:têñ.£îhqwâ£
(a) That the respondent judge has no authority to place respondents in
possession of the property;
(b) That the Supreme Court has never affirmed any decision of the trial
court that tolls collected from the diversionary road on the property, which
is public land, belong to said respondents;
(c) That to assess petitioner a P25,000.00 liability for damages is purely
punitive imposition without factual or legal justification.
The foregoing Motion for Reconsideration was denied by respondent Judge per Order dated
November 18, 1970. Saod Order states, in part:têñ.£îhqwâ£
It goes without saying that defendant Comintan is entitled to be placed in
possession of lot No. 5785-A of PLS-45 (Calauag Public Land
Subdivision) and enjoyment of the tolls from March, 1967 to March, 1968
and from September, 1969 to March 31, l970 which were received by
plaintiff Bartolome Ortiz, collected from the property by reason of the
diversion road where vehicular traffic was detoured. To defendant
Comintan belongs the tolls thus collected from a portion of the land
awarded to him used as a diversionary road by the doctrine of accretion
and his right over the same is ipso jure, there being no need of any action
to possess said addition. It is so because as consistently maintained by
the Supreme Court, an applicant who has complied with all the terms and
conditions which entitle him to a patent for a particular tract of publlic land,
41
 acquires a vested right therein and is to be regarded as equitable owner
thereof so that even without a patent, a perfected homestead or sales
application is a property right in the fullest sense, unaffectcd by the fact
that the paramount title is still in the Government and no subsequent law
can deprive him of that vested right The question of the actual damages
suffered by defendant Comintan by reason of the unaccounted tolls
received by plaintiff had already been fully discussed in the order of
September 23, 1970 and the Court is honestly convinced and believes it
to be proper and regular under the circumstances.
Incidentally, the Court stands to correct itself when in the same order, it
directed the execution of he decision with respect to the one-half portion
"B" of the property only after the public sale by the Bureau of Lands, the
same being an oversight, it appearing that the Sales Application of
defendant Eleuterio Zamora had already been recognized and full
confirmed by the Supreme Court.
In view thereof, finding the motion filed by plaintiff to be without merit, the
Court hereby denies the same and the order of September 23, 1970 shall
remain in full force subject to the amendment that the execution of the
decision with respect to the one-half portion "B" shall not be conditioned
to the public sale by the Bureau of Lands. SO ORDERED.7
III
Petitioner thus filed the instant petition, contending that in having issued the Order and Writ
of Execution, respondent Court "acted without or in excess of jurisdiction, and/or with grave
abuse of discretion, because the said order and writ in effect vary the terms of the judgment
they purportedly seek to enforce." He argued that since said judgment declared the
petitioner a possessor in good faith, he is entitled to the payment of the value of the
improvements introduced by him on the whole property, with right to retain the land until he
has been fully paid such value. He likewise averred that no payment for improvements has
been made and, instead, a bond therefor had been filed by defendants (private
respondents), which, according to petitioner, is not the payment envisaged in the decision
which would entitle private respondents to the possession of the property. Furthermore, with
respect to portion "B", petitioner alleges that, under the decision, he has the right to retain
the same until after he has participated and lost in the public bidding of the land to be
conducted by the Bureau of Lands. It is claimed that it is only in the event that he loses in
the bidding that he can be legally dispossessed thereof.
It is the position of petitioner that all the fruits of the property, including the tolls collected by
him from the passing vehicles, which according to the trial court amounts to P25,000.00,
belongs to petitioner and not to defendant/private respondent Quirino Comintan, in
accordance with the decision itself, which decreed that the fruits of the property shall be in
lieu of interest on the amount to be paid to petitioner as reimbursement for improvements.
Any contrary opinion, in his view, would be tantamount to an amendment of a decision
which has long become final and executory and, therefore, cannot be lawfully done.
Petitioner, therefore, prayed that: (1) a Writ of Preliminary Injunction be issued enjoining the
enforcement of the Orders of September 23, 1970 and November 18, 1970, and the Writ of
Execution issued thereto, or restoring to petitioner the possession of the property if the
private respondents had been placed in possession thereof; (2) annulling said Orders as
well as the Writ of Execution, dissolving the receivership established over the property; and
(3) ordering private respondents to account to petitioner all the fruits they may have
gathered or collected from the property in question from the time of petitioiier's illegal
dispossession thereof.
On January 29, 1971, this Court issued the Writ of Preliminary Injunction. On January 30,
1971, private respondents filed a Motion for Reconsideration and/or Modification of the
Order dated January 29, 1971. This was followed by a Supplemental Motion for
Reconsideration and Manifestation on February 3, 1971. In the latter motion, private
respondents manifested that the amount of P14,040.96, representing the amount decreed in
the judgment as reimbursement to petitioner for the improvements, plus interest for six
months, has already been deposited by them in court, "with the understanding that said
amount shall be turned over to the plaintiff after the court a quo shall have determined the
improvement on Lot 5785-A, and subsequently the remaining balance of the deposit shall
be delivered to the petitioner (plaintiff therein) in the event he loses the bid for Lot 5785-B in
favor of private respondent Eleuterio Zamora." 8 The deposit is evidenced by a certification
made by the Clerk of the Court a quo.9 Contending that said deposit was a faithful
compliance with the judgment of the trial court, private respondent Quirino Comintan prayed
for the dissolution of the Writ of Injunction.
It appears that as a consequence of the deposit made by private respondents, the Deputy,
Sheriff of Calauag, Quezon ousted petitioner's representative from the land in question and
put private respondents in possession thereof. 10
On March 10, 1971, petitioner filed a "Comment on Respondents' 'Motion for
Reconsideration' dated January 29, 1971' and 'Supplemental Motion for Reconsideration
and Manifestation,'" contending that the tender of deposit mentioned in the Suplemental
Motion was not really and officially made, "inasmuch as the same is not supported by any
official receipt from the lower court, or from its clerk or cashier, as required by law;" that said
deposit does not constitute sufficient compliance with the judgment sought to be enforced,
neither was it legally and validly made because the requisites for consignation had not been
complied with; that the tender of legal interest for six months cannot substitute petitioner's
enjoyment of the fruits of the property as long as the judgment in Civil Case No. C-90 has
not been implemented in the manner decreed therein; that contrary to the allegations of
private respondents, the value of the improvements on the whole property had been
determined by the lower court, and the segregation of the improvements for each lot should
have been raised by them at the opportune moment by asking for the modification of the
decision before it became final and executory; and that the tolls on the property constituted
"civil fruits" to which the petitioner is entitled under the terms of the decision.
42
IV
The issue decisive of the controvery is—after the rendition by the trial court of its judgment
in Civil Case No. C-90 on March 22, 1966 confirming the award of one-half of the property
to Quirino Comintan—whether or not petitioner is still entitled to retain for his own exclusive
benefit all the fruits of the property, such as the tolls collected by him from March 1967 to
December 1968, and September 1969 to March 31, 1970, amounting to about P25,000.00.
In other words, petitioner contends that so long as the aforesaid amount of P13,632,00
decreed in the judgment representing the expenses for clearing the land and the value of
the coconuts and fruit trees planted by him remains unpaid, he can appropriate for his
exclusive benefit all the fruits which he may derive from the property, without any obligation
to apply any portion thereof to the payment of the interest and the principal of the debt.
We find this contention untenable.
There is no question that a possessor in good faith is entitled to the fruits received before
the possession is legally interrupted. 11 Possession in good faith ceases or is legally
interrupted from the moment defects in the title are made known to the possessor, by
extraneous evidence or by the filing of an action in court by the true owner for the recovery
of the property.12 Hence, all the fruits that the possessor may receive from the time he is
summoned in court, or when he answers the complaint, must be delivered and paid by him
to the owner or lawful possessor. 13
However, even after his good faith ceases, the possessor in fact can still retain the property,
pursuant to Article 546 of the New Civil Code, until he has been fully reimbursed for all the
necessary and useful expenses made by him on the property. This right of retention has
been considered as one of the conglomerate of measures devised by the law for the
protection of the possessor in good faith. Its object is to guarantee the reimbursement of the
expenses, such as those for the preservation of the property,14 or for the enhancement of its
utility or productivity.15 It permits the actual possessor to remain in possession while he has
not been reimbursed by the person who defeated him in the possession for those necessary
expenses and useful improvements made by him on the thing possessed. The principal
characteristic of the right of retention is its accessory character. It is accessory to a principal
obligation. Considering that the right of the possessor to receive the fruits terminates when
his good faith ceases, it is necessary, in order that this right to retain may be useful, to
concede to the creditor the right to secure reimbursement from the fruits of the property by
utilizing its proceeds for the payment of the interest as well as the principal of the debt while
he remains in possession. This right of retention of the property by the creditor, according to
Scaevola, in the light of the provisions of Article 502 of the Spanish Civil Code, 16 is
considered not a coercive measure to oblige the debtor to pay, depriving him temporarily of
the enjoyment of the fruits of his property, but as a means of obtainitig compensation for the
debt. The right of retention in this case is analogous to a contract of antichresis and it cati
be considered as a means of extinguishing the obligation, inasmuch as the right to retain
the thing lasts only for the period necessary to enable the creditor to be reimbursed from the
fruits for the necessary and useful expenses. 17
According to Manresa, the right of retention is, therefore, analogous to that of a pledge, if
the property retained is a movable, and to that of antichresis, if the property held is
immovable.18 This construction appears to be in harmony with similar provisions of the civil
law which employs the right of retention as a means or device by which a creditor is able to
obtain the payment of a debt. Thus, under Article 1731 of the New Civil Code, any person
who has performed work upon a movable has a right to retain it by way of pledge until he is
paid. Similarly, under Article 1914 of the same Code, the agent may retain in pledge the
things which are the object of the agency until the principal effects reimbursement of the
funds advanced by the former for the execution of the agency, or he is indemnified for all
damages which he may have suffered as a consequence of the execution of the agency,
provided he is free from fault. To the same effect, the depositary, under Article 1994 of the
same Code, may retain the thing in pledge until the full payment of what may be due him by
reason of the deposit. The usufructuary, pursuant to Article 612 of the same Code, may
retain the property until he is reimbursed for the amount paid for taxes levied on the capital
(Article 597) and tor extraordinary repairs (Article 594).
In all of these cases, the right of retention is used as a means of extinguishing the
obligation. As amply observed by Manresa: "El derecho de retencion, lo hemos dicho, es el
derecho de prenda o el de anticresis constituido por la ley con independencia de las
partes." 19 In a pledge, if the thing pledged earns or produces fruits, income, dividends or
interests, the creditor shall compensate what he receives with those which are owing
him.20 In the same manner, in a contract of antichresis, the creditor acquires the right to
receive the fruits of an immovable of his debtor with the obligation to apply them to payment
of the interest, if owing, and thereafter to the principal of his credit. 21 The debtor can not
reacquire enjoyment of the immovable until he has actually paid what he owes the
creditor. 22
Applying the afore-cited principles to the case at bar, petitioner cannot appropriate for his
own exclusive benefit the tolls which he collected from the property retained by him. It was
his duty under the law, after deducting the necessary expenses for his administration, to
apply such amount collected to the payment of the interest, and the balance to the payment
of the obligation.
We hold, therefore, that the disputed tolls, after deducting petitioner's expenses for
administration, belong to Quirino Comintan, owner of the land through which the toll road
passed, further considering that the same was on portions of the property on which
petitioner had not introduced any improvement. The trial court itself clarified this matter
when it placed the toll road under receivership. The omission of any mention of the tolls in
the decision itself may be attributed to the fact that the tolls appear to have been collected
after the rendition of the judgment of the trial court.
The records further reveal that earnest efforts have been made by private respondents to
have the judgment executed in the most practicable manner. They deposited in court the
amount of the judgment in the sum of P13,632.00 in cash, subject only to the accounting of
the tolls collected by the petitioner so that whatever is due from him may be set off with the
amount of reimbursement. This is just and proper under the circumstances and, under the
43
law, compensation or set off may take place, either totally or partially. Considering that
petitioner is the creditor with respect to the judgment obligation and the debtor with respect
to the tolls collected, Comintan being the owner thereof, the trial court's order for an
accounting and compensation is in accord with law. 23
With respect to the amount of reimbursement to be paid by Comintan, it appears that the
dispositive portion of the decision was lacking in specificity, as it merely provided that
Comintan and Zamora are jointly liable therefor. When two persons are liable under a
contract or under a judgment, and no words appear in the contract or judgment to make
each liable for the entire obligation, the presumption is that their obligation is joint
or mancomunada, and each debtor is liable only for a proportionate part of the
obligation. 24 The judgment debt of P13,632.00 should, therefore, be pro-rated in equal
shares to Comintan and Zamora.
Regarding Lot 5785-B, it appears that no public sale has yet been conducted by the Bureau
of Lands and, therefore, petitioner is entitled to remain in possession thereof. This is not
disputed by respondent Eleuterio Zamora. 25 After public sale is had and in the event that
Ortiz is not declared the successful bidder, then he should be reimbursed by respondent
Zamora in the corresponding amount for the improvements on Lot 5785-B.
WHEREFORE, in view hereof, the Order of respondent Court of November 18, 1970 is
hereby modified to conform to the foregoing judgment. The Writ of Preliminary Injunction,
dated January 29, 1971, is hereby dissolved. Without special pronouncement as to costs.
G.R. No. 120303 July 24, 1996
FEDERICO GEMINIANO, MARIA GEMINIANO, ERNESTO GEMINIANO, ASUNCION
GEMINIANO, LARRY GEMINIANO and MARLYN GEMINIANO, petitioners,
vs.
COURT OF APPEALS, DOMINADOR NICOLAS, and MARY A. NICOLAS, respondents.
DAVIDE, JR. J.:p
This petition for review on certiorari has its origins in Civil Case No. 9214 of Branch
3 of the Municipal Trial Court in Cities (MTCC) in Dagupan City for unlawful
detainer and damages. The petitioners ask the Court to set aside the decision of
the Court of Appeals affirming the decision of Branch 40 of the Regional Trial Court
(RTC) of Dagupan City, which, in turn, reversed the MTCC; ordered the petitioners
to reimburse the private respondents the value of the house in question and other
improvements; and allowed the latter to retain the premises until reimbursement
was made.
It appears that Lot No. 3765-B-1 containing an area of 314 square meters was
originally owned by the petitioners' mother, Paulina Amado vda. de Geminiano. On
a 12-square-meter portion of that lot stood the petitioners' unfinished bungalow,
which the petitioners sold in November 1978 to the private respondents for the
sum of P6,000.00, with an alleged promise to sell to the latter that portion of the lot
occupied by the house. Subsequently, the petitioners' mother executed a contract
of lease over a 126 square-meter portion of the lot, including that portion on which
the house stood, in favor of the private respondents for P40.00 per month for a
period of seven years commencing on 15 November 1978. 1 The private
respondents then introduced additional improvements and registered the house in
their names. After the expiration of the lease contract in November 1985, however,
the petitioners' mother refused to accept the monthly rentals.
It turned out that the lot in question was the subject of a suit, which resulted in its
acquisition by one Maria Lee in 1972. In 1982, Lee sold the lot to Lily Salcedo, who
in turn sold it in 1984 to the spouses Agustin and Ester Dionisio.
On 14 February 1992, the Dionisio spouses executed a Deed of Quitclaim over the
said property in favor of the petitioners. 2 As such, the lot was registered in the
latter's name.3
On 9 February 1993, the petitioners sent, via registered mail, a letters addressed
to private respondent Mary Nicolas demanding that she vacate the premises and
pay the rentals in arrears within twenty days from notice. 4
Upon failure of the private respondents to heed the demand, the petitioners filed
with the MTCC of Dagupan City a complaint for unlawful detainer and damages.
During the pre-trial conference, the parties agreed to confine the issues to: (1)
whether there was an implied renewal of the lease which expired in November
1985; (2) whether the lessees were builders in good faith and entitled to
reimbursement of the value of the house and improvements; and (3) the value of
the house.
The parties then submitted their respective position papers and the case was
heard under the Rule on Summary Procedure.
On the first issue, the court held that since the petitioners' mother was no longer
the owner of the lot in question at the time the lease contract was executed in
1978, in view of its acquisition by Maria Lee as early as 1972, there was no lease
to speak of, much less, a renewal thereof. And even if the lease legally existed, its
implied renewal was not for the period stipulated in the original contract, but only
on a month-to-month basis pursuant to Article 1687 of the Civil Code. The refusal
of the petitioners' mother to accept the rentals starting January 1986 was then a
clear indication of her desire to terminate the monthly lease. As regard the
petitioners' alleged failed promise to sell to the private respondents the lot
occupied by the house, the court held that such should be litigated in a proper case
44
before the proper forum, not an ejectment case where the only issue was physical
possession of the property.
The court resolved the second issue in the negative, holding that Articles 448 and
546 of the Civil Code, which allow possessors in good faith to recover the value of
improvements and retain the premises until reimbursed, did not apply to lessees
like the private respondents, because the latter knew that their occupation of the
premises would continue only during the life of the lease. Besides, the rights of the
private respondents were specifically governed by Article 1678, which allow
reimbursement of up to one-half of the value of the useful improvements, or
removal of the improvements should the lessor refuse to reimburse.
On the third issue, the court deemed as conclusive the private respondents'
allegation that the value of the house and improvements was P180,000.00, there
being no controverting evidence presented.
The trial court thus ordered the private respondents to vacate the premises, pay
the petitioners P40.00 a month as reasonable compensation for their stay thereon
from the filing of the complaint on 14 April 1993 until they vacated, and to pay the
sum of P1,000.00 as attorney's fees, plus costs.5
On appeal by the private respondents, the RTC of Dagupan City reversed the trial
court's decision and rendered a new judgment: (1) ordering the petitioners to
reimburse the private respondents for the value of the house and improvements in
the amount of P180,000.00 and to pay the latter P10,000.00 as attorney's fees and
P2,000.00 as litigation expenses; and (2) allowing the private respondents to
remain in possession of the premises until they were fully reimbursed for the value
of the house.6 It ruled that since the private respondents were assured by the
petitioners that the lot they leased would eventually be sold to them, they could be
considered builders in good faith, and as such, were entitled to reimbursed of the
value of the house and improvements with the right of retention until
reimbursement and had been made.
On appeal, this time by the petitioners, the Court of Appeals affirmed the decision
of the RTC7 and denied8the petitioners' motion for reconsideration. Hence, the
present petition.
The Court is confronted with the issue of which provision of law governs the case
at bench: Article 448 or Article 1678 of the Civil Code? The said articles read 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 plantercannot 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 if disagreement, the court
shall fix the terms thereof.
xxx xxx xxx
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 remover 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 reimbursed, 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.
The crux of the said issue then is whether the private respondents are builder in
good faith or mere lessees.
The private respondents claim they are builders in good faith, hence, Article 448 of
the Civil Code should apply. They rely on the lack of title of the petitioners' mother
at the time of the execution of the contract of lease, as well as the alleged
assurance made by the petitioners that the lot on which the house stood would be
sold to them.
It has been said that while the right to let property is an incident of title and
possession, a person may be lessor and occupy the position of a landlord to the
tenant although he is not the owner of the premises let. 9After all, ownership of the
property is not being transferred, 10 only the temporary use and enjoyment
thereof.11
In this case, both parties admit that the land in question was originally owned by
the petitioners' mother. The land was allegedly acquired later by one Maria Lee by
virtue of an extrajudicial foreclosure of mortage. Lee, however, never sought a writ
of possession in order that she gain possession of the property in question.12The
petitioners' mother therefore remained in possession of the lot.
45
It is undisputed that the private respondents came into possession of 126 square-
meter portion of the said lot by virtue of contract of lease executed by the
petitioners' mother as lessor, and the private respondents as lessees, is therefore
well-established, and carries with it a recognition of the lessor's title.13 The private
respondents, as lessees who had undisturbed possession for the entire term under
the lease, are then estopped to deny their landlord's title, or to assert a better title
not only in themselves, but also in some third person while they remain in
possession of the leased premises and until they surrender possession to the
landlord.14 This estoppel applies even though the lessor had no title at the time the
relation of lessor and lessee was created, 15 and may be asserted not only by the
original lessor, but also by those who succeed to his title. 16
Being mere lessees, the private respondents knew that their occupation of the
premises would continue only for the life of the lease. Plainly, they cannot be
considered as possessors nor builders in good faith. 17
In a plethora of cases,18 this Court has held that Article 448 of the Civil Code, in
relation to Article 546 of the same Code, which allows full reimbursement of useful
improvements and retention of the premises until reimbursement is made, applies
only to a possessor in good faith, i.e., one who builds on land with the belief that he
is the owner thereof. It does not apply where one's only interest is that of a lessee
under a rental contract; otherwise, it would always be in the power of the tenant to
"improve" his landlord out of his property.
Anent the alleged promise of the petitioners to sell the lot occupied by the private
respondents' house, the same was not substantiated by convincing evidence.
Neither the deed of sale over the house nor the contract of lease contained an
option in favor of the respondent spouses to purchase the said lot. And even if the
petitioners indeed promised to sell, it would not make the private respondents
possessors or builders in good faith so as to covered by the provision of Article 448
of the Civil Code. The latter cannot raise the mere expectancy or ownership of the
aforementioned lot because the alleged promise to sell was not fulfilled nor its
existence even proven. The first thing that the private respondents should have
done was to reduce the alleged promise into writing, because under Article 1403 of
the Civil Code, an agreement for the sale of real property or an interest therein is
unenforceable, unless some note or memorandum thereof be produced. Not
having taken any steps in order that the alleged promise to sell may be enforced,
the private respondents cannot bank on the promise and profess any claim nor
color of title over the lot in question.
There is no need to apply by analogy the provisions of Article 448 on indemnity as
was done in Pecson vs. Court of Appeals,19 because the situation sought to be
avoided and which would justify the application of that provision, is not present in
this case. Suffice it to say, "a state of forced coownership" would not be created
between the petitioners and the private respondents. For, as correctly pointed out
by the petitioners, the right of the private respondents as lessees are governed by
Article 1678 of the Civil Code which allows reimbursement to the extent of one-half
of the value of the useful improvements.
It must be stressed, however, that the right to indemnity under Article 1678 of the
Civil Code arises only if the lessor opts to appropriate the improvements. Since the
petitioners refused to exercise that option,20 the private respondents cannot
compel them to reimburse the one-half value of the house and improvements.
Neither can they retain the premises until reimbursement is made. The private
respondents' sole right then is to remove the improvements without causing any
more impairment upon the property leased than is necessary. 21
WHEREFORE, judgment is hereby rendered GRANTING the instant petition,
REVERSING and SETTING ASIDE the decision of the Court of Appeals of 27
January 1995 in CA-G.R. SP No. 34337; and REINSTATING the decision of
Branch 3 of the Municipal Trial Court in Cities of Dagupan City in Civil Case No.
9214 entitled "Federico Geminiano, et al. vs. Dominador Nicolas, et al."
Cost against the private respondents.
SO ORDERED.
G.R. No. 79688 February 1, 1996
PLEASANTVILLE DEVELOPMENT CORPORATION, petitioner,
vs.
COURT OF APPEALS, WILSON KEE, C.T. TORRES ENTERPRISES, INC. and ELDRED
JARDINICO, respondents.
DECISION
PANGANIBAN, J.:
Is a lot buyer who constructs improvements on the wrong property erroneously delivered by
the owner's agent, a builder in good faith? This is the main issue resolved in this petition for
review on certiorari to reverse the Decision1of the Court of Appeals2 in CA-G.R. No. 11040,
promulgated on August 20, 1987.
By resolution dated November 13, 1995, the First Division of this Court resolved to transfer
this case (along with several others) to the Third Division. After due deliberation and
consultation, the Court assigned the writing of this Decision to the undersigned ponente.
The Facts
46
The facts, as found by respondent Court, are as follows:
Edith Robillo purchased from petitioner a parcel of land designated as Lot 9, Phase II and
located at Taculing Road, Pleasantville Subdivision, Bacolod City. In 1975, respondent
Eldred Jardinico bought the rights to the lot from Robillo. At that time, Lot 9 was vacant.
Upon completing all payments, Jardinico secured from the Register of Deeds of Bacolod
City on December 19, 1978 Transfer Certificate of Title No. 106367 in his name. It was then
that he discovered that improvements had been introduced on Lot 9 by respondent Wilson
Kee, who had taken possession thereof.
It appears that on March 26, 1974, Kee bought on installment Lot 8 of the same subdivision
from C.T. Torres Enterprises, Inc. (CTTEI), the exclusive real estate agent of petitioner.
Under the Contract to Sell on Installment, Kee could possess the lot even before the
completion of all installment payments. On January 20, 1975, Kee paid CTTEI the relocation
fee of P50.00 and another P50.00 on January 27, 1975, for the preparation of the lot plan.
These amounts were paid prior to Kee's taking actual possession of Lot 8. After the
preparation of the lot plan and a copy thereof given to Kee, CTTEI through its employee,
Zenaida Octaviano, accompanied Kee's wife, Donabelle Kee, to inspect Lot 8.
Unfortunately, the parcel of land pointed by Octaviano was Lot 9. Thereafter, Kee
proceeded to construct his residence, a store, an auto repair shop and other improvements
on the lot.
After discovering that Lot 9 was occupied by Kee, Jardinico confronted him. The parties
tried to reach an amicable settlement, but failed.
On January 30, 1981, Jardinico's lawyer wrote Kee, demanding that the latter remove all
improvements and vacate Lot 9. When Kee refused to vacate Lot 9, Jardinico filed with the
Municipal Trial Court in Cities, Branch 3, Bacolod City (MTCC), a complaint for ejectment
with damages against Kee.
Kee, in turn, filed a third-party complaint against petitioner and CTTEI.
The MTCC held that the erroneous delivery of Lot 9 to Kee was attributable to CTTEI. It
further ruled that petitioner and CTTEI could not successfully invoke as a defense the failure
of Kee to give notice of his intention to begin construction required under paragraph 22 of
the Contract to Sell on Installment and his having built a sari-sari store without the prior
approval of petitioner required under paragraph 26 of said contract, saying that the purpose
of these requirements was merely to regulate the type of improvements to be constructed
on the Lot.3
However, the MTCC found that petitioner had already rescinded its contract with Kee over
Lot 8 for the latter's failure to pay the installments due, and that Kee had not contested the
rescission. The rescission was effected in 1979, before the complaint was instituted. The
MTCC concluded that Kee no longer had any right over the lot subject of the contract
between him and petitioner. Consequently, Kee must pay reasonable rentals for the use of
Lot 9, and, furthermore, he cannot claim reimbursement for the improvements he introduced
on said lot.
The MTCC thus disposed:
IN VIEW OF ALL THE FOREGOING, judgment is hereby rendered as follows:
1. Defendant Wilson Kee is ordered to vacate the premises of Lot 9, covered by
TCT No. 106367 and to remove all structures and improvements he introduced
thereon;
2. Defendant Wilson Kee is ordered to pay to the plaintiff rentals at the rate of
P15.00 a day computed from the time this suit was filed on March 12, 1981 until he
actually vacates the premises. This amount shall bear interests (sic) at the rate of
12 per cent (sic) per annum.
3. Third-Party Defendant C.T. Torres Enterprises, Inc. and Pleasantville
Subdivision are ordered to pay the plaintiff jointly and severally the sum of
P3,000.00 as attorney's fees and P700.00 as cost and litigation expenses.4
On appeal, the Regional Trial Court, Branch 48, Bacolod City (RTC) ruled that petitioner
and CTTEI were not at fault or were not negligent, there being no preponderant evidence to
show that they directly participated in the delivery of Lot 9 to Kee 5 . It found Kee a builder in
bad faith. It further ruled that even assuming arguendo that Kee was acting in good faith, he
was, nonetheless, guilty of unlawfully usurping the possessory right of Jardinico over Lot 9
from the time he was served with notice to vacate said lot, and thus was liable for rental.
The RTC thus disposed:
WHEREFORE, the decision appealed from is affirmed with respect to the order
against the defendant to vacate the premises of Lot No. 9 covered by Transfer
Certificate of Title No. T-106367 of the land records of Bacolod City; the removal of
all structures and improvements introduced thereon at his expense and the
payment to plaintiff (sic) the sum of Fifteen (P15.00) Pesos a day as reasonable
rental to be computed from January 30, 1981, the date of the demand, and not
from the date of the filing of the complaint, until he had vacated (sic) the premises,
with interest thereon at 12% per annum. This Court further renders judgment
against the defendant to pay the plaintiff the sum of Three Thousand (P3,000.00)
Pesos as attorney's fees, plus costs of litigation.
The third-party complaint against Third-Party Defendants Pleasantville
Development Corporation and C.T. Torres Enterprises, Inc. is dismissed. The
47
 order against Third-Party Defendants to pay attorney's fees to plaintiff and costs of
litigation is reversed.6
Following the denial of his motion for reconsideration on October 20, 1986, Kee appealed
directly to the Supreme Court, which referred the matter to the Court of Appeals.
The appellate court ruled that Kee was a builder in good faith, as he was unaware of the
"mix-up" when he began construction of the improvements on Lot 8. It further ruled that the
erroneous delivery was due to the negligence of CTTEI, and that such wrong delivery was
likewise imputable to its principal, petitioner herein. The appellate court also ruled that the
award of rentals was without basis.
Thus, the Court of Appeals disposed:
WHEREFORE, the petition is GRANTED, the appealed decision is REVERSED,
and judgment is rendered as follows:
1. Wilson Kee is declared a builder in good faith with respect to the improvements
he introduced on Lot 9, and is entitled to the rights granted him under Articles 448,
546 and 548 of the New Civil Code.
2. Third-party defendants C.T. Torres Enterprises, Inc. and Pleasantville
Development Corporation are solidarily liable under the following circumstances:
A. If Eldred Jardinico decides to appropriate the improvements and,
thereafter, remove these structures, the third-party defendants shall
answer for all demolition expenses and the value of the improvements
thus destroyed or rendered useless;
b. If Jardinico prefers that Kee buy the land, the third-party defendants
shall answer for the amount representing the value of Lot 9 that Kee
should pay to Jardinico.
3. Third-party defendants C.T. Torres Enterprises, Inc. and Pleasantville
Development Corporation are ordered to pay in solidum the amount of P3,000.00
to Jardinico as attorney's fees, as well as litigation expenses.
4. The award of rentals to Jardinico is dispensed with.
Furthermore, the case is REMANDED to the court of origin for the determination of
the actual value of the improvements and the property (Lot 9), as well as for further
proceedings in conformity with Article 448 of the New Civil Code.7
Petitioner then filed the instant petition against Kee, Jardinico and CTTEI.
The Issues
The petition submitted the following grounds to justify a review of the respondent Court's
Decision, as follows:
1. The Court of Appeals has decided the case in a way probably not in accord with
law or the the (sic) applicable decisions of the Supreme Court on third-party
complaints, by ordering third-party defendants to pay the demolition expenses
and/or price of the land;
2. The Court of Appeals has so far departed from the accepted course of judicial
proceedings, by granting to private respondent-Kee the rights of a builder in good
faith in excess of what the law provides, thus enriching private respondent Kee at
the expense of the petitioner;
3. In the light of the subsequent events or circumstances which changed the rights
of the parties, it becomes imperative to set aside or at least modify the judgment of
the Court of Appeals to harmonize with justice and the facts;
4. Private respondent-Kee in accordance with the findings of facts of the lower
court is clearly a builder in bad faith, having violated several provisions of the
contract to sell on installments;
5. The decision of the Court of Appeals, holding the principal, Pleasantville
Development Corporation (liable) for the acts made by the agent in excess of its
authority is clearly in violation of the provision of the law;
6. The award of attorney's fees is clearly without basis and is equivalent to putting
a premium in (sic) court litigation.
From these grounds, the issues could be re-stated as follows:
(1) Was Kee a builder in good faith?
(2) What is the liability, if any, of petitioner and its agent, C.T. Torres Enterprises,
Inc.? and
(3) Is the award of attorney's fees proper?
The First Issue: Good Faith
48
Petitioner contends that the Court of Appeals erred in reversing the RTC's ruling that Kee
was a builder in bad faith.
Petitioner fails to persuade this Court to abandon the findings and conclusions of the Court
of Appeals that Kee was a builder in good faith. We agree with the following observation of
the Court of Appeals:
The roots of the controversy can be traced directly to the errors committed by
CTTEI, when it pointed the wrong property to Wilson Kee and his wife. It is highly
improbable that a purchaser of a lot would knowingly and willingly build his
residence on a lot owned by another, deliberately exposing himself and his family
to the risk of being ejected from the land and losing all improvements thereon, not
to mention the social humiliation that would follow.
Under the circumstances, Kee had acted in the manner of a prudent man in
ascertaining the identity of his property. Lot 8 is covered by Transfer Certificate of
Title No. T-69561, while Lot 9 is identified in Transfer Certificate of Title No. T-
106367. Hence, under the Torrens system of land registration, Kee is presumed to
have knowledge of the metes and bounds of the property with which he is dealing.
...
xxx xxx xxx
But as Kee is a layman not versed in the technical description of his property, he
had to find a way to ascertain that what was described in TCT No. 69561 matched
Lot 8. Thus, he went to the subdivision developer's agent and applied and paid for
the relocation of the lot, as well as for the production of a lot plan by CTTEI's
geodetic engineer. Upon Kee's receipt of the map, his wife went to the subdivision
site accompanied by CTTEI's employee, Octaviano, who authoritatively declared
that the land she was pointing to was indeed Lot 8. Having full faith and confidence
in the reputation of CTTEI, and because of the company's positive identification of
the property, Kee saw no reason to suspect that there had been a misdelivery. The
steps Kee had taken to protect his interests were reasonable. There was no need
for him to have acted ex-abundantia cautela, such as being present during the
geodetic engineer's relocation survey or hiring an independent geodetic engineer
to countercheck for errors, for the final delivery of subdivision lots to their owners is
part of the regular course of everyday business of CTTEI. Because of CTTEI's
blunder, what Kee had hoped to forestall did in fact transpire. Kee's efforts all went
to naught.8
Good faith consists in the belief of the builder that the land he is building on is his and his
ignorance of any defect or flaw in his title 9 . And as good faith is presumed, petitioner has
the burden of proving bad faith on the part of Kee 10 .
At the time he built improvements on Lot 8, Kee believed that said lot was what he bought
from petitioner. He was not aware that the lot delivered to him was not Lot 8. Thus, Kee's
good faith. Petitioner failed to prove otherwise.
To demonstrate Kee's bad faith, petitioner points to Kee's violation of paragraphs 22 and 26
of the Contract of Sale on Installment.
We disagree. Such violations have no bearing whatsoever on whether Kee was a builder in
good faith, that is, on his state of mind at the time he built the improvements on Lot 9. These
alleged violations may give rise to petitioner's cause of action against Kee under the said
contract (contractual breach), but may not be bases to negate the presumption that Kee
was a builder in good faith.
Petitioner also points out that, as found by the trial court, the Contract of Sale on Installment
covering Lot 8 between it and Kee was rescinded long before the present action was
instituted. This has no relevance on the liability of petitioner, as such fact does not negate
the negligence of its agent in pointing out the wrong lot. to Kee. Such circumstance is
relevant only as it gives Jardinico a cause of action for unlawful detainer against Kee.
Petitioner next contends that Kee cannot "claim that another lot was erroneously pointed out
to him" because the latter agreed to the following provision in the Contract of Sale on
installment, to wit:
13. The Vendee hereby declares that prior to the execution of his contract he/she
has personally examined or inspected the property made subject-matter hereof, as
to its location, contours, as well as the natural condition of the lots and from the
date hereof whatever consequential change therein made due to erosion, the said
Vendee shall bear the expenses of the necessary fillings, when the same is so
desired by him/her. 11
The subject matter of this provision of the contract is the change of the location, contour and
condition of the lot due to erosion. It merely provides that the vendee, having examined the
property prior to the execution of the contract, agrees to shoulder the expenses resulting
from such change.
We do not agree with the interpretation of petitioner that Kee contracted away his right to
recover damages resulting from petitioner's negligence. Such waiver would be contrary to
public policy and cannot be allowed. "Rights may be waived, unless the waiver is contrary to
law, public order, public policy, morals, or good customs, or prejudicial to a third person with
a right recognized by law." 12
The Second Issue: Petitioner's Liability
49
Kee filed a third-party complaint against petitioner and CTTEI, which was dismissed by the
RTC after ruling that there was no evidence from which fault or negligence on the part of
petitioner and CTTEI can be inferred. The Court of Appeals disagreed and found CTTEI
negligent for the erroneous delivery of the lot by Octaviano, its employee.
Petitioner does not dispute the fact that CTTEI was its agent. But it contends that the
erroneous delivery of Lot 9 to Kee was an act which was clearly outside the scope of its
authority, and consequently, CTTEI I alone should be liable. It asserts that "while [CTTEI]
was authorized to sell the lot belonging to the herein petitioner, it was never authorized to
deliver the wrong lot to Kee" 13 .
Petitioner's contention is without merit.
The rule is that the principal is responsible for the acts of the agent, done within the scope
of his authority, and should bear the damage caused to third persons 14 . On the other hand,
the agent who exceeds his authority is personally liable for the damage 15
CTTEI was acting within its authority as the sole real estate representative of petitioner
when it made the delivery to Kee. In acting within its scope of authority, it was, however,
negligent. It is this negligence that is the basis of petitioner's liability, as principal of CTTEI,
per Articles 1909 and 1910 of the Civil Code.
Pending resolution of the case before the Court of Appeals, Jardinico and Kee on July 24,
1987 entered into a deed of sale, wherein the former sold Lot 9 to Kee. Jardinico and Kee
did not inform the Court of Appeals of such deal.
The deed of sale contained the following provision:
1. That Civil Case No. 3815 entitled "Jardinico vs. Kee" which is now pending
appeal with the Court of Appeals, regardless of the outcome of the decision shall
be mutually disregarded and shall not be pursued by the parties herein and shall
be considered dismissed and without effect whatso-ever; 16
Kee asserts though that the "terms and conditions in said deed of sale are strictly for the
parties thereto" and that "(t)here is no waiver made by either of the parties in said deed of
whatever favorable judgment or award the honorable respondent Court of Appeals may
make in their favor against herein petitioner Pleasantville Development Corporation and/or
private respondent C.T. Torres Enterprises; Inc." 17
Obviously, the deed of sale can have no effect on the liability of petitioner. As we have
earlier stated, petitioner's liability is grounded on the negligence of its agent. On the other
hand, what the deed of sale regulates are the reciprocal rights of Kee and Jardinico; it
stressed that they had reached an agreement independent of the outcome of the case.
Petitioner further assails the following holding of the Court of Appeals:
2. Third-party defendants C.T. Torres Enterprises, Inc. and Pleasantville
Development Corporation are solidarily liable under the following circumstances:
a. If Eldred Jardinico decides to appropriate the improvements and,
thereafter, remove these structures, the third-party defendants shall
answer for all demolition expenses and the value of the improvements
thus destroyed or rendered useless;
b. If Jardinico prefers that Kee buy the land, the third-party defendants
shall answer for the amount representing the value of Lot 9 that Kee
should pay to Jardinico. 18
Petitioner contends that if the above holding would be carried out, Kee would be unjustly
enriched at its expense. In other words, Kee would be able to own the lot, as buyer, without
having to pay anything on it, because the aforequoted portion of respondent Court's
Decision would require petitioner and CTTEI jointly and solidarily to "answer" or reimburse
Kee therefor.
We agree with petitioner.
Petitioner' s liability lies in the negligence of its agent CTTEI. For such negligence, the
petitioner should be held liable for damages. Now, the extent and/or amount of damages to
be awarded is a factual issue which should be determined after evidence is adduced.
However, there is no showing that such evidence was actually presented in the trial court;
hence no damages could flow be awarded.
The rights of Kee and Jardinico vis-a-vis each other, as builder in good faith and owner in
good faith, respectively, are regulated by law (i.e., Arts. 448, 546 and 548 of the Civil Code).
It was error for the Court of Appeals to make a "slight modification" in the application of such
law, on the ground of "equity". At any rate, as it stands now, Kee and Jardinico have
amicably settled through their deed of sale their rights and obligations with regards to Lot 9.
Thus, we delete items 2 (a) and (b) of the dispositive portion of the Court of Appeals'
Decision [as reproduced above] holding petitioner and CTTEI solidarily liable.
The Third Issue: Attorney's Fees
The MTCC awarded Jardinico attorney's fees and costs in the amount of P3,000.00 and
P700.00, respectively, as prayed for in his complaint. The RTC deleted the award,
consistent with its ruling that petitioner was without fault or negligence. The Court of
50
Appeals, however, reinstated the award of attorney's fees after ruling that petitioner was
liable for its agent's negligence.
The award of attorney's fees lies within the discretion of the court and depends upon the
circumstances of each case 19 . We shall not interfere with the discretion of the Court of
Appeals. Jardinico was compelled to litigate for the protection of his interests and for the
recovery of damages sustained as a result of the negligence of petitioner's agent 20 .
In sum, we rule that Kee is a builder in good faith. The disposition of the Court of Appeals
that Kee "is entitled to the rights granted him under Articles 448, 546 and 548 of the New
Civil Code" is deleted, in view of the deed of sale entered into by Kee and Jardinico, which
deed now governs the rights of Jardinico and Kee as to each other. There is also no further
need, as ruled by the appellate Court, to remand the case to the court of origin "for
determination of the actual value of the improvements and the property (Lot 9), as well as
for further proceedings in conformity with Article 448 of the New Civil Code."
WHEREFORE , the petition is partially GRANTED. The Decision of the Court of Appeals is
hereby MODIFIED as follows:
(1) Wilson Kee is declared a builder in good faith;
(2) Petitioner Pleasantville Development Corporation and respondent C.T. Torres
Enterprises, Inc. are declared solidarily liable for damages due to negligence;
however, since the amount and/or extent of such damages was not proven during
the trial, the same cannot now be quantified and awarded;
(3) Petitioner Pleasantville Development Corporation and respondent C.T. Torres
Enterprises, Inc. are ordered to pay in solidum the amount of P3,000.00 to
Jardinico as attorney's fees, as well as litigation expenses; and
(4) The award of rentals to Jardinico is dispensed with. SO ORDERED.
G.R. No. L-23509 June 23, 1966
NATY BALTAZAR, ET AL., plaintiffs and appellees,
vs.
SILVINA CARIDAD, ET AL., defendants and appellants.
REYES, J.B.L., J.:
Appeal against an order, issued by the Court of First Instance of Ilocos Norte, in its
Cadastral Case No. 54, CLRO Cad. Case No. 1222, compelling respondents Silvina
Caridad and Eduarda Caridad to remove their respective houses built on the southern
portion of Lot No. 8864 within thirty days from receipt of said order. Respondents originally
interposed the present appeal to the Court of Appeals, where it was docketed as its CA-
G.R. No. 31289-R. The appellate court, however, certified the appeal to this Court for
raising only questions of law.
The facts are not in dispute, and are as follows:
In the cadastral proceeding above stated, the trial court rendered decision, dated January
23, 1941, awarding said Lot No. 8864 of the Laoag (Ilocos Norte) cadastre to the spouses
Julio Baltazar and Constancia Valencia as their conjugal partnership property. Said decision
having become final, the corresponding decree was issued on July 12, 1941, and pursuant
thereto, said lot was registered in the names of applicant spouses under Original Certificate
of Title No. O-1445, which was later transcribed, on November 5, 1959, in the off ice of the
Register of Deeds of Ilocos Norte.
In the meanwhile, Julio Baltazar, the registered owner of said Lot No. 8854, died. On
December 6, 1961, his surviving wife and children, as petitioners, filed a motion, in the
cadastral case, praying for writ of possession against respondents Silvina Caridad and her
daughter, Eduarda Caridad, who had been in possession of the southern portion of said Lot
No. 8864 since 1939, while the cadastral case involving said lot was pending before the trial
court, and before the decision was rendered and the corresponding decree issued in 1941.
No writ having theretofore been issued in petitioners' favor, the trial court issued an order,
on December 11, 1961, granting petitioners' motion, and overruled respondents' opposition
but directed the sheriff not to remove or destroy the permanent improvements on the lot
without an express command. On January 2, 1962, the order having become final, the
sheriff enforced the writ and placed petitioners in possession of the southern portion of the
lot.1äwphï1.ñët
On January 23, 1962, petitioners presented a motion to compel respondents Eduarda
Caridad and her mother, Silvina Caridad, to remove their respective houses which they built
in 1958 and 1959, respectively, in the southern portion of the disputed lot, and, in the event
of their failure to do so, to order the sheriff to demolish the same. Respondents again
opposed said motion.
On March 20, 1962, the trial court, after due hearing, granted petitioners' motion, ordering
respondents to remove their respective houses from the southern portion of said lot No.
8864 within thirty days from receipt of said order. Not satisfied, respondents appealed.
Respondents-appellants question the power or jurisdiction of the trial court, sitting as a
cadastral court, to order the removal of their respective houses which were built in the
disputed lot long after the issuance of the final decree of registration. They insist that they
51
are builders in good faith of the houses in question, and, as such, they are accorded rights
under Article 448 of the new Civil Code, which rights cause a conflict to arise between
petitioners, as registered owners, on the one hand, and respondents, as builders in good
faith, on the other; that this conflict is a new matter which the cadastral court could not have
possibly passed upon in 1941 when it rendered its decision awarding the disputed lot to
Julio Baltazar, to predecessor-in-interest of petitioners. Respondents also insist that the
determination or settlement of this controversy is cognizable only by a court exercising
general jurisdiction, and that the only remedy available to petitioners is to file an ordinary
action for ejectment or recovery of possession against them. Respondents further urged
that this remedy is rendered unnecessary in view of the pendency of an action for
reconveyance over the disputed portion of said Lot No. 8864, which respondents filed
against petitioners in the same court and docketed (but after the writ of possession had
been asked) as its Civil Case No. 3451, and wherein the respective rights, interests and title
of the parties will ultimately be ventilated.
The above contentions of respondents are without merit. It is to be noted that respondents
do not dispute that during the pendency of the cadastral proceeding, rendition of the
judgment awarding said Lot No. 8864, and consequent issuance of the final decree of
registration of the same in favor of Julio Baltazar, the late Andres Caridad, his surviving
spouse, respondent Silvina Caridad, and their children, one of whom is respondent Eduarda
Caridad, were in possession of the southern portion of undisputed lot; and that respondent
Eduarda Caridad claims right and title thereto as a mere heir and successor-in-interest of
said Andres Caridad. Neither do respondents dispute the propriety and validity of the order
of the cadastral court, granting the writ of possession in favor of petitioners as well as its
enforcement. Under these circumstances, we hold that the order, dated March 20, 1962, of
the cadastral court, granting petitioners' motion to compel respondents to remove their
respective houses from the disputed lot, is valid and enforceable against respondents. In
the case of Marcelo vs. Mencias, etc., et al., L-15609, April 29, 1960, 58 O.G. 3349, this
Court had already upheld the jurisdiction or authority of the court of first instance, sitting as
a land registration court, to order, as a consequence of the writ of possession issued by it,
the demolition of improvements introduced by the successor-in-interest of a defeated
oppositor in the land registration case. Thus, in the foregoing cited case, Mr. Justice Jesus
G. Barrera, speaking for the Court, opined:
It is contended that respondent Judge erred in denying the petition for demolition.
To this we agree. Section 13, Rule 39 of the old Rules of Court, provides:
"SEC. 13. How execution for the delivery or restitution of property
enforced — the officer must enforce an execution for the delivery or
restitution of property by placing the plaintiff in possession of such
property, and by levying as hereinafter provided upon so much of the
property of the judgment debtor as will satisfy the amount of the costs,
damages, rents, and profits included in the execution. However, the
officer shall not destroy, demolish or remove the improvements made by
the defendant or his agent on the property, except by special order of the
court, which order may only issue upon petition of the plaintiff after due
hearing and upon the defendant's failure to remove the improvements
within a reasonable time to be fixed by the court."
Respondent Judge is of the view that the above-quoted provision of the Rules of
Court applies only to ordinary actions involving the delivery or restitution of
property, and not to proceedings under the land registration law which, according
to him, is silent on the point. The view is not correct, for the reason that the
provisions of the Rules of Court are applicable to land registration cases in a
suppletory character (Rule 132). Put differently, if the writ of possession issued in a
land registration proceeding implies the delivery of possession of the land to the
successful litigant therein (Demorar vs. Ibañez, 51 O.G.) 2872; Pasay Estates
Company vs. Del Rosario, et al., 11 Phil. 391; Manlapas vs. Llorente, 48 Phil. 298),
a writ of demolition must, likewise, issue, especially considering that the latter writ
is but a complement of the former which without said writ of demolition would be
ineffective.
Apparently, respondent Judge, in refusing to issue the writ of demolition to
petitioner, was of the belief that the latter has another remedy, namely, by resorting
to ordinary civil actions in the regular courts, such as that of forcible entry and
detainer, or the recovery of possession, in which instances, said courts would then
be competent to issue said writ. Such a situation, in our opinion, could not have
been intended by the law. To require a successful litigant in a land registration
case to institute another action for the purpose of obtaining possession of the land
adjudged to him, would be a cumbersome process. It would foster unnecessary
and expensive litigations and result in multiplicity of suits, which our judicial system
abhors. In this connection, this Court on one occasion, said:
"But this construction of the law entirely defeats its purpose. It would
compel a successful litigant in the Court of Land Registration to
commence other actions in other courts for the purpose of securing fruits
of his victory. The evident purpose of the law was to prevent that very
thing; ... (Pasay Estates Co. vs. Del Rosario, et al., supra).
Furthermore, Section 6, Rule 124, of the Rules of Court states that —
"When by law jurisdiction is conferred on a court or judicial officer, all
auxiliary writs, processes and other means necessary to carry it into effect
may be employed by such court or officer and if the procedure to be
followed in the exercise of such jurisdiction is not specifically pointed out
by these rules, any suitable process or mode of proceeding may be
adopted which appears most conformable to the spirit of said rules."
As already stated, provisions of the Rules of Court are applicable to land
registration cases in a suppletory character. Pursuant to the provision just quoted,
respondent Judge has the power to issue all auxiliary writs, including the writ of
52
 demolition sought by petitioner, processes and other means necessary to carry
into effect the jurisdiction conferred upon it by law in land registration cases to
issue a writ of possession to the successful litigant, the petitioner herein.
Lastly, in the case of Shoiji vs. Harvey, 43 Phil. 333, we pointed out that
"Independent of any statutory provision, ... every court has inherent power to do all
things reasonably necessary for the administration of justice within the scope of its
jurisdiction." In line with this doctrine, it may be stated that respondent Judge, in
the instant case, has the inherent power to issue the writ of demolition demanded
by petitioner. Needless to say, its issuance is reasonably necessary to do justice to
petitioner who is being deprived of the possession of the lots in question, by
reason of the continued refusal of respondent Clemente Pagsisihan to remove his
house thereon and restore possession of the premises to petitioner.
We believe the above-quoted ruling aptly answers the arguments of respondents-
appellants, the same having practically identical sets of facts obtaining in the case at bar.
Appellants can not be regarded as builders in good faith because they are bound by the
1941 decree of registration that obligated their parents and predecessors-in-interest. Good
faith must rest on a colorable right in the builder, beyond a mere stubborn belief in one's title
despite judicial adjudication. The fact that in 1959 appellants demolished and replaced their
old house with new and bigger ones can not enervate the rights of the registered owners.
Otherwise, the rights of the latter to enjoy full possession of their registered property could
be indefinitely defeated by an unsuccessful opponent through the simple subterfuge of
replacing his old house with a new one from time to time.
Wherefore, the appealed order should be, as it is hereby affirmed. With costs against
respondents-appellants.
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.
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.
53
 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:
I provided for in Article 546 of the Civil Code. Otherwise, the plaintiffs may oblige the
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
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.
G.R. No. L-49219 April 15, 1988
SPOUSES CONCEPCION FERNANDEZ DEL CAMPO and ESTANISLAO DEL
CANTO, plaintiffs-appellees,
54
vs.
BERNARDA FERNANDEZ ABESIA, 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:
I. 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
55
 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.
G.R. No. 144635 June 26, 2006
PROGRAMME INCORPORATED, Petitioner,
vs.
PROVINCE OF BATAAN,1 Respondent.
DECISION
CORONA, J.:
In this petition filed under Rule 45 of the Rules of Court, petitioner Programme Incorporated
contests the Court of Appeals (CA) decision2 and resolution3 upholding respondent Province
of Bataan’s ownership of Piazza Hotel and the land on which it stands. The assailed
decision in CA-G.R. CV No. 49135 affirmed the decision of the Regional Trial Court (RTC),
Branch 4, Balanga, Bataan in a suit for preliminary injunction and sum of money filed by
petitioner against Bataan Shipyard and Engineering Co., Inc. (BASECO). The case was
docketed as Civil Case No. 129-ML. The dispositive portion of the trial court decision read:
WHEREFORE, in view of all the foregoing considerations, judgment is hereby rendered
dismissing the complaint, without pronouncement as to costs.
Similarly, [BASECO’s] counterclaim is dismissed.
On the complaint in intervention, judgment is hereby rendered ordering [petitioner] to pay
[respondent] the rentals for the leased premises in question, namely, the Piazza Hotel and
the Mariveles Lodge, situated at the Bataan Export Processing Zone (BEPZ) Compound in
Mariveles, Bataan, at the rate of six thousand five hundred pesos (P6,500.00) per month for
both establishments, starting in August 1989 with legal interest at 6% per annum, up to and
until the legal arrearages shall have been fully paid, and to pay the succeeding rentals
therefor at the same rate. SO ORDERED.4
The controversy arose from the following facts.
BASECO was the owner of Piazza Hotel and Mariveles Lodge, both located in Mariveles,
Bataan.
On May 14, 1986, BASECO granted petitioner a contract of lease over Piazza Hotel at a
monthly rental of P6,500 for three years, i.e., from January 1, 1986 to January 1, 1989,
subject to renewal by mutual agreement of the parties. After the expiration of the three-year
lease period, petitioner was allowed to continue operating the hotel on monthly extensions
of the lease.
In April 1989, however, the Presidential Commission on Good Government (PCGG) issued
a sequestration order against BASECO pursuant to Executive Order No. 1 of former
President Corazon C. Aquino.5 Among the properties provisionally seized and taken over
was the lot on which Piazza Hotel stood.
On July 19, 1989, however, Piazza Hotel was sold at a public auction for non-payment of
taxes to respondent Province of Bataan. The title of the property was transferred to
56
respondent. BASECO’s Transfer Certificate of Title (TCT) No. T-59631 was cancelled and a
new one, TCT No. T-128456, was issued to the Province of Bataan.
On July 21, 1989, petitioner filed a complaint for preliminary injunction and collection of sum
of money against BASECO (Civil Case No. 129-ML).6 Respondent, as the new owner of the
property, filed a motion for leave to intervene on November 22, 1990. After its motion was
granted, respondent filed a complaint-in-intervention praying, inter alia, that petitioner be
ordered to vacate Piazza Hotel and Mariveles Lodge for lack of legal interest.
During the pre-trial of the complaint-in-intervention, the parties agreed that the case7 be
tried on the sole issue of whether respondent province, as complainant-intervenor, was the
legitimate owner of the Piazza Hotel and Mariveles Lodge.
On February 3, 1995, after trial on the merits, the trial court rendered judgment in favor of
respondent.1avvphil.net
On appeal, the CA addressed the issue of ownership of Piazza Hotel and Mariveles Lodge
as follows:
[W]e affirm the trial court’s ruling that [respondent] Province of Bataan has
established by preponderance of evidence its claim of ownership of Piazza Hotel and
Mariveles Lodge. In fact, [petitioner] has not presented evidence proving its
ownership of the said buildings[, whereas respondent presented] a tax declaration
and certificate of title over the same properties, over which it now exercises full
control and dominion. The fact that the subject properties were placed under
sequestration is of no moment for the PCGG is not an owner but a conservator who can
exercise only powers of administration over property sequestered, frozen or provisionally
taken over. As the owner of said properties, [respondent-intervenor] is entitled to the
payment of the monthly rental in the sum of P6,500.00 as ruled by the trial
court.8 (emphasis ours)
We agree with the appellate court.
Time and again, we have ruled that factual matters are best evaluated by trial courts which
can scrutinize evidence and hear testimony presented and offered by the parties (in this
case, on the issue of ownership of the subject property). All the more does this principle ring
true in this petition since such factual determination by the RTC was upheld by the
CA.9 Only questions of law are the proper subject of a petition for review on certiorari in this
Court, unless any of the known exceptions is extant in this case. 10 There is none.
The evidence clearly established respondent’s ownership of Piazza Hotel. 11 First, the title of
the land on which Piazza Hotel stands was in the name of respondent.12 Second, Tax
Declaration No. 12782 was in the name of respondent as owner of Piazza Hotel. 13 A note at
the back of the tax declaration read:
Transferred by virtue of a final bill of sale executed by the Provincial [Treasurer] of
Bataan in favor of the Provincial Government on Feb. 13, 1989[, a] year after the
expiration of the redemption period from date of auction sale held on Feb. 12, 1988 of all
real property declared in the name of [BASECO].14 (emphasis ours)
Third, petitioner was doubtlessly just a lessee. In the lease contract annexed to the
complaint, petitioner in fact admitted BASECO’s (respondent’s predecessor-in-interest)
ownership then of the subject property. A stipulation in the contract read:
WHEREAS, the lessor (BASECO) is the owner of the building PIAZZA HOTEL and its
outlet MARIVELES LODGE located at BASECO, Mariveles, Bataan xxx15 (emphasis ours)
The Rules of Court states that "[a]n admission, verbal or written, made by a party in the
course of the proceedings in the same case, does not require proof. The admission may be
contradicted only by showing that it was made through palpable mistake or that no such
admission was made."16
[Such admissions] may be made in (a) the pleadings filed by the parties, (b) in the
course of the trial either by verbal or written manifestations or stipulations, or (c) in
other stages of the judicial proceeding, as in the pre-trial of the case. Admissions
obtained through depositions, written interrogatories or requests for admission are also
considered judicial admissions.17 (emphasis ours)
"To be considered as a judicial admission, the same must be made in the same case in
which it is offered."18
In its own complaint19 for preliminary injunction and sum of money, petitioner acknowledged
that it was not the owner of the property when it stated that "[BASECO] lease[d] to
[petitioner] the building Piazza Hotel and its outlet Mariveles Lodge xxx for monthly rentals
of P6,500.00."20 Petitioner could not possibly be the owner of a building merely leased to
it.21
Furthermore, petitioner’s reference to Article 44822 of the
Civil Code to justify its supposed rights as "possessor in good faith" was erroneous.
The benefits granted to a possessor in good faith cannot be maintained by the lessee
against the lessor because, such benefits are intended to apply only to a case where one
builds or sows or plants on land which he believes himself to have a claim of title and not to
lands wherein one’s only interest is that of a tenant under a rental contract, otherwise, it
would always be in the power of a tenant to improve his landlord out of his property.
Besides, as between lessor and lessee, the Code applies specific provisions designed to
cover their rights.
57
Hence, the lessee cannot claim reimbursement, as a matter of right, for useful
improvements he has made on the property, nor can he assert a right of retention until
reimbursed. His only remedy is to remove the improvement if the lessor does not choose to
pay its value; but the court cannot give him the right to buy the land. 23
Petitioner’s assertion that Piazza Hotel was constructed "at (its) expense" found no support
in the records. Neither did any document or testimony prove this claim. At best, what was
confirmed was that petitioner managed and operated the hotel. There was no evidence that
petitioner was the one which spent for the construction or renovation of the property. And
since petitioner’s alleged expenditures were never proven, it could not even seek
reimbursement of one-half of the value of the improvements upon termination of the lease
under Article 167824 of the Civil Code.
Finally, both the trial and appellate courts declared that the land as well as the improvement
thereon (Piazza Hotel) belonged to respondent. We find no reason to overturn this factual
conclusion.
Since this petition for review on certiorari was clearly without legal and factual basis,
petitioner’s counsel should not have even filed this appeal. It is obvious that the intention
was merely to delay the disposition of the case.
WHEREFORE, the petition is hereby DENIED. The decision and resolution of the Court of
Appeals in CA-G.R. CV No. 49135 are AFFIRMED.
Costs against petitioner. Same costs against Atty. Benito R. Cuesta I, petitioner’s counsel,
for filing this flimsy appeal, payable within ten (10) days from finality of this decision. SO
ORDERED.
G.R. No. 170923 January 20, 2009
SULO SA NAYON, INC. and/or PHILIPPINE VILLAGE HOTEL, INC. and JOSE MARCEL
E. PANLILIO,Petitioners,
vs.
NAYONG PILIPINO FOUNDATION, Respondent.
DECISION
PUNO, C.J.:
On appeal are the Court of Appeals’ (CA’s) October 4, 2005 Decision 1 in CA-G.R. SP No.
74631 and December 22, 2005 Resolution,2 reversing the November 29, 2002 Decision3 of
the Regional Trial Court (RTC) of Pasay City in Civil Case No. 02-0133. The RTC modified
the Decision4 of the Metropolitan Trial Court (MeTC) of Pasay City which ruled against
petitioners and ordered them to vacate the premises and pay their arrears. The RTC
declared petitioners as builders in good faith and upheld their right to indemnity.
The facts are as follows:
Respondent Nayong Pilipino Foundation, a government-owned and controlled corporation,
is the owner of a parcel of land in Pasay City, known as the Nayong Pilipino Complex.
Petitioner Philippine Village Hotel, Inc. (PVHI), formerly called Sulo sa Nayon, Inc., is a
domestic corporation duly organized and existing under Philippine laws. Petitioner Jose
Marcel E. Panlilio is its Senior Executive Vice President.
On June 1, 1975, respondent leased a portion of the Nayong Pilipino Complex, consisting of
36,289 square meters, to petitioner Sulo sa Nayon, Inc. for the construction and operation of
a hotel building, to be known as the Philippine Village Hotel. The lease was for an initial
period of 21 years, or until May 1996. It is renewable for a period of 25 years under the
same terms and conditions upon due notice in writing to respondent of the intention to
renew at least 6 months before its expiration. Thus, on March 7, 1995, petitioners sent
respondent a letter notifying the latter of their intention to renew the contract for another 25
years. On July 4, 1995, the parties executed a Voluntary Addendum to the Lease
Agreement. The addendum was signed by petitioner Jose Marcel E. Panlilio in his official
capacity as Senior Executive Vice President of the PVHI and by Chairman Alberto A. Lim of
the Nayong Pilipino Foundation. They agreed to the renewal of the contract for another 25
years, or until 2021. Under the new agreement, petitioner PVHI was bound to pay the
monthly rental on a per square meter basis at the rate of ₱20.00 per square meter, which
shall be subject to an increase of 20% at the end of every 3-year period. At the time of the
renewal of the lease contract, the monthly rental amounted to ₱725,780.00.
Beginning January 2001, petitioners defaulted in the payment of their monthly rental.
Respondent repeatedly demanded petitioners to pay the arrears and vacate the premises.
The last demand letter was sent on March 26, 2001.
On September 5, 2001, respondent filed a complaint for unlawful detainer before the MeTC
of Pasay City. The complaint was docketed as Civil Case No. 708-01. Respondent
computed the arrears of petitioners in the amount of twenty-six million one hundred eighty-
three thousand two hundred twenty-five pesos and fourteen centavos (₱26,183,225.14), as
of July 31, 2001.
On February 26, 2002, the MeTC rendered its decision in favor of respondent. It ruled, thus:
. . . . The court is convinced by the evidence that indeed, defendants defaulted in the
payment of their rentals. It is basic that the lessee is obliged to pay the price of the lease
according to the terms stipulated (Art. 1657, Civil Code). Upon the failure of the lessee to
pay the stipulated rentals, the lessor may eject (sic) and treat the lease as rescinded and
sue to eject the lessee (C. Vda[.] De Pamintuan v. Tiglao, 53 Phil. 1). For non-payment of
58
rentals, the lessor may rescind the lease, recover the back rentals and recover possession
of the leased premises. . .
xxx
. . . . Improvements made by a lessee such as the defendants herein on leased premises
are not valid reasons for their retention thereof. The Supreme Court has occasion to
address a similar issue in which it ruled that: "The fact that petitioners allegedly made
repairs on the premises in question is not a reason for them to retain the possession of the
premises. There is no provision of law which grants the lessee a right of retention over the
leased premises on that ground. Article 448 of the Civil Code, in relation to Article 546,
which provides for full reimbursement of useful improvements and retention of the premises
until reimbursement is made, applies only to a possessor in good faith, i.e., one who builds
on a land in the belief that he is the owner thereof. This right of retention does not apply to a
mere lessee, like the petitioners, otherwise, it would always be in his power to "improve" his
landlord out of the latter’s property (Jose L. Chua and Co Sio Eng vs. Court of Appeals and
Ramon Ibarra, G.R. No. 109840, January 21, 1999)."
Although the Contract of Lease stipulates that the building and all the improvements in the
leased premises belong to the defendants herein, such will not defeat the right of the
plaintiff to its property as the defendants failed to pay their rentals in violation of the terms of
the contract. At most, defendants can only invoke [their] right under Article 1678 of the New
Civil Code which grants them the right to be reimbursed one-half of the value of the building
upon the termination of the lease, or, in the alternative, to remove the improvements if the
lessor refuses to make reimbursement.
The dispositive portion of the decision reads as follows:
WHEREFORE, premises considered, judgment is hereby rendered in favor of Nayong
Pilipino Foundation, and against the defendant Philippine Village Hotel, Inc[.], and all
persons claiming rights under it, ordering the latter to:
1. VACATE the subject premises and surrender possession thereof to plaintiff;
2. PAY plaintiff its rental arrearages in the sum of TWENTY SIX MILLION ONE
HUNDRED EIGHTY THREE THOUSAND TWO HUNDRED TWENTY FIVE
PESOS AND 14/100 (P26,183,225.14) incurred as of July 31, 2001;
3. PAY plaintiff the sum of SEVEN HUNDRED TWENTY FIVE THOUSAND
SEVEN HUNDRED EIGHTY PESOS (P725,780.00) per month starting from
August 2001 and every month thereafter by way of reasonable compensation for
the use and occupation of the premises;
4. PAY plaintiff the sum of FIFTY THOUSAND PESOS (P50,000.00) by way of
attorney’s fees[; and]
5. PAY the costs of suit.
The complaint against defendant Jose Marcel E. Panlilio is hereby dismissed for lack of
cause of action. The said defendant’s counterclaim however is likewise dismissed as the
complaint does not appear to be frivolous or maliciously instituted.
SO ORDERED.5
Petitioners appealed to the RTC which modified the ruling of the MeTC. It held that:
. . . it is clear and undisputed that appellants-lessees were expressly required to construct a
first-class hotel with complete facilities. The appellants were also unequivocally declared in
the Lease Agreement as the owner of the improvements so constructed. They were even
explicitly allowed to use the improvements and building as security or collateral on loans
and credit accommodations that the Lessee may secure for the purpose of financing the
construction of the building and other improvements (Section 2; pars. "A" to "B," Lease
Agreement). Moreover, a time frame was setforth (sic) with respect to the duration of the
lease initially for 21 years and renewable for another 25 years in order to enable the
appellants-lessees to recoup their huge money investments relative to the construction and
maintenance of the improvements.
xxx
Considering therefore, the elements of permanency of the construction and substantial
value of the improvements as well as the undispute[d] ownership over the land
improvements, these, immensely engender the application of Art. 448 of the Civil Code. The
only remaining and most crucial issue to be resolved is whether or not the appellants as
builders have acted in good faith in order for Art. 448 in relation to Art. 546 of the Civil Code
may apply with respect to their rights over improvements.
xxx
. . . it is undeniable that the improvement of the hotel building of appellants (sic) PVHI was
constructed with the written consent and knowledge of appellee. In fact, it was precisely the
primary purpose for which they entered into an agreement. Thus, it could not be denied that
appellants were builders in good faith.
Accordingly, and pursuant to Article 448 in relation to Art. 546 of the Civil Code, plaintiff-
appellee has the sole option or choice, either to appropriate the building, upon payment of
proper indemnity consonant to Art. 546 or compel the appellants to purchase the land
whereon the building was erected. Until such time that plaintiff-appellee has elected an
59
option or choice, it has no right of removal or demolition against appellants unless after
having selected a compulsory sale, appellants fail to pay for the land (Ignacio vs. Hilario; 76
Phil. 605). This, however, is without prejudice from the parties agreeing to adjust their rights
in some other way as they may mutually deem fit and proper.
The dispositive portion of the decision of the RTC reads as follows:
WHEREFORE, and in view of the foregoing, judgment is hereby rendered modifying the
decision of [the] MTC, Branch 45 of Pasay City rendered on February 26, 2002 as follows:
1. Ordering plaintiff-appellee to submit within thirty (30) days from receipt of a copy
of this decision a written manifestation of the option or choice it selected, i.e., to
appropriate the improvements upon payment of proper indemnity or compulsory
sale of the land whereon the hotel building of PVHI and related improvements or
facilities were erected;
2. Directing the plaintiff-appellee to desist and/or refrain from doing acts in the
furtherance or exercise of its rights and demolition against appellants unless and
after having selected the option of compulsory sale and appellants failed to pay
[and] purchase the land within a reasonable time or at such time as this court will
direct;
3. Ordering defendants-appellants to pay plaintiff-appellee [their] arrears in rent
incurred as of July 31, 2001 in the amount of P26,183,225.14;
4. Ordering defendants-appellants to pay to plaintiff-appellee the unpaid monthly
rentals for the use and occupation of the premises pending this appeal from July to
November 2002 only at P725,780.00 per month;
5. The fourth and fifth directives in the dispositive portion of the trial court’s
decision including that the last paragraph thereof JME Panlilio’s complaint is
hereby affirmed;
6. The parties are directed to adjust their respective rights in the interest of justice
as they may deem fit and proper if necessary.
SO ORDERED.6
Respondent appealed to the CA which held that the RTC erroneously applied the rules on
accession, as found in Articles 448 and 546 of the Civil Code when it held that petitioners
were builders in good faith and, thus, have the right to indemnity. The CA held:
By and large, respondents are admittedly mere lessees of the subject premises and as
such, cannot validly claim that they are builders in good faith in order to solicit the
application of Articles 448 and 546 of the Civil Code in their favor. As it is, it is glaring error
on the part of the RTC to apply the aforesaid legal provisions on the supposition that the
improvements, which are of substantial value, had been introduced on the leased premises
with the permission of the petitioner. To grant the respondents the right of retention and
reimbursement as builders in good faith merely because of the valuable and substantial
improvements that they introduced to the leased premises plainly contravenes the law and
settled jurisprudential doctrines and would, as stated, allow the lessee to easily "improve"
the lessor out of its property.
. . . . Introduction of valuable improvements on the leased premises does not strip the
petitioner of its right to avail of recourses under the law and the lease contract itself in case
of breach thereof. Neither does it deprive the petitioner of its right under Article 1678 to
exercise its option to acquire the improvements or to let the respondents remove the same.
Petitioners’ Motion for Reconsideration was denied.
Hence, this appeal.7
Petitioners assign the following errors:
I
THE HONORABLE COURT OF APPEALS COMMITTED A GRAVE REVERSIBLE ERROR
IN NOT HOLDING THAT PETITIONERS WERE BUILDERS IN GOOD FAITH OVER THE
SUBSTANTIAL AND VALUABLE IMPROVEMENTS WHICH THEY HAD INTRODUCED
ON THE SUBJECT PROPERTY, THUS COMPELLING THE APPLICATION OF ARTICLE
448 OF THE CIVIL CODE IN RELATION TO ARTICLE 546 OF THE SAME CODE,
INSTEAD OF ARTICLE 1678 OF THE CIVIL CODE.
II
THE HONORABLE COURT OF APPEALS COMMITTED A SERIOUS REVERSIBLE
ERROR WHEN IT DISREGARDED THE FACT THAT THE LEASE CONTRACT GOVERNS
THE RELATIONSHIP OF THE PARTIES AND CONSEQUENTLY THE PARTIES MAY BE
CONSIDERED TO HAVE IMPLIEDLY WAIVED THE APPLICATION OF ARTICLE 1678 OF
THE CIVIL CODE TO THE INSTANT CASE.
III
ASSUMING ARGUENDO THAT THE PETITIONERS ARE NOT BUILDERS IN GOOD
FAITH, THE HONORABLE COURT OF APPEALS COMMITTED A GRAVE REVERSIBLE
ERROR WHEN IT OVERLOOKED THE FACT THAT RESPONDENT ALSO ACTED IN
BAD FAITH WHEN IT DID NOT HONOR AND INSTEAD BREACHED THE LEASE
60
CONTRACT BETWEEN THE PARTIES, THUS BOTH PARTIES ACTED AS IF THEY ARE
IN GOOD FAITH.
IV
TO SANCTION THE APPLICATION OF ARTICLE 1678 OF THE CIVIL CODE INSTEAD
OF ARTICLE 448 OF THE CIVIL CODE IN RELATION TO ARTICLE 546 OF THE SAME
CODE WOULD NOT ONLY WREAK HAVOC AND CAUSE SUBSTANTIAL INJURY TO
THE RIGHTS AND INTERESTS OF PETITIONER PHILIPPINE VILLAGE HOTEL, INC.
WHILE RESPONDENT NAYONG PILIPINO FOUNDATION, IN COMPARISON THERETO,
WOULD SUFFER ONLY SLIGHT OR INCONSEQUENTIAL INJURY OR LOSS, BUT ALSO
WOULD CONSTITUTE UNJUST ENRICHMENT ON THE PART OF RESPONDENT AT
GREAT EXPENSE AND GRAVE PREJUDICE OF PETITIONERS.
V or planted to pay the price of the land, and the one who sowed, the proper rent. However,
THE HONORABLE COURT OF APPEALS COMMITTED A GRAVE REVERSIBLE ERROR
IN NOT HOLDING THAT THE COURTS A QUO DID NOT ACQUIRE JURISDICTION
OVER THE UNLAWFUL DETAINER CASE FOR NON-COMPLIANCE WITH
JURISDICTIONAL REQUIREMENTS DUE TO THE ABSENCE OF A NOTICE TO VACATE
UPON PETITIONERS.8
First, we settle the issue of jurisdiction. Petitioners argue that the MeTC did not acquire
jurisdiction to hear and decide the ejectment case because they never received any
demand from respondent to pay rentals and vacate the premises, since such demand is a
jurisdictional requisite. We reiterate the ruling of the MeTC, RTC and CA. Contrary to the
claim of petitioners, documentary evidence proved that a demand letter dated March 26,
2001 was sent by respondent through registered mail to petitioners, requesting them "to pay
the rental arrears or else it will be constrained to file the appropriate legal action and
possess the leased premises."
Further, petitioners’ argument that the demand letter is "inadequate" because it contained
no demand to vacate the leased premises does not persuade. We have ruled that:
. . . . The word "vacate" is not a talismanic word that must be employed in all notices. The
alternatives in this case are clear cut. The tenants must pay rentals which are fixed and
which became payable in the past, failing which they must move out. There can be no other
interpretation of the notice given to them. Hence, when the petitioners demanded that either
he pays ₱18,000 in five days or a case of ejectment would be filed against him, he was
placed on notice to move out if he does not pay. There was, in effect, a notice or demand to
vacate.9
In the case at bar, the language of the demand letter is plain and simple: respondent
demanded payment of the rental arrears amounting to ₱26,183,225.14 within ten days from
receipt by petitioners, or respondent will be constrained to file an appropriate legal action
against petitioners to recover the said amount. The demand letter further stated that
respondent will possess the leased premises in case of petitioners’ failure to pay the rental
arrears within ten days. Thus, it is clear that the demand letter is intended as a notice to
petitioners to pay the rental arrears, and a notice to vacate the premises in case of failure of
petitioners to perform their obligation to pay.
Second, we resolve the main issue of whether the rules on accession, as found in Articles
448 and 546 of the Civil Code, apply to the instant case.
Article 448 and Article 546 provide:
Art. 448. The owner of the land on which anything has been built, sown or planted in good
faith, shall have the right to appropriate as his own the works, sowing or planting, after
payment of the indemnity provided for in Articles 546 and 548, or to oblige the one who built
the builder or planter cannot be obliged to buy the land if its value is considerably more than
that of the building or trees. In such case, he shall pay reasonable rent, if the owner of the
land does not choose to appropriate the building or trees after proper indemnity. The parties
shall agree upon the terms of the lease and in case of disagreement, the court shall fix the
terms thereof.
Art. 546. Necessary expenses shall be refunded to every possessor; but only the possessor
in good faith may retain the thing until he has been reimbursed therefor.
Useful expenses shall be refunded only to the possessor in good faith with the same right of
retention, the person who has defeated him in the possession having the option of refunding
the amount of the expenses or of paying the increase in value which the thing may have
acquired by reason thereof.
We uphold the ruling of the CA.
The late Senator Arturo M. Tolentino, a leading expert in Civil Law, explains:
This article [Article 448] is manifestly intended to apply only to a case where one builds,
plants, or sows on land in which he believes himself to have a claim of title, 10 and not to
lands where the only interest of the builder, planter or sower is that of a holder, such as a
tenant.11
In the case at bar, petitioners have no adverse claim or title to the land. In fact, as lessees,
they recognize that the respondent is the owner of the land. What petitioners insist is that
because of the improvements, which are of substantial value, that they have introduced on
the leased premises with the permission of respondent, they should be considered builders
in good faith who have the right to retain possession of the property until reimbursement by
respondent.
61
We affirm the ruling of the CA that introduction of valuable improvements on the leased
premises does not give the petitioners the right of retention and reimbursement which
rightfully belongs to a builder in good faith. Otherwise, such a situation would allow the
lessee to easily "improve" the lessor out of its property. We reiterate the doctrine that a
lessee is neither a builder in good faith nor in bad faith12 that would call for the application of
Articles 448 and 546 of the Civil Code. His rights are governed by Article 1678 of the Civil
Code, which reads:
Art. 1678. If the lessee makes, in good faith, useful improvements which are suitable to the
use for which the lease is intended, without altering the form or substance of the property
leased, the lessor upon the termination of the lease shall pay the lessee one-half of the
value of the improvements at that time. Should the lessor refuse to reimburse said amount,
the lessee may remove the improvements, even though the principal thing may suffer
damage thereby. He shall not, however, cause any more impairment upon the property
leased than is necessary.
With regard to ornamental expenses, the lessee shall not be entitled to any reimbursement,
but he may remove the ornamental objects, provided no damage is caused to the principal
thing, and the lessor does not choose to retain them by paying their value at the time the
lease is extinguished.
Under Article 1678, the lessor has the option of paying one-half of the value of the
improvements which the lessee made in good faith, which are suitable for the use for which
the lease is intended, and which have not altered the form and substance of the land. On
the other hand, the lessee may remove the improvements should the lessor refuse to
reimburse.
Petitioners argue that to apply Article 1678 to their case would result to sheer injustice, as it
would amount to giving away the hotel and its other structures at virtually bargain prices.
They allege that the value of the hotel and its appurtenant facilities amounts to more than
two billion pesos, while the monetary claim of respondent against them only amounts to a
little more than twenty six-million pesos. Thus, they contend that it is the lease contract that
governs the relationship of the parties, and consequently, the parties may be considered to
have impliedly waived the application of Article 1678.
We cannot sustain this line of argument by petitioners. Basic is the doctrine that laws are
deemed incorporated in each and every contract. Existing laws always form part of any
contract. Further, the lease contract in the case at bar shows no special kind of agreement
between the parties as to how to proceed in cases of default or breach of the contract.
Petitioners maintain that the lease contract contains a default provision which does not give
respondent the right to appropriate the improvements nor evict petitioners in cases of
cancellation or termination of the contract due to default or breach of its terms. They cite
paragraph 10 of the lease contract, which provides that:
10. DEFAULT. - . . . Default shall automatically take place upon the failure of the LESSEE to
pay or perform its obligation during the time fixed herein for such obligations without
necessity of demand, or, if no time is fixed, after 90 days from the receipt of notice or
demand from the LESSOR. . .
In case of cancellation or termination of this contract due to the default or breach of its
terms, the LESSEE will pay all reasonable attorney’s fees, costs and expenses of litigation
that may be incurred by the LESSOR in enforcing its rights under this contract or any of its
provisions, as well as all unpaid rents, fees, charges, taxes, assessment and others which
the LESSOR may be entitled to.
Petitioners assert that respondent committed a breach of the lease contract when it filed the
ejectment suit against them. However, we find nothing in the above quoted provision that
prohibits respondent to proceed the way it did in enforcing its rights as lessor. It can
rightfully file for ejectment to evict petitioners, as it did before the court a quo.
IN VIEW WHEREOF, petitioners’ appeal is DENIED. The October 4, 2005 Decision of the
Court of Appeals in CA-G.R. SP No. 74631 and its December 22, 2005 Resolution are
AFFIRMED. Costs against petitioners. SO ORDERED.
G.R. No. 125683 March 2, 1999
EDEN BALLATAN and SPS. BETTY MARTINEZ and CHONG CHY LING, petitioners,
vs.
COURT OF APPEALS, GONZALO GO, WINSTON GO, LI CHING YAO, ARANETA
INSTITUTE OF AGRICULTURE and JOSE N. QUEDDING, respondents.
PUNO, J.:
This is a petition for review on certiorari of the decision of the Court of Appeals dated March
25, 1996 in CA-G.R. CV No. 32472 entitled "Eden Ballatan., et. al., plaintiffs-appellees v.
Gonzalo Go and Winston Go, appellants and third-party plaintiffs-appellants v. Li Ching
Yao, et. al., third-party defendants."1
The instant case arose from a dispute over forty-two (42) square meters of residential land
belonging to petitioners. The parties herein are owners of adjacent lots located at Block No.
3, Poinsettia Street, Araneta University Village, Malabon, Metro Manila. Lot No. 24, 414
square meters in area, is registered in the name of petitioners Eden Ballatan and spouses
Betty Martinez and Chong Chy Ling. 2 Lots Nos. 25 and 26, with an area of 415 and 313
square meters respectively, are registered in the name of respondent Gonzalo Go, Sr. 3 On
Lot No. 25, respondent Winston Go, son of Gonzalo Go, Sr., constructed his house.
Adjacent to Lot No. 26 is Lot No. 27, 417 square meters in area, and is registered in the
name of respondent Li Ching Yao. 4
62
In 1985, petitioner Ballatan constructed her house on Lot No. 24. During the construction,
she noticed that the concrete fence and side pathway of the adjoining house of respondent
Winston Go encroached on the entire length of the eastern side of her property. 5 Her
building contractor formed her that the area of her lot was actually less than that described
in the title. Forthwith, Ballatan informed respondent Go of this discrepancy and his
encroachment on her property. Respondent Go, however, claimed that his house, including
its fence and pathway, were built within the parameters of his father's lot; and that this lot
was surveyed by Engineer Jose Quedding, the authorized surveyor of the Araneta Institute
of Agriculture (AIA), the owner-developer of the subdivision project.
Petitioner Ballatan called the attention of the IAI to the discrepancy of the land area in her
title and the actual land area received from them. The AIA authorized another survey of the
land by Engineer Jose N. Quedding.
In a report dated February 28, 1985, Engineer Quedding found that the lot area of petitioner
Ballatan was less by few meters and that of respondent Li Ching Yao, which was three lots
away, increased by two (2) meters. Engineer Quedding declared that he made a verification
survey of Lots Nos. 25 and 26 of respondents Go in 1983 and allegedly found the
boundaries to have been in their proper position. He, however, could not explain the
reduction in Ballatan's area since he was not present at the time respondents Go
constructed their boundary walls. 6
On June 2, 1985, Engineer Quedding made a third relocation survey upon request of the
parties. He found that Lot No. 24 lost approximately 25 square meters on its eastern
boundary that Lot No. 25, although found to have encroached on Lot No. 24, did not lose
nor gain any area; that Lot No. 26 lost some three (3) square meters which, however, were
gained by Lot No. 27 on its western boundary. 7 In short, Lots Nos. 25, 26 and 27 moved
westward to the eastern boundary of Lot No. 24.
On the basis of this survey, on June 10, 1985, petitioner Ballatan made a written demand on
respondents Go to remove and dismantle their improvements on Lot No. 24. Respondents
Go refused. The parties including Li Ching Yao, however, met several times to reach an
agreement one matter.
Failing to agree amicably, petitioner Ballatan brought the issue before the barangay.
Respondents Go did not appear. Thus, on April 1, 1986, petitioner Ballatan instituted
against respondents Go Civil Case No. 772-MN for recovery of possession before the
Regional Trial Court, Malabon, Branch 169. The Go' s filed their "Answer with Third-Party
Complaint" impleading as third-party defendants respondents Li Ching Yao, the AIA and
Engineer Quedding.
On August 23, 1990, the trial court decided in favor of petitioners. It ordered the Go's to
vacate the subject portion of Lot No. 24, demolish their improvements and pay petitioner
Ballatan actual damages, attorney's fees and the costs of the suit. It dismissed the third-
party complaint against: (1) AIA after finding that the lots sold to the parties were in
accordance with the technical description a verification plan covered by their respective
titles; (2) Jose N. Quedding, there being no privity of relation between him and respondents
Go and his erroneous survey having been made at the instance of AIA, not the parties; and
(3) Li Ching Yao for failure to prove that he committed any wrong in the subject
encroachment. 8 The court made the following disposition:
WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the
defendants, ordering the latter:
1. To demolish and remove all improvements existing and encroaching on
plaintiff's lot;
2. To clear, vacate and deliver possession of the encroached area to the
plaintiffs;
3. To pay plaintiffs jointly and severally the following:
a) P7,800.00 for the expenses paid to the surveyors;
b) P5,000.00 for plaintiffs' transportation;
4. To pay plaintiffs, jointly and severally, attorney's fees equivalent to 25%
of the current market value of the subject matter in litigation at the time of
execution; and
5. To pay the costs of suit.
The third-party complaint filed by third-party plaintiff Gonzalo Go and
Winston Go against third-party defendants Araneta Institute of Agriculture,
Jose N. Quedding and Li Ching Yao is hereby DISMISSED, without
pronouncement as to costs. SO ORDERED.
Respondents Go appealed. On March 25, 1996, the Court of Appeals modified the decision
of the trial court. It affirmed the dismissal of the third-party complaint against the AIA but
reinstated the complaint against Li Ching Yao and Jose Quedding. Instead of ordering
respondents Go to demolish their improvements on the subject land, the appellate court
ordered them to pay petitioner Ballatan, and respondent Li Ching Yao to pay respondents
Go, a reasonable amount for that portion of the lot which they encroached, the value to be
fixed at the time of taking. It also ordered Jose Quedding to pay respondents Go attorney's
fees of P5,000.00 for his erroneous survey. The dispositive portion of the decision reads:
WHEREFORE, premises considered, the decision appealed from is
hereby AFFIRMED insofar as the dismissal of the third-party complaint
63
against Araneta Institute of Agriculture is concerned but modified in all
other aspects as follows:
1) Defendants-appellants are hereby ordered to pay plaintiffs-appellees
the reasonable value of the forty-two (42) square meters of their lot at the
time of its taking;
2) Third-party defendant Li Ching Yao is hereby ordered to pay
defendants-appellants the reasonable value of the thirty-seven (37)
square meters of the latter's lot at the time of its taking; and
3) Third-party defendant Jose N. Quedding is hereby ordered to pay to
defendants-appellants the amount of P5,000.00 as attorney's fees.
LET THE RECORD of the case be remanded to the Regional Trial Court
of Malabon for further proceedings and reception of evidence for the
determination of the reasonable value of Lots Nos. 24 and 26.
SO ORDERED.9
Hence, this petition. Petitioners allege that:
RESPONDENT COURT OF APPEALS ERRED ON QUESTIONS OF
LAW AND GRAVELY ABUSED ITS DISCRETION AMOUNTING TO
LACK OF JURISDICTION WHEN:
1. IT APPLIED EQUITY OR EQUITABLE SOLUTIONS TO THE INSTANT
CASE IN UTTER DISREGARD AND IN VIOLATION OR GROSS
IGNORANCE OF EXISTING LAWS AND JURISPRUDENCE VESTING
BASIC PROPERTY RIGHTS TO HEREIN PETITIONERS.
RESPONDENT COURT HAS NO POWER TO APPLY/USE EQUITY IN
THE PRESENCE OF EXISTING LAWS TO THE CONTRARY.
2. UNDER THE GUISE OF APPLYING EQUITY BUT IN EFFECT A
VERY APPARENT PARTIALITY AND FAVOR TO RESPONDENTS GO,
IT ORDERED PAYMENT OF THE ENCROACHED AREA AT THE
VALUE AT THE TIME OF ITS TAKING AND NOT THE VALUE AT THE
TIME OF PAYMENT, THEREBY ENRICHING THE GO'S BUT
DEPRIVING PETITIONERS OF THE FRUITS OR INCREASE IN VALUE
OF THEIR PROPERTY TO WHICH THEY ARE ENTITLED UNDER THE
LAW AS THE REGISTERED OWNERS WITH TORRENS TITLE IN
THEIR NAMES.
3. WHEN IT DID NOT DISMISS THE THIRD-PARTY COMPLAINT DUE
TO NON-PAYMENT OF ANY FILING OR DOCKET FEE.
4. WHEN IT DENIED PETITIONERS THE RECOVERY OF THE
NECESSARY EXPENSES IN PROTECTING THEIR RIGHTS IN THIS
CASE. 10
Petitioners question the admission by respondent Court of Appeals of the third-party
complaint by respondents Go against the AIA, Jose Quedding and Li Ching Yao. Petitioners
claim that the third-party complaint should not have been considered by the Court of
Appeals for lack of jurisdiction due to third-party plaintiffs' failure to pay the docket and filing
fees before the trial court.
The third-party complaint in the instant case arose from the complaint of petitioners against
respondents Go. The complaint filed was for accion publiciana, i.e., the recovery of
possession of real property which is a real action. The rule in this jurisdiction is that when an
action is filed in court, the complaint must be accompanied the payment of the requisite
docket and filing fees. 11 In real actions, the docket and filing fees are based on the value of
the property and the amount of damages claimed, if any 12 If the complaint is filed but the
fees are not paid at the time of filing, the court acquires jurisdiction upon full payment of the
fees within a reasonable time as the court may grant, barring prescription. 13 Where the fees
prescribed for the real action have been paid but the fees of certain related damages are
not, the court, although having jurisdiction over the real action, may not have acquired
jurisdiction over the accompnying claim for damages. 14 Accordingly, the court may expunge
those claims for damages, or allow, on motion, a reasonable time for amendment of the
complaint so as to allege the precise amount of damages and accept payment of the
requisite legal fee. 15 If there are unspecified claims, the determination of which may arise
after the filing of the complaint or similar pleading, the additional filing fee thereon shall
constitute a lien on the judgment award. 16 The same rule also applies to third-party claims
and other similar pleadings. 17
In the case at bar, the third-party complaint filed by respondents Go was incorporated in
their answer to the complaint. The third-party complaint sought the same remedy as the
principal complaint but added a prayer for attorney's fees and costs without specifying their
amounts, thus:
ON THE THIRD PARTY COMPLAINT
1. That summons be issued against Third-Party Defendants Araneta Institute of
Agriculture, Jose N. Quedding and Li Ching Yao;
2. That after hearing, they be sentenced to indemnify the Third-Party Plaintiffs for
whatever is adjudged against the latter in favor of the Plaintiffs;
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 3. That Third-Party Defendants be ordered to pay attorney's fees as may be proved
during trial;
4. That Third-Party Defendants be ordered to pay the costs.
18
Other just and equitable reliefs are also prayed for.
The Answer with Third-Party Complaint was admitted by the trial court without the requisite
payment of filing fees, particularly on the Go's prayer for damages. 19 The trial court did not
award the Go's any damages. It dismissed the third-party complaint. The Court of Appeals,
however, granted the third-party complaint in part by ordering third-party defendant Jose N.
Quedding to pay the Go's the sum of P5,000.00 as attorney's fees.
Contrary to petitioners' claim, the Court of Appeal did not err in awarding damages despite
the Go's failure to specify the amount prayed for and pay the corresponding additional filing
fees thereon. The claim for attorney's fees refers to damages arising after the filing of the
complaint against the Go's. The additional filing fee on this claim is deemed to constitute a
lien on the judgment award. 20
The Court of Appeals found that the subject portion is actually forty-two (42) square meters
in area, not forty-five (45), as initially found by the trial court; that this forty-two (42) square
meter portion is on the entire eastern side of Lot No. 24 belonging to petitioners; that this
said portion is found the concrete fence and pathway that extends from respondent Winston
Go's house on adjacent Lot No. 25; that inclusive of the subject portion, respondents Go did
not gain nor lose any portion of Lots Nos. 25 and 26; that instead, Lot No. 27, on which
respondent Li Ching Yao built his house, encroached on the land of respondents Go,
gaining in the process thirty-seven (37) square meters of the latter's land.21
We hold that the Court of Appeals correctly dismissed the third-party complaint against AIA..
The claim that the discrepancy in the lot areas was due to AIA's fault was not proved. The
appellate court, however, found that it was the erroneous survey by Engineer Quedding that
triggered these discrepancies. And it was this survey that respondent Winston Go relied
upon in constructing his house on his father's land. He built his house in the belief that it
was entirely within the parameters of his father's land. In short, respondents Go had no
knowledge that they encroached petitioners' lot. They are deemed builders in good
faith 22 until the time petitioner Ballatan informed them of their encroachment on her
property.23
Respondent Li Ching Yao built his house on his lot before any of the other parties did. 24 He
constructed his house in 1982, respondents Go in 1983, and petitioners in 1985. 25 There is
no evidence, much less, any allegation that respondent Li Ching Yao was aware that when
he built his house he knew that a portion thereof encroached on respondents Go's adjoining
land. Good faith is always presumed, and upon him who alleges bad faith on the part of a
possessor rests the burden of proof. 26
All the parties are presumed to have acted in good faith. Their rights must, therefore, be
determined in accordance with the appropriate provisions of the Civil Code on property.
Art. 448 of the Civil Code provides:
Art. 448. The owner of the land on which anything has been built, sown or planted in good
faith, shall have the right to appropriate as his own the works, sowing or planting, after
payment of the indemnity provided for in Articles 546 and 548, 27 or to oblige the one who
built or planted to pay the price of the land, and the one who sowed the proper rent.
However, the builder or planter cannot be obliged to buy the land if its value is considerably
more than that of the building or trees. In such case, he shall pay reasonable rent, if the
owner of the land does not choose to appropriate the building or trees after proper
indemnity. The parties shall agree upon the terms of the lease and in case of disagreement,
the court shall fix the terms thereof.
The owner of the land on which anything has been built, sown or planted in good
faith shall have the right to appropriate as his own the building, planting or sowing,
after payment to the builder, planter or sower of the necessary and useful
expenses, and in the proper case, expenses for pure luxury or mere pleasure. The
owner of the land may also oblige the builder, planter or sower to purchase and
pay the price of the land. If the owner chooses to sell his land, the builder, planter
or sower must purchase the land, otherwise the owner may remove the
improvements thereon. The builder, planter or sower, however, is not obliged to
purchase the land if its value considerably more than the building, planting or
sowing. In such case, the builder, planter or sower must pay rent to the owner of
the land. If the parties cannot come to terms over the conditions of the lease, the
court must fix the terms thereof. The right to choose between appropriating the
improvement or selling the land on which the improvement stands to the builder,
planter or sower, is given to the owner of the land. 28
Art. 448 has been applied to improvements or portions of improvements built by mistaken
belief on land belonging to the adjoining owner. 29 The facts of the instant case are similar to
those in Cabral v. Ibanez, 30 to wit:
[P]laintiffs Geronima Zabala and her husband Justino Bernardo, constructed their house in
the belief that it was entirely within the area of their own land without knowing at that time
that part of their house was occupying a 14-square meter portion of the adjoining lot
belonging to the defendants, and that the defendants Bernardo M. Cabral and Mamerta M.
Cabral were likewise unaware of the fact that a portion of plaintiff's house was extending
and occupying a portion of their lot with an area of 14 square meters. The parties came to
know of the fact that part of the plaintiff's house was occupying part of defendant's land
when the construction of plaintiff's house was about to be finished, after a relocation of the
monuments of the two properties had been made by the U.S. Army through the Bureau of
Lands, according to their "Stipulation of Facts," dated August 17, 1951.
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On the basis of these facts, we held that:
The court, therefore, concludes that the plaintiffs are builders in good faith and the relative
rights of the defendant Mamerta Cabral as owner of the land and of the plaintiffs as owners
of the building is governed by Article 361 of the Civil Code (Co Tao v. Joaquin Chan Chico,
46 Off. Gaz.5514). Article 361 of the old Civil Code has been reproduced with an additional
provision in Article 448 of the new Civil Code, approved June 18, 1949. 31
Similarly, in Grana and Torralba v. Court of Appeals,32 we held that:
Although without any legal and valid claim over the land in question, petitioners, however,
were found by the Court of Appeals to have constructed a portion of their house thereon in
good faith. Under Article 361 of the old Civil Code (Article 448 of the new), the owner of the
land on which anything has been built in good faith shall have the right to appropriate as his
own the building, after payment to the builder of necessary or useful expenses, and in the
proper case, expenses for pure luxury or mere pleasure, or to oblige the builder to pay the
price of the land. Respondents, as owners of the land, have therefore the choice of either
appropriating the portion of petitioners' house which is on their land upon payment of the
proper indemnity to petitioners, or selling to petitioners that part of their land on which
stands the improvement. It may here be pointed out that it would be impractical for
respondents to choose to exercise the first alternative, i.e., buy that portion of the house
standing on their land, for in that event the whole building might be rendered useless. The
more workable solution, it would seem, is for respondents to sell to petitioners that part of
their land on which was constructed a portion of the latter's house. If petitioners are
unwilling or unable to buy, then they must vacate the land and must pay rentals until they do
so. Of course, respondents cannot oblige petitioners to buy the land if its value is
considerably more than that of the aforementioned portion of the house. If such be the case,
then petitioners must pay reasonable rent. The parties must come to an agreement as to
the conditions of the lease, and should they fail to do so, then the court shall fix the same. 33
In light of these rulings, petitioners, as owners of Lot No. 24, may choose to purchase the
improvement made by respondents Go on their land, or sell to respondents Go the subject
portion. If buying the improvement is impractical as it may render the Go's house useless,
then petitioners may sell to respondents Go that portion of Lot No. 24 on which their
improvement stands. If the Go's are unwilling or unable to buy the lot, then they must vacate
the land and, until they vacate, they must pay rent to petitioners. Petitioners, however,
cannot compel respondents Go to buy the land if its value is considerably more than the
portion of their house constructed thereon. If the value of the land is much more than the
Go's improvement, the respondents Go must pay reasonable rent. If they do not agree on
the terms of the lease, then they may go to court to fix the same.
In the event that petitioners elect to sell to respondents Go the subject portion of their lot,
the price must be fixed at the prevailing market value at the time of payment. The Court of
Appeals erred in fixing the price at the time of taking, which is the time the improvements
were built on the land. The time of taking is determinative of just compensation in
expropriation proceedings. The instant case is not for expropriation. It is not a taking by the
state of private property for a public purpose upon payment of just compensation. This is a
case of an owner who has been paying real estate taxes on his land but has been deprived
of the use of a portion of this land for years. It is but fair and just to fix compensation at the
time of payment.34
Art. 448 and the same conditions abovestated also apply to respondents Go as owners and
possessors of their land and respondent Li Ching Yao as builder of the improvement that
encroached on thirty-seven (37) square meters of respondents Go's land.
IN VIEW WHEREOF, the decision of respondent Court of Appeals is modified as follows:
(1) Petitioners are ordered to exercise within thirty (30) days from finality of this decision
their option to either buy the portion of respondents Go's improvement on their Lot No. 24,
or sell to said respondents the portion of their land on which the improvement stands. If
petitioners elect to sell the land or buy the improvement, the purchase price must be at the
prevailing market price at the time of payment. If buying the improvement will render
respondents Go's house useless, then petitioners should sell the encroached portion of their
land to respondents Go. If petitioners choose to sell the land but respondents Go are
unwilling or unable to buy, then the latter must vacate the subject portion and pay
reasonable rent from the time petitioners made their choice up to the time they actually
vacate the premises. But if the value of the land is considerably more than the value of the
improvement, then respondents Go may elect to lease the land, in which case the parties
shall agree upon the terms, the lease. Should they fail to agree on said terms, the court of
origin is directed to fix the terms of the lease.
From the moment petitioners shall have exercised their option, respondents Go shall pay
reasonable monthly rent up to the time the parties agree on the terms of the lease or until
the court fixes such terms.
(2) Respondents Go are likewise directed to exercise their rights as owners of Lots Nos. 25
and 26, vis-a-visrespondent Li Ching Yao as builder of the improvement that encroached on
thirty seven (37) square meters of respondents Go 's land in accordance with paragraph
one abovementioned.
(3) The Decision of the Court of Appeals ordering Engineer Quedding, as third-party
defendant, to pay attorney's fees of P5,000.00 to respondents Go is affirmed. The additional
filing fee on the damages constitutes a lien on this award.
(4) The Decision of the Court of Appeals dismissing third-party complaint against Araneta
Institute of Agriculture is affirmed. SO ORDERED.
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