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THIRD DIVISION

[G.R. No. 157044. October 5, 2005.]


RODOLFO V. ROSALES, (represented by his heirs, Rodolfo, Jr., Romeo Allan, Lillian
Rhodora, Roy Victor, Roger Lyle and Alexander Nicolai, all surnamed Rosales) and
LILY ROSQUETA-ROSALES, petitioners, vs. MIGUEL CASTELLTORT, JUDITH
CASTELLTORT, and LINA LOPEZ-VILLEGAS, assisted by her Attorney-in-Fact, Rene
Villegas, respondents.
DECISION
CARPIO MORALES, J : p

The present petition for review on certiorari assails the October 2, 2002 Decision 1 and February 6, 2003
Resolution 2 of the Court of Appeals (CA) in CA G.R. CV No. 64046 and seeks to reinstate the April 21, 1999
Decision 3 of the Regional Trial Court (RTC) of Calamba, Laguna, Branch 34 in Civil Case No. 2229-95-C.
Spouses-petitioners Rodolfo V. Rosales and Lily Rosqueta-Rosales (petitioners) are the registered owners of a
parcel of land with an area of approximately 315 square meters, covered by Transfer Certificate of Title (TCT)
No. 36856 4 and designated as Lot 17, Block 1 of Subdivision Plan LRC Psd-55244 situated in Los Baos,
Laguna.
On August 16, 1995, petitioners discovered that a house was being constructed on their lot, without their
knowledge and consent, by respondent Miguel Castelltort (Castelltort). 5
It turned out that respondents Castelltort and his wife Judith had purchased a lot, Lot 16 of the same
Subdivision Plan, from respondent Lina Lopez-Villegas (Lina) through her son-attorney-in-fact Rene Villegas
(Villegas) but that after a survey thereof by geodetic engineer Augusto Rivera, he pointed to Lot 17 as the Lot
16 the Castelltorts purchased.
Negotiations for the settlement of the case thus began, with Villegas offering a larger lot near petitioners' lot in
the same subdivision as a replacement thereof. 6 In the alternative, Villegas proposed to pay the purchase
price of petitioners' lot with legal interest. 7 Both proposals were, however, rejected by petitioners 8 whose
counsel, by letter 9 of August 24, 1995, directed Castelltort to stop the construction of and demolish his house
and any other structure he may have built thereon, and desist from entering the lot.
Petitioners subsequently filed on September 1, 1995 a complaint 10 for recovery of possession and damages
with prayer for the issuance of a restraining order and preliminary injunction against spouses-respondents
Miguel and Judith Castelltort before the RTC of Calamba, Laguna, docketed as Civil Case No. 2229-95-C.
To the complaint, the Castelltorts claimed in their Answer with Counterclaim 11 that they were builders in good
faith.
Lina, represented by her son-attorney-in-fact Villegas, soon filed a Motion for Intervention 12 before the RTC
which was granted by Order 13 of December 19, 1995.
In her Answer to the complaint, 14 Lina alleged that the Castelltorts acted in good faith in constructing the
house on petitioners' lot as they in fact consulted her before commencing any construction thereon, they
having relied on the technical description of the lot sold to them, Lot 16, which was verified by her officially
designated geodetic engineer.
Nevertheless, Lina proposed to give petitioners a lot containing an area of 536 square meters together with the
house and duplex structure built thereon or, if petitioners choose, to encumber the 536 square meter lot as
collateral "to get immediate cash" through a financing scheme in order to compensate them for the lot in
question. 15
Ruling out good faith, the RTC, by Decision of April 21, 1999, found for petitioners in this wise:
In the instant case, there is no well-founded belief of ownership by the defendants of the land upon
which they built their house. The title or mode of acquisition upon which they based their belief of such
ownership stemmed from a Contract to Sell (Exhibit "P") of which they were not even parties, the
designated buyer being Elizabeth Yson Cruz and the sale even subjected to the judicial reconstitution
of the title. And by their own actions, particularly defendant Miguel Castelltort, defendants betrayed this
very belief in their ownership when realizing the inutility of anchoring their ownership on the basis of the
Contract of Sale, defendant Miguel Castelltort in his testimony declared Elizabeth Yson Cruz as his wife
(tsn, pp. 7-8, March 24, 1998) despite an admission in their answer that they are the spouses named as
defendants (tsn, p. 8, January 12, 1998) and which declaration is an utter falsehood as the Contract to
Sell itself indicates the civil status of said Elizabeth Yson Cruz to be single.
Even if we are to concede that defendants built their house in good faith on account of the
representation of attorney-in-fact Rene Villegas, their failure to comply with the requirements of the
National Building Code, particularly the procurement of a building permit, stained such good faith and
belief.
xxx xxx xxx
From any and all indications, this deliberate breach is an unmitigated manifestation of bad faith. And
from the evidence thus adduced, we hold that defendants and the intervenor were equally guilty of
negligence which led to the construction of the defendants' house on plaintiffs' property and therefore
jointly and severally liable for all the damages suffered by the plaintiffs. 16 (Underscoring supplied)
The dispositive portion of the trial court's Decision reads, quoted verbatim:
ACCORDINGLY, in view of all the foregoing, judgment is hereby rendered in favor of plaintiffs and
against the defendants, ordering the latter to surrender the possession of the property covered by TCT
No. 36856 of the Register of Deeds of Laguna including any and all improvements built thereon to the
plaintiffs.
Defendants and intervenors are likewise jointly and severally directed to pay to plaintiffs the following
damages:
a) TWO THOUSAND (P2,000.00) PESOS per month from February 1995 by way of reasonable
compensation for the use of plaintiffs' property until the surrender of the same;
b) FIFTY THOUSAND (P50,000.00) PESOS by way of moral damages;
c) THIRTY THOUSAND (P30,000.00) PESOS as exemplary damages;
d) TWENTY THOUSAND (P20,000.00) PESOS as attorney's fees and cost of suit.
The counterclaim interposed by the defendants in their responsive pleading is hereby dismissed for lack
of merit.
SO ORDERED. 17
Respondents thereupon filed their respective appeals with the CA.
Petitioner Rodolfo Rosales, in the meantime, died on December 7, 2001. His heirs Rodolfo, Jr., Romeo Allan,
Lillian Rhodora, Roy Victor, Roger Lyle and Alexander Nicolai, all surnamed Rosales, filed their
Appearance 18 as his substitute.
By Decision of October 2, 2002, the CA granted the appeal and set aside the April 21, 1999 RTC Decision.
The dispositive portion of the Decision reads, quoted verbatim:
WHEREFORE, premises considered, the instant appeal is hereby GRANTED and the assailed decision
of the court a quo REVERSED AND SET ASIDE. In accordance with the cases of Technogas
Philippines Manufacturing Corp. vs. Court of Appeals and Depra vs. Dumlao, applying Article 448 of the
Civil Code, this case is REMANDED to the Regional Trial Court of Calamba, Laguna, Branch 34, for
further proceedings, as follows:
1. to determine the present fair price of appellees' 315 square meter area of land and the amount of the
expenses actually spent by the appellants for building the house as of 21 August 1995, which is the
time they were notified of appellees' rightful claim over Lot 17.
2. to order the appellees to exercise their option under the law (Article 448, Civil Code), whether to
appropriate the house as their own by paying to the appellants the amount of the expenses spent for
the house as determined by the court a quo in accordance with the limitations as aforestated or to
oblige the appellants to pay the price of the land.
In case the appellees exercise the option to oblige the appellants to pay the price of the land but the
latter reject such purchase because, as found by the court, the value of the land is considerably more
than that of the house, the court shall order the parties to agree upon the terms of a forced lease, and
give the court a quo a formal written notice of such agreement and its provisos. If no agreement is
reached by the parties, the court a quo shall then fix the terms of the forced lease, provided that the
monthly rental to be fixed by the Court shall not be less that Two Thousand Pesos (P2,000.00) per
month, payable within the first five (5) days of each calendar month and the period thereof shall not be
more than two (2) years, counted from the finality of the judgment.
Upon the expiration of the forced lease, or upon default by the appellants in the payment of rentals for
two (2) consecutive months, the appellees shall be entitled to terminate the forced lease, to recover
their land, and to have the improvement removed by the appellants at the latter's expense. The rentals
herein provided shall be tendered by the appellants to the court for payment to the appellees, and such
tender shall constitute evidence of whether or not compliance was made within the period fixed by the
court.
In any event, the appellants shall pay the appellees the amount of Two Thousand Pesos (P2,000.00) as
reasonable compensation for their occupancy of the encroached property from the time said appellants'
good faith cease (sic) to exist until such time the possession of the property is delivered to the
appellees subject to the reimbursement of the aforesaid expenses in favor of the appellants or until
such time the payment of the purchase price of the said lot be made by the appellants in favor of the
appellees in case the latter opt for the compulsory sale of the same. IaDSEA

SO ORDERED. 19 (Emphasis in the original)


In reversing the trial court, the CA held:
xxx xxx xxx

. . . A perusal of the records readily reveals that said court instead relied on flimsy, if not immaterial, allegations
of the appellees, which have no direct bearing in the determination of whether the appellants are builders in
bad faith.
For one, the pivotal issue to be resolved in this case, i.e. whether appellant Miguel is a builder in good
faith, was ignored by the court a quo. The instant case does not in any way concern the personal and
property relations of spouses-appellants and Elizabeth Yson Cruz which is an altogether different
matter that can be ventilated by the concerned parties through the institution of a proper action. . . . The
court a quo should have focused on the issue of whether appellant Miguel built, in good faith, the
subject house without notice of the adverse claim of the appellees and under the honest belief that the
lot which he used in the construction belongs to him. . . .
. . . As it is, appellant Miguel relied on the title which the intervenor showed to him which, significantly,
has no annotation that would otherwise show a prior adverse claim. Thus, as far as appellant Miguel is
concerned, his title over the subject lot, as well as the title of the intervenor thereto, is clean and
untainted by an adverse claim or other irregularities.
For another, the appellants' failure to secure a building permit from the Municipal Engineer's Office on
their construction on Lot 17 does not impinge on the good faith of the appellants. In fact, it can be told
that a building permit was actually filed by appellant Miguel with respect to Lot 16 and it was only due to
the confusion and misapprehension by the intervenor of the exact parameters of the property which
caused appellant's belief that Lot 17 [the questioned lot], is his. This fact bolsters appellant Miguel's
good faith in building his house on appellees' lot under the mistaken belief that the same is his property.
Otherwise, he should have secured a building permit on Lot 17 instead or should not have bothered to
take the necessary measures to obtain a building permit on Lot 16 in the first place.
By and large, the records show that, as testified to by Engr. Rebecca T. Lanuang, appellant Miguel had
already applied for a building permit as early as February 1994 and was in fact issued a temporary
building permit pending the completion of the requirements for said permit. Although the building permit
was belatedly issued in January 1996, this does not in any way detract from appellant Miguel's good
faith.
xxx xxx xxx
In holding the appellants as builders in bad faith, the court a quo defied law and settled jurisprudence
considering that the factual basis of its findings and the incontrovertible evidence in support thereof
prove that the appellant Miguel, in good faith, built the house on appellees' land without knowledge of
an adverse claim or any other irregularities that might cast a doubt as to the veracity of the assurance
given to him by the intervenor. Having been assured by the intervenor that the stone monuments were
purposely placed, albeit wrongfully, by the land surveyor in said land to specifically identify the lot and
its inclusive boundaries, the appellants cannot be faulted for having relied on the expertise of the land
surveyor who is more equipped and experienced in the field of land surveying. Although under the
Torrens system of land registration, the appellant is presumed to have knowledge of the metes and
bounds of the property with which he is dealing, appellant however, considering that he is a layman not
versed in the technical description of his property, cannot be faulted in his reliance on the survey plan
that was delivered to him by the intervenor and the stone monuments that were placed in the
encroached property.
xxx xxx xxx
Peremptorily, contrary to the flawed pronouncements made by the court a quo that appellant Miguel is
deemed as a builder in bad faith on the basis of a mere assertion that he built his house without initially
satisfying himself that he owns the said property, this Court finds reason to maintain good faith on the
part of the appellant. Admittedly, the appellants' house erroneously encroached on the property of the
appellees due to a mistake in the placement of stone monuments as indicated in the survey plan, which
error is directly attributable to the fault of the geodetic engineer who conducted the same. This fact
alone negates bad faith on the part of appellant Miguel.
xxx xxx xxx
Moreover, it is quite illogical for appellant Miguel to knowingly build his house on a property which he
knew belongs to another person. . . .
xxx xxx xxx
In view of the good faith of both parties in this case, their rights and obligations are to be
governed by Article 448, which has been applied to improvements or portions of improvements
built by mistaken belief on land belonging to the adjoining owner. . . .
xxx xxx xxx 20 (Emphasis and underscoring supplied)
Petitioners' Motion for Reconsideration 21 dated October 22, 2002 having been denied by the CA by Resolution
of March 13, 2002, the present petition was filed raising the following issues:
I.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF
DISCRETION IN MAKING A FINDING THAT IS CONTRARY TO THE ADMISSIONS BY THE
PARTIES
II.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED A REVERSIBLE
ERROR OF LAW IN CONCLUDING THAT THE TRIAL COURT, IN DECIDING THE CASE, RELIED
ON FLIMSY, IF NOT IMMATERIAL, ALLEGATIONS OF THE PETITIONERS, WHICH HAVE NO
DIRECT BEARING IN THE DETERMINATION OF WHETHER THE RESPONDENTS ARE BUILDERS
IN GOOD FAITH
III.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED A REVERSIBLE
ERROR OF LAW IN RENDERING A DECISION THAT IS UNENFORCEABLE AGAINST BOTH
RESPONDENT JUDITH CASTELLTORT AND THIRD-PARTY ELIZABETH CRUZ 22
Petitioners initially hammer against respondents' proving that Castelltort and a certain Elizabeth Cruz are the
builders of the house on the subject property, they faulting them with estoppel for alleging in their Answer
before the trial court that "they (respondents Castelltort and Judith) caused the construction of their house
which they bought from a certain Lina Lopez-Villegas."
Petitioners rely on the following doctrine established in Elayda v. Court of Appeals: 23
"an admission made in the pleadings cannot be controverted by the party making such admission and
are conclusive as to him and that all proofs submitted by him contrary thereto or inconsistent therewith,
should be ignored, whether objection is interposed by the party or not . . ."
Petitioners' contention is hardly relevant to the case at bar. Whether it was Castelltort and Judith or Castelltort
and Elizabeth Cruz who purchased the property from Lina is not material to the outcome of the instant
controversy. As found by the CA:
The fact remains that appellant [Castelltort] is the builder of the house on Lot 17 . . . The court a
quo should have focused on the issue of whether appellant Miguel built, in good faith, the subject house
without notice of the adverse claim of the appellees and under the honest belief that the lot which he
used in the construction belongs to him. . . . it cannot be gainsaid that appellant Miguel has a title over
the land that was purchased from the intervenor . . . 24
At all events, as this Court held in the case of Gardner v. Court of Appeals: 25
In its Resolution reversing the original Decision, respondent Court discredited the testimony of Ariosto
SANTOS for being at variance with the allegations in his Answer. The fact, however, that the
allegations made by Ariosto SANTOS in his pleadings and in his declarations in open Court differed will
not militate against the findings herein made nor support the reversal by respondent Court. As a
general rule, facts alleged in a party's pleading are deemed admissions of that party and binding upon
it, but this is not an absolute and inflexible rule. An Answer is a mere statement of fact which the party
filing it expects to prove, but it is not evidence. As Ariosto SANTOS himself, in open Court, had
repudiated the defenses he had raised in his Answer and against his own interest, his testimony is
deserving of weight and credence. 26 (Underscoring supplied)
The issue determinative of the controversy in the case at bar hinges on whether Castelltort is a builder in good
faith.
A builder in good faith is one who builds with the belief that the land he is building on is his, or that by some
title one has the right to build thereon, and is ignorant of any defect or flaw in his title. 27
Article 527 of the Civil Code provides that good faith is always presumed, and upon him who alleges bad faith
on the part of a possessor rests the burden of proof. 28
In the case at bar, Lot 16 was sold by Lina, through her attorney-in-fact Villegas, to Castelltort and a certain
Elizabeth Cruz 29 for a consideration of P500,000.00. While prior to the sale, what Villegas showed Castelltort
as evidence of his mother Lina's ownership of the property was only a photocopy of her title TCT No. (T-
42171) T-18550 30 he explaining that the owner's duplicate of the title was lost and that judicial reconstitution
thereof was ongoing, Castelltort acted in the manner of a prudent man and went to the Registry of Deeds of
Laguna to procure a certified true copy of the TCT. 31 The certified true copy bore no annotation indicating any
prior adverse claim on Lot 16. cEaSHC

The records indicate that at the time Castelltort began constructing his house on petitioners' lot, he believed
that it was the Lot 16 he bought and delivered to him by Villegas.
In his cross-examination, Villegas testified:
Q: You said the surveyor placed a mujon along boundary of the property?

A: Yes.
Q: When were the mujons placed in the boundary of the property?
A: These mujons were the basis for my locating the property in pointing to Mr. Castelltort.
xxx xxx xxx
Q: Is it not a fact that before Miguel Castelltort started constructing that house he sought your advice or
permission to construct the same over that particular lot?
A: Yes.
Q: And you gave your consent?
A: Yes, because based on my knowledge also that that was the lot as pointed by Engr. Rivera.
xxx xxx xxx
Q: Was there any remarkable difference between lot 16 and 17 at the time that this particular lot was
sold to Miguel Castelltort and Elizabeth Cruz?
xxx xxx xxx
A: Both lots 16 and 17 are practically the same. The (sic) have the same frontage. There is only a
difference of 4 square meters, one is 311 square meters and the other 315 square meters. Both
sides were fenced, as drawn they were facing the same road. They are practically the same.
Q: But at the time or immediately before Mr. Castelltort started the construction of the house, was there
any remarkable distinction between these two properties?
A: None. 32 (Emphasis and underscoring supplied)
The confusion in the identification of Lot 16 was eventually traced to the error committed by geodetic engineer
Augusto Rivera's employees in placing stone monuments on petitioners' property, instead of on Lot 16, the lot
sold to Castelltort, based on the survey made by the engineer in 1992.
The engineer so testified:
Q: Now, aside from inspecting personally the site, what else did your men or assistants do?
A: After computing the subdivision lots, they went back to the field to plant those subdivision corners
with concrete monuments.
Q: Which is (sic) also called as "mohons"?
A: Yes, sir.
Q: Now, can you point to this Honorable Court where exactly did your men place these additional
mohons and how many?
A: Later on we discovered that they placed the mohons in the adjoining lot, lot 17.
xxx xxx xxx
Q: . . . when again did you meet Mr. Rene Villegas or after how many months or year?
A: Maybe after a year, sir.
Q: And you met him again because he had a problem regarding the property of one Engr. Rosales?
A: Yes, sir.
Q: And when he confided to you this matter, did you go to the site of Lot 16 or 17?
A: Yes, sir.
Q: And what did you see there?
A: A house being constructed then I rechecked the location of the house and it turned out to be in Lot
17.
xxx xxx xxx
Q: Considering that you found out that a mistake was actually made by your assistants Dennis Orencio,
Mario Carpio and Sovejano when you allowed them to proceed on their own to make this
computation, did you confront these men of yours afterwards?
A: Yes, sir.
Q: In what manner?
A: I actually reprimanded them verbally and also I dismissed Mario Carpio from my office.
xxx xxx xxx
Q: And did you investigate how your men committed this mistake of planting these monuments on
another lot when corners 4 & 1 were clearly planted on the ground?
A: I myself rechecked it and found out that they committed an error.
xxx xxx xxx
Q: And now, you are saying that your men committed a mistake by placing thereon monuments by
planting these monuments not on Lot 16 but on Lot 17?
A: When I investigated how did they commit (sic) a mistake it came to be like this. Before when we
surveyed first this in 1992, at that time Dante Villegas contracted my services there was a fence
here then when we went back, the road was already removed so they committed an error that
this point is Lot 19, they thought that it was Lot 19, the back portion.
xxx xxx xxx
Q: In this particular case, did you find out how your men checked the succeeding lots, how they
determine (sic) the exact location of lot 16?
A: They just relied on one side of the subdivision.
Q: By just counting the number of lots?
A: Yes, sir.
Q: Without making any actual measurement?
A: They made an actual measurement but the reference point is not the one, the correct one because
they also checked it with the other corner of the road going back.
xxx xxx xxx
Q: And how did they commit a mistake when you said they checked the lot at the back of Lot 16?
A: Because they were quite confident since we had already relocated the property two years ago so
they thought that they get (sic) the right lot without checking the other side of the subdivision.
xxx xxx xxx
Q: Now, you said that when you went to the place because you heard from Rene Villegas that there
was a mistake you no longer could find the monuments on lines 1 and 4 and according to you
the reason is that a fence was already constructed?
A: Yes, sir.
Q: For clarification, is this line 1 & 4 on Lot 16 a common line 1 & 4 on Lot 17?
A: Yes, sir a common line.
Q: In other words, this line 1 & 4 devides (sic) Lot 16 & 17?
A: Yes, sir.
Q: So that when these monuments were placed on lines 1 & 4 somebody could mistake it for Lot 17
also because there were monuments now 1 & 4 for lot 16 since these are common lines for
Lot 17 also with Lot 16, it could also be construed that these are monuments for Lot 17?
A: Yes, sir possible. 33 (Underscoring supplied)
As correctly found by the CA, both parties having acted in good faith at least until August 21, 1995, the
applicable provision in this case is Article 448 of the Civil Code which reads:
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.
Under the foregoing provision, the landowner can choose between appropriating the building by paying the
proper indemnity or obliging the builder to pay the price of the land, unless its value is considerably more than
that of the structures, in which case the builder in good faith shall pay reasonable rent. 34 If the parties cannot
come to terms over the conditions of the lease, the court must fix the terms thereof.
The choice belongs to the owner of the land, a rule that accords with the principle of accession, i.e., that the
accessory follows the principal and not the other way around. Even as the option lies with the landowner, the
grant to him, nevertheless, is preclusive. 35 The landowner cannot refuse to exercise either option and compel
instead the owner of the building to remove it from the land. 36
The raison d'etre for this provision has been enunciated thus:
Where the builder, planter or sower has acted in good faith, a conflict of rights arises between the
owners, and it becomes necessary to protect the owner of the improvements without causing injustice
to the owner of the land. In view of the impracticability of creating a state of forced co-ownership, the
law has provided a just solution by giving the owner of the land the option to acquire the improvements
after payment of the proper indemnity, or to oblige the builder or planter to pay for the land and the
sower the proper rent. He cannot refuse to exercise either option. It is the owner of the land who is
authorized to exercise the option, because his right is older, and because, by the principle of accession,
he is entitled to the ownership of the accessory thing. 37
Possession acquired in good faith does not lose this character except in the case and from the moment facts
exist which show that the possessor is not unaware that he possesses the thing improperly or
wrongfully. 38 The 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 suit for recovery of the property by the true owner. 39
In the case at bar, Castelltort's good faith ceased on August 21, 1995 when petitioners personally apprised him
of their title over the questioned lot. As held by the CA, should petitioners then opt to appropriate the house,
they should only be made to pay for that part of the improvement built by Castelltort on the questioned property
at the time good faith still existed on his part or until August 21, 1995.
The CA, however, failed to qualify that said part of the improvement should be pegged at its current fair market
value consistent with this Court's pronouncement inPecson v. Court of Appeals. 40
And, as correctly found by the CA, the commencement of Castelltort's payment of reasonable rent should start
on August 21, 1995 as well, to be paid until such time that the possession of the property is delivered to
petitioners, subject to the reimbursement of expenses, that is, if such option is for petitioners to appropriate the
house.
This Court quotes the CA's ratiocination with approval:
. . . Generally, Article 448 of the Civil Code provides that the payment of reasonable rent should be
made only up to the date appellees serve notice of their option as provided by law upon the appellants
and the court a quo; that is, if such option is for appellees to appropriate the encroaching structure. In
such event, appellants would have a right to retain the land on which they have built in good faith until
they are reimbursed the expenses incurred by them. 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.

However, considering that appellants had ceased as builders in good faith at the time that appellant
Miguel was notified of appellees' lawful title over the disputed property, the payment of reasonable rent
should accordingly commence at that time since he can no longer avail of the rights provided under the
law for builders in good faith. 41
If the option chosen by petitioners is compulsory sale, however, the payment of rent should continue up to the
actual transfer of ownership. 42
Respecting petitioners' argument that the appellate court erred in rendering a decision that is "unenforceable
against Judith who is not the owner of the house and Elizabeth Cruz who was found to be a part owner of the
house built on their lot but is not a party to the case," the same does not lie. ISTHED

While one who is not a party to a proceeding shall not be affected or bound 43 by a judgment rendered
therein, 44 like Elizabeth Cruz, this does not detract from the validity and enforceability of the judgment on
petitioners and respondents Castelltorts.
WHEREFORE, the petition is DENIED. The Decision dated October 2, 2002 and Resolution dated February 6,
2003 of the Court of Appeals are AFFIRMED with MODIFICATION such that the trial court shall include for
determination the increase in value ("plus value") which petitioners' 315 square meter lot may have acquired
by reason of the existence of that portion of the house built before respondents Miguel and Judith Castelltort
were notified of petitioners' rightful claim on said lot, and the current fair market value of said portion.
SO ORDERED.
EN BANC
[G.R. No. L-23497. April 26, 1968.]
J.M. TUASON & CO., INC., petitioner, vs. ESTRELLA VDA. DE LUMANLAN, and THE
COURT OF APPEALS (FIFTH DIVISION),respondents.
Sison & San Juan for petitioner.
Chuico & Dizon for respondent.
SYLLABUS
1. COMPROMISE AGREEMENT; REPUDIATION THEREOF BY RESPONDENT DEPRIVES HER OF RIGHT
TO DERIVE RIGHTS THEREFROM. Respondent does not claim that she had signed new contract with J.
M. Tuason, and she has assailed the compromise agreement which gives her a preferential right to buy the lot.
She cannot, therefore, take advantage and derive rights from that compromise agreement.
2. LAND REGISTRATION; DECREE OF REGISTRATION BARS ANY ADVERSE CLAIM FILED 20 YEARS
AFTER ITS ISSUANCE. Without the compromise agreement, respondent must justify her possession on the
basis of that of her predecessors-in-interest - the Deudors' old informacion posesoria over Tuason's
Certificate of Title No. 1267, traceable back to Original Certificate of Title No. 735 of Rizal. This cannot be done
because as ruled by the Supreme Court, the decree of registration in favor of Tuason's predecessors cannot
be assailed 20 years after its issuance.
3. CONTRACTS; RULE ON UNDETERMINATE PRICE, NOT APPLICABLE IN ABSENCE OF CONTRACT.
In the absence of a contract between Tuason and respondent Lumanlan for the sale of the lot occupied by the
latter, the rule of Article 1474 of the Civil Code for payment of a reasonable price for a delivered thing whose
price is indeterminate is wholly inapplicable.
4. OWNERSHIP; POSSESSION, CLAIM OF; RESPONDENT NOT A "BUILDER IN GOOD FAITH," ENTITLED
TO CONSIDERATION. On respondent's counter-claim that she should be deemed a builder in good faith, a
similar claim has been rejected in Tuason & Co., vs. Macalindong, L-15398, December 29, 1962. There being
a presumptive knowledge of the Torrens title issued to Tuason & Co., and its predecessors-in-interest since
1914, the buyer from the Deudors cannot in good conscience claim that she believed her vendor had rights of
ownership over the lot purchased. She is bound conclusively by Tuason's Torrens title. Respondent is,
therefore, not a builder in good faith.
5. EQUITY; RIGHT TO DEMAND REFUND OR TO BE CREDITED FOR AMOUNT PAID, RESERVED, AS A
MATTER OF EQUITY. Although respondent could have asked for the return of the amounts paid by her to
the Deudors or to be credited therefor, no such claim was made by her in the trial court and therefore no
pronouncement thereon can be made in this appeal. Equity demands however that her right to claim such
return, or to be credited therefor, should be reserved.
DECISION
REYES, J.B.L., J :p

J.M. Tuason & Co., Inc. petitioned for a review by certiorari of the decision issued by the Court of Appeals
(Fifth Division) in its case CA-G.R. No. 27259-R, reversing the judgment rendered by the Court of First
Instance of Rizal (Civil Case No. Q-4243) that ordered defendant (now respondent) Estrella Vda. de Lumanlan
to vacate the lot occupied by her in Sta. Mesa Heights Subdivision, barrio Tatalon, Quezon City, and to remove
therefrom the house and other structures constructed thereon, paying P240.00 a month until restoration of the
premises to plaintiff.
The facts are stated in the decision of the Court of Appeals (accepted by both parties) in this wise:"
. . . That in the complaint filed in this case by plaintiff, J.M. Tuason & Co., Inc., hereinafter called
Tuason, on 30 April, 1959, the basis is that it being the registered owner of the property known as
Santa Mesa Heights Subdivision, situated at barrio North Tatalon, Quezon City, herein defendant
sometime in April, 1949 unlawfully entered into possession of 800 square meters, and therein
constructed his house so that plaintiff prayed for ejectment and damages for the occupancy; and
defendant in her answer set forth affirmative defense that on 12 March, 1949, she had bought the
property she was occupying from one Pedro Deudor, and that in a compromise agreement between
Pedro and Tuason on 10 March 1953, approved by the Court of First Instance of Quezon City, she was
one of the buyers therein recognized, so that she asked that her rights be recognized and the complaint
dismissed; but on the basis of the evidence presented by both parties in the trial, Lower Court sustained
plaintiff, holding that Tuason being the registered owner, and the question being purely one of
possession, therefore, defendant's said evidence was 'completely immaterial' . . ." (Page 2 of Decision,
Annex 'A' of Petition.)
Upon the facts thus stated, the Fifth Division of the Court of Appeals held that, pursuant to this Supreme
Court's ruling in Evangelista vs. Deudor, L-12826, September 10, 1959, the Compromise Agreement (Exh. 2)
between the petitioner Tuason & Co. and the Deudors constituted a valid defense against the possessory
action filed by Tuason & Co.; that under paragraph 7 of said Compromise Agreement, petitioner bound and
committed itself to sell to respondent Lumanlan the lot occupied by her at a reasonable price; that said
respondent had a right to compel petitioner to accept payment for the lot in question; and that the compromise
agreement legalized the possession of respondent.
These pronouncements are assailed by the petitioner in this appeal as legally incorrect and contrary to the
decisions of this Court.
The terms of the compromise agreement between the heirs of Telesforo Deudor and J.M. Tuason & Co. have
been taken cognizance of in many decisions of this Court (Evangelista vs. Deudor, jam. cit; Deudor vs. J.M.
Tuason & Co., L-13768, May 30, 1961, and L-20805, Oct. 31, 1963; J.M. Tuason vs. Jaramillo, et al., L-18932-
34, Sept. 30, 1963; J.M. Tuason vs. Macalindong, L-15398, Dec. 29, 1962 and others). The Deudors had
therein recognized the registered site of Tuason & Co. over the lands claimed by them, and received payment
of certain sums of money; but as the Deudors had, prior to the compromise, sold their possessory rights to
various persons, paragraph seventh of the compromise agreement (Case Q-135 of the court of origin)
provided:
"That the sales of the possessory rights claimed by the DEUDORS, are described in the lists submitted
by them to the OWNERS which are attached hereto marked Annexes 'B' and 'C' and made part hereof.
Whatever amounts may have been collected by the DEUDORS on account thereof, shall be deducted
from the total sum of P1,201,063.00 to be paid to them. It shall be the joint and solidary obligation of the
DEUDORS to make the buyer of the lots purportedly sold by them to recognize the title of the
OWNERS over the property purportedly bought by them, and to make them sign, whenever possible,
new contracts of purchase for said property at the current prices and terms specified by the OWNERS
in their sales of lots in their subdivision known at 'Sta. Mesa Heights Subdivision.' The DEUDORS
HEREBY advise of the OWNERS that the buyer listed in Annex 'B' herein with the annotation 'continue'
shall buy the lots respectively occupied by them and shall sign contracts, but the sums already paid by
them to the DEUDORS amounting to P134,922.84 (subject to verification by the Court) shall be credited
to the buyers and shall be deducted from the sums to be paid to the DEUDORS by the OWNERS. The
DEUDORS also advise the OWNERS that, the buyers listed in Annex 'C' herein with the annotation
'Refund' have decided not to continue with their former contracts or purchases with the DEUDORS and
the sums already paid by them to the DEUDORS TOTALLING P101,182.42 (subject to verification by
the Court) shall be refunded to them by the OWNERS and deducted from the sums that may be due to
the DEUDORS from the OWNERS J.M. Tuason & Co., Inc. vs. Jaramillo, L-18932, Sept. 30, 1963);"
Careful analysis of this paragraph of the compromise agreement will show that while the same created "a sort
of contractual relation" between the J.M. Tuason & Co., Inc., and the Deudor vendees (as ruled by this Court in
Evangelista vs.Dendor, ante), the same in no way obligated Tuason & Co. to sell to those buyers the lots
occupied by them at the price stipulated with the Deudors, but at "the current prices and terms specified by the
OWNERS (Tuason) in their sales of lots in their subdivision known as 'Sta. Mesa Heights Subdivision'." This is
what is expressly provided. Further, paragraph plainly imports that these buyers of the Deudors must
"recognize the title of the OWNERS (Tuason) over the propertypurportedly bought by them" from the Deudors,
and "sign, whenever possible, new contracts of purchase for said property"; and, if and when they do so, "the
sums paid by them to the Deudors . . . shall be credited to the buyers." All that Tuason & Co. agreed to,
therefore, was to grant the Deudor buyers preferential right to purchase "at current prices and terms" the lots
occupied by them, upon their recognizing the title of Tuason & Co., Inc., and signing new contracts therefor;
and to credit them for the amounts they had paid to the Deudors.
Nowhere in her answer did the respondent Estrella Vda. de Lumanlan claim that she had signed a new
contract with J. M. Tuason & Co., Inc. for the purchase of the lot occupied. What is worse, instead of
recognizing the title of the owners (Tuason & Co.) as required by the offmentioned compromise agreement,
she charged in paragraph 6 of her special defense (Rec. on Appeal, p. 10) that "Pedro Deudor and his co-
owners and the plaintiff herein . . . conspired together and helped each other . . . by entering into a supposed
Compromise" whereby "Pedro Deudor and his co-owners renounced, ceded, waived and quitclaimed all their
rights, title and interest in the property including the land sold to herein defendant, in favor of the plaintiff J. M.
Tuason & Co., Inc., in consideration of the sum of P1,201,063.00, without the knowledge and consent,
and much less the intervention of the herein defendant." In other words, the respondent Lumanlan in her
answer repudiated and assailed the compromise between the Deudors and J.M. Tuason & Co. How then can
she now claim to take advantage and derive rights from that compromise?

Without the compromise agreement, Lumanlan must justify her possession on the basis of a pretended
superiority of the Deudors' old Spanish information posesoria over Tuason's Certificate of Title No. 1267,
traceable back to the original Certificate of Title No. 735 of Rizal, issued under the Registration Act No. 496.
But, as ruled by this Court in previous cases, Lumanlan is by now barred from assailing the decree of
registration in favor of Tuason & Co., Inc.'s predecessors twenty years after its issuance
(Tiburcio vs. PHHC, L- 13429, Oct. 31, 1959; Tuason & Co. vs. Bolanos, 95 Phil. 107; Tuason &
Co. vs. Santiago, 99 Phil. 622-623; Tuason & Co. vs. Macalindon, supra: Tuason & Co. vs. Jaramillo, L-16827,
Jan. 31, 1963).
It is thus apparent that no legal basis exists for the pronouncement in the appealed decision that Tuason & Co.
had committed itself to sell to Lumanlan the lot occupied by her at a reasonable price, or that the compromise
agreement legalized the possession of the respondent, since the latter does not rely on the compromise but,
on the contrary, she assails it.
The Court of Appeals ruled that the price to be paid by Lumanlan to Tuason & Co., Inc., is governed by Article
1474 of the new Civil Code of the Philippines, which provides that:
"Where the price cannot be determined in accordance with the preceding articles, or in any other
manner, the contract is inefficacious. However, if the thing or any part thereof has been delivered to and
appropriated by the buyer, he must pay a reasonable price therefor. What is a reasonable price is a
question of fact dependent on the circumstances of each particular case."
Since there has been no contract between petitioner Tuason & Co., and respondent Lumanlan for the sale of
the lot occupied by the latter, and by paragraph 7 of the Compromise Agreement (assuming that respondent-
appellee still has the right to invoke the same, and seek refuge thereunder), Tuason & Co. did not consider
itself bound by the sales made by the Deudors, but demanded that the Deudor buyers should
sign new contracts with it at current pricesspecified for the sales of lots in "Sta. Mesa Heights Subdivision"
(ante) the aforequoted Article 1474 can have no bearing on the case, Lumanlan not being a buyer from Tuason
& Co.
As to Lumanlan's allegation in her counterclaim that she should be deemed a builder in good faith, a similar
contention has been rejected in Tuason & Co. vs.Macalindong, L-15398, December 29, 1962, where We ruled
that there being a presumptive knowledge of the Torrens titles issued to Tuason & Co. and its predecessors in
interest since 1914, the buyer from Deudors (or from their transferees) cannot, in good conscience, say now
that she believed her vendor had rights of ownership over the lot purchased. The reason given by the Court is
that
"Had he investigated before buying and before building his house on the questioned lot, he would have
been informed that the land is registered under the Torrens system in the name of J.M. Tuason & Co.,
Inc. If he failed to make the necessary inquiry, appellant is now bound conclusively by appellee's
Torrens title (Sec. 51, Act 496; Emas vs. Zuzuarregui, 35 Phil. 144)" (Tuason & Co, Inc. vs.
Macalindong, ante).
Lumanlan had chosen to ignore the Torrens title of Tuason & Co., Inc. and relied instead upon the Deudors'
claim of ownership perhaps because such course appeared to her as more advantageous; hence, she has
only herself to blame for the consequences now that the Deudors' claim has been abandoned by the Deudors
themselves, and cannot pretend good faith. The Court of First Instance, therefore, did not err in holding that
she was not a rightful possessor and sentencing her to vacate.
Respondent could have asked that she recover or be credited with the amounts paid by her to the Deudors,
but as no claim to such credit was ever advanced by her in the trial Court, no pronouncement can be made
thereon in this appeal. Equity demands, however, that her right to claim such return, or to have the amount
offset against the sums she was sentenced to pay, should be, as it is, reserved.
WHEREFORE, the decision of the Court of Appeals is reversed and that of the Court of First Instance
reinstated. Costs against respondent, Estrella Vda. de Lumanlan.
SECOND DIVISION
[G.R. No. 140798. September 19, 2006.]
MARCELITO D. QUEVADA, petitioner, vs. COURT OF APPEALS and JUANITO N.
VILLAVERDE, respondents.
DECISION
AZCUNA, J : p

This is a petition for review 1 by Marcelito D. Quevada, assailing the Decision and Resolution of the Court of
Appeals (CA) dated September 16, 1999 and November 11, 1999, respectively, in CA-G.R. SP No. 53209
entitled "Marcelito Quevada v. Juanito Villaverde."
The facts 2 of the case are as follows:
Before the [Metropolitan Trial Court (MeTC)], the plaintiff/respondent said that he is the lessor of a
parcel of land with a residential house in Sampaloc, Manila. Sometime in 1994, he (as a lessor) and
defendant/petitioner entered into a Contract of Lease of a portion of the residential house (consisting of
96 square meters) which is located on the subject property for the period from August 15, 1994 to
August 15, 1995, at a monthly rental of P2,500.
After expiration of the lease, they entered into another Contract of Lease, which was an extension of
the previous date, commencing from August 15, 1995 to April 15, 1996.
After the expiration of the extended Lease, the petitioner continued possessing the premises, but
without payment of any reasonable compensation (for the use and occupancy thereof).
[Private respondent] made several demands to the petitioner to vacate the premises but was refused;
as a matter of fact, the petitioner refused to vacate without justifiable reason. Because of the
[petitioner's] refusal to vacate the premises, [private respondent] referred the matter to the barangay
court for conciliation, only for the former to repudiate the "agreement to vacate as of December 31,
1997."
On January 20, 1998, [private respondent] served upon the petitioner a notice to vacate the leased
property within a period of fifteen (15) days supposedly counted from receipt thereof, to pay P5,000
rental starting May, 1996, and every month thereafter until the premises shall have been vacated.
It was, on the other hand, the answer of the petitioner that as early as November, [1985], 3 he already
started building the house on the lot which was finished in [1986], 4 at which time he occupied the
house as his residence. CIAHDT

Sometime in 1994, the [private] respondent negotiated for the purchase of the lot from the previous
owner; [petitioner] similarly offered to buy the lot but was not able to raise the amount of P1,000,000
representing the purchase price.
Herein [private] respondent in turn "advised" him that he would go ahead and buy the lot but with an
assurance that as soon as [petitioner] would be in a financial position to do payment, [the former] will
transfer the title to [the latter.] [T]hus, a Lease Contract, in the meantime, was executed, for him to pay
the rentals at P2,500 a month, but only with respect to the land, since the house belonged to him.
On his (petitioner) part, he assured the [private] respondent that if he would not be able to purchase the
lot after a reasonable period of time, then, he was willing to deliver possession of the house to the
[private] respondent after payment of the cost, or the sum of P500,000.
The [private] respondent did not give him a chance to pay the purchase price by setting a deadline to
do the payment; similarly, the [private] respondent refused to accept the monthly rental of the lot for
P2,500.
Because of [private respondent's refusal] to accept the rental payments, [petitioner] opened an account
"in trust" for the [private respondent] where the monthly rentals could be deposited.
Petitioner added that there was an implied trust by virtue of the "true agreement" whereby the purchase
price of the lot would be paid by the [private] respondent and for the latter, later on, to transfer the title
after he ([private] respondent) shall have paid the purchase price.
In its Decision dated October 27, 1998, the Metropolitan Trial Court (MeTC) of Manila, Branch 30, ruled in
favor of private respondent, thus:
WHEREFORE, in view of the foregoing, judgment is hereby rendered in favor of [private respondent]
ordering [petitioner]:
a) and all persons claiming rights under him to immediately vacate and surrender to [private
respondent] the leased premises situated at 842 Vicente G. Cruz St., Sampaloc, Manila subject
to the right of [petitioner] to remove the improvements existing thereon;
b) to pay reasonable compensation for the continued use and occupancy of subject lot in the
amount of P2,500 monthly from May, 1996 until subject premises is finally vacated and
surrendered to [private respondent];
c) the costs of suit.
SO ORDERED. 5
Petitioner appealed, but the Regional Trial Court (RTC) of Manila, Branch VII, affirmed the MeTC's Decision in
the following manner:
WHEREFORE and finding no reversible error in the decision of the lower court, the same is hereby
affirmed in toto.
SO ORDERED. 6
Petitioner then went on appeal again asking for reversal of the RTC Decision. The CA rendered its assailed
Decision, the dispositive portion of which reads:
THE FOREGOING CONSIDERED, the appealed Decision is hereby AFFIRMED
SO ORDERED. 7
Petitioner's Motion for Reconsideration of the CA Decision was denied.
Hence, this petition relying upon the following grounds:
I
THE COURT OF APPEALS GRIEVOUSLY ERRED WHEN IT FAILED TO APPRECIATE THE FACT
THAT AN IMPLIED TRUST WAS CREATED IN FAVOR OF PETITIONER WHO THEREBY BECOMES
THE BENEFICIAL OWNER OF THE LOT IN QUESTION AND, THUS, ENTITLED TO CONTINUED
POSSESSION THEREOF. EScaIT

II.
AT THE VERY LEAST, PETITIONER OUGHT TO BE REIMBURSED FOR THE VALUE OF THE
HOUSE STANDING ON THE LOT.
III.
THE COURT OF APPEALS ERRED IN SUSTAINING THE JURISDICTION OF THE [MeTC] TO HEAR
THE INSTANT CASE CONSIDERING THAT THE ALLEGED UNLAWFUL WITHHOLDING
OCCURRED MORE THAN ONE YEAR BEFORE THE FILING OF THE EJECTMENT SUIT.
IV.
THE COURT OF APPEALS ERRED IN UPHOLDING THE RIGHT OF THE RESPONDENT TO BRING
THE ACTION FOR EJECTMENT ALTHOUGH HE IS NOT THE TITLED OWNER THEREOF.
Simply restated, the issues to be resolved are: 1) whether the action for ejectment is proper; 2) whether such
action can be brought by private respondent who is not the titled owner of the property; 3) whether petitioner
can be reimbursed for the value of the house on the property; and 4) whether there is an implied trust.
A discussion of these issues shows that the petition is partly meritorious.
First, the action for ejectment or, more specifically, unlawful detainer ordesahucio is under the proper
jurisdiction of the MeTC.
Section 1, Rule 70 of the Rules of Court provides:
SECTION 1. Who may institute proceedings, and when. Subject to the provisions of the next
succeeding section, a person deprived of the possession of any land or building by force, intimidation,
threat, strategy, or stealth, or a lessor, vendor, vendee, or other personagainst whom the possession of
any land or building is unlawfully withheld after the expiration or termination of the right to hold
possession, by virtue of any contract, express or implied, or the legal representatives or assigns of any
such 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. [Underscoring
supplied.]
The necessary allegations in private respondent's complaint clearly meet the requirements of the above-cited
provision in filing an action for unlawful detainer. 8 Moreover, in accordance with the 1991 Revised Rule on
Summary Procedure, such action is within the jurisdiction of the MeTC 9 and must be filed within one year. 10
As a lessor, private respondent was unlawfully deprived possession of the residential house after petitioner's
right to its possession as lessee had expired on April 15, 1996. Despite several demands given by the former
to vacate the premises, the latter refused and even repudiated the agreement to vacate, which was entered
into on December 31, 1997 before the barangay court.
Under Section 2, Rule 70, such action by the lessor shall be commenced after demand to pay or comply with
the conditions of the lease and to vacate is made upon the lessee, thus:
SEC. 2. Lessor to proceed against lessee only after demand. Unless otherwise stipulated, such
action by the lessor shall be commenced only after demand to pay or comply with the conditions of the
lease and to vacate is made upon the lessee, or by serving written notice of such demand upon the
person found on the premises, or by posting such notice on the premises if no person be found thereon,
and the lessee fails to comply therewith after fifteen (15) days in the case of land or five (5) days in the
case of buildings. [Underscoring supplied.]
The lease contract was not extended again after its expiration on April 15, 1996. Petitioner's continued use and
occupancy of the premises without any contract between him and private respondent was by mere tolerance or
permission of the latter. "Acts of a possessory character performed by one who holds by mere tolerance of the
owner [or lessor as in this case] are clearly not en concepto de dueo, and such possessory acts, no matter
how long so continued, do not start the running of the period of prescription." 11
"[P]ossession by tolerance is lawful, but such possession becomes unlawful when the possessor by tolerance
refuses to vacate upon demand made by the owner. 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 to
vacate upon demand, failing which, a summary action for ejectment is the proper remedy." 12 "The situation is
not much different from that of a tenant whose lease expires but who continues in occupancy by tolerance of
the owner, in which case there is deemed to be an unlawful deprivation or withholding of possession as of the
date of the demand to vacate." 13

Aside from the fact that the lease contract had expired, petitioner also did not honor the agreement to vacate
as of December 31, 1997 before the barangaycourt. Consequently, private respondent had to serve upon him
on January 20, 1998 a written notice to vacate the leased property within fifteen (15) days from its
receipt. 14 This notice was not complied with. Thus, the action for ejectment filed on March 9, 1998 was
properly commenced in the MeTC, following its referral for conciliation. 15 Its filing was within the one-year
period after private respondent had been unlawfully deprived or withheld of its possession. The unlawful
deprivation or withholding of possession started not from the date the lease contract expired, but from the date
the written notice to vacate was served. 16
Besides, while the dispute is under conciliation, the prescriptive period for the cause of action was interrupted
upon filing of the complaint with the punong barangay and resumed to run upon receipt by private respondent
of the certificate to file action dated January 10, 1998, 17 in accordance with Section 410(c) of the Local
Government Code, which provides:
SECTION 410. Procedure for Amicable Settlement. . . .
(c) Suspension of prescriptive period of offenses. While the dispute is under mediation, conciliation,
or arbitration, the prescriptive periods for offenses and cause of action under existing laws shall be
interrupted upon filing the complaint with the punong barangay. The prescriptive periods shall resume
upon receipt by the complainant of the certificate of repudiation or of the certification to file action
issued by thelupon or pangkat secretary: Provided, however, That such interruption shall not exceed
sixty (60) days from the filing of the complaint with thepunong barangay. EASCDH

xxx xxx xxx


Necessarily, the prescriptive period was suspended while the case was pending before
the barangay authorities. The 60-day period under the above provision shall be deducted from the one-
year period within which to file the action for ejectment.
Even assuming that there was an agreement to pay monthly rent after April 15, 1996, 18 the implied renewal of
the expired lease contract was still for a definite period. 19 "A month-to-month lease under Article 1687 . . .
expires after the last day of any given thirty-day period, upon proper demand and notice by the lessor to
vacate." 20 Since there was proper notice given after the thirty-day lease periods ended December 15, 1997
(prior to the agreement to vacate made before the barangay court) and January 15, 1998 (subsequent to such
agreement), petitioner's "right to stay in the premises came to an end." 21Indeed, private respondent's
tolerance of petitioner's possession de facto was formally withdrawn on January 20, 1998. Continued
possession by the latter had become unlawful upon his refusal to comply with the demand to vacate.
"[E]jectment of the lessee may be ordered." 22
Second, private respondent may bring the action for unlawful detainer, even though he is not the titled owner of
the leased property.
Such action has "for its object the recovery of the physical possession" 23 or determination of "who is entitled to
possession de facto" 24 "of the leased premises (the house)[,] not the ownership of the lot" 25 and not its "legal
possession, in the sense contemplated in civil law." 26 In fact, "any finding of the court regarding the issue of
ownership is merely provisional and not conclusive."27 The judgment rendered "shall not bar an action between
the same parties respecting title to the land or building nor shall it be conclusive as to the facts therein found in
a case between the same parties upon a different cause of action involving possession." 28
The Court has consistently held that the only issue to be resolved in unlawful detainer or desahucio is the
actual "physical or material possession of the property involved, independent of any claim of ownership by any
of the party litigants. Ejectment cases are designed to summarily restore physical possession to one who has
been illegally deprived of such possession, without prejudice to the settlement of the parties' opposing claims
of juridical possession in appropriate proceedings." 29 Those in actual possession of property under any "right
entitling them to the use of the same may maintain an action for ejectment against a wrongful
possessor." 30 Thus, a mere lessor may file such action.
Petitioner should not trifle with the summary nature of an ejectment suit by the simple expedient of asserting
someone else's ownership over the leased property. 31 The proceedings are "only intended to provide an
expeditious means of protecting actual possession or right to possession of property. Title is not involved." 32 In
fact, the absence of title is not a ground "to withhold relief from the parties . . . ." 33 "It does not even matter if a
party's title to the property is questionable . . . ." 34 "[N]o questions can be raised or decided incidentally tending
to defeat the title or right of possession evidenced by the documents introduced" 35 by petitioner.
"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." 36 The underlying philosophy behind the former "is
to prevent breach of peace and criminal disorder and to compel" 37 parties out of possession to respect and
resort to the law alone in order to obtain what they claim are theirs. Petitioner "is necessarily in prior lawful
possession of the property, but his possession eventually becomes unlawful upon termination or expiration of
his right to possess." 38 His prior physical possession of the leased property does not automatically entitle him
to continue in its possession and does not give him "a better right to the property." 39
Third, petitioner should be paid for the value of the portion of the house covered by the lease, to be offset
against rentals due.
Article 448 of the Civil Code provides:
ARTICLE 448. The owner of the land on which anything has been built, sown or planted in good faith,
shall have the right to appropriate as his own the works, sowing or planting, after payment of the
indemnity provided for in articles 546 and 548, or to oblige the one who built or planted to pay the price
of the land, and the one who sowed, the proper rent. However, the builder or planter cannot be obliged
to buy the land if its value is considerably more than that of the building or trees. In such case, he shall
pay reasonable rent, if the owner of the land does not choose to appropriate the building or trees after
proper indemnity. The parties shall agree upon the terms of the lease and in case of disagreement, the
court shall fix the terms thereof.
IaSAHC

The above-cited article "covers only cases in which the builders, sowers[,] or planters believe themselves to be
owners of the land or, at least, to have a claim of title thereto. It does not apply when the interest is . . . that of .
. . a mere tenant . . . ." 40 However, it is also applied to cases where a builder has "constructed improvements
with the consent of the owner." 41
Petitioner is not the owner of or claiming title to the land, but a mere tenant 42occupying only a portion of the
house on it under the lease contract between him and private respondent. No supporting evidence was
presented showing that petitioner's construction of the house was with the consent of the land's previous
owner, but good faith should be presumed, 43 particularly since the lease relationship was open and in plain
view.
Neither is there a showing of bad faith in petitioner's refusal to vacate the land.44 On the other hand, there is no
indication that private respondent will oblige petitioner to pay the price of the land. In fact, the former refuses to
sell it to the latter. 45 As a mere tenant, however, petitioner must pay reasonable rent for the continued use and
occupancy of the leased premises from the time the lease contract expired until he finally vacates and
surrenders it to private respondent.
It would not be fair for private respondent to receive both the rent and the portion of the house covered by the
lease. As to its valuation, there is only petitioner's assertion that it cost P500,000. In order to satisfy the
demands of substantial justice, morality, conscience, and fair dealing, and pursuant to equity and the principle
proscribing unjust enrichment, the value of the portion of the house covered by the lease should be determined
so that compensation of its value against the rentals due can take effect.
In their exercise of rights and performance of duties, everyone must act with justice. 46 Although he asserts that
his ownership of the house is not refuted, petitioner is willing to receive reimbursement for its value. Similarly,
by insisting on ejecting petitioner, private respondent in effect elects to appropriate the building. 47 "The
fundamental doctrine of unjust enrichment is the transfer of value without just cause or
consideration." 48 Therefore, to have a just transfer of the leased portion of the house, its value should be
offset 49 against the reasonable rent due for its continued use and occupancy until the former vacates and
surrenders it to the latter. Private respondent shall not be inequitably profited or enriched at petitioner's
expense. 50 Nemo cum alterius detrimento locupletari potest. 51
Fourth, there is no implied trust. Petitioner fails to support his assertion that such has been created in his favor
and that the purchase of the land by private respondent is for and in his behalf.

"A trust is defined as a 'fiduciary relationship with respect to property which involves the existence of equitable
duties imposed upon the holder of the title to the property to deal with it for the benefit of another. A person
who establishes a trust is called the trustor; one in whom confidence is reposed as regards property for the
benefit of another is known as the trustee; and the person for whose benefit the trust has been created is
referred to as the beneficiary orcestui que trust.'" 52
Aside from the lessor-lessee relationship between them, no other legal relationship exists that shows the
equitable ownership in the land belonging to petitioner and its legal title to private respondent. No resulting or
constructive trust has been shown to arise from the relationship of the parties. Verily, the agreement to vacate
on October 18, 1997 53 before the barangay court negates the contention that an implied trust exists between
the parties.
Article 1450 of the Civil Code does not apply, 54 to wit:
ARTICLE 1450. If the price of a sale of property is loaned or paid by one person for the benefit of
another and the conveyance is made to the lender or payer to secure the payment of the debt, a trust
arises by operation of law in favor of the person to whom the money is loaned or for whom it is paid.
The latter may redeem the property and compel a conveyance thereof to him.
The conveyance of the property was not from petitioner, but rather from its previous owner, to private
respondent. No evidence is presented to show that such conveyance was to secure payment of a debt.
Thus, there is no resulting trust. Private respondent is under no obligation in equity to hold his legal title to
the land for the benefit of petitioner.
There is no constructive trust either. Private respondent is not alleged to have obtained or held the legal right
thereto by fraud, duress, or abuse of confidence. Again, in the absence of proof showing that private
respondent has fraudulently registered the land in his name, petitioner has no right to recover it under Article
1456 of the Civil Code, which states:
ARTICLE 1456. If property is acquired through mistake or fraud, the person obtaining it is, by force of
law, considered a trustee of an implied trust for the benefit of the person from whom the property
comes.
"While an implied trust may be proved orally (Civil Code of the Philippines, Art. 1457), the evidence must be
trustworthy and received by the courts with extreme caution, because such kind of evidence may be easily
fabricated . . . . It cannot be made to rest on vague and uncertain evidence or on loose, equivocal[,] or
indefinite declarations . . . ." 55 "[T]he burden of proving the existence of a trust is on the party asserting its
existence, and such proof must be clear and satisfactorily show the existence of the trust and its elements." 56
WHEREFORE, the petition is PARTLY GRANTED. The Decision and Resolution of the Court of Appeals in
CA-G.R. SP No. 53209, dated September 16, 1999 and November 11, 1999, respectively, are hereby
AFFIRMED BUT WITH THE MODIFICATION that the case is REMANDED to the court a quo, which shall
immediately conduct the appropriate proceedings to assess the value of the leased portion of the house
against which the reasonable rent due for its continued use and occupancy, until it is vacated and surrendered
to private respondent, may be offset.
No costs. CAacTH

SO ORDERED.
Puno, Sandoval-Gutierrez, Corona and Garcia, JJ., concur.
||| (Quevada v. Court of Appeals, G.R. No. 140798, [September 19, 2006], 533 PHIL 527-548)
THIRD DIVISION
[G.R. Nos. 154391-92. September 30, 2004.]
Spouses ISMAEL and TERESITA MACASAET, petitioners, vs. Spouses VICENTE and
ROSARIO MACASAET, respondents.
DECISION
PANGANIBAN, J : p

The present case involves a dispute between parents and children. The children were invited by the parents to
occupy the latter's two lots, out of parental love and a desire to foster family solidarity. Unfortunately, an
unresolved conflict terminated this situation. Out of pique, the parents asked them to vacate the premises.
Thus, the children lost their right to remain on the property. They have the right, however, to be indemnified for
the useful improvements that they constructed thereon in good faith and with the consent of the parents. In
short, Article 448 of the Civil Code applies.
The Case
Before us is a Petition for Review 1 under Rule 45 of the Rules of Court, assailing the March 22, 2002
Decision 2 and the June 26, 2002 Resolution 3 of the Court of Appeals (CA) in CA-GR SP Nos. 56205 & 56467.
The challenged Decision disposed as follows:
"WHEREFORE, the assailed Decision is AFFIRMED with the following MODIFICATIONS:
'1. Vicente and Rosario should reimburse Ismael and Teresita one-half of the value of the
useful improvements introduced in the premises prior to demand, which is equivalent to
P475,000.00. In case the former refuse to reimburse the said amount, the latter may remove
the improvements, even though the land may suffer damage thereby. They shall not, however,
cause any more impairment upon the property leased than is necessary.
'2. The award of attorney's fees is DELETED.
'3. The records of these consolidated cases are REMANDED to the Court of origin for further
proceedings to determine the option to be taken by Vicente and Rosario and to implement the
same with dispatch." 4
The assailed Resolution denied petitioners' Motion for Reconsideration. aAIcEH

The Facts
Petitioners Ismael and Teresita 5 Macasaet and Respondents Vicente and Rosario Macasaet are first-degree
relatives. Ismael is the son of respondents, and Teresita is his wife. 6
On December 10, 1997, the parents filed with the Municipal Trial Court in Cities (MTCC) of Lipa City an
ejectment suit against the children. 7 Respondents alleged that they were the owners of two (2) parcels of land
covered by Transfer Certificate of Title (TCT) Nos. T-78521 and T-103141, situated at Banay-banay, Lipa City;
that by way of a verbal lease agreement, Ismael and Teresita occupied these lots in March 1992 and used
them as their residence and the situs of their construction business; and that despite repeated demands,
petitioners failed to pay the agreed rental of P500 per week. 8
Ismael and Teresita denied the existence of any verbal lease agreement. They claimed that respondents had
invited them to construct their residence and business on the subject lots in order that they could all live near
one other, employ Marivic (the sister of Ismael), and help in resolving the problems of the family. 9 They added
that it was the policy of respondents to allot the land they owned as an advance grant of inheritance in favor of
their children. Thus, they contended that the lot covered by TCT No. T-103141 had been allotted to Ismael as
advance inheritance. On the other hand, the lot covered by TCT No. T-78521 was allegedly given to petitioners
as payment for construction materials used in the renovation of respondents' house. 10
The MTCC 11 ruled in favor of respondents and ordered petitioners to vacate the premises. It opined that
Ismael and Teresita had occupied the lots, not by virtue of a verbal lease agreement, but by tolerance of
Vicente and Rosario. 12 As their stay was by mere tolerance, petitioners were necessarily bound by an implied
promise to vacate the lots upon demand. 13 The MTCC dismissed their contention that one lot had been
allotted as an advance inheritance, on the ground that successional rights were inchoate. Moreover, it
disbelieved petitioners' allegation that the other parcel had been given as payment for construction
materials. 14
On appeal, the regional trial court 15 (RTC) upheld the findings of the MTCC. However, the RTC allowed
respondents to appropriate the building and other improvements introduced by petitioners, after payment of the
indemnity provided for by Article 448 in relation to Articles 546 and 548 of the Civil Code. 16It added that
respondents could oblige petitioners to purchase the land, unless its value was considerably more than the
building. In the latter situation, petitioners should pay rent if respondents would not choose to appropriate the
building. 17
Upon denial of their individual Motions for Reconsideration, the parties filed with the CA separate Petitions for
Review, which were later consolidated. 18
Ruling of the Court of Appeals
The CA sustained the finding of the two lower courts that Ismael and Teresita had been occupying the subject
lots only by the tolerance of Vicente and Rosario.19 Thus, possession of the subject lots by petitioners became
illegal upon their receipt of respondents' letter to vacate it. 20
Citing Calubayan v. Pascual, 21 the CA further ruled that petitioners' status was analogous to that of a lessee or
a tenant whose term of lease had expired, but whose occupancy continued by tolerance of the
owner. 22 Consequently, in ascertaining the right of petitioners to be reimbursed for the improvements they had
introduced on respondents' properties, 23 the appellate court applied the Civil Code's provisions on lease. The
CA modified the RTC Decision by declaring that Article 448 of the Civil Code was inapplicable. The CA opined
that under Article 1678 of the same Code, Ismael and Teresita had the right to be reimbursed for one half of
the value of the improvements made. 24
Not satisfied with the CA's ruling, petitioners brought this recourse to this Court.25
The Issues
Petitioners raise the following issues for our consideration:
"1.a) Whether or not Section 17[,] Rule 70 of the Rules of Court on Judgment should apply in the
rendition of the decision in this case;
b) Whether or not the Complaint should have been dismissed;
c) Whether or not damages including attorney's fees should have been awarded to herein petitioners;
"2.a) Whether or not the rule on appearance of parties during the Pretrial should apply on appearance
of parties during Preliminary Conference in an unlawful detainer suit;
b) Whether or not the case of Philippine Pryce Assurance Corporation vs. Court of Appeals (230 SCRA
164) is applicable to appearance of parties in an unlawful detainer suit;
"3. Whether or not Article 1678 of the Civil Code should apply to the case on the matters of
improvements, or is it Article 447 of the Civil Code in relation to the Article 453 and 454 thereof that
should apply, if ever to apply the Civil Code;
"4. Whether or not the [D]ecision of the Court of Appeals is supported by evidence, appropriate laws,
rules and jurisprudence;
"5. Whether or not Assisting Judge Norberto Mercado of the MTCC Lipa City should be held
accountable in rendering the MTCC [D]ecision;
"6. Whether or not Atty. Glenn Mendoza and Atty. Andrew Linatoc of the same [l]aw office should be
held accountable for pursuing the [e]jectment case[.]" 26
The Court's Ruling
The Petition is partly meritorious.
First Issue:
Ejectment
Who is entitled to the physical or material possession of the premises? At the outset, we stress that this is the
main issue in ejectment proceedings. 27 In the present case, petitioners failed to justify their right to retain
possession of the subject lots, which respondents own. Since possession is one of the attributes of
ownership, 28 respondents clearly are entitled to physical or material possession.
Allegations of the Complaint
Petitioners allege that they cannot be ejected from the lots, because respondents based their Complaint
regarding the nonpayment of rentals on a verbal lease agreement, which the latter failed to prove. 29 Petitioners
contend that the lower courts erred in using another ground (tolerance of possession) to eject them.
In actions for unlawful detainer, possession that was originally lawful becomes unlawful upon the expiration or
termination of the defendant's right to possess, arising from an express or implied contract. 30 In other words,
the plaintiff's cause of action comes from the expiration or termination of the defendant's right to continue
possession. 31 The case resulting therefrom must be filed within one year from the date of the last demand.
To show a cause of action in an unlawful detainer, an allegation that the defendant is illegally withholding
possession from the plaintiff is sufficient. The complaint may lie even if it does not employ the terminology of
the law, provided the said pleading is couched in a language adequately stating that the withholding of
possession or the refusal to vacate has become unlawful. 32 It is equally settled that the jurisdiction of the court,
as well as the nature of the action, is determined from the averments of the complaint. 33
In the present case, the Complaint alleged that despite demands, petitioners "refused to pay the accrued
rentals and [to] vacate the leased premises." 34 It prayed that judgment be rendered "[o]rdering [petitioners] and
all those claiming rights under them to vacate the properties . . . and remove the structures . . . constructed
thereon." 35 Effectively then, respondents averred that petitioners' original lawful occupation of the subject lots
had become unlawful. CSDcTH

The MTCC found sufficient cause to eject petitioners. While it disbelieved the existence of a verbal lease
agreement, it nevertheless concluded that petitioners' occupation of the subject lots was by mere tolerance of
respondents. Basing its conclusion on the fact that the parties were close relatives, the MTCC ruled thus:

". . . [T]he parties herein are first degree relatives. Because of this relationship, this Court takes judicial
notice of the love, care, concern and protection imbued upon the parents towards their [children], i.e., in
the instant case, the love, care, concern and protection of the [respondents] to the [petitioners]. With
this in mind, this Court is inclined to believe the position of the [petitioners] that there was no such
verbal lease agreement between the parties herein that took place in 1992. . . .
"From the allegations of the [petitioners], this Court is convinced that their stay and occupancy of the
subject premises was by mere tolerance of the [respondents], and not by virtue of a verbal lease
agreement between them." 36
Having found a cause of action for unlawful detainer, the MTCC (as well as the RTC and the CA) did not err in
ordering the ejectment of petitioners as prayed for by respondents. There was no violation of Section 17 of
Rule 70 37 of the Rules of Court. As earlier explained, unlawful detainer was sufficiently alleged in the
Complaint and duly proven during the trial. Significantly, the issue of whether there was enough ground to eject
petitioners was raised during the preliminary conference. 38
Not Merely Tolerated Possession
Petitioners dispute the lower courts' finding that they occupied the subject lots on the basis of mere tolerance.
They argue that their occupation was not under such condition, since respondents had invited, offered and
persuaded them to use those properties. 39
This Court has consistently held that those who occupy the land of another at the latter's tolerance or
permission, without any contract between them, are necessarily bound by an implied promise that the
occupants will vacate the property upon demand. 40 A summary action for ejectment is the proper remedy to
enforce this implied obligation. 41 The unlawful deprivation or withholding of possession is to be counted from
the date of the demand to vacate. 42
Toleration is defined as "the act or practice of permitting or enduring something not wholly approved
of." 43 Sarona v. Villegas 44 described what tolerated actsmeans, in this language:
"Professor Arturo M. Tolentino states that acts merely tolerated are 'those which by reason of
neighborliness or familiarity, the owner of property allows his neighbor or another person to do on the
property; they are generally those particular services or benefits which one's property can give to
another without material injury or prejudice to the owner, who permits them out of friendship or
courtesy.' . . . And, Tolentino continues, even though 'this is continued for a long time, no right will be
acquired by prescription." . . . Further expounding on the concept, Tolentino writes: 'There is tacit
consent of the possessor to the acts which are merely tolerated. Thus, not every case of knowledge
and silence on the part of the possessor can be considered mere tolerance. By virtue of tolerance that
is considered as an authorization, permission or license, acts of possession are realized or performed.
The question reduces itself to the existence or non-existence of the permission." 45
We hold that the facts of the present case rule out the finding of possession by mere tolerance. Petitioners
were able to establish that respondents had invited them to occupy the subject lots in order that they could all
live near one other and help in resolving family problems. 46 By occupying those lots, petitioners demonstrated
their acceptance of the invitation. Hence, there was a meeting of minds, and an agreement regarding
possession of the lots impliedly arose between the parties.
The occupancy of the subject lots by petitioners was not merely "something not wholly approved of" by
respondents. Neither did it arise from what Tolentino refers to as "neighborliness or familiarity." In point of fact,
their possession was upon the invitation of and with the complete approval of respondents, who desired that
their children would occupy the premises. It arose from familial love and a desire for family solidarity, which are
basic Filipino traits.
Right to Use the Lots Terminated
That Ismael and Teresita had a right to occupy the lots is therefore clear. The issue is the duration of
possession. In the absence of a stipulation on this point,Article 1197 of the Civil Code allows the courts to fix
the duration or the period.
"Article 1197. If the obligation does not fix a period, but from its nature and the circumstances it can be
inferred that a period was intended, the courts may fix the duration thereof.
"The courts shall also fix the duration of the period when it depends upon the will of the debtor.
"In every case the courts shall determine such period as may under the circumstances have been
probably contemplated by the parties. Once fixed by the courts, the period cannot be changed by
them."
Article 1197, however, applies to a situation in which the parties intended a period. Such qualification cannot
be inferred from the facts of the present case.
To repeat, when Vicente and Rosario invited their children to use the lots, they did so out of parental love and
a desire for solidarity expected from Filipino parents. No period was intended by the parties. Their mere failure
to fix the duration of their agreement does not necessarily justify or authorize the courts to do so. 47
Based on respondents' reasons for gratuitously allowing petitioners to use the lots, it can be safely concluded
that the agreement subsisted as long as the parents and the children mutually benefited from the arrangement.
Effectively, there is a resolutory condition in such an agreement. 48 Thus, when a change in the condition
existing between the parties occurs like a change of ownership, necessity, death of either party or
unresolved conflict or animosity the agreement may be deemed terminated. Having been based on parental
love, the agreement would end upon the dissipation of the affection. ICTacD

When persistent conflict and animosity overtook the love and solidarity between the parents and the children,
the purpose of the agreement ceased. 49 Thus, petitioners no longer had any cause for continued possession
of the lots. Their right to use the properties became untenable. It ceased upon their receipt of the notice to
vacate. And because they refused to heed the demand, ejectment was the proper remedy against them. Their
possession, which was originally lawful, became unlawful when the reason therefor love and solidarity
ceased to exist between them.
No Right to Retain Possession
Petitioners have not given this Court adequate reasons to reverse the lower courts' dismissal of their
contention that Lots T-78521 and T-103141, respectively, were allegedly allotted to them as part of their
inheritance and given in consideration for past debts.
The right of petitioners to inherit from their parents is merely inchoate and is vested only upon the latters'
demise. Indisputably, rights of succession are transmitted only from the moment of death of the
decedent. 50 Assuming that there was an "allotment" of inheritance, ownership nonetheless remained with
respondents. Moreover, an intention to confer title to certain persons in the future is not inconsistent with the
owners' taking back possession in the meantime for any reason deemed sufficient. 51 Other than their self-
serving testimonies and their affidavits, petitioners offered no credible evidence to support their outlandish
claim of inheritance "allocation."
We also agree with the lower courts that petitioners failed to prove the allegation that, through a dation in
payment, Lot T-78521 had been transferred to the latter as payment for respondents' debts. 52 The evidence
presented by petitioners related only to the alleged indebtedness of the parents arising from the latter's
purported purchases and advances. 53 There was no sufficient proof that respondents had entered into a
contract of dation to settle the alleged debt. Petitioners even stated that there was a disagreement in the
accounting of the purported debt, 54 a fact that disproves a meeting of the minds with the parents.
Petitioners also admitted that a portion of the alleged debt is the subject matter of a collection case against
respondents (Civil Case No. 0594-96). 55 Thus, the former's allegation that the indebtedness has been paid
through a dation cannot be given credence, inconsistent as it is with their action to recover the same debt.
Despite their protestations, petitioners recognized the right of the parents to recover the premises when they
admitted in their Position Paper filed with the MTCC that respondents had a title to the lots.
"The [respondents] want to get their property because the title is theirs, the [petitioners] do not object
but what is due the [petitioners] including the reparation for the tarnish of their dignity and honor must
be given the [petitioners] for the benefits of their children before the premises will be turned over." 56
As a rule, the right of ownership carries with it the right of possession.
Second Issue:
Appearance at the Preliminary Conference
Section 8 of Rule 70 of the Rules of Court requires the appearance of the plaintiff and the defendant during the
preliminary conference. On the basis of this provision, petitioners claim that the MTCC should have dismissed
the case upon the failure of respondents to attend the conference. However, petitioners do not dispute that an
attorney-in-fact with a written authorization from respondents appeared during the preliminary
conference. 57 The issue then is whether the rules on ejectment allow a representative to substitute for a
party's personal appearance.
Unless inconsistent with Rule 70, the provisions of Rule 18 on pretrial applies to the preliminary
conference. 58 Under Section 4 of this Rule, the nonappearance of a party may be excused by the showing of a
valid cause; or by the appearance of a representative, who has been fully authorized in writing to enter into an
amicable settlement, to submit to alternative modes of dispute resolution, and to enter into stipulations or
admissions of facts and of documents. 59

Section 4 of Rule 18 may supplement Section 8 of Rule 70. Thus, the spirit behind the exception to personal
appearance under the rules on pretrial is applicable to the preliminary conference. If there are valid reasons or
if a representative has a "special authority," a party's appearance may be waived. As petitioners are
challenging only the applicability of the rules on pretrial to the rule on preliminary conference, the written
authorization from respondents can indeed be readily considered as a "special authorization."
Third Issue:
Rights of a Builder in Good Faith
As applied to the present case, accession refers to the right of the owner to everything that is incorporated or
attached to the property. 60 Accession industrial building, planting and sowing on an immovable is
governed by Articles 445 to 456 of the Civil Code. DTESIA

Articles 447 and 1678 of the


Civil Code Inapplicable
To buttress their claim of reimbursement for the improvements introduced on the property, petitioners
cite Article 447. 61 They allege that the CA erred in applying Article 1678, since they had no lease agreement
with respondents.
We clarify. Article 447 is not applicable, because it relates to the rules that apply when the owner of the
property uses the materials of another. It does not refer to the instance when a possessor builds on the
property of another, which is the factual milieu here.
In view of the unique factual setting of the instant case, the contention of petitioners regarding the
inapplicability of Article 1678 deserves attention. The CA applied the provisions on lease, because it found
their possession by mere tolerance comparable with that of a lessee, per the pronouncement inCalubayan
v. Pascual, 62 from which we quote:
". . . It has been held that a person who occupies the land of another at the latter's tolerance or
permission, without any contract between them, is necessarily bound by an implied promise that he will
vacate upon demand, failing which a summary action for ejectment is the proper remedy against them.
The status of defendant is analogous to that of a lessee or tenant whose term of lease has expired but
whose occupancy continued by tolerance of the owner. In such a case, the unlawful deprivation or
withholding of possession is to be counted from the date of the demand to vacate." 63 (Emphasis in the
original.)
As explained earlier, Ismael and Teresita's possession of the two lots was not by mere tolerance, a
circumstance that negates the applicability of Calubayan.
Article 448 Applicable
On the other hand, when a person builds in good faith on the land of another, the applicable provision is Article
448, which reads: 64
"Article 448. The owner of the land on which anything has been built, sown or planted in good faith,
shall have the right to appropriate as his own the works, sowing or planting, after payment of the
indemnity provided for in Articles 546 and 548, or to oblige the one who built or planted to pay the price
of the land, and the one who sowed, the proper rent. However, the builder or planter cannot be obliged
to buy the land if its value is considerably more than that of the building or trees. In such case, he shall
pay reasonable rent, if the owner of the land does not choose to appropriate the building or trees after
proper indemnity. The parties shall agree upon the terms of the lease and in case of disagreement, the
court shall fix the terms thereof."
This Court has ruled that this provision covers only cases in which the builders, sowers or planters believe
themselves to be owners of the land or, at least, to have a claim of title thereto. 65 It does not apply when the
interest is merely that of a holder, such as a mere tenant, agent or usufructuary. 66 From these
pronouncements, good faith is identified by the belief that the land is owned; or that by some title one has
the right to build, plant, or sow thereon. 67
However, in some special cases, this Court has used Article 448 by recognizing good faith beyond this limited
definition. Thus, in Del Campo v. Abesia, 68 this provision was applied to one whose house despite having
been built at the time he was still co-owner overlapped with the land of another. 69 This article was also
applied to cases wherein a builder had constructed improvements with the consent of the owner. The Court
ruled that the law deemed the builder to be in good faith. 70 In Sarmiento v. Agana, 71 the builders were found
to be in good faith despite their reliance on the consent of another, whom they had mistakenly believed to be
the owner of the land. 72
Based on the aforecited special cases, Article 448 applies to the present factual milieu. The established facts
of this case show that respondents fully consented to the improvements introduced by petitioners. In fact,
because the children occupied the lots upon their invitation, the parents certainly knew and approved of the
construction of the improvements introduced thereon. 73 Thus, petitioners may be deemed to have been in
good faith when they built the structures on those lots. DcICEa

The instant case is factually similar to Javier v. Javier. 74 In that case, this Court deemed the son to be in good
faith for building the improvement (the house) with the knowledge and consent of his father, to whom belonged
the land upon which it was built. Thus, Article 448 75 was applied.
Rule on Useful Expenses
The structures built by petitioners were "useful" improvements, because they augmented the value or income
of the bare lots. 76 Thus, the indemnity to be paid by respondents under Article 448 is provided for by Article
546, which we quote:
"Art. 546. Necessary expenses shall be refunded to every possessor; but only the possessor in good
faith may retain the thing until he has been reimbursed therefor.
"Useful expenses shall be refunded only to the possessor in good faith with the same right of retention,
the person who has defeated him in the possession having the option of refunding the amount of the
expenses or of paying the increase in value which the thing may have acquired by reason thereof."
Consequently, respondents have the right to appropriate as their own the building and other
improvements on the subject lots, but only after (1) refunding the expenses of petitioners or (2) paying the
increase in value acquired by the properties by reason thereof. They have the option to oblige petitioners to
pay the price of the land, unless its value is considerably more than that of the structures in which case,
petitioners shall pay reasonable rent.
In accordance with Depra v. Dumlao, 77 this case must be remanded to the trial court to determine matters
necessary for the proper application of Article 448 in relation to Article 546. Such matters include the option
that respondents would take and the amount of indemnity that they would pay, should they decide to
appropriate the improvements on the lots. We disagree with the CA's computation of useful expenses, which
were based only on petitioners' bare allegations in their Answer. 78
Ruling on Improvement Justified
While, ordinarily, the jurisdiction of the MTCC on ejectment proceedings is limited to the issue of physical or
material possession of the property in question, this Court finds it necessary to abbreviate the issue on the
improvements in relation to Article 448. First, the determination of the parties' right to those improvements is
intimately connected with the MTCC proceedings in the light of the ejectment of petitioners. Second, there is
no dispute that while they constructed the improvements, respondents owned the land. Third, both parties
raised no objection when the RTC and the CA ruled accordingly on this matter.
Equitable considerations compel us to settle this point immediately, pro hoc vice, to avoid needless delay. Both
parties have already been heard on this issue; to dillydally or equivocate would not serve the cause of
substantial justice.
Other Issues Raised
Given the foregoing rulings, it is no longer necessary to address petitioners' allegation that the MTCC judge
and respondents' lawyers should be respectively held personally accountable for the Decision and for filing the
case. 79 The insinuation of petitioners that the lawyers manipulated the issuance of a
falsebarangay certification is unavailing. 80 Their contention that respondents did not attend
the barangay conciliation proceedings was based solely on hearsay, which has little or no probative value. 81
WHEREFORE, the assailed Decision and Resolution of the Court of Appeals are AFFIRMED with the following
MODIFICATIONS:
1. The portion requiring Spouses Vicente and Rosario Macasaet to reimburse one half of the value of the
useful improvements, amounting to P475,000, and the right of Spouses Ismael and Rosita Macasaet to
remove those improvements (if the former refuses to reimburse) is DELETED.
2. The case is REMANDED to the court of origin for further proceedings to determine the facts essential to the
proper application of Articles 448 and 546 of the Civil Code, specifically to the following matters:
a. Spouses Vicente and Rosario Macasaet's option to appropriate as their own the
improvements on the lots, after paying the indemnity, as provided under Article 546 in
relation to Article 448 of the Civil Code; or in requiring Spouses Ismael and Rosita
Macasaet to pay for the value of the lots, unless it is considerably more than that of the
improvements, in which case petitioners shall pay reasonable rent based upon the
terms provided under the Civil Code
b. The value of the useful expenses incurred by Spouses Ismael and Rosita Macasaet in the
construction of the improvements on the lots
c. The increase in value acquired by the lots by reason of the useful improvements
d. Spouses Vicente and Rosario Macasaet's choice of type of indemnity to be paid (whether b
or c)

e. Whether the value of the lots is considerably more than that of the improvements built
thereon
No pronouncement as to costs. aTEACS

SO ORDERED.
Sandoval-Gutierrez, Corona and Carpio Morales, JJ ., concur.
||| (Spouses Macasaet v. Spouses Macasaet, G.R. Nos. 154391-92, [September 30, 2004], 482 PHIL 853-876)
SECOND DIVISION
[G.R. No. 172292. July 23, 2010.]
2:00 P.M.
ALIDA MORES, petitioner, vs. SHIRLEY M. YU-GO, MA. VICTORIA M. YU-LIM, and MA.
ESTRELLA M. YU, respondents.
DECISION
CARPIO, J :
p

G.R. No. 172292 is a petition for review 1 assailing the Decision 2promulgated on 26 August 2005 by
the Court of Appeals (appellate court) as well as the Resolution 3 promulgated on 14 March 2006 in CA-G.R.
CV No. 76076. The appellate court partially granted the petition filed by Shirley M. Yu-Go, Ma. Victoria M.
Yu-Lim, and Ma. Estrella M. Yu (Yu siblings) and reversed the decision of the Regional Trial Court of Naga
City, Branch 27 (trial court), dated 28 June 2002 in Civil Case No. 99-4216. The appellate court ordered
spouses Antonio and Alida Mores (spouses Mores) to pay the Yu siblings moral damages in the amount of
P100,000. cEHSIC

The Facts
Antonio Mores passed away during the pre-trial stage. Hence, Alida Mores remained as the only
defendant, per the trial court's order dated 3 May 2000. 4
The appellate court narrated the facts as follows:
On January 21, 1998, plaintiffs-appellants Shirley M. Yu-Go, Ma. Victoria M. Yu-Lim and Ma. Estrella M.
Yu ("appellants") filed a Complaint for Injunction and Damages with Prayer for Issuance of a Temporary
Restraining Order and Preliminary Injunction before the Regional Trial Court in Naga City against
defendants-appellees, spouses Antonio and Alida Mores ("appellees"). Appellants alleged that they co-
owned a parcel of land located in Sto. Tomas, Magarao, Camarines Sur on which a building of strong
materials ("subject property") was built. In March 1983, appellees pleaded to appellants that they be
allowed to stay in the subject property in the meantime that they did not own a house yet. Since appellee
Antonio Mores used to be an errand boy of appellants' family, they readily agreed without asking for any
rental but subject only to the condition that the said stay would last until anyone of appellants would need
the subject property. Forthwith, appellees and their children occupied the same as agreed upon.
In November 1997, appellants made known to appellees that they were already in need of the subject
property. They explained that appellant Shirley Yu-Go needed the same and, besides, appellees already
have their own house in Villa Grande Homes, Naga City. Yet, appellees begged that they be given a 6-
month extension to stay thereat or until May 1998. However, even after May 1998, appellees failed to
make good their promise and even further asked that they be allowed to stay therein until October 1998,
which was again extended until the end of the same year. Thus, sometime in the first week of January
1999, appellants gave their final demand for appellees to vacate the subject property. However, instead
of heeding such demand, appellees hired some laborers and started demolishing the improvements on
the subject property on January 20, 1999.
Appellants' protest fell on deaf ears because appellees continued their demolition and even took away
and appropriated for themselves the materials derived from such unlawful demolition. Consequently,
appellants instituted the said action for injunction where they also prayed for the reimbursement of the
value of the residential building illegally demolished as well as for the payment of moral damages,
attorney's fees, litigation expenses and costs of suit.
AIHaCc

On February 5, 1999, appellees filed their Answer where they denied the material averments of the
complaint. They claimed that appellee Antonio Mores, who was appellants' uncle, used to be the assistant
manager and cashier of appellants' father at their Caltex Service Station until the later's death sometime
in 1980. Appellants' Caltex Filling Station had stopped operation and was just rented out to Herce
Trucking Service. Upon the expiration of such lease contract, appellees were allowed to occupy the
subject property as their dwelling places. They were the ones who caused its renovation consisting of a
3-bedroom annex, a covered veranda and a concrete hollow block fence, at their own expense, and with
appellants' consent, which renovation was made without altering the form and substance of the subject
property. They denied that appellants made a demand for them to vacate the subject property, insisting
that it was merely a sort of reminder that sooner or later appellees should yield possession thereof since,
after all, they had already bought a second-hand house which was undergoing repair. Appellees argued
that what they removed was merely the improvements made on the subject property, which removal had
not caused any substantial damage thereto as, in fact, it remained intact. By way of counterclaims, they
demanded payment of actual damages, attorney's fees and litigation expenses. 5
The Trial Court's Ruling
On 28 June 2002, the trial court promulgated its Decision in favor of the spouses Mores. The trial
court ratiocinated and ruled thus:
Defendants, who are possessors in good faith, were able to prove by preponderance of evidence that
they removed only the improvements they introduced without destroying the principal building, after the
plaintiffs refused to pay them the reasonable value of the improvements. . . .
But defendants failed to prove the allegations in their counterclaims that plaintiffs acted in bad faith and/or
through gross and reckless negligence in filing this complaint, and the damages defendants allegedly
suffered. Failing in this, plaintiffs must also be presumed to have acted in good faith when they filed this
complaint with the honest belief that their rights were violated when defendants removed the useful
improvements from the principal building and land of plaintiffs. Applying the same principle, the equipoise
rule, defendants' counterclaims must necessarily fail. IHEAcC

Both parties having acted in good faith, the court will not disturb the present status, and will leave the
parties where it found them. Wounds should not be scratched in order to hasten the healing process, and
neither should this Court scratch herein parties rift that torn [sic] them apart from being close relatives
before this controversy started. Parties owe to their siblings and to their posterity to reconcile. Anyway,
this case was started because parties were very close relatives.
The courts are not only courts of justice but also courts of equity.
WHEREFORE, the complaint and the counterclaims are hereby dismissed. No pronouncement as to
cost.
SO ORDERED. 6
The trial court gave due course to the Yu siblings' Notice of Appeal in an Order dated 22 July 2002.
The Appellate Court's Ruling
The appellate court partially granted the Yu siblings' appeal. The appellate court disagreed with the
trial court's conclusion that the spouses Mores were builders in good faith and have the right of accession
under Articles 546 and 547 of the Civil Code. Instead, the appellate court believed that the relationship
between the Yu siblings and the spouses Mores is one between a lessor and a lessee, making Article 1678
of the Civil Code applicable to the present case. The options given by Article 1678, the right of appropriating
the useful improvements after reimbursing 50% of its value or the right of removal of the useful improvements,
are given by law to the lessor the Yu siblings. The spouses Mores, however, failed to give the Yu siblings
the opportunity to choose from these two options. The appellate court thus ordered the spouses Mores to
pay the Yu siblings moral damages worth P100,000.
The appellate court resolved to deny Alida Mores' Motion for Reconsideration for want of merit. 7

The Issues
In her petition, Alida Mores stated that the decision of the appellate court awarding the Yu siblings
moral damages in the amount of P100,000 is rendered with grave abuse of discretion and is not in accord
with the decisions of this Court. 8
The Court's Ruling
The petition has merit.
Alida Mores argues that in case of breach of contract between a lessor and a lessee, moral damages
are not awarded to the lessor if the lessee is not shown to have acted in bad faith. She proves her and her
husband's alleged good faith by quoting the appellate court's decision which stated that: cADEIa

[The Spouses Mores'] good faith is underscored by the fact that no one from appellants had objected or
prevented appellees from effecting said improvements which, obviously, were undertaken in quite a span
of time. Even if we believe appellant Victoria Yu-Lim's testimony that they would only learn of the
introduction of such improvements after each of such improvements had already been built, [the Yu
siblings] never made known their objections thereto nor did they pose a warning against future
introduction of any improvement. After all, the said improvements were not introduced simultaneously. 9
The good faith referred to by Alida Mores was about the building of the improvements on the leased
subject property. However, tenants like the spouses Mores cannot be said to be builders in good faith as
they have no pretension to be owners of the property. 10 Indeed, 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. 11
The appellate court is correct in ruling that Article 1678 of the Civil Code should apply in the present
case. Article 1678 reads:
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 the 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.
It is incorrect, however, for the appellate court to state that the spouses Mores did not give the Yu
siblings the option to retain the improvements. The appellate court stated that "nothing in the records reveal
that [the Yu siblings] were given the chance to choose from the options of either paying one-half (1/2) of the
value of the improvements at the time they were made on the subject property, or to demand the removal by
[the spouses Mores] of such improvements at their expense." 12 The trial court even quoted from the
transcript of Alida Mores' direct testimony on 10 October 2001 on the subject: DTEcSa

Q: Plaintiff Yu-Lim likewise testified that the plaintiffs demanded in 1998 that you vacate the premises
because it will be needed by plaintiff Shirley Yu-Co, what can you say to that?
A: It was in November 1998 that the plaintiff intimated that we will soon vacate the place because by
that time we had already bought a second-hand house.
Q: What happened after that?
A: My husband good-naturedly asked for reimbursement for the improvements we constructed at our
expense.
Q: What happened to that demand?
A: The plaintiffs became mad at us and refused to pay.
Q: What happened after that, what did your husband do?
A: My husband removed the roofing, coco lumber, trusses, the electrical installation and the
improvements constructed, glass panel and window panel.
Q: By the way, who spent for the introduction of these improvements?
A: My husband and I. 13
There is thus no reason for the appellate court's award of moral damages to the Yu siblings. We agree with the
trial court's finding that the spouses Mores "removed only the improvements they introduced without destroying
the principal building, after the [Yu siblings] refused to pay them the reasonable value of the
improvements." 14 When the spouses Mores demanded reimbursement, the Yu siblings should have offered to
pay the spouses Mores one-half of the value of the improvements. Since the Yu siblings failed to make such
offer, the spouses Mores had the right to remove the improvements.
WHEREFORE, we GRANT the petition. We AFFIRM with MODIFICATION the Decision of the Court of
Appeals promulgated on 26 August 2005 as well as the Resolution promulgated on 14 March 2006 in CA-G.R.
CV No. 76076. Article 1678 of the Civil Code is applicable to the present case. The award of moral damages
worth P100,000 to the Yu siblings is deleted. DHCcST

SO ORDERED.
Nachura, Peralta, Abad and Mendoza, JJ., concur.
||| (Mores v. Yu-Go, G.R. No. 172292, [July 23, 2010], 639 PHIL 304-311)
FIRST DIVISION
[G.R. No. L-49219. April 15, 1988.]
SPOUSES CONCEPCION FERNANDEZ DEL OCAMPO and ESTANISLAO DEL
CAMPO, plaintiffs-appellees, vs. BERNARDA FERNANDEZ ABESIA,defendant-appellant.
SYLLABUS
1. CIVIL LAW; ACCESSION; RIGHT OF A BUILDER IN GOOD FAITH; NOT APPLICABLE WHERE CO-
OWNERSHIP EXISTS. 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.
2. ID.; ID.; ID.; APPLICABLE WHERE CO-OWNERSHIP IS TERMINATED. 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.
3. ID.; ID.; ID.; ID.; PAYMENT OF INDEMNITY. Applying Article 448 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 plaintiffs 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.
DECISION
GANCAYCO, J : p

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-
ownerspro indiviso of this lot in the proportion of 2/3 and 1/3 share each, respectively. The trial court appointed
a commissioner in accordance with the agreement of the parties. The said 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
defendant's house which has encroached an area of five (5) sq. meters of the land allotted 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 later allotted to another
co-owner in the partition. The co-owner is not 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.' (Tolentino, Civil Code of the Philippines, Vol. II, p. 102,
citing 3 Manresa 215, 3 Planiol and Ripert 245, and Viuda de Arias vs. Aguilar, (C A.), O.G. Supp., Aug.
30, 1941, 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. LLphil
"WHEREFORE, judgment is hereby rendered assigning Lot 1161-A with an area of thirty (30) sq.
meters to the plaintiffs spouses Concepcion Fernandez del Campo and Estanislao del Campo and Lot
1161-B with an area of fifteen (15) sq. meters to the defendants Bernarda 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 PORTION 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."
LexLib

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 afore-said 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 plaintiffs 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 plaintiffs to indemnify defendants
for the value of the said 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. cdrep

SO ORDERED.
Teehankee, C.J., Narvasa, Cruz and Grio-Aquino, JJ., concur.
||| (Spouses Del Campo v. Abesia, G.R. No. L-49219, [April 15, 1988], 243 PHIL 532-537)
THIRD DIVISION
[G.R. No. 100866. July 14, 1992.]
REBECCA BOYER-ROXAS and GUILLERMO ROXAS, petitioners, vs.HON. COURT OF
APPEALS and HEIRS OF EUGENIA V. ROXAS, INC., respondents.
Oscar Z. Benares for petitioners.
Benito P. Fabie for private respondent.
SYLLABUS
1. LEGAL ETHICS; ATTORNEY-CLIENT RELATIONSHIP; CLIENT BOUND BY THE MISTAKE OF HIS
LAWYER; EXCEPTION. The well-settled doctrine is that the client is bound by the mistakes of his lawyer.
(Aguila v. Court of First Instance of Batangas, Branch I, 160 SCRA 352 [1988] and other cases cited) This rule,
however, has its exceptions. Thus, in several cases, we ruled that the party is not bound by the actions of his
counsel in case the gross negligence of the counsel resulted in the client's deprivation of his property without
due process of law. (Legarda v. Court of Appeals, 195 SCRA 418 [1991])
2. ID.; ID.; ID.; CLIENT IN CASE AT BAR, NOT A VICTIM OF LAWYER'S GROSS NEGLIGENCE. The
petitioners were not victims of the gross negligence of their counsel. They are to be blamed for the October 22,
1986 order issued by the lower court submitting the cases for decision. They received notices of the scheduled
hearings and yet they did not do anything. More specifically, the parties received notice of the Order dated
September 29, 1986 with the warningthat if they fail to attend the October 22, 1986 hearing, the cases would be
submitted for decision based on the evidence on record. Earlier, at the scheduled hearing on September 29,
1986, the counsel for the respondent corporation moved that the cases be submitted for decision for failure of
the petitioners and their counsel to attend despite notice. The lower court denied the motion and gave the
petitioners and their counsel another chance by rescheduling the October 22, 1986 hearing. Indeed, the
petitioners knew all along that their counsel was not attending the scheduled hearings. They did not take steps
to change their counsel or make him attend to their cases until it was too late. On the contrary, they continued
to retain the services of Atty. Manicad knowing fully well his lapses vis-a-vis their cases. They, therefore, cannot
raise the alleged gross negligence of their counsel resulting in their denial of due process to warrant the reversal
of the lower court's decision.
3. COMMERCIAL LAW; CORPORATION LAW; CORPORATION; WITH JURIDICAL PERSONALITY
SEPARATE AND DISTINCT FROM ITS STOCKHOLDERS. The respondent is a bona fide corporation. As
such, it has a juridical personality of its own separate from the members composing it. (Western Agro Industrial
Corporation v. Court of Appeals, 188 SCRA 709 [1990] and other cases cited)
4. ID.; ID.; ID.; SHARES OF STOCK, AN ALIQUOT PART OF THE CORPORATION'S PROPERTY.
Regarding properties owned by a corporation, we stated in the case of Stockholders of F. Guanzon and Sons,
Inc. v. Register of Deeds of Manila,(6 SCRA 373 [1962]): ". . . Properties registered in the name of the corporation
are owned by it as an entity separate and distinct from its members. While shares of stock constitute personal
property, they do not represent property of the corporation. The corporation has property of its own which
consists chiefly of real estate (Nelson v. Owen, 113 Ala., 372, 21 So. 75; Morrow v. Gould, 145 Iowa 1, 123 N.W.
743). A share of stock only typifies an aliquot part of the corporation's property, or the right to share in its
proceeds to that extent when distributed according to law and equity (Hall & Faley v. Alabama Terminal, 173
Ala., 398, 56 So. 235), but its holder is not the owner of any part of the capital of the corporation
(Bradley v. Bauder, 36 Ohio St., 28). Nor is he entitled to the possession of any definite portion of its property or
assets (Gottfried v. Miller, 104 U.S., 521; Jones v. Davis, 35 Ohio St., 474). The stockholder is not a co-owner
or tenant in common of the corporate property (Harton v. Johnston, 166 Ala., 317, 51 So., 992)."
5. ID.; ID.; ID.; TRANSACTS BUSINESS ONLY THRU ITS AUTHORIZED OFFICERS OR AGENTS. The
corporation transacts its business only through its officers or agents. (Western Agro Industrial
Corporation v. Court of Appeals, supra) Whatever authority these officers or agents may have is derived from
the board of directors or other governing body unless conferred by the charter of the corporation. An officer's
power as an agent of the corporation must be sought from the statute, charter, the by-laws or in a delegation of
authority to such officer, from the acts of the board of directors, formally expressed or implied from a habit or
custom of doing business. (Vicente v. Geraldez, 52 SCRA 210 [1973]) In the present case, the record shows
that Eufrocino V. Roxas who then controlled the management of the corporation, being the majority stockholder,
consented to the petitioners' stay within the questioned properties. Specifically, Eufrocino Roxas gave his
consent to the conversion of the recreation hall to a residential house, now occupied by petitioner Guillermo
Roxas. The Board of Directors did not object to the actions of Eufrocino Roxas. The petitioners were allowed to
stay within the questioned properties until August 27, 1983, when the Board of Directors approved a Resolution
ejecting the petitioners.
6. ID.; ID.; ID.; ID.; ACT OF MANAGING STOCKHOLDER ALLOWING THIRD PARTY POSSESSION OF
CORPORATE PROPERTY, DOES NOT PRECLUDE THE BOARD OF EJECTING PARTY; CASE AT BAR.
We find nothing irregular in the adoption of the Resolution by the Board of Directors. The petitioners' stay within
the questioned properties was merely by tolerance of the respondent corporation in deference to the wishes of
Eufrocino Roxas, who during his lifetime, controlled and managed the corporation. Eufrocino Roxas' actions
could not have bound the corporation forever. The petitioners have not cited any provision of the corporation by-
laws or any resolution or act of the Board of Directors which authorized Eufrocino Roxas to allow them to stay
within the company premises forever. We rule that in the absence of any existing contract between the petitioners
and the respondent corporation, the corporation may elect to eject the petitioners at any time it wishes for the
benefit and interest of the respondent corporation.
7. ID.; ID.; PIERCING THE VEIL OF CORPORATE FICTION; WHEN RESORTED TO; NOT APPLICABLE IN
CASE AT BAR. The petitioners' suggestion that the veil of the corporate fiction should be pierced is untenable.
The separate personality of the corporation may be disregarded only when the corporation is used "as a cloak
or cover for fraud or illegality, or to work injustice, or where necessary to achieve equity or when necessary for
the protection of the creditors." (Sulo ng Bayan, Inc. v. Araneta, Inc., 72 SCRA 347 [1976]) The circumstances
in the present cases do not fall under any of the enumerated categories.
8. CIVIL LAW; PROPERTY; RIGHT OF ACCESSION WITH RESPECT TO IMMOVABLE PROPERTY; RULE
WHERE BOTH ARE CONSIDERED IN GOOD FAITH; CASE AT BAR. The petitioners insist that as regards
the unfinished building, Rebecca Boyer-Roxas is a builder in good faith. The construction of the unfinished
building started when Eriberto Roxas, husband of Rebecca Boyer-Roxas, was still alive and was the general
manager of the respondent corporation. The couple used their own funds to finance the construction of the
building. The Board of Directors of the corporation, however, did not object to the construction. They allowed the
construction to continue despite the fact that it was within the property of the corporation. Under these
circumstances, we agree with the petitioners that the provision of Article 453 of the Civil Code should have been
applied by the lower courts. Article 453 of the Civil Code provides: "If there was bad faith, not only on the part of
the person who built, planted or sown on the land of another but also on the part of the owner of such land, the
rights of one and the other shall be the same as though both had acted in good faith." In such a case, the
provisions of Article 448 of the Civil Codegovern the relationship between petitioner Rebecca Boyer-Roxas and
the respondent corporation, to wit: "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 buildings 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."
DECISION
GUTIERREZ, JR., J : p

This is a petition to review the decision and resolution of the Court of Appeals in CA-G.R. No. 14530 affirming
the earlier decision of the Regional Trial Court of Laguna, Branch 37, at Calamba, in the consolidated RTC Civil
Case Nos. 802-84-C and 803-84-C entitled "Heirs of Eugenia V. Roxas, Inc. v. Rebecca Boyer-Roxas" and Heirs
of Eugenia V. Roxas, Inc. v. Guillermo Roxas," the dispositive portion of which reads:
"IN VIEW OF THE FOREGOING, judgment is hereby rendered in favor of the plaintiff and against the
defendants, by ordering as it is hereby ordered that:
1) In RTC Civil Case No. 802-84-C: Rebecca Boyer-Roxas and all persons claiming under her to:
a) Immediately vacate the residential house near the Balugbugan pool located inside the premises of the
Hidden Valley Springs Resort at Limao, Calauan, Laguna;
b) Pay the plaintiff the amount of P300.00 per month from September 10, 1983, for her occupancy of the
residential house until the same is vacated;
c) Remove the unfinished building erected on the land of the plaintiff within ninety (90) days from receipt
of this decision;

d) Pay the plaintiff the amount of P100.00 per month from September 10, 1983, until the said unfinished
building is removed from the land of the plaintiff; and
e) Pay the costs.
2) In RTC Civil Case No. 803-84-C: Guillermo Roxas and all persons claiming under him to: LexLib

a) Immediately vacate the residential house near the tennis court located within the premises of the
Hidden Valley Springs Resort at Limao, Calauan, Laguna;
b) Pay the plaintiff the amount of P300.00 per month from September 10, 1983, for his occupancy of the
said residential house until the same is vacated; and
c) Pay the costs." (Rollo, p. 36)
In two (2) separate complaints for recovery of possession filed with the Regional Trial Court of Laguna against
petitioners Rebecca Boyer-Roxas and Guillermo Roxas respectively, respondent corporation, Heirs of Eugenia
V. Roxas, Inc., prayed for the ejectment of the petitioners from buildings inside the Hidden Valley Springs Resort
located at Limao, Calauan, Laguna allegedly owned by the respondent corporation.
In the case of petitioner Rebecca Boyer-Roxas (Civil Case No. 802-84-C), the respondent corporation alleged
that Rebecca is in possession of two (2) houses, one of which is still under construction, built at the expense of
the respondent corporation; and that her occupancy on the two (2) houses was only upon the tolerance of the
respondent corporation.
In the case of petitioner Guillermo Roxas (Civil Case No. 803-84-C), the respondent corporation alleged that
Guillermo occupies a house which was built at the expense of the former during the time when Guillermo's father,
Eriberto Roxas, was still living and was the general manager of the respondent corporation; that the house was
originally intended as a recreation hall but was converted for the residential use of Guillermo; and that Guillermo's
possession over the house and lot was only upon the tolerance of the respondent corporation.
In both cases, the respondent corporation alleged that the petitioners never paid rentals for the use of the
buildings and the lots and that they ignored the demand letters for them to vacate the buildings.
In their separate answers, the petitioners traversed the allegations in the complaint by stating that they are heirs
of Eugenia V. Roxas and therefore, co-owners of the Hidden Valley Springs Resort; and as co-owners of the
property, they have the right to stay within its premises.
The cases were consolidated and tried jointly.
At the pre-trial, the parties limited the issues as follows:
"1) whether plaintiff is entitled to recover the questioned premises;
2) whether plaintiff is entitled to reasonable rental for occupancy of the premises in question; cdrep

3) whether the defendant is legally authorized to pierce the veil of corporate fiction and interpose the
same as a defense in an accion publiciana;
4) whether the defendants are truly builders in good faith, entitled to occupy the questioned premises;
5) whether plaintiff is entitled to damages and reasonable compensation for the use of the questioned
premises;
6) whether the defendants are entitled to their counterclaim to recover moral and exemplary damages as
well as attorney's fees in the two cases;
7) whether the presence and occupancy by the defendants on the premises in questioned (sic) hampers,
deters or impairs plaintiff's operation of Hidden Valley Springs Resort; and
8) whether or not a unilateral and sudden withdrawal of plaintiff's tolerance allowing defendants'
occupancy of the premises in questioned (sic) is unjust enrichment." (Original Records, 486)
Upon motion of the plaintiff respondent corporation Presiding Judge Francisco Ma. Guerrero of Branch 34 issued
an Order dated April 25, 1986 inhibiting himself from further trying the case. The cases were re-raffled to Branch
37 presided by Judge Odilon Bautista. Judge Bautista continued the hearing of the cases.
For failure of the petitioners (defendants below) and their counsel to attend the October 22, 1986 hearing despite
notice, and upon motion of the respondent corporation, the court issued on the same day, October 22, 1986, an
Order considering the cases submitted for decision. At this stage of the proceedings, the petitioners had not yet
presented their evidence while the respondent corporation had completed the presentation of its evidence.
The evidence of the respondent corporation upon which the lower court based its decision is as follows:
"To support the complaints, the plaintiff offered the testimonies of Maria Milagros Roxas and that of
Victoria Roxas Villarta as well as Exhibits 'A' to 'M-3'.
The evidence of the plaintiff established the following: that the plaintiff, Heirs of Eugenia V. Roxas,
Incorporated, was incorporated on December 4, 1962 (Exh. 'C') with the primary purpose of engaging in
agriculture to develop the properties inherited from Eugenia V. Roxas and that of Eufrocino Roxas; that
the Articles of Incorporation of the plaintiff, in 1871, was amended to allow it to engage in the resort
business (Exh. 'C-1'); that the incorporators as original members of the board of directors of the plaintiff
were all members of the same family, with Eufrocino Roxas having the biggest share; that accordingly,
the plaintiff put up a resort known as Hidden Valley Springs Resort on a portion of its land located at Bo.
Limao, Calauan, Laguna, and covered by TCT No. 32639 (Exhs. 'A' and 'A-1'); that improvements were
introduced in the resort by the plaintiff and among them were cottages, houses or buildings, swimming
pools, tennis court, restaurant and open pavilions; that the house near the Balugbugan Pool (Exh. 'B-1')
being occupied by Rebecca B. Roxas was originally intended as staff house but later used as the
residence of Eriberto Roxas, deceased husband of the defendant Rebecca Boyer-Roxas and father of
Guillermo Roxas; that this house presently being occupied by Rebecca B. Roxas was built from corporate
funds; that the construction of the unfinished house (Exh. 'B-2') was started by the defendant Rebecca
Boyer-Roxas and her husband Eriberto Roxas; that the third building (Exh. 'B-3') presently being occupied
by Guillermo Roxas was originally intended as a recreation hall but later converted as a residential house;
that this house was built also from corporate funds; that the said house occupied by Guillermo Roxas
when it was being built had nipa roofing but was later changed to galvanized iron sheets; that at the
beginning, it had no partition downstairs and the second floor was an open space; that the conversion
from a recreation hall to a residential house was with the knowledge of Eufrocino Roxas and was not
objected to by any of the Board of Directors of the plaintiff; that most of the materials used in converting
the building into a residential house came from the materials left by Coppola, a film producer, who filmed
the movie `Apocalypse Now'; that Coppola left the materials as part of his payment for rents of the rooms
that he occupied in the resort; that after the said recreation hall was converted into a residential house,
defendant Guillermo Roxas moved in and occupied the same together with his family sometime in 1977
or 1978; that during the time Eufrocino Roxas was still alive, Eriberto Roxas was the general manager of
the corporation and there was seldom any board meeting; that Eufrocino Roxas together with Eriberto
Roxas were (sic) the ones who were running the corporation; that during this time, Eriberto Roxas was
the restaurant and wine concessionaire of the resort; that after the death of Eufrocino Roxas, Eriberto
Roxas continued as the general manager until his death in 1980; that after the death of Eriberto Roxas
in 1980, the defendants Rebecca B. Roxas and Guillermo Roxas, committed acts that impeded the
plaintiff's expansion and normal operation of the resort; that the plaintiff could not even use its own
pavilions, kitchen and other facilities because of the acts of the defendants which led to the filing of
criminal cases in court; that cases were even filed before the Ministry of Tourism, Bureau of Domestic
Trade and the Office of the President by the parties herein; that the defendants violated the resolution
and orders of the Ministry of Tourism dated July 28, 1983, August 3, 1983 and November 26, 1984 (Exhs.
'G', 'H' and 'H-1') which ordered them or the corporation they represent to desist from and to turn over
immediately to the plaintiff the management and operation of the restaurant and wine outlets of the said
resort (Exh. 'G-1'); that the defendants also violated the decision of the Bureau of Domestic Trade dated
october 23, 1983 (Exh. 'C'); that on August 27, 1983, because of the acts of the defendants, the Board of
Directors of the plaintiff adopted Resolution No. 83-12 series of 1983 (Exh. 'F') authorizing the ejectment
of the defendants from the premises occupied by them; that on September 1, 1983, demand letters were
sent to Rebecca Boyer-Roxas and Guillermo Roxas (Exhs. 'D' and 'D-1') demanding that they vacate the
respective premises they occupy; and that the dispute between the plaintiff and the defendants was
brought before the barangay level and the same was not settled (Exhs. 'E' and 'E-1')." (Original Records,
pp. 454-456) prcd

The petitioners appealed the decision to the Court of Appeals. However, as stated earlier, the appellate court
affirmed the lower court's decision. The petitioners' motion for reconsideration was likewise denied.
Hence, this petition.
In a resolution dated February 5, 1992, we gave due course to the petition.
The petitioners now contend:
I. Respondent Court erred when it refused to pierce the veil of corporate fiction over private respondent
and maintain the petitioners in their possession and/or occupancy of the subject premises considering
that petitioners are owners of aliquot part of the properties of private respondent. Besides, private
respondent itself discarded the mantle of corporate fiction by acts and/or omissions of its board of
directors and/or stockholders.

II. The respondent Court erred in not holding that petitioners were in fact denied due process or their day
in court brought about by the gross negligence of their former counsel.
III. The respondent Court misapplied the law when it ordered petitioner Rebecca Boyer-Roxas to remove
the unfinished building in RTC Case No. 802-84-C, when the trial court opined that she spent her own
funds for the construction thereof. (CA Rollo, pp. 17-18)
Were the petitioners denied due process of law in the lower court?
After the cases were re-raffled to the sala of Presiding Judge Odilon Bautista of Branch 37 the following events
transpired:
On July 3, 1986, the lower court issued an Order setting the hearing of the cases on July 21, 1986. Petitioner
Rebecca V. Roxas received a copy of the Order on July 15, 1986, while petitioner Guillermo Roxas received his
copy on July 18, 1986. Atty. Conrado Manicad, the petitioners' counsel received another copy of the Order on
July 11, 1986. (Original Records, p. 260)
On motion of the respondent corporation's counsel, the lower court issued an Order dated July 15, 1986
cancelling the July 21, 1986 hearing and resetting the hearing to August 11, 1986. (Original records, 262-263)
Three separate copies of the order were sent and received by the petitioners and their counsel. (Original
Records, pp. 268, 269, 271)
A motion to cancel and re-schedule the August 11, 1986 hearing filed by the respondent corporation's counsel
was denied in an Order dated August 8, 1986. Again separate copies of the Order were sent and received by
the petitioners and their counsel. (Original Records, pp. 276-279)
At the hearing held on August 11, 1986, only Atty. Benito P. Fabie, counsel for the respondent corporation
appeared. Neither the petitioners nor their counsel appeared despite notice of hearing. The lower court then
issued an Order on the same date, to wit:
"ORDER
When these cases were called for continuation of trial, Atty. Benito P. Fabie appeared before this Court,
however, the defendants and their lawyer despite receipt of the Order setting the case for hearing today
failed to appear. On Motion of Atty. Fabie, further cross examination of witness Victoria Vallarta is hereby
considered as having been waived.
The plaintiff is hereby given twenty (20) days from today within which to submit formal offer of evidence
and defendants are also given ten (10) days from receipt of such formal offer of evidence to file their
objection thereto.
In the meantime, hearing in these cases is set to September 29, 1986 at 10:00 o'clock in the morning."
(Original Records, p. 286)
Copies of the Order were sent and received by the petitioners and their counsel on the following dates
Rebecca Boyer-Roxas on August 20, 1986, Guillermo Roxas on August 26, 1986, and Atty. Conrado Manicad
on September 19, 1986. (Original Records, pp. 288-290)
On September 1, 1986, the respondent corporation filed its "Formal Offer of Evidence." In an Order dated
September 29, 1986, the lower court issued an Order admitting exhibits "A" to "M-3" submitted by the respondent
corporation in its "Formal Offer of Evidence . . . there being no objection . . . ." (Original Records, p. 418) Copies
of this Order were sent and received by the petitioners and their counsel on the following dates: Rebecca Boyer-
Roxas on October 9, 1986 and Atty. Conrado Manicad on October 4, 1986 (Original Records, pp. 420, 421, 428)
The scheduled hearing on September 29, 1986 did not push through as the petitioners and their counsel were
not present prompting Atty. Benito Fabie, the respondent corporation's counsel to move that the cases be
submitted for decision. The lower court denied the motion and set the cases for hearing on October 22, 1986.
However, in its Order dated September 29, 1986, the courtwarned that in the event the petitioners and their
counsel failed to appear on the next scheduled hearing, the court shall consider the cases submitted for decision
based on the evidence on record. (Original Records, p. 429, 430 and 431)
Separate copies of this Order were sent and received by the petitioners and their counsel on the following dates:
Rebecca Boyer-Roxas on October 9, 1986, Guillermo Roxas on October 9, 1986; and Atty. Conrado Manicad
on October 1, 1986. (Original Records, pp. 429-430) prcd

Despite notice, the petitioners and their counsel again filed to attend the scheduled October 22, 1986 hearing.
Atty. Fabie representing the respondent corporation was present. Hence, in its Order dated October 22, 1986,
on motion of Atty. Fabie and pursuant to the order dated September 29, 1986, the Court considered the cases
submitted for decision. (Original Records, p. 436)
On November 14, 1986, the respondent corporation, filed a "Manifestation", stating that ". . . it is submitting
without further argument its `Opposition to the Motion for Reconsideration' for the consideration of the Honorable
Court in resolving subject incident." (Original Records, p. 442)
On December 16, 1986, the lower court issued an Order, to wit:
"ORDER
Considering that the Court up to this date has not received any Motion for Reconsideration filed by the
defendants in the above-entitled cases, the Court cannot act on the Opposition to Motion for
Reconsideration filed by the plaintiff and received by the Court on November 14, 1986." (Original Records,
p. 446)
On January 15, 1987, the lower court rendered the questioned decision in the two (2) cases. (Original Records,
pp. 453-459)
On January 20, 1987, Atty. Conrado Manicad, the petitioners' counsel filed an Ex-Parte Manifestation and
attached thereto, a motion for reconsideration of the October 22, 1986 order submitting the cases for decision.
He prayed that the Order be set aside and the cases be re-opened for reception of evidence for the petitioners.
He averred that: 1) within the reglementary period he prepared the motion for reconsideration and among other
documents, the draft was sent to his law office thru his messenger; after signing the final copies, he caused the
service of a copy to the respondent corporation's counsel with the instruction that the copy of the Court be filed;
however, there was a miscommunication between his secretary and messenger in that the secretary mailed the
copy for the respondent corporation's counsel and placed the rest in an envelope for the messenger to file the
same in court but the messenger thought that it was the secretary who would file it; it was only later on when it
was discovered that the copy for the Court has not yet been filed and that such failure to file the motion for
reconsideration was due to excusable neglect and/or accident. The motion for reconsideration contained the
following allegations: that on the date set for hearing (October 22, 1986), he was on his way to Calamba to attend
the hearing but his car suffered transmission breakdown; and that despite efforts to repair said transmission, the
car remained inoperative resulting in his absence at the said hearing. (Original Records, pp. 460-469)
On February 3, 1987, Atty. Manicad filed a motion for reconsideration of the January 15, 1987 decision. He
explained that he had to file the motion because the receiving clerk refused to admit the motion for
reconsideration attached to the ex-parte manifestation because there was no proof of service to the other party.
Included in the motion for reconsideration was a notice of hearing of the motion on February 3, 1987. (Original
Records, p. 476-A)
On February 4, 1987, the respondent corporation through its counsel filed a Manifestation and Motion
manifesting that they received the copy of the motion for reconsideration only today (February 4, 1987), hence
they prayed for the postponement of the hearing. (Original Records, pp., 478-479)
On the same day, February 4, 1987, the lower court issued an Order setting the hearing on February 13, 1987
on the ground that it received the motion for reconsideration late. Copies of this Order were sent separately to
the petitioners and their counsel. The records show that Atty. Manicad received his copy on February 11, 1987.
As regards the petitioners, the records reveal that Rebecca Boyer-Roxas did not receive her copy while as
regards Guillermo Roxas, somebody signed for him but did not indicate when the copy was received. (Original
Records, pp. 481-483)
At the scheduled February 13, 1987 hearing, the counsels for the parties were present. However, the hearing
was reset for March 6, 1987 in order to allow the respondent corporation to file its opposition to the motion for
reconsideration. (Order dated February 13, 1987, Original Records, p. 486) Copies of the Order were sent and
received by the petitioners and their counsel on the following dates: Rebecca Boyer-Roxas on February 23,
1987; Guillermo Roxas on February 23, 1987 and Atty. Manicad on February 19, 1987. (Original Records, pp.
487, 489-490)
The records are not clear as to whether or not the scheduled hearing on March 6, 1987 was held. Nevertheless,
the records reveal that on March 13, 1987, the lower court issued an Order denying the motion for
reconsideration.
The well-settled doctrine is that the client is bound by the mistakes of his lawyer. (Aguila v. Court of First Instance
of Batangas, Branch I, 160 SCRA 352 [1988]; See also Vivero v. Santos, et al., 98 Phil. 500 [1956]; Isaac v.
Mendoza, 89 Phil. 279 [1951]; Montes v. Court of First Instance of Tayabas, 48 Phil. 640 [1926]; People v.
Manzanilla, 43 Phil. 167 [1922]; United States v. Dungca, 27 Phil. 274 [1914]; and United States v. Umali, 15
Phil. 33 [1910]) This rule, however, has its exceptions. Thus, in several cases, we ruled that the party is not
bound by the actions of his counsel in case the gross negligence of the counsel resulted in the client's deprivation
of his property without due process of law. In the case of Legarda v. Court of Appeals (195 SCRA 418 [1991]),
we said:
"In People's Homesite & Housing Corp. v. Tiongco and Escasa (12 SCRA 471 [1964]), this Court
ruled as follows:

'Procedural technicality should not be made a bar to the vindication of a legitimate


grievance. When such technicality deserts from being an aid to justice, the courts are justified in
excepting from its operation a particular case. Where there was something fishy and suspicious
about the actuations of the former counsel of petitioners in the case at bar, in that he did not give
any significance at all to the processes of the court, which has proven prejudicial to the rights of
said clients, under a lame and flimsy explanation that the court's processes just escaped his
attention, it is held that said lawyer deprived his clients of their day in court, thus entitling said
clients to petition for relief from judgment despite the lapse of the reglementary period for filing
said period for filing said petition.'
"In Escudero v. Judge Dulary (158 SCRA 69 [1988]), this Court, in holding that the counsel's blunder in
procedure is an exception to the rule that the client is bound by the mistakes of counsel, made the
following disquisition:
'Petitioners contend, through their new counsel, that the judgment rendered against them
by the respondent court was null and void, because they were therein deprived of their day in
court and divested of their property without due process of law, through the gross ignorance,
mistake and negligence of their previous counsel. They acknowledge that, while as a rule, clients
are bound by the mistake of their counsel, the rule should not be applied automatically to their
case, as their trial counsel's blunder in procedure and gross ignorance of existing jurisprudences
changed their cause of action and violated their substantial rights.
'We are impressed with petitioner's contentions. cdrep

xxx xxx xxx


'While this Court is cognizant of the rule that, generally, a client will suffer consequences
of the negligence, mistake or lack of competence of his counsel, in the interest of justice and
equity, exceptions may be made to such rule, in accordance with the facts and circumstances of
each case. Adherence to the general rule would, in the instant case, result in the outright
deprivation of their property through a technicality.'
"In its questioned decision dated November 19, 1989 the Court of Appeals found, in no uncertain terms,
the negligence of the then counsel for petitioners when he failed to file the proper motion to dismiss or to
draw a compromise agreement if it was true that they agreed on a settlement of the case; or in simply
filing an answer; and that after having been furnished a copy of the decision by the court he failed to
appeal therefrom or to file a petition for relief from the order declaring petitioners in default. In all these
instances the appellate court found said counsel negligent but his acts were held to bind his client,
petitioners herein, nevertheless.
The Court disagrees and finds that the negligence of counsel in this case appears to be so gross and
inexcusable. This was compounded by the fact, that after petitioner gave said counsel another chance to
make up for his omissions by asking him to file a petition for annulment of the judgment in the appellate
court, again counsel abandoned the case of petitioner in that after he received a copy of the adverse
judgment of the appellate court, he did not do anything to save the situation or inform his client of the
judgment. He allowed the judgment to lapse and become final. Such reckless and gross negligence
should not be allowed to bind the petitioner. Petitioner was thereby effectively deprived of her day in
court." (at pp. 426-427)
The herein petitioners', however, are not similarly situated as the parties mentioned in the abovecited cases. We
cannot rule that they, too, were victims of the gross negligence of their counsel.
The petitioners are to be blamed for the October 22, 1986 order issued by the lower court submitting the cases
for decision. They received notices of the scheduled hearings and yet they did not do anything. More specifically,
the parties received notice of the Order dated September 29, 1986 with the warningthat if they fail to attend the
October 22, 1986 hearing, the cases would be submitted for decision based on the evidence on record. Earlier,
at the scheduled hearing on September 29, 1986, the counsel for the respondent corporation moved that the
cases be submitted for decision for failure of the petitioners and their counsel to attend despite notice. The lower
court denied the motion and gave the petitioners and their counsel another chance by rescheduling the October
22, 1986 hearing.
Indeed, the petitioners knew all along that their counsel was not attending the scheduled hearings. They did not
take steps to change their counsel or make him attend to their cases until it was too late. On the contrary, they
continued to retain the services of Atty. Manicad knowing fully well his lapses vis-a-vis their cases. They,
therefore, cannot raise the alleged gross negligence of their counsel resulting in their denial of due process to
warrant the reversal of the lower court's decision. In a similar case, Aguila v. Court of First Instance of Batangas,
Branch 1 (supra), we ruled:
"In the instant case, the petitioner should have noticed the succession of errors committed by his counsel
and taken appropriate steps for his replacement before it was altogether too late. He did not. On the
contrary, he continued to retain his counsel through the series of proceedings that all resulted in the
rejection of his cause, obviously through such counsel's 'ineptitude' and, let it be added, the clients'
forbearance. The petitioner's reverses should nave cautioned him that his lawyer was mishandling his
case and moved him to seek the help of other counsel, which he did in the end but rather tardily.
Now petitioner wants us to nullify all of the antecedent proceedings and recognize his earlier claims to
the disputed property on the justification that his counsel was grossly inept. Such a reason is hardly
plausible as the petitioner's new counsel should know. Otherwise, all a defeated party would have to do
to salvage his case is claim neglect or mistake on the part of his counsel as a ground for reversing the
adverse judgment. There would be no end to litigation if these were allowed as every shortcoming of
counsel could be the subject of challenge by his client through another counsel who, if he is also found
wanting, would likewise be disowned by the same client through another counsel, and so on ad infinitum.
This would render court proceedings indefinite, tentative and subject to reopening at any time by the mere
subterfuge of replacing counsel." (at pp. 357-358)
We now discuss the merits of the cases.
In the first assignment of error, the petitioners maintain that their possession of the questioned properties must
be respected in view of their ownership of an aliquot portion of all the properties of the respondent corporation
being stockholders thereof. They propose that the veil of corporate fiction be pierced, considering the
circumstances under which the respondent corporation was formed.
Originally, the questioned properties belonged to Eugenia V. Roxas. After the death, the heirs of Eugenia V.
Roxas, among the petitioners herein, decided to form a corporation Heirs of Eugenia V. Roxas, Incorporated
(private respondent herein) with the inherited properties as capital of the corporation. The corporation was
incorporated on December 4, 1962 with the primary purpose of engaging in agriculture to develop the inherited
properties. The Articles of Incorporation of the respondent corporation were amended in 1971 to allow it to
engage in the resort business. Accordingly, the corporation put up a resort known as Hidden Valley Springs
Resort where the questioned properties are located.
These facts, however, do not justify the position taken by the petitioners.
The respondent is a bona fide corporation. As such, it has a juridical personality of its own separate from the
members composing it. (Western Agro Industrial Corporation v. Court of Appeals, 188 SCRA 709 [1990]; Tan
Boon Bee & Co., Inc. v. Jarencio, 163 SCRA 205 [1988]; Yutivo Sons Hardware Company v. Court of Tax
Appeals, 1 SCRA 160 [1961]; Emilio Cano Enterprises, Inc. v. Court of Industrial Relations, 13 SCRA 290 [1965])
There is no dispute that title over the questioned land where the Hidden Valley Springs Resort is located is
registered in the name of the corporation. The records also show that the staff house being occupied by petitioner
Rebecca Boyer-Roxas and the recreation hall which was later on converted into a residential house occupied by
petitioner Guillermo Roxas are owned by the respondent corporation. Regarding properties owned by a
corporation, we stated in the case of Stockholders of F. Guanzon and Sons, Inc. v. Register of Deeds of Manila,
(6 SCRA 373 [1962]): Cdpr
xxx xxx xxx
". . . Properties registered in the name of the corporation are owned by it as an entity separate and distinct
from its members. While shares of stock constitute personal property, they do not represent property of
the corporation. The corporation has property of its own which consists chiefly of real estate (Nelson v.
Owen, 113 Ala., 372, 21 So. 75; Morrow v. Gould, 145 Iowa 1, 123 N.W. 743). A share of stock only
typifies an aliquot part of the corporation's property, or the right to share in its proceeds to that extent
when distributed according to law and equity (Hall & Faley v. Alabama Terminal, 173 Ala., 398, 56 So.
235), but its holder is not the owner of any part of the capital of the corporation (Bradley v. Bauder, 36
Ohio St., 28). Nor is he entitled to the possession of any definite portion of its property or assets (Gottfried
v. Miller, 104 U.S., 521; Jones v. Davis, 35 Ohio St., 474 ). The stockholder is not a co-owner or tenant
in common of the corporate property (Harton v. Johnston, 166 Ala., 317, 51 So., 992)." (at pp. 375-376)

The petitioners point out that their occupancy of the staff house which was later used as the residence of Eriberto
Roxas, husband of petitioner Rebecca Boyer-Roxas and the recreation hall which was converted into a
residential house were with the blessings of Eufrocino Roxas, the deceased husband of Eugenia V. Roxas, who
was the majority and controlling stockholder of the corporation. In his lifetime, Eufrocino Roxas together with
Eriberto Roxas, the husband or petitioner Rebecca Boyer-Roxas, and the father of petitioner Guillermo Roxas
managed the corporation. The Board of Directors did not object to such an arrangement. The petitioners argue
that ". . . that authority thus given by Eufrocino Roxas for the conversion of the recreation hall into a residential
house can no longer be questioned by the stockholders of the private respondent and/or its board of directors
for they impliedly but no less explicitly delegated such authority to said Eufrocino Roxas." (Rollo, p. 12)
Again, we must emphasize that the respondent corporation has a distinct personality separate from its members.
The corporation transacts its business only through its officers or agents. (Western Agro Industrial Corporation
v. Court of Appeals, supra) Whatever authority these officers or agents may have is derived from the board of
directors or other governing body unless conferred by the charter of the corporation. An officer's power as an
agent of the corporation must be sought from the statute, charter, the by-laws or in a delegation of authority to
such officer, from the acts of the board of directors, formally expressed or implied from a habit or custom of doing
business. (Vicente v. Geraldez, 52 SCRA 210 [1973])
In the present case, the record shows that Eufrocino V. Roxas who then controlled the management of the
corporation, being the majority stockholder, consented to the petitioners' stay within the questioned properties.
Specifically, Eufrocino Roxas gave his consent to the conversion of the recreation hall to a residential house,
now occupied by petitioner Guillermo Roxas. The Board of Directors did not object to the actions of Eufrocino
Roxas. The petitioners were allowed to stay within the questioned properties until August 27, 1983, when the
Board of Directors approved a Resolution ejecting the petitioners, to wit:
"RESOLUTION No. 83-12
RESOLVED, That Rebecca B. Roxas and Guillermo Roxas, and all persons claiming under them, be
ejected from their occupancy of the Hidden Valley Springs compound on which their houses have been
constructed and/or are being constructed only on tolerance of the Corporation and without any contract
therefore, in order to give way to the Corporation's expansion and improvement program and obviate
prejudice to the operation of the Hidden Valley Springs Resort by their continued interference.
RESOLVED, Further that the services of Atty. Benito P. Fabie be engaged and that he be authorized as
he is hereby authorized to effect the ejectment, including the filing of the corresponding suits, if necessary
to do so." (Original Records, p. 327)
We find nothing irregular in the adoption of the Resolution by the Board of Directors. The petitioners' stay within
the questioned properties was merely by tolerance of the respondent corporation in deference to the wishes of
Eufrocino Roxas, who during his lifetime, controlled and managed the corporation. Eufrocino Roxas' actions
could not have bound the corporation forever. The petitioners have not cited any provision of the corporation by-
laws or any resolution or act of the Board of Directors which authorized Eufrocino Roxas to allow them to stay
within the company premises forever. We rule that in the absence of any existing contract between the petitioners
and the respondent corporation, the corporation may elect to eject the petitioners at any time it wishes for the
benefit and interest of the respondent corporation.
The petitioners' suggestion that the veil of the corporate fiction should be pierced is untenable. The separate
personality of the corporation may be disregarded only when the corporation is used "as a cloak or cover for
fraud or illegality, or to work injustice, or where necessary to achieve equity or when necessary for the protection
of the creditors." (Sulo ng Bayan, Inc. v. Araneta, Inc., 72 SCRA 347 [1976] cited in Tan Boon Bee & Co., Inc.,
v. Jarencio, supra and Western AGro Industrial Corporation v. Court of Appeals, supra) The circumstances in
the present cases do not fall under any of the enumerated categories.
In the third assignment of error, the petitioners insists that as regards the unfinished building, Rebecca Boyer-
Roxas is a builder in good faith.
The construction of the unfinished building started when Eriberto Roxas, husband of Rebecca Boyer-Roxas, was
still alive and was the general manager of the respondent corporation. The couple used their own funds to finance
the construction of the building. The Board of Directors of the corporation, however, did not object to the
construction. They allowed the construction to continue despite the fact that it was within the property of the
corporation. Under these circumstances, we agree with the petitioners that the provision of Article 453 of the
Civil Code should have been applied by the lower courts.
Article 453 of the Civil Code provides:
"If there was bad faith, not only on the part of the person who built, planted or sown on the land of another
but also on the part of the owner of such land, the rights of one and the other shall be the same as though
both had acted in good faith."
In such a case, the provisions of Article 448 of the Civil Code govern the relationship between petitioner Rebecca
Boyer-Roxas and the respondent corporation, to wit: LibLex

"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 buildings 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."
WHEREFORE, the present petition is partly GRANTED. The questioned decision of the Court of Appeals
affirming the decision of the Regional Trial Court of Laguna, Branch 37, in RTC Civil Case No. 802-84-C is
MODIFIED in that subparagraphs (c) and (d) of Paragraph 1 of the dispositive portion of the decision are deleted.
In their stead, the petitioner Rebecca Boyer-Roxas and the respondent corporation are ordered to follow the
provisions of Article 448 of the Civil Code as regard the questioned unfinished building in RTC Civil Case No.
802-84-C. The questioned decision is affirmed in all other respects.
SO ORDERED.
Feliciano, Bidin, Davide, Jr. and Romero, JJ., concur.
||| (Boyer-Roxas v. Court of Appeals, G.R. No. 100866, [July 14, 1992])
SECOND DIVISION
[G.R. No. 57288. April 30, 1984.]
LEONILA SARMIENTO, petitioner, vs. HON. ENRIQUE A. AGANA, District Judge, Court
of First Instance of Rizal, Seventh Judicial District, Branch XXVIII, Pasay City, and
SPOUSES ERNESTO VALENTlNO and REBECCA LORENZO-VALENTINO, respondents.
Mercedes M . Respicio for petitioner.
Romulo R. Bobadilla for private respondents.
SYLLABUS
1. CIVIL LAW; PROPERTY; POSSESSION; BUILDERS IN GOOD FAITH; GOOD FAITH MANIFESTED
WHERE RESIDENTIAL HOUSE WAS BUILT WITH THE CONSENT OF THE ALLEGED OWNER. 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.
2. ID.; ID.; ID.; ID.; OPTIONS OF LANDOWNER; CASE AT BAR. 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 of 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. "The owner of the building erected
in good faith on a land owned by another, is entitled to retain 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 . . . 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" (Ignacio vs. Hilario, 76 Phil. 605, 608 [1946]).
DECISION
MELENCIO-HERRERA, J : p

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 Paraaque, 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.
cdll

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 Paraaque (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. Santos, Jr. who, on
September 7, 1974, sold the same to petitioner SARMIENTO. The following January 6, 1975, SARMIENTO
asked ERNESTO and wife to vacate and, on April 21, 1975, filed an Ejectment suit against them. In the
evidentiary hearings before the Municipal Court, SARMIENTO submitted the deed of sale of the LAND in her
favor, which showed the price to be P15,000.00. On the other hand, ERNESTO testified that the then cost of
the RESIDENTIAL HOUSE would be from P30,000.00 to P40,000.00. The figures were not questioned by
SARMIENTO.
The Municipal Court found that private respondents had built the RESIDENTIAL HOUSE in good faith, and,
disregarding the testimony of ERNESTO, that it had a value of P20,000.00. It then ordered ERNESTO and wife
to vacate the LAND after SARMIENTO has paid them the mentioned sum of P20,000.00.
The Ejectment suit was elevated to the Court of First Instance of Pasay where, after the submission of
memoranda, said Court rendered a modifying Decision under Article 448 of the Civil Code. SARMIENTO was
required, within 60 days, to exercise the option to reimburse ERNESTO and wife the sum of P40,000.00 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. LLjur

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. LexLib

"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 supplied).
"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.
Teehankee, Plana, Relova, Gutierrez, Jr. and De la Fuente, JJ ., concur.
||| (Sarmiento v. Agana, G.R. No. 57288, [April 30, 1984], 214 PHIL 101-106)
FIRST DIVISION
[G.R. No. 146259. September 13, 2007.]
FLORENTINO, TROADIO and PEDRO, all surnamed OCHOA,petitioners, vs. MAURO
APETA and APOLONIA ALMAZAN,respondents.
DECISION
SANDOVAL-GUTIERREZ, J : p

Challenged in this Petition for Review on Certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as
amended, are the Decision 1 dated September 8, 2000 and Resolution 2 dated November 20, 2000 of the Court
of Appeals in CA G.R. CV No. 56109.
The facts are:
Since 1910, the above-named petitioners and their predecessors-in-interest have been occupying Lot No.
1580 consisting of 886 square meters situated in Malaban, Bian, Laguna. The lot is covered by Transfer
Certificate of Title (TCT) No. T-40624 of the Registry of Deeds of that province. They built their houses and
apartment building thereon.
Sometime in May 10, 1982, Mauro Apeta and Apolonia Almazan, respondents, found that they are the true
owners of Lot No. 1580 being occupied by petitioners.
On January 22, 1988, respondents filed with the Regional Trial Court (RTC), Branch 24, Bian, Laguna a
complaint for recovery of possession and damages against petitioners, docketed as Civil Case No. B-2777.
Respondents alleged in the main that they are the lawful owners of Lot No. 1580 covered by Certificate of Title
No. RT-599 (10731) issued by the Registry of Deeds of Laguna.
In their answer to the complaint, petitioners specifically denied the allegations in the complaint, contending that
they are the owners of Lot No. 1580 as shown by TCT No. T-40624 issued by the Registry of Deeds of
Laguna.
During the proceedings before the RTC, upon agreement of the parties, the trial judge commissioned Engr.
Romulo Unciano of the Bureau of Lands of Region IV to conduct a resurvey of the disputed property. The
result of the resurvey (approved by the Bureau of Lands) shows that Lot No. 1580, occupied by petitioners,
was registered in the name of Margarita Almada, respondents' predecessor-in-interest; and that the lot covered
by TCT No. T-40624 is not Lot No. 1580, but Lot No. 1581 registered in the name of Servillano Ochoa,
petitioners' predecessor-in-interest. This lot has been occupied by Isidro Jasmin.
On March 24, 1995, the trial court rendered a Decision in favor of respondents, thus:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiffs and against
the defendants as follows:
1. Declaring plaintiffs as the true and lawful owners of Lot 1580 of the Bian Estate Subdivision covered
by Transfer Certificate of Title No. RT-599 (10731) and declaring the defendants without right
whatsoever to continue in possession thereof.
2. Ordering the defendants and all those acting in their behalf to deliver peacefully the physical
possession of Lot 1580 to the plaintiffs and to remove their houses and apartment building thereon.
3. Ordering the defendants to pay, jointly and severally to plaintiffs the amount of P30,000 as and for
attorneys fees and litigation expenses.
SO ORDERED. 3
On appeal, the Court of Appeals, in its Decision dated September 8, 2000, affirmed the judgment of the RTC.
Petitioners filed a motion for reconsideration, but it was denied by the appellate court in its Resolution 4 dated
November 20, 2000.
Hence, the instant petition.
Petitioners contend that Lot No. 1580 belongs to them and that respondents' action is barred by prescription.
Petitioners' contention lacks merit.
On petitioners' claim that they are the owners of Lot No. 1580, it is a well-established principle that in an
appeal via a petition for review on certiorari, only questions of law may be raised. Here, the issue posed by
petitioners requires us to weigh anew the evidence submitted by the parties already passed upon by the Court
of Appeals. It is basic that this Court is not a trier of facts. Thus, it may not review the findings of the Court of
Appeals except, among others: (a) when its factual findings and those of the trial court are contradictory; (b)
when its inference is manifestly mistaken or absurd; (c) when its judgment is premised on its misapprehension
of the facts; and (d) when it failed to resolve relevant facts which, if properly considered, would justify a
modification or reversal of the decision of the appellate court. 5 The issue raised by petitioners that they are the
actual owners of Lot No. 1580 is factual in nature and requires a review of the pieces of evidence presented by
the parties. Thus, we can no longer pass upon and evaluate the lower courts' finding that based on the
evidence presented before them, specifically the result of the resurvey conducted by Engr. Romulo Unciano,
respondents are "the true and lawful owners of Lot 1580."
Anent petitioners' second contention that respondents' action has been barred by prescription, suffice it to state
that no title to registered land in derogation to that of the registered owner shall be acquired by prescription or
adverse possession. 6 Neither can prescription be allowed against the hereditary successors of the registered
owner, because they step into the shoes of the decedent and are merely the continuation of the personality of
their predecessor-in-interest. 7
Verily, the Court of Appeals did not err when it ruled that respondents are the true and lawful owners of Lot No.
1580. Hence, they "should now be placed in possession thereof."
Parenthetically, considering that petitioners and their predecessors-in-interest have built their houses and
apartment building on Lot No. 1580, should respondents be allowed to take possession of those
improvements? In order to settle this matter, we should determine whether petitioners were builders in good
faith.
Good faith is an intangible and abstract quality with no technical meaning or statutory definition, and it
encompasses, among other things, an honest belief, the absence of malice and the absence of design to
defraud or to seek an unconscionable advantage. It implies honesty of intention, and freedom from knowledge
of circumstances which ought to put the holder upon inquiry. 8 The essence of good faith lies in an honest
belief in the validity of one's right, ignorance of a superior claim and absence of intention to overreach
another. 9Applied to possession, one is considered in good faith if he is not aware that there exists in his title or
mode of acquisition any flaw which invalidates it. 10
Using the above parameters, we are convinced that petitioners and their predecessors-in-interest were in good
faith when they built their houses and apartment building on Lot No. 1580 since they were convinced it was
covered by their TCT No. T-40624.
The following provisions of the Civil Code are relevant:
Article 448. The owner of the land on which anything has been built, sown or planted in good faith,
shall have the right to appropriate as his own the works, sowing or planting, after payment of the
indemnity provided for in Articles 546 and 548, or to oblige the one who built or planted to pay the price
of the land, and the one who sowed, the proper rent. However, the builder or planter cannot be obliged
to buy the land if its value is considerably more than that of the building or trees. In such case, he shall
pay reasonable rent, if the owner of the land does not choose to appropriate the building or trees after
proper indemnity. The parties shall agree upon the terms of the lease and in case of disagreement, the
court shall fix the terms thereof.
Article 546. Necessary expenses shall be refunded to every possessor; but only the possessor in good
faith may retain the thing until he has been reimbursed therefor.
Useful expenses shall be refunded only to the possessor in good faith with the same right of retention,
the person who has defeated him in the possession having the option of refunding the amount of the
expenses or of paying the increase in value which the thing may have acquired by reason thereof.
Article 548. Expense for pure luxury or mere pleasure shall not be refunded to the possessor in good
faith; but he may remove the ornaments with which he has embellished the principal thing if it suffers no
injury thereby, and if his successors in the possession do not prefer to refund the amount expended.
Under the foregoing provisions, the landowner can make a choice either by appropriating the building by
paying the proper indemnity or obliging the builder to pay the price of the land. The choice belongs to the
owner of the land, a rule that accords with the principle of accession that the accessory follows the principal
and not the other way around. He must choose only one.
Following the above provisions, respondents, as owners of Lot No. 1580, may choose between appropriating
as their own the houses and apartment building constructed thereon by petitioners and their predecessors-in-
interest by paying the proper indemnity or value; or obliging petitioners to pay the price of Lot No. 1580 which
is not more than that of the improvements.
WHEREFORE, we DENY the petition. The assailed Decision and Resolution of the Court of Appeals in CA
G.R. CV No. 56109 are AFFIRMED with MODIFICATION in the sense that respondents have the option to pay
for the houses and apartment building constructed by petitioners and their predecessors-in-interest on Lot No.
1580; or to oblige petitioners to pay the price of the lot in an amount not more than the value of the said
improvements.
SO ORDERED.
Puno, C.J., Corona, Azcuna and Garcia, JJ., concur.
||| (Ochoa v. Apeta, G.R. No. 146259, [September 13, 2007], 559 PHIL 650-657)
FIRST DIVISION
[G.R. No. L-57348. May 16, 1985.]
FRANCISCO DEPRA, plaintiff-appellee, vs. AGUSTIN DUMLAO,defendant-appellant.
Roberto D. Dineros for plaintiff-appellee.
Neil D. Hechanova for defendant-appellant.
DECISION
MELENCIO-HERRERA, J : p

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. T-3087, 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 Derla, 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 Dumangas, docketed as Civil Case No. I. Said
complaint was later amended to include DEPRA as a party 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: Cdpr

"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 that day that this decision shall
have become final."
From the foregoing judgment, neither party appealed so that, if 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 ourselves 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). 1 The Municipal Court overstepped 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, LLpr

"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; . . ." (Italics ours)
Consistent with the principles 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 apply 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 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 Code.
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.
LLpr

". . . es justa la facultad que el codigo da al dueo del suelo en el articulo 361, en el caso de
edificacion o plantacion? Algunos comentaristas la conceptuan injusta, y como un extraordinario
privilegio en favor de la propiedad territorial. Entienden que impone el Codigo una pena al
poseedor de buena fe; y como advierte uno de los comentaristas aludidos, 'no se ve claro el por
que de tal pena . . . al obligar al que obro de buena fe a quedarse con el edificio o plantacion,
previo el pago del terreno que ocupa, porque si bien es verdad que cuando edifico o planto
demostro con este hecho, que queria para si el edificio o plantio, tambien lo es que el que edifico
o planto de buena fe lo hizo en la erronea inteligencia de creerse dueo 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 eddficar. 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 eniquecido 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 posible 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 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. Ibaez [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 a his own by paying
to DUMLAO either the amount of the expenses spent by DUMLAO for the building of the kitchen, or
the increase in value ("plus value") which the said area of 34 square meters may have acquired by
reason thereof, or to oblige DUMLAO to pay the price of said area. The amounts to be respectively
paid by DUMLAO and DEPRA, in accordance with the option thus exercised by written notice of the
other party and to the Court, shall be paid by the obligor within fifteen (15) days from such notice of
the option by tendering the amount to the Court in favor of the party entitled to receive it;
b) The trial Court shall further order that if DEPRA exercises the option to oblige DUMLAO to
pay the price of the land but the latter rejects such purchase because, as found by the trial Court, the
value of the land is considerably more than that of the kitchen, DUMLAO shall give written notice of
such rejection to DEPRA and to the Court within fifteen (15) days from notice of DEPRA's option to
sell the land. In that event, the parties shall be given a period of fifteen (15) days from such notice of
rejection within which to agree upon the terms of the lease, and give the Court formal written notice of
such agreement and its provisos. If no agreement is reached by the parties, the trial Court, within
fifteen (15) days from and after the termination of the said period fixed for negotiation, shall then fix
the terms of the lease, provided that the monthly rental to be fixed by the Court shall not be less than
Ten Pesos (P10.00) per month, payable within the first five (5) days of each calendar month. The
period for the forced lease shall not be more than two (2) years, counted from the finality of the
judgment, considering the long period of time since 1952 that DUMLAO has occupied the subject
area. The rental thus fixed shall be increased by ten percent (10%) for the second year of the forced
lease. DUMLAO shall not make any further constructions or improvements on the kitchen. Upon
expiration of the two-year period, or upon default by DUMLAO in the payment of rentals for two (2)
consecutive months, DEPRA shall be entitled to terminate the forced lease, to recover his land, and
to have the kitchen removed by DUMLAO or at the latter's expense. The rentals herein provided shall
be tendered by DUMLAO to the Court for payment to DEPRA, and such tender shall constitute
evidence of whether or not compliance was made within the period fixed by the Court. LLphil

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 Decision shall be inextendible, and upon
failure of the party obliged to tender to the trial Court the amount due to the obligee, the party entitled
to such payment shall be entitled to an order of execution for the enforcement of payment of the
amount due and for compliance with such other acts as may be required by the prestation due the
obligee.
No costs.
SO ORDERED.
||| (Depra v. Dumlao, G.R. No. L-57348, [May 16, 1985], 221 PHIL 168-179)
FIRST DIVISION
[G.R. No. 151815. February 23, 2005.]
SPOUSES JUAN NUGUID AND ERLINDA T. NUGUID, petitioners,vs. HON. COURT OF
APPEALS AND PEDRO P. PECSON,respondents.
DECISION
QUISUMBING, J : p

This is a petition for review on certiorari of the Decision 1 dated May 21, 2001, of the Court of Appeals in CA-
G.R. CV No. 64295, which modified the Order dated July 31, 1998 of the Regional Trial Court (RTC) of
Quezon City, Branch 101 in Civil Case No. Q-41470. The trial court ordered the defendants, among them
petitioner herein Juan Nuguid, to pay respondent herein Pedro P. Pecson, the sum of P1,344,000 as
reimbursement of unrealized income for the period beginning November 22, 1993 to December 1997. The
appellate court, however, reduced the trial court's award in favor of Pecson from the said P1,344,000 to
P280,000. Equally assailed by the petitioners is the appellate court's Resolution 2dated January 10, 2002,
denying the motion for reconsideration.
It may be recalled that relatedly in our Decision dated May 26, 1995, in G.R. No. 115814, entitled Pecson v.
Court of Appeals, we set aside the decision of the Court of Appeals in CA-G.R. SP No. 32679 and the Order
dated November 15, 1993, of the RTC of Quezon City, Branch 101 and remanded the case to the trial court for
the determination of the current market value of the four-door two-storey apartment building on the 256-square
meter commercial lot.
The antecedent facts in this case are as follows:
Pedro P. Pecson owned a commercial lot located at 27 Kamias Road, Quezon City, on which he built a four-
door two-storey apartment building. For failure to pay realty taxes, the lot was sold at public auction by the City
Treasurer of Quezon City to Mamerto Nepomuceno, who in turn sold it for P103,000 to the spouses Juan and
Erlinda Nuguid. EcICDT

Pecson challenged the validity of the auction sale before the RTC of Quezon City in Civil Case No. Q-41470. In
its Decision, 3 dated February 8, 1989, the RTC upheld the spouses' title but declared that the four-door two-
storey apartment building was not included in the auction sale. 4 This was affirmed in toto by the Court of
Appeals and thereafter by this Court, in its Decision 5 dated May 25, 1993, in G.R. No. 105360 entitled Pecson
v. Court of Appeals.
On June 23, 1993, by virtue of the Entry of Judgment of the aforesaid decision in G.R. No. 105360, the
Nuguids became the uncontested owners of the 256-square meter commercial lot.
As a result, the Nuguid spouses moved for delivery of possession of the lot and the apartment building.
In its Order 6 of November 15, 1993, the trial court, relying upon Article 546 7 of the Civil Code, ruled that the
Spouses Nuguid were to reimburse Pecson for his construction cost of P53,000, following which, the spouses
Nuguid were entitled to immediate issuance of a writ of possession over the lot and improvements. In the same
order the RTC also directed Pecson to pay the same amount of monthly rentals to the Nuguids as paid by the
tenants occupying the apartment units or P21,000 per month from June 23, 1993, and allowed the offset of the
amount of P53,000 due from the Nuguids against the amount of rents collected by Pecson from June 23, 1993
to September 23, 1993 from the tenants of the apartment. 8
Pecson duly moved for reconsideration, but on November 8, 1993, the RTC issued a Writ of
Possession, 9 directing the deputy sheriff to put the spouses Nuguid in possession of the subject property with
all the improvements thereon and to eject all the occupants therein. caAICE

Aggrieved, Pecson then filed a special civil action for certiorari and prohibition docketed as CA-G.R. SP No.
32679 with the Court of Appeals. jur2005cd

In its decision of June 7, 1994, the appellate court, relying upon Article 448 10 of the Civil Code, affirmed the
order of payment of construction costs but rendered the issue of possession moot on appeal, thus:
WHEREFORE, while it appears that private respondents [spouses Nuguid] have not yet indemnified
petitioner [Pecson] 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 [Underscoring supplied.]
Frustrated by this turn of events, Pecson filed a petition for review docketed as G.R. No. 115814 before this
Court.
On May 26, 1995, the Court handed down the decision in G.R. No 115814, to wit:
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 [Spouses Juan and Erlinda Nuguid] to the petitioner [Pedro Pecson] otherwise the
petitioner shall be restored to the possession of the apartment building until payment of the required
indemnity.
No costs.
SO ORDERED. 12 [Emphasis supplied.]
In so ruling, this Court pointed out that: (1) Article 448 of the Civil Code is not apposite to the case at bar where
the owner of the land is the builder, sower, or planter who then later lost ownership of the land by sale, but
may, however, be applied by analogy; (2) the current market value of the improvements should be made as the
basis of reimbursement; (3) Pecson was entitled to retain ownership of the building and, necessarily, the
income therefrom; (4) the Court of Appeals erred not only in upholding the trial court's determination of the
indemnity, but also in ordering Pecson to account for the rentals of the apartment building from June 23, 1993
to September 23, 1993.
On the basis of this Court's decision in G.R. No. 115814, Pecson filed a Motion to Restore Possession and a
Motion to Render Accounting, praying respectively for restoration of his possession over the subject 256-
square meter commercial lot and for the spouses Nuguid to be directed to render an accounting under oath, of
the income derived from the subject four-door apartment from November 22, 1993 until possession of the
same was restored to him.
In an Order 13 dated January 26, 1996, the RTC denied the Motion to Restore Possession to the plaintiff
averring that the current market value of the building should first be determined. Pending the said
determination, the resolution of the Motion for Accounting was likewise held in abeyance.
With the submission of the parties' assessment and the reports of the subject realty, and the reports of the
Quezon City Assessor, as well as the members of the duly constituted assessment committee, the trial court
issued the following Order 14 dated October 7, 1997, to wit:
On November 21, 1996, the parties manifested that they have arrived at a compromise agreement that
the value of the said improvement/building is P400,000.00 The Court notes that the plaintiff has already
received P300,000.00. However, when defendant was ready to pay the balance of P100,000.00, the
plaintiff now insists that there should be a rental to be paid by defendants. Whether or not this should
be paid by defendants, incident is hereby scheduled for hearing on November 12, 1997 at 8:30
a.m. DCASEc

Meantime, defendants are directed to pay plaintiff the balance of P100,000.00.


SO ORDERED. 15
On December 1997, after paying the said P100,000 balance to Pedro Pecson the spouses Nuguid prayed for
the closure and termination of the case, as well as the cancellation of the notice of lis pendens on the title of
the property on the ground that Pedro Pecson's claim for rentals was devoid of factual and legal bases. 16
After conducting a hearing, the lower court issued an Order dated July 31, 1998, directing the spouses to pay
the sum of P1,344,000 as reimbursement of the unrealized income of Pecson for the period beginning
November 22, 1993 up to December 1997. The sum was based on the computation of P28,000/month rentals
of the four-door apartment, thus:
The Court finds plaintiff's motion valid and meritorious. The decision of the Supreme Court in the
aforesaid case [Pecson vs. Court of Appeals, 244 SCRA 407] which set aside the Order of this Court of
November 15, 1993 has in effect upheld plaintiff's right of possession of the building for as long as he is
not fully paid the value thereof. It follows, as declared by the Supreme Court in said decision that the
plaintiff is entitled to the income derived therefrom, thus
xxx xxx xxx
Records show that the plaintiff was dispossessed of the premises on November 22, 1993 and that he
was fully paid the value of his building in December 1997. Therefore, he is entitled to the income
thereof beginning on November 22, 1993, the time he was dispossessed, up to the time of said full
payment, in December 1997, or a total of 48 months.
The only question left is the determination of income of the four units of apartments per month. But as
correctly pointed out by plaintiff, the defendants have themselves submitted their affidavits attesting that
the income derived from three of the four units of the apartment building is P21,000.00 or P7,000.00
each per month, or P28,000.00 per month for the whole four units. Hence, at P28,000.00 per month,
multiplied by 48 months, plaintiff is entitled to be paid by defendants the amount of P1,344,000.00. 17

The Nuguid spouses filed a motion for reconsideration but this was denied for lack of merit. 18

The Nuguid couple then appealed the trial court's ruling to the Court of Appeals, their action docketed as CA-
G.R. CV No. 64295.
In the Court of Appeals, the order appealed from in CA-G.R. CV No. 64295, was modified. The CA reduced the
rentals from P1,344,000 to P280,000 in favor of the appellee. 19 The said amount represents accrued rentals
from the determination of the current market value on January 31, 1997 20 until its full payment on December
12, 1997.
Hence, petitioners state the sole assignment of error now before us as follows:
THE COURT OF APPEALS ERRED IN HOLDING PETITIONERS LIABLE TO PAY RENT OVER AND
ABOVE THE CURRENT MARKET VALUE OF THE IMPROVEMENT WHEN SUCH WAS NOT
PROVIDED FOR IN THE DISPOSITIVE PORTION OF THE SUPREME COURT'S RULING IN G.R.
No. 115814. ECTSDa

Petitioners call our attention to the fact that after reaching an agreed price of P400,000 for the improvements,
they only made a partial payment of P300,000. Thus, they contend that their failure to pay the full price for the
improvements will, at most, entitle respondent to be restored to possession, but not to collect any rentals.
Petitioners insist that this is the proper interpretation of the dispositive portion of the decision in G.R. No.
115814, which states in part that "[t]he value so determined shall be forthwith paid by the private respondents
[Spouses Juan and Erlinda Nuguid] to the petitioner [Pedro Pecson] otherwisethe petitioner shall be restored to
the possession of the apartment building until payment of the required indemnity." 21
Now herein respondent, Pecson, disagrees with herein petitioners' contention. He argues that petitioners are
wrong in claiming that inasmuch as his claim for rentals was not determined in the dispositive portion of the
decision in G.R. No. 115814, it could not be the subject of execution. He points out that in moving for an
accounting, all he asked was that the value of the fruits of the property during the period he was dispossessed
be accounted for, since this Court explicitly recognized in G.R. No. 115814, he was entitled to the property. He
points out that this Court ruled that "[t]he petitioner [Pecson] not having been so paid, he was entitled to retain
ownership of the building and, necessarily, the income therefrom." 22 In other words, says respondent,
accounting was necessary. For accordingly, he was entitled to rental income from the property. This should be
given effect. The Court could have very well specifically included rent (as fruit or income of the property), but
could not have done so at the time the Court pronounced judgment because its value had yet to be
determined, according to him. Additionally, he faults the appellate court for modifying the order of the RTC,
thus defeating his right as a builder in good faith entitled to rental from the period of his dispossession to full
payment of the price of his improvements, which spans from November 22, 1993 to December 1997, or a
period of more than four years.
It is not disputed that the construction of the four-door two-storey apartment, subject of this dispute, was
undertaken at the time when Pecson was still the owner of the lot. When the Nuguids became the uncontested
owner of the lot on June 23, 1993, by virtue of entry of judgment of the Court's decision, dated May 25, 1993,
in G.R. No. 105360, the apartment building was already in existence and occupied by tenants. In its decision
dated May 26, 1995 in G.R. No. 115814, the Court declared the rights and obligations of the litigants in
accordance with Articles 448 and 546 of the Civil Code. These provisions of the Code are directly applicable to
the instant case.
Under Article 448, the landowner is given the option, either to appropriate the improvement as his own upon
payment of the proper amount of indemnity or to sell the land to the possessor in good faith. Relatedly, Article
546 provides that a builder in good faith is entitled to full reimbursement for all the necessary and useful
expenses incurred; it also gives him right of retention until full reimbursement is made.
While the law aims to concentrate in one person the ownership of the land and the improvements thereon in
view of the impracticability of creating a state of forced co-ownership, 23 it guards against unjust enrichment
insofar as the good-faith builder's improvements are concerned. The right of retention is considered as one of
the measures devised by the law for the protection of builders in good faith. Its object is to guarantee full and
prompt reimbursement as it permits the actual possessor to remain in possession while he has not been
reimbursed (by the person who defeated him in the case for possession of the property) for those necessary
expenses and useful improvements made by him on the thing possessed. 24 Accordingly, a builder in good
faith cannot be compelled to pay rentals during the period of retention 25 nor be disturbed in his possession by
ordering him to vacate. In addition, as in this case, the owner of the land is prohibited from offsetting or
compensating the necessary and useful expenses with the fruits received by the builder-possessor in good
faith. Otherwise, the security provided by law would be impaired. This is so because the right to the expenses
and the right to the fruits both pertain to the possessor, making compensation juridically impossible; and one
cannot be used to reduce the other. 26
As we earlier held, since petitioners opted to appropriate the improvement for themselves as early as June
1993, when they applied for a writ of execution despite knowledge that the auction sale did not include the
apartment building, they could not benefit from the lot's improvement, until they reimbursed the improver in full,
based on the current market value of the property. DTIaHE

Despite the Court's recognition of Pecson's right of ownership over the apartment building, the petitioners still
insisted on dispossessing Pecson by filing for a Writ of Possession to cover both the lot and the building.
Clearly, this resulted in a violation of respondent's right of retention. Worse, petitioners took advantage of the
situation to benefit from the highly valued, income-yielding, four-unit apartment building by collecting rentals
thereon, before they paid for the cost of the apartment building. It was only four years later that they finally paid
its full value to the respondent.
Petitioners' interpretation of our holding in G.R. No. 115814 has neither factual nor legal basis. The decision of
May 26, 1995, should be construed in connection with the legal principles which form the basis of the decision,
guided by the precept that judgments are to have a reasonable intendment to do justice and avoid wrong. 27
The text of the decision in G.R. No. 115814 expressly exempted Pecson from liability to pay rentals, for we
found that the Court of Appeals erred not only in upholding the trial court's determination of the indemnity, but
also in ordering him to account for the rentals of the apartment building from June 23, 1993 to September 23,
1993, the period from entry of judgment until Pecson's dispossession. As pointed out by Pecson, the
dispositive portion of our decision in G.R. No. 115814 need not specifically include the income derived from the
improvement in order to entitle him, as a builder in good faith, to such income. The right of retention, which
entitles the builder in good faith to the possession as well as the income derived therefrom, is already provided
for under Article 546 of the Civil Code.
Given the circumstances of the instant case where the builder in good faith has been clearly denied his right of
retention for almost half a decade, we find that the increased award of rentals by the RTC was reasonable and
equitable. The petitioners had reaped all the benefits from the improvement introduced by the respondent
during said period, without paying any amount to the latter as reimbursement for his construction costs and
expenses. They should account and pay for such benefits.
We need not belabor now the appellate court's recognition of herein respondent's entitlement to rentals from
the date of the determination of the current market value until its full payment. Respondent is clearly entitled to
payment by virtue of his right of retention over the said improvement.
WHEREFORE, the instant petition is DENIED for lack of merit. The Decision dated May 21, 2001 of the Court
of Appeals in CA-G.R. CV No. 64295 is SET ASIDE and the Order dated July 31, 1998, of the Regional Trial
Court, Branch 101, Quezon City, in Civil Case No. Q-41470 ordering the herein petitioners, Spouses Juan and
Erlinda Nuguid, to account for the rental income of the four-door two-storey apartment building from November
1993 until December 1997, in the amount of P1,344,000, computed on the basis of Twenty-eight Thousand
(P28,000.00) pesos monthly, for a period of 48 months, is hereby REINSTATED. Until fully paid, said amount
of rentals should bear the legal rate of interest set at six percent (6%) per annum computed from the date of
RTC judgment. If any portion thereof shall thereafter remain unpaid, despite notice of finality of this Court's
judgment, said remaining unpaid amount shall bear the rate of interest set at twelve percent (12%) per annum
computed from the date of said notice. Costs against petitioners. SETaHC

SO ORDERED.
||| (Spouses Nuguid v. Court of Appeals, G.R. No. 151815, [February 23, 2005], 492 PHIL 343-354)
EN BANC
[G.R. No. L-13343. December 29, 1962.]
EULOGIO RODRIGUEZ, SR., plaintiff-appellant, vs. SOFRONIO FRANCISCO, as
Administrator of the Estate of MAXIMO FRANCISCO, defendant-appellee.
Tolentino & Garcia for plaintiff-appellant.
Antonio C. Masaquel for defendant-appellee.
SYLLABUS
1. POSSESSION; GOOD FAITH; PRESUMPTION OF CONTINUANCE. The possession having been
begun in good faith the presumption is that it continued to be enjoyed in the same character until it could be
proven that the possessor was not unaware that his possession was wrongful (Articles 528 and 529, Civil
Code).
2. ID.; ID.; ID.; INTERRUPTED BY SERVICE OF SUMMONS. On the date of the service of summons upon
appellee in this case, considering that the appellant was thereafter declared owner by final judgment (G.R. No.
L-12039), appellee's possession in good faith was interrupted and hence from that time he lost the right to the
fruits.
3. ID.; ID.; DAMAGES AGAINST ESTATE OF DECEDENT; PROCEDURE. Damages up to the decedent's
death should be claimed against his possession was wrongful (Articles 528 and 529, Civil Code). (Sec. 5, Rule
87). Damages accruing after his death are not debts left by him and hence recoverable by ordinary action,
such as the present one.
DECISION
MAKALINTAL, J : p

Plaintiff filed this action in the Court of First Instance of Rizal for judicial declaration of ownership, recovery of
possession, and damages. The facts are set forth in the decision of that court, dated September 15, 1956, as
follows:
"It appeals that Exequiel Ampil, now deceased, was the registered owner of the land in question under
Original Certificate of Title No. 2497 issued way back on May 25, 1918, Exhibit B-1. On March 24, 1924
Exequiel Ampil executed a deed of sale covering the land in favor of defendant Maximo Francisco for
the sum of P1,500, Exhibit 4. Sometime thereafter, the defendant took possession of the premises
which, upon his death, was continued by his heirs up to the present, publicly and in the concept of
owner. The land taxes thereon since 1924 was religiously paid by Maximo Francisco up to 1955 (see
Exhibits 5, 5-2 to p for 1924-1948). Despite the sale, the Torrens title continued until 1937 in the name
of the vendor Exequiel Ampil. At the trial, defendant presented the owner's duplicate, Exhibit 1, of
Original Certificate of Title No. 2497 which was delivered to defendant by Ampil.
"Prior to October 21, 1933, Exequiel Ampil was indebted to various creditors, to wit: (1) China Banking
Corporation P11,995.00, (2) Philippine National Bank P9,000.00; (3) Don Wenceslao Trinidad
P10,000.00, total - P31,395.00. The payment of this indebtedness was guaranteed by the plaintiff
Eulogio Rodriguez, Sr., on the date Exequiel Ampil executed a document entitled "Venta Condicional",
Exhibit D-1. The deed was duly registered in the Office of the Register of Deeds on November 15, 1933
(see Exhibit 1, memoranda of encumbrances). This deed conveyed the land together with some other
parcels to plaintiff by a conditional sale, the conveyance to be absolute upon the fulfillment of certain
conditions specified therein.
"On February 9, 1934, as Exequiel Ampil made payment amounting to P15,181,67, plaintiff executed
"Release of Part of the Conditionally Sold Premises", Exhibit 2, Therein, the real properties covered by
Certificates of Title Nos. 8756, 8670, 2673 and 8672 which were embraced in the "Venta Condicional"
were released. As to the other parcels conditionally sold, among which was the land covered by
Original Certificate of Title No. 2497 it was provided in Exhibit 2 that they were to be held and retained
by the plaintiff as security for the money remaining due on the conditional sale.
"On December 10, 1936, plaintiff filed an affidavit consolidating ownership over the land in question
together with five other parcels by virtue of the fact that the conditional sale of October 21, 1933
between him and Ampil had become absolute (Exhibits C and C-1). However, as the Owner's Duplicate
Certificate of Title was unavailable, a petition was filed in the original registration proceedings, Case No.
106, G.L.R.O. Rec. No. 13181, of the Court of First Instance of Rizal for the issuance of a new owner's
duplicate and after due notice and hearing the Court ordered that the lost certificate be cancelled and a
new one issued to the owner (see Exhibit B-1, memo. of encumbrances). Then, on February 12, 1937
by virtue of the affidavit of consolidation, the Register of Deeds of Rizal cancelled Original Certificate of
Title No. 2497 and issued to plaintiff Transfer Certificate of Title No. 31204, Exhibit A-1."
Upon the foregoing facts the trial court adjudged plaintiff the rightful owner of the disputed land and ordered
defendant to deliver its possession to him, but found defendant to be a possessor in good faith and hence free
from liability for damages. Both parties appealed from the decision: plaintiff to the Court of Appeals on this last
finding in favor of defendant; and the latter directly to this Court on the issue of ownership (G.R. No. L-12039).
By resolution dated November 19, 1957 upon motion of plaintiff, as appellee, this Court agreed to take
cognizance of both appeals. That taken by plaintiff was accordingly forwarded here, docketed under G.R. No.
L-13343 and is now the subject of this decision. G.R. No. L-12039, wherein defendant was the appellant, was
decided by us on June 30, 1961. The judgment appealed from was affirmed in so far as it declared plaintiff the
owner, and therefore entitled to the possession, of the land in question.
In the present appeal by plaintiff the only error assigned by him refers to the conclusion of the court below that
Maximo Francisco (and now herein defendant as administrator of his estate after his death on June 20, 1950)
was a possessor in good faith. Although at first blush the issue may seem to be one of fact, it is in reality one of
law, involving as it does the correctness of that conclusion in the light of the facts found by the said court,
which are not seriously disputed. Appellant draws the inference of bad faith in the possession of appellee from
the following circumstances: (1) that the description of the land in the deed of sale executed by Exequiel Ampil
in favor of Maximo Francisco in 1924 (Exhibit 4) does only tally with the description in the vendor's certificate of
title No. 2497; (2), that Maximo Francisco never registered the sale in the office of the Register of Deeds of
Rizal thereafter; and (3) that when appellant consolidated in himself the ownership of the land in 1926 he had
to obtain previous order from the court in the original registration case for the issuance of a new owner's
duplicate certificate of title, after notice to interested parties, notwithstanding which appellee did not appear to
assert his rights to the land.
All the foregoing circumstances, in our opinion, did not necessarily make appellee a possessor in bad faith.
The first circumstance cited is of no material importance, because as found by the lower court and later on by
this Court itself on appeal in G.R. No. L-12039, the land sold by virtue of Exhibit 4 is the same one covered by
TCT 2497. And the non-registration of the sale did not make the vendee one in bad faith. With particular
reference to the last circumstance stated, it has not been shown that Maximo Francisco was notified or had
actual knowledge of the said proceeding for consolidation of ownership in appellant. Francisco was then and
for a long time had been in possession of the land, and there can be no question that for purposes of such
possession the deed of sale marked Exhibit 4 was a good and sufficient title. It was acquired without any flaw
which would invalidate it. The possession having begun in good faith the presumption is that it continued to be
enjoyed in the same character until it could be proven that the possessor was not unaware that his possession
was wrongful (Article 528 and 529, Civil Code). It appears that in spite of the consolidation of ownership in
appellant and the issuance of a transfer certificate of title in his name in 1937, he never attempted to exercise
possessory rights over the property or paid taxes thereon, nor did he demand its possession from appellee
until the complaint in this case was filed in January 20, 1949.
However, we agree with appellant's alternative contention that on the date of the service of summons upon
appellee in this case, considering that the former was thereafter declared owner by final judgment (G. R. No. L-
12039), appellee's possession in good faith was interrupted and hence from that time he lost the right to the
fruits. * In the case of Tacas vs. Tobon, 53 Phil., 356, 361, this Court, citing Manresa (Vol. 4, pp. 270, 271),
stated:
"But to every possessor in good faith there comes a time when he is considered a possessor in bad
faith. When the owner or possessor with a better right comes along, when he becomes aware that what
he had taken for granted is at least doubtful, and when he learns the grounds in support of the adverse
contention, good faith ceases. The possessor may still believe that his right is more secure, because
we resign ourselves with difficulty to the sight of our vanishing hopes; but when the final judgment of the
court deprives him of the possession, all illusion necessarily disappears. Although he may not have
been convinced of it before, the possessor becomes aware that his possession is unlawful from the
time he learns of the complaint, from the time he is summoned to the trial. It is at this time that his
possession is interrupted according to article 1945, and that he ceases to receive the fruits, according
to the first paragraph of article 451. The ruling of the court retroacts to that time; but shall in good faith
be deemed to cease then. Although there is a great difference between requiring the possessor in good
faith to return the fruits he received from the time when his possession was legally interrupted, and
considering him a possessor in bad faith for all legal purposes from that time, the law had to establish a
definite rule in the matter, which is none other than that deducible from a combination of articles 452,
1945, and 435. Whether or not the defendant be a possessor in good faith, for there is no doubt that he
can be, and the law makes no attempt to deny it, from the service of judicial summons there exists an
act that this possessor knows that his right is not secure, that someone disputes it, and that he may yet
lose it; and if the court holds that restitution be made, that time determines all the legal consequences
of the interruption, the time when the possession in good faith ceased to be so before the law.'"

Maximo Francisco died on June 20, 1950. Damages up to that time should be claimed against his estate in the
administration proceeding, if still feasible (Sec. 5, Rule 87). Damages accruing after his death are not debts left
by him and hence recoverable by ordinary action, such as the one before us. Considering, however, that there
is no evidence as to when the cultivation of the land started and when it was finished in the year 1950,
appellee should be held liable for damages, consisting of the fruits of the land in question, only from the year
1951. The undisputed evidence shows that the owner's share of the fruits consist of 25 cavans of palay a year,
valued at P8.00 per cavan, or P200.00 yearly.
The judgment appealed from is modified in the sense that defendant-appellee, as administrator of the estate of
the deceased Maximo Francisco, is ordered to pay, plaintiff-appellant the sum of P200.00 yearly, starting from
1951 until the restoration of the possession of the land to said appellant pursuant to the judgment in civil case
No. 12039, with interest at the legal rate, plus costs.
||| (Rodriguez, Sr. v. Francisco, G.R. No. L-13343, [December 29, 1962], 116 PHIL 1213-1218)
EN BANC
[G.R. No. L-17681. February 26, 1965.]
MINDANAO ACADEMY, INC., MAURICIO O. BAS, ERLINDA D. DIAZ, accompanied by her
husband ANTOLIN DIAZ, ESTER AIDA D. BAS, accompanied by her husband MAURICIO
O. BAS, ROSALINDA D. BELLEZA, accompanied by her husband APOLINARIO
BELLEZA, LUZ MINDA D. DAJAO, accompanied by her husband ELIGIO C. DAJAO,
ADELAIDA D. NUESA, accompanied by her husband WILSON NUESA, PEDRO N.
ABUTON, SY PAOCO, JOSEFA DIGNUM, and PERFECTO VELASQUEZ, plaintiffs-
appellees, vs. ILDEFONSO D. YAP, ROSENDA A. DE NUQUI, and SOTERO A. DIONISO,
JR.,defendants, ILDEFONSO D. YAP, defendant-appellant.
[G.R. No. L-17682. February 26, 1965]
ROSENDA A. DE NUQUI, SOTERO DIONISIO, JR., ERLINDA DIONISIO-DIAZ and ANTOLIN
DIAZ, plaintiffs-appellees, vs.ILDEFONSO D. YAP, ET AL., defendant-appellant.
SYLLABUS
1. SALE; VOID ENTIRELY WHERE VENDORS CEDED ALSO INTEREST BELONGING TO PERSONS NOT
PARTIES AND PRESTATION IS INDIVISIBLE. A contract of sale is entirely null and void where it purports to
sell properties of which the sellers were not the only owners and the prestation involved was indivisible, and
therefore incapable of partial annulment.
2. ID.; LEGAL FICTION OF GOOD FAITH CEASES AFTER COMPLAINT IS FILED IN COURT. Although the
bad faith of one party neutralizes that of the other and hence as between themselves their rights would be as if
both of them had acted in good faith at the time of the transaction, this legal fiction of the buyer's good faith
ceased when the complaint against him was filed.
3. ID.; ID.; POSSESSOR IN GOOD FAITH NOT ENTITLED TO FRUITS AFTER LEGAL INTERRUPTION OF
POSSESSION. A possessor in good faith is entitled to the fruits only so long as his possession is not legally
interrupted, and such interruption takes place upon service of judicial summons.
4. ID.; ID.; POSSESSOR IN GOOD FAITH NOT ENTITLED TO REIMBURSEMENT OF IMPROVEMENTS
CONSTRUCTED AFTER FILING OF ACTION FOR ANNULMENT. A possessor in good faith cannot recover
the value of a new building constructed after the filing of an action for annulment of the sale of land on which it
is constructed, thus rendering him a builder in bad faith who is denied by law any right of reimbursement.
5. DAMAGES; NOMINAL AND EXEMPLARY DAMAGES NOT AWARDED TO STOCKHOLDERS ALREADY
REPRESENTED BY THE CORPORATION. Where the interests of the stockholders were already represented
by the corporation itself, which was the proper party plaintiff, and no cause of action accruing to them separately
from the corporation is alleged in the complaint, the trial court's ruling out the claim for moral damages to the
corporation also rules out any award for such nominal and exemplary damages to the stockholders.
DECISION
MAKALINTAL, J : p

By deed entitled "Mutual Agreement," executed on May 10, 1964, Rosenda A. de Nuqui (widow of
deceased Sotero Dionisio) and her son Sotero Dionisio, Jr. sold three parcels of residential land in
Oroquieta, Misamis Occidental, and another parcel in Ozamis City in favor of Ildefonso D. Yap. Included in
the sale were certain buildings situated on said lands as well as laboratory equipment, books, furniture and
fixtures used by two schools established in the respective properties: the Mindanao Academy in Oroquieta
and the Misamis Academy in Ozamis City. The aggregate price stated in the deed was P100,700.00, to be
paid according to the terms and conditions specified in the contract.
Besides Rosenda and her son Sotero, Jr., both of whom signed the instrument, Adelaida Dionisio Nuesa (a
daughter of Rosenda) is also named therein as co-vendor, but actually did not take part either personally or
through her uncle and supposed attorney-in-fact, Restituto Abuton.
These three Rosenda and her two children above named are referred to in the deed as the owners pro-
indiviso of the properties sold. The truth, however, was that there were other co-owners of the lands, namely,
Erlinda D. Diaz, Ester Aida D. Bas, Rosalinda D. Belleza and Luz Minda D. Dajao, children also of Rosenda by
her deceased husband Sotero Dionisio, Sr., and that as far as the school buildings, equipment, books, furniture
and fixtures were concerned, they were owned by the Mindanao Academy, Inc., a corporation operating both
the Mindanao Academy in Oroquieta and the Misamis Academy in Ozamis City.
The buyer, Ildefonso D. Yap, obtained possession of the properties by virtue of the sale, took over the operation
of the two schools and even changed their names to Harvardian Colleges. In view thereof two actions were
commenced in the Court of First Instance of Misamis Occidental. The first was for annulment of the sale and
recovery of rents and damages (Civil Case No. 1774, filed May 3,1955) with the Mindanao Academy, Inc., the
five children of Rosenda Nuqui who did not take part in the deed of sale, and several other persons who were
stockholders of the said corporation, as plaintiffs, and the parties who signed the deed of sale as defendants.
The second action was for rescission (Civil Case No. 1907, filed July 17, 1956) with Rosenda Nuqui, Sotero
Dionisio, Jr. and Erlinda D. Diaz (and the latter's husband Antolin Diaz) as plaintiffs, and Ildefonso D. Yap as
lone defendant. The other four children of Rosenda did not join, having previously ceded and quitclaimed their
shares in the litigated properties in favor of their sister Erlinda D. Diaz.
The two actions were tried jointly and on March 31, 1960 the court a quorendered judgment as follows:
"In both Cases
(1) The Mutual Agreement is hereby declared null and void ab initio;
(2) Defendant Ildefonso D. Yap is hereby ordered to pay the costs of the proceedings in
both cases.
In Civil Case No. 1907 only
(1) Defendant Ildefonso D. Yap is hereby ordered to restore to the plaintiffs in said case all
the buildings and grounds described in the Mutual Agreement together with all the permanent
improvements thereon;
(2) To pay to the plaintiffs therein the amount of P300.00 monthly from July 31, 1956 up to
the time he shall have surrendered the properties in question to the plaintiffs therein, plus
P1,000.00 as attorney's fees to plaintiffs Antolin and Erlinda D. Diaz.
In Civil Case No. 1774 only
(1) Defendant Ildefonso D. Yap is hereby ordered to restore to the Mindanao Academy,
Inc., all the books, laboratory apparatus, furniture and other equipments described in the Mutual
Agreement and specified in the Inventory attached to the Records of this case; or in default thereof,
their value in the amount of P23,500.00;
(2) To return all the Records of the Mindanao Academy and Misamis Academy;
(3) To pay to the plaintiffs stockholders of the Mindanao Academy, Inc., the amount of
P10,000.00 as nominal damages; P3,000.00 as exemplary damages; and P2,000.00 as attorney's
fees. These damages shall be apportioned to each of the stockholders named as plaintiffs in said
case in proportion to their respective interests in the corporation."
Ildefonso D. Yap appealed from the foregoing judgment and has assigned five errors therein.
I. He first contends that the lower court erred "in declaring that the mutual agreement dated May 10, 1954 . . . is
entirely void and legally non existent in that the vendors therein ceded to defendant-appellant not only their
interest, rights, shares and participation in the property sold but also those that belonged to persons who were
not parties thereto."
The lower court did not rule categorically on the question of rescission, considering it unnecessary to do so in
view of its conclusion that the contract of sale is null and void. This conclusion is premised on two grounds: (a)
the contract purported to sell properties of which the sellers were not the only owners, since of the four parcels
of land mentioned in the deed their shares consisted only of 7/12, (6/12 for Rosenda Nuqui and 1/12 for Sotero,
Jr.), while in the buildings, laboratory equipment, books, furniture and fixtures they had no participation at all, the
owner being the Mindanao Academy, Inc.; and (b) the prestation involved in the sale was indivisible, and
therefore incapable of partial annulment, inasmuch as the buyer Yap, by his own admission, would not have
entered into the transaction except to acquire all of the properties purchased by him.
These premises are not challenged by appellant. But he calls attention to one point, namely, that the four children
of Rosenda Nuqui who did not take part in the sale, besides Erlinda Dionisio Diaz, quitclaimed in favor of the
latter their interests in the properties; and that the trial court held that Erlinda as well as her husband acted in
bad faith, because "having reasonable notice of defendants' having unlawfully taken possession of the property,
they failed to make reasonable demands for (him) to vacate the premises to respect their rights thereto." It is
argued that being herself guilty of bad faith, Erlinda D. Diaz, as owner of 5/12 undivided interest in the properties
(including the 4/12 ceded to her by her four sisters), is in no position to ask for annulment of the sale. The
argument does not convince us. In the first place the quitclaim, in the form of an extrajudicial partition, was made
on May 6, 1956, after the action for annulment was filed, wherein, the plaintiffs were not only Erlinda but also the
other co-owners who took no part in the sale and to whom there has been no imputation of bad faith. Secondly
the trial courts' finding of bad faith is an erroneous conclusion induced by a manifest oversight of an undisputed
fact, namely, that on June 10, 1954, just a month after the deed of sale in question, Erlinda D. Diaz did file an
action against Ildefonso D. Yap and Rosenda Nuqui, among others, asserting her rights as co-owner of the
properties (Case No. 1646). Finally, bad faith on the part of Erlinda would not militate against the nullity of the
sale, considering that it included not only the lands in common by Rosenda Nuqui and her six children but also
the buildings and school facilities owned by the Mindanao Academy, Inc., an entity which had nothing to do with
the transaction and which could be represented solely by its Board of Trustees.

The first assignment of error is therefore without merit.


II. The second and third errors are discussed jointly in appellant brief. They read as follows:
"THE LOWER COURT ERRED IN HOLDING DEFENDANT - APPELLANT LIABLE FOR
RENTS AND ATTORNEY'S FEES IN THE SUM OF P1,000.00 AFTER DECLARING THAT ALL
THE PLAINTIFFS-APPELLEES IN CIVIL CASE NO. 1907 ACTED IN BAD FAITH.
"THE LOWER COURT ERRED IN HOLDING THAT PLAINTIFFS-APPELLEES IN SAID
CIVIL CASE NO. 1907 ARE ENTITLED TO RECOVER ALL THE LANDS, BUILDINGS AND
OTHER PERMANENT IMPROVEMENTS DESCRIBED IN THE MUTUAL AGREEMENT DATED
MAY 10, 1954."
The lower court correctly found that both vendors and vendee in the sale acted in bad faith and therefore must
be treated, vis-a-vis each other, as having acted in good faith. The return of the properties by the vendee is a
necessary consequence of the decree of annulment. No part of the purchase price having been paid, as far as
the record shows, the trial court correctly made no corresponding order for the restitution thereof.
In regard to the rents the trial court found that prior to the sale the Mindanao Academy, Inc., was paying P300.00
monthly for its occupancy of the lands on which the buildings are situated. This is the amount the defendant has
been ordered to pay to the plaintiffs in Civil Case No. 1907, beginning July 31, 1956, when he filed his "first
pleading" in the case. There can be no doubt that Erlinda D. Diaz is entitled to recover a share of the said rents
in proportion to her own interest in the lands and the interest of her four co-owners which she had acquired.
Rosenda Nuqui and her son Sotero, it is true, acted in bad faith when they sold the properties as theirs alone;
but so did the defendant Yap when he purchased them with knowledge of the fact that there were other co-
owners. Although the bad faith of one party neutralizes that of the other and hence as between themselves their
rights would be as if both of them had acted in good faith at the time of the transaction, this legal fiction of Yap's
good faith ceased when they sold the properties as theirs alone; but so did the court's declaration of liability for
the rents thereafter is correct and proper. A possessor in good faith is entitled to the fruits only so long as his
possession is not legally interrupted, and such interruption takes place upon service of judicial summons (Arts.
544 and 1123, Civil Code).
In our opinion the award of attorney's fees to Erlinda D. Diaz and her husband is erroneous. Civil Case No. 1907,
in which said fees have been adjudged, is for rescission (more properly resolution) of the so-called "mutual
agreement" on the ground that the defendant Yap failed to comply with certain undertakings specified therein
relative to the payment of the purchase price. Erlinda Diaz was not a party to that agreement and hence had no
cause of action for rescission. And as already stated, the trial court did not decide the matter of rescission
because of the decree of annulment it rendered in the other case (Civil No. 1774), wherein the defendants are
not only Ildefonso D. Yap but also Rosenda Nuqui and her son Sotero. Erlinda D. Diaz could just as well have
refrained from joining as plaintiff in the action for rescission, not being a part to the contract sought to be
rescinded and being already one of the plaintiffs in the other action. In other words, it cannot be said with
justification that she was constrained to litigate, in Civil Case No. 1907, because of some cause attributable to
the appellant.
The appellant claims reimbursement for the value of the improvements he allegedly introduced in the schools,
consisting of new building worth P8,000.00 and a toilet costing P800.00, besides laboratory equipment, furniture,
fixtures and books for the libraries. It should be noted that the judgment of the trial court specifies, for delivery to
the plaintiffs (in Civil Case No. 1907), only "the buildings and grounds described in the mutual
agreement together with all the permanent improvements thereon." If the defendant constructed a new building,
as he alleges, he cannot recover its value because the construction was done after the filing of the action for
annulment, thus rendering him a builder in bad faith who is denied by law any right of reimbursement.
In connection with the equipment, books, furniture and fixtures brought in by him, he is not entitled to
reimbursement either, because the judgment does not award them to any of the plaintiffs in these two actions.
What is adjudged (in Civil Case No. 1774) is for the defendant to restore to the Mindanao Academy, Inc. all the
books, laboratory apparatus, furniture and other equipment "described in the Mutual Agreement and specified in
the Inventory attached to the records of this case; or in default thereof, their value in the amount of P23,500.00."
In other words, whatever has been brought in by the defendant is outside the scope of the judgment and may
be retained by him.
III. The appellant's fourth assignment of error refers to the nominal and exemplary damages, as well as the
attorney's fees, granted to the stockholders of the Mindanao Academy, Inc. The trial court awarded no
compensatory damages because the Mindanao Academy, Inc., had been operating the two schools at a loss
before the sale in question, and the defendant himself was no more successful after he took over. Are the
stockholders of the said corporation who joined as plaintiffs in Civil Case No. 1774 entitled to nominal and
exemplary damages? We do not believe so. According to their second amended complaint they were joined
merely pro forma, and "for the sole purpose of the moraldamage which has been all the time alleged in the
original complaint." Indeed the interests of the said stockholders, if any, were already represented by the
corporation itself, which was the proper party plaintiff; and no cause of action accruing to them separately from
the corporation is alleged in the complaint, other than that for moral damages due to "extreme mental anguish,
serious anxiety and wounded feelings." The trial court, however, ruled out this claim for moral damages and no
appeal from such ruling has taken. The award for nominal and exemplary damages should be eliminated in toto.
The award for attorney's fees in the amount of P2,000.00 should be upheld, although the same should be for the
account, not of the plaintiff stockholders of the Mindanao Academy, Inc., but of the corporation itself, and payable
to their common counsel as prayed for in the complaint.
IV. Under the fifth and last assignment of error the appellant insists on the warranty provided for in Clause VI of
the deed of sale in view of the claims of the co-owners who did not take part therein. The said clause provides:
"if any claim shall be filed against the properties or any right, share or interest which are in the possession of the
party of the First Part (vendors) which had been hereby transferred, ceded and conveyed unto the party of the
Second Part (vendee) the party of the First Part assumes as it hereby holds itself answerable."
It is unnecessary to pass upon the question posed in this assignment of error in view of the total annulment of
the sale on grounds concerning which both parties thereto were at fault. The nullity of the contract precludes
enforcement of any of its stipulations.
WHEREFORE, the judgment appealed from is modified by eliminating therefrom the award of attorney's fees of
P1,000.00 in favor of Erlinda D. Diaz and her husband, plaintiffs in Civil Case No. 1907, and the award of nominal
and exemplary damages in Civil Case No. 1774; and making the award of attorney's fees in the sum of P2,000.00
payable to counsel for the account of the Mindanao Academy, Inc. instead of the plaintiff stockholders. In all
other respects the judgment appealed from is affirmed. No pronouncement as to costs.
Bengzon, C.J., Bautista Angelo, Concepcion, Reyes J.B.L., Paredes and Bengzon, J.P., JJ., concur.
Barrera, Dizon, Regala and Zaldivar, JJ., took no part.

||| (Mindanao Academy v. Yap, G.R. Nos. L-17681 & L-17682 , [February 26, 1965], 121 PHIL 204-213)
EN BANC
[G.R. No. L-25359. September 28, 1968.]
ARADA LUMUNGO, JUHURI DAWA, ET AL., petitioners, vs. ASAAD USMAN, JOSE
ANGELES and DOMINGA USMAN, ET AL.,respondents.
Dominador Sobrevias for petitioners.
Marciano Almario for respondents.
SYLLABUS
1.CIVIL LAW; PROPERTY; PURCHASE OF PROPERTY SUBJECT OF CONTROVERSY; NO
REIMBURSEMENT TO BUILDER IN BAD FAITH IN INSTANT CASE. In the instant case, the Court of
Appeals found as a fact that when Dominga Usman sold and transferred her rights in and to the property in
question to Jose Angeles "the latter made the purchase with the knowledge that the property subject matter of
the sale was already in dispute by and between herein defendants, one of whom is the husband of intervenor
Dominga Usman, on the one hand and herein plaintiffs on the other." Angeles was, therefore, aware of
sufficient facts to induce a reasonably prudent man to inquire into the status of the title to the property in
question, which was an easy matter for him to ascertain, said property being registered under the Torrens
System. In this connection, it should be noted that trees, are improvements, not "necessary expenses of
preservation," which a builder, planter or sower in bad faith may recover under Arts. 452 and 546 of the Civil
Code. The provision applicable to this case is, accordingly, Article 449 of the Civil Code, which provides that,
"(h)e who builds, plants or sows in bad faith on the land of another, loses what is built, planted or sown without
right to indemnity." Obviously, the alleged equity in favor of Jose Angeles, on which the lower courts have
relied, cannot prevail over the aforementioned express statutory provision to the contrary, apart from the fact
that he who seeks equity must come with clean hands.
DECISION
CONCEPCION, J : p

Review on certiorari of a decision of the Court of Appeals, on appeal from a decision of the Court of First
Instance of Sulu in Civil Cases Nos. 155 and 156 of said court, both instituted by plaintiffs herein, Arada
Lumungo (deceased), substituted by her heirs, Juhuri Dawa, Kayajuja, Sadatul, Sarapatul, Jaramatul, Alma,
Kalukasa and Vicente, all surnamed Juhuri, to recover the possession of lot No. 871 of the Siasi Cadastre, in
the first case, and in the second, of lots Nos. 892, 893, 894 and 1121 of the same cadastre. The defendants in
case No. 155 are Asaad Usman, Akmadul and Hada, whereas those in case No. 156 are Asaad Usman,
Fatima Angeles, Hadjaratul Julkanain, Inkiran and Sitti Haridja, who were subsequently joined by Dominga
Usman and Jose Angeles, as defendants-intervenors.
After a joint trial of the two (2) cases, the Court of First Instance of Sulu rendered a decision, the dispositive
part of which reads as follows:
"WHEREFORE, judgment is hereby rendered declaring plaintiffs to have a better right to the
possession of Lots Nos. 892, 893, 1121, and 871, Siasi and Lapak Cadastral Survey, located at Lapak,
Siasi, Sulu, and described in Transfer Certificates of Title Nos. T-419, T-422, T- 420 and T-421 and
Original Certificate of Title No. 8023. The defendants are ordered to vacate said lots in favor of the
plaintiffs if they have not already done so.
"On the other hand, the plaintiffs are ordered to reimburse to the defendant-intervenor, JOSE
ANGELES, the sum of P4,500.00 representing the value of the 3,000 coconut trees introduced by him
and his predecessors in interest on Lots 892, 893 and 894. Should plaintiffs fail to do so within ninety
(90) days from the date this decision becomes final, the three lots shall be ordered sold at public
auction, the proceeds of which shall be applied to the P4,500.00 herein adjudged to Jose Angeles, and
the balance to be delivered to the plaintiffs."
Both parties appealed from this decision to the Court of Appeals, but, later, the defendants withdrew their
appeal, which, accordingly, was dismissed. Thus the only question left for determination by the Court of
Appeals was plaintiffs' appeal from the trial court's decision, insofar as it sentenced them to pay P4,500.00 to
intervenor Jose Angeles. After appropriate proceedings, the Court of Appeals reduced this amount to
P2,500.00 and affirmed the decision of the Court of First Instance in all other respects, with costs against
defendants-intervenors. The case is now before us upon petition for review on certiorari filed by the plaintiffs.
The pertinent facts are set forth in the decision of the trial court, which were adopted in that of the Court of
Appeals, from which we quote:
"It . . . appears that, having allegedly collaborated with the enemy during the Japanese Occupation of
Sulu, Datu Idiris Amilhussin was arrested and detained when the American Liberation Forces came to
Sulu in the year 1945. On March 1, 1946, Datu Idiris was prosecuted for Treason before the People's
Court, docketed as Criminal Case No. 1334 in said Court. Justice of the Peace Asaad Usman of Siasi
and his wife Dominga Usman, became interested in Lots. Nos. 892, 893, 894, 1121 and 871. Jamasali
Usman, brother of Atty. Asaad Usman, also became interested in Lot No. 1226(?). Datu Idiris was
desperately in need of money to pay his attorney's fees and the premium on his bailbond. He sent his
wife to Jamasali for money. Jamasali proposed to buy Lot No. 1227(?). Upon the execution of a Pacto
de Retro sale (Exhibit "DDD"), Jamasali gave Datu Idiris partial payments of the P3,000.00 mentioned
in the document. Sometime in the year 1946, Atty. Usman visited Datu Idiris in the Provincial Jail and
promised to help him in his case and to secure his bailbond for his temporary liberty. But Atty. Usman
asked Datu Idiris to sell to his wife, Dominga Miranda Usman, the five lots in question. Datu Idiris
agreed.
"Through the help of Atty. Usman, the bailbond of Datu Idiris was perfected. Consequently, on January
11, 1947, he was released from the Provincial Jail. True to his word, on March 14, 1947, Datu Idiris
executed an agreement with Dominga Usman (Exhibit "33"). He also caused Datu Amirul Amilhussin,
brother of Datu Idiris, to sign a similar document, being one of the co-owners of said lots (Exh. "34").
Upon execution of the agreement, Dominga Usman paid Datu Idiris P300.00; subsequently, Atty.
Usman paid him P500.00 and P10.00. Thus, Datu Idiris received all in all from the spouses, P810.00 in
consideration of the tenor stated in the document, Exhibit "33". In the meantime, Atty. Usman took
possession of the five lots in question and cultivated the same.
"As the whole amount of P3,000.00 mentioned in the sale of Pacto de Retro executed by Datu Idiris in
favor of Jamasali Usman was not fully paid, Datu Idiris, upon his being released from confinement,
demanded from Jamasali to complete payment. He also demanded from Atty. Usman the payment of
the balance of the purchase price of the lots described in Exhibit "33". After Datu Idiris had
been repeatedly refusedsaid payments by both Jamasali and Atty. Usman, he became exasperated. He
wrote two complaints, one to the Secretary of Justice, dated June 15, 1946, and the other, to the
President of the Philippines, dated March 8, 1948, complaining against Justice of the Peace Asaad
Usman and Jamasali Usman. After filing these complaints, Justice of the Peace Usman
immediately caused the revocation of the bailbond of Datu Idiris before the People's Court. On March
31, 1948, he was rearrested and committed to the Provincial Jail again. A serious misunderstanding
developed between Datu Idiris, on one hand and Atty. Usman and Jamasali Usman, on the other.
Several complaints for murder were caused to be filed before the Court of Justice of the Peace Usman
against Datu Idiris. In the meantime, Atty. Usman wrote letters of demand upon Datu Idiris asking him
to produce the titles to the above five lots to enable him to have a sufficient deed of sale conveying the
said five lots in favor of his wife. Datu Idiris, on the other hand, had been demanding from Atty. Usman
to pay the balance of the purchase price of the land. Despite those mutual demands, no one complied
therewith. On December 10, 1951, Datu Idiris proposed, thru Atty. Flor, to call off the deal, stated in
documents, Exhibits "33" and "34", promising to return the P810.00 which he received from the
spouses. Dominga Usman and Atty. Usman agreed to call off the deal. Datu Idiris, however, never paid
the P810.00. Despite this, Dominga Usman and Atty. Usman never went to Court to file an action to
compel Datu Idiris either to comply with his obligation to execute and deliver a good and sufficient deed
conveying titles to the five lots in question, or to pay back the P810.00. What Dominga Usman did when
Datu Idiris failed to pay her the P810.00 was to sell lots 892, 893 and 894 to Jose Angeles for
P1,000.00. Jose Angeles, upon taking possession of the land, planted same with coconuts, which,
together with those already planted by Dominga Usman, numbered about 3,000, most of which are now
fruit bearing.
"On Feb. 2, 1962, Datu Idiris filed a civil complaint against Atty. Asaad Usman for recovery of
possession of the five lots in question which was docketed as Civil Case No. 87 of this Court. Atty.
Usman, instead of informing the Court that he and his wife had the legal right to possess those lots by
virtue of the agreement had between Datu Idiris and his wife embodied in Exhibit "33", manifested in
open Court on September 26, 1952, that he was not interested in the possession or ownership of the
land, and that he did not buy the land from Datu Idiris. So, on said date, this Court dictated an order as
follows:
"'In Open Court, when this case was called for hearing, the defendant Attorney Asaad Usman
manifested that he does not claim ownership nor possession to the two parcels of land described in
paragraph 2 of the complaint of the plaintiff. Thereupon, the plaintiff (moved) the Court to enter
judgment, to which motion the defendant interposed no objection. Such being the case, the Court has
no alternative but to enter judgment as it is hereby entered in favor of the plaintiff Datu Idiris Amilhussin,
and against the defendant declaring the plaintiff the owner and possessor of the two parcels of land
above mentioned, and inasmuch as the defendant is not in possession of the land, the Court finds it
unnecessary to enter an order ejecting the said defendant from the two parcels of lands, without
prejudice to any claim of any other third party, without pronouncement as to costs.'

"'On the other hand, the defendant moved for the dismissal of his counterclaim. The Court orders the
dismissal of the same, also without pronouncement as to cost.'
"Upon the promulgation of the above-quoted judgment, Datu Idiris, who was badly in need of money,
went around, offering to sell the land to another. Spouses Juhuri Dawa and Arada Lumungo, being
interested in acquiring those lots, asked Atty. Dominador Sobrevias to verify if they could buy the
same. Atty. Sobrevias went to the Office of the Register of Deeds and found no annotation of
encumbrances on the Original Certificates of Title of the five lots. Besides, since the Court had already
adjudged in the above-quoted order that Atty. Usman did not hove any claim of possession or
ownership over the land, and that he did not buy the land from Datu Idiris, Atty. Sobrevias advised his
clients that they may buy the lots. Accordingly, a deed of sale, Exhibit "L" to "L-2", was executed. Upon
presentation of this deed of sale to the Register of Deeds, Original Certificates of Title Nos. 8986, 8123,
8087 and 8122 were cancelled and in lieu thereof, Transfer Certificates of Title Nos. T-419, T-420, T-
422, and T-421 were issued in the names of the plaintiffs. Plaintiffs took possession of the property, but
they were allegedly driven from the land. About three years ago, the defendants left Lots Nos. 892, 893,
894 and 1121. Plaintiffs took possession thereof. The defendants are still in possession of Lot No.
871." 1
Defendants maintained in the Court of Appeals that the sale made by Datu Idiris Amilhussin to plaintiffs Arada
Lumungo and Juhuri Dawa, on September 30, 1952, is null and void because the lots thus sold had previously
been conveyed by Datu Idiris and Datu Amirul Amilhussin to intervenor Dominga Usman, wife of defendant
Asaad Usman, and because the sale to said plaintiffs was not approved by the provincial governor of Sulu, as
required by the Administrative Code of Mindanao and Sulu. The Court of Appeals overruled these objections
upon the ground that the sale to Dominga Usman "did not materialize" and was "called off" by mutual
agreement of the vendors and the vendee, and that said lack of approval by the provincial governor is a
defense available to the contracting parties only, not to the defendants herein who are not parties to said
transaction. Then the Court of Appeals went on to say:
"Upon the other hand, it is to be noted that when intervenor Dominga Usman who claimed to have
purchased the lots in question from one of the original owners, sold and transferred her alleged
ownership over the same to her co-intervenor Jose Angeles, the latter made the purchase with the
knowledge that the property subject matter of the sole was already in dispute by and between herein
defendants, one of whom is the husband of intervenor Dominga Usman, on the one hand, and herein
plaintiffs on the other. Nevertheless, as well stated by the court a quo, equity should come in to protect
the rights of intervenor Jose Angeles who introduced some improvements on three of the lots subject-
matter of the litigation, namely, lots Nos. 892, 893 and 894.
"The Court found for a fact that around 3,000 coconut trees were planted on those lots aforementioned,
some of them already fruit-bearing. It appears from the records that not all, but a portion, of the 3,000
were planted by intervenor Jose Angeles. The value placed by the lower court of P1.50 per fruit-bearing
coconut tree is reasonable enough, inasmuch as the lower court was in a better position to make the
assessment, it being more closely in contact with the conditions and circumstances of the locality. We
are not prepared to disturb such finding for lack of evidence to warrant such an action on our part.
"IN VIEW OF THE FOREGOING CONSIDERATIONS, with the only modification that the amount of
indemnity should be reduced from P4,500.00 to P2,500.00, the rest of the judgment appealed from is
hereby affirmed with costs against defendants-intervenors." 2
The only issue posed by plaintiffs' petition for review is whether or not Jose Angeles is entitled to
reimbursement for the coconut trees planted by him on the property in litigation. In this connection, it should be
noted that said trees are improvements, not "necessary expenses of preservation", which a builder, planter or
sower in bad faith may recover under Arts. 452 and 546, first paragraph, of the Civil Code.
Upon the other hand, the Court of Appeals found as a fact that when Dominga Usman sold and transferred her
rights in and to the property in question to Jose Angeles "the latter made the purchase with the knowledge that
the property subject matter of the sale was already in dispute by and between herein defendants, one of whom
is the husband of intervenor Dominga Usman, on the one hand, and herein plaintiffs on the other." Angeles
was, therefore, aware of sufficient facts to induce a reasonably prudent man to inquire into the status of the title
to the property in question, which was an easy matter for him to ascertain, said property being registered under
the Torrens System. 3
Indeed, Jose Angeles is a nephew of defendant Asaad Usman, and the controversy between the latter and
Datu Idiris was a matter of public knowledge, for Usman was a justice of the peace, and Datu Idiris had filed
charges against him, as such, with the Department of Justice and the Office of the President, to which Usman
countered by causing the bail bond of Datu Idiris to be cancelled and his corresponding reincarceration, as well
as the filing of complaints for murder against him. Besides, on February 2, 1952, or several months prior to the
sale to Angeles on September 30, 1952, Datu Idiris had filed Civil Case No. 87 of the Court of First Instance of
Sulu against Asaad Usman to recover the lots in question, and the latter stated in that case, on September 26,
1952, or four (4) days before the aforementioned sale, that he was not interested in either the possession or
the ownership of said lots, and that he had not bought the same from the former. It may not be amiss to note,
also, that at the time of the alleged sale in his favor, Jose Angeles was a law student; that, in fact, on August 9,
1957, he entered his appearance as counsel for the defendants, in collaboration with Asaad Usman; and that
the consideration for said sale, involving a land of 46 hectares, was only P1,000.
In short, the foregoing facts, and the above-quoted findings of both the trial court and the Court of Appeals,
leave no room for doubt that Jose Angeles was a purchaser and a builder in bad faith 4 The provision
applicable to this case is, accordingly, Article 449 of the Civil Code, which provides that, "(h)e who builds,
plants or sows in bad faith on the land of another, loses what is built, planted or sown without right to
indemnity."
Obviously, the alleged equity in favor of Jose Angeles, on which the lower courts have relied, cannot prevail
over the aforementioned express statutory provision to the contrary, 5 apart from the fact that he who seeks
equity must come with clean hands. 6
WHEREFORE, the decision of the Court of Appeals should be as it is hereby modified by eliminating therefrom
the contested award of P2,500.00 in favor of Jose Angeles, and, thus modified, said decision is hereby
affirmed in all other respects, with the costs. It is so ordered.
||| (Lumungo v. Usman, G.R. No. L-25359, [September 28, 1968], 134 PHIL 323-331)
EN BANC
[G.R. No. L-25450. January 31, 1969.]
LEONARDO SANTOS, petitioner, vs. HON. ANGEL H. MOJICA,Judge, Court of First
Instance of Rizal, Pasay City Branch, The PROVINCIAL SHERIFF of Rizal, Pasay City
Branch, TEODORICO,CARMEN, ANTERO, VIDAL, CATALINA, MELANIO, MANUEL,FELI
CIDAD, AURELIO, PACITA and ELEUTERIA, all surnamed ALLANIGUE, respondents.
Lupio A. Lazaro for petitioner.
Dominador A. Rodriguez for respondents.
SYLLABUS
1.REMEDIAL LAW; JUDGMENT; SUCCESSORS-IN-INTEREST BOUND BY JUDGMENT ON PARTITION OF
PROPERTY. A judgment in an action for partition of property binds not only the defendants but also their
son, who is their successor-in-interest and who claims his right to the property under them.
2.ID.; ID.; RES ADJUDICATA BARS SUBSEQUENT LITIGATION. Where the question of validity of an
order of demolition had been raised and decided by the Supreme Court in a certiorari and prohibition
proceedings, such decision is res adjudicata to the present petition for certiorari and prohibition raising the
same question of validity of a subsequent order of demolition involving the same parties and the same subject
matter.
3.CIVIL LAW; PROPERTY; BUILDER IN BAD FAITH, EFFECT. A son in possession of a land, who built his
house thereon after his predecessors-in-interest had been summoned in an action for partition of the property,
is a builder in bad faith who must lose his improvement to the owners of the land without right to indemnity.
4.ID.; ID.; ID.; ALTERNATIVE RIGHTS OF OWNER. The owners of the land where a house had been
constructed in bad faith may choose to appropriate the house or require its demolition at the expense of the
builder.
DECISION
CAPISTRANO, J : p

On March 19, 1959, in the Court of First Instance of Rizal, eleven brothers and sisters, all surnamed Allanigue,
brought an action (Civil Case NO. 217-R) against their sister, Lorenza Allanigue, her husband, Simeon Santos,
Maria San Agustin and Felicidad San Agustin, for partition of a 360-square-meter lot situated at San Dionisio,
Paraaque, Rizal, and for the annulment of certain conveyances involving the same. Defendants having been
declared in default, the trial court, after hearing the plaintiffs' evidence, rendered judgment ordering the
partition of the lot among the eleven plaintiffs and the defendant Lorenza Allanigue. In a subsequent order the
court set off Lorenza Allanigue's share against the amount that she had failed to pay as rents to the plaintiffs
as directed in the decision.
A writ of execution was issued on the judgment ordering the defendants to vacate the lot and deliver its
possession to the plaintiffs. Leonardo Santos, not a party defendant but a son of defendants Simeon Santos
and Lorenza Allanigue, owned a house standing on the lot. He filed with the sheriff a third-party claim, and with
the court, a motion to recall the writ of execution insofar as his house was concerned. The motion was denied.
On March 15, 1962, the defendants and movant Leonardo Santos having failed to remove their houses from
the lot within the period given them, the court ordered the sheriff to demolish said houses.
On April 2, 1962, Leonardo Santos and the defendants in the case, as petitioners, filed in the Supreme Court a
petition for certiorari and prohibition, G.R. No. L-19618, against Judge Angel H. Mojica, the Provincial Sheriff of
Rizal and the plaintiffs in the case, as respondents. Among the issues raised therein was whether or not the
lower court had jurisdiction to order the demolition of petitioners' houses in that special civil action. In its
decision of February 28, 1964, the Supreme Court denied the petition after finding that Leonardo Santos, who
claimed to be the owner of a house and the portion of land on which it stood by purchase from his parents, did
not follow the procedure sanctioned by law in vindicating his alleged ownership, i.e., he should have filed an
ordinary civil action to vindicate his alleged ownership of the house and the portion of land on which it was
built.
After the said decision of the Supreme Court had become final, the respondent Judge, Angel H. Mojica, on
motion of the plaintiffs in the same Civil Case No. 217-R, ordered the demolition of the defendants' houses.
The defendants having voluntarily removed their houses, the only house that remained standing on the lot was
that belonging to Leonardo Santos. Subsequently, the respondent Judge, on motion of the plaintiffs, issued an
order dated December 9, 1965, directing the sheriff to demolish the house of Leonardo Santos. Hence, the
present petition for certiorari and prohibition in this Court where Leonardo Santos, petitioner, questions the
jurisdiction of the respondent Judge in issuing the order of demolition of his house.
The instant petition for certiorari and prohibition should be denied in view of the following considerations:
1.Petitioner Leonardo Santos is bound by the judgment in Civil Case No. 217-R because he is a successor-in-
interest of his parents, Simeon Santos and Lorenza Allanigue, defendants in Civil Case No. 217- R, and his
right, if any, is claimed under them. Hence, the judgment in said civil case binds not only Simeon Santos and
Lorenza Allanigue but also their son, Leonardo Santos, who is their successor-in- interest and who claims
under them. The fact that the sale to Leonardo Santos from his parents was registered, is of no moment
because, as pointed out, he is bound by the judgment against them.
Leonardo Santos' house having been built and reconstructed (after March, 1962) into a bigger one after his
predecessors-in-interest, his parents, had been summoned in 1959 in Civil Case No. 217-R, he must be
deemed a builder in bad faith. As builder in bad faith he lost the improvement made by him consisting of the
reconstructed house to the owners of the land without right to indemnity, pursuant to Article 449 of the Civil
Code, which provides:
"ART. 449.He who builds, plants or sows in bad faith on the land of another, loses what is built, planted
or sown without right to indemnity."
The Allanigue brothers and sisters therefore became owners of the improvement consisting of the house built
in bad faith by Leonardo Santos if they chose to appropriate the accession. (Article 445 and 449, Civil Code.)
However, said owners could choose instead the demolition of the improvement or building at the expense of
the builder, pursuant to Article 450 of the Civil Code, which, in part, provides:
"ART. 450.The owner of the land on which anything has been built, planted or sown in bad faith may
demand the demolition of the work, or that the planting or sowing be removed, in order to replace things
in their former condition at the expense of the person who built, planted or sowed .."It is of record in
Civil Case No. 217-R that the owners of the land chose to have the house or improvement demolished
pursuant to their motion for demolition which was granted by respondent Judge Mojica on December 9,
1965.
2.The present petition is barred by the prior judgment of this Court in G.R. No. L-19618. Herein petitioner,
Leonardo Santos, was one of the petitioners in that case against the same official and private respondents in
the instant petition. In the two cases there is identity of subject matter, namely, the portion of the lot and the
house standing on said portion alleged by petitioner to belong to him. There is also identity of cause of action,
to wit: the order of the respondent Judge for the removal or demolition of the houses standing on the lot. In the
previous case this Court had jurisdiction, and its decision, which was on the merits, had become final. It is
evident that the judgment of this Court in G.R. No. L-19618 is res judicata in the instant case on the question of
the validity of the order of demolition of December 9, 1965.
PREMISES CONSIDERED, the petition is denied, with treble costs against the petitioner.
Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Sanchez, Ruiz Castro, Fernando, Teehankee and Barredo,
JJ., concur.
Zaldivar, J., took no part.
||| (Santos v. Mojica, G.R. No. L-25450, [January 31, 1969], 136 PHIL 139-143)
FIRST DIVISION
[G.R. No. L-25462. February 21, 1980.]
MARIANO FLOREZA, petitioner, vs. MARIA D. de EVANGELISTA and SERGIO
EVANGELISTA, respondents.
R. D. Hipolito & B. P. Fabir for petitioner.
E. G. Tanjuatco & Associates for respondents.
DECISION
MELENCIO-HERRERA, J : p

This is a Petition for Review on Certiorari of the Decision of the Court of Appeals (CA-G.R. No. 23516-R)
promulgated on November 4, 1965, entitled "Maria de Evangelista and Sergio Evangelista, (now the
respondents) vs. Mariano Floreza (petitioner herein)," reversing the judgment of the Court of First Instance of
Rizal rendered on July 17, 1957, and instead ordering petitioner to vacate respondents' residential lot, to
remove his house at his own expenses and to pay rental from May 5, 1956.
Plaintiffs Maria de Evangelista and Sergio Evangelista, who are mother and son, (the EVANGELISTAS, for
short) are the owners of a residential lot located at Sumilang St., Tanay, Rizal, with an area of 204.08 sq. ms.,
assessed at P410.00.
In May 1945, the EVANGELISTAS borrowed from FLOREZA the amount of P100.00. On or about November
1945, with the consent of the EVANGELISTAS, FLOREZA occupied the above residential lot and built thereon
a house of light materials (barong-barong) without any agreement as to payment for the use of said residential
lot owing to the fact that the EVANGELISTAS has then a standing loan of P100.00 in favor of FLOREZA. 1
On the following dates, the EVANGELISTAS again borrowed the indicated amounts: September 16, 1946 -
P100.00; 2 August 17, 1947 P200.00; 3 January 30, 1949 P200.00; 4 April 1, 1949 P140.00, 5 or a total
of P740.00 including the first loan. The last three items are evidenced by private documents stating that the
residential lot stands as security therefor and that the amounts covered thereunder are payable within six years
from date, without mention of interest. The document executed on September 16, 1946 stated specifically that
the loan was without interest "walang anumang patubo."
On January 10, 1949, FLOREZA demolished this house of light materials and in its place constructed one of
strong materials assessed in his name at P1,410.00 under Tax Declaration No. 4448. FLOREZA paid no rental
as before. 6
On August 1, 1949, the EVANGELISTAS, for and in consideration of P1,000.00 representing the total
outstanding loan of P740.00 plus P260.00 in cash, sold their residential lot to FLOREZA, with a right to
repurchase within a period of 6 years from date, or up to August 1, 1955, as evidenced by a notarial document,
Exh. B, registered under Act 3344 on December 6, 1949, as Inscription No. 2147.7
On January 2, 1955, or seven months before the expiry of the repurchase period, the EVANGELISTAS paid in
full the repurchase price of P1,000.00.
On April 25, 1956, the EVANGELISTAS, through their counsel, wrote FLOREZA a letter 8 asking him to vacate
the premises as they wanted to make use of their residential lot besides the fact that FLOREZA had already
been given by them more than one year within which to move his house to another site. On May 4, 1956, the
EVANGELISTAS made a formal written demand to vacate, within five days from notice, explaining that they
had already fully paid the consideration for the repurchase of the lot. 9 FLOREZA refused to vacate unless he
was first reimbursed the value of his house. Hence, the filing of this Complaint on May 18, 1956 by the
EVANGELISTAS.
The EVANGELISTAS prayed that: 1) they be declared the owners of the house of strong materials built by
FLOREZA on their residential lot, without payment of indemnity; or, in the alternative to order FLOREZA to
remove said house; 2) that FLOREZA pay them the sum of P10.00 per month as the reasonable value for the
use and occupation of the same from January 2, 1955 (the date the repurchase price was paid) until FLOREZA
removes the house and delivers the lot to them; and 3) to declare the transaction between them and FLOREZA
as one of mortgage and not of pacto de retro.
In his Answer, FLOREZA admitted the repurchase but controverted by stating that he would execute a deed of
repurchase and leave the premises upon payment to him of the reasonable value of the house worth
P7,000.00.
In a Decision dated July 17, 1957, the Court of First Instance of Rizal opined that the question of whether the
transaction between the parties is one of mortgage or pacto de retro is no longer material as the indebtedness
of P1,000.00 of the EVANGELISTAS to FLOREZA had already been fully paid. And, applying Article 448 of the
Civil Code, 10 it rendered a decision dispositively decreeing:
"FOR ALL THE FOREGOING CONSIDERATIONS, the Court hereby renders judgment granting the
plaintiffs the right to elect, as owners of the land, to purchase the house built on the said lot in question
by the defendant for P2,500 or to sell their said land to the defendant for P1,500. In the event that the
plaintiffs shall decide not to purchase the house in question, the defendant should be allowed to remain
in plaintiffs' premises by paying a monthly rental of P10.00 which is the reasonable value for the use of
the same per month as alleged by plaintiffs in their complaint. The Court also orders the defendant to
pay a monthly rental of P10.00 for the use of the land in question from May 18, 1956, the date of the
commencement of this action. The counterclaim of the defendant is hereby ordered dismissed. Without
pronouncement as to costs.
"SO ORDERED." 11
Both parties appealed to the Court of Appeals.
On November 4, 1965, the Court of Appeals concluded that Article 448 of the Civil Code, supra, was
inapplicable; that FLOREZA was not entitled to reimbursement for his house but that he could remove the
same at his expense; and accordingly rendered judgment thus:
"WHEREFORE, judgment is hereby rendered: (1) adjudging the defendant-appellant Mariano Floreza
to vacate plaintiffs' residential lot described in the complaint and to pay rental of P10.00 a month from
May 5, 1956, until he (defendant) shall have vacated the premises; (2) ordering defendant to remove
his house from the land in question within 30 days from the time this decision becomes final and
executory; (3) ordering the Register of Deeds of Rizal to cancel inscription No. 2147, Page 210, Vol. 36,
in the Registration Book under Act 3344 upon payment of his lawful fees; and (4) taxing the costs in
both instances against defendant-appellant Mariano Floreza." 12
Hence, this Petition for Review on Certiorari by FLOREZA, seeking a reversal of the aforestated judgment and
ascribing the following errors: prLL

1) That the Court of Appeals erred in holding that petitioner Floreza was a builder in bad faith without
likewise holding that respondents as owners of the land in dispute, were likewise in bad faith and
therefore both parties should in accordance with Art. 453 of the New Civil Code be considered as
having acted in good faith.
2) That the Court of Appeals erred in completely ignoring the issue raised on appeal as to whether or
not respondents as owners of the questioned lot, were in bad faith in the sense that they had
knowledge of and acquiesced to the construction of the house of petitioner on their lot.
3) That the Court of Appeals erred in not applying Art. 448 of the New Civil Code in the adjudication of
the rights of petitioner and respondent.
4) That the Court of Appeals erred in declaring that petitioner is not entitled to reimbursement for the
value of his house and that he should instead remove the same at his expense.
5) That the Court of Appeals erred in adjudging petitioner to vacate respondents' lot in question and to
pay rentals commencing from May 5, 1956, until he shall have vacated the premises, notwithstanding
that petitioner is entitled under Arts. 448 and 546 of the New Civil Code, to retention without payment of
rental while the corresponding indemnity of his house had not been paid.
6) That the Court of Appeals erred in taxing costs against petitioner.
7) That the Court of Appeals erred in not awarding petitioner's counterclaim.
During the pendency of this appeal, petitioner Maria D. de Evangelista died and was ordered substituted by her
son, petitioner Sergio, as her legal representative, in a Resolution dated May 14, 1976.
On October 20, 1978, the EVANGELISTAS filed a Motion to Dismiss stating that FLOREZA had since died and
that his heirs had voluntarily vacated the residential lot in question. The date FLOREZA passed away and the
date his heirs had voluntarily vacated the property has not been stated. Required to comment, "petitioner
(represented by his heirs)", through counsel, confirmed his death and the removal of the house and manifested
that thereby the question of reimbursement had become moot and academic. He objected to the dismissal of
the case, however, on the ground that the issue of rentals still pends. on January 21, 1980, complying with a
Resolution of this Court, the EVANGELISTAS clarified that the dismissal they were praying for was not of the
entire case but only of this Petition for Review on Certiorari.
We are not in agreement that the question of reimbursement of the value of the improvement erected on the
subject property has become moot. Petitioner's right of retention of subject property until he is reimbursed for
the value of his house, as he had demanded, is inextricably linked with the question of rentals. For if petitioner
has the right to indemnity, he has the right of retention and no rentals need be paid. Conversely, if no right of
retention exists, damages in the form of rentals for the continued use and occupation of the property should be
allowed.
We uphold the Court of Appeals in its conclusion that Article 448 of the Civil Code is inapplicable to the factual
milieu herein. Said codal provision applies only when the builder, planter, or sower believes he had the right so
to build, plant or sow because he thinks he owns the land or believes himself to have a claim of title. 13 In this
case, petitioner makes no pretensions of ownership whatsoever.

Petitioner concedes that he was a builder in bad faith but maintains that the EVANGELISTAS should also be
held in bad faith, so that both of them being in bad faith, Article 453 of the Civil Code 14 should apply. By the
same token, however, that Article 448 of the same Code is not applicable, neither is Article 453 under the
ambiance of this case.
Would petitioner, as vendee a retro, then be entitled to the rights granted in Article 1616 of the Civil Code (Art.
1518 of the old Code)? To quote:
"Art. 1616. The vendor cannot avail himself of the right of repurchase without returning to the vendee
the price of the sale, and in addition:
(1) The expenses of the contract, and any other legitimate payments made by reason of the sale;
(2) The necessary and useful expenses made on the thing sold."
The question again calls for a negative answer. It should be noted that petitioner did not construct his house as
a vendee a retro. The house had already been constructed as far back as 1949 (1945 for the house of light
materials) even before the pacto de retro sale in 1949. Petitioner incurred no useful expense, therefore, after
that sale. The house was already there at the tolerance of the EVANGELISTAS in consideration of the several
loans extended to them. Since petitioner cannot be classified as a builder in good faith within the purview of
Article 448 of the Civil Code, nor as a vendee a retro, who made useful improvements during the lifetime of
the pacto de retro, petitioner has no right to reimbursement of the value of the house which he had erected on
the residential lot of the EVANGELISTAS, much less to retention of the premises until he is reimbursed. The
rights of petitioner are more akin to those of a usufructuary who, under Article 579 of the Civil Code (Art. 487 of
the old- Code), may make on the property useful improvements but with no right to be indemnified therefor. He
may, however, remove such improvements should it be possible to do so without damage to the property: For
if the improvements made by the usufructuary were subject to indemnity, we would have a dangerous and
unjust situation in which the usufructuary could dispose of the owner's funds by compelling him to pay for
improvements which perhaps he would not have made. 15
We come now to the issue of rentals. It is clear that from the date that the redemption price had been paid by
the EVANGELISTAS on January 2, 1955, petitioner's right to the use of the residential lot without charge had
ceased. Having retained the property although a redemption had been made, he should be held liable for
damages in the form of rentals for the continued use of the subject residential lot 16 at the rate of P10.00
monthly from January 3, 1955, and not merely from the date of demand on May 4, 1956, as held by the Court
of Appeals, until the house was removed and the property vacated by petitioner or his heirs. cdphil

WHEREFORE, the judgment appealed from is hereby affirmed, with the modification that payment of rentals
by the heirs of Mariano Floreza, who are hereby ordered substituted for him, shall commence on January 3,
1955 until the date that the residential lot in question was vacated.
Costs against petitioner.
SO ORDERED.
||| (Floreza v. De Evangelista, G.R. No. L-25462, [February 21, 1980], 185 PHIL 85-93)