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Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 79688 February 1, 1996

PLEASANTVILLE DEVELOPMENT CORPORATION, petitioner,


vs.
COURT OF APPEALS, WILSON KEE, C.T. TORRES ENTERPRISES, INC. and ELDRED JARDINICO, respondents.

DECISION

PANGANIBAN, J.:

Is a lot buyer who constructs improvements on the wrong property erroneously delivered by the owner's agent, a
builder in good faith? This is the main issue resolved in this petition for review on certiorari to reverse the Decision1of
the Court of Appeals2 in CA-G.R. No. 11040, promulgated on August 20, 1987.

By resolution dated November 13, 1995, the First Division of this Court resolved to transfer this case (along with
several others) to the Third Division. After due deliberation and consultation, the Court assigned the writing of this
Decision to the undersigned ponente.

The Facts

The facts, as found by respondent Court, are as follows:

Edith Robillo purchased from petitioner a parcel of land designated as Lot 9, Phase II and located at Taculing Road,
Pleasantville Subdivision, Bacolod City. In 1975, respondent Eldred Jardinico bought the rights to the lot from Robillo. At
that time, Lot 9 was vacant.

Upon completing all payments, Jardinico secured from the Register of Deeds of Bacolod City on December 19, 1978
Transfer Certificate of Title No. 106367 in his name. It was then that he discovered that improvements had been
introduced on Lot 9 by respondent Wilson Kee, who had taken possession thereof.

It appears that on March 26, 1974, Kee bought on installment Lot 8 of the same subdivision from C.T. Torres
Enterprises, Inc. (CTTEI), the exclusive real estate agent of petitioner. Under the Contract to Sell on Installment, Kee
could possess the lot even before the completion of all installment payments. On January 20, 1975, Kee paid CTTEI the
relocation fee of P50.00 and another P50.00 on January 27, 1975, for the preparation of the lot plan. These amounts
were paid prior to Kee's taking actual possession of Lot 8. After the preparation of the lot plan and a copy thereof given
to Kee, CTTEI through its employee, Zenaida Octaviano, accompanied Kee's wife, Donabelle Kee, to inspect Lot 8.
Unfortunately, the parcel of land pointed by Octaviano was Lot 9. Thereafter, Kee proceeded to construct his residence,
a store, an auto repair shop and other improvements on the lot.

After discovering that Lot 9 was occupied by Kee, Jardinico confronted him. The parties tried to reach an amicable
settlement, but failed.

On January 30, 1981, Jardinico's lawyer wrote Kee, demanding that the latter remove all improvements and vacate Lot
9. When Kee refused to vacate Lot 9, Jardinico filed with the Municipal Trial Court in Cities, Branch 3, Bacolod City
(MTCC), a complaint for ejectment with damages against Kee.

Kee, in turn, filed a third-party complaint against petitioner and CTTEI.

The MTCC held that the erroneous delivery of Lot 9 to Kee was attributable to CTTEI. It further ruled that petitioner and
CTTEI could not successfully invoke as a defense the failure of Kee to give notice of his intention to begin construction
required under paragraph 22 of the Contract to Sell on Installment and his having built a sari-sari store without the
prior approval of petitioner required under paragraph 26 of said contract, saying that the purpose of these
requirements was merely to regulate the type of improvements to be constructed on the Lot. 3
However, the MTCC found that petitioner had already rescinded its contract with Kee over Lot 8 for the latter's failure
to pay the installments due, and that Kee had not contested the rescission. The rescission was effected in 1979, before
the complaint was instituted. The MTCC concluded that Kee no longer had any right over the lot subject of the contract
between him and petitioner. Consequently, Kee must pay reasonable rentals for the use of Lot 9, and, furthermore, he
cannot claim reimbursement for the improvements he introduced on said lot.

The MTCC thus disposed:

IN VIEW OF ALL THE FOREGOING, judgment is hereby rendered as follows:

1. Defendant Wilson Kee is ordered to vacate the premises of Lot 9, covered by TCT No. 106367 and to remove
all structures and improvements he introduced thereon;

2. Defendant Wilson Kee is ordered to pay to the plaintiff rentals at the rate of P15.00 a day computed from the
time this suit was filed on March 12, 1981 until he actually vacates the premises. This amount shall bear
interests (sic) at the rate of 12 per cent (sic) per annum.

3. Third-Party Defendant C.T. Torres Enterprises, Inc. and Pleasantville Subdivision are ordered to pay the
plaintiff jointly and severally the sum of P3,000.00 as attorney's fees and P700.00 as cost and litigation
expenses.4

On appeal, the Regional Trial Court, Branch 48, Bacolod City (RTC) ruled that petitioner and CTTEI were not at fault or
were not negligent, there being no preponderant evidence to show that they directly participated in the delivery of Lot
9 to Kee5. It found Kee a builder in bad faith. It further ruled that even assuming arguendo that Kee was acting in good
faith, he was, nonetheless, guilty of unlawfully usurping the possessory right of Jardinico over Lot 9 from the time he
was served with notice to vacate said lot, and thus was liable for rental.

The RTC thus disposed:

WHEREFORE, the decision appealed from is affirmed with respect to the order against the defendant to vacate
the premises of Lot No. 9 covered by Transfer Certificate of Title No. T-106367 of the land records of Bacolod
City; the removal of all structures and improvements introduced thereon at his expense and the payment to
plaintiff (sic) the sum of Fifteen (P15.00) Pesos a day as reasonable rental to be computed from January 30,
1981, the date of the demand, and not from the date of the filing of the complaint, until he had vacated (sic)
the premises, with interest thereon at 12% per annum. This Court further renders judgment against the
defendant to pay the plaintiff the sum of Three Thousand (P3,000.00) Pesos as attorney's fees, plus costs of
litigation.

The third-party complaint against Third-Party Defendants Pleasantville Development Corporation and C.T.
Torres Enterprises, Inc. is dismissed. The order against Third-Party Defendants to pay attorney's fees to plaintiff
and costs of litigation is reversed.6

Following the denial of his motion for reconsideration on October 20, 1986, Kee appealed directly to the Supreme
Court, which referred the matter to the Court of Appeals.

The appellate court ruled that Kee was a builder in good faith, as he was unaware of the "mix-up" when he began
construction of the improvements on Lot 8. It further ruled that the erroneous delivery was due to the negligence of
CTTEI, and that such wrong delivery was likewise imputable to its principal, petitioner herein. The appellate court also
ruled that the award of rentals was without basis.

Thus, the Court of Appeals disposed:

WHEREFORE, the petition is GRANTED, the appealed decision is REVERSED, and judgment is rendered as
follows:

1. Wilson Kee is declared a builder in good faith with respect to the improvements he introduced on Lot 9, and
is entitled to the rights granted him under Articles 448, 546 and 548 of the New Civil Code.

2. Third-party defendants C.T. Torres Enterprises, Inc. and Pleasantville Development Corporation are solidarily
liable under the following circumstances:
A. If Eldred Jardinico decides to appropriate the improvements and, thereafter, remove these
structures, the third-party defendants shall answer for all demolition expenses and the value of the
improvements thus destroyed or rendered useless;

b. If Jardinico prefers that Kee buy the land, the third-party defendants shall answer for the amount
representing the value of Lot 9 that Kee should pay to Jardinico.

3. Third-party defendants C.T. Torres Enterprises, Inc. and Pleasantville Development Corporation are ordered
to pay in solidum the amount of P3,000.00 to Jardinico as attorney's fees, as well as litigation expenses.

4. The award of rentals to Jardinico is dispensed with.

Furthermore, the case is REMANDED to the court of origin for the determination of the actual value of the
improvements and the property (Lot 9), as well as for further proceedings in conformity with Article 448 of the
New Civil Code.7

Petitioner then filed the instant petition against Kee, Jardinico and CTTEI.

The Issues

The petition submitted the following grounds to justify a review of the respondent Court's Decision, as follows:

1. The Court of Appeals has decided the case in a way probably not in accord with law or the the (sic)
applicable decisions of the Supreme Court on third-party complaints, by ordering third-party defendants to pay
the demolition expenses and/or price of the land;

2. The Court of Appeals has so far departed from the accepted course of judicial proceedings, by granting to
private respondent-Kee the rights of a builder in good faith in excess of what the law provides, thus enriching
private respondent Kee at the expense of the petitioner;

3. In the light of the subsequent events or circumstances which changed the rights of the parties, it becomes
imperative to set aside or at least modify the judgment of the Court of Appeals to harmonize with justice and
the facts;

4. Private respondent-Kee in accordance with the findings of facts of the lower court is clearly a builder in bad
faith, having violated several provisions of the contract to sell on installments;

5. The decision of the Court of Appeals, holding the principal, Pleasantville Development Corporation (liable)
for the acts made by the agent in excess of its authority is clearly in violation of the provision of the law;

6. The award of attorney's fees is clearly without basis and is equivalent to putting a premium in (sic) court
litigation.

From these grounds, the issues could be re-stated as follows:

(1) Was Kee a builder in good faith?

(2) What is the liability, if any, of petitioner and its agent, C.T. Torres Enterprises, Inc.? and

(3) Is the award of attorney's fees proper?

The First Issue: Good Faith

Petitioner contends that the Court of Appeals erred in reversing the RTC's ruling that Kee was a builder in bad faith.

Petitioner fails to persuade this Court to abandon the findings and conclusions of the Court of Appeals that Kee was a
builder in good faith. We agree with the following observation of the Court of Appeals:

The roots of the controversy can be traced directly to the errors committed by CTTEI, when it pointed the
wrong property to Wilson Kee and his wife. It is highly improbable that a purchaser of a lot would knowingly
and willingly build his residence on a lot owned by another, deliberately exposing himself and his family to the
risk of being ejected from the land and losing all improvements thereon, not to mention the social humiliation
that would follow.

Under the circumstances, Kee had acted in the manner of a prudent man in ascertaining the identity of his
property. Lot 8 is covered by Transfer Certificate of Title No. T-69561, while Lot 9 is identified in Transfer
Certificate of Title No. T-106367. Hence, under the Torrens system of land registration, Kee is presumed to have
knowledge of the metes and bounds of the property with which he is dealing. . . .

xxx xxx xxx

But as Kee is a layman not versed in the technical description of his property, he had to find a way to ascertain
that what was described in TCT No. 69561 matched Lot 8. Thus, he went to the subdivision developer's agent
and applied and paid for the relocation of the lot, as well as for the production of a lot plan by CTTEI's geodetic
engineer. Upon Kee's receipt of the map, his wife went to the subdivision site accompanied by CTTEI's
employee, Octaviano, who authoritatively declared that the land she was pointing to was indeed Lot 8. Having
full faith and confidence in the reputation of CTTEI, and because of the company's positive identification of the
property, Kee saw no reason to suspect that there had been a misdelivery. The steps Kee had taken to protect
his interests were reasonable. There was no need for him to have acted ex-abundantia cautela, such as being
present during the geodetic engineer's relocation survey or hiring an independent geodetic engineer to
countercheck for errors, for the final delivery of subdivision lots to their owners is part of the regular course of
everyday business of CTTEI. Because of CTTEI's blunder, what Kee had hoped to forestall did in fact transpire.
Kee's efforts all went to naught.8

Good faith consists in the belief of the builder that the land he is building on is his and his ignorance of any defect or
flaw in his title 9. And as good faith is presumed, petitioner has the burden of proving bad faith on the part of Kee 10.

At the time he built improvements on Lot 8, Kee believed that said lot was what he bought from petitioner. He was not
aware that the lot delivered to him was not Lot 8. Thus, Kee's good faith. Petitioner failed to prove otherwise.

To demonstrate Kee's bad faith, petitioner points to Kee's violation of paragraphs 22 and 26 of the Contract of Sale on
Installment.

We disagree. Such violations have no bearing whatsoever on whether Kee was a builder in good faith, that is, on his
state of mind at the time he built the improvements on Lot 9. These alleged violations may give rise to petitioner's
cause of action against Kee under the said contract (contractual breach), but may not be bases to negate the
presumption that Kee was a builder in good faith.

Petitioner also points out that, as found by the trial court, the Contract of Sale on Installment covering Lot 8 between it
and Kee was rescinded long before the present action was instituted. This has no relevance on the liability of
petitioner, as such fact does not negate the negligence of its agent in pointing out the wrong lot. to Kee. Such
circumstance is relevant only as it gives Jardinico a cause of action for unlawful detainer against Kee.

Petitioner next contends that Kee cannot "claim that another lot was erroneously pointed out to him" because the
latter agreed to the following provision in the Contract of Sale on installment, to wit:

13. The Vendee hereby declares that prior to the execution of his contract he/she has personally examined or
inspected the property made subject-matter hereof, as to its location, contours, as well as the natural
condition of the lots and from the date hereof whatever consequential change therein made due to erosion,
the said Vendee shall bear the expenses of the necessary fillings, when the same is so desired by him/her. 11

The subject matter of this provision of the contract is the change of the location, contour and condition of the lot due
to erosion. It merely provides that the vendee, having examined the property prior to the execution of the contract,
agrees to shoulder the expenses resulting from such change.

We do not agree with the interpretation of petitioner that Kee contracted away his right to recover damages resulting
from petitioner's negligence. Such waiver would be contrary to public policy and cannot be allowed. "Rights may be
waived, unless the waiver is contrary to law, public order, public policy, morals, or good customs, or prejudicial to a
third person with a right recognized by law." 12

The Second Issue: Petitioner's Liability


Kee filed a third-party complaint against petitioner and CTTEI, which was dismissed by the RTC after ruling that there
was no evidence from which fault or negligence on the part of petitioner and CTTEI can be inferred. The Court of
Appeals disagreed and found CTTEI negligent for the erroneous delivery of the lot by Octaviano, its employee.

Petitioner does not dispute the fact that CTTEI was its agent. But it contends that the erroneous delivery of Lot 9 to Kee
was an act which was clearly outside the scope of its authority, and consequently, CTTEI I alone should be liable. It
asserts that "while [CTTEI] was authorized to sell the lot belonging to the herein petitioner, it was never authorized to
deliver the wrong lot to Kee" 13.

Petitioner's contention is without merit.

The rule is that the principal is responsible for the acts of the agent, done within the scope of his authority, and should
bear the damage caused to third persons 14. On the other hand, the agent who exceeds his authority is personally
liable for the damage 15

CTTEI was acting within its authority as the sole real estate representative of petitioner when it made the delivery to
Kee. In acting within its scope of authority, it was, however, negligent. It is this negligence that is the basis of
petitioner's liability, as principal of CTTEI, per Articles 1909 and 1910 of the Civil Code.

Pending resolution of the case before the Court of Appeals, Jardinico and Kee on July 24, 1987 entered into a deed of
sale, wherein the former sold Lot 9 to Kee. Jardinico and Kee did not inform the Court of Appeals of such deal.

The deed of sale contained the following provision:

1. That Civil Case No. 3815 entitled "Jardinico vs. Kee" which is now pending appeal with the Court of Appeals,
regardless of the outcome of the decision shall be mutually disregarded and shall not be pursued by the
parties herein and shall be considered dismissed and without effect whatso-ever; 16

Kee asserts though that the "terms and conditions in said deed of sale are strictly for the parties thereto" and that
"(t)here is no waiver made by either of the parties in said deed of whatever favorable judgment or award the
honorable respondent Court of Appeals may make in their favor against herein petitioner Pleasantville Development
Corporation and/or private respondent C.T. Torres Enterprises; Inc." 17

Obviously, the deed of sale can have no effect on the liability of petitioner. As we have earlier stated, petitioner's
liability is grounded on the negligence of its agent. On the other hand, what the deed of sale regulates are the
reciprocal rights of Kee and Jardinico; it stressed that they had reached an agreement independent of the outcome of
the case.

Petitioner further assails the following holding of the Court of Appeals:

2. Third-party defendants C.T. Torres Enterprises, Inc. and Pleasantville Development Corporation are solidarily
liable under the following circumstances:

a. If Eldred Jardinico decides to appropriate the improvements and, thereafter, remove these
structures, the third-party defendants shall answer for all demolition expenses and the value of the
improvements thus destroyed or rendered useless;

b. If Jardinico prefers that Kee buy the land, the third-party defendants shall answer for the amount
representing the value of Lot 9 that Kee should pay to Jardinico. 18

Petitioner contends that if the above holding would be carried out, Kee would be unjustly enriched at its expense. In
other words, Kee would be able to own the lot, as buyer, without having to pay anything on it, because the
aforequoted portion of respondent Court's Decision would require petitioner and CTTEI jointly and solidarily to "answer"
or reimburse Kee therefor.

We agree with petitioner.

Petitioner' s liability lies in the negligence of its agent CTTEI. For such negligence, the petitioner should be held liable
for damages. Now, the extent and/or amount of damages to be awarded is a factual issue which should be determined
after evidence is adduced. However, there is no showing that such evidence was actually presented in the trial court;
hence no damages could flow be awarded.

The rights of Kee and Jardinico vis-a-vis each other, as builder in good faith and owner in good faith, respectively, are
regulated by law (i.e., Arts. 448, 546 and 548 of the Civil Code). It was error for the Court of Appeals to make a "slight
modification" in the application of such law, on the ground of "equity". At any rate, as it stands now, Kee and Jardinico
have amicably settled through their deed of sale their rights and obligations with regards to Lot 9. Thus, we delete
items 2 (a) and (b) of the dispositive portion of the Court of Appeals' Decision [as reproduced above] holding petitioner
and CTTEI solidarily liable.

The Third Issue: Attorney's Fees

The MTCC awarded Jardinico attorney's fees and costs in the amount of P3,000.00 and P700.00, respectively, as
prayed for in his complaint. The RTC deleted the award, consistent with its ruling that petitioner was without fault or
negligence. The Court of Appeals, however, reinstated the award of attorney's fees after ruling that petitioner was
liable for its agent's negligence.

The award of attorney's fees lies within the discretion of the court and depends upon the circumstances of each
case 19. We shall not interfere with the discretion of the Court of Appeals. Jardinico was compelled to litigate for the
protection of his interests and for the recovery of damages sustained as a result of the negligence of petitioner's
agent 20.

In sum, we rule that Kee is a builder in good faith. The disposition of the Court of Appeals that Kee "is entitled to the
rights granted him under Articles 448, 546 and 548 of the New Civil Code" is deleted, in view of the deed of sale
entered into by Kee and Jardinico, which deed now governs the rights of Jardinico and Kee as to each other. There is
also no further need, as ruled by the appellate Court, to remand the case to the court of origin "for determination of
the actual value of the improvements and the property (Lot 9), as well as for further proceedings in conformity with
Article 448 of the New Civil Code."

WHEREFORE , the petition is partially GRANTED. The Decision of the Court of Appeals is hereby MODIFIED as follows:

(1) Wilson Kee is declared a builder in good faith;

(2) Petitioner Pleasantville Development Corporation and respondent C.T. Torres Enterprises, Inc. are declared
solidarily liable for damages due to negligence; however, since the amount and/or extent of such damages
was not proven during the trial, the same cannot now be quantified and awarded;

(3) Petitioner Pleasantville Development Corporation and respondent C.T. Torres Enterprises, Inc. are ordered to
pay in solidum the amount of P3,000.00 to Jardinico as attorney's fees, as well as litigation expenses; and

(4) The award of rentals to Jardinico is dispensed with.

SO ORDERED.

Navasa, C.J., Davide, Jr. and Melo, JJ., concur.


Francisco, J., took no part.

Footnotes

1
Rollo, pp. 37-46.

2
Eleventh Division, composed of J. Alfredo L. Benipayo, ponente, and JJ. Lorna S. Lombos-dela Fuente, chair,
and Ricardo J. Francisco, member.

3
Rollo, pp. 28-29.
4
Rollo, pp. 30-31.

5
Rollo, p. 34.

6
Rollo, p. 35.

7
Rollo, pp. 45-46.

8
Rollo, pp. 43-44.

9
Floreza vs. Evangelista, 96 SCRA 130 (February 21, 1980); cf. Art. 526, Civil Code of the Philippines.

10
Art. 527, Civil Code of the Philippines.

11
Rollo, p. 17.

12
Art. 6, Civil Code of the Philippines; see Canete vs. San Antonio Agro-Industrial Development Corp., 113
SCRA 723 (April 27, 1982).

13
Rollo, p. 19.

14
Lopez vs. Alvendia, 120 Phil. 1424 (December 24, 1964); cf. Art. 1910, Civil Code.

15
BA Finance Corporation vs. Court of Appeals, 211 SCRA 112 (July 3, 1992); Art. 1897, Civil Code.

16
Rollo, p. 47.

17
Rollo, p. 61.

18
Rollo, pp. 9-10.

19
Universal Shipping Lines, Inc. vs. Intermediate Appellate Court, 188 SCRA 170 (July 31, 1990).

20
Art. 2208, Civil Code of the Philippines.
Republic of the Philippines
SUPREME COURT
Baguio City

SECOND DIVISION

G.R. No. 117642 April 24, 1998

EDITHA ALVIOLA and PORFERIO ALVIOLA, petitioners,


vs.
HONORABLE COURT OF APPEALS, FORENCIA BULING Vda de TINAGAN, DEMOSTHENES TINAGAN, JESUS
TINAGAN, ZENAIDA T., JOSEP and JOSEPHINE TINAGAN, respondents.

MARTINEZ, J.:

In this petition for review on certiorari, petitioners assail the decision 1 of the Court of Appeals dated April 8, 1994
which affirmed the decision of the lower court ordering petitioners to peacefully vacate and surrender the possession
of the disputed properties to the private respondents.

Culled from the record are the following antecedent facts of this case to wit:

On April 1, 1950, Victoria Sonjaconda Tinagan purchased from Mauro Tinagan two (2) parcels of land situated at
Barangay Bongbong, Valencia, Negros Oriental. 2 One parcel of land contains an area of 5,704 square meters, more or
less; 3 while the other contains 10,860 square meters. 4 Thereafter, Victoria and her son Agustin Tinagan, took
possession of said parcels of land.

Sometime in 1960, petitioners occupied portions thereof whereat they built a copra dryer and put up a store wherein
they engaged in the business of buying and selling copra.

On June 23, 1975, Victoria died. On October 26, 1975, Agustin died, survived by herein private respondents, namely
his wife, Florencia Buling Vda. de Tinagan and their children Demosthenes, Jesus, Zenaida and Josephine, all surnamed
Tinagan.

On December 24, 1976, petitioner Editha assisted by her husband filed a complaint for partition and damages before
the then Court of First Instance of Negros Oriental, Branch 1, Dumaguete City, docketed as Civil Case No. 6634,
claiming to be an acknowledged natural child of deceased Agustin Tinagan and demanding the delivery of her shares
in the properties left by the deceased. 5

On October 4, 1979, the aforesaid case was dismissed by the trial court on the ground that recognition of natural
children may be brought only during the lifetime of the presumed parent and petitioner Editha did not fall in any of the
exceptions enumerated in Article 285 of the Civil Code. 6

Petitioners assailed the order of dismissal by filing a petition for certiorari and mandamus before this Court. 7 On
August 9, 1982, this Court dismissed the petition for lack of merit. 8 Petitioners filed a motion for reconsideration but
the same was denied on October 19, 1982. 9

On March 29, 1988, private respondents filed a complaint for recovery of possession against Editha and her husband
Porferio Alviola before the Regional Trial Court of Negros Oriental, Branch 35, Dumaguete City, docketed as Civil Case
No. 9148, praying, among others, that they be declared absolute owners of the said parcels of land, and that
petitioners be ordered to vacate the same, to remove their copra dryer and store, to pay actual damages (in the form
of rentals), moral and punitive damages, litigation expenses and attorney's fees. 10

In their answer, petitioners contend that they own the improvements in the disputed properties which are still public
land; that they are qualified to be beneficiaries of the comprehensive agrarian reform program and that they are
rightful possessors by occupation of the said properties for more than twenty years. 11
After trial, the lower court rendered judgment in favor of the private respondents, the dispositive portion of which
reads:

WHEREFORE, premises considered, in Civil Case No. 9148, for Recovery of Property, the court hereby
renders judgment:

a) Declaring plaintiffs as the absolute owners of the land in question including the portion claimed and
occupied by defendants;

b) Ordering defendants Editha Alviola and her husband Porfirio Alviola to peacefully vacate and to
surrender the possession of the premises in question to plaintiffs; Defendants may remove their store
and dryer on the premises without injury and prejudice to the plaintiffs;

c) Ordering defendants to pay the following amounts to the plaintiffs:

1. P150.00 monthly rentals from April 1988 up to the time the improvements in the questioned
portions are removed;

2. P5,000.00 for attorney's fees;

3. P3,000.00 for litigation expenses and to pay the costs.

12
SO ORDERED.

Petitioners appealed to the Court of Appeals. On April 8, 1994, the respondent court rendered its decision, 13 affirming
the judgment of the lower court. Petitioners filed a motion for reconsideration 14 but the same was denied by the
respondent court in an order dated October 6, 1994. 15

Hence, this petition.

Petitioners aver that respondent court erred in declaring private respondents the owners of the disputed properties.
They contend that ownership of a public land cannot be declared by the courts but by the Executive Department of the
Government, citing the case of Busante vs. Hon. Court of Appeals, Oct. 20, 1992, 214 SCRA 774; and that the
respondent court erred in not considering that private respondents' predecessor-in-interest, Victoria Sonjaco Tinagan,
during her lifetime, ceded her right to the disputed properties in favor of petitioners.

Moreover, petitioners maintain that the respondent court erred in holding that they were in bad faith in possessing the
disputed properties and in ruling that the improvements thereon are transferable. They claim that the copra dryer and
the store are permanent structures, the walls thereof being made of hollow-blocks and the floors made of cement.

Private respondents counter that the question of whether or not the disputed properties are public land has been
resolved by overwhelming evidence showing ownership and possession by the Tinagans and their predecessors-in-
interest prior to 1949. They further aver that they merely tolerated petitioners' possession of the disputed properties
for a period which was less than that required for extraordinary prescription.

The petition must fail.

Petitioners claim that the disputed properties are public lands. This is a factual issue. The private respondents adduced
overwhelming evidence to prove their ownership and possession of the two (2) parcels of land on portions of which
petitioners built the copra dryer and a store. Private respondents' tax declarations and receipts of payment of real
estate taxes, as well as other related documents, prove their ownership of the disputed properties. As stated
previously in the narration of facts, these two (2) parcels of land were originally owned by Mauro Tinagan, who sold the
same to Victoria S. Tinagan on April 1, 1950, as evidenced by a Deed of Sale, 16 wherein the two (2) lots, Parcels 1 and
2, are described. 17 Anent Parcel 1, tax declarations indicate that the property has always been declared in the name of
the Tinagans. The first, Tax Declaration No. 3335 18 is in the name of Mauro Tinagan. It was thereafter cancelled by Tax
Declaration No. 19534 effective 1968, 19 still in the name of Mauro. This declaration was cancelled by Tax Declaration
No. 016740 now in the name of Agustin Tinagan, 20 effective 1974, followed by Tax Declaration No. 08-421 in the name
of Jesus Tinagan, effective 1980; 21 and finally by Tax Declaration No. 08-816 in the name of Jesus Tinagan, effective
1985. 22

With regard to Parcel 2, private respondents presented Tax Declaration No. 20973 in the name of Mauro Tinagan,
effective 1959, 23 Tax Declaration No. 016757, effective 1974; 24 Tax Declaration No. 08-405-C in the name of Agustin
Tinagan, effective 1980 25 and Tax Declaration No. 08-794 in the name of Agustin Tinagan, effective 1985. 26 Moreover,
27
the realty taxes on the two lots have always been paid by the private respondents. There can be no doubt,
therefore, that the two parcels of land are owned by the private respondents.

The record further discloses that Victoria S. Tinagan and her son, Agustin Tinagan, took possession of the said
properties in 1950, introduced improvements thereon, and for more than 40 years, have been in open, continuous,
exclusive and notorious occupation thereof in the concept of owners.

Petitioners' own evidence recognized the ownership of the land in favor of Victoria Tinagan. In their tax
declarations,28 petitioners stated that the house and copra dryer are located on the land of Victoria S. Tinagan/Agustin
Tinagan. By acknowledging that the disputed portions belong to Victoria/Agustin Tinagan in their tax declarations,
petitioners' claim as owners thereof must fail.

The assailed decision of the respondent court states that "Appellants do not dispute that the two parcels of land
subject matter of the present complaint for recovery of possession belonged to Victoria S. Tinagan, the grandmother of
herein plaintiffs-appellees; that Agustin Tinagan inherited the parcels of land from his mother Victoria; and that
plaintiffs-appellees, in turn, inherited the same from Agustin." 29

Taking exception to the aforequoted finding, petitioners contend that while the 2 parcels of land are owned by private
respondents, the portions wherein the copra dryers and store stand were ceded to them by Victoria S. Tinagan in
exchange for an alleged indebtedness of Agustin Tinagan in the sum of P7,602.04. 30

This claim of the petitioners was brushed aside by the respondent court as merely an afterthought, thus

Appellants' claim that they have acquired ownership over the floor areas of the store and dryer "in
consideration of the account of Agustin Tinagan in the sum of P7,602.04" is not plausible. It is more of
an "after-thought" defense which was not alleged in their answer. Although the evidence presented by
them in support of this particular claim was not duly objected to by counsel for appellees at the proper
time and therefore deemed admissible in evidence, an examination of the oral and documentary
evidence submitted in support thereof, reveals the weakness of their claim.

Appellant testified that the areas on which their store and dryer were located were exchanged for the
amount of P7,602.04 owed to them by Agustin in 1967 (TSN, Hearing of April 14, 1989, p. 9); that he
did not bother to execute a document reflecting such agreement "because they were our parents and
we had used the land for quite sometime already they had also sold their copra to us for a long time."
(id.) Yet, as earlier discussed, the tax declarations in appellants' answer show that even after 1967,
they expressly declared that the parcels of land on which their store and dryer were constructed,
belonged to Victoria and Agustin (Exhs. 2-A, 2-B, 2-C, 3-A, 3-B). If appellants really believed that they
were in possession of the said particular areas in the concept of owners, they could have easily
declared it in said tax declarations. 31

Concededly, petitioners have been on the disputed portions since 1961. However, their stay thereon was merely by
tolerance on the part of the private respondents and their predecessor-in-interest. The evidence shows that the
petitioners were permitted by Victoria Sanjoco Tinagan to build a copra dryer on the land when they got married.
Subsequently, petitioner Editha Alviola, claiming to be the illegitimate daughter of Agustin Tinagan, filed a petition for
partition demanding her share in the estate of the deceased Agustin Tinagan on December 6, 1976. However, the
petition was dismissed since it was brought only after the death of Agustin Tinagan. This Court dismissed the petition
for certiorari and mandamus filed by petitioner Editha Alviola on August 9, 1982. It was on March 29, 1988, when
private respondents filed this complaint for recovery of possession against petitioners. Considering that the petitioners'
occupation of the properties in dispute was merely tolerated by private respondents, their posture that they have
acquired the property by "occupation" for 20 years does not have any factual or legal foundation.

As correctly ruled by the respondent court, there was bad faith on the part of the petitioners when they constructed
the copra dryer and store on the disputed portions since they were fully aware that the parcels of land belonged to
Victoria Tinagan. And, there was likewise bad faith on the part of the private respondents, having knowledge of the
arrangement between petitioners and Victoria Tinagan relative to the construction of the copra dryer and store. Thus,
for purposes of indemnity, Article 448 of the New Civil Code should be applied. 32 However, the copra dryer and the
store, as determined by the trial court and respondent court, are transferable in nature. Thus, it would not fall within
the coverage of Article 448. As the noted civil law authority, Senator Arturo Tolentino, aptly explains: "To fall within the
provision of this Article, the construction must be of permanent character, attached to the soil with an idea of
perpetuity; but if it is of a transitory character or is transferable, there is no accession, and the builder must remove
the construction. The proper remedy of the landowner is an action to eject the builder from the land." 33

The private respondents' action for recovery of possession was the suitable solution to eject petitioners from the
premises.
WHEREFORE, this petition should be, as it is hereby, DISMISSED.

The assailed decision is hereby AFFIRMED.

SO ORDERED.

Regalado, Melo, Puno and Mendoza, JJ., concur.

Footnotes

1 Penned by the Honorable Justices of the Court of Appeals, Ma. Alicia Austria-Martinez, Ponente,
Alfredo M. Marigomen, Chairman, and Ruben T. Reyes, Junior Member, 13th Division.

2 Exhibit "L," Deed of Purchase and Sale, Folder of Exhibits.

3 Exhibit "L-1," ibid.

4 Exhibit "L-2," ibid.

5 Exhibit "B," ibid.

6 Order, Exhibit "E," Folder of Exhibits.

7 Petition, Exhibit "A," ibid.

8 Resolution of the Second Division, Exhibit "J," ibid.

9 Resolution of the Second Division, Exhibit "K," ibid.

10 Complaint, pp. 2-5, Original Record.

11 Answer, pp. 12-13, ibid.

12 Decision, pp. 161-181, Original Record.

13 Decision, pp. 25-33, CA Rollo.

14 Motion for Reconsideration, pp. 34-35, ibid.

15 Order, page 42, ibid.

16 Exhibit "L."

17 Exhibits "L-1" and "L-2."

18 Exhibit "M."

19 Exhibit "N."

20 Exhibit "O."

21 Exhibit "P."

22 Exhibit "Q."

23 Exhibit "R."

24 Exhibit "S."
25 Exhibit "T."

26 Exhibit "U."

27 Exhibits "W" to "CC-3."

28 Exhibits "2," "2-A" to "2-C" and Exhibits "3," "3-A" and "3-B."

29 P. 4, CA Decision; p. 18, Petition.

30 P. 18, Petition.

31 P. 5, Petition.

32 P. 8, CA Decision.

33 Ibid.
Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

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

MANOTOK REALTY, INC., petitioner,


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

Romeo J. Calejo for petitioner.

Mantanggot C. Gunigundo for private respondent.

GUTIERREZ, JR., J.:

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

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

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

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

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

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

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

xxx xxx xxxx x x

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

xxx xxx xxx

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

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

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

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

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

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

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

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

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

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

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

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

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

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

We are, therefore, led to the inevitable conclusion that the sale between Don Vicente Legarda and the private
respondent is void ab initio, the former being neither an owner nor administrator of the subject property. Such being
the case, the sale cannot be the subject of the ratification by the Philippine Trust Company or the probate court. As
was held in the case of Arsenal v. Intermediate Appellate Court (143 SCRA 40, 49):

Under the provisions of the Civil Code, a void contract is inexistent from the beginning. It cannot be
ratified neither can the right to set up the defense of its illegality be waived. (Art. 1409, Civil Code .

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

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

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

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

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

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

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

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

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

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

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

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

SO ORDERED.

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