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24. COSIO VS. PALILEO Lease; Bad faith.

—When the petitioners took possession of a house in good


faith, in the honest belief that they were entitled to do so, their bad faith started
196 SUPREME COURT REPORTS ANNOTATED only from the time they became aware of the decision in the first case, because it
Cosio and de Rama vs. Palileo was from that date only that they became aware of
No. L-18452. May 20, 1966. 198
AUGUSTO Cosio and BEATRIZ DE RAMA, petitioners, vs.CHERIE PALILEO, 198 SUPREME COURT REPORTS ANNOTATED
respondent. Cosio and de Rama vs. Palileo
the flaw in their title. This liability for rent must, accordingly, be deemed to
________________ begin from December 15, 1955 only when the decision in the first case become final.

Montero vs. Castellanes, L-12694, June 30, 1960.


8
RESOLUTION on Motion for Reconsideration of a decision promulgated on May
197 31, 1965.
VOL. 17, MAY 20, 1966 197
Cosio and de Rama vs. Palileo Recto Law Offices for petitioners.
Contracts; Transaction is determined by its nature.—A transaction is Bengzon, Villegas & Zarraga for respondent.
determined by the nature thereof. The nature of the agreement being inherent in
the agreement itself, exists from the very moment the transaction was entered into. REGALA, J.:
Thus, “except as to bona fide city purchasers without notice and those standing in
similar relations, on the reformation of an instrument, the general rule is that it Petitioners have filed a motion for reconsideration of the decision in this case in so
relates back to and takes effect from the time of its original execution, especially as far as it declares petitioner Cosio de Rama to be a possessor in bad faith of a house,
between the parties themselves” (76 C.J.S., par. 93). with obligation to pay rental for its use.
Same; Function of reformation.—The function of reformation is not to make Petitioners contend, first of all, that Cosio de Rama could not have known that
a new contract for the parties, but only to make the instrument speak their genuine she was not entitled to the possession of the house before the decision in Palileo v.
intention. Cosio, 97 Phil. 919 (1955), because even Palileo herself referred to Cosio de Rama
Mortgage; Antichresis results when mortgaged property is delivered to as the owner of the house. For instance, the following portion of a letter. written by
mortgagee.—Where by agreement the mortgaged property is delivered to the Palileo to Sor Consuelo of the Hospicio de San Jose, dated February 17, 1952, is
mortgagee, such mortgagee in possession is subject to the obligation of an cited.
antichretic creditor to apply the fruits to the payment, first, of the interest and, “I am in receipt of your letter today and wish to explain the situation about the lot
later, of the principal (Diego vs. Fernando, L-15128, Aug. 25, 1960; and house.
Macapinlac vs. Gutierrez-Repide, 43 Phil, 770). “x x x Everyone who sees my house falls in love with it and so instead of my
Same; Possession is not an element of a mortgage.—A simple mortgage does offer to mortgage the house, the other party wanted a conditional sale for one (1)
not give the mortgagee the right to the possession of mortgaged property year, This means that Miss Cosio is the temporary owner of my house until
(Alvano vs. Batoon, 25 Phil. 178). December 31, 1952 or until I can pay her back P12,000 before that date.”
Same; Definition of “mortgagee in possession."—A mortgagee in possession is Another letter is cited in which the Hospicio de San Jose made the statement that
one “who has lawfully acquired actual or constructive possession of the premises Palileo had “sold the house to Miss B. Cosio” and it is said that Palileo’s failure to
mortgaged to him, standing upon his rights as mortgagee and not claiming another deny this statement was in ef f ect an admission of the truth of that statement,
title, for the purpose of enforcing his security upon such property or making its Finally, it is contended that when the house was burning, respondent Palileo called
income help to pay his debt.” (Diaz vs. De Mendezona, 48 Phil. 666, 669). Cosio de Rama and told her: “Betty, your house is burning!” All this is shown to
Possessor in bad faith is liable for rent.—A possessor in bad faith is liable for prove that before their transaction was declared to be an equitable mortgage, Cosio
rent during all the time he deprived the owner of the use of the property de Rama had a right to the possession of the house.
(Lerma vs. De la Cruz, 7 Phil. 580). Palileo may indeed have called the transaction a “sale” and referred to Cosio de
Possession; Presumption as to character of possession.—It is presumed that Rama as “owner” of the house.
possession is enjoyed in the same character in which it was acquired until the 199
contrary is proved (Art, 529, New Civil Code). VOL. 17, MAY 20, 1966 199
Resolution on Second Motion for Reconsideration: Insurance; Mortgagee has Cosio and de Rama vs. Palileo
insurable interest in thing mort-gaged.—Even a mere mortgagee has an insurable
but that is no reason for inferring that the parties understood their contract to be
interest in the thing mortgaged (Palileo vs. Cosio, 97 Phil. 919).
one of sale. For that matter, they entitled their contract “Conditional Sale of
Residential Building” and it was doubtless in the context of that contract that
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Palileo referred to Cosio de Rama as the “temporary owner of my house until Fernando, G.R. No. L-15128, August 25, 1960; Macapinlac v. Gutierrez Repide, 43
December 31, 1952 or until I can pay her back P12,000 before that time.” Because Phil. 770[1922],) Thus it was held in Macapinlac v. Gutierrez Repide, supra, at
the parties referred to their contract as a “conditional sale,” should we then have 786–87:
held that Cosio de Rama was the “temporary owner” with a right to the possession “The respective rights and obligations of the parties to a contract of antichresis,
of the house? under the Civil Code, appear to be similar and in many respects identical with
A transaction is determined by the nature thereof. The nature of the agreement those recognized in the equity jurisprudence of England and America as incident
being inherent in the agreement itself, exists from the very moment the transaction to the position of a mortgagee in possession in reference to which the following
was entered into. Thus: “Except as to bona fide city purchasers without notice and propositions may be taken to be established, namely, that if the mortgagee acquires
those standing in similar relations, OR the reformation of an instrument the possession in any lawful manner, he is entitled to retain such possession until the
general rule is that it relates back to and takes effect from the time of its original indebtedness is satisf ied and the property redeemed; that the nonpayment of the
execution, especially as between the parties themselves x x x” (76 C.J.S. par. 93, debt within the term agreed does not vest the ownership of the property in the
citing cases therein). creditor; that the general duty of the mortgagee in possession towards the premises
The fact is that in Palileo v. Cosio, supra, this Court found Cosio de Rama to be is that of the ordinary prudent owner; that the mortgagee must account for the
a mere mortgagee of the house and that decision is now final. It was merely to rents and profits of the land. or its value for purposes of use and occupation, any
pursue the logical implication of that decision that we ruled in this case that if the amount thus realized going towards
parties’ true agreement was to make the house a security for a loan, then Cosio de 201
Rama, as mortgagee must have known that she was not at all entitled to the VOL. 17, MAY 20, 1966 201
possession of the house. This, because the function of reformation is not to make a Cosio and de Rama vs. Palileo
new contract for the parties but only to make the instrument speak their genuine the discharge of the mortgage debt; that if the mortgagee remains in possession
intention. after the mortgage debt has been satisfied, he becomes a trustee for the mortgagor
Changing their position, petitioners now maintain that Cosio de Rama was as to the excess of the rents and profits over such debt; and, lastly, that the
given possession of the house and the proposition is now advanced that a mortgagee mortgagor can only enforce his rights to the land by an equitable action for an
may be given possession of the property mortgaged “without thereby altering the account and to redeem.” (3 Pomeroy Equity Jurisprudence, secs. 1215–1218)
nature of the contract,” petitioners citing Legaspi v. Celestial, 66 Phil. 372 (1938) Now, was there an agreement in this case to permit Cosio de Rama to have
for authority. A complete statement of the rule laid down in Legaspi reads: possession of the house in lieu of the payment of interest? Quite the contrary, the
200 parties stipulated that interest (in the form of rent) was to be paid at the rate of
200 SUPREME COURT REPORTS ANNOTATED P250 a month, an amount which we found to be excessive. For petitioners,
Cosio and de Rama vs. Palileo therefore, to espouse the theory of a mortgagee in possession would be for them to
“In a contract of mortgage, the mortgagor, as a general rule, retains the possession admit unwittingly that doubly excessive interest was collected for a loan of P12,000
of the property mortgaged as security for the payment of the sum borrowed from which Cosio de Rama had extended to Palileo.
the mortgagee, and pays the latter a certain per cent thereof as interest on his Nor would it improve petitioners’ position to argue that since Palileo remained
principal by way of compensation for his sacrifice in depriving himself of the use of in possession of the house as lessee, her possession was that of Cosio de Rama on
said money and the enjoyment of its fruits, in order to give them to the mortgagor. the principle that a lessee’s possession is the lessor’s s possession. Precisely, we
Inasmuch as it is not an essential requisite of the contract of mortgage that the held in the earlier case of Palileo v. Cosio, supra, that there was no lease contract
property mortgaged remain in the possession of the mortgagor (Article 1857 of the between the parties, because the so-called rents were in reality interests. Indeed,
Civil Code) the latter may deliver said property to the mortgagee, without thereby Article 1602 of the Civil Code states that “The contract shall be presumed to be an
altering the nature of the contract. It not being an essential requisite of said equitable mortgage x x x (2) When the vendor remains in possession as lessee or
contract of mortgage that the principal of the mortgage credit bear interest, or that otherwise.”
the interest, as compensation for the use of the principal and enjoyment of its fruits, Furthermore, it is error to say; that the possession of the premises of the house
be in the form of a certain per cent thereof, such interest may be in the form of was delivered to the petitioner for the period of the consideration of the transaction
fruits of the mortgaged property, without the contract’s losing thereby its character because the transaction having been found to be an equitable mortgage the
of a mortgage contract. (At 377–378) respondent, as mortgagor, retained possession of the premises, under the general
We may mention, at this point, that this ruling was made in answer to the principle of law as elsewhere stated, and therefore there was actually no legal
contention of the appellant in that case that the contract was an antichresis and possession that was transferred from the mortgagor (respondent) to the mortgagee
not a mortgage. Of course in other cases the rule has been laid down that where by (petitioner) by virtue of the aforesaid transaction.
agreement the mortgaged property is delivered to the mortgagee, such mortgagee Still, it is insisted that when petitioners entered the premises, they acted well
in possession is subject to the obligation of an antichretic creditor to apply the fruits within their right.
to the payment, first, of the interest and, later, of the principal. (Diego vs.

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For this purpose, petitioners submit three propositions: (1) their right as Independently of the foregoing, it is logical to presume that for about the same
mortgagee to take possession of the period that she has been deprived of the use of the property the respondent may
202 have suffered damages by way of the rentals she may have paid for the premises
202 SUPREME COURT REPORTS ANNOTATED she has occupied to settle herself in the meantime. On that basis, whatever amount
Cosio and de Rama vs. Palileo the respondent will therefore receive from the petitioner as rentals for the property
house; (2) their right as mortgagee to take possession of the house because it was in question would but be a reimbursement of what she had paid as rentals for
abandoned; (3) their right as mortgagee, who may, “if [they] can make a peaceable another place.
entry upon the mortgaged premises after condition [is] broken, x x x maintain such Parenthetically, and on the point that Palileo would in effect be “absolved” from
possession against the mortgagor,” petitioners citing Cook v. Cooper, 18 Or. 142, 22 paying the loan, we note that the petitioner had already collected the insurance
P. 945 (1889) for the last proposition. proceeds from the Associated Insurance & Surety Company which should be
The first proposition is contrary to settled law, according to which a simple deemed in payment of the loan. Aside therefrom, the petitioner may again collect
mortgage does not give the mortgagee the right to the possession of the mortgaged the amount of P12,297.00 with legal interest thereon, this time from the respondent
property unless the contract contains some special provision (Alvano v. Batoon, 25 by virtue of the assignment of the credit (originally P13,107.00 but reduced by
Phil, 178 [1913]); the second proposition is contrary to the facts as found by both P8,100.00 paid thereon) which was assigned to the petitioner by the Associated
the trial and the appellate courts to the effect that, at the time of the fire, the house Insurance & Surety Company for P1.00 (Exh. “T") which assignment we have
was being rented by Mary Icard as tenant of Palileo. If at the time petitioners upheld by affirming the decision of the Court of Appeals on the matter.
entered the premises no one was in actual possession of the house, it was because In the letter Exhibit “L", the “Associated Insurance & Surety Company
of the fire that destroyed part of it. This fact did not certainly give petitioners a considers the payment made of the in-
right to enter the premises. The third proposition is non-sequitur for at the time 204
petitioners took possession of the house. no condition of the loan had been broken. 204 SUPREME COURT REPORTS ANNOTATED
At any rate, after claiming the right to possession as incident of ownership, Cosio and de Rama vs. Palileo
petitioners should not claim the right of possession as mortgagee. A mortgagee in surance policy as insurance risk and therefore its policy precludes it from
possession is one “who has lawfully acquired actual or constructive possession of recovering what has been paid on account of the risk attaching to an insurance
the premises mortgaged to him, standing upon his rights as mortgagee and not policy.” It would therefore appear that the petitioner would be collecting the
claiming under another title, for the purpose of enforcing his security upon such mortgage indebtedness twice since it is apparent from the letter Exhibit “L",
property or making its income help to pay his debt” (Diaz v. de Mendezona, 48 Phil. pertinent portion of which is quoted above, and from the deed of assignment Exhibit
666, 669 [1926]). “T" that the only consideration for the assigned credit is P1.00.
In Polileo v. Cosio, supra, we upheld Cosio de Rama’s right to the proceeds of Nor is it fair to say that the decision in this case would hand over to Palileo a
the fire insurance even as we held that her claim against Palileo on the loan of “completed house” at absolutely “no expense to her” considering that the decision
P12,000 was to be deemed assigned to the insurer, the Associated Insurance & orders Palileo to reimburse Cosio de Rama the expenses incurred by the latter in
Surety Company. It is now contended that, with the decision in this case, the right repairing the house.
of Cosio de Rama as adjudged in the earlier case would be lost. More specifically, it It is finally contended that at any rate rents should run up to June 1958 only
is claimed that under the decision in this case, Palileo would “not only find herself when Cosio de Rama died, because bad faith is personal and intransmissible (Civil
in effect absolved from paying her mortgage indebtedness but she gets in Code, Art. 534). The short answer to this would be that, under the Code, it is
203 presumed that possession continues to be enjoyed in the same character in which
VOL. 17, MAY 20, 1966 203 it was acquired, until the contrary is proved (Art. 529). We have already shown that
Cosio and de Rama vs. Palilio petitioners'” possession has been in bad faith and we have not been shown the
addition, at absolutely no expense to her, a completed house plus several thousand contrary.
pesos in the form of rentals for the house which fire destroyed and which she did Moreover, the finding on the liability for the payment of rental is applicable not
not rebuild.” only to the deceased Cosio de Rama but also to the petitioner Augusto Cosio during
This is a gross misrepresentation.—Nowhere in the decision in this case do we all the time that the respondent has been deprived of the possession of the premises
“in effect” absolve Palileo from her indebtedness on the loan. If the point which in question.
petitioners wish to make is that after offsetting Palileo’s obligation on the loan with In any case, and in so far as petitioner Beatriz Cosio de Rama is concerned,
the amount of rentals due her (which according to petitioners now total P46,800) since the latter’s estate should be deemed in possession of the premises and is
there would still be left a balance in her favor, then the situation is one that cannot enjoying the benefit of such possession, it (the estate) should be held liable for the
be questioned. A possessor in bad faith is liable for rent during all the time he rental of the house. Whether part of the rentals accrued during the lifetime of the
deprived the owner of the use of the property. (Lerma v. De la Cruz, 7 Phil. petitioner Cosio de Rama and the other part, to her estate, would be of no serious
580[1907].) consequence since the ultimate result will practically be the same, namely, the total

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amount of the rentals should now be paid by Beatriz Cosio de Rama’s estate. It was situated, and paid the rents therefor in the sum of P135.00 a quarter. On
would be an empty formality to require the respondent Palileo to file a separate February 17, 1952 respondent wrote a letter to Sor Consuelo of the Hospicio de San
claim for the rentals Jose, stating that under her contract with petitioner, “Miss Cosio is the temporary
205 owner of my house until December 31, 1952 or until I can pay her back P12,000.00
VOL. 17, MAY 20, 1966 205 before that time.”
Cosio and de Rama vs. Palileo After the house was partially burned on October 25, 1952, it was petitioner who
that accrued after the death of petitioner Beatriz Cosio de Rama against the latter’s reconstructed it. Nobody was then in occupancy. It was entirely proper that
estate instead of joining said rentals as all due under the instant case since it will petitioner should take charge to protect her interest. If she knew or thought then
be the same estate that will pay for it. that she had no right to be in possession, as the decision under consideration says,
The motion for reconsideration is denied. there would be no point in reconstructing the house at all: she had collected the
Chief Justice Cesar Bengzon and Justices Bautista insurance proceeds and the loan she had extended to respondent was still
Angelo and Zaldivar, concur. Justices J.P. Bengzon and Sanchez, took no part. outstanding and therefore supposed to be collectible, even if the property set up as
Motion denied. guarranty had been damaged. Indeed, respondent herself considered it the duty of
petitioner to rebuild the house as shown by a pleading she filed in the first case,
MAKALINTAL, J., dissenting: wherein she complained that “x x x defendant (Cosio de Rama) did not rebuild said
building notwithstanding that she had received the aforesaid sum of P13,107.00
I am for reconsidering the decision by eliminating therefrom the adjudication of from the insurance company,” and alleged that she was willing to pay her
rents in favor of respondent Cherie Palileo at the rate of P300.00. To date the indebtedness of P12,000.00 “provided the defendant first rebuild the building in
aggregate amount of such rents is over P46,000.00 and it seems to me that to award question to its original condition before its destruction by fire.”
it to her is in effect to put a pre-mium on her own default, for if she had paid her The inference as to possession that might be derived from the judicial
indebtedness on time (within one year from December 18, 1951) she would not have construction of’ the sale as an equitable
had such rents at all. 207
The main ground upon which petitioner Beatriz Cosio de Rama’s liability is VOL. 17, MAY 20, 1966 207
based is that she was a possessor of the house in bad faith, and this finding in turn Cosio and de Rama vs. Palileo
is based on the decision of this Court in the first case between the parties (Palileo mortgage cannot in my opinion, overthrow the clear agreement of the parties,
vs. Cosio, 97 Phil. 919) that their contract executed on December 18, 1951, while implemented by their conduct, that such possession should be in the vendee
denominated a sale with the right of repurchase, was in reality an equitable (equitable mortgage); and to make her pay rents would be rewarding the defaulting
mortgage. That case was for reformation of instrument, filed sometime towards the debtor unjustly, since it was precisely her default which assured her of such rents
end of 1952. I do not believe, in view of the circumstances, that just because the month after month for many years without having to comply with the obligations
transaction was held to be an equitable mortgage petitioner Cosio de Rama of a lessor with respect to the maintainance of the house in good condition, and to
necessarily had no right to the possession of the house and was aware of it from the the payment of taxes, of premiums on the insurance and of the rents of the lot on
very moment the instrument was executed. The obvious, and to my mind the only, which the said house is situated.
effect of that decision is that non-payment of the obligation within the period Justices Concepcion, J.B.L. Reyes and Dizon, concur in the dissent of Justice
stipulated—one year from December 18, 1951—did not preclude redemption of the Makalintal.
property ostensibly sold nor result in the consolidation of the ownership thereof in Motion for reconsideration denied.
the vendee. The agreement concerning possession of the house—explicit in the RESOLUTION ON SECOND MOTION
contract and implicit in the con- FOR RECONSIDERATION
206 November 28, 1966.
206 SUPREME COURT REPORTS ANNOTATED
Cosio and de Rama vs. Palileo REGALA, J.:
temporaneous acts of the parties—was in no wise affected by our decision.
The deed of sale itself, of course, presupposed delivery of the house to the Petitioners have filed a second motion for reconsideration based on substantially
vendee. Such delivery was confirmed simultaneously by the lease of the house to the same grounds advanced by them in their first motion for reconsideration,
the vendor, pursuant to which the latter remained in occupancy as tenant for five grounds which were already considered in both the resolution of May 20, 1966 and
(5) months, leaving the place in May, 1952, The day after the sale, that is, on in the dissenting opinion of Mr. Justice Makalintal. Thus, the following
December 19, 1951 petitioner Cosio de Rama insured the house for her own account circumstances are cited as basis for petitioners’ claim of good faith in taking
and paid the corresponding premium on the policy. She likewise secured a new possession of the house.
contract of lease with the Hospicio de San Jose, owner of the lot on which the house
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1. 1.The agreement of the parties whereby respondent Palileo was allowed to “WHEREFORE, with the modification that petitioner Cosio de Rama should be
remain in possession of the house, ostensibly as lessee, after it was reimbursed her necessary expenses in the amount of P1 2,000 by respondent
allegedly sold to petitioner Cosio de Rama. Palileo, and that petitioners, for their possession of the house, are ordered to pay
2. 2.The alleged impression of the parties that their transaction was one of respondent Palileo a monthly rental of P300 starting from the time the decision in
conditional sale, by virtue of which petitioner Cosio de Rama became the Palileo v. Cosio, 96 Phil. 9.19 [1955] became final on December 15, 1955 the
“temporary owner” of the house, evident in the act of petitioner Cosio de judgment of the Court of’ Appeals is affirmed in all other respects, without any
Rama of insuring the house against fire, renewing the lease of the land pronouncement as to costs.”
on which it was built and repairing the house when it was partly Justices J.B.L. Reyes, Dizon and Zaldivar, concur. Messrs. Justices J.P.
destroyed by fire. Bengzon, Sanchez and Castro did not take part.

208 MAKALINTAL, J., dissenting:


208 SUPREME COURT REPORTS ANNOTATED
Cosio and de Rama vs. Palileo I have set forth, in my dissent ‘from this Court’s resolution denying petitioners’ first
But, as already stated in the prior case of Palileo v. Cosio,97 Phil. 919 (1955), as motion for reconsideration, the reasons why they should not be held liable for rents
well as in the main decision in this case, the agreement to permit respondent on the house in question, which under the decision would not aggregate
Palileo to remain in possession of the house as lessee thereof was merely a device approximately P50,000.00, at P300.00 a month since December 1952. The
to enable the collection of excessive interests in the guise of monthly rentals. It is resolution on petitioners’ second motion for reconsideration now modifies the
precisely schemes such as these which the law presumes to be equitable mortgages judgment in the sense that their liability for such rents should start only from
(Civil Code, Art. 1606 [2]) and it was on this score that this Court declared the December 15, 1955, when our decision in the present case of Palileo vs. Cosio, 97
parties’ contract to be a mortgage. Phil. 919, became final. The modification is based on the proposition that
The second has already been answered also in the resolution of May 20, 1966. “petitioners must be deemed to have taken possession of the house in good ‘faith,
Consistently with the design to conceal the true nature of their agreement which in the honest belief that they were entitled to do so,1 and that it was only after the
they styled a “Conditional Sale of a Residential House,” it was not unlikely for the decision in Palileo vs. Cosio, supra, became final on December 15, 1955 that
parties to act the way parties to a real sale might act. This probably explains why petitioners’ bad faith started, because it was from that date only that they became
petitioner Cosio de Rama renewed the lease on the land when it expired, although, aware 01 the flaw in their title (Art. 528)."
with respect to the insurance which she took, it might be said that even a mere I am still unable to accept this new development. If petitioners’ original
mortgagee has an insurable interest in the thing mortgaged. This is the ruling in possession of the house was in good faith—and I am convinced it was and has since
the first case of Palileo vs. Cosio, supra, and it was on the basis of this ruling that continued to be so—even the alleged change in the character
petitioner Cosio de Rama’s right to the proceeds of the fire insurance was upheld.
However, realizing that the issues in this case are such that even members of ________________
the Court are divided and considering that mistake upon difficult questions of law
may be the basis of good faith (Civil Code, Art. 526), we have decided to give 1That was in 1952, under the contract of “conditional sale” between the parties.
petitioners the benefit of the doubt For this reason, petitioners must now be deemed 210
to have taken possession of the house in good faith, in the honest beIief that they 210 SUPREME COURT REPORTS ANNOTATED
were entitled to do so, and that it was only after the decision in Palileo vs. Cosio, Filipinas Life Assurance Co,, et al. vs. Nava
supra, became final on December 15, 1955 that petitioners’ bad faith started, of that possession by virtue of the 1955 decision would not render them liable for
because it was from that date only that they became aware of the flaw in their title rents thereafter, As possessors in good faith they incurred necessary expenses on
(Art. 528). Petitioners’ liability for rent must accordingly be deemed to begin from the house when they reconstructed it after the fire in 1952, spending the amount
December 15, 1955 only but their right to reimbursement for necessary expenses of P12,000.00 for that purpose. And under Article 546 of the Civil Code a possessor
as declared in our original decisions in this case, is reaffirmed. Such in good faith has the right of retention until such necessary expenses have been
reimbursement, in the amount of P12.000 maybe deducted from the rents refunded. I believe, under the facts and circumstances of this case, that to grant
209 respondent Palileo’s claim for rents without her having made reimbursement—not
VOL. 17, MAY 20, 1966 209 to say without having paid.her original indebtedness, which has been assigned back
Cosio and de Rama vs. Palileo to the petitioners by the insurance company—would be to allow said respondent to
due the respondent enrich herself unjustly at petitioners’ expense. For petitioners could very well have
Wherefore, the dispositive portion of the original decision is hereby modified to put the P12,000.00 to some other lucrative use than the reconstruction of the
mid as follows: mortgaged house and received, by way of income, the equivalent of the rental value
.thereof. As it is, however, under the present resolution of this Court respondent
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would in effect receive the income from capital which she has not invested; and
petitioners in turn would be virtually penalized for having spent their money in
reconstructing the house. because if they had not done so the house would hardly
command any rental value, having been almost totally destroyed. I do not think the
whole setup is equitable and just.
Justice Concepcion concurs in the foregoing dissent of Mr. Justice
Makalintal.
Original decision modified.

—————

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