CALICDAN v.

CENDAÑA
G.R. No. 155080 February 5, 2004

FACTS:
                On August 25, 1947, Fermina Calicdan executed a deed of donation whereby she
conveyed a parcel of land to respondent Silverio Cendaña, who immediately entered into
possession of the land, built a fence around the land and constructed a two-storey residential
house thereon. He occupied the land from 1949 until his death in 1998. On June 1992,
petitioner, through her legal guardian, filed a complaint for "Recovery of Ownership, Possession
and Damages" against the respondent, alleging that the donation was void; that respondent
took advantage of her incompetence in acquiring the land; and that she merely tolerated
respondent’s possession of the land as well as the construction of his house thereon.

In his Answer, respondent alleged that the land was donated to him by Fermina in 1947;
and that he had been publicly, peacefully, continuously, and adversely in possession of the land
for a period of 45 years. Moreover, he argued that the complaint was barred by prior judgment
in the special proceedings for the "Inventory of Properties of Incompetent Soledad Calicdan",
where the court decreed the exclusion of the land from the inventory of properties of the
petitioner. The trial court ruled in favor of the petitioner, while the Court of Appeals reversed the
trial court's decision.

ISSUE:
                Whether or not the donation is valid.

HELD:
                The trial court found the donation of the land void because Fermina was not the
owner thereof, considering that it was inherited by Sixto Calicdan from his parents. Thus, the
land was not part of the conjugal property of the spouses Sixto and Fermina Calicdan, because
under the Spanish Civil Code, the law applicable when Sixto died in 1941, the surviving spouse
had a right of usufruct only over the estate of the deceased spouse. Consequently, respondent,
who derived his rights from Fermina, only acquired the right of usufruct as it was the only right
which the latter could convey.
After a review of the evidence on record, we find that the Court of Appeals’ ruling that the
donation was valid was not supported by convincing proof. Respondent admitted during the
cross examination that he had no personal knowledge of whether Sixto Calicdan in fact
purchased the subject land from Felomino Bautista.
Facts: Respondent Church applied to purchase lots from a Resettlement Project in Cavite.
Petitioner approved the respondent’s application. Respondents then proceeded to possess the
land and made improvements. The Respondents received the letter from the petitioner duly
approving the sale of the subject lots but in a price not declared to them by the NHA Field
Office. Petitioner returned the check stating that the amount was insufficient considering that
the price of the properties had changed. The Church made demands to the petitioner but the
latter refused to accept the payment.
The Church instituted a complaint for specific performance and the trial court ruled that there
was a valid contract of sale between the parties and ordered that the petitioners reimburse the
respondent Church the overpayment made for the lots. NHA appealed the case and the
appellate court affirmed the trial court’s decision that there was a valid contract of sale but held
that the petitioner sell the lots at the price approved by the NHA.

A motion for reconsideration was filed but was denied.

Issue: WON there was a valid contract of sale

Ruling: There was no contract at all.
Ratio Decidendi: The principle of estoppel will not apply in this case because it does not operate
against the Government for the acts or inaction of its agents. The case will cover the principle
of equity under the law ad will require the determination of the laws that will govern. Contracts,
once perfected, are binding upon the parties and obligations arising from it have the force of
law between them and should be complied in good faith. However, contracts are not the only
source of law that govern obligations. A contract must not run in contrary to law, morals, good
customs, public order and public policy.

The offer of the NHA to sell the subject property was not accepted by the respondent. Thus, the
alleged contract involved in this case should be more accurately denominated as inexistent. There
being no concurrence of the offer and acceptance, it did not pass the stage of generation to the
point of perfection. As such, it is without force and effect from the very beginning or from its
incipiency, as if it had never been entered into, and hence, cannot be validated either by lapse
of time or ratification. Equity cannot give validity to a void contract, and this rule should apply
with equal force to inexistent contracts.

The Church, despite knowledge that its intended contract of sale with the NHA had not been
perfected, proceeded to introduce improvements on the disputed land. On the other hand, the
NHA knowingly granted the Church temporary use of the subject properties and did not prevent
the Church from making improvements thereon. Thus, the Church and the NHA, who both
acted in bad faith, shall be treated as if they were both in good faith.

The case was remanded back to the trial court to access the value of the improvements made
on the land and fix the terms of the lease if the parties so agree.
We note from the records, however, that the Church, despite knowledge that its intended contract of
sale with the NHA had not been perfected, proceeded to introduce improvements on the disputed
land. On the other hand, the NHA knowingly granted the Church temporary use of the subject
properties and did not prevent the Church from making improvements thereon. Thus, the Church
and the NHA, who both acted in bad faith, shall be treated as if they were both in good faith. 28 In this
connection, Article 448 of the Civil Code provides:

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 and 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.

Pursuant to our ruling in Depra v. Dumlao, 29 there is a need to remand this case to the trial court,
which shall conduct the appropriate proceedings to assess the respective values of the
improvements and of the land, as well as the amounts of reasonable rentals and indemnity, fix the
terms of the lease if the parties so agree, and to determine other matters necessary for the proper
application of Article 448, in relation to Articles 546 and 548, of the Civil Code.
 FRANK N. LIU, deceased, substituted by his surviving spouse Diana Liu, and children, namely: Walter,
Milton, Frank, Jr., Henry and Jockson, all surnamed Liu, Rebecca Liu Shui and Pearl Liu Rodriguez,
petitioners, vs. ALFREDO LOY, JR., TERESITA A. LOY and ESTATE OF JOSE VAÑO, respondents.

G.R. No. 145982 July 3, 2003

FACTS: Teodoro Vaño (Teodoro), as attorney-in-fact of Jose Vaño, sold seven lots to Benito Liu, through
petitioner Frank Liu (Frank), and to Cirilo Pangalo. The lots sold to Benito Liu were Lot Nos. 5, 6, 13, 14,
and 15 while the lots sold to Cirilo Pangalo were Lot Nos. 14 and 15. When Jose Vaño passed away
Benito Liu stopped further payments but after the Supreme Court declared valid the will of his father,
Teodoro informed Frank that he could already transfer the titles to the buyers’ names upon payment of
the balance of the purchase price. It was only after nine years that Frank responded that he was ready to
pay the balance of the purchase price of the seven lots after he had purchased the lots formerly sold to
Benito Liu and Cirilo Panglao. He requested for the execution of a deed of sale of the lots in his name
and the delivery of the titles to him.

Despite repeated demands by Frank, Teodoro sold Lot No. 6 to respondent Teresita Loy. Frank
then filed a complaint against Teodoro for specific performance, execution of deed of absolute sale,
issuance of certificates of title and construction of subdivision roads, before the Court of First Instance
and a notice of lis pendens on the seven lots was filed before the Register of Deeds. A year after,
Teodoro sold Lot No. 5 to respondent Alfredo Loy.

When the complaint filed by Frank was dismissed, he filed his claim to the probate court which
was subsequently granted. Milagros Vaño, who succeeded as administratrix of the Estate of Jose Vaño,
executed a deed of conveyance covering the seven lots in favor of Frank. The probate court, however,
also approved the sale to respondents Teresita and Alfredo Loy upon their motion and new titles were
issued under their name.

As a result, Frank Liu filed a complaint for reconveyance or annulment of title of Lot Nos. 5 and
6. The trial court confirmed the unilateral extrajudicial rescission of the contract by the late Teodoro
Vaño and it was later on affirmed by the Court of Appeals.

Whether the Loys were in good faith when they built on the Lots.

The Civil Code describes a possessor in good faith as follows:

Art. 526. He is deemed a possessor in good faith who is not aware that there exists in his
title or mode of acquisition any flaw which invalidates it.

He is deemed a possessor in bad faith who possesses in any case contrary to the foregoing.

Mistake upon a doubtful or difficult question of law may be the basis of good faith.

Art. 1127. The good faith of the possessor consists in the reasonable belief that the person from
whom he received the thing was the owner thereof, and could transmit his ownership.
In Duran v. Intermediate Appellate Court,51 the Court explained possession in good faith in this
manner:

Guided by previous decisions of this Court, good faith consists in the possessor’s belief that
the person from whom he received the thing was the owner of the same and could convey
his title (Arriola vs. Gomez de la Serna, 14 Phil. 627). Good faith, while it is always presumed
in the absence of proof to the contrary, requires a well-founded belief that the person from
whom title was received was himself the owner of the land, with the right to convey it
(Santiago vs. Cruz, 19 Phil. 148). There is good faith where there is an honest intention to
abstain from taking unconscientious advantage from another (Fule vs. Legare, 7 SCRA 351).

The Loys were not in good faith when they built on the lots because they knew that they bought from
someone who was not the registered owner. The registered owner on the TCTs of the lots was the
"Estate of Jose Vaño," clearly indicating that the sale required probate court approval. Teodoro Vaño
did not show any court approval to the Loys when they purchased the lots because there was none.
To repeat, any one who buys from a person who is not the registered owner is not a purchaser in
good faith.52 If the Loys built on the lots before the court approval, then they took the risk.