A) MERCADO VS CA GR No.

L-44001 June 10, 1988

B) BALLATAN VS MARTINEZ GR No. 125683 March 2, 1999
C) SARMIENTO V AGANA GR No. L-57288 April 30, 1984
D) TECHNOGAS V CA GR No. 108894 February 10,1997
E) DEPRA V DUMLAO GR No. L-57348, May 6, 1985
F) VIRGILIO V PATRICIA GR No. 134651, September 18, 2000
G) GUZMAN et al. VS FUENTE et al., GR 32433, December 29, 1930
H) ALBURU V VILLANUEVA GR. No. 3003. January 2, 1907
I) TUASON V. LUMANLAN GR. No. L-23497 April 26, 1968
J) PLEASANTVILLE V CA GR. NO. 79688 February 1, 1996
A) MERCADO VS CA
G.R. No. L-44001 June 10, 1988
PAZ MERCADO, CAROLINA S. CHICO, LUCIANA CABRERA, JOAQUIN
IGNACIO, ELMER FLORES, AVELINA C. NUCOM, et al., petitioners,  On October 24,1975, respondent Judge rendered a summary judgment in
vs.
HON. COURT OF APPEALS, HON. BENIGNO PUNO, LOLITA C. BULAONG,
FLORENTINO AGULTO, SEVERINO SALAYSAY, SUSANA BERNARDINO, et
al., respondents.
Facts:  thereof. The decision also declared that the Bulaong and Mercado Groups
The private respondents Bulaong Group, had for many years been
individual lessees of stalls in the public market of Baliuag, Bulacan; from
1956 to 1972. The market was destroyed by fire on February 17, 1956; the
members of the Bulaong Group constructed new stalls therein at their
expense; and they thereafter paid rentals thereon to the Municipality of
Baliuag.
In 1972, the members of the group sub-leased their individual stalls to
other persons, referred to as theMercado Group. After the Mercado Group
had been in possession of the market stalls for some months, as sub-
lessees of the Bulaong Group, the municipal officials of Baliuag cancelled
the long standing leases of the Bulaong Group and declared the persons
comprising the Mercado Group as the rightful lessees of the stalls in
question, in substitution of the former.
The members of the Bulaong Group sued. They filed several individual
complaints with the Court of First Instance seeking recovery of their stalls
from the Mercado Group as well as damages. 1 Their theory was anchored
on their claimed ownership of the stalls constructed by them at their own
expense, and their resulting right, as such owners, to sub-lease the stalls,
and necessarily, to recover them from any person withholding possession
thereof from them.
all the cases. 3 It rejected the claim of the Municipality of Baliuag that it
had automatically acquired ownership of the new stalls constructed after
the old stalls had been razed by fire, declaring the members of the Bulaong
Group to bebuilders in good faith, entitled to retain possession of the stalls
respectively put up by them until and unless indemnified for the value
had executed the sub-letting agreements with full awareness that they
were thereby violating Ordinance No. 14; they were thus in pari
delicto, and hence had no cause of action one against the other and no
right to recover whatever had been given or demand performance of
anything undertaken. The judgment therefore decreed (1) the annulment
of the leases between the Municipality and the individuals comprising the
Mercado Group (the defendants who had taken over the original leases of
the Bulaong Group); and (2) the payment to the individual members of the
Bulaong Group (the plaintiffs) of the stated, adjudicated value of the stalls,
with interest IF —
The members of the Mercado Group are now before this Court on an
appeal by certiorari, this time timely taken, assailing the above rulings of
the Court of Appeals. Their appeal must fail for lack of merit. No error can
be ascribed to the judgment of the Court of Appeals which is hereby
affirmed in toto.
Held: It was held that “to be deemed a builder in good faith, it is essential
that a person assert title to the land on which he builds; i.e., that he be a
possessor in concept of owner, and that he be unaware ‘that there exists
in his title or mode of acquisition any flaw which invalidates it.’
Lessees cannot be considered builders in good faith (taken from Haystacks,
by Berne Guerrero)

The members of the Bulaong group were admittedly lessees of space in the
public market; they therefore could not, and in truth never did make the
claim, that they were owners of any part of the land occupied by the
market so that in respect of any new structure put up by them thereon,
they could be deemed builders in good faith (in accordance with Article
526 of the Civil Code). To be deemed a builder in good faith, it is essential
that a person assert title to the land on which he builds; i.e., that he be a
possessor in concept of owner, and that he be unaware “that there exists
in his title or mode of acquisition any flaw which invalidates it. It is such a
builder in good faith who is given the right to retain the thing, even as
against the real owner, until he has been reimbursed in full not only for the
necessary expenses but also for useful expenses. On the other hand, unlike
the builder in good faith, a lessee who “makes in good faith useful
improvements which are suitable to the use for which the lease is
intended, without altering the form or substance of the property leased,”
can only claim payment of “one-half of the value of the improvements” or,
“should the lessor refuse to reimburse said amount, remove the
improvements, even though the principal thing may suffer damage
thereby.”
B) BALLATAN VS MARTINEZ

G.R. No. 125683 March 2, 1999

EDEN BALLATAN and SPS. BETTY MARTINEZ and CHONG CHY

LING, petitioners, 
vs.
COURT OF APPEALS, GONZALO GO, WINSTON GO, LI CHING YAO,
ARANETA INSTITUTE OF AGRICULTURE and JOSE N.
QUEDDING, respondents.

 
C) SARMIENTO V AGANA
G.R. No. L-57288 April 30, 1984
LEONILA SARMINETO, petitioner, 
vs.
HON. ENRIQUE A. AGANA, District Judge, Court of First Instance of Rizal,
Seventh Judicial District, Branch XXVIII, Pasay City, and SPOUSES
ERNESTO VALENTINO and REBECCA LORENZO-VALENTINO,respondents.
This Petition for certiorari questions a March 29, 1979 Decision rendered
by the then Court of First Instance of Pasay City. The Decision was one
made on memoranda, pursuant to the provisions of RA 6031, and it
modified, on October 17, 1977, a judgment of the then Municipal Court of
Paranaque, Rizal, in an Ejectment suit instituted by herein petitioner
Leonila SARMIENTO against private respondents, the spouses ERNESTO
Valentino and Rebecca Lorenzo. For the facts, therefore, we have to look
to the evidence presented by the parties at the original level.
It appears that while ERNESTO was still courting his wife, the latter's
mother had told him the couple could build a RESIDENTIAL HOUSE on a lot
of 145 sq. ms., being Lot D of a subdivision in Paranaque (the LAND, for
short). In 1967, ERNESTO did construct a RESIDENTIAL HOUSE on the LAND
at a cost of P8,000.00 to P10,000.00. It was probably assumed that the
wife's mother was the owner of the LAND and that, eventually, it would
somehow be transferred to the spouses.
It subsequently turned out that the LAND had been titled in the name of
Mr. & Mrs. Jose C. Santo, Jr. who, on September 7 ,  1974, sold the same to
petitioner SARMIENTO. The following January 6, 1975, SARMIENTO asked
ERNESTO and wife to vacate and, on April 21, 1975, filed an Ejectment suit
against them. In the evidentiary hearings before the Municipal Court,
SARMIENTO submitted the deed of sale of the LAND in her favor, which
showed the price to be P15,000.00. On the other hand, ERNESTO testified
that the then cost of the RESIDENTIAL HOUSE would be from P30,000.00 to
P40,000.00. The figures were not questioned by SARMIENTO.
The Municipal Court found that private respondents had built the
RESIDENTIAL HOUSE in good faith, and, disregarding the testimony of
ERNESTO, that it had a value of P20,000.00. It then ordered ERNESTO and
wife to vacate the LAND after SARMIENTO has paid them the mentioned
sum of P20,000.00.
The Ejectment suit was elevated to the Court of First Instance of Pasay
where, after the submission of memoranda, said Court rendered a
modifying Decision under Article 448 of the Civil Code. SARMIENTO was
required, within 60 days, to exercise the option to reimburse ERNESTO and
wife the sum of 40,000.00 as the value of the RESIDENTIAL HOUSE, or the
option to allow them to purchase the LAND for P25,000.00. SARMIENTO
did not exercise any of the two options within the indicated period, and
ERNESTO was then allowed to deposit the sum of P25,000.00 with the
Court as the purchase price for the LAND. This is the hub of the
controversy. SARMIENTO then instituted the instant certiorari proceedings.
We agree that ERNESTO and wife were builders in good faith in view of the
peculiar circumstances under which they had constructed the RESIDENTIAL
HOUSE. As far as they knew, the LAND was owned by ERNESTO's mother-
in-law who, having stated they could build on the property, could
reasonably be expected to later on give them the LAND.
In regards to builders in good faith, Article 448 of the Code provides:têñ.
£îhqwâ£
ART. 448. The owner of the land on which anything has
been built, sown or planted in good faith,
shall have the right
to appropriate as his own the works, sowing or planting,
after payment of the indemnity provided for in articles
546 and 548, or
to oblige the one who built or planted to pay the price of
the land, and the one who sowed, the proper rent.
 However, the builder or planter cannot be obliged to buy
the land if its value is considerably more than that of the
building or trees. In such case, he shall pay reasonable
rent, if the owner of the land does not choose to
appropriate the building or trees after proper indemnity.
The parties shall agree upon the terms of the lease and in
case of disagreement, the court shall fix the terms
thereof. (Paragraphing supplied)
The value of the LAND, purchased for P15,000.00 on September 7, 1974,
could not have been very much more than that amount during the
following January when ERNESTO and wife were asked to vacate. However,
ERNESTO and wife have not questioned the P25,000.00 valuation
determined by the Court of First Instance.
In regards to the valuation of the RESIDENTIAL HOUSE, the only evidence
presented was the testimony of ERNESTO that its worth at the time of the
trial should be from P30,000.00 to P40,000.00. The Municipal Court chose
to assess its value at P20,000.00, or below the minimum testified by
ERNESTO, while the Court of First Instance chose the maximum of
P40,000.00. In the latter case, it cannot be said that the Court of First
Instance had abused its discretion.
The challenged decision of respondent Court, based on valuations of
P25,000.00 for the LAND and P40,000.00 for the RESIDENTIAL HOUSE,
cannot be viewed as not supported by the evidence. The provision for the
exercise by petitioner SARMIENTO of either the option to indemnify
private respondents in the amount of P40,000.00, or the option to allow
private respondents to purchase the LAND at P25,000.00, in our opinion,
was a correct decision.têñ.£îhqwâ£
The owner of the building erected in good faith on a land
owned by another, is entitled to retain the possession of
the land until he is paid the value of his building, under
article 453 (now Article 546). The owner, of the land.
upon, the other hand, has the option, under article 361
(now Article 448), either to pay for the building or to sell
his land to the owner of the building. But he cannot, as
respondents here did, refuse both to pay for the building
and to sell the land  and compel the owner of the building
to remove it from the land where it is erected. He is
entitled to such remotion only when, after having chosen
to sell his land, the other party fails to pay for the same.
(Emphasis ours)
We hold, therefore, that the order of Judge Natividad
compelling defendants-petitioners to remove their
buildings from the land belonging to plaintiffs-
respondents only because the latter chose neither to pay
for such buildings nor to sell the land, is null and void, for
it amends substantially the judgment sought to be
executed and is, furthermore, offensive to articles 361
(now Article 448) and 453 (now Article 546) of the Civil
Code. (Ignacio vs. Hilario, 76 Phil. 605, 608 [1946]).
WHEREFORE, the Petition for Certiorari is hereby ordered dismissed,
without pronouncement as to costs.
SO ORDERED.1äwphï1.ñët
Teehankee (Chairman), Plana, Relova, Gutierrez, Jr. and De la Fuente, JJ.,
concur.
D) TECHNOGAS V CA
G.R. No. 108894 February 10, 1997
TECNOGAS PHILIPPINES MANUFACTURING CORPORATION, petitioner,  occupied by the two-storey building;
vs.
COURT OF APPEALS (FORMER SPECIAL SEVENTEENTH DIVISION) and
EDUARDO UY, respondents.
PANGANIBAN, J.:
The parties in this case are owners of adjoining lots in Parañaque, Metro
Manila. It was discovered in a survey, that a portion of a building of
petitioner, which was presumably constructed by its predecessor-in-
interest, encroached on a portion of the lot owned by private respondent.
What are the rights and obligations of the parties? Is petitioner considered
a builder in bad faith because, as held by respondent Court, he is
"presumed to know the metes and bounds of his property as described in
his certificate of title"? Does petitioner succeed into the good faith or bad
faith of his predecessor-in-interest which presumably constructed the
building?
These are the questions raised in the petition for review of the
Decision 1 dated August 28, 1992, in CA-G.R. CV No. 28293 of respondent
Court 2 where the disposition reads: 3
WHEREFORE, premises considered, the Decision of the
Regional Trial Court is hereby reversed and set aside and
another one entered —
1. Dismissing the complaint for lack of cause of action;
2. Ordering Tecnogas to pay the sum of P2,000.00 per
month as reasonable rental from October 4, 1979 until
appellee vacates the land;
3. To remove the structures and surrounding walls on the
encroached area;
4. Ordering appellee to pay the value of the land
5. Ordering appellee to pay the sum of P20,000.00 for
and as attorney's fees;
6. Costs against appellee.
Acting on the motions for reconsideration of both petitioner and private
respondent, respondent Court ordered the deletion of paragraph 4 of
the dispositive portion in an Amended Decision dated February 9, 1993, as
follows: 4
WHEREFORE, premises considered, our decision of
August 28, 1992 is hereby modified deleting paragraph 4
of the dispositive portion of our decision which reads:
4. Ordering appellee to pay the value of
the land occupied by the two-storey
building.
The motion for reconsideration of appellee is hereby
DENIED for lack of merit.
The foregoing Amended Decision is also challenged in the instant petition.
The Facts
The facts are not disputed. Respondent Court merely reproduced the
factual findings of the trial court, as follows: 5
That plaintiff (herein petitioner) which is a corporation
duly organized and existing under and by virtue of
Philippine laws is the registered owner of a parcel of land
situated in Barrio San Dionisio, Parañaque, Metro Manila
known as Lot 4331-A (should be 4531-A) of Lot 4531 of
the Cadastral Survey of Parañaque, Metro Manila,
covered by Transfer Certificate of Title No. 409316 of the
Registry of Deeds of the Province of Rizal; that said land
was purchased by plaintiff from Pariz Industries, Inc. in
1970, together with all the buildings and improvements
including the wall existing thereon; that the defendant
(herein private respondent) is the registered owner of a
parcel of land known as Lot No. 4531-B of Lot 4531 of the
Cadastral Survey of Parañaque, LRC (GLRO) Rec. No.
19645 covered by Transfer Certificate of Title No.
279838, of the Registry of Deeds for the Province of Rizal;
that said land which adjoins plaintiff's land was
purchased by defendant from a certain Enrile Antonio
also in 1970; that in 1971, defendant purchased another
lot also adjoining plaintiffs land from a certain Miguel
Rodriguez and the same was registered in defendant's
name under Transfer Certificate of Title No. 31390, of the
Registry of Deeds for the Province of Rizal; that portions
of the buildings and wall bought by plaintiff together
with the land from Pariz Industries are occupying a
portion of defendant's adjoining land; that upon learning
of the encroachment or occupation by its buildings and
wall of a portion of defendant's land, plaintiff offered to
buy from defendant that particular portion of
defendant's land occupied by portions of its buildings
and wall with an area of 770 square meters, more or less,
but defendant, however, refused the offer. In 1973, the
parties entered into a private agreement before a certain
Col. Rosales in Malacañang, wherein plaintiff agreed to
demolish the wall at the back portion of its land thus
giving to defendant possession of a portion of his land
previously enclosed by plaintiff's wall; that defendant
later filed a complaint before the office of Municipal
Engineer of Parañaque, Metro Manila as well as before
the Office of the Provincial Fiscal of Rizal against plaintiff
in connection with the encroachment or occupation by
plaintiff's buildings and walls of a portion of its land but
said complaint did not prosper; that defendant dug or
caused to be dug a canal along plaintiff's wall, a portion
of which collapsed in June, 1980, and led to the filing by
plaintiff of the supplemental complaint in the above-
entitled case and a separate criminal complaint for
malicious mischief against defendant and his wife which
ultimately resulted into the conviction in court of
defendant's wife for the crime of malicious mischief; that
while trial of the case was in progress, plaintiff filed in
Court a formal proposal for settlement of the case but
said proposal, however, was ignored by defendant.
After trial on the merits, the Regional Trial Court  6 of Pasay City, Branch
117, in Civil Case No. PQ-7631-P, rendered a decision dated December 4,
1989 in favor of petitioner who was the plaintiff therein. The dispositive
portion
reads: 7
WHEREFORE, judgment is hereby rendered in favor of
plaintiff and against defendant and ordering the latter to
sell to plaintiff that portion of land owned by him and
occupied by portions of plaintiff's buildings and wall at
the price of P2,000.00 per square meter and to pay the
former:
1. The sum of P44,000.00 to
compensate for the losses in materials
and properties incurred by plaintiff
through thievery as a result of the
destruction of its wall;
2. The sum of P7,500.00 as and by way
of attorney's fees; and
 3. The costs of this suit.
Appeal was duly interposed with respondent Court, which as previously
stated, reversed and set aside the decision of the Regional Trial Court and
rendered the assailed Decision and Amended Decision. Hence, this
recourse under Rule 45 of the Rules of Court.
The Issues
In its Memorandum, petitioner poses the following issues:
 8
The petition raises the following issues:
(A)
Whether or not the respondent Court of Appeals erred in
holding the petitioner a builder in bad faith because it is
"presumed to know the metes and bounds of his
property."
(B)
Whether or not the respondent Court of Appeals erred
when it used the amicable settlement between the
petitioner and the private respondent, where both
parties agreed to the demolition of the rear portion of
the fence, as estoppel amounting to recognition by
petitioner of respondent's right over his property
including the portions of the land where the other
structures and the building stand, which were not
included in the settlement.
(C)
Whether or not the respondent Court of Appeals erred in
ordering the removal of the "structures and surrounding
walls on the encroached area" and in withdrawing its
earlier ruling in its August 28, 1992 decision for the
petitioner "to pay for the value of the land occupied" by
the building, only because the private respondent has
"manifested its choice to demolish" it despite the
absence of compulsory sale where the builder fails to pay
for the land, and which "choice" private respondent
deliberately deleted from its September 1, 1980 answer
to the supplemental complaint in the Regional Trial
Court.
A.
The time when to determine the good faith of the builder
under Article 448 of the New Civil Code, is
reckoned during the period when it was actually being
built; and in a case where no evidence was
presented nor introduced as to the good faith or bad
faith of the builder at that time, as in this case, he must
be presumed to be a "builder in good faith," since "bad
faith cannot be presumed." 9
B.
In a specific "boundary overlap situation" which involves
a builder in good faith, as in this case, it is now well
settled that the lot owner, who builds on the adjacent lot
is not charged with "constructive notice" of the technical
metes and bounds contained in their torrens titles to
determine the exact and precise extent of his boundary
perimeter. 10
C.
The respondent court's citation of the twin cases
of Tuason & Co. v. Lumanlan and Tuason &
Co. v.Macalindong is not the "judicial authority" for a
boundary dispute situation between adjacent torrens
titled lot owners, as the facts of the present case
do not fall within nor square with the involved principle
of a dissimilar case. 11
D.
Quite contrary to respondent Uy's reasoning, petitioner
Tecnogas continues to be a builder in good faith, even if
it subsequently built/repaired the walls/other permanent
structures thereon while the case a quo was pending and
even while respondent sent the petitioner many
letters/filed cases thereon. 12
D.(E.)
The amicable settlement between the parties should be
interpreted as a contract and enforced only in
accordance with its explicit terms, and not over and
beyond that agreed upon; because the courts
do not have the power to create a contract nor expand
its scope. 13
E.(F.)
As a general rule, although the landowner has the option
to choose between: (1) "buying the building built in good
faith", or (2) "selling the portion of his land on which
stands the building" under Article 448 of the Civil Code;
the  first option is not absolute, because
an exception thereto, once it would be impractical for the
landowner to choose to exercise the first alternative, i.e.
buy that portion of the house standing on his land, for
the whole building might be rendered useless. The
workable solution is for him to select the second
alternative, namely, to sell to the builder that part of his
land on which was constructed a portion of the house. 14
Private respondent, on the other hand, argues that the petition is
"suffering from the following flaws: 15
1. It did not give the exact citations of cases decided by
the Honorable Supreme Court that allegedly contradicts
the ruling of the Hon. Court of Appeals based on the
doctrine laid down in Tuason vs.Lumanlan case citing
also Tuason vs. Macalindong case (Supra).
2. Assuming that the doctrine in the alleged Co Tao
vs. Chico case is contradictory to the doctrine inTuason
vs. Lumanlan and Tuason vs. Macalindong, the two cases
being more current, the same should prevail.
Further, private respondent contends that the following "unmistakably"
point to the bad faith of petitioner: (1) private respondent's purchase of
the two lots, "was ahead of the purchase by petitioner of the building and
lot from Pariz Industries"; (2) the declaration of the General Manager of
Tecnogas that the sale between petitioner and Pariz Industries "was not
registered" because of some problems with China Banking Corporation;
and (3) the Deed of Sale in favor of petitioner was registered in its name
only in "the month of May 1973." 16
The Court's Ru1ing
The petition should be granted.
Good Faith or Bad Faith
Respondent Court, citing the cases of J.M. Tuason & Co., Inc. vs. Vda. de
Lumanlan  17 and J.M. Tuason & Co., Inc.vs. Macalindong, 18 ruled that
petitioner "cannot be considered in good faith" because as a land owner, it
is "presumed to know the metes and bounds of his own property, specially
if the same are reflected in a properly issued certificate of title. One who
erroneously builds on the adjoining lot should be considered a builder
in (b)ad (f)aith, there being presumptive knowledge of the Torrens title,
the area, and the extent of the boundaries." 19
We disagree with respondent Court. The two cases it relied upon do not
support its main pronouncement that a registered owner of land has
presumptive knowledge of the metes and bounds of its own land, and is
therefore in bad faith if he mistakenly builds on an adjoining land. Aside
from the fact that those cases had factual moorings radically different from
those obtaining here, there is nothing in those cases which would suggest,
however remotely, that bad faith is imputable to a registered owner of
land when a part of his building encroaches upon a neighbor's land, simply
because he is supposedly presumed to know the boundaries of his land as
described in his certificate of title. No such doctrinal statement could have
been made in those cases because such issue was not before the Supreme
Court. Quite the contrary, we have rejected such a theory in Co Tao
vs. Chico, 20 where we held that unless one is versed in the science of
surveying, "no one can determine the precise extent or location of his
property by merely examining his paper title."
There is no question that when petitioner purchased the land from Pariz
Industries, the buildings and other structures were already in existence.
The record is not clear as to who actually built those structures, but it may
well be assumed that petitioner's predecessor-in-interest, Pariz Industries,
did so. Article 527 of the Civil Code presumes good faith, and since no
proof exists to show that the encroachment over a narrow, needle-shaped
portion of private respondent's land was done in bad faith by the builder of
the encroaching structures, the latter should be presumed to have built
them in good faith. 21 It is presumed that possession continues to be
enjoyed in the same character in which it was acquired, until the contrary
is proved. 22 Good faith consists in the belief of the builder that the land he
is building on is his, and his ignorance of any defect or flaw in his
title. 23 Hence, such good faith, by law, passed on to Pariz's successor,
petitioner in this case. Further, "(w)here one derives title to property from
another, the act, declaration, or omission of the latter, while holding the
title, in relation to the property, is evidence against the former." 24And
possession acquired in good faith does not lose this character except in
case and from the moment facts exist which show that the possessor is not
unaware that he possesses the thing improperly or wrongfully. 25 The good
faith ceases from the moment defects in the title are made known to the
possessor, by extraneous evidence or by suit for recovery of the property
by the true owner. 26
Recall that the encroachment in the present case was caused by a very
slight deviation of the erected wall (as fence) which was supposed to run in
a straight line from point 9 to point 1 of petitioner's lot. It was an error
which, in the context of the attendant facts, was consistent with good
faith. Consequently, the builder, if sued by the aggrieved landowner for
recovery of possession, could have invoked the provisions of Art. 448 of
the Civil Code, which reads:
The owner of the land on which anything has been built,
sown or planted in good faith, shall have the right to
appropriate as his own the works, sowing or planting,
after payment of the indemnity provided for in articles
546 and 548, or to oblige the one who built or planted to
pay the price of the land, and the one who sowed, the
proper rent. However, the builder or planter cannot be
obliged to buy the land if its value is considerably more
than that of the building or trees. In such case, he shall
pay reasonable rent, if the owner of the land does not
choose to appropriate the building or trees after proper
indemnity. The parties shall agree upon the terms of the
lease and in case of disagreement, the court shall fix the
terms thereof.
The obvious benefit to the builder under this article is that,
instead of being outrightly ejected from the land, he can compel
the landowner to make a choice between the two options: (1) to
appropriate the building by paying the indemnity required by law,
or (2) sell the land to the builder. The landowner cannot refuse to
exercise either option and compel instead the owner of the
building to remove it from the land. 27
The question, however, is whether the same benefit can be invoked by
petitioner who, as earlier stated, is not the builder of the offending
structures but possesses them as buyer.
We answer such question in the affirmative.
In the first place, there is no sufficient showing that petitioner was aware
of the encroachment at the time it acquired the property from Pariz
Industries. We agree with the trial court that various factors in evidence
adequately show petitioner's lack of awareness thereof. In any case,
contrary proof has not overthrown the presumption of good faith under
Article 527 of the Civil Code, as already stated, taken together with the
disputable presumptions of the law on evidence. These presumptions
state, under Section 3 (a) of Rule 131 of the Rules of Court, that the person
is innocent of a crime or wrong; and under Section 3 (ff) of Rule 131, that
the law has been obeyed. In fact, private respondent Eduardo Uy himself
was unaware of such intrusion into his property until after 1971 when he
hired a surveyor, following his purchase of another adjoining lot, to survey
all his newly acquired lots. Upon being apprised of the encroachment,
petitioner immediately offered to buy the area occupied by its building — a
species of conduct consistent with good faith.
In the second place, upon delivery of the property by Pariz Industries, as
seller, to the petitioner, as buyer, the latter acquired ownership of the
property. Consequently and as earlier discussed, petitioner is deemed to
have stepped into the shoes of the seller in regard to all rights of
ownership over the immovable sold, including the right to compel the
private respondent to exercise either of the two options provided under
Article 448 of the Civil Code.
Estoppel
Respondent Court ruled that the amicable settlement entered into
between petitioner and private respondent estops the former from
questioning the private respondent's "right" over the disputed property. It
held that by undertaking to demolish the fence under said settlement,
petitioner recognized private respondent's right over the property, and
"cannot later on compel" private respondent "to sell to it the land since"
private respondent "is under no obligation to sell." 28
We do not agree. Petitioner cannot be held in estoppel for entering into
the amicable settlement, the pertinent portions of which read: 29
That the parties hereto have agreed that the rear portion
of the fence that separates the property of the
complainant and respondent shall be demolished up to
the back of the building housing the machineries which
demolision (sic) shall be undertaken by the complainant
at anytime.
That the fence which serve(s) as a wall housing the
electroplating machineries shall not be demolished in the
mean time which portion shall be subject to negotiation
by herein parties.
From the foregoing, it is clear that petitioner agreed only to the demolition
of a portion of the wall separating the adjoining properties of the parties
— i.e. "up to the back of the building housing the machineries." But that
portion of the fence which served as the wall housing the electroplating
machineries was not to be demolished. Rather, it was to "be subject to
negotiation by herein parties." The settlement may have recognized the
ownership of private respondent but such admission cannot be equated
with bad faith. Petitioner was only trying to avoid a litigation, one reason
for entering into an amicable settlement.
As was ruled in Osmeña vs. Commission on Audit, 30
A compromise is a bilateral act or transaction that is
expressly acknowledged as a juridical agreement by the
Civil Code and is therein dealt with in some detail. "A
compromise," declares Article 2208 of said Code, "is a
contract whereby the parties, by making reciprocal
concessions, avoid a litigation or put an end to one
already commenced."
xxx xxx xxx
The Civil Code not only defines and authorizes
compromises, it in fact encourages them in civil actions.
Art. 2029 states that "The Court shall endeavor to
 persuade the litigants in a civil case to agree upon some
fair compromise." . . .
In the context of the established facts, we hold that petitioner did not lose
its rights under Article 448 of the Civil Code on the basis merely of the fact
that some years after acquiring the property in good faith, it learned about
— and aptly recognized — the right of private respondent to a portion of
the land occupied by its building. The supervening awareness of the
encroachment by petitioner does not militate against its right to claim the
status of a builder in good faith. In fact, a judicious reading of said Article
448 will readily show that the landowner's exercise of his option can only
take place after the builder shall have come to know of the intrusion — in
short, when both parties shall have become aware of it. Only then will the
occasion for exercising the option arise, for it is only then that both parties
will have been aware that a problem exists in regard to their property
rights.
Options of Private Respondent
What then is the applicable provision in this case which private respondent
may invoke as his remedy: Article 448 or Article 450 31 of the Civil Code?
In view of the good faith of both petitioner and private respondent, their
rights and obligations are to be governed by Art. 448. The essential fairness
of this codal provision has been pointed out by Mme. Justice Ameurfina
Melencio-Herrera, citing Manresa and applicable precedents, in the case
of Depra vs. Dumlao, 32 to wit:
Where the builder, planter or sower has acted in good
faith, a conflict of rights arises between the owners, and
it becomes necessary to protect the owner of the
improvements without causing injustice to the owner of
the land. In view of the impracticality of creating a state
of forced co-ownership, the law has provided a just
solution by giving the owner of the land the option to
acquire the improvements after payment of the proper
indemnity, or to oblige the builder or planter to pay for
the land and the sower to pay the proper rent. It is the
owner of the land who is authorized to exercise the
option, because his right is older, and because, by the
principle of accession, he is entitled to the ownership of
the accessory thing. (3 Manresa 213; Bernardo vs.
Bataclan, 37 Off. Gaz. 1382; Co Tao vs. Chan Chico, G.R.
No. 49167, April 30, 1949; Article applied; see Cabral, et
al. vs. Ibanez [S.C.] 52 Off. Gaz. 217; Marfori vs. Velasco,
[C.A.] 52 Off. Gaz. 2050).
The private respondent's insistence on the removal of the encroaching
structures as the proper remedy, which respondent Court sustained in its
assailed Decisions, is thus legally flawed. This is not one of the remedies
bestowed upon him by law. It would be available only if and when he
chooses to compel the petitioner to buy the land at a reasonable price but
the latter fails to pay such price. 33 This has not taken place. Hence, his
options are limited to: (1) appropriating the encroaching portion of
petitioner's building after payment of proper indemnity, or (2) obliging the
latter to buy the lot occupied by the structure. He cannot exercise a
remedy of his own liking.
Neither is petitioner's prayer that private respondent be ordered to sell the
land 34 the proper remedy. While that was dubbed as the "more workable
solution" in Grana and Torralba vs. The Court of Appeals, et al., 35 it was
not the relief granted in that case as the landowners were directed to
exercise "within 30 days from this decision their option to either buy the
portion of the petitioners' house on their land or sell to said petitioners the
portion of their land on which it stands." 36Moreover, in Grana and
Torralba, the area involved was only 87 square meters while this case
involves 520 square meters37. In line with the case of Depra
vs. Dumlao, 38 this case will have to be remanded to the trial court for
further proceedings to fully implement the mandate of Art. 448. It is a rule
of procedure for the Supreme Court to strive to settle the entire
controversy in a single proceeding leaving no root or branch to bear the
seeds of future
litigation. 39
Petitioner, however, must also pay the rent for the property occupied by
its building as prescribed by respondent Court from October 4, 1979, but
only up to the date private respondent serves notice of its option upon
petitioner and the trial court; that is, if such option is for private
respondent to appropriate the encroaching structure. In such event,
petitioner would have a right of retention which negates the obligation to
pay rent. 40 The rent should however continue if the option chosen is
compulsory sale, but only up to the actual transfer of ownership.
The award of attorney's fees by respondent Court against petitioner is
unwarranted since the action appears to have been filed in good faith.
Besides, there should be no penalty on the right to litigate. 41
WHEREFORE, premises considered, the petition is hereby GRANTED and
the assailed Decision and the Amended Decision are REVERSED and SET
ASIDE. In accordance with the case of Depra vs. Dumlao, 42 this case is
REMANDED to the Regional Trial Court of Pasay City, Branch 117, for
further proceedings consistent with Articles 448 and 546 43 of the Civil
Code, as follows:
The trial court shall determine:
a) the present fair price of private respondent's 520
square-meter area of land;
b) the increase in value ("plus value") which the said area
of 520 square meters may have acquired by reason of
the existence of the portion of the building on the area;
c) the fair market value of the encroaching portion of the
building; and
d) whether the value of said area of land is considerably
more than the fair market value of the portion of the
building thereon.
2. After said amounts shall have been determined by competent evidence,
the regional trial court shall render judgment as follows:
a) The private respondent shall be granted a period of
fifteen (15) days within which to exercise his option
under the law (Article 448, Civil Code), whether to
appropriate the portion of the building as his own by
paying to petitioner its fair market value, or to oblige
petitioner to pay the price of said area. The amounts to
be respectively paid by petitioner and private
respondent, in accordance with the option thus exercised
by written notice of the other party and to the court,
shall be paid by the obligor within fifteen (15) days from
such notice of the option by tendering the amount to the
trial court in favor of the party entitled to receive it;
b) If private respondent exercises the option to oblige
petitioner to pay the price of the land but the latter
rejects such purchase because, as found by the trial
court, the value of the land is considerably more than
that of the portion of the building, petitioner shall give
written notice of such rejection to private respondent
and to the trial court within fifteen (15) days from notice
of private respondent's option to sell the land. In that
event, the parties shall be given a period of fifteen (15)
days from such notice of rejection within which to agree
upon the terms of the lease, and give the trial court
formal written notice of the agreement and its provisos.
If no agreement is reached by the parties, the trial court,
within fifteen (15) days from and after the termination of
the said period fixed for negotiation, shall then fix the
terms of the lease provided that the monthly rental to be
fixed by the Court shall not be less than two thousand
pesos (P2,000.00) per month, payable within the first five
(5) days of each calendar month. The period for the
forced lease shall not be more than two (2) years,
counted from the finality of the judgment, considering
the long period of time since 1970 that petitioner has
 occupied the subject area. The rental thus fixed shall be SO ORDERED
increased by ten percent (10%) for the second year of the
forced lease. Petitioner shall not make any further
constructions or improvements on the building. Upon
expiration of the two-year period, or upon default by
petitioner in the payment of rentals for two (2)
consecutive months, private respondent shall be entitled
to terminate the forced lease, to recover his land, and to
have the portion of the building removed by petitioner or
at latter's expense. The rentals herein provided shall be
tendered by petitioner to the trial court for payment to
private respondent, and such tender shall constitute
evidence of whether or not compliance was made within
the period fixed by the said court.

c) In any event, petitioner shall pay private respondent

an amount computed at two thousand pesos (P2,000.00)
per month as reasonable compensation for the
occupancy of private respondent's land for the period
counted from October 4, 1979, up to the date private
respondent serves notice of its option to appropriate the
encroaching structures, otherwise up to the actual
transfer of ownership to petitioner or, in case a forced
lease has to be imposed, up to the commencement date
of the forced lease referred to in the preceding
paragraph;

d) The periods to be fixed by the trial court in its decision

shall be non-extendible, and upon failure of the party
obliged to tender to the trial court the amount due to the
obligee, the party entitled to such payment shall be
entitled to an order of execution for the enforcement of
payment of the amount due and for compliance with
such other acts as may be required by the prestation due
the obligee.

No costs.
E) DEPRA VS DUMLAO
G.R. No. L-57348 May 16, 1985
FRANCISCO DEPRA, plaintiff-appellee,  faith, and applying Article 448 of the Civil Code, rendered judgment on
vs.
AGUSTIN DUMLAO, defendant-appellant.
Roberto D. Dineros for plaintiff-appellee.
Veil D. Hechanova for defendant-appellant.
MELENCIO-HERRERA, J.:
This is an appeal from the Order of the former Court of First Instance of
Iloilo to the then Court of Appeals, which the latter certified to this
instance as involving pure questions of law
Plaintiff-appellee, Francisco Depra, is the owner of a parcel of land
registered under Transfer Certificate of Title No. T3087, known as Lot No.
685, situated in the municipality of Dumangas, Iloilo, with an area of
approximately 8,870 square meters. Agustin Dumlao, defendant-appellant,
owns an adjoining lot, designated as Lot No. 683, with an approximate area
of 231 sq. ms.
Sometime in 1972, when DUMLAO constructed his house on his lot, the
kitchen thereof had encroached on an area of thirty four (34) square
meters of DEPRA's property, After the encroachment was discovered in a
relocation survey of DEPRA's lot made on November 2,1972, his mother,
Beatriz Depra after writing a demand letter asking DUMLAO to move back
from his encroachment, filed an action for Unlawful Detainer on February
6,1973 against DUMLAO in the Municipal Court of of Dumangas, docketed
as Civil Case No 1, Said complaint was later amended to include DEPRA as a
party plain. plaintiff.
After trial, the Municipal Court found that DUMLAO was a builder in good
September 29, 1973, the dispositive portion of which reads:
Ordering that a forced lease is created between the
parties with the plaintiffs, as lessors, and the defendants
as lessees, over the disputed portion with an area of
thirty four (34) square meters, the rent to be paid is five
(P5.00) pesos a month, payable by the lessee to the
lessors within the first five (5) days of the month the rent
is due; and the lease shall commence on the day that this
decision shall have become final.
From the foregoing judgment, neither party appeal so that, ff it were a
valid judgment, it would have ordinarily lapsed into finality, but even then,
DEPRA did not accept payment of rentals so that DUMLAO deposited such
rentals with the Municipal Court.
On July 15,1974, DEPRA filed a Complaint for Quieting of Title against
DUMLAO before the then Court of First Instance of Iloilo, Branch IV (Trial
Court), involving the very same 34 square meters, which was the bone of
contention in the Municipal Court. DUMLAO, in his Answer, admitted the
encroachment but alleged, in the main, that the present suit is barred
by res judicata by virtue of the Decision of the Municipal Court, which had
become final and executory.
After the case had been set for pre-trial, the parties submitted a Joint
Motion for Judgment based on the Stipulation of Facts attached thereto.
Premised thereon, the Trial Court on October 31, 1974, issued the assailed
Order, decreeing:
WHEREFORE, the Court finds and so holds that the thirty
four (34) square meters subject of this litigation is part
 and parcel of Lot 685 of the Cadastral Survey of
Dumangas of which the plaintiff is owner as evidenced by
Transfer Certificate of Title No. 3087 and such plaintiff is
entitled to possess the same.
Without pronouncement as to costs.
SO ORDERED.
Rebutting the argument of res judicata relied upon by DUMLAO, DEPRA
claims that the Decision of the Municipal Court was null and void ab
initio because its jurisdiction is limited to the sole issue of possession,
whereas decisions affecting lease, which is an encumbrance on real
property, may only be rendered by Courts of First Instance.
Addressing out selves to the issue of validity of the Decision of the
Municipal Court, we hold the same to be null and void. The judgment in a
detainer case is effective in respect of possession only (Sec. 7, Rule 70,
Rules of Court). 1 The Municipal Court over-stepped its bounds when it
imposed upon the parties a situation of "forced lease", which like "forced
co-ownership" is not favored in law. Furthermore, a lease is an interest in
real property, jurisdiction over which belongs to Courts of First Instance
(now Regional Trial Courts) (Sec. 44(b), Judiciary Act of 1948; 2 Sec. 19 (2)
Batas Pambansa Blg. 129). 3 Since the Municipal Court, acted without
jurisdiction, its Decision was null and void and cannot operate as res
judicata to the subject complaint for Queting of Title. Besides, even if the
Decision were valid, the rule on res judicata  would not apply due to
difference in cause of action. In the Municipal Court, the cause of action
was the deprivation of possession, while in the action to quiet title, the
cause of action was based on ownership. Furthermore, Sec. 7, Rule 70 of
the Rules of Court explicitly provides that judgment in a detainer case
"shall not bar an action between the same parties respecting title to the
land. " 4
Conceded in the Stipulation of Facts between the parties is that DUMLAO
was a builder in good faith. Thus,
8. That the subject matter in the unlawful detainer case,
Civil Case No. 1, before the Municipal Court of
Dumangas, Iloilo involves the same subject matter in the
present case, the Thirty-four (34) square meters portion
of land and built thereon in good faith is a portion of
defendant's kitchen and has been in the possession of
the defendant since 1952 continuously up to the present;
... (Emphasis ours)
Consistent with the principle that our Court system, like any other, must be
a dispute resolving mechanism, we accord legal effect to the agreement of
the parties, within the context of their mutual concession and stipulation.
They have, thereby, chosen a legal formula to resolve their dispute to
appeal ply to DUMLAO the rights of a "builder in good faith" and to DEPRA
those of a "landowner in good faith" as prescribed in Article 448. Hence,
we shall refrain from further examining whether the factual situations of
DUMLAO and DEPRA conform to the juridical positions respectively
defined by law, for a "builder in good faith" under Article 448, a "possessor
in good faith" under Article 526 and a "landowner in good faith' under
Article 448.
In regards to builders in good faith, Article 448 of the Civil Code provides:
ART. 448. The owner of the land on which anything has been built sown or
planted in good faith,
shall have the right
to appropriate as his own the works, sowing or planting,
after payment of the indemnity provided for in articles
546 and 548, or
to oblige the one who built or planted to pay the price of
the land, and the one who sowed, the proper rent.
However, the builder or planter cannot be obliged to buy
the land if its value is considerably more than that of the
 building or trees. In such case, he shall pay reasonable
rent, if the owner of the land does not choose to
appropriate the building or trees after proper indemnity.
The parties shall agree upon the terms of the lease and in
case of disagreement, the court shall fix the terms
thereof (Paragraphing supplied)
Pursuant to the foregoing provision, DEPRA has the option either to pay for
the encroaching part of DUMLAO's kitchen, or to sell the encroached 34
square meters of his lot to DUMLAO. He cannot refuse to pay for the
encroaching part of the building, and to sell the encroached part of his
land, 5 as he had manifested before the Municipal Court. But that
manifestation is not binding because it was made in a void proceeding.
However, the good faith of DUMLAO is part of the Stipulation of Facts in
the Court of First Instance. It was thus error for the Trial Court to have
ruled that DEPRA is "entitled to possession," without more, of the disputed
portion implying thereby that he is entitled to have the kitchen removed.
He is entitled to such removal only when, after having chosen to sell his
encroached land, DUMLAO fails to pay for the same. 6 In this case,
DUMLAO had expressed his willingness to pay for the land, but DEPRA
refused to sell.
The owner of the building erected in good faith on a land
owned by another, is entitled to retain the possession of
the land until he is paid the value of his building, under
article 453 (now Article 546). The owner of the land,
upon the other hand, has the option, under article 361
(now Article 448), either to pay for the building or to sell
his land to the owner of the building. But he cannot as
respondents here did refuse both to pay for the building
and to sell the land  and compel the owner of the building
to remove it from the land where it erected. He is
entitled to such remotion only when, after having chosen
to sell his land. the other party fails to pay for the same
(italics ours).
We hold, therefore, that the order of Judge Natividad
compelling defendants-petitioners to remove their
buildings from the land belonging to plaintiffs-
respondents only because the latter chose neither to pay
for such buildings nor to sell the land, is null and void, for
it amends substantially the judgment sought to be
executed and is. furthermore, offensive to articles 361
(now Article 448) and 453 (now Article 546) of the Civil
Code. (Ignacio vs. Hilario, 76 Phil. 605, 608[1946]).
A word anent the philosophy behind Article 448 of the Civil rode.
The original provision was found in Article 361 of the Spanish Civil Code;
which provided:
ART. 361. The owner of land on which anything has been
built, sown or planted in good faith, shall have the right
to appropriate as his own the work, sowing or planting,
after the payment of the indemnity stated in Articles 453
and 454, or to oblige the one who built or planted to pay
the price of the land, and the one who sowed, the proper
rent.
As will be seen, the Article favors the owner of the land, by giving him one
of the two options mentioned in the Article. Some commentators have
questioned the preference in favor of the owner of the land, but Manresa's
opinion is that the Article is just and fair.
. . . es justa la facultad que el codigo da al dueno del
suelo en el articulo 361, en el caso de edificacion o
plantacion? Algunos comentaristas la conceptuan injusta,
y como un extraordinario privilegio en favor de la
propiedad territorial. Entienden que impone el Codigo
una pena al poseedor de buena fe y como advierte uno
de los comentaristas aludidos 'no se ve claro el por que
de tal pena . . . al obligar al que obro de buena fe a
quedarse con el edificio o plantacion, previo el pago del
 terreno que ocupa, porque si bien es verdad que cuando
edifico o planto demostro con este hecho, que queria
para si el edificio o plantio tambien lo es que el que
edifico o planto de buena fe lo hizo en la erronea
inteligencia de creerse dueno del terreno Posible es que,
de saber lo contrario, y de tener noticia de que habia que
comprar y pagar el terreno, no se hubiera decidido a
plantar ni a edificar. La ley obligandole a hacerlo fuerza
su voluntad, y la fuerza por un hecho inocente de que no
debe ser responsable'. Asi podra suceder pero la realidad
es que con ese hecho voluntario, aunque sea inocente, se
ha enriquecido torticeramente con perjuicio de otro a
quien es justo indemnizarle,
En nuestra opinion, el Codigo ha resuelto el conflicto de
la manera mas justa y equitativa y respetando en lo
possible el principio que para la accesion se establece en
el art. 358. 7
Our own Code Commission must have taken account of the objections to
Article 361 of the Spanish Civil Code. Hence, the Commission provided a
modification thereof, and Article 448 of our Code has been made to
provide:
ART. 448. The owner of the land on which anything has
been built, sown or planted in good faith, shall have the
right to appropriate as his own the works, sowing or
planting, after payment of the indemnity provided for in
articles 546 and 548, or to oblige the one who built or
planted to pay the price of the land, and the one who
sowed, the proper rent. However, the builder or planter
cannot be obliged to buy the land if its value is
considerably more than that of the building or trees. In
such case, he shall pay reasonable rent, if the owner of
the land does not choose to appropriate the building or
trees after proper indemnity. The parties shall agree
upon the terms of the lease and in case of disagreement,
the court shall fix the terms thereof.
Additional benefits were extended to the builder but the landowner
retained his options.
The fairness of the rules in Article 448 has also been explained as follows:
Where the builder, planter or sower has acted in good
faith, a conflict of rights arises between the owners, and
it becomes necessary to protect the owner of the
improvements without causing injustice to the owner of
the land. In view of the impracticability of creating a state
of forced co-ownership, the law has provided a just
solution by giving the owner of the land the option to
acquire the improvements after payment of the proper
indemnity, or to oblige the builder or planter to pay for
the land and the sower to pay for the proper rent. It is
the owner of the land who is authorized to exercise the
option, because his right is older, and because, by the
principle of accession, he is entitled to the ownership of
the accessory thing. (3 Manresa 213; Bernardo vs.
Bataclan, 37 Off. Gaz. 1382; Co Tao vs. Chan Chico, G.R.
No. 49167, April 30, 1949; Article applied: see Cabral, et
al vs. Ibanez [S.C.] 52 Off. Gaz. 217; Marfori vs. Velasco,
[C.A.] 52 Off. Gaz. 2050). 8
WHEREFORE, the judgment of the trial Court is hereby set aside, and this
case is hereby ordered remanded to the Regional Trial Court of Iloilo for
further proceedings consistent with Articles 448 and 546 of the Civil Code,
as follows:
1. The trial Court shall determine
a) the present fair price of DEPRA's 34 square meter area
of land;
 b) the amount of the expenses spent by DUMLAO for the
building of the kitchen;
c) the increase in value ("plus value") which the said area
of 34 square meters may have acquired by reason
thereof, and
d) whether the value of said area of land is considerably
more than that of the kitchen built thereon.
2. After said amounts shall have been determined by competent evidence,
the Regional, Trial Court shall render judgment, as follows:
a) The trial Court shall grant DEPRA a period of fifteen
(15) days within which to exercise his option under the
law (Article 448, Civil Code), whether to appropriate the
kitchen as his own by paying to DUMLAO either the
amount of tile expenses spent by DUMLAO f or the
building of the kitchen, or the increase in value ("plus
value") which the said area of 34 square meters may
have acquired by reason thereof, or to oblige DUMLAO
to pay the price of said area. The amounts to be
respectively paid by DUMLAO and DEPRA, in accordance
with the option thus exercised by written notice of the
other party and to the Court, shall be paid by the obligor
within fifteen (15) days from such notice of the option by
tendering the amount to the Court in favor of the party
entitled to receive it;
b) The trial Court shall further order that if DEPRA
exercises the option to oblige DUMLAO to pay the price
of the land but the latter rejects such purchase because,
as found by the trial Court, the value of the land is
considerably more than that of the kitchen, DUMLAO
shall give written notice of such rejection to DEPRA and
to the Court within fifteen (15) days from notice of
DEPRA's option to sell the land. In that event, the parties
shall be given a period of fifteen (15) days from such
notice of rejection within which to agree upon the terms
of the lease, and give the Court formal written notice of
such agreement and its provisos. If no agreement is
reached by the parties, the trial Court, within fifteen (15)
days from and after the termination of the said period
fixed for negotiation, shall then fix the terms of the lease,
provided that the monthly rental to be fixed by the Court
shall not be less than Ten Pesos (P10.00) per month,
payable within the first five (5) days of each calendar
month. The period for the forced lease shall not be more
than two (2) years, counted from the finality of the
judgment, considering the long period of time since 1952
that DUMLAO has occupied the subject area. The rental
thus fixed shall be increased by ten percent (10%) for the
second year of the forced lease. DUMLAO shall not make
any further constructions or improvements on the
kitchen. Upon expiration of the two-year period, or upon
default by DUMLAO in the payment of rentals for two (2)
consecutive months, DEPRA shall be entitled to
terminate the forced lease, to recover his land, and to
have the kitchen removed by DUMLAO or at the latter's
expense. The rentals herein provided shall be tendered
by DUMLAO to the Court for payment to DEPRA, and
such tender shall constitute evidence of whether or not
compliance was made within the period fixed by the
Court.
c) In any event, DUMLAO shall pay DEPRA an amount
computed at Ten Pesos (P10.00) per month as
reasonable compensation for the occupancy of DEPRA's
land for the period counted from 1952, the year
DUMLAO occupied the subject area, up to the
commencement date of the forced lease referred to in
the preceding paragraph;
d) The periods to be fixed by the trial Court in its
Precision shall be inextendible, and upon failure of the
 party obliged to tender to the trial Court the amount due
to the obligee, the party entitled to such payment shall
be entitled to an order of execution for the enforcement
of payment of the amount due and for compliance with
such other acts as may be required by the prestation due
the obligee.

No costs,

SO ORDERED.
F) VIRGILIO VS PATRICIA
SPOUSES VIRGILIO and JOSIE JIMENEZ, petitioners, vs.  PATRICIA,
INC., respondent.
DECISION
BELLOSILLO, J.:
The Joint Decision of the Court of Appeals [1] (dismissing the petition
for review filed by spouses Virgilio and Josie Jimenez in CA-G.R. SP No.
43185 and giving due course to the petition for review filed by Patricia,
Inc., in CA-G.R. SP No. 43179), in effect reversing the decision of the
Regional Trial Court and reinstating that of the Metropolitan Trial Court, is
assailed in the instant petition.
Petitioners Virgilio and Josie Jimenez, spouses, are sublessees of a lot
and buildinglocated at 2853 Juan Luna Street, Tondo, Manila, owned by
respondent Patricia Inc. (PATRICIA for brevity), a domestic corporation duly
organized and existing under Philippine laws. The Jimenez spouses
subleased the property in 1980 from a certain Purisima Salazar who had
been leasing the property from PATRICIA since 1970.
Sometime in 1995 Purisima Salazar abandoned the property thus
incurring back rentals dating back to January 1992. Hence, by reason of her
non-payment of the monthly rentals, her contract of lease with PATRICIA
was terminated.
On 29 March 1995 PATRICIA sent a letter to the Jimenez spouses
informing them of the termination of the lease and demanding that they
vacate the premises within fifteen (15) days from notice since they had no
existing lease contract with it.[2] But the spouses refused to leave.
Thus, on 5 May 1995 PATRICIA filed a complaint[3] for unlawful
detainer against the Jimenez spouses alleging, among others, that the
lessee Purisima Salazar subleased the premises to the Jimenezes; that
Purisima Salazar no longer occupied the premises; that this
notwithstanding, the Jimenez spouses continued to occupy the premises
without any contract with PATRICIA, its owner, hence, their stay was
merely being tolerated by the latter; and, that despite demands made
upon them, they refused to vacate the premises thereby unlawfully and
illegally withholding the property to the damage and prejudice of
PATRICIA.
In their Answer, the Jimenez spouses claimed that they occupied the
premises as sublessees of Purisima Salazar with the knowledge of
PATRICIA; that the building originally found on the lot was owned by
Purisima Salazar which she sold to them in 1984 with notice and without
any objection from PATRICIA; that, when the building was gutted by fire in
1987 they constructed a new house on the lot worth P1,500,000.00 with
the knowledge and without any objection from PATRICIA; and, that
PATRICIA never collected any rental for the land but they nevertheless
voluntarily paid the amount of P23,537.25 as rent corresponding to the
period of September 1979 to 31 December 1991. [4]
The MeTC ruled in favor of PATRICIA and ordered the Jimenez
spouses to vacate the premises, to pay PATRICIA the sum of P3,000.00 a
month as reasonable rental and/or compensation for the use of the
premises beginning April 1995 until they finally vacated thepremises, and
to pay PATRICIA the sum of P5,000.00 as reasonable attorney's fees, plus
costs of suit.[5]
The Jimenez spouses appealed the MeTC decision to the RTC. [6] On 2
January 1997 the RTC modified the decision in favor of the spouses holding
that an implied new lease contract existed between the Jimenez spouses
and PATRICIA in view of the latter's acceptance of rentals from the
former. Thus the RTC extended the term of the lease between the parties
for a period of one (1) year from date of decision, and ordered PATRICIA to
reimburse the Jimenez spouses the expenses incurred in the construction
of the house built on the property and/or for the Jimenez spouses to
remove the improvements thereon.[7]
On 20 January 1997 PATRICIA filed a Motion for Clarificatory
Judgment and later added a Supplement to the Motion for Clarificatory
Judgment.
On 27 January 1997 PATRICIA, without waiting for the resolution of
its Motion for Clarificatory Judgment as well as its supplement thereto,
filed a Petition for Review of the RTC decision with the Court of Appeals,
docketed as CA-G.R. SP No. 43179.
 On 13 February 1997 the Jimenez spouses filed their own Petition for
Review, docketed as CA-G.R. SP No. 43185. Subsequently, this petition was
consolidated with PATRICIA's Petition for Review since it involved the same
parties, facts, and issues.
The Court of Appeals in due course rendered a Joint
Decision dismissing the Petition for Review filed by the Jimenez spouses
while giving due course to the petition of PATRICIA. The Court of Appeals
held that there was no implied renewal of the lease contract between the
parties since, to begin with, there was no lease contract between them;
hence, the Jimenez spouses could not have tendered payment of rentals to
PATRICIA. Instead, it declared the status of the Jimenez spouses as being
analogous to that of a lessee or tenant whose lease has expired but whose
occupancy has been continued by mere tolerance of the owner, and
hence, bound by an implied promise that he would vacate the premises
upon demand. Thus, the appellate court reversed and set aside the
decision of the RTC and reinstated the decision of the MeTC which, among
others, ordered the Jimenez spouses to vacate the premises.
Petitioners now assail the jurisdiction of the MeTC contending that
the failure of the complaint to allege the character of the sublease or entry
of the Jimenez spouses into the property, whether legal or illegal,
automatically classified it into an accion publiciana or
reinvindicatoria cognizable by the RTC and not by the MeTC; [8] thus, the
action should have been dismissed.
The rule is settled that a question of jurisdiction may be raised at any
time, even on appeal, provided that its application does not result in a
mockery of the tenets of fair play. In the instant case, the jurisdictional
issue was raised by petitioners for the first time only in the instant Petition
for Review. However, it should be noted that they did so only after an
adverse decision was rendered by the Court of Appeals. Despite several
opportunities in the RTC, which ruled in their favor, and in the Court of
Appeals, petitioners never advanced the question of jurisdiction of the
MeTC. Additionally, petitioners participated actively in the proceedings
before the MeTC[9] and invoked its jurisdiction with the filing of their
answer, in seeking affirmative relief from it,
in subsequently filing a notice of appeal before the RTC, and later,
a Petition for Review with the Court of Appeals. Upon these premises,
petitioners cannot now be allowed belatedly to adopt an inconsistent
posture by attacking the jurisdiction of the court to which they had
submitted themselves voluntarily. Laches now bars them from doing so.
Be that as it may, we find no error in the MeTC assuming jurisdiction
over the subject matter. A complaint for unlawful detainer is sufficient if it
alleges that the withholding of possession or the refusal to vacate is
unlawful without necessarily employing the terminology of the law. [10] As
correctly found by the appellate court, to which we agree, the allegations
in the complaint sufficiently established a cause of action for unlawful
detainer.The complaint clearly stated how entry was effected and how and
when dispossession started - petitioners were able to enter the subject
premises as sublessees of Purisima Salazar who, despite the termination of
her lease with respondent, continued to occupy the subject premises
without any contract with it; thus, their stay was by tolerance of
respondent.
The fact that the complaint failed to state that respondent was in
prior possession of the property before it was unlawfully withheld by
petitioner spouses is of no moment. Prior physical possession is
indispensable only in actions for forcible entry but not in unlawful
detainer.[11]
Petitioner spouses, as mere sublessees of Purisima Salazar, derive
their right from the sublessor whose termination of contract with the
lessor necessarily also ends the sublease contract. Thus, when the contract
of lease of Purisima Salazar with respondent was terminated the contract
of sublease of petitioners with the former also necessarily ended and
petitioners cannot insist on staying on the premises. Petitioners can invoke
no right superior to that of their sublessor.[12]
It is not correct to say that petitioners could not have occupied the
property by tolerance of respondent as their entry into the premises was
inceptively illegal, the sublease being entered into without the consent of
the owner.[13] Petitioners argue that tolerance is only available in cases
where entry was lawful from the start and cannot be asserted where entry
was illegal from the start. It appears however that respondent did not
expressly and equivocally prohibit the subleasing of the property. Although
the attached contracts of lease state that the lessee cannot sublease the
property, none of those contracts pertain to the contract of lease between
Purisima Salazar and respondent PATRICIA. [14] In any event, the fact that decision that could properly be the subject of a petition for review before
PATRICIA sent a letter to the Jimenez spouses informing them of the the Court of Appeals.
termination of the lease of Purisima Salazar shows that they recognize and
We do not agree. The Petition for Review filed by respondent with the
acknowledge their stay in the premises as sublessees of Salazar. However,
Court of Appeals was not prematurely filed. It should be borne in mind that
after the termination of the contract oflease of Purisima Salazar with
a Motion for Clarificatory Judgment not being in the character of a motion
PATRICIA, any right of the Jimenez spouses to stay in the premises,
for reconsideration does not toll the reglementary period for filing a
although previously recognized, then and there ended. After the
petition for review with the Court of Appeals. Its filing will not bar the
termination of the contract of lease of Salazar the continued stay of the
judgment from attaining finality, nor will its resolution amend the decision
Jimenez spouses thereat was merely by tolerance of PATRICIA and it
to be reviewed. Thus, when respondent filed a Petition for Review before
became unlawful after they ignored the lessor's demand to leave.
the Court of Appeals, there was already a final judgment that could
The status of petitioner spouses is akin to that of a lessee or a tenant properly be the subject of a petition for review.
whose term of lease has expired but whose occupancy has continued by
Moreover, under the Rules on Summary Procedure, the decision of
tolerance of the owner. A person who occupies the land of another at the
the RTC in civil cases governed by this Rule, including forcible entry and
latter's forbearance or permission without any contract between them is
unlawful detainer, is immediately executory without prejudice to a further
necessarily bound by an implied promise that he will vacate upon demand
appeal that may be taken therefrom. The judgment of the RTC being final
failing which a summary action for ejectment is the proper remedy against
and executory the filing of the Petition for Review was proper.
him.[15]The present action being for unlawful detainer, it is well within the
exclusive original jurisdiction of the metropolitan trial courts. As to the house built by petitioners on the property, this Court has
previously ruled that lessees, much less, sublessees, are not possessors or
Petitioners contend that respondent has no cause of action against
builders in good faith[16] over rented land because they know that their
them since, as proved by Transfer Certificate of Title No. T-44247, the
occupancy of the premises continues only during the life of the lease, or
property is in the name of the City of Manila and not of respondent
sublease as the case may be; and, they cannot as a matter of right recover
PATRICIA.
the value of their improvements from the lessor, much less retain the
Records however show that this issue has not been raised in the premises until they are reimbursed.[17] Instead, their rights are governed by
proceedings below, hence, will not be ruled upon by this Court. Any issue Art. 1678 of the Civil Code which allows reimbursement of lessees up to
raised for the first time on appeal and not timely raised in the proceedings one-half (1/2) of the value of their improvements if the lessor so elects:
in the lower court is barred by estoppel. Moreover, being mere sublessees
of the property in question, petitioners cannot in an action involving Art. 1678. If the lessee makes, in good faith, useful improvements which
possession of the leased premises controvert the title of PATRICIA, or are suitable to the use for which the lease is intended, without altering the
assert any right adverse to its title. It is the Manila City Government, not form or substance of the property leased, the lessor upon the termination
the Jimenez spouses, that is the proper party to dispute the ownership of of the lease shall pay the lessee one-half of the value of the improvements
PATRICIA. at that time. Should the lessor refuse to reimburse said amount, the lessee
may remove the improvements, even though the principal thing may suffer
Petitioners argue that the Petition for Review of respondent should
damage thereby. He shall not, however, cause any more impairment upon
have been dismissed for being premature in view of the pendency of
the property leased than is necessary xxx (New Civil Code).
its Motion for Clarificatory Judgment and Supplement to the Motion for
Clarificatory Judgment which remained unresolved by the RTC. They assert
that because of the pendency of its motion, there was no final judgment or
 Thus, applying the above rule, petitioners cannot recover full
reimbursement of the value spent for the construction of the house, but is
limited only to one-half (1/2) of its value at the election of the
lessor. However, as PATRICIA has manifested its lack of intention to do so,
the Jimenez spouses have no recourse but to remove the house at their
own expense.
WHEREFORE, the assailed Joint Decision of the Court of Appeals
reversing and setting aside the decision of the Regional
Trial Court and reinstating the decision of theMetropolitan Trial Court
is AFFIRMED, with the MODIFICATION that petitioner spouses Virgilio and
Josie Jimenez should also remove the house they have constructed on the
lot at their own expense. Thus, petitioner spouses and all persons claiming
title under them are ordered: (a) to vacate the premises described in the
complaint located at 2853 Juan Luna Street, Tondo, Manila; (b) to remove
at their own expense within sixty (60) days from finality of this Decision the
house they have constructed thereon; (c) to pay respondent Patricia, Inc.,
the sum of P3,000.00 a month as reasonable rental/compensation for the
use of the premises beginning April 1995 until they finally vacate the
premises; and, (d) to pay respondent Patricia, Inc., the sum of P5,000.00 as
attorney's fees, plus costs of suit.
SO ORDERED
G) GUZMAN ET AL VS FUENTE ET AL
G.R. No. L-32433             December 29, 1930
FRANCISCO DE GUZMAN, ET. AL., plaintiffs-appellants,  2. In denying our motion for new trial.
vs.
CRISANTO DE LA FUENTE, ET AL., defendants-appellants.
Mariano Sta. Romana for plaintiffs-appellants.
Hermogenes Concepcion for defendants-appellants.
 
ROMUALDEZ, J.:
The dispositive part of the lower court's judgment reads as follows:
Wherefore, the court hereby orders the defendants to vacate the
premises set forth in the complaint, restoring them to the
plaintiffs herein. For lack of evidence, no judgment can be
rendered against the defendants Crisanto de la Fuente and
Agapita Payumo to pay the plaintiffs the sum of P697.50 claimed
by the latter as damages, from October 1, 1926, to January 15,
1928, nor against the aforementioned defendants and Taw Pe
Chan to pay the plaintiffs jointly and severally damages in the
amount of P120 per month from January 15, 1928, until they
vacate the premises. The counterclaim and the cross-complaint
filed by the defendants are hereby dismissed as against the
plaintiffs. Without costs.
Both plaintiffs and defendants appealed from this judgment, and the
former made the following assignments of error:
1. In not ordering and compelling the defendants to pay damages
for their illegal occupation of the land now in question to the
plaintiffs.
The following assignments of error were made by the defendants:
1. In ordering the defendant to vacate the premises.
2. In absolving plaintiff Francisco de Guzman from the
counterclaim and the cross-complaint.
3. In not holding the defendants to be the owners of the land in
question.
4. In not sentencing plaintiff Francisco de Guzman to .convey the
land in question to the defendants, plaintiffs in the cross-
complaint.
5. In not cancelling the original certificate of title No. 1921 (Exhibit
A) with respect to the land in question, and in not ordering the
issuance of another certificate of title in the name of the
defendants.
6. In not sentencing the plaintiff to indemnify the defendants for
the value of said land, that is, P4 a square meter.
7. in holding that the defendants' possession in good faith became
a possession in bad faith upon receipt of the letter of notification
(Exhibit C) from the plaintiff's lawyer, Mr. Mariano Santa Romana.
8. In not sentencing the plaintiff, defendant in the cross-
complaint, to indemnify the defendants, plaintiffs in the cross-
 complaint, for the improvements made by the latter in good faith,
worth P15,000.
Plaintiff Francisco de Guzman and defendant De la Fuente, being close
friends and compadres, the former having been the recipient of
considerable attention and favors from the latter, agreed verbally that the
said defendant should occupy, in addition to a house he intended to build,
the land here in question, belonging to the plaintiffs.
In 1912 said defendant De la Fuente built his house upon said land, which
house was repaired in 1928. The court below has appraised the house,
after the repairs, at P7,504, which finding is supported by the record.
The plaintiffs contend in this instance that said defendant occupies their
land by mere tolerance, having been required to pay rent at the rate of P45
a month from October 1,.1926, to December 31, 1927, and at P120 a
month from January 1, 1928, when the house was repaired, and from
which date the house, besides being occupied by said defendant, yielded
him a monthly rented of P40. But the defendant claims that the land
belongs to him.
This is therefore a case where on party is the owner of the land, and the
other is the owner, in good faith, of the building thereon, provided for in
article 361 of the Civil Code; and the present value of the house, as stated,
is P7,504.
The evidence does not justify the award of damages claimed by either the
defendants or the plaintiffs.
Wherefore, the judgment appealed from is modified, and it is held that the
land in question belongs not to the defendant De la Fuente, but to the
plaintiffs, who are entitled to acquire said defendant's house built thereon,
by paying its owner the sum of P7,504, or to compel him to pay them the
price of the land agreed upon by the interested parties; and in default
thereof, the price as fixed by the competent court; and should the plaintiff
choose to acquire the house, the defendant shall have be the right to
retain the same until the above-mentioned amount is satisfied.
The remainder of the judgment appealed from is hereby affirmed in so far
as it is not incompatible with this decision. Without express
pronouncement of costs. So ordered.

The evidence does not support this claim of the defendant De La Fuente.
The record shows that the owners of the land were Francisco de Guzman
and his deceased wife, and it now belongs to said Francisco de Guzman
and his children, the plaintiffs herein.

Defendant De la Fuente's possession of the land commenced and

continues in good faith, inasmuch as, on the one hand, the extra-judicial
notice given by the defendant about November, 1927 did not by itself
destroy said good faith, and will continue to exist as long as there is no
final judgment to the contrary, which to date has not been redered; and,
on the other hand, the necessity for the repairs of the house has been
sufficiently proved.lawphi1>net

We find not merits in the assignments of error made by either party,

incompatible with the conclusions just stated.
H) ALBURU VS VILLANUEVA
G.R. No. 3003            January 2, 1907
LORENZA ALBURO, plaintiff-appellee, 
vs.
CATALINA VILLANUEVA, defendant-appellant.
Ledesma, Sumulong & Quintos for appellant. 
Hipolito Magsalin for appellee.
CARSON, J.:
In this case no motion for a new trial was filed on the ground that the
findings of fact of the trial judge were manifestly contrary to the weight of
the evidence, and the facts found must be accepted as set out in the
opinion of the lower court.
It appears that the plaintiff is the owner, by inheritance from her
grandfather, of a certain lot of land in the city of Manila, which, by written
contract, was rented on the 23d of January, 1892, to one Antonio Susano
Goenco, for a term of six years, with the privilege of renewal for a second
term of six years; that the defendant, who is the wife of the said Goenco,
came into possession by virtue of this rental contract; that the defendant
had her husband expended a considerable sum of money filling in and
leveling the lot and that they built a house of hard materials thereon; and
that the rental contract, while it expressly permitted the tenant to build
upon the lot, is silent as to the disposition of the house at the expiration of
the rental term and makes no express provision as to improvements to be
made upon the land by way of leveling or otherwise.
The defendant having refused to surrender the lot in question of the
expiration of the rental term, this action was brought to recover
possession thereof and judgment was rendered for the plaintiff, reserving
to the defendant the right to remove the house from the lot.
Counsel for the defendant contends that she is entitled to a renewal of the
rental contract for a third term of six years; or if this be denied, to be
reimbursed for expenditures in filling in and leveling the lot, and to have
the benefits of the provisions of article 361 of the Civil Code, wherein it is
provided that —
The owner of the land on which building, sowing, or planting is
done in good faith shall have a right to appropriate as his own
work, sowing, or planting, having previously paid the indemnity
mentioned in articles four hundred and fifty-three and four
hundred and fifty-four, or to oblige the person who has built or
planted to pay him the value of the land.
It is said that this rental contract should be construed in accordance with
the provisions of articles 1281, 1282, 1288, and 1289 of the Civil Code so as
to give the defendant the right to renew the contract for a third term of six
years, and so on indefinitely so long as she faithfully paid the rent, but we
are of the opinion that there is no room for interpretation in accordance
with the provisions of these articles since the contract expressly provides
for a term of a definite number of years, with a privilege of renewal for a
second term of definite number of years. This is a very usual form of rental
contract and its terms are so clear and explicit that they do not justify an
attempt to read into it any alleged intention of the parties other than that
which appears upon its face.
In support of her claim for reimbursement for expenses in filling in and
leveling the lot, defendant relies on the provisions of paragraph 2 of article
1554 of the Civil Code, wherein it is provided that the landlord is obliged
"during the lease to make all necessary repairs in order to  preserve  the
thing rented in condition to serve for the purpose to which it was
destined." But, as Manresa points out, this article is strictly limited in its
effect to repairs necessary to preserve the thing rented in a condition
suitable to the use agreed upon (  para el uso pactado). A repair implies the
putting of something back into the condition in which it was originally and
not an improvement in the condition thereof by adding something new
thereto, unless the new thing be in substitution of something formerly in
existence and is added to preserve the original status of the subject-matter provided for in article 1573 read in connection with article 487, wherein it
of the repairs; the filling in of a vacant lot can not be regarded as a repair is provided that the tenant may make such improvements, either useful or
as the word is used in this article; and even though it could be so convenient, as he considers advantageous, provided he does not alter the
considered, the remedy of the tenant under the provisions of article 1556, form and substance of the thing rented, but that he will have no right for
when the landlord fails to make necessary repairs, is by demand for the indemnification therefor, though he can take away such improvements if it
annulment of the contract and indemnity by way of damages or without is possible to do so without injury or damage to the thing rented.
demanding annulment of the contract by demand for damages for
negligence on the part of the landlord; and the tenant is not authorized to The trial court authorized the removal of the house, apparently relying on
make such repairs at the expense of the landlord, except when it is a the provisions of this article, but since no objection was made by the
matter of the most urgent necessity (reparacion urgentisima) "where the plaintiff in the court below, we are not authorized to review his action in
slightest delay would involve grave damages," when the tenant may take this connection.
the absolutely necessary means to avoid the loss, at the cost of the owner,
doing only that which is required by the force of circumstances and no The judgment appealed from is affirmed, with the costs of this instance
more, but this on the ground that "he had acted by virtue of the social duty against the appellant. After the expiration of twenty days let judgment be
of mutual aid and assistance." (Manresa, vol. 10, p. 473.) entered in accordance herewith and ten days thereafter let the record in
this case be remanded to the court of its origin for execution.
It has been suggested that the claim of the defendant for compensation for
the filling in and leveling of the lot may be based upon article 453 of the Arellano, C.J. Torres, Willard and Tracey, JJ., concur
Civil Code which provides that "necessary expenditures will be repaid to all
persons in possession (los gastos necesarios se abonan a todo poseedor)."
It may be doubted, however, whether the "possessor" referred to in this
provision can be said to include one who stands in relation of tenant to his
landlord, for the above-cited article 1554 of the Civil Code, and the chapter
wherein it occurs, seem to provide for such cases; and in any event we do
not think that the filling in and improvement of a lot can be brought under
the head of necessary expenses (gastos necesarios) as used in this
connection. Manresa in his commentaries upon this article says that gastos
necesarios are no others than those made for the preservation of the thing
upon which they have been expended.

The contention that the defendant is entitled to the benefits of the

provisions of article 361 of the Civil Code can not be maintained because
the right to indemnification secured in that article is manifestly intended to
apply only to a case where one builds or sows or plants an land in which he
believes himself to have a claim of title and not to lands wherein one's only
interest is that of tenant under a rental contract; otherwise it would always
be in the power of the tenant to improve his landlord out of his property.
The right of a tenant in regard to improvements (mejoras) is expressly
I) TUASON VS LUMANLAN
G.R. No. L-23497             April 26, 1968
J.M. TUASON and CO., INC., petitioner, 
vs.
ESTRELLA VDA. DE LUMANLAN and the COURT OF APPEALS (FIFTH
DIVISION), respondents.
Tuason and Sison for petitioner.
Jose Chuico and Wilfredo E. Dizon for respondents.
REYES, J.B.L., Actg. C.J.:
J. M. Tuason & Co., Inc. petitioned for a review by certiorari of the decision
issued by the Court of Appeals (Fifth Division) in its case CA-G.R. No.
27259-R, reversing the judgment rendered by the Court of First Instance of
Rizal (Civil Case No. Q-4243) that ordered defendant (now respondent)
Estrella Vda. de Lumanlan to vacate the lot occupied by her in Sta. Mesa
Heights Subdivision, barrio Tatalon, Quezon City, and to remove therefrom
the house and other structures constructed thereon, paying P240.00 a
month until restoration of the premises to plaintiff.
The facts are stated in the decision of the Court of Appeals (accepted by
both parties) in this wise:1äwphï1.ñët
. . . That in the complaint filed in this case by plaintiff, J. M. Tuason
& Co., Inc., hereinafter called Tuason, on 30 April, 1969, the basis
is that it being the registered owner of the property known as
Santa Mesa Heights Subdivision, situated at Barrio North Tatalon,
Quezon City, herein defendant sometime in April, 1949 unlawfully
entered into possession of 800 square meters, and therein
constructed his house so that plaintiff prayed for ejectment and
damages for the occupancy; and defendant in her answer set
forthaffirmative defense that on 12 March, 1949, she had bought
the property she was occupying from one Pedro Deudor, and that
in a compromise agreement between Pedro and Tuason on 16
March 1953, approved by the Court of First Instance of Quezon
City, she was one of the buyers therein recognized, so that she
asked that her rights be recognized and the complaint dismissed;
but on the basis of the evidence presented by both parties in the
trial, Lower Court sustained plaintiff, holding that Tuason being
the registered owner, and the question being purely one of
possession, therefore, defendant's said evidence was "completely
immaterial". . . . (Page 2 of Decision, Annex "A" of Petition.)
Upon the facts thus stated, the Fifth Division of the Court of Appeals held
that, pursuant to this Supreme Court's ruling in Evangelista vs. Deudor, L-
12826, September 10, 1959, the Compromise Agreement (Exh. 2) between
the petitioner Tuason & Co. and the Deudors constituted a valid defense
against the possessory action filed by Tuason & Co.; that under paragraph
7 of said Compromise Agreement, petitioner bound and committed itself
to sell to respondent Lumanlan the lot occupied by her at a reasonable
price; that said respondent had a right to compel petitioner to accept
payment for the lot in question; and that the compromise agreement
legalized the possession of respondent.
These pronouncements are assailed by the petitioner in this appeal as
legally incorrect and contrary to the decisions of this Court.
The terms of the compromise agreement between the heirs of Telesforo
Deudor and J. M. Tuason & Co. have been taken cognizance of in many
decisions of this Court (Evangelista vs. Deudor,  jam. cit; Deudor vs. J. M.
Tuason & Co., L-18768, May 30, 1961, and L-20105, Oct. 31, 1963; J. M.
Tuason vs. Jaramillo, et al., L-18932-34, Sept. 30, 1963; J. M. Tuason vs.
Macalindong, L-15398, Dec. 29, 1962 and others). The Deudors had therein
recognized the registered title of Tuason & Co. over the lands claimed by
them, and received payment of certain sums of money; but as the Deudors
had, prior to the compromise, sold their possessory rights to various
persons, paragraph seventh of the compromise agreement (case Q-135 of
the court of origin) provided:
That the sales of the possessory rights claimed by the DEUDORS,
are described in the lists submitted by them to the OWNERS
which are attached hereto marked Annexes "B" and "C" and made
part hereof. Whatever amounts may have been collected by the
DEUDORS on account thereof, shall be deducted from the total
sum of P1,201,063.00 to be paid to them. It shall be the joint and
solidary obligation of the DEUDORS to make the buyer of the lots
purportedly sold by them to recognize the title of the OWNERS
over the property purportedly bought by them, and to make them
sign, whenever possible, new contracts of purchase for said
property at the current paces and terms specified by the OWNERS
in their sales of lots in their subdivision known at "Sta. Mesa
Heights Subdivision." The DEUDORS HEREBY advised the OWNERS
that the buyer listed in Annex "B" herein with the annotation
"continue" shall buy the lots respectively occupied by them and
shall sign contracts, but the sums already paid by them to the
DEUDORS amounting to P134,922.84 (subject to verification by
the Court) shall be credited to the buyers and shall be deducted
from the sums to be paid to the DEUDORS by the OWNERS. The
DEUDORS also advise the OWNERS that, the buyers listed in
Annex "C" herein with the annotation "Refund" have decided not
to continue with their former contracts or purchases with the
DEUDORS and the sums already paid by them to the DEUDORS
TOTALLING P101,182.42 (subject to verification by the Court) shall
be refunded to them by the OWNERS and deducted from the
sums that may be due to the DEUDORS from the OWNERS (J.M.
Tuason & Co., Inc. vs. Jaramillo, L-18932, Sept. 30, 1963);
Careful analysis of this paragraph of the compromise agreement will show
that while the same created "a sort of contractual relation" between the J.
M. Tuason & Co., Inc., and the Deudor vendees (as ruled by this Court in
Evangelista vs. Deudor, ante), the same in no way obligated Tuason & Co.
to sell to those buyers the lots occupied by them at the price stipulated
with the Deudors, but at "the current prices and terms specified by the
OWNERS (Tuason) in their sales of lots in their subdivision known as 'Sta.
Mesa Heights Subdivision'". This is what is expressly provided. Further, the
paragraph plainly imports that these buyers of the Deudors must
"recognize the title of the OWNERS (Tuason) over the
property  purportedly bought by them" from the Deudors, and "sign,
whenever possible, new contracts of purchase for said property"; and, if
and when they do so, "the sums paid by them to the Deudors . . . shall be
credited to the buyers." All that Tuason & Co. agreed to, therefore, was to
grant the Deudor buyers preferential right to purchase "at current prices
and terms" the lots occupied by them, upon their recognizing the title of
Tuason & Co., Inc., and signing new contracts therefor; and to credit them
for the amounts they had paid to the Deudors.
Nowhere in her answer did the respondent Estrella Vda. de Lumanlan
claim that she had signed a new contract with J. M. Tuason & Co., Inc. for
the purchase of the lot occupied. What is worse, instead of recognizing the
title of the owners (Tuason & Co.) as required by the aforementioned
compromise agreement, she charged in paragraph 6 of her special defense
(Rec. on Appeal, p. 10) that "Pedro Deudor and his co-owners and the
plaintiff herein . . . conspired together and helped each other . . .  by
entering into a supposed Compromise" whereby "Pedro Deudor and his co-
owners renounced, ceded, waived and quitclaimed all their rights, title and
interest in the property including the land sold to herein defendant, in
favor of the plaintiff J. M. Tuason & Co., Inc., in consideration of the sum of
P1,201,063.00, without the knowledge and consent, and much less the
intervention of the herein defendant." In other words, the respondent
Lumanlan in her answer repudiated and assailed the compromise between
the Deudors and J. M. Tuason & Co. How then can she now claim to take
advantage and derive rights from that compromise?
Without the compromise agreement, Lumanlan must justify her possession
on the basis of a pretended superiority of the Deudors' old
Spanish informacion posesoria over Tuason's Certificate of Title No. 1267,
traceable back to the original Certificate of Title No. 735 of Rizal, issued
under the Registration Act No. 496. But, as ruled by this Court in previous
cases, Lumanlan is by now barred from assailing the decree of registration
in favor of Tuason & Co., Inc.'s predecessors twenty years after its issuance
(Tiburcio vs. PHHC, L-13429, Oct. 31, 1959; Tuason & Co. vs. Bolaños, 95
Phil. 107; Tuason & Co. vs. Santiago, 99 Phil. 622-623; Tuason & Co. vs.
Macalindong, supra; Tuason & Co. vs. Jaramillo, L-16827, Jan. 31, 1963).
It is thus apparent that no legal basis exists for the pronouncement in the
appealed decision that Tuason & Co. had committed itself to sell to
Lumanlan the lot occupied by her at a reasonable price, or that the
compromise agreement legalized the possession of the respondent, since
the latter does not rely on the compromise but, on the contrary, she assails
it.
The Court of Appeals ruled that the price to be paid by Lumanlan to Tuason
& Co., Inc., is governed by Article 1474 of the new Civil Code of the
Philippines, which provides that:
Where the price cannot be determined in accordance with the
preceding articles, or in any other manner, the contract is
inefficacious. However, if the thing or any part thereof has been
delivered to and appropriated by the buyer, he must pay a
reasonable price therefor. What is a reasonable price is a question
of fact dependent on the circumstances of each particular case.
Since there has been no contract between petitioner Tuason & Co. and
respondent Lumanlan for the sale of the lot occupied by the latter, and by
paragraph 7 of the Compromise Agreement (assuming that respondent-
appellee still has the right to invoke the same, and seek refuge
thereunder), Tuason & Co. did not consider itself bound by the sales made
by the Deudors, but demanded that the Deudor buyers should
sign new contracts with it at current prices  specified for the sales of lots in
"Sta. Mesa Heights Subdivision" (ante) the aforequoted Article 1474 can
have no bearing on the case, Lumanlan not being a buyer from Tuason &
Co.
As to Lumanlan's allegation in her counterclaim that she should be deemed
a builder in good faith, a similar contention has been rejected in Tuason &
Co. vs. Macalindong, L-15398, December 29, 1962, where we ruled that
there being a presumptive knowledge of the Torrens titles issued to
Tuason & Co. and its predecessors-in-interest since 1914, the buyer from
the Deudors (or from their transferees) can not, in good conscience, say
now that she believed her vendor had rights of ownership over the lot
purchased. The reason given by the Court is that —
Had he investigated before buying and before building his house
on the questioned lot, he would have been informed that the land
is registered under the Torrens system in the name of J. M.
Tuason & Co., Inc., If he failed to make the necessary inquiry,
appellant is now bound conclusively by appellee's Torrens title
(Sec. 51, Act 496; Emas vs. Zuzuarregui, 35 Phil. 144) (Tuason &
Co., Inc. vs. Macalindong, ante).
Lumanlan had chosen to ignore the Torrens title of Tuason & Co., Inc. and
relied instead upon the Deudors' claim of ownership, perhaps because
such course appeared to her as more advantageous; hence, she has only
herself to blame for the consequences now that the Deudors' claim has
been abandoned by the Deudors themselves, and can not pretend good
faith. The Court of First Instance, therefore, did not err in holding that she
was not a rightful possessor and sentencing her to vacate.
Respondent could have asked that she recover or be credited with the
amounts paid by her to the Deudors, but as no claim to such credit was
ever advanced by her in the trial Court, no pronouncement can be made
thereon in this appeal. Equity demands, however, that her right to claim
such return, or to have the amount offset against the sums she was
sentenced to pay, should be, as it is, reserved.
WHEREFORE, the decision of the Court of Appeals is reversed and that of
the Court of First Instance reinstated. Costs against respondent, Estrella
Vda. de Lumanlan.
J) PLEASANTVILLE VS CA
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 owners agent, a builder in good faith? This is
the main issue resolved in this petition for review on certiorari to reverse
the Decision[1] of the Court of Appeals[2] in CA-G.R. SP 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 undersignedponente.
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 Kees 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 Kees 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, Jardinicos 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 latters 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 ofLot 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 tithe 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 P 15.00 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 CT. Torres Enterprises, Inc. and Pleasantville
Subdivision are ordered to pay the plaintiff jointly and severally the sum of
P3,000.00 as attorneys fees and P700.00 as cost and litigation expenses. [4]
On appeal, the Regional Trial Court, Branch 48, Bacolod City (RTC)
ruled that petitioner and CTTEI were not at fault or were not negligent,
there being no preponderant evidence to show that they directly
participated in the delivery of Lot 9 to Kee.[5] It found Kee a builder in bad
faith. It further ruled that even assuming arguendo  that Kee was acting in
good faith, he was, nonetheless, guilty of unlawfully usurping the
possessory right of Jardinico over Lot 9 from the time he was served with
notice to vacate said lot, and thus was liable for rental.
The RTC thus disposed:
WHEREFORE, the decision appealed from is affirmed with respect to the
order against the defendant to vacate the premises of Lot No. 9 covered by
Transfer Certificate of Title No. T-106367 of the land records of Bacolod
City; the removal of all structures and improvements introduced thereon
at his expense and the payment to plaintiff (sic) the sum of Fifteen (P
15.00) 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 attorneys 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 attorneys 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 attorneys
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 Courts 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 attorneys 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 attorneys fees proper?
The First Issue: Good Faith
Petitioner contends that the Court of Appeals erred in reversing the
RTCs 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. x x x
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 developers
agent and applied and paid for the relocation of the lot, as well as for the
production of a lot plan by CTTEIs geodetic engineer. Upon Kees receipt of
the map, his wife went to the subdivision site accompanied by CTTEIs
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 companys 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 engineers 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 CTTEIs blunder,
what Kee had hoped to forestall did in fact transpire. Kees 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, Kees good faith. Petitioner failed to
prove otherwise.
To demonstrate Kees bad faith, petitioner points to Kees 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 onLot 9. These alleged violations may give rise to
petitioners 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 petitioners
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: Petitioners 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 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]
Petitioners 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 petitioners 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
whatsoever;[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, petitioners 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 Courts Decision would
require petitioner and CTTEI jointly and solidarily to answer or reimburse
Kee there for.
We agree with petitioner.
Petitioners 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 now 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: Attorneys Fees
The MTCC awarded Jardinico attorneys 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 attorneys fees after ruling that petitioner was liable for its agents
negligence.
The award of attorneys 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 petitioners 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. Tones 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 Develpment Corporation and
respondent C.T. Torres Enterprises, Inc. are ordered to
pay in solidum  the amount of P3,000.00 to Jardinico as
attorneys fees, as well as litigation expenses; and
(4) The award of rentals to Jardinico is dispensed with.
SO ORDERED.