FIRSTDIVISION

[G.R.No.L­25462,February21,1980]

MARIANOFLOREZA,PETITIONER,VS.MARIAD.DEEVANGELISTAANDSERGIOEVANGELISTA,RESPONDENTS.

DECISION

MELENCIO­HERRERA,J.:

This isaPetition forReviewonCertiorari of theDecision of theCourt of Appeals(CA­G.R. No. 23516­R) promulgated on November 4, 1965, entitled "Maria deEvangelista and Sergio Evangelista, (now the respondents) vs. Mariano Floreza(petitionerherein), reversing the judgmentof theCourt of First InstanceofRizalrenderedonJuly17,1957,and insteadorderingpetitionertovacaterespondents'residentiallot,toremovehishouseathisownexpenseandtopayrentalfromMay5,1956.

Thefactualbackgroundofthecasefollows:

PlaintiffsMariadeEvangelistaandSergioEvangelista,whoaremotherandson,(theEVANGELISTAS, forshort)are theownersofa residential lot locatedatSumilangSt.,Tanay,Rizal,withanareaof204.08sq.ms.,assessedatP410.00.

InMay1945,theEVANGELISTASborrowedfromFLOREZAtheamountofP100.00.On or about November 1945, with the consent of the EVANGELISTAS, FLOREZAoccupied the above residential lot and built thereon a house of light materials(barong­barong) without any agreement as to payment for the use of saidresidentiallotowingtothefactthattheEVANGELISTAShadthenastandingloan

ofP100.00infavorofFLOREZA.[1]

Onthefollowingdates,theEVANGELISTASagainborrowedtheindicatedamounts:

September16,1946­P100.00;[2]August17,1947­P200.00;[3]January30,1949

­P200.00;[4]April 1,1949 ­P140.00,[5] ora total of P740.00 including the firstloan. The last three items are evidenced by private documents stating that theresidentiallotstandsassecuritythereforandthattheamountscoveredthereunderarepayablewithinsixyearsfromdate,withoutmentionofinterest.Thedocumentexecuted on September 16, 1946 stated specifically that the loan was withoutinterest"walang anumang patubo."

OnJanuary10,1949,FLOREZAdemolishedthishouseoflightmaterialsandinitsplaceconstructedoneofstrongmaterialsassessedinhisnameatP1,410.00under

TaxDeclarationNo.4448.FLOREZApaidnorentalasbefore.[6]

On August 1, 1949, the EVANGELISTAS, for and in consideration of P1,000.00representingthetotaloutstandingloanofP740.00plusP260.00incash,soldtheirresidential lot to FLOREZA,with a right to repurchasewithin a period of 6 yearsfromdate,oruptoAugust1,1955,asevidencedbyanotarialdocument,Exh.B,

registeredunderAct3344onDecember6,1949,asInscriptionNo.2147.[7]

OnJanuary2,1955,orsevenmonthsbefore theexpiryof therepurchaseperiod,theEVANGELISTASpaidinfulltherepurchasepriceofP1,000.00.

OnApril 25, 1956, the EVANGELISTAS, through their counsel,wrote FLOREZA a

letter[8] asking him to vacate the premises as theywanted tomake use of theirresidentiallotbesidesthefactthatFLOREZAhadalreadybeengivenbythemmorethanoneyearwithinwhichtomovehishousetoanothersite.OnMay4,1956,theEVANGELISTASmade a formal written demand to vacate, within five days fromnotice, explaining that they had already fully paid the consideration for the

repurchaseofthelot.[9]FLOREZArefusedtovacateunlesshewasfirstreimbursedthevalueofhishouse.Hence,thefilingofthisComplaintonMay18,1956bytheEVANGELISTAS.

TheEVANGELISTASprayedthat:1)theybedeclaredtheownersofthehouseofstrong materials built by FLOREZA on their residential lot, without payment ofindemnity;or, in thealternative toorderFLOREZAtoremovesaidhouse;2) thatFLOREZApaythemthesumofP10.00permonthasthereasonablevaluefortheuse and occupation of the same from January 2, 1955 (the date the repurchasepricewaspaid)untilFLOREZAremovesthehouseanddeliversthelottothem;and3)todeclarethetransactionbetweenthemandFLOREZAasoneofmortgageandnotofpacto de retro.

InhisAnswer,FLOREZAadmittedtherepurchasebutcontrovertedbystatingthathewould execute a deedof repurchaseand leave thepremisesuponpayment tohimofthereasonablevalueofthehouseworthP7,000.00.

InaDecisiondatedJuly17,1957,theCourtofFirstInstanceofRizalopinedthatthequestionofwhetherthetransactionbetweenthepartiesisoneofmortgageorpacto de retro is no longer material as the indebtedness of P1,000.00 of theEVANGELISTAStoFLOREZAhadalreadybeenfullypaid.And,applyingArticle448

oftheCivilCode,[10]itrenderedadecisiondispositivelydecreeing:

"FOR ALL THE FOREGOING CONSIDERATIONS, the Court herebyrendersjudgmentgrantingtheplaintiffstherighttoelect,asownersoftheland,topurchasethehousebuiltonthesaidlotinquestionbythedefendant for P2,500 or to sell their said land to the defendant for

P1,500.Intheeventthattheplaintiffsshalldecidenottopurchasethehouse in question, the defendant should be allowed to remain inplaintiffs' premises by paying amonthly rental of P10.00which is thereasonable value for the use of the same per month as alleged byplaintiffsintheircomplaint.TheCourtalsoordersthedefendanttopayamonthlyrentalofP10.00fortheuseofthelandinquestionfromMay18, 1956, the date of the commencement of this action. Thecounterclaim of the defendant is hereby ordered dismissed. Withoutpronouncementastocosts.

"SOORDERED."[11]

BothpartiesappealedtotheCourtofAppeals.

OnNovember4,1965,theCourtofAppealsconcludedthatArticle448oftheCivilCode,supra,wasinapplicable;thatFLOREZAwasnotentitledtoreimbursementforhis house but that he could remove the same at his expense; and accordinglyrenderedjudgmentthus:

"WHEREFORE, judgment is hereby rendered: (1) adjudging thedefendant­appellant Mariano Floreza to vacate plaintiffs' residential lotdescribed in the complaint and to pay rental of P10.00 amonth fromMay5,1956,untilhe(defendant)shallhavevacatedthepremises;(2)orderingdefendanttoremovehishousefromthelandinquestionwithin30 days from the time this decision becomes final and executory; (3)ordering theRegister ofDeeds of Rizal to cancel inscriptionNo. 2147,Page 210, Vol. 36, in the Registration Book under Act 3344 uponpayment of his lawful fees; and (4) taxing the costs in both instances

againstdefendant­appellantMarianoFloreza."[12]

Hence,thisPetitionforReviewonCertioraribyFLOREZA,seekingareversaloftheaforestatedjudgmentandascribingthefollowingerrors:

1) That the Court of Appeals erred in holding that petitionerFlorezawas a builder in bad faithwithout likewise holdingthat respondents as owners of the land in dispute, werelikewise in bad faith and therefore both parties should inaccordance with Art. 453 of the New Civil Code beconsideredashavingactedingoodfaith.

2) That theCourtofAppealserred incompletely ignoringtheissueraisedonappealastowhetherornotrespondentsasownersofthequestionedlot,wereinbadfaithinthesensethat they had knowledge of and acquiseced to theconstructionofthehouseofpetitionerontheirlot.

3) ThattheCourtofAppealserredinnotapplyingArt.448ofthe New Civil Code in the adjudication of the rights of

petitionerandrespondent.

4) ThattheCourtofAppealserredindeclaringthatpetitionerisnotentitledtoreimbursementforthevalueofhishouseand that he should instead remove the same at hisexpense.

5) That theCourt of Appeals erred in adjudgingpetitioner tovacate respondents' lot in question and to pay rentalscommencingfromMay5,1956,untilheshallhavevacatedthe premises, notwithstanding that petitioner is entitledunderArt.448and546oftheNewCivilCode,toretentionwithout payment of rental while the correspondingindemnityofhishousehadnotbeenpaid.

6) That the Court of Appeals erred in taxing costs againstpetitioner.

7) ThattheCourtofAppealserredinnotawardingpetitioner'scounterclaim.

Duringthependencyofthisappeal,petitionerMariaD.deEvangelistadiedandwasorderedsubstitutedbyherson,petitionerSergio,asher legalrepresentative, inaResolutiondatedMay14,1976.

OnOctober 20, 1978, the EVANGELISTAS filed aMotion to Dismiss stating thatFLOREZAhadsincediedandthathisheirshadvoluntarilyvacatedtheresidentiallot in question. The date FLOREZA passed away and the date his heirs hadvoluntarily vacated the property has not been stated. Required to comment,"petitioner (represented by his heirs)", through counsel, confirmed his death andthe removal of the house and manifested that thereby the question ofreimbursementhadbecomemootandacademic. Heobjected to thedismissalofthecase,however,onthegroundthattheissueofrentalsstillpends.OnJanuary21,1980, complyingwithaResolutionof thisCourt, theEVANGELISTASclarifiedthatthedismissaltheywereprayingforwasnotoftheentirecasebutonlyofthisPetitionforReviewonCertiorari.

Wearenot inagreement that thequestionof reimbursementof thevalueof theimprovementerectedonthesubjectpropertyhasbecomemoot.Petitioner'srightofretentionofsubjectpropertyuntilheisreimbursedforthevalueofhishouse,ashe had demanded, is inextricably linked with the question of rentals. For ifpetitionerhastherightto indemnity,hehastherightofretentionandnorentalsneedbepaid. Conversely, ifno rightof retentionexists,damages in the formofrentalsforthecontinueduseandoccupationofthepropertyshouldbeallowed.

WeupholdtheCourtofAppealsinitsconclusionthatArticle448oftheCivilCodeisinapplicabletothefactualmilieuherein.Saidcodalprovisionappliesonlywhenthebuilder,planter,orsowerbelieveshehastherightsotobuild,plantorsowbecause

hethinksheownsthe landorbelieveshimselftohaveaclaimoftitle.[13] In this

case,petitionermakesnopretensionsofownershipwhatsoever.

Petitioner concedes that he was a builder in bad faith but maintains that theEVANGELISTASshouldalsobeheldinbadfaith,sothatbothofthembeinginbad

faith,Article453oftheCivilCode[14]shouldapply.Bythesametoken,however,thatArticle448ofthesameCodeisnotapplicable,neitherisArticle453undertheambianceofthiscase.

Wouldpetitioner,asvendeearetro,thenbeentitledtotherightsgrantedinArticle1616oftheCivilCode(Art.1518oftheoldCode)?Toquote:

"Art.1616.Thevendorcannotavailhimselfoftherightofrepurchasewithoutreturningtothevendeethepriceofthesale,andinaddition:

(1) The expenses of the contract, and any other legitimate paymentsmadebyreasonofthesale;

(2)Thenecessaryandusefulexpensesmadeonthethingsold."

Thequestionagaincallsforanegativeanswer.Itshouldbenotedthatpetitionerdid not construct his house as a vendee a retro. The house had already beenconstructedasfarbackas1949(1945forthehouseoflightmaterials)evenbeforethepacto de retro sale in1949. Petitioner incurrednousefulexpense, therefore,afterthatsale.ThehousewasalreadythereatthetoleranceoftheEVANGELISTASinconsiderationoftheseveralloansextendedtothem.Sincepetitionercannotbeclassified as a builder in good faithwithin the purview of Article 448 of theCivilCode,norasavendeea retro,whomadeusefulimprovementsduringthelifetimeofthepacto de retro,petitionerhasnorighttoreimbursementofthevalueofthehousewhichhehaderectedontheresidentiallotoftheEVANGELISTAS,muchlessto retention of the premises until he is reimbursed. The rights of petitioner aremoreakintothoseofausufructuarywho,underArticle579oftheCivilCode(Art.487oftheoldCode),maymakeonthepropertyusefulimprovementsbutwithnoright to be indemnified therefor. Hemay, however, remove such improvementsshould it be possible to do so without damage to the property. For if theimprovementsmadebytheusufructuaryweresubjecttoindemnity,wewouldhavea dangerous and unjust situation in which the usufructuary could dispose of theowner'sfundsbycompellinghimtopayforimprovementswhichperhapshewould

nothavemade.[15]

We come now to the issue of rentals. It is clear that from the date that theredemption price had been paid by the EVANGELISTAS on January 2, 1955,petitioner's right to the use of the residential lot without charge had ceased.Havingretainedthepropertyalthougharedemptionhadbeenmade,heshouldbeheldliablefordamagesintheformofrentalsforthecontinueduseofthesubject

residential lot[16] at the rate of P10.00 monthly from January 3, 1955, and not

merelyfromthedateofdemandonMay4,1956,asheldbytheCourtofAppeals,untilthehousewasremovedandthepropertyvacatedbypetitionerorhisheirs.

WHEREFORE, the judgment appealed from is hereby affirmed, with themodification that payment of rentals by the heirs of Mariano Floreza, who areherebyorderedsubstituted forhim,shallcommenceonJanuary3,1955until thedatethattheresidentiallotinquestionwasvacated.

Costsagainstpetitioner.

SOORDERED.

Teehankee,(Chairman),Makasiar, Fernandez, Guerrero,andDe Castro, JJ.,concur.

[1]Exh.A,p.1,RecordofExhibits.

[2]Exh.9,p.29,ibid.

[3]Exh.10,p.30,ibid.

[4]Exh.2,p.24,ibid.

[5]Exh.3,p.25,ibid.

[6]Exh.11,p.31,ibid.

[7]Pp.3­4,ibid.

[8]Exh.5,p.27,ibid.

[9]Exh.6,p.28,ibid.

[10]"ART.448.Theownerofthelandonwhichanythinghasbeenbuilt,sownorplanted in good faith, shall have the right to appropriate as his own the works,sowingorplanting,afterpaymentoftheindemnityprovidedforinarticles546and548,ortoobligetheonewhobuildorplantedtopaythepriceoftheland,andtheonewhosowed,theproperrent.However,thebuilderorplantercannotbeobligedtobuythelandifitsvalueisconsiderablymorethanthatofthebuildingortrees.Insuchcase,heshallpayreasonablerent,iftheownerofthelanddoesnotchoosetoappropriatethebuildingortreesafterproperindemnity.Thepartiesshallagreeuponthetermsofleaseandincaseofdisagreement,thecourtshallfixthetermsthereof."

[11]AmendedRecordonAppeal,p.22.

[12]Decision,pp.9­10.

[13]Alburo vs. Villanueva, 7 Phil. 277 (1907);Quemuel vs. Olaes, 1 SCRA 1159(1961);Racaza vs. Susana Realty, Inc.,18SCRA1172(1966).

[14]"ART.453.Iftherewasbadfaith,notonlyonthepartofthepersonwhobuilt,plantedorsowedonthelandofanother,butalsoonthepartoftheownerofsuchland,therightsofoneandtheothershallbethesameasthoughbothhadactedingoodfaith.

"Itisunderstoodthatthereisbadfaithonthepartofthelandownerwhenevertheactwasdonewithhisknowledgeandwithoutoppositiononhispart."

[15]Tolentino,Civil Code,citingCastan237,citingdeDiegoVol.II,pp.315­316,1972ed.

[16]Cho Chun Chac vs. Garcia,47Phil.530(1925).

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