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Republic of the Philippines

SUPREME COURT

Manila

EN BANC

G.R. No. L-12812 September 29, 1959

FILIPINAS COLLEGES, INC., plaintiff-appellee,

vs.

MARIA GARCIA TIMBANG, ET AL., defendants.

------------------------------

G.R. No. L-12813 September 29, 1959

MARIA GARCIA TIMBANG, ET AL., plaintiffs.

MARIA GARICA TIMBANG, plaintiff-appellant,

vs.

MARIA GERVACIO BLAS, defendant-appellee.

De Guzman and Fernandez for appellee Filipinas Colleges, Inc.

San Huan, Africa and Benedicto for appellant Maria Garcia Timbang.

Nicanor S. Sison for appellee Maria Gervacio Blas.

BARRERA,J.:

This is an appeal taken from an order of the Court of First Instance of Manila dated May 10, 1957 (a) declaring the Sheriff's certificate

of sale covering a school building sold at public auction null and void unless within 15 days from notice of said order the successful bidders,

defendants-appellants spouses Maria Garcia Timbang and Marcelino Timbang, shall pay to, appellee Maria Gervacio Blas directly or

through the Sheriff of Manila the sum of P5,750.00 that the spouses Timbang had bid for the building at the Sheriff's sale; (b) declaring the

other appellee Filipinas Colleges, Inc. owner of 24,500/3,285,934 undivided interest in Lot No. 2-a covered by certificate of tile No 45970,on which the building sold in the auction sale is situated; and (c) ordering the sale in public auction of the said undivided interest of the

Filipinas Colleges, Inc., in lot No. 2-a aforementioned to satisfy the unpaid portion of the judgment in favor of appellee Blas and against

Filipinas Colleges, Inc. in the amount of P8,200.00 minus the sum of P5,750.00 mentioned in (a) above.

The order appealed from is the result of three motions filed in the court a quo in the course of the execution of a final judgment of the

Court of Appeals rendered in 2 cases appealed to it in which the spouses Timbang, the Filipinas Colleges, Inc., and Maria Gervacio Blas

were the parties. IN that judgment of the Court of Appeals, the respective rights of the litigants have been adjudicated as follows:1wphl.nt

(1) Filipinas Colleges, Inc. was declared to have acquired the rights of the spouses Timbang in and to lot No. 2-a mentioned above and in

consideration thereof, Filipinas Colleges, Inc., was ordered to pay the spouses Timbang the amount of P15,807.90 plus such other amounts

which said spouses might have paid or had to pay after February, 1953, to Hoskins and Co. Inc., agent of the Urban Estate s, Inc., original

vendor of the lot. Filipinas Colleges, Inc. original vendor of the total amount with the court within 90 days after the decision shall have

become final.

(2) Maria Gervacio Blas was declared to be a builder in good faith of the school building constructed on the lot in question and entitled to be

paid the amount of P19,000.00 for the same. Filipinas Colleges, Inc., purchaser of the said building was ordered to deliver to Blas stock

certificate (Exh. C) for 108 shares of Filipinas Colleges, Inc. with a par value of P10,800.00 and to pay Blas the sum of P8,200.00 of thehouse.

(3) In case Filipinas Colleges, Inc. failed to deposit the value of the land, which after liquidation was fixed at P32,859.34, within the 90-day

period set by the court, Filipinas Colleges would lose all its rights to the land and the spouses Timbang would then become the owners

thereof. In that eventuality, the Timbangs would make known to the court their option under Art. 448 of the Civil Code whether they would

appropriate the building in question, in which even they would have to pay Filipinas Colleges, Inc. the sum of P19,000.00, or would compel

the latter to acquire the land and pay the price thereof.

Filipinas Colleges, Inc. having failed to pay or deposit the sum of P32,859.34 within the time prescribed, the spouses Timbang, in

compliance with the judgment of the Court of Appeals, on September 28, 1956, made known to the court their decision that they had chosen

not of appropriate the building but to compel Filipinas Colleges, Inc., for the payment of the sum of P32,859,34. The motion having been

granted, a writ of execution was issued on January 8, 1957.

On January 16, 1957, appellee Blas in turn filed a motion for execution of her judgment of P8,200.00 representing the unpaid portion

of the price of the house sold to Filipinas Colleges, Inc. Over the object of the Timbangs, the court grated the motion and the corresponding

writ of execution was issued on January 30, 1957, date of the granting of the motion for execution, Blas through counsel, sent a letter to the

Sheriff of Manila advising him of her preferential claim or lien on the house to satisfy the unpaid balance of the purchase price thereof under

Article 2242 of the Civil Code, and to withhold from the proceed of the auction sale the sum of P8,200.00. Levy having been made on the

house in virtue of the writs of execution, the Sheriff of Manila on March 5, 1957, sold the building in public auction in favor of the spouses

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Timbang, as the highest bidders, in the amount of P5,750.00. Personal properties of Filipinas Colleges, Inc. were also auctioned for P245.00

in favor of the spouses Timbang.

As a result of these actuation, three motion were subsequently filed before the lower court:

(1) By appellee Blas, praying that the Sheriff of Manila and/or the Timbang spouses be ordered to pay and deliver to her the sum of

P5,750.00 representing the proceeds of the auction sale of the building of Filipinas Colleges, Inc. over which she has a lien of P8,200.00 forthe unpaid balance of the purchase price thereof;.

(2) Also by the appellee Bals, praying that there being still two unsatisfied executions, one for the sum of P32,859.34 in favor the land

involved, Lot No. 2-a, be sold at public auction; and (3) By Filipinas Colleges, Inc. praying that because its properties, the house and some

personal properties, have been auctioned for P5,750.00 and P245.00 respectively in favor of the Timbang spouses who applied the proceeds

to the partial payment of the sum of P32,859.34 value of the land, Lot No. 2-a, it (Filipinas Colleges, Inc.) be declared part owner of said lot

to the extent of the total amount realized from the execution sale of its properties.1wphl.nt

The Timbang spouses presented their opposition to each and all of these motion. After due hearing the lower court rendered its

resolution in the manner indicated at the beginning of this decision, from which the Timbangs alone have appealed.

In assailing the order of the court a quo directing the appellants to pay appellee Blas the amount of their bid (P5,750.00) made at the

public auction, appellants' counsel has presented a novel, albeit ingenious, argument. It is contended that because the builder in good faith

has failed to pay the price of the land after the owners thereof exercised their option under Article 448 of the Civil Code, the builder lost his

right of retention provided in Art icle 546 and by operation of Article 445, the appellants as owners of the land automatically became the

owners ipso facto, the execution sale of the house in their favor was superfluous. Consequently, they are not bound to make good their bid of

P5,750.00 as that would be to make goods to pay for their own property. By the same token, Blas claim for preference on account of theunpaid balance of the purchase price of the house does not apply because preference applies only with respect to the property of the debtor,

and the Timbangs, owners of the house, are not the debtors of Blas.

This Court cannot accept this oversimplification of appellants' position. Article 448 and 546 of the Civil Code defining the right of the

parties in case a person in good faith builds, sows or plants on the land of another, respectively provides:

ART. 448. The owner of the land on which anything has been built, sown or plated in good faith shall have the r ight to appropriate as

his own the works, sowing or planting, after payment of the indemnify provided for in article 546 and 548, or to obligate 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 part ies shall agree upon the terms of the lease and in case of

disagreement, the court shall fix the terms thereof.

ART. 546. Necessary expenses shall be refunded to every possessor; but only the possessor in good faith may retain the thing until he

has reimbursed therefor.

Useful expenses shall be refunded only to the possessor in good faith with the same right of retention the person who has defeated him

in the possession having to option of refunding the amount of expenses or of paying the case in value which thing may have acquired byreason thereof.

Under the terms of these article, it is true that the owner of the land has the right to choose between appropriating the building by

reimbursing the builder of the value thereof or compelling the builder in good faith to pay for his land. Even this second right cannot be

exercised if the value of the land is considerably more than that of the building. In addition to the right of the builder to be paid the value of

his improvement, Article 546 gives him the corollary right of retention of the property until he is indemnified by the owner of the land.

There is nothing in the language of these two article, 448 and 546, which would justify the conclusion of appellants that, upon the failure of

the builder to pay the value of the land, when such is demanded by the land-owner, the latter becomes automatically the owner of the

improvement under Article 445. The case of Bernardo vs. Bataclan, 66 Phil., 590 cited by appellants i s no authority for this conclusion.

Although it is true it was declared therein that in the event of the failure of the builder to pay the land after the owner thereof has chosen this

alternative, the builder's right of retention provided in Article 546 is lost, nevertheless there was nothing said that as a consequence thereof,

the builder loses entirely all rights over his own building. The question is; what is the recourse or remedy left to the parties in such

eventuality where the builder fails to pay the value of the land? While the Code is silent on this Court in the cases ofMiranda vs. Fadullon,

et al., 97 Phil., 801; 51 Off. Gaz., [12] 6226;Ignacio vs. Hilario, 76 Phil., 605 and the cited case ofBernardo vs. Bataclan,supra.

In the first case, this Court has said:

A builder in good faith not be required to pay rentals. he has r ight to retain the land on which he has built in good faith until he is

reimbursed the expenses incurred by him. Possibly he might be made to pay rental only when the owner of the land chooses not to appropriate

the improvement and requires the builder in good faith to pay for the land but that the builder is unwilling or unable to pay the land, and then

they decide to leave things as they are and assume the relation of lessor and lessee, and should they disagree as to the amount of rental then

they can go to the court to fix that amount. (Emphasis supplied)

Should the parties not agree to leave things as they are and to assume the relation of lessor and lessee, another remedy is suggested in

the case ofIgnacio vs. Hilario, supra, wherein the court has ruled that the owner of the land in entit led to have the improvement removed

when after having chosen to sell his land to the other party, i.e., the builder in good faith fails to pay for the same.

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A further remedy is indicated in the case ofBernardo vs. Bataclan, supra, where this Court approved the sale of the land and the

improvement in a public auction applying the proceeds thereof first to the payment of the value of the land and the excess, if any, to be

delivered to the owner of the house in payment thereof.

The appellants herein, owners o the land, instead of electing any of the alternative above indicated chose to seek recovery of the value

of their land by asking for a writ of execution; levying on the house of the builder; and selling the same in public auction. Sand because they

are the highest bidder in their own auction sale, they now claim they acquired title to the building without necessity of paying in cash on

account of their bid. In other words, they in effect pretend to retain their land and acquire the house without paying a cent therefor.

This contention is without merit. This Court has already held inMatias vs. The Provincial Sheriff of Nueva Ecija (74 Phil., 326) that

while it is the inveriable practice, dictated by common sense, that where the successful bidder is the execution creditor himself, he need not

pay down the amount of the bid if it does not exceed the amount of his judgement, nevertheless, when their is a claim by a third-party, to the

proceeds of the sale superior to his judgment credit, the execution creditor, as successful bidder, must pay in cash the amount of his bid as a

condition precedent to the issuance to him of the certificate of sale. In the instant case, the Court of Appeals has already adjudged that

appellee Blas is entitled to the payment of the unpaid balance of the purchase price of the school building. Blas is actually a lien on the

school building are concerned. The order of the lower court directing the Timbang spouses, as successful bidders, to pay in cash the amount

of their bid in the sum of P5,750.00 is therefore correct.

With respect to the order of the court declaring appellee Filipinas Colleges, Inc. part owner of the land to the extent of the value of it s

personal properties sold at public auction in favor of the Timbang, this Court Likewise finds the same as justified, for such amount

represents, in effect, a partial payment of the value of the land. If this resulted in the continuation of the so-called involuntary partnership

questioned by the difference between P8,200.00 the unpaid balance of the purchase price of the building and the sum of P5,750.00

amount to be paid by the Timbangs, the order of the court directing the sale of such undivided interest of the Filipinas Colleges, Inc. is

likewise justified to satisfy the claim of the appellee Blas.

Considering that the appellant spouses Marcelino Timbang and Maria Garcia Timbang may not voluntarily pay the sum of P5,750.00

as ordered, thereby further delaying the final termination of this case, the first part of the dispositive portion of the order appealed from is

modified in the sense that upon failure of the Timbang spouses to pay to the Sheriff or to Manila Gervacio Blas said sum of P5,750.00 within

fifteen (15) days from notice of the final judgment, an order of execution shall issue in favor of Maria Gervasio Blas to be levied upon all

properties of the Timbang spouses not exempt from execution for the satisfaction of the said amount.

In all other respects, the appealed order of the court a quo is hereby affirmed, with costs against the appellants.

It is so ordered.


SUPREME COURT

Manila

EN BANC

G.R. No. L-8220 October 29, 1955

SALVACION MIRANDA, plaintiff-appellants,

vs.

ESTEBAN FADULLON and spouses DIONISIO SEGARRA and CLEMENCIA N. DE SEGARRA, defendants-appellees.

Lopez, Duterte, Guillamac, Rubillos, Montecillo and Bernardo for appellees.

Gaudencio R. Juezan for appellant.

MONTEMAYOR,J.:

The present appeal was first taken to the Court of Appeals. Later by resolution of the said court it was certified to us under section 17,

paragraph 6 of the Judiciary Act of 1948, as amended, the said Tribunal being of the opinion that the case involved only questions of law.

The facts as may be gathered from the pleadings filed by the part ies may be briefly stated as follows. In the year 1939 one Lucio Tio was the

owner of a parcel of land, lot 1589-J of the Banilad Estate, Cebu, under Transfer Certificate of Title No. 10548. On December 29, 1939, a

power of attorney in favor of one Esteban Fadullon executed by Lucio Tio was registered in the land records of Cebu City and annotated on

the same certificate of t itle. In the year 1946, on the strength of the said power of attorney Fadullon to make the repurchase within thisperiod, the Segarras about ten days after the expiration of the period filed a sword petition for the consolidation of their ownership and

registered said petition in the office of the Register of Deeds on May 15, 1946. Apprised of the sale of his property, Lucio Tio on June 4,

1946, filed a complaint in the Court of First Instance of Cebu, Civil Case No. 181 to annul the sale. Service of summons was made upon the

Segarras on June 10, 1946. After hearing the t rial court rendered judgment annulling the sale. The Segarras appealed to the Court of Appeals

under CAG. R. No.6550-R and the said Tribunal affirmed the appealed decision and further required the Segarras to pay plaintiff the

reasonable rentals on the property from the filing of the action until said property shall have been returned to plaintiff. Upon the decision

becoming final the corresponding writ of execution was issued directing the Sheriff to put plaintiff Tio in possession of the lot. It turned out

however that during the possession of the property by the Segarras they had introduced improvements thereon consisting of a building of

three rooms and a storage room, and one artesian well, with tower and water tank and a cement flooring covering about one-third of the lot

which according to the Segarras cost them P5,300. They then filed a motion with the trial court claiming that they were possessors in goodfaith of the lot in question, and that they had introduced the improvements aforementioned in good faith and asked the court to order the

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plaintiff to pay for the said improvements valued at P5,300 or to allow them to buy the land should the plaintiff decide not to pay for the

improvements. On August 28, 1952, the trial court issued the following order:

The attorney for the plaintiff has been accordingly served with copy of defendant's motion of July 31, 1952, filed through counsel.

As prayed for, without opposition, the plaintiff is hereby ordered to either pay the defendant spouses, Dionisio Segarra and Clemencia N.

Segarra (possessors in good faith) the sum of P5,300, value of the building erected on the land in question, or otherwise allow saiddefendants to purchase the aforementioned lot.

The plaintiff filed a motion for reconsideration claiming that the Segarras were possessors and builders in bad faith and so were not entitled

to reimbursement for the value of the improvements; that the reason he (plaintiff) did not file an opposition to the motion of the defendants

asking for reimbursement was that he thought that the trial court was sufficiently informed and impressed with the bad faith with which

defendants bought the land and introduced improvements thereon and that it would consequently deny their motion; and in support of his

motion for reconsideration plaintiff quoted portions of the decision of the t rial court and the Court of Appeals. Upon the denial of his motion

for reconsideration, he took the present appeal.

After a careful review of the record we agree with the plaintiff-appellant. The trial court in its decision declaring the sale of the land to the

defendants null and void and commenting on the alleged good faith of defendants in buying the property said the following:

There are two circumstances which seem to stubbornly belie the professed good faith on the part of the Segarras in buying this property;

namely. the circumstances of the power-of-attorney appearing on the back of the title as of five or six years previous and the other

circumstances of the comparatively limited period of one month granted vendor Fadullon to redeem the property. Above all these, is the

further circumstance that the said property had already been mortgaged in favor of the Cebu Mutual Building and Loan Association by virtue

of that power-of-attorney.

While the evidence did not disclose a collusion or conspiracy between Fadullon and the Segarras, yet, considering the short period of one

month within which to redeem and the surrounding circumstances, the possibility of such collusion lingers.

Obviously there was in this transaction a prevailing intention of railroading the property into a new ownership as may be proven by the fact

that said purchasers filed a sworn petition for consolidating their ownership barely ten days after the expiration of thirty days, that is, on

April 13, 1946, and registered with the office of Register of Deeds for Cebu twelve days thereafter, or on May 15, 1946.

The Court of Appeals in its decision affirming that of the trial court said:

The Segarra spouses maintain that they are purchasers in good faith. We will now examine the record on this point. The alleged power of

attorney executed by the late Lucio Tio in favor of appellant Fadullon was registered in the land record of the Register of Deeds of Cebu

Citly and annotated at the back of Transfer Certificate of Title No. 10548 on December 29, 1939. On the same date, the deed of mortgage in

favor of the Cebu Mutual Building and Loan Association was annotated in the said Torrens title (Exhibits 1 and 1-B). This encumbrance

alone should have been sufficient to put the Segarra spouses upon an inquiry as to the authority of Fadullon to sell to them the same property

six years later. For instance, the Segarras could have asked themselves this question: Did not the mortgage of P400 serve the purpose for

which the power of attorney was executed?

The Segarras did not require Fadullon to produce his power of attorney. While it is true that said power of attorney is annotated at the back

of the Torrens title of Tio, it was still incumbent upon the Segarras to ascertain the scope and authority of Fadullon under said power of

attorney. Fadullon executed the sale with the right to repurchase within the extraordinary short period of 30 days. This circumstance, again,

should have placed the Segarras on their guards, knowing, as they did, that they were dealing with an agent under a power of attorney

executed before the war. These unusual circumstances would seem to engender in our minds the possibility of collusion between the

appellants, to hasten the registration of the title of the Segarras to the land in dispute . . .

. . . the transfer of dominion on the property in question to the Segarras was null and void and of no effect. The new Certificate of Torrens

Title No. 392 on the property now in the name of the Segarras i s hereby ordered cancelled and that a new one issued in the name of Lucio

Tio and his wife Salvacion Miranda; ordering the Segarras to return the possession of said property to plaintiff;

The defendants Segarras are furthermore required to pay plaintiff the reasonable rentals on the property from the filing of this action until

such time as the said property shall have been returned to plaintiff . . ."

Although neither the trial court nor the Court of Appeals did expressly say and in so many words that the defendants-appellees were

possessors in bad faith, from a reading of their decisions particularly those we have just quoted, one can logically infer that that was theconclusion of the two courts, or to say it more mildly, that the defendants were not possessors in good faith. Moreover, the very fact that the

Court of Appeals sentenced the defendants to pay rentals is an indication, even proof that defendants were considered possessors and

builders in bad faith, or at least that they were not possessors and builders in good faith. A builder in good faith may not be required to pay

rentals. He has a right to retain the land on which he has built in good faith until he is reimbursed the expenses incurred by him. Possibly he

might be required to pay rental only when the owner of the land chooses not to appropriate the improvement and requires the builder in good

faith to pay for the land, but that the builder is unwilling or unable to buy the land, and then they decide to leave things as they are and

assume the relation of lessor and lessee, and should they disagree as to the amount of the rental then they can go to the court to fix that

amount. Furthermore, plaintiff-appellant in her brief (page 7) says without denial or refutation on the part of defendants-appellees that they

(defendants) applied for a building permit to construct the improvements in question on December 4, 1946, and the permit was granted on

January 11, 1947, all this about seven months after they received the summons on June 10, 1946, meaning to say that the improvements wereintroduced long after their alleged good faith as possessors had ended.

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In view of the foregoing, the appealed order of August 28, 1952 and the order of October 15, 1952, denying plaintiff's motion for

reconsideration are set aside. With costs against appellees.


SUPREME COURTManila

EN BANC

G.R. No. L-175 April 30, 1946

DAMIAN IGNACIO, FRANCISCO IGNACIO and LUIS IGNACIO, petitioners,

vs.

ELIAS HILARIO and his wife DIONISIA DRES, and FELIPE NATIVIDAD, Judge of First Instance of Pangasinan, respondents.

Leoncio R. Esliza for petitioners.

Mauricio M. Monta for respondents.

MORAN, C.J.:

This is a petition forcertiorari arising from a case in the Court of First Instance of Pangasinan between the herein respondents Elias Hilario

and his wife Dionisia Dres as plaintiffs, and the herein petitioners Damian, Francisco and Luis, surnamed Ignacio, as defendants, concerning

the ownership of a parcel of land, partly rice-land and partly residential. After the trial of the case, the lower court, presided over by Hon.

Alfonso Felix, rendered judgment holding plaintiffs as the legal owners of the whole property but conceding to defendants the ownership ofthe houses and granaries built by them on the residential portion with the rights of a possessor in good faith, in accordance with article 361 of

the Civil Code. The dispositive part of the decision, hub of this controversy, follows:

Wherefore, judgment is hereby rendered declaring:

(1) That the plaintiffs are the owners of the whole property described in transfer certificate of title No. 12872 (Exhibit A) issued in their

name, and entitled to the possession of the same;

(2) That the defendants are entitled to hold the position of the residential lot until after they are paid the actual market value of their houses

and granaries erected thereon, unless the plaintiffs prefer to sell them said residential lot, in which case defendants shall pay the plaintiffs the

proportionate value of said residential lot taking as a basis the price paid for the whole land according to Exhibit B; and

(3) That upon defendant's failure to purchase the residential lot in question, said defendants shall remove their houses and granaries after this

decision becomes final and within the period of sixty (60) days from the date that the court is informed in writing of the attitude of the

parties in this respect.

No pronouncement is made as to damages and costs.

Once this decision becomes final, the plaintiffs and defendants may appear again before this court for the purpose of determining their

respective rights under article 361 of the Civil Code, if they cannot come to an extra-judicial settlement with regard to said rights.

Subsequently, in a motion filed in the same Court of First Instance but now presided over by the herein respondent Judge Hon. Felipe

Natividad, the plaintiffs prayed for an order of execution alleging that since they chose neither to pay defendants for the buildings nor to sell

to them the residential lot, said defendants should be ordered to remove the structure at their own expense and to restore plaintiffs in the

possession of said lot. Defendants objected to this motion which, after hearing, was granted by Judge Natividad. Hence, this petition by

defendants praying for (a) a restraint and annulment of the order of execution issued by Judge Natividad; (b) an order to compel plaintiffs to

pay them the sum of P2,000 for the buildings, or sell to them the residential lot for P45; or (c), a rehearing of the case for a determination of

the rights of the parties upon failure of extra-judicial settlement.

The judgment rendered by Judge Felix is founded on articles 361 and 453 of the Civil Code which are as follows:

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 topay the price of the land, and the one who sowed, the proper rent.

ART. 453. Necessary expenses shall be refunded to every possessor; but only the possessor in good faith may retain the thing until such

expenses are made good to him.

Useful expenses shall be refunded to the possessor in good faith with the same right of retention, the person who has defeated him in the

possession having the option of refunding the amount of the expenses or paying the increase in value which the thing may have acquired in

consequence thereof.

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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. The owner of the land, upon the other hand, has the option, under article 361, 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 sellthe 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. But this is not the case before us.

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 not 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 and 453 of the Civil Code.

There is, however, in the decision of Judge Felix a question of procedure which calls for the clarification, to avoid uncertainty and delay in

the disposition of cases. In that decision, the rights of both parties are well defined under articles 361 and 453 of the Civil Code, but it fails to

determine the value of the buildings and of the lot where they are erected as well as the periods of time within which the option may be

exercised and payment should be made, these particulars having been left for determination apparently after the judgment has become final.

This procedure is erroneous, for after the judgment has become final, no additions can be made thereto and nothing can be done therewith

except its execution. And execution cannot be had, the sheriff being ignorant as to how, for how much, and within what t ime may the option

be exercised, and certainly no authority is vested in him to settle these matters which involve exercise of judicial discretion. Thus the

judgment rendered by Judge Felix has never become final, it having left matters to be settled for its completion in a subsequent proceeding,

matters which remained unsettled up to the time the petition is filed in the instant case.

For all the foregoing, the writ of execution issued by Judge Natividad is hereby set aside and the lower court ordered to hold a hearing in the

principal case wherein it must determine the prices of the buildings and of the residential lot where they are erected, as well as the period of

time within which the plaintiffs-respondents may exercise their option either to pay for the buildings or to sell their land, and, in the last

instance, the period of time within which the defendants-petitioners may pay for the land, all these periods to be counted from the date the

judgment becomes executory or unappealable. After such hearing, the court shall render a final judgment according to the evidence

presented by the parties.

The costs shall be paid by plaintiffs-respondents.


SUPREME COURT

Manila

SECOND DIVISION

G.R. No. L-32974 July 30, 1979

BARTOLOME ORTIZ, petitioner,vs.HON. UNION C. KAYANAN, in his capacity as Judge of the Court of First Instance of Quezon, Branch IV; ELEUTERIOZAMORA, QUIRINO COMINTAN, VICENTE FERRO, AND GREGORIO PAMISARAN,respondents.

Salonga, Ordo;ez, Yap, Sicat & Associates and Salvador, Ulgado & Carbon for petitioner.

Jose A. Cusi for private respondents.

ANTONIO, J.:1wph1.t

Petition for certiorari and Prohibition with Preliminary Injunction to nullify the Order of respondent Judge directing the execution ofthe final judgment in Civil Case No. C-90, entitled "Bartolome Ortiz vs. Secretary of Agriculture and Natural Resources, et al.," andthe Writ of Execution issued to implement said Order, allegedly for being inconsistent with the judgment sought to be enforced.

Civil Case No. C-90 was filed by Bartolome Ortiz who sought the review and/or annulment of the decision of the Secretary ofAgriculture and Natural Resources, giving preference to the sales applications of private respondents Quirino Comintan and

Eleuterio Zamora over Lot No. 5785, PLS-45, located at Barrio Cabuluan, Calauag, Quezon.

I

The factual background of the case, as found by respondent Court, is as follows: t.hqw

... The lot in controversy was formerly the subject of Homestead Application No. 122417 of Martin Dolorico II, plaintiff's ward whodied on August 20, 1931; that since then it was plaintiff who continued the cultivation and possession of the property, withouthowever filing any application to acquire title thereon; that in the Homestead Application No. 122417, Martin Dolorico II named hisuncle, Martin Dolorico I as his heir and successor in interest, so that in 1951 Martin Dolorico I executed an affidavit relinquishinghis rights over the property in favor of defendants Quirino Comintan and Eleuterio Zamora, his grandson and son-in-law,

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respectively, and requested the Director of Lands to cancel the homestead application; that on the strength of the affidavit,Homestead Application No. 122417 was cancelled and thereafter, defendants Comintan and Zamora filed their respective salesapplications Nos. 8433 and 9258; that plaintiff filed his protest on November 26, 1951 alleging that he should be given preferenceto purchase the lot inasmuch as he is the actual occupant and has been in continuous possession of the same since 1931; andinspite of plaintiff's opposition, "Portion A" of the property was sold at public auction wherein defendant Comintan was the onlybidder; that on June 8, 1957, investigation was conducted on plaintiff's protest by Assistant Public Lands Inspector SerapionBauzon who submitted his report to the Regional Land Officer, and who in turn rendered a decision on April 9, 1958, dismissingplaintiff's claim and giving due course to defendants' sales applications on the ground that the relinquishment of the homesteadrights of Martin Dolorico I in favor of Comintan and Zamora is proper, the former having been designated as successor in interestof the original homestead applicant and that because plaintiff failed to participate in the public auction, he is forever barred to claimthe property; that plaintiff filed a motion for reconsideration of this decision which was denied by the Director of Lands in his orderdated June 10, 1959; that, finally, on appeal to the Secretary of Agriculture and Natural Resources, the decision rendered by theRegional Land Officer was affirmed in toto.1

On March 22, 1966, respondent Court rendered judgment in the afore-mentioned civil case, the dispositive portion of which readsas follows:t.hqw

IN VIEW OF THE FOREGOING CONSIDERATIONS, judgment is hereby rendered awarding Lot No. 5785-A of PLS-45, (CalauagPublic Land Subdivision) one-half portion of the property in litigation located at Bo. Cabuluan, Calauag, Quezon, in favor ofdefendant QUIRINO COMINTAN, being the successful bidder in the public auction conducted by the bureau of Lands on April 18,1955, and hereby giving due course to the Sales Application No. 9258 of defendant Eleuterio Zamora over the other half, Lot No.5785-B of PLS-45, Calauag, without prejudice to the right of plaintiff BARTOLOME ORTIZ to participate in the public bidding of thesame to be announced by the Bureau of Lands, Manila. However, should plaintiff Bartolome Ortiz be not declared the successfulbidder thereof, defendants Quirino Comintan and Eleuterio Zamora are ordered to reimburse jointly said plaintiff the improvementshe has introduced on the whole property in the amount of THIRTEEN THOUSAND SIX HUNDRED THIRTY-TWO (P13,632.00)PESOS, the latter having the right to retain the property until after he has been fully paid therefor, without interest since he enjoysthe fruits of the property in question,with prejudice and with costs again the plaintiff. 2

Plaintiff appealed the decision to the Court of Appeals.

Two (2) years after the rendition of the judgment by the court a quo, while the case was pending appeal and upon petition ofprivate respondents Quirino Comintan and Eleuterio Zamora, respondent Court appointed respondent Vicente Ferro, Clerk ofCourt, as Receiver to collect tolls on a portion of the property used as a diversion road. On August 19, 1969, the Court of Appealsissued a Resolution annulling the Order appointing the Receiver. Subsequently, on February 19, 1970, the Appellate Courtaffirmed the decision of the trial court. A petition for review on certiorari of the decision of the Court of Appeals was denied by thisCourt on April 6, 1970. At this point, private respondents filed a petition for appointment of a new receiver with the court a quo.This petition was granted and the receiver was reappointed. Petitioner sought the annulment of this Order with the Court ofAppeals, but said Court ruled that its decision had already become final and that the records of the case were to be remanded tothe trial court.

Not satisfied with such denial, petitioner filed a petitioner for certiorari, prohibition and mandamus with preliminary injunction beforethis Court, 3praying for the annulment of the Order reappointing the Receiver. On July 13, 1970, the petition was dismissed by thisCourt on the ground of insufficient showing of grave abuse of discretion.

II

The judgment having become final and executory private respondents filed a motion for the execution of the same, praying asfollows:t.hqw

WHEREFORE, it is respectfully prayed of this Honorable Court to order the issuance of a writ of execution in accordance with thejudgment of this Honorable Court, confirmed by the Court of Appeals and the Supreme Court, commanding any lawful officer todeliver to defendants Comintan and Zamora the land subject of the decision in this case but allowing defendants to file a bond insuch amount as this Honorable Court may fix, in lieu of the P13,632.00 required to be paid to plaintiff, conditioned that after theaccounting of the tools collected by plaintiff, there is still an amount due and payable to said plaintiff, then if such amount is notpaid on demand, including the legal interests, said bond shall be held answerable.

Ordering further the plaintiff to render an accounting of the tolls he collected from March of 1967 to December 31, 1968 and fromSeptember 1969 to March 31, 1970, and deliver said tolls collected to the receiver and if judgment is already executed, then toQuirino Comintan and Eleuterio Zamora; and,

Finally, to condemn plaintiff to pay moral damages for withholding the tools which belong to your movant in an amount this Courtmay deem just in the premises. 4

Acting upon the foregoing motion, respondent Judge issued an Order, dated September 23, 1970, stating, among others, thefollowing: t.hqw

The records further disclosed that from March 1967 to December 31, 1968, piaintiff Bartolome Ortiz collected tolls on a portion ofthe propertv in question wherein he has not introduced anv improvement particularlv on Lot No. 5785-A; PLS-45 awarded todefendant Quirino Comintan, thru which vehicular traffic was detoured or diverted, and again from September 1969 to March 31,1970, the plaintiff resumed the collection of tools on the same portion without rendering any accounting on said tolls to the

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Receiver, who, was reappointed after submitting the required bond and specifically authorized only to collect tolls leaving theharvesting of the improvements to the plaintiff.

xxx xxx xxx

ln virtue of he findings of this Court as contained in the dispositive portion of its decision, the defendants are jointly obligated topay the plaintiff in the amount of P13,632.00 as reasonable value of the improvements he introduced on the whole property inquestion, and that he has the right of retention until fully paid. It can be gleaned from the motion of the defendants that if plaintiff

submits an accounting of the tolls he collected during the periods above alluded to, their damages of about P25,000.00 can morethan offset their obligation of P13,362.00 in favor of the plaintiff, thereafter the possession of the land be delivered to thedefendants since the decision of the Supreme Court has already become final and executory, but in the interregnum pending suchaccounting and recovery by the Receiver of the tolls collected by the plaintiff, the defendants pray that they allowed to put up abond in lieu of the said P13,632.00 to answer for damages of the former, if any.

On the other hand, plaintiff contends in his opposition, admitting that the decision of the Supreme Court has become final andexecutory; (1) the offer of a bond in lieu of payment of P13,632.00 does not, and cannot, satisfy the condition imposed in thedecision of this Court which was affirmed in toto; (2) the public sale of Portion "B" of the land has still to take place as ordainedbefore the decision could be executed; and, (3) that whatever sums plaintiff may derive from the property cannot be set off againstwhat is due him for the improvements he made, for which he has to be reimbursed as ordered.

xxx xxx xxx

Let it be known that plaintiff does not dispute his having collected tolls during the periods from March 1967 to December 31, 1968and from September 1969 to March 31, 1970. The Supreme Court affirmed the decision of this Court its findings that said tollsbelong to the defendant, considering that the same were collected on a portion of the land question where the plaintiff did not

introduce any improvement. The reimbursement to the plaintiff pertains only to the value of the improvements, like coconut treesand other plants which he introduced on the whole property. The tolls collected by the plaintiff on an unimproved portion naturallybelong to the defendants, following the doctrine on accretion. Further, the reappointment of a Receiver by this Court was upheldby the Supreme Court when it denied the petition for certiorari filed by the plaintiff, bolstering the legal claim of defendants oversaid tolls. Thus, the decision of the Supreme Court rendered the decision of this Court retroactive from March 22, 1966 althoughpending accounting of the tolls collected by the plaintiff is justified and will not prejudice anybody, but certainly would substantiallysatisfy the conditions imposed in the decision. However, insofar as the one-half portion "B" of the property, the decision may beexecuted only after public sale by the Bureau of Lands shall be accomplished.

WHEREFORE, finding the Motion for Execution filed by the defendants to be meritorious, the same is granted; provided, however,that they put up a bond equal the adjudicated amount of P13,632.00 accruing in favor of the plaintiff, from a reputable orrecognized bonding or surety company, conditioned that after an accounting of the tolls collected by the plaintiff should there befound out any balance due and payable to him after reckoning said obligation of P13,632.00 the bond shall be held answerabletherefor. 5

Accordingly, a Writ of Execution was issued after private respondent Quirino Comintan had filed the required bond. The writdirected the Sheriff to enforce the decision of the Court, and stated, part in, the following:t.hqw

But should there be found any amount collectible after accounting and deducting the amount of P3,632.00, you are herebyordered that of the goods and chattels of Bartolome Ortiz of Bo. Kabuluan, Calauag, Quezon, be caused to be made any excess inthe above-metioned amount together with your lawful fees and that you render same to defendant Quirino Comintan. If sufficientpersonal property cannot be found thereof to satisfy this execution and lawful fees thereon, then you are commanded that of thelands and buildings of the said BARTOLOME ORTIZ you make the said excess amount in the manner required by the Rules ofCourt, and make return of your proceedings within this Court within sixty (60) days from date of service.

You are also ordered to cause Bartolome Ortiz to vacate the property within fifteen (15) days after service thereof the defendantQuirino Comintan having filed the required bond in the amount of THIRTEEN THOUSAND SIX HUNDRED THIRTY-TWO(P13,632.00) PESOS. 6

On October 12, 1970, petitioner filed a Motion for Reconsideration of the aforesaid Order and Writ of Execution, alleging: t.hqw

(a) That the respondent judge has no authority to place respondents in possession of the property;

(b) That the Supreme Court has never affirmed any decision of the trial court that tolls collected from the diversionary road on theproperty, which is public land, belong to said respondents;

(c) That to assess petitioner a P25,000.00 liability for damages is purely punitive imposition without factual or legal justification.

The foregoing Motion for Reconsideration was denied by respondent Judge per Order dated November 18, 1970. Saod Orderstates, in part:t.hqw

It goes without saying that defendant Comintan is entitled to be placed in possession of lot No. 5785-A of PLS-45 (Calauag PublicLand Subdivision) and enjoyment of the tolls from March, 1967 to March, 1968 and from September, 1969 to March 31, l970 which

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were received by plaintiff Bartolome Ortiz, collected from the property by reason of the diversion road where vehicular traffic wasdetoured. To defendant Comintan belongs the tolls thus collected from a portion of the land awarded to him used as a diversionaryroad by the doctrine of accretion and his right over the same is ipso jure, there being no need of any action to possess saidaddition. It is so because as consistently maintained by the Supreme Court, an applicant who has complied with all the terms andconditions which entitle him to a patent for a particular tract of publlic land, acquires a vested right therein and is to be regarded asequitable owner thereof so that even without a patent, a perfected homestead or sales application is a property right in the fullestsense, unaffectcd by the fact that the paramount title is still in the Government and no subsequent law can deprive him of thatvested right The question of the actual damages suffered by defendant Comintan by reason of the unaccounted tolls received byplaintiff had already been fully discussed in the order of September 23, 1970 and the Court is honestly convinced and believes it tobe proper and regular under the circumstances.

Incidentally, the Court stands to correct itself when in the same order, it directed the execution of he decision with respect to theone-half portion "B" of the property only after the public sale by the Bureau of Lands, the same being an oversight, it appearingthat the Sales Application of defendant Eleuterio Zamora had already been recognized and full confirmed by the Supreme Court.

In view thereof, finding the motion filed by plaintiff to be without merit, the Court hereby denies the same and the order ofSeptember 23, 1970 shall remain in full force subject to the amendment that the execution of the decision with respect to the one-half portion "B" shall not be conditioned to the public sale by the Bureau of Lands.

SO ORDERED. 7

III

Petitioner thus filed the instant petition, contending that in having issued the Order and Writ of Execution, respondent Court "actedwithout or in excess of jurisdiction, and/or with grave abuse of discretion, because the said order and writ in effect vary the terms

of the judgment they purportedly seek to enforce." He argued that since said judgment declared the petitioner a possessor in goodfaith, he is entitled to the payment of the value of the improvements introduced by him on the whole property, with right to retainthe land until he has been fully paid such value. He likewise averred that no payment for improvements has been made and,instead, a bond therefor had been filed by defendants (private respondents), which, according to petitioner, is not the paymentenvisaged in the decision which would entitle private respondents to the possession of the property. Furthermore, with respect toportion "B", petitioner alleges that, under the decision, he has the right to retain the same until after he has participated and lost inthe public bidding of the land to be conducted by the Bureau of Lands. It is claimed that it is only in the event that he loses in thebidding that he can be legally dispossessed thereof.

It is the position of petitioner that all the fruits of the property, including the tolls collected by him from the passing vehicles, whichaccording to the trial court amounts to P25,000.00, belongs to petitioner and not to defendant/private respondent QuirinoComintan, in accordance with the decision itself, which decreed that the fruits of the property shall be in lieu of interest on theamount to be paid to petitioner as reimbursement for improvements. Any contrary opinion, in his view, would be tantamount to anamendment of a decision which has long become final and executory and, therefore, cannot be lawfully done.

Petitioner, therefore, prayed that: (1) a Writ of Preliminary Injunction be issued enjoining the enforcement of the Orders ofSeptember 23, 1970 and November 18, 1970, and the Writ of Execution issued thereto, or restoring to petitioner the possession of

the property if the private respondents had been placed in possession thereof; (2) annulling said Orders as well as the Writ ofExecution, dissolving the receivership established over the property; and (3) ordering private respondents to account to petitionerall the fruits they may have gathered or collected from the property in question from the time of petitioiier's illegal dispossessionthereof.

On January 29, 1971, this Court issued the Writ of Preliminary Injunction. On January 30, 1971, private respondents filed a Motionfor Reconsideration and/or Modification of the Order dated January 29, 1971. This was followed by a Supplemental Motion forReconsideration and Manifestation on February 3, 1971. In the latter motion, private respondents manifested that the amount ofP14,040.96, representing the amount decreed in the judgment as reimbursement to petitioner for the improvements, plus interestfor six months, has already been deposited by them in court, "with the understanding that said amount shall be turned over to theplaintiff after the court a quo shall have determined the improvement on Lot 5785-A, and subsequently the remaining balance ofthe deposit shall be delivered to the petitioner (plaintiff therein) in the event he loses the bid for Lot 5785-B in favor of privaterespondent Eleuterio Zamora." 8 The deposit is evidenced by a certification made by the Clerk of the Court a quo. 9Contending thatsaid deposit was a faithful compliance with the judgment of the trial court, private respondent Quirino Comintan prayed for thedissolution of the Writ of Injunction.

It appears that as a consequence of the deposit made by private respondents, the Deputy, Sheriff of Calauag, Quezon oustedpetitioner's representative from the land in question and put private respondents in possession thereof. 10

On March 10, 1971, petitioner filed a "Comment on Respondents' 'Motion for Reconsideration' dated January 29, 1971' and'Supplemental Motion for Reconsideration and Manifestation,'" contending that the tender of deposit mentioned in the SuplementalMotion was not really and officially made, "inasmuch as the same is notsupported by any official receipt from the lower court, orfrom its clerk or cashier, as required by law;" that said deposit does not constitute sufficient compliance with the judgment soughtto be enforced, neither was it legally and validly made because the requisites for consignation had not been complied with; that thetender of legal interest for six months cannot substitute petitioner's enjoyment of the fruits of the property as long as the judgmentin Civil Case No. C-90 has not been implemented in the manner decreed therein; that contrary to the allegations of privaterespondents, the value of the improvements on the whole property had been determined by the lower court, and the segregationof the improvements for each lot should have been raised by them at the opportune moment by asking for the modification of thedecision before it became final and executory; and that the tolls on the property constituted "civil fruits" to which the petitioner isentitled under the terms of the decision.

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IV

The issue decisive of the controvery isafter the rendition by the trial court of its judgment in Civil Case No. C-90 on March 22,1966 confirming the award of one-half of the property to Quirino Comintanwhether or not petitioner is still entitled to retain for hisown exclusive benefit all the fruits of the property, such as the tolls collected by him from March 1967 to December 1968, andSeptember 1969 to March 31, 1970, amounting to about P25,000.00. In other words, petitioner contends that so long as theaforesaid amount of P13,632,00 decreed in the judgment representing the expenses for clearing the land and the value of thecoconuts and fruit trees planted by him remains unpaid, he can appropriate for his exclusive benefit all the fruits which he mayderive from the property, without any obligation to apply any portion thereof to the payment of the interest and the principal of the

debt.

We find this contention untenable.

There is no question that a possessor in good faith is entitled to the fruits received before the possession is legally interrupted. 11

Possession in good faith ceases or is legally interrupted from the moment defects in the title are made known to the possessor, byextraneous evidence or by the filing of an action in court by the true owner for the recovery of the property. 12 Hence, all the fruitsthat the possessor may receive from the time he is summoned in court, or when he answers the complaint, must be delivered andpaid by him to the owner or lawful possessor. 13

However, even after his good faith ceases, the possessor in fact can still retain the property, pursuant to Article 546 of the NewCivil Code, until he has been fully reimbursed for all the necessary and useful expenses made by him on the property. This right ofretention has been considered as one of the conglomerate of measures devised by the law for the protection of the possessor ingood faith. Its object is to guarantee the reimbursement of the expenses, such as those for the preservation of the property, 14 orfor the enhancement of its utility or productivity. 15 It permits the actual possessor to remain in possession while he has not beenreimbursed by the person who defeated him in the possession for those necessary expenses and useful improvements made byhim on the thing possessed. The principal characteristic of the right of retention is its accessory character. It is accessory to aprincipal obligation. Considering that the right of the possessor to receive the fruits terminates when his good faith ceases, it isnecessary, in order that this right to retain may be useful, to concede to the creditor the right to secure reimbursement from thefruits of the property by utilizing its proceeds for the payment of the interest as well as the principal of the debt while he remains inpossession. This right of retention of the property by the creditor, according to Scaevola, in the light of the provisions of Article 502of the Spanish Civil Code, 16 is considered not a coercive measure to oblige the debtor to pay, depriving him temporarily of theenjoyment of the fruits of his property, but as a means of obtainitig compensation for the debt. The right of retention in this case isanalogous to a contract of antichresis and it cati be considered as a means of extinguishing the obligation, inasmuch as the rightto retain the thing lasts only for the period necessary to enable the creditor to be reimbursed from the fruits for the necessary anduseful expenses. 17

According to Manresa, the right of retention is, therefore, analogous to that of a pledge, if the property retained is a movable, andto that of antichresis, if the property held is immovable. 18 This construction appears to be in harmony with similar provisions of thecivil law which employs the right of retention as a means or device by which a creditor is able to obtain the payment of a debt.Thus, under Article 1731 of the New Civil Code, any person who has performed work upon a movable has a right to retain it byway of pledge until he is paid. Similarly, under Article 1914 of the same Code, the agent may retain in pledge the things which arethe object of the agency until the principal effects reimbursement of the funds advanced by the former for the execution of theagency, or he is indemnified for all damages which he may have suffered as a consequence of the execution of the agency,provided he is free from fault. To the same effect, the depositary, under Article 1994 of the same Code, may retain the thing in

pledge until the full payment of what may be due him by reason of the deposit. The usufructuary, pursuant to Article 612 of thesame Code, may retain the property until he is reimbursed for the amount paid for taxes levied on the capital (Article 597) and torextraordinary repairs (Article 594).

In all of these cases, the right of retention is used as a means of extinguishing the obligation. As amply observed by Manresa: "Elderecho de retencion, lo hemos dicho, es el derecho de prenda o el de anticresis constituido por la ley con independencia de laspartes." 19 In a pledge, if the thing pledged earns or produces fruits, income, dividends or interests, the creditor shall compensatewhat he receives with those which are owing him. 20 In the same manner, in a contract of antichresis, the creditor acquires the rightto receive the fruits of an immovable of his debtor with the obligation to apply them to payment of the interest, if owing, andthereafter to the principal of his credit. 21 The debtor can not reacquire enjoyment of the immovable until he has actually paid whathe owes the creditor. 22

Applying the afore-cited principles to the case at bar, petitioner cannot appropriate for his own exclusive benefit the tolls which hecollected from the property retained by him. It was his duty under the law, after deducting the necessary expenses for hisadministration, to apply such amount collected to the payment of the interest, and the balance to the payment of the obligation.

We hold, therefore, that the disputed tolls, after deducting petitioner's expenses for administration, belong to Quirino Comintan,owner of the land through which the toll road passed, further considering that the same was on portions of the property on whichpetitioner had not introduced any improvement. The trial court itself clarified this matter when it placed the toll road underreceivership. The omission of any mention of the tolls in the decision itself may be attributed to the fact that the tolls appear tohave been collected after the rendition of the judgment of the trial court.

The records further reveal that earnest efforts have been made by private respondents to have the judgment executed in the mostpracticable manner. They deposited in court the amount of the judgment in the sum of P13,632.00 in cash, subject only to theaccounting of the tolls collected by the petitioner so that whatever is due from him may be set off with the amount ofreimbursement. This is just and proper under the circumstances and, under the law, compensation or set off may take place,either totally or partially. Considering that petitioner is the creditor with respect to the judgment obligation and the debtor withrespect to the tolls collected, Comintan being the owner thereof, the trial court's order for an accounting and compensation is inaccord with law. 23

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With respect to the amount of reimbursement to be paid by Comintan, it appears that the dispositive portion of the decision waslacking in specificity, as it merely provided that Comintan and Zamora are jointly liable therefor. When two persons are liable undera contract or under a judgment, and no words appear in the contract or judgment to make each liable for the entire obligation, thepresumption is that their obligation is joint ormancomunada, and each debtor is liable only for a proportionate part of theobligation. 24 The judgment debt of P13,632.00 should, therefore, be pro-rated in equal shares to Comintan and Zamora.

Regarding Lot 5785-B, it appears that no public sale has yet been conducted by the Bureau of Lands and, therefore, petitioner isentitled to remain in possession thereof. This is not disputed by respondent Eleuterio Zamora. 25 After public sale is had and in theevent that Ortiz is not declared the successful bidder, then he should be reimbursed by respondent Zamora in the corresponding

amount for the improvements on Lot 5785-B.

WHEREFORE, in view hereof, the Order of respondent Court of November 18, 1970 is hereby modified to conform to theforegoing judgment. The Writ of Preliminary Injunction, dated January 29, 1971, is hereby dissolved. Without specialpronouncement as to costs.

Barredo (Chairman), Concepcion, Jr. and Guerrero, JJ., concur.


SUPREME COURT

THIRD DIVISION

G.R. No. 157044 October 5, 2005

RODOLFO V. ROSALES, (represented by his heirs, Rodolfo, Jr., Romeo Allan, Lillian Rhodora, Roy Victor, Roger Lyle and

Alexander Nicolai, all surnamed Rosales) and LILY ROSQUETA-ROSALES, Petitioners

vs.

MIGUEL CASTELLTORT, JUDITH CASTELLTORT, and LINA LOPEZ-VILLEGAS, assisted by her Attorney-in-Fact, Rene

Villegas, Respondents.

D E C I S I O N

CARPIO MORALES, J.:

The present petition for review on certiorari assails the October 2, 2002 Decision1and February 6, 2003 Resolution2of the Court of Appeals

(CA) in CA G.R. CV No. 64046 and seeks to reinstate the April 21, 1999 Decision 3of the Regional Trial Court (RTC) of Calamba, Laguna,

Branch 34 in Civil Case No. 2229-95-C.

Spouses-petitioners Rodolfo V. Rosales and Lily Rosqueta-Rosales (petitioners) are the registered owners of a parcel of land with an area of

approximately 315 square meters, covered by Transfer Certificate of Title (TCT) No. 36856

4

and designated as Lot 17, Block 1 ofSubdivision Plan LRC Psd-55244 situated in Los Baos, Laguna.

On August 16, 1995, petitioners discovered that a house was being constructed on their lot, without their knowledge and consent, by

respondent Miguel Castelltort (Castelltort).5

It turned out that respondents Castelltort and his wife Judith had purchased a lot, Lot 16 of the same Subdivision Plan, from respondent Lina

Lopez-Villegas (Lina) through her son-attorney-in-fact Rene Villegas (Villegas) but that after a survey thereof by geodetic engineer Augusto

Rivera, he pointed to Lot 17 as the Lot 16 the Castelltort s purchased.

Negotiations for the settlement of the case thus began, with Villegas offering a larger lot near petitioners lot in the same subdivision as a

replacement thereof.6In the alternative, Villegas proposed to pay the purchase price of petitioners lot with legal interest.7Both proposals

were, however, rejected by petitioners8whose counsel, by letter9of August 24, 1995, directed Castelltort to stop the construction of and

demolish his house and any other structure he may have built thereon, and desist from entering the lot.

Petitioners subsequently filed on September 1, 1995 a complaint10for recovery of possession and damages with prayer for the issuance of a

restraining order and preliminary injunction against spouses-respondents Miguel and Judith Castelltort before the RTC of Calamba, Laguna,docketed as Civil Case No. 2229-95-C.

To the complaint, the Castelltorts claimed in their Answer with Counterclaim 11that they were builders in good faith.

Lina, represented by her son-attorney-in-fact Villegas, soon filed a Motion for Intervention12before the RTC which was granted by Order13

of December 19, 1995.

In her Answer to the complaint ,14 Lina alleged that the Castelltorts acted in good faith in constructing the house on petitioners lot as they in

fact consulted her before commencing any construction thereon, they having relied on the technical description of the lot sold to them, Lot

16, which was verified by her officially designated geodetic engineer.

11
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Nevertheless, Lina proposed to give petitioners a lot containing an area of 536 square meters together with the house and duplex structure

built thereon or, if petitioners choose, to encumber the 536 square meter lot as collateral "to get immediate cash" through a financing scheme

in order to compensate them for the lot in question.15

Ruling out good faith, the RTC, by Decision of April 21, 1999, found for petitioners in this wise:

In the instant case, there i s no well-founded belief of ownership by the defendants of the land upon which they built their house. The title ormode of acquisition upon which they based their belief of such ownership stemmed from a Contract to Sell (Exhibit "P") of which they were

not even parties, the designated buyer being El izabeth Yson Cruz and the sale even subjected to the judicial reconstitution of the title. Andby their own actions, particularly defendant Miguel Castelltort, defendants betrayed this very belief in their ownership when realizing the

inutility of anchoring their ownership on the basis of the Contract of Sale, defendant Miguel Castelltort in his testimony declared Elizabeth

Yson Cruz as his wife (tsn, pp. 7-8, March 24, 1998) despite an admission in their answer that they are the spouses named as defendants (tsn,

p. 8, January 12, 1998) and which declaration is an utter falsehood as the Contract to Sell itself indicates the civil status of said Elizabeth

Yson Cruz to be single.

Even if we are to concede that defendants built their house in good faith on account of the representation of attorney-in-fact Rene Villegas,

their failure to comply with the requirements of the National Building Code, particularly the procurement of a building permit, stained such

good faith and belief.

x x x

From any and all indications, this deliberate breach is an unmitigated manifestation of bad faith. And from the evidence thus adduced, we

hold that defendants and the intervenor were equally guilty of negligence which led to the construction of the defendants house on

plaintiffs property and therefore jointly and severally liable for all the damages suffered by the plaintiffs.16(Underscoring supplied)

The dispositive portion of the trial courts Decision reads, quoted verbatim:

ACCORDINGLY, in view of all the foregoing, judgment is hereby rendered in favor of plaintiffs and against the defendants, ordering thelatter to surrender the possession of the property covered by TCT No. 36856 of the Register of Deeds of Laguna including any and all

improvements built thereon to the plaintiffs.

Defendants and intervenors are likewise jointly and severally directed to pay to plaintiffs the following damages:

a) TWO THOUSAND (P2,000.00) PESOS per month from February 1995 by way of reasonable compensation for the use of plaintiffs

property until the surrender of the same;

b) FIFTY THOUSAND (P50,000.00) PESOS by way of moral damages;

c) THIRTY THOUSAND (P30,000.00) PESOS as exemplary damages;

d) TWENTY THOUSAND (P20,000.00) PESOS as attorneys fees and cost of suit.

The counterclaim interposed by the defendants in their responsive pleading is hereby dismissed for lack of merit.

SO ORDERED.17

Respondents thereupon filed their respective appeals with the CA.

Petitioner Rodolfo Rosales, in the meantime, died on December 7, 2001. His heirs Rodolfo, Jr., Romeo Allan, Lillian Rhodora, Roy Victor,

Roger Lyle and Alexander Nicolai, all surnamed Rosales, filed their Appearance18as his substitute.

By Decision of October 2, 2002, the CA granted the appeal and set aside the April 21, 1999 RTC Decision. The dispositive portion of the

Decision reads, quoted verbatim:

WHEREFORE, premises considered, the instant appeal is hereby GRANTED and the assailed decision of the court a quo REVERSED

AND SET ASIDE. In accordance with the cases ofTechnogas Philippines Manufacturing Corp. vs. Court of Appeals andDepra vs. Dumlao,

applying Article 448 of the Civil Code, this case is REMANDED to the Regional Trial Court of Calamba, Laguna, Branch 34, for further

proceedings, as follows:

1. to determine the present fair price of appellees 315 square meter area of land and the amount of the expenses actually spent by the

appellants for building the house as of 21 August 1995, which is the time they were notified of appellees r ightful claim over Lot 17.

2. to order the appellees to exercise their option under the law (Art icle 448, Civil Code), whether to appropriate the house as their own by

paying to the appellants the amount of the expenses spent for the house as determined by the court a quo in accordance with the limitations

as aforestated or to oblige the appellants to pay the price of the land.

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In case the appellees exercise the option to oblige the appellants to pay the price of the land but the lat ter reject such purchase because, as

found by the court, the value of the land is considerably more than that of the house, the court shall order the parties to agree upon the terms

of a forced lease, and give the court a quo a formal written notice of such agreement and its provisos. If no agreement is reached by theparties, the court a quo shall then fix the terms of the forced lease, provided that the monthly rental to be fixed by the Court shall not be less

that Two Thousand Pesos (P2,000.00) per month, payable within the first five (5) days of each calendar month and the period thereof shall

not be more than two (2) years, counted from the finality of the judgment.

Upon the expiration of the forced lease, or upon default by the appellants in the payment of rentals for two (2) consecutive months, the

appellees shall be entitled to terminate the forced lease, to recover their land, and to have the improvement removed by the appellants at the

latters expense. The rentals herein provided shall be tendered by the appellants to the court for payment to the appellees, and such tendershall constitute evidence of whether or not compliance was made within the period fixed by the court.

In any event, the appellants shall pay the appellees the amount of Two Thousand Pesos (P2,000.00) as reasonable compensation for their

occupancy of the encroached property from the time said appellants good faith cease (sic) to exist until such time the possession of the

property is delivered to the appellees subject to the reimbursement of the aforesaid expenses in favor of the appellants or until such time the

payment of the purchase price of the said lot be made by the appellants in favor of the appellees in case the latter opt for the compulsory sale

of the same.

SO ORDERED.19(Emphasis in the original)

In reversing the trial court, the CA held:

x x x

x x x A perusal of the records readily reveals that said court instead relied on flimsy, if not immaterial, allegations of the appellees, whichhave no direct bearing in the determination of whether the appellants are builders in bad faith.

For one, the pivotal issue to be resolved in this case, i.e. whether appellant Miguel is a builder in good faith, was ignored by the court a quo.The instant case does not in any way concern the personal and property relations of spouses-appellants and Elizabeth Yson Cruz which is an

altogether different matter that can be ventilated by the concerned parties through the institution of a proper action. xxx The court a quo

should have focused on the issue of whether appellant Miguel built, in good faith, the subject house without notice of the adverse claim of

the appellees and under the honest belief that the lot which he used in the construction belongs to him. xxx

xxx As it is, appellant Miguel relied on the title which the intervenor showed to him which, significantly, has no annotation that would

otherwise show a prior adverse claim. Thus, as far as appellant Miguel is concerned, his title over the subject lot, as well as the title of the

intervenor thereto, is clean and untainted by an adverse claim or other irregularities.

For another, the appellants failure to secure a building permit from the Municipal Engineers Office on their construction on Lot 17 does not

impinge on the good faith of the appellants. In fact, it can be told that a building permit was actually filed by appellant Miguel with respect

to Lot 16 and it was only due to the confusion and misapprehension by the intervenor of the exact parameters of the property which caused

appellants belief that Lot 17 [the questioned lot], is his. This fact bolsters appellant Miguels good faith in building his house on appellees

lot under the mistaken belief that the same is his property. Otherwise, he should have secured a building permit on Lot 17 instead or shouldnot have bothered to take the necessary measures to obtain a building permit on Lot 16 in the first place.

By and large, the records show that, as testified to by Engr. Rebecca T. Lanuang, appellant Miguel had already applied for a building permit

as early as February 1994 and was in fact issued a temporary building permit pending the completion of the requirements for said permit.

Although the building permit was belatedly issued in January 1996, this does not in any way detract from appellant Miguels good faith.

x x x

In holding the appellants as builders in bad faith, the court a quo defied law and settled jurisprudence considering that the factual basis of its

findings and the incontrovertible evidence in support thereof prove that the appellant Miguel, in good faith, built the house on appellees land

without knowledge of an adverse claim or any other irregularities that might cast a doubt as to the veracity of the assurance given to him by

the intervenor. Having been assured by the intervenor that the stone monuments were purposely placed, albeit wrongfully, by the land

surveyor in said land to specifically identify the lot and its inclusive boundaries, the appellants cannot be faulted for having relied on the

expertise of the land surveyor who is more equipped and experienced in the field of land surveying. Although under the Torrens system of

land registration, the appellant is presumed to have knowledge of the metes and bounds of the property with which he is dealing, appellant

however, considering that he is a layman not versed in the technical description of his property, cannot be faulted in his reliance on the

survey plan that was delivered to him by the intervenor and the stone monuments that were placed in the encroached property.

x x x

Peremptorily, contrary to the flawed pronouncements made by the court a quo that appellant Miguel is deemed as a builder in bad faith on

the basis of a mere assertion that he built his house without initially satisfying himself that he owns the said property, this Court finds reason

to maintain good faith on the part of the appellant. Admittedly, the appellants house erroneously encroached on the property of the appellees

due to a mistake in the placement of stone monuments as indicated in the survey plan, which error is directly attributable to the fault of the

geodetic engineer who conducted the same. This fact alone negates bad faith on the part of appellant Miguel.

x x x

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Moreover, it is quite illogical for appellant Miguel to knowingly build his house on a property which he knew belongs to another person. x x

x

x x x

In view of the good faith of both parties in this case, their rights and obligations are to be governed by Article 448, which has been

applied to improvements or portions of improvements built by mistaken belief on land belonging to the adjoining owner. x x x

x x x20 (Emphasis and underscoring supplied)

Petitioners Motion for Reconsideration21dated October 22, 2002 having been denied by the CA by Resolution of March 13, 2002, the

present petition was filed raising the following issues:

I.

WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION IN MAKING A

FINDING THAT IS CONTRARY TO THE ADMISSIONS BY THE PARTIES

II.

WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR OF LAW IN

CONCLUDING THAT THE TRIAL COURT, IN DECIDING THE CASE, RELIED ON FLIMSY, IF NOT IMMATERIAL,

ALLEGATIONS OF THE PETITIONERS, WHICH HAVE NO DIRECT BEARING IN THE DETERMINATION OF WHETHER THE

RESPONDENTS ARE BUILDERS IN GOOD FAITH

III.

WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR OF LAW IN RENDERING

A DECISION THAT IS UNENFORCEABLE AGAINST BOTH RESPONDENT JUDITH CASTELLTORT AND THIRD-PARTY

ELIZABETH CRUZ22

Petitioners initially hammer against respondents proving that Castelltort and a certain Elizabeth Cruz are the builders of the house on the

subject property, they faulting them with estoppel for alleging in their Answer before the trial court that "they (respondents Castelltort and

Judith) caused the construction of their house which they bought from a certain Lina Lopez-Villegas."

Petitioners rely on the following doctrine established inElayda v. Court of Appeals:23

"an admission made in the pleadings cannot be controverted by the party making such admission and are conclusive as to him and that all

proofs submitted by him contrary thereto or inconsistent therewith, should be ignored, whether objection is interposed by the party or not x xx"

Petitioners contention is hardly relevant to the case at bar. Whether it was Castelltort and Judith or Castelltort and Elizabeth Cruz who

purchased the property from Lina is not material to the outcome of the instant controversy. As found by the CA:

The fact remains that appellant [Castelltort] is the builder of the house on Lot 17 xxx The court a quo should have focused on the issue of

whether appellant Miguel built, in good faith, the subject house without notice of the adverse claim of the appellees and under the honest

belief that the lot which he used in the construction belongs to him. xxx it cannot be gainsaid that appellant Miguel has a title over the land

that was purchased from the intervenor x x x 24

At all events, as this Court held in the case ofGardner v. Court of Appeals:25

In its Resolution reversing the original Decision, respondent Court discredited the testimony of Ariosto SANTOS for being at variance with

the allegations in his Answer. The fact, however, that the allegations made by Ariosto SANTOS in his pleadings and in his declarations in

open Court differed will not militate against the findings herein made nor support the reversal by respondent Court. As a general rule, facts

alleged in a partys pleading are deemed admissions of that party and binding upon it, but this is not an absolute and inflexible rule. AnAnswer is a mere statement of fact which the party filing it expects to prove, but it is not evidence. As Ariosto SANTOS himself, in open

Court, had repudiated the defenses he had raised in his Answer and against his own interest, his testimony is deserving of weight and

credence.26(Underscoring supplied)

The issue determinative of the controversy in the case at bar hinges on whether Castelltort is a builder in good faith.

A builder in good faith i s one who builds with the belief that the land he is building on is his, or that by some tit le one has the right to build

thereon, and is ignorant of any defect or flaw in his title.27

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