SPOUSES JUAN NUGUID AND ERLINDA T. NUGUID VS. HON.

COURT OF APPEALS AND

PEDRO P. PECSON
G.R. No. 151815. February 23, 2005
Facts: Pedro P. Pecson owned a commercial lot on which he built a 4-door 2-storey
apartment building. For failure to pay realty taxes, the lot was sold at public auction
to Mamerto Nepomuceno, who in turn sold it to the spouses Juan and Erlinda
Nuguid. Pecson challenged the validity of the auction sale before the RTC of Quezon
City, which upheld the spouses title but declared that the apartment building was
not included in the auction sale. This was affirmed in toto by the Court of Appeals
and thereafter by this Court. On June 23, 1993, by virtue of the Entry of Judgment,
the Nuguids became the uncontested owners of the 256-square meter commercial
lot. As a result, the Nuguid spouses moved for delivery of possession of the lot and
the apartment building.
The trial court, relying upon Article 546[1][7] of the Civil Code, ruled that the
Spouses Nuguid were to reimburse Pecson for his construction cost, the spouses
Nuguid were entitled to immediate issuance of a writ of possession over the lot and
improvements. The RTC also directed Pecson to pay the same amount of monthly
rentals to the Nuguids as paid by the tenants occupying the apartment units.
Pecson duly moved for reconsideration, the RTC issued a Writ of Possession,directing
the deputy sheriff to put the spouses Nuguid in possession of the subject property
with all the improvements thereon and to eject all the occupants therein.Pecson
then filed a special civil action for certiorari and prohibition with the Court of
Appeals, which affirmed the order of payment of construction costs but rendered
the issue of possession moot on appeal.
Frustrated by this turn of events, Pecson filed a petition for review before this Court.
On May 26, 1995, the Court handed down the decision remanding to the trial court
for it to determine the current market value of the apartment building on the lot.
The value so determined shall be forthwith paid by Spouses Juan and Erlinda
Nuguid] to Pedro Pecson otherwise the petitioner shall be restored to the possession
of the apartment building until payment of the required indemnity.
On the basis of this Courts decision, Pecson filed a Motion to Restore Possession
and a Motion to Render Accounting, praying respectively for restoration of his
possession over the subject 256-square meter commercial lot and for the spouses
Nuguid to be directed to render an accounting under oath, of the income derived
from the subject four-door apartment from November 22, 1993 until possession of
the same was restored to him.
Issue: Whether or not the petitioners are liable to pay rent over and above the
current market value of the improvement and that such increased award of rentals
by the RTC was reasonable and equitable.
Held: It is not disputed that the construction of the 4-door 2-storey apartment,
subject of this dispute, was undertaken at the time when Pecson was still the owner

of the lot. When the Nuguids became the uncontested owner of the lot, by virtue of
entry of judgment of the Courts decision, the apartment building was already in
existence and occupied by tenants.
Under Article 448, the landowner is given the option, either to appropriate the
improvement as his own upon payment of the proper amount of indemnity or to sell
the land to the possessor in good faith. Relatedly, Article 546 provides that a builder
in good faith is entitled to full reimbursement for all the necessary and useful
expenses incurred; it also gives him right of retention until full reimbursement is
made. As we earlier held, since petitioners opted to appropriate the improvement
for themselves as early as June 1993, when they applied for a writ of execution
despite knowledge that the auction sale did not include the apartment building,
they could not benefit from the lots improvement, until they reimbursed the
improver in full, based on the current market value of the property.
Despite the Courts recognition of Pecsons right of ownership over the apartment
building, the petitioners still insisted on dispossessing Pecson by filing for a Writ of
Possession to cover both the lot and the building. Clearly, this resulted in a violation
of respondents right of retention. Worse, petitioners took advantage of the situation
to benefit from the highly valued, income-yielding, four-unit apartment building by
collecting rentals thereon, before they paid for the cost of the apartment building. It
was only 4 years later that they finally paid its full value to the respondent.
Given the circumstances of the instant case where the builder in good faith has
been clearly denied his right of retention for almost half a decade, we find that the
increased award of rentals by the RTC was reasonable and equitable. The petitioners
had reaped all the benefits from the improvement introduced by the respondent
during said period, without paying any amount to the latter as reimbursement for
his construction costs and expenses. They should account and pay for such
benefits.
We need not belabor now the appellate courts recognition of herein respondents
entitlement to rentals from the date of the determination of the current market
value until its full payment. Respondent is clearly entitled to payment by virtue of
his right of retention over the said improvement.