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LUCIANO BRIONES and NELLY G.R. No.

150666
BRIONES,
Petitioners,
Present:

- versus -

CARPIO MORALES, J.,


Chairperson,
BRION,
BERSAMIN,
ABAD, and
VILLARAMA, JR., JJ.

JOSE MACABAGDAL, FE D.
MACABAGDAL and VERGON Promulgated:
REALTY
INVESTMENTS
August 3, 2010
CORPORATION,
Respondents.
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION
VILLARAMA, JR., J.:
On appeal under Rule 45 of the 1997 Rules of Civil Procedure, as amended,
is the Decision[1] dated December 11, 2000 of the Court of Appeals (CA) in CAG.R. CV No. 48109 which affirmed the September 29, 1993 Decision [2] of the
Regional Trial Court (RTC) of Makati City, Branch 135, ordering petitioners
Luciano and Nelly Briones to remove the improvements they have made on the
disputed property or to pay respondent-spouses Jose and Fe Macabagdal the
prevailing price of the land as compensation.
The undisputed factual antecedents of the case are as follows:
Respondent-spouses purchased from Vergon Realty Investments Corporation
(Vergon) Lot No. 2-R, a 325-square-meter land located in Vergonville Subdivision
No. 10 at Las Pinas City, Metro Manila and covered by Transfer Certificate of Title
No. 62181 of the Registry of Deeds of Pasay City. On the other hand, petitioners
are the owners of Lot No. 2-S, which is adjacent to Lot No. 2-R.

Sometime in 1984, after obtaining the necessary building permit and the
approval of Vergon, petitioners constructed a house on Lot No. 2-R which they
thought was Lot No. 2-S. After being informed of the mix up by Vergons manager,
respondent-spouses immediately demanded petitioners to demolish the house and
vacate the property.Petitioners, however, refused to heed their demand. Thus,
respondent-spouses filed an action to recover ownership and possession of the said
parcel of land with the RTC of Makati City.[3]
Petitioners insisted that the lot on which they constructed their house was the
lot which was consistently pointed to them as theirs by Vergons agents over the
seven (7)-year period they were paying for the lot. They interposed the defense of
being buyers in good faith and impleaded Vergon as third-party defendant claiming
that because of the warranty against eviction, they were entitled to indemnity from
Vergon in case the suit is decided against them.[4]
The RTC ruled in favor of respondent-spouses and found that petitioners
house was undoubtedly built on Lot No. 2-R. The dispositive portion of the trial
courts decision reads as follows:
PREMISES CONSIDERED, let judgment be rendered declaring,
to wit:
1. That plaintiffs are the owners of Lot No. 2-R of subdivision
plan (LRC) Psd-147392 at Vergonville Subdivision, No. 10, Las Pias,
Metro Manila covered by TCT No. 62181 of the Registry of Deeds of
Pasay City on which defendants have constructed their house;
2. Defendants, jointly and severally, are ordered to demolish
their house and vacate the premises and return the possession of the
portion of Lot No. 2-R as above-described to plaintiffs within thirty (30)
days from receipt of this decision, or in the alternative, plaintiffs should
be compensated by defendants, jointly and severally, by the payment of
the prevailing price of the lot involved as Lot No. 2-R with an area of
325 square meters which should not be less than P1,500.00 per square
meter, in consideration of the fact that prices of real estate properties in
the area concerned have increased rapidly;
3. Defendants, jointly and severally, pay to plaintiffs for moral
damages with plaintiffs plans and dreams of building their own house on

their own lot being severely shattered and frustrated due to defendants
incursion as interlopers of Lot No. 2-R in the sum of P50,000.00;
4. Defendants, jointly and severally, to pay plaintiffs in the
amount of P30,000.00 as attorneys fees; and,
5. to pay the costs of the proceedings.
Defendants counterclaim against plaintiffs is dismissed for lack of
merit and with no cause of action.
Defendants third-party complaint against third-party defendant
Vergonville Realty and Investments Corporation is likewise ordered
dismissed for lack of cause of action and evidently without merit.
On the other hand, defendants, jointly and severally, are liable for
the litigation expenses incurred by Vergonville Realty by way of
counterclaim, which is also proven by the latter with a mere
preponderance of evidence, and are hereby ordered to pay the sum
of P20,000.00 as compensatory damage; and attorneys fees in the sum
of P10,000.00
SO ORDERED.[5]

On appeal, the CA affirmed the RTCs finding that the lot upon which
petitioners built their house was not the one (1) which Vergon sold to them. Based
on the documentary evidence, such as the titles of the two (2) lots, the contracts to
sell, and the survey report made by the geodetic engineer, petitioners house was
built on the lot of the respondent-spouses.[6] There was no basis to presume that the
error was Vergons fault. Also the warranty against eviction under Article 1548 of
the Civil Code was not applicable as there was no deprivation of property: the lot
on which petitioners built their house was not the lot sold to them by Vergon,
which remained vacant and ready for occupation. [7] The CA further ruled that
petitioners cannot use the defense of allegedly being a purchaser in good faith for
wrongful occupation of land.[8]
Aggrieved, petitioners filed a motion for reconsideration, but it was denied
by the appellate court.[9] Hence, this petition for review on certiorari.
Petitioners raise the following assignment of errors:
I.
THE COURT OF APPEALS DECIDED A QUESTION OF
SUBSTANCE CONTRARY TO LAW AND APPLICABLE

DECISIONS OF THE SUPREME COURT IN AFFIRMING THE


DECISION OF THE TRIAL COURT ORDERING PETITIONERS TO
DEMOLISH THEIR ONLY HOUSE AND VACATE THE LOT AND
TO PAY MORAL AND COMPENSATORY DAMAGES AS WELL AS
ATTORNEYS FEE IN THE TOTAL AMOUNT OF PS[P] 110,000;
AND
II.
THE COURT OF APPEALS SANCTIONED THE DEPARTURE OF
THE LOWER COURT FROM THE ACCEPTED AND USUAL
COURSE OF JUDICIAL PROCEEDINGS AS TO CALL FOR AN
EXERCISE OF THE POWER OF SUPERVISION.[10]

In the main, it is petitioners position that they must not bear the damage
alone. Petitioners insist that they relied with full faith and confidence in the
reputation of Vergons agents when they pointed the wrong property to them. Even
the President of Vergon, Felix Gonzales, consented to the construction of the house
when he signed the building permit.[11] Also, petitioners are builders in good faith.
[12]

The petition is partly meritorious.


At the outset, we note that petitioners raise factual issues, which are beyond
the scope of a petition for review on certiorari under Rule 45 of the Rules. Well
settled is the rule that the jurisdiction of this Court in cases brought to it from the
CA via a petition for review on certiorari under Rule 45 is limited to the review of
errors of law. The Court is not bound to weigh all over again the evidence adduced
by the parties, particularly where the findings of both the trial court and the
appellate court coincide. The resolution of factual issues is a function of the trial
court whose findings on these matters are, as a general rule, binding on this Court,
more so where these have been affirmed by the CA. [13] We note that the CA and
RTC did not overlook or fail to appreciate any material circumstance which, when
properly considered, would have altered the result of the case. Indeed, it is beyond
cavil that petitioners mistakenly constructed their house on Lot No. 2-R which they
thought was Lot No. 2-S.

However, the conclusiveness of the factual findings notwithstanding, we


find that the trial court nonetheless erred in outrightly ordering petitioners to vacate
the subject property or to pay respondent spouses the prevailing price of the land as
compensation. Article 527[14] of the Civil Code presumes good faith, and since no
proof exists to show that the mistake was done by petitioners in bad faith, the latter
should be presumed to have built the house in good faith.
When a person builds in good faith on the land of another, Article 448 of
the Civil Code governs. Said article provides,
ART. 448. The owner of the land on which anything has been built,
sown or planted in good faith, shall have the right to appropriate as
his own the works, sowing or planting, after payment of the indemnity
provided for in Articles 546 and 548, or to oblige the one who built or
planted to pay the price of the land, and the one who sowed, the
proper rent. However, the builder or planter cannot be obliged to buy the
land if its value is considerably more than that of the building or trees.
In such case, he shall pay reasonable rent, if the owner of the land does
not choose to appropriate the building or trees after proper indemnity.
The parties shall agree upon the terms of the lease and in case of
disagreement, the court shall fix the terms thereof. (Emphasis ours.)

The above-cited article covers cases in which the builders, sowers or


planters believe themselves to be owners of the land or, at least, to have a claim of
title thereto.[15]The builder in good faith can compel the landowner to make a
choice between appropriating the building by paying the proper indemnity or
obliging the builder to pay the price of the land. The choice belongs to the owner
of the land, a rule that accords with the principle of accession, i.e., that the
accessory follows the principal and not the other way around. However, even as
the option lies with the landowner, the grant to him, nevertheless, is preclusive. He
must choose one.[16] He cannot, for instance, compel the owner of the building to
remove the building from the land without first exercising either option. It is only
if the owner chooses to sell his land, and the builder or planter fails to purchase it
where its value is not more than the value of the improvements, that the owner may
remove the improvements from the land. The owner is entitled to such remotion
only when, after having chosen to sell his land, the other party fails to pay for the
same.[17]

Moreover, petitioners have the right to be indemnified for the necessary and
useful expenses they may have made on the subject property. Articles 546 and 548
of the Civil Code provide,
ART. 546. Necessary expenses shall be refunded to every
possessor; but only the possessor in good faith may retain the thing until
he has been 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 the option of refunding the amount of the
expenses or of paying the increase in value which the thing may have
acquired by reason thereof.
ART. 548. Expenses for pure luxury or mere pleasure shall not be
refunded to the possessor in good faith; but he may remove the
ornaments with which he has embellished the principal thing if it suffers
no injury thereby, and if his successor in the possession does not prefer
to refund the amount expended.

Consequently, the respondent-spouses have the option to appropriate the


house on the subject land after payment to petitioners of the appropriate indemnity
or to oblige petitioners to pay the price of the land, unless its value is considerably
more than the value of the structures, in which case petitioners shall pay reasonable
rent.
In accordance with Depra v. Dumlao,[18] this case must be remanded to the
RTC which shall conduct the appropriate proceedings to assess the respective
values of the improvement and of the land, as well as the amounts of reasonable
rentals and indemnity, fix the terms of the lease if the parties so agree, and to
determine other matters necessary for the proper application of Article 448, in
relation to Articles 546 and 548, of the Civil Code.
As to the liability of Vergon, petitioners failed to present sufficient evidence
to show negligence on Vergons part. Petitioners claim is obviously one (1) for tort,
governed by Article 2176 of the Civil Code, which provides:
ART. 2176. Whoever by act or omission causes damage to
another, there being fault or negligence, is obliged to pay for the

damage done. Such fault or negligence, if there is no preexisting


contractual relation between the parties, is called a quasi-delict and is
governed by the provisions of this Chapter. (Emphasis ours.)

Under this provision, it is the plaintiff who has to prove by a preponderance


of evidence: (1) the damages suffered by the plaintiff; (2) the fault or negligence of
the defendant or some other person for whose act he must respond; and (3) the
connection of cause and effect between the fault or negligence and the damages
incurred.[19] This the petitioners failed to do. The President of Vergon signed the
building permit as a precondition for its approval by the local government, but it
did not guarantee that petitioners were constructing the structure within the metes
and bounds of petitioners lot. The signature of the President of Vergon on the
building permit merely proved that petitioners were authorized to make
constructions within the subdivision project of Vergon. And while petitioners acted
in good faith in building their house on Lot No. 2-R, petitioners did not show by
what authority the agents or employees of Vergon were acting when they pointed
to the lot where the construction was made nor was petitioners claim on this matter
corroborated by sufficient evidence.
One (1) last note on the award of damages. Considering that petitioners
acted in good faith in building their house on the subject property of the
respondent-spouses, there is no basis for the award of moral damages to
respondent-spouses. Likewise, the Court deletes the award to Vergon of
compensatory damages and attorneys fees for the litigation expenses Vergon had
incurred as such amounts were not specifically prayed for in its Answer to
petitioners third-party complaint. Under Article 2208[20] of the Civil Code,
attorneys fees and expenses of litigation are recoverable only in the concept of
actual damages, not as moral damages nor judicial costs. Hence, such must be
specifically prayed foras was not done in this caseand may not be deemed
incorporated within a general prayer for such other relief and remedy as this court
may deem just and equitable.[21] It must also be noted that aside from the
following, the body of the trial courts decision was devoid of any statement
regarding attorneys fees. In Scott Consultants & Resource Development
Corporation, Inc. v. Court of Appeals,[22] we reiterated that attorneys fees are not to
be awarded every time a party wins a suit. The power of the court to award
attorneys fees under Article 2208 of the Civil Code demands factual, legal, and

equitable justification; its basis cannot be left to speculation or conjecture. Where


granted, the court must explicitly state in the body of the decision, and not only in
the dispositive portion thereof, the legal reason for the award of attorneys fees.
WHEREFORE, the Decision dated December 11, 2000 of the Court of
Appeals
in
CA-G.R.
CV
No.
48109
is AFFIRMED WITH
MODIFICATION. The award of moral damages in favor of respondent-spouses
Jose and Fe Macabagdal and the award of compensatory damages and attorneys
fees to respondent Vergon Realty Investments Corporation are DELETED. The
case is REMANDED to the Regional Trial Court of Makati City, Branch 135, for
further proceedings consistent with the proper application of Articles 448, 546 and
548 of the Civil Code, as follows:
1. The trial court shall determine:
a. the present fair price of the respondent-spouses lot;
b. the amount of the expenses spent by petitioners for the building of their
house;
c. the increase in value (plus value) which the said lot may have acquired
by reason thereof; and
d. whether the value of said land is considerably more than that of the house
built thereon.
2. After said amounts shall have been determined by competent evidence, the
Regional Trial Court shall render judgment, as follows:
a. The trial court shall grant the respondent-spouses a period of fifteen (15)
days within which to exercise their option under Article 448 of the Civil
Code, whether to appropriate the house as their own by paying to
petitioners either the amount of the expenses spent by petitioners for the
building of the house, or the increase in value (plus value) which the said
lot may have acquired by reason thereof, or to oblige petitioners to pay
the price of said land. The amounts to be respectively paid by the
respondent-spouses and petitioners, in accordance with the option thus
exercised by written notice of the other party and to the Court, shall be
paid by the obligor within fifteen (15) days from such notice of the
option by tendering the amount to the Court in favor of the party entitled
to receive it;

b. The trial court shall further order that if the respondent-spouses exercises
the option to oblige petitioners to pay the price of the land but the latter
rejects such purchase because, as found by the trial court, the value of the
land is considerably more than that of the house, petitioners shall give
written notice of such rejection to the respondent-spouses and to the
Court within fifteen (15) days from notice of the respondent-spouses
option to sell the land. In that event, the parties shall be given a period of
fifteen (15) days from such notice of rejection within which to agree
upon the terms of the lease, and give the Court formal written notice of
such agreement and its provisos. If no agreement is reached by the
parties, the trial court, within fifteen (15) days from and after the
termination of the said period fixed for negotiation, shall then fix the
terms of the lease, payable within the first five (5) days of each calendar
month. The period for the forced lease shall not be more than two (2)
years, counted from the finality of the judgment, considering the long
period of time since petitioners have occupied the subject area. The rental
thus fixed shall be increased by ten percent (10%) for the second year of
the forced lease. Petitioners shall not make any further constructions or
improvements on the house. Upon expiration of the two (2)-year period,
or upon default by petitioners in the payment of rentals for two (2)
consecutive months, the respondent-spouses shall be entitled to terminate
the forced lease, to recover their land, and to have the house removed by
petitioners or at the latters expense. The rentals herein provided shall be
tendered by petitioners to the Court for payment to the respondentspouses, and such tender shall constitute evidence of whether or not
compliance was made within the period fixed by the Court.
c. In any event, petitioners shall pay the respondent-spouses reasonable
compensation for the occupancy of the respondent-spouses land for the
period counted from the year petitioners occupied the subject area, up to
the commencement date of the forced lease referred to in the preceding
paragraph;
d. The periods to be fixed by the trial court in its Decision shall be
inextendible, and upon failure of the party obliged to tender to the trial
court the amount due to the obligee, the party entitled to such payment
shall be entitled to an order of execution for the enforcement of payment

of the amount due and for compliance with such other acts as may be
required by the prestation due the obligee.
No costs.
SO ORDERED.
MARTIN S. VILLARAMA, JR.
Associate Justice

G.R. No. 150666, August 3, 2010


Luciano Briones and Nelly Briones
vs Jose Macabagdal and Vergon Realty Investment Corporation
Ponente: Villarama, Jr.
Facts:
Respondents spouses purchased a land from Vergon Realty located in a subdivision in Las
Pinas (Lot 2R) with a registered TCT. Vergon on the other hand owns the adjacent land (Lot
2S).
In 1984, after obtaining the building permit and approval of Vergon, Jose Macabagdal
constructed a house on Lot 2R which they thought was Lot 2S. After being informed of the
mix up, spouses immediately demanded for demolition of the house constructed. Jose,
refused. Spouses then filed an action to recover ownership and possession of the said land in
RTC Makati.
Jose, insisted that the lot which they constructed their house was the lot which was
consistently pointed to them by the Vergon's agents over the 7-year period of paying the lot.
They interposed the defense of being buyers in good faith and impleaded indemnity from
Vergon because of the warranty against eviction, in case the suit is decided against them.
RTC ruled in favor of the spouses. Defendants were ordered to demolish their house and
vacate the premises and return the possession of the lot to the spouses with damages.
Defendants counterclaim as well as the 3rd-party complaint were dismissed for lack of merit
and with no cause of action. On appeal, CA affirmed the RTC. Saying that, there was no

basis that the error was Vergon's fault and that they cannot invoke the defense of a
purchaser in good faith for wrongful occupation of the land.
Thus, this petition.
Issue:
In the main, it is petitioners' position that they must not bear the damage alone. Petitioners
insist that they relied with full faith and confidence in the reputation of Vergon's agents
when they pointed the wrong property to them. Even the President of Vergon, Felix
Gonzales, consented to the construction of the house when he signed the building permit.
Also, petitioners are builders in good faith.
Held: Petition is partly meritorious.
RTC erred in out rightly ordering petitioners to vacate the subject property or to pay
respondent spouses the prevailing price of the land as compensation. Article 527[14] of the
Civil Code presumes good faith, and since no proof exists to show that the mistake was done
by petitioners in bad faith, the latter should be presumed to have built the house in good
faith (Art. 448).
The builder in good faith can compel the landowner to make a choice between appropriating
the building by paying the proper indemnity or obliging the builder to pay the price of the
land. The choice belongs to the owner of the land, a rule that accords with the principle of
accession, i.e., that the accessory follows the principal and not the other way around.
However, even as the option lies with the landowner, the grant to him, nevertheless, is
preclusive. He must choose one. He cannot, for instance, compel the owner of the building
to remove the building from the land without first exercising either option. It is only if the
owner chooses to sell his land, and the builder or planter fails to purchase it where its value
is not more than the value of the improvements, that the owner may remove the
improvements from the land. The owner is entitled to such remotion only when, after
having chosen to sell his land, the other party fails to pay for the same.
Moreover, petitioners have the right to be indemnified for the necessary and useful expenses
they may have made on the subject property. Articles 546 and 548 of the Civil Code provide,
ART. 546. Necessary expenses shall be refunded to every possessor; but only the possessor
in good faith may retain the thing until he has been 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 the option of refunding

the amount of the expenses or of paying the increase in value which the thing may have
acquired by reason thereof.
ART. 548. Expenses for pure luxury or mere pleasure shall not be refunded to the possessor
in good faith; but he may remove the ornaments with which he has embellished the
principal thing if it suffers no injury thereby, and if his successor in the possession does not
prefer to refund the amount expended.
Consequently, the respondent-spouses have the option to appropriate the house on the
subject land after payment to petitioners of the appropriate indemnity or to oblige
petitioners to pay the price of the land, unless its value is considerably more than the value
of the structures, in which case petitioners shall pay reasonable rent.

As to the liability of Vergon, petitioners failed to present sufficient evidence to show


negligence on Vergon's part. It is the plaintiff who has to prove by a preponderance of
evidence: (1) the damages suffered by the plaintiff; (2) the fault or negligence of the
defendant or some other person for whose act he must respond; and (3) the connection of
cause and effect between the fault or negligence and the damages incurred.

G.R. No. L-11269

February 28, 1958

SILVERIO FELICES, plaintiff-appellee,


vs.
MAMERTO IRIOLA, defendant-appellant.
Ezekiel S. Grageda for appellant.
Reyes & Dy-Liaco for appellee.
REYES, J.B.L., J.:
Originally brought to the Court of Appeals, this appeal was certified to us by that Court on the ground
that it does not raise any genuine issue of fact.
It appears that plaintiff and appellee Silverio Fences was the grantee of a homestead of over eight
hectares located in barrio Curry, Municipality of Pili, Province of Camarines Sur, under Homestead
Patent No. V-2117 dated January 26, 1949, and by virtue of which he was issued Original Certificate
of Title No. 104 over said property. The month following the issuance of his patent, on February 24,
1949, appellee conveyed in conditional sale to defendant and appellant Mamerto Iriola a portion of
his homestead of more than four hectares, for the consideration of P1,700. The conveyance (Exh. 1)
expressly stipulates that the sale was subject to the provisions of Sec. 119 of Act 141, as amended,
and to the prohibitions spread on the vendor's patent; and that after the lapse of five years or as
soon as may be allowed by law, the vendor or his successors would execute in vendee's favor a
deed of absolute sale over the land in question.

Two years after the sale, on April 19, 1951, appellee tried to recover the land in question from
appellant, but the latter refused to allow it unless he was paid the amount of P2,000 as the alleged
value of improvements he had introduced on the property. In view of appellant's persistent refusal,
plaintiff deposited the received price in court and filed this action on October 4, 1951.
In the court below, appellant, while recognizing appellee's right to "redeem", insisted that he must
first be reimbursed, the value of his improvements. Whereupon, the court appointed a commissioner
to ascertain the nature and value of the alleged improvements, and thereafter found that said
improvements were made by defendant either after plaintiff had informed him of his intention to
recover the land, or after the complaint had been filed; some of the improvements were even
introduced after a commissioner had already been appointed to appraise their value. Wherefore, the
lower court held defendant in bad faith and not entitled to reimbursement for his improvements.
Defendant was, likewise, ordered to accept the amount of P1,700 deposited by plaintiff in court, to
execute in favor of the latter the corresponding deed of reconveyance, and to restore him in
possession of the land in question.
At the outset, it must be made clear that as the sale in question was executed by the parties within
the five-year prohibitive period under section 118 of the Public Land Law, the same is absolutely null
and void and ineffective from its inception. Consequently, appellee never lost his title or ownership
over the land in question, and there was no need either for him to repurchase the same from
appellant, or for the latter to execute a deed of reconveyance in his favor. The case is actually for
mutual restitution, incident to the nullity ab initio of the conveyance. .
The question now is: May appellant recover or be reimbursed the value of his improvements on the
land in question, on the theory that as both he and appellee knew that their sale was illegal and void,
they were both in bad faith and consequently, Art. 453 of the Civil Code applies in that "the rights of
one and the other shall be the same as though both had acted in good faith"?
The rule of Art. 453 of the Civil Code invoked by appellant1 can not be applied to the instant case for
the reason that the lower court found, and appellant admits, that the improvements in question were
made on the premises only after appellee had tried to recover the land in question from appellant,
and even during the pendency of this action in the court below. After appellant had refused to restore
the land to the appellee, to the extent that the latter even had to resort to the present action to
recover his property, appellee could no longer be regarded as having impliedly assented or
conformed to the improvements thereafter made by appellant on the premises. Upon the other hand,
appellant, recognizing as he does appellee's right to get back his property, continued to act in bad
faith when he made improvements on the land in question after he had already been asked extrajudicially and judicially, to surrender and return its possession to appellee; and as a penalty for such
bad faith, he must forfeit his improvements without any right to reimbursement therefor. "He who
builds, plants or sows in bad faith on the land of another, loses that is built, planted, or sown without
right to indemnity" (Art. 449, New Civil Code).
Wherefore, the judgment appealed from is affirmed, with the sole modification that appellant need
not execute a deed of reconveyance in appellee's favor, the original conveyance being hereby
declared void ab initio. Costs against appellant Mamerto Iriola. So ordered.
Paras, C.J., Bengzon, Montemayor, Reyes, A., Bautista Angelo, Labrador, Concepcion, Endencia
and Felix, JJ.,concur.

Footnotes
ART. 453. If there was bad faith, not only on the part of the Person who built, planted or
sowed on the land of another, but also on the part of the owner of such land, the rights of
one and the other shall be the same as though both had acted in good faith.
1

G.R. No. 115814 May 26, 1995


PEDRO P. PECSON, petitioner,
vs.
COURT OF APPEALS, SPOUSES JUAN NUGUID and ERLINDA NUGUID, respondents.

DAVIDE, JR., J.:


This petition for review on certiorari seeks to set aside the decision 1 of the Court of Appeals in CAG.R. SP No. 32679 affirming in part the order 2 of the Regional Trial Court (RTC) of Quezon City, Branch
101, in Civil Case No. Q-41470.
The factual and procedural antecedents of this case as gathered from the record are as follows:
Petitioner Pedro P. Pecson was the owner of a commercial lot located in Kamias Street, Quezon
City, on which he built a four-door two-storey apartment building. For his failure to pay realty taxes
amounting to twelve thousand pesos (P12,000.00), the lot was sold at public auction by the city
Treasurer of Quezon City to Mamerto Nepomuceno who in turn sold it on 12 October 1983 to the
private respondents, the spouses Juan Nuguid and Erlinda Tan-Nuguid, for one hundred three
thousand pesos (P103,000.00).
The petitioner challenged the validity of the auction sale in Civil Case No. Q-41470 before the RTC
of Quezon City. In its decision of 8 February 1989, the RTC dismissed the complaint, but as to the
private respondents' claim that the sale included the apartment building, it held that the issue
concerning it was "not a subject of the . . . litigation." In resolving the private respondents' motion to
reconsider this issue, the trial court held that there was no legal basis for the contention that the
apartment building was included in the sale. 3
Both parties then appealed the decision to the Court of Appeals. The case was docketed as CA-G.R.
CV No. 2931. In its decision of 30 April 1992, 4 the Court of Appeals affirmed in toto the assailed
decision. It also agreed with the trial court that the apartment building was not included in the auction sale
of the commercial lot. Thus:
Indeed, examining the record we are fully convinced that it was only the land
without the apartment building which was sold at the auction sale, for plaintiff's
failure to pay the taxes due thereon. Thus, in the Certificate of Sale of Delinquent
Property To Purchaser (Exh. K, p. 352, Record) the property subject of the auction
sale at which Mamerto Nepomuceno was the purchaser is referred to as Lot No. 21A, Block No. K-34, at Kamias, Barangay Piahan, with an area of 256.3 sq. m., with

no mention whatsoever, of the building thereon. The same description of the subject
property appears in the Final Notice To Exercise The Right of Redemption (over
subject property) dated September 14, 1981 (Exh. L, p. 353, Record) and in the Final
Bill of Sale over the same property dated April 19, 1982 (Exh. P, p. 357, Record).
Needless to say, as it was only the land without any building which Nepomuceno had
acquired at the auction sale, it was also only that land without any building which he
could have legally sold to the Nuguids. Verily, in the Deed of Absolute Sale of
Registered Land executed by Mamerto Nepomuceno in favor of the Nuguids on
October 25, 1983 (Exh. U, p. 366, Record) it clearly appears that the property
subject of the sale for P103,000.00 was only the parcel of land, Lot 21-A, Blk. K-34
containing an area of 256.3 sq. meters, without any mention of any improvement,
much less any building thereon. (emphases supplied)
The petition to review the said decision was subsequently denied by this Court. 5 Entry of judgment
was made on 23 June 1993. 6
On November 1993, the private respondents filed with the trial court a motion for delivery of
possession of the lot and the apartment building, citing article 546 of the Civil Code. 7 Acting thereon,
the trial court issued on 15 November 1993 the challenged order 8 which reads as follows:
Submitted for resolution before this Court is an uncontroverted [sic] for the Delivery
of Possession filed by defendants Erlinda Tan, Juan Nuguid, et al. considering that
despite personal service of the Order for plaintiff to file within five (5) days his
opposition to said motion, he did not file any.
In support of defendant's motion, movant cites the law in point as Article 546 of the
Civil Code . . .
Movant agrees to comply with the provisions of the law considering that plaintiff is a
builder in good faith and he has in fact, opted to pay the cost of the construction
spent by plaintiff. From the complaint itself the plaintiff stated that the construction
cost of the apartment is much more than the lot, which apartment he constructed at a
cost of P53,000.00 in 1965 (par. 8 complaint). This amount of P53,000.00 is what the
movant is supposed to pay under the law before a writ of possession placing him in
possession of both the lot and apartment would be issued.
However, the complaint alleges in paragraph 9 that three doors of the apartment are
being leased. This is further confirmed by the affidavit of the movant presented in
support of the motion that said three doors are being leased at a rental of P7,000.00
a month each. The movant further alleges in his said affidavit that the present
commercial value of the lot is P10,000.00 per square meter or P2,500,000.00 and
the reasonable rental value of said lot is no less than P21,000.00 per month.
The decision having become final as per Entry of Judgment dated June 23, 1993 and
from this date on, being the uncontested owner of the property, the rents should be
paid to him instead of the plaintiff collecting them. From June 23, 1993, the rents
collected by plaintiff amounting to more than P53,000.00 from tenants should be
offset from the rents due to the lot which according to movant's affidavit is more than
P21,000.00 a month.

WHEREFORE, finding merit in the Motion, the Court hereby grants the following
prayer that:
1. The movant shall reimburse plaintiff the construction cost of
P53,000.00.
2. The payment of P53,000.00 as reimbursement for the construction
cost, movant Juan Nuguid is hereby entitled to immediate issuance of
a writ of possession over the Lot and improvements thereon.
3. The movant having been declared as the uncontested owner of the
Lot in question as per Entry of Judgment of the Supreme Court dated
June 23, 1993, the plaintiff should pay rent to the movant of no less
than P21,000.00 per month from said date as this is the very same
amount paid monthly by the tenants occupying the lot.
4. The amount of P53,000.00 due from the movant is hereby offset
against the amount of rents collected by the plaintiff from June 23,
1993, to September 23, 1993.
SO ORDERED.
The petitioner moved for the reconsideration of the order but it was not acted upon by the trial court.
Instead, on 18 November 1993, it issued a writ of possession directing the deputy sheriff "to place
said movant Juan Nuguid in possession of subject property located at No. 79 Kamias Road, Quezon
City, with all the improvements thereon and to eject therefrom all occupants therein, their agents,
assignees, heirs and representatives." 9
The petitioner then filed with the Court of Appeals a special civil action for certiorari and prohibition
assailing the order of 15 November 1993, which was docketed as CA-G.R. SP No. 32679. 10 In its
decision of 7 June 1994, the Court of Appeals affirmed in part the order of the trial court citing Article 448
of the Civil Code. In disposing of the issues, it stated:
As earlier pointed out, private respondent opted to appropriate the improvement
introduced by petitioner on the subject lot, giving rise to the right of petitioner to be
reimbursed of the cost of constructing said apartment building, in accordance with
Article 546 of the . . . Civil Code, and of the right to retain the improvements until he
is reimbursed of the cost of the improvements, because, basically, the right to retain
the improvement while the corresponding indemnity is not paid implies the tenancy or
possession in fact of the land on which they are built . . . [2 TOLENTINO, CIVIL
CODE OF THE PHILIPPINES (1992) p. 112]. With the facts extant and the settled
principle as guides, we agree with petitioner that respondent judge erred in ordering
that "the movant having been declared as the uncontested owner of the lot in
question as per Entry of Judgment of the Supreme Court dated June 23, 1993, the
plaintiff should pay rent to the movant of no less than P21,000 per month from said
date as this is the very same amount paid monthly by the tenants occupying the lot.
We, however, agree with the finding of respondent judge that the amount of
P53,000.00 earlier admitted as the cost of constructing the apartment building can be

offset from the amount of rents collected by petitioner from June 23, 1993 up to
September 23, 1993 which was fixed at P7,000.00 per month for each of the three
doors. Our underlying reason is that during the period of retention, petitioner as such
possessor and receiving the fruits from the property, is obliged to account for such
fruits, so that the amount thereof may be deducted from the amount of indemnity to
be paid to him by the owner of the land, in line with Mendoza vs. De Guzman, 52
Phil. 164 . . . .
The Court of Appeals then ruled as follows:
WHEREFORE, while it appears that private respondents have not yet indemnified
petitioner with the cost of the improvements, since Annex I shows that the Deputy
Sheriff has enforced the Writ of Possession and the premises have been turned over
to the possession of private respondents, the quest of petitioner that he be restored
in possession of the premises is rendered moot and academic, although it is but fair
and just that private respondents pay petitioner the construction cost of P53,000.00;
and that petitioner be ordered to account for any and all fruits of the improvements
received by him starting on June 23, 1993, with the amount of P53,000.00 to be
offset therefrom.
IT IS SO ORDERED. 11
Aggrieved by the Court of Appeals' decision, the petitioner filed the instant petition.
The parties agree that the petitioner was a builder in good faith of the apartment building on the
theory that he constructed it at the time when he was still the owner of the lot, and that the key issue
in this case is the application of Articles 448 and 456 of the Civil Code.
The trial court and the Court of Appeals, as well as the parties, concerned themselves with the
application of Articles 448 and 546 of the Civil Code. These articles read as follows:
Art. 448. The owner of the land on which anything has been built, sown or planted in
good faith, shall have the right to appropriate as his own the works, sowing or
planting, after payment of the indemnity provided for in articles 546 and 548, or to
oblige the one who built or planted to pay the price of the land, and the one who
sowed, the proper rent. However, the builder or planter cannot be obliged to buy the
land if its value is considerably more than that of the building or trees. In such case,
he shall pay reasonable rent, if the owner of the land does not choose to appropriate
the building or trees after proper indemnity. The parties shall agree upon the terms of
the lease and in case of disagreement, the court shall fix the terms thereof. (361a)
xxx xxx xxx
Art. 546. Necessary expenses shall be refunded to every possessor; but only the
possessor in good faith may retain the thing until he has been 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 the

option of refunding the amount of the expenses or of paying the increase in value
which the thing may have acquired by reason thereof. (453a)
By its clear language, Article 448 refers to a land whose ownership is claimed by two or more
parties, one of whom has built some works, or sown or planted something. The building, sowing or
planting may have been made in good faith or in bad faith. The rule on good faith laid down in Article
526 of the Civil Code shall be applied in determining whether a builder, sower or planter had acted in
good faith. 12
Article 448 does not apply to a case where the owner of the land is the builder, sower, or planter who
then later loses ownership of the land by sale or donation. This Court said so in Coleongco
vs. Regalado: 13
Article 361 of the old Civil Code is not applicable in this case, for Regalado
constructed the house on his own land before he sold said land to Coleongco. Article
361 applies only in cases where a person constructs a building on the land of
another in good or in bad faith, as the case may be. It does not apply to a case
where a person constructs a building on his own land, for then there can be no
question as to good or bad faith on the part of the builder.
Elsewise stated, where the true owner himself is the builder of works on his own land, the issue of
good faith or bad faith is entirely irrelevant.
Thus in strict point of law, Article 448 is not apposite to the case at bar. Nevertheless, we believe that
the provision therein on indemnity may be applied by analogy considering that the primary intent of
Article 448 is to avoid a state of forced co-ownership and that the parties, including the two courts
below, in the main agree that Articles 448 and 546 of the Civil Code are applicable and indemnity for
the improvements may be paid although they differ as to the basis of the indemnity.
Article 546 does not specifically state how the value of the useful improvements should be
determined. The respondent court and the private respondents espouse the belief that the cost of
construction of the apartment building in 1965, and not its current market value, is sufficient
reimbursement for necessary and useful improvements made by the petitioner. This position is,
however, not in consonance with previous rulings of this Court in similar cases. In Javier
vs. Concepcion, Jr., 14 this Court pegged the value of the useful improvements consisting of various
fruits, bamboos, a house and camarin made of strong material based on the market value of the said
improvements. In Sarmiento vs. Agana, 15 despite the finding that the useful improvement, a residential
house, was built in 1967 at a cost of between eight thousand pesos (P8,000.00) to ten thousand
pesos(P10,000.00), the landowner was ordered to reimburse the builder in the amount of forty thousand
pesos (P40,000.00), the value of the house at the time of the trial. In the same way, the landowner was
required to pay the "present value" of the house, a useful improvement, in the case ofDe Guzman vs. De
la Fuente, 16 cited by the petitioner.
The objective of Article 546 of the Civil Code is to administer justice between the parties involved. In
this regard, this Court had long ago stated in Rivera vs. Roman Catholic Archbishop of Manila 17 that
the said provision was formulated in trying to adjust the rights of the owner and possessor in good faith of
a piece of land, to administer complete justice to both of them in such a way as neither one nor the other
may enrich himself of that which does not belong to him. Guided by this precept, it is therefore the current
market value of the improvements which should be made the basis of reimbursement. A contrary ruling

would unjustly enrich the private respondents who would otherwise be allowed to acquire a highly valued
income-yielding four-unit apartment building for a measly amount. Consequently, the parties should
therefore be allowed to adduce evidence on the present market value of the apartment building upon
which the trial court should base its finding as to the amount of reimbursement to be paid by the
landowner.

The trial court also erred in ordering the petitioner to pay monthly rentals equal to the aggregate
rentals paid by the lessees of the apartment building. Since the private respondents have opted to
appropriate the apartment building, the petitioner is thus entitled to the possession and enjoyment of
the apartment building, until he is paid the proper indemnity, as well as of the portion of the lot where
the building has been constructed. This is so because the right to retain the improvements while the
corresponding indemnity is not paid implies the tenancy or possession in fact of the land on which it
is built, planted or sown. 18 The petitioner not having been so paid, he was entitled to retain ownership of
the building and, necessarily, the income therefrom.
It follows, too, that the Court of Appeals erred not only in upholding the trial court's determination of
the indemnity, but also in ordering the petitioner to account for the rentals of the apartment building
from 23 June 1993 to 23 September 1993.
WHEREFORE, the decision of the Court of Appeals in CA-G.R. SP No. 32679 and the Order of 15
November 1993 of the Regional Trial Court, Branch 101, Quezon City in Civil Case No. Q-41470 are
hereby SET ASIDE.
The case is hereby remanded to the trial court for it to determine the current market value of the
apartment building on the lot. For this purpose, the parties shall be allowed to adduce evidence on
the current market value of the apartment building. The value so determined shall be forthwith paid
by the private respondents to the petitioner otherwise the petitioner shall be restored to the
possession of the apartment building until payment of the required indemnity.
No costs.
SO ORDERED.

G.R. No. L-4529 December 29, 1952


VICENTE M. COLEONGCO, petitioner,
vs.
PEDRO F. REGALADO and LEONOR MONTILLA, respondents.
Jose Ur. Carbonell for petitioner.
Jose M. Estacion and Remigio M. Pea for respondents.

JUGO, J.:
The Court of Appeals (5th Division) rendered the following decision, the facts of which cannot be
reviewed by this court:
DECISION
FELIX, J.:
Antecedents. Prior to September of 1944, Pedro F. Regalado was the owner of lot No.
1205-A of plan Psd. 12393, G.L.R.O. cadastral record No. 55, situated at barrio Mandalagan,
Municipality of Bacolod, Province of Negros Occidental, of which lot No. 157 of the
subdivision plan Psd. 12395 was a portion. In this lot there was erected a building which in
September of 1944, was being occupied by the forces of the Japanese Army. In that month
of September Pedro F. Regalado sold lot No. 157 to Vicente M. Coleongco who thus became
the owner of the lot, covered by transfer certificate of title No. 663 of the Land Records of
Negros Occidental. The total area of the lot was 1,000 square meters, and the land occupied
by the house was 245 square meters. Until the year of 1947, the assessed value of the
whole lot and the house was P1,156 and P4,500, respectively.
It appears from the records that Vicente M. Coleongco contended that the house erected on
lot 157 was included in the sale to him of this property, and when the City of Bacolod was
liberated by the American Forces that succeeded the Japanese and occupied said house for
about two months, Coleongco received from the local office of the AFWESPAC as rentals for
such occupation the sum of $93.75 or P137.50. It so happened, however, that after the
American Forces vacated the house, Pedro F. Regalado occupied the same, so Vicente M.
Coleongco instituted Civil Case No. 185 of the Court of First Instance of Negros Occidental,
which on March 21, 1947, decided that the improvement of lot No. 157, consisting of a
residential house, was the property of the defendant therein Pedro F. Regalado. From that
decision Coleongco appealed to the Court of Appeals, but on August 28, 1947, this tribunal
declared the appeal abandoned.
The case. One month before this outcome in the Court of Appeals of said case No. 185,
or on July 21, 1947, Vicente M. Coleongco filed the complaint that gave rise to the present
action. On September 20, 1947, Pedro F. Regalado, in consideration of the sum of P3,500,
deeded and sold said house to Leonor Montilla Vda. de Pea, who was duly apprised of the
present case that was pending against the vendor (Annex A). This transaction was
supplemented by contract Annex B, dated October 3, 1947, wherein the vendee Leonor
Montilla expressly admitted that she had knowledge of the existence of this civil case (docket
No. 718 of the Court of First Instance of Negros Occidental) concerning the house object of
the sale, assumed whatever rights and obligations might arise with respect to such civil case,
and freed and liberated the vendor Regalado from the result of the case. Because of these
transactions between Regalado and Mrs. Montilla, on or about October 22, 1947, the plaintiff
amended his complaint including Leonor Montilla as party defendant. In the amended
complaint it is prayed that after due hearing thedefendants be condemned:
1. To pay unto the plaintiff the monthly rental of sixty pesos (P60) for his premises during the
period occupied by said defendants;
2. To order the defendants to remove or clear the house from the plaintiff's premises;
3. To pay the costs of the suit; and

4. To grant such relief or other remedies which the court may consider just and equitable.
On November 3, 1947, Atty. Vivencio T. Ibrado, signing over the title of "Attorney for
the Defendant", filed an answer to the amended complaint with counterclaim, praying the
court that:
1. The complaint of the plaintiff be dismissed, with costs against the plaintiff;

lawphil.net

2. That the Honorable Court fix the rental for the occupation of the 245 square meters of the
lot in question and that said rental be made effective only from August 28, 1947;
3. That the plaintiff be ordered to pay to the defendant the sum of ninety-three dollars and
seventy-five cents ($93.75);
4. That the Honorable Court fix the value of the lot in question and order the plaintiff to sell
the lot to the defendant;
5. To grant such other remedies as this Honorable Court may deem just and equitable in the
premises;
Defendant Leonor Montilla did not file a separate answer to the amended complaint, and on
motion of the plaintiff the court by order of February 11, 1948, declared Leonor Montilla in
default over the objection of both defendants who claimed that the answer to the amended
complaint filed by Attorney Ibrado on November 3, 1947, used the words "defendants" in
various parts of the answer, and that it was intended to be the answer for both.
After proper proceedings and hearing, on January 3, 1949, the court rendered judgment, the
dispositive part of which, translated into English, is as follows:
lawphil.net

"In view of the foregoing, the court renders judgment in this case, sentencing the defendants
to pay the plaintiff the monthly sum of P14.06 from September, 1945, as rentals, with legal
interest thereon from the date of the filing of the complaint in this case, and providing that the
sum of $93.75 or P187.50, its equivalent in Philippine currency, he deducted from the total
sum of said rents.
"Defendants are ordered to vacate the building from the portion of the lot on which it is
erected within the period of two months from the date this decision becomes final, and to that
end they are ordered to remove the building from the said portion of the lot within the
aforementioned period.
"The costs are taxed against the defendants."
From this decision both defendants appealed, and in this instance their counsel maintains
that the lower court erred:
1. In declaring the appellant Leonor Montilla in default;
2. In sentencing the defendants to pay the plaintiff the monthly rental of P14.06 for the
portion of lot No. 157 of subdivision plan Psd-12395 from the month of September, 1945,
with legal-interest from the date of the presentation of the complaint;

3. In ordering the appellants to remove their house from the portion of the lot occupied by the
same within the period of two months from the date its decision becomes final; and
4. In not absolving the defendants from the complaint and in sentencing them to pay the
costs of this suit.
Discussion of the controversy. Before the presentation of evidence at the hearing, the
parties entered into the following stipulation of facts, to wit:
"1. That the parties are all of legal age and residents of the City of Bacolod, Philippines;
"2. That since the month of September, 1944, the plaintiff became the registered owner of lot
No. 157 of the subdivision plan Psd-12395, which is a portion of lot No. 1205-A of
subdivision plan Psd-12393, G.L.R.O. cadastral record No. 55, situated in the City of
Bacolod and described in the transfer certificate of title No. 663 (P.R.);
"3. That be decision rendered in civil case No. 185 by this same court and which is now final,
defendant Pedro F. Regalado was declared the owner of the building of strong materials
erected on said lot;
"4. That actual assessed value of said lot is P5,625;
"5. That said building is also assessed at P4,500;
"6. That on October 30, 1946, the lot in question was assessed at P1,312.50;
"7. That said lot has an area of 1,000 square meters;
"8. That the portion of the same occupied by the building existing thereon is of an area of
245 square meters;
"9. That in the month of September of 1947, defendant Pedro F. Regalado sold said building
to his co-defendant Leonor Montilla for the sum of P3,500, of which amount the vendee paid
the vendor, at the time of the execution of the deed of sale, the sum of P2,000, binding
herself to pay the balance of P1,500 on or before October 31, 1947. Defendants Pedro F.
Regalado and Leonor Montilla have executed a contract supplementary to the previous deed
of sale, by virtue of which said Leonor Montilla acknowledged the existence of the present
case and assumed the obligation of paying whatever rents and of complying with whatever
obligations the court would impose on the defendant Pedro F. Regalado."
Aside from this stipulation and the facts appearing in the preceding narration of the
antecedents and of the statement of the case, plaintiff-appellee declared that he desired to
take possession of the portion of the lot occupied by the questioned building because he
intended to construct his own house, as he was then paying rents for the lease of his
residence at a rate higher than the amount he is entitled to receive as rents from the portion
of the land occupied by the building of the defendants.
A perusal of the record discloses that the present action for ejectment was instituted on July
21, 1947,before plaintiff's appeal in Case No. 185 was finally declared abandoned in the
Court of Appeals, and the fact that in said case Coleongco unsuccessfully claimed to be the
owner of the house in litigation does not preclude his right to depart from his former

contention and to institute these ejectment proceedings to compel the defendants to vacate
his lot and to remove therefrom the building which at first he maintained to be his, and to
further demand payment of the corresponding rentals for the occupancy of the lot by said
building from September, 1944, when he bought the property, up to the time said building is
actually removed, except, of course, for the period that he might have occupied or used that
building. But the record is silent about such use and all indications are that from September
of 1944, the house was first occupied by the Japanese, then by the American Forces, after
liberation, and right afterwards in September of 1945 by defendant Regalado himself and by
his successors in interest. The lower court, however, sentenced the defendants to pay rents
from September, 1945, and as plaintiff has not appealed from that ruling, We can only
consider the adequacy of the amount fixed by the court as rentals from September, 1945.
With regard to defendant Leonor Montilla's alleged default, and despite the considerations
made by the lower court in its order of February 11, 1948, we are of the opinion that the
answer with the counterclaim filed by Attorney Ibrado on November 3, 1947, should have
been considered as submitted for both defendants: firstly, because the attorney that filed that
answer specifically so stated; and, secondly, because the grammatical errors in the use of
the verbs in connection with the word "defendants", as for example in the expression of
"defendants alleges", should not be charged against any of them who did not prepare that
pleading and, under the circumstances, should not be deprived of any right on account of the
careless preparation thereof. Notwithstanding this opinion, we hold that the ruling of the
lower court on this point is of no sequence, because both defendants had common interests
and the defenses, and the rights of appellant Leonor Montilla have been properly attended to
by her co-appellant Pedro F. Regalado.
The action which originally was instituted as an ejectment case for the main purpose of
causing the removal of defendants' building from plaintiff's lot and was filed directly in the
Court of First Instance of Occidental Negros because the right of action had accrued since
September of 1944 was enlarged by defendants' counterclaim to include plaintiff's right of
accession prescribed in article 361 of the old Civil Code. In passing upon the merits of the
controversy on this question at issue, we may state that it is not disputed that the building in
litigation was formerly the property of Pedro F. Regalado and presently of Leonor Montilla,
that this building was constructed in good faith, and consequently, that the enjoyment and
possession thereof must be considered to have been always in good faith. Our Civil Code
provides:
"ART. 358. What is built, planted or sown on another's land and any improvements or repair
made on it, belongs to the owner of the land, subject to the provisions of the following
articles.
"ART. 361. The owner of land on which anything has been built, sown or planted, in good
faith, shall be entitled to appropriate the thing so built, sown, or planted, upon paying the
compensation mentioned in articles 453 and 456, or to compel the person who has built or
planned to pay him the value of the land, and the person who sowed thereon to pay the
proper rent therefor.
"ART. 453. Necessary expenditures shall be refunded to every possessor; but only the
possessor in good faith may retain the thing until they are repaid to him.
Useful expenditures shall be paid to the possessor in good faith with the same right of
retention, the person who has defeated him in his possession having the option of refunding

the amount of such expenditures or paying him the increase in value which the thing has
acquired by reason thereof.
"ART. 454. Expenditures purely for ostentation or mere pleasure shall not be repaid the
possessor in good faith; but he may remove the ornaments with which he has established
the principal thing if it does not suffer injury thereby and if the successor in the possession
does no prefer to refund the amount expended.
"In view of this legal provisions, we have to declare that the right of the owner of a lot to have
the same vacated or cleared from any construction or improvement belonging to another
which built it in good faith, is to be subordinated to and without prejudice of whatever rights
the owner and builder in good faith of the improvement may have. We, therefore, cannot now
act favorably on plaintiff's complaint for ejectment disregarding defendants' rights either to
pay for the acquisition of lot No. 157 or of being paid the value of the building erected
thereon, at the option of the plaintiff.
"As regards the amount of monthly rents that appellants were condemned to pay the plaintiff,
the following considerations must be taken into account, to wit: (a) that although the portion
of lot 157 actually occupied by the building is of an area of 245 square meters, for the
purpose of fixing the rent in this case the assessed value of the whole lot should be had in
mind, as there is no evidence that the occupied portion of said lot had been devoted to any
use other than as site of the house in question; (b) that the amount of the rent that
defendants should have been sentenced to pay for the period of from September, 1945, to
the end of 1946 should have been fixed in accordance with its former assessed value of
P1,312.50; (c) that from January of 1947, the assessed value of P5,625 should be the one
determining the proper amount of the rents; (d) that section 3 of Commonwealth Act No. 689
promulgated October 15, 1945, prescribes that "in the case of the lease for the occupation of
the lot, the rents shall be presumed unjust and unreasonable if the amount thereof per
annum likewise exceeds twenty per centum of the annual assessment value of said lot"; (e)
that although Executive Order No. 62, issued on June 21, 1947, reduced the annual rent
demandable to an amount not exceeding twelve per centum of the assessed value, said
Executive Order was declared null and void for having been issued without authority of law
(Araneta vs. Dinglasan, * 45 Off. Gaz., No. 10, p. 4411); (f) that on the strength of the provisions of law quoted, the
amount of the rent that ought to have been fixed as monthlyrent in this case is P21.875 from September, 1944, up to December,
1946, and P93.75 from January of 1947, up to the time of actual removal of the building form the lot, or to the time when the
parties would come to an agreement as per article 361 of the old Civil Code; (g) that the aggregate sum of such rents being
greater than the amount fixed by the lower court, and even greater than the amount that plaintiff prayed for in the complaint, and
as plaintiff has not appealed from the amount fixed in this decision of the lower court, we are not in a position to increase or
modify the amount of the rents the defendants have been sentenced to pay to the plaintiff.

Wherefore, the decision appealed from is hereby affirmed in so far as it condemns the
defendants to pay to the plaintiff as monthly rents the sum of P14.06 from September, 1945,
with legal interest thereon from the date of the filing of the complaint (July 21, 1947), from
the total of which the sum of P187.50 should be deducted. The decision is reversed as to the
rest and this case is returned to the lower court, with instructions to give the plaintiff an
opportunity to exercise his right of option granted to him by article 361 of the old Civil Code,
without pronouncement as to cost. It is so ordered.
ALFONSO FELIX
Associate Justice
We concur:
M. L. DE LA ROSA

EMILIO PEA

Associate Justice

Associate Justice

Coleongco contended that in September, 1944, he bought not only the lot above-mentioned but also
the house erected thereon. He instituted an action in civil case No. 185 of the Court of First Instance
of Occidental Negros, in order to be declared the owner of the house. However, the Court of First
Instance, on March 21, 1947, decided that said house was the property of the defendant Pedro F.
Regalado, not sold to Coleongco. Coleongco appealed to the Court of Appeals but latter on said
Court declared the appeal abandoned and the decision of the Court of First Instance became final.
This decision is to the effect that Regalado, being the owner of both the lot and the house, sold only
the lot to Coleongco, retaining ownership of the house. Consequently, Regalado or his successor
Leonor Montilla should remove said house from the lot without any compensation from Coleongco.
Article 361 of the old Civil Code is not applicable in this case, for Regalado constructed the house on
his own land before he sold said land to Coleongco. Article 361 applies only in the cases where a
person constructs a building on the land of another in good or in bad faith, as the case may be. It
does not apply to a case where a person constructs a building on his own land, for then there can be
no question as to good or bad faith on the part of the builder.
In view of the foregoing, the decision of the Court of Appeals is modified by ordering Regalado and
his successor Leonor Montilla to remove the above-mentioned house from the lot of Coleongco,
without any obligation on the part of the latter to pay any compensation to Regalado or his successor
Montilla. In all other respects, the decision of the Court of Appeals is affirmed with costs against
respondents Regalado and Montilla. So ordered.
Paras, C.J., Pablo, Bengzon, Padilla, Bautista Angelo and Labrador, JJ., concur.

G.R. No. L-44001 June 10, 1988


PAZ MERCADO, CAROLINA S. CHICO, LUCIANA CABRERA, JOAQUIN IGNACIO, ELMER
FLORES, AVELINA C. NUCOM, et al., petitioners,
vs.
HON. COURT OF APPEALS, HON. BENIGNO PUNO, LOLITA C. BULAONG, FLORENTINO
AGULTO, SEVERINO SALAYSAY, SUSANA BERNARDINO, et al., respondents.

NARVASA, J.:
The question presented by this appeal is whether or not the special civil action of certiorari may be
properly resorted to by a party aggrieved by a judgment of a Regional Trial Court (or Court of First
Instance)which became final because not appealed within the reglementary period to bring
about its reversal on the ground that the Court had applied the wrong provision of the Civil Code,
and had rendered summary judgment at the instance of the defendants without receiving evidence
on the issue of damages allegedly suffered by the plaintiffs, thereby denying them due process.
The private respondents, hereafter simply referred to as the Bulaong Group, had for many years
been individual lessees of stalls in the public market of Baliuag, Bulacan; from 1956 to 1972, to be

more precise. The market was destroyed by fire on February 17, 1956; the members of the Bulaong
Group constructed new stalls therein at their expense; and they thereafter paid rentals thereon to the
Municipality of Baliuag.
Sometime in 1972, the members of the group sub-leased their individual stalls to other persons,
hereafter simply referred to as the Mercado Group. After the Mercado Group had been in
possession of the market stlls for some months, as sub-lessees of the Bulaong Group, the municipal
officials of Baliuag cancelled the long standing leases of the Bulaong Group and declared the
persons comprising the Mercado Group as the rightful lessees of the stalls in question, in
substitution of the former. The municipal authorities justified the cancellation of the leases of the
Bulaong Group by invoking the provisions of Municipal Ordinance No. 14, dated December 14,
1964, which prohibited the sub-leasing of stalls by the lessees thereof, as well as a directive of the
Office of the President (contained in a letter of Executive Secretary R. Zamora dated May 29,1973)
requiring enforcement of said Ordinance No. 14. Recognition of the Mercado Group's rights over the
stalls was subsequently manifested in Municipal Ordinance No. 49, approved on July 5,1973.
The members of the Bulaong Group sued. They filed several individual complaints with the Court of
First Instance seeking recovery of their stalls from the Mercado Group as well as damages. 1 Their
theory was anchored on their claimed ownership of the stalls constructed by them at their own expense,
and their resulting right, as such owners, to sub-lease the stalls, and necessarily, to recover them from
any person withholding possession thereof from them. Answers were seasonably filed in behalf of the
defendants, including the Municipality of Baliuag, 2 after which a pre-trial was held in the course of which
the parties stipulated upon practically all the facts.
The Mercado Group thereafter filed motions for summary judgment, asserting that in light of the
admissions made at the pre-trial and in the pleadings, no issue remained under genuine
controversion. The Bulaong Group filed an opposition which, while generally stating that there were
"other material allegations in the amended complaint(s)" upon which proof was needful, actually
identified only one issue of fact requiring "formal submission of evidence," i.e., the claim for actual
damages " ... the exact amount of which shall be proven at the trial." The Bulaong Group then filed a
"Motion to Accept Affidavits and Photographs as Annexes to the Opposition to the Motion for
Summary Judgment," which affidavits and photographs tended to establish the character and value
of the improvements they had introduced in the market stalls. As far as the records show, no
objection whatever was presented to this motion by the Mercado Group (movants for summary
judgment), and the affidavits and photographs were admitted by the Trial Court. Specifically, the
Mercado Group never asked, either in their motion for summary judgment or at any time after having
received a copy of the motion to accept affidavits and photographs, etc., that a hearing be scheduled
for the reception of evidence on the issue of the Bulaong Group's claimed actual damages.
On October 24,1975, respondent Judge rendered a summary judgment in all the cases. 3 It rejected
the claim of the Municipality of Baliuag that it had automatically acquired ownership of the new stalls
constructed after the old stalls had been razed by fire, declaring the members of the Bulaong Group to
be builders in good faith, entitled to retain possession of the stalls respectively put up by them until and
unless indemnified for the value thereof. The decision also declared that the Bulaong and Mercado
Groups had executed the sub-letting agreements with full awareness that they were thereby violating
Ordinance No. 14; they were thus in pari delicto, and hence had no cause of action one against the other
and no right to recover whatever had been given or demand performance of anything undertaken. The
judgment therefore decreed (1) the annulment of the leases between the Municipality and the individuals
comprising the Mercado Group (the defendants who had taken over the original leases of the Bulaong

Group); and (2) the payment to the individual members of the Bulaong Group (the plaintiffs) of the stated,
adjudicated value of the stalls, with interest IF

... the Municipality ... would insist in its right rescind or annul its contracts of leases with the said
plaintiffs over the lots on which the stalls in question are erected; for this purpose, since the private
defendants become immediate beneficiaries to a transfer of possession over the stalls in question,
the Municipality .. may require said private defendants .. to pay the plaintiffs the aforesaid amounts
in the event that said private defendants and the Minucipality .. the lots on which said stalls are
contracted; however, unless the plaintiffs shall have been fully paid of the value of their stalls in the
amounts mentioned above, they shall have the right to remain in their respective stalls and in case
the private defendants shall refuse to pay for the value of the stalls in this event, the ejectment of the
said private defendants from the stalls in question shall be ordered .....
The Mercado Group and the Municipality filed on November 14, 1975, motions for reconsideration of
the summary judgment, notice of which had been served on them on November 3, 1975. These
were denied, and notice of the order of denial was received by them on December 18, 1975. On
January 7, 1976, the Mercado Group filed a notice of appeal, an appeal bond and a motion for
extension of time to file their record on appeal. But by Order dated January 9, 1976, the Trial Court
directed inter alia the execution of the judgment, at the instance of the Bulaong Group and despite
the opposition of that Mercado Group, adjudging that its decision had become final because the
appeal documents had "not been seasonably filed." The writ was issued, and the Mercado Group's
motion to quash the same and to re-open the case was denied.
The Group went to the Court of Appeals, instituting in that court a special civil action of certiorari and
prohibition 4"to annul that portion of the summary judgment . . awarding damages to private respondents
(the Bulaong Group), and to restrain the respondent Judge and the Provincial Sheriff of Bulacan from
enforcing the same." That Court rendered judgment on May 14, 1976, 5 holding that (1) the summary
judgment was properly rendered, respondent Judge (having) merely adhered to the procedure set forth by
the . . . Rule (34);" and if "he committed error in the appreciation of the probative values of the affidavits
and counter-affidavits submitted by the parties, such error is merely one of judgment, and not of
jurisdiction;" (2) the Mercado Group had not been denied due process "for failure of respondent Judge to
conduct a formal trial . . (to receive) evidence on the question of damages," since the parties were
afforded the right, in connection with the motion for summary judgment, to speak and explain their side of
the case by means of affidavits and counter-affidavits; and (3) since the Mercado Group had attempted to
perfect an appeal from the summary judgment which was however futile because their appeal papers
"were filed beyond the reglementary period," the judgment had become final and certiorari or prohibition
could not be availed of as a substitute for the group's lost appeal. Once again, the Mercado Group moved
for reconsideration of an adverse judgment, and once again were rebuffed.
The members of the Mercado Group are now before this Court on an appeal by certiorari, this time
timely taken, assailing the above rulings of the Court of Appeals. Their appeal must fail for lack of
merit. No error can be ascribed to the judgment of the Court of Appeals which is hereby
affirmed in toto.
Upon the factual findings of the Court of Appeals, by which this court is bound, and taking account of
well established precedent from which there is no perceivable reason in the premises to depart,
there is no question that the petitioners (the Mercado Group) had failed to perfect an appeal from the
summary judgement within the reglementary period fixed by the Rules of Court. According to the
Appellate Court-

The summary judgment rendered by respondent Judge, being a final adjudication on


the merits of the said cases, could have been appealed by the petitioners. In point of
fact, petitioners did attempt to perfect an appeal from said judgment, but the attempt
proved futile because their notice of appeal, appeal bond and motion for extension of
time file record on appeal were filed beyond the reglementary period. The record
discloses that they received copy of the summary judgment on November 3, 1975;
that on November 14, 1975, or after the lapse of eleven (11) days from receipt of said
decision, they filed their motion for reconsideration of said decision; that on
December 18, 1975, they received copy of the order denying their motion for
reconsideration; and that they did not file their notice of appeal, appeal bond and
motion for extension of time until January 7, 1976, or twenty (20) days after receipt of
the order denying their motion for reconsideration. The notice of appeal, appeal bond
and motion for extension were, therefore, presented one (1) day after the expiration
of the 30-day period to perfect an appeal. Thus, respondent Judge correctly
disallowed the appeal.
The Appellate Court's computation of the period is correct, and is in accord with Section 3, Rule 41
of the Rules of Court providing that from the 30-day reglementary period of appeal shall be deducted
the "time during which a motion to set aside the judgment or order or for a new trial has been
pending." 6
Significantly, the petitioners have made no serious effort to explain and excuse the tardiness of their
appeal. What they have done and continue to do is to insist that the special civil action of certiorari is
in truth the proper remedy because the judgment is void. The judgment is void, they say, because
they were denied due process, as "respondent Judge granted exorbitant damages, without reliable
proof, and without giving petitioners the chance to prove their claim that private respondents are not
entitled to damages, and conceding that they are, the damages are much lower than that awarded
by the respondent Judge." 7 According to them, since the matter of damages was clearly a controverted
fact, the Court had absolutely no jurisdiction to determine it on mere affidavits.
There can be no debate about the proposition that under the law, the Trial Court validly acquired
jurisdiction not only over the persons of the parties but also over the subject matter of the actions at
bar. The parties composing the Mercado Group cannot dispute this; they recognized the Court's
competence when they filed their answers to the complaints without questioning the
Court's jurisdiction of the subject-matter; indeed neither at that time nor at any other time thereafter
did any one of them ever raise the question.
Now, jurisdiction, once acquired, is not lost by any error in the exercise thereof that might
subsequently be committed by the court. Where there is jurisdiction over the subject matter, the
decision of all other questions arising in the case is but an exercise of that jurisdiction . 8 And when a
court exercises its jurisdiction, an error committed while engaged in that exercise does not deprive it
of the jurisdiction being exercise when the error is committed. If it did, every error committed by a
court would deprive it of jurisdiction and every erroneous judgment would be a void judgment. This,
of course, can not be allowed. The administration of justice would not survive such a rule . 9 Moreover,
any error that the Court may commit in the exercise of its jurisdiction, being merely an error of judgment, is reviewable only by appeal, not by
the special civil action of certiorari or prohibition. 10

The petitioners do not dispute the propriety of the rendition of a summary judgment by the Court a
quo, a remedy that they themselves had in fact asked for. What they challenge is the inclusion in that

judgment of an award of damages on the basis merely of affidavits, without actual reception of
evidence thereon at a hearing set for the purpose.
The challenge is not however justified by the peculiar circumstances of the case at bar. The
petitioners, to repeat, were the parties who, as defendants, had moved for summary judgment . They
knew or were supposed to know that, as stated by the Rules, their motion would be granted if "the
pleadings, depositions, and admissions on file, together with the affidavits show that, except as to
the amount of damages, there is no genuine issue as to any material fact and that ... (they are)
entitled to a judgment as a matter of law." 11 They knew that the private respondents, as plaintiffs, had in
fact opposed their motion and had pointed out precisely the need for a hearing on the controverted matter
of damages. That they did not join in the move to have a hearing on the issue of damages is an indication
that they considered it unnecessary, When the respondents (plaintiffs)apparently in view of the Court's
and the defendants' indifference to the notion of having a hearing on the matter of damages, implicitly
indicating the belief of the superfluity of a hearingpresented affidavits and depositions to prove the
value of the improvements, for which they were seeking reimbursement, the petitioners (defendants) did
not ask that the matter be ventilated at a hearing, or submit counter-affidavits, as was their right. They
made no response whatever. They were evidently quite confident of obtaining a favorable judgment, and
that such an eventuality would preclude the claimed reimbursement or recovery of damages. As it turned
out, they were wrong in their prognostication.
In any event, even assuming error on the Court's part in relying on the unopposed affidavits and
photographs as basis for an award of damages, it was, as the Appellate Court has opined, not an
error of jurisdiction under the circumstances, but one in the exercise of jurisdiction, to correct which
the prescribed remedy is appeal. This is not to say that where a Court determines the propriety of a
summary judgment which it may do on the basis of the pleadings, depositions, admissions and
affidavits submitted by the partiesand discovers that there are genuine issues of fact, these
genuine issues may nonetheless be adjudicated on the basis of depositions, admissions or affidavits
and not of evidence adduced at a formal hearing or trial. This is not the rule. 12 The rule is that it is
only the ascertainment of the character of the issues raised in the pleadingsas genuine, or sham or
fictitiouswhich can be done by depositions, admissions, or affidavits; the resolution of such issues as
are found to be genuine should be made upon proof proferred at a formal hearing. The peculiar
circumstances of the case at bar, already pointed out, operate to exclude it from the scope of the rule. It is
an exception that should however be taken, as affirming and not eroding the rule.
The petitioners' other theory is more tenable, but will not appreciably advance their cause. They
suggest that it was a mistake for the Trial Court to have accorded to the individuals of the Bulaong
Group the stalls and builders in good faith in accordance with Article 526 of the Civil Code. They are
correct. It was indeed error for the Court to have so ruled. The members of this group were
admittedly lessees of space in the public market; they therefore could not, and in truth never did
make the claim, that they were owners of any part of the land occupied by the market so that in
respect of any new structure put up by them thereon, they could be deemed builders in good faith.
To be deemed a builder in good faith, it is essential that a person assert title to the land on which he
builds; i.e., that he be a possessor in concept of owner, 13 and that he be unaware "that there exists in
his title or mode of acquisition any flaw which invalidates it. 14 It is such a builder in good faith who is given
the right to retain the thing, even as against the real owner, until he has been reimbursed in full not only
for the necessary expenses but also for useful expenses. 15 On the other hand, unlike the builder in good
faith, a lessee who "makes in good faith useful improvements which are suitable to the use for which the
lease is intended, without altering the form or substance of the property leased," can only claim payment
of "one-half of the value of the improvements" or, "should the lessor refuse to reimburse said amount, ...
remove the improvements, even though the principal thing may suffer damage thereby." 16

But this error does not go to the Trial Court's jurisdiction. It is an error in the exercise of jurisdiction,
which may be corrected by the ordinary recourse of appeal, not by the extraordinary remedy
of certiorari. It is an error that in the premises can no longer be set aright
The summary judgment rendered by respondent Judge on October 24, 1975 was not an
interlocutory disposition or order but a final judgment within the meaning of Section 2, Rule 41 of the
Rules of Court. By that summary judgment the Court finally disposed of the pending action, leaving
nothing more to be done by it with respect to the merits, thus putting an end to the litigation as its
level . 17
The remedy available to the petitioners against such a final judgment, as repeatedly stated, was an
appeal in accordance with the aforementioned Rule 41 of the Rules of Court 18 But as observed in an
analogous case recently resolved by this Court. 19
. . instead of resorting to ordinary remedy of appeal, ... (the petitioners) availed of
the extraordinary remedy of a special civil action of certiorari in the ... (Court of Appeals), under Rule 65 of
the Rules of Court. The choice was clearly wrong. The availability of the right of appeal obviously
precluded recourse to the special civil action of certiorari. This is axiomatic. It is a proposition made plain
by Section 1 of Rule 65 which lays down as a condition for the filing of a certiorari petition that there
be 'no appeal, nor any plain, speedy and adequate remedy in the ordinary course of law.

In the case at bar, the petitioners lost their right to appeal by failing to avail of it seasonably. To
remedy that loss, they have resorted to the extraordinary remedy of certiorari, as a mode of
obtaining reversal of the judgment from which they failed to appeal. This cannot be done. The
judgment was not in any sense null and void ab initio, incapable of producing any legal effects
whatever, which could never become final, and execution of which could be resisted at any time and
in any court it was attempted. 20 It was a judgment which might and probably did suffer from some
substantial error in procedure or in findings of fact or of law, and could on that account have been
reversed or modified on appeal. But since it was not appealed, it became final and has thus gone beyond
the reach of any court to modify in any substantive aspect. The remedy to obtain a reversal or
modification of the judgment on the merits is appeal. This is true even if the error, or one of the errors,
ascribed to the Court rendering the judgment is its lack of jurisdiction of the subject matter, or the exercise
of power in excess thereof, or grave abuse of discretion in the findings of fact or of law set out in its
decision. The existence and availability of the right of appeal prescribes a resort to certiorari, one of the
requisites for availment of the latter remedy being precisely that "there should be no appeal. 21 There may
to be sure, be instances when certiorari may exceptionally be permitted in lieu of appeal, as when their
appeal would be inadequate, slow, insufficient, and will not promptly relieve a party from the injurious
effect of the judgment complained of, or to avoid future litigations, 22 none of which situations obtains in
the case at bar. And certain it is that the special civil action of certioraricannot be a substitute for appeal,
specially where the right to appeal has been lost through a party's fault or excusable negligence. 23
That the judgment of the Trial Court applied the wrong provision of the law in the resolution of the
controversy has ceased to be of any consequence. As already discussed, instead of the legal
provision governing lessees' rights over improvements on leased realty, the judgment invoked that
relative to the rights of builders in good faith . 24But the error did not render the judgment void. A
judgment contrary to the express provisions of a statute is of course erroneous, but it is not void; and if it
becomes final and executory, it becomes as binding and effective as any valid judgment; and though
erroneous, will henceforth be treated as valid, and will be enforced in accordance with its terms and
dispositions. 25

WHEREFORE, the petition is dismissed, with costs against the petitioners.


Cruz, Gancayco, Grio-Aquino and Medialdea, JJ., concur.