40. PERSHING TAN QUETO vs.

COURT OF APPEALS

Facts: Restituta Tacalinar Guanaco de Pombuena (RESTITUTA, for short) received the questioned lot of the
Cadastre Survey of the Municipality of Centro, Mizamis Occidental, either as a purported donation or by way of
purchase on(with P50.00) as the alleged consideration thereof. The transaction took place during her mother's
lifetime (her father having predeceased the mother). Also, the said transaction was consummated while
Restituta was already married to Juan.

In 1935, Juan filed for himself and his supposed co-owner RESTITUTA an application for a Torrens
Title over the land. In 1938, a decision was promulgated (Cadastral Case No. 12) pronouncing JUAN ('married
to RESTITUTA') as the owner of the land. As a consequence of the cadastral case, an Original Certificate of
Title was issued in JUAN's name ("married to RESTITUTA") in 1962. During 1949, a contract of lease over the
lot was entered into between Pershing Tan Queto and RESTITUTA (with the consent of her husband JUAN) for
a period of ten (10) years. In 1960 RESTITUTA sued TAN QUETO for unlawful detainer (the lease contract
having expired) before the Municipal Court of Ozamis City.

The unlawful detainer case was won by the spouses in the municipal court but on appeal in CFI, it was
dismissed on the ground that in 1962, there was a barter agreement between Tan Queto and Juan, whereby Tan
Queto became the owner of the disputed lot, while the spouses became the owner of the parcel of land with the
house constructed previously owned by Tan Queto.

After the barter agreement, Tan Queto constructed on the disputed land-concrete building without any
objection on th part of Restituta. Later on, Restituta sued both Juan and Tan Queto for reconveyance of the title
over the registered but disputed lot, for annulment of barter and for the recovery of land with damages.

Issues: 1. WON the lot is paraphernal or conjugal

2. WON Tan Queto is builder in good faith and entitled to reimbursement

Held: The CFI and CA found the disputed lot as paraphernal and Tan Queto was declared as builder in bad
faith. Tan Queto filed for motion for reconsideration whereby SC set aside the previous decisions.

The land is conjugal. Ownership was acquired by spouses by tradition/delivery as consequence of

contract of sale with P50.00 as cause or consideration of transaction. It was also acquired thru onerous title,
since the money used is presumed conjugal since no proof that Restituta had paraphernal funds of her own. The
land was not also transferred to Restituta by donation. (Oral donation of lot is invalid donation inter vivos--- no
public instrument was executed, also the donation is invalid mortis causa for the formalities of will were not
complied with. The sale cannot be said as fictitious and simulated because there was a valid consideration
(P50.00)

There is no admission of Restituta’s exlusive ownership. Although, Tan Queto admitted Restituta was
“an” owner and not “the” owner of the lot since she was a co-owner of the lot together with Juan. Even
assuming that despite registration of the lot as conjugal, Tan Queto nursed the belief that the lot was actually
Restituta’s (making him in bad faith), still Restituta’s failure to prohibit him from building despite her
knowledge that construction was actually being done, makes her also in bad faith. The net resultant of mutual
bad faith would entitle Tan Qyeto to the rights of a builder in good faith, ergo, reimbursement should be
given him if Restituta decides to appropriate the building for herself.
 While Tan Queto having bartered his own lot and small house with the questioned lot with Juan (who
has been adverted to by a court decision and by the OCT a conjugal owner) may be said to be the owner-
possessor of the lot. Certainly he is not merely a possessor or builder in good faith (this phrase presupposes
ownership in another); much less is he a builder in bad faith. He is a builder-possessor because he is the owner
himself.

The difference between a builder (or possessor) in good faith and one in bad faith is that the former is
not aware of the defect or flaw in his title or mode of acquisition while the latter is aware of such defect or flaw.
But in either case there is a flaw or defect. In the present case, there is no such flaw or defect because it is Tan
Queto himself (not somebody else) who is the owner of the property.