G.R. No.
L-2659 October 12, 1950 Bachrach, as usufructuary or life tenant of the estate,
In the matter of the testate estate of Emil Maurice
Bachrach, deceased. MARY McDONALD
BACHRACH, petitioner-appellee,
vs.
SOPHIE SEIFERT and ELISA
ELIANOFF, oppositors-appellants.
Ross, Selph, Carrascoso and Janda for appellants.
Delgado and Flores for appellee.
OZAETA, J.:
Is a stock dividend fruit or income, which belongs to
the usufructuary, or is it capital or part of the corpus
of the estate, which pertains to the remainderman?
That is the question raised in the appeal.
The deceased E. M. Bachrach, who left no forced heir
except his widow Mary McDonald Bachrach, in his
last will and testament made various legacies in cash
and willed the remainder of his estate as follows:
Sixth: It is my will and do herewith bequeath
and devise to my beloved wife Mary
McDonald Bachrach for life all the fruits
and usufruct of the remainder of all my
estate after payment of the legacies,
bequests, and gifts provided for above; and
she may enjoy said usufruct and use or
spend such fruits as she may in any manner
wish.
The will further provided that upon the death of Mary
McDonald Bachrach, one-half of the all his estate
"shall be divided share and share alike by and
between my legal heirs, to the exclusion of my
brothers."
The estate of E. M. Bachrach, as owner of 108,000
shares of stock of the Atok-Big Wedge Mining Co.,
Inc., received from the latter 54,000 shares
representing 50 per cent stock dividend on the said
108,000 shares. On June 10, 1948, Mary McDonald
petitioned the lower court to authorize the Peoples
Bank and Trust Company as administrator of the
estate of E. M. Bachrach, to her the said 54,000 share
of stock dividend by endorsing and delivering to her
the corresponding certificate of stock, claiming that
said dividend, although paid out in the form of stock,
is fruit or income and therefore belonged to her as
usufructuary or life tenant. Sophie Siefert and Elisa
Elianoff, legal heirs of the deceased, opposed said
petition on the ground that the stock dividend in
question was not income but formed part of the
capital and therefore belonged not to the usufructuary
but to the remainderman. And they have appealed
from the order granting the petition and overruling
their objecti on.
While appellants admits that a cash dividend is an
income, they contend that a stock dividend is not, but
merely represents an addition to the invested capital.
The so-called Massachusetts rule, which prevails in
certain jurisdictions in the United States, supports
appellants' contention . It regards cash dividends,
however large, as income, and stock dividends,
however made, as capital. (Minot vs. Paine, 99 Mass.,
101; 96 Am. Dec., 705.) It holds that a stock dividend
is not in any true sense any true sense any dividend at
all since it involves no division or severance from the
corporate assets of the dividend; that it does not
distribute property but simply dilutes the shares as
they existed before; and that it takes nothing from the
property of the corporation, and nothing to the
interests of the shareholders.
On the other hand, so called Pennsylvania rule, which
prevails in various other jurisdictions in the United
States, supports appellee's contention. This rule
declares that all earnings of the corporation made
prior to the death of the testator stockholder belong to
the corpus of the estate, and that all earnings, when
declared as dividends in whatever form, made during
the lifetime of the usufructuary or life tenant. (Earp's
Appeal, 28 Pa., 368.)
. . . It is clear that testator intent the
remaindermen should have only the corpus
of the estate he left in trust, and that all
dividends should go the life tenants. It is true
that profits realized are not dividends until
declared by the proper officials of the
corporation, but distribution of profits,
however made, in dividends, and the form of
the distribution is immaterial. (In
re Thompson's Estate, 262 Pa., 278; 105 Atl.
273, 274.)
In Hite vs. Hite (93 Ky., 257; 20 S. W., 778, 780), the
Court of Appeals of Kentucky, speaking thru its
Chief Justice, said:
. . . Where a dividend, although declared in
stock, is based upon the earnings of the
company, it is in reality, whether called by
one name or another, the income of the
capital invested in it. It is but a mode of
distributing the profit. If it be not income,
what is it? If it is, then it is rightfully and
equitably the property of the life tenant. If it
be really profit, then he should have it,
whether paid in stock or money. A stock
dividend proper is the issue of new shares
paid for by the transfer of a sum equal to
their par value from the profits and loss
account to that representing capital stock;
and really a corporation has no right to a
dividend, either in cash or stock, except
from its earnings; and a singular state of
case — it seems to us, an unreasonable one
— is presented if the company, although it
rests with it whether it will declare a
dividend, can bind the courts as to the proper
ownership of it, and by the mode of payment
substitute its will for that of that of the
testator, and favor the life tenants or the
remainder-men, as it may desire. It cannot,
in reason, be considered that the testator
contemplated such a result. The law regards
substance, and not form, and such a rule
might result not only in a violation of the
testator's intention, but it would give the
power to the corporation to beggar the life
tenants, who, in this case, are the wife and
 children of the testator, for the benefit of the
remainder-men, who may perhaps be
unknown to the testator, being unborn when
the will was executed. We are unwilling to
adopt a rule which to us seems so arbitrary,
and devoid of reason and justice. If the
dividend be in fact a profit, although
declared in stock, it should be held to be
income. It has been so held in Pennsylvania
and many other states, and we think it the
correct rule. Earp's Appeal, 28 Pa. St. 368;
Cook, Stocks & S. sec. 554. . . .
We think the Pennsylvania rule is more in accord
with our statutory laws than the Massachusetts rule.
Under section 16 of our Corporation Law, no
corporation may make or declare any dividend except
from the surplus profits arising from its business. Any
dividend, therefore, whether cash or stock, represents
surplus profits. Article 471 of the Civil Code provides
that the usufructuary shall be entitled to
receive all the natural, industrial, and civil fruits of
the property in usufruct. And articles 474 and 475
provide as follows:
ART. 474. Civil fruits are deemed to accrue
day by day, and belong to the usufructuary
in proportion to the time the usufruct may
last.
ART. 475. When a usufruct is created on the
right to receive an income or periodical
revenue, either in money or fruits, or the
interest on bonds or securities payable to
bearer, each matured payment shall be
considered as the proceeds or fruits such
right.
When it consists of the enjoyment of the
benefits arising from an interest in an
industrial or commercial enterprise, the
profits of which are not distributed at fixed
periods, such profits shall have the same
consideration.lawphil.net
In either case they shall be distributed as revenue. The phrase "u otras analogas" used (in the
civil fruits, and shall be applied in original Spanish, art. 355, last paragraph, Civil Code)
accordance with the rules prescribed by the in the following context: "Y el importe de las rentas
next preceding article. perpetuas, vitalicias u otras analogas," refers to
"rentas," for the adjectives "otras" and "analogas"
The 108,000 shares of stock are part of the property agree with the noun "rentas," as do also the other
in usufruct. The 54,000 shares of stock dividend are adjectives "perpetuas" and "vitalicias."
civil fruits of the original investment. They represent
profits, and the delivery of the certificate of stock
covering said dividend is equivalent to the payment DECISION
of said profits. Said shares may be sold independently
of the original shares, just as the offspring of a
domestic animal may be sold independently of its ROMUALDEZ, J.:
mother.
This proceeding originated in a complaint filed by the
The order appealed from, being in accordance with
Bachrach Motor Co., Inc. against the Talisay-Silay
the above-quoted provisions of the Civil Code, his
Milling Co., Inc., for the delivery of the amount of
hereby affirmed, with costs against the appellants.
P13,850 or promissory notes or other instruments of
credit for that sum payable on June 30, 1930, as
bonus in favor of Mariano Lacson Ledesma; the
complaint further prays that the sugar central be
THE BACHRACH MOTOR CO., INC., Plaintiff-
ordered to render an accounting of the amounts it
Appellee, v. TALISAY- SILAY MILLING CO. ET
owes Mariano Lacson Ledesma by way of bonus,
AL., Defendants-Appellees. THE PHILIPPINE
dividends, or otherwise, and to pay the plaintiff a sum
NATIONAL BANK, Intervenor-Appellant.
sufficient to satisfy the judgment mentioned in the
complaint, and that the sale made by said Mariano
Ramon J. Lacson for Intervenor-Appellant.
Lacson Ledesma be declared null and void.
Mariano Ezpeleta for Plaintiff-Appellee.
The Philippine National Bank filed a third party
claim alleging a preferential right to receive any
Nolan & Hernaez for defendants-appellees
amount which Mariano Lacson Ledesma might be
Talisay-Silay Milling Co. and Cesar Ledesma.
entitled to from the Talisay-Silay Milling Co. as
bonus, because that would be civil fruits of the land
SYLLABUS
mortgaged to said bank by said debtor for the benefit
of the central referred to, and by virtue of a deed on
1. REAL PROPERTY; CIVIL FRUITS. — The
assignment, and praying that said central be ordered
bonus which the Talisay-Silay Milling Co., Inc., had
to deliver directly to the intervening bank said sum on
to pay the planters who had mortgaged their lands to
account of the latter’s credit against the aforesaid
the Philippine National Bank in order to secure the
Mariano Lacson Ledesma.
payment of the company’s debt to the bank, is not a
civil fruit of the mortgaged property.
The corporation Talisay-Silay Milling Co., Inc.,
answered the complaint stating that of Mariano
2. ID.; ID. — Article 355 of the Civil Code considers
Lacson Ledesma’s credit, P7,500 belonged to Cesar
three things as civil truths; (1) rents from building,
Ledesma because he had purchased it, and praying
(2) proceeds from leases of lands, and (3) the income
that it be absolved from the complaint and that the
from perpetual or life annuities or similar sources of
proper party be named so that the remainder might be
delivered.
Cesar Ledesma, in turn, claiming to be the owner by
purchase in good faith and for a consideration of the
P7,500 which is a part of the credit referred to above,
answered praying that he be absolved from the
complaint.
The plaintiff Bachrach Motor Co., Inc., answered the
third party claim alleging that its credit against
Mariano Lacson Ledesma was prior and preferential
to that of the intervening bank, and praying that the
latter’s complaints be dismissed.
At the trial all the parties agreed to recognize and
respect the sale made in Favor of Cesar Ledesma of
the P7,500 part of the credit in question, for which
reason the trial court dismissed the complaint and
cross-complaint against Cesar Ledesma authorizing
the defendant central to deliver to him the
aforementioned sum of P7,500. And upon conclusion
of the hearing, the court held that the Bachrach Motor
Co., Inc., had a preferred right to receive the amount
of P11,076.02 which was Mariano Lacson Ledesma’s
bonus, and it ordered the defendant central to deliver
said sum to the plaintiff.
The Philippine National Bank appeals, assigning the
following alleged errors as committed by the trial
court:jgc:chanrobles.com.ph
"1. In holding that the bonus which the Talisay-Silay
Milling Co., Inc., bound itself to pay the planters who
had mortgaged their land to the Philippine National
Bank to secure the payment of the debt of said central
to said bank is not civil fruits of said land.
"2. In not holding that said bonus became subject to
the mortgage executed by the defendant Mariano
Lacson Ledesma to the Philippine National Bank to
secure the payment of his personal debt to said bank
when it fell due.
"3. In holding that the assignment (Exhibit 9, P. N.
B.) of said bonus made on March 7, 1930, by
Mariano Lacson Ledesma to the Philippine National
Bank to be applied to the payment of his debt to said
Philippine National Bank is fraudulent.
"4. In holding that the Bachrach Motor Co., Inc., in
civil case No. 31597 of the Court of First Instance of
Manila levied a valid attachment upon the bonus in
question.
"5. In admitting and considering the supplementary
complaint filed by the Bachrach Motor Co., Inc.,
alleging as a cause of action the attachment of the
bonus in question which said Bachrach Motor Co.,
Inc., in civil case No. 31821 of the Court of First
Instance of Manila levied after the filing of the
original complaint in this case, and after Mariano
Lacson Ledesma in this case had been declared in
default.
"6. In holding that the Bachrach Motor Co., Inc., has
a preferential right to receive from the Talisay-Silay
Milling Co., Inc., the amount of P11,076.02 which is
in the possession of said corporation as the bonus to
be paid to Mariano Lacson Ledesma, and in ordering
the Talisay-Silay Milling Co., Inc., to deliver said
amount to the Bachrach Motor Co., Inc.
"7. In not holding that the Philippine National Bank
has a preferential right to receive from the Talisay-
Silay Milling Co., Inc., the amount of P11,076.02
held by said corporation as Mariano Lacson
Ledesma’s bonus, and in not ordering said Talisay-
Silay Milling Co., Inc., to deliver said amount to the
Philippine National Bank.
"8. In not holding that the amended complaint and the
supplementary complaint of the Bachrach Motor Co.,
Inc., do not state facts sufficient to constitute a cause
of action in favor of the Bachrach Motor Co., Inc.,
and against the Talisay-Silay Milling Co., Inc., or
against the Philippine National Bank."cralaw
virtua1aw library
The appellant bank bases its preferential right upon
the contention that the bonus in question is civil fruits
of the land which the owners had mortgaged for the
benefit of the central giving the bonus, and that, a
civil fruits of said land, said bonus was assigned by
Mariano Lacson Ledesma on March 7, 1930, by
virtue of the document Exhibit 9 of said intervening
institution, which admitted in its brief that "if the
bonus in question is not civil fruits or rent which
became subject to the mortgage in favor of the
Philippine National Bank when Mariano Lacson
Ledesma’s personal obligation fell due, the
assignment of March 7, 1930 (Exhibit 9, P. N. B.) , is
null and void, not because it is fraudulent, for there
was no intent of fraud in executing the deed, that the
cause or consideration of the assignment was
erroneous, for it was based upon the proposition that
the bonus was civil fruits of the land mortgaged to the
Philippine National Bank." (P. 31.)
The fundamental question, then, submitted to our
consideration is whether or not the bonus in question
is civil fruits.
This is how that bonus came to be granted: On
December 22, 1923, the Talisay-Silay Milling Co.,
Inc., was indebted to the Philippine National Bank.
To secure the payment of its debt, it succeeded in
inducing its planters, among whom was Mariano
Lacson Ledesma, to mortgage their land to the
creditor bank. And in order to compensate those
planters for the risk they were running with their
property under that mortgage, the aforesaid central,
by a resolution passed on that same date, i.e.,
December 22, 1923, and amended on March 23,
1928, undertook to credit the owners of the plantation
thus mortgaged every year with a sum equal to two
per centum of the debt secured according to the
yearly balance, the payment of the bonus being made
at once, or in part from time to time, as soon as the
central became free of its obligations to the aforesaid
bank, and of those contracted by virtue of the contract
of supervision, and had funds which might be so
used, or as soon as it obtained from said bank
authority to make such payment. (Exhibits 5, 6; P. N.
B.)
Article 355 of the Civil Code considers three things
as civil fruits: First, the rents of buildings; second, the
proceeds from leases of lands; and, third, the income
from perpetual or life annuities, or other similar
sources of revenue. It may be noted that according to
the context of the law, the phrase "u otras analogas"
refers only to rents or income, for the adjectives
"otras" and "analogas" agree with the noun "rentas,"
as do also the other adjectives "perpetuas" and
"vitalicias." That is why we say that by "civil fruits"
the Civil Code understands one of three and only
three things, to wit: the rent of a building, the rent of
land, and certain kinds of income. As the bonus in
question is not the rent of a building or of land, the
only meaning of "civil fruits" left to be examined is
that of "income."cralaw virtua1aw library
Assuming that in the broad juridical sense of the
word "income" it might be said that the bonus in
question is "income" under article 355 of the Civil
Code, it is obvious to inquire whether it is derived
from the land mortgaged by Mariano Lacson
Ledesma to the appellant bank for the benefit of the
central; for if it is not obtained from that land but
from something else, it is not civil fruits of that land,
and the bank’s contention is untenable.
It is to be noted that the said bonus bears no
immediate, but only a remote and accidental relation
to the land mentioned, having been granted as
compensation for the risk of having subjected one’s
land to a lien in favor of the bank, for the benefit of
the entity granting said bonus. If this bonus be
income or civil fruits of anything, it is income arising
from said risk, or, if one chooses, from Mariano
Lacson Ledesma’s generosity in facing the danger for
the protection of the central, but certainly it is not
civil fruits or income from the mortgaged property,
which, as far as this case is concerned, has nothing to
do with it. Hence, the amount of the bonus, according
to the resolution of the central granting it, is not based
upon the value, importance or any other circumstance
of the mortgaged property, but upon the total value of
the debt thereby secured, according to the annual
balance, which is something quite distinct from and
independent of the property referred to.
Finding no merit in this appeal, the judgment
appealed from is affirmed, without express finding as
to costs. So ordered.
Johnson, Street, Malcolm, Villamor, Ostrand, Villa-
Real and Imperial, JJ., concur.
[G.R. No. 44606. November 28, 1938.]
VICENTE STO. DOMINGO
BERNARDO, Plaintiff-Appellant, v. CATALINO
BATACLAN, Defendant-Appellant. TORIBIO
TEODORO, purchaser-appellee.
Pedro de Leon,, for Plaintiff-Appellant.
Angel H. Mojica and Francisco Lavides,,
for Defendant-Appellant.
Jose Y. Garde, for Appellee.
DECISION
LAUREL, J.:
This is an appeal taken by both the plaintiff and the
defendant from the order of September 26, 1935,
hereinbelow referred to, of the Court of First Instance
of Cavite in Civil Case No. 2428.
There is no controversy as to the facts. By a contract
of sale executed on July 17, 1920, the plaintiff herein
acquired from Pastor Samonte and others ownership
of the parcel of land of about 90 hectares situated in
sitio Balayunan, Silang Cavite. To secure possession
of the land from the vendors the said plaintiff, on July
20, 1929, instituted Civil Case No. 1935 in the Court
of First Instance of Cavite. The trial court found for
the plaintiff in a decision which was affirmed by this
Supreme Court on appeal (G. R. No. 33017). 1 When
plaintiff entered upon the premises, however, he
found the defendant herein, Catalino Bataclan, who
appears to have been authorized by former owners, as
far back as 1922, to clear the land and make
improvements thereon, As Bataclan, who appears to
have been authorized by former owners, as far bank
as 1922, to clear the land and make improvements
thereon. As Bataclan was not a party in Case No.
1935, plaintiff, on June 11, 1931, instituted against
him, in the Court of First Instance of Cavite, Civil
Case No. 2428. In this case, plaintiff was declared
owner but the defendant was held to be possessor in
good faith, entitled to reimbursement in the total sum
of P1,642, for work done and improvements made.
The dispositive part of the decision
reads:jgc:chanrobles.com.ph
"Por las consideraciones expuestas, se declara al
demandante Vicente Santo Domingo Bernardo dueño
con derecho a la posesion del terreno que se describe
en la demanda, y al demandado Catalino Bataclan
con derecho a que el demandante le pague la suma de
P1,642 por gastos utiles hechos de buena fe en el
terreno, y por el cerco y ponos de coco y abaca
existentes en el mismo, y con derecho, ademas a
retener la posesion del terreno hasta que se le pague
dicha cantidad. Al demandante puede optar, en el
plazo de treinta dias, a partir de la fecha en que fuere
notificado de la presente, por pagar esa suma al
demandado, haciendo asi suyos el cerco y todas las
plantaciones existentes en el terreno, a razon de
trescientos pesos la hectarea. En el caso de que el
demandante optara por que el demandado le pagara el
precio del terreno, el demandado efectuara el pago en
el plazo conveniente por las partes o que sera fijado
por el Juzgado. Sin costas."cralaw virtua1aw library
Both parties appealed to this court (G. R. No. 37319).
1 The decision appealed from was modified by
allowing the defendant to recover compensation
amount to P2,212 and by reducing the price at which
the plaintiff could require the defendant to purchase
the land in question from P300 to P200 per hectare.
Plaintiff was given by this court 30 days from the
date when the decision became final within which to
exercise his option, either to sell the land to the
defendant or to buy the improvements from him. On
January 9, 1934, the plaintiff manifested to the lower
court his desire "to require the defendant to pay him
the value of the land at the rate of P200 per hectare or
a total price of P18,000 for the whole tract of land."
The defendant informed the lower court that he was
unable to pay for the land and, on January 24, 1934,
an order was issued giving the plaintiff 30 days
within which to pay the defendant the sum of P2,212
stating that, in the event of failure to make such
payment, the land would be ordered sold at public
auction "Para hacer pago al demandante de la suma
de P2,212 y el remanente después de deducidos los
gastos legales de la venta en publica subasta sera
entregado al demandante." On February 21, 1934,
plaintiff moved to reconsider the foregoing order so
that he would have preference over the defendant in
the order of payment. The motion was denied on
March 1, 1934 but on March 16 following the court
below, muto proprio, modified its order of January
24, "en el sentido de que el demandante tiene derecho
preferente al importe del terreno no se vendiere en
publica subasta, a razon de P200 por hecatarea y el
remanente, si acaso o hubiere se entregara el
demandado en pago de la cantidad de P2,212 por la
limpieza del terreno y las mejoras introducidas en el
mismo por el citado demandado." On April 24, 1934,
the court below, at the instance of the plaintiff and
without objection on the part of the defendant,
ordered the sale of the land in question at public
auction. The land was sold on April 5, 1935 to
Toribio Teodoro, the highest bidder, for P8,000. In
the certificate of sale issued to said purchaser on the
very day of sale, it was stated that the period of
redemption of the land sold was to expire on April 5,
1936. Upon petition of Toribio Teodoro the court
below ordered the provincial sheriff to issue another
certificate not qualified by any equity of redemption.
This was complied with by the sheriff on July 30,
1935. On September 18, 1935, Teodoro moved that
he be placed in possession of the land purchased by
him. The motion was granted by order of September
26, 1935, the dispositive part of which is as
follows:jgc:chanrobles.com.ph
"Por tanto, se ordena al Shériff Provincial de Cavite
ponga a Toribio Teodoro en posesion del terreno
comprado por el en subasta publica y por el cual se le
expidio certificado de vente definitiva, reservando al
demandado su derecho de ejercitar una accion
ordinaria para reclamar del demandante la cantidad
de P2,212 a que tiene derecho por la limpieza y
mejoras del terreno y cuya suma, en justicia y
equidad, debe ser descontada y deducida de la suma
de P8,000 que ya ha recibido el demandante."cralaw
virtua1aw library
The Civil Code confirms certain time-honored
principles of the law of property. One of these is the
principle of accession whereby the owner of property
acquires not only that which it produces but that
which is united to it either naturally or artificially.
(Art. 353.) Whatever is built, planted or sown on the
land of another, and the improvements or repairs
made thereon, belong to the owner of the land (art.
358). Where, however, the planter, builder, or sower
has acted in good faith, a conflict of rights arises
between the owners and it becomes necessary to
protect the owner of the improvements without
causing injustice to the owner of the land. In view of
the impracticability of creating what Manresa calls a
state of "forced coownership" (vol. 3, 4th ed., p. 213),
the law has provided a just and equitable solution by
giving the owner of the land the option to acquire the
improvements after payment of the proper indemnity
or to oblige the builder or planter to pay for the land
and the sower to pay the proper rent (art. 361). It is
the owner of the land who is allowed to exercise the
option because his right is older and because, by the
principle of accession, he is entitled to the ownership
of the accessory thing (3 Manresa, 4th ed., p. 213). In
the case before us, the plaintiff, as owner of the land,
chose to require the defendant, as owner of the
improvements, to pay for the land.
The defendant states that he is a possessor in good
faith and that the amount of P2,212 to which he is
entitled has not yet been paid to him. Therefore, he
says, he has a right to retain the land in accordance
with the provisions of article 453 of the Civil Code.
We do not doubt the validity of the premises stated.
"Considera la ley tan sagrada y legitima la deuda,
que, hasta que sea pagada, no consiente que la cosa se
restituya al vencedor." (4 Manresa, 4th ed., p., 304.)
We find, however, that the defendant has lost his
right to retention. In obedience to the decision of his
right to retention. In obedience to the decision of this
court in G. R. No. 37319, the plaintiff expressed his
desire to require the defendant to pay for the value of
the land. The said defendant could have become
owner of both land and improvements and continued
in possession thereof. But he said he could not pay
and the land was sold at public auction to Toribio
Teodoro. The law, as we have already said, requires
no more than that the owner of the land should
choose between indemnifying the owner of the
improvements or requiring the latter to pay for the
land. When he failed to pay for the land, the
defendant herein lost his right of retention.
The sale at public auction having been asked by the
plaintiff himself (p. 22, bill of exceptions) and the
purchase price of P8,000 received by him from
Toribio Teodoro, we find no reason to justify a
rupture of the situation has created between them, the
defendant- appellant not being entitled, after all, to
recover from the plaintiff the sum of P2,212.
The judgment of the lower court is accordingly
modified by eliminating therefrom the reservation
made in favor of the defendant- appellant to recover
from the plaintiff the sum of P2,212. In all other
respects, the same is affirmed, without
pronouncement regarding costs. So ordered.
Avanceña, C.J., Villa-Real, Imperial and Diaz, JJ.,
concur.
G.R. No. L-175 April 30, 1946
DAMIAN IGNACIO, FRANCISCO IGNACIO
and LUIS IGNACIO, petitioners,
vs.
ELIAS HILARIO and his wife DIONISIA DRES,
and FELIPE NATIVIDAD, Judge of First
Instance of Pangasinan, respondents.
Leoncio R. Esliza for petitioners.
Mauricio M. Monta for respondents.
MORAN, C.J.:
This is a petition for certiorari arising from a case in
the Court of First Instance of Pangasinan between the
herein respondents Elias Hilario and his wife Dionisia
Dres as plaintiffs, and the herein petitioners Damian,
Francisco and Luis, surnamed Ignacio, as defendants,
concerning the ownership of a parcel of land, partly
rice-land and partly residential. After the trial of the
case, the lower court, presided over by Hon. Alfonso
Felix, rendered judgment holding plaintiffs as the
legal owners of the whole property but conceding to
defendants the ownership of the houses and granaries
built by them on the residential portion with the rights
of a possessor in good faith, in accordance with
article 361 of the Civil Code. The dispositive part of
the decision, hub of this controversy, follows:
Wherefore, judgment is hereby rendered
declaring:
(1) That the plaintiffs are the owners of the
whole property described in transfer
certificate of title No. 12872 (Exhibit A)
issued in their name, and entitled to the
possession of the same;
(2) That the defendants are entitled to hold
the position of the residential lot until after
they are paid the actual market value of their
houses and granaries erected thereon, unless
the plaintiffs prefer to sell them said
residential lot, in which case defendants
shall pay the plaintiffs the proportionate
value of said residential lot taking as a basis
the price paid for the whole land according
to Exhibit B; and
(3) That upon defendant's failure to purchase
the residential lot in question, said
defendants shall remove their houses and
granaries after this decision becomes final
and within the period of sixty (60) days from
the date that the court is informed in writing
of the attitude of the parties in this respect.
No pronouncement is made as to damages
and costs.
Once this decision becomes final, the
plaintiffs and defendants may appear again
before this court for the purpose of
determining their respective rights under
article 361 of the Civil Code, if they cannot
come to an extra-judicial settlement with
regard to said rights.
Subsequently, in a motion filed in the same Court of
First Instance but now presided over by the herein
respondent Judge Hon. Felipe Natividad, the
plaintiffs prayed for an order of execution alleging
that since they chose neither to pay defendants for the
buildings nor to sell to them the residential lot, said
defendants should be ordered to remove the structure
at their own expense and to restore plaintiffs in the
possession of said lot. Defendants objected to this
motion which, after hearing, was granted by Judge
Natividad. Hence, this petition by defendants praying
for (a) a restraint and annulment of the order of
execution issued by Judge Natividad; (b) an order to
compel plaintiffs to pay them the sum of P2,000 for
the buildings, or sell to them the residential lot for
P45; or (c), a rehearing of the case for a
determination of the rights of the parties upon failure
of extra-judicial settlement.
The judgment rendered by Judge Felix is founded on
articles 361 and 453 of the Civil Code which are as
follows:
ART. 361. The owner of land on which
anything has been built, sown or planted in
good faith, shall have the right to
appropriate as his own the work, sowing or
planting, after the payment of the indemnity
stated in articles 453 and 454, or to oblige
the one who built or planted to pay the price
of the land, and the one who sowed, the
proper rent.
ART. 453. Necessary expenses shall be
refunded to every possessor; but only the
possessor in good faith may retain the thing
until such expenses are made good to him.
Useful expenses shall be refunded to the
possessor in good faith with the same right
of retention, the person who has defeated
him in the possession having the option of
refunding the amount of the expenses or
paying the increase in value which the thing
may have acquired in consequence thereof.
The owner of the building erected in good faith on a
land owned by another, is entitled to retain the
possession of the land until he is paid the value of his
building, under article 453. The owner of the land,
upon the other hand, has the option, under article 361,
either to pay for the building or to sell his land to the
owner of the building. But he cannot, as respondents
here did, refuse both to pay for the building and to
sell the land and compel the owner of the building to
remove it from the land where it is erected. He is
entitled to such remotion only when, after having
chosen to sell his land, the other party fails to pay for
the same. But this is not the case before us.
We hold, therefore, that the order of Judge Natividad
compelling defendants-petitioners to remove their
buildings from the land belonging to plaintiffs-
respondents only because the latter chose neither to
pay for such buildings not to sell the land, is null and
void, for it amends substantially the judgment sought
to be executed and is, furthermore, offensive to
articles 361 and 453 of the Civil Code.
There is, however, in the decision of Judge Felix a
question of procedure which calls for the
clarification, to avoid uncertainty and delay in the
disposition of cases. In that decision, the rights of
both parties are well defined under articles 361 and
453 of the Civil Code, but it fails to determine the
value of the buildings and of the lot where they are
erected as well as the periods of time within which
the option may be exercised and payment should be
made, these particulars having been left for
determination apparently after the judgment has
become final. This procedure is erroneous, for after
the judgment has become final, no additions can be
made thereto and nothing can be done therewith
except its execution. And execution cannot be had,
the sheriff being ignorant as to how, for how much,
and within what time may the option be exercised,
and certainly no authority is vested in him to settle
these matters which involve exercise of judicial
discretion. Thus the judgment rendered by Judge
Felix has never become final, it having left matters to
be settled for its completion in a subsequent
proceeding, matters which remained unsettled up to
the time the petition is filed in the instant case.
For all the foregoing, the writ of execution issued by
Judge Natividad is hereby set aside and the lower
court ordered to hold a hearing in the principal case
wherein it must determine the prices of the buildings
and of the residential lot where they are erected, as
well as the period of time within which the plaintiffs-
respondents may exercise their option either to pay
for the buildings or to sell their land, and, in the last
instance, the period of time within which the
defendants-petitioners may pay for the land, all these
periods to be counted from the date the judgment
becomes executory or unappealable. After such
hearing, the court shall render a final judgment
according to the evidence presented by the parties.
The costs shall be paid by plaintiffs-respondents.
G.R. No. L-57288 April 30, 1984
LEONILA SARMINETO, petitioner,
vs.
HON. ENRIQUE A. AGANA, District Judge,
Court of First Instance of Rizal, Seventh Judicial
District, Branch XXVIII, Pasay City, and
SPOUSES ERNESTO VALENTINO and
REBECCA LORENZO-
VALENTINO, respondents.
Mercedes M. Respicio for petitioner.
Romulo R. Bobadilla for private respondents.
MELENCIO-HERRERA, J.:ñé+.£ªwph!1
This Petition for certiorari questions a March 29,
1979 Decision rendered by the then Court of First
Instance of Pasay City. The Decision was one made
on memoranda, pursuant to the provisions of RA
6031, and it modified, on October 17, 1977, a
judgment of the then Municipal Court of Paranaque,
Rizal, in an Ejectment suit instituted by herein
petitioner Leonila SARMIENTO against private
respondents, the spouses ERNESTO Valentino and
Rebecca Lorenzo. For the facts, therefore, we have to
look to the evidence presented by the parties at the
original level.
It appears that while ERNESTO was still courting his
wife, the latter's mother had told him the couple could
build a RESIDENTIAL HOUSE on a lot of 145 sq.
ms., being Lot D of a subdivision in Paranaque (the
LAND, for short). In 1967, ERNESTO did construct
a RESIDENTIAL HOUSE on the LAND at a cost of
P8,000.00 to P10,000.00. It was probably assumed
that the wife's mother was the owner of the LAND
and that, eventually, it would somehow be transferred
to the spouses.
It subsequently turned out that the LAND had been
titled in the name of Mr. & Mrs. Jose C. Santo, Jr.
who, on September 7 , 1974, sold the same to
petitioner SARMIENTO. The following January 6,
1975, SARMIENTO asked ERNESTO and wife to
vacate and, on April 21, 1975, filed an Ejectment suit
against them. In the evidentiary hearings before the
Municipal Court, SARMIENTO submitted the deed
of sale of the LAND in her favor, which showed the
price to be P15,000.00. On the other hand,
ERNESTO testified that the then cost of the
RESIDENTIAL HOUSE would be from P30,000.00
to P40,000.00. The figures were not questioned by
SARMIENTO.
The Municipal Court found that private respondents
had built the RESIDENTIAL HOUSE in good faith,
and, disregarding the testimony of ERNESTO, that it
had a value of P20,000.00. It then ordered ERNESTO
and wife to vacate the LAND after SARMIENTO has
paid them the mentioned sum of P20,000.00.
The Ejectment suit was elevated to the Court of First
Instance of Pasay where, after the submission of
memoranda, said Court rendered a modifying
Decision under Article 448 of the Civil Code.
SARMIENTO was required, within 60 days, to
exercise the option to reimburse ERNESTO and wife
the sum of 40,000.00 as the value of the
RESIDENTIAL HOUSE, or the option to allow them
to purchase the LAND for P25,000.00. SARMIENTO
did not exercise any of the two options within the
indicated period, and ERNESTO was then allowed to
deposit the sum of P25,000.00 with the Court as the
purchase price for the LAND. This is the hub of the
controversy. SARMIENTO then instituted the instant
certiorari proceedings.
We agree that ERNESTO and wife were builders in
good faith in view of the peculiar circumstances
under which they had constructed the
RESIDENTIAL HOUSE. As far as they knew, the
LAND was owned by ERNESTO's mother-in-law
who, having stated they could build on the property,
could reasonably be expected to later on give them
the LAND.
In regards to builders in good faith, Article 448 of the
Code provides:têñ.£îhqwâ£
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. (Paragraphing
supplied)
The value of the LAND, purchased for P15,000.00 on
September 7, 1974, could not have been very much
more than that amount during the following January
when ERNESTO and wife were asked to vacate.
However, ERNESTO and wife have not questioned
the P25,000.00 valuation determined by the Court of
First Instance.
In regards to the valuation of the RESIDENTIAL
HOUSE, the only evidence presented was the
testimony of ERNESTO that its worth at the time of
the trial should be from P30,000.00 to P40,000.00.
The Municipal Court chose to assess its value at
P20,000.00, or below the minimum testified by
ERNESTO, while the Court of First Instance chose
the maximum of P40,000.00. In the latter case, it
cannot be said that the Court of First Instance had
abused its discretion.
The challenged decision of respondent Court, based
on valuations of P25,000.00 for the LAND and
P40,000.00 for the RESIDENTIAL HOUSE, cannot WHEREFORE, the Petition for Certiorari is hereby
be viewed as not supported by the evidence. The ordered dismissed, without pronouncement as to
provision for the exercise by petitioner SARMIENTO costs.
of either the option to indemnify private respondents
in the amount of P40,000.00, or the option to allow SO ORDERED.1äwphï1.ñët
private respondents to purchase the LAND at
P25,000.00, in our opinion, was a correct
decision.têñ.£îhqwâ£
The owner of the building erected
in good faith on a land owned by
another, is entitled to retain the
possession of the land until he is
paid the value of his building,
under article 453 (now Article 546).
The owner, of the land. upon, the
other hand, has the option, under
article 361 (now Article 448), either
to pay for the building or to sell his
land to the owner of the
building. But he cannot, as
respondents here did, refuse both to
pay for the building and to sell the
land and compel the owner of the
building to remove it from the land
where it is erected. He is entitled to
such remotion only when, after
having chosen to sell his land, the
other party fails to pay for the
same. (Emphasis ours)
We hold, therefore, that the order of
Judge Natividad compelling
defendants-petitioners to remove
their buildings from the land
belonging to plaintiffs-respondents
only because the latter chose
neither to pay for such buildings
nor to sell the land, is null and void,
for it amends substantially the
judgment sought to be executed and
is, furthermore, offensive to articles
361 (now Article 448) and 453
(now Article 546) of the Civil
Code. (Ignacio vs. Hilario, 76 Phil.
605, 608 [1946]).