November 6, 1913

G.R. No. 7726MARIANO RIOSA,plaintiff-appellant,vs.CLARO VERZOSA and CIRIACO BULAN,defendants-appellees.Albert E. Somersille, for appellant.Sulpicio V. Cea, for appellees.

JOHNSON,J.:On the 25th of January, 1910, the plaintiff commenced an action against the defendants, the purpose of which was to secure an injunction against the defendants to prevent them from harvesting and destroying the growing hemp upon a certain parcel of land, more particularly described in the first paragraph of the complaint, and to recover damages in the sum of P500, for injuries already committed upon such land, and to require the defendants to deposit the hemp already harvested with the deputy sheriff of the pueblo of Malinao.

Upon the presentation of said petition, the Honorable Vicente Nepomuceno, judge, granted a temporary injunction in conformity with the prayer of the petition. The defendants were duly served with a summons and a copy of the petition, as well as with a copy of the injunction granted by the court. The defendants failed to appear and answer the complaint within the time prescribed by law and the rules of the court. By reason of the failure of the defendants to appeal, the plaintiff, on the 21st of March, 1910, presented a motion asking that a judgment by default be rendered against them, which motion was granted on the 2d of April, 1910.

On the 15th of April, the defendants appeared by their attorney. The cause was duly brought to trial, by notice to all of the parties, on the 20th of April, 1910. After hearing the evidence, the Honorable Vicente Nepomuceno, judge, granted a permanent injunction against the defendants, restraining them from cultivating or harvesting the crops upon the said land or from doing anything thereon which would tend to injure its value, and also found that the defendants had caused damages to the plaintiff in the sum of P300.

It appears from the record that the attorney for the defendants was present in court during the trial of the cause, but by reason of the fact that the defendants had presented no answer, no defense whatever was made during the trial of the cause.

On the 21st of April, 1910, the defendants, by their attorney, presented a motion, asking that the judgment by default be set aside and that they be permitted to present their defense. It appears from the record that the present cause in the lower court was numbered 1206 and that there was pending in the lower court at the same time cause No. 1207, in which the present plaintiff was the plaintiff and the said Claro Verzosa was the defendant. The record does not fully disclose what the real purpose of cause No. 1207 was. It may be gathered, however, from some things which appear in the record, that cause No. 1207 related to a mortgage with Claro Verzosa had executed and delivered to the present plaintiff, upon the same parcel of land described in the first paragraph of the complaint.

Upon a consideration of the motion to have the judgment by default set aside, the Honorable Percy M. Moir, judge, after a consideration of the arguments of the respective parties, denied the same in the following language:

The court does not consider the facts set out herein sufficient to warrant the setting aside of the judgment herein mentioned. It does seem to the court, from a study solely of the record, that the damages given are excessive, but the court does not consider that the defendant in this case has any right to ask the setting aside of a judgment which was rendered in his presence and in his presence and in the presence of his attorneys.If the defendant had redeemed the land or should redeem the land in the time allowed by law, a motion then for relief from the judgment will be considered.At this juncture, by reason of the ruling of Judge Moir upon the motion to dismiss, it becomes important to examine the particular facts, in order to fully understand Judge Moir's conclusions. The facts involved in the present case seem to be as follows:

Some time prior to the 1st day of December, 1909, a judgment was rendered against the defendant, Claro Verzosa, for the sum of P320.87. Upon said judgment an execution was issued and was levied upon the land described in the first paragraph of the complaint. Upon the 1st day of December, 1909, said land was sold at public auction, under said execution, and was purchased by the plaintiff also held a mortgage upon said land which was due on the 1st day of January, 1910. It will be remembered that the present action was commenced on the 25th of January, 1910. The record does not clearly disclose what action the plaintiff had taken to protect his interest in the land under his mortgage. The present action was brought to protect the plaintiff's interest in the land, by virtue of his purchase of the same under said execution on the 1st of December, 1909. It will be remembered that the law permits the owner of land which has been sold under an execution to redeem the same within a period of twelve months. The question then arises, in view of that right of the owner of the land, What interest has the purchaser of the land sold under execution in the same during said twelve months? What right has he to interfere with the owner in the management and control of such land? Is he entitled to the rents and profits during the twelve months? Can he eject the owner from the possession of the same? We believe that the weight of authority is to the effect that the purchaser of lands sold at public auction under a writ of execution only has an inchoate right in the property, subject to be defeated and terminated within a period of twelve months from the date of sale, by a redemption on the part of the owner. (Sections 464, 465, 468, and 469,Act No. 190.) We have already held, in the case of De la Rosavs.Santos (10 Phil. Rep., 148), that the purchaser, where the land was in possession of the owner and not a tenant, was not entitled to recover the rents and profits of the land sold during the period within which the owner might redeem. By virtue of said section 469, where the land is in possession of a tenant, a different rule prevails. In the present case the property was in the possession of the owner, and the inchoate right of the purchaser was subject to be defeated at any moment during the period of redemption. The owner was entitled to remain in the possession of the land sold for the statutory term of twelve months, and she might at any time defeat the inchoate right obtained by the purchaser by proper redemption within that period. (Sections 463 and 464,Act No. 190; De la Rosavs.Santos,supra;In reCeballos,12 Phil. Rep., 271.) There would seem, therefore, to be much reason in the conclusion of Judge Moir that he would consider the motion to set aside the judgment by default, if the defendant should redeem the land in question within the time allowed by law. Under the law it would seem to be difficult to fully understand the right of the plaintiff to interfere in the manner in which he has attempted to interfere with the owner of the land before the expiration of the twelve months within which the owner had a right to redeem the land.On the 11th of September, 1910, the defendants, having redeemed the land in the manner provided for by laws, renewed their motion to have the judgment by default set aside. This motion was duly brought on for trial on the 17th of September, 1910, and Judge Moir thereupon set aside the judgment therefore rendered by the Honorable Vicente Nepomuceno, in which he granted a permanent injunction and allowed damages against the defendants. Later the defendants presented an answer and the cause was duly brought to trial on its merits.

After hearing the evidence, the Honorable Percy M. Moir, judge, on the 3d of April, 1911, rendered a judgment in which he held that the plaintiff was not entitled to the remedy prayed for in his petition, and dismissed the cause of action with costs against the defendants. From that judgment the plaintiff appealed and in this court made the following assignments of error:

The Court of First Instance erred:

1. In setting aside the judgment rendered in this case on September 17, 1910.

2. In assuming jurisdiction to annul said judgment.

3. In not allowing the plaintiffs damages, after assuming jurisdiction.

The first and second assignments of error we think may properly be considered together. The appellee presents no brief.

In the first place Judge Percy M. Moir succeeded Vicente Nepomuceno as judge of the Court of First Instance of the Province of Albay and therefore had a right to do, in relation with the sentence in the present case, whatever the former judge might have done. It will be remembered that after Judge Nepomuceno rendered his judgment of the 20th of April, 1910, in which a permanent injunction was granted and damages allowed to the plaintiff, a motion by the defendant was made on the 21st of April, 1910, which prevented the judgment of the 20th of April, 1910, from becoming final until said motion had been finally disposed of. It will be noted also that the order of Judge Moir of the 9th of June, 1910, did not finally dispose of said motion. Said order gave the defendants the right to have the question presented in their motion considered again when they redeemed the land in question. Inasmuch, therefore, as the judge had left the motion of the defendants of the 21st of April undecided, the sentence of the 20th of April did not become final. On the 11th of September, 1910, the defendants having presented satisfactory proof that they had redeemed the land in question, again asked the court to consider their motion of the 21st of April.

On the 17th of September, 1910, Judge Moir, upon a reconsideration of the motion (of the 21st of April, 1910) in relation with the proof presented on the 11th of September, 1910, by the defendants, entered an order declaring it without effect and nullifying the sentence of the 20th of April, 1910. To this ruling the plaintiff excepted and gave notice of his intention to appeal the cause to the Supreme Court, which notice of appeal was later withdrawn.

After certain proceedings, which we deem it unnecessary here to relate, the lower court on the 24th of September, 1910, as well as by an order of the 25th of February, 1911, modified said order of the 17th of September, 1910. The cause was thereafter tried upon its merits and Judge Moir rendered a sentence deciding that the plaintiff was without right in the premises against the defendants, with costs against the defendants, and final decision was rendered upon the 10th of April, 1911.

As we said above, Judge Moir had jurisdiction to make any order in the premises which the former judge might have made. An examination of the record shows that every order which was made after the sentence of the 20th of April, 1910, until final judgment was rendered on the 10th of April, 1911, was made at the special instance and request of either the plaintiff or the defendant. No objection was made to the jurisdiction of the court in consideration of the questions presented to it. From a careful examination of all the orders made by the lower court, the Honorable Percy M. Moir, they seem to be fully justified and we find no reason for modifying or reversing them.

With reference to the third assignment of error, it may be said:

1. That the defendants were in possession of the land at the time it was sold at public sale under execution on the 1st of December, 1909, and continued in the possession of said land.

2. The plaintiff, by virtue of the purchase under the execution sale, acquired no right, except a mere inchoate right in the land, until after the expiration of the period within which the defendants had right to redeem.

3. The defendants redeemed the land in accordance with the provisions of law within the legal period. It must follow, therefore, that the plaintiff was not entitled to the remedy prayed for in his petition and is, therefore, not entitled to damages resulting from the use and occupation by the defendants.

We find no reason in the record for reversing or modifying the conclusions of the lower court. The judgment of the lower court is, therefore, hereby affirmed with the costs of this instance.

G.R. No. 9921, Velasco v. Rosenberg's Inc., 32 Phil. 72

G.R. No. 9921JOSE VELASCO,plaintiff-appellant,vs.ROSENBERGS'S, INCORPORATED,defendant-appellee.

C.W. O'Brien for appellant.Beaumont and Tenney for appellee.

JOHNSON,J.:The present action was commenced in the Court of First Instance of the city of Manila, on the 14th of July, 1913. Its purpose was to recover of the defendant corporation the possession of a certain parcel of land, together with the buildings thereon, more particularly described in the third paragraph of the complaint, together with the sum of P500, for each and every month from the 1st of July, 1912, until the same is delivered to the plaintiff. The plaintiff further petitioned for the appointment of a receiver to take charge of and conserve the property in litigation during the pendency of the action.

In accordance with the prayer of the petition a receiver was appointed on the 14th of July, 1913. The receiver took possession of the property.

The defendant set up a general and special defense. In his general defense he denied that the plaintiff is entitled to the possession of the property in question. The defendant further alleged that the receiver not only took possession of the property described in the third paragraph of the complaint, but other property as well. The defendant further alleged that the plaintiff, through its receiver, fraudulently used the name of Rosenberg, and did solicit and obtain business from the public by the use of such name, to the damage of the defendant in the sum of P20,000. The defendant further alleged that he had been damaged by the appointment of the receiver in the sum of P5,000, together with other damages which the defendant claims to have received from the action of the plaintiff, and prayed for a judgment against the plaintiff in the sum of P29,350.

Upon the issue thus presented the cause was brought on for trial and after hearing the evidence, the honorable A.S. Crossfield, judge, found that during the time the plaintiff occupied the property in question, through its receiver, and used the trade name of the defendant, the latter was damaged in the sum of P500. The court further found that the receiver took possession of certain personal property, including twenty garbage cans, thirty-four feed boxes, and other property of a similar character, and retained the same to the damage of the defendant in the sum of P350, and rendered the following judgment: (First) that the plaintiff was entitled to the possession of the parcel of land, together with the buildings thereon, particularly described in said paragraph three; (second) that a judgment be rendered in favor of the defendant and against the plaintiff in the sum of P850.

From that judgment the plaintiff appealed to this court and made the following assignments of error: (first) the court erred in holding that while the plaintiff was the owner of the property from July 1, 1912, that he was not entitled to recover for its subsequent use and occupation; (second) the court erred in holding that the defendant corporation was lawfully occupying the premises; (third) the plaintiff being the owner of the property and entitled to its possession, the court erred in holding that because the plaintiff, in connection with the receiver, continued the livery business thereinbefore conducted by the defendant, that the defendant was entitled to damages therefor; (fourth) the court erred in failing to allow the plaintiff payment for the use of the personal property and for payment for the property sold and converted by the defendant after July 1, 1912; (fifth) the court erred in holding that the defendant was entitled to the sum of P350 for the property mentioned in paragraph six of its cross-complaint.

In our judgment, the first, second, third, and fourth assignments of error may be discussed together. They involve but two questions: (first) the right of the purchaser at an execution sale to the rents and profits of the property sold when the execution debtor is in possession of the same at the time of the sale, during the period of redemption, or for a period of one year there after; and (second) the right of the defendant to recover of the plaintiff damages resulting from a continuance of the business sold under execution, by a receiver duly appointed by the court.

With reference to the first question, it may be said that that question has already been discussed and decided by this court in the case ofDe la Rosa vs. Revita Santos(10 Phil. Rep., 148). The facts in that case are very analogous to the facts in the present case, so far as the right of the purchaser is concerned to collect rent for the property during the period of redemption when the execution debtor is in possession of the property. In that case the court held: "That, inasmuch as, under the law, the rents received by the purchaser during the period allowed for redemption must be applied on account of the redemption price, the judgment debtor in possession of such property should not be required to pay rent, inasmuch as he would thereby simply be paying rent to himself." (Aldecoa & Co.vs.Navarro,23 Phil. Rep., 203, 206; Riosavs.Verzosa and Bulan,26 Phil. Rep., 86,89; secs. 464, 465, 468, and 469 ofAct No. 190.)

With reference to the damage caused to the defendant by the receiver in continuing in the business, it may be said that inasmuch as the receiver did continue to run the business and inasmuch as he was an officer of the court, appointed thereby for the purpose of conserving the property we have a right to assume that he was authorized so to do. There is nothing in the record to the contrary. That being true, the question of damages arising from his running the business should have been settled in his final accounting to the court. There is nothing in the record in the present case which justifies that part of the judgment of the lower court. Therefore that part of the judgment of the lower court in favor of the defendant and against the plaintiff for the sum of P500 must be revoked.

With reference to that part of the judgment of the lower court relating to the P350, it may be said that there is nothing in the record which shows that said garbage cans and other property, horse feed, etc., was not a part of the property turned over to the receiver. If it were, then the receiver should have rendered an account for the same in his final report to the court. If in such final accounting the receiver had not properly reported the same or accounted therefor, an objection might properly have then been made to the accounting of the receiver and he held responsible therefor in case of loss through negligence or by bad administration of the property given into his care. There is nothing in the record which shows that the property had not been properly accounted for. There is nothing in the record which shows that said property had been negligently lost, and therefore nothing in the record which justifies a judgment against the plaintiff and in favor of the defendant for its value. Therefore that part of the judgment of the lower court must also be revoked.

With the above modifications the judgment of the lower court is hereby affirmed, and without any finding as to costs, it is so ordered.

FIRST DIVISION

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.:+.wph!1This 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 HOUSEona 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:t.hqwART. 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 be viewed as not supported by the evidence. The provision for the exercise by petitioner SARMIENTO of either the option to indemnify private respondents in the amount of P40,000.00, or the option to allow private respondents to purchase the LAND at P25,000.00, in our opinion, was a correct decision.t.hqwThe 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 landand 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]).

WHEREFORE, the Petition for Certiorari is hereby ordered dismissed, without pronouncement as to costs.

SO ORDERED.1wph1.tSECOND DIVISION

G.R. No. L-33422 May 30, 1983

ROSENDO BALUCANAG,petitioner,vs.HON. JUDGE ALBERTO J. FRANCISCO and RICHARD STOHNER,respondents.

Alfredo C. Estrella for petitioner.

Pascual C. Garcia for respondents.

ESCOLIN,J.:This petition for review of the decision of the Court of First Instance of Manila in Civil Case No. 67503 calls for a determination of the respective rights of the lessor and the lessee over the improvements introduced by the latter in the leased premises.

Cecilia dela Cruz Charvet was the owner of a 177.50 square meter lot located in Zamora Street, Pandacan, Manila, covered by Transfer Certificate of Title No. 25664. On August 31, 1952, Mrs. Charvet leased said lot to respondent Richard Stohner for a period of five [5] years at the monthly rental of 2140.00, payable in advance within the first ten [10] days of each month. The lease contract1provided, among others, that:

IV. The lessee may erect such buildings upon and make such improvements to the leased land as he shag see fit. All such buildings and improvements shall remain the property of the lessee and he may remove them at any nine, it being agreed, however, that should he not remove the said buildings and improvements within a period of two months after the expiration of this Agreement, the Lessor may remove the said buildings and improvements or cause them to be removed at the expense of the Lessee.

During the existence of the lease, Stohner made fillings on the land and constructed a house thereon, said improvements being allegedly valued at P35,000.00.

On March 8, 1966, Mrs. Charvet sold the said lot to petitioner Rosendo Balucanag.2For Stohner's failure to pay the rents, Balucanag, thru counsel, wrote Stohner a letter demanding that he vacate the premises.3In reply thereto, Stohner, also thru counsel, claimed that he was a builder in good faith of the residential house erected in the land. He offered the following proposals for a possible compromise, to wit:

[a] Mr. Stohner will purchase the said lot from your client with the interest of 12% per annum on the value, or

[b] Your client Mr. Rosendo Balucanag will reimburse our client in the total amount of P35,000.00 for the improvements and construction he has made on the lot in question.

As no agreement was reached, Balucanag instituted in the City Court of Manila an ejectment suit against Stohner and, after due trial, the court rendered a decision, the decretal portion of which reads as follows:

IN VIEW OF THE FOREGOING CONSIDERATIONS, judgment is hereby rendered, ordering the defendant to pay the plaintiff the sum of P360.00 as back rentals from December, 1965 to August 1966 at the rate of P40.00 a month and to vacate the premises. The defendant is further ordered to pay the sum of P100.00 as Attomey's fees which is considered reasonable within the premises.

On appeal, the Court of First Instance of Manila, Branch IX, presided by respondent Judge Alberto J. Francisco, after conducting a trial de novo, rendered a decision, setting aside the judgment of the city court and dismissing the petitioner's complaint. Respondent judge held that Stohner was a builder in good faith because he had constructed the residential house with the consent of the original lessor, Mrs. Charvet, and also because the latter, after the expiration of the lease contract on August 31, 1957, had neither sought Stohner's ejectment from the premises, nor the removal of his house therefrom. Invoking Articles 448 and 546 of the Civil Code.4respondent judge concluded that Stohner, being a builder in good faith, cannot be ejected until he is reimbursed of the value of the improvements.

Frustrated in his effort to have the decision reconsidered, Balucanag filed the instant petition for review.

We find the petition impressed with merit. Paragraph IV of the lease contract entered into by Stohner with Mrs. Charvet specifically provides that "... such buildings and improvements shan remain the property of the lessee and he may remove them at any time, it being agreed, however, that should he not remove the said buildings and improvements within a period of two months after the expiration of this Agreement, the Lessor may remove the said buildings and improvements or cause them to be removed at the expense of the Lessee." Respondent Stohner does not assail the validity of this stipulation, Neither has he advanced any reason why he should not be bound by it.

But even in the absence of said stipulation, respondent Stohner cannot be considered a builder in good faith. Article 448 of the Civil Code, relied upon by respondent judge, applies only to a case where one builds on land in the belief that he is the owner thereof and it does not apply where one's only interest in the land is that of a lessee under a rental contract. In the case at bar, there is no dispute that the relation between Balucanag and Stohner is that of lessor and lessee, the former being the successor in interest of the original owner of the lot. As we ruled inLopez, Inc. vs. Phil. and Eastern Trading Co., Inc.,5"... the principle of possessor in good faith refers only to a party who occupies or possess property in the belief that he is the owner thereof and said good faith ends only when he discovers a flaw in his title so as to reasonably advise or inform him that after all he may not be the legal owner of said property. It cannot apply to a lessee because as such lessee he knows that he is not the owner of he leased premises. Neither can he deny the ownership or title of his lessor. ... A lessee who introduces improvements in the leased premises, does so at his own risk in the sense that he cannot recover their value from the lessor, much less retain the premises until such reimbursement. ..."

The law applicable to the case at bar is Article 1678 of the Civil Code, which We quote:

Art. 1678. If the lessee 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, the lessor upon the termination of the lease shall pay the lessee one-half of the value of the improvements at the time. Should the lessor refuse to reimburse said amount, the lessee may remove the improvements, even though the principal thing may suffer damage thereby. He shall not, however, cause any more impairment upon the property leased than is necessary. ...

This article gives the lessor the option to appropriate the useful improvements by paying one-half of their value,6And the lessee cannot compel the lessor to appropriate the improvements and make reimbursement, for the lessee's right under the law is to remove the improvements even if the leased premises may suffer damage thereby. But he shall not cause any more damage upon the property than is necessary.

One last point. It appears that while the lease contract entered into by Stohner and Mrs. Charvet had expired on August 31, 1957, he nevertheless continued in possession of the premises with the acquiescence of Mrs. Charvet and later, of Balucanag. An implied new lease ortacita reconduccionwas thus created between the parties, the period of which is established by Article 1687 of the Civil Code thus:

Art. 1687. If the period for the lease has not been fixed, it is understood to be from year to year, if the rent agreed upon is annual; from month to month, if it is monthly: from week to week, if the rent is weekly: and from day to day, if the rent is to be paid daily. ...

Under the above article, the duration of the new lease must be deemed from month to month, the agreed rental in the instant case being payable on a monthly basis. The lessor may thus terminate the lease after each month with due notice upon the lessee. After such notice, the lessee's right to continue in possession ceases and his possession becomes one of detainer. Furthermore, Stohner's failure to pay the stipulated rentals entities petitioner to recover possession of the premises.

WHEREFORE, the decision in Civil Case No. 67503 is hereby set aside, with costs against respondent Stohner. The latter is ordered to vacate the premises in question and to pay Rogelio Balucanag the rentals due from March 1969 up to the time he surrenders the premises, at the rate of P40.00 a month.

SO ORDERED.

SECOND DIVISION

G.R. No. L-34199 May 30, 1983

REPUBLIC OF THE PHILIPPINES,petitioner,vs.HON. SANTIAGO O. TAADA, as Judge of the Court of First Instance of Cebu, Branch V, and SPOUSES JACINTO K. RAFANAN and VICENTA L. RAFANAN,respondents.

The Solicitor General for petitioner.

Jose D. Palma for respondents.

ABAD SANTOS,J.:By petition for review on certiorari We are asked to reverse a decision of the defunct Court of First Instance of Cebu in Civil Case No. 10630.

In Civil Case No. 10630, the Republic of the Philippines sought the reversion of two parcels of land from the spouses Jacinto and Vicente Rafanan. After issues had been joined for trial and judgment, the parties submitted a stipulation of facts which reads as follows:

Come now the parties, assisted by their respective counsels, and to this Honorable Court most respectfully submit the following stipulation of facts:

1. That the parties admit the rapacity, personality, Identity and residence of each one of them;

2. That the parties likewise admit the Identity of the two parcels of land involved in this case, the description of which are as follows:

A parcel of land (Lot No. 2745 of the Cadastral Survey of Cebu, L.R.C. Cad. Record No. 9467), situated in the City of Cebu, Island of Cebu, [technical description follows]; containing an area of EIGHT THOUSAND EIGHT HUNDRED FIFTY (8,850) SQUARE METERS. ...

A parcel of land (lot 2740 of the Cad. Survey of Cebu, L.R.C. Cad. Record No. 9467), situated in the City of Cebu, [technical description follows]; containing an area of THREE THOUSAND NINE HUNDRED SEVENTY FIVE (3,975) SQUARE METERS ...

3. That the plaintiff was the original owner of the two (2) parcels of land above described together with all buildings and improvements thereon, covered by Transfer Certificate of Title No. 20800 and Transfer Certificate of Title No. 20801, respectively, both issued by the Register of Deeds of Cebu City, free from all hens and encumbrances, having acquired the said parcels of land from the United States Government to which these parcels of land were vested under the Philippine Property Act of 1946, the same being former enemy (Japanese) owned lands. Certified copies of Transfer Certificates of Titles Nos. 20800 and 20801 are hereto attached and the integral part hereof as Annexes "A" and "A-1".

4. That on or about January 28, 1959, the plaintiff, acting through the Board of Liquidators, a government agency created under Executive Order No. 372, series of 1950, through its Acting Chairman and Manager Filomeno C. Kintanar, thereunto duly authorized by its Resolution No. 726, series of 1958, sold the above described parcels of land together with au improvements existing thereon, to DELFIN N. LOPEZ, of legal age, single, Filipino and resident of Mambaling, Cebu City, (now deceased), for and in consideration of the sum of TWELVE THOUSAND EIGHT HUNDRED TWENTY FIVE (P12,825.00). PESOS, Philippine Currency. A certified true copy of the deed of absolute sale embodying the foregoing is hereto attached and made integral part hereof as Annex "B".

5. That on December 29, 1959, Delfin N. Lopez sold the said parcels of land to MARIANO HO, SR., of legal age, Filipino, married to Josefina Tan Cheng and resident of Cebu City, for and in consideration of the sum of TWENTY-ONE THOUSAND EIGHT HUNDRED TWO and FIFTY CENTAVOS (P21,802.50) PESOS, Philippine Currency. A certified true copy of the deed of absolute sale embodying the foregoing is hereto attached and made integral part hereof as Annex "C". Pursuant to the said deed of absolute sale, the Register of Deeds of Cebu City issued Transfer Certificates of Title Nos. 20984 and 20986, respectively, in the name of MARIANO HO, SR., Filipino, of legal age, married to Josefina Tan Cheng, with residence and postal address at Cebu City, Philippines. Certified copies of the Transfer Certificates of 'title Nos. 20984 and 20985 are hereto attached and made integral part hereof as Annexes "C-1 " and "C.2."

6. That on July l6, 1982, Mariano Ho and Josefina Tan Cheng sold the above described two parcels of land, together with all improvements existing thereon, to the spouses JACINTO K. RAFANAN and VICENTA L. RAFANAN, both of legal age, Filipinos, and residents of Cebu City, for and in consideration of the sum of TWENTY SIX THOUSAND (P26,000.00) PESOS, Philippine currency. A certified true copy of the deed of absolute sale embodying the foregoing is hereto attached and made integral part hereof as Annex "D". Pursuant to such deed of absolute sale, the Register of Deeds of Cebu City issued Transfer Certificates of Title Nos. 25490 and 26491, respectively, certified true copies of which being hereto attached and made integral part hereof as Annexes "D-1 " and "D-2".

WHEREFORE, it is respectfully prayed that the foregoing stipulation of facts be approved and that judgment be rendered on the basis thereof.

The parties further pray that they be granted thirty (30) days from approval hereof to file their respective memoranda simultaneously.

Cebu City, December 7, 1970.

The parties prayed that the stipulation of facts be approved and that the case be considered submitted for decision without further trial and presentation of evidence, oral or documentary. The court granted the prayer and rendered a decision dismissing the complaint.

One of the grounds invoked for the reversion of the lands to the petitioner is stated in the complaint as follows:

7. Considering that the sale executed by plaintiff's Board of Liquidators of the above described realty to DELFIN N. LOPEZ was subject to the approval of the President of the Philippines, and to other conditions and limitations imposed by law, which the defendants are conclusively presumed to know, and since no such approval was given, the sale was atotalnullity... (Rollo, pp. 27-28.)

The same ground is invoked in the petition in the following words:

In the case at bar, the deed of sale executed by the Republic of the Philippines, represented by the Board of Liquidators as vendor in favor of Delfin N. Lopez, of legal age, single, Filipino with residence at Mambaling, Cebu City, of the two (2) parcels of land owned by the government, which it acquired from the United States Government under the Philippine Property Act of 1946, was executed by Filomeno C. Kintanar, Acting Chairman and Manager of the Board of Liquidators, pursuant to Resolution No. 726, series of 1958 of aforesaid Board. The said deed of sale was not signed or even approved by the President of the Philippines as required by law, which approval should appear in the same deed of sale. (Rollo, pp. 14-15.)

The stipulation of facts is silent as to whether or not the President of the Philippines approved the sale of the two lots to Delfin N. Lopez. Nonetheless, the petitioner insists that there was no approval. It calls attention to the fact that the deed of sale which is attached to the stipulation of facts and marked as Annex B "was not signed or even approved by the President of the Philippines as required by law, which approval should appear in the same deed of sale." (Brief, p. 9.) An examination of the copy of the deed of sale which is attached as Annex A to the petition and which forms pages 29 and 30 of the Rollo of this case confirms the factual claim of the petitioner-that the sale of the two lots to Delfin N. Lopez did not have the approval of the President of the Philippines.

The private respondents invoke three legal presumptions in rebuttal, namely: "(a) that official duty has been regularly performed (Sec. 5 (M), Rule 131, new Rules of Court); (b) that the ordinary course of business has been followed (Sec. 5, (q), Rule 131, new Rules of Court; and (c) that the law has been obeyed (Sec. 5 (ff), Rule 131, new Rules of Court)." (Brief, p. 9.) But these presumptions are unavailing to the private respondents for as shall be shown below the approval of the President of the Philippines to the sale is a positive requirement which cannot be presumed; it must be shown affirmatively.

It should be recalled that the two lots were former enemy properties. They were transferred to the Republic of the Philippines and by virtue of R.A. No. 477 their disposition was entrusted to the National Abaca and Other Fibers Corporation (NAFCO). The corporation was abolished by Executive Order No. 372, series of 1950, and its functions, particularly as provided in R.A. No. 477 were transferred to the Board of Liquidators which was created by the same executive order.

Section 4 of Executive Order No. 372, series of 1950, provides: "The Board of Liquidators shall, with the approval of the President of the Philippines, and subject to the provisions of existing law, sell, lease, transfer, assign, or otherwise dispose of, the properties, funds, other assets, development projects, demonstration plantations, experimental stations, and nurseries of the corporations herein abolished; ..."

The private respondents assert: "[E]ven granting that the sale of the land by the Board of Liquidators to Delfin N. Lopez lacked the required presidential approval, the deficiency does not invalidate the sale of the land. For the requirement of presidential approval is not contained in any law but merely by Executive Order No. 372. Failure to follow this executive order may only subject the proper officials to disciplinary action but may not cause the nullity of the transaction. Presidential approval of such sale is not essential to the validity of the contract." (Brief, p. 13.) Assuming without conceding the correctness of the assertion, it is nonetheless unavailing because as pointed out by the petitioner: "Sections 79 (F) and 567 of the Revised Administrative Code require that the deed of sale be signed personally by the President of the Philippines or by an official duly designated by him, unless the authority therefore be expressly vested by law in another officer. The deed of sale herein involved (Annex "A" of Annex "B") does not show that the deed was approved or signed by the President of the Philippines or another official authorized by law. Considering the failure to comply with the statutory requirements, the deed of sale is ineffective and thus wholly void." (Brief, p. 9.)

Section 8 of R.A. No. 477 provides:

Sec. 8. Except in favor of the Government or any of its branches, units, or institutions, and ofany church, sect ordenominationfor its churchand/or cemeterysite,land acquired under the provisions of this Act or any permanent improvements hereon sham not be subject to encumbrance or aberration from the date of the award of the land or the improvements thereon and for a term of ten years from and after the date of issuance of the certificate of title, nor shall they become liable to the satisfaction of any debt contracted prior to the expiration of such period.

Any occupant or applicant of lands under this Act who transfer whatever rights he has acquired on said lands and/or improvements thereon before the date of the award or signature of the contract of sale, shall not be entitled to apply for another piece of agricultural land or urban, homesite or residential lot, as, the case may be, from the National Abaca and Other Fibers Corporation; and such transfer shall be considered null and void. (Emphasis words are amendments introduced by R.A. No. 4370, Sec. 1, approved June 19, 1965.)

The petitioner also anchors its prayer for reversion on the ground that Delfin N. Lopez sold the two lots to Mariano Ho in violation of Section 8 of R.A. No. 477. The complaint recites: "... but even if the sale were considered as valid, the subsequent alienation of the subject realty within the prohibited ten-year period to MARIANO HO and the latter's simulated transfer thereof to the defendants spouses arevoid abinitio; consequently, none of the transferees, namely, DELFIN N. LOPEZ, MARIANO HO, and the defendants spouses JACINTO K. RAFANAN and VICENTA L. RAFANAN acquired a valid title over the said realty. By operation of law, the violation aforesaid are sufficient to cause the reversion of the above described realty to the State." (Rollo, p. 28.)

The private respondents seek to neutralize the petitioner's assertion by pointing to the case ofRas vs. Sua,L-23302, September 25, 1968, 25 SCRA 153.

InRas vs. Sua,the plaintiff leased a parcel of land which he had acquired from NAFCO unaware of but in violation of R.A. No. 477. He filed a complaint to recover possession of the land alleging breaches of contract. Two of the defenses interposed by Sua were that Ras had no personality to bring the action, the proper party being the Republic of the Philippines and that the jurisdiction to order the return to the plaintiff of the land belongs, not to the courts, but to the Board of Liquidators. On these points, this Court held:

The above contentions are without merit; they being premised on the assumption that upon the plaintiff 's violation of Republic Act 477 he automatically loses his rights over the land and said rights immediately revert to the State. That is not correct.

In the first place, it is worthwhile to note that, unlike in a transfer of the applicant's rights made before the award or signing of the contract of sale, which is specifically declared nun and void and disqualifies such applicant from further acquiring any land from the NAFCO, Republic Act 477 is silent as to the consequence of the alienation or encumbering of the land after the execution of the contract of sale, but within 10 years from the issuance of the corresponding certificate of title. Considering that the aim of the government in allowing the distribution or sale of disposable public lands to deserving applicants is to enable the landless citizens to own the land they could work on, and the reversion of these lands to the government is penal in character, reversion cannot be construed to be implied from the provision making certain acts prohibited. Where, as in this case, the interest of the individual outweighs the interest of the public, strict construction of a penal provision is justified. Article 1416 of the Civil Code of the Philippines prescribes as follows:

Art. 1416. When the agreement is not illegalper sebut is merely prohibited, and the prohibition by the law is designed for the protection of the plaintiff, he may, if public policy is thereby enhanced, recover what he has paid or delivered.

Secondly, under Section 9 of Republic Act No. 477, the disposition of lands by the NAFCO is to be governed by the Public Land Act (C.A. 141); and it has been ruled, in connection with the same, that a disregard or violation of the conditions of the land grant does not produce automatic reversion of the property to the State, nor work to defeat the grantee's right to recover the property he had previously disposed of or encumbered. This was made clear by this Court when it said:

... Similar contentions were made in the case ofCataluna de los Santos vs. Roman Catholic Church of Midsayap, et al., 94 Phil 405, 50 Off. Gaz. 1588, but they were there overruled, this Court holding that thepari delictodoctrine may not be invoked in a case of this kind since it would turn counter to an avowed fundamental policy of the State that the forfeiture of the homestead is a matter between the State and the grantee or his heirs, and that until the State has taken steps to annul the grant and asserts title to the homestead, the purchaser is, as against the vendor or his heirs, 'no more entitled to keep the land than any intruder.' (Acierto vs. De los Santos, 95 Phil. 887.)

Clearly, until and unless an appropriate proceeding for reversion is instituted by the State, and its reacquisition of the ownership and possession of the land decreed by a competent court, the grantee can not be said to have been divested of whatever right that he may have over the same property. (At pp. 159-160.)

The Ras case indeed holds that violation of R.A. No. 477 does not automatically revert the land to the State but it likewise holds that the State can institute appropriate proceeding for reversion and its reacquisition of the ownership and possession of the land decreed by a competent court which is precisely what the petitioner has done in this case.

To summarize: The conveyance of the two lots to Lopez was void for lack of presidential approval; the conveyance of the same lots to Ho by Lopez was likewise void not only because Lopez had nothing to convey but also because the conveyance was made within the prohibited period; and the conveyance to the Rafanan spouses by Ho was void for the same reasons.

WHEREFORE, the petition is hereby granted; the judgment in Civil Case No. 10630 is set aside and another one is entered commanding the Register of Deeds of Cebu to cancel Transfer Certificate of Title Nos. 25490 and 25491 which were issued to the private respondents and in lieu thereof to issue new ones in the name of the Republic of the Philippines. No costs.

SO ORDERED.

FIRST DIVISION

G.R. No. L-25462 February 21, 1980

MARIANO FLOREZA,petitioner,vs.MARIA D. de EVANGELISTA and SERGIO EVANGELISTA,respondents.

R.D. Hipolito & B. P. Fabir for petitioner.

E.G. Tanjuatco & Associates for respondents.

MELENCIO-HERRERA,J:This is a Petition for Review on certiorari of the Decision of the Court of Appeals (CA-G.R. No. 23516-R) promulgated on November 4, 1965, entitled "Maria de Evangelista and Sergio Evangelists, (now the respondents) vs. Mariano Floreza (petitioner herein)," reversing the judgment of the Court of First Instance of Rizal rendered on July 17, 1957, and instead ordering petitioner to vacate respondents' residential lot, to remove his house at his own expenses and to pay rental from May 5, 1956.

Plaintiffs Maria de Evangelista and Sergio Evangelista, who are mother and son, (the EVANGELISTAS, for short) are the owners of a residential lot located at Sumilang St., Tanay, Rizal, with an area of 204.08 sq. ms., assessed at P410.00. In May 1945, the EVANGELISTAS borrowed from FLOREZA the amount of P100.00. On or about November 1945, with the consent of the EVANGELISTAS, FLOREZA occupied the above residential lot and built thereon a house of light materials (barong- barong) without any agreement as to payment for the use of said residential lot owing to the fact that the EVANGELISTAS has then a standing loan of P100.00 in favor of FLOREZA.1On the following dates, the EVANGELISTAS again borrowed the indicated amounts: September 16, 1946 P100.00;2August 17, 1947 P200,00;3January 30, 1949 P200.00;4April 1, 1949 P140.00,5or a total of P740.00 including the first loan. The last three items are evidenced by private documents stating that the residential lot stands as security therefor and that the amounts covered thereunder are payable within six years from date, without mention of interest. The document executed on September 16, 1946 stated specifically that the loan was without interest "walang anumang patubo."

On January 10, 1949, FLOREZA demolished this house of light materials and in its place constructed one of strong materials assessed in his name at P1,410.00 under Tax Declaration No. 4448. FLOREZA paid no rental as before.6On August 1, 1949, the EVANGELISTAS, for and in consideration of P1,000.00 representing the total outstanding loan of P740.00 plus P260.00 in cash, sold their residential lot to FLOREZA, with a right to repurchase within a period of 6 years from date, or up to August 1, 1955, as evidenced by a notarial document, Exh. B, registered under Act 3344 on December 6, 1949, as Inscription No. 2147.7On January 2, 1955, or seven months before the expiry of the repurchase period, the EVANGELISTAS paid in full the repurchase price of P1,000.00.

On April 25, 1956, the EVANGELISTAS, through their counsel, wrote FLOREZA a letter8asking him to vacate the premises as they wanted to make use of their residential lot besides the fact that FLOREZA had already been given by them more than one year within which to move his house to another site. On May 4, 1956, the EVANGELISTAS made a formal written demand to vacate, within five days from notice, explaining that they had already fully paid the consideration for the repurchase of the lot.9FLOREZA refused to vacate unless he was first reimbursed the value of his house. Hence, the filing of this Complaint on May 18, 1956 by the EVANGELISTAS.

The EVANGELISTAS prayed that: 1) they be declared the owners of the house of strong materials built by FLOREZA on their residential lot, without payment of indemnity; or, in the alternative to order FLOREZA to remove said house; 2) that FLOREZA pay them the sum of P10.00 per month as the reasonable value for the use and occupation of the same from January 2, 1955 (the date the repurchase price was paid) until FLOREZA removes the house and delivers the lot to them; and 3) to declare the transaction between them and FLOREZA as one of mortgage and not ofpacto de retro.

In his Answer, FLOREZA admitted the repurchase but controverted by stating that he would execute a deed of repurchase and leave the premises upon payment to him of the reasonable value of the house worth P7,000.00.

In a Decision dated July 17, 1957, the Court of First Instance of Rizal opined that the question of whether the transaction between the parties is one of mortgage orpacto de retrois no longer material as the indebtedness of P1,000.00 of the EVANGELISTAS to FLOREZA had already been fully paid. And, applying Article 448 of the Civil Code,10it rendered a decision dispositively decreeing:

FOR ALL THE FOREGOING CONSIDERATIONS, the Court hereby renders judgment granting the plaintiffs the right to elect, as owners of the land, to purchase the house built, on the said lot in question by the defendant for P2,500 or to sell their said land to e defendant for P1,500. In the event that the plaintiffs shall decide not to purchase the house in question the defendant should be allowed to remain in plaintiffs' premises by, paying a monthly rental of P10.00 which is the reasonable value for the use of the same per month as alleged by plaintiffs in their complaint. The Court also orders the defendant to pay a monthly rental of P10.00 for the use of the land in question from May 18, 1956, the date of the commencement of this action. The counterclaim of the defendant is hereby ordered dismissed. Without pronouncement as to costs.

SO ORDERED.11Both parties appealed to the Court of Appeals.

On November 4, 1965, the Court of Appeals concluded that Article 448 of the Civil Code,supra, was inapplicable; that FLOREZA was not entitled to reimbursement for his house but that he could remove the same at his expense; and accordingly rendered judgment thus:

WHEREFORE, judgment is hereby rendered: (1) adjudging the defendant-appellant Mariano Floreza to vacate plaintiffs' residential lot described in the complaint and to pay rental of P10.00 a month from May 5, 1956, until he (defendant) shall have vacated the premises; (2) ordering defendant to remove his house from the land in question within 30 days from the time this decision becomes final and executory; (3) ordering the Register of Deeds of Rizal to cancel inscription No. 2147, Page 210, Vol. 36, in the Registration Book under Act 3344 upon payment of his lawful fees; and (4) taxing the costs in both instances against defendant-appellant Mariano Floreza.12Hence, this Petition for Review oncertiorariby FLOREZA, seeking a reversal of the aforestated judgment and ascribing the following errors:

1) That the Court of Appeals erred in holding that petitioner Floreza was a builder in bad faith without likewise holding that respondents as owners of the land in dispute, were likewise in bad faith and therefore both parties should in accordance with Art. 453 of the New Civil Code be considered as having acted in good faith.

2) That the Court of Appeals erred in completely ignoring the issue raised on appeal as to whether or not respondents as owners of the questioned lot, were in bad faith in the sense that they had knowledge of and acquiseced to the construction of the house of petitioner on their lot.

3) That the Court of Appeals erred in not applying Art. 448 of the New Civil Code in the adjudication of the rights of petitioner and respondent.

4) That the Court of Appeals erred in declaring that petitioner is not entitled to reimbursement for the value of his house and that he should instead remove the same at his expense.

5) That the Court of Appeals erred in adjudging petitioner to vacate respondents' lot in question and to pay rentals commencing from May 5, 1956, until he shall have vacated the premises, notwithstanding that petitioner is entitled under Arts. 448 and 546 of the New Civil Code, to retention without payment of rental while the corresponding indemnity of his house had not been paid.

6) That the Court of Appeals erred in taxing costs against petitioner.

7) That the Court of Appeals erred in not awarding petitioner's counterclaim.

During the pendency of this appeal, petitioner Maria D. de Evangelista died and was ordered substituted by her son, petitioner Sergio, as her legal representative, in a Resolution dated May 14, 1976.

On October 20, 1978. the EVANGELISTAS filed a Motion to Dismiss stating that FLOREZA had since died and that his heirs had voluntarily vacated the residential lot in question. The date FLOREZA passed away and the date his heirs had voluntarily vacated the property has not been stated. Required to comment, "petitioner (represented by his heirs)", through counsel, confirmed his death and the removal of the house and manifested that thereby the question of reimbursement had moot and academic. He objected to the dismissal of the case, however, on the ground that the issue of rentals still pends. On January 21, 1980, complying with a Resolution of 'his Court, the EVANGELISTAS clarified that the dismissal they were praying for was not of the entire case but only of this Petition for Review onCertiorari.

We are not in agreement that the question of reimbursement of the value of the improvement erected on the subject property has become moot. Petitioner's right of retention of subject property until he is reimbursed for the value of his house, as he had demanded, is inextricably linked with the question of rentals. For if petitioner has the right to indemnity, he has the right of retention and no rentals need be paid. Conversely, if no right of retention exists, damages in the form of rentals for the continued use and occupation of the property should be allowed.

We uphold the Court of Appeals in its conclusion that Article 448 of the Civil Code is inapplicable to the factual milieu herein. Said codal provision applies only when the builder, planter, or sower believes he had the right so to build, plant or sow because he thinks he owns the land or believes himself to have a claim of title.13In this case, petitioner makes no pretensions of ownership whatsoever.

Petitioner concedes that he was a builder in bad faith but maintains that' the EVANGELISTAS should also be held in bad faith, so that both of them being in bad faith, Article 453 of the Civil Code14should apply. By the same token, however, that Article 448 of the same Code is not applicable, neither is Article 453 under the ambiance of this case.

Would petitioner, as vendeea retro, then be entitled to the rights granted iii Article 1616 of the Civil Code (Art. 1518 of the old Code)? To quote:

Art. 1616. The vendor cannot avail himself of the right of repurchase without returning to the vendee the price of the sale, and in addition:

(1) The expenses of the contract, and any other legitimate payments made by reason of the sale;

(2) The necessary and useful expenses made on the thing sold.

The question again calls for a negative answer. It should be noted that petitioner did not construct his house as a vendeea retro. The house had already been constructed as far back as 1949 (1945 for the house of light materials) even before thepacto de retrosale in 1949. Petitioner incurred no useful expense, therefore, after that sale. The house was already there at the tolerance of the EVANGELISTAS in consideration of the several loans extended to them. Since petitioner cannot be classified as a builder in good faith within the purview of Article 448 of the Civil Code, nor as a vendeea retro, who made useful improvements during the lifetime of thepacto de retro, petitioner has no right to reimbursement of the value of the house which he had erected on the residential lot of the EVANGELISTAS, much less to retention of the premises until he is reimbursed.The rights of petitioner are more akin to those of a usufructuary who, under Article 579 of the Civil (Art. 487 of the old Code), may make on the property useful improvements but with no right to be indemnified therefor. He may, however, remove such improvements should it be possible to do so without damage to the property: For if the improvements made by the usufructuary were subject to indemnity, we would have a dangerous and unjust situation in which the usufructuary could dispose of the owner's funds by compelling him to pay for improvements which perhaps he would not have made.15We come now to the issue of rentals. It is clear that from the date that the redemption price had been paid by the EVANGELISTAS on January 2, 1955, petitioner's right to the use of the residential lot without charge had ceased. Having retained the property although a redemption had been made, he should be held liable for damages in the form of rentals for the continued use of the subject residential lot16at the rate of P10.00 monthly from January 3, 1955, and not merely from the date of demand on May 4, 1956, as held by the Court of Appeals, until the house was removed and the property vacated by petitioner or his heirs.

WHEREFORE, the judgment appealed from is hereby affirmed, with the modification that payment of rentals by the heir, of Mariano Floreza, who are hereby ordered substituted for him, shall commence on January 3, 1955 until the date that the residential lot in question was vacated.

Costs against petitioner.

SO ORDERED.

EN BANC

G.R. No. L-12812 September 29, 1959FILIPINAS COLLEGES, INC.,plaintiff-appellee,vs.MARIA GARCIA TIMBANG, ET AL.,defendants.

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G.R. No. L-12813 September 29, 1959MARIA GARCIA TIMBANG, ET AL.,plaintiffs.MARIA GARICA TIMBANG,plaintiff-appellant,vs.MARIA GERVACIO BLAS,defendant-appellee.

De Guzman and Fernandez for appellee Filipinas Colleges, Inc.San Huan, Africa and Benedicto for appellant Maria Garcia Timbang.Nicanor S. Sison for appellee Maria Gervacio Blas.BARRERA,J.:This is an appeal taken from an order of the Court of First Instance of Manila dated May 10, 1957 (a) declaring the Sheriff's certificate of sale covering a school building sold at public auction null and void unless within 15 days from notice of said order the successful bidders, defendants-appellants spouses Maria Garcia Timbang and Marcelino Timbang, shall pay to, appellee Maria Gervacio Blas directly or through the Sheriff of Manila the sum of P5,750.00 that the spouses Timbang had bid for the building at the Sheriff's sale; (b) declaring the other appellee Filipinas Colleges, Inc. owner of 24,500/3,285,934 undivided interest in Lot No. 2-a covered by certificate of tile No 45970, on which the building sold in the auction sale is situated; and (c) ordering the sale in public auction of the said undivided interest of the Filipinas Colleges, Inc., in lot No. 2-a aforementioned to satisfy the unpaid portion of the judgment in favor of appellee Blas and against Filipinas Colleges, Inc. in the amount of P8,200.00 minus the sum of P5,750.00 mentioned in (a) above.

The order appealed from is the result of three motions filed in the courta quoin the course of the execution of a final judgment of the Court of Appeals rendered in 2 cases appealed to it in which the spouses Timbang, the Filipinas Colleges, Inc., and Maria Gervacio Blas were the parties. IN that judgment of the Court of Appeals, the respective rights of the litigants have been adjudicated as follows:1wphl.nt(1) Filipinas Colleges, Inc. was declared to have acquired the rights of the spouses Timbang in and to lot No. 2-a mentioned above and in consideration thereof, Filipinas Colleges, Inc., was ordered to pay the spouses Timbang the amount of P15,807.90 plus such other amounts which said spouses might have paid or had to pay after February, 1953, to Hoskins and Co. Inc., agent of the Urban Estates, Inc., original vendor of the lot. Filipinas Colleges, Inc. original vendor of the total amount with the court within 90 days after the decision shall have become final.

(2) Maria Gervacio Blas was declared to be a builder in good faith of the school building constructed on the lot in question and entitled to be paid the amount of P19,000.00 for the same. Filipinas Colleges, Inc., purchaser of the said building was ordered to deliver to Blas stock certificate (Exh. C) for 108 shares of Filipinas Colleges, Inc. with a par value of P10,800.00 and to pay Blas the sum of P8,200.00 of the house.

(3) In case Filipinas Colleges, Inc. failed to deposit the value of the land, which after liquidation was fixed at P32,859.34, within the 90-day period set by the court, Filipinas Colleges would lose all its rights to the land and the spouses Timbang would then become the owners thereof. In that eventuality, the Timbangs would make known to the court their option under Art. 448 of the Civil Code whether they would appropriate the building in question, in which even they would have to pay Filipinas Colleges, Inc. the sum of P19,000.00, or would compel the latter to acquire the land and pay the price thereof.

Filipinas Colleges, Inc. having failed to pay or deposit the sum of P32,859.34 within the time prescribed, the spouses Timbang, in compliance with the judgment of the Court of Appeals, on September 28, 1956, made known to the court their decision that they had chosen not of appropriate the building but to compel Filipinas Colleges, Inc., for the payment of the sum of P32,859,34. The motion having been granted, a writ of execution was issued on January 8, 1957.

On January 16, 1957, appellee Blas in turn filed a motion for execution of her judgment of P8,200.00 representing the unpaid portion of the price of the house sold to Filipinas Colleges, Inc. Over the object of the Timbangs, the court grated the motion and the corresponding writ of execution was issued on January 30, 1957, date of the granting of the motion for execution, Blas through counsel, sent a letter to the Sheriff of Manila advising him of her preferential claim or lien on the house to satisfy the unpaid balance of the purchase price thereof under Article 2242 of the Civil Code, and to withhold from the proceed of the auction sale the sum of P8,200.00. Levy having been made on the house in virtue of the writs of execution, the Sheriff of Manila on March 5, 1957, sold the building in public auction in favor of the spouses Timbang, as the highest bidders, in the amount of P5,750.00. Personal properties of Filipinas Colleges, Inc. were also auctioned for P245.00 in favor of the spouses Timbang.

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

(1) By appellee Blas, praying that the Sheriff of Manila and/or the Timbang spouses be ordered to pay and deliver to her the sum of P5,750.00 representing the proceeds of the auction sale of the building of Filipinas Colleges, Inc. over which she has a lien of P8,200.00 for the unpaid balance of the purchase price thereof;.

(2) Also by the appellee Bals, praying that there being still two unsatisfied executions, one for the sum of P32,859.34 in favor the land involved, Lot No. 2-a, be sold at public auction; and (3) By Filipinas Colleges, Inc. praying that because its properties, the house and some personal properties, have been auctioned for P5,750.00 and P245.00 respectively in favor of the Timbang spouses who applied the proceeds to the partial payment of the sum of P32,859.34 value of the land, Lot No. 2-a, it (Filipinas Colleges, Inc.) be declared part owner of said lot to the extent of the total amount realized from the execution sale of its properties.1wphl.ntThe Timbang spouses presented their opposition to each and all of these motion. After due hearing the lower court rendered its resolution in the manner indicated at the beginning of this decision, from which the Timbangs alone have appealed.

In assailing the order of the court a quo directing the appellants to pay appellee Blas the amount of their bid (P5,750.00) made at the public auction, appellants' counsel has presented a novel, albeit ingenious, argument. It is contended that because the builder in good faith has failed to pay the price of the land after the owners thereof exercised their option under Article 448 of the Civil Code, the builder lost his right of retention provided in Article 546 and by operation of Article 445, the appellants as owners of the land automatically became the ownersipso facto, the execution sale of the house in their favor was superfluous. Consequently, they are not bound to make good their bid of P5,750.00 as that would be to make goods to pay for their own property. By the same token, Blas claim for preference on account of the unpaid balance of the purchase price of the house does not apply because preference applies only with respect to the property of the debtor, and the Timbangs, owners of the house, are not the debtors of Blas.

This Court cannot accept this oversimplification of appellants' position. Article 448 and 546 of the Civil Code defining the right of the parties in case a person in good faith builds, sows or plants on the land of another, respectively provides:

ART. 448. The owner of the land on which anything has been built, sown or plated in good faith shall have the right to appropriate as his own the works, sowing or planting, after payment of the indemnify provided for in article 546 and 548, or to obligate the one who built or planted to pay the price of the land, and the one who sowed, the proper rent. However, the builder or planter cannot be obliged to buy the land if its value is considerably more than that of the building or trees. In such case, he shall pay reasonable rent, if the owner of the land does not choose to appropriate the building or trees after proper indemnity. The parties shall agree upon the terms of the lease and in case of disagreement, the court shall fix the terms thereof.

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

Useful expenses shall be refunded only to the possessor in good faith with the same right of retention the person who has defeated him in the possession having to option of refunding the amount of expenses or of paying the case in value which thing may have acquired by reason thereof.

Under the terms of these article, it is true that the owner of the land has the right to choose between appropriating the building by reimbursing the builder of the value thereof or compelling the builder in good faith to pay for his land. Even this second right cannot be exercised if the value of the land is considerably more than that of the building. In addition to the right of the builder to be paid the value of his improvement, Article 546 gives him the corollary right of retention of the property until he is indemnified by the owner of the land. There is nothing in the language of these two article, 448 and 546, which would justify the conclusion of appellants that, upon the failure of the builder to pay the value of the land, when such is demanded by the land-owner, the latter becomes automatically the owner of the improvement under Article 445. The case of Bernardovs.Bataclan, 66 Phil., 590 cited by appellants is no authority for this conclusion. Although it is true it was declared therein that in the event of the failure of the builder to pay the land after the owner thereof has chosen this alternative, the builder's right of retention provided in Article 546 is lost, nevertheless there was nothing said that as a consequence thereof, the builder loses entirely all rights over his own building. The question is; what is the recourse or remedy left to the parties in such eventuality where the builder fails to pay the value of the land? While the Code is silent on this Court in the cases ofMiranda vs. Fadullon, et al., 97 Phil., 801; 51 Off. Gaz., [12] 6226;Ignacio vs. Hilario, 76 Phil., 605 and the cited case ofBernardo vs. Bataclan,supra.

In the first case, this Court has said:

A builder in good faith not be required to pay rentals. he has right to retain the land on which he has built in good faith until he is reimbursed the expenses incurred by him.Possibly he might be made to pay rental only when the owner of the land chooses not to appropriate the improvement and requires the builder in good faith to pay for the land but that the builder is unwilling or unable to pay the land, and then they decide to leave things as they are and assume the relation of lessor and lessee, and should they disagree as to the amount of rental then they can go to the court to fix that amount. (Emphasis supplied)

Should the parties not agree to leave things as they are and to assume the relation of lessor and lessee, another remedy is suggested in the case ofIgnacio vs. Hilario, supra, wherein the court has ruled that the owner of the land in entitled to have the improvement removed when after having chosen to sell his land to the other party, i.e., the builder in good faith fails to pay for the same.

A further remedy is indicated in the case ofBernardo vs. Bataclan, supra, where this Court approved the sale of the land and the improvement in a public auction applying the proceeds thereof first to the payment of the value of the land and the excess, if any, to be delivered to the owner of the house in payment thereof.

The appellants herein, owners o the land, instead of electing any of the alternative above indicated chose to seek recovery of the value of their land by asking for a writ of execution; levying on the house of the builder; and selling the same in public auction. Sand because they are the highest bidder in their own auction sale, they now claim they acquired title to the building without necessity of paying in cash on account of their bid. In other words, they in effect pretend to retain their land and acquire the house without paying a cent therefor.

This contention is without merit. This Court has already held inMatias vs. The Provincial Sheriff of Nueva Ecija(74 Phil., 326) that while it is the inveriable practice, dictated by common sense, that where the successful bidder is the execution creditor himself, he need not pay down the amount of the bid if it does not exceed the amount of his judgement, nevertheless, when their is a claim by a third-party, to the proceeds of the sale superior to his judgment credit, the execution creditor, as successful bidder, must pay in cash the amount of his bid as a condition precedent to the issuance to him of the certificate of sale. In the instant case, the Court of Appeals has already adjudged that appellee Blas is entitled to the payment of the unpaid balance of the purchase price of the school building. Blas is actually a lien on the school building are concerned. The order of the lower court directing the Timbang spouses, as successful bidders, to pay in cash the amount of their bid in the sum of P5,750.00 is therefore correct.

With respect to the order of the court declaring appellee Filipinas Colleges, Inc. part owner of the land to the extent of the value of its personal properties sold at public auction in favor of the Timbang, this Court Likewise finds the same as justified, for such amount represents, in effect, a partial payment of the value of the land. If this resulted in the continuation of the so-called involuntary partnership questioned by the difference between P8,200.00 the unpaid balance of the purchase price of the building and the sum of P5,750.00 amount to be paid by the Timbangs, the order of the court directing the sale of such undivided interest of the Filipinas Colleges, Inc. is likewise justified to satisfy the claim of the appellee Blas.

Considering that the appellant spouses Marcelino Timbang and Maria Garcia Timbang may not voluntarily pay the sum of P5,750.00 as ordered, thereby further delaying the final termination of this case, the first part of the dispositive portion of the order appealed from is modified in the sense that upon failure of the Timbang spouses to pay to the Sheriff or to Manila Gervacio Blas said sum of P5,750.00 within fifteen (15) days from notice of the final judgment, an order of execution shall issue in favor of Maria Gervasio Blas to be levied upon all properties of the Timbang spouses not exempt from execution for the satisfaction of the said amount.

In all other respects, the appealed order of the courta quois hereby affirmed, with costs against the appellants.

It is so ordered.

FIRST DIVISION

[G.R. No. 149295.September 23, 2003]

PHILIPPINE NATIONAL BANK,petitioner, vs. GENEROSO DE JESUS, represented by his Attorney-in-Fact, CHRISTIAN DE JESUS,respondent.

D E C I S I O N

VITUG,J.:

Petitioner Philippine National Bank disputes the decision handed down by the Court of Appeals promulgated on 23 March 2001 in CA-G.R. CV No. 56001, entitled Generoso De Jesus, represented by his Attorney-in-Fact, Christian De Jesus, versus Philippine National Bank.The assailed decision has affirmed the judgment rendered by the Regional Trial Court, Branch 44, of Mamburao, Occidental Mindoro, declaring respondent Generoso de Jesus as being the true and lawful owner of the 124-square-meter portion of the land covered by Transfer Certificate of Title (TCT) No. T-17197 and ordering petitioner bank to vacate the premises, to deliver possession thereof to respondent, and to remove the improvement thereon.

It would appear that on 10 June 1995, respondent filed a complaint against petitioner before the Regional Trial Court of Occidental Mindoro for recovery of ownership and possession, with damages, over the questioned property.In his complaint, respondent stated that he had acquired a parcel of land situated in Mamburao, Occidental Mindoro, with an area of 1,144 square meters covered by TCT No. T-17197, and that on 26 March 1993, he had caused a verification survey of the property and discovered that the northern portion of the lot was being encroached upon by a building of petitioner to the extent of 124 square meters.Despite two letters of demand sent by respondent, petitioner failed and refused to vacate the area.

Petitioner, in its answer, asserted that when it acquired the lot and the building sometime in 1981 from then Mayor Bienvenido Ignacio, the encroachment already was in existence and to remedy the situation, Mayor Ignacio offered to sell the area in question (which then also belonged to Ignacio) to petitioner at P100.00 per square meter which offer the latter claimed to have accepted.The sale, however, did not materialize when, without the knowledge and consent of petitioner, Mayor Ignacio later mortgaged the lot to the Development Bank of the Philippines.

The trial court decided the case in favor of respondent declaring him to be the rightful owner of the disputed 124-square-meter portion of the lot and ordering petitioner to surrender possession of the property to respondent and to cause, at its expense, the removal of any improvement thereon.

The Court of Appeals, on appeal, sustained the trial court but it ordered to be deleted the award to respondent of attorneys fees, as well as moral and exemplary damages, and litigation expenses.

Petitioner went to this Court,viaa petition for review, after the appellate court had denied the banks motion for reconsideration, here now contending that -

1. THE COURT OF APPEALS GRAVELY ERRED IN LAW IN ADJUDGING PNB A BUILDER IN BAD FAITH OVER THE ENCROACHED PROPERTY IN QUESTION;

2. THE COURT OF APPEALS GRAVELY ERRED IN LAW IN NOT APPLYING IN FAVOR OF PNB THE PROVISION OF ARTICLE 448 OF THE CIVIL CODE AND THE RULING IN TECNOGAS PHILIPPINES MANUFACTURING CORP. VS. COURT OF APPEALS, G.R. No. 108894, February 10, 1997, 268 SCRA 7.[1]The Regional Trial Court and the Court of Appeals have both rejected the idea that petitioner can be considered a builder in good faith.In the context that such term is used in particular reference to Article 448, et seq., of the Civil Code, a builder in good faith is one who, not being the owner of the land, builds on that land believing himself to be its owner and unaware of any defect in his title or mode of acquisition.

The various provisions of the Civil Code, pertinent to the subject, read:

Article 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 a 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.

Article 449. He who builds, plants, or sows in bad faith on the land of another, loses what is built, planted or sown without right to indemnity.

Article 450.The owner of the land on which anything has been built, planted or sown in bad faith may demand the demolition of the work, or that the planting or sowing be removed, in order to replace things in their former condition at the expense of the person who built, planted or sowed; or he may compel the builder or planter to pay the price of the land, and the sower the proper rent.

A builder in good faith can, under the foregoing provisions, 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.[2]Even as the option lies with the landowner, the grant to him, nevertheless, is preclusive.He much choose one.He cannot, for instance, compel the owner of the building to instead remove it from the land.[3]In order, however, that the builder can invoke that accruing benefit and enjoy his corresponding right to demand that a choice be made by the landowner, he should be able to prove good faith on his part.

Good faith, here understood, is an intangible and abstract quality with no technical meaning or statutory definition, and it encompasses, among other things, an honest belief, the absence of malice and the absence of design to defraud or to seek an unconscionable advantage.An individuals personal good faith is a concept of his own mind and, therefore, may not conclusively be determined by his protestations alone.It implies honesty of intention, and freedom from knowledge of circumstances which ought to put the holder upon inquiry.[4]The essence of good faith lies in an honest belief in the validity of ones right, ignorance of a superior claim, and absence of intention to overreach another.[5]Applied to possession, one is considered in good faith if he is not aware that there exists in his title or mode of acquisition any flaw which invalidates it.[6]Given the findings of both the trial court and the appellate court, it should be evident enough that petitioner would fall much too short from its claim of good faith.Evidently, petitioner was quite aware, and indeed advised, prior to its acquisition of the land and building from Ignacio that a part of the building sold to it stood on the land not covered by the land conveyed to it.

Equally significant is the fact that the building, constructed on the land by Ignacio, has in actuality been part of the property transferred to petitioner.Article 448, of the Civil Code refers to a piece of land whose ownership is claimed by two or more parties, one of whom has built some works (or sown or planted something) and notto 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 otherwise for, 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.[7]In fine, petitioner is not in a valid position to invoke the provisions of Article 448 of the Civil Code.The Court commiserates with petitioner in its present predicament; upon the other hand, respondent, too, is entitled to his rights under the law, particularly after having long been deprived of the enjoyment of his property.Nevertheless, the Court expresses hope that the parties will still be able to come up with an arrangement that can be mutually suitable and acceptable to them.

WHEREFORE,the decision of the Court of Appeals in CA-G.R. CV No. 56001 is AFFIRMED.No costs.

SO ORDERED.

SECOND DIVISION

G.R. No. 193517 January 15, 2014THE HEIRS OF VICTORINO SARILI, NAMELY: ISABEL A. SARILI,*MELENCIA**S. MAXIMO, ALBERTO A. SARILI, IMELDA S. HIDALGO, all herein represented by CELSO A. SARILI,Petitioners,vs.PEDRO F. LAGROSA, represented in this act by his Attorney-in-Fact LOURDES LABIOS MOJICA,Respondent.

D E C I S I O N

PERLAS-BERNABE,J.:Assailed in this petition for review on Certiorari1are the Decision2dated May