property cases right of accession

8/10/2019 Property Cases Right of Accession

1/62

Manila

EN BANC

G.R. No. 35223 September 17, 1931

THE BACHRACH MOTOR CO., INC.,plaintiff-appellee,vs.TALISAY-SILAY MILLING CO., ET AL.,defendants-appellees.THE PHILIPPINE NATIONAL BANK, intervenor-appellant.

Roman J. Lacson for intervenor-appellant.Mariano Ezpeleta for plaintiff-appellee.Nolan and Hernaez for defendants-appellees Talisay-Silay Milling Co. and Cesar Ledesma.

ROMUALDEZ, J.:

This proceeding originated in a complaint filed by the Bachrach Motor Co., Inc., against the Talisay-

Silay Milling Co., Inc., for the delivery of the amount P13,850 or promissory notes or otherinstruments or credit for that sum payable on June 30, 1930, as bonus in favor of Mariano LacsonLedesma; the complaint further prays that the sugar central be ordered to render an accounting ofthe amounts it owes Mariano Lacson Ledesma by way of bonus, dividends, or otherwise, and to paythe plaintiff a sum sufficient to satisfy the judgment mentioned in the complaint, and that the salemade by said Mariano Lacson Ledesma be declared null and void.

The Philippine National Bank filed a third party claim alleging a preferential right to receive anyamount which Mariano Lacson Ledesma might be entitled to from the Talisay-Silay Milling Co. asbonus, because that would be civil fruits of the land mortgaged to said bank by said debtor for thebenefit of the central referred to, and by virtue of a deed of assignment, and praying that said centralbe ordered to delivered directly to the intervening bank said sum on account of the latter's credit

against the aforesaid Mariano Lacson Ledesma.

The corporation Talisay-Silay Milling Co., Inc., answered the complaint stating that of MarianoLacson Ledesma's credit, P7,500 belonged to Cesar Ledesma because he had purchased it, andpraying that it be absolved from the complaint and that the proper party be named so that theremainder might be delivered.

Cesar Ledesma, in turn, claiming to be the owner by purchase in good faith an for a reconsiderationof the P7,500 which is a part of the credit referred to above, answered praying that he be absolvedfrom the complaint.

The plaintiff Bachrach Motor Co., Inc., answered the third party claim alleging that its credit againstMariano Lacson Ledesma was prior and preferential to that of the intervening bank, and praying thatthe latter's complaint be dismissed.

At the trial all the parties agreed to recognize and respect the sale made in favor of Cesar Ledesmaof the P7,500 part of the credit in question, for which reason the trial court dismissed the complaintand cross-complaint against Cesar Ledesma authorizing the defendant central to deliver to him theaforementioned sum of P7,500. And upon conclusion of the hearing, the court held that theBachrach Motor Co., Inc., had a preferred right to receive the amount of P11,076.02 which was


2/62

Mariano Lacson Ledesma's bonus, and it ordered the defendant central to deliver said sum to theplaintiff.

The Philippine National Bank appeals, assigning the following alleged errors as committed by thetrial court:

1. In holding that the bonus which the Talisay-Silay Milling Co., Inc., bound itself to pay theplanters who had mortgaged their land to the Philippine National Bank to secure the paymentof 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 defendantMariano Lacson Ledesma to the Philippine National Bank to secure the payment of hispersonal 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 ofhis 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 FirstInstance of Manila levied a valid attachment upon the bonus in question.

5. In admitting and considering the supplementary complaint filed by the Bachrach MotorCo., Inc., alleging as a cause of action the attachment of the bonus in question which saidBachrach Motor Co., Inc., in civil case No. 31821 of the Court of First Instance of Manilalevied after the filing of the original complaint in this case, and after Mariano LacsonLedesma in this case had been declared in default.

6. In holding that the Bachrach Motor Co., Inc., has a preferential right to receive from theTalisay-Silay Milling Co., Inc., the amount of P11,076.02 which is in the possession of saidcorporation 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 theTalisay-Silay Milling Co., Inc., the amount of P11,076.02 held by said corporation as MarianoLacson Ledesma's bonus, and in not ordering said Talisay-Silay Milling Co., Inc., to deliversaid amount to the Philippine National Bank.

8. In not holding that the amended complaint and the supplementary complaint of theBachrach Motor Co., Inc., do not state facts sufficient to constitute a cause of action in favorof the Bachrach Motor Co., Inc., and against the Talisay-Silay Milling Co., Inc., or against thePhilippine National Bank.

The appellant bank bases its preferential right upon the contention that the bonus in question is civilfruits of the lands which the owners had mortgaged for the benefit of the central giving the bonus,and that, as civil fruits of said land, said bonus was assigned by Mariano Lacson Ledesma on March7, 1930, by virtue of the document Exhibit 9 of said intervening institution, which admitted in its briefthat "if the bonus in question is not civil fruits or rent which became subject to the mortgage in favorof the Philippine National Bank when Mariano Lacson Ledesma's personal obligation fell due, theassignment of March 7, 1930 (Exhibit 9, P.N.B.), is null and void, not because it is fraudulent, forthere was no intent of fraud in executing the deed, but that the cause or consideration of theassignment was erroneous, for it was based upon the proposition that the bonus was civil fruits ofthe land mortgaged to the Philippine National Bank." (P. 31.)


3/62

The fundamental question, then, submitted to our consideration is whether or not the bonus inquestion is civil fruits.

This is how the 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 succeededin 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 theirproperty under the mortgage, the aforesaid central, by a resolution passed on that same date, i.e.,December 22, 1923, undertook to credit the owners of the plantation thus mortgaged every year witha sum equal to two per centum of the debt secured according to yearly balance, the payment of thebonus being made at once, or in part from time to time, as soon as the central became free of itsobligations 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 makesuch 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 othersimilar sources of revenue. It may be noted that according to the context of the law, the phrase "uotras analogas"refers only to rent or income, for the adjectives "otras"and "analogas"agree with thenoun "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 abuilding, the rent of land, and certain kinds of income.

As the bonus in question is not rent of a building or of land, the only meaning of "civil fruits" left to beexamined is that of "income."

Assuming that in broad juridical sense of the word "income" it might be said that the bonus inquestion is "income" under article 355 of the Civil Code, it is obvious to inquire whether it is derivedfrom the land mortgaged by Mariano Lacson Ledesma to the appellant bank for the benefit of thecentral; for 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 accidental relation to theland mentioned, having been granted as compensation for the risk of having subjected one's land toa lien in favor of the bank, for the benefit of the entity granting said bonus. If this bonus be income orcivil fruits of anything, it is income arising from said risk, or, if one chooses, from Mariano LacsonLedesma's generosity in facing the danger for the protection of the central, but certainly it is not civilfruits or income from the mortgaged property, which, as far as this case is concerned, has nothing todo with it. Hence, the amount of the bonus, according to the resolution of the central granting it, isnot based upon the value, importance or any other circumstance of the mortgaged property, butupon the total value of the debt thereby secured, according to the annual balance, which issomething 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 tocosts. So ordered.

Johnson, Street, Malcolm, Villamor, Ostrand, Villa-Real, and Imperial, JJ.,concur.


4/62

EN BANC

[G.R. No. 133879. November 21, 2001]

EQUATORIAL REALTY DEVELOPMENT, Inc., petitioner, vs. MAYFAIR

THEATER, Inc., respondent.

D E C I S I O N

PANGANIBAN, J.:

General propositions do not decide specific cases. Rather, laws are interpreted in the

context of the peculiar factual situation of each proceeding. Each case has its own flesh and

blood and cannot be ruled upon on the basis of isolated clinical classroom principles.

While we agree with the general proposition that a contract of sale is valid until rescinded, it

is equally true that ownership of the thing sold is not acquired by mere agreement, but by

tradition or delivery. The peculiar facts of the present controversy as found by this Court in anearlier relevant Decision show that delivery was not actually effected; in fact, it was prevented

by a legally effective impediment. Not having been the owner, petitioner cannot be entitled to

the civil fruits of ownership like rentals of the thing sold. Furthermore, petitioners bad faith, asagain demonstrated by the specific factual milieu of said Decision, bars the grant of such

benefits. Otherwise, bad faith would be rewarded instead of punished.

The Case

Filed before this Court is a Petition for Review[1]under Rule 45 of the Rules of Court,

challenging the March 11, 1998 Order[2]of the Regional Trial Court of Manila (RTC), Branch 8,in Civil Case No. 97-85141. The dispositive portion of the assailed Order reads as follows:

WHEREFORE, the motion to dismiss filed by defendant Mayfair is hereby

GRANTED, and the complaint filed by plaintiff Equatorial is hereby DISMISSED.[3]

Also questioned is the May 29, 1998 RTC Order[4]denying petitioners Motion for

Reconsideration.

The Facts

The main factual antecedents of the present Petition are matters of record, because it arose

out of an earlier case decided by this Court on November 21, 1996, entitledEquatorial Realty
http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn1http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn1http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn2http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn2http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn2http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn3http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn3http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn4http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn4http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn4http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn4http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn3http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn2http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn1


5/62

Development, Inc. v. Mayfair Theater, Inc.[5](henceforth referred to as the mother case),

docketed as GR No. 106063.

Carmelo & Bauermann, Inc. (Carmelo) used to own a parcel of land, together with two 2-

storey buildings constructed thereon, located at Claro M. Recto Avenue, Manila, and covered byTCT No. 18529 issued in its name by the Register of Deeds of Manila.

On June 1, 1967, Carmelo entered into a Contract of Lease with Mayfair Theater Inc.

(Mayfair) for a period of 20 years. The lease covered a portion of the second floor andmezzanine of a two-storey building with about 1,610 square meters of floor area, which

respondent used as a movie house known as Maxim Theater.

Two years later, on March 31, 1969, Mayfair entered into a second Contract of Lease with

Carmelo for the lease of another portion of the latters property -- namely, a part of the secondfloor of the two-storey building, with a floor area of about 1,064 square meters; and two store

spaces on the ground floor and the mezzanine, with a combined floor area of about 300 square

meters. In that space, Mayfair put up another movie house known as Miramar Theater. The

Contract of Lease was likewise for a period of 20 years.

Both leases contained a provision granting Mayfair a right of first refusal to purchase the

subject properties. However, on July 30, 1978 - within the 20-year-lease term -- the subject

properties were sold by Carmelo to Equatorial Realty Development, Inc. (Equatorial) for thetotal sum of P11,300,000, without their first being offered to Mayfair.

As a result of the sale of the subject properties to Equatorial, Mayfair filed a Complaint

before the Regional Trial Court of Manila (Branch 7) for (a) the annulment of the Deed of

Absolute Sale between Carmelo and Equatorial, (b) specific performance, and (c)damages. After trial on the merits, the lower court rendered a Decision in favor of Carmelo and

Equatorial. This case, entitled Mayfair Theater, Inc. v. Carmelo and Bauermann, Inc., et al.,

was docketed as Civil Case No. 118019.

On appeal (docketed as CA-GR CV No. 32918), the Court of Appeals (CA) completelyreversed and set aside the judgment of the lower court.

The controversy reached this Court via GR No. 106063. In this mother case, it denied the

Petition for Review in this wise:

WHEREFORE, the petition for review of the decision of the Court of Appeals, dated

June 23, 1992,in CA-G.R. CV No. 32918, is HEREBY DENIED. The Deed of

Absolute Sale between petitioners Equatorial Realty Development, Inc. and Carmelo

& Bauermann, Inc. is hereby deemed rescinded; Carmelo & Bauermann is ordered to

return to petitioner Equatorial Realty Development the purchase price. The latter isdirected to execute the deeds and documents necessary to return ownership to

Carmelo & Bauermann of the disputed lots. Carmelo & Bauermann is ordered to

allow Mayfair Theater, Inc. to buy the aforesaid lots for P11,300,000.00.[6]

The foregoing Decision of this Court became final and executory on March 17, 1997. On

April 25, 1997, Mayfair filed a Motion for Execution, which the trial court granted.
http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn5http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn5http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn5http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn6http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn6http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn6http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn5


6/62

However, Carmelo could no longer be located. Thus, following the order of execution of

the trial court, Mayfair deposited with the clerk of court a quo its payment to Carmelo in the sum

of P11,300,000 less P847,000 as withholding tax. The lower court issued a Deed ofReconveyance in favor of Carmelo and a Deed of Sale in favor of Mayfair. On the basis of these

documents, the Registry of Deeds of Manila cancelled Equatorials titles and issued new

Certificates of Title

[7]

in the name of Mayfair.Ruling on Equatorials Petition forCertiorariand Prohibition contesting the foregoing

manner of execution, the CA in its Resolution of November 20, 1998, explained that Mayfair had

no right to deduct the P847,000 as withholding tax. Since Carmelo could no longer be located,

the appellate court ordered Mayfair to deposit the said sum with the Office of the Clerk of Court,Manila, to complete the full amount of P11,300,000 to be turned over to Equatorial.

Equatorial questioned the legality of the above CA ruling before this Court in GR No.

136221 entitled Equatorial Realty Development, Inc. v. Mayfair Theater, Inc. In a Decision

promulgated on May 12, 2000,[8]this Court directed the trial court to follow strictly the Decisionin GR No. 106063, the mother case. It explained its ruling in these words:

We agree that Carmelo and Bauermann is obliged to return the entire amount of

eleven million three hundred thousand pesos (P11,300,000.00) to Equatorial. On the

other hand, Mayfair may not deduct from the purchase price the amount of eight

hundred forty-seven thousand pesos (P847,000.00) as withholding tax. The duty to

withhold taxes due, if any, is imposed on the seller, Carmelo and Bauermann, Inc.[9]

Meanwhile, on September 18, 1997 -- barely five months after Mayfair had submitted its

Motion for Execution before the RTC of Manila, Branch 7 -- Equatorial filed with the Regional

Trial Court of Manila, Branch 8, an action for the collection of a sum of money against Mayfair,

claiming payment of rentals or reasonable compensation for the defendants use of the subject

premises after its lease contracts had expired. This action was the progenitor of the present case.

In its Complaint, Equatorial alleged among other things that the Lease Contract covering the

premises occupied by Maxim Theater expired on May 31, 1987, while the Lease Contractcovering the premises occupied by Miramar Theater lapsed on March 31, 1989.[10]Representing

itself as the owner of the subject premises by reason of the Contract of Sale on July 30, 1978, it

claimed rentals arising from Mayfairs occupation thereof.

Ruling of the RTC Manila, Branch 8

As earlier stated, the trial court dismissed the Complaint via the herein assailed Order anddenied the Motion for Reconsideration filed by Equatorial.[11]

The lower court debunked the claim of petitioner for unpaid back rentals, holding that the

rescission of the Deed of Absolute Sale in the mother case did not confer on Equatorial any

vested or residual proprietary rights, even in expectancy.

In granting the Motion to Dismiss, the court aquo held that the critical issue was whether

Equatorial was the owner of the subject property and could thus enjoy the fruits or rentals
http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn7http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn7http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn7http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn8http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn8http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn8http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn9http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn9http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn10http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn10http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn10http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn11http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn11http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn11http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn11http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn10http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn9http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn8http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn7


7/62

therefrom. It declared the rescinded Deed of Absolute Sale as void at its inception as though it

did not happen.

The trial court ratiocinated as follows:

The meaning of rescind in the aforequoted decision is to set aside. In the case

of Ocampo v. Court of Appeals, G.R. No. 97442, June 30, 1994, the Supreme Court

held that, to rescind is to declare a contract void in its inception and to put an end as

though it never were. It is not merely to terminate it and release parties from further

obligations to each other but to abrogate it from the beginning and restore parties to

relative positions which they would have occupied had no contract ever been made.

Relative to the foregoing definition, the Deed of Absolute Sale between Equatorial

and Carmelo dated July 31, 1978 is voidat its inception as though it did not happen.

The argument of Equatorial that this complaint for backrentals as reasonable

compensation for use of the subject property after expiration of the leasecontractspresumes that the Deed of Absolute Sale dated July 30, 1978 from whence

the fountain of Equatorials alleged property rights flows is still valid and existing.

xxx xxx xxx

The subject Deed of Absolute Sale having been rescinded by the Supreme Court,

Equatorial is not the owner and does not have any right to demand backrentals from

the subject property. x x x.[12]

The trial court added: The Supreme Court in theEquatorialcase, G.R. No. 106063, hascategorically stated that the Deed of Absolute Sale dated July 31, 1978 has been rescinded

subjecting the present complaint to res judicata.[13]

Hence, the present recourse.[14]

Issues

Petitioner submits, for the consideration of this Court, the following issues:[15]

A.

The basis of the dismissal of the Complaint by the Regional Trial Court not only

disregards basic concepts and principles in the law on contracts and in civil law,

especially those on rescission and its corresponding legal effects, but also ignores the

dispositive portion of the Decision of the Supreme Court in G.R. No. 106063 entitled

Equatorial Realty Development, Inc. & Carmelo & Bauermann, Inc. vs. Mayfair

Theater, Inc.
http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn12http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn12http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn13http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn13http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn14http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn14http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn14http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn15http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn15http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn15http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn15http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn14http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn13http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn12


8/62

B.

The Regional Trial Court erred in holding that the Deed of Absolute Sale in favor of

petitioner by Carmelo & Bauermann, Inc., dated July 31, 1978, over the premises used

and occupied by respondent, having been deemed rescinded by the Supreme Court

in G.R. No. 106063, is void at its inception as though it did not happen.

C.

The Regional Trial Court likewise erred in holding that the aforesaid Deed of

Absolute Sale, dated July 31, 1978, having been deemed rescinded by the Supreme

Court in G.R. No. 106063, petitioner is not the owner and does not have any right to

demand backrentals from the subject property, and that the rescissionof the Deed of

Absolute Sale by the Supreme Court does not confer to petitioner any vested right

nor any residual proprietary rights even in expectancy.

D.

The issue upon which the Regional Trial Court dismissed the civil case, as stated in its

Order of March 11, 1998, was not raised by respondent in its Motion to Dismiss.

E.

The sole ground upon which the Regional Trial Court dismissed Civil Case No. 97-

85141 is not one of the grounds of a Motion to Dismiss under Sec. 1 of Rule 16 of the

1997 Rules of Civil Procedure.

Basically, the issues can be summarized into two: (1) the substantive issue of whether

Equatorial is entitled to back rentals; and (2) the procedural issue of whether thecourt aquosdismissal of Civil Case No. 97-85141 was based on one of the grounds raised by

respondent in its Motion to Dismiss and covered by Rule 16 of the Rules of Court.

This Courts Ruling

The Petition is not meritorious.

First Issue:

Ownership of Subject Propert ies

We hold that under the peculiar facts and circumstances of the case at bar, as found by thisCourt en banc in its Decision promulgated in 1996 in the mother case, no right of ownership was


9/62

transferred from Carmelo to Equatorial in view of a patent failure to deliver the property to the

buyer.

Rental - a Civil F ru it of Ownership

To better understand the peculiarity of the instant case, let us begin with some basic

parameters. Rent is a civil fruit[16]that belongs to the owner of the property producing it[17]byright of accession.[18]Consequently and ordinarily, the rentals that fell due from the time of the

perfection of the sale to petitioner until its rescission by final judgment should belong to the

owner of the property during that period.

By a contract of sale, one of the contracting parties obligates himself to transfer ownership

of and to deliver a determinate thing and the other to pay therefor a price certain in money or its

equivalent.[19]

Ownership of the thing sold is a real right,[20]which thebuyer acquires only upon delivery of

the thing to him in any of the ways specified in articles 1497 to 1501, or in any other mannersignifying an agreement that the possession is transferred from the vendor to the vendee.[21]This

right is transferred, not by contract alone, but by tradition or delivery.[22]Non nudis pactis sed

traditione dominia rerum transferantur. And there is said to be delivery if and when the thingsold is placed in the control and possession of the vendee.[23]Thus, it has been held that while

the execution of a public instrument of sale is recognized by law as equivalent to the delivery of

the thing sold,[24]such constructive or symbolic delivery, being merely presumptive, is deemednegated by the failure of the vendee to take actual possession of the land sold.[25]

Delivery has been described as a composite act, a thing in which both parties must join and

the minds of both parties concur. It is an act by which one party parts with the title to and the

possession of the property, and the other acquires the right to and the possession of the same. Inits natural sense, delivery means something in addition to the delivery of property or title; it

means transfer of possession.[26]In the Law on Sales, delivery may be either actual or

constructive, but both forms of delivery contemplate the absolute giving up of the control andcustody of the property on the part of the vendor, and the assumption of the same by the

vendee.[27]

Possession Never Acquired by Peti tioner

Let us now apply the foregoing discussion to the present issue. From the peculiar facts of

this case, it is clear that petitioner never took actual control andpossession of the property sold,in view of respondents timely objection to the sale and the continued actual possession of theproperty. The objection took the form of a court action impugning the sale which, as we know,

was rescinded by a judgment rendered by this Court in the mother case. It has been held that the

execution of a contract of sale as a form of constructive delivery is a legal fiction. It holds trueonly when there is no impediment that may prevent the passing of the property from the hands of

the vendor into those of the vendee.[28]When there is such impediment, fiction yields to reality -

the delivery has not been effected.[29]
http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn16http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn16http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn16http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn17http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn17http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn17http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn18http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn18http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn18http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn19http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn19http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn20http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn20http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn20http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn21http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn21http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn22http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn22http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn22http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn23http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn23http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn23http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn24http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn24http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn24http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn25http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn25http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn25http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn26http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn26http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn26http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn27http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn27http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn28http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn28http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn28http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn29http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn29http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn29http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn29http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn28http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn27http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn26http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn25http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn24http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn23http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn22http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn21http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn20http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn19http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn18http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn17http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn16


10/62

Hence, respondents opposition to the transfer of the property by way of sale to Equatorial

was a legally sufficient impediment that effectively prevented the passing of the property into the

latters hands.

This was the same impediment contemplated in Vda. de Sarmiento v. Lesaca,[30]in which theCourt held as follows:

The question that now arises is: Is there any stipulation in the sale in question from

which we can infer that the vendor did not intend to deliver outright the possession of

the lands to the vendee? We find none. On the contrary, it can be clearly seen therein

that the vendor intended to place the vendee in actual possession of the lands

immediately as can be inferred from the stipulation that the vendee takes actual

possession thereof x x x with full rights to dispose, enjoy and make use thereof in

such manner and form as would be most advantageous to herself. The possession

referred to in the contract evidently refers to actual possession and not merely

symbolical inferable from the mere execution of the document.

Has the vendor complied with this express commitment? she did not. As provided

in Article 1462, the thing sold shall be deemed delivered when the vendee is placed in

the control andpossession thereof, which situation does not here obtain because from

the execution of the sale up to the present the vendee was never able to take

possession of the lands due to the insistent refusal of Martin Deloso to surrender them

claiming ownership thereof. And although it is postulated in the same article that the

execution of a public document is equivalent to delivery, this legal fiction only holds

true when there is no impediment that may prevent the passing of the property from

the hands of the vendor into those of the vendee. x x x.[31]

The execution of a public instrument gives rise, therefore, only to a prima facie presumptionof delivery. Such presumption is destroyed when the instrument itself expresses or implies that

delivery was not intended; or when by other means it is shown that such delivery was not

effected, because a third person was actually in possession of the thing. In the latter case, thesale cannot be considered consummated.

However, the point may be raised that under Article 1164 of the Civil Code, Equatorial as

buyer acquired a right to the fruits of the thing sold from the time the obligation to deliver theproperty to petitioner arose.[32]That time arose upon the perfection of the Contract of Sale on July

30, 1978, from which moment the laws provide that the parties to a sale may reciprocally

demand performance.[33]

Does this mean that despite the judgment rescinding the sale, the right tothe fruits[34]belonged to, and remained enforceable by, Equatorial?

Article 1385 of the Civil Code answers this question in the negative, because [r]escission

creates the obligation to return the things which were the object of the contract, together with

their fruits, and the price with its interest; x x x. Not only the land and building sold, but also

the rental payments paid, if any, had to be returned by the buyer.
http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn30http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn30http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn30http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn31http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn31http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn31http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn32http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn32http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn32http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn33http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn33http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn33http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn34http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn34http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn34http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn34http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn33http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn32http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn31http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn30


11/62

Another point. The Decision in the mother case stated that Equatorial x x x has received

rents from Mayfair during all the years that this controversy has been litigated. The Separate

Opinion of Justice Teodoro Padilla in the mother case also said that Equatorial was derivingrental income from the disputed property. Even hereinponentesSeparate Concurring Opinion

in the mother case recognized these rentals. The question now is: Do all these statements

concede actual delivery?The answer is No. The fact that Mayfair paid rentals to Equatorial during the litigation

should not be interpreted to mean either actual delivery or ipso factorecognition of Equatorials

title.

The CA Records of the mother case[35]show that Equatorial - as alleged buyer of thedisputed properties and as alleged successor-in-interest of Carmelos rights as lessor - submitted

two ejectment suits against Mayfair. Filed in the Metropolitan Trial Court of Manila,

thefirst was docketed as Civil Case No. 121570 on July 9, 1987; and thesecond, as Civil Case

No. 131944 on May 28, 1990. Mayfair eventually won them both. However, to be able tomaintain physical possession of the premises while awaiting the outcome of the mother case, it

had no choice but to pay the rentals.The rental payments made by Mayfair should not be construed as a recognition of Equatorial

as the new owner. They were made merely to avoid imminent eviction. It is in this context thatone should understand the aforequoted factual statements in theponencia in the mother case, as

well as the Separate Opinion of Mr. Justice Padilla and the Separate Concurring Opinion of the

hereinponente.

At bottom, it may be conceded that, theoretically, a rescissible contract is valid until

rescinded. However, thisgeneralprinciple is not decisive to the issue of whether Equatorial ever

acquired the right to collect rentals. What is decisive is the civil law rule that ownership is

acquired, not by mere agreement, but by tradition or delivery. Under the factual environment of

this controversy as found by this Court in the mother case, Equatorial was never put in actual andeffective control or possession of the property because of Mayfairs timely objection.

As pointed out by Justice Holmes, general propositions do not decide specific cases. Rather,

laws are interpreted in the context of the peculiar factual situation of each case. Each case hasits own flesh and blood and cannot be decided on the basis of isolated clinical classroom

principles.[36]

In short, the sale to Equatorial may have been valid from inception, but it was judiciallyrescinded before it could be consummated. Petitioner never acquired ownership, not because the

sale was void, as erroneously claimed by the trial court, but because the sale was not

consummated by a legally effectivedelivery of the property sold.

Benefi ts Precluded by Petitioners Bad Faith

Furthermore, assuming for the sake of argument that there was valid delivery, petitioner isnot entitled to anybenefits from the rescinded Deed of Absolute Sale because of its bad

faith. This being the law of the mother case decided in 1996, it may no longer be changed


12/62

because it has long become final and executory. Petitioners bad faith is set forth in the

following pertinent portions of the mother case:

First and foremost is that the petitioners acted inbad faith to render Paragraph 8

inutile.

xxx xxx xxx

Since Equatorial is abuyer in bad faith, this finding renders the sale to it of the

property in question rescissible. We agree with respondent Appellate Court that the

records bear out the fact that Equatorial was aware of the lease contracts because its

lawyers had, prior to the sale, studied the said contracts. As such, Equatorial cannot

tenably claim to be a purchaser in good faith, and, therefore, rescission lies.

xxx xxx xxx

As also earlier emphasized, the contract of sale between Equatorial and Carmelo is

characterized by bad faith, since it was knowingly entered into in violation of the

rights of and to the prejudice of Mayfair. In fact, as correctly observed by the Court

of Appeals, Equatorial admitted that its lawyers had studied the contract of lease prior

to the sale. Equatorials knowledge of the stipulations therein should have cautioned

it to look further into the agreement to determine if it involved stipulations that would

prejudice its own interests.

xxx xxx xxx

On the part of Equatorial, itcannot be a buyer in good faithbecause it bought the

property with notice and full knowledge that Mayfair had a right to or interest in the

property superior to its own. Carmelo and Equatorial took unconscientious advantage

of Mayfair.[37](Italics supplied)

Thus, petitioner was and still is entitledsolely to the return of the purchase price it paid to

Carmelo; no more, no less. This Court has firmly ruled in the mother case that neither of them isentitled to any consideration of equity, as both took unconscientious advantage of Mayfair.[38]

In the mother case, this Court categorically denied the payment of interest, a fruit of

ownership. By the same token, rentals, another fruit of ownership, cannot be granted without

mocking this Courts en banc Decision, which has long become final.

Petitioners claim of reasonable compensation for respondents use and occupation of the

subject property from the time the lease expired cannot be countenanced. If it suffered any loss,

petitioner must bear it in silence, since it had wrought that loss upon itself. Otherwise, bad faith

would be rewarded instead of punished.

We uphold the trial courts disposition, not for the reason it gave, but for (a) the patent

failure to deliver the property and (b) petitioners bad faith, asabove discussed.


13/62

Second Issue:

Ground in Motion to Dismiss

Procedurally, petitioner claims that the trial court deviated from the accepted and usual

course of judicial proceedings when it dismissed Civil Case No. 97-85141 on a ground not raised

in respondents Motion to Dismiss. Worse, it allegedly based its dismissal on a ground notprovided for in a motion to dismiss as enunciated in the Rules of Court.

We are not convinced. A review of respondents Motion to Dismiss Civil Case No. 97-85141 shows that there were two grounds invoked, as follows:

(A)

Plaintiff is guilty of forum-shopping.

(B)

Plaintiffs cause of action, if any, is barred by prior judgment.[39]

The court a quo ruled, inter alia, that the cause of action of petitioner (plaintiff in the case

below) had been barred by a prior judgment of this Court in GR No. 106063, the mother case.

Although it erred in its interpretation of the said Decision when it argued that the rescinded

Deed of Absolute Sale was void, we hold, nonetheless, that petitioners cause of action isindeed barred by a prior judgment of this Court. As already discussed, our Decision in GR No.

106063 shows that petitioner is not entitled to back rentals, because it never became the owner of

the disputed properties due to a failure of delivery. And even assuming arguendothat there was avalid delivery, petitioners bad faith negates its entitlement to the civil fruits of ownership, like

interest and rentals.Under the doctrine of res judicataor bar by prior judgment, a matter that has been

adjudicated by a court of competent jurisdiction must be deemed to have been finally andconclusively settled if it arises in any subsequent litigation between the same parties and for the

same cause.[40]Thus, [a] final judgment on the merits rendered by a court of competent

jurisdiction is conclusive as to the rights of the parties and their privies and constitutes anabsolute bar to subsequent actions involving the same claim, demand, or cause of action.[41]Res

judicatais based on the ground that the party to be affected, or some other with whom he is in

privity, has litigated the same matter in a former action in a court of competent jurisdiction, and

should not be permitted to litigate it again.[42]

It frees the parties from undergoing all over again the rigors of unnecessary suits andrepetitive trials. At the same time, it prevents the clogging of court dockets. Equally important,

it stabilizes rights and promotes the rule of law.

We find no need to repeat the foregoing disquisitions on the first issue to show satisfactionof the elements of res judicata. Suffice it to say that, clearly, our ruling in the mother case bars

petitioner from claiming back rentals from respondent. Although the court a quo erred when it

declared void from inceptionthe Deed of Absolute Sale between Carmelo and petitioner, our
http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn39http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn39http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn40http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn40http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn40http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn41http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn41http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn42http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn42http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn42http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn41http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn40http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn39


14/62

foregoing discussion supports the grant of the Motion to Dismiss on the ground that our prior

judgment in GR No. 106063 has already resolved the issue of back rentals.

On the basis of the evidence presented during the hearing of Mayfairs Motion to Dismiss,

the trial court found that the issue of ownership of the subject property has been decided by thisCourt in favor of Mayfair. We quote the RTC:

The Supreme Court in theEquatorialcase, G.R. No. 106063 has categorically stated

that the Deed of Absolute Sale dated July 31, 1978 has been rescinded subjecting the

present complaint to res judicata.[43](Emphasis in the original)

Hence, the trial court decided the Motion to Dismiss on the basis of res judicata, even if it

erred in interpreting the meaning of rescinded as equivalent to void. In short, it ruled on the

ground raised; namely, bar by prior judgment. By granting the Motion, it disposedcorrectly, even if its legal reason for nullifying the sale was wrong. The correct reasons are

given in this Decision.

WHEREFORE, the Petition is herebyDENIED. Costs against petitioner.

SO ORDERED.

Davide, Jr., C.J., Quisumbing, Pardo, Buena, Ynares-Santiago, andCarpio, JJ., concur.

Bellosillo, J.,join the dissenting opinion ofJ. Sandoval-Gutierrez.

Melo,J., see concurring opinion.

Puno, andMendoza, JJ., concur and join the concurring opinion ofJ. Melo.

Vitug,andSandoval-Gutierrez,JJ., see dissenting opinion.

Kapunan, J.,join the dissenting opinion ofJ. Vitug and Sandoval-Gutierrez.

De Leon, Jr., J.,join the dissenting opinion ofJ. Vitug.
http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn43http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn43http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn43http://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879_melo.htmhttp://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879_melo.htmhttp://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879_vitug.htmhttp://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879_vitug.htmhttp://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879_sandoval.htmhttp://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879_sandoval.htmhttp://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879_sandoval.htmhttp://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879_sandoval.htmhttp://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879_vitug.htmhttp://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879_melo.htmhttp://sc.judiciary.gov.ph/jurisprudence/2001/nov2001/133879.htm#_edn43


15/62

EN BANC

G.R. No. L-175 April 30, 1946

DAMIAN IGNACIO, FRANCISCO IGNACIO and LUIS

IGNACIOPetitioners, vs. ELIAS HILARIO and his wifeDIONISIA DRES, and FELIPE NATIVIDAD, Judge of First

Instance of Pangasinan,Respondents.

Leoncio R. Esliza for petitioners.Mauricio M. Monta for respondents.

MORAN, C.J.:chanroblesvirtual law library

This is a petition for certiorariarising from a case in the Court of First Instance of

Pangasinan between the herein respondents Elias Hilario and his wife Dionisia Dres asplaintiffs, and the herein petitioners Damian, Francisco and Luis, surnamed Ignacio, as

defendants, concerning the ownership of a parcel of land, partly rice-land and partlyresidential. 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 article361 of the Civil Code. The dispositive part of the decision, hub of this controversy, follows:

Wherefore, judgment is hereby rendered declaring:chanrobles virtual law library

(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 thesame;chanrobles virtual law library

(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 theplaintiffs the proportionate value of said residential lot taking as a basis the price paid forthe whole land according to Exhibit B; and chanrobles virtual law library

(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 theperiod of sixty (60) days from the date that the court is informed in writing of the attitude

of the parties in this respect.chanroblesvirtualawlibrarychanrobles virtual law library

No pronouncement is made as to damages and costs.chanroblesvirtualawlibrarychanroblesvirtual law library

Once this decision becomes final, the plaintiffs and defendants may appear again before thiscourt for the purpose of determining their respective rights under article 361 of the CivilCode, if they cannot come to an extra-judicial settlement with regard to said rights.


16/62

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 tosell 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. Defendantsobjected 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 executionissued 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 casefor a determination of the rights of the parties upon failure of extra-judicialsettlement.chanroblesvirtualawlibrarychanrobles virtual law library

The judgment rendered by Judge Felix is founded on articles 361 and 453 of the Civil Codewhich 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 thepayment 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 properrent.chanroblesvirtualawlibrarychanrobles virtual law library

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 tohim.chanroblesvirtualawlibrarychanrobles virtual law library

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 refundingthe amount of the expenses or paying the increase in value which the thing may haveacquired 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 payfor 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 suchremotion only when, after having chosen to sell his land, the other party fails to pay for thesame. But this is not the case before us.chanroblesvirtualawlibrarychanrobles virtual lawlibrary

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 thelatter 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 toarticles 361 and 453 of the Civil Code.chanroblesvirtualawlibrarychanrobles virtual lawlibrary

There is, however, in the decision of Judge Felix a question of procedure which calls for theclarification, to avoid uncertainty and delay in the disposition of cases. In that decision, therights 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 asthe periods of time within which the option may be exercised and payment should be made,


17/62

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. Andexecution 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 settlethese 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 ina subsequent proceeding, matters which remained unsettled up to the time the petition isfiled in the instant case.chanroblesvirtualawlibrarychanrobles virtual law library

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 theperiod 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 fromthe date the judgment becomes executory or unappealable. After such hearing, the court

shall render a final judgment according to the evidence presented by theparties.chanroblesvirtualawlibrarychanrobles virtual law library

The costs shall be paid by plaintiffs-respondents.chanroblesvirtualawlibrarychanroblesvirtual law library

Ozaeta, Paras, Jaranilla, Feria, De Joya, Pablo, Perfecto, Hilado, Bengzon and Briones,JJ.,concur.


18/62

Republic of the PhilippinesSUPREME COURT

Manila

THIRD DIVISION

G.R. No. 72876 January 18, 1991

FLORENCIO IGNAO, petitioner,vs.HON. INTERMEDIATE APPELLATE COURT, JUAN IGNAO, substituted by his LegalHeirs, and ISIDRO IGNAO, respondents.

Dolorfino and Dominguez Law Offices for petitioner.

Ambrosio Padilla, Mempin & Reyes Law Offices for private respondents.

FERNAN, C.J.:p

In this petition for review by certiorari, petitioner seeks the reversal of the decision of the IntermediateAppellate Court (now Court of Appeals) affirming in toto the decision of the Court of First Instance ofCavite, ordering petitioner Florencio Ignao to sell to private respondents Juan and Isidro Ignao, that partof his property where private respondents had built a portion of their houses.

The antecedent facts are as follows:

Petitioner Florencio Ignao and his uncles private respondents Juan Ignao and Isidro Ignao were co-owners of a parcel of land with an area of 534 square meters situated in Barrio Tabon, Municipality ofKawit, Cavite. Pursuant to an action for partition filed by petitioner docketed as Civil Case No. N-1681, thethen Court of First Instance of Cavite in a decision dated February 6, 1975 directed the partition of theaforesaid land, alloting 133.5 square meters or 2/8 thereof to private respondents Juan and Isidro, andgiving the remaining portion with a total area of 266.5 square meters to petitioner Florencio. However, noactual partition was ever effected.

1

On July 17, 1978, petitioner instituted a complaint for recovery of possession of real property againstprivate respondents Juan and Isidro before the Court of First Instance of Cavite, docketed as Civil CaseNo. 2662. In his complaint petitioner alleged that the area occupied by the two (2) houses built by privaterespondents exceeded the 133.5 square meters previously alloted to them by the trial court in Civil CaseNo. N-1681.

Consequently, the lower court conducted an ocular inspection. It was found that the houses of Juan andIsidro actually encroached upon a portion of the land belonging to Florencio. Upon agreement of theparties, the trial court ordered a licensed geodetic engineer to conduct a survey to determine the exactarea occupied by the houses of private respondents. The survey subsequently disclosed that the houseof Juan occupied 42 square meters while that of Isidro occupied 59 square meters of Florencio's land or atotal of 101 square meters.


19/62

In its decision, the trial court (thru Judge Luis L. Victor) ruled that although private respondents occupieda portion of Florencio's property, they should be considered builders in good faith. The trial court took intoaccount the decision of the Court of First Instance of Cavite in the action for partition

2and quoted:

. . . . Hence, it is the well-considered opinion of the Court that although it turned out thatthe defendants had, before partition, been in possession of more than what rightfully

belongs to them,their possession of what is in excess of their rightful share can at worstbe possession in good faith which exempts them from being condemned to pay damagesby reason thereof.

3

Furthermore, the trial court stated that pursuant to Article 448 of the Civil Code, the owner of the land(Florencio) should have the choice to either appropriate that part of the house standing on his land afterpayment of indemnity or oblige the builders in good faith (Juan and Isidro) to pay the price of the land.However, the trial court observed that based on the facts of the case, it would be useless and unsuitablefor Florencio to exercise the first option since this would render the entire houses of Juan and Isidroworthless. The trial court then applied the ruling in the similar case of Grana vs.Court of Appeals,

4where

the Supreme Court had advanced a more "workable solution". Thus, it ordered Florencio to sell to Juanand Isidro those portions of his land respectively occupied by the latter. The dispositive portion of saiddecision reads as follows:

WHEREFORE, judgment is hereby rendered in favor of the defendants and

(a) Ordering the plaintiff Florencio Ignao to sell to the defendants Juan and Isidro Ignaothat portion of his property with an area of 101 square meters at P40.00 per squaremeter, on which part the defendants had built their houses; and

(b) Ordering the said plaintiff to execute the necessary deed of conveyance to thedefendants in accordance with paragraph (a) hereof.

Without pronouncement as to costs.5

Petitioner Florencio Ignao appealed to the Intermediate Appellate Court. On August 27, 1985, theAppellate Court, Second Civil Cases Division, promulgated a decision, 6affirming the decision of the trialcourt.

Hence the instant petition for review which attributes to the Appellate Court the following errors:

1. That the respondent Court has considered private respondents builders in good faithon the land on question, thus applying Art. 448 of the Civil Code, although the land inquestion is still owned by the parties in co-ownership, hence, the applicable provision isArt. 486 of the Civil Code, which was not applied.

2. That, granting for the sake of argument that Art. 448 . . . is applicable, the respondentCourt has adjudged the working solution suggested in Grana and Torralba vs. CA. (109

Phil. 260), which is just an opinion by way of passing, and not the judgment renderedtherein, which is in accordance with the said provision of the Civil Code, wherein theowner of the land to buy (sic) the portion of the building within 30 days from the judgmentor sell the land occupied by the building.

3. That, granting that private respondents could buy the portion of the land occupied bytheir houses, the price fixed by the court is unrealistic and pre-war price.

7


20/62

The records of the case reveal that the disputed land with an area of 534 square meters was originallyowned by Baltazar Ignao who married twice. In his first marriage, he had four children, namely Justo (thefather of petitioner Florencio), Leon and private respondents Juan and Isidro. In his second marriage,Baltazar had also four children but the latter waived their rights over the controverted land in favor ofJusto. Thus, Justo owned 4/8 of the land which was waived by his half-brothers and sisters plus his 1/8share or a total of 5/8. Thereafter, Justo acquired the 1/8 share of Leon for P500.00 which he later sold tohis son Florencio for the same amount. When Justo died, Florencio inherited the 5/8 share of his fatherJusto plus his 1/8 share of the land which he bought or a total of 6/8 (representing 400.5 square meters).Private respondents, Juan and Isidro, on the other hand, had 1/8 share (66.75 square meters) each of theland or a total of 133.5 square meters.

Before the decision in the partition case was promulgated, Florencio sold 134 square meters of his shareto a certain Victa for P5,000.00 on January 27, 1975. When the decision was handed down on February6,1975, the lower court alloted 2/8 of the land to private respondents Juan and Isidro, or a total of 133.5square meters.

It should be noted that prior to partition, all the co-owners hold the property in common dominion but atthe same time each is an owner of a share which is abstract and undetermined until partition is effected.As cited in Eusebio vs. Intermediate Appellate Court,

8"an undivided estate is co-ownership by the heirs."

As co-owners, the parties may have unequal shares in the common property, quantitatively speaking. Butin a qualitative sense, each co-owner has the same right as any one of the other co-owners. Every co-owner is therefore the owner of the whole, and over the whole he exercises the right of dominion, but heis at the same time the owner of a portion which is truly abstract, because until division is effected suchportion is not concretely determined.

9

Petitioner Florencio, in his first assignment of error, asseverates that the court a quoerred in applyingArticle 448 of the Civil Code, since this article contemplates a situation wherein the land belongs to oneperson and the thing built, sown or planted belongs to another. In the instant case, the land in disputeused to be owned in common by the contending parties.

Article 448 provides:

Art. 448. The owner of the land on which anything has been built, sown or planted ingood 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 onewho 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 isconsiderably more than that of the building or trees. In such case, he shall payreasonable rent, if the owner of the land does not choose to appropriate the building ortrees after proper indemnity. The parties shall agree upon the terms of the lease and incase of disagreement, the court shall fix the terms thereof.

Whether or not the provisions of Article 448 should apply to a builder in good faith on a property held incommon has been resolved in the affirmative in the case of Spouses del Campo vs.Abesia,

10wherein

the Court ruled that:

The courta quocorrectly held that Article 448 of the Civil Code cannot apply where a co-owner builds, plants or sows on the land owned in common for then he did not build,plant or sow upon land that exclusively belongs to another but of which he is a co-owner.The co-owner is not a third person under the circumstances, and the situation isgoverned by the rules of co-ownership.


21/62

However, when, as in this case, the ownership is terminated by the partition and itappears that the home of defendants overlaps or occupies a portion of 5 square metersof the land pertaining to plaintiffs which the defendants obviously built in good faith, thenthe provisions of Article 448 of the new Civil Code should apply. Manresa and NavarroAmandi agree that the said provision of the Civil Code may apply even when there is aco-ownership if good faith has been established.

11

In other words, when the co-ownership is terminated by a partition and it appears that the house of anerstwhile co-owner has encroached upon a portion pertaining to another co-owner which was howevermade in good faith, then the provisions of Article 448 should apply to determine the respective rights ofthe parties.

Petitioner's second assigned error is however well taken. Both the trial court and the Appellate Courterred when they peremptorily adopted the "workable solution" in the case of Grana vs.Court ofappeals,

12and ordered the owner of the land, petitioner Florencio, to sell to private respondents, Juan

and Isidro, the part of the land they intruded upon, thereby depriving petitioner of his right to choose.Such ruling contravened the explicit provisions of Article 448 to the effect that "(t)he owner of the land . . .shall have the right to appropriate . . .or to oblige the one who built . . . to pay the price of the land . . . ."The law is clear and unambiguous when it confers the right of choice upon the landowner and not upon

the builder and the courts.

Thus, in Quemuel vs.Olaes,13

the Court categorically ruled that the right to appropriate the works orimprovements or to oblige the builder to pay the price of the land belongs to the landowner.

As to the third assignment of error, the question on the price to be paid on the land need not be discussedas this would be premature inasmuch as petitioner Florencio has yet to exercise his option as the ownerof the land.

WHEREFORE, the decision appealed from is hereby MODIFIED as follows: Petitioner Florencio Ignao isdirected within thirty (30) days from entry of judgment to exercise his option to either appropriate as hisown the portions of the houses of Juan and Isidro Ignao occupying his land upon payment of indemnity inaccordance with Articles 546 and 548 of the Civil Code, or sell to private respondents the 101 square

meters occupied by them at such price as may be agreed upon. Should the value of the land exceed thevalue of the portions of the houses that private respondents have erected thereon, private respondentsmay choose not to buy the land but they must pay reasonable rent for the use of the portion of petitioner'sland as may be agreed upon by the parties. In case of disagreement, the rate of rental and other terms ofthe lease shall be determined by the trial court. Otherwise, private respondents may remove or demolishat their own expense the said portions of their houses encroaching upon petitioner's land.

14No costs.

SO ORDERED.

Gutierrez, Jr., Feliciano and Bidin, JJ., concur.


22/62

Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. L-12812 September 29, 1959

FILIPINAS COLLEGES, INC.,plaintiff-appellee,vs.MARIA GARCIA TIMBANG, ET AL.,defendants.

------------------------------

G.R. No. L-12813 September 29, 1959

MARIA 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 voidunless within 15 days from notice of said order the successful bidders, defendants-appellants spousesMaria Garcia Timbang and Marcelino Timbang, shall pay to, appellee Maria Gervacio Blas directly orthrough the Sheriff of Manila the sum of P5,750.00 that the spouses Timbang had bid for the building atthe Sheriff's sale; (b) declaring the other appellee Filipinas Colleges, Inc. owner of 24,500/3,285,934undivided interest in Lot No. 2-a covered by certificate of tile No 45970, on which the building sold in theauction sale is situated; and (c) ordering the sale in public auction of the said undivided interest of theFilipinas Colleges, Inc., in lot No. 2-a aforementioned to satisfy the unpaid portion of the judgment in favorof appellee Blas and against Filipinas Colleges, Inc. in the amount of P8,200.00 minus the sum ofP5,750.00 mentioned in (a) above.

The order appealed from is the result of three motions filed in the court a quoin the course of theexecution of a final judgment of the Court of Appeals rendered in 2 cases appealed to it in which thespouses Timbang, the Filipinas Colleges, Inc., and Maria Gervacio Blas were the parties. IN thatjudgment of the Court of Appeals, the respective rights of the litigants have been adjudicated asfollows:1wphl.nt

(1) Filipinas Colleges, Inc. was declared to have acquired the rights of the spouses Timbang inand to lot No. 2-a mentioned above and in consideration thereof, Filipinas Colleges, Inc., wasordered to pay the spouses Timbang the amount of P15,807.90 plus such other amounts whichsaid spouses might have paid or had to pay after February, 1953, to Hoskins and Co. Inc., agentof the Urban Estates, Inc., original vendor of the lot. Filipinas Colleges, Inc. original vendor of thetotal amount with the court within 90 days after the decision shall have become final.


23/62

(2) Maria Gervacio Blas was declared to be a builder in good faith of the school buildingconstructed 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 stockcertificate (Exh. C) for 108 shares of Filipinas Colleges, Inc. with a par value of P10,800.00 and topay 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 liquidationwas fixed at P32,859.34, within the 90-day period set by the court, Filipinas Colleges would loseall its rights to the land and the spouses Timbang would then become the owners thereof. In thateventuality, the Timbangs would make known to the court their option under Art. 448 of the CivilCode whether they would appropriate the building in question, in which even they would have topay Filipinas Colleges, Inc. the sum of P19,000.00, or would compel the latter to acquire the landand 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 compelFilipinas Colleges, Inc., for the payment of the sum of P32,859,34. The motion having been granted, awrit 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 P8,200.00representing the unpaid portion of the price of the house sold to Filipinas Colleges, Inc. Over the object ofthe Timbangs, the court grated the motion and the corresponding writ of execution was issued on January30, 1957, date of the granting of the motion for execution, Blas through counsel, sent a letter to the Sheriffof Manila advising him of her preferential claim or lien on the house to satisfy the unpaid balance of thepurchase price thereof under Article 2242 of the Civil Code, and to withhold from the proceed of theauction sale the sum of P8,200.00. Levy having been made on the house in virtue of the writs ofexecution, the Sheriff of Manila on March 5, 1957, sold the building in public auction in favor of thespouses Timbang, as the highest bidders, in the amount of P5,750.00. Personal properties of FilipinasColleges, 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 topay and deliver to her the sum of P5,750.00 representing the proceeds of the auction sale of thebuilding of Filipinas Colleges, Inc. over which she has a lien of P8,200.00 for the unpaid balanceof the purchase price thereof;.

(2) Also by the appellee Bals, praying that there being still two unsatisfied executions, one for thesum of P32,859.34 in favor the land involved, Lot No. 2-a, be sold at public auction; and (3) ByFilipinas Colleges, Inc. praying that because its properties, the house and some personalproperties, have been auctioned for P5,750.00 and P245.00 respectively in favor of the Timbangspouses who applied the proceeds to the partial payment of the sum of P32,859.34 value of theland, Lot No. 2-a, it (Filipinas Colleges, Inc.) be declared part owner of said lot to the extent of thetotal amount realized from the execution sale of its properties.1wphl.nt

The Timbang spouses presented their opposition to each and all of these motion. After due hearing thelower court rendered its resolution in the manner indicated at the beginning of this decision, from whichthe Timbangs alone have appealed.

In assailing the order of the court a quo directing the appellants to pay appellee Blas the amount of theirbid (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 landafter the owners thereof exercised their option under Article 448 of the Civil Code, the builder lost his right


24/62

of retention provided in Article 546 and by operation of Article 445, the appellants as owners of the landautomatically became the owners ipso facto, the execution sale of the house in their favor wassuperfluous. Consequently, they are not bound to make good their bid of P5,750.00 as that would be tomake goods to pay for their own property. By the same token, Blas claim for preference on account of theunpaid balance of the purchase price of the house does not apply because preference applies only withrespect 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 CivilCode defining the right of the parties in case a person in good faith builds, sows or plants on the land ofanother, respectively provides:

ART. 448. The owner of the land on which anything has been built, sown or plated in good faithshall have the right to appropriate as his own the works, sowing or planting, after payment of theindemnify provided for in article 546 and 548, or to obligate the one who built or planted to paythe price of the land, and the one who sowed, the proper rent. However, the builder or plantercannot be obliged to buy the land if its value is considerably more than that of the building ortrees. In such case, he shall pay reasonable rent, if the owner of the land does not choose toappropriate the building or trees after proper indemnity. The parties shall agree upon the terms ofthe 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 ingood 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 ofretention the person who has defeated him in the possession having to option of refunding theamount of expenses or of paying the case in value which thing may have acquired by reasonthereof.

Under the terms of these article, it is true that the owner of the land has the right to choose betweenappropriating the building by reimbursing the builder of the value thereof or compelling the builder in goodfaith to pay for his land. Even this second right cannot be exercised if the value of the land is considerablymore 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 bythe owner of the land. There is nothing in the language of these two article, 448 and 546, which wouldjustify the conclusion of appellants that, upon the failure of the builder to pay the value of the land, whensuch is demanded by the land-owner, the latter becomes automatically the owner of the improvementunder Article 445. The case of Bernardo vs.Bataclan, 66 Phil., 590 cited by appellants is no authority forthis conclusion. Although it is true it was declared therein that in the event of the failure of the builder topay the land after the owner thereof has chosen this alternative, the builder's right of retention provided inArticle 546 is lost, nevertheless there was nothing said that as a consequence thereof, the builder losesentirely all rights over his own building. The question is; what is the recourse or remedy left to the partiesin such eventuality where the builder fails to pay the value of the land? While the Code is silent on thisCourt in the cases of Miranda vs. Fadullon, et al., 97 Phil., 801; 51 Off. Gaz., [12] 6226; Ignacio vs.Hilario, 76 Phil., 605 and the cited case of Bernardo 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 hehas built in good faith until he is reimbursed the expenses incurred by him. Possibly he might bemade to pay rental only when the owner of the land chooses not to appropriate the improvementand requires the builder in good faith to pay for the land but that the builder is unwilling or unableto pay the land, and then they decide to leave things as they are and assume the relation oflessor and lessee, and should they disagree as to the amount of rental then they can go to thecourt to fix that amount. (Emphasis supplied)


25/62

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 of Ignacio vs. Hilario, supra, wherein the court has ruled that theowner of the land in entitled to have the improvement removed when after having chosen to sell his landto the other party, i.e., the builder in good faith fails to pay for the same.

A further remedy is indicated in the case of Bernardo 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 thepayment of the value of the land and the excess, if any, to be delivered to the owner of the house inpayment thereof.

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

This contention is without merit. This Court has already held in Matias vs. The Provincial Sheriff of NuevaEcija (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 doesnot exceed the amount of his judgement, nevertheless, when their is a claim by a third-party, to theproceeds of the sale superior to his judgment credit, the execution creditor, as successful bidder, mustpay 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 thepayment of the unpaid balance of the purchase price of the school building. Blas is actually a lien on theschool building are concerned. The order of the lower court directing the Timbang spouses, as successfulbidders, 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 tothe extent of the value of its personal properties sold at public auction in favor of the Timbang, this CourtLikewise finds the same as justified, for such amount represents, in effect, a partial payment of the valueof 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 ofP5,750.00 amount to be paid by the Timbangs, the order of the court directing the sale of suchundivided interest of th

property cases right of accession

Documents