Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-12486 August 31, 1960

LEONOR GRANA and JULIETA TORRALBA, petitioners,

Tranquilino O. Calo, Jr. for petitioners.

GUTIERREZ DAVID, J.:

This is a petition to review on certiorari a decision of the Court of Appeals.

Leonor Grana and Julieta Torralba, defendants below and herein petitioners, were on April 13, 1951 sued by Aurora
Bongato and Jardenio Sanchez, respondents herein, before the Court of First Instance of Agusan, for the recovery of
87 square meters of residential land. After trial, the court rendered judgment declaring the plaintiffs, herein
respondents, owners of the land in controversy and ordering petitioners to vacate and deliver it to said respondents
and to pay a monthly rental of P10.00 from the filing of the complaint until they actually vacate the same, plus
attorney's fees and costs. The decision, on appeal, having been affirmed by the Court of Appeals with the only
modification of disallowing the award for attorney's fees, petitioners brought the case to this Court through the
present petition for review.

The record discloses that sometime in 1909 a cadastral survey of Butuan, Agusan, was made by the Bureau of
Lands. In that survey, the parcel of land here in question was included as part of the lot belonging to Gregorio
Bongato and Clara Botcon for which Original Certificate of Title No. RO-72 (138) was issued in their favor on
February 12, 1923. On November 25, 1933, this lot was purchased by the spouses Marcos Bongato and Eusebia
More, and upon their death, the land was inherited by the respondents Aurora Bongato and Jardenio Sanchez, the
former being the daughter of Marcos Bongato by his first marriage while the latter is the son of Eusebia More also
by her first marriage.

Petitioners claim that the lands in Butuan were subsequently resurveyed due to conflicts and overlapping of
boundaries. In that resurvey (TS-65 Butuan Cadastre), Gregorio Bongato's lot, according to petitioners, was
identified as Lot No. 311 and that of Isidaria Trillo, their predecessor in interest, as Lot No. 310. Citing the fact that
Original Certificate of Title No. RO-72 (138) covers 295 square meters of land, while the sketch plan of the second
cadastral survey of Butuan shows that Lot No. 311 has only 230 square meters, petitioners maintain that it is the
latter area properly belongs to respondents and that the land in question is part of the adjoining land, Lot No. 310,
which belonged to their predecessor in interest.

Petitioners' stand is untenable. No proof was presented to show that the first survey was erroneous or that it included
part of the contigous land of petitioners' predecessor in interest as part of the lot now covered by Original Certificate
of Title No. RO-72 (138). Note that the difference in area between the land covered by said title and Lot No. 311 of
the resurvey plan is 65 square meters while the area of the land in dispute if 87 square meters. And what is more, the
alleged sketch plan of the resurvey was not presented in evidence.

Upon the other hand, it is not disputed that the land in question is part of the lot covered by the Torrens title issued
way back in 1923 in the name of respondents' predecessor in interest. Said title has not been contested up to the
present, and, therefore, has become inconvertible evidence of the ownership of the land covered by it. Well settled is
the rule that a Torrens certificate of title becomes conclusive and indefeasible after the lapse of the period within
which it may be impugned (Reyes, et al. vs. Borbon, et al., 50 Phil., 791; Yumul vs. Rivera, et al., 64 Phil., 13).

Petitioners' contention that the Court of Appeals erred in not granting their motion for new trial on the ground of
newly discovered evidence, likewise, cannot be sustained. The new evidence sought to be introduced was the sketch
plan of the second survey, which, with the employment of reasonable diligence would have easily been discovered
and produced at the trial. Anyway, even if presented at the result of the case. If a subsequent certificate of title
cannot be permitted to prevail over a previous Torrens title (Reyes, et al, vs. Borbon, et al., supra) with more reason
should a resurvey plan not to be allowed to alter or modify such title so as to make the area of the land therein
described agree with that given in the plan. (See Government of the Philippines vs. Arias, 36 Phil., 195).

Although without any legal and valid claim over the land in question, petitioners, however, were found by the Court
of Appeals to have constructed a portion of their house thereon in good faith. Under Article 361 of the old Civil
Code (Article 448 of the new), the owner of the land on which anything has been built in good faith shall have the
right to appropriate as his own faith shall have the right to appropriate as his own the building, after payment to the
builder of necessary and useful expenses, and in the proper case, expenses for pure luxury or mere pleasure, or to
oblige the builder to pay the price of the land. Respondents, as owners of the land, have therefore the choice of
either appropriating the portion of petitioners' house which is on their land upon payment of the proper indemnity to
petitioners, or selling to petitioners that part of their land on which stands the improvement. It may here be pointed
out that it would be impractical for respondents to choose to exercise the first alternative, i.e., buy that portion of the
house standing on their land, for in that event the whole building might be rendered useless. The more workable
solution, it would seem, is for respondents to sell to petitioners that part of their land on which was constructed a
portion of the latter's house. If petitioners are unwilling or unable to buy, then they must vacate the land and must
pay rentals until they do so. Of course, respondents cannot oblige petitioners to buy the land if its value is
considerably more than that of the aforementioned portion of the house. If such be the case, then petitioners must
pay reasonable rent. The parties must come to an agreement as to the conditions of the lease, and should they fail to
do so, then the court shall fix the same. (Article 361, old Civil Code; Article 448 of the new).

In this connection, the appellate court erred in ordering petitioners to pay monthly rentals of P10.00 from the date of
filing of the complaint until they actually vacate said land. A builder in good faith may not be required to pay
rentals. He has a right to retain the land on which he has built in good faith until he is reimbursed the expenses
incurred by him. (Miranda vs. Fadullon, et al., 97 Phil., 801; 51 Off. Gaz., 6226, see also Martinez vs. Baganus, 28
Phil., 500; De Guzman vs. De la Fuente, 55 Phil., 501; Kasilag vs. Rodriguez, Off. Gaz., Supp., August 16, 1941, p.
247).

Petitioners further contend that he complaint should have been dismissed for nonjoinder of an indispensable party, it
being alleged that their mother Maria Cupin, who owns the land in question as part of her Lot No. 310, has not been
made a party defendant in the case. This contention, which was not raised in the trial court, deserves scant
consideration. Petitioners clearly asserted ownership over the land in dispute as well as over Lot No. 310 in their
answer to the complaint. They are consequently estopped from alleging otherwise.

As to petitioners' assertion that they should have been awarded damages alleged to have been suffered by them in
their counterclaim, suffice it to say that petitioners failed to prove that they suffered any damage at all by reason of
the filing of the complaint. Indeed, in the light of the view we have taken of the case, they could not have
substantiated their claim for damages.

In view of the foregoing, the appealed decision is modified in the sense that respondents are hereby directed to
exercise within 30 days from this decision their option to either buy the portion of the petitioners' house on their land
or sell to said petitioners the portion of their land and petitioners are unwilling or unable to buy, then they must
vacate the same and must pay reasonable rent of P10.00 monthly from the time respondents made their choice up to
the time they actually vacate the premises. But if the value of the eland is considerably more than the value of the
improvement, then petitioners may elect to rent the land, in which case the parties shall agree upon the terms of a
lease. Should they disagree, the court of origin is hereby instructed to intervene and fix the terms thereof. Petitioners
shall pay reasonable rent of P10.00 monthly up to the time the parties agree on the terms of the lease or until the curt
fixes such terms. So ordered without pronouncement as to costs.
 FIRST DIVISION

G.R. No. L-57348 May 16, 1985

FRANCISCO DEPRA, Plaintiff-Appellee, vs. AGUSTIN DUMLAO, Defendant-Appellant.

Roberto D. Dineros for plaintiff-appellee.chanrobles virtual law library

Veil D. Hechanova for defendant-appellant.

MELENCIO-HERRERA, J.:

This is an appeal from the Order of the former Court of First Instance of Iloilo to the then Court of Appeals, which
the latter certified to this instance as involving pure questions of law chanrobles virtual law library

Plaintiff-appellee, Francisco Depra, is the owner of a parcel of land registered under Transfer Certificate of Title No.
T3087, known as Lot No. 685, situated in the municipality of Dumangas, Iloilo, with an area of approximately 8,870
square meters. Agustin Dumlao, defendant-appellant, owns an adjoining lot, designated as Lot No. 683, with an
approximate area of 231 sq. ms.chanroblesvirtualawlibrary chanrobles virtual law library

Sometime in 1972, when DUMLAO constructed his house on his lot, the kitchen thereof had encroached on an area
of thirty four (34) square meters of DEPRA's property, After the encroachment was discovered in a relocation
survey of DEPRA's lot made on November 2,1972, his mother, Beatriz Depra after writing a demand letter asking
DUMLAO to move back from his encroachment, filed an action for Unlawful Detainer on February 6,1973 against
DUMLAO in the Municipal Court of of Dumangas, docketed as Civil Case No 1, Said complaint was later amended
to include DEPRA as a party plain. plaintiff.chanroblesvirtualawlibrary chanrobles virtual law library

After trial, the Municipal Court found that DUMLAO was a builder in good faith, and applying Article 448 of the
Civil Code, rendered judgment on September 29, 1973, the dispositive portion of which reads:

Ordering that a forced lease is created between the parties with the plaintiffs, as lessors, and the defendants as
lessees, over the disputed portion with an area of thirty four (34) square meters, the rent to be paid is five (P5.00)
pesos a month, payable by the lessee to the lessors within the first five (5) days of the month the rent is due; and the
lease shall commence on the day that this decision shall have become final.

From the foregoing judgment, neither party appeal so that, ff it were a valid judgment, it would have ordinarily
lapsed into finality, but even then, DEPRA did not accept payment of rentals so that DUMLAO deposited such
rentals with the Municipal Court.chanroblesvirtualawlibrary chanrobles virtual law library

On July 15,1974, DEPRA filed a Complaint for Quieting of Title against DUMLAO before the then Court of First
Instance of Iloilo, Branch IV (Trial Court), involving the very same 34 square meters, which was the bone of
contention in the Municipal Court. DUMLAO, in his Answer, admitted the encroachment but alleged, in the main,
that the present suit is barred by res judicata by virtue of the Decision of the Municipal Court, which had become
final and executory.chanroblesvirtualawlibrary chanrobles virtual law library

After the case had been set for pre-trial, the parties submitted a Joint Motion for Judgment based on the Stipulation
of Facts attached thereto. Premised thereon, the Trial Court on October 31, 1974, issued the assailed Order,
decreeing:

WHEREFORE, the Court finds and so holds that the thirty four (34) square meters subject of this litigation is part
and parcel of Lot 685 of the Cadastral Survey of Dumangas of which the plaintiff is owner as evidenced by Transfer
Certificate of Title No. 3087 and such plaintiff is entitled to possess the same.chanroblesvirtualawlibrary chanrobles
virtual law library
Without pronouncement as to costs.chanroblesvirtualawlibrarychanrobles virtual law library

SO ORDERED.

Rebutting the argument of res judicata relied upon by DUMLAO, DEPRA claims that the Decision of the Municipal
Court was null and void ab initio because its jurisdiction is limited to the sole issue of possession, whereas decisions
affecting lease, which is an encumbrance on real property, may only be rendered by Courts of First
Instance.chanroblesvirtualawlibrary chanrobles virtual law library

Addressing out selves to the issue of validity of the Decision of the Municipal Court, we hold the same to be null
and void. The judgment in a detainer case is effective in respect of possession only (Sec. 7, Rule 70, Rules of
Court). 1 The Municipal Court over-stepped its bounds when it imposed upon the parties a situation of "forced
lease", which like "forced co-ownership" is not favored in law. Furthermore, a lease is an interest in real property,
jurisdiction over which belongs to Courts of First Instance (now Regional Trial Courts) (Sec. 44(b), Judiciary Act of
1948; 2 Sec. 19 (2) Batas Pambansa Blg. 129). 3 Since the Municipal Court, acted without jurisdiction, its Decision
was null and void and cannot operate as res judicata to the subject complaint for Queting of Title. Besides, even if
the Decision were valid, the rule on res judicata would not apply due to difference in cause of action. In the
Municipal Court, the cause of action was the deprivation of possession, while in the action to quiet title, the cause of
action was based on ownership. Furthermore, Sec. 7, Rule 70 of the Rules of Court explicitly provides that judgment
in a detainer case "shall not bar an action between the same parties respecting title to the land. " 4 chanrobles virtual
law library

Conceded in the Stipulation of Facts between the parties is that DUMLAO was a builder in good faith. Thus,

8. That the subject matter in the unlawful detainer case, Civil Case No. 1, before the Municipal Court of Dumangas,
Iloilo involves the same subject matter in the present case, the Thirty-four (34) square meters portion of land and
built thereon in good faith is a portion of defendant's kitchen and has been in the possession of the defendant since
1952 continuously up to the present; ... (Emphasis ours)

Consistent with the principle that our Court system, like any other, must be a dispute resolving mechanism, we
accord legal effect to the agreement of the parties, within the context of their mutual concession and stipulation.
They have, thereby, chosen a legal formula to resolve their dispute to appeal ply to DUMLAO the rights of a
"builder in good faith" and to DEPRA those of a "landowner in good faith" as prescribed in Article 448. Hence, we
shall refrain from further examining whether the factual situations of DUMLAO and DEPRA conform to the
juridical positions respectively defined by law, for a "builder in good faith" under Article 448, a "possessor in good
faith" under Article 526 and a "landowner in good faith' under Article 448.chanroblesvirtualawlibrary chanrobles
virtual law library

In regards to builders in good faith, Article 448 of the Civil Code provides: chanrobles virtual law library

ART. 448. The owner of the land on which anything has been built sown or planted in good faith,

shall have the right chanrobles virtual law library

to appropriate as his own the works, sowing or planting, after payment of the indemnity provided for in articles 546
and 548, or chanrobles virtual law library

to oblige the one who built or planted to pay the price of the land, and the one who sowed, the proper
rent.chanroblesvirtualawlibrary chanrobles virtual law library

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)

Pursuant to the foregoing provision, DEPRA has the option either to pay for the encroaching part of DUMLAO's
kitchen, or to sell the encroached 34 square meters of his lot to DUMLAO. He cannot refuse to pay for the
encroaching part of the building, and to sell the encroached part of his land, 5 as he had manifested before the
Municipal Court. But that manifestation is not binding because it was made in a void
proceeding.chanroblesvirtualawlibrary chanrobles virtual law library

However, the good faith of DUMLAO is part of the Stipulation of Facts in the Court of First Instance. It was thus
error for the Trial Court to have ruled that DEPRA is "entitled to possession," without more, of the disputed portion
implying thereby that he is entitled to have the kitchen removed. He is entitled to such removal only when, after
having chosen to sell his encroached land, DUMLAO fails to pay for the same. 6 In this case, DUMLAO had
expressed his willingness to pay for the land, but DEPRA refused to sell.

The owner of the building erected in good faith on a land owned by another, is entitled to retain the possession of the
land until he is paid the value of his building, under article 453 (now Article 546). The owner of the land, upon the
other hand, has the option, under article 361 (now Article 448), either to pay for the building or to sell his land to the
owner of the building. But he cannot as respondents here did refuse both to pay for the building and to sell the
land and compel the owner of the building to remove it from the land where it 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 (italics
ours).chanroblesvirtualawlibrary chanrobles virtual law library

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]).

A word anent the philosophy behind Article 448 of the Civil rode.chanroblesvirtualawlibrary chanrobles virtual law
library

The original provision was found in Article 361 of the Spanish Civil Code; which provided:

ART. 361. The owner of land on which anything has been built, sown or planted in good faith, shall have the right to
appropriate as his own the work, sowing or planting, after the payment of the indemnity stated in Articles 453 and
454, or to oblige the one who built or planted to pay the price of the land, and the one who sowed, the proper rent.

As will be seen, the Article favors the owner of the land, by giving him one of the two options mentioned in the
Article. Some commentators have questioned the preference in favor of the owner of the land, but Manresa's opinion
is that the Article is just and fair.

. . . es justa la facultad que el codigo da al dueno del suelo en el articulo 361, en el caso de edificacion o plantacion?
Algunos comentaristas la conceptuan injusta, y como un extraordinario privilegio en favor de la propiedad
territorial. Entienden que impone el Codigo una pena al poseedor de buena fe y como advierte uno de los
comentaristas aludidos 'no se ve claro el por que de tal pena . . . al obligar al que obro de buena fe a quedarse con el
edificio o plantacion, previo el pago del terreno que ocupa, porque si bien es verdad que cuando edifico o planto
demostro con este hecho, que queria para si el edificio o plantio tambien lo es que el que edifico o planto de buena
fe lo hizo en la erronea inteligencia de creerse dueno del terreno Posible es que, de saber lo contrario, y de tener
noticia de que habia que comprar y pagar el terreno, no se hubiera decidido a plantar ni a edificar. La ley
obligandole a hacerlo fuerza su voluntad, y la fuerza por un hecho inocente de que no debe ser responsable'. Asi
podra suceder pero la realidad es que con ese hecho voluntario, aunque sea inocente, se ha enriquecido
torticeramente con perjuicio de otro a quien es justo indemnizarle, chanrobles virtual law library
En nuestra opinion, el Codigo ha resuelto el conflicto de la manera mas justa y equitativa y respetando en lo possible
el principio que para la accesion se establece en el art. 358. 7

Our own Code Commission must have taken account of the objections to Article 361 of the Spanish Civil Code.
Hence, the Commission provided a modification thereof, and Article 448 of our Code has been made to provide:

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

Additional benefits were extended to the builder but the landowner retained his
options.chanroblesvirtualawlibrary chanrobles virtual law library

The fairness of the rules in Article 448 has also been explained as follows:

Where the builder, planter or sower has acted in good faith, a conflict of rights arises between the owners, and it
becomes necessary to protect the owner of the improvements without causing injustice to the owner of the land. In
view of the impracticability of creating a state of forced co-ownership, the law has provided a just solution by giving
the owner of the land the option to acquire the improvements after payment of the proper indemnity, or to oblige the
builder or planter to pay for the land and the sower to pay for the proper rent. It is the owner of the land who is
authorized to exercise the option, because his right is older, and because, by the principle of accession, he is entitled
to the ownership of the accessory thing. (3 Manresa 213; Bernardo vs. Bataclan, 37 Off. Gaz. 1382; Co Tao vs.
Chan Chico, G.R. No. 49167, April 30, 1949; Article applied: see Cabral, et al vs. Ibanez [S.C.] 52 Off. Gaz. 217;
Marfori vs. Velasco, [C.A.] 52 Off. Gaz. 2050). 8

WHEREFORE, the judgment of the trial Court is hereby set aside, and this case is hereby ordered remanded to the
Regional Trial Court of Iloilo for further proceedings consistent with Articles 448 and 546 of the Civil Code, as
follows: chanrobles virtual law library

1. The trial Court shall determine

a) the present fair price of DEPRA's 34 square meter area of land; chanrobles virtual law library

b) the amount of the expenses spent by DUMLAO for the building of the kitchen; chanrobles virtual law library

c) the increase in value ("plus value") which the said area of 34 square meters may have acquired by reason thereof,
and chanrobles virtual law library

d) whether the value of said area of land is considerably more than that of the kitchen built thereon.

2. After said amounts shall have been determined by competent evidence, the Regional, Trial Court shall render
judgment, as follows:

a) The trial Court shall grant DEPRA a period of fifteen (15) days within which to exercise his option under the law
(Article 448, Civil Code), whether to appropriate the kitchen as his own by paying to DUMLAO either the amount
of tile expenses spent by DUMLAO f or the building of the kitchen, or the increase in value ("plus value") which the
said area of 34 square meters may have acquired by reason thereof, or to oblige DUMLAO to pay the price of said
area. The amounts to be respectively paid by DUMLAO and DEPRA, in accordance with the option thus exercised
by written notice of the other party and to the Court, shall be paid by the obligor within fifteen (15) days from such
notice of the option by tendering the amount to the Court in favor of the party entitled to receive it; chanrobles
virtual law library

b) The trial Court shall further order that if DEPRA exercises the option to oblige DUMLAO to pay the price of the
land but the latter rejects such purchase because, as found by the trial Court, the value of the land is considerably
more than that of the kitchen, DUMLAO shall give written notice of such rejection to DEPRA and to the Court
within fifteen (15) days from notice of DEPRA's option to sell the land. In that event, the parties shall be given a
period of fifteen (15) days from such notice of rejection within which to agree upon the terms of the lease, and give
the Court formal written notice of such agreement and its provisos. If no agreement is reached by the parties, the
trial Court, within fifteen (15) days from and after the termination of the said period fixed for negotiation, shall then
fix the terms of the lease, provided that the monthly rental to be fixed by the Court shall not be less than Ten Pesos
(P10.00) per month, payable within the first five (5) days of each calendar month. The period for the forced lease
shall not be more than two (2) years, counted from the finality of the judgment, considering the long period of time
since 1952 that DUMLAO has occupied the subject area. The rental thus fixed shall be increased by ten percent
(10%) for the second year of the forced lease. DUMLAO shall not make any further constructions or improvements
on the kitchen. Upon expiration of the two-year period, or upon default by DUMLAO in the payment of rentals for
two (2) consecutive months, DEPRA shall be entitled to terminate the forced lease, to recover his land, and to have
the kitchen removed by DUMLAO or at the latter's expense. The rentals herein provided shall be tendered by
DUMLAO to the Court for payment to DEPRA, and such tender shall constitute evidence of whether or not
compliance was made within the period fixed by the Court.chanroblesvirtualawlibrary chanrobles virtual law library

c) In any event, DUMLAO shall pay DEPRA an amount computed at Ten Pesos (P10.00) per month as reasonable
compensation for the occupancy of DEPRA's land for the period counted from 1952, the year DUMLAO occupied
the subject area, up to the commencement date of the forced lease referred to in the preceding paragraph; chanrobles
virtual law library

d) The periods to be fixed by the trial Court in its Precision shall be inextendible, and upon failure of the party
obliged to tender to the trial Court the amount due to the obligee, the party entitled to such payment shall be entitled
to an order of execution for the enforcement of payment of the amount due and for compliance with such other acts
as may be required by the prestation due the obligee.

No costs, chanrobles virtual law library

SO ORDERED.