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.

Neil D. Hechanova for defendant-appellant.

DECISION

MELENCIO-HERRERA, J : p

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.
Plaintiff-appellee, Francisco Depra, is the owner of a parcel of land
registered under Transfer Certificate of Title No. T-3087, 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.
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 Derla,
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 Dumangas, docketed as Civil Case
No. I. Said complaint was later amended to include DEPRA as a party
plaintiff.
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: Cdpr

"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 that day that this decision shall have
become final."

From the foregoing judgment, neither party appealed so that, if it were

a valid judgment, it would have ordinarily lapsed into finality, but even then,
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 DEPRA did not accept payment of rentals so that DUMLAO deposited such
rentals with the Municipal Court.
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.
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.

"Without pronouncement as to costs.

"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.
Addressing ourselves 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 overstepped 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
Conceded in the Stipulation of Facts between the parties is that
DUMLAO was a builder in good faith. Thus, LLpr

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 "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; . . ." (Italics ours)

Consistent with the principles 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 apply 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
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.
In regards to builders in good faith, Article 448 of the Civil Code
provides:
"ART. 448. The owner of the land on which anything has been
built sown or planted in good faith.

shall have the right.

to appropriate as his own the works, sowing or planting, after

payment of the indemnity provided for in articles 546 and 548, or

to oblige the one who built or planted to pay the price of the
land, and the one who sowed, the proper rent.

However, the builder or planter cannot be obliged to buy the land

if its value is considerably more than that of the building or trees. In
such case, he shall pay reasonable rent, if the owner of the land does
not choose to appropriate the building or trees after proper indemnity.
The parties shall agree upon the terms of the lease and in case of
disagreement, the court shall fix the terms thereof." (Paragraphing
supplied)

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.

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.
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 "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).
"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 Code.
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. LLpr

". . . es justa la facultad que el codigo da al dueño 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 dueño 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 eddficar. 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 eniquecido torticeramente con perjuicio de otro a quien es
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 justo indemnizarle.
"En nuestra opinion, el Codigo ha resuelto el conflicto de la
manera mas justa y equitativa, y respetando en lo posible 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 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.
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. Ibañez [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:
1. The trial Court shall determine —
a) the present fair price of DEPRA's 34 square meter-area of
land;
b) the amount of the expenses spent by DUMLAO for the
building of the kitchen;
c) the increase in value ("plus value") which the said area of 34
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 square meters may have acquired by reason thereof, and
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 a his own by paying to
DUMLAO either the amount of the expenses spent by DUMLAO for 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;
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.LLphil

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
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 year DUMLAO occupied the subject area, up to the commencement date
of the forced lease referred to in the preceding paragraph;
d) The periods to be fixed by the trial Court in its Decision 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.
SO ORDERED.
Teehankee, Actg. C.J., Plana, Relova, De la Fuente and Alampay, JJ.,
concur.
Gutierrez, Jr., J., took no part.

Footnotes

1. "Rule 70.
"Forcible Entry and Detainer.
"Sec. 7. Judgment conclusive only on possession; not conclusive in actions
involving title or ownership. — The judgment rendered in an action for
forcible entry or detainer shall be effective with respect to the possession
only and in no wise bind the title of affect the ownership of the land or
building. Such judgment shall not bar an action between the same parties
respecting title to the land or building, nor shall it be held conclusive of the
facts therein found in a case between the same parties upon a different
cause of action not involving possession."

2. "Sec. 44. Original jurisdiction. . . .

(b) In all civil actions which involve the title to, or possession of real
property, or any interest therein, or the legality of and tax, impose or
assessment, except actions of forcible entry into and detainer on lands or
buildings, original jurisdiction of which of conferred by this Act upon city and
municipal courts;"
3. "Sec. 19. Jurisdiction in civil case. — . . .
(2) In all civil actions which involve the title to, or possession of, real
property, or any interest therein, except action for forcible entry into and
unlawful detainer of lands or buildings, original jurisdiction over which is
conferred upon Metropolitan Trial Courts, Municipal Trial Courts, and
Municipal Circuit Trial Courts;"
4. Supra.
5. Ignacio vs. Hilario, 76 Phil. 605 (1946).

6. ibid.
7. 3 Manresa, 7th Ed., pp. 300-301.
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 8. II Tolentino, Civil Code of the Philippines, 1963 ed., p. 97.

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