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Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION

G.R. No. 115814 May 26, 1995

PEDRO P. PECSON, petitioner,vs.COURT OF APPEALS, SPOUSES JUAN NUGUID an ERLINDANUGUID, respondents.

DA!IDE, JR., J.:

This petition for revie on certiorari see!s to set aside the decision 1 of the "ourt of #ppeals in "#$%.R. SP No. &'()* affir+in in part the order 2 of the Re ional Trial"ourt -RT" of /ue0on "it1, 2ranch 343, in "ivil "ase No. /$535)4.

The factual and procedural antecedents of this case as athered fro+ the record areas follo s6

Petitioner Pedro P. Pecson as the o ner of a co++ercial lot located in 7a+iasStreet, /ue0on "it1, on hich he built a four$door t o$store1 apart+ent buildin . Forhis failure to pa1 realt1 ta8es a+ountin to t elve thousand pesos -P3',444.44 , thelot as sold at public auction b1 the cit1 Treasurer of /ue0on "it1 to Ma+ertoNepo+uceno ho in turn sold it on 3' October 3*9& to the private respondents, thespouses :uan Nu uid and ;rlinda Tan$Nu uid, for one hundred three thousand pesos-P34&,444.44 .

The petitioner challen ed the validit1 of t he auction sale in "ivil "ase No. /$535)4before the RT" of /ue0on "it1. In its decision of 9 Februar1 3*9*, the RT" dis+issedthe co+plaint, but as to the private respondents< clai+ that the sale included theapart+ent buildin , it held that the issue concernin it as =not a sub>ect of the . . .liti ation.= In resolvin the private respondents< +otion to reconsider this issue, the trialcourt held that there as no le al basis for the contention that the apart+ent buildinas included in the sale. "

2oth parties then appealed the decision to the "ourt of #ppeals. The case asdoc!eted as "#$%.R. "V No. '*&3. In its decision of &4 #pril 3**', 4 the "ourt of

#ppeals affir+ed in toto the assailed decision. It also a reed ith the trial court that theapart+ent buildin as not included in the auction sale of the co++ercial lot. Thus6

Indeed, examining the record we are fully convinced that it was onlythe land without the apartment building which was sold at theauction sale, for plaintiff's failure to pay the taxes due thereon . Thus,in the "ertificate of Sale of Delin?uent Propert1 To Purchaser -;8h.7, p. &@', Record the propert1 sub>ect of the auction sale at hichMa+erto Nepo+uceno as the purchaser is referred to as Aot No.'3$#, 2loc! No. 7$&5, at 7a+ias, 2aran a1 PiBahan, ith an area of '@(.& s?. +., ith no +ention hatsoever, of the buildin thereon.The sa+e description of the sub>ect propert1 appears in the FinalNotice To ;8ercise The Ri ht of Rede+ption -over sub>ect propert1dated Septe+ber 35, 3*93 -;8h. A, p. &@&, Record and in the Final2ill of Sale over the sa+e propert1 dated #pril 3*, 3*9' -;8h. P, p.&@), Record . Needless to sa1, as it as onl1 the land ithout an1buildin hich Nepo+uceno had ac?uired at the auction sale, it asalso onl1 that land ithout an1 buildin hich he could have le all1sold to the Nu uids. Verily, in the Deed of Absolute Sale ofegistered !and executed by "amerto #epomuceno in favor of the#uguids on $ctober %&, ()* + xh- ., p- *//, ecord0 it clearlyappears that the property sub1ect of the sale for 2 3*,333-33 wasonly the parcel of land, !ot % 4A, 5l6- 74*8 containing an area of%&/-* s9- meters, without any mention of any improvement, muchless any building thereon . -e+phases supplied

The petition to revie the said decision as subse?uentl1 denied b1 this "ourt. 5 ;ntr1of >ud +ent as +ade on '& :une 3**&. 6

On Nove+ber 3**&, the private respondents filed ith the trial court a +otion fordeliver1 of possession of the lot and the apart+ent buildin , citin article @5( of the"ivil "ode. # #ctin thereon, the trial court issued on 3@ Nove+ber 3**& thechallen ed order 8 hich reads as follo s6

Sub+itted for resolution before this "ourt is an uncontroverted C sic for the Deliver1 of Possession filed b1 defendants ;rlinda Tan, :uanNu uid, et al. considerin that despite personal service of the Orderfor plaintiff to file ithin five -@ da1s his opposition to said +otion, hedid not file an1.

In support of defendant

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possession placin hi+ in possession of both the lot and apart+entould be issued.

Eo ever, the co+plaint alle es in para raph * that three doors ofthe apart+ent are bein leased. This is further confir+ed b1 theaffidavit of the +ovant presented in support of the +otion that saidthree doors are bein leased at a rental of P),444.44 a +onth each.The +ovant further alle es in his said affidavit that the presentco++ercial value of the lot is P34,444.44 per s?uare +eter orP',@44,444.44 and the reasonable rental value of said lot is no lessthan P'3,444.44 per +onth.

The decision havin beco+e final as per ;ntr1 of :ud +ent dated:une '&, 3**& and fro+ this date on, bein the uncontested o nerof the propert1, the rents should be paid to hi+ instead of the plaintiff collectin the+. Fro+ :une '&, 3**&, the rents collected b1 plaintiffa+ountin to +ore than P@&,444.44 fro+ tenants should be offsetfro+ the rents due t o the lot hich accordin to +ovantect therefro+ all occupants therein, their a ents, assi nees, heirs andrepresentatives.= 9

The petitioner then filed ith the "ourt of #ppeals a special civil actionfor certiorari and prohibition assailin the order of 3@ Nove+ber 3**&, hich asdoc!eted as "#$%.R. SP No. &'()*. 1$ In its decision of ) :une 3**5, the "ourt of

#ppeals affir+ed in part the order of the trial court citin #rticle 559 of the "ivil "ode.In disposin of the issues, it stated6

#s earlier pointed out, private respondent opted to appropriate thei+prove+ent introduced b1 petitioner on the sub>ect lot, ivin rise tothe ri ht of petitioner to be rei+bursed of the cost of constructinsaid apart+ent buildin , in accordance ith #rticle @5( of the . . ."ivil "ode, and of the ri ht to retain the i+prove+ents until he isrei+bursed of the cost of the i+prove+ents, because, basicall1, theri ht to retain the i+prove+ent hile the correspondin inde+nit1 isnot paid i+plies the tenanc1 or possession in fact of the land onhich the1 are built . . . C' TOA;NTINO, "IVIA "OD; OF TE;PEIAIPPIN;S -3**' p. 33' . ith the facts e8tant and the settledprinciple as uides, e a ree ith petitioner that respondent >ud eerred in orderin that =the +ovant havin been declared as theuncontested o ner of the lot in ?uestion as per ;ntr1 of :ud +ent of the Supre+e "ourt dated :une '&, 3**&, the plaintiff should pa1 rentto the +ovant of no less than P'3,444 per +onth fro+ said date asthis is the ver1 sa+e a+ount paid +onthl1 b1 the tenants occup1inthe lot.

e, ho ever, a ree ith the findin of respondent >ud e that thea+ount of P@&,444.44 earlier ad+itted as the cost of constructinthe apart+ent buildin can be offset fro+ the a+ount of rentscollected b1 petitioner fro+ :une '&, 3**& up to Septe+ber '&, 3**&hich as fi8ed at P),444.44 per +onth for each of the three doors.Our underl1in reason is that durin the period of retention,petitioner as such possessor and receivin the fruits fro+ thepropert1, is obli ed to account for such fruits, so that the a+ountthereof +a1 be deducted fro+ the a+ount of inde+nit1 to be paid tohi+ b1 the o ner of the land, in line ith Mendo0a vs. De %u0+an,@' Phil. 3(5 . . . .

The "ourt of #ppeals then ruled as follo s6

E;R;FOR;, hile it appears t hat private respondents have not1et inde+nified petitioner ith the cost of the i+prove+ents, since

#nne8 I shos that the Deput1 Sheriff has enforced the rit of

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Possession and the pre+ises have been turned over to thepossession of private respondents, the ?uest of petitioner that he berestored in possession of the pre+ises is rendered +oot andacade+ic, althou h it is but fair and >ust that private respondents pa1petitioner the construction cost of P@&,444.44G and that petitioner beordered to account for an1 and all fruits of the i+prove+entsreceived b1 hi+ startin on :une '&, 3**&, ith the a+ount ofP@&,444.44 to be offset therefro+.

IT IS SO ORD;R;D. 11

# rieved b1 the "ourt of #ppeals< decision, the petitioner filed the instant petition.

The parties a ree that the petitioner as a builder in ood faith of the apart+entbuildin on the theor1 that he constructed it at the ti+e hen he as still t he o ner ofthe lot, and that the !e1 issue in this case is the application of #rticles 559 and 5@( ofthe "ivil "ode.

The trial court and the "ourt of #ppeals, as ell as the parties, concerned the+selvesith the application of #rticles 559 and @5( of the "ivil "ode. These articles read asfollo s6

#rt. 559. The o ner of the land on hich an1thin has been built,so n or planted in ood faith, shall have the ri ht to appropriate ashis o n the or!s, so in or plantin , after pa1+ent of theinde+nit1 provided for in articles @5( and @59, or to obli e the oneho built or planted to pa1 the price of the land, and the one hoso ed, the proper rent. Eo ever, the builder or planter cannot beobli ed to bu1 the land if its value is considerabl1 +ore than that ofthe buildin or trees. In such case, he shall pa1 reasonable rent, ifthe o ner of the land does not choose to appropriate the buildin ortrees after proper inde+nit1. The parties shall a ree upon the ter+sof the lease and in case of disa ree+ent, the court shall fi8 theter+s thereof. -&(3a

888 888 888

#rt. @5(. Necessar1 e8penses shall be refunded to ever1 possessorGbut onl1 the possessor in ood faith +a1 retain the thin until he hasbeen rei+bursed therefor.

Hseful e8penses shall be refunded onl1 to the possessor in oodfaith ith the sa+e ri ht of retention, the person ho has defeatedhi+ in the possession havin the option of refundin the a+ount ofthe e8penses or of pa1in the increase in value hich the thin +a1have ac?uired b1 reason thereof. -5@&a

21 its clear lan ua e, #rticle 559 refers to a land hose o nership is clai+ed b1 t oor +ore parties, one of ho+ has built so+e or!s, or so n or planted so+ethin .The buildin , so in or plantin +a1 have been +ade in ood faith or in bad faith. Therule on ood faith laid do n in #rticle @'( of the "ivil "ode shall be applied indeter+inin hether a builder, so er or planter had acted in ood faith. 12

#rticle 559 does not appl1 to a case here the o ner of the land is the builder, so er,or planter ho then later loses o nership of the land b1 sale or donation. This "ourtsaid so in :oleongco vs . egalado 6 1"

#rticle &(3 of the old "ivil "ode is not applicable in this case, forRe alado constructed the house on his o n land before he sold saidland to "oleon co. #rticle &(3 applies onl1 in cases here a personconstructs a buildin on the land of another in ood or in bad faith,as the case +a1 be. It does not appl1 to a case here a personconstructs a buildin on his o n land, for then there can be no?uestion as to ood or bad faith on the part of the builder.

;lse ise stated, here the true o ner hi+self is the builder of or!s on his o n land,the issue of ood faith or bad faith is entirel1 irrelevant.

Thus in strict point of la , #rticle 559 is not apposite to the case at bar. Nevertheless,e believe that the provision therein on inde+nit1 +a1 be applied b1 analo 1considerin that the pri+ar1 intent of #rticle 559 is to avoid a state of forced co$o nership and that the parties, includin the t o courts belo , in the +ain a ree that

#rticles 559 and @5( of the "ivil "ode are applicable and inde+nit1 for thei+prove+ents +a1 be paid althou h the1 differ as to the basis of the inde+nit1.

#rticle @5( does not specificall1 state ho the value of the useful i+prove+ents shouldbe deter+ined. The respondent court and the private respondents espouse the beliefthat the cost of construction of the apart+ent buildin in 3*(@, and not its current+ar!et value, is sufficient rei+burse+ent for necessar1 and useful i+prove+ents+ade b1 the petitioner. This position is, ho ever, not in consonance ith previousrulin s of this "ourt in si+ilar cases. In ;avier vs . :oncepcion, ;r

., 14 this "ourt pe edthe value of the useful i+prove+ents consistin of various fruits, ba+boos, a house

and ca+arin +ade of stron +aterial based on the +ar!et value of the saidi+prove+ents. In Sarmiento vs . Agana , 15 despite the findin that the usefuli+prove+ent, a residential house, as built in 3*() at a cost of bet een ei htthousand pesos -P9,444.44 to ten thousand pesos-P34,444.44 , the lando ner asordered to rei+burse the builder in the a+ount of fort1 thousand pesos -P54,444.44 ,the value of the house at the ti+e of the trial. In the sa+e a1, the lando ner asre?uired to pa1 the =present value= of the house, a useful i+prove+ent, in the caseof De uente , 16 cited b1 the petitioner.

The ob>ective of #rticle @5( of the "ivil "ode is to ad+inister >ustice bet een theparties involved. In this re ard, this "ourt had lon a o stated in ivera vs. oman:atholic Archbishop of "anila 1# that the said provision as for+ulated in tr1in toad>ust the ri hts of the o ner and possessor in ood faith of a piece of land, to

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ad+inister co+plete >ustice to both of the+ in such a a1 as neither one nor the other+a1 enrich hi+self of that hich does not belon to hi+. %uided b1 this precept, it istherefore the current +ar!et value of the i+prove+ents hich should be +ade thebasis of rei+burse+ent. # contrar1 rulin ould un>ustl1 enrich the private respondentsho ould other ise be allo ed to ac?uire a hi hl1 valued inco+e$1ieldin four$unitapart+ent buildin for a +easl1 a+ount. "onse?uentl1, the parties should therefore beallo ed to adduce evidence on the present +ar!et value of the apart+ent buildinupon hich the trial court should base its findin as to the a+ount of rei+burse+ent tobe paid b1 the lando ner.

The trial court also erred in orderin the petitioner to pa1 +onthl1 rentals e?ual to thea re ate rentals paid b1 the lessees of the apart+ent buildin . Since the privaterespondents have opted to appropriate the apart+ent buildin , the petitioner is thusentitled to the possession and en>o1+ent of the apart+ent buildin , until he is paid theproper inde+nit1, as ell as of the portion of the lot here the buildin has beenconstructed. This is so because the ri ht to retain the i+prove+ents hile thecorrespondin inde+nit1 is not paid i+plies the tenanc1 or possession in fact of theland on hich it is built, planted or so n. 18 The petitioner not havin been so paid, heas entitled to retain o nership of the buildin and, necessaril1, the inco+e therefro+.

It follo s, too, that the "ourt of #ppeals erred not onl1 in upholdin the trial court