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Republic of the PhilippinesSUPREME COURT

Manila

THIRD DIVISION

G.R. No. 108894 February 10, 1997

TECNOGAS PHIIPPINES MANUFACTURING CORPORATION,petitioner,vs.COURT OF APPEAS !FORMER SPECIA SE"ENTEENTH #I"ISION$ a%&E#UAR#O U', respondents.

PANGANI(AN, J.:

The parties in this case are oners of ad!oinin" lots in Para#a$ue, Metro Manila. It asdiscovered in a surve%, that a portion of a buildin" of petitioner, hich as presu&abl%constructed b% its predecessor'in'interest, encroached on a portion of the lot oned b%private respondent. (hat are the ri"hts and obli"ations of the parties) Is petitionerconsidered a builder in bad faith because, as held b% respondent *ourt, he is+presu&ed to no the &etes and bounds of his propert% as described in his certificateof title+) Does petitioner succeed into the "ood faith or bad faith of his predecessor'in'interest hich presu&abl% constructed the buildin")

These are the $uestions raised in the petition for revie of the Decision1dated -u"ust/, 011, in *-'2.R. *V No. /13 of respondent *ourt )here the dispositionreads4*

(H5R56OR5, pre&ises considered, the Decision of the Re"ionalTrial *ourt is hereb% reversed and set aside and another oneentered 7

0. Dis&issin" the co&plaint for lac of cause of action8

. Orderin" Tecno"as to pa% the su& of P,999.99 per &onth asreasonable rental fro& October :, 01;1 until appellee vacates theland8

3. To re&ove the structures and surroundin" alls on theencroached area8

:. Orderin" appellee to pa% the value of the land occupied b% theto'store% buildin"8

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purchased b% defendant fro& a certain 5nrile -ntonio also in 01;98that in 01;0, defendant purchased another lot also ad!oinin"plaintiffs land fro& a certain Mi"uel Rodri"ueA and the sa&e asre"istered in defendant=s na&e under Transfer *ertificate of Title No.30319, of the Re"istr% of Deeds for the Province of RiAal8 thatportions of the buildin"s and all bou"ht b% plaintiff to"ether ith theland fro& PariA Industries are occup%in" a portion of defendant=sad!oinin" land8 that upon learnin" of the encroach&ent or occupationb% its buildin"s and all of a portion of defendant=s land, plaintiffoffered to bu% fro& defendant that particular portion of defendant=s

land occupied b% portions of its buildin"s and all ith an area of;;9 s$uare &eters, &ore or less, but defendant, hoever, refusedthe offer. In 01;3, the parties entered into a private a"ree&entbefore a certain *ol. Rosales in Malaca#an", herein plaintiffa"reed to de&olish the all at the bac portion of its land thus "ivin"to defendant possession of a portion of his land previousl% enclosedb% plaintiff=s all8 that defendant later filed a co&plaint before theoffice of Municipal 5n"ineer of Para#a$ue, Metro Manila as ell asbefore the Office of the Provincial 6iscal of RiAal a"ainst plaintiff inconnection ith the encroach&ent or occupation b% plaintiff=sbuildin"s and alls of a portion of its land but said co&plaint did notprosper8 that defendant du" or caused to be du" a canal alon"plaintiff=s all, a portion of hich collapsed in Eune, 01/9, and led to

the filin" b% plaintiff of the supple&ental co&plaint in the above'entitled case and a separate cri&inal co&plaint for &alicious&ischief a"ainst defendant and his ife hich ulti&atel% resultedinto the conviction in court of defendant=s ife for the cri&e of&alicious &ischief8 that hile trial of the case as in pro"ress,plaintiff filed in *ourt a for&al proposal for settle&ent of the case butsaid proposal, hoever, as i"nored b% defendant.

-fter trial on the &erits, the Re"ional Trial *ourtof Pasa% *it%, Cranch 00;, in *ivil*ase No. PF';>30'P, rendered a decision dated Dece&ber :, 01/1 in favor ofpetitioner ho as the plaintiff therein. The dispositive portionreads4 7

(H5R56OR5, !ud"&ent is hereb% rendered in favor of plaintiff anda"ainst defendant and orderin" the latter to sell to plaintiff thatportion of land oned b% hi& and occupied b% portions of plaintiff=sbuildin"s and all at the price of P,999.99 per s$uare &eter and topa% the for&er4

0. The su& of P::,999.99 to co&pensate for thelosses in &aterials and properties incurred b%plaintiff throu"h thiever% as a result of thedestruction of its all8

. The su& of P;,

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-.

The ti&e hen to deter&ine the "ood faith of the builder under-rticle ::/ of the Ne *ivil *ode, is reconed duringthe periodhen it as actuall% bein" built8 and in a case here noevidenceas presented nor

introduced as to the "ood faith or bad faith of thebuilder at that ti&e, as in this case, he &ust bepresumedto be a+builder in "ood faith,+ since +bad faith cannotbe presu&ed.+9

C.

In a specific +boundar% overlap situation+ hich involves a builder in"ood faith, as in this case, it is no ell settled that the lot oner,ho builds on the ad!acent lot is notchar"ed ith +constructivenotice+ of the technical &etes and bounds contained in their torrenstitles to deter&ine the eBact and precise eBtent of his boundar%peri&eter. 10

*.

The respondent court=s citation of the tin cases of Tuason &Co. v. Lumanlanand Tuason & Co. v.Macalindongis notthe +!udicialauthorit%+ for a boundar% dispute situation beteen ad!acent torrenstitled lot oners, as the facts of the present case do notfallithin nors$uare ith the involved principle of a dissi&ilar case. 11

D.

Fuite contrar% to respondent G%=s reasonin", petitioner Tecno"ascontinues to be a builder in "ood faith, even if it subse$uentl%builtrepaired the allsother per&anent structures thereon hile thecase a quoas pendin" and even hile respondent sent thepetitioner &an% lettersfiled cases thereon. 1)

D.?5.@

The a&icable settle&ent beteen the parties should be interpretedas a contract and enforced onl% in accordance ith its eBplicit ter&s,and notover and be%ond that a"reed upon8 because the courtsdonothave the poer to create a contract noreBpand its scope. 1*

5.?6.@

-s a general rule, althou"h the landoner has the option to choosebeteen4 ?0@ +buyingthe buildin" built in "ood faith+, or ?@+sellingthe portion of his land on hich stands the buildin"+ under

-rticle ::/ of the *ivil *ode8 thefirstoption is not absolute, becausean exceptionthereto, once it ould be i&practical for the landonerto choose to eBercise the first alternative, i.e. bu% that portion of thehouse standin" on his land, for the hole buildin" &i"ht be rendereduseless. The orable solution is for hi& to select the secondalternative, na&el%, to sell to the builder that part of his land onhich as constructed a portion of the house. 14

Private respondent, on the other hand, ar"ues that the petition is +sufferin" fro& thefolloin" flas4 1+

0. It did not "ive the eBact citations of cases decided b% theHonorable Supre&e *ourt that alle"edl% contradicts the rulin" of theHon. *ourt of -ppeals based on the doctrine laid don in Tuasonvs.Lumanlancase citin" also Tuason vs. Macalindongcase ?Supra@.

. -ssu&in" that the doctrine in the alle"ed Co Tao vs. Chicocase iscontradictor% to the doctrine inTuason vs. Lumanlanand Tuasonvs. Macalindong, the to cases bein" &ore current, the sa&e shouldprevail.

6urther, private respondent contends that the folloin" +un&istaabl%+ point to the bad

faith of petitioner4 ?0@ private respondent=s purchase of the to lots, +as ahead of thepurchase b% petitioner of the buildin" and lot fro& PariA Industries+8 ?@ the declarationof the 2eneral Mana"er of Tecno"as that the sale beteen petitioner and PariAIndustries +as not re"istered+ because of so&e proble&s ith *hina Canin"*orporation8 and ?3@ the Deed of Sale in favor of petitioner as re"istered in its na&eonl% in +the &onth of Ma% 01;3.+ 1

The Courts !u"ing

The petition should be "ranted.

#ood Faith or $ad Faith

Respondent *ourt, citin" the cases of %.M. Tuason & Co., Inc. vs. da. deLumanlan 17and %.M

. Tuason & Co., Inc.vs. Macalindong, 18ruled that petitioner+cannot be considered in "ood faith+ because as a land oner, it is +presu&ed to nothe &etes and bounds of his on propert%, speciall% if the sa&e are reflected in aproperl% issued certificate of title. One ho erroneousl% builds on the ad!oinin" lotshould be considered a builder in 'b(ad 'f(aith, there bein" presu&ptive noled"e ofthe Torrens title, the area, and the eBtent of the boundaries.+ 19

(e disa"ree ith respondent *ourt. The to cases it relied upon do not support its&ain pronounce&ent that a re"istered oner of land has presu&ptive noled"e ofthe &etes and bounds of its on land, and is therefore in bad faith if he &istaenl%

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builds on an ad!oinin" land. -side fro& the fact that those cases had factual &oorin"sradicall% different fro& those obtainin" here, there is nothin" in those cases hichould su""est, hoever re&otel%, that bad faith is i&putable to a re"istered oner ofland hen a part of his buildin" encroaches upon a nei"hbor=s land, si&pl% because heis supposedl% presu&ed to no the boundaries of his land as described in hiscertificate of title. No such doctrinal state&ent could have been &ade in those casesbecause such issue as not before the Supre&e *ourt. Fuite the contrar%, e havere!ected such a theor% in Co Tao vs. Chico, )0here e held that unless one is versedin the science of surve%in", +no one can deter&ine the precise eBtent or location of hispropert% b% &erel% eBa&inin" his paper title.+

There is no $uestion that hen petitioner purchased the land fro& PariA Industries, thebuildin"s and other structures ere alread% in eBistence. The record is not clear as toho actuall% built those structures, but it &a% ell be assu&ed that petitioner=spredecessor'in'interest, PariA Industries, did so. -rticle

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That the parties hereto have a"reed that the rear portion of the fencethat separates the propert% of the co&plainant and respondent shallbe de&olished up to the bac of the buildin" housin" the&achineries hich de&olision ?sic@ shall be undertaen b% theco&plainant at an%ti&e.

That the fence hich serve?s@ as a all housin" the electroplatin"&achineries shall not be de&olished in the &ean ti&e hich portionshall be sub!ect to ne"otiation b% herein parties.

6ro& the fore"oin", it is clear that petitioner a"reed onl% to the de&olition of a portionof the all separatin" the ad!oinin" properties of the parties 7 i.e. +up to the bac ofthe buildin" housin" the &achineries.+ Cut that portion of the fence hich served asthe all housin" the electroplatin" &achineries as not to be de&olished. Rather, itas to +be sub!ect to ne"otiation b% herein parties.+ The settle&ent &a% havereco"niAed the onership of private respondent but such ad&ission cannot be e$uatedith bad faith. Petitioner as onl% tr%in" to avoid a liti"ation, one reason for enterin"into an a&icable settle&ent.

-s as ruled in *sme+a vs. Commission on ,udit, *0

- co&pro&ise is a bilateral act or transaction that is eBpressl%

acnoled"ed as a !uridical a"ree&ent b% the *ivil *ode and istherein dealt ith in so&e detail. +- co&pro&ise,+ declares -rticle9/ of said *ode, +is a contract hereb% the parties, b% &ain"reciprocal concessions, avoid a liti"ation or put an end to onealread% co&&enced.+

BBB BBB BBB

The *ivil *ode not onl% defines and authoriAes co&pro&ises, it infact encoura"es the& in civil actions. -rt. 91 states that +The*ourt shall endeavor to persuade the liti"ants in a civil case to a"reeupon so&e fair co&pro&ise.+ . . .

In the conteBt of the established facts, e hold that petitioner did not lose its ri"htsunder -rticle ::/ of the *ivil *ode on the basis &erel% of the fact that so&e %ears afterac$uirin" the propert% in "ood faith, it learned about 7 and aptl% reco"niAed 7 theri"ht of private respondent to a portion of the land occupied b% its buildin". Thesupervenin" aareness of the encroach&ent b% petitioner does not &ilitate a"ainst itsri"ht to clai& the status of a builder in "ood faith. In fact, a !udicious readin" of said-rticle ::/ ill readil% sho that the landoner=s eBercise of his option can onl% taeplace after the builder shall have co&e to no of the intrusion 7 in short, hen bothparties shall have beco&e aare of it. Onl% then ill the occasion for eBercisin" theoption arise, for it is onl% then that both parties ill have been aare that a proble&eBists in re"ard to their propert% ri"hts.

*ptions of -rivate !espondent

(hat then is the applicable provision in this case hich private respondent &a% invoeas his re&ed%4 -rticle ::/ or -rticle :

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Petitioner, hoever, &ust also pa% the rent for the propert% occupied b% its buildin" asprescribed b% respondent *ourt fro& October :, 01;1, but onl% up to the date privaterespondent serves notice of its option upon petitioner and the trial court8 that is, if suchoption is for private respondent to appropriate the encroachin" structure. In suchevent, petitioner ould have a ri"ht of retention hich ne"ates the obli"ation to pa%rent. 40The rent should hoever continue if the option chosen is co&pulsor% sale, butonl% up to the actual transfer of onership.

The aard of attorne%=s fees b% respondent *ourt a"ainst petitioner is unarrantedsince the action appears to have been filed in "ood faith. Cesides, there should be nopenalt% on the ri"ht to liti"ate. 41

(H5R56OR5, pre&ises considered, the petition is hereb% 2R-NT5D and theassailed Decision and the -&ended Decision are R5V5RS5D and S5T -SID5. Inaccordance ith the case of .epra vs. .umlao, 4)this case is R5M-ND5D to theRe"ional Trial *ourt of Pasa% *it%, Cranch 00;, for further proceedin"s consistent ith-rticles ::/ and 4*of the *ivil *ode, as follos4

The trial court shall deter&ine4

a@ the present fair price of private respondent=s