Property Assignment July 26

8/11/2019 Property Assignment July 26

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RODOLFO SANTOS,Petitioner,

- versus -

RONALD C. MANALILI as Heir or Representative of

Deceased Defendants NOLI BELEN C. MANALILI

and REYNALDO MANALILI & BOARD OF LIQUIDATORS,Respondents.

G.R. No. 157812

Present:

PANGANIBAN,J., Chairman

SANDOVAL-GUTIERREZ,CORONA,

CARPIO MORALES, andGARCIA,JJ.

Promulgated:

_November 22, 2005

x------------------------------------------------------------------------------------x

D E C I S I O N

GARCIA,J.:

Thru this petition for review on certiorari, petitioner Rodolfo Santos seeks the reversal of the Decision[1]

dated July 24, 2002 of the Courtof Appeals (CA) in CA-G.R. CV No. 46890, affirming the September 20, 1993 decision of the Regional Trial Court at Davao City, Branch 14, whichdismissed petitioners complaint forReconveyance, Damages, Attorneys Fees and/or Annu lment of Title against the herein public and private

respondents.

At the core of the controversy is a 4,608 square-meter parcel of land which originally formed part of the Furukawa Plantation owned bya Japanese national and situated in the District of Toril, Davao City. After the war, the land was turned over to the Philippine government andadministered by the National Abaca and Other Fibers Corporation, and thereafter by the respondent Board of Liquidators (BOL).

On August 6, 1970, Reynaldo Manalili, predecessor-in-interest of respondent Ronald C. Manalili, filed with the BOL an application to purchasethe subject property, attaching therewith his Occupants Affidavit. The application was favorably acted up on and on March 27, 1972, the BOLrequired Manalili to pay the downpayment of 10% of the purchase price or P1,865.28. Thereafter, Manalili declared the land for taxation purposes.

On March 25, 1981, after the lapse of nine (9) years and even as the BOL had already issued a Certification of Full Payment endorsing theapproval of the sale of the land in question to applicant Reynaldo Manalili, herein petitioner Rodolfo Santos wrote an undated letter to the BOL

protesting Manalilis application. On account thereof, Land Examiner Ildefonso S. Carrillo issued a Memorandum addressed to the BOL SeniorExecutive Assistant, recommending a formal investigation.

On October 7, 1981, the BOLs Alien Property Unit came out with a report that petitioner was not actually occupying the lot and that he only

hired certain Abalahin and Lumaad to plant bananas and coconut trees and maintain a vegetable garden thereon presumably to establish a bona-

fideoccupancy over the lot, and accordingly recommended the dismissal of petitioners protest and the approval of the sale to Manalili.

Meanwhile, Manalili, thru counsel, made known to the barrio captain of the place of petitioners illegal entry into the premises.

On December 16, 1981, following Manalilis compliance with other requirements, the BOL issued to him the corresponding Deed of AbsoluteSale which was duly approved by the Office of the President on December 21, 1981. And, on January 6, 1982, upon request of the BOL, the Register

of Deeds, Davao City, issued TCT 86414 covering the land in question in the name of Manalili.

On April 26, 1982, petitioner filed the aforementioned complaint forReconveyance, Damages, Attorneys Fees and/or Annulment ofTitle against the BOL and the Manalilis.

Initially, the trial court dismissed the complaint on grounds of lack of jurisdiction and non-exhaustion of administrative remedies. However, onpetitioners appeal to the then Intermediate Appellate Court (IAC), the latter reversed the trial courts order of dismissal and remanded the case to

it for trial. Upon further elevation, this Court affirmed the IAC.

After the remand and trial of the case, the trial court rendered its September 20, 1993 decision in favor of the Manalilis. Dispositively, thedecision reads:

IN VIEW OF THE FOREGOING, judgment is hereby rendered against the plaintiff [petitioner], dismissing his Complaintand ordering him to immediately vacate the land in question which is covered by T.C.T. No. T-86414, deliver the possessionthereof to the private defendants, as substituted, pay the private defendants TWENTY THOUSAND PESOS (P20,000.00) asdamages and another amount of TEN THOUSAND PESOS (P10,000.00) as attorneys fees and the costs of suit .

[2]

Therefrom, petitioner went on appeal to the Court of Appeals (CA), thereat docketed as CA-G.R. CV No. 46890.

In the herein challenged Decision[3]

dated July 24, 2002, the appellate court dismissed petitioners appeal and affirmed the appealeddecision of the trial court, thus:

WHEREFORE, upon the premises, then (sic) instant appeal is DISMISSED and the Decision appealed fromis AFFIRMED.

SO ORDERED.
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In time, petitioner moved for a reconsideration but his motion was denied by the appellate court in its resolution of March 3, 2003.[4]

Hence, petitioners present recourse, faulting the appellate court, as follows:

I

THE COURT A QUO ERRED IN UPHOLDING THAT RESPONDENT MANALILI HAS THE BETTER RIGHT OF POSSESSION OVER

THE LOT IN QUESTION.

II

THE COURT A QUO ERRED IN DECLARING THAT THE SALE OF THE LOT TO THE RESPONDENT WAS NOT FRAUDULENT AND

THAT THE PETITIONERS PROTEST WAS DULY INVESTIGATED.

We DENY.

In its assailed decision of July 24, 2002, supra, the Court of Appeals upheld the findings of the chief of the Alien Property Unit, BOL thatpetitioners protest was unfounded and was only meant to disturb the sale of the subject land to r espondent Manalili. To the appellate court, theBOLs findings were duly supported by evidence, as in fact the sale of the land to Manalili was approved by no less than the Office of the President.

Presently, petitioner submits that he has clearly established a better right of possession over the subject property. Per his testimony and

those of his two (2) witnesses, namely Ernesto Abalahin and Corenelio Mundan, petitioner belabored to show that the land in dispute wasoriginally occupied by one Col. Agsalud in 1956 up to 1959, the latter being given preference as a guerilla veteran. Later, Col. Agsaludtransferred his rights in favor of one Ernesto Abalahin who continuously occupied the land and from whom petitioner acquired the property

sometime in February 1969, after which he himself introduced various improvements thereon and continuously occupied the same up to thepresent.

Petitioner insists that sometime in 1981, he came to learn that the land was surreptitiously applied for and was already awarded by BOLto Manalili, whereupon he immediately filed a protest which triggered an investigation by a BOL land examiner who submitted a report dated

September 1981 to the effect that he (petitioner) is the actual occupant thereof and introduced considerable improvements thereon, as againstrespondent Manalili who was never in possession, occupation and cultivation of the same.

We are not persuaded.

The two (2) courts below, in unanimously upholding the validity of the sale of the land in question to the Manalilis, likewise affirmed theBOLs finding that the Manalilis had a better right of possession thereto. Preponderant evidence of respondent have sufficien tly established that as

early as 1970, Reynaldo Manalili, respondents predecessor -in-interest, had already filed an Affidavit of Occupancy with the BOL, the governmentagency tasked to administer it; that the Manalilis administered the land before they left for Manila in 1972; that after they moved to Manila they

appointed an administrator to oversee the land and the improvements and crops they have planted thereon, such as bananas and coconut trees;and that the Manalilis have been paying the real estate taxes for the subject land even before the sale thereof to them.

The circumstance that after the sale, the Manalilis resided in Manila and Pangasinan is of no moment. As it is, possession may beexercised in ones own name or in that of another.

[5] It is not necessary that the owner or holder of the thing exercise personally the rights of

possession. Rights of possession may be exercised through agents.[6]

In contrast, petitioners claim of having bought the land from a certain Ernesto Abalahin who, in turn, bought it from one Co l. Agsalud,allegedly a guerrilla veteran who occupied the lot from 1956 to 1959, is without basis. For one, no proof has been presented by petitioner asto the alleged title of Col. Agsalud or the transfer of any rights from the latter to Ernesto Abalahin, petitioners alleged immediate transferor.

For another, the supposed Deed of Absolute Sale between petitioner and Ernesto Abalahin does not even sufficiently identify the lot which was thesubject of the sale. Worse, that same deed is not notarized and is unregistered. A sale of a piece of land appearing in a private deed cannot be

considered binding on third persons if it is not embodied in a public instrument and recorded in the Registry of Deeds .[7]

Verily, it was only in 1981that Abalahin entered the subject land without permission, and that in 1982, petitioner, together with Abalahin and one Lumaad, illegally cut trees

on the land, thereby prompting the Manalilis to report their unlawful entry to the local barrio captain.

True, there is petitioners claim that the BOLs sale of the land to Reynaldo Manalili was fraudulent. Basic it is in the law of evidence,however, that mere assertion of an alleged fact is not enough. It behooves petitioner to substantiate his claim by credible evidence, of which thereis none, more so, because the law

[8]presumes BOL to have acted regularly in recommending the sale of the disputed land to Manalili and the Office

of the President, in approving the sale.

As it is, petitioners evidence do not support his allegation of fraud. It is a matter of record that petitioners protest, filed nine (9) yearsafter Reynaldo Manalili filed his application with attached occupants affidavit, and after the BOL had already issued a Cert ification of FinalPayment in Manalilis favor, was duly investigated by the BOL, after which it recommended the sale o f the land to Manalili, which recommendationwas formally acted upon by the Office of the President which ultimately approved the Deed of Sale for Manalili. It is well-settled that fraud mustbe established by clear and convincing evidence.

[9] Petitioner failed in this venture.

To cap it all, it is a settled rule in this jurisdiction that factual findings of an administrative agency deserve utmost respect, more so,

when, as here, they are supported by substantial evidence, albeit such evidence may not be overwhelming or merely preponderant. By reason oftheir special knowledge and expertise on matters falling under their jurisdiction, administrative agencies are in a better position to pass judgmentthereon, and their findings of fact relative thereto are generally accorded great respect, if not finality, by the courts .

[10]It is not the task of this

Court to weigh once more the evidence submitted before administrative bodies and to substitute its own for that of the latter.

In fine, we rule and so hold that no reversible error was committed by the Court of Appeals in affirming the decision of the trial courtupholding the validity of the sale of the disputed property to the Manalilis.

WHEREFORE, the petition is DENIEDand the assailed Decision of the Court of Appeals AFFIRMED.
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Costs against petitioner.

SO ORDERED.


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ARIA CARLOS, represented by G.R. No. 164823TERESITA CARLOS VICTORIA,

Petitioner, Present:

Puno,J.

Chairman,Austria-Martinez,

- versus - Callejo, Sr.,Tinga, andChico-Nazario,JJ.

Promulgated:REPUBLIC OF THE PHILIPPINES,

Respondent. August 31, 2005

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x DECISION

Puno,J.:

This is a petition for review on certiorari to annul the decision of the Court of Appeals in CA-G.R. CV No. 76824 entitled Re: Application for

Land Registration of a Parcel of Land in Taguig, Metro Manila, Maria Carlos represented by Teresita Carlos Victoria, Applicant-Appellee vs. Republicof the Philippines through the Office of the Solicitor General, Oppositor-Appellant.

On December 19, 2001, petitioner Maria Carlos, represented by her daughter, Teresita Carlos Victoria, filed an application for registration andconfirmation of title over a parcel of land with an area of 3,975 square meters located at Pusawan, Ususan, Taguig, Metro Manila, covered by PlanPsu-244418. Petitioner alleged, among others, that she is the owner of said parcel of land which she openly, exclusively and notoriously possessedand occupied since July 12, 1945 or earlier under a bona fideclaim of ownership; that there is no mortgage or encumbrance affecting said property,nor is it part of any military or naval reservation; that the property is being used for industrial purposes; and that there are no tenants or lessees on

the property. Petitioner further claimed that she has been in possession of the subject land in the concept of an owner; that her possess ion hasbeen peaceful, public, uninterrupted and continuous since 1948 or earlier; and tacking her possession with that of her predecessors-in-interest,petitioner has been in possession of the land for more than 50 years.

[1]

The Republic of the Philippines, represented by the Director of Lands, filed an opposition to petitioners application .[2]

During the initial hearing, however, only petitioner and her counsel appeared. They presented documentary evidence to prove thejurisdictional requirements.

[3]

Petitioner later presented testimonial evidence consisting of the testimonies of her neighbors, Sergio Cruz and Daniel Castillo, and Teresita

Carlos Victoria herself.[4]

Sergio Cruz, 83 years old, a native of Ususan, Taguig, and neighbor of Maria Carlos, testified that the property subject of the application

was previously owned and possessed by Jose Carlos. He planted it with palay and sold the harvest. Everyone in the community knew him as theowner of said parcel of land. He also paid the taxes thereon. After the death of Jose Carlos in 1948, his daughter, Maria Carlos, inherited the

property and immediately took possession thereof. Her possession was peaceful, open, public, continuous, uninterrupted, notorious, adverse andin the concept of an owner. When Maria Carlos died, her heirs took over the property.

[5]

Cruzs testimony was corroborated by Daniel Castillo, 76 years old, Barangay Captain of Ususan, Taguig .[6]

Teresita Carlos Victoria stated on the witness stand that her mother, Maria Carlos, was in possession of the subject property until she passedaway on January 6, 2001. Upon the demise of Maria Carlos, Victoria took possession of the property with the consent of her brothers and

sisters. She characterized Maria Carloss possession as peaceful, open, public, continuous, adverse, notorious and in the con cept of an owner. Shehas never been disturbed in her possession; the whole community recognized her as the owner of the land; she declared the land for tax purposes;

and she paid the taxes thereon. In addition, Victoria informed the court that the heirs of Maria Carlos have not yet instituted a settlement of herestate. However, they have agreed to undertake the titling of the property and promised to deliver the certificate of title to Ususan DevelopmentCorporation which bought the property from Maria Carlos. Victoria admitted that her mother had sold the land to Ususan DevelopmentCorporation in 1996 but failed to deliver the title. Hence, the heirs of Maria Carlos made a commitment to the corporation to deliver the certificateof title so that they could collect the unpaid balance of the purchase price.

[7]

Petitioner also presented in court the concerned officers of the Department of Environment and Natural Resources (DENR) to establish thatthe land in question is alienable and disposable.

Elvira R. Reynaldo, Records Officer, DENR Lands Management Bureau, appeared to certify that their office has no record of any kind ofpublic land application/land patent covering the parcel of land situated at Ususan, Taguig, Rizal, identified/described in Plan Psu-244418.

[8]

Ulysses Sigaton, Land Management Inspector, DENRNational Capital Region, stated that he conducted an ocular inspection of the subjectproperty and found that it is within the alienable and disposable area under Project No. 27-B, LC Map No. 2623, certified by the Bureau of Forest

Development on January 4, 1968. He also noted that the land is being used for industrial purposes. It had several warehouses, four big water tanksand is enclosed by a fence.

[9]

The trial court granted the application in its decision dated October 24, 2002. It held:After considering the applicants evidence ex-parte which is based on factual and meritorious grounds, and considering

that the applicant acquired the property under registration through inheritance from her father, Jose Carlos, and consideringfurther that her possession thereof, tacked with that of her predecessor-in-interest, is open, continuous, exclusive, notoriousand undisturbed, under claim of ownership since time immemorial up to the present time; and considering further that the

subject parcel of land is part of the disposable and alienable land (Tsn, July 3, 2002, p.6) and considering further that the realtytaxes due thereon have been religiously paid (Exhs. HH, II, JJ, and JJ-1), and considering finally that the subject parcel of
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land belong[s] to the applicant and that she possess[es] a perfect title thereto which may be confirmed and registered in hername under the (P)roperty Registration Decree (P.D. 1529), the herein application is hereby GRANTED.

[10]

On appeal, the Court of Appeals reversed and set aside the decision of the trial court. It noted that:In the instant case, the applicant at the time she filed her application for registration of title was no longer in possession

and occupation of the land in question since on October 16, 1996, the applicants mother and predecessor -in-interest sold thesubject land to Ususan Development Corporation. This was admitted by witness Teresita Carlos Victoria x x x

Clearly, as early as 1996, possession and occupation of the land in question pertains not to the applicant but to UsusanDevelopment Corporation, thus it can be said that the applicant has no registrable title over the land in question.

[11]

Hence, this petition.

We affirm the findings of the appellate court.

Applicants for confirmation of imperfect title must prove the following: (a) that the land forms part of the disposable and alienableagricultural lands of the public domain; and (b) that they have been in open, continuous, exclusive, and notorious possession and occupation of thesame under a bona fideclaim of ownership either since time immemorial or since June 12, 1945.

[12]

As found by the Court of Appeals, petitioner has met the first requirement but not the second.

The Court held in Republic vs. Alconaba[13]

that the applicant must show that he is in actual possessionof the property at the time of theapplication, thus:

The law speaks of possession and occupation. Since these words are separated by the conjunction *+and*+, the clear

intention of the law is not to make one synonymous with the other. Possession is broader than occupation because it includesconstructive possession. When, therefore, the law adds the word occupation, it seeks to delimit the all-encompassing effect ofconstructive possession. Taken together with the words open, continuous, exclusive and notorious, the word occupationserves to highlight the fact that for an applicant to qualify, his possession must not be a mere fiction. Actual possession of aland consists in the manifestation of acts of dominion over it of such a nature as a party would naturally exercise over his own

property.

It is clear in the case at bar that the applicant, Maria Carlos, no longer had possession of the property at the time of the application for theissuance of a certificate of title. The application was filed in court on December 19, 2001. Teresita Carlos Victoria, the daughter of Maria Carlos,admitted during the hearing that her mother had sold the property to Ususan Development Corporation in 1996. They also presented as evidence

the deed of absolute sale executed by and between Maria Carlos and Ususan Development Corporation on October 16, 1996.[14]

The documentstates, among others:

xxx

4. That the VENDOR, by this Deed hereby transfer(s) possession of the property to the VENDEE.[15]

This contradicts petitioners claim that she was in possession of the property at the time that she applied for confirmation of title.

Nonetheless, even if it were true that it was petitioner who had actual possession of the land at that time, such possession was no longer in

the concept of an owner. Possession may be had in one of two ways: possession in the concept of an owner and possession of a holder. Apossessor in the concept of an owner may be the owner himself or one who claims to be so. On the other hand, one who possesses as a mereholder acknowledges in another a superior right which he believes to be ownership, whether his belief be right or wrong .

[16] Petitioner herein

acknowledges the sale of the property to Ususan Development Corporation in 1996 and in fact promised to deliver the certificate of title to thecorporation upon its obtention. Hence, it cannot be said that her possession since 1996 was under a bonafideclaim of ownership. Under the law,

only he who possesses the property under a bona fideclaim of ownership is entitled to confirmation of title.

We therefore find that the Court of Appeals did not err in denying the issuance of a certificate of title to petitioner.

IN VIEW WHEREOF, the petition is DENIED.

SO ORDERED.
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6

FELICIANO GAITERO G.R. No. 181812and NELIA GAITERO,

Petitioners, Present:

CARPIO,J., Chairperson,

- versus - NACHURA,BRION,

*

PERALTA, andABAD,JJ.

GENEROSO ALMERIA and

TERESITA ALMERIA, Promulgated:Respondents.

June 8, 2011x --------------------------------------------------------------------------------------- x

DECISION

ABAD,J.:

Will laches, a rule of equity, benefit one who himself slept on his supposed right?

The Facts and the Case

Following a cadastral survey in BarangayYsulat, Tobias Fornier, Antique, a land registration court issued an original certificate of title[1]

toRosario O. Tomagan (Tomagan) covering a 10,741 square-meter land, designated as Lot 9960.

[2] Subsequently in 1993, Tomagan subdivided the lot

awarded to her into four: Lot 9960-A[3]

covering 3,479 sq m; Lot 9960-B covering 1,305 sq m; Lot 9960- C[4]

covering 3,073 sq m; and Lot 9960-Dcovering the remaining 2,884 sq m. Tomagan waived her rights over Lots 9960-A and 9960-C in favor of petitioner Feliciano Gaitero (Gaitero)and Lot 9960-B in favor of BarangayYsulat, Tobias Fornier. She retained Lot 9960-D.[5]

Lot 9960-A that went to Gaitero adjoined Lot 9964 which belonged to respondent spouses Generoso and Teresita Almeria (the Almerias) andwas covered by OCT P-14556. In June 2000, the Almerias commissioned a relocation survey of their lot and were astonished to find that Gaitero,who owned adjoining Lot 9960-A, intruded into their lot by as much as 737 sq m (the disputed area).

On August 9, 2000, apparently to settle the dispute, the Almerias waived their rights over a 158 sq m portion of the disputed area in Gaiterosfavor but maintained their claim over the remaining 579 sq m. Subsequently, however, Gaitero filed an affidavit of adverse claim on the Almerias

title over the remaining 579 sq m.[6]

When barangayconciliation proceedings failed to settle the differences between the two neighbors, Gaitero filed an action for recovery ofpossession against the Almerias

[7]before the Municipal Circuit Trial Court (MCTC) of Tobias Fornier-Anini-Y-Hamtic. Gaitero prayed for the return

of the possession of the remaining 579 sq m, moral damages of P100,000.00, exemplary damages of P25,000.00, attorneys fees ofP15,000.00, and

litigation expenses of P10,000.00.

Gaitero claimed that he was the registered owner of Lot 9960-A, which was covered by TCT T-2544 and had an assessed valueof P11,050.00; that he inherited the same from his mother, Maria Obay, who in turn inherited it from her father, Bonifacio Obay; that before thecadastral survey, Lot 9960-A was erroneously lumped with Lot 9960 in Tomagans name; that, acknowledging the mistake, Tomagan subdivided Lot9960 into four lots and waived her rights over Lots 9960-A and 9960-C in Gaiteros favor; that the Almerias claimed a portion of Lot 9960 -A byvirtue of a relocation survey and fenced it close to Gaiteros house, obstructing the latters passageway; and that while the Almerias returned 158

sq m of the disputed portion, they refused to return to him the remaining 579 sq m.

Answering the complaint and instituting a counterclaim, the Almerias alleged that they bought Lot 996 4[8]

in 1985 by virtue of an Extra-Judicial Settlement of Estate and Sale; that it was Gaitero who unlawfully encroached on the 737 sq m portion of Lot 9964; and that, while they had

waived a portion of the disputed area, Gaiteros incessant claim to the remaining 579 sq m prompted them to cancel their prev ious waiver of the158 sq m.

[9] The Almerias prayed for the dismissal of the complaint and the award of damages in their favor.

In his reply, Gaitero claimed that the cadastral survey was erroneous in that it included a 737 sq m portion of Lot 9960-A into Lot 9964.

After trial, on December 9, 2002 the MCTC rendered a decision, dismissing the complaint and ordering Gaitero to pay theAlmerias P20,000.00 in moral damages andP20,000.00 in attorneys fees. The MCTC held that the Almerias were entitled to the possession of thedisputed area considering that it is included in the technical description of their registered title. Further, the MCTC held that Gaitero acknowledgedthe true boundaries of 9960-A when Lot 9960 was subdivided in 1993. Indeed, the subdivision plan clearly shows that the disputed area isexcluded from 9960-A.

On appeal,[10]

the Regional Trial Court (RTC) reversed the decision of the MCTC.[11]

The RTC held that, while the Almerias were the rightfulowners of the disputed area, lachesprevented them from asserting their right over the same since it took them 15 years before they did so. TheRTC also ordered the Almerias to pay Gaitero moral damages of P50,000.00, attorneys fees ofP15,000.00 and litigation expenses of P30,000.00.

On review,[12]

the Court of Appeals (CA) rendered judgment on May 21, 2007, reversing the decision of the RTC and reinstating that of theMCTC. The CA held that the Almerias owned the disputed area since, between a registered title and a verbal claim of ownership, the former mustprevail. The CA did not consider the Almerias in laches since no one had lodge a claim of ownership against their title to the disputed property. Onmotion for reconsideration, the CA deleted the award of moral damages, litigation expenses, and attorneys fees in its resolution of February 11,2008.

The Issue Presented
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The sole issue presented to the Court is whether or not the CA erred in holding that the Almerias are entitled to the possession of thedisputed area as against Gaitero.

The Courts Ruling

Possession is an essential attribute of ownership. Necessarily, whoever owns the property has the right to possess it.[13]

Here, between theAlmerias registered title of ownership and Gaiteros verbal claim to the same, the formers title is far superior.

As the MCTC, the RTC, and the CA found, the disputed area forms part of the Almerias registered title. Upon examination, this fact is alsoconfirmed by the subdivision plan which partitioned Tomagans originalLot 9960. The evidence shows that the Almer ias bought Lot 9964, which

includes the disputed area, from the Asenjo heirs in whose names the land was originally registered. Since Gaitero was unable to prove that fraudattended the titling of the disputed area, the Almerias right over the same became indefeasible and incontrovertible a year from registration.

[14]

The Court cannot consider Gaiteros claim of ownership of the disputed area, based o n his alleged continuous possession of the same,without running afoul of the rule that bars collateral attacks of registered titles .

[15] Gaiteros action before the MCTC is one for recovery of

possession of the disputed area. An adjudication of his claim of ownership over the same would be out of place in such kind of action. A registeredtitle cannot be impugned, altered, changed, modified, enlarged, or diminished, except in a direct proceeding permitted by law. Otherwise, relianceon registered titles would be lost.

[16] Gaiteros action is prohibited by law and should be dismissed.

Gaiteros theory oflachescannot vest on him the ownership of the disputed area. To begin with, laches is a consideration in equity[17]andtherefore, anyone who invokes it must come to court with clean hands, for he who has done inequity shall not have equity .

[18] Here, Gaiteros

claim of laches against the Almerias can be hurled against him. When the lot that the Almerias acquired (Lot 9964) was registered in 1979, Gaiterohad constructive, if not actual, notice that the cadastral survey included the disputed area as part of the land that Leon Asenjo claimed. Yet,neither Gaitero nor his mother complained or objected to such inclusion.

Worse, when Gaitero saw the subdivision plan covering Tomagans original Lot 9960 in 1993, it showed that the disputed area fel l outsidethe boundaries of Lot 9960-A which he claimed. Still, Gaitero did nothing to correct the alleged mistake. He is by his inaction clearly estoppedfrom claiming ownership of the disputed area. He cannot avail himself of the law of equity.

WHEREFORE, the Court DISMISSESthe petition and AFFIRMSthe decision and resolution of the Court of Appeals in CA-G.R. SP 80285 datedMay 21, 2007 and February 11, 2008, respectively.

SO ORDERED.
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RODOLFO V. ROSALES, (represented by his heirs,

Rodolfo, Jr., Romeo Allan, Lillian Rhodora, Roy

Victor, Roger Lyle and Alexander Nicolai, all

surnamed Rosales) and LILY ROSQUETA-ROSALES,

Petitioners,

- versus -

MIGUEL CASTELLTORT, JUDITH CASTELLTORT, and

LINA LOPEZ-VILLEGAS, assisted by her Attorney-in-Fact, Rene Villegas,

Respondents.

G.R. No. 157044

Present:

PANGANIBAN,J., Chairman,

SANDOVAL-GUTIERREZ,CORONA,CARPIO MORALES, and GARCIA,JJ.

Promulgated:October 5, 2005

xx - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - xx

D E C I S I O N

CARPIO MORALES,J.:The present petition for review on certiorari assails the October 2, 2002 Decisio n

[1]and February 6, 2003 Resolution

[2]of the Court of

Appeals (CA) in CA G.R. CV No. 64046 and seeks to reinstate the April 21, 1999 Decisio n[3]

of the Regional Trial Court (RTC) of Calamba, Laguna,Branch 34 in Civil Case No. 2229-95-C.

Spouses-petitioners Rodolfo V. Rosales and Lily Rosqueta-Rosales (petitioners) are the registered owners of a parcel of land with an area

of approximately 315 square meters, covered by Transfer Certificate of Title (TCT) No. 36856[4]

and designated as Lot 17, Block 1 of Subdivision PlanLRC Psd-55244 situated in Los Baos, Laguna.

On August 16, 1995, petitioners discovered that a house was being constructed on their lot, without their knowledge and consent,by respondent Miguel Castelltort (Castelltort).[5]

It turned out that respondents Castelltort and his wife Judith had purchased a lot, Lot 16 of the same Subdivision Plan, from respondent

Lina Lopez-Villegas (Lina) through her son-attorney-in-fact Rene Villegas (Villegas) but that after a survey thereof by geodetic engineer AugustoRivera, he pointed to Lot 17 as the Lot 16 the Castelltorts purchased.

Negotiations for the settlement of the case thus began, with Villegas offering a larger lot near petitioners lot in the same subdivision as areplacement thereof.[6] In the alternative, Villegas proposed to pay the purchase price of petitioners lot with legal interest.[7] Both proposals

were, however, rejected by petitioners[8]

whose counsel, by letter[9]

of August 24, 1995, directed Castelltort to stop the construction of anddemolish his house and any other structure he may have built thereon, and desist from entering the lot.

Petitioners subsequently filed on September 1, 1995 a complaint[10]

for recovery of possession and damages with prayer for the issuanceof a restraining order and preliminary injunction against spouses-respondents Miguel and Judith Castelltort before the RTC of Calamba, Laguna,docketed as Civil Case No. 2229-95-C.

To the complaint, the Castelltorts claimed in their Answer with Counterclaim[11]

that they were builders in good faith.

Lina, represented by her son-attorney-in-fact Villegas, soon filed a Motion for Intervention[12]

before the RTC which was granted by

Order[13]

of December 19, 1995.

In her Answer to the complaint,[14]Lina alleged that the Castelltorts acted in good faith in constructing the house on petitioners lot asthey in fact consulted her before commencing any construction thereon, they having relied on the technical description of the lot sold to them, Lot16, which was verified by her officially designated geodetic engineer.

Nevertheless, Lina proposed to give petitioners a lot containing an area of 536 square meters together with the house and duplex

structure built thereon or, if petitioners choose, to encumber the 536 square meter lot as collateral to get immediate cash through a financing

scheme in order to compensate them for the lot in question .[15]

Ruling out good faith, the RTC, by Decision of April 21, 1999, found for petitioners in this wise:

In the instant case, there is no well-founded belief of ownership by the defendants of the land upon which they builttheir house. The title or mode of acquisition upon which they based their belief of such ownership stemmed from a Contractto Sell (Exhibit P) of which they were not even parties, the designated buyer being Elizabeth Yson Cruz and the sale even

subjected to the judicial reconstitution of the title. And by their own actions, particularly defendant Miguel Castelltort,

defendants betrayed this very belief in their ownership when realizing the inutility of anchoring their ownership on the basis ofthe Contract of Sale, defendant Miguel Castelltort in his testimony declared Elizabeth Yson Cruz as his wife (tsn, pp. 7-8, March24, 1998) despite an admission in their answer that they are the spouses named as defendants (tsn, p. 8, January 12, 1998) andwhich declaration is an utter falsehood as the Contract to Sell itself indicates the civil status of said Elizabeth Yson Cruz to besingle.

Even if we are to concede that defendants built their house in good faith on account of the representation ofattorney-in-fact Rene Villegas, their failure to comply with the requirements of the National Building Code, particularly the

procurement of a building permit, stained such good faith and belief.
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x x x

From any and all indications, this deliberate breach is an unmitigated manifestation of bad faith. And from the

evidence thus adduced, we hold that defendants and the intervenor were equally guilty of negligence which led to theconstruction of the defendants houseon plaintiffs property and therefore jointly and severally liable for all the damages

suffered by the plaintiffs.[16]

(Underscoring supplied)

The dispositive portion of the trial courts Decision reads, quoted verbatim:

ACCORDINGLY, in view of all the foregoing, judgment is hereby rendered in favor of plaintiffs and against the

defendants, ordering the latter to surrender the possession of the property covered by TCT No. 36856 of the Register of Deeds ofLaguna including any and all improvements built thereon to the plaintiffs.

Defendants and intervenors are likewise jointly and severally directed to pay to plaintiffs the following damages:

a) TWO THOUSAND (P2,000.00) PESOS per month from February 1995 by way of reasonablecompensation for the use of plaintiffs property until the surrender of the same;

b) FIFTY THOUSAND (P50,000.00) PESOS by way of moral damages;c) THIRTY THOUSAND (P30,000.00) PESOS as exemplary damages;

d) TWENTY THOUSAND (P20,000.00) PESOS as attorneys fees and cost of suit.

The counterclaim interposed by the defendants in their responsive pleading is hereby dismissed for lack of merit.

SO ORDERED.[17]

Respondents thereupon filed their respective appeals with the CA.

Petitioner Rodolfo Rosales, in the meantime, died on December 7, 2001. His heirs Rodolfo, Jr., Romeo Allan, Lillian Rhodora, Roy Victor,Roger Lyle and Alexander Nicolai, all surnamed Rosales, fi led their Appearance

[18]as his substitute.

By Decision of October 2, 2002, the CA granted the appeal and set aside the April 21, 1999 RTC Decision. The dispositive portion of the

Decision reads, quoted verbatim:

WHEREFORE, premises considered, the instant appeal is hereby GRANTEDand the assailed decision of the court aquo REVERSED AND SET ASIDE. In accordance with the cases ofTechnogas Philippines Manufacturing Corp. vs. Court of

Appealsand Depra vs. Dumlao, applying Article 448 of the Civil Code, this case is REMANDED to the Regional Trial Court ofCalamba, Laguna, Branch 34, for further proceedings, as follows:

1. to determine the present fair price of appellees 315 square meter area of land and the amoun t of the expensesactually spent by the appellants for building the house as of 21 August 1995, which is the time they were notified of appelle es

rightful claim over Lot 17.

2. to order the appellees to exercise their option under the law (Article 448, Civil Code), whether to appropriate thehouse as their own by paying to the appellants the amount of the expenses spent for the house as determined by the court aquo in accordance with the limitations as aforestated or to oblige the appellants to pay the price of the land.

In case the appellees exercise the option to oblige the appellants to pay the price of the land but the latter reject such

purchase because, as found by the court, the value of the land is considerably more than that of the house, the court shallorder the parties to agree upon the terms of a forced lease, and give the court a quo a formal written notice of such agreement

and its provisos. If no agreement is reached by the parties, the court a quo shall then fix the terms of the forced lease,provided that the monthly rental to be fixed by the Court shall not be less that Two Thousand Pesos (P2,000.00) per month,payable within the first five (5) days of each calendar month and the period thereof shall not be more than two (2) years,counted from the finality of the judgment.

Upon the expiration of the forced lease, or upon default by the appellants in the payment of rentals for two (2)consecutive months, the appellees shall be entitled to terminate the forced lease, to recover their land, and to have theimprovement removed by the appellants at the latters expense. The rentals herein provided shall be tendered by theappellants to the court for payment to the appellees, and such tender shall constitute evidence of whether or not compliancewas made within the period fixed by the court.

In any event, the appellants shall pay the appellees the amount of Two Thousand Pesos (P2,000.00) as reasonablecompensation for their occupancy of the encroached property from the time said appellants good faith cease (sic) to exist untilsuch time the possession of the property is delivered to the appellees subject to the reimbursement of the aforesaid expenses

in favor of the appellants or until such time the payment of the purchase price of the said lot be made by the appellants infavor of the appellees in case the latter opt for the compulsory sale of the same.

SO ORDERED.[19]

(Emphasis in the original)

In reversing the trial court, the CA held:

x x x
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x x x A perusal of the records readily reveals that said court instead relied on flimsy, if not immaterial, allegations ofthe appellees, which have no direct bearing in the determination of whether the appellants are builders in bad faith.

For one, the pivotal issue to be resolved in this case, i.e. whether appellant Miguel is a builder in good faith, wasignored by the court a quo. The instant case does not in any way concern the personal and property relations of spouses-

appellants and Elizabeth Yson Cruz which is an altogether different matter that can be ventilated by the concerned partiesthrough the institution of a proper action. xxx The court a quo should have focused on the issue of whether appellant Miguel

built, in good faith, the subject house without notice of the adverse claim of the appellees and under the honest belief that thelot which he used in the construction belongs to him. xxx

xxx As it is, appellant Miguel relied on the title which the intervenor showed to him which, significantly, has noannotation that would otherwise show a prior adverse claim. Thus, as far as appellant Miguel is concerned, his title over the

subject lot, as well as the title of the intervenor thereto, is clean and untainted by an adverse claim or other irregularities.

For another, the appellants failure to secure a building permit from the Municipal Engineers Office on their

construction on Lot 17 does not impinge on the good faith of the appellants. In fact, it can be told that a building permit wasactually filed by appellant Miguel with respect to Lot 16 and it was only due to the confusion and misapprehension by theintervenor of the exact parameters of the property which caused appel lants belief that Lot 17 *the questioned lot+, is his. Thisfact bolsters appellant Miguels good faith in building his house on appellees lot under the mistaken belief that the same i s hisproperty. Otherwise, he should have secured a building permit on Lot 17 instead or should not have bothered to take thenecessary measures to obtain a building permit on Lot 16 in the first place.

By and large, the records show that, as testified to by Engr. Rebecca T. Lanuang, appellant Miguel had already appliedfor a building permit as early as February 1994 and was in fact issued a temporary building permit pending the completion of

the requirements for said permit. Although the building permit was belatedly issued in January 1996, this does not in any waydetract from appellant Miguels good faith.

x x x

In holding the appellants as builders in bad faith, the court a quo defied law and settled jurisprudence consideringthat the factual basis of its findings and the incontrovertible evidence in support thereof prove that the appellant Miguel, ingood faith, built the house on appellees land without knowledge of an adverse claim or any other irregularities that might c asta doubt as to the veracity of the assurance given to him by the intervenor. Having been assured by the intervenor that thestone monuments were purposely placed, albeit wrongfully, by the land surveyor in said land to specifically identify the lot and

its inclusive boundaries, the appellants cannot be faulted for having relied on the expertise of the land surveyor who is moreequipped and experienced in the field of land surveying. Although under the Torrens system of land registration, the appellant

is presumed to have knowledge of the metes and bounds of the property with which he is dealing, appellant however,considering that he is a layman not versed in the technical description of his property, cannot be faulted in his reliance on the

survey plan that was delivered to him by the intervenor and the stone monuments that were placed in the encroachedproperty.

x x x

Peremptorily, contrary to the flawed pronouncements made by the court a quo that appellant Miguel is deemed as abuilder in bad faith on the basis of a mere assertion that he built his house without initially satisfying himself that he owns thesaid property, this Court finds reason to maintain good faith on the part of the appellant. Admittedly, the appellants houseerroneously encroached on the property of the appellees due to a mistake in the placement of stone monuments as indicatedin the survey plan, which error is directly attributable to the fault of the geodetic engineer who conducted the same. This fact

alone negates bad faith on the part of appellant Miguel.

x x x

Moreover, it is quite illogical for appellant Miguel to knowingly build his house on a property which he knew belongsto another person. x x x

x x x

In view of the good faith of both parties in this case, their rights and obligations are to be governed by Article 448,

which has been applied to improvements or portions of improvements built by mistaken belief on land belonging to the

adjoining owner. x x x

x x x[20]

(Emphasis and underscoring supplied)

Petitioners Motion for Reconsideration[21]

dated October 22, 2002 having been denied by the CA by Resolution of March 13, 2002, thepresent petition was filed raising the following issues:

I.

WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION IN MAKING A FINDINGTHAT IS CONTRARY TO THE ADMISSIONS BY THE PARTIES

II.

WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR OF LAW IN CONCLUDING THAT THE

TRIAL COURT, IN DECIDING THE CASE, RELIED ON FLIMSY, IF NOT IMMATERIAL, ALLEGATIONS OF THE PETITIONERS, WHICH HAVENO DIRECT BEARING IN THE DETERMINATION OF WHETHER THE RESPONDENTS ARE BUILDERS IN GOOD FAITH
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III.

WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR OF LAW IN RENDERING A DECISIONTHAT IS UNENFORCEABLE AGAINST BOTH RESPONDENT JUDITH CASTELLTORT AND THIRD-PARTY ELIZABETH CRUZ

[22]

Petitioners initially hammer against respondents proving that Castelltort and a certain Elizabeth Cruz are the builders of the house on thesubject property, they faulting them with estoppel for alleging in their Answer before the trial court that they (respondents Castelltort and Judith)caused the construction of their house which they bought from a certain Lina Lopez-Villegas.

Petitioners rely on the following doctrine established in Elayda v. Court of Appeals:[23]

an admission made in the pleadings cannot be controverted by the party making such admission and are conclusiveas to him and that all proofs submitted by him contrary thereto or inconsistent therewith, should be ignored, whetherobjection is interposed by the party or not x x x

Petitioners contention is hardly relevant to the case at bar. Whether it was Castelltort and Judith or Castelltort and Elizabeth Cruz whopurchased the property from Lina is not material to the outcome of the instant controversy. As found by the CA:

The fact remains that appellant [Castelltort] is the builder of the house on Lot 17 xxx The court a quo should havefocused on the issue of whether appellant Miguel built, in good faith, the subject house without notice of the adverse claim ofthe appellees and under the honest belief that the lot which he used in the construction belongs to him. xxx it cannot be

gainsaid that appellant Miguel has a title over the land that was purchased from the intervenor x x x[24]

At all events, as this Court held in the case of Gardner v. Court of Appeals:[25]

In its Resolution reversing the original Decision, respondent Court discredited the testimony of Ariosto SANTOS for

being at variance with the allegations in his Answer. The fact, however, that the allegations made by Ariosto SANTOS in hispleadings and in his declarations in open Court differed will not militate against the findings herein made nor support thereversal by respondent Court. As a general rule, facts alleged in a partys pleading are deemed admissions of that party andbinding upon it, but this is not an absolute and inflexible rule. An Answer is a mere statement of fact which the party filing itexpects to prove, but it is not evidence. As Ariosto SANTOS himself, in open Court, had repudiated the defenses he had raised

in his Answer and against his own interest, his testimony is deserving of weight and credence.[26]

(Underscoring supplied)

The issue determinative of the controversy in the case at bar hinges on whether Castelltort is a builder in good faith.

A builder in good faith is one who builds with the belief that the land he is building on is his, or that by some title one has the right tobuild thereon, and is ignorant of any defect or flaw in his title .[27]

Article 527 of the Civil Code provides that good faith is always presumed, and upon him who alleges bad faith on the part of a possessor

rests the burden of proof.[28]

In the case at bar, Lot 16 was sold by Lina, through her attorney-in-fact Villegas, to Castelltort and a certain Elizabeth Cru z

[29]for a

consideration of P500,000.00. While prior to the sale, what Villegas showed Castelltort as evidence of his mother Linas ownership of the propertywas only a photocopy of her title TCT No. (T-42171) T-18550

[30]he explaining that the owners duplicate of the title was lost and that judicial

reconstitution thereof was ongoing, Castelltort acted in the manner of a prudent man and went to the Registry of Deeds of Laguna to procure a

certified true copy of the TCT.[31]

The certified true copy bore no annotation indicating any prior adverse claim on Lot 16.

The records indicate that at the time Castelltort began constructing his house on petitioners lot, he believed that it was the Lot 16 hebought and delivered to him by Villegas.

In his cross-examination, Villegas testified:

Q: You said the surveyor placed a mujon along boundary of the property?A: Yes.

Q: When were the mujons placed in the boundary of the property?A: These mujons were the basis for my locating the property in pointing to Mr. Castelltort.

x x x

Q: Is it not a fact that before Miguel Castelltort started constructing that house he sought your advice or permission toconstruct the same over that particular lot?

A: Yes.

Q: And you gave your consent?A: Yes, because based on my knowledge also that that was the lot as pointed by Engr. Rivera.

x x x

Q: Was there any remarkable difference between lot 16 and 17 at the time that this particular lot was sold to Miguel Castelltortand Elizabeth Cruz?

x x x
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A: Both lots 16 and 17 are practically the same. The (sic) have the same frontage. There is only a difference of 4 squaremeters, one is 311 square meters and the other 315 square meters. Both sides were fenced, as drawn they were facing

the same road. They are practically the same.

Q: But at the time or immediately before Mr. Castelltort started the construction of the house, was there any remarkabledistinction between these two properties?

A: None.[32]

(Emphasis and underscoring supplied)

The confusion in the identification of Lot 16 was eventually traced to the error committed by geodetic engineer Augusto Riverasemployees in placing stone monuments on petitioners property , instead of on Lot 16, the lot sold to Castelltort, based on the survey made by the

engineer in 1992.

The engineer so testified:

Q: Now, aside from inspecting personally the site, what else did your men or assistants do?A: After computing the subdivision lots, they went back to the field to plant those subdivision corners with concrete

monuments.

Q: Which is (sic) also called as mohons?A: Yes, sir.

Q: Now, can you point to this Honorable Court where exactly did your men place these additional mohons and how many?A: Later on we discovered that they placed the mohons in the adjoining lot, lot 17.

x x x

Q: x x x when again did you meet Mr. Rene Villegas or after how many months or year?A: Maybe after a year, sir.

Q: And you met him again because he had a problem regarding the property of one Engr. Rosales?

A: Yes, sir.

Q: And when he confided to you this matter, did you go to the site of Lot 16 or 17?A: Yes, sir.

Q: And what did you see there?A: A house being constructed then I rechecked the location of the house and it turned out to be in Lot 17.

x x x

Q: Considering that you found out that a mistake was actually made by your assistants Dennis Orencio, Mario Carpio andSovejano when you allowed them to proceed on their own to make this computation, did you confront these men ofyours afterwards?

A: Yes, sir.

Q: In what manner?

A: I actually reprimanded them verbally and also I dismissed Mario Carpio from my office.

x x x

Q: And did you investigate how your men committed this mistake of planting these monuments on another lot when corners 4& 1 were clearly planted on the ground?

A: I myself rechecked it and found out that they committed an error.

x x x

Q: And now, you are saying that your men committed a mistake by placing thereon monuments by planting these monumentsnot on Lot 16 but on Lot 17?

A: When I investigated how did they commit (sic) a mistake it came to be like this. Before when we surveyed first this in 1992,at that time Dante Villegas contracted my services there was a fence here then when we went back, the road was alreadyremoved so they committed an error that this point is Lot 19, they thought that it was Lot 19, the back portion.

x x x

Q: In this particular case, did you find out how your men checked the succeeding lots, how they determine (sic) the exactlocation of lot 16?

A: They just relied on one side of the subdivision.

Q: By just counting the number of lots?A: Yes, sir.

Q: Without making any actual measurement?
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A: They made an actual measurement but the reference point is not the one, the correct one because they also checked itwith the other corner of the road going back.

x x x

Q: And how did they commit a mistake when you said they checked the lot at the back of Lot 16?A: Because they were quite confident since we had already relocated the property two years ago so they thought that they get

(sic) the right lot without checking the other side of the subdivision.

x x x

Q: Now, you said that when you went to the place because you heard from Rene Villegas that there was a mistake you no

longer could find the monuments on lines 1 and 4 and according to you the reason is that a fence was alreadyconstructed?

A: Yes, sir.

Q: For clarification, is this line 1 & 4 on Lot 16 a common line 1 &4 on Lot 17?A: Yes, sir a common line.

Q: In other words, this line 1 &4 devides (sic) Lot 16 & 17?A: Yes, sir.

Q: So that when these monuments were placed on lines 1 & 4 somebody could mistake it for Lot 17 also because there weremonuments now 1 &4 for lot 16 since these are common lines for

Lot 17 also with Lot 16, it could also be construed that these are monuments for Lot 17?A: Yes, sir possible.

[33] (Underscoring supplied)

As correctly found by the CA, both parties having acted in good faith at least until August 21, 1995, the applicable provision in this case is

Article 448 of the Civil Code which reads:

Art. 448. The owner of the land on which anything has been built, sown or planted in good faith, shall have the rightto 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 suchcase, 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 termsthereof.

Under the foregoing provision, the landowner can choose between appropriating the building by paying the proper indemnity or obliging

the builder to pay the price of the land, unless its value is considerably more than that of the structures, in which case the builder in good faith shallpay reasonable rent.

[34] If the parties cannot come to terms over the conditions of the lease, the court must fix the terms thereof.

The choice belongs to the owner of the land, a rule that accords with the principle of accession, i.e., that the accessory follows theprincipal and not the other way around. Even as the option lies with the landowner, the grant to him, nevertheless, is preclusive.[35] Thelandowner cannot refuse to exercise either option and compel instead the owner of the building to remove it from the land.

[36]

The raison detrefor this provision has been enunciated thus:

Where the builder, planter or sower has acted in good faith, a conflict of rights arises between the owners, and itbecomes 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 theland the option to acquire the improvements after payment of the proper indemnity, or to oblige the builder or planter to payfor the land and the sower the proper rent. He cannot refuse to exercise either option. It is the owner of the land who isauthorized to exercise the option, because his right is older, and because, by the principle of accession, he is entitled to theownership of the accessory thing.

[37]

Possession acquired in good faith does not lose this character except in the case and from the moment facts exist which show that thepossessor is not unaware that he possesses the thing improperly or wrongfully .

[38] The good faith ceases or is legally interrupted from the moment

defects in the title are made known to the possessor, by extraneous evidence or by suit for recovery of the property by the true owner.[39]

In the case at bar, Castelltorts good faith ceased on August 21, 1995 when petitioners personally apprised him of their title over thequestioned lot. As held by the CA, should petitioners then opt to appropriate the house, they should only be made to pay for that part ofthe improvement built by Castelltort on the questioned property at the time good faith still existed on his part or until August 21, 1995.

The CA, however, failed to qualify that said part of the improvement should be pegged at its current fair market value consistent with thisCourts pronouncement inPecson v. Court of Appeals.

[40]

And, as correctly found by the CA, the commencement of Castelltorts payment of reasonable rent should start on August 21, 1995 aswell, to be paid until such time that the possession of the property is delivered to petitioners, subject to the reimbursement of expenses, that is, ifsuch option is for petitioners to appropriate the house.
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This Court quotes the CAs ratiocination with approval:

x x x Generally, Article 448 of the Civil Code provides that the payment of reasonable rent should be made only up to

the date appellees serve notice of their option as provided by law upon the appellants and the court a quo; that is, if suchoption is for appellees to appropriate the encroaching structure. In such event, appellants would have a right to retain the land

on which they have built in good faith until they are reimbursed the expenses incurred by them. This is so because the right toretain the improvements while the corresponding indemnity is not paid implies the tenancy or possession in fact of the land on

which it is built, planted or sown.

However, considering that appellants had ceased as builders in good faith at the time that appellant Miguel was

notified of appellees lawful title over the disputed property, the payment of reasonable rent should accordingly commence at that time since he can no longer avail of the rights provided under the law for builders in good faith.

[41]

If the option chosen by petitioners is compulsory sale, however, the payment of rent should continue up to the actual transfer ofownership.

[42]

Respecting petitioners argument that the appellate court erred in rendering a decision that is unenforceable against Judith who is not

the owner of the house and Elizabeth Cruz who was found to be a part owner of the house built on their lot but is not a party to the case, thesame does not lie.

While one who is not a party to a proceeding shall not be affected or bound[43]

by a judgment rendered therein,[44]

like Elizabeth Cruz, thisdoes not detract from the validity and enforceability of the judgment on petitioners and respondents Castelltorts.

WHEREFORE, the petition is DENIED. The Decision dated October 2, 2002 and Resolution dated February 6, 2003 of the Court of Appealsare AFFIRMEDwithMODIFICATIONsuch that the trial court shall include for determination the increase in value (plus value) which petitioners315 square meter lot may have acquired by reason of the existence of that portion of the house built before respondents Miguel and JudithCastelltort were notified of petitioners rightful claim on said lot, and the current fair market value of said portion.

SO ORDERED.
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SPOUSES LYDIA FLORES-CRUZ G.R. No. 172217and REYNALDO I. CRUZ,

Petitioners,

Present:

PUNO, C.J., Chairperson,CORONA,

- v e r s u s - CHICO-NAZARIO,*

LEONARDO-DE CASTRO andBERSAMIN,JJ.

SPOUSES LEONARDO andILUMINADA GOLI-CRUZ,SPOUSES RICO and FELIZADE LA CRUZ, SPOUSES BOYand LANI DE LA CRUZ,ZENAIDA A. JACINTO andROGELIO DE LOS SANTOS,

Respondents. Promulgated:

September 18, 2009

x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x

R E S O L U T I O NCORONA,J.:

This is a petitio

Documents

Property Assignment July 26