221 Phil.

168

FIRST DIVISION

[ G.R. No. 57348, May 16, 1985 ]

FRANCISCO DEPRA, PLAINTIFF-APPELLEE, VS. AGUSTIN
DUMLAO, DEFENDANT-APPELLANT.
DECISION

MELENCIO-HERERA, J.:

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

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 dis-
positive portion of which reads:

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

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

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 over-stepped its
bounds when it imposed upon the parties a situation of "forced lease", which, like "forced
co-ownership" is not favored in law. Furthermore, a lease is an interest in real property,
jurisdiction over which belongs to Courts of First Instance (now Regional Trial Courts)
(Sec. 44(b), Judiciary Act of 1948[2]; Sec. 19 (2) Batas Pambansa Blg. 129).[3] Since the
Municipal Court, acted without jurisdiction, its Decision was null and void and cannot
operate as res judicata to the subject complaint for Quieting 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,
 "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 continously up to the present; x x x "
(Bold ours)

Consistent with the principle that our Court system, like any other, must be a dispute
resolving mechanism, we accord legal effect to the agreement of the parties, within the
context of their mutual concession and stipulation. They have, thereby, chosen a legal
formula to resolve their dispute — to 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 by law, for a "builder in
good faith" under Article 448, a "possessor in good faith" under Article 526 and a
"landowner in good faith" under Article 448.

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
reasonble 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.

"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 (underscoring 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.

". . . 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 dueno del terreno. Posible es que, de saber lo
contrario, y de tener noticia de que habia que comprar y pagar el terreno, no se
hubiera decidido a plantar ni a edificar. La ley, obligandole a hacerlo, fuerza
su voluntad, y la fuerza por un hecho inocente de que no debe ser responsable'.
Asi podra suceder; pero la realidad es qua con ese hecho voluntario, aunque
sea inocente, se ha enriquecido torticeramente con perjuicio de otro a quien es
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 anything has been built, sown or
planted in good faith, shall have the right to appropriate as his own the works,
sowing or planting, after payment of the indemnity provided for in articles 546
and 548, or to oblige the one who built or planted to pay the price of the land,
and the one who sowed, the proper rent. However, the builder or planter cannot
be obliged to buy the land if its value is considerably more than that of the
building or trees. In such case, he shall pay reasonable rent, if the owner of the
land does not choose to appropriate the building or trees after proper indemnity.
The parties shall agree upon the terms of the lease and in case of disagreement,
the court shall fix the terms thereof."

Additional benefits were extended to the builder but the landowner retained his options.

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

"Where the builder, planter or sower has acted in good faith, a conflict of rights
arises between the owners, and it becomes necessary to protect the owner of the
improvements without causing injustice to the owner of the land. In view of the
impracticability of creating a state of forced co-ownership, the law has provided
a just solution by giving the owner of the land the option to acquire the
improvements after payment of the proper indemnity, or to oblige the builder or
planter to pay for the land and the sower to pay for the proper rent. It is the
owner of the land who is authorized to exercise the option, because his right is
older, and because, by the principle of accession, he is entitled to the ownership
of the accessory thing. (3 Manresa 213; Bernardo vs. Bataclan, 37 Off. Gaz.
1382; Co Tao vs. Chan Chico, G.R. No. 49167, April 30, 1949; Article applied:
see Cabral, et al vs. Ibanez [S.C.] 52 Off. Gaz. 217; Marfori vs. Velasco, [C.A.]
52 Off. Gaz. 2050)."[8]
WHEREFORE, the judgment of the trial Court is hereby set aside, and this case is hereby
ordered remanded to the Regional Trial Court of Iloilo for further proceedings consistent
with Articles 448 and 546 of the Civil Code, as follows:

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

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 as 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 to 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, shaIl 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;

c) In any event, DUMLAO shall pay DEPRA an amount computed

at Ten Pesos (P10.00) per month as reasonable compensation for the
occupancy of DEPRA's land for the period counted from 1952, the
year DUMLAO occupied the subject area, up to the commencement
date of the forced lease referred to in the preceding paragraph;

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, Acting C.J., Plana, Relova, De La Fuente, and Alampay, JJ., concur.

Gutierrez, Jr., J., took no part, having been one of the two members of a Court of Appeals’
Division of Five Justices who dissented from the majority opinion certifying this case to
this Court.

[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 or 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. x x x

(b) In all civil actions which involve the title to or possession of real property, or
any interest therein, or the legality of any tax, impose or assessment, except
actions of forcible entry into and detainer on lands or buildings, original
jurisdiction of which is conferred by this Act upon city and municipal courts;"

[3] "Sec. 19. Jurisdiction in civil case. - x x x

(2) In all civil actions which involve the title to, or possession of, real property,
or any interest therein, except actions 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.

[8] II Tolentino, Civil Code of the Philippines, 1963 ed., p. 97.

Source: Supreme Court E-Library | Date created: November 21, 2014

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