Pecson v. Court of Appeals 244 SCRA 407

PECSON V.
COURT OF APPEALS 244 SCRA 407
DOCTRINE:
Art. 448 of the Civil Code does not apply to a case where the owner of the land is the builder, sower, or
planter who then later loses ownership of the land by sale or donation.—By its clear language, Article 448
refers to a land whose ownership is claimed by two or more parties, one of whom has built some works,
or sown or planted something. The building, sowing or planting may have been made in good faith or in
bad faith. The rule on good faith laid down in Article 526 of the Civil Code shall be applied in
determining whether a builder, sower or planter had acted in good faith. Article 448 does not apply to a
case where the owner of the land is the builder, sower, or planter who then later loses ownership of the
land by sale or donation.
The provision of Art. 448 on indemnity may be applied by analogy to a case where one loses the
ownership of the land on which he earlier built an apartment.—Elsewise stated, where the true owner
himself is the builder of works on his own land, the issue of good faith or bad faith is entirely irrelevant.
Thus in strict point of law, Article 448 is not apposite to the case at bar. Nevertheless, we believe that the
provision therein on indemnity may be applied by analogy considering that the primary intent of Article
448 is to avoid a state of forced co-ownership and that the parties, including the two courts below, in the
main agree that Articles 448 and 546 of the Civil Code are applicable and indemnity for the
improvements may be paid although they differ as to the basis of the indemnity.
Equity; Unjust Enrichment; It is the current market value of the improvements which should be made the
basis of reimbursement to the builder in good faith.—The objective of Article 546 of the Civil Code is to
administer justice between the parties involved. In this regard, this Court had long ago stated in Rivera vs.
Roman Catholic Archbishop of Manila that the said provision was formulated in trying to adjust the rights
of the owner and possessor in good faith of a piece of land, to administer complete justice to both of them
in such a way as neither one nor the other may enrich himself of that which does not belong to him.
Guided by this precept, it is therefore the current market value of the improvements which should be
made the basis of reimbursement. A contrary ruling would unjustly enrich the private respondents who
would otherwise be allowed to acquire a highly valued incomeyielding four-unit apartment building for a
measly amount. Consequently, the parties should therefore be allowed to adduce evidence on the present
market value of the apartment building upon which the trial court should base its finding as to the amount
of reimbursement to be paid by the landowner.
The right to retain 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 and retention of ownership of the
improvements and, necessarily, the income therefrom.—The trial court also erred in ordering the
petitioner to pay monthly rentals equal to the aggregate rentals paid by the lessees of the apartment
building. Since the private respondents have opted to appropriate the apartment building, the petitioner is
thus entitled to the possession and enjoyment of the apartment building, until he is paid the proper
indemnity, as well as of the portion of the lot where the building has been constructed. This is so because
the right to retain 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. The petitioner not having been so paid,
he was entitled to retain ownership of the building and, necessarily, the income therefrom.
FACTS:
Pedro Pecson was the owner of a commercial lot on which he built a 4-door-2-storey apartment building.
He failed to pay realty taxes amounting to P12k so the lot was sold at public auction to Mamerto
Nepomuceno who later on sold it to the Sps. Nuguid.
Pecson challenged the validity of the auction before the RTC but was dismissed but the RTC held that the
apartment bldg was not subject of the litigation. On appeal, the CA appealed in toto the decision of the
RTC that the apartment bldg was not included in the auction sale.
After an entry of judgment was made, the Sps. Nuguid filed a motion with the RTC for a motion for
delivery of possession of the lot and the apartment bldg citing Art. 546 of the CC. The RTC issued an
order declaring that the owner of the lot and apartment bldg were the Sps. Nuguid and to pay the
construction cost of the apartment before a writ of possession would be issued and to pay rent to the
spouses. Pecson moved for reconsideration but the Trial court did not act on it, instead it issued a writ of
possession. The CA affirmed in part the decision declaring the cost of construction can be offset from the
amount of rents to be collected and that since Sps. Nuguid opted to appropriate the improvement, Pecson
is entitled to be reimbursed the cost of construction at the time it was built in 1965 which is at P53k and
the right the retain the improvement until full indemnity is paid.
Thus the case at bar.
ISSUE:
Whether or not Art. 448 and 546 applies in the case at bar.
RULING:
With regard to Art. 448, the provision on indemnity may be applied in analogy. Whoever is the owner of
the land may appropriate whatever has been built, planted or sown after paying indemnity. However, it
does not apply when the owner of the land is also the builder of the works on his own land who later on
loses ownership by sale or donation.
Art. 546 refers to the necessary and useful expenses which shall be refunded to the possessor in good faith
with right of retention. However, it does not state how to determine the value of the useful improvement.
The respondents [court and private respondents alike] espouses as sufficient reimbursement the cost of
construction in 1965, however, this is contrary to previous rulings which declares that the value to the
reimbursed should be the present market value of said improvements so as not to unjustly enrich either of
the parties. [the trial court erred in ordering Pecson to pay rent since the Sps. Nuguid has yet to pay the
indemnity therefore Pecson has the right to retain the improvements and the income thereof. The case was
remanded to the trial court for determination of the current market value of the apartment bldg and
ordered the Sps to pay Pecson otherwise it shall be restored to Pecson until payment of indemnity.]
DISPOSITIVE PORTION:
WHEREFORE, the decision of the Court of Appeals in CA-G.R. SP No. 32679 and the Order of 15
November 1993 of the Regional Trial Court, Branch 101, Quezon City in Civil Case No. Q-41470 are
hereby SET ASIDE.
The case is hereby remanded to the trial court for it to determine the current market value of the
apartment building on the lot. For this purpose, the parties shall be allowed to adduce evidence on the
current market value of the apartment building. The value so determined shall be forthwith paid by the
private respondents to the petitioner otherwise the petitioner shall be restored to the possession of the
apartment building until payment of the required indemnity.
No costs.
SO ORDERED.

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PECSON V.

COURT OF APPEALS 244 SCRA 407

Thus the case at bar.

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