Case Digest: Aquino vs. Aguilar, G.R. No. 182754. June 29, 2015.

CASE TITLE: Aquino vs. Aguilar
GR No/ Date: G.R. No. 182754. June 29, 2015.*
PONENTE: Sereno, CJ.
CASE WITH THE SC: Petition for Review on Certiorari under Rule 45
PROCEDURAL ANTECEDENTS: MeTC - Ejectment Complaint RTC - Cancellation of Title and/or Reversion, Motion to Remove Improvements CA - Certiorari under Rule 65
FACTS: Teresa Vela Aquino and her husband, Crispin Aquino, owned a house and lot in Guadalupe. Since 1981, Teresa's sister Josefina Vela Aguilar, her spouse Eusebio Aguilar, and their family have lived on the property with the Aquinos' consent while the Aquinos resided in the US. The original house was demolished, and a three-story building was constructed. The Aguilars occupied part of the third floor without paying rent for 20 years. On September 22, 2003, the Aquinos demanded the property back for an immediate family member. The Aguilars did not comply, leading the Aquinos to file an ejectment complaint. Barangay Guadalupe Viejo: Attempts at amicable settlement through the barangay captain failed. On November 19, 2003, the Aquinos filed a complaint with the MeTC to evict the Aguilars and seek compensation for property use. MeTC: Ruled in favor of the Aquinos, ordering the Aguilars to vacate and pay monthly rent and attorney fees. Declared the Aguilars as builders in bad faith, stating their occupation was by mere tolerance. RTC: Upheld the MeTC decision, affirming the Aguilars were not co-owners and built without consent, making them builders in bad faith. CA: Affirmed lower courts' rulings, stating the Aguilars occupied by tolerance and had no co-ownership. However, the CA ruled the Aguilars should be reimbursed for necessary and useful expenses under Articles 1678 and 548 of the Civil Code. Remanded the case to the lower court to determine costs of necessary and useful improvements. Ordered the Aquinos to pay the Aguilars for these expenses and allowed removal of improvements if not reimbursed. The Aguilars did not appeal the CA decision. The Aquinos filed a Petition for Review with the Supreme Court.
ISSUE: Whether the CA seriously erred in remanding the case to the court of origin for the purpose of ascertaining the right of respondents to be reimbursed for the improvements introduced on the property. YES
ARGUMENTS/LEGAL BASES
PETITIONER	RESPONDENTS
Respondents were builders in bad faith, and, as such, are not entitled to reimbursement under Articles 449, 450 and 451 of the Civil Code. Supposed improvements constructed by respondents from 1999 to 2003 amounting to ₱995,995.94, which is highly ridiculous and unbelievable.	CA correctly ruled that their status is akin to that of a lessee or tenant whose term of lease has expired, but whose occupancy continues by virtue of the tolerance of the owner. They aver that the CA properly upheld their entitlement to reimbursement pursuant to Articles 1678 and 546 of the Civil Code.
PREVAILING PARTY:  Aquino
DECISION/DOCTRINE: Since respondents no longer appealed the Decision of the CA, they are considered bound by its findings and conclusions. These include its affirmation of the earlier findings of the MeTC and the RTC that respondents cannot be considered builders in good faith: Both the MeTC and the RTC have rejected the idea that petitioners are builders in good faith. We agree. The resolution of the issues at bar calls for the application of the rules on accession under the Civil Code. The term "builder in good faith" as used in reference to Article 448 of the Civil Code, refers to one who, not being the owner of the land, builds on that land believing himself to be its owner and unaware of the land, builds on that land, believing himself to be its owner and unaware of the defect in his title or mode of acquisition. The essence of good faith lies in an honest belief in the validity of one's right, ignorance of a superior claim, and absence of intention to overreach another. In the instant case, the Spouses Aguilar cannot be considered as builders in good faith on account of their admission that the subject lot belonged to the Spouses Aquino when they constructed the building. At the onset, petitioners were aware of a flaw in their title and a limit to their right to possess the property. By law, one is considered in good faith if he is not aware that there exists in his title or mode of acquisition any flaw which invalidates it. Respondents are deemed to have acquiesced to the foregoing findings when they failed to appeal the CA Decision. A party who does not appeal from a judgment can no longer seek the modification or reversal thereof. Accordingly, the only issue left for this Court to determine is that which is now raised by petitioners - whether the CA erred in remanding this case to the court of origin for the determination of the necessary and useful expenses to be reimbursed to respondents pursuant to Articles 1678 and 546 of the Civil Code. We resolve to PARTLY GRANT the Petition and modify the ruling of the CA. Article 1678 is not applicable to this case. In its Decision, the CA found that respondents were occupants of the property by mere tolerance or generosity of petitioners and were bound by an implied promise to vacate the premises upon demand. Based on this finding, the CA held that "the status of petitioners is analogous to that of a lessee or a tenant whose term of lease has expired but whose occupancy continued by tolerance of owner" pursuant to this Court's ruling in Calubayan v. Pascual, As a result, the CA concluded that Articles 1678 and 546 of the Civil Code must be applied to allow respondents to be reimbursed for their necessary and useful expenses. We disagree. By its express provision, Article 1678 of the Civil Code applies only to lessees who build useful improvements on the leased property. It does not apply to those who possess property by mere tolerance of the owners, without a contractual right. A careful reading of the statement made by this Court in Calubayan would show that it did not, as it could not, modify the express provision in Article 1678, but only noted an "analogous" situation. According to the Court, the analogy between a tenant whose term of lease has expired and a person who occupies the land of another at the latter's tolerance lies in their implied obligation to vacate the premises upon demand of the owner. The Court stated: To begin with, it would appear that although the defendant is regarded by the plaintiffs as a "squatter" his occupancy of the questioned premises had been permitted or tolerated even before the Philippine Realty Corporation sold the lots to the plaintiffs. Otherwise, the latter would not have found him on the premises. It may be true that upon their acquisition of the parcels of land in 1957, plaintiffs notified and requested defendant to see them, but despite defendant's failure to heed these requests, plaintiffs did not choose to bring an action in court but suffered the defendant instead to remain in the premises for almost six years. Only on February 2, 1963, did the plaintiffs for the first time notify the defendant that "they now need the two parcels of land in question" and requested him to vacate the same. In allowing several years to pass without requiring the occupant to vacate the premises nor filing an action to eject him, plaintiffs have acquiesced to defendant's possession and use of the premises. It has been held that a person who occupies the land of another at the latter's tolerance or permission, without any contract between them, is necessarily bound by an implied promise that he will vacate upon demand, failing which a summary action for ejectment is the proper remedy against them. The status of defendant is analogous to that of a lessee or tenant whose term of lease has expired but whose occupancy continued by tolerance of the owner. In such a case, the unlawful deprivation or withholding of possession is to be counted from the date of the demand to vacate.  It is clear from the above that Calubayan is not sufficient basis to confer the status and rights of a lessee on those who occupy property by mere tolerance of the owner. In this case, there is absolutely no evidence of any lease contract between the parties. In fact, respondents themselves never alleged that they were lessees of the lot or the building in question. Quite the opposite, they insisted that they were co-owners of the building and builders in good faith under Article 448 of the Civil Code. For that reason, respondents argue that it was erroneous for the CA to consider them as lessees and to determine their rights in accordance with Article 1678. As builders in bad faith, respondents are not entitled to reimbursement of useful expenses. Furthermore, even if we were to subscribe to the CA' s theory that the situation of respondents is "analogous to that of a lessee or tenant whose term of lease has expired but whose occupancy continued by tolerance," the absence of good faith on their part prevents them from invoking the provisions of Article 1678. As discussed above, the MeTC, the RTC and the CA all rejected the claims of respondents that they were builders in good faith. This pronouncement is considered conclusive upon this Court, in view of respondents' failure to appeal from the CA decision. This rule bars the application of Article 1678 as well as Articles 448 and 576 of the Civil Code and all other provisions requiring good faith on the part of the builder. We are aware that in some instances, this Court has allowed the application of Article 448 to a builder who has constructed improvements on the land of another with the consent of the owner.61 In those cases, the Court found that the owners knew and approved of the construction of improvements on the property. Hence, we ruled therein that the structures were built in good faith, even though the builders knew that they were constructing the improvement on land owned by another. Although the factual circumstances in the instant case are somewhat similar, there is one crucial factor that warrants a departure from the above-described rulings: the presence of evidence that petitioners prohibited respondents from building their own structure on a portion of the property. Based on the findings of fact of the MeTC and the RTC, petitioners had already warned respondents not to build a structure on the property as early as 1983. The MeTC explained: Likewise, in a letter dated 15 July 1983 sent by plaintiffs to the defendants marked as Exhibit "2" of defendants' Position Paper, Teresa Aquino made known to the defendants not to construct on the premises as she planned to sell the same when the value of the property shall increase (sic). Defendants are undoubtedly builders in bad faith for despite the prohibition made upon them, they continued their construction activities upon respondents' property.  This ruling was affirmed by the RTC in its Decision dated 3 January 2006, which reads: An examination of appellants' Exhibit "2" which is a letter dated July 15, 1983, sent to appellant Josefina Aguilar, the sister of appellee Teresa Aquino, abundantly shows that their occupancy of the premises in question is by tolerance of the appellees. Thus, the letter expressly states that the appellants are advised not to put up a shop, as the appellees had plan (sic) then of disposing the property (the land) in question for a reasonable profit after a period of three or four years, thereby placing on notice them (appellants) that their possession of the said property is temporary in nature and by mere generosity of the appellees, they being sisters. The letter likewise advised them to apply for a housing project so that by the time the property in question is sold, they have a place to transfer to. All these undisputed antecedents which can be considered as judicially admitted by the appellants being their own evidence marked as Exhibit "2", coupled with the fact that since the time they occupied the premises in 1983 up to the time when the complaint was filed, they were not asked to pay any monthly rental for the use, enjoyment and occupancy of the said property, ineluctably established the fact that their possession of the said property is by mere tolerance of the appellees.  x x x x Their contention that pursuant to Article 453 of the Civil Code, they should be considered builders in good faith even if they have acted in bad faith, since their act of introducing improvements to one-half of the third floor of the three storey building was with knowledge and without opposition on the part of the appellants, cannot be sustained, principally on the ground that as stated earlier, their Exhibit "2" is very limpid on the act that they were already forewarned as early as 1983 not to introduce any improvements thereon as the property is slated to be sold as it was only bought for investment purposes. The fact that the appellees did not thereafter remind them of this, is of no moment, as this letter was not likewise withdrawn by a subsequent one or modified by the appellees.  We find no reason to depart from the conclusions of the trial courts. Respondents were evidently prohibited by petitioners from building improvements on the land because the latter had every intention of selling it. That this sale did not materialize is irrelevant. What is crucial is that petitioners left respondents clear instructions not to build on the land. We also agree with the RTC's ruling that the lack of constant reminders from petitioners about the "prohibition" expressed in the 1983 letter was immaterial. The prohibition is considered extant and continuing since there is no evidence that this letter was ever withdrawn or modified. Moreover, no evidence was presented to show that petitioners were aware of what was happening: that respondents were constructing a portion of the building with their own funds and for their exclusive use and ownership. Neither were respondents able to present evidence that petitioners had agreed to share the expenses with them, or that the former had given consent to the latter's contribution, if any. In view of the foregoing, this Court's previous rulings on Article 448 cannot be applied to this case. Hence, we hold that petitioners, as the owners of the land, have the right to appropriate what has been built on the property, without any obligation to pay indemnity therefor; and that respondents have no right to a refund of any improvement built therein, pursuant to Articles 449 and 450 of the Civil Code: Art. 449. He who builds, plants or sows in bad faith on the land of another, loses what is built, planted or sown without right of indemnity. Art. 450. The owner of the land on which anything has been built, planted or sown in bad faith may demand the demolition of the work, or that the planting or sowing be removed, in order to replace things in their former condition at the expense of the person who built, planted or sowed; or he may compel the builder or planter to pay the price of the land, and the sower the proper rent. Art. 451. In the cases of the two preceding articles, the landowner is entitled to damages from the builder, planter or sower. Respondents may recover the necessary expenses incurred for the preservation of the property but without the right of retention. Pursuant to Article 452 of the Civil Code, a builder in bad faith is entitled to recoup the necessary expenses incurred for the preservation of the land. The CA correctly ruled that respondents in this case are similarly entitled to this reimbursement. However, being builders in bad faith, they do not have the right of retention over the premises.  While the evidence before this Court does not establish the amount of necessary expenses incurred by respondents during their stay in the property, we note that even petitioners do not deny that such expenses were incurred. In fact, in a letter dated 15 July 1983, petitioners acknowledged that respondents had spent personal money for the maintenance of the property. Petitioners even promised to reimburse them for those expenses. In this light, we find it proper to order the remand of this case to the court a quo for the purpose of determining the amount of necessary expenses to be reimbursed to respondents. With respect to the award of actual damages to petitioners, we find no reason to reverse or modify the ruling of the CA. This Court has consistently held that those who occupy the land of another at the latter's tolerance or permission, even without any contract between them, are necessarily bound by an implied promise that the occupants would vacate the property upon demand. Failure to comply with this demand renders the possession unlawful and actual damages may be awarded to the owner from the date of the demand to vacate until the actual surrender of the property. Accordingly, we affirm the CA's award of actual damages to petitioners in the amount of ₱7,000 per month from the date of demand (22 October 2003) until the subject properties are vacated. This amount represents a reasonable compensation for the use and occupation of respondents' property as determined by the RTC and the MeTC. As to petitioners' prayer for attorney's fees, we find no cogent basis for the award. WHEREFORE, the Petition is PARTLY GRANTED. The Court of Appeals Decision dated 25 April 2008 is REVERSED insofar as it ordered: (a) the reimbursement of the useful expenses incurred by respondents while in possession of the property; and  (b) the determination of the cost of these useful improvements by the court of origin. The rest of the Decision of the Court of Appeals is hereby AFFIRMED. Accordingly, this case is REMANDED to the court of origin for the determination of the necessary expenses of preservation of the land, if any, incurred by respondent spouses Eusebio and Josefina Aguilar while they were in possession of the property, which expenses shall be reimbursed to them by petitioner spouses Crispin and Teresa Aquino. On the other hand, respondents and all persons claiming rights under them are ordered, upon finality of this Decision without awaiting the resolution of the matter of necessary expenses by the trial court, to immediately VACATE the subject property and DELIVER its peaceful possession to petitioners. Respondents are likewise ordered to PAY petitioners ₱7,000 as monthly rental plus interest thereon at the rate of 6% per annum, to be computed from 22 October 2003 until the finality of this Decision. No pronouncement as to costs. SO ORDERED.