Manotok Realty, Inc. v. Court of Appeals
REITERATIONFacts
1. The Antecedents: The underlying dispute concerns a parcel of land registered to Manotok Realty, Inc. (petitioner). Respondent Felipe Carillo occupied a portion of this land, claiming to have acquired it from Delfin Dayrit, who in turn had purchased it on installment from the estate of Clara Tambunting. Manotok Realty demanded possession, but Carillo refused to vacate, leading to litigation. 2. Procedural History: The petitioner, Manotok Realty, Inc., filed a reivindicatory action against Felipe Carillo after its demands to vacate were unsuccessful. The trial court ruled in favor of Manotok Realty, ordering Carillo to surrender possession, pay monthly rentals, and cover attorney's fees. The Court of Appeals modified this decision, declaring Carillo a builder in good faith and entitling him to retain possession without rent until reimbursed for necessary and useful expenses. 3. The Petition: This petition for review seeks to reverse the Court of Appeals' decision. The petitioner argues that the appellate court erred in considering Carillo a possessor and builder in good faith. Petitioner contends that Carillo should have verified the registered ownership of the land, especially since it was already registered in Manotok Realty's name at the time of the assignment to Carillo, and that Carillo's predecessor, Dayrit, had defaulted on installment payments, causing the property to revert to the original owner.
Issue(s)
Whether respondent Felipe Carillo is a builder in good faith. Whether respondent is entitled to the right of retention and reimbursement for improvements made on the property.
Ruling
The Supreme Court set aside the decision of the Court of Appeals and affirmed in toto the decision of the Court of First Instance of Manila. Respondent Felipe Carillo is not a builder in good faith and is not entitled to the right of retention or reimbursement.
Ratio Decidendi
On the issue of whether respondent Felipe Carillo is a builder in good faith: The Court ruled that respondent is not a builder in good faith. A possessor in good faith is one unaware of any flaw in their title or mode of acquisition. The records showed that when Delfin Dayrit executed the deed of assignment in favor of respondent, the disputed lot was already registered and titled in the name of the petitioner. This registration served as constructive notice to the whole world, including the respondent. The Court emphasized that one who acquires real estate with knowledge of a defect or lack of title in his vendor, or knowledge of facts that should put a reasonable man on guard, cannot claim good faith. Furthermore, the respondent failed to exercise due diligence by inquiring about the certificate of title covering the lot, despite his transferor, Dayrit, not showing him any title. This failure to exercise reasonable precaution precludes him from claiming possession in good faith. The Court also noted that Dayrit himself was in default of installment payments since August 9, 1954, eight years before he conveyed the lot to respondent, causing the property to revert to the original owner. Therefore, Dayrit had no more right to convey when he assigned the lot to respondent. On the issue of whether respondent is entitled to the right of retention and reimbursement for improvements made on the property: Since respondent was not considered a builder in good faith, he is not entitled to the right of retention or reimbursement for any improvements made on the property. The Civil Code provisions on builders in good faith, which grant rights of retention and reimbursement, are predicated on the possessor's lack of knowledge of any defect in their title. As respondent had constructive notice of petitioner's registered ownership and failed to exercise due diligence, he cannot invoke these provisions. The Court reinstated the trial court's decision, which ordered respondent to vacate and surrender possession, and pay rentals, as no installments or rentals had been paid for the lot for over thirty years.
Main Doctrine
A vendee who acquires property from a vendor who is in default of installment payments, and who fails to exercise due diligence in verifying the vendor's title, cannot be considered a builder in good faith and is not entitled to the right of retention or reimbursement for improvements made on the property.