Metropolitan Waterworks and Sewerage System v. Court of Appeals
REITERATIONFacts
The Antecedents: The City of Dagupan (CITY) filed a complaint against the National Waterworks and Sewerage Authority (NAWASA), now Metropolitan Waterworks and Sewerage System (MWSS), for the recovery of ownership and possession of the Dagupan Waterworks System. NAWASA claimed ownership under R.A. 1383 and counterclaimed for reimbursement of P255,000.00 for necessary and useful improvements. The trial court ruled in favor of the CITY, finding NAWASA a possessor in bad faith and thus not entitled to reimbursement. Procedural History: The Court of Appeals affirmed the trial court's decision, holding that the useful expenses were made in bad faith as they were incurred after the complaint was filed and after numerous Supreme Court decisions declared the taking of patrimonial waterworks systems unconstitutional. The appellate court cited Article 546 of the New Civil Code, stating that a possessor in bad faith is not entitled to indemnity for useful improvements. The Petition: MWSS, as successor-in-interest of NAWASA, appealed to the Supreme Court, raising the sole issue of whether it had the right to remove the useful improvements introduced by NAWASA, despite NAWASA being declared a possessor in bad faith. MWSS argued that Articles 546, 547, and 549 of the Civil Code do not definitively settle this question and cited Mindanao Academy, Inc. v. Yap and Carbonell v. Court of Appeals.
Issue(s)
Whether the issue of removal of useful improvements, not raised in the lower courts, can be considered by the Supreme Court. Whether a possessor in bad faith has the right to remove useful improvements.
Ruling
The Supreme Court affirmed the decision of the Court of Appeals. It ruled that a possessor in bad faith is not entitled to remove useful improvements and has no right to indemnity for them.
Ratio Decidendi
On the issue of considering the removal of useful improvements: The Court acknowledged the CITY's procedural objection that the issue of removal was raised for the first time on appeal. While technically correct, the Court chose to overlook this procedural defect to rule on the main substantive issue. The Court clarified that the provision on amendment to conform to evidence (Section 5, Rule 10 of the Rules of Court) is not applicable here because the case was decided on a stipulation of facts, and no evidence was introduced on the issue of removability of improvements. Therefore, the pleadings could not be deemed amended to conform to evidence that was never presented. On whether a possessor in bad faith has the right to remove useful improvements: The Court definitively ruled in the negative. It cited Article 449 of the Civil Code, which states that one who builds, plants, or sows in bad faith on the land of another loses what is built, planted, or sown without right to indemnity. The Court further expounded on Articles 546 and 547 of the Civil Code, which explicitly grant rights of reimbursement and removal of useful improvements only to a possessor in good faith. Article 549 was also discussed, limiting the right of a possessor in bad faith to remove improvements only to those for pure luxury or mere pleasure, provided no damage is caused and the lawful possessor does not opt to retain them by paying their value. The Court found that NAWASA, as a possessor in bad faith, was not entitled to any of these rights concerning the useful improvements it introduced.
Main Doctrine
A possessor in bad faith is not entitled to indemnity for useful improvements and has no right to remove them, as such improvements are lost to the owner without right to reimbursement.