Santos v. Intermediate Appellate Court
REITERATIONFacts
The Antecedents: The late spouses Antonio San Jose and Valentina Barron, childless, took custody of Maximino de Leon. Antonio San Jose died on February 27, 1955, leaving a will that bequeathed a residential lot with a house to Maximino de Leon. In March 1955, Valentina Barron, at her own expense, demolished the old house and built a new one on the same lot, with Maximino de Leon's consent and assistance. Maximino de Leon and Valentina Barron executed a Project of Partition dated December 15, 1955, assigning the residential lot to Maximino de Leon, which was approved by the court on July 12, 1956. When Maximino de Leon returned in 1959, he found Eugenio Cruz and Maria Reyes occupying the house with Valentina Barron. Maximino de Leon filed an ejectment case in 1959, claiming ownership of the house, but it was dismissed for lack of jurisdiction. Valentina Barron claimed ownership of the house, asserting she built it at her own expense and it was covered by a tax declaration in her name. She also raised the defense of being a builder in good faith under Article 448 of the Civil Code. Maximino de Leon filed another case for recovery of possession of the lot and house in 1962. Valentina Barron died in 1963 and was substituted by Eugenio Cruz and Maria Reyes. On April 2, 1964, Maximino de Leon sold the lot and house to Vicente Santos (petitioner) for P15,700.00 without notice to the trial court or private respondents. The sale was registered on April 6, 1964. Petitioner demanded that respondents vacate the premises. Procedural History: The Municipal Court dismissed the ejectment case for lack of jurisdiction. The case was appealed to the Court of First Instance (CFI). Maximino de Leon filed another case for recovery of possession, which was consolidated. Valentina Barron died and was substituted. Maximino de Leon sold the property to petitioner while cases were pending. Petitioner filed a complaint-in-intervention. A compromise agreement was reached between Maximino de Leon and private respondents regarding the ownership of the house and the sale to petitioner, which was approved by the trial court as its judgment. The trial court ruled in favor of petitioner, declaring him lawful owner and ordering respondents to vacate and pay rentals. On appeal, the Intermediate Appellate Court (IAC) reversed the trial court's decision, rescinding the deed of sale between Maximino de Leon and petitioner and ordering Maximino de Leon to execute a deed of sale in favor of the private respondents for the price of the land after deducting the value of the house. Petitioner's motion for reconsideration was denied. The Petition: Petitioner seeks review of the IAC's decision and resolution. The core issue is whether Valentina Barron was a builder in good faith and thus entitled to the rights under Article 448 of the Civil Code, and whether the sale to petitioner was valid.
Issue(s)
Whether Valentina Barron was a builder in good faith. Whether the sale of the property by Maximino de Leon to Vicente Santos is valid, considering the pendency of litigation and the rights of the builder in good faith, and whether Maximino de Leon acted in bad faith. Whether the Intermediate Appellate Court erred in rescinding the deed of sale and ordering a reconveyance to the private respondents, and the proper application of Article 448 regarding the rights of a builder in good faith.
Ruling
The petition is denied, and the assailed decision of the Intermediate Appellate Court is affirmed. The sale of the subject land to petitioner is rescinded and declared null and void. Maximino de Leon is ordered to execute a deed of sale conveying the land in question to the defendants-appellants (private respondents) for the sum of P11,700.00.
Ratio Decidendi
On the issue of Valentina Barron being a builder in good faith: The Court affirmed the presumption of good faith under Article 527 of the Civil Code. There was no allegation or proof of bad faith on the part of Valentina Barron. She constructed the house in March 1955, after her husband's death on February 27, 1955, and before the approval of the project of partition. At the time of construction, she believed the land was still conjugal property. The Court noted that Maximino de Leon, who consented to and helped in the construction, also shares responsibility for any error in identifying the land. Citing Azingo v. Arena, the Court stated that improvements made with permission are done in good faith and require due consideration from the owner of the land. On the validity of the sale to petitioner and the rescission: The Court found bad faith in Maximino de Leon's actions, as evidenced by his admission in the compromise agreement that he sold the land to petitioner with knowledge of Valentina Barron's rights and the pendency of cases, without notifying the private respondents. The Court also found petitioner to be a buyer in bad faith, based on testimony that he was informed of the pending cases involving both the house and the land. Therefore, the sale to petitioner was rescissible under Article 1381, paragraph 4 of the Civil Code, as the property was under litigation. The IAC correctly rescinded the sale and ordered the reconveyance to the private respondents, who, as successors-in-interest of Valentina Barron, held the rights of a builder in good faith. On the rights of the builder in good faith and reconveyance: The Court upheld the IAC's ruling that Maximino de Leon, as the owner of the land, should have offered to sell the land to Valentina Barron (and subsequently to her successors-in-interest) as provided by Article 448 of the Civil Code, which grants the landowner the option to buy the improvements or sell the land. The IAC's order for Maximino de Leon to execute a deed of sale in favor of the private respondents for the price of the land, after deducting the value of the house, was deemed a proper application of the law, considering the circumstances and the rights of the builder in good faith.
Main Doctrine
A builder in good faith is entitled to the rights of pre-emption and retention under Article 448 of the Civil Code. A sale of property under litigation is rescissible under Article 1381 of the Civil Code.