Delos Santos v. Abejon
REITERATIONFacts
The Antecedents: Respondents filed a Complaint for Cancellation of Title with collection of sum of money against petitioners. Respondents alleged that Erlinda and her deceased husband Pedro mortgaged their property to Teresita for ₱100,000.00. Erlinda later agreed to sell the property to Teresita for ₱150,000.00, executing a Deed of Sale and Release of Mortgage. TCT No. 131753 was cancelled and TCT No. 180286 was issued in Teresita's name. Respondents constructed a ₱2,000,000.00 building on the land. Petitioners claimed Pedro's signature on the Deed of Sale was forged as he died in 1989, prior to its execution in 1992. Respondents demanded payment of the sale consideration and construction cost, which petitioners refused. Procedural History: The RTC declared the Deed of Sale null and void, ordered the cancellation of TCT No. 180286 and reinstatement of TCT No. 131753. It also ordered petitioners to pay respondents ₱100,000.00 (loan) plus interest, ₱2,000,000.00 (construction cost), and ₱100,000.00 as attorney's fees. The CA affirmed with modifications, adjusting the interest computation date for the loan and imposing interest on the construction cost. The CA held petitioners liable for the loan, reasoning they inherited it from Pedro, and liable for construction costs due to their knowledge and occupation of the building. The Petition: Petitioners sought review of the CA decision, questioning their liability for the aggregate amount of ₱2,200,000.00.
Issue(s)
Whether the CA correctly held petitioners liable for the ₱100,000.00 loan obligation. Whether the CA correctly held petitioners liable for the ₱2,000,000.00 construction cost of the building, including considerations of the void Deed of Sale and the ₱50,000.00 additional consideration. Whether the CA correctly awarded attorney's fees and litigation expenses.
Ruling
The petition is partly meritorious. The Court modified the CA ruling, declaring the Deed of Sale and Release of Mortgage void, ordering the cancellation of TCT No. 180286 and reinstatement of TCT No. 131753 with the mortgage annotated. The ₱100,000.00 loan obligation was declared a liability of the conjugal partnership of Erlinda and Pedro Delos Santos. Erlinda was ordered to return ₱50,000.00 to respondents with legal interest. The case was remanded to the RTC for determination of indemnity for the building under Articles 448 and 453 of the Civil Code. The award of attorney's fees was deleted.
Ratio Decidendi
On the ₱100,000.00 loan obligation: The Court ruled that the loan was contracted by Erlinda and her deceased husband Pedro during their marriage and was governed by the system of conjugal partnership of gains. Therefore, the obligation is chargeable to their conjugal partnership. If the partnership's assets are insufficient, Erlinda and Pedro's estate shall be solidarily liable. The Court found that the CA erred in holding the other petitioners (daughters) directly liable for the loan, as Pedro's share was passed to his estate, not directly to his heirs. Respondents were also advised of their option to foreclose the mortgage on the subject land. On the ₱2,000,000.00 construction cost of the building and the void Deed of Sale: The Court applied the rules on accession, specifically Articles 448 and 453 of the Civil Code, as both the builder (respondents) and the landowner (petitioners) acted in bad faith. Teresita knew the Deed of Sale was void as Pedro died before its execution, yet respondents proceeded with construction. Petitioners, despite knowing the defect, acquiesced to the construction. Under Article 453, they are treated as if both acted in good faith. This entitles the landowner (petitioners) to either appropriate the building after reimbursing useful and necessary expenses (Articles 546 and 548) or sell the land to the builder. The case was remanded to the RTC to determine the necessary indemnities and apply the relevant provisions. Since the Deed of Sale was declared void due to forgery, the parties must return what they received. Petitioners are entitled to the return of the subject land, with TCT No. 180286 cancelled and TCT No. 131753 reinstated with the mortgage annotated. Respondents, as Teresita's successors-in-interest, are entitled to the refund of the ₱50,000.00 additional consideration paid by Teresita. This liability, however, falls solely on Erlinda, as she was the only petitioner involved in the sale. The amount shall bear legal interest of six percent (6%) per annum from the finality of the decision. On attorney's fees: The Court deleted the award of attorney's fees, citing the general rule that they cannot be recovered as part of damages and that the power to award them requires factual, legal, and equitable justification, which was found lacking in this case.
Main Doctrine
Where both the landowner and the builder acted in bad faith, they shall be treated as if both had acted in good faith, and the landowner is given the option to appropriate the improvements after reimbursement or sell the land to the builder.