CATALINA DE LEON AND ELEUTERIO LIMCACO, PETITIONERS, VS. PETRONILO CASTAÑEDA AND HONORABLE COURT OF APPEALS, RESPONDENTS.

This case concerns a piece of land which has been the subject of
numerous litigations.  Hopefully, this
decision will clear away all clouds over the
land and its improvements.

Before us is a petition to review a decision of the Court of
Appeals concerning the ownership of the land, which is denominated as Lot 11, Block K-19 of the Diliman Estate Subdivision and
formerly owned by the People’s Homesite and Housing Corporation (PHHC).

On July 11, 1949, the
spouses Perfecta Roque and Aurelio Bautista, who were awardees of the parcel of
land in question by the PHHC, sold their right to purchase said land to Rosario
de Leon for P2,000 of which P900 was given as initial payment and the balance
payable within sixty (60) days.

Upon failure of Rosario de Leon to pay the balance of the
purchase price, the spouses Bautista sold the same right to Petronilo Castañeda
on October 3, 1949.

It appears, however, that a deed of assignment of rights was
executed by Rosario de Leon, dated October 5, 1949, in favor of her sister-in-law
Catalina de Leon.  This deed of
assignment covers one-half portion of the land in question.

Four civil actions were
filed to litigate the ownership of this contested parcel of land, including the
present case.

Rosario de Leon filed Civil Case No. 9366 on October 6, 1949,
before the Court of First Instance of Manila against the spouses Bautista for
specific performance to compel the latter to accept the balance of the purchase
price.  The trial court decided the case
on December 22, 1950, declaring the contract between Rosario de Leon and the spouses Bautista rescinded and directed the latter to
return the P900 to Rosario de Leon.  The
decision was not appealed and, therefore, became final.

Petronilo Castañeda
instituted Civil Case No. Q-64 on October 17, 1949, before the Court of First Instance of Quezon City to
restrain Rosario de Leon from fencing the property, from making constructions thereon and to pay
damages.

In 1950, Catalina de Leon filed Civil Case No. Q-198 also before
the Court of First Instance of Quezon City, against Rosario de Leon, Petronilo
Castañeda, the spouses Bautista, and the PHHC to make effective her right to
purchase of one-half portion of the contested property.

Judgment was rendered in Civil Case No. Q-64 in favor of
Castañeda on February 6, 1952, directing Rosario de Leon to demolish the house
and other improvements built on the land. 
The trial court also awarded damages to Castañeda in the amount of
P2,000 representing the liquidated damages which Castañeda had paid to a contractor
named Chua Chuay Guat; monthly rentals of P180 from January 1950 to date of delivery; plus cost of the
suit.  A writ of execution directing the
defendant to demolish a house and other improvements was served upon Catalina
de Leon who claimed that she was the owner of the house and improvements on the
land and refused to vacate the same on the strength of the deed of assignment
in her favor.  The trial court ruled that
Catalina de Leon had no right over the property as her right was contingent
upon the contract between Rosario de Leon and the spouses Bautista which was
declared rescinded in Civil Case No. 9366. 
Catalina de Leon appealed the demolition order to the Court of
Appeals.  The demolition order was set
aside by the Court of Appeals and the case was ordered to be remanded to the
trial court “to determine solely the question of whether or not petitioner
Catalina de Leon is a successor-in-interest by title subsequent to the
commencement of the action in Civil Case No.
Q-64 as contemplated by Rule 39, Sec. 44(b).” Castañeda appealed to the
Supreme Court in L-7805.  The Supreme
Court, on December 24, 1957, at 102 Phil. 690, affirmed the setting aside of
the demolition order but reversed and set aside the portion remanding
the case to the trial court for further
proceedings to determine if Catalina de Leon may be considered a privy to
Rosario de Leon; instead, this Court “Ordered that the correlative rights
of Petronilo Castañeda and Catalina de
Leon to the land and improvements thereon be decided in a separate
action.” The dispositive portion of the decision is quoted hereunder:

“For the foregoing considerations, the decision of the Court
of Appeals is hereby affirmed insofar as it sets aside the order of demolition
issued by respondent judge, Hon. Hermogenes Caluag, on August 30, 1952, but
that portion thereof which directs the case to be remanded to the trial court
for determination if Catalina de Leon may be considered a privy to Rosario de
Leon, is here­by set aside; and it is hereby declared and ordered that the correlative
rights of Petronilo Castañeda and Catalina de Leon to the land and the
improvements thereon be decided in a sepa­rate action.  No costs in the appeal.” (Emphasis
supplied.)

In the meantime, Civil
Case No. Q-198 aforementioned, filed by
Catalina de Leon in 1950, was dismissed by the trial court on the ground of res
judicata by reason of the final decision in Civil Case No. 9366.  On appeal, the Supreme Court, in L-8965
promulgated on February 29, 1956, at 98 Phil. 589 ruled that Catalina de Leon
was not a “successor-in-interest by title subse­quent to the commencement
of an action”, mentioned in Section 44 (b) Rule 39, and remanded
the case to the trial court for further proceedings.

It appears that after Civil Case No. Q-198 (L-8965) was remanded
to the lower court in 1956, Catalina de Leon did not pursue her case and, on
September 30, 1960, the Court of First Instance of Rizal dismissed her
complaint for failure to prosecute and the order of dismissal became final.

Sometime in 1958, Castañeda obtained a certificate of title (TCT
No. 42103, Register of Deeds of Quezon City) covering the land in question
after making full payment of the price of the land to the PHHC and on the
strength of this certificate of title, Castañeda instituted on August 7, 1958,
an action before the Court of First Instance of Rizal, against Catalina de Leon
et al., Civil Case No. 3239, for “Reivindication de possession y cobro de
daños perjuicious.”

On September 12, 1960, the trial court declared Castañeda the
legitimate owner of the contested parcel of land and ordered the defendants to
vacate the land and to deliver the possession thereof to Castañeda.  In addition, the trial court sentenced them
to pay damages quoted hereunder:

“Asimismo, el Juzgado condena a diches demandados para que
paguen mancomunada y solidariamente al demandante las siguientes
cantidades:  (1) P2,000.00 que el
demandante, ha pagado al contratista Chua Guay Huat, como daños liquidades; (2)
P1,000.00 como honorarious de sus abogados en la Causa Civil No. Q-64; (3)
P2,000.00 causa; (4) P3,600.00 como alquileres que ha estado pagando el
demandante per espacio de 20 meses desde el mes de Enero de 1950 a razon de
P180.00 al mes; y (5) P50.00 al mes como alquiler justo y razonable del terreno
en cuestion desde el Marzo de 1952 en que el Sheriff de esta Ciudad no pudo
poner en possession del mismo al demandante por la oposicion de los demandados, hasta que se le reponga al demandante
en posesion de dicho terreno, mas las costas del juicio.”

On appeal, the Court of Appeals sustained the findings of facts
and conclusion of the trial court and affirmed the decision in toto.  The trial court ordered the execution of its
decision pending appeal.  This order of
execution pending appeal was sustained by the Court of Appeals and, eventually,
by the Supreme Court in L-18722 promulgated on September 14, 1967, at 21 SCRA
85.

Petitioner Catalina de Leon now assigns before this Court several
alleged errors of law supposedly committed by the Court of Appeals, which,
however, are not sufficient to overturn the decision appealed from.

The decision of the trial
court which was wholly affirmed by the Court of Appeals was based upon findings
of fact that Castañeda acquired the contested property two days earlier than the
execution of the deed of assignment in favor of Catalina de Leon; that Catalina
de Leon was not the true owner of the house and improvements on the land but
her sister-in-law Rosario de Leon; and that Catalina de Leon’s alleged good
faith was not at all justified by her conduct for she had failed to question
the approval by the PHHC of the transfer of rights to Castañeda nor did she pay
the PHHC anything as price of the land in question.

Petitioner Catalina de Leon maintains that the aforesaid findings
of the Court of Appeals and the trial court deviate from the alleged
“adjudicated facts and legal dispositions” made by the Supreme Court
in L-8965 and L-7805.  This is not
correct.  This Court made no findings of fact relative to the right of Catalina
de Leon over the questioned property. 
The only legal disposition made by the Court in the said two cases was
that the Deed of Assignment made in favor of Catalina de Leon did not make her
“a successor in interest by title subsequent to the commencement of an
action” mentioned in Section 44(b), Rule 39, of the Rules of Court, as to
whom a decision in said action would have the effect of res judicata.  The action referred to was Civil Case No.
9366 which was an action instituted by Catalina de Leon’s predecessor-in-interest,
Rosario de Leon.  However, the Court in
said two cases did not make any finding of fact relative to the validity of the
title of Catalina de Leon over the contested property.  On the contrary, the Court declared in L-7805
that the correlative rights of Catalina de Leon and Petronilo Castañeda over
the questioned property had to be determined independently of the action, Civil
Case No. Q-64, between Petronilo Castañeda and Rosario de Leon.  Catalina de Leon appeared in Civil Case No.
Q-64 only during the proceedings for execution. 
L-7805 was an appeal by Petronilo Castañeda where the Court observed:

“The problem that has arisen proceeds from the fact that
Perfecta Roque had sold the residential land to two vendees, first to Rosario
B. de Leon and later to Petronilo Castañeda. 
If justice is to be done to the rights of Rosario B. de Leon’s
vendee, Catalina de Leon, who had constructed two houses and a fence on
one-half of the resi­dential lot in question, complicated questions of fact and
good faith will have to be inves­tigated and decided and certainly this can not
be done in the proceedings for execution. 
The question can be decided
fairly and justly only in an ordinary suit between the parties, as the
correlative rights and obligations of owner and builders were never at issue in
civil case No. Q-64 because Catalina de Leon was not allowed to be a party to
the suit.” (Emphasis supplied.)

In the same way, L-8965
merely reversed the dismissal of Civil Case No. Q-198, which was based
on res judicata, again because of the decision in Civil Case No.
9366.  This Court remanded the case for further proceedings.  However, as above stated, Catalina de
Leon did not pursue her case.  This
prompted the observation made by Justice J.B.L. Reyes in L-18722, supra,
that “x x x petitioner’s own suit to confirm her pretended title, Civil
Case No. Q-198 of the Court of First Instance of Rizal, has been
unconditionally dimissed (after the remand order by us in 98 Phil. 589) for
lack of prosecution, a dismissal that under the Rules of Court ‘shall have the
effect of an adjudication on the merits, unless otherwise provided.’ Thus, her
lack of title becomes more evident and that she has spent all efforts to drag
out these litigations as far as possible.” This definitely disposes of the
question of ownership.

Petitioner also assigns
as error the finding of the Court of Appeals that she was not a possessor or
builder in good faith on the ground that the same is contradicted by the fact
that she had acquired her title through a deed of assignment executed by
Rosario de Leon.

Article 526 of the Civil
Code states the law on this point:

“Art. 526.  He is deemed
a possessor in good faith who is not aware that there exists in his title or
mode of acquisition any flaw which invalidates it.

“He is deemed a possessor in good faith who is a possessor in
any case contrary to the foregoing.

“Mistake upon a doubtful or difficult question of law may be
the basis of good faith.”

The trial court and the Court of Appeals ruled that Catalina’s
presumed good faith was not supported by her conduct.  She failed to seek the approval of the PHHC on the supposed transfer of rights to
her and she did not make any payments to the PHHC.  The claim of Catalina de Leon that she was
the owner of the house and improve­ments on the questioned land was, according
to the Court of Appeals, absolutely unfounded. 
The Court of Appeals upheld the finding of the trial court that the true
owner of the house and improvements was her sister-in-law, Rosario de Leon.

The conjunction of the abovementioned facts would support the
conclusion that she was not a possessor or builder in good faith.  She could not have been unaware of the flaw
in her title otherwise she would have vindicated her rights to the full extent
that the law would allow.  On the
contrary, she stopped her suit when the tide, so to speak, was in her
favor.  She was the prevailing party in
L-8965 and L-7805.

Another fact that would destroy her claim of good faith is that
the Deed of Assignment was dated October 5, 1949, or the day before Rosario
filed her suit against the spouses Bautista. 
Catalina could not have been unaware that there was a defect in her
title.

Finally, petitioner questions the award of damages, claim­ing
that they are the same damages awarded to Castañeda in Civil Case No. Q-64
against the defendant in that case, Rosario de Leon.

The award of damages appears to be justified.  Petitioner has not manifested whether or not
the award in Civil Case No. Q-64 against the defendant Rosario B. de Leon was
ever executed.  It appears that the
execution of the decision in Civil Case No. Q-64 was stayed because Catalina
appealed the demolition order to the Court of Appeals.  Then, the order of the Court of Appeals
remanding the case to the trial court for further proceedings was reversed and
set aside by the Supreme Court in L-7805. 
Petitioner does not assert that Castañeda was, in fact, able to collect
against Rosario B. de Leon.  Thus, while
there may be a duplication of award, there can be no unjust enrichment on the
part of Castañeda at the expense of Catalina de Leon because the previous award
in his favor was never executed.

The instant award of damages against Catalina de Leon is
justified by the finding both of the trial court and the Court of Appeals that
the deed of assignment in favor of Catalina de Leon was, in effect, a simulated
one.  Catalina de Leon was a possessor in
bad faith, whose insistence on her simulated title prevented Castañeda from
taking possession over the questioned property. 
Since the damages suffered by Castañeda are by reason of his inability
to take possession of the questioned property and enjoy his rights of
ownership, Catalina de Leon is, properly, the one liable for the damages.

WHEREFORE, the decision appealed from is hereby affirmed.

It is evident that petitioner, as stated by Justice J.B.L. Reyes,
“has spent all efforts to drag out these litigations as far as
possible.” Her actuations have to be rebuked and, accordingly, she shall
pay treble costs.

SO ORDERED.

Barredo, (Chairman), Antonio, Aquino, and Santos, JJ., concur.