SPOUSES RENATO R. CO AND VIVIAN CO REPRESENTED BY THEIR ATTORNEY-IN-FACT BELEN CO, PETITIONERS, VS. LIBERTY LOCSIN, RESPONDENT.

Spouses Co versus Locsin

The Case

This is a petition for review brought by the spouses Renato Co and Vivian Co, acting through their attorney-in-fact Belen Co, against Liberty Locsin. The spouses sued for unlawful detainer before the Municipal Trial Court of Tanza, Cavite, claiming that Locsin was their lessee in a commercial building erected on their land, that the lease had long expired, that she had fallen into rental arrears, and that she had subleased a portion of the premises without their written consent. Locsin answered that she was not a lessee at all but the owner of the building itself, having constructed it with her own funds under an agreement with the spouses. The case matters because it is the Supreme Court's clean statement of how far a court in a summary ejectment suit may go in resolving the question of ownership, and of the provisional character of that resolution.

Procedural History

The spouses filed their complaint for unlawful detainer with damages before the Municipal Trial Court of Tanza, Cavite. On June 9, 2003, the Municipal Trial Court rendered judgment for the spouses, enjoining Locsin from exercising proprietary acts over the commercial unit, ordering her to pay rental arrears of 47,000 pesos with legal interest, ordering her to vacate the premises, and awarding attorney's fees, appearance fees, and costs.

Locsin appealed to the Regional Trial Court of Trece Martirez City, Cavite, Branch 23. On February 6, 2004, the Regional Trial Court reversed the Municipal Trial Court, set aside its decision, and ordered the parties to adhere to the provisions of Article 448 of the New Civil Code, finding that Locsin had constructed the building in good faith. The spouses' motion for reconsideration was denied in an order dated August 30, 2004.

The spouses then filed a petition for review under Rule 42 of the 1997 Rules of Civil Procedure, seeking to annul and set aside the decision of the Regional Trial Court and its order denying reconsideration. The Supreme Court dismissed the petition for lack of merit and affirmed the Regional Trial Court.

Facts

The spouses claimed to be the registered owners of a commercial building situated along Soriano Highway in Tanza, Cavite, erected on a lot covered by a transfer certificate of title. According to them, Locsin was a lessee paying 15,000 pesos a month, the lease had expired in 1996, she owed 47,000 pesos in arrears exclusive of interest, she had subleased a portion without their written consent, and she ignored their demand letter sent through counsel on December 9, 2002.

Locsin's story was entirely different. She asserted that she owned the building, supported by a tax declaration and tax receipt in her name. She said that in November 2000 there was an old house on the property whose frontal portion had been cut off by road widening; that the spouses asked her to help them construct a two-storey building on their land, which she agreed to do; and that they agreed the spouses would reimburse her construction expenses when they could afford it, but in the meantime she would have the right to use, possess, and occupy the building. She claimed she was using the building in the concept of an owner, and that since the spouses never paid her, they had no right to eject her.

The Regional Trial Court examined the evidence and found that the receipts dated November 2000 showed the construction materials were used in building the structure, that the building permit was issued in Locsin's name, and that her receipts totaled 484,867 pesos, enough to construct a building. It also noted that the deed of absolute sale presented by the spouses conveyed a parcel of land together with a residential house already existing in 1994, whereas the building in controversy was constructed only in the year 2000. That contradiction defeated the spouses' claim that the building already existed when they bought the land.

Issues

• Whether or not the Regional Trial Court erred in disturbing the findings of fact of the Municipal Trial Court.
• Whether or not the Regional Trial Court erred in finding that it was the defendant who constructed the building on the land owned by the plaintiffs, when the building was allegedly already in existence at the time the defendant leased the premises.
• Whether or not the defendant was the one who built the building and whether or not she is a builder in good faith under Article 448 of the New Civil Code.
• Whether or not the question of ownership of the building is essential in this summary action of ejectment.

Applicable Provisions

Article 448 of the New Civil Code, which the Regional Trial Court applied and which the Supreme Court affirmed, provides:

The owner of the land on which anything has been built, sown or planted in good faith, shall have the right to appropriate as his own the works, sowing or planting, after payment of the indemnity provided for in Articles 546 and 548, or to oblige the one who built or planted to pay the price of the land, and the one who sowed, the proper rent. However, the builder or planter cannot be obliged to buy the land if its value is considerably more than that of the building or trees. In such case, he shall pay reasonable rent, if the owner of the land does not choose to appropriate the building or trees after proper indemnity. The parties shall agree upon the terms of the lease and in case of disagreement, the court shall fix the terms thereof.

This provision bears on the case because the Regional Trial Court found Locsin to be a builder in good faith, so that the spouses, as owners of the land, cannot simply appropriate the building for themselves without paying the indemnity the article requires.

Ruling

On the first issue, the Supreme Court held that the Regional Trial Court did not err in disturbing the findings of the Municipal Trial Court, because the petitioners failed to adduce evidence that would warrant reversal, and their own evidence contradicted their claim of ownership of the building.

On the second and third issues, the Court affirmed the finding that Locsin constructed the building with her own funds. The receipts dated November 2000, the building permit in her name, and the discrepancy between the 1994 deed of sale describing a residential house and the year 2000 construction all supported that conclusion. Being a builder in good faith, she is protected by Article 448, and the spouses cannot appropriate the building without indemnifying her.

On the fourth issue, the Court held that while an ejectment action involves only possession de facto, the resolution of ownership was properly undertaken because it was inextricably linked to possession. The Court stated the governing rule:

When the defendant raised the defense of ownership and the question of possession cannot be resolved without deciding the issue of ownership, the issue of ownership shall be resolved for the purposes only of determining the issue of possession, and such judgment shall not bar an action between the same parties respecting title to the real property.

The Court stressed, however, that this was only an initial determination of ownership, for the purpose of settling possession, and that the adjudication is merely provisional and would not bar a separate action respecting title to the building.

Doctrine

An ejectment suit decides only possession de facto. But when the defendant raises ownership and possession cannot be resolved without deciding it, the court may resolve ownership for the sole purpose of determining possession, and that judgment does not bar a later action on title. The reason is to prevent the defendant from trifling with the summary nature of ejectment by merely asserting ownership. A builder in good faith under Article 448 may not be deprived of the building by the landowner without payment of the indemnity provided in Articles 546 and 548, or the landowner may oblige the builder to pay the price of the land.

Disposition

The Supreme Court dismissed the petition for lack of merit and affirmed the decision of the Regional Trial Court of Trece Martirez City, Cavite.

Remember This

Memorize this line: in ejectment, ownership is decided only provisionally, for the purpose of possession, and never bars a separate action on title. Examiners use this case to test the limits of a municipal trial court's power over ownership in a summary ejectment suit and the rights of a builder in good faith under Article 448.