LOURDESITA T. ESMERO, PLAINTIFF-APPELLEE, VS.SPOUSES MARIO AND MARIETTA D. LUMANAO, DEFENDANTS-APPELLANTS. SPOUSES BERNABE AND EUFEMIA LUMANAO, INTERVENORS-APPELLANTS.

Esmero versus Lumanao

The Case

This is a case about a small parcel of land in Tandag, Surigao del Sur, and about who truly owns it. Lourdesita Esmero sues her neighbor's son, Mario Lumanao, for recovery of possession, demolition of a building, damages, and attorney's fees over a one hundred twenty eight square meter lot registered in her name. Mario's parents, Bernabe and Eufemia Lumanao, intervene, claiming that most of that lot belongs to them by purchase from Lourdesita's siblings. The case matters for two reasons. First, it restates the rule that a co-owner's possession is never adverse to his co-owners absent clear repudiation. Second, and more importantly for the bar, it applies the law on builders in good faith even where the builder is not the landowner but merely occupied the land with the consent of someone he mistakenly believed to be the owner.

Procedural History

Lourdesita filed the complaint for recovery of possession, demolition of building, damages, and attorney's fees before the Regional Trial Court of Tandag, Surigao del Sur. The Lumanaos moved to intervene, and the trial court admitted their complaint in intervention. After trial, the Regional Trial Court ruled in favor of Lourdesita. It declared her the owner of the lot, entitled to recover possession, and gave her the option of refunding the expenses the Lumanaos incurred in constructing or remodelling the house, with a right of retention until reimbursement. The Lumanaos appealed, assigning as errors the declaration of Lourdesita's ownership, the grant of the option to refund, the award of costs, the failure to dismiss on grounds of prescription, estoppel, and laches, and the failure to recognize the intervenors as true owners. The case reached the Supreme Court on appeal from the trial court's decision.

Facts

The subject property is a one hundred twenty eight square meter lot, originally owned by Lourdesita's mother, Concepcion Serina Trinidad, who sold it to Lourdesita. Adjoining it is a one hundred seventy nine square meter lot owned by Bernabe Lumanao. For cadastral titling, the two lots were consolidated as Lot 3329, and a decree of registration was issued in favor of both Bernabe and Lourdesita. An original certificate of title was issued in their names in 1981.

In 1991, Lourdesita had the land subdivided. The one hundred twenty eight square meter portion became Lot 3329-B, registered in her name, while the remaining portion became Lot 3329-A, registered in Bernabe's name. Bernabe executed an affidavit of confirmation on March 22, 1993, confirming that Lourdesita owned the one hundred twenty eight square meter portion. Meanwhile, Mario, Bernabe's son, had been occupying Lot 3329-B with the consent of his parents.

On January 24, 1994, Lourdesita demanded that Mario vacate the lot. He did not. She repeated the demand on November 23, 1996, and brought the matter to the Lupon ng mga Tagapamayapa in January 1997, but no settlement was reached. She filed this case on September 12, 2003. Mario answered that Lourdesita's acquisition was fraudulent and that his father had bought the shares of Lourdesita's siblings, making Bernabe the owner of the bigger portion. The intervenors repeated these claims and prayed for reconveyance of the one hundred eighteen square meter portion.

Issues

• Whether or not Lourdesita is the true owner of Lot 3329-B and entitled to recover possession thereof from the Lumanaos.
• Whether or not Mario is a builder in good faith entitled to the protection of Article 448 of the Civil Code.
• Whether or not Lourdesita's action is barred by estoppel, prescription, and laches.
• Whether or not the trial court erred in ordering the Lumanaos to pay the costs of suit.

Applicable Provisions

Article 527 of the Civil Code provides:

Article 527. Good faith is always presumed, and upon him who alleges bad faith on the part of a possessor rests the burden of proof.

This provision places the burden on Lourdesita to prove that Mario knew of her claim, and since she failed to do so, Mario is presumed a possessor in good faith.

Article 448 of the Civil Code provides:

Article 448. 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 governs the rights and obligations of Lourdesita as landowner and Mario as builder in good faith, and it is the basis for remanding the case to fix the indemnity or the rent.

Article 546 of the Civil Code provides:

Article 546. Necessary expenses shall be refunded to every possessor; but only the possessor in good faith may retain the thing until he has been reimbursed therefor. Useful expenses shall be refunded only to the possessor in good faith with the same right of retention, the person who has defeated him in the possession having the option of refunding the amount of the expenses or of paying the increase in value which the thing may have acquired by reason thereof.

This provision defines the indemnity Lourdesita must pay and the right of retention Mario may exercise until reimbursement.

Article 548 of the Civil Code provides:

Article 548. Expenses for pure luxury or mere pleasure shall not be refunded to the possessor in good faith; but he may remove the ornaments with which he has embellished the principal thing if it suffers no injury thereby, and if his successor in the possession does not prefer to refund the amount expended.

This provision completes the framework of indemnity by excluding expenses for pure luxury from reimbursement.

Ruling

On the first issue, the Court held that Lourdesita is the true owner of Lot 3329-B. The cadastral court granted the decree of registration to both Bernabe and Lourdesita, making them co-owners, and Bernabe himself affirmed Lourdesita's ownership of the one hundred twenty eight square meter portion when he executed the affidavit of confirmation. The Lumanaos' claim that Bernabe bought the shares of Lourdesita's siblings rested on Mario's testimony alone, with no other evidence. The Court applied the familiar rule that he who alleges must prove his allegation. As for the claim that Lourdesita fraudulently secured her title, the Court held that bare and unsupported allegations cannot overthrow the presumption of validity of a notarized affidavit of confirmation, which enjoys the presumption of regularity and can be overturned only by clear and convincing evidence.

On the third issue, the Court held that estoppel, prescription, and laches do not bar the action. Bernabe's possession since 1962 did not ripen into sole ownership through prescription, because the property was held in co-ownership, and the state of co-ownership was recognized. The Court quoted its own ruling that possession of a co-owner is like that of a trustee and shall not be regarded as adverse to the other co-owners but in fact as beneficial to all of them. For a co-owner's possession to be adverse, there must be unequivocal acts of repudiation amounting to an ouster, made known to the other co-owners, and proved by clear and convincing evidence. The Lumanaos failed to prove any such repudiation; on the contrary, Bernabe reaffirmed the co-ownership when he executed the affidavit of confirmation in 1993.

On the second issue, the Court held that Mario is a builder in good faith. Article 527 presumes good faith, and Lourdesita presented no evidence that Mario knew of her claim before she demanded that he vacate in 1994. The Court acknowledged that Article 448 generally covers builders who believe themselves to be owners, but noted that the Supreme Court has found builders in good faith even where they relied on the consent of another whom they mistakenly believed to be the owner. The Court quoted its ruling in Briones versus Macabagdal that the choice belongs to the owner of the land, a rule that accords with the principle of accession, and that the grant to the landowner is preclusive: he must choose one option and cannot compel the builder to remove the building without first exercising either option. Thus, Lourdesita may appropriate the building after paying the indemnity, or oblige Mario to pay the price of the land, unless its value is considerably more than the improvements, in which case he shall pay reasonable rent.

On the fourth issue, the Court found no basis for the award of costs and ordered that no pronouncement be made as to costs.

Doctrine

A co-owner's possession is like that of a trustee; it is not adverse to the other co-owners but beneficial to all of them. To make it adverse, there must be unequivocal acts of repudiation amounting to an ouster, made known to the other co-owners, and proved by clear and convincing evidence. He who alleges must prove his allegation, and a notarized document enjoys the presumption of regularity that can be overturned only by clear and convincing evidence.

Good faith is always presumed under Article 527, and the burden of proving bad faith rests on the one who alleges it. A builder in good faith under Article 448 need not believe himself to be the owner; he may be one who relied on the consent of another whom he mistakenly believed to be the owner. The landowner has a preclusive choice: to appropriate the building after paying the indemnity under Articles 546 and 548, or to oblige the builder to pay the price of the land, unless its value is considerably more than the improvements, in which case the builder pays reasonable rent.

Disposition

The Supreme Court affirmed the trial court's decision with modification, remanding the case to the Regional Trial Court of Tandag City for further proceedings to determine the facts essential to the proper application of Articles 448 and 546 of the Civil Code, with no pronouncement as to costs.

Remember This

Memorize this line: a co-owner's possession is like that of a trustee, and it becomes adverse only upon clear and convincing proof of unequivocal acts of repudiation amounting to an ouster. Examiners use this case to test the good faith of a builder who relies on another's consent under Article 448, and the preclusive choice of the landowner between appropriating the improvement and selling the land.