VICENTE M. COLEONGCO, PETITIONER, VS. PEDRO F. REGALADO AND LEONOR MONTILLA, RESPONDENTS.

The Court of Appeals (5th Division) rendered the following
decision, the facts of which cannot be reviewed by this court:

“DECISION

“FELIX, J. :

“Antecedents.—Prior to September of 1944, Pedro F. “Regalado
was the owner of lot No. 1205-A of plan Psd. 12393, G.L.R.O. cadastral record
No. 55, situated at barrio Mandalagan, municipality of Bacolod, Province of
Negros Occidental, of which lot No. 157 of the subdivision plan Psd. 12395 was a
portion. In this, lot there was erected a building which in September of 1944,
was being occupied by the forces of the Japanese Army. In that month of
September Pedro F. Regalado sold lot No. 157 to Vicente M. Coleongco who thus
became the owner of the lot, covered by transfer certificate of title No. 663 of
the Land Records of Negros Occidental. The total area of the lot was 1,000
square meters, and the land occupied by the house was 245 square meters. Until
the year of 1947, the assessed value of the whole lot and the house was P1,156
and P4,500, respectively.

“It appears from the records that Vicente M. Coleongco
contended that the house erected on lot 157 was included in the sale to him of
this property, and when the City of Bacolod was liberated by the American Forces
that succeeded the Japanese and occupied said house for about two months,
Coleongco received from the local office of the AFWESPAC as rentals for such
occupation the sum of $93.75 or P137.50. It so happened, however, that after the
American Forces vacated the house, Pedro F. Regalado occupied the same, so
Vicente M. Coleongco instituted Civil Case No. 185 of the Court of First
Instance of Negros Occidental, which on March 21, 1947, decided that the
improvement of lot No. 157, consisting of a residential house, was the property
of the defendant therein Pedro F. Regalado. From that decision Coleongco
appealed to the Court of Appeals, but on August 28, 1947, this tribunal declared
the appeal abandoned.

“The case.—One month before this outcome in the Court of
Appeals of said case No. 185, or on July 21, 1947, Vicente M. Goleongco filed
the complaint that gave rise to the present action. On September 20, 1947, Pedro
F. Regalado, in consideration of the sum of P3,500, deeded and sold said house
to Leonor Montilla Vda. de Pena, who was duly apprised of the present case that
was pending against the vendor (Annex A). This transaction was supplemented by
contract Annex B, dated October 3, 1947, wherein the vendee Leonor Montilla
expressly admitted that she had knowledge of the existence of this civil case
(docket No. 718 of the Court of First Instance of Negros Occidental) concerning
the house object of the sale, assumed whatever rights, and obligations might
arise with respect to such civil case, and freed and liberated the vendor
Regalado from the result of the case. Because of these transactions between
Regalado and Mrs. Montilla, on or about October 22, 1947, the plaintiff amended
his complaint including Leonor Montilla as party defendant. In the amended
complaint it is prayed that after due hearing the defendants be condemned:

“1. To pay unto the plaintiff the monthly rental of sixty pesos
(P60) for his premises during the period occupied by said defendants;

“2. To order the defendants to remove or clear the house from
the plaintiff’s premises;

“3. To pay the costs of the suit; and

“4. To grant such relief or other remedies which the court may
consider just and equitable.

“On November 3, 1947, Atty. Vivencio T. Ibrado, signing over
the title of ‘Attorney for the Defendant‘, filed an answer to the amended
complaint with counterclaim; praying the court that:

“1. The complaint of the plaintiff be dismissed, with costs
against the plaintiff;

“2. That the Honorable Court fix the rental for the occupation
of the 245 square meters of the lot in question and that said rental be made
effective only from August 28, 1947;

“3. That the plaintiff be ordered to pay to the defendant the
sum of ninety-three dollars and seventy-five cents ($93.75);

“4. That the Honorable Court fix the value of the lot in
question and order the plaintiff to sell the lot to the defendant;

“5. To grant such other remedies as this Honorable Court may
deem just and equitable in the premises;

“Defendant Leonor Montilla did not file a separate answer to
the amended complaint, and on motion of the plaintiff the court, by order of
February 11, 1948, declared Leonor Montilla in default over the objection of
both defendants who claimed that the answer to the amended complaint filed by
Attorney Ibrado on November 3, 1947, used the word ‘defendants’ in various parts
of the answer, and that it was intended to be the answer for both.

“After proper proceedings and hearing, on January 3, 1949, the
court rendered judgment, the dispositive part of which, translated into English,
is as follows:

“ ‘In view of the foregoing, the court renders judgment in this
case, sentencing the defendants to pay the plaintiff the monthly sum of P14.06
from September, 1945, as rents, with legal interest thereon from the date of the
filing of the complaint in this case, and providing that the sum of $93.75 or
P187.50, its equivalent in Philippine currency, be deducted from the total sum
of said rents.

” ‘Defendants are ordered to vacate the building from the
portion of the lot on which it is erected within the period of two months from
the date this decision becomes final, and to that end they are ordered to remove
the building from the said portion of the lot within the aforementioned
period.

” ‘The costs are taxed against the defendants.’

“From this decision both defendants appealed, and in this
instance their counsel maintains that the lower court erred:

“1. In declaring the appellant Leonor Montiila in default;

“2. In sentencing the defendants to pay the plaintiff
the,monthly rental of P14.06 for the portion of lot No. 157 of subdivision plan
Psd-12395 from the month of September, 1945, with legal interest from the date
of the presentation of the complaint;

“3. In ordering the appellants to remove their house from the
portion of the lot occupied by the same within the period of two months from the
date its decision becomes final; and

“4. In not absolving the defendants from the complaint and in
sentencing them to pay the costs of this suit.

“Discussion of the controversy.—Before the presentation of
evidence at the hearing, the parties entered into the following stipulation of
facts, to wit:

” ‘1. That the parties are all of legal age and residents of the
City of Bacolod, Philippines;

” ‘2. That since the month of September, 1944, the plaintiff
became the registered owner of lot No. 157 of the subdivision plan Psd-12395,
which is a portion of lot No. 1205-A of subdivision plan Psd-12393, G. L. R. O.
cadastral record No. 55, situated in the City of Bacolod and described in
transfer certificate of title No. 663 (P.R.);

” ‘3. That by decision rendered in civil case No. 185 by this
same court and which is now final, defendant Pedro F. Eegalado was declared the
owner of the building of strong materials erected on said lot;

” ‘4. That actual assessed value of said lot is P5,625;

” ‘5. That said building is also assessed at P4,500;

” ‘6. That on October 30, 1946, the lot in question was assessed
at P1,312.50;

” ‘7. That said lot has an area of 1,000 square meters;

” ‘8. That the portion of the same occupied by the building
existing thereon is of an area of 245 square meters;

” ‘9. That in the month of September of 1947, defendant Pedro F.
Regalado sold said building to his co-defendant Leonor Montilla for the sum of
P3,500, of which amount the vendee paid the vendor, at the time of the execution
of the deed of sale, the sum of P2,000, binding herself to pay the balance of
Pl,500 on or before October 31, 1947. Defendants Pedro F. Regalado and Leonor
Montilla have executed a contract supplementary to the previous deed of sale, by
virtue of which said Leonor Montilla acknowledged the existence of the present
ease and assumed the obligation of paying whatever rents and of complying with
whatever obligations the court would impose on the defendant Pedro F.
Regalado.’

“Aside from this stipulation and the facts appearing in the
preceding narration of the antecedents and of the statement of the case,
plaintiff-appellee declared that he desired to take possession of the portion of
the lot occupied by the questioned building because he intended to construct his
own house, as he was then paying rents for the lease of his residence at a rate
higher than the amount he is entitled to receive as rents from the portion of
the land occupied by the building of the defendants.

“A perusal of the record discloses that the present action for
ejectment was instituted on July 21, 1947, before plaintiff’s appeal in Case No.
185 was finally declared abandoned in the Court of Appeals, and the fact that in
said case Coleongco unsuccessfully claimed to be the owner of the house in
litigation does not preclude his right to depart from his former contention, and
to institute these ejectment proceedings to compel the defendants to vacate his
lot and to remove therefrom the building which at first he maintained to be his,
and to further demand payment of the corresponding rentals for the occupancy of
the lot by said building from September, 1944, when he bought the property, up
to the time said building is actually removed, except, of course, for the period
that be might have occupied or used that building. But the record is silent
about such use and all indications are that from September of 1944, the house
was first occupied by the Japanese, then by the American Forces, after
liberation, and right afterwards in September of 1945 by defendant Regalado
himself and by his successors in interest. The lower court, however, sentenced
the defendants to pay rents from September, 1945, only, and as plaintiff has not
appealed from that ruling, We can only consider the adequacy of the amount fixed
by the court as rentals from September, 1945.

“With regard to defendant Leonor Montilla’s alleged default,
and despite the considerations made by the lower court in its order of February
11, 1948, we are of the opinion that the answer with the counterclaim filed by
Attorney Ibrado on November 3, 1947, should have been considered as submitted
for both defendants: firstly, because the attorney that filed that answer
specifically so stated; and, secondly, because the grammatical errors in the use
of the verbs in. connection with the word ‘defendants’, as for example in the
expression of ‘defendants alleges’, should not be charged against any of them
who did not prepare that pleading and, under the circumstances, should not be
deprived of any right on account of the careless preparation thereof.
Notwithstanding this opinion, we hold that the ruling of the lower court on this
point is of no sequence, because both defendants had common interests and the
same defenses, and the rights of appellant Leonor Montilla have been properly
attended to by her co-appellant Pedro F. Regalado.

“The action which originally was instituted as an ejectment
case for the main purpose of causing the removal of defendants’ building from
plaintiff’s lot—and was filed directly in the Court of First Instance of
Occidental Negros because the right of action had accrued since September of
1944—was enlarged by defendants counterclaim to include plaintiff’s right of
accession prescribed in article 361 of the old Civil Code. In passing upon the
merits of the controversy On this question at issue, we may state that it is not
disputed that the building in litigation was formerly the property of Pedro F.
Regalado and presently of Leonor Montilla, that this building was constructed in
good faith, and, consequently, that the enjoyment and possession thereof must be
considered to have been always in good faith. Our Civil Code provides:

” ‘ART. 358. What is built, planted or sown on another’s land
and any improvements or repair made on it, belongs to the owner of the land,
subject to the provisions of the following articles.

” ‘ART. 361. The owner of land on which anything has been
built, sown or planted, in good faith, shall be entitled to appropriate the
thing so built, sown, or planted, upon paying the compensation mentioned in
acticles 453 and 456, or to compel the person who has built or planted to pay
him the value of the land, and the person who sowed thereon to pay the proper
rent therefor.

” ‘ART. 453. Necessary expenditures shall be refunded to every
possessor; but only the possessor in good faith may retain the thing until they
are repaid to him.

“Useful expenditures shall be paid to the possessor in good
faith with the same right of retention, the person who has defeated him in his
possession having the option of refunding the amount of such expenditures or
paying him the increase in value which the thing has acquired by reason thereof.

” ‘ART. 454. Expenditures purely for ostentation or mere
pleasure shall not be repaid the possessor in good faith; but he may remove the
ornaments with which he has embellished the principal thing if it does not
suffer injury thereby and if the successor in the possession does no prefer to
refund the amount expended.

“In view of these legal provisions, we have to declare that the
right of the owner of a lot to have the same vacated or cleared from any
construction or improvement belonging to another which built it in good faith,
is to be subordinated to and without prejudice of whatever rights the owner and
builder in good faith of the improvement may have. We, therefore, cannot now act
favorably on plaintiff’s complaint for ejectment disregarding defendants’ rights
either to pay for the acquisition of lot No. 157 or of being paid the value of
the building erected thereon, at the option of the plaintiff.

“As regards the amount of monthly rents that appellants were
condemned to pay the plaintiff, the following considerations must be taken into
account, to wit: (a) that although the portion of lot 157 actually occupied by
the building is of an area of 245 square meters, for the purpose of fixing the
rent in this case the assessed value of the whole lot should be had in mind, as
there is no evidence that the occupied portion of said lot had been devoted to
any use other than as site of the house in question; (b) that the amount of the
rent that defendants should have been sentenced to pay for the period of from
September, 1945, to the end of 1946 should have been fixed in accordance with
its former assessed value of P1,312,50; (c) that from January of 1947, the
assessed value of P5,625 should be the one determining the proper amount of the
rents; (d) that section 3 of Commonwealth Act No. 689 promulgated October 15,
1945, prescribes that ‘in the case of the lease for the occupation of a lot, the
rents shall be presumed unjust and unreasonable if the amount thereof per annum
likewise exceeds twenty per centum of the annual assessment value of said lot’;
(e) that although Executive Order No. 62, issued on June 21, 1947, reduced the
annual rent demandable to an amount not exceeding twelve per centum of the
assessed value, said Executive Order was declared null and void for having been
issued without authority of law (Araneta vs. Dinglasan,^* 45 Off. Gaz., No. 10,
p. 4411); (f) that on the strength of the provisions of law just quoted, the
amount of the rent that ought to have been fixed as monthly rent in this case is
P21.875 from September, 1944, up to December, 1946, and P93.75 from January of
1947, up to the time of the actual removal of the building from the lot, or to
the time when the parties would come to an agreement as per article 361 of the
old Civil Code; (g) that the aggregate sum of such rents being greater than the
amount fixed by the lower court, and even greater than the amount that plaintiff
prayed for in the complaint, and as plaintiff has not appealed from the amount
fixed in this decision of the lower court, we are not in a position to increase
or modify the amount of the rents the defendants have been sentenced to pay to
the plaintiff.

“Wherefore, the decision appealed from is hereby affirmed in so
far as it condemns the defendants to pay to the plaintiff, as monthly rents the
sum of P14.06 from September, 1945, with legal interest thereon from the date of
the filing of the complaint (July 21, 1947), from the total of which the sum of
P187.50 should be deducted. The decision is reversed as to the rest and this
case is returned to the lower court, with instructions to give the plaintiff an
opportunity to exercise his right of option granted to him by article 361 of the
old Civil Code, without pronouncement as to cost. It is so ordered.

“ALFONSO FELIX
Associate Justice

“We concur:

“M. L. DE LA ROSA                      EMILIO PEÑA
Associate Justice”                      Associate Justice”

Coleongco contended that in September, 1944, he bought not only
the lot above-mentioned but also the house erected thereon. He instituted an
action in civil case No. 185 of the Court of First Instance of Occidental
Negros, in order to be declared the owner of the house. However, the Court of
First Instance, on March 21, 1947, decided that said house was the property of
the defendant Pedro F. Regalado, not sold to Coleongco. Coleongco appealed to
the Court of Appeals but later on said Court declared the appeal abandoned and
the decision of the Court of First Instance became final. This decision is to
the effect that Regalado, being the owner of both the lot and the house, sold
only the lot to Coleongco, retaining ownership of the house. Consequently,
Regalado or his successor Leonor Montilla should remove said house from the lot
without any compensation from Coleongco.

Article 361 of the old Civil Code is not applicable in this
case, for Regalado constructed the house on his own land before he sold said
land to Coleongco. Article 361 applies only in cases where a person constructs a
building on the land of another in good or in bad faith, as the case may be. It
does not apply to a case where a person constructs a building on his own land,
for then there can be no question as to good or bad faith on the part of the
builder.

In view of the foregoing, the decision of the Court of Appeals
is modified by ordering Regalado and his successor Leonor Montilla to remove the
above-mentioned house from the lot of Coleongco, without any obligation on the
part of the latter to pay any compensation to Regalado or his successor
Montilla. In all other respects, the decision of the Court of Appeals is
affirmed with costs against respondents Regalado and Montilla. So ordered.

Paras, C. J., Pablo, Bengzon, Padilla, Bautista Angelo, and
Labrador, JJ., concur.

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* 84 Phil., 368.