AGUEDA DE VERA, MARIO DE LA CRUZ, EVANGELINE DELA CRUZ, AND EDRONEL DE LA CRUZ, PETITIONERS, VS. HON. COURT OF APPEALS, AND RICARDO RAMOS, RESPONDENTS.

Agueda de Vera versus Court of Appeals

The Case

This is a petition for review on certiorari brought by Agueda de Vera and the other members of the de la Cruz family against the Court of Appeals and Ricardo Ramos. It is, at bottom, an action for recovery of possession with damages over a small strip of land in Isabela. Ricardo Ramos claims the land by homestead patent and torrens title; the de Vera family claims it by long possession and a pending public land application. The case matters because it gathers in one decision three doctrines every examinee must know: when laches will not defeat a registered owner, how good faith and bad faith possession are distinguished under Article 526 of the Civil Code, and the three alternative rights of a landowner against a builder in bad faith under Articles 449, 450 and 451.

Procedural History

Ricardo Ramos filed a complaint for recovery of property with damages before the Regional Trial Court of Cauayan, Isabela, and later filed an amended complaint. During pre-trial, the parties agreed to a relocation survey, and the trial court appointed the Chief of the Survey Party of the Bureau of Lands in Cauayan as commissioner. The commissioner reported that the disputed area consisted of Portion A, Portion B and Portion C, and that Portion A was separate from the titled lot of Ramos. The trial court approved the commissioner's report. After trial on the merits, the trial court rendered judgment in favor of Ramos, declaring him owner of the lands adjoining the lot up to the National Road, ordering the de Veras to vacate and to remove their improvements, and awarding monthly rents, attorney's fees and costs.

The de Veras appealed to the Court of Appeals, arguing that the complaint should have been dismissed on the ground of laches, that they were not possessors in bad faith, and that they could not be made liable for rents, attorney's fees and costs. The Court of Appeals modified the decision, dismissing the complaint as regards Portion A and deleting the rents corresponding to that portion, but affirming in all other respects. The de Veras then came to the Supreme Court by petition for review on certiorari under Rule 45.

Facts

On September 20, 1947, Ricardo Ramos filed a homestead application over the land in litigation. The application was approved by the District Land Officer on November 22, 1947. In 1949 he fully complied with the cultivation and residence requirements of the Public Land Act. On December 15, 1955, Homestead Patent No. V-62617 was issued to him, and on the basis of that patent Original Certificate of Title No. P-5619 was issued by the Register of Deeds of Isabela.

Ramos then brought an action for recovery of possession against several persons, including the predecessors of the de Veras. That litigation dragged on for years, with the opposing parties attacking the validity of his homestead patent itself. The case eventually reached the Supreme Court, which in January 1981 upheld the validity of Ramos's title. Meanwhile, the de Veras had been occupying a portion of the land, and in 1983 they dismantled their old house of light materials and built a house of strong materials on the disputed area.

On April 27, 1981, Ramos wrote the de Veras informing them that their house stood on his titled property and offering them the option to buy the portion they occupied or to lease it on a yearly or monthly basis, failing which he would take legal action. The letter was ignored. Ramos then filed the complaint in 1983. The commissioner's survey later showed that the area occupied by the de Veras consisted of Portion B, with an area of 5 square meters, and Portion C, with an area of 18 square meters, both parts of Ramos's titled lot, while Portion A, with an area of 51 square meters, was part of another lot covered by the de Veras' predecessor's miscellaneous sales application.

Issues

• Whether or not laches can defeat the title and recovery of possession by Ricardo Ramos over Portions B and C of the disputed property.
• Whether or not the de Veras were possessors and builders in bad faith over Portions B and C, such that they may be made liable for rents and for the removal of their improvements.

Applicable Provisions

Article 526 of the New Civil Code provides:

Article 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 bad faith who possesses in any case contrary to the foregoing. Mistake upon a doubtful or difficult question of law may be the basis of good faith.

This is the test the Court used to characterize the possession of the de Veras after they were notified of Ramos's title.

Article 449 of the New Civil Code provides:

Article 449. He who builds, plants or sows in bad faith on the land of another, loses what is built, planted or sown without right to indemnity.

This governs the fate of the improvements built by a possessor in bad faith.

Article 450 of the New Civil Code provides:

Article 450. The owner of the land on which anything has been built, planted or sown in bad faith may demand the demolition of the work, or that the planting or sowing be removed, in order to replace things in their former condition at the expense of the person who built, planted or sowed; or he may compel the builder or planter to pay the price of the land, and the sower the proper rent.

This supplies the three alternative rights of the landowner, one of which Ramos chose to exercise.

Article 451 of the New Civil Code provides:

Article 451. In the cases of the two preceding articles, the landowner is entitled to damages from the builder, planter or sower.

This is the basis for the award of damages against the builder in bad faith.

Ruling

On the first issue, the Court held that laches does not apply. Laches is the failure or neglect, for an unreasonable and unexplained length of time, to do that which by exercising due diligence could or should have been done earlier, or to assert a right within reasonable time, warranting a presumption that the party entitled to it has either abandoned it or declined to assert it. But laches is an equitable doctrine, and its application is controlled by equitable considerations. The Court found that Ramos's failure to assert his rights over the land for twenty three years, from 1958 to 1981, was due to the prolonged litigation in which the validity of his own patent was being questioned. His cause of action had to be kept dormant pending the determination of that question. The delay was therefore not unreasonable, and the essence of laches is the unreasonableness of the delay. The Court of Appeals put it well when it said that it would be inequitable to count that period as delay where the pendency of the question of ownership precisely crippled his actions.

On the second issue, the Court held that the de Veras were possessors and builders in bad faith. Before they built their house of strong materials in 1983, they had already received the demand letter of April 27, 1981, informing them that the land was within Ramos's titled property. They ignored it and built anyway. These were outward acts and proven conduct showing bad faith. Their claimed titles did not establish good faith: the action on their public land application was merely recommendatory and still subject to the approval of the Director of Lands, and tax declarations, when not supported by other effective evidence, are no proof of the right of possession. In contrast, Portions B and C were covered by Ramos's original and transfer certificates of title, which are conclusive as to all matters contained in them, particularly the identity of the owner. Under Articles 449 and 450, the landowner has three alternative rights: to appropriate what has been built without any obligation to pay indemnity, to demand that the builder remove what he built, or to compel the builder to pay the value of the land. In any event, he is entitled to be indemnified under Article 451. Ramos availed of the second alternative, which is legally feasible.

Doctrine

• Laches is an equitable doctrine controlled by equitable considerations. It will not be applied where the delay in asserting a right was caused by the pendency of litigation testing the very title relied upon, because such delay is not unreasonable.
• Good faith under Article 526 is a state of mind determined by outward acts and proven conduct. A possessor who continues to occupy and even builds in bad faith after being notified that the land belongs to another by torrens title is a possessor in bad faith.
• A pending public land application that is merely recommendatory and not yet final, and tax declarations unsupported by other evidence, do not establish good faith against a torrens certificate of title, which is conclusive as to ownership.
• Under Articles 449, 450 and 451, the landowner against a builder in bad faith may choose any of three alternatives: appropriate the improvement without indemnity, demand demolition at the builder's expense, or compel the builder to pay the price of the land; and in all cases the landowner is entitled to damages.

Disposition

The petition was denied for lack of merit, and the decision of the Court of Appeals was affirmed in its entirety, with no pronouncement as to costs.

Remember This

Memorize the line that laches is an equitable doctrine controlled by equitable considerations, and that a builder in bad faith loses what he built without right to indemnity unless the landowner chooses otherwise. Examiners use this case to test the Article 526 distinction between good faith and bad faith possession, and the three alternative rights of the landowner under Articles 449, 450 and 451.