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TECNOGAS PHILIPPINES MANUFACTURING CORPORATION v. CA

FACTS:

The parties in this case are owners of adjoining lots in Parañaque, Metro Manila. The petitioner acquired a lot with a building from Pariz Industries, which was found to encroach on a portion of the private respondent's property. The dispute revolves around the rights and obligations of the parties, with the petitioner arguing that they should not be deemed a builder in bad faith since they were presumed to know the boundaries of their property as indicated in their certificate of title. They also questioned whether they should be held responsible for the actions of their predecessor-in-interest who constructed the building. The Regional Trial Court initially ruled in favor of the petitioner but the Court of Appeals reversed the decision and ordered the removal of the encroaching structures as well as payment of rental fees and attorney's fees. The Court of Appeals later amended its decision to remove the order for the petitioner to pay the value of the occupied land. Both parties filed motions for reconsideration, which were denied.

The petitioner filed a petition for review with the Supreme Court, raising various issues including whether they were a builder in good faith and whether an amicable settlement should be enforced. The private respondent argued that the petition lacked citations of contrary cases and maintained that the finding of the petitioner's bad faith was supported by these cases.

ISSUES:

  1. Whether the petitioner can be held in estoppel for entering into an amicable settlement with the private respondent.

  2. Whether the private respondent can invoke Article 448 or Article 450 of the Civil Code as his remedy.

  3. Whether the private respondent can exercise a remedy of his own liking in relation to the encroaching portion of the petitioner's building.

  4. Whether the proper remedy is for the private respondent to be ordered to sell the land to the petitioner.

  5. Whether the award of attorney's fees against the petitioner is warranted.

  6. Whether the petitioner is entitled to compensation for the occupancy of private respondent's land.

  7. What is the period of compensation to be awarded to the petitioner.

RULING:

  1. The petitioner cannot be held in estoppel for entering into the amicable settlement. The settlement only agreed to the demolition of a portion of the wall separating the properties. The settlement did not equate to bad faith and was entered into to avoid litigation.

  2. The applicable provision in this case is Article 448 of the Civil Code. Both petitioner and private respondent acted in good faith, and therefore, their rights and obligations are to be governed by Article 448.

  3. The private respondent cannot exercise a remedy of his own liking in relation to the encroaching portion of the petitioner's building. His options are limited to appropriating the encroaching portion of petitioner's building after payment of proper indemnity, or obliging the petitioner to buy the lot occupied by the structure.

  4. The proper remedy is not for the private respondent to be ordered to sell the land to the petitioner. The case is remanded to the trial court for further proceedings to fully implement the mandate of Article 448 of the Civil Code. The trial court must determine the present fair price of the private respondent's land, the increase in value of the land due to the existence of the portion of the building on the area, the fair market value of the encroaching portion of the building, and whether the value of the land is considerably more than the fair market value of the portion of the building.

  5. The award of attorney's fees against the petitioner is unwarranted as the action appears to have been filed in good faith. There should be no penalty on the right to litigate.

  6. Yes, the petitioner is entitled to compensation for the occupancy of private respondent's land.

  7. The period of compensation shall be counted from October 4, 1979, up to the date private respondent serves notice of its option to appropriate the encroaching structures, otherwise up to the actual transfer of ownership to petitioner or, in case a forced lease has to be imposed, up to the commencement date of the forced lease referred to in the preceding paragraph.

PRINCIPLES:

  • One who erroneously builds on an adjoining lot should be considered a builder in bad faith, there being presumptive knowledge of the Torrens title, the area, and the extent of the boundaries.

  • Unless one is versed in the science of surveying, no one can determine the precise extent or location of his property by merely examining his paper title.

  • Possession acquired in good faith does not lose this character except in case and from the moment facts exist which show that the possessor is not unaware that he possesses the thing improperly or wrongfully.

  • The benefit of Article 448 of the Civil Code can be invoked by a buyer who possesses the structures as long as there is no sufficient showing of awareness of the encroachment at the time of acquisition.

  • Estoppel does not apply when the settlement entered into is within the terms agreed upon by the parties.

  • A compromise is a juridical agreement that is encouraged by the Civil Code and aims to avoid or put an end to litigation.

  • Article 448 of the Civil Code provides a just solution to conflicts between owners and builders or planters who have acted in good faith. The owner of the land has the option to acquire the improvements after payment of proper indemnity or to oblige the builder or planter to pay for the land.

  • The options available to a landowner whose land has been encroached by a building are limited to appropriating the encroaching portion or obliging the occupant to buy the land. The landowner cannot exercise a remedy of his own liking. (Art. 448, Civil Code)

  • In cases involving the encroachment of a building on a land, the proper remedy is to remand the case to the trial court for further proceedings to fully implement Article 448 of the Civil Code. The trial court must determine the fair price of the land, the increase in value of the land due to the existence of the building, and the fair market value of the encroaching portion of the building. (Depra v. Dumlao)

  • Attorney's fees should not be awarded against a party if the action appears to have been filed in good faith. There should be no penalty on the right to litigate.

  • The occupant of another's property without prior authority, warranting his removal, shall be liable to pay reasonable compensation for the use of the property. (Magsaysay-Labrador v. Court of Appeals, G.R. No. 101897, January 28, 1993)

  • Possession in good faith ceases from the moment defects in the title are made known to the possessor, by extraneous evidence or by suit for recovery of the property by the true owner. (Tala Realty Services Corp. v. Banco Filipino Savings and Mortgage Bank, G.R. No. 167335, September 30, 2013)