View full case

SPS. JUAN NUGUID v. CA

FACTS:

This case involves a commercial lot in Quezon City owned by Pedro Pecson. Pecson constructed a four-door two-storey apartment building on the lot. Due to Pecson's failure to pay realty taxes, the lot was sold at a public auction. Mamerto Nepomuceno purchased the lot and later sold it to the spouses Juan and Erlinda Nuguid.

Pecson contested the validity of the auction sale and the ownership of the apartment building. The court ruled that the spouses had valid title to the lot but declared that the apartment building was not part of the auction sale. Seeking reimbursement for his construction costs and payment of monthly rentals, Pecson filed a case against the Nuguids.

The trial court initially granted Pecson's claims, ordering the Nuguids to reimburse him and pay monthly rentals. This decision was affirmed by the Court of Appeals. Dissatisfied with the rulings, Pecson escalated the case to the Supreme Court through a special civil action and later a petition for review.

The Supreme Court overturned the decisions of the lower courts and referred the case back to the trial court to determine the current market value of the apartment building. Subsequently, Pecson filed a motion for restoration of possession and a motion for accounting. The trial court denied the motion for restoration of possession but postponed the motion for accounting.

Upon submission of assessment reports, the trial court scheduled a hearing and directed the Nuguids to pay the balance for the improvement or building. The Nuguids complied and sought the closure and termination of the case.

In response, the trial court ordered the Nuguids to pay Pecson an amount of P1,344,000 as reimbursement for the unrealized income from November 1993 to December 1997.

ISSUES:

  1. Whether the Nuguid spouses are liable to pay rent over and above the current market value of the improvement.

  2. Whether the value of the fruits of the property during the period of dispossession should be accounted for.

  3. Whether the builders in good faith are entitled to full reimbursement for necessary and useful expenses incurred.

  4. Whether the builders in good faith have the right of retention until full reimbursement is made.

  5. Whether the owner of the land is prohibited from offsetting or compensating the necessary and useful expenses with the fruits received by the builder-possessor in good faith.

  6. Whether the petitioners violated the builder's right of retention and unjustly benefited from the income-yielding apartment building.

RULING:

  1. The Court of Appeals erred in holding the Nuguid spouses liable to pay rent over and above the current market value of the improvement. The Supreme Court's ruling in G.R. No. 115814 did not include the payment of rent in the dispositive portion. Therefore, the petitioners' interpretation that their failure to pay the full price for the improvements only entitles the respondent to be restored to possession, but not to collect any rentals, is correct.

  2. The value of the fruits of the property during the period of dispossession should be accounted for. The Supreme Court, in G.R. No. 115814, recognized that the respondent was entitled to the property and the income therefrom. Although the specific value of the rent was not determined at the time of the judgment, the respondent is entitled to rental income from the property due to his right as a builder in good faith. The Court of Appeals erred in modifying the lower court's order, which defeated the respondent's right to rental income from the period of dispossession until full payment of the price of the improvements.

  3. Yes, builders in good faith are entitled to full reimbursement for necessary and useful expenses incurred.

  4. Yes, builders in good faith have the right of retention until full reimbursement is made.

  5. Yes, the owner of the land is prohibited from offsetting or compensating the necessary and useful expenses with the fruits received by the builder-possessor in good faith.

  6. Yes, the petitioners violated the builder's right of retention and unjustly benefited from the income-yielding apartment building.

PRINCIPLES:

  • The landowner has the option to appropriate the improvement as his own upon payment of indemnity or to sell the land to the possessor in good faith, as provided under Article 448 of the Civil Code.

  • The possessor in good faith, who is dispossessed of the property, is entitled to the fruits or income from the property until full payment of the price of the improvements, as recognized by the Supreme Court.

  • A builder in good faith is entitled to full reimbursement for necessary and useful expenses incurred.

  • A builder in good faith has the right of retention until full reimbursement is made.

  • The owner of the land is prohibited from offsetting or compensating the necessary and useful expenses with the fruits received by the builder-possessor in good faith.