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SPS. MAXIMO ESPINOZA v. SPS. ANTONIO MAYANDOC

FACTS:

The case involves a parcel of land originally owned by Eusebio Espinoza in Dagupan City. After Eusebio's death, the land was divided among his heirs, including petitioner Maximo Espinoza. On May 25, 1972, one of the heirs, Pastora Espinoza, executed a Deed of Sale conveying her share of the property to respondents and Leopoldo Espinoza. On the same date, a fictitious deed of sale was executed by Maximo's father, conveying the majority share of the estate to Erlinda Cayabyab Mayandoc's parents. Subsequently, another fictitious deed of sale was executed by various parties, including Maximo and his spouse, over the land in favor of respondents-spouses Antonio and Erlinda Mayandoc. Petitioners filed an action for annulment of the documents, which was decided in their favor by the RTC and affirmed by the CA, ordering respondents to reconvey the land.

Respondents then filed a complaint for reimbursement of useful expenses, claiming that they were builders in good faith and sought reimbursement for the cost of the house they constructed on the disputed land. Petitioners argued that respondents were builders in bad faith. The RTC rendered a decision requiring petitioners to sell the land to respondents, and the CA affirmed it with modifications. Petitioners appealed to the Supreme Court, questioning the finding of good faith and the applicability of res judicata.

ISSUES:

  1. Whether the respondents are builders in good faith.

  2. Whether the application of Article 448 of the Civil Code is proper in this case.

  3. Whether the court a quo should determine the option chosen by the defendants-appellants, either the appropriation of the building upon payment of indemnity or the sale of the land to the plaintiffs-appellees.

  4. Whether the court a quo should ascertain the amount of indemnification for the building or the value of the subject property in relation to the building.

RULING:

  1. The respondents are builders in good faith. The RTC and the CA found that the respondents were unaware of any flaw in their claim of title to the land on which they built their house. Their good faith is also presumed under Article 527 of the Civil Code, and the burden of proving bad faith lies with the petitioners, which they failed to discharge.

  2. The application of Article 448 of the Civil Code is proper in this case. Article 448 applies when the builder believes that he has the right to build on the land, or at least has a claim of title to it. It provides a just resolution in cases where the builder acted in good faith, by giving the landowner the option to appropriate the improvements after reimbursing the builder for necessary and useful expenses, or to sell the land to the builder. The choice of option lies with the landowner, as the principle of accession dictates that the accessory follows the principal.

  3. The court a quo must determine the option chosen by the defendants-appellants, either the appropriation of the building upon payment of indemnity or the sale of the land to the plaintiffs-appellees.

  4. The court a quo should ascertain either the amount of indemnification for the building or the value of the subject property in relation to the building.

PRINCIPLES:

  • To be deemed a builder in good faith, a person must assert title to the land on which he builds and be unaware of any flaw in his title. Good faith is presumed, and the burden of proving bad faith lies with the party alleging it.

  • Article 448 of the Civil Code applies when the builder believes he has the right to build on the land or has a claim of title to it, and provides a just resolution by giving the landowner the option to appropriate the improvements or sell the land to the builder. The landowner cannot refuse to exercise either option.

  • In cases where a conflict of rights arises between the owner of the land and the builder, planter, or sower, the owner of the land is given the option to acquire the improvements upon payment of indemnity or to demand payment for the land and proper rent from the builder or planter. This is based on the principle of accession and the impracticability of creating a state of forced ownership. (Article 448)

  • The doctrine of res judicata does not apply when there is no identity of subject matter and cause of action between two cases. (Briones v. Macabagdal)

  • The principle of res judicata aims to avoid unduly burdening the courts with multiple suits, but it is inapplicable in cases where it would result in one party inequitably profiting at the expense of another.