G.R. No. 156437   March 1, 2004

NATIONAL HOUSING AUTHORITY,
vs.
GRACE BAPTIST CHURCH and the COURT OF APPEALS,

Facts: On June 13, 1986, respondent Grace Baptist Church (hereinafter, the Church) wrote a letter to petitioner National Housing Authority (NHA), manifesting its interest in acquiring Lots 4 and 17 of the General Mariano Alvarez Resettlement Project in Cavite. In its letter-reply dated July 9, 1986, petitioner informed respondent: In reference to your request letter dated 13 June 1986, regarding your application for Lots 4 and 17, Block C-3-CL, we are glad to inform you that your request was granted and you may now visit our Project Office at General Mariano Alvarez for processing of your application to purchase said lots. On February 22, 1991, the NHA’s Board of Directors passed Resolution No. 2126, approving the sale of the subject lots to respondent Church at the price of P700.00 per square meter, or a total price of P430,500.00. The Church was duly informed of this Resolution through a letter sent by the NHA.On April 8, 1991, the Church tendered to the NHA a manager’s check in the amount of P55,350.00, purportedly in full payment of the subject properties. The Church insisted that this was the price quoted to them by the NHA Field Office, as shown by an unsigned piece of paper with a handwritten computation scribbled thereon. Petitioner NHA returned the check, stating that the amount was insufficient considering that the price of the properties have changed. The Church made several demands on the NHA to accept their tender of payment, but the latter refused. Thus, the Church instituted a complaint for specific performance and damages against the NHA with the Regional Trial Court of Quezon City.

Issue: Can the NHA be compelled to sell the subject lots to Grace Baptist Church in the absence of any perfected contract of sale between the parties?

Ruling: No. The contract has not been perfected.In the case at bar, the offer of the NHA to sell the subject property, as embodied in Resolution No. 2126, was similarly not accepted by the respondent. Thus, the alleged contract involved in this case should be more accurately denominated as inexistent. There being no concurrence of the offer and acceptance, it did not pass the stage of generation to the point of perfection. As such, it is without force and effect from the very beginning or from its incipiency, as if it had never been entered into, and hence, cannot be validated either by lapse of time or ratification. Equity can not give validity to a void contract, and this rule should apply with equal force to inexistent contracts. We note from the records, however, that the Church, despite knowledge that its intended contract of sale with the NHA had not been perfected, proceeded to introduce improvements on the disputed land. On the other hand, the NHA knowingly granted the Church temporary use of the subject properties and did not prevent the Church from making improvements thereon. Thus, the Church and the NHA, who both acted in bad faith, shall be treated as if they were both in good faith. In this connection, Article 448 of the Civil Code provides:The owner of the land on which anything has been built, sown or planted in good faith, shall have the right to appropriate as his own the works, sowing or planting, after payment of the indemnity provided for in articles 546 and 548, or to oblige the one who built or planted to pay the price of the land, and the one who sowed, the proper rent. However, the builder or planter cannot be obliged to buy the land and if its value is considerably more than that of the building or trees. In such case, he shall pay reasonable rent, if the owner of the land does not choose to appropriate the building or trees after proper indemnity. The parties shall agree upon the terms of the lease and in case of disagreement, the court shall fix the terms thereof.

G.R. No. 151815  February 23, 2005

SPOUSES JUAN NUGUID AND ERLINDA T. NUGUID,
vs.
HON. COURT OF APPEALS AND PEDRO P. PECSON

Facts:  Pedro P. Pecson owned a commercial lot located at 27 Kamias Road, Quezon City, on which he built a four-door two-storey apartment building. For failure to pay realty taxes, the lot was sold at public auction by the City Treasurer of Quezon City to Mamerto Nepomuceno, who in turn sold it for P103,000 to the spouses Juan and Erlinda Nuguid.Pecson challenged the validity of the auction sale before the RTC of Quezon City . In its Decision, dated February 8, 1989, the RTC upheld the spouses’ title but declared that the four-door two-storey apartment building was not included in the auction sale. This was affirmed in toto by the Court of Appeals and thereafter by this Court, in its Decision dated May 25, 1993, in G.R. No. 105360 entitled Pecson v. Court of Appeals.

On June 23, 1993, by virtue of the Entry of Judgment of the aforesaid decision in G.R. No. 105360, the Nuguids became the uncontested owners of the 256-square meter commercial lot.

As a result, the Nuguid spouses moved for delivery of possession of the lot and the apartment building.

In the same order the RTC also directed Pecson to pay the same amount of monthly rentals to the Nuguids as paid by the tenants occupying the apartment units or P21,000 per month from June 23, 1993, and allowed the offset of the amount of P53,000 due from the Nuguids against the amount of rents collected by Pecson from June 23, 1993 to September 23, 1993 from the tenants of the apartment.

Pecson duly moved for reconsideration, but on November 8, 1993, the RTC issued a Writ of Possession, directing the deputy sheriff to put the spouses Nuguid in possession of the subject property with all the improvements thereon and to eject all the occupants therein.

Issue: W/Not the Nuguids should reimburse Pecson for the benefits derived from the apartment building.

Ruling: Yes. It is not disputed that the construction of the four-door two-storey apartment, subject of this dispute, was undertaken at the time when Pecson was still the owner of the lot. When the Nuguids became the uncontested owner of the lot on June 23, 1993, by virtue of entry of judgment of the Court’s decision, dated May 25, 1993, in G.R. No. 105360, the apartment building was already in existence and occupied by tenants. In its decision dated May 26, 1995 in G.R. No. 115814, the Court declared the rights and obligations of the litigants in accordance with Articles 448 and 546 of the Civil Code. These provisions of the Code are directly applicable to the instant case.

Under Article 448, the landowner is given the option, either to appropriate the improvement as his own upon payment of the proper amount of indemnity or to sell the land to the possessor in good faith. Relatedly, Article 546 provides that a builder in good faith is entitled to full reimbursement for all the necessary and useful expenses incurred; it also gives him right of retention until full reimbursement is made. While the law aims to concentrate in one person the ownership of the land and the improvements thereon in view of the impracticability of creating a state of forced co-ownership, it guards against unjust enrichment insofar as the good-faith builder’s improvements are concerned. The right of retention is considered as one of the measures devised by the law for the protection of builders in good faith. Its object is to guarantee full and prompt reimbursement as it permits the actual possessor to remain in possession while he has not been reimbursed (by the person who defeated him in the case for possession of the property) for those necessary expenses and useful improvements made by him on the thing possessed. Accordingly, a builder in good faith cannot be compelled to pay rentals during the period of retention  nor be disturbed in his possession by ordering him to vacate. In addition, as in this case, 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. Otherwise, the security provided by law would be impaired. This is so because the right to the expenses and the right to the fruits both pertain to the possessor, making compensation juridically impossible; and one cannot be used to reduce the other.

As we earlier held, since petitioners opted to appropriate the improvement for themselves as early as June 1993, when they applied for a writ of execution despite knowledge that the auction sale did not include the apartment building, they could not benefit from the lot’s improvement, until they reimbursed the improver in full, based on the current market value of the property.Given the circumstances of the instant case where the builder in good faith has been clearly denied his right of retention for almost half a decade, we find that the increased award of rentals by the RTC was reasonable and equitable. The petitioners had reaped all the benefits from the improvement introduced by the respondent during said period, without paying any amount to the latter as reimbursement for his construction costs and expenses. They should account and pay for such benefits.

PROGRAMME INCORPORATED, vs. PROVINCE OF BATAAN

  G.R. No. 144635  June 26, 2006

Facts:  BASECO was the owner of Piazza Hotel and Mariveles Lodge, both located in Mariveles, Bataan. On May 14, 1986, BASECO granted petitioner a contract of lease over Piazza Hotel at a monthly rental of P6,500 for three years,i.e., from January 1, 1986 to January 1, 1989, subject to renewal by mutual agreement of the parties.  After the expiration of the three-year lease period, petitioner was allowed to continue operating the hotel on monthly extensions of the lease.

       In April 1989, however, the Presidential Commission on Good Government (PCGG) issued a sequestration order against BASECO pursuant to Executive Order No. 1 of former President Corazon C. Aquino. Among the properties provisionally seized and taken over was the lot on which Piazza Hotel stood.On July 19, 1989, however, Piazza Hotel was sold at a public auction for non-payment of taxes to respondent Province of Bataan.  The title of the property was transferred to respondent. BASECO’s Transfer Certificate of Title (TCT) No. T-59631 was cancelled and a new one, TCT No. T-128456, was issued to the Province of Bataan.

       On July 21, 1989, petitioner filed a complaint for preliminary injunction and collection of sum of money against BASECO (Civil Case No. 129-ML).  Respondent, as the new owner of the property, filed a motion for leave to intervene on November 22, 1990. After its motion was granted, respondent filed a complaint-in-intervention praying, inter alia, that petitioner be ordered to vacate Piazza Hotel and Mariveles Lodge for lack of legal interest. 

Issue: W/Not the petitioner is a possessor in good faith of the Piazza Hotel and Mariveles Lodge.

Ruling:  The evidence clearly established respondent’s ownership of Piazza Hotel. First, the title of the land on which Piazza Hotel stands was in the name of respondent. Second, Tax Declaration No. 12782 was in the name of respondent as owner of Piazza Hotel. Third, petitioner was doubtlessly just a lessee.  In the lease contract annexed to the complaint, petitioner in fact admitted BASECO’s (respondent’s predecessor-in-interest) ownership then of the subject property.

          Furthermore, petitioner’s reference to Article 448 of the

Civil Code to justify its supposed rights as “possessor in good faith” was erroneous.

 The benefits granted to a possessor in good faith cannot be maintained by the lessee against the lessor because, such benefits are intended to apply only to a case where one builds or sows or plants on land which he believes himself to have a claim of title and not to lands wherein one’s only interest is that of a tenant under a rental contract, otherwise, it would always be in the power of a tenant to improve his landlord out of his property.  Besides, as between lessor and lessee, the Code applies specific provisions designed to cover their rights.

 Hence, the lessee cannot claim reimbursement, as a matter of right, for useful improvements he has made on the property, nor can he assert a right of retention until reimbursed.  His only remedy is to remove the improvement if the lessor does not choose to pay its value; but the court cannot give him the right to buy the land.

            Petitioner’s assertion that Piazza Hotel was constructed “at (its) expense” found no support in the records.  Neither did any document or testimony prove this claim.  At best, what was confirmed was that petitioner managed and operated the hotel.  There was no evidence that petitioner was the one which spent for the construction or renovation of the property. And since petitioner’s alleged expenditures were never proven, it could not even seek reimbursement of one-half of the value of the improvements upon termination of the lease under Article 1678 of the Civil Code.       

Finally, both the trial and appellate courts declared that the land as well as the improvement thereon (Piazza Hotel) belonged to respondent.  We find no reason to overturn this factual conclusion.

G.R. No. 105387 November 11, 1993

JOHANNES SCHUBACK & SONS PHILIPPINE TRADING CORPORATION
vs.
THE HON. COURT OF APPEALS, RAMON SAN JOSE, JR.,

Facts:  Sometime in 1981, defendant  established contact with plaintiff  through the Philippine Consulate General in Hamburg, West Germany, because he wanted to purchase MAN bus spare parts from Germany. Plaintiff communicated with its trading partner. Johannes Schuback and Sohne Handelsgesellschaft m.b.n. & Co. (Schuback Hamburg) regarding the spare parts defendant wanted to order.On October 16, 1981, defendant submitted to plaintiff a list of the parts (Exhibit B) he wanted to purchase with specific part numbers and description. Plaintiff referred the list to Schuback Hamburg for quotations. Upon receipt of the quotations, plaintiff sent to defendant a letter dated 25 November, 1981 (Exh. C) enclosing its offer on the items listed by defendant.On December 4, 1981, defendant informed plaintiff that he preferred genuine to replacement  parts, and requested that he be given 15% on all items (Exh. D).On December 17, 1981, plaintiff submitted its formal offer (Exh. E) containing the item number, quantity, part number, description, unit price and total to defendant. On December, 24, 1981, defendant informed plaintiff of his desire to avail of the prices of the parts at that time and enclosed Purchase Order No. 0101 dated 14 December 1981 (Exh. F to F-4). Said Purchase Order contained the item number, part number and description. Defendant promised to submit the quantity per unit he wanted to order on December 28 or 29 (Exh. F).

On October 18, 1982, Plaintiff again reminded defendant of his order and advised that the case may be endorsed to its lawyers (Exh. L). Defendant  replied that he did not make any valid Purchase Order and that there was no definite contract between him and plaintiff (Exh. M). Plaintiff sent a rejoinder explaining that there is a valid Purchase Order and suggesting that defendant either proceed with the order and open a letter of credit or cancel the order and pay the cancellation fee of 30% of F.O.B. value, or plaintiff will endorse the case to its lawyers (Exh. N).

Issue: whether or not a contract of sale has been perfected between the parties.

Ruling: Article 1319 of the Civil Code states: "Consent is manifested by the meeting of the offer and acceptance upon the thing and the cause which are to constitute the contract. The offer must be certain and the acceptance absolute. A qualified acceptance constitutes a counter offer." The facts presented to us indicate that consent on both sides has been manifested.The offer by petitioner was manifested on December 17, 1981 when petitioner submitted its proposal containing the item number, quantity, part number, description, the unit price and total to private respondent. On December 24, 1981, private respondent informed petitioner of his desire to avail of the prices of the parts at that time and simultaneously enclosed its Purchase Order No. 0l01 dated December 14, 1981. At this stage, a meeting of the minds between vendor and vendee has occurred, the object of the contract: being the spare parts and the consideration, the price stated in petitioner's offer dated December 17, 1981 and accepted by the respondent on December 24,1981.Although said purchase order did not contain the quantity he wanted to order, private respondent made good, his promise to communicate the same on December 29, 1981. At this juncture, it should be pointed out that private respondent was already in the process of executing the agreement previously reached between the parties. While we agree with the trial court's conclusion that indeed a perfection of contract was reached between the parties, we differ as to the exact date when it occurred, for perfection took place, not on December 29, 1981. Although the quantity to be ordered was made determinate only on December 29, 1981, quantity is immaterial in the perfection of a sales contract. What is of importance is the meeting of the minds as to the object and cause, which from the facts disclosed, show that as of December 24, 1981, these essential elements had already occurred.

On the part of the buyer, the situation reveals that private respondent failed to open an irrevocable letter of credit without recourse in favor of Johannes Schuback of Hamburg, Germany. This omission, however. does not prevent the perfection of the contract between the parties, for the opening of the letter of credit is not to be deemed a suspensive condition. The facts herein do not show that petitioner reserved title to the goods until private respondent had opened a letter of credit. Petitioner, in the course of its dealings with private respondent, did not incorporate any provision declaring their contract of sale without effect until after the fulfillment of the act of opening a letter of credit.