GR 151815; (February, 2005) (Digest)
G.R. No. 151815 ; February 23, 2005
SPOUSES JUAN NUGUID AND ERLINDA T. NUGUID, petitioners, vs. HON. COURT OF APPEALS AND PEDRO P. PECSON, respondents.
FACTS
Pedro Pecson owned a commercial lot in Quezon City with a four-door apartment building he constructed. Due to tax delinquency, the lot was auctioned and eventually purchased by the spouses Juan and Erlinda Nuguid. In a prior case ( G.R. No. 105360 ), the Supreme Court upheld the Nuguids’ title to the lot but declared that the building was not included in the sale, remaining Pecson’s property. The Nuguids subsequently obtained a writ of possession. In a related case ( G.R. No. 115814 ), the Supreme Court ruled that Article 448 of the Civil Code, governing land ownership and improvements built in good faith, applied by analogy. It ordered the case remanded to the trial court to determine the building’s current market value, which the Nuguids must pay to appropriate it; otherwise, possession must be restored to Pecson.
Upon remand, the Regional Trial Court (RTC) set the building’s value at ₱1.6 million. The Nuguids failed to pay. The RTC then ordered them to reimburse Pecson for “unrealized income” (rentals) from the building from November 1993 to December 1997, amounting to ₱1,344,000. The Court of Appeals modified this, reducing the award to ₱280,000, representing rentals for a specific 20-month period when the Nuguids’ possession was deemed unlawful. The Nuguids appealed.
ISSUE
Whether the Court of Appeals erred in awarding unrealized income (rentals) to Pecson for the period the Nuguids were in possession of the property.
RULING
The Supreme Court denied the petition and affirmed the Court of Appeals, with modification on the interest rate. The legal logic proceeds from the consequences of the Nuguids’ failure to pay the indemnity for the building. In G.R. No. 115814 , the Court established that Pecson, as owner of the building, was entitled to retain it and its income until the Nuguids paid its current market value to appropriate it. Their failure to pay despite the court order rendered their continued possession of the entire property—land and building—unlawful. As unlawful possessors, they became liable for the fruits (rentals) of the property.
The Court clarified that the award was not for unrealized income in a contractual sense but for the actual fruits or benefits derived from the property to which Pecson was rightfully entitled as owner of the building. The appellate court correctly limited this liability to the period starting from the finality of the order setting the indemnity (March 1996) until the Nuguids vacated (November 1997), as their possession prior to the final valuation order was considered to be in provisional custody of the property pending judicial determination. Thus, they were liable to account for and pay the rentals collected during their period of unlawful possession. The Supreme Court imposed legal interest on the awarded amount for forbearance of money.