G.R. No. 189061 , August 6, 2014
MIDWAY MARITIME AND TECHNOLOGICAL FOUNDATION, represented by its Chairman/President PhD in Education DR. SABINO M. MANGLICMOT, Petitioner, vs. MARISSA E. CASTRO, ET AL., Respondents.

FACTS

The petitioner, Midway Maritime and Technological Foundation, is the lessee of two parcels of land in Cabanatuan City. The land is registered under the name of Adoracion Cloma, wife of the petitioner’s president, Dr. Sabino Manglicmot. On a portion of this land stands a residential building owned by the respondents, the Castro children. The land was originally owned by the respondents’ father, Louis Castro, Sr., who was also president of Cabanatuan City Colleges (CCC). In 1974, he mortgaged the land to Bancom Development Corporation. During the mortgage, CCC’s board agreed to a 15-year lease (until 1992) of a portion of the land to the respondents, who built the residential house. CCC failed to pay its obligation, leading to foreclosure and a public auction in 1979, with Bancom as the highest bidder. Bancom assigned the credit to Union Bank of the Philippines, which consolidated ownership in 1984. In a prior case (Castro, Jr. v. CA), the Supreme Court ruled that the respondents’ residential house should not have been included in a writ of possession over the properties, as CCC did not own it. Meanwhile, Adoracion’s father, Tomas Cloma, bought the two parcels of land from Union Bank in an auction sale in 1993. He leased the property to the petitioner and later sold it to Adoracion. The respondents filed an action for Ownership, Recovery of Possession and Damages, alleging they owned the building, that Manglicmot leased it from their mother starting June 1993, and that the petitioner failed to pay rent starting August 1995. The petitioner denied the respondents’ ownership, claiming Adoracion owned the building as it was included in the sale of the land. The Regional Trial Court ruled in favor of the respondents, declaring them absolute owners and ordering the petitioner to pay unpaid rentals. The Court of Appeals affirmed the decision.

ISSUE

The primary issue is whether the respondents are the owners of the residential building and whether the petitioner is obligated to pay rent arrearages, hinging on the existence of a lease agreement and the application of the principle of estoppel against a tenant.

RULING

The Supreme Court DENIED the petition, affirming the lower courts’ decisions. The Court held:
1. The existence of a lease agreement between the petitioner and the respondents was a question of fact resolved affirmatively by the RTC, supported by evidence such as a cash disbursement voucher showing rental payments by the petitioner to the respondents’ mother.
2. The petitioner is estopped from denying the respondents’ title to the residential building. Under Section 2(b), Rule 131 of the Rules of Court, a tenant cannot deny the title of his landlord at the commencement of the landlord-tenant relation. By leasing the building, the petitioner acknowledged the respondents’ ownership.
3. The respondents’ ownership of the building is an established fact, stemming from the final and executory ruling in Castro, Jr. v. CA, which held that the building was not owned by CCC (the mortgagor) and thus not included in the foreclosure sale. The principle “nemo dat quod non habet” applies; Tomas Cloma could only sell what Union Bank owned—the land, not the building owned by a third party (the respondents).
4. The building, as an immovable by destination, remained the property of the respondents. The petitioner’s claim that the lease between CCC and the respondents had expired was unsubstantiated.
Consequently, the Court upheld the respondents’ ownership and the petitioner’s liability for unpaid rentals.