G.R. No. L-19998 April 22, 1977
J. M. TUASON & CO., INC., plaintiff-appellee, vs. VICENTE JURILLA and ESTER L. JURILLA, defendants-appellants.

FACTS

Plaintiff J. M. Tuason & Co., Inc., filed an accion publiciana to recover possession of a parcel of land covered by its Transfer Certificate of Title. Defendants Vicente Jurilla and Ester L. Jurilla were in possession, having purchased the land from one Florencio Deudor. The defendants claimed they were possessors and builders in good faith. They argued that the plaintiff’s title was not indefeasible and that, by virtue of a compromise agreement in a prior case (Civil Case No. 3626), the plaintiff had stepped into the shoes of Deudor and assumed his obligation to sell the land to them under the terms of their original contract.
The defendants also assigned as error the trial court’s denial of their motion to file a third-party complaint against Florencio Deudor. The trial court ordered the defendants to vacate the land and to pay a monthly rental of P100.00 from the filing of the complaint until they restore possession to the plaintiff.

ISSUE

The core legal issue is whether the defendants-appellants are possessors in good faith entitled to indemnity for improvements and, consequently, whether the plaintiff-appellee is obligated to recognize and execute the sale made by Florencio Deudor to the appellants.

RULING

The Supreme Court affirmed the trial court’s decision. On the procedural issue, the Court held that the denial of the motion to file a third-party complaint, even if erroneous, was not a jurisdictional error and did not preclude a separate action for indemnity; thus, the first assignment of error was overruled. On the substantive issues, the Court ruled that the appellants could not be considered possessors in good faith. Good faith requires a belief that the person from whom possession was received was the owner or could transmit ownership. Here, Deudor was not the registered owner; the land was titled in the name of J. M. Tuason & Co., Inc. The appellants’ claim of good faith was further negated by their own allegation that they knew of the prior litigation (Civil Case No. 3626) involving the title, putting them on inquiry notice.
The Court also rejected the argument that the compromise agreement obligated the plaintiff to honor Deudor’s sale. The agreement stipulated that the balance appellants would pay depended on a new agreement to be negotiated with the plaintiff, not on the terms of their contract with Deudor. Since appellants refused to negotiate new terms, they had no right to remain in possession. Their tender of payment based on the old contract was therefore invalid. The plaintiff’s Torrens title was indefeasible, and the appellants, as mere claimants under an unregistered sale, were bound to respect it. The award of monthly rental was sustained.