[ G.R. No. 222482, June 02, 2020 ]

PRINCESS RACHEL DEVELOPMENT CORPORATION AND BORACAY ENCLAVE CORPORATION, PETITIONERS, V. HILL VIEW MARKETING CORPORATION, STEFANIE DORNAU AND ROBERT DORNAU, RESPONDENTS.

SEPARATE CONCURRING OPINION

ZALAMEDA, J.:

I concur. The issue of good faith or bad faith of the builder and the landowner should be considered based on the peculiar circumstances surrounding the case.

Petitioner Princess Rachel Development Corporation is a landowner in good faith, and it must be categorically declared to be so

It need not be underscored that the laws applicable here enjoin the courts not only to make a finding on the builder’s good faith or bad faith, but also make a specific determination of the landowner’s good faith or the absence of it. Simply put, the determination of the respective rights and liabilities of the parties essentially depends on the finding of good faith or bad faith on their part.

While respondent Hillview Marketing Corporation (respondent Hillview), along with its co-respondents Stefanie Dornau and Robert Dornau (Stefanie and Robert), is adamant that petitioner Princess Rachel Development Corporation (petitioner) should be held in bad faith for sleeping on its rights in this case, the respective decisions of the Regional Trial Court (RTC) and the Court of Appeals (CA) are conspicuously silent on the matter. Although the CA had the occasion to point out petitioner’s alleged inactions or negligence in protecting its rights as landowner, it nevertheless shunned away from the responsibility of making a categorical finding whether petitioner is a landowner in good faith or bad faith.

The ponente aptly fills the lacuna with the pertinent discussion and duly declares petitioner to be a landowner in good faith.

Verily, petitioner, being a registered landowner, can rightfully claim protection under the Torrens system, in that it may rest secure, without the necessity of waiting in the portals of the court, or sitting in the mirador de su casa, to avoid the possibility of losing its land.1 In addition, Article 4532 of the New Civil Code is categorical that bad faith may only be attributed to a landowner when the act of building, planting, or sowing was done with his knowledge and without opposition on his or her part.3

As I have consistently pointed out from the start, the scrutiny of the established facts readily reveals petitioner’s good faith in this case.

Contrary to what the CA opined in the assailed decision, petitioner had shown sufficient justification for not being able to object to the construction of respondent Hillview from 2004-2007. Its office is located in Metro Manila while the disputed properties are situated in Aklan. Respondent Hillview’s intrusion into petitioner’s properties was discovered only in 2007, after the latter caused a relocation survey of the same due to the impending sale thereof to Boracay Enclave Corporation. From then on, however, petitioner diligently notified respondent Hillview of the encroachment, and sent the appropriate demands for the latter to vacate and return possession of the encroached lots to petitioner. When such demands unfortunately fell on deaf ears, petitioner immediately filed the complaint. All these actions were undertaken by petitioner in a matter of months after its discovery of respondent Hillview’s encroachment.

In fine, as discussed in the ponencia, petitioner cannot be said to have slept on its right and must therefore be regarded as a landowner in good faith, entitled to the protections provided under the New Civil Code.

Bad faith of respondent Hillview in building on the disputed properties is clear and unmistakable from the established facts

The RTC and the CA were unanimous in finding that respondent Hillview encroached upon a huge portion of petitioner’s properties. This factual finding binds this Court, as it is clearly supported by evidence. Be that as it may, the trial and appellate courts were diametrically opposed on the responsibilities of respondent Hillview: the RTC found respondent Hillview liable under the circumstances based mainly on the “revelations” of Engineer Reynaldo Lopez (Engr. Lopez) imputing actual knowledge of the encroachment on respondent Hillview, while the CA found no liability on the part of the latter applying the presumption of good faith in its favor.

In resolving the impasse, the ponencia upheld the RTC’s view that respondent Hillview is indeed a builder in bad faith, albeit for an entirely different reason.

Based on the facts and evidence on hand, it is correct that respondent Hillview be held liable for being a builder in bad faith. This must be so notwithstanding the rather unreliable testimony of Engr. Lopez. Indeed, regardless of my strong misgivings on the motivation of Engr. Lopez’ surprising shift of allegiance in this case, the CA committed reversible error in applying the presumption of good faith in favor of respondent Hillview.

It is axiomatic in jurisprudence that the essence of good faith lies in an honest belief in the validity of one’s right, ignorance of a superior claim and absence of intention to overreach another. Applied to possession, one is considered in good faith if he is not aware that there exists in his title or mode of acquisition any flaw which invalidates it.4

In the instant case, based on the figures alone, it can already be fairly deduced that respondent Hillview was well-aware of its intrusion into the lots of petitioner. Tommy Sarceno, respondent Hillview’s own witness, testified that respondent Hillview only bought a total of 5,100 square meters of spouses Tirol’s property,5 which means that the encroachment extended to more than 50% of responde]nt Hillview’s own lot. An increase in the land area of such proportion is too great to be left undiscovered by respondent Hillview at any time before, or during the construction of the Alargo Residence, with Engineer Lester Madlangbayan describing the encroachment as very visible.6

Respondent Hillview ought to have known the actual land area or the metes and bounds of its own property as part of its due diligence, being the developer of the Alargo Residence subdivision project. To be sure, the encroachment in this case spanned 2,783 square meters, and every square inch thereof was a potential source of huge profit for respondent Hillview. As found in the records, a unit at the Alargo Residence – an upscale and sophisticated residential project – was pegged at USD200,000.00.7 Needless to say, no prudent and savvy developer could miss that vital information.

If that is not enough, it bears pointing out that respondent Hillview, in a desperate attempt to hide the fact of encroachment, even resorted to several schemes to repeatedly avoid the RTC’s order for the parties to submit their respective survey reports within the period provided. When it was left with no other ruse to employ, it instead submitted a consolidated sketch plan, or a table survey prepared by its chosen geodetic engineer, without even conducting an actual survey on the ground.8

With the foregoing factual findings, it is certain that respondent Hillview knew very well of its encroachment into petitioner’s properties, and should be declared a builder in bad faith.

The ponente is right in declaring the good faith or bad faith of a builder, as in the case of the landowner, based on the peculiar circumstances of the case, not on a strict application of the constructive notice rule

Despite the long, tedious deliberation of the members of this Court, I still have not wavered in my view that a declaration of the good faith or bad faith strictly on a priori application of the constructive notice rule and the presumptive knowledge of Torrens title may lead to iniquitous results. To reiterate, an indiscriminate, blind application of these rules, without regard to the peculiar factual circumstances of each case, may not be the best approach to dispense justice.

To illustrate, A bought a registered lot from a subdivision developer and after receiving a go signal from the latter, built a house thereon. After completion of the construction, B, the adjoining lot owner and A’s neighbor, found through a recently concluded technical survey that A’s house and lot encroached on his property because of an error committed by the subdivision developer. A, who built on the lot, relying in good faith on the subdivision developer’s title and representations, and without negligence on his part should not be deemed a builder in bad faith under the circumstances.

Indeed, subservience to the provisions of the pertinent provisions of PD 1529, or a literal application thereof, is not always the rational and judicious way of resolving encroachment cases like this, as have been amply proven in jurisprudence. Badges of good faith of the builders or their transferees would be negated if the Court expands the scope and application of the constructive notice rule under PD 1529 to include a presumptive knowledge of the metes and bounds of every registered land, as reflected in the technical description thereof. Verily, certificates of titles are not always free from errors; hence, there has been a need for their correction in many instances. Most of the time, however, the errors are only realized much later, often after the owners have already constructed their improvements. There are also instances of honest mistakes by the builders, as when the lots delivered to them by the sellers are different, a case which is prevalent in subdivision developments.

Jurisprudence abound where the Court, in declaring the rights and liabilities of a builder, made use of the factual circumstances approach, instead of a blind application of the constructive notice rule

It has been said that Article 4489 of the Civil Code applies only when the builder believes that he is the owner of the land or that by some title he has the right to build thereon, or that, at least, he has a claim of title thereto.10 It is not amiss to underscore, however, that Article 52711 of the New Civil Code provides that good faith is always presumed, and upon him who alleges bad faith on the part of a possessor rests the burden of proof. Corollarily, the settled rule is bad faith should be established by clear and convincing evidence since the law always presumes good faith.12 However, bad faith does not simply connote bad judgment or negligence. It imports a dishonest purpose or some moral obliquity and conscious doing of a wrong, a breach of known duty through some motive or interest or ill-will that partakes of the nature of fraud. It is, therefore, a question of intention, which can be inferred from one’s conduct and/or contemporaneous statements.13

Following these settled principles, the Court has had many occasions where it recognized good faith beyond its limited definition,14 by declaring the builder to be in good faith despite a finding that the latter encroached or built on a registered lot belonging to another.

In the vintage case of Co Tao v. Chico,15 the three (3) surveyors who made a resurvey of the ground with the aid of their scientific devices, along with their experience and knowledge of surveying, still had a disagreement on the results of their respective measurements. Hence, the Court, in declaring the builder to be in good faith, underscored that unless one is versed in the science of surveying, no one can determine the precise extent or location of his property by merely examining his paper title when even the surveyors cannot, with exactitude, do so.

Also, in Tecnogas Philippines Manufacturing Corporation v. Court of Appeals, et al.,16 the Court, after taking into consideration all the circumstances established in the said case, adjudged petitioner Tecnogas in good faith despite its property encroaching a “narrow, needle-shaped portion of private respondent’s land.”

Meanwhile, the Court, in Sarmiento v. Hon. Agana,17 found the builder to be in good faith despite building his residential house on a lot owned by another. The Court held therein that the builder was in good faith in view of the peculiar circumstances under which he had constructed his house. As the facts disclosed, he proceeded to build on the erroneous assumption that land was owned by his mother-in-law who gave her consent, and thus, could reasonably be expected to later on give him the lot.

Similarly, Rosales v. Castelltort,18 Briones v. Macabagdal, et al.,19 and Pleasantville Development Corporation v. Court of Appeals, et al.,20 all declared the builders therein in good faith despite building their improvements on the properties of another. In these cases, the builders constructed their houses on the lots of another on the honest, albeit mistaken, belief that the lots they built on were the ones sold to them by their predecessors or developers.

In Spouses Aquino v. Spouses Aguilar21 the Court was categorical in acknowledging that it is, in fact, aware of some instances where it allowed the application of Article 448 to a builder who has constructed improvements on the land of another with the consent of the owner. The Court explained therein that builders may be adjudged in good faith even though they are aware of the construction of their improvement on a land owned by another for as long as the landowners knew and approved or acquiesced to the construction of improvements on their property. This was also the declaration of the Court in Communities Cagayan, Inc. v. Spouses Nanol.22

In Pen Dev’t. Corp. v. Leyba, Inc.,23 the Court likewise determined the bad faith of the builder therein on a “more factual approach” rather than by a mechanical application of the constructive notice rule.

Lest it be forgotten, the foregoing cases and several more, involved real estate properties registered under the Torrens system. Yet, these cases prove that even if the provisions of PD 1529 supposedly require an indiscriminate and overreaching application of the constructive notice rule and presumptive knowledge of Torrens title, the Court nevertheless has had so many occasions where it did not apply the same, but instead judiciously considered the peculiar facts of the case in determining the good faith or bad faith of the builder instead.

The determination of the good faith or bad faith must indeed be on a case to case basis

The use of the factual approach in the case at bar in determining the good faith or bad faith of the builder is clearly neither novel nor an aberration, but finds clear support from jurisprudence. Prudence and the interest of justice dictate that We should apply the same going forward. Withal, in PNB v. Heirs of Militar,24 the Court elucidated that in ascertaining good faith, or the lack of it, which is a question of intention, courts are necessarily controlled by the evidence as to the conduct and outward acts by which alone the inward motive may, with safety, be determined. Expounding further, the Court stressed:

Good faith, or want of it, is capable of being ascertained only from the acts of one claiming its presence, for it is a condition of the mind which can be judged by actual or fancied token or signs. Good faith, or want of it, is not a visible, tangible fact that can be seen or touched, but rather a state or condition of mind which can only be judged by actual or fancied token or signs. Good faith connotes an honest intention to abstain from taking unconscientious advantage of another. Accordingly, in University of the East v. Jader we said that “[g]ood faith connotes an honest intention to abstain from taking undue advantage of another, even though the forms and technicalities of law, together with the absence of all information or belief of facts, would render the transaction unconscientious.”

x x x

Contrastingly, in Magat, Jr. v. Court of Appeals the Court explained that “[b]ad faith does not simply connote bad judgment or negligence. It imports a dishonest purpose or some moral obliquity and conscious doing of wrong. It means a breach of a known duty through some motive or interest or ill will that partakes of the nature of fraud.” In Arenas v. Court of Appeals the Court held that the determination of whether one acted in bad faith is evidentiary in nature. Thus “[s]uch acts (of bad faith) must be substantiated by evidence.” Indeed, the unbroken jurisprudence is that “[b]ad faith under the law cannot be presumed; it must be established by clear and convincing evidence.

By this yardstick, it is more judicious for the Court to take on a calibrated examination of the facts and evidence in resolving similarly situated encroachment disputes, as acknowledged by the ponente in this case.

Accordingly, I vote to GRANT the petition.

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Footnotes

1 See Wee v. Mardo, G.R. No. 202414, 4 June 2014; 735 Phil. 420-434 (2014); 725 SCRA 242.

2 ARTICLE 453. If there was bad faith, not only on the part of the person who built, planted or sowed on the land of another, but also on the part of the owner of such land, the rights of one and the other shall be the same as though both had acted in good faith. It is understood that there is bad faith on the part of the landowner whenever the act was done with his knowledge and without opposition on his part.

3 See Dinglasan-Delos Santos v. Abejon, G.R. No. 215820, 20 March 2017; 807 Phil. 720-737 (2017); 821 SCRA 132.

4 See Ochoa v. Apeta, G.R. No. 146259, 13 September 2007; 559 Phil. 650-657 (2007); 533 SCRA 235.

5 RTC Decision; rollo, pp. 143-144.

6 Id. at 139.

7 Id. at 143-144.

8 Rollo, p. 16.

9 ARTICLE 448. 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 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.

10 See Communities Cagayan, Inc. v. Spouses Nanol, G.R. No. 176791, 14 November 2012; 698 Phil. 648- 669 (2012); 685 SCRA 453.

11 ARTICLE 527. Good faith is always presumed, and upon him who alleges bad faith on the part of a possessor rests the burden of proof.

12 Spouses Espinoza v. Spouses Mayandoc, G.R. No. 211170 , 03 July 2017; 812 Phil. 95-107 (2017); 828 SCRA 601.

13 Adriano v. La Sala, G.R. No. 197842, 09 October 2013; 719 Phil. 408-421 (2013); 707 SCRA 345.

14 Supra at note 10.

15 G.R. No. 49167, 30 April 1949; 83 Phil. 543 -547 (1949).

16 G.R. No. 108894, 10 February 1997; 335 Phil. 471-489 (1997); 268 SCRA 5.

17 G.R. No. 57288, 30 April 1984; 214 Phil. 101-106 (1984).

18 G.R. No. 157044, 05 October 2005; 509 Phil. 137-156 (2005); 427 SCRA 144.

19 G.R. No. 150666, 03 August 2010; 640 Phil. 343-358 (2010); 626 SCRA 300.

20 G.R. No. 79688, 01 February 1996; 323 Phil. 12-29 (1996); 253 SCRA 10.

21 G.R. No. 182754, 29 June 2015; 762 Phil. 52-72 (2015); 760 SCRA 444.

22 Supra at note 10.

23 G.R. No. 211845, 09 August 2017; 816 Phil. 554-595 (2017); 836 SCRA 548.

24 G.R. No. 164801, 30 June 2006; 526 Phil. 788-808 (2006); 494 SCRA 308.

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