GR L 12439; (May, 1959) (Digest)
G.R. No. L-12439; May 22, 1959
FELICIANO MARTIN, petitioner, vs. PRUDENCIO MARTIN, LUISA DE LA CRUZ, and IGNACIO DE LA CRUZ, respondents.
FACTS
On September 12, 1919, Jose Balagui and Dorotea Balagui sold two parcels of land to Feliciano Martin and Florentino Martin for P1,200. On April 17, 1923, Jose Balagui filed an action for damages against the Martins in the Justice of the Peace Court of Solsona, Ilocos Norte, due to the latter’s alleged failure to comply with conditions of the sale. This action was terminated by a compromise agreement submitted to and approved by the court. The agreement stipulated: (1) the 1919 deed of sale was to be considered without effect; (2) in a new deed, Isidro Martin would replace Florentino Martin as a buyer; and (3) pending the new deed, the land would be at the disposal of the defendants (Feliciano Martin, et al.) to enjoy its fruits for the amount of P1,200, without the defendants transferring ownership definitively. The Court of Appeals found that Feliciano Martin did sign this compromise and that the parties’ intention was to transform the original sale into an equitable mortgage. On January 8, 1946, Jose Balagui sold the same lands to respondent Ignacio de la Cruz for P2,500, with the understanding that de la Cruz would redeem them from the Martins by paying P1,200. Feliciano Martin and his son-in-law and daughter built houses on the land, valued at P3,000 and P2,000 respectively, after Feliciano had returned Florentino’s P600 contribution to the purchase price. The Court of First Instance of Ilocos Norte had declared the compromise null and void for lack of jurisdiction of the Justice of the Peace Court, but the Court of Appeals reversed this, declaring de la Cruz the owner upon payment of P600 to Feliciano Martin. The Court of Appeals’ decision was silent on the rights and obligations concerning the houses.
ISSUE
1. Whether the Court of Appeals erred in declaring that the compromise agreement validly converted the contract of sale into an equitable mortgage.
2. Whether the Court of Appeals erred in not making a finding on the rights and obligations of the parties with respect to the houses built on the land.
RULING
1. On the validity and effect of the compromise agreement: The Supreme Court upheld the Court of Appeals’ findings. The finding that Feliciano Martin signed the compromise agreement is final and binding. The compromise is valid and binding upon the parties as it was executed willingly and voluntarily, regardless of whether the Justice of the Peace Court had jurisdiction over the original case. A party cannot repudiate a voluntary agreement merely because the court lacked jurisdiction. Therefore, the Court of Appeals correctly concluded that the agreement transformed the original sale into an equitable mortgage.
2. On the houses built on the land: The Supreme Court found merit in petitioner’s contention. The Court of Appeals erred in failing to rule on the rights concerning the houses. The evidence showed the houses were built after Feliciano Martin had become the rightful possessor (having returned Florentino’s share and declared the land for tax purposes), and there was no claim or evidence that they were built in bad faith. The compromise did not prohibit construction, and part of the land was residential. Thus, the houses were built in good faith. Applying Article 361 of the Spanish Civil Code, the owner of the land (Ignacio de la Cruz) has the option either to appropriate the houses by paying their value or to compel the builder (Feliciano Martin) to pay the value of the land. Since the houses were built about 29 years prior and their current value was undetermined, the case must be remanded to determine their present value before de la Cruz can exercise his option.
DISPOSITIVE:
The decision of the Court of Appeals is affirmed insofar as it declares intervenor-appellee Ignacio de la Cruz the owner of the lands, entitled to possession upon payment of P600 to petitioner Feliciano Martin. The decision is modified by ordering the remand of the case to the lower court to determine the present value of the two houses, after which Ignacio de la Cruz shall exercise the option provided in Article 361 of the Spanish Civil Code.