G.R. No. L-12812 & L-12813; September 29, 1959
Case Parties/Title: FILIPINAS COLLEGES, INC., plaintiff-appellee, vs. MARIA GARCIA TIMBANG, ET AL., defendants. (L-12812) / MARIA GARCIA TIMBANG, ET AL., plaintiffs. MARIA GARCIA TIMBANG, plaintiff-appellant, vs. MARIA GERVACIO BLAS, defendant-appellee. (L-12813)

FACTS

This is an appeal from an order of the Court of First Instance of Manila dated May 10, 1957, issued during the execution of a final judgment of the Court of Appeals. The judgment adjudicated the rights of the parties as follows:
1. Filipinas Colleges, Inc. was declared to have acquired the rights of spouses Maria Garcia Timbang and Marcelino Timbang to a lot (Lot No. 2-a) and was ordered to pay them P15,807.90 plus other amounts paid to the original vendor. Filipinas Colleges was required to deposit the total land value (later fixed at P32,859.34) with the court within 90 days after the decision became final; otherwise, it would lose all rights to the land, and the Timbang spouses would become owners.
2. Maria Gervacio Blas was declared a builder in good faith of a school building on the lot and was entitled to P19,000.00 for it. Filipinas Colleges, as purchaser of the building, was ordered to deliver stock certificates worth P10,800.00 and pay Blas P8,200.00.
3. If Filipinas Colleges failed to deposit the land value, the Timbang spouses would become owners of the land and had to inform the court of their option under Article 448 of the Civil Code: either to appropriate the building by paying Filipinas Colleges P19,000.00 or to compel Filipinas Colleges to acquire the land and pay its price.
Filipinas Colleges failed to deposit the P32,859.34 within the prescribed period. The Timbang spouses informed the court they chose to compel Filipinas Colleges to pay for the land. A writ of execution was issued for this amount. Blas also filed for execution of her judgment for the unpaid P8,200.00 for the building, and a writ was issued. Blas notified the Sheriff of her preferential lien on the building under Article 2242 of the Civil Code. The Sheriff levied on the building and sold it at public auction on March 5, 1957, with the Timbang spouses as the highest bidders for P5,750.00. Personal properties of Filipinas Colleges were also auctioned for P245.00 in favor of the Timbangs.
Subsequently, three motions were filed:
1. By Blas, praying that the Sheriff and/or the Timbangs be ordered to pay her the P5,750.00 from the auction sale of the building, over which she had a lien.
2. By Blas, praying that the lot be sold at public auction to satisfy the two unsatisfied executions.
3. By Filipinas Colleges, praying that since its properties were auctioned and the proceeds applied to partially pay the land value, it be declared part-owner of the lot to the extent of those proceeds.
The Timbang spouses opposed all motions. The lower court granted the motions, ordering: (a) the Timbangs to pay Blas P5,750.00 or the Sheriff’s certificate of sale would be void; (b) Filipinas Colleges declared owner of an undivided interest in the lot proportional to the auction proceeds; and (c) the sale of that interest to satisfy the balance of Blas’s judgment. The Timbangs appealed.

ISSUE

1. Whether the Timbang spouses, as successful bidders at the auction sale of the building, are obligated to pay their bid of P5,750.00 to Maria Gervacio Blas, who holds a lien for the unpaid balance of the building’s purchase price.
2. Whether the lower court correctly declared Filipinas Colleges a part-owner of the lot and ordered the sale of its interest to satisfy Blas’s claim.

RULING

1. Yes, the Timbang spouses are obligated to pay their bid of P5,750.00 to Blas. The Court rejected the Timbangs’ argument that, because Blas (as builder in good faith) failed to pay for the land after they exercised their option under Article 448, she lost her right of retention under Article 546, and they automatically became owners of the building under Article 445, making the auction sale superfluous and their bid a payment for their own property. The Court held that Articles 448 and 546 of the Civil Code do not support this conclusion. The landowner’s right to choose between appropriating the building or compelling the builder to pay for the land does not automatically transfer ownership of the building to the landowner upon the builder’s failure to pay. The builder’s right of retention persists until indemnified. The auction sale was valid, and the Timbangs, as successful bidders, are bound to pay their bid. Blas’s preferential lien for the unpaid purchase price attaches to the building, and the proceeds should be applied to her credit. The Court modified the order to provide that if the Timbangs fail to pay the P5,750.00 within 15 days from notice of final judgment, an execution shall issue against their properties for that amount.
2. Yes, the lower court correctly declared Filipinas Colleges a part-owner and ordered the sale of its interest. The Court found the order justified because the proceeds from the auction of Filipinas Colleges’ properties (P5,750.00 for the building and P245.00 for personalty) constituted a partial payment of the land value owed to the Timbangs. Consequently, Filipinas Colleges acquired a proportional undivided interest in the lot. To satisfy the remaining balance of Blas’s judgment (the difference between P8,200.00 and P5,750.00), the sale of that undivided interest was proper.
The appealed order was affirmed in all other respects, with costs against the appellants.