G.R. No. L-23497 April 26, 1968
J.M. TUASON and CO., INC., petitioner, vs. ESTRELLA VDA. DE LUMANLAN and the COURT OF APPEALS (FIFTH DIVISION), respondents.

FACTS

Petitioner J.M. Tuason & Co., Inc., a registered owner of land in Sta. Mesa Heights Subdivision, filed a complaint in the Court of First Instance of Rizal to eject respondent Estrella Vda. de Lumanlan from an 800-square-meter lot she occupied since April 1949. Lumanlan defended her possession by claiming she bought the lot from Pedro Deudor in March 1949 and that a Compromise Agreement between Deudor and Tuason & Co., approved by the court in March 1953, recognized her rights as a buyer. The trial court ruled in favor of Tuason & Co., holding that as the registered owner, its title prevailed, rendering Lumanlan’s evidence immaterial. The Court of Appeals reversed, applying the Supreme Court’s ruling in Evangelista vs. Deudor, and held that paragraph 7 of the Compromise Agreement constituted a valid defense, obligated Tuason & Co. to sell the lot to Lumanlan at a reasonable price, and legalized her possession.

ISSUE

Whether the Court of Appeals erred in ruling that the Compromise Agreement between Tuason & Co. and the Deudors obligated Tuason & Co. to sell the lot to respondent Lumanlan at a reasonable price and legalized her possession.

RULING

Yes, the Court of Appeals erred. The Supreme Court reversed the decision of the Court of Appeals and reinstated the judgment of the Court of First Instance. The Court held that paragraph 7 of the Compromise Agreement did not obligate Tuason & Co. to sell to the Deudors’ buyers at the price stipulated with the Deudors. Instead, it only granted the buyers a preferential right to purchase the lots they occupied at the current prices and terms specified by Tuason & Co. for its subdivision, provided they recognized Tuason & Co.’s title and signed new contracts. Respondent Lumanlan never signed such a new contract and, in her answer, repudiated and assailed the Compromise Agreement, thus barring her from deriving rights from it. Without the Agreement, she could not justify her possession against Tuason & Co.’s Torrens title, which she was conclusively bound by. Furthermore, she could not be considered a builder in good faith due to presumptive knowledge of the registered title. The Court reserved Lumanlan’s right to claim a refund or credit for amounts paid to the Deudors, as this was not raised in the trial court.