G.R. No. L-25954. June 29, 1979.
CATALINA DE LEON and ELEUTERIO LIMCACO, petitioners, vs. PETRONILO CASTAÑEDA and HONORABLE COURT OF APPEALS, respondents.

FACTS

This case involves a protracted dispute over a parcel of land. The spouses Bautista, original PHHC awardees, first sold their right to purchase the land to Rosario de Leon in July 1949. Upon Rosario’s failure to pay the balance, the Bautistas sold the same right to respondent Petronilo Castañeda in October 1949. Meanwhile, Rosario executed a deed assigning one-half of her rights to her sister-in-law, petitioner Catalina de Leon, dated October 5, 1949. Multiple litigations ensued. In a prior specific performance case (Civil Case No. 9366), the contract between Rosario and the Bautistas was declared rescinded. Castañeda later obtained a certificate of title after fully paying the PHHC.
Castañeda filed the present action for recovery of possession and damages against Catalina de Leon. The trial court ruled in Castañeda’s favor, declaring him the legitimate owner, ordering the defendants to vacate, and awarding him damages, including P2,000 for liquidated damages paid to a contractor and monthly rentals. The Court of Appeals affirmed this decision.

ISSUE

The core issues are: (1) Whether Catalina de Leon is a possessor or builder in good faith entitled to rights over the land and its improvements; and (2) Whether the award of damages to Castañeda is proper.

RULING

The Supreme Court affirmed the decision of the Court of Appeals, ruling against Catalina de Leon on both counts. On the first issue, the Court held that Catalina was not a possessor in good faith. Her claim derived from an assignment from Rosario de Leon, whose own contract with the Bautistas had been definitively rescinded by a final judgment. This rescission voided the source of Catalina’s alleged rights. Furthermore, the assignment was dated October 5, 1949, a day before Rosario filed her own suit against the Bautista spouses, indicating Catalina’s awareness of the defect in the title. Her failure to diligently prosecute her own separate action (Civil Case No. Q-198), which was dismissed for failure to prosecute, further undermined her claim of good faith. She was, therefore, a possessor in bad faith.
On the second issue, the award of damages was upheld. The Court found that the damages awarded corresponded to Castañeda’s inability to possess and use his property due to Catalina’s bad-faith occupation. While similar damages had been awarded in a prior case (Civil Case Q-64) against Rosario de Leon, there was no showing that Castañeda had successfully collected from Rosario. The execution in that case was stayed due to Catalina’s own appeals. Thus, no double recovery or unjust enrichment was proven. Catalina, as a possessor in bad faith who insisted on a simulated title, was properly held liable for the resulting damages. The Court also imposed treble costs on Catalina for her dilatory tactics in prolonging the litigation.