G.R. No. L-3756 June 30, 1952
SAGRADA ORDEN DE PREDICADORES DEL SANTISIMO ROSARIO DE FILIPINAS, plaintiff-appellee, vs. NATIONAL COCONUT CORPORATION, defendant-appellant.

FACTS

The plaintiff, Sagrada Orden de Predicadores, is the registered owner of a parcel of land with warehouses in Pandacan, Manila. During the Japanese occupation, on January 4, 1943, the property was sold under duress to a Japanese corporation, Taiwan Tekkosho, for P140,000, and a transfer certificate of title was issued in its name. After liberation, the United States Alien Property Custodian took possession, control, and custody of the property under the Trading with the Enemy Act, as enemy property. In 1946, the Copra Export Management Company occupied the property under a custodianship agreement with the Alien Property Custodian, and later, the defendant National Coconut Corporation (a Philippine government corporation) occupied it. The Philippine Government made representations with the Alien Property Custodian for the property’s use by the government. The defendant spent P26,898.27 on repairs and subleased part of the warehouse.
The plaintiff filed a claim with the Alien Property Custodian, which was denied, and then brought an action in court (Civil Case No. 5007) to annul the sale to Taiwan Tekkosho and recover possession. The Republic of the Philippines intervened. The parties submitted a joint petition agreeing that the sale was null and void ab initio due to duress, that the title be cancelled and re-issued in the plaintiff’s name, that the plaintiff pay the Philippine Alien Property Administration P140,000, and that the defendant vacate by February 28, 1949. The court rendered judgment based on this agreement, releasing the Alien Property Administrator and the intervenor from liability but reserving the plaintiff’s right to recover reasonable rentals from the defendant for its use and occupation.
The present action seeks to recover reasonable rentals from the defendant from August 1946 (when it began occupation) until it vacated. The defendant admits liability for rentals from February 28, 1949, but contests liability for the period prior to that date, claiming it occupied in good faith with the permission of the Alien Property Custodian and was under no obligation to pay. The trial court ruled in favor of the plaintiff, ordering payment of P3,000 monthly from August 1946.

ISSUE

Whether the defendant National Coconut Corporation is liable to pay rentals to the plaintiff for the use and occupation of the property for the period from August 1946 to February 28, 1949.

RULING

No. The Supreme Court reversed the part of the trial court’s judgment that sentenced the defendant to pay rentals from August 1946 to February 28, 1949. The Court affirmed the judgment in all other respects.
The Court held that the defendant’s obligation to pay rentals must arise from one of the sources of obligations under the Civil Code (law, contract, quasi-contract, crime, or negligence). No such obligation existed for the contested period. The defendant entered and occupied the property with the permission of the Alien Property Administration, which had legal control and administration under the Trading with the Enemy Act. The Alien Property Administration held the property not as a successor or trustee of the plaintiff, but as a trustee of the United States Government, with absolute control and power to dispose of it. Therefore, even if rentals were due, they would accrue to the United States Government, not the plaintiff. There was no express or implied agreement for the defendant to pay rentals, as evidenced by the custodianship agreement with the preceding occupant, which contained no rental provision, and the circumstances surrounding the government’s efforts to secure the property for the defendant. The defendant was a possessor in good faith, and the rents it collected from its sublessee rightfully accrued to it. The reservation of the right to sue the defendant in the prior judgment did not create a new right where none existed.