G.R. No. L-6088 - De Los Santos vs. Roman Catholic Church of Midsayap

The City of Dagupan (the CITY) filed a complaint against the National Waterworks and Sewerage Authority (NAWASA), now the Metropolitan Waterworks and Sewerage System (MWSS), for recovery of ownership and possession of the Dagupan Waterworks System.
NAWASA claimed ownership under R.A. 1383, which vested it with ownership, possession, and control over all waterworks systems in the Philippines.
NAWASA also counterclaimed for reimbursement of expenses amounting to ₱255,000.00 for necessary and useful improvements made to the Dagupan Waterworks System.

The court found the City of Dagupan to be the lawful owner of the waterworks system.
NAWASA was declared a possessor in bad faith due to its taking of the property without just compensation after Supreme Court decisions declaring such acts unconstitutional.
As a possessor in bad faith, NAWASA was not entitled to indemnity for the improvements it had introduced.

The Court of Appeals affirmed the trial court decision, ruling that a possessor in bad faith is not entitled to reimbursement for useful improvements under Article 546 of the Civil Code.
It cited that the improvements were made after litigation had commenced and after relevant Supreme Court rulings, reinforcing NAWASA’s bad faith status.
The appellate court referred to legal authorities confirming that the owner is entitled to all useful improvements without obligation to reimburse a bad faith possessor.

MWSS (successor-in-interest of NAWASA) filed a petition for review on certiorari.
The sole issue was whether a possessor in bad faith has the right to remove useful improvements introduced to the property.
MWSS argued that Civil Code provisions did not explicitly settle this right and cited cases (Mindanao Academy, Inc. vs. Yap; Carbonell vs. Court of Appeals) to support removal rights.
The City of Dagupan raised procedural objections, stating the issue was not raised below and the improvements were not identified specifically. They also contested the applicability of cited cases and the separability of improvements without damage.

The Supreme Court noted a common procedural error where the trial or appellate court is improperly joined as a party respondent in appeals under Rule 45.
The Court clarified that the proper respondents are the appellees only and that courts are parties only in special civil actions for certiorari under Rule 65, not in petitions for review on certiorari under Rule 45.

Whether MWSS, as possessor in bad faith, has the right to remove useful improvements introduced to the Dagupan Waterworks System.
Whether the procedural objections by the City of Dagupan concerning the raising of the removal issue for the first time before the Supreme Court are valid.