G.R. No. 211170 - Spouses Espinoza vs. Spouses Mayandoc

A parcel of land in Dagupan City was originally owned by Eusebio Espinoza and, upon his death, divided among his heirs Pastora, Domingo, and Pablo Espinoza.
Domingo Espinoza (father of petitioner Maximo) died in 1965; his spouse Agapita Cayabyab died in 1963.

On May 25, 1972, Pastora Espinoza sold her undivided one-third share to respondents Antonio and Erlinda Mayandoc and to Leopoldo Espinoza.
On the same date, a fictitious deed of sale by Domingo purported to convey three-fourths of the estate to Erlinda’s parents, resulting in TCT No. 28397.
On July 9, 1977, another fictitious deed by Nemesio Cayabyab, Candida Cruz, petitioners, and Leopoldo Espinoza conveyed the entire parcel to respondents, resulting in TCT No. 37403.

Petitioners filed for annulment of documents and nullification of TCT No. 37403; on August 16, 1999, RTC Branch 40 ruled in their favor, ordering reconveyance and attorney’s fees.
On February 6, 2004, the CA affirmed the RTC decision with deletion of attorney’s fees; this decision became final and executory on March 8, 2004.

Respondents filed a complaint under Articles 448 and 546 of the New Civil Code, claiming reimbursement of P800,000 for a house built in good faith in 1995–1996 on the disputed land.
Petitioners answered that respondents knew the deeds were fictitious and thus were bad-faith builders not entitled to indemnity.
On January 5, 2011 respondents opted to buy the land; petitioners declined both to sell the land and to buy the house.
On February 18, 2011, RTC Branch 42 ordered petitioners to sell the land at BIR zonal value.
On September 17, 2013, the CA affirmed with modifications, remanding for proper application of Articles 448, 546, and 548 of the Civil Code.
On January 28, 2014, the CA denied petitioners’ motion for reconsideration.
On March 21, 2014, petitioners filed a Petition for Review under Rule 45 before the Supreme Court.

Whether the CA erred in ruling that petitioners failed to prove respondents’ bad faith in constructing the improvements.
Whether the CA erred in ruling that res judicata does not apply to bar the complaint for reimbursement of useful expenses.