G.R. No. 153625 - Heirs of Cabal vs. Spouses Cabal

Case Summary (G.R. No. 153625)

Factual Background

During his lifetime, Marcelo Cabal owned a parcel described as Lot G under Original Certificate of Title No. 29. In 1949 Marcelo allowed his son Marcelino to build a house on a portion of Lot G, and Marcelino and later his son continuously occupied that southernmost portion thereafter. Marcelo died in August 1954, and his heirs effected an extrajudicial settlement in 1964 dividing Lot G into equal undivided shares and obtaining TCT No. T-8635. Subsequent partitions and subdivisions in 1976 and thereafter produced TCTs identifying adjacent lots; a subdivision survey plan in 1982 resulted in designation of the co-owners’ shares as Lots 1-A through 1-E, with Lot 1-E later issued as TCT No. 43419 in the name of Lorenzo in 1993. The subdivision showed the house built by Marcelino to be located on the southernmost portion of Lot 1-E, not on the lot designated as Lot G-1 under TCT No. T-22656, which produced the dispute.

Early Attempts at Amicable Settlement and Origin of Suit

Upon discovery of the discrepancy, SPOUSES LORENZO CABAL AND ROSITA CABAL confronted Marcelino and the parties agreed on March 1, 1989 to a re-survey and swapping of lots for reconstruction of titles, but the agreed resurvey and swapping of lots did not materialize. After barangay-level efforts failed, respondents filed a complaint for recovery of possession with damages against Marcelino on August 10, 1994, alleging bad faith introduction of improvements on their land.

Trial Court Proceedings (MTC)

Marcelino answered with a counterclaim and asserted possession in good faith and acquisitive prescription. After trial, the Municipal Trial Court rendered judgment on November 19, 1997 in favor of Marcelino, ordering plaintiffs to relinquish possession to the defendant, to remove improvements or be evicted, and to pay moral and exemplary damages and attorney’s fees. The MTC reasoned that prescription had barred respondents’ claim. Respondents filed a motion for reconsideration, which the MTC denied on February 5, 1998.

RTC Proceedings and Ruling

Respondents appealed to the Regional Trial Court, Branch 70, which, on August 10, 2000, reversed the MTC. The RTC ordered Marcelino and those claiming under him to vacate and deliver peaceful possession of the disputed 423-square-meter portion to the plaintiffs, to remove improvements, and to pay moral and exemplary damages and attorney’s fees. The RTC concluded that Marcelino’s possession was in the concept of a co-owner and that toleration by co-owners did not ripen into ownership; thus prescription did not operate in his favor. Marcelino’s motion for reconsideration before the RTC was denied.

Court of Appeals Proceedings

Marcelino sought relief from the Court of Appeals. The CA, in a decision dated September 27, 2001, affirmed the RTC in toto. The CA held that although Marcelino may have initially been in good faith when he occupied the disputed portion in 1949, his good faith diminished after Lot G was surveyed because he was apprised that the portion he occupied differed from the portion titled in his name; the CA further concluded that he sought to retain both the lot he occupied and Lot G-1, which could not be allowed. Marcelino’s motion for reconsideration before the CA was denied on May 22, 2002. Marcelino died during the pendency of the CA proceedings.

Petition to the Supreme Court and Issues Presented

The heirs of Marcelino, represented by his widow Victoria, filed a petition for review under Rule 45. They principally argued that Marcelino never intended to hold both the 423-square-meter portion within Lot 1-E and Lot G-1; that he was only interested in the disputed portion because he had introduced considerable improvements thereon in good faith; and that the CA erred in ruling that his good faith began to diminish after the survey of Lot G. Petitioners alternatively asked that Marcelino be adjudged a builder in good faith and accorded rights under Article 448 of the Civil Code, or that swapping of lots be ordered because no improvements existed on Lot G-1.

Parties’ Contentions Before the Supreme Court

Petitioners emphasized long-standing occupation since 1949 with the co-heirs’ acquiescence, the absence of improvements on Lot G-1, the 1989 agreement to re-survey and swap lots as evidence of good faith, and the abandonment of the prescription defense on appeal. Respondents maintained that Marcelino acted in bad faith and therefore could not be considered a builder in good faith entitled to remedies under Article 448.

Applicable Rules on Standard of Review and Exceptions

The Court reiterated that it ordinarily limited its review to questions of law in appeals from the CA and did not reweigh evidence. It then identified recognized exceptions permitting the Court to resolve factual issues, including findings grounded entirely on speculation, inferences that are manifestly mistaken, judgments based on misapprehension of facts, and instances where the CA manifestly overlooked relevant undisputed facts. The Court found that several of these exceptions applied to the present case and thus undertook a factual review.

Supreme Court’s Findings on Possession, Co-ownership and Prescription

The Court found that Marcelino and his predecessors had continuously occupied the disputed portion since 1949 with his father’s consent and the co-heirs’ knowledge, such that his inheritance was already particularly designated and physically segregated long before the 1976 subdivision. The Court applied the principle that co-ownership does not exist where the portion owned is concretely determined and identifiable, even if technically not described. The Court concluded that the 1976 subdivision produced the dilemma by designating an adjacent parcel as Marcelino’s share contrary to his long-standing possession. On acquisitive prescription, the Court held that the evidence was insufficient to establish either ordinary or extraordinary prescription as to the disputed lot; tax declarations and receipts alone were inadequate proof of ownership by prescription absent proof of actual possession of the parcel declared. The Court observed that petitioners and Marcelino ceased to press prescription before the RTC and CA, and thus were deemed to have abandoned that defense.

Supreme Court’s Findings on Good Faith and Builder in Good Faith Status

Applying the presumption of good faith and the statutory definitions, the Court held that Marcelino’s possession was in good faith until the moment facts showed his possession to be improper. The Court found no concrete evidence showing knowledge by Marcelino, prior to the respondents’ notice, that he occupied respondents’ land. The 1977 mortgage of Lot G-1 did not demonstrate bad faith since there was no proof Marcelino then knew of the mismatch between his title and the parcel he occupied. The 1989 agreement to re-survey and swap lots constituted substantial proof of good faith and lack of intent to hold two lots. The CA’s conclusion that Marcelino intended to hold both lots was characterized as mere speculation unsupported by the record. The Court therefore adjudged Marcelino a builder in good faith at least until respondents informed him of the encroachment.

Legal Consequences Under Article 448 and Related Provisions

The Court turned to Article 448 of the Civil Code, which sets out the remedies and options when a person builds in good faith on the land of another. The Court observed that the owner may appropriate the work af

Case Syllabus (G.R. No. 153625)

Parties and Procedural Posture

Heirs of Marcelino Cabal, represented by Victoria Cabal filed a petition for review under Rule 45, Rules of Court assailing the decision of the Court of Appeals in CA-G.R. SP No. 64729.
Spouses Lorenzo Cabal and Rosita Cabal were the plaintiffs below who prosecuted the action for recovery of possession with damages against Marcelino Cabal.
The action originated as Civil Case No. 735 before the Municipal Trial Court of Iba, Zambales and was appealed to RTC, Branch 70, Iba, Zambales as Civil Case No. RTC-1489-I.
The Court of Appeals affirmed the RTC decision by Decision dated September 27, 2001 and denied reconsideration by Resolution dated May 22, 2002.
The petitioners filed the present petition on June 6, 2002 after Marcelino Cabal died during the pendency of the appellate proceedings.

Key Factual Allegations

Marcelo Cabal owned a 4,234-square meter parcel known as Lot G that was covered by OCT No. 29 and which later underwent successive partitions and subdivisions.
Marcelino Cabal built his house in 1949 on a definite southernmost portion of what later became Lot 1-E and continuously occupied that portion with his father’s consent.
An extra-judicial partition in 1964 resulted in undivided shares and later subdivisions in 1976 produced a designated Lot G-1 in favor of Marcelino and Lot G-2 in favor of the other heirs.
A later subdivision survey (Psd-307100) and related instruments designated the parcel actually occupied by Marcelino as the southernmost portion of Lot 1-E which eventually issued as TCT No. 43419 in the name of Lorenzo.
The parties executed an agreement on March 1, 1989 to resurvey and swap lots for reconstructions of titles, but the agreement did not materialize.
Respondents filed a complaint for recovery of possession with damages in 1994, and the MTC initially rendered judgment for the defendant in 1997 on grounds of prescription.
The RTC reversed the MTC in 2000 and ordered the defendant to vacate, remove improvements, and pay damages and attorney’s fees, a decision later affirmed by the Court of Appeals.

Issues Presented

Whether acquisitive prescription or possession in the concept of an owner had barred the respondents' recovery of the disputed portion.
Whether the defendant’s long possession was in the concept of a co-owner such that prescription could run in his favor.
Whether the defendant was a builder in good faith over the improvements on the disputed land and, if so, what remedies or indemnities apply under Article 448 and related provisions.
Whether a judicial order compelling swapping of lots was warranted despite the parties’ failure to plead or pursue enforcement of the swapping agreement.

Contentions of the Parties

Petitioners contended that Marcelino possessed the disputed lot in good faith since 1949, that he never intended to hold both lots, that he introduced considerable improvements on the lot he occupied, and that his good faith only ceased upon formal notice of the error.
Respondents maintained that Marcelino acted in bad faith and knowingly introduced improvements on land titled to others, and they sought recovery of possession and damages.
The MTC found that acquisitive prescription had vested in Marcelino, while the RTC and CA found his possession to be in the concept of a co-owner and ordered recovery.

Court’s Findings of Fact

The Court found that Marcelino built and occupied the disputed portion in 1949 with his father’s consent and with the knowledge of co-heirs, giving him exclusive dominion over a concrete, identifiable portion.
The Court found that the 1976 subdivision designated a different adjacent parcel as M