Case Summary (G.R. No. 183543)
Property and Legal Background
The NHA owns a 120-hectare government property reserved for the National Government Center. Under Proclamation No. 1670 issued on September 19, 1977, President Ferdinand Marcos granted the respondent usufructuary rights over seven hectares of this property. However, the respondent occupied a total of sixteen hectares, exceeding the area granted, and leased the excess nine hectares to private tenants.
Changes in Property Status and Government Actions
On November 11, 1987, President Corazon Aquino issued Memorandum Order No. 127, revoking the reserved status of fifty hectares of the property—including portions occupied by the respondent—and authorized NHA to commercialize and dispose of it by bidding. Later, Executive Order No. 58 (1993) created an inter-agency Executive Committee, including the NHA, to oversee development of the property known as the North Triangle Property. Given the respondent’s occupancy of a prime area, the committee proposed relocating the respondent to more suitable areas.
Initial Litigation and RTC Proceedings
The respondent filed a complaint for injunction in August 1994 to protect its possession under Proclamation No. 1670. The NHA counterclaimed, seeking the respondent’s vacation of the excess area and recovery of rent, damages, attorney’s fees, and expenses. The RTC initially issued a preliminary injunction barring the petitioner from relocating the respondent and, in a 1998 summary judgment, granted a final injunction in favor of the respondent for the seven-hectare area but reserved ruling on the counterclaim regarding the excess. Both parties’ motions for reconsideration were denied. The Court of Appeals (CA) affirmed, remanding the case for determination of the counterclaim. The petitioner recovered possession of the excess on March 1, 1999.
RTC Final Ruling on Counterclaim
In its 2005 decision, the RTC validated the turnover of the excess area to NHA but denied the claim for rent, exemplary damages, attorney’s fees, and litigation expenses. The court found that the respondent had authority from then Minister of Natural Resources Ernesto Maceda to lease the excess area to raise funds for its operations, as it no longer received government donations post-1986. Furthermore, the respondent had protected and developed the excess area, preventing squatter occupation. The court held that the expenses incurred by the respondent compensated the NHA, negating rent claims.
Court of Appeals Ruling
The CA upheld the RTC’s decision, ruling that respondent was not an officious manager since ownership was not abandoned or neglected by NHA. Respondent’s possession of the excess was by tolerance, making a formal demand to vacate necessary to establish unlawful detainer and entitlement to rent and damages. The Executive Committee’s relocation proposal was not considered a legal demand. Since the excess was surrendered without demand and there was no evidence of bad faith, the CA denied rent and damage claims. Petitioner’s motion for reconsideration was denied.
Issue Before the Supreme Court
The petitioner raised a sole issue: whether it is entitled to recover rent, exemplary damages, attorney’s fees, and litigation expenses from the respondent for the excess area unlawfully occupied beyond the seven hectares.
Supreme Court’s Analysis on Usufructuary Rights and Possession
The Court reaffirmed the respondent’s usufructuary rights under Proclamation No. 1670 are limited to seven hectares only. Encroachment beyond this area constituted abuse of privilege and wrongful possession. The Court classified respondent as a possessor in bad faith for the excess since it acted beyond granted rights, and this status was unaffected by the alleged authorization given by Minister Maceda, which did not originate from the NHA as owner.
Legal Consequences of Bad Faith Possession
Under Articles 549, 546, and 443 of the Civil Code of the Philippines, a possessor in bad faith is obliged to:
- Reimburse the legitimate possessor for fruits (profits) received and those the legitimate possessor could have received during possession.
- Only recover necessary expenses, which are expenses required for preservation or proper upkeep of the property, excluding improvements for luxury or pleasure.
The respondent admitted leasing the excess area and generating income therefrom, thus must account for such fruits to the NHA. However, it is entitled to reimbursement of documented necessary expenses, including efforts to develop and protect the excess area from squatters, as previously found by both the RTC and C
Case Syllabus (G.R. No. 183543)
Facts and Procedural Background
- The petitioner, National Housing Authority (NHA), owns a 120-hectare government property in Diliman, Quezon City, reserved for the National Government Center.
- By Proclamation No. 1670 dated 19 September 1977, President Ferdinand Marcos reserved a seven-hectare portion of this property and granted Manila Seedling Bank Foundation, Inc. (respondent) usufructuary rights over it.
- The respondent occupied a total of 16 hectares, thus exceeding the 7-hectare portion legally granted, and leased the excess area to private tenants.
- Subsequent governmental issuances, including Memorandum Order No. 127 and Executive Order No. 58, changed the status of the remaining property and created an Executive Committee to oversee its development, which recommended respondent’s transfer to other locations.
- In response, respondent filed a Complaint for injunction with prayer for preliminary injunction before the Regional Trial Court (RTC) seeking protection of its possession of the property under Proclamation No. 1670.
- The RTC issued a writ of preliminary injunction in favor of respondent and later granted a final injunction protecting the 7-hectare area but reserved decision on the excess.
- Petitioner counterclaimed for respondent’s vacation of the entire occupied area (7 hectares plus the excess) and sought payment for rent, exemplary damages, attorney’s fees, and litigation expenses.
- The Court of Appeals (CA) upheld the injunction but remanded the case to the RTC to address the counterclaim regarding the excess.
- Petitioner regained possession of the excess area in March 1999 and proceeded to litigate for damages.
RTC Decision
- The RTC validated the turnover of the excess property to petitioner.
- It denied petitioner’s claim for rent, exemplary damages, attorney’s fees, and litigation expenses.
- The court found that respondent had authority from the then Minister of Natural Resources, Ernesto Maceda, to lease the excess to generate operational income, as it no longer received government donations since 1986.
- The RTC also noted that respondent invested in developing and protecting the excess area from squatters.
- The court reasoned that such developmental expenses served as compensation to petitioner for the use of the excess property.
CA Ruling
- The CA affirmed the RTC decision, agreeing that respondent’s actions were not those of an officious manager under negotiorum gestio, as petitioner did not abandon or neglect the excess property.
- The CA emphasized that respondent’s possession of the excess was tolerated by petitioner and hence a demand to vacate was required before unlawful detainer or damages could be