A) MERCADO VS CA GR No. L-44001 June 10, 1988B) BALLATAN VS MARTINEZ GR No. 125683 March 2, 1999C) SARMIENTO V AGANA GR No. L-57288 April 30, 1984D) TECHNOGAS V CA GR No. 108894 February 10,1997E) DEPRA V DUMLAO GR No. L-57348, May 6, 1985F) VIRGILIO V PATRICIA GR No. 134651, September 18, 2000G) GUZMAN et al. VS FUENTE et al., GR 32433, December 29, 1930H) ALBURU V VILLANUEVA GR. No. 3003. January 2, 1907I) TUASON V. LUMANLAN GR. No. L-23497 April 26, 1968J) PLEASANTVILLE V CA GR. NO. 79688 February 1, 1996

A) MERCADO VS CAG.R. No. L-44001 June 10, 1988PAZ MERCADO, CAROLINA S. CHICO, LUCIANA CABRERA, JOAQUIN IGNACIO, ELMER FLORES, AVELINA C. NUCOM, et al.,petitioners,vs.HON. COURT OF APPEALS, HON. BENIGNO PUNO, LOLITA C. BULAONG, FLORENTINO AGULTO, SEVERINO SALAYSAY, SUSANA BERNARDINO, et al.,respondents.NARVASA,J.:The question presented by this appeal is whether or not the special civil action ofcertiorarimay be properly resorted to by a party aggrieved by a judgment of a Regional Trial Court (or Court of First Instance)which became final because not appealed within the reglementary period to bring about its reversal on the ground that the Court had applied the wrong provision of the Civil Code, and had rendered summary judgment at the instance of the defendants without receiving evidence on the issue of damages allegedly suffered by the plaintiffs, thereby denying them due process.The private respondents, hereafter simply referred to as theBulaong Group, had for many years been individual lessees of stalls in the public market of Baliuag, Bulacan; from 1956 to 1972, to be more precise. The market was destroyed by fire on February 17, 1956; the members of the Bulaong Group constructed new stalls therein at their expense; and they thereafter paid rentals thereon to the Municipality of Baliuag.Sometime in 1972, the members of the group sub-leased their individual stalls to other persons, hereafter simply referred to as theMercado Group.After the Mercado Group had been in possession of the market stlls for some months,as sub-lessees of the Bulaong Group,the municipal officials of Baliuag cancelled the long standing leases of the Bulaong Group and declared the persons comprising the Mercado Group as the rightful lessees of the stalls in question, in substitution of the former. The municipal authorities justified the cancellation of the leases of the Bulaong Group by invoking the provisions of Municipal Ordinance No. 14, dated December 14, 1964, which prohibited the sub-leasing of stalls by the lessees thereof, as well as a directive of the Office of the President (contained in a letter of Executive Secretary R. Zamora dated May 29,1973) requiring enforcement of said Ordinance No. 14. Recognition of the Mercado Group's rights over the stalls was subsequently manifested in Municipal Ordinance No. 49, approved on July 5,1973.The members of the Bulaong Group sued. They filed several individual complaints with the Court of First Instance seeking recovery of their stalls from the Mercado Group as well as damages.1Their theory was anchored on their claimed ownership of the stalls constructed by them at their own expense, and their resulting right, as such owners, to sub-lease the stalls, and necessarily, to recover them from any person withholding possession thereof from them. Answers were seasonably filed in behalf of the defendants, including the Municipality of Baliuag,2after which apre-trial was held in the course of which the parties stipulated upon practically all the facts.The Mercado Group thereafter filed motions for summary judgment, asserting that in light of the admissions made at the pre-trial and in the pleadings, no issue remained under genuine controversion. The Bulaong Group filed an opposition which, while generally stating that there were "other material allegations in the amended complaint(s)" upon which proof was needful, actually identified only one issue of fact requiring "formal submission of evidence," i.e., the claim for actual damages " ... the exact amount of which shall be proven at the trial." The Bulaong Group then filed a "Motion to Accept Affidavits and Photographs as Annexes to the Opposition to the Motion for Summary Judgment," which affidavits and photographstended to establish the character and value of the improvements they had introduced in the market stalls.As far as the records show, no objection whatever was presented to this motion by the Mercado Group (movants for summary judgment), and the affidavits and photographs were admitted by the Trial Court. Specifically, the Mercado Group never asked, either in their motion for summary judgment or at any time after having received a copy of the motion to accept affidavits and photographs, etc., that a hearing be scheduled for the reception of evidence on the issue of the Bulaong Group's claimed actual damages.On October 24,1975, respondent Judge rendered a summary judgment in all the cases.3It rejected the claim of the Municipality of Baliuag that it had automatically acquired ownership of the new stalls constructed after the old stalls had been razed by fire, declaring the members of the Bulaong Group to bebuilders in good faith,entitled to retain possession of the stalls respectively put up by them until and unless indemnified for the value thereof. The decision also declared that the Bulaong and Mercado Groups had executed the sub-letting agreements with full awareness that they were thereby violating Ordinance No. 14; they were thus inpari delicto,and hence had no cause of action one against the other and no right to recover whatever had been given or demand performance of anything undertaken. The judgment therefore decreed (1) the annulment of the leases between the Municipality and the individuals comprising the Mercado Group (the defendants who had taken over the original leases of the Bulaong Group); and (2) the payment to the individual members of the Bulaong Group (the plaintiffs) of the stated, adjudicated value of the stalls, with interest IF ... the Municipality ... would insist in its right rescind or annul its contracts of leases with the said plaintiffs over the lots on which the stalls in question are erected; for this purpose, since the private defendants become immediate beneficiaries to a transfer of possession over the stalls in question, the Municipality .. may require said private defendants .. to pay the plaintiffs the aforesaid amounts in the event that said private defendants and the Minucipality .. the lots on which said stalls are contracted; however, unless the plaintiffs shall have been fully paid of the value of their stalls in the amounts mentioned above, they shall have the right to remain in their respective stalls and in case the private defendants shall refuse to pay for the value of the stalls in this event, the ejectment of the said private defendants from the stalls in question shall be ordered .....The Mercado Group and the Municipality filed on November 14, 1975, motions for reconsideration of the summary judgment, notice of which had been served on them on November 3, 1975. These were denied, and notice of the order of denial was received by them on December 18, 1975. On January 7, 1976, the Mercado Group filed a notice of appeal, an appeal bond and a motion for extension of time to file their record on appeal. But by Order dated January 9, 1976, the Trial Court directedinter aliathe execution of the judgment, at the instance of the Bulaong Group and despite the opposition of that Mercado Group, adjudging that its decision had become final because the appeal documents had "not been seasonably filed." The writ was issued, and the Mercado Group's motion to quash the same and to re-open the case was denied.The Group went to the Court of Appeals, instituting in that court a special civil action ofcertiorariand prohibition4"to annul that portion of the summary judgment . . awarding damages to private respondents (the Bulaong Group), and to restrain the respondent Judge and the Provincial Sheriff of Bulacan from enforcing the same." That Court rendered judgment on May 14, 1976,5holding that (1) the summary judgment was properly rendered, respondent Judge (having) merely adhered to the procedure set forth by the . . . Rule (34);" and if "he committed error in the appreciation of the probative values of the affidavits and counter-affidavits submitted by the parties, such error is merely one of judgment, and not of jurisdiction;" (2) the Mercado Group had not been denied due process "for failure of respondent Judge to conduct a formal trial . . (to receive) evidence on the question of damages," since the parties were afforded the right, in connection with the motion for summary judgment, to speak and explain their side of the case by means of affidavits and counter-affidavits; and (3) since the Mercado Group had attempted to perfect an appeal from the summary judgment which was however futile because their appeal papers "were filed beyond the reglementary period," the judgment had become final andcertiorarior prohibition could not be availed of as a substitute for the group's lost appeal. Once again, the Mercado Group moved for reconsideration of an adverse judgment, and once again were rebuffed.The members of the Mercado Group are now before this Court on an appeal bycertiorari,this time timely taken, assailing the above rulings of the Court of Appeals. Their appeal must fail for lack of merit. No error can be ascribed to the judgment of the Court of Appeals which is hereby affirmedintoto.Upon the factual findings of the Court of Appeals, by which this court is bound, and taking account of well established precedent from which there is no perceivable reason in the premises to depart, there is no question that the petitioners (the Mercado Group) had failed to perfect an appeal from the summary judgement within the reglementary period fixed by the Rules of Court. According to the Appellate Court-The summary judgment rendered by respondent Judge, being a final adjudication on the merits of the said cases, could have been appealed by the petitioners. In point of fact, petitioners did attempt to perfect an appeal from said judgment, but the attempt proved futile because their notice of appeal, appeal bond and motion for extension of time file record on appeal were filed beyond the reglementary period. The record discloses that they received copy of the summary judgment on November 3, 1975; that on November 14, 1975, or after the lapse of eleven (11) days from receipt of said decision, they filed their motion for reconsideration of said decision; that on December 18, 1975, they received copy of the order denying their motion for reconsideration; and that they did not file their notice of appeal, appeal bond and motion for extension of time until January 7, 1976, or twenty (20) days after receipt of the order denying their motion for reconsideration. The notice of appeal, appeal bond and motion for extension were, therefore, presented one (1) day after the expiration of the 30-day period to perfect an appeal. Thus, respondent Judge correctly disallowed the appeal.The Appellate Court's computation of the period is correct, and is in accord with Section 3, Rule 41 of the Rules of Court providing that from the 30-day reglementary period of appeal shall be deducted the "time during which a motion to set aside the judgment or order or for a new trial has been pending."6Significantly, the petitioners have made no serious effort to explain and excuse the tardiness of their appeal. What they have done and continue to do is to insist that the special civil action ofcertiorariis in truth the proper remedy because the judgment is void. The judgment is void, they say, because they were denied due process, as "respondent Judge granted exorbitant damages, without reliable proof, and without giving petitioners the chance to prove their claim that private respondents are not entitled to damages, and conceding that they are, the damages are much lower than that awarded by the respondent Judge."7According to them, since the matter of damages was clearly a controverted fact, the Court had absolutely no jurisdiction to determine it on mere affidavits.There can be no debate about the proposition that under the law, the Trial Court validly acquired jurisdiction not only over the persons of the parties but also over the subject matter of the actions at bar. The parties composing the Mercado Group cannot dispute this; they recognized the Court's competence when they filed their answers to the complaints without questioning the Court'sjurisdiction of the subject-matter; indeed neither at that time nor at any other time thereafter did any one of them ever raise the question.Now, jurisdiction, once acquired, is not lost by any error in the exercise thereof that might subsequently be committed by the court. Where there is jurisdiction over the subject matter, the decision of all other questions arising in the case is but an exercise of that jurisdiction . 8 And when a court exercises its jurisdiction, an error committed while engaged in that exercise does not deprive it of the jurisdiction being exercise when the error is committed. If it did, every error committed by a court would deprive it of jurisdiction and every erroneous judgment would be a void judgment. This, of course, can not be allowed. The administration of justice would not survive such a rule. 9Moreover, any error that the Court may commit in the exercise of its jurisdiction, being merely an error of judgment, is reviewable only by appeal, not by the special civil action ofcertiorarior prohibition.10The petitioners do not dispute the propriety of the rendition of a summary judgment by the Courta quo, a remedy that they themselves had in fact asked for. What they challenge is the inclusion in that judgment of an award of damages on the basis merely of affidavits, without actual reception of evidence thereon at a hearing set for the purpose.The challenge is not however justified by the peculiar circumstances of the case at bar. The petitioners, to repeat, were the parties who, as defendants, had moved for summary judgment . They knew or were supposed to know that, as stated by the Rules, their motion would be granted if "the pleadings, depositions, and admissions on file, together with the affidavits show that,except as to the amount of damages,there is no genuine issue as to any material fact and that ... (they are) entitled to a judgment as a matter of law."11They knew that the private respondents, as plaintiffs, had in fact opposed their motion and had pointed out preciselythe need for a hearing on the controverted matter of damages.That they did not join in the move to have a hearing on the issue of damages is an indication that they considered it unnecessary, When the respondents (plaintiffs)apparently in view of the Court's and the defendants' indifference to the notion of having a hearing on the matter of damages, implicitly indicating the belief of the superfluity of a hearingpresented affidavits and depositions to prove the value of the improvements, for which they were seeking reimbursement, the petitioners (defendants) did not ask that the matter be ventilated at a hearing, or submit counter-affidavits, as was their right. They made no response whatever. They were evidently quite confident of obtaining a favorable judgment, and that such an eventuality would preclude the claimed reimbursement or recovery of damages. As it turned out, they were wrong in their prognostication.In any event, even assuming error on the Court's part in relying on the unopposed affidavits and photographs as basis for an award of damages, it was, as the Appellate Court has opined, not an error of jurisdiction under the circumstances, but one in the exercise of jurisdiction, to correct which the prescribed remedy is appeal. This is not to say that where a Court determines the propriety of a summary judgment which it may do on the basis of the pleadings, depositions, admissions and affidavits submitted by the partiesand discovers that there are genuine issues of fact, these genuine issues may nonetheless be adjudicated on the basis of depositions, admissions or affidavits and not of evidence adduced at a formal hearing or trial. This is not the rule.12The rule is that it is only the ascertainment of the character of the issues raised in the pleadingsas genuine, or sham or fictitiouswhich can be done by depositions, admissions, or affidavits; the resolution of such issues as are found to be genuine should be made upon proof proferred at a formal hearing. The peculiar circumstances of the case at bar, already pointed out, operate to exclude it from the scope of the rule. It is an exception that should however be taken, as affirming and not eroding the rule.The petitioners' other theory is more tenable, but will not appreciably advance their cause. They suggest that it was a mistake for the Trial Court to have accorded to the individuals of the Bulaong Group the stalls and builders in good faith in accordance with Article 526 of the Civil Code. They are correct. It was indeed error for the Court to have so ruled. The members of this group were admittedly lessees of space in the public market; they therefore could not, and in truth never did make the claim, that they wereowners of any part of the landoccupied by the market so that in respect of any new structure put up by them thereon, they could be deemed builders in good faith. To be deemed a builder in good faith, it is essential that a person assert title to the land on which he builds; i.e., that he be a possessor in concept of owner,13and that he be unaware "that there exists in his title or mode of acquisition any flaw which invalidates it.14It is such a builder in good faith who is given the right to retain the thing, even as against the real owner, until he has been reimbursed in full not only for the necessary expenses but also for useful expenses.15On the other hand, unlike the builder in good faith, a lessee who "makes in good faith useful improvements which are suitable to the use for which the lease is intended, without altering the form or substance of the property leased," can only claim payment of "one-half of the value of the improvements" or, "should the lessor refuse to reimburse said amount, ... remove the improvements, even though the principal thing may suffer damage thereby."16But this error does not go to the Trial Court's jurisdiction. It is an error in the exercise of jurisdiction, which may be corrected by the ordinary recourse of appeal, not by the extraordinary remedy ofcertiorari. It is an error that in the premises can no longer be set arightThe summary judgment rendered by respondent Judge on October 24, 1975 was not an interlocutory disposition or order but afinaljudgment within the meaning of Section 2, Rule 41 of the Rules of Court. By that summary judgment the Court finally disposed of the pending action, leaving nothing more to be done by it with respect to the merits, thus putting an end to the litigation as its level .17The remedy available to the petitioners against such a final judgment, as repeatedly stated, was an appeal in accordance with the aforementioned Rule 41 of the Rules of Court18But as observed in an analogous case recently resolved by this Court.19. . instead of resorting toordinaryremedy of appeal, ... (the petitioners) availed of theextraordinaryremedy of a special civil action ofcertiorariin the ... (Court of Appeals), under Rule 65 of the Rules of Court. The choice was clearly wrong. The availability of the right of appeal obviously precluded recourse to the special civil action of certiorari. This is axiomatic. It is a proposition made plain by Section 1 of Rule 65 which lays down as a condition for the filing of a certiorari petition that there be'no appeal, nor any plain, speedy and adequate remedy in the ordinary course of law.In the case at bar, the petitioners lost their right to appeal by failing to avail of it seasonably. To remedy that loss, they have resorted to the extraordinary remedy ofcertiorari, as a mode of obtaining reversal of the judgment from which they failed to appeal. This cannot be done. The judgment was not in any sense null and voidab initio, incapable of producing any legal effects whatever, which could never become final, and execution of which could be resisted at any time and in any court it was attempted.20It was a judgment which might and probably did suffer from some substantial error in procedure or in findings of fact or of law, and could on that account have been reversed or modified on appeal. But since it was not appealed, it became final and has thus gone beyond the reach of any court to modify in any substantive aspect. The remedy to obtain a reversal or modification of the judgmenton the meritsis appeal. This is true even if the error, or one of the errors, ascribed to the Court rendering the judgment is itslack of jurisdictionof the subject matter, or the exercise of power inexcessthereof, orgrave abuse of discretionin the findings of fact or of law set out in its decision. The existence and availability of the right of appeal prescribes a resort tocertiorari,one of the requisites for availment of the latter remedy being precisely that"there should be no appeal.21There may to be sure, be instances whencertiorarimay exceptionally be permitted in lieu of appeal, as when their appeal would be inadequate, slow, insufficient, and will not promptly relieve a party from the injurious effect of the judgment complained of, or to avoid future litigations,22none of which situations obtains in the case at bar. And certain it is that the special civil action ofcertioraricannot be a substitute for appeal, specially where the right to appeal has been lost through a party's fault or excusable negligence.23That the judgment of the Trial Court applied the wrong provision of the law in the resolution of the controversy has ceased to be of any consequence. As already discussed, instead of the legal provision governing lessees' rights over improvements on leased realty, the judgment invoked that relative to the rights of builders in good faith .24But the error did not render the judgment void. A judgment contrary to the express provisions of a statute is of course erroneous, but it is not void; and if it becomes final and executory, it becomes as binding and effective as any valid judgment; and though erroneous, will henceforth be treated as valid, and will be enforced in accordance with its terms and dispositions.25WHEREFORE, the petition is dismissed, with costs against the petitioners.Cruz, Gancayco, Grio-Aquino and Medialdea, JJ., concur.

B) BALLATAN VS MARTINEZ G.R. No. 125683 March 2, 1999EDEN BALLATAN and SPS. BETTY MARTINEZ and CHONG CHY LING,petitioners,vs.COURT OF APPEALS, GONZALO GO, WINSTON GO, LI CHING YAO, ARANETA INSTITUTE OF AGRICULTURE and JOSE N. QUEDDING,respondents.PUNO,J.:This is a petition for review oncertiorariof the decision of the Court of Appeals dated March 25, 1996 in CA-G.R. CV No. 32472 entitled "Eden Ballatan.,et.al., plaintiffs-appellees v. Gonzalo Go and Winston Go, appellants and third-party plaintiffs-appellants v. Li Ching Yao,et.al., third-party defendants."1The instant case arose from a dispute over forty-two (42) square meters of residential land belonging to petitioners. The parties herein are owners of adjacent lots located at Block No. 3, Poinsettia Street, Araneta University Village, Malabon, Metro Manila. Lot No. 24, 414 square meters in area, is registered in the name of petitioners Eden Ballatan and spouses Betty Martinez and Chong Chy Ling.2Lots Nos. 25 and 26, with an area of 415 and 313 square meters respectively, are registered in the name of respondent Gonzalo Go, Sr.3On Lot No. 25, respondent Winston Go, son of Gonzalo Go, Sr., constructed his house. Adjacent to Lot No. 26 is Lot No. 27, 417 square meters in area, and is registered in the name of respondent Li Ching Yao.4In 1985, petitioner Ballatan constructed her house on Lot No. 24. During the construction, she noticed that the concrete fence and side pathway of the adjoining house of respondent Winston Go encroached on the entire length of the eastern side of her property.5Her building contractor formed her that the area of her lot was actually less than that described in the title. Forthwith, Ballatan informed respondent Go of this discrepancy and his encroachment on her property. Respondent Go, however, claimed that his house, including its fence and pathway, were built within the parameters of his father's lot; and that this lot was surveyed by Engineer Jose Quedding, the authorized surveyor of the Araneta Institute of Agriculture (AIA), the owner-developer of the subdivision project.Petitioner Ballatan called the attention of the IAI to the discrepancy of the land area in her title and the actual land area received from them. The AIA authorized another survey of the land by Engineer Jose N. Quedding.In a report dated February 28, 1985, Engineer Quedding found that the lot area of petitioner Ballatan was less by few meters and that of respondent Li Ching Yao, which was three lots away, increased by two (2) meters. Engineer Quedding declared that he made a verification survey of Lots Nos. 25 and 26 of respondents Go in 1983 and allegedly found the boundaries to have been in their proper position. He, however, could not explain the reduction in Ballatan's area since he was not present at the time respondents Go constructed their boundary walls.6On June 2, 1985, Engineer Quedding made a third relocation survey upon request of the parties. He found that Lot No. 24 lost approximately 25 square meters on its eastern boundary that Lot No. 25, although found to have encroached on Lot No. 24, did not lose nor gain any area; that Lot No. 26 lost some three (3) square meters which, however, were gained by Lot No. 27 on its western boundary.7In short, Lots Nos. 25, 26 and 27 moved westward to the eastern boundary of Lot No. 24.On the basis of this survey, on June 10, 1985, petitioner Ballatan made a written demand on respondents Go to remove and dismantle their improvements on Lot No. 24. Respondents Go refused. The parties including Li Ching Yao, however, met several times to reach an agreement one matter.Failing to agree amicably, petitioner Ballatan brought the issue before the barangay. Respondents Go did not appear. Thus, on April 1, 1986, petitioner Ballatan instituted against respondents Go Civil Case No. 772-MN for recovery of possession before the Regional Trial Court, Malabon, Branch 169. The Go' s filed their "Answer with Third-Party Complaint" impleading as third-party defendants respondents Li Ching Yao, the AIA and Engineer Quedding.On August 23, 1990, the trial court decided in favor of petitioners. It ordered the Go's to vacate the subject portion of Lot No. 24, demolish their improvements and pay petitioner Ballatan actual damages, attorney's fees and the costs of the suit. It dismissed the third-party complaint against: (1) AIA after finding that the lots sold to the parties were in accordance with the technical description a verification plan covered by their respective titles; (2) Jose N. Quedding, there being no privity of relation between him and respondents Go and his erroneous survey having been made at the instance of AIA, not the parties; and (3) Li Ching Yao for failure to prove that he committed any wrong in the subject encroachment.8The court made the following disposition:WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the defendants, ordering the latter:1. To demolish and remove all improvements existing and encroaching on plaintiff's lot;2. To clear, vacate and deliver possession of the encroached area to the plaintiffs;3. To pay plaintiffs jointly and severally the following:a) P7,800.00 for the expenses paid to the surveyors;b) P5,000.00 for plaintiffs' transportation;4. To pay plaintiffs, jointly and severally, attorney's fees equivalent to 25% of the current market value of the subject matter in litigation at the time of execution; and5. To pay the costs of suit.The third-party complaint filed by third-party plaintiff Gonzalo Go and Winston Go against third-party defendants Araneta Institute of Agriculture, Jose N. Quedding and Li Ching Yao is hereby DISMISSED, without pronouncement as to costs.SO ORDERED.Respondents Go appealed. On March 25, 1996, the Court of Appeals modified the decision of the trial court. It affirmed the dismissal of the third-party complaint against the AIA but reinstated the complaint against Li Ching Yao and Jose Quedding. Instead of ordering respondents Go to demolish their improvements on the subject land, the appellate court ordered them to pay petitioner Ballatan, and respondent Li Ching Yao to pay respondents Go, a reasonable amount for that portion of the lot which they encroached, the value to be fixed at the time of taking. It also ordered Jose Quedding to pay respondents Go attorney's fees of P5,000.00 for his erroneous survey. The dispositive portion of the decision reads:WHEREFORE, premises considered, the decision appealed from is hereby AFFIRMED insofar as the dismissal of the third-party complaint against Araneta Institute of Agriculture is concerned but modified in all other aspects as follows:1) Defendants-appellants are hereby ordered to pay plaintiffs-appellees the reasonable value of the forty-two (42) square meters of their lot at the time of its taking;2) Third-party defendant Li Ching Yao is hereby ordered to pay defendants-appellants the reasonable value of the thirty-seven (37) square meters of the latter's lot at the time of its taking; and3) Third-party defendant Jose N. Quedding is hereby ordered to pay to defendants-appellants the amount of P5,000.00 as attorney's fees.LET THE RECORD of the case be remanded to the Regional Trial Court of Malabon for further proceedings and reception of evidence for the determination of the reasonable value of Lots Nos. 24 and 26.SO ORDERED.9Hence, this petition. Petitioners allege that:RESPONDENT COURT OF APPEALS ERRED ON QUESTIONS OF LAW AND GRAVELY ABUSED ITS DISCRETION AMOUNTING TO LACK OF JURISDICTION WHEN:1. IT APPLIED EQUITY OR EQUITABLE SOLUTIONS TO THE INSTANT CASE IN UTTER DISREGARD AND IN VIOLATION OR GROSS IGNORANCE OF EXISTING LAWS AND JURISPRUDENCE VESTING BASIC PROPERTY RIGHTS TO HEREIN PETITIONERS. RESPONDENT COURT HAS NO POWER TO APPLY/USE EQUITY IN THE PRESENCE OF EXISTING LAWS TO THE CONTRARY.2. UNDER THE GUISE OF APPLYING EQUITY BUT IN EFFECT A VERY APPARENT PARTIALITY AND FAVOR TO RESPONDENTS GO, IT ORDERED PAYMENT OF THE ENCROACHED AREA AT THE VALUE AT THE TIME OF ITS TAKING AND NOT THE VALUE AT THE TIME OF PAYMENT, THEREBY ENRICHING THE GO'S BUT DEPRIVING PETITIONERS OF THE FRUITS OR INCREASE IN VALUE OF THEIR PROPERTY TO WHICH THEY ARE ENTITLED UNDER THE LAW AS THE REGISTERED OWNERS WITH TORRENS TITLE IN THEIR NAMES.3. WHEN IT DID NOT DISMISS THE THIRD-PARTY COMPLAINT DUE TO NON-PAYMENT OF ANY FILING OR DOCKET FEE.4. WHEN IT DENIED PETITIONERS THE RECOVERY OF THE NECESSARY EXPENSES IN PROTECTING THEIR RIGHTS IN THIS CASE.10Petitioners question the admission by respondent Court of Appeals of the third-party complaint by respondents Go against the AIA, Jose Quedding and Li Ching Yao. Petitioners claim that the third-party complaint should not have been considered by the Court of Appeals for lack of jurisdiction due to third-party plaintiffs' failure to pay the docket and filing fees before the trial court.The third-party complaint in the instant case arose from the complaint of petitioners against respondents Go. The complaint filed was foraccion publiciana,i.e., the recovery of possession of real property which is a real action. The rule in this jurisdiction is that when an action is filed in court, the complaint must be accompanied the payment of the requisite docket and filing fees.11In real actions, the docket and filing fees are based on the value of the property and the amount of damages claimed, if any12If the complaint is filed but the fees are not paid at the time of filing, the court acquires jurisdiction upon full payment of the fees within a reasonable time as the court may grant, barring prescription.13Where the fees prescribed for the real action have been paid but the fees of certain related damages are not, the court, although having jurisdiction over the real action, may not have acquired jurisdiction over the accompnying claim for damages.14Accordingly, the court may expunge those claims for damages, or allow, on motion, a reasonable time for amendment of the complaint so as to allege the precise amount of damages and accept payment of the requisite legal fee.15If there are unspecified claims, the determination of which may arise after the filing of the complaint or similar pleading, the additional filing fee thereon shall constitute a lien on the judgment award.16The same rule also applies to third-party claims and other similar pleadings.17In the case at bar, the third-party complaint filed by respondents Go was incorporated in their answer to the complaint. The third-party complaint sought the same remedy as the principal complaint but added a prayer for attorney's fees and costs without specifying their amounts, thus:ON THE THIRD PARTY COMPLAINT1. That summons be issued against Third-Party Defendants Araneta Institute of Agriculture, Jose N. Quedding and Li Ching Yao;2. That after hearing, they be sentenced to indemnify the Third-Party Plaintiffs for whatever is adjudged against the latter in favor of the Plaintiffs;3. That Third-Party Defendants be ordered to pay attorney's fees as may be proved during trial;4. That Third-Party Defendants be ordered to pay the costs.Other just and equitable reliefs are also prayed for.18The Answer with Third-Party Complaint was admitted by the trial court without the requisite payment of filing fees, particularly on the Go's prayer for damages.19The trial court did not award the Go's any damages. It dismissed the third-party complaint. The Court of Appeals, however, granted the third-party complaint in part by ordering third-party defendant Jose N. Quedding to pay the Go's the sum of P5,000.00 as attorney's fees.Contrary to petitioners' claim, the Court of Appeal did not err in awarding damages despite the Go's failure to specify the amount prayed for and pay the corresponding additional filing fees thereon. The claim for attorney's fees refers to damages arising after the filing of the complaint against the Go's. The additional filing fee on this claim is deemed to constitute a lien on the judgment award.20The Court of Appeals found that the subject portion is actually forty-two (42) square meters in area, not forty-five (45), as initially found by the trial court; that this forty-two (42) square meter portion is on the entire eastern side of Lot No. 24 belonging to petitioners; that this said portion is found the concrete fence and pathway that extends from respondent Winston Go's house on adjacent Lot No. 25; that inclusive of the subject portion, respondents Go did not gain nor lose any portion of Lots Nos. 25 and 26; that instead, Lot No. 27, on which respondent Li Ching Yao built his house, encroached on the land of respondents Go, gaining in the process thirty-seven (37) square meters of the latter's land.21We hold that the Court of Appeals correctly dismissed the third-party complaint against AIA.. The claim that the discrepancy in the lot areas was due to AIA's fault was not proved. The appellate court, however, found that it was the erroneous survey by Engineer Quedding that triggered these discrepancies. And it was this survey that respondent Winston Go relied upon in constructing his house on his father's land. He built his house in the belief that it was entirely within the parameters of his father's land. In short, respondents Go had no knowledge that they encroached petitioners' lot. They are deemed builders in good faith22until the time petitioner Ballatan informed them of their encroachment on her property.23Respondent Li Ching Yao built his house on his lot before any of the other parties did.24He constructed his house in 1982, respondents Go in 1983, and petitioners in 1985.25There is no evidence, much less, any allegation that respondent Li Ching Yao was aware that when he built his house he knew that a portion thereof encroached on respondents Go's adjoining land. Good faith is always presumed, and upon him who alleges bad faith on the part of a possessor rests the burden of proof.26All the parties are presumed to have acted in good faith. Their rights must, therefore, be determined in accordance with the appropriate provisions of the Civil Code on property.Art. 448 of the Civil Code provides:Art. 448. The owner of the land on which anything has been built, sown or planted in good faith, shall have the right to appropriate as his own the works, sowing or planting, after payment of the indemnity provided for in Articles 546 and 548,27or to oblige the one who built or planted to pay the price of the land, and the one who sowed the proper rent. However, the builder or planter cannot be obliged to buy the land if its value is considerably more than that of the building or trees. In such case, he shall pay reasonable rent, if the owner of the land does not choose to appropriate the building or trees after proper indemnity. The parties shall agree upon the terms of the lease and in case of disagreement, the court shall fix the terms thereof.The owner of the land on which anything has been built, sown or planted in good faith shall have the right to appropriate as his own the building, planting or sowing, after payment to the builder, planter or sower of the necessary and useful expenses, and in the proper case, expenses for pure luxury or mere pleasure. The owner of the land may also oblige the builder, planter or sower to purchase and pay the price of the land. If the owner chooses to sell his land, the builder, planter or sower must purchase the land, otherwise the owner may remove the improvements thereon. The builder, planter or sower, however, is not obliged to purchase the land if its value considerably more than the building, planting or sowing. In such case, the builder, planter or sower must pay rent to the owner of the land. If the parties cannot come to terms over the conditions of the lease, the court must fix the terms thereof. The right to choose between appropriating the improvement or selling the land on which the improvement stands to the builder, planter or sower, is given to the owner of the land.28Art. 448 has been applied to improvements or portions of improvements built by mistaken belief on land belonging to the adjoining owner.29The facts of the instant case are similar to those inCabral v.Ibanez,30to wit:[P]laintiffs Geronima Zabala and her husband Justino Bernardo, constructed their house in the belief that it was entirely within the area of their own land without knowing at that time that part of their house was occupying a 14-square meter portion of the adjoining lot belonging to the defendants, and that the defendants Bernardo M. Cabral and Mamerta M. Cabral were likewise unaware of the fact that a portion of plaintiff's house was extending and occupying a portion of their lot with an area of 14 square meters. The parties came to know of the fact that part of the plaintiff's house was occupying part of defendant's land when the construction of plaintiff's house was about to be finished, after a relocation of the monuments of the two properties had been made by the U.S. Army through the Bureau of Lands, according to their "Stipulation of Facts," dated August 17, 1951.On the basis of these facts, we held that:The court, therefore, concludes that the plaintiffs are builders in good faith and the relative rights of the defendant Mamerta Cabral as owner of the land and of the plaintiffs as owners of the building is governed by Article 361 of the Civil Code (Co Tao v. Joaquin Chan Chico, 46 Off. Gaz.5514). Article 361 of the old Civil Code has been reproduced with an additional provision in Article 448 of the new Civil Code, approved June 18, 1949.31Similarly, inGrana and Torralba v.Court of Appeals,32we held that:Although without any legal and valid claim over the land in question, petitioners, however, were found by the Court of Appeals to have constructed a portion of their house thereon in good faith. Under Article 361 of the old Civil Code (Article 448 of the new), the owner of the land on which anything has been built in good faith shall have the right to appropriate as his own the building, after payment to the builder of necessary or useful expenses, and in the proper case, expenses for pure luxury or mere pleasure, or to oblige the builder to pay the price of the land. Respondents, as owners of the land, have therefore the choice of either appropriating the portion of petitioners' house which is on their land upon payment of the proper indemnity to petitioners, or selling to petitioners that part of their land on which stands the improvement. It may here be pointed out that it would be impractical for respondents to choose to exercise the first alternative,i.e., buy that portion of the house standing on their land, for in that event the whole building might be rendered useless. The more workable solution, it would seem, is for respondents to sell to petitioners that part of their land on which was constructed a portion of the latter's house. If petitioners are unwilling or unable to buy, then they must vacate the land and must pay rentals until they do so. Of course, respondents cannot oblige petitioners to buy the land if its value is considerably more than that of the aforementioned portion of the house. If such be the case, then petitioners must pay reasonable rent. The parties must come to an agreement as to the conditions of the lease, and should they fail to do so, then the court shall fix the same.33In light of these rulings, petitioners, as owners of Lot No. 24, may choose to purchase the improvement made by respondents Go on their land, or sell to respondents Go the subject portion. If buying the improvement is impractical as it may render the Go's house useless, then petitioners may sell to respondents Go that portion of Lot No. 24 on which their improvement stands. If the Go's are unwilling or unable to buy the lot, then they must vacate the land and, until they vacate, they must pay rent to petitioners. Petitioners, however, cannot compel respondents Go to buy the land if its value is considerably more than the portion of their house constructed thereon. If the value of the land is much more than the Go's improvement, the respondents Go must pay reasonable rent. If they do not agree on the terms of the lease, then they may go to court to fix the same.In the event that petitioners elect to sell to respondents Go the subject portion of their lot, the price must be fixed at the prevailing market value at the time of payment. The Court of Appeals erred in fixing the price at the time of taking, which is the time the improvements were built on the land. The time of taking is determinative of just compensation in expropriation proceedings. The instant case is not for expropriation. It is not a taking by the state of private property for a public purpose upon payment of just compensation. This is a case of an owner who has been paying real estate taxes on his land but has been deprived of the use of a portion of this land for years. It is but fair and just to fix compensation at the time of payment.34Art. 448 and the same conditions abovestated also apply to respondents Go as owners and possessors of their land and respondent Li Ching Yao as builder of the improvement that encroached on thirty-seven (37) square meters of respondents Go's land.IN VIEW WHEREOF, the decision of respondent Court of Appeals is modified as follows:(1) Petitioners are ordered to exercise within thirty (30) days from finality of this decision their option to either buy the portion of respondents Go's improvement on their Lot No. 24, or sell to said respondents the portion of their land on which the improvement stands. If petitioners elect to sell the land or buy the improvement, the purchase price must be at the prevailing market price at the time of payment. If buying the improvement will render respondents Go's house useless, then petitioners should sell the encroached portion of their land to respondents Go. If petitioners choose to sell the land but respondents Go are unwilling or unable to buy, then the latter must vacate the subject portion and pay reasonable rent from the time petitioners made their choice up to the time they actually vacate the premises. But if the value of the land is considerably more than the value of the improvement, then respondents Go may elect to lease the land, in which case the parties shall agree upon the terms, the lease. Should they fail to agree on said terms, the court of origin is directed to fix the terms of the lease.From the moment petitioners shall have exercised their option, respondents Go shall pay reasonable monthly rent up to the time the parties agree on the terms of the lease or until the court fixes such terms.(2) Respondents Go are likewise directed to exercise their rights as owners of Lots Nos. 25 and 26,vis-a-visrespondent Li Ching Yao as builder of the improvement that encroached on thirty seven (37) square meters of respondents Go 's land in accordance with paragraph one abovementioned.(3) The Decision of the Court of Appeals ordering Engineer Quedding, as third-party defendant, to pay attorney's fees of P5,000.00 to respondents Go is affirmed. The additional filing fee on the damages constitutes a lien on this award.(4) The Decision of the Court of Appeals dismissing third-party complaint against Araneta Institute of Agriculture is affirmed.SO ORDERED.Bellosillo, Mendoza, Quisumbing and Buena, JJ., concur.

C) SARMIENTO V AGANA

G.R. No. L-57288 April 30, 1984LEONILA SARMINETO,petitioner,vs.HON. ENRIQUE A. AGANA, District Judge, Court of First Instance of Rizal, Seventh Judicial District, Branch XXVIII, Pasay City, and SPOUSES ERNESTO VALENTINO and REBECCA LORENZO-VALENTINO,respondents.Mercedes M. Respicio for petitioner.Romulo R. Bobadilla for private respondents.MELENCIO-HERRERA,J.:+.wph!1This Petition for certiorari questions a March 29, 1979 Decision rendered by the then Court of First Instance of Pasay City. The Decision was one made on memoranda, pursuant to the provisions of RA 6031, and it modified, on October 17, 1977, a judgment of the then Municipal Court of Paranaque, Rizal, in an Ejectment suit instituted by herein petitioner Leonila SARMIENTO against private respondents, the spouses ERNESTO Valentino and Rebecca Lorenzo. For the facts, therefore, we have to look to the evidence presented by the parties at the original level.It appears that while ERNESTO was still courting his wife, the latter's mother had told him the couple could build a RESIDENTIAL HOUSEona lot of 145 sq. ms., being Lot D of a subdivision in Paranaque (the LAND, for short). In 1967, ERNESTO did construct a RESIDENTIAL HOUSE on the LAND at a cost of P8,000.00 to P10,000.00. It was probably assumed that the wife's mother was the owner of the LAND and that, eventually, it would somehow be transferred to the spouses.It subsequently turned out that the LAND had been titled in the name of Mr. & Mrs. Jose C. Santo, Jr. who, on September 7,1974, sold the same to petitioner SARMIENTO. The following January 6, 1975, SARMIENTO asked ERNESTO and wife to vacate and, on April 21, 1975, filed an Ejectment suit against them. In the evidentiary hearings before the Municipal Court, SARMIENTO submitted the deed of sale of the LAND in her favor, which showed the price to be P15,000.00. On the other hand, ERNESTO testified that the then cost of the RESIDENTIAL HOUSE would be from P30,000.00 to P40,000.00. The figures were not questioned by SARMIENTO.The Municipal Court found that private respondents had built the RESIDENTIAL HOUSE in good faith, and, disregarding the testimony of ERNESTO, that it had a value of P20,000.00. It then ordered ERNESTO and wife to vacate the LAND after SARMIENTO has paid them the mentioned sum of P20,000.00.The Ejectment suit was elevated to the Court of First Instance of Pasay where, after the submission of memoranda, said Court rendered a modifying Decision under Article 448 of the Civil Code. SARMIENTO was required, within 60 days, to exercise the option to reimburse ERNESTO and wife the sum of 40,000.00 as the value of the RESIDENTIAL HOUSE, or the option to allow them to purchase the LAND for P25,000.00. SARMIENTO did not exercise any of the two options within the indicated period, and ERNESTO was then allowed to deposit the sum of P25,000.00 with the Court as the purchase price for the LAND. This is the hub of the controversy. SARMIENTO then instituted the instant certiorari proceedings.We agree that ERNESTO and wife were builders in good faith in view of the peculiar circumstances under which they had constructed the RESIDENTIAL HOUSE. As far as they knew, the LAND was owned by ERNESTO's mother-in-law who, having stated they could build on the property, could reasonably be expected to later on give them the LAND.In regards to builders in good faith, Article 448 of the Code provides:t.hqwART. 448. The owner of the land on which anything has been built, sown or planted in good faith,shall have the rightto appropriate as his own the works, sowing or planting, after payment of the indemnity provided for in articles 546 and 548, orto oblige the one who built or planted to pay the price of the land, and the one who sowed, the proper rent.However, the builder or planter cannot be obliged to buy the land if its value is considerably more than that of the building or trees. In such case, he shall pay reasonable rent, if the owner of the land does not choose to appropriate the building or trees after proper indemnity. The parties shall agree upon the terms of the lease and in case of disagreement, the court shall fix the terms thereof. (Paragraphing supplied)The value of the LAND, purchased for P15,000.00 on September 7, 1974, could not have been very much more than that amount during the following January when ERNESTO and wife were asked to vacate. However, ERNESTO and wife have not questioned the P25,000.00 valuation determined by the Court of First Instance.In regards to the valuation of the RESIDENTIAL HOUSE, the only evidence presented was the testimony of ERNESTO that its worth at the time of the trial should be from P30,000.00 to P40,000.00. The Municipal Court chose to assess its value at P20,000.00, or below the minimum testified by ERNESTO, while the Court of First Instance chose the maximum of P40,000.00. In the latter case, it cannot be said that the Court of First Instance had abused its discretion.The challenged decision of respondent Court, based on valuations of P25,000.00 for the LAND and P40,000.00 for the RESIDENTIAL HOUSE, cannot be viewed as not supported by the evidence. The provision for the exercise by petitioner SARMIENTO of either the option to indemnify private respondents in the amount of P40,000.00, or the option to allow private respondents to purchase the LAND at P25,000.00, in our opinion, was a correct decision.t.hqwThe owner of the building erected in good faith on a land owned by another, is entitled to retain the possession of the land until he is paid the value of his building, under article 453 (now Article 546). The owner, of the land. upon, the other hand, has the option, under article 361 (now Article 448), either to pay for the building or to sell his land to the owner of the building.But he cannot,as respondents here did,refuse both to pay for the building and to sell the landand compel the owner of the building to remove it from the land where it is erected. He is entitled to such remotion only when, after having chosen to sell his land, the other party fails to pay for the same. (Emphasis ours)We hold, therefore, that the order of Judge Natividad compelling defendants-petitioners to remove their buildings from the land belonging to plaintiffs-respondents only because the latter chose neither to pay for such buildings nor to sell the land, is null and void, for it amends substantially the judgment sought to be executed and is, furthermore, offensive to articles 361 (now Article 448) and 453 (now Article 546) of the Civil Code. (Ignacio vs. Hilario, 76 Phil. 605, 608 [1946]).WHEREFORE, the Petition for Certiorari is hereby ordered dismissed, without pronouncement as to costs.SO ORDERED.1wph1.tTeehankee (Chairman), Plana, Relova, Gutierrez, Jr. and De la Fuente, JJ., concur.

D) TECHNOGAS V CAG.R. No. 108894 February 10, 1997TECNOGAS PHILIPPINES MANUFACTURING CORPORATION,petitioner,vs.COURT OF APPEALS (FORMER SPECIAL SEVENTEENTH DIVISION) and EDUARDO UY,respondents.PANGANIBAN,J.:The parties in this case are owners of adjoining lots in Paraaque, Metro Manila. It was discovered in a survey, that a portion of a building of petitioner, which was presumably constructed by its predecessor-in-interest, encroached on a portion of the lot owned by private respondent. What are the rights and obligations of the parties? Is petitioner considered a builder in bad faith because, as held by respondent Court, he is "presumed to know the metes and bounds of his property as described in his certificate of title"? Does petitioner succeed into the good faith or bad faith of his predecessor-in-interest which presumably constructed the building?These are the questions raised in the petition for review of the Decision1dated August 28, 1992, in CA-G.R. CV No. 28293 of respondent Court2where the disposition reads:3WHEREFORE, premises considered, the Decision of the Regional Trial Court is hereby reversed and set aside and another one entered 1. Dismissing the complaint for lack of cause of action;2. Ordering Tecnogas to pay the sum of P2,000.00 per month as reasonable rental from October 4, 1979 until appellee vacates the land;3. To remove the structures and surrounding walls on the encroached area;4. Ordering appellee to pay the value of the land occupied by the two-storey building;5. Ordering appellee to pay the sum of P20,000.00 for and as attorney's fees;6. Costs against appellee.Acting on the motions for reconsideration of both petitioner and private respondent, respondent Court ordered the deletion of paragraph 4 ofthe dispositive portion in an Amended Decision dated February 9, 1993, as follows:4WHEREFORE, premises considered, our decision of August 28, 1992 is hereby modified deleting paragraph 4 of the dispositive portion of our decision which reads:4. Ordering appellee to pay the value of the land occupied by the two-storey building.The motion for reconsideration of appellee is hereby DENIED for lack of merit.The foregoing Amended Decision is also challenged in the instant petition.The FactsThe facts are not disputed. Respondent Court merely reproduced the factual findings of the trial court, as follows:5That plaintiff (herein petitioner) which is a corporation duly organized and existing under and by virtue of Philippine laws is the registered owner of a parcel of land situated in Barrio San Dionisio, Paraaque, Metro Manila known as Lot 4331-A (should be 4531-A) of Lot 4531 of the Cadastral Survey of Paraaque, Metro Manila, covered by Transfer Certificate of Title No. 409316 of the Registry of Deeds of the Province of Rizal; that said land was purchased by plaintiff from Pariz Industries, Inc. in 1970, together with all the buildings and improvements including the wall existing thereon; that the defendant (herein private respondent) is the registered owner of a parcel of land known as Lot No. 4531-B of Lot 4531 of the Cadastral Survey of Paraaque, LRC (GLRO) Rec. No. 19645 covered by Transfer Certificate of Title No. 279838, of the Registry of Deeds for the Province of Rizal; that said land which adjoins plaintiff's land was purchased by defendant from a certain Enrile Antonio also in 1970; that in 1971, defendant purchased another lot also adjoining plaintiffs land from a certain Miguel Rodriguez and the same was registered in defendant's name under Transfer Certificate of Title No. 31390, of the Registry of Deeds for the Province of Rizal; that portions of the buildings and wall bought by plaintiff together with the land from Pariz Industries are occupying a portion of defendant's adjoining land; that upon learning of the encroachment or occupation by its buildings and wall of a portion of defendant's land, plaintiff offered to buy from defendant that particular portion of defendant's land occupied by portions of its buildings and wall with an area of 770 square meters, more or less, but defendant, however, refused the offer. In 1973, the parties entered into a private agreement before a certain Col. Rosales in Malacaang, wherein plaintiff agreed to demolish the wall at the back portion of its land thus giving to defendant possession of a portion of his land previously enclosed by plaintiff's wall; that defendant later filed a complaint before the office of Municipal Engineer of Paraaque, Metro Manila as well as before the Office of the Provincial Fiscal of Rizal against plaintiff in connection with the encroachment or occupation by plaintiff's buildings and walls of a portion of its land but said complaint did not prosper; that defendant dug or caused to be dug a canal along plaintiff's wall, a portion of which collapsed in June, 1980, and led to the filing by plaintiff of the supplemental complaint in the above-entitled case and a separate criminal complaint for malicious mischief against defendant and his wife which ultimately resulted into the conviction in court of defendant's wife for the crime of malicious mischief; that while trial of the case was in progress, plaintiff filed in Court a formal proposal for settlement of the case but said proposal, however, was ignored by defendant.After trial on the merits, the Regional Trial Court6of Pasay City, Branch 117, in Civil Case No. PQ-7631-P, rendered a decision dated December 4, 1989 in favor of petitioner who was the plaintiff therein. The dispositive portionreads:7WHEREFORE, judgment is hereby rendered in favor of plaintiff and against defendant and ordering the latter to sell to plaintiff that portion of land owned by him and occupied by portions of plaintiff's buildings and wall at the price of P2,000.00 per square meter and to pay the former:1. The sum of P44,000.00 to compensate for the losses in materials and properties incurred by plaintiff through thievery as a result of the destruction of its wall;2. The sum of P7,500.00 as and by way of attorney's fees; and3. The costs of this suit.Appeal was duly interposed with respondent Court, which as previously stated, reversed and set aside the decision of the Regional Trial Court and rendered the assailed Decision and Amended Decision. Hence, this recourse under Rule 45 of the Rules of Court.The IssuesThe petition raises the following issues:8(A)Whether or not the respondent Court of Appeals erred in holding the petitioner a builder in bad faith because it is "presumed to know the metes and bounds of his property."(B)Whether or not the respondent Court of Appeals erred when it used the amicable settlement between the petitioner and the private respondent, where both parties agreed to the demolition of the rear portion of the fence, as estoppel amounting to recognition by petitioner of respondent's right over his property including the portions of the land where the other structures and the building stand, which were not included in the settlement.(C)Whether or not the respondent Court of Appeals erred in ordering the removal of the "structures and surrounding walls on the encroached area" and in withdrawing its earlier ruling in its August 28, 1992 decision for the petitioner "to pay for the value of the land occupied" by the building,only becausethe private respondent has "manifested its choice to demolish" it despite the absence of compulsory sale where the builder fails to pay for the land, and which "choice" private respondent deliberately deleted from its September 1, 1980 answer to the supplemental complaint in the Regional Trial Court.In its Memorandum, petitioner poses the following issues:A.The time when to determine the good faith of the builder under Article 448 of the New Civil Code, is reckonedduringthe period when it was actually being built; and in a case wherenoevidence was presentednorintroduced as to the good faith or bad faith of the builder at that time, as in this case, he must bepresumedto be a "builder in good faith," since "bad faithcannotbe presumed."9B.In a specific "boundary overlap situation" which involves a builder in good faith,as in this case, it is now well settled that the lot owner, who builds on the adjacent lot isnotcharged with "constructive notice" of the technical metes and bounds contained in their torrens titles to determine the exact and precise extent of his boundary perimeter.10C.The respondent court's citation of the twin cases ofTuason & Co.v.LumanlanandTuason & Co.v.Macalindongisnotthe "judicial authority" for a boundary dispute situation between adjacent torrens titled lot owners, as the facts of the present case donotfall withinnorsquare with the involved principle of a dissimilar case.11D.Quite contrary to respondent Uy's reasoning, petitioner Tecnogas continues to be a builder in good faith, even if it subsequently built/repaired the walls/other permanent structures thereon while the casea quowas pending and even while respondent sent the petitioner many letters/filed cases thereon.12D.(E.)The amicable settlement between the parties should be interpreted as a contract and enforced only in accordance with its explicit terms, andnotover and beyond that agreed upon; because the courts donothave the power to create a contractnorexpand its scope.13E.(F.)As ageneral rule, although the landowner has the option to choose between: (1) "buyingthe building built in good faith", or (2) "sellingthe portion of his land on which stands the building" under Article 448 of the Civil Code; thefirstoption is not absolute, because anexceptionthereto, once it would be impractical for the landowner to choose to exercise the first alternative,i.e. buy that portion of the house standing on his land, for the whole building might be rendered useless. The workable solution is for him to select the second alternative, namely, to sell to the builder that part of his land on which was constructed a portion of the house.14Private respondent, on the other hand, argues that the petition is "suffering from the following flaws:151. It did not give the exact citations of cases decided by the Honorable Supreme Court that allegedly contradicts the ruling of the Hon. Court of Appeals based on the doctrine laid down inTuason vs.Lumanlancase citing alsoTuason vs.Macalindongcase (Supra).2. Assuming that the doctrine in the allegedCo Tao vs.Chicocase is contradictory to the doctrine inTuason vs.LumanlanandTuason vs.Macalindong, the two cases being more current, the same should prevail.Further, private respondent contends that the following "unmistakably" point to the bad faith of petitioner: (1) private respondent's purchase of the two lots, "was ahead of the purchase by petitioner of the building and lot from Pariz Industries"; (2) the declaration of the General Manager of Tecnogas that the sale between petitioner and Pariz Industries "was not registered" because of some problems with China Banking Corporation; and (3) the Deed of Sale in favor of petitioner was registered in its name only in "the month of May 1973."16The Court's Ru1ingThe petition should be granted.Good Faith or Bad FaithRespondent Court, citing the cases ofJ.M.Tuason & Co.,Inc.vs.Vda.de Lumanlan17andJ.M.Tuason & Co.,Inc.vs.Macalindong,18ruled that petitioner "cannot be considered in good faith" because as a land owner, it is "presumed to know the metes and bounds of his own property, specially if the same are reflected in a properly issued certificate of title. One who erroneously builds on the adjoining lot should be considered a builder in(b)ad (f)aith, there being presumptive knowledge of the Torrens title, the area, and the extent of the boundaries."19We disagree with respondent Court. The two cases it relied upon do not support its main pronouncement that a registered owner of land has presumptive knowledge of the metes and bounds of its own land, and is therefore in bad faith if he mistakenly builds on an adjoining land. Aside from the fact that those cases had factual moorings radically different from those obtaining here, there is nothing in those cases which would suggest, however remotely, that bad faith is imputable to a registered owner of land when a part of his building encroaches upon a neighbor's land, simply because he is supposedly presumed to know the boundaries of his land as described in his certificate of title. No such doctrinal statement could have been made in those cases because such issue was not before the Supreme Court. Quite the contrary, we have rejected such a theory inCo Tao vs.Chico,20where we held that unless one is versed in the science of surveying, "no one can determine the precise extent or location of his property by merely examining his paper title."There is no question that when petitioner purchased the land from Pariz Industries, the buildings and other structures were already in existence. The record is not clear as to who actually built those structures, but it may well be assumed that petitioner's predecessor-in-interest, Pariz Industries, did so. Article 527 of the Civil Code presumes good faith, and since no proof exists to show that the encroachment over a narrow, needle-shaped portion of private respondent's land was done in bad faith by the builder of the encroaching structures, the latter should be presumed to have built them in good faith.21It is presumed that possession continues to be enjoyed in the same character in which it was acquired, until the contrary is proved.22Good faith consists in the belief of the builder that the land he is building on is his, and his ignorance of any defect or flaw in his title.23Hence, such good faith, by law, passed on to Pariz's successor, petitioner in this case. Further, "(w)here one derives title to property from another, the act, declaration, or omission of the latter, while holding the title, in relation to the property, is evidence against the former."24And possession acquired in good faith does not lose this character except in case and from the moment facts exist which show that the possessor is not unaware that he possesses the thing improperly or wrongfully.25The good faith ceases from the moment defects in the title are made known to the possessor, by extraneous evidence or by suit for recovery of the property by the true owner.26Recall that the encroachment in the present case was caused by a very slight deviation of the erected wall (as fence) which was supposed to run in a straight line from point 9 to point 1 of petitioner's lot. It was an error which, in the context of the attendant facts, was consistent with good faith. Consequently, the builder, if sued by the aggrieved landowner for recovery of possession, could have invoked the provisions of Art. 448 of the Civil Code, which reads:The owner of the land on which anything has been built, sown or planted in good faith, shall have the right to appropriate as his own the works, sowing or planting, after payment of the indemnity provided for in articles 546 and 548, or to oblige the one who built or planted to pay the price of the land, and the one who sowed, the proper rent. However, the builder or planter cannot be obliged to buy the land if its value is considerably more than that of the building or trees. In such case, he shall pay reasonable rent, if the owner of the land does not choose to appropriate the building or trees after proper indemnity. The parties shall agree upon the terms of the lease and in case of disagreement, the court shall fix the terms thereof.The obvious benefit to the builder under this article is that, instead of being outrightly ejected from the land, he can compel the landowner to make a choice between the two options: (1) to appropriate the building by paying the indemnity required by law, or (2) sell the land to the builder. The landowner cannot refuse to exercise either option and compel instead the owner of the building to remove it from the land.27The question, however, is whether the same benefit can be invoked by petitioner who, as earlier stated, is not the builder of the offending structures but possesses them as buyer.We answer such question in the affirmative.In the first place, there is no sufficient showing that petitioner was aware of the encroachment at the time it acquired the property from Pariz Industries. We agree with the trial court that various factors in evidence adequately show petitioner's lack of awareness thereof. In any case, contrary proof has not overthrown the presumption of good faith under Article 527 of the Civil Code, as already stated, taken together with the disputable presumptions of the law on evidence. These presumptions state, under Section 3 (a) of Rule 131 of the Rules of Court, that the person is innocent of a crime or wrong; and under Section 3 (ff) of Rule 131, that the law has been obeyed. In fact, private respondent Eduardo Uy himself was unaware of such intrusion into his property until after 1971 when he hired a surveyor, following his purchase of another adjoining lot, to survey all his newly acquired lots. Upon being apprised of the encroachment, petitioner immediately offered to buy the area occupied by its building a species of conduct consistent with good faith.In the second place, upon delivery of the property by Pariz Industries, as seller, to the petitioner, as buyer, the latter acquired ownership of the property. Consequently and as earlier discussed, petitioner is deemed to have stepped into the shoes of the seller in regard to all rights of ownership over the immovable sold, including the right to compel the private respondent to exercise either of the two options provided under Article 448 of the Civil Code.EstoppelRespondent Court ruled that the amicable settlement entered into between petitioner and private respondent estops the former from questioning the private respondent's "right" over the disputed property. It held that by undertaking to demolish the fence under said settlement, petitioner recognized private respondent's right over the property, and "cannot later on compel" private respondent "to sell to it the land since" private respondent "is under no obligation to sell."28We do not agree. Petitioner cannot be held in estoppel for entering into the amicable settlement, the pertinent portions of which read:29That the parties hereto have agreed that the rear portion of the fence that separates the property of the complainant and respondent shall be demolished up to the back of the building housing the machineries which demolision (sic) shall be undertaken by the complainant at anytime.That the fence which serve(s) as a wall housing the electroplating machineries shall not be demolished in the mean time which portion shall be subject to negotiation by herein parties.From the foregoing, it is clear that petitioner agreed only to the demolition of a portion of the wall separating the adjoining properties of the parties i.e. "up to the back of the building housing the machineries." But that portion of the fence which served as the wall housing the electroplating machineries was not to be demolished. Rather, it was to "be subject to negotiation by herein parties." The settlement may have recognized the ownership of private respondent but such admission cannot be equated with bad faith. Petitioner was only trying to avoid a litigation, one reason for entering into an amicable settlement.As was ruled inOsmea vs.Commission on Audit,30A compromise is a bilateral act or transaction that is expressly acknowledged as a juridical agreement by the Civil Code and is therein dealt with in some detail. "A compromise," declares Article 2208 of said Code, "is a contract whereby the parties, by making reciprocal concessions, avoid a litigation or put an end to one already commenced."xxx xxx xxxThe Civil Code not only defines and authorizes compromises, it in fact encourages them in civil actions. Art. 2029 states that "The Court shall endeavor to persuade the litigants in a civil case to agree upon some fair compromise." . . .In the context of the established facts, we hold that petitioner did not lose its rights under Article 448 of the Civil Code on the basis merely of the fact that some years after acquiring the property in good faith, it learned about and aptly recognized the right of private respondent to a portion of the land occupied by its building. The supervening awareness of the encroachment by petitioner does not militate against its right to claim the status of a builder in good faith. In fact, a judicious reading of said Article 448 will readily show that the landowner's exercise of his option can only take place after the builder shall have come to know of the intrusion in short, when both parties shall have become aware of it. Only then will the occasion for exercising the option arise, for it is only then that both parties will have been aware that a problem exists in regard to their property rights.Options of Private RespondentWhat then is the applicable provision in this case which private respondent may invoke as his remedy: Article 448 or Article 45031of the Civil Code?In view of the good faith ofbothpetitioner and private respondent, their rights and obligations are to be governed by Art. 448. The essential fairness of this codal provision has been pointed out by Mme. Justice Ameurfina Melencio-Herrera, citing Manresa and applicable precedents, in the case ofDepra vs.Dumlao,32to wit:Where the builder, planter or sower has acted in good faith, a conflict of rights arises between the owners, and it becomes necessary to protect the owner of the improvements without causing injustice to the owner of the land. In view of the impracticality of creating a state of forced co-ownership, the law has provided a just solution by giving the owner of the land the option to acquire the improvements after payment of the proper indemnity, or to oblige the builder or planter to pay for the land and the sower to pay the proper rent. It is the owner of the land who is authorized to exercise the option, because his right is older, and because, by the principle of accession, he is entitled to the ownership of the accessory thing. (3 Manresa 213; Bernardo vs. Bataclan, 37 Off. Gaz. 1382; Co Tao vs. Chan Chico, G.R. No. 49167, April 30, 1949; Article applied; see Cabral, et al. vs. Ibanez [S.C.] 52 Off. Gaz. 217; Marfori vs. Velasco, [C.A.] 52 Off. Gaz. 2050).The private respondent's insistence on the removal of the encroaching structures as the proper remedy, which respondent Court sustained in its assailed Decisions, is thus legally flawed. This is not one of the remedies bestowed upon him by law. It would be available only if and when he chooses to compel the petitioner to buy the land at a reasonable price but the latter fails to pay such price.33This has not taken place. Hence, his options are limited to: (1) appropriating the encroaching portion of petitioner's building after payment of proper indemnity, or (2) obliging the latter to buy the lot occupied by the structure. He cannot exercise a remedy of his own liking.Neither is petitioner's prayer that private respondent be ordered to sell the land34the proper remedy. While that was dubbed as the "more workable solution" inGrana and Torralba vs.The Court of Appeals,etal.,35it was not the relief granted in that case as the landowners were directed to exercise "within 30 days from this decision their option to either buy the portion of the petitioners' house on their land or sell to said petitioners the portion of their land on which it stands."36Moreover, inGrana and Torralba, the area involved was only 87 square meters while this case involves 520 square meters37. In line with the case ofDepra vs.Dumlao,38this case will have to be remanded to the trial court for further proceedings to fully implement the mandate of Art. 448. It is a rule of procedure for the Supreme Court to strive to settle the entire controversy in a single proceeding leaving no root or branch to bear the seeds of futurelitigation.39Petitioner, however, must also pay the rent for the property occupied by its building as prescribed by respondent Court from October 4, 1979, but only up to the date private respondent serves notice of its option upon petitioner and the trial court; that is, if such option is for private respondent to appropriate the encroaching structure. In such event, petitioner would have a right of retention which negates the obligation to pay rent.40The rent should however continue if the option chosen is compulsory sale, but only up to the actual transfer of ownership.The award of attorney's fees by respondent Court against petitioner is unwarranted since the action appears to have been filed in good faith. Besides, there should be no penalty on the right to litigate.41WHEREFORE, premises considered, the petition is hereby GRANTED and the assailed Decision and the Amended Decision are REVERSED and SET ASIDE. In accordance with the case ofDepra vs.Dumlao,42this case is REMANDED to the Regional Trial Court of Pasay City, Branch 117, for further proceedings consistent with Articles 448 and 54643of the Civil Code, as follows:The trial court shall determine:a) the present fair price of private respondent's 520 square-meter area of land;b) the increase in value ("plus value") which the said area of 520 square meters may have acquired by reason of the existence of the portion of the building on the area;c) the fair market value of the encroaching portion of the building; andd) whether the value of said area of land is considerably more than the fair market value of the portion of the building thereon.2. After said amounts shall have been determined by competent evidence, the regional trial court shall render judgment as follows:a) The private respondent shall be granted a period of fifteen (15) days within which to exercise his option under the law (Article 448, Civil Code),whetherto appropriate the portion of the building as his own by paying to petitioner its fair market value,orto oblige petitioner to pay the price of said area. The amounts to be respectively paid by petitioner and private respondent, in accordance with the option thus exercised by written notice of the other party and to the court, shall be paid by the obligor within fifteen (15) days from such notice of the option by tendering the amount to the trial court in favor of the party entitled to receive it;b) If private respondent exercises the option to oblige petitioner to pay the price of the land but the latter rejects such purchase because, as found by the trial court, the value of the land is considerably more than that of the portion of the building, petitioner shall give written notice of such rejection to private respondent and to the trial court within fifteen (15) days from notice of private respondent's option to sell the land. In that event, the parties shall be given a period of fifteen (15) days from such notice of rejection within which to agree upon the terms of the lease, and give the trial court formal written notice of the agreement and its provisos. If no agreement is reached by the parties, the trial court, within fifteen (15) days from and after the termination of the said period fixed for negotiation, shall then fix the terms of the lease provided that the monthly rental to be fixed by the Court shall not be less than two thousand pesos (P2,000.00) per month, payable within the first five (5) days of each calendar month. The period for the forced lease shall not be more than two (2) years, counted from the finality of the judgment, considering the long period of time since 1970 that petitioner has occupied the subject area. The rental thus fixed shall be increased by ten percent (10%) for the second year of the forced lease. Petitioner shall not make any further constructions or improvements on the building. Upon expiration of the two-year period, or upon default by petitioner in the payment of rentals for two (2) consecutive months, private respondent shall be entitled to terminate the forced lease, to recover his land, and to have the portion of the building removed by petitioner or at latter's expense. The rentals herein provided shall be tendered by petitioner to the trial court for payment to private respondent, and such tender shall constitute evidence of whether or not compliance was made within the period fixed by the said court.c) In any event, petitioner shall pay private respondent an amount computed at two thousand pesos (P2,000.00) per month as reasonable compensation for the occupancy of private respondent's land for the period counted from October 4, 1979, up to the date private respondent serves notice of its option to appropriate the encroaching structures, otherwise up to the actual transfer of ownership to petitioner or, in case a forced lease has to be imposed, up to the commencement date of the forced lease referred to in the preceding paragraph;d) The periods to be fixed by the trial court in its decision shall be non-extendible, and upon failure of the party obliged to tender to the trial court the amount due to the obligee, the party entitled to such payment shall be entitled to an order of execution for the enforcement of payment of the amount due and for compliance with such other acts as may be required by the prestation due the obligee.No costs.SO ORDERED

E) DEPRA VS DUMLAOG.R. No. L-57348 May 16, 1985FRANCISCO DEPRA,plaintiff-appellee,vs.AGUSTIN DUMLAO,defendant-appellant.Roberto D. Dineros for plaintiff-appellee.Veil D. Hechanova for defendant-appellant.MELENCIO-HERRERA,J.:This is an appeal from the Order of the former Court of First Instance of Iloilo to the then Court of Appeals, which the latter certified to this instance as involving pure questions of lawPlaintiff-appellee, Francisco Depra, is the owner of a parcel of land registered under Transfer Certificate of Title No. T3087, known as Lot No. 685, situated in the municipality of Dumangas, Iloilo, with an area of approximately 8,870 square meters. Agustin Dumlao, defendant-appellant, owns an adjoining lot, designated as Lot No. 683, with an approximate area of 231 sq. ms.Sometime in 1972, when DUMLAO constructed his house on his lot, the kitchen thereof had encroached on an area of thirty four (34) square meters of DEPRA's property, After the encroachment was discovered in a relocation survey of DEPRA's lot made on November 2,1972, his mother, Beatriz Depra after writing a demand letter asking DUMLAO to move back from his encroachment, filed an action for Unlawful Detainer on February 6,1973 against DUMLAO in the Municipal Court of of Dumangas, docketed as Civil Case No 1, Said complaint was later amended to include DEPRA as a party plain. plaintiff.After trial, the Municipal Court found that DUMLAO was a builder in good faith, and applying Article 448 of the Civil Code, rendered judgment on September 29, 1973, the dispositive portion of which reads:Ordering that a forced lease is created between the parties with the plaintiffs, as lessors, and the defendants as lessees, over the disputed portion with an area of thirty four (34) square meters, the rent to be paid is five (P5.00) pesos a month, payable by the lessee to the lessors within the first five (5) days of the month the rent is due; and the lease shall commence on the day that this decision shall have become final.From the foregoing judgment, neither party appeal so that, ff it were a valid judgment, it would have ordinarily lapsed into finality, but even then, DEPRA did not accept payment of rentals so that DUMLAO deposited such rentals with the Municipal Court.On July 15,1974, DEPRA filed a Complaint for Quieting of Title against DUMLAO before the then Court of First Instance of Iloilo, Branch IV (Trial Court), involving the very same 34 square meters, which was the bone of contention in the Municipal Court. DUMLAO, in his Answer, admitted the encroachment but alleged, in the main, that the present suit is barred byres judicataby virtue of the Decision of the Municipal Court, which had become final and executory.After the case had been set for pre-trial, the parties submitted a Joint Motion for Judgment based on the Stipulation of Facts attached thereto. Premised thereon, the Trial Court on October 31, 1974, issued the assailed Order, decreeing:WHEREFORE, the Court finds and so holds that the thirty four (34) square meters subject of this litigation is part and parcel of Lot 685 of the Cadastral Survey of Dumangas of which the plaintiff is owner as evidenced by Transfer Certificate of Title No. 3087 and such plaintiff is entitled to possess the same.Without pronouncement as to costs.SO ORDERED.Rebutting the argument ofres judicatarelied upon by DUMLAO, DEPRA claims that the Decision of the Municipal Court was null and voidab initiobecause its jurisdiction is limited to the sole issue of possession, whereas decisions affecting lease, which is an encumbrance on real property, may only be rendered by Courts of First Instance.Addressing out selves to the issue of validity of the Decision of the Municipal Court, we hold the same to be null and void. The judgment in a detainer case is effective in respect of possession only (Sec. 7, Rule 70, Rules of Court).1The Municipal Court over-stepped its bounds when it imposed upon the parties a situation of "forced lease", which like "forced co-ownership" is not favored in law. Furthermore, a lease is an interest in real property, jurisdiction over which belongs to Courts of First Instance (now Regional Trial Courts) (Sec. 44(b), Judiciary Act of 1948;2Sec. 19 (2) Batas Pambansa Blg. 129).3Since the Municipal Court, acted without jurisdiction, its Decision was null and void and cannot operate asres judicatato the subject complaint for Queting of Title. Besides, even if the Decision were valid, the rule onres judicatawould not apply due to difference in cause of action. In the Municipal Court, the cause of action was the deprivation of possession, while in the action to quiet title, the cause of action was based on ownership. Furthermore, Sec. 7, Rule 70 of the Rules of Court explicitly provides that judgment in a detainer case "shall not bar an action between the same parties respecting title to the land. "4Conceded in the Stipulation of Facts between the parties is that DUMLAO was a builder in good faith. Thus,8. That the subject matter in the unlawful detainer case, Civil Case No. 1, before the Municipal Court of Dumangas, Iloilo involves the same subject matter in the present case, the Thirty-four (34) square meters portion of land and built thereon in good faith is a portion of defendant's kitchen and has been in the possession of the defendant since 1952 continuously up to the present; ... (Emphasis ours)Consistent with the principle that our Court system, like any other, must be a dispute resolving mechanism, we accord legal effect to the agreement of the parties, within the context of their mutual concession and stipulation. They have, thereby, chosen alegal formulato resolve their dispute to appeal ply to DUMLAO the rights of a "builder in good faith" and to DEPRA those of a "landowner in good faith" as prescribed in Article 448. Hence, we shall refrain from further examining whether the factual situations of DUMLAO and DEPRA conform to the juridical positions respectively defined by law, for a "builder in good faith" under Article 448, a "possessor in good faith" under Article 526 and a "landowner in good faith' under Article 448.In regards to builders in good faith, Article 448 of the Civil Code provides:ART. 448. The owner of the land on which anything has been built sown or planted in good faith,shall have the rightto appropriate as his own the works, sowing or planting, after payment of the indemnity provided for in articles 546 and 548, orto oblige the one who built or planted to pay the price of the land, and the one who sowed, the proper rent.However, the builder or planter cannot be obliged to buy the land if its value is considerably more than that of the building or trees. In such case, he shall pay reasonable rent, if the owner of the land does not choose to appropriate the building or trees after proper indemnity. The parties shall agree upon the terms of the lease and in case of disagreement, the court shall fix the terms thereof (Paragraphing supplied)Pursuant to the foregoing provision, DEPRA has the option either to pay for the encroaching part of DUMLAO's kitchen, or to sell the encroached 34 square meters of his lot to DUMLAO. He cannot refuse to pay for the encroaching part of the building, and to sell the encroached part of his land,5as he had manifested before the Municipal Court. But that manifestation is not binding because it was made in a void proceeding.