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G.R. No. 211170. July 3, 2017.*

SPOUSES MAXIMO ESPINOZA and WINIFREDA DE

VERA, petitioners, vs. SPOUSES ANTONIO MAYANDOC
and ERLINDA CAYABYAB MAYANDOC, respondents.

Remedial Law; Civil Procedure; Findings of Fact; The

findings of facts of the Court of Appeals (CA) conclusive and
binding on the Supreme Court (SC) and they carry even more
weight when the said court affirms the factual findings of the trial
court.—The findings of facts of the Court of Appeals are
conclusive and binding on this Court and they carry even more
weight when the said court affirms the factual findings of the trial
court. Stated differently, the findings of the Court of Appeals, by
itself, which are supported by substantial evidence, are almost
beyond the power of review by this Court. Although this rule is
subject to certain exceptions, this Court finds none that is
applicable in this case. Nevertheless, the petition still fails
granting that an exception obtains.

_______________

*  SECOND DIVISION.

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602

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Espinoza vs. Mayandoc

Civil Law; Builders in Good Faith; To be deemed a builder in

good faith, it is essential that a person asserts title to the land on
which he builds, i.e., that he be a possessor in the concept of owner,
and that he be unaware that there exists in his title or mode of
acquisition any flaw which invalidates it.—To be deemed a
builder in good faith, it is essential that a person asserts title to
the land on which he builds, i.e., that he be a possessor in the
concept of owner, and that he be unaware that there exists in his
title or mode of acquisition any flaw which invalidates it.
Same; Bad Faith; The settled rule is bad faith should be
established by clear and convincing evidence since the law always
presumes good faith.—The settled rule is bad faith should be
established by clear and convincing evidence since the law always
presumes good faith. In this particular case, petitioners were not
able to prove that respondents were in bad faith in constructing
the house on the subject land. Bad faith does not simply connote
bad judgment or negligence. It imports a dishonest purpose or
some moral obliquity and conscious doing of a wrong. It means
breach of a known duty through some motive, interest or ill will
that partakes of the nature of fraud. For anyone who claims that
someone is in bad faith, the former has the duty to prove such.
Hence, petitioners err in their argument that respondents failed
to prove that they are builders in good faith in spite of the
findings of the RTC and the CA that they are.
Same; Builders in Good Faith; In Tuatis v. Spouses Escol, et
al., 604 SCRA 471 (2009), the Supreme Court (SC) ruled that the
seller (the owner of the land) has two (2) options under Article 448:
(1) he may appropriate the improvements for himself after
reimbursing the buyer (the title he has the right to build thereon,
builder in good faith) the necessary and useful expenses under
Articles 546 and 548 of the Civil Code; or (2) he may sell the land
to the buyer, unless its value is considerably more than that of the
improvements, in which case, the buyer shall pay reasonable rent.
—Article 448 of the Civil Code must be applied. It applies when
the builder believes that he is the owner of the land or that by
some title he has the right to build thereon, or that, at least, he

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has a claim of title thereto. In Tuatis v. Spouses Escol, et al., 604

SCRA 471 (2009), this Court ruled that the seller (the owner of
the land) has two options under Article 448: (1) he may
appropriate the improvements for himself after reimbursing the
buyer (the builder in good faith) the necessary and

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Espinoza vs. Mayandoc

useful expenses under Articles 546 and 548 of the Civil Code;
or (2) he may sell the land to the buyer, unless its value is
considerably more than that of the improvements, in which case,
the buyer shall pay reasonable rent, thus: The rule that the choice
under Article 448 of the Civil Code belongs to the owner of the
land is in accord with the principle of accession, i.e., that the
accessory follows the principal and not the other way around.
Even as the option lies with the landowner, the grant to him,
nevertheless, is preclusive. The landowner cannot refuse to
exercise either option and compel instead the owner of the
building to remove it from the land. The raison d’être for this
provision has been enunciated thus: 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 impracticability 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 the proper rent. He
cannot refuse to exercise either option. 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.
Remedial Law; Civil Procedure; Res Judicata; The well-settled
rule is that the principle or rule of res judicata is primarily one of
public policy. It is based on the policy against multiplicity of suits,
whose primary objective is to avoid unduly burdening the dockets
of the courts.—The well-settled rule is that the principle or rule of
res judicata is primarily one of public policy. It is based on the

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policy against multiplicity of suits, whose primary objective is to

avoid unduly burdening the dockets of the courts. In this case,
however, such principle is inapplicable.

PETITION for review on certiorari of the decision and

resolution of the Court of Appeals.
The facts are stated in the opinion of the Court.
   Emilio V. Angeles for respondents.

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Espinoza vs. Mayandoc

PERALTA,** J.:

Before this Court is the Petition for Review on Certiorari

under Rule 45, dated March 21, 2014, of petitioners-
spouses Maximo Espinoza and Winifreda De Vera, that
seeks to reverse and set aside the Decision1 dated
September 17, 2013 and Resolution dated January 28,
2014, both of the Court of Appeals (CA) which, in turn,
affirmed with modifications the Decision2 dated February
18, 2011 of the Regional Trial Court (RTC), Branch 42,
Dagupan City, in a complaint for useful expenses under
Articles 4483 and 5464 of the New Civil Code of the
Philippines.

_______________

** Designated Acting Chairperson per Special Order No. 2445 dated

June 16, 2017.
1  Penned by Associate Justice Danton Q. Bueser, with the concurrence
of Associate Justices Amelita G. Tolentino and Ramon R. Garcia; Rollo,
pp. 34-43.
2  Penned by Presiding Judge A. Florentino R. Dumlao, Jr.; id., at pp.
118-125.
3  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, or to oblige the one who built or
planted to pay the price of the land, and the one who sowed, the proper

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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.
4  Art. 546. Necessary expenses shall be refunded to every possessor;
but only the possessor in good faith may retain the thing until he has been
reimbursed therefor.
Useful expenses shall be refunded only to the possessor in good faith
with the same right of retention, the person who has defeated him in the
possession having the option of refunding the amount of the expenses or of
paying the increase in value which the thing may have acquired by reason
thereof.

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The facts follow.

A parcel of land located in Dagupan City was originally
owned by Eusebio Espinoza. After the death of Eusebio, the
said parcel of land was divided among his heirs, namely:
Pastora Espinoza, Domingo Espinoza and Pablo Espinoza.
Petitioner Maximo is the son of Domingo Espinoza, who
died on November 3, 1965, and Agapita Cayabyab, who
died on August 11, 1963.
Thereafter, on May 25, 1972, Pastora Espinoza executed
a Deed of Sale conveying her share of the same property to
respondents and Leopoldo Espinoza. However, on that
same date, a fictitious deed of sale was executed by
petitioner Maximo’s father, Domingo Espinoza, conveying
the three-fourth (3/4) share in the estate in favor of
respondent Erlinda Cayabyab Mayandoc’s parents; thus,
TCT No. 28397 was issued in the names of the latter.
On July 9, 1977, a fictitious deed of sale was executed by
Nemesio Cayabyab, Candida Cruz, petitioners-spouses
Maximo Espinoza and Winifreda De Vera and Leopoldo
Espinoza over the land in favor of respondents-spouses
Antonio and Erlinda Mayandoc; thus, TCT No. 37403 was
issued under the names of the latter.

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As a result of the foregoing, petitioners filed an action

for annulment of document with prayer for the nullification
of TCT No. 37403 and, on August 16, 1999, the RTC,
Branch 40, Dagupan City rendered a Decision in favor of
petitioners and ordering respondents to reconvey the land
in dispute and to pay attorney’s fees and the cost of the
suit.
Respondents appealed, but the CA, in its Decision dated
February 6, 2004, affirmed the RTC with modifications
that the award of attorney’s fees and litigation expenses be
deleted for lack of factual basis. The said CA Decision
became final and executory on March 8, 2004.
Thus, respondents filed a complaint for reimbursement
for useful expenses, pursuant to Articles 448 and 546 of the
New

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Espinoza vs. Mayandoc

Civil Code, alleging that the house in question was built on

the disputed land in good faith sometime in 1995 and was
finished in 1996. According to respondents, they then
believed themselves to be the owners of the land with a
claim of title thereto and were never prevented by the
petitioners in constructing the house. They added that the
new house was built after the old house belonging to
respondent Erlinda Mayandoc’s father was torn down due
to termite infestation and would not have reconstructed the
said house had they been aware of the defect in their title.
As such, they claimed that they are entitled to
reimbursement of the construction cost of the house in the
amount of P800,000.00. They further asserted that at the
time that their house was constructed, they were
possessors in good faith, having lived over the land in
question for many years and that petitioners questioned
their ownership and possession only in 1997 when a
complaint for nullity of documents was filed by the latter.
Petitioners, in their Answer, argued that respondents
can never be considered as builders in good faith because
the latter were aware that the deeds of sale over the land

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in question were fictitious and, therefore, null and void;

thus, as builders in bad faith, they lose whatever has been
built over the land without right to indemnity.
Respondents, on January 5, 2011, manifested their
option to buy the land where the house stood, but
petitioners expressed that they were not interested to sell
the land or to buy the house in question.
The RTC, on February 18, 2011, rendered its Decision
with the following dispositive portion:

WHEREFORE, judgment is hereby rendered requiring the

defendants to sell the land, where the plaintiffs’ house stands, to
the latter at a reasonable price based on the zonal value
determined by the Bureau of Internal Revenue (BIR).

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SO ORDERED.5

Petitioners appealed to the CA, but the latter, in its

Decision dated September 17, 2013, affirmed the decision of
the RTC with modifications. The dispositive portion of the
Decision reads:

WHEREFORE, the Decision dated February 18, 2011 by the

Regional Trial Court, Branch 42 of Dagupan City, in Civil Case
No. 2005-0271-D is hereby AFFIRMED with MODIFICATIONS.
Let the case be REMANDED to the aforementioned trial court
for further proceedings consistent with the proper application of
Articles 448, 546 and 548 of the New Civil Code and to render a
complete judgment of the case.
SO ORDERED.6

The motion for reconsideration of petitioners were

subsequently denied by the CA in its Resolution dated
January 28, 2014.
Hence, the present petition.
Petitioners raise the following issues:

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I.
WHETHER THE HONORABLE COURT OF APPEALS ERRED
IN RULING THAT THE PETITIONERS WERE NOT ABLE TO
PROVE BAD FAITH ON THE PART OF THE RESPONDENTS.
II.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS
ERRED IN RULING THAT RES JUDICATA DOES NOT APPLY
IN THE INSTANT CASE.

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5  Rollo, p. 125.
6  Id., at pp. 42-43.

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According to petitioners, whether or not respondents

were in bad faith in introducing improvements on the
subject land is already moot, since the judgment rendered
by the RTC of Dagupan City, Branch 40 and affirmed by
the CA, that declared the two Deeds of Definite/Absolute
Sale dated May 25, 1972 and July 9, 1977 as null and void,
had long become final and executory on March 8, 2004.
They also argue that respondents had not successfully
shown any right to introduce improvements on the said
land as their claim of laches and acquisitive prescription
have been rejected by the CA on appeal; thus, it follows
that the respondents were builders in bad faith because
knowing that the land did not belong to them and that they
had no right to build thereon, they still caused the house to
be erected. They further insist that respondents are
deemed builders in bad faith because their house has been
built and reconstructed into a bigger one after respondent
Erlinda’s parents forged a fictitious sale. Finally, they
claim that the principle of res judicata in the mode of
‘conclusiveness of judgment’ applies in this case.
The petition lacks merit.
The findings of facts of the Court of Appeals are
conclusive and binding on this Court7 and they carry even

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more weight when the said court affirms the factual

findings of the trial court.8 Stated differently, the findings
of the Court of Appeals, by itself, which are supported by
substantial evidence, are almost beyond the power of
review by this Court.9 Although this rule is subject to
certain exceptions, this Court finds none

_______________

7  Security Bank & Trust Company v. Triumph Lumber and

Construction Corporation, 361 Phil. 463, 474; 301 SCRA 537, 548 (1999);
American Express International, Inc. v. Court of Appeals, 367 Phil. 333,
339; 308 SCRA 65, 69 (1999).
8  Borromeo v. Sun, 375 Phil. 595, 602; 317 SCRA 176, 182 (1999);
Boneng v. People, 363 Phil. 594, 600; 304 SCRA 252, 257 (1999).
9  Pimentel v. Court of Appeals, 366 Phil. 494, 501; 307 SCRA 38, 43
(1999).

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that is applicable in this case. Nevertheless, the petition

still fails granting that an exception obtains.
To be deemed a builder in good faith, it is essential that
a person asserts title to the land on which he builds, i.e.,
that he be a possessor in the concept of owner, and that he
be unaware that there exists in his title or mode of
acquisition any flaw which invalidates it.10 The RTC, as
affirmed by the CA, found respondents to be builders in
good faith, thus:

The plaintiffs are builders in good faith. As asserted by

plaintiffs and not rebutted by defendants, the house of plaintiffs
was built on the lot owned by defendants in 1995. The complaint
for nullity of documents and reconveyance was filed in 1997,
about two years after the subject conjugal house was constructed.
Defendants-spouses believed that at the time when they
constructed their house on the lot of defendants, they have a
claim of title. Art. 526, New Civil Code, states that a possessor in
good faith is one who has no knowledge of any flaw or defect in his

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title or mode of acquisition. This determines whether the builder

acted in good faith or not. Surely, plaintiffs would not have
constructed the subject house which plaintiffs claim to have cost
them P800,000.00 to build if they knew that there is a flaw in
their claim of title. Nonetheless, Art. 527, New Civil Code, states
clearly that good faith is always presumed, and upon him who
alleges bad faith on the part of the possessor lies the burden of
proof. The records do not show that the burden of proof was
successfully discharged by the defendants.
x x x x
Plaintiffs are in good faith in building their conjugal house in
1995 on the lot they believed to be their own by purchase. They
also have in their favor the legal presumption of good faith. It is
the defendants who had the burden to prove otherwise. They
failed to discharge such

_______________

10  Department of Education v. Casibang, G.R. No. 192268, January 27,

2016, 782 SCRA 326, citing Heirs of Victorino Sarili v. Lagrosa, 724 Phil.
608, 623; 713 SCRA 726, 741 (2014).

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burden until the Regional Trial Court, Br. 40, Dagupan City,
promulgated an adverse ruling in Civil Case No. 97-0187-D. Thus,
Art. 448 comes in to protect the plaintiffs-owners of their
improvement without causing injustice to the lot owner. Art. 448
provided a just resolution of the resulting ‘forced-ownership’ by
giving the defendants lot owners the option to acquire the
conjugal house after payment of the proper indemnity or to oblige
the builder plaintiffs to pay for the lot. It is the defendants-lot
owners who are authorized to exercise the option as their right is
older, and under the principle of accession where the accessory
(house) follows the principal. x x x.11

The settled rule is bad faith should be established by

clear and convincing evidence since the law always

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presumes good faith.12 In this particular case, petitioners

were not able to prove that respondents were in bad faith
in constructing the house on the subject land. Bad faith
does not simply connote bad judgment or negligence.13 It
imports a dishonest purpose or some moral obliquity and
conscious doing of a wrong.14 It means breach of a known
duty through some motive, interest or ill will that partakes
of the nature of fraud.15 For anyone who claims that
someone is in bad faith, the former has the duty to prove
such. Hence, petitioners err in their argument that
respondents failed to prove that they are builders in good
faith in spite of the findings of the RTC and the CA that
they are.

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11  Rollo, pp. 120-121. (Citations omitted)

12  Ford Philippines, Inc. v. Court of Appeals, 335 Phil. 1, 9-10; 267
SCRA 320, 328-329 (1997).
13  Id., at p. 9; p. 328.
14  Id.
15  Id.

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As such, Article 44816 of the Civil Code must be applied.

It applies when the builder believes that he is the owner of
the land or that by some title he has the right to build
thereon,17 or that, at least, he has a claim of title thereto.18
In Tuatis v. Spouses Escol, et al.,19 this Court ruled that
the seller (the owner of the land) has two options under
Article 448: (1) he may appropriate the improvements for
himself after reimbursing the buyer (the builder in good
faith) the necessary and useful expenses under Articles
54620 and 54821 of the Civil

_______________

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16  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, 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. (361a)
17  Rosales v. Castelltort, 509 Phil. 137, 147; 472 SCRA 144, 155 (2005).
18  Briones v. Macabagdal, 640 Phil. 343, 352; 626 SCRA 300, 307
(2010).
19  619 Phil. 465, 483; 604 SCRA 471, 492 (2009), cited in Communities
Cagayan, Inc. v. Nanol, 698 Phil. 648, 663-664; 685 SCRA 453, 470-471
(2012).
20  Art. 546. Necessary expenses shall be refunded to every
possessor; but only the possessor in good faith may retain the thing until
he has been reimbursed therefor.
Useful expenses shall be refunded only to the possessor in good faith
with the same right of retention, the person who has defeated him in the
possession having the option of refunding the amount of the expenses or of
paying the increase in value which the thing may have acquired by reason
thereof.
21  Art. 548. Expenses for pure luxury or mere pleasure shall not be
refunded to the possessor in good faith; but he may remove

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Code; or (2) he may sell the land to the buyer, unless its
value is considerably more than that of the improvements,
in which case, the buyer shall pay reasonable rent, thus:

The rule that the choice under Article 448 of the Civil Code
belongs to the owner of the land is in accord with the principle of
accession, i.e., that the accessory follows the principal and not the
other way around. Even as the option lies with the landowner, the
grant to him, nevertheless, is preclusive. The landowner cannot

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refuse to exercise either option and compel instead the owner of

the building to remove it from the land.
The raison d’être for this provision has been enunciated thus:
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
impracticability 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 the proper rent. He cannot refuse to exercise either
option. 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.22

The CA, therefore, did not err in its ruling that instead
of requiring the petitioners to sell the land, the RTC must
determine the option which the petitioners would choose.
As aptly ruled by the CA:

_______________

the ornaments with which he has embellished the principal thing if it

suffers no injury thereby, and if his successor in the possession does not
prefer to refund the amount expended.
22  Tuatis v. Escol, supra note 19 at pp. 488-489; pp. 494-495.
(Citations omitted)

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The rule that the right of choice belongs to the owner of the
land is in accordance with the principle of accession. However,
even if this right of choice is exclusive to the landowner, he cannot
refuse to exercise either option and demand, instead for the
removal of the building.

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Instead of requiring defendants-appellants to sell the land, the

court a quo must determine the option which they would choose.
The first option, to appropriate the building upon payment of
indemnity or the second option, to sell the land to the plaintiffs-
appellees. Moreover, the court a quo should also ascertain: (a)
under the first option, the amount of indemnification for the
building; or (b) under the second option, the value of the subject
property vis-à-vis that of the building, and depending thereon, the
price of, or the reasonable rent for, the subject property.
Hence, following the ruling in the recent case of Briones v.
Macabagdal, this case must be remanded to the court a quo for
the conduct of further proceedings to assess the current fair
market of the kind and to determine other matters necessary for
the proper application of Article 448, in relation to Articles 546
and 548 of the New Civil Code.23

Therefore, this Court agrees with the CA that there is a

need to remand the case to the RTC for further
proceedings, specifically, in assessing the current fair
market value of the subject land and other matters that are
appropriate in the application of Article 448, in relation to
Articles 546 and 548 of the New Civil Code.
As to the issue of res judicata, the CA is correct in its
ruling that there is no identity of subject matter and cause
of action between the prior case of annulment of document
and the present case, thus:

In the instant case, res judicata will not apply since there is no
identity of subject matter and cause of action. The first case is for
annulment of document, while the instant case is for
reimbursement of useful expenses as

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23  Rollo, p. 40. (Citation omitted)

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builders in good faith under article 448 in relation to Articles 546

and 548 of the New Civil Code.
Moreover, We are not changing or reversing any findings of the
RTC and by this Court in Our 6 February 2004 decision. The
Court is still bound by this judgment insofar as it found the Deeds
of Absolute Sale null and void, and that defendants-appellants are
the rightful owners of the lot in question.
However, if the court a quo did not take cognizance of the
instant case, plaintiffs-appellees shall lose ownership of the
building worth Php316,400.00 without any compensation. While,
the defendants-appellants not only will recover the land but will
also acquire a house without payment of indemnity. The fairness
of the rules enunciated in Article 448 is explained by the Supreme
Court in the case of Depra v. Dumlao, viz.:
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 impracticability of creating a state of
forced 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.
Finally, “the decision of the court a quo should not be viewed as
a denigration of the doctrine of immutability of final judgments,
but a recognition of the equally sacrosanct doctrine that a person
should not be allowed to profit or enrich himself inequitably at
another’s expense.”24

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24  Id., at pp. 41-42. (Italics in the original)

615

VOL. 828, JULY 3, 2017 615

Espinoza vs. Mayandoc

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SUPREME COURT REPORTS ANNOTATED 828 Page 16 of 17

The well-settled rule is that the principle or rule of res

judicata is primarily one of public policy. It is based on the
policy against multiplicity of suits,25 whose primary
objective is to avoid unduly burdening the dockets of the
courts.26 In this case, however, such principle is
inapplicable.
WHEREFORE, the Petition for Review on Certiorari
under Rule 45, dated March 21, 2014, of petitioners-
spouses Maximo Espinoza and Winifreda De Vera, is
DENIED. Consequently, the Decision dated September 17,
2013 and Resolution dated January 28, 2014, both of the
Court of Appeals are AFFIRMED.
SO ORDERED.

Mendoza, Leonen and Martires, JJ., concur.

Carpio, J., On Wellness Leave.

Petition denied, judgment and resolution affirmed.

Notes.—To be deemed a builder in good faith, it is

essential that a person asserts title to the land on which he
builds, i.e., that he be a possessor in the concept of owner,
and that he be unaware that there exists in his title or
mode of acquisition any flaw which invalidates it.
(Department of Education vs. Casibang, 782 SCRA 326
[2016])
It is provided under Article 448 of the Civil Code that
the builder cannot be obliged to buy the land if its value is
considerably more than that of the improvements and
buildings. (Id.)

——o0o——

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25  Cruz v. Court of Appeals, 369 Phil. 161, 170-171; 309 SCRA 714,
722 (1999).
26  Riviera Golf Club, Inc. v. CCA Holdings, B.V., G.R. No. 173783,
June 17, 2015, 758 SCRA 691, 707.

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