J.M. Tuason and Co., Inc. vs. Lumanlan

A Deudor vendee acquires under paragraph seventh of the Tuason-Deudor compromise only a preferential right to purchase the occupied lot at current prices and terms, upon recognizing Tuason title and signing a new contract, with prior payments to the Deudors credited — not a vested right to retain possession at the old Deudor price or at a judicially fixed reasonable price.

J.M. Tuason and Co., Inc. is the registered owner of the Sta. Mesa Heights Subdivision in Barrio Tatalon, Quezon City, under Certificate of Title No. 1267 traceable to Original Certificate of Title No. 735 of Rizal issued under Act No. 496. Telesforo Deudor's heirs asserted a competing claim based on old Spanish informacion posesoria and had sold possessory rights to numerous occupants before compromising with Tuason. The compromise in Case Q-135, approved by the court, recognized Tuason title in exchange for P1,201,063.00, with Annexes "B" and "C" classifying Deudor buyers as "continue" or "Refund" and allocating credits and refunds.

J.M. Tuason and Co., Inc. claimed registered ownership of the Santa Mesa Heights Subdivision in Barrio North Tatalon, Quezon City. Estrella Vda. de Lumanlan occupied 800 square meters therein and built a house and other structures. According to the complaint, she entered unlawfully sometime in April 1949. According to her answer, she had bought the occupied property on 12 March 1949 from Pedro Deudor.

Thereafter, on 16 March 1953, the Deudor heirs and Tuason entered into a compromise agreement, approved by the Court of First Instance of Quezon City, whereby the Deudors recognized Tuason's registered title and received stipulated sums totaling P1,201,063.00, subject to deductions for amounts collected from their buyers. Paragraph seventh addressed sales of possessory rights listed in Annexes "B" and "C", imposing on the Deudors the joint and solidary obligation to make their buyers recognize Tuason title and sign new purchase contracts at current prices and terms for Sta. Mesa Heights Subdivision, with sums already paid to the Deudors credited or refunded as annotated "continue" or "Refund".

Lumanlan invoked that compromise as an affirmative defense, asserting she was among the buyers recognized therein and asking that her rights be upheld and the complaint dismissed. In the same answer, however, she alleged in paragraph 6 of her special defense that Pedro Deudor, his co-owners, and Tuason had conspired together by entering into a supposed compromise whereby the Deudors renounced and quitclaimed all rights including the land sold to her for P1,201,063.00 without her knowledge, consent, or intervention. She never alleged execution of a new contract with Tuason or recognition of its title, and in counterclaim she sought treatment as a builder in good faith. No claim for credit or return of amounts paid to the Deudors was advanced by her in the trial court.

The trial court sustained Tuason, treating registered ownership as decisive on the purely possessory issue and directing vacatur, removal, and P240.00 monthly payment until restoration. The Court of Appeals reversed, accepting the compromise as a defense that obligated Tuason to sell at a reasonable price and legalized continued possession.

• Correctness of the Court of Appeals Construction: Petitioner argued that the appealed pronouncements — that the compromise constituted a valid possessory defense, bound Tuason to sell at a reasonable price, conferred a right to compel acceptance of payment, and legalized respondent's possession — were legally incorrect and contrary to the decisions of the Court.

• Purchase from Deudor and Compromise Recognition: Respondent maintained that she had bought the occupied property from Pedro Deudor on 12 March 1949 and was one of the buyers recognized in the 16 March 1953 compromise agreement between the Deudors and Tuason, so her rights should be recognized and the complaint dismissed.
• Repudiation of the Compromise: Respondent charged that Pedro Deudor, his co-owners, and Tuason conspired together and helped each other by entering into a supposed compromise renouncing and ceding all rights including the land sold to her for P1,201,063.00 without her knowledge, consent, and intervention.
• Builder in Good Faith: Respondent claimed in counterclaim that she should be deemed a builder in good faith.

• Effect of the Compromise Agreement: Whether paragraph seventh of the Tuason-Deudor compromise obligated Tuason to sell the occupied lot to respondent and legalized respondent's possession as a defense to ejectment.
• Repudiation and Right to Invoke: Whether respondent, having assailed the compromise as a product of conspiracy without her consent, may still derive rights therefrom.
• Superiority of Title and Bar to Attack: Whether respondent may justify possession on the Deudors' informacion posesoria as superior to Tuason's Torrens title more than twenty years after issuance of the decree of registration.
• Reasonable Price under Article 1474: Whether the price payable by respondent is governed by Article 1474 of the new Civil Code on reasonable price where price cannot be determined.
• Good Faith Possession: Whether respondent is a builder or possessor in good faith entitled to remain.

• Effect of the Compromise Agreement: No. Paragraph seventh created only a preferential right to purchase at current prices and terms upon recognition of Tuason title and signing of new contracts, with credit for sums paid to the Deudors.
• Repudiation and Right to Invoke: No. Having repudiated and assailed the compromise in her answer, respondent cannot claim advantage or derive rights from it.
• Superiority of Title and Bar to Attack: No. Attack on the decades-old registration decree in favor of Tuason's predecessors is barred, Tuason's Certificate of Title No. 1267 prevailing over the old informacion posesoria.
• Reasonable Price under Article 1474: No. Article 1474 is inapplicable absent any sale contract between Tuason and respondent, Tuason having expressly required new contracts at current prices.
• Good Faith Possession: No. Reliance on the Deudor claim despite presumptive knowledge of the Torrens title since 1914 negates good faith, warranting vacatur.

• Effect of the Compromise Agreement: The text expressly required Deudor buyers to recognize Tuason ownership over property purportedly bought from the Deudors and to sign, whenever possible, new purchase contracts at current prices and terms specified for Sta. Mesa Heights Subdivision. The sums paid to the Deudors were merely to be credited to buyers who complied, and refunded to those annotated "Refund" who discontinued. Thus, while a sort of contractual relation arose under Evangelista vs. Deudor, no obligation to honor old Deudor prices was imposed.
• Repudiation and Right to Invoke: Nowhere in her answer did respondent allege execution of a new contract with Tuason. Worse, she pleaded conspiracy and lack of knowledge, consent, and intervention to invalidate the very compromise now invoked. One who repudiates an agreement cannot selectively enforce it; without reliance on the compromise, no contractual link to Tuason was shown.
• Superiority of Title and Bar to Attack: Stripped of the compromise, possession rested solely on asserted superiority of the Deudors' Spanish informacion posesoria over Certificate of Title No. 1267 traceable to Original Certificate of Title No. 735 under Act No. 496. Long-settled rulings bar such collateral attack twenty years after issuance of the registration decree, as reiterated in the Tuason line of cases.
• Reasonable Price under Article 1474: Article 1474 presupposes delivery to and appropriation by a buyer from the seller sought to be paid. No sale existed between Tuason and Lumanlan, and paragraph seventh negated continuity of the Deudor sale by demanding new contracts at current prices. Hence no gap in price-determination within a Tuason sale could trigger a judicial reasonable-price fix.
• Good Faith Possession: Following J.M. Tuason and Co., Inc. vs. Macalindong, presumptive knowledge of Torrens titles issued to Tuason and predecessors since 1914 precludes honest belief in the Deudor vendor's ownership. Failure to investigate the registry binds the occupant conclusively under Section 51 of Act 496; having deliberately preferred the Deudor claim after its abandonment by the Deudors themselves, respondent bears the consequences and was correctly sentenced to vacate as not a rightful possessor.

• Preferential right under Tuason-Deudor compromise, paragraph seventh — Deudor vendees listed in Annexes "B" and "C" were not automatically confirmed as owners at old prices; the Deudors undertook solidarily to make them recognize Tuason title and sign new contracts at current prices and terms, with prior payments credited if they continued or refunded through Tuason if they discontinued. Applied to deny respondent a defense to ejectment where no recognition or new contract was pleaded or proved.
• Indefeasibility and presumptive knowledge of Torrens title — Registration under Act No. 496 confers conclusive notice; purchasers are bound by the registered title and barred from assailing the decree long after issuance, and cannot claim good faith based on an unregistered adverse claim they failed to verify. Applied to prefer Certificate of Title No. 1267 over informacion posesoria and to reject builder-in-good-faith status for one who ignored the registry since 1914.
• Estoppel by repudiation of compromise — A party who attacks a compromise as conspiratorial and non-binding on her cannot simultaneously invoke it as source of rights against the other party. Applied to preclude Lumanlan, who assailed the Deudor-Tuason compromise, from claiming its benefits.
• Reasonable price under Article 1474, Civil Code — Where price cannot be determined, the contract is inefficacious, except that one who has received and appropriated the thing as buyer must pay a reasonable price as a question of fact. Applied as inapplicable where no contract of sale existed between the registered owner and the occupant.

• "It shall be the joint and solidary obligation of the DEUDORS to make the buyer of the lots purportedly sold by them to recognize the title of the OWNERS over the property purportedly bought by them, and to make them sign, whenever possible, new contracts of purchase for said property at the current paces and terms specified by the OWNERS in their sales of lots in their subdivision known at 'Sta. Mesa Heights Subdivision.'" — States the controlling compromise obligation, establishing that only new contracts at current prices, not old Deudor sales, could ground continued possession.
• "All that Tuason & Co. agreed to, therefore, was to grant the Deudor buyers preferential right to purchase 'at current prices and terms' the lots occupied by them, upon their recognizing the title of Tuason & Co., Inc., and signing new contracts therefor; and to credit them for the amounts they had paid to the Deudors." — Formulates the ratio that the compromise conferred preference, not vested ownership, defeating the Court of Appeals reasonable-price theory.
• "Had he investigated before buying and before building his house on the questioned lot, he would have been informed that the land is registered under the Torrens system in the name of J. M. Tuason & Co., Inc., If he failed to make the necessary inquiry, appellant is now bound conclusively by appellee's Torrens title (Sec. 51, Act 496; Emas vs. Zuzuarregui, 35 Phil. 144)" — Reiterates the Macalindong good-faith test, holding Deudor buyers to conclusive registry notice since 1914.
• "Where the price cannot be determined in accordance with the preceding articles, or in any other manner, the contract is inefficacious. However, if the thing or any part thereof has been delivered to and appropriated by the buyer, he must pay a reasonable price therefor. What is a reasonable price is a question of fact dependent on the circumstances of each particular case." — Quotes Article 1474 verbatim to show its inapplicability absent a Tuason-Lumanlan sale.

• Evangelista vs. Deudor, L-12826, September 10, 1959 — Followed for the proposition that paragraph seventh created a sort of contractual relation between Tuason and Deudor vendees, but distinguished as not obligating sale at old Deudor prices.
• J.M. Tuason and Co., Inc. vs. Macalindong, L-15398, December 29, 1962 — Followed to reject builder-in-good-faith claim, holding presumptive knowledge of Tuason Torrens titles since 1914 binds Deudor buyers conclusively.
• Deudor vs. J.M. Tuason and Co., Inc., L-18768, May 30, 1961 and L-20105, October 31, 1963; J.M. Tuason and Co., Inc. vs. Jaramillo, et al., L-18932-34, September 30, 1963 — Cited as prior cognizance of the compromise terms recognizing Tuason title and requiring new contracts at current prices.
• Tiburcio vs. PHHC, L-13429, October 31, 1959; J.M. Tuason and Co., Inc. vs. Bolaños, 95 Phil. 107; J.M. Tuason and Co., Inc. vs. Santiago, 99 Phil. 622-623; J.M. Tuason and Co., Inc. vs. Jaramillo, L-16827, January 31, 1963 — Followed to bar collateral attack on the decades-old registration decree favoring Tuason predecessors.
• Emas vs. Zuzuarregui, 35 Phil. 144 — Cited through Macalindong for conclusive effect of Torrens title under Section 51 of Act 496 upon one who fails to inquire.

• Article 1474, New Civil Code of the Philippines — Provides that a sale without determinable price is inefficacious, save that a buyer who received and appropriated the thing must pay a reasonable price; held inapplicable because Lumanlan was not a buyer from Tuason and no Tuason sale price remained undetermined.
• Section 51, Act 496; Registration Act No. 496 — Establishes registration as constructive notice binding all persons; applied to impute to respondent knowledge of Certificate of Title No. 1267 and Original Certificate of Title No. 735, negating good faith and sustaining ejectment.

Dizon, Makalintal, Bengzon, J.P., Zaldivar, Sanchez, Castro and Fernando, JJ., concurred. Angeles, J., took no part. Concepcion, C.J., was on leave.