Lumungo vs. Usman

A planter or builder in bad faith on another’s registered land loses the improvements without right to indemnity under Article 449 of the Civil Code; equitable considerations cannot override this express statutory rule.

The controversy concerned several lots in the Siasi and Lapak Cadastral Surveys in Sulu, registered under the Torrens System. Petitioners Arada Lumungo and Juhuri Dawa traced their claim to Datu Idiris Amilhussin, who had been charged with treason before the People’s Court after the Japanese Occupation and had dealt with Justice of the Peace Asaad Usman and his wife Dominga Usman. Jose Angeles was Asaad Usman’s nephew and later appeared as counsel for the defendants. The Torrens registration of the lots made the status of their certificates of title material to any purchaser’s inquiry.

Datu Idiris Amilhussin, having allegedly collaborated with the enemy during the Japanese Occupation of Sulu, was arrested and detained when the American Liberation Forces came to Sulu in 1945. On March 1, 1946, he was prosecuted for treason before the People’s Court, docketed as Criminal Case No. 1334. Justice of the Peace Asaad Usman of Siasi and his wife Dominga Usman became interested in Lots Nos. 892, 893, 894, 1121 and 871, while Jamasali Usman, brother of Atty. Asaad Usman, became interested in Lot No. 1226(?). Datu Idiris needed money to pay attorney’s fees and the premium on his bailbond, so he sent his wife to Jamasali for money. Jamasali proposed to buy Lot No. 1227(?). Upon execution of a Pacto de Retro sale, Exhibit “DDD,” Jamasali gave Datu Idiris partial payments of the P3,000.00 mentioned in the document. Sometime in 1946, Atty. Usman visited Datu Idiris in the provincial jail, promised to help him in his case and secure his bailbond, but asked Datu Idiris to sell the five lots in question to his wife, Dominga Miranda Usman. Datu Idiris agreed.

Through Atty. Usman’s help, the bailbond of Datu Idiris was perfected. Consequently, on January 11, 1947, he was released from the provincial jail. On March 14, 1947, Datu Idiris executed an agreement with Dominga Usman, Exhibit “33,” and caused Datu Amirul Amilhussin, his brother and one of the co-owners, to sign a similar document, Exhibit “34.” Upon execution of the agreement, Dominga Usman paid Datu Idiris P300.00; subsequently, Atty. Usman paid him P500.00 and P10.00. Datu Idiris thus received a total of P810.00 from the spouses as consideration under Exhibit “33.” In the meantime, Atty. Usman took possession of the five lots and cultivated them.

Because the whole amount of P3,000.00 mentioned in the Pacto de Retro sale in favor of Jamasali Usman was not fully paid, Datu Idiris, upon release from confinement, demanded that Jamasali complete payment. He also demanded from Atty. Usman payment of the balance of the purchase price of the lots described in Exhibit “33.” After Datu Idiris was repeatedly refused payment by both Jamasali and Atty. Usman, he wrote two complaints, one to the Secretary of Justice dated June 15, 1946, and the other to the President of the Philippines dated March 8, 1948, complaining against Justice of the Peace Asaad Usman and Jamasali Usman. After these complaints were filed, Justice of the Peace Usman caused the revocation of Datu Idiris’s bailbond before the People’s Court. On March 31, 1948, Datu Idiris was rearrested and committed to the provincial jail again. A serious misunderstanding developed between Datu Idiris and Atty. Usman and Jamasali Usman. Several complaints for murder were caused to be filed before the Court of Justice of the Peace Usman against Datu Idiris. Atty. Usman also wrote letters of demand asking Datu Idiris to produce the titles to the five lots to enable him to have a sufficient deed of sale conveying the lots to his wife, while Datu Idiris demanded payment of the balance of the purchase price. Despite these mutual demands, no one complied.

On December 10, 1951, Datu Idiris proposed through Atty. Flor to call off the deal stated in Exhibits “33” and “34,” promising to return the P810.00 he had received from the spouses. Dominga Usman and Atty. Usman agreed to call off the deal. Datu Idiris, however, never paid the P810.00. Despite this, Dominga Usman and Atty. Usman never went to court to compel Datu Idiris either to comply with his obligation to execute and deliver a good and sufficient deed conveying the five lots or to pay back the P810.00. When Datu Idiris failed to pay the P810.00, Dominga Usman sold Lots 892, 893 and 894 to Jose Angeles for P1,000.00. Jose Angeles, upon taking possession of the land, planted coconuts which, together with those already planted by Dominga Usman, numbered about 3,000, most of which were fruit-bearing.

Datu Idiris filed a civil complaint against Atty. Asaad Usman for recovery of possession of the five lots, docketed as Civil Case No. 87; the Court’s analysis dates this filing to February 2, 1952. Instead of informing the court that he and his wife had the legal right to possess the lots by virtue of the agreement in Exhibit “33,” Atty. Usman manifested in open court on September 26, 1952 that he was not interested in the possession or ownership of the land and that he did not buy the land from Datu Idiris. On that date, the court dictated an order in favor of Datu Idiris, declaring him the owner and possessor of the two parcels of land, finding it unnecessary to order Usman’s ejectment because he was not in possession, without prejudice to any claim of any third party, and without pronouncement as to costs. The defendant moved for dismissal of his counterclaim, which the court ordered dismissed, also without pronouncement as to costs.

Upon promulgation of that judgment, Datu Idiris, badly in need of money, went around offering to sell the land. Spouses Juhuri Dawa and Arada Lumungo, interested in acquiring the lots, asked Atty. Dominador Sobreviñas to verify if they could buy the same. Atty. Sobreviñas went to the Office of the Register of Deeds and found no annotation of encumbrances on the Original Certificates of Title of the five lots. Since the court had already adjudged that Atty. Usman did not have any claim of possession or ownership over the land and that he did not buy the land from Datu Idiris, Atty. Sobreviñas advised his clients that they could buy the lots. Accordingly, a deed of sale, Exhibits “L” to “L-2,” was executed on September 30, 1952. Upon presentation of this deed of sale to the Register of Deeds, Original Certificates of Title Nos. 8986, 8123, 8087 and 8122 were cancelled, and Transfer Certificates of Title Nos. T-419, T-420, T-422 and T-421 were issued in the names of the plaintiffs. Plaintiffs took possession of the property, but they were allegedly driven from the land. About three years before, the defendants left Lots Nos. 892, 893, 894 and 1121, and plaintiffs took possession thereof. The defendants remained in possession of Lot No. 871.

The Court of Appeals found that when Dominga Usman sold and transferred her rights in the property to Jose Angeles, the latter made the purchase with knowledge that the property was already in dispute between the defendants, one of whom was Dominga Usman’s husband, and the plaintiffs. It also found that around 3,000 coconut trees had been planted on the lots, some of them already fruit-bearing, and that not all but a portion of the 3,000 were planted by Jose Angeles; the lower court valued fruit-bearing coconut trees at P1.50 each.

• Reimbursement for Improvements: Petitioners questioned the award in favor of Jose Angeles, raising as the sole issue whether he is entitled to reimbursement for the coconut trees he planted on the litigated property.

• Prior Conveyance to Dominga Usman: Respondents maintained that the sale made by Datu Idiris Amilhussin to petitioners Arada Lumungo and Juhuri Dawa on September 30, 1952 is null and void because the lots had previously been conveyed by Datu Idiris and Datu Amirul Amilhussin to intervenor Dominga Usman, wife of defendant Asaad Usman.
• Lack of Provincial Governor’s Approval: Respondents argued that the sale to petitioners was not approved by the provincial governor of Sulu, as required by the Administrative Code of Mindanao and Sulu.

• Reimbursement for Improvements: Whether Jose Angeles is entitled to reimbursement for the coconut trees planted by him on the property in litigation.

• Reimbursement for Improvements: No. Jose Angeles, as a purchaser and builder in bad faith, loses the coconut trees without right to indemnity under Article 449 of the Civil Code; the P2,500.00 award was eliminated. Equity cannot override the express statute.

• Reimbursement for Improvements: The coconut trees are improvements, not “necessary expenses of preservation,” which a builder, planter or sower in bad faith may recover under Articles 452 and 546, first paragraph, of the Civil Code. The Court of Appeals found as a fact that when Dominga Usman sold and transferred her rights to Jose Angeles, the latter made the purchase with knowledge that the property was already in dispute between the defendants, one of whom was Dominga Usman’s husband, and the plaintiffs. Angeles was therefore aware of sufficient facts to induce a reasonably prudent man to inquire into the status of the title, which was easy for him to ascertain because the property was registered under the Torrens System. The Court further noted that Jose Angeles was a nephew of defendant Asaad Usman; that the controversy between Usman and Datu Idiris was a matter of public knowledge because Usman was a justice of the peace and Datu Idiris had filed charges against him with the Department of Justice and the Office of the President, to which Usman countered by causing the cancellation of Datu Idiris’s bailbond, his reincarceration, and the filing of complaints for murder against him; that Datu Idiris had filed Civil Case No. 87 on February 2, 1952, several months before the sale to Angeles on September 30, 1952; that Usman stated on September 26, 1952, four days before the sale, that he was not interested in either the possession or ownership of the lots and had not bought them from Datu Idiris; that at the time of the alleged sale in his favor, Jose Angeles was a law student and later, on August 9, 1957, entered his appearance as counsel for the defendants in collaboration with Asaad Usman; and that the consideration for the sale, involving land of 46 hectares, was only P1,000. These facts left no room for doubt that Jose Angeles was a purchaser and a builder in bad faith. Under Article 449 of the Civil Code, he who builds, plants or sows in bad faith on the land of another loses what is built, planted or sown without right to indemnity. The alleged equity in favor of Jose Angeles, on which the lower courts relied, cannot prevail over the express statutory provision, apart from the fact that he who seeks equity must come with clean hands. The award of P2,500.00 in his favor was therefore eliminated.

• Builder or Planter in Bad Faith under Article 449 — Article 449 of the Civil Code provides that he who builds, plants or sows in bad faith on the land of another loses what is built, planted or sown without right to indemnity. The Court applied this provision to Jose Angeles because he purchased the property with knowledge of the existing dispute and planted coconut trees on it, making him a builder and planter in bad faith who could not recover the value of the improvements.
• Equity Cannot Override Express Statute — Equitable considerations cannot prevail over an express statutory provision to the contrary. The Court rejected the lower courts’ reliance on equity to award reimbursement to Jose Angeles because Article 449 expressly denied indemnity to a builder or planter in bad faith.
• He Who Seeks Equity Must Come with Clean Hands — A party seeking equitable relief must himself act fairly and without bad faith. The Court invoked this maxim against Jose Angeles, whose purchase and planting were attended by circumstances showing bad faith.
• Purchaser’s Duty to Inquire under the Torrens System — A purchaser who is aware of sufficient facts to induce a reasonably prudent man to inquire into the status of the title is charged with knowledge of what such inquiry would reveal, especially where the property is registered under the Torrens System. The Court used this principle to support the finding that Jose Angeles was a purchaser in bad faith.

• "The provision applicable to this case is, accordingly, Article 449 of the Civil Code, which provides that, '(h)e who builds, plants or sows in bad faith on the land of another, loses what is built, planted or sown without right to indemnity.'" — This states the ratio decidendi: Article 449 governs the case and denies indemnity to a builder or planter in bad faith.
• "In short, the foregoing facts, and the above-quoted findings of both the trial court and the Court of Appeals, leave no room for doubt that Jose Angeles was a purchaser and a builder in bad faith." — This is the Court’s definitive finding on Angeles’s status, which triggered the loss of improvements without indemnity.
• "Obviously, the alleged equity in favor of Jose Angeles, on which the lower courts have relied, cannot prevail over the aforementioned express statutory provision to the contrary, apart from the fact that he who seeks equity must come with clean hands." — This passage rejects the equitable basis of the lower courts’ award and affirms the primacy of the express statute.
• "Angeles was, therefore, aware of sufficient facts to induce a reasonably prudent man to inquire into the status of the title to the property in question, which was an easy matter for him to ascertain, said property being registered under the Torrens System." — This defines the duty-to-inquire standard applied to Angeles and explains why his purchase was in bad faith.

• Mañacop vs. Cansino, L-13971, February 27, 1961 — Cited in support of the rule that a purchaser aware of facts sufficient to induce inquiry into the status of the title is charged with knowledge; applied to Jose Angeles.
• Leung Yee vs. Strong, 37 Phil. 644; Flores vs. Lim, 50 Phil. 738; Emas vs. Zuzuarregui, 53 Phil. 197; Felices vs. Iriola, L-11269, February 28, 1958; Bagoba vs. Fernandez, L-11539, May 19, 1958; Tuason vs. Cabildo, L-17168, October 31, 1962; Tuason vs. Macalindog, L-15398, December 29, 1962 — Cited in footnote as authorities supporting the finding that Jose Angeles was a purchaser and builder in bad faith.
• Barrios vs. Go Thong, L-17192, March 30, 1963 — Cited for the principle that equity cannot prevail over an express statutory provision.
• Jurado vs. Flores, 79 Phil. 460 — Cited for the maxim that he who seeks equity must come with clean hands.

• Article 449, Civil Code — He who builds, plants or sows in bad faith on the land of another loses what is built, planted or sown without right to indemnity. Applied to deny reimbursement to Jose Angeles.
• Article 452, Civil Code — Cited as allowing a builder, planter or sower in bad faith to recover necessary expenses of preservation; the Court distinguished the coconut trees as improvements, not necessary expenses.
• Article 546, first paragraph, Civil Code — Cited together with Article 452 for the rule on necessary expenses of preservation recoverable by a builder, planter or sower in bad faith.
• Administrative Code of Mindanao and Sulu — Invoked by respondents as requiring approval by the provincial governor of Sulu for the sale to petitioners; the Court of Appeals rejected the defense as available only to the contracting parties. The Supreme Court did not rely on it in disposing of the petition.

Reyes, J.B.L., Makalintal, Sanchez, Castro, Angeles, Fernando and Capistrano, JJ., concur. Dizon and Zaldivar, JJ., took no part.