Mangulon Calagan vs. Court of First Instance of Davao (Branch II)

A homesteader exercising the right of repurchase under Section 119 of the Public Land Act is not required to reimburse the vendee for useful improvements introduced on the land; instead, the homesteader has the option to require the vendee to remove such improvements where they can be removed without damage to the principal thing, pursuant to Articles 546 and 547 of the Civil Code, construed in conjunction with Article 1616.

The petitioners are the heirs of a homestead grantee who was issued Original Certificate of Title No. P-2388 over a 5.2905-hectare parcel in Dawis, Digos, Davao. The private respondent purchased a 9,230-square-meter portion of the homestead from the grantee and his daughter in 1961. The Public Land Act (Commonwealth Act No. 141), Section 119, provides that every conveyance of land acquired under the homestead provisions shall be subject to repurchase by the applicant, his widow, or legal heirs within five years from the date of conveyance.

In 1954, petitioner Mangulon Calagan and his wife Takura were granted a Homestead Patent over a 5.2905-hectare parcel in Dawis, Digos, Davao, and were issued Original Certificate of Title No. P-2388. Takura died in 1955, survived by her husband and their eight children, all of whom are petitioners herein.

On August 8, 1961, Mangulon and his daughter Paula sold a 9,230-square-meter portion of the homestead to private respondent Petra Sandoval for P2,340.00. Petitioners' title to the land was borrowed by the private respondent so that the sale could be annotated thereon. In 1963, Mangulon offered to repurchase the portion sold, but private respondent refused. Petitioners made subsequent offers to repurchase, but the private respondent was adamant in her refusal. The latter maintained that she was willing to comply with petitioners' demands provided she was reimbursed the value of the house she had constructed on the subject land.

On April 15, 1966, petitioners brought an action for reconveyance against private respondent. On October 10, 1968, the trial court rendered judgment ordering the defendant to reconvey the land upon return of the P2,340.00 purchase price and payment of P3,000.00 as the value of the house constructed in good faith by the defendant on the lot, to deliver the duplicate certificate of title, to pay attorney's fees of P500.00, and to pay costs. Petitioners appealed, contesting only the portion of the judgment requiring them to pay P3,000.00 for the value of the house.

There was no dispute on the following basic points: (1) the subject land is a portion of a homestead belonging to petitioners; (2) a repurchase is proper pursuant to Section 119 of the Public Land Act (CA No. 141); and (3) the action for repurchase was filed within the five-year period from the date of sale.

• Necessary vs. Useful Expenses: Petitioners argued that only necessary expenses are subject to reimbursement, and a house constructed on a coconut land is not necessary but merely useful.
• Circumvention of the Public Land Act: Petitioners argued that in a repurchase under Section 119 of the Public Land Act, a homesteader is only supposed to tender the purchase price; requiring payment for the value of the house in addition to the purchase price constitutes a circumvention of the Public Land Act.
• Good Faith of the Vendee: Petitioners argued that a vendee who introduced a building on land sought to be repurchased under the Public Land Act, during the time when the homesteader can validly repurchase, cannot be considered in good faith because possession over the land is of a precarious character.

• Ownership Rights: Private respondent countered that when she bought the land in dispute, she was not merely a tenant, lessee, or possessor in good faith therein but the owner of the tenement itself.
• Lawful Exercise of Owner's Rights: Private respondent argued that as she needed a house where she and her family could live, she constructed a modest house in the lawful exercise of her rights as an owner.

• Reimbursement for Useful Improvements: Whether the homesteader-repurchaser should be required to pay the vendee the value of the house constructed on the homestead as a condition for repurchase under Section 119 of the Public Land Act.
• Applicable Law: Whether Article 1616 of the Civil Code on legal redemption should apply to homestead repurchase, or whether it should be construed in conjunction with Articles 546 and 547 of the Civil Code.

• Reimbursement for Useful Improvements: No. The homesteader-repurchaser should not be required to pay the value of the house constructed by the vendee. The judgment was modified to eliminate the P3,000.00 payment, and the private respondent was given the right to remove her house without damage to the land.
• Applicable Law: Article 1616 of the Civil Code is, in general, the applicable law to a homesteader desirous to redeem his property. However, considering the purpose of the law on homesteads, Article 1616 should be construed in conjunction with Articles 546 and 547 of the Civil Code prescribing the rules on refund of necessary and useful expenses.

• Reimbursement for Useful Improvements: The Court reasoned that the house constructed by the private respondent is a useful expense, defined as that which increases the value or augments the income of the property, as contrasted to a necessary expense which is incurred for the preservation of the thing. While Article 1616 of the Civil Code provides that the vendor a retro cannot avail himself of the right of repurchase without returning to the vendee the price of the sale, the expenses of the contract, and the necessary and useful expenses made on the thing sold, the Court held that considering the purpose of the law on homesteads—which is to conserve ownership in the hands of the homesteader and his family—Article 1616 should be construed in conjunction with Articles 546 and 547 of the Civil Code. Under Article 547, if the useful improvements can be removed without damage to the principal thing, the possessor in good faith may remove them unless the person who recovers the possession exercises the option under paragraph 2 of the preceding article. Applying Article 547, the homesteader desiring to repurchase should be given the option to require the vendee a retro to remove the useful improvements on the land subject of the sale a retro, which option is not granted the vendor a retro under Article 1616. To allow a vendee a retro of a homestead the right of retention until payment of useful expenses is made by the redemptioner would render nugatory the right of repurchase granted by law to a homesteader, because all a vendee a retro can do to prevent repurchase is to build something on the homestead beyond the capacity to pay of the homesteader who seeks to repurchase. The Court cited its ruling in Philippine National Bank vs. Landeta, where it held that although the mortgagee-bank had sold the homestead to a third party within the five-year period, the homesteader should be allowed to repurchase the mortgaged homestead from the bank and not from the third person, for otherwise, a vendee a retro could make conveyance of the property for amounts beyond the capacity of said owner to pay. Since petitioners were not exercising the option to refund the amount of the expenses incurred by private respondent for the house, nor to pay the increase in value acquired by the land by reason of such expenses as provided for in Article 546, private respondent, as the vendee a retro, may remove her house since this can be done without damage to the principal thing, as stipulated in Article 547.

• Homestead Repurchase and Useful Improvements — A homesteader exercising the right of repurchase under Section 119 of the Public Land Act is not required to reimburse the vendee for useful improvements introduced on the land. The homesteader has the option to require the vendee to remove such improvements where they can be removed without damage to the principal thing, pursuant to Articles 546 and 547 of the Civil Code, construed in conjunction with Article 1616. This rule prevents a vendee a retro from rendering nugatory the right of repurchase by building improvements beyond the capacity to pay of the homesteader.

• "To allow a vendee a retro of a homestead, however, the right of retention until payment of useful expenses is made by the redemptioner would be to render nugatory the right of repurchase granted by law to a homesteader because all a vendee a retro can do to prevent repurchase is to build something on the homestead beyond the capacity to pay of the homesteader who seeks to repurchase." — This passage articulates the core rationale for the Court's ruling, explaining why the right of retention under Article 1616 must yield to the policy of the Public Land Act.
• "Petitioners should not, as opined by the trial Court, be made to refund the value of that house to private respondent, else, the salutary policy behind the Public Land Law would be thwarted and rendered meaningless." — This states the conclusion of the Court's reasoning, emphasizing the policy consideration that drove the decision.

• Philippine National Bank vs. Landeta, 18 SCRA 273 (1966) — Cited as controlling precedent. The Court relied on this case to support the proposition that a homesteader should be allowed to repurchase the homestead even where the property had been sold to a third party within the five-year period, for otherwise a vendee a retro could make conveyance of the property for amounts beyond the capacity of said owner to pay.
• Gargalo vs. Duero and Espejo, 1 SCRA 1311 (1961) — Cited in the footnotes in connection with the discussion of the option granted to the homesteader under Article 547.

• Section 119, Commonwealth Act No. 141 (Public Land Act) — Provides that every conveyance of land acquired under the free patent or homestead provisions, when proper, shall be subject to repurchase by the applicant, his widow, or legal heirs within a period of five years from the date of conveyance. This provision was the basis for the petitioners' right to repurchase the homestead.
• Article 1616, Civil Code — Provides that the vendor cannot avail himself of the right of repurchase without returning to the vendee the price of the sale, the expenses of the contract and other legitimate payments, and the necessary and useful expenses made on the thing sold. The Court held this provision should be construed in conjunction with Articles 546 and 547.
• Article 546, Civil Code — Provides that necessary expenses shall be refunded to every possessor, but only the possessor in good faith may retain the thing until reimbursed; 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 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.
• Article 547, Civil Code — Provides that if the useful improvements can be removed without damage to the principal thing, the possessor in good faith may remove them unless the person who recovers the possession exercises the option under paragraph 2 of the preceding article. This provision was applied to give the homesteader the option to require removal of the house.

Teehankee (Chairman), Makasiar, Fernandez, Guerrero, and De Castro, JJ., concurred.