Mirallosa vs. Carmel Development Inc.

An unconstitutional law produces no effect and confers no right upon any person, and a judicial declaration of a law's unconstitutionality binds all persons, not merely the parties to the case, such that one who occupies property pursuant to a decree already declared unconstitutional cannot claim good faith or rely on the operative fact doctrine.

Respondent Carmel Development, Inc. was the registered owner of Pangarap Village, a 156-hectare property in Caloocan City covered by TCTs in the name of Carmel Farms, Inc. On September 14, 1973, President Marcos issued P.D. 293, which invalidated respondent's titles and declared the property open for disposition to members of the Malacañang Homeowners Association, Inc. (MHAI), described as the present bona fide occupants. Petitioner's predecessor-in-interest, Pelagio M. Juan, was an MHAI member who occupied Lot No. 32, Block No. 73 pursuant to the decree. The Supreme Court declared P.D. 293 unconstitutional in Tuason on January 29, 1988, and the Register of Deeds cancelled the memorandum inscribed on respondent's title on February 17, 1988, restoring respondent's ownership.

Respondent Carmel Development, Inc. was the registered owner of Pangarap Village, a 156-hectare property located at Barrio Makatipo, Caloocan City, consisting of three parcels of land registered in the name of Carmel Farms, Inc. under TCT Nos. (62603) 15634, (62605) 15632, and (64007) 15807. The lot at the center of the dispute is Lot No. 32, Block No. 73, covered by these titles.

On September 14, 1973, President Ferdinand Marcos issued Presidential Decree No. 293, which cancelled all sales contracts and transfers covering certain lots of the Tala Estate in Caloocan City, declared the TCTs in the name of Carmel Farms, Inc. invalid and cancelled as against the Government, and declared the lots open for disposition and sale to members of the Malacañang Homeowners Association, Inc. (MHAI), the present bona fide occupants, pursuant to Commonwealth Act No. 32, as amended. By virtue of P.D. 293, a memorandum was inscribed on the last page of respondent's title declaring it null and void ab initio and the property open for disposition to MHAI members. Petitioner's predecessor-in-interest, Pelagio M. Juan, an MHAI member, occupied Lot No. 32 and built houses thereon. Respondent was constrained to allow MHAI members to occupy the rest of Pangarap Village.

On January 29, 1988, the Supreme Court promulgated Roman Tuason and Remedio V. Tuason, Attorney-in-fact, Trinidad S. Viado vs. The Register of Deeds, Caloocan City, Ministry of Justice and the National Treasurer, which declared P.D. 293 unconstitutional and void ab initio in all its parts. The dispositive portion commanded the cancellation of the inscriptions on the titles, restoration of the titles to full effect and efficacy, and cessation from implementing any provision of P.D. 293. On February 17, 1988, the Register of Deeds cancelled the memorandum inscribed on respondent's title, restoring respondent's ownership of the entire property. Sometime in 1995, petitioner took over Lot No. 32 by virtue of an affidavit executed by Pelagio M. Juan in his favor.

As a consequence of Tuason, respondent made several oral demands on petitioner to vacate the premises, but to no avail. A written demand letter sent sometime in April 2002 likewise went unheeded. On January 14, 2003, respondent filed a Complaint for Unlawful Detainer before the MeTC. The MeTC found that respondent was the registered owner, that petitioner's occupancy was by mere tolerance, and that petitioner was bound by an implied promise to vacate upon demand; it ordered petitioner to vacate, pay ₱10,000 as attorney's fees, and pay the costs of suit. The RTC reversed, holding that respondent's tolerance came only after P.D. 293 was declared unconstitutional and that petitioner's possession was under color of title, placing the complaint outside the category of unlawful detainer. The CA reversed the RTC and reinstated the MeTC decision, holding that the MeTC had jurisdiction, that respondent as registered owner had a better right to possession, and that petitioner was not a builder in good faith from the moment P.D. 293 was declared unconstitutional and title restored to respondent.

• Jurisdiction: Petitioner argued that the MeTC had no jurisdiction over the subject matter because respondent filed the Complaint beyond the one-year prescriptive period for ejectment cases, respondent having allegedly lost ownership and possession as early as September 14, 1973 when P.D. 293 took effect.
• Tolerance: Petitioner insisted that tolerance was not present from the start of his possession, as respondent extended tolerance only after P.D. 293 was declared unconstitutional, necessarily placing respondent's cause of action outside the category of unlawful detainer and making it either an accion publiciana or an accion reivindicatoria.
• Binding Effect of Tuason: Petitioner argued that under the doctrine of operative fact and the doctrine of res inter alios judicatae nullum aliis praejudicium faciunt, he should not be prejudiced by Tuason, since the declaration of unconstitutionality of P.D. 293 should not affect the rights of persons not party to that case.
• Builder in Good Faith: Petitioner claimed to be a builder in good faith for want of knowledge of any infirmity in P.D. 293, entitling him to reimbursement of useful expenses and the right to retain possession pending reimbursement, in accordance with Article 545 of the Civil Code.

• Jurisdiction: Whether the MeTC had jurisdiction over the case.
• Binding Effect of Unconstitutionality: Whether Tuason may be applied here, despite petitioner not being a party to that case.
• Builder in Good Faith: Whether petitioner is a builder in good faith.

• Jurisdiction: Yes. The MeTC rightly exercised jurisdiction, the case being one of unlawful detainer filed within the one-year prescriptive period counted from the date of the last demand to vacate.
• Binding Effect of Unconstitutionality: Yes. Tuason may be applied despite petitioner not being a party, because a declaration of a law's unconstitutionality binds all persons and an unconstitutional law produces no effect and confers no right on anyone.
• Builder in Good Faith: No. Petitioner is not a builder in good faith, having occupied the property in 1995, approximately seven years after Tuason declared P.D. 293 unconstitutional, and is therefore bound by mandatory judicial notice of that ruling.

• Jurisdiction: An action for unlawful detainer exists when a person unlawfully withholds possession after the expiration or termination of the right to possess by virtue of any contract, express or implied. The one-year prescriptive period is tacked from the date of the last demand, because the other party may waive prior demands and allow the possessor to remain temporarily. Petitioner's possession was originally legal under P.D. 293 but became illegal when Tuason declared the decree unconstitutional. While tolerance must be present at the start of possession, respondent had no option but to allow MHAI members to enter the property when P.D. 293 was promulgated — this was not the "tolerance" envisioned by law, as the decree was, in the words of Tuason, "a disguised, vile stratagem deliberately resorted to favor a few individuals, in callous and disdainful disregard of the rights of others" and "a taking of private property without due process and without compensation whatever." When respondent sent a demand letter in April 2002 and filed the Complaint in January 2003, it did so within the one-year prescriptive period. Any ownership issue would only be provisionally determined for the purpose of settling possession, as held in Heirs of Ampil vs. Manahan, where the Court stated that the lower court's adjudication of ownership in an ejectment case is merely provisional and would not bar a separate action involving title.

• Binding Effect of Unconstitutionality: A law declared unconstitutional produces no effect whatsoever and confers no right on any person, regardless of whether the person was a party to the original case. Not only the parties but all persons are bound by the declaration of unconstitutionality, meaning no one may thereafter invoke the law nor may courts apply it in subsequent cases. Petitioner's invocation of res inter alios judicatae nullum aliis praejudicium faciunt fails because the doctrine does not apply when the party concerned is a successor in interest by title subsequent to the commencement of the action, or when the proceeding is in rem. The judgment in Tuason is binding on petitioner because the declaration of P.D. 293 as a nullity partakes of the nature of an in rem proceeding. The operative fact doctrine, which recognizes interim effects of a law prior to its declaration of unconstitutionality, is a rule of equity applicable only when the declaration would impose an undue burden on those who relied on the invalid law, and can never be invoked to validate an unconstitutional act. Petitioner could not claim such burden because the affidavit transferring occupancy was executed in 1995, approximately seven years after Tuason was promulgated, and he should have been aware of the binding effects of that ruling.

• Builder in Good Faith: A builder in good faith is one who builds with the belief that the land is his or that by some title he has the right to build thereon, and is ignorant of any defect or flaw in his title. Petitioner only started occupying the property in 1995, approximately seven years after Tuason was promulgated. Since all judicial decisions form part of the law of the land, their existence is a matter of mandatory judicial notice; on the other hand, ignorantia legis non excusat. Petitioner should have been aware of the binding effect of Tuason and the subsequent unconstitutionality of P.D. 293. These circumstances remove him from the ambit of the operative fact doctrine and preclude a finding of good faith. Accordingly, he loses whatever he has built on the property without right to indemnity, pursuant to Article 449 of the Civil Code.

• Operative Fact Doctrine — A rule of equity that recognizes the interim effects of a law prior to its declaration of unconstitutionality. It is applied as an exception to the general rule that an unconstitutional law produces no effects. The doctrine is applicable when a declaration of unconstitutionality will impose an undue burden on those who have relied on the invalid law, but it can never be invoked to validate an unconstitutional act. In this case, petitioner could not invoke the doctrine because he occupied the property in 1995, seven years after Tuason declared P.D. 293 unconstitutional, and thus could not claim to have been unduly burdened by reliance on the invalid law.

• Res Inter Alios Judicatae Nullum Aliis Praejudicium Faciunt — Judgments in actions between parties do not prejudice non-parties. This doctrine does not apply when the party concerned is a successor in interest by title subsequent to the commencement of the action, or when the action or proceeding is in rem, the judgment in which is binding against him. The Court held that the declaration of P.D. 293 as a nullity in Tuason partakes of the nature of an in rem proceeding and is therefore binding on petitioner even though he was not a party to Tuason.

• One-Year Prescriptive Period in Unlawful Detainer — The one-year prescriptive period for filing an unlawful detainer case is tacked from the date of the last demand to vacate, because the other party has the right to waive the right of action based on previous demands and let the possessor remain on the premises in the meantime. The importance of making a demand is jurisdictional in nature.

• Provisional Determination of Ownership in Ejectment — In an unlawful detainer case, physical or material possession of the property, independent of any claim of ownership, is the sole issue for resolution. Where ownership is raised, courts may pass upon the issue to determine who has the right to possess, but such adjudication is merely provisional and does not bar or prejudice a separate action involving title to the property.

• "As a general rule, a law declared as unconstitutional produces no effect whatsoever and confers no right on any person. It matters not whether the person is a party to the original case, because 'not only the parties but all persons are bound by the declaration of unconstitutionality, which means that no one may thereafter invoke it nor may the courts be permitted to apply it in subsequent cases. It is, in other words, a total nullity.'" — This passage articulates the fundamental principle that a declaration of unconstitutionality binds all persons, not just parties, and is central to the Court's ruling on the second issue.

• "The operative fact doctrine is a rule of equity. As such, it must be applied as an exception to the general rule that an unconstitutional law produces no effects. The doctrine is applicable when a declaration of unconstitutionality will impose an undue burden on those who have relied on the invalid law, but it can never be invoked to validate as constitutional an unconstitutional act." — This defines the operative fact doctrine's scope and limitations, explaining why petitioner could not benefit from it.

• "In an unlawful detainer case, the physical or material possession of the property involved, independent of any claim of ownership by any of the parties, is the sole issue for resolution. But where the issue of ownership is raised, the courts may pass upon said issue in order to determine who has the right to possess the property. This adjudication, however, is only an initial determination of ownership for the purpose of settling the issue of possession, the issue of ownership being inseparably linked thereto." — This passage, quoted from Heirs of Ampil vs. Manahan, defines the scope of ejectment courts' authority over ownership questions and the provisional nature of such determination.

• Tuason vs. Register of Deeds, Caloocan City, 241 Phil. 650 (1988) — Controlling precedent. Declared P.D. 293 unconstitutional and void ab initio in all its parts. The Court applied Tuason's binding effect on petitioner despite his not being a party, because the declaration of unconstitutionality partakes of an in rem proceeding.
• Republic of the Philippines vs. Court of Appeals, G.R. No. 79732, 227 SCRA 509 (1993) — Followed for the principle that an unconstitutional law produces no effect and confers no right on any person, and that all persons are bound by the declaration of unconstitutionality.
• Heirs of Ampil vs. Manahan, G.R. No. 175990, 684 SCRA 130 (2012) — Followed for the rule that in ejectment cases, ownership adjudication is merely provisional and does not bar a separate action involving title.
• Dar Adventure Farm Corp. vs. Court of Appeals, G.R. No. 161122, 681 SCRA 580 (2012) — Cited for the exception to the doctrine of res inter alios judicatae, i.e., that the doctrine does not apply to successors in interest or in rem proceedings.
• League of Cities of the Philippines vs. COMELEC, G.R. No. 176951, 628 SCRA 819 (2010) — Cited for the principle that the operative fact doctrine is a rule of equity applied as an exception to the general rule that an unconstitutional law produces no effects.

• Presidential Decree No. 293 — Declared unconstitutional and void ab initio in Tuason. The decree had invalidated respondent's titles and opened the property to MHAI members. Its unconstitutionality meant it produced no effect and conferred no rights on any person, including petitioner.
• 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 petitioner as a builder in bad faith, causing him to lose his improvements without right to indemnity.
• Article 545, Civil Code — Cited by petitioner for the right to reimbursement of useful expenses and retention of possession, but denied because petitioner was not a builder in good faith.
• Article 448, Civil Code — Referenced by the CA regarding builder in good faith, but its benefits did not apply because petitioner was not a builder in good faith.

Teresita J. Leonardo-De Castro, Lucas P. Bersamin, Martin S. Villarama, Jr., and Bienvenido L. Reyes concurred.