Mindanao Academy vs.

Yap

Doctrine: Builder in bad faith loses right to be paid indemnity for what he built as just punishment for bad
faith.

Legal basis: Art. 449. 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.

Facts:

1. Rosenda A. de Nuqui and her son Sotero Dionisio, Jr. sold 4 parcels of land (3 residential lands in
Oroquieta, Misamis Occidental and 1 in Ozamis City) to Ildefonso D. Yap via a Mutual Agreement dated
May 10, 1964

* Another daughter, Adelaida Dionisio-Nuesa, was named as co-owner in the deed of sale,
however did not actually take part thereof.

2. Situated on the parcels of land were certain buildings as well as laboratory equipment, books, furniture
and fixtures used by two schools. These were also included in the sale to Yap. The two schools (both
owned by Mindanao Academy, Inc.) are:

a. Mindanao Academy - in Oroquieta, Misamis Occidental

b. Misamis Academy - in Ozamis

3. However, there were other co-owners of the properties namely (not included in the Mutual Agreement):

a. Children of Rosenda & deceased husband Sotero Dionisio, Sr.: Erlinda D. Diaz, Ester Aida D.
Bas, Rosalinda D. Belleza and Luz Minda D. Dajao (solely for the lands)
b. Mindanao Academy, Inc. (with regards to school buildings, equipment, books, furniture and
fixtures, including a laboratory situated in the lands)

4. Yap took over the properties and renamed the schools to Harvardian Colleges.

5. On July 4, 1954, Erlinda Diaz filed action to assert her rights as co-owner.

6. On July 31, 1956, Yap filed his first pleading.

CFI LEVEL:

Two actions were initiated:

a. Action for annulment of the sale and recovery of rents and damages - filed by Mindanao
Academy, some stockholders, and the 5 children of Nuqui named above VS. Nuqui and son
Dionisio

Held: i. Yap is hereby ordered to pay costs

ii. Mutual Agreement is null and void
iii. Yap ordered to restore all the buildings and grounds
iv. Yap is ordered to restore to the Mindanao Academy, all the books, laboratory
apparatus, furniture and other equipment described in the Mutual Agreement
v. Yap to return all the Records of the Mindanao Academy and Misamis Academy
vi. Yap to pay to the plaintiffs stockholders of the Mindanao Academy, Inc., the amount of
P10,000.00 as nominal damages; P3.000.00 as exemplary damages; and P2.000.00 as
attorney's fees
 b. Action for rescission of deed of sale – filed by Mother Nuqui, Dionisio, Jr. and Erlinda D.
Diaz (and husband Antolin Diaz) VS. Yap

* The other 4 children did not join in the 2nd action as they already relinquished their
claim to sister Erlinda Diaz (quitclaim)

Held:

i. Yap is hereby ordered to pay cost

ii. Mutual Agreement is null and void
iii. Yap ordered to restore all the buildings and grounds described in the Mutual
Agreement together with all the permanent improvements
iv. Yap ordered to pay to the plaintiffs the amount of P300.00 monthly from July
31, 1956 up to the time he shall have surrendered the properties in question to
the plaintiffs therein, plus P1,000.00 as attorney's fees to plaintiffs Antolin and
Erlinda D. Diaz

SC LEVEL:

I. Yap argues CFI erred in declaring Mutual Agreement null and void.

SC: No error. The prestation involved were indivisible because the vendors (Nuqui and Sotero
were not the only owners of either the lands (co-owned by other children) or the buildings, equipments,
laboratory, etc. (owned by Mindanao Academy). As admitted by Yap, he would not have entered into the
transaction except to acquire all of the properties.

II. Yap argues CFI erred in holding him liable for rents

SC: No error. Both vendor (Nuqui and son) and vendee (Yap) acted in bad faith. If both acted in
bad faith, they must be treated as having acted in good faith. This fictive good faith of Yap’s excuses him
from rental fees up to July 31, 1956 (the date of his first pleading) because the filing of his first pleading
made it known that there were other co-owners, so his fictive good faith ceases.

III. Yap argues CFI erred in holding plaintiffs entitled to recover all the lands, buildings, and other
permanent improvements described in the Mutual Agreement

SC:

* Reimbursement for improvements (new building worth P8,000 and toilet worth P800) – Not
granted because these were constructed after the action for annulment was commenced, thereby
tainting his good faith.

* Reimbursement for equipment, books, furniture, fixtures brought in by him – Not granted
because what was adjudged to be restored was what was described in the Mutual Agreement
(not what he brought in), so this is outside the scope of the judgment