Republic of the PhilippinesSUPREME COURTManilaSECOND DIVISIONG.R. No. 176791 November 14, 2012COMMUNITIES CAGAYAN, INC., Petitioner, vs.SPOUSES ARSENIO (e!e"#e$% "&$ ANGE'ES NANO' AN ANY(OY C'AIMING RIG)TS UNER T)EM,Respondents.D E C I S I O NE' CASTI''O, J.:!"S fill the #ap in a contract.$his Petition for Revie% on Certiorari& under Rule '( of the Rules of Court assails the Dece)ber *+. *,,- Decision* and the .ebruar/ &*, *,,0 Order1 of the Re#ional $rial Court 2R$C3, Ca#a/an De Oro Cit/, 4ranch &5, in Civil Case No. *,,(6&(5.Factual AntecedentsSo)eti)es in &++', respondent6spouses !rsenio and !n#eles Nanol entered into a Contract to Sell' %ith petitioner Co))unities Ca#a/an, Inc.,( %hereb/ the latter a#reed to sell to respondent6spouses a house and ots &0 and &+- located at 4loc7 &-, Ca)ella 8o)es Subdivision, Ca#a/an deOro Cit/, 0 for the price of P1-5,,,,.,,.5 Respondent6spouses, ho%ever, did not avail of petitioner9s inhouse financin# due to its hi#h interest rates.+ Instead, the/ obtained a loan fro) Capitol Develop)ent 4an7, a sister co)pan/ of petitioner, usin# the propert/ as collateral.&, $o facilitate the loan, a si)ulated sale over the propert/ %as e:ecuted b/ petitioner in favor of respondent6spouses.&& !ccordin#l/, titles %ere transferred in the na)es of respondent6spouses under $ransfer Certificates of $itle 2$C$3 Nos. &,(*,* and &,(*,1, and sub)itted to Capitol Develop)ent 4an7 for loan processin#.&* ;nfortunatel/, the ban7 collapsed and closed before it could release the loan.&1$hus, on Nove)ber 1,, &++0, respondent6spouses entered into another Contract to Sell&' %ith petitioner over the sa)e propert/ for the sa)e price of P1-5,,,,.,,.&( $his ti)e, respondent6spouses availed of petitioner9s in6house financin#&-thus, underta7in# to pa/ the loan over four /ears, fro) &++0 to *,,&.&0So)eti)e in *,,,, respondent !rsenio de)olished the ori#inal house and constructed a three6stor/ house alle#edl/ valued at P1.( )illion, )ore or less.&5In

uenc/ and Cancellation of Contract to Sell*, due to the latter9s failure to pa/ the )onthl/ a)orti=ations.In Dece)ber *,,1, petitioner filed before 4ranch 1 of the Municipal $rial Court in Cities of Ca#a/an de Oro Cit/, an action for unla%ful detainer, doc7eted as C16Dec6*&-,, a#ainst respondent6spouses.*& "hen the case %as referred for )ediation, respondent !n#eles offered to pa/ P**,,,,,.,, to settle the case but petitioner refused to accept the pa/)ent.** $he case %as later %ithdra%n and conse>uentl/ dis)issed because the ?ud#e found out that the titles %ere alread/ re#istered under the na)es of respondent6spouses.*1;nfa=ed b/ the unfortunate turn of events, petitioner, on

• uirin# petitioner to pa/ respondent6spouses the value of the ne% house )inus the cost of the old house based on !rticle ''5 of the Civil Code, sub?ect to succeedin# discussions.Petitioner has t%o options under Article &&' and pursuant to the ruling in Tuatis v. (scol.--In $uatis, %e ruled that the seller 2the o%ner of the land3 has t%o options under !rticle ''5A 2&3 he )a/ appropriate the i)prove)ents for hi)self after rei)bursin# the bu/er 2the builder in #ood faith3 the necessar/ and useful e:penses under !rticles ('--0 and ('5-5 of the Civil CodeH or 2*3 he )a/ sell the land to the bu/er, unless its value is considerabl/ )ore than that of the i)prove)ents, in %hich case, the bu/er shall pa/ reasonable rent.-+ Kuoted belo% are the pertinent portions of our rulin# in that caseA$a7in# into consideration the provisions of the Deed of Sale b/ Install)ent and !rticle ''5 of the Civil Code, Vis)inda has the follo%in# optionsA;nder the first option, Vis)inda m"3 "44ro4r-"/e 1or 2er#e,1 /2e b+-,$-&. o& /2e #+b7e!/ 4ro4er/3"1/er -&$em&-13-&. T+"/-# 1or /2e &e!e##"r3 "&$ +#e1+, e84ee# /2e ,"//er -&!+rre$ 1or #"-$ b+-,$-&., "# 4rov-$e$ -& Ar/-!,e 646 o1 /2e C-v-, Co$e.It is %orth/ to )ention that in Pecson v. Court of !ppeals, the Court pronounced /2"/ /2e "mo+&/ /o be re1+&$e$ /o /2e b+-,$er +&$er Ar/-!,e 646 o1 /2e C-v-, Co$e #2o+,$ be /2e !+rre&/ m"r9e/ v",+e o1 /2e -m4roveme&/, /2+#:: : : :;ntil Vis)inda appropriatel/ inde)nifies $uatis for the buildin# constructed b/ the latter, $uatis )a/ retain possession of the buildin# and the sub?ect propert/.;nder the second option, Vis)inda m"3 !2oo#e &o/ /o "44ro4r-"/e /2e b+-,$-&. "&$, -/e"$, ob,-.e T+"/-# /o 4"3 /2e 4re#e&/ or !+rre&/ 1"-r v",+e o1 /2e ,"&$. $he P&,,,,,.,, price of the sub?ect propert/, as stated in the Deed of Sale on Install)ent e:ecuted in Nove)ber &+5+, shall no lon#er appl/, since Vis)inda %ill be obli#in# $uatis to pa/ for the price of the land in the e:ercise of Vis)inda9s ri#hts under !rticle ''5 of the Civil Code, and not under the said Deed. $uatis9 obli#ation %ill then be statutor/, and not contractual, arisin# onl/ %hen Vis)inda has chosen her option under !rticle ''5 of the Civil Code.Still under the second option, -1 /2e 4re#e&/ or !+rre&/ v",+e o1 /2e ,"&$, /2e #+b7e!/ 4ro4er/3 2ere-&, /+r o+/ /o be !o-$er"b,3 more /2"& /2"/ o1 /2e b+-,$-&. b+-,/ /2ereo&, T+"/-# !"&&o/ be ob,-.e$ /o 4"3 1or /2e #+b7e!/ 4ro4er/3, b+/ #2e m+#/ 4"3 *-#m-&$" re"#o&"b,e re&/1or /2e #"me. *-#m-&$" "&$ T+"/-# m+#/ ".ree o& /2e /erm# o1 /2e ,e"#e; o/2eruences %ere also not clearl/ presented to her b/ the &+ !pril &+++ Decision of the R$C. She )ust then be #iven the opportunit/ to )a7e a choice bet%een the options available to her after bein# dul/ infor)ed herein of her ri#hts and obli#ations under both.0, 2E)phasis supplied.3In confor)it/ %ith the fore#oin# pronounce)ent, %e hold that petitioner, as lando%ner, has t%o options. It )a/ appropriate the ne% house b/ rei)bursin# respondent !n#eles the current )ar7et value thereof )inus the cost of the old house. ;nder this option, respondent !n#eles %ould have @a ri#ht of retention %hich ne#ates the obli#ation to pa/ rent.@0& In the alternative, petitioner )a/ sell the lots to respondent !n#eles at a price e>uivalent to the current fair value thereof. 8o%ever, if the value of the lots is considerabl/ )ore than the value of the i)prove)ent, respondent !n#eles cannotbe co)pelled to purchase the lots. She can onl/ be obli#ed to pa/ petitioner reasonable rent.In vie% of the fore#oin# dis>uisition and in accordance %ith Depra v. Du)lao0* and $echno#as Philippines Manufacturin# Corporation v. Court of !ppeals,01 %e find it necessar/ to re)and this caseto the court of ori#in for the purpose of deter)inin# )atters necessar/ for the proper application of !rticle ''5, in relation to !rticles ('- and ('5 of the Civil Code.=)ERE>ORE, the petition is hereb/ PARTIA''Y GRANTE. $he assailed Decision dated Dece)ber *+, *,,- and the Order dated .ebruar/ &*, *,,0 of the Re#ional $rial Court, Ca#a/an deOro Cit/, 4ranch &5, in Civil Case No. *,,(6&(5 are hereb/ A>>IRME %ith MOI>ICATION that petitioner Co))unities Ca#a/an, Inc. is hereb/ ordered to RETURN the cash surrender value of thepa/)ents )ade b/ respondent6spouses on the properties, %hich is e>uivalent to (,I of the total pa/)ents )ade, in ccordance %ith Section 12b3 of Republic !ct No. -((*, other%ise 7no%n as the Maceda a%.$he case is hereb/ REMANE to the Re#ional $rial Court, Ca#a/an de Oro Cit/, 4ranch &5, for further proceedin#s consistent %ith the proper application of !rticles ''5, ('- and ('5 of the Civil Code, as follo%sA&. $he trial court shall deter)ineAa3 the present or current fair value of the lotsHb3 the current )ar7et value of the ne% houseHc3 the cost of the old houseH andd3 %hether the value of the lots is considerabl/ )ore than the current )ar7et value of the ne% house )inus the cost of the old house.*. !fter said a)ounts shall have been deter)ined b/ co)petent evidence, the trial court shall render?ud#)ent as follo%sAa3 Petitioner shall be #ranted a period of &( da/s %ithin %hich to e:ercise its option under the la% 2!rticle ''5, Civil Code3, %hether to appropriate the ne% house b/ pa/in# to respondent !n#eles the current )ar7et value of the ne% house )inus the cost of the old house, or to obli#e respondent !n#eles to pa/ the price of the lots. $he a)ounts to be respectivel/ paid b/ the parties, in accordance %ith the option thus e:ercised b/ %ritten notice to the other part/ and to the court, shall be paid b/ the obli#or %ithin &( da/s fro) such notice of the option b/ tenderin# the a)ount to the trial court in favor of the part/ entitled to receive it.b3 If petitioner e:ercises the option to obli#e respondent !n#eles to pa/ the price of the lots but the latter re?ects such purchase because, as found b/ the trial court, the value of the lots is considerabl/ )ore than the value of the ne% house )inus the cost of the old house, respondent !n#eles shall #ive %ritten notice of such re?ection to petitioner and to the trial court %ithin &( da/s fro) notice of petitioner9s option to sell the land. In that event, the parties shall be #iven a period of &( da/s fro) such notice of re?ection %ithin %hich to a#ree upon the ter)s of the lease, and #ive the trial court for)al %ritten notice of the a#ree)ent and its provisos. If no a#ree)ent is reached b/ the parties, the trial court, %ithin &( da/s fro) and after the ter)ination of the said period fi:ed for ne#otiation, shall then fi: the periodand ter)s of the lease, includin# the )onthl/ rental, %hich shall be pa/able %ithin the first five da/s of each calendar )onth. Respondent !n#eles shall not )a7e an/ further constructions or i)prove)ents on the buildin#. ;pon e:piration of the period, or upon defaultb/ respondent !n#eles in the pa/)ent of rentals for t%o consecutive )onths, petitioner shall be entitled to ter)inate the forced lease, to recover its land, and to have the ne% house re)oved b/ respondent !n#eles or at the latter9s e:pense.c3 In an/ event, respondent !n#eles shall pa/ petitioner reasonable co)pensation for the occupanc/ of the propert/ for the period counted fro) the ti)e the Decision dated Dece)ber*+, *,,- beca)e final as to respondent !n#eles or &( da/s after she received a cop/ of the said Decision up to the date petitioner serves notice of its option to appropriate the encroachin# structures, other%ise up to the actual transfer of o%nership to respondent !n#eles or, in case a forced lease has to be i)posed, up to the co))ence)ent date of the forced lease referred to in the precedin# para#raph.1wphi1d3 $he periods to be fi:ed b/ the trial court in its decision shall be none:tendible, and upon failure of the part/ obli#ed to tender to the trial court the a)ount due to the obli#ee, the part/entitled to such pa/)ent shall be entitled to an order of e:ecution for the enforce)ent of pa/)ent of the a)ount due and for co)pliance %ith such other acts as )a/ be re>uired b/ the prestation due the obli#ee.SO ORDERED.MARIANO C. E' CASTI''O!ssociate