Prescription and Land Ownership: Protecting the Rights of Long-Term Land Possessors

The Philippine Supreme Court's 2009 decision in Narvaez v. Alciso (G.R. No. 165907) tackles a situation that recurs often in property disputes: a former owner who wants her land back after it has passed through several buyers, one of whom has already built on it. The ruling explains how the right to repurchase operates, when a third person may enforce a benefit written into someone else's contract, and why the rules on builders in good faith do not apply to someone building on land he already owns.

How the land changed hands

Larry Ogas owned a 1,329-square-meter lot in La Trinidad, Benguet, covered by a transfer certificate of title. He sold it to his daughter, Rose Alciso, who became the registered owner.

In 1979, Alciso sold the property to Jaime Sansano with a right to repurchase. She later bought it back. In March 1980, she sold it absolutely to Celso Bate, who then sold it in August 1981 to the spouses Dominador and Lilia Narvaez. Each transfer cancelled the previous title and a new one was issued in the buyer's name. In 1982, the Narvaez spouses built a commercial building on the lot worth P300,000.

The deed between Bate and the Narvaez spouses carried a clause stating that Bate "carries over the manifested intent of the original SELLER of the property (Alciso) to buy back the same at a price under such conditions as the present BUYERS (Spouses Narvaez) may impose."

Alciso later told the Narvaez spouses she wanted to repurchase the property. They asked for P300,000; she offered P150,000. No agreement was reached, and in 1984 she sued to annul the various deeds, claiming the transactions were really a mortgage.

The ruling on the right to repurchase

Both the trial court and the Court of Appeals found that the August 1981 deed was a sale with a right of repurchase, not a mortgage. The Supreme Court agreed. Under Article 1601 of the Civil Code, conventional redemption takes place when the vendor reserves the right to repurchase the thing sold. The Court also cited Gallar v. Husain for the rule that the right of repurchase may be exercised by the vendor or by anyone to whom that right has been transferred.

Because the contract did not fix a period, Article 1606 gave Alciso four years from August 14, 1981 to repurchase. She did not tender payment within that period, and the Court held that merely telling the buyers she wanted the property back was not enough. As Lee v. Court of Appeals explains, the vendor must offer to return the price; an intention to redeem is insufficient.

However, the third paragraph of Article 1606 gives a seller thirty days from final judgment to repurchase when the case was litigated on the theory that the contract was a mortgage. That is the window the Court left open for Alciso.

What the buyer must be paid

Under Article 1616, a vendor exercising the right of repurchase must return the price of the sale, the expenses of the contract, legitimate payments made because of the sale, and necessary and useful expenses on the thing sold. The Court treated the cost of the commercial building as a useful expense, since improvements that increase the land's value fall under that category. The Regional Trial Court was directed to determine these amounts, after which Alciso would have thirty days to pay.

The benefit in favor of a third person

The Narvaez spouses argued that Alciso could not enforce the repurchase clause because she never communicated her acceptance of it. The Court disagreed.

Article 1311, paragraph 2 of the Civil Code allows a third person to demand fulfillment of a stipulation in his favor if he communicated acceptance to the obligor before revocation. Applying the requisites listed in Limitless Potentials, Inc. v. Quilala, the Court found all of them present: the clause favored Alciso, formed only part of the contract, was deliberately conferred rather than incidental, was unconditional and uncompensated, was accepted before revocation, and was made by parties who did not represent her.

Whether Alciso actually communicated acceptance is a question of fact, and the trial court's finding — affirmed by the Court of Appeals — binds the Supreme Court. Florentino v. Encarnacion, Sr. teaches that acceptance may be made in any form and may be implied, as long as it comes before revocation.

Builders on their own land

The Court of Appeals had applied Article 448, which governs a builder in good faith on another's land and lets the landowner choose between appropriating the improvement or forcing the builder to buy the land. The Supreme Court rejected this.

Article 448 does not apply when the owner of the land is himself the builder. As Pecson v. Court of Appeals explains, when a person builds on his own land and later loses that land by sale or donation, the question of good or bad faith is irrelevant. The Narvaez spouses built on land titled in their names, so Article 448 had no application. Compelling them to buy land they already owned would be absurd.

Practical takeaways

• A right to repurchase must be exercised by tendering payment, not by merely stating an intention to buy the property back.
• If the contract does not state a period, the right lasts four years from the date of the contract under Article 1606.
• A seller who treated the transaction as a mortgage may still repurchase within thirty days from final judgment confirming the contract as a sale with right of repurchase.
• A third person named in a contract may enforce a benefit in his favor if he accepts it before it is revoked; acceptance need not be formal.
• Article 448 on builders in good faith does not apply to a person who builds on land he owns.

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.