06 MWSS vs.

CA
No. L-54526. (August 25, 1988)
Feria, J. / kam

Subject Matter: Rule 10 - Amendment to conform to or authorize presentation of evidence

Summary: Dagupan filed a complaint against NAWASA (now petitioner MWSS) for recovery of ownership and possession of
the Dagupan Waterworks System before the CFI Pangasinan. MWSS interposed as its defense R.A. 1813 which vested upon it
ownership, possession, and control of all waterworks system in the entire country. MWSS, in its counterclaim, sought
reimbursements for the useful improvements it introduced amounting to 255k. CFI ruled in favor of Dagupan. CA affirmed the
CFI ruling. In its petition for review under Rule 45 before the SC, for the first time, MWSS raises for the first time (not raised in
both CFI and CA) the issue of whether it has the right, despite being a builder in bad faith, to remove the useful improvements
that it introduced. SC held there could not be amendment (of NAWASA’s counterclaim) to conform to evidence. NAWASA
should have alleged its additional counterclaim in the alternative – for reimbursement of the expenses it incurred for
necessary and useful improvements (should have included this one) or for the removal of all the useful improvements it
introduced. However, the Court overlooked this procedural defect and rule on the main issue raised in this: Does a possessor
in bad faith have the right to remove useful improvements? SC still held no. CA judgement affirmed.

Doctrine: Sec. 5, Rule 10 is premised on the fact that the evidence was introduced on an issue not raised by the pleadings,
without any objection thereto being raised by the adverse party. Said section does not apply where no evidence was
introduced at trial .because the case was decided on the basis of a stipulation of facts, as here. Consequently, the pleadings
could not be deemed amended to conform to the evidence.

Action before SC: Petition for review on certiorari under Rule 45 of the CA decision

Parties:
Petitioner Metropolitan Waterworks and Sewerage System
Respondents The Court of Appeals and The City of Dagupan

Facts:
NAWASA - National Waterworks and Sewerage Authority (former name of MWSS)
MWSS - Metropolitan Waterworks and Sewerage System

CFI Pangasinan – in favor of Dagupan

1. The City of Dagupan (Dagupan) filed a complaint against NAWASA (now petitioner MWSS) for recovery of ownership
and possession of the Dagupan Waterworks System before CFI of Pangasinan.
2. In its Answer, NAWASA interposed as special defense R.A. 1813, which vested upon it ownership, possession, and
control of all waterworks system in the entire country. In its Counterclaim, NAWASA sought reimbursement for the
necessary and useful expenses it incurred for improvements amounting to Php 255,000.00.
3. CFI ruled for Dagupan on the basis of a stipulation of facts, and dismissed NAWASA’s counterclaim. It found NAWASA
to be a possessor in bad faith and hence, not entitled to reimbursement.

Court of Appeals (CA)

4. NAWASA appealed to CA (including the dismissal of its counterclaim), arguing that Dagupan should have been liable
for the amortization of the balance of the loan secured by it (NAWASA) for the improvement of the Dagupan
Waterworks System.
5. CA affirmed the decision of CFI. The appellate court ruled that the useful expenses were made in bad faith as they
were instituted after the complaint was filed, and that under New Civil Code Art. 546, a builder or possessor in bad
faith is not entitled to any reimbursement.

Present petition
6. Hence this petition. Petitioner MWSS raises the sole issue of whether it has the right to remove all the useful
improvements NAWASA introduced to the Dagupan Waterworks System, notwithstanding the fact that NAWASA was
found to be a possessor in bad faith.
7. Dagupan’s procedural objection (RELEVANT TO TOPIC): In its brief, respondent Dagupan challenged NAWASA’s act
of raising said issue for the first time in the Court. Said issue was not raised before the court a quo. Neither was it
assigned as an error before CA.

Issues:
1. WON there could be amendment (of counterclaim) to conform to evidence? (NO)
2. WON MWSS has the right to remove all the useful improvements NAWASA introduced to the Dagupan Waterworks
System? (NO)
Ratio:
First issue:
1. No, there could not be amendment (of NAWASA’s counterclaim) to conform to evidence. NAWASA should have alleged
its additional counterclaim in the alternative – for reimbursement of the expenses it incurred for necessary and useful
improvements or for the removal of all the useful improvements it introduced.
2. MWSS argues that although said issue was not pleaded as a counterclaim, it was nevertheless joined with respondent
Dagupan’s implied consent. This is because, according to MWSS, Dagupan never filed a counter-manifestation or
objection to its (MWSS) manifestation. In its manifestation, MWSS stated that the improvements were separable from
the system. MWSS relies on Sec. 5, Rule 101 to support its contention.
3. The Court finds petitioner MWSS’s argument UNTENABLE. Sec. 5, Rule 10 is premised on the fact that the evidence
was introduced on an issue not raised by the pleadings, without any objection thereto being raised by the adverse
party. HERE, no evidence whatsoever was introduced by petitioner MWSS on the issue of removability of the
improvements. The case was decided below on a stipulation of facts. So, the pleadings could not be deemed amended
to conform to the evidence.
4. However, the Court shall overlook this procedural defect and rule on the main issue raised in this: Does a possessor in
bad faith have the right to remove useful improvements?

Second issue: (Not relevant)

1. No, MWSS does not have the right. Article 449 of the Civil Code of the Philippines provides that ”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.” As a
builder in bad faith, NAWASA lost whatever useful improvements it had made without right to indemnity (Santos vs.
Mojica, Jan. 31, 1969, 26 SCRA 703).

Dispositive: CA decision AFFIRMED.

Others:
 The only parties in an appeal by certiorari under rule 45 are the appellant as petitioner and the appellee as
respondent. (Cf. Elks Club vs. Rovira, 80 Phil. 272) The court which rendered the judgment (CA in this case)
appealed from is not a party in said appeal. It is in the special civil action of certiorari under Section 5 of Rule 65 of
the Rules of Court where the court or judge is required to be joined as party defendant or respondent.

1
SEC. 5. Amendment to conform to or authorize presentation of evidence.—When issues not raised by the pleadings are tried by express or
implied consent of the parties, they shall be treated in all respects, as if they had been raised in the pleadings. Such amendment of the pleadings as
may be necessary to cause them to conform to the evidence and to raise these issues may be made upon motion of any party at any time, even
after judgment; but failure so to amend does not affect the result of the trial of these issues. xxx