1

Bachrach Motors v. Talisay-Silay Milling [G.R. No. 35223. September 17, 1931. En Banc, Romualdez (J): 7 concurring Facts: On 22 December 1923, the Talisay-Silay Milling Co., Inc., was indebted to the PNB. To secure the payment of its debt, it succeeded in inducing its planters, among whom was Mariano Lacson Ledesma, to mortgage their land to the bank. And in order to compensate those planters for the risk they were running with their property under that mortgage, the aforesaid central, by a resolution passed on the same date, and amended on 23 March 1928, undertook to credit the owners of the plantation thus mortgaged every year with a sum equal to 2% of the debt secured according to the yearly balance, the payment of the bonus being made at once, or in part from time to time, as soon as the central became free of its obligations to the bank, and of those contracted by virtue of the contract of supervision, and had funds which might be so used, or as soon as it obtained from said bank authority to make such payment. <It seems Mariano Lacson Ledesma is indebted from Bachrach Motor; the circumstance of which is not found in the case facts.> Bachrach Motor Co., Inc. filed a complaint against the Talisay-Silay Milling Co., Inc., for the delivery of the amount of P13,850 or promissory notes or other instruments of credit for that sum payable on 30 June 1930, as bonus in favor of Mariano Lacson Ledesma. The complaint further prays that the sugar central be ordered to render an accounting of the amounts it owes Mariano Lacson Ledesma by way of bonus, dividends, or otherwise, and to pay Bachrach Motors a sum sufficient to satisfy the judgment mentioned in the complaint, and that the sale made by said Mariano Lacson Ledesma be declared null and void. The PNB filed a thirdparty claim alleging a preferential right to receive any amount which Mariano Lacson Ledesma might be entitled from Talisay-Silay Milling as bonus. Talisay-Silay answered the complaint that Mariano Lacson Ledesmas credit (P7,500) belonged to Cesar Ledesma because he had purchase it. Cesar Ledesma claimed to be an owner by purchase in good faith. At the trial all the parties agreed to recognize and respect the sale made in favor of Cesar Ledesma of the P7,500 part of the credit in question, for which reason the trial court dismissed the complaint and cross-complaint against Cesar Ledesma authorizing the central to deliver to him the sum of P7,500. And upon conclusion of the hearing, the court held that the Bachrach Motor Co., Inc., had a preferred right to receive the amount of P11,076.02 which was Mariano Lacson Ledesmas bonus, and it ordered the central to deliver said sum to Bachrach Motors. PNB appealed. The Supreme Court affirmed the judgment appealed from, as it found no merit in the appeal;, without express finding as to costs. 1. Civil Fruits under Article 355 of the Civil Code Article 355 of the Civil Code considers three things as civil fruits: First, the rents of buildings; second, the proceeds from leases of lands; and, third, the income from perpetual or life annuities, or other similar sources of revenue. According to the context of the law, the phrase u otras analogas refers only to rents or income, for the adjectives otras and analogas agree with the noun rentas, as do also the other adjectives perpetuas and vitalicias. The civil fruits the Civil Code understands one of three and only three things, to wit: the rent of a building, the rent of land, and certain kinds of income. 2. Bonus not a civil fruit; not an income of the land

The amount of the bonus, according to the resolution of the central granting it, is not based upon the value, importance or any other circumstance of the mortgaged property, but upon the total value of the debt thereby secured, according to the annual balance, which is something quite distinct from and independent of the property referred to. As the bonus is not obtained from the land, it is not civil fruits of that land. It is neither rent of buildings, proceeds from lease of lands, or income under Article 355 of the Civil Code.

Pacific Farms Inc. v. Esguerra G.R. No. L-21783, November 29, 1969, 30 SCRA 684 Castro, J.

FACTS: On October 1, 1956 to March 2, 1957 the Company sold and delivered lumber and construction materials to the Insular Farms Inc. which the latter used in the construction of the si buildings at its compound in Bolinao, Pangasinan, of the total procurement price of P15,000.00, the sum of P4,710.18 has not been paid. Consequently, the Company instituted a civil case to recover the unpaid balance and the court sustained their claim. The defendant sheriff levied th six buildings. The Pacific Farms, Inc. filed a suit against the Company and the sheriff asserting ownership over the levied buildings which it had acquired from the Insular Farms by virtue of absolute sale executed on March 21, 1958. Pacific prays that the judicial sale of the six buildings be declared null and void. The trial court rendered judgment annulling the levy and the certificate of sale. However, it denied the plaintiff's claim for actual and exemplary damages on the ground that it was not "prepared to find there was gross negligence or bad faith on the part of any defendants".

ISSUE: Whether or not the application by analogy of the rules of accession would suffice for a just adjudication.

HELD: Article 447 of the Civil Code contemplates a principal and an accessory; the land being considered the principal, and the plantings, constructions or works, the accessory. The owner of the land who in good faith whether personally or through another - makes constructions or works thereon, using materials belonging to somebody else, becomes the owner of the said materials with the obligation however of paying for their value. On the other hand, the owner of the materials is entitled to remove them, provided no substantial injury is caused to the landowner. Otherwise, he has the right to reimbursement for the value of his materials,

Applying article 447 by analogy, the Court consider the buildings as the principal and the lumber and construction materials that went into their construction as the accessory. Thus the appellee, if it does own the six buildings, must bear the obligation to pay for the values of the said materials; the appellant which apparently has no desire to remove the materials, and, even if it were minded to do so, cannot remove them without necessarily damaging the buildings has the corresponding right to recover the value of the unpaid lumber and construction materials.

Bernardo v. Bataclan G.R. No. L-44606, November 28, 1938

Facts: By a contract of sale executed on July 17, 1920, Bernardo (plaintiff) acquired from Pastor Samonte and others ownership of a parcel of land of about 90 hectares. To secure possession of the land from the vendors the said plaintiff, on July 20, 1929, instituted a civil case. The trial court found for the plaintiff in a decision which was affirmed by this Supreme Court on appeal (G.R. No. 33017). When plaintiff entered upon the premises, however, he found the defendant herein, Catalino Bataclan, who appears to have been authorized by former owners, as far back as 1922, to clear the land and make improvements thereon. As Bataclan was not a party in the civil case, plaintiff, on June 11, 1931, instituted against him a civil case. In this case, plaintiff was declared owner but the defendant was held to be a possessor in good faith, entitled for reimbursement in the total sum of P1,642, for work done and improvements made. The defendant states that he is a possessor in good faith and that the amount of P2,212 to which he is entitled has not yet been paid to him. Therefore, he says, he has a right to retain the land in accordance with the provisions of article 453 of the Civil Code. In obedience to the decision of this court in G.R. No. 37319, the plaintiff expressed his desire to require the defendant to pay for the value of the land. The said defendant could have become owner of both land and improvements and continued in possession thereof. But he said he could not pay and the land was sold at public auction to Toribio Teodoro. When he failed to pay for the land, the defendant herein lost his right of retention. Issue: Whether or not there is good faith. Held: The judgment of the lower court is accordingly modified by eliminating therefrom the reservation made in favor of the defendant-appellant to recover from the plaintiff the sum of P2,212. In all the respects, the same is affirmed, without pronouncement regarding costs. So ordered The sale at public auction having been asked by the plaintiff himself (p. 22, bill of exceptions) and the purchase price of P8,000 received by him from Toribio Teodoro, we find no reason to justify a rapture of the situation thus created between them, the defendant-appellant not being entitled, after all, to recover from the plaintiff the sum of P2,212.

San Diego v. Montesa [G.R. No. L-17985. September 29, 1962.] En Banc, Reyes JBL (J): 8 concur Facts: After trial in Civil Case 770 of the CFI Bulacan, on complaint of Jose, Maria, and Urbano, all surnamed "de la Cruz", to recover a parcel of land and damages from Gil San Diego and Rufina San Diego, the Court rendered a decision declaring the deed of sale null and void, ordering the San Diegos to vacate the land upon payment of the sum P3,500 by the de la Cruzes within 30 days after the decision becomes final, dismissing the counterclaim of the de la Cruzes, without pronouncement as to costs. The court found that the disputed portion of a parcel of land belonged to the de la Cruzes through hereditary succession; that the San Diegos built a house on the land in good faith, having acquired the land from Catalina Anastacio, mother of the de la Cruzes, by purchase for P1,000.00. During the proceedings, the San Diegos filed a third-party complaint against said vendor. The vendor (mother of the de la Cruzes) subsequently died; hence, the de la Cruzes, who were the plaintiffs, became at the same time third-party defendants in substitution of their deceased mother. The court voided the sale on the ground that the vendor had no right to the land, but upheld the defense of the San Diegos as builders in good faith. On appeal by the de la Cruzes, the Court of Appeals affirmed in toto the lower court's decision, and the same, thereafter, became final and executory. Over 2 years later, the San Diegos, who were in possession of the parcel of land in litigation, moved to execute paragraph (b) of the dispositive portion of the decision in order to collect the sum of P3,500.00 and thereafter to vacate the premises. The motion was denied by the court, and a motion for reconsideration was likewise of no avail. Hence, the instant petition for mandamus was filed to compel the judge to issue the writ applied for. The Supreme Court granted the writ prayed for, and ordered the CFI Bulacan to issue the writ of execution in favor of San Diegos. Costs against de la Cruz 1. Judgment based on right of retention due to possessors in good faith; No rental required during period of retention The judgment affirmed by the Court of Appeals, and now final, explicitly ordains the payment by the de la Cruzes of the amount of P3,500.00 "within 30 days after this decision becomes final" to the San Diegos. If it also orders the San Diegos to vacate only upon such payment, it did so in recognition of the right of retention granted to possessors in good faith by Article 546 of the Civil Code of the Philippines. This provision is expressly made applicable to builders in good faith (Article 448). The right of retention thus granted is merely a security for the enforcement of the possessor's right to indemnity for the improvements made by him. As a result, the possessor in good faith, in retaining the land and its improvements pending reimbursement of his useful expenditure, is not bound to pay any rental during the period of retention; otherwise, the value of his security would be impaired (cf. Tufexis vs. Chunaco (C.A.) 36 O.G. 2455). 2. Options of the landowner; Decision limited to appropriation of the improvement which the landowner did not object to; Decision final and cannot be altered Normally the landowner has the option to either appropriate the improvement or to sell the land to the possessor. This option is no longer open to the landowners herein because the decision in the former suit limits them to the first alternative by requiring the San Diegos to vacate the land (and surrender the improvements) upon payment of P3,500.00. Evidently, the CFI and the CA opined that the de la Cruzes' suit to recover the property was an exercise of their right to choose to appropriate the improvements and pay the indemnity fixed by law. The de La Cruzes acquiesced in this view, since they did not ask for the modification of the judgment and allowed it to become final. Consequently, they can no longer insist on selecting another alternative; nor can they be heard now to urge that the

value of the indemnity, set at P3,500.00, is exorbitant, for the same reason that the judgment fixing that amount is no longer subject to alteration. 3. Courts duty to execute a final judgment; Writ of Mandamus The judgment ordering payment to the San Diegos of P3,500.00, by way of indemnity, having become final, and the 30 days for its payment having elapsed, the CFI has the ministerial duty to order its execution (Zulueta vs. Paredes, 62 Phil. 5; Buenaventura vs. Garcia, 78 Phil. 759; Amor vs. Jugo, 17 Phil. 703; Viquiera vs. Baraa, 78 Phil. 456). That duty is compellable by mandamus; and the execution is leviable on any property of the de la Cruzes, including the land now in question and its improvements.

Miranda v. Fadullon [G.R. No. L-8220. October 29, 1955.] En Banc, Montemayor (J): 8 concur Facts: In 1939 Lucio Tio was the owner of a parcel of land, lot 1589-J of the Banilad Estate, Cebu, under TCT 10548. On 9 December 1939, a power of attorney in favor of one Esteban Fadullon executed by Lucio Tio was registered in the land records of Cebu City and annotated at the back of the TCT. On the same date the deed of mortgage in favor of the Cebu Mutual Building and Loan Association was also annotated on the same certificate of title. In 1946, on the strength of the said power of attorney Fadullon sold the property to the spouses Dionisio Segarra and Clemencia N. de Segarra with right to repurchase within the short period of 30 days. Upon failure of Fadullon to make the repurchase within the period, the Segarras within 10 days after the expiration of the period filed a sworn petition for the consolidation of their ownership and registered said petition in the office of the Register of Deeds on 15 May 1946. Apprised of the sale of his property, Lucio Tio on 4 June 1946, filed a complaint in the CFI Cebu, Civil Case 181 to annul the sale. After hearing the trial court rendered judgment annulling the sale;canceling the new Certificate of Torrens Title 392 on the property in the name of the Segarras, and ordered a new one to be issued in the name of Lucio Tio and his wife Salvacion Miranda. The Segarras appealed to the Court of Appeals under CA-GR. 6550-R and the said Tribunal affirmed the appealed decision and further required the Segarras to pay Tio the reasonable rentals on the property from the filing of the action until said property shall have been returned to the latter. Upon the decision becoming final the corresponding writ of execution was issued directing the Sheriff to put Tio in possession of the lot. It turned out however that during the possession of the property by the Segarras they had introduced improvements thereon consisting of a building of 3 rooms and a storage room, and one artesian well, with tower and water tank and a cement flooring covering about 1/3 of the lot which according to the Segarras cost them P5,300. They filed a motion with the trial court claiming that they were possessors in good faith of the lot in question, and that they had introduced the improvements aforementioned in good faith and asked the court to order Tio to pay for the said improvements valued at P5,300 or to allow them to buy the land should Tio decide not to pay for the improvements. On 28 August 1952, the trial court ordered Tio to pay the Segarras the sum of P5,300 or otherwise allow the latter to purchase the lot. Tio filed a motion for reconsideration claiming that the Segarras are possessors and builders in bad faith, and explained his lack of opposition for the reimbursement with the understanding that the trial court was sufficiently informed and impressed with the bad faith with which defendants bought the land and introduced improvements thereon. Upon the denial of his motion for reconsideration, he took the appeal. The Court of Appeals certified the case to the Supreme Court on the opinion that the case involved only questions of law.

(Lucio Tio later on succeeded by Salvacion Miranda, his wife, after his demise; the case facts did not provide when) The Supreme Court set aside the appealed order of 28 August 1952 and the order of 15 October 1952, denying plaintiff's motion for reconsideration are set aside; with costs against Fadullon and the spouses Segarra. 1. Good faith wanting in the manner the lot was sold; Collusion or conspiracy vis--vis short period of redemption While the evidence did not disclose a collusion or conspiracy between Fadullon and the Segarras, yet, considering the short period of one month within which to redeem and the surrounding circumstances, the possibility of such collusion lingers. Obviously there was in this transaction a prevailing intention of railroading the property into a new ownership as may be proven by the fact that said purchasers filed a sworn petition for consolidating their ownership barely 10 days after the expiration of 30 days, i.e. on 13 April 13, 1946, and registered with the office of Register of Deeds for Cebu 12 days thereafter, i.e. on 15 May 1946. 2. Good faith wanting in the manner the lot was sold; Inquiry on the agents power of attorney The alleged power of attorney executed by the late Lucio Tio in favor of appellant Fadullon was registered in the land record of the Register of Deeds of Cebu City and annotated at the back of TCT 10548 on 29 December 1939. On the same date, the deed of mortgage in favor of the Cebu Mutual Building and Loan Association was annotated in the said Torrens title. This encumbrance alone should have been sufficient to put the Segarra spouses upon an inquiry as to the authority of Fadullon to sell to them the same property 6 years later, but they did not. Further, the Segarras did not require Fadullon to produce his power of attorney. While it is true that said power of attorney is annotated at the back of the Torrens title of Tio, it was still incumbent upon the Segarras to ascertain the scope and authority of Fadullon under said power of attorney. Fadullon executed the sale with the right to repurchase within the extraordinary short period of 30 days. This circumstance, again, should have placed the Segarras on their guards, knowing, as they did, that they were dealing with an agent under a power of attorney executed before the war. 3. Order to pay rent an indicatum that the lower courts perceive defendants as possessors in bad faith From the decisions of the lower courts, one can logically infer that the conclusion of the two courts, to say it more mildly, that the defendants were not possessors in good faith. The fact that the Court of Appeals sentenced the defendants to pay rentals is an indication, even proof that defendants were considered possessors and builders in bad faith, or at least that they were not possessors and builders in good faith. A builder in good faith may not be required to pay rentals. He has a right to retain the land on which he has built in good faith until he is reimbursed the expenses incurred by him. Possibly he might be required to pay rental only when the owner of the land chooses not to appropriate the improvement and requires the builder in good faith to pay for the land, but that the builder is unwilling or unable to buy the land, and then they decide to leave things as they are and assume the relation of lessor and lessee, and should they disagree as to the amount of the rental then they can go to the court to fix that amount. Furthermore, Miranda (Tio) in her brief says without denial or refutation on the part of Fadullon and the Segarra spouses that the latter applied for a building permit to construct the improvements in question on 4 December 1946 and the permit was granted on 11 January 1947, about seven months after they received the summons on 10 June 1946.

Depra v. Dumlao [G.R. No. L-57348. May 16, 1985.] First Division, Melencio-Herrera (J): 5 concur, 1 took no part Facts: Francisco Depra is the owner of a parcel of land registered under TCT T-3087, known as Lot 685, situated in the municipality of Dumangas, Iloilo, with an area of approximately 8,870 sq. m. Agustin Dumlao owns an adjoining lot, designated as Lot 683, with an approximate area of 231 sq. ms. In 1972, when Dumlao constructed his house on his lot, the kitchen thereof had encroached on an area of 34 sq. m. of Depra's property. After the encroachment was discovered in a relocation survey of Depra's lot made on 2 November 1972, his mother, Beatriz Derla, after writing a demand letter asking Dumlao to move back from his encroachment, filed an action for Unlawful Detainer on 6 February 1973 against Dumlao in the Municipal Court of Dumangas. Said complaint was later amended to include Depra as a party plaintiff. After trial the Municipal Court found that Dumlao was a builder in good faith, and applying Article 448 of the Civil Code, rendered judgment on 29 September 1973, ordering that a forced lease is created between the parties with Depra, as lessor, and the Dumlao as lessee, over the disputed portion with an area of 34 sq. m., the rent to be paid is P5.00 a month, payable by the lessee to the lessors within the first 5 days of the month the rent is due; and the lease shall commence on that day that this decision shall have become final. From the foregoing judgment, neither party appealed so that, if it were a valid judgment, it would have ordinarily lapsed into finality. Still, Depra did not accept payment of rentals so that Dumlao deposited such rentals with the Municipal Court. On 15 July 1974, Depra filed a Complaint for Quieting of Title against Dumlao before the then CFI Iloilo (Branch IV), involving the same 34 sq. m., which was the bone of contention in the Municipal Court. Dumlao, in his Answer, admitted the encroachment but alleged, in the main, that the present suit is barred by res judicata by virtue of the Decision of the Municipal Court, which had become final and executory. Premised on the joint motion for judgment based on the stipulation of facts by the parties, the Trial Court on 31 October 1974, issued the assailed Order, decreeing that the 34 sq.m. is part and parcel of Lot 685 of the Cadastral Survey of Dumangas of which Depra is owner as evidenced by TCT 3087 and such plaintiff is entitled to possess the same; without pronouncement as to cost. Thus, an appeal was filed with the then Court of Appeals, which the latter certified to the Supreme Court as involving pure questions of law. The Supreme Court set aside the judgment of the trial Court and ordered the case remanded to the RTC Iloilo for further proceedings consistent with Articles 448 and 546 of the Civil Code. It ordered (1) the trial court to determine the present fair price of Depras 34 square meter-area of land, the amount of the expenses spent by Dumlao for the building of the kitchen, the increase in value ("plus value") which the said area of 34 square meters may have acquired by reason thereof, and whether the value of said area of land is considerably more than that of the kitchen built thereon; and after said amount have been determined by competent evidence, (2) the RTC shall render judgment, (a) granting Depra a period of 15 days within which to exercise his option under the law (Article 448, Civil Code), whether to appropriate the kitchen a his own by paying to Dumlao either the amount of the expenses spent by Dumlao for the building of the kitchen, or the increase in value ("plus value") which the said area of 34 square meters may have acquired by reason thereof, or to oblige Dumlao to pay the price of said area. The amounts shall be paid by the obligor within 15 days from notice of the option by tendering the amount to the Court in favor of the party entitled to receive it, (b) that if Depra exercises the option to oblige Dumlao to pay the price of the land but the latter rejects such purchase because the value of the land is considerably more than that of the kitchen, Dumlao shall give written notice of such rejection to Depra and to the Court within 15 days from notice of Depra's option to sell the land. In that event, the parties shall be given a period of 15 days from such notice of rejection within which to agree upon the terms of the lease, and give the Court formal written notice of such agreement and

its provisos. If no agreement is reached by the parties, the trial Court, within 15 days from and after the termination of the said period fixed for negotiation, shall then fix the terms of the lease, provided that the monthly rental to be fixed by the Court shall not be less than P10 per month, payable within the first 5 days of each calendar month. The period for the forced lease shall not be more than 2 years, counted from the finality of the judgment, considering the long period of time since 1952 that Dumlao has occupied the subject area. The rental thus fixed shall be increased by 10% for the second year of the forced lease. Dumlao shall not make any further constructions or improvements on the kitchen. Upon expiration of the 2-year period, or upon default by Dumlao in the payment of rentals for 2 consecutive months, Depra shall be entitled to terminate the forced lease, to recover his land, and to have the kitchen removed by Dumlao or at the latter's expense. The rentals herein provided shall be tendered by Dumlao to the Court for payment to Depra, and such tender shall constitute evidence of whether or not compliance was made within the period fixed by the Court, (c) ordering Dumlao to pay Depra an amount computed at P10 per month as reasonable compensation for the occupancy of Depra's land for the period counted from 1952, the year Dumlao occupied the subject area, up to the commencement date of the forced lease, and (d) that the periods to be fixed by the trial Court in its Decision shall be inextendible, and upon failure of the party obliged to tender to the trial Court the amount due to the obligee, the party entitled to such payment shall be entitled to an order of execution for the enforcement of payment of the amount due and for compliance with such other acts as may be required by the prestation due the obligee; Without costs. 1. Decision of the Municipal Court null and void, cannot operate as res judicata The Decision of the Municipal Court is null and void. The judgment in a detainer case is effective in respect of possession only (Sec. 7, Rule 70, Rules of Court). The Municipal Court overstepped its bounds when it imposed upon the parties a situation of "forced lease", which like "forced coownership" is not favored in law. Furthermore, a lease is an interest in real property, jurisdiction over which belongs to CFI (now RTC) (Sec. 44(b), Judiciary Act of 1948; 2 Sec. 19 (2) BP 129). Since the Municipal Court, acted without jurisdiction, its Decision was null and void and cannot operate as res judicata to the subject complaint for Queting of Title. 2. Difference in causes in detainer and action to quiet title; Judgment in detainer case not a bar to action respecting title to land Even if the Decision of the Municipal Court were valid, the rule on res judicata would not apply due to difference in cause of action. In the Municipal Court, the cause of action was the deprivation of possession, while in the action to quiet title, the cause of action was based on ownership. Furthermore, Sec. 7, Rule 70 of the Rules of Court explicitly provides that judgment in a detainer case "shall not bar an action between the same parties respecting title to the land." 3. Court system a dispute resolving mechanism; Legal effect of agreement of parties within context of mutual concession and stipulation Consistent with the principles that the Court system must be a dispute resolving mechanism, the Court accords legal effect to the agreement of the parties, within the context of their mutual concession and stipulation. They have, thereby, chosen a legal formula to resolve their dispute (Stipulation of Facts) to apply to Dumlao the rights of a "builder in good faith" and to Depra those of a "landowner in good faith" as prescribed in Article 448. The Court thus refrained from further examining whether the factual situations of Dumlao and Depra conform to the juridical positions respectively defined law, for a "builder in good faith" under Article 448, a "possessor in good faith" under Article 526 and a "landowner in good faith" under Article 448. 4. Builder in good faith; Article 448 Article 448 of the Civil Code provides that the owner of the land on which anything has been built sown or planted in good faith shall have the right to appropriate as his own the works, sowing or planting, after payment of the indemnity provided for in articles 546 and 548, or to oblige the one who

built or planted to pay the price of the land, and the one who sowed, the proper rent. However, the builder or planter cannot be obliged to buy the land if its value is considerably more than that of the building or trees. In such case, he shall pay reasonable rent, if the owner of the land does not choose to appropriate the building or trees after proper indemnity. The parties shall agree upon the terms of the lease and in case of disagreement, the court shall fix the terms thereof." Pursuant to the foregoing provision, Depra has the option either to pay for the encroaching part of Dumlao's kitchen, or to sell the encroached 34 square meters of his lot to Dumlao. He cannot refuse to pay for the encroaching part of the building, and to sell the encroached part of his land. 5. Right of remotion The owner of the building erected in good faith on a land owned by another, is entitled to retain the possession of the land until he is paid the value of his building, under article 453 (now 546). The owner of the land, upon the other hand, has the option, under article 361 (now 448), either to pay for the building or to sell his land to the owner of the building. But he cannot refuse both to pay for the building and to sell the land and compel the owner of the building to remove it from the land where it erected. He is entitled to such remotion only when, after having chosen to sell his land, the other party fails to pay for the same. In the present case, Dumlao had expressed his willingness to pay for the land, but Depra refused to sell. 6. Ignacio v. Hilario An order of the lower compelling the builder to remove their buildings from the land belonging to the landowner only because the latter chose neither to pay for such buildings nor to sell the land, is null and void, for it amends substantially the judgment sought to be executed and is, furthermore, offensive to articles 361 (now Article 448) and 453 (now Article 546) of the Civil Code. (Ignacio vs. Hilario, 76 Phil. 605, 608 [1946])." 7. Article 361 of the Spanish Civil Code vis--vis Article 448 of the New Civil Code; Benefits extended to builder but landowner retained his option The original provision found in Article 361 of the Spanish Civil Code provides that the owner of land on which anything has been built, sown or planted in good faith, shall have the right to appropriate as his own the work, sowing or planting, after the payment of the indemnity stated in Articles 453 and 454, or to oblige the one who built or planted to pay the price of the land, and the one who sowed, the proper rent." The Code Commission must have taken account of the objections (of some commentators) to Article 361 of the Spanish Civil Code. Hence, the Commission provided a modification thereof, and Article 448 of our Code has been made to provide that the owner of the land on which has been built, sown or planted in good faith, shall have the right to appropriate as his own the works, sowing or planting, after payment of the indemnity provided for in articles 546 and 548, or to oblige the one who built or planted to pay the price of the land, and the one who sowed, the proper rent. However, the builder or planter cannot be obliged to buy the land if its value is considerably more than that of the building or trees. In such case, he shall pay reasonable rent, if the owner of the land does not choose to appropriate the building or trees after proper indemnity. The parties shall agree upon the terms of the lease and in case of disagreement, the court shall fix the terms thereof." Additional benefits were extended to the builder but the landowner retained his options. 8. The fairness of the rules in Article 448 Where the builder, planter or sower has acted in good faith, a conflict of rights arises between the owners, and it becomes necessary to protect the owner of the improvements without causing injustice to the owner of the land. In view of the impracticability of creating a state of forced co-ownership, the law has provided a just solution by giving the owner of the land the option to acquire the improvements after payment of the proper indemnity, or to oblige the builder or planter to pay for the land and the sower to pay for the proper rent. It is the owner of the land who is authorized to exercise

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the option, because his right is older, and because, by the principle of accession, he is entitled to the ownership of the accessory thing. (3 Manresa 213; Bernardo vs. Bataclan, 37 Off. Gaz. 1382; Co Tao vs. Chan Chico, G.R. No. 49167, April 30, 1949; Article applied: see Cabral, et al vs. Ibaez [S.C.] 52 Off. Gaz. 217; Marfori vs. Velasco, [C.A.] 52 Off. Gaz. 2050).

DEPRA V. DUMLAO FACTS: Dumlao is the owner of a parcel of land in Iloilo, while Depra owns the lot adjoining his. Dumlao built his house on his own land, but the kitchen encroached about 34 sq.m on Depras property. Upon finding this, Depras mom ordered Dumlao to move back from his encroachment, then subsequently filed an action for unlawful detainer against Dumlao. The lower court found that Dumlao was a builder in good faith, and ordered him to pay rent (PhP5.00/month) forced lease between the parties. Depra refused to accept the rentals so Dumlao deposited this with the MTC. Neither party appealed judgment so this became final and executory. 1 year later, though, Depra filed an complaint for Quieting of Title. Dumlao contested this, stating that the suit is barred by res judicata. But Depra averred that the lower court did not have jurisdiction to rule on encumbrances of real property only the CFI has jurisdiction. ISSUE: 1. Whether or not res judicata would apply to the case at bar? 2. Whether or not the land owner can be compelled to accept rent payments by the court (with both LO and BPS being in good faith)? HELD: In the first issue, res judicata would not apply should the first case be one for ejectment and the other for quieting of title. Article 448 of the Civil Code provides that the land owner has 2 options to buy the building or to sell/rent his land. This is so because the rights of the owner of the land is older, and by the principle of accession, he also has a right to the accessories. The Court remanded the case to the RTC to determine the fair price of the land, the expenses incurred by the BPS (Dumlao), the increase in value of the land, and whether the value of the land is considerably more than the value of the kitchen built on it. The RTC shall then give Depra 15 days to exercise such option.

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Ortiz vs. Kayanan

Facts: Plaintiff used to be the legal guardian of Martin Dolorico II. When his ward died, plaintiff continued to cultivate and possess the latters property, which was formerly a subject of homestead application. In the said application, the wards uncle was named as his heir and successor in interest. Thus, the uncle executed an affidavit relinquishing his rights over the property in favor of Comintan and Zamora, his grandson and son-in-law and requested the Director of Lands to cancel the homestead application. The homestead application was cancelled to the protest of Ortiz saying that he should be given preference to purchase the lot inasmuch as he is the actual occupant and has been in continuous possession of the same. Still, the lot in question was sold at a public auction wherein defendant Comintan was the only bidder. The plaintiffs protest was investigated upon but his claim was not given due course. On appeal, respondent court rules that half of the portion of land should be given to the defendant, being the successful bidder. The other half should be awarded to Zamora without prejudice to the right of Ortiz to participate in the public bidding of the lot. If Ortiz is to be not declared the successful bidder, defendants should reimburse jointly said plaintiff for the improvements introduced on the land, with him, having the right to retain the property until after he has been paid for. Plaintiff appealed the judgment. It was later found out that Ortiz collected tolls on a portion of the property wherein he has not introduced any improvement. The judgment became final and executory. Private respondents filed a motion for its execution requesting that they file a bond in lieu of the amount that should be paid to Ortiz, on the condition that after the accounting of the tolls collected by plaintiff, there is still and amount due and payable to the said plaintiff, the bond shall be held answerable. Petitioner thus filed the instant petition, contending that in having issued the Order and Writ of Execution, respondent Court "acted without or in excess of jurisdiction, and/or with grave abuse of discretion, because the said order and writ in effect vary the terms of the judgment they purportedly seek to enforce." He argued that since said judgment declared the petitioner a possessor in good faith, he is entitled to the payment of the value of the improvements introduced by him on the whole property, with right to retain the land until he has been fully paid such value. He likewise averred that no payment for improvements has been made and, instead, a bond therefor had been filed by defendants (private respondents), which, according to petitioner, is not the payment envisaged in the decision which would entitle private respondents to the possession of the property. Furthermore, with respect to portion "B", petitioner alleges that, under the decision, he has the right to retain the same until after he has participated and lost in the public bidding of the land to be conducted by the Bureau of Lands. It is claimed that it is only in the event that he loses in the bidding that he can be legally dispossessed thereof. It is the position of petitioner that all the fruits of the property, including the tolls collected by him from the passing vehicles, which according to the trial court amounts to P25,000.00, belongs to petitioner and not to defendant/private respondent Quirino Comintan, in accordance with the decision itself, which decreed that the fruits of the property shall be in lieu of interest on the amount to be paid to

12

petitioner as reimbursement for improvements. Any contrary opinion, in his view, would be tantamount to an amendment of a decision which has long become final and executory and, therefore, cannot be lawfully done. The issue decisive of the controvery isafter the rendition by the trial court of its judgment in Civil Case No. C-90 on March 22, 1966 confirming the award of one-half of the property to Quirino Comintanwhether or not petitioner is still entitled to retain for his own exclusive benefit all the fruits of the property, such as the tolls collected by him from March 1967 to December 1968, and September 1969 to March 31, 1970, amounting to about P25,000.00.

RULING: Negative 1. No contention that the possessor in good faith is entitled to the fruits received before the possession is legally interrupted. Possession in good faith ceases or is legally interrupted from the moment defects in the title are made known to the possessor, by extraneous evidence or by the filing of an action in court by the true owner for the recovery of the property. Hence, all the fruits that the possessor may receive from the time he is summoned in court, or when he answers the complaint, must be delivered and paid by him to the owner or lawful possessor. 2. However, even after his good faith ceases, the possessor can still retain the property (Art 546) until he has been fully reimbursed for all the necessary and useful expenses made by him on the property. he principal characteristic of the right of retention is its accessory character. It is accessory to a principal obligation. Considering that the right of the possessor to receive the fruits terminates when his good faith ceases, it is necessary, in order that this right to retain may be useful, to concede to the creditor the right to secure reimbursement from the fruits of the property by utilizing its proceeds for the payment of the interest as well as the principal of the debt while he remains in possession. 3. Petitioner cannot appropriate for his own exclusive benefit the tolls which he collected from the property retained by him. It was his duty under the law, after deducting the necessary expenses for his administration, to apply such amount collected to the payment of the interest, and the balance to the payment of the obligation. We hold, therefore, that the disputed tolls, after deducting petitioner's expenses for administration, belong to Quirino Comintan, owner of the land through which the toll road passed, further considering that the same was on portions of the property on which petitioner had not introduced any improvement. The trial court itself clarified this matter when it placed the toll road under receivership. The omission of any mention of the tolls in the decision itself may be attributed to the fact that the tolls appear to have been collected after the rendition of the judgment of the trial court. 4. As to the other lot, it appears that no public sale has yet been conducted by the Bureau of Lands and, therefore, petitioner is entitled to remain in possession thereof. This is not disputed by respondent Eleuterio Zamora. After public sale is had and in the event that Ortiz is not declared the successful bidder, then he should be reimbursed by respondent Zamora in the corresponding amount for the improvements on Lot 5785-B.

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IGNACIO v HILARIO (1946; Moran) Facts: Elias Hilario and his wife Dionisia Dres filed a complaint against Damian, Francisco and Luis Ignacio concerning the ownership of a parcel of land, partly rice-land and partly residential. After the trial of the case, the lower court under Judge Alfonso Felix, rendered judgment holding Hilario and Dres as the legal owners of the whole property but conceding to the Ignacios the ownership of the houses and granaries built by them on the residential portion with the rights of a possessor in good faith, in accordance with article 361 of the Civil Code.

Subsequently, in a motion filed in the same CFI (now handled by respondent Judge Hon. Felipe Natividad), Hilario and Dres prayed for an order of execution alleging that since they chose neither to pay the Ignacios for the buildings nor to sell to them the residential lot, the Ignacios should be ordered to remove the structure at their own expense and to restore Hilario and Dres in the possession of said lot. After hearing, the motion was granted by Judge Natividad. Hence, the petition for certiorari was filed by the Ignacios praying for (a) a restraint and annulment of the order of execution issued by Judge Natividad; (b) an order to compel Hilario and Dres to pay them the sum of P2,000 for the buildings, or sell to them the residential lot for P45; or (c) a rehearing of the case for a determination of the rights of the parties upon failure of extra-judicial settlement. The Supreme Court set aside the writ of execution issued by Judge Natividad and ordered the lower court to hold a hearing in the principal case wherein it must determine the prices of the buildings and of the residential lot where they are erected, as well as the period of time within which Hilario and Dres may exercise their option either to pay for the buildings or to sell their land, and, in the last instance, the period of time within which the Ignacios may pay for the land, all these periods to be counted from the date the judgment becomes executory or unappealable. After such hearing, the court shall render a final judgment according to the evidence presented by the parties; with costs against Hilarion and Dres.

1. Right of retention of builder in good faith The owner of the building erected in good faith on a land owned by another, is entitled to retain the possession of the land until he is paid the value of his building, under article 453. Article 453 provides that Necessary expenses shall be refunded to every possessor; but only the possessor in good faith may retain the thing until such expenses are made good to him. Useful expenses shall be refunded to the possessor in good faith with the same right of retention, the person who has defeated him in the possession having the option of refunding the amount of the expenses or paying the increase in value which the thing may have acquired in consequence thereof."

2. Option of the landowner to pay for the building or sell his land to the owner of the building; Right of remotion only available if he chose the latter and the owner of the building cannot pay The owner of the land, upon the other hand, has the option, under article 361, either to pay for the building or to sell his land to the owner of the building. Article 361 provides that The owner of land on which anything has been built, sown or planted in good faith, shall have the right to appropriate as his

14

own the work, sowing or planting, after the payment of the indemnity stated in articles 453 and 454, or to oblige the one who built or planted to pay the price of the land, and the one who sowed, the proper rent. He cannot however refuse both to pay for the building and to sell the land and compel the owner of the building to remove it from the land where it is erected. He is entitled to such remotion only when, after having chosen to sell his land, the other party fails to pay for the same.

3. Order amends judgment substantially and thus null and void The order of Judge Natividad compelling the Ignacios to remove their buildings from the land belonging to Hilario and Dres only because the latter chose neither to pay for such buildings nor to sell the land, is null and void, for it amends substantially the judgment sought to be executed and is, furthermore, offensive to articles 361 and 453 of the Civil Code.

4. Original decision did not become final as it failed to determine the value of the buildings and of the lot; and the time to which the option may be exercised In the decision of Judge Felix, the rights of both parties were well defined under articles 361 and 453 of the Civil Code, but it failed to determine the value of the buildings and of the lot where they are erected as well as the periods of time within which the option may be exercised and payment should be made, these particulars having been left for determination apparently after the judgment has become final. The procedure is erroneous, for after the judgment has become final, no additions can be made thereto and nothing can be done therewith except its execution. And execution cannot be had, the sheriff being ignorant as to how, for how much, and within what time may the option be exercised, and certainty no authority is vested in him to settle these matters which involve exercise of judicial discretion. Thus, the judgment rendered by Judge Felix has never become final, it having left matters to be settled for its completion in a subsequent proceeding, matters which remained unsettled up to the time the petition is filed in the present case.

IGNAO VS. IAC

FACTS: Florencio Ignao and his uncles (private respondents) were co-owners of a parcel of land. This was originally owned by Baltazar Ignao, who married twice. In his first marriage, he had four children, including the father of the petitioner. In his second marriage, he also had four children who waived their rights over the controverted land.

Justo, Florencios father owned 5/8 of the land. Thereafter, Justo acquired 1/8 share of brother Leon for P500, which was later sold to his son Florencio for the same amount. When Justo died, Florencio inherited the 5/8 share of his father, which brought his land share to 6/8. Private respondents Juan and Isidro each has 1/8 share on the land.

15

Petitioner brought an action for partition. Before it was promulgated, Florencio sol 134 sqm of his share. The decision for partition allotted 2/8 of the land to private respondents. However, no actual partition was effected. Thus, petitioner instituted a complaint for recovery of possession of real property against private respondents, because the area occupied by the two houses built by private respondents exceeded the portion allotted to them. Trial court ruled that the private respondents are builders in good faith.

ISSUE: Whether or not the provisions of Art 448 should apply on a property held in common

RULING: Affirmative It should be noted that prior to partition, all the co-owners hold the property in common dominion but at the same time each is an owner of a share which is abstract and undetermined until partition is effected. As cited in Eusebio vs. Intermediate Appellate Court, "an undivided estate is co-ownership by the heirs." As co-owners, the parties may have unequal shares in the common property, quantitatively speaking. But in a qualitative sense, each co-owner has the same right as any one of the other co-owners. Every co-owner is therefore the owner of the whole, and over the whole he exercises the right of dominion, but he is at the same time the owner of a portion which is truly abstract, because until division is effected such portion is not concretely determined. Whether or not the provisions of Article 448 should apply to a builder in good faith on a property held in common has been resolved in the affirmative in the case of Spouses del Campo vs. Abesia, wherein the Court ruled that: The court a quo correctly held that Article 448 of the Civil Code cannot apply where a co-owner builds, plants or sows on the land owned in common for then he did not build, plant or sow upon land that exclusively belongs to another but of which he is a co-owner. The co-owner is not a third person under the circumstances, and the situation is governed by the rules of co-ownership. However, when, as in this case, the ownership is terminated by the partition and it appears that the home of defendants overlaps or occupies a portion of 5 square meters of the land pertaining to plaintiffs which the defendants obviously built in good faith, then the provisions of Article 448 of the new Civil Code should apply. Manresa and Navarro Amandi agree that the said provision of the Civil Code may apply even when there is a co-ownership if good faith has been established. In other words, when the co-ownership is terminated by a partition and it appears that the house of an erstwhile co-owner has encroached upon a portion pertaining to another co-owner which was however made in good faith, then the provisions of Article 448 should apply to determine the respective rights of the parties.

16

Petitioner's second assigned error is however well taken. Both the trial court and the Appellate Court erred when they peremptorily adopted the "workable solution" in the case of Grana vs. Court of appeals, and ordered the owner of the land, petitioner Florencio, to sell to private respondents, Juan and Isidro, the part of the land they intruded upon, thereby depriving petitioner of his right to choose. Such ruling contravened the explicit provisions of Article 448 to the effect that "(t)he owner of the land . . . shall have the right to appropriate . . .or to oblige the one who built . . . to pay the price of the land . . . ." The law is clear and unambiguous when it confers the right of choice upon the landowner and not upon the builder and the courts. Thus, in Quemuel vs. Olaes, the Court categorically ruled that the right to appropriate the works or improvements or to oblige the builder to pay the price of the land belongs to the landowner.

Filipinas Colleges Inc. vs. Garcia Timbang

Filipinas Colleges was declared to have acquired the rights of the spouses Timbang and in consideration thereof, Filipinas Colleges was ordered to pay the spouses P15,807.90 plus other amounts. Filipinas Colleges was required to deposit this to the court within 90 days after the decision shall have become final.

Meanwhile, Maria Gervacio Blas was declared to be a builder in good faith of the school building constructed on the lot in question and entitled to be paid the amount of P19,000 for it. Filipinas Colleges, purchaser of the said building, was ordered to deliver to Blas stock certificate and pay her P8,200 representing the unpaid balance of the purchase price of the house.

Filipinas Colleges failed to pay the said amounts. Spouses Timbang made known to the court that they had chosen to compel Filipinas Colleges to acquire the land and pay them the value thereof. The spouses asked for an order of execution, which was granted by court. Moreover, the levied on the house of the builder and then sold the same in public auction.

The Sheriff of Manila sold the building in public auction in favor of the spouses Timbang as the highest bidders. Personal properties of Filipinas Colleges were also auctioned in favor of the spouses.

The lower court declared the Sheriffs certificate of sale covering the school building null and void unless within 15 days from notice of said order, the successful bidders pay Blas P5,750. It also declared Filipinas Colleges as the owner of undivided interest in Lot 2-1 on which the building sold in

17

the auction sale is situated and ordered the sale in public auction of said undivided interest of the Filipinas Colleges in favor of Blas and against Filipinas Colleges.

The appellant spouses posited that because the builder in good faith has failed to pay the price of the land after the owners thereof exercised their option under Art 448, the builder lost his right of retention provided in Art 546 and by operation of Art 445, the appellants as owners of the land automatically became the owners of the building.

ISSUE: Whether or not the contention of the appellants are valid

RULING: Negative. Under the terms of these article, it is true that the owner of the land has the right to choose between appropriating the building by reimbursing the builder of the value thereof or compelling the builder in good faith to pay for his land. Even this second right cannot be exercised if the value of the land is considerably more than that of the building. In addition to the right of the builder to be paid the value of his improvement, Article 546 gives him the corollary right of retention of the property until he is indemnified by the owner of the land. There is nothing in the language of these two article, 448 and 546, which would justify the conclusion of appellants that, upon the failure of the builder to pay the value of the land, when such is demanded by the land-owner, the latter becomes automatically the owner of the improvement under Article 445. The case of Bernardo vs. Bataclan, 66 Phil., 590 cited by appellants is no authority for this conclusion. Although it is true it was declared therein that in the event of the failure of the builder to pay the land after the owner thereof has chosen this alternative, the builder's right of retention provided in Article 546 is lost, nevertheless there was nothing said that as a consequence thereof, the builder loses entirely all rights over his own building.

The question is; what is the recourse or remedy left to the parties in such eventuality where the builder fails to pay the value of the land? While the Code is silent on this Court in the cases of Miranda vs. Fadullon, et al., 97 Phil., 801; 51 Off. Gaz., [12] 6226; Ignacio vs. Hilario, 76 Phil., 605 and the cited case of Bernardo vs. Bataclan, supra. a. decide to leave things as they are and assume the relation of lessor and lessee, and should they disagree as to the amount of rental then they can go to the court to fix that amount. b. Should the parties not agree to leave things as they are and to assume the relation of lessor and lessee, another remedy is suggested in the case of Ignacio vs. Hilario, supra, wherein the court has ruled that the owner of the land in entitled to have the improvement removed when after having chosen to sell his land to the other party, i.e., the builder in good faith fails to pay for the same. c. A further remedy is indicated in the case of Bernardo vs. Bataclan, supra, where this Court approved the sale of the land and the improvement in a public auction applying the proceeds thereof first to the payment of the value of the land and the excess, if any, to be delivered to the owner of the house in payment thereof.

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Manotok Realty v. Tecson G.R. No. L-47475 August 19, 1988, 164 SCRA 287 Gutierrez Jr., J.

FACTS: Petitioner Manotok Realty filed a complaint against Nilo Madlangawa for recovery of possession with damages with the Court of First Instance of Manila. Said court rendered judgment declaring Madlangawa as a builder-possessor in good faith; ordering the company to recognize the right of Madlangawa to remain in Lot 345, Block 1, of the Clara Tambunting Subdivision until after he shall have been reimbursed by the company the sum of P7,500.00, without pronouncement as to costs.

Not satisfied with the trial courts decision, petitioner appealed to the Court of Appeals and upon affirming the trial courts decision, it elevated the case to the Supreme Court. On July 13, 1977, the Supreme Court issued a resolution denying Manotoks petition for lack of merit. Pet itioner then filed with the trial court (Judge Jose H. Tecson), a motion for the approval of the companys exercise of option and for satisfaction of judgment. However, Judge Tecson denied the motion for approval. Hence, this petition is filed.

ISSUE: Whether or not respondent Judge Tecson can deny petitioners (landowner) motion to avail of its option.

HELD: No. There is, therefore, no basis for the respondent judge to deny the petitioners motion to avail of its option to appropriate the improvements made on its property. Neither can the judge deny the issuance of a writ of execution because the private respondent was adjudged a builder in good faith or on the ground of peculiar circumstances which supervened after the institution of this case, like, for instance, the introduction of certain major repairs of and other substantial improvements because the option given by law belongs to the owner of the land. Under Article 448 of the Civil Code, the right to appropriate the works or improvements or to oblige the one who built or planted to pay the proper price of the land belongs to the owner of the land. The only right given to the builder in good faith is the right of reimbursement of necessary expenses for the preservation of the land; the builder cannot compel the landowner to sell such land to the former.

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Spouses Del Ocampo v. Abesia G.R. No. L-49219, April 15, 1998, 160 SCRA 379 Gancayco, J.

FACTS: Plaintiffs spouses Concepcion Fernandez and Estanislao Del Campo and defendant Bernarda Fernandez Abesia are co-owners of parcel of land with an area of 45 square meters and divided in the proportion of 2/3 and 1/3 share each, respectively. A commissioner, who is appointed by the court, conducted a survey and recommended that the property be divided into two lots: Lot 1161 A with an area of 30 square meters for the plaintiffs and Lot 1161 B with an area of 15 square meters for the defendants. However, it was shown in the sketch plan that the house of the defendant occupied the portion with an area of 5 square meters of Lot 1161 A of plaintiffs. The parties asked the court to finally settle and adjudicate who among the parties should take possession of the 5 square meters of land. ISSUES: 1.) Whether or not Article 448 of the Civil Code, the rights of a builder in good faith, should be applied to the plaintiff-spouses Del Campo. 2.) Whether or not the house of the defendant Abesia should be removed and demolished at their expense. HELD: 1.) Yes. Article 448 of the Civil Code cannot apply where a co-owner builds, plants or sows on the land owned in common for then, he did not build, plant or sow upon land that exclusively belongs to another but of which he is a co-owner. The co-owner is not a third person under the circumstances, and the situation is governed by the rules of co-ownership. However, when, as in this case, the coownership is terminated by the partition and it appears that the house of defendants overlaps or occupies a portion of 5 square meters of the land pertaining to plaintiffs which the defendants obviously built in good faith, then the provisions of Article 448 of the new Civil Code should apply. Manresa and Navarro Amandi agree that the said provision of the Civil Code may apply even when there was co-ownership if good faith has been established. 2.) It depends. Applying Article 448 of the Civil Code, the plaintiffs have the right to appropriate said portion of the house of defendants upon payment of indemnity to defendants as provided for in Article 546 of the Civil Code. Otherwise, the plaintiffs may oblige the defendants to pay the price of the land occupied by their house. However, if the price asked for is considerably much more than the value of the portion of the house of defendants built thereon, then the latter cannot be obliged to buy the land. The defendant shall then pay the reasonable rent to the plaintiffs upon such terms and conditions that they may agree. In case of disagreement, the trial court shall fix the terms thereof. Of course, defendants may demolish or remove the said portion of their house, at their own expense, if they so decide.

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Pecson v. Court of Appeals G.R. No. 115814, May 26, 1995, 244 SCRA 407 Davide, Jr. J.

FACTS: Pedro Pecson owned a commercial lot situated in Kamias street, Quezon City, on which he built a a four-door, two-storey apartment building. But because of failure to pay realty taxes amounting to P12,000.00, the commercial lot owned was sold at a public auction. It was purchased by Nepomuceno, which later sold the same to the Nuguid spouses for P103,000 on October 12, 1983. Pecson then challenged the sale, alleging that the apartment building, contrary to the claim of the Nuguid spouses, was not included in the sale. The lower court judged in favor of Pecson, declaring that the apartment building was indeed not included in the subject sale. The Court of Appeals affirmed the same. The Spouses Nuguid then filed a motion for delivery of possession of the lot and the apartment building. The lower court ruled in favor of the private respondents, but subject to the reimbursement to Pecson of the cost of constructing the apartment building minus the rents due to the spouses (calculated at P21,000 from June 23, 1993 to September 23, 1993). With the said decision at hand, the spouses then made a move to eject Pecson and as well as the tenants residing therein. However, the spouses have yet to pay Pecson for the construction costs.

ISSUE: Whether the Nuguid Spouses can eject Pecson even if reimbursement hasnt been given for the construction costs.

HELD: No. The Court ruled that since the spouses still havent reimbursed Pecson for the cost of construction of the building, the latter has the right to retain the property, and along with it, the fruits of which during such possession.

The court ruled that though Article 448 do not apply in the case at bar. By its clear language, Article 448 refers to a land whose ownership is claimed by two or more parties, one of whom has built some works, or sown or planted something. The building, sowing or planting may have been made in good faith or in bad faith. As in this case, since the owner himself was the one who constructed the improvement, good faith and bad faith becomes irrelevant. However, by analogy, the indemnity may be applied, considering that the primary intent of Article 448 is to avoid a state of forced co-ownership and that the parties agree that Articles 448 and 546 of the Civil Code are applicable and indemnity for the improvements may be paid, although they differ as to the basis of the indemnity. Since the spouses have opted to appropriate the apartment building, Pecson is thus entitled to the possession and enjoyment of the apartment building, until he is paid the proper indemnity, as well as of the portion of the lot where the building has been constructed. This is so because the right to retain the improvements while the corresponding indemnity is not paid implies the tenancy or possession in fact of the land on which it is built, planted or sown. The petitioner not having been so paid, he was entitled to retain ownership of the building and, necessarily, the income therefrom.

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PECSON VS. COURT OF APPEALS

FACTS: Pecson was the owner of a commercial lot on which he built a four-door storey-apartment building. For his failure to pay realty taxes, the lot was sold at public auction who in turn sold it to the private respondents. Petitioner challenges the validity of the auction sale.

ISSUE: Whether or not Art 448 finds application in the said case

RULING: Negative By its clear language, Art 448 refers to a land whose ownership is claimed by two or more parties, one of whom has built some works or sown or planted something. The rule on good faith laid down in Art 526 of the Civil Code shall be applied in determining whether the builder, sower or planter had acted in good faith.

Art 448 does not apply to a case where the owner of the land is the builder, sower or planter who then later loses ownership of the land by sale or donation. Where the true owner himself is the builder of works on his own land, good faith or bad faith is irrelevant. Thus, in strict point of law, Art 448 is not apposite to the case at bar. Nevertheless, the court applied the provision therein on indemnity.

Technogas Philippines Manufacturing Corporation v. Court of Appeals G.R. No. 108894, February, 10, 1997, 268 SCRA 5 Panganiban, J.

FACTS: Technogas purchased a parcel of land from Pariz Industries, Inc. In the same year, Eduardo Uy purchased the land adjacent to it. The following year, Uy bought another lot adjoining the lot of Technogas. Portions of the buildings and wall bought by Technogas together with the land from Pariz Industries are occupying a portion of Uys adjoining land. The knowledge of some encroachment was only made known to both parties after their parties of their respective parcels of land.

ISSUES: 1.) Whether or not petitioner Technogas Philippines is a possessor in bad faith. 2.) Whether or not petitioner Technogas Philippines has stepped into the shoes of the seller.

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HELD: 1.) No. Unless one is versed in the science of surveying, no one can determine the precise extent or location of his property by merely examining his paper title. There is no question in that when Technogas purchased the land from Pariz Industries, the buildings and other structures were already in existence. Furthermore, it is not clear as to who actually built these structures but it can be assumed that the predecessor-in-interest of Technogas, Pariz Industries, did so. An article 527 of the New Civil Code presumes good faith. Since no proof exists to show that the builder built the encroaching structures in bad faith, the structures should be presumed to have been built in good faith. Good faith consists in the belief of the builder that the land he is building on is his, and his ignorance of any defect or flaw in his title. Furthermore, possession acquired in good faith does not lose this character except in case and from the moment facts exist which show that the possessor is not aware that he possesses the thing improperly or wrongfully. The good faith ceases from the moment the defects in the title are made known to the possessor, by extraneous evidence or by suit for recovery of the property of the true owner. 2.) Yes. Has been shown, contrary as to the good faith of Technogas has not been overthrown. Similarly, upon delivery of the property to Pariz Industries, as seller, to Technogas, as buyer, the latter acquired ownership of the property. Consequently, Technogas is deemed to have stepped into the shoes of the seller with regard to all the rights of ownership of the property over the immovable sold, including the right to compel Uy to exercise either of the two options under Article 448 of the New Civil Code. Thus, the landowners exercise of his option can only take place after the builder shall have to know the intrusion in short, when both parties shall have become aware of it. Only then will the occasion for exercising the option arise, for it is only then that both parties will have been aware that a problem exists with regard to their property rights. Pleasantville Development Corporation v. Court of Appeals G.R. No. 79688, February 1, 1996, Panganiban, J.

FACTS: On March 26, 1974, Wilson Kee on installment Lot 8 from C.T. Torres Enterprises Inc. the exclusive real estate agent of petitioner. Under the Contract to Sell on installment. Kee can exercise possession over the parcel of land even before the completion of installment payments. On January 20, 1975, Kee paid CTTEI relocation fee of Php 50.00 and another on January 27, 1975 for the preparation of lot plan. These amounts were paid by Kee before he took possession of Lot 8. After the preparation of the lot plan and a copy was presented to Kee, Zenaida Octaviano, employee of CTTEI accompanied Donnabelle Kee the wife of Wilson Kee to inspect Lot 8. Unfortuantely, Octaviano pointed Lot 9. Thereafter, Kee constructed his residence on the said Lot 9 together a store, repair shop and other improvements.

Edith Robillo purchased from Pleasantville Development Corporation Lot 9. Sometime in 1975, she sold the said parcel of land, Lot 9, to Eldred Jardinico which at that time is vacant. Upon paying completely to Robillo, Jardinico secured from the Register of Deeds of Bacolod City on December 19, 1978 Transfer Certificate of Title No. 106367 in his name. It was only that time that he discovered that

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Wilson Kee take possession of that lot and that the same have introduced improvements to the same lot. Jardinico confronted Kee and tried to reach for an amicable settlement, but failed.

On January 30, 1981, Jardinico, through his lawyer, demanded that Kee vacate Lot 9 and remove all the improvements introduced by the latter. Kee refused which made Jardinico filed with the Municipal Trial Court in Cities, Branch 3, Bacolod City a complaint for ejectment with damages against Kee. Kee, in turn filed a third-party complaint against Pleasantville Development Corporation and CTTEI.

The MTCC held that the erroneous delivery was attributable to CTTEI and the Kee has no rights to Lot 9 because of the rescission made by CTTEI of their contract due to Kees failure to pay the installment. MTCC also held that Kee must pay reasonable rental for the use of Lot 9 and furthermore he cannot claim reimbursement for the improvements introduced by him. On appeal, the Regional Trial Court held that Pleasantville and CTTEI were not negligent and that Kee was in bad faith.

Kee appealed directly to the Supreme Court which referred the matter to the Court of Appeals. The Appellate Court overturned the ruling of the RTC and held the Kee was a builder in good faith and the erroneous delivery was attributable to the negligence of CTTEI. Hence the instant petition filed by Pleasantville. ISSUES: 1.) Whether or not, Wilson Kee is a builder in good faith. 2.) Whether or not petitioner is liable for the acts of its agent CTTEI. HELD: 1.) Petitioner fails to persuade the Court to abandon the findings and conclusions of the Court of Appeals that Kee was a builder in good faith. Good faith consists in the belief of the builder that the land he is building on is his and his ignorance of any defect or flaw in his title. And as good faith is presumed, petitioner has the burden of proving bad faith on the part of Kee. At the time he built improvements on Lot 8, Kee believed that said lot was what he bought from petitioner. He was not aware that the lot delivered to him was not Lot 8. Thus, Kee is in good faith. Petitioner failed to prove otherwise. To demonstrate Kee's bad faith, petitioner points to Kee's violation of paragraphs 22 and 26 of the Contract of Sale on Installment. It has no merit. Such violations have no bearing whatsoever on whether Kee was a builder in good faith, that is, on his state of mind at the time he built the improvements on Lot 9. These alleged violations may give rise to petitioner's cause of action against Kee under the said contract (contractual breach), but may not be the basis to negate the presumption that Kee was a builder in good faith. 2.) Yes. The rule is that the principal is responsible for the acts of the agent done within the scope of his authority, and should bear the damage caused to third persons. On the other hand, the agent who exceeds his authority is personally liable for the damage. But CTTEI was acting within its authority as

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the sole real estate representative of petitioner when it made the delivery to Kee, only that in so acting, it was negligent. It is this negligence that is the basis of petitioner's liability, as principal of CTTEI, per Articles 1909 and 1910 of the Civil Code. For such negligence, the petitioner should be held liable for damages. The rights of Kee and Jardinico vis-a-vis each other, as builder in good faith and owner in good faith, respectively, are regulated by law (i.e., Arts. 448, 546 and 548 of the Civil Code). It was error for the Court of Appeals to make a "slight modification" in the application of such law [by holding petitioner and CTTEI solidarily liable], on the ground of "equity".

Agustin v. Intermediate Appellate Court G.R. No. 66075-76, July 5, 1990, 187 SCRA 218 Grino Aquino, J. FACTS: The Cagayan River separates the towns of Solana on the west and Tuguegarao on the east in the province of Cagayan. In 1919 the lands of the east of the river were covered by the Tuguegarao Cadastre. In 1925, OCT 5472 was issued for land east of the Cagayan River owned by Eulogio Agustin. As the years went by, the Cagayan River moved gradually eastward, depositing silt on the west bank. The shifting of the river and siltation continued until 1968. In 1950, all lands west of the river were included in the Solana Cadastre. Among these occupying lands covered by Solana Cadastre were Pablo Binayug and Maria Melad. Through the years, the Cagayan River eroded lands of the Tuguegarao Cadastre on its eastern bank among which was Agustins Lot 8457, depositing the alluvium as accretion on the land possessed by Binayug on the western bank. However, 1968, after a big flood, the Cagayan River changed its course, returned to its 1919 bed and in the process, cut across the lands of Maria Melad, Timoteo Melad, and the spouses Pablo Binayug and Geronima Ubina whose lands were transferred on the eastern, or Tuguegarao, side of the river. To cultivate those lots they had to cross the river. In April 1969, while the Melads, Binayug, Urbina and their tenants were planting corn on their lots located on the easter side of Cagayan River, Agustin, the heirs of Baldomero Langcay, Juan Langcay, and Arturo Balisi, accompanied by the mayor and some policemen of Tuguegarao, claimed the same lands as their own and drove away the Melads, Binayug and Urbina from the premises. ISSUE: Whether or not ownership of accretion is lost upon sudden and abrupt change of the river. HELD: No. The ownership of the accretion to the lands was not lost upon sudden and abrupt change of the course of the river (Cagayan River in 1968 or 1969 when it reverted to its old 1919 bed), and separated or transferred said accretions to the other side (eastern bank) of the river. Articles 459 and 463 of the New Civil Code apply to this situation. Article 459 provides tha t whenever the current of a river, creek or torrent segregates from an estate on its bank a known portion of land and transfer it to another estate, the owner of the land to which the segregated portion belonged retains the ownership of it, provided that he removes the same within two years. Article 463 provides that, whenever the current of a river divides itself into branches, leaving a piece of land or part thereof isolated, the owner of the land retains his ownership. He also retains it if a portion of land is separated from the estate by the current.