1

ART. 447
GRN L-21783 NOVEMBER 29, 1969
PACIFIC FARMS, INC. VS. SIMPLICIO G.
ESGUERRA, CARRIED LUMBER
COMPANY
FACTS:
On several occasions, the Company sold
and delivered lumber and construction
materials to
the Insular Farms, Inc. which the latter
used in the
construction of the aforementioned six
buildings at its compound in Bolinao,
Pangasian. Of the total
procurement price of P15,000, the sum of
P4,710.18
has not been paid by the Insular Farms,
Inc. The
Company instituted a civil case with the
CIR of
Pangasinan to recover the said unpaid
balance from
the Insular Farms, Inc. The trial court
rendered
judgment in favor of the Company's
claim. The
corresponding writ of execution was issued
because
there was no appeal instituted by Insular,
Inc.
The Pacific Farms, Inc. filed a third-party
claim asserting ownership over the levied
buildings
which it had acquired from the Insular
Farms, Inc. by
virtue of a deed of absolute sale executed
about
seven months before the Company filed
the civil
action. Shielded by an indemnity bond put
up by the
Company and the Cosmopolitan Insurance
Company, Inc., the sheriff proceeded with
the
announced public auction and sold the
levied
buildings to the Company.
ISSUE:
WON the Company is entitled to a
materialmans lien to be paid by Pacific
Farms, Inc?
HELD: YES.

Therefore, applying article 447 by analogy,

we perforce consider the buildings as the
principal
and the lumber and construction materials
that went
into their construction as the accessory.
Thus Pacific
Farms, if it does own the six buildings,
must bear the
obligation to pay for the value of the said
materials;
the Company- 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.
Of course, the character of a buyer in
good
faith and for value, if really possessed by
the Pacific
Farms, could possibly exonerate it from
making
compensation. But the Pacific Farm's
stance that it is
an innocent purchaser for value and in
good faith is
open to grave doubt because of certain
facts of
substantial import (evident from the
records) that
cannot escape notice.
In the deed of absolute sale, exhibit 1, the
Insular Farms, Inc. (vendor) was
represented in the
contract by its president, J. Antonio
Araneta. The
latter was a director of the appellee
(Pacific Farms,
Inc.) and was the counsel who signed the
complaint
filed by the appellee in the court below.
J. Antonio Araneta was, therefore, not only
the president of the Insular Farms, Inc. but
also a director and counsel of Pacific
Farms.
During the trial of civil case the Insular
Farms, Inc. was represented by Attorney
Amado
Santiago, Jr. of the law firm of J. Antonio

2
Araneta.
The latter was one of the counsels of the
Pacific
Farms, Inc.
They cannot claim ignorance of the
pendency of civil case because the Insular
Farms, Inc. was defended by the same
lawyer
from the same law firm that commenced
the
present action.
Pacific Farms merely folded its arms in
disinterest and waited, so to speak. Not
until a
decision was rendered therein in favor of
the
Company, a writ of execution issued, and
the six
buildings levied upon by the sheriff, did it
file a thirdparty claim over the levied buildings.

sometime in 1981
from then Mayor Bienvenido Ignacio, the
encroachment already was in existence
and to
remedy the situation, Mayor Ignacio
offered to sell
the area in question (which then also
belonged to
Ignacio) to petitioner at P100.00 per
square meter
which offer the latter claimed to have
accepted. The
sale, however, did not materialize when,
without the
knowledge and consent of petitioner,
Mayor Ignacio
later mortgaged the lot to the
Development Bank of
the Philippines. He also contends that he
is a builder
in good faith.

ART. 448
PNB V. DE JESUS
411 SCRA 557

ISSUE:
Whether or not being a builder in good
faith matters
under article 448.

FACTS:
It would appear that on 10 June 1995,
respondent filed a complaint against
petitioner before the Regional Trial Court
of Occidental Mindoro for recovery of
ownership and possession, with damages,
over the questioned property. In his
complaint, respondent stated that he had
acquired a
parcel of land situated in Mamburao,
Occidental
Mindoro, with an area of 1,144 square
meters
covered by TCT No. T-17197, and that on
26 March
1993, he had caused a verification survey
of the
property and discovered that the northern
portion of the lot was being encroached
upon by a building of
petitioner to the extent of 124 square
meters.
Despite two letters of demand sent by
respondent,
petitioner failed and refused to vacate the
area.
Petitioner, in its answer, asserted that
when
it acquired the lot and the building

HELD:
Article 448, of the Civil Code refers to a
piece of land whose ownership is claimed
by two or
more parties, one of whom has built some
works (or
sown or planted something) and not 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
otherwise for, elsewise stated, where the
true owner
himself is the builder of works on his own
land, the
issue of good faith or bad faith is entirely
irrelevant.
G.R. NO. 120303. JULY 24, 1996
GEMINIANO, ET. AL. VS. COURT
OF APPEALS
FACTS:
It appears that subject lot was originally
owned by the petitioners' mother, Paulina
Amado

3
vda. de Geminiano. On a 12-square-meter
portion of
that lot stood the petitioners' unfinished
bungalow,
which the petitioners sold to the private
respondents, with an alleged promise to
sell to the latter that portion of the lot
occupied by the house.
Subsequently, the petitioners' mother
executed a
contract of lease over a 126 square-meter
portion of
the lot, including that portion on which the
house
stood, in favor of the private respondents
for P40.00
per month for a period of 7 years.
The private respondents then introduced
additional improvements and registered
the house in
their names. After the expiration of the
lease
contract, however, the petitioners' mother
refused to accept the monthly rentals.
It turned out that the lot in question was
the
subject of a suit, which resulted in its
acquisition by
one Maria Lee in 1972. Lee sold the lot to
Lily
Salcedo, who in turn sold it to the spouses
Dionisio.
Spouses Dionisio executed a Deed of
Quitclaim over
the said property in favor of the
petitioners.
The petitioners sent a letter addressed to
private respondent Mary Nicolas
demanding that she vacate the premises
and pay the rentals in arrears within
twenty days from notice.
Upon failure of the private respondents to
heed the demand, the petitioners filed a
complaint for unlawful detainer and
damages.
ISSUE: WON Art. 448 is applicable to this
case.
HELD: NO.
The private respondents claim they are
builders in good faith, hence, Article 448
of the Civil
Code should apply. They rely on the lack of
title of

the petitioners' mother at the time of the

execution of the contract of lease, as well
as the alleged
assurance made by the petitioners that
the lot on
which the house stood would be sold to
them.
But being mere lessees, the private
respondents
knew that their occupation of the premises
would
continue only for the life of the lease.
Plainly, they
cannot be considered as possessors nor
builders in
good faith.
Article 448 of the Civil Code, in relation to
Article 546 of the same Code, which allows
full
reimbursement of useful improvements
and retention of the premises until
reimbursement is made, applies only to a
possessor in good faith, i.e., one who
builds on land with the belief that he is the
owner thereof. It does not apply where
one's only interest is that of a lessee
under a rental contract; otherwise, it
would always be in the power of the
tenant to "improve" his landlord out of his
property.
And even if the petitioners indeed
promised
to sell, it would not make the private
respondents
possessors or builders in good faith so as
to be
covered by the provisions of Article 448 of
the Civil
Code. The latter cannot raise the mere
expectancy
of ownership of the aforementioned lot
because the
alleged promise to sell was not fulfilled nor
its
existence even proven.
BALUCANAG VS. FRANCISCO
122 SCRA 344
FACTS:
The petitioner bought a lot owned by Mrs.
Charvet which was then previously leased
by the
latter to one Richard Stohner. The said

4
lease contract
provided that the lessee may erect
structures and
improvements which shall remain as
lessee's
property and he may remove them at any
time. It
further provided that should the lessee fail
to remove
the same structures or improvements
withing two
months after the expiration of the lease,
the lessor
may remove them or cause them to be
removed at
the expense of the lessee. Stohner made
fillings on
the land and constructed a house. When
he failed to
pay the rent, the petitioner, through
counsel, sent
Stohner a demand letter ordering him to
vacate the
lot. The lessee contended that he is a
'builder in good
faith.'
ISSUE:
Is the lessee a builder in good faith?
HELD:
No, the lessee cannot be considered a
builder in good faith. The provision under
Art. 448 of
the
New Civil Code
(Philippine) on a builder of good
faith applies only to the owner of the land
who
believes he is the rightful owner thereof,
but not to a
lessee who's interest in the land is derived
only from
a rental contract. Neither can Stohner be
considered
a 'possessor in good faith'. A possessor in
good faith
is a party who possesses property
believing that he is
its rightful owner but discovers later on a
flaw in his
title that could indicate that he might not
be its legal
owner. It cannot apply to a lessee because
he knows

right from the start that he is merely a

lessee and not the owner of the premises.
As a mere lessee, he introduces
improvements to the property at his own
risk such that he cannot recover from the
owner the reimbursements nor he has any
right to retain the premises until
reimbursements. What applies in this case
is Art. 1678 (NCC) which provides that, " if
the lessee, makes, in good faith, useful
improvements which are suitable to the
use for which the lease is intended,
without altering the form or substance
of the property leased, the lessor upon the
termination
of the lease shall pay the lessee 1/2 of the
value of
the improvements at the time. Should the
lessor
refuse to reimburse said amount, the
lessee may
remove the improvements even though
the principal
thing may suffer damage thereby. He shall
not.
however, cause any more impairment
upon the
property leased than is necessary."
G.R. No. 156437. March 1, 2004
NATIONAL HOUSING AUTHORITY vs.
GRACE
BAPTIST CHURCH and COURT OF
APPEALS
FACTS:
On June 13, 1986, Respondent Grace
Baptist Church wrote a letter to NHA
manifesting their intent to purchase Lot 4
and 17 of the General
Mariano Alvarez Resettlement Project in
Cavite. The
latter granted request hence respondent
entered into possession of the lots and
introduced improvements thereon.On
February 22, 1991, NHA passed a
resolution approving the sale of the
subject lots to respondent Church for 700
per square meter, a total of P430,500.
respondents were duly informed.
On April 8, 1991, respondent church
tendered a check amounting to P55,350
contending
that this was the agreed price. NHA avers
stating that the price now (1991) is

5
different from before (1986).
The trial court rendered a decision in
favor
of NHA stating that there was no contract
of sale,
ordering to return the said lots to NHA and
to pay
NHA rent of 200 pesos from the time it
took
possession of the lot.
Respondent Church appealed to the CA
which affirms the decision of RTC
regarding no
contract of sale but modifying it by
ordering NHA to
execute the sale of the said lots to Church
for 700 per square, with 6% interest per
annum from March
1991. Petitioner NHA filed a motion for
reconsideration which was denied. Hence
this
petition for review on certiorari
ISSUE:
WON NHA can be compelled to sell the lots
under
market value?
HELD:
No, because the contract has not been
perfected. The Church despite knowledge
that its
intended contract of sale with the NHA
had not been
perfected proceeded to introduce
improvements on
the land. On the other hand, NHA
knowingly granted
the Church temporary use of the subject
properties
and did not prevent the Church from
making
improvements thereon. Thus the Church
and NHA,
who both acted in bad faith shall be
treated as if they were both in good faith.
In this connection Art 448 provides: the
owner of the land in 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 theone
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 and 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, on case
of disagreement, court shall fix.
G.R. NO. 151815. FEBRUARY 23, 2005
SPOUSES JUAN NUGUID AND ERLINDA
T.
NUGUID VS. HON. COURT OF APPEALS
AND
PEDRO P. PECSON
FACTS:
Pedro P. Pecson owned a commercial lot on
which he built a four-door two-storey
apartment
building. For failure to pay realty taxes,
the lot was
sold at public auction by the City Treasurer
to
Mamerto Nepomuceno, who in turn sold it
for
P103,000 to the spouses Juan and Erlinda
Nuguid.
Pecson challenged the validity of the
auction
sale before the RTC of Quezon City, the
RTC upheld
the spouses title but declared that the
four-door two-storey apartment building
was not included in the auction sale. This
was affirmed by the CA and by the SC.
The Nuguids became the uncontested
owners of commercial lot. The Nuguid
spouses
moved for delivery of possession of the lot
and the
apartment building.
ISSUE:
WON the Nuguids should reimburse
Pecson for the
benefits derived from the apartment
building.
HELD: YES.
With regard to Art. 448, the provision on
indemnity may be applied in analogy.
Whoever is the owner of the land may
appropriate whatever has been built,

6
planted or sown after paying indemnity.
However, it does not apply when the
owner of the land is also the builder of the
works on his own land who later on loses
ownership by sale or donation.
Since petitioners opted to appropriate the
improvement for themselves as early as
June 1993,
when they applied for a writ of execution
despite
knowledge that the auction sale did not
include the
apartment building, they could not benefit
from the
lots improvement, until they reimbursed
the improver in full, based on the current
market value of the property.
Under Article 448, the landowner is given
the option, either to appropriate the
improvement as his own upon payment of
the proper amount of
indemnity or to sell the land to the
possessor in good
faith. Relatedly, Article 546 provides that a
builder in
good faith is entitled to full reimbursement
for all the necessary and useful expenses
incurred; it also gives him right of
retention until full reimbursement is made.
The right of retention is considered as one
of the measures devised by the law for the
protection of builders in good faith. Its
object is to guarantee full and prompt
reimbursement as it permits the actual
possessor to remain in possession while he
has not been reimbursed (by the person
who defeated him in the case for
possession of the property) for those
necessary expenses and useful
improvements made by him on the thing
possessed.
Given the circumstances of the instant
case
where the builder in good faith has been
clearly
denied his right of retention for almost half
a decade, we find that the increased
award of rentals by the RTC was
reasonable and equitable. The petitioners
had reaped all the benefits from the
improvement introduced by the
respondent during said period, without
paying any amount to the latter as
reimbursement for his construction costs

and
expenses. They should account and pay
for such
benefits.
The case was remanded to the trial court
for determination of the current market
value of the apartment bldg and ordered
the Sps to pay Pecson otherwise it shall be
restored to Pecson until payment of
indemnity.]
G.R. NO. 157605. DECEMBER 13, 2005
SPS. RASDAS, ET. AL. VS. ESTENOR,
ET. AL.
FACTS:
The dispute centers on a parcel of land
with
an situated in Ilagan, Isabela. Respondent
filed a
Complaint for Recovery Of Ownership and
Possession With Damages against. The
complaint
was docketed and tried by the RTC of
Ilagan. In the
same complaint, respondent asserted that
he was the owner of the subject property,
which was then in the possession of
petitioners. The RTC decided in favor of
petitioners. The CA reversed the judgment
of the RTC and declared respondent as the
owner of the subject property. Thereafter,
a Writ of Execution and Writ of Demolition
was issued against petitioners, who were
ordered to demolish their houses,
structures, and improvements on the
property.
Petitioners alleged that they were entitled
to
just compensation relating to the value of
the houses they had built on the property,
owing to their purported status as builders
in good faith. They
claimed that the CA decision did not
declare them as
builders in bad faith, and thus, they were
entitled to
be reimbursed of the value of their houses
before
these could be demolished. They posited
that without such reimbursement, they
could not be ejected from their houses.
ISSUE:

7
WON petitioners are in good faith.
HELD: NO.
The father of the petitioners (and their
predecessor-in-interest) had already
known that he
did not own the property, and that his stay
therein
was merely out of tolerance. Such
conclusion in fact
bolstered the eventual conclusion that
respondents
were the owners of the land and that
petitioners
should vacate the same.
These premises remaining as they are, it is
clear that petitioners are not entitled to
the just
compensation they seek through the
present
complaint. Under Article 448 of the Civil
Code, the
builder in bad faith on the land of another
loses what is built without right to
indemnity. Petitioners were in bad faith
when they built the structures as they had
known that the subject property did not
belong to them.
tolerance ended when children
graduated When the predecessor has
knowledge that his possession of the
property is by mere tolerance, the
successors cannot be considered in good
faith. Under Article 448 of the Civil Code,
the builder in bad faith on the land of
another loses what is built without right to
indemnity. Petitioners were in bad faith
when they built the structures since they
had known that the subject property did
not belong to them.

G.R. NO. 123672. DECEMBER 14, 2005

FERNANDO CARRASCOSO, JR. VS.
COURT OF
APPEALS, LAURO LEVISTE
FACTS:
El Dorado Plantation, Inc. (El Dorado) was
the registered owner of a land situated in
Sablayan,
Occidental Mindoro. At a special meeting
of El
Dorados Board of Directors, a Resolution

was
passed authorizing Feliciano Leviste, then
President
of El Dorado, to negotiate the sale of the
property
and sign all documents and contracts
bearing
thereof. Through a Deed of Sale of Real
Property, El
Dorado, through Feliciano Leviste, sold the
property
to Carrascoso, Jr.
PLDT commenced construction of
improvements on the 1,000 hectare
portion of the
property immediately after the execution
of
Agreement to Buy and Sell.
Lauro Leviste (Lauro), a stockholder and
member of the Board of Directors of El
Dorado,
through his counsel, Atty. Benjamin
Aquino, called
the attention of the Board to Carrascosos
failure to
pay the balance of the purchase price of
the property.
He wants a rescission of the sale made by
the El
Dorado Plantation, Inc. to Mr. Carrascoso.
ISSUE: WON PLDT is in good faith when it
built its
improvements on the subject land.
HELD:
In the case at bar, it is undisputed that
PLDT
commenced construction of improvements
on the
1,000 hectare portion of the property
immediately
after the execution of the July 11, 1975
Agreement to Buy and Sell with the full
consent of Carrascoso.
Thus, until March 15, 1977 when the
Notice of Lis
Pendens was annotated on Carrascosos
TCT No. T6055, PLDT is deemed to have been in
good faith in
introducing improvements on the 1,000
hectare
portion of the property. After March 15,
1977,

8
however, PLDT could no longer invoke the
rights of a
builder in good faith.
Should El Dorado then opt to appropriate
the improvements made by PLDT on the
1,000
hectare portion of the property, it should
only be
made to pay for those improvements at
the time good faith existed on the part of
PLDT or until March 15,1977, to be pegged
at its current fair market value.
The commencement of PLDTs payment
of
reasonable rent should start on March 15,
1977 as
well, to be paid until such time that the
possession of the 1,000 hectare portion is
delivered to El Dorado,subject to the
reimbursement of expenses as
aforestated, that is, if El Dorado opts to
appropriate
the improvements.
If El Dorado opts for compulsory sale,
however, the payment of rent should
continue up to
the actual transfer of ownership.
G.R. NO. 144635 JUNE 26, 2006
PROGRAMME INCORPORATED, V.
PROVINCE OF BATAAN
FACTS:
BASECO is the owner of Piazza Hotel and
Mariveles Lodge, both located in
Mariveles, Bataan.
In 1986, BASECO granted petitioner a
contract of lease over Piazza Hotel at a
monthly
rental of P6,500 for three years, subject to
renewal by mutual agreement of the
parties. After the expiration of the threeyear lease period, petitioner was allowed
to continue operating the hotel on monthly
extensions of the lease. In 1989, however,
the Presidential Commission on Good
Government (PCGG) issued a
sequestration order against BASECO
pursuant to Executive Order No. 1 of
former President Corazon C. Aquino.
Among the properties provisionally seized
and taken over was the lot on which Piazza
Hotel stood.
On July, 1989, however, Piazza Hotel was
sold at a public auction for non-payment

of taxes to
respondent Province of Bataan. The title of
the
property was transferred to respondent.
BASECOs
Transfer Certificate of Title was cancelled
and a new
one, was issued to the Province of Bataan.
The trial court rendered judgment in favor
of
respondent.
CA affirmed the trial courts ruling.
ISSUE:
WON the petitioner is a possessor in good
faith of the Piazza Hotel and Mariveles
Lodge
HELD:
The benefits granted to a possessor in
good faith cannot be maintained by the
lessee
against the lessor because, such benefits
are
intended to apply only to a case where
one builds or
sows or plants on land which he believes
himself to
have a claim of title and not to lands
wherein ones
only interest is that of a tenant under a
rental
contract, otherwise, it would always be in
the power
of a tenant to improve his landlord out of
his
property. Besides, as between lessor and
lessee, the
Code applies specific provisions designed
to cover
their rights.
Hence, the lessee cannot claim
reimbursement, as a matter of right, for
useful
improvements he has made on the
property, nor can
he asserts a right of retention until
reimbursed. His
only remedy is to remove the
improvement if the
lessor does not choose to pay its value;
but the court
cannot give him the right to buy the land.
Petitioners assertion that Piazza Hotel was
constructed "at (its) expense" found no

9
support in the
records. Neither did any document or
testimony
prove this claim. At best, what was
confirmed was
that petitioner
managed and operated
the hotel.
There was no evidence that petitioner was
the one
which spent for the construction or
renovation of the
property. And since petitioners alleged
expenditures
were never proven, it could not even seek
reimbursement of one-half of the value of
the
improvements upon termination of the
lease under
Article 1678 of the Civil Code.
G.R. NO. L-26694 DECEMBER 18, 1973
NELITA MORENO VDA. DE BACALING V
HECTOR
LAGUNA
FACTS:
Hector Laguda is the registered owner of a
residential land situated at La Paz, Iloilo
City. Many
years back, petitioner and her late
husband, Dr.
Ramon Bacaling, with the acquiescence of
private
respondent Laguda, constructed a
residential house
on a portion of said lot fronting Huevana
Street, paying a monthly rental of P80.00.
Unable to pay the lease rental from July
1959 to September 1961, totaling
P2,160.00, an action for ejectment was
filed by private respondent Laguda against
petitioner in her capacity as judicial
administrator of the estate of her late
husband, Dr. Bacaling. The filing of said
case spawned various court suits.
Petitioner suffered a series of legal
reverses
and ended up with a compromise
agreement with the respondent. Trial court
approved the amicable
settlement however the petitioner failed to
comply with the terms.

ISSUE:
WON petitioner is a builder in good faith
and,
therefore, entitled to reimbursement,
and/or
reasonable expenses that may be incurred
in
transferring the house to another place
HELD:
Petitioner's contention that she be
considered a builder in good faith and,
therefore,
entitled to reimbursement in addition to
reasonable
expenses that may be incurred in
transferring the
house to another place, the same cannot
stand legal
scrutiny.
The rule is well-settled that lessees, like
petitioner, are not possessors in good
faith, because
they knew that their occupancy of the
premises
continues only during the life of the lease,
and they
cannot as a matter of right, recover the
value of their improvements from the
lessor, much less retain the premises until
they are reimbursed. Their rights
aregoverned by Article 1678 of the Civil
Code which allows reimbursement of
lessees up to one-half of the value of their
improvements if the lessor so elects.
G.R. NO.157044. OCTOBER 5, 2005
ROSALES VS. CASTELLFORT
FACTS:
Spouses-petitioners Rodolfo V. Rosales and
Lily Rosqueta-Rosales (petitioners) are the
registered
owners of a parcel of land with an area of
approximately 315 square meters, covered
by
Transfer Certificate of Title (TCT) No.
36856[4] and
designated as Lot 17, Block 1 of
Subdivision Plan LRC
Psd-55244 situated in Los Baos, Laguna.
On August 16, 1995, petitioners
discovered
that a house was being constructed on
their lot,

10
without their knowledge and consent, by
respondent
Miguel Castelltort (Castelltort).
It turned out that respondents Castelltort
and his wife Judith had purchased a lot,
Lot 16 of the same Subdivision Plan, from
respondent Lina LopezVillegas (Lina) through her son-attorney-infact Rene
Villegas (Villegas) but that after a survey
thereof by
geodetic engineer Augusto Rivera, he
pointed to Lot
17 as the Lot 16 the Castelltorts
purchased.
Negotiations for the settlement of the case
thus began,with Villegas offering a larger
lot near petitioners lot in the same
subdivision as a replacement thereof. In
the alternative, Villegas proposed to pay
the purchase price of petitioners lot with
legal interest. Both proposals were,
however, rejected by petitioners whose
counsel, by letter of August 24, 1995,
directed Castelltort to stop the
construction of and demolish his house
and any other structure he may have built
thereon, and desist from entering the lot.
Petitioners subsequently filed on
September
1, 1995 a complaint for recovery of
possession and
damages with prayer for the issuance of a
restraining
order and preliminary injunction against
spousesrespondents Miguel and Judith Castelltort
before the
RTC of Calamba, Laguna, docketed as Civil
Case No.
2229-95-C.
ISSUE:
Under Art 448, who has the right of
option?
HELD:
Under the foregoing provision (Art 448),
the
landowner can choose between
appropriating the
building by paying the proper indemnity or
obliging the
builder to pay the price of the land, unless
its value is

considerably more than that of the

structures, in which case the builder in
good faith shall pay reasonable rent.[34] If
the parties cannot come to terms over the
conditions of the lease, the court must fix
the terms thereof.
The choice belongs to the owner of the
land,
a rule that accords with the principle of
accession, i.e., that the accessory follows
the principal and not the other way
around. Even as the option lies with the
landowner, the grant to him, nevertheless,
is
preclusive. The landowner cannot refuse
to exercise
either option and compel instead the
owner of the
building to remove it from the land. The
raison detre for this provision has been
enunciated thus:
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 the proper rent. He cannot
refuse
to exercise either option. It is the owner of
the land who is authorized to exercise the
option, because his right is older, and
because, by the principle of accession, he
is
entitled to the ownership of the accessory
thing.
G.R. NO. 170923 JANUARY 20, 2009
SULO SA NAYON, INC. VS
NAYONG PILIPINO FOUNDATION
FACTS:
In 1975, respondent leased a portion of
the
Nayong Pilipino Complex, to petitioner

11
Sulo sa
Nayon, Inc. for the construction and
operation of a
hotel building, to be known as the
Philippine Village
Hotel. The lease was for an initial period of
21 years,
or until May 1996. It is renewable for a
period of 25
years under the same terms and
conditions upon due notice in writing to
respondent of the intention to renew.
In 1995, petitioners sent respondent a
letter
notifying the latter of their intention to
renew the
contract for another. July of the same year,
parties
agreed to the renewal of the contract for
another 25
years, or until 2021. Under the new
agreement,
petitioner PVHI was bound to pay the
monthly rentals beginning January 2001,
petitioners
defaulted in the payment of their monthly
rental.
Respondent repeatedly demanded
petitioners to pay
the arrears and vacate the premises.
MeTC rendered its decision in favor
of respondent
RTC which modified the ruling of the MeTC.
CA which held that the RTC erroneously
applied the rules on accession, as found in
Articles
448 and 546 of the Civil Code.
ISSUE:
WON Sulo sa Nayon as builders have
acted
in good faith in order for Art. 448 in
relation to Art.
546 of the Civil Code may apply with
respect to their
rights over improvements.
HELD:
The high court held that introduction of
any improvement on a leased property
does not give its lessee the right to retain
possession of the property.
Article 448 is manifestly intended to apply
only to a case where one builds, plants, or
sows on

land in which he believes himself to have

a claim of
title, and not to lands where the only
interest of the
builder, planter or sower is that of a
holder, such as a tenant.
In the case at bar, petitioners have no
adverse claim or title to the land. In fact,
as lessees,
they recognize that the respondent is the
owner of
the land. What petitioners insist is that
because of the improvements, which are
of substantial value, that they have
introduced on the leased premises with
the permission of respondent, they should
be considered builders in good faith who
have the right to retain possession of the
property until reimbursement by
respondent.
We affirm the ruling of the CA that
introduction of valuable improvements on
the leased
premises does not give the petitioners the
right of
retention and reimbursement which
rightfully belongs to a builder in good
faith. Otherwise, such a situation would
allow the lessee to easily "improve" the
lessor out of its property. We reiterate the
doctrine that a lessee is neither a builder
in good faith nor in bad faith that would
call for the application of Articles 448 and
546 of the Civil Code. His rights are
governed by
Article 1678 of the Civil Code.
96 SCRA 130 February 21, 1980
FLOREZA v EVANGELISTA
FACTS:
The Evangelistas were the owner of a
residential lot in Rizal with an area of
204.08 sq. m.
assessed at P410. They borrowed P100
from
Floreza. Floreza occupied the residential
lot and built
a house of light material (barong-barong)
with the
consent of the Evangelistas. Additional
Loans were
made by the Evangelistas. Floreza
demolished the house of light material and
constructed one of strong material

12
assessed. Floreza has not been paying any
rentals since the beginning of their
transactions. Eventually, Evangelistas
sold, with a right to repurchase within 6
years, their land to Floreza. Seven months
before the expiry of the repurchase period,
the Evangelistas were able to pay in full.
Floreza refused to vacate the lot unless he
was first reimbursed for the value of the
house he built. Evangelistas filed a
complaint. CFI ruled
based on Art, 448 of the Civil Code saying
that
Evangelistas have the choice between
purchasing
the house or selling the land to Floreza. CA
ruled
that Art. 448 was inapplicable and that
Floreza was
not entiled to the reimbursement of his
house and
could remove the same at his own
expense.
ISSUE:
1. WON Floreza was entitled to
reimbursement of the cost of his house.
2. WON he (his heirs who replaced him)
should pay
rental of the land.
HELD:
1. NO.
Issue of reimbursement is not moot
because if
Floreza has no right of retention, then he
must pay
damages in the form of rentals. Agree with
CA that
Art. 448 is inapplicable because it applies
only when
the builder is in good faith (he believed he
had a right to build). Art. 453 is also not
applicable because it requires both of the
parties to be in bad faith. Neither is Art.
1616 applicable because Floreza is not a
vendee a retro. The house was already
constructed
in 1945 (light materials) even before the
pacto de
retro was entered into in 1949. Floreza
cannot be
classified as a builder in good faith nor a
vendee a
retro, who made useful improvements

during the
pacto de retro, he has no right to
reimbursement of
the value of the house, much less to the
retention of
the premises until he is paid.
His rights are more akin to a usufructury
under Art. 579, who may make on the
property useful improvements but with no
right to be indemnified thereof, He may,
however, remove such
improvements should it be possible to do
so without
damage to the property.
2. YES.
From the time the redemption price was
paid in
January 3, 1955, Florezas right to use the
residential
lot without rent ceased. He should be held
liable for
damages in the form of rentals for the
continued use
of the lot for P10 monthly from January 3,
1955 until
the house was removed and the property
vacated by
Floreza or his heirs. Judgment affirmed
with
modification.
ART. 449
DEL ROSARIO V. SPS. MANUEL
FACTS:
On August 12, 1999, spouses Jose and
Concordia Manuel, respondents, filed with
the
Municipal Trial Court (MTC), San Mateo,
Rizal a
complaint1 for unlawful detainer against
Alfredo
Yasay del Rosario, petitioner, docketed as
Civil Case
No. 1360. They alleged that they are the
true and
lawful owners of a 251 square meter lot
located at
Sta. Ana, San Mateo, Rizal. Because of
their
compassion, they allowed petitioner,
whose house
was destroyed by a strong typhoon, to
occupy their
lot. They agreed that he could build

13
thereon a
temporary shelter of light materials. But
without their consent, what he constructed
was a house of
concrete materials.
In 1992, respondents asked petitioner to
vacate the
lot. This was followed by repeated verbal
demands
but to no avail, prompting them to bring
the matter to the barangay. But the
parties failed to reach an
amicable settlement. On June 25, 1999,
the
barangay chairman issued a Certification
to File
Action. In his answer to the complaint,
petitioner
claimed that sometime in 1968,
respondents allowed
him to build his house on the lot, provided
he would
guard the premises to prevent
landgrabbers and
squatters from occupying the area. In
1995, when
respondents visited this country, they
agreed verbally to sell the portion on
which his house was
constructed. A year later, he made an
offer to buy
the 60 square meter portion occupied by
him and to
spend for its survey. But what respondents
wanted
to sell was the whole area containing 251
square
meters. He then informed them that he
would first
consult his children and they said they will
wait.
Instead, they filed the instant complaint.
ISSUE:
WON petitioner is a builder in good faith.
HELD:
NO.
Petitioner is not a builder in good
faith. Considering that he occupies the
land by
mere tolerance, he is aware that his
occupation
of the same may be terminated by
respondents

any time.
LUMUNGO V. USMAN
25 SCRA 255
FACTS:
Dominga Usman sold and transfers her
rights in and to the 3 lots in question to
Jose Angeles.
The latter made the purchase with the
knowledge
that the property was already in dispute
by Atty.
Usman, husband of Dominga, and by the
plaintiffs.
Angeles, upon taking possession of the
land, planted
the same with coconuts, which, together
with those
already planted by Dominga Usman,
numbered about 3,000, most of which are
now fruit-bearing. In short, Angeles was a
purchaser and a builder in bad faith.
ISSUE:
Whether or not Angeles is entitled to
reimbursement for the coconuts tree he
planted on the property in litigation.
HELD:
No. It should be noted that said trees are
improvements, not "necessary expenses
of
preservation," which a builder, planter or
sower in
bad faith may recover under Arts. 452 and
546, first
paragraph, of the Civil Code. The facts and
findings
of both the trial court and the Court of
Appeals leave
no room for doubt that Jose Angeles was a
purchaser and a builder in bad faith.
The provision applicable to this case is,
accordingly, Article 449 of the Civil
Code,which 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."
ART. 453
MUNICIPALITY OF OAS V. ROA
7 PHIL. 20

14
FACTS:
The Municipality brought the action for the
recovery of a tract of land in the pueblo of
Oas,
claiming that it was a part of the public
square of said town, while Roa alleged that
he was the owner of the property. The
defendant admitted in writing that he
knew that the land is owned by the
Municipality and that Jose Castillo, whom
he bought the property did not own the
land. When Roa constructed a substantial
building on the property in question after
he acquired the property from Castillo,
the Municipality did not oppose the
construction.
ISSUE:
Whether or not the municipality owns the
land.
HELD:
Yes.
The defendant was not a purchaser in
good faith. The plaintiff, having permitted
the erection by the defendant of a building
on the land without objection, acted in bad
faith. The rights of the parties must,
therefore, be determined as if they both
had acted in good faith. To the case are
applicable those provisions of the Civil
Code which relate to the construction by
one person of a building upon land
belonging to another. Article 364 (now
Art.453) of the Civil Code is as follows:
"When there has been bad faith, not only
on the part of the person who built, sowed,
or planted on another's land, but also on
the part of the owner of the latter, the
rights of both shall be the same as if they
had acted in good faith. The Supreme
declared that the Municipality is the
owner
of the land and that it has the option of
buying the
building thereon, which is the property of
the
defendant, or of selling to him the land on
which it
stands.
ART. 458
GOVERNMENT V. COLEGIO DE SAN
JOSE
53 PHIL. 423

FACTS:
During the months of September to
November every year, the waters of
Laguna de Bay
cover a long strip of land along the
eastern border of the two parcels of land
in question. The claimant
Colegio de San Jose contends that the
parcels of
land are a part of the Hacienda de San
Pedro
Tunasan belonging it, which has been in
possession
thereof since time immemorial by means
of its
tenants or lessees and farmers. In
contrast, the
Government contends that the said two
parcels of
land belong to the public domain, and its
evidence
tends to prove that they have always been
known as
the shores of Laguna de Bay. The CFI
rendered a
decision in favor of Colegio de San Jose
ordering the
registration of the 2 parcels of land in
accordance
with law. Both admitted that the strip was
formerly
covered by water but since the Bay
receded, it was
now uncovered. The government tried to
apply Art.
458 which states the adjoin estate (the
College) does
not acquire the land left dry by the natural
decrease
of the waters.
ISSUES:
Whether or not Art. 458 is applicable.
Whether or not the property in question
belongs to
the public domain as a part of the bed of
Laguna de
Bay.
HELD:
No. Article 367 (now Art.458) provides that
the
owners of estates bordering on ponds or
lagoons, do

15
not acquire the land left dry by the natural
decrease
of the waters, nor lose those inundated by
them in
extraordinary floods. The provision refers
to ponds
and lagoons, and has therefore no
application to the
present case, which refers to a lake, a
lagoon being
legally distinct in character from a lake.
Instead,
Art.77 of the Spanish Law of Waters should

apply,
which provides: Lands accidentally
inundated by the waters of lakes, or by
creeks, rivers or other streams shall
continue to be the property of their
respective owners. Therefore, they must
belong to Colegio de San Jose as part of
Hacienda de San Pedro
Tunasan, which was originally owned by it.