1 Pecson v. Court of Appeals | G.R. No.
115814 | May 26, 1995 The case is hereby remanded to the trial court for it to determine the
Doctrine: Article 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. It does not apply to a case where
a person constructs a building on his own land, for then there can be no
question as to good or bad faith on the part of the builder. 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.
The objective of Article 546 of the Civil Code is to administer justice
between the parties involved. It is therefore the current market value of
the improvements which should be made the basis of
reimbursement.
Facts:
1. Petitioner Pecson was the owner of a commercial lot located
in Kamias St., in QC on which he built a four-door two-storey apartment
building.
2. Due to non-payment of realty taxes amounting to 12k, the lot was
sold at public auction to Mamerto Nepomuceno who in turn sold to
Respondents Nuguid for 103,000.
3. Respondents assert that the sale included the apartment building.
4. Respondents filed with the RTC a motion for delivery of possession
of the lot and the apartment building, citing Art 546. – This was
granted by the Trial Court.
5. The petitioner filed with the CA a special civil action for certiorari and
prohibition assailing the order citing Art 448 of the Civil Code as
respondents opted to appropriate the improvement introduced by
petitioner on the subject lot, giving rise to the right of petitioner to be
reimbursed of the cost of constructing said apartment building, in
accordance with Art 546 and of the right to retain the improvements until
he is reimbursed of the cost of the improvements.
6. CA held that respondents should pay petitioner the construction
cost of 53K; and petitioner to account any fruits of the improvements
received by him starting June 23, with the amount of 53K.
Issue: WON Art 448 applies to the case of the petitioner. - NO
Held: RTC & CA Decision SET ASIDE.
current market value of the apartment building on the lot. For this
purpose, the parties shall be allowed to adduce evidence on the
current market value of the apartment building. The value so
determined shall be forthwith paid by the private respondents to the
petitioner otherwise the petitioner shall be restored to the possession of
the apartment building until payment of the required indemnity.
1. 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. The rule on good faith laid down in
Article 526 of the Civil Code shall be applied in determining whether a
builder, sower or planter had acted in good faith.
2. Nevertheless, we believe that the provision therein on
indemnity may be applied by analogy considering that the primary
intent of Article 448 is to avoid a state of forced co-ownership and that
the parties, including the two courts below, in the main 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.
3. The objective of Article 546 of the CC is to administer justice
between the parties involved. In this regard, this Court had long ago
stated in Rivera vs. Roman Catholic Archbishop of Manila that the
said provision was formulated in trying to adjust the rights of the
owner and possessor in good faith of a piece of land, to administer
complete justice to both of them is such a way as neither one nor the
other may enrich himself of that which does not belong to him. Guided
by this precept, it is therefore the current market value of the
improvements which should be made the basis of reimbursement. A
contrary ruling would unjustly enrich the private respondents who
would otherwise be allowed to acquire a highly valued income-yielding
four-unit apartment building for a measly amount. Consequently, the
parties should therefore be allowed to adduce evidence on the
present market value of the apartment building upon which the trial
court should base its finding as to the amount of reimbursement to be
paid by the landowner.
2 SPOUSES RAFAEL BENITEZ AND AVELINA BENITEZ v.
COURT OF APPEALS, SPOUSES RENATO MACAPAGAL and
ELIZABETH MACAPAGAL
Facts: Spouses Benitez purchased a land with improvement.
Subsequently, Spouses Macapagal also bought a lot, then filed a
case against Spouses Benitez for the recovery of possession of an
encroached portion of the lot they purchased. They reached a
compromise in which Spouses Macapagal sold the encroached
portion to Spouses Benitez at the acquisition cost of P1,000 per
square meter. Spouses Macapagal then purchased another property,
adjacent to that of Spouses Benitez’. After a relocation survey was
conducted, Spouses Macapagal discovered that some 46.50 sqm of
their property was occupied by Spouses Benitez’ house. Despite
demands, Spouses Benitez refused to vacate. Spouses Macapagal
filed with the MeTC for ejectment against Spouses Benitez. MeTC in
favor of Spouses Macapagal. RTC affirmed. CA denied Benitez’
appeal.
Issues: (a) Can the possession of the portion of Spouses Macapagal’s
land encroached by Spouses Benitez’ house be recovered through an
action of ejectment, not accion publiciana?
(b) Is the imposed "rental" for the occupancy of the encroached
portion valid?
(c) Do the Spouses Benitez have a pre-emptive right to purchase the
encroached portion of Spouses Macapagal’s land?
Held: PETITION DENIED.
(a) YES. Ejectment is the proper remedy, thus, MeTC has jurisdiction.
Spouses Macapagal were unlawfully deprived of possession of the
encroached land and the action for the recovery of possession was
made within the 1-year reglementary period.
(b) YES. Spouses Benitez wrongly construed the order of the MeTC to
pay Spouses Macapagal P930 a month until they finally vacate the
subject premises as "rentals". Technically, such award is not rental, but
damages. Damages are recoverable in ejectment cases and these
damages arise from the loss of the use and occupation of the
property. There is no question that Spouses Benitez benefited from
their occupation of a portion of Spouses Macapagal’s property.
Doctrine:
(c) NO. Option To Sell Belongs To Owner. Article 448 is unequivocal
that the option to sell the land on which another in good faith builds,
plants or sows on, belongs to the landowner. The option is to sell, not
to buy, and it is the landowner's choice. Not even a declaration of the
builder, planter, or sower's bad faith shifts this option to him per Article
450. This advantage in Article 448 is accorded the landowner
because "his right is older, and because, by the principle of accession,
he is entitled to the ownership of the accessory thing." There can be no
pre-emptive right to buy even as a compromise, as this prerogative
belongs solely to the landowner. No compulsion can be legally forced
on him, contrary to what Spouses Benitez assert. Thus, the lower
courts were correct in rejecting Spouses Benitez’ offer to buy the
encroached land.
3 Tecnogas Philippines Manufacturing Corporation vs Court of
Appeals(Former Special Seventeenth Division) and Eduardo Uy
Facts:
❖ Tecnogas is a corporation duly organized and existing under and by
virtue of the PH laws is the registered owner of a parcel of land
situated in Barrio San Dionisio, Parañaque known as Lot
4331-A(should be 4531-A_ of Lot 4531 of the Cadastral Survey of
Pque; said land was purchase by them from Pariz Industries, Inc. in
1970 together with all the buildings and improvements including the
wall exisiting thereon.
❖ Eduardo Uy is the he registered owner of a parcel of land known as
Lot No. 4531-B of Lot 4531 of the Cadastral Survey of Pque; said
land which adjoins Tecnogas's land was purchased by Uy from a
certain Enrile Antonio also in 1970; that in 1971, Uy purchased
another lot also adjoining Tecnogas's land from a certain Miguel
Rodriguez and the same was registered in his name.
❖ The portions of the buildings and wall bought by Tecnogas together
with the land from Pariz are occupying a portion of Uy's adjoining
land. Upon learning of the encroachment or occupation by its
buildings and wall of a portion of Uy's land, Tecnogas offered to
buy from Uy that particular portion of Uy's land occupied by
portions of its buildings and wall with an area of 770 square
meters, more or less, but Uy, however, refused the offer.
❖ In 1973, the parties entered into a private agreement before a
certain Col. Rosales in Malacañang, wherein Tecnogas agreed to
demolish the wall at the back portion of its land thus giving to Uy
possession of a portion of his land previously enclosed by
Tecnogas's wall; Uy later filed a complaint before the office of
Municipal Engineer of Pque, as well as before the Office of the
Provincial Fiscal of Rizal against Tecnogas in connection with the
encroachment or occupation by Tecnogas's buildings and walls of a
portion of its land but said complaint did not prosper; Uy dug or
caused to be dug a canal along Tecnogas's wall, a portion of which
collapsed in June, 1980, and led to the filing by Tecnogas of the
supplemental complaint in the above-entitled case and a separate
criminal complaint for malicious mischief against Uy and his wife
which ultimately resulted into the conviction in court of Uy's wife for
the crime of malicious mischief; that while trial of the case was in
progress, Tecnogas filed in Court a formal proposal for settlement of
the case but said proposal, however, was ignored by Uy."
❖ RTC ruled in favor of Tecnogas which was reversed by the CA.
Issue:
Whether or not petitioner is a builder in bad faith because it is
'presumed to know the metes and bounds of his property? NO
Fallo:
WHEREFORE, premises considered, the petition is hereby
GRANTED and the assailed Decision and the Amended Decision are
REVERSED and SET ASIDE. In accordance with the case of Depra vs.
Dumlao, this case is REMANDED to the Regional Trial Court of Pasay
City, Branch 117, for further proceedings consistent with Articles
448 and 546 of the Civil Code, (then listed down instructions for the
RTC)
Held:
❖ Ca Tao vs. Chico – held that 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.”
o Bad faith isn’t imputable to a registered owner of a land
when a part of his building encroaches upon a builder’s
land
❖ Possession of property in good faith is presumed. - There is no
question that when petitioner purchased the land from Pariz
Industries, the buildings and other structures were already in
existence. The record is not clear as to who actually built those
structures, but it may well be assumed that petitioner's
predecessor-in-interest, Pariz Industries, did so. Article 527 of the
Civil Code presumes good faith, and since no proof exists to show
that the encroachment over a narrow, needle-shaped portion of
private respondent's land was done in bad faith by the builder of the
encroaching structures, the latter should be presumed to have built
them in good faith. It is presumed that possession
continues to be enjoyed in the same character in which it was
acquired, until the contrary is proved. 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. Hence, such good faith,
by law passed on to Pariz's successor, petitioner in this case.
Further, "(w)here one derives title to property from another, the act,
declaration, or omission of the latter, while holding the title, in
relation to the property, is evidence against the former." And
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 unaware that he possesses the thing
improperly or wrongfully. The good faith ceases from the moment
defects in the title are made known to the possessor, by
extraneous evidence or by suit for recovery of the property by the
true owner.
❖ Ownership – right of accession of an immovable property the
builder in good faith can compel the landowner to exercise his
option under A448 which is applicable to a buyer in good faith.
- The builder in good faith under Article 448 of the Civil Code,
instead of being outrightly ejected from the land, can compel the
landowner to make a choice between the two options: (1) to
appropriate the building by paying the indemnity required by law, or
(2) sell the land to the builder. The landowner cannot refuse
to exercise either option and compel instead the owner of the
building to remove it from the land. The same benefit can be
invoked by petitioner who is not the builder of the offending
structures but possesses them in good faith as buyer. Petitioner
is deemed to have stepped into the shoes of the seller in regard to
all rights of ownership over the immovable sold, including the right to
compel the private respondent to exercise either of the two
options provided under Article 448 of the Civil Code.
❖ We hold that petitioner did not lose its rights under Article 448 of the
Civil Code on the basis merely of the fact that some years after
acquiring the property in good faith, it learned about — and aptly
recognized — the right of private respondent to a portion of the
land occupied by its building. The supervening awareness of the
encroachment by petitioner does not militate against its right to
claim the status of a builder in good faith. In fact, a judicious
reading of said Article 448 will readily show that the landowner's
exercise of his option can only take place after the builder shall
have come to know of 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 in regard to their property
rights.
4 MANOTOK REALTY, INC., petitioner, vs. THE HONORABLE
JOSE H. TECSON, Judge of the Court of First Instance of Manila
and NILO MADLANGAWA, respondents.
DOCTRINE: Under Art 448. the right to appropriate the works or
improvements or to oblige the one who built or planted to pay the
price of the land belongs to the owner of the land. The only right given
to the builder in good faith is the right to reimbursement for the
improvements; the builder cannot compel the owner of the land to sell
such land to the former.
FACTS:
● In a complaint filed by the Manotok Realty for recovery of
possession and damages against Nilo Madlangawa, the then
Court rendered judgment, declaring Nilo Madlangawa as a
builder or possessor in good faith; which upon appeal, was
affirmed by the CA. Manotok Realty elevated the case to SC
but was dismissed for lack of merit.
● Consequently, Manotok Realty filed with the trial court
presided by Judge Tecson, a motion for the approval of
petitioner’s exercise of option for the satisfaction of judgment on
the grounds that under Art 338 and 546, exercise of option
belongs to the owner of the property either to retain the
premises and pay for the improvements thereon or to sell said
premises to the builder in good faith
o Manotok Realty further alleges that since judgment of
the TC has become final, it is entitled to the execution of
the same and that since the house of Madlangawa was
gutted by fire, the execution would now involve
delivery of possession of the disputed area to Manotok
Realty.
o Judge Tecson DENIED the motion.
o After MR denied, the petitioner filed the present petition
for mandamus alleging that the respondent judge
committed grave abuse of discretion in denying his
motion to exercise option and for execution of
judgment on the same grounds initially raised
o Madlangawa filed his comment on the petition alleging
that the same has already become moot and academic
for two reasons: first, fire gutted not only the house of the
private respondent but the majority of the houses in
Tambunting Estate; and second, as a result of the said
fire, the then First Lady and Metro Manila Governor
Imelda R. Marcos has placed the disputed area under
her Zonal Improvement Project, allowing the victims of
the fire to put up new structures on the premises, so
that the willingness and readiness of the petitioner to
exercise the alleged option can no longer be exercised
since the subject-matter thereof has been extinguished
by the fire. Furthermore, the President of the
Philippines has already issued a Presidential Decree
for the expropriation of certain estates in Metro Manila
including the Tambunting Estate. Therefore, the
beneficient and humanitarian purpose of the Zonal
Improvement Project and the expropriation
proceeding would be defeated if petitioner is
allowed to exercise an option which would result in
the ejectment of the private respondent.
o On December 28, 1980, Presidential Decree (P.D.) No.
1669 was issued providing for the expropriation of the
Tambunting Estate
▪ PD was challenged in the Manotok v NHA and
was declared unconstitional.
ISSUE: WON the petitioner is entitled to delivery of possession of the
disputed area? YES
FALLO: WHEREFORE, IN VIEW OF THE FOREGOING, the petition
is GRANTED and the respondent judge is hereby ordered to
immediately issue a writ of execution ordering the private respondent to
vacate the disputed premises and deliver possession of the same to the
petitioner.
HELD:
● Judge Tecson cannot deny the issuance of a writ of execution
because Madlangawa was adjudged a builder in good faith or
on the ground of peculiar circumstances which supervened
after the institution of this case, because the option given by law
either to retain the premises and pay for the improvements
thereon or to sell the said premises to the builder in good faith
belongs to the owner of the property.
● Under Art 448. the right to appropriate the works or
improvements or to oblige the one who built or planted to pay
the price of the land belongs to the owner of the land. The only
right given to the builder in good faith is the right to
reimbursement for the improvements; the builder cannot
compel the owner of the land to sell such land to the former.
● To be deemed a builder in good faith, it is essential that
a person assert title to the land on which he builds and that he
be unaware that there exists in his title or mode of acquisition
any flaw which invalidates it. It is such a builder in good faith
who is given the right to retain the thing, even as against the real
owner, until he has been reimbursed in full not only for the
necessary expenses but also for the useful expenses.
● Madlangawa’s good faith ceased after the filing of the
complaint below by the petitioner
o The repairs and improvements introduced by him after
the complaint was filed cannot be considered to have
been built in good faith
Since the improvements have been gutted by fire, and therefore the
basis for Madlangawa’s right to retain the premises has already been
extinguished without the fault of Manotok Realty; there is no other
recourse for Madlangawa but to vacate the premises and deliver the
same to Manotok Realty
5 Sarmiento v. Agana | G.R No. 57288 | April 30, 1984
Doctrine: "The owner of the building erected in good faith on a land
owned by another, is entitled to retain possession of the land until he is
paid the value of his building under Article 453 (now Article 546).
Facts:
1. While Ernesto was still courting his wife, the latter’s mother had told
him the couple could build a residential house on Lot D of a
subdivision.
2. Ernesto did construct a house assuming that the wife’s mother was
the owner of the land and that, eventually, it would somehow be
transferred to the spouses.
3. However, it turned out that the land had been titled in the name of
Mr. and Mrs. Santos who, sold the same to Sarmiento for 15K.
4. Sarmiento asked Ernesto and wife to vacate.
5. Sarmiento filed an Ejectment Suit against them.
6. Sarmiento submitted the deed of sale of the land in her favor while
Ernesto testified that the then cost of the house would be from
30K-40K. This was not questioned by Sarmiento.
7. CFI decided under Art 448 of the CC:
a. Sarmiento was required within 60 days to exercise the option to
REIMBURSE Ernesto and wife of 40K for the value of the house, or
b. The option to allow them the purchase the Land for 25K.
8. Sarmiento did not exercise any of the two options within the
indicated period, and Ernesto was then allowed to deposit the sum of
25K with the Court as purchase prices for the Land. Hence petition.
Issue: WON Art 448 would apply to the case. - YES
Held: Petition for Certiorari is hereby ordered dismissed.
We agree that Ernesto and wife were builders in good faith in view of
the peculiar circumstances under which they had constructed the
residential house. As far as they knew, the land was owned by
Ernesto's mother-in-law who, having stated they could build on the
property, could reasonably be expected to later on give them the land.
The value of the Land, purchased for 15K on September 7, 1974,
could not have been very much more than that amount during the
following January when Ernesto and wife were asked to vacate.
However, Ernesto and wife have not questioned the 40K valuation
determined by the CFI
The valuation of the house which the only evidence presented was
the testimony of Ernesto that its worth at the time of the trial should be
from P30,000.00 to P40,000.00. The Municipal Court chose to assess
its value at P20,000.00, or below the minimum testified by Ernesto,
while the CFI chose the maximum of P40,000.00. In the latter case, it
cannot be said that the Court of First Instance had abused its
discretion.
The challenged decision of respondent Court, based on valuations of
25K for the Land and 40K for the House, cannot be viewed as not
supported by the evidence. The provision for the exercise by
petitioner Sarmiento of either the option to indemnify private
respondents in the amount of 40K, or the option to allow private
respondents to purchase the LAND at 25K, in our opinion, was a
correct decision.
6 FRANCISCO DEPRA v. AGUSTIN DUMLAO
Facts: Depra, is the owner of a parcel of land, Lot No. 685, 8,870
sqm, situated Iloilo. Dumlao, owns an adjoining lot, Lot No. 683, 231
sqm. When Dumlao constructed his house on his lot, the kitchen
thereof had encroached on an area of 34 sqm of Depra’s property.
After the encroachment was discovered in a relocation survey of
Depra’s lot, his mother, Beatriz Derla, after writing a demand letter
asking Dumlao to move back from his encroachment, filed an action for
Unlawful Detainer against Dumlao in the Municipal Court.
Municipal Court found that Dumlao was a builder in good faith
ordering a forced leas between the parties. But even then, Depra did
not accept payment of rentals so that Dumlao deposited such rentals
with the Municipal Court. Depra filed a Complaint for Quieting of Title
against Dumlao before the CFI involving the same 34 sqm. CFI ruled
Depra is entitled to possession of the 34 sqm. Depra claims that the
Decision of the Municipal Court was null and void ab initio because its
jurisdiction is limited to the sole issue of possession, whereas
decisions affecting lease, which is an encumbrance on real property,
may only be rendered by CFI.
Issue: Is Depra entitled to have the kitchen removed on his
encroached land? - NO.
Doctrine: 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 Article 546).
The owner of the land, upon the other hand, has the option, under
article 361 (now Article 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.
Held: CASE REMANDED TO RTC.
1. The Decision of the Municipal Court is null and void. The judgment in
a detainer case is effective in respect of possession only. The
Municipal Court overstepped its bounds when it imposed upon the
parties a situation of "forced lease", which like "forced co-ownership" is
not favored in law. Furthermore, a lease is an interest in real
property, jurisdiction over which belongs to CFI.
2. Conceded in the Stipulation of Facts between the parties is that
Dumlao was a builder in good faith. They have, thereby, chosen a
legal formula to resolve their dispute — 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. According to Article 448, Depra has
the option either to pay for the encroaching part of Dumlao’s kitchen, or
to sell the encroached 34 sqm 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, as he had manifested before the
Municipal Court. But that manifestation is not binding because it was
made in a void proceeding. However, the good faith of Dumlao is part
of the Stipulation of Facts, thus, it was an error for the CFI to have ruled
that Depra is "entitled to possession," without more, of the disputed
portion implying thereby that he is entitled to have the kitchen
removed. He is entitled to such removal only when, after having
chosen to sell his encroached land, Dumlao fails to pay for the same. In
this case, Dumlao had expressed his willingness to pay for the land, but
Depra refused to sell.
7 Eden Ballatan and Sps. Betty Martinez and Chong Chy Ling vs
Court of Appeals, Gonzalo Go, Winston Go, Li Ching Yao,
Araneta Instittute of Agriculture and Jose N. Quedding
Facts:
❖ The parties herein are owners of adjacent lots located at Block No.
3, Poinsettia Street, Araneta University Village, Malabon, Metro
Manila. Lot No. 24, 414 square meters in area, is registered in the
name of petitioners Eden Ballatan and spouses Betty Martinez and
Chong Chy Ling. Lots Nos. 25 and 26, with an area of 415 and 313
square meters respectively, are registered in the name of
respondent Gonzalo Go, Sr. On Lot No. 25, respondent Winston
Go, son of Gonzalo Go, Sr., constructed his house. Adjacent to Lot
No. 26 is Lot No. 27, 417 square meters in area, and is registered in
the name of respondent Li Ching Yao.
❖ In 1985, Ballatan constructed her house and during the
construction, she noticed that the concrete fence and side pathway
of the adjoining house of Winston Go encroached on the entire
length of the eastern side of her property. She was informed by the
contractor that the area of her lot was actually less that that
describe in the title. She then informed Go of this but he claimed that
his house, including its fence and pathway, were built w/in the
parameters of his father’s lot. The Go’s land was surveyed by
Engineer Jose Quedding, the authorized surveyor of the Araneta
Institute of Agriculture (AIA), the owner-developer of the
subdivision project.
❖ Ballatan called the attention of the AIA, so the latter authorized
another survey by Quedding.
❖ Quedding found that the lot area of Ballatan was less by a few
meters and that of Yao, which was 3 lots away, increased by 2
meters. Quedding declared that he made a verification survey of
Lots Nos. 25 and 26 of respondents Go in 1983 and allegedly
found the boundaries to have been in their proper position. He,
however, could not explain the reduction in Ballatan's area since he
was not present at the time respondents Go constructed their
boundary walls.
❖ Quedding made a third relocation survey upon request of the
parties. He found that Lot 24 lost approximately 25 square meters on
its eastern boundary, that Lot 25, although found to have
encroached on Lot 24, did not lose nor gain any area; that Lot 26
lost some three (3) square meters which, however, were gained by
Lot 27 on its western boundary. 7 In short, Lots Nos. 25, 26 and 27
moved westward to the eastern boundary of Lot No. 24.
❖ On the basis of this survey, Ballatan made a written demand on Go
to remove and dismantle their improvements on Lot 24, to which the
latter refused to. The parties met several times but did not
agree, so Ballatan brought the issue before the barangay but to no
avail. She then instituted a civil case against Go for recovery of
possession.
❖ RTC decided in favor of petitioners. The CA ordered Go to pay
Ballatan, a reasonable amount for that portion of the lot which they
encroached, the value to be fixed at the time of taking.
Issue:
WON good faith may be presumed in the instant case? YES
Fallo:
IN VIEW WHEREOF, the decision of respondent Court of Appeals is
modified as follows: (listed the modifications medj mahaba so di ko na
i-paste)
Held:
❖ Good faith is always presumed; burden of proof leis upon him
who alleges bad faith. – Respondent Li Ching Yao built his house
on his lot before any of the other parties did. He constructed his
house in 1982, respondents Go in 1983, and petitioners in 1985.
There is no evidence, much less, any allegation that respondent Li
Ching Yao was aware that when he built his house he knew that a
portion thereof encroached on respondents Go's adjoining land.
Good faith is always presumed, and upon him who alleges bad
faith on the part of a possessor rests the burden of proof. All the
parties are presumed to have acted in good faith. Their right must,
therefore, be determined in accordance with the appropriate
provisions of the Civil Code on property.
❖ 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 building, planting or sowing, after payment to the builder,
planter or sower of the necessary and useful expenses, and in the
proper case, expenses for pure luxury or mere pleasure. The
owner of the land may also oblige the builder, planter or sower to
purchase and pay the price of the land. If the owner chooses to sell
his land, the builder, planter or sower must purchase the land,
otherwise the owner may remove the improvements thereon. The
 builder, planter or sower, however, is not obliged to purchase the
land if its value is considerably more than the building, planting or
sowing. In such case, the builder, planter or sower must pay rent to
the owner of the land. If the parties cannot come to terms over the
conditions of the lease, the court must fix the terms thereof. The
right to choose between appropriating the improvement or selling the
land on which the improvement stands to the builder, planter or
sower, is given to the owner of the land.
❖ Rights of the owner of the land when improvement was built by
a mistaken belief on his land are in A448. – A448 of the Civil Code
has been applied to improvements or portions of
improvements built by mistaken belief on land belonging to the
adjoining owner. Petitioners, as owners of Lot No. 24, may choose
to purchase the improvement made by respondents Go on their
land, or sell to respondents Go the subject portion. If buying the
improvement is impractical as it may render the Go's house
useless, then petitioners may sell to respondents Go that portion of
Lot No. 24 on which their improvement stands. If the Go's are
unwilling or unable to buy the lot, then they must vacate the land and,
until they vacate, they must pay rent to petitioners. Petitioners,
however, cannot compel respondents Go to buy the land if its value
is considerably more than the portion of their house constructed
thereon. If the value of the land is much more than the Go's
improvement, then respondents Go must pay reasonable rent. If
they do not agree on the terms of the lease, then they may go to
court to fix the same.
❖ When the owner of the land elects to sell the land or buy the
improvement, the purchase price must be fixed at prevailing
market value at the time of payment. – In the event that that
petitioners elect to sell to respondents Go the subject portion of
their lot, the price must be fixed at the prevailing market value at the
time of payment. The Court of Appeals erred in fixing the price at the
time of taking, which is the time the improvements were built on the
land. The time of taking is determinative of just compensation
in expropriation proceedings. The instant case is not for
expropriation. It is not a taking by the state of private property for a
public purpose upon payment of just compensation. This is a case
of an owner who has been paying real estate taxes on his land but
has been deprived of the use of a portion of this land for years. It is
but fair and just to fix compensation at the time of
payment. Article 448 and the same conditions above stated also
apply to respondents Go as owners and possessors of their land and
respondent Li Ching Yao as builder of the improvement that
encroached on thirty-seven (37) square meters of respondents
Go's land.
8 FEDERICO GEMINIANO, MARIA GEMINIANO,
ERNESTO GEMINIANO, ASUNCION GEMINIANO, LARRY
GEMINIANO and MARLYN GEMINIANO, petitioners, vs.
COURT OF APPEALS, DOMINADOR NICOLAS, and MARY A.
NICOLAS, respondents. G.R. No. 120303 July 24, 1996
DOCTRINE: Article 448 in relation to Art 546, 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., the one who builds on land with the belief that he is the
owner thereof. It doesn’t 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.
FACTS:
● Lot No 3765 B-1 was originally owned by petitioners’ mother
Paulina Geminiano. On a 12 sqm portion of the lot if the
unfinished bungalow of Federico, Maria, Ernesto, Asunscion,
Larry and Marylyn
● November 1978, they sold the said bungalow to the
respondents Nicolas for Php 6,000. The Geminianos’ allegedly
promised the Nicolas that the said portion of the land would be
sold to them
● Subsequently, Paulina Geminiano executed a Contract of
Lease over a 126 sqm portion of the lot, including the portion
covering the house. The lease was executed in favor of the
respondents for P40/ month for 7 years
o Thereafter, the Nicolas introduced additional
improvements and registered the house IN THEIR
NAMES
o However, after the lease contract has expired, Paulina
Geminiano refused to accept the monthly rentals
 ● It was found out later that the lot was the subject of a suit and
was acquired by a certain Maria Lee in 1972, the ownership
was later transferred to herein petitioners.
o By virtue of this, the petitioners demanded that the
Nicolas vacate the premises and pay the rentals.
o Federico et al filed a complaint in the MTCC for
UNLAWFUL DETAINER and DAMAGES. MTCC ruled in
their favor. On appeal, RTC reversed the decision. CA
affirmed the decision of the RTC.
ISSUE: WON Dominador and Mary Nicolas has the right to recover the
value of the house and improvements? NO
FALLO: WHEREFORE, judgment is hereby rendered GRANTING the
instant petition, REVERSING and SETTING ASIDE the decision of
the Court of Appeals of 27 January 1995 in CA-G.R. SP No. 34337; and
REINSTATING the decision of Branch 3 of the Municipal Trial Court
in Cities of Dagupan City in Civil Case No. 9214 entitled "Federico
Geminiano, et al. vs. Dominador Nicolas, et al."
HELD:
● The court noted that as the Nicolas are mere lessess, they
knew that their occupation of the premises would continue only
for the life of the lease.
● Plainly then they cannot be considered as BUILDERS IN
GOOD FAITH
o Article 448 in relation to Art 546, 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., the one who builds on
land with the belief that he is the owner thereof. It
doesn’t 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.
● Re: alleged promise of the petitioners to sell the lot occupied by
the private respondents' house, the same was not
substantiated by convincing evidence. Neither the deed of sale
over the house nor the contract of lease contained an option in
favor of the respondent spouses to purchase the said lot. 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 covered by the provision of Article 448 of the
Civil Code. The latter cannot raise the mere expectancy or
ownership of the aforementioned lot because the alleged
promise to sell was not fulfilled nor its existence even proven
9 Sulo vs. Nayong Pilipino Foundation | G.R No. 170923 |
Doctrine: 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.
Facts:
1. Respondent Nayong Pilipino Foundation is the owner of a
parcel of land in Pasay City known as the Nayong Pilipino Complex
entered into a leasing agreement with Petitioner Sulo sa Nayon.
2. In the agreement, the lease is renewable for a period of 25
years under th same terms and conditions upon due notice in writing to
respondent of the intention to renew at least 6 months before its
expiration.
3. Petitioner sent a letter notifying the latter of their intention to
renew the contract. In the new agreement, petitioner was bound to
pay the monthly rental on a per square basis at the rate of P20/sqm.
The monthly rental amounted to 725K.
4. Petitioners defaulted in the payment of their monthly rental and
respondent repeatedly demanded petitioners to pay.
5. Respondent filed a complaint for unlawful detainer. It
amounted to 26Million for the arrears of the petitioners.
6. MeTC – Petitioner defaulted; RTC: Petitioners were builders in
good faith.
7. Respondent appealed to CA which reversed RTC
Issue: WON Art 448 would apply to the case. - NO
Held:
IN VIEW WHEREOF, petitioners' appeal is DENIED. The October 4,
2005 Decision of the Court of Appeals in CA-G.R. SP No. 74631 and its
December 22, 2005 Resolution are AFFIRMED. Costs against
petitioners.
1. 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.
2. 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.
3. His rights are governed by Article 1678 of the Civil Code the
lessor has the option of paying one-half of the value of the
improvements which the lessee made in good faith, which are suitable
for the use for which the lease is intended, and which have not altered
the form and substance of the land. On the other hand, the lessee
may remove the improvements should the lessor refuse to reimburse.
10 SPOUSES Concepcion & Estanislao DEL CAMPO v.
BERNARDA FERNANDEZ ABESIA
Facts: This case involves a parcel of land, Lot No. 1161 of the
Cadastral Survey of Cebu, with an area of 45 sqm, situated at the
corner of F. Flores and Cavan Streets, Cebu City. An action for
partition was filed by Del Campos in the CFI. Del Campos and Abesia
are co-owners pro indiviso of this lot in the proportion of 2/3 and 1/3
share each, respectively. The CFI-appointed commissioner conducted
a survey, prepared a sketch plan and submitted a report,
recommending that the property be divided into two lots: Lot 1161-A
with an area of 30 sqm for Del Campos and Lot No. 1161-B with an area
of 15 sqm for Abesia. On the sketch plan, the house of Abesia occupied
the portion with an area of 5 sqm of Lot 1161-A of Del Campos.
The parties manifested their conformity to the report and asked the
CFI to finally settle and adjudicate who among the parties should take
possession of the 5 sqm of the land in question.
CFI: “Del Campos cannot be obliged to pay for the value of the portion
of the Abesia’s house which has encroached 5 sqm of the land
allotted to them. Abesia cannot also be obliged to pay for the price of
the said 5 sqm. The rights of a builder in good faith under Article 448
does not apply to a case where one co-owner has built, planted or
sown on the land owned in common. Manresa agreeing with Sanchez
Roman, says that as a general rule this article is not applicable
because the matter should be governed more by the provisions on co-
ownership than on accession. Planiol and Ripert are also of the
opinion that this article is not applicable to a co-owner who constructs,
plants or sows on the community property, even if the land where the
construction, planting or sowing is made is later allotted to another
co-owner in the partition. The co-owner is not a third person under the
circumstances, and the situation is governed by the rules of
co-ownership.
CA has held that this article cannot be invoked by one co-owner
against another who builds, plants or sows upon their land, since the
latter does not do so on land not belonging to him. Abesia has no
other alternative except to remove and demolish part of their house that
has encroached 5 sqm of the land allotted to the Del Campos.
Lot 1161-A, 30sqm, is assigned to the Del Campos and Lot
1161-B, 15 sqm, to Abesia. Abesia is also ordered at her expense to
remove and demolish part of their house which has encroached
5 sqm from Lot 1161-A of the Del Campos.”
Issue: (a) Should the rights of a builder in good faith under Art. 448
apply to Abesia with respect to the part of her house occupying
a portion of the lot assigned to the Del Campos? - YES.
(b) Should Abesia be ordered to remove and demolish at her
expense, that part of the house which has encroached on the 5 sqm of
Del Campos’ lot? - NO.
Held: Here, since the co-ownership is terminated by the partition and
the house of Abesia occupies a portion of 5 sqm of the land of the Del
Campos, which Abesia obviously built in good faith, then the
provisions of Article 448 should apply. Thus, the Del Campos have
the right to appropriate said portion of the house of Abesia upon
payment of indemnity to Abesia as provided for in Article 546.
Otherwise, the Del Campos may oblige Abesia to pay the price of the
land occupied by her house. However, if the price asked for is
considerably much more than the value of the portion of the house of
Abesia built thereon, then the latter cannot be obliged to buy the land.
Abesia shall then pay the reasonable rent to the Del Campos upon
such terms and conditions that they may agree. In case of
disagreement, the trial court shall fix the terms. Of course, Abesia
may demolish or remove the said portion of her house, at her own
expense, if she does so decide.
11 Florencio Ignao vs. Hon. Intermediate Appellate Court, Juan
Ignao, substituted by his Legal Heirs, and Isidro Ignao [G.R. No.
72876. January 18, 1991]
Facts:
❖ Florencio Ignao and his uncles private respondents Juan Ignao and
Isidro Ignao were co-owners of a parcel of land with an area of
534sqm situated in Barrio Tabon, Municipality of Kawit Cavite. He
filed an action for partition, where the CFI allotted 133.5sqm or 2/8
thereof to private respondents Juan and Isidro, and giving the
remaining portion with a total area of 266.5sqm to Florencio.
However, no actual partition was ever effected.
❖ On July 17, 1978, Florencio instituted a complaint for recovery of
possession of real property against Juan and Isidro where he
alleged that the area occupied by the 2 houses built by his uncles
exceeded the 133.5sqm previously allotted in the earlier case.
❖ The lower court conducted an ocular inspection and they found that
the houses of Juan and Isidro actually encroached upon a portion of
the land belonging to Florencio. Upon agreement of the parties, the
trial court ordered a licensed geodetic engineer to conduct a survey
to determine the exact area occupied by the houses of private
respondents. The survey subsequently disclosed that the house
of Juan occupied 42sqm while that of Isidro occupied 59sqm of
Florencio's land or a total of 101sqm.
❖ The trial court ruled that although Juan and Isidro occupied a
portion, they should be considered builders in good faith. Florencio
then appealed to the IAC which affirmed the decision of the trial
court.
Issue: WON the provisions of A448 should apply to a builder in
good faith on a property held in common? YES
Fallo: WHEREFORE, the decision appealed from is hereby
MODIFIED as follows…
Held:
❖ 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.
❖ Spouses del Campo vs Abesia:
"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."
Notes:
❖ 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, 8
"an undivided estate is co-ownership by the heirs."
❖ As c o-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.
12 LUCIANO BRIONES and NELLY BRIONES, Petitioners, vs.
JOSE MACABAGDAL, FE D. MACABAGDAL and VERGON
REALTY INVESTMENTS CORPORATION,Respondents.
DOCTRINE:
1. Article 527 presumes good faith and since no proof exists to
show that the mistake was done by petitioners in bad faith, the
latter should be presumed to have built the house in good
faith. When a person builds in good faith on the land of
another, Art 448 governs.
2. The builder in good faith can compel the landowner to make a
choice between appropriating the building by paying the
proper indemnity or obliging the builder to pay the price of the
land. The choice belongs to the owner of the land. However,
even as the option lies with the landowner, the grant to him,
nevertheless, is preclusive.
FACTS:
● Macabagdal spouses purchased from Vergon Realty
Investments Corporation Lot No 2-R, a 325 sqm land
● Briones spouses are the owners of Lot No. 2-S, adjacent to
the land of the respondents
● After obtaining the necessary building permit and the approval
of Vergon, Briones constructed a house on Lot 2-R (which
they thought was 2-s)
● Macabagdal immediately demanded Briones to demolish the
house and vacate the property
● Macabagdal instituted an ACTION TO RECOVER
OWNERSHIP AND POSSESSION
● RTC: Macabagdal; petitioner’s house was undoubtedly built on
Lot 2-R
● CA: affirmed RTC; petitioners cannot use the defense of
allegedly being a PURCHASER IN GOOD FAITH for wrongful
occupation of land
ISSUE: WON CA was correct in affirming RTC decision ordering the
Briones to demolish their only house and vacate the lot and pay
damges?
FALLO: WHEREFORE, the Decision dated December 11, 2000 of
the Court of Appeals in CA-G.R. CV No. 48109 is AFFIRMED WITH
MODIFICATION. The award of moral damages in favor of
respondent-spouses Jose and Fe Macabagdal and the award of
compensatory damages and attorney’s fees to respondent Vergon
Realty Investments Corporation are DELETED. The case
is REMANDED to the Regional Trial Court of Makati City, Branch 135,
for further proceedings consistent with the proper application of
Articles 448, 546 and 548 of the Civil Code, as follows:
(GUYS DI KO NA LALAGAY KASI SOBRANG HABA NG RULING
HA HAHAHAHAHA)
HELD: Partly meritorious claim
● RTC erred in out rightly ordering petitioners to vacate the
subject property or to pay respondent spouses the prevailing
price of the land as compensation. Article 527 of the Civil
Code presumes good faith, and since no proof exists to show
that the mistake was done by petitioners in bad faith, the latter
should be presumed to have built the house in good faith (Art.
448)
● When a person builds in good faith on the land of another,
Article 448 of the Civil Code governs. Said article provides,
o ART. 448. 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.
● The builder in good faith can compel the landowner to make a
choice between appropriating the building by paying the
proper indemnity or obliging the builder to pay the price of the
land. 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. However,
even as the option lies with the landowner, the grant to him,
nevertheless, is preclusive. He must choose one
● Moreover, petitioners have the right to be indemnified for the
necessary and useful expenses they may have made on the
subject property.
13 Metropolitan Waterworks and Sewerage System vs. CA |
Doctrine: Article 449 of the Civil Code of the Philippines provides that
"he who builds, plants or sows in bad faith on the land of another,
loses what is built, planted or sown without right to indemnity."
Facts:
1. City of Dagupan filed a complaint against MWSS (formerly
NAWASA), for recovery of the ownership and possession of the
Dagupan Waterworks System.
2. MWSS interposed the defenses RA 1383 which vested upon its
ownership, possession and control of all waterworks systems
throughout the Philippines and as one of its counterclaims the
reimbursement of the expenses it had incurred for necessary and
useful improvements amounting to 255K.
3. TC found MWSS to be a possessor in bad faith hence not
entitled to reimbursement claimed by it.
4. MWSS appealed to the CA that the City of Dagupan should
have been held liable for the amortization of the balance of the laon
secured by MWSS for the improvement of the Dagupan Waterworks
System.
5. CA affirmed the judgment of TC stating that the useful
expenses were made in utter bad faith for they were instituted after the
complaint was filed.
6. Petitioner raises the sole issue WON it has the right to remove
all the useful improvements introduced by MWSS to the Dagupan
Waterworks System, notwithstanding the fact that MWSS was found to
be a possessor in bad faith.
7. Respondent argues that, as possessor in bad faith, it has
absolutely no right to the useful improvements
Issue: Does a possessor in bad faith have the right to remove useful
improvements? - NO
Held:
WHEREFORE, the decision of the appellate court is affirmed with
costs against petitioner.
1. As a builder in bad faith, NAWASA lost whatever useful
improvements it had made without right to indemnity.
2. Under Article 546 of said code, only a possessor in good faith
shall be refunded for useful expenses with the right of retention until
reimbursed; and under Article 547 thereof, only a possessor in good
faith may remove useful improvements if the can be done without
damage to the principal thing and if the person who recovers the
possession does not exercise the option of reimbursing the useful
expenses.
3. The right given a possessor in bad faith is to remove
improvements applies only to improvements for pure luxury or mere
pleasure, provided the thing suffers no injury thereby and the lawful
possessor does not prefer to retain them by paying the value they
have at the time he enters into possession.
14 REPUBLIC OF THE PHILIPPINES, represented by Romeo T.
Acosta (formerly Jose D. Malvas), Director of Forest Management
Bureau, Department of Environment and Natural Resources v.
RTC JUDGE NORMELITO J. BALLOCANAG and DANILO REYES
Facts: Reyes bought the subject 182,941 sqm land in Oriental
Mindoro from one Regina Castillo. Reyes introduced improvements
and planted the land with fruit trees: mangoes, Mandarin citrus, and
guyabanos. The land that he bought in good faith, unfortunately,
turned out that about 162,500 sqm of this land is part of the
timberland and, therefore, cannot be subject to any disposition or
acquisition, and is not registrable. Thus, OSG filed a Complaint for
“Cancellation of Title and/or Reversion.” SC ruled in favor of the
Republic.
Reyes then led a Motion to Remove Improvements Introduced on the
Property. He averred that: he occupied in good faith the land for 30
years; he had already spent millions of pesos in planting fruit-bearing
trees thereon; and he employed many workers. Reyes prayed that he
and/or his agents be given at least (1) year to remove his mango,
citrus and guyabano trees, and that they be allowed to stay in the
premises within that period to work on the cutting and removal of the
said trees. Republic opposed the motion, citing the principle of
accession under Article 440; and that there are no improvements to
speak of, because the land in question never ceased to be a property
of the Republic, even if Reyes claimed that he was a purchaser for
value and in good faith and was in possession for more than (30)
years. And that, assuming Reyes was initially a planter/sower in good
faith, Article 448 cannot be of absolute application since from the time
the reversion case was led by Reyes, he ceased to be a planter/sower
in good faith and had become a planter/sower in bad faith.
RTC ruled in favor of Reyes. CA affirmed.
Issue: Should the Motion to Remove Improvements filed by Reyes be
granted? - RESTRICTED.
Held: PETITION DENIED. In an action for reversion, it admits to
State ownership of the disputed land. The ownership over the
subject land reverted to the State by virtue of the RTC & CA decisions
and SC resolution. But these decisions simply ordered the
reversion of the property to the State, and did not consider the
improvements that Reyes had introduced on the property.
Correlatively, the courts in the reversion case overlooked the issue of
whether Reyes, over his improvements, is a builder or planter in good
faith. The issue is significant, because Articles 448 and 546 of the
Civil Code grant the builder or planter in good faith full reimbursement
of useful improvements and retention of the premises until
reimbursement is made. Reyes was a planter in good faith. Reyes
was of the belief that he was the owner of the land. To order Reyes to
simply surrender all of these fruit-bearing trees in favor of the State —
because the decision in the reversion case declaring that the land is
part of inalienable forest land and belongs to the State is already final
and immutable — would inequitably result in unjust enrichment of the
State at the expense of Reyes, a planter in good faith. Reyes is
entitled to the benefits of Articles 448 and 546. However, Reyes’
options are restricted by Article 547 (useful improvements
cannot be removed without damage to the principal thing)
because to allow Reyes to remove the fruit-bearing trees now
full-grown, even if he is legally entitled to do so, would be risking
substantial damage to the land. It would negate the policy
consideration underlying the Agro-Forestry Farm Lease Agreement —
to protect and preserve the biodiversity and the environment, and to
prevent any damage to the land.
15 Communities Cagayan, Inc., vs Spouses Arsenio (Deseased)
and Angeles Nanol and Anybody Claiming Rights under them
Facts:
❖ 1994, Arsenio and Angeles Nanol(Spuses)entered into a Contract to
Sell with Communities Cagayan, Inc. (petitioner) whereby the
latter agreed to sell to them a house and lot.
❖ They obtained a loan from Capitol Development Bank (CDB), using
the property as collateral. To facilitate the loan, a simulated sale
over the property was executed by petitioner in favor of
respondent-spouses. Accordingly, titles (TCT Nos. 105202 and
105203) were transferred in the names of respondent-spouses and
submitted to CDB for loan processing. The bank collapsed and
closed before it could release the loan. They then availed of
petitioner’s in-house financing.
❖ Sometime in 2000, Arsenio demolished the original house and
constructed a 3-story house; he later on died on July 2001, leaving
his wife Angeles to pay for the monthly amortizations.
❖ In 2003, petitioner sent the spouses a notarized Notice of
Delinquency and Cecellation of Contract to Sell due to the latter’s
failure to pay. They then filed before the MTC of Cagayan de oro, an
action for unlawful detainer. Angeles offered to pay but the
petitioner refused to, the case was leter w/drawn and consequently
dismissed because the judge found out that the titles were already
registered under the names of the spouses.
❖ In 2005, the petitioner then filed (RTC CDO) a Complaint for
Cancellation of Title, Recovery of Possession, Reconveyance and
 Damages. Angeles on the other hand averred htat the Deed
of
Absolute Sale was valid.
❖ Ther RTC declared the Deed of Absolute Sale void and that the
[respondents] and any person claiming rights under them are
directed to turn-over the possession of the house and lot to
[petitioner], Communities Cagayan, Inc., subject to the latter's
payment of their total monthly installments and the value of the
new house minus the cost of the original house.
❖ Petitioner seeks to delete from the dispositive portion the order
requiring petitioner to reimburse respondent-spouses the total
monthly installments they had paid and the value of the new house
minus the cost of the original house.
Issue:
WON petitioner is obliged to reimburse respondent -spouses the
value of the new house minus the cost of the original house? YES
Fallo:
WHEREFORE, the petition is hereby PARTIALLY GRANTED.
Communities Cagayan, Inc. is hereby ordered to RETURN the cash
surrender value of the payments made by respondent-spouses on the
properties, which is equivalent to 50% of the total payments made, in
accordance with Section 3 (b) of Republic Act No. 6552, otherwise
known as the Maceda Law.
The case is hereby REMANDED to the Regional Trial Court,
Cagayan de Oro City, Branch 18, for further proceedings consistent with
the proper application of Articles 448, 546 and 548 of the Civil Code…
Held:
❖ As a general rule, Article 448 on builders in good faith does not
apply where there is a contractual relation between the parties,
such as in the instant case. We went over the records of this case
and we note that the parties failed to attach a copy of the Contract to
Sell.
❖ Article 448 of the Civil Code applies when the builder believes that he
is the owner of the land or that by some title he has the right to build
thereon, or that, at least, he has a claim of title thereto.
Concededly, this is not present in the instant case. The subject
property is covered by a Contract to Sell hence ownership still
remains with petitioner being the seller. Nevertheless, there were
already instances where this Court applied Article 448 even if the
builders do not have a claim of title over the property.
❖ In fine, the Court applied Article 448 by construing good faith
beyond its limited definition. We find no reason not to apply the
Court's ruling in Spouses Macasaet v. Spouses Macasaet[The
Court thus ruled that as owners of the property, the parents have the
right to possession over it. However, they must reimburse their son
and his wife for the improvements they had introduced on the
property because they were considered builders in good faith even
if they knew for a fact that they did not own the property] in this
case. We thus hold that Article 448 is also applicable to the instant
case. First, good faith is presumed on the part of the
respondent-spouses. Second, petitioner failed to rebut this
presumption. Third, no evidence was presented to show that
petitioner opposed or objected to the improvements introduced by
the respondent-spouses. Consequently, we can validly presume
that petitioner consented to the improvements being constructed.
This presumption is bolstered by the fact that as the subdivision
developer, petitioner must have given the respondent-spouses
permits to commence and undertake the construction. Under
Article 453 of the Civil Code, "[i]t is understood that there is bad
faith on the part of the landowner whenever the act was done with
his knowledge and without opposition on his part."
❖ Two options under Article 448: (1) he may appropriate the
improvements for himself after reimbursing the buyer (the builder in
good faith) the necessary and useful expenses under Articles 546
and 548 of the Civil Code; or (2) he may sell the land to the buyer,
unless its value is considerably more than that of the
improvements, in which case, the buyer shall pay reasonable rent.
o We hold that the petitioner, as landowner, has two
options. It may appropriate the new house by
reimbursing respondent Angeles the current market
value thereof minus the cost of the old house. Under
this option, respondent Angeles would have "a right of
retention which negates the obligation to pay rent." 71
In the alternative, petitioner may sell the lots to
respondent Angeles at a price equivalent to the current
fair value thereof. However, if the value of the lots is
considerably more than the value of the improvement,
respondent Angeles cannot be compelled to purchase
the lots. She can only be obliged to pay petitioner
reasonable rent.