Bachrach Motor Co V.

Lacson Ledesma

FACTS:
*June 30, 1927: CFI favored Bachrach Motor Co., Inc (Bachrach)
against Mariano Lacson Ledesma EQUATORIAL REALTY V. MAYFAIR

*Ledesma mortgaged to the Philippine National Bank (PNB) Talisay-Silay
Milling Co., Inc shares
*September 29, 1928: PNB brought an action against Ledesma and his
wife Concepcion Diaz for the recovery of a mortgage credit
FACTS: Petitioner Carmelo and Bauermann Inc. leased its parcel of land
with 2-storey building to respondent Mayfair Theater Inc.
They entered a contract which provides that if the LESSOR should desire
to sell the leased premises, the LESSEE shall be given 30-days exclusive
option to purchase the same.

*January 2, 1929: PNB amended its complaint by including the Bachrach
Motor Co., Inc., as party defendant because they claim to have rights to
some of the subject matters of this complaint
*January 30, 1929: Bachrach field a gen. denial
Carmelo informed Mayfair that it will sell the property to
Equatorial. Mayfair made known its interest to buy the property but only to
the extent of the leased premises.
Notwithstanding Mayfair’s intention, Carmelo sold the property to
Equatorial.

*CFI: favored PNB ISSUE: WON the sale of the property to Equatorial is valid.

*December 20, 1929: Bachrach brought an action in the CFI against the
Talisay-Silay Milling Co., Inc., to recover P13,850 against the bonus or
dividend w/c, by virtue of the resolution of December 22, 1923, Central
Talisay-Silay Milling Co., Inc., had declared in favor of Ledesma as one of
the owners of the hacienda which had been mortgaged to the PNB to
secure the obligation of the Talisay-Silay Milling Co., Inc. in favor of said
bank
*CFI: favored Bachrach
HELD: The sale of the property should be rescinded because Mayfair has
the right of first refusal. Both Equatorial and Carmelo are in bad faith
because they knew of the stipulation in the contract regarding the right of
first refusal.
The stipulation is a not an option contract but a right of first refusal and as
such the requirement of a separate consideration for the option, has no
applicability in the instant case. The consideration is built in the reciprocal
obligation of the parties.

ISSUE: W/N shares of stock are personal property and therefore can be
subject to pledge or chattel mortgage
HELD: YES. AFIRMED
*Section 4 of the Chattel Mortgage Law, in so far as it provides that a
chattel mortgage shall not be valid against any person except the
mortgagor, his executors or administrators, unless the possession of the
property is delivered to and retained by the mortgagee or unless the
mortgage is recorded in the office of the register of deeds of the province
in which the mortgagor resides.
In reciprocal contract, the obligation or promise of each party is the
consideration for that of the other. (Promise to lease in return of the right
to first refusal)
With regard to the impossibility of performance, only Carmelo can be
blamed for not including the entire property in the right of first refusal.
Court held that Mayfair may not have the option to buy the property. Not
only the leased area but the entire property.

*Pledge of the 6,300 stock dividends is valid against

the Bachrach because the certificate was delivered to the creditor bank,
notwithstanding the fact that the contract does not appear in a public
instrument

*Certificates of stock or of stock dividends, under the Corporation Law, are

quasi negotiable instruments in the sense that they may be given in
pledge or mortgage to secure an obligation

*Certificates of stock, while not negotiable in the sense of the law

merchant, like bills and notes, are so framed and dealt with as to be
transferable, when property endorsed, by mere delivery, and as they
frequently convey, by estoppel against the corporation or against prior
holders, as good a title to the transferee as if they were negotiable, and
inasmuch as a large commercial use is made of such certificates as
collateral security, and it is to the public interest that such use should be
simplify and facilitated by placing them as nearly as possible on the plane
of commercial paper, they are often spoken of and treated as quasi
negotiable, that is as having some of the attributes and partaking of the
character of negotiable instruments, in passing from hand to hand,
especially where they are accompanied by an assignment and power of
attorney, executed in blank, to transfer them to anyone who may obtain
possession as holders, even though such assignment and power are
under seal.
DACLISON v. BAYTION
It cannot be considered as an improvement or accession.
FACTS: Baytion filed a complaint for Forcible Entry and Damages with
Prayer for Issuance of Preliminary Mandatory IInjunction with the MeTC of Civil Code provides:
Quexon city against Daclison. Baytion was co-owner and administrator of
a parcel of land he and his siblings inherited from his parents. This 1,500 Art. 445. Whatever is built, planted or sown on the land of
SqM land was covered by TCT No. 221507. On said land was a one- another and the improvements or repairs made thereon, belong
storey building divided into seven stalls. One of these stalls was leased to to the owner of the land, subject to the provisions of the
Leonida, whose lease expired sometime in May 2008. Daclison took following articles.
possession of the Leonida’s portion without prior knowledge and consent
of Baytion, and used it for his business of selling marble and other Improvements must be made, constructed, or introduced WITHIN OR ON
finishing materials. Upon learning of the unauthorized entry, Baytion THE PROPERTY
demanded that Daclison vacate the property.
BAYTION IS NOT THE OWNER OF THE CONTESTED PORTION; HE
Daclison contends that Baytion leased the subject portion in 1978 to DOES NOT HAVE A BETTER RIGHT TO POSSESSS THE SAME. He
Antonio dela Cruz for his business. 15 yrs later, a RIPRAP was erected at does not have any cause of action to eject Daclison.
the creek lying beside Baytion’s property, leaving a deep down-sloping
area, which Antonio filled until it was levelled with the leased portion. He
then paid for the right to possess the same. In 2000, Leonida took over his
business; she suffered a stroke in December 2007 and after her death,
Ernanie dela Cruz and Daclison took over the business in 2008. Daclison
took over the management of their business venture. Baytion demanded
that he vacate the premises. Baytion and Ernanie agreed that ernanie
would continue the lease, and as such, he issued a check in the amount of
P100,000 s payment for rental arrears. Baytion returned the check 2
weeks after and demanded that they vacate the property. Baytion also
promised not to bother them anymore if thy transferred to the filled-up,
plane-levelled property. As such, Daclison and ernanie vacated the leased
area and transferred to the area in question.
The MeTC dismissed the case(without prejudice) on the ground that
Baytion failed to include his siblings/co-owners as plaintiffs in the case.
On appeal to the RTC, RTC ruled that MeTC did not have jurisdiction as
the allegations in the complaint failed to constitute a case of forcible entry;
RTC did not dismiss the case but exercised its original jurisdiction. It held
that Baytion had a better right of possession over the property. Daclison
appealed to the CA.

CA ruled that MeTC had no jurisdiction to hear and decide the case in a
summary proceeding for forcible entry because Baytion failed to allege
that he was in prior physical possession of the property and that he was
deprived of his possession under Section 1, Rule 70 of the Revised Rules
of Court. It was of the view that the present action for forcible entry had
actually ripened into one for recovery of the right to possess or accion
publiciana. It also held that Baytion had a better right to possess as co-
owner of the said property.

Daclison contends that the filled-up portion is not an improvement on the

leased property; it is separate and distinct from the leased property.

Baytion contends that the disputed portion is outside of the property under
TCT 221507, it forms an integral part as it is an accretion, construction or
improvement on the property, and thus under the law, any accretion or
anything built thereon belongs to him and his co-owners.

ISSUE: Who between the parties has a better right over the contested
portion of the land co-owned by Baytion and the constructed riprap

HELD: Baytion's contention that he owns that portion by reason of

accretion is misplaced. Article 457 of the New Civil Code provides:

To the owners of lands adjoining the banks of rivers belongs

the accretion which they gradually receive from the effects of
the current of the waters.
In other words, the following requisites must concur in order
for an accretion to be considered, namely:

1.that the deposit be gradual and imperceptible;

2. that it be made through the effects of the current of the
water; and,
3.that the land where accretion takes place is adjacent to the
banks of rivers

Baytion does not have a better right over the contested portion; it is not an
accretion as the deposits were artificial and man-made
Land Bank of the Philippines v. Perez
Art. 445. Whatever is built, planted or sown on the land of another and the
improvements or repairs made thereon, belong to the owner of the land,
subject to the provisions of the following articles. (358)
FACTS: Petitioner Land Bank of the Philippines (LBP) is a government
financial institution and the official depository of the Philippines.
Respondents were officers of Asian Construction and Development
Corporation (ACDC), a corporation engaged in the construction business.
On several occasions, respondents executed in favor of Land Bank of the
Philippines (LBP) trust receipts to secure the purchase of construction
materials that they will need in their construction projects. When the trust
receipts matured, ACDC failed to return to LBP the proceeds of the
construction projects or the construction materials subject of the trust
receipts. After several demands went unheeded, LBP filed a complaint for
Estafa or violation of Art. 315, par. 1(b) of the RPC, in relation to PD 115,
against the respondent officers of ACDC.
Even if we consider the vague possibility that the materials, consisting of
cement, bolts and reinforcing steel bars, would be used for the
construction of a movable property, the ownership of these properties
would still pertain to the government and not remain with the bank as they
would be classified as property of the public domain, which is defined by
the Civil Code as:
In contrast with the present situation, it is fundamental in a trust receipt
transaction that the person who advanced payment for the merchandise
becomes the absolute owner of said merchandise and continues as owner
until he or she is paid in full, or if the goods had already been sold, the
proceeds should be turned over to him or to her.

ISSUE: WON the disputed transactions is a trust receipt or a loan?

HELD: TRUST RECEIPT – There are two obligations in a trust receipt

transaction. The first is covered by the provision that refers to money
under the obligation to deliver it (entregarla) to the owner of the
merchandise sold. The second is covered by the provision referring to
merchandise received under the obligation to return it (devolvera) to the
owner. Thus, under the Trust Receipts Law,] intent to defraud is presumed
when (1) the entrustee fails to turn over the proceeds of the sale of goods
covered by the trust receipt to the entruster; or (2) when the entrustee fails
to return the goods under trust, if they are not disposed of in accordance
with the terms of the trust receipts.
In all trust receipt transactions, both obligations on the part of the trustee
exist in the alternative the return of the proceeds of the sale or the return
or recovery of the goods, whether raw or processed. When both parties
enter into an agreement knowing that the return of the goods subject of
the trust receipt is not possible even without any fault on the part of the
trustee, it is not a trust receipt transaction penalized under Section 13 of
P.D. 115; the only obligation actually agreed upon by the parties would be
the return of the proceeds of the sale transaction. This transaction
becomes a mere loan, where the borrower is obligated to pay the bank the
amount spent for the purchase of the goods.
Article 1371 of the Civil Code provides that [i]n order to judge the intention
of the contracting parties, their contemporaneous and subsequent acts
shall be principally considered. Under this provision, we can examine the
contemporaneous actions of the parties rather than rely purely on the trust
receipts that they signed in order to understand the transaction through
their intent.
We note in this regard that at the onset of these transactions, LBP knew
that ACDC was in the construction business and that the materials that it
sought to buy under the letters of credit were to be used for the following
projects: the Metro Rail Transit Project and the Clark Centennial
Exposition Project. LBP had in fact authorized the delivery of the materials
on the construction sites for these projects, as seen in the letters of credit
it attached to its complaint. Clearly, they were aware of the fact that there
was no way they could recover the buildings or constructions for which the
materials subject of the alleged trust receipts had been used. Notably,
despite the allegations in the affidavit-complaint wherein LBP sought the
return of the construction materials, its demand letter dated May 4, 1999
sought the payment of the balance but failed to ask, as an alternative, for
the return of the construction materials or the buildings where these
materials had been used.
Ignacio vs Hilario
FACTS: Sometime during the 1940s in Pangasinan, a civil suit arose
between Damian Ignacio and Elias Hilario. Hilario was the owner of a parcel
of land. He later discovered that Ignacio built some buildings therein (a
granary and a house). After trial, Judge Antonio Felix of the Court of First
Instance of Pangasinan ruled that both were in good faith (Hilario was the
owner in good faith while Ignacio was the builder in good faith).
Judge Felix then spelled out the rights of the parties to wit:
a.) Ignacio can retain possession over the buildings he erected until after he
is paid by Hilario for the value of the buildings he erected;
b.) Hilario can choose to buy the said buildings or he can choose to sell
Ignacio his land since the value of his land was only P45.00 while the value
of the buildings erected was P2,000.00.
However, Hilario refused to avail of his options. Instead, he filed a motion in
court to have Ignacio be ejected and have them destroy the buildings he
erected. Judge Felipe Natividad (he replaced Judge Felix), granted Hilario’s
motion.
ISSUE: Whether or not Hilario, the owner in good faith, may eject a builder
in good faith without choosing either to appropriate the building for himself
after payment of its value or to sell his land to the builder in good faith.
HELD: No. The owner in good faith has to make a choice. He cannot
dispense the options under the law and then eject the builder in good faith.
This is because both are in good faith.
But when can the owner in good faith compel the builder in good faith
to remove the building he erected?
This is only available if after the owner in good faith chose to sell his land to
the builder in good faith and the latter fails to pay the value of the land within
the agree period. Only then can the owner in good faith compel the builder
in good faith to remove the building he erected.

The fact that LBP had knowingly authorized the delivery of construction
materials to a construction site of two government projects, as well as
unspecified construction sites, repudiates the idea that LBP intended to be
the owner of those construction materials. As a government financial
institution, LBP should have been aware that the materials were to be
used for the construction of an immovable property, as well as a property
of the public domain. As an immovable property, the ownership of
whatever was constructed with those materials would presumably belong
to the owner of the land, under Article 445 of the Civil Code.
Ignacio vs Intermediate Appellate Court
Facts: Florencio Ignao and his Uncles, Juan and Isidro Ignao, were co
owners of a parcel of land. Petitioner filed an action for partition the party.
On July 27, 1978, Floriencio filed a complaint to recover real property
against Juan and Isidro claiming that the houses the latter constructed were
in excess to their portion of the property according to the judicial partition.
The court ruled that even if the buses encroached upon the property of
Florencio, the respondents are building in good faith. Therefore, Article 448
of the Civil Code awards the petitioner two options (ie. appropriate the
portion of the house on his land, or sell the portion of the land to the
respondents). However, the court found that the first option would be near
worthless in the present case and ordered the sale of the land. The CA
affirmed.
Issue: Whether or not Article 448 of the Civil Code is applicable.
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. (361a)
Decision: The court ruled that Article 448 applies because it pertains to
builders in good faith. Although said article do not apply to co-owners of a
land over which a co-owner constructed a building, co-ownership was
already terminated by the partition of the land. Where it appears that the
house build by a co-owner encroaches upon the portion of another, he is a
builder in good faith and Article 448 applies. The decision of the court which
deprives the landowner the option to chose those provided by the said
provision is null and void as it contravenes the law.
FILIPINAS COLLEGES INC. vs. MARIA GARCIA TIMBANG, ET AL.
FACTS: This is an appeal taken from an order of the Court of First Instance
of Manila dated May 10, 1957 (a) declaring the Sheriff’s certificate of sale
covering a school building sold at public auction null and void unless within
15 days from notice of said order the successful bidders, defendants-
appellantsspouses Maria Garcia Timbang and Marcelino Timbang, shall
pay to, appellee Maria Gervacio Blas directly or through the Sheriff of Manila
the sum of P5,750.00 that the spouses Timbang had bid for the building at
the Sheriff's sale; (b) declaring the other appellee Filipinas Colleges, Inc.
owner of 24,500/3,285,934 undivided interest in Lot No. 2-a covered by
certificate of tile No 45970, on which the building sold in the auction sale is
situated; and© ordering the sale in public auction of the said undivided
interest of the Filipinas Colleges, Inc., in lot No. 2-a aforementioned to
satisfy the unpaid portion of the judgment in favor of appellee Blas and
against Filipinas Colleges, Inc. in the amount of P8,200.00 minus the sum
of P5,750.00mentioned in (a) above. The order appealed from is the result
of three motions filed in the court a quo in the course of the execution of a
final judgment of the Court of Appeals rendered in 2 cases appealed to it in
which the spouses Timbang, the Filipinas Colleges, Inc., and Maria
Gervacio Blaswere the parties. The Timbang spouses presented their
opposition to each and all of this motion. In assailing the order of the court
a quo directing the appellants to pay appellee Blas the amount of their bid
(P5,750.00) made at the public auction, appellants' counsel has presented
a novel, albeit ingenious, argument. They contend that since the builder in
good faith has failed to pay the price of the land after the owners thereof
exercised their option under Article 448 of the Civil Code, the builder has
lost his right and the appellants as owners of the land automatically became
the owners ipso facto.
ISSUE/S: 1. Whether or not the contention of the appellants is valid. If not,
what are the remedies left to the owner of the land if the builder fails to pay?
2.Whether or not the appellants, as owner of the land, may seek recovery
of the value of their land by a writ of execution; levy the house of the builder
and sell it in public auction.
HOLDING & RATIO DECIDENDI: NO, THE APPELLANTS CONTENTION
IS SUPERFLUOUS.
There is nothing in the language of these two articles, 448 and 546, which
would justify the conclusion of appellants that, upon the failure of the builder
to pay the value of the land, when such is demanded by the land-owner, the
latter becomes automatically the owner of the improvement under Article
445. Although it is true, it was declared therein that in the event of the failure
of the builder to pay the land after the owner thereof has chosen this
alternative, the builder’s right of retention provided in Article 546 is lost,
nevertheless there was nothing said that as a consequence thereof, the
builder loses entirely all rights over his own building. The remedy left to the
parties in such eventuality where the builder fails to pay the value of the
land, though the Code is silent on this Court, a builder in good faith not be
required to pay rentals. He has right to retain the land on which he has built
in good faith until he is reimbursed the expenses incurred by him.
Possibly he might be made to pay rental only when the owner of the land
chooses not to appropriate the improvement and requires the builder in
good faith to pay for the land but that the builder is unwilling or unable to
pay the land, and then they decide to leave things as they are and assume
the relation of lessor and lessee, and should they disagree as to the amount
of rental then they can go to the court to fix that amount.
This was ruled in the case of
Miranda vs. Fadullon, et al., 97 Phil.,801. A further remedy is indicated in
the case of Bernardo vs. Bataclan, supra, where this Court approved the
sale of the land and the improvement in a public auction applying the
proceeds thereof first to the payment of the value of the land and the excess,
if any, to be delivered to the owner of the house in payment thereof.
The second contention was without merit.
In the instant case, the Court of Appeals has already adjudged that appellee
Blas is entitled to the payment of the unpaid balance of the purchase price
of the school building. With respect to the order of the court declaring
appellee Filipinas Colleges, Inc. part owner of the land to the extent of the
value of its personal properties sold at public auction in favor of the
Timbang, this Court likewise finds the same as justified, for such amount
represents, in effect, a partial payment of the value of the land. Failure of
the Timbang spouses to pay to the Sheriff or to Manila Gervacio Blas said
sum of P5,750.00 within fifteen (15) days from notice of the final judgment,
an order of execution shall issue in favor of Maria Gervasio Blas to be levied
upon all properties of the Timbang spouses not exempt from execution for
the satisfaction of the said amount.
Manotok Realty, Inc. vs Hon. Jose Tecson
Facts: Manotok Realty, inc. filed a complaint against Nilo Madlangawa for
the recovery of possession of a parcel of land, but the trial court declared
the latter a building and possessor in good faith.
Petitioner then filed a case for the appropriation of the building as provided
in Article 448 and 546 of the Civil Code. It was argued that since the
judgment became final it is entitled to the execution of the judgment and
delivery of possession over the property. The CFI denied and held that
circumstances intervened, such as the construction of improvements, which
would make the action not legally proper. Appeal was then made to the
Supreme Court. In their comment, the respondent claim that the issue has
already become moot because fire has already gutted the buildings.
Issue: Whether or not the petitioner is entitled to the delivery of the
possession of the property in question.
Decision: The court ruled in the affirmative. When the judgment became
final, it became incumbent upon the court to issue the necessary writ of
execution. The landowner cannot be denied of his right to appropriate the
building because it is an option given to him by law.
Furthermore, the buildings/improvements introduced father the filing of the
complaint cannot be held to be made in good faith. Since the improvements
thereon has been gutted by fire, the basis of the respondent’s right to retain
the premises has already been extinguished. He therefore, has no other
choice but to deliver the property.
Bernardo v. Bataclan
Facts: By a contract of sale executed from Pastor Samonte and others
ownership of a parcel of land of about 90 hectares. To secure possession
of the land from the vendors the said plaintiff, on July 20, 1929, instituted a
civil case. The trial court found for the plaintiff in a decision which was
affirmed by this Supreme Court on appeal (G.R. No. 33017). When plaintiff
entered upon the premises, however, he found the defendant herein,
Catalino Bataclan, who appears to have been authorized by former owners,
as far back as 1922, to clear the land and make improvements thereon. As
Bataclan was not a party in the civil case, plaintiff, on June 11, 1931,
instituted against him a civil case. In this case, plaintiff was declared owner
but the defendant was held to be a possessor in good faith, entitled for
reimbursement in the total sum of P1,642, for work done and improvements
made.
The defendant states that he is a possessor in good faith and that the
amount of P2,212 to which he is entitled has not yet been paid to him.
Therefore, he says, he has a right to retain the land in accordance with the
provisions of article 453 of the Civil Code. In obedience to the decision of
this court in G.R. No. 37319, the plaintiff expressed his desire to require the
defendant to pay for the value of the land. The said defendant could have
become owner of both land and improvements and continued in possession
thereof. But he said he could not pay and the land was sold at public auction
to Toribio Teodoro. When he failed to pay for the land, the defendant herein
lost his right of retention.
Issue: Whether or not there is good faith.
Held: The judgment of the lower court is accordingly modified by eliminating
therefrom the reservation made in favor of the defendant-appellant to
recover from the plaintiff the sum of P2,212. In all the respects, the same is
affirmed, without pronouncement regarding costs. So ordered
The sale at public auction having been asked by the plaintiff himself (p. 22,
bill of exceptions) and the purchase price of P8,000 received by him from
Toribio Teodoro, we find no reason to justify a rapture of the situation thus
created between them, the defendant-appellant not being entitled, after all,
to recover from the plaintiff the sum of P2,212.
HEIRS OF DURANO SR VS UY
Facts: As far back as August 1970, a 128 hectare of land located in the
barrios of Dunga and Cahumayhumayan, Danao City. On December 27,
1973, the late Congressman Ramon Durano Sr. together with his son
Ramon Durano III, and the latter’s wide Elizabeth Hotchkins-Durano,
instituted an action for damages against spouses Angeles Sepulveda Uy
and Emigdio Beng Sing Uy, Spouses Faustino Alatan and Valeriana
Garro, Spouses Rufino Lavador and Aurelia Mata, Silvestre Ramos,
Hermogenes Tito, Teotimo Gonzales, Primitiva Garro, Julian Garro,
Ismael Garro, Bienvido Castro, Glicerio Alcala, Felemon Lavador,
Candelario Lumantao, Garino Quimbo, Justino Tito, Marcelino Gonzales,
Salvador Duyday, Venancia Repaso, Leodegracia Gonzales, Jose dela
Calzada, Restituta Gonzales, and Cosme Ramos before branch XVII of
the then Court of First Instance of Cebu, Danao City.. Herein respondents
are the possessors of the subject parcel of land which they are cultivating,
it was used to be owned by CEPCO who later sold the same to Durano &
Co. On September 15, 1990, Durano & Co sold the disputed property to
petitioner Ramon Durano III, who procured the registration of these lands
in his name under TCT no. T-103 and T-104. The different parts of the
entire land was bulldozed by the petitioner’s company resulting to the
destruction of plants and other products that were placed by the
respondents. Hence, a claim for damages was lodged against herein
petitioner. The respondents presented tax declaration covering the
different areas of the parcel of land that is titled in each of them as proof
that they are entitled for the said damages.
Issue: Whether or not the doctrine of piercing the veil of corporate entity
can be applied in order to make Durano & Co liable for damages.
Held: Yes. The court of appeals applied the well-recognized principle of
piercing the corporate veil, i.e. the law will regard the act of the corporation
as the ac of its individual stockholders, when it is shown that the
corporation was used merely as an alter ego by those persons in the
commission of fraud or other illegal acts.
That the test in determining the applicability of the doctrine of piercing the
veil of corporate fiction is as follows:
1.Control, not mere majority or complete stock control, but complete
domination, not only of finances but of policy and business practice in
respect to the transaction attacked so that the corporate entity as to this
transaction had at the time no separate mind, will or existence of its own.
2.Such control must, have been used by the defendant to commit fraud or
wrong, to perpetrate the violation of statutory or other positive legal duty,
on dishonest and unjust acts in contravention of plaintiff’s legal right; and
3.The aforesaid control and breach of duty must proximately cause the
injury or unjust loss complained of.
The absence of any one of these elements prevents the piercing the
corporate veil. In applying the instrumentality or alter ego doctrine, the
courts are concerned with reality not form, with how the corporation
operated and the individual defendant’s relationship to that operation.
Eden Ballatan and Sps. Betty Martinez and Chong Chy Ling v. CA
Facts: In 1985, Eden Ballatan constructed her house on Lot No. 24 in Araneta
University Village, Malabon. During the construction, she noticed that the
concrete fence & side pathway of the adjoining house of Winston Go encroached
upon the entire length of the eastern side of her property. Her building contractor
informed her that the area of her lot was actually less than that described in the
title.
Ballatan informed Go about the discrepancy and encroachment, but Go claimed
that his house (including its fence and pathway) were built within the parameters
of his father’s lot.
The owner-developer of the subdivision, Araneta Insitute of Agriculture (AIA)
authorized a survey of the land by Engr. Jose N. Quedding. Quedding found that
the lot area of Ballatan was less by a few meters & that of Li Ching Yao (3 lots
away), increased by 2 meters. He declared that he made a verification survey of
the lots belonging to Go in 1983, and found the boundaries to be in order.
However he could not explain the reduction in Ballatan’s area.
Engr. Quedding made another relocation survey upon request of the parties. He
found that Lot 24 lost approx.. 25sqm. on its eastern boundary; that Lot 25 did
not lose nor gain any area; that Lot 26 lost around 3 sqm which were however
gained by Lot 27.
On the basis of this survey, Ballatan made a written demand on Go to remove
& dismantle their improvements on Lot No. 24. Go refused, thus Ballatan brought
the issue before the barangay. Go did not appear.
Ballatan filed a case for recovery of possession before the RTC of Malabon. The
Go’s filed an answer with third-party complaint, impleading Li Ching Yao, AIA &
Engr. Quedding.
The RTC decided in favor of Ballatan, ordering Go to vacate Lot No. 24 and
demolish their improvements and to pay Ballatan actual damages. It also
dismissed the third-party complaint against AIA, Quedding & Li Ching Yao.
On appeal, the CA modified the decision of the RTC. It ordered Li Ching Yao &
Engr. Quedding to pay Ballatan; and Li Ching Yao to pay Go, a reasonable
amount for that portion of the lot which they encroached – the value to be fixed
at the time of taking.
Issues: 1. Is the award of damages proper, despite Go’s failure to specify the
amount prayer for & failure to pay the corresponding additional filing fees
thereon? 2. Given the fact of encroachment on Ballatan’s property, what are her
rights?
Ruling: 1.YES, the award of damages is proper.
The third-party complaint in the instant case arose from the complaint of accion
publiciana of Ballatan against Go, which is a real action. In real actions, the
docket & filing fees are based on the value of property & the amount of damages
claimed.
Where the fees prescribed for the real action have been paid, but the fees of
certain related damages are not, the court, although having jurisdiction over the
real action, may not have acquired jurisdiction over the accompanying claim for
damages. Accordingly, the court may expunge those claims for damages, or
allow (on motion) a reasonable time for amendment of the complaint so as to
allege the precise amount of damages & accept payment of the requisite legal
fees.
In the instant case, the third-party complaint sought the same remedy as the
principal complaint, but added a prayer for attorney’s fees & costs without
specifying their amounts. The additional filing fee on this claim is deemed to
constitute a lien on the judgment award.
2.The erroneous survey by Engr. Quedding triggered the discrepancies. It was
upon said erroneous survey that Go relied upon in constructing his house on
his father’s land. Otherwise stated, Go had no knowledge that they encroached
on Ballatan’s lot. They are deemed builders in good faith.
Li Ching Yao built his house on his lot before any of the other parties did. There
is no evidence, much less, any allegation that Li Ching Yao was aware that when
he built his house he knew that a portion thereof encroached on Go’s adjoining
land. Good faith is always presumed, & upon him who alleges bad faith on the
part of a possessor rests the burden of proof.
Thus, Ballatan as owner of Lot No. 24, may choose to purchase the
improvement made by Go on their land, or sell to Go the subject portion.
If buying the improvement is impractical as it may render Go’s house useless,
then Ballatan may sell to 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 Ballatan.
In the event that Ballatan elects to sell to Go the subject portion of their lot, the
price must be fixed at the prevailaing market value at the time of payment. The
time of taking is determinative of just compensation in expropriation
proceedings; clearly the instant case is not one for expropriation.
Ballatan was ordered to decide within 30 days whether to buy the portion of Go’s
improvement on Lot 24, or to sell to Go the portion of their land on which the
improvement stands. Engr. Quedding was ordered to pay attorney’s fees of
P5,000 to Go.
Fuentes vs. Roca
FACTS: Sabina Tarroza owned a land in Canelar,Zamboanga City and
she sold it to her son, Tarciano T. Roca (Tarciano) under a deed of
absolute sale. Six years later in 1988, Tarciano offered to sell the lot to
petitioners Manuel and Leticia Fuentes (the Fuentes spouses). They met
in the office of Atty. Romulo D. Plagata whom they asked to prepare the
documents of sale and signed an agreement to sell that Atty. Plagata
prepared. It expressly stated that the sale was to take effect in six months.
Within six months, Tarciano was to clear the lot of structures and
occupants and secure the consent of his estranged wife, Rosario Gabriel
Roca (Rosario), to the sale.
Upon Tarciano’s compliance with these conditions, the Fuentes spouses
were to take possession of the lot and pay him an additional pay besides
the downpayment, depending on whether or not he succeeded in
demolishing the house standing on it. If Tarciano was unable to comply with
these conditions, the Fuentes spouses would become owners of the lot
without any further formality and payment.
The parties left their signed agreement with Atty. Plagata who then worked
on the other requirements of the sale. According to the lawyer, he went to
see Rosario in one of his trips to Manila and had her sign an affidavit of
consent. After 6 months, a new title was issued in the name of the spouses
who immediately constructed a building on the lot. Thereafter Tarciano
passed away, followed by his wife Rosario who died nine months
afterwards.
Eight years later in 1997, the children of Tarciano and Rosario, namely,
respondents(collectively, the Rocas), filed an action for annulment of sale
and re-conveyance of the land against the Fuentes spouses before the
RTC.
The Rocas claimed that the sale to the spouses was void since Tarciano’s
wife, Rosario, did not give her consent to it. Her signature on the affidavit of
consent had been forged. They thus prayed that the property be reconveyed
to them upon reimbursement of the price that the Fuentes spouses paid
Tarciano.
The spouses denied the Rocas’ allegations. They presented Atty. Plagata
who testified that he personally saw Rosario sign the affidavit at her
residence. He admitted, however,that he notarized the document in
Zamboanga City four months later. All the same, the Fuentes spouses
pointed out that the claim of forgery was personal to Rosario and she alone
could invoke it. Besides, the four-year prescriptive period for nullifying the
sale on ground of fraud had already lapsed.
ISSUES: 1. Whether Rosario’s signature on the document of consent to
her husband Tarciano’s sale of their conjugal land to the Fuentes spouses
was forged? 2. Whether the Rocas’ action for the declaration of nullity of
that sale to the spouses already prescribed? 3. Whether or not only
Rosario, the wife whose consent was not had, could bring the action to
annul that sale?
HELD: 1. It was forged 2. It did not prescribe 3. The heirs of Rosario may
bring an action to annul the sale.
RATIO: 1. The key issue in this case is whether or not Rosario’s signature
on the document of consent had been forged. For, if the signature were
genuine, the fact that she gave her consent to her husband’s sale of
the conjugal land would render the other issues merely academic. The SC
agreed with the CA that the signature was forged.
While a defective notarization will merely strip the document of its public
character and reduce it to a private instrument, that falsified jurat, taken
together with the marks of forgery in the signature, dooms such document
as proof of Rosario’s consent to the sale of the land. That the Fuentes
spouses honestly relied on the notarized affidavit as proof of Rosario’s
consent does not matter. The sale is still void without an authentic consent.
2. Contrary to the ruling of the Court of Appeals, the law that applies to this
case is the Family Code, not the Civil Code. Although Tarciano and Rosario
got married in 1950, Tarciano sold the conjugal property to the Fuentes
spouses on January 11, 1989, a few months after the Family Code took
effect on August 3, 1988.
When Tarciano married Rosario, the Civil Code put in place the system
of conjugalpartnership of gains on their property relations. While
its Article 165 made Tarciano the sole administrator of
the conjugal partnership, Article 166 prohibited him from selling commonly
owned real property without his wife’s consent. Still, if he sold the same
without his wife’s consent, the sale is merely voidable. Article 173 gave
Rosario the right to have the sale annulled during the marriage within ten
years from the date of the sale. Failing in that, she or her heirs may demand,
after dissolution of the marriage, only the value of the property that Tarciano
fraudulently sold.
But, as already stated, the Family Code took effect on August 3, 1988. Its
Chapter 4 on Conjugal Partnership of Gains expressly superseded Title
VI, Book I of the CivilCode on Property Relations Between Husband and
Wife. Further, the Family Code provisions were also made to apply to
already existing conjugal partnerships without prejudice to vested rights.
Art. 105. x x x The provisions of this Chapter shall also apply
to conjugalpartnerships of gains already established between spouses
before the effectivity of this Code, without prejudice to vested rights
already acquired in accordance with the Civil Code or other laws, as
provided in Article 256.
(n)
In contrast to Article 173 of the Civil Code, Article 124 of the Family Code
does not provide a period within which the wife who gave no consent may
assail her husband’s sale of the real property. It simply provides that without
the other spouse’s written consent or a court order allowing the sale, the
same would be void.
Under the provisions of the Civil Code governing contracts, a void or
inexistent contract has no force and effect from the very beginning. And this
rule applies to contracts that are declared void by positive provision of law,
as in the case of a sale of conjugal property without the other spouse’s
written consent. But, although a void contract has no legal effects even if no
action is taken to set it aside, when any of its terms have been performed,
an action to declare its inexistence is necessary to allow restitution of what
has been given under it. This action, according to Article1410 of
the Civil Code does not prescribe.
Here, the Rocas filed an action against the Fuentes spouses in 1997 for
annulment of sale and re-conveyance of the real property that Tarciano sold
without their mother’s (his wife’s) written consent. The passage of time did
not erode the right to bring such an action.
3. As stated above, that sale was void from the beginning. Consequently,
the land remained the property of Tarciano and Rosario despite that sale.
When the two died, they passed on the ownership of the property to their
heirs.
COMMUNITIES CAGAYAN INC. VS SPOUSES NANOL
Facts: Sometime in 1994, respondent-spouses Arsenio and Angeles Nanol
entered into contract to Sell with petitioner Communities Cagayan, Inc.,
whereby the former agreed to sell to respondent-spouses a house and Lots
17 and 19″ locate Block 16, Camella Homes Subdivision, Cagayan de
Oro City, for the price of P 368,000.00. Respondent-spouses, however,
did not avail of petitioner’s inhouse financing due to its high interest
rates. Instead, they obtained a loan from Capitol Development Bank, a
sister company of petitioner, 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 were transferred in the
names of respondent-spouses under Transfer Certificates of Title (TCT)
Nos. 105202 and 105203, and submitted to Capitol Development Bank
for loan processing. Unfortunately, the bank collapsed and closed before
it could release the loan. Thus, on November 30, 1997, respondent-
spouses entered into another Contract to Sell with petitioner over the
same property for the same price of P 368,000.00. This time, respondent-
spouses availed of petitioner’s in-house financing thus, undertaking to
pay the loan over four years, from 1997 to 2001. Sometime in 2000,
respondent Arsenio demolished the original house and constructed a
three-story house allegedly valued at P 3.5 million, more or less.18 In
July 2001, respondent Arsenio died, leaving his wife, herein respondent
Angeles, to pay for the monthly amortizations.
Sarmiento v. Agana, the builders were found to be in good faith despite
their reliance on the consent of another, whom they had mistakenly
believed to be the owner of the land.
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 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, “it 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.”

Issue: Whether or not respondents are considered builders in good faith

entitled to indemnification for necessary and useful expenses and/or to buy
the land under the provisions of the New Civil Code.

Held: Yes. 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.
As such, we are constrained to apply Article 448 of the Civil Code, which
provides viz:

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.

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. Thus:

This Court has ruled that this provision covers only cases in which
the builders, sowers or planters believe themselves to be owners of the
land or, at least, to have a claim of title thereto. It does not apply when
the interest is merely that of a holder, such as a mere tenant, agent or
usufructuary. From these pronouncements, good faith is identified by the
belief that the land is owned; or that – by some title – one has the
right to build, plant, or sow thereon.

However, in some special cases, this Court has used Article 448 by
recognizing good faith beyond this limited definition. Thus, in Del Campo
v. Abesia, this provision was applied to one whose house – despite
having been built at the time he was still co-owner – overlapped with
the land of another. This article was also applied to cases wherein a
builder had constructed improvements with the consent of the owner.
The Court ruled that the law deemed the builder to be in good faith. In
Angeles v. Pascual the builder. Consequently, the land being the principal and the building the
accessory, preference is given to Pascual as the owner of the land to make
Under appeal is the decision promulgated on January 31, involved a dispute the choice as between appropriating the building or obliging Angeles as the
about the true location of the respective lots of the parties, with the builder to pay the value of the land. Contrary to the insistence of Angeles,
respondents (Pascual) claiming that the petitioner (Angeles) had therefore, no inconsistency exists between the finding of good faith in his
encroached on their lot but the latter denying the encroachment. favor and the grant of the reliefs set forth in Article 448 of the Civil Code.
The Petition is Dismissed.
Facts: Neighbors Regidor Pascual and Pedro Angeles were registered
owners of adjacent parcels of land located in Cabanatuan City. Each of Information on this sentence is trivial but can be cited in recitation for
them built a house on his respective lot, believing all the while that his descriptive purposes. Ibid. iii Simply put, “Whether or not Angeles is a
respective lot was properly delineated. It was not until Metropolitan Bank builder in good faith.” iv Fajardo went on site to survey the property while
and Trust Company (Metrobank), as the highest bidder in the foreclosure Fernandez simply looked at the TCT and sketch work of the property.
sale of an adjacent, caused the relocation survey of foreclosed lot that the
geodetic engineer discovered that Pascual’s house had encroached on said
foreclosed lot. As a consequence, Metrobank successfully ejected Pascual.
In turn, Pascual caused the relocation survey of his own Lot 4 and
discovered that Angeles’ house in turn encroached on his lot. Of i the 318
square meters comprising Lot 4, Angeles occupied 252 square meters,
leaving Pascual with only about 66 square meters. Pascual demanded
rentals for the use of the encroached area from Angeles, or the removal of
Angeles’ house. Angeles refused the demand. Accordingly, Pascual sued
Angeles for recovery of possession and damages in the Regional Trial Court
(RTC) in Cabanatuan City.

In the course of the trial, Pascual presented Clarito Fajardo, the geodetic
engineer who had conducted the relocation survey and had made the
relocation plan of Pascual’s lot, Fajardo testified that Angeles’ house was
erected on said lot. On the other hand, Angeles presented Juan Fernandez,
the geodetic engineer who had prepared the sketch plan relied upon by
Angeles to support his claim that there had been no encroachment.
However, Fernandez explained that he had performed only a “table work,”
that is, he did not actually go to the site but based the sketch plan on the
descriptions and bearings appearing on the TCTs of the lots in question and
recommended the conduct of a relocation survey. The RTC ruled that the
ownership of the lots is not the issue, rather what was disputed between
them was the location of their respective lots; that Pascual proved Angeles’
encroachment on his lot by preponderant evidence; and that Pascual was
entitled to relief. Thus the RTC ordered the Angeles or persons claiming
right through him to cause the removal of his house insofar as the same
occupies

the portion of Pascual’s lot, of an area of 252 square meters . Angeles then
appealed the case to the CA. On January 31, 2002, the CA affirmed the
RTC, and held that as between the findings of the geodetic engineer
(Fajardo) who had actually gone to the site and those of the other
(Fernandez) who had based his findings on the TCTs of the owners of the
three lots; those of the former should prevail. However, the modified the
ruling of the RTC stating that Angels is a builder in good faith as provided
for in Article 448 of the Civil Code. Thus the CA ordered Angeles to vacate,
appropriate, or pay rent for the occupied portion of Pascual’s property.
Moreover, Angeles may opt to sell his property instead. Angeles sought for
reconsideration but CA denied the motion. Hence this case of certiorari for
certiorari under rule 45.

Issues: 1. Whether or not the CA was correct in agreeing with the RTC with
respect to the testimony of Fajardo over the testimony of Fernandez.
2. Whether or not the decision of the CA with respect to the options given
was contrary to its finding of good faith.

Held: With regards the first issue, the Supreme Court that the credence
given by the RTC to the testimony and relocation plan of Fajardo was
conclusive upon this Court especially by virtue of the affirmance by the CA
of the RTC. Resultantly, the fact of Angeles’ iv encroachment on Pascual’s
Lot was proved by preponderant evidence . Thus it is unassailable that
Angeles’ house straddled the lot of Pascual. On the second issue, the
Supreme Court affirmed the findings of the RTC and the CA that Angels is
a builder in good faith which can easily be drawn from the fact that Angeles
insisted that he built his house entirely on his own lot. Good faith consists in
the belief of the builder that the land he is building on is his and in his
ignorance of a defect or flaw in his title. Furthermore, the Court affirmed the
application of the CA of the provisions of Article 448 of the Civil Code which
spells out the rights and obligations of the owner of the land as well as of
Sulo sa Nayon v Nayong Piipino Foundation
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.
FACTS: On June 1975, the respondent leased a portion of the Nayong
Pilipino Complex to Sulo sa Nayon Inc. for the construction and operation
of a hotel building (Philippine Village Hotel Inc/ PVHI). The lease was for an
initial period of 21 years, renewable for a period of 25 years. On March 7,
1995, petitioners renewed the contract until 2021.
Parties executed a Voluntary Addendum to the Lease Agreement which
bound PVHI to pay the monthly rental of P20 per sqm subject to an interest
rate of 20% at the end of every 3 year period. At the time of the renewal of
the lease contract, the monthly rental amounted to P725,780
On Jan 2001, petitioners defaulted in the payment of the monthly rental.
Respondent repeatedly demanded petitioners to pay arrears and vacate the
premises. Sept 2001, respondent filed a complaint for unlawful detainer in
the MeTC of Pasay. The arrears of the petitioners or computed in the
amount of P26 Million as of July 31, 2001. MeTC ruled in favor of the
respondent ordering the petitioners to vacate the premises and to pay
rentals, damages, and Atty.’s fees.
Petitioners appealed to the RTC which still ruled in favor of respondents,
however with a few modifications on the MeTC decision:
1.Considering that the petitioner’s improvements on that land are
permanent and of substantial value, these immensely engender the
application of Art.448 of the CC
2.The only remaining and most crucial issue to be resolved is whether or
not the appellants (petitioners) have acted in good faith in order for A.448 in
relation to 546 may apply.
3.Art. 448 in relation to Art.546 – plaintiff appellee has the sole option or
choice, either to appropriate the building, upon payment of proper indemnity
or compel the appellants to purchase the land whereon the building was
erected. Until such time that plaintiff-appellee has elected an option or
choice, it has no right of removal or demolition against appellants unless
after having selected a compulsory sale, appellants fail to pay for the land
4.The parties may agree to adjust their rights in some other way as they
may mutually deem fit and proper.
Respondents appealed to CA which held that the RTC erroneously applied
the rules on accession (Art. 448 and 546) when it held that the petitioners
were builders in good faith and, thus, have the right to indemnity.
The introduction of valuable improvements on the leased premises does not
strip the petitioner of its right to avail of recourses under the law and the
lease contract itself in case of breach thereof. Neither does it deprive the
petitioner of its right under Art. 1678 to exercise its option to acquire the
improvements or to let the respondents remove the same.
ISSUE: Whether the rules on accession, as found in Articles 448 and 546
of the Civil Code, apply to the instant case.
HELD: No.
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.
Art. 546. Necessary expenses shall be refunded to every possessor; but
only the possessor in good faith may retain the thing until he has been
reimbursed therefor.
Useful expenses shall be refunded only to the possessor in good faith with
the same right of retention, the person who has defeated him in the
possession having the option of refunding the amount of the expenses or of
paying the increase in value which the thing may have acquired by reason
thereof.
The SC upholds the ruling of the CA. 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.
The court affirms 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, which reads:
Art. 1678. 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 one-half of the value of the improvements at that
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.
With regard to ornamental expenses, the lessee shall not be entitled to any
reimbursement, but he may remove the ornamental objects, provided no
damage is caused to the principal thing, and the lessor does not choose to
retain them by paying their value at the time the lease is extinguished.
Under Article 1678, 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.
Petitioners’ appeal is DENIED. Decision of the Court of Appeals and its
Resolution are AFFIRMED. Costs against petitioners.
DEP ED v TULIAO
Facts:
*Mariano Tuliao filed an action for recovery of possession and removal of
structure with damages against DepEd with the Mtc in Tuguegarao.
*He alleged that he was a registered owner of the subject of parcel of land
and that a portion of said property was allowed by his predecessor-in-
interest to be used by the Atulayan Elementary School as an access road
for the schoolchildren in going to and from the school..
*In March 200, upon discovering that a structure was being constructed on
the land, he demanded that DepEd cease and desist and vacate the
property. DepEd refused.
*Tuliao likewise demanded payment for reasonable rent but was also
ignored.
*Tuliao presented a certificate of title as well as tax declarations and real
property tax receipts for the years 2003-2005.
*Hence, the CA ruled that Tuliao has a better right of possession
ISSUE: W/N DepEd has the right to construct on the question land
HELD: No, the registered owner of the land is Tuliao. It must be noted that
DepEd’s contention that its possession of the land was open, continuous,
exclusive, adverse, notorious and in the concept of an owner for 32 years
is untenable. DepEds possession of a portion of the Tuliao’s land to be
used as a passageway for the students was merely tolerance on the part
of Tuliao.
Mere material possession of the land ws not adverse as against the owner
and is insufficient to vest tile unless such possession was accompanied by
the intent to possess as an owner.
At any rate, the MTC was fair when it stated that that DepEd could not
order the immediate removal of the structures and directed Tuliao to
exercise his option under Art 448.
Department of Education v Casibang
FACTS:
*In 1965, upon the request of the then Mayor Caronan, Juan Cepeda
(deceased) allowed the construction of a school on the western portion of
his 7,532-square meter lot.
*The said school is Solano North Central School managed by DepEd.
*Despite Cepeda’s death in 1983, respondents (as heirs of Cepeda)
continued to tolerate the possession of the property by the school.
*In 2000, respondents entered and occupied a portion of the lot. The
teachers found out and brought the matter to the attention of the barangay
captain. The school eventually demanded the respondents to vacate the
premises
*DepEd filed a complaint for forcible entry which was granted
*Respondents demanded either payment of rent or payment of purchase
price or for the petitioners to vacate the premises. DepEd refused
*Respondents filed for a recovery of possession and/or sum of money
ISSUE:
1.Whether or not respondents are barred by laches for failure to assert
their ownership in the parcel of land. – Not barred by laches
2.Whether respondents are entitled to the payment of rent/ payment of
purchase price or for appropriation of the school’s premises – Only
rent/purchase price as the case may be
RULING: A. No laches
Laches: failure or neglect for an unreasonable and unexplained length of
time to that which by exercising due diligence could have been done
earlier.
*The presumption becomes that the party has abandoned his right or has
declined to assert it
*Evidentiary in nature
*Proven by 1. Conduct of the defendant, 2. Delay in asserting plaintiff’s
rights, 3. Lack of knowledge on part of the defendant that plaintiff will
assert his rights and 4. Injury of the defendant in the event relief is
afforded.
In this case:
It is established that Respondents are the owners (DepEd failed to prove
its possession as ownership)
*DepEd’s proof: mere allegation that the land was bought for the school by
civic-minded residents
*Respondent’s proof: OCT (note: torrens title as best proof of ownership),
Tax Declarations, Technical Descriptions of the lot by the DENR,
Certification from MTC of Solana
*Therefore, as registered owners, the respondents have a right to eject
any person illegally occupying their property. Such right is imprescriptible.
The rule is that even if owners are aware and regardless of the length of
time of possession, lawful owners have a right to demand the return of the
property as long as possession was unauthorized or merely tolerated
Never barred by laches
B.DepEd is a builder in good faith and the owner of the land is entitled to
elect the option in accordance with Article 448
-Builder in good faith:
*a person who asserts title on the land he builds and that he be unaware
that there exists in his title any flaws which invalidates it
*Also made to include builders who constructed improvements on land
with the consent of the owner (such as in the instant case)
-Article 448 applies
*“Forced co-ownership”
*2 options for respondents as landowners
*Landowners have the right of choice because their right is older and
because by the principle of accession, they are also entitled to ownership
of the accessory
1.Appropriate + pay indemnity to the school – this is not feasible as it is
being used for school premises
2.Oblige DepEd to pay the price of the land or pay rent provided that
DepEd cannot be compelled to purchase the land if the value of the land is
more than the value of the building – only this option can be availed of
*The court, therefore, has to determine the value of the land and the
building to determine whether or not DepEd may be compelled to pay the
price of the land
Note: Value is fixed at the prevailing market value at the time the
landowner elected his choice. In this case, it is the present/ current market
value of the land.
DISPOSITION: Accordingly, this case is REMANDED to the court of origin
to determine the value of the subject property. If the value of the property
is less than the value of the buildings and improvements, the Department
of Education is ordered to pay such amount. If the value of the property is
greater than the value of the buildings and improvements, the DepEd is
ordered to pay reasonable rent in accordance with the agreement of the
parties. In case of disagreement, the trial court shall fix the amount of
reasonable rent.

Briones v. Macabagdal
FACTS: Spouses Macabagdal purchased from Vergon a lot located in
Vergonville Subdivision. Sometime in 1984, spouses Briones, after
obtaining the necessary building permit from Vergon, started constructing
on the same parcel of land. After learning of such, spouses Macabagdal
demanded sposes Briones to demolish the house and vacate the property.
Spouses Briones refused.
Spouses Macabagdal thus filed a case for recovery of ownership and
possession of said parcel of land. The RTC and CA ruled in favor of
spouses Macabagdal, and ordered spouses Briones to either vacate the
property or to pay spouses Macabagdal the prevailing price of the land.
ISSUE: Are spouses Briones builders in good faith, thus, must not bear
the damage alone?
HELD: Yes. Since there was no evidence to show that spouses Briones
were builders in bad faith, they must be considered builders in good faith.
Thus, the landowner is given the option to appropriate the building by
paying compensation or to oblige the builder to pay the price of the land.
Moreover, the builder in good faith is entitled to be reimbursed the
necessary and useful expenses they made of the subject land.
Thus, spouses Macabagdal cannot demand the removal of the building
unless he first exercises the option of appropriating such after payment to
spouses Briones of the proper compensation.
SPOUSES MACASAET vs SPOUSES MACASAET
Facts:
*Petitioners Ismael and Teresita Macasaet and Respondents Vicente and
Rosario Macasaet are first-degree relatives. Ismael is the son of
respondents and Teresita is his wife.
*On December 10, 1997, the parents filed with the MTC of Lipa an
ejectment suit against the children.
*Respondents alleged that they were the owners of 2 parcels of land,
situated at Banay-banay, Lipa City; that by way of a verbal lease
agreement, Ismael and Teresita occupied these lots in Mar. 1992 and
used them as their residence and the situs of their construction business;
and that despite repeated demands, petitioners failed to pay the agreed
rental of P500.
*Ismael and Teresita denied the existence of any verbal lease agreement.
They claimed that respondents had invited them to construct their
residence and business on the subject lots in order that they could all live
near one another, employ marivic, the sister of Ismael, and help in
resolving the problems of the family.
*They added that it was the policy of respondents to allot the land they
owned as an advance grant of inheritance in favor of their children.
*The MTCC ruled in favor of respondents and ordered petitioners to
vacate the premises. It opined that Ismael and Teresita had occupied the
lots, not by virtue of a verbal lease agreement, but by tolerance of Vicente
and Rosario.
*As their stay was merely tolerance, petitioners were necessarily bound by
an implied promise to vacate the lots upon demand.
*On appeal, the regional trial court updheld the findings fo the MTCC.
However, the RTC allowed the respondents to appropriate the building
and other improvements introduced by petitioners, after payment of the
indemnity provided for by Art. 448 in relation to Art. 546 and 548 of the
NCC.
*The CA sustained the finding of the two lower courts that Ismael and
Teresita had been occupying the subject lots only by the tolerance of
Vicente and Rosario. Citing Calubayan v. pascual, the CA further ruled
that petitioners’ status was analogous to that of a lessee or a tenant
whose term of lease had expired, but whose occupancy continued by
tolerance of the owner.
*Consequently, in ascertaining the right of the petitioners to be reimbursed
for the improvements they had introduced on respondents properties, the
appellate court applied the Civil Codes provisions on lease.
Issue: W.O.N. the courts should fix the duration of possession.
Held:
*That Ismael and Teresita had a right to occupy the lots is therefore clear,
the issue is the duration of possession. In the absence of a stipulation on
this point, Art. 1197 of the civil Code allows the courts to fix the duration or
the period.
*Article 1197. If the obligation does not fix a period, but from its nature and
the circumstances it can be inferred that a period was intended, the courts
may fix the duration thereof.
*The courts shall also fix the duration of the period when it depends upon
the will of the debtor.
*Article 1197, however, applies to a situation in which the parties intended
a period. Such qualification cannot be inferred from the facts of the
present case.
*The mere failure to fix the duration of their agreement does not
necessarily justify or authorize the courts to do so
*It can be safely concluded that the agreement subsisted as long as the
parents and the children mutually benefited from the arrangement.
*Effectively, there is a resolutory condition in such an agreement.
*Their possession which was originally lawful became unlawful when the
reason therefore – love and solidarity – ceased to exist between them.
Spouse Aquino v. Spouses Aguilar
Doctrine: By law, one is considered in good faith if he is not aware that
there exists in his title or mode of acquisition any flaw which invalidates it.
The presence of evidence that petitioners prohibited the respondents from
building their own structure on a portion of the property negates good faith
on the part on the latter. The fact that the petitioners did not thereafter
remind respondents of this is of no moment, what is crucial is that the
petitioners left the respondents clear instructions not to build on the land.
Facts: Spouses Crispin and Teresa Aquino (petitioners) are the owners of
a house and lot. Since 1981, this property has been occupied by Teresa's
sister, Josefina Aguilar and her family (respondents). Respondents stayed
on the property with the consent and approval of petitioners, who were
then residing in the United States.
While respondents were in possession of the property, the house
previously constructed therein was demolished, and a three-storey
building built in its place. Respondents occupied half of the third floor of
this new building for the next 20 years without payment of rental.
Petitioners sent a letter to respondents informing them that an immediate
family member needed to use the premises and demanding the surrender
of the property within 10 days from notice. Respondents failed to heed this
demand, prompting petitioners to file a Complaint for ejectment against
them before the office of the barangay captain of Guadalupe Viejo. The
parties attempted to reach an amicable settlement in accordance with
Section 412 of the Local Government Code, but these efforts proved
unsuccessful.
opposition on the part of the petitioners, cannot be sustained, principally
on the ground that as stated, they were already forewarned as early not to
introduce any improvements as the property is slated to be sold as it was
only bought for investment purposes. The fact that the petitioners did not
thereafter remind them of this is of no moment, as this letter was not
likewise withdrawn by a subsequent one or modified by the petitioners.
That this sale did not materialize is irrelevant. What is crucial is that
petitioners left respondents clear instructions not to build on the land.
In view of the foregoing, it was held that petitioners, as the owners of the
land, have the right to appropriate what has been built on the property,
without any obligation to pay indemnity therefor, and that respondents
have no right to a refund of any improvement built therein, pursuant to
Articles 449 and 450 of the Civil Code.
However, pursuant to Article 452 of the Civil Code, a builder in bad faith is
entitled to recoup the necessary expenses incurred for the preservation of
the land. However, being builders in bad faith, they do not have the right of
retention over the premises. While the evidence presented does not
establish the amount of necessary expenses incurred by respondents
during their stay in the property, the Court noted that even petitioners do
not deny that such expenses were incurred. Accordingly, the case was
remanded to the lower court for the determination of the necessary
expenses of preservation of the land, if any, incurred by respondents
which expenses shall be reimbursed to them by petitioners.

Petitioners filed a Complaint with the MeTC of Makati City praying that
respondents be ordered to (a) vacate the portion of the building they were
then occupying; and (b) pay petitioners a reasonable amount for the use
and enjoyment of the premises from the time the formal demand to vacate
was made.

In their Answer with Counterclaim, respondents claimed that they had

contributed to the improvement of the property and the construction of the
building, both in terms of money and management/supervision services.
Petitioners purportedly agreed to let them contribute to the costs of
construction in exchange for the exclusive use of a portion of the building.
Since they were allegedly co-owners of the building and builders in good
faith, respondents claimed that they had the right to be compensated for
the current value of their contribution. Accordingly, they prayed for the
dismissal of the Complaint and the award of ₱5 million as compensation
for their contributions to the construction of the building, as well as moral
damages, attorney's fees and costs of litigation.

Issue: Whether respondents are builders in good faith?

Held: No, the Spouses Aguilar cannot be considered as builders in good

faith on account of their admission that the subject lot belonged to the
Spouses Aquino when they constructed the building. At the onset,
petitioners were aware of a flaw in their title and a limit to their right to
possess the property. By law, one is considered in good faith if he is not
aware that there exists in his title or mode of acquisition any flaw which
invalidates it.

An examination of a letter sent by petitioners to Josefina Aguila

abundantly shows that respondent’s occupancy of the property in question
is by tolerance of the petitioners. Said letter expressly states that the
respondents are advised not to put up a shop, as the petitioners planned
on disposing the property for profit after a period of three or four years,
thereby placing the respondents on notice that their possession of the said
property is temporary in nature and by mere generosity of the petitioners.
The letter likewise advised them to apply for a housing project so that by
the time the property in question is sold, they have a place to transfer to.

Respondents’ contention that pursuant to Article 453 of the Civil Code,

they should be considered builders in good faith even if they have acted in
bad faith, since their act of introducing improvements to one-half of the
third floor of the three storey building was with knowledge and without
 SPOUSES MARCOS R. ESMAQUEL & VICTORIA SORDEVILLA vs. In Rodriguez v. Rodriguez, citing the case of Co v. Militar, the Court held
MARIA COPRADA that:

FACTS: Petitioners, spouses Marcos Esmaquel and Victoria
Sordevilla filed an ejectment case against respondent Maria V. Coprada
before the MCTC when the latter refused to vacate a parcel of land, with
an area of 253 square meters and covered by a TCT claimed by the
petitioners who are registered owner, upon demand. Respondent
occupied said lot and constructed their residential house, under the
condition that they will vacate the premises should petitioners need to use
the same. Furthermore, respondent and her family have been occupying
the subject premises free of rent, including payment of realty taxes.
[T]he Torrens System was adopted in this country because it was believed
to be the most effective measure to guarantee the integrity of land titles
and to protect their indefeasibility once the claim of ownership is
established and recognized. It is settled that a Torrens Certificate of title is
indefeasible and binding upon the whole world unless and until it has
been nullified by a court of competent jurisdiction. Under existing
statutory and decisional law, the power to pass upon the validity of such
certificate of title at the first instance properly belongs to the Regional Trial
Courts in a direct proceeding for cancellation of title.

Respondent admitted that petitioners are the registered owners of
the subject land. However, she averred that in 1945, Emiliana Coprada,
Victoria Sordevilla's mother and original owner who gave permission to her
late husband Brigido Coprada to use the subject lot as their permanent
abode, because of her love and affection for her nephew, and also, due to
the fact that the lot is virtually a wasteland. When Emiliana died, the
ownership of the property was inherited by petitioner Victoria. Respondent
alleged that Victoria sold to her for P2,000.00 in installment and which was
fully paid in 1962. Due to their close relationship, the agreement was
never reduced to writing and since then she has been the one paying the
realty taxes due on the property. After the sale, respondent built on the lot
a semi-concrete structure. Respondent stated that petitioners' claim is
barred by laches. Even granting, without admitting, that respondent's claim
of ownership is improper, respondent argued that she is a builder in good
faith, because she was able to build the structure on the subject lot with
the prior permission of the owner.
MCTC rendered judgment dismissing the complaint. It held that laches
had already set in which prevented petitioners from questioning the validity
of the purported sale between Victoria and Maria. RTC reversed MCTC’s
judgment ruling that respondent's occupation of the subject property was
by virtue of petitioners' tolerance and permission, hence,
respondent is bound by an implied promise that she will vacate the
property upon demand and her possession became unlawful after the
petitioners demanded her to vacate the property.
Upon review, the CA reversed the Decision of the RTC and affirmed in
toto the Decision of the MCTC.
As the registered owner, petitioner had a right to the possession of the
property, which is one of the attributes of ownership. x x x
Moreover, as the registered owners, petitioners' right to eject
any person illegally occupying their property is not barred by laches. In
Gaudencio Labrador, represented by Lulu Labrador Uson, as Attorney-in-
Fact v. Spouses Ildefonso Perlas and Pacencia Perlas and Spouse
Rogelio Pobre and Melinda Fogata Pobre, the Court held that:
x x x As a registered owner, petitioner has a right to eject any person
illegally occupying his property. This right is imprescriptible and can never
be barred by laches. In Bishop v. Court of Appeals, we held, thus:
As registered owners of the lots in question, the private respondents have
a right to eject any person illegally occupying their property. This right is
imprescriptible. Even if it be supposed that they were aware of
the petitioners' occupation of the property, and regardless of the length of
that possession, the lawful owners have a right to demand the return of
their property at any time as long as the possession was unauthorized or
merely tolerated, if at all. This right is never barred by laches.

ISSUE: WON petitioners have a valid ground to evict respondent from the
subject property.

HELD: An action for forcible entry or unlawful detainer is governed by

Section 1, Rule 70 of the Rules of Court, which provides:
SECTION 1. Who may institute proceedings, and when. - Subject to the
provisions of the next succeeding section, a person deprived of the
possession of any land or building by force, intimidation, threat, strategy,
or stealth, or a lessor, vendor, vendee, or other person against whom the
possession of any land or building is unlawfully withheld after the
expiration or termination of the right to hold possession by virtue of any
contract, express or implied, or the legal representatives or assigns of any
such lessor, vendor, vendee, or other person, may, at any time within one
(1) year after such unlawful deprivation or withholding of possession, bring
an action in the proper Municipal Trial Court against the person or persons
unlawfully withholding or depriving of possession, or any person or
persons claiming under them, for the restitution of such possession,
together with damages and costs.

It is undisputed that the subject property is covered by Transfer Certificate

of Title No. T-93542, registered in the name of the petitioners. As against
the respondent's unproven claim that she acquired a portion of the
property from the petitioners by virtue of an oral sale, the Torrens title of
petitioners must prevail. Petitioners' title over the subject property is
evidence of their ownership thereof. It is a fundamental principle in land
registration that the certificate of title serves as evidence of an
indefeasible and incontrovertible title to the property in favor of the
person whose name appears therein.

Moreover, the age-old rule is that the person who has a Torrens title over
a land is entitled to possession thereof.