G.R. No. 149295 | Philippine National Bank v.

De Jesus 03/09/2018, 12*53 AM

FIRST DIVISION

[G.R. No. 149295. September 23, 2003.]

PHILIPPINE NATIONAL BANK, petitioner, vs. GENEROSO

DE JESUS, represented by his Attorney-in-Fact,
CHRISTIAN DE JESUS, respondent.

The Chief Legal Counsel for petitioner.

Rolando V. Zubiri for private respondent.

SYNOPSIS

Respondent Generoso de Jesus filed a complaint against petitioner

Philippine National Bank (PNB) for recovery of ownership and possession
over the northern portion of the lot which he acquired which was being
encroached upon by a building of the petitioner. In its answer, petitioner
asserted that when it acquired the lot and building from Mayor Bienvenido
Ignacio, the encroachment was already in existence and to remedy the
situation, Mayor Ignacio offered to sell the area in question but it did not
materialize when Mayor Ignacio mortgaged the lot to the Development Bank
of the Philippines. After trial, the court a quo decided in favor of respondent.
It was affirmed by the Court of Appeals. In this petition, the petitioner claimed
that the Court of Appeals gravely erred in law in adjudging PNB as a builder
in bad faith over the encroached property in question. AcCTaD

The Court ruled that given the findings of both the trial court and the
appellate court, it should be evident enough that petitioner would fall much
too short from its claim of good faith. Evidently, petitioner was quite aware,
and indeed advised, prior to its acquisition of the land and building from
Ignacio that a part of the building sold to it stood on the land not covered by
the land conveyed to it. Equally significant is the fact that the building,
constructed on the land by Ignacio, has in actuality been part of the property
transferred to petitioner. Article 448 of the Civil Code refers to a piece of land
whose ownership is claimed by two or more parties, one of whom has built
some works (or sown or planted something) and not to a case where the

about:blank Page 1 of 7
G.R. No. 149295 | Philippine National Bank v. De Jesus 03/09/2018, 12*53 AM

owner of the land is the builder, sower, or planter who then later loses
ownership of the land by sale or otherwise for, elsewhere 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. " Petitioner was not in a valid position
to invoke the provisions of Article 448 of the Civil Code. Consequently, the
decision of the Court of Appeals was affirmed.

SYLLABUS

1. CIVIL LAW; PROPERTY; BUILDER IN GOOD FAITH; OPTION

OF THE LANDOWNER IS PRECLUSIVE. —A 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. Even as the option lies with the landowner, the
grant to him, nevertheless, is preclusive. He must choose one. He cannot,
for instance, compel the owner of the building to instead remove it from the
land. In order, however, that the builder can invoke that accruing benefit and
enjoy his corresponding right to demand that a choice be made by the
landowner, he should be able to prove good faith on his part.
2. ID.; ID.; ID.; ARTICLE 448 OF THE CIVIL CODE REFERS TO A
PIECE OF LAND WHOSE OWNERSHIP IS CLAIMED BY TWO OR MORE
PARTIES, ONE OF WHOM HAS BUILT SOME WORKS. — Equally
significant is the fact that the building, constructed on the land by Ignacio,
has in actuality been part of the property transferred to petitioner. Article 448,
of the Civil Code refers to a piece of land whose ownership is claimed by two
or more parties, one of whom has built some works (or sown or planted
something) and not to a case where the owner of the land is the builder,
sower, or planter who then later loses ownership of the land by sale or
otherwise for, elsewise stated, "where the true owner himself is the builder of
works on his own land, the issue of good faith or bad faith is entirely
irrelevant. "
3. ID.; ID.; GOOD FAITH; ELUCIDATED. — Good faith, here
understood, is an intangible and abstract quality with no technical meaning
or statutory definition, and it encompasses, among other things, an honest
belief, the absence of malice and the absence of design to defraud or to
seek an unconscionable advantage. An individual's personal good faith is a
concept of his own mind and, therefore, may not conclusively be determined
by his protestations alone. It implies honesty of intention, and freedom from
knowledge of circumstances which ought to put the holder upon inquiry. The
about:blank Page 2 of 7
G.R. No. 149295 | Philippine National Bank v. De Jesus 03/09/2018, 12*53 AM

essence of good faith lies in an honest belief in the validity of one's right,
ignorance of a superior claim, and absence of intention to overreach another.
Applied to possession, 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.
4. ID.; ID.; ID.; NOT PRESENT IN CASE AT BAR. — Given the
findings of both the trial court and the appellate court, it should be evident
enough that petitioner would fall much too short from its claim of good faith.
Evidently, petitioner was quite aware, and indeed advised, prior to its
acquisition of the land and building from Ignacio that a part of the building
sold to it stood on the land not covered by the land conveyed to it.

DECISION

VITUG, J : p

Petitioner Philippine National Bank disputes the decision handed down

by the Court of Appeals promulgated on 23 March 2001 in CA-G.R. CV No.
56001, entitled "Generoso De Jesus, represented by his Attorney-in-Fact,
Christian De Jesus, versus Philippine National Bank." The assailed decision
has affirmed the judgment rendered by the Regional Trial Court, Branch 44,
of Mamburao, Occidental Mindoro, declaring respondent Generoso de Jesus
as being the true and lawful owner of the 124-square-meter portion of the
land covered by Transfer Certificate of Title (TCT) No. T-17197 and ordering
petitioner bank to vacate the premises, to deliver possession thereof to
respondent, and to remove the improvement thereon.
It would appear that on 10 June 1995, respondent filed a complaint
against petitioner before the Regional Trial Court of Occidental Mindoro for
recovery of ownership and possession, with damages, over the questioned
property. In his complaint, respondent stated that he had acquired a parcel of
land situated in Mamburao, Occidental Mindoro, with an area of 1,144
square meters covered by TCT No. T-17197, and that on 26 March 1993, he
had caused a verification survey of the property and discovered that the
northern portion of the lot was being encroached upon by a building of
petitioner to the extent of 124 square meters. Despite two letters of demand
sent by respondent, petitioner failed and refused to vacate the area.
Petitioner, in its answer, asserted that when it acquired the lot and the
building sometime in 1981 from then Mayor Bienvenido Ignacio, the
encroachment already was in existence and to remedy the situation, Mayor
Ignacio offered to sell the area in question (which then also belonged to
about:blank Page 3 of 7
G.R. No. 149295 | Philippine National Bank v. De Jesus 03/09/2018, 12*53 AM

Ignacio) to petitioner at P100.00 per square meter which offer the latter
claimed to have accepted. The sale, however, did not materialize when,
without the knowledge and consent of petitioner, Mayor Ignacio later
mortgaged the lot to the Development Bank of the Philippines.
The trial court decided the case in favor of respondent declaring him to
be the rightful owner of the disputed 124-square-meter portion of the lot and
ordering petitioner to surrender possession of the property to respondent and
to cause, at its expense, the removal of any improvement thereon.
The Court of Appeals, on appeal, sustained the trial court but it
ordered to be deleted the award to respondent of attorney's fees, as well as
moral and exemplary damages, and litigation expenses.
Petitioner went to this Court, via a petition for review, after the
appellate court had denied the bank's motion for reconsideration, here now
contending that —
"1. THE COURT OF APPEALS GRAVELY ERRED IN
LAW IN ADJUDGING PNB A BUILDER IN BAD FAITH OVER
THE ENCROACHED PROPERTY IN QUESTION;
"2. THE COURT OF APPEALS GRAVELY ERRED IN
LAW IN NOT APPLYING IN FAVOR OF PNB THE PROVISION
OF ARTICLE 448 OF THE CIVIL CODE AND THE RULING IN
TECHNOGAS PHILIPPINES MANUFACTURING CORP. VS.
COURT OF APPEALS, G.R. No. 108894, February 10, 1997, 268
SCRA 7." 1
The Regional Trial Court and the Court of Appeals have both rejected
the idea that petitioner can be considered a builder in good faith. In the
context that such term is used in particular reference to Article 448, et seq.,
of the Civil Code, a builder in good faith is one who, not being the owner of
the land, builds on that land believing himself to be its owner and unaware of
any defect in his title or mode of acquisition.
The various provisions of the Civil Code, pertinent to the subject, read:
"Article 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 a

about:blank Page 4 of 7
G.R. No. 149295 | Philippine National Bank v. De Jesus 03/09/2018, 12*53 AM

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 449. 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."
"Article 450. The owner of the land on which anything has
been built, planted or sown in bad faith may demand the
demolition of the work, or that the planting or sowing be removed,
in order to replace things in their former condition at the expense
of the person who built, planted or sowed; or he may compel the
builder or planter to pay the price of the land, and the sower the
proper rent."
A builder in good faith can, under the foregoing provisions, 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. 2 Even as the option lies with the landowner, the grant to him,
nevertheless, is preclusive. He must choose one. He cannot, for instance,
compel the owner of the building to instead remove it from the land. 3 In
order, however, that the builder can invoke that accruing benefit and enjoy
his corresponding right to demand that a choice be made by the landowner,
he should be able to prove good faith on his part.
Good faith, here understood, is an intangible and abstract quality with
no technical meaning or statutory definition, and it encompasses, among
other things, an honest belief, the absence of malice and the absence of
design to defraud or to seek an unconscionable advantage. An individual's
personal good faith is a concept of his own mind and, therefore, may not
conclusively be determined by his protestations alone. It implies honesty of
intention, and freedom from knowledge of circumstances which ought to put
the holder upon inquiry. 4 The essence of good faith lies in an honest belief in
the validity of one's right, ignorance of a superior claim, and absence of
intention to overreach another. 5 Applied to possession, 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. 6

about:blank Page 5 of 7
G.R. No. 149295 | Philippine National Bank v. De Jesus 03/09/2018, 12*53 AM

Given the findings of both the trial court and the appellate court, it
should be evident enough that petitioner would fall much too short from its
claim of good faith. Evidently, petitioner was quite aware, and indeed
advised, prior to its acquisition of the land and building from Ignacio that a
part of the building sold to it stood on the land not covered by the land
conveyed to it.
Equally significant is the fact that the building, constructed on the land
by Ignacio, has in actuality been part of the property transferred to petitioner.
Article 448, of the Civil Code refers to a piece of land whose ownership is
claimed by two or more parties, one of whom has built some works (or sown
or planted something) and not to a case where the owner of the land is the
builder, sower, or planter who then later loses ownership of the land by sale
or otherwise for, elsewise stated, "where the true owner himself is the builder
of works on his own land, the issue of good faith or bad faith is entirely
irrelevant." 7
In fine, petitioner is not in a valid position to invoke the provisions of
Article 448 of the Civil Code. The Court commiserates with petitioner in its
present predicament; upon the other hand, respondent, too, is entitled to his
rights under the law, particularly after having long been deprived of the
enjoyment of his property. Nevertheless, the Court expresses hope that the
parties will still be able to come up with an arrangement that can be mutually
suitable and acceptable to them.
WHEREFORE, the decision of the Court of Appeals in CA-G.R. CV
No. 56001 is AFFIRMED. No costs.
SO ORDERED.
Davide, Jr., C .J ., Ynares-Santiago and Carpio, JJ ., concur.
Azcuna, J ., on sick leave.

Footnotes
1. Rollo, p. 12.
2. Depra vs. Dumlao, G.R. No. L-57348,16 May 1985, 136 SCRA 475.
3. Ignacio vs. Hilario, 76 Phil. 605; Sarmiento vs. Agana, G.R. No. L-
57288, 30 April 1984, 129 SCRA 122; Tecnogas Philippines
Manufacturing Corp. vs. Court of Appeals, G.R. No. 108894, 10 February
1997, 268 SCRA 7.
4. Black's Law Dictionary, Abridged Fifth Edition, p. 353.

about:blank Page 6 of 7
G.R. No. 149295 | Philippine National Bank v. De Jesus 03/09/2018, 12*53 AM

5. Bernardo vs. Bernardo, 96 Phil. 202; Negrete vs. CFI of Marinduque,

G.R. No. L-31267, 24 November 1972,48 SCRA 113.
6. Article 526, Civil Code of the Philippines.
7. Pecson vs. Court of Appeals, G.R. No. 115814, 26 May 1995, 244
SCRA 407.

about:blank Page 7 of 7