PROPERTY CASES

The Bachrach Motor Co., Inc., vs. Talisay-Silay Milling Co. FACTS: The Talisay- Silay Milling Co., Inc., in order to secure its indebtedness to the Philippine National Bank, induced its planters, among whom was Mariano Ledesma to mortgage their land to the creditor bank. As compensation and bonus to those planters for the risk they were running with their property under the mortgage, the aforesaid central, by a resolution passed on December 22, 1923, granted to herein respondent, Mariano Lacson Ledesma, the sum of P19,911.11, Philippine currency, which sum, however, would not be payable until the month of January, 1930. Thereafter, or on December 20, 1929, Bachrach Motor Co., Inc., brought an action in the Court of First Instance of Iloilo against the Talisay-Silay Milling Co., Inc., to recover from it the sum of P13,850 against the bonus or dividend which, by virtue of the resolution of December 22, 1923, said Central Talisay-Silay Milling Co., Inc., had declared in favor of the defendant Mariano Lacson Ledesma as one of the owners of the hacienda which had been mortgaged to the Philippine National Bank to secure the obligation of the Talisay-Silay Milling Co., Inc., in favor of said bank. The Philippine National Bank, on the other hand, on February 13, 1930, filed a complaint in intervention alleging that in had a preferred right to said bonus granted by the central to the defendant Mariano Lacson Ledesma as one of the owners of the haciendas which had been mortgaged to said bank to answer for the obligations of the Central Talisay-Silay Milling Co., Inc., basing such allegation on the fact that, as said properties were mortgaged to it by the debtor Mariano Lacson Ledesma, by virtue of the deed to secure the obligations of the Talisay-Silay Milling Co., Inc., and said bonus being a civil fruit of the mortgaged lands, said bank was entitled to it on the ground that the mortgage of August 9, 1923, had become due. Issue: Whether the bonus in question is a civil fruit and hence should pertain to PNB on account of the mortgage of Ledesmas land Held: No. The bonus is not a civil fruit. The Supreme Court held that the bonus had no immediate relation to the lands in question but merely a remote and accidental one and, therefore, it was not a civil fruit of the real properties mortgaged to the Philippine National Bank to secure the obligation of the Talisay-Silay Milling Co., Inc., being a mere personal right of Mariano Lacson Ledesma. It is not one of those meant by Art. 442 of the Civil Code when it says other similar income since the phrase merely refers to things analogous to rents, leases, and annuities. Assuming that it is income, still it is not income obtained or derived from the land itself, but obtained as compensation for the risk assumed by the owner. It should, moreover, be remembered that the bonus was not based upon the value or importance of the land but upon the total value of the debt secured. Hence, the PNB does not have a preferred right with regard to the bonus as against herein petitioner. G.R. No. L-175; April 30, 1946 DAMIAN, FRANCISCO, and LUIS IGNACIO, petitioners vs. ELIAS HILARIO and his wife DIONISIA DRES, and FELIPE NATIVIDAD, Judge of CFI Pangasinan, respondents MORAN, C.J.: FACTS: This is a petition for certiorari concerning the ownership of a parcel of land, partly rice-land and partly residential. CFI held plaintiffs as the legal owners of the whole property but conceding to defendants the ownership of the houses and granaries built by them on the residential portion with the rights of a possessor in good faith, in accordance with article 361 of the Civil Code. Plaintiffs prayed for an order of execution alleging that since they chose neither to pay defendants for the buildings nor to sell to them the residential lot, said defendants should be ordered to remove the structure at their own expense and to restore plaintiffs in the possession of said lot. Defendants objected to this motion which, after hearing, was granted by Judge Natividad. Hence, this petition by defendants. The judgment is founded on articles 361 and 453 of the Civil Code which are as follows: ART. 361. The owner of land on which anything has been built, sown or planted in good faith, shall have the right to appropriate as his own the work, sowing or planting, after the payment of the indemnity stated in articles 453 and 454, or to oblige the one who built or planted to pay the price of the land, and the one who sowed, the proper rent. ART. 453. Necessary expenses shall be refunded to every possessor; but only the possessor in good faith may retain the thing until such expenses are made good to him. ISSUE: Whether the plaintiffs can refuse both to pay for the building and to sell the land. HELD: NO. The owner of the building erected in good faith on a land owned by another, is entitled to retain the possession of the land until he is paid the value of his building,

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under article 453. The owner of the land, upon the other hand, has the option, under article 361, either to pay for the building or to sell his land to the owner of the building. But he cannot, as respondents here did, refuse both to pay for the building and to sell the land and compel the owner of the building to remove it from the land where it is erected. He is entitled to such remotion only when, after having chosen to sell his land, the other party fails to pay for the same. But this is not the case. The order of Judge Natividad compelling defendants-petitioners to remove their buildings from the land belonging to plaintiffs-respondents only because the latter chose neither to pay for such buildings not to sell the land, is null and void, for it amends substantially the judgment sought to be executed and is, furthermore, offensive to articles 361 and 453 of the Civil Code. The judgment has never become final, it having left matters to be settled for its completion in a subsequent proceeding, matters which remained unsettled up to the time the petition is filed in the instant case (value of improvements). The writ of execution is set aside and the lower court ordered to hold a hearing in the principal case wherein it must determine the prices of the buildings and of the residential lot where they are erected, as well as the period of time within which the plaintiffs-respondents may exercise their option either to pay for the buildings or to sell their land. FLORENCIO IGNAO vs. IAC, JUAN IGNAO, substituted by hus legal heirs, and ISIDRO IGNAO GR no. 72876. January 18, 1991 Ponente: Fernan, C.J.

died, Florencio inherited the 5/8 share of Justo plus his 1/8 share, or a total of 6/8, representing 400.5 sq. m. Juan and Isidro on the other hand, had 1/8 share, 66.75 sq. m. each of the land or a total of 133,5 sq. m. Before the decision of the partition case, Florencio sold 134 sq. m. of his share to Victa.)
3 years later, Florencio instituted a complaint for recovery of possession of real property against Juan and Isidro alleging that the area occupied by the 2 houses build by Juan and Isidro exceeded the 133.5 sq. m. previously allotted to them. Consequently, the lower court conducted an ocular inspection and found that the houses actually encroached upon a portion of the land belonging to Florencio. Upon agreement of the parties, the trial court ordered a licensed geodetic engineer to conduct a survey to determine the exact area occupied by the houses of Juan and Isidro. The survey disclosed that Juan's house occupied 42 sq. m. while Isidro's house occupied 59 sq. m., a total of 110 sq. m. of Florencio's land. CFI Judge Luis Victor ruled that Juan and Isidro are builders in good faith. They had, before partition, been in possession of more than what rightfully belongs to them, their possession of what is in excess of their rightful share can at worst be possession in good faith which exempts them from being condemned to pay damages by reason thereof. Hence, pursuant to Art. 448 of the NCC, Florencio should have the choice to either appropriate that part of the house standing on his land after payment of indemnity or oblige the builders in good faith to pay the price of the land. However, the court observed that it would be useless and unsuitable for Florencio to exercise the first option since this would render the entire houses of Juan and Isidro worthless thus ordering Florencio to sell to Juan and Isidro those portions of his land respectively occupied by the latter. CA affirmed. Issue: Whether the court erred in depriving Florencio of his option pursuant to Art. 448 of the NCC. Held: YES. Prior to the partition, all the co-owners hold the property in common dominion but at the same time each as an owner of a share which is abstract and undetermined until partition is effected. As co-owners, parties may have unequal shares in the common property, quantitatively speaking. But in a qualitative sense, each coowner has the same right as any one of the other co-owners. Ever co-owner is therefore the owner of the whole, and over the whole he exercises the right of dominion, but he is at the same time, the owner of a portion which is truly abstract, because until division is effected such portion is not concretely determined.

Facts: Florencio Ignao and his uncles Juan and Isidro Ignao were co-owners of a parcel of land with an area of 534 sq. m. situated in Barrio Tabio, Kawit, Cavite. Pursuant to an action for partition filed by Florencio, CFI Cavite directed the partition of said land, alloying 133.5 sq. m. or 2/8 thereof to Juan and Isidro, and giving the remaining portion with a total area of 266.5 sq. m. to Florencio. However, no actual partition was ever effected.

(The disputed land was originally owned by Baltazar Ignao who married twice. In his first marriage, he had 4 children - Justo (Florencio's father), Leon, Juan, and Isidro. In his second marriage, he had 4 children who waived their rights over the controverted land in favour of Justo. Thus, Justo owned 5/8 of the land. Thereafter, he acquired 1/8 share of Leon which he sold to Florencio. When Justo

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When the co-ownership is terminated by a partition and it appears that the house of an erstwhile co-owner has encroached upon a portion pertaining to another coowner which was however made in good faith, then the provisions of Art. 448 should apply to determine the respective rights of the parties. Pursuant to Art. 448, the owner of the land shall have the right to appropriate or to oblige the one who built to pay the price of the land. The law is clear and unambiguous when it confers the right of choice upon the landowner and not upon the builder and the courts. Florencio was directed to exercise his option to either appropriate as his own the portions of the houses of Juan and Isidro occupying his land upon payment of indemnity in accordance with Art. 546 and 548 of the NCC OR to sell to Juan and Isidro the area occupied by them at such price as may be agreed upon. Should the value of the land exceed the value of the portions of the houses that Juan and Isidro have erected thereon, the latter may choose not to buy the land but they must pay reasonable rent for the use of the portion of the Florencio's land as may be agreed upon by the parities. In case of disagreement, the rate of rental and other terms of the lease shall be determined by the trial court. Otherwise, Juan and Isidro may remove or demolish at their own expense the said portions of their houses encroaching upon Florencio's land. 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-appellants spouses 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 (c) 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 P5,750.00 mentioned 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 Blas were 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. ISSUES: 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. HELD: 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 th e 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

PROPERTY CASES
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, Judge of CFI Manila, and NILO MADLANGAWA GR No. L-47475. August 19, 1988 Ponente: Gutierrez, Jr., J. Madlangawa filed his comment alleging that petition has become moot and academic because (a) fire gutted not only his house but the majority of the houses in Tambunting Estate; and (b) as a result of said fire, First Lady and Metro Manila Governor Imelda Marcos has placed the disputed area under her Zonal Improvement Project, thereby allowing the victims of the fire to put up new structures on the premises; so that the willingness and readiness of Manotok to exercise the alleged option can no longer be exercised since the subject-matter thereof has been extinguished by the fire. Furthermore, the President of the PH has already issued a PD for the expropriation of certain estates in MM including the Tambunting Estate. Therefore, the Zonal Improvement Project and expropriation proceeding would be defeated if Manotok is allowed to exercise an option which would result in Madlangawa's ejectment. PD 1668 (providing for the expropriation of the Tambunting Estate) was later declared unconstitutional for being violative of the due process clause. Issue: Whether Judge Tecson erred in denying Manotok's motion to exercise option. Held: YES. When the decision of the trial court became final and executory, it became incumbent upon Judge Tecson to issue the necessary writ for the execution of the same. There is no basis for him to deny Manotok's motion to avail of its option to appropriate the improvements made on its property. Under Art. 448, the right to appropriate the works or improvements or to oblige the one who built or planted to pay the price of the land belongs to the owner of the land. The only right given to the builder in good faith is the right to reimbursement for the improvements, the builder cannot compel the owner of the land to sell such land to the former. Also, to be deemed a builder in good faith, it is essential a person assert title to the land on which he builds, i.e. he be a possessor in the concept of owner, and that he be unaware that there exists in his title or mode of acquisition any flaw which invalidates it. It is such builder in good faith who is given the right to retain the thing, even as against the real owner, until he has been reimbursed in full not only for the necessary expenses but also for useful expenses. However, in this case, Madlangawa's good faith ceased after the filing of the complaint by Manotok. A possessor in good faith is entitled to the fruits only so long as his possession is not legally interrupted and such interruption takes place upon service of judicial summons (Art. 544 and 1123 of the NCC). The repairs and improvements introduced by Madlangawa after the complaint was filed cannot be

Facts: In a complaint filed by Manotok Realty for recovery of possession and damages against Madlangawa, the then CFI Manila rendered judgment declaring Madlangawa as builder/possessor in good faith and ordering Manotok to recognise the right of Madlangawa to remain in Lot No. 345, Block 1, of the Clara Tambunting Subdivision until after he shall have been reimbursed by Manotok the sum of P7500. CA affirmed. SC dismissed Manotok's petition for lack of merit. Later, Manotok filed with the trial court, presided over Hon. Jose Tecson, a motion for the approval of Manotok's exercise of option and for satisfaction of judgment, praying that the court issue an order (a) approving the exercise of Manotok's option to appropriate improvements introduced by Madlangawa on the property; thereafter (b) Madlangawa be ordered to deliver possession of the property in question to Manotok. Motion was denied. MR was also denied. Hence, the petition for madamus alleging that Tecson committed grave abuse of discretion in denying his motion to exercise option and for execution of judgment on the grounds that under Art. 448 and 546 of the NCC, the exercise of option belongs to the owner of the property, Manotok, and that upon finality of judgement, the prevailing party is entitled, as a matter of right, to its execution which is only a ministerial act of the judge.

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considered to have been built in good faith, much less, justify the denial of Manotok's fai-rn of option. Also, since the improvements have been gutted by fire, basis for Madlangawa's right to retain the premises has already been extinguished without Manotok's fault, there is no other recourse for Madlangawa but to vacate the premises and to deliver the same to Manotok. Petition granted. Judge ordered to issue writ of execution. VICENTE STO. DOMINGO BERNARDO vs CATALINO BATACLAN, LAUREL, J.: FACTS: Plaintiff Vicente Bernardo purchased a parcel of land of about 90 hectares situated in sitio Balayunan, Silang, Cavite from Pastor Samonte. To secure possession of the land from the vendors, the plaintiff instituted Civil Case No. 1935 in the Court of First Instance of Cavite. The trial court decided in favor of the plaintiff in a decision which was affirmed by the Supreme Court on appeal (G.R. No. 33017). However, when plaintiff entered upon the premises of the land, he found the defendant Catalino Bataclan, who appears to have been authorized by former owners to clear the land and make improvements thereon. As Bataclan was not a party in Case No. 1935, plaintif instituted Civil Cases No. 2428 against defendant, in the CFI of Cavite. In this case, plaintiff was declared the owner but the defendant was held to be a possessor in good faith, entitled to reimbursement in the total sum of P1,642, for work done and improvements made. Both parties appealed to the Supreme Court (G. R. No. 37319). The decision appealed from was modified by allowing the defendant to recover compensation amounting to P2,212 and by reducing the price at which the plaintiff could require the defendant to purchase the land in question from P300 to P200 per hectare. Plaintiff was given 30 days from the date when the decision became final within which to exercise his option, either to sell the land to the defendant or to buy the improvements from him. The plaintiff manifested to the lower court his desire "to require the defendant to pay him the value of the land at the rate of P200 per hectare or a total price of P18,000 for the whole tract of land." However, the defendant informed the lower court that he was unable to pay the land and an order was issued giving the plaintiff 30 days within which to pay the defendant the The defendant claimed 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. ISSUE: Whether the defendant Bataclan has a right to retain the land? HELD: Where the planter, builder, or sower has acted in good faith, a conflict of rights arises between the owners and it becomes necessary to protect the owner of the improvements without causing injustice to the owner of the land. In view of the impracticability of creating a state of "forced co-ownership", the law has provided a just and equitable solution by giving the owner of the land the option to acquire the improvements after payment of the proper indemnity or to oblige the builder or planter to pay for the land and the sower to pay the proper rent. It is the owner of the land who is allowed to exercise the option because his right is older and because, by the principle of accession, he is entitled to the ownership of the accessory thing. In this case, the plaintiff, as owner of the land, chose to require the defendant, as owner of the improvements, to pay for the parcel of land.al law library The Court ruled that the defendant has lost his right of retention. 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 defendant could have become owner of both land and improvements and continued in possession thereof but he was not able pay and the land was sold at public auction to Toribio Teodoro. The law, as we have already said, requires no more than that the owner of the land should choose between indemnifying the owner of the improvements or requiring the latter to pay for the land. When he failed to pay for the land, the defendant herein lost his right of retention. Heirs of Durano vs Uy sum of P2,212 stating that, in the event of failure to make such payment, the land would be ordered sold at public auction. At the instance of the plaintiff and without objection on the part of the defendant, the lower court ordered the sale of the land in question at public auction. The land was sold on April 5, 1935 to Toribio Teodoro, the highest bidder, for P8,000.

PROPERTY CASES
FACTS: Petitioner Ramon Durano III bought a 128 hectare property in Danao City sold to him by a company of his family RMD. The land was bought by RMD from Cebu Protland Cement Co (Cepoc). Durano III then proceeded to have the property titled under his name. At the time of the sale of the property, it was occupied by herein respondents. Respondents claim that they inherited the land from their parents who then inherited it from their parents. Durano III then proceeded to evict the occupants of the property and bulldozed the plantings found therein, which caused damage to herein respondents. Since the Duranos are powerful people in Danao, the respondents asked the Sec. of Justice and the President for help. They accused petitioners for land grabbing. The petitioners then filed a case against the respondents for allegedly spreading false rumors against them. The respondents then filed their answers with counterclaims. Petitioners later withdrew their complaint and the trial court proceeded only for as regards the counterclaim of the respondents. The lower court ruled to award damages to the respondents for the plantings and properties destroyed. Petitioners then appealed to the CA. The CA upheld the decision of the RTC and further ruled that the issuance of the Certificate of Titles to Durano III was attended by fraud. Corollarily, it declared that petitioners were possessors in bad faith, and were not entitled to the reimbursement for useful expenses incurred in the conversion of the property into sugarcane lands. Hence this appeal. Here, the petitioners argue that the CA erred in finding that they are builders in bad faith. They also contest the award of ownership of the lands to respondents thru prescription. Issue: Whether petitioners are buyers in bad faith and builder in bad faith. Held: yes. A purchaser of a parcel of land cannot close his eyes to facts which should put a reasonable man upon his guard, such as when the property subject of the purchase is in the possession of persons other than the seller. A buyer who could not have failed to know or discover that the land sold to him was in the adverse possession of another is a buyer in bad faith. In the herein case, respondents were in open possession and occupancy of the properties when Durano & Co. supposedly purchased the same from Cepoc. Petitioners made no attempt to investigate the nature of respondents' possession before they ordered demolition in August 1970. In the same manner, the purchase of the property by petitioner Ramon Durano III from Durano & Co. could not be said to have been in good faith. It is not disputed that Durano III acquired the property with full knowledge of respondents' occupancy thereon. There even appears to be undue haste in the conveyance of the property to Durano III, as the bulldozing operations by Durano & Co. were still underway when the deed of sale to Durano III was executed on September 15, 1970. There is not even an indication that Durano & Co. attempted to transfer registration of the property in its name before it conveyed the same to Durano III. Since petitioners knew fully well the defect in their titles, they were correctly held by the Court of Appeals to be builders in bad faith. The Civil Code provides: Art. 449. He who builds, plants or sows in bad faith on the land of another, loses what is built, planted or sown without right of indemnity. Art. 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. Art. 451. In the cases of the two preceding articles, the landowner is entitled to damages from the builder, planter or sower. Based on these provisions, the owner of the land has three alternative rights: (1) to appropriate what has been built without any obligation to pay indemnity therefor, or (2) to demand that the builder remove what he had built, or (3) to compel the builder to pay the value of the land. 32 In any case, the landowner is entitled to damages under Article 451, abovecited. We sustain the return of the properties to respondents and the payment of indemnity as being in accord with the reliefs under the Civil Code.

Eden Ballatan and Sps. Betty Martinez and Chong Chy Ling V s. C A, Gonzalo Go, Winston Go, Li Ching Yao, Araneta Institute of Agriculture and Jose N. Quedding

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GR. No. 1256832, March 2, 1999 Facts: The instant case arose from a dispute over 42 square meters of residential land belonging to petitioners. The parties herein are owners of adjacent lots located at block no 3, Poinsettia Street, Araneta University Village, Malabon, Metro Manila. Lot 24, 414 sq. m. in area, is registered in the name of Eden Ballatan and spouses Betty Martinez and Chong Chy Ling. 2 lots, Nos. 25 and 26, with an area of 415 and 313 sq. m. respectively, are registered in the name of Gonzalo Go, Sr. On lot 25, Winston Go, Gonzalos son, constructed his house. Adjacent to Lot 26 is Lot 27, 417 sq. m. in area, is registered in the name of Li Ching Yao. Eden Ballatan constructed a house and found out that Winston Go was encroaching on her land. Later, it was found out that Engineer Queding made an erroneous survey: 1. That the supposed eastern side of lot 24 was made part of lot 25 and the concrete fence and pathway of Winston Go was found therein; 2. Inclusive the portion encroached from lot 24, Lots 25 and 26 did not gain nor lose any portion; 3. That Lot 27, where Li Ching Yaos house was built, gained 37 sq. meters of supposed part of Lot 26. Ballatan made a written demand on respondents Go to remove and dismantle their improvements but the latter refused. The parties, including Li Ching Yao tried to settle it amicably but to no avail. Thus, Ballatan instituted a civil case against the Gos for recovery of the possession of the parcel of land before RTC Malabon. The Gos their answer and impleading as third-party defendants Li Ching Yao and AIA and Engr. Quedding. On August 23, 1990, the trial court decided in favor of petitioners. It ordered the Gos to vacate the subject portion of Lot 24, demolish their improvements and pay petitioner Ballatan actual damages, attorneys fees and the cost of the suit and dismissed the third-party complaint. Respondents Go appealed. On March 25, 1996, the Court of Appeals modified the decision of the trial court. It affirmed the dismissal of the third-party complaint against the Araneta Institute of Agriculture but reinstated the complaint against Li Ching Yao and Jose Quedding. Moreover, instead of ordering respondents Go to demolish their improvements on the subject land, the appellate court ordered them to pay Ballatan and Li Ching Yao to pay the Gos reasonable amount for that portion of the lot which they encroached, the value to be fixed at the time of the taking. It also ordered Engr. Quedding to pay respondents Go attorneys fees of P5,000 for his erroneous survey. Issues: 1. Is the respondent a builder in good faith? 2. What are the rights of the parties against each other? Held: 1. YES. The Gos had no knowledge that they encroached on petitioners land. Moreover, Li Ching Yao built his house on Lot 27 before any of the others did. He constructed his house in 1982, Go in 1983, and Ballatan in 1985. There is no evidence, much less, any allegation that respondent Yao was aware that when he built his house he knew that when he built his house he knew that a portion thereof encroached on Gos adjoining land. It was the erroneous survey be Engr. Quedding that triggered these discrepancies. 2. The owner of the land on which anything has been built, sown, or planted in good faith shall have the right to appropriate as his own the building, planting, or sowing, after payment to the builder, planter, or sower of the necessary and useful expense, and in the proper case expenses for pure luxury or mere pleasure. The owner of the land may also oblige the builder, planter or sower to purchse and pay the price of the land. If the owner chooses to sell his land, the builder, planter, or sower must purchase the land, otherwise the owner may remove the improvements thereon. The builder, planter, or sower, however, Is not obliges to purchase the land if its value is considerably more than the building, planting, or sowing. In such case, the builder, planter, or sower must pay the rent to the owner of the land, if the parties cannot come to terms, over the conditions of the lease, the court must fix the terms thereof. The right to choose between appropriating the improvement or selling the land to the builder, planter, or sower is given to the owner of the land. Thus, the petitioners, as owners of Lot 24, may choose to purchase the improvement of sell the land to the Gos.

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SPOUSES CONCEPCION FERNANDEZ DEL CAMPO and ESTANISLAO DEL CAMPO, plaintiffs-appellees, vs. BERNARDA FERNANDEZ ABESIA, defendant-appellant. G.R. No. L-49219, April 15, 1988 Ponente: Gancayco FACTS Spouses Estanislao and Concepcion del Campo AND Bernarda Abesia are co-owners of a lot in Cebu City, in the proportion of 2/3 ans 1/3 share each, respectively. The spouses filed an action for partition in the CFI of Cebu. The commissioner which was appointed by the trial court to survey the property recommended that the same be divided into two lots, one with an area of 30 square meters for the spouses and another with an area of 15 square meters for Abesia. From the sketch plan, the parties discovered that the house of Abesia occupied a portion of the lot of the del Campos, eating 5 square meters of it. The parties asked the trial court to settle and adjudicate who among the parties should take possession of the encroached 5 square meters of land in question. The trial court said the del Campos cannot be obliged to pay for the value of the portion of Abesia's house. It said the defendants cannot be obliged to pay for the price of the said 5 square meters. It said the rights of a builder in good faith under ARTICLE 448 of the NCC does not apply to a case where one co-owner has built, planted or sown on the land owned in common. The trial court said Abesia has no other alternative except to remove and demolish part of their house that has encroached the del Campos' land. Hence, this appeal interposed by Abesia. ISSUE Whether the provisions of Article 448 of the NCC on the rights of a builder in good faith are applicable when the property involved is owned in common HELD Article 448 of the NCC cannot apply where a co-owner builds, plants or sows on the land owned in common for then he did not build, plant or sow upon land that exclusively belongs to another but of which he is a co-owner. The co-owner is not a third person under the circumstances, and the situation is governed by the rules of co-ownership. HOWEVER, when, as in this case, the co-ownership is terminated by the partition, and it appears that the house of the defendants occupying a portion of the plaintiffs' land was built in good faith, the provision of Article 448 should apply. Applying the aforesaid provision of the Civil Code, the plaintiffs have the right to appropriate said portion of the house of defendants upon payment of indemnity to defendants as provided for in Article 546 of the Civil Code. Otherwise, the plaintiffs may oblige the defendants to pay the price of the land occupied by their house. However, if the price asked for is considerably much more than the value of the portion of the house of defendants built thereon, then the latter cannot be obliged to buy the land. The defendants shall then pay the reasonable rent to the plaintiff upon such terms and conditions that they may agree. In case of disagreement, the trial court shall fix the terms thereof. Of course, defendants may demolish or remove the said portion of their house, at their own expense, if they so decide. # G.R. No. L-21783; November 29, 1969 PACIFIC FARMS, INC., plaintiff-appellee vs. SIMPLICIO G. ESGUERRA, ET AL., defendants, CARRIED LUMBER COMPANY, defendant-appellant. CASTRO, J.: FACTS: The Company sold and delivered lumber and construction materials to the Insular Farms, Inc. for the construction of six buildings at its compound in Bolinao, Pangasinan, of the total procurement price of P15,000, the sum of P4,710.18 has not been paid by Insular Farms, Inc. The Company instituted a civil case to recover the said unpaid balance, which was sustained. The judgment debtor did not appeal; so a writ of execution was issued. Defendant sheriff levied upon the six buildings. Pacific Farms, Inc. filed a third-party claim asserting ownership over the levied buildings which it had acquired from the Insular Farms, Inc. by virtue of a deed of absolute sale. But still, sheriff proceeded with the announced public auction and sold the levied buildings to the Company. Asserting absolute and exclusive ownership of the buildings in question, the Pacific Farms, Inc. filed a complaint against the Company and the sheriff, praying to (a) declare null and void the levy and judicial sale of the six buildings, and (b) adjudge the defendants jointly and severally liable to the plaintiff. After due trial, the court a quo rendered judgment annulling the levy and the certificate of sale but denied the plaintiff's claim for actual and exemplary damages. Hence, this appeal. ISSUE: Whether Pacific Farms can claim for itself the buildings in question.

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HELD: NO. The appellant is an unpaid furnisher of materials. The application by analogy of the rules of accession would suffice for a just adjudication. Article 447 of the Civil Code provides: The owner of the land who makes thereon personally or through another, plantings, constructions or works with the materials of another, shall pay their value; and, if he acted in bad faith, he shall also be obliged to the reparation of damages. The owner of the materials shall have the right to remove them only in case he can do so without injury to the work constructed, or without the plantings, constructions or works being destroyed. However, if the landowner acted in bad faith, the owner of the materials may remove them in any event with a right to be indemnified for damages. Applying article 447 by analogy, the buildings are the principal and the lumber and construction materials that went into their construction are the accessory. Thus the appellee, if it does own the six buildings, must bear the obligation to pay for the value of the said materials; the appellant which apparently has no desire to remove the materials, and, even if it were minded to do so, cannot remove them without necessarily damaging the buildings has the corresponding right to recover the value of the unpaid lumber and construction materials. Well-established in jurisprudence is the rule that compensation should be borne by the person who has been benefited by the accession. No doubt, the appellee benefited from the accession. It should therefore shoulder the compensation due to the appellant as unpaid furnisher of materials. Appellee was not a buyer in good faith and for value. It cannot be free from paying compensation. The appellee cannot claim ignorance of the pendency of the civil case because the Insular Farms, Inc. was defended by the same lawyer from the same law firm that commenced the present action. J. Antonio Araneta, as counsel for the Pacific Farms, Inc., cannot close his eyes to facts of which he as president of the Insular Farms, Inc. had actual knowledge. It follows, as a necessary corollary, that the sale at public auction conducted by the defendant sheriff of the six buildings described in the certificate of sale was valid and effective. In view of equity, Pacific Farms, Inc. is granted a period of thirty (30) days to exercise the option of redeeming the six buildings, by paying to the defendantappellant Carried Lumber Company the sum of P4,710.18, with legal interest until the said amount shall have been fully paid. PEDRO P. PECSON V. COURT OF APPEALS, SPS. NUGUID

FACTS: Pedro Pecson was the owner of a commercial lot on which he built a 4-door-2storey apartment building. He failed to pay realty taxes amounting to P12k so the lot was sold at public auction to Mamerto Nepomuceno who later on sold it to the Sps. Nuguid.

Pecson challenged the validity of the auction before the RTC but was dismissed but the RTC held that the apartment bldg was not subject of the litigation. On appeal, the CA appealed in toto the decision of the RTC that the apartment bldg was not included in the auction sale. After an entry of judgment was made, the Sps. Nuguid filed a motion with the RTC for a motion for delivery of possession of the lot and the apartment bldg citing Art. 546 of the CC. The RTC issued an order declaring that the owner of the lot and apartment bldg were the Sps. Nuguid and to pay the construction cost of the apartment before a writ of possession would be issued and to pay rent to the spouses. Pecson moved for reconsideration but the Trial court did not act on it, instead it issued a writ of possession. The CA affirmed in part the decision declaring the cost of construction can be offset from the amount of rents to be collected and that since Sps. Nuguid opted to appropriate the improvement, Pecson is entitled to be reimbursed the cost of construction at the time it was built in 1965 which is at P53k and the right the retain the improvement until full indemnity is paid. Thus the case at bar. ISSUE: Whether or not Art. 448 and 546 applies in the case at bar HELD: YES With regard to Art. 448, the provision on indemnity may be applied in analogy. Whoever is the owner of the land may appropriate whatever has been built, planted or sown after paying indemnity. However, it does not apply when the owner of the

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land is also the builder of the works on his own land who later on loses ownership by sale or donation. Defendant dug or caused to be dug a canal along petitioners wall, a portion of which collapsed in June, 1980, and led to the filing by plaintiff of a civil action and a separate criminal complaint for malicious mischief against defendant and his wife. While trial of the case was in progress, petitioner filed in Court a formal proposal for settlement of the case but said proposal was ignored by defendant. The RTC rendered a decision in favor of Technogas Phil. and ordered the respondent to sell to petitioner that portion of land owned by him and occupied by portions of petitioners buildings and wall at the price of P2,000.00 per square meter. The decision was appealed to the CA, which reversed and set aside the decision of the RTC. According to the CA, petitioner cannot be considered in good faith. As a land owner, it is presumed to know the metes and bounds of his own property, especially if the same are reflected in a properly issued certificate of title. ISSUE: Whether petitioner Technogas Phil. be considered as a builder in good faith? HELD: When petitioner purchased the land from Pariz Industries, the buildings and other structures were already in existence. The record is not clear as to who actually built those structures, but it may well be assumed that petitioners predecessor-in-interest, Pariz Industries, did so. Article 527 of the Civil Code presumes good faith, and since no proof exists to show that the encroachment over a narrow, needle-shaped portion of private respondents land was done in bad faith by the builder of the encroaching structures, the latter should be presumed to have built them in good faith. It is presumed that possession continues to be enjoyed in the same character in which it was acquired, until the contrary is proved. Good faith consists in the belief of the builder that the land he is building on is his, and his ignorance of any defect or flaw in his title. Hence, such good faith, by law, passed on to Parizs successor, petitioner in this case. The obvious benefit to the builder under Article 448 is that, instead of being outrightly ejected from the land, he can compel the landowner to make a choice between the two options: (1) to appropriate the building by paying the indemnity required by law, or (2) sell the land to the builder. The landowner cannot refuse to exercise either option and compel instead the owner of the building to remove it from the land. The private respondents insistence on the removal of the encroaching structures as the proper remedy, which respondent Court sustained in its assailed Decisions, is thus legally flawed. This is not one of the remedies bestowed upon him by law. It would be available only if and when he chooses to compel the petitioner to buy the land at a reasonable price but the latter fails to pay such

Art. 546 refers to the necessary and useful expenses which shall be refunded to the possessor in good faith with right of retention. However, it does not state how to determine the value of the useful improvement. The respondents [court and private respondents alike] espouses as sufficient reimbursement the cost of construction in 1965, however, this is contrary to previous rulings which declares that the value to the reimbursed should be the present market value of said improvements so as not to unjustly enrich either of the parties. [the trial court erred in ordering Pecson to pay rent since the Sps. Nuguid has yet to pay the indemnity therefore Pecson has the right to retain the improvements and the income thereof. The case was remanded to the trial court for determination of the current market value of the apartment bldg and ordered the Sps to pay Pecson otherwise it shall be restored to Pecson until payment of indemnity.] TECNOGAS PHILIPPINES MANUFACTURING CORPORATION, petitioner, vs. COURT OF APPEALS (FORMER SPECIAL SEVENTEENTH DIVISION) and EDUARDO UY, respondents . PANGANIBAN, J .: FACTS: The parties in this case are owners of adjoining lots in Paraaque, Metro Manila. It was discovered in a survey that a portion of a building of petitioner, which was presumably constructed by its predecessor-in-interest, encroached on a portion of the lot owned by private respondent. Petitioner is the registered owner of a parcel of land situated in Barrio San Dionisio, Paraaque, Metro Manila which it purchased from Pariz Industries, Inc. in 1970, together with all the buildings and improvements including the wall existing thereon. Private respondent Uy is the registered owner of a parcel of land which adjoins plaintiffs land. The said property was purchased by defendant from a certain Enrile Antonio also in 1970. In 1971, defendant purchased another lot also adjoining plaintiffs land from a certain Miguel Rodriguez. A survey of the land revealed that portions of the buildings and wall bought by petitioner together with the land from Pariz Industries are occupying a portion of respondents adjoining land. Upon learning of the encroachment or occupation by its buildings and wall of a portion of respondents land, Technogas Phil. offered to buy from Mr. Uy that particular portion of defendants land occupied by portions of its buildings and wall with an area of 770 square meters, more or less, but the latter refused the offer.

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price. Hence, his options are limited to: (1) appropriating the encroaching portion of petitioners building after payment of proper indemnity, or (2) obliging the latter to buy the lot occupied by the structure. The petition was GRANTED and the case is REMANDED to the Regional Trial Court for further proceedings consistent with Articles 448 and 546 of the Civil Code. Pleasantville devt corp vs CA Facts: Edith Robillo purchased from petitioner a parcel of land designated as Lot 9, Phase II and located at Taculing Road, Pleasantville Subdivision, Bacolod City. In 1975, respondent Eldred Jardinico bought the rights to the lot from Robillo. At that time, Lot 9 was vacant. After completing the payments for Lot 9, he discovered that improvements had been introduced on Lot 9 by respondent Wilson Kee, who had taken possession thereof. It appears that on March 26, 1974, Kee bought on installment Lot 8 of the same subdivision from C.T. Torres Enterprises, Inc. (CTTEI), the exclusive real estate agent of petitioner. Under the Contract to Sell on Installment, Kee could possess the lot even before the completion of all installment payments. On January 20, 1975, Kee paid CTTEI the relocation fee of P50.00 and another P50.00 on January 27, 1975, for the preparation of the lot plan. These amounts were paid prior to Kee's taking actual possession of Lot 8. After the preparation of the lot plan and a copy thereof given to Kee, CTTEI through its employee, Zenaida Octaviano, accompanied Kee's wife, Donabelle Kee, to inspect Lot 8. Unfortunately, the parcel of land pointed by Octaviano was Lot 9. Thereafter, Kee proceeded to construct his residence, a store, an auto repair shop and other improvements on the lot. Jardinico demanded that Kee remove all the improvements and vacate Lot 9. Kee refused. Thus Jardinico filed an ejectment suit with damages. The MTC ruled that there was negligence on the part of C.T. Torres Enterprises, Inc. (CTTEI), the exclusive real estate agent of petitioner when it erroneously delivered Lot 9 to kee instead of Lot 8. It also ordered Kee to vacate Lot 9 and to pay Jardinico rentals. On appeal, the RTC reversed the decision of the MTC and it held that Kee was a builder in bad faith. Kee appealed to the CA which ruled that the former is a builder in good faith as he was unaware of the "mix-up" when he began construction of the improvements on Lot 8. It further ruled that the erroneous delivery was due to the negligence of CITEI, and that such wrong delivery was likewise imputable to its principal, petitioner herein. The appellate court also ruled that the award of rentals was without basis. Thus this appeal. Issue: whether Kee is a builder in good faith and is thus entitled to rights under Article 448 of the Civil Code. Held: Yes. The roots of the controversy can be traced directly to the errors committed by CTTEI, when it pointed the wrong property to Wilson Kee and his wife. It is highly improbable that a purchaser of a lot would knowingly and willingly build his residence on a lot owned by another, deliberately exposing himself and his family to the risk of being ejected from the land and losing all improvements thereon, not to mention the social humiliation that would follow. Under the circumstances, Kee had acted in the manner of a prudent man in ascertaining the identity of his property. Lot 8 is covered by Transfer Certificate of Title No. T-69561, while Lot 9 is identified in Transfer Certificate of Title No. T106367. Hence, under the Torrens system of land registration, Kee is presumed to have knowledge of the metes and bounds of the property with which he is dealing. But as Kee is a layman not versed in the technical description of his property, he had to find a way to ascertain that what was described in TCT No. 69561 matched Lot 8. Thus, he went to the subdivision developer's agent and applied and paid for the relocation of the lot, as well as for the production of a lot plan by CTTEI's geodetic engineer. Upon Kee's receipt of the map, his wife went to the subdivision site accompanied by CTTEI's employee, Octaviano, who authoritatively declared that the land she was pointing to was indeed Lot 8. Having full faith and confidence in the reputation of CTTEI, and because of the company's positive identification of the property, Kee saw no reason to suspect that there had been a misdelivery. The steps Kee had taken to protect his interests were reasonable. There was no need for him to have acted ex-abundantia cautela, such as being present during the geodetic engineer's relocation survey or hiring an independent geodetic engineer to countercheck for errors, for the final delivery of subdivision lots to their owners is part of the regular course of everyday business of CTTEI. Because of CTTEI's blunder, what Kee had hoped to forestall did in fact transpire. Kee's efforts all went to naught.

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Good faith consists in the belief of the builder that the land he is building on is his and his ignorance of any defect or flaw in his title. 9 And as good faith is presumed, petitioner has the burden of proving bad faith on the part of Kee. 10 At the time he built improvements on Lot 8, Kee believed that said lot was what he bought from petitioner. He was not aware that the lot delivered to him was not Lot 8. Thus, Kee's good faith. Petitioner failed to prove otherwise. Issue: Which provision of law governs the case: Article 448 or Article 1678? Or, are respondents Nicolas have the right to recover the value of the house and improvements? Held: Article 1678. The Court noted that as the private respondents are mere lessees, they knew that their occupation of the premises would continue only for the life of the lease. Plainly then they cannot be considered builders in good faith. The Court ruled that Article 448, in relation to 546, which allows full reimbursement of useful improvements and retention of the premises until reimbursement is made, applies only to a possessor in good faith, i.e., one who builds on land with a belief that he is the owner thereof. Moreover, the Court held that the rights of the private respondents as lessees are governed by Art. 1678 which allows reimbursement to the extent of one-half of the value of the useful improvement if the lessor opts to appropriate the improvements. However, petitioners refused to exercise that option leaving the respondents the sole right to remove the improvements without causing any more impairment upon the property than is necessary.

Federico Geminiano, Maria Geminiano, Ernesto Geminiano, Asuncion Geminiano, Larry Geminiano, and Marlyn Geminiano V s. C A, Dominador Nicolas, and Mary A, Nicolas Gr. No. 120303. July 24, 1996 Davide, Jr., J: Facts: Lot No. 3765 B-1 was originally owned by petitioners mother, Paulina Geminiano. On the 12 sq. m. portion of the lot is the unfinished bungalow of petitioners Federico, Maria, Ernesto, Asincion, Larry and Marlyn, all surnamed Geminiano. On November 1978, they sold the said bungalow to respondents Dominador and Mary Nicolas for P6, 000. The petitioners allegedly promised provate respondents that the said portion of the land would be sold to them. Subsequently, the petitioners mother executed a Contract of Lease over the 126 sq. m. portion of the land, including the portion covering the house. The lease was executed in favor of respondent for P40 per month, for a period of 7 years. Thereafter, private respondents introduced additional improvements and registered the house in their names. However, after the expiration of the lease contract, Paulina Geminiano refused to accept the monthly rentals. It was found out later that the lot was the subject of a suit and was acquired by a certain Maria Lee in 1972, and the ownership was later transferred to herein petitioners on Febuary 14, 1992. The petitioners demand respondents Nicolas to vacate the premises and pay the rentals. Failing ti heed to their demand, petitioners filed a complaint in the MTCC of Dagupan City for unlkawful detainer and damages. The MTCC ruled in favor of the petitioners. RTC reversed the decision which the CA affirmed.

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