a.

Bad faith as liability for damages Art. 447- 456

Depra vs. Dumlao 136 SCRA 475

III.

RIGHT OF ACCESSION

FACTS: Dumlao is the owner of a parcel of land in Iloilo, while Depra owns the lot adjoining his. Dumlao built his house on his own land, but the kitchen encroached about 34 sq.m on Depras property. Upon finding this, Depras mom ordered Dumlao to move back from his encroachment, then subsequently filed an action for unlawful detainer against Dumlao. The lower court found that Dumlao was a builder in good faith, and ordered him to pay rent (PhP5.00/month) forced lease between the parties. Depra refused to accept the rentals so Dumlao deposited this with the MTC. Neither party appealed judgment so this became final and executory. 1 year later, though, Depra filed an complaint for Quieting of Title. Dumlao contested this, stating that the suit is barred by res judicata. But Depra averred that the lower court did not have jurisdiction to rule on encumbrances of real property only the CFI has jurisdiction. ISSUE: 1. Whether or not res judicata would apply to the case at bar? 2. Whether or not the land owner can be compelled to accept rent payments by the court (with both LO and BPS being in good faith)?

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. Since art 448 does not apply, the Plaintiff cannot be obliged to pay for the portion of defendants house that entered into the 30 sqm lot, AND Defendant cannot be obliged to pay for the price of the 5 sqm their house occupied. Why? The RTC believed the rules of co-ownership should govern, and not that of accession. RTC then assigned the full 30sqm to Plaintiff and ordered Defendants to demolish the 5sqm part of their house encroaching the 30sqm lot of the Plaintiffs. Defendants where aghast at having to axe the family home, hence they appealed. CA affirmed the decision. So we have the SC coming to the rescue. ISSUE: w/n the rules of accession applies (and not coownership) on property that used to be co-owned, but was subdivided. HELD: The rule of accession applies because co-ownership was terminated upon the partitioning of the lot. Art 448 therefore governs. The house of Defendant overlapped that of Plaintiff, but this was built on good faith. Hence, the plaintiffs have the right to choose one of two options: > Appropriate the 5sqm portion of the house of Defendants after indemnifying the Defendants; or > Obliging the Defendants to pay a portion of the land on which their home rested. ( or they can rent it) Mercado vs. CA June 10, 1988 FACTS: Lolita C. Bulaong, FlorentinoAgulto, SeverinoSalaysay, Susana Bernardino (the Bulaong Group), from 1956 to 1972, have been individual lessees of stalls in the public market of Baliuag, Bulacan. The market was destroyed by fire on 17 February 1956; the members of the Bulaong Group constructed new stalls therein at their expense; and they thereafter paid rentals thereon to the Municipality of Baliuag. In 1972, the members of the group sub-leased their individual stalls to other persons: Paz Mercado, Carolina S. Chico,nLuciana Cabrera, Joaquin Ignacio, Elmer Flores, and Avelina C. Nucom (the Mercado Group). After the Mercado Group had been in possession of the market stalls for some months, the municipal officials of Baliuag cancelled the long standing leases of the Bulaong Group and declared the persons comprising the Mercado Group as the rightful lessees of the stalls in question, in substitution of the former. The municipal authorities justified the cancellation of the leases of the Bulaong Group by invoking the provisions of Municipal Ordinance 14, dated 14 December 1964, which prohibited the sub-leasing stalls by the lessees thereof, as well as a 29 May 1973 directive of the Office of the President requiring enforcement of said Ordinance 14. Recognition of the Mercado Groups rights over the stalls was subsequently manifested in Municipal Ordinance 49, approved on 5 July 1973. The members of the Bulaong Group sued. They filed several individual complaints with the CFI seeking recovery of their stalls from the Mercado Group as well as damages. Their theory was anchored on their claimed ownership of the stalls constructed by them at their own expense, and their resulting right, as such owners, to sub-lease the stalls, and necessary, to recover them from any person withholding possessionthereof from them. The Mercado Group thereafter filed motions for summary judgment, asserting that in light of the admissions made at the pre-trial and in the pleadings, no issue remained under genuine controversion, to which the Bulaong Group objected. Assuming the indifference of the Court and the other
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HELD: In the first issue, res judicata would not apply should the first case be one for ejectment and the other for quieting of title. Article 448 of the Civil Code provides that the land owner has 2 options to buy the building or to sell/rent his land. This is so because the rights of the owner of the land is older, and by the principle of accession, he also has a right to the accessories. The Court remanded the case to the RTC to determine the fair price of the land, the expenses incurred by the BPS (Dumlao), the increase in value of the land, and whether the value of the land is considerably more than the value of the kitchen built on it. The RTC shall then give Depra 15 days to exercise such option. Del Campo vs. Abesia 160 SCRA 379 When land is co-owned by two parties, but the co-ownership is terminated, Article 448 governs in case real property (like a house) encroaches the land of another. This is provided that good faith exists. FACTS: The case involves two friendly parties who are co-owners of a corner lot at Flores and Cavan Streets in Cebu City. Plaintiff owns 2/3 of the lot and Defendant owns 1/3 of the same. The total size of the lot is 45 square meters (which is about the size of a typical Starbux caf) Later on, the two parties decided to divide the co-owned property into two lots. 30 square meters went to the plaintiffs and 15 square meters went to the defendants. From the sketch plan, both parties discovered that the house of the defendants occupied a portion of the plaintiffs adjacent lot, eating 5 sqm of it. The parties then requested the trial court to adjudicate who should take possession of the encroached 5 sqm. The trial court ruled that Art 448 does not apply. 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
PROPERTY Case Digests PART III Right of Accession

group to its opposition, the former presented affidavits and depositions to prove the value of the improvements, for which they were seeking reimbursement, to which the Mercado Group did not respond. On 24 October 1975, Judge Benigno Puno rendered a summary judgment in all the cases. It rejected the claim of the Municipality of Baliuag that it had automatically acquired ownership of the new stalls constructed after the old stalls had been razed by fire, declaring the members of the Bulaong Group to be builders in good faith, entitled to retain possession of the stalls respectively put up by them until and unless indemnified for the value thereof The decision also declared that the Bulaong and Mercado Groups had executed the sub-letting agreements with full awareness that they were thereby violating Ordinance 14; they were thus inpari delicto, and hence had no cause of action one against the other and no right to recover whatever had been given or demand performance of anything undertaken. The Mercado Group and the Municipality filed on 14 November 1975, motions for reconsideration of the summary judgment, notice of which had been served on them on 3 November 1975. These were denied, and notice of the order of denial was received by them on 18 December 1975. On 7 January 1976, the Mercado Group filed a notice of appeal, an appeal bond and a motion for extension of time to file their record on appeal. But by Order dated 9 January 1976, the Trial Court directed inter alia the execution of the judgment, adjudging that its decision had become final because the appeal documents had not been seasonably filed. The writ was issued, and the Mercado Groups motion to quash the same and to re-open the case was denied.The Group went to the Court of Appeals, instituting in that court a special civil action of certiorari and prohibition to annul that portion of the summary judgment awarding damages to the Bulaong Group and to restrain the Judge and the Provincial Sheriff of Bulacan from enforcing the same. The appellate Court rendered judgment on 14 May 1976 affirming the judgment of the lower court, holding that the judgment had become final and certiorari or prohibition could not be availed of as a substitute for the groups lost appeal. Once again, the Mercado Group moved for reconsideration of an adverse judgment, and once again wererebuffed. An appeal by way of certiorari was filed before the Supreme Court. The Supreme Court dismissed the petition and affirmed the appealed judgment, with costs against the Mercado Group. Lessees cannot be considered builders in good faith The members of the Bulaong group were admittedly lessees of space in the public market; they therefore could not, and in truth never did make the claim, that they were owners of any part of the land occupied by the market so that in respect of any new structure put up by them thereon, they could be deemed builders in good faith (in accordance with Article 526 of the Civil Code). To be deemed a builder in good faith, it is essential that a person assert title to the land on which he builds; i.e., that he be a possessor in 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 a builder in good faith who is given the right to retain the thing, even as against the real owner, until he has been reimbursed in full not only for the necessary expenses but also for useful expenses. On the other hand, unlike the builder in good faith, a lessee who makes in good faith useful improvements which aresuitable to the use for which the lease is intended, without altering the form or substance of the property leased, can only claim payment of one-half of the value of the improvements or, should the lessor refuse to reimburse said amount, remove the improvements, even though the principal thing may suffer damage thereby.

b.

Industrial

Gaboya vs. Cui -28 SCRA 85 FACTS: Don Mariano sold his three lots prodiviso to his three children. One of his children, due to lack of funds, wasnt able to purchase part of the land. This reverted back to the father. As part of the sale, the father reserved for himself the usufruct of the property. He co-owned the land with his children then. A building was then constructed in a portion of the land, wherein rentals was given to the father. Thereafter, the two children who were co-owners obtained a loan, secured by a mortgage, with authority of the father, to construct a commercial building. The father alleges that since he has usufruct over the land, he has usufruct or share in the rentals earned through the constructed building. HELD: The reserved right of vendor on a parcel of land doesnt include rentals from the buildings subsequently constructed on the vacant lots, but that it did entitle the usufructuary to a reasonable rental for the portion of the land being occupied by the building.

b.

Civil
Mary McDonald Bachrach v. Sophie Seifert

FACTS: The deceased E. M. Bachrach, who left no forced heir except his widow Mary McDonald Bachrach, in his last will and testament made various legacies in cash and willed the remainder of his estate. The estate of E. M. Bachrach, as owner of 108,000 shares of stock of the Atok-Big Wedge Mining Co., Inc., received from the latter 54,000 shares representing 50 per cent stock dividend on the said 108,000 shares. On June 10, 1948, Mary McDonald Bachrach, as usufructuary or life tenant of the estate, petitioned the lower court to authorize the Peoples Bank and Trust Company, as administrator of the estate of E. M. Bachrach, to transfer to her the said 54,000 shares of stock dividend by indorsing and delivering to her the corresponding certificate of stock, claiming that said dividend, although paid out in the form of stock, is fruit or income and therefore belonged to her as usufructuary or life tenant. Sophie Siefert and Elisa Elianoff, legal heirs of the deceased, opposed said petition on the ground that the stock dividend in question was not income but formed part of the capital and therefore belonged not to the usufructuary but to the remainderman. While appellants admit that a cash dividend is an income, they contend that a stock dividend is not, but merely represents an addition to the invested capital. ISSUE: Whether or not a dividend is an income and whether it should go to the usufructuary. HELD: The usufructuary shall be entitled to receive all the natural, industrial, and civil fruits of the property in usufruct. The 108,000 shares of stock are part of the property in usufruct. The 54,000 shares of stock dividend are civil fruits of the original investment. They represent profits, and the delivery of the certificate of stock covering said dividend is equivalent to the payment of said profits. Said shares may be sold independently of the original shares, just as the offspring of a domestic animal may be sold independently of its mother. If the dividend be in fact a profit, although declared in stock, it should be held to be income. A dividend, whether in the form of cash or stock, is income and, consequently, should go to the usufructuary, taking into consideration that a stock dividend as well as a cash dividend can be declared only out of profits of the corporation, for if it were declared out of the capital it would be a serious violation of the law.

A.

Kinds of accession: 1. Accesion Discreta Art. 440 a. Natural

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Under the Massachusetts rule, a stock dividend is considered part of the capital and belongs to the remainderman; while under the Pennsylvania rule, all earnings of a corporation, when declared as dividends in whatever form, made during the lifetime of the usufructuary, belong to the latter. The Pennsylvania rule is more in accord with our statutory laws than the Massachusetts rule. Bachrach vs. Talisay Silay 56 PHIL 117 FACTS: Talisay obtained a loan from PNB with a REM provided by one of its planters, Ledesma. To compensateLedesma for the accommodation, Talisaygranted him a bonus whose value was computed as a percentage of the balance of the loan. Bachrach, as a creditor of Ledesma, laid a claim to the bonus received by the latter. On the other hand, PNB claims that it owns the fruits, because under Article 2127, the mortgage extends to the civil fruits of the property. ISSUE: Whether the bonus is a civil fruit, thereby giving PNB a preferential right over it. HELD: The bonus is not a civil fruit. Civil fruits are the rents of the buildings, leases of lands, and income from life annuities, or other similar sources of income. Though it is possible to consider the bonus as income, it is not similar income to the items in the preceding enumeration. The common denominator, which is absent in the bonus, is derivation of the income from the land itself. In this case, the bonus is not based on the value of the land but rather on the amount of the outstanding obligation of Talisay. It is clearly meant to becompensation for the risk assumed by the owner, Ledesma.

neighbor's property, while respondents became aware of it only after purchasing said property. Petitioners cannot claim good faith as against the respondents. Since petitioners are not builders in good faith, they cannot demand that respondents sell the disputed portion; what the law provides is that the builders in bad faith can be ordered to dismantle said structure at their own expense. In the interim period that petitioners' structure remains, they should pay reasonable rent until they remove the structure. In this petition for review on certiorari, petitioners pray, inter alia, for a review of the factual finding of bad faith. Due to their alleged good faith, they claim the pre-emptive right to purchase the litigated portion as a matter of course. ISSUE: W/N the petitioners, as builders in good faith, have the preemptive right to purchase the litigated portion of the property? RULING: Option To Sell Belongs To Owner Article 448 of the Civil Code is unequivocal that the option to sell the land on which another in good faith builds, plants or sows on, belongs to the landowner. The option is to sell, not to buy, and it is the landowner's choice. Not even a declaration of the builder, planter, or sower's bad faith shifts this option to him per Article 450 of the Civil Code. This advantage in Article 448 is accorded the landowner because "his right is older, and because, by the principle of accession, he is entitled to the ownership of the accessory thing." There can be no pre-emptive right to buy even as a compromise, as this prerogative belongs solely to the landowner. No compulsion can be legally forced on him, contrary to what petitioners asks from the Court. Such an order would certainly be invalid and illegal. Thus, the lower courts were correct in rejecting the petitioners' offer to buy the encroached land. The SC found it unwarranted to review the lower courts factual finding of bad faith. The assailed resolution was AFFIRMED.

2.

Accession Continua a. Over Immovables 1. Artificial or industrial building, planting, sowing (bps) Art. 448 a. Owner is bps with material of another In good faith
Sps. Benitez vs. CA 77 SCAD 793

FACTS: Petitioners Rafael and Avelina Benitez purchased a 303-squaremeter parcel of land with improvement from the Cavite Development Bank, covered by Transfer Certificate of Title No. 41961 (now, TCT No. 55864). Subsequently, private respondents Renato and Elizabeth Macapagal bought a 361-square-meter lot covered by TCT No. 40155. On September 18, 1986, a case was filed against petitioners for the recovery of possession of an encroached portion of the lot they purchased. The parties were able to reach a compromise in which private respondents sold the encroached portion to petitioners at the acquisition cost of P1,000 per square meter. On July 17, 1989, private respondents purchased still another property, adjacent to that of petitioners. After a relocation survey was conducted, private respondents discovered that some 46.5 square meters of their property was occupied by petitioners' house. Despite verbal and written demands, petitioners refused to vacate. A last notice to vacate was sent to petitioners on October 26, 1989. On January 18, 1990, private respondents filed an ejectment case against petitioners. The MeTC of San Juan decided in favor of the petitioners. On appeal, the RTC affirmed the decision of the MeTC. CA upheld the decision of the lower courts. Petitioners were fully aware that part of their house encroached on their
PROPERTY Case Digests PART III Right of Accession

In bad faith ( Art. 447)

3.

Bps in good faith Art. 448

Filipinas College Inc. vs Garcia Timbang 106 PHIL 247 This is an appeal taken from an order of the CFI of Manila (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 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. In the judgment of the Court of Appeals, the respective rights of the litigants have been adjudicated as follows: (1) Filipinas Colleges, Inc. was declared to have acquired the rights of the spouses Timbang in and to lot No. 2-a mentioned above and in consideration thereof, Filipinas Colleges, Inc., was ordered to pay the spouses Timbang the amount of P15,807.90 plus such other amounts which said spouses might have paid or had to pay after February, 1953, to Hoskins and Co. Inc., agent of the
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Urban Estates, Inc., original vendor of the lot. Filipinas Colleges, Inc. original vendor of the total amount with the court within 90 days after the decision shall have become final. (2) Maria Gervacio Blas was declared to be a builder in good faith of the school building constructed on the lot in question and entitled to be paid the amount of P19,000.00 for the same. Filipinas Colleges, Inc., purchaser of the said building was ordered to deliver to Blas stock certificate (Exh. C) for 108 shares of Filipinas Colleges, Inc. with a par value of P10,800.00 and to pay Blas the sum of P8,200.00 of the house. (3) In case Filipinas Colleges, Inc. failed to deposit the value of the land, which after liquidation was fixed at P32,859.34, within the 90day period set by the court, Filipinas Colleges would lose all its rights to the land and the spouses Timbang would then become the owners thereof. In that eventuality, the Timbangs would make known to the court their option under Art. 448 of the Civil Code whether they would appropriate the building in question, in which even they would have to pay Filipinas Colleges, Inc. the sum of P19,000.00, or would compel the latter to acquire the land and pay the price thereof. Appellant contended that because 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 lost his right of retention provided in Article 546 and by operation of Article 445, the appellants as owners of the land automatically became the owners ipso facto, the execution sale of the house in their favor was superfluous. Consequently, they are not bound to make good their bid of P5,750.00 as that would be to make goods to pay for their own property. By the same token, Blas claim for preference on account of the unpaid balance of the purchase price of the house does not apply because preference applies only with respect to the property of the debtor, and the Timbangs, owners of the house, are not the debtors of Blas. ISSUES/RULING: (1) Suppose that the owner of the land should avail himself of the 2nd remedy provided for in Art 448- compelling the builder in good faith to pay the value of the land- but such builder fails to pay, does he become automatically the owner of the building? Under Arts 448 and 546, the owner of the land has the right to choose between appropriating the building by reimbursing the builder of the value thereof or compelling the builder in good faith to pay for his land. Even this second right cannot be exercised if the value of the land is considerably more than that of the building. In addition to the right of the builder to be paid the value of his improvement, Article 546 gives him the corollary right of retention of the property until he is indemnified by the owner of the land. There is nothing in the language of these two article, 448 and 546, which would justify the conclusion of appellants that, upon the failure of the builder zo 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. (2) What then is the remedy left to the owner of the land if the builder fails to pay? Where the builder in good faith fails to pay the value of the land when such is demanded by the landowner, the parties may resort to: (a) Parties may 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. (b) Should the parties not agree to leave things as they are and to assume the relation of lessor and lessee, the owner of the land in entitled to have the improvement removed when after having chosen to sell his land to the other party, i.e., the builder in good faith fails to pay for the same. (c) The land and the improvement may be sold at public auction applying the proceeds thereof first to the payment of the
PROPERTY Case Digests PART III Right of Accession

value of the land and the excess, if any, to be delivered to the owner of the house in payment thereof. (3) The appellants , owners o the land, instead of electing any of the alternative above indicated chose to seek recovery of the value of their land by asking for a writ of execution; levying on the house of the builder; and selling the same in public auction with the owner as highest bidder, what is the effect upon the rights of the parties? When there is a claim by a third-party, to the proceeds of the sale superior to his judgment credit, the execution creditor, as successful bidder, must pay in cash the amount of his bid as a condition precedent to the issuance to him of the certificate of sale. 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. Blas is actually a lien on the school building are concerned. The order of the lower court directing the Timbang spouses, as successful bidders, to pay in cash the amount of their bid in the sum of P5,750.00 is therefore correct. 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. If this resulted in the continuation of the so-called involuntary partnership questioned by the difference between P8,200.00 the unpaid balance of the purchase price of the building and the sum of P5,750.00 amount to be paid by the Timbangs, the order of the court directing the sale of such undivided interest of the Filipinas Colleges, Inc. is likewise justified to satisfy the claim of the appellee Blas. The first part of the dispositive portion of the order appealed from is modified in the sense that upon 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 amoun In all other respects, the appealed order of the court a quo is hereby affirmed, with costs against the appellants.

4.

Good faith does not include negligence Art. 456

Bernardo vs. Bataclan 66 PHIL 598 G.R. No. L-44606, November 28, 1938

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, CatalinoBataclan, who appears to have been authorized by former owners, as far back as 1922, to clear the land and make improvements thereon. As Bataclanwas 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
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continued in possession thereof. But he said he could not pay and the land was sold at public auction to ToribioTeodoro. 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 ToribioTeodoro, 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. Sarmiento vs. Agana 129 SCRA 122 FACTS: Before Ernesto Valentino and Rebecca Lorenzo wed, Rebeccas mother offered a lot in Paranaque that they could build their house on. In 1967, they finally built their home which cost about PhP8,000-10,000, thinking that someday, the lot would be transferred to them in their name. It turns out, though, that the lot was owned by the Spouses Santos who , in turn, sold the same to Leonila Sarmiento in 1974. A year later, Sarmiento ordered the Valentinos to vacate their lot, then eventually filed and Ejection Suit against them. The lower court ruled in Sarmientos favor and ordered her to pay 20,000 as the value of the house. But the case was then elevated to the CFI of Pasay (w/ Agana as Judge), and pursuant to Art.448 of the CC (March 1979), the Court ordered Sarmiento to exercise the option in 60 days to pay Ernesto 40,000 as the value of the house or to let them purchase the land for 25,000. Sarmiento was not able to exercise this option, and the CFI allowed Ernesto to deposit the 25,000 purchase price with the Court. ISSUE: Whether or not the land owner is compelled to exercise either option: to buy the building or to sell the land? HELD: Ernesto and his wife (BPS) were clearly in good faith as they believed that Rebeccas mother has the capacity to eventually transfer the title of the land to them. In line with this, Sarmiento (LO) was required to exercise only 2 options: To purchase the house or to sell the land to them, in this case, based on the value decided by the courts. Since Sarmiento failed to exercise the option within the allotted period, and based on Art. 448, the LO is compelled by law to exercise either option. Not choosing either is a violation of the law.

In view of Ong Cu's failure to vacate the lots after the expiration of the lease and to remove his improvements thereon, Mrs. Laureano filed against him an ejectment suit where the court rendered a judgment ordering Ong Cu to vacate the lots, to restore their possession to Mrs. Laureano, to remove his buildings and other improvements thereon and to pay P12,428 monthly as compensation for the use and occupation of the lots from September 1, 1974 up to the time he vacates them, with interest at twelve percent per annum from the date of accrual plus P10,000 as moral and exemplary damages and attorney's fees. On appeal, the court granted Ong Cus ex parte motion for the approval of his supersedeas bond in the sum of P22,000 and to fix the rental value of the two lots at P1,200 a month. Laureano filed a motion for a preliminary mandatory injunction to restore her to the possession of the said lots. She also asked for immediate execution of the city court's judgment on the ground that Ong Cu's supersedeas bond was inadequate and that he had failed to deposit the sum of P12,428 monthly as reasonable value of the use and occupation of the lots adjudged by the city court. Respondent judge upheld the city court's order fixing the supersedeas bond and the amount to be deposited by Ong Cu. Laureano's motion for a mandatory injunction was denied because it had already sanctioned Ong Cu's supersedeas bond, the purpose of which was to stay execution pending appeal. The lower court reasoned out that it would be absurd to stay execution and at the same time restore possession to the plaintiff by granting the mandatory injunction. It regarded Ong Cu as a possessor in good faith with right of retention and right to reimbursement of his necessary and useful expenses. Laureano in this special civil action of certiorari assailed the interlocutory orders denying her motions for execution and for a preliminary mandatory injunction. ISSUE: W/N Ong Cu is a possessor in good faith? RULING: NO. The lower court erred in assuming that Ong Cu in constructing his building on the leased lots is a possessor in good faith entitled to reimbursement of the necessary and useful expenses incurred by him and with a right of retention, as contemplated in articles 546 and 547 of the Civil Code. The expiration of lease and Mrs. Laureano's refusal to renew it made Ong Cu an unlawful withholder of the possession of the lots. He has become a possessor in bad faith. The Civil Code provides: ART. 1669. If the lease was made for a determinate time, it ceases upon the day fixed, without the need of a demand. (1565) ART. 1671. If the lessee continues enjoying the thing after the expiration of the contract over the lessor's objection, the former shall be subject to the responsibilities of a possessor in bad faith. (n) ART. 1673. The lessor may judicially eject the lessee for any of the following causes: (1) When the period agreed upon, ... has expired. xxx xxx xxx (1569a) The rule is that if after the termination of the lease contract the lessee prolongs his occupation of the premises, there is unlawful detainer. It is enough that the plaintiff is the owner of the land and that the defendant is in temporary occupation thereof whether under a lease contract or on mere tolerance or under a temporary permit.

Laureano vs. Adil 72 SCRA 148 FACTS: Mrs. Laureano is the registered owner of Lots 996 and 1004-B with a total area of 3,107 square meters in Iloilo City. The lots were leased to Ong Cu for a fifteen year period which allegedly expired on August 31, 1974.

PROPERTY Case Digests PART III Right of Accession

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Under Article 448 of the Civil Code, where the owner of the land on which anything has been built in good faith may appropriate the building after payment of the indemnity provided in articles 546 and 548 of the Civil Code, only applies to a case where one builds on land of which he honestly claims to be the owner and not to lands wherein one's only interest is that of a lessee under a rental contract. A contrary rule would place it within the power of the lessee "to improve his landlord out of his property". The lessee knows at the outset that he is not the owner of the land. The interlocutory orders of the lower court were set aside. Balucanag vs. Francisco 122 SCRA 265 FACTS: The petitioner bought a lot owned by Mrs.Charvet which was then previously leased by the latter to one Richard Stohner. The said lease contract provided that the lessee may erect structures and improvements which shall remain as lessee's property and he may remove them at any time. It further provided that should the lessee fail to remove the same structures or improvements withing two months after the expiration of the lease, the lessor may remove them or cause them to be removed at the expense of the lessee. Stohner made fillings on the land and constructed a house. When he failed to pay the rent, the petitioner, through counsel, sent Stohner a demand letter ordering him to vacate the lot. The lessee contended that he is a 'builder in good faith.' ISSUE: Is the lessee a builder in good faith? RULING: No, the lessee cannot be considered a builder in good faith. The provision under Art. 448 of the New Civil Code (Philippine) on a builder of good faith applies only to the owner of the land who believes he is the rightful owner thereof, but not to a lessee who's interest in the land is derived only from a rental contract. Neither can Stohner be considered a 'possessor in good faith'. A possessor in good faith is a party who possesses property believing that he is its rightful owner but discovers later on a flaw in his title that could indicate that he might not be its legal owner. It cannot apply to a lessee because he knows right from the start that he is merely a lessee and not the owner of the premises. As a mere lessee, he introduces improvements to the property at his own risk such that he cannot recover from the owner the reimbursements nor he has any right to retain the premises until reimbursements. What applies in this case is Art. 1678 (NCC) which provides that, " if the lessee, makes, in good faith, useful improvements which are suitable to the use for which the lease is intended, without altering the form or substance of the property leased, the lessor upon the termination of the lease shall pay the lessee 1/2 of the value of the improvements at the time. Should the lessor refuse to reimburse said amount, the lessee may remove the improvements even though the principal thing may suffer damage thereby. He shall not. however, cause any more impairment upon the property leased than is necessary."

predeceased the mother) and consummated while Restitutawas already married to her husband Juan Pombuena. On 22 January 1935, Juan filed an application of Torrens title over the land for himself and his supposed co-owner Restituta. On 22 November 1938, a decision waspromulgated (GLRC 1638, Cadastral Case 12) pronouncing Juan (married toRestituto) as the owner of the land. On 22 September 1949 a contract of lease over the lot was entered into between Pershing Tan Queto and Restituta (with the consent of her husband) for a period of 10 years. Meanwhile, On 27 December 1960 Restituta sued Tan Queto for unlawful detainer (the lease contract having expired) before the Municipal Court of Ozamis City. On 22 April 1962, as a consequence of the cadastral case, an OCT was issued in Juans name. On 10 October 1962, Tan Queto and Juan entered into a barter agreement whereby Tan Queto became the owner of the disputed lot, and the spouses in turn became the owners of a parcel of land with the house constructed thereon previously owned (that is, before the barter) by Tan Queto. Thereafter, Tan Queto constructed on the disputed land a concrete building, without any objection on the part of Restituta. The Municipal court ruled in favor of the spouses in the unlawful detainer case; but on appeal in the CFI, the entire case was dismissed because of an understanding (barter) entered into by Juan and Tan Queto. Restituta sued both Juan and Tan Queto for reconveyance of the title over the registered but disputed lot, for annulment of the barter, and for recovery of the land with damages. The CFI and the Court of Appeals found the disputed lot as paraphernal and that Tan Queto was a builder in bad faith. These findings were regarded by the Supreme Court as findings of facts and thus ordinarily conclusive upon the Court. Tan Queto filed for amotion for reconsideration of the Supreme Court decision dated 16 May 1983. The Supreme Court set aside its decision promulgated on 16 May 1983, and rendered a new one declaring the questioned lot together with the building thereon, as Tan Quetos exclusive property; without costs. Important Ruling: Tan Queto recognized Restituta as an owner, not the owner. The Chapter on Possession (jus possessionis, not juspossidendi) in the Civil Code refers to a possessor other than the owner. The difference between a builder (or possessor) in good faith and one in bad faith is that the former is not aware of the defect or flaw in his title or mode of acquisition while the latter is aware of such defect or flaw (Art. 526, Civil Code). But in either case there is a flaw or defect. In the present case, there is no such flaw or defect because it is Tan Queto himself (not somebody else) who is the owner of the property.

Manotok Realty vs. CA 134 SCRA 325(?) Tan Queto vs. CA 122 SCRA 206 G.R. No.L-35648, February 27, 1987 FACTS: Restituta Tagalinar Guangco de Pombuena received the questioned lot (Lot 304-B of the Cadastre Survey of the Municipality of Centro, Misamis Occidental) either as a purported donation or by way of purchase on 11 February 1927 for P50.00 as the alleged consideration thereof. The transaction took place during her mothers lifetime (her father having
PROPERTY Case Digests PART III Right of Accession

Manotok Realty v. Tecson 164 SCRA 587 FACTS: After a denial of its motion for reconsideration, the petitioner filed the present petition for mandamus alleging that the respondent judge committed grave abuse of discretion in denying his motion to exercise option and for execution of judgment on the grounds that under Articles 448 and 546 of
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the Civil Code, the exercise of option belongs to the owner of the property, who is the petitioner herein, and that upon finality of judgment, the prevailing party is entitled, as a matter of right, to its execution which is only a ministerial act on the part of the respondent judge. On April 15, 1978, the private respondent filed his comment on the petition alleging that the same has already become moot and academic for two reasons: first, fire gutted not only the house of the private respondent but the majority of the houses in Tambunting Estate; and second, as a result of the said fire, the then First Lady and Metro Manila Governor Imelda R. Marcos has placed the disputed area under her Zonal Improvement Project, thereby allowing the victims of the fire to put up new structures on the premises, so that the willingness and readiness of the petitioner to exercise the alleged option can no longer be exercised since the subject-matter thereof has been extinguished by the fire. Furthermore, the President of the Philippines has already issued a Presidential Decree for the expropriation of certain estates in Metro Manila including the Tambunting Estate. Therefore, the beneficient and humanitarian purpose of the Zonal Improvement Project and the expropriation proceeding would be defeated if petitioner is allowed to exercise an option which would result in the ejectment of the private respondent. As stated earlier, the petitioner argues that since the judgment of the trial court has already become final, it is entitled to the execution of the same and that moreover, since the house of the private respondent was gutted by fire, the execution of the decision would now involve the delivery of possession of the disputed area by the private respondent to the petitioner. ISSUE: Whether or not the respondent has the right of retention? HELD: The respondent judge is hereby ordered to immediately issue a writ of execution ordering the private respondent to vacate the disputed premises and deliver possession of the same to the petitioner. Thus, the repairs and improvements introduced by the said respondents after the complaint was filed cannot be considered to have been built in good faith, much less, justify the denial of the petitioners fai-rn of option. Since the improvements have been gutted by fire, and therefore, the basis for private respondents right to retain the premises has already been extinguished without the fault of the petitioner, there is no other recourse for the private respondent but to vacate the premises and deliver the same to herein petitioner.

PROPERTY Case Digests PART III Right of Accession

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