[G.R. No. 149295. September 23, 2003]PHILIPPINE NATIONAL BANK, petitioner, vs.

GENEROSO DE JESUS

FACTS:

Respondent filed a complaint against petitioner before the Regional Trial Court of Occidental Mindoro
for recovery of ownership and possession, with damages, over the questioned property. On 26 March
1993, he had caused a verification survey of the property and discovered that the northern portion of
the lot was being encroached upon by a building of petitioner to the extent of 124 square meters.
Despite two letters of demand sent by respondent, petitioner failed and refused to vacate the area

Petitioner asserted that when it acquired the lot and the building sometime in 1981 from then Mayor
Bienvenido Ignacio, the encroachment already was in existence and to remedy the situation, Mayor
Ignacio offered to sell the area in question (which then also belonged to Ignacio) to petitioner at
P100.00 per square meter which offer the latter claimed to have accepted. The sale, however, did not
materialize when, without the knowledge and consent of petitioner, Mayor Ignacio later mortgaged the
lot to the Development Bank of the Philippines.

The trial court decided the case in favor of respondent declaring him to be the rightful owner. The Court
of Appeals sustained the trial court.

ISSUE: W/N PETITIONER IS A BUILDER IN GOOD FAITHHELD:

In reference to Article 448, et seq., of the Civil Code, a builder in good faith is one who, not being the
owner of the land, builds on that land believing himself to be its owner and unaware of any defect in his
title or mode of acquisition. The essence of good faith lies in an honest belief in the validity of ones right,
ignorance of a superior claim, and absence of intention to overreach another. Applied to possession,
one is considered in good faith if he is not aware that there exists in his title or mode of acquisition any
flaw which invalidates it. Evidently, petitioner was quite aware, and indeed advised, prior to its
acquisition of the land and building from Ignacio that a part of the building sold to it stood on the land
not covered by the land conveyed to it. Equally significant is the fact that the building, constructed on
the land by Ignacio, has in actuality been part of the property transferred to petitioner. Article 448, of
the Civil Code refers to a piece of land whose ownership is claimed by two or more parties, one of whom
has built some works (or sown or planted something) and not to a case where the owner of the land is
the builder, sower, or planter who then later loses ownership of the land by sale or otherwise for,
elsewise stated, where the true owner himself is the builder of works on his own land, the issue of good
faith or bad faith is entirely irrelevant.

In fine, petitioner is not in a valid position to invoke the provisions of Article 448 of the Civil Code

Balucanag v Francisco Digest

Facts of the Case:
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."

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-2-storey 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 land is also the builder of the works on his own land who later
on loses ownership by sale or donation.
> 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.]

DAMIAN IGNACIO, FRANCISCO IGNACIO and LUIS IGNACIO, petitioners,
vs.
 ELIAS HILARIO and his wife
DIONISIA DRES, and FELIPE NATIVIDAD, Judge of First Instance of Pangasinan, respondents.

Facts:

This is a petition for certiorari arising from a case in the Court of First Instance of Pangasinan between
the herein respondents Elias Hilario and his wife Dionisia Dres as plaintiffs, and the herein petitioners
Damian, Francisco and Luis, surnamed Ignacio, as defendants, concerning the ownership of a parcel of
land, partly rice-land and partly residential.

After the trial of the case, the lower court, presided over by Hon. Alfonso Felix, rendered judgment
holding plaintiff Hilario, as the legal owners of the whole property but conceding to defendants, Ignacio,
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.

The plaintiff, Hilario, 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 defendant, Ignacio, should be
ordered to remove the structure at their own expense and to restore plaintiff in the possession of said
lot.

Issue:

W/N Plaintiff, Hilario, can validly opt not to buy the house nor sell the land, but instead order the
removal of those structures that Ignacio built in good faith.

Ruling:

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, 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.

ALEJANDRO QUEMUEL and RUPERTA SOLIS v.ANGEL S. OLAES and JULIANA PRUDENTEG.R. No. L-11084
April 29, 1961Nature

Appeal from the order of the trial court dismissing the complaint of plaintiffs to compel respondents to
reduce the monthly rental and to sell to the former the portion of the lot where the plaintiffs’ house was
erected

Facts

The Olaes spouses sued in the CFI of Cavite the Quemel spouses for recovery of possession of a parcel of
land. The Quemel spouses admitted plaintiffs’ ownership but contended that their occupation was
gratuitous. In 1954, the trial court ordered the Quemel spouses to return the possession of the land to
the Olaes spouses and to pay the latter Php20.00 a month from January 1954, until they shall have
vacatedthe premises. The Quemel, to forestall execution of the judgment, filed a complaint against the
Olaes spouses seeking to reduce the monthly rental and to compel shoelaces spouses to sell to them the
portion of the lot. But the trial court granted the motion to dismiss filed by Olaes spouses, to which the
Quemel spouses appealed from, and as certified by the appellate court the appeal went to the Supreme
Court.

Issue
Can the Quemel spouses invoke as their basis of cause of action Article 448 in connection with Article
546 of the Civil Code?

Held
No. The decision appealed from is affirmed.

Ratio
A cursory reading of these provisions, however, will show that they are not applicable to plaintiffs' case.
Under Article 448, the 1) right to appropriate the works or improvements or 2) 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. This is assuming that the
plaintiffs are builders in good faith.

But the plaintiffs are not builders in good faith. From the pleadings and the documentary evidence
submitted, it is indisputable that the land in question originally belonged to the government as part of
the Friar Lands Estate and the title thereto was in the name of the government, until it was purchased
by Agapita Solis who applied, thru the Bureau of Lands, to purchase the land by installments. The
corresponding Sale Certificate No. 531,effective July 1, 1909 was executed. In defendants' complaint
before the CFI, they alleged that they are the owners of lot and that plaintiffs, have been occupying
southeastern half portion thereof, without any right thereto, except the tolerance of defendants, which
were admitted expressly and under oath, in the answer of plaintiffs herein. It would, therefore, appear
that plaintiffs herein were not unaware of the flaw in their title, if any, and that their true relation with
the herein defendants was that of tenant and landlord, and that their rights are governed by Article
1573 in relation to article487 of the old Civil Code.*

It can clearly be inferred that plaintiffs cannot compel the defendants to pay for the improvements the
former made on the property or to sell the latter's land.Plaintiffs' only right, is to remove improvements,
if it is possible to do so, without damage to the land.

*Art. 1573. A lessee shall have with respect to useful a voluntary improvements, the same right which are granted
the usufructuaries. Art. 487. The usufructuary may make on the property in usufruct any improvements, useful or
recreative,which may deem proper, provided he does not change its form or substance, but he shall have no right
tobe indemnified thereof. He may, however, remove such improvements, should it possible to do so without injury
to the property

Francisco Depra vs Agustin Dumlao

136 SCRA 475 – Civil Law – Property – Accession Industrial – Builder in Good Faith; Owner in Good Faith – Forced
Lease
Remedial Law – Res Judicata – Unlawful Detainer will not bar a subsequent action for Quieting of Title

The properties of Francisco Depra and Agustin Dumlao were adjoining each other. In 1972, Dumlao built his house
however, he unwittingly built the kitchen portion of his house on Depra’s land. Depra then sued Dumlao for
unlawful detainer. During pre-trial, the parties agreed that Dumlao was a builder in good faith.

Eventually, the trial court ruled that both parties were in good faith but then a forced lease was ordered whereby
Dumlao retains the kitchen but he shall pay a rental to Depra at P5.00 per month. But Depra refused to receive the
rental payments from Dumlao, instead, Depra filed an action for quieting of title against Dumlao. In his defense,
Dumlao raised the defense of res judicata considering that the nature and purpose of the initial unlawful detainer
case and that of the subsequent quieting of title case is ejectment.

ISSUES:

1. Whether or not the order of forced lease decreed in the unlawful detainer case is valid.

2. Whether or not the subsequent case of res judicata is barred by prescription due to the prior case of unlawful
detainer.

HELD:

1. No. The judgment of forced lease is improper. A forced lease, just like co-ownership is not favored. It should be
considered that the parties themselves stipulated that Dumlao, the builder, was in good faith and it was later
found that Depra, the owner, was also in good faith. Hence, what applies is the provisions of Article 448 of the Civil
Code, which provides in sum that:
a. Builder in good faith – entitled to retain the possession of the land on which he built in good faith until he is paid
the value of the building he built in good faith;

b. Owner in good faith – has the option to either (i) pay for the building OR (ii) sell his land to the builder in good
faith but builder cannot be forced to buy said land if the same is considerably more than the value of the building.

Forced rent only comes in if the owner exercises his right to sell the land but the builder rejects it by reason of the
price thereof being considerably more than the value of the building – in such case, the parties shall agree to the
terms of the lease, if they can’t agree then they may bring the issue to court.

2. No. The action for quieting of title is not barred by reason of res judicata. The cause of action in the unlawful
detainer case involves possession while the cause of action in the quieting of title case involves ownership.
Furthermore, the Rules of Court explicitly provides that judgment in a detainer case shall not bar an action
between the same parties respecting title to the land.

Reynante v. CA
More than 50 years ago, petitioner Jose Reynante was taken as tenant of thelate Don Cosme Carlos over a
fishpond. During his tenancy, Jose Reynanteconstructed a nipa hut where his family resided and took care of nipa
palmswhich he planted on lots 1 and 2.

Petitioner harvested and sold the nipa palms without interference and prohibition from anybody. However, after
the death of Don Cosme Carlos,petitioner was made to surrender the fishpond and all his rights therein byvirtue of
the “Sinumpaang Salaysay ng Pagsasauli ng Karapatan” with a P200kconsideration by the heirs of Don Cosme.

The respondents, heirs of Don Cosme, leased the fishpond to Carlos dela Cruz while petitioner continued to live in
the nipa hut he constructed on lots 1 and 2and took care of the nipa palms he planted thereto.

Formal demand to vacate was made but petitioner refused or failed to vacate. Thus, a complaint for forcible entry
was instituted by the private respondents.

ISSUE:
Who has prior physical possession of the property?
WON accretion benefits the owners.

RULLING:Petitioner proved prior possession for more than 50 years. What was surrendered was the fishpond and
his rights thereon not the “sasahan” where he built his hut. It was found out that Lots 1 & 2 were created by
alluvial formation and properties of the respondents by accretion. However, failure of the respondents to register
said accretion for more than 50 years subjected said accretion to acquisition through prescription by third persons.
Reynante has a better right to the accretions.

G.R. NO. 170923 JANUARY 20, 2009SULO SA NAYON, INC. VS

NAYONG PILIPINOFOUNDATION
FACTS: In 1975, respondent leased a portion of the Nayong Pilipino Complex, to petitioner Sulo sa Nayon, Inc. for
the construction and operation of a hotel building, to be known as the Philippine Village Hotel. The lease was for
an initial period of 21 years, or until May 1996. It is renewable for a period of 25years under the same terms and
conditions upon due notice in writing to respondent of the intention to renew.

In 1995, petitioners sent respondent a letter notifying the latter of their intention to renew the contract for
another. July of the same year, parties agreed to the renewal of the contract for another 25years, or until 2021.
Under the new agreement, petitioner PVHI was bound to pay the monthly rentals beginning January 2001,
petitioners defaulted in the payment of their monthly rental. Respondent repeatedly demanded petitioners to pay
the arrears and vacate the premises.

MeTC rendered its decision in favor of respondent RTC which modified the ruling of the MeTC. CA which held that
the RTC erroneously applied the rules on accession, as found in Articles 448 and 546 of the Civil Code

ISSUE: WON Sulo sa Nayon as builders have acted in good faith in order for Art. 448 in relation to Art.546 of the
Civil Code may apply with respect to their rights over improvements. HELD: Article 448 is manifestly intended to
apply only to a case where one builds, plants, or sows on land in which he believes himself to have a claim of title
and not to lands where the only interest of the builder, planter or sower is that of a holder, such as a tenant.

In the case at bar, petitioners have no adverse claim or title to the land. In fact, as lessees, they recognize that the
respondent is the owner of the land. What petitioners insist is that because of the improvements, which are of
substantial value that they have introduced on the leased premises with the permission of respondent they should
be considered builders in good faith who have the right to retain possession of the property until reimbursement
by respondent.

We affirm the ruling of the CA that introduction of valuable improvements on the leased premises does not give
the petitioners the right of retention and reimbursement which rightfully belongs to a builder in good faith.
Otherwise, such a situation would allow the lessee to easily "improve" the lessor out of its property. We reiterate
the doctrine that a lessee is neither a builder in good faith nor in bad faith that would call for the application of
Articles 448and 546 of the Civil Code. His rights are governed by Article 1678 of the Civil Code.

[G.R. No. L-25462. February 21, 1980.] MARIANO FLOREZA, petitioner, vs. MARIA D. de EVANGELISTA
and SERGIO EVANGELISTA, respondents.

Facts: Evangelistas are the owners of a residential lot located at Sumilang St., Tanay, Rizal. They
borrowed from FLOREZA the amount of P100.00 they consented FLOREZA to occupy the above
residential lot and built thereon a house of light materials (barong-barong) without any agreement as to
payment for the use of said residential lot owing to the fact that the EVANGELISTAS has then a standing
loan of P100.00 in favor of FLOREZA.
Evangelistas again borrowed to Floreza amounting (September 16, 1946 - P100.00; August 17, 1947 —
P200.00; January 30, 1949 — P200.00; April 1, 1949 — P140.00) to P740 including the first loan. Last
three items was in private document and the residential lot as a security and it is payable within 6 years
from date without mention of interest.
FLOREZA demolished this house of light materials and in its place constructed one of strong materials
assessed in his name and paid no rental. Evangelistas for and in consideration of P1,000.00 representing
the total outstanding loan of P740.00 plus P260.00 in cash, sold their residential lot to FLOREZA, with a
right to repurchase within a period of 6 years from date and it was notarized. 7 months after, they paid
in full the repurchased price of 1,000.
Evangelistas counsel wrote a letter to Floreza to vacate the premises. They also made a formal written
demand to vacate, within five days from notice, explaining that they had already fully paid the
consideration for the repurchase of the lot. Floreza refused unless he is paid reimbursement value of his
house.
Evangelistas filed complaint. They prayed that they be declared the owners of the house of strong
materials built by FLOREZA on their residential lot, without payment of indemnity; or, in the alternative
to order FLOREZA to remove said house; that Floreza pay P10.00per month as value of the use and
occupation of the land and to declare the transaction between them and FLOREZA as one of mortgage
and not of pacto de retro
FLOREZA admitted the repurchase but controverted by stating that he would execute a deed of
repurchase and leave the premises upon payment to him of the reasonable value of the house worth
P7,000.00

Ruling of CFI:
Court of First Instance of Rizal opined that the question of whether the transaction between the parties is one of
mortgage or pacto de retro is no longer material as the indebtedness of P1,000.00 of the EVANGELISTAS to
FLOREZA had already been fully paid. CFI applied Article 448 of the Civil Code.

Ruling of CA: Court of Appeals concluded that Article 448 of the Civil Code was inapplicable; that
FLOREZA was not entitled to reimbursement for his house but that he could remove the same at his
expense; and accordingly rendered judgment.

Petitioner Maria D. de Evangelista died and was ordered substituted by her son, petitioner Sergio, as her
legal representative during the appeal. It was confirmed that Floreza died and the removal of the house
and manifested that thereby the question of reimbursement had become moot and academic. Sergio
then filed a Motion to Dismiss stating that FLOREZA had since died and that his heirs had voluntarily
vacated the residential lot in question. He then clarified that the dismissal they were praying for was not
of the entire case but only of this Petition for Review on Certiorari.

ISSUE:
 WON Court of Appeals erred in declaring that petitioner is not entitled to reimbursement for the value
of his house and that he should instead remove the same at his expense and it becomes moot upon
death of Floreza
 WON Court of Appeals erred in not applying Art. 448 of the New Civil Code in the adjudication of the
rights of petitioner and respondent.
 WON Court of Appeals erred in holding that petitioner Floreza was a builder in bad faith without
likewise holding that respondents as owners of the land in dispute
 WON Court of Appeals erred in adjudging petitioner to vacate respondents' lot in question and to pay
rentals
Ruling:
 NO, Petitioner's right of retention of subject property until he is reimbursed for the value of his house,
as he had demanded, is inextricably linked with the question of rentals. For if petitioner has the right to
indemnity, he has the right of retention and no rentals need be paid. Conversely, if no right of retention
exists, damages in the form of rentals for the continued use and occupation of the property should be
allowed.
 NO, Said codal provision applies only when the builder, planter, or sower believes he had the right so
to build, plant or sow because he thinks he owns the land or believes himself to have a claim of title. 13
In this case, petitioner makes no pretensions of ownership whatsoever.
 NO, Article 448 of the same Code is not applicable, neither is Article 453 under the ambiance of this
case. Floreza is not, as vendee a retro, entitled to the rights granted in Article 1616 of the Civil Code.
Floreza cannot be classified as a builder in good faith within the purview of Article 448 of the Civil Code,
nor as a vendee a retro, who made useful improvements during the lifetime of the pacto de retro,
petitioner has no right to reimbursement of the value of the house which he had erected on the
residential lot of the EVANGELISTAS, much less to retention of the premises until he is reimbursed.

The rights of Floreza are more akin to those of a usufructuary who, under Article 579 of the Civil Code
(Art. 487 of the old- Code), may make on the property useful improvements but with no right to be
indemnified therefore. If the improvements made by the usufructuary were subject to indemnity, we
would have a dangerous and unjust situation in which the usufructuary could dispose of the owner's
funds by compelling him to pay for improvements which perhaps he would not have made.
 NO, it is clear that from the date that the redemption price had been paid by the EVANGELISTAS on
January 2, 1955, petitioner's right to the use of the residential lot without charge had ceased. Having
retained the property although a redemption had been made, he should be held liable for damages in
the form of rentals for the continued use of the subject residential lot at the rate of P10.00 monthly
from January 3, 1955, and not merely from the date of demand on May 4, 1956, as held by the Court of
Appeals, until the house was removed and the property vacated by petitioner or his heirs.

Tan Queto v. CA [G.R. No. L-35648. February 27, 1987.]; Resolution

En Banc, Paras (J): 10 concur, 1 votes to deny reconsideration, 1 dissents, 2 took no part

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 mother’s lifetime (her father having predeceased the mother) and consummated while
Restituta was 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 was promulgated (GLRC 1638, Cadastral Case 12) pronouncing Juan (married
to Restituto) 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 Juan’s 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 a motion 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 Queto’s exclusive property;
without costs.

1. Findings of the lower courts ordinary conclusive upon the Court; exception, if erroneous
The findings of the Court of First Instance and the Court of Appeals were regarded by the Supreme
Court as findings of facts and thus ordinarily conclusive upon the Court. Assuming they are factual
findings, still if they are erroneous inferences from certain facts, they cannot bind the Court.

2. Land not transferred to Restituta by donation, for it to be paraphernal

The oral donation of the lot cannot be a valid donation inter-vivos because it was not executed in a
public instrument (Art. 749, Civil Code), nor as a valid donation mortis causa for the formalities of a will
were not complied with. The allegation that the transfer was a conveyance to Restituta of her hereditary
share in the estate of her mother (or parents) cannot be sustained for the contractual transmission of
future inheritance is generally prohibited.

3. Land is conjugal, not paraphernal; Ownership by tradition

The land is conjugal, not paraphernal. Ownership was acquired by the spouses by tradition (delivery) as
a consequence of the contract of sale (See Art. 712, Civil Code) with P50.00 (then a considerable
amount) as the cause or consideration of the transaction. The lot is therefore conjugal, having been
acquired by the spouses thru onerous title (the money used being presumably conjugal, there being no
proof that Restituta had paraphernal funds of her own).

4. Sale not fictitious nor simulated; Allegation of simulation cannot prejudice a stranger
The sale cannot be said to be fictitious or simulated (and therefore void) as there was a valid
consideration therefor. Assuming that there had indeed been a simulation, the parties thereto cannot
use said simulation to prejudice a stranger to said strategem (like petitioner herein).

5. Tan Queto recognized Restituta as an owner, not the owner

Tan Queto admitted Restituta was “an owner” (not the owner) of the lot in his Answer, and this is true,
for she was a co-owner (with Juan, and therefore “an owner.”) There is no admission of Restituta’s
exclusive ownership.

6. Assuming Tan Queto recognized Restituta as the owner; bad faith of one neutralizes the bad faith of
the other
Even assuming that despite registration of the lot as conjugal, Tan Queto nursed the belief that the lot
was actually Restituta’s (making him in bad faith), still Restituta’s failure to prohibit him from building
despite her knowledge that construction was actually being done, makes her also in bad faith. The net
resultant of mutual bad faith would entitle Tan Qyeto to the rights of a builder in good faith (Art. 448,
Civil Code), ergo, reimbursement should be given him if Restituta decides to appropriate the building for
herself (Art. 448, Civil Code).

7. Tan Queto an owner-possessor

Tan Queto having bartered his own lot and small house with the questioned lot with Juan (who has been
adverted to by a court decision and by the OCT a conjugal owner) may be said to be the owner-
possessor of the lot. Certainly he is not merely a possessor or builder in good faith (this phrase
presupposes ownership in another); much less is he a builder in bad faith. He is a builder-possessor (jus
possidendi) because he is the owner himself.

8. Jus possessionis, jus possidendi; good faith and bad faith

The Chapter on Possession (jus possessionis, not jus possidendi) 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.
(taken from other source)