Depra vs.

Dumlao, May 16, 1985

Pure questions of law.

Facts:

Depra, is the owner of a parcel of land registered under Transfer Certificate of Title. Dumlao owns an adjoining
lot. In 1972, when DUMLAO constructed his house on his lot, the kitchen thereof had encroached on DEPRA's
property, After the encroachment was discovered in a relocation survey of DEPRA's lot, his mother, after
writing a demand letter asking DUMLAO to move back from his encroachment, filed an action for Unlawful
Detainer in 1973 against DUMLAO.

After trial, MTC found that DUMLAO was a builder in good faith, and applied Article 448 of the CC (builder
in good faith the right to compel the landowner to choose between: to appropriate the building by paying the
indemnity required by law; or to sell the land to the builder.) No party appealed, but DEPRA didn’t accept
payment of rentals so that DUMLAO deposited such rentals with the MTC. In 1974, DEPRA filed a Complaint
for Quieting of Title against DUMLAO before RTC.

Rebutting the argument of res judicata relied upon by DUMLAO, DEPRA claims that the Decision of MTC
was null and void ab initio because its jurisdiction is limited to the sole issue of possession, whereas decisions
affecting lease, which is an encumbrance on real property, may only be rendered by RTC.

Issue: WON the Decision of the MTC is valid. NO

Held:

The judgment in a detainer case is effective in respect of possession only. The MTC over-stepped its bounds
when it imposed upon the parties a situation of "forced lease", which like "forced co-ownership" is not favored
in law. Furthermore, a lease is an interest in real property, jurisdiction over which belongs to RTC. Since the
MTC, acted without jurisdiction, its Decision was null and void and cannot operate as res judicata to the subject
complaint for Queting of Title. Besides, even if the Decision were valid, the rule on res judicata  would not
apply due to difference in cause of action.

Consistent with the principle that our Court system must be a dispute resolving mechanism, we accord legal
effect to the agreement of the parties, within the context of their mutual concession and stipulation. They have
chosen a legal formula to resolve their dispute to appeal ply to DUMLAO the rights of a "builder in good faith"
and to DEPRA those of a "landowner in good faith" as prescribed in Article 448.

Pursuant to the Builders in good faith under Art. 448, DEPRA has the option either to pay for the encroaching
part of DUMLAO's kitchen, or to sell the encroached portion of his lot to DUMLAO. He can’t refuse to pay for
the encroaching part of the building, and to sell the encroached part of his land, as he had manifested before the
MTC. But that manifestation is not binding because it was made in a void proceeding.

However, the good faith of DUMLAO is part of the Stipulation of Facts in the CFI. It was thus error for the
Trial Court to have ruled that DEPRA is "entitled to possession," of the disputed portion implying thereby that
he is entitled to have the kitchen removed. He is entitled to such removal only when, after having chosen to sell
his encroached land, DUMLAO fails to pay for the same.  In this case, DUMLAO had expressed his willingness
to pay for the land, but DEPRA refused to sell.

Remanded to the RTC for further proceedings consistent with Articles 448 and 546 of the CC, as follows:

1. The trial Court shall determine: a) the present fair price of DEPRA's portion of land; b) the amount of the
expenses spent by DUMLAO for the building of the kitchen; c) the increase in value ("plus value") which the
said area of portion may have acquired by reason thereof, d) whether the value of said area of land is
considerably more than that of the kitchen built thereon.
Del Campo vs. Abesia, April 15, 1988

Question of law involved

Facts:

This case involves a parcel of land, with an area of only about 45 sqm. An action for partition was filed by Del
Campo in the CFI. Parties are co-owners pro indiviso of this lot in the proportion of 1/3 share each. The trial
court appointed a commissioner in accordance with the agreement of the parties, who conducted a survey and
submitted a report to the trial court recommending that the property be divided into 2 lots: The 1 st with an area
of 30 square meters for Del Campo and 2 nd with an area of 15 square meters for Abesia. The house of Abesia
occupied the portion with an area of 5 sqm of Del Campo. The parties manifested their conformity to the report
and asked the trial court to finally settle and adjudicate who among the parties should take possession of the 5
square meters of the land in question.

Issue: WON the provisions of Article 448 of the Civil Code relating to a builder in good faith when the property
involved is owned in common is applicable. NO

Held:

The court a quo  correctly held that Article 448 can’t 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 3 rd person under the circumstances, and the situation is governed
by the rules of co-ownership.

However, when the co-ownership is terminated by the partition and it appears that the house of Abesia occupies
a portion of 5 sqm of the land pertaining to Del Campo which Abesia obviously built in good faith, then the
provisions of Article 448 should apply.

Del Campo has the right to appropriate said portion of the house of Abesia upon payment of indemnity to
Abesia as provided for in Article 546. Otherwise, Del Campo may oblige Abesia 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 Abesia built thereon, then Abesia 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, Abesia may remove the said portion of their
house, at their own expense, if they so decide.

The decision appealed from is hereby MODIFIED by ordering Del Campo to indemnify defendants for the
value of the portion of the house of Abesia in accordance with Article 546 of the Civil Code, if Del Campo elect
to appropriate the same. Otherwise, the Abesia shall pay the value of the 5 sqm of land occupied by their house
at such price as may be agreed upon with Del Campo and if its value exceeds the portion of the house that
Abesia built thereon, they may choose not to buy the land but Abesia must pay a reasonable rental for the use of
the portion of the land of Del Campo’s As may be agreed upon between the parties. In case of disagreement, the
rate of rental shall be determined by the trial court. Otherwise, defendants may remove or demolish at their own
expense the said portion of their house.
Mercado vs. CA, June 10, 1988

Facts:

The private respondents, Bulaong Group, had been individual lessees of stalls in the public market from 1956-
1972. The market was destroyed by fire in 1956, and they 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, the Mercado Group. After the Mercado Group had been in
possession of the market stalls for some months, as sub-lessees of the Bulaong Group, the municipal officials
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 Municipal
Ordinance No. 14, which prohibited the sub-leasing of stalls by the lessees thereof, as well as a directive of the
President requiring enforcement of said Ordinance. 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 to recover them from any person
withholding possession thereof from them.

In 1975, respondent Judge rendered a summary judgment in all the cases, 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 No. 14;
they were thus in  pari 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.

Issue: Whether the trial court erred in declaring the members of the Bulaong group builders in good faith
entitling them to retain possession of the stalls and whether such error may be remedied by a certiorari. YES

Held:

There is no question that the Mercado Group had failed to perfect an appeal from the summary judgement
within the reglementary period fixed by the Rules of Court. They made no serious effort to explain and excuse
the tardiness of their appeal.
Bulaong group is 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. 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 are
suitable 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.”

But this error does not go to the Trial Court's jurisdiction. It is an error in the exercise of jurisdiction, which
may be corrected by the ordinary recourse of appeal, not by the extraordinary remedy of certiorari. It is an error
that in the premises can no longer be set aright. In the case at bar, the petitioners lost their right to appeal by
failing to avail of it seasonably. To remedy that loss, they have resorted to the extraordinary remedy
of certiorari, as a mode of obtaining reversal of the judgment from which they failed to appeal. This cannot be
done. The judgment was not in any sense null and void ab initio, incapable of producing any legal effects
whatever, which could never become final, and execution of which could be resisted at any time and in any
court it was attempted.
PNB vs. de Jesus

Philippine National Bank disputes the decision handed down by the CA. The assailed decision has affirmed the
judgment rendered by the RTC, declaring de Jesus as being the true and lawful owner of the lot with TCT and
ordering the bank to vacate the premises, to deliver possession thereof to de Jesus, and to remove the
improvement thereon.

De Jesus filed a complaint against PNB with RTC for recovery of ownership and possession, with damages,
over the questioned property. De Jesus stated that he had acquired a parcel of land and caused a verification
survey of the property and discovered that the northern portion of the lot was being encroached upon by a
building of PNB to the extent of 124 sqm. PNB refused to vacate despite demands. PNB assailed that when it
acquired the lot and the building in 1981 from then Mayor Ignacio, the encroachment already was in existence
and to remedy the situation, Mayor Ignacio offered to sell the area in question. The sale, however, did not
materialize when, without the knowledge and consent of PNB, Mayor Ignacio later mortgaged the lot to the
Development Bank of the Philippines.

Issues: WON CA erred in adjudging PNB a builder in bad faith over the property and in not applying Art. 448.
NO

Held:

Applied: Article 448. Article 449. Article 450.

A builder in good faith can compel the landowner to make a choice between appropriating the building by
paying the proper indemnity or obliging the builder to pay the price of the land. The choice belongs to the
owner of the land, a rule that accords with the principle of accession. Even as the option lies with the
landowner, the grant to him is preclusive. He much choose one. He cannot, for instance, compel the owner of
the building to instead remove it from the land. In order, however, that the builder can invoke that accruing
benefit and enjoy his corresponding right to demand that a choice be made by the landowner, he should be able
to prove good faith on his part.

Good faith is an intangible and abstract quality with no statutory definition, and it encompasses, among other
things, an honest belief, the absence of malice and the absence of design to defraud or to seek an
unconscionable advantage. An individuals personal good faith is a concept of his own mind and, therefore, may
not conclusively be determined by his protestations alone. It implies honesty of intention, and freedom from
knowledge of circumstances which ought to put the holder upon inquiry. 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.

PNB 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 refers to a piece of land whose ownership is claimed by two or
more parties, one of whom has built some works 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.

PNB is not in a valid position to invoke the provisions of Article 448. The Court commiserates with petitioner
in its present predicament; upon the other hand, respondent, too, is entitled to his rights under the law,
particularly after having long been deprived of the enjoyment of his property. Nevertheless, the Court expresses
hope that the parties will still be able to come up with an arrangement that can be mutually suitable and
acceptable to them.
Bachrach vs. Siefert

The deceased Bachrach, who left no forced heir except his widow Mary, in his last will and testament made
various legacies in cash and willed the remainder of his estate to his wife Mary.( all the fruits and usufruct of
the remainder of the estate after payment of the legacies, bequests, and gifts provided for above; and may enjoy
said usufruct and use or spend such fruits as she may in any manner wish.) The will further provided that upon
the death of Mary, ½ of the all his estate shall be divided share and share alike by his legal heirs, to the
exclusion of his brothers.

The estate of Bachrach owns of 108,000 shares of stock of the Atok-Big Wedge Mining Co., received from the
latter 54,000 shares representing 50% stock dividend on the said 108,000 shares. Mary, 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 Bachrach, to her the said 54,000 share of stock dividend by endorsing 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. Siefert and 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 admits that a cash dividend is an income, they contend that a stock dividend is not, but merely
represents an addition to the invested capital. The Massachusetts rule, which prevails in certain jurisdictions in
the US, supports appellants' contention. It regards cash dividends, however large, as income, and stock
dividends, however made, as capital.

The Pennsylvania rule, which prevails in various other jurisdictions in the US, supports appellee's contention.
This rule declares that all earnings of the corporation made prior to the death of the testator stockholder belong
to the corpus of the estate, and that all earnings, when declared as dividends in whatever form, made during the
lifetime of the usufructuary or life tenant.

Issue: Is a stock dividend fruit or income, which belongs to the usufructuary, or is it capital or part of the corpus
of the estate, which pertains to the remainderman? FRUITS

Held:

We think the Pennsylvania rule is more in accord with our statutory laws. Under section 16 of our Corporation
Law, no corporation may make or declare any dividend except from the surplus profits arising from its business.
Any dividend, whether cash or stock, represents surplus profits. Article 471 of the Civil Code provides that the
usufructuary shall be entitled to receive all the natural, industrial, and civil fruits of the property in usufruct.
And articles 474 and 475 provide.

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.

In favor of appellee.
Bachrach vs. Talisay-Silay

Facts:

Bachrach Motor Co., filed a complaint against the Talisay-Silay Milling Co., for the delivery of the amount
P13,850 or promissory notes or other instruments or credit for that sum payable in 1930, as bonus in favor of
Ledesma; the complaint further prays that the sugar central be ordered to render an accounting of the amounts it
owes Ledesma by way of bonus, dividends, and to pay Bachrach a sum sufficient to satisfy the judgment
mentioned in the complaint, and that the sale made by Ledesma be declared null and void.

PNB filed a 3rd party claim alleging a preferential right to receive any amount which Ledesma might be entitled
to from the Talisay-Silay Milling Co. as bonus, because that would be civil fruits of the land mortgaged to said
bank by said debtor for the benefit of the central referred to, and by virtue of a deed of assignment, and praying
that said central be ordered to delivered directly to the intervening bank said sum on account of the latter's credit
against Ledesma.

Talisay-Silay Milling Co. answered stating that Ledesma's credit belonged Cesar Ledesma because he had
purchased it, and praying that it be absolved from the complaint and that the proper party be named so that the
remainder might be delivered. Cesar Ledesma, in turn, claiming to be the owner by purchase in good faith
which is a part of the credit referred to above, answered praying that he be absolved from the complaint.

ISSUE: Whether or not the bonus in question is civil fruits. NO

Held:
Under Article 355 of the Civil Code considers 3 things as civil fruits: (1) the rents of buildings; (2) the proceeds
from leases of lands; and (3) the income from perpetual or life annuities, or other similar sources of revenue.
According to the context of the law, the phrase “u otras analogas” refers only to rents or income, for the
adjectives “otras” and “analogas” agree with the noun “rentas,” as do also the other adjectives “perpetuas” and
“vitalicias.” The “civil fruits” the Civil Code understands one of three and only three things, to wit: the rent of a
building, the rent of land, and certain kinds of income.

As the bonus in question is not rent of a building or of land, the only meaning of "civil fruits" left to be
examined is that of "income."The amount of the bonus, according to the resolution of the central granting it, is
not based upon the value, importance or any other circumstance of the mortgaged property, but upon the total
value of the debt thereby secured, according to the annual balance, which is something quite distinct from and
independent of the property referred to. As the bonus is not obtained from the land, it is not civil fruits of that
land. It is neither rent of buildings, proceeds from lease of lands, or income under Article 355 of the Civil Code.

This is how the bonus came to be granted: On December 22, 1923, the Talisay-Silay Milling Co., Inc., was
indebted to the Philippine National Bank. To secure the payment of its debt, it succeeded in inducing its
planters, among whom was Mariano Ledesma, to mortgage their land to the creditor bank. And in order to
compensate those planters for the risk they were running with their property under the mortgage, the aforesaid
central, by a resolution passed, undertook to credit the owners of the plantation thus mortgaged every year with
a sum equal to 2 per centum of the debt secured according to yearly balance, the payment of the bonus being
made at once, or in part from time to time, as soon as the central became free of its obligations to the aforesaid
bank, and of those contracted by virtue of the contract of supervision, and had funds which might be so used, or
as soon as it obtained from said bank authority to make such payment.

Assuming that in broad juridical sense of the word "income" it might be said that the bonus in question is
"income" under article 355 of the Civil Code, it is obvious to inquire whether it is derived from the land
mortgaged by Mariano Ledesma to the appellant bank for the benefit of the central; for it is not obtained from
that land but from something else, it is not civil fruits of that land, and the bank's contention is untenable.
Sps. Benitez vs. CA, January 16, 1997

Facts:

In 1986, spouses Benitez purchased a 303-square-meter parcel of land with improvement from the Cavite
Development Bank. Subsequently, private respondents spouses Macapagal bought a 361-square-meter lot.
Spouses Macapagal filed a Civil Case in RTC against spouses Benitez for the recovery of possession of an
encroached portion of the lot they purchased. The parties were able to reach a compromise in which spouses
Macapagal sold the encroached portion to spouses Benitez at the acquisition cost of 1k/sqm.

In 1989, spouses Macapagal purchased still another property, a 285.70 square-meter-lot, adjacent to that of Sps.
Benitez. After a relocation survey was conducted, the former discovered that some 46.50 square meters of their
property was occupied by Sps. Benitez’s house. Despite demands, Sps. Benitez refused to vacate.

In 1990, sps. Macapagal filed for ejectment against sps. Benitez. The MeTC decided in favor of sps. Macapagal.
RTC affimed this decision

Issue: Whether the possession of the portion of Macapagal’s land encroached by Benitez’s house can be
recovered through an action of ejectment, not accion publiciana. NO

Held:

MeTC Has Jurisdiction. After conducting a relocation survey, sps. Macapagal discovered that a portion of their
land was encroached by sps. Benitez’s house; notices to vacate were sent to them; and sps. Macapagal filed the
ejectment suit within 1 year from the last demand. Sps. Macapagals’ cause of action springs from Sec. 1, Rule
70 of the Revised Rules of Court.

The award is not rental, but damages. Damages are recoverable in ejectment cases under Section 8, Rule 70 of
the Revised Rules of Court. These damages arise from the loss of the use and occupation of the property, and
not the damages which private respondents may have suffered but which have no direct relation to their loss of
material possession. Damages is limited to "rent" or "fair rental value" for the use and occupation of the
property.

Option To Sell Belongs To Owner. Article 448 of 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. 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.
Filipinas College Inc. vs. Garcia Timbang
Facts:
This is an appeal taken from an order of the CFI in 1957, 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, spouses Timbang, shall pay to, Gervacio Blas directly or through the Sheriff the sum that
spouses Timbang had bid for the building at the Sheriff’s sale, and in declaring the Filipinas Colleges owner
of the undivided interest in Lot No. 2-a covered by a certificate of tile, on which the building sold in the auction
sale is situated; and in ordering the sale in public auction of the said undivided interest of the Filipinas Colleges,
in lot No. 2-a aforementioned to satisfy the unpaid portion of the judgment in favor of Blas and against Filipinas
Colleges in the amount of P8,200.00 minus the sum of P5,750.00.
The order appealed from is the result of 3 motions filed in the court a quo in the course of the execution of a
final judgment of CA rendered in 2 cases appealed to it in which the spouses Timbang, the Filipinas Colleges,
and Gervacio Blas were the parties. 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 Blas the amount of their bid made at the
public auction. Sps. Timbang 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, the builder has lost his right and the
appellants as owners of the land automatically became the owners ipso facto.

Issues: 1.) WON 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.) WON 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. NO for both

Held:

Cited Arts. 448 and 546. Useful expenses shall be refunded only to the possessor in good faith with the same
right of retention the person who has defeated him in the possession having the option of refunding the amount
of the expenses or of paying the increase in value which the thing may have acquired by reason thereof.

The conclusion of sps. Timbang 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
is untenable. The question is: what is the recourse or remedy left to the parties in such eventuality where the
builder fails to pay the value of the land? While the Code is silent on this point, guidance may be derived from
other decisions of SC: "A builder in good faith may not be required to pay rentals. He has a right to retain the
land on which he has built in good faith until he is reimbursed the expenses incurred by him. Possibly he might
be made to pay rental only when the owner of the land chooses not to appropriate the improvement and
requires the builder in good faith to pay for the land but that the builder is unwilling or unable to pay the land,
and then they decide to leave things as they are and assume the relation of lessor and lessee, and should they
disagree as to the amount of rental then they can go to the court to fix that amount.”
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 is entitled to have the improvement removed when after having chosen to sell his land to the other
party.

2nd contention is with no merit. In the instant case, CA has already adjudged that 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 Filipinas Colleges 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 spouses Timbang to pay to the Sheriff
or Blas said sum of P5,750.00 within 15 days from notice of the final judgment, an order of execution shall
issue in favor of Blas to be levied upon all properties of the Timbang spouses not exempt from execution for the
satisfaction of the said amount. The properties of the Timbang spouses not exempt from execution for the
satisfaction of the said amount.

Under the terms of Articles 448 and 546, it is true that 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 2nd 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’s nothing in the language of these 2 articles which would justify the conclusion that, upon the failure of
the builder to pay the value of the land, when such is demanded by the landowner, the latter becomes
automatically the owner of the improvement under Article 445.

Bernardo vs. Bataclan, November 28, 1938

Facts:

By a contract of sale executed from Pastor Samonte and others ownership of a parcel of land. To secure
possession of the land from the vendors Bernardo in 1929, instituted a Civil Case in the CFI. Trial Court found
for Bernardo in a decision which was affirmed by SC on appeal. When Bernardo entered upon the premises, he
found 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 the civil case, Bernardo, in 1931, instituted against him a
civil case. In this case, Bernardo was declared owner but the Bataclan was held to be a possessor in good faith,
entitled to reimbursement for work done and improvements made.

In 1934, Bernardo 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." The defendant
informed the lower court that he was unable to pay the land. The court below, at the instance of Bernardo and
without objection on the part of Bataclan, ordered the sale of the land in question at public auction. The land
was sold in 1935 to Teodoro, the highest bidder.

Issue: WON Bataclan is a possessor in good faith, hence, entitled to retain the land and be paid the amount for
improvements made on the land. NO

Held:

The Civil Code confirms certain time-honored principles of the law of property. One of these is the principle of
accession whereby the owner of property acquires not only that which it produces but that which is united to it
either naturally or artificially. Whatever is built, planted or sown on the land of another, and the improvements
or repairs made thereon, belong to the owner of the land. Where, however, 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 what Manresa calls a state of "forced coownership", 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.

Bataclan has lost his right of retention. In obedience to the decision of this court in G.R. No. 37319, Bernardo
expressed his desire to require Bataclan to pay for the value of the land. Bataclan could have become owner of
both land and improvements and continued in possession thereof. But he said he could not pay and the land was
sold at public auction to 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, Bataclan lost his right of retention.
Sarmiento vs. Agana, April 30, 1984
Facts:
While ERNESTO was still courting his wife, the latter's mother had told him the couple could build a
RESIDENTIAL HOUSE on a lot of 145 sq. ms., being Lot D of a subdivision. In 1967, ERNESTO did
construct a RESIDENTIAL HOUSE on the LAND at a cost of P8,000.00 to P10,000.00. It was probably
assumed that the wife's mother was the owner of the LAND and that, eventually, it would somehow be
transferred to the spouses.

It subsequently turned out that the LAND had been titled in the name of Mr. & Mrs. Jose Santo, Jr. who, in
1974, sold the same to SARMIENTO. In 1975, SARMIENTO asked ERNESTO and wife to vacate and filed an
Ejectment suit against them. In the evidentiary hearings before the Municipal Court, SARMIENTO submitted
the deed of sale of the LAND in her favor, which showed the price to be P15,000.00. On the other hand,
ERNESTO testified that the then cost of the RESIDENTIAL HOUSE would be from P30,000.00 to P40,000.00.
The figures were not questioned by SARMIENTO.

The Municipal Court found that the spouses had built the RESIDENTIAL HOUSE in good faith, and,
disregarding the testimony of ERNESTO, that it had a value of P20,000.00. It then ordered ERNESTO and wife
to vacate the LAND after SARMIENTO has paid them the mentioned sum of P20,000.00. The Ejectment suit
was elevated to the CFI where said Court rendered a modifying Decision under Article 448 of the Civil Code.
SARMIENTO was required, within 60 days, to exercise the option to reimburse ERNESTO and wife the sum of
40,000.00 as the value of the RESIDENTIAL HOUSE, or the option to allow them to purchase the LAND for
P25,000.00. SARMIENTO didn’t exercise any of the 2 options within the indicated period, and ERNESTO was
then allowed to deposit the sum of P25,000.00 with the Court as the purchase price for the LAND.

Issue: Can the owner compel the owner of the building to remove the improvement from the land where it is
erected and to refuse to pay for the building and/or to sell the land? NO

 Held:

ERNESTO and wife were builders in good faith in view of the peculiar circumstances under which they had
constructed the RESIDENTIAL HOUSE. As far as they knew, the LAND was owned by ERNESTO's mother-
in-law who, having stated they could build on the property, could reasonably be expected to later on give them
the LAND.

As correctly held by the lower court: “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
546. The owner, of the land. Upon, the other hand, has the option, under Article 448, 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.”
Laureano vs. Adil, July 29, 1976
Facts:

Mrs. Laureano is the registered owner of 2 lots with a total area of 3,107 square meters. The lots were leased to
Ong Cu for 15 year period which allegedly expired in 1974. In view of Ong Cu's failure to vacate the lots and
The city 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 12 perc%  per annum from the date of accrual.

Instead of filing a supersedeas bond based on the findings of the city court in its decision, Ong Cu asked the city
court ex parte to approve his supersedeas bond in the sum of P22,000 and to fix the rental value of the 2 lots at
P1,200 a month.

The purpose of the supersedeas bond is to secure payment of the rents and damages adjudged in the appealed
judgment. It answers only for rentals was in the judgment and not for those that may accrue during the
pendency of the appeal which are guaranteed by the periodical deposits to be made by the defendant. The
damages contemplated in section 8 of Rule 70 refer to the reasonable compensation for the use and occupation
of the property which is generally measured by its fair rental value. Attorney's fees cannot be considered as
damages. Ong Cu didn’t file any supersedeas bond or did not make any monthly deposit, then Mrs. Laureano
would be entitled as a matter of right to the immediate execution of the city court's judgment both as to the
restoration of possession and the payment of the accrued rentals or compensation for the use and occupation of
the premises.

Article 1674 is reproduced in section 9 of Rule 70. Article 539 in its 2 nd paragraph grants to the possessor, who
was deprived of the possession of his real property through forcible entry, the right to secure from an inferior
court in the action for forcible entry a writ of preliminary mandatory injunction to restore him in his
possession. It’s in consonance with the summary character of an ejectment suit which is an expeditious means
for recovering possession of real property but the effectiveness of which was often frustrated by defendant's
dilatory tactics which were tolerated by inferior courts.

Issue: Whether Ong Cu is a possessor in good faith entitled to reimbursement of the necessary and useful
expenses incurred by him and with a right of retention. NO.

Held:

The expiration of lease and Mrs. Laureano's refusal to renew it made Ong Cu a deforciant or an unlawful with
holder of the possession of the lots. He has become a possessor in bad faith. The rule is that if after the
termination of the lease contract the lessee prolongs his occupation of the premises, there is unlawful detainer.
As a lessee, who constructed a building on the leased land, Ong Cu can’t be characterized as a builder in good
faith. Under article 448, 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.

Article 448 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. It does not apply to the lessee
because the lessee knows at the outset that he is not the owner of the land.

Ong Cu's rights with respect to the improvements made by him on the leased land. Under article 1678 it is the
lessor who has the option to pay for ½ of the value of the improvements which the lessee has made in good
faith, which are suitable for the use for which the lease is intended and which have not altered the form and
substance of the land

Contrary to the lower courts impression, the lessee has no right of retention because article 546 of the Civil
Code does not apply to the improvements made by him. Only the possessor in good faith has a right of retention
under article 546. As already noted, article 1671 regards an overstaying lessee as a possessor in bad faith.
Balucanag vs. Francisco, May 30, 1983

Facts:

Cecilia dela Cruz Charvet was the owner of a 177.50 square meter lot. In 1952, Charvet leased said lot to
respondent Stohner for a period of 5 years with a monthly rental. The lessee may erect such buildings upon and
make such improvements to the leased land as he see fit. All such buildings and improvements shall remain the
property of the lessee and he may remove them at any time, it being agreed, however, that should he not remove
the said buildings and improvements within a period of 2 months after the expiration of their Agreement, the
Lessor may remove the buildings and improvements or cause them to be removed at the expense of the Lessee.

During the existence of the lease, Stohner made fillings on the land and constructed a house thereon, said
improvements being allegedly valued at P35,000.00. In 1966, Charvet sold the said lot to petitioner Balucanag.

For Stohner's failure to pay the rents, Balucanag, wrote Stohner a letter demanding that he vacate the premises.
In reply thereto, Stohner claimed that he was a builder in good faith of the residential house erected in the land.
As no agreement was reached, Balucanag instituted an ejectment suit against Stohner.

Issue: Whether Stohner was a builder in good faith? NO

Held:

Stohner doesn’t assail the validity of the above stipulation nor advanced any reason why he should not be bound
by it. But even in the absence of said stipulation, respondent Stohner can’t be considered a builder in good faith
for there is no dispute that the relation between Balucanag and Stohner is that of lessor and lessee, the former
being the successor in interest of the original owner of the lot. A lessee who introduces improvements in the
leased premises, does so at his own risk in the sense that he cannot recover their value from the lessor, much
less retain the premises until such reimbursement.

The law applicable to the case at bar is Article 1678 which gives the lessor the option to appropriate the useful
improvements by paying 1/2 of their value, and the lessee cannot compel the lessor to appropriate the
improvements and make reimbursement, for the lessee's right under the law is to remove the improvements
even if the leased premises may suffer damage thereby. But he shall not cause any more damage upon the
property than is necessary.

One last point. It appears that while the lease contract entered into by Stohner and Mrs. Charvet had expired on
August 31, 1957, he nevertheless continued in possession of the premises with the acquiescence of Mrs.
Charvet and later, of Balucanag. The duration of the new lease must be deemed from month to month, the
agreed rental in the instant case being payable on a monthly basis. The lessor may thus terminate the lease after
each month with due notice upon the lessee. After such notice, the lessee's right to continue in possession ceases
and his possession becomes one of detainer. Furthermore, Stohner's failure to pay the stipulated rentals entities
petitioner to recover possession of the premises.
Tan Queto vs. CA, February 27, 1987

Facts:

Restituta received the questioned lot either as a purported donation or by way of purchase in 1927 for P50.00 as
the alleged consideration thereof. The transaction took place during her mother’s lifetime and consummated
while Restituta was already married to her husband Juan Pombuena. In 1935, Juan filed an application of
Torrens title over the land for himself and his supposed co-owner Restituta. In 1938, a decision was
promulgated pronouncing Juan (married to Restituto) as the owner of the land. In 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.

In 1960, Restituta sued Tan Queto for unlawful detainer (the lease contract having expired) before the
Municipal Court. As a consequence of the cadastral case, an OCT was issued in Juan’s name. In 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.
CFI and CA 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 in 1983.

Issues: (1) Is the questioned lot paraphernal or conjugal? (2) In having constructed the building on the lot,
should TAN QUETO be regarded as a builder in good faith (and hence entitled to reimbursement) or a builder
in bad faith (with no right to reimbursement)? NO
Held:
The land is conjugal, not paraphernal. The oral donation of the lot cannot be a valid
donation interviews because it was not executed in a public instrument, 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 can’t be sustained for the contractual
transmission of future inheritance is generally prohibited. The fact is ownership was acquired by both  JUAN
and RESTITUTA by delivery as a consequence of the contract of sale. 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). The contention that the sale was fictitious or
simulated is bankrupt: 1) there was a valid consideration therefor. 2) assuming that there had indeed been a
simulation, the parties thereto can’t use said simulation to prejudice a stranger.
There’s no admission of Restituta’s exclusive ownership. 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 Queto to the rights of a builder in good faith hence, reimbursement should be given
him if Restituta decides to appropriate the building for herself.

However, Tan Queto 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) who 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. Tan Queto is a builder-possessor (jus possidendi) because he is
the owner himself.

The Chapter on Possession 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). 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, January 3, 1985

Facts:

Manotok Realty is the registered owner of a parcel of land. It acquired the aforementioned property from the
Testate Estate of Tambunting de Legarda, being the highest bidder in a sale conducted by the Probate Court.
After having acquired said property, Manotok Realty subdivided it, but could not take possession thereof
because the whole area is occupied by several houses among which is the one belonging to Carillo. Demands to
vacate and to surrender possession of the property were made by the Manotok Realty verbally and by
publication but Carillo refused to vacate.

On the other hand, Carillo’s evidence tends to show that he acquired the lot in dispute from a certain Dayrit in
1962, pursuant to a deed of assignment, which the latter acquired from Tambunting by virtue of a Contract of
Sale on Installment Basis. Dayrit couldn’t continue paying the succeeding installments as they fen due because
Legarda, the surviving spouse of Tambunting, refused to receive any payment for the same and that it was only
lately when Dayrit conveyed the lot to Carillo. After the Manotok Realty failed in its attempts to take
possession of the lot, it filed the reivindicatory action against Carillo.

Issues: WON Carillo is a possessor and builder in good faith. YES

Held:

A possessor in good faith is one who is not aware that there exists in his title or mode of acquisition any flaw
which invalidates it. One who acquires real estate with knowledge of a defect or lack of title in his vendor
cannot claim that he has acquired title thereto in good faith as against the true owner of the land or of an interest
therein; and the same rule must be applied to one who has knowledge of facts which should put a reasonable
man upon his guard, and then claims that he acted in good faith under the belief that there was no defect in the
title of the vendor.

The records show that when Dayrit executed the deed of' assignment in favor of Carillo, the disputed lot was
already registered and titled in the name of Manotok Realty. Such an act of registration served as a constructive
notice to the whole world and the title issued in favor of petitioner made his ownership conclusive upon and
against all persons including Dayrit and Carillo although no personal notice was served on either of the latter.
Therefore, the presumption of good faith in favor of Carillo can’t apply because as far as the law is concerned,
he had notice of the ownership by the petitioner over said lot. Furthermore, Carillo didn’t even bother to inquire
about the certificate of title covering the lot in question to verify who was the real owner thereof, despite the
fact that Dayrit never showed him any title thereto; a circumstance which should have put him upon such
inquiry or investigation. His failure to exercise that measure of precaution which was reasonably required of a
prudent man in order to acquaint him with the defects in the title of his vendor precludes him from claiming
possession in good faith.
Manotok Realty vs. CA, April 30, 1987
Facts:

The private respondent Madlangawa claims that he has been occupying a parcel of land in the Clara de
Tambunting de Legarda Subdivision since 1949 upon permission being obtained from Ladores, then an overseer
of the subdivision, with the understanding that he would eventually buy the lot.

In 1950, Tambunting died and her entire estate, including her paraphernal properties which covered the lot
occupied by the private respondent were placed under custodia legis. Madlangawa made a deposit for the said
lot which was received by Legarda, husband of the late owner. Madlangawa didn’t pay or was unable to pay
this balance because after the death of the testatrix, Tambunting, her heirs could not settle their differences.
Apart from the initial deposit, no further payments were made from 1950.

Don Vicente Legarda was appointed as a special administrator of the estate. Meanwhile the Madlangawa
remained in possession of the lot in question. Subsequently, Manotok Realty became the successful bidder and
vendee of the Subdivision in the special proceeding with the Manila probate court. The lot in dispute was one of
those covered by the sale.

In its effort to clear the Subdivision of its squatters and occupants, Manotok Realty caused the publication of
several notices, advising the occupants to vacate their respective premises, otherwise, court action with damages
would follow. In addition to these notices by publication, Manotok Realty sent circulars to the occupants to
vacate. The Madlangawa was one of the many occupants who refused to vacate the lots they were occupying, so
that in 1968, the Manotok Realty filed the action below to recover the said lot.

Issue: Whether Don Vicente Legarda could validly dispose of the paraphernal property? NO

Held:

It is an undisputed fact that the lot in dispute is the paraphernal property of Tambunting and that at the time of
the sale thereof, the owner was already dead. There is nothing in the records that wig show that Don Legarda
was the administrator of the paraphernal properties of Tambunting during the lifetime of the latter. Thus, it
cannot be said that the sale which was entered into by the Madlangawa and Don Legarda had its inception
before the death of Tambunting and was entered into by the former for and on behalf of the latter, but was only
consummated after her death. Don Legarda, therefore, couldn’t have validly disposed of the lot in dispute as a
continuing administrator of the paraphernal properties of Dona Tambunting.

The sale between Don Legarda and Madlangawa is void ab initio, the former being neither an owner nor
administrator of the subject property. Such being the case, the sale can’t be the subject of the ratification by the
Philippine Trust Company or the probate court.

After the appointment of Don Legarda as administrator of the estate of Dona Tambunting, he should have
applied before the probate court for authority to sell the disputed property in favor of Madlangawa. If the
probate court approved the request, then Don Legarda would have been able to execute a valid deed of sale in
favor of Madlangawa.

Considering the location of the disputed lot, we find a monthly rental of P.20/ sqm. to be more than fair to the
Madlangawa for his use of the premises. Manotok Realty should return the P 1,500.00 received by Mr. Legarda,
with legal interest, to the respondent.