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.]

GEMINIANO v. CA

FACTS:

The lot in question was originally owned by the mother of the petitioner. Petitioner sold their unfinished
bungalow to the respondents for P6,000, with a promise to sell the lot to the latter. The property was
later leased to the respondents for 7 years starting November 1978 for P40 a month as evidenced by
their written lease contract. The respondents built their house and introduced some improvements in
the lot. In 1985 petitioner’s mother refused receiving monthly rentals. It turned out that the lot in
question was subject to litigation which resulted to its acquisition by Maria Lee which was sold to
Salcedo, who further sold to Dionisio spouses. The property eventually came back to the petitioner
when the Dinisio spouses executed a Deed of Quitclaim over the said property in favor of the
petitioners. As such, the lot was registered in the latter’s names. (petitioners never lost possession of
the land because Lee and company never issued a writ of possession against them).

In 1993, petitioners wrote a letter to respondents demanding them to vacate the premises and when
the latter refused, petitioners filed in court. Respondents claim that they should be entitled to buy the
land because of the promise of the petitioners to sell them the land and because they were builders in
Good faith. The courts now are deciding which one to use: Art. 448 regarding builders and land owners
in good faith or Art. 1678 regarding lessee in good faith who can be reimbursed half of the expenses of
the improvements if the LO chooses to appropriate them and that such lessee have the right to retain in
the premises until fully reimbursed.

ISSUES:

1) Whether or not the respondents were builders in Good faith?

2) Whether Art 448 or 1678 should be applied?

RULING:

1) No, they were not builders in good faith. The respondents knew that their stay would end after the
lease contract expires. They can’t bank on the promise, which was not in writing, of the petitioners that
the latter will sell the land to them. According to 1403, an agreement for the sale of real property or an
interest therein is unenforceable, unless some note or memorandum thereof be produced. Other than
the alleged promise by petitioner, respondents had no other evidence to prove their claim.

2) They are mere lessees in good faith; therefore Art 1678 may apply if the lessor chooses to appropriate
the improvements. But since the petitioners refused to exercise that option, the private respondents
can’t compel them to reimburse the one-half value of the house and improvements. Neither can they
retain the premises until reimbursement is made. The private respondents’ sole right then is to remove
the improvements without causing any more impairment upon the property leased than is necessary.

TECHNOGAS PHIL. v. CA

FACTS

Petitioner bought a lot together with the building and improvements including the wall which
encroached that of the defendant. Upon learning of such encroachment, petitioner offered to buy the
land but defendant refused.

After 2 years, through an agreement, petitioner agreed to demolish the wall (but the case did not state
what happened to this agreement, my assumption is that it did not happen due to conflicts that arose
after)

Defendant dug a canal along the wall which caused a portion of it to collapse. Petitioner filed a
supplemental complaint re the action and a separate criminal action of malicious mischief (which the
wife was convicted of)
RTC decided for the petitioners and the CA reversed. Note that respondent wants to have the wall
demolished.

ISSUES:

A. Whether or not petitioner is a builder in bad faith because it is 'presumed to know the metes and
bounds of his property.'
B. Whether or not amicable settlement was a proper remedy
C. Whether or not respondent can opt to demolish the structure without exercising the option to sell the
land to the petitioner and the latter cannot do buy the same

RULING: Petition was granted.

Good faith or Bad Faith – No such doctrinal statement that supports that the knowledge of metes and
bounds of a land due to the Torrens system would amount to bad faith if there was encroachment on
the land of another.

A. When the petitioner purchased the lot, the wall was already built. Even the respondent did not knew
about the encroachment until he has hired a surveyor.

B. Where one derives title to the property from another, the act, declaration, or omission of the latter,
while holding the title, in relation to the property, is evidence against the former. And possession in
good faith does not lose this character except when the possessor is aware of this impropriety.

C. The encroachment was very narrow which can be considered as a mere error. Remedy – the 
petitioner, despite being a purchaser of the original builder, can compel the landowner to either buy the
property or sell the piece of land because:

He was really unaware of the encroachment basing on the fact presented by both sides.

When the petitioner bought the land, he has stepped into the rights of the original owner (hence, the
right to compel the LO to buy or sell is also transferred)

Estoppel – Petitioner is not considered in estoppel only because it has previously agreed to demolish a
part of the wall. Rather, it was to be negotiated by the parties concern. In the meantime, petitioner has
to pay the rent for the property occupied by its building only up to the date when respondent serves
notice of their option. Case remanded back to the trial court for determination of the value of the land
and the number of days to allot for the respondent to choose an option.