FIRST DIVISION

[G.R. No. 149295. September 23, 2003.]

PHILIPPINE NATIONAL BANK , petitioner, vs . GENEROSO DE JESUS,

represented by his Attorney-in-Fact, CHRISTIAN DE JESUS ,
respondent.

The Chief Legal Counsel for petitioner.

Rolando V. Zubiri for private respondent.

SYNOPSIS

Respondent Generoso de Jesus led a complaint against petitioner Philippine

National Bank (PNB) for recovery of ownership and possession over the northern portion
of the lot which he acquired which was being encroached upon by a building of the
petitioner. In its answer, petitioner asserted that when it acquired the lot and building from
Mayor Bienvenido Ignacio, the encroachment was already in existence and to remedy the
situation, Mayor Ignacio offered to sell the area in question but it did not materialize when
Mayor Ignacio mortgaged the lot to the Development Bank of the Philippines. After trial,
the court a quo decided in favor of respondent. It was a rmed by the Court of Appeals. In
this petition, the petitioner claimed that the Court of Appeals gravely erred in law in
adjudging PNB as a builder in bad faith over the encroached property in question. AcCTaD

The Court ruled that given the ndings of both the trial court and the appellate court,
it should be evident enough that petitioner would fall much too short from its claim of
good faith. 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 signi cant 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, elsewhere
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. " Petitioner was not in a valid position to invoke
the provisions of Article 448 of the Civil Code. Consequently, the decision of the Court of
Appeals was affirmed.

SYLLABUS

1. CIVIL LAW; PROPERTY; BUILDER IN GOOD FAITH; OPTION OF THE

LANDOWNER IS PRECLUSIVE. —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, i.e., that the accessory follows the
principal and not the other way around. Even as the option lies with the landowner, the
grant to him, nevertheless, is preclusive. He must choose one. He cannot, for instance,
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 compel the owner of the building to instead remove it from the land. In order, however, that
the builder can invoke that accruing bene t 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.
2. ID.; ID.; ID.; 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. — 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. "
3. ID.; ID.; GOOD FAITH; ELUCIDATED. — Good faith, here understood, is an
intangible and abstract quality with no technical meaning or statutory de nition, 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 individual's
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. The essence of
good faith lies in an honest belief in the validity of one's 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 aw
which invalidates it.
4. ID.; ID.; ID.; NOT PRESENT IN CASE AT BAR. — Given the ndings of both the
trial court and the appellate court, it should be evident enough that petitioner would fall
much too short from its claim of good faith. 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.

DECISION

VITUG , J : p

Petitioner Philippine National Bank disputes the decision handed down by the Court
of Appeals promulgated on 23 March 2001 in CA-G.R. CV No. 56001, entitled "Generoso
De Jesus, represented by his Attorney-in-Fact, Christian De Jesus, versus Philippine
National Bank." The assailed decision has a rmed the judgment rendered by the Regional
Trial Court, Branch 44, of Mamburao, Occidental Mindoro, declaring respondent Generoso
de Jesus as being the true and lawful owner of the 124-square-meter portion of the land
covered by Transfer Certi cate of Title (TCT) No. T-17197 and ordering petitioner bank to
vacate the premises, to deliver possession thereof to respondent, and to remove the
improvement thereon.
It would appear that on 10 June 1995, respondent led a complaint against
petitioner before the Regional Trial Court of Occidental Mindoro for recovery of ownership
and possession, with damages, over the questioned property. In his complaint, respondent
stated that he had acquired a parcel of land situated in Mamburao, Occidental Mindoro,
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 with an area of 1,144 square meters covered by TCT No. T-17197, and that on 26 March
1993, he had caused a veri cation 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, in its answer, 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 of the disputed 124-square-meter portion of the lot and ordering petitioner
to surrender possession of the property to respondent and to cause, at its expense, the
removal of any improvement thereon.
The Court of Appeals, on appeal, sustained the trial court but it ordered to be
deleted the award to respondent of attorney's fees, as well as moral and exemplary
damages, and litigation expenses.
Petitioner went to this Court, via a petition for review, after the appellate court had
denied the bank's motion for reconsideration, here now contending that —
"1. THE COURT OF APPEALS GRAVELY ERRED IN LAW IN ADJUDGING
PNB A BUILDER IN BAD FAITH OVER THE ENCROACHED PROPERTY IN
QUESTION;

"2. THE COURT OF APPEALS GRAVELY ERRED IN LAW IN NOT

APPLYING IN FAVOR OF PNB THE PROVISION OF ARTICLE 448 OF THE CIVIL
CODE AND THE RULING IN TECHNOGAS PHILIPPINES MANUFACTURING CORP.
VS. COURT OF APPEALS, G.R. No. 108894, February 10, 1997, 268 SCRA 7." 1

The Regional Trial Court and the Court of Appeals have both rejected the idea that
petitioner can be considered a builder in good faith. In the context that such term is used in
particular 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 various provisions of the Civil Code, pertinent to the subject, read:
"Article 448. The owner of the land on which anything has been built, sown,
or planted in good faith, shall have the right to appropriate as his own the works,
sowing or planting, after payment of the indemnity provided for in Articles 546
and 548, or to oblige the one who built or planted to pay the price of the land, and
the one who sowed, the proper rent. However, the builder or planter cannot be
obliged to buy the land if its value is considerably more than that of the building
or trees. In such a case, he shall pay reasonable rent, if the owner of the land does
not choose to appropriate the building or trees after proper indemnity. The parties
shall agree upon the terms of the lease and in case of disagreement, the court
shall fix the terms thereof."

"Article 449. He who builds, plants, or sows in bad faith on the land of
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 another, loses what is built, planted or sown without right to indemnity."
"Article 450. The owner of the land on which anything has been built,
planted or sown in bad faith may demand the demolition of the work, or that the
planting or sowing be removed, in order to replace things in their former condition
at the expense of the person who built, planted or sowed; or he may compel the
builder or planter to pay the price of the land, and the sower the proper rent."

A builder in good faith can, under the foregoing provisions, 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, i.e., that the accessory follows the
principal and not the other way around. 2 Even as the option lies with the landowner, the
grant to him, nevertheless, is preclusive. He must choose one. He cannot, for instance,
compel the owner of the building to instead remove it from the land. 3 In order, however,
that the builder can invoke that accruing bene t 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, here understood, is an intangible and abstract quality with no technical
meaning or statutory de nition, 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 individual's 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. 4 The essence of good faith lies in an honest belief in the validity of one's
right, ignorance of a superior claim, and absence of intention to overreach another. 5
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. 6
Given the ndings of both the trial court and the appellate court, it should be evident
enough that petitioner would fall much too short from its claim of good faith. 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 signi cant 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." 7
In ne, petitioner is not in a valid position to invoke the provisions of Article 448 of
the Civil Code. 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.
WHEREFORE, the decision of the Court of Appeals in CA-G.R. CV No. 56001 is
AFFIRMED. No costs.
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 SO ORDERED.
Davide, Jr., C .J ., Ynares-Santiago and Carpio, JJ ., concur.
Azcuna, J ., on sick leave.

Footnotes

1. Rollo, p. 12.
2. Depra vs. Dumlao, G.R. No. L-57348,16 May 1985, 136 SCRA 475.
3. Ignacio vs. Hilario, 76 Phil. 605; Sarmiento vs. Agana, G.R. No. L-57288, 30 April 1984,
129 SCRA 122; Tecnogas Philippines Manufacturing Corp. vs. Court of Appeals, G.R. No.
108894, 10 February 1997, 268 SCRA 7.

4. Black's Law Dictionary, Abridged Fifth Edition, p. 353.

5. Bernardo vs. Bernardo, 96 Phil. 202; Negrete vs. CFI of Marinduque, G.R. No. L-31267, 24
November 1972,48 SCRA 113.
6. Article 526, Civil Code of the Philippines.
7. Pecson vs. Court of Appeals, G.R. No. 115814, 26 May 1995, 244 SCRA 407.

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