G.R. No.

177881 October 13, 2010

EMMANUEL C. VILLANUEVA, vs.
CHERDAN LENDING INVESTORS CORPORATION
FACTS: Spouses Peñaredondo obtained from respondent Cherdan Lending
Investors Corporation a loan
secured by a real estate mortgage over a parcel of land. Despite demand,
spouses Peñaredondo failed to
pay the obligation. Hence, respondent extrajudicially foreclosed the
mortgage. Cherdan won the bid.
Upon the expiration of the redemption period, the title to the property was
consolidated and a new title
was issued in respondent’s name.
Writ of possession was issued for Cherdan, Emmanuel C. Villanueva
moved for the reconsideration of the
order and the setting aside of the writ of possession on the ground that
he is the owner and is in actual
possession of the subject property.
RTC granted Villanueva’s motion and ordered that the same be allowed
possession of the property
pending finality of decision of the matter. And writ of possession
previously issued in favor of Cherdan
was recalled.
Cherdan instituted a special civil action for certiorari before the CA. CA
granted the petition.
The CA held that the pendency of the case for annulment of the
foreclosure proceedings was not a bar
to the issuance of the writ of possession. The CA refused to apply Section
33, Rule 39 of the Rules of
Court, which authorizes the giving of possession of the property to the
purchaser or last redemptioner
unless a third party is actually holding the property adverse to the
judgment obligor, ratiocinating that
the provision applies only to execution sales and not to extrajudicial
foreclosures of real estate mortgage
under Act 3135.

G.R. No. 177881 October 13, 2010EMMANUEL C.

VILLANUEVA, vs.CHERDAN LENDING INVESTORS CORPORATION

FACTS:

Spouses Peñaredondo obtained from respondent Cherdan Lending

Investors Corporation a loan secured by a real estate mortgage over a
parcel of land. Despite demand, spouses Peñaredondo failed to pay the
obligation. Hence, respondent extrajudicially foreclosed the mortgage.
Cherdan won the bid. Upon the expiration of the redemption period, the
title to the property was consolidated and a new title was issued in
respondent’s name.

Writ of possession was issued for Cherdan, Emmanuel C. Villanueva

moved for the reconsideration of the order and the setting aside of the
writ of possession on the ground that he is the owner and is in actual
possession of the subject property. RTC granted Villanueva’s motion and
ordered that the same be allowed possession of the property pending
finality of decision of the matter. And writ of possession previously issued
in favor of Cherdan was recalled. Cherdan instituted a special civil action
for certiorari before the CA. CA granted the petition. The CA held that the
pendency of the case for annulment of the foreclosure proceedings was
not a bar to the issuance of the writ of possession. The CA refused to
apply Section 33, Rule 39 of the Rules of Court, which authorizes the
giving of possession of the property to the purchaser or last redemptioner
unless a third party is actually holding the property adverse to the
judgment obligor, ratiocinating that the provision applies only to execution
sales and not to extrajudicial foreclosures of real estate mortgage under
Act 3135.
Issue:

W/N a case for annulment of foreclosure is a bar to issuance of writ of

possession.

Held:

YES. It is settled that the buyer in a foreclosure sale becomes the absolute
owner of the property purchased if it is not redeemed within one year
after the registration of the sale. As such, he is entitled to the possession
of the property and can demand that he be placed in possession at any
time following the consolidation of ownership in his name and the
issuance to him of a new TCT.

Time and again, we have held that it is ministerial upon the court to issue
a writ of possession after the foreclosure sale and during the period of
redemption. Upon the filing of an ex parte motion and the approval of the
corresponding bond, the court issues the order for a writ of possession.
The writ of possession issues as a matter of course even without the filing
and approval of a bond after consolidation of ownership and the issuance
of a new TCT in the name of the purchaser.

This rule, however, is not without exception. Under Section 33, Rule 39 of
the Rules of Court, which is made to apply suppletory to the extrajudicial
foreclosure of real estate mortgages by Section 6, Act 3135,as amended,
the possession of the mortgaged property may be awarded to a purchaser
in the extrajudicial foreclosure unless a third party is actually holding the
property adversely to the judgment debtor.

Important: The purchaser’s right of possession is recognized only as

against the judgment debtor and his successor-in-interest but not against
persons whose right of possession is averse to the latter.

Bachrach v. Seifert [G.R. No. L-2659. October 12, 1950.]

Facts:
The deceased E. M. Bachrach, who left no forced heir except his widow
Mary McDonald Bachrach, in his last will and testament made various
legacies in cash and willed the remainder of his estate. The estate of E. M.
Bachrach, as owner of 108,000 shares of stock of the Atok-Big Wedge
Mining Co., Inc., received from the latter 54,000 shares representing 50
per cent stock dividend on the said 108,000 shares. On June 10, 1948,
Mary McDonald Bachrach, as usufructuary or life tenant of the estate,
petitioned the lower court to authorize the Peoples Bank and Trust
Company, as administrator of the estate of E. M. Bachrach, to transfer to
her the said 54,000 shares of stock dividend by indorsing and delivering to
her the corresponding certificate of stock, claiming that said dividend,
although paid out in the form of stock, is fruit or income and therefore
belonged to her as usufructuary or life tenant. Sophie Siefert and Elisa
Elianoff, legal heirs of the deceased, opposed said petition on the ground
that the stock dividend in question was not income but formed part of the
capital and therefore belonged not to the usufructuary but to the
remainderman. While appellants admit that a cash dividend is an income,
they contend that a stock dividend is not, but merely represents an
addition to the invested capital.

Issue:
Whether or not a dividend is an income and whether it should go to the
usufructuary.

Held:
The usufructuary shall be entitled to receive all the natural, industrial, and
civil fruits of the property in usufruct. The 108,000 shares of stock are
part of the property in usufruct. The 54,000 shares of stock dividend are
civil fruits of the original investment. They represent profits, and the
delivery of the certificate of stock covering said dividend is equivalent to
the payment of said profits. Said shares may be sold independently of the
original shares, just as the offspring of a domestic animal may be sold
independently of its mother. If the dividend be in fact a profit, although
declared in stock, it should be held to be income. A dividend, whether in
the form of cash or stock, is income and, consequently, should go to the
usufructuary, taking into consideration that a stock dividend as well as a
cash dividend can be declared only out of profits of the corporation, for if
it were declared out of the capital it would be a serious violation of the
law.
Under the Massachusetts rule, a stock dividend is considered part of the
capital and belongs to the remainderman; while under the Pennsylvania
rule, all earnings of a corporation, when declared as dividends in whatever
form, made during the lifetime of the usufructuary, belong to the latter.
The Pennsylvania rule is more in accord with our statutory laws than the
Massachusetts rule.

Bachrach Motors v. Talisay-Silay Milling [G.R. No. 35223.

September 17, 1931.]

Facts: 
On 22 December 1923, the Talisay-Silay Milling Co., Inc., was indebted to
the PNB. To secure the payment of its debt, it succeeded in inducing its
planters, among whom was Mariano Lacson Ledesma, to mortgage their
land to the bank. And in order to compensate those planters for the risk
they were running with their property under that mortgage, the aforesaid
central, by a resolution passed on the same date, and amended on 23
March 1928, undertook to credit the owners of the plantation thus
mortgaged every year with a sum equal to 2% of the debt secured
according to the 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 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.
<It seems Mariano Lacson Ledesma is indebted from Bachrach Motor; the
circumstance of which is not found in the case facts.>

Bachrach Motor Co., Inc. filed a complaint against the Talisay-Silay Milling
Co., Inc., for the delivery of the amount of P13,850 or promissory notes or
other instruments of credit for that sum payable on 30 June 1930, as
bonus in favor of Mariano Lacson Ledesma. The complaint further prays
that the sugar central be ordered to render an accounting of the amounts
it owes Mariano Lacson Ledesma by way of bonus, dividends, or
otherwise, and to pay Bachrach Motors a sum sufficient to satisfy the
judgment mentioned in the complaint, and that the sale made by said
Mariano Lacson Ledesma be declared null and void. The PNB filed a third
party claim alleging a preferential right to receive any amount which
Mariano Lacson Ledesma might be entitled from Talisay-Silay Milling as
bonus. Talisay-Silay answered the complaint that Mariano Lacson
Ledesma’s credit (P7,500) belonged to Cesar Ledesma because he had
purchase it. Cesar Ledesma claimed to be an owner by purchase in good
faith. At the trial all the parties agreed to recognize and respect the sale
made in favor of Cesar Ledesma of the P7,500 part of the credit in
question, for which reason the trial court dismissed the complaint and
cross-complaint against Cesar Ledesma authorizing the central to deliver
to him the sum of P7,500. And upon conclusion of the hearing, the court
held that the Bachrach Motor Co., Inc., had a preferred right to receive
the amount of P11,076.02 which was Mariano Lacson Ledesma’s bonus,
and it ordered the central to deliver said sum to Bachrach Motors. PNB
appealed.

ISSUE: Whether or not a “bonus” is a civil fruit.

Held: Negative – proceed to Number 2

1. Civil Fruits under Article 355 of the Civil Code

Article 355 of the Civil Code considers three things as civil fruits: First, the
rents of buildings;
second, the proceeds from leases of lands; and, third, 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.
2. Bonus not a civil fruit; not an income of the land
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.

VICENTE STO. DOMINGO BERNARDO vs. CATALINO BATACLAN

66 Phil 598 G.R. No. L-44606 November 28, 1938

Doctrine:

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 (art. 358). 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.

Facts: 1.

Bernardo learned when he entered into the premises of the property

purchased from Pastor Samonte that the latter authorised Catalino
Bataclan to make improvements thereon. In a civil case to secure
possession, the court ruled that Bataclan was a builder and possessor in
good faith and was entitled to reimbursement for the works and
improvements,

2.

The court gave the plaintiff 30 days within which to choose between the
sale of the land or to buy the works. Bernardo decided to sell the land to
the defendant but the latter informed the court that he is unable to pay
the sum required. The court then awarded the respondent 30 days to
purchase the land or else the property will be sold in a public auction.

3.

In the auction sale, Toribio Teodoro was the highest bidder for 8,000
Pesos. The purchaser sought judicial remedy for the possession of the
property.
Issue:

W/N the defendant lost his right to retain the property pending payment
for indemnity.

Decision:

The Court ruled that the right to retain the property has already been lost.
Due to the failure and inability of the defendant to pay the purchase price
the subject property was sold in a public auction which Bernardo asked
for, without any protest from Bataclan. Therefore, the court found no
reason to keep the property in the possession of the defendant. the Court
explained that Article 448 provides a just and equitable solution to the
impracticability of creating "forced co-ownership" 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. The owner of the land is allowed to
exercise the said options because his right is older and because, by the
principle of accession, he is entitled to the ownership of the accessory
thing.

Digest: Damian Ignacio, et. al.  vs Elias Hilario, et. al. , G.R. No. L-

175 [76 Phil 605] April 30, 1946

Civil Law – Property – Accession Industrial – Builder in Good Faith; Owner

in Good Faith

Facts: This is a civil suit between Elias Hilario and his wife Dionisia Dres,
and Damian, Francisco and Luis, surnamed Ignacio concerning the
ownership of a parcel of land, partly rice-land and partly residential.
Hilario was the owner of a parcel of land. He later discovered that Ignacio
built some buildings therein (a granary and a house) at the residential
portion of the lot. Hon. Alfonso Felix (Lower courts) presided over and
rendered the a judgment holding Hilario as the legal owners of the whole
property (owner in good faith) and conceded to Ignacio the ownership of
the houses and granaries built by them on the residential portion with the
rights of a possessor in good faith (builder in good faith), in accordance
with article 361 of the Civil Code.
Ruling of Court of First Instance of Pangasinan
(1) Ignacio are the owners of the whole property (transfer
certificate of title No. 12872) issued in their name, and entitled to
the possession of the same;
(2) Hilario are entitled to hold the position of the residential lot
until after they are paid the actual market value of their houses
and granaries erected thereon, unless Ignacio prefer to sell them
said residential lot, in which case Hilario shall pay the Ignacio the
proportionate value of said residential lot taking as a basis the
price paid for the whole land
(3) That upon Hilario’s failure to purchase the residential lot in
question, said defendants shall remove their houses and
granaries after this decision becomes final and within the period
of 60 days from the date that the court is informed in writing of
the attitude of the parties in this respect.
No pronouncement is made as to damages and costs.
Parties prayed for order of execution. The current presiding judge is now
Hon. Felipe Natividad. Hilario chose neither to pay Ignacio for the
buildings nor to sell to them the residential lot, said Ignacio should be
ordered to remove the structure at their own expense and to restore
plaintiffs in the possession of said lot, which was granted by the Court.
Issue: W/N owner in good faith, may eject a builder in good faith without
choosing either to appropriate the building for himself after payment of its
value or to sell his land to the builder in good faith.
Ruling: No. The owner in good faith has to make a choice. He cannot
dispense the options under the law and then eject the builder in good
faith. This is because both are in good faith.
 
ART. 361. The owner of land on which anything has been built,
sown or planted in good faith, shall have the right to appropriate
as his own the work, sowing or planting, after the payment of
the indemnity stated in articles 453 and 454, or to oblige the one
who built or planted to pay the price of the land, and the one
who sowed, the proper rent.
 
ART. 453. Necessary expenses shall be refunded to every
possessor; but only the possessor in good faith may retain the
thing until such expenses are made good to him.
Useful expenses shall be refunded 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
paying the increase in value which the thing may have acquired in
consequence thereof.
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.
The writ of execution fails to determine the prices of the buildings and of
the residential lot where they are erected, as well as the period of time
within which Hilario may exercise their option either to pay for the
buildings or to sell their land, and, in the last instance, the period of time
within which the Ignacio may pay for the land, these particulars having
been left for determination apparently after the judgment has become
final. This is erroneous. The writ of execution issued by Judge Natividad is
hereby set aside and the lower court ordered to hold a hearing in the
principal case to determine the said particulars.

RGGM
Depra v. Dumlao
136 SCRA 475

DOCTRINE: The owner of land on which improvement was built by

another in good faith is entitled to removal of improvement only after land
owner has opted to sell the land and the builder refused to pay for the
same. where the land’s value is considerably more than the improvement,
the landowner cannot compel the builder to buy the land. In such event, a
“forced lease” is created and the court shall fix the terms thereof in case
the parties disagree thereon.

FACTS:
Francisco Depra, is the owner of a parcel of land registered, situated in
the municipality of Dumangas, Iloilo. Agustin Dumlao, defendant-
appellant, owns an adjoining lot. When Dumlao constructed his house on
his lot, the kitchen thereof had encroached on an area of thirty four (34)
square meters of Depra’s property, After the encroachment was
discovered in a relocation survey of Depra’s lot made on November 2,
1972, his mother, Beatriz Depra after writing a demand letter asking
Dumlao to move back from his encroachment, filed an action for Unlawful
Detainer. Said complaint was later amended to include Depra as a party
plaintiff. After trial, the Municipal Court found that Dumlao was a builder
in good faith, and applying Article 448 of the Civil Code. Depra did not
accept payment of rentals so that Dumlao deposited such rentals with the
Municipal Court. In this case, the Municipal Court, acted without
jurisdiction, its Decision was null and void and cannot operate as res
judicata to the subject complaint for Quieting of Title. The court conceded
in the MCs decision that Dumlao is a builder in good faith.

ISSUE:
Whether or not the factual situations of Dumlao and Depra conform to the
juridical positions respectively defined by law, for a "builder in good faith"
under Article 448, a "possessor in good faith" under Article 526 and a
"landowner in good faith' under Article 448?

HELD:
Owner of the land on which improvement was built by another in good
faith is entitled to removal of improvement only after landowner has opted
to sell the land and the builder refused to pay for the same. Res judicata
doesn’t apply wherein the first case was for ejectment and the other was
for quieting of title.

ART. 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 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.

Sarmiento v. Agana
129 SCRA 122

FACTS:
While one Ernesto was still courting his wife, the latter's mother had told
him the couple could build a residential house on a certain lot. They
constructed a residential house.

Subsequently, the land was sold to petitioner Sarmiento, who asked

Ernesto and his wife to vacate. Sarmiento filed an Ejectment suit against
them.

In the evidentiary hearing, Sarmiento submitted the deed of sale of the

land which showed the price to be PHP15,000. On the otherhand, Ernesto
testified that the residential house then cost PHP30,000-40,000, which
was not questioned.

The MTC found that Ernesto was a builder in good faith and the house
had a value of PHP20,000. When the case was elevated, the CFI of Pasay
ordered Sarmiento to exercise his option, to reimburse Ernesto for the
sum of the house or allow them to purchase the land, within sixty days.
Upon expiration of the period, Ernesto was allowed to deposit the sum of
PHP25,000 with the Court as the purchase price for the land.

ISSUE:
WON private respondents are builders in good faith. -- YES

HELD:
Ernesto and his wife were builders in good faith in view of the peculiar
circumstance under which they had constructed the residential house. As
far as they knew, the land was owned by Ernesto's mother-in-law, and
could reasonably be expected to later on give them the land.

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. The owner of the land, has the option either to pay
for the building or to sell his land to the owner of the building. But he
cannot, as Sarmiento 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.

Sarmiento v. Agana
129 SCRA 122

Facts:

Before Ernesto Valentino and Rebecca Lorenzo wed, Rebecca’s mother

offered a lot in Paranaque that they could build their house on. In 1967,
they finally built their home which cost about PhP8,000- 10,000, thinking
that someday, the lot would be transferred to them in their name. It turns
out, though, that the lot was owned by the Spouses Santos who, in turn,
sold the same to Leonila Sarmiento in 1974.

A year later, Sarmiento ordered the Valentinos to vacate their lot, then
eventually filed and Ejection Suit against them.

Municipal Court: The Municipal Court found that private respondents 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.

CFI: But the case was then elevated to the CFI of Pasay (w/ Agana as
Judge), and pursuant to Art.448 of the CC (March 1979), the Court
ordered Sarmiento to exercise the option in 60 days to pay Ernesto 40,000
as the value of the house or to let them purchase the land for 25,000.
Sarmiento was not able to exercise this option, and the CFI allowed
Ernesto to deposit the 25,000 purchase price with the Court. This is the
hub of the controversy. Sarmiento then instituted the instant certiorari
proceedings.

ISSUES: (1) Whether or not Ernesto and his wife were builders in good
faith.

(2) Whether or not the land owner Sarmiento can be compelled to

exercise either option: to buy the building or to sell the land.

HELD: (1) Yes. We agree that 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. In
regards to builders in good faith, Article 448 of the Code provides: ART.
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 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.

(2) Yes. Because Ernesto and his wife were clearly in good faith,
Sarmiento was required to exercise either of 2 options: to purchase the
house or to sell the land to them. In this case, based on the value decided
by CFI of Pasay. She is compelled by law to exercise either option. Not
choosing either is a violation of the law. 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 (now Article 546). The owner, of the land. upon, the other
hand, has the option, under article 361 (now 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.
We hold, therefore, that the order of Judge Natividad compelling
defendants-petitioners to remove their buildings from the land belonging
to plaintiffs-respondents only because the latter chose neither to pay for
such buildings nor to sell the land, is null and void, for it amends
substantially the judgment sought to be executed and is, furthermore,
offensive to articles 361 (now Article 448) and 453 (now Article 546) of
the Civil Code. (Ignacio vs. Hilario, 76 Phil. 605, 608 [1946]).
WHEREFORE, the Petition for Certiorari is hereby ordered dismissed,
without pronouncement as to costs.

FILIPINAS COLLEGES INC. vs. MARIA GARCIA TIMBANG, ET AL.

[G.R. No. L-1281, September 29, 1959]BARRERA, J.:

FACTS:

This is an appeal taken from an order of the Court of First Instance of

Manila dated May 10, 1957 (a) declaring the Sheriff's certificate of sale

covering a school building sold at public auction null and void unless

within 15 daysfrom notice of said order the successful bidders,

defendants-appellantsspouses Maria Garcia Timbang and Marcelino

Timbang, shall pay to, appelleeMaria Gervacio Blas directly or

through the Sheriff of Manila the sum ofP5,750.00 that the

spouses Timbang had bid for the building at the Sheriff'ssale; (b)

declaring the other appellee Filipinas Colleges, Inc. owner

of24,500/3,285,934 undivided interest in Lot No. 2-a covered by

certificate oftile No 45970, on which the building sold in the auction sale is

situated; and(c) ordering the sale in public auction of the said undivided

interest of the Filipinas Colleges, Inc., in lot No. 2-a aforementioned to

satisfy the unpaidportion of the judgment in favor of appellee

Blas and against FilipinasColleges, Inc. in the amount of

P8,200.00 minus the sum of P5,750.00mentioned in (a) above.

The order appealed from is the result of threemotions filed in

the court a quo in the course of the execution of a finaljudgment of the

Court of Appeals rendered in 2 cases appealed to it in whichthe spouses

Timbang, the Filipinas Colleges, Inc., and Maria Gervacio Blaswere the

parties. The Timbang spouses presented their opposition to eachand all of

this motion. In assailing the order of the court a quo directing

theappellants to pay appellee Blas the amount of their bid (P5,750.00)

made atthe public auction, appellants' counsel has presented a

novel, albeitingenious, argument. They contend that since the builder in

good faith hasfailed to pay the price of the land after the owners thereof

exercised theiroption under Article 448 of the Civil Code, the builder has

lost his right andthe appellants as owners of the land automatically

became the owners ipsofacto.

ISSUE/S:

1.Whether or not 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.Whether or not the appellants, 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.

HOLDING & RATIO DECIDENDI:NO, THE APPELLANTS CONTENTION IS

SUPERFLUOUS.

There is nothing in the language of these two articles, 448 and 546, which

would justify the conclusion of appellants 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. Although it is true, it was declared therein that in the

event of the failure of the builder to

pay the land after the owner thereof has chosen this

alternative, the builder's right of retention provided in Article 546 is lost,

nevertheless therewas nothing said that as a consequence thereof, the

builder loses entirely allrights over his own building. The remedy

left to the parties in such eventuality where the builder fails to pay

the value of the land, though theCode is silent on this Court, a

builder in good faith not be required to pay rentals. He has 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. This was ruled in the

case of Miranda vs. Fadullon, et al., 97 Phil.,801. A further remedy is

indicated in the case of Bernardo vs. Bataclan, supra, where this

Court approved the sale of the land and the improvement in a public

auction applying the proceeds thereof first to the payment of the value of

the land and the excess, if any, to be delivered to the owner of the house

in payment thereof. The second contention was without merit. In the

instant case, the Court of Appeals has already adjudged that appellee Blas

is entitled to the payment of the unpaid balance of the purchase price of

the school building. With respect to the order of the court declaring

appelleeFilipinas Colleges, Inc. part owner of the land to the extent of the

value of itspersonal properties sold at public auction in favor of the

Timbang, this Court likewise finds the same as justified, for such amount

represents, in effect, apartial payment of the value of the land. Failure of

the Timbang spouses topay to the Sheriff or to Manila Gervacio Blas said
sum of P5,750.00 within fifteen (15) days from notice of the final

judgment, an order of execution shall issue in favor of Maria Gervasio Blas

to be levied upon all properties of the Timbang spouses not exempt from

execution for the satisfaction of the said amount.

[ACCESSION CONTINUA] 08 BARTOLOME ORTIZ V. HON. UNION

C. KAYANAN, in his capacity as Judge of the Court of First

Instance of Quezon, Branch IV; ELEUTERIO ZAMORA, QUIRINO

COMINTAN, VICENTE FERRO, and GREGORIO PAMISARAN July

30, 1979 | Antonio, J. |

Doctrine: Even after his good faith ceases, the possessor can still retain

the property (Art 546) until he has been fully reimbursed for all the

necessary and useful expenses made by him on the property.

Facts:

○ Plaintiff used to be the legal guardian of Martin Dolorico II. When his

ward died, plaintiff continued to cultivate and possess the latter’s

property, which was formerly a subject of homestead application. In the

said application, the ward’s uncle was named as his heir and successor in
interest. Thus, the uncle executed an affidavit relinquishing his rights over

the property in favor of Comintan and Zamora, his grandson and son-in-

law and requested the Director of Lands to cancel the homestead

application. The homestead application was cancelled to the protest of

Ortiz saying that he should be given preference to purchase the lot

inasmuch as he is the actual occupant and has been in continuous

possession of the same. Still, the lot in question was sold at a public

auction wherein defendant Comintan was the only bidder.

The plaintiff’s protest was investigated upon but his claim was not given

due course on the ground that because the plaintiff failed to participate in

the pubic auction, he is forever barred to claim the property.

On appeal, respondent court ruled that half of the portion of land should
be given to the defendant, being the successful bidder. The other half

should be awarded to Zamora without prejudice to the right of Ortiz to

participate in the public bidding of the lot. If Ortiz is to be not declared the

successful bidder, defendants should reimburse jointly said plaintiff for the

improvements introduced on the land, with him, having the right to retain

the property until after he has been paid for.

Plaintiff appealed the judgment. It was later found out that Ortiz collected

tolls on a portion of the property wherein he has not introduced any

improvement. The judgment became final and executory. Private

respondents filed a motion for its execution requesting that they file a

bond in lieu of the amount that should be paid to Ortiz, on the condition

that after the accounting of the tolls collected by plaintiff, there is still and

amount due and payable to the said plaintiff, the bond shall be held

answerable. Petitioner thus filed the instant petition, contending that in

having issued the Order and Writ of Execution, respondent Court "acted

without or in excess of jurisdiction, and/or with grave abuse of discretion,

because the said order and writ in effect vary the terms of the judgment

they purportedly seek to enforce." ○ Since said judgment declared the

petitioner a possessor in good faith, he is entitled to the payment of the

value of the improvements introduced by him on the whole property, with

right to retain the land until he has been fully paid such value.

No payment for improvements has been made and, instead, a bond

therefor had been filed by defendants (private respondents), which,

according to petitioner, is not the payment envisaged in the decision

which would entitle private respondents to the possession of the property.

Under the decision, he has the right to retain the same until after he has

participated and lost in the bidding and that he can be legally

dispossessed thereof. All the fruits of the property, including the tolls

collected by him from the passing vehicles belongs to petitioner and not to

defendant/private respondent Quirino Comintan, in accordance with the

decision itself, which decreed that the fruits of the property shall be in lieu

of interest on the amount to be paid to petitioner as reimbursement for

improvements. Any contrary opinion, in his view, would be tantamount to

an amendment of a decision which has long become final and executory

and, therefore, cannot be lawfully done.

Issue:

W/N petitioner is still entitled to retain for his own exclusive benefit all the

fruits of the property.

Held:

NO. It was his duty under the law, after deducting the necessary

expenses for his administration, to apply such amount collected to hte

payment of the interest, and the balance to the payment of the principal

of the obligation.

● There is no question that a possessor in good faith is entitled to the

fruits received before the possession is legally interrupted.

○ Possession in good faith ceases or is legally interrupted from the

moment defects in the title are made known to the possessor, by

extraneous evidence or by the filing of an action in court by the true

owner for the recovery of the property.

○ Hence, all the fruits that the possessor may receive from the time he is

summoned in court, or when he answers the complaint, must be delivered

and paid by him to the owner or lawful possessor.

● However, even after his good faith ceases, the possessor can still retain

the property (Art 546) until he has been fully reimbursed for all the

necessary and useful expenses made by him on the property.

 ○ The principal characteristic of the right of retention is its accessory

character. It is accessory to a principal obligation. Considering that the

right of the possessor to receive the fruits terminates when his good faith

ceases, it is necessary, in order that this right to retain may be useful, to

concede to the creditor the right to secure reimbursement from the fruits

of the property by utilizing its proceeds for the payment of the interest as

well as the principal of the debt while he remains in possession.

Petitioner cannot appropriate for his own exclusive benefit the tolls which

he collected from the property retained by him. It was his duty under the

law, after deducting the necessary expenses for his administration, to

apply such amount collected to the payment of the interest, and the

balance to the payment of the obligation. The disputed tolls, after

deducting petitioner’s expenses for administration, belong to Quirino

Comintan, owner of the land through which the toll road passed, further

considering that the same was on portions of the property on which

petitioner had not introduced any improvement. As to the other lot, it

appears that no public sale has yet been conducted by the Bureau of

Lands and, therefore, petitioner is entitled to remain in possession

thereof. This is not disputed by respondent Eleuterio Zamora. After public

sale is had and in the event that Ortiz is not declared the successful

bidder, then he should be reimbursed by respondent Zamora in the

corresponding amount for the improvements on Lot 5785-B.

96 SCRA 130 February 21, 1980

FLOREZA v EVANGELISTA
FACTS:
The Evangelistas were the owner of a residential lot in Rizal with an area
of 204.08 sq. m. assessed at P410. They borrowed P100 from Floreza.
Floreza occupied the residential lot and built a house of light material
(barong-barong) with the consent of the Evangelistas. Additional Loans
were made by the Evangelistas. Floreza demolished the house of light
material and constructed one of strong material
assessed. Floreza has not been paying any rentals since the beginning of
their transactions. Eventually,
Evangelistas sold, with a right to repurchase within 6 years, their land to
Floreza. Seven months before
the expiry of the repurchase period, the Evangelistas were able to pay in
full. Floreza refused to vacate the
lot unless he was first reimbursed for the value of the house he built
Evangelistas filed a complaint. CFI ruled based on Art, 448 of the Civil
Code saying that Evangelistas have the choice between purchasing
the house or selling the land to Floreza. CA ruled that Art. 448 was
inapplicable and that Floreza was
not entiled to the reimbursement of his house and could remove the same
at his own expense.

ISSUE:
1. WON Floreza was entitled to reimbursement of the cost of his house.
2. WON he (his heirs who replaced him) should pay rental of the land.
HELD:
1. NO. Issue of reimbursement is not moot because if Floreza has no right
of retention, then he must pay
damages in the form of rentals. Agree with CA that Art. 448 is inapplicable
because it applies only when
the builder is in good faith (he believed he had a right to build). Art. 453
is also not applicable because it
requires both of the parties to be in bad faith. Neither is Art. 1616
applicable because Floreza is not a
vendee a retro. The house was already constructed in 1945 (light
materials) even before the pacto de
retro was entered into in 1949. Floreza cannot be classified as a builder in
good faith nor a vendee a
retro, who made useful improvements during the pacto de retro, he has
no right to reimbursement of
the value of the house, much less to the retention of the premises until he
is paid.
His rights are more akin to a usufructury under Art. 579, who may make
on the property useful improvements but with no right to be indemnified
thereof, He may, however, remove such improvements should it be
possible to do so without damage to the property.

2. YES. From the time the redemption price was paid in January 3, 1955,
Floreza’s right to use the residential lot without rent ceased. He should be
held liable for damages in the form of rentals for the continued use of the
lot for P10 monthly from January 3, 1955 until the house was removed
and the property vacated by Floreza or his heirs. Judgment affirmed with
modification.

DEL CAMPO V. ABESIA

When land is co-owned by two parties, but the co-ownership is

terminated, Article 448 governs in case real property (like a house)

encroaches the land of another. This is provided that good faith exists.

FACTS:

The case involves two friendly parties who are co-owners of a corner lot

at Flores and Cavan Streets in Cebu City. Plaintiff owns 2/3 of the lot and
Defendant owns 1/3 of the same. The total size of the lot is 45 square

meters (which is about the size of a typical Starbux café)

Later on, the two parties decided to divide the co-owned property into two

lots. 30 square meters went to the plaintiffs and 15 square meters went to

the defendants. From the sketch plan, both parties discovered that the

house of the defendants occupied a portion of the plaintiff’s adjacent lot,

eating 5 sqm of it. The parties then requested the trial court to adjudicate

who should take possession of the encroached 5 sqm.

The trial court ruled that Art 448 does not apply. The owner of the land on

which anything has been built, sown or planted in good faith, shall have
the right to appropriate as his own the works, sowing or planting, after

payment of the indemnity provided for in Articles 546 and 548, or to

oblige the one who built or planted to pay the price of the land, and the

one who sowed, the proper rent. However, the builder or planter cannot

be obliged to buy the land if its value is considerably more than that of

the building or trees. In such case, he shall pay reasonable rent, if the

owner of the land does not choose to appropriate the building or trees

after proper indemnity. The parties shall agree upon the terms of the

lease and in case of disagreement, the court shall fix the terms thereof.

Since art 448 does not apply, the Plaintiff cannot be obliged to pay for the

portion of defendant’s house that entered into the 30 sqm lot, AND

Defendant cannot be obliged to pay for the price of the 5 sqm their house

occupied. Why? The RTC believed the rules of co-ownership should

govern, and not that of accession.

RTC then assigned the full 30sqm to Plaintiff and ordered Defendants to

demolish the 5sqm part of their house encroaching the 30sqm lot of the

Plaintiffs. Defendants where aghast at having to axe the family home,

hence they appealed.

CA affirmed the decision. So we have the SC coming to the rescue.

Issue: Whether or Not Article 448 of the Civil Code is applicable to a

builder in good faith when the property involved is owned in common.

Held:
When the co-ownership is terminated by the partition and it appears that
the house of defendants overlaps or occupies a portion of 5 square meters
of the land pertaining to plaintiffs which the defendants obviously built in
good faith, then the provisions of Article 448 of the new Civil Code should
apply. Manresa and Navarro Amandi agree that the said provision of the
Civil Code may apply even when there was co-ownership if good faith has
been established. 

Applying the aforesaid provision of the Civil Code, the plaintiffs have the
right to appropriate said portion of the house of defendants upon payment
of indemnity to defendants as provided for in Article 546 of the Civil Code.
Otherwise, the plaintiffs may oblige the defendants 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 defendants built thereon, then the latter
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, defendants may demolish or remove the said portion
of their house, at their own expense, if they so decide.

Article 448 of the New Civil Code provides as follows:

Art. 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 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.

Ignao v. IAC, G.R. No. 72876

193 SCRA 17

DOCTRINE: When the co-ownership is terminated by a partition and it

appears that the house of an erstwhile co-owner has encroached upon a
portion pertaining to another co-owner which was however made in good
faith, then the provisions of Article 448 should apply to determine the
respective rights of the parties.

FACTS:
Petitioner Florencio Ignao and his uncles private respondents Juan Ignao
and Isidro Ignao were co-owners of a parcel of land with an area of 534
square meters situated in Barrio Tabon, Municipality of Kawit, Cavite.
Pursuant to an action for partition filed by petitioner, the then CFI directed
the partition of the aforesaid land, allotting 133.5 square meters or 2/8
thereof to private respondents Juan and Isidro, and giving the remaining
portion with a total area of 266.5 square meters to petitioner Florencio.
However, no actual partition was ever effected.

Petitioner instituted a complaint for recovery of possession of real

property against private respondents Juan and Isidro before the CFI. In
his complaint petitioner alleged that the area occupied by the two (2)
houses built by private respondents exceeded the 133.5 square meters
previously allotted to them by the trial court.

It was found that the houses of Juan and Isidro actually encroached upon
a portion of the land belonging to Florencio. Upon agreement of the
parties, the trial court ordered a licensed geodetic engineer to conduct a
survey to determine the exact area occupied by the houses of private
respondents. The survey subsequently disclosed that the house of Juan
occupied 42 square meters while that of Isidro occupied 59 square meters
of Florencio's land or a total of 101 square meters.

Trial court ruled that although private respondents occupied a portion of

Florencio's property, they should be considered builders in good faith.

Petitioner appealed to IAC which subsequently affirmed the decision of the

trial court.

Thus, herein petition.

ISSUE:
Whether the provisions of Article 448 should apply to a builder in good
faith on a property held in common. -- YES

HELD:
It should be noted that prior to partition, all the co-owners hold the
property in common dominion but at the same time each is an owner of a
share which is abstract and undetermined until partition is effected. As co-
owners, the parties may have unequal shares in the common property,
quantitatively speaking. But in a qualitative sense, each co-owner has the
same right as any one of the other co-owners. Every co-owner is therefore
the owner of the whole, and over the whole he exercises the right of
dominion, but he is at the same time the owner of a portion which is truly
abstract, because until division is effected such portion is not concretely
determined.

Article 448 provides: 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
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.

Whether or not the provisions of Article 448 should apply to a builder in

good faith on a property held in common has been resolved in the case of
Spouses del Campo vs. Abesia, wherein the Court ruled that:

The court a quo correctly held that Article 448 of the Civil Code cannot
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
third person under the circumstances, and the situation is governed by the
rules of co-ownership.

However, when, as in this case, the ownership is terminated by the

partition and it appears that the home of defendants overlaps or occupies
a portion of 5 square meters of the land pertaining to plaintiffs which the
defendants obviously built in good faith, then the provisions of Article 448
of the new Civil Code should apply.

Both the trial court and the Appellate Court erred when they peremptorily
adopted the "workable solution" in the case of Grana vs. CA, and ordered
the owner of the land, petitioner Florencio, to sell to private respondents,
Juan and Isidro, the part of the land they intruded upon, thereby
depriving petitioner of his right to choose. Such ruling contravened the
explicit provisions of Article 448 to the effect that "(t)he owner of the land
xxx shall have the right to appropriate xxx or to oblige the one who built
xxx to pay the price of the land xxx." The law is clear and unambiguous
when it confers the right of choice upon the landowner and not upon the
builder and the courts.

Pecson v. CA
244 SCRA 407

DOCTRINES:
1. Article 448 of the Civil Code does not apply 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 donation.

2. The provision of Art. 448 on indemnity may be applied

by analogy to a case where one loses the ownership of the land on
which he earlier built an apartment.

FACTS:
Pecson was the owner of a commercial lot on which he built a 4-door, 2-
storey apartment. For his failure to pay realty tax on said property, the lot
was sold at public auction by the City Treasurer of Quezon City to
Nepomuceno, who in turn the property to Sps. Nuguid. Pecson questioned
the validity of the auction sale. RTC then, dismissed the complaint and
ruled that the apartment building was included in the sale. It reached the
SC, but the same was denied. Thereafter, Sps. Nuguid filed a Motion for
delivery of possession, which was granted by the trial court. Pecson
contested. The Court of Appeals affirmed in part the order of the trial
court citing Article 448 of the Civil Code. CA ordered that Pecson should
be indemnified with the construction cost of the apartment.

ISSUE:
Is Article 448 applicable in a case wherein the owner of the land is also
the builder who then later loses ownership of the land by sale? -- NO

HELD:
By its clear language, Article 448 refers to a land whose ownership is
claimed by two or more parties, one of whom has built some works, or
sown or planted something. The building, sowing or planting may have
been made in good faith or in bad faith. The rule on good faith laid down
in Article 526 of the Civil Code shall be applied in determining whether a
builder, sower or planter had acted in good faith. Article 448 does not
apply 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 donation.

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.
Thus in strict point of law, Article 448 is not apposite to the case at bar.
Nevertheless, we believe that the provision therein on indemnity may be
applied by analogy considering that the primary intent of Article 448 is to
avoid a state of forced co-ownership and that the parties, including the
two courts below, in the main agree that Articles 448 and 546 of the Civil
Code are applicable and indemnity for the improvements may be paid
although they differ as to the basis of the indemnity.

MWSS v. C.A.
143 SCRA 623

DOCTRINE: The right of a possessor in bad faith to remove

improvements applies only to improvements for pure luxury or mere
pleasure, provided the thing does not suffer any injury and the lawful
possessor does not prefer to retain them by paying their value at the time
of his possession.

FACTS:
Dagupan City filed a complaint against MWSS for recovery of ownership
and possession of the Dagupan Waterworks System. MWSS interposed
R.A. 1383 as its defense; it vested to MWSS the ownership, possession,
and control of all waterworks system throughout the Philippines. MWSS
also filed a counterclaim for reimbursement of expenses it incurred for
necessary and useful improvements.

Trial court ruled that MWSS is a possessor in bad faith so it is not entitled
to claim reimbursement. MWSS appealed to the Court of Appeals arguing
that Dagupan City should be liable for payment of the balance of the loan
secured by MWSS for the improvement of the Dagupan Waterworks
System; however the Court of Appeals affirmed trial court’s judgment.

MWSS appealed to the Supreme Court for the removal of useful

improvements. Dagupan City argues that MWSS is a possessor in bad faith
so it has absolutely no right to the useful improvements.

ISSUE:
Whether or not a possessor in bad faith has the right to remove useful
improvements. -- NO

HELD:
Under Article 499 of the Civil Code, “he who builds, plants, or sows in bad
faith on the land of another, loses what is built, planted, or sown without
right to indemnity.” Additionally, under Article 546 of the Civil Code, only a
possessor in good faith shall be refunded for useful expenses with the
right of retention until reimbursed. Finally, under Article 547 of the Civil
Code, only a possessor in good faith may remove useful improvements if
this can be done without damage to the principal thing and if the person
who recovers the possession does not exercise the option of reimbursing
the useful expenses.

The right of a possessor in bad faith to remove improvements applies only

to improvements for pure luxury or mere pleasure, provided the thing
does not suffer any injury and the lawful possessor does not prefer to
retain them by paying their value at the time of his possession.

In this case, MWSS is a builder in bad faith so it loses whatever useful

improvements it made without right to indemnity.

Communities Cagayan Inc. vs Spouses Nanol

GR No. 176791 November 14, 2012

Facts: Sometime in 1994, respondent-spouses Arsenio and Angeles Nanol

entered into contract to Sell with petitioner Communities Cagayan, Inc.,
whereby the former  agreed to sell to respondent-spouses a house and
Lots 17 and 19″ locate Block 16,  Camella  Homes  Subdivision,  Cagayan
de  Oro City,  for the  price  of P 368,000.00.  Respondent-spouses, 
however,  did not  avail  of petitioner’s  inhouse  financing  due  to  its
high  interest  rates.  Instead,  they obtained  a loan from Capitol 
Development  Bank,  a  sister  company of petitioner,  using  the 
property  as collateral.  To  facilitate the loan,  a simulated  sale over  the
property  was  executed by petitioner in favor of respondent-spouses.
Accordingly,  titles  were transferred  in the  names  of respondent-
spouses  under Transfer Certificates  of Title (TCT)  Nos.  105202  and
105203,  and  submitted  to  Capitol  Development  Bank for loan
processing.   Unfortunately,  the  bank collapsed  and closed  before it 
could release  the  loan.  Thus,  on  November  30,  1997,  respondent-
spouses  entered into  another Contract to  Sell with  petitioner  over the 
same property for the  same price  of P 368,000.00.   This  time, 
respondent-spouses  availed of  petitioner’s  in-house financing  thus, 
undertaking  to  pay the  loan  over  four years,  from  1997 to 2001. 
Sometime in 2000,  respondent  Arsenio demolished  the  original  house 
and constructed  a three-story  house  allegedly valued at  P 3.5  million, 
more  or  less.18 In July  2001,  respondent  Arsenio  died,  leaving his 
wife,  herein respondent Angeles,  to  pay for  the  monthly 
amortizations.

Issue: Whether or not respondents are considered builders in good faith

entitled to indemnification for necessary and useful expenses and/or to
buy the land under the provisions of the New Civil Code.

Held: Yes. As  a  general  rule,  Article  448  on builders  in good faith

does  not  apply where  there  is  a  contractual  relation  between  the 
parties,  such  as  in  the  instant case.   We  went  over the  records  of
this  case and we  note  that  the  parties  failed to attach  a copy of the 
Contract  to Sell.   As  such,  we  are  constrained  to  apply Article 448  of
the Civil  Code,  which  provides  viz:  

ART.  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  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 448  of the  Civil  Code  applies  when  the builder believes  that 
he is the owner  of the  land  or that  by  some  title  he  has  the  right 
to build  thereon, or that,  at least,  he  has  a  claim  of  title  thereto. 
Concededly,  this  is  not  present  in the instant  case.   The  subject 
property is  covered by  a  Contract  to  Sell  hence ownership  still
remains with  petitioner  being  the  seller.   Nevertheless,  there were
already instances  where  this  Court  applied  Article  448  even if the 
builders  do  not have  a  claim  of  title over  the property.    Thus: 

This  Court  has  ruled  that  this  provision  covers  only  cases  in  which
the builders,  sowers or  planters believe themselves  to  be  owners  of 
the  land  or,  at least,  to  have a claim  of  title thereto.   It  does not 
apply  when  the interest  is merely that  of  a  holder, such as  a  mere 
tenant, agent  or  usufructuary.  From  these pronouncements, good  faith
is  identified by the  belief  that  the  land is  owned;  or that  –  by  some 
title  –  one  has  the  right  to  build,  plant,  or  sow  thereon. 

However,  in  some  special  cases,  this  Court  has used  Article 448  by
recognizing  good  faith  beyond this  limited definition.  Thus, in  Del 
Campo  v. Abesia, this  provision was  applied to one  whose  house  – 
despite  having been built at the  time  he  was  still co-owner  – 
overlapped with  the  land of  another.   This article  was also  applied  to 
cases wherein  a builder  had  constructed improvements  with the 
consent  of  the  owner.  The  Court  ruled that  the  law deemed the 
builder  to be  in good  faith.   In  Sarmiento  v. Agana,  the  builders 
were found to  be  in good  faith  despite  their  reliance  on the  consent 
of  another,  whom they had  mistakenly  believed to  be  the  owner  of 
the  land.

In fine,  the Court  applied  Article  448 by construing  good faith beyond
its limited definition.   We find no reason not  to  apply the  Court’s  ruling
in  Spouses Macasaet  v.  Spouses  Macasaet  in  this case.   We  thus 
hold  that  Article  448  is also applicable  to the  instant  case.   First, 
good faith  is  presumed  on the  part  of the respondent-spouses.  
Second,  petitioner  failed to rebut  this presumption.   Third, no evidence 
was  presented  to  show  that  petitioner  opposed  or  objected  to  the
improvements introduced by the  respondent-spouses.   Consequently, 
we  can validly presume  that  petitioner  consented  to  the 
improvements  being  constructed.   This  presumption  is  bolstered  by 
the  fact  that  as  the  subdivision developer, petitioner  must  have
given  the respondent-spouses  permits to  commence  and undertake 
the  construction.    Under  Article  453  of  the  Civil  Code,  “it  is
understood  that  there  is  bad faith  on the  part  of the  landowner
whenever the  act was  done  with  his  knowledge  and without 
opposition on his  part.”