CASE 1

EN BANC G.R. No. L-21783 November 29, 1969

PACIFIC FARMS, INC., Plaintiff-Appellee, vs. SIMPLICIO G. ESGUERRA, ET AL., defendants, CARRIED LUMBER COMPANY, Defendant-Appellant. CASTRO, J.: Before us for review, on appeal by the defendant Carried Lumber Company (hereinafter referred to as the Company), is the decision, dated May 30, 1962, of the Court of First Instance of Pangasinan in civil case D1317, annulling the levy and certificate of sale covering six buildings owned by the plaintiff Pacific Farms, Inc., executed by the defendant deputy provincial sheriff Simplicio G. Esguerra in favor of the Company to satisfy a money judgment against the Insular Farms, Inc., the plaintiff's predecessor-in-interest over the said buildings. The environmental setting is uncontroverted. On several occasions from October 1, 1956 to March 2, 1957 the Company sold and delivered lumber and construction materials to the Insular Farms, Inc. which the latter used in the construction of the aforementioned six buildings at its compound in Bolinao, Pangasinan, of the total procurement price of P15,000, the sum of P4,710.18 has not been paid by Insular Farms, Inc. Consequently, on October 17, 1958 the Company instituted civil case D-775 with the Court of First Instance of Pangasinan to recover the said unpaid balance from the Insular Farms, Inc. On August 23, 1961 the trial court rendered judgment sustaining the Company's claim. The judgment debtor did not appeal; so on December 19, 1961 the corresponding writ of execution was issued. On January 16, 1962 the defendant sheriff levied upon the six buildings. On January 30, 1962 the Pacific Farms, Inc. filed a third-party claim, subscribed by its corporate president, asserting ownership over the levied buildings which it had acquired from the Insular Farms, Inc. by virtue of a deed of absolute sale executed on March 21, 1958, about seven months before the Company filed the above-mentioned action (civil case D-775). Shielded by an indemnity bond of P7,120 put up by the Company and the Cosmopolitan Insurance Company, Inc., the sheriff proceeded with the announced public auction on February 12, 1962 and sold the levied buildings to the Company for P6,110.78. Asserting absolute and exclusive ownership of the buildings in question, the Pacific Farms, Inc. filed a complaint on May 14, 1962 against the Company and the sheriff with the court a quo, praying that judgment be rendered, (a) declaring null and void the levy and judicial sale of the six buildings, and (b) adjudging the defendants jointly and severally liable to the plaintiff in the sum of P2,000 by way of actual damages and for such amount as the court may deem proper and just to impose by way of exemplary damages and for costs of the suit. After due trial, the court a quo on May 30, 1963 rendered judgment annulling the levy of January 16, 1962 and the certificate of sale of February 12, 1962. The court, however, denied the plaintiff's claim for actual and exemplary damages on the ground that it was not "prepared to find that there was gross negligence or BAD FAITH on the part of any of the defendants." Hence this appeal, imputing errors which, according to the appellant's formulation, are the following: 1. The lower court erred in holding that the credit of the defendant-appellant, Carried Lumber Company, against the Insular Farms, Inc., consisting of the value of lumber and construction materials used in the buildings which were later acquired by the Pacific Farms, Inc., the appellee, was not a statutory lien on those buildings; . 2. The lower court, likewise, erred in holding that the doctrine laid down in De Barretto, et al. vs. Villanueva, et al. (G.R. No. L-14938, December 29, 1962) is applicable to the facts of this case as found by said court; and .
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3. The lower court erred, finally, in declaring that the sale at public auction conducted by the defendant deputy provincial sheriff of Pangasinan, covering the six buildings described in the certificate of sale dated February 12, 1962, was null and void. 1. In ruling against the appellant below, the trial court relied mainly on the resolution (on the motion for reconsideration) promulgated on December 29, 1962 by this Court in De Barretto, et al. vs. Villanueva, et al., L-14938 (6 SCRA 928). The said case, however, is inapplicable because it concerned not one but two or more preferred creditors who, pursuant to articles 2242 and 2249 of the Civil Code, must necessarily be convened and the nature and extent of their respective claims ascertained. Thus, we held that before there can be a pro rata payment of credits entitled to preference as to the same specific real property, there must first be some proceeding where the claims of all the preferred creditors may be bindingly adjudicated, such as insolvency, the settlement of a decedent's estate under Rule 87 of the Rules of Court, or liquidation proceedings of similar import. But the case before us does not involve a question of preference of credits, and is not one where two or more creditors have separate and distinct claims against the same debtor who has insufficient property. Indeed, it is a matter of necessity and logic that the question of preference should arise only where the debtor cannot pay his debts in full. For, if debtor A is able in full to pay all his three creditors, B, C, and D, how can the need arise for determining which of the three creditors shall be paid first or whether they shall be paid out of the proceeds of a specific property? 2. It is undenied and undeniable that the appellant furnished lumber and construction materials to the Insular Farms, Inc. (the appellee's predecessor-in-interest) which the latter used in the construction of the six buildings. Likewise unchallenged is the lower court's factual finding that out of the total procurement price of P15,000, the amount of P4,710.18 remains outstanding and unpaid by the Insular Farms, Inc. The appellant is therefore an unpaid furnisher of materials. Whether there exists a materialman's lien over the six buildings in favor of the appellant, is a question we do not here decide. To our mind the application by analogy of the rules of accession would suffice for a just adjudication. Article 447 of the Civil Code1 provides: The owner of the land who makes thereon personally or through another, plantings, constructions or works with the materials of another, shall pay their value; and, if he acted in BAD FAITH, he shall also be obliged to the reparation of damages. The owner of the materials shall have the right to remove them only in case he can do so without injury to the work constructed, or without the plantings, constructions or works being destroyed. However, if the landowner acted in BAD FAITH, the owner of the materials may remove them in any event with a right to be indemnified for damages. The abovequoted legal provision contemplates a principal and an accessory, the land being considered the principal, and the plantings, constructions or works, the accessory. The owner of the land who in GOOD FAITH - whether personally or through another - makes constructions or works thereon, using materials belonging to somebody else, becomes the owner of the said materials with the obligation however of praying for their value.2 The owner of the materials, on the other hand, is entitled to remove them, provided no substantial injury is caused to the landowner. Otherwise, he has the right to reimbursement for the value of his materials. Although it does not appear from the records of this case that the land upon which the six buildings were built is owned by the appellee, nevertheless, that the appellee claims that it owns the six buildings constructed out of the lumber and construction materials furnished by the appellant, is indubitable. Therefore, applying article 447 by analogy, we perforce consider the buildings as the principal and the lumber and construction materials that went into their construction as the accessory. Thus the appellee, if it does own the six buildings, must bear the obligation to pay for the value of the said materials; the appellant - which apparently has no desire to remove the materials, and, even if it were minded to do so, cannot remove them without necessarily damaging the buildings - has the corresponding right to recover the value of the unpaid lumber and construction materials.
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Well-established in jurisprudence is the rule that compensation should be borne by the person who has been benefited by the accession.3 No doubt, the appellee benefited from the accession, i.e., from the lumber and materials that went into the construction of the six buildings. It should therefore shoulder the compensation due to the appellant as unpaid furnisher of materials. Of course, the character of a buyer in GOOD FAITH and for value, if really possessed by the appellee, could possibly exonerate it from making compensation. But the appellee's stance that it is an innocent purchaser for value and in GOOD FAITH is open to grave doubt because of certain facts of substantial import (evident from the records) that cannot escape notice. In the deed of absolute sale, exhibit 1, the Insular Farms, Inc. (vendor) was represented in the contract by its president, J. Antonio Araneta. The latter was a director of the appellee (Pacific Farms, Inc.) and was the counsel who signed the complaint filed by the appellee in the court below. J. Antonio Araneta was, therefore, not only the president of the Insular Farms, Inc. but also a director and counsel of the appellee. During the trial of civil case D-775 the Insular Farms, Inc. was represented by Attorney Amado Santiago, Jr. of the law firm of J. Antonio Araneta. The latter was one of the counsels of the Pacific Farms, Inc. The appellee cannot claim ignorance of the pendency of civil case D-775 because the Insular Farms, Inc. was defended by the same lawyer from the same law firm that commenced the present action. J. Antonio Araneta, as counsel for the Pacific Farms, Inc., cannot close his eyes to facts of which he as president of the Insular Farms, Inc. had actual knowledge. Significantly, exhibit 1 (supra) itself shows that the Insular Farms, Inc. and the Pacific Farms, Inc. were housed in adjacent rooms (nos. 304 and 303, respectively), of the same building, the Insular Life Building, as early as March 21, 1958. It is reasonable therefore to conclude that the appellee, through its director and counsel, J. Antonio Araneta, knew about the unpaid balance of the purchase price of the lumber and construction materials supplied or furnished by the appellant to the Insular Farms, Inc. Parenthetically, it is likewise worth our attention that despite the appellee's knowledge of the suit instituted by the appellant against the Insular Farms, Inc. (the appellee's predecessor-in-interest) for the recovery of the unpaid balance of the purchase price of the lumber and materials used in the construction of its six buildings, it merely folded its arms in disinterest and waited, so to speak. Not until a decision was rendered therein in favor of the appellant, a writ of execution issued, and the six buildings levied upon by the sheriff, did it file a third-party claim over the levied buildings. In the face of the knowledge that its predecessor-in-interest had not fully paid for the lumber and construction materials used in the six buildings it had purchased, its natural and expected reaction should have been to intervene in the suit filed by the appellant against the Insular Farms, Inc. and hold the latter to account for breach of the warranties deemed included in the deed of absolute sale conveying said building to it. Curiously enough, although the six buildings in question were supposedly sold by the Insular Farms to the appellee on March 21, 1958, as evidenced by the deed of absolute sale (exhibit 1), about seven months before the appellant filed civil case D-775, the Insular Farms, Inc. never moved to implead the appellee therein as a necessary party-defendant, and remained completely and strangely silent about the sale. It is not amiss to surmise that it is entirely possible that the Insular Farms, Inc. and the appellee chose to remain silent in the hope that the appellant's claim against the Insular Farms, Inc. in civil case D-775 would be dismissed or non-suited. Moreover, the appellee was in a better position to protect its interest. It knew that the Insular Farms, Inc., its predecessor-in-interest, was a mere lessee of the premises on which the buildings were located. This should have placed it on guard and compelled it to ascertain the circumstances surrounding the construction of the said buildings on the premises. On the other hand, the appellant was not as advantageously situated as the appellee. There being no separate registry of property for buildings and no procedure provided by law for registering or annotating the claim of an unpaid furnisher of materials, it was helpless to prevent the sale of the property built from lumber and construction materials it furnished. But certainly, because it has a right, pursuant to article 447, supra, to reimbursement for the value of its unpaid materials, the appellant could pursue any remedy
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3. Respondents. ACCORDINGLY. L-35648 February 27. Rec. J. and enforcing its right of reimbursement through the execution of the final judgment it obtained in the said case against the six buildings in the possession of the appellee who now stands to benefit therefrom. No. and the complaint is hereby dismissed. The Decision erred in reforming the Contract of Sale (Exh.L. 1962. 0-1160 issued pursuant to the November 22. asking for the reversal of said decision on the following grounds: 1. was valid and effective. Restituta Tacalinar Guangco de Pombuena. of the equities clearly attendant in this case. G. RESOLUTION PARAS. Juan Pombuena. the appellant acted correctly in bringing an action (D-775) against the Insular Farms. 1961 (the date the judgment in civil case D-775 became final). 1987 PERSHING TAN QUETO.710. 304-B was registered in the name of the husband. B) of Lot 304-B from Basilides Tacalinar (mother) to the respondent. vs. In view.O. Decison erred in disregarding the fact that Lot No. with legal interest from September 23. from a sale to a conveyance of the share of the wifeRestituta Tacalinar (daughter) in the future hereditary estate of her parents. COURT OF APPEALS. 448 (City Court of Ozamiz City) as his admission that Lot 304-B is the paraphernal property of the wife. the judgment a quo is reversed.: This is a Motion for Reconsideration of the decision dated May 16. The Decision erred in misinterpreting the admission in the Answer of petitioner to the complaint in the unlawful detainer Case No. Restituta Tacalinar. 1638. Thus. 1938 Decision (Exhibit 3) of the Cadastral Court in Cadastral Case No.18. No pronouncement as to costs. It follows. however. 12. 4. No. that the sale at public auction conducted by the defendant sheriff of the six buildings described in the certificate of sale dated February 12. as it is hereby. 2. exhibit 7. as per OCT. whereby private respondents-spouses received valuable consideration. Petitioner. it is the sense of this Court that the plaintiff-appellee Pacific Farms. JUAN POMBUENA and RESTITUTA TACALINAR GUANGCO DE POMBUENA. The Decision erred in over-looking that the barter agreement is an onerous contract of exchange. and that petitioner had the right to relyon said OCT. by paying to the defendant-appellant Carried Lumber Company the sum of P4. as a necessary corollary. Cad.R. No. within which it may exercise the option of redeeming the six buildings. Inc. until the said amount shall have been fully paid. should be. granted a period of thirty (30) days from the date this judgment becomes final.R. CASE 2 Republic of the Philippines SUPREME COURT Manila EN BANC G. Inc. concessions and other benefits therefor and in concluding that 'the barter agreement has no effect. Property Volume 3 Bachelor of Laws II-A 4 .available to it under the law in order to enforce the said right.1983 of this Court * in the above-entitled case.

(10) that after the barter agreement dated October 10. Rollo. 304-B inGOOD FAITH relying OCT No. for short) received the questioned lot (no. 1927) (with P50. before the barter) by TAN QUETO. (pp. (6) that on September 22. for short). 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)? Property Volume 3 Bachelor of Laws II-A 5 . The rule is that questions of law are reviewable on appeal or by certiorari. 6. 304-B). her father having predeceased the mother. an Original Certificate of Title (Exh. the rule on finding of fact is subject to well-settled exceptions. (8) that as a consequence of the cadastral case. but on appeal in the Court of First Instance. either as a purported donation or by way of purchase on (February 11. The Decision erred in disregarding the fact that petitioner constructed his concrete building on Lot No. II) on the disputed land a concrete building. 1962 between JUAN and TAN QUETO. 257. and the spouses RESTITUTA and JUAN in turn became the owners of a parcel of land (with the house constructed thereon) previously owned (that is. (5) that under date of November 22. 1962. The Decision erred in confusing the conclusion of law that petitioner is a builder in BAD FAITH with a finding of fact. 1938 a decision was promulgated in GLRC No. 257-258. 0-1160. the latter constructed (See p. (3) that the donation or sale was consummated while RESTITUTA was already married to her husband Juan Pombuena (JUAN. 10) was issued in JUAN's name ("married to RESTITUTA") on April 22. for annulment of the barter. RESTITUTA sued both JUAN and TAN QUETO for reconveyance of the title over the registered but disputed lot. for short. of the Cadastre Survey of the Municipality of Centro. (11) that later. the entire case was DISMISSED because of an understanding (barter) whereby TAN QUETO became the owner of the disputed lot. (9) that the unlawful detainer case was won by the spouses in the Municipal Court. the herein petitioner) and RESTITUTA (with the consent of her husband JUAN) for a period of ten (10) years. (2) that the transaction took place during her mother's lifetime. JUAN filed for himself and his supposed co-owner RESTITUTA an application for a Torrens Title over the land. after the dismissal of the ejectment case and only after the execution of said barter agreement. Moreover. 1638 (Cadastral Case No. (7) that on December 27. Vol. 1949 a contract of lease over the lot was entered into between Pershing Tan Queto (TAN QUETO. The two principal issues are clearly the following: (1) Is the questioned lot paraphernal or conjugal? (2) In having constructed the building on the lot. and for recovery of the land with damages. (4) that on January 22. Rollo) It wig be recalled that the undisputed relevant facts indicate: (1) that Restituta Tacalinar Guanaco de Pombuena (RESTITUTA.00) as the alleged consideration thereof.5. 1935. Mizamis Occidental. 1960 RESTITUTA sued TAN QUETO for unlawful detainer (the lease contract having expired) before the Municipal Court of Ozamis City. 12) pronouncing JUAN ('married to RESTITUTA') as the owner of the land. without any objection on the part of RESTITUTA.

Civil Code). Secondly. there was a valid consideration therefor. And yet this is the basis of the trial court's conclusion that the lot was indeed paraphernal.. 712. (2) Was Tan Queto a possessor and builder in GOOD FAITH or in BAD FAITH? Even assuming that despite registration of the lot as conjugal. Civil Code).1983 is hereby SET ASIDE. " Surely. This is not so. Civil Code). Please note further that 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. But in either case there is a flaw or defect. ergo. 448. The net resultant of mutual BAD FAITH would entitle TAN QUETO to the rights of a builder in GOOD FAITH (Art. and this is true. Our decision promulgated on May 16. But did not TAN QUETO admit in his Answer that RESTITUTA was the owner of the lot. nor as a valid donation mortis causa for the formalities of a will were not complied with. TAN QUETO having bartered his own lot and small house with the questioned lot with JUAN (who has been adverted to by a court decision and by the OCT a conjugal owner) may be said to be the OWNER-POSSESSOR of the lot. not paraphernal. No costs. Firstly. and a new one is hereby rendered declaring the questioned lot together with the building thereone. Property Volume 3 Bachelor of Laws II-A 6 . The contention that the sale was fictitious or simulated (and therefore void) is bankrupt. How was ownership transferred. The fact is ownership was acquired by both JUAN and RESTITUTA by tradition (delivery) as a consequence of the contract of sale (See Art. not jus possidendi) in the Civil Code refers to a possessor other than the owner. as already previously intimated. there is no admission of RESTITUTA's exclusive ownership. Please note that the Chapter on Possession (jus possesionis.00 (then a considerable amount) as the cause or consideration of the transaction. However. if at all. the parties thereto cannot use said simulation to prejudice a stranger to said stratagem (like petitioner herein). Tan Queto nursed the belief that the lot was actually RESTITUTA's (making him in BAD FAITH). Certainly he is not merely a possessor or builder in GOOD FAITH (this phrase presupposes ownership in another). reimbursement should be given him if RESTITUTA decides to appropriate the building for herself (Art. assuming that there had indeed been a simulation. they cannot bind this Court. 749. The lot is therefore conjugal. The allegation that the transfer was a conveyance to RESTITUTA of her hereditary share in the estate of her mother (or parents) cannot be sustained for the contractual transmission of future inheritance is generally prohibited. He is a builder-possessor jus possidendi because he is the OWNER himself. SO ORDERED. WHEREFORE. still if they are erroneous inferences from certain facts. for she was a co-owner (with JUAN. as TAN QUETO's exclusive property. He admitted RESTITUTA was an owner" (not the owner) of the lot. makes her also in BAD FAITH.The finding by both the Court of First Instance and the Court of Appeals that the disputed lot is paraphernal and that TAN QUETO is a builder in BAD FAITH were regarded by Us in Our assailed decision as findings of facts and thus ordinarily conclusive on Us. Assuming they are factual findings. still RESTITUTA's failure to prohibit him from building despite her knowledge that construction was actually being done. and therefore "an owner. Civil Code). from her mother to RESTITUTA? The oral donation of the lot cannot be a valid donation interviews because it was not executed in a public instrument (Art. much less is he a builder inBAD FAITH. A second hard look at the circumstances of the case has constrained Us to rule as follows: (1) The land is conjugal. 448. 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). 526. One nagging question has been posed. In the case of TAN QUETO there is no such flaw or defect because it is he himself (not somebody else) who is the owner of the property. Civil Code) with P50.

In 1975. DECISION PANGANIBAN. C. No. Lot 9 was vacant.R. SP No. 1996 PLEASANTVILLE DEVELOPMENT CORPORATION.R. INC.: Is a lot buyer who constructs improvements on the wrong property erroneously delivered by the owners agent. 79688. Phase II and located at Taculing Road. the Court assigned the writing of this Decision to the undersigned ponente.T. 11040. Property Volume 3 Bachelor of Laws II-A 7 . Respondent. 1995. J. By resolution dated November 13. WILSON KEE. The Facts The facts. respondent Eldred Jardinico bought the rights to the lot from Robillo. the First Division of this Court resolved to transfer this case (along with several others) to the Third Division. Pleasantville Subdivision. TORRES ENTERPRISES. a builder in GOOD FAITH? This is the main issue resolved in this petition for review on certiorari to reverse the Decision 1 of the Court of Appeals 2 in CA-G. Bacolod City. are as follows: Edith Robillo purchased from petitioner a parcel of land designated as Lot 9. vs. At that time. 1987. Petitioner.CASE 3 THIRD DIVISION G. COURT OF APPEALS. After due deliberation and consultation. February 1. promulgated on August 20. as found by respondent Court. and ELDRED JARDINICO.

the prior approval of petitioner required under paragraph 26 of said contract. who had taken possession thereof.00 and another P50. furthermore. the Regional Trial Court. nonetheless. 1978 Transfer Certificate of Title No. When Kee refused to vacate Lot 9. Branch 3. Torres Enterprises. (CTTEI). 5 It found Kee a builder in BAD FAITH. a store. Jardinico secured from the Register of Deeds of Bacolod City on December 19. to inspect Lot 8. The MTCC thus disposed: "IN VIEW OF ALL THE FOREGOING. Kee. Torres Enterprises." 4 On appeal. The parties tried to reach an amicable settlement. the MTCC found that petitioner had already rescinded its contract with Kee over Lot 8 for the latters failure to pay the installments due. It was then that he discovered that improvements had been introduced on Lot 9 by respondent Wilson Kee. The MTCC held that the erroneous delivery of Lot 9 to Kee was attributable to CTTEI. 106367 in his name. Kee bought on installment Lot 8 of the same subdivision from C. 1974. CTTEI through its employee. After discovering that Lot 9 was occupied by Kee. before the complaint was instituted. accompanied Kees wife. Unfortunately. Zenaida Octaviano. and that Kee had not contested the rescission.00 on January 27. Kee paid CTTEI the relocation fee of P50. Jardinicos lawyer wrote Kee. but failed. filed a third-party complaint against petitioner and CTTEI. Defendant Wilson Kee is ordered to pay to the plaintiff rentals at the rate of P 15. This amount shall bear interests (sic) at the rate of 12 per cent (sic) per annum. guilty of unlawfully Property Volume 3 Bachelor of Laws II-A 8 . judgment is hereby rendered as follows: 1. an auto repair shop and other improvements on the lot. Branch 48.00 as cost and litigation expenses. 1981. he was. It further ruled that even assuming arguendo that Kee was acting in GOOD FAITH. On January 20. for the preparation of the lot plan. Jardinico confronted him. Defendant Wilson Kee is ordered to vacate tithe premises of Lot 9. After the preparation of the lot plan and a copy thereof given to Kee. Third-Party Defendant CT. Kee could possess the lot even before the completion of all installment payments.T. The rescission was effected in 1979. in turn. 106367 and to remove all structures and improvements he introduced thereon. 1975. The MTCC concluded that Kee no longer had any right over the lot subject of the contract between him and petitioner. Bacolod City (RTC) ruled that petitioner and CTTEI were not at fault or were not negligent. covered by TCT No.000. 1981 until he actually vacates the premises. he cannot claim reimbursement for the improvements he introduced on said lot. 2. a complaint for ejectment with damages against Kee. Kee must pay reasonable rentals for the use of Lot 9. demanding that the latter remove all improvements and vacate Lot 9. It further ruled that petitioner and CTTEI could not successfully invoke as a defense the failure of Kee to give notice of his intention to begin construction required under paragraph 22 of the Contract to Sell on Installment and his having built a sari-sari store without. 1975. the exclusive real estate agent of petitioner. 3.00 a day computed from the time this suit was filed on March 12. saying that the purpose of these requirements was merely to regulate the type of improvements to be constructed on the lot 3 . Inc. Thereafter. Kee proceeded to construct his residence.00 as attorneys fees and P700. These amounts were paid prior to Kees taking actual possession of Lot 8. It appears that on March 26. Inc. Bacolod City (MTCC). Under the Contract to Sell on Installment. Consequently. Donabelle Kee. and Pleasantville Subdivision are ordered to pay the plaintiff jointly and severally the sum of P3. the parcel of land pointed by Octaviano was Lot 9. and. However. On January 30. there being no preponderant evidence to show that they directly participated in the delivery of Lot 9 to Kee. Jardinico filed with the Municipal Trial Court in Cities.Upon completing all payments.

the petition is GRANTED. as well as for further proceedings in conformity with Article 448 of the New Civil Code. plus costs of litigation. Third-party defendants C. If Jardinico prefers that Kee buy the land.usurping the possessory right of Jardinico over Lot 9 from the time he was served with notice to vacate said lot. and judgment is rendered as follows: 1. T-106367 of the land records of Bacolod City. Inc. The appellate court ruled that Kee was a builder in GOOD FAITH. the date of the demand. Inc. as he was unaware of the "mix-up" when he began construction of the improvements on Lot 8. petitioner herein. Inc. thereafter. "The third-party complaint against Third-Party Defendants Pleasantville Development Corporation and C.T. The order against Third-Party Defendants to pay attorneys fees to plaintiff and costs of litigation is reversed. 2. The award of rentals to Jardinico is dispensed with. 9 covered by Transfer Certificate of Title No. and not from the date of the filing of the complaint. The appellate court also ruled that the award of rentals was without basis. and Pleasantville Development Corporation are ordered to pay in solidum the amount of P3.00) Pesos a day as reasonable rental to be computed from January 30.00 to Jardinico as attorneys fees. and is entitled to the rights granted him under Articles 448. until he had vacated (sic) the premises. Third-party defendants C. with interest thereon at 12% per annum.T. Property Volume 3 Bachelor of Laws II-A 9 . the third-party defendants shall answer for all demolition expenses and the value of the improvements thus destroyed or rendered useless. Torres Enterprises. The RTC thus disposed: "WHEREFORE. as well as litigation expenses. Kee appealed directly to the Supreme Court." 6 Following the denial of his motion for reconsideration on October 20. and thus was liable for rental. the decision appealed from is affirmed with respect to the order against the defendant to vacate the premises of Lot No. the appealed decision is REVERSED. the removal of all structures and improvements introduced thereon at his expense and the payment to plaintiff (sic) the sum of Fifteen (P 15. the Court of Appeals disposed: "WHEREFORE. Thus. the case is REMANDED to the court of origin for the determination of the actual value of the improvements and the property (Lot 9). 3. "Furthermore. Torres Enterprises.000." 7 Petitioner then filed the instant petition against Kee. is dismissed. Jardinico and CTTEI. 4. and Pleasantville Development Corporation are solidarily liable under the following circumstances: a. If Eldred Jardinico decides to appropriate the improvements and.00) Pesos as attorneys fees. This Court further renders judgment against the defendant to pay the plaintiff the sum of Three Thousand (P3. and that such wrong delivery was likewise imputable to its principal. Wilson Kee is declared a builder in GOOD FAITH with respect to the improvements he introduced on Lot 9. 546 and 548 of the New Civil Code. remove these structures. It further ruled that the erroneous delivery was due to the negligence of CTTEI. Torres Enterprises. 1981.000. b. the third-party defendants shall answer for the amount representing the value of Lot 9 that Kee should pay to Jardinico. which referred the matter to the Court of Appeals.T. 1986.

? and (3) Is the award of attorneys fees proper? The First Issue: GOOD FAITH Petitioner contends that the Court of Appeals erred in reversing the RTCs ruling that Kee was a builder in BAD FAITH. thus enriching private respondent Kee at the expense of the petitioner. The award of attorneys fees is clearly without basis and is equivalent to putting a premium in (sic) court litigation.T. We agree with the following observation of the Court of Appeals: "The roots of the controversy can be traced directly to the errors committed by CTTEI. by granting to private respondent-Kee the rights of a builder in GOOD FAITH in excess of what the law provides. "6.The Issues The petition submitted the following grounds to justify a review of the respondent Courts Decision. not to mention the social humiliation that would follow. having violated several provisions of the contract to sell on installments. "5. Pleasantville Development Corporation (liable) for the acts made by the agent in excess of its authority is clearly in violation of the provision of the law. T-106367. The decision of the Court of Appeals. In the light of the subsequent events or circumstances which changed the rights of the parties. The Court of Appeals has so far departed from the accepted course of judicial proceedings. Kee is presumed to have knowledge of the metes and bounds of the property with which he is dealing. holding the principal. It is highly improbable that a purchaser of a lot would knowingly and willingly build his residence on a lot owned by another. if any. C. Lot 8 is covered by Transfer Certificate of Title No. the issues could be re-stated as follows: (1) Was Kee a builder in GOOD FAITH? (2) What is the liability. Inc. The Court of Appeals has decided the case in a way probably not in accord with law or the the (sic) applicable decisions of the Supreme Court on third-party complaints. under the Torrens system of land registration. of petitioner and its agent. "4. deliberately exposing himself and his family to the risk of being ejected from the land and losing all improvements thereon. while Lot 9 is identified in Transfer Certificate of Title No. T-69561. Torres Enterprises. Private respondent-Kee in accordance with the findings of facts of the lower court is clearly a builder in BAD FAITH. Kee had acted in the manner of a prudent man in ascertaining the identity of his property. "Under the circumstances. Petitioner fails to persuade this Court to abandon the findings and conclusions of the Court of Appeals that Kee was a builder in GOOD FAITH. "3. when it pointed the wrong property to Wilson Kee and his wife. it becomes imperative to set aside or at least modify the judgment of the Court of Appeals to harmonize with justice and the facts. by ordering third-party defendants to pay the demolition expenses and/or price of the land. "2. Hence. as follows: "1." From these grounds. x x x xxx xxx xxx Property Volume 3 Bachelor of Laws II-A 10 .

to wit: "13. his wife went to the subdivision site accompanied by CTTEIs employee. he went to the subdivision developers agent and applied and paid for the relocation of the lot. Petitioner next contends that Kee cannot "claim that another lot was erroneously pointed out to him" because the latter agreed to the following provision in the Contract of Sale on Installment. Such violations have no bearing whatsoever on whether Kee was a builder in GOOD FAITH. having examined the property prior to the execution of the contract. the said Vendee shall bear the expenses of the necessary fillings. when the same is so desired by him/her." 12 The Second Issue: Petitioners Liability Kee filed a third-party complaint against petitioner and CTTEI. Kees efforts all went to naught. Kee saw no reason to suspect that there had been a misdelivery." 11 The subject matter of this provision of the contract is the change of the location. petitioner points to Kees violation of paragraphs 22 and 26 of the Contract of Sale on Installment. as well as for the production of a lot plan by CTTEIs geodetic engineer. unless the waiver is contrary to law. or prejudicial to a third person with a right recognized by law. To demonstrate Kees BAD FAITH. These alleged violations may give rise to petitioners cause of action against Kee under the said contract (contractual breach). He was not aware that the lot delivered to him was not Lot 8. and because of the companys positive identification of the property. or good customs. Octaviano. Thus. as such fact does not negate the negligence of its agent in pointing out the wrong lot to Kee. petitioner has the burden of proving BAD FAITH on the part of Kee. There was no need for him to have acted ex-abundantia cautela. Kee believed that said lot was what he bought from petitioner. public policy. he had to find a way to ascertain that what was described in TCT No. We disagree. 10 At the time he built improvements on Lot 8. contours. It merely provides that the vendee. The steps Kee had taken to protect his interests were reasonable. morals. the Contract of Sale on Installment covering Lot 8 between it and Kee was rescinded long before the present action was instituted. This has no relevance on the liability of petitioner. as to its location. on his state of mind at the time he built the improvements on Lot 9. Thus. Petitioner also points out that. 9And as GOOD FAITH is presumed. Kees GOOD FAITH. Such circumstance is relevant only as it gives Jardinico a cause of action for unlawful detainer against Kee. The Vendee hereby declares that prior to the execution of his contract he/she has personally examined or inspected the property made subject-matter hereof. public order. who authoritatively declared that the land she was pointing to was indeed Lot 8. Upon Kees receipt of the map. Having full faith and confidence in the reputation of CTTEI. Because of CTTEIs blunder. Petitioner failed to prove otherwise. which was dismissed by the RTC after ruling that there was no evidence from which fault or negligence on the part of petitioner and CTTEI can be Property Volume 3 Bachelor of Laws II-A 11 . We do not agree with the interpretation of petitioner that Kee contracted away his right to recover damages resulting from petitioners negligence. as well as the natural condition of the lots and from the date hereof whatever consequential change therein made due to erosion. as found by the trial court. that is. "Rights may be waived. agrees to shoulder the expenses resulting from such change. for the final delivery of subdivision lots to their owners is part of the regular course of everyday business of CTTEI. 69561 matched Lot 8. such as being present during the geodetic engineers relocation survey or hiring an independent geodetic engineer to countercheck for errors." 8 GOOD FAITH consists in the belief of the builder that the land he is building on is his and his ignorance of any defect or flaw in his title. but may not be bases to negate the presumption that Kee was a builder in GOOD FAITH. contour and condition of the lot due to erosion. Such waiver would be contrary to public policy and cannot be allowed. what Kee had hoped to forestall did in fact transpire."But as Kee is a layman not versed in the technical description of his property.

In acting within its scope of authority." 13 Petitioners contention is without merit. 15 CTTEI was acting within its authority as the sole real estate representative of petitioner when it made the delivery to Kee. Petitioner further assails the following holding of the Court of Appeals: "2. Property Volume 3 Bachelor of Laws II-A 12 . Jardinico and Kee on July 24. CTTEI alone should be liable. Third-party defendants C. As we have earlier stated. done within the scope of his authority. and should bear the damage caused to third persons.T. 14 On the other hand. Jardinico and Kee did not inform the Court of Appeals of such deal. it stressed that they had reached an agreement independent of the outcome of the case. Petitioner does not dispute the fact that CTTEI was its agent.T. Kee would be -able to own the lot. Inc. If Eldred Jardinico decides to appropriate the improvements and. Pending resolution of the case before the Court of Appeals. Torres Enterprises." 18 Petitioner contends that if the above holding would be carried out. 1987 entered into a deed of sale. as principal of CTTEI. the third-party defendants shall answer for all demolition expenses and the value of the improvements thus destroyed or rendered useless. That Civil Case No. remove these structures. it was never authorized to deliver the wrong lot to Kee. Kee would be unjustly enriched at its expense. But it contends that the erroneous delivery of Lot 9 to Kee was an act which was clearly outside the scope of its authority. because the aforequoted portion of respondent Courts Decision would require petitioner and CTTEI jointly and solidarily to "answer" or reimburse Kee there for. The deed of sale contained the following provision: "1. and consequently. Kee" which is now pending appeal with the Court of Appeals. The Court of Appeals disagreed and found CTTEI negligent for the erroneous delivery of the lot by Octaviano. Torres Enterprises. its employee. however. wherein the former sold Lot 9 to Kee. the third-party defendants shall answer for the amount representing the value of Lot 9 that Kee should pay to Jardinico. It is this negligence that is the basis of petitioners liability. If Jardinico prefers that Kee buy the land.inferred. the deed of sale can have no effect on the liability of petitioner. 16 Kee asserts though that the "terms and conditions in said deed of sale are strictly for the parties thereto" and that "(t)here is no waiver made by either of the parties in said deed of whatever favorable judgment or award the honorable respondent Court of Appeals may make in their favor against herein petitioner Pleasantville Development Corporation and/or private respondent C. the agent who exceeds his authority is personally liable for the damage. In other words. 3815 entitled "Jardinico vs. what the deed of sale regulates are the reciprocal rights of Kee and Jardinico. Inc. thereafter. We agree with petitioner. On the other hand. The rule is that the principal is responsible for the acts of the agent. petitioners liability is grounded on the negligence of its agent. regardless of the outcome of the decision shall be mutually disregarded and shall not be pursued by the parties herein and shall be considered dismissed and without effect whatsoever. it was. without having to pay anything on it. and Pleasantville Development Corporation are solidarily liable under the following circumstances: "a. as buyer." 17 Obviously. It asserts that "while [CTTEI] was authorized to sell the lot belonging to the herein petitioner. per Articles 1909 and 1910 of the Civil Code. "b. negligent.

Torres Enterprises. 546 and 548 of the New Civil Code" is deleted. the same cannot now be quantified and awarded. 546 and 548 of the Civil Code).000. The RTC deleted the award.T.e. however. Arts.00 to Jardinico as attorneys fees. The rights of Kee and Jardinico vis-a-vis each other. the petitioner should be held liable for damages. we rule that Kee is a builder in GOOD FAITH. to remand the case to the court of origin "for determination of the actual value of the improvements and the property (Lot 9). which deed now governs the rights of Jardinico and Kee as to each other. however. consistent with its ruling that petitioner was without fault or negligence. hence no damages could now be awarded. Inc. Kee and Jardinico have amicably settled through their deed of sale their rights and obligations with regards to Lot 9. are regulated by law(i. The Third Issue: Attorneys Fees The MTCC awarded Jardinico attorneys fees and costs in the amount of P3. there is no showing that such evidence was actually presented in the trial court. respectively. since the amount and/or extent of such damages was not proven during the trial.." WHEREFORE. 448. There is also no further need. Inc. and (4) The award of rentals to Jardinico is dispensed with. SO ORDERED.00. in view of the deed of sale entered into by Kee and Jardinico. as well as litigation expenses.000. The Decision of the Court of Appeals is hereby MODIFIED as follows: (1) Wilson Kee is declared a builder in GOOD FAITH. the extent and/or amount of damages to be awarded is a factual issue which should be determined after evidence is adduced. reinstated the award of attorneys fees after ruling that petitioner was liable for its agents negligence. The disposition of the Court of Appeals that Kee "is entitled to the rights granted him under Articles 448. It was error for the Court of Appeals to make a "slight modification" in the application of such law. (3) Petitioner Pleasantville Develpment Corporation and respondent C. Property Volume 3 Bachelor of Laws II-A 13 . the petition is partially GRANTED. are declared solidarily liable for damages due to negligence. However. The award of attorneys fees lies within the discretion of the court and depends upon the circumstances of each case. on the ground of "equity". Now. Jardinico was compelled to litigate for the protection of his interests and for the recovery of damages sustained as a result of the negligence of petitioners agent. we delete items 2 (a) and (b) of the dispositive portion of the Court of Appeals Decision [as reproduced above] holding petitioner and CTTEI solidarily liable. (2) Petitioner Pleasantville Development Corporation and respondent C.00 and P700. At any rate. as it stands now. as builder in GOOD FAITH and owner in GOOD FAITH. The Court of Appeals. 20 In sum. 19 We shall not interfere with the discretion of the Court of Appeals.T. respectively. For such negligence. Thus. are ordered to pay in solidum the amount of P3. as well as for further proceedings in conformity with Article 448 of the New Civil Code. as prayed for in his complaint.Petitioners liability lies in the negligence of its agent CTTEI. as ruled by the appellate Court. Tones Enterprises.

Respondents again opposed said motion. petitioners presented a motion to compel respondents Eduarda Caridad and her mother. to remove their respective houses which they built in 1958 and 1959. 54. granting petitioners' motion. On March 20. ordering respondents to remove their respective houses from the southern portion of said lot No. 31289-R. 8864 since 1939. as registered owners. filed a motion. as such. On January 23. and. On December 6. respondents appealed. 1941. No writ having theretofore been issued in petitioners' favor. dated January 23. 1222. SILVINA CARIDAD. as petitioners. 1961. 8864 within thirty days from receipt of said order. on December 11. on November 5. the order having become final. in its Cadastral Case No. which rights cause a conflict to arise between petitioners. to predecessor-in-interest of petitioners. Respondents also insist that the determination or Property Volume 3 Bachelor of Laws II-A 14 . ET AL. Silvina Caridad. in the off ice of the Register of Deeds of Ilocos Norte..R. that this conflict is a new matter which the cadastral court could not have possibly passed upon in 1941 when it rendered its decision awarding the disputed lot to Julio Baltazar. 1962. O-1445. 1962. 1959. the trial court rendered decision. said lot was registered in the names of applicant spouses under Original Certificate of Title No. which was later transcribed. and before the decision was rendered and the corresponding decree issued in 1941. 8864 of the Laoag (Ilocos Norte) cadastre to the spouses Julio Baltazar and Constancia Valencia as their conjugal partnership property. while the cadastral case involving said lot was pending before the trial court. granted petitioners' motion. 1961.R.B. the registered owner of said Lot No. and overruled respondents' opposition but directed the sheriff not to remove or destroy the permanent improvements on the lot without an express command. Respondents-appellants question the power or jurisdiction of the trial court. Respondents originally interposed the present appeal to the Court of Appeals. and are as follows: In the cadastral proceeding above stated. where it was docketed as its CA-G. praying for writ of possession against respondents Silvina Caridad and her daughter. L-23509 June 23. 1962. compelling respondents Silvina Caridad and Eduarda Caridad to remove their respective houses built on the southern portion of Lot No. in the event of their failure to do so. certified the appeal to this Court for raising only questions of law. ET AL.L. Julio Baltazar.CASE 4 EN BANC G. Eduarda Caridad. The facts are not in dispute. to order the removal of their respective houses which were built in the disputed lot long after the issuance of the final decree of registration. 1941. 8864 within thirty days from receipt of said order.. REYES. 1966 NATY BALTAZAR. the trial court issued an order. No. On January 2. in the cadastral case. and. as builders in GOOD FAITH. the sheriff enforced the writ and placed petitioners in possession of the southern portion of the lot. after due hearing. No. plaintiffs and appellees. They insist that they are builders in GOOD FAITH of the houses in question.. died. CLRO Cad. Said decision having become final. who had been in possession of the southern portion of said Lot No. on the one hand. defendants and appellants. In the meanwhile. The appellate court. issued by the Court of First Instance of Ilocos Norte. J. the trial court. his surviving wife and children. on the other. and pursuant thereto. 8854. vs. Not satisfied. sitting as a cadastral court. awarding said Lot No. the corresponding decree was issued on July 12. in the southern portion of the disputed lot. Case No. to order the sheriff to demolish the same. respectively. J.: Appeal against an order. and respondents. however. they are accorded rights under Article 448 of the new Civil Code.

Section 13. the demolition of improvements introduced by the successor-in-interest of a defeated oppositor in the land registration case. in refusing to issue the writ of demolition to petitioner. interests and title of the parties will ultimately be ventilated. to order. his surviving spouse. speaking for the Court.the officer must enforce an execution for the delivery or restitution of property by placing the plaintiff in possession of such property. and wherein the respective rights. 1960. 51 O. Barrera. if the writ of possession issued in a land registration proceeding implies the delivery of possession of the land to the successful litigant therein (Demorar vs. in the foregoing cited case. However. said: "But this construction of the law entirely defeats its purpose.G. is silent on the point. we hold that the order. and not to proceedings under the land registration law which. except by special order of the court. opined: It is contended that respondent Judge erred in denying the petition for demolition. would be a cumbersome process. and by levying as hereinafter provided upon so much of the property of the judgment debtor as will satisfy the amount of the costs.settlement of this controversy is cognizable only by a court exercising general jurisdiction. Llorente. Such a situation. To require a successful litigant in a land registration case to institute another action for the purpose of obtaining possession of the land adjudged to him. 8864. in our opinion. It is to be noted that respondents do not dispute that during the pendency of the cadastral proceeding. 48 Phil. was of the belief that the latter has another remedy. this Court had already upheld the jurisdiction or authority of the court of first instance. granting petitioners' motion to compel respondents to remove their respective houses from the disputed lot. which respondents filed against petitioners in the same court and docketed (but after the writ of possession had been asked) as its Civil Case No.) 2872. and that the only remedy available to petitioners is to file an ordinary action for ejectment or recovery of possession against them. is valid and enforceable against respondents. respondent Judge. Manlapas vs. Del Rosario. which order may only issue upon petition of the plaintiff after due hearing and upon the defendant's failure to remove the improvements within a reasonable time to be fixed by the court.G. in which instances. or the recovery of possession. and that respondent Eduarda Caridad claims right and title thereto as a mere heir and successor-in-interest of said Andres Caridad. Put differently. especially considering that the latter writ is but a complement of the former which without said writ of demolition would be ineffective. 8864. a writ of demolition must. Neither do respondents dispute the propriety and validity of the order of the cadastral court. 11 Phil. the officer shall not destroy. et al. The view is not correct. according to him. Thus. In the case of Marcelo vs. 391. for the reason that the provisions of the Rules of Court are applicable to land registration cases in a suppletory character (Rule 132). It would foster unnecessary and expensive litigations and result in multiplicity of suits. the late Andres Caridad. respondent Silvina Caridad. Pasay Estates Company vs.. Respondents further urged that this remedy is rendered unnecessary in view of the pendency of an action for reconveyance over the disputed portion of said Lot No." Respondent Judge is of the view that the above-quoted provision of the Rules of Court applies only to ordinary actions involving the delivery or restitution of property. by resorting to ordinary civil actions in the regular courts. which our judicial system abhors. 298). and their children. In this connection. dated March 20. Mr. Mencias. 3349. damages. said courts would then be competent to issue said writ. The above contentions of respondents are without merit. granting the writ of possession in favor of petitioners as well as its enforcement. It would compel a successful litigant in the Court of Land Registration to commence other actions in other courts for the purpose of securing fruits of Property Volume 3 Bachelor of Laws II-A 15 . provides: "SEC. Iba�ez. as a consequence of the writ of possession issued by it.. Apparently. rendition of the judgment awarding said Lot No. of the cadastral court. one of whom is respondent Eduarda Caridad. rents. etc. likewise. sitting as a land registration court. et al. 3451. L-15609. 58 O. and profits included in the execution. could not have been intended by the law. 1962. How execution for the delivery or restitution of property enforced . were in possession of the southern portion of undisputed lot. To this we agree. Justice Jesus G. Under these circumstances. this Court on one occasion. namely. and consequent issuance of the final decree of registration of the same in favor of Julio Baltazar. Rule 39 of the old Rules of Court. issue. demolish or remove the improvements made by the defendant or his agent on the property. 13. such as that of forcible entry and detainer.. April 29.

Property Volume 3 Bachelor of Laws II-A 16 . provisions of the Rules of Court are applicable to land registration cases in a suppletory character. by reason of the continued refusal of respondent Clemente Pagsisihan to remove his house thereon and restore possession of the premises to petitioner.. all auxiliary writs. With costs against respondentsappellants. in the case of Shoiji vs. including the writ of demolition sought by petitioner. Needless to say. . vs. processes and other means necessary to carry it into effect may be employed by such court or officer and if the procedure to be followed in the exercise of such jurisdiction is not specifically pointed out by these rules.. Lastly. Appellants can not be regarded as builders in GOOD FAITH because they are bound by the 1941 decree of registration that obligated their parents and predecessors-in-interest. the petitioner herein. GOOD FAITH must rest on a colorable right in the builder. 43 Phil. Section 6. its issuance is reasonably necessary to do justice to petitioner who is being deprived of the possession of the lots in question. (Pasay Estates Co.his victory. Otherwise. 333. Furthermore. Del Rosario." In line with this doctrine. of the Rules of Court states that "When by law jurisdiction is conferred on a court or judicial officer. the same having practically identical sets of facts obtaining in the case at bar. et al. processes and other means necessary to carry into effect the jurisdiction conferred upon it by law in land registration cases to issue a writ of possession to the successful litigant. every court has inherent power to do all things reasonably necessary for the administration of justice within the scope of its jurisdiction. has the inherent power to issue the writ of demolition demanded by petitioner. We believe the above-quoted ruling aptly answers the arguments of respondents-appellants.. beyond a mere stubborn belief in one's title despite judicial adjudication. The evident purpose of the law was to prevent that very thing. as it is hereby affirmed." As already stated. in the instant case. Harvey. Pursuant to the provision just quoted. respondent Judge has the power to issue all auxiliary writs. we pointed out that "Independent of any statutory provision.. .. the appealed order should be. the rights of the latter to enjoy full possession of their registered property could be indefinitely defeated by an unsuccessful opponent through the simple subterfuge of replacing his old house with a new one from time to time. any suitable process or mode of proceeding may be adopted which appears most conformable to the spirit of said rules. it may be stated that respondent Judge. Wherefore. Rule 124. supra). The fact that in 1959 appellants demolished and replaced their old house with new and bigger ones can not enervate the rights of the registered owners.

DOMINADOR NICOLAS. in turn. and MARLYN GEMINIANO. It appears that Lot No. however. Petitioners. de Geminiano.00 per month for a period of seven years commencing on 15 November 1978. the petitioners' mother executed a contract of lease over a 126 square-meter portion of the lot.00. The petitioners ask the Court to set aside the decision of the Court of Appeals affirming the decision of Branch 40 of the Regional Trial Court (RTC) of Dagupan City. and MARY A.. Respondents. which.R. Subsequently. DECISION DAVIDE. with an alleged promise to sell to the latter that portion of the lot occupied by the house. 3765-B-1 containing an area of 314 square meters was originally owned by the petitioners' mother. the lot was registered in the latter's names. Lee sold the lot to Lily Salcedo. 120303. which resulted in its acquisition by one Maria Lee in 1972. COURT OF APPEALS. After the expiration of the lease contract in November 1985. JR. ordered the petitioners to reimburse the private respondents the value of the house in question and other improvements. reversed the MTCC. and allowed the latter to retain the premises until reimbursement was made. who in turn sold it in 1984 to the spouses Agustin and Ester Dionisio. in favor of the private respondents for P40. No. vs. July 24. 1996 FEDERICO GEMINIANO. including that portion on which the house stood. In 1982. J. NICOLAS. On a 12-square-meter portion of that lot stood the petitioners' unfinished bungalow. Paulina Amado vda. ASUNCION GEMINIANO.: This petition for review on certiorari has its origins in Civil Case No. LARRY GEMINIANO. On 14 February 1992.CASE 5 THIRD DIVISION [ G.000. MARIA GEMINIANO. the Dionisio spouses executed a Deed of Quitclaim over the said property in favor of the petitioners. 9214 of Branch 3 of the Municipal Trial Court in Cities (MTCC) in Dagupan City for unlawful detainer and damages. 2 As such. 1 The private respondents then introduced additional improvements and registered the house in their names. the petitioners' mother refused to accept the monthly rentals. ERNESTO GEMINIANO. 3 Property Volume 3 Bachelor of Laws II-A 17 . which the petitioners sold in November 1978 to the private respondents for the sum of P6. It turned out that the lot in question was the subject of a suit.

this time by the petitioners. did not apply to lessees like the private respondents. and (2) allowing the private respondents to remain in possession of the premises until they were fully reimbursed for the value of the house. there being no controverting evidence presented. the Court of Appeals affirmed the decision of the RTC denied 8 the petitioners' motion for reconsideration. (2) whether the lessees were builders in GOOD FAITH and entitled to reimbursement of the value of the house and improvements. and as such. its implied renewal was not for the period stipulated in the original contract. The parties then submitted their respective position papers and the case was heard under the Rule on Summary Procedure. a renewal thereof. the RTC of Dagupan City reversed the trial court's decision and rendered a new judgment: (1) ordering the petitioners to reimburse the private respondents for the value of the house and improvements in the amount of P180. much less. or removal of the improvements should the lessor refuse to reimburse.000.00 and to pay the latter P10. 7 and The Court is confronted with the issue of which provision of law governs the case at bench: Article 448 or Article 1678 of the Civil Code? The said articles read as follows: Property Volume 3 Bachelor of Laws II-A 18 . holding that Articles 448 and 546 of the Civil Code. As regards the petitioners' alleged failed promise to sell to the private respondents the lot occupied by the house. and (3) the value of the house. the petitioners filed with the MTCC of Dagupan City a complaint for unlawful detainer and damages.000. The court resolved the second issue in the negative.On 9 February 1993. which allows reimbursement of up to onehalf of the value of the useful improvements. On the first issue.000. the petitioners sent. the present petition. were entitled to reimbursement of the value of the house and improvements with the right of retention until reimbursement had been made. which allow possessors in GOOD FAITH to recover the value of improvements and retain the premises until reimbursed. the court deemed as conclusive the private respondents' allegation that the value of the house and improvements was P180. 4 Upon failure of the private respondents to heed the demand. The trial court thus ordered the private respondents to vacate the premises.00 as attorney's fees. the rights of the private respondents were specifically governed by Article 1678. pay the petitioners P40. a letter addressed to private respondent Mary Nicolas demanding that she vacate the premises and pay the rentals in arrears within twenty days from notice.00 as litigation expenses. the court held that such should be litigated in a proper case before the proper forum. not an ejectment case where the only issue was physical possession of the property.00 as attorney's fees and P2. 6 It ruled that since the private respondents were assured by the petitioners that the lot they leased would eventually be sold to them. the court held that since the petitioners' mother was no longer the owner of the lot in question at the time the lease contract was executed in 1978. but only on a monthto-month basis pursuant to Article 1687 of the Civil Code. the parties agreed to confine the issues to: (1) whether there was an implied renewal of the lease which expired in November 1985.00. Besides.000. in view of its acquisition by Maria Lee as early as 1972. The refusal of the petitioners' mother to accept the rentals starting January 1986 was then a clear indication of her desire to terminate the monthly lease. via registered mail.00 a month as reasonable compensation for their stay thereon from the filing of the complaint on 14 April 1993 until they vacated. On the third issue. Hence. and to pay the sum of P1. they could be considered builders in GOOD FAITH.000. On appeal. And even if the lease legally existed. plus costs. During the pre-trial conference. because the latter knew that their occupation of the premises would continue only during the life of the lease. 5 On appeal by the private respondents. there was no lease to speak of.

11 In this case. or to oblige the one who built or planted to pay the price of the land. the lessor upon the termination of the lease shall pay the lessee one-half of the value of the improvements at that time. provided no damage is caused to the principal thing. the court shall fix the terms thereof. 12 The petitioners' mother therefore remained in possession of the lot. 16 Being mere lessees.e. 17 In a plethora of cases. If the lessee makes. 15 and may be asserted not only by the original lessor. Article 448 of the Civil Code should apply. however. and the one who sowed. However. or to assert a better title not only in themselves. i. and the private respondents as lessees. without altering the form or substance of the property leased. useful improvements which are suitable to the use for which the lease is intended. With regard to ornamental expenses. 9 After all. the lessee may remove the improvements. the builder or planter cannot be obliged to buy the land if its value is considerably more than that of the building or trees. The juridical relation between the petitioners' mother as lessor. 18 this Court has held that Article 448 of the Civil Code. Should the lessor refuse to reimburse said amount. 448. however. and the lessor does not choose to retain them by paying their value at the time the lease is extinguished. never sought a writ of possession in order that she gain possession of the property in question. xxx xxx xxx Art. 14 This estoppel applies even though the lessor had no title at the time the relation of lessor and lessee was created. Plainly. are then estopped to deny their landlord's title. sown or planted in GOOD FAITH. sowing or planting. is therefore well-established. The land was allegedly acquired later by one Maria Lee by virtue of an extrajudicial foreclosure of mortgage. applies only to a possessor in GOOD FAITH. in relation to Article 546 of the same Code. the proper rent. which allows full reimbursement of useful improvements and retention of the premises until reimbursement is made. the lessee shall not be entitled to any reimbursement. but also in some third person while they remain in possession of the leased premises and until they surrender possession to the landlord. It is undisputed that the private respondents came into possession of a 126 square-meter portion of the said lot by virtue of a contract of lease executed by the petitioners' mother in their favor. in GOOD FAITH.Art. The owner of the land on which anything has been built. hence. and carries with it a recognition of the lessor's title. The private respondents claim they are builders in GOOD FAITH. 13 The private respondents. one who builds on land Property Volume 3 Bachelor of Laws II-A 19 . It has been said that while the right to let property is an incident of title and possession. both parties admit that the land in question was originally owned by the petitioners' mother. He shall not.. as lessees who had undisturbed possession for the entire term under the lease. they cannot be considered as possessors nor builders in GOOD FAITH. cause any more impairment upon the property leased than is necessary. if the owner of the land does not choose to appropriate the building or trees after proper indemnity. he shall pay reasonable rent. Lee. a person may be a lessor and occupy the position of a landlord to the tenant although he is not the owner of the premises let. 10 only the temporary use and enjoyment thereof. but he may remove the ornamental objects. even though the principal thing may suffer damage thereby. as well as the alleged assurance made by the petitioners that the lot on which the house stood would be sold to them. They rely on the lack of title of the petitioners' mother at the time of the execution of the contract of lease. In such case. The crux of the said issue then is whether the private respondents are builders in GOOD FAITH or mere lessees. ownership of the property is not being transferred. The parties shall agree upon the terms of the lease and in case of disagreement. the private respondents knew that their occupation of the premises would continue only for the life of the lease. 1678. after payment of the indemnity provided for in articles 546 and 548. but also by those who succeed to his title. shall have the right to appropriate as his own the works.

Dominador Nicolas.R. The first thing that the private respondents should have done was to reduce the alleged promise into writing. Not having taken any steps in order that the alleged promise to sell may be enforced. For. respondent. DECISION CORONA. et al. December 11. J. that the right to indemnity under Article 1678 of the Civil Code arises only if the lessor opts to appropriate the improvements. 19because the situation sought to be avoided and which would justify the application of that provision.: Before us is a petition for review of the decision[1 dated February 28. otherwise. And even if the petitioners indeed promised to sell. SO ORDERED. No. represented by Reynaldo de los Santos. it would not make the private respondents possessors or builders in GOOD FAITH so as to be covered by the provisions of Article 448 of the Civil Code. for brevity) of Davao City. Neither the deed of sale over the house nor the contract of lease contained an option in favor of the respondent spouses to purchase the said lot. Court of Appeals. It must be stressed. Branch 11. an agreement for the sale of real property or an interest therein is unenforceable. et al.with the belief that he is the owner thereof. Neither can they retain the premises until reimbursement is made. 2000 of the Court of Appeals[2 affirming the decision[3 of the Regional Trial Court (RTC." Costs against the private respondents. judgment is hereby rendered GRANTING the instant petition. Suffice it to say. It does not apply where one's only interest is that of a lessee under a rental contract. Anent the alleged promise of the petitioners to sell the lot occupied by the private respondents' house. REVERSING and SETTING ASIDE the decision of the Court of Appeals of 27 January 1995 in CA-G. CASE 6 THIRD DIVISION G. JOUVET ONG LEE. however. it would always be in the power of the tenant to "improve" his landlord out of his property. the private respondents cannot bank on that promise and profess any claim nor color of title over the lot in question. vs. the same was not substantiated by convincing evidence. the rights of the private respondents as lessees are governed by Article 1678 of the Civil Code which allows reimbursement to the extent of one-half of the value of the useful improvements. is not present in this case. Since the petitioners refused to exercise that option. 9214 entitled "Federico Geminiano. and REINSTATING the decision of Branch 3 of the Municipal Trial Court in Cities of Dagupan City in Civil Case No.R. 142131. SP No. Property Volume 3 Bachelor of Laws II-A 20 . 34337. unless some note or memorandum thereof be produced. The private respondents' sole right then is to remove the improvements without causing any more impairment upon the property leased than is necessary. as correctly pointed out by the petitioners. because under Article 1403 of the Civil Code. vs. 21 WHEREFORE. "a state of forced co-ownership" would not be created between the petitioners and the private respondents. Petitioners. There is no need to apply by analogy the provisions of Article 448 on indemnity as was done in Pecson vs. 20 the private respondents cannot compel them to reimburse the one-half value of the house and improvements. The latter cannot raise the mere expectancy of ownership of the aforementioned lot because the alleged promise to sell was not fulfilled nor its existence even proven. 2002] SPOUSES DARIO LACAP and MATILDE LACAP.

the respondent filed a complaint for unlawful detainer against the petitioners. The petitioner spouses introduced improvements thereon allegedly amounting to some P500. During the auction sale. however. the RTC of Davao City. When the petitioner spouses called the banks head office. the petitioner spouses representative went to the bank to pay the monthly rental.000. 1996[5. Branch 11. 1996. for brevity) of Davao City in a case[4 for unlawful detainer filed by respondent Jouvet Ong Lee against the petitioner spouses Dario and Matilde Lacap. 1996. 1997 of the Municipal Trial Court in Cities (MTCC. On August 25. On June 20. premises considered. But. In 1981. to wit: Property Volume 3 Bachelor of Laws II-A 21 . This case is now pending before Branch 13 of the Regional Trial Court (RTC. Jouvet Ong Lee. the Municipal Trial Court of Davao City.[7 On appeal.The said courts affirmed on appeal the decision dated April 30. b) pay P1.00 as reasonable compensation for the use of the said premises commencing the date of this decision until defendants vacate the same. the RTC issued an order granting respondents motion. SO ORDERED. However. the bank emerged as the highest bidder and title passed on to it. affirmed the assailed decision of the municipal trial court.000. The petitioner spouses complied that same day. the property had already been sold to another person. The bank allowed the petitioner spouses to stay in the premises as lessees paying a monthly rental of P800. After trial. the petitioner spouses received a letter demanding that they vacate the premises because it was already owned by herein respondent. for brevity) of Davao City. are as follows: Before 1981. the bank refused to accept the rentals inasmuch as.100. on October 30.00 as and by way of attorneys fees.500. with the modification that respondent should reimburse the petitioner spouses for the improvements the latter introduced to the premises. judgment is hereby rendered in favor of the plaintiff and against the defendants ordering the latter to: a) vacate the subject premises. a certain Victor Facundo mortgaged two parcels of land and the improvements thereon to Monte de Piedad Savings Bank (the bank. c) pay P10. The facts. The petitioner spouses instituted a civil case against the respondent for cancellation of sale and damages with an application for preliminary injunction. on May 22. herein petitioner spouses Dario and Matilde Lacap assumed to pay Facundos mortgage obligation to the bank.000 after relying on the banks assurance that the property would be sold back to them. 1998. for brevity).[6 Meanwhile. and d) cost of suit.[8 The respondent filed a motion for reconsideration praying for the deletion of the order to reimburse petitioner spouses for the improvements introduced on the subject premises. according to the bank. the Vice-President of the Assets Division of the bank advised them to submit a written offer to the bank for P1. The dispositive portion of the decision reads: WHEREFORE. the bank turned down the petitioner spouses offer. as found by the Court of Appeals and the Regional Trial Court. judgment is hereby rendered affirming the decision of the court a quo with the modification that plaintiff should reimburse the defendant for the improvements the latter introduced on the premises. rendered judgment as follows: WHEREFORE. Branch 4. Due to their failure to pay their obligation to the bank. On May 1. 1996. the latter foreclosed on the mortgage.

WHEREFORE, the Motion for Reconsideration of Plaintiff-Appellee is hereby granted to leave the premises therein even if the property may suffer damage. But they shall not cause more damage than what is necessary. They shall likewise remove the ornamental improvements introduced therein. SO ORDERED.[9 On August 23, 1999, the said court denied the petitioner spouses motion for reconsideration. Petitioner spouses appealed the decision of the RTC to the Court of Appeals. According to them, the courts a quo committed serious errors of fact and law in entertaining the complaint for unlawful detainer despite the lack of jurisdiction considering that the issue recovery of the right to possess was the subject matter of an accion publiciana which was properly cognizable by the Regional Trial Courts.[10 On February 28, 2000, the appellate court rendered a decision, the dispositive portion of which reads: WHEREFORE, for lack of merit, the instant petition is DISMISSED and the assailed Decision dated February 20, 1998 and Order dated August 25, 1998 are AFFIRMED. SO ORDERED.[11 The appellate court held that the municipal trial court had jurisdiction over the case inasmuch as the complaint itself sufficiently alleged that possession was unlawfully withheld from the respondent who was the registered owner thereof, and that the petitioner spouses refused to vacate the subject premises despite demands to vacate the same. In brushing aside the petitioner spouses argument that respondents ownership was assailable due to the banks violation of its promise to first offer the subject property to them, the appellate court ruled that it could not touch upon said issue as it was the subject matter of a separate case filed by the spouses before the RTC of Davao City, Branch 13. Reiterating the rulings of the courts a quo, the appellate court held that the petitioner spouses could not be builders in GOOD FAITH inasmuch as their payment of rentals to the bank was an indication that they were lessees. Thus, in the indemnification for improvements made, Article 1678, not Article 448, of the Civil Code should govern. Hence, this petition seeking a resolution on the following assigned issues: I WHETHER OR NOT THE COURT OF APPEALS CORRECTLY RULED ON THE JURISDICTIONAL QUESTION, THAT IS THE JURISDICTION OF THE DAVAO CITY MUNICIPAL COURT OVER THE UNLAWFUL DETAINER CASE FILED BY THE RESPONDENT; AND AS AN ALTERNATIVE TO, BUT ASSOCIATED WITH, THE ABOVE ISSUE, AND ASSUMING THAT THE DAVAO CITY MUNICIPAL COURT HAD JURISDICTION, II WHETHER OR NOT THE COURT OF APPEALS CORRECTLY APPLIED ARTICLE 1678 INSTEAD OF ARTICLE 448 OF THE CIVIL CODE WITH REGARD TO INDEMNITY FOR THE IMPROVEMENTS INTRODUCED BY THE PETITIONERS ON THE SUBJECT PROPERTY.[12 Abandoning their previous position of lack of jurisdiction on the part of MTC, the petitioner spouses now claim that the courts a quo erred in oversimplifying the issue in the case at bar. Since they were questioning the title of the respondent over the subject property, the case for unlawful detainer was no longer limited to the question of possession but also involved the question of ownership. Thus, the courts a quo should not have evaded ruling on the issue of ownership as a pre-requisite to the determination and resolution of the issue of physical possession. Section 16 of the 1997 Rules of Civil Procedure provides that: Sec. 16. Resolving defense of ownership.- When the defendant raises the defense of ownership in his pleadings and the question of possession cannot be resolved without deciding the issue of ownership, the issue of ownership shall be resolved only to determine the issue of possession.
Property Volume 3 Bachelor of Laws II-A 22

The petitioner spouses are questioning the respondents ownership by raising as an issue the alleged failure of the bank to first offer to them the subject property, thereby making respondents title defective. This, according to the petitioner spouses, is a defense of ownership that should have been resolved by the courts a quo. This Court takes exception to this argument. The defense of ownership contemplated by the said rule refers to a situation where the defendants either claim ownership of the subject property or attributes said ownership to another person other than the plaintiff. It does not apply where the defendants merely question the validity of the title of the plaintiff. Thus, the petitioner spouses must anchor the legality of their material possession of the property on a claim of title in order for the court to be able to touch, at least provisionally and only for purposes of determining possession, on the legality of the issue of ownership. In their Reply[13, they do not claim ownership over the subject premises to support their right to possess the property. They do not claim having a better right to the said property by way of transfer of title through one of the modes of transferring ownership. The alleged violation of their right of priority or first option to buy the premises is not the defense of ownership contemplated in Sec. 16 because said violation, even if true, would only give a cause of action for damages on the ground of breach of contract but not an action for recovery of title. The cases cited by petitioners cannot support their position as said cases refer to different factual situations. In Oronce v. Court of Appeals,[14] the defendants maintained ownership over the property by claiming that the contract of sale with assumption of mortgage was actually an equitable mortgage. We ruled therein that the defendant as mortgagor, and not as vendor, of the property can raise as a defense his claim of ownership over the subject property. In Refugia v. Court of Appeals,[15] the defendants claimed title over the subject property by contending that they, and not the plaintiffs, paid for the purchase of the said property. In the instant case, however, the petitioners admit that they do not own the subject parcels of land. As third persons to the contract of sale between the bank and the respondent, they are only questioning the validity of the transfer of title to respondent. The same cannot qualify as a defense of ownership as they will not derive title as a consequence but will, at best, only be given their disputed priority option to buy the subject premises. Another reason why the supposed issue of ownership cannot be ruled upon by the courts a quo is due to the fact that the same issue is also the subject of a separate pending case for cancellation of sale filed by the petitioners themselves against the respondent before the Regional Trial Court Davao City. In effect, by questioning the ownership of respondent, the petitioners are raising a defense that serves as the main cause of action in the complaint for the cancellation of sale pending before another court. This legal strategy is prohibited by the rule on the alleged litis pendencia. To ask the courts a quo to rule on the alleged defense of ownership is to pre-empt the ruling of the RTC, Branch 13, hearing the case for cancellation of sale. A party is prohibited from splitting his cause of action for the reason that it will unnecessarily clog the court dockets, waste the time and money of the parties, and perpetrate an abuse of the legal system by filing cases of the same nature in the hope of insuring a favorable judgment. Thus, the ruling of the MTCC that petitioner spouses defense does not qualify as a defense of ownership is correct. In the event that their first assigned error is not resolved in their favor, the petitioner spouses assert that their right to be indemnified for the improvements they introduced should be based on Article 448 of the Civil Code which provides that: 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.
Property Volume 3 Bachelor of Laws II-A 23

The parties shall agree upon the terms of the lease and in case of disagreements the courts shall fix the terms thereof. Article 546 of the Civil Code provides that builders in GOOD FAITH are entitled to reimbursement for necessary and useful expenses, with right of retention in both cases. The petitioners insist that they should be treated as builders in GOOD FAITH inasmuch as they stepped into the shoes of Victor Facundo, the former owner-mortgagor, when the latter assigned to them the obligation to pay the bank the balance due on the mortgage. Since then, they occupied the subject property and introduced improvements thereon. They contend that they were not lessees and paid no rentals thereon. We do not think so. Article 528 of the Civil Code provides that possession in GOOD FAITH continues to subsist until facts exist which show that the possessor is already aware that he wrongfully possesses the thing. Although, in the beginning, the petitioners were made to believe that they had a claim of title over the said property by assuming the mortgage and possessing the subject property, all this changed when they started paying monthly rentals to the mortgagee bank after the foreclosure of the said property. We find this finding of the courts a quoconclusive on us in this petition for review.[16 A conclusive presumption arises from the fact that, during the tenancy relationship, the petitioner spouses admitted the validity of the title of their landlord. This negated their previous claim of title.[17 If, indeed, they believed in GOOD FAITH they had at least an imperfect title of dominion over the subject premises, they should have tried to prevent the foreclosure and objected to the acquisition of title by the bank. In other words, their supposed belief in GOOD FAITH of their right of dominion ended when the bank foreclosed and acquired title over the subject premises. Hence, the applicable provision in the instant case is Article 1678 of the Civil Code which provides that: Art. 1678. If the lessee makes, in GOOD FAITH, useful improvements which are suitable to the use for which the lease is intended, without altering the form or substance of the property leased, the lessor upon the termination of the lease shall pay the lessee one-half of the value of the improvements at that time. Should the lessor refuse to reimburse said amount, the lessee may remove the improvements, even though the principal thing may suffer damage thereby. He shall not, however, cause any more impairment upon the property leased than is necessary. With regard to ornamental expenses, the lessee shall not be entitled to any reimbursement, but he may remove the ornamental objects, provided no damage is cause to the principal thing, and the lessor does not choose to retain them by paying their value at the time the lease is extinguished. The petitioner spouses are therefore entitled to be paid only one-half of the value of the useful improvements at the time of the termination of the lease or to have the said improvements removed if the respondent refuses to reimburse them. WHEREFORE, the petition for review is hereby DENIED. The decision dated February 28, 2000 of the Court of Appeals is hereby AFFIRMED. Costs against the petitioners. SO ORDERED.

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prepared a sketch plan and submitted a report to the trial court on May 29. The houses of plaintiffs and defendants were surveyed and shown on the sketch plan. recommending that the property be divided into two lots: Lot 1161-A with an area of 30 square meters for plaintiffs and Lot No. p. Property Volume 3 Bachelor of Laws II-A 25 . The house of defendants occupied the portion with an area of 5 square meters of Lot 1161-A of plaintiffs.: In this appeal from the decision of the Court of First Instance (CFI) of Cebu. In solving the issue the trial court held as follows: The Court believed that the plaintiffs cannot be obliged to pay for the value of the portion of the defendants' house which has encroached an area of five (5) sq. Lourdes Fernandez Rodil. Supp. since the latter does not do so on land not belonging to him.).the Id commissioner conducted a survey.G. (C. 194. Planiol and Ripert are also of the opinion that this article is not applicable to a co-owner who constructs. 1161-B with an area of 15 square meters for the defendants. Lot No. and the situation is governed by the rules of co-ownership. 1161 of the Cadastral Survey of Cebu. situated at the corner of F. says that as a general rule this article is not applicable because the matter should be governed more by the provisions on co-ownership than on accession. 1976. An action for partition was filed by plaintiffs in the CFI of Cebu. 30. No. Flores and Cavan Streets. planted or sown on the land owned in common. . WHEREFORE. O. judgment is hereby rendered assigning Lot 1161-A with an area of thirty (30) sq. -versusBERNARDA FERNANDEZ ABESIA. meters of the land alloted to them.CASE 7 FIRST DIVISION G. plants or sows upon their land. 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.A. even if the land where the construction.. "Manresa agreeing with Sanchez Roman. 126). 61850. GANCAYCO. respectively. The trial court appointed a commissioner in accordance with the agreement of the parties. Cebu City covered by TCT No. planting or sowing is made is a third person under the circumstances. Plaintiffs and defendants are coowners pro indiviso of this lot in the proportion of and 1/3 share each. Aug. The rights of a builder in GOOD FAITH under Article 448 of the New Civil Code does (sic) not apply to a case where one co-owner has built. with an area of only about 45 square meters. plants or sows on the community property. J. plaintiffsappellees. Our Court of Appeals has held that this article cannot be invoked by one co-owner against another who builds. certified to this Court by the Court of Appeals on account of the question of law involved. meters to the plaintiffs spouses Concepcion Fernandez Abesia. 1988 SPOUSES CONCEPCION FERNANDEZ DEL CAMPO and ESTANISLAO DEL CANTO. This case involves a parcel of land. L-49219 April 15.R. the sole issue is the applicability of the provisions of Article 448 of the Civil Code relating to a builder in GOOD FAITH when the property involved is owned in common. In the light of the foregoing authorities and considering that the defendants have expressed their conformity to the partition that was made by the commissioner as shown in the sketch plan attached to the commissioner's report. The defendants cannot also be obliged to pay for the price of the said five (5) square meters. said defendants have no other alternative except to remove and demolish part of their house that has encroached an area of five (5) sq. defendant-appellant. meters of the land allotted to the plaintiffs.

the court shall fix the terms thereof. and the situation is governed by the rules of co-ownership. or to oblige the one who built or planted to pay the price of the land. or planted in GOOD FAITH. 448 OF THE NEW CIVIL CODE TO DEFENDANTS-APPELLANTS WITH RESPECT TO THAT PART OF THEIR HOUSE OCCUPYING A PROTION OF THE LOT ASSIGNED TO PLAINTIFFSAPPELLEES. 1976 prepared by the Commissioner. For the Commissioner's fee of P400. plants or sows on the land owned in common for then he did not build. Further.00. In case Property Volume 3 Bachelor of Laws II-A 26 . shall have the right to appropriate as his own the works. Article 448 of the New Civil Code provides as follows: Art. However. 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. when.Genaro Fernandez and Dominga A. after payment of the indemnity provided for in articles 546 and 548. 1 However. as in this case. this appeal interposed by the defendants with the following assignments of errors: I THE TRIAL COURT ERRED IN NOT APPLYING THE RIGHTS OF A BUILDER IN GOOD FAITH UNDER ART. if the owner of the land does not choose to appropriate the building or trees after proper indemnity. if the price asked for is considerably much more than the value of the portion of the house of defendants built thereon. plant or sow upon land that exclusively belongs to another but of which he is a co-owner. he shall pay reasonable rent. in the respective metes and bounds as shown in the subdivision sketch plan attached to the Commissioner's Report dated may 29. Hence. 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. the defendants are hereby ordered at their expense to remove and demolish part of their house which has encroached an area of five (5) square meters from Lot 1161-A of the plaintiffs. The parties shall agree upon the terms of the lease and in case of disagreement. the plaintiffs may oblige the defendants to pay the price of the land occupied by their house.33 and the balance thereof to be paid by the plaintiffs. II THE TRIAL COURT ERRED IN ORDERING DEFENDANTS-APPELLANTS TO REMOVE AND DEMOLISH AT THEIR EXPENSE. within sixty (60) days from date hereof and to deliver the possession of the same to the plaintiffs. then the latter cannot be obliged to buy the land. then the provisions of Article 448 of the new Civil Code should apply. The owner of the land on which anything has been built. The co-owner is not a third person under the circumstances. the defendants are ordered to pay. Otherwise. However. A certified copy of this judgment shall be recorded in the office of the Register of Deeds of the City of Cebu and the expense of such recording shall be taxed as a part of the costs of the action. the sum of P133. In such case. Fernandez. 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. the proper rent. The defendants shall then pay the reasonable rent to the plaintiff upon such terms and conditions that they may agree. jointly and severally. The court a quo correctly held that Article 448 of the Civil Code cannot apply where a co-owner builds. 2 Applying the aforesaid provision of the Civil Code. 448. the builder or planter cannot be obliged to buy the land if its value is considerably more than that of the building or trees. The costs of suit shall be paid by the plaintiffs and the defendants in the proportion of two-thirds (2/3) and one-third (1/3) shares respectively. THAT PART OF THEIR HOUSE WHICH HAS ENCROACHED ON AN AREA OF FIVE SQUARE METERS OF LOT 1161-A OF PLAINTIFFS-APPELLEES. Geodetic Engineer Espiritu Bunagan. sown. sowing or planting. and the one who sowed.

that part of his property where private respondents had built a portion of their houses. It was found that the houses of Juan and Isidro actually encroached upon a portion of the land belonging to Florencio. if plaintiffs elect to appropriate the same. 2662. Consequently. Upon agreement of the parties. ordering petitioner Florencio Ignao to sell to private respondents Juan and Isidro Ignao. The antecedent facts are as follows: 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. no actual partition was ever effected. and giving the remaining portion with a total area of 266.5 square meters or 2/8 thereof to private respondents Juan and Isidro. Petitioner. C. INTERMEDIATE APPELLATE substituted by his Legal Heirs. vs. the defendants shall pay the value of the 5 square meters of land occupied by their house at such price as may be agreed upon with plaintiffs and if its value exceeds the portion of the house that defendants built thereon. if they so decide. HON.5 square meters to petitioner Florencio. Respondents. petitioner instituted a complaint for recovery of possession of real property against private respondents Juan and Isidro before the Court of First Instance of Cavite. No costs.: In this petition for review by certiorari. petitioner seeks the reversal of the decision of the Intermediate Appellate Court (now Court of Appeals) affirming in toto the decision of the Court of First Instance of Cavite. JUAN IGNAO. Of course. In case of disagreement. SO ORDERED.5 square meters previously alloted to them by the trial court in Civil Case No. The survey subsequently disclosed that the house of Property Volume 3 Bachelor of Laws II-A 27 COURT. the then Court of First Instance of Cavite in a decision dated February 6. 1991 FLORENCIO IGNAO. FERNAN. the decision appealed from is hereby MODIFIED by ordering plaintiff to indemnify defendants for the value of the Id portion of the house of defendants in accordance with Article 546 of the Civil Code. However. the defendants may choose not to buy the land but defendants must pay a reasonable rental for the use of the portion of the land of plaintiffs As may be agreed upon between the parties. alloting 133.of disagreement. N-1681. the trial court ordered a licensed geodetic engineer to conduct a survey to determine the exact area occupied by the houses of private respondents. WHEREFORE. at their own expense. 1975 directed the partition of the aforesaid land. 72876 January 18. the lower court conducted an ocular inspection. and ISIDRO IGNAO. Cavite. . CASE 8 Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G. N-1681. In his complaint petitioner alleged that the area occupied by the two (2) houses built by private respondents exceeded the 133. the rate of rental shall be determined by the trial court. No. Pursuant to an action for partition filed by petitioner docketed as Civil Case No. the trial court shall fix the terms thereof. Otherwise. defendants may remove or demolish at their own expense the said portion of their house.R. 1978.J. docketed as Civil Case No. defendants may demolish or remove the said portion of their house. 1 On July 17. Municipality of Kawit. Otherwise.

judgment is hereby rendered in favor of the defendants and(a) Ordering the plaintiff Florencio Ignao to sell to the defendants Juan and Isidro Ignao that portion of his property with an area of 101 square meters at P40. wherein the owner of the land to buy (sic) the portion of the building within 30 days from the judgment or sell the land occupied by the building. and not the judgment rendered therein. namely Justo (the father of petitioner Florencio). The trial court took into account the decision of the Court of First Instance of Cavite in the action for partition 2 and quoted: . 3 Furthermore. the trial court (thru Judge Luis L. it ordered Florencio to sell to Juan and Isidro those portions of his land respectively occupied by the latter. granting that private respondents could buy the portion of the land occupied by their houses. promulgated a decision. although the land in question is still owned by the parties in co-ownership. the owner of the land (Florencio) should have the choice to either appropriate that part of the house standing on his land after payment of indemnity or oblige the builders in GOOD FAITH (Juan and Isidro) to pay the price of the land. 448 . 448 of the Civil Code. That. the Appellate Court. . Hence. been in possession of more than what rightfully belongs to them. Hence the instant petition for review which attributes to the Appellate Court the following errors: 1. . Victor) ruled that although private respondents occupied a portion of Florencio's property. 7 The records of the case reveal that the disputed land with an area of 534 square meters was originally owned by Baltazar Ignao who married twice. the trial court observed that based on the facts of the case. before partition. thus applying Art. it would be useless and unsuitable for Florencio to exercise the first option since this would render the entire houses of Juan and Isidro worthless. and (b) Ordering the said plaintiff to execute the necessary deed of conveyance to the defendants in accordance with paragraph (a) hereof. 4 where the Supreme Court had advanced a more "workable solution". the applicable provision is Art. 1985. 5 Petitioner Florencio Ignao appealed to the Intermediate Appellate Court. 2. it is the well-considered opinion of the Court that although it turned out that the defendants had. is applicable. However. Justo owned 4/8 of the land which was waived by his half-brothers and sisters plus his 1/8 Property Volume 3 Bachelor of Laws II-A 28 . Without pronouncement as to costs. 3. which is just an opinion by way of passing. hence. (109 Phil. In his first marriage. which was not applied. they should be considered builders in GOOD FAITH. Baltazar had also four children but the latter waived their rights over the controverted land in favor of Justo. CA. the trial court stated that pursuant to Article 448 of the Civil Code. In its decision. which is in accordance with the said provision of the Civil Code. on which part the defendants had built their houses. On August 27. the respondent Court has adjudged the working solution suggested in Grana and Torralba vs. Thus. Court of Appeals. Thus. the price fixed by the court is unrealistic and pre-war price. their possession of what is in excess of their rightful share can at worst be possession in GOOD FAITH which exempts them from being condemned to pay damages by reason thereof. That the respondent Court has considered private respondents builders in GOOD FAITH on the land on question. he had four children. . 6affirming the decision of the trial court. Second Civil Cases Division. Leon and private respondents Juan and Isidro. . 260). That. granting for the sake of argument that Art. 486 of the Civil Code. In his second marriage. The trial court then applied the ruling in the similar case of Grana vs. The dispositive portion of said decision reads as follows: WHEREFORE.00 per square meter. .Juan occupied 42 square meters while that of Isidro occupied 59 square meters of Florencio's land or a total of 101 square meters.

Before the decision in the partition case was promulgated. However. Private respondents.000. or a total of 133. each co-owner has the same right as any one of the other co-owners. when. Property Volume 3 Bachelor of Laws II-A 29 . since this article contemplates a situation wherein the land belongs to one person and the thing built. the court shall fix the terms thereof. and over the whole he exercises the right of dominion. In the instant case.00 which he later sold to his son Florencio for the same amount. plants or sows on the land owned in common for then he did not build. 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.5 square meters). then the provisions of Article 448 of the new Civil Code should apply. Florencio sold 134 square meters of his share to a certain Victa for P5. The parties shall agree upon the terms of the lease and in case of disagreement.5 square meters. 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. Abesia. because until division is effected such portion is not concretely determined. 8 "an undivided estate is co-ownership by the heirs. 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. Every coowner is therefore the owner of the whole. 448. It should be noted that prior to partition. in his first assignment of error. Article 448 provides: Art. Intermediate Appellate Court. However. As cited in Eusebio vs. 11 In other words. the builder or planter cannot be obliged to buy the land if its value is considerably more than that of the building or trees.1975. Justo acquired the 1/8 share of Leon for P500. shall have the right to appropriate as his own the works. 9 Petitioner Florencio.share or a total of 5/8. quantitatively speaking. the land in dispute used to be owned in common by the contending parties. sowing or planting. the parties may have unequal shares in the common property. then the provisions of Article 448 should apply to determine the respective rights of the parties. the proper rent. he shall pay reasonable rent. When Justo died. the lower court alloted 2/8 of the land to private respondents Juan and Isidro. if the owner of the land does not choose to appropriate the building or trees after proper indemnity. The co-owner is not a third person under the circumstances.00 on January 27. Thereafter. sown or planted belongs to another. and the one who sowed. after payment of the indemnity provided for in articles 546 and 548. 1975. 10 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. When the decision was handed down on February 6. or to oblige the one who built or planted to pay the price of the land. on the other hand. 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 affirmative in the case of Spouses del Campo vs. but he is at the same time the owner of a portion which is truly abstract. In such case. sown or planted in GOOD FAITH. Juan and Isidro. Manresa and Navarro Amandi agree that the said provision of the Civil Code may apply even when there is a co-ownership if GOOD FAITH has been established. and the situation is governed by the rules of co-ownership.75 square meters) each of the land or a total of 133. But in a qualitative sense. plant or sow upon land that exclusively belongs to another but of which he is a co-owner. Florencio inherited the 5/8 share of his father Justo plus his 1/8 share of the land which he bought or a total of 6/8 (representing 400. asseverates that the court a quo erred in applying Article 448 of the Civil Code. The owner of the land on which anything has been built. had 1/8 share (66. as in this case.5 square meters.

As to the third assignment of error. vs. Court of appeals. Thus. the decision appealed from is hereby MODIFIED as follows: Petitioner Florencio Ignao is directed within thirty (30) days from entry of judgment to exercise his option to either appropriate as his own the portions of the houses of Juan and Isidro Ignao occupying his land upon payment of indemnity in accordance with Articles 546 and 548 of the Civil Code. . 13 the Court categorically ruled that the right to appropriate the works or improvements or to oblige the builder to pay the price of the land belongs to the landowner. . J. Otherwise. Chicote. 14 No costs. plaintiff-appellant. in Quemuel vs. . In case of disagreement. the rate of rental and other terms of the lease shall be determined by the trial court. 2209 January 2. Such ruling contravened the explicit provisions of Article 448 to the effect that "(t)he owner of the land .or to oblige the one who built . Rohde for appellant. J. shall have the right to appropriate . private respondents may remove or demolish at their own expense the said portions of their houses encroaching upon petitioner's land. . W. MAPA. petitioner Florencio. 12 and ordered the owner of the land.R. . Both the trial court and the Appellate Court erred when they peremptorily adopted the "workable solution" in the case of Grana vs.: Property Volume 3 Bachelor of Laws II-A 30 . No. . 1907 SEGUNDO JAVIER. SO ORDERED. . Juan and Isidro. WHEREFORE." The law is clear and unambiguous when it confers the right of choice upon the landowner and not upon the builder and the courts. the part of the land they intruded upon. LONGINOS JAVIER. private respondents may choose not to buy the land but they must pay reasonable rent for the use of the portion of petitioner's land as may be agreed upon by the parties. Miranda & Sierra for appelle. thereby depriving petitioner of his right to choose. or sell to private respondents the 101 square meters occupied by them at such price as may be agreed upon. . CASE 9 EN BANC G. to pay the price of the land .Petitioner's second assigned error is however well taken. Olaes. the question on the price to be paid on the land need not be discussed as this would be premature inasmuch as petitioner Florencio has yet to exercise his option as the owner of the land. to sell to private respondents. administrator of the estate of Manuel Javier and Perfecta Tagle. defendantappelle. . Should the value of the land exceed the value of the portions of the houses that private respondents have erected thereon.

with their father's consent. for the return of the same. as appears from a public document executed on the same date. by themselves. paying therefor the sum of 350 pesos. they. the plaintiff excepted to the judgment. the description of the property in controversy is not very clear and definite. for there is nothing said in the deed as to such redemption. This theory is plainly and manifestly contrary to the express terms of the deed executed and delivered on the 11th of September. No question has been raised upon this point. 1862. Their testimony is in open conflict with the real facts. because. or in any other manner reacquired the ownership of the said lot. This fact is of capital importance in this action. . Such was the contract entered into between Javier and Joven with regard to the lot in question. for they proceed upon the theory that the property had not been absolutely sold to Ceferino Joven. alleging that is belongs exclusively to him. and not the administrator of the estate. it was a transfer and not a mortgage — an absolute and irrevocable transfer.This action involves the ownership of a house and lot. (a) Lot. They testified that they and their brother. "Having agreed upon the sale. would have the right to contest the ownership of the property. The defendant contends that the property belongs to the said estate. therefore. and the payment of the rent received by the said plaintiff from the property. and which is a part of the record in this case. had repurchased. they and not the estate would be the owners of the lot. As suggested by the appellant in his brief. on the other hand. The terms of this instrument are conclusive against the assertion of some of the witnesses for the defendant to the effect that the contract between Manuel Javier and Ceferino Joven related to a mortgage only." According to this. under whom both parties claim. or at most.complaint praying that judgment be entered against the plaintiff. . "with Ceferino Joven . The case was decided in the court below in favor of the defendant. In consideration thereof he transfers to the purchaser the title and ownership which he has to the property so that the said purchaser may dispose of and alienate the same. Such a conclusion could not be arrived at even if we admitted for the sake of argument everything that the witnesses for the defendant said upon this point. . or perhaps to a sale on condition of redemption. This property was included in the inventory of the property of the estate of Manuel Javier and Perfecta Tagle. for review. however. by means of a bill of exceptions. it not appearing in any way that Manuel Javier or his wife. on their own account. from their own funds. as his own properly acquired property . such being the price formerly paid by Ceferino Joven. there is nothing other than the testimony of the said witnesses. introduced by the plaintiff. 1862. The parties in discussing their respective rights have assumed that the description was correct. to Ceferino Joven. These witnesses were Gavina Javier and Romualda Javier. and has brought the case this court. Ceferino Joven. as he may see fit. however. Perfecta Tagle. under which the parties to this action claim. The defendant filed a counter. to which prior reference had been made. since the repurchase was made. to the administrator of the estate. This. sold to him on condition of redemption. Manuel Javier sold this lot. as contended by the defendant in this case. and with their own funds. we shall now proceed to examine the same separately. with another lot. which in our opinion was more conclusive. . who is now in possession of the property. But the fact is that the testimony of these two witnesses was completely contradicted by other evidence in the case. for the sum of 350 pesos on the 11th of September. to show that they had reacquired the property in question from the original purchaser. and the plaintiff seeks to have the property in controversy excluded from the said inventory. properly included in the inventory. sufficient proof to show that the plaintiff and his brother. the sisters and coheirs of the parties to this action. and that it has been. If this were true. There is. made a motion for a new trial on the ground that the judgment was not justified by the weight of the evidence. as they say. but simply mortgaged to him. is of no practical importance in this case. . bought from the heirs of the Property Volume 3 Bachelor of Laws II-A 31 . Luis. Martin. repurchased the lot in question. (Manuel Javier) declares that he actually sells and transfers the said two lots to the said Ceferino Joven for the aforesaid sum of three hundred and fifty pesos. — It is beyond dispute that this lot formerly belonged to Manuel Javier. and not subject to redemption. it can not be considered as a part of the estate of the said spouses. In such a case. Moreover. The evidence introduced as to each of the pieces of property in question being different." reads the text of the document.

The plaintiff alleged in his complaint. and the signatures of Martin Javier appearing thereon. which was admitted by the defendant at the trial. according to the complaint. Segundo Javier is built. testified as to such uninterrupted possession by the plaintiff. and his testimony. jr. We can not give credit to this explanation. repurchased the property with their own funds. were identified by his son. the work having proceeded slowly. something that the defendant has no even attempted to prove.. and such acknowledgment on their parts is proof all the more appreciable in favor of the plaintiff since it comes from persons who. 1884. it was rebuilt while Manuel Javier. is built upon land belonging to the estate. No." reads each and all the said documents. the father of the plaintiff. The natural presumption is the one does not sign a document without first informing himself of its Property Volume 3 Bachelor of Laws II-A 32 . for the sum of 350 pesos. November 11. thus giving various other heirs. exclusive of the land upon which it stands. the lot in question. and it having been almost entirely destroyed by a typhoon in 1882. Whatever probatory force the said document may have itself. he having died. stated that certain actions had been brought against the plaintiff. together with another building lot. Not only the plaintiff. is conclusive evidence of the fact that the plaintiff. Santos Javier. except that part thereof relating to the sums of money mentioned in the same. the exclusive property of my brother. This proof is further strengthened by the fact that the plaintiff had been continuously in possession of the said house since it was built. taken together with the fact that the plaintiff was then in the physical possession of the property. 1900 and January 15. an interest in the said property. 1903. This. and therefore interested in the latter's estate. respectively. and that Luis subsequently sold to the plaintiff his share in the property.said Joven the property in question. although it was not completely finished and painted until the year 1895. who also had an interest in the estate in question. who testified as to these facts. including the plaintiff. had an entirely adverse interest to that of the plaintiff in this case. like the plaintiff in this case. and should be. three of which purport to be signed by Felix Javier on June 1. The question therefore relates only to the ownership of the building. which was introduced in evidence by the plaintiff. the rents for which were always received by him. Martin. and that such possession was recorded in the Register of Property in the plaintiffs own name. he alleging that he signed the same without first informing himself as to their contents. and insisted upon it in his testimony. for were it true that they and their brother. — This house. Those documents constitute an acknowledgment of the fact that the house in controversy belonged exclusively to the plaintiff. This statement of the plaintiff is supported by five documents. 520 Calle Real or Cabanas. The document above referred to represent receipts for certain sums borrowed by them from the plaintiff as advances upon the lots left by their deceased father. Gavina Javier and Romualda Javier. and the owner of the land upon which the said house. which corroborates in its entirety the testimony of the plaintiff." The authenticity of the documents signed by Felix Javier was admitted by him at the trial. the children and heirs of Manuel Javier. This house was apparently built in 1880. is improbable. 1901. stands. respectively. and the other two by Martin Javier on April 1 and July 4. before the gobernadorcillo of the district of Malate and attesting witnesses. as heirs of Manuel Javier. Luis was one of the heirs of Manuel Javier and Perfecta Tagle. in so far as it favors the plaintiff to the prejudice of the estate in which he was interested as such heir is. it would be exceedingly to strange that instead of contending that the property belongs to them exclusively they should consent to its being considered as a part of the estate. a witness for the defendant as well. It seems that Manuel Javier died in 1885. The conclusion reached by the court below to the contrary upon this point is manifestly erroneous. 1887. "one of which lots. but Romualda Javier. But above all this there stands the instrument executed on the 12th of March. the plaintiff having thus become the sole owner of the land. but that they never succeeded in taking away from him the possession of the house. unless it is shown that he acted in collusion with the plaintiff. Romualda. "being the lot upon which the house of strong materials. (b) House. that he built the said house with the knowledge and consent of his father and at his own expense. and it appears therein that the said Joven in his dual capacities aforesaid sold and transferred to the plaintiff and his brother Luis. above suspicion. was still living. the fact remains that its authenticity was admitted at the trial by the vendor. Felix and Martin Javier are. we have the sworn statement of the said Luis. This instrument purports to have been executed by Ceferino Joven. and not the estate of Manuel Javier and Perfecta Tagle is the legitimate owner of the property. himself and as attorney in fact of his mother. An attempt was made by Felix Javier to overcome the probatory force of the documents signed by him. as they claim. Aside from the testimony of the latter. Manuel Javier. while testifying upon this point. The testimony of this witness upon this point is as impartial as the testimony of the witnesses. In 1884 the house was already habitable. Ceferino Joven.

or planting is done in GOOD FAITH shall have a right to appropriate as his own the work. Article 453 of the same code provides: Useful expenses are paid the possessor in GOOD FAITH with the same right of retention. and to force the person who sowed to pay the proper rent. Romualda testified that the house was constructed at the expense of herself. The property in controversy. Consequently the house was built by the plaintiff in GOOD FAITH. after having paid the indemnity therefor as required by articles 453 and 454. were signed. Manuel Javier and Perfecta Tagle.contents. belonging to the plaintiff as it does. the father. or to compel the person who has built or planted to pay to him the value of the land. as is here the case. That articles provides that the owner of the land on which building. the right is reserved to the parties to so determine the value in the manner which they deem best. The judgment appealed from is hereby reversed and we hold (1) that the house and the lot in question should be excluded from the inventory of the property of the estate of the deceased. while according to the latter. and (2) that the latter's heirs have a right to retain the said house after indemnifying the plaintiff in the value thereof. according to the plaintiff. the plaintiff having the right to retain the same in the meantime until the value of the said land is paid. The house was built. This testimony has not been contradicted. the latter and not the estate would be the owners of the house if Gavina's statement is true. the person who has defeated him in his possession having the option of refunding the amount of the expenses or paying him the increase in value the thing has acquired by reason thereof. sowing. with the knowledge and consent of his father. her father. consented to the construction of the house. Of course. and herself paid for the construction. but on the contrary is strengthened by the further testimony of the plaintiff to the effect that his father lived with him at that time in the house in question. sowing. or planting. After the expiration of twenty days from the date hereof let judgment be entered in accordance herewith and ten days thereafter the case be remanded to the court below for execution. or to compel the latter to pay to them the value of the land occupied by the said house. So ordered. Property Volume 3 Bachelor of Laws II-A 33 . for under such an hypothesis it would appear that her parents did not contribute at all to the expenses of the construction. There is nothing in the record that can in any way overcome this presumption. In view of the fact that there is not sufficient evidence in the case to determine the actual value of the house and lot. The testimony of Romualda Javier and Gavina Javier to the effect that the house in question belonged to the estate of their deceased parents can not prevail against the evidence introduced by the plaintiff. and that presumption acquires greater force where not only. this aside from the fact that both witnesses have made conflicting statements. and is absolutely devoid of any corroboration. but several documents. We make no special provisions as to costs. executed at different times and at different places. to whom the land upon which it was built belonged. This fact conclusively shows that he. Their testimony is obviously interested. and article 361 of the Civil Code is perfectly applicable to this case. Romualda. the cross-complaint of the defendant must fail. and of Gavina. her brother Martin.

CV No. the RTC dismissed the complaint. with an area of 256. 4 the Court of Appeals affirmed in toto the assailed decision.000. For his failure to pay realty taxes amounting to twelve thousand pesos (P12. at Kamias.R. Lot 21-A.R. it held that the issue concerning it was "not a subject of the . p. m. COURT OF APPEALS. p. 1995 PEDRO P. DAVIDE. 352. but as to the private respondents' claim that the sale included the apartment building. Record) the property subject of the auction sale at which Mamerto Nepomuceno was the purchaser is referred to as Lot No. 3 Both parties then appealed the decision to the Court of Appeals. on which he built a four-door two-storey apartment building. SP No. without any mention of any improvement. Record) and in the Final Bill of Sale over the same property dated April 19. SPOUSES JUAN NUGUID and ERLINDA NUGUID.which was sold at the auction sale. it was also only that land without any building which he could have legally sold to the Nuguids. L. 1983 (Exh.3 sq.without the apartment building . Block No. The petitioner challenged the validity of the auction sale in Civil Case No.R. 1982 (Exh. No. . P. 1981 (Exh. Respondents. the trial court held that there was no legal basis for the contention that the apartment building was included in the sale.00 was only the parcel of land. Thus: Indeed. much less any building thereon. The case was docketed as CA-G. Blk. Q-41470 before the RTC of Quezon City. vs.3 sq. In its decision of 8 February 1989. In its decision of 30 April 1992. JR. K. Needless to say. Record) it clearly appears that the property subject of the sale for P103. The same description of the subject property appears in the Final Notice To Exercise The Right of Redemption (over subject property) dated September 14. 2931. 353. Branch 101.CASE 10 Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G. the spouses Juan Nuguid and Erlinda Tan-Nuguid. Thus.000. Verily. 32679 affirming in part the order 2 of the Regional Trial Court (RTC) of Quezon City.000. p. p. It also agreed with the trial court that the apartment building was not included in the auction sale of the commercial lot. with no mention whatsoever. in the Deed of Absolute Sale of Registered Land executed by Mamerto Nepomuceno in favor of the Nuguids on October 25." In resolving the private respondents' motion to reconsider this issue. 115814 May 26. in Civil Case No. Q-41470. Quezon City. 366. 357.00). J. examining the record we are fully convinced that it was only the land . PECSON. U. for one hundred three thousand pesos (P103. Record).. Petitioner. The factual and procedural antecedents of this case as gathered from the record are as follows: Petitioner Pedro P.: This petition for review on certiorari seeks to set aside the decision 1 of the Court of Appeals in CA-G. litigation.00). as it was only the land without any building which Nepomuceno had acquired at the auction sale. in the Certificate of Sale of Delinquent Property To Purchaser (Exh. K-34 containing an area of 256. for plaintiff's failure to pay the taxes due thereon. (emphases supplied) Property Volume 3 Bachelor of Laws II-A 34 . Pecson was the owner of a commercial lot located in Kamias Street. 21-A.. K-34. the lot was sold at public auction by the city Treasurer of Quezon City to Mamerto Nepomuceno who in turn sold it on 12 October 1983 to the private respondents. Barangay Piñahan. of the building thereon. . meters.

However.000. which was docketed as CA-G.000. heirs and representatives. the rents collected by plaintiff amounting to more than P53. This is further confirmed by the affidavit of the movant presented in support of the motion that said three doors are being leased at a rental of P7. Instead. The payment of P53. movant Juan Nuguid is hereby entitled to immediate issuance of a writ of possession over the Lot and improvements thereon. .000.00. considering that despite personal service of the Order for plaintiff to file within five (5) days his opposition to said motion.00 as reimbursement for the construction cost. 2.00 is what the movant is supposed to pay under the law before a writ of possession placing him in possession of both the lot and apartment would be issued.00 per month.000. being the uncontested owner of the property. 10 In its decision of Property Volume 3 Bachelor of Laws II-A 35 .000. 1993. 79 Kamias Road. 3. In support of defendant's motion. opted to pay the cost of the construction spent by plaintiff. Movant agrees to comply with the provisions of the law considering that plaintiff is a builder in GOOD FAITH and he has in fact.00 and the reasonable rental value of said lot is no less than P21. 6 On November 1993. the complaint alleges in paragraph 9 that three doors of the apartment are being leased. 5 Entry of judgment was made on 23 June 1993. 8 complaint).000.00 per month from said date as this is the very same amount paid monthly by the tenants occupying the lot. The amount of P53. 1993. WHEREFORE. finding merit in the Motion. on 18 November 1993.500. citing article 546 of the Civil Code. their agents. Juan Nuguid. From June 23. he did not file any. SP No. The petitioner moved for the reconsideration of the order but it was not acted upon by the trial court." 9 The petitioner then filed with the Court of Appeals a special civil action for certiorari and prohibition assailing the order of 15 November 1993.00 due from the movant is hereby offset against the amount of rents collected by the plaintiff from June 23. with all the improvements thereon and to eject therefrom all occupants therein.000.00 from tenants should be offset from the rents due to the lot which according to movant's affidavit is more than P21. The movant further alleges in his said affidavit that the present commercial value of the lot is P10. 1993 and from this date on.R. 4.The petition to review the said decision was subsequently denied by this Court. From the complaint itself the plaintiff stated that the construction cost of the apartment is much more than the lot. the trial court issued on 15 November 1993 the challenged order 8 which reads as follows: Submitted for resolution before this Court is an uncontroverted [sic] for the Delivery of Possession filed by defendants Erlinda Tan. it issued a writ of possession directing the deputy sheriff "to place said movant Juan Nuguid in possession of subject property located at No. The decision having become final as per Entry of Judgment dated June 23. 7 Acting thereon. .000. assignees. Quezon City. the private respondents filed with the trial court a motion for delivery of possession of the lot and the apartment building. the Court hereby grants the following prayer that: 1. movant cites the law in point as Article 546 of the Civil Code .000. This amount of P53. 1993.00 in 1965 (par.000.00 a month. to September 23. 1993. 32679. The movant having been declared as the uncontested owner of the Lot in question as per Entry of Judgment of the Supreme Court dated June 23. the rents should be paid to him instead of the plaintiff collecting them. The movant shall reimburse plaintiff the construction cost of P53.00 a month each. et al. which apartment he constructed at a cost of P53. SO ORDERED.000.00 per square meter or P2.000. the plaintiff should pay rent to the movant of no less than P21.

and that petitioner be ordered to account for any and all fruits of the improvements received by him starting on June 23. However. The parties agree that the petitioner was a builder in GOOD FAITH of the apartment building on the theory that he constructed it at the time when he was still the owner of the lot. shall have the right to appropriate as his own the works. the petitioner filed the instant petition. petitioner as such possessor and receiving the fruits from the property.00 per month for each of the three doors. [2 TOLENTINO. We. 1993. The owner of the land on which anything has been built. 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 disposing of the issues.00 to be offset therefrom. The parties shall agree upon the terms of the lease and in case of disagreement. 1993 up to September 23. the right to retain the improvement while the corresponding indemnity is not paid implies the tenancy or possession in fact of the land on which they are built .000. CIVIL CODE OF THE PHILIPPINES (1992) p. the Court of Appeals affirmed in part the order of the trial court citing Article 448 of the Civil Code. in line with Mendoza vs. we agree with petitioner that respondent judge erred in ordering that "the movant having been declared as the uncontested owner of the lot in question as per Entry of Judgment of the Supreme Court dated June 23. sown or planted in GOOD FAITH. the court shall fix the terms thereof. 164 . . 1993. although it is but fair and just that private respondents pay petitioner the construction cost of P53. and of the right to retain the improvements until he is reimbursed of the cost of the improvements. and that the key issue in this case is the application of Articles 448 and 456 of the Civil Code.7 June 1994. basically. while it appears that private respondents have not yet indemnified petitioner with the cost of the improvements. agree with the finding of respondent judge that the amount of P53. and the one who sowed. 52 Phil. .000. if the owner of the land does not choose to appropriate the building or trees after proper indemnity. after payment of the indemnity provided for in articles 546 and 548. Necessary expenses shall be refunded to every possessor. 546. as well as the parties. or to oblige the one who built or planted to pay the price of the land. 11 Aggrieved by the Court of Appeals' decision. in accordance with Article 546 of the . Our underlying reason is that during the period of retention. however. . IT IS SO ORDERED. with the amount of P53.000. the plaintiff should pay rent to the movant of no less than P21.00 earlier admitted as the cost of constructing the apartment building can be offset from the amount of rents collected by petitioner from June 23. . 448. the proper rent. but only the possessor in GOOD FAITH may retain the thing until he has been reimbursed therefor. he shall pay reasonable rent. . is obliged to account for such fruits. it stated: As earlier pointed out. The trial court and the Court of Appeals. Civil Code. (361a) xxx xxx xxx Art. With the facts extant and the settled principle as guides.000. the quest of petitioner that he be restored in possession of the premises is rendered moot and academic. The Court of Appeals then ruled as follows: WHEREFORE.00. Property Volume 3 Bachelor of Laws II-A 36 . . because. 112]. These articles read as follows: Art. In such case. private respondent opted to appropriate the improvement introduced by petitioner on the subject lot. 1993 which was fixed at P7. concerned themselves with the application of Articles 448 and 546 of the Civil Code. so that the amount thereof may be deducted from the amount of indemnity to be paid to him by the owner of the land. giving rise to the right of petitioner to be reimbursed of the cost of constructing said apartment building. sowing or planting. De Guzman. . since Annex I shows that the Deputy Sheriff has enforced the Writ of Possession and the premises have been turned over to the possession of private respondents.000 per month from said date as this is the very same amount paid monthly by the tenants occupying the lot.

in the case of De Guzman vs. This Court said so in Coleongco vs. bamboos. for then there can be no question as to good or BAD FAITH on the part of the builder.000. a useful improvement. sowing or planting may have been made in GOOD FAITH or in BAD FAITH. 14 this Court pegged the value of the useful improvements consisting of various fruits. or sown or planted something. Roman Catholic Archbishop of Manila 17 that the said provision was formulated in trying to adjust the rights of the owner and possessor in GOOD FAITH of a piece of land. It does not apply to a case where a person constructs a building on his own land. This is so because the right to retain the improvements while the corresponding Property Volume 3 Bachelor of Laws II-A 37 . Jr. as well as of the portion of the lot where the building has been constructed. it is therefore the current market value of the improvements which should be made the basis of reimbursement. Thus in strict point of law. 16 cited by the petitioner. the landowner was ordered to reimburse the builder in the amount of forty thousand pesos (P40. 15 despite the finding that the useful improvement. the issue of GOOD FAITH or BAD FAITH is entirely irrelevant. In the same way. where the true owner himself is the builder of works on his own land. Nevertheless. In Sarmiento vs. sower or planter had acted in GOOD FAITH. as the case may be.00). the value of the house at the time of the trial. until he is paid the proper indemnity. Article 448 refers to a land whose ownership is claimed by two or more parties. Regalado: 13 Article 361 of the old Civil Code is not applicable in this case.000. the petitioner is thus entitled to the possession and enjoyment of the apartment building. is sufficient reimbursement for necessary and useful improvements made by the petitioner. was built in 1967 at a cost of between eight thousand pesos (P8. or planter who then later loses ownership of the land by sale or donation. one of whom has built some works. Article 361 applies only in cases where a person constructs a building on the land of another in good or in BAD FAITH. Agana. In this regard. Guided by this precept. to administer complete justice to both of them in such a way as neither one nor the other may enrich himself of that which does not belong to him. 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. a residential house. Concepcion. The respondent court and the private respondents espouse the belief that the cost of construction of the apartment building in 1965. 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. this Court had long ago stated in Rivera vs. The rule on GOOD FAITH laid down in Article 526 of the Civil Code shall be applied in determining whether a builder. and not its current market value.Useful expenses shall be refunded only to the possessor in GOOD FAITH with the same right of retention. 12 Article 448 does not apply to a case where the owner of the land is the builder. Since the private respondents have opted to appropriate the apartment building.00) to ten thousand pesos(P10. the parties should therefore be allowed to adduce evidence on the present market value of the apartment building upon which the trial court should base its finding as to the amount of reimbursement to be paid by the landowner. however. for Regalado constructed the house on his own land before he sold said land to Coleongco. the landowner was required to pay the "present value" of the house. De la Fuente. In Javier vs. Elsewise stated.. 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. Article 448 is not apposite to the case at bar. This position is. Article 546 does not specifically state how the value of the useful improvements should be determined. a house and camarin made of strong material based on the market value of the said improvements. The trial court also erred in ordering the petitioner to pay monthly rentals equal to the aggregate rentals paid by the lessees of the apartment building. sower.000. A contrary ruling would unjustly enrich the private respondents who would otherwise be allowed to acquire a highly valued income-yielding four-unit apartment building for a measly amount. The building.00). The objective of Article 546 of the Civil Code is to administer justice between the parties involved. Consequently. not in consonance with previous rulings of this Court in similar cases. including the two courts below. (453a) By its clear language.

Respondents.R. that the Court of Appeals erred not only in upholding the trial court's determination of the indemnity. What are the rights and obligations of the parties? Is petitioner considered a builder in BAD FAITH because. SO ORDERED. Metro Manila.indemnity is not paid implies the tenancy or possession in fact of the land on which it is built. which was presumably constructed by its predecessor-ininterest. in CAG. Dismissing the complaint for lack of cause of action. but also in ordering the petitioner to account for the rentals of the apartment building from 23 June 1993 to 23 September 1993. he is "presumed to know the metes and bounds of his property as described in his certificate of title"? Does petitioner succeed into the GOOD FAITH or BAD FAITH of his predecessor-in-interest which presumably constructed the building? These are the questions raised in the petition for review of the Decision 1 dated August 28. For this purpose. necessarily. CV No. too. that a portion of a building of petitioner. COURT OF APPEALS (FORMER SPECIAL SEVENTEENTH DIVISION) and EDUARDO UY. the decision of the Court of Appeals in CA-G. 18 The petitioner not having been so paid.R. the Decision of the Regional Trial Court is hereby reversed and set aside and another one entered 1. 1997 TECNOGAS PHILIPPINES MANUFACTURING CORPORATION. Branch 101. The value so determined shall be forthwith paid by private respondents to the petitioner otherwise the petitioner shall be restored to the possession of apartment building until payment of the required indemnity. WHEREFORE.R. 32679 and the Order of 15 November 1993 of the Regional Trial Court. 28293 of respondent Court 2 where the disposition reads: 3 WHEREFORE. the income therefrom. No. The case is hereby remanded to the trial court for it to determine the current market value of apartment building on the lot. PANGANIBAN. It was discovered in a survey. It follows. encroached on a portion of the lot owned by private respondent. 108894 February 10. Petitioner. Property Volume 3 Bachelor of Laws II-A 38 . Q-41470 are hereby SET ASIDE. 1992. premises considered. Quezon City in Civil Case No. planted or sown. No costs. the the the the CASE 11 Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G. the parties shall be allowed to adduce evidence on current market value of the apartment building. as held by respondent Court. vs. he was entitled to retain ownership of the building and. SP No. J.: The parties in this case are owners of adjoining lots in Parañaque.

To remove the structures and surrounding walls on the encroached area. but defendant. that defendant dug or caused to be dug a canal along plaintiff's wall. In 1973.000. however. was ignored by defendant. 4. our decision of August 28. premises considered. 6. Ordering appellee to pay the sum of P20. plaintiff offered to buy from defendant that particular portion of defendant's land occupied by portions of its buildings and wall with an area of 770 square meters. 3. that defendant later filed a complaint before the office of Municipal Engineer of Parañaque. 1980. Acting on the motions for reconsideration of both petitioner and private respondent. as follows: 4 WHEREFORE. in 1970. Property Volume 3 Bachelor of Laws II-A 39 . that portions of the buildings and wall bought by plaintiff together with the land from Pariz Industries are occupying a portion of defendant's adjoining land.00 for and as attorney's fees. 1993. LRC (GLRO) Rec. that said land was purchased by plaintiff from Pariz Industries. 1992 is hereby modified deleting paragraph 4 of the dispositive portion of our decision which reads: 4. and led to the filing by plaintiff of the supplemental complaint in the above-entitled case and a separate criminal complaint for malicious mischief against defendant and his wife which ultimately resulted into the conviction in court of defendant's wife for the crime of malicious mischief. that upon learning of the encroachment or occupation by its buildings and wall of a portion of defendant's land.000. 31390. that the defendant (herein private respondent) is the registered owner of a parcel of land known as Lot No. refused the offer. of the Registry of Deeds for the Province of Rizal. Metro Manila known as Lot 4331-A (should be 4531-A) of Lot 4531 of the Cadastral Survey of Parañaque. as follows: 5 That plaintiff (herein petitioner) which is a corporation duly organized and existing under and by virtue of Philippine laws is the registered owner of a parcel of land situated in Barrio San Dionisio. Respondent Court merely reproduced the factual findings of the trial court. 5. Costs against appellee. respondent Court ordered the deletion of paragraph 4 of the dispositive portion in an Amended Decision dated February 9. however. Ordering Tecnogas to pay the sum of P2. plaintiff filed in Court a formal proposal for settlement of the case but said proposal. the parties entered into a private agreement before a certain Col.00 per month as reasonable rental from October 4. together with all the buildings and improvements including the wall existing thereon. Inc. a portion of which collapsed in June. wherein plaintiff agreed to demolish the wall at the back portion of its land thus giving to defendant possession of a portion of his land previously enclosed by plaintiff's wall. Metro Manila. No. that in 1971. Ordering appellee to pay the value of the land occupied by the two-storey building. that said land which adjoins plaintiff's land was purchased by defendant from a certain Enrile Antonio also in 1970. 19645 covered by Transfer Certificate of Title No. The foregoing Amended Decision is also challenged in the instant petition. The Facts The facts are not disputed. that while trial of the case was in progress. 1979 until appellee vacates the land. Parañaque. Rosales in Malacañang. The motion for reconsideration of appellee is hereby DENIED for lack of merit. 279838. Ordering appellee to pay the value of the land occupied by the two-storey building. 409316 of the Registry of Deeds of the Province of Rizal.2. of the Registry of Deeds for the Province of Rizal. more or less. defendant purchased another lot also adjoining plaintiffs land from a certain Miguel Rodriguez and the same was registered in defendant's name under Transfer Certificate of Title No. 4531-B of Lot 4531 of the Cadastral Survey of Parañaque. covered by Transfer Certificate of Title No. Metro Manila as well as before the Office of the Provincial Fiscal of Rizal against plaintiff in connection with the encroachment or occupation by plaintiff's buildings and walls of a portion of its land but said complaint did not prosper.

where both parties agreed to the demolition of the rear portion of the fence. and 3. it is now well settled that the lot owner. The dispositive portion reads: 7 WHEREFORE. In its Memorandum.00 to compensate for the losses in materials and properties incurred by plaintiff through thievery as a result of the destruction of its wall. The sum of P7." since "BAD FAITH cannot be presumed. (C) Whether or not the respondent Court of Appeals erred in ordering the removal of the "structures and surrounding walls on the encroached area" and in withdrawing its earlier ruling in its August 28. Appeal was duly interposed with respondent Court." 9 B. The costs of this suit. as in this case. 1989 in favor of petitioner who was the plaintiff therein. is reckonedduring the period when it was actually being built. The sum of P44. which as previously stated. and which "choice" private respondent deliberately deleted from its September 1. this recourse under Rule 45 of the Rules of Court. Branch 117. as in this case. as estoppel amounting to recognition by petitioner of respondent's right over his property including the portions of the land where the other structures and the building stand. which were not included in the settlement. who builds on the adjacent lot is not charged with "constructive notice" Property Volume 3 Bachelor of Laws II-A 40 . in Civil Case No. 1980 answer to the supplemental complaint in the Regional Trial Court.500.After trial on the merits. rendered a decision dated December 4." (B) Whether or not the respondent Court of Appeals erred when it used the amicable settlement between the petitioner and the private respondent. 1992 decision for the petitioner "to pay for the value of the land occupied" by the building.000.00 as and by way of attorney's fees.000. the Regional Trial Court 6 of Pasay City. and in a case where no evidence was presented norintroduced as to the GOOD FAITH or BAD FAITH of the builder at that time.00 per square meter and to pay the former: 1. he must be presumed to be a "builder in GOOD FAITH. only because the private respondent has "manifested its choice to demolish" it despite the absence of compulsory sale where the builder fails to pay for the land. reversed and set aside the decision of the Regional Trial Court and rendered the assailed Decision and Amended Decision. 2. The Issues The petition raises the following issues: 8 (A) Whether or not the respondent Court of Appeals erred in holding the petitioner a builder in BAD FAITH because it is "presumed to know the metes and bounds of his property. In a specific "boundary overlap situation" which involves a builder in GOOD FAITH. Hence. petitioner poses the following issues: A. judgment is hereby rendered in favor of plaintiff and against defendant and ordering the latter to sell to plaintiff that portion of land owned by him and occupied by portions of plaintiff's buildings and wall at the price of P2. The time when to determine the GOOD FAITH of the builder under Article 448 of the New Civil Code. PQ-7631-P.

it is "presumed to know the metes and bounds of his own property. The workable solution is for him to select the second alternative.) The amicable settlement between the parties should be interpreted as a contract and enforced only in accordance with its explicit terms.) As a general rule. Inc. GOOD FAITH or BAD FAITH Respondent Court. as the facts of the present case do not fall within nor square with the involved principle of a dissimilar case.M.. Macalindong isnot the "judicial authority" for a boundary dispute situation between adjacent torrens titled lot owners. Macalindong. Court of Appeals based on the doctrine laid down in Tuason vs. Further. It did not give the exact citations of cases decided by the Honorable Supreme Court that allegedly contradicts the ruling of the Hon. Vda. v. Macalindong. 13 E. buy that portion of the house standing on his land. 2.(E. and the extent of the boundaries. v. even if it subsequently built/repaired the walls/other permanent structures thereon while the case a quo was pending and even while respondent sent the petitioner many letters/filed cases thereon. petitioner Tecnogas continues to be a builder in GOOD FAITH.of the technical metes and bounds contained in their torrens titles to determine the exact and precise extent of his boundary perimeter. the two cases being more current. for the whole building might be rendered useless. on the other hand. once it would be impractical for the landowner to choose to exercise the first alternative. i." 16 The Court's Ru1ing The petition should be granted. because the courts do not have the power to create a contract nor expand its scope. The respondent court's citation of the twin cases of Tuason & Co. de Lumanlan 17 and J." 19 Property Volume 3 Bachelor of Laws II-A 41 .M. and not over and beyond that agreed upon. private respondent contends that the following "unmistakably" point to the BAD FAITH of petitioner: (1) private respondent's purchase of the two lots. Assuming that the doctrine in the alleged Co Tao vs.e. there being presumptive knowledge of the Torrens title. One who erroneously builds on the adjoining lot should be considered a builder in (b)ad (f)aith. Tuason & Co. 14 Private respondent. 12 D. "was ahead of the purchase by petitioner of the building and lot from Pariz Industries". 10 C. Tuason & Co. argues that the petition is "suffering from the following flaws: 15 1. the same should prevail. 11 D. Lumanlan case citing alsoTuason vs. although the landowner has the option to choose between: (1) "buying the building built in GOOD FAITH". v.. because an exception thereto. and (3) the Deed of Sale in favor of petitioner was registered in its name only in "the month of May 1973. namely. Quite contrary to respondent Uy's reasoning. Lumanlan and Tuason & Co. to sell to the builder that part of his land on which was constructed a portion of the house. or (2) "selling the portion of his land on which stands the building" under Article 448 of the Civil Code.Lumanlan and Tuason vs.(F. the first option is not absolute. (2) the declaration of the General Manager of Tecnogas that the sale between petitioner and Pariz Industries "was not registered" because of some problems with China Banking Corporation. 18 ruled that petitioner "cannot be considered in GOOD FAITH" because as a land owner. Inc. Macalindong case (Supra). specially if the same are reflected in a properly issued certificate of title. the area. citing the cases of J. Chico case is contradictory to the doctrine in Tuason vs. v.

as already stated. The record is not clear as to who actually built those structures. or to oblige the one who built or planted to pay the price of the land. while holding the title. In any case. and the one who sowed. or (2) sell the land to the builder. The parties shall agree upon the terms of the lease and in case of disagreement. In such case. the builder or planter cannot be obliged to buy the land if its value is considerably more than that of the building or trees. We agree with the trial court that various factors in evidence adequately show petitioner's lack of awareness thereof. 448 of the Civil Code. Further. passed on to Pariz's successor. the builder. The obvious benefit to the builder under this article is that. he can compel the landowner to make a choice between the two options: (1) to appropriate the building by paying the indemnity required by law. shall have the right to appropriate as his own the works. as earlier stated. 20 where we held that unless one is versed in the science of surveying. there is no sufficient showing that petitioner was aware of the encroachment at the time it acquired the property from Pariz Industries. until the contrary is proved. by law. the latter should be presumed to have built them in GOOD FAITH. sown or planted in GOOD FAITH. in the context of the attendant facts. the court shall fix the terms thereof. that BAD FAITH is imputable to a registered owner of land when a part of his building encroaches upon a neighbor's land. 27 The question. by extraneous evidence or by suit for recovery of the property by the true owner. Pariz Industries. and his ignorance of any defect or flaw in his title. The two cases it relied upon do not support its main pronouncement that a registered owner of land has presumptive knowledge of the metes and bounds of its own land. such GOOD FAITH. 22 GOOD FAITH consists in the belief of the builder that the land he is building on is his. sowing or planting. Chico. if sued by the aggrieved landowner for recovery of possession. instead of being outrightly ejected from the land. "(w)here one derives title to property from another. under Section 3 (a) of Rule Property Volume 3 Bachelor of Laws II-A 42 . there is nothing in those cases which would suggest. In the first place. the proper rent. is not the builder of the offending structures but possesses them as buyer." 24 And possession acquired in GOOD FAITH does not lose this character except in case and from the moment facts exist which show that the possessor is not unaware that he possesses the thing improperly or wrongfully. contrary proof has not overthrown the presumption of GOOD FAITH under Article 527 of the Civil Code. and is therefore in BAD FAITH if he mistakenly builds on an adjoining land. he shall pay reasonable rent. 21 It is presumed that possession continues to be enjoyed in the same character in which it was acquired. Aside from the fact that those cases had factual moorings radically different from those obtaining here. Consequently. is evidence against the former." There is no question that when petitioner purchased the land from Pariz Industries. No such doctrinal statement could have been made in those cases because such issue was not before the Supreme Court. 25 The GOOD FAITH ceases from the moment defects in the title are made known to the possessor. after payment of the indemnity provided for in articles 546 and 548. however. or omission of the latter.We disagree with respondent Court. and since no proof exists to show that the encroachment over a narrow. but it may well be assumed that petitioner's predecessor-in-interest. was consistent with GOOD FAITH. taken together with the disputable presumptions of the law on evidence. simply because he is supposedly presumed to know the boundaries of his land as described in his certificate of title. It was an error which. in relation to the property. if the owner of the land does not choose to appropriate the building or trees after proper indemnity. which reads: The owner of the land on which anything has been built. Quite the contrary. petitioner in this case. 26 Recall that the encroachment in the present case was caused by a very slight deviation of the erected wall (as fence) which was supposed to run in a straight line from point 9 to point 1 of petitioner's lot. "no one can determine the precise extent or location of his property by merely examining his paper title. is whether the same benefit can be invoked by petitioner who. we have rejected such a theory in Co Tao vs. 23 Hence. could have invoked the provisions of Art. however remotely. Article 527 of the Civil Code presumes GOOD FAITH. needle-shaped portion of private respondent's land was done in BAD FAITH by the builder of the encroaching structures. These presumptions state. However. the buildings and other structures were already in existence. We answer such question in the affirmative. did so. declaration. the act. The landowner cannot refuse to exercise either option and compel instead the owner of the building to remove it from the land.

" The settlement may have recognized the ownership of private respondent but such admission cannot be equated with BAD FAITH.a species of conduct consistent with GOOD FAITH. In fact. following his purchase of another adjoining lot.the right of private respondent to a portion of the land occupied by its building. Estoppel Respondent Court ruled that the amicable settlement entered into between petitioner and private respondent estops the former from questioning the private respondent's "right" over the disputed property. Consequently and as earlier discussed. the latter acquired ownership of the property.131 of the Rules of Court. In fact. avoid a litigation or put an end to one already commenced. "A compromise. private respondent Eduardo Uy himself was unaware of such intrusion into his property until after 1971 when he hired a surveyor." xxx xxx xxx The Civil Code not only defines and authorizes compromises. it is clear that petitioner agreed only to the demolition of a portion of the wall separating the adjoining properties of the parties . It held that by undertaking to demolish the fence under said settlement. As was ruled in Osmeña vs. upon delivery of the property by Pariz Industries. we hold that petitioner did not lose its rights under Article 448 of the Civil Code on the basis merely of the fact that some years after acquiring the property in GOOD FAITH. the pertinent portions of which read: 29 That the parties hereto have agreed that the rear portion of the fence that separates the property of the complainant and respondent shall be demolished up to the back of the building housing the machineries which demolision (sic) shall be undertaken by the complainant at anytime. Upon being apprised of the encroachment. In the second place." But that portion of the fence which served as the wall housing the electroplating machineries was not to be demolished. it was to "be subject to negotiation by herein parties. petitioner immediately offered to buy the area occupied by its building . as seller. .and aptly recognized . 2029 states that "The Court shall endeavor to persuade the litigants in a civil case to agree upon some fair compromise." 28 We do not agree. Commission on Audit. and under Section 3 (ff) of Rule 131.e. From the foregoing. it learned about . including the right to compel the private respondent to exercise either of the two options provided under Article 448 of the Civil Code." declares Article 2208 of said Code. it in fact encourages them in civil actions. The supervening awareness of the encroachment by petitioner does not militate against its right to claim the status of a builder in GOOD FAITH. 30 A compromise is a bilateral act or transaction that is expressly acknowledged as a juridical agreement by the Civil Code and is therein dealt with in some detail. Petitioner cannot be held in estoppel for entering into the amicable settlement. petitioner is deemed to have stepped into the shoes of the seller in regard to all rights of ownership over the immovable sold. that the person is innocent of a crime or wrong. to survey all his newly acquired lots. That the fence which serve(s) as a wall housing the electroplating machineries shall not be demolished in the mean time which portion shall be subject to negotiation by herein parties. that the law has been obeyed. petitioner recognized private respondent's right over the property. to the petitioner. "up to the back of the building housing the machineries. one reason for entering into an amicable settlement. by making reciprocal concessions. Rather. In the context of the established facts. Art.i." . a judicious reading of said Article Property Volume 3 Bachelor of Laws II-A 43 . Petitioner was only trying to avoid a litigation. as buyer. "is a contract whereby the parties. and "cannot later on compel" private respondent "to sell to it the land since" private respondent "is under no obligation to sell. .

the law has provided a just solution by giving the owner of the land the option to acquire the improvements after payment of the proper indemnity.448 will readily show that the landowner's exercise of his option can only take place after the builder shall have come to know of the intrusion . The Court of Appeals. by the principle of accession. In accordance with the case of Depra vs. or to oblige the builder or planter to pay for the land and the sower to pay the proper rent. Marfori vs. there should be no penalty on the right to litigate.in short. 39 Petitioner. 38 this case will have to be remanded to the trial court for further proceedings to fully implement the mandate of Art.. Options of Private Respondent What then is the applicable provision in this case which private respondent may invoke as his remedy: Article 448 or Article 450 31 of the Civil Code? In view of the GOOD FAITH of both petitioner and private respondent.] 52 Off. and it becomes necessary to protect the owner of the improvements without causing injustice to the owner of the land. He cannot exercise a remedy of his own liking. but only up to the date private respondent serves notice of its option upon petitioner and the trial court. planter or sower has acted in GOOD FAITH. premises considered. 40 The rent should however continue if the option chosen is compulsory sale. the area involved was only 87 square meters while this case involves 520 square meters 37. his options are limited to: (1) appropriating the encroaching portion of petitioner's building after payment of proper indemnity. 42 this Property Volume 3 Bachelor of Laws II-A 44 . 217. petitioner would have a right of retention which negates the obligation to pay rent. Bataclan. Neither is petitioner's prayer that private respondent be ordered to sell the land 34 the proper remedy. is thus legally flawed. Dumlao. see Cabral. In line with the case of Depra vs.] 52 Off. but only up to the actual transfer of ownership. when both parties shall have become aware of it. 1382.R. Article applied. [C. 448. 33 This has not taken place. In such event. Besides. It would be available only if and when he chooses to compel the petitioner to buy the land at a reasonable price but the latter fails to pay such price. in the case of Depra vs. Gaz. however. Co Tao vs. 2050). The private respondent's insistence on the removal of the encroaching structures as the proper remedy. Justice Ameurfina Melencio-Herrera. In view of the impracticality of creating a state of forced co-ownership. 41 WHEREFORE. et al. their rights and obligations are to be governed by Art. This is not one of the remedies bestowed upon him by law. While that was dubbed as the "more workable solution" in Grana and Torralba vs. Velasco. The award of attorney's fees by respondent Court against petitioner is unwarranted since the action appears to have been filed in GOOD FAITH. citing Manresa and applicable precedents. 32 to wit: Where the builder. Ibanez [S. 49167. Dumlao. vs. a conflict of rights arises between the owners. Gaz. 37 Off. that is. It is the owner of the land who is authorized to exercise the option. Only then will the occasion for exercising the option arise. must also pay the rent for the property occupied by its building as prescribed by respondent Court from October 4. Bernardo vs. 448. It is a rule of procedure for the Supreme Court to strive to settle the entire controversy in a single proceeding leaving no root or branch to bear the seeds of future litigation. G. Chan Chico. because his right is older. in Grana and Torralba. April 30. (3 Manresa 213. Hence. 1979. Gaz. if such option is for private respondent to appropriate the encroaching structure. The essential fairness of this codal provision has been pointed out by Mme. which respondent Court sustained in its assailed Decisions. 1949.A. et al. or (2) obliging the latter to buy the lot occupied by the structure. 35 it was not the relief granted in that case as the landowners were directed to exercise "within 30 days from this decision their option to either buy the portion of the petitioners' house on their land or sell to said petitioners the portion of their land on which it stands.C. he is entitled to the ownership of the accessory thing. the petition is hereby GRANTED and the assailed Decision and the Amended Decision are REVERSED and SET ASIDE. and because." 36 Moreover. Dumlao. for it is only then that both parties will have been aware that a problem exists in regard to their property rights. No.

2. counted from the finality of the judgment. otherwise up to the actual transfer of ownership to petitioner or. and to have the portion of the building removed by petitioner or at latter's expense. c) the fair market value of the encroaching portion of the building. the party entitled to such payment shall be entitled to an order of execution for the enforcement of payment of the amount due and for compliance with such other acts as may be required by the prestation due the obligee. SO ORDERED.00) per month. 1979. shall be paid by the obligor within fifteen (15) days from such notice of the option by tendering the amount to the trial court in favor of the party entitled to receive it. payable within the first five (5) days of each calendar month. the parties shall be given a period of fifteen (15) days from such notice of rejection within which to agree upon the terms of the lease. The period for the forced lease shall not be more than two (2) years.000. Property Volume 3 Bachelor of Laws II-A 45 . petitioner shall give written notice of such rejection to private respondent and to the trial court within fifteen (15) days from notice of private respondent's option to sell the land. After said amounts shall have been determined by competent evidence. in accordance with the option thus exercised by written notice of the other party and to the court.case is REMANDED to the Regional Trial Court of Pasay City. up to the date private respondent serves notice of its option to appropriate the encroaching structures. the regional trial court shall render judgment as follows: a) The private respondent shall be granted a period of fifteen (15) days within which to exercise his option under the law (Article 448. In that event.00) per month as reasonable compensation for the occupancy of private respondent's land for the period counted from October 4. Civil Code). If no agreement is reached by the parties. and such tender shall constitute evidence of whether or not compliance was made within the period fixed by the said court. whether to appropriate the portion of the building as his own by paying to petitioner its fair market value. and d) whether the value of said area of land is considerably more than the fair market value of the portion of the building thereon. d) The periods to be fixed by the trial court in its decision shall be non-extendible. within fifteen (15) days from and after the termination of the said period fixed for negotiation. c) In any event. Branch 117. Petitioner shall not make any further constructions or improvements on the building. No costs. up to the commencement date of the forced lease referred to in the preceding paragraph. The rentals herein provided shall be tendered by petitioner to the trial court for payment to private respondent. the trial court. b) the increase in value ("plus value") which the said area of 520 square meters may have acquired by reason of the existence of the portion of the building on the area. private respondent shall be entitled to terminate the forced lease. in case a forced lease has to be imposed. and give the trial court formal written notice of the agreement and its provisos. b) If private respondent exercises the option to oblige petitioner to pay the price of the land but the latter rejects such purchase because. as found by the trial court. to recover his land. or upon default by petitioner in the payment of rentals for two (2) consecutive months. and upon failure of the party obliged to tender to the trial court the amount due to the obligee. Upon expiration of the two-year period. petitioner shall pay private respondent an amount computed at two thousand pesos (P2. or to oblige petitioner to pay the price of said area. as follows: The trial court shall determine: a) the present fair price of private respondent's 520 square-meter area of land. shall then fix the terms of the lease provided that the monthly rental to be fixed by the Court shall not be less than two thousand pesos (P2. considering the long period of time since 1970 that petitioner has occupied the subject area.000. for further proceedings consistent with Articles 448 and 546 43 of the Civil Code. The rental thus fixed shall be increased by ten percent (10%) for the second year of the forced lease. the value of the land is considerably more than that of the portion of the building. The amounts to be respectively paid by petitioner and private respondent.

of Mamburao. In his complaint. and that on 26 March 1993.[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. at its expense. The sale. 149295. via a petition for review. THE COURT OF APPEALS GRAVELY ERRED IN LAW IN ADJUDGING PNB A BUILDER IN BAD FAITH OVER THE ENCROACHED PROPERTY IN QUESTION. 268 SCRA 7. GENEROSO DE JESUS. T-17197. with an area of 1. CHRISTIAN DE JESUS. 2003] PHILIPPINE NATIONAL BANK. It would appear that on 10 June 1995. COURT OF APPEALS. Christian De Jesus. February 10. and litigation expenses. 2.R. 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. G. The assailed decision has affirmed the judgment rendered by the Regional Trial Court. CV No.: Petitioner Philippine National Bank disputes the decision handed down by the Court of Appeals promulgated on 23 March 2001 in CA-G. however.R. represented by his Attorney-in-Fact. entitled Generoso De Jesus. in its answer. Occidental Mindoro. on appeal. over the questioned property. 108894. VS. represented by his Attorney-in-Fact. and to remove the improvement thereon. he had caused a verification survey of the property and discovered that the northern portion of the lot was being encroached upon by a building of petitioner to the extent of 124 square meters. sustained the trial court but it ordered to be deleted the award to respondent of attorneys fees. J. DECISION VITUG. did not materialize when. In the context that such term is used in particular reference to Property Volume 3 Bachelor of Laws II-A 46 .144 square meters covered by TCT No.CASE 12 FIRST DIVISION G. after the appellate court had denied the banks motion for reconsideration. Petitioner went to this Court. Branch 44. versus Philippine National Bank. 1997. with damages. No. without the knowledge and consent of petitioner. Despite two letters of demand sent by respondent. Petitioner. 56001.00 per square meter which offer the latter claimed to have accepted. Mayor Ignacio later mortgaged the lot to the Development Bank of the Philippines. Mayor Ignacio offered to sell the area in question (which then also belonged to Ignacio) to petitioner at P100. September 23. the removal of any improvement thereon. Occidental Mindoro. The Court of Appeals.R. T-17197 and ordering petitioner bank to vacate the premises. respondent stated that he had acquired a parcel of land situated in Mamburao. No. 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.respondent. 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 TECNOGAS PHILIPPINES MANUFACTURING CORP. v. declaring respondent Generoso de Jesus as being the true and lawful owner of the 124-square-meter portion of the land covered by Transfer Certificate of Title (TCT) No. here now contending that 1. petitioner failed and refused to vacate the area. respondent filed a complaint against petitioner before the Regional Trial Court of Occidental Mindoro for recovery of ownership and possession. to deliver possession thereof to respondent. as well as moral and exemplary damages. Petitioner.

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. ignorance of a superior claim. 5 Applied to possession. builds on that land believing himself to be its owner and unaware of any defect in his title or mode of acquisition. The owner of the land on which anything has been built. among other things. under the foregoing provisions. the court shall fix the terms thereof. sown. or he may compel the builder or planter to pay the price of the land. He cannot. that the accessory follows the principal and not the other way around. GOOD FAITH. or that the planting or sowing be removed. that the builder can invoke that accruing benefit and enjoy his corresponding right to demand that a choice be made by the landowner.[3 In order. shall have the right to appropriate as his own the works. et seq. An individuals personal GOOD FAITH is a concept of his own mind and.Article 448. The Court commiserates with petitioner in its present predicament. plants. not being the owner of the land. an honest belief. the proper rent. too. is preclusive. may not conclusively be determined by his protestations alone. It implies honesty of intention. where the true owner himself is the builder of works on his own land. petitioner is not in a valid position to invoke the provisions of Article 448 of the Civil Code. upon the other hand. petitioner was quite aware.6 Given the findings of both the trial court and the appellate court. and the sower the proper rent. compel the owner of the building to instead remove it from the land. particularly after having long been deprived of the enjoyment of his Property Volume 3 Bachelor of Laws II-A 47 .e. Article 450. for instance. if the owner of the land does not choose to appropriate the building or trees after proper indemnity. the issue of GOOD FAITH or BAD FAITH is entirely irrelevant. read: Article 448. or planted in GOOD FAITH. or to oblige the one who built or planted to pay the price of the land. here understood. He much choose one. he shall pay reasonable rent. it should be evident enough that petitioner would fall much too short from its claim of GOOD FAITH.2 Even as the option lies with the landowner. The various provisions of the Civil Code. constructed on the land by Ignacio. loses what is built. 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. is an intangible and abstract quality with no technical meaning or statutory definition. he should be able to prove GOOD FAITH on his part. the builder or planter cannot be obliged to buy the land if its value is considerably more than that of the building or trees. or planter who then later loses ownership of the land by sale or otherwise for.. planted or sowed. therefore. sower. has in actuality been part of the property transferred to petitioner. nevertheless. the absence of malice and the absence of design to defraud or to seek an unconscionable advantage. planted or sown without right to indemnity. or sows in BAD FAITH on the land of another. The choice belongs to the owner of the land. and the one who sowed. Article 448. The parties shall agree upon the terms of the lease and in case of disagreement. pertinent to the subject. elsewise stated.[4 The essence of GOOD FAITH lies in an honest belief in the validity of ones right. The owner of the land on which anything has been built. In such a case. however. is entitled to his rights under the law.. He who builds. and freedom from knowledge of circumstances which ought to put the holder upon inquiry. 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. a builder in GOOD FAITH is one who. the grant to him. sowing or planting. and absence of intention to overreach another. Equally significant is the fact that the building. of the Civil Code refers to a piece of land whose ownership is claimed by two or more parties. i. 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. of the Civil Code. and it encompasses. after payment of the indemnity provided for in Articles 546 and 548. Article 449. However. in order to replace things in their former condition at the expense of the person who built. and indeed advised. planted or sown in BAD FAITH may demand the demolition of the work.[7 In fine. respondent. A builder in GOOD FAITH can. Evidently. a rule that accords with the principle of accession.

No. defendant-appellee. Filipinas Colleges. plaintiffs.R. 1957 (a) 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.200. L-12813 September 29. 2-a mentioned above and in consideration thereof. BARRERA. plaintiff-appellant. L-12812 September 29. ET AL. Nevertheless. 56001 is AFFIRMED. and (c) ordering the sale in public auction of the said undivided interest of the Filipinas Colleges. WHEREFORE.750. 2-a aforementioned to satisfy the unpaid portion of the judgment in favor of appellee Blas and against Filipinas Colleges. J. CASE 13 EN BANC G. appellee Maria Gervacio Blas directly or through the Sheriff of Manila the sum of P5.285. Sison for appellee Maria Gervacio Blas. shall pay to. in lot No.. San Huan. in the amount of P8. was declared to have acquired the rights of the spouses Timbang in and to lot No.R. 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. 1959 FILIPINAS COLLEGES.750. the Filipinas Colleges. the respective rights of the litigants have been adjudicated as follows: (1) Filipinas Colleges.. was ordered to pay the spouses Timbang the amount of P15. -----------------------------G. Inc.934 undivided interest in Lot No.00 minus the sum of P5. INC. The order appealed from is the result of three motions filed in the court a quo in the course of the execution of a final judgment of the Court of Appeals rendered in 2 cases appealed to it in which the spouses Timbang. 2-a covered by certificate of tile No 45970. ET AL. -versusMARIA GERVACIO BLAS. Nicanor S. defendants. SO ORDERED. No costs.property. Inc. (b) declaring the other appellee Filipinas Colleges.: This is an appeal taken from an order of the Court of First Instance of Manila dated May 10.00 that the spouses Timbang had bid for the building at the Sheriff's sale. on which the building sold in the auction sale is situated. -versusMARIA GARCIA TIMBANG.500/3. Inc. 1959 MARIA GARCIA TIMBANG.807. defendants-appellants spouses Maria Garcia Timbang and Marcelino Timbang.. the decision of the Court of Appeals in CA-G. and Maria Gervacio Blas were the parties. Inc. Africa and Benedicto for appellant Maria Garcia Timbang.. No.. IN that judgment of the Court of Appeals. MARIA GARICA TIMBANG. Inc..00 mentioned in (a) above. plaintiff-appellee. owner of 24.R. Inc. CV No. Inc.90 plus such other amounts which said spouses Property Volume 3 Bachelor of Laws II-A 48 . De Guzman and Fernandez for appellee Filipinas Colleges.

Inc. Blas through counsel.859.. within the 90-day period set by the court. 448 of the Civil Code whether they would appropriate the building in question.859. Filipinas Colleges.750. The motion having been granted. Inc. made known to the court their decision that they had chosen not of appropriate the building but to compel Filipinas Colleges. 1957.000. Inc.200. the spouses Timbang. praying that there being still two unsatisfied executions. Inc. Inc. As a result of these actuation. Inc. the builder Property Volume 3 Bachelor of Laws II-A 49 .750. sold the building in public auction in favor of the spouses Timbang.. the Sheriff of Manila on March 5. Filipinas Colleges. failed to deposit the value of the land.00 for the same. in which even they would have to pay Filipinas Colleges.34 value of the land.200.00.200. date of the granting of the motion for execution. In that eventuality. the court grated the motion and the corresponding writ of execution was issued on January 30. one for the sum of P32. as the highest bidders. original vendor of the total amount with the court within 90 days after the decision shall have become final. On January 16. and to withhold from the proceed of the auction sale the sum of P8. Filipinas Colleges would lose all its rights to the land and the spouses Timbang would then become the owners thereof.00 respectively in favor of the Timbang spouses who applied the proceeds to the partial payment of the sum of P32. and (3) By Filipinas Colleges. Inc. (3) In case Filipinas Colleges. purchaser of the said building was ordered to deliver to Blas stock certificate (Exh. Inc. 1957. with a par value of P10.00 and to pay Blas the sum of P8. from which the Timbangs alone have appealed. C) for 108 shares of Filipinas Colleges.. 1957. having failed to pay or deposit the sum of P32.. agent of the Urban Estates. Inc. appellants' counsel has presented a novel. appellee Blas in turn filed a motion for execution of her judgment of P8.34 in favor the land involved.might have paid or had to pay after February.00.34 within the time prescribed. three motion were subsequently filed before the lower court: (1) By appellee Blas. Inc. Lot No.859.800. in the amount of P5. Inc.00. which after liquidation was fixed at P32. (2) Also by the appellee Bals. 1956.00 and P245. After due hearing the lower court rendered its resolution in the manner indicated at the beginning of this decision. Inc. Personal properties of Filipinas Colleges.00 representing the unpaid portion of the price of the house sold to Filipinas Colleges.. for the payment of the sum of P32. Inc. It is contended that because the builder in GOOD FAITH has failed to pay the price of the land after the owners thereof exercised their option under Article 448 of the Civil Code. 2-a.200. praying that because its properties.000. or would compel the latter to acquire the land and pay the price thereof. it (Filipinas Colleges. the Timbangs would make known to the court their option under Art.00 representing the proceeds of the auction sale of the building of Filipinas Colleges.00 of the house. The Timbang spouses presented their opposition to each and all of these motion.00 in favor of the spouses Timbang. 2-a. Over the object of the Timbangs.) be declared part owner of said lot to the extent of the total amount realized from the execution sale of its properties. sent a letter to the Sheriff of Manila advising him of her preferential claim or lien on the house to satisfy the unpaid balance of the purchase price thereof under Article 2242 of the Civil Code.34. argument. Inc. In assailing the order of the court a quo directing the appellants to pay appellee Blas the amount of their bid (P5. Filipinas Colleges. be sold at public auction. to Hoskins and Co. on September 28.00) made at the public auction. the house and some personal properties. a writ of execution was issued on January 8. have been auctioned for P5. (2) Maria Gervacio Blas was declared to be a builder in GOOD FAITH of the school building constructed on the lot in question and entitled to be paid the amount of P19. Lot No.859. 1957.00 for the unpaid balance of the purchase price thereof. were also auctioned for P245. original vendor of the lot.859. in compliance with the judgment of the Court of Appeals.750.34. the sum of P19.750. 1953. over which she has a lien of P8. praying that the Sheriff of Manila and/or the Timbang spouses be ordered to pay and deliver to her the sum of P5. Levy having been made on the house in virtue of the writs of execution. albeit ingenious.

et al. [12] 6226. but only the possessor in GOOD FAITH may retain the thing until he has reimbursed therefor. supra. The owner of the land on which anything has been built. The question is. 66 Phil. ART. 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 Court in the cases ofMiranda vs.. the appellants as owners of the land automatically became the owners ipso facto. nevertheless there was nothing said that as a consequence thereof. the proper rent. Bataclan. 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. 448. Article 448 and 546 of the Civil Code defining the right of the parties in case a person in GOOD FAITH builds. There is nothing in the language of these two article. 605 and the cited case of Bernardo vs. wherein the court has ruled Property Volume 3 Bachelor of Laws II-A 50 . another remedy is suggested in the case of Ignacio vs. 51 Off. upon the failure of the builder to pay the value of the land. and the Timbangs..00 as that would be to make goods to pay for their own property. respectively provides: ART. supra.. or to obligate the one who built or planted to pay the price of the land. Bataclan. Hilario. the execution sale of the house in their favor was superfluous. 448 and 546. 76 Phil. This Court cannot accept this oversimplification of appellants' position. In the first case.. Hilario. (Emphasis supplied) Should the parties not agree to leave things as they are and to assume the relation of lessor and lessee. In addition to the right of the builder to be paid the value of his improvement. Consequently. The case of Bernardo vs. he has right to retain the land on which he has built in GOOD FAITH until he is reimbursed the expenses incurred by him. the builder loses entirely all rights over his own building. and then they decide to leave things as they are and assume the relation of lessor and lessee. sows or plants on the land of another. and should they disagree as to the amount of rental then they can go to the court to fix that amount. are not the debtors of Blas.lost his right of retention provided in Article 546 and by operation of Article 445. Under the terms of these article. this Court has said: A builder in GOOD FAITH not be required to pay rentals. 590 cited by appellants is no authority for this conclusion. the builder or planter cannot be obliged to buy the land if its value is considerably more than that of the building or trees. 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. Fadullon. Gaz. The parties shall agree upon the terms of the lease and in case of disagreement. Ignacio vs. 801. the latter becomes automatically the owner of the improvement under Article 445. the court shall fix the terms thereof. 97 Phil. 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. if the owner of the land does not choose to appropriate the building or trees after proper indemnity. 546. which would justify the conclusion of appellants that. sowing or planting. and the one who sowed. Blas claim for preference on account of the unpaid balance of the purchase price of the house does not apply because preference applies only with respect to the property of the debtor. Even this second right cannot be exercised if the value of the land is considerably more than that of the building. Necessary expenses shall be refunded to every possessor. In such case.. when such is demanded by the land-owner. Article 546 gives him the corollary right of retention of the property until he is indemnified by the owner of the land. he shall pay reasonable rent. By the same token. the builder's right of retention provided in Article 546 is lost. 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 to option of refunding the amount of expenses or of paying the case in value which thing may have acquired by reason thereof. after payment of the indemnify provided for in article 546 and 548.750. owners of the house. However. they are not bound to make good their bid of P5. sown or plated in GOOD FAITH shall have the right to appropriate as his own the works.

to the proceeds of the sale superior to his judgment credit. owners o the land. 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. is likewise justified to satisfy the claim of the appellee Blas. The appellants herein. in effect. instead of electing any of the alternative above indicated chose to seek recovery of the value of their land by asking for a writ of execution. nevertheless. as successful bidders. dictated by common sense.00 — amount to be paid by the Timbangs. With respect to the order of the court declaring appellee Filipinas Colleges. with costs against the appellants. the order of the court directing the sale of such undivided interest of the Filipinas Colleges. A further remedy is indicated in the case of Bernardo vs. In the instant case. In all other respects. Inc. The Provincial Sheriff of Nueva Ecija (74 Phil. he need not pay down the amount of the bid if it does not exceed the amount of his judgement. Blas is actually a lien on the school building are concerned. to be delivered to the owner of the house in payment thereof. Sand because they are the highest bidder in their own auction sale. to pay in cash the amount of their bid in the sum of P5.750.00 as ordered.. Property Volume 3 Bachelor of Laws II-A 51 . This Court has already held in Matias vs. if any. they now claim they acquired title to the building without necessity of paying in cash on account of their bid. If this resulted in the continuation of the so-called involuntary partnership questioned by the difference between P8. It is so ordered. the first part of the dispositive portion of the order appealed from is modified in the sense that upon failure of the Timbang spouses to pay to the Sheriff or to Manila Gervacio Blas said sum of P5.00 is therefore correct. Bataclan. 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. i. Considering that the appellant spouses Marcelino Timbang and Maria Garcia Timbang may not voluntarily pay the sum of P5. that where the successful bidder is the execution creditor himself. part owner of the land to the extent of the value of its personal properties sold at public auction in favor of the Timbang. the execution creditor. 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.750. In other words. they in effect pretend to retain their land and acquire the house without paying a cent therefor. a partial payment of the value of the land. the appealed order of the court a quo is hereby affirmed..00 within fifteen (15) days from notice of the final judgment. thereby further delaying the final termination of this case. supra. 326) that while it is the inveriable practice.that the owner of the land in entitled to have the improvement removed when after having chosen to sell his land to the other party. The order of the lower court directing the Timbang spouses.e.750.750. the builder in GOOD FAITH fails to pay for the same. must pay in cash the amount of his bid as a condition precedent to the issuance to him of the certificate of sale. This contention is without merit. this Court Likewise finds the same as justified. as successful bidder. Inc. for such amount represents. and selling the same in public auction.200. when their is a claim by a third-party.00 — the unpaid balance of the purchase price of the building and the sum of P5. levying on the house of the builder.

the Segarras about ten days after the expiration of the period filed a sword petition for the consolidation of their ownership and registered said petition in the office of the Register of Deeds on May 15. as amended. The Segarras appealed to the Court of Appeals under CA—G. No. on the strength of the said power of attorney Fadullon to make the repurchase within this period. the said Tribunal being of the opinion that the case involved only questions of law. 1955 SALVACION MIRANDA. 1946. a power of attorney in favor of one Esteban Fadullon executed by Lucio Tio was registered in the land records of Cebu City and annotated on the same certificate of title. 1946. After hearing the trial court rendered judgment annulling the sale. Service of summons was made upon the Segarras on June 10.: The present appeal was first taken to the Court of Appeals. -versusESTEBAN FADULLON and spouses DIONISIO SEGARRA and CLEMENCIA N. paragraph 6 of the Judiciary Act of 1948. defendants-appellees.R. plaintiff-appellants. under Transfer Certificate of Title No.CASE 14 EN BANC G. L-8220 October 29.6550-R and the said Tribunal affirmed the appealed decision and further required the Segarras to pay plaintiff the reasonable rentals on the property from the Property Volume 3 Bachelor of Laws II-A 52 . 1939. Later by resolution of the said court it was certified to us under section 17. DE SEGARRA. No. R. lot 1589-J of the Banilad Estate. filed a complaint in the Court of First Instance of Cebu. Apprised of the sale of his property. The facts as may be gathered from the pleadings filed by the parties may be briefly stated as follows. 1946. Civil Case No. MONTEMAYOR. J. 10548. Cebu. 181 to annul the sale. Lucio Tio on June 4. In the year 1939 one Lucio Tio was the owner of a parcel of land. On December 29. In the year 1946.

the Segarras could have asked themselves this Property Volume 3 Bachelor of Laws II-A 53 . without opposition. After a careful review of the record we agree with the plaintiff-appellant. Dionisio Segarra and Clemencia N. The Court of Appeals in its decision affirming that of the trial court said: The Segarra spouses maintain that they are purchasers in GOOD FAITH. 1952. 10548 on December 29. As prayed for. Upon the decision becoming final the corresponding writ of execution was issued directing the Sheriff to put plaintiff Tio in possession of the lot. Obviously there was in this transaction a prevailing intention of railroading the property into a new ownership as may be proven by the fact that said purchasers filed a sworn petition for consolidating their ownership barely ten days after the expiration of thirty days.300 or to allow them to buy the land should the plaintiff decide not to pay for the improvements. On the same date. yet.300. filed through counsel. on April 13. is the further circumstance that the said property had already been mortgaged in favor of the Cebu Mutual Building and Loan Association by virtue of that power-of-attorney. The alleged power of attorney executed by the late Lucio Tio in favor of appellant Fadullon was registered in the land record of the Register of Deeds of Cebu Citly and annotated at the back of Transfer Certificate of Title No. It turned out however that during the possession of the property by the Segarras they had introduced improvements thereon consisting of a building of three rooms and a storage room. This encumbrance alone should have been sufficient to put the Segarra spouses upon an inquiry as to the authority of Fadullon to sell to them the same property six years later. that the reason he (plaintiff) did not file an opposition to the motion of the defendants asking for reimbursement was that he thought that the trial court was sufficiently informed and impressed with the BAD FAITH with which defendants bought the land and introduced improvements thereon and that it would consequently deny their motion. and registered with the office of Register of Deeds for Cebu twelve days thereafter. he took the present appeal. value of the building erected on the land in question. On August 28. the circumstances of the power-of-attorney appearing on the back of the title as of five or six years previous and the other circumstances of the comparatively limited period of one month granted vendor Fadullon to redeem the property.300. 1952. 1946. 1946. or otherwise allow said defendants to purchase the aforementioned lot. We will now examine the record on this point. with tower and water tank and a cement flooring covering about one-third of the lot which according to the Segarras cost them P5. the plaintiff is hereby ordered to either pay the defendant spouses. The plaintiff filed a motion for reconsideration claiming that the Segarras were possessors and builders in BAD FAITH and so were not entitled to reimbursement for the value of the improvements. Upon the denial of his motion for reconsideration. the trial court issued the following order: The attorney for the plaintiff has been accordingly served with copy of defendant's motion of July 31. that is. the deed of mortgage in favor of the Cebu Mutual Building and Loan Association was annotated in the said Torrens title (Exhibits 1 and 1-B).filing of the action until said property shall have been returned to plaintiff. Above all these. namely. the possibility of such collusion lingers. 1939. or on May 15. and that they had introduced the improvements aforementioned in GOOD FAITH and asked the court to order the plaintiff to pay for the said improvements valued at P5. Segarra (possessors in GOOD FAITH) the sum of P5. and one artesian well. and in support of his motion for reconsideration plaintiff quoted portions of the decision of the trial court and the Court of Appeals. considering the short period of one month within which to redeem and the surrounding circumstances. For instance. While the evidence did not disclose a collusion or conspiracy between Fadullon and the Segarras. The trial court in its decision declaring the sale of the land to the defendants null and void and commenting on the alleged GOOD FAITH of defendants in buying the property said the following: There are two circumstances which seem to stubbornly belie the professed GOOD FAITH on the part of the Segarras in buying this property. They then filed a motion with the trial court claiming that they were possessors in GOOD FAITH of the lot in question.

but that the builder is unwilling or unable to buy the land.J. even proof that defendants were considered possessors and builders in BAD FAITH. it was still incumbent upon the Segarras to ascertain the scope and authority of Fadullon under said power of attorney. and should they disagree as to the amount of the rental then they can go to the court to fix that amount. and then they decide to leave things as they are and assume the relation of lessor and lessee. L-175 April 30. The new Certificate of Torrens Title No. to hasten the registration of the title of the Segarras to the land in dispute . This circumstance. 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. . Moreover. Judge of First Instance of Pangasinan. or at least that they were not possessors and builders in GOOD FAITH. that they were dealing with an agent under a power of attorney executed before the war. These unusual circumstances would seem to engender in our minds the possibility of collusion between the appellants. 1947. as they did. knowing. one can logically infer that that was the conclusion of the two courts. Fadullon executed the sale with the right to repurchase within the extraordinary short period of 30 days. and the permit was granted on January 11. No.R. . the appealed order of August 28.question: Did not the mortgage of P400 serve the purpose for which the power of attorney was executed? The Segarras did not require Fadullon to produce his power of attorney. all this about seven months after they received the summons on June 10. In view of the foregoing. respondents. the transfer of dominion on the property in question to the Segarras was null and void and of no effect. C. 1952. Esliza for petitioners. petitioners. With costs against appellees. . denying plaintiff's motion for reconsideration are set aside. or to say it more mildly. meaning to say that the improvements were introduced long after their alleged GOOD FAITH as possessors had ended. . 1946. 392 on the property now in the name of the Segarras is hereby ordered cancelled and that a new one issued in the name of Lucio Tio and his wife Salvacion Miranda. should have placed the Segarras on their guards. 1946. that the defendants were not possessors in GOOD FAITH. Leoncio R. Furthermore. . CASE 15 EN BANC G. the very fact that the Court of Appeals sentenced the defendants to pay rentals is an indication. plaintiff-appellant in her brief (page 7) says without denial or refutation on the part of defendants-appellees that they (defendants) applied for a building permit to construct the improvements in question on December 4. 1952 and the order of October 15. ordering the Segarras to return the possession of said property to plaintiff. and FELIPE NATIVIDAD. 1946 DAMIAN IGNACIO. ELIAS HILARIO and his wife DIONISIA DRES. A builder in GOOD FAITH may not be required to pay rentals. . vs. The defendants Segarras are furthermore required to pay plaintiff the reasonable rentals on the property from the filing of this action until such time as the said property shall have been returned to plaintiff ." Although neither the trial court nor the Court of Appeals did expressly say and in so many words that the defendants-appellees were possessors in BAD FAITH. While it is true that said power of attorney is annotated at the back of the Torrens title of Tio. Monta for respondents. FRANCISCO IGNACIO and LUIS IGNACIO. again. Possibly he might be required 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. from a reading of their decisions particularly those we have just quoted.: Property Volume 3 Bachelor of Laws II-A 54 . . MORAN. Mauricio M.

Hence. but only the possessor in GOOD FAITH may retain the thing until such expenses are made good to him. or sell to them the residential lot for P45. 361. after hearing. ART. the plaintiffs prayed for an order of execution alleging that since they chose neither to pay defendants for the buildings nor to sell to them the residential lot. Felipe Natividad. this petition by defendants praying for (a) a restraint and annulment of the order of execution issued by Judge Natividad. 12872 (Exhibit A) issued in their name. in a motion filed in the same Court of First Instance but now presided over by the herein respondent Judge Hon. unless the plaintiffs prefer to sell them said residential lot. in accordance with article 361 of the Civil Code. rendered judgment holding plaintiffs as the legal owners of the whole property but conceding to defendants the ownership of the houses and granaries built by them on the residential portion with the rights of a possessor in GOOD FAITH. said defendants shall remove their houses and granaries after this decision becomes final and within the period of sixty (60) days from the date that the court is informed in writing of the attitude of the parties in this respect. and the one who sowed. was granted by Judge Natividad.This is a petition for certiorari arising from a case in the Court of First Instance of Pangasinan between the herein respondents Elias Hilario and his wife Dionisia Dres as plaintiffs. concerning the ownership of a parcel of land. sowing or planting. or to oblige the one who built or planted to pay the price of the land. The owner of land on which anything has been built. said defendants should be ordered to remove the structure at their own expense and to restore plaintiffs in the possession of said lot. surnamed Ignacio. if they cannot come to an extra-judicial settlement with regard to said rights. No pronouncement is made as to damages and costs. and entitled to the possession of the same. in which case defendants shall pay the plaintiffs the proportionate value of said residential lot taking as a basis the price paid for the whole land according to Exhibit B. Subsequently. (2) That the defendants 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. the lower court. Alfonso Felix. follows: Wherefore. and (3) That upon defendant's failure to purchase the residential lot in question. the plaintiffs and defendants may appear again before this court for the purpose of determining their respective rights under article 361 of the Civil Code.000 for the buildings. 453. shall have the right to appropriate as his own the work. sown or planted in GOOD FAITH. or (c). hub of this controversy. judgment is hereby rendered declaring: (1) That the plaintiffs are the owners of the whole property described in transfer certificate of title No. (b) an order to compel plaintiffs to pay them the sum of P2. partly rice-land and partly residential. The judgment rendered by Judge Felix is founded on articles 361 and 453 of the Civil Code which are as follows: ART. as defendants. Francisco and Luis. 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. Useful expenses shall be refunded to the possessor in GOOD FAITH with the same right of retention. Once this decision becomes final. After the trial of the case. and the herein petitioners Damian. the proper rent. Necessary expenses shall be refunded to every possessor. after the payment of the indemnity stated in articles 453 and 454. presided over by Hon. a rehearing of the case for a determination of the rights of the parties upon failure of extra-judicial settlement. The dispositive part of the decision. Property Volume 3 Bachelor of Laws II-A 55 . Defendants objected to this motion which.

either to pay for the building or to sell his land to the owner of the building. But he cannot. And execution cannot be had. No. upon the other hand. the rights of both parties are well defined under articles 361 and 453 of the Civil Code. He is entitled to such remotion only when. under article 453. The owner of the land. But this is not the case before us. in the last instance. Thus the judgment rendered by Judge Felix has never become final. for after the judgment has become final. it having left matters to be settled for its completion in a subsequent proceeding. and.The owner of the building erected in GOOD FAITH on a land owned by another. We hold. offensive to articles 361 and 453 of the Civil Code. After such hearing. the period of time within which the defendants-petitioners may pay for the land. as respondents here did. and certainly no authority is vested in him to settle these matters which involve exercise of judicial discretion. the sheriff being ignorant as to how.R. these particulars having been left for determination apparently after the judgment has become final. for it amends substantially the judgment sought to be executed and is. The costs shall be paid by plaintiffs-respondents. 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 not to sell the land. 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. For all the foregoing. the other party fails to pay for the same. CASE 16 SECOND DIVISION [G. This procedure is erroneous. matters which remained unsettled up to the time the petition is filed in the instant case. no additions can be made thereto and nothing can be done therewith except its execution. therefore. is entitled to retain the possession of the land until he is paid the value of his building. There is. 125683. March 2. under article 361. and within what time may the option be exercised. in the decision of Judge Felix a question of procedure which calls for the clarification. for how much. after having chosen to sell his land. the court shall render a final judgment according to the evidence presented by the parties. to avoid uncertainty and delay in the disposition of cases. however. as well as the period of time within which the plaintiffsrespondents may exercise their option either to pay for the buildings or to sell their land. all these periods to be counted from the date the judgment becomes executory or unappealable. is null and void. In that decision. 1999] Property Volume 3 Bachelor of Laws II-A 56 . but it fails to determine the value of the buildings and of the lot where they are erected as well as the periods of time within which the option may be exercised and payment should be made. 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 wherein it must determine the prices of the buildings and of the residential lot where they are erected. has the option. furthermore.

Petitioner Ballatan called the attention of the AIA to the discrepancy of the land area in her title and the actual land area received from them. however. 27. petitioner Ballatan constructed her house on Lot No. Araneta University Village.: This is a petition for review on certiorari of the decision of the Court of Appeals dated March 25. 1996 in CA-G. claimed that his house. that Lot No. Forthwith. however. 24 lost approximately 25 square meters on its eastern boundary. WINSTON GO. 26 and 27 moved westward to the eastern boundary of Lot No.[2 Lots Nos. The AIA authorized another survey of the land by Engineer Jose N. 417 square meters in area. 25 and 26 of respondents Go in 1983 and allegedly found the boundaries to have been in their proper position. that Lot No. Lot No. 24. 25.[3 On Lot No. Malabon. COURT OF APPEALS. 26 lost some three (3) square meters which. Failing to agree amicably. Respondent Go. QUEDDING. which was three lots away. respondent Winston Go. petitioner Ballatan brought the issue before the barangay. Respondents.[7 In short. plaintiffs-appellees v. GONZALO GO. appellants and third-party plaintiffs-appellants v. The parties. are registered in the name of respondent Gonzalo Go. Engineer Quedding declared that he made a verification survey of Lots Nos.EDEN BALLATAN and SPS. Quedding. He.et. On the basis of this survey. were gained by Lot No. DECISION PUNO. 3. 27 on its western boundary. Lots Nos. During the construction. vs. et. 25. did not lose nor gain any area. third-party defendants. 24. including its fence and pathway. Property Volume 3 Bachelor of Laws II-A 57 . Engineer Quedding found that the lot area of petitioner Ballatan was less by a few meters and that of respondent Li Ching Yao. could not explain the reduction in Ballatan's area since he was not present at the time respondents Go constructed their boundary walls. The Go's filed their "Answer with Third-Party Complaint" impleading as third-party defendants respondents Li Ching Yao. met several times to reach an agreement on the matter. constructed his house. Adjacent to Lot No.. including Li Ching Yao."[1 The instant case arose from a dispute over forty-two (42) square meters of residential land belonging to petitioners. Sr. Branch 169. and is registered in the name of respondent Li Ching Yao. Thus. ARANETA INSTITUTE OF AGRICULTURE and JOSE N. the authorized surveyor of the Araneta Institute of Agriculture (AIA).al. however. 1985. although found to have encroached on Lot No. petitioner Ballatan instituted against respondents Go Civil Case No. were built within the parameters of his father's lot. Metro Manila. 414square meters in area. 1986. Gonzalo Go and Winston Go. LI CHING YAO..R. In a report dated February 28.[5 Her building contractor informed her that the area of her lot was actually less than that described in the title.. BETTY MARTINEZ and CHONG CHY LING. J. on April 1. 25. Ballatan informed respondent Go of this discrepancy and his encroachment on her property. 1985. on June 10. 26 is Lot No. however. Respondents Go did not appear. Sr.[6 On June 2. 24. He found that Lot No. al. 772-MN for recovery of possession before the Regional Trial Court. the owner-developer of the subdivision project. 24. Respondents Go refused. The parties herein are owners of adjacent lots located at Block No. she noticed that the concrete fence and side pathway of the adjoining house of respondent Winston Go encroached on the entire length of the eastern side of her property. Poinsettia Street. the AIA and Engineer Quedding. with an area of 415 and 313 square meters respectively. and that this lot was surveyed by Engineer Jose Quedding. Li Ching Yao. Engineer Quedding made a third relocation survey upon request of the parties. son of Gonzalo Go. Petitioners. is registered in the name of petitioners Eden Ballatan and spouses Betty Martinez and Chong Chy Ling. increased by two (2) meters. 25 and 26. 24. petitioner Ballatan made a written demand on respondents Go to remove and dismantle their improvements on Lot No.[4 In 1985. 32472 entitled "Eden Ballatan. CV No. Malabon. 1985.

800. Jose N. attorney's fees equivalent to 25% of the current market value of the subject matter in litigation at the time of execution. 2. SO ORDERED. demolish their improvements and pay petitioner Ballatan actual damages. judgment is hereby rendered in favor of the plaintiffs and against the defendants. It ordered the Go's to vacate the subject portion of Lot No.000.000. 24. It also ordered Jose Quedding to pay respondents Go attorney's fees of P5.[8 The court made the following disposition: "WHEREFORE. and (3) Li Ching Yao for failure to prove that he committed any wrong in the subject encroachment. (2) Jose N. and respondent Li Ching Yao to pay respondents Go. Quedding is hereby ordered to pay to defendants-appellants the amount of P5. Property Volume 3 Bachelor of Laws II-A 58 . attorney's fees and the costs of the suit. Instead of ordering respondents Go to demolish their improvements on the subject land. To pay the costs of suit. not the parties. To demolish and remove all improvements existing and encroaching on plaintiff's lot.000. LET THE RECORD of the case be remanded to the Regional Trial Court of Malabon for further proceedings and reception of evidence for the determination of the reasonable value of Lots Nos. Quedding. the trial court decided in favor of petitioners. the Court of Appeals modified the decision of the trial court. vacate and deliver possession of the encroached area to the plaintiffs. To pay plaintiffs. 3. jointly and severally. without pronouncement as to costs. a reasonable amount for that portion of the lot which they encroached. It affirmed the dismissal of the third-party complaint against the AIA but reinstated the complaint against Li Ching Yao and Jose Quedding. there being no privity of relation between him and respondents Go and his erroneous survey having been made at the instance of AIA. and 5. the appellate court ordered them to pay petitioner Ballatan. premises considered. and 3) Third-party defendant Jose N. ordering the latter: 1.00 for his erroneous survey. 4.00 for the expenses paid to the surveyors." Respondents Go appealed. The dispositive portion of the decision reads: "WHEREFORE. To clear. The third-party complaint filed by third-party plaintiff Gonzalo Go and Winston Go against third-party defendants Araneta Institute of Agriculture. 24 and 26.00 for plaintiffs' transportation. 1990. the decision appealed from is hereby AFFIRMED insofar as the dismissal of the third-party complaint against Araneta Institute of Agriculture is concerned but modified in all other aspects as follows: 1) Defendants-appellants are hereby ordered to pay plaintiffs-appellees the reasonable value of the fortytwo (42) square meters of their lot at the time of its taking. On March 25. as attorney's fees. b) P5.On August 23. 2) Third-party defendant Li Ching Yao is hereby ordered to pay defendants-appellants the reasonable value of the thirty-seven (37) square meters of the latter's lot at the time of its taking. the value to be fixed at the time of taking. 1996.00. Quedding and Li Ching Yao is hereby DISMISSED. To pay plaintiffs jointly and severally the following: a) P7. It dismissed the third-party complaint against: (1) AIA after finding that the lots sold to the parties were in accordance with the technical description and verification plan covered by their respective titles.

the additional filing fee thereon shall constitute a lien on the judgment award. UNDER THE GUISE OF APPLYING EQUITY BUT IN EFFECT A VERY APPARENT PARTIALITY AND FAVOR TO RESPONDENTS GO. this petition. a reasonable time for amendment of the complaint so as to allege the precise amount of damages and accept payment of the requisite legal fees. or allow. barring prescription. i. The third-party complaint in the instant case arose from the complaint of petitioners against respondents Go. Petitioners allege that: "RESPONDENT COURT OF APPEALS ERRED ON QUESTIONS OF LAW AND GRAVELY ABUSED ITS DISCRETION AMOUNTING TO LACK OF JURISDICTION WHEN: 1. The complaint filed was foraccion publiciana.SO ORDERED. IT ORDERED PAYMENT OF THE ENCROACHED AREA AT THE VALUE AT THE TIME OF ITS TAKING AND NOT THE VALUE AT THE TIME OF PAYMENT. although having jurisdiction over the real action. 2. Jose N. 2.[17 In the case at bar. The rule in this jurisdiction is that when an action is filed in court. WHEN IT DENIED PETITIONERS THE RECOVERY OF THE NECESSARY EXPENSES IN PROTECTING THEIR RIGHTS IN THIS CASE. the docket and filing fees are based on the value of the property and the amount of damages claimed. WHEN IT DID NOT DISMISS THE THIRD-PARTY COMPLAINT DUE TO NON-PAYMENT OF ANY FILING OR DOCKET FEE. the court. the recovery of possession of real property which is a real action."[10 Petitioners question the admission by respondent Court of Appeals of the third-party complaint by respondents Go against the AIA. the court may expunge those claims for damages. 4. The third-party complaint sought the same remedy as the principal complaint but added a prayer for attorney's fees and costs without specifying their amounts.[15 If there are unspecified claims. RESPONDENT COURT HAS NO POWER TO APPLY/USE EQUITY IN THE PRESENCE OF EXISTING LAWS TO THE CONTRARY. That summons be issued against Third-Party Defendants Araneta Institute of Agriculture. Quedding and Li Ching Yao.[16 The same rule also applies to third-party claims and other similar pleadings. Property Volume 3 Bachelor of Laws II-A 59 .[12 If the complaint is filed but the fees are not paid at the time of filing. That after hearing.[11 In real actions. the complaint must be accompanied by the payment of the requisite docket and filing fees. thus: "ON THE THIRD PARTY COMPLAINT 1.[13 Where the fees prescribed for the real action have been paid but the fees of certain related damages are not.e. the determination of which may arise after the filing of the complaint or similar pleading.[14 Accordingly. if any. Petitioners claim that the third-party complaint should not have been considered by the Court of Appeals for lack of jurisdiction due to thirdparty plaintiffs' failure to pay the docket and filing fees before the trial court. 3. the court acquires jurisdiction upon full payment of the fees within a reasonable time as the court may grant. IT APPLIED EQUITY OR EQUITABLE SOLUTIONS TO THE INSTANT CASE IN UTTER DISREGARD AND IN VIOLATION OR GROSS IGNORANCE OF EXISTING LAWS AND JURISPRUDENCE VESTING BASIC PROPERTY RIGHTS TO HEREIN PETITIONERS. may not have acquired jurisdiction over the accompanying claim for damages. on motion."[9 Hence.. Jose Quedding and Li Ching Yao. the third-party complaint filed by respondents Go was incorporated in their answer to the complaint. they be sentenced to indemnify the Third-Party Plaintiffs for whatever is adjudged against the latter in favor of the Plaintiffs. THEREBY ENRICHING THE GO'S BUT DEPRIVING PETITIONERS OF THE FRUITS OR INCREASE IN VALUE OF THEIR PROPERTY TO WHICH THEY ARE ENTITLED UNDER THE LAW AS THE REGISTERED OWNERS WITH TORRENS TITLE IN THEIR NAMES.

respondents Go in 1983. the court shall fix the terms thereof. planter or sower to purchase and pay the Property Volume 3 Bachelor of Laws II-A 60 . shall have the right to appropriate as his own the works. The claim for attorney's fees refers to damages arising after the filing of the complaint against the Go's. gaining in the process thirty-seven (37) square meters of the latter's land. That Third-Party Defendants be ordered to pay attorney's fees as may be proved during trial. 25. The Court of Appeals. that inclusive of the subject portion. He built his house in the belief that it was entirely within the parameters of his father's land. particularly on the Go's prayer for damages. on which respondent Li Ching Yao built his house. The owner of the land may also oblige the builder. However. planting or sowing."[18 The Answer with Third-Party Complaint was admitted by the trial court without the requisite payment of filing fees. much less. The owner of the land on which anything has been built. Contrary to petitioners' claim. sown or planted in GOOD FAITH shall have the right to appropriate as his own the building. he shall pay reasonable rent.[27 or to oblige the one who built or planted to pay the price of the land. planter or sower of the necessary and useful expenses. Quedding to pay the Go's the sum of P5. Lot No.[24 He constructed his house in 1982. after payment of the indemnity provided for in Articles 546 and 548. granted the third-party complaint in part by ordering third-party defendant Jose N.[19 The trial court did not award the Go's any damages. and the one who sowed the proper rent. the builder or planter cannot be obliged to buy the land if its value is considerably more than that of the building or trees. and in the proper case. Article 448 of the Civil Code provides: "Art.000. Their rights must.3. sown or planted in GOOD FAITH. The claim that the discrepancy in the lot areas was due to AIA's fault was not proved. not forty-five (45). as initially found by the trial court. found that it was the erroneous survey by Engineer Quedding that triggered these discrepancies. That Third-Party Defendants be ordered to pay the costs. The appellate court. therefore. respondents Go had no knowledge that they encroached on petitioners' lot. 4. however.[21 We hold that the Court of Appeals correctly dismissed the third-party complaint against AIA. They are deemed builders in GOOD FAITH[22 until the time petitioner Ballatan informed them of their encroachment on her property. and upon him who alleges BAD FAITH on the part of a possessor rests the burden of proof. GOOD FAITH is always presumed.[26 All the parties are presumed to have acted in GOOD FAITH. The additional filing fee on this claim is deemed to constitute a lien on the judgment award.[20 The Court of Appeals found that the subject portion is actually forty-two (42) square meters in area.[23 Respondent Li Ching Yao built his house on his lot before any of the other parties did. encroached on the land of respondents Go." The owner of the land on which anything has been built. Other just and equitable reliefs are also prayed for. 448. be determined in accordance with the appropriate provisions of the Civil Code on property. that on this said portion is found the concrete fence and pathway that extends from respondent Winston Go's house on adjacent Lot No. that instead. sowing or planting. and petitioners in 1985. after payment to the builder. expenses for pure luxury or mere pleasure. however.[25 There is no evidence. respondents Go did not gain nor lose any portion of Lots Nos. if the owner of the land does not choose to appropriate the building or trees after proper indemnity. 25 and 26. The parties shall agree upon the terms of the lease and in case of disagreement. the Court of Appeals did not err in awarding damages despite the Go's failure to specify the amount prayed for and pay the corresponding additional filing fees thereon. any allegation that respondent Li Ching Yao was aware that when he built his house he knew that a portion thereof encroached on respondents Go's adjoining land. 24 belonging to petitioners. In short.00 as attorney's fees. In such case. that this forty-two (42) square meter portion is on the entire eastern side of Lot No. It dismissed the third-party complaint. 27. And it was this survey that respondent Winston Go relied upon in constructing his house on his father's land.

or sell to respondents Go the subject portion."[31 Similarly. If the owner chooses to sell his land.[28 Article 448 has been applied to improvements or portions of improvements built by mistaken belief on land belonging to the adjoining owner. petitioners. On the basis of these facts. the builder. the builder.. If the value of the land is much more than the Property Volume 3 Bachelor of Laws II-A 61 . expenses for pure luxury or mere pleasure.[32 we held that: "Although without any legal and valid claim over the land in question. then petitioners must pay reasonable rent."[33 In light of these rulings. Gaz. 46 Off. The builder. the court must fix the terms thereof. approved June 18. concludes that the plaintiffs are builders in GOOD FAITH and the relative rights of the defendant Mamerta Cabral as owner of the land and of the plaintiffs as owners of the building is governed by Article 361 of the Civil Code (Co Tao v. for in that event the whole building might be rendered useless. and in the proper case. Petitioners. as owners of the land. 1951.' dated August 17. 24 on which their improvement stands. until they vacate. they must pay rent to petitioners. or selling to petitioners that part of their land on which stands the improvement. In such case. The right to choose between appropriating the improvement or selling the land on which the improvement stands to the builder. we held that: "The Court. If petitioners are unwilling or unable to buy. then they must vacate the land and must pay rentals until they do so. If buying the improvement is impractical as it may render the Go's house useless. 24. Court of Appeals. then the court shall fix the same. according to their 'Stipulation of Facts. The more workable solution. and should they fail to do so. or to oblige the builder to pay the price of the land. is for respondents to sell to petitioners that part of their land on which was constructed a portion of the latter's house.5514). however. planter or sower. Ibanez. buy that portion of the house standing on their land. planter or sower must purchase the land. planting or sowing. Respondents. have therefore the choice of either appropriating the portion of petitioners' house which is on their land upon payment of the proper indemnity to petitioners. i. Article 361 of the old Civil Code has been reproduced with an additional provision in Article 448 of the new Civil Code. after a relocation of the monuments of the two properties had been made by the U. Of course. after payment to the builder of necessary or useful expenses. as owners of Lot No. respondents cannot oblige petitioners to buy the land if its value is considerably more than that of the aforementioned portion of the house. the owner of the land on which anything has been built in GOOD FAITH shall have the right to appropriate as his own the building. otherwise the owner may remove the improvements thereon. therefore. is given to the owner of the land. If such be the case. Cabral were likewise unaware of the fact that a portion of plaintiff's house was extending and occupying a portion of their lot with an area of 14 square meters. Army through the Bureau of Lands. is not obliged to purchase the land if its value is considerably more than the building. however. petitioners. The parties must come to an agreement as to the conditions of the lease. It may here be pointed out that it would be impractical for respondents to choose to exercise the first alternative. If the parties cannot come to terms over the conditions of the lease. then petitioners may sell to respondents Go that portion of Lot No. it would seem. The parties came to know of the fact that part of the plaintiff's house was occupying part of defendant's land when the construction of plaintiff's house was about to be finished. may choose to purchase the improvement made by respondents Go on their land.e.S. in Grana and Torralba v. Under Article 361 of the old Civil Code (Article 448 of the new). cannot compel respondents Go to buy the land if its value is considerably more than the portion of their house constructed thereon. then they must vacate the land and. Cabral and Mamerta M. If the Go's are unwilling or unable to buy the lot.price of the land. planter or sower must pay rent to the owner of the land. [30 to wit: "[P]laintiffs Geronima Zabala and her husband Justino Bernardo. were found by the Court of Appeals to have constructed a portion of their house thereon in GOOD FAITH. 1949.[29 The facts of the instant case are similar to those in Cabral v. and that the defendants Bernardo M. Joaquin Chan Chico. planter or sower. constructed their house in the belief that it was entirely within the area of their own land without knowing at that time that part of their house was occupying a 14-square meter portion of the adjoining lot belonging to the defendants. however.

the purchase price must be at the prevailing market price at the time of payment. The Court of Appeals erred in fixing the price at the time of taking. But if the value of the land is considerably more than the value of the improvement. From the moment petitioners shall have exercised their option. Property Volume 3 Bachelor of Laws II-A 62 . IN VIEW WHEREOF. It is not a taking by the state of private property for a public purpose upon payment of just compensation. the court of origin is directed to fix the terms of the lease. to pay attorney's fees of P5. If petitioners elect to sell the land or buy the improvement. then petitioners should sell the encroached portion of their land to respondents Go. in which case the parties shall agree upon the terms of the lease. The time of taking is determinative of just compensation in expropriation proceedings.000. In the event that petitioners elect to sell to respondents Go the subject portion of their lot. SO ORDERED. The additional filing fee on the damages constitutes a lien on this award. then respondents Go may elect to lease the land. The instant case is not for expropriation. 24. This is a case of an owner who has been paying real estate taxes on his land but has been deprived of the use of a portion of this land for years. the price must be fixed at the prevailing market value at the time of payment. 25 and 26. then respondents Go must pay reasonable rent. If they do not agree on the terms of the lease. vis-avis respondent Li Ching Yao as builder of the improvement that encroached on thirty seven (37) square meters of respondents Go's land in accordance with paragraph one abovementioned. the decision of respondent Court of Appeals is modified as follows: (1) Petitioners are ordered to exercise within thirty (30) days from finality of this decision their option to either buy the portion of respondents Go's improvement on their Lot No.Go's improvement. as third-party defendant. Should they fail to agree on said terms. It is but fair and just to fix compensation at the time of payment.[34 Article 448 and the same conditions abovestated also apply to respondents Go as owners and possessors of their land and respondent Li Ching Yao as builder of the improvement that encroached on thirty-seven (37) square meters of respondents Go's land. (2) Respondents Go are likewise directed to exercise their rights as owners of Lots Nos. If buying the improvement will render respondents Go's house useless. (4) The Decision of the Court of Appeals dismissing the third-party complaint against Araneta Institute of Agriculture is affirmed. (3) The Decision of the Court of Appeals ordering Engineer Quedding. then the latter must vacate the subject portion and pay reasonable rent from the time petitioners made their choice up to the time they actually vacate the premises. If petitioners choose to sell the land but respondents Go are unwilling or unable to buy. respondents Go shall pay reasonable monthly rent up to the time the parties agree on the terms of the lease or until the court fixes such terms. then they may go to court to fix the same. which is the time the improvements were built on the land.00 to respondents Go is affirmed. or sell to said respondents the portion of their land on which the improvement stands.

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