4 Accession

168 PROPERTY
and therefore, may require the property owners to apply for a Height
Clearance Permit if the proposed site of the building/structure is covered
by any restrictions.
(3) For properties far from the airport, they are subject to the
provisions of the National Building Code196 and local ordinances.
Chapter 2
RIGHT OF ACCESSION
GENERAL PROVISIONS
Art. 440. The ownership of property gives the right by accession

to everything which is produced thereby, or which is incorporated or at-
tached thereto, either naturally or artificially. (353)
§ 40. Accession
[40.1] Definition and Concept
The ownership of property gives the right by accession to
everything which is produced thereby, or which is incorporated or
attached thereto, either naturally or artificially.197 Accession, therefore,
is the right of an owner of a thing to the products of said thing as well as
to whatever is inseparably attached thereto as an accessory.198
From the provisions of Article 440, it is clear that “accession”
presupposes a previously existing ownership by the owner over the
principal, such that it is considered merely as an incident or an attribute
of ownership. It is not, therefore, a mode of acquiring ownership but
a right included in ownership. At any rate, Article 712 of the New
Civil Code which enumerates the seven modes of acquiring ownership
(occupation, intellectual creation, law, donation, succession, tradition
and prescription) does not consider “accession” as one of such modes.
In addition, the concept of accession is discussed by the Code only in
relation to the right of ownership.
196
R.A. No. 6541.
197
Art. 440, NCC.
198
Sanchez Roman, Vol. II, p. 89.
PROPERTY, OWNERSHIP, AND ITS MODIFICATION 169
OWNERSHIP
Right of Accession General Provisions
[40.2] Kinds of Accession

Based from the provisions of Article 440, accession is classified
into two: (1) accesion discreta; and (2) accesion continua. The first part
of the article defines the concept of accesion discreta or the right of
the owner to anything which is produced by his property. The second
part of the article, on the other hand, defines the concept of accesion
continua or the right of the owner to anything which is incorporated or
attached to his property, whether such attachment is through natural or
artificial causes.
Accesion discreta is subdivided into: (1) natural fruits, (2)
industrial fruits, and (3) civil fruits. Accesion continua, in turn, may
refer to either immovable property or movable property.
With regard to immovable property, accesion continua is classified
into either industrial accession or natural accession depending on
the manner by which the attachment or incorporation takes place.
In industrial accession, the incorporation takes place artificially;
while natural accession takes place through natural means. Industrial
accession, in turn, may take the form of either building, planting
or sowing. Natural accession, on the other hand, has four forms: (1)
alluvion, (2) avulsion; (3) change of course of river; and (4) formation
of islands.
With respect to movable property, accesion continua may either
be: (1) adjunction or conjunction, (2) commixtion or confusion, and
(3) specification. Adjunction or conjunction, in turn, may take place
by: (1) inclusion (engraftment), (2) soldadura (attachment); (3) tejido
(weaving); (4) pintura (painting); or (5) escritura (writing).
Section 1. — Right of Accession with Respect to

What is Produced by Property
Art. 441. To the owner belongs:

(1) The natural fruits;
(2) The industrial fruits;
(3) The civil fruits. (354)
Art. 442. Natural fruits are the spontaneous products of the soil, and
the young and other products of animals.
170 PROPERTY
Industrial fruits are those produced by lands of any kind through

cultivation or labor.
Civil fruits are the rents of buildings, the price of leases of lands
and other property and the amount of perpetual or life annuities or other
similar income. (355a)
Art. 443. He who receives the fruits has the obligation to pay the
expenses made by a third person in their production, gathering, and pres-
ervation. (356)
Art. 444. Only such as are manifest or born are considered as natu-
ral or industrial fruits.
With respect to animals, it is sufficient that they are in the womb of
the mother, although unborn. (357)
§ 41. Accesion Discreta

[41.1] Basic Rule
As defined, accesion discreta is the right of the owner to the
products of his property or to the fruits of the same. In our Civil Code, the
basic rule on accesion discreta is stated in Article 441, which provides
that “to the owner belongs: (1) the natural fruits, (2) the industrial fruits,
and (3) the civil fruits.”
[41.2] Exceptions to the Rule

The rule in Article 441 is not absolute inasmuch as there are
cases where the owner is not entitled to the fruits of his property. The
exceptions to the rule are the following:
(a) in usufruct
It is the essence of usufruct that the usufructuary199 is entitled not
only to the enjoyment of the property subject matter thereof but also to
its fruits. Thus, Article 566 of the New Civil Code provides:
“Art. 566. The usufructuary shall be entitled to all the

natural, industrial and civil fruits of the property in usufruct.
With respect to hidden treasure which may be found on the
land or tenement, he shall be considered a stranger.”
199
He is the person in whose favor the usufruct was constituted.
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(b) in lease of rural lands

In lease of rural land, the lessee is entitled to the natural and
industrial fruits of the thing leased while the lessor is entitled to civil
fruits in the form of the rent paid by the lessee.200
(c) in antichresis
By the contract of antichresis the creditor acquires the right to
receive the fruits of an immovable of his debtor, with the obligation to
apply them to the payment of the interest, if owing, and thereafter to the
principal of his credit.201
(d) in possession in good faith

According to Article 544 of the New Civil Code, a possessor in
good faith is entitled to the fruits received by him before his possession
is legally interrupted.
(e) fruits naturally falling

According to Article 681 of the New Civil Code, fruits naturally
falling upon adjacent land belong to the owner of the said land and not
to the owner of the tree.
[41.3] Kinds of Fruits

In our Civil Code, fruits are classified into: (1) natural; (2)
industrial, and (3) civil. It has been held that the term natural, industrial
and civil fruits are highly technical, and are authoritatively defined in
Article 442 of the Civil Code so that, therefore, there can be no question
as to the meaning which should be given them when they occur in a
decree entered by the court.202
[41.3.1] Natural Fruits

There are two kinds of natural fruits,203 namely: (a) the spontaneous
products of the soil — those that appear without the intervention of
human labor, such as the wild fruits in the forest, herbs, and common
200
Arts. 1654, 1676, par. 2, NCC.
201
Art. 2123, Civil Code.
202
Pamintuan v. Garcia, 39 Phil. 746.
203
Art. 442, par. 1, NCC.
172 PROPERTY
grass; and (b) the young and other products of animals, such as milk,
hair, wool, horn, hide, eggs, and animals dung or manure.
With respect to the natural fruit of the first kind, it is required that
the same must be spontaneous product of the soil. In other words, it is
necessary that there must be no human labor which has intervened in its
generation. If human labor intervenes in the production of the fruit, the
same is classified as an industrial fruit.
Trees which grew spontaneously on the soil and adhering thereto
are not considered as natural fruits in contemplation of the first
paragraph of Article 442 because they are themselves immovables.
Trees may, however, be exceptionally considered as fruits if they are
being exploited for an industry.204 In such a case, they are classified as
industrial fruits because human labor intervenes.
With regard to the natural fruit of the second kind, there may be a
situation where the young or offspring is a product of animals belonging
to different owners. Note that our Civil Code is silent with respect to
the ownership of the young if the male and female parents belonged
to different owners. There is no problem if the mating of the parent-
animals is agreed upon by their respective owners and they provided for
the ownership of the offspring. In the absence of any agreement to settle
the ownership of the offspring, the rule is that “the young belongs to the
owner of the female parent.” This is the rule enunciated by the Supreme
Court in the early case of US v. Caballero205 in consonance with the
express provisions of the Partidas based on the maxim partus sequitur
ventrem — the offspring follows the condition of the mother.206
[41.3.2] Industrial Fruits

Industrial fruits are those produced by lands of any kind through
cultivation or labor.207 Hence, for a fruit to be classified as an industrial
fruit, it must satisfy two requirements: (1) it is produced by the land; and
(2) it is produced through cultivation or labor. Both the natural fruits of
the first kind and industrial fruits are products of the land. They differ,
however, in the manner of their coming into existence. The former is
204
3 Manresa, 6th ed., p. 191.
205
25 Phil. 356 (1913).
206
Bouvier’s Law Dict., 1934 ed., p. 784.
207
OWNERSHIP
produced naturally and spontaneously by the soil; while the latter is

produced through cultivation or through human labor. Examples of
industrial fruits are the coffee beans in a coffee plantation; mango fruits
in a mango plantation; palay, corn or sugar cane produced by farmers.
By express provisions of the law, it is required that industrial fruits,
like natural fruits of the first kind, must come from the soil. Therefore,
manufactured products such as clothes, jeans, watches and cell phones,
although produced through human labor, are not considered industrial
fruits.208
[41.3.3] Civil Fruits

Civil fruits, under the Civil Code, refers to “rents of building, the
price of leases of lands and other property and the amount of perpetual
or life annuity or other similar income.”209 Civil fruits, therefore, are the
income or revenues derived from the property itself. Hence, a dividend,
whether in the form of cash or stock, is considered as civil fruit because
it is declared out of the profits of a corporation and not out of the capital
stock.210 But a bonus which is paid to the owner of a piece of land for
undertaking the risk of securing with his property a loan given to a
sugar central is not civil fruits of the mortgaged property since it is not
income derived from the property itself but a compensation for the risk
assumed by the owner.211
[41.4] Existence of Fruits, When Recognized

When does the law recognize the existence of fruits? This question
is answered by the provisions of Article 444 of the New Civil Code.
With respect to natural and industrial fruits, only those “manifest”
or “born” are considered as such.212 In relation to the offspring or young
of animals, they are deemed existing at the beginning of the maximum
period of gestation, this being the surest criterion of their existence in
the mother’s womb.213 Hence, the offspring is already considered as a
natural fruit even during the time that it is inside the womb of its mother
208
3 Manresa, 6th ed., 191-192.
209
210
Bachrach v. Seifert, 87 Phil. 483; Orozco v. Araneta, 90 Phil. 399.
211
Bachrach Motor Co. v. Talisay-Silay Milling Co., 56 Phil. 117.
212
213
3 Manresa, 6th ed., 199, cited in II Caguioa, Civil Code, 1966 ed., 78.
174 PROPERTY
so long as the latter’s pregnancy is already manifest or evident. In the

case of plants which produce only a single crop and then perish, they are
deemed manifest or existing from the time the seedlings appear on the
ground, without waiting for the grains to appear.214 As to plants and trees
that live for years and yield periodic fruits, the latter are not deemed
existing until they actually appear on the plants and trees.215
§ 42. Production Expenses

[42.1] Situation Contemplated in Article 443
Article 443 of the New Civil Code contemplates a situation where
the recipient of the fruits was not the same person who incurred the
expenses in connection with its production, gathering and preservation.
This may happen, for example, if the property was previously in the
possession of a possessor in bad faith and the latter incurred expenses in
connection with the production, gathering and preservation of the fruits
but subsequently the owner recovered possession of the property and
the possessor turned over to the owner such fruits he already gathered.
In such a situation, Article 443 provides that the recipient of the fruits
“has the obligation to pay the expenses made by a third person in their
production, gathering and preservation.” This rule is but proper in order
that no one may unjustly enrich himself at the expense of another.216
[42.2] Applicability of Article 443

Article 443 applies only when the fruits are already harvested and
gathered since the article refers to persons “who receives the fruits.”
Hence, the article does not apply to a situation where the fruits are still
pending. At the same time, the article refers to a recipient who did not
incur the expenses for the production, gathering and preservation of
the fruits. This may happen only if the property was previously in the
possession of a possessor bad in faith but not if the possessor was in
good faith. Under the Civil Code, a possessor in good faith is entitled to
the fruits received by him before his possession is legally interrupted.217
Hence, he cannot be compelled by the owner to return whatever fruits
214
Ibid.
215
Ibid.
216
3 Manresa, 6th ed., 196.
217
OWNERSHIP
he received prior to the interruption of his good faith. On the other

hand, the possessor in bad faith is required to reimburse to the legitimate
possessor the fruits received by him and those which the legitimate
possessor could have received.218 Such being the case, the provisions of
Article 443 finds application in a case where the true owner recovers
possession of the property from a possessor in bad faith who is required
by law to return to the owner not only the fruits he already received but
also the fruits which the owner could have received. This is confirmed
by the provisions of Article 549 of the New Civil Code which states
that while the possessor in bad faith is obligated to reimburse the
fruits received by him and those which the legitimate possessor could
have received, he is, at the same time, entitled to recover the expenses
mentioned in Article 443.
[42.3] Article 443 Does Not Apply To Pending Fruits

As discussed above, Article 443 does not apply to a situation
where the fruits are still pending. In a situation where the fruits are
still pending (or ungathered) at the time the owner recovers possession
from a possessor in bad faith, it is the provisions of Article 449 of the
New Civil Code that will apply. Under the provisions of Article 449, the
planter or sower in bad faith on the land of another loses what is planted
or sown. Except for the necessary expenses incurred for the preservation
of the land,219 the planter or sower in bad faith is not entitled to recover
any indemnity, including the expenses mentioned in Article 443.
[42.4] When Refundable

In order for the production expenses to be refundable, such expenses
must have the following characteristics: (1) that they are dedicated to
the annual production and not merely for purposes of improvement;
(2) that they be not superfluous, excessive or for luxury but rather
that they be commensurate with that required by the products.220 If the
foregoing requisites are complied with, the same must be refunded
by the recipient of the fruits to the one who incurred it irrespective of
whether the amount of the expenses far exceed the value of the fruits.
This must be the rule because Article 443 does not make any distinction
218
Art. 549, NCC.
219
Art. 452, NCC.
220
3 Manresa, 6th ed., 196-197, cited in II Caguioa, Civil Code, 1966 ed., 76.
176 PROPERTY
and because if the owner himself had made the expenses he would have
spent the same amount.221
Section 2. — Right of Accession with Respect to

Immovable Property
Art. 445. Whatever is built, planted or sown on the land of another
and the improvements or repairs made thereon, belong to the owner of
the land, subject to the provisions of the following articles. (358)
Art. 446. All works, sowing, and planting are presumed made by the
owner and at his expense, unless the contrary is proved. (359)
§ 43. Accesion Continua

As defined, accesion continua is the right of the owner to anything
which is incorporated or attached to his property, whether the attachment
is by reason of natural or artificial causes.222
As discussed in supra § 40.2, with respect to immovable property,
accesion continua is classified into either industrial accession or
natural accession. In industrial accession, the incorporation is caused
by the act of man while natural accession takes place independently of
the act of man.
[43.1] Presupposes Absence of Agreement

Accesion continua involves the union of two or more things
belonging to different owners in such a manner that they cannot be
separated from each other or from one another without causing a
substantial injury to any of the things involved. The application of the
law on accesion continua presupposes, however, the absence of any
agreement, whether express or implied, between or among the owners
of the different things involved. If there is such agreement before the
attachment or incorporation, the situation shall be governed primarily
by the agreement of the parties and secondarily by the pertinent law
on the matter — not by the law on accesion continua. In other words,
the law on accesion continua applies only to situations where there is a
controversy as to who shall be entitled to the resulting union of two or
221
II Caguioa, Civil Code, 1966 ed., 76.
222
Art. 440, NCC.
OWNERSHIP
more things belonging to different owners. It is not so applicable where

there is no such controversy.
[43.2] Basic Principles Governing Accesion Continua

Accesion continua is based on the following basic principles:
(1) That the union or attachment or the incorporation of two or
more things belonging to different owners to each other or to one another
must be such that they cannot be separated from each other or from
one another without causing a substantial physical or juridical injury to
any one, to some, or to all of the things involved. If such separation is
possible without injury, their respective owners retain their ownership
without effects on the others.
This principle is shown, for example, in Article 447 of the New
Civil Code where the owner of the materials is allowed to demand
for the removal of his materials in case the same can be done without
injury to the work constructed or without the plantings, constructions or
works being destroyed. If separation is indeed possible without injury,
there is no accesion continua. Hence, the owner of the materials retains
ownership over his property.
(2) That the accessory follows the principal (“accessio cedit
principali”). This means that the owner of the principal thing has the
right to claim ownership of the accessory thing and not vice versa.
This principle is shown, for example, in the provisions of Article 466
the New Civil Code which states that the owner of the principal thing
acquires the accessory whenever two movable things belonging to
different owners are, without bad faith, united in such a way that they
form a single object.
(3) That no one shall unjustly enrich himself at the expense of
another. In Article 466, for example, even if the owner of the principal
thing can appropriate the accessory thing that has been attached or
incorporated to his property, he must, nonetheless, pay for its value if
no bad faith intervenes on the part of the owner of the accessory thing.
(4) That good faith exonerates a person from punitive liability
and damages. He who acts in good faith may be held responsible for
his act, but he should not be penalized. In Article 447 of the New Civil
Code, for example, if the owner of the land made use of the materials of
178 PROPERTY
another in good faith, he can appropriate the materials upon payment of

its value but he is not liable to pay damages.
(5) That bad faith subjects a person to damages and other
unfavorable consequences. In Articles 449 and 451 of the New Civil
Code, for example, the builder in bad faith not only loses what he has
built without right to indemnity but is likewise liable to the owner of the
land for damages.
(6) That bad faith of one party neutralizes the bad faith of the
other and, therefore, both should be considered as having acted in good
faith. This principle is recognized for example in Article 453 of the
New Civil Code which states that “if there was bad faith not only on the
part of the person who built, planted or sowed on the land of another
but also on the part of the owner of such land, the rights of one and the
other shall be the same as though both had acted in good faith.”
A. INDUSTRIAL ACCESSION
§ 44. Industrial Accession

[44.1] Three Forms
Industrial accession may take the form of building, planting or
sowing.
(1) Building
The term building is a generic term for all architectural work
with roof, built for the purpose of being used as man’s dwelling, or
for offices, clubs, theaters, etc.223 The term, however, does not refer
to partitions, railings, counters, shelves and other fixtures made in
a building belonging to the owner of the land.224 This is because the
Spanish text of the provision uses the word “edificar” which means
to undertake the construction of an edifice such as a house, stable or
similar structure.225 While one may build a partition, door, window or
223
II Tolentino, Civil Code, 107, cited in Songcuya v. Mr. & Mrs. Lim, CA-G.R. No. 57357,
Aug. 31, 2006.
224
II Caguioa, Civil Code, 1966 ed., 83.
225
Id.
OWNERSHIP
even a chair or desk, it is improper to use the verb “edificar” to describe

the making of such partition, door, window, etc.226
(2) Planting and Sowing

Planting refers to trees, big or small, while sowing refers to crops
and plants caused by the scattering or strewing of seeds upon the soil.
The distinction between planting and sowing is material in applying
the second option available to the landowner in good faith under the
provisions of Article 448 of the New Civil Code. In Article 448, the
option of compelling the builder or the planter to pay the price of the
land is not available against the sower.
[44.2] Building, Planting or Sowing on One’s Own Land

Under the articles of the Civil Code on industrial accession by
edification on the principal land (Articles 445 to 456), such accession is
limited either to buildings erected on the land of another, or buildings
constructed by the owner of the land with materials owned by someone
else.227 Nowhere in these articles on industrial accession is there any
mention of the case of a landowner building on his own land with
materials owned by him.228 The reason for the omission is readily
apparent: recourse to the rules on accession is totally unnecessary and
inappropriate where the ownership of the land and of the materials used
to build thereon are concentrated on one and the same person.229 Even if
the law did not provide for accession, the landowner would necessarily
own the building, because he has paid for the materials and labor used
in constructing it.230 Thus, the Civil Code limits the cases of industrial
accession to those involving land and materials belonging to different
owners231 for in these cases a controversy arises as to the rights and
obligations of the parties to each other or to one another.
At any rate, in the absence of proof to the contrary, the law pre-
sumes that all works, sowing and planting are made by the owner and
226
Id., citing Lao Chit v. Security Bank & Trust Co., L-11028, April 17, 1959.
227
Gaboya v. Cui, 38 SCRA 85, 92 (1971).
228
Id.
229
Id.
230
Id.
231
Id.
180 PROPERTY
at his expense.232 Hence, the burden of proving that the works, sowing
and planting are not made by the landowner at his expense is incumbent
upon those who are alleging such fact. Hence, as a rule, “whatever is
built, planted or sown on the land of another and the improvements or
repairs made thereon, belonged to the owner of the land.”233 This rule,
however, is subject to the provisions of Articles 448 up to 456 upon
presentation of proof that the works, sowing or planting is not made by
the owner of the land nor made at his expense.
[44.3] Controversial Cases

In general, there are three possible persons involved in industrial
accession: (1) the landowner; (2) the builder, planter or sower; and (3)
the owner of the materials. As discussed in supra § 44.2, if these three
persons are merged into one, such that the landowner is at the same time
the builder, planter or sower with materials belonging to him, there is
no controversy since it is clear that whatever has been built, planted or
sown belonged to him. A controversy will arise only if the landowner is
not the builder, planter or sower nor the owner of the materials. Hence,
there are three possible controversial situations in industrial accession:
(1) When the landowner builds, plants or sows on his land but
using materials belonging to another;
(2) When a person builds, plants or sows on another’s land but
he made use of materials belonging to him; and
(3) When a person builds, plants or sows on another’s land but
he made use of materials belonging to another.
Art. 447. 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 indemni-
fied for damages. (360a)
232
Art. 446, NCC.
233
Art. 445, NCC.
OWNERSHIP
§ 45. Using Materials Belonging To Another

[45.1] Situation Contemplated in Article 447
Article 447 of the New Civil Code contemplates a situation where
the landowner, either personally or through the instrumentality of an
agent, makes plantings, constructions or works on his own land but he
made use of materials belonging to another person. In such a situation,
the following questions may arise: (1) Who can claim the ownership
of what has been built, planted or sown? (2) What are the rights and
obligations of the landowner and the owner of the materials as against
each other? These and other questions are addressed by the provisions
of Article 447.
[45.2] Determining the Legal Consequences
The legal effects of the situation contemplated in Article 447 shall
depend on the good faith or bad faith of the landowner in making use
of the materials belonging to a third person. Note that in this article, the
law presumes that the owner of the materials is in good faith because
the rights of the parties when the owner of the materials is in bad faith
are determined by the provisions of Article 455 of the Civil Code.
While Article 455 refers to a situation of building, planting or sowing
on another’s land with the materials belonging to another person,
there is no reason why the effects of the presence of good faith or bad
faith on the part of the owner of the materials should not be applied
to the situation contemplated in Article 447. Hence, if Article 447 is
interpreted in conjunction with the provisions of Article 455, we will
have the following possible scenarios:
(1) Both the landowner and the owner of the materials acted in
good faith;
(2) Both of them acted in bad faith;
(3) The owner of the materials acted in good faith while the
landowner acted in bad faith; and
(4) The owner of the materials acted in bad faith while the
landowner acted in good faith.
[45.2.1] Both Acted In Good Faith
As stated earlier, Article 447 presumes that the owner of the
materials is in good faith. Hence, where both the landowner and the
182 PROPERTY
owner of the materials acted in good faith, the legal effects of such
a situation are determined by the provisions of Article 447. Applying
the provisions of Article 447 and the principles governing accesion
continua, the following are the legal effects of a situation where both
parties acted in good faith:
[i] Since the one responsible for the attachment or incorporation
(the landowner) acted in good faith, he is exonerated from punitive
liability and damages.
[ii] Being the owner of the principal (the land) and following the
principle of accesio cedit principali, the land owner is given the right to
appropriate what has been built, planted or sown but with the obligation
to indemnify the owner for the value of the materials234 following the
principle that no person should unjustly enrich himself at the expense
of another.
Instead of appropriating the materials, can the landowner choose
to return the same to its owner? Article 447 grants the right to demand
for the removal and return of the materials only to the owner of the
materials if such removal can be done without injury to the work
constructed or without the plantings, constructions or works being
destroyed. Notwithstanding the fact that the same right is not expressly
granted to the landowner, it is believed, however, that the landowner
may likewise choose to return the materials to its owner if removal is
possible without causing injury to the work constructed or without the
plantings, constructions or works being destroyed. In such a situation,
there is really no accesion continua. As discussed in supra § 43.2, there
is accesion continua only if the union or attachment or the incorporation
of two or more things belonging to different owners to each other or
to one another is in such a way that they cannot be separated from
each other or from one another without causing substantial physical
or juridical injury to any one, to some, or to all of the things involved.
There being no accession, the provision of Article 447 limiting the
option of the landowner to the payment of the value of the materials
does not apply. On the contrary, there being no accession, the owners
of the things attached or joined retain ownership over their respective
properties.
234
Art. 447, NCC.
OWNERSHIP
[45.2.2] Both Acted In Bad Faith

Following the principle that the bad faith of one party is neutralized
by the bad faith of the other and, therefore, both should be considered as
having acted in good faith, the legal effects discussed in supra § 45.2.1
shall likewise apply in the present situation.
But what constitutes good faith or bad faith on the part of the
landowner and the owner of the materials in the situation contemplated
in Article 447? The landowner is considered to have acted in good faith
if he honestly believed that the materials were his at the time that he
made use of them. If he was aware that he had no right to make use
of the materials at the time that he made use of them, he is considered
to have acted in bad faith. On the part of the owner of the materials,
he is considered to have acted in good faith if he was not aware that
his materials were being used by the landowner at the time of the
construction, planting or work. He came to know of it only after the
materials have already been used by the landowner. If he knew at the
time of the construction, planting or work that his materials were being
used by another but he did not object thereto, he is considered to have
acted in bad faith.
[45.2.3] Landowner In Bad Faith; Owner of the Materials

In Good Faith
Again, this situation is governed by the provisions of Article 447.
Applying the provisions of Article 447 and the principles governing
accesion continua, the following are the legal effects of a situation
where the landowner acted in bad faith while the owner of the materials
was in good faith:
[i] Being in bad faith, the landowner is liable to the owner of the
materials for damages.235
[ii] Having acted in bad faith, the landowner shall also suffer
the other unfavorable consequences of his act, such that the law grants
the owner of the materials the options of either: (1) demanding for the
value of the materials, with a right to be indemnified for damages; or
(2) demanding for the removal of the materials “in any event” — even
235
Art. 447, NCC.
184 PROPERTY
if it will cause injury to the land or to the materials — with a right to be

indemnified for damages.236
[iii] The foregoing is without prejudice to the criminal liability
of the landowner for the unlawful taking and use of the materials of
another without the latter’s knowledge and consent.
[45.2.4] Landowner In Good Faith; Owner of the Materials

In Bad Faith
This situation is not governed by Article 447 since the latter article
presumes that the owner of the materials is in good faith. Instead, what
applies, by analogy, are the provisions of Articles 455 and 449 to the
effect that the owner of the materials who acted in bad faith loses his
materials without any right whatsoever and is furthermore liable to the
landowner for damages.
Pacific Farms, Inc. v. Esguerra

30 SCRA 684 (1969)
From 1956 to 1957, Carried Lumber Company sold and delivered lumber
and construction materials to the Insular Farms, Inc. which the latter used in
the construction of six buildings at its compound in Bolinao, Pangasinan.
For failure of Insular Farms to pay the full purchase price, Carried Lumber
instituted in October 1958 a civil case against Insular Farms for the recovery
of the unpaid balance. In 1961, the trial court rendered judgment in favor of
Carried Lumber. Insular Farms did not appeal. In 1962, Carried Lumber levied
upon six buildings in Bolinao, Pangasinan. At this point, Pacific Farms, Inc.
filed a third-party claim, asserting ownership over the levied buildings which
it had allegedly acquired from Insular Farms by virtue of a deed of absolute
sale executed sometime in March 1958. The sheriff proceeded, however, with
the public auction and eventually sold the buildings to Carried Lumber as the
highest bidder. Thereafter, Pacific Farms filed a complaint against Carried
Lumber and the sheriff for the nullification of the auction and for damages. The
trial court, after trial, rendered judgment annulling the levy and the certificate
of sale. Carried Lumber appealed from said judgment alleging, inter alia,
that there exists a materialman’s lien over the six buildings in its favor. In
resolving the controversy, the Supreme Court opted not to rule on the issue of
the materialman’s lien but applied by analogy the rules of accession, thus —
236
Art. 447, NCC.
OWNERSHIP
Article 447 of the Civil Code provides:
“The owner of the land who makes thereon personally or

through another, plantings, constructions or works with the materi-
als 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 dam-
ages.”
The above-quoted 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 paying for their value. 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 bui1dings
— has the corresponding right to recover the value of the unpaid
lumber and construction materials.
Well-established in jurisprudence is the rule that compensation
should be borne by the person who has been benefited by the
accession. 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.
186 PROPERTY
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.
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 pro-
vided for in Articles 546 and 548, or to oblige the one who built or planted
to pay the price of the land, and the one who sowed, the proper rent.
However, the builder or planter cannot be obliged to buy the land if its
value is considerably more than that of the building or trees. In such case,
he shall pay reasonable rent, if the owner of the land does not choose to
appropriate the building or trees after proper indemnity. The parties shall
agree upon the terms of the lease and in case of disagreement, the court
shall fix the terms thereof. (361a)
Art. 449. He who builds, plants or sows in bad faith on the land of
another, loses what is built, planted or sown without right to indemnity.
(362)
Art. 450. The owner of the land on which anything has been built,
planted or sown in bad faith may demand the demolition of the work,
or that the planting or sowing be removed, in order to replace things in
their former condition at the expense of the person who built, planted or
sowed; or he may compel the builder or planter to pay the price of the
land, and the sower the proper rent. (363a)
Art. 451. In the cases of the two preceding articles, the landowner is
entitled to damages from the builder, planter or sower. (n)
Art. 452. The builder, planter or sower in bad faith is entitled to reim-
bursement for the necessary expenses of preservation of the land. (n)
Art. 453. If there was bad faith, not only on the part of the person
who built, planted or sowed on the land of another, but also on the part of
the owner of such land, the rights of one and the other shall be the same
as though both had acted in good faith.
It is understood that there is bad faith on the part of the landowner
whenever the act was done with his knowledge and without opposition
on his part. (364a)
Art. 454. When the landowner acted in bad faith and the builder,
planter or sower proceeded in good faith, the provisions of Article 447
shall apply. (n)
OWNERSHIP
§ 46. Building With One’s Own Materials on the Land of Another

Articles 448 up to 454 of the New Civil Code contemplate a
situation where a person built, planted or sown on the land of another
but he made use of materials belonging to him. This is the second of the
controversial cases mentioned in supra § 44.3. In this situation, there are
actually two persons involved: (1) the landowner; and (2) the builder,
planter or sower (who is at the same time the owner of the materials). In
determining the legal effects of this situation, it is necessary to take into
consideration the good faith or bad faith of both parties. Such being the
case, there are four possible scenarios:
(1) Both the landowner and the builder, planter or sower (who
is at the same time the owner of the materials) acted in good
faith;
(2) Both of them acted in bad faith;
(3) The landowner acted in good faith while the builder, planter
or sower (who is at the same time the owner of the materials)
acted in bad faith; and
(4) The landowner acted in bad faith while the builder, planter
or sower (who is at the same time the owner of the materials)
acted in good faith.
§ 47. Both Acted In Good Faith

[47.1] Concept of Good Faith
[47.1.1] Good Faith of the Builder, Planter or Sower
Article 448 of the New Civil Code governs the situation where
both the landowner and the builder, planter or sower (who is at the
same time the owner of the materials) acted in good faith. However, this
article applies only when the builder, planter or sower believes he had
the right so to build, plant or sow because he thinks he owns the land
or believes himself to have a claim of title.237 To be deemed a builder
in good faith, it is essential that a person asserts title to the land on
which he builds, i.e., it is essential that he be a possessor in concept of
237
Floreza v. Evangelista, 96 SCRA 130, 136 (1980); citing Alburo v. Villanueva, 7 Phil.
277 (1907); Quemuel v. Olaes, 1 SCRA 1159 (1961); Racaza v. Susana Realty, Inc., 18 SCRA
1172 (1966).
188 PROPERTY
owner and that he be unaware that there exists in his title or mode of
acquisition any flaw which invalidates it.238
However, as already previously intimated, the concept of builder
in good faith or bad faith presupposes ownership in another.239 If a
person builds on his own land with his own materials, he is not merely
a builder in good faith — he is a builder-owner.
Pershing Tan Queto v. CA

148 SCRA 54 (1987)
In this case, a parcel of land was acquired by the spouses Juan and
Restituta Pombuena from the latter’s mother through onerous title (sale).
Thereafter, Juan filed for himself and his co-owner Restituta an application for
a Torrens title over the land. Subsequently, a decision was promulgated in the
cadastral proceedings pronouncing Juan (married to Restituta) as the owner of
the land. Some years after, a contract of lease over the land was entered into
between Pershing Tan Queto and Restituta (with the consent of Juan) for a
period of ten years. After the expiration of the lease, Juan and Restituta sued
Pershing for unlawful detainer. In the meantime, an Original Certificate of
Title was issued in the name of Juan (married to Restituta) as a consequence
of the cadastral case. During the pendency of the ejectment case, Juan entered
into a barter agreement with Pershing whereby the latter became the owner
of the leased premises, and the spouses Juan and Restituta in turn became the
owners of a parcel of land with improvements previously owned by Pershing.
Subsequently, Pershing constructed a concrete building on the property
previously owned by Juan and Restituta. The construction of the building was
without any objection on the part of Restituta. Later, however, Restituta sued
both Juan and Pershing for reconveyance of title over the disputed land, for the
annulment of the barter, and for recovery of the land with damages. One of the
issues that crop up in the case was whether Pershing is a builder in good faith
or in bad faith. The Supreme Court ruled that he is neither a builder in good
faith nor a builder in bad faith. The Court explained —
“(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,
Tan Queto nursed the belief that the lot was actually RESTlTUTA’s
(making him in bad faith), still RESTITUTA’s failure to prohibit
238
Mercado v. CA, 162 SCRA 75, 85 (1988); cited in Manotok Realty, Inc. v. Tecson, 164
SCRA 587, 592 (1988).
239
Pershing Tan Queto v. CA, 148 SCRA 54 (1987).
OWNERSHIP
him from building despite her knowledge that construction was

actually being done, makes her also in bad faith. The net resultant
of mutual bad faith would entitle TAN QUETO to the rights of a
builder in good faith (Art. 448, Civil Code), ergo, reimbursement
should be given him if RESTITUTA decides to appropriate the
building for herself (Art. 448, Civil Code).
However, as already previously intimated, 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. Certainly he is not merely a possessor
or builder in good faith (this phrase presupposes ownership in
another); much less is he a builder in bad faith. He is a builder-
possessor (jus possidendi) because he is the OWNER himself.
Please note that the Chapter on Possession (jus possessionis,
not jus possidendi) in the Civil Code refers to a possessor other
than the owner. 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. 526, Civil Code). But in either case there is a flaw or
defect. 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.”
Pleasantville Development Corporation v. CA

253 SCRA 10 (1996)
In this case, Edith Robillo purchased from Pleasantville Development
Corp. (PDC) a parcel of land designated as Lot 9, Phase II in Pleasantville
Subdivision, Bacolod City. In 1975, Eldred Jardinico bought the rights to the
lot from Robillo. At that time, lot 9 was vacant. Upon completing payments,
Jardinico secured from the Register of Deeds in 1978 title in his name. It
was then that he discovered that improvements had been introduced on lot
9 by Wilson Kee, who had taken possession thereof. It appears that in 1974,
Kee bought on installment lot 8 of the same subdivision from C.T. Toress
Enterprises, Inc. (CTTEI), the exclusive real estate agent of PDC. CCTEI
through its employee, accompanied Kee’s wife to inspect lot 8. Unfortunately,
the parcel of land pointed by CCTEI’s employee was lot 9. Thereafter, Kee
proceeded to construct his residence, a store, an auto repair shop and other
improvements on the lot. Is Kee a builder in good faith? The Supreme Court
answered in the affirmative. The Court held —
190 PROPERTY
“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. And as good faith is presumed, petitioner has the burden
of proving bad faith on the part of Kee.
At that time he built improvements on lot 8, Kee believed
that said lot was what he bought from petitioner. He was not aware
that the lot delivered to him was not lot 8. Thus, Kee’s good faith.
Petitioner failed to prove otherwise.”
Baltazar v. Caridad
17 SCRA 460 (1966)
In this case, the trial court rendered a decision in a cadastral proceeding
awarding Lot No. 8864 to spouses Julio Baltazar and Constancia Valencia
as their conjugal partnership property. Said decision having become final,
the corresponding decree was issued on July 12, 1941, and pursuant thereto,
said lot was registered in the names of the applicant spouses under Original
Certificate of Title No. O-1445. In the meanwhile, Julio Baltazar died. In 1961,
his surviving wife and children filed a motion in the cadastral case for writ
of possession against Silvina Caridad and her daughter, Eduarda Caridad,
who had been in possession of the southern portion of Lot No. 8864 since
1939, while the cadastral case involving the lot was pending before the trial
court, and before the decision and the corresponding decree issued in 1941.
The Caridads refused to remove their houses from the southern portion of Lot
No. 8864 insisting that they are builders in good faith and, as such, they are
accorded rights under article 448 of the new Civil Code. The houses were built
in 1958 and 1959. In debunking the contention of the Caridads’, the Court
explained —
“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. Good faith
must rest on a colorable right in the builder, beyond a mere
stubborn belief in one’s title despite judicial adjudication. The
fact that in 1959 appellants demolished and replaced their old house
with new and bigger ones cannot enervate the rights of the registered
owners. Otherwise, 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.”
OWNERSHIP
[47.1.2] A Lessee Is Not A Builder In Good Faith

Article 448 applies only to a case where one builds on land in the
belief that he is the owner thereof and it does not apply where one’s
only interest in the land is that of a lessee under a rental contract.240 As
ruled by the Court in Lopez, Inc. v. Phil. and Eastern Trading Co.,241
the principle of possessor in good faith refers only to a party who
occupies or possess property in the belief that he is the owner thereof
and said good faith ends only when he discovers a flaw in his title so
as to reasonably advise or inform him that after all he may not be the
legal owner of said property. It cannot apply to a lessee because as
such lessee he knows that he is not the owner of the leased premises.
Neither can he deny the ownership or title of his lessor. A lessee who
introduces improvements in the leased premises, does so at his own risk
in the sense that he cannot recover their value from the lessor, much less
retain the premises until such reimbursement.242
In a plethora of cases,243 the Supreme Court has held that Article
448 of the New Civil Code, in relation to Article 546 of the same Code,
which allows full reimbursement of useful improvements and retention
of the premises until reimbursement is made, applies only to a possessor
in good faith, i.e., one who builds on land with the belief that he is the
owner thereof. It does not apply where one’s only interest is that of
a lessee under a rental contract; otherwise, it would always be in the
power of the tenant to “improve” his landlord out of his property.244
The law applicable to the lessee who introduced improvement
on the leased premises is Article 1678 of the New Civil Code, which
provides:
“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
240
Bulacanag v. Francisco, 122 SCRA 498, 502 (1983).
241
98 Phil. 348.
242
Bulacanag v. Francisco, supra.
243
Alburo v. Villanueva, 7 Phil. 277, 280 (1907) (referring to the provisions of the Old Civil
Code); Racaza v. Susana Realty, Inc., supra note 17, at 1177-1178; Bulacanag v. Francisco, Ibid.;
Gabrito v. Court of Appeals, 167 SCRA 771, 778-779 (1988); Cabangis v. Court of Appeals, 200
SCRA 414, 419-421 (1991); Heirs of the late Jaime Binuya v. Court of Appeals, 211 SCRA 761,
766 (1992).
244
Geminiano v. CA, 259 SCRA 344 (1996).
192 PROPERTY
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 caused to the
principal thing, and the lessor does not choose to retain them
by paying their value at the time the lease is extinguished.”
This article gives the lessor the option to appropriate the useful
improvements by paying one-half of their value, and the lessee
cannot compel the lessor to appropriate the improvements and make
reimbursement, for the lessee’s right under the law is to remove the
improvements even if the leased premises may suffer damage thereby.
But he shall not cause any more damage upon the property than is
necessary.245 A lessee, in order to be entitled to one half the value of the
improvements introduced by him in the leased premises, or to remove
them should the lessor refuse to reimburse the half value thereof, must
show that the same were introduced in good faith; are useful; suitable
to the use for which the lease is intended without altering the form and
substance of the premises.246
Geminiano v. Court of Appeals

259 SCRA 344 (1996)
In this case, Lot No. 3765-B-1 was originally owned by the petitioners’
mother, Paulina Geminiano. On a portion of the said lot stood the petitioners’
unfinished bungalow which they sold in 1978 to Dominador and May Nicolas.
Subsequently, the petitioners’ mother subsequently executed a contract of lease
over a 126 square meter portion of the lot, including that portion on which the
house stood, in favor of Dominador and Mary Nicolas (private respondents)
for a period of seven years commencing on November 15, 1978. The Nicolases
then introduced additional improvements and registered the house in their
245
Ibid.
246
Imperial Insurance, Inc. v. Simon, 14 SCRA 855.
OWNERSHIP
names. After the expiration of the lease in 1985, the petitioners’ mother refused
to accept the monthly rentals. It turned out that the lot in question was the
subject of a suit, which resulted in its acquisition by one Maria Lee in 1972.
In 1982, Lee sold the lot to Lily Salcedo, who in turn sold it in 1984 to the
spouses Agustin and Ester Dionisio. In 1992, the Dionisio spouses executed a
Deed of Quitclaim over the said property in favor of the petitioners. As such,
the lot was registered in the latter’s names. In 1993, the petitioners filed an
ejectment case against Mary Nicolas. The issue in this case is whether the
lessees were builders in good faith and entitled to reimbursement of the value
of the houses and improvements. The Supreme Court ruled in the negative. The
Court explained —
Being mere lessees, the private respondents knew that their

occupation of the premises would continue only for the life of the
lease. Plainly, they cannot be considered as possessors nor builders
in good faith.
In a plethora of cases (Alburo v. Villanueva, 7 Phil. 277, 280
[1907] referring to the provisions of the Old Civil Code; Racaza
v. Susana Realty, Inc., supra., note 17, at 1177-1178; Bulacanag
v. Francisco, 122 SCRA 498, 502 [1983]; Gabrito v. Court of
Appeals, 167 SCRA 771, 778 779 [1988]; Cabangis v. Court of
Appeals, 200 SCRA 414, 419-421 [1991]; Heirs of the late Jaime
Binuya v. Court of Appeals, 211 SCRA 761, 766 [1992]), this Court
has held that Article 448 of the Civil Code, in relation to Article
546 of the same Code, which allows full reimbursement of useful
improvements and retention of the premises until reimbursement
is made, applies only to a possessor in good faith, i.e., one who
builds on land with the belief that he is the owner thereof. It does
not apply where one’s only interest is that of a lessee under a rental
contract; otherwise, it would always be in the power of the tenant
to “improve” his landlord out of his property.
Anent the alleged promise of the petitioners to sell the lot
occupied by the private respondents’ house, the same was not
substantiated by convincing evidence. 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. And even if the
petitioners indeed promised to sell, 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. 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. The first thing that the private respondents
194 PROPERTY
should have done was to reduce the alleged promise into writing,
because under Article 1403 of the Civil Code, an agreement for the
sale of real property or an interest therein is unenforceable, unless
some note or memorandum thereof be produced. Not having taken
any steps in order that the alleged promise to sell may be enforced,
the private respondents cannot bank on that promise and profess
any claim nor color of title over the lot in question.
There is no need to apply by analogy the provisions of Article
448 on indemnity as was done in Pecson v. Court of Appeals (244
SCRA 407 [1995]), because the situation sought to be avoided and
which would justify the application of that provision, is not present
in this case. Suffice it to say, “a state of forced co-ownership” would
not be created between the petitioners and the private respondents.
For, as correctly pointed out by the petitioners, 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.
It must be stressed, however, that the right to indemnity
under Article 1678 of the Civil Code arises only if the lessor opts
to appropriate the improvements. Since the petitioners refused to
exercise that option, the private respondents cannot compel them
to reimburse the one-half value of the house and improvements.
Neither can they retain the premises until reimbursement is
made. The private respondents’ sole right then is to remove the
improvements without causing any more impairment upon the
property leased than is necessary.
Sps. Lacap v. Ong Lee

G.R. No. 142131, December 11, 2002
In this case, a certain Facundo mortgaged two parcels of land to Monte
de Piedad Savings Bank. In 1981, the spouses Lacap assumed to pay Facundo’s
mortgage obligation to the bank. Due to their failure to pay their obligation to
the bank, the latter foreclosed on the mortgage. During the auction sale, the
bank emerged as the highest bidder and title passed on to it. The bank, however,
allowed the spouses to stay in the premises as lessees paying a monthly rental.
The spouses thereafter introduced improvements thereon after relying on the
bank’s assurance that the property would be sold back to them. In 1996, when
the spouses tried to pay their monthly rental, the bank refused to accept the
payment inasmuch as the property had already been sold to another person.
When the spouses offered to buy the property, the bank turned down their offer.
Sometime thereafter, the spouses received a letter demanding that they vacate
OWNERSHIP
the premises because it was already owned by Ong Lee. The spouses instituted
a civil case against Ong Lee for cancellation of sale and damages. Ong Lee,
on the other hand, filed a complaint for unlawful detainer. May the spouses be
considered as a builder in good faith pursuant to Article 448 of the Civil Code?
The Supreme Court said no. The Court explained —
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. 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
196 PROPERTY
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 quo conclusive on us in this petition for review.
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. 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.
[47.1.3] As A Rule, Art. 448 Cannot Apply To A Co-Owner

Article 448 of the New Civil Code cannot apply where a co-owner
builds, plants or sows on the land owned in common for then he did
OWNERSHIP
not build, plant or sow upon land that exclusively belongs to another
but of which he is a co-owner. The co-owner is not a third person
under the circumstances, and the situation is governed by the rules of
co-ownership.247 However, when the co-ownership is terminated by a
partition and it appears that the house of an erstwhile co-owner has
encroached upon a portion pertaining to another co-owner which was
however made in good faith, then the provisions of Article 448 should
apply to determine the respective rights of the parties.248
Spouses Del Campo v. Abesia

160 SCRA 379 (1988)
This case involves a parcel of land co-owned by the plaintiffs and
defendants in the proportion of 2/3 and 1/3 each, respectively. An action for
partition was filed by plaintiffs in the CFI of Cebu. The trial court appointed
a commissioner in accordance with the agreement of the parties. The said
commissioner conducted a survey, prepared a sketch plan and submitted a
report to the court, recommending that the property be divided into two lots:
lot 1161-A with an area of 30 square meters for plaintiffs and lot no-1161-B
for the defendants with an area of 15 square meters. The houses of plaintiffs
and defendants were surveyed and shown on the sketch plan. The house of
defendants occupied the portion of lot 1161-A of plaintiffs. 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. The trial court thereafter rendered a
decision which states that since Article 448 cannot be applied to a case where
one has built, planted or sown on the land owned in common, the defendants
should remove and demolish, at their expense, the part of their house which
encroached upon the land of the plaintiffs. The defendants appealed from said
decision. On appeal, the Supreme Court held that Article 448 of the Civil Code
is applicable. The Court explained —
The court a quo correctly held that Article 448 of the Civil
Code cannot apply where a co-owner builds, plants or sows on the
land owned in common for then he did not build, plant or sow upon
land that exclusively belongs to another but of which he is a co-
owner. The co-owner is not a third person under the circumstances,
and the situation is governed by the rules of co-ownership.
247
Spouses Del Campo v. Abesia, 160 SCRA 379, 382 (1988).
248
Ignao v. IAC, 193 SCRA 17, 23 (1991); Sps. Del Campo v. Abesia, supra.
198 PROPERTY
However, when, as in this case, the co-ownership is terminated

by the partition and it appears that the house of defendants overlaps
or occupies a portion of 5 square meters of the land pertaining to
plaintiffs which the defendants obviously built in good faith, then
the provisions of Article 448 of the New Civil Code should apply.
Manresa and Navarro Amandi agree that the said provision of the
Civil Code may apply even when there was co-ownership if good
faith has been established.
Applying the aforesaid provision of the Civil Code, the
plaintiffs have the right to appropriate said portion of the house of
defendants upon payment of indemnity to defendants as provided
for in Article 546 of the Civil Code. Otherwise, the plaintiffs may
oblige the defendants to pay the price of the land occupied by their
house. However, if the price asked for is considerably much more
than the value of the portion of the house of defendants built thereon,
then the latter cannot be obliged to buy the land. The defendants
shall then pay the reasonable rent to the plaintiffs upon such terms
and conditions that they may agree. In case of disagreement, the
trial court shall fix the terms thereof. Of course, defendants may
demolish or remove the said portion of their house, at their own
expense, if they so decide.
WHEREFORE, the decision appealed from is hereby
MODIFIED by ordering plaintiffs to indemnify defendants for the
value of the said portion of the house of defendants in accordance
with Article 546 of the Civil Code, if plaintiffs elect to appropriate
the same. Otherwise, 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, 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. In case of disagreement, the
rate of rental shall be determined by the trial court. Otherwise,
defendants may remove or demolish at their own expense the said
portion of their house.
Ignao v. IAC
193 SCRA 17 (1991)
In this case, Florencio Ignao and his uncles, Juan Ignao and Isidro Ignao,
were co-owners of a parcel of land with an area of 534 square meters. Pursuant
to an action for partition, the CFI of Cavite in 1975 directed the partition of the
OWNERSHIP
aforesaid land, allotting 133.5 square meters or 2/8 thereof to Juan and Isidro,
and giving the remaining portion with a total area of 266.5 square meters
to Florencio. However, no actual partition was effected. In 1978, Florencio
instituted a complaint for recovery of possession of real property against Juan
and Isidro alleging that the area occupied by the two houses built by Juan and
Isidro exceeded the 133.5 square meters previously allotted to them by the trial
court. When the property was surveyed upon the agreement of the parties, it
was disclosed that the house of Juan occupied 42 square meters while that of
Isidro occupied 59 square meters of Florencio’s land or a total of 101 square
meters. The trial court applied article 448 of the Civil Code in resolving the
conflicting rights of the parties, which decision was affirmed by the Court of
Appeals. Florencio appealed to the Supreme Court contending that the CA
erred in applying Article 448 of the Civil Code since this article contemplates
a situation wherein the land belongs to one person and the thing built, sown or
planted belongs to another. In holding that Article 448 applies in this particular
case, the Supreme Court explained —
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 v.
Abesia (160 SCRA 379 [1988]) wherein the Court ruled that:
“The court a quo correctly held that Article 448
of the Civil Code cannot apply where a co-owner
builds, plants or sows on the land owned in common
for then he did not build, plant or sow upon land that
exclusively belongs to another but of which he is a
co-owner. The co-owner is not a third person under
the circumstances, and the situation is governed by the
rules of co-ownership.
“However, when, as in this case, the ownership
is terminated by the partition and it appears that the
home of defendants overlaps or occupies a portion
of 5 square meters of the land pertaining to plaintiffs
which the defendants obviously built in good faith,
then the provisions of Article 448 of the New Civil
Code should apply. 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.’’
In other words, 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
200 PROPERTY
was however made in good faith, then the provisions of Article 448
should apply to determine the respective rights of the parties.
Petitioner’s second assigned error is however well taken.
Both the trial court and the Appellate Court erred when they
peremptorily adopted the “workable solution” in the case of Grana
v. Court of Appeals (109 Phil. 260), and ordered the owner of the
land, petitioner Florencio, to sell to private respondents, Juan and
Isidro, the part of the land they intruded upon, thereby depriving
petitioner of his right to choose. Such ruling contravened the
explicit provisions of Article 448 to the effect that “(t)he owner
of the land xxx shall have the right to appropriate xxx or to oblige
the one who built xxx to pay the price of the land xxx.” The law
is clear and unambiguous when it confers the right of choice upon
the landowner and not upon the builder and the courts.
Thus, in Quemuel v. Olaes (1 SCRA 1159 [1961]), 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.
As to the third assignment of error, 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.
WHEREFORE, 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, or sell to private respondents the 101 square meters occupied
by them at such price as may be agreed upon. Should the value of
the land exceed the value of the portions of the houses that private
respondents have erected thereon, 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. In case of disagreement, the rate of rental and other terms of
the lease shall be determined by the trial court. Otherwise, private
respondents may remove or demolish at their own expense the said
portions of their houses encroaching upon petitioner’s land.
OWNERSHIP
[47.1.4] Art. 448 Made Applicable Under Peculiar Circum-

stances
In Sarmiento v. Agana,249 the Supreme Court, deviating from the
general rule that Article 448 applies only when a builder builds in the
concept of an owner, ruled that the Valentino spouses were builders
in good faith in view of the peculiar circumstances under which they
constructed their residential house. As far as the couple knew, the land
was owned by the husband’s mother-in-law who, having stated they
could build on the property, could reasonably be expected to later on
give them the land. It turned out that the land had been titled in the name
of another person. The Supreme Court, however, applied in this case the
provisions of Article 448.
In Macasaet v. Macasaet,250 the Court also held that the children
have the right to be indemnified for the useful improvements constructed
in good faith on a lot owned by the parents, applying the provisions of
Article 448. In this case, the parents invited their children to occupy the
formers’ lots, out of parental love and desire to foster family solidarity.
Because of that invitation, the children constructed their residential
house on the property. Unfortunately, an unresolved conflict terminated
this situation and out of pique, the parents asked the children to vacate
the premises. Deviating again from the general rule that Article 448
applies only when a builder builds in the concept of an owner, the Court
held that the children were builders in good faith.
The Macasaet case is factually similar to Javier v. Javier.251 In
that case, the Court deemed the son to be in good faith for building the
improvement (the house) with the knowledge and consent of his father,
to whom belonged the land upon which it was built. Thus, Article 448
(then Article 361 of the Old Civil Code) was applied.
Ordinarily, Article 448 does not apply to a case where the owner of
the land is the builder, sower or planter who then later loses ownership
of the land by sale or donation,252 for then there can be no question as
to good or bad faith on the part of the builder.253 In the case of Pecson v.
249
129 SCRA 122 (1984).
250
439 SCRA 625.
251
7 Phil. 261 (1907).
252
Pecson v. CA, 244 SCRA 407 (1995).
253
Colengco v. Regalado, 92 Phil. 387, 395 (1952).
202 PROPERTY
Court of Appeals,254 however, the Court applied by analogy the provision

of Article 448 on indemnity to a builder who loses ownership of his
land when the same was auctioned off by a local government unit for
failure of the landowner to pay the real estate taxes.
Pecson v. Court of Appeals

244 SCRA 407 (1995)
In this case, Pedro Pecson was the owner of a commercial lot located
in Kamias Street, Quezon City, on which he built a four-door two-storey
apartment building. For his failure to pay realty taxes, the lot was sold at public
auction by the City Treasurer of Quezon City to Mamerto Nepomuceno whoin
turn sold it in 1983 to the spouses Juan and Erlinda Nuguid. Pecson challenged
the validity of the auction sale. The trial court dismissed the complaint but
held that the apartment building was not included in the auction sale. Both
parties appealed. The Court of Appeals, on the other hand, affirmed in toto
the decision of the trial court. When the decision became final, the spouses
Nuguid filed with the trial court a motion for the delivery of possession of the
lot and the apartment building citing Article 546 of the Civil Code. The trial
court granted the motion. Pecson elevated the matter to the CA in a special
civil action for certiorari. The Court of Appeals affirmed in part the order of
the trial court citing Article 448 of the Civil Code. Aggrieved by the decision
of the CA, Pecson went to the Supreme Court on appeal. The parties agree that
Pecson 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. The key
issue in this case is the application of Articles 448 and 546 of the Civil Code.
The Court held —
By its clear language, Article 448 refers to a land whose

ownership is claimed by two or more parties, one of whom has
built some works, or sown or planted something. The building,
sowing or planting may have been made in good faith or in bad
faith. The rule on good faith laid down in Article 526 of the Civil
Code shall be applied in determining whether a builder, sower or
planter had acted in good faith.
Article 448 does not apply to a case where the owner of the
land is the builder, sower, or planter who then later loses ownership
of the land by sale or donation. This Court said so in Coleongco v.
Regalado (92 Phil. 387, 395 [1952]):
254
Supra.
OWNERSHIP
Article 361 of the old Civil Code is not applicable in this

case, for Regalado constructed the house on his own land before
he sold said land to Coleongco. Article 361 applies only in cases
where a person constructs a building on the land of another in good
or in bad faith, as the may be. It does not apply to a case where a
person constructs a building on his own land, for then there can be
no question as to good or bad faith on the part of the builder.
Elsewise stated, where the true owner himself is the builder
of works on his own land, the issue of good faith or bad faith is
entirely irrelevant.
Thus in strict point of law, Article 448 is not apposite to the
case at bar. Nevertheless, we believe that the provision therein on
indemnity may be applied by analogy considering that the primary
intent of Article 448 is to avoid a state of forced co-ownership
and that the parties, including the two courts below, in the main
agree that Articles 448 and 546 of the Civil Code are applicable
and indemnity for the improvements may be paid although they
differ as to the basis of the indemnity.
Article 546 does not specifically state how the value of the
useful improvements should be determined. The respondent court
and the private respondents espouse the belief that the cost of
construction of the apartment building in 1965, and not its current
market value, is sufficient reimbursement for necessary and useful
improvements made by the petitioner. This position is, however,
not in consonance with previous rulings of this Court in similar
cases. In Javier v. Concepcion, Jr. (94 SCRA 212 [1979]), this
Court pegged the value of the useful improvements consisting
of various fruits, bamboos, a house and camarin made of strong
material based on the market value of the said improvements. In
Sarmiento v. Agana (129 SCRA 122 [1984]), despite the finding
that the useful improvement, a residential house, was built in
1967 at a cost of between Eight thousand pesos (P8,000.00) to
Ten thousand pesos (P10,000.00), the landowner was ordered
to reimburse the builder in the amount of Forty thousand pesos
(P40,000.00), the value of the house at the time of the trial. In the
same way, the landowner was required to pay the “present value”
of the house, a useful improvement, in the case of De Guzman v.
De la Fuente (55 Phil. 501 [1930]), cited by the petitioner.
The objective of Article 546 of the Civil Code is to adminis-
ter justice between the parties involved. In this regard, this Court
had long ago stated in Rivera v. Roman Catholic Archbishop of
204 PROPERTY
Manila (40 Phil. 717 [1920]) that the said provision was formu-
lated in trying to adjust the rights of the owner and possessor in
good faith of a piece of land, 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. Guided by this pre-
cept, it is therefore the current market value of the improvements
which should be made the basis of reimbursement. 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. Consequently,
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 reimburse-
ment to be paid by the landowner.
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. Since the private respondents have opted to
appropriate the apartment building, the petitioner is thus entitled to
the possession and enjoyment of the apartment building, until he is
paid the proper indemnity, as well as of the portion of the lot where
the building has been constructed. This is so because the right to
retain the improvements while the corresponding indemnity is not
paid implies the tenancy or possession in fact of the land on which
it is built, planted or sown. The petitioner not having been so paid,
he was entitled to retain ownership of the building and, necessarily,
the income therefrom.
It follows, too, that the Court of Appeals erred not only in
upholding the trial court’s determination of the indemnity, but also
in ordering the petitioner to account for the rentals of the apartment
building from 23 June 1993 to 23 September 1993.
WHEREFORE, the decision of the Court of Appeals in CA-
G.R. SP No. 32679 and the Order of 15 November 1993 of the
Regional Trial Court, Branch 101, Quezon City in Civil Case No.
Q-41470 are hereby SET ASIDE.
The case is hereby remanded to the trial court for it to deter-
mine the current market value of the apartment building on the lot.
For this purpose, the parties shall be allowed to adduce evidence
on the current market value of the apartment building. The value
so determined shall be forthwith paid by the private respondents
to the petitioner otherwise the petitioner shall be restored to the
OWNERSHIP
possession of the apartment building until payment of the required

indemnity.
Sarmiento v. Agana
129 SCRA 122 (1984)
While Ernesto Valentino was still courting his wife, Rebecca, the latter’s
mother had told him the couple could build a residential house on a certain lot
of a subdivision in Parañaque. Assuming that the wife’s mother was the owner
of the land, Ernesto did construct a house on the said land in 1967 at a cost of
P8,000 to P10,000. It turned out that the land had been titled in the name of
Mr. & Mrs. Jose Santos, Jr., who in 1974, sold the same to Leonila Sarmiento.
In 1975, Sarmiento asked the spouses Valentino to vacate the land. Thereafter,
Sarmiento filed an ejectment case against the spouses. The Municipal Court
found that the spouses Valentino had built the house in good faith and that it
had a value of P20,000.00. It then ordered the spouses to vacate after Sarmiento
has paid them the mentioned sum of P20,000.00. On appeal, the CFI of Pasay
modified the decision pursuant to Article 448 of the Civil Code. Sarmiento
was required, within 60 days, to exercise the option to reimburse the spouses
Valentino the sum of P40,000.00 as the value of the residential house, or the
option to allow them to purchase the land for P25,000.00. Sarmiento did not
exercise any of the two options within the indicated period, and Ernesto was
then allowed to deposit the sum of P25,000.00 with the court as the purchase
price for the land. Subsequently, Sarmiento questioned the action of the court.
(1) Are the spouses Valentino builders in good faith?
The Supreme Court ruled in the affirmative. The Court said — “We agree
that ERNESTO and wife are builders in good faith in view of the peculiar
circumstances under which they had constructed the RESIDENTIAL HOUSE.
As far as they knew, the LAND was owned by ERNESTO’s mother-in-law
who, having stated they could build on the property, could reasonably expected
to later on give them the LAND.”
(2) Can Sarmiento refuse either to pay for the building or to sell the
land and insist on the removal of the building?
NO. “The owner of the building erected in good faith on a land owned by
another, is entitled to retain the possession of the land until he is paid the value
of his building, under Article 453 (now Article 546). The owner of the land,
upon the other hand, has the option, under Article 361 (now Article 448), either
to pay for the building or to sell his land to the owner of the building. But he
cannot, as respondents did here, refuse both to pay for the building and to sell
the land and compel the owner of the building to remove it from the land where
it is erected. He is entitled to such remotion only when, after having chosen to
sell his land, the other party fails to pay for the same.
206 PROPERTY
[47.1.5] Art. 448 Can Be Invoked By Successor-In-Interest

In the case of Technogas Philippines Manufacturing Corp. v.
Court of Appeals,255 Technogas was allowed to invoke the benefits of
Article 448 of the New Civil Code, i.e., to compel the landowner to
make a choice between two options: (1) to appropriate the building by
paying the indemnity required by law, or (2) sell the land to the builder,
although it is not the builder of the buildings and/or improvements but
merely acquired the same, by sale, from the builder in good faith.
Technogas Philippines Manufacturing Corp. v. CA

268 SCRA 5 (1997)
In 1970, Technogas purchased a parcel of land, with all the buildings
and improvements including the wall existing thereon, from Pariz Industries,
Inc. Eduardo Uy, on the other hand, owns the adjoining parcel of land which
he acquired from a certain Enrile Antonio in 1970. In 1971, Uy purchased
another lot also adjoining Technogas’ land from a certain Miguel Rodriguez.
It turned out that portions of the buildings and wall bought by Technogas are
occupying portions of Uy’s adjoining land. Upon learning of the encroachment,
Technogas offered to buy from Uy that particular portion of Uy’s land occupied
by portions of its buildings and wall. Uy, however, refused the offer. Technogas
filed an action in court to compel Uy to sell the portions of Uy’s land occupied
by its buildings and wall.
(1) Can the benefit of Article 448 of the Civil Code be invoked by
Technogas even if it is not the builder of the offending structures but merely
possessors of the same as buyers?
The Supreme Court ruled in the affirmative. Said the Court —
The question, however, is whether the same benefit can be

invoked by petitioner who, as earlier stated, is not the builder of
the offending structures but possesses them as buyer.
We answer such question in the affirmative.
In the first place, there is no sufficient showing that petitioner
was aware of the encroachment at the time it acquired the property
from Pariz Industries. We agree with the trial court that various
factors in evidence adequately show petitioner’s lack of awareness
thereof. In any case, contrary proof has not overthrown the
255
268 SCRA 5 (1997).
OWNERSHIP
presumption of good faith under Article 527 of the Civil Code,

as already stated, taken together with the disputable presumptions
of the law on evidence. These presumptions state, under Section
3(a) of Rule 131 of the Rules of Court, that the person is innocent
of a crime or wrong; and under Section 3(ff) of Rule 131, that
the law has been obeyed. In fact, private respondent Eduardo Uy
himself was unaware of such intrusion into his property until after
1971 when he hired a surveyor, following his purchase of another
adjoining lot, to survey all his newly acquired lots. Upon being
apprised of the encroachment, petitioner immediately offered
to buy the area occupied by its building — a species of conduct
consistent with good faith.
In the second place, upon delivery of the property by Pariz
Industries, as seller, to the petitioner, as buyer, the latter acquired
ownership of the property. Consequently and as earlier discussed,
petitioner is deemed to have stepped into the shoes of the seller
in regard to all rights of ownership over the immovable sold,
including the right to compel the private respondent to exercise
either of the two options provided under Article 448 of the Civil
Code.”256
(2) Uy contends that Technogas cannot be considered in good faith
because as landowner, it is presumed to know the metes and bounds of its own
property? Is the contention correct?
The Supreme Court said no. Bad faith cannot be imputed to a registered
owner of land when a part of his building encroaches upon a neighbor’s land
simply because he is supposedly presumed to know the boundaries of his land
as prescribed in his certificate of title. Unless one is versed in the science of
surveying, “no one can determine the precise extent or location of his property
by merely examining his paper title.”257
(3) May Technogas lose its rights under Article 448 on the basis merely
of the fact that some years after acquiring the property in good faith, it learned
about and recognized the right of Uy to a portion of the land occupied by its
buildings?
NO. “The supervening awareness of the encroachment by (Technogas)
does not militate against its right to claim the status of a builder in good faith.
In fact, a judicious reading of said Article 448 will readily show that the
landowner’s exercise of his option can only take place after the builder shall
256
At p. 17.
257
At pp. 14-15.
208 PROPERTY
have come to know of the intrusion — in short, when both parties shall have
become aware of it. Only then will the occasion for exercising the option arise,
for it is only then that both parties will have been aware that a problem exists
in regard to their property rights.”
[47.2] Good Faith of the Landowner

The landowner, on the other hand, is said to have acted in good
faith if he did not know or was not aware that something was being
built, planted or sown on his land; he learned of it only after the act
was done. This is clear from the provisions of the second paragraph of
Article 453 of the New Civil Code which states “it is understood that
there is bad faith on the part of the landowner whenever the act was
done with his knowledge and without opposition on his part.”
[47.3] Legal Effects Where Both Parties Are In Good Faith

What then are the legal effects of a situation where both the
landowner and the builder, planter or sower (who is at the same time the
owner of the materials) acted in good faith? Article 448 governs such a
situation. Under Article 448, the landowner, as owner of the principal
thing, is given two alternative rights: (1) to appropriate as his own the
works, sowing or planting after payment to the builder, planter or sower
of the necessary and useful expenses, and in the proper cases, expenses
for pure luxury or mere pleasure, incurred by the latter; or (2) to oblige
the one who built or planted to pay the price of the land, if the value of
the land is not considerably more than that of the building or trees, and
the one who sowed, the proper rent. The essential fairness of this codal
provision has been pointed out by Mme. Justice Ameurfina Melencio-
Herrera, citing Manresa and applicable precedents, in the case of Depra
v. Dumlao,258 to wit:
Where the builder, planter or sower has acted in good
faith, a conflict of rights arises between the owners, and it
becomes necessary to protect the owner of the improvements
without causing injustice to the owner of the land. In view of
the impracticality of creating a state of forced co-ownership,
the law has provided a just solution by giving the owner
of the land the option to acquire the improvements after
258
136 SCRA 475, 483 (1985).
OWNERSHIP
payment of the proper indemnity, or to oblige the builder or

planter to pay for the land and the sower to pay the proper
rent. It is the owner of the land who is authorized to exercise
the option, because his right is older, and because, by the
principle of accession, he is entitled to the ownership of the
accessory thing. (3 Manresa 213; Bernardo v. Bataclan, 37
Off. Gaz. 1382; Co Tao v. Chan Chico, G.R. No. 49167,
April 30, 1949; Article applied; see Cabral, et al. v. Ibañez
[S.C.] 52 Off. Gaz. 217; Marfori v. Velasco, [CA] 52 Off.
Gaz. 2050).
[47.3.1] Option Is Given To the Landowner

Under Article 448, the right to choose between appropriating
the improvement or selling the land on which the improvement of the
builder, planter or sower stands, is given to the owner of the land,259 a
rule that accords with the principle of accession, i.e., that the accessory
follows the principal.260 The only right given to the builder in good faith
is the right to reimbursement for the improvements; the builder cannot
compel the owner of the land to sell such land to the former.261 It is the
owner of the land who is authorized to exercise the option, because his
right is older, and because, by the principle of accession, he is entitled
to the ownership of the accessory thing.262
Quemel v. Olaes
1 SCRA 1159 (1961)
The Olaes spouses (Angel and Juliana) sued the Quemuel spouses
(Alejandro and Ruperta) for recovery of possession of a parcel of land. In their
answer, the Quemel spouses admitted plaintiffs’ ownership but contended that
their occupation was gratuitous. In 1954, the trial court ordered the Quemel
spouses to return the possession of the land to the Olaes spouses and to pay
the latter P20.00 a month from January 1954, until they shall have vacated the
premises. The Quemel spouses did not appeal. To forestall the execution of
259
Ballatan v. CA, 304 SCRA 34, 46 (1999), citing Grana and Torralba v. CA, 109 Phil. 260,
263 (1960); Acuna v. Furukawa Plantation Co., 93 Phil. 957, 961 (1953); Aringo v. Arena, 14 Phil.
263, 269 (1909); also in Quemuel v. Olaes, 1 SCRA 1159 (1961).
260
Rosales v. Castelltort, 472 SCRA SCRA 144, 155 (2005).
261
Quemuel v. Olaes, supra., at p. 1163
262
Depra v. Dumlao, 136 SCRA 475, 483 (1985).
210 PROPERTY
the judgment, the Quemel spouses filed a complaint against the Olaes spouses
seeking to reduce the monthly rental and to compel the Olaes spouses to sell
to them the portion of the lot where their house is erected. The Olaes spouses
filed a motion to dismiss the complaint on the ground of lack of cause of action
and res judicata. The trial court dismissed the complaint. The Quemel spouses
appealed to the Court of Appeals. The appeal, however, was certified to the
Supreme Court. The plaintiffs (Quemel spouses) claim that their cause of
action to compel the Olaes spouses to sell to them the land is based on Article
448 in connection with Article 546 of the New Civil Code. On this issue, the
Supreme Court held —
On the assumption that the allegations of the second cause
of action are true, what would be the rights of the parties? The
plaintiffs claim that their second cause of action is based on Article
448 in connection with Article 546, of the New Civil Code. A
cursory reading of these provisions, however, will show that they
are not applicable to plaintiffs’ case. Under Article 448, the right to
appropriate the works or improvements or “to oblige the one who
built or planted to pay the price of the land” belongs to the owner
of the land. The only right given to the builder in good faith is the
right to reimbursement for the improvements; the builder, cannot
compel the owner of the land to sell such land to the former. This
is assuming that the plaintiffs are builders in good faith. But the
plaintiffs are not builders in good faith. xxx
San Diego v. Montesa

6 SCRA 207 (1962)
After trial in Civil Case No. 770 for recovery of a parcel of land filed
by Jose, Maria and Urbano, all surnamed “de la Cruz,” against Gil San Diego
and Rufino San Diego, the trial court rendered a decision. Under the dipositive
portion of said decision, the defendants and third-party plaintiffs were ordered
to vacate the land in question upon payment to them by the plaintiffs and
third-party defendants, within thirty days after the decision has become final,
of the sum of P3,500.00. The judgment became final and executory. The
defendants and third-party plaintiffs, who were in possession of the land in
litigation, moved to execute the portion of the decision which required the
payment of P3,500.00. The plaintiffs opposed the motion on the ground that,
as owners, they have the right to exercise the option to either pay the value of
improvements or demand reasonable rent if they do not choose to appropriate
the building.
We find the petition meritorious. The judgment affirmed by
the Court of Appeals, and now final, explicitly ordains the payment
OWNERSHIP
by the respondents dela Cruz of the amount of P3,500.00 “within

30 days after this decision becomes final” to petitioners San Diego.
If it also orders petitioners to vacate only upon the payment, it did
so in recognition of the right of retention granted to possessors
in good faith by Article 546 of the Civil Code of the Philippines.
This provision is expressly made applicable to builders in good
faith (Article 448). The right of retention thus granted is merely a
security for the enforcement of the possessor’s right to indemnity
for the improvements made by him. As a result, the possessor in
good faith, in retaining the land and its improvements pending
reimbursement of his useful expenditures, is not bound to pay
any rental during the period of retention; otherwise, the value of
his security would be impaired (cf. Tufexis v. Chunaco [C.A.], 36
O.G. 2455).
Normally, of course, the landowner has the option to either
appropriate the improvement or to sell the land to the possessor.
This option is no longer open to the respondent landowners because
the decision in the former suit limits them to the first alternative
by requiring the petitioners to vacate the land (and surrender the
improvements) upon payment of P3,500.00. Evidently, the Courts
of First Instance and of Appeals opined that the respondents’ suit
to recover the property was an exercise of their right to choose
to appropriate the improvements and pay the indemnity fixed by
law. The respondents acquiesced in this view, since they did not
ask for a modification of the judgment, and allowed it to become
final. Consequently, they can no longer insist on selecting another
alternative; nor can they be heard now to urge that the value of the
indemnity, set at P3,500.00, is exorbitant, for the same reason that
the judgment fixing that amount is no longer subject to alteration.
[47.3.2] Landowner Cannot Refuse To Exercise Either

Option
Even as the option lies with the landowner, the grant to him, nev-
ertheless, is preclusive.263 He must choose one.264 Hence, the landowner
cannot refuse to exercise either option and compel instead the owner of
the building or improvement to remove it from the land.265 The remedy
263
Rosales v. Castelltort, 472 SCRA 144 citing PNB v. De Jesus, 411 SCRA 557, 560
(2003).
PNB v. De Jesus, supra.
264
Id., Technogas Philippines Manufacturing Corp. v. CA, 268 SCRA 5, 17 (1997), citing
265
Ignacio v. Hilario, 76 Phil. 605 (1946) and Sarmiento v. Agana, 129 SCRA 122 (1984).
212 PROPERTY
of remotion is available only if and when the owner of the land chooses
to compel the builder to buy the land at a reasonable price but the latter
fails to pay such price.266 In a situation where the landowner is refusing
to exercise any of the options granted him under Article 448, the build-
er in good faith can, under the same Article, 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.267
Technogas Philippines Manufacturing Corp. v. CA

268 SCRA 5 (1997)
In 1970, Technogas purchased a parcel of land, with all the buildings
and improvements including the wall existing thereon, from Pariz Industries,
Inc. Eduardo Uy, on the other hand, owns the adjoining parcel of land which
he acquired from a certain Enrile Antonio in 1970. In 1971, Uy purchased
another lot also adjoining Technogas’ land from a certain Miguel Rodriguez.
It turned out that portions of the buildings and wall bought by Technogas are
occupying portions of Uy’s adjoining land. Upon learning of the encroachment,
Technogas offered to buy from Uy that particular portion of Uy’s land occupied
by portions of its buildings and wall. Uy, however, refused the offer. Technogas
filed an action in court to compel Uy to sell the portions of Uy’s land occupied
by its buildings and wall. In resolving the respective rights and obligations of
the parties, the Supreme Court held —
What then is the applicable provision in this case which
private respondent may invoke as his remedy: Article 448 or
Article 450 of the Civil Code?
In view of the good faith of both petitioner (Technogas)
and private respondent (Uy), their rights and obligations are to be
governed by Art. 448. The essential fairness of this codal provision
has been pointed out by Mme. Justice Ameurfina Melencio-
Herrera, citing Manresa and applicable precedents, in the case of
Depra v. Dumlao (136 SCRA 475, 483 [1985]) to wit:
“Where the builder, planter or sower has acted in good faith,
a conflict of rights arises between the owners, and it becomes
necessary to protect the owner of the improvements without causing
injustice to the owner of the land. In view of the impracticality of
creating a state of forced co-ownership, the law has provided a just
266
Technogas Philippines Manufacturing Corp. v. CA, supra.
267
PNB v. De Jesus, supra.
OWNERSHIP
solution by giving the owner of the land the option to acquire the
improvements after payment of the proper indemnity, or to oblige
the builder or planter to pay for the land and the sower to pay the
proper rent. It is the owner of the land who is authorized to exercise
the option, because his right is older, and because, by the principle
of accession, he is entitled to the ownership of the accessory thing.
(3 Manresa 213; Bernardo v. Bataclan, 37 Off. Gaz. 1382; Co Tao
v. Chan Chico, G.R. No. 49167, April 30, 1949; Article applied;
see Cabral, et al. v. Ibañez [S.C.] 52 Off. Gaz. 217; Marfori v.
Velasco, [CA] 52 Off. Gaz. 2050).”
The private respondent’s insistence on the removal of the
encroaching structures as the proper remedy, which respondent
Court sustained in its assailed Decisions, is thus legally flawed.
This is not one of the remedies bestowed upon him by law. 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. (Ignacio v. Hilario, supra.) This has not taken place. Hence,
his options are limited to: (1) appropriating the encroaching
portion of petitioner’s building after payment of proper indemnity,
or (2) obliging the latter to buy the lot occupied by the structure.
He cannot exercise a remedy of his own liking.
Neither is petitioner’s prayer that private respondent be
ordered to sell the land the proper remedy. While that was dubbed
as the “more workable solution” in Grana and Torralba v. The
Court of Appeals, et al. (109 Phil. 260, 264 [1960]), 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 stand.” Moreover,
in Grana and Torralba, the area involved was only 87 square
meters while this case involves 520 square meters. In line with the
case of Depra v. Dumlao, this case will have to be remanded to the
trial court for further proceedings to fully implement the mandate
of Art. 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.
Petitioner, however, must also pay the rent for the property
occupied by its building as prescribed by respondent Court from
October 4, 1979, but only up to the date private respondent serves
notice of its option upon petitioner and the trial court; that is, if
such option is for private respondent to appropriate the encroaching
214 PROPERTY
structure. In such event, petitioner would have a right of retention

which negates the obligation to pay rent. The rent should however
continue if the option chosen is compulsory sale, but only up to the
actual transfer of ownership.
The award of attorney’s fees by respondent Court against
petitioner is unwarranted since the action appears to have been
filed in good faith. Besides, there should be no penalty on the right
to litigate.
WHEREFORE, premises considered, the petition is hereby
GRANTED and the assailed Decision and the Amended Decision
are REVERSED and SET ASIDE. In accordance with the case of
Depra v. Dumlao, this case is REMANDED to the Regional Trial
Court of Pasay City, Branch 117, for further proceedings consistent
with Articles 448 and 546 of the Civil Code, as follows:
The trial court shall determine:
a) the present fair price of private respondent’s 520
square meter area of land;
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;
c) the fair market value of the encroaching portion
of the building; 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.
2. After said amounts shall have been determined by
competent evidence, 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, Civil Code), whether to appropriate the
portion of the building as his own by paying to petitioner its
fair market value, or to oblige petitioner to pay the price of
said area. The amounts to be respectively paid by petitioner
and private respondent, in accordance with the option thus
exercised by written notice of the other party and to the
court, 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;
OWNERSHIP
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,
the value of the land is considerably more than that of the
portion of the building, 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. In that event, 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, and give
the trial court formal written notice of the agreement and its
provisos. If no agreement is reached by the parties, the trial
court, within fifteen (15) days from and after the termination
of the said period fixed for negotiation, 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
(P2,000.00) per month, payable within the first five (5) days
of each calendar month. The period for the forced lease shall
not be more than two (2) years, counted from the finality
of the judgment, considering the long period of time since
1970 that petitioner has occupied the subject area. The rental
thus fixed shall be increased by ten percent (10%) for the
second year of the forced lease. Petitioner shall not make
any further constructions or improvements on the building.
Upon expiration of the two-year period, or upon default by
petitioner in the payment of rentals for two (2) consecutive
months, private respondent shall be entitled to terminate the
forced lease, to recover his land, and to have the portion of
the building removed by petitioner or at latter’s expense. The
rentals herein provided shall be tendered by petitioner to the
trial court for payment to private respondent, and such tender
shall constitute evidence of whether or not compliance was
made within the period fixed by the said court.
c) In any event, petitioner shall pay private respon-
dent an amount computed at Two thousand pesos (P2,000.00)
per month as reasonable compensation for the occupancy of
private respondent’s land for the period counted from Octo-
ber 4, 1979, up to the date private respondent serves notice
of its option to appropriate the encroaching structures; other-
wise up to the actual transfer of ownership to petitioner or, in
case a forced lease has to be imposed, up to the commence-
ment date of the forced lease referred to in the preceding
paragraph;
216 PROPERTY
d) The periods to be fixed by the trial court in its

decision shall be non-extendible, and upon failure of the
party obliged to tender to the trial court the amount due to the
obligee, 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
maybe required by the prestation due the obligee.”
PNB v. De Jesus
411 SCRA 557 (2003)
Petitioner Philippine National Bank disputes the decision handed down
by the Court of Appeals promulgated on 23 March 2001 in CA-G.R. CV No.
56001, entitled “Generoso De Jesus, represented by his Attorney-in-Fact,
Christian De Jesus, versus Philippine National Bank.” The assailed decision
has affirmed the judgment rendered by the Regional Trial Court, Branch
44, of Mamburao, Occidental Mindoro, declaring respondent Generoso de
Jesus as being the true and lawful owner of the 124-square-meter portion
of the land covered by Transfer Certificate of Title (TCT) No. T-17197 and
ordering petitioner bank to vacate the premises, to deliver possession thereof
to respondent, and to remove the improvement thereon.
It would appear that on 10 June 1995, respondent filed a complaint against
petitioner before the Regional Trial Court of Occidental Mindoro for recovery
of ownership and possession, with damages, over the questioned property. In
his complaint, respondent stated that he had acquired a parcel of land situated in
Mamburao, Occidental Mindoro, with an area of 1,144 square meters covered
by TCT No. T-17197, and that on 26 March 1993, 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. Despite two letters of demand sent by respondent, petitioner failed and
refused to vacate the area.
Petitioner, in its answer, asserted that when it acquired the lot and
the building sometime in 1981 from then Mayor Bienvenido Ignacio, the
encroachment already was in existence and to remedy the situation, Mayor
Ignacio offered to sell the area in question (which then also belonged to
Ignacio) to petitioner at P100.00 per square meter which offer the latter claimed
to have accepted. The sale, however, did not materialize when, without the
knowledge and consent of petitioner, Mayor Ignacio later mortgaged the lot to
the Development Bank of the Philippines.
The trial court decided the case in favor of respondent declaring him to
be the rightful owner of the disputed 124-square-meter portion of the lot and
OWNERSHIP
ordering petitioner to surrender possession of the property to respondent and to

cause, at its expense, the removal of any improvement thereon.
The Court of Appeals, on appeal, sustained the trial court but it ordered
to be deleted the award to respondent of attorney’s fees, as well as moral and
exemplary damages, and litigation expenses.
Petitioner went to this Court, via a petition for review, after the appellate
court had denied the bank’s motion for reconsideration, here now contending
that —
“1. THE COURT OF APPEALS GRAVELY ERRED IN
LAW IN ADJUDGING PNB A BUILDER IN BAD FAITH OVER
THE ENCROACHED PROPERTY IN QUESTION;
“2. THE COURT OF APPEALS GRAVELY ERRED IN
LAW IN NOT APPLYING IN FAVOR OF PNB THE PROVISION
OF ARTICLE 448 OF THE CIVIL CODE AND THE RULING
IN TECNOGAS PHILIPPINES MANUFACTURING CORP. V.
COURT OF APPEALS, G.R. No. 108894, February 10, 1997, 268
SCRA 7.”
The Regional Trial Court and the Court of Appeals have both rejected
the idea that petitioner can be considered a builder in good faith. In the context
that such term is used in particular reference to Article 448, et seq., of the Civil
Code, a builder in good faith is one who, not being the owner of the land,
builds on that land believing himself to be its owner and unaware of any defect
in his title or mode of acquisition.
The various provisions of the Civil Code, pertinent to the subject, read:
“Article 448. The owner of the land on which anything has
been built, sown, or planted in good faith, shall have the right to
appropriate as his own the works, sowing or planting, after payment
of the indemnity provided for in Articles 546 and 548, or to oblige
the one who built or planted to pay the price of the land, and the one
who sowed, the proper rent. However, the builder or planter cannot
be obliged to buy the land if its value is considerably more than
that of the building or trees. In such a case, he shall pay reasonable
rent, if the owner of the land does not choose to appropriate the
building or trees after proper indemnity. The parties shall agree
upon the terms of the lease and in case of disagreement, the court
shall fix the terms thereof.”
“Article 449. He who builds, plants, or sows in bad faith on
the land of another, loses what is built, planted or sown without
right to indemnity.”
218 PROPERTY
“Article 450. The owner of the land on which anything has

been built, planted or sown in bad faith may demand the demolition
of the work, or that the planting or sowing be removed, in order
to replace things in their former condition at the expense of the
person who built, planted or sowed; or he may compel the builder
or planter to pay the price of the land, and the sower the proper
rent.”
A builder in good faith can, under the foregoing provisions, compel the
landowner to make a choice between appropriating the building by paying
the proper indemnity or obliging the builder to pay the price of the land. The
choice belongs to the owner of the land, a rule that accords with the principle
of accession, i.e., that the accessory follows the principal and not the other
way around. Even as the option lies with the landowner, the grant to him,
nevertheless, is preclusive. He much choose one. He cannot, for instance,
compel the owner of the building to instead remove it from the land. In order,
however, that the builder can invoke that accruing benefit and enjoy his
corresponding right to demand that a choice be made by the landowner, he
should be able to prove good faith on his part.
Good faith, here understood, is an intangible and abstract quality with
no technical meaning or statutory definition, and it encompasses, among other
things, an honest belief, the absence of malice and the absence of design to
defraud or to seek an unconscionable advantage. An individual’s personal
good faith is a concept of his own mind and, therefore, may not conclusively
be determined by his protestations alone. It implies honesty of intention, and
freedom from knowledge of circumstances which ought to put the holder
upon inquiry. The essence of good faith lies in an honest belief in the validity
of one’s right, ignorance of a superior claim, and absence of intention to
overreach another. Applied to possession, one is considered in good faith if he
is not aware that there exists in his title or mode of acquisition any flaw which
invalidates it.
Given the findings of both the trial court and the appellate court, it should
be evident enough that petitioner would fall much too short from its claim of
good faith. Evidently, petitioner was quite aware, and indeed advised, prior to
its acquisition of the land and building from Ignacio that a part of the building
sold to it stood on the land not covered by the land conveyed to it.
Equally significant is the fact that the building, constructed on the land
by Ignacio, has in actuality been part of the property transferred to petitioner.
Article 448, of the Civil Code refers to a piece of land whose ownership is
claimed by two or more parties, one of whom has built some works (or sown or
planted something) and not to a case where the owner of the land is the builder,
sower, or planter who then later loses ownership of the land by sale or otherwise
OWNERSHIP
for, elsewise stated, “where the true owner himself is the builder of works on
his own land, the issue of good faith or bad faith is entirely irrelevant.”
In fine, petitioner is not in a valid position to invoke the provisions of
Article 448 of the Civil Code. The Court commiserates with petitioner in
its present predicament; upon the other hand, respondent, too, is entitled to
his rights under the law, particularly after having long been deprived of the
enjoyment of his property. Nevertheless, the Court expresses hope that the
parties will still be able to come up with an arrangement that can be mutually
suitable and acceptable to them.
WHEREFORE, the decision of the Court of Appeals in CA-G.R. CV No.
56001 is AFFIRMED. No costs.
SO ORDERED.
[47.4] Option to Appropriate

[47.4.1] What Indemnity Consists Of
If the landowner chooses to acquire the building, he must pay
the builder the indemnities provided for in Articles 546 and 548 of the
New Civil Code.268 In short, the landowner must pay the necessary and
useful expenses, and in the proper case, expenses for pure luxury or
mere pleasure.269
[47.4.2] Basis of Indemnity

What shall be the basis of the indemnity to be paid by the landowner?
In Javier v. Concepcion, Jr.,270 the Supreme Court pegged the value of
the useful improvements consisting of various fruits, bamboos, a house
and camarin made of strong materials based on the market value of the
said improvements. In Sarmiento v. Agana,271 despite the finding that
the useful improvement, a residential house, was built in 1967 at a cost
of between Eight thousand pesos (P8,000.00) to Ten thousand pesos
(P10,000.00), the landowner was ordered to reimburse the builder in the
amount of Forty thousand pesos (P40,000.00), the value of the house
at the time of the trial. In the same way, the landowner was required to
268
269
Ballatan v. CA, supra, at p. 46.
270
94 SCRA 212 (1979).
271
Supra.
220 PROPERTY
pay the “present value” of the house, a useful improvement, in the case
of De Guzman v. Dela Fuente.272
In Pecson v. Court of Appeals,273 the Supreme Court categorically
held that “it is the current market value of the improvements which
should be made the basis of reimbursement.” The Court explained —
The objective of Article 546 of the Civil Code is to
administer justice between the parties involved. In this
regard, this Court had long ago stated in Rivera v. Roman
Catholic Archbishop of Manila (40 Phil. 717 [1920]) 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,
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. Guided by this precept, it is therefore
the current market value of the improvements which should
be made the basis of reimbursement. 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. Consequently,
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.274
[47.4.3] Pending Reimbursement, Builder Has Right of

Retention
In addition to the right of the builder in good faith to be paid
the value of his improvement, Article 546 of the New Civil Code
gives him the corollary right of retention of the property until he is
indemnified by the owner of the land.275 The builder in good faith may
not, therefore, be required to pay rentals.276 This is so because the right
to retain the improvements while the corresponding indemnity is not
272
55 Phil. 501 (1930).
273
Supra, at p. 416.
274
At p. 416.
275
Filipinas Colleges, Inc. v. Garcia Timbang, et al., 106 Phil. 247, 253 (1959).
276
Miranda v. Fadullon, 97 Phil. 801, 806 (1955).
OWNERSHIP
paid implies the tenancy or possession in fact of the land on which it is

built, planted or sown.277 However, Article 448 of the New Civil Code,
in relation to Article 546, which provides for full reimbursement of
useful improvements and retention of the premises until reimbursement
is made, applies only to a possessor in good faith, i.e., one who builds
on a land in the belief that he is the owner thereof. It does not apply to
a mere lessee, otherwise, it would always be in his power to “improve”
his landlord out of the latter’s property.278
While the law aims to concentrate in one person the ownership of
the land and the improvements thereon in view of the impracticability
of creating a state of forced co-ownership, it guards against unjust
enrichment insofar as the good faith builder’s improvements are
concerned.279 The right of retention is considered as one of the measures
devised by the law for the protection of builders in good faith.280 Its object
is to guarantee full and prompt reimbursement as it permits the actual
possessor to remain in possession while he has not been reimbursed (by
the person who defeated him in the case for possession of the property)
for those necessary expenses and useful improvements made by him
on the things possessed.281 Accordingly, a builder in good faith cannot
be compelled to pay rentals during the period of retention282 nor be
disturbed in his possession by ordering him to vacate. In addition, the
owner of the land is prohibited from offsetting or compensating the
necessary and useful expenses with the fruits received by the builder-
possessor in good faith.283 Otherwise, the security provided by law
would be impaired. This is so because the right to the expenses and the
right to the fruits both pertain to the possessor, making compensation
juridically impossible; and one cannot be used to reduce the other.284
277
Pecson v. CA, supra, at p. 416.
278
Chua v. CA, 301 SCRA 356, 364 (1999).
279
Nuguid v. CA, 452 SCRA 243, 252 (2005), citing Ortiz v. Kayanan, 92 SCRA 146, 159
(1979).
280
Id.
281
Id.
282
Id., citing San Diego v. Hon. Montesa, 6 SCRA 208, 210 (1962).
283
Id.
284
Id.
222 PROPERTY
[47.4.4] Time of Transfer of Ownership

In Bataclan v. CFI,285 the Supreme Court ruled that the ownership
of the building does not pass to the landowner until after the payments
mentioned under Articles 546 and 548 has been given to the builder.
[47.5] Option To Sell the Land

[47.5.1] Option To Compel Builder or Planter To Buy the
Land
If the landowner elected to compel the builder or planter to pay
the price of the land, then said builder or planter must do so, unless the
value of land is considerably more than that of the building or trees,
in which case, the builder or planter must pay reasonable rent if the
landowner does not choose to appropriate the building or trees.286 If
the parties cannot come to terms over the conditions of the lease, the
courts must fix the terms thereof.287 Note that this option is available
only against the builder or planter because with respect to the sower,
the landowner can only compel him to pay the proper rent,288 in case the
landowner does not choose to appropriate the crops.
[47.5.2] Remedy If Builder or Planter Refuses To Pay

In the event the builder or the planter refuses to pay the price of
the land (on the assumption that said price is not considerably more than
the value of the building or trees), will the landowner automatically
become the owner of the improvements without paying any indemnity?
This question was answered in the negative by the Supreme Court in
the case of Filipinas Colleges, Inc. v. Garcia Timbang, et al.,289 where
the Court held —
“x x x. There is nothing in the language of these two
articles, 448 and 546, which would justify the conclusion of
appellants that, upon the failure of the builder to pay the value
of the land, when such is demanded by the landowner, the
latter becomes automatically the owner of the improvement
285
61 Phil. 428.
286
287
Ibid.
288
289
106 Phil. 247 (1959).
OWNERSHIP
under Article 445. The case of Bernardo v. Bataclan, 66 Phil.

590 cited by appellants is no authority for this conclusion.
Although it is true it was declared therein that in the event
of the failure of the builder to pay the land, after the owner
thereof has chosen this alternative, the builder’s right of
retention provided in Article 546 is lost, nevertheless there
was nothing said that as a consequence thereof, the builder
loses entirely all rights over his own building. x x x”290
What then is the recourse or remedy left to the parties in such
eventuality where the builder fails to pay the value of the land? While
the Code is silent on this point, guidance may be derived from the
decisions of the Supreme Court in the cases of Miranda v. Fadullon,291
Ignacio v. Hilario,292 and Bernardo v. Bataclan.293
In Miranda v. Fadullon, supra, the Court suggested —
“xxx A builder in good faith may not be required to

pay rentals. He has a right to retain the land on which he
has built in good faith until he is reimbursed the expenses
incurred by him. Possibly he might be 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, but that the builder is unwilling or unable
to buy the land, and then they decide to leave things as they
are and assume the relation of lessor and lessee, and should
they disagree as to the amount of the rental then they can go
to the court to fix that amount. xxx.”294
Note, however, that in this situation a “forced lease” may not be
resorted to since such remedy is available only in situations where the
landowner cannot oblige the builder or planter to pay the price of the
land because its value is considerably more than that of the building or
trees. But if the landowner can compel the builder or planter to pay the
price of the land because its value is not considerably more than that of
290
At p. 253.
291
97 Phil. 801 (1955).
292
76 Phil. 605 (1946).
293
66 Phil. 590.
294
At p. 806, cited in Filipinas Colleges, Inc. v. Garcia Timbang, et al., at pp. 253-254.
224 PROPERTY
the building or trees and the builder or planter fails to pay such price,
the parties may agree to assume the relation of lessor and lessee — but
they must do so voluntarily.
Should the parties do not agree to leave things as they are and to
assume the relation of lessor and lessee, another remedy is suggested
in the case of Ignacio v. Hilario, supra, wherein the Court held that the
owner of the land is entitled to have the improvement removed when
after having chosen to sell his land to the other party, i.e., the builder
in good faith, fails to pay for the same.295 In this situation, the builder’s
right of retention provided in Article 546 is lost.296
A further remedy is indicated in the case of Bernardo v. Bataclan,
supra, where the Court approved the sale of the land and improvement
in a public auction applying the proceeds thereof first to the payment of
the value of the land and the excess, if any, was ordered to be delivered
to the owner of the house in payment thereof.297
[47.5.3] Basis in Determining Price of the Land

In Ballatan v. Court of Appeals,298 it was ruled that in the event the
landowner elects to sell the land to the builder in good faith, the price
must be fixed at the prevailing market value at the time of payment. In
the event of the failure of the builder to pay the land, after the owner
thereof has chosen this alternative, the builder’s right of retention
provided in Article 546 is also lost.299
Ballatan v. CA
304 SCRA 37 (1999)
In this case, the parties are owners of adjacent lots — lots 24, 25, 26
and 27. Lot 24 is co-owned by Eden Ballatan and spouses Betty Martinez and
Chong Chy Ling. Lots 25 and 26 are owned by Gonzalo Go, Sr. while lot 27 is
owned by Li Ching Yao. Li Ching Yao built his house on his lot before any of
the parties did. He constructed his house in 1982. Li Ching Yao was not aware
that when he built his house a portion thereof encroached on Go’s adjoining
295
See Filipinas Colleges, Inc. v. Garcia Timbang, et al., at p. 254.
296
See Bernardo v. Bataclan, supra.
297
See Filipinas Colleges, Inc. v. Garcia Timbang, et al., at p. 254.
298
304 SCRA 37 (1999).
299
Bernardo v. Bataclan, supra.
OWNERSHIP
land. In 1983, the son of Gonzalo Go, Winston, constructed his house on lot
no. 25. At the time of construction, Winston was not aware that he encroached
on a portion of land owned by Ballatan and the spouses Betty Martinez and
Chong Chy Ling. In 1985, Ballatan constructed her house on lot 24. During
the construction, she noticed that Go encroached on her property. Since then,
the parties had been aware of the encroachments on each other’s properties.
Apparently, it was the erroneous survey of the geodetic engineer commissioned
by the subdivision developer that caused these discrepancies. In determining
the rights of the parties, the Supreme Court applied Article 448 of the Civil
Code since all the parties had acted in good faith. The Court ruled —
“xxx petitioners (Ballatan and the spouses Betty Martinez and

Chong Chy Ling), as owners of Lot No. 24, may choose to purchase
the improvement made by respondents Go on their land, or sell to
respondents Go the subject portion. If buying the improvement is
impractical as it may render the Go’s house useless, then petitioners
may sell to respondents Go that portion of Lot No. 24 on which
their improvement stands. If the Go’s are unwilling or unable to
buy the lot, then they must vacate the land and, until they vacate,
they must pay rent to petitioners. Petitioners, however, cannot
compel respondents Go to buy the land if its value is considerably
more than the portion of their house constructed thereon. If the
value of the land is much more than the Go’s improvement, then
respondents Go must pay reasonable rent. If they do not agree on
the terms of the lease, then they must go to court to fix the same.
In the event that petitioners elect to sell to respondents
Go the subject portion of their lot, the price must be fixed at the
prevailing market value at the time of payment. The Court of
Appeals erred in fixing the price at the time of taking, which is
the time the improvements were built on the land. The time of
taking is determinative of just compensation in expropriation
proceedings. The instant case is not for expropriation. It is not a
taking by the State of private property for a public purpose upon
payment of just compensation. 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. It is but fair and just to
fix compensation at the time of payment.
Article 448 and the same conditions above-stated 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.
226 PROPERTY
[47.5.4] Rule If Only a Portion of the Land Has Been

Encroached
Article 448 has been applied to improvements or portions of
improvements built by mistaken belief on land belonging to the
adjoining owner.300
§ 48. Landowner In Good Faith; Builder In Bad Faith

[48.1] Concept of Bad Faith
If 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,301 a
fortiori, the builder, planter or sower (who is at the same time the owner
of the materials) is deemed to have acted in bad faith if he knows that
the land is not his, or if he has knowledge of any flaw or defect in his
title or mode of acquisition of the land.
[48.2] Legal Consequences; Alternative Rights of the Landowner

If the landowner has acted in good faith, i.e., he was not aware
that something was being built, planted or sown on his land and he
learned about only after it was done, and the builder, planter or sower
(who is at the same time the owner of the materials) has acted in bad
faith, the landowner can exercise any of the following three rights and/
or remedies under Articles 449, 450 and 451:
[48.2.1] Right to Appropriate

He can appropriate what has been built, planted or sown on his
land in bad faith without any obligation to pay indemnity because
Article 449 of the New Civil Code provides that “he who builds, plants
or sows in bad faith on the land of another, loses what is built, planted
or sown without right to indemnity.” And in addition to this right of
“confiscation” of the improvements, he can also demand damages from
the builder, planter or sower in bad faith pursuant to Article 451.
With respect to the fruits, it must be understood that the landowner
can appropriate them without paying indemnity if said fruits are still
300
Ballatan v. CA, supra; Technogas Philippines Manufacturing Corp. v. CA, supra; Depra
v. Dumlao, supra; and Grana and Torralba v. CA, 109 Phil. 260 (1960).
301
Pleasantville Development Corp. v. CA, supra., at p. 18.
OWNERSHIP
ungathered (pending) at the time of recovery of possession of the land,

for if said fruits have already been separated from the land, the principle
of accesion continua no longer applies. Instead, Article 443 of the New
Civil Code will apply, in which case, the planter or sower (in bad faith)
can be compelled to deliver to the landowner in good faith the fruits he
has gathered, or their value, minus the expenses incurred by the former
in their production, gathering and preservation.
[48.2.2] Right of Remotion

The second right or remedy of the landowner is to exercise the
right of remotion pursuant to Article 450, i.e., he can demand that what
has been built, planted or sown in bad faith on his land be removed or
demolished and that the land be restored to its original condition — all
at the expense of the builder, planter or sower — plus damages suffered
by the landowner pursuant to Article 451.
Santos v. Mojica
26 SCRA 703 (1969)
In this case, eleven brothers and sisters, all surnamed Allanigue, brought
an action against their sister, Lorenzana Allanigue, her husband, Simeon
Santos, Maria San Agustin and Felicidad San Agustin for partition of a 360-
square meter lot and for the annulment of certain conveyances involving the
same. After the spouses Simeon and Lorenzana Santos were summons, their
son (Leonardo Santos) built and reconstructed his house into a bigger one.
The plaintiffs eventually won the case. When the judgment became final and
executory, a writ of execution was issued ordering the defendants to vacate the
lot and deliver the same to the plaintiffs. Leonardo refused to vacate. May his
house be demolished? The Supreme Court ruled —
“1. Petitioner Leonardo Santos is bound by the judgment

in Civil Case No. 217-R because he is a successor-in-interest of his
parents, Simeon Santos and Lorenzana Allanigue, defendants in
Civil Case No. 217-R, and his right, if any, is claimed under them.
Hence, the judgment in said civil case binds not only Simeon Santos
and Lorenzana Allanigue but also their son, Leonardo Santos, who
is their successor-in-interest and who claims under them. The fact
that the sale to Leonardo Santos from his parents was registered, is
of no moment because, as pointed out, he is bound by the judgment
against them.
228 PROPERTY
Leonardo Santos’ house having been built and reconstructed

(after March, 1962) into a bigger one after his predecessors-in-
interests, his parents, had been summoned in 1959 in Civil Case
No. 217-R, he must be deemed a builder in bad faith. As builder
in bad faith he lost the improvement made by him consisting of
the reconstructed house to the owners of the land without right
to indemnity, pursuant to Article 449 of the Civil Code, which
provides:
xxx xxx xxx
The Allanigue brothers and sisters therefore became owners
of the improvements consisting of the house built in bad faith
by Leonardo Santos if they choose to appropriate the accession.
(Articles 445 and 449, Civil Code) However, said owners could
choose instead the demolition of the improvement or building at
the expense of the builder, pursuant to Article 450 of the Civil
Code which in part, provides:
xxx xxx xxx
It is of record in Civil Case No. 217-R that the owners of the
land chose to have the house or improvement demolished pursuant
to their motion for demolition which was granted by respondent
Judge Mojica on December 9, 1965.”
[48.2.3] Right To Compel Payment of the Price of the Land

The third possible right of the landowner is to compel the builder
or planter to pay the price of the land, and the sower the proper rent,
pursuant to Article 450, plus damages under Article 451. There being
no exception provided in the law, it is submitted that the landowner
can exercise this right even if the value of the land is considerably
more than that of the building or trees. But then again, this remedy is
available against the builder and planter only. With respect to the sower,
the landowner may only compel him to pay the proper rent.
[48.3] Limited Rights of Builder, Planter or Sower in Bad Faith

The foregoing rights of the landowner are alternative, i.e., he
can exercise only one of them as his option. But in all cases, “the
builder, planter or sower in bad faith is entitled to reimbursement for
the necessary expenses of preservation of the land,”302 otherwise the
302
OWNERSHIP
landowner would be enriching himself at the expense of the former. A

builder in bad faith has no right, however, to be indemnified for useful
improvements.303 Neither has he any right to remove them.304 The right
given a possessor in bad faith to remove improvements applies only
to improvements for pure luxury or mere pleasure, provided the thing
suffers no injury thereby and the lawful possessor does not prefer to
retain them by paying the value they have at the time he enters into
possession.305
In Lumungo v. Usman,306 it was ruled that a planter in bad faith is
not entitled to be reimbursed for the value of the coconut trees planted
by him as said coconut trees are improvements, not “necessary expenses
of preservation.”
§ 49. Both Acted In Bad Faith

[49.1] Rules That Will Govern If Both Parties Acted In Bad Faith
One basic principle of accesion continua is that the bad faith
of one person neutralizes the bad faith of another and both should be
considered as having acted in good faith. This principle is embodied
in the first paragraph of Article 453 of the New Civil Code, which
provides:
“Art. 453. If there was bad faith, not only on the part
of the person who built, planted or sowed on the land of
another, but also on the part of the owner of such land, the
rights of one and the other shall be the same as though both
had acted in good faith.”
Therefore, Article 448 of the New Civil Code governs this situation
such that whatever has been discussed therein shall likewise apply in
this situation.
[49.2] Bad Faith of the Landowner

It is understood that there is bad faith on the part of the landowner
whenever the act was done with his knowledge and without opposition
303
Sabido v. CA, 165 SCRA 498 (1988).
304
MWSS v. CA, 143 SCRA 623 (1986).
305
Ibid., citing Art. 549, Civil Code.
306
25 SCRA 255, 261 (1968).
230 PROPERTY
on his part.307 Thus, when one in possession of property of another erects

buildings and makes other improvements thereon in bad faith, but with
knowledge of the owner who does not object, the case must be treated
as if both parties had acted in good faith.308
§ 50. Landowner In Bad Faith; Builder In Good Faith

Article 454 of the New Civil Code provides: “When the landowner
acted in bad faith and the builder, planter or sower proceeded in
good faith, the provisions of Art. 447 shall apply.” As a consequence,
whatever has been discussed under Article 447 shall likewise apply in
this situation.
Article 447 governs the case of building, planting or sowing on
one’s own land with materials of another either in good faith or in bad
faith. The reason why said article applies may be explained as follows:
that if the landowner knew that something was being built, planted or
sown on his land by another and he did not interpose any objection
thereto, it is as if he was the one building, planting or sowing in bad
faith on his own land with materials belonging to another, using the
owner of the materials as his worker. As a consequence, and pursuant
to the provisions of Article 447, the owner of the materials (who is at
the same time the builder, planter or sower in this case) acquires two
alternative rights, namely: (1) to demand the value of his materials, plus
damages; or (2) to demand the return of his materials in any event, plus
damages.
Art. 455. If the materials, plants or seeds belong to a third person

who has not acted in bad faith, the owner of the land shall answer sub-
sidiarily for their value and only in the event that the one who made use of
them has no property with which to pay.
This provision shall not apply if the owner makes use of the rights
granted by Article 450. If the owner of the materials, plants or seeds has
been paid by the builder, planter or sower, the latter may demand from the
landowner the value of the materials and labor. (365a)
Art. 456. In the cases regulated in the preceding articles, good faith
does not necessarily exclude negligence, which gives right to damages
under Article 2176. (n)
307
Art. 453, 2nd par., Civil Code.
308
Municipality of Oas v. Roa, 7 Phil. 20.
OWNERSHIP
§ 51. Building on Another’s Land Using Another’s Materials

[51.1] Situation Contemplated in Art. 455
Article 455 of the New Civil Code contemplates of a situation
where the builder, planter or sower has built, planted or sown on
another’s land using materials belonging to another person. In such
a situation, there are actually three persons whose good faith or bad
faith must all be taken into account, namely: (1) the landowner; (2) the
builder, planter or sower; and (3) the owner of the materials.
To simplify the resolution of this “controversial” situation, Article
455 offers to settle first the right of the owner of the materials whose
only interest, of course, is the recovery of the value of his materials.
Such recovery, however, shall depend on whether he acted in good faith
or in bad faith.
[51.2] If the Owner of the Materials Acted In Bad Faith

[51.2.1] He Loses His Materials Without Indemnity
If the owner of the materials acted in bad faith, he loses his
materials without any right whatsoever. This is so because if he knew
that his materials were being used by another but did not object thereto,
it is as if he was the one who built, planted or sowed with his materials
in bad faith on the land of another. The builder, planter or sower would
be considered merely an agent of the owner of the materials. Therefore,
the provisions of Article 449 of the Civil Code will apply by analogy, in
which case, he loses what he has built, planted or sown without right to
indemnity. He is even liable for damages.309 The only exception to this
rule is if all the parties acted in bad faith because then their rights would
be governed as if they were in good faith.
[51.2.2] Rights of the Landowner

If the owner of the materials acted in bad faith, the landowner
can claim what has been built, planted or sown on his land without any
obligation to indemnify the owner of the materials. This is in pursuance
to the principles stated in Articles 449 and 445 of the Civil Code.
309
Art. 451, NCC.
232 PROPERTY
[51.2.3] Rights of the Builder, Planter or Sower

The rights of the builder, planter or sower shall be determined
depending on his good faith or bad faith.
(a) If he acted in good faith. — If he acted in good faith in that he
thought honestly that both the land and the materials belonged to him,
he may claim from the landowner a reasonable compensation for his
labor. This is based on the principle that no person should be unjustly
enriched at the expense of another.
(b) If he acted in bad faith. — If he acted in bad faith in that he
knew that the materials he was using belonged to somebody else or that
he had no right to the land, then he is not entitled to anything. He may
instead be made to pay damages to the landowner.
[51.3] If the Owner of the Materials Acted In Good Faith

[51.3.1] He Must Be Reimbursed For the Value of His
Materials
If the owner of the materials acted in good faith, in that he did
not know that his materials were used by another, the law says that
he is entitled to recover the value of his materials. This is expressly
recognized in Article 455 of the New Civil Code.
[51.3.2] Builder, Planter or Sower Is Primarily Liable

The builder, planter or sower is primarily liable to make such
payment to the owner of the materials310 — without damages if he
(builder, planter or sower) acted in good faith — and with damages if
he acted in bad faith. If such payment is made by the builder, planter
or sower, he becomes the owner of the materials and the case would
be the same as the second “controversial case” discussed in supra §§
46-50 — that of building, planting or sowing with one’s own materials
on the land of another. Hence, to determine the rights and obligations
of the builder, planter or sower and the landowner against each other,
we will again apply the rules in the following four situations: (1) if
both the landowner and the builder, planter or sower acted in good faith
(Art. 448); (2) if the landowner acted in good faith and the builder,
planter or sower acted in bad faith (Arts. 449, 450 and 451); (3) if both
310
Art. 455, NCC.
OWNERSHIP
parties acted in bad faith (Art. 448, in relation to Art. 453); and (4) if the
landowner acted in bad faith and the builder, planter or sower acted in
good faith (Art. 447, in relation to Art. 454).
[51.3.3] Subsidiary Liability of the Landowner

The landowner is subsidiarily liable for the payment of the value
of the materials.311 This subsidiary liability, however, of the owner of
the land is only available if the following conditions are met: (1) in
case of insolvency of the builder, planter or sower; and (2) the owner of
the land appropriates the building, planting or sowing.312 A fortiori, the
owner of the land is not liable to the owner of the materials if the former
chooses to order the demolition of the construction or the removal of
the building, planting or sowing which he has the right to do in case
the builder, planter or sower acted in bad faith.313 If the landowner pays
for the value of the materials, he becomes the owner thereof. In such a
situation, he may demand damages from the builder, planter or sower
if the latter acted in bad faith, or pay the builder, planter or sower a
reasonable compensation for his labor if the latter acted in good faith.
B. NATURAL ACCESSION
§ 52. Natural Accession
[52.1] Four Forms
As discussed in supra §40.2, there are four forms of natural
accession:
(1) Alluvion;
(2) Avulsion;
(3) Natural change of course of river; and
(4) Formation of island.
Art. 457. To the owners of lands adjoining the banks of rivers belong
the accretion which they gradually receive from the effects of the current
of the waters. (366)
311
Art. 455, NCC.
312
Id.
313
Id.

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168 PROPERTY

Art. 440. The ownership of property gives the right by accession

[40.2] Kinds of Accession

Section 1. — Right of Accession with Respect to

Art. 441. To the owner belongs:

Industrial fruits are those produced by lands of any kind through

§ 41. Accesion Discreta

[41.2] Exceptions to the Rule

“Art. 566. The usufructuary shall be entitled to all the

(b) in lease of rural lands

(d) in possession in good faith

(e) fruits naturally falling

[41.3] Kinds of Fruits

[41.3.1] Natural Fruits

[41.3.2] Industrial Fruits

produced naturally and spontaneously by the soil; while the latter is

[41.3.3] Civil Fruits

[41.4] Existence of Fruits, When Recognized

so long as the latter’s pregnancy is already manifest or evident. In the

§ 42. Production Expenses

[42.2] Applicability of Article 443

he received prior to the interruption of his good faith. On the other

[42.3] Article 443 Does Not Apply To Pending Fruits

[42.4] When Refundable

Section 2. — Right of Accession with Respect to

§ 43. Accesion Continua

[43.1] Presupposes Absence of Agreement

more things belonging to different owners. It is not so applicable where

[43.2] Basic Principles Governing Accesion Continua

another in good faith, he can appropriate the materials upon payment of

§ 44. Industrial Accession

even a chair or desk, it is improper to use the verb “edificar” to describe

(2) Planting and Sowing

[44.2] Building, Planting or Sowing on One’s Own Land

[44.3] Controversial Cases

§ 45. Using Materials Belonging To Another

[45.2.2] Both Acted In Bad Faith

[45.2.3] Landowner In Bad Faith; Owner of the Materials

if it will cause injury to the land or to the materials — with a right to be

[45.2.4] Landowner In Good Faith; Owner of the Materials

Pacific Farms, Inc. v. Esguerra

Article 447 of the Civil Code provides:

“The owner of the land who makes thereon personally or

Of course, the character of a buyer in good faith and for

§ 46. Building With One’s Own Materials on the Land of Another

§ 47. Both Acted In Good Faith

Pershing Tan Queto v. CA

him from building despite her knowledge that construction was

Pleasantville Development Corporation v. CA

“Appellants can not be regarded as builders in good faith

[47.1.2] A Lessee Is Not A Builder In Good Faith

of the property leased, the lessor upon the termination

Geminiano v. Court of Appeals

Being mere lessees, the private respondents knew that their

Sps. Lacap v. Ong Lee

In the event that their first assigned error is not resolved

when they started paying monthly rentals to the mortgagee bank

“Art. 1678. If the lessee makes, in good faith,

[47.1.3] As A Rule, Art. 448 Cannot Apply To A Co-Owner

Spouses Del Campo v. Abesia

However, when, as in this case, the co-ownership is terminated

[47.1.4] Art. 448 Made Applicable Under Peculiar Circum-

Court of Appeals,254 however, the Court applied by analogy the provision

Pecson v. Court of Appeals