Basic Principles: (GONE BAD) 1. He who is in good faith may be held responsible but will not be penalized. 2.

To the owner of a thing belongs the extension or increase of such thing. 3. Bad faith of one party neutralizes the bad faith of the other. 4. There should be no unjust enrichment at the expense of others. 5. Bad faith involves liability for damages. 6. Accessory follows the principal. 7. Accession exists only if the incorporation is such that separation would either seriously damage the thing or diminish its value.
LANDOWNER (LO) Good Faith Acquire improvements and pay to B, P, S indemnity; subsidiarily liable to owner of materials a. sell land to B or P except if the value of the land is considerably more b. rent to S (448, 546, 455) Good Faith Acquire improvements and pay indemnity to B, P, S A. Sell to B, P except if the value of land is considerably more, forced lease Without subsidiary liability for cost of material Good Faith Option to: Acquire improvement w/o paying indemnity and collect damages, or Demolition or restoration, and collect damages, or Sell to B, P or rent to S, and collect damages Pay necessary expenses to B, P, S (449, 450, 451) BUILDER, PLANTER, SOWER (B,P,S) Good Faith Right of retention for necessary and useful expense Pay value of materials to owner of materials Good Faith Right of retention for necessary and useful expenses Keep building, planting or sowing w/o indemnity to owner of materials and collect damages (546, 449) Bad Faith Recover necessary expenses for preservation Lose improvements w/o right to indemnity from LO (452) unless the LO sells land OWNER OF THE MATERIALS (OM) Good Faith Collect value of materials primarily from B, P, S; subsidiarily from land owner if B, P, S insolvent Remove only if without injury (455, 447) Bad Faith Lose them without right to indemnity (449)

Bad Faith Recover value from B, P, S (as if both acted in good faith) If B, P, S acquires improvements, remove materials if w/o injury (447) No action versus LO

Bad Faith {Same as though all acted in good faith (453)} Bad Faith Good Faith Good Faith Acquire improvements after paying Remove improvements in any event Remove materials if w/o injury indemnity and damages to B, P, S Be indemnified for damages Collect value of materials, primarily from B, Subsidiarily liable to owner of materials P, S; subsidiarily from LO (447, 455) (454, 447, 455) Bad Faith Bad Faith Good Faith Acquire improvements after indemnity to B, Right of retention for necessary expenses Collect value of materials primarily form B, P, S; subsidiarily liable to owner of Pay value of materials to owner of P, S; subsidiarily from LO materials materials and pay him damages (546, 447) 2. Collect damages a. Sell to B, P except: if the value is 3. If B, P, S acquires improvements considerably more remove materials in any event (447, 455) b. Rent to S (453, 448, 546, 548, 455) Good Faith Bad Faith Good Faith Option to: Recover necessary expenses (452, 443) Collect value of materials and damages Acquire w/o paying indemnity and collect Lose improvements w/o right of retention from B, P, S and subsidiarily from LO damages from LO (452) unless LO sells the land Remove materials in any event if B, P, S Sell to B, P and rent to S and collect acquires improvements damages Demolish or restore and collect damages Pay necessary expenses to B, P, S Subsidiarily liable to owner of materials (449, 450, 451) Bad Faith Good Faith Bad Faith Acquire improvements & pay indemnity & Indemnity for damages No indemnity; lose materials (449) damages to B, P, S (454,447) Remove improvements in any event (454,447)

Article 448: Application: Applies only when the builder, planter or sower believes he has the right to build, plant or sow because he thinks he owns the land or believes himself to have a claim of title (Morales vs. CA, GR No. 126196, January 28, 1998). When the co-ownership is terminated by a partition and it appears that the house of an erstwhile coowner has encroached upon a portion pertaining to another co-owner which was however made in good faith, then the provisions of Art. 448 should apply to determine the respective rights of the parties (Ignao vs. Intermediate Appellate Court GR No. 72876, January 18, 1991). Does not apply where ones interest in the land is merely that of a holder such as a mere lessee under a rental contract (Balucanag vs. Francisco GR No. L-33422, May 30, 1983), an agent, or a usufructuary (Macasaet vs. Macasaet GR No. 154391, September 30, 2004). The provision on indemnity in Art. 448 may be applied by analogy considering that the primary intent of the law is to avoid a state of forced coownership especially where the parties agree that Arts. 448 and 546 are applicable and indemnity for the improvements may be paid although they differ as to the basis of the indemnity. It is the current market value of the improvements which should be made the basis of reimbursement to the builder in good faith (Pecson vs. CA, GR No. 94033, May 29, 1995). Options of the landowner: The owner of the land shall have the right to appropriate as his own the building, planting or sowing, after payment of the necessary and useful expenses. The owner of the land may also oblige the builder, planter or sower to pay the price of the land. If the owner chooses to sell his land, the builder, etc. must purchase the land; otherwise, the owner may remove the improvements thereon. The builder, etc. is not obliged to purchase the land if its value is considerably more than the building. In such case, the builder, etc. must pay rent. If the parties cannot come to terms over the conditions of the lease, the court must fix the terms thereof. (Ballatan vs. CA, GR No. 125683, March 2, 1999). The landowner may not refuse both to pay for the building and to sell the land and instead seek to compel the owner of the building to remove the building from the land. He is entitled to such removal ONLY when, after having chosen to sell the land, the other party fails to pay for said land (Ignacio vs. Hilario GR No. L-175, April 30, 1946). Should no other arrangement be agreed upon, the owner of the land does not automatically become the owner of the improvement (Filipinas Colleges, Inc. vs. Timbang GR No. L-12812, September 29, 1959). Right to choose: It is the owner of the land who must exercise the option because his right is older and because, by the principle of accession, he is entitled to the ownership of the accessory (Bernardo vs. Bataclan GR No. 44606, November 28, 1938). The so-called workable solution, as provided in the case of Grana vs. CA (GR No. L-49219, April 18, 1988) is one where the Court orders the owner of the land to sell to the builder, etc. the part of the land intruded upon, and thereby depriving him of his right to choose, because it would be impractical to choose the first alternative for the whole improvement might be rendered useless.