Depra vs. Dumlao Facts : Depra is a registered owner of a piece of land in ilo-ilo .

Adjoining his land is the land of the respondent Dumlao. Dumlao built a house and it was discovered in a survey that his kitchen encroached upon Depras land. An ejectment case was filed before the municipal court.

Municipal Court Dumlao is a builder in good faith. Mun court applied 448, ordered that there be a forced lease created between the parties.

none of the parties appealed the decision. but Depra refused to accept rentals from Dumlao. Dumlao deposited said rentals to the mun court. Depra instituted an action to quiet the title of his land (arguing that res judicata will not apply considering that the decision of Mun court is invalid for forcing them to a lease contract- saying that only the CFIhas jurisdiction on such matter and mun court can only decide on the matter of possession not on encumbrances upon properties brought before it.) CFI- Depra is the owner of the land upon which Dumlaos kitchen is built. CA- affirmed CFI Issue: SC- affirmed CA. Dumlao here is builder in good faith based on the stipulation of facts between the parties SC said MC erred in granting possession to Depra because Dumlao is a builder in good faith Remanded the case to lower court, directing it to decide according to Art 448 That is giving depra 2 options: - to pay for dumlaos kitchen or to compel him to pay for the value of the land. And that depra may only evict dumlao is on the occasion that the former chose to exercise option 2 and the latter failed to pay the price of the subject land

DEL CAMPO VS. ABESIA Facts: Plaintiff and defendant in this case are co-owners of a piece of land situated in Cebu They filed a partition case and the assigned commissioner made a survey and proposed a partition plan to them ( land be divided in two lots) The parties agreed to the plan Turned out however that house built by the defendants were in the portion given to the plaintiffs. CFI : defendants are not entitled reimbursement because he is not a builder in good faith contemplated in art 448 ( a co-owner may not be a builder in bad faith by building in a land that he co-own with other people.) Issue: WON art 448 will apply. Held: Yes. 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.

MERCADO VS. CA Facts: private respondents, the Bulaong Group, had for many years been individual lessees of stalls in the public market of Baliuag, Bulacan; The market was destroyed by fire members of the Bulaong Group constructed new stalls therein at their expense; and they thereafter paid rentals thereon to the Municipality of Baliuag. Sometime in 1972, the members of the group sub-leased their individual stalls to other persons( Mercado Group). the municipal officials of Baliuag cancelled the long standing leases of the Bulaong Group and declared the persons comprising the Mercado Group as the rightful lessees of the stalls in question, in substitution of the former The municipal authorities justified the cancellation of the leases of the Bulaong Group by invoking the provisions of Municipal Ordinance No. 14, which prohibited the subleasing of stalls by the lessees thereof Bulaong Group sued to recover their stalls and damages

MC: ruled in favour or Bulaong Group ( respondent Judge rendered a summary judgment in all the cases. 3 It rejected the claim of the Municipality of Baliuag that it had automatically acquired ownership of the new stalls constructed after the old stalls had been razed by fire, declaring the members of the Bulaong Group to be builders in good faith,entitled to retain possession of the stalls respectively put up by them until and unless indemnified for the value thereof. The decision also declared that the Bulaong and Mercado Groups had executed the sub-letting agreements with full awareness that they were thereby violating Ordinance No. 14; they were thus in pari delicto, and hence had no cause of action one against the other and no right to recover whatever had been given or demand performance of anything undertaken) MFR of Mercado group was denied CA: Affirmed Lower court Issue: WON Bulaong are builders in good faith as contemplated in Art 448. SC: No. The members of this group were admittedly lessees of space in the public market; they therefore could not, and in truth never did make the claim, that they were owners of any part of the land occupied by the market so that in respect of any new structure put up by them thereon, they could be deemed builders in good faith. To be deemed a builder in good faith, it is essential that a person assert title to the land on which he builds; i.e., that he be a possessor in concept of owner, 13 and that he be unaware "that there exists in his title or mode of acquisition any flaw which invalidates it. 14 It is such a builder in good faith who is given the right to retain the thing, even as against the real owner, until he has been reimbursed in full not only for the necessary expenses but also for useful expenses. 15 On the other hand, unlike the builder in good faith, a lessee who "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," can only claim payment of "one-half of the value of the improvements" or, "should the lessor refuse to reimburse said amount, ... remove the improvements, even though the principal thing may suffer damage thereby." 16 Lower court erred in applying the article on builder in good faith instead of applying the provisions on lease. However this decision is invalid but it is not void since it has already become final and executory when the petitioner Mercado group failed to file their appeal.

PNB VS. DE JESUS FACTS: June 10, 1995- Respondent (De Jesus) filed a complaint against the Petitioner PNB before the RTC of Occidental Mindoro for recovery of ownership and possession, with damages, over the questioned property. Respondents contention: 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 March 26, 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 the 2 letters of demand sent by Respondent, Petitioner failed and refused to vacate the same. Petitioners contention: When it acquired the lot and the building sometime in 1981 from then Mayor Bienvenido Ignacio, the encroachment already was in existence. 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 DBP. He also contends that he is a builder in good faith. RTC judgment: in favor of respondent (DE JESUS) declaring him to be the rightful owner of the disputed 124-square-meter portion of the lot and ordering petitioner to surrender possession of the property to respondent and to cause, at its expense, the removal of any improvement thereon. CA decision: sustained the trial court but it ordered to be deleted the award to respondent of attorneys fees, as well as moral and exemplary damages, and litigation expenses. Hence, this Petition for review

ISSUE WON PNB is a builder in good faith matters under Art. 448

HELD NO. Builder in good faith

- one who, not being the owner of the land, builds on that land honestly believing himself to be its owner and unaware of any defect in his title or mode of acquisition; - can compel the landowner to make a choice between appropriating the building by paying the proper indemnity or obliging the builder to pay the price of the land. The choice belongs to the owner of the land, a rule that accords with the principle of accession (the accessory follows the principal). 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. 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. Also, the building, constructed on the land by Ignacio, has in actuality been part of the property transferred to petitioner. Art. 448 of the NCC refers to a piece of land whose ownership is claimed by 2 or more parties, one of whom has built some works (or sown or planted something) and not to a case where the owner of the land is the builder, sower, or planter who then later loses ownership of the land by sale or otherwise for, elsewhere stated, where the true owner himself is the builder of works on his own land, the issue of good faith or bad faith is entirely irrelevant. SC ruling: affirmed CA decision

Gaboya v Cui Facts: Don Mariano Cui sold his lots to his 3 children, Rosario C. de Encarnacion, Mercedes C. de Ramas and Antonio Ma. Cui, pro indiviso. Rosario was not able to pay; hence the sale as to 1/3 of the property corresponding to her was cancelled and returned to Don Mariano. Don Mariano, Mercedes and Antonio became co-owners of the whole mass in equal portions. In the deed of sale, Don Mariano retained for himself the usufruct of the property. There were no buildings or any other improvements on the lots. Sometime after the sale, Mercedes and Antonio applied for a loan to construct a commercial building presumably on a portion of the entire parcel corresponding to their share. Being a coowner of the mass of the property, Don Mariano executed an authority to mortgage authorizing his two children co-owners to mortgage his share. Don Mariano was declared incompetent and a guardian in the name of Victorino Reynes was appointed for his property. In his capacity as guardian, he filed a complaint alleging that the

usufructuary right reserved in favor of Don Mariano extends to and includes the rentals of the building constructed by Antonio and Mercedes on the land sold to them by their father; that the defendants retained those rentals for themselves; that the usufructuary rights of the vendor were of the essence of the sale, and their violation entitled him to rescind (or resolve) the sale. Mercedes and Antonio, while admitting the reserved usufruct and the collection of rentals of the building, denied that the usufructuary rights included or extended to the said rentals, or that such usufruct was of the essence of the sale; that the vendor (Don Mariano) had waived and renounced the usufruct and that the defendants vendees gave the vendor P400.00 a month by way of aid. Issue: Whether the usufruct gave Don Mariano (usufructuary) the right to receive the rentals of the commercial building constructed by Mercedes and Antonio (vendees) Ruling: No. In the portion of the authority to mortgage, it was stated that the reserved usufruct in favor of the vendor, Don Mariano, was limited to the rentals of the land alone. Had it been designed to include also the rents of the buildings intended to be raised on the land, an express provision would have been included to the effect. Appellants argue that the terms of the deed constituting the usufruct are not determinative of the extent of the right conferred; and that by law, the enjoyment of the rents of the building subsequently erected passed to the usufructuary, by virtue of Article 571 of the Civil Code of the Philippines: Art. 571. The usufructuary shall have the right to enjoy any increase which the thing in usufruct may acquire through accession, the servitudes established in its favor, and, in general, all the benefits inherent therein, inasmuch as (in the appellants' view) the building constructed by appellees was an accession to the land. This argument is not convincing. Under the articles of the Civil Code on industrial accession by modification on the principal land (Articles 445 to 456 of the Civil Code) 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. Thus, Article 445, establishing the basic rule of industrial accession, prescribes that 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. while Article 449 states:

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. (Emphasis supplied) Articles 447 and 445, in turn, treat of accession produced by the landowner's building, planting and sowing "with the materials of another" and when "the materials, plants or seeds belong to a third person other than the landowner or the builder, planter or sower. Nowhere in these articles on industrial accession is there any mention of the case of landowner building on his own land with materials owned by himself. The reason for the omission is readily apparent: recourse to the rules of accession are totally unnecessary and inappropriate where the ownership of land and of the, materials used to build thereon are concentrated on one and the same person. Even if the law did not provide for accession the land-owner would necessarily own the building, because he has paid for the materials and labor used in constructing it.

BACHRACH VS. SEIFERT Facts: Emil Marice Bachrach died left no forced heir except his wife Mary McDonald Bachrach. In his last will he made various legacies and willed the rest to his wife as usufructuary and use or spend such fruits as she may in any manner wish. for life of the remainder of his estate The will further provided that upon the death of his wife one-half of all of his estate shall be divided among his legal heirs to the exclusion of his brothers. The estate of Bachrach, as owner of 108,000 shares of stock of the Atok-Big Wedge Mining Co received from the latter 54,000 shares representing 50 % stock dividend on the said 108,000 shares. On June 10, 1948, Mary McDonald Bachrach, as usufructuary or life, petitioned the lower court to authorize the Peoples Bank and Trust Company as (administrator of the estate of E. M. Bachrach) to transfer to her the said 54,000 shares of stockdivided. She claimed that said dividend is fruit or income and therefore belonged to her. Sophie Siefert and Elisa Elianoff, (legal heirs), opposed said petition on the ground that the stock dividend in question was not income but formed part of the capital and therefore belonged not to the usufructuary but to the remainderman. Lower Court Granted the petition of Mary. Sophie and Elisa appealed. Issue: WON a stock dividend fruit or income, which belongs to the usufructuary, or is it capital or part of the corpus of the estate, which pertains to the remainderman?

Ruling: It is a fruit/income therefore it belongs to the wife as usufructuary. (Pennsylvania Rule was applied citing Hite vs Hite) The 54,000 shares of stock dividend are civil fruits of the original investment. They represent profits, and the delivery of the certificate of stock covering said dividend is equivalent to the payment of said profits. Said shares may be sold independently of the original shares, just as the offspring of a domestic animal may be sold independently of its mother. Under section 16 of our Corporation Law, no corporation may make or declare any dividend except from the surplus profits arising from its business. Any dividend, therefore, whether cash or stock, represents surplus profits. Article 471 of the Civil Code provides that the usufructuary shall be entitled to receive all the natural, industrial, and civil fruits of the property in usufruct. And articles 474 and 475 provide as follows: ART. 474. Civil fruits are deemed to accrue day by day, and belong to the usufructuary in proportion to the time the usufruct may last. ART. 475. When a usufruct is created on the right to receive an income or periodical revenue, either in money or fruits, or the interest on bonds or securities payable to bearer, each matured payment shall be considered as the proceeds or fruits such right.

BACHRACH v TALISAY SILAY Facts: 22 Dec 1923, Talisay-Silay was indebted to PNB. To secure the loan, Talisay induced its planters one of whom was Mariano Lacson Ledesma to mortgage their land. The central, to compensate the planters for mortgaging their property, undertook to credit the owners of the plantation every year with a sum equal to 2% of the debt secured according to the yearly balance. The payment to be made as soon as the central was freed of its debts Mariano sold his land to Cesar Ledesma for P7500 Bachrach on the other hand was a creditor of Mariano Ledesma. When Mariano could no longer pay Bachrach, it went after Talisay (original complaint), praying for the delivery of P13850 Talisay owed to Mariano as bonus stated in the instrument of credit. It also prayed for accounting of whatever the central owed to Mariano by way of bonus, dividend, etc., as well as the nullification of the sale made to Cesar Ledesma PNB filed third party claim alleging a preferential right over Marianos credit owed by Talisay as part of the civil fruits of the land mortgaged to the bank. Bachrach contested this.

Talisay prayed for the absolution of 7500 of the credit as it belonged to Cesar Ledesma as buyer in good faith. All parties later agreed to respect Cesars credit and absolved him from the complaint and ordered delivery to him of P7500 Trial court ruled in favor of Bachrach, awarding it P11,076.02 of Marianos bonus from Talisay. Hence this appeal Issues: W/N the bonus was a civil fruit which formed part of the mortgaged land NO Held and Ratio: NO. Art 355 of the old Civil Code (Art 442 of the current Civil Code) considers three things as civil fruits: rents of buildings, proceeds from leases of lands, and income from perpetual of life annuities or other similar sources of revenue. The bonus in question was neither rent of a building nor land. For it to come under the coverage of income, it must be obtained from the land. In this case however, the bonus bears no immediate but only a remote and accidental relation to the land. The central granted it as compensation for the risk that the landowners entered in mortgaging their lands. If the bonus was an income of any kind, it comes from the assumption of risk, and not from the land itself. Thus, it is distinct and independent from the property referred to in the mortgage to the bank. Judgment affirmed BERNARDO VS. BATCLAN FACTS: Plaintiff Bernardo acquired the property in question from a civil case he instituted against its former owner( Pastor Samonte et al). When he entered the property , he discovered that the respondent Bataclan who was authorized by the former owner has cleared and made improvements upon the property. Plaintiff filed a case and the court decided he was the rightful owner but the respondent is also a possessor in good faith and therefore he was entitled to reimbursement for the work done and the improvements upon the properties. Both parties appealed The decision appealed from was modified by allowing the defendant to recover compensation amounting to P2,212 and by reducing the price at which the plaintiff could require the defendant to purchase the land in question from P300 to P200 per hectare. On January 9, 1934, the plaintiff manifested to the lower court his desire "to require the defendant to pay him the value of the land at the rate of P200 per hectare or a

total price of P18,000 for the whole tract of land." The defendant informed the lower court that he was unable to pay the land and, on January 24, 1934, an order was issued giving the plaintiff 30 days within which to pay the defendant the sum of P2,212 stating that, in the event of failure to make such payment, the land would be ordered sold at public auction On February 21, 1934, plaintiff moved to reconsider the foregoing order so that he would have preference over the defendant in the order of payment. The motion was denied on March 1, 1934 but on March 16 following the court below, motu proprio modified its order of January 24, The land was sold in a public auction and was awarded to the highest bidder Respondent Bataclan however averred that he is a possessor in good faith and he is still entitled possession of the land since he has yet received reimbursement from his work in the property

Issue: WON respondent may still retain the possession of the property Held: No. We find, however, that the defendant has lost his right of retention. In obedience to the decision of this court in G.R. No. 37319, the plaintiff expressed his desire to require the defendant to pay for the value of the land. The said defendant could have become owner of both land and improvements and continued in possession thereof. But he said he could not pay and the land was sold at public auction to Toribio Teodoro. The law, as we have already said, requires no more than that the owner of the land should choose between indemnifying the owner of the improvements or requiring the latter to pay for the land. When he failed to pay for the land, the defendant herein lost his right of retention. The sale at public auction having been asked by the plaintiff himself (p. 22, bill of exceptions) and the purchase price of P8,000 received by him from Toribio Teodoro, we find no reason to justify a rapture of the situation thus created between them, the defendantappellant not being entitled, after all, to recover from the plaintiff the sum of P2,212. Note: SC further explained:
The Civil Code confirms certain time-honored principles of the law of property. One of these is the principle of accession whereby the owner of property acquires not only that which it produces but that which is united to it either naturally or artificially. (Art. 353.) Whatever is built, planted or sown on the land of another, and the improvements or repairs made thereon, belong to the owner of the land (art. 358). Where, however, the planter, builder, or sower has acted in good faith, a conflict of rights arises between the owners and it becomes necessary to protect the owner of the improvements without causing injustice to the owner of the land. In view of the impracticability of creating what Manresa calls a state of "forced coownership" (vol. 3, 4th ed., p. 213), the law has provided a just and equitable 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 (art. 361). It is the owner of the land who is allowed 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, 4th ed., p. 213). In the case before us, the plaintiff, as owner of the land, chose to require the defendant, as owner of the improvements, to pay for the land.

Sarmiento vs. Agana

Facts: While respondent ERNESTO was still courting his wife, the latter's mother had told him that they can build a RESIDENTIAL HOUSE on a lot in Paranaque. In 1967, ERNESTO constructed a RESIDENTIAL HOUSE on the LAND at a cost of P8, 000.00 to P10, 000.00.They assumed that the wife's mother was the owner of the LAND and that, eventually, it would be transferred to them. It turned out that the land was registered to Mr. & Mrs. Jose C. Santo, Jr. who sold the same to petitioner SARMIENTO in 1974. SARMIENTO then asked ERNESTO and wife to vacate the land and filed an Ejectment suit against them. In the Municipal Court, SARMIENTO submitted that the price of the land was P15,000.00. ERNESTO also testified the cost of their HOUSE was P30, 000.00 to P40, 000.00. The figures were not questioned by SARMIENTO. The Municipal Court ruled that the value of the house was P20, 000.00, that Ernesto and his wife were builders in good faith, and that they vacate the land after SARMIENTO reimburse them of the mentioned sum of P20, 000.00 for the value of the house. The Ejectment suit was elevated to the CFI of Pasay where, said Court rendered a modifying decision saying that SARMIENTO was required, within 60 days, to exercise the option to reimburse ERNESTO and wife the sum of 40,000.00 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 allowed to deposit the sum of P25,000.00 with the Court as the purchase price for the LAND. SARMIENTO then instituted the instant certiorari proceedings. Issue: Whether or not the owner of the land may be compelled to either buy the building or to sell the land to the respondent Held: Yes We agree that ERNESTO and wife were builders in good As far as they knew, the LAND was owned by ERNESTO's mother-in-law who, having stated they could build on the property, could reasonably be expected to later on give them the LAND. ART. 448. The owner of the land on which anything has been built, sown or planted in good faith,

shall have the right to appropriate as his own the works, sowing or planting, after payment of the indemnity provided for in articles 546 and 548, or to oblige the one who built or planted to pay the price of the land, and the one who sowed, the proper rent. However, the builder or planter cannot be obliged to buy the land if its value is considerably more than that of the building or trees. In such case, he shall pay reasonable rent, if the owner of the land does not choose to appropriate the building or trees after proper indemnity. The parties shall agree upon the terms of the lease and in case of disagreement, the court shall fix the terms thereof. (Paragraphing supplied) The challenged decision of respondent Court, based on valuations of P25,000.00 for the LAND and P40,000.00 for the RESIDENTIAL HOUSE, cannot be viewed as not supported by the evidence. The provision for the exercise by petitioner SARMIENTO of either the option to indemnify private respondents in the amount of P40,000.00, or the option to allow private respondents to purchase the LAND at P25,000.00, in our opinion, was a correct decision. The owner of the building erected in good faith on a land owned by another, is entitled to retain the possession of the land until he is paid the value of his building, under article 453 (now Article 546). The owner, of the land upon, the other hand, has the option, under article 361 (now Article 448), either to pay for the building or to sell his land to the owner of the building. But he cannot, as respondents here did, refuse both to pay for the building and to sell the land and compel the owner of the building to remove it from the land where it is erected. He is entitled to such remotion only when, after having chosen to sell his land, the other party fails to pay for the same. (Emphasis ours) We hold, therefore, that the order of Judge Natividad compelling defendants-petitioners to remove their buildings from the land belonging to plaintiffs-respondents only because the latter chose neither to pay for such buildings nor to sell the land, is null and void, for it amends substantially the judgment sought to be executed and is, furthermore, offensive to articles 361 (now Article 448) and 453 (now Article 546) of the Civil Code. (Ignacio vs. Hilario, 76 Phil. 605, 608 [1946]). WHEREFORE, the Petition for Certiorari is hereby ordered dismissed.