1. SPOUSES PELAGIO GULLA and PERLITA GULLA vs.

HEIRS OF ALEJANDRO
LABRADOR G.R. No. 149418 July 27, 2006

DOCTRINE:
While it is true that the salvage zone cannot be the subject of commerce, the adjoining owner thereof,
has the priority to use it. The law provides the different modes of acquiring ownership and accession is
not among the modes of acquiring ownership. Accession is a right implicitly included in ownership,
without which it will have no basis or existence. The right to accession is automatic, requiring no prior
act on the part of the owner of the principal.

FACTS:

Respondents filed a complaint against petitioners for "Cancellation of Tax Declaration and
Recovery of Possession with Damages" (accion publiciana) involving a lot and another lot abutting the
titled property. According to the respondents, the property was declared for taxation purposes under
their names and the corresponding taxes were paid thereon. In 1996, the petitioners occupied a portion
of the property fronting the China Sea, as well as the lot within the salvage area. The respondents
pointed out that whatever alleged claims the petitioners had on the property was acquired through a
Deed of Waiver of Rights executed in 1986 in their favor by another "squatter" Alfonso Bactad. For
their part, the petitioners claimed that they had been in possession of the property, since 1984 and
declared the property for taxation purposes under their names. In 1994, they filed an application for
miscellaneous sales patent which was certified as alienable and disposable land by the barangay captain.

In 1998, the MTC rendered judgment in favor of the Labradors, ordering the spouses Gulla to
vacate the portion of the property occupied by them and the lot within the salvage zone. According to
the MTC, the Labradors were able to establish ownership over the subject property, as evidenced by the
title under their name. For their part, the petitioners failed to overcome the evidence of the respondents,
and not being the riparian owners of the lot which is within the salvage zone, they have no right to
possess the same.

On appeal, the RTC rendered judgment affirming the appealed decision. Applying Article 440 of
the New Civil Code, the RTC declared that the Labradors had the right to possess the land, it being
inseparably attached to the titled property as an accessory.

ISSUE:

Whether or not petitioners are entitled to the possession of the area outside the titled property of
the respondents and is within the Salvage Zone.

RULING:

NO. Petitioners should be ejected even if the portion occupied by them is in the salvage zone. 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 (Article 440, Civil Code). Accession 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.

In the case at bar, it is undisputed that the area is outside the titled property of the respondents and
is within the salvage zone adjacent to respondents property. However, while it is true that the salvage
zone cannot be the subject of commerce, the adjoining owner thereof, the respondents in this case, has
the priority to use it. Otherwise stated, herein respondents do not own the salvage zone but as an
adjacent owner, he has the right to use it more than the petitioners applying the basic rule as stated
above. Moreover, the law provides the different modes of acquiring ownership and accession is not
among the modes of acquiring ownership. Accession is a right implicitly included in ownership, without
which it will have no basis or existence. In general, the right to accession is automatic (ipso jure),
requiring no prior act on the part of the owner of the principal.

3. G.R. No. 152319, October 28, 2009

Heirs of Joaquin Limense vs Rita Vda. De Ramos

Facts:

Lozada was the registered owner of a land in Manila, he subdivided his property into five and gave the
divided lots to his daughters through a deed of donation on March 9, 1932.

In 1981, Joaquin Limense wanted to build a hollow block fence on his property but could not because a
substantial portion of the respondent's building encroached upon portion of Limense property.

Limense demanded the removal of the encroached area, respondent ignored both oral and written
demands.

In the RTC, the respondents averred that they are daughters of on of the Lozada daughters. . After
subdividing the said lot, Dalmacio Lozada donated Lot No. 12-C in favor of his daughters Catalina,
married to Sotero Natividad; Isabel, married to Isaac Limense; and Salud, married to Francisco Ramos.
Being the surviving heirs of Francisco Ramos, respondents later became co-owners of Lot No. 12-C. Lot
No. 12-C has served as right of way or common alley of all the heirs of Dalmacio Lozada since 1932 up
to the present. As a common alley, it could not be closed or fenced by Joaquin Limense without causing
damage and prejudice to respondents.

RTC: dismissed the complaint of Limense ruling that an apparent easement of right of way existed in
favor of respondents. The Court also finds that when plaintiff acquired the lot (12-C) which forms the
alley, he knew that said lot could serve no other purpose than as an alley.

Joaquin filed a notice of appeal but during the pendency of the appeal with the CA, Joaquin died. His
heirs then elevated the case to the SC via petition for review on certiorari.

Issue: Whether CA committed a grave abuse amounting to lack of jurisdiction in holding that
respondent's ot has an easement of right of way.

Held: In the case at bar, the action filed before the RTC against respondents was an action for removal
of obstruction and damages. Respondents raised the defense that Joaquin Limense's title could have
been obtained through fraud and misrepresentation in the trial proceedings before the RTC. Such
defense is in the nature of a collateral attack, which is not allowed by law.

As with the present case, the CA's observation that TCT No. 96886 is of dubious origin, as TCT No.
40043 does not appear to have been disposed of by Catalina, Isabel and Salud Lozada, is improper and
constitutes an indirect attack on TCT No. 96886. As we see it, TCT No. 96886, at present, is the best
proof of Joaquin Limenses ownership over Lot No. 12-C. Thus, the CA erred in ruling that respondents
and petitioners co-owned Lot No. 12-C, as said lot is now registered exclusively in the name of Joaquin
Limense.

Due to the foregoing, Joaquin Limense, as the registered owner of Lot 12-C, and his successors-in-
interest, may enclose or fence his land or tenements by means of walls, ditches, live or dead hedges, or
by any other means without detriment to servitudes constituted thereon.

Joaquin Limense and his successors-in-interests are fully aware that Lot No. 12-C has been continuously
used and utilized as an alley by respondents and residents in the area for a long period of time.

The portions of Lot No. 12-D, particularly the overhang, covering 1 meter in width and 17 meters in
length; the stairs; and the concrete structures are all within the 1/3 share allotted to them by their donor
Dalmacio Lozada and, hence, there was absence of a showing that respondents acted in bad faith when
they built portions of their house on Lot No. 12-C.

WHEREFORE, the petition is DENIED, the Decision of the Court of Appeals dated December 20, 2001
in CA-G.R. CV No. 33589 is AFFIRMED with the following MODIFICATIONS:

1. No co-ownership exists over Lot No. 12-C, covered by TCT No. 96886, between petitioners and
respondents.

2. The case is REMANDED to the Regional Trial Court, Branch 15, Manila, for further proceedings
without further delay to determine the facts essential to the proper application of Articles 448 and 546 of
the Civil Code.

4. SPS. MACASAET vs SPS. MACASAET G.R. 154391-92 Sept. 30, 2004

Facts:

Petitioners Ismael and Teresita5 Macasaet and Respondents Vicente and Rosario Macasaet are first-degree
relatives. Ismael is the son of respondents, and Teresita is his wife.6

On December 10, 1997, the parents filed with the Municipal Trial Court in Cities (MTCC) of Lipa City an
ejectment suit against the children.7 Respondents alleged that they were the owners of two (2) parcels of land
covered by Transfer Certificate of Title (TCT) Nos. T-78521 and T-103141, situated at Banay-banay, Lipa City;
that by way of a verbal lease agreement, Ismael and Teresita occupied these lots in March 1992 and used them as
their residence and the situs of their construction business; and that despite repeated demands, petitioners failed to
pay the agreed rental of P500 per week.8

Ismael and Teresita denied the existence of any verbal lease agreement. They claimed that respondents had
invited them to construct their residence and business on the subject lots in order that they could all live near one
other, employ Marivic (the sister of Ismael), and help in resolving the problems of the family. 9 They added that it
was the policy of respondents to allot the land they owned as an advance grant of inheritance in favor of their
children. Thus, they contended that the lot covered by TCT No. T-103141 had been allotted to Ismael as advance
inheritance. On the other hand, the lot covered by TCT No. T-78521 was allegedly given to petitioners as
payment for construction materials used in the renovation of respondents house.10

The MTCC11 ruled in favor of respondents and ordered petitioners to vacate the premises. It opined that Ismael
and Teresita had occupied the lots, not by virtue of a verbal lease agreement, but by tolerance of Vicente and
Rosario.12 As their stay was by mere tolerance, petitioners were necessarily bound by an implied promise to
vacate the lots upon demand.13 The MTCC dismissed their contention that one lot had been allotted as an advance
inheritance, on the ground that successional rights were inchoate. Moreover, it disbelieved petitioners allegation
that the other parcel had been given as payment for construction materials.14

On appeal, the regional trial court15 (RTC) upheld the findings of the MTCC. However, the RTC allowed
respondents to appropriate the building and other improvements introduced by petitioners, after payment of the
indemnity provided for by Article 448 in relation to Articles 546 and 548 of the Civil Code.16 It added that
respondents could oblige petitioners to purchase the land, unless its value was considerably more than the
building. In the latter situation, petitioners should pay rent if respondents would not choose to appropriate the
building.17

Issue:
Whether or not Article 1678 of the Civil Code should apply to the case on the matters of improvements,
or is it Article 447 of the Civil Code in relation to the Article 453 and 454 thereof that should apply, if
ever to apply the Civil Code
Held:

Rights of a Builder in Good Faith

As applied to the present case, accession refers to the right of the owner to everything that is incorporated or
attached to the property.60 Accession industrial -- building, planting and sowing on an immovable -- is governed
by Articles 445 to 456 of the Civil Code.

Articles 447 and 1678 of the

Civil Code Inapplicable

To buttress their claim of reimbursement for the improvements introduced on the property, petitioners cite Article
447.61

We clarify. Article 447 is not applicable, because it relates to the rules that apply when the owner of the property
uses the materials of another. It does not refer to the instance when a possessor builds on the property of another,
which is the factual milieu here.

In view of the unique factual setting of the instant case, the contention of petitioners regarding the inapplicability
of Article 1678 deserves attention. The CA applied the provisions on lease, because it found their possession by
mere tolerance comparable with that of a lessee, per the pronouncement in Calubayan v. Pascual,62 from which we
quote:

"x x x. It has been held that a person who occupies the land of another at the latters tolerance or
permission, without any contract between them, is necessarily bound by an implied promise that he will
vacate upon demand, failing which a summary action for ejectment is the proper remedy against them.
The status of defendant is analogous to that of a lessee or tenant whose term of lease has expired but
whose occupancy continued by tolerance of the owner. In such a case, the unlawful deprivation or
withholding of possession is to be counted from the date of the demand to vacate." 63 (Emphasis in the
original.)

As explained earlier, Ismael and Teresitas possession of the two lots was not by mere tolerance, a circumstance
that negates the applicability of Calubayan.

Article 448 Applicable

On the other hand, when a person builds in good faith on the land of another, the applicable provision is Article
448, which reads:64

"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 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."

This Court has ruled that this provision covers only cases in which the builders, sowers or planters believe
themselves to be owners of the land or, at least, to have a claim of title thereto. 65 It does not apply when the
interest is merely that of a holder, such as a mere tenant, agent or usufructuary.66 From these pronouncements,
good faith is identified by the belief that the land is owned; or that -- by some title -- one has the right to build,
plant, or sow thereon.67

However, in some special cases, this Court has used Article 448 by recognizing good faith beyond this limited
definition. Thus, in Del Campo v. Abesia,68 this provision was applied to one whose house -- despite having been
built at the time he was still co-owner -- overlapped with the land of another.69 This article was also applied to
cases wherein a builder had constructed improvements with the consent of the owner. The Court ruled that the law
deemed the builder to be in good faith.70 In Sarmiento v. Agana,71 the builders were found to be in good faith
despite their reliance on the consent of another, whom they had mistakenly believed to be the owner of the land.72

Based on the aforecited special cases, Article 448 applies to the present factual milieu. The established facts of
this case show that respondents fully consented to the improvements introduced by petitioners. In fact, because
the children occupied the lots upon their invitation, the parents certainly knew and approved of the construction of
the improvements introduced thereon.73 Thus, petitioners may be deemed to have been in good faith when they
built the structures on those lots.

The instant case is factually similar to Javier v. Javier.74 In that case, this 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 44875 was applied.

Rule on Useful Expenses

The structures built by petitioners were "useful" improvements, because they augmented the value or income of
the bare lots.76 Thus, the indemnity to be paid by respondents under Article 448 is provided for by Article 546,
which we quote:

"Art. 546. Necessary expenses shall be refunded to every possessor; but only the possessor in good faith
may retain the thing until he has been reimbursed therefor.

"Useful expenses shall be refunded only to the possessor in good faith with the same right of retention,
the person who has defeated him in the possession having the option of refunding the amount of the
expenses or of paying the increase in value which the thing may have acquired by reason thereof."

Consequently, respondents have the right to appropriate -- as their own -- the building and other improvements on
the subject lots, but only after (1) refunding the expenses of petitioners or (2) paying the increase in value
acquired by the properties by reason thereof. They have the option to oblige petitioners to pay the price of the
land, unless its value is considerably more than that of the structures -- in which case, petitioners shall pay
reasonable rent.
In accordance with Depra v. Dumlao,77 this case must be remanded to the trial court to determine matters
necessary for the proper application of Article 448 in relation to Article 546. Such matters include the option that
respondents would take and the amount of indemnity that they would pay, should they decide to appropriate the
improvements on the lots. We disagree with the CAs computation of useful expenses, which were based only on
petitioners bare allegations in their Answer.78

Ruling on Improvement Justified

This Court finds it necessary to abbreviate the issue on the improvements in relation to Article 448. First, the
determination of the parties right to those improvements is intimately connected with the MTCC proceedings in
the light of the ejectment of petitioners. Second, there is no dispute that while they constructed the improvements,
respondents owned the land. Third, both parties raised no objection when the RTC and the CA ruled accordingly
on this matter.

5. COMMUNITIES CAGAYAN, INC.,

vs.
SPOUSES ARSENIO (Deceased) and ANGELES NANOL AND ANYBODY CLAIMING
RIGHTS UNDER THEM

Facts:
Sometime in 1994, respondent-spouses Arsenio and Angeles Nanol entered into a Contract to Sell with
petitioner Communities Cagayan, Inc., (CCI) whereby the latter agreed to sell to respondent-spouses a
house and Lots 17 and 19 located at Block 16, Camella Homes Subdivision, Cagayan de Oro City, for
the price of P368,000.00 (P368T). They obtained a loan from Capitol Development Bank (CDB), using
the property as collateral. To facilitate the loan, a simulated sale over the property was executed by
petitioner in favor of respondent-spouses. Accordingly, titles (TCT Nos. 105202 and 105203) were
transferred in the names of respondent-spouses and submitted to CDB for loan processing. The bank
collapsed and closed before it could release the loan.

On November 30, 1997, respondent-spouses entered into another Contract to Sell with petitioner over
the same property for the same price. This time, they availed of petitioners in-house financing thus,
undertaking to pay the loan over four years, from 1997 to 2001.

Respondent Arsenio demolished the original house and constructed a three-story house allegedly valued
at P3.5 million, more or less. (Respondent Arsenio died, leaving his wife, herein respondent Angeles, to
pay for the monthly amortizations.)

On September 10, 2003, petitioner sent respondent-spouses a notarized Notice of Delinquency and
Cancellation of Contract to Sell due to the latters failure to pay the monthly amortizations. Petitioner
filed before the Municipal Trial Court in Cities, an action for unlawful detainer against respondent-
spouses.

In her Answer, respondent Angeles averred that the Deed of Absolute Sale is valid.

Issues
1) Whether petitioner is obliged to refund to respondent-spouses all the monthly installments paid; and
2) Whether petitioner is obliged to reimburse respondent-spouses the value of the new house minus the
cost of the original house.
Ruling
The petition is partly meritorious.

Respondent-spouses are entitled to the cash surrender value of the payments on the property equivalent
to 50% of the total payments made under the Maceda Law. Respondent-spouses are entitled to
reimbursement of the improvements made on the property.

In view of the special circumstances obtaining in this case, we are constrained to rely on the
presumption of good faith on the part of the respondent-spouses which the petitioner failed to rebut.
Thus, respondent-spouses being presumed builders in good faith, we now rule on the applicability of
Article 448 of the Civil Code. Article 448 on builders in good faith does not apply where there is a
contractual relation between the parties, such as in the instant case. We went over the records of this
case and we note that the parties failed to attach a copy of the Contract to Sell. As such, we are
constrained to apply Article 448 of the Civil Code, which provides viz:

ART. 448. The owner of the land on which anything has been built, sown or planted in good faith, shall
have the right to appropriate as his own the works, sowing or planting, after payment of the indemnity
provided for in Articles 546 and 548, or to oblige the one who built or planted to pay the price of the
land, and the one who sowed, the proper rent. However, the builder or planter cannot be obliged to buy
the land if its value is considerably more than that of the building or trees. In such case, he shall pay
reasonable rent, if the owner of the land does not choose to appropriate the building or trees after proper
indemnity. The parties shall agree upon the terms of the lease and in case of disagreement, the court
shall fix the terms thereof.

The rule that the choice under Article 448 of the Civil Code belongs to the owner of the land is in accord
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. The
landowner cannot refuse to exercise either option and compel instead the owner of the building to
remove it from the land. The raison detre for this provision has been enunciated thus: 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 impracticability 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 payment of
the proper indemnity, or to oblige the builder or planter to pay for the land and the sower the proper rent.
He cannot refuse to exercise either option. 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.

In conformity with the foregoing pronouncement, we hold that petitioner, as landowner, has two options.
It may appropriate the new house by reimbursing respondent Angeles the current market value thereof
minus the cost of the old house. Under this option, respondent Angeles would have "a right of retention
which negates the obligation to pay rent." In the alternative, petitioner may sell the lots to respondent
Angeles at a price equivalent to the current fair value thereof. However, if the value of the lots is
considerably more than the value of the improvement, respondent Angeles cannot be compelled to
purchase the lots. She can only be obliged to pay petitioner reasonable rent.
6. Sps. Reynaldo and Esmeralda Alcaraz v. Pedro M. Tangga-an et.
al.,
GR No. 128568, 09 April 2003
1. On October 4, 1994, respondents Pedro Tangga-an and the heirs of Virginia Tangga-an filed a
complaint for unlawful detainer, with damages, against petitioner spouses Reynaldo Alcaraz and
Esmeralda Alcaraz.
2. The complaint alleged that the late Virginia Tangga-an (the spouse of respondent Pedro Tangaa-
an and mother of the rest of the respondents) leased a residential building (house) located in
Cebu City to the petitioner spouses.
3. The lease contract was limited to the use and occupancy of the said residential building and
did not include the lot on which it was constructed because the said lot was then owned by the
National Housing Authority (NHA).
4. Under the contract, the petitioner spouses bound themselves for five years to pay Virginia a
monthly rental of P4,000 beginning November 22, 1991. However, since November 1993, they
failed to pay rent.
5. Thus, as of October, 1994, they were in arrears in the amount of P48,000. Despite repeated
demands by respondents to pay the rentals in arrears and to surrender the possession of the
residential building, the petitioner spouses refused to vacate the same.
6. Petitioner spouses alleged that, on July 23, 1993, the ownership of the lot on which the house
stood was transferred by the NHA to Virgilio and Angelita D. Tangga-an.
7. Virgilio Tangga-an is the son of the late Virgilia Tangga-an and respondent Pedro Tangga-an,
and the brother of the other respondents.
8. According to the petitioner spouses, the subsequent change in ownership of the lot and the
house resulted in the cancellation of the contract of lease between respondents and
petitioner spouses.
9. Thereafter, they paid the rent to the new owners of the lot (Virgilio and Angelita) and not to
respondents since the latter supposedly no longer had the legal right to collect rentals.
10. MTC: ruled in favor of the respondents. Petitioner spouses clearly violated the contract of
lease due to non-payment of rent. They failed to show that the subject house belonged to
Virgilio alone.
11. RTC affirmed the decision of the MTC, and held that: spouses failed to present any documentary
evidence modifying or amending the contract of lease.
12. CA: private respondents have the right to institute the action for ejectment, and that the
claim of petitioner that Virgilio Tangga-an owns the lot where the leased residential
building stands and occupied by petitioners is still the subject of a civil action for
annulment of the sale of the lot before the Regional Trial Court of Cebu.
ISSUE: whether the petitioner spouses, as lessees, were excused from paying the rent because of the
change in the ownership of the land on which the rented house was built.
HELD: NO, petitioner spouses failed to substantiate their factual averment that Virgilio not only
acquired the lot but also the house.
RATIO:
1. All the petitioner spouses presented was Virgilios uncertified xerox copy of the certificate of
title over the lot. No document was ever shown evidencing cession of the subject house in
Virgilios favor. Virgilios title could not be used to prove ownership over the house built on said
lot as it carried no reference at all to the house.
2. On the other hand, the respondents proved that, as compulsory heirs of Virginia, they were the
rightful owners of the subject house. They presented a tax declaration in the name of their
trustees, co-respondent Hermes Tangga-an and his wife, which tax declaration sufficiently
evidences their co-ownership and acquisition of title following the death of the decedent
 Virginia.
3. They claim that the lease contract ceased to be effective because Virgilios assumption of
ownership of the land stripped the respondents of ownership of the building. Section 2, Rule 131
of the Rules of Court provides as a conclusive presumption that:
Sec. 2. Conclusive presumptions. The following are instances of conclusive presumptions:
(a) Whenever a party has, by his own declaration, act, or omission, intentionally and
deliberately led another to believe a particular thing true, and to act upon such belief, he
cannot, in any litigation arising out of such declaration, act or omission, be permitted to
falsify it;
4. After recognizing the validity of the lease contract for two years, the petitioner spouses are
barred from alleging the automatic cancellation of the contract on the ground that the
respondents lost ownership of the house after Virgilio acquired title over the lot.
5. Further, petitioner spouses rescinded the contract of lease without judicial approval. They alleged
that there was no reason anymore to perform their obligations as lessees because the lessor had
ceased to be the owner of the house.
6. But there is nothing in their lease contract that allows the parties to extrajudicially rescind the
same in case of violation of the terms thereof. Extrajudicial rescission of a contract is not
possible without an express stipulation to that effect.
7. What the petitioner spouses should have done was to file a special civil action for interpleader
for the claimants to litigate their claims and to deposit the rentals in court.

7. Philippine National Bank vs. Spouses Bernard and Cresencia Maraon

GR No. 189316 July 01, 2013

Facts:
A 152 square meter lot in downtown Bacolod with a building leased to various tenants was subjected to a loan
and mortgage by Spouses Montealegre with Philippines National Bank. The property was under the name of
Emolie Montalegre under TCT 156512. The Spouses Montealegre failed to pay the loan and PNB foreclosed on
said lot and building. During auction sale PNB was the highest bidder on August 16, 1991, then was issued a
Certificate of Sale on December 17, 1991 and registered on February 4, 1992.

Spouses Maraon filed on July 29, 1992 before the RTC a complaint for Annulment of Title, Reconveyance and
Damages against the Montealegres, PNB, the Register of Deeds and Provincial Sherriff. The civil case alleged
that the Maraons are rightful owners of the lot and the Montealegres forged their names in a Deed of Sale to
transfer the property to the Montealegres. PNB averred it is a mortgagee in good faith and the mortgage is binding
and valid.

During the trial Paterio Tolete deposited with the Clerk of Court of Bacolod P144,000 and P30,000 with PNB of
rental payments.

RTC found in favor of the Maraon after it was determined that their signatures were in deed forged and the
conveyance to the Montealegres was null and void. PNB was also adjudged as a mortgagee in good faith and to
respect the lien on the property. Neither parties dissented.

Current controversy is the rental monies deposited.

Maraons filed an Urgent Motions for Withdrawal of Deposited Rental for the P144,000 and P30,000 deposited
by Tolete. The RTC granted the motion for both rental payments because the Spouses are the rightful owners and
they are entitled to the civil fruits of their property. The RTC issued Orders to return the P30,000 to the Spouses.

PNB dissented saying the mortgage lien was decided to be respected and they are entitled to both the P144,000
and the P30,000 rental payments and filed petitions for certiorari and mandamus to the Court of Appeals.
Court of Appeals denied the petition rationalizing that the mortgage transaction was not between the current
petitioners and respondents and that PNB was not a mortgagee in good faith because as a financial institution
should have looked beyond the title presented by the Montealegres. Motion for reconsideration was denied.

Issues:
#1 Whether or not that the mortgage the RTC decided should be respected should also include the fruits deposited
to answer for the debt.

HELD:

No.

Rent is a civil fruit31 that belongs to the owner of the property32 producing it by right of accession33.34 The rightful
recipient of the disputed rent in this case should thus be the owner of the subject lot at the time the rent accrued. It
is beyond question that Spouses Maraon never lost ownership over the subject lot. This is the precise
consequence of the final and executory judgment in Civil Case No. 7213 rendered by the RTC on June 3, 2006
whereby the title to the subject lot was reconveyed to them and the cloud thereon consisting of Emilies
fraudulently obtained title was removed. Ideally, the present dispute can be simply resolved on the basis of such
pronouncement. However, the application of related legal principles ought to be clarified in order to settle the
intervening right of PNB as a mortgagee in good faith.

The protection afforded to PNB as a mortgagee in good faith refers to the right to have its mortgage lien carried
over and annotated on the new certificate of title issued to Spouses Maraon35 as so adjudged by the RTC.
Thereafter, to enforce such lien thru foreclosure proceedings in case of non-payment of the secured debt,36 as PNB
did so pursue. The principle, however, is not the singular rule that governs real estate mortgages and foreclosures
attended by fraudulent transfers to the mortgagor.

Rent, as an accessory follow the principal.37 In fact, when the principal property is mortgaged, the mortgage shall
include all natural or civil fruits and improvements found thereon when the secured obligation becomes due as
provided in Article 2127 of the Civil Code, viz:

Art. 2127. The mortgage extends to the natural accessions, to the improvements, growing fruits, and the rents or
income not yet received when the obligation becomes due, and to the amount of the indemnity granted or owing
to the proprietor from the insurers of the property mortgaged, or in virtue of expropriation for public use, with the
declarations, amplifications and limitations established by law, whether the estate remains in the possession of the
mortgagor, or it passes into the hands of a third person.

Accordingly, since the building was not foreclosed, it remains a property of Spouses Maraon; it is not affected
by non-redemption and is excluded from any consolidation of title made by PNB over the subject lot. Thus,
PNBs claim for the rent paid by Tolete has no basis.

8. GRN L-21783 NOVEMBER 29, 1969

PACIFIC FARMS, INC. VS. SIMPLICIO G. ESGUERRA, CARRIED LUMBER COMPANY

FACTS:
On several occasions, the Company sold and delivered lumber and construction materials to the Insular
Farms, Inc. which the latter used in the construction of the aforementioned six buildings at its compound
in Bolinao, Pangasian. Of the total procurement price of P15,000, the sum of P4,710.18 has not been
paid by the Insular Farms, Inc. The Company instituted a civil case with the CIR of Pangasinan to
recover the said unpaid balance from the Insular Farms, Inc. The trial court rendered judgment in favor
of the Company's claim. The corresponding writ of execution was issued because there was no appeal
instituted by Insular, Inc.

The Pacific Farms, Inc. filed a third-party claim asserting ownership over the levied buildings which it
had acquired from the Insular Farms, Inc. by virtue of a deed of absolute sale executed about seven
months before the Company filed the civil action. Shielded by an indemnity bond put up by the
Company and the Cosmopolitan Insurance Company, Inc., the sheriff proceeded with the announced
public auction and sold the levied buildings to the Company.

ISSUE:
WON the Company is entitled to a materialmans lien to be paid by Pacific Farms, Inc?

HELD:

YES.

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 Pacific Farms,
if it does own the six buildings, must bear the obligation to pay for the value of the said materials; the
Company- which apparently has no desire to remove the materials, and, even if it were minded to do so,
cannot remove them without necessarily damaging the buildings has the corresponding right to recover
the value of the unpaid lumber and construction materials.

Of course, the character of a buyer in good faith and for value, if really possessed by the Pacific Farms,
could possibly exonerate it from making compensation. But the Pacific Farm's stance that it is an
innocent purchaser for value and in good faith is open to grave doubt because of certain facts of
substantial import (evident from the records) that cannot escape notice.

In the deed of absolute sale, exhibit 1, the Insular Farms, Inc. (vendor) was represented in the contract
by its president, J. Antonio Araneta. The latter was a director of the appellee (Pacific Farms, Inc.) and
was the counsel who signed the complaint filed by the appellee in the court below. J. Antonio Araneta
was, therefore, not only the president of the Insular Farms, Inc. but also a director and counsel of Pacific
Farms.

During the trial of civil case the Insular Farms, Inc. was represented by Attorney Amado Santiago, Jr. of
the law firm of J. Antonio Araneta. The latter was one of the counsels of the Pacific Farms, Inc. They
cannot claim ignorance of the pendency of civil case because the Insular Farms, Inc. was defended by
the same lawyer from the same law firm that commenced the present action.
Pacific Farms merely folded its arms in disinterest and waited, so to speak. Not until a decision was
rendered therein in favor of the Company, a writ of execution issued, and the six buildings levied upon
by the sheriff, did it file a third-party claim over the levied buildings

9. Depra vs Dumlao
FACTS:

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

Held: Owner of the land on which improvement was built by another in good faith is entitled to removal
of improvement only after landowner has opted to sell the land and the builder refused to pay for the
same. Res judicata doesnt apply wherein the first case was for ejectment and the other was for quieting
of title.

ART. 448. The owner of the land on which anything has been built sown or planted in good faith, shall
have the right to appropriate as his own the works, sowing or planting, after payment of the indemnity
provided for in articles 546 and 548, or to oblige the one who built or planted to pay the price of the
land, and the one who sowed, the proper rent.

However, the builder or planter cannot be obliged to buy the land if its value is considerably more than
that of the building or trees. In such case, he shall pay reasonable rent, if the owner of the land does not
choose to appropriate the building or trees after proper indemnity. The parties shall agree upon the terms
of the lease and in case of disagreement, the court shall fix the terms thereof.

10. PEDRO P. PECSON v. COURT OF APPEALS, SPS. NUGUID

FACTS:
Pedro Pecson was the owner of a commercial lot on which he built a 4-door-2-storey apartment
building. He failed to pay realty taxes amounting to P12k so the lot was sold at public auction to
Mamerto Nepomuceno who later on sold it to the Sps. Nuguid.

Pecson challenged the validity of the auction before the RTC but was dismissed but the RTC held that
the apartment bldg was not subject of the litigation. On appeal, the CA appealed in toto the decision of
the RTC that the apartment bldg was not included in the auction sale.

After an entry of judgment was made, the Sps. Nuguid filed a motion with the RTC for a motion for
delivery of possession of the lot and the apartment bldg citing Art. 546 of the CC. The RTC issued an
order declaring that the owner of the lot and apartment bldg were the Sps. Nuguid and to pay the
construction cost of the apartment before a writ of possession would be issued and to pay rent to the
spouses. Pecson moved for reconsideration but the Trial court did not act on it, instead it issued a writ of
possession. The CA affirmed in part the decision declaring the cost of construction can be offset from
the amount of rents to be collected and that since Sps. Nuguid opted to appropriate the improvement,
Pecson is entitled to be reimbursed the cost of construction at the time it was built in 1965 which is at
P53k and the right the retain the improvement until full indemnity is paid.

Thus the case at bar.

ISSUE:
Whether or not Art. 448 and 546 applies in the case at bar
HELD: YES
> With regard to Art. 448, the provision on indemnity may be applied in analogy. Whoever is the owner
of the land may appropriate whatever has been built, planted or sown after paying indemnity. However,
it does not apply when the owner of the land is also the builder of the works on his own land who later
on loses ownership by sale or donation.

> Art. 546 refers to the necessary and useful expenses which shall be refunded to the possessor in good
faith with right of retention. However, it does not state how to determine the value of the useful
improvement. The respondents [court and private respondents alike] espouses as sufficient
reimbursement the cost of construction in 1965, however, this is contrary to previous rulings which
declares that the value to the reimbursed should be the present market value of said improvements so as
not to unjustly enrich either of the parties. [the trial court erred in ordering Pecson to pay rent since the
Sps. Nuguid has yet to pay the indemnity therefore Pecson has the right to retain the improvements and
the income thereof. The case was remanded to the trial court for determination of the current market
value of the apartment bldg and ordered the Sps to pay Pecson otherwise it shall be restored to Pecson
until payment of indemnity.]