PROPERTY (Atty.
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A. Accession Discreta
BACHRACH v SEIFERT (1950; Ozaeta)1
o In his will, the deceased Emil Maurice Bachrach named
his wife (Mary McDonald Bachrach) as usufructuary of
the remainder of his estate. The will further provided that
upon the death of Mary McDonald Bachrach, one-half of
all his estate shall be divided among his legal heirs, to the
exclusion of his brothers.
o The estate of E. M. Bachrach, as owner of 108,000 shares
of stock of the Atok-Big Wedge Mining Co., Inc., received
from the latter 54,000 shares representing 50% stock
dividend on the said 108,000 shares.
o June 10, 1948, Mary (the widow), as usufructuary or life
tenant of the estate, petitioned the lower court to
authorize the Peoples Bank and Trust Company (the
administrator of the estate of E. M. Bachrach) to transfer
to her the said 54,000 shares of stock dividend. She
claimed that said dividend, although paid out in the form
of stock, is fruit or income and therefore belonged to her
as usufructuary or life tenant.
o Sophie Seifert and Elisa Elianoff, legal heirs of the
deceased, 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 remainderman2.
o The lower court granted Marys petition and overruled
S&Es objection. Seifer and Elianoff appealed.
ISSUE: Whether the stock dividend can be considered as a
fruit/income (which belongs to the usufructuary) or part of the
capital (part of the corpus of the estate which will be delivered
1 Camille Maranan
together with the rest of the future estate to the
remainderman)?
HELD: The stock dividend is a form of income. The SC cited
Hite vs. Hite wherein the Court of Appeals of Kentucky, held
that "where a dividend, although declared in stock, is based
upon the earnings of the company, it is in reality, whether called
by one name or another, the income of the capital invested in it.
In the present case; the 108,000 shares of stock are part of the
property in usufruct. The 54,000 shares of stock dividend are
civil fruits of the original investment.
Also, two US rulings figured in this case:
1. Massachusetts rule = stock dividend is not an income but
merely represents an addition to the investment capital The
Massachusetts rule regards cash dividends, however large, as
income, and stock dividends, however made, as capital. It holds
that a stock dividend is not in any true sense any dividend at
all since it involves no division or severance from the corporate
assets of the subject of the dividend. This rule supports Seifert
and Elianoffs contention that a stock dividend is not an income
(unlike a cash dividend), but merely represents an addition to
the invested capital.
2. The Pennsylvania rule declares that all earnings of the
corporation made prior to the death of the testator-stockholder
belong to the corpus of the estate, and that all earnings, when
declared as dividends in whatever form, made during the
lifetime of the usufructuary or life tenant are income and belong
to the usufructuary or life tenant. This rule supports Mary
Bachrach's contention.
According to our SC, the Pennsylvania rule is more in accord
with Philippine statutory laws than the Massachusetts rule
since under section 16 of the Corporation Law, no corporation
2
According to my legal dictionary, a remainder is a future estate and a
remainderman is the inchoate possessor of that future estate
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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. Therefore, the
stock dividend, as part of the income of the usufruct, should be
transferred to Mary since Article 471 of the Civil Code (now Art.
566)provides that the usufructuary shall be entitled to receive
all the natural, industrial, and civil fruits of the property in
usufruct.
In My Understanding: The widow is saying that the stock
dividend should be transferred to her account since this form
part of the income of the estate and since she is the
usufructuary, she has the right over such income. On the other
hand, the legal heirs/ remainderman (or men) are contending
that the stock dividend is part of the capital and should be
delivered to them (together with the rest of the estate upon
Marys death). The court held that stock dividends form part of
the income and therefore, should be delivered to the
usufructuary (the widow).
DISPOSITIVE: Order affirmed.
BACHRACH v TALISAY SILAY (1931; Romualdez)3
Plaintiff-appellee: Bachrach Motor Co., Inc.
Defendants-appellees: Talisay-Silay Milling Co. et al.
Intervenor-appellant: Philippine National Bank
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 accdg
3 Doms Obias
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 first paragraph, or any 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
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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.
Disposition: Judgment affirmed
B. Accession Continua
BERNARDO V. BATACLAN, 66 PHIL. 598 (1938; Laurel)
FACTS: Plaintiff Vicente Bernardo acquired a parcel of land
from Pastor Samonte thru a contract of sale. Thereafter,
Bernardo instituted a case against said vendor to secure
possession of the land. Bernardo was able to obtain a favorable
decision from the court. The plaintiff found the defendant
herein, Catalino Bataclan, in the said premises. It appears that
he has been authorized by former owners, as far back as 1922,
to clear the land and make improvements thereon. Thus,
plaintiff instituted a case against Bataclan in the Court of First
Instance of Cavite. In this case, plaintiff was declared the owner
of the land but the defendant was held to be a possessor in good
faith, entitled to reimbursement in the total sum of P1,642, for
work done and improvements made. Both parties appealed the
decision.
The court thereafter made some modifications 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 down to
P200 per hectare. Plaintiff was likewise given 30 days from the
date when the decision became final to exercise his option,
either to sell the land to the defendant or to buy the
improvements from him. On January 9, 1934, the plaintiff
conveyed to the 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
indicated 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.
Subsequently, on April 24, 1934, the court below, at the
instance of the plaintiff and without objection on the part of the
defendant, ordered the sale of the land in question at public
auction. The land was sold on April 5, 1935 to Toribio Teodoro
for P8,000.
ISSUE: WON DEFENDANT BATACLAN IS STILL
ENTITLED TO RECOVER THE COURT MANDATED
COMPENSATION ARISING FROM THE SALE OF THE
PROPERTY TO TORIBIO
HELD: NO. Manresa, basing on Art 448 of the NCC, where 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. The law 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. In this case, the plaintiff,
as owner of the land, chose to require the defendant, as owner
of the improvements to pay for the land.
The defendant avers that he is a possessor in good faith and
that the amount of P2,212 to which he is entitled has not yet
been paid to him. Defendant further claims that he has a right
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to retain the land in accordance with the provisions of article

453 of the Civil Code. While the said argument is legally
tenable, the same must perforce be denied because defendant
Bataclan has lost his right of retention as he failed to pay for
the land. 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.
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IGNACIO V. HILARIO, 76 PHIL. 605 (1946; Moran)
Facts: Elias Hilario and his wife Dionisia Dres filed a complaint
against Damian, Francisco and Luis Ignacio concerning the
ownership of a parcel of land, partly rice-land and partly
residential. After the trial of the case, the lower court under
Judge Alfonso Felix, rendered judgment holding Hilario and
Dres as the legal owners of the whole property but conceding to
the Ignacios the ownership of the houses and granaries built by
them on the residential portion with the rights of a possessor in
good faith, in accordance with article 361 of the Civil Code.
Subsequently, in a motion filed in the same CFI (now handled
by respondent Judge Hon. Felipe Natividad), Hilario and Dres
prayed for an order of execution alleging that since they chose
neither to pay the Ignacios for the buildings nor to sell to them
the residential lot, the Ignacios should be ordered to remove the
structure at their own expense and to restore Hilario and Dres
in the possession of said lot. After hearing, the motion was
granted by Judge Natividad. Hence, the petition for certiorari
was filed by the Ignacios praying for (a) a restraint and
annulment of the order of execution issued by Judge Natividad;
(b) an order to compel Hilario and Dres to pay them the sum of
P2,000 for the buildings, or sell to them the residential lot for
P45; or (c) a rehearing of the case for a determination of the
rights of the parties upon failure of extra-judicial settlement.
The Supreme Court set aside the writ of execution issued by
Judge Natividad and ordered the lower court to hold a hearing
in the principal case wherein it must determine the prices of the
buildings and of the residential lot where they are erected, as
well as the period of time within which Hilario and Dres may
exercise their option either to pay for the buildings or to sell
their land, and, in the last instance, the period of time within
which the Ignacios may pay for the land, all these periods to be
counted from the date the judgment becomes executory or
unappealable. After such hearing, the court shall render a final
judgment according to the evidence presented by the parties;
with costs against Hilarion and Dres.
1. Right of retention of builder in good faith
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. Article
453 provides that Necessary expenses shall be refunded to
every possessor; but only the possessor in good faith may retain
the thing until such expenses are made good to him. Useful
expenses shall be refunded 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 paying the increase in value which the thing may
have acquired in consequence thereof."
2. Option of the landowner to pay for the building or sell his
land to the owner of the building; Right of remotion only
available if he chose the latter and the owner of the building
cannot pay
The owner of the land, upon the other hand, has the option,
under article 361, either to pay for the building or to sell his
land to the owner of the building. Article 361 provides that The
owner of land on which anything has been built, sown or planted
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in good faith, shall have the right to appropriate as his own the
work, sowing or planting, after the payment of the indemnity
stated in articles 453 and 454, or to oblige the one who built or
planted to pay the price of the land, and the one who sowed, the
proper rent. He cannot however 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.
the sheriff being ignorant as to how, for how much, and within
what time may the option be exercised, and certainty no
authority is vested in him to settle these matters which involve
exercise of judicial discretion. Thus, the judgment rendered by
Judge Felix has never become final, it having left matters to be
settled for its completion in a subsequent proceeding, matters
which remained unsettled up to the time the petition is filed in
the present case.

3. Order amends judgment substantially and thus null and void

The order of Judge Natividad compelling the Ignacios to remove
their buildings from the land belonging to Hilario and Dres 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 and 453 of the Civil Code.

4. Original decision did not become final as it failed to

determine the value of the buildings and of the lot; and the time
to which the option may be exercised
In the decision of Judge Felix, the rights of both parties were
well defined under articles 361 and 453 of the Civil Code, but it
failed to determine the value of the buildings and of the lot
where they are erected as well as the periods of time within
which the option may be exercised and payment should be
made, these particulars having been left for determination
apparently after the judgment has become final. The procedure
is erroneous, for after the judgment has become final, no
additions can be made thereto and nothing can be done
therewith except its execution. And execution cannot be had,
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the Municipal Court.

Depra then filed a Complaint for Quieting of Title against

Dumlao, the latter admitted the encroachment but alleged, that
the present suit us barred by res judicate by virtue of the
DEPRA V. DUMLAO, 136 SCRA 475 decision of the Municipal Court.

Facts: Depra is the owner of a parcel of land to which Dumlao,

living in an adjoining lot, had built a kitchen that encroached
DEPRA claims that the Decision of the Municipal Court was
an area of 34 square meters. The encroachment was discovered
null and void ab initio because its jurisdiction is limited to the
in a relocation survey of Depras property. Upon discovery,
sole issue of possession, whereas decisions affecting lease,
Depras mother wrote a demand letter asking Dumlao to move
which is an encumbrance on real property, may only be
back from his encroachment. She then filed a case of Unlawful
rendered by Courts of First Instance.
Detainer against Dumlao.

Issue:
In the trial court it was proven that Dumlao was a builder in
good faith; thus the Municipal Court rendered it judgment that
reads:
I. Whether or not the Municipal Courts decision was null and
void ab initio because it has no jurisdiction over the case?

Ordering that a forced lease is created between the parties with

the plaintiffs, as lessors, and the defendants as lessees, over the
II. Whether or not the factual situations of DUMLAO and
disputed portion with an area of thirty four (34) square meters,
DEPRA conform to the juridical positions respectively defined
the rent to be paid is five (P5.00) pesos a month, payable by the
by law, for a "builder in good faith" under Article 448, a
lessee to the lessors within the first five (5) days of the month
"possessor in good faith" under Article 526 and a "landowner in
the rent is due; and the lease shall commence on the day that
good faith' under Article 448?
this decision shall have become final.

Held:
Neither party appealed. However, Depra did not accept the
payment of rentals so that Dumlao deposited such rentals with
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I. Addressing out selves to the issue of validity of the Decision or trees. In such case, he shall pay reasonable rent, if the owner
of the of the land does not choose to appropriate the building or trees
after proper indemnity. The parties shall agree upon the terms
Municipal Court, we hold the same to be null and void. The
of the lease and in case of disagreement, the court shall fix the
judgment in a detainer case is effective in respect of possession
terms thereof (Paragraphing supplied)
only (Sec. 7, Rule 70, Rules of Court). The Municipal Court over-
stepped its bounds when it imposed upon the parties a situation
of "forced lease", which like "forced co-ownership" is not favored
Pursuant to the foregoing provision, DEPRA has the option
in law. Furthermore, a lease is an interest in real property,
either to pay for the encroaching part of DUMLAO's kitchen, or
jurisdiction over which belongs to Courts of First Instance (now
to sell the encroached 34 square meters of his lot to DUMLAO.
Regional Trial Courts) (Sec. 44(b), Judiciary Act of 1948; Sec. 19
He cannot refuse to pay for the encroaching part of the building,
(2) Batas Pambansa Blg. 129). Since the Municipal Court, acted
and to sell the encroached part of his land, 5 as he had
without jurisdiction, its Decision was null and void and cannot
manifested before the Municipal Court. But that manifestation
operate as res judicata to the subject complaint for Queting of
is not binding because it was made in a void proceeding.
Title. Besides, even if the Decision were valid, the rule on res
judicata would not apply due to difference in cause of action. In
the Municipal Court, the cause of action was the deprivation of
possession, while in the action to quiet title, the cause of action However, the good faith of DUMLAO is part of the Stipulation
was based on ownership. Furthermore, Sec. 7, Rule 70 of the of Facts in the Court of First Instance. It was thus error for the
Rules of Court explicitly provides that judgment in a detainer Trial Court to have ruled that DEPRA is "entitled to
case "shall not bar an action between the same parties possession," without more, of the disputed portion implying
respecting title to the land. " thereby that he is entitled to have the kitchen removed. He is
entitled to such removal only when, after having chosen to sell
his encroached land, DUMLAO fails to pay for the same. 6 In
this case, DUMLAO had expressed his willingness to pay for the
II. ART. 448. The owner of the land on which anything has been
land, but DEPRA refused to sell.
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
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TECHNOGAS PHILSS V. CA 268 SCRA 5
G.R. No. 108894 February 10, 1997
PANGANIBAN, J.:
ISSUE: WON the petitioner is builder in good faith.
FACTS:
HELD: YES.
The parties in this case are owners of adjoining lots in
Paraaque, Metro Manila. It was discovered in a survey,
that a portion of a building of Technogas, which was
presumably constructed by its predecessor-in-interest,
encroached on a portion of the lot owned by private
respondent Edward Uy.
Upon learning of the encroachment or occupation by its
buildings and wall of a portion of private respondents
land, the petitioner offered to buy from defendant that
particular portion of Uys land occupied by portions of
its buildings and wall with an area of 770 square meters,
more or less, but the latter, however, refused the offer
The parties entered into a private agreement before a
certain Col. Rosales in Malacaang, wherein petitioner
agreed to demolish the wall at the back portion of its
land thus giving to the private respondent possession of
a portion of his land previously enclosed by petitioner's
wall.
Uy later filed a complaint before the office of Municipal
Engineer of Paraaque, Metro Manila as well as before
the Office of the Provincial Fiscal of Rizal against
Technogas in connection with the encroachment or
occupation by plaintiff's buildings and walls of a portion
of its land but said complaint did not prosper; so Uy dug
or caused to be dug a canal along Technogas wall, a
portion of which collapsed in June, 1980, and led to the
filing by the petitioner of the supplemental complaint in
the above-entitled case and a separate criminal
complaint for malicious mischief against Uy and his wife
which ultimately resulted into the conviction in court
Uy's wife for the crime of malicious mischief;
We disagree with Respondent Courts reliance on the
cases of J.M. Tuason & Co., Inc. vs. Vda. de Lumanlan
and J.M. Tuason & Co., Inc. vs. Macalindong, in ruling
that the petitioner "cannot be considered in good faith"
because as a land owner, it is "presumed to know the
metes and bounds of his own property, specially if the
same are reflected in a properly issued certificate of
title. One who erroneously builds on the adjoining lot
should be considered a builder in (b)ad (f)aith, there
being presumptive knowledge of the Torrens title, the
area, and the extent of the boundaries." There is nothing
in those cases which would suggest that bad faith is
imputable 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 described in his certificate of
title,
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Article 527 of the Civil Code presumes good faith, and
since no proof exists to show that the encroachment over
a narrow, needle-shaped portion of private respondent's
land was done in bad faith by the builder of the
encroaching structures, the latter should be presumed
to have built them in good faith. It is presumed that
possession continues to be enjoyed in the same character
in which it was acquired, until the contrary is proved.
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. Hence, such good faith, by law,
passed on to Pariz's successor, petitioner in this case.
The good faith ceases from the moment defects in the
title are made known to the possessor, by extraneous
evidence or by suit for recovery of the property by the
true owner.
Consequently, the builder, if sued by the aggrieved
landowner for recovery of possession, could have
invoked the provisions of Art. 448 of the Civil Code,
which reads:
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 obvious benefit to the builder under this article is
that, instead of being outrightly ejected from the land,
he can compel the landowner to make a choice between
the two options: (1) to appropriate the building by
paying the indemnity required by law, or (2) sell the
land to the builder. The landowner cannot refuse to
exercise either option and compel instead the owner of
the building to remove it from the land
In view of the good faith of both petitioner and private
respondent, their rights and obligations are to be
governed by Art. 448. 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

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
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BRIONES V. MACABAGDAL
Facts: Respondents spouses purchased a land from Vergon
Realty located in a subdivision in Las Pinas (Lot 2R) with a
registered TCT. Vergon on the other hand owns the adjacent
land (Lot 2S).
In 1984, after obtaining the building permit and approval of
Vergon, Jose Macabagdal constructed a house on Lot 2R which
they thought was Lot 2S. After being informed of the mix up,
spouses immediately demanded for demolition of the house
constructed. Jose, refused. Spouses then filed an action to
recover ownership and possession of the said land in RTC
Makati.
Jose, insisted that the lot which they constructed their house
was the lot which was consistently pointed to them by the
Vergon's agents over the 7-year period of paying the lot. They
interposed the defense of being buyers in good faith and
impleaded indemnity from Vergon because of the warranty
against eviction, in case the suit is decided against them.
RTC ruled in favor of the spouses. Defendants were ordered to
demolish their house and vacate the premises and return the
possession of the lot to the spouses with damages. Defendants
counterclaim as well as the 3rd-party complaint were dismissed
for lack of merit and with no cause of action. On appeal, CA
affirmed the RTC. Saying that, there was no basis that the error
was Vergon's fault and that they cannot invoke the defense of a
purchaser in good faith for wrongful occupation of the land.
Thus, this petition.
Issue:
In the main, it is petitioners' position that they must not bear
the damage alone. Petitioners insist that they relied with full
faith and confidence in the reputation of Vergon's agents when
they pointed the wrong property to them. Even the President of
Vergon, Felix Gonzales, consented to the construction of the
house when he signed the building permit. Also, petitioners are
builders in good faith.
Held: Petition is partly meritorious.
RTC erred in out rightly ordering petitioners to vacate the
subject property or to pay respondent spouses the prevailing
price of the land as compensation. Article 527[14] of the Civil
Code presumes good faith, and since no proof exists to show that
the mistake was done by petitioners in bad faith, the latter
should be presumed to have built the house in good faith (Art.
448).
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The builder in good faith can compel the landowner to make a

choice between appropriating the building by paying the proper
ART. 548. Expenses for pure luxury or mere pleasure shall not
indemnity or obliging the builder to pay the price of the land.
be refunded to the possessor in good faith; but he may remove
The choice belongs to the owner of the land, a rule that accords
the ornaments with which he has embellished the principal
with the principle of accession, i.e., that the accessory follows
thing if it suffers no injury thereby, and if his successor in the
the principal and not the other way around. However, even as
possession does not prefer to refund the amount expended.
the option lies with the landowner, the grant to him,
nevertheless, is preclusive. He must choose one. He cannot, for Consequently, the respondent-spouses have the option to
instance, compel the owner of the building to remove the appropriate the house on the subject land after payment to
building from the land without first exercising either option. It petitioners of the appropriate indemnity or to oblige petitioners
is only if the owner chooses to sell his land, and the builder or to pay the price of the land, unless its value is considerably more
planter fails to purchase it where its value is not more than the than the value of the structures, in which case petitioners shall
value of the improvements, that the owner may remove the pay reasonable rent.
improvements from the land. The owner is entitled to such
remotion only when, after having chosen to sell his land, the
other party fails to pay for the same.

As to the liability of Vergon, petitioners failed to present

Moreover, petitioners have the right to be indemnified for the
necessary and useful expenses they may have made on the
subject property. Articles 546 and 548 of the Civil Code provide,
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.
sufficient evidence to show negligence on Vergon's part. It is the
plaintiff who has to prove by a preponderance of evidence: (1)
the damages suffered by the plaintiff; (2) the fault or negligence
of the defendant or some other person for whose act he must
respond; and (3) the connection of cause and effect between the
fault or negligence and the damages incurred.

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.
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ORTIZ V. KAYANAN, 92 SCRA 146
Facts: Plaintiff used to be the legal guardian of Martin Dolorico
II. When his ward died, plaintiff continued to cultivate and
possess the latters property, which was formerly a subject of
homestead application. In the said application, the wards uncle
was named as his heir and successor in interest. Thus, the uncle
executed an affidavit relinquishing his rights over the property
in favor of Comintan and Zamora, his grandson and son-in-law
and requested the Director of Lands to cancel the homestead
application. The homestead application was cancelled to the
protest of Ortiz saying that he should be given preference to
purchase the lot inasmuch as he is the actual occupant and has
been in continuous possession of the same. Still, the lot in
question was sold at a public auction wherein defendant
Comintan was the only bidder.
The plaintiffs protest was investigated upon but his claim was
not given due course. On appeal, respondent court rules that
half of the portion of land should be given to the defendant,
being the successful bidder. The other half should be awarded
to Zamora without prejudice to the right of Ortiz to participate
in the public bidding of the lot. If Ortiz is to be not declared the
successful bidder, defendants should reimburse jointly said
plaintiff for the improvements introduced on the land, with him,
having the right to retain the property until after he has been
paid for.
Plaintiff appealed the judgment. It was later found out that
Ortiz collected tolls on a portion of the property wherein he has
not introduced any improvement.
The judgment became final and executory. Private respondents
filed a motion for its execution requesting that they file a bond
in lieu of the amount that should be paid to Ortiz, on the
condition that after the accounting of the tolls collected by
plaintiff, there is still and amount due and payable to the said
plaintiff, the bond shall be held answerable.
Petitioner thus filed the instant petition, contending that in
having issued the Order and Writ of Execution, respondent
Court "acted without or in excess of jurisdiction, and/or with
grave abuse of discretion, because the said order and writ in
effect vary the terms of the judgment they purportedly seek to
enforce." He argued that since said judgment declared the
petitioner a possessor in good faith, he is entitled to the
payment of the value of the improvements introduced by him on
the whole property, with right to retain the land until he has
been fully paid such value. He likewise averred that no payment
for improvements has been made and, instead, a bond therefor
had been filed by defendants (private respondents), which,
according to petitioner, is not the payment envisaged in the
decision which would entitle private respondents to the
PROPERTY (Atty. Labitag)
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possession of the property. Furthermore, with respect to portion
"B", petitioner alleges that, under the decision, he has the right
to retain the same until after he has participated and lost in the
public bidding of the land to be conducted by the Bureau of
Lands. It is claimed that it is only in the event that he loses in
the bidding that he can be legally dispossessed thereof.
It is the position of petitioner that all the fruits of the property,
including the tolls collected by him from the passing vehicles,
which according to the trial court amounts to P25,000.00,
belongs to petitioner and not to defendant/private respondent
Quirino Comintan, in accordance with the decision itself, which
decreed that the fruits of the property shall be in lieu of interest
on the amount to be paid to petitioner as reimbursement for
improvements. Any contrary opinion, in his view, would be
tantamount to an amendment of a decision which has long
become final and executory and, therefore, cannot be lawfully
done.
The issue decisive of the controvery isafter the rendition by
the trial court of its judgment in Civil Case No. C-90 on March
22, 1966 confirming the award of one-half of the property to
Quirino Comintanwhether or not petitioner is still entitled to
retain for his own exclusive benefit all the fruits of the property,
such as the tolls collected by him from March 1967 to December
1968, and September 1969 to March 31, 1970, amounting to
about P25,000.00.
RULING: Negative
1. No contention that the possessor in good faith is entitled
to the fruits received before the possession is legally
interrupted. Possession in good faith ceases or is legally
interrupted from the moment defects in the title are made
known to the possessor, by extraneous evidence or by the filing
of an action in court by the true owner for the recovery of the
property. Hence, all the fruits that the possessor may receive
from the time he is summoned in court, or when he answers the
complaint, must be delivered and paid by him to the owner or
lawful possessor.
2. However, even after his good faith ceases, the possessor
can still retain the property (Art 546) until he has been fully
reimbursed for all the necessary and useful expenses made by
him on the property. he principal characteristic of the right of
retention is its accessory character. It is accessory to a principal
obligation. Considering that the right of the possessor to receive
the fruits terminates when his good faith ceases, it is necessary,
in order that this right to retain may be useful, to concede to the
creditor the right to secure reimbursement from the fruits of the
property by utilizing its proceeds for the payment of the interest
as well as the principal of the debt while he remains in
possession.
3. Petitioner cannot appropriate for his own exclusive
benefit the tolls which he collected from the property retained
by him. It was his duty under the law, after deducting the
necessary expenses for his administration, to apply such
amount collected to the payment of the interest, and the balance
to the payment of the obligation.
We hold, therefore, that the disputed tolls, after deducting
petitioner's expenses for administration, belong to Quirino
Comintan, owner of the land through which the toll road passed,
further considering that the same was on portions of the
property on which petitioner had not introduced any
improvement. The trial court itself clarified this matter when it
placed the toll road under receivership. The omission of any
mention of the tolls in the decision itself may be attributed to
PROPERTY (Atty. Labitag)
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the fact that the tolls appear to have been collected after the
rendition of the judgment of the trial court.
4. As to the other lot, it appears that no public sale has yet
been conducted by the Bureau of Lands and, therefore,
petitioner is entitled to remain in possession thereof. This is not
disputed by respondent Eleuterio Zamora. After public sale is
had and in the event that Ortiz is not declared the successful
bidder, then he should be reimbursed by respondent Zamora in
the corresponding amount for the improvements on Lot 5785-B.
GEMINIANO V. CA, 259 SCRA 10
FACTS:
It appears that subject lot was originally owned by the
petitioners' mother, Paulina Amado vda. de Geminiano. On a
12-square-meter portion of that lot stood the petitioners'
unfinished bungalow, which the petitioners sold to the private
respondents, with an alleged promise to sell to the latter that
portion of the lot occupied by the house. Subsequently, the
petitioners' mother 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 the private respondents for P40.00
per month for a period of 7 years.
The private respondents then introduced additional
improvements and registered the house in their names. After
the expiration of the lease contract, however, 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. Lee sold the lot to Lily Salcedo, who in turn sold it to the
spouses Dionisio. Spouses Dionisio executed a Deed of
Quitclaim over the said property in favor of the petitioners.
The petitioners sent a letter addressed to private
respondent Mary Nicolas demanding that she vacate the
premises and pay the rentals in arrears within twenty days
from notice.
Upon failure of the private respondents to heed the
demand, the petitioners filed a complaint for unlawful detainer
and damages.
ISSUE: WON Art. 448 is applicable to this case.
HELD: NO.
The private respondents claim they are builders in good
faith, hence, Article 448 of the Civil Code should apply. They
rely on the lack of title of the petitioners' mother at the time of
the execution of the contract of lease, as well as the alleged
assurance made by the petitioners that the lot on which the
house stood would be sold to them.
But 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.
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.
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.
PROPERTY (Atty. Labitag)
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possession of the property even before full payment of the price.

CTTEI through an employee, Zenaida Octaviano accompanied
Kees wife Donabelle to inspect Lot No. 8. Octaviano however
mistakenly pointed towards Lot 9. Hence spouses Kee had their
residence, an auto repair shop, a store and other improvements
constructed on the wrong lot.

PLEASANTVILLE DEVT CORP V. CA, 253 SCRA 10

Upon discovery of the blunder both Kee and Jardinico
tried to reach an amicable settlement but they failed. Jardinico
Doctrine: Good faith consists in the belief of the builder that he
demanded that the improvements be removed but as Kee
land he is building on is his and his ignorance of any defect or
refused, Jardinico filed a complaint for ejectment with damages
flaw in his title. The burden of proving bad faith belongs to the
against Kee at the Municipal Trial Court in Cities (MTCC) of
one asserting it.
Bacolod City. Kee filed a third-party complaint against herein
petitioner and CTTEI.
Facts: Edith Robillo purchased from Pleasantville Development
Corporation, herein petitioner a parcel of land at Pleasantville
The MTCC found that the error was attributable to
Subdivision, Bacolod City. The property was designated as Lot
CTTEI also since at present the contract with Kee has rescinded
9, Phase II. In 1975, herein respondent Eldred Jardinico bought
for Kees failure to pay installments. Kee no longer had any
the said subject lot from the former purchaser. Eldred later
right over the subject property and must pay rentals for its use.
discovered that the property he purchased had improvements
The Regional Trial Court (RTC) of Bacolod City ruled that
introduced therein by respondent Wilson Kee.
petitioner and CTTEI were not at fault or were not negligent. It
Kee on the other hand bought on installments Lot 8 of
argued that Kee was a builder in bad faith. Even if assuming
the same subdivision from C.T. Torres Enterprises, Inc.
that he was in good faith, he was no longer so and must pay
(CTTEI) which is the exclusive real estate agent of the
rentals from the time that he was given notice to vacate the lot.
petitioner. Under the contract Kee was allowed to take
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The Court of Appeals ruled that Kee was a builder in good faith
as he was unaware of the mix-up when he constructed the
improvements. It was in fact due to the negligence and wrongful
delivery of CTTEI which included its principal the herein
petitioner. It further ruled that the award of rental was without
basis.
Pending the resolution of the case at the Court of
Appeals Jardinico and Kee entered into a deed of sale, wherein
Lot 9 was sold to Kee. In the said deed a provision stating that
regardless of the outcome of the decision, such shall not be
pursued by the parties and shall be considered dismissed and
without effect. The appellate court was not informed of this
deal.
Issue: Whether or not a lot buyer who constructs improvements
on the wrong property erroneously delivered by the owners
agent, a builder in good faith?
Held: Yes. Article 527 of the Civil Code provides the
presumption that petitioner has the burden of proving that Kee
was a builder in bad faith. Kee may be made liable for the
violation of the contract with CTTEI but this may not be used
as a basis of bad faith and as a sufficient ground to negate the
presumption of good faith. Jardinico is presently only allowed
to file a complaint for unlawful detainer. Good faith is based on
the belief of the builder that the land he is building on is his and
his ignorance of any flaw or defect in is title. Since at the time
when Kee constructed his improvements on Lot 8, he was not
aware that it was actually Lot 9 that was delivered to him.
Petitioner further contends that Kee was negligent as a
provision in the Contract of Sale on Installment stated that the
vendee must have personally examined the property and shall
bear on his own the consequential expenses in the changes that
may happen thereon. The court held that such provision cannot
be interpreted as a waiver of the vendees right to recover
damages resulting from petitioners negligence. Such
interpretation of the waiver is contrary to law and public policy
and cannot be allowed. Petitioner cannot claim and excuse itself
from liability by claiming that it was not directly involved in the
delivery of the property. The principal must be responsible for
the acts of the agent done within the scope of his authority.
CTTEI was the sole real estate representative of the petitioner
when the delivery was made. Wilson Kee is therefore declared
a builder in good faith. Petitioner and respondent CTTEI are
declared solidarily liable for damages due to negligence. The
award of rentals to Jardinico is dispensed with.
PROPERTY (Atty. Labitag)
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Originally brought to the Court of Appeals, this appeal was

certified to us by that Court on the ground that it does not raise
any genuine issue of fact.

It appears that plaintiff and appellee Silverio Fences was the

grantee of a homestead of over eight hectares located in barrio
Curry, Municipality of Pili, Province of Camarines Sur, under
Homestead Patent No. V-2117 dated January 26, 1949, and by
virtue of which he was issued Original Certificate of Title No.
104 over said property. The month following the issuance of his
patent, on February 24, 1949, appellee conveyed in conditional
sale to defendant and appellant Mamerto Iriola a portion of his
homestead of more than four hectares, for the consideration of
FELICES V. IRIOLE, GR NO. 115814 MAY 26, 1995 (FULL P1,700. The conveyance (Exh. 1) expressly stipulates that the
sale was subject to the provisions of Sec. 119 of Act 141, as
CASE) amended, and to the prohibitions spread on the vendor's patent;
Republic of the Philippines and that after the lapse of five years or as soon as may be
allowed by law, the vendor or his successors would execute in
SUPREME COURT vendee's favor a deed of absolute sale over the land in question.
Manila
Two years after the sale, on April 19, 1951, appellee tried to
recover the land in question from appellant, but the latter
EN BANC refused to allow it unless he was paid the amount of P2,000 as
the alleged value of improvements he had introduced on the
G.R. No. L-11269 February 28, 1958 property. In view of appellant's persistent refusal, plaintiff
deposited the received price in court and filed this action on
SILVERIO FELICES, plaintiff-appellee, October 4, 1951.
vs.
MAMERTO IRIOLA, defendant-appellant. In the court below, appellant, while recognizing appellee's right
to "redeem", insisted that he must first be reimbursed, the value
Ezekiel S. Grageda for appellant. of his improvements. Whereupon, the court appointed a
Reyes & Dy-Liaco for appellee. commissioner to ascertain the nature and value of the alleged
improvements, and thereafter found that said improvements
REYES, J.B.L., J.: were made by defendant either after plaintiff had informed him
of his intention to recover the land, or after the complaint had
been filed; some of the improvements were even introduced
PROPERTY (Atty. Labitag)
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after a commissioner had already been appointed to appraise
their value. Wherefore, the lower court held defendant in bad
faith and not entitled to reimbursement for his improvements.
Defendant was, likewise, ordered to accept the amount of
P1,700 deposited by plaintiff in court, to execute in favor of the
latter the corresponding deed of reconveyance, and to restore
him in possession of the land in question.
At the outset, it must be made clear that as the sale in question
was executed by the parties within the five-year prohibitive
period under section 118 of the Public Land Law, the same is
absolutely null and void and ineffective from its inception.
Consequently, appellee never lost his title or ownership over the
land in question, and there was no need either for him to
repurchase the same from appellant, or for the latter to execute
a deed of reconveyance in his favor. The case is actually for
mutual restitution, incident to the nullity ab initio of the
conveyance. .
The question now is: May appellant recover or be reimbursed
the value of his improvements on the land in question, on the
theory that as both he and appellee knew that their sale was
illegal and void, they were both in bad faith and consequently,
Art. 453 of the Civil Code applies in that "the rights of one and
the other shall be the same as though both had acted in good
faith"?
having impliedly assented or conformed to the improvements
thereafter made by appellant on the premises. Upon the other
hand, appellant, recognizing as he does appellee's right to get
back his property, continued to act in bad faith when he made
improvements on the land in question after he had already been
asked extra-judicially and judicially, to surrender and return its
possession to appellee; and as a penalty for such bad faith, he
must forfeit his improvements without any right to
reimbursement therefor. "He who builds, plants or sows in bad
faith on the land of another, loses that is built, planted, or sown
without right to indemnity" (Art. 449, New Civil Code).
Wherefore, the judgment appealed from is affirmed, with the
sole modification that appellant need not execute a deed of
reconveyance in appellee's favor, the original conveyance being
hereby declared void ab initio. Costs against appellant Mamerto
Iriola. So ordered.
Paras, C.J., Bengzon, Montemayor, Reyes, A., Bautista Angelo,
Labrador, Concepcion, Endencia and Felix, JJ.,concur.

The rule of Art. 453 of the Civil Code invoked by appellant1 can
not be applied to the instant case for the reason that the lower
court found, and appellant admits, that the improvements in
question were made on the premises onlyafter appellee had
tried to recover the land in question from appellant, and even
during the pendency of this action in the court below. After
appellant had refused to restore the land to the appellee, to the
extent that the latter even had to resort to the present action to
recover his property, appellee could no longer be regarded as
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SPOUSES NUGUID V. CA, GR NO. 105360, MAY 25, 1993
AND GR NO. 151815, JANUARY 23, 2005
FACTS:
Pedro P. Pecson owned a commercial lot on which he
built a four-door two-storey apartment building. For failure to
pay realty taxes, the lot was sold at public auction by the City
Treasurer to Mamerto Nepomuceno, who in turn sold it for
P103,000 to the spouses Juan and Erlinda Nuguid.
Pecson challenged the validity of the auction sale before
the RTC of Quezon City, the RTC upheld the spouses title but
declared that the four-door two-storey apartment building was
not included in the auction sale. This was affirmed by the CA
and by the SC.
The Nuguids became the uncontested owners of
commercial lot. The Nuguid spouses moved for delivery of
possession of the lot and the apartment building.
ISSUE:
WON the Nuguids should reimburse Pecson for the benefits
derived from the apartment building.
HELD: YES.
Since petitioners opted to appropriate the improvement
for themselves as early as June 1993, when they applied for a
writ of execution despite knowledge that the auction sale did
not include the apartment building, they could not benefit from
the lots improvement, until they reimbursed the improver in
full, based on the current market value of the property.
Under Article 448, the landowner is given the option,
either to appropriate the improvement as his own upon
payment of the proper amount of indemnity or to sell the land
to the possessor in good faith. Relatedly, Article 546 provides
that a builder in good faith is entitled to full reimbursement for
all the necessary and useful expenses incurred; it also gives him
right of retention until full reimbursement is made.
The right of retention is considered as one of the
measures devised by the law for the protection of builders in
good faith. 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 thing possessed.
Given the circumstances of the instant case where the
builder in good faith has been clearly denied his right of
retention for almost half a decade, we find that the increased
award of rentals by the RTC was reasonable and equitable. The
petitioners had reaped all the benefits from the improvement
introduced by the respondent during said period, without
paying any amount to the latter as reimbursement for his
construction costs and expenses. They should account and pay
for such benefits.
PROPERTY (Atty. Labitag)
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PECSON VS. COURT OF APPEALS
FACTS: Pecson was the owner of a commercial lot on which he
built a four-door storey-apartment building. For his failure to
pay realty taxes, the lot was sold at public auction who in turn
sold it to the private respondents. Petitioner challenges the
validity of the auction sale.
ISSUE: Whether or not Art 448 finds application in the said
case
RULING: Negative
By its clear language, Art 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 rule on good faith laid
down in Art 526 of the Civil Code shall be applied in
determining whether the builder, sower or planter had acted in
good faith.
Art 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. Where the true owner himself is
the builder of works on his own land, good faith or bad faith is
irrelevant. Thus, in strict point of law, Art 448 is not apposite
to the case at bar. Nevertheless, the court applied the provision
therein on indemnity.
MERCADO V. COURT OF APPEALS
Facts:
Plaintiff, Aurea Mercado used to work in the United States and
is a legitimate sister of Nilo Mercado. Before she left for the US
where she stayed up to 1984, she gave her brother Nilo cash
money to buy a property close to UP because she planned to
teach in the said university when she comes back. She was not
given any receipt for the money handed to her brother.
In 1967, she was informed through letter from the Philippines
coming from her mother and sister that her brother Nilo had
already purchased a property located at No. 181 Esteban Abada
Street, Quezon City. She never saw the title of the property.
In 1972, Nilo went to visit Aurea in the US. Aurea asked Nilo
about the purchase of the property. The latter assured her that
he would give her a paper with respect to that property. In 1978,
Nilo sent through their mother an affidavit wherein he
admitted the existence of co-ownership over the property
PROPERTY (Atty. Labitag)
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Aurea told Nilo to pay for the lot and insisted that the land be
partitioned because she committed the land as payment to a
contractor for her school building in Davao.
Nilo Mercado:
57 y.o. UP LAW graduate and a businessman in occupation. He
decided to buy the subject property from Sps. Vargas using
money out of his personal savings and money borrowed from his
mother, sister, and Aurea. The Sps executed a Deed of
Conditional Sale after he tendered the downpayment He
applied for a housing loan with the SSS and upon its approval,
a Deed of Absolute Sale was executed between him and the Sps.
He paid the amortization for the loan but the property was
foreclosed by SSS. He was able to redeem the property.
ISSUES/ HELD:
Whether or not there was co-ownership between Nilo and
Aurea. Yes
Whether or not the co-ownersip was extinguished by the fact
that it was mortgaged, foreclosed and it was only petitioner who
caused the redemption of the property. No.
Ratio:
1. The affidavit executed by defendant was a high quality
evidence which contains admission against interest on
the part of petitioner. As a lawyer, petitioner cannot
pretend that the plain meaning of his admission eluded
his mind.
2. Private respondent did not know of the mortgage of their
co-owned property in favor of the SSS and the expiry
date of its period of redemption. In other words, private
respondent did not voluntary relinquish at any period of
time her pro-indiviso share in the subject property.
Petitioner, for his own benefit, borrowed money
from the SSS and mortgaged the subject property to the
SSS on June 5, 1967 without the knowledge and consent
of his co-owner, herein private respondent. Necessarily,
private respondent could not have helped in the
payment of the SSS loan nor could she have redeemed
the subject property from the SSS. This is against the
pronouncement in Article 493 of the Civil Code which
says:
Art. 493. Each co-owner shall have the
full ownership of his part and of the fruits and
benefits pertaining thereto, and he may
therefore alienate, assign or mortgage it and
even substitute another person in its enjoyment,
except when personal rights are involved. But
the effect of the alienation or mortgage, with
respect to the co-owners, shall be limited to the
portion which may be allotted to him in the
division upon the termination of the co-
ownership.
A co-owner has the right to alienate his pro-
indiviso share in the co-owned property even without
the consent of the other co-owners but cannot alienate
the shares of their co-owners. No one can give what he
does not have.
In Bailon-Casilao vs. Court of Appeals, the Court ruled
that:
since a co-owner is entitled to sell his undivided share,
a sale of the entire property by one-co-owner without the
consent of the other co-owners is not null and void.
However, only the rights of the co-owner-seller are
PROPERTY (Atty. Labitag)
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transferred, thereby making the buyer a co-owner of the

property.

Petitioners reliance on the ruling in Tan v. CA is

erroneous. The ruling in that case is based on a different
set of facts.In Tan, the heirs/ the co-owners) allowed the
one year redemption period to expire without redeeming
their parents' former property and permitted the
consolidation of ownership and the issuance of a new
title, thereby allowing the extinguishment of the co-
ownership.