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ART.

440, NCC:

“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.”

GENERAL PRINCIPLE OF ACCESSION:

a. Accessory follows the Principal (Accesio cedit principali)

b. No unjust enrichment1 (No one shall enrich himself at the expense of another)

c. All works, sowing and planting are presumed made by the OWNER at his expense, unless the contrary is proved

d. Accessory incorporated to principal must be incapable of separation without injury. (Art. 447 2)

KINDS OF ACCESSION:

a. Accesion Discreta (right to the fruits) – Art. 441, “To the owner belongs…”
i. Natural Fruits – are the spontaneous products of the soil, and the young and other products of animals.

ii. Industrial Fruits – are those produced by lands of any kind through cultivation or labor.

iii. Civil Fruits – are the rents of buildings, the price of leases of lands and other property, and the amount of
perpetual or life annuities or other similar income.

EXCEPTIONS: (person other than the owner of a property owns the fruits thereof)
 Possession in good faith by another
 Usufruct
 Lease of rural lands
 Pledge
 Antichresis
b. Accesoion Continua (right to things attached or incorporated)

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ART. 22- Every person who, through an act or performance by another, or any other means, acquires or comes into possession of something at the expense or
the latter without just or legal ground, shall return the same to him.

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ART. 447- The OWNER OF THE LAND who makes thereon, personally or through another, plantings, constructions or works with the materials of another, shall
pay their value; and if he(LANDOWNER) acted in bad faith, he shall also be obliged to the reparation of damages. The OWNER OF THE MATERIALS shall have the
right to remove them only in case he can do so without injury to the work constructed, or without the plantings, constructions or works being destroyed.
However, if the LANDOWNER acted in bad faith, the OWNER OF THE MATERIALS may remove them in any event, with a right to be indemnified for damages.
EXCEPTIONS IN WHICH FACTUAL ISSUES MAY BE RESOLVED BY SC:

(1) when the findings are grounded entirely on speculation, surmises or conjectures;
(2)when the inference made is manifestly mistaken, absurd or impossible;
(3) when there is grave abuse of discretion;
(4) when the judgment is based on a misapprehension of facts;
(5) when the findings of facts are conflicting;
(6) when in making its findings the CA went beyond the issues of the case, or its findings are contrary to the admissions of both the appellant and the appellee;
(7) when the findings are contrary to the trial court;
(8) when the findings are conclusions without citation of specific evidence on which they are based;
(9) when the facts set forth in the petition as well as in the petitioner's main and reply briefs are not disputed by the respondent;
(10) when the findings of fact are premised on the supposed absence of evidence and contradicted by the evidence on record;
(11) when the CA manifestly overlooked certain relevant facts not disputed by the parties, which, if properly considered, would justify a different conclusion.
In the matter of the testate estate of Emil Maurice Bachrach, deceased. MARY McDONALD BACHRACH,petitioner-
appellee, vs. SOPHIE SEIFERT and ELISA ELIANOFF, oppositors-appellants. (October 13, 1950)

Is a stock dividend fruit or income, which belongs to the usufructuary, or is it capital or part of the corpus of the estate,
which pertains to the remainderman?

Emil Bachrach (deceased) had no forced heir1 other than his widow, Mary McDonald Bachrach. In Emil’s last will and
testament, he made various legacies in cash and willed the remainder of his estate to Mary McDonald Bachrach (for life all
the fruits and usufruct2 of the remainder of all my estate after payment of the legacies, bequests, and gifts provided for
above; and she may enjoy said usufruct and use or spend such fruits as she may in any manner wish.)

Upon the death of Mary McDonald, one-half of all his estate "shall be divided share and share alike by and between my
legal heirs, to the exclusion of my brothers."

The estate of Emil, 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.

Mary McDonald (as usufructuary or life tenant of the estate): petitioned CFI-Manila to authorize the Peoples Bank and
Trust Company as administrator of the estate of Emil, to transfer to her the said 54,000 share of stock dividend by
endorsing and delivering to her the corresponding certificate of stock. “The dividend, although paid out in the form of
stock, is fruit or income and therefore belonged to her as usufructuary or life tenant.”

Sophie Siefert 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 remainderman3.

CFI-Manila: Granted Mary Mcdonald’s petition and authorized Peoples’ Bank to transfer to Mary the certificate of stock.

Seifert & Elianoff: a cash dividend is an income, but a stock dividend is not. It merely represents an addition to the invested
capital.

Massachusetts rule: cash dividends(however large) is INCOME; stock dividends(however made) is CAPITAL. 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 dividend. It does not distribute property but simply dilutes the shares as they existed before; and that it takes nothing
from the property of the corporation, and nothing to the interests of the shareholders.

Pennsylvania rule: 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. (It is clear that testator intent the
remaindermen should have only the corpus of the estate he left in trust, and that all dividends 4 should go the life tenants.)

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. It is but a mode of distributing the profit.

A STOCK DIVIDEND PROPER is the issue of new shares paid for by the transfer of a sum equal to their par value from the
profits and loss account to that representing capital stock; and really a corporation has no right to a dividend, either in cash
or stock, except from its earnings;

SC: Pennsylvania rule is more in accord with our statutory laws than the Massachusetts rule.

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COMPULSORY HEIRS: 1) legitimate children and descendants, with respect to their legitimate parents and ascendants; 2) in default of the foregoing, legitimate
parents and ascendants, with respect to their legitimate children and descendants; 3) the widow or widower; and 4) acknowledged illegitimate children

2
USUFRUCT: gives a right to enjoy the property of another with the obligation of preserving its form and substance, unless the title constituting it or the law
otherwise provides

3
REMAINDERMAN: is a person who inherits or is entitled to inherit property upon the termination of the estate of the former owner.

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DIVIDENDS: a sum of money paid regularly (typically quarterly) by a company to its shareholders out of its profits (or reserves).
Section 16, Corporation Law: no corporation may make or declare any dividend except from the surplus profits arising from
its business. Any dividend, therefore, whether cash or stock, represents surplus profits.

Article 471, Civil Code: the usufructuary shall be entitled to receive all the natural, industrial, and civil fruits of the property
in usufruct.

ART. 474, Civil Code: Civil fruits are deemed to accrue day by day, and belong to the usufructuary in proportion to the time
the usufruct may last.

ART. 475, Civil Code: When a usufruct is created on the right to receive an income or periodical revenue, either in money
or fruits, or the interest on bonds or securities payable to bearer, each matured payment shall be considered as the
proceeds or fruits of such right.

When it consists of the enjoyment of the benefits arising from an interest in an industrial or commercial
enterprise, the profits of which are not distributed at fixed periods, such profits shall have the same
consideration. lawphil.net

In either case they shall be distributed as civil fruits, and shall be applied in accordance with the rules prescribed
by the next preceding article.

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. They represent profits, and the delivery of the certificate of stock covering said dividend is equivalent
to the payment of said profits. Said shares may be sold independently of the original shares, just as the offspring of a
domestic animal may be sold independently of its mother.
(September 17, 1931)

THE BACHRACH MOTOR CO., INC., vs. TALISAY-SILAY MILLING CO., ET AL., PHILIPPINE NATIONAL BANK (September 17, 1931)

Talisay-Silay Milling Co., Inc., was indebted to PNB. To secure the payment of its debt, Talisay-Silay succeeded in inducing its
planters (among whom was Mariano Lacson Ledesma) to mortgage their land to PNB. To compensate those planters for the risk
they were running with their property under the mortgage, Talisay-Silay undertook to credit the owners of the plantation thus
mortgaged every year with a sum equal to 2% of the debt secured according to yearly balance, the payment of the bonus being
made at once, or in part from time to time, as soon as the central became free of its obligations to PNB,

Bachrach Motor Co., Inc. filed a COMPLAINT against the Talisay-Silay Milling Co., Inc., for the delivery of the amount P13,850
or promissory notes or other instruments or credit for that sum payable on June 30, 1930, as bonus in favor of Mariano Lacson
Ledesma;(CFI-Manila levied a valid attachment upon the bonus; civil case) and that the sale made by said Mariano Lacson
Ledesma be declared null and void. (sale to Cesar)

PNB filed a third party claim alleging a preferential right to receive any amount which Mariano Lacson Ledesma might be
entitled to from the Talisay-Silay Milling Co. as bonus, because that would be civil fruits of the land mortgaged to said bank by
Ledesma for the benefit of the central referred to, and by virtue of a deed of assignment, and praying that said central be
ordered to delivered directly to PNB said sum on account of the latter's credit against the aforesaid Mariano Lacson Ledesma.

Talisay-Silay Milling Co., Inc., answered stating that of Mariano Lacson Ledesma's credit, P7,500 belonged to Cesar Ledesma
because he had purchased it, and praying that it be absolved from the complaint.

Cesar Ledesma claiming to be the owner by purchase in good faith answered praying that he be absolved from the complaint.
All the parties agreed to recognize and respect the sale made in favor of Cesar Ledesma of the P7,500.

CFI-Iloilo: Bachrach Motor Co., Inc., had a preferred right to receive the amount of P11,076.02 which was Mariano Lacson
Ledesma's bonus, and it ordered Talisay-Silay to deliver said sum to Bachrach.

PNB appealed: the bonus in question is civil fruits of the lands which the owners had mortgaged. As CIVIL FRUITS of said land,
said bonus was assigned by Mariano Lacson Ledesma on March 7, 1930, by virtue of a deed of assignment.

Whether or not the bonus in question is civil fruits.

Article 355 of the Civil Code considers three things as civil fruits (old civil code):

1. the rents of buildings; (u otras analogas)


2. the proceeds from leases of lands; and, (u otras analogas)

3. the income from perpetual or life annuities, or other similar sources of revenue.

Assuming that in broad juridical sense of the word "income" it might be said that the bonus in question is "income" under article
355 of the Civil Code, it is obvious to inquire whether it is derived from the land mortgaged by Mariano Lacson Ledesma to PNB
for the benefit of the central; for if it is not obtained from that land but from something else, it is not civil fruits of that land, and
the bank's contention is untenable.

SC: The said bonus bears no immediate, but only a remote accidental relation to the land mentioned, having been granted as
compensation for the risk of having subjected one's land to a lien in favor of the bank, for the benefit of the entity granting said
bonus. If this bonus be income or civil fruits of anything, it is income arising from said risk, or, if one chooses, from Mariano
Lacson Ledesma's generosity in facing the danger for the protection of the central, but certainly it is not civil fruits or income
from the mortgaged property, which, as far as this case is concerned, has nothing to do with it.

Hence, the amount of the bonus is not based upon the value, importance or any other circumstance of the mortgaged property,
but upon the total value of the debt thereby secured, according to the annual balance, which is something quite distinct from
and independent of the property referred to.
THE PHILIPPINE SUGAR ESTATES DEVELOPMENT CO., LTD., INC., plaintiff-appellee,
vs. JUAN M. POIZAT, ET AL., defendants. GABRIELA ANDREA DE COSTER, appellant. (December 31, 1925)

On August 25, 1905, Gabriela de Coster executed to and in favor of her husband, Juan Poizat, a general power of attorney,
which authorized him to do in her name, place and stead, and making use of her rights and actions, the following things:

To loan or borrow any amount in cash or fungible things under conditions he may deem convenient collecting or paying
the principal or interest, for the time, and under the principal of the interest, when they respectively should or private
documents, and making there transactions with or without mortgage, pledge or personal securities.

November 2, 1912, Juan applied for and obtained from Philippine Sugar Estates a credit for the sum of 10,000 Pounds Sterling
(payable in 4 years, at 9% interest per year) to be drawn on the" Banco Espanol del Rio de la Plata" in London not later than
January, 1913. Later, to secure the payment of the loan, he executed a [voluntary special] mortgage upon the real property of
his wife (house and 6 warehouses and lot in Binondo; demolished) For failure to pay the loan, Philippine Sugar Estates brought
an action against Juan to foreclose the mortgage.

CFI-Manila: Jose Galan admitted in open court all of the allegations made in the complaint and that judgment should be
rendered as prayed for. Juan filed an exception to the judgment and moved for new trial, but was denied. Execution was issued
directing the sale of the mortgaged property to satisfy the judgment. The property, which had an assessed value of P342,685,
was sold to Philippine Sugar Estates for P100,000.

For the first time, Gabriella personally appeared and objected to the confirmation of the sale on grounds that it was illegally
executed, and is null and void, because the agent was not authorized to execute it, and because there was no consideration. It
was alleged that at the time the action was filed and the judgment rendered, Gabriela was absent from the Philippine Islands,
and had no knowledge of the execution of the mortgage.

Whether or not the real mortgage in question is null and void as to Gabriella.
The mortgage recites that: a new building was erected. That the property is the subject of a new registration in which it must
be made to appear that the land belongs in fee simple and in full ownership as the paraphernal property 1 of the wife, and that
the new building thereon is the property of the conjugal partnership.

It is contended that the instrument upon its face shows that its purpose and intent was to bind the wife. But it also shows upon
its face that the credit was granted to Juan which he might use within the "entire month of January." The mortgage in question
was signed by Juan in his own name, his own proper person, and by him only, and it was acknowledge by him in his personal
capacity, and there is nothing in either the signature or acknowledgment which shows or tends to show that it was executed for
or on behalf of his wife or "in her name, place or stead." There is no principle of law by which a person can become liable on a
real mortgage which she never executed either in person or by attorney in fact.

It should be noted that this is a mortgage upon real property, the title to which cannot be divested except by sale on execution
or the formalities of a will or deed. For such reasons, the law requires that a power of attorney to mortgage or sell real property
should be executed with all of the formalities required in a deed. For the same reason that the personal signature of Juan,
standing alone, would not convey the title of his wife in her own real property, such a signature would not bind her as a
mortgagor in real property, the title to which was in her name.

Applying it to the facts, under his power of attorney, Juan may have had authority to borrow money and mortgage the real
property of his wife, but the law specifies how and in what manner it must be done, and the stubborn fact remains that, as to
the transaction in question, that power was never exercised. The mortgage in question was executed by him and him only, and
for such reason, it is not binding upon the wife, and as to her, it is null and void.

SC: The whole decree against Gabriella and her paraphernal property and the sale of that property to satisfy the mortgage are
null and void. The land in question was the paraphernal property of the wife, but after the marriage the old buildings on the
property were torn down and a new building constructed and, in the absence of evidence to the contrary, it must be presumed
that the new building is conjugal property of the husband and wife. As such, it is subject of the debts of the conjugal
partnership2 for the payment or security of which the husband has the power to mortgage or otherwise encumber the property.

*The BUILDING is subject to the debts of the conjugal property

The mortgage as to the paraphernal property of the wife is declared null and void ab initio, and as to her personally, the decree is
declared null and void, and as to her paraphernal property, the sale is set aside and vacated, and held for naught, leaving it free
and clear from the mortgage, decree and sale, and in the same condition as if the mortgage had never been executed, with costs
in favor of the appellant.

DECISION UPON PETITION FOR REHEARING (1926)

Whether or not the mortgage in question is valid, not only as to the buildings, but also as to the land on which they are
constructed.

Previous decision: The buildings being conjugal property, the mortgage is valid as to the buildings, but that it is not valid as to the
land, which is the paraphernal property of the wife.

Philippine Sugar Estates: the land is conjugal property under Art. 1404

SC: That article does not apply to the instant case. It does not appear that the buildings are of the nature therein specified.

The word building is a generic term for all architectural work with roof built for the purpose used as man's dwelling, or
for offices, clubs, theaters, etc. When the structure does not constitute a building, then the rule must be followed. The
article cannot but be interpreted strictly. An inclosure for cattle or a 'tinada,' a stone barn, etc., follow the soil as
accessories thereto.

It appears from the mortgage that the buildings in question to be constructed are warehouses, and as the circumstances and
details do not appear in the record, such warehouses could not be construed as the class of buildings mentioned in article 1404.
Hence, the facts are not sufficient to justify the court in holding that the exceptional provision applies to this case in the sense of

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PARAPHERNAL PROPERTY – is property that solely belongs to either the husband or the wife only. It is not part of the conjugal property or the absolute
community property.
2
CONJUGAL PARTNERSHIP – husband and wife place in a common fund the proceeds, products, fruits, and income from their separate properties and those
acquired by either or both spouses through their efforts or by chance.
considering the soil as an accessory to the building, contrary to the general rule contained in the Civil Code (arts. 358-364 and
1368).

Conceding that article 1404 does apply, yet under the provisions of that article, the owner of the land is entitled to an indemnity
for its value. Since, according to the spirit of the law contained in article 349 of the Civil Code, no one can be deprived of his
property without previous indemnity, and it not appearing in the instant case that such indemnity was paid, the land in question
cannot now be considered as conjugal property.

It further appears that this property is registered under the Torrens System, and that the title to the land is vested in the wife,
and is not conjugal property, and that the wife is at least the owner of the land.

Philippine Sugar Estates: Cites National Bank vs. Quintos and Ansaldo, in which article 1408 of the Civil Code was applied.

SC: It must be conceded that this article applies only to those cases wherein there is a presumption that the debt contracted by
the husband is for the common benefit of both spouses, but this presumption may be overcome by evidence to the contrary.

For this reason, where, as in the instant case, it appears that the loan obtained by the husband was not only not obtained for the
common benefit of the conjugal partnership, but was obtained to the damage of the wife, there is no such presumption, and
that article does not apply.

DEPARTMENT OF EDUCATION, vs. DELFINA CASIBANG (January 27, 2016)

The property in controversy is a 7,532 square meter portion of Lot 115 covered by OCT registered under the name of Juan
Cepeda. In 1965, upon the request of then Mayor Justo Cesar Caronan, Cepeda allowed the construction and operation of a
school on the western portion of his property. The school is now known as Solana North Central School, operating under the
control and supervision of DepEd.

Despite Cepeda's death in 1983, respondents (descendants of Cepeda) continued to tolerate the use and possession of the
property by the school.

Sometime between October 31, 2000 and November 2, 2000, the respondents entered and occupied a portion of the property.
Upon discovery of the said occupation, the teachers of the school brought the matter to the attention of the barangay captain.
The school officials demanded the respondents to vacate the property. Respondents refused to vacate the property, and asserted
Cepeda's ownership of the lot.

In 2001, the DepEd filed a Complaint for Forcible Entry and Damages against respondents before the MCTC-Solana-Enrile.

MCTC: Ruled in favor of DepEd and directed respondents to vacate the premises; RTC: affirmed the decision of the MCTC.

Respondents demanded for DepEd to either pay rent, purchase the area occupied, or vacate the premises. DepEd did not heed
the demand and refused to recognize the ownership of the respondents over the property.

In 2004, the respondents filed an action for Recovery of Possession and/or Sum of Money against DepEd. Respondents averred
that since their late father did not have any immediate need of the land in 1965, he consented to the building of the temporary
structure and allowed the conduct of classes in the premises. (OCT under Juan Cepeda’s name, Tax Declarations since 1965,
Technical Descriptions of DENR and LMB, MTC certification in a cadastral case)
DepEd: alleged that it owned the subject property because it was purchased by civic-minded residents of Solana, Cagayan from
Cepeda. It further alleged that contrary to respondents' claim that the occupation is by mere tolerance, the property has always
been occupied and used adversely, peacefully, continuously and in the concept of owner for almost 40 years. It insisted that the
respondents had lost whatever right they had over the property through laches. (Failed to present any evidence to support its
claim that the disputed land was indeed purchased by the residents)

RTC: Respondents are the owners of the subject property, thus: “Since restoration of possession of said portion by the defendant
Department of Education is no longer feasible or convenient because it is now used for the school premises, the only relief
available is for the government to pay due compensation which should have [been] done years ago.”

DepEd appeal to CA (OSG): the respondents have lost their right over the subject property for their failure to assert the same for
more than 30 years, starting in 1965, when the Mayor placed the school in possession thereof.

CA: affirmed the decision of the RTC, favoring the respondents. DepEd appealed to SC.

Whether or not respondent’s right to recover possession of the subject property is barred by prescription or laches 1.

There is no absolute rule as to what constitutes laches or staleness of demand; each case is to be determined according to its
particular circumstances. The question of laches is addressed to the sound discretion of the court, and since laches is an
equitable doctrine, its application is controlled by equitable considerations. It cannot work to defeat justice or to perpetrate
fraud and injustice. Laches is evidentiary in nature, a fact that cannot be established by mere allegations in the pleadings.

It is undisputed that the subject property is covered by OCT No. O-627, registered in the name of the Juan Cepeda. 33 A
fundamental principle in land registration under the Torrens system is that a certificate of title serves as evidence of an
indefeasible and incontrovertible title to the property in favor of the person whose name appears therein. Thus, the certificate
of title becomes the best proof of ownership of a parcel of land.

As registered owners of the lots in question, the respondents have a right to eject any person illegally occupying their property.
This right is imprescriptible. Even if it be supposed that they were aware of the petitioner's occupation of the property, and
regardless of the length of that possession, the lawful owners have a right to demand the return of their property at any time
as long as the possession was unauthorized or merely tolerated, if at all. This right is never barred by laches.

Sarona, et al. v. Villegas, et al.:

TOLERATED ACTS – those which by reason of neighborliness or familiarity, the owner of property allows his neighbor or another
person to do on the property; they are generally those particular services or benefits which one's property can give to another
without material injury or prejudice to the owner, who permits them out of friendship or courtesy . Even though this is
continued for a long time, no right will be acquired by prescription.

Considering that the occupation of the subject lot is by mere tolerance or permission of the respondents, the DepEd, without any
contract between them, is bound by an implied promise that it will vacate the same upon demand. Hence, until such demand to
vacate was communicated by the respondents to the DepEd, respondents are not required to do any act to recover the subject
land, precisely because they knew of the nature of the DepEd's possession which is by mere tolerance.

Respondents are not guilty of failure or neglect to assert a right within a reasonable time. The nature of that possession by the
DepEd has never changed from 1965 until the filing of the complaint for forcible entry against the respondents on June 21, 2001.
It was only then that the respondents had knowledge of the adverse claim of the DepEd over the property. The respondents
filed the action for recovery of possession on March 16, 2004 after they lost their appeal in the forcible entry case and upon the
continued refusal of the DepEd to pay rent, purchase the lot or vacate the premises.

DEPED IS A BUILDER IN GOOD FAITH. To be deemed a builder in good faith, it is essential that:

1. a person asserts title to the land on which he builds, and that he be unaware that there exists in his title or mode of
acquisition any flaw which invalidates it; or
2. in those cases that the owners knew and approved of the construction of improvements on the property.

1
LACHES – failure or neglect for an unreasonable and unexplained length of time, to do that which, by exercising due diligence, could or should have been done
earlier; it is negligence or omission to assert a right within a reasonable time, warranting a presumption that the party entitled to assert it either has abandoned
it or declined to assert it.
Despite being a possessor by mere tolerance, the DepEd is considered a builder in good faith, since Cepeda permitted the
construction of building and improvements to conduct classes on his property. Hence, Article 448 may be applied in the case at
bar, in relation to Article 546. (rights of respondents as landowners as against the DepEd, a builder in good faith)

Article 448 provides a just and equitable solution to the impracticability of creating "forced co-ownership" 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. The owner of the land is allowed to exercise the said options because his right
is older and because, by the principle of accession, he is entitled to the ownership of the accessory thing.

TWO options available to the respondents as landowners are:

(a) they may appropriate the improvements, after payment of indemnity representing the value of the
improvements introduced and the necessary and useful expenses defrayed on the subject lots; or
(b) they may oblige the DepEd to pay the price of the land.

However, it is also provided under Article 448 that the builder cannot be obliged to buy the land if its value is considerably more
than that of the improvements and buildings. If that is the case, the DepEd is not duty-bound to pay the price of the land should
the value of the same be considerably higher than the value of the improvement introduced by the DepEd on the subject
property. In which case, the law provides that the parties shall agree on the terms of the lease and, in case of disagreement, the
court shall fix the terms thereof.

RTC/CA: The option of the landowner to appropriate after payment of the indemnity representing the value of the improvements
introduced and the necessary and useful expenses defrayed on the subject lots is no longer feasible or convenient because it is
now being used as school premises. The respondents are thus left with the second option of obliging the DepEd to pay the price
of the land or to require the DepEd to pay reasonable rent if the value of the land is considerably more than the value of the
buildings and improvements. Since the determination of the value of the subject property is factual in nature, this Court finds a
need to remand the case to the trial court to determine its value.

SC: the time of taking is determinative of just compensation in expropriation proceedings but not in a case where a landowner
has been deprived of the use of a portion of this land for years due to the encroachment of another. The computation of the
value of the property should be fixed at the prevailing market value. The reckoning period for valuing the property in case the
landowner exercised his rights in accordance with Article 448 shall be at the time the landowner elected his choice. Therefore,
the basis for the computation of the value of the subject property in the instant case should be its present or current fair market
value.
BLISS DEVELOPMENT CORP./ HOME GUARANTY CORP. V. MONTANO DIAZ (August 5, 2015)

Bliss Development Corporation is the registered owner of a lot in Diliman, Quezon City as evidenced by a TCT. On October 19,
1984, it entered into and executed a Deed of Sale over the said property in favor of Spouses Emiliano and Leonila Melgazo
(deceased)

In 1991, Rodolfo Nacua sent a letter to BDC, saying that Sps. Melgazo transferred to him their rights over the property. He further
expressed willingness to pay the outstanding obligations of Sps. Melgazo to BDC. Before the property was fully paid, Nacua sold
his rights to Olivia Garcia, through a Deed of Transfer of Rights. Later, Garcia transferred her rights to Elizabeth Reyes. Reyes then
transferred her rights to Domingo Tapay, who then later sold his rights to herein respondent Montano Diaz for P600,000. Diaz
then paid BDC the amortizations due on the property, amounting to P406,915.15, and BDC issued a permit to occupy the
property in favor of Diaz. Diaz then introduced improvements on the property, amounting to P700,000.

In 1992, BDC executed a Contract to Sell in favor of Diaz. In 1994, BDC informed Diaz that respondent Edgar Arreza was claiming
that the heirs of Sps. Melgazo sold to him the rights over the property. BDC then placed Diaz’s account in “inactive status.” To
resolve the conflicting claims of Arreza and Diaz, BDC filed a complaint for Interpleader against them before the RTC-Makati.

RTC-Makati: the signatures of Sps. Melgazo transferring their rights to Nacua were mere forgeries. Thus, it ruled that Arreza had
a better right over the property. This decision became final and executory.

Diaz filed the present complaint for sum of money against BDC before the RTC-Makati. Diaz argued that BDC and Tapay’s
representations led him to believe that he had a good title over the property, but due to the court’s ruling in the interpleader
case, he was constrained to transfer the property to Arreza.

BDC and Tapay: argued that their respective acts were lawful and done in good faith. Arreza filed a Motion to Dismiss, citing res
judicata, arguing that the claim of Diaz is a compulsory counterclaim that should have been pleaded in the Interpleader case.
RTC: Diaz failed to prove that he is an assignee in good faith; dismissed the complaint for lack of merit. (Plaintiff must show that
he inquired not only into the title of the assignor, but also into the assignor’s capacity to convey. The failure of plaintiff to
diligently inquire as such, indicated that he is not an assignee in good faith.)

CA: CA reversed the ruling of the RTC and ruled that Diaz is entitled to be paid reimbursement and damages. The CA anchored
its ruling on its finding that Diaz is both a buyer in good faith and a builder in good faith. (While Bliss executed a Deed of Sale
with Mortgage in favor of the spouses Melgazo, title over the property was in Bliss’ name. The title remained in Bliss’ name when
Tapay offered to transfer his rights over the property to Diaz. Considering that the property involved is registered land, Diaz
need not go beyond the title to be considered a buyer in good faith.)

With regard to the liability of BDC, the CA ruled that the provision in the Contract to Sell excusing it from reimbursing the
monthly amortizations to Diaz cannot exempt it from liability, because it acted in bad faith. Bliss should pay Diaz for
amortizations and improvements on property.

BDC: argues that it is not liable to respondent Diaz, both for the amortizations that Diaz paid to it, and the value of the
improvements that Diaz introduced to the property.

SC: CA committed reversible error in ruling that Diaz was a buyer in good faith and for value. Nevertheless, BDC is liable to Diaz
because it acted in bad faith when it allowed Diaz to take over the payment of the amortizations over the subject property.

Diaz was NOT a buyer in good faith and for value. For one to be considered a purchaser in good faith: (1) the purchaser buys the
property of another without notice that some other person has a right to or interest in such property; and (2) the purchaser pays
a full and fair price for the property at the time of such purchase or before he or she has notice of the claim of another.

While it is true that the subject lot is registered lot, the doctrine of not going beyond the face of the title does not apply in the
case here, because what was subjected to a series of sales was not the lot itself but the right to purchase the lot from BDC.
Notably, the several transfers themselves did not purport to be Deeds of Absolute Sale, but merely deeds of assignment of rights.
The subject of those deeds of assignment was never the real right over the subject property, but merely the personal right to
purchase it. Therefore, the mirror doctrine finds no application in the case at bar. A careful review of the records of this case
reveals that Diaz, in fact, failed to diligently inquire into the title of his predecessor before entering into the contract of sale.

Notwithstanding the fact that Diaz is not an innocent purchaser in good faith and for value, BDC is nevertheless liable to return to
him the amortizations which he already paid on the property, applying the rule on unjust enrichment.

Whether or not BDC is liable to Diaz for the value of the improvements that Diaz introduced to the property.

Art. 453. If there was bad faith, not only on the part of the person who built, planted or sowed on the land of another, but also
on the part of the owner of such land, the rights of one and the other shall be the same as though both had acted in good faith.

It is understood that there is bad faith on the part of the landowner whenever the act was done with his knowledge and
without opposition on his part.

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.

Art. 548. Expenses for pure luxury or mere pleasure shall not be refunded to the possessor in good faith; but he may remove
the ornaments with which he has embellished the principal thing if it suffers no injury thereby, and if his successor in the
possession does not prefer to refund the amount expended.

The CA may have made the erroneous conclusion that Diaz acted in good faith, but because BDC equally acted in bad faith, Art.
453 of the Civil Code commands that the rights of one and the other shall be the same as though both had acted in good faith.
The CA made the correct observation then, when it said:

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. In this case, however, the option
of selling the land to the builder in good faith is no longer viable in light of the ruling in the interpleader case. Hence, there is
only one thing left for [BDC] to do: indemnify Diaz for the improvements introduced on the property.

In sum, the CA correctly reversed the ruling of the RTC, and ordered BDC to pay Diaz the amount he paid as amortizations, as
well as the value of the improvements that he introduced on the subject property. However, because both parties acted in bad
faith, there is no basis for the award of moral and exemplary damages, as well as attorney’s fees.

SC: (1) petitioner Bliss Development Corporation/Home Guaranty Corporation is ordered to pay Diaz the amount of
P1,106,915.58 for the amortizations paid and the amount spent on improvements on the property; and (2) Domingo Tapay is
ordered to pay respondent Diaz the amount of P600,000.00, the amount he paid for the transfer of rights.

THE HEIRS OF VICTORINO SARILI, vs. PEDRO LAGROSA (January 15, 2014)

In 2000, Pedro Lagrosa, represented by Lourdes Mojica via a special power of attorney, filed a complaint against Sps. Sarili and
the Register of Deeds before the RTC, alleging that he is the owner of a certain parcel of land situated in Caloocan City as
evidenced by a TCT and has been religiously paying the real estate taxes since its acquisition on November 29, 1974.

Lagrosa claimed that he is a resident of California, USA, and that during his vacation in the Philippines, he discovered that a new
certificate of title to the subject property was issued by the Registry of Deeds in the name of Victorino by virtue of a falsified
Deed of Absolute Sale dated 1978 purportedly executed by him and his wife. Lagrosa prayed for the annulment of the said TCT.

Sps. Sarili: maintained that they are innocent purchasers for value, having purchased the subject property from Ramon
Rodriguez, who possessed and presented a Special Power of Attorney to sell/dispose of the same, and, in such capacity, executed
a Deed of Absolute Sale dated November 20, 1992 conveying the said property in their favor. Sps. Sarili denied any participation
in the preparation of the February 16, 1978 deed of sale, which may have been merely devised by the "fixer" they hired to
facilitate the issuance of the title in their names. During the pendency of the proceedings, Victorino passed away and was
substituted by his heirs.

RTC: held in favor of Sps. Sarili. Lagrosa’s signature on the subject SPA is "the same and exact replica" of his signature in the 1999
SPA in favor of Lourdes. Thus, with Ramon’s authority having been established, the November 20, 1992 deed of sale executed by
the latter as "valid, genuine, lawful and binding" and, as such, had validly conveyed the subject property in favor of Sps. Sarili.

CA: held that the RTC erred in its ruling since the November 20, 1992 deed of sale was not the source document for the transfer
of the subject property and the issuance of TCT in the name of Sps. Sarili, but rather the February 16, 1978 deed of sale. In fine,
the CA declared the deeds of sale dated February 16, 1978 and November 20, 1992, as well as the subject SPA as void, and
consequently ordered the RD to cancel TCT in the name of Victorino and consequently reinstate TCT in respondent’s name.
Whether or not there was a valid conveyance of the subject property to Sps. Sarili

Heirs of Victorino: argue that regardless of the fictitious 1978 deed of sale, there was still a valid conveyance of the subject
property to Sps. Sarili who relied on the authority of Ramon (as per the subject SPA) to sell the same. They posit that the due
execution of the subject SPA between Lagrosa and Ramon and the 1992 deed of sale between Victorino and Ramon were duly
established facts and that from the authenticity and genuineness of these documents, a valid conveyance of the subject land
from respondent to Victorino had leaned upon.32

SC: Even if the procurement of a certificate of title was tainted with fraud and misrepresentation, such defective title may be the
source of a completely legal and valid title in the hands of an innocent purchaser for value.

The general rule is that every person dealing with registered land may safely rely on the correctness of the certificate of title
issued therefor and the law will in no way oblige him to go beyond the certificate to determine the condition of the property.
Where there is nothing in the certificate of title to indicate any cloud or vice in the ownership of the property, or any
encumbrance thereon, the purchaser is not required to explore further than what the Torrens Title upon its face indicates in
quest for any hidden defects or inchoate right that may subsequently defeat his right thereto. 34

HOWEVER, a higher degree of prudence is required from one who buys from a person who is not the registered owner, although
the land object of the transaction is registered. In such a case, the buyer is expected to examine not only the certificate of title
but all factual circumstances necessary for him to determine if there are any flaws in the title of the transferor The buyer also has
the duty to ascertain the identity of the person with whom he is dealing with and the latter’s legal authority to convey the
property.

The strength of the buyer’s inquiry on the seller’s capacity or legal authority to sell depends on the proof of capacity of the seller.
If the proof of capacity consists of a special power of attorney duly notarized, mere inspection of the face of such public
document already constitutes sufficient inquiry. If no such special power of attorney is provided or there is one but there appears
to be flaws in its notarial acknowledgment, mere inspection of the document will not do; the buyer must show that his
investigation went beyond the document and into the circumstances of its execution.

In the present case, it is undisputed that Sps. Sarili purchased the subject property from Ramon on the strength of the latter’s
ostensible authority to sell under the subject SPA. The said document, however, readily indicates flaws in its notarial
acknowledgment since respondent’s community tax certificate number was not indicated thereon. Under the governing rule on
notarial acknowledgments at that time,(LCG of 1991) when an individual subject to the community tax acknowledges any
document before a notary public, it shall be the duty of the administering officer to require such individual to exhibit the
community tax certificate. Despite this irregularity, however, Sps. Sarili failed to show that they conducted an investigation
beyond the subject SPA and into the circumstances of its execution as required by prevailing jurisprudence. Hence, Sps. Sarili
cannot be considered as innocent purchasers for value.

Article 1874 of the Civil Code provides that "[w]hen a sale of a piece of land or any interest therein is through an agent, the
authority of the latter shall be in writing; otherwise, the sale shall be void." In other words, if the subject SPA was not proven to
be duly executed and authentic, then it cannot be said that the foregoing requirement had been complied with; hence, the sale
would be void.

Unrebutted too is the testimony of respondent who, during trial, attested to the fact that he and his wife, Amelia, had
immigrated to the USA since 1968 and therefore could not have signed the subject SPA due to their absence.

Further, records show that the notary public, Atty. Ramon Untalan, failed to justify why he did not require the presentation of
respondent’s CTC or any other competent proof of the identity of the person who appeared before him to acknowledge the
subject SPA as Lagrosa’s free and voluntary act and deed despite the fact that he did not personally know the latter and that he
met him for the first time during the notarization.

SC: Thus, in light of the totality of evidence at hand, the Court agrees with the CA’s conclusion that respondent was able to
preponderate his claims of forgery against the subject SPA. In view of its invalidity, the November 20, 1992 sale relied on by
Sps. Sarili to prove their title to the subject property is therefore void.

Since Sps. Sarili’s claim over the subject property is based on forged documents, no valid title had been transferred to them.
Verily, when the instrument presented is forged, even if accompanied by the owner’s duplicate certificate of title, the registered
owner does not thereby lose his title, and neither does the assignee in the forged deed acquire any right or title to the
property. Accordingly, the TCT in the name of Victorino should be annulled, while TCT in the name of Lagrosa should be
reinstated.
Rights and obligations of the parties with respect to the house Sps. Sarili had built on the subject property in bad faith in
accordance with Article 449 in relation to Articles 450, 451, 452, and the first paragraph of Article 546 of the Civil Code which
respectively read as follows:

ART. 449. He who builds, plants or sows in bad faith on the land of another, loses what is built, planted or sown without right to
indemnity.

ART. 450. The owner of the land on which anything has been built, planted or sown in bad faith may demand the demolition of
the work, or that the planting or sowing be removed, in order to replace things in their former condition at the expense of the
person who built, planted or sowed; or he may compel the builder or planter to pay the price of the land, and the sower the
proper rent.

ART. 451. In the cases of the two preceding articles, the landowner is entitled to damages from the builder, planter or sower.

ART. 452. The builder, planter or sower in bad faith is entitled to reimbursement for the necessary expenses of preservation of
the land.

BUILDER IN GOOD FAITH - essential that a person asserts title to the land on which he builds, and that he be unaware that there
exists in his title or mode of acquisition any flaw which invalidates it. GOOD FAITH is an intangible and abstract quality with no
technical meaning or statutory definition, and it encompasses, among other things, an honest belief, the absence of malice and
the absence of design to defraud or to seek an unconscionable advantage. It implies honesty of intention, and freedom from
knowledge of circumstances which ought to put the holder upon inquiry.

As for Sps. Sarili, they knew – or at the very least, should have known – from the very beginning that they were dealing with a
person who possibly had no authority to sell the subject property considering the palpable irregularity in the subject SPA’s
acknowledgment. It cannot be seriously doubted that Sps. Sarili were actually aware of a flaw or defect in their title or mode of
acquisition and have consequently built the house on the subject property in bad faith under legal contemplation.

SC: the case is REMANDED to the court a quo for the proper application of Article 449 in relation to Articles 450, 451, 452, and
the first paragraph of Article 546 of the Civil Code with respect to the house Spouses Victorino Sarili had built on the subject
property as herein discussed.
FILOMENA R. BENEDICTO, vs. ANTONIO VILLAFLORES (October 6, 2010)

Maria Villaflores was the owner of Lot 2-A in Meycauayan, Bulacan, evidenced by a TCT. In 1980, Maria sold a portion of the lot
to her nephew, Antonio Villaflores. Antonio then took possession of the portion sold to him and constructed a house thereon. In
1992, Maria executed in favor of Antonio a deed of absolute sale covering the entire Lot 2-A. However, Antonio did not register
the sale or pay the real property taxes for the subject land.

In 1994, Maria sold the same Lot 2-A to Filomena Benedicto, evidenced by a Kasulatan ng Bilihang Tuluyan. Filomena registered
the sale with the Registry of Deeds of Meycauayan on September 6, 1994. Thus, the TCT in the name of Maria was cancelled and
a TCT was issued in the name of Filomena. Since then Filomena paid the real property taxes for the subject parcel of land.

In 2000, Filomena filed a case for Accion Publiciana with Cancellation of Notice of Adverse Claim, Damages and Attorney’s
Fees against Antonio. She alleged that she acquired Lot 2-A in 1994 from her grandaunt Maria by virtue of the Kasulatan ng
Bilihang Tuluyan. At the time of the sale, she was not aware that Antonio had any claim or interest over the subject property.
Antonio assured her that there was no impediment to her acquisition of the land, and promised to vacate the property 5 years
after the sale. In August 1999, Antonio requested an extension of one year, and offered to pay a monthly rental of ₱2,000.00,
which she granted. However, in 2000, Antonio refused to vacate the property and claimed absolute ownership of Lot 2-A.

Antonio: alleged that he purchased the subject property from Maria in 1980; and that he took possession of the same and
constructed his house thereon. He came to know of the sale in favor of Filomena only in 2000 when the latter demanded that he
vacate the property. He averred that Filomena was aware of the sale;

RTC: ruled in favor of Filomena as she was the one who registered the sale in good faith; as such, she has better right than
Antonio. It rejected Antonio’s allegation of bad faith on the part of Filomena because no sufficient evidence was adduced to
prove it. RTC found Antonio’s evidence of ownership questionable. Nevertheless, it declared Antonio a builder in good faith.
CA: affirmed the RTC for upholding Filomena’s ownership of Lot 2-A and for declaring Antonio a builder in good faith.
However, it remanded the case to the RTC for further proceedings to determine the respective rights of the parties under Articles
448 and 546 of the Civil Code, and the amount due Antonio.

Filomena: asserts that Antonio is not entitled to any reimbursement because he possessed the property by mere tolerance.
Maria merely allowed Antonio to construct his house on a portion of Lot 2-A; hence, he is not entitled to any reimbursement or
retention.

SC: The question of whether a possessor is in good or bad faith is a factual matter. The construction of Antonio’s house was
undertaken long before the sale in favor of Filomena. When Filomena bought the property from Maria, Antonio’s house which he
used as residence had already been erected on the property. “Antonio claims not being aware of any flaw in his title. He believed
being the owner of the subject premises on account of the Deed of Sale thereof in his favor despite his inability to register the
same. Thus, we sustain the finding that Antonio is a builder in good faith.

Under Article 448, a landowner is given the option to either appropriate the improvement as his own upon payment of the
proper amount of indemnity, or 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.14

Indeed, respondent was compelled to file this suit to vindicate his rights. However, such fact by itself will not justify an award of
attorney’s fees, when there is no sufficient showing of petitioner’s bad faith in refusing to pay the said rentals as well as the
repair and overhaul costs.

No reversible error committed by the CA.

LUCIANO BRIONES and NELLY BRIONES v. JOSE MACABAGDAL (August 3, 2010)

Spouses Jose and Fe Macabagdal purchased from Vergon Realty Investments Corporation Lot 2-R in Vergonville Subd. Las Pinas,
covered by a TCT. Luciano and Nelly Briones are the owners of Lot No2-S, which is adjacent to Lot No. 2-R.

In 1984, after obtaining a building permit and Vergon’s approval, spouses Briones constructed a house on Lot No. 2-R which they
thought was Lot No. 2-S. After being informed of the mix up by Vergon’s manager, spouses Macabagdal immediately demanded
that spouses Briones demolish the house and vacate the property. Spouses Briones refused to heed their demand. Thus,
spouses Macabagdal filed an action to recover ownership and possession of the said parcel of land with the RTC-Makati City.

Spouses Briones: insisted that the lot on which they constructed their house was the lot which was consistently pointed to them
as theirs by Vergon’s agents over the 7-year period they were paying for the lot. They interposed the defense of being buyers in
good faith and impleaded Vergon as third-party defendant claiming that because of the warranty against eviction, they were
entitled to indemnity from Vergon in case the suit is decided against them. [

RTC-Makati: ruled in favor of spouses Macabagdal as the owners of Lot No. 2-R. Spouses Briones are ordered to demolish their
house and return the possession of the portion of Lot No. 2-R, or in the alternative, compensate spouses Macabagdal

CA: affirmed RTCs finding that the lot upon which spouses Briones built their house was not the one which Vergon sold to them.
Based on the documentary evidence, such as the titles of the two lots, the contracts to sell, and the survey report made by the
geodetic engineer, petitioners house was built on the lot of the respondent-spouses. Spouses Briones cannot use the defense of
allegedly being a purchaser in good faith for wrongful occupation of land.
Spouses Briones: insist that they relied with full faith and confidence in the reputation of Vergon’s agents when they pointed the
wrong property to them. 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.

SC: Article 527 of the Civil Code presumes good faith. 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.

When a person builds in good faith on the land of another, Article 448 of the Civil Code governs. Article 448 covers 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. The
BUILDER IN GOOD FAITH can compel the landowner to make a choice between appropriating the building by paying the proper
indemnity or obliging the builder to pay the price of the land. The choice belongs to the owner of the land, a rule that accords
with the principle of accession, i.e., that the accessory follows the principal and not the other way around.

However, even as the option lies with the landowner, the grant to him, nevertheless, is preclusive. He must choose one. He
cannot, for instance, compel the owner of the building to remove the building from the land without first exercising either
option. It is only if the owner chooses to sell his land, and the builder or planter fails to purchase it where its value is not more
than the value of the improvements, that the owner may remove the 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. Moreover, petitioners have the
right to be indemnified for the necessary and useful expenses they may have made on the subject property.

Spouses Macabagdal have the option to appropriate the house on the subject land after payment to petitioners of the
appropriate indemnity or to oblige petitioners to pay the price of the land, unless its value is considerably more than the value of
the structures, in which case petitioners shall pay reasonable rent.

SC: must be remanded to the RTC which shall conduct the appropriate proceedings to assess the respective values of the
improvement and of the land, as well as the amounts of reasonable rentals and indemnity, fix the terms of the lease if the parties
so agree, and to determine other matters necessary for the proper application of Article 448, in relation to Articles 546 and 548,
of the Civil Code.

Considering that petitioners Briones acted in good faith in building their house on the subject property of the respondent-
spouses, there is no basis for the award of moral damages to respondent-spouses.

The case is REMANDED to the RTC-Makati City. Further proceedings consistent with the proper application of Articles 448, 546
and 548 of the Civil Code, as follows:

1. RTC shall determine:

a. the present fair price of the respondent-spouses lot;

b. the amount of the expenses spent by petitioners for the building of their house;

c. the increase in value (plus value) which the said lot may have acquired by reason thereof; and

d. whether the value of said land is considerably more than that of the house built thereon.

2. After said amounts shall have been determined by competent evidence, the RTC shall render judgment, as follows:

a. The trial court shall grant the respondent-spouses a period of 15 days within which to exercise their option under
Article 448 of the Civil Code: 1.) whether to appropriate the house as their own by paying to petitioners either the
amount of the expenses spent by petitioners for the building of the house, or the increase in value (plus value)
which the said lot may have acquired by reason thereof, 2.) or to oblige petitioners to pay the price of said land. The
amounts to be respectively paid by the respondent-spouses and petitioners, in accordance with the option thus
exercised by written notice of the other party and to the Court, shall be paid by the obligor within 15 days from
such notice of the option by tendering the amount to the Court in favor of the party entitled to receive it;
b. If the respondent-spouses exercises the option to oblige petitioners to pay the price of the land but the latter
rejects such purchase because, as found by the trial court, the value of the land is considerably more than that of
the house, petitioners shall give written notice of such rejection to the respondent-spouses and to the Court within
15 days from notice of the respondent-spouses option to sell the land. In that event, the parties shall be given a
period of 15 days from such notice of rejection within which to agree upon the terms of the lease, and give the
Court formal written notice of such agreement and its provisos. If no agreement is reached by the parties, the trial
court, within 15 days from and after the termination of the said period fixed for negotiation, shall then fix the terms
of the lease, payable within the first 5 days of each calendar month.

The period for the forced lease shall not be more than 2 years, counted from the finality of the judgment,
considering the long period of time since petitioners have occupied the subject area. The rental thus fixed shall be
increased by 10% for the second year of the forced lease. Petitioners shall not make any further constructions or
improvements on the house. Upon expiration of the 2-year period, or upon default by petitioners in the payment
of rentals for two (2) consecutive months, the respondent-spouses shall be entitled to terminate the forced
lease, to recover their land, and to have the house removed by petitioners or at the latter’s expense. The rentals
herein provided shall be tendered by petitioners to the Court for payment to the respondent-spouses, and such
tender shall constitute evidence of whether or not compliance was made within the period fixed by the Court.

c. In any event, petitioners shall pay the respondent-spouses reasonable compensation for the occupancy of the
respondent-spouses land for the period counted from the year petitioners occupied the subject area, up to the
commencement date of the forced lease referred to in the preceding paragraph;

d. The periods to be fixed by the trial court in its Decision shall be inextendible, and upon failure of the party obliged
to tender to the trial court the amount due to the obligee, the party entitled to such payment shall be entitled to an
order of execution for the enforcement of payment of the amount due and for compliance with such other acts as
may be required by the prestation due the obligee.

OPHELIA TUATIS vs. SPOUSES ELISEO ESCOL and VISMINDA ESCOL (October 27, 2009)

In 1996, Opelia Tuatis filed a Complaint for Specific Performance with Damages against Visminda Escol before the RTC.

In November 1989, Visminda(seller) and Tuatis(buyer) entered into a Deed of Sale of a Part of a Registered Land by Installment.
The subject matter of said Deed was part of a registered land, Lot No. 251, Pls-66 covered under an OCT with an area of 300
square meters, more or less. Under the deed, Tuatis shall pay Visminda ₱10,000 (₱3,000 as downpayment; ₱4,000 on or before
December 31, 1989; ₱3,000 on or before January 31, 1990) Upon failure of Tuatis to pay the remaining balance within the period
of three months from the period stipulated above, Tuatis shall return the land subject of this contract to Visminda and Visminda
shall return all the amount paid by Tuatis.

Of the ₱10,000, Tuatis paid Visminda ₱3,000 as downpayment. Tuatis paid ₱3,000 as installment on December 19, 1989, and
another ₱1,000 on February 17, 1990. Tuatis averred that she paid Visminda the remaining ₱3,000 on February 27, 1990 in the
presence of Eric Selda, a clerk in the law office of one Atty. Alanixon Selda. In support of this averment, Tuatis attached to her
Complaint a certification executed by Eric on May 27, 1996.

In the meantime, Tuatis took possession of the subject property and constructed a residential building thereon. In 1996, Tuatis
requested Visminda to sign a prepared absolute deed of sale covering the subject property, but the latter refused, contending
that the purchase price had not yet been fully paid. The parties tried to amicably settle the case before the Lupon Barangay, to
no avail.

Tuatis: contended that Visminda failed and refused to sign the absolute deed of sale without any valid reason. Thus, Tuatis
prayed that the RTC order Visminda to do all acts for the consummation of the contract sale, sign the absolute deed of sale and
pay damages, as well as attorney’s fees.
Visminda: countered that, except for the ₱3,000 downpayment and ₱1,000.00 installment paid by Tuatis on 19 December 1989
and 17 February 1990,13 respectively, Tuatis made no other payment to Visminda. Visminda asked that the RTC dismiss Tuatis’
Complaint, or in the alternative, order Tuatis to return the subject property to Visminda after Visminda’s reimbursement of the
₱4,000.00 she had received from Tuatis.

RTC: held in favor of Visminda. “Under the facts and circumstances, the evidence for Tuatis has not established by satisfactory
proof her compliance with the terms and conditions in the Deed of Sale by Installment. [Tuatis] constructed the building in bad
faith for she had knowledge of the fact that the Visminda is still the absolute owner of the subject land. There was bad faith also
on the part of Visminda since [she] allowed [Tuatis] to construct the building without any opposition.

The rights of the parties must, therefore, be determined as if they both had acted in bad faith. (Governed by Article 448, NCC)

1.) Dismissal of Tuatis’ Complaint for lack of merit,


2.) the return by Tuatis of physical possession of the subject property to Visminda,

3.) and the return by Visminda of the ₱4,000.00 she received from Tuatis.

CA: dismissed the appeal for failure of Tuatis to serve and file her appellant’s brief within the second extended period for the
same. Upon finality of the RTC decision, Visminda filed a Motion for Issuance of a Writ of Execution before the RTC. The RTC
granted Visminda’s Motion and issued the Writ of Execution.

Tuatis filed before the RTC a Motion to Exercise Right under Article 448 of the Civil Code. Tuatis moved that the RTC issue an
order allowing her to buy the subject property from Visminda. While Tuatis indeed had the obligation to pay the price of the
subject property, she opined that such should not be imposed if the value of the said property was considerably more than the
value of the building constructed thereon by Tuatis. Tuatis alleged that the building she constructed was valued at ₱502,073, but
the market value of the entire piece of land measuring was only about ₱27,000. Tuatis maintained that she then had the right to
choose between being indemnified for the value of her residential building or buying from Visminda the parcel of land subject of
the case. Tuatis stated that she was opting to exercise the second option.

Visminda deposited ₱4,000 to the office of the Clerk of Court of the RTC, pursuant to the Decision of the trial court.

Tuatis filed the present Petition for Certiorari and Mandamus, principally arguing that Article 448 of the Civil Code must be
applied to the situation between her and Visminda.

Tuatis reiterates that the building she constructed is valued at ₱502,073.00, per assessment of the Municipal Assessor of
Sindangan, Zamboanga del Norte; while the entire piece of land, which includes the subject property, has a market value of only
about ₱27,000, based on Tax Declaration issued in 2000. Tuatis posits that she is entitled to buy the land at a price to be
determined by the Court or, alternatively, she is willing to sell her house to Visminda in the amount of ₱502,073.00.

SC: The RTC utterly failed to make an adjudication on the rights of Tuatis and Visminda under Article 448 of the Civil Code. It
would seem that the decretal part of said RTC judgment was limited to implementing the Deed of Sale by Installment without
considering the effects of Article 448 of the Civil Code.

The Court has not lost sight of the fact that the RTC Decision already became final and executor. Jurisprudence also provides,
however, that where there is an ambiguity caused by an omission or a mistake in the dispositive portion of the decision, the
Court may clarify such an ambiguity by an amendment even after the judgment has become final. (should not be viewed as a
denigration of the doctrine of immutability of final judgments, but a recognition of the equally sacrosanct doctrine that a person
should not be allowed to profit or enrich himself inequitably at another's expense.)

SC: Taking into consideration the provisions of the Deed of Sale by Installment and Article 448 of the Civil Code, Visminda has the
following options:

1. Visminda may appropriate for herself the building on the subject property after indemnifying Tuatis for the
necessary1 and useful expenses2 the latter incurred for said building, as provided in Article 546 of the Civil Code. Until
Visminda appropriately indemnifies Tuatis for the building constructed by the latter, Tuatis may retain possession of the
building and the subject property.

1
NECESSARY EXPENSES – those made for the preservation of the thing; as those without which the thing would deteriorate or be lost; as those that augment the
income of the things upon which they are expanded. Among the necessary expenditures are those incurred for cultivation, production, upkeep, etc.

2
USEFUL EXPENSES – incurred to give greater utility or productivity to the thing.
2. Visminda may choose not to appropriate the building and, instead, oblige Tuatis to pay the present or current fair value
of the land. The ₱10,000.00 price of the subject property, as stated in the Deed of Sale on Installment executed in
November 1989, shall no longer apply, since Visminda will be obliging Tuatis to pay for the price of the land in the
exercise of Visminda’s rights under Article 448 of the Civil Code, and not under the said Deed. Tuatis’ obligation will then
be statutory, and not contractual.

The options under Article 448 are available to Visminda, as the owner of the subject property. Depending on Visminda’s choice,
Tuatis’ rights as a builder under Article 448 are limited to the following: (a) under the first option, a right to retain the building
and subject property until Visminda pays proper indemnity; and (b) under the second option, a right not to be obliged to pay for
the price of the subject property, if it is considerably higher than the value of the building, in which case, she can only be obliged
to pay reasonable rent for the same.

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.55

The raison d’etre 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. 56

SPS. DOMINADOR and LILIA NARVAEZ vs. SPS. ROSE OGAS ALCISO and ANTONIO ALCISO (July 27, 2009)

Larry Ogas owned a parcel of land in La Trinidad, Benguet, covered by a TCT. A portion of such was subject to a 30-year lease
agreement with Esso Standard Eastern, Inc. When Ogas sold the property to his daughter, Rose Alciso, a new TCT was issued in
the name of Alciso.

On August 1979, Alciso entered into a Deed of Sale with Right to Repurchase, selling the property to Jaime Sansano for
₱10,000. Alciso later repurchased the property from Sansano and, on March 1980, she entered into another Deed of Absolute
Sale, this time selling the property to Celso Bate for ₱50,000. A new TCT was issued in the name of Bate. On August 1981, Bate
entered into a Deed of Sale of Realty, selling the property to the spouses Narvaez for ₱80,000. A new TCT was issued in the
name of the Spouses Narvaez. In 1982, the Spouses Narvaez built a commercial building on the property amounting to
₱300,000.

Alciso demanded that a stipulation be included in the August 1981 Deed of Sale of Realty allowing her to repurchase the
property from the Spouses Narvaez. In compliance with Alciso’s demand, the Deed stated that, "The SELLER (Bate) carries over
the manifested intent of the original SELLER of the property (Alciso) to buy back the same at a price under such conditions as the
present BUYERS (Spouses Narvaez) may impose."

Alciso informed the Spouses Narvaez that she wanted to repurchase the property. The Spouses Narvaez demanded ₱300,000,
but Alciso was willing to pay only ₱150,000. Alciso and the Spouses Narvaez failed to reach an agreement on the repurchase
price.
In 1984, Alciso filed a complaint before the RTC, praying that the August 1979 Deed of Sale with Right to Repurchase, the March
1980 Deed of Absolute Sale, and the August 1981 Deed of Sale of Realty be annulled; (2) the Register of Deeds be ordered to
cancel TCT Nos. T-16066 and T-16528; (3) the Spouses Narvaez be ordered to reconvey the property; and (4) Sansano, Bate, and
the Spouses Narvaez be ordered to pay damages. Alciso claimed that the intention of the parties was to enter into a contract of
real estate mortgage and not a contract of sale with right of repurchase.

RTC: held that “(4) the August 1981 Deed of Sale of Realty contained a stipulation pour autrui in favor of Alciso — Alciso could
repurchase the property; (5) Alciso communicated to the Spouses Narvaez her acceptance of the favor contained in the
stipulation pour autrui; (6) the repurchase price was ₱80,000; (7) Alciso could either appropriate the commercial building after
payment of the indemnity equivalent to one-half of its market value when constructed or sell the land to the Spouses Narvaez”

CA: held that (1) the August 1981 Deed of Sale of Realty contained a stipulation pour autrui; (2) Alciso accepted the favor
contained in the stipulation pour autrui; (3) the RTC erred in setting the repurchase price at ₱80,000; (4) the August 1981 Deed
of Sale of Realty involved a contract of sale with right of repurchase and not real estate mortgage; (5) the Spouses Narvaez were
builders in good faith; and (6) Alciso could either appropriate the commercial building after payment of the indemnity or oblige
the Spouses Narvaez to pay the price of the land, unless the price was considerably more than that of the building. The Court of
Appeals remanded the case to the RTC for determination of the property’s reasonable repurchase price.

SC: Article 448 is inapplicable in cases involving contracts of sale with right of repurchase — it is inapplicable when the owner
of the land is the builder, sower, or planter. Article 448 does not apply to a case where the owner of the land is the builder,
sower, or planter who then later loses ownership of the land by sale or donation.

Elsewise stated, where the true owner himself is the builder of the works on his own land, the issue of good faith or bad faith
is entirely irrelevant. Article 448 is inapplicable in the present case because the Spouses Narvaez built the commercial building
on the land that they own. Besides, to compel them to buy the land, which they own, would be absurd.

Art. 1606. The right referred to in Article 1601, in the absence of an express agreement, shall last four years from the date of the
contract. Should there be an agreement, the period cannot exceed ten years.

However, the vendor may still exercise the right to repurchase within thirty days from the time final judgment was rendered in a
civil action on the basis that the contract was a true sale with right to repurchase.

Art. 1616. The vendor cannot avail himself of the right of repurchase without returning to the vendee the price of the sale, and in
addition:

(1) The expenses of the contract, and any other legitimate payments made by reason of the sale;

(2) The necessary and useful expenses made on the thing sold.

Under Article 1616, Alciso may exercise her right of redemption by paying the Spouses Narvaez (1) the price of the sale, (2) the
expenses of the contract, (3) legitimate payments made by reason of the sale, and (4) the necessary and useful expenses made
on the thing sold. In the present case, the cost of the building constitutes a useful expense. Useful expenses include
improvements which augment the value of the land.

Under Article 1606, Alciso had four years from August 1981 to repurchase the property since there was no express agreement
as to the period when the right can be exercised. Tender of payment of the repurchase price is necessary in the exercise of the
right of redemption. Nevertheless, under the third paragraph of Article 1606, Alciso has 30 days from the finality of this
Decision to exercise her right of repurchase. In Laserna v. Javier,31 the Court held that:

The new Civil Code in Article 1606, thereof gives the vendors a retro "the right to repurchase within thirty days from the time
final judgment was rendered in a civil action, on the basis that the contract was a true sale with the right to repurchase." This
provision has been construed to mean that "after the courts have decided by a final or executory judgment that the contract was
a pacto de retro and not a mortgage, the vendor (whose claim as mortgagor had definitely been rejected) may still have the
privilege of repurchasing within 30 days."

The third paragraph of Article 1606 allows sellers, who considered the transaction they entered into as mortgage, to repurchase
the property within 30 days from the time they are bound by the judgment finding the transaction to be one of sale with right of
repurchase.
SC: Alciso may exercise her right of redemption by paying the petitioners Spouses Narvaez (1) the price of the sale, (2) the
expenses of the contract, (3) legitimate payments made by reason of the sale, and (4) the necessary and useful expenses made
on the subject property.

The Court DIRECTS the RTC-La Trinidad, Benguet, to determine the amounts of the expenses of the contract, the legitimate
expenses made by reason of the sale, and the necessary and useful expenses made on the subject property.

After such determination, Alciso shall have 30 days to pay the amounts to petitioners Spouses Narvaez.
Heirs of MARCELINO CABAL, represented by VICTORIA CABAL, vs. Spouses LORENZO and ROSITA CABAL, (July 31, 2006)

Marcelo Cabal was the owner of a parcel of land in Iba, Zambales, described as Lot G and covered by an OCT. In 1954, Marcelo
died, survived by his wife Higinia Villanueva and his children: Marcelino, Daniel, Cecilio, Natividad, Juan, Margarita, Lorenzo,
Lauro and Anacleto. Five years before he died(1949), Marcelo allowed his son, Marcelino, to build his house on a portion of Lot G
(now the southernmost portion of Lot 1-E. Since then, Marcelino resided thereon. Later, Marcelino's son also built his house on
the disputed property.

Daniel sold a portion of his undivided share to spouses Oscar Merete and Clarita Ebue. In 1976, the heirs subdivided Lot G into
Lot G-1 in favor of Marcelino, and Lot G-2 in favor of Higinia, and the eight other children of Marcelo. Lot G-2 was further
subdivided and the remaining portion, known as Lot 1 of the subdivision plan, became subject of another TCT with Higinia, and
eight others as co-owners. When the co-owners of Lot 1 executed a Deed of Agreement of Partition with Sale, Lorenzo bought
the shares of Higinia, Margarita, Daniel and Natividad. (1,737 square meters).

In 1982, a land survey was conducted on Lot 1. Based on the survey, they submitted a subdivision survey plan designating the
shares of Carmelita Pagar(1-A), Marcela B. Francia(1-B), spouses Oscar Merete and Clarita Ebue(1-C), Anacleto(1-D), and
Lorenzo(1-E). The subdivision survey plan of Lot 1 was approved by the Director of the Bureau of Lands.

In the meantime, since the subdivision plan revealed that Marcelino and his son occupied and built their houses on the
southernmost portion of Lot 1-E and not the adjacent lot designated as Lot G-1, the spouses Lorenzo and Rosita Cabal
confronted Marcelino on this matter which resulted to an agreement to a re-survey and swapping of lots for the purpose of
reconstruction of land titles. However, the agreed resurvey and swapping of lots did not materialize and efforts to settle the
dispute in the barangay level proved futile.25

On August 10, 1994, Lorenzo and Rosita Cabal filed a complaint for Recovery of Possession with Damages against Marcelino
before MTC-Iba. They alleged that Marcelino introduced improvements in bad faith on their land with knowledge that the
adjacent lot is titled in his name.

Marcelino: contends that respondents have no cause of action against him because he has been in possession in good faith since
1949 with the spouses Cabal’s knowledge and acquiescence. He further avers that acquisitive prescription has set in. (Tax
declaration and receipts as evidence) During the pendency of the trial of the case, Lorenzo died.

MTC: held in favor of Marcelino and directed spouses Lorenzo Cabal to relinquish the possession of said property. MTC reasoned
that prescription or the length of time by which Marcelino has held or possessed the property has barred the respondents
from filing a claim.

RTC: set aside the Decision of the MTC; ordered Marcelino Cabal to vacate and deliver peaceful possession of the disputed area
to the plaintiffs-appellants; to remove all improvements therein introduced, and to pay moral and exemplary damages. RTC held
that Marcelino's possession was in the concept of a co-owner and therefore prescription does not run in his favor; that his
possession, which was tolerated by his co-owners, does not ripen into ownership. Marcelino filed a petition for review with the
CA, but he died during the pendency of the case

CA: affirmed the Decision of the RTC. CA held that Marcelino may have been in good faith when he started to occupy the
disputed portion in 1949 but his occupation in good faith diminished after Lot G was surveyed when he was apprised of the
fact that the portion he was occupying was not the same as the portion titled in his name; that from the tenor of the petition for
review Marcelino would like to hold on to both the lot he occupies and Lot G-1, which cannot be allowed since it will double his
inheritance to the detriment of his brother Lorenzo.

Heirs of Marcelino: contend that since 1949 Marcelino has claimed no other portion as his inheritance from Marcelo, except the
disputed lot; that Marcelino believed in good faith that the disputed lot is Lot G-1; that Marcelino never intended to hold on to
both lots since he did not introduce any improvement on Lot G-1 and he even agreed to a resurvey, swapping of lots and
reconstruction of title after discovery of the mistake in 1989; that Marcelino wanted the disputed lot because he has introduced
considerable improvements thereon. Marcelino should be adjudged a builder in good faith of all the improvements built

Heirs of Lorenzo: Marcelino cannot be adjudged a builder in good faith since he exhibited blatant and deliberate bad faith in
dealing with respondents.
SC: The Court rules in favor of the HEIRS OF MARCELINO. Marcelino built his house on the disputed property in 1949 with the
consent of his father. Marcelino has been in possession of the disputed lot since then with the knowledge of his co-heirs, such
that even before his father died in 1954, when the co-ownership was created, his inheritance or share in the co-ownership was
already particularly designated or physically segregated. Thus, even before Lot G was subdivided in 1976, Marcelino already
occupied the disputed portion and even then co-ownership did not apply over the disputed lot.

There is no co-ownership where the portion owned is concretely determined and identifiable, though not technically
described, or that said portion is still embraced in one and the same certificate of title does make said portion less determinable
or identifiable, or distinguishable, one from the other, nor that dominion over each portion less exclusive, in their respective
owners.

Thus, since Marcelino built a house and has been occupying the disputed portion since 1949, with the consent of his father and
knowledge of the co-heirs, it would have been just and equitable to have segregated said portion in his favor and not one
adjacent to it. Undoubtedly, the subdivision survey effected in 1976 spawned the dilemma in the present case. It designated Lot
G-1 as Marcelino's share in the inheritance notwithstanding his possession since 1949 of a definite portion of Lot G, now the
southernmost portion of Lot 1-E.

Marcelino raised the defense of acquisitive prescription, in addition to possession in good faith. Prescription, in general, is a
mode of acquiring or losing ownership and other real rights through the lapse of time in the manner and under conditions laid
down by law, namely, that the possession should be in the concept of an owner, public, peaceful, uninterrupted and
adverse. Acquisitive prescription is either ordinary or extraordinary.

ORDINARY ACQUISITIVE PRESCRIPTION requires possession in good faith and with just title for ten years.
EXTRAORDINARY PRESCRIPTION, require uninterrupted adverse possession thereof for thirty years, without need of title or of
good faith.

Evidence presented during the trial proceedings in the MTC were sorely insufficient to prove that acquisitive prescription has
set in with regards to the disputed lot. Tax declarations and receipts can only be the basis of a claim of ownership through
prescription when coupled with proof of actual possession. Evidently, Marcelino declared and paid realty taxes on property
which he did not actually possess as he took possession of a lot eventually identified as the southernmost portion of Lot 1-E.
Marcelino no longer invoked prescription in his pleadings before the RTC and CA; They are thus deemed to have abandoned the
defense of prescription.

Applicability of the PRINCIPLE OF POSSESSION IN GOOD FAITH.

It has been said that good faith is always presumed, and upon him who alleges bad faith on the part of the possessor rests the
burden of proof. Good faith is an intangible and abstract quality with no technical meaning or statutory definition, and it
encompasses, among other things, an honest belief, the absence of malice and the absence of design to defraud or to seek an
unconscionable advantage. An individual's personal good faith is a concept of his own mind and, therefore, may not conclusively
be determined by his protestations alone. It implies honesty of intention, and freedom from knowledge of circumstances which
ought to put the holder upon inquiry. The essence of good faith lies in an honest belief in the validity of one's right, ignorance
of a superior claim, and absence of intention to overreach another. Applied to possession, one is considered in good faith if he
is not aware that there exists in his title or mode of acquisition any flaw which invalidates it.

SC: The Court notes that petitioners' alternative prayer that swapping of lots be ordered because no improvements have been
introduced on Lot G-1. This cannot be granted. Heirs of Marcelino did not pray for swapping of lots in all their pleadings below.
Both parties also did not allege the existence of a swapping agreement in their initial pleadings, much less pursue the
enforcement of the swapping agreement. They are deemed to have renounced or abandoned any enforceable right they had
under the swapping agreement and the parties cannot be compelled to a swapping of lots.

The case is REMANDED to the court of origin for further proceedings to determine the facts essential to the proper application of
Article 448 in relation to Articles 546 and 548 of the Civil Code.
LEONILA SARMIENTO, vs. ENRIQUE AGANA(CFI), and SPOUSES ERNESTO and REBECCA VALENTINO (April 30, 1984)

When Ernesto Valentino was still courting Rebecca, Rebecca’s mother told him that the couple could build a RESIDENTIAL
HOUSE on Lot D of a subdivision in Paranaque. In 1967, ERNESTO did construct a RESIDENTIAL HOUSE on the LAND at a cost of
P8,000-P10,000, on the assumption that the wife's mother was the owner of the LAND.

It turned out that the LAND had been titled in the name of Spouses Jose Santo, Jr. who, in September 7, 1974, sold the same to
Leonila Sarmiento. On January 6, 1975, SARMIENTO asked ERNESTO and wife to vacate and, on April 21, 1975, filed an
Ejectment suit against them. SARMIENTO submitted the deed of sale of the LAND in her favor, which showed the price to be
P15,000. On the other hand, ERNESTO testified that the then cost of the RESIDENTIAL HOUSE would be from P30,000-P40,000.

MTC: held that Ernesto built the RESIDENTIAL HOUSE in good faith, and that it had a value of P20,000. It then ordered ERNESTO
and wife to vacate the LAND after SARMIENTO has paid them the mentioned sum of P20,000.00.

CFI-Pasay: rendered a modifying Decision under Article 448 of the Civil Code. SARMIENTO was required, within 60 days, to
exercise the option to reimburse ERNESTO and wife the sum of 40,000 as the value of the RESIDENTIAL HOUSE, or the option to
allow them to purchase the LAND for P25,000.

SARMIENTO did not exercise any of the two options within the indicated period, and ERNESTO was then allowed to deposit the
sum of P25,000 with the Court as the purchase price for the LAND. SARMIENTO then filed a PETITION FOR CERTIORARI
questioning the decision rendered by the CFI-Pasay.

SC: ERNESTO and wife were builders in good faith in view of the peculiar circumstances under which they had constructed the
RESIDENTIAL HOUSE. As far as they knew, the LAND was owned by ERNESTO's mother-in-law who, having stated they could build
on the property, could reasonably be expected to later on give them the LAND.

The value of the LAND, purchased for P15,000 on September 7, 1974, could not have been very much more than that amount
during the following January when ERNESTO and wife were asked to vacate. HOWEVER, ERNESTO and wife have not questioned
the P25,000 valuation determined by the CFI.

Valuation of the RESIDENTIAL HOUSE, the only evidence presented was the testimony of ERNESTO that its worth at the time of
the trial should be from P30,000-P40,000. MTC assessed its value at P20,000.00; CFI chose the maximum of P40,000. In the latter
case, it cannot be said that the CFI had abused its discretion.

Valuation of the LAND, CFI assessed its value at P25,000.00

SC: It was a CORRECT DECISION. “The provision for the exercise by petitioner SARMIENTO of either the option: 1.) to indemnify
private respondents in the amount of P40,000, 2.) or the option to allow private respondents to purchase the LAND at P25,000.”

The owner of the building erected in good faith on a land owned by another, is entitled to retain the possession of the land until
he is paid the value of his building, under article 453 (now Article 546).

The owner, of the land. upon, the other hand, has the option, under article 361 (now Article 448), either to pay for the building
or to sell his land to the owner of the building. LEONILA SARMIENTO cannot 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.
FRANCISCO DEPRA vs. AGUSTIN DUMLAO (May 16, 1985)

Francisco Depra, is the owner Lot No. 685 (8,870 sq.ms.) in Dumangas, Iloilo as evidenced by a TCT. Agustin Dumlao owns an
adjoining lot, designated as Lot No. 683 (231 sq. ms.)

In 1972, when DUMLAO constructed his house on his lot, the kitchen thereof had encroached on DEPRA's property (34 sq. ms.)
After the encroachment was discovered in a relocation survey of DEPRA's lot made on November 2, 1972, his mother, Beatriz
Depra wrote a demand letter asking DUMLAO to move back from his encroachment, then filed an action for Unlawful
Detainer on February 6,1973 against DUMLAO in the MTC-Dumangas.

MTC: DUMLAO was a builder in good faith, and applying Article 448 of the Civil Code, rendered judgment, ordering that a forced
lease is created between the parties (Depra as lessors, and Dumlao as lessees) over the disputed portion, the rent to be paid is
P5.00/ month.

Neither party appeal so that if it were a valid judgment, it would have ordinarily lapsed into finality, but even then, DEPRA did
not accept payment of rentals so that DUMLAO deposited such rentals with the Municipal Court.

In 1974, DEPRA filed a Complaint for Quieting of Title against DUMLAO before the CFI-Iloilo, involving the very same 34 square
meters.

DUMLAO: admitted the encroachment but alleged that the present suit is barred by res judicata1 by virtue of the Decision of the
MTC which had become final and executory.

CFI-Iloilo: held that the 34 sq. ms. subject of the litigation is part and parcel of Lot 685 which Depra owns, thus he is entitled to
possess the same.

DEPRA: claims that the Decision of the MTC was null and void ab initio because its jurisdiction is limited to the sole issue of
possession, whereas decisions affecting lease, which is an encumbrance on real property, may only be rendered by CFI.

SC: The Decision of the Municipal Court is null and void. The judgment in a detainer case is effective in respect of possession 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 in law. A lease is an interest in real property, jurisdiction over
which belongs to CFI. MTC acted without jurisdiction, its Decision was null and void and cannot operate as res judicata to the
subject complaint for Queting of Title. (Even if the Decision were valid, the rule on res judicata would not apply due to difference
in cause of action; MTC-deprivation of possession, Action to quiet title- cause of action was based on ownership)

Consistent with the principle that our Court system must be a dispute resolving mechanism, we accord legal effect to the
agreement of the parties, within the context of their mutual concession and stipulation. They have chosen a legal formula to
resolve their dispute to appeal ply to DUMLAO the rights of a "builder in good faith" and to DEPRA those of a "landowner in good
faith" as prescribed in Article 448.

DEPRA has the option either: to pay for the encroaching part of DUMLAO's kitchen, or to sell the encroached 34 square meters of
his lot to DUMLAO. He cannot refuse to pay for the encroaching part of the building, and to sell the encroached part of his
land, as he had manifested before the Municipal Court. (manifestation is not binding because it was made in a void proceeding.)

SC: The good faith of DUMLAO is part of the Stipulation of Facts in the CFI. It was error for the Trial Court to have ruled that
DEPRA is "entitled to possession," without more, of the disputed portion implying 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. In this case, DUMLAO had expressed his willingness to pay for the land, but DEPRA refused to sell.

Article 448 favors the owner of the land, by giving him one of the two options mentioned in the Article. 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 to pay
for the proper rent.

It is the owner of the land who is authorized to exercise the option, because his right is older, and because, by the principle of
accession, he is entitled to the ownership of the accessory thing.

1
RES JUDICATA – a matter that has been adjudicated by a competent court and may not be pursued further by the same parties.
SC: WHEREFORE, the judgment of the trial Court is hereby set aside, and this case is hereby ordered remanded to RTC-Iloilo for
further proceedings consistent with Articles 448 and 546 of the Civil Code, as follows:

1. The trial Court shall determine

a) the present fair price of DEPRA's 34 square meter area of land;

b) the amount of the expenses spent by DUMLAO for the building of the kitchen;

c) the increase in value ("plus value") which the said area of 34 square meters may have acquired by reason
thereof, and

d) whether the value of said area of land is considerably more than that of the kitchen built thereon.

2. After said amounts shall have been determined by competent evidence, the RTC shall render judgment, as follows:

a) The trial Court shall grant DEPRA a period of fifteen (15) days within which to exercise his option under
Article 448, Civil Code, whether to appropriate the kitchen as his own by paying to DUMLAO either the amount
of tile expenses spent by DUMLAO for the building of the kitchen, or the increase in value ("plus value") which
the 34 square meters may have acquired by reason thereof, or to oblige DUMLAO to pay the price of said area.
The amounts shall be paid by the obligor within fifteen (15) days from such notice of the option by tendering
the amount to the Court in favor of the party entitled to receive it;

b) The trial Court shall further order that if DEPRA exercises the option to oblige DUMLAO to pay the price of
the land but the latter rejects such purchase because the value of the land is considerably more than that of
the kitchen, DUMLAO shall give written notice of such rejection to DEPRA and to the Court within fifteen (15)
days from notice of DEPRA's option to sell the land. In that event, the parties shall be given a period of fifteen
(15) days from such notice of rejection within which to agree upon the terms of the lease, and give the Court
formal written notice of such agreement and its provisos.

If no agreement is reached by the parties, the trial Court, within fifteen (15) days from and after the
termination of the said period fixed for negotiation, shall then fix the terms of the lease, provided that the
monthly rental to be fixed by the Court shall not be less than Ten Pesos (P10.00) per month, payable within the
first five (5) days of each calendar month. The period for the forced lease shall not be more than two (2) years,
counted from the finality of the judgment, considering the long period of time since 1952 that DUMLAO has
occupied the subject area. The rental thus fixed shall be increased by ten percent (10%) for the second year of
the forced lease. DUMLAO shall not make any further constructions or improvements on the kitchen. Upon
expiration of the two-year period, or upon default by DUMLAO in the payment of rentals for two (2)
consecutive months, DEPRA shall be entitled to terminate the forced lease, to recover his land, and to have the
kitchen removed by DUMLAO or at the latter's expense. The rentals herein provided shall be tendered by
DUMLAO to the Court for payment to DEPRA, and such tender shall constitute evidence of whether or not
compliance was made within the period fixed by the Court.

c) In any event, DUMLAO shall pay DEPRA an amount computed at P10 per month as reasonable compensation
for the occupancy of DEPRA's land for the period counted from 1952, the year DUMLAO occupied the subject
area, up to the commencement date of the forced lease referred to in the preceding paragraph;

d) The periods to be fixed by the trial Court in its Precision shall be inextendible, and upon failure of the party
obliged to tender to the trial Court the amount due to the obligee, the party entitled to such payment shall be
entitled to an order of execution for the enforcement of payment of the amount due and for compliance with
such other acts as may be required by the prestation due the obligee.
BARTOLOME ORTIZ vs.HON. UNION C. KAYANAN(CFI-Quezon); ELEUTERIO ZAMORA, QUIRINO COMINTAN, VICENTE FERRO,
AND GREGORIO PAMISARAN, (July 30, 1979)

Petition for certiorari and Prohibition with Preliminary Injunction to nullify the Order of respondent Judge directing the execution
of the final judgment in Civil Case No. C-90, entitled "Bartolome Ortiz vs. Secretary of Agriculture and Natural Resources, et al.,"
and the Writ of Execution issued to implement said Order, allegedly for being inconsistent with the judgment sought to be
enforced.

Civil Case No. C-90 was filed by Bartolome Ortiz who sought the review and/or annulment of the decision of the Secretary of
Agriculture and Natural Resources, giving preference to the sales applications of private respondents Quirino Comintan and
Eleuterio Zamora over Lot No. 5785, PLS-45, located at Barrio Cabuluan, Calauag, Quezon.

... The lot in controversy was formerly the subject of Homestead Application of Martin Dolorico II, plaintiff's ward who died on
August 20, 1931. ; that since then it was plaintiff who continued the cultivation and possession of the property, without however
filing any application to acquire title thereon; that in the Homestead Application No. 122417, Martin Dolorico II named his uncle,
Martin Dolorico I as his heir and successor in interest, so that in 1951 Martin Dolorico I executed an affidavit relinquishing his
rights over the property in favor of defendants Quirino Comintan and Eleuterio Zamora, his grandson and son-in-law,
respectively, and requested the Director of Lands to cancel the homestead application; that on the strength of the affidavit,
Homestead Application No. 122417 was cancelled and thereafter, defendants Comintan and Zamora filed their respective sales
applications Nos. 8433 and 9258; that plaintiff filed his protest on November 26, 1951 alleging 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 since
1931; and inspite of plaintiff's opposition, "Portion A" of the property was sold at public auction wherein defendant Comintan
was the only bidder; that on June 8, 1957, investigation was conducted on plaintiff's protest by Assistant Public Lands Inspector
Serapion Bauzon who submitted his report to the Regional Land Officer, and who in turn rendered a decision on April 9, 1958,
dismissing plaintiff's claim and giving due course to defendants' sales applications on the ground that the relinquishment of the
homestead rights of Martin Dolorico I in favor of Comintan and Zamora is proper, the former having been designated as
successor in interest of the original homestead applicant and that because plaintiff failed to participate in the public auction, he
is forever barred to claim the property; that plaintiff filed a motion for reconsideration of this decision which was denied by the
Director of Lands in his order dated June 10, 1959; that, finally, on appeal to the Secretary of Agriculture and Natural Resources,
the decision rendered by the Regional Land Officer was affirmed in toto. 1

On March 22, 1966, respondent Court rendered judgment in the afore-mentioned civil case, the dispositive portion of which
reads as follows:têñ.£îhqwâ£

IN VIEW OF THE FOREGOING CONSIDERATIONS, judgment is hereby rendered awarding Lot No. 5785-A of PLS-
45, (Calauag Public Land Subdivision) one-half portion of the property in litigation located at Bo. Cabuluan,
Calauag, Quezon, in favor of defendant QUIRINO COMINTAN, being the successful bidder in the public auction
conducted by the bureau of Lands on April 18, 1955, and hereby giving due course to the Sales Application No.
9258 of defendant Eleuterio Zamora over the other half, Lot No. 5785-B of PLS-45, Calauag, without prejudice
to the right of plaintiff BARTOLOME ORTIZ to participate in the public bidding of the same to be announced by
the Bureau of Lands, Manila. However, should plaintiff Bartolome Ortiz be not declared the successful bidder
thereof, defendants Quirino Comintan and Eleuterio Zamora are ordered to reimburse jointly said plaintiff the
improvements he has introduced on the whole property in the amount of THIRTEEN THOUSAND SIX HUNDRED
THIRTY-TWO (P13,632.00) PESOS, the latter having the right to retain the property until after he has been fully
paid therefor, without interest since he enjoys the fruits of the property in question, with prejudice and with
costs again the plaintiff.2

Plaintiff appealed the decision to the Court of Appeals.

Two (2) years after the rendition of the judgment by the court a quo, while the case was pending appeal and upon petition of
private respondents Quirino Comintan and Eleuterio Zamora, respondent Court appointed respondent Vicente Ferro, Clerk of
Court, as Receiver to collect tolls on a portion of the property used as a diversion road. On August 19, 1969, the Court of Appeals
issued a Resolution annulling the Order appointing the Receiver. Subsequently, on February 19, 1970, the Appellate Court
affirmed the decision of the trial court. A petition for review on certiorari of the decision of the Court of Appeals was denied by
this Court on April 6, 1970. At this point, private respondents filed a petition for appointment of a new receiver with the court a
quo. This petition was granted and the receiver was reappointed. Petitioner sought the annulment of this Order with the Court of
Appeals, but said Court ruled that its decision had already become final and that the records of the case were to be remanded to
the trial court.
Not satisfied with such denial, petitioner filed a petitioner for certiorari, prohibition and mandamus with preliminary injunction
before this Court, 3 praying for the annulment of the Order reappointing the Receiver. On July 13, 1970, the petition was
dismissed by this Court on the ground of insufficient showing of grave abuse of discretion.

II

The judgment having become final and executory private respondents filed a motion for the execution of the same, praying as
follows:têñ.£îhqwâ£

WHEREFORE, it is respectfully prayed of this Honorable Court to order the issuance of a writ of execution in
accordance with the judgment of this Honorable Court, confirmed by the Court of Appeals and the Supreme
Court, commanding any lawful officer to deliver to defendants Comintan and Zamora the land subject of the
decision in this case but allowing defendants to file a bond in such amount as this Honorable Court may fix, in
lieu of the P13,632.00 required to be paid to plaintiff, conditioned that after the accounting of the tools
collected by plaintiff, there is still an amount due and payable to said plaintiff, then if such amount is not paid
on demand, including the legal interests, said bond shall be held answerable.

Ordering further the plaintiff to render an accounting of the tolls he collected from March of 1967 to December
31, 1968 and from September 1969 to March 31, 1970, and deliver said tolls collected to the receiver and if
judgment is already executed, then to Quirino Comintan and Eleuterio Zamora; and,

Finally, to condemn plaintiff to pay moral damages for withholding the tools which belong to your movant in an
amount this Court may deem just in the premises. 4

Acting upon the foregoing motion, respondent Judge issued an Order, dated September 23, 1970, stating, among others, the
following: têñ.£îhqwâ£

The records further disclosed that from March 1967 to December 31, 1968, piaintiff Bartolome Ortiz collected
tolls on a portion of the propertv in question wherein he has not introduced anv improvement particularlv on
Lot No. 5785-A; PLS-45 awarded to defendant Quirino Comintan, thru which vehicular traffic was detoured or
diverted, and again from September 1969 to March 31, 1970, the plaintiff resumed the collection of tools on
the same portion without rendering any accounting on said tolls to the Receiver, who, was reappointed after
submitting the required bond and specifically authorized only to collect tolls leaving the harvesting of the
improvements to the plaintiff.

xxx xxx xxx

ln virtue of he findings of this Court as contained in the dispositive portion of its decision, the defendants are
jointly obligated to pay the plaintiff in the amount of P13,632.00 as reasonable value of the improvements he
introduced on the whole property in question, and that he has the right of retention until fully paid. It can be
gleaned from the motion of the defendants that if plaintiff submits an accounting of the tolls he collected
during the periods above alluded to, their damages of about P25,000.00 can more than offset their obligation
of P13,362.00 in favor of the plaintiff, thereafter the possession of the land be delivered to the defendants
since the decision of the Supreme Court has already become final and executory, but in the interregnum
pending such accounting and recovery by the Receiver of the tolls collected by the plaintiff, the defendants
pray that they allowed to put up a bond in lieu of the said P13,632.00 to answer for damages of the former, if
any.

On the other hand, plaintiff contends in his opposition, admitting that the decision of the Supreme Court has
become final and executory; (1) the offer of a bond in lieu of payment of P13,632.00 does not, and cannot,
satisfy the condition imposed in the decision of this Court which was affirmed in toto;(2) the public sale of
Portion "B" of the land has still to take place as ordained before the decision could be executed; and, (3) that
whatever sums plaintiff may derive from the property cannot be set off against what is due him for the
improvements he made, for which he has to be reimbursed as ordered.

xxx xxx xxx

Let it be known that plaintiff does not dispute his having collected tolls during the periods from March 1967 to
December 31, 1968 and from September 1969 to March 31, 1970. The Supreme Court affirmed the decision of
this Court its findings that said tolls belong to the defendant, considering that the same were collected on a
portion of the land question where the plaintiff did not introduce any improvement. The reimbursement to the
plaintiff pertains only to the value of the improvements, like coconut trees and other plants which he
introduced on the whole property. The tolls collected by the plaintiff on an unimproved portion naturally
belong to the defendants, following the doctrine on accretion. Further, the reappointment of a Receiver by this
Court was upheld by the Supreme Court when it denied the petition for certiorari filed by the plaintiff,
bolstering the legal claim of defendants over said tolls. Thus, the decision of the Supreme Court rendered the
decision of this Court retroactive from March 22, 1966 although pending accounting of the tolls collected by
the plaintiff is justified and will not prejudice anybody, but certainly would substantially satisfy the conditions
imposed in the decision. However, insofar as the one-half portion "B" of the property, the decision may be
executed only after public sale by the Bureau of Lands shall be accomplished.

WHEREFORE, finding the Motion for Execution filed by the defendants to be meritorious, the same is granted;
provided, however, that they put up a bond equal the adjudicated amount of P13,632.00 accruing in favor of
the plaintiff, from a reputable or recognized bonding or surety company, conditioned that after an accounting
of the tolls collected by the plaintiff should there be found out any balance due and payable to him after
reckoning said obligation of P13,632.00 the bond shall be held answerable therefor. 5

Accordingly, a Writ of Execution was issued after private respondent Quirino Comintan had filed the required bond. The writ
directed the Sheriff to enforce the decision of the Court, and stated, part in, the following:têñ.£îhqwâ£

But should there be found any amount collectible after accounting and deducting the amount of P3,632.00,
you are hereby ordered that of the goods and chattels of Bartolome Ortiz of Bo. Kabuluan, Calauag, Quezon, be
caused to be made any excess in the above-metioned amount together with your lawful fees and that you
render same to defendant Quirino Comintan. If sufficient personal property cannot be found thereof to satisfy
this execution and lawful fees thereon, then you are commanded that of the lands and buildings of the said
BARTOLOME ORTIZ you make the said excess amount in the manner required by the Rules of Court, and make
return of your proceedings within this Court within sixty (60) days from date of service.

You are also ordered to cause Bartolome Ortiz to vacate the property within fifteen (15) days after service
thereof the defendant Quirino Comintan having filed the required bond in the amount of THIRTEEN
THOUSAND SIX HUNDRED THIRTY-TWO (P13,632.00) PESOS. 6

On October 12, 1970, petitioner filed a Motion for Reconsideration of the aforesaid Order and Writ of Execution, alleging:têñ.
£îhqwâ£

(a) That the respondent judge has no authority to place respondents in possession of the property;

(b) That the Supreme Court has never affirmed any decision of the trial court that tolls collected from the
diversionary road on the property, which is public land, belong to said respondents;

(c) That to assess petitioner a P25,000.00 liability for damages is purely punitive imposition without factual or
legal justification.

The foregoing Motion for Reconsideration was denied by respondent Judge per Order dated November 18, 1970. Saod Order
states, in part:têñ.£îhqwâ£

It goes without saying that defendant Comintan is entitled to be placed in possession of lot No. 5785-A of PLS-
45 (Calauag Public Land Subdivision) and enjoyment of the tolls from March, 1967 to March, 1968 and from
September, 1969 to March 31, l970 which were received by plaintiff Bartolome Ortiz, collected from the
property by reason of the diversion road where vehicular traffic was detoured. To defendant Comintan belongs
the tolls thus collected from a portion of the land awarded to him used as a diversionary road by the doctrine
of accretion and his right over the same is ipso jure, there being no need of any action to possess said addition.
It is so because as consistently maintained by the Supreme Court, an applicant who has complied with all the
terms and conditions which entitle him to a patent for a particular tract of publlic land, acquires a vested right
therein and is to be regarded as equitable owner thereof so that even without a patent, a perfected homestead
or sales application is a property right in the fullest sense, unaffectcd by the fact that the paramount title is still
in the Government and no subsequent law can deprive him of that vested right The question of the actual
damages suffered by defendant Comintan by reason of the unaccounted tolls received by plaintiff had already
been fully discussed in the order of September 23, 1970 and the Court is honestly convinced and believes it to
be proper and regular under the circumstances.
Incidentally, the Court stands to correct itself when in the same order, it directed the execution of he decision
with respect to the one-half portion "B" of the property only after the public sale by the Bureau of Lands, the
same being an oversight, it appearing that the Sales Application of defendant Eleuterio Zamora had already
been recognized and full confirmed by the Supreme Court.

In view thereof, finding the motion filed by plaintiff to be without merit, the Court hereby denies the same and
the order of September 23, 1970 shall remain in full force subject to the amendment that the execution of the
decision with respect to the one-half portion "B" shall not be conditioned to the public sale by the Bureau of
Lands.

SO ORDERED.7

III

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 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.

Petitioner, therefore, prayed that: (1) a Writ of Preliminary Injunction be issued enjoining the enforcement of the Orders of
September 23, 1970 and November 18, 1970, and the Writ of Execution issued thereto, or restoring to petitioner the possession
of the property if the private respondents had been placed in possession thereof; (2) annulling said Orders as well as the Writ of
Execution, dissolving the receivership established over the property; and (3) ordering private respondents to account to
petitioner all the fruits they may have gathered or collected from the property in question from the time of petitioiier's illegal
dispossession thereof.

On January 29, 1971, this Court issued the Writ of Preliminary Injunction. On January 30, 1971, private respondents filed a
Motion for Reconsideration and/or Modification of the Order dated January 29, 1971. This was followed by a Supplemental
Motion for Reconsideration and Manifestation on February 3, 1971. In the latter motion, private respondents manifested that
the amount of P14,040.96, representing the amount decreed in the judgment as reimbursement to petitioner for the
improvements, plus interest for six months, has already been deposited by them in court, "with the understanding that said
amount shall be turned over to the plaintiff after the court a quo shall have determined the improvement on Lot 5785-A, and
subsequently the remaining balance of the deposit shall be delivered to the petitioner (plaintiff therein) in the event he loses the
bid for Lot 5785-B in favor of private respondent Eleuterio Zamora." 8 The deposit is evidenced by a certification made by the
Clerk of the Court a quo.9 Contending that said deposit was a faithful compliance with the judgment of the trial court, private
respondent Quirino Comintan prayed for the dissolution of the Writ of Injunction.

It appears that as a consequence of the deposit made by private respondents, the Deputy, Sheriff of Calauag, Quezon ousted
petitioner's representative from the land in question and put private respondents in possession thereof. 10

On March 10, 1971, petitioner filed a "Comment on Respondents' 'Motion for Reconsideration' dated January 29, 1971' and
'Supplemental Motion for Reconsideration and Manifestation,'" contending that the tender of deposit mentioned in the
Suplemental Motion was not really and officially made, "inasmuch as the same is not supported by any official receipt from the
lower court, or from its clerk or cashier, as required by law;" that said deposit does not constitute sufficient compliance with the
judgment sought to be enforced, neither was it legally and validly made because the requisites for consignation had not been
complied with; that the tender of legal interest for six months cannot substitute petitioner's enjoyment of the fruits of the
property as long as the judgment in Civil Case No. C-90 has not been implemented in the manner decreed therein; that contrary
to the allegations of private respondents, the value of the improvements on the whole property had been determined by the
lower court, and the segregation of the improvements for each lot should have been raised by them at the opportune moment
by asking for the modification of the decision before it became final and executory; and that the tolls on the property constituted
"civil fruits" to which the petitioner is entitled under the terms of the decision.

IV

The issue decisive of the controvery is—after 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 Comintan—whether 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. In other words, petitioner contends that so long as the
aforesaid amount of P13,632,00 decreed in the judgment representing the expenses for clearing the land and the value of the
coconuts and fruit trees planted by him remains unpaid, he can appropriate for his exclusive benefit all the fruits which he may
derive from the property, without any obligation to apply any portion thereof to the payment of the interest and the principal of
the debt.

We find this contention untenable.

There is no question that a possessor in good faith is entitled to the fruits received before the possession is legally
interrupted. 11 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.12 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. 13

However, even after his good faith ceases, the possessor in fact can still retain the property, pursuant to Article 546 of the New
Civil Code, until he has been fully reimbursed for all the necessary and useful expenses made by him on the property. This right
of retention has been considered as one of the conglomerate of measures devised by the law for the protection of the possessor
in good faith. Its object is to guarantee the reimbursement of the expenses, such as those for the preservation of the
property,14 or for the enhancement of its utility or productivity. 15 It permits the actual possessor to remain in possession while he
has not been reimbursed by the person who defeated him in the possession for those necessary expenses and useful
improvements made by him on the thing possessed. The 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. This right of retention of the property by the creditor, according to Scaevola,
in the light of the provisions of Article 502 of the Spanish Civil Code, 16 is considered not a coercive measure to oblige the debtor
to pay, depriving him temporarily of the enjoyment of the fruits of his property, but as a means of obtainitig compensation for
the debt. The right of retention in this case is analogous to a contract of antichresis and it cati be considered as a means of
extinguishing the obligation, inasmuch as the right to retain the thing lasts only for the period necessary to enable the creditor to
be reimbursed from the fruits for the necessary and useful expenses. 17

According to Manresa, the right of retention is, therefore, analogous to that of a pledge, if the property retained is a movable,
and to that of antichresis, if the property held is immovable. 18 This construction appears to be in harmony with similar provisions
of the civil law which employs the right of retention as a means or device by which a creditor is able to obtain the payment of a
debt. Thus, under Article 1731 of the New Civil Code, any person who has performed work upon a movable has a right to retain it
by way of pledge until he is paid. Similarly, under Article 1914 of the same Code, the agent may retain in pledge the things which
are the object of the agency until the principal effects reimbursement of the funds advanced by the former for the execution of
the agency, or he is indemnified for all damages which he may have suffered as a consequence of the execution of the agency,
provided he is free from fault. To the same effect, the depositary, under Article 1994 of the same Code, may retain the thing in
pledge until the full payment of what may be due him by reason of the deposit. The usufructuary, pursuant to Article 612 of the
same Code, may retain the property until he is reimbursed for the amount paid for taxes levied on the capital (Article 597) and
tor extraordinary repairs (Article 594).

In all of these cases, the right of retention is used as a means of extinguishing the obligation. As amply observed by Manresa: "El
derecho de retencion, lo hemos dicho, es el derecho de prenda o el de anticresis constituido por la ley con independencia de las
partes." 19 In a pledge, if the thing pledged earns or produces fruits, income, dividends or interests, the creditor shall compensate
what he receives with those which are owing him. 20 In the same manner, in a contract of antichresis, the creditor acquires the
right to receive the fruits of an immovable of his debtor with the obligation to apply them to payment of the interest, if owing,
and thereafter to the principal of his credit. 21 The debtor can not reacquire enjoyment of the immovable until he has actually
paid what he owes the creditor. 22
Applying the afore-cited principles to the case at bar, 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 the fact that the tolls
appear to have been collected after the rendition of the judgment of the trial court.

The records further reveal that earnest efforts have been made by private respondents to have the judgment executed in the
most practicable manner. They deposited in court the amount of the judgment in the sum of P13,632.00 in cash, subject only to
the accounting of the tolls collected by the petitioner so that whatever is due from him may be set off with the amount of
reimbursement. This is just and proper under the circumstances and, under the law, compensation or set off may take place,
either totally or partially. Considering that petitioner is the creditor with respect to the judgment obligation and the debtor with
respect to the tolls collected, Comintan being the owner thereof, the trial court's order for an accounting and compensation is in
accord with law. 23

With respect to the amount of reimbursement to be paid by Comintan, it appears that the dispositive portion of the decision was
lacking in specificity, as it merely provided that Comintan and Zamora are jointly liable therefor. When two persons are liable
under a contract or under a judgment, and no words appear in the contract or judgment to make each liable for the entire
obligation, the presumption is that their obligation is joint or mancomunada, and each debtor is liable only for a proportionate
part of the obligation. 24 The judgment debt of P13,632.00 should, therefore, be pro-rated in equal shares to Comintan and
Zamora.

Regarding Lot 5785-B, 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. 25 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.

WHEREFORE, in view hereof, the Order of respondent Court of November 18, 1970 is hereby modified to conform to the
foregoing judgment. The Writ of Preliminary Injunction, dated January 29, 1971, is hereby dissolved. Without special
pronouncement as to costs.