PECSON vs.
Court of Appeals
Petitioners: PEDRO P. PECSON
Respondent: COURT OF APPEALS, SPOUSES JUAN NUGUID AND
ERLINDA NUGUID
Ponencia: Davide Jr., J.
Digest Author: Garcia, R.
DOCTRINE: For article 448, indemnities may apply even if the BPS is
the same landowner who lost ownership of the lot.
For article 556, the necessary expenses is to be valued at its current
market price at the time of the trial.
FACTS:
1. Pedro Pecson was the owner of a commercial lot located in Q.C
where he built an apartment building.
2. He failed to pay realty taxes amounting to 12,000 which caused the
lot to be sold at a public auction where it was sold to the spouses
Nuguid.
3. Pecson challenged the validity of the auction sale before the RTC of
Q.C. The RTC dismissed the complaint, but as to the Nuguid’s claim
that the sale included the apartment building, it held that there was
no legal basis for the contention that the apartment building was
included in the sale.
4. On appeal, the CA affirmed the decision stating that the sale was
only the land without the apartment which was sold at the auction
sale for Pecson’s failure to pay the taxes due upon it.
5. The Nuguid’s also filed a petition for delivery of possession of the lot
and the apartment citing article 546 of the Civil Code. The RTC
issued an order declaring that the owner of the lot and apartment
were the Nuguid’s. The court however said that they had to pay the
construction cost of the apartment before the writ of possession
would be issued.
6. Pecson was entitled to reimbursement of the cost of construction ath
the time it was built which was 53k and the right to retain the
improvement until full indemnity is paid.
ISSUE:
Whether or not Articles 448 and 546 of the civil code are applicable.
PROVISIONS:
Art. 448. The owner of the land on which anything has been built, sown or planted in
good faith, shall have the right to appropriate as his own the works, sowing or
planting, after payment of the indemnity provided for in articles 546 (full
reimbursement) and 548, or to oblige the one who built or planted to pay the price of
the land, and the one who sowed, the proper rent. However, the builder or planter
cannot be obliged to buy the land if its value is considerably more than that of the
building or trees. In such case, he shall pay reasonable rent, if the owner of the land
does not choose to appropriate the building or trees after proper indemnity. The
parties shall agree upon the terms of the lease and in case of disagreement, the court
shall fix the terms thereof.
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
therefore.
Useful expenses shall be refunded to the possessor in good faith with the
same right of retention, the person who has defeated him in the possession
having the option of refunding the amount of the expenses or of paying the
increase in value which the thing may have acquired by reason thereof.
RULING + RATIO:
I. Article 448: This article 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. Thus, in strict point of law,
Article 448 should not be applicable to the case at bar.
a. However, the provision on indemnity may be applied by
analogy considering that the primary intent of Article 448 is
to avoid a state of forced co-ownership and that article 448
and 546 of the civil code are applicable and indemnity for the
improvements may be paid though they differ as to the basis
of the indemnity.
II. Article 546: This article does not specifically state how the value of
useful improvements should be determined. The Supreme Court in
previous cases has consistently held that the value of the materials
should be its current market value at the time of the trial. The order of
 the lower courts to value the home at the time it was built in 1965
was therefore erroneous.

a. The objective of Article 546 of the Civil Code is to administer

justice between the parties involved.

DISPOSITION: Case is REMANDED to trial court to determine current

market value of the apartment building on the lot.
Digest Author: Leiron Conrad T. Martija
Sps. BENITEZ v COURT OF APPEALS(1997)
Petitioner: Sps. Benitez
Respondent: The Court of Appeals, Sps. Macapagal
Ponencia: PANGANIBAN, J.
DOCTRINE:
FACTS:
1. The Spouses Benitez buy a parcel of land with improvements
introduced by the Cavite Bank. Subsequently, the private
respondents Spouses Macapagal buy the lot without improvements
adjacent to the petitioner’s lot.
2. The Macapagals file a civil case for recovery of possession of an
encroached area in their lot against the petitioners. Eventually an
amicable settlement was reached – the Spouses Macapagal
would sell the encroached area to the petitioners for Php 1000.00
per sq/m
3. 3 years later the Spouses Macapagal buy another lot adjacent to
property of petitioners. Upon conducting a relocation survey, the
Spouses Macapagal discover that some 46.5 sq/m of their new
property was being encroached by the house of petitioner.
4. Demand letters were sent to petitionet to vacate the area.
Petitioner refuses to vacate.
5. Case for Unlawful Detainer filed with the MetC, finding in favor
of the Sps. Macapagal.
a. Ordering P to pay the Macapagals Php 930.00 a month
from the time case was filed
b. Attorney’s fees
6. Petitioners raise defenses: “Builders in Good Faith”;
Appropriateness of R’s Action (Should have been Accion
Publiciana instead of UD); Jurisdiction of MetC is wanting;
Rentals are invalid as they are not lessees and R spouses are
not lessors; Not afforded by R spouses the pre-emptive right to
buy the encroached property
7. All lower courts affirm the finding of the MetC
ISSUES:
1. Is the action appropriate? Thus, was it raised in the proper court?
2. Was the imposition of rentals valid?
3. Did the petitioner spouses have the pre-emptive right to buy the
encroached property?
PROVISION: Art. 448 of the Civil Code
ART. 448. The owner of the land on which anything has been built sown or
planted in good faith, shall have the right to appropriate as his own the
works, sowing or planting, after payment of the indemnity provided for in
articles 546 and 548, or to oblige the one who built or planted to pay the price
of the land, and the one who sowed, the proper rent.
However, the builder or planter cannot be obliged to buy the land if its value
is considerably more than that of the building or trees. In such case, he shall
pay reasonable rent, if the owner of the land does not choose to appropriate
the building or trees after proper indemnity. The parties shall agree upon the
terms of the lease and in case of disagreement, the court shall fix the terms
thereof.
RULING + RATIO:
1. Yes
Petitioners aver that the Respondents did not have prior physical
possession of the encroached property, thus making unlawful
detainer an invalid action. However, The Court rules that prior
physical possession is not necessary in unlawful detainer. It is
sufficient that they deprived the R of the enjoyment of the property.
That it was unlawfully detained.
o Further, petitioners are estopped from raising the question
of jurisdiction as they have submitted themselves to the
judgment. They cannot raise it now just because the MetC
decision is unfavorable as it is the law of the case between
the parties.
2. Yes
The Rentals here are actually really damages. Since they occupied
the property and deprived the respondent spouses of the right to
enjoy the same, they cannot unjustly enrich themselves.
3. No.
There is no such thing as a pre-emptive right to buy initiated by the
buyer. There is only the option to sell which is afforded to the Land
Owner.
DISPOSITION: CA RULING AFFIRMED
Author: Joss P.
Technogas Phil Manufacturing Corp v CA 2. NO
Petition: a. Petitioner cannot be held in estoppel for entering into the amicable settlement.
Petitioner: TECNOGAS PHILIPPINES MANUFACTURING CORPORATION Petitioner agreed only to the demolition of a portion of the wall separating the
Respondent: OURT OF APPEALS (FORMER SPECIAL SEVENTEENTH DIVISION) and EDUARDO UY adjoining properties of the parties — i.e. "up to the back of the building housing
Ponencia: PANGANIBAN, J the machineries." But that portion of the fence which served as the wall housing
the electroplating machineries was not to be demolished. Rather, it was to "be
DOCTRINE: subject to negotiation by herein parties." The settlement may have recognized the
ownership of private respondent but such admission cannot be equated with bad
If the LO is in good faith while the BPS is in good faith: LO has the choice to either buy the improvement faith.
or sell the land to B 3. NO
a. In view of the good faith of both petitioner and private respondent, their rights
FACTS: and obligations are to be governed by: 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
1.) Technogas Phil. purchased a lot with the building and improvements. This included the wall
land and the sower to pay the proper rent.
which encroached on the property of Eduardo Uy, the private respondent
b. The private respondent's insistence on the removal of the encroaching structures
2.) Technogas discovered the encroachment so he offered to buy the land but Uy refused to sell
as the proper remedy, which respondent Court sustained in its assailed Decisions,
it
is thus legally flawed. This is not one of the remedies bestowed upon him by law. It
3.) Two years passed, Technogas agreed to destroy or demolish the wall
would be available only if and when he chooses to compel the petitioner to buy
4.) Uy dug a canal somewhere along the wall which caused the wall to collapse 33
the land at a reasonable price but the latter fails to pay such price. This has not
5.) Technogas filed a complaint regarding the wall collapsing and a separate action for malicious
taken place. Hence, his options are limited to: (1) appropriating the encroaching
mischief
portion of petitioner's building after payment of proper indemnity, or (2) obliging
6.) RTC ruled in favor of Technogas while the CA ruled in favor of Uy
the latter to buy the lot occupied by the structure. He cannot exercise a remedy of
his own liking
ISSUES:
1. WoN Technogas is a Builder in bad faith
2. WoN an amicable settlement is a remedy
3. WoN Uy can just demolish the wall w/o choosing the option to sell to Technogas DISPOSITION: Petition Granted
PROVISION

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

RULING + RATIO:
1. NO
a. The two cases respondent relied upon do not support its main pronouncement
that a registered owner of land has presumptive knowledge of the metes and
bounds of its own land, and is therefore in bad faith if he mistakenly builds on an
adjoining land. No such doctrinal statement could have been made in those cases
because such issue was not before the Supreme Court.
b. when petitioner purchased the land from Pariz Industries, the buildings and other
structures were already in existence. The record is not clear as to who actually
built those structures, but it may well be assumed that petitioner's predecessor-in-
interest, Pariz Industries, did so. Article 527 of the Civil Code presumes good faith,
and since no proof exists to show that the encroachment over a narrow, needle-
shaped portion of private respondent's land was done in bad faith by the builder of
the encroaching structures, the latter should be presumed to have built them in
good faith
Digest Author: Alexi Calda
MANOTOK REALTY,INC v. TECSON (1988) payment of the indemnity provided for in Articles 546 and 548, or to
Petitioner: Manotok Realty Inc oblige the one who built or planted to pay the price of the land, and
Respondent: Judge Tecson (CFI Manila) and NIlo Madlangawa the one who sowed, the proper rent. However, the builder or planter
Ponencia: Gutierrez Jr. cannot be obliged to buy the land if its value is considerably more
than that of the building or trees. In such case, he shall pay
DOCTRINE: To be deemed a builder in good faith, it is essential reasonable rent, if the owner of the land does not choose to
that a person assert title to the land on which he builds and the appropriate the building or trees after proper indemnity. The parties
he be unaware that there exists in his title or mode of acquisition shall agree upon the terms of the lease and in case of disagreement,
any flaw which invalidates it. the court shall fix the terms thereof. (361a)

FACTS:
1. In a complaint filed by Manotok Realty against Mandlangawa,
the latter was declared by the court as a builder or
possessor in good faith, so the former was asked to
recognize his right.
2. MR filed another petition asking for the approval of the court
for exercising his option to appropriate the improvements
introduced by Madlangawa to his property.
RULING + RATIO: YES.
Repairs and improvements introduced Madlangawa after the
complaint was filed were not built in good faith (he was already
aware that someone owns the land)
Improvements were already gutted by fire and so there is no
basis for Madlangawa to retain the premises anymore
DISPOSITION: PETITION GRANTED.

3. The petition was denied on the ground that there were certain
major repairs and other substantial improvements
introduced to the property.

4. Meanwhile, fire destroyed the houses in the Tambunting

estate including the house of Madlangawa.

5. The Tambunting estate was made a subject of expropriation

but PD 1669: was ruled unconstitutional (Consti II Eminent
Domain case).

6. Manotok Realty filed a petition for mandamus claiming that it is

entitled to the execution of the same since after the fire, what
will be involved already is just the delivery of possession of
the disputed area.

ISSUE: WoN Manotok Realty is entitled the writ of execution

PROVISION: Art. 448. The owner of the land on which anything has
been built, sown or planted in good faith, shall have the right to
appropriate as his own the works, sowing or planting, after
Digest Author: Fredrick Rodel V. Atienza RULING + RATIO:
SARMIENTO v. AGANA (1984) 1. Yes. We agree that ERNESTO and wife were builders in good faith
Petitioner: LEONILA SARMIENTO in view of the peculiar circumstances under which they had
Respondent: HON. ENRIQUE AGANA, SPS. ERNESTO VALENTINO and constructed the RESIDENTIAL HOUSE. As far as they knew, the
REBECCA LORENZO-VALENTINO LAND was owned by ERNESTO's mother-in-law who, having
Ponencia: MELENCIO-HERRERA, J. stated they could build on the property, could reasonably be
expected to later on give them the LAND.
DOCTRINE: The landowner on which a building has been constructed in
good faith by another has the option to buy the building or sell the land to the 2. Yes. Under Art. 448, the landowner cannot refuse both to
builder, he cannot refuse to exercise either option. appropriate or sell the land, and to compel the builder to
FACTS: remove it from the land on which it is located. He is entitled to
1. While Ernesto was still courting his wife, the latter’s mom had told such demolition only when after having chosen to sell the land,
him the couple could build a residential house on a lot of 145 sq. ms. the other party fails to pay for the same.
In a subdivision in Paranaque.
2. Ernesto constructed the Residential House at a cost of P8,000 to
P10,000. It was probably assumed that the lot belonged to the wife’s DISPOSITION: WHEREFORE, the Petition for Certiorari is hereby ordered
mother. dismissed, without pronouncement as to costs.
3. Subsequently, it turned out that the land was titled in the name of Mr.
and Mrs. Jose Santos. They sold the land to Sarmiento for P15,000.
4. Sarmiento asked Ernesto and his wife to vacate and thereafter filed
an ejectment case against them.
5. Ernesto testified that the cost of the House would be from P30,000 to
P40,000.
6. Sarmiento refused to reimburse Ernesto for the value of the house or
allow Ernesto to buy the land for P25,000.

ISSUES:
1. Whether or not Ernesto is a builder in good faith?
2. Whether or not the land owner is compelled to exercise either option: to
buy the building or to sell the land?

PROVISION: Art. 448 of the Civil Code

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

However, the builder or planter cannot be obliged to buy the land if its value
is considerably more than that of the building or trees. In such case, he shall
pay reasonable rent, if the owner of the land does not choose to appropriate
the building or trees after proper indemnity. The parties shall agree upon the
terms of the lease and in case of disagreement, the court shall fix the terms
thereof.
Digest Author: Anjo A. Alvañiz
DEPRA v. DUMLAO (1985)
Petitioner: FRANCISCO DEPRA,
Respondent: AGUSTIN DUMLAO
Ponencia: MELENCIO-HERRERA, J.
DOCTRINE: 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.
FACTS:
1. Francisco Depra, is the owner of a parcel of land registered,
situated in the municipality of Dumangas, Iloilo. Agustin Dumlao,
defendant-appellant, owns an adjoining lot. When DUMLAO
constructed his house on his lot, the kitchen thereof had
encroached on an area of thirty four (34) square meters of
DEPRA’s property.
2. After the encroachment was discovered in a relocation survey of
DEPRA’s lot made on November 2, 1972, his mother, Beatriz
Depra after writing a demand letter asking DUMLAO to move back
from his encroachment, filed an action for Unlawful Detainer. Said
complaint was later amended to include DEPRA as a party plaintiff.
3. The lower court found that Dumlao was a builder in good faith,
and ordered him to pay rent (PhP5.00/month) – forced lease
between the parties. Depra refused to accept the rentals so
Dumlao deposited this with the MTC. Neither party appealed
judgment so this became final and executory.
4. 1 year later, though, Depra filed a complaint for Quieting of Title.
Dumlao contested this, stating that the suit is barred by res
judicata. But Depra averred that the lower court did not have
jurisdiction to rule on encumbrances of real property – only the CFI
has jurisdiction.
pay reasonable rent, if the owner of the land does not choose to appropriate
the building or trees after proper indemnity. The parties shall agree upon the
terms of the lease and in case of disagreement, the court shall fix the terms
thereof.
RULING + RATIO:
1. No
Res judicata doesn’t apply wherein the first case was for ejectment
and the other was for quieting of title.
2. No
Article 448 of the Civil Code provides that the land owner has 2
options – to buy the building or to sell/rent his land. 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.
DISPOSITION: The Court remanded the case to the RTC to determine the
fair price of the land, the expenses incurred by the BPS (Dumlao), the
increase in value of the land, and whether the value of the land is
considerably more than the value of the kitchen built on it. The RTC shall
then give Depra 15 days to exercise such option.

ISSUES:
1. Whether or not res judicata would apply to the case at bar?
2. Whether or not the land owner can be compelled to accept rent payments
by the court (with both LO and BPS being in good faith)?

PROVISION: Art. 448 of the Civil Code

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

However, the builder or planter cannot be obliged to buy the land if its value
is considerably more than that of the building or trees. In such case, he shall
Digest Author: Falgui
Ballatan v CA
Petitioner: EDEN BALLATAN and SPS. BETTY MARTINEZ and
CHONG CHY LING
Respondent: COURT OF APPEALS, GONZALO GO, WINSTON GO,
LI CHING YAO, ARANETA INSTITUTE OF AGRICULTURE and
JOSE N. QUEDDING
Ponencia: PUNO,J.
DOCTRINE: The owner of the land on which anything has been built, sown
or planted in good faith shall have the right to appropriate as his own the
building, planting or sowing, after payment to the builder, planter or sower of
the necessary and useful expenses, and in the proper case, expenses for
pure luxury or mere pleasure. The owner of the land may also oblige the
builder, planter or sower to purchase and pay the price of the land. If the
owner chooses to sell his land, the builder, planter or sower must purchase
the land, otherwise the owner may remove the improvements thereon. The
builder, planter or sower, however, is not obliged to purchase the land if its
value is considerably more than the building, planting or sowing. In such
case, the builder, planter or sower must pay rent to the owner of the land. If
the parties cannot come to terms over the conditions of the lease, the court
must fix the terms thereof. The right to choose between appropriating the
improvement or selling the land on which the improvement stands to the
builder, planter or sower, is given to the owner of the land
FACTS:
1. Eden Ballatan owns Lot No. (24) which has been encroached upon
by the concrete fence and side pathway of Winston Go whose house
is on the adjacent Lot No. (25).
2. Go averred that his house was built in accordance with the survey
conducted by Engr. Quedding. When Engr. Quedding conducted
subsequent surveys at the behest of the parties, he found that Lot
No. (24) lost approximately 25 square meters on its eastern
boundary, that Lot No. (25), although found to have encroached on
Lot No. (24), did not lose nor gain any area; that Lot No. (26) also
registered under Go’s father lost some three (3) square meters
which, however, were gained by Lot No. (27) owned by Li Ching Yao
on its western boundary. In short, Lots Nos. 25, 26 and 27 moved
westward to the eastern boundary of Lot No. (24).
3. On the basis of this survey, on June 10, 1985, petitioner Ballatan
made a written demand on respondents Go to remove and dismantle
their improvements on Lot No. 24. Respondents Go refused.
4. On August 23, 1990, the trial court decided in favor of petitioners. It
ordered the Go's to vacate the subject portion of Lot No. 24,
demolish their improvements and pay petitioner Ballatan actual
damages, attorney's fees and the costs of the suit. It dismissed the
third-party complaint against: (1) AIA after finding that the lots sold to
the parties were in accordance with the technical description and
verification plan covered by their respective titles; (2) Jose N.
Quedding, there being no privity of relation between him and
respondents Go and his erroneous survey having been made at the
instance of AIA, not the parties; and (3) Li Ching Yao for failure to
prove that he committed any wrong in the subject encroachment.
5. On March 25, 1996, the Court of Appeals modified the decision of
the trial court. It affirmed the dismissal of the third-party complaint
against the AIA but reinstated the complaint against Li Ching Yao
and Jose Quedding. Instead of ordering respondents Go to
demolish their improvements on the subject land, the appellate court
ordered them to pay petitioner Ballatan, and respondent Li Ching
Yao to pay respondents Go, a reasonable amount for that portion of
the lot which they encroached, the value to be fixed at the time of
taking. It also ordered Jose Quedding to pay respondents Go
attorney's fees of P5,000.00 for his erroneous survey.
ISSUES:
WON Ballatan can recover possession of the area encroached upon
PROVISION: Article 448 of the Civil Code
"Art. 448. The owner of the land on which anything has been built, sown or planted in
good faith, shall have the right to appropriate as his own the works, sowing or
planting, after payment of the indemnity provided for in Articles 546 and 548, or to
oblige the one who built or planted to pay the price of the land, and the one who
sowed the proper rent. However, the builder or planter cannot be obliged to buy the
land if its value is considerably more than that of the building or trees. In such case,
he shall pay reasonable rent, if the owner of the land does not choose to appropriate
the building or trees after proper indemnity. The parties shall agree upon the terms of
the lease and in case of disagreement, the court shall fix the terms thereof."
RULING + RATIO:
Yes.
Based on the provision, petitioners, as owners of Lot No. 24, may
choose to purchase the improvement made by respondents Go on their land,
or sell to respondents Go the subject portion. If buying the improvement is
impractical as it may render the Go's house useless, then petitioners may sell
to respondents Go that portion of Lot No. 24 on which their improvement
stands. If the Go's are unwilling or unable to buy the lot, then they must
vacate the land and, until they vacate, they must pay rent to petitioners.
Petitioners, however, cannot compel respondents Go to buy the land if its
value is considerably more than the portion of their house constructed
thereon. If the value of the land is much more than the Go's improvement,
then respondents Go must pay reasonable rent. If they do not agree on the
terms of the lease, then they may go to court to fix the same.
In the event that petitioners elect to sell to respondents Go the subject
portion of their lot, the price must be fixed at the prevailing market value at
the time of payment. The Court of Appeals erred in fixing the price at the
time of taking, which is the time the improvements were built on the
land. The time of taking is determinative of just compensation in
expropriation proceedings. The instant case is not for expropriation. It is not
a taking by the state of private property for a public purpose upon payment of
just compensation. This is a case of an owner who has been paying real
estate taxes on his land but has been deprived of the use of a portion of this
land for years. It is but fair and just to fix compensation at the time of
payment

DISPOSITION: the decision of respondent CA is modified

 GEMINIANO v. Court of Appeals (1996)
Petitioners: FEDERICO GEMINIANO, MARIA GEMINIANO, ERNESTO
GEMINIANO, ASUNCION GEMINIANO, LARRY GEMINIANO, and MARLYN
GEMINIANO
Respondent: COURT OF APPEALS, DOMINADOR NICOLAS, and MARY A.
NICOLAS
Ponencia: Davide Jr., J.
Digest Author: Gullas J.
DOCTRINE: Defense of good faith is not available to lessees who
introduce improvements on the land with the knowledge that their right
to use the land would continue only during the life of the lease.
FACTS:
1. Lot No. 3765-B-1 containing an area of 314 square meters was
originally owned by the petitioners' mother, Paulina Amado vda. de
Geminiano. On a 12-square-meter portion of that lot stood the
petitioners' unfinished bungalow, which the petitioners sold in
November 1978 to the private respondents for the sum of P6,000
with an alleged promise to sell to the latter that portion of the lot
occupied by the house.
2. Petitioners' mother executed a contract of lease over a 126 square-
meter portion of the lot, including that portion on which the house
stood, in favor of the private respondents for P40.00 per month for a
period of seven years commencing on 15 November 1978.
The private respondents then introduced additional improvements
and registered the house in their names. After the expiration of the
lease contract in November 1985, however, the petitioners' mother
refused to accept the monthly rentals
3. It turned out that the lot in question was the subject of a suit, which
resulted in its acquisition by one Maria Lee in 1972. In 1982, Lee
sold the lot to Lily Salcedo, who in turn sold it in 1984 to the spouses
Agustin and Ester Dionisio
4. On 14 February 1992, the Dionisio spouses executed a Deed of
Quitclaim over the said property in favor of the petitioners. As such,
the lot was registered in the latter's names.
5. On 9 February 1993, the petitioners sent, via registered mail, a letter
addressed to private respondent Mary Nicolas demanding that she
vacate the premises and pay the rentals in arrears within twenty days
from notice.
6. Upon failure of the private respondents to heed the demand,
the petitioners filed with the MTCC of Dagupan City a complaint for
unlawful detainer and damages.
7. The MTCC ordered the private respondents to vacate the premises,
pay the petitioners P40.00 a month as reasonable compensation for
staying on the land from the date of filing of the complaint and
Php1,000 in attorney’s fees plus costs.
8. RTC then reversed in favor of the private respondents by requiring
petitioners to reimburse the private respondents for the value of the
house and improvements. CA affirmed the RTC judgment. Hence
this petition
ISSUES:
WON the private respondents are builders in good faith (Art. 448) or mere
lessees (Art. 1678)
PROVISIONS:
Art. 448. The owner of the land on which anything has been built, sown or planted in
good faith, shall have the right to appropriate as his own the works, sowing or
planting, after payment of the indemnity provided for in articles 546 (full
reimbursement) and 548, or to oblige the one who built or planted to pay the price of
the land, and the one who sowed, the proper rent. However, the builder or planter
cannot be obliged to buy the land if its value is considerably more than that of the
building or trees. In such case, he shall pay reasonable rent, if the owner of the land
does not choose to appropriate the building or trees after proper indemnity. The
parties shall agree upon the terms of the lease and in case of disagreement, the court
shall fix the terms thereof.
Art. 1678. If the lessee makes, in good faith, useful improvements, which are
suitable to the use for which the lease is intended, without altering the form or
substance of the property leased, the lessor upon the termination of the lease
shall pay the lessee one-half of the value of the improvements at that
time. Should the lessor refuse to reimburse said amount, the lessee may remove the
improvements, even though the principal thing may suffer damage thereby. He shall
not, however, cause any more impairment upon the property leased than is
necessary.
With regard to ornamental expenses, the lessee shall not be entitled to any
reimbursement, but he may remove the ornamental objects, provided no damage is
caused to the principal thing, and the lessor does not choose to retain them by paying
their value at the time the lease is extinguished.
RULING + RATIO:

Private Respondents are mere lessees.

I. The juridical relation between the petitioners' mother as lessor, and

the private respondents as lessees is well established and carries
with it recognition of the lessor's title. The private respondents, as
lessees who had undisturbed possession for the entire term under
the lease, are then estopped to deny their landlord's title, or to assert
a better title not only in themselves, but also in some third person
while they remain in possession of the leased premises and until
they surrender possession to the landlord.

II. Being mere lessees, the private respondents knew that their
occupation of the premises would continue only for the life of the
lease. Plainly, they cannot be considered as possessors or builders
in good faith. The Court has held that Article 448 of the Civil Code, in
relation to Article 546 of the same Code, which allows full
reimbursement of useful improvements and retention of the premises
until reimbursement is made, applies only to a possessor in good
faith, i.e., one who builds on land with the belief that he is the owner
thereof. It does not apply where one's only interest is that of a
lessee under a rental contract; otherwise, it would always be in the
power of the tenant to "improve" his landlord out of his property.

III. Anent the alleged promise of the petitioners to sell the lot occupied
by the private respondents' house, the same was not substantiated
by convincing evidence. Neither the deed of sale over the house nor
the contract of lease contained an option in favor of the respondent
spouses to purchase the said lot. And even if the petitioners indeed
promised to sell, it would not make the private respondents
possessors or builders in good faith so as to be covered by the
provisions of Article 448 of the Civil Code. The latter cannot raise
the mere expectancy of ownership of the aforementioned lot because
the alleged promise to sell was not fulfilled nor its existence even
proven.

DISPOSITION: Petition GRANTED. CA decision is REVERSED and SET

ASIDE in favor of the petitioner
G.R. NO. 170923 JANUARY 20, 2009 SULO SA NAYON,
INC. VS NAYONG PILIPINOFOUNDATION
Petitioner: SULO SA NAYON, INC. and/or PHILIPPINE
VILLAGE HOTEL, INC. and JOSE MARCEL E. PANLILIO
Respondents: NAYONG PILIPINO FOUNDATION
Doctrine: Article 448 is manifestly intended to apply only to a
case where one builds, plants, or sows on land in which he
believes himself to have a claim of title and not to lands where
the only interest of the builder, planter or sower is that of a
holder, such as a tenant.
FACTS:
In June 1 1975, respondent leased a portion of the
Nayong Pilipino Complex, to petitioner Sulo sa Nayon,
Inc. for the construction and operation of a hotel
building, known as Philippine Village Hotel.
The lease was for an initial period of 21 years or until
May 1996. It is renewable for a period of 25 years. On
March 1995, petitioners sent respondent a
letter notifying the latter of their intention to renew. July
1995, parties agreed to the renewal of the contract for
another 25
years, until 2021. Under the new agreement, petitioner
PVHI was bound to pay the monthly rentals on a per
square meter basis at the rate of P20.00 per square
meter.
Beginning January 2001, petitioners
defaulted in the payment of their monthly rental.
Respondent repeatedly demanded petitioners to pay
the arrears and vacate the premises. The last demand
letter was sent on March, 2001.
September 5, 2001, respondent filed a complaint for
unlawful detainer before the MeTC of Pasay City.
MeTC rendered its decision in favor of respondent.
RTC modified the ruling of the MeTC saying that
petitioners were builders in good faith.
CA which held that the RTC erroneously applied the
rules on accession, as found in Articles 448 and 546 of
the Civil Code when it held that petitioners were
builders in good faith.
ISSUE: W/N Petitioners as builders have acted in good faith in
order for Art. 448 in relation to Art.546 of the Civil Code may
apply with respect to their rights over improvements.
Provisions:
Art. 448. The owner of the land on which anything has
been built, sown or planted in good faith, shall have the
right to appropriate as his own the works, sowing or
planting, after payment of the indemnity provided for in
Articles 546 and 548, or to oblige the one who built or
planted to pay the price of the land, and the one who
sowed, the proper rent. However, the builder or planter
cannot be obliged to buy the land if its value is
considerably more than that of the building or trees. In
such case, he shall pay reasonable rent, if the owner of
the land does not choose to appropriate the building or
trees after proper indemnity. The parties shall agree
upon the terms of the lease and in case of
disagreement, the court shall fix the terms thereof.
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.

HELD: No. The provisions do not apply in this case.

Article 448 is manifestly intended to apply only to a

case where one builds, plants, or sows on land in
which he believes himself to have a claim of title and
not to lands where the only interest of the builder,
planter or sower is that of a holder, such as a tenant.
Introduction of valuable improvements on the leased
premises does not give the petitioners the right of
retention and reimbursement which rightfully belongs to
a builder in good faith. Otherwise, such a situation
would allow the lessee to easily “improve” the lessor
out of its property. We reiterate the doctrine that a
lessee is neither a builder in good faith nor in bad
faith that would call for the application of Articles 448
and 546 of the Civil Code.

DECISION: IN VIEW WHEREOF, petitioners’ appeal

is DENIED. The October 4, 2005 Decision of the
Court of Appeals in CA-G.R. SP No. 74631 and its
December 22, 2005 Resolution are AFFIRMED.
Costs against petitioners. SO ORDERED.
Author: Kycia Cue
SPOUSES DEL CAMPO VS ABESIA (1988)
Petition: Petition for Review on certiorari
Petitioner: Concepcion Fernandez Del Campo,
Estanislao Del Canto
Respondent: Bernarda Fernandez Abesia
Ponencia: Gancayco, J.
DOCTRINE: When a co-ownership is terminated by the
partition and BPS (co owner) has built, planted or sown
on it in good faith (house), Article 448 can still be
applied.
FACTS:
1. This case involves a parcel of land, situated at the
corner of F. Flores and Cavan Streets, Cebu City, owned
by the spouses Del Campo and Abesia. They are co-
owners pro indiviso (undivided land) of the lot with 1/3
share each.
2. An action for partition was filed by spouses Del
Campo in the CFI of Cebu.
3. The trial court appointed a commissioner in
accordance with the agreement of the parties where he
then conducted a survey. He then recommended that
the property be divided into two lots:
> Lot 1161-A with an area of 30 square meters
for plaintiffs
> Lot No. 1161-B with an area of 15 square
meters for the defendants.
4. However, the house of Abesia occupied the portion
with an area of 5 square meters of Lot 1161-A (Del
Campo portion).
ISSUE:
1. WON Article 448 applies to a builder in good faith
when property is owned in common
PROVISION:
Art. 448. The owner of the land on which anything has
been built, sown, or planted in good faith, shall have the
right to appropriate as his own the works, sowing or
planting, after payment of the indemnity provided for in
articles 546 and 548, or to oblige the one who built or
planted to pay the price of the land, and the one who
sowed, the proper rent. However, the builder or planter
cannot be obliged to buy the land if its value is
considerably more than that of the building or trees. In
such case, he shall pay reasonable rent, if the owner of
the land does not choose to appropriate the building or
trees after proper indemnity. The parties shall agree
upon the terms of the lease and in case of
disagreement, the court shall fix the terms thereof.
HELD:
YES. Art. 448 applies.
In this case, the co-ownership was already terminated by
the partition (by commissioner) and it appears that the
house of Abesia occupies a portion of the land of Del
Campo, which Abesia obviously built in good faith, then
the provisions of Article 448 of the new Civil Code
should apply.
CHART 2 (LO- GF, BPS- GF)
Option 1: Del Campos have the right to appropriate said
portion of the house of defendants upon payment of
indemnity to defendants
Option 2: Otherwise, the plaintiffs may oblige the
defendants to pay the price of the land occupied by their
house.
However, if the price asked for is considerably much
more than the value of the portion of the house of
defendants built thereon, then the latter cannot be
obliged to buy the land. The defendants shall then pay
the reasonable rent to the plaintiff upon such terms and
conditions that they may agree.
In case of disagreement, the trial court shall fix the
terms thereof. Of course, defendants may demolish or
remove the said portion of their house, at their own
expense, if they so decide.
MAY BE IMPORTANT
Although the court a quo held that Article 448 cannot
apply where a co-owner is the BPS on the land owned in
common for then he did not build, plant or sow upon land
that exclusively belongs to another. The co-owner is not
a third person under the circumstances, and the situation
is governed by the rules of co-ownership.
HOWEVER, Manresa and Navarro Amandi agree that
the said Art. 448 may still apply even when there was
co-ownership if good faith has been established.
* this rule doesn’t really apply in the case since the
said property was already divided based on the
partition of the commissioner.
Digest Author: Billy Alcid
Ignao v. Intermediate Appellate Court (1991)
Petitioner: Florencio Ignao
Respondent: Hon. Intermediate Appellate Court, Juan Ignao, substituted by
his Legal Heirs, and Isidro Ignao
Ponencia: Fernan, C.J.
DOCTRINE: The right to appropriate the works or improvements or to oblige
the builder to pay the price of the land belongs to the landowner.
When the co-ownership is terminated by a partition and it appears that the
house of an erstwhile co-owner has encroached upon a portion pertaining to
another co-owner which was however made in good faith, then the provisions
of Article 448 should apply to determine the respective rights of the parties.
FACTS:
1. Petitioner Florencio Ignao and his uncles private respondents Juan
Ignao and Isidro Ignao were co-owners of a parcel of land situated in
Barrio Tabon, Municipality of Kawit, Cavite.
2. Petitioner filed an action for partition of the land and in a
decision, the CFI of Cavite allotted 2/8 thereof to private
respondents and the remaining portion to petitioner. However,
no actual partition was effected.
3. Petitioner instituted a complaint for recovery of possession of real
property against the private respondents alleging that the area
occupied by the 2 houses built by private respondents exceeded the
area of the land previously allotted to them by the trial court.
4. Lower court conducted an ocular inspection and found that the
houses of the private respondents were encroaching upon the land
allotted to petitioner.
5. Trial court ruled: private respondents were builders in good faith
although they encroached upon the land of petitioner. Although citing
Art. 448 of the Civil Code on the options of petitioner, the trial court
nevertheless ordered petitioner to sell to private respondents those
portions of his land occupied by the latter. (“workable solution”)
ISSUES:
1. WON Art. 448 should apply in the instant case.
2. WON the trial court can order petitioner to sell the aforesaid portions
of the land to private respondents.
PROVISION: Art. 448 of the Civil Code. The owner of the land on which
anything has been built, sown or planted in good faith, shall have the right to
appropriate as his own the works, sowing or planting, after payment of the
indemnity provided for in articles 546 and 548, or to oblige the one who built
or planted to pay the price of the land, and the one who sowed, the proper
rent. However, the builder or planter cannot be obliged to buy the land if its
value is considerably more than that of the building or trees. In such case, he
shall pay reasonable rent, if the owner of the land does not choose to
appropriate the building or trees after proper indemnity. The parties shall
agree upon the terms of the lease and in case of disagreement, the court
shall fix the terms thereof.
RULING + RATIO:
1. Yes
It should be noted that prior to partition, all the co-owners hold the
property in common dominion but at the same time each is an owner
of a share which is abstract and undetermined until partition is
effected.
Every co-owner is therefore the owner of the whole, and over the
whole he exercises the right of dominion, but he is at the same time
the owner of a portion which is truly abstract, because until division is
effected such portion is not concretely determined.
When the co-ownership is terminated by a partition and it appears
that the house of an erstwhile co-owner has encroached upon a
portion pertaining to another co-owner which was however made in
good faith, then the provisions of Article 448 should apply to
determine the respective rights of the parties.
2. No
Such ruling contravened the explicit provisions of Article 448 to the
effect that "(t)he owner of the land . . . shall have the right to
appropriate . . .or to oblige the one who built . . . to pay the price of
the land . . . ." The law is clear and unambiguous when it confers the
right of choice upon the landowner and not upon the builder and the
courts.
Thus, in Quemuel vs. Olaes, the Court categorically ruled that the
right to appropriate the works or improvements or to oblige the
builder to pay the price of the land belongs to the landowner.
DISPOSITION: Decision of IAC is modified allowing Florencio to exercise his
option to either appropriate as his own the portions of the houses or sell to
private respondents the portions of the land occupied by them.
Digest Author: Bugsy Mangaser
LUCIANO BRIONES v. JOSE MACABAGDAL et al.
(2010)
Petitioner: Luciano Briones and Nelly Briones
Respondent: Jose Macabagdal, Fe D. Macabagdal and Vergnon Realty Investment
Corporation
Ponencia: Villamar, Jr., J.
DOCTRINE:
Builder (on the property of another) in good faith may compel landowner to
choose between 1.) appropriating the building or 2.) obliging the builder to
pay the price of the land
FACTS:
1. Spouses MACABAGDAL purchased LOT NO 2-R from Vergnon
Realty Investment Corporation (VERGNON), a 325-square-meter-
land
2. Spouses BRIONES own LOT NO 2-S which is adjacent to Lot No 2-
R
3. After obtaining necessary building permit and the approval of
VERGNON, spouses BRIONES constructed a house on LOT NO 2-
R, which they thought was LOT NO 2-s
4. Spouses MACABAGDAL, upon being informed of the mix up by
VERGNON's manager, demanded spouses BRIONES to demolish
and vacate the house.
5. Spouses BRIONES refused to vacate. Thus, an action was filed.
6. RTC and CA ruled in favor of spouses MACABAGDAL
ISSUES:
WoN spouses BRIONES may be ordered to vacate the property
WoN VERGNON is liable for the damages done to spouses
MACABAGDAL
NO.
No proof exists to show that the mistake was done by spouses
BRIONES in bad faith, thus they should be presumed to have built
the house in good faith.
o When a person is deemed to have built on the land of
another, Article 448 of the Civil Code governs.
o A 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 grant of choice to the landowner is preclusive.
He must choose only one.
o 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.
Also, spouses BRIONES may be indemnified for the necessary and
useful expenses they may have made on the subject property (Art.
546 and 548)
o According to jurisprudence, the case must be remanded to
the RTC for proper application of Articles 448, 546 and 548.
NO.
Spouses BRIONES failed to present sufficient evidence to show
negligence on VERGNON's part (Art. 2176)
Approval made by VERGNON to construct the house does not serve
as a guarantee that petitioners were constructing within the metes
and bounds of their property
DISPOSITION: Appeal made by petitioner AFFIRMED with
MODIFICATION. REMANDED to the RTC for further proceedings consistent
with the proper application of Articles 448, 546 and 548 of the Civil Code.

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

RULING + RATIO:
Digest Author: George Filasol o (Art. 547) remove useful improvements if this can be done
MWSS v. CA (1986) without damage to the principal thing and if the person who
Petitioner: Metropolitan Waterworks and Sewerage System recovers the possession does not exercise the option of
Respondent: Court of Appeals and City of Dagupan reimbursing the useful expenses.
Ponencia: Feria, J. Possessor in bad faith:
o (Art. 549) Remove luxurious improvements, provided the
DOCTRINE: thing does not suffer any injury and the lawful possessor
A builder in bad faith is not entitled to whatever useful improvements it had does not want to retain them by paying the value they have
made without right to indemnity. at the time he enters into possession.

FACTS: DISPOSITION: The decision of the appellate court is affirmed with cost
1. City of Dagupan filed a complaint against NAWASA for recovery of against petitioner.
the ownership of the Dagupan Waterworks System.
2. Judgment was rendered by the trial court in favor of the City of
Dagupan and found that NAWASA is a possessor in bad faith.
3. NAWASA appealed to the CA with its lone assignment of error that
the City of Dagupan should have been liable for the amortization of
the balancesecured by NAWASA for the improvement of the
Dagupan Waterworks System.
4. CA affirmed the judgment of the trial court.
5. MWSS, the successor-in-interest of NAWASA, appealed to the SC
stating that it has the right to remove the useful improvements even
though it was a possessor in bad faith.
a. It argued that Arts. 546, 547 and 549 of the Civil Code did
not settle the question on whether or not a possessor in bad
faith has the right to remove useful improvements.

ISSUES:
WoN a possessor in bad faith has the right to remove the useful
improvements.
PROVISION:
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.”

RULING + RATIO:
NO.
Art. 499 of the Civil Code provides that a builder in bad faith, build on
the land of another, loses whatever he has built without indemnity.
As a builder in bad faith, NAWASA lost whatever it had made without
right to indemnity.
Discussion on rights of a builder in good faith/bad faith who built on the
land of another
Possessor in good faith:
o (Art. 546) Refunded for useful improvements with the right of
retention until reimbursed
Author: Mercado
REPUBLIC V. BALLOCANAG (2008)
Petitioner: Republic of the Philippines RULING + RATIO:
Respondent: Hon. Normelito Ballocanag and Danilo Reyes NO
Ponencia: Nachura, J. Reyes was a planter in good faith. He received notice of the
Republic’s claim only when the reversion case was filed on 1987.
DOCTRINE: Options under Art. 448 may be restricted, that is, an alternative (Art. 448 and 546 should apply)
may not be exercised due to the circumstances of the case. Since the land is currently covered by the AFFLA and the removal of
the fruit-bearing trees would be risking substantial damage to the
land, the only option for the Republic is to buy the improvements.
FACTS: o The Republic must prevent the damage of the land due to
1. Sometime in 1970, Reyes bought a land (182,941 sqm) from one fundamental principles and state policies.
Regina Castillo. The Republic shall also have the right of subrogation against the
lessee who may have benefited from the improvements.
2. Right after his purchase, Reyes introduced improvements and
planted the land with fruit trees. DISPOSITION: Petition denied.

a. About a thousand mangoes

b. More than a hundred Mandarin citrus
c. More than a hundred guyabanos

3. A huge portion (162,500 sqm) of the land bought in good faith turned
out to be timberland of Oriental Mindoro, and therefore cannot be
subject to any disposition or acquisition under any existing law and is
not registrable.

4. Thus, in the complaint for reversion filed by the OSG, it was

explained that the Original Transfer Certificate of Title was fictitious.

5. The portion of the land was entirely inside the 140 hectares Agro-
Forestry Farm Lease Agreement (AFFLA).

6. The land was reverted back to the Republic.

7. Reyes file a motion to remove improvements, which was granted by

the court.

ISSUES:

Whether or not Reyes may remove the improvements he introduced

from the land.

PROVISION:
Author: De Claro, Kimmi
Communities Cagayan Inc. v. Spouses Arsenio
Petitioner: Communities Cagayan Inc.
Respondent: Spouses Arsenio and Angeles Nanol
Ponente: Del Castillo, J.
DOCTRINE: 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.
FACTS:
1. In 1994, spouses Arsenio and Angeles Nanol entered into a
Contract to Sell with Communities Cagayan, Inc., (CCI). CCI
agreed to sell to spouses a house and Lots 17 and 19 located
at Block 16, Camella Homes Subdivision, Cagayan de Oro
City, for the price of P368,000.00.
2. Spouses Arsenio and Nanol did not avail of CCI’s financing
due to high interest rates. Instead, they obtained a loan from
Capitol Development Bank (CDB), using the property as
collateral. To facilitate the loan, a simulated sale over the
property was executed by petitioner in favor of respondent-
spouses. The titles were transferred in the names of
respondent-spouses and submitted to CDB for loan
processing. The bank collapsed and closed before it could
release the loan.
3. In 1997, respondent-spouses entered into another Contract to
Sell with petitioner over the same property for the same price.
This time, they availed of petitioner’s in-house financing thus,
undertaking to pay the loan over four years, from 1997 to
2001.
4. Respondent Arsenio demolished the original house and
constructed a three-story house allegedly valued at
P3.5 million, more or less. (Respondent Arsenio died, leaving
his wife, herein respondent Angeles, to pay for the monthly
amortizations.)
5. On September 10, 2003, petitioner sent respondent-spouses a
notarized Notice of Delinquency and Cancellation of Contract
to Sell due to the latter’s failure to pay the monthly
amortizations. Petitioner filed before the Municipal Trial Court
in Cities, an action for unlawful detainer against respondent-
spouses.
6. Angeles argued that the Deed of Absolute Sale is valid.
ISSUES:
Whether petitioner is obliged to reimburse respondent-
spouses the value of the new house minus the cost of the
original house.
RULING + RATIO:
Yes. Respondent-spouses are entitled to reimbursement of
the improvements made on the property.
As a general rule, Article 448 on builders in good faith does not
apply where there is a contractual relation between the parties, such
as in the instant case. However, the parties failed to attach a copy of
the Contract to Sell.
The subject property is covered by a Contract to Sell hence
ownership still remains with petitioner being the seller. Nevertheless,
there were already instances where the Court applied Article 448
even if the builders do not have a claim of title over the property.
Author: De Claro, Kimmi
The Court, in some special cases, has used Article 448 by
recognizing good faith beyond its limited definition. First, good faith is
presumed on the part of the respondent-spouses. Second, petitioner
failed to rebut this presumption. Third, no evidence was presented to
show that petitioner opposed or objected to the improvements
introduced by the respondent-spouses. Consequently, it can be
presumed that petitioner consented to the improvements being
constructed. As the subdivision developer, petitioner must have given
the respondent-spouses permits to commence and undertake the
construction which is tantamount to consent.

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.

CCI, as landowner, has two options:

1. It may appropriate the new house by reimbursing respondent

Angeles the current market value thereof minus the cost of the
old house. Under this option, respondent Angeles would have
"a right of retention which negates the obligation to pay rent."

2. CCI may sell the lots to respondent Angeles at a price

equivalent to the current fair value thereof. However, if the
value of the lots is considerably more than the value of the
improvement, respondent Angeles cannot be compelled to
purchase the lots. She can only be obliged to pay petitioner
reasonable rent.

DISPOSITION: WHEREFORE, the petition is hereby PARTIALLY

GRANTED (remanded to the court of origin to determine matters
necessary for the proper application of Article 448)