TECNOGAS v.

CA
GR No. 108894, Feb. 10, 1997
PETITIONER: Tecnogas Philippines Manufacturing Corporation
RESPONDENTS: Court of Appeals and Eduardo Uy
RELEVANT PRINCIPLES:
- Presumption of good faith in the possession of property: Art. 527 presumes good faith; proof of
bad faith lies with the one who alleges it. Good faith consists in the belief of the builder that the
land he is building on is his.
- Buyer in good faith can compel landowner to exercise his options under Art. 448: As a builder in
good faith, Pariz can invoke Art. 448 as defense. Tecnogas became Pariz's successor-in-interest
when it acquired the disputed lands. Therefore, it can compel Uy to choose an option available
to him under Art. 448: either (1) appropriate the building by paying the indemnity required by law,
or (2) sell the land to Tecnogas. Uy cannot refuse to make a choice and force Tecnogas to
remove the buildings and the wall encroaching upon his property.

FACTS:
- In 1970, respondent Eduardo Uy bought two parcels of land situated in Paranaque, both
covered by Lot 4531-B. That same year, petitioner Tecnogas Phils. bought from Pariz Industries
a parcel of land (Lot 4531-A) adjacent to Uy's, including all buildings and the perimeter wall
within it.
- A year later, Uy hired a surveyor to inspect Lot 4531-B, and found out that parts of the buildings
and perimeter wall bought by Tecnogas encroached portions of his property covering 520 sq.m.
When informed of this, Tecnogas immediately offered to buy those portions of land, but Uy
refused.
- In 1973, the two parties reached an agreement where Tecnogas agreed to demolish a portion of
the perimeter wall occupying Uy's property, with the rest of the encroachments still to be
negotiated between parties.
- Subsequently, Uy dug a canal along a portion of the perimeter wall not included in their prior
agreement (but was within Uy's land), causing damages to the said wall and to some of
Tecnogas's equipment. Tecnogas then filed this instant case.
- The Pasay City RTC rendered a decision in favor of Tecnogas, ordering Uy to sell the portion of
his land occupied by Tecnogas's buildings and perimeter wall.
- The CA however reversed the RTC decision and ordered Tecnogas to remove the wall and the
buildings encroaching Uy's property.
- Tecnogas then elevated this case to the SC.

ISSUES:
- WoN Tecnogas is considered to be a possessor in good faith;
- WoN Art. 448 can be invoked by Tecnogas in this case.

ARGUMENTS:
Petitioner Tecnogas:
- The determination of good faith must be reckoned during the period when the buildings and
walls encroaching Uy's property was actually being built. Since it was Pariz Industries who
actually built those encroachments, and Uy failed to prove the bad faith of Pariz, under Art.
527 Tecnogas should be presumed as a possessor in good faith.
- Tecnogas can invoke Art. 448 because Uy failed to prove Pariz's bad faith in the construction
of the encroachments, and therefore Pariz is presumed to be a builder in good faith. Since
Tecnogas bought Pariz's properties, it has stepped into the shoes of Pariz, and can therefore
compel Uy to exercise the options available to him under Art. 448.
Respondents Uy and CA:
- Uy argues that Tecnogas is a possessor in bad faith because (1) Tecnogas's acquisition from
Pariz of Lot 4531-A happened after Uy bought the adjacent Lot 4531-B, (2) the sale between
Tecnogas and Pariz was not registered because of some problems with a bank, and (3) the
Deed of Sale was only registered in 1973. Therefore, Tecnogas cannot invoke Art. 448.
- The CA in its ruling held that Tecnogas is a possessor in bad faith because, as a land owner,
Tecnogas is presumed to know the metes and bounds of its property, especially when these
are reflected in the certificate of title. Tecnogas should have known that the buildings and the
perimeter wall it bought was encroaching upon Uy's property. Therefore, as a possessor in
bad faith, Tecnogas cannot invoke Art. 448.

HELD:
- Yes, Tecnogas is a possessor in good faith. Art. 527 presumes good faith; proof of bad faith
lies with the one who alleges it. Since Uy failed to show that Pariz was in bad faith when it built
the buildings and the wall encroaching over his property, the latter should be presumed to have
built them in good faith. Good faith consists in the belief of the builder that the land he is building
on is his. When Tecnogas bought the property, Pariz's good faith passed on to Tecnogas. The
Court also held that the CA erred in ruling bad faith due to Tecnogas's ignorance of defects or
flaw in its title. Tecnogas cannot be presumed to have known the boundaries of the property it
bought by merely looking at its certificate of title, since no one can determine the precise extent
of his property unless he is versed in the science of land survey.
- Yes, Art. 448 can be invoked since Pariz is presumed to be a builder in good faith. When
Tecnogas bought the disputed property, it became the successor-in-interest to Pariz. Tecnogas
can therefore compel Uy to exercise the options available to him under Art. 448: either (1)
 appropriate the building by paying the indemnity required by law, or (2) sell the land to
Tecnogas. Uy cannot refuse to make a choice and force Tecnogas to remove the buildings and
the wall encroaching upon his property.

RULING: Petition is GRANTED. CA decision is REVERSED and SET ASIDE, and the case is
remanded back to the RTC for the determination of the values of the land and the buildings in
question, and for the issuance of an order compelling private respondent Eduardo Uy to choose an
option available to him as landowner under Art. 448.