PROPERTY FIFTH SET |1
[No. 44606. November 28, 1938]
VICENTE STO. DOMINGO BERNARDO, plaintiff and appellant, vs. CATALINO
BATACLAN, defendant and appellant. TORIBIO TEODORO, purchaser and
appellee.
1.OWNERSHIP; ACCESSION; LAND AND IMPROVEMENTS.—The Civil Code confirms
certain time-honored principles of the law of property. One of these is the principle of
accession whereby the owner of property acquires not only that which it produces but
that which is united to it either naturally or artificially. Whatever is built, planted or
sown on the land of another, and the improvements or repairs made thereon, belong
to the owner of the land. Where, however, the planter, builder, or sower has acted in
good faith, a conflict of rights arises between the owners and it becomes necessary
to protect the owner of the improvements without causing injustice to the owner of
the land.
2. ID.; ID.; ID.; OPTION GRANTED TO OWNER OF LAND.— In view of the
impracticability of creating what Manresa calls a state of "forced coownership" (vol. 3,
4th ed., p. 213), the law has provided a just and equitable solution by giving the
owner of the land the option to acquire the improvements after payment of the
proper indemnity or to oblige the builder or planter to pay for the land and the sower
to pay the proper rent. It is the owner of the land who is allowed 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. The, plaintiff, as owner of the land,
chose to require the defendant, as owner of the improvements, to pay for the land.
When the latter failed to pay for the land, he lost his right of retention.
APPEAL from a judgment of the Court of First Instance of Cavite. Rovira, J.
The facts are stated in the opinion of the court.
Pedro de Leon for plaintiff-appellant.
Angel H. Mojica and Francisco Lavides for defendantappellant.
Jose Y, Garde for appellee.
LAUREL, J:
This is an appeal taken by both the plaintiff and the defendant from the order of
September 26, 1935, hereinbelow referred to, of the Court of First Instance of Cavite
in Civil Case No. 2428.
There is no controversy as to the facts. By a contract of sale executed on July 17,
1920, the plaintiff herein acquired from Pastor Samonte and others ownership of a
parcel of land of about 90 hectares situated in sitio Balayunan, Silang, Cavite. To
secure possession of the land from the vendors the said plaintiff, on July 20, 1929,
instituted Civil Case No. 1935 in the Court of First Instance of Cavite. The trial court
found for the plaintiff in a decision which was affirmed by this Supreme Court on
appeal (G. R. No. 33017).1 When plaintiff entered upon the premises, however, he
found the defendant herein, Catalino Bataclan, who appears to have been authorized
by former owners, as far back as 1922, to clear the land and make improvements
thereon. As Bataclan was not a party in Case No. 1935, plaintiff, on June 11, 1931,
instituted against him, in the Court of First Instance of Cavite, Civil Case No. 2428. In
this case, plaintiff was declared owner but the defendant was held to be a possessor
in good faith, entitled to reimbursement in the total sum of P1,642, for work done
and improvements made. The dispositive part of the decision reads.:
"Por las consideraciones expuestas, se declara al demandante Vicente Santo Domingo
Bernardo dueño con derecho a la posesión del terreno que se describe en la
demanda, y al demandado Catalino Bataclan con derecho a que el demandante le
pague la suma de P1,642 por gastos útiles hechos de buena fe en el terreno, y por el
cerco y ponos de coco y abacá existentes en el mismo, y con derecho, además a
retener la posesión del terreno hasta que se le pague dicha cantidad. Al demandante
puede optar, en el plazo de treinta días, a partir de la fecha en que fuere notificado
de la presente, por pagar esa suma al demandado, haciendo así suyos el cerco y
todas las plantaciones existentes en el terreno, ú obligar al demandado a pagarle el
precio del terreno, a razón de trescientos pesos la heetárea. En el caso de que el
demandante optara por que el demandado le pagara el precio del terreno, el
demandado efectuará el pago en el plazo conveniente por las partes o que será fijado
por el Juzgado. Sin costas."
Both parties appealed to this court (G. R. No. 37319).1 .* The decision appealed from
was modified by allowing the defendant to recover compensation amounting to
P2,212 and by reducing the price at which the plaintiff could require the defendant to
purchase the land in question from P300 to P200 per hectare. Plaintiff was given by
this court 30 days from the date when the decision became final within which to
exercise his option, either to sell the land to the defendant or to buy the
improvements from him. On January 9, 1934, the plaintiff manifested to the lower
court his desire "to require the defendant to pay him the value of the land at the rate
of P200 per hectare or a total price of P18,000 for the whole tract of land." The
defendant informed the lower court that he was unable to pay for the land and, on
January 24, 1934, an order was issued giving the plaintiff 30 days within which to
'pay the defendant the sum of P2,212 stating that, in the event of failure to make
such payment, the land would be ordered sold at public auction "Para hacer pago al
demandante de la suma de P2,212 y el remanente después de deducidos los gastos
legales de la venta en pública subasta será entregado al demandante." On February
21, 1934, plaintiff moved to reconsider the foregoing order so that he would have
preference over the defendant in the order of payment. The motion was denied on

March 1, 1934 but on March 16 following the court below, motu proprio, modified its
order of January 24, "en el sentido de que el demandante tiene derecho preferente al
importe del terreno no se vendiere en púnlica subasta, a razón de P200 por hectarea
y el remanente, si acaso lo hubiere se entregará al demandado en pago de la
cantidad de P2,212 por la limpieza del terreno y las mejoras introducidas en el mismo
por el citado demandado." On April 24, 1934, the court below, at the instance of the
plaintiff and without objection on the part of the defendant, ordered the sale of the
land in question at public auction. The land was sold on April 5, 1935 to Toribio
Teodoro, the highest bidder, for P8,000. In the certificate of sale issued to said
purchaser on the very day of sale, it was stated that the period of redemption of the
land sold was to expire on April 5, 1936. Upon petition of Toribio Teodoro the court
below ordered the provincial sheriff to issue another certificate not qualified by any
equity of redemption. This was complied with by the sheriff on July 30, 1935. On
September 18, 1935, Teodoro moved that ha be placed in possession of the land
purchased by him. The motion was granted by order of September 26, 1935, the
dispositive part of which is as f follows:
"Por tanto, se ordena al Sheriff Provincial de Cavite ponga a Toribio Teodoro en
posesión del terreno comprado por el en subasta pública y por el cual se le expidió
certificado de venta definitiva, reservando al demandado su derecho de ejercitar una
acción ordinaria para reclamar del demandante la cantidad de P2,212 a que tiene
derecho por la impieza y mejoras del terreno y cuya suma, en justicia y equidad,
debe ser descontada y deducida de la suma de P8,000 que ya ha recibido el
demandante."
The Civil Code confirms certain time-honored principles of the law of property. One of
these is the principle of accession whereby the owner of property acquires not only
that which it produces but that which is united to it either naturally or artificially. (Art.
353.) Whatever H built, planted or sown on the land of another, and the
improvements or repairs made thereon, belong to the owner of the land (art. 358).
Where, however, the planter, builder, or sower has acted in good faith, a conflict of
rights arises between the owners and it becomes necessary to protect the owner of
the improvements without causing injustice to the owner of the land. In view of the
impracticability of creating what Manresa calls a state of "forced coownership" (vol. 3,
4th ed., p. 213), the law has provided a just and equitable solution by giving the
owner of the land the option to acquire the improvements after payment of the
proper indemnity or to oblige the builder or planter to pay for the land and the sower
to pay the proper rent (art. 361), It is the owner of the land who is allowed 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 (3 Manresa, 4th ed.,
p. 213). In the case before us, the plaintiff, as owner of the land, chose to require
the defendant, as owner of the improvements, to pay for the land.
PROPERTY FIFTH SET |2
The defendant states that he is a possessor in good faith and that the amount of
P2,212 to which he is entitled has not yet been paid to him. Therefore, he says, he
has a right to retain the land in accordance with the provisions of article 453 of the
Civil Code. We do not doubt the validity of the premises stated. "Considera la ley tan
sagrada y legítima la deuda, que hasta que sea pagada, no consiente que la cosa se
restituya al vencedor." (4 Manresa. 4th ed., p., 304.) We find, however, that the
defendant has lost his right of retention. In obedience to the decision of this court in
G. R. No. 37319, the plaintiff expressed his desire to require the defendant to pay for
the value of the land. The said defendant could have become owner of both land and
improvements and continued in possession thereof But he said he could not- pay and
the land was sold at public auction to Toribio Teodoro. The law, as we have already
said, requires no more than that the owner of the land should choose between
indemnifying the owner of the improvements or requiring the latter to pay for the
land. When he failed to pay for the land, the defendant herein lost his right of
retention.
The sale at public auction having been asked by the plaintiff himself (p. 22, bill of
exceptions) and the purchase price of P8,000 received by him from Toribio Teodoro,
we find no reason to justify a rupture of the situation thus created between them, the
defendant-appellant not being entitled, after all, to recover from the plaintiff the sum
of P2,212.
The judgment of the lower court is accordingly modified by eliminating therefrom the
reservation made in favor of the defendant-appellant to recover from the plaintiff the
sum of P2,212. In all other respects, the same is affirmed, without pronouncement
regarding costs. So ordered.
Avanceña, C. J., Villa-Real, Imperial, and Diaz, JJ., concur.
Judgment modified. Bernardo vs. Bataclan, 66 Phil. 598, No. 44606 November 28,
1938

[No. L-175. April 30, 1946]
DAMIAN IGNACIO, FRANCISCO IGNACIO and LUIS IGNACIO, petitioners,
vs. ELIAS HILARIO and his wife DIONISIA DRES, and FELIPE NATIVIDAD,
Judge of First Instance of Pangasinan, respondents.
1.PROPERTY; IMPROVEMENTS; RIGHTS AND OBLIGATIONS OF OWNER OF LAND
AND OF OWNER OF IMPROVEMENTS.—The owner of the building evected 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 of the Civil Code. The owner of
the land, upon the other hand, has the option, under article 361, either to pay for the
building or to sell his land to the owner of the building. But he cannot, as
respondents here did, 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.
2.JUDGMENTS; ADDITIONS TO FlNAL JUDGMENTS; SHERIFF NOT AUTHORIZED TO
SETTLE MATTERS INVOLVING EXERCISE OF JUDICIAL DISCRETION; CASE AT BAR.—
The trial court's decision defining rightly the rights of both parties under articles 361
and 453 of the Civil Code, fails to determine the value of the buildings and of the lot
where they are erected as well as the periods of time within which the option may be
exercised and payment should be made, these particulars having been left for
determination apparently after the judgment has become final. This procedure is
erroneous, for after the judgment has become final, no additions can be made
thereto and nothing can be done therewith except its execution. And execution
cannot be had, the sheriff being ignorant as to how, for how much, and Within what
time may the option be exercised, and certainly no authority is vested in him to settle
these matters which involve exercise of judicial discretion. Thus the appealed
judgment has never become final, it having left matters to be settled for its
completion in a subsequent proceeding, matters which remained unsettled up to the
time the petition is filed in the instant case.
ORIGINAL ACTION in the Supreme Court. Certiorari.
The facts are stated in the opinion of the court.
Leoncio R. Esliza for petitioners.
Mauricio M. Monta for respondents.
MORAN, C. J.:
This is a petition for certiorari arising from a case in the Court of First Instance of
Pangasinan between the herein respondents Elias Hilario and his wife Dionisia Dres as
plaintiffs, and the herein petitioners Damian, Francisco and Luis, surnamed Ignacio,
PROPERTY FIFTH SET |3
as defendants, concerning the ownership of a parcel of land, partly rice-land and
partly residential. After the trial of the case, the lower court, presided over by Hon.
Alfonso Felix, rendered judgment holding plaintiffs as the legal owners of the whole
property but conceding to defendants the ownership of the houses and granaries
built by them on the residential portion with the rights of a possessor in good faith, in
accordance with article 361 of the Civil Code. The dispositive part of the decision, hub
of this controversy, follows:
"Wherefore, judgment is hereby rendered declaring:
"(1) That the plaintiffs are the owners of the whole property described in transfer
certificate of title No. 12872 (Exhibit A) issued in their name, and entitled to the
possession of the same;
"(2) That the defendants are entitled to hold the possession of the residential lot until
after they are paid the actual market value of their houses and granaries erected
thereon, unless the plaintiffs prefer to sell them said residential lot, in which case
defendants shall pay the plaintiffs the proportionate value of said residential lot taking
as a basis the price paid for the whole land according to Exhibit B; and
"(3) That upon defendant's failure to purchase the residential lot in question, said
defendants shall remove their houses and granaries after this decision becomes final
and within the period of sixty (60) days from the date that the court is informed in
writing of the attitude of the parties in this respect,
"No pronouncement is made as to damages and costs. "Once this decision becomes
final, the plaintiffs and defendants may appear again before this court for the
purpose of determining their respective rights under article 361 of the Civil Code, if
they cannot come to an extra-judicial settlement with regard to said rights."
Subsequently, in a motion filed in the same Court of First Instance but now presided
over by the herein respondent Judge Hon. Felipe Natividad, the plaintiffs prayed for
an order of execution alleging that since they chose neither to pay defendants for the
buildings nor to sell to them the residential lot, said defendants should be ordered to
remove the structure at their own expense and to restore plaintiffs in the possession
of said lot. Defendants objected to this motion which, after hearing, was granted by
Judge Natividad. Hence, this petition by defendants praying for (a) a restraint and
annulment of the order of execution issued by Judge Natividad; (b) an order to
compel plaintiffs to pay them the sum of P2,000 for the buildings, or sell to them the
residential lot for P45; or (e), a rehearing of the case for a determination of the rights
of the parties upon failure of extra-judicial settlement.
 PROPERTY FIFTH SET |4

The judgment rendered by Judge Felix is founded on articles 361 and 453 of the Civil
Code which are as follows:
"ART. 361. The owner of land on which anything has been built, sown or planted in
good faith, shall have the right to appropriate as his own the work, sowing or
planting, after the payment of the indemnity stated in articles 453 and 454, or to
oblige the one who built or planted to pay the price of the land, and the one who
sowed, the proper rent.
"ART. 453. Necessary expenses shall be refunded to every possessor; but only the
possessor in good faith may retain the thing until such expenses are made good to
him.
"Useful expenses shall be refunded to the possessor in good faith -with the same
right of retention, the person who has defeated him in the possession having the
option of refunding the amount of the expenses or paying the increase in value which
the thing may have acquired in consequence thereof."
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. The owner of the land, upon the other hand, has the option, under
article 361, either to pay for the building or to sell his land to the owner of the
building. But he cannot, as respondents here did, 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. But this is not the case bef ore
us.
cannot be had, the sheriff being ignorant as to how, for how much, and within what
time may the option be exercised, and certainly no authority is vested in him to settle
these matters which involve exercise of judicial discretion. Thus the judgment
rendered by Judge Felix has never become final, it having left matters to be settled
for its completion in a subsequent proceeding, matters which remained unsettled up
to the time the petition is filed in the instant case.
For all the foregoing, the writ of execution issued by Judge Natividad is hereby set
aside and the lower court ordered to hold a hearing in the principal case wherein it
must determine the prices of the buildings and of the residential lot where they are
erected, as well as the period of time within which the plaintiffs-respondents may
exercise their option either to pay for the buildings or to sell their land, and, in the
last instance, the period of time within which the defendants-petitioners may pay for
the land, all these periods to be counted from the date the judgment becomes
executory or unappealable, After such hearing, the court shall render a final judgment
according to the evidence presented by the parties.
The costs shall be paid by plaintiffs-respondents.
Ozaeta, Parás, Jaranilla, Feria, De Joya, Pablo, Perfecto, Hilado, Bengzon, and
Briones, JJ., concur.
Writ set aside; case remanded with instructions. Ignacio vs. Hilario, 76 Phil. 605, No.
L-175 April 3

We hold, therefore, that the order of Judge Natividad compelling defendants-

petitioners to remove their buildings from the land belonging to plaintiffs-respondents
only because the latter chose neither to pay for such buildings nor to sell the land, is
null and void, for it amends substantially the judgment sought to be executed and is,
furthermore, offensive to articles 361 and 453 of the Civil Code.

There is, however, in the decision of Judge Felix a question of procedure which calls
for clarification, to avoid uncertainty and delay in the disposition of cases. In that
decision, the rights of both parties are well defined under articles 361 and 453 of the
Civil Code, but it fails to determine the value of the buildings and of the lot where
they are erected as well as the periods of time within which the option may be
exercised and payment should be made, these particulars having been left for
determination apparently after the judgment has become final. This procedure is
erroneous, for after the judgment has become final, no additions can be made
thereto and nothing can be done therewith except its execution. And execution

No. L-57348. May 16, 1985.*
FRANCISCO DEPRA, plaintiff-appellee, vs. AGUSTIN DUMLAO, defendant-
appellant.
Leases; Ejectment; The judgment of a Municipal Court in ejectment cases is effective
in respect of possession only. It has no authority to impose a “forced lease.”—
Addressing ourselves to the issue of validity of the Decision of the Municipal Court,
we hold the same to be 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
overstepped its bounds when it imposed upon the parties a situation of “forced
lease”, which like “forced co-ownership” is not favored in law, Furthermore, a lease is
an interest in real property, jurisdiction over which belongs to Courts of First Instance
(now Regional Trial Courts) (Sec. 44(b), Judiciary Act of 1948; Sec. 19 (2) Batas
Pambansa Blg. 129). Since the Municipal Court, acted without jurisdiction, its Decision
was null and void and cannot operate as res judicata to the subject complaint for
Quieting of Title.
Same; Same; Judgments; Res judicata does not apply where previous case is an
ejectment case and subsequent case is a petition for quieting of title.—Besides, even
if the Decision were valid, the rule on res judicata would not apply due to difference
in cause of action. In the Municipal Court, the cause of action was the deprivation of
possession, while in the action to quiet title, the cause of action was based on
ownership. Furthermore. Sec. 7, Rule 70 of the Rules of Court explicitly provides that
judgment in a detainer case “shall not bar an action between the same parties
respecting title to the land.”
Same; Property; Owner of land on which improvement was built by another in good
faith is entitled to removal of improvement only after landowner has opted to sell the
land and the builder refused to pay for the same.—However, the good faith of
DUMLAO is part of the Stipulation of Facts in the Court of First Instance. It was thus
er ror 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.
Same; Same; Where the land’s value is considerably more than the improvement, the
landowner cannot compel the builder to buy the land. In such event, a “forced lease”
is created and the court shall fix the terms thereof in case the parties disagree
thereon.—The trial Court shall further order that if DEPRA exercises the option to
PROPERTY FIFTH SET |5
oblige DUMLAO 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 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.
APPEAL from the order of the Court of First Instance of Iloilo.
The facts are stated in the opinion of the Court
Roberto D. Dineros for plaintiff-appellee.
Neil D. Hechanova for defendant-appellant.
MELENCIO-HERRERA, J.:
This is an appeal from the Order of the former Court of First Instance of Iloilo to the
then Court of Appeals, which the latter certified to this instance as involving pure
questions of law.
Plaintiff-appellee, Francisco Depra, is the owner of a parcel of land registered under
Transfer Certificate of Title No. T-3087, known as Lot No. 685, situated in the
municipality of Dumangas, Iloilo, with an area of approximately 8,870 square meters.
Agustin Dumlao, defendant-appellant, owns an adjoining lot, designated as Lot No.
683, with an approximate area of 231 sq. ms.

Sometime in 1972, 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, After the encroachment was discovered in a relocation survey of DEPRA’s
lot made on November 2, 1972, his mother, Beatriz Derla, after writing a demand
letter asking DUMLAO to move back from his encroachment, filed an action for
Unlawful Detainer on February 6, 1973 against DUMLAO in the Municipal Court of of
Dumangas, docketed as Civil Case No. I. Said complaint was later amended to include
DEPRA as a party plaintiff.
After trial, the Municipal Court found that DUMLAO was a builder in good faith, and
applying Article 448 of the Civil Code, rendered judgment on September 29, 1973,
the dispositive portion of which reads:
“Ordering that a forced lease is created between the parties with the plaintiffs, as
lessors, and the defendants as lessees, over the disputed portion with an area of
thirty four (34) square meters, the rent to be paid is five (P5.00) pesos a month,
payable by the lessee to the lessors within the first five (5) days of the month the
rent is due; and the lease shall commence on the day that this decision shall have
become final.”
From the foregoing judgment, neither party appealed 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.
On July 15, 1974, DEPRA filed a Complaint for Quieting of Title against DUMLAO
before the then Court of First Instance of Iloilo, Branch IV (Trial Court), involving the
very same 34 square meters, which was the bone of contention in the Municipal
Court, DUMLAO, in his Answer, admitted the encroachment but alleged, in the main,
that the present suit is barred by res judicata by virtue of the Decision of the
Municipal Court, which had become final and executory.
After the case had been set for pre-trial, the parties submitted a Joint Motion for
Judgment based on the Stipulation of Facts attached thereto. Premised thereon, the
Trial Court on October 31, 1974, issued the assailed Order, decreeing:
“WHEREFORE, the Court finds and so holds that the thirty four (34) square meters
subject of this litigation is part and parcel of Lot 685 of the Cadastral Survey of
Dumangas of which the plaintiff is owner as evidenced by Transfer Certificate of Title
No. 3087 and such plaintiff is entitled to possess the same.
“Without pronouncement as to costs.
PROPERTY FIFTH SET |6
“SO ORDERED.”
Rebutting the argument of res judicata relied upon by DUMLAO, DEPRA claims that
the Decision of the Municipal Court 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 Courts of First Instance.
Addressing ourselves to the issue of validity of the Decision of the Municipal Court,
we hold the same to be null and void. The judgment in a detainer case is effective in
respect of possession only (Sec. 7, Rule 70, Rules of Court).1 The Municipal Court
overstepped its bounds when it imposed upon the parties a situation of “forced
lease”, which like “forced co-ownership” is not favored in law. Furthermore, a lease is
an interest in real property, jurisdiction over which belongs to Courts of First Instance
(now Regional Trial Courts) (Sec. 44(b), Judiciary Act of 1948;2 Sec. 19 (2) Batas
Pambansa Blg. 129).3 Since the Municipal Court, acted without jurisdiction, its
Decision was null and void and cannot operate as res judicata to the subject
complaint for Queting of Title. Besides, even if the Decision were valid, the rule on
res judicata would not apply due to difference in cause of action. In the Municipal
Court, the cause of action was the deprivation of possession, while in the action to
quiet title, the cause of action was based on ownership. Furthermore, Sec. 7, Rule 70
of the Rules of Court explicitly provides that judgment in a detainer case “shall not
bar an action between the same parties respecting title to the land.”4
Conceded In the Stipulation of Facts between the parties is that DUMLAO was a
builder in good faith. Thus,
“8. That the subject matter in the unlawful detainer case, Civil Case No. 1, before the
Municipal Court of Dumangas, Iloilo involves the same subject matter in the present
case, the Thirty-four (34) square meters portion of land and built thereon in good
faith is a portion of defendant’s kitchen and has been in the possession of the
defendant since 1952 continuously up to the present; x x x.” (Italics ours)
Consistent with the principle that our Court system, like any other, 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, thereby, chosen a
legal formula to resolve their dispute—to apply 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. Hence, we shall refrain from further examining whether the factual situations of
DUMLAO and DEPRA conform to the juridical positions respectively defined by law,
for a “builder in good faith” under Article 448, a “possessor in good faith” under
Article 526 and a “landowner in good faith” under Article 448.
In regards to builders in good faith, Article 448 of the Civil Code provides:

“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.” (Paragraphing
supplied)
Pursuant to the foregoing provision, 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,5 as he had manifested before the
Municipal Court. But that manifestation is not binding because it was made in a void
proceeding.
However, the good faith of DUMLAO is part of the Stipulation of Facts in the Court of
First Instance. It was thus 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.6
In this case, DUMLAO had expressed his willingness to pay for the land, but DEPRA
refused to sell.
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. But he cannot, as respondents here did 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 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
(italics ours).
PROPERTY FIFTH SET |7
“We hold, therefore, that the order of Judge Natividad compelling defendants-
petitioners to remove their buildings from the land belonging to plaintiffs-respondents
only because the latter chose neither to pay for such buildings nor to sell the land, is
null and void, for it amends substantially the judgment sought to be executed and is,
furthermore, offensive to articles 361 (now Article 448) and 453 (now Article 546) of
the Civil Code, (Ignacio vs. Hilario, 76 Phil. 605, 608 [1946]).”
A word anent the philosophy behind Article 448 of the Civil Code.
The original provision was found in Article 361 of the Spanish Civil Code, which
provided:
“ART. 361. The owner of land on which anything has been built, sown or planted in
good faith, shall have the right to appropriate as his own the work, sowing or
planting, after the payment of the indemnity stated in Articles 453 and 454, or to
oblige the one who built or planted to pay the price of the land, and the one who
sowed, the proper rent.”
As will be seen, the Article favors the owner of the land, by giving him one of the two
options mentioned in the Article. Some commentators have questioned the
preference in favor of the owner of the land, but Manresa’s opinion is that the Article
is just and fair.
“. . . es justa la facultad que el codigo da al dueño del suelo en el articulo 361, en el
caso de edificacion o plantacion? Algunos coinentaristas la conceptuan injusta, y
como un extraordinario privilegio en favor de la propiedad territorial. Entienden que
impone el Codigo una pena al poseedor de buena fe; y como advierte uno de los
comentaristas aludidos, ‘no se veclaroelpor que de tal pena . . . alobligar al que obro
de buena fe a quedarse con el edificio o plantacion, previo el pago del terreno que
ocupa, porque si bien es verdad que cuando edifico o planto demostro con este
hecho, que queria para si el edificio o plantio, tambien lo es que el que edifico o
planto de buena fe lo hizo en la erronea inteligencia de creerse dueño del terreno.
Posible es que, de saber lo contrario, y de tener noticia de que habia que comprar y
pagar el terreno, no se hubiera decidido a plantar ni a edificar. La ley, obligandole a
hacerlo, fuerza su voluntad, y la fuerza por un hecho inocente de que no debe ser
responsable’. Asi podra suceder; pero la realidad es que con ese hecho voluntario,
aunque sea inocente, se ha enriquecido torticeramente con perjuicio de otro a quien
es justo indemnizarle.
“En nuestra opinion, el Codigo ha resuelto el conflicto de la manera mas justa y
equitativa, y respetando en lo posible el principio que para la accesion se establece
en el art. 358.”7

Our own Code Commission must have taken account of the objections to Article 361
of the Spanish Civil Code. Hence, the Commission provided a modification thereof,
and Article 448 of our Code has been made to provide:
“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.”
Additional benefits were extended to the builder but the landowner retained his
options.
The fairness of the rules in Article 448 has also been explained as follows:
“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. (3
Manresa 213; Bernardo vs. Bataclan, 37 Off. Gaz. 1382; Co Tao vs. Chan Chico, G.R.
No. 49167, April 30, 1949; Article applied: see Cabral, et al. vs. Ibanez [S.C.] 52 Off.
Gaz. 217; Marfori vs. Velasco, [C.A.] 52 Off. Gaz. 2050).”8
WHEREFORE, the judgment of the trial Court is hereby set aside, and this case is
hereby ordered remanded to the Regional Trial Court of 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 84 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
PROPERTY FIFTH SET |8
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
Regional Trial Court 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 the law (Article 448, Civil Code), whether to appropriate the
kitchen as his own by paying to DUMLAO either the amount of the expenses spent by
DUMLAO for the building of the kitchen, or the increase in value (“plus value”) which
the said area of 34 square meters may have acquired by reason thereof, or to oblige
DUMLAO to pay the price of said area. The amounts to be respectively paid by
DUMLAO and DEPRA, 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 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, as
found by the trial Court, 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 Ten Pesos
(P10.00) 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 Decision shall be inextendible, and
upon failure of the party obliged to tender to the trial Court the amount due to the
 PROPERTY FIFTH SET |9

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.
No costs.
SO ORDERED.

Teehankee, Actg. C.J., Plana, Relova De la Fuente and Alampay, JJ., concur.

Gutierrez, Jr.,** J., took no part.

Judgment set aside and case remanded to Regional Trial Court for further
proceedings.

Notes.—Article 448, New Civil Code, 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 dower
is that of a holder, such as a tenant. (Alburo vs. Villanueva, 7 Phil. 277; De Laureano
vs. Adil, 72 SCRA 148; Eloreza vs. Evangelista, 96 SCRA 130.) The rule stated in
Article 526, that a possessor in good faith is one who has no knowledge of any flaw
or defect in his title or mode of acquisition, should be applied in determining whether
the builder, planter, or sower acts in good faith. Good faith consists in the belief of
the builder, planter or sower that the land is his, or that by some title he has a right
to build, plant or sow thereon. Good faith is presumed, under Article 527, and he who
alleges bad faith has the burden of proving such bad faith, (3 Manreza 209.)

——o0o——

_______________

** Mr. Justice Hugo E. Gutierrez, Jr. took no part, having been one of the two
members of a Court of Appeals’ Division of Five Justices who dissented from the
majority opinion certifying this case to this Court. Depra vs. Dumlao, 136 SCRA 475,
No. L-57348 May 16, 1985

[No. L-12812. September 29, 1959.]
FILIPINAS COLLEGES, INC., plaintiff and appellee, vs. MARIA GARCIA
TIMBANG, ET AL., defendants.
[No. L-12813. September 29, 1959]
MARIA GARCIA TIMBANG, ET AL., plaintiffs. MARIA GARCIA TIMBANG, plaintiff and
appellant, vs. MARIA GERVACIÓ BLAS, defendant and appellee.
1.ACCESSION; RlGHTS OF LANDOWNER AND BUILDER; FAILURE OF BUILDER IN
GOOD FAITH TO PAY VALUE OF LAND WHEN SUCH IS DEMANDED BY THE
LANDOWNER.—Under the terms of Articles 448 and 546 of the Civil Code, it is true
that the owner of the land has the right to choose between appropriating the building
by reimbursing the builder of the value thereof or compelling the builder in good faith
to pay for his land. Even this second right cannot be exercised if the value of the land
is considerably more than that of the building. In addition to the right of the builder
to be paid the value of his improvement, Article 546 gives him the corollary right of
retention of the property until he is indemnified by the owner of the land. There is
nothing in the language of these two articles which would justify the conclusion that,
upon the failure of the builder to pay the value of the land, when such is demanded
by the landowner, the latter becomes automatically the owner of the improvement
under Article 445 of the Civil Code.
2.ID.; ID.; ID.; REMEDY OF PARTIES.—Where, as in the present case, the builder in
good faith fails to pay the value of the land when such is demanded by the
landowner, the parties may resort to the following remedies: (1) The parties may
decide to leave things as they are and assume the relation of lessor and lessee, and
should they disagree as to the amount of rental, then they can go to the court to fix
that amount (Miranda vs. Fadullon, -et al., 51 Off. Gaz., 6226); (2) Should the parties
not agree to assume the relation of lessor and lessee, the owner of the land is
entitled to have the improvement removed (Ignacio vs. Hilario, 76 Phil., 605); and (3)
The land and the improvement may be sold at public auction, applying the proceeds
thereof first to the payment of the value of the land and the excess, if any, to be
delivered to the owner of the improvement in payment thereof (Bernardo vs.
Bataclan, 66 Phil., 590).
3.ID.; ID.; ID.; EXECUTION SALE; WHERE PURCHASER IS THE JUDGMENT
CREDITOR; CASH PAYMENT OF BID, WHEN REQUIRED.—Appellants, owners of the
land, instead of electing any of the alternatives above indicated, chose to seek
recovery of the value of their land by asking for a writ of execution; levying on the
house of the builder; and selling the same in public auction. And because they are
the highest bidder, they now claim they acquired title to the building without
necessity of paying in cash on account of their bid. Held: While it is the invariable
practice that where the successful bidder is the execution creditor himself, he need
P R O P E R T Y F I F T H S E T | 10
not pay down the amount of the bid if it does not exceed the amount of his
judgment, nevertheless, when there is a claim by a third-party, to the proceeds of the
sale superior to his judgment credit, the execution creditor, as successful bidder,
must pay in cash the amount of his bid, as a condition precedent to the issuance to
him of the certificate of sale. In the instant case, the Court of Appeals has already
adjudged that appellee is entitled to the payment of the unpaid balance of the
purchase price of the school building. Appellee's claim is, therefore, not a mere
preferred credit, but is actually a lien on the school building as specifically provided in
Article 2242 of the new Civil Code. As such, it is superior to the claim of the
appellants, insofar as the proceeds of the sale of said school building are concerned.
The order of the lower court directing the appellants, as successful bidders, to pay in
cash the amount of their bid is, therefore, correct.
APPEAL from an order of the Court of First Instance of Manila. Enriquez, J.
The facts are stated in the opinion of the Court.
De Guzmán & Fernández for appellee Filipinas Colleges, Inc.
San Juan, Africa & Benedicto f or appellant Maria García Timbang.
Nicanor S. Sison for appellee Maria Gervacio Blas.
BARRERA, J.:
This is an appeal taken from an order of the Court of First Instance of Manila dated
May 10, 1957 (a) declaring the Sheriff's certificate of sale covering a school building
sold at public auction null and void unless within 15 days from notice of said order
the successful bidders, defendantsappellants spouses Maria García Timbang and
Marcelino Timbang, shall pay to appellee Maria Gervacio Blas directly or through the
Sheriff of Manila the sum of P5,750.00 that the spouses Timbang had bid for the
building at the Sheriff's sale; (b) declaring the other appellee Filipinas Colleges, Inc.
owner of 24,500/3,285,934 undivided interest in Lot No. 2-a covered by certificate of
title No. 45970, on which the building sold in the auction sale is situated; and (c)
ordering the sale in public auction of the said undivided interest of the Filipinas
Colleges, Inc. in lot No. 2-a aforementioned to satisfy the unpaid portion of the
judgment in favor of appellee Blas and against Filipinas Colleges, Inc. in the amount
of P8,200.00 minus the sum of P5,750.00 mentioned in (a) above.
The order appealed from is the result of three motions filed in the court a quo in the
course of the execution of a final judgment of the Court of Appeals rendered in 2
cases appealed to it in which the spouses Timbang, the Filipinas Colleges, Inc. and

Maria Gervacio Blas were the parties. In that judgment of the Court of Appeals, the
respective rights of the litigants have been adjudicated as follows:
(1) Filipinas Colleges, Inc. was declared to have acquired the rights of the spouses
Timbang in and to lot No. 2-a mentioned above and in consideration thereof, Filipinas
Colleges, Inc. was ordered to pay the spouses Timbang the amount of P15,807.90
plus such other amounts which said spouses might have paid or had to pay after
February, 1953, to Hoskins & Co., Inc., agent of the Urban Estates, Inc., original
vendor of the lot. Filipinas Colleges, Inc. was required to deposit the total amount
with the court within 90 days after the decision shall have become final.
(2) Maria Gervacio Blas was declared to be a builder in good faith of the school
building constructed on the lot in question and entitled to be paid the amount of
P19,000.00 for the same. Filipinas Colleges, Inc., purchaser of the said building was
ordered to deliver to Blas stock certificate (Exh. C) for 108 shares of Filipinas
Colleges, Inc. with a par value of P10,800.00 and to pay Blas the sum of P8,200.00
representing the unpaid balance of the purchase price of the house.
(3) In case Filipinas Colleges, Inc. failed to deposit the value of the land, which after
liquidation was fixed at P32,859.34, within the 90-day period set by the court,
Filipinas Colleges would lose all its rights to the land and the spouses Timbang would
then become the owners thereof. In that eventuality, the Timbangs would make
known to the court their option under Art. 448 of the Civil Code whether they would
appropriate the building in question, in which even they would have to pay Filipinas
Colleges, Inc. the sum of P19,000.00, or would compel the latter to acquire the land
and pay the price thereof.
Filipinas Colleges, Inc. having failed to pay or deposit the sum of P32,859.34 within
the time prescribed, the spouses Timbang, in compliance with the judgment of the
Court of Appeals, on September 28, 1956, made known to the court their decision
that they had chosen not to appropriate the building but to compel Filipinas Colleges,
Inc., to acquire the land and pay them the value thereof. Consequently, on December
29, 1956, the Timbang spouses asked for an order of execution against Filipinas
Colleges, Inc. for the payment of the sum of P32,859.34. The motion having been
granted, a writ of execution was issued on January 8, 1957.
On January 16, 1957, appellee Blas in turn filed a motion for execution of her
judgment of P8,200.00 representing the unpaid portion of the price of the house sold
to Filipinas Colleges, Inc. Over the objection of the Timbangs, the court granted the
motion and the corresponding writ of execution was issued on January 30, 1957.
Even before the actual issuance of this writ, or on January 19, 1957, date of the
granting of the motion for execution, Blas through counsel, sent a letter to the Sheriff
of Manila advising him of her preferential claim or lien on the house to satisfy the
unpaid balance of the purchase price thereof under Article 2242 of the Civil Code, and
to withhold from the proceed of the auction sale the sum of P8,200.00. Levy having
been made on the house in virtue of the writs of execution, the Sheriff of Manila on
P R O P E R T Y F I F T H S E T | 11
March 5, 1957, sold the building in public auction in favor of the spouses Timbang, as
the highest bidders, in the amount of P5,750.00. Personal properties of Filipinas
Colleges, Inc. were also auctioned for P245.00 in favor of the spouses Timbang.
As a result of these actuations, three motions were subsequently filed before the
lower court:
(1) By appellee Blas, praying that the Sheriff of Manila and/or the Timbang spouses
be ordered to pay and deliver to her the sum of P5,750.00 representing the proceeds
of the auction sale of the building of Filipinas Colleges, Inc. over which she has a lien
of P8,200.00 for the unpaid balance of the purchase price thereof;
(2) Also by the appellee Blas, praying that there being still two unsatisfied executions,
one for the sum of P32,859.34 in favor of the Timbang spouses, and another, for the
sum of P8,200.00 in her favor, the land involved, Lot No. 2-a, be sold at public
auction; and
(3) By Filipinas Colleges, Inc., praying that because its properties, the house and
some personal properties, have been auctioned for P5,750.00 and P245.00
respectively in favor of the Timbang spouses who applied the proceeds to the partial
payment of the sum of P32,859.34, value of the land, Lot No. 2-a, it (Filipinas
Colleges, Inc.) be declared part owner of said lot to the extent of the total amount
realized from the execution sales of its properties.
The Timbang spouses presented their opposition to each and all of these motions.
After due hearing the lower court rendered its resolution in the manner indicated at
the beginning of this decision, from which the Timbangs alone have appealed.
In assailing the order of the court a quo directing the appellants to pay appellee Blas
the amount of their bid (P5,750.00) made at the public auction, appellants' counsel
has presented a novel, albeit ingenious, argument. It is contended that because the
builder in good faith has failed to pay the price of the land after the owners thereof
exercised their option under Article 448 of the Civil Code, the builder lost his right of
retention provided in Article 546 and by operation of Article 445, the appellants as
owners of the land automatically became the owners of the building. And since they
are the owners ipso facto, the execution sale of the house in their favor was
superflous. Consequently, they are not bound to make good their bid of P5,750.00 as
that would be to compel them to pay for their own property. By the same token, Blas'
claim for preference on account of the unpaid balance of the purchase price of the
house does not apply because preference applies only with respect to the property of
the debtor, and the Timbangs, owners of the house, are not the debtors of Blas.
This Court cannot accept this oversimplification of appellants' position. Articles 448
and 546 of the Civil Code, defining the rights of the parties in case a person in good
faith builds, sows or plants on the land of another, respectively provides:

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.
Under the terms of these articles, it is true that the owner of the land has the right to
choose between appropriating the building by reimbursing the builder of the value
thereof or compelling the builder in good faith to pay for his land. Even this second
right cannot be exercised if the value of the land is considerably more than that of
the building. In addition to the right of the builder to be paid the value of his
improvement, Article 546 gives him the corollary right of retention of the property
until he is indemnified by the owner of the land. There is nothing in the language of
these two articles, 448 and 546, which would justify the conclusion of appellants that,
upon the failure of the builder to pay the value of the land, when such is demanded
by the land-owner, the latter becomes automatically the owner of the improvement
under Article 445. The case of Bernardo vs. 'Bataclan, 66 Phil., 590 cited by
appellants is no authority for this conclusion. Although it is true it was declared
therein that in the event of the failure of the builder to pay the land, after the owner
thereof has chosen this alternative, the builder's right of retention provided in Article
546 is lost, nevertheless there was nothing said that as a consequence thereof, the
builder loses entirely all rights over his own building. The question is: what is the
recourse or remedy left to the parties in such eventuality where the builder fails to
pay the value of the land? While the Code is silent on this point, guidance may be
derived from the decisions of this Court in the cases of Miranda vs. Fadullon, et al.,
97 Phil., 801; 51 Off. Gaz., [12] 6226; Ignacio vs. Hilario, 76 Phil., 605 and the cited
case of Bernardo vs. Bataclan, supra.
In the first case, this Court has said:
"A builder in good faith may not be required to pay rentals. He has a right to retain
the land on which he has built in good faith until he is reimbursed the expenses
P R O P E R T Y F I F T H S E T | 12
incurred by him. Possibly he might be made to pay rental only when the owner of the
land chooses not to appropriate the improvement and requires the builder in good
faith to pay for the land but that the builder is unwilling or unable to pay the land,
and then they decide to leave things as they are and assume the relation of lessor
and lessee, and should they disagree as to the amount of rental then they can go to
the court to fix that amount". (Italics supplied).
Should the parties not agree to leave things as they are and to assume the relation of
lessor and lessee, another remedy is suggested in the case of Ignacio vs. Hilario,
supra, wherein the court has ruled that the owner of the land is entitled to have the
improvement removed when after having chosen to sell his land to the other party,
i.e., the builder in good faith fails to pay for the same. A further remedy is indicated
in the case of Bernardo vs. Bataclan, supra, where this Court approved the sale of the
land and the improvement in a public auction applying the proceeds thereof first to
the payment of the value of the land and the excess, if any, to be delivered to the
owner of the house in payment thereof.
The appellants herein, owners of the land, instead of electing any of the alternatives
above indicated chose to seek recovery of the value of their land by asking for a writ
of execution; levying on the house of the builder; and selling the same in public
auction. And because they are the highest bidder in their own auction sale, they now
claim they acquired title to the building without necessity of paying in cash on
account of their bid. In other words, they in effect pretend to retain their land and
acquire the house without paying a cent therefor.
This contention is without merit. This Court has already held in Matias vs. The
Provincial Sheriff of Nueva Ecija (74 Phil., 326) that while it is the invariable practice,
dictated by common sense, that where the successf ul bidder is the execution creditor
himself, he need not pay down the amount of the bid if it does not exceed the
amount of his judgment, nevertheless, when there is a claim by a third-party, to the
proceeds of the sale superior to his judgment credit, the execution creditor, as
successful bidder, must pay in cash the amount of his bid as a condition precedent to
the issuance to him of the certificate of sale. In the instant case, the Court of Appeals
has already adjudged that appellee Blas is entitled to the payment of the unpaid
balance of the purchase price of the school building. Blas' claim is therefore not a
mere preferred credit, but is actually a lien on the school building as specifically
provided in Article 2242 of the new Civil Code. As such, it is superior to the claim of
the Timbangs insofar as the proceeds of the sale of said school building are
concerned. The order of the lower court directing the Timbang spouses, as successful
bidders, to pay in cash the amount of their bid in the sum of P5,750.00 is therefore
correct.
 P R O P E R T Y F I F T H S E T | 13

With respect to the order of the court declaring appellee Filipinas Colleges, Inc. part
owner of the land to the extent of the value of its personal properties sold at public
auction in favor of the Timbangs, this Court likewise finds the same as justified, for
such amount represents, in effect, a partial payment of the value of the land. If this
resulted in the continuation of the so-called involuntary partnership questioned by the
appellants, it was due to their own action. As appellee Blas still has an unsatisfied
judgment representing the difference between P8,200.00—the unpaid balance of the
purchase price of the building and the sum of P5,750.00—amount to be paid by the
Timbangs, the order of the court directing the sale of such undivided interest of the
Filipinas Colleges, Inc. is likewise justified to satisfy the claim of the appellee Blas.

Considering that the appellant spouses Marcelino Timbang and Maria García Timbang
may not voluntarily pay the sum of P5,750.00 as ordered, thereby further delaying
the final termination of this case, the first part of the dispositive portion of the order
appealed from is modified in the sense that upon failure of the Timbang spouses to
pay to the sheriff or to Maria Gervacio Blas said sum of P5,750.00 within fifteen (15)
days from notice of the final judgment, an order of execution shall issue in favor of
Maria Gervasio Blas to be levied upon all properties of the Timbang spouses not
exempt from execution for the satisfaction of the said amount.

In all other respects, the appealed order of the court a quo is hereby affirmed, with
costs against the appellants.

It is so ordered.

Parás, C. J., Bengzon, Padilla, Montemayor, Bautista Angelo, Labrador, Concepción,

and Endencia, JJ., concur.

Order affirmed with modification. Filipinas Colleges, Inc. vs. Garcia Timbang, et al.,
106 Phil. 247, No. L-12812, No. L-12813 September 29, 1959

No. L-57288. April 30, 1984.*
LEONILA SARMIENTO, petitioner, vs. HON. ENRIQUE A. AGANA, District
Judge, Court of First Instance of Rizal, Seventh Judicial District, Branch
XXVIII, Pasay City, and SPOUSES ERNESTO VALENTINO and REBECCA
LORENZO-VALENTINO, respondents.
Property; Price fixed by the court on value of land of petitioner and building
constructed by private respondent not done with abuse of discretion.—In regards to
the 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
P30,000.00 to P40,000.00. The Municipal Court chose to assess its value at
P20,000.00, or below the minimum testified by ERNESTO, while the Court of First
Instance chose the maximum of P40,000.00. In the latter case, it cannot be said that
the Court of First Instance had abused its discretion.
Same; The landowner on which a building has been constructed in good faith by
another has the option to buy the building or sell his land to the builder, he cannot
refuse to exercise either option.—The challenged decision of respondent Court based
on valuations of P25,000.00 for the LAND and P40,000.00 for the RESIDENTIAL
HOUSE, cannot be viewed as not supported by the evidence. The provision for the
exercise by petitioner SARMIENTO of either the option to indemnify private
respondents in the amount of P40,000.00, or the option to allow private respondents
to purchase the LAND at P25,000.00, in our opinion, was a correct decision.
Same; Same.—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. But he cannot, as
respondents here did, 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. (italics ours)
PETITION for certiorari to review the decision of the Court of First Instance of Pasay
City.
The facts are stated in the opinion of the Court.
Mercedes M. Respicio for petitioner.
Romulo R. Bobadilla for private respondents.
P R O P E R T Y F I F T H S E T | 14
MELENCIO-HERRERA. J.:
This Petition for Certiorari questions a March 29, 1979 Decision rendered by the then
Court of First Instance of Pasay City. The Decision was one made on memoranda,
pursuant to the provisions of RA 6031, and it modified, on October 17, 1977, a
judgment of the then Municipal Court of Parañaque, Rizal, in an Ejectment suit
instituted by herein petitioner Leonila SARMIENTO against private respondents, the
spouses ERNESTO Valentino and Rebecca Lorenzo. For the facts, therefore, we have
to look to the evidence presented by the parties at the original level.
It appears that while ERNESTO was still courting his wife, the latter’s mother had told
him the couple could build a RESIDENTIAL HOUSE on a lot of 145 sq. ms., being Lot
D of a subdivision in Parañaque (the LAND, for short). In 1967, ERNESTO did
construct a RESIDENTIAL HOUSE on the LAND at a cost of P8,000.00 to P10,000.00.
It was probably assumed that the wife’s mother was the owner of the LAND and that,
eventually, it would somehow be transferred to the spouses.
It subsequently turned out that the LAND had been titled in the name of Mr. & Mrs.
Jose C. Santos, Jr. who, on September 7, 1974, sold the same to petitioner
SARMIENTO. The following January 6, 1975, SARMIENTO asked ERNESTO and wife
to vacate and, on April 21, 1975, filed an Ejectment suit against them. In the
evidentiary hearings before the Municipal Court, SARMIENTO submitted the deed of
sale of the LAND in her favor, which showed the price to be P15,000.00. On the other
hand, ERNESTO testified that the then cost of the RESIDENTIAL HOUSE would be
from P30,000.00 to P40,000.00. The figures were not questioned by SARMIENTO.
The Municipal Court found that private respondents had built the RESIDENTIAL
HOUSE in good faith, and, disregarding the testimony of ERNESTO, that it had a
value of P20,000.00, It then ordered ERNESTO and wife to vacate the LAND after
SARMIENTO has paid them the mentioned sum of P20,000.00.
The Ejectment suit was elevated to the Court of First Instance of Pasay where, after
the submission of memoranda, said Court 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 P40,000.00 as the value of the
RESIDENTIAL HOUSE, or the option to allow them to purchase the LAND for
P25,000.00. SARMIENTO did not exercise any of the two options within the indicated
period, and ERNESTO was then allowed to deposit the sum of P25,000.00 with the
Court as the purchase price for the LAND. This is the hub of the controversy.
SARMIENTO then instituted the instant Certiorari proceedings.
We agree that 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. In regards to builders in good faith, Article 448 of the Code provides:
“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.” (Paragraphing
supplied)
The value of the LAND, purchased for P15,000.00 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 P25,000.00 valuation determined by the Court of First Instance.
In regards to the 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
P30,000.00 to P40,000.00. The Municipal Court chose to assess its value at
P20,000.00, or below the minimum testified by ERNESTO, while the Court of First
Instance chose the maximum of P40,000.00. In the latter case, it cannot be said that
the Court of First Instance had abused its discretion.
The challenged decision of respondent Court, based on valuations of P25,000.00 for
the LAND and P40,000.00 for the RESIDENTIAL HOUSE, cannot be viewed as not
supported by the evidence. The provision for the exercise by petitioner SARMIENTO
of either the option to indemnify private respondents in the amount of P40,000.00, or
the option to allow private respondents to purchase the LAND at P25,000.00, in our
opinion, was a correct decision.
“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. But he cannot, as respondents here did, refuse
both to pay for the building and to sell the land and compel the owner of the building
P R O P E R T Y F I F T H S E T | 15
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.
(italics ours) “We hold, therefore, that the order of Judge Natividad compelling
defendants-petitioners to remove their buildings from the land belonging to plaintiffs-
respondents only because the latter chose neither to pay for such buildings nor to sell
the land, is null and void, for it amends substantially the judgment sought to be
executed and is, furthermore, offensive to articles 361 (now Article 448) and 453
(now Article 546) of the Civil Code.” (Ignacio vs. Hilario, 76 Phil. 605, 608 [1946]).
WHEREFORE, the Petition for Certiorari is hereby ordered dismissed, without
pronouncement as to costs.
SO ORDERED.
Teehankee (Chairman), Plana, Relova, Gutierrez, Jr. and De la Fuente, JJ., concur.
Petition dismissed.
Notes.—A building, like a warehouse, is always an immovable property under the Civil
Code. Separate treatment by the parties of the building from the land in which it
stands does not change the immovable character of said building. (Punzalan, Jr. vs.
Vda. de Lacsamana, 121 SCRA 331.)
Batas 25 did not intent to prevent bona fide sales from owners/lessors who wish to
dispose of their property to third persons. Giving preferential right to a tenant over
and above a new owner’s need of the premises for his use and that of his family
constitutes an impairment of the new owner’s liberty of abode. (Barasi vs. C.A., 125
SCRA 798.)
A parcel of land sold to a Chinese citizen which the latter subsequently sold to a
Filipino citizen can no longer be recovered by the vendor. (Godinez vs. Fong Pak
Luen, 120 SCRA 223.)
The essence of the bona fide or good faith lies in honest belief in the validity of one’s
right, ignorance of a superior claim, and absence of intention to overreach another.
(Negrete vs. CFI of Marinduque, 48 SCRA 113.)
When the party in physical possession of land acknowledges in a public document the
ownership thereof in another, it follows that the latter has, as of that time, come to
be in constructive possession of said land thru the former. (Viacrusis vs. Court of
Appeals, 44 SCRA 176.) Sarmiento vs. Agana, 129 SCRA 122, No. L-57288 April 30,
1984

BARTOLOME ORTIZ, petitioner, vs. HON. UNION C. KAYANAN, in his
capacity as Judge of the Court of First Instance of Quezon, Branch IV;
ELEUTERIO ZAMORA, QUIRINO COMINTAN, VICENTE FERRO, AND
GREGORIO PAMISARAN, respondents.
Civil Law; Property; Possessor in Good Faith; Rights of a possessor in good faith;
When does possession in good faith legally interrupted.—There is no question that a
possessor in good faith is entitled to the fruits received before the possession is
legally interrupted. Possession in good faith ceases or is legally interrupted from the
moment defects in the title are made known to the possessor, by extreneous
evidence or by the filing of an action in court by the true owner for the recovery of
the property. Hence, all the fruits that the possessor may receive from the time he is
summoned in court, or when he answers the complaint, must be delivered and paid
by him to the owner or lawful possessor.
Same; Same; Same; Same; Right of retention of a possessor in good faith until
reimbursement of his expenses on the land; Nature of the right.—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, or for the enhancement of its utility or productivity. 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, 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 obtaining compensation for the debt.
Same; Same; Same; Same; Right of retention of a possessor in good faith analogous
to a contract of antichresis.—The right of retention in this case is analogous to a
contract of antichresis and it can 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.
P R O P E R T Y F I F T H S E T | 16
Same; Same; Same; Same; Right of retention of a possessor in good faith analogous
to pledge as to movable property and antichresis as to immovable property.—
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 property
held is immovable. 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.
Same; Same; Same; Same; Right of retention of a possessor in good faith is used by
means of extinguishing the obligation.—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 reten-cion, lo hemos dicho, es el derecho de prenda o el de anticresis
constitutido por la ley con independencia de la voluntad de las partes.” 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. 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 the
payment of the interest, if owing, and thereafter to the principal of his credit. The
debtor can not reacquire enjoyment of the immovable until he has actually paid what
he owes the creditor.
Same; Same; Appropriation by possessor of property of the fruits for his exclusive
benefit after confirmation of award of property to another in a judgment not allowed;
Duty of claimant of property of accounting of the tolls collected.—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 principal 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.
Same; Same; Obligations; Joint Liability; Presumption when two persons are liable
under a contract or judgment and no mention of the specific liability of each for the
entire obligation.—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. The judgment debt of
P13,632.00 should, therefore, be pro-rated in equal shares to Comintan and Zamora.
ORIGINAL ACTION in the Supreme Court. Certiorari and prohibition with preliminary
injunction.
The facts are stated in the opinion of the Court.
Salonga, Ordoñez, Yap, Sicat & Associates and Salvador, Ulgado & Carbon for
petitioner.
Jose A. Cusi for private respondents.
ANTONIO, J.:
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.
I announced by the Bureau of Lands, Manila. However, should plaintiff Bartolome Ortiz
The factual background of the case, as found by respondent Court, is as follows:
“* * * The lot in controversy was formerly the subject of Homestead Application No.
122417 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,
P R O P E R T Y F I F T H S E T | 17
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 oreder 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:
“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
be not declared the successful bidder thereof, defendants Quirino Comintan and
Eleuterio Zamora are odered 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 against 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 petition 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:
“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
P R O P E R T Y F I F T H S E T | 18
Acting upon the foregoing motion, respondent Judge issued an Order, dated
September 23, 1970, stating, among others, the following:
“The records further disclosed that from March 1967 to December 31, 1968, plaintiff
Bartolome Ortiz collected tolls on a portion of the property in question wherein he has
not introduced any improvement particularly 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.
*** *** ***
“In virtue of the 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.
*** *** ***
“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 in its findings that
said tolls belong to the defendants, considering that the same were collected on a

portion of the land in 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 defen-
dants, 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 the decision of this
Court retroactive from March 22, 1966 although pending appeal its implementation
was suspended, it is our honest conviction, therefore, that the putting up of a bond
by the defendants 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 pro perty,
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, in part, the following:
“But should there be found any amount collectible after accounting and deducting the
amount of P13,632.00, 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-mentioned 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
P R O P E R T Y F I F T H S E T | 19
On October 12, 1970, petitioner filed a Motion for Reconsideration of the aforesaid
Order and Writ of Execution, alleging:
“(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. Said Order states, in part:
“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, 1970
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 public 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, unaffected 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 the 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 Eleuteria Zamora had already been
recognized and fully 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 petitioner’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
P R O P E R T Y F I F T H S E T | 20
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 Supplemental 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 con-signation 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 P13,682.00 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
properkty but 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 obtaining compensation for the debt. The right of
retention in this case is analogous to a contract of antichresis and it can 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
P R O P E R T Y F I F T H S E T | 21
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 for 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 retención, lo hemos dicho,
es el derecho de prenda o el de anticresis constituido por la ley con independencia de
la voluntad 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 the 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 principal 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 successfulbidder, 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.
Barredo (Chairman), Concepcion, Jr., and Guerrero, JJ., concur.
Aquino, J., in the result.
Santos and Abad Santos, JJ., are on official leave.
Guerrero, J., was designated to sit in the Second Division
Order modified.
Notes.—Where a person sells land and thereafter obtains title to it thru fraudulent
misrepresentations, he is deemed to hold it in trust for the benefit of the person
prejudiced by it, and the action for reconveyance of the property prescribes after the
lapse of ten years. (Gonzales vs. Jimenez, 13 SCRA 80).
P R O P E R T Y F I F T H S E T | 22
One cannot recognize the right of another and at the same time claim adverse
possession which can ripen to ownership, thru acquisitive prescription. For
prescription to set in, the possession must be adverse, continuous, public and to the
exclusion of all. (Corpus vs. Padilla, 5 SCRA 814).
Good faith must rest on a colorable right in the builder, beyond a mere stubborn
belief in one’s title despite judicial adjudication. (Baltazar vs. Caridad, 17 SCRA 460).
A writ of possession is illegal where, in a mere suit for prohibition, the lower court
declared a person to be the absolute owner of a parcel of land. (Magallanes vs.
Sarita, 18 SCRA 575).
Rule that possessor in good faith entitled to reimbursement of necessary and useful
expenses incurred by him and with light of retention is not applicable to lessee who
construct building in the belief that he was the owner thereof. (Laureano vs. Adil, 72
SCRA 148).
Under Article 559 of the new Civil Code, the title of the possessor in good faith is not
that of ownership, but is merely a presumptive title sufficient to serve as a basis for
acquisitive prescription, that the clause immediately following provides that “one who
has lost any movable or has been unlawfully deprived thereof, may recover it from
the person in possession of the same. (De Garcia vs. Court of Appeals, 37 SCRA 129).
The essence of the bona fide or good faith lies in honest belief in the validity of one’s
right, ignorance of a superior claim, and absence of intention to over reach another.
(Negrete vs. Court of First Instance of Marinduque, 48 SCRA 113).
Where the party in physical possession of the land acknowledges in a public
document the ownership thereof in another, it follows the latter has, as of that time,
come to be in constructive possession of the said land thru the former. (Viacrusis vs.
Court of Appeals, 44 SCRA 176). Ortiz vs. Kayanan, 92 SCRA 146, No. L-32974 July
30, 1979

MARIANO FLOREZA, petitioner, vs. MARIA D. de EVANGELISTA and SERGIO
EVANGELISTA, respondents.
Civil Law; Builder in good faith, not a case of; Applicability of Art 448 of the Civil
Code.—We uphold the Court of Appeals in its conclusion that Article 448 of the Civil
Code is inapplicable to the factual milieu herein. Said codal provision applies only
when the builder, planter, or sower believes he has the right so to build, plant or sow
because he thinks he owns the land or believes himself to have a claim of title. In this
case, petitioner makes no pretensions of ownership whatsoever.
Same; Same; Rights of a person who made useful improvements on the lot of
another before effectivity of the pacto de retro sale of the lot; Rights akin to those of
the usufructuary.—Since petitioner cannot be classified as a builder in good faith
within the purview of Article 448 of the Civil Code, nor as a vendee a retro, who
made useful improvements during the lifetime of the pacto de retro, petitioner has no
right to reimbursement of the value of the house which he had erected on the
residential lot of the EVANGELISTAS, much less to retention of the premises until he
is reimbursed. The rights of petitioner are more akin to those of a usufructuary who,
under Article 579 of the Civil Code (Art. 487 of the old Code), may make on the
property useful improvements but with no right to be indemnified therefor. He may,
however, remove such improvements should it be possible to do so without damage
to the property. For if the improvements made by the usufructuary were subject to
indemnity, we would have a dangerous and unjust situation in which the usufructuary
could dispose of the owner’s funds by compelling him to pay for improvements which
perhaps he would not have made.
Same; Damages; Liability for damages for retention of property although redemption
thereof had been made.—Having retained the property although a redemption had
been made, he should be held liable for damages in the form of rentals for the
continued use of the subject residential lot at the rate of P10.00 monthly from
January 3, 1955, and not merely from the date of demand on May 4, 1956, as held
by the Court of Appeals, until the house was removed and the property vacated by
petitioner or his heirs.
PETITION for review on certiorari of the decision of the Court of Appeals.
The facts are stated in the opinion of the Court.
R. D. Hipolito & B. P. Fabir for petitioner.
E. G. Tanjuatco & Associates for respondents.
MELENCIO-HERRERA, J.:
P R O P E R T Y F I F T H S E T | 23
This is a Petition for Review on Certiorari of the Decision of the Court of Appeals (CA-
G.R. No. 23516-R) promulgated on November 4, 1965, entitled “Maria de Evangelista
and Sergio Evangelista, (now the respondents) vs. Mariano Floreza (petitioner
herein),” reversing the judgment of the Court of First Instance of Rizal rendered on
July 17, 1957, and instead ordering petitioner to vacate respondents’ residential lot,
to remove his house at his own expenses and to pay rental from May 5, 1956.
Plaintiffs Maria de Evangelista and Sergio Evangelista, who are mother and son, (the
EVANGELISTAS, for short) are the owners of a residential lot located at Sumilang St.,
Tanay, Rizal, with an area of 204.08 sq. ms., assessed at P410.00.
In May 1945, the EVANGELISTAS borrowed from FLOREZA the amount of P100.00.
On or about November 1945, with the consent of the EVANGELISTAS, FLOREZA
occupied the above residential lot and built thereon a house of light materials
(barong-barong) without any agreement as to payment for the use of said residential
lot owing to the fact that the EVANGELISTAS has then a standing loan of P100.00 in
favor of FLOREZA.1
On the following dates, the EVANGELISTAS again borrowed the indicated amounts:
September 16, 1946 - P100.00;2 August 17, 1947 - P200.00;3 January 30, 1949 -
P200.00;4 April
1, 1949 - P140.00,5 or a total of P740.00 including the first loan. The last three items
are evidenced by private documents stating that the residential lot stands as security
therefor and that the amounts covered thereunder are payable within six years from
date, without mention of interest. The document executed on September 16, 1946
stated specifically that the loan was without interest “walang anumang patubo.”
On January 10, 1949, FLOREZA demolished this house of light materials and in its
place constructed one of strong materials assessed in his name at P1,410.00 under
Tax Declaration No. 4448. FLOREZA paid no rental as before.6
On August 1, 1949, the EVANGELISTAS, for and in consideration of P1,000.00
representing the total outstanding loan of P740.00 plus P260.00 in cash, sold their
residential lot to FLOREZA, with a right to repurchase within a period of 6 years from
date, or up to August 1, 1955, as evidenced by a notarial document, Exh. B,
registered under Act 3344 on December 6, 1949, as Inscription No. 2147.7
On January 2, 1955, or seven months before the expiry of the repurchase period, the
EVANGELISTAS paid in full the repurchase price of P1,000.00.
On April 25, 1956, the EVANGELISTAS, through their counsel, wrote FLOREZA a
letter8 asking him to vacate the premises as they wanted to make use of their

residential lot besides the fact that FLOREZA had already been given by them more
than one year within which to move his house to another site. On May 4, 1956, the
EVANGELISTAS made a formal written demand to vacate, within five days from
notice, explaining that they had already fully paid the consideration for the
repurchase of the lot.9 FLOREZA refused to vacate unless he was first reimbursed the
value of his house. Hence, the filing of this Complaint on May 18, 1956 by the
EVANGELISTAS.
The EVANGELISTAS prayed that: 1) they be declared the owners of the house of
strong materials built by FLOREZA on their residential lot, without payment of
indemnity; or, in the alternative to order FLOREZA to remove said house; 2) that
FLOREZA pay them the sum of P10.00 per month as the reasonable value for the use
and occupation of the same from January 2, 1955 (the date the repurchase price was
paid) until FLOREZA removes the house and delivers the lot to them; and 3) to
declare the transaction between them and FLOREZA as one of mortgage and not of
pacto de retro.
In his Answer, FLOREZA admitted the repurchase but controverted by stating that he
would execute a deed of repurchase and leave the premises upon payment to him of
the reasonable value of the house worth P7,000.00.
In a Decision dated July 17, 1957, the Court of First Instance of Rizal opined that the
question of whether the transaction between the parties is one of mortgage or pacto
de retro is no longer material as the indebtedness of P1,000.00 of the EVANGELISTAS
to FLOREZA had already been fully paid. And, applying Article 448 of the Civil
Code,10 it rendered a decision dispositively decreeing:
“FOR ALL THE FOREGOING CONSIDERATIONS, the Court hereby renders judgment
granting the plaintiffs the right to elect, as owners of the land, to purchase the house
built on the said lot in question by the defendant for P2,500 or to sell their said land
to the defendant for P1,500. In the event that the plaintiffs shall decide not to
purchase the house in question, the defendant should be allowed to remain in
plaintiffs’ premises by paying a monthly rental of P10.00 which is the reasonable
value for the use of the same per month as alleged by plaintiffs in their complaint.
The Court also orders the defendant to pay a monthly rental of P10.00 for the use of
the land in question from May 18, 1956, the date of the commencement of this
action. The counterclaim of the defendant is hereby ordered dismissed. Without
pronouncement as to costs.
On November 4, 1965, the Court of Appeals concluded that Article 448 of the Civil
Code, supra, was inapplicable; that FLOREZA was not entitled to reimbursement for
his house but that he could remove the same at his expense; and accordingly
rendered judgment thus:
P R O P E R T Y F I F T H S E T | 24
“WHEREFORE, judgment is hereby rendered: (1) adjudging the defendant-appellant
Mariano Floreza to vacate plaintiffs’ residential lot described in the complaint and to
pay rental of P10.00 a month from May 5, 1956, until he (defendant) shall have
vacated the premises; (2) ordering defendant to remove his house from the land in
question within 30 days from the time this decision becomes final and executory; (3)
ordering the Register of Deeds of Rizal to cancel inscription No. 2147, Page 210, Vol.
36, in the Registration Book under Act 3344 upon payment of his lawful fees; and (4)
taxing the costs in both instances against defendant-appellant Mariano Floreza.”12
Hence, this Petition for Review on Certiorari by FLOREZA, seeking a reversal of the
aforestated judgment and ascribing the following errors:
1) That the Court of Appeals erred in holding that petitioner Floreza was a builder in
bad faith without likewise holding that respondents as owners of the land in dispute,
were likewise in bad faith and therefore both parties should in accordance with Art.
453 of the New Civil Code be considered as having acted in good faith.
2) That the Court of Appeals erred in completely ignoring the issue raised on appeal
as to whether or not respondents as owners of the questioned lot, were in bad faith
in the sense that they had knowledge of and acquiesced to the construction of the
house of petitioner on their lot.
3) That the Court of Appeals erred in not applying Art. 448 of the New Civil Code in
the adjudication of the rights of petitioner and respondent.
4) That the Court of Appeals erred in declaring that petitioner is not entitled to
reimbursement for the value of his house and that he should instead remove the
same at his expense.
5) That the Court of Appeals erred in adjudging petitioner to vacate respondents’ lot
in question and to pay rentals commencing from May 5, 1956, until he shall have
vacated the premises, notwithstanding that petitioner is entitled under Arts. 448 and
546 of the New Civil Code, to retention without payment of rental while the
corresponding indemnity of his house had not been paid.
6) That the Court of Appeals erred in taxing costs against petitioner.
7) That the Court of Appeals erred in not awarding petitioner’s counterclaim.
During the pendency of this appeal, petitioner Maria D. de Evangelista died and was
ordered substituted by her son, petitioner Sergio, as her legal representative, in a
Resolution dated May 14, 1976.
On October 20, 1978, the EVANGELISTAS filed a Motion to Dismiss stating that
FLOREZA had since died and that his heirs had voluntarily vacated the residential lot
in question. The date FLOREZA passed away and the date his heirs had voluntarily
vacated the property has not been stated. Required to comment, “petitioner
(represented by his heirs)”, through counsel, confirmed his death and the removal of
the house and manifested that thereby the question of reimbursement had become
moot and academic. He objected to the dismissal of the case, however, on the

ground that the issue of rentals still pends. On January 21, 1980, complying with a
Resolution of this Court, the EVANGELISTAS clarified that the dismissal they were
praying for was not of the entire case but only of this Petition for Review on
Certiorari.
We are not in agreement that the question of reimbursement of the value of the
improvement erected on the subject property has become moot. Petitioner’s right of
retention of subject property until he is reimbursed for the value of his house, as he
had demanded, is inextricably linked with the question of rentals. For if petitioner has
the right to indemnity, he has the right of retention and no rentals need be paid.
Conversely, if no right of retention exists, damages in the form of rentals for the
continued use and occupation of the property should be allowed.
We uphold the Court of Appeals in its conclusion that Article 448 of the Civil Code is
inapplicable to the factual milieu herein. Said codal provision applies only when the
builder, planter, or sower believes he had the right so to build, plant or sow because
he thinks he owns the land or believes himself to have a claim of title.13 In this case,
petitioner makes no pretensions of ownership whatsoever.
Petitioner concedes that he was a builder in bad faith but maintains that the
EVANGEUSTAS should also be held in bad faith, so that both of them being in bad
faith, Article 453 of the Civil Code14 should apply. By the same token, however, that
Article 448 of the same Code is not applicable, neither is Article 453 under the
ambiance of this case.
Would petitioner, as vendee a retro, then be entitled to the rights granted in Article
1616 of the Civil Code (Art. 1518 of the old Code)? To quote:
“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:
________________
13 Alburo vs. Villanueva, 7 Phil. 277 (1907): Quemuel vs. Olaes, 1 SCRA 1159 (1961);
Racaza vs. Susana Realty, Inc., 18 SCRA 1172 (1966).
14 ”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.”
(1) The expenses of the contract, and any other legitimate payments made by
reason of the sale;
P R O P E R T Y F I F T H S E T | 25
(2) The necessary and useful expenses made on the thing sold.”
The question again calls for a negative answer. It should be noted that petitioner did
not construct his house as a vendee a retro. The house had already been constructed
as far back as 1949 (1945 for the house of light materials) even before the pacto de
retro sale in 1949. Petitioner incurred no useful expense, therefore, after that sale.
The house was already there at the tolerance of the EVANGELISTAS in consideration
of the several loans extended to them. Since petitioner cannot be classified as a
builder in good faith within the purview of Article 448 of the Civil Code, nor as a
vendee a retro, who made useful improvements during the lifetime of the pacto de
retro, petitioner has no right to reimbursement of the value of the house which he
had erected on the residential lot of the EVANGELISTAS, much less to retention of the
premises until he is reimbursed. The rights of petitioner are more akin to those of a
usufructuary who, under Article 579 of the Civil Code (Art 487 of the old Code), may
make on the property useful improvements but with no right to be indemnified
therefor. He may, however, remove such improvements should it be possible to do so
without damage to the property: For if the improvements made by the usufructuary
were subject to indemnity, we would have a dangerous and unjust situation in which
the usufructuary could dispose of the owner’s funds by compelling him to pay for
improvements which perhaps he would not have made.15
We come now to the issue of rentals. It is clear that from the date that the
redemption price had been paid by the EVANGELISTAS on January 2, 1955,
petitioner’s right to the use of the residential lot without charge had ceased. Having
retained the property although a redemption had been made, he should be held liable
for damages in the form of rentals for the continued use of the subject residential
lot16 at the rate of P10.00 monthly from January 3, 1955, and not merely from the
date of demand on May 4, 1956, as held by the Court of Appeals, until the house was
removed and the property vacated by petitioner or his heirs.
WHEREFORE, the judgment appealed from is hereby affirmed, with the modification
that payment of rentals by the heirs of Mariano Floreza, who are hereby ordered
substituted for him, shall commence on January 3, 1955 until the date that the
residential lot in question was vacated.
Costs against petitioner.
SO ORDERED.
Teehankee (Chairman), Makasiar, Fernandez, Guerrero, and De Castro, JJ.,
concur.
Judgment affirmed.
 P R O P E R T Y F I F T H S E T | 26

Notes.—Improvements on a parcel of land which fall under Article 415 of the New
Civil Code are immovable property insofar as third persons are concerned and the
mortgage con stituted thereon must be susceptible of registration as a real estate
mortgage. (Tolentino vs. Baltazar, 1 SCRA 822).

Pursuant to the right of retention granted to possessors in good faith by Article 546 of
the Civil Code, which is applicable to builders in good faith (Art. 448), the latter may
be ordered to vacate the land upon payment by the landowner of indemnity for
improvements. (People vs. Repato, 6 SCRA 207).

Where a house stands on a rented land belonging to another person, it may be the
subject-matter of a chattel mortgage as person or movable property if so stipulated in
the document of mortgage, and in an action by the mortgage for foreclosure, the
validity of the chattel mortgage cannot be assailed by one of the parties to the
contract of mortgage. (Navarro vs. Pineda, 9 SCRA 631).

Article 167 of the Civil Code on disposition of the fruits of property redeemed applies
only when the parties failed to provide a sharing arrangement thereon. (Budlong vs.
Pondoc, 79 SCRA 24).

A vendee a retro has a right to share in the harvest of palay planted when said
vendee was still owner of the land. (Almeda, vs. Daluro, 79 SCRA 327).

It is not always necessary for owner of real property to wait after expiration of 12
months before he may maintain a forcible entry suit in the nature of accion publiciana
in the Court of First Instance. (Banayos vs. Susana Realty, Inc., 71 SCRA 557).

Article 593 of the Civil Code in its second paragraph grants to the possessor, who was
deprived of the possession of his real property through forcible entry, the right to
secure from an inferior court in the action for forcible entry a writ of preliminary
mandatory injunction to restore him in his possession. (Laureano vs. Adil, 72 SCRA
148).

The damages contemplated in Section 8 of Rule 70 refer to the reasonable

compensation for the use and occupation of the property which is generally measured
by its fair rental value. (Laureano vs. Adil, 72 SCRA 148).

Trial court should give reasonable time for defendant to make deposit to stay
execution pending appeal of ejectment case. (Sanchez vs. Zosa, 68 SCRA 171).
Floreza vs. Evangelista, 96 SCRA 130, No. L-25462 February 21, 1980

No. L49219. April 15, 1988.*
SPOUSES CONCEPCION FERNANDEZ DEL CAMPO and ESTANISLAO DEL
CAMPO, plaintiffs-appellees, vs. BERNARDA FERNANDEZ ABESIA,
defendant-appellant.
Civil Law; Property; Builder in good faith; Co-ownership; When a co-ownership is
terminated by the partition and the house of defendants overlaps a portion of the
land of plaintiffs which defendants built in good faith, Article 448 of the Civil Code
applies; Article 448 may apply even when there was co-owner$hip if good faith has
been established.—However, when, as in this case, the co-ownership is terminated by
the partition and it appears that the house of defendants overlaps or occupies a
portion of 5 square meters of the land pertaining to plaintiffs which the defendants
obviously built in good faith, then the provisionB of Article 448 of the new Civil Code
should apply. Manresa and Navarro Amandi agree that the said provision of the Civil
Code may apply even when there was co-ownership if good faith has been
established.
Same; Same; Same; Same; Right of a builder in good faith under Article 546 of the
Civil Code.—Applying the afore-said provision of the Civil Code, the plaintiffs have the
right to appropriate said portion of the house of defendants upon payment of
indemnity to defendants as provided for in Article 546 of the Civil Code. 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
plaintiffs 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.
The facts are stated in the opinion of the Court.
Geronimo Creer, Jr. for plaintiffs-appellees.
Benedicto G. Cobarde for defendant-appellant.
GANCAYCO, J.:
In this appeal from the decision of the Court of First Instance (CFI) of Cebu, certified
to this Court by the Court of Appeals on account of the question of law involved, the
sole issue is the applicability of the provisions of Article 448 of the Civil Code relating
to a builder in good faith when the property involved is owned in common.
P R O P E R T Y F I F T H S E T | 27
This case involves a parcel of land, Lot No. 1161 of the Cadastral Survey of Cebu,
with an area of only about 45 square meters, situated at the corner of F. Flores and
Cavan Streets, Cebu City covered by TCT No. 61850. An action for partition was filed
by plaintiffs in the CFI of Cebu. Plaintiffs and defendants are co-owners pro indiviso
of this lot in the proportion of 2/3 and 1/3 share each, respectively. The trial court
appointed a commissioner in accordance with the agreement of the parties. The said
commissioner conducted a survey, prepared a sketch plan and submitted a report to
the trial court on May 29,1976, recommending that the property be divided into two
lots: Lot 1161-A with an area of 30 square meters for plaintiffs and Lot No. 1161 -B
with an area of 15 square meters for the defendants. The houses of plaintiffs and
defendants were surveyed and shown on the sketch plan. The house of defendants
occupied the portion with an area of 5 square meters of Lot 1161-A of plaintiffs. The
parties manifested their conformity to the report and asked the trial court to finally
settle and adjudicate who among the parties should take possession of the 5 square
meters of the land in question.
In solving the issue the trial court held as follows:
The Court believed that the plaintiffs cannot be obliged to pay for the value of the
portion of the defendants’ house which has encroached an area of five (5) sq. meters
of the land allotted to them. The defendants cannot also be obliged to pay for the
price of the said five (5) square meters. The rights of a builder in good faith under
Article 448 of the New Civil Code does (sic) not apply to a case where one coowner
has built, planted or sown on the land owned in common. ‘Manresa agreeing with
Sanchez Roman, says that as a general rule this article is not applicable because the
matter should be governed more by the provisions on co-ownership than on
accession. Planiol and Ripert are also of the opinion that this article is not applicable
to a coowner who constructs, plants or sows on the community property, even if the
land where the construction, planting or sowing is made is later allotted to another
co-owner in the partition. The co-owner is not a third person under the
circumstances, and the situation is governed by the rules of co-ownership. Our Court
of Appeals has held that this article cannot be invoked by one co-owner againBt
another who builds, plants or sows upon their land, since the latter does not do so on
land not belonging to him.’ (Tolentino, Civil Code of the Philippines, Vol. II, p. 102,
citing 3 Manresa 215, 3 Planiol and Ripert 245, and Viuda de Arias vs. Aguilar, (C.A.),
O.G. Supp., Aug. 30, 1941, p. 126). In the light of the foregoing authoritieB and
considering that the defendants have expressed their conformity to the partition that
was made by the commissioner as shown in the sketch plan attached to the
commissioner’s report, said defendants have no other alternative except to remove
and demolish part of their house that has encroached an area of five (5) sq. meters
of the land allotted to the plaintiflB.

“WHEREFORE, judgment is hereby rendered assigning Lot 1161A with an area of
thirty (30) sq. meters to the plaintiffs spouses Concepcion Fernandez del Campo and
Estanislao del Campo and Lot 1161 -B with an area of fifteen (15) sq. meters to the
defendants Bernarda Fernandez Abesia, Lourdes Fernandez Rodil, Genaro Fernandez
and Dominga A. Fernandez, in the respective metes and bounds as shown in the
subdivision sketch plan attached to the Commissioner’s Report dated May 29,1976
prepared by the Commissioner, Geodetic Engineer Espiritu Bunagan. Further, the
defendants are hereby ordered at their expense to remove and demolish part of their
house which has encroached an area of five (5) square meters from Lot 1161 -A of
the plaintiffs; within sixty (60) days from date hereof and to deliver the possession of
the same to the plaintiffs, For the Commissioner’s fee of P400.00, the defendants are
ordered to pay, jointly and severally, the sum ofPl 33.33 and the balance thereof to
be paid by the plaintiffs. The costs of suit shall be paid by the plaintiffs and the
defendants in the proportion of two-thirds (2/3) and one-third (1/3) shares
respectively. A certified copy of this judgment shall be recorded in the office of the
Register of Deeds of the City of Cebu and the expense of such recording shall be
taxed as a part of the costs of the action.”
Hence, this appeal interposed by the defendants with the following assignments of
errors:
“I
THE TRIAL COURT ERRED IN NOT APPLYING THE RIGHTS OF A BUILDER IN GOOD
FAITH UNDER ART. 448 OF THE NEW CIVIL CODE TO DEFENDANTS-APPELLANTS
WITH RESPECT TO THAT PART OF THEIR HOUSE OCCUPYING A PORTION OF THE
LOT ASSIGNED TO PLAINTIFFS-APPELLEES.
II
THE TRIAL COURT ERRED IN ORDERING DEFENDANTSAPPELLANTS TO REMOVE
AND DEMOLISH AT THEIR EXPENSE, THAT PART OF THEIR HOUSE WHICH HAS
ENCROACHED ON AN AREA OF FIVE SQUARE METERS OF LOT 1161 -A OF
PLAINTIFFS-APPELLEES."
Article 448 of the New Civil Code provides as follows:
“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,
P R O P E R T Y F I F T H S E T | 28
he shall pay reasonable rent, if the owner of the land does not choose to appropriate
the building or trees after proper indemnity. The parties shall agree upon the terms
of the lease and in case of disagreement, the court shall fix the terms thereof.”
The court a quo correctly held that Article 448 of the Civil Code cannot apply where a
co-owner builds, plants or sows on the land owned in common for then he did not
build, plant or sow upon land that exclusively belongs to another but of which he is a
co-owner. The co-owner is not a third person under the circumstances, and the
situation is governed by the rules of coownership.1
However, when, as in this case, the co-ownership is termi-nated by the partition and
it appears that the house of defendants overlaps or occupies a portion of 5 square
meters of the land pertaining to plaintiffs which the defendants obviously built in
good faith, then the provisions of Article 448 of the new Civil Code should apply.
Manresa and Navarro Amandi agree that the said provision of the Civil Code may
apply even when there was co-ownership if good faith has been established.2
Applying the afore-said provision of the Civil Code, the plaintiffs have the right to
appropriate said portion of the house of defendants upon payment of indemnity to
defendants as provided for in Article 546 of the Civil Code. 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 plaintiffs 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.
WHEREFORE, the decision appealed from is hereby MODIFIED by ordering plaintiffs
to indemnify defendants for the value of the said portion of the house of defendants
in accordance with Article 546 of the Civil Code, if plaintiffs elect to appropriate the
same. Otherwise, the defendants shall pay the value of the 5 square meters of land
occupied by their house at such price as may be agreed upon with plaintiffs and if its
value exceeds the portion of the house that defendants built thereon, the defendants
may choose not to buy the land but defendants must pay a reasonable rental for the
use of the portion of the land of plaintiffs as may be agreed upon between the
parties. In case of disagreement, the rate of rental shall be determined by the trial
court. Otherwise, defendants may remove or demolish at their own expense the said
portion of their house. No costs.
Teehankee, (C.J.), Narvasa, Cruz and Grino-Aquino, JJ., concur.
Decision modified.
 P R O P E R T Y F I F T H S E T | 29

Note.—Co-ownership is terminated where the co-owners drew up a Subdivision plan

and actually occupied their respective portions in the plan, a title issued accordingly.
(Caro vs. Court of Appeals, 113 SCRA10.)

——o0o——

Spouses Del Campo vs. Abesia, 160 SCRA 379, No. L49219 April 15, 1988

G.R. No. 72876. January 18, 1991.*
FLORENCIO IGNAO, petitioner, vs. HON. INTERMEDIATE APPELLATE
COURT, JUAN IGNAO, substituted by his Legal Heirs, and ISIDRO IGNAO,
respondents.
Co-ownership; Property; Art. 448, new Civil Code applies to property held in common
once it is partitioned.—In other words, 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.
Same; Same; When co-owned estate is partitioned, it is the co-owner whose portion
is encroached upon who has the option to sell that portion or buy the improvement.—
Petitioner’s second assigned error is however well taken. Both the trial court and the
Appellate Court erred when they peremptorily adopted the “workable solution” in the
case of Grana vs. Court of Appeals, and ordered the owner of the land, petitioner
Florencio, to sell to private respondents, Juan and Isidro, the part of the land they
intruded upon, thereby depriving petitioner of his right to choose. Such ruling
contravened the explicit provisions of Article 448 to the effect that “(t)he owner of
the land xxx shall have the right to appropriate xxx or to oblige the one who built xxx
to pay the price of the land xxx.” The law is clear and unambiguous when it confers
the right of choice upon the landowner and not upon the builder and the courts.
Same; Same; Same.—Wherefore, the decision appealed from is hereby MODIFIED as
follows: Petitioner Florencio Ignao is directed within thirty (30) days from entry of
judgment to exercise his option to either appropriate as his own the portions of the
houses of Juan and Isidro Ignao occupying his land upon payment of indemnity in
accordance with Articles 546 and 548 of the Civil Code, or sell to private respondents
the 101 square meters occupied by them at such price as may be agreed upon.
Should the value of the land exceed the value of the portions of the houses that
private respondents have erected thereon, private respondents may choose not to
buy the land but they must pay reasonable rent for the use of the portion of
petitioner’s land as may be agreed upon by the parties. In case of disagreement, the
rate of rental and other terms of the lease shall be determined by the trial court.
Otherwise, private respondents may remove or demolish at their own expense the
said portions of their houses encroaching upon petitioner’s land.
PETITION for certiorari to review the decision of the Intermediate Appellate Court.
The facts are stated in the opinion of the Court.
Dolorfino and Dominguez Law Offices for petitioner.
P R O P E R T Y F I F T H S E T | 30
Ambrosio Padilla, Mempin & Reyes Law Offices for private respondents.
FERNAN, C.J.:
In this petition for review by certiorari, petitioner seeks the reversal of the decision of
the Intermediate Appellate Court (now Court of Appeals) affirming in toto the
decision of the Court of First Instance of Cavite, ordering petitioner Florencio Ignao to
sell to private respondents Juan and Isidro Ignao, that part of his property where
private respondents had built a portion of their houses.
The antecedent facts are as follows:
Petitioner Florencio Ignao and his uncles private respondents Juan Ignao and Isidro
Ignao were co-owners of a parcel of land with an area of 534 square meters situated
in Barrio Tabon, Municipality of Kawit, Cavite. Pursuant to an action for partition filed
by petitioner docketed as Civil Case No. N-1681, the then Court of First Instance of
Cavite in a decision dated February 6, 1975 directed the partition of the aforesaid
land, alloting 133.5 square meters or 2/8 thereof to private respondents Juan and
Isidro, and giving the remaining portion with a total area of 266.5 square meters to
petitioner Florencio. However, no actual partition was ever effected.1
On July 17, 1978, petitioner instituted a complaint for recovery of possession of real
property against private respondents Juan and Isidro before the Court of First
Instance of Cavite, docketed as Civil Case No. 2662. In his complaint petitioner
alleged that the area occupied by the two (2) houses built by private respondents
exceeded the 133.5 square meters previously alloted to them by the trial court in Civil
Case No. N-1681.
Consequently, the lower court conducted an ocular inspection. It was found that the
houses of Juan and Isidro actually encroached upon a portion of the land belonging
to Florencio. Upon agreement of the parties, the trial court ordered a licensed
geodetic engineer to conduct a survey to determine the exact area occupied by the
houses of private respondents. The survey subsequently disclosed that the house of
Juan occupied 42 square meters while that of Isidro occupied 59 square meters of
Florencio’s land or a total of 101 square meters.
In its decision, the trial court (thru Judge Luis L. Victor) ruled that although private
respondents occupied a portion of Florencio’s property, they should be considered
builders in good faith. The trial court took into account the decision of the Court of
First Instance of Cavite in the action for partition2 and quoted:
“xxx.Hence, it is the well-consired opinion of the Court that although it turned out
that the defendants had, before partition, been in possession of more than what

rightfully belongs to them, their possession of what is in excess of their rightful share
can at worst be possession in good faith which exempts them from being condemned
to pay damages by reason thereof.”3
Furthermore, the trial court stated that pursuant to Article 448 of the Civil Code, the
owner of the land (Florencio) should have the choice to either appropriate that part of
the house standing on his land after payment of indemnity or oblige the builders in
good faith (Juan and Isidro) to pay the price of the land. However, the trial court
observed that based on the facts of the case, it would be useless and unsuitable for
Florencio to exercise the first option since this would render the entire houses of Juan
and Isidro worthless. The trial court then applied the ruling in the similar case of
Grana vs. Court of Appeals,4 where the Supreme Court had advanced a more
“workable solution”. Thus, it ordered Florencio to sell to Juan and Isidro those
portions of his land respectively occupied by the latter. The dispositive portion of said
decision reads as follows:
“WHEREFORE, judgment is hereby rendered in favor of the defendants and—
“(a) Ordering the plaintiff Florencio Ignao to sell to the defendants Juan and Isidro
Ignao that portion of his property with an area of 101 square meters at P40.00 per
square meter, on which part the defendants had built their houses; and
“(b) Ordering the said plaintiff to execute the necessary deed of conveyance to the
defendants in accordance with paragraph (a) hereof. “Without pronouncement as to
costs.”5
Petitioner Florencio Ignao appealed to the Intermediate Appellate Court. On August
27, 1985, the Appellate Court, Second Civil Cases Division, promulgated a decision,6
affirming the decision of the trial court.
Hence the instant petition for review which attributes to the Appellate Court the
following errors:
“1. That the respondent Court has considered private respondents builders in good
faith on the land on question, thus applying Art. 448 of the Civil Code, although the
land in question is still owned by the parties in co-ownership, hence, the applicable
provision is Art. 486 of the Civil Code, which was not applied.
“2. That, granting for the sake of argument that Art. 448 x x x is applicable, the
respondent Court has adjudged the working solution suggested in Grana and Torralba
vs. C.A. (109 Phil. 260), which is just an opinion by way of passing, and not the
judgment rendered therein, which is in accordance with the said provision of the Civil
Code, wherein the owner of the land to buy (sic) the portion of the building within 30
days from the judgment or sell the land occupied by the building.
“3. That, granting that private respondents could buy the portion of the land occupied
by their houses, the price fixed by the court is unrealistic and pre-war price.”7
P R O P E R T Y F I F T H S E T | 31
The records of the case reveal that the disputed land with an area of 534 square
meters was originally owned by Baltazar Ignao who married twice. In his first
marriage, he had four children, namely Justo (the father of petitioner Florencio), Leon
and private respondents Juan and Isidro. In his second marriage, Baltazar had also
four children but the latter waived their rights over the controverted land in favor of
Justo. Thus, Justo owned 4/8 of the land which was waived by his half-brothers and
sisters plus his 1/8 share or a total of 5/8. Thereafter, Justo acquired the 1/8 share of
Leon for P500.00 which he later sold to his son Florencio for the same amount. When
Justo died, Florencio inherited the 5/8 share of his father Justo plus his 1/8 share of
the land which he bought or a total of 6/8 (representing 400.5 square meters).
Private respondents, Juan and Isidro, on the other hand, had 1/8 share (66.75 square
meters) each of the land or a total of 133.5 square meters.
Before the decision in the partition case was promulgated, Florencio sold 134 square
meters of his share to a certain Victa ring.
for P5,000.00 on January 27, 1975. When the decision was handed down on February
6, 1975, the lower court alloted 2/8 of the land to private respondents Juan and
Isidro, or a total of 133.5 square meters.
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. As cited in Eusebio vs. Intermediate
Appellate Court,8 “an undivided estate is co-ownership by the heirs.”
As co-owners, the parties may have unequal shares in the common property,
quantitatively speaking. But in a qualitative sense, each co-owner has the same right
as any one of the other co-owners. 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.9
Petitioner Florencio, in his first assignment of error, asseverates that the court a quo
erred in applying Article 448 of the Civil Code, since this article contemplates a
situation wherein the land belongs to one person and the thing built, sown or planted
belongs to another. In the instant case, the land in dispute used to be owned in
common by the contending parties.
Article 448 provides:
“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.”
Whether or not the provisions of Article 448 should apply to a builder in good faith on
a property held in common has been resolved in the affirmative in the case of
Spouses del Campo vs. Abesia,10 wherein the Court ruled that:
“The court a quo correctly held that Article 448 of the Civil Code cannot apply where
a co-owner builds, plants or sows on the land owned in common for then he did not
build, plant or sow upon land that exclusively belongs to another but of which he is a
co-owner. The co-owner is not a third person under the circumstances, and the
situation is governed by the rules of co-ownership.
“However, when, as in this case, the ownership is terminated by the partition and it
appears that the home of defendants overlaps or occupies a portion of 5 square
meters of the land pertaining to plaintiffs which the defendants obviously built in
good faith, then the provisions of Article 448 of the new Civil Code should apply.
Manresa and Navarro Amandi agree that the said provision of the Civil Code may
apply even when there is a co-ownership if good faith has been established.”11
In other words, 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.
Petitioner’s second assigned error is however well taken. Both the trial court and the
Appellate Court erred when they peremptorily adopted the “workable solution” in the
case of Grana vs. Court of Appeals,12 and ordered the owner of the land, petitioner
Florencio, to sell to private respondents, Juan and Isidro, the part of the land they
intruded upon, thereby depriving petitioner of his right to choose. Such ruling
contravened the explicit provisions of Article 448 to the effect that “(t)he owner of
the land xxx shall have the right to appropriate xxx or to oblige the one who built xxx
to pay the price of the land xxx.” 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,13 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.
P R O P E R T Y F I F T H S E T | 32
As to the third assignment of error, the question on the price to be paid on the land
need not be discussed as this would be premature inasmuch as petitioner Florencio
has yet to exercise his option as the owner of the land.
WHEREFORE, the decision appealed from is hereby MODIFIED as follows: Petitioner
Florencio Ignao is directed within thirty (30) days from entry of judgment to exercise
his option to either appropriate as his own the portions of the houses of Juan and
Isidro Ignao occupying his land upon payment of indemnity in accordance with
Articles 546 and 548 of the Civil Code, or sell to private respondents the 101 square
meters occupied by them at such price as may be agreed upon. Should the value of
the land exceed the value of the portions of the houses that private respondents have
erected thereon, private respondents may choose not to buy the land but they must
pay reasonable rent for the use of the portion of petitioner’s land as may be agreed
upon by the parties. In case of disagreement, the rate of rental and other terms of
the lease shall be determined by the trial court. Otherwise, private respondents may
remove or demolish at their own expense the said portions of their houses
encroaching upon petitioner’s land.14 No costs.
SO ORDERED.
Gutierrez, Jr., Feliciano and Bidin, JJ., concur.
Decision modified.
Notes.—A person who obtains property through mistake or fraud is by force of law
considered a trustee of an implied trust for the benefit of the person from whom the
property comes. (Tomas vs. Court of Appeals, 185 SCRA 627.)
Imprescriptibility of property inherited cannot be invoked when a co-owner possessed
the property as exclusive owner. (Bicarme vs. Court of Appeals, 186 SCRA 294.)
Barron being a builder in good faith the house she built cannot become the
landowner’s property without proper recompense. (Santos vs. Intermediate Appellate
Court, 186 SCRA 694.)
——o0o—— Ignao vs. Intermediate Appellate Court, 193 SCRA 17, G.R. No. 72876
January 18, 1991

G.R. No. 115814. May 26, 1995.*
PEDRO P. PECSON, petitioner, vs. COURT OF APPEALS, SPOUSES JUAN
NUGUID and ERLINDA NUGUID, respondents.
Property; Ownership; Builder in Good Faith; Art. 448 of the Civil Code 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.—By its clear language, Article 448
refers to a land whose ownership is claimed by two or more parties, one of whom has
built some works, or sown or planted something. The building, sowing or planting
may have been made in good faith or in bad faith. The rule on good faith laid down
in Article 526 of the Civil Code shall be applied in determining whether a builder,
sower or planter had acted in good faith. 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.
Same; Same; Same; The provision of Art. 448 on indemnity may be applied by
analogy to a case where one loses the ownership of the land on which he earlier built
an apartment.—Elsewise stated, where the true owner himself is the builder of works
on his own land, the issue of good faith or bad faith is entirely irrelevant. Thus in
strict point of law, Article 448 is not apposite to the case at bar. Nevertheless, we
believe that the provision therein 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 the parties, including the two courts below, in the main agree
that Articles 448 and 546 of the Civil Code are applicable and indemnity for the
improvements may be paid although they differ as to the basis of the indemnity.
Same; Same; Same; Equity; Unjust Enrichment; It is the current market value of the
improvements which should be made the basis of reimbursement to the builder in
good faith.—The objective of Article 546 of the Civil Code is to administer justice
between the parties involved. In this regard, this Court had long ago stated in Rivera
vs. Roman Catholic Archbishop of Manila that the said provision was formulated in
trying to adjust the rights of the owner and possessor in good faith of a piece of land,
to administer complete justice to both of them in such a way as neither one nor the
other may enrich himself of that which does not belong to him. Guided by this
precept, it is therefore the current market value of the improvements which should be
made the basis of reimbursement. A contrary ruling would unjustly enrich the private
respondents who would otherwise be allowed to acquire a highly valued
incomeyielding four-unit apartment building for a measly amount. Consequently, the
parties should therefore be allowed to adduce evidence on the present market value
of the apartment building upon which the trial court should base its finding as to the
amount of reimbursement to be paid by the landowner.
P R O P E R T Y F I F T H S E T | 33
Same; Same; Same; Same; The right to retain the improvements while the
corresponding indemnity is not paid implies the tenancy or possession in fact of the
land on which it is built, planted or sown and retention of ownership of the
improvements and, necessarily, the income therefrom.—The trial court also erred in
ordering the petitioner to pay monthly rentals equal to the aggregate rentals paid by
the lessees of the apartment building. Since the private respondents have opted to
appropriate the apartment building, the petitioner is thus entitled to the possession
and enjoyment of the apartment building, until he is paid the proper indemnity, as
well as of the portion of the lot where the building has been constructed. This is so
because the right to retain the improvements while the corresponding indemnity is
not paid implies the tenancy or possession in fact of the land on which it is built,
planted or sown. The petitioner not having been so paid, he was entitled to retain
ownership of the building and, necessarily, the income therefrom.
PETITION for review on certiorari of a decision of the Court of Appeals.
The facts are stated in the opinion of the Court.
Barbers, Molina & Tamargo for petitioner.
Benjamin C. Reyes for private respondents.
DAVIDE, JR., J.:
This petition for review on certiorari seeks to set aside the decision1 of the Court of
Appeals in CA-G.R. SP No. 32679 affirming in part the order2 of the Regional Trial
Court (RTC) of Quezon City, Branch 101, in Civil Case No. Q-41470.
The factual and procedural antecedents of this case as gathered from the record are
as follows:
Petitioner Pedro P. Pecson was the owner of a commercial lot located in Kamias
Street, Quezon City, on which he built a fourdoor two-storey apartment building. For
his failure to pay realty taxes amounting to twelve thousand pesos (P12,000.00), the
lot was sold at public auction by the City Treasurer of Quezon City to Mamerto
Nepomuceno who in turn sold it on 12 October 1983 to the private respondents, the
spouses Juan Nuguid and Erlinda Tan-Nuguid, for one hundred three thousand pesos
(P103,000.00).
The petitioner challenged the validity of the auction sale in Civil Case No. Q-41470
before the RTC of Quezon City. In its decision of 8 February 1989, the RTC dismissed
the complaint, but as to the private respondents’ claim that the sale included the
apartment building, it held that the issue concerning it was “not a subject of the . . .

litigation.” In resolving the private respondents’ motion to reconsider this issue, the
trial court held that there was no legal basis for the contention that the apartment
building was included in the sale.3
Both parties then appealed the decision to the Court of Appeals. The case was
docketed as CA-G.R. CV No. 2931. In its decision of 30 April 1992,4 the Court of
Appeals affirmed in toto the assailed decision. It also agreed with the trial court that
the apartment building was not included in the auction sale of the commercial lot.
Thus:
Indeed, examining the record we are fully convinced that it was only the land—
without the apartment building—which was sold at the auction sale, for plaintiff’s
failure to pay the taxes due thereon . Thus, in the Certificate of Sale of Delinquent
Property To Purchaser (Exh. K, p. 352, Record) the property subject of the auction
sale at which Mamerto Nepomuceno was the purchaser is referred to as Lot No. 21-A,
Block No. K-34, at Kamias, Barangay Piñahan, with an area of 256.3 sq.m., with no
mention whatsoever, of the building thereon. The same description of the subject
property appears in the Final Notice To Exercise The Right of Redemption (over
subject property) dated September 14, 1981 (Exh. L, p. 353, Record) and in the Final
Bill of Sale over the same property dated April 19, 1982 (Exh. P, p. 357, Record).
Needless to say, as it was only the land without any building which Nepomuceno had
acquired at the auction sale, it was also only that land without any building which he
could have legally sold to the Nuguids. Verily, in the Deed of Absolute Sale of
Registered Land executed by Mamerto Nepomuceno in favor of the Nuguids on
October 25, 1983 (Exh. U, p. 366, Record) it clearly appears that the property subject
of the sale for P103,000.00 was only the parcel of land, Lot 21-A, Blk. K-34 containing
an area of 256.3 sq. meters, without any mention of any improvement, much less
any building thereon. (emphases supplied)
The petition to review the said decision was subsequently denied by this Court.5
Entry of judgment was made on 23 June 1993.6
On November 1993, the private respondents filed with the trial court a motion for
delivery of possession of the lot and the apartment building, citing Article 546 of the
Civil Code.7 Acting thereon, the trial court issued on 15 November 1993 the
challenged order8 which reads as follows:
Submitted for resolution before this Court is an uncontroverted [sic] for the Delivery
of Possession filed by defendants Erlinda Tan, Juan Nuguid, et al. considering that
despite personal service of the Order for plaintiff to file within (5) days his opposition
to said motion, he did not file any.
P R O P E R T Y F I F T H S E T | 34
In support of defendant’s motion, movant cites the law in point as Article 546 of the
Civil Code . . .
Movant agrees to comply with the provisions of the law considering that plaintiff is a
builder in good faith and he has in fact, opted to pay the cost of the construction
spent by plaintiff. From the complaint itself the plaintiff stated that the construction
cost of the apartment is much more than the lot, which apartment he constructed at
a cost of P53,000.00 in 1965 (par. 8 complaint). This amount of P53,000.00 is what
the movant is supposed to pay under the law before a writ of possession placing him
in possession of both the lot and apartment would be issued.
However, the complaint alleges in paragraph 9 that three doors of the apartment are
being leased. This is further confirmed by the affidavit of the movant presented in
support of the motion that said three doors are being leased at a rental of P7,000.00
a month each. The movant further alleges in his said affidavit that the present
commercial value of the lot is P10,000.00 per square meter or P2,500,000.00 and the
reasonable rental value of said lot is no less than P21,000.00 per month. The decision
having become final as per Entry of Judgment dated June 23, 1993 and from this
date on, being the uncontested owner of the property, the rents should be paid to
him instead of the plaintiff collecting them. From June 23, 1993, the rents collected
by plaintiff amounting to more than P53,000.00 from tenants should be offset from
the rents due to the lot which according to movant’s affidavit is more than
P21,000.00 a month.
WHEREFORE, finding merit in the Motion, the Court hereby grants the following
prayer that:
1. The movant shall reimburse plaintiff the construction cost of P53,000.00.
2. The payment of P53,000.00 as reimbursement for the construction cost, movant
Juan Nuguid is hereby entitled to immediate issuance of a writ of possession over the
lot and improvements thereon.
3. The movant having been declared as the uncontested owner of the lot in question
as per Entry of Judgment of the Supreme Court dated June 23, 1993, the plaintiff
should pay rent to the movant of no less than P21,000.00 per month from said date
as this is the very same amount paid monthly by the tenants occupying the lot.
4. The amount of P53,000.00 due from the movant is hereby offset against the
amount of rents collected by the plaintiff from June 23, 1993, to September 23,
1993.”
SO ORDERED.
The petitioner moved for the reconsideration of the order but it was not acted upon
by the trial court. Instead, on 18 November 1993, it issued a writ of possession
directing the deputy sheriff “to place said movant Juan Nuguid in possession of

subject property located at No. 79 Kamias Road, Quezon City, with all the
improvements thereon and to eject therefrom all occupants therein, their agents,
assignees, heirs and representatives.”9
The petitioner then filed with the Court of Appeals a special civil action for certiorari
and prohibition assailing the order of 15 November 1993, which was docketed as CA-
G.R. SP No. 32679.10 In its decision of 7 June 1994, the Court of Appeals affirmed in
part the order of the trial court citing Article 448 of the Civil Code. In disposing of the
issues, it stated:
As earlier pointed out, private respondent opted to appropriate the improvement
introduced by petitioner on the subject lot, giving rise to the right of petitioner to be
reimbursed of the cost of constructing said apartment building, in accordance with
Article 546 of the . . . Civil Code, and of the right to retain the improvements until he
is reimbursed of the cost of the improvements, because, basically, the right to retain
the improvement while the corresponding indemnity is not paid implies the tenancy
or possession in fact of the land on which they are built . . . . [2 TOLENTINO, CIVIL
CODE OF THE PHILIPPINES. (1992) p. 112]. With the facts extant and the settled
principle as guides, we agree with petitioner that respondent judge erred in ordering
that “the movant having been declared as the uncontested owner of the lot in
question as per Entry of Judgment of the Supreme Court dated June 23, 1993, the
plaintiff should pay rent to the movant of no less than P21,000 per month from said
date as this is the very same amount paid monthly by the tenants occupying the lot.”
We, however, agree with the finding of respondent judge that the amount of
P53,000.00 earlier admitted as the cost of constructing the apartment building can be
offset from the amount of rents collected by petitioner from June 23, 1993 up to
September 23, 1993 which was fixed at P7,000.00 per month for each of the three
doors. Our underlying reason is that during the period of retention, petitioner as such
possessor and receiving the fruits from the property, is obliged to account for such
fruits, so that the amount thereof may be deducted from the amount of indemnity to
be paid to him by the owner of the land, in line with Mendoza vs. De Guzman, 52
Phil. 164 . . . .
The Court of Appeals then ruled as follows:
WHEREFORE, while it appears that private respondents have not yet indemnified
petitioner with the cost of the improvements, since Annex I shows that the Deputy
Sheriff has enforced the Writ of Possession and the premises have been turned over
to the possession of private respondents, the quest of petitioner that he be restored
in possession of the premises is rendered moot and academic, although it is but fair
and just that private respondents pay petitioner the construction cost of P53,000.00;
and that petitioner be ordered to account for any and all fruits of the improvements
P R O P E R T Y F I F T H S E T | 35
received by him starting on June 23, 1993, with the amount of P53,000.00 to be
offset therefrom.
IT IS SO ORDERED.11
Aggrieved by the Court of Appeals’ decision, the petitioner filed the instant petition.
The parties agree that the petitioner was a builder in good faith of the apartment
building on the theory that he constructed it at the time when he was still the owner
of the lot, and that the key issue in this case is the application of Articles 448 and 546
of the Civil Code.
The trial court and the Court of Appeals, as well as the parties, concerned themselves
with the application of Articles 448 and 546 of the Civil Code. These articles read as
follows:
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. (361a)
***
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. (453a)
By its clear language, Article 448 refers to a land whose ownership is claimed by two
or more parties, one of whom has built some works, or sown or planted something.
The building, sowing or planting may have been made in good faith or in bad faith.
The rule on good faith laid down in Article 526 of the Civil Code shall be applied in
determining whether a builder, sower or planter had acted in good faith.12

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. This
Court said so in Coleongco vs. Regalado:13
Article 361 of the old Civil Code is not applicable in this case, for Regalado
constructed the house on his own land before he sold said land to Coleongco. Article
361 applies only in cases where a person constructs a building on the land of another
in good or in bad faith, as the
_______________
12 ARTURO M. TOLENTINO, Commentaries and Jurisprudence on the Civil Code of
the Philippines, vol. II, 1983 ed., 103.
13 92 Phil. 387, 395 [1952]. See EDGARDO L. PARAS, Civil Code of the Philippines
Annotated, vol. Two, Eleventh ed. [1984], 192.
case may be. It does not apply to a case where a person constructs a building on his
own land, for then there can be no question as to good or bad faith on the part of the
builder.
Elsewise stated, where the true owner himself is the builder of works on his own
land, the issue of good faith or bad faith is entirely irrelevant.
Thus in strict point of law, Article 448 is not apposite to the case at bar. Nevertheless,
we believe that the provision therein 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 the parties, including the two courts below, in the main agree
that Articles 448 and 546 of the Civil Code are applicable and indemnity for the
improvements may be paid although they differ as to the basis of the indemnity.
Article 546 does not specifically state how the value of the useful improvements
should be determined. The respondent court and the private respondents espouse
the belief that the cost of construction of the apartment building in 1965, and not its
current market value, is sufficient reimbursement for necessary and useful
improvements made by the petitioner. This position is, however, not in consonance
with previous rulings of this Court in similar cases. In Javier vs. Concepcion, Jr.,14
this Court pegged the value of the useful improvements consisting of various fruits,
bamboos, a house and camarin made of strong material based on the market value
of the said improvements. In Sarmiento vs. Agana,15 despite the finding that the
useful improvement, a residential house, was built in 1967 at a cost of between eight
thousand pesos (P8,000.00) to ten thousand pesos (P10,000.00), the landowner was
ordered to reimburse the builder in the amount of forty thousand pesos (P40,000.00),
P R O P E R T Y F I F T H S E T | 36
the value of the house at the time of the trial. In the same way, the landowner was
required to pay the “present value” of the house, a useful improvement, in the case
of De Guzman vs. De la Fuente ,16 cited by the petitioner.
The objective of Article 546 of the Civil Code is to administer justice between the
parties involved. In this regard, this Court had long ago stated in Rivera vs. Roman
Catholic Archbishop of Manila17 that the said provision was formulated in trying to
adjust the rights of the owner and possessor in good faith of a piece of land, to
administer complete justice to both of them in such a way as neither one nor the
other may enrich himself of that which does not belong to him. Guided by this
precept, it is therefore the current market value of the improvements which should be
made the basis of reimbursement. A contrary ruling would unjustly enrich the private
respondents who would otherwise be allowed to acquire a highly valued income-
yielding four-unit apartment building for a measly amount. Consequently, the parties
should therefore be allowed to adduce evidence on the present market value of the
apartment building upon which the trial court should base its finding as to the
amount of reimbursement to be paid by the landowner.
The trial court also erred in ordering the petitioner to pay monthly rentals equal to
the aggregate rentals paid by the lessees of the apartment building. Since the private
respondents have opted to appropriate the apartment building, the petitioner is thus
entitled to the possession and enjoyment of the apartment building, until he is paid
the proper indemnity, as well as of the portion of the lot where the building has been
constructed. This is so because the right to retain the improvements while the
corresponding indemnity is not paid implies the tenancy or possession in fact of the
land on which it is built, planted or sown.18 The petitioner not having been so paid,
he was entitled to retain ownership of the building and, necessarily, the income
therefrom.
It follows, too, that the Court of Appeals erred not only in upholding the trial court’s
determination of the indemnity, but also in ordering the petitioner to account for the
rentals of the apartment building from 23 June 1993 to 23 September 1993.
WHEREFORE, the decision of the Court of Appeals in CA-G.R. SP No. 32679 and the
Order of 15 November 1993 of the Regional Trial Court, Branch 101, Quezon City in
Civil Case No. Q-41470 are hereby SET ASIDE.
The case is hereby remanded to the trial court for it to determine the current market
value of the apartment building on the lot. For this purpose, the parties shall be
allowed to adduce evidence on the current market value of the apartment building.
The value so determined shall be forthwith paid by the private respondents to the
petitioner otherwise the petitioner shall be restored to the possession of the
apartment building until payment of the required indemnity.
 P R O P E R T Y F I F T H S E T | 37

No costs.

SO ORDERED.

Padilla (Chairman), Bellosillo and Kapunan, JJ., concur.

Quiason, J., On official leave.

Judgment set aside, case remanded to trial court for determination of current market
value of apartment building.

Notes.—The best proof of ownership of a piece of land is the certificate of title. (Heirs
of George Bofill vs. Court of Appeals, 237 SCRA 451 [1994])

Possession is transferred to the vendee by virtue of the notarized deed of

conveyance. (Ong Ching Po vs. Court of Appeals, 239 SCRA 341 [1994])

———o0o——— Pecson vs. Court of Appeals, 244 SCRA 407, G.R. No. 115814 May
26, 1995

No. L-54526. August 25, 1988.*
METROPOLITAN WATERWORKS AND SEWERAGE SYSTEM, petitioner, vs.
THE COURT OF APPEALS and THE CITY OF DAGUPAN, respondents.
Remedial Law; Civil Procedure; Appeal by certiorari; Parties; Court or judge, not a
party in an appeal by certiorari, but only the appellant as petitioner and the appellee
as private respondent; Joinder of court or judge, required only in special civil actions
of certiorari.—Before proceeding farther, it may be necessary to invite attention to
the common error of joining the court (be it a Regional Trial Court, the Intermediate
Appellate Court, or the Sandiganbayan) as a party respondent in an appeal by
certiorari to this Court under Rule 45 of the Rules of Court. The only parties in an
appeal by certiorari are the appellant as petitioner and the appellee as respondent.
(Cf. Elks Club vs. Rovira, 80 Phil. 272) The court which rendered the judgment
appealed from is not a party in said appeal. It is in the special civil action of certiorari
under Section 5 of Rule 65 of the Rules of Court where the court or judge is required
to be joined as party defendant or respondent. The joinder of the Intermediate
Appellate Court or the Sandiganbayan as party respondent in an appeal by certiorari
is necessary in cases where the petitioner-appellant claims that said court acted
without or in excess of its jurisdiction or with grave abuse of discretion.
Same; Evidence; Amendment of pleadings to conform to evidence; Where no
evidence was presented on the issue of removability of improvements and the case
was decided on the stipulation of facts, the pleadings are not deemed amended to
conform to the evidence.—This argument is untenable because the above-quoted
provision is premised on the fact that evidence had been introduced on an issue not
raised by the pleadings without any objection thereto being raised by the adverse
party. In the case at bar, no evidence whatsoever had been introduced by petitioner
on the issue of removability of the improvements and the case was decided on a
stipulation of facts. Consequently, the pleadings could not be deemed amended to
conform to the evidence.
Civil Law; Property; Possession; Builder in bad faith, not entitled to whatever useful
improvements it had made without right to indemnity.— Article 449 of the Civil Code
of the Philippines provides that “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.” As a
builder in bad faith, NAWASA lost whatever useful improvements it had made without
right to indemnity (Santos vs. Mojida, Jan. 31, 1969, 26 SCRA 703).
Same; Same; Same; Same; Rights of a possessor in good faith and a possessor in
bad faith.—Moreover, under Article 546 of said code, only a possessor in good faith
shall be refunded for useful expenses with the right of retention until reimbursed; and
under Article 547 thereof, only a possessor in good faith may remove useful
improvements if this can be done without damage to the principal thing and if the
P R O P E R T Y F I F T H S E T | 38
person who recovers the possession does not exercise the option of reimbursing the
useful expenses. The right given a possessor in bad faith is to remove improvements
applies only to improvements for pure luxury or mere pleasure, provided the thing
suffers no injury thereby and the lawful possessor does not prefer to retain them by
paying the value they may have at the time he enters into possession (Article 549,
Id.).
PETITION for review on certiorari of the decision of the Court of Appeals.
The facts are stated in the opinion of the Court.
Miguel T. Caguioa, Ireneo B. Orlino and Manuel D. Victoria for respondent City of
Dagupan.
FERIA, J.:
This is a petition for review on certiorari of the decision of the Court of Appeals which
affirmed the decision of the then Court of First Instance of Pangasinan. The lower
court had declared respondent City of Dagupan the lawful owner of the Dagupan
Waterworks System and held that the National Waterworks and Sewerage Authority,
now petitioner Metropolitan Waterworks and Sewerage System, was a possessor in
bad faith and hence not entitled to indemnity for the useful improvements it had
introduced.
Before proceeding further, it may be necessary to invite attention to the common
error of joining the court (be it a Regional Trial Court, the Intermediate Appellate
Court, or the Sandiganbayan) as a party respondent in an appeal by certiorari to this
Court under Rule 45 of the Rules of Court. The only parties in an appeal by certiorari
are the appellant as petitioner and the appellee as respondent. (Cf. Elks Club vs.
Rovira, 80 Phil. 272) The court which rendered the judgment appealed from is not a
party in said appeal. It is in the special civil action of certiorari under Section 5 of
Rule 65 of the Rules of Court where the court or judge is required to be joined as
party defendant or respondent. The joinder of the Intermediate Appellate Court or
the Sandiganbayan as party respondent in an appeal by certiorari is necessary in
cases where the petitioner-appellant claims that said court acted without or in excess
of its jurisdiction or with grave abuse of discretion. An example of this is a case
where the petitioner-appellant claims that the Intermediate Appellate Court or the
Sandiganbayan acted with grave abuse of discretion in making its findings of fact,
thus justifying the review by this court of said findings of fact. (See the exceptions to
the rule of conclusiveness of the findings of fact of the Intermediate Appellate Court
or the Sandiganbayan in the case of Sacay vs. Sandiganbayan, G.R. Nos. 66497-98,
July 10, 1986.) In such a case, the petition for review on certiorari under Rule 45 of
the Rules of Court is at the same time a petition for certiorari under Rule 65, and the

joinder of the Intermediate Appellate Court or the Sandiganbayan becomes
necessary. (Cf. Lianga Lumber Company vs. Lianga Timber Co., Inc., March 31, 1977,
76 SCRA 197).
The City of Dagupan (hereinafter referred to as the CITY) filed a complaint against
the former National Waterworks and Sewerage Authority (hereinafter referred to as
the NAWASA), now the Metropolitan Waterworks and Sewerage System (hereinafter
referred to as MWSS), for recovery of the ownership and possession of the Dagupan
Waterworks System. NAWASA interposed as one of its special defenses R.A. 1383
which vested upon it the ownership, possession and control of all waterworks
systems throughout the Philippines and as one of its counterclaims the
reimbursement of the expenses it had incurred for necessary and useful
improvements amounting to P255,000.00. Judgment was rendered by the trial court
in favor of the CITY on the basis of a stipulation of facts. The trial court found
NAWASA to be a possessor in bad faith and hence not entitled to the reimbursement
claimed by it. NAWASA appealed to the then Court of Appeals and argued in its lone
assignment of error that the CITY should have been held liable for the amortization of
the balance of the loan secured by NAWASA for the improvement of the Dagupan
Waterworks System. The appellate court affirmed the judgment of the trial court and
ruled as follows:
“However, as already found above, these useful expenses were made in utter bad
faith for they were instituted after the complaint was filed and after numerous
Supreme Court decisions were promulgated declaring unconstitutional the taking by
NAWASA of the patrimonial waterworks systems of cities, municipalities and provinces
without just compensation.
“Under Article 546 of the New Civil Code cited by the appellant, it is clear that a
builder or a possessor in bad faith is not entitled to indemnity for any useful
improvement on the premises. (Santos vs. Mojica, L-25450, Jan. 31, 1969). In fact,
he is not entitled to any right regarding the useful expenses (II Paras [1971] 387). He
shall not have any right whatsoever. Consequently, the owner shall be entitled to all
of the useful improvements without any obligation on his part (Jurado, Civil Law
Reviewer [1974] 223).”
Petitioner-Appellant MWSS, successor-in-interest of the NAWASA, appealed to this
Court raising the sole issue of whether or not it has the right to remove all the useful
improvements introduced by NAWASA to the Dagupan Waterworks System,
notwithstanding the fact that NAWASA was found to be a possessor in bad faith. In
support of its claim for removal of said useful improvements, MWSS argues that the
pertinent laws on the subject, particularly Articles 546, 547 and 549 of the Civil Code
of the Philippines, do not definitely settle the question of whether a possessor in bad
faith has the right to remove useful improvements. To bolster its claim MWSS further
P R O P E R T Y F I F T H S E T | 39
cites the decisions in the cases of Mindanao Academy, Inc. vs. Yap (13 SCRA 190)
and Carbonell vs. Court of Appeals (69 SCRA 99).
The CITY in its brief questions the raising of the issue of the removal of useful
improvements for the first time in this Court, inasmuch as it was not raised in the trial
court, much less assigned as an error before the then Court of Appeals. The CITY
further argues that petitioner, as a possessor in bad faith, has absolutely no right to
the useful improvements; that the rulings in the cases cited by petitioner are not
applicable to the case at bar; that even assuming that petitioner has the right to
remove the useful improvements, such improvements were not actually identified,
and hence a rehearing would be required which is improper at this stage of the
proceedings; and finally, that such improvements, even if they could be identified,
could not be separated without causing substantial injury or damage to the Dagupan
Waterworks System.
The procedural objection of the CITY is technically correct. NAWASA should have
alleged its additional counterclaim in the alternative—for the reimbursement of the
expenses it had incurred for necessary and useful improvements or for the removal of
all the useful improvements it had introduced.
Petitioner, however, argues that although such issue of removal was never pleaded
as a counterclaim, nevertheless it was joined with the implied consent of the CITY,
because the latter never filed a counter-manifestation or objection to petitioner’s
manifestation wherein it stated that the improvements were separable from the
system, and quotes the first part of Sec. 5 of Rule 10 of the Rules of Court to support
its contention. Said provision reads as follows:
“SEC. 5. Amendment to conform to or authorize presentation of evidence.—When
issues not raised by the pleadings are tried by express or implied consent of the
parties, they shall be treated in all respects, as if they had been raised in the
pleadings. Such amendment of the pleadings as may be necessary to cause them to
conform to the evidence and to raise these issues may be made upon motion of any
party at any time, even after judgment; but failure so to amend does not affect the
result of the trial of these issues. xxx”
This argument is untenable because the above-quoted provision is premised on the
fact that evidence had been introduced on an issue not raised by the pleadings
without any objection thereto being raised by the adverse party. In the case at bar,
no evidence whatsoever had been introduced by petitioner on the issue of
removability of the improvements and the case was decided on a stipulation of facts.
Consequently, the pleadings could not be deemed amended to conform to the
evidence.

However, We shall overlook this procedural defect and rule on the main issue raised
in this appeal, to wit: Does a possessor in bad faith have the right to remove useful
improvements?
The answer is clearly in the negative. Recognized authorities on the subject are
agreed on this point.**
Article 449 of the Civil Code of the Philippines provides that ”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.” As a builder in bad faith, NAWASA lost whatever useful
improvements it had made without right to indemnity (Santos vs. Mojica, Jan. 31,
1969, 26 SCRA 703).
Moreover, under Article 546 of said code, only a possessor in good faith shall be
refunded for useful expenses with the right of retention until reimbursed; and under
Article 547 thereof, only a possessor in good faith may remove useful improvements
if this can be done without damage to the principal thing and if the person who
recovers the possession does not exercise the option of reimbursing the useful
expenses. The right given a possessor in bad faith is to remove improvements applies
only to improvements for pure luxury or mere pleasure, provided the thing suffers no
injury thereby and the lawfu l possessor does not prefer to retain them by paying the
value they have at the time he enters into possession (Article 549, id.).
The decision in the case of Mindanao Academy, Inc. vs. Yap (13 SCRA 190) cited by
petitioner does not support its stand. On the contrary, this Court ruled in said case
that “if the defendant constructed a new building, as he alleges, he cannot recover its
value because the construction was done after the filing of the action for annulment,
thus rendering him a builder in bad faith who is denied by law any right of
reimbursement.” What this Court allowed appellant Yap to remove were the
equipment, books, furniture and fixtures brought in by him, because they were
outside of the scope of the judgment and may be retained by him.
Neither may the decision in the case of Carbonell vs. Court of Appeals (69 SCRA 99),
also cited by petitioner, be invoked to modify the clear provisions of the Civil Code of
the Philippines that a possessor in bad faith is not entitled to reimbursement of useful
expenses or to removal of useful improvements.
In said case, both the trial court and the Court of Appeals found that respondents
Infantes were possessors in good faith. On appeal, the First Division of this Court
reversed the decision of the Court of Appeals and declared petitioner Carbonell to
have the superior right to the land in question. On the question of whether or not
respondents Infantes were possessors in good faith, four Members ruled that they
were not, but as a matter of equity allowed them to remove the useful improvements
P R O P E R T Y F I F T H S E T | 40
they had introduced on the land. Justice Teehankee (now Chief Justice) concurred on
the same premise as the dissenting opinion of Justice Munoz Palma that both the
conflicting buyers of the real property in question, namely petitioner Carbonell as the
first buyer and respondents Infantes as the second buyer, may be deemed
purchasers in good faith at the respective dates of their purchase. Justice Munoz
Palma dissented on the ground that since both purchasers were undoubtedly in good
faith, respondents Infantes’ prior registration of the sale in good faith entitled them to
the ownership of the land. Inasmuch as only four Members concurred in ruling that
respondents Infantes were possessors in bad faith and two Members ruled that they
were possessors in good faith, said decision does not establish a precedent.
Moreover, the equitable consideration present in said case are not present in the case
at bar.
WHEREFORE, the decision of the appellate court is affirmed with costs against
petitioner.
SO ORDERED.
Fernan, Gutierrez, Jr., Paras and Cruz, JJ., concur.
Alampay, *** J., took no part.
Notes.—Useful expenses are incurred to give greater utility or productivity to the
thing. They are reimbursed only to the possessor in good faith as a compensation or
reward for him. The possessor in bad faith, on the other hand, knowing his want of
right, cannot claim reimbursement for expenses incurred to increase his own benefit
from the thing hence, he is not allowed to recover such expenses, (Tolentino, Civil
Code of the Philippines, Vol. II, 1983 Ed., p. 261.)
——o0o—— Metropolitan Waterworks and Sewerage System vs. Court of Appeals,
143 SCRA 623, No. L-54526 August 25, 1988
No. L-73418. September 20, 1988.*

PELICULA SABIDO and MAXIMO RANCES, petitioners vs. THE HONORABLE
INTERMEDIATE APPELLATE COURT and DOMINADOR STA. ANA,
respondents.
Civil Law; Property; Builder in Bad Faith; Useful Improvements; A builder in bad faith
loses what is built without right to indemnity. Only a possessor in good faith shall be
refunded for useful expenses with the right of rentention until reimbursed.—Hence, it
is clear that the private respondent has to remove all his constructions over Lot “B”
and vacate the premises. This is his only option. Being adjudged in privy with spouses
Dasals, he cannot avail himself of the rights granted to a builder in good faith. He,
therefore, must remove all his useful improvements over Lot “B” at his own expense
and if the same have already been removed, he cannot be entitled to the right of
retention or to any reimbursement. Thus, in the case of Metropolitan Waterworks and
Sewerage System v. Court of Appeals, (143 SCRA 623, 629), we ruled: “Article 449 of
the Civil Code of the Philippines provides that ‘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.’ As a builder in bad faith, NAWASA lost whatever useful improvements it
had made without right to indemnity (Santos y Mojica, Jan. 31, 1969, 26 SCRA 703).
“Moreover, under Article 546 of said code, only a possessor in good faith shall be
refunded for useful expenses with the right of retention until reimbursed; and under
Article 547 thereof, only a possessor in good faith may remove useful improvements
if this can be done without damage to the principal thing and if the person who
recovers the possession does not exercise the option of reimbursing the useful
expenses. The right given a possessor in bad faith to remove improvements applies
only to improvements for pure luxury or mere pleasure,provided the thing suffers no
injury thereby and the lawful possessor does not prefer to retain them by paying the
value they have at the time he enters into possession.
PETITION for certiorari to review the decision of the then Intermediate Appellate
Court.
The facts are stated in the opinion of Court.
GUTIERREZ, JR., J.:
This petition for review on certiorari seeks to set aside the decision of the then
Intermediate Appellate Court which nullified the orders of the trial court for the
issuance of the writs of execution and demolition in favor of the petitioners and which
ordered the trial court to assess the value of the demolished properties of the private
respondent for the purposes of set-off against respondent’s liability to the petitioners.
This case originated from an action for quieting of title which was filed by the
spouses Victor Dasal and Maria Pecunio against herein petitioners, Maximo Rances
P R O P E R T Y F I F T H S E T | 41
and Pelicula Sabido on the question of ownership over two parcels of land otherwise
known as Lots “B” and “D”.
On October 7, 1969, the trial court presided by Judge Delfin Sunga declared the
petitioners as owners of Lots “B” and “D”. The decision became final. However, when
the decision was being carried out to put the petitioners in possession of Lot “B”, the
Provincial Sheriff found three (3) persons occupying portions of Lot “B”. One of them
was private respondent Dominador Sta. Ana.
The petitioners filed a motion to require the private respondent to show cause why
he should not be ejected from the portion of Lot “B”. In his answer, Sta. Ana claimed
ownership by purchase from one, Prudencio Lagarto, of a bigger area of which Lot
“B” is a part. He stated that the two other persons occupying the disputed portion are
his tenants.
Subsequently, an order of demolition was issued by the trial court against the private
respondent. This order was challenged by the private respondent and upon his filing
of certiorari proceedings, this Court on November 26, 1973, set aside the order of the
trial court and remanded the case to the latter for further reception of evidence to
determine: 1) Whether or not the private respondent is privy to the spouses Victor
Dasal and Maria Pecunio as the losing parties in the action below; and 2) Whether or
not the petitioners and the private respondent are litigating over the same parcel of
land or whether there is overlapping of boundaries of their respective lands.
On December 12, 1974, after conducting an ocular inspection and hearing, Judge
Sunga issued an order for the private respondent to vacate Lot “B” upon finding that
there is no proof that what the respondent allegedly purchased from Lagarto covers a
portion of Lot “B” but on the contrary, the deed of sale and tax declaration show that
what was sold to the respondent was bounded on the south by Tigman river and
therefore, the respondent’s ownership could not have extended to Lot “B” which was
separated by Tigman river and mangrove swamps from the portion he purchased.
Before the order of December 12, 1974, could be executed, however, Judge Sunga
inhibited himself from the case so the same was transferred to the then Court of First
Instance (now Branch XXI, Regional Trial Court) of Naga City presided by Judge
Mericia B. Palma.
The execution of the order met with some further delay when the records were
reconstituted. Judge Palma, feeling the need for a clearer understanding of the facts
and issues involved in the case, proceeded to hear and received evidence.
On May 16, 1983, Judge Palma issued a resolution finding that there was privity
between the private respondent and the spouses Victor Dasal and Maria Pecunio as

to the ownership of Lot “C” and as to the possession over the western portion of the
private road and the disputed Lot “B”; and that Lot “B” and the private road are not
included in the land purchased by the respondent from Lagarto.
According to the trial court, the private respondent was in the company of Dasal
(from whom he was renting Lot “C” and who was also the brother-in-law of Lagarto)
and was present when Commissioner Tubianosa inspected the land in question in
1953 supporting the claim that the respondent knew that the land was already in
dispute between Dasal and the petitioners; and if the respondent really believed that
he owns the entire Lot “B” and the private road, he should have raised his claim of
ownership when Tubianosa inspected the land. The respondent also failed to include
the land in dispute in the survey of his purchased lot with the flimsy excuse that the
surveyor failed to return to finish the survey and include the disputed land.
Before arriving at the above findings, however, the trial court clarified the issues
involved in the case. It said:
“WE NOW come to the RESOLUTION OF THE TWO ISSUES: (1) Was there privity
between Petitioner Sta. Ana and Plaintiffs Dasal? and (2) Is the disputed area
identified in paragraph ‘1’ of the foregoing enumeration, part of the land purchased
by Petitioner from Prudencio Lagarto?
“If there is a privity between the Petitioner and Dasal, then the Petitioner is bound by
the final decision in this CC No. R-396 (2040) against Dasal and therefore Petitioner is
subject to the order of execution and is bound to vacate the land in question or
subject a portion of his house and the surrounding walls to demolition. If there is no
privity then he is not bound by said final decision.” (Rollo, pp. 48-49).
In the dispositive portion, however, the trial court held:
“WHEREFORE, premises considered, the Court finds:
“1) That there is privity between the petitioner and the plaintiffs spouses Victor Dasal
and Maria Pecunio as to ownership of Lot C and as to the possession over the
western portion of the private road and the disputed Lot B as so identified in Exhibit
5;
“2) That the private road identified as within points 1, 2, 3, 4, 5, 6 and 1 in Exh. 5 is
owned by the respondents as already decided in CC No. 1103, and the same private
road and the Lot B in Exhibit 5 are both owned by the respondents as already
decided in this CC No. R-396 (2040);
“3) That the balcony of the present house of the petitioner is located in the disputed
Lot B and its southern (or southeastern) part of the western portion of the ‘private
road’;
P R O P E R T Y F I F T H S E T | 42
xxx xxx xxx
“6) That therefore, this Court recommends to the Honorable Supreme Court, that the
petitioner be ordered to remove the entire balcony and the nothern portion of the
main house to the extent of about one meter found to be standing on the private
road, as well as the northern extension of the hollow block walls on the eastern
boundary of Lot C that stand on the private road and to the northern end of Lot B
which wall measures to a total length of about 15 meters from the northern boundary
of Lot B to the southern edge of the private road; or in the alternative to require the
petitioner to pay the respondents the value of the western portion of the disputed
area which is now enclosed in the wall constructed by the petitioner;
“7) And to hold the petitioner liable to the respondents for reasonable attorney’s fees
and damages.” (Rollo, p. 52)
On June 7, 1983, the private respondent filed with this Court a pleading captioned
“Notice of Appeal for Review.” Said petition was denied in this Court’s resolution on
October 26, 1983, to wit:
L-32642 (Dominador Sta. Ana v. Hon. Delfin Vir, Sunga, etc., et al.). Considering the
petition of petitioner for review of trial court resolution dated May 16, 1983, the Court
Resolved to DENY the petition, said resolution of May 16, 1983, being in accord with
the decision of November 26, 1973 (Rec., p. 438) and the resolution of May 16, 1975
(idem, p. 595) as well as the order of December 12, 1974 (idem, p. 500) which
ordered the petitioner to vacate the premises (which is presumably final). As stated in
the aforesaid resolution of May 16, 1975, any review has to be sought by timely
appeal to the appellate court and cannot be sought in this case.” (Rollo, p. 65).
A series of resolutions were subsequently issued by this Court denying the private
respondent’s motion to reconsider the above-quoted resolution. Finally, on February
27, 1984, this Court issued a resolution ordering “the Chief of the Judgment Division
of this Court to RETURN the records thereof to the respondent court for execution of
judgment.”
On August 9, 1984, the petitioners filed motion for execution of judgment,
accompanied by a bill of costs, as follows: 1) Attorney’s fees—P25,000.00; 2) Cost of
litigation—P7,000.00; 3) Expenses for transcript of record—P600.00; 4) Expenses for
xeroxing of important papers and documents—P500.00; 5) Accrued rentals for the lot
in question—P11,800.00 and 6) Legal interest of accrued rentals at 12% a year—
P1,436.00, for a total of P46,336.00.
On October 5, 1984, the trial court issued an order granting the petitioners’ motion
for execution and application for a writ of attachment and approving the bill of costs.
In said order, the trial court ordered the demolition of any part of the private
respondent’s building and all other construction within Lot “B” and the private road.
The demolition was effected.

The private respondent appealed to the then Intermediate Appellate Court,
contending that the order of the trial court departed from the intention of the
Supreme Court’s resolution ordering execution of the judgment, for it thereby
deprived him of the alternative choice of paying the value of the disputed area which
was allowed in the trial court’s resolution of May 16, 1983, which the Supreme Court
found to be in accord with, among others, its decision in G.R. No. L-32642 (Sta. Ana
v. Sunga, 54 SCRA 36).
On September 20, 1985, the appellate court rendered the assailed decision, the
dispositive portion of which provided;
“WHEREFORE, the writs of certiorari and prohibition applied for are granted. The
Order of October 5, 1984 approving the bill of costs and granting execution of
‘previous orders’, as well as the order/ writ of demolition are hereby set aside,
Respondent Court is ordered to forthwith determine the value of the demolished
portion of petitioner’s residential building and other structures affected by the
demolition and also, to assess the value of the disputed area for purposes of set off
and whatever is the excess in value should be paid to the party entitled thereto.”
(Rollo, pp. 40-41)
In its decision, the appellate court explained the rationale behind the dispositive
portion. It said:
xxx xxx xxx
“The unqualified affirmance of said resolution of May 16, 1983, to Our Mind, carried
with it the approval of the above recommendation. The fact that the Supreme Court
was silent on the recommended alternative choice of demolition and payment of the
disputed area and merely returned the records for execution of judgment, did not
indicate that the recommended demolition was preferred. The sufficiency and efficacy
of the resolution of May 16, 1983, as the judgment to be enforced or executed,
cannot be doubted considering its substance rather than its form. The aforequoted
recommendation, itself the dispositive portion, can be ascertained as to its meaning
and operation. Thereby, the petitioner is given the option to pay the value of the
western portion of the disputed area which is enclosed in the wall constructed by said
petitioner. It is petitioner who is given the alternative choice since if he does not pay,
then he can be ordered to remove whatever structure he had introduced in the
questioned premises. Notably, petitioner indicated his willingness to pay the price of
the disputed area or otherwise exercised that option.
“Respondent Court therefore acted with grave abuse of discretion tantamount to lack
or excess of jurisdiction in abandoning the alternative choice of payment of the value
P R O P E R T Y F I F T H S E T | 43
of the area in dispute, which it authorized in its final resolution of May 16, 1983,
when it ordered execution of its ‘previous orders’ for the petitioner to vacate the land
in question and for demolition, which was set aside when the case was remanded for
hearing pursuant to the Supreme Court decision of November 26, 1973. The previous
orders referred to have not been specified by the respondent Court in its Order of
October 5, 1984. If it is the Order of December 12, 1974 which is being referred to by
respondent Court, it should have so specified; however, it did not presumably
because it was reconsidered as can be deduced from the fact that thereafter,
respondent Court further heard the parties and received their respective evidence in
compliance with the decision of November 26, 1973, after which proceedings, the
respondent Court issued its resolution of May 16, 1983.” (Rollo, p. 38)
In the petition before us, the petitioners maintain that the appellate court committed
grave abuse of discretion when it granted the private respondent the option of
exercising the alternative choice of staying in the disputed land when it has been
established that the private respondent was in privy with the spouses Victor Dasal
and Maria Pecunio and, therefore, he could not be considered a builder in good faith
as to entitle him to the alternative choice of retention; and that the demolition of the
private respondent’s construction on Lot “B” and on the private road is a logical
consequence of the finding that he was privy to the losing parties who were also the
adversaries of the petitioners in the original case.
We agree.
When this Court ordered the remand of the case between the petitioners and the
private respondent in our decision of November 26, 1973 (see Sta. Ana v. Sunga,
supra), it was precisely to determine whether herein respondent was privy to the
spouses Dasals as to make the decision against the latter and in favor of the
petitioners over Lot “B” binding upon him. And this fact was clearly pointed out by
Judge Palma in her resolution of May 16, 1983 stating that if there is privity between
the private respondent and the spouses Dasals, then the former is bound by the final
decision in CC No. R-396 (2040) which is the case between the Dasals and the
petitioners. However, an apparent confusion was brought about by the
dispositive portion of the aforementioned resolution when it recommended to this
Court either to order the respondent to remove all his constructions over Lot “B” or to
require said respondent to pay the petitioners the value of the disputed area which
was already enclosed by a wall constructed by the respondent. This, nevertheless,
was rectified when we issued the series of resolutions denying the respondent’s
petition and motions for reconsideration before this Court wherein we stated that the
resolution of May 16, 1983 was in accord, among others, with the order of December
12, 1974 “which ordered the petitioner (private respondent) to vacate the premises
(which is presumably final).”
 P R O P E R T Y F I F T H S E T | 44

Hence, it is clear that the private respondent has to remove all his constructions over
Lot “B” and vacate the premises. This is his only option. Being adjudged in privy with
the spouses Dasals, he cannot avail himself of the rights granted to a builder in good
faith. He, therefore, must remove all his useful improvements over Lot “B” at his own
expense and if the same have already been removed, he cannot be entitled to the
right of retention or to any reimbursement. Thus, in the case of Metropolitan
Waterworks and Sewarage System v. Court of Appeals, (143 SCRA 623, 629), we
ruled:
Petition granted and decision annuled and set aside.
Note.—Builder in bad faith is not entitled to whatever useful improvements it had
made without right to indemnity. (Metropolitan Waterworks and Sewarage System vs.
Court of Appeals, 143 SCRA 623.)
——o0o—— Sabido vs. Intermediate Appellate Court, 165 SCRA 498, No. L-73418
September 20, 1988

“Article 449 of the Civil Code of the Philippines provides that ‘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.’ As a builder in bad faith, NAWASA lost whatever useful
improvements it had made without right to indemnity (Santos v. Mojica, Jan. 31,
1969, 26 SCRA 703).

“Moreover, under Article 546 of said code, only a possessor in good faith shall be
refunded for useful expenses with the right of retention until reimbursed; and under
Article 547 thereof, only a possessor in good faith may remove useful improvements
if this can be done without damage to the principal thing and if the person who
recovers the possession does not exercise the option of reimbursing the useful
expenses. The right given a possessor in bad faith to remove improvements applies
only to improvements for pure luxury or mere pleasure, provided the thing suffers no
injury thereby and the lawful possessor does not prefer to retain them by paying the
value they have at the time he enters into possession (Article 549, Id.).”

We, therefore, find that the appellate court committed reversible error in holding that
the private respondent is entitled to exercise the option to pay the value of the
disputed area of Lot “B” and to reimbursement for the value of the demolished
portion of his building. We, however, affirm its ruling that the petitioner’s bill of costs
must be set aside and that while the resolution of May 16, 1983 included attorney’s
fees and damages, the necessity of proof cannot be dispensed with. Since no proof
was presented before the trial regarding any of these claims, they cannot be
awarded.

WHEREFORE, the petition is GRANTED and the decision of the court of Appeals dated
September 20, 1985 is ANNULED and SET ASIDE. The writ of attachment issued by
the trial court for the purpose of satisfying the award for damages and the bill of
costs is, however, permanently SET ASIDE.

SO ORDERED.

Fernan (C.J.), Feliciano, Bidin and Cortés, JJ., concur.


G.R. No. 176791. November 14, 2012.*
COMMUNITIES CAGAYAN, INC., petitioner, vs. SPOUSES ARSENIO
(Deceased) and ANGELES NANOL AND ANYBODY CLAIMING RIGHTS
UNDER THEM, respondents.
Civil Law; Maceda Law; Contracts to Sell; The Maceda Law governs sales of real
estate on installments.—Considering that this case stemmed from a Contract to Sell
executed by the petitioner and the respondent-spouses, we agree with petitioner that
the Maceda Law, which governs sales of real estate on installment, should be applied.
Sections 3, 4, and 5 of the Maceda Law provide for the rights of a defaulting buyer,
to wit: Section 3. In all transactions or contracts involving the sale or financing of real
estate on installment payments, including residential condominium apartments but
excluding industrial lots, commercial buildings and sales to tenants under Republic
Act Numbered Thirty-eight hundred forty-four, as amended by Republic Act
Numbered Sixty-three hundred eighty-nine, where the buyer has paid at least two
years of installments, the buyer is entitled to the following rights in case he defaults
in the payment of succeeding installments: (a) To pay, without additional interest, the
unpaid installments due within the total grace period earned by him which is hereby
fixed at the rate of one month grace period for every one year of installment
payments made: Provided, That this right shall be exercised by the buyer only once in
every five years of the life of the contract and its extensions, if any. (b) If the
contract is canceled, the seller shall refund to the buyer the cash surrender value of
the payments on the property equivalent to fifty percent of the total payments made,
and, after five years of installments, an additional five percent every year but not to
exceed ninety percent of the total payments made: Provided, That the actual
cancellation of the contract shall take place after thirty days from receipt by the buyer
of the notice of cancellation or the demand for rescission of the contract by a notarial
act and upon full payment of the cash surrender value to the buyer. Down payments,
deposits or options on the contract shall be included in the computation of the total
number of installment payments made. (Emphasis supplied.) Section 4. In case
where less than two years of installments were paid, the seller shall give the buyer a
grace period of not less than sixty days from the date the installment became due. If
the buyer fails to pay the installments due at the expiration of the grace period, the
seller may cancel the contract after thirty days from receipt by the buyer of the notice
of cancellation or the demand for rescission of the contract by a notarial act. Section
5. Under Sections 3 and 4, the buyer shall have the right to sell his rights or assign
the same to another person or to reinstate the contract by updating the account
during the grace period and before actual cancellation of the contract. The deed of
sale or assignment shall be done by notarial act.
Same; Same; Same; Before a contract to sell can be validly and effectively cancelled,
the seller has (1) to send a notarized notice of cancellation to the buyer and (2) to
P R O P E R T Y F I F T H S E T | 45
refund the cash surrender value. Until and unless the seller complies with these twin
mandatory requirements, the contract to sell between the parties remains valid and
subsisting.—We deem it necessary to point out that, under the Maceda Law, the
actual cancellation of a contract to sell takes place after 30 days from receipt by the
buyer of the notarized notice of cancellation, and upon full payment of the cash
surrender value to the buyer. In other words, before a contract to sell can be validly
and effectively cancelled, the seller has (1) to send a notarized notice of cancellation
to the buyer and (2) to refund the cash surrender value. Until and unless the seller
complies with these twin mandatory requirements, the contract to sell between the
parties remains valid and subsisting. Thus, the buyer has the right to continue
occupying the property subject of the contract to sell, and may “still reinstate the
contract by updating the account during the grace period and before the actual
cancellation” of the contract.
Same; Builders in Good Faith; Petition for Review on Certiorari; The issue of whether
respondent-spouses are builders in good faith or bad faith is a factual question, which
is beyond the scope of a petition filed under Rule 45 of the Rules of Court.—At the
outset, we emphasize that the issue of whether respondent-spouses are builders in
good faith or bad faith is a factual question, which is beyond the scope of a petition
filed under Rule 45 of the Rules of Court. In fact, petitioner is deemed to have waived
all factual issues since it appealed the case directly to this Court, instead of elevating
the matter to the CA. It has likewise not escaped our attention that after their failed
preliminary conference, the parties agreed to submit the case for resolution based on
the pleadings and exhibits presented. No trial was conducted. Thus, it is too late for
petitioner to raise at this stage of the proceedings the factual issue of whether
respondent-spouses are builders in bad faith. Hence, in view of the special
circumstances obtaining in this case, we are constrained to rely on the presumption
of good faith on the part of the respondent-spouses which the petitioner failed to
rebut.
Same; Same; Article 448 of the Civil Code applies when the builder believes that he is
the owner of the land or that by some title he has the right to build thereon, or that,
at least, he has a claim of title thereto.—Article 448 of the Civil Code applies when
the builder believes that he is the owner of the land or that by some title he has the
right to build thereon, or that, at least, he has a claim of title thereto. Concededly,
this is not present in the instant case. 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 this Court applied Article 448 even if the builders
do not have a claim of title over the property.
Same; Same; The Court applied Article 448 in Spouses Macasaet v. Spouses
Macasaet, 439 SCRA 625 (2004), notwithstanding the fact that the builders therein
knew they were not the owners of the land.—The Court likewise applied Article 448 in

Spouses Macasaet v. Spouses Macasaet, 439 SCRA 625 (2004), notwithstanding the
fact that the builders therein knew they were not the owners of the land. In said
case, the parents who owned the land allowed their son and his wife to build their
residence and business thereon. As found by this Court, their occupation was not by
mere tolerance but “upon the invitation of and with the complete approval of (their
parents), who desired that their children would occupy the premises. It arose from
familial love and a desire for family solidarity x x x.” Soon after, conflict between the
parties arose. The parents demanded their son and his wife to vacate the premises.
The Court thus ruled that as owners of the property, the parents have the right to
possession over it. However, they must reimburse their son and his wife for the
improvements they had introduced on the property because they were considered
builders in good faith even if they knew for a fact that they did not own the property.
Same; Same; The seller (the owner of the land) has two options under Article 448:
(1) he may appropriate the improvements for himself after reimbursing the buyer
(the builder in good faith) the necessary and useful expenses under Articles 546 and
548 of the Civil Code; or (2) he may sell the land to the buyer, unless its value is
considerably more than that of the improvements, in which case, the buyer shall pay
reasonable rent.—In Tuatis, we ruled that the seller (the owner of the land) has two
options under Article 448: (1) he may appropriate the improvements for himself after
reimbursing the buyer (the builder in good faith) the necessary and useful expenses
under Articles 546 and 548 of the Civil Code; or (2) he may sell the land to the buyer,
unless its value is considerably more than that of the improvements, in which case,
the buyer shall pay reasonable rent.
PETITION for review on certiorari of the decision and order of the Regional Trial
Court of Cagayan de Oro City, Br. 18.
The facts are stated in the opinion of the Court.
Salcedo-Babarin and Babarin Law Office for petitioner.
Rexy Pador for respondents.
DEL CASTILLO, J.:
Laws fill the gap in a contract.
This Petition for Certiorari1 under Rule 45 of the Rules of Court assails the December
29, 2006 Decision2 and the February 12, 2007 Order3 of the Regional Trial Court
(RTC), Cagayan de Oro City, Branch 18, in Civil Case No. 2005-158.
Factual Antecedents
P R O P E R T Y F I F T H S E T | 46
Sometime in 1994, respondent-spouses Arsenio and Angeles Nanol entered into a
Contract to Sell4 with petitioner Communities Cagayan, Inc.,5 whereby the latter
agreed to sell to respondent-spouses a house and Lots 17 and 196 located at Block
16, Camella Homes Subdivision, Cagayan de Oro City,7 for the price of P368,000.00.8
Respondent-spouses, however, did not avail of petitioner’s in-house financing due to
its high interest rates.9 Instead, they obtained a loan from Capitol Development
Bank, a sister company of petitioner, using the property as collateral.10 To facilitate
the loan, a simulated sale over the property was executed by petitioner in favor of
respondent-spouses.11 Accordingly, titles were transferred in the names of
respondent-spouses under Transfer Certificates of Title (TCT) Nos. 105202 and
105203, and submitted to Capitol Development Bank for loan processing.12
Unfortunately, the bank collapsed and closed before it could release the loan.13
Thus, on November 30, 1997, respondent-spouses entered into another Contract to
Sell14 with petitioner over the same property for the same price of P368,000.00.15
This time, respondent-spouses availed of petitioner’s in-house financing16 thus,
undertaking to pay the loan over four years, from 1997 to 2001.17
Sometime in 2000, respondent Arsenio demolished the original house and
constructed a three-story house allegedly valued at P3.5 million, more or less.18
In July 2001, respondent Arsenio died, leaving his wife, herein respondent Angeles,
to pay for the monthly amortizations.19
On September 10, 2003, petitioner sent respondent-spouses a notarized Notice of
Delinquency and Cancellation of Contract to Sell20 due to the latter’s failure to pay
the monthly amortizations.
In December 2003, petitioner filed before Branch 3 of the Municipal Trial Court in
Cities of Cagayan de Oro City, an action for unlawful detainer, docketed as C3-Dec-
2160, against respondent-spouses.21 When the case was referred for mediation,
respondent Angeles offered to pay P220,000.00 to settle the case but petitioner
refused to accept the payment.22 The case was later withdrawn and consequently
dismissed because the judge found out that the titles were already registered under
the names of respondent-spouses.23
Unfazed by the unfortunate turn of events, petitioner, on July 27, 2005, filed before
Branch 18 of the RTC, Cagayan de Oro City, a Complaint for Cancellation of Title,
Recovery of Possession, Reconveyance and Damages,24 docketed as Civil Case No.
2005-158, against respondent-spouses and all persons claiming rights under them.
Petitioner alleged that the transfer of the titles in the names of respondent-spouses
was made only in compliance with the requirements of Capitol Development Bank
and that respondent-spouses failed to pay their monthly amortizations beginning

January 2000.25 Thus, petitioner prayed that TCT Nos. T-105202 and T-105203 be
cancelled, and that respondent Angeles be ordered to vacate the subject property
and to pay petitioner reasonable monthly rentals from January 2000 plus damages.26
In her Answer,27 respondent Angeles averred that the Deed of Absolute Sale is valid,
and that petitioner is not the proper party to file the complaint because petitioner is
different from Masterplan Properties, Inc.28 She also prayed for damages by way of
compulsory counterclaim.29
In its Reply,30 petitioner attached a copy of its Certificate of Filing of Amended
Articles of Incorporation31 showing that Masterplan Properties, Inc. and petitioner
are one and the same. As to the compulsory counterclaim for damages, petitioner
denied the same on the ground of “lack of knowledge sufficient to form a belief as to
the truth or falsity of such allegation.”32
Respondent Angeles then moved for summary judgment and prayed that petitioner
be ordered to return the owner’s duplicate copies of the TCTs.33
Pursuant to Administrative Order No. 59-2005, the case was referred for mediation.34
But since the parties failed to arrive at an amicable settlement, the case was set for
preliminary conference on February 23, 2006.35
On July 7, 2006, the parties agreed to submit the case for decision based on the
pleadings and exhibits presented during the preliminary conference.36
Ruling of the Regional Trial Court
On December 29, 2006, the RTC rendered judgment declaring the Deed of Absolute
Sale invalid for lack of consideration.37 Thus, it disposed of the case in this wise:
WHEREFORE, the Court hereby declares the Deed of Absolute Sale VOID.
Accordingly, Transfer Certificate[s] of Title Nos. 105202 and 105203 in the names of
the [respondents], Arsenio (deceased) and Angeles Nanol, are ordered CANCELLED.
The [respondents] and any person claiming rights under them are directed to turn-
over the possession of the house and lot to [petitioner], Communities Cagayan, Inc.,
subject to the latter’s payment of their total monthly installments and the value of the
new house minus the cost of the original house.
SO ORDERED.38
Not satisfied, petitioner moved for reconsideration of the Decision but the Motion39
was denied in an Order40 dated February 12, 2007.
P R O P E R T Y F I F T H S E T | 47
Issue
Instead of appealing the Decision to the Court of Appeals (CA), petitioner opted to file
the instant petition directly with this Court on a pure question of law, to wit:
WHETHER X X X THE ACTION [OF] THE [RTC] BRANCH 18 X X X IN ORDERING THE
RECOVERY OF POSSESSION BY PETITIONER ‘subject to the latter’s payment of their
total monthly installments and the value of the new house minus the cost of the
original house’ IS CONTRARY TO LAW AND JURISPRUDENCE X X X.41
Petitioner’s Arguments
Petitioner seeks to delete from the dispositive portion the order requiring petitioner to
reimburse respondent-spouses the total monthly installments they had paid and the
value of the new house minus the cost of the original house.42 Petitioner claims that
there is no legal basis for the RTC to require petitioner to reimburse the cost of the
new house because respondent-spouses were in bad faith when they renovated and
improved the house, which was not yet their own.43 Petitioner further contends that
instead of ordering mutual restitution by the parties, the RTC should have applied
Republic Act No. 6552, otherwise known as the Maceda Law,44 and that instead of
awarding respondent-spouses a refund of all their monthly amortization payments,
the RTC should have ordered them to pay petitioner monthly rentals.45
Respondent Angeles’ Arguments
Instead of answering the legal issue raised by petitioner, respondent Angeles asks for
a review of the Decision of the RTC by interposing additional issues.46 She maintains
that the Deed of Absolute Sale is valid.47 Thus, the RTC erred in cancelling TCT Nos.
105202 and 105203.
Our Ruling
The petition is partly meritorious.
At the outset, we must make it clear that the issues raised by respondent Angeles
may not be entertained. For failing to file an appeal, she is bound by the Decision of
the RTC. Well entrenched is the rule that “a party who does not appeal from a
judgment can no longer seek modification or reversal of the same. He may oppose
the appeal of the other party only on grounds consistent with the judgment.”48 For
this reason, respondent Angeles may no longer question the propriety and
correctness of the annulment of the Deed of Absolute Sale, the cancellation of TCT
Nos. 105202 and 105203, and the order to vacate the property.

Hence, the only issue that must be resolved in this case is whether the RTC erred in
ordering petitioner to reimburse respondent-spouses the “total monthly installments
and the value of the new house minus the cost of the original house.”49 Otherwise
stated, the issues for our resolution are:
1) Whether petitioner is obliged to refund to respondent-spouses all the monthly
installments paid; and
2) Whether petitioner is obliged to reimburse respondent-spouses the value of the
new house minus the cost of the original house.
Respondent-spouses are entitled to
the cash surrender value of the pay-
ments on the property equivalent to
50% of the total payments made.
Considering that this case stemmed from a Contract to Sell executed by the petitioner
and the respondent-spouses, we agree with petitioner that the Maceda Law, which
governs sales of real estate on installment, should be applied.
Sections 3, 4, and 5 of the Maceda Law provide for the rights of a defaulting buyer,
to wit:
Section 3. In all transactions or contracts involving the sale or financing of real
estate on installment payments, including residential condominium apartments but
excluding industrial lots, commercial buildings and sales to tenants under Republic
Act Numbered Thirty-eight hundred forty-four, as amended by Republic Act
Numbered Sixty-three hundred eighty-nine, where the buyer has paid at least two
years of installments, the buyer is entitled to the following rights in case he defaults
in the payment of succeeding installments:
(a) To pay, without additional interest, the unpaid installments due within the total
grace period earned by him which is hereby fixed at the rate of one month grace
period for every one year of installment payments made: Provided, That this right
shall be exercised by the buyer only once in every five years of the life of the contract
and its extensions, if any.
(b) If the contract is canceled, the seller shall refund to the buyer the cash
surrender value of the payments on the property equivalent to fifty percent of the
total payments made, and, after five years of installments, an additional five percent
every year but not to exceed ninety percent of the total payments made: Provided,
That the actual cancellation of the contract shall take place after thirty days from
receipt by the buyer of the notice of cancellation or the demand for rescission of the
P R O P E R T Y F I F T H S E T | 48
contract by a notarial act and upon full payment of the cash surrender value to the
buyer.
Down payments, deposits or options on the contract shall be included in the
computation of the total number of installment payments made. (Emphasis supplied.)
Section 4. In case where less than two years of installments were paid, the seller
shall give the buyer a grace period of not less than sixty days from the date the
installment became due.
If the buyer fails to pay the installments due at the expiration of the grace period, the
seller may cancel the contract after thirty days from receipt by the buyer of the notice
of cancellation or the demand for rescission of the contract by a notarial act.
Section 5. Under Sections 3 and 4, the buyer shall have the right to sell his rights
or assign the same to another person or to reinstate the contract by updating the
account during the grace period and before actual cancellation of the contract. The
deed of sale or assignment shall be done by notarial act.
In this connection, we deem it necessary to point out that, under the Maceda Law,
the actual cancellation of a contract to sell takes place after 30 days from receipt by
the buyer of the notarized notice of cancellation,50 and upon full payment of the cash
surrender value to the buyer.51 In other words, before a contract to sell can be
validly and effectively cancelled, the seller has (1) to send a notarized notice of
cancellation to the buyer and (2) to refund the cash surrender value.52 Until and
unless the seller complies with these twin mandatory requirements, the contract to
sell between the parties remains valid and subsisting.53 Thus, the buyer has the right
to continue occupying the property subject of the contract to sell,54 and may “still
reinstate the contract by updating the account during the grace period and before the
actual cancellation”55 of the contract.
In this case, petitioner complied only with the first condition by sending a notarized
notice of cancellation to the respondent-spouses. It failed, however, to refund the
cash surrender value to the respondent-spouses. Thus, the Contract to Sell remains
valid and subsisting and supposedly, respondent-spouses have the right to continue
occupying the subject property. Unfortunately, we cannot reverse the Decision of the
RTC directing respondent-spouses to vacate and turn-over possession of the subject
property to petitioner because respondent-spouses never appealed the order. The
RTC Decision as to respondent-spouses is therefore considered final.
In addition, in view of respondent-spouses’ failure to appeal, they can no longer
reinstate the contract by updating the account. Allowing them to do so would be
unfair to the other party and is offensive to the rules of fair play, justice, and due

process. Thus, based on the factual milieu of the instant case, the most that we can
do is to order the return of the cash surrender value. Since respondent-spouses paid
at least two years of installment,56 they are entitled to receive the cash surrender
value of the payments they had made which, under Section 3(b) of the Maceda Law,
is equivalent to 50% of the total payments made.
Respondent-spouses are entitled to
reimbursement of the improvements
made on the property.
Petitioner posits that Article 448 of the Civil Code does not apply and that
respondent-spouses are not entitled to reimbursement of the value of the
improvements made on the property because they were builders in bad faith. At the
outset, we emphasize that the issue of whether respondent-spouses are builders in
good faith or bad faith is a factual question, which is beyond the scope of a petition
filed under Rule 45 of the Rules of Court.57 In fact, petitioner is deemed to have
waived all factual issues since it appealed the case directly to this Court,58 instead of
elevating the matter to the CA. It has likewise not escaped our attention that after
their failed preliminary conference, the parties agreed to submit the case for
resolution based on the pleadings and exhibits presented. No trial was conducted.
Thus, it is too late for petitioner to raise at this stage of the proceedings the factual
issue of whether respondent-spouses are builders in bad faith. Hence, in view of the
special circumstances obtaining in this case, we are constrained to rely on the
presumption of good faith on the part of the respondent-spouses which the petitioner
failed to rebut. Thus, respondent-spouses being presumed builders in good faith, we
now rule on the applicability of Article 448 of the Civil Code.
As a general rule, Article 448 on builders in good faith does not apply where there is
a contractual relation between the parties,59 such as in the instant case. We went
over the records of this case and we note that the parties failed to attach a copy of
the Contract to Sell. As such, we are constrained to apply Article 448 of the Civil
Code, which provides viz.:
ART. 448. The owner of the land on which anything has been built, sown or planted
in good faith, shall have the right to appropriate as his own the works, sowing or
planting, after payment of the indemnity provided for in Articles 546 and 548, or to
oblige the one who built or planted to pay the price of the land, and the one who
sowed, the proper rent. However, the builder or planter cannot be obliged to buy the
land if its value is considerably more than that of the building or trees. In such case,
he shall pay reasonable rent, if the owner of the land does not choose to appropriate
the building or trees after proper indemnity. The parties shall agree upon the terms
of the lease and in case of disagreement, the court shall fix the terms thereof.
P R O P E R T Y F I F T H S E T | 49
Article 448 of the Civil Code applies when the builder believes that he is the owner of
the land or that by some title he has the right to build thereon,60 or that, at least, he
has a claim of title thereto.61 Concededly, this is not present in the instant case. 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 this
Court applied Article 448 even if the builders do not have a claim of title over the
property. Thus:
This Court has ruled that this provision covers only cases in which the builders,
sowers or planters believe themselves to be owners of the land or, at least, to have a
claim of title thereto. It does not apply when the interest is merely that of a holder,
such as a mere tenant, agent or usufructuary. From these pronouncements, good
faith is identified by the belief that the land is owned; or that—by some title—one has
the right to build, plant, or sow thereon.
However, in some special cases, this Court has used Article 448 by recognizing good
faith beyond this limited definition. Thus, in Del Campo v. Abesia, this provision was
applied to one whose house—despite having been built at the time he was still co-
owner—overlapped with the land of another. This article was also applied to cases
wherein a builder had constructed improvements with the consent of the owner. The
Court ruled that the law deemed the builder to be in good faith. In Sarmiento v.
Agana, the builders were found to be in good faith despite their reliance on the
consent of another, whom they had mistakenly believed to be the owner of the
land.62
The Court likewise applied Article 448 in Spouses Macasaet v. Spouses Macasaet63
notwithstanding the fact that the builders therein knew they were not the owners of
the land. In said case, the parents who owned the land allowed their son and his wife
to build their residence and business thereon. As found by this Court, their occupation
was not by mere tolerance but “upon the invitation of and with the complete approval
of (their parents), who desired that their children would occupy the premises. It arose
from familial love and a desire for family solidarity x x x.”64 Soon after, conflict
between the parties arose. The parents demanded their son and his wife to vacate
the premises. The Court thus ruled that as owners of the property, the parents have
the right to possession over it. However, they must reimburse their son and his wife
for the improvements they had introduced on the property because they were
considered builders in good faith even if they knew for a fact that they did not own
the property, thus:
Based on the aforecited special cases, Article 448 applies to the present factual
milieu. The established facts of this case show that respondents fully consented to
the improvements introduced by petitioners. In fact, because the children occupied
the lots upon their invitation, the parents certainly knew and approved of the

construction of the improvements introduced thereon. Thus, petitioners may be
deemed to have been in good faith when they built the structures on those lots.
The instant case is factually similar to Javier v. Javier. In that case, this Court deemed
the son to be in good faith for building the improvement (the house) with the
knowledge and consent of his father, to whom belonged the land upon which it was
built. Thus, Article 448 was applied.65
In fine, the Court applied Article 448 by construing good faith beyond its limited
definition. We find no reason not to apply the Court’s ruling in Spouses Macasaet v.
Spouses Macasaet in this case. We thus hold that Article 448 is also applicable to the
instant case. 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, we can validly presume that petitioner consented
to the improvements being constructed. This presumption is bolstered by the fact
that as the subdivision developer, petitioner must have given the respondent-spouses
permits to commence and undertake the construction. Under Article 453 of the Civil
Code, “[i]t 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.”
In view of the foregoing, we find no error on the part of the RTC in requiring
petitioner to pay respondent-spouses the value of the new house minus the cost of
the old house based on Article 448 of the Civil Code, subject to succeeding
discussions.
Petitioner has two options under
Article 448 and pursuant to the
ruling in Tuatis v. Escol66
In Tuatis, we ruled that the seller (the owner of the land) has two options under
Article 448: (1) he may appropriate the improvements for himself after reimbursing
the buyer (the builder in good faith) the necessary and useful expenses under Articles
54667 and 54868 of the Civil Code; or (2) he may sell the land to the buyer, unless
its value is considerably more than that of the improvements, in which case, the
buyer shall pay reasonable rent.69 Quoted below are the pertinent portions of our
ruling in that case:
Taking into consideration the provisions of the Deed of Sale by Installment and Article
448 of the Civil Code, Visminda has the following options:
P R O P E R T Y F I F T H S E T | 50
Under the first option, Visminda may appropriate for herself the building on the
subject property after indemnifying Tuatis for the necessary and useful expenses the
latter incurred for said building, as provided in Article 546 of the Civil Code.
It is worthy to mention that in Pecson v. Court of Appeals, the Court pronounced that
the amount to be refunded to the builder under Article 546 of the Civil Code should
be the current market value of the improvement, thus:
xxxx
Until Visminda appropriately indemnifies Tuatis for the building constructed by the
latter, Tuatis may retain possession of the building and the subject property.
Under the second option, Visminda may choose not to appropriate the building and,
instead, oblige Tuatis to pay the present or current fair value of the land. The
P10,000.00 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, arising only when Visminda has chosen her option
under Article 448 of the Civil Code.
Still under the second option, if the present or current value of the land, the subject
property herein, turns out to be considerably more than that of the building built
thereon, Tuatis cannot be obliged to pay for the subject property, but she must pay
Visminda reasonable rent for the same. Visminda and Tuatis must agree on the terms
of the lease; otherwise, the court will fix the terms.
Necessarily, the RTC should conduct additional proceedings before ordering the
execution of the judgment in Civil Case No. S-618. Initially, the RTC should determine
which of the aforementioned options Visminda will choose. Subsequently, the RTC
should ascertain: (a) under the first option, the amount of indemnification Visminda
must pay Tuatis; or (b) under the second option, the value of the subject property
vis-à-vis that of the building, and depending thereon, the price of, or the reasonable
rent for, the subject property, which Tuatis must pay Visminda.
The Court highlights that the options under Article 448 are available to Visminda, as
the owner of the subject property. There is no basis for Tuatis’ demand that, since
the value of the building she constructed is considerably higher than the subject
property, she may choose between buying the subject property from Visminda and
selling the building to Visminda for P502,073.00. Again, the choice of options is for
Visminda, not Tuatis, to make. And, 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.
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.
Visminda’s Motion for Issuance of Writ of Execution cannot be deemed as an
expression of her choice to recover possession of the subject property under the first
option, since the options under Article 448 of the Civil Code and their respective
consequences were also not clearly presented to her by the 19 April 1999 Decision of
the RTC. She must then be given the opportunity to make a choice between the
options available to her after being duly informed herein of her rights and obligations
under both.70 (Emphasis supplied.)
In conformity with the foregoing pronouncement, we hold that petitioner, as
landowner, has two options. It may appropriate the new house by reimbursing
respondent Angeles the current market value thereof minus the cost of the old house.
Under this option, respondent Angeles would have “a right of retention which negates
the obligation to pay rent.”71 In the alternative, petitioner may sell the lots to
respondent Angeles at a price equivalent to the current fair value thereof. However, if
the value of the lots is considerably more than the value of the improvement,
respondent Angeles cannot be compelled to purchase the lots. She can only be
obliged to pay petitioner reasonable rent.
In view of the foregoing disquisition and in accordance with Depra v. Dumlao72 and
Technogas Philippines Manufacturing Corporation v. Court of Appeals,73 we find it
P R O P E R T Y F I F T H S E T | 51
necessary to remand this case to the court of origin for the purpose of determining
matters necessary for the proper application of Article 448, in relation to Articles 546
and 548 of the Civil Code.
WHEREFORE, the petition is hereby PARTIALLY GRANTED. The assailed Decision
dated December 29, 2006 and the Order dated February 12, 2007 of the Regional
Trial Court, Cagayan de Oro City, Branch 18, in Civil Case No. 2005-158 are hereby
AFFIRMED with MODIFICATION that petitioner Communities Cagayan, Inc. is hereby
ordered to RETURN the cash surrender value of the payments made by respondent-
spouses on the properties, which is equivalent to 50% of the total payments made, in
accordance with Section 3(b) of Republic Act No. 6552, otherwise known as the
Maceda Law.
The case is hereby REMANDED to the Regional Trial Court, Cagayan de Oro City,
Branch 18, for further proceedings consistent with the proper application of Articles
448, 546 and 548 of the Civil Code, as follows:
1. The trial court shall determine:
a) the present or current fair value of the lots;
b) the current market value of the new house;
c) the cost of the old house; and
d) whether the value of the lots is considerably more than the current market value
of the new house minus the cost of the old house.
2. After said amounts shall have been determined by competent evidence, the trial
court shall render judgment as follows:
a) Petitioner shall be granted a period of 15 days within which to exercise its option
under the law (Article 448, Civil Code), whether to appropriate the new house by
paying to respondent Angeles the current market value of the new house minus the
cost of the old house, or to oblige respondent Angeles to pay the price of the lots.
The amounts to be respectively paid by the parties, in accordance with the option
thus exercised by written notice to 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 trial court in favor of the party entitled to receive it.
b) If petitioner exercises the option to oblige respondent Angeles to pay the price of
the lots but the latter rejects such purchase because, as found by the trial court, the
value of the lots is considerably more than the value of the new house minus the cost
 P R O P E R T Y F I F T H S E T | 52

of the old house, respondent Angeles shall give written notice of such rejection to
petitioner and to the trial court within 15 days from notice of petitioner’s option to sell ――o0o―― Communities Cagayan, Inc. vs. Nanol, 685 SCRA 453, G.R. No. 176791
the land. In that event, the parties shall be given a period of 15 days from such November 14, 2012
notice of rejection within which to agree upon the terms of the lease, and give the
trial court formal written notice of the 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 period and terms of the
lease, including the monthly rental, which shall be payable within the first five days of
each calendar month. Respondent Angeles shall not make any further constructions
or improvements on the building. Upon expiration of the period, or upon default by
respondent Angeles in the payment of rentals for two consecutive months, petitioner
shall be entitled to terminate the forced lease, to recover its land, and to have the
new house removed by respondent Angeles or at the latter’s expense.

c) In any event, respondent Angeles shall pay petitioner reasonable compensation

for the occupancy of the property for the period counted from the time the Decision
dated December 29, 2006 became final as to respondent Angeles or 15 days after
she received a copy of the said Decision up to the date petitioner serves notice of its
option to appropriate the encroaching structures, otherwise up to the actual transfer
of ownership to respondent Angeles or, in case a forced lease has to be imposed, 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 non-extendible,
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.

SO ORDERED.

Carpio (Chairperson), Brion, Perez and Perlas-Bernabe, JJ., concur.

Petition partially granted, judgment and order affirmed with modification.

Notes.―The Maceda Law applies to contracts of sale of real estate on installment

payments, including residential condominium apartments but excluding industrial lots,
commercial buildings and sales to tenants. (Garcia vs. Court of Appeals, 619 SCRA
280 [2010])

Good faith consists in the belief of the builder that the land he is building on is his
and in his ignorance of a defect or flaw in his title. (Angeles vs. Pascual, 658 SCRA 23
[2011])