PNB vs.

CA et al
G.R. No. 121597 June 29, 2001
FACTS: The spouses Chua were the owners of a parcel of land covered by a TCT and registered in their
names. Upon the husbands death, the probate court appointed his son, private respondent Allan as
special administrator of the deceaseds intestate estate. The court also authorized Allan to obtain a loan
accommodation from PNB to be secured by a real estate mortgage over the above-mentioned parcel of
land, which Allan did for P450,000.00 with interest.
For failure to pay the loan in full, the bank extrajudicially foreclosed the real estate mortgage. During the
auction, PNB was the highest bidder. However, the loan having a payable balance, to claim this
deficiency, PNB instituted an action with the RTC, Balayan, Batangas, against both Mrs. Chua and Allan.
The RTC rendered its decision, ordering the dismissal of PNBs complaint. On appeal, the CA affirmed the
RTC decision by dismissing PNBs appeal for lack of merit.
Hence, the present petition for review on certiorari under Rule 45 of the Rules of Court.
ISSUE: The WON it was error for the CA to rule that petitioner may no longer pursue by civil action the
recovery of the balance of indebtedness after having foreclosed the property securing the same.
HELD: petition is DENIED. The assailed decision of the CA is AFFIRMED.
No
Petitioner relies on Prudential Bank v. Martinez, 189 SCRA 612, 615 (1990), holding that in extrajudicial
foreclosure of mortgage, when the proceeds of the sale are insufficient to pay the debt, the mortgagee
has the right to recover the deficiency from the mortgagor.
However, it must be pointed out that petitioners cited cases involve ordinary debts secured by a
mortgage. The case at bar, we must stress, involves a foreclosure of mortgage arising out of a settlement
of estate, wherein the administrator mortgaged a property belonging to the estate of the decedent,
pursuant to an authority given by the probate court. As the CA correctly stated, the Rules of Court on
Special Proceedings comes into play decisively. The applicable rule is Section 7 of Rule 86 of the Revised
Rules of Court ( which PNB contends is not.)
In the present case it is undisputed that the conditions under the aforecited rule have been complied
with [see notes]. It follows that we must consider Sec. 7 of Rule 86, appropriately applicable to the
controversy at hand, which in summary [and case law as well] grants to the mortgagee three distinct,
independent and mutually exclusive remedies that can be alternatively pursued by the mortgage
creditor for the satisfaction of his credit in case the mortgagor dies, among them:
(1) to waive the mortgage and claim the entire debt from the estate of the mortgagor as an ordinary
claim;

(2) to foreclose the mortgage judicially and prove any deficiency as an ordinary claim; and
(3) to rely on the mortgage exclusively, foreclosing the same at any time before it is barred by
prescription without right to file a claim for any deficiency.
Clearly petitioner herein has chosen the mortgage-creditors option of extrajudicially foreclosing the
mortgaged property of the Chuas. This choice now bars any subsequent deficiency claim against the
estate of the deceased. Petitioner may no longer avail of the complaint for the recovery of the balance
of indebtedness against said estate, after petitioner foreclosed the property securing the mortgage in its
favor. It follows that in this case no further liability remains on the part of respondents and the
deceaseds estate.
NOTES:
Section 7, Rule 86 of the Rules of Court, which states that:
Sec. 7. Rule 86. Mortgage debt due from estate. A creditor holding a claim against the deceased
secured by mortgage or other collateral security, may abandon the security and prosecute his claim in
the manner provided in this rule, and share in the general distribution of the assets of the estate; or he
may foreclose his mortgage or realize upon his security, by action in court, making the executor or
administrator a party defendant, and if there is a judgment for a deficiency, after the sale of the
mortgaged premises, or the property pledged, in the foreclosure or other proceeding to realize upon the
security, he may claim his deficiency judgment in the manner provided in the preceding section; or he
may rely upon his mortgage or other security alone and foreclose the same at any time within the
period of the statute of limitations, and in that event he shall not be admitted as a creditor, and shall
receive no share in the distribution of the other assets of the estate; but nothing herein contained shall
prohibit the executor or administrator from redeeming the property mortgaged or pledged by paying
the debt for which it is hold as security, under the direction of the court if the court shall adjudge it to be
for the interest of the estate that such redemption shall be made.
To begin with, it is clear from the text of Section 7, Rule 89, that once the deed of real estate mortgage
is recorded in the proper Registry of Deeds, together with the corresponding court order authorizing the
administrator to mortgage the property, said deed shall be valid as if it has been executed by the
deceased himself. Section 7 provides in part:
Sec. 7. Rule 89. Regulations for granting authority to sell, mortgage, or otherwise encumber estate The
court having jurisdiction of the estate of the deceased may authorize the executor or administrator to
sell personal estate, or to sell, mortgage, or otherwise encumber real estate, in cases provided by these
rules when it appears necessary or beneficial under the following regulations:
xxx
(f) There shall be recorded in the registry of deeds of the province in which the real estate thus sold,
mortgaged, or otherwise encumbered is situated, a certified copy of the order of the court, together
with the deed of the executor or administrator for such real estate, which shall be valid as if the deed
had been executed by the deceased in his lifetime.

Republic of the Philippines, Benguet & Atok vs. Court of Appeals & De La Rosa
G.R. No. L-43938, April 15, 1988
Cruz, J.:
Doctrine: The owner of a piece of land has rights not only to its surface but also to everything
underneath and the airspace above it up to a reasonable height. The rights over the land are indivisible
and the land itself cannot be half agricultural and half mineral. The classification must be categorical; the
land must be either completely mineral or completely agricultural.
Facts: These cases arose from the application for registration of a parcel of land filed on February 11,
1965, by Jose de la Rosa on his own behalf and on behalf of his three children, Victoria, Benjamin and
Eduardo. The land, situated in Tuding, Itogon, Benguet Province, was divided into 9 lots and covered by
plan Psu-225009. According to the application, Lots 1-5 were sold to Jose de la Rosa and Lots 6-9 to his
children by Mamaya Balbalio and Jaime Alberto, respectively, in 1964.
The application was separately opposed by Benguet Consolidated, Inc. as to Lots 1-5, Atok Big Wedge
Corporation, as to Portions of Lots 1-5 and all of Lots 6-9, and by the Republic of the Philippines, through
the Bureau of Forestry Development, as to lots 1-9.
In support of the application, both Balbalio and Alberto testified that they had acquired the subject land
by virtue of prescription Balbalio claimed to have received Lots 1-5 from her father shortly after the
Liberation.
Benguet opposed on the ground that the June Bug mineral claim covering Lots 1-5 was sold to it on
September 22, 1934, by the successors-in-interest of James Kelly, who located the claim in September
1909 and recorded it on October 14, 1909. From the date of its purchase, Benguet had been in actual,
continuous and exclusive possession of the land in concept of owner, as evidenced by its construction of
adits, its affidavits of annual assessment, its geological mappings, geological samplings and trench side
cuts, and its payment of taxes on the land.
For its part, Atok alleged that a portion of Lots 1-5 and all of Lots 6-9 were covered by the Emma and
Fredia mineral claims located by Harrison and Reynolds on December 25, 1930, and recorded on January
2, 1931, in the office of the mining recorder of Baguio. These claims were purchased from these locators
on November 2, 1931, by Atok, which has since then been in open, continuous and exclusive possession
of the said lots as evidenced by its annual assessment work on the claims, such as the boring of tunnels,
and its payment of annual taxes thereon.
The Bureau of Forestry Development also interposed its objection, arguing that the land sought to be
registered was covered by the Central Cordillera Forest Reserve under Proclamation No. 217 dated
February 16, 1929. Moreover, by reason of its nature, it was not subject to alienation under the
Constitutions of 1935 and 1973.

The trial court denied the application, holding that the applicants had failed to prove their claim of
possession and ownership of the land sought to be registered.
The applicants appealed to the respondent court, which reversed the trial court and recognized the
claims of the applicant, but subject to the rights of Benguet and Atok respecting their mining claims. In
other words, the Court of Appeals affirmed the surface rights of the de la Rosas over the land while at
the same time reserving the sub-surface rights of Benguet and Atok by virtue of their mining claims.
Both Benguet and Atok have appealed to this Court, invoking their superior right of ownership.
Issue: Whether respondent courts decision, i.e. the surface rights of the de la Rosas over the land
while at the same time reserving the sub-surface rights of Benguet and Atok by virtue of their mining
claim, is correct.
Held: No. Our holding is that Benguet and Atok have exclusive rights to the property in question by
virtue of their respective mining claims which they validly acquired before the Constitution of 1935
prohibited the alienation of all lands of the public domain except agricultural lands, subject to vested
rights existing at the time of its adoption. The land was not and could not have been transferred to the
private respondents by virtue of acquisitive prescription, nor could its use be shared simultaneously by
them and the mining companies for agricultural and mineral purposes. It is true that the subject
property was considered forest land and included in the Central Cordillera Forest Reserve, but this did
not impair the rights already vested in Benguet and Atok at that time. Such rights were not affected
either by the stricture in the Commonwealth Constitution against the alienation of all lands of the public
domain except those agricultural in nature for this was made subject to existing rights. The perfection of
the mining claim converted the property to mineral land and under the laws then in force removed it
from the public domain. By such act, the locators acquired exclusive rights over the land, against even
the government, without need of any further act such as the purchase of the land or the obtention of a
patent over it. As the land had become the private property of the locators, they had the right to
transfer the same, as they did, to Benguet and Atok. The Court of Appeals justified this by saying there is
no conflict of interest between the owners of the surface rights and the owners of the sub-surface
rights. This is rather doctrine, for it is a well-known principle that the owner of piece of land has rights
not only to its surface but also to everything underneath and the airspace above it up to a reasonable
height. Under the aforesaid ruling, the land is classified as mineral underneath and agricultural on the
surface, subject to separate claims of title. This is also difficult to understand, especially in its practical
application.
The Court feels that the rights over the land are indivisible and that the land itself cannot be half
agricultural and half mineral. The classification must be categorical; the land must be either completely
mineral or completely agricultural. In the instant case, as already observed, the land which was originally
classified as forest land ceased to be so and became mineral and completely mineral once the
mining claims were perfected. As long as mining operations were being undertaken thereon, or
underneath, it did not cease to be so and become agricultural, even if only partly so, because it was
enclosed with a fence and was cultivated by those who were unlawfully occupying the surface.

This is an application of the Regalian doctrine which, as its name implies, is intended for the benefit of
the State, not of private persons. The rule simply reserves to the State all minerals that may be found in
public and even private land devoted to agricultural, industrial, commercial, residential or (for) any
purpose other than mining. Thus, if a person is the owner of agricultural land in which minerals are
discovered, his ownership of such land does not give him the right to extract or utilize the said minerals
without the permission of the State to which such minerals belong.
The flaw in the reasoning of the respondent court is in supposing that the rights over the land could be
used for both mining and non-mining purposes simultaneously. The correct interpretation is that once
minerals are discovered in the land, whatever the use to which it is being devoted at the time, such use
may be discontinued by the State to enable it to extract the minerals therein in the exercise of its
sovereign prerogative. The land is thus converted to mineral land and may not be used by any private
party, including the registered owner thereof, for any other purpose that will impede the mining
operations to be undertaken therein, For the loss sustained by such owner, he is of course entitled to
just compensation under the Mining Laws or in appropriate expropriation proceedings.

POWELL vs THE PHILIPPINE NATIONAL BANK G.R. No. L-31339 (November 27, 1929)
Villa-Real, J.:
FACTS: In order to secure payments of his debts to PNB, Severino Aldeguer executed mortage
deeds in favor of the former. Failing to settle in full his balances, Aldeguers rights and lots were
sold at a public auction wherein Asia Banking Corp. was the highest bidder. Aldeguer continued
to cultivate his lots mortgaged to the PNB by buying 40 tons of fertilizer from Felipe Gomez to
which he issued a promissory note in the amount of P5,000 which the latter endorsed to PNB.
PNB, instead of applying the harvested sugar to the payment of the promissory notes acquired
by it from Felipe Gomez, applied it to the payment of its credit against Severino P. Aldeguer
secured by the two parcels of land that produced said crops.
ISSUE: WON Severino Aldeguer can compel PNB to apply the sugar as payment of the
promissory notes to the fertilizer being the most burdensome to him.
HELD: The Court held that in accordance with the provisions of articles 1172 and 1174 of the
Civil Code, suffice it to say that such application of having the sugar pay the promissory notes to
the fertilizer which was the most burdensome debt to Aldeguer should have been made at the
time of payment, and not afterwards, when his account with the bank had already been credited.
In doing so, it waived its preferred right to said sugar for the payment of said promissory notes,
because that preferred right subsisted in so far as the sugar continued to belong to the debtor.
From the time the Philippine National Bank applied it to the payment of its credit against
Severino P. Aldeguer, with the latter's consent, said sugar ceased to belong to said Severino P.
Aldeguer, and became the property of the aforesaid Philippine National Bank.

136 SCRA 475 Civil Law Property Accession Industrial Builder in Good Faith; Owner in Good
Faith Forced Lease
Remedial Law Res Judicata Unlawful Detainer will not bar a subsequent action for Quieting of
Title
The properties of Francisco Depra and Agustin Dumlao were adjoining each other. In 1972, Dumlao
built his house however, he unwittingly built the kitchen portion of his house on Depras land. Depra
then sued Dumlao for unlawful detainer. During pre-trial, the parties agreed that Dumlao was a
builder in good faith.
Eventually, the trial court ruled that both parties were in good faith but then a forced lease was
ordered whereby Dumlao retains the kitchen but he shall pay a rental to Depra at P5.00 per month.
But Depra refused to receive the rental payments from Dumlao, instead, Depra filed an action for
quieting of title against Dumlao. In his defense, Dumlao raised the defense of res judicata
considering that the nature and purpose of the initialunlawful detainer case and that of
the subsequent quieting of title case is ejectment.
ISSUES:
1. Whether or not the order of forced lease decreed in the unlawful detainer case is valid.
2. Whether or not the subsequent case of res judicata is barred by prescription due to the prior case
ofunlawful detainer.
HELD:
1. No. The judgment of forced lease is improper. A forced lease, just like co-ownership is not
favored. It should be considered that the parties themselves stipulated that Dumlao, the builder, was
in good faith and it was later found that Depra, the owner, was also in good faith. Hence, what
applies is the provisions of Article 448 of the Civil Code, which provides in sum that:
a. Builder in good faith entitled to retain the possession of the land on which he built in good faith
until he is paid the value of the building he built in good faith;
b. Owner in good faith has the option to either (i) pay for the building OR (ii) sell his land to the
builder in good faith but builder cannot be forced to buy said land if the same is considerably more
than the value of the building.
Forced rent only comes in if the owner exercises his right to sell the land but the builder rejects it by
reason of the price thereof being considerably more than the value of the building in such case, the
parties shall agree to the terms of the lease, if they cant agree then they may bring the issue to
court.
2. No. The action for quieting of title is not barred by reason of res judicata. The cause of action in
the unlawful detainer case involves possession while the cause of action in the quieting of title case
involves ownership. Furthermore, 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.

SARMIENTO v. AGANA
FACTS:
Before Ernesto Valentino and Rebecca Lorenzo wed, Rebeccas mother offered a lot in
Paranaque that they could build their house on. In 1967, they finally built their home which cost
about PhP8,000-10,000, thinking that someday, the lot would be transferred to them in their
name. It turns out, though, that the lot was owned by the Spouses Santos who , in turn, sold the
same to Leonila Sarmiento in 1974. A year later, Sarmiento ordered the Valentinos to vacate
their lot, then eventually filed and Ejection Suit against them.
The lower court ruled in Sarmientos favor and ordered her to pay 20,000 as the value of the
house. But the case was then elevated to the CFI of Pasay (w/ Agana as Judge), and pursuant
to Art.448 of the CC (March 1979), the Court ordered Sarmiento to exercise the option in 60
days to pay Ernesto 40,000 as the value of the house or to let them purchase the land for
25,000. Sarmiento was not able to exercise this option, and the CFI allowed Ernesto to deposit
the 25,000 purchase price with the Court.
ISSUE:
Whether or not the land owner is compelled to exercise either option: to buy the building or to
sell the land?
HELD:
Ernesto and his wife (BPS) were clearly in good faith as they believed that Rebeccas mother
has the capacity to eventually transfer the title of the land to them. In line with this, Sarmiento
(LO) was required to exercise only 2 options: To purchase the house or to sell the land to them,
in this case, based on the value decided by the courts. Since Sarmiento failed to exercise the
option within the allotted period, and based on Art. 448, the LO is compelled by law to exercise
either option. Not choosing either is a violation of the law.

ARTICLE 454- ALVIOLA VS. CA

Facts:- Victoria Tinagan bought 2 parcels of land and took possession thereof withher son,
Agustin- after 10 years, Alviola occupied portions thereof, built a copra dryer and store,tolerate
occupancy by Victoria and Agustin
- after 15 years, Victoria and Agustin died- wife of Agustin (referred as Tinagan) filed a
complaint for recovery of possessionagainst AlviolaRTC/CA: in favor of Tinagan, Alviola to
vacate and remove store and dryer, payrentals until improvements are removed
- Alviola contends that Victoria ceded her right over the property in favor of Alviola,Tinagans
tolerated their occupancy making the landowners in bad faith and they, Alviolas in good faith,
copra store and dryer are of permanent structures thus cannot be removed
Issue; W/n Article 454 may be applied where the landowner is in bad faith, the BPS ingood
faith? NO
Held:- Tax declarations of the 2 parcels of land declared to be in the name of theTinagans- bad
faith on the part of Alviola upon construction of improvements despite beingfully aware that the
parcels of land belonged to Victoria Tinagan- bad faith also on the part of Tinagans (wife of
Agustin and children) because they had knowledge of the constructions and still tolerated their
occupancy thereon-in pari delicto, treated as if both parties acted in good faith, 448 is applicable
not 454- but 448 will not apply upon the dryer and store being transferable in nature- to fall
under 448, the construction must be of permanent character, attached to thesoil- if transitory,
there is no accession and the builder must remove the construction- proper remedy was an
action to eject the builder from the land

Balucanag v Francisco Digest

Facts of the Case:
The petitioner bought a lot owned by Mrs. Charvet which was then previously leased by the
latter to one Richard Stohner. The said lease contract provided that the lessee may erect
structures and improvements which shall remain as lessee's property and he may remove them
at any time. It further provided that should the lessee fail to remove the same structures or
improvements withing two months after the expiration of the lease, the lessor may remove them
or cause them to be removed at the expense of the lessee. Stohner made fillings on the land
and constructed a house. When he failed to pay the rent, the petitioner, through counsel, sent
Stohner a demand letter ordering him to vacate the lot. The lessee contended that he is a
'builder in good faith.'
Issue: Is the lessee a builder in good faith?
Ruling: No, the lessee cannot be considered a builder in good faith. The provision under Art.
448 of the New Civil Code (Philippine) on a builder of good faith applies only to the owner of the
land who believes he is the rightful owner thereof, but not to a lessee who's interest in the land
is derived only from a rental contract. Neither can Stohner be considered a 'possessor in good
faith'. A possessor in good faith is a party who possesses property believing that he is its rightful
owner but discovers later on a flaw in his title that could indicate that he might not be its legal
owner. It cannot apply to a lessee because he knows right from the start that he is merely a
lessee and not the owner of the premises.
As a mere lessee, he introduces improvements to the property at his own risk such that he
cannot recover from the owner the reimbursements nor he has any right to retain the premises
until reimbursements. What applies in this case is Art. 1678 (NCC) which provides that, " if the
lessee, makes, in good faith, useful improvements which are suitable to the use for which the
lease is intended, without altering the form or substance of the property leased, the lessor upon
the termination of the lease shall pay the lessee 1/2 of the value of the improvements at the
time. Should the lessor refuse to reimburse said amount, the lessee may remove the
improvements even though the principal thing may suffer damage thereby. He shall not.
however, cause any more impairment upon the property leased than is necessary."

DEL CAMPO V. ABESIA

When land is co-owned by two parties, but the co-ownership is terminated, Article 448 governs
in case real property (like a house) encroaches the land of another. This is provided that good
faith exists.
FACTS:The case involves two friendly parties who are co-owners of a corner lot at Flores and
Cavan Streets in Cebu City. Plaintiff owns 2/3 of the lot and Defendant owns 1/3 of the same.
The total size of the lot is 45 square meters (which is about the size of a typical Starbux caf)
Later on, the two parties decided to divide the co-owned property into two lots. 30 square
meters went to the plaintiffs and 15 square meters went to the defendants. From the sketch
plan, both parties discovered that the house of the defendants occupied a portion of the
plaintiffs adjacent lot, eating 5 sqm of it. The parties then requested the trial court to adjudicate
who should take possession of the encroached 5 sqm.
The trial court ruled that Art 448 does not apply. 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. Since art 448 does not apply, the Plaintiff cannot be obliged to
pay for the portion of defendants house that entered into the 30 sqm lot, AND Defendant cannot
be obliged to pay for the price of the 5 sqm their house occupied. Why? The RTC believed the
rules of co-ownership should govern, and not that of accession.
RTC then assigned the full 30sqm to Plaintiff and ordered Defendants to demolish the 5sqm
part of their house encroaching the 30sqm lot of the Plaintiffs. Defendants where aghast at
having to axe the family home, hence they appealed.
CA affirmed the decision. So we have the SC coming to the rescue.
ISSUE: w/n the rules of accession applies (and not coownership) on property that used to be
co-owned, but was subdivided.
HELD:The rule of accession applies because co-ownership was terminated upon the
partitioning of the lot. Art 448 therefore governs. The house of Defendant overlapped that of
Plaintiff, but this was built on good faith. Hence, the plaintiffs have the right to choose one of two
options
> Appropriate the 5sqm portion of the house of Defendants after indemnifying the Defendants;
or > Obliging the Defendants to pay a portion of the land on which their home rested. ( or they
can rent it)

Spouses Del Ocampo v. Abesia

G.R. No. L-49219, April 15, 1998, 160 SCRA 379
Gancayco, J.
FACTS: Plaintiffs spouses Concepcion Fernandez and Estanislao Del Campo and defendant
Bernarda Fernandez Abesia are co-owners of parcel of land with an area of 45 square meters
and divided in the proportion of 2/3 and 1/3 share each, respectively. A commissioner, who is
appointed by the court, conducted a survey and recommended that the property be divided into
two lots: Lot 1161 A with an area of 30 square meters for the plaintiffs and Lot 1161 B with
an area of 15 square meters for the defendants. However, it was shown in the sketch plan that
the house of the defendant occupied the portion with an area of 5 square meters of Lot 1161
A of plaintiffs. The parties asked the court to finally settle and adjudicate who among the parties
should take possession of the 5 square meters of land.
ISSUES:
1.) Whether or not Article 448 of the Civil Code, the rights of a builder in good faith, should be
applied to the plaintiff-spouses Del Campo.
2.) Whether or not the house of the defendant Abesia should be removed and demolished at
their expense.

HELD: 1.) Yes. 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 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 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.) It depends. Applying Article 448 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 defendant 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.

Ignao v. Intermediate Appellate Court

G.R. No. 72876, January 18, 1991, 193 SCRA 17
Fernan, C. J.

FACTS: Petitioner Florencio Ignao and his uncles Juan Ignao and Isidro Ignao were co-owners
of a 534sqm land located in Cavite. Pursuant to an action for partition filed by petitioner, the CFI
of Cavite directed the partition of the said land. A total of 133.5 sqm was allotted to the
petitioners uncles while the remaining 266.5 was allotted to the petitioner. However, when Juan
and Isidro built their houses they encroached upon a portion of land belonging to Florencio. A
geodetic engineer surveyed the land and it was found out that Juan and Isidro occupied a total
of 101sqm of Florencios lot.

The trial court which based its decision on Article 448 of the Civil Code, ruled that Florencio
should have the choice to either appropriate to himself that part of the house standing on his lot
or to require Juan and Isidro to pay the price of the land. But since the first option seems to be
impractical, it ordered to sell to Juan and Isidro those portions occupied by them because it is
the workable solution. Upon appeal petitioner contends that Article 448 cannot be applied
because they are co-owners of he subject property. However, the appellate court affirmed in
toto the decision of the trial court.

ISSUE: Whether or not Article 448 of the Civil Code is applicable in the case at bar.

HELD: Yes. It is true that Article 448 cannot be applied where a co-owner builds upon a land
owned in common. However, in the case at bar, the co-ownership has already been terminated
by virtue of the partition, thus, Article 448 now applies since the builder is not anymore
considered as an owner of the land where the house was built.

As to the workable solution applied by the lower court, the same cannot be upheld because
Article 448 clearly states that the right of choice belongs to the land owner and not upon the
builder and the courts. Thus, whether it might seem impractical, the landowner may choose to
appropriate the improvements.

IGNAO V. IAC
When co-ownership is terminated by division of land, Art 448 applies to parties in good faith. The party
whose land is encroached upon has the sole right to choose whether to sell his land encroached or to
appropriate that which encroaches his land.

FACTS:
The case involves Petitioner Florencio Ignao and his Uncles Juan and Isidro Ignao as Respondents. Both
Petitioner and Respondents co-owned land with 534 sqm (about the size of an Olympic swimming pool.)
in Cavite. The parties had a falling out (maybe the uncles had bad breath) and so attempted to partition
the land, with 133 going to the uncles and 266 going to Petitioner. The attempt failed. Later, Petitioner
discovered that the two houses of Respondent uncles encroached his land. Juan ate 42 sqm and Isidro
ate 59 sqm for the grand total of 101 sqm. He complained.
The RTC said that uncles built in good faith therefore that exempts them from damages. Art 448 therefore
applies But things didnt go to well for the Petitioner. The RTC said that if Petitioner opted to appropriate
the sections of the encroaching houses, the Uncles will be left with worthless hovels. Hence, RTC
ordered Petitioner to just sell his land which was encroached. No Good! cried Petitioner and he
appealed to the IAC. He lost again. Petitioner trooped to the SC for vindication

ISSUE:
1. Whether or not Petitioner has the right to choose whether to appropriate the house encroaching his
land or to sell his land.
2. Whether or not the courts and respondents can rob Petitioner of the options provided for under Art 448.

HELD:
Petitioner has the right whether to appropriate the houses or to sell his land! The ruling of the RTC and
IAC contravened the explicit provisions of Art 448 which granted him the explicit right to choose. The law
is clear when it bestows choice upon the aggrieved land owner and not upon the builders or the courts.

ART. 453
MUNICIPALITY OF OAS V. ROA7 PHIL. 20
FACTS:The Municipality brought the action for therecovery of a tract of land in the pueblo of
Oas,claiming that it was a part of the public square of saidtown, while Roa alleged that he was the
owner of theproperty. The defendant admitted in writing that heknew that the land is owned by the
Municipality andthat Jose Castillo, whom he bought the property didnot own the land. When Roa
constructed asubstantial building on the property in question after he acquired the property from
Castillo, theMunicipality did not oppose the construction.ISSUE:Whether or not the municipality owns
the land.HELD:Yes.

The defendant was not a purchaser ingood faith. The plaintiff, having permitted the erectionby the
defendant of a building on the land withoutobjection, acted in bad faith. The rights of the partiesmust,
therefore, be determined as if they both hadacted in good faith. To the case are applicable
thoseprovisions of the Civil Code which relate to theconstruction by one person of a building upon
landbelonging to another. Article 364 (now Art.453) of theCivil Code is as follows: "When there has been
badfaith, not only on the part of the person who built,sowed, or planted on another's land, but also on
thepart of the owner of the latter, the rights of both shallbe the same as if they had acted in good faith.
TheSupreme declared that the Municipality is the owner of the land and that it has the option of buying
thebuilding thereon, which is the property of thedefendant, or of selling to him the land on which
itstands.

LUMUNGO VS USMaN
FACTS: Dominga Usman sold and transfers her rights in and to the 3 lots in question to Jose Angeles. The
latter made the purchase with the knowledge that the property was already in dispute by Atty. Usman,
husband of Dominga, and by the plaintiffs. Angeles, upon taking possession of the land, planted the
same with coconuts, which, together with those already planted by Dominga Usman, numbered
about3,000, most of which are now fruit-bearing. In short, Angeles was a purchaser and a builder in bad
faith.
ISSUE: Whether or not Angeles is entitled to reimbursement for the coconuts tree he planted on the
property in litigation.
HELD No. It should be noted that said trees are improvements, not "necessary expenses of
preservation," which a builder, planter or sower in bad faith may recover under Arts. 452 and 546, first
paragraph, of the Civil Code. The facts and findings of both the trial court and the Court of Appeals leave
no room for doubt that Jose Angeles was a purchaser and a builder in bad faith.
The provision applicable to this case is, accordingly, Article 449 of the Civil Code, which 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."

Metropolitan Waterworks and Sewerage System v. Court of Appeals

G.R. No. L-54526, August 25, 1986, 143 SCRA 623
Martinez, J.

FACTS: Sometime in 1965, petitioner MWSS (then known as NAWASA) leased around
one hundred twenty eight (128) hectares of its land (hereafter, subject property) to
respondent CHGCCI (formerly the International Sports Development Corporation) for
twenty five (25) years and renewable for another fifteen (15) years or until the year
2005, with the stipulation allowing the latter to exercise a right of first refusal should the
subject property be made open for sale. The terms and conditions of respondent
CHGCCI's purchase thereof shall nonetheless be subject to presidential approval.
Pursuant to Letter of instruction (LOI) No. 440 issued on July 29,1976 by then President
Ferdinand E. Marcos directing petitioner MWSS to negotiate the cancellation of the
MWSS-CHGCCI lease agreement for the disposition of the subject property, Oscar
Ilustre, then General Manager of petitioner MWSS, sometime in November of 1980
informed respondent CHGCCI, through its president herein respondent Pablo Roman,
Jr., of its preferential right to buy the subject property which was up for sale. Valuation
thereof was to be made by an appraisal company of petitioner MWSS' choice, the Asian
Appraisal Co., Inc. which, on January 30, 1981, pegged a fair market value of P40.00
per square meter or a total of P53,800,000.00 for the subject property. Upon being
informed that petitioner MWSS and respondent CHGCCI had already agreed in
principle on the purchase of the subject property, President Marcos expressed his
approval of the sale as shown in his marginal note on the letter sent by respondents
Jose Roxas and Pablo Roman, Jr. dated December 20, 1982.The Board of Trustees of
petitioner MWSS thereafter passed Resolution 36-83, approving the sale of the subject
property in favor of respondent SILHOUETTE, as assignee of respondent CHGCCI. The
MWSS-SILHOUETTE sales agreement eventually pushed through. Per the Agreement
dated May 11, 1983 covering said purchase, the total price for the subject property is
P50,925,200, P25 Million of which was to be paid upon President Marcos' approval of
the contract and the balance to be paid within one (1) year from the transfer of the title
to respondent SILHOUETTE as vendee with interest at 12% per annum. The balance
was also secured by an irrevocable letter of credit. A Supplemental Agreement was
forged between petitioner MWSS and respondent SILHOUETTE on August 11, 1983 to
accurately identify the subject property. Subsequently, respondent SILHOUETTE, under
a deed of sale dated July 26, 1984, sold to respondent AYALA about sixty-seven (67)
hectares of the subject property at P110.00 per square meter. Of the total price of
around P74 Million, P25 Million was to be paid by respondent AYALA directly to
petitioner MWSS for respondent SILHOUETTE's account and P2 Million directly to
respondent SILHOUETTE. P11,600,000 was to be paid upon the issuance of title in
favor of respondent AYALA, and the remaining balance to be payable within one (1)
year with 12% per annum interest. Respondent AYALA developed the land it purchased
into a prime residential area now known as the Ayala Heights Subdivision. Almost a

decade later, petitioner MWSS on March 26, 1993 filed an action against all herein
named respondents before the Regional Trial Court of Quezon City seeking for the
declaration of nullity of the MWSS-SILHOUETTE sales agreement and all subsequent
conveyances involving the subject property, and for the recovery thereof with damages.
ISSUE: Whether or not MWSS failed to provide appropriate security measures over its own
records; Circumstances led NBI to believe that the fraudulent encashment as an inside job.

HELD: Yes. The records likewise show that MWSS failed to provide appropriate security
measures over its own records thereby laying confidential records open to unauthorized
persons. MWSS's own Fact Finding Committee, in its report submitted to their General Manager
underscored this laxity of records control. It observed that the "office of Mr. Ongtengco (Cashier
VI of the Treasury Department at the NAWASA) is quite open to any person known to him or his
staff members and that the check writer is merely on top of his table. Relying on the foregoing
statement of Mr. Ongtengco, the NBI concluded in its Report dated 2 November 1970 that the
fraudulent encashment of the 23 checks in question was an "inside job". Thus the NBI believe
that the fraudulent act was an inside job or one pulled with inside connivance at NAWASA. The
serial numbers of the checks in question conform with the numbers in current use of NAWASA,
aside from the fact that these fraudulent checks were found to be of the same kind and design
as that of NAWASA's own checks. While knowledge as to such facts may be obtained through
the possession of a NAWASA check of current issue, an outsider without information from the
inside can not possibly pinpoint which of NAWASA's various accounts has sufficient balance to
cover all these fraudulent checks. None of these checks, it should be noted, was dishonored for
insufficiency of funds.