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G.R.No.108894
RepublicofthePhilippines
SUPREMECOURT
Manila
THIRDDIVISION
G.R.No.108894February10,1997
TECNOGASPHILIPPINESMANUFACTURINGCORPORATION,petitioner,
vs.
COURTOFAPPEALS(FORMERSPECIALSEVENTEENTHDIVISION)andEDUARDOUY,respondents.
PANGANIBAN,J.:
The parties in this case are owners of adjoining lots in Paraaque, Metro Manila. It was discovered in a
survey, that a portion of a building of petitioner, which was presumably constructed by its predecessorin
interest,encroachedonaportionofthelotownedbyprivaterespondent.Whataretherightsandobligations
of the parties? Is petitioner considered a builder in bad faith because, as held by respondent Court, he is
"presumed to know the metes and bounds of his property as described in his certificate of title"? Does
petitioner succeed into the good faith or bad faith of his predecessorininterest which presumably
constructedthebuilding?
ThesearethequestionsraisedinthepetitionforreviewoftheDecision1datedAugust28,1992,inCAG.R.CV
No.28293ofrespondentCourt2wherethedispositionreads:3

WHEREFORE, premises considered, the Decision of the Regional Trial Court is hereby reversed and set
asideandanotheroneentered
1.Dismissingthecomplaintforlackofcauseofaction
2. OrderingTecnogas to pay the sum of P2,000.00 per month as reasonable rental from October 4, 1979
untilappelleevacatestheland
3.Toremovethestructuresandsurroundingwallsontheencroachedarea
4.Orderingappelleetopaythevalueofthelandoccupiedbythetwostoreybuilding
5.OrderingappelleetopaythesumofP20,000.00forandasattorney'sfees
6.Costsagainstappellee.
Acting on the motions for reconsideration of both petitioner and private respondent, respondent Court
orderedthedeletionofparagraph4of
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thedispositiveportioninanAmendedDecisiondatedFebruary9,1993,asfollows:4
WHEREFORE,premisesconsidered,ourdecisionofAugust28,1992isherebymodifieddeletingparagraph
4ofthedispositiveportionofourdecisionwhichreads:
4.Orderingappelleetopaythevalueofthelandoccupiedbythetwostoreybuilding.
ThemotionforreconsiderationofappelleeisherebyDENIEDforlackofmerit.
TheforegoingAmendedDecisionisalsochallengedintheinstantpetition.
TheFacts
The facts are not disputed. Respondent Court merely reproduced the factual findings of the trial court, as
follows:5
That plaintiff (herein petitioner) which is a corporation duly organized and existing under and by virtue of
PhilippinelawsistheregisteredownerofaparceloflandsituatedinBarrioSanDionisio,Paraaque,Metro
ManilaknownasLot4331A(shouldbe4531A)ofLot4531oftheCadastralSurveyofParaaque,Metro
Manila,coveredbyTransferCertificateofTitleNo.409316oftheRegistryofDeedsoftheProvinceofRizal
that said land was purchased by plaintiff from Pariz Industries, Inc. in 1970, together with all the buildings
andimprovementsincludingthewallexistingthereonthatthedefendant(hereinprivaterespondent)isthe
registered owner of a parcel of land known as Lot No. 4531B of Lot 4531 of the Cadastral Survey of
Paraaque,LRC(GLRO)Rec.No.19645coveredbyTransferCertificateofTitleNo.279838,oftheRegistry
ofDeedsfortheProvinceofRizalthatsaidlandwhichadjoinsplaintiff'slandwaspurchasedbydefendant
from a certain Enrile Antonio also in 1970 that in 1971, defendant purchased another lot also adjoining
plaintiffs land from a certain Miguel Rodriguez and the same was registered in defendant's name under
TransferCertificateofTitleNo.31390,oftheRegistryofDeedsfortheProvinceofRizalthatportionsofthe
buildingsandwallboughtbyplaintifftogetherwiththelandfromParizIndustriesareoccupyingaportionof
defendant'sadjoininglandthatuponlearningoftheencroachmentoroccupationbyitsbuildingsandwallof
a portion of defendant's land, plaintiff offered to buy from defendant that particular portion of defendant's
land occupied by portions of its buildings and wall with an area of 770 square meters, more or less, but
defendant,however,refusedtheoffer.In1973,thepartiesenteredintoaprivateagreementbeforeacertain
Col.RosalesinMalacaang,whereinplaintiffagreedtodemolishthewallatthebackportionofitslandthus
givingtodefendantpossessionofaportionofhislandpreviouslyenclosedbyplaintiff'swallthatdefendant
laterfiledacomplaintbeforetheofficeofMunicipalEngineerofParaaque,MetroManilaaswellasbefore
theOfficeoftheProvincialFiscalofRizalagainstplaintiffinconnectionwiththeencroachmentoroccupation
byplaintiff'sbuildingsandwallsofaportionofitslandbutsaidcomplaintdidnotprosperthatdefendantdug
orcausedtobedugacanalalongplaintiff'swall,aportionofwhichcollapsedinJune,1980,andledtothe
filingbyplaintiffofthesupplementalcomplaintintheaboveentitledcaseandaseparatecriminalcomplaint
formaliciousmischiefagainstdefendantandhiswifewhichultimatelyresultedintotheconvictionincourtof
defendant'swifeforthecrimeofmaliciousmischiefthatwhiletrialofthecasewasinprogress,plaintifffiled
inCourtaformalproposalforsettlementofthecasebutsaidproposal,however,wasignoredbydefendant.

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After trial on the merits, the Regional Trial Court 6 of Pasay City, Branch 117, in Civil Case No. PQ7631P,
renderedadecisiondatedDecember4,1989infavorofpetitionerwhowastheplaintifftherein.Thedispositiveportion
reads:7

WHEREFORE,judgmentisherebyrenderedinfavorofplaintiffandagainstdefendantandorderingthelatter
toselltoplaintiffthatportionoflandownedbyhimandoccupiedbyportionsofplaintiff'sbuildingsandwallat
thepriceofP2,000.00persquaremeterandtopaytheformer:
1. The sum of P44,000.00 to compensate for the losses in materials and properties incurred by plaintiff
throughthieveryasaresultofthedestructionofitswall
2.ThesumofP7,500.00asandbywayofattorney'sfeesand
3.Thecostsofthissuit.
Appeal was duly interposed with respondent Court, which as previously stated, reversed and set aside the
decisionoftheRegionalTrialCourtandrenderedtheassailedDecisionandAmendedDecision.Hence,this
recourseunderRule45oftheRulesofCourt.
TheIssues
Thepetitionraisesthefollowingissues:8
(A)
WhetherornottherespondentCourtofAppealserredinholdingthepetitionerabuilderinbadfaithbecause
itis"presumedtoknowthemetesandboundsofhisproperty."
(B)
Whether or not the respondent Court ofAppeals erred when it used the amicable settlement between the
petitionerandtheprivaterespondent,wherebothpartiesagreedtothedemolitionoftherearportionofthe
fence,asestoppelamountingtorecognitionbypetitionerofrespondent'srightoverhispropertyincludingthe
portions of the land where the other structures and the building stand, which were not included in the
settlement.
(C)
Whether or not the respondent Court of Appeals erred in ordering the removal of the "structures and
surrounding walls on the encroached area" and in withdrawing its earlier ruling in its August 28, 1992
decisionforthepetitioner"topayforthevalueofthelandoccupied"bythebuilding,onlybecausetheprivate
respondent has "manifested its choice to demolish" it despite the absence of compulsory sale where the
builder fails to pay for the land, and which "choice" private respondent deliberately deleted from its
September1,1980answertothesupplementalcomplaintintheRegionalTrialCourt.
InitsMemorandum,petitionerposesthefollowingissues:
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A.
ThetimewhentodeterminethegoodfaithofthebuilderunderArticle448oftheNewCivilCode,isreckoned
during the period when it was actually being built and in a case where no evidence was presented nor
introducedastothegoodfaithorbadfaithofthebuilderatthattime,asinthiscase,hemustbepresumed
tobea"builderingoodfaith,"since"badfaithcannotbepresumed."9
B.

Inaspecific"boundaryoverlapsituation"whichinvolvesabuilderingoodfaith,asinthiscase,itisnowwell
settled that the lot owner, who builds on the adjacent lot is not charged with "constructive notice" of the
technicalmetesandboundscontainedintheirtorrenstitlestodeterminetheexactandpreciseextentofhis
boundaryperimeter.10
C.

The respondent court's citation of the twin cases of Tuason & Co. v. Lumanlan and Tuason & Co. v.
Macalindongisnotthe"judicialauthority"foraboundarydisputesituationbetweenadjacenttorrenstitledlot
owners,asthefactsofthepresentcasedonotfallwithinnorsquarewiththeinvolvedprincipleofadissimilar
case.11
D.

Quite contrary to respondent Uy's reasoning, petitioner Tecnogas continues to be a builder in good faith,
evenifitsubsequentlybuilt/repairedthewalls/otherpermanentstructuresthereonwhilethecaseaquowas
pendingandevenwhilerespondentsentthepetitionermanyletters/filedcasesthereon.12
D.(E.)

The amicable settlement between the parties should be interpreted as a contract and enforced only in
accordance with its explicit terms, and not over and beyond that agreed upon because the courts do not
havethepowertocreateacontractnorexpanditsscope.13
E.(F.)

Asageneralrule,althoughthelandownerhastheoptiontochoosebetween:(1)"buyingthebuildingbuiltin
goodfaith",or(2)"sellingtheportionofhislandonwhichstandsthebuilding"underArticle448oftheCivil
Code the first option is not absolute, because an exception thereto, once it would be impractical for the
landownertochoosetoexercisethefirstalternative,i.e.buythatportionofthehousestandingonhisland,
for the whole building might be rendered useless. The workable solution is for him to select the second
alternative, namely, to sell to the builder that part of his land on which was constructed a portion of the
house.14
Privaterespondent,ontheotherhand,arguesthatthepetitionis"sufferingfromthefollowingflaws:15
1. It did not give the exact citations of cases decided by the Honorable Supreme Court that allegedly
contradictstherulingoftheHon.CourtofAppealsbasedonthedoctrinelaiddowninTuasonvs.Lumanlan
casecitingalsoTuasonvs.Macalindongcase(Supra).
2.AssumingthatthedoctrineintheallegedCoTaovs.ChicocaseiscontradictorytothedoctrineinTuason
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vs.LumanlanandTuasonvs.Macalindong,thetwocasesbeingmorecurrent,thesameshouldprevail.
Further,privaterespondentcontendsthatthefollowing"unmistakably"pointtothebadfaithofpetitioner:(1)
privaterespondent'spurchaseofthetwolots,"wasaheadofthepurchasebypetitionerofthebuildingand
lot from Pariz Industries" (2) the declaration of the General Manager of Tecnogas that the sale between
petitioner and Pariz Industries "was not registered" because of some problems with China Banking
Corporationand(3)theDeedofSaleinfavorofpetitionerwasregisteredinitsnameonlyin"themonthof
May1973."16
TheCourt'sRu1ing
Thepetitionshouldbegranted.
GoodFaithorBadFaith
RespondentCourt,citingthecasesofJ.M.Tuason&Co.,Inc.vs.Vda.deLumanlan17andJ.M.Tuason&Co.,
Inc. vs. Macalindong, 18 ruled that petitioner "cannot be considered in good faith" because as a land owner, it is
"presumedtoknowthemetesandboundsofhisownproperty,speciallyifthesamearereflectedinaproperlyissued
certificateoftitle.Onewhoerroneouslybuildsontheadjoininglotshouldbeconsideredabuilderin(b)ad (f)aith, there
beingpresumptiveknowledgeoftheTorrenstitle,thearea,andtheextentoftheboundaries."19

We disagree with respondent Court. The two cases it relied upon do not support its main pronouncement
thataregisteredowneroflandhaspresumptiveknowledgeofthemetesandboundsofitsownland,andis
thereforeinbadfaithifhemistakenlybuildsonanadjoiningland.Asidefromthefactthatthosecaseshad
factual moorings radically different from those obtaining here, there is nothing in those cases which would
suggest, however remotely, that bad faith is imputable to a registered owner of land when a part of his
building encroaches upon a neighbor's land, simply because he is supposedly presumed to know the
boundaries of his land as described in his certificate of title. No such doctrinal statement could have been
made in those cases because such issue was not before the Supreme Court. Quite the contrary, we have
rejectedsuchatheoryinCoTaovs.Chico,20whereweheldthatunlessoneisversedinthescienceofsurveying,
"noonecandeterminethepreciseextentorlocationofhispropertybymerelyexamininghispapertitle."

ThereisnoquestionthatwhenpetitionerpurchasedthelandfromParizIndustries,thebuildingsandother
structureswerealreadyinexistence.Therecordisnotclearastowhoactuallybuiltthosestructures,butit
maywellbeassumedthatpetitioner'spredecessorininterest,ParizIndustries,didso.Article527oftheCivil
Codepresumesgoodfaith,andsincenoproofexiststoshowthattheencroachmentoveranarrow,needle
shaped portion of private respondent's land was done in bad faith by the builder of the encroaching
structures, the latter should be presumed to have built them in good faith. 21 It is presumed that possession
continues to be enjoyed in the same character in which it was acquired, until the contrary is proved. 22 Good faith
consistsinthebeliefofthebuilderthatthelandheisbuildingonishis,andhisignoranceofanydefectorflawinhis
title.23 Hence, such good faith, by law, passed on to Pariz's successor, petitioner in this case. Further, "(w)here one
derivestitletopropertyfromanother,theact,declaration,oromissionofthelatter,whileholdingthetitle,inrelationto
the property, is evidence against the former." 24 And possession acquired in good faith does not lose this character
exceptincaseandfromthemomentfactsexistwhichshowthatthepossessorisnotunawarethathepossessesthe
thing improperly or wrongfully. 25 The good faith ceases from the moment defects in the title are made known to the
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possessor,byextraneousevidenceorbysuitforrecoveryofthepropertybythetrueowner.26

Recallthattheencroachmentinthepresentcasewascausedbyaveryslightdeviationoftheerectedwall
(as fence) which was supposed to run in a straight line from point 9 to point 1 of petitioner's lot. It was an
errorwhich,inthecontextoftheattendantfacts,wasconsistentwithgoodfaith.Consequently,thebuilder,if
suedbytheaggrievedlandownerforrecoveryofpossession,couldhaveinvokedtheprovisionsofArt.448
oftheCivilCode,whichreads:
Theownerofthelandonwhichanythinghasbeenbuilt,sownorplantedingoodfaith,shallhavetherightto
appropriateashisowntheworks,sowingorplanting,afterpaymentoftheindemnityprovidedforinarticles
546and548,ortoobligetheonewhobuiltorplantedtopaythepriceoftheland,andtheonewhosowed,
theproperrent.However,thebuilderorplantercannotbeobligedtobuythelandifitsvalueisconsiderably
morethanthatofthebuildingortrees.Insuchcase,heshallpayreasonablerent,iftheowneroftheland
doesnotchoosetoappropriatethebuildingortreesafterproperindemnity.Thepartiesshallagreeuponthe
termsoftheleaseandincaseofdisagreement,thecourtshallfixthetermsthereof.
Theobviousbenefittothebuilderunderthisarticleisthat,insteadofbeingoutrightlyejectedfromtheland,
hecancompelthelandownertomakeachoicebetweenthetwooptions:(1)toappropriatethebuildingby
paying the indemnity required by law, or (2) sell the land to the builder. The landowner cannot refuse to
exerciseeitheroptionandcompelinsteadtheownerofthebuildingtoremoveitfromtheland.27
Thequestion,however,iswhetherthesamebenefitcanbeinvokedbypetitionerwho,asearlierstated,is
notthebuilderoftheoffendingstructuresbutpossessesthemasbuyer.
Weanswersuchquestionintheaffirmative.
Inthefirstplace,thereisnosufficientshowingthatpetitionerwasawareoftheencroachmentatthetimeit
acquired the property from Pariz Industries. We agree with the trial court that various factors in evidence
adequatelyshowpetitioner'slackofawarenessthereof.Inanycase,contraryproofhasnotoverthrownthe
presumption of good faith under Article 527 of the Civil Code, as already stated, taken together with the
disputablepresumptionsofthelawonevidence.Thesepresumptionsstate,underSection3(a)ofRule131
oftheRulesofCourt,thatthepersonisinnocentofacrimeorwrongandunderSection3(ff)ofRule131,
thatthelawhasbeenobeyed.Infact,privaterespondentEduardoUyhimselfwasunawareofsuchintrusion
intohispropertyuntilafter1971whenhehiredasurveyor,followinghispurchaseofanotheradjoininglot,to
surveyallhisnewlyacquiredlots.Uponbeingapprisedoftheencroachment,petitionerimmediatelyoffered
tobuytheareaoccupiedbyitsbuildingaspeciesofconductconsistentwithgoodfaith.
Inthesecondplace,upondeliveryofthepropertybyParizIndustries,asseller,tothepetitioner,asbuyer,
thelatteracquiredownershipoftheproperty.Consequentlyandasearlierdiscussed,petitionerisdeemedto
have stepped into the shoes of the seller in regard to all rights of ownership over the immovable sold,
including the right to compel the private respondent to exercise either of the two options provided under
Article448oftheCivilCode.
Estoppel
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RespondentCourtruledthattheamicablesettlemententeredintobetweenpetitionerandprivaterespondent
estopstheformerfromquestioningtheprivaterespondent's"right"overthedisputedproperty.Itheldthatby
undertaking to demolish the fence under said settlement, petitioner recognized private respondent's right
over the property, and "cannot later on compel" private respondent "to sell to it the land since" private
respondent"isundernoobligationtosell."28
We do not agree. Petitioner cannot be held in estoppel for entering into the amicable settlement, the
pertinentportionsofwhichread:29
That the parties hereto have agreed that the rear portion of the fence that separates the property of the
complainant and respondent shall be demolished up to the back of the building housing the machineries
whichdemolision(sic)shallbeundertakenbythecomplainantatanytime.
Thatthefencewhichserve(s)asawallhousingtheelectroplatingmachineriesshallnotbedemolishedinthe
meantimewhichportionshallbesubjecttonegotiationbyhereinparties.
Fromtheforegoing,itisclearthatpetitioneragreedonlytothedemolitionofaportionofthewallseparating
the adjoining properties of the parties i.e. "up to the back of the building housing the machineries." But
that portion of the fence which served as the wall housing the electroplating machineries was not to be
demolished. Rather, it was to "be subject to negotiation by herein parties." The settlement may have
recognized the ownership of private respondent but such admission cannot be equated with bad faith.
Petitionerwasonlytryingtoavoidalitigation,onereasonforenteringintoanamicablesettlement.
AswasruledinOsmeavs.CommissiononAudit,30
Acompromiseisabilateralactortransactionthatisexpresslyacknowledgedasajuridicalagreementbythe
CivilCodeandisthereindealtwithinsomedetail."Acompromise,"declaresArticle2208ofsaidCode,"isa
contract whereby the parties, by making reciprocal concessions, avoid a litigation or put an end to one
alreadycommenced."
xxxxxxxxx
TheCivilCodenotonlydefinesandauthorizescompromises,itinfactencouragesthemincivilactions.Art.
2029statesthat"TheCourtshallendeavortopersuadethelitigantsinacivilcasetoagreeuponsomefair
compromise."...
Inthecontextoftheestablishedfacts,weholdthatpetitionerdidnotloseitsrightsunderArticle448ofthe
Civil Code on the basis merely of the fact that some years after acquiring the property in good faith, it
learnedaboutandaptlyrecognizedtherightofprivaterespondenttoaportionofthelandoccupiedby
itsbuilding.Thesuperveningawarenessoftheencroachmentbypetitionerdoesnotmilitateagainstitsright
toclaimthestatusofabuilderingoodfaith.Infact,ajudiciousreadingofsaidArticle448willreadilyshow
thatthelandowner'sexerciseofhisoptioncanonlytakeplaceafterthebuildershallhavecometoknowof
the intrusion in short, when both parties shall have become aware of it. Only then will the occasion for
exercisingtheoptionarise,foritisonlythenthatbothpartieswillhavebeenawarethataproblemexistsin
regardtotheirpropertyrights.
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OptionsofPrivateRespondent
Whatthenistheapplicableprovisioninthiscasewhichprivaterespondentmayinvokeashisremedy:Article
448orArticle45031oftheCivilCode?
In view of the good faith of both petitioner and private respondent, their rights and obligations are to be
governed byArt. 448.The essential fairness of this codal provision has been pointed out by Mme. Justice
AmeurfinaMelencioHerrera,citingManresaandapplicableprecedents,inthecaseofDepravs.Dumlao, 32
towit:

Wherethebuilder,planterorsowerhasactedingoodfaith,aconflictofrightsarisesbetweentheowners,
anditbecomesnecessarytoprotecttheowneroftheimprovementswithoutcausinginjusticetotheownerof
theland.Inviewoftheimpracticalityofcreatingastateofforcedcoownership,thelawhasprovidedajust
solutionbygivingtheownerofthelandtheoptiontoacquiretheimprovementsafterpaymentoftheproper
indemnity,ortoobligethebuilderorplantertopayforthelandandthesowertopaytheproperrent.Itisthe
ownerofthelandwhoisauthorizedtoexercisetheoption,becausehisrightisolder,andbecause,bythe
principleofaccession,heisentitledtotheownershipoftheaccessorything.(3Manresa213Bernardovs.
Bataclan, 37 Off. Gaz. 1382 Co Tao vs. Chan Chico, G.R. No. 49167,April 30, 1949Article applied see
Cabral,etal.vs.Ibanez[S.C.]52Off.Gaz.217Marforivs.Velasco,[C.A.]52Off.Gaz.2050).
The private respondent's insistence on the removal of the encroaching structures as the proper remedy,
which respondent Court sustained in its assailed Decisions, is thus legally flawed. This is not one of the
remedies bestowed upon him by law. It would be available only if and when he chooses to compel the
petitionertobuythelandatareasonablepricebutthelatterfailstopaysuchprice.33Thishasnottakenplace.
Hence, his options are limited to: (1) appropriating the encroaching portion of petitioner's building after payment of
properindemnity,or(2)obligingthelattertobuythelotoccupiedbythestructure.Hecannotexercisearemedyofhis
ownliking.

Neitherispetitioner'sprayerthatprivaterespondentbeorderedtoselltheland34theproperremedy.Whilethat
wasdubbedasthe"moreworkablesolution"inGranaandTorralbavs. The Court ofAppeals, et al., 35 it was not the
reliefgrantedinthatcaseasthelandownersweredirectedtoexercise"within30daysfromthisdecisiontheiroptionto
eitherbuytheportionofthepetitioners'houseontheirlandorselltosaidpetitionerstheportionoftheirlandonwhichit
stands."36Moreover,inGranaandTorralba,theareainvolvedwasonly87squaremeterswhilethiscaseinvolves520
squaremeters37.InlinewiththecaseofDepravs.Dumlao,38thiscasewillhavetoberemandedtothetrialcourtfor
furtherproceedingstofullyimplementthemandateofArt.448.ItisaruleofprocedurefortheSupremeCourttostrive
tosettletheentirecontroversyinasingleproceedingleavingnorootorbranchtobeartheseedsoffuture
litigation.39

Petitioner, however, must also pay the rent for the property occupied by its building as prescribed by
respondentCourtfromOctober4,1979,butonlyuptothedateprivaterespondentservesnoticeofitsoption
upon petitioner and the trial court that is, if such option is for private respondent to appropriate the
encroachingstructure.Insuchevent,petitionerwouldhavearightofretentionwhichnegatestheobligation
topayrent. 40 The rent should however continue if the option chosen is compulsory sale, but only up to the actual
transferofownership.
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Theawardofattorney'sfeesbyrespondentCourtagainstpetitionerisunwarrantedsincetheactionappears
tohavebeenfiledingoodfaith.Besides,thereshouldbenopenaltyontherighttolitigate.41
WHEREFORE, premises considered, the petition is hereby GRANTED and the assailed Decision and the
AmendedDecisionareREVERSEDandSETASIDE.InaccordancewiththecaseofDepravs.Dumlao,42 this
case is REMANDED to the Regional Trial Court of Pasay City, Branch 117, for further proceedings consistent with
Articles448and54643oftheCivilCode,asfollows:

Thetrialcourtshalldetermine:
a)thepresentfairpriceofprivaterespondent's520squaremeterareaofland
b) the increase in value ("plus value") which the said area of 520 square meters may have acquired by
reasonoftheexistenceoftheportionofthebuildingonthearea
c)thefairmarketvalueoftheencroachingportionofthebuildingand
d)whetherthevalueofsaidareaoflandisconsiderablymorethanthefairmarketvalueoftheportionofthe
buildingthereon.
2. After said amounts shall have been determined by competent evidence, the regional trial court shall
renderjudgmentasfollows:
a)Theprivaterespondentshallbegrantedaperiodoffifteen(15)dayswithinwhichtoexercisehisoption
under the law (Article 448, Civil Code), whether to appropriate the portion of the building as his own by
payingtopetitioneritsfairmarketvalue,ortoobligepetitionertopaythepriceofsaidarea.Theamountsto
be respectively paid by petitioner and private respondent, 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
suchnoticeoftheoptionbytenderingtheamounttothetrialcourtinfavorofthepartyentitledtoreceiveit
b) If private respondent exercises the option to oblige petitioner to pay the price of the land but the latter
rejectssuchpurchasebecause,asfoundbythetrialcourt,thevalueofthelandisconsiderablymorethan
thatoftheportionofthebuilding,petitionershallgivewrittennoticeofsuchrejectiontoprivaterespondent
andtothetrialcourtwithinfifteen(15)daysfromnoticeofprivaterespondent'soptiontoselltheland.Inthat
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 trial court formal written notice of the agreement and its
provisos.Ifnoagreementisreachedbytheparties,thetrialcourt,withinfifteen(15)daysfromandafterthe
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 two thousand pesos (P2,000.00) per month,
payable within the first five (5) days of each calendar month. The period for the forced lease shall not be
morethantwo(2)years,countedfromthefinalityofthejudgment,consideringthelongperiodoftimesince
1970thatpetitionerhasoccupiedthesubjectarea.Therentalthusfixedshallbeincreasedbytenpercent
(10%) for the second year of the forced lease. Petitioner shall not make any further constructions or
improvements on the building. Upon expiration of the twoyear period, or upon default by petitioner in the
payment of rentals for two (2) consecutive months, private respondent shall be entitled to terminate the
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forcedlease,torecoverhisland,andtohavetheportionofthebuildingremovedbypetitioneroratlatter's
expense.Therentalshereinprovidedshallbetenderedbypetitionertothetrialcourtforpaymenttoprivate
respondent, and such tender shall constitute evidence of whether or not compliance was made within the
periodfixedbythesaidcourt.
c) In any event, petitioner shall pay private respondent an amount computed at two thousand pesos
(P2,000.00)permonthasreasonablecompensationfortheoccupancyofprivaterespondent'slandforthe
period counted from October 4, 1979, up to the date private respondent serves notice of its option to
appropriatetheencroachingstructures,otherwiseuptotheactualtransferofownershiptopetitioneror,in
caseaforcedleasehastobeimposed,uptothecommencementdateoftheforcedleasereferredtointhe
precedingparagraph
d)The periods to be fixed by the trial court in its decision shall be nonextendible, 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
compliancewithsuchotheractsasmayberequiredbytheprestationduetheobligee.
Nocosts.
SOORDERED.
Narvasa,C.J.,Davide,Jr.,MeloandFrancisco,JJ.,concur.Footnotes
1Rollo,pp.1017.
2SpecialSeventeenthDivisioncomposedofJ.AntonioM.Martinez,ponente,andJJ.SerafinV.C.Guingona
andSalomeA.Montoya,concurring.
3Rollo,pp.1617.
4Ibid.,pp.2021.
5Ibid.,pp.1112.
6PresidedbyJudgeLeonardoM.Rivera.
7Rollo,p.10.
8Ibid.,pp.106107.
9Ibid.,p.392.
10Ibid.,p.399.
11Ibid.,p.402.
12Ibid.,p.410.

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13Ibid.,p.416.
14Ibid.,p.423.
15Ibid.,p.247.
16Ibid.,pp.25355.
1723SCRA230,April26,1968.
186SCRA938,December29,1962.
19Rollo,p.14.
2083Phil.543(1949).
21U.S.vs.Rapian,1Phil.294,296(1902)CityofManilavs.delRosario,5Phil.227,231(1905)Gabriel,
etal.vs.Bartolome,etal.,7Phil.699,706(1907)Sidecovs.Pascua,13Phil.342,344(1909)Arriolavs.
GomezDelaSerna,14Phil.627,629(1909)Ceavs.Villanueva,18Phil.538,542(1911)Bondadvs.
Bondad,34Phil.232,233(1916)Serravs.NationalBank,45Phil.907(1924)Escritorvs.Intermediate
AppellateCourt,155SCRA577,583,November12,1987.
22Article529oftheCivilCode.
23PleasantvilleDevelopmentCorporationvs.CourtofAppeals,253SCRA10,18,February1,1996.
24Roblezavs.CourtofAppeals,174SCRA354,365,June28,1989citingSection28,Rule130,Rulesof
Court.
25Article528oftheCivilCode.
26Ortizvs.Kayanan,92SCRA146,159,July30,1979citingArticle528,CivilCode.
27Ignaciovs.Hilario,76Phil.605(1946)Sarmientovs.Agana,129SCRA122,April30,1984.
28Rollo,p.14.
29OriginalRecords,p.179.
30238SCRA463,470471,November29,1994.
31Article450.Theownerofthelandonwhichanythinghasbeenbuilt,plantedorsowninbadfaithmay
demandthedemolitionofthework,orthattheplantingorsowingberemoved,inordertoreplacethingsin
theirformerconditionattheexpenseofthepersonwhobuilt,plantedorsowedorhemaycompelthe
builderorplantertopaythepriceoftheland,andthesowertheproperrent.
32136SCRA475,483,May16,1985.

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33Ignaciovs.Hilano,supra.InSarmientovs.Agana(129SCRA122,126,April30,1984),itwasheldthat:
Theownerofthebuildingerectedingoodfaithonalandownedbyanother,isentitledtoretainthe
possessionofthelanduntilheispaidthevalueofhisbuilding,underArticle453(nowArticle546)Theowner
oftheland,upontheotherhand,hastheoption,underArticle361(nowArticle448),eithertopayforthe
buildingortosellhislandtotheownerofthebuilding.Buthecannot,asrespondentsheredid,refuseboth
topayforthebuildingandtosellthelandandcompeltheownerofthebuildingtoremoveitfromtheland
whereitiserected.Heisentitledtosuchremotiononlywhen,afterhavingchosentosellhisland,theother
partyfailstopayforthesame.
34Rollo,pp.423426.
35109Phil.260,264(1960).
36atp.265.
37Inviewofthecompromiseagreement,theencroachingwallwastorndown.Asexplainedinprivate
respondent'sMemorandum,theareaencroachedbypetitioner'sbuildingisonly520squaremeters,no
longertheoriginal770referredtointhestatementoffactsnarratedbythetwolowercourts.(Rollo,p.467).
38Supra.
39HeirsofCrisantaY.GabrielAlmoradievs.CourtofAppeals,229SCRA15,29,January4,1994.
40Granavs.CourtofAppeals,supra.
41Castillovs.CourtofAppeals,205SCRA529,537,January27,1992,citingIlocosNorteElectricCompany
vs.CourtofAppeals,179SCRA5,November6,1989andEspirituvs.CourtofAppeals,137SCRA50,June
19,1985.
42Supra,atpp.483486.
43Article546.Necessaryexpensesshallberefundedtoeverypossessorbutonlythepossessoringood
faithmayretainthethinguntilhehasbeenreimbursedtherefor.
Usefulexpensesshallberefundedonlytothepossessoringoodfaithwiththesamerightofretention,the
personwhohasdefeatedhiminthepossessionhavingtheoptionofrefundingtheamountoftheexpenses
orofpayingtheincreaseinvaluewhichthethingmayhaveacquiredbyreasonthereof.

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