Sarmiento vs Agana

G.R. No. L-57288

DOCTRINE: The land owner is required by the law to exercise only two (2) options:
To purchase the house or to sell the land to them. Based on Article 448, the owner
of the land is compelled by law to exercise either option. Not choosing either is a
violation of the law.
FACTS:
When respondent Ernesto Valentino was still courting his wife, the latters mother
told him that they as a couple could build a residential house on Lot D of a
subdivision located in Paranaque in 1967. Because of that, Ernesto then constructed
a residential house on the land at a cost of Php 8,000 to Php10,000. He assumed
that his wifes mother owns the land and eventually transferred it to them.
However, it turned out that the land is owned by Mr. and Mrs. Jose Santos Jr who
sold the same to the petitioner Sarmiento. On January 6, 1975, Sarmiento asked
Ernesto and his wife to vacate and later filed an ejectment suit against the spouses.
The MTC ruled that the private respondents built the residential house in good faith.
It then ordered the spouses to vacate the land after Sarmiento has paid them the
value of the land (Php20,000). The case was then elevated to the Court of First
Instance where the respondent Judge Agana has jurisdiction. Pursuant to Article 448
of the Civil Code, CFI 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: The SC agreed that respondent spouses 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.
Sarmiento, who owns the land, was required to exercise only two (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 owner of the land is compelled by law to
exercise either option. Not choosing either is a violation of the law.
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 546. The owner of the land on the other hand, has the option, under
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.