LEONCIA LIUANAG, plaintiff-appellee,

vs.
YU-SONQUIAN, defendant-appellant.
WILLARD, J.:
Yu-Chingco left Manila for China on the 23rd day of August, 1901, and died there on the 30th of
October of the same year. After his death Yu-Chiocco entered into a lease with the owner thereof,
of certain land on Calle Lemery, in Tondo, and erected certain buildings thereon. The lease of the
land was taken by Yu-Chiocco in his own name. He erected the buildings under a license issued
to him by the city of Manila, and he carried on the business of a carpenter shop therein under an
industrial license issued to him. In none of these papers was any mention made of Yu-Chingco,
or of his administratrix or heirs.
This action was brought in the court below by the plaintiff as administratrix of Yu-Chingco, and
she alleged in her complaint that the property in Tondo, hereinbefore described, belonged to the
estate of Yu-Chingco. Yu-Chiocco died in August, 1902, and the action was brought against his
executor. The court below, in its decision, found as a fact that Yu-Chiocco performed all the
necessary labor in erecting these buildings, and that the material necessary for and used in their
construction belonged to the estate of Yu-Chingco. Upon these facts he decided that the plaintiff,
as administratrix of Yu-Chingco, was the owner of one-half of the buildings. We do not think that
this judgment can be sustained. What the facts are in regard to the use in the buildings of material
belonging to the estate of Yu-Chingco, and the amount and value thereof, we do not determine.
It is enough to say that, if such material was used therein, it does not follow, as a conclusion of
law, that the owner of the material thereby became the owner of any part of the
buildings.lawphil.net
Ruling:
Article 360 of the Civil Code is as follows:
The owner of the soil who shall make thereon, in person or through another, plantings,
constructions, or works with material belonging to another person, is obliged to pay their value;
and should he have acted in bad faith he shall, furthermore, be obliged to indemnify for loss and
damage. The owner of the material shall have the right to remove it only in case he can do so
without injury to the work constructed, or without destroying the plantings, constructions, and work
done.
We think that this article is applicable to a leasehold in real estate. Upon the most favorable view
of the case for the plaintiff she has a claim for the value of the material which belonged to the
estate of Yu-Chingco, and which was actually used in the construction of the building.
The judgment of the court below in this case, No. 1517 in the court, is reversed, and after the
expiration of twenty days the case should be remanded, with directions to enter judgment in favor
of the defendant, with costs, and without prejudice to the right of plaintiff to present her aforesaid
claim against the person or estate bound to pay it, and without costs in this appeal.

JM Tuason v. Vda. de Lumanlan

Facts: That in the complaint filed in this case by plaintiff, J. M. Tuason & Co., Inc., hereinafter
called Tuason, on 30 April, 1969, the basis is that it being the registered owner of the property,
herein defendant sometime in April, 1949 unlawfully entered into possession of 800 square
meters, and therein constructed his house so that plaintiff prayed for ejectment and damages for
the occupancy; and defendant in her answer set forth affirmative defense that on 12 March, 1949,
she had bought the property she was occupying from one Pedro Deudor, and that in a
compromise agreement between Pedro and Tuason on 16 March 1953, approved by the Court
of First Instance of Quezon City, she was one of the buyers therein recognized, so that she asked
that her rights be recognized and the complaint dismissed; but on the basis of the evidence
presented by both parties in the trial, Lower Court sustained plaintiff, holding that Tuason being
the registered owner, and the question being purely one of possession, therefore, defendant's
said evidence was "completely immaterial.
All that Tuason & Co. agreed to, therefore, was to grant the Deudor buyers preferential right to
purchase "at current prices and terms" the lots occupied by them, upon their recognizing the title
of Tuason & Co., Inc., and signing new contracts therefor; and to credit them for the amounts they
had paid to the Deudors.
Issue: W/N respondent Lumanlan there is a valid transfer of ownership between the plaintiff and
the respondent.
Ruling: No, It is thus apparent that no legal basis exists for the pronouncement in the appealed
decision that Tuason & Co. had committed itself to sell to Lumanlan the lot occupied by her at a
reasonable price, or that the compromise agreement legalized the possession of the respondent,
since the latter does not rely on the compromise but, on the contrary, she assails it.
Lumanlan had chosen to ignore the Torrens title of Tuason & Co., Inc. and relied instead upon
the Deudors' claim of ownership, perhaps because such course appeared to her as more
advantageous; hence, she has only herself to blame for the consequences now that the Deudors'
claim has been abandoned by the Deudors themselves, and cannot pretend good faith.
Ordered defendant (now respondent) Estrella Vda. de Lumanlan to vacate the lot occupied by her
in Sta. Mesa Heights Subdivision, barrio Tatalon, Quezon City, and to remove therefrom the
house and other structures constructed thereon, paying P240.00 a month until restoration of the
premises to plaintiff.
GABOYA V. CUI 38 SCRA 85

FACTS:

Don Mariano Cui, widower, as owner of 3 lots situated in the City of Cebu, sold said three lots to three of
his children named Rosario C. de Encarnacion, Mercedes C. de Ramas and Antonio Ma. Cui, pro indiviso for
the sum of P64,000. However one-third of the property corresponding to Rosario C. de Encarnacion was
returned to the vendor because she was not able to pay for the purchase price which resulted to the
cancellation of the 1/3 sale. Because of the sale of these lots pro indiviso and because of the cancellation
of the sale to one of the three original vendees, Don Mariano and his children Mercedes and Antonio
became co-owners of the whole mass in equal portions. In the deed of sale vendor Don Mariano retained
for himself the usufruct of the property. Subsequently, a building was erected on a portion of this mass
facing Calderon street and was occupied by a Chinese businessman for which he paid Don Mariano P600
a month as rental. The date when the building, was constructed and by whom do not appear in the record.
Sometime after the sale to Mercedes and Antonio the two applied to the Rehabilitation Finance
Corporation (RFC) for a loan of P130,000 with which to construct a 12-door commercial building
presumably on a portion of the entire parcel corresponding to their share. On January 7, 1947 Don
Mariano, executed an authority to mortgage authorizing his two children co-owners to mortgage his
share. The loan was eventually granted and was secured by a mortgage on the three lots in question, Don
Mariano being included as one of the three mortgagors and signing the corresponding promissory note
with his two co-owners. He did not however, join in the construction of the 12-door commercial building.

The 12-door commercial building was eventually constructed and the builder-owners thereof Mercedes
and Antonio received and continued to receive the rents thereof amounting to P4,800 a month and paying
therefrom the installments due for payment on the loan to the Rehabilitation Finance Corporation.

The complaint alleges that the usufructuary right reserved in favor of Don Mariano Cui extends to and
includes the rentals of the building constructed by Antonio Cui and Mercedes Cui on the land sold to them
by their father; that the defendants retained those rentals for themselves; that the usufructuary rights of
the vendor were of the essence of the sale, and their violation entitled him to rescind (or resolve) the sale.
It prayed either for rescission with accounting, or for delivery of the rentals of the building with interests,
attorneys’ fees and costs.

Issue: Whether or not the usufruct reserved by the vendor in the deed of sale, over the lots in question
that were at the time vacant and unoccupied, gave the usufructuary the right to receive the rentals of the
commercial building constructed by the vendees with funds borrowed from the Rehabilitation and
Finance Corporation, the loan being secured by a mortgage over the lots sold.

Whether or not the failure of the vendees to pay over its rentals to the usufructuary entitled the latter to
rescind, or more properly, resolve the contract of sale.

Whether the action for rescission due to breach of the contract could still be enforced and was not yet
barred.

Held: Under the articles of the Civil Code on industrial accession by modification on the principal land
(Articles 445 to 456 of the Civil Code) such accession is limited either to buildings erected on the land of
another, or buildings constructed by the owner of the land with materials owned by someone else.

Thus, Article 445, establishing the basic rule of industrial accession, prescribes that —

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 subject to the provisions of the following articles.

while Article 449 states:

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. (Emphasis supplied)

Articles 447 and 445, in turn, treat of accession produced by the landowner’s building, planting and sowing
“with the materials of another” and when “the materials, plants or seeds belong to a third person other
than the landowner or the builder, planter or sower.
Nowhere in these articles on industrial accession is there any mention of the case of landowner building
on his own land with materials owned by himself (which is the case of appellees Mercedes and Antonio
Cui).

The Civil Code itself limits the cases of industrial accession to those involving land and materials belonging
to different owners

The usufruct over the land did not entitle the usufructuary to either the gross or the net income of the
building erected by the vendees, but only to the rental value of the portion of the land occupied by the
structure (in so far as the usufructuary was prevented from utilizing said portion), and that rental value
was not liquidated when the complaints were filed in the court below, hence, there was no default in its
payment. Actually, this theory of appellants fails to take into account that Don Mariano could not retain
ownership of the land and, at the same time, be the usufructuary thereof. His intention of the
usufructuary rights in itself imports that he was no longer its owner. For usufruct is essentially jus in re
aliena; and to be a usufructuary of one’s own property is in law a contradiction in terms, and a conceptual
absurdity.

Floresca v. Evangelista

Facts: 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, 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.
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 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. 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 letter 8 asking
him to vacate the premises as they wanted to make use of their residential lot. FLOREZA refused
to vacate unless he was first reimbursed the value of his house.
Issue: W/N Floresa is entitled for reimbursement on the improvement of the property.
Ruling No, 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
(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.

Ignacio v. Hilario 76 Phil. 605

Facts:

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, 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
plaintiff Hilario, as the legal owners of the whole property but conceding to defendants, Ignacio, 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 plaintiff, Hilario, 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 defendant, Ignacio, should be
ordered to remove the structure at their own expense and to restore plaintiff in the possession of said
lot.

Issue:

W/N Plaintiff, Hilario, can validly opt not to buy the house nor sell the land, but instead order the removal
of those structures that Ignacio built in good faith.

Ruling:

No. 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.
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 didn’t 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.
Filipinas College Inc. v. Garcia Timbang,

FILIPINAS COLLEGES INC. vs. MARIA GARCIA TIMBANG, ET AL.

[G.R. No. L-1281, September 29, 1959]

BARRERA, J.:
FACTS:
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, defendants-
appellants spouses Maria Garcia 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 tile 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. The Timbang spouses presented their opposition to each and all of this motion. 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. They contend that since 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 has lost his right and the appellants as owners of the land automatically became the
owners ipso facto.
ISSUE/S:
1. Whether or not the contention of the appellants is valid. If not, what are the remedies
left to the owner of the land if the builder fails to pay?
2. Whether or not the appellants, as owner of the land, may seek recovery of the value of
their land by a writ of execution; levy the house of the builder and sell it in public auction.
HOLDING & RATIO DECIDENDI:
NO, THE APPELLANTS CONTENTION IS SUPERFLUOUS. 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. 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 remedy left to the parties in such eventuality where the builder
fails to pay the value of the land, though the Code is silent on this Court, a builder in good faith not
be required to pay rentals. He has right to retain the land on which he has built in good faith until
he is reimbursed the expenses 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. This was ruled in the case of Miranda vs. Fadullon, et al., 97 Phil., 801. 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 second contention was without merit. 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. 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 Timbang, this Court likewise finds the
same as justified, for such amount represents, in effect, a partial payment of the value of the
land. Failure of the Timbang spouses to pay to the Sheriff or to Manila 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.

Manotok Realty, Inc. v. Tecson

MANOTOK REALTY INC v. TECSON

Manotok Realty v. Tecson

MANOTOK REALTY, INC. v. THE HONORABLE JOSE H. TECSON, Judge of the Court of First
Instance of Manila and NILO MADLANGAWA
G.R. No. L-47475 August 19, 1988
Gutierrrez, Jr., J.

FACTS:
In a complaint filed by the petitioner for recovery of possession and damages against the private
respondent, the then Court of First Instance of Manila rendered judgment declaring the defendant
Nilo Madlangawa as a builder or possessor in good faith; and ordering the plaintiff to recognize
the right of said defendant to remain in Lot No. 345, Block 1, of the Clara Tambunting Subdivision
until after he shall have been reimbursed by the plaintiff the sum of P7,500.00, without
pronouncement as to costs.
Not satisfied with the trial court’s decision, the petitioner appealed to the Court of Appeals and
upon affirmance by the latter of the decision below, the petitioner elevated its case to this Court
which dismissed the case for lack of merit.
The petitioner filed with the trial court, presided over by respondent Judge Jose H. Tecson, a
motion for the approval of petitioner’s exercise of option and for satisfaction of judgment, praying
that the court issue an order: a) approving the exercise of petitioner’s option to appropriate the
improvements introduced by the private respondent on the property; b) thereafter, private
respondent be ordered to deliver possession of the property in question to the petitioner.
After a denial of its motion for reconsideration, the petitioner filed the present petition for
mandamus alleging that the respondent judge committed grave abuse of discretion in denying his
motion to exercise option and for execution of judgment on the grounds that under Articles 448
and 546 of the Civil Code, the exercise of option belongs to the owner of the property, who is the
petitioner herein, and that upon finality of judgment, the prevailing party is entitled, as a matter of
right, to its execution which is only a ministerial act on the part of the respondent judge.
ISSUE:
Should the motion for the approval of the exercise of option be granted?
HELD:
Yes. When the decision of the trial court became final and executory, it became incumbent upon
the respondent judge to issue the necessary writ for the execution of the same. There is, therefore,
no basis for the respondent judge to deny the petitioner’s motion to avail of its option to
appropriate the improvements made on its property.
To be deemed a builder in good faith, it is essential that a person assert title to the land on which
he builds; i.e., that he be a possessor in the concept of owner and that he be unaware ‘that there
exists in his title or mode of acquisition any flaw which invalidates it. The private respondent’s
good faith ceased after the filing of the complaint below by the petitioner.
Thus, the repairs and improvements introduced by the said respondents after the complaint was
filed cannot be considered to have been built in good faith, much less, justify the denial of the
petitioner’s exercise of option. Since the improvements have been gutted by fire, and therefore,
the basis for private respondent’s right to retain the premises has already been extinguished
without the fault of the petitioner, there is no other recourse for the private respondent but to
vacate the premises and deliver the same to herein petitioner.

MWSS V. CA, CITY OF DAGUPAN, 143 SCRA 623

FACTS:
The City of Dagupan (CITY) filed a complaint against the former National Waterworks and
Sewerage Authority (NAWASA), now the Metropolitan Waterworks and Sewerage System
(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.

ISSUE:
Whether or not MWSS 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?
HELD: No.

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. 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 lawful possessor does not prefer to retain
them by paying the value they have at the time he enters into possession (Article 549).

PLEASANTVILLE DEVELOPMENT CORPORATION v. CA, GR No. 79688, 1996-02-01

Facts:
Edith Robillo purchased from petitioner a parcel of land designated as Lot 9, Phase II and located
at Taculing Road, Pleasantville Subdivision, Bacolod City. In 1975, respondent Eldred Jardinico
bought the rights to the lot from Robillo. At that time, Lot 9 was vacant.
Upon completing all payments, Jardinico secured from the Register of Deeds of Bacolod City on
December 19, 1978 Transfer Certificate of Title No. 106367 in his name. It was then that he
discovered that improvements had been introduced on Lot 9 by respondent Wilson Kee, who
had... taken possession thereof.
It appears that on March 26, 1974, Kee bought on installment Lot 8 of the same subdivision from
C.T. Torres Enterprises, Inc. (CTTEI), the exclusive real estate agent of petitioner.
After discovering that Lot 9 was occupied by Kee, Jardinico confronted him. The parties tried to
reach an amicable settlement, but failed.
On January 30, 1981, Jardinico's lawyer wrote Kee, demanding that the latter remove all
improvements and vacate Lot 9. When Kee refused to vacate Lot 9, Jardinico filed with the
Municipal Trial Court in Cities, Branch 3, Bacolod City (MTCC), a complaint for ejectment with...
damages against Kee.
Kee, in turn, filed a third-party complaint against petitioner and CTTEI.
The MTCC held that the erroneous delivery of Lot 9 to Kee was attributable to CTTEI.
On appeal, the Regional Trial Court, Branch 48, Bacolod City (RTC) ruled that petitioner and
CTTEI were not at fault or were not negligent, there being no preponderant evidence to show that
they directly participated in the delivery of Lot 9 to Kee.
The appellate court ruled that Kee was a builder in good faith, as he was unaware of the "mix-up"
when he began construction of the improvements on Lot 8.
Issues:
(1) Was Kee a builder in good faith?
(2) What is the liability, if any, of petitioner and its agent, C.T. Torres Enterprises, Inc.? and
(3) Is the award of attorney's fees proper?
Ruling:
On issue no. 1
Petitioner fails to persuade this Court to abandon the findings and conclusions of the Court of
Appeals that Kee was a builder in good faith.
The roots of the controversy can be traced directly to the errors committed by CTTEI, when it
pointed the wrong property to Wilson Kee and his wife. It is highly improbable that a purchaser of
a lot would knowingly and willingly build his residence on a lot owned by... another, deliberately
exposing himself and his family to the risk of being ejected from the land and losing all
improvements thereon, not to mention the social humiliation that would follow.
"Under the circumstances, Kee had acted in the manner of a prudent man in ascertaining the
identity of his property.
Upon Kee's receipt of the map, his wife went to the subdivision site accompanied by CTTEI's
employee, Octaviano, who authoritatively declared that the land she was pointing to was indeed
Lot 8. Having full... faith and confidence in the reputation of CTTEI, and because of the company's
positive identification of the property, Kee saw no reason to suspect that there had been a
misdelivery.
Good faith consists in the belief of the builder that the land he is building on is his and his
ignorance of any defect or flaw in his title.[9] And as good faith is presumed, petitioner has the
burden of proving bad faith on the part of Kee.[10]
At the time he built improvements on Lot 8, Kee believed that said lot was what he bought from
petitioner. He was not aware that the lot delivered to him was not Lot 8. Thus, Kee's good faith.
Petitioner failed to prove otherwise.
On issue no. 2
The rule is that the principal is responsible for the acts of the agent, done within the scope of his
authority, and should bear the damage caused to third persons.[14] On the other hand, the agent
who exceeds his authority is personally liable for the... damage.
CTTEI was acting within its authority as the sole real estate representative of petitioner when it
made the delivery to Kee. In acting within its scope of authority, it was, however, negligent. It is
this negligence that is the basis of petitioner's liability, as principal... of CTTEI, per Articles 1909
and 1910 of the Civil Code.
For such negligence, the petitioner should be held liable for damages. Now, the extent and/or
amount of damages to be awarded is a factual issue which should be determined after evidence
is adduced.
However, there is no showing that such evidence was actually presented in the trial court; hence
no damages could now be awarded.
On issue no. 3
The MTCC awarded Jardinico attorney's fees and costs in the amount of P3,000.00 and P700.00,
respectively, as prayed for in his complaint. The RTC deleted the award, consistent with its ruling
that petitioner was without fault or negligence. The Court of Appeals, however,... reinstated the
award of attorney's fees after ruling that petitioner was liable for its agent's negligence.
The award of attorney's fees lies within the discretion of the court and depends upon the
circumstances of each case.[19] We shall not interfere with the discretion of the Court of Appeals.
Jardinico was compelled to litigate for the protection of his... interests and for the recovery of
damages sustained as a result of the negligence of petitioner's agent.
Principles:
The rule is that the principal is responsible for the acts of the agent, done within the scope of his
authority, and should bear the damage caused to third persons.[14] On the other hand, the agent
who exceeds his authority is personally liable for the... damage.

Alviola v. CA

FACTS:
Victoria Tinagan bought two parcels of land in 1950. She and her son Agustin took possession of
the said land thereafter.
Sometime in 1960, petitioners occupied portions of the land whereat they built a copra dryer and
put up a store wherein they engaged in the business of buying and selling copra.
On 1975, Victoria and Agustin died, the latter survived by his wife and children who are the private
respondents in the instant case.
The private respondents filed a complaint for recovery of possession against the petitioners
asking the Regional Trial Court of Negros Oriental that they be declared the absolute owners of
the said parcels of land and that petitioners be ordered vacate the same, to remove their copra
dryer and store, to pay actual damages (in the form of rentals), moral and punitive damages,
litigation expenses and attorney's fees.

The trial court ruled in favour of the private respondents, hence this petition.
The petitioners put up the defense that the contested parcels of land are public lands, making
them qualify to become beneficiaries of the comprehensive agrarian reform program and rightful
possessors of the land in virtue of their occupation of the same for 20 years.
The petitioners also contend that the copra dryer and the store are permanent structures as they
are made of hollow blocks and cement.
Private respondents on the other hand offer overwhelming evidence of their ownership and
possession of the land and contended that they merely tolerated the petitioner’s occupation of the
disputed property.
ISSUE:
WON the petitioners have ownership over the portions of land where the copra dryer and store
are located.
HELD:
No.
The petitioners’ defense that the said parcels of land are public lands is rebutted by the Private
respondents' tax declarations and receipts of payment of real estate taxes, as well as other related
documents which prove their ownership of the disputed properties.

The record further discloses that Victoria S. Tinagan and her son, Agustin Tinagan, took
possession of the said properties in 1950, introduced improvements thereon, and for more than
40 years, have been in open, continuous, exclusive and notorious occupation thereof in the
concept of owners.
The Court brushed as an afterthought the petitioners’ later defense that the portions where the
copra dryer and store are located were ceded to them by Victoria in exchange for a prior debt
since it was not supported by any document pointing to Victoria transferring the ownership of the
said portion and the lack of declaration on the part of the petitioners.
The Court also ruled that though the petitioners were in occupation of the portions of land in
question for 20 years, they were able to do so out of the tolerance of the private respondents and
thus, their posture that they have acquired the property by "occupation" for 20 years does not
have any factual or legal foundation.
As correctly ruled by the respondent court, there was bad faith on the part of the petitioners when
they constructed the copra dryer and store on the disputed portions since they were fully aware
that the parcels of land belonged to Victoria Tinagan.
But there was likewise bad faith on the part of the private respondents, having knowledge of the
arrangement between petitioners and Victoria Tinagan relative to the construction of the copra
dryer and store.
Thus, for purposes of indemnity, Article 448 of the New Civil Code should be applied. 32 However,
the copra dryer and the store, as determined by the trial court and respondent court, are
transferable in nature. Thus, it would not fall within the coverage of Article 448. As the noted civil
law authority, Senator Arturo Tolentino, aptly explains: "To fall within the provision of this Article,
the construction must be of permanent character, attached to the soil with an idea of perpetuity;
but if it is of a transitory character or is transferable, there is no accession, and the builder must
remove the construction. The proper remedy of the landowner is an action to eject the builder
from the land." 33
The private respondents' action for recovery of possession was the suitable solution to eject
petitioners from the premises.
Petition dismissed.

Heirs of Roman Durano, Sr. vs Spouses Uy, et al.

Gr 136456

October 24, 2000

Facts:

Congressman Ramon Durano, Sr, and son Ramon Durano III and the latter’s wife Elizabeth Hotchkiss
Durano (herein petitioners) filed a case for damages against respondents for allegedly officiating a “hate
campaign” against them by lodging complaints for invasion of the respondents’ properties in
Cahumayhumayan, Danao City. The complaints were filed with the Police Department of Danao and the
Office of the President. The said complaints were investigated by the Department of Justice through the
City Fiscal and the Philippine Constabulary who later on dismissed the complaints for being baseless. The
petitioners added that the respondents spread false rumours and tales which subjected them to public
contempt and ridicule.

The respondents made a counterclaim demanding the return of their properties claiming that in August
1970, they received mimeographed notices signed by Durano Sr. informing them that the land they
occupied is owned by Cebu Portland Cement Company and was purchased by Durano & Co for immediate
turn over. However, before many of them could even receive the notice, employees of Durano & Co.
proceeded to bulldoze the land, destroying plantings and improvements made therein. On September 15,
1970, Durano & Co. sold the subject land to Durano III. Claiming that during that time, they were not able
to find local relief as Durano Sr.’s wife was the Mayor at that time causing them to send a letter to then
President Marcos.

On April 22, 1975, petitioners moved to dismiss their own complaint – granted by the RTC without
prejudice to the counterclaim of the respondents. According to the petitioners, the property originally
belonged to Cepoc and was sold to Durano & Co., and later on to Durano III. But Durano III claimed that
he only learned of the bulldozing when complaints were already filed by the respondents. He further
claimed that they dismissed the complaints against the respondents as a form of reconciliation with them
but the latter still pursued their counterclaim. According to him, the properties of the claimants, except
for Sepulveda Uy, daughter of former Mayor of Danao, were occupants of the said property and Durano
& Co. purchased the adjacent property for mining coal.

The RTC ordered in their ruling that the petitioners are to pay damages to the respondent and the return
of the properties of Venancia Repaso, Hermogenes Tito, and Marcelino Gonzales as well as the property
of Angeles Sepulveda Uy with respect to the are found outside of the Cepoc property. On appeal, the CA
affirmed the decision but modified the judgement ordering the return of all properties to the respondents.

Issue:

Whether or not the respondents are builders in good faith.

Decision:

The court ruled that the records indicated that the respondents’ possession has already ripened into
ownership by acquisitive prescription. Acquisitive prescription is acquired by possession in good faith with
just tittle for a period of ten years. One is considered in good faith when he is not aware of any flaw in his
tittle or mode of acquisition of the property and there is just title when the adverse claimant came into
possession of the property through one of the modes of acquiring ownership provided by law.

In the case at bar, the respondents acquired the properties by purchase or inheritance and ever since
were in actual, continuous, open, and adverse possession. The records showed that they were unaware
of any claims over the properties until the notices given on August 1970.

The petitioners on the other hand cannot claim good faith. The validity of the certificates of title obtained
by them were doubted by the courts as there was a lack of registered title of Cepoc and the deed of sale
between Cepoc and Durano & Co. were not notarised and therefore unregisterable. Furthermore, a buyer
could not have been ignorant that the property they bought were adversely possessed by the respondents
nor did they investigate the property – the petitioners cannot be held to be buyers in good faith, nor
builders in good faith.

Under the Article 449 of the New Civil Code, he who builds etc. in bad faith on the land of another, loses
what is built etc. without right of indemnity. Furthermore, Article 450 gives the landowner over which
something was built in bad faith the power to demolish the works to replace the property in their former
condition at the expense of the builder. And Article 451 gives him the right to damages.

***non property issue: piercing the veil of corporate fiction

Test in determining the applicability of the doctrine of piercing the veil of corporate fiction:

1. Control

2. Control myst have been used to commit fraud or a wrong

3. Control and breach of duty must proximately cause the injury or unjust loss complained off.

Bernardo v. Bataclan G.R. No. L-44606, November 28, 1938

Facts:

By a contract of sale executed from Pastor Samonte and others ownership of a parcel of land of about 90
hectares. To secure possession of the land from the vendors the said plaintiff, on July 20, 1929, instituted
a civil case. The trial court found for the plaintiff in a decision which was affirmed by this Supreme Court
on appeal (G.R. No. 33017). 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 the civil case, plaintiff,
on June 11, 1931, instituted against him a civil case. In this case, plaintiff was declared owner but the
defendant was held to be a possessor in good faith, entitled for reimbursement in the total sum of P1,642,
for work done and improvements made.
 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. 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. When
he failed to pay for the land, the defendant herein lost his right of retention.

Issue:

Whether or not there is good faith.

Held:

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 the respects, the
same is affirmed, without pronouncement regarding costs. So ordered

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 rapture 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.

Heirs of Roman Durano, Sr. vs Spouses Uy, et al.

Gr 136456

October 24, 2000

Facts:

Congressman Ramon Durano, Sr, and son Ramon Durano III and the latter’s wife Elizabeth Hotchkiss
Durano (herein petitioners) filed a case for damages against respondents for allegedly officiating a “hate
campaign” against them by lodging complaints for invasion of the respondents’ properties in
Cahumayhumayan, Danao City. The complaints were filed with the Police Department of Danao and the
Office of the President. The said complaints were investigated by the Department of Justice through the
City Fiscal and the Philippine Constabulary who later on dismissed the complaints for being baseless. The
petitioners added that the respondents spread false rumours and tales which subjected them to public
contempt and ridicule.

The respondents made a counterclaim demanding the return of their properties claiming that in August
1970, they received mimeographed notices signed by Durano Sr. informing them that the land they
occupied is owned by Cebu Portland Cement Company and was purchased by Durano & Co for immediate
turn over. However, before many of them could even receive the notice, employees of Durano & Co.
proceeded to bulldoze the land, destroying plantings and improvements made therein. On September 15,
1970, Durano & Co. sold the subject land to Durano III. Claiming that during that time, they were not able
to find local relief as Durano Sr.’s wife was the Mayor at that time causing them to send a letter to then
President Marcos.
On April 22, 1975, petitioners moved to dismiss their own complaint – granted by the RTC without
prejudice to the counterclaim of the respondents. According to the petitioners, the property originally
belonged to Cepoc and was sold to Durano & Co., and later on to Durano III. But Durano III claimed that
he only learned of the bulldozing when complaints were already filed by the respondents. He further
claimed that they dismissed the complaints against the respondents as a form of reconciliation with them
but the latter still pursued their counterclaim. According to him, the properties of the claimants, except
for Sepulveda Uy, daughter of former Mayor of Danao, were occupants of the said property and Durano
& Co. purchased the adjacent property for mining coal.

The RTC ordered in their ruling that the petitioners are to pay damages to the respondent and the return
of the properties of Venancia Repaso, Hermogenes Tito, and Marcelino Gonzales as well as the property
of Angeles Sepulveda Uy with respect to the are found outside of the Cepoc property. On appeal, the CA
affirmed the decision but modified the judgement ordering the return of all properties to the respondents.

Issue:

Whether or not the respondents are builders in good faith.

Decision:

The court ruled that the records indicated that the respondents’ possession has already ripened into
ownership by acquisitive prescription. Acquisitive prescription is acquired by possession in good faith with
just tittle for a period of ten years. One is considered in good faith when he is not aware of any flaw in his
tittle or mode of acquisition of the property and there is just title when the adverse claimant came into
possession of the property through one of the modes of acquiring ownership provided by law.

In the case at bar, the respondents acquired the properties by purchase or inheritance and ever since
were in actual, continuous, open, and adverse possession. The records showed that they were unaware
of any claims over the properties until the notices given on August 1970.

The petitioners on the other hand cannot claim good faith. The validity of the certificates of title obtained
by them were doubted by the courts as there was a lack of registered title of Cepoc and the deed of sale
between Cepoc and Durano & Co. were not notarised and therefore unregisterable. Furthermore, a buyer
could not have been ignorant that the property they bought were adversely possessed by the respondents
nor did they investigate the property – the petitioners cannot be held to be buyers in good faith, nor
builders in good faith.

Under the Article 449 of the New Civil Code, he who builds etc. in bad faith on the land of another, loses
what is built etc. without right of indemnity. Furthermore, Article 450 gives the landowner over which
something was built in bad faith the power to demolish the works to replace the property in their former
condition at the expense of the builder. And Article 451 gives him the right to damages.

***non property issue: piercing the veil of corporate fiction

Test in determining the applicability of the doctrine of piercing the veil of corporate fiction:

1. Control

2. Control myst have been used to commit fraud or a wrong

3. Control and breach of duty must proximately cause the injury or unjust loss complained off.

BALLATAN v. CA

-Land Owner in Good faith, Builder in Good faith scenario -The right to choose between appropriating the
improvement or selling the land on which the improvement of the builder, planter or sower stands, is
given to the owner.

-If the option chooses is to sell the lot, the price must be fixed at the prevailing market value at the time
of payment.

FACTS:

Eden Ballatan, together with other petitioners, is living in and registered owners of Lot No. 24. Respondent
Winston Go is living in and registered owners of Lot No. 25 and 26. And Li Ching Yao is living in and the
registered owner of Lot. 27. The Lots are adjacent to each other.

When Ballatan constructed her house in her lot, she noticed that the concrete fence and side pathway of
the adjoining house of respondent Winston Go encroached on the entire length of the eastern side of her
property. She was informed by her contractor of this discrepancy, who then told respondent Go of the
same. Respondent, however, claims that his house was built within the parameters of his father’s lot; and
that this lot was surveyed by engineer Jose Quedding, the authorized surveyor of Araneta Institute of
Agriculture (AIA). Petitioner called the attention of AIA on the matter and so the latter authorized another
survey of the land by Engineer Quedding. The latter then did the survey twice which led to the conclusion
that Lots Nos 25, 26 (owned by respondent Go) and 27 (owned by Li Ching Yao) moved westward to the
eastern boundary of Lot 24 (owned by petitioner Ballatan.) –(it was later on discovered by the courts that
Go encroached 42 square meters from the property of Ballatan and Yao encroached 37 square meters on
Go’s property, all of which were in GOOD FAITH) Ballatan made written demands to the respondent to
dismantle and move their improvements and since the latter wasn’t answering the petitioner filed accion
publiciana in court. Go’s filed their “Answer with Third-Party Complaint” impleading as third party
defendants respondents Li Ching Yao, the AIA and Engineer Quedding.

RTC ruled in favor of the petitioner ordering respondent Go to demolish their improvements and pay
damages to Petitioner but dismissing the third-party complaint. CA affirmed the dismissal of the third
party-complaint as to AIA but reinstated the the complaint against Yao and the Engineer. CA also affirmed
the demolition and damages awarded to petitioner and added that Yao should also pay respondent for
his encroachment of respondent Go’s property. Jose Quedding was also ordered to pay attorney’s fees
for his negligence which caused all this fuzz.

ISSUE: What is the proper remedy in this situation (everyone was in good faith)?
RULING:

Art 448 is the proper remedy (Lower Courts are wrong in awarding the damages). It was established in
the case that the parties had no knowledge of the encroachment until Ballatan noticed it there all of them
were builders in Good faith. In that scenario they have two options. 1st option is that the land owner will
buy the improvements and the 2nd option is to oblige the builders to buy the land given that the value of
the land is not considerably more than the buildings or tree; other wise the owner may remove the
improvements thereon.

The builder, planter or sower, however, is not obliged to purchase the land if its value is considerably
more than the building, planting or sowing. In such case, the builder, planter or sower must pay rent to
the owner of the land. If the parties cannot come to terms over the conditions of the lease, the court must
fix the terms thereof. The right to choose between appropriating the improvement or selling the land on
which the improvement of the builder, planter or sower stands, is given to the owner. If the option
chooses is to sell the lot, the price must be fixed at the prevailing market value at the time of payment.

Petitioner was given by SC 30 days to decide on what to do or which right to exercise. Likewise, Go was
also given time to do the regarding Yao’s encroachment. Engineer Quedding was still asked to pay
attorney’s fees.

Fuentes vs. Roca

G.R. No. 178902, [April 21, 2010]
FACTS:
Sabina Tarroza owned a land in Canelar,Zamboanga City and she sold it to her son, Tarciano T.
Roca (Tarciano) under a deed of absolute sale. Six years later in 1988, Tarciano offered to sell
the lot to petitioners Manuel and Leticia Fuentes (the Fuentes spouses). They met in the office of
Atty. Romulo D. Plagata whom they asked to prepare the documents of sale and signed an
agreement to sell that Atty. Plagata prepared. It expressly stated that the sale was to take effect
in six months. Within six months, Tarciano was to clear the lot of structures and occupants and
secure the consent of his estranged wife, Rosario Gabriel Roca (Rosario), to the sale.
Upon Tarciano’s compliance with these conditions, the Fuentes spouses were to take possession
of the lot and pay him an additional pay besides the downpayment, depending on whether or not
he succeeded in demolishing the house standing on it. If Tarciano was unable to comply with
these conditions, the Fuentes spouses would become owners of the lot without any further
formality and payment.
The parties left their signed agreement with Atty. Plagata who then worked on the
other requirements of the sale. According to the lawyer, he went to see Rosario in one of his trips
to Manila and had her sign an affidavit of consent. After 6 months, a new title was issued in the
name of the spouses who immediately constructed a building on the lot. Thereafter Tarciano
passed away, followed by his wife Rosario who died nine months afterwards.
Eight years later in 1997, the children of Tarciano and Rosario, namely, respondents(collectively,
the Rocas), filed an action for annulment of sale and re-conveyance of the land against the
Fuentes spouses before the RTC.
The Rocas claimed that the sale to the spouses was void since Tarciano’s wife, Rosario, did not
give her consent to it. Her signature on the affidavit of consent had been forged. They thus prayed
that the property be reconveyed to them upon reimbursement of the price that the Fuentes
spouses paid Tarciano.
The spouses denied the Rocas’ allegations. They presented Atty. Plagata who testified that he
personally saw Rosario sign the affidavit at her residence. He admitted, however,that he notarized
the document in Zamboanga City four months later. All the same, the Fuentes spouses pointed
out that the claim of forgery was personal to Rosario and she alone could invoke it. Besides, the
four-year prescriptive period for nullifying the sale on ground of fraud had already lapsed.
ISSUES:
1. Whether Rosario’s signature on the document of consent to her husband Tarciano’s sale of
their conjugal land to the Fuentes spouses was forged?
2. Whether the Rocas’ action for the declaration of nullity of that sale to the spouses already
prescribed?
3. Whether or not only Rosario, the wife whose consent was not had, could bring the action to
annul that sale?
HELD:
It was forged
It did not prescribe
The heirs of Rosario may bring an action to annul the sale.
RATIO:
1. The key issue in this case is whether or not Rosario’s signature on the document of consent
had been forged. For, if the signature were genuine, the fact that she gave her consent to her
husband’s sale of the conjugal land would render the other issues merely academic. The SC
agreed with the CA that the signature was forged.
While a defective notarization will merely strip the document of its public character and reduce it
to a private instrument, that falsified jurat, taken together with the marks of forgery in the signature,
dooms such document as proof of Rosario’s consent to the sale of the land. That the Fuentes
spouses honestly relied on the notarized affidavit as proof of Rosario’s consent does not matter.
The sale is still void without an authentic consent.
2. Contrary to the ruling of the Court of Appeals, the law that applies to this case is the Family
Code, not the Civil Code. Although Tarciano and Rosario got married in 1950, Tarciano sold
the conjugal property to the Fuentes spouses on January 11, 1989, a few months after the Family
Code took effect on August 3, 1988.
When Tarciano married Rosario, the Civil Code put in place the system of conjugal partnership
of gains on their property relations. While its Article 165 made Tarciano the sole administrator of
the conjugal partnership, Article 166 prohibited him from selling commonly owned real property
without his wife’s consent. Still, if he sold the same without his wife’s consent, the sale is merely
voidable. Article 173 gave Rosario the right to have the sale annulled during the marriage within
ten years from the date of the sale. Failing in that, she or her heirs may demand, after dissolution
of the marriage, only the value of the property that Tarciano fraudulently sold.
But, as already stated, the Family Code took effect on August 3, 1988. Its Chapter 4
on Conjugal Partnership of Gains expressly superseded Title VI, Book I of the Civil Code on
Property Relations Between Husband and Wife. Further, the Family Code provisions were also
made to apply to already existing conjugal partnerships without prejudice to vested rights.
Art. 105. x x x The provisions of this Chapter shall also apply to conjugal partnerships of gains
already established between spouses before the effectivity of this Code, without prejudice to
vested rights already acquired in accordance with the Civil Code or other laws, as provided in
Article 256.
(n)
In contrast to Article 173 of the Civil Code, Article 124 of the Family Code does not provide a
period within which the wife who gave no consent may assail her husband’s sale of the real
property. It simply provides that without the other spouse’s written consent or a court order
allowing the sale, the same would be void.
Under the provisions of the Civil Code governing contracts, a void or inexistent contract has no
force and effect from the very beginning. And this rule applies to contracts that are declared void
by positive provision of law, as in the case of a sale of conjugal property without the other spouse’s
written consent. But, although a void contract has no legal effects even if no action is taken to set
it aside, when any of its terms have been performed, an action to declare its inexistence is
necessary to allow restitution of what has been given under it. This action, according to Article
1410 of the Civil Code does not prescribe.
Here, the Rocas filed an action against the Fuentes spouses in 1997 for annulment of sale and
re-conveyance of the real property that Tarciano sold without their mother’s (his wife’s) written
consent. The passage of time did not erode the right to bring such an action.
3. As stated above, that sale was void from the beginning. Consequently, the land remained the
property of Tarciano and Rosario despite that sale. When the two died, they passed on the
ownership of the property to their heirs,

Communities Cagayan Inc. vs Spouses Nanol

GR No. 176791 November 14, 2012

Facts: Sometime in 1994, respondent-spouses Arsenio and Angeles Nanol entered into contract to Sell
with petitioner Communities Cagayan, Inc., whereby the former agreed to sell to respondent-spouses a
house and Lots 17 and 19″ locate Block 16, Camella Homes Subdivision, Cagayan de Oro City, for
the price of P 368,000.00. Respondent-spouses, however, did not avail of
petitioner’s inhouse financing due to its high interest rates. Instead, they obtained a loan from
Capitol Development Bank, a sister company of petitioner, using the property as
collateral. To facilitate the loan, a simulated sale over the property was executed by petitioner in
favor of respondent-spouses. 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. Unfortunately, the bank
collapsed and closed before it could release the loan. Thus, on November 30, 1997, respondent-
spouses entered into another Contract to Sell with petitioner over the same property for the same
price of P 368,000.00. This time, respondent-spouses availed of petitioner’s in-house
financing thus, undertaking to pay the loan over four years, from 1997 to 2001. Sometime in
2000, respondent Arsenio demolished the original house and constructed a three-
story house allegedly valued at P 3.5 million, more or less.18 In
July 2001, respondent Arsenio died, leaving his wife, herein respondent Angeles, to pay
for the monthly amortizations.

Issue: Whether or not respondents are considered builders in good faith entitled to indemnification for
necessary and useful expenses and/or to buy the land under the provisions of the New Civil Code.

Held: Yes. As a general rule, Article 448 on builders in good faith does not apply
where there is a contractual relation between the parties, 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.

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. 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.

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, “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.”

PEDRO ANGELES v. ESTELITA B. PASCUAL, GR No. 157150, 2011-09-21

Facts:
Neighbors
Pascual... and
Angeles... were registered owners of adjacent parcels of land
Each of them built a house on his respective lot, believing all the while that his respective lot
was properly delineated. It was not until Metropolitan
Bank and Trust Company (Metrobank), as the highest bidder in the foreclosure sale...
caused the relocation survey... that the geodetic engineer discovered that Pascual's house
had encroached on Lot 3. As a consequence, Metrobank... successfully ejected Pascual.
In turn, Pascual caused the relocation survey of his own Lot... and discovered that Angeles'
house also encroached on his lot.
Pascual demanded rentals... for the use of the encroached area... from Angeles, or the
removal of Angeles' house.
Angeles refused the demand. Accordingly, Pascual sued Angeles for recovery of
possession and damages in the Regional Trial Court... judgment is rendered in favor of the
plaintiff
Angeles appealed... to... the CA affirmed the RTC
Issues:
the options laid down by the CA, i.e., for Pascual either to buy the portion of
Angeles' house or to sell to Angeles the portion of his land occupied by Angeles were
contrary to its finding of good faith.
Ruling:
CA's application of Article 448 of the Civil Code was correct and proper.
Article 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.
The provision contemplates a person building, or sowing, or planting in good faith on land
owned by another.
The RTC and CA found and declared Angeles to be a builder in... good faith.
We cannot veer away from their unanimous conclusion, which can easily be drawn from the
fact that Angeles insists until now that he built his house entirely on his own lot. 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.
With the unassailable finding that Angeles' house straddled the lot of Pascual, and that
Angeles had built his house in good faith, Article 448 of the Civil Code, which spells out the
rights and obligations of the owner of the land as well as of the builder, is... unquestionably
applicable.
the land being the principal and the building the accessory, preference is given to Pascual
as the owner of the land to make the choice as between appropriating the building or
obliging Angeles as the builder to pay the value... of the land.

SULO SA NAYON, INC., vs. NAYONG PILIPINO FOUNDATION

G.R. No. 170923
January 20, 2009
FACTS:
Respondent Nayong Pilipino Foundation, a GOCC, is the owner of a parcel of land in Pasay
City, known as the Nayong Pilipino Complex. Petitioner Philippine Village Hotel, Inc. (PVHI),
formerly called Sulo sa Nayon, Inc., is a domestic corporation duly organized and existing under
Philippine laws.
In 1975, respondent leased a portion of the Nayong Pilipino Complex, consisting of 36,289
square meters, to petitioner Sulo sa Nayon, Inc. for the construction and operation of a hotel
building, to be known as the Philippine Village Hotel. The lease was for an initial period of 21
years, or until May 1996. It is renewable for a period of 25 years under the same terms and
conditions upon due notice in writing to respondent of the intention to renew at least 6 months
before its expiration. Thus, on March 7, 1995, petitioners sent respondent a letter notifying the
latter of their intention to renew the contract for another 25 years. On July 4, 1995, the parties
executed a Voluntary Addendum to the Lease Agreement. The addendum was signed by
petitioner Jose Marcel E. Panlilio in his official capacity as Senior Executive Vice President of
the PVHI and by Chairman Alberto A. Lim of the Nayong Pilipino Foundation. They agreed to
the renewal of the contract for another 25 years, or until 2021. Under the new agreement,
petitioner PVHI was bound to pay the monthly rental on a per square meter basis at the rate of
P20.00 per square meter, which shall be subject to an increase of 20% at the end of every 3-
year period. At the time of the renewal of the lease contract, the monthly rental amounted to
P725,780.00.
Beginning January 2001, petitioners defaulted in the payment of their monthly rental.
Respondent repeatedly demanded petitioners to pay the arrears and vacate the premises. The
last demand letter was sent on March 26, 2001.
On September 5, 2001, respondent filed a complaint for unlawful detainer before the MeTC of
Pasay City.
ISSUE:
Whether the rules on accession, as found in Articles 448 and 546 of the Civil Code, apply to the
instant case.
HELD:
NO, the rules on accession should NOT apply. The late Senator Arturo M. Tolentino, a leading
expert in Civil Law, explains: „This article [Article 448] 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 sower is that of a holder,
such as a tenant.”
What petitioners insist is that because of the improvements, which are of substantial value, that
they have introduced on the leased premises with the permission of respondent, they should be
considered builders in good faith who have the right to retain possession of the property until
reimbursement by respondent.
We affirm the ruling of the CA that introduction of valuable improvements on the leased
premises does not give the petitioners the right of retention and reimbursement which rightfully
belongs to a builder in good faith. Otherwise, such a situation would allow the lessee to easily
“improve” the lessor out of its property. We reiterate the doctrine that a lessee is neither a
builder in good faith nor in bad faith12 that would call for the application of Articles 448 and 546
of the Civil Code.