PROPERTY CASE DIGESTS

ART. 447
GRN L-21783 NOVEMBER 29, 1969 PACIFIC FARMS, INC. VS. SIMPLICIO G. ESGUERRA, CARRIED LUMBER COMPANY FACTS: On several occasions, the Company sold and delivered lumber and construction materials to the Insular Farms, Inc. which the latter used in the construction of the aforementioned six buildings at its compound in Bolinao, Pangasian. Of the total procurement price of P15,000, the sum of P4,710.18 has not been paid by the Insular Farms, Inc. The Company instituted a civil case with the CIR of Pangasinan to recover the said unpaid balance from the Insular Farms, Inc. The trial court rendered judgment in favor of the Company's claim. The corresponding writ of execution was issued because there was no appeal instituted by Insular, Inc. The Pacific Farms, Inc. filed a third-party claim asserting ownership over the levied buildings which it had acquired from the Insular Farms, Inc. by virtue of a deed of absolute sale executed about seven months before the Company filed the civil action. Shielded by an indemnity bond put up by the Company and the Cosmopolitan Insurance Company, Inc., the sheriff proceeded with the announced public auction and sold the levied buildings to the Company. ISSUE: WON the Company is entitled to a materialmans lien to be paid by Pacific Farms, Inc? HELD: YES. Therefore, applying article 447 by analogy, we perforce consider the buildings as the principal and the lumber and construction materials that went into their construction as the accessory. Thus Pacific Farms, if it does own the six buildings, must bear the obligation to pay for the value of the said materials; the Company- which apparently has no desire to remove the materials, and, even if it were minded to do so, cannot remove them without necessarily damaging the buildings has the corresponding right to recover the value of the unpaid lumber and construction materials. Of course, the character of a buyer in good faith and for value, if really possessed by the Pacific

Farms, could possibly exonerate it from making compensation. But the Pacific Farm's stance that it is an innocent purchaser for value and in good faith is open to grave doubt because of certain facts of substantial import (evident from the records) that cannot escape notice. In the deed of absolute sale, exhibit 1, the Insular Farms, Inc. (vendor) was represented in the contract by its president, J. Antonio Araneta. The latter was a director of the appellee (Pacific Farms, Inc.) and was the counsel who signed the complaint filed by the appellee in the court below. J. Antonio Araneta was, therefore, not only the president of the Insular Farms, Inc. but also a director and counsel of Pacific Farms. During the trial of civil case the Insular Farms, Inc. was represented by Attorney Amado Santiago, Jr. of the law firm of J. Antonio Araneta. The latter was one of the counsels of the Pacific Farms, Inc. They cannot claim ignorance of the pendency of civil case because the Insular Farms, Inc. was defended by the same lawyer from the same law firm that commenced the present action. Pacific Farms merely folded its arms in disinterest and waited, so to speak. Not until a decision was rendered therein in favor of the Company, a writ of execution issued, and the six buildings levied upon by the sheriff, did it file a thirdparty claim over the levied buildings.

ART. 448
PNB V. DE JESUS 411 SCRA 557 FACTS: It would appear that on 10 June 1995, respondent filed a complaint against petitioner before the Regional Trial Court of Occidental Mindoro for recovery of ownership and possession, with damages, over the questioned property. In his complaint, respondent stated that he had acquired a parcel of land situated in Mamburao, Occidental Mindoro, with an area of 1,144 square meters covered by TCT No. T-17197, and that on 26 March 1993, he had caused a verification survey of the property and discovered that the northern portion of

Digested and compiled by Chami, Daisy, James, Moneh, and Relie UST LAW 2B

PROPERTY CASE DIGESTS

the lot was being encroached upon by a building of petitioner to the extent of 124 square meters. Despite two letters of demand sent by respondent, petitioner failed and refused to vacate the area. Petitioner, in its answer, asserted that when it acquired the lot and the building sometime in 1981 from then Mayor Bienvenido Ignacio, the encroachment already was in existence and to remedy the situation, Mayor Ignacio offered to sell the area in question (which then also belonged to Ignacio) to petitioner at P100.00 per square meter which offer the latter claimed to have accepted. The sale, however, did not materialize when, without the knowledge and consent of petitioner, Mayor Ignacio later mortgaged the lot to the Development Bank of the Philippines. He also contends that he is a builder in good faith. ISSUE: Whether or not being a builder in good faith matters under article 448. HELD: Article 448, of the Civil Code refers to a piece of land whose ownership is claimed by two or more parties, one of whom has built some works (or sown or planted something) and not to a case where the owner of the land is the builder, sower, or planter who then later loses ownership of the land by sale or otherwise for, elsewise stated, where the true owner himself is the builder of works on his own land, the issue of good faith or bad faith is entirely irrelevant. The private respondents then introduced additional improvements and registered the house in their names. After the expiration of the lease contract, however, the petitioners' mother refused to accept the monthly rentals. It turned out that the lot in question was the subject of a suit, which resulted in its acquisition by one Maria Lee in 1972. Lee sold the lot to Lily Salcedo, who in turn sold it to the spouses Dionisio. Spouses Dionisio executed a Deed of Quitclaim over the said property in favor of the petitioners. The petitioners sent a letter addressed to private respondent Mary Nicolas demanding that she vacate the premises and pay the rentals in arrears within twenty days from notice. Upon failure of the private respondents to heed the demand, the petitioners filed a complaint for unlawful detainer and damages. ISSUE: WON Art. 448 is applicable to this case. HELD: NO. The private respondents claim they are builders in good faith, hence, Article 448 of the Civil Code should apply. They rely on the lack of title of the petitioners' mother at the time of the execution of the contract of lease, as well as the alleged assurance made by the petitioners that the lot on which the house stood would be sold to them. But being mere lessees, the private respondents knew that their occupation of the premises would continue only for the life of the lease. Plainly, they cannot be considered as possessors nor builders in good faith. Article 448 of the Civil Code, in relation to Article 546 of the same Code, which allows full reimbursement of useful improvements and retention of the premises until reimbursement is made, applies only to a possessor in good faith, i.e., one who builds on land with the belief that he is the owner thereof. It does not apply where one's only interest is that of a lessee under a rental contract; otherwise, it would always be in the power of the tenant to "improve" his landlord out of his property. And even if the petitioners indeed promised to sell, it would not make the private respondents possessors or builders in good faith so as to be covered by the provisions of Article 448 of the Civil Code. The latter cannot raise the mere expectancy of ownership of the aforementioned lot because the alleged promise to sell was not fulfilled nor its existence even proven.

G.R. NO. 120303. JULY 24, 1996 GEMINIANO, ET. AL. VS. COURT OF APPEALS
FACTS: It appears that subject lot was originally owned by the petitioners' mother, Paulina Amado vda. de Geminiano. On a 12-square-meter portion of that lot stood the petitioners' unfinished bungalow, which the petitioners sold to the private respondents, with an alleged promise to sell to the latter that portion of the lot occupied by the house. Subsequently, the petitioners' mother executed a contract of lease over a 126 square-meter portion of the lot, including that portion on which the house stood, in favor of the private respondents for P40.00 per month for a period of 7 years.

Digested and compiled by Chami, Daisy, James, Moneh, and Relie UST LAW 2B

PROPERTY CASE DIGESTS

BALUCANAG VS. FRANCISCO 122 SCRA 344 FACTS: The petitioner bought a lot owned by Mrs. Charvet which was then previously leased by the latter to one Richard Stohner. The said lease contract provided that the lessee may erect structures and improvements which shall remain as lessee's property and he may remove them at any time. It further provided that should the lessee fail to remove the same structures or improvements withing two months after the expiration of the lease, the lessor may remove them or cause them to be removed at the expense of the lessee. Stohner made fillings on the land and constructed a house. When he failed to pay the rent, the petitioner, through counsel, sent Stohner a demand letter ordering him to vacate the lot. The lessee contended that he is a 'builder in good faith.' ISSUE: Is the lessee a builder in good faith? HELD: No, the lessee cannot be considered a builder in good faith. The provision under Art. 448 of the New Civil Code (Philippine) on a builder of good faith applies only to the owner of the land who believes he is the rightful owner thereof, but not to a lessee who's interest in the land is derived only from a rental contract. Neither can Stohner be considered a 'possessor in good faith'. A possessor in good faith is a party who possesses property believing that he is its rightful owner but discovers later on a flaw in his title that could indicate that he might not be its legal owner. It cannot apply to a lessee because he knows right from the start that he is merely a lessee and not the owner of the premises. As a mere lessee, he introduces improvements to the property at his own risk such that he cannot recover from the owner the reimbursements nor he has any right to retain the premises until reimbursements. What applies in this case is Art. 1678 (NCC) which provides that, " if the

lessee, makes, in good faith, useful improvements which are suitable to the use for which the lease is intended, without altering the form or substance of the property leased, the lessor upon the termination of the lease shall pay the lessee 1/2 of the value of the improvements at the time. Should the lessor refuse to reimburse said amount, the lessee may remove the improvements even though the principal thing may suffer damage thereby. He shall not. however, cause any more impairment upon the property leased than is necessary."

G.R. No. 156437. March 1, 2004 NATIONAL HOUSING AUTHORITY vs. GRACE BAPTIST CHURCH and COURT OF APPEALS FACTS: On June 13, 1986, Respondent Grace Baptist Church wrote a letter to NHA manifesting their intent to purchase Lot 4 and 17 of the General Mariano Alvarez Resettlement Project in Cavite. The latter granted request hence respondent entered into possession of the lots and introduced improvements thereon. On February 22, 1991, NHA passed a resolution approving the sale of the subject lots to respondent Church for 700 per square meter, a total of P430,500. respondents were duly informed. On April 8, 1991, respondent church tendered a check amounting to P55,350 contending that this was the agreed price. NHA avers stating that the price now (1991) is different from before (1986). The trial court rendered a decision in favour of NHA stating that there was no contract of sale, ordering to return the said lots to NHA and to pay NHA rent of 200 pesos from the time it took possession of the lot. Respondent Church appealed to the CA which affirms the decision of RTC regarding no contract of sale but modifying it by ordering NHA to execute the sale of the said lots to Church for 700 per square, with 6% interest per annum from March 1991. Petitioner NHA filed a motion for reconsideration which was denied. Hence this petition for review on certiorari ISSUE: WON NHA can be compelled to sell the lots under market value? HELD: No, because the contract has not been perfected.

Digested and compiled by Chami, Daisy, James, Moneh, and Relie UST LAW 2B

PROPERTY CASE DIGESTS

The Church despite knowledge that its intended contract of sale with the NHA had not been perfected proceeded to introduce improvements on the land. On the other hand, NHA knowingly granted the Church temporary use of the subject properties and did not prevent the Church from making improvements thereon. Thus the Church and NHA, who both acted in bad faith shall be treated as if they were both in good faith. In this connection Art 448 provides: the owner of the land in 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 and 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, on case of disagreement, court shall fix. when they applied for a writ of execution despite knowledge that the auction sale did not include the apartment building, they could not benefit from the lots improvement, until they reimbursed the improver in full, based on the current market value of the property. Under Article 448, the landowner is given the option, either to appropriate the improvement as his own upon payment of the proper amount of indemnity or to sell the land to the possessor in good faith. Relatedly, Article 546 provides that a builder in good faith is entitled to full reimbursement for all the necessary and useful expenses incurred; it also gives him right of retention until full reimbursement is made. The right of retention is considered as one of the measures devised by the law for the protection of builders in good faith. Its object is to guarantee full and prompt reimbursement as it permits the actual possessor to remain in possession while he has not been reimbursed (by the person who defeated him in the case for possession of the property) for those necessary expenses and useful improvements made by him on the thing possessed. Given the circumstances of the instant case where the builder in good faith has been clearly denied his right of retention for almost half a decade, we find that the increased award of rentals by the RTC was reasonable and equitable. The petitioners had reaped all the benefits from the improvement introduced by the respondent during said period, without paying any amount to the latter as reimbursement for his construction costs and expenses. They should account and pay for such benefits. G.R. NO. 157605. DECEMBER 13, 2005 SPS. RASDAS, ET. AL. VS. ESTENOR, ET. AL. FACTS: The dispute centers on a parcel of land with an situated in Ilagan, Isabela. Respondent filed a Complaint For Recovery Of Ownership And Possession With Damages against. The complaint was docketed and tried by the RTC of Ilagan. In the same complaint, respondent asserted that he was the owner of the subject property, which was then in the possession of petitioners. The RTC decided in favor of petitioners. The CA reversed the judgment of the RTC and declared respondent as the owner of the subject property. Thereafter, a Writ of Execution and Writ of Demolition was issued against petitioners,

G.R. NO. 151815. FEBRUARY 23, 2005 SPOUSES JUAN NUGUID AND ERLINDA T. NUGUID VS. HON. COURT OF APPEALS AND PEDRO P. PECSON FACTS: Pedro P. Pecson owned a commercial lot on which he built a four-door two-storey apartment building. For failure to pay realty taxes, the lot was sold at public auction by the City Treasurer to Mamerto Nepomuceno, who in turn sold it for P103,000 to the spouses Juan and Erlinda Nuguid. Pecson challenged the validity of the auction sale before the RTC of Quezon City, the RTC upheld the spouses title but declared that the four-door twostorey apartment building was not included in the auction sale. This was affirmed by the CA and by the SC. The Nuguids became the uncontested owners of commercial lot. The Nuguid spouses moved for delivery of possession of the lot and the apartment building. ISSUE: WON the Nuguids should reimburse Pecson for the benefits derived from the apartment building. HELD: YES. Since petitioners opted to appropriate the improvement for themselves as early as June 1993,

Digested and compiled by Chami, Daisy, James, Moneh, and Relie UST LAW 2B

PROPERTY CASE DIGESTS

who were ordered to demolish their houses, structures, and improvements on the property. Petitioners alleged that they were entitled to just compensation relating to the value of the houses they had built on the property, owing to their purported status as builders in good faith. They claimed that the CA decision did not declare them as builders in bad faith, and thus, they were entitled to be reimbursed of the value of their houses before these could be demolished. They posited that without such reimbursement, they could not be ejected from their houses. ISSUE: WON petitioners are in good faith. HELD: NO. The father of the petitioners (and their predecessor-in-interest) had already known that he did not own the property, and that his stay therein was merely out of tolerance. Such conclusion in fact bolstered the eventual conclusion that respondents were the owners of the land and that petitioners should vacate the same. These premises remaining as they are, it is clear that petitioners are not entitled to the just compensation they seek through the present complaint. Under Article 448 of the Civil Code, the builder in bad faith on the land of another loses what is built without right to indemnity. Petitioners were in bad faith when they built the structures as they had known that the subject property did not belong to them. G.R. NO. 123672. DECEMBER 14, 2005 FERNANDO CARRASCOSO, JR. VS. COURT OF APPEALS, LAURO LEVISTE FACTS: El Dorado Plantation, Inc. (El Dorado) was the registered owner of a land situated in Sablayan, Occidental Mindoro. At a special meeting of El Dorados Board of Directors, a Resolution was passed authorizing Feliciano Leviste, then President of El Dorado, to negotiate the sale of the property and sign all documents and contracts bearing thereof. Through a Deed of Sale of Real Property, El Dorado, through Feliciano Leviste, sold the property to Carrascoso, Jr. PLDT commenced construction of improvements on the 1,000 hectare portion of the property immediately after the execution of Agreement to Buy and Sell. Lauro Leviste (Lauro), a stockholder and member of the Board of Directors of El Dorado, through his counsel, Atty. Benjamin Aquino, called the attention of the Board to Carrascosos failure to pay the balance of the purchase price of the property. He wants a rescission of the sale made by the El Dorado Plantation, Inc. to Mr. Carrascoso. ISSUE: WON PLDT is in good faith when it built its improvements on the subject land. HELD: In the case at bar, it is undisputed that PLDT commenced construction of improvements on the 1,000 hectare portion of the property immediately after the execution of the July 11, 1975 Agreement to Buy and Sell with the full consent of Carrascoso. Thus, until March 15, 1977 when the Notice of Lis Pendens was annotated on Carrascosos TCT No. T6055, PLDT is deemed to have been in good faith in introducing improvements on the 1,000 hectare portion of the property. After March 15, 1977, however, PLDT could no longer invoke the rights of a builder in good faith. Should El Dorado then opt to appropriate the improvements made by PLDT on the 1,000 hectare portion of the property, it should only be made to pay for those improvements at the time good faith existed on the part of PLDT or until March 15, 1977, to be pegged at its current fair market value. The commencement of PLDTs payment of reasonable rent should start on March 15, 1977 as well, to be paid until such time that the possession of the 1,000 hectare portion is delivered to El Dorado, subject to the reimbursement of expenses as aforestated, that is, if El Dorado opts to appropriate the improvements. If El Dorado opts for compulsory sale, however, the payment of rent should continue up to the actual transfer of ownership.

G.R. NO. 144635 JUNE 26, 2006 PROGRAMME INCORPORATED, V. PROVINCE OF BATAAN FACTS: BASECO is the owner of Piazza Hotel and Mariveles Lodge, both located in Mariveles, Bataan. In 1986, BASECO granted petitioner a

Digested and compiled by Chami, Daisy, James, Moneh, and Relie UST LAW 2B

PROPERTY CASE DIGESTS

contract of lease over Piazza Hotel at a monthly rental of P6,500 for three years, subject to renewal by mutual agreement of the parties. After the expiration of the three-year lease period, petitioner was allowed to continue operating the hotel on monthly extensions of the lease. In 1989, however, the Presidential Commission on Good Government (PCGG) issued a sequestration order against BASECO pursuant to Executive Order No. 1 of former President Corazon C. Aquino. Among the properties provisionally seized and taken over was the lot on which Piazza Hotel stood. On July, 1989, however, Piazza Hotel was sold at a public auction for non-payment of taxes to respondent Province of Bataan. The title of the property was transferred to respondent. BASECOs Transfer Certificate of Title was cancelled and a new one, was issued to the Province of Bataan. The trial court rendered judgment in favor of respondent. CA affirmed the trial courts ruling. ISSUE: WON the petitioner is a possessor in good faith of the Piazza Hotel and Mariveles Lodge HELD: The benefits granted to a possessor in good faith cannot be maintained by the lessee against the lessor because, such benefits are intended to apply only to a case where one builds or sows or plants on land which he believes himself to have a claim of title and not to lands wherein ones only interest is that of a tenant under a rental contract, otherwise, it would always be in the power of a tenant to improve his landlord out of his property. Besides, as between lessor and lessee, the Code applies specific provisions designed to cover their rights. Hence, the lessee cannot claim reimbursement, as a matter of right, for useful improvements he has made on the property, nor can he assert a right of retention until reimbursed. His only remedy is to remove the improvement if the lessor does not choose to pay its value; but the court cannot give him the right to buy the land. Petitioners assertion that Piazza Hotel was constructed "at (its) expense" found no support in the records. Neither did any document or testimony prove this claim. At best, what was confirmed was that petitioner managed and operated the hotel. There was no evidence that petitioner was the one which spent for the construction or renovation of the property. And since petitioners alleged expenditures were never proven, it could not even seek reimbursement of one-half of the value of the improvements upon termination of the lease under Article 1678 of the Civil Code.

G.R. NO. L-26694 DECEMBER 18, 1973 NELITA MORENO VDA. DE BACALING V HECTOR LAGUNA FACTS: Hector Laguda is the registered owner of a residential land situated at La Paz, Iloilo City. Many years back, petitioner and her late husband, Dr. Ramon Bacaling, with the acquiescence of private respondent Laguda, constructed a residential house on a portion of said lot fronting Huevana Street, paying a monthly rental of P80.00. Unable to pay the lease rental from July 1959 to September 1961, totalling P2,160.00, an action for ejectment was filed by private respondent Laguda against petitioner in her capacity as judicial administratrix of the estate of her late husband, Dr. Bacaling. The filing of said case spawned various court suits. Petitioner suffered a series of legal reverses and ended up with a compromise agreement with the respondent. Trial court approved the amicable settlement however the petitioner failed to comply with the terms. ISSUE: WON petitioner is a builder in good faith and, therefore, entitled to reimbursement, and/or reasonable expenses that may be incurred in transferring the house to another place HELD: Petitioner's contention that she be considered a builder in good faith and, therefore, entitled to reimbursement in addition to reasonable expenses that may be incurred in transferring the house to another place, the same cannot stand legal scrutiny. The rule is well-settled that lessees, like petitioner, are not possessors in good faith, because they knew that their occupancy of the premises continues only during the life of the lease, and they cannot as a matter of right, recover the value of their improvements from the lessor, much less retain the

Digested and compiled by Chami, Daisy, James, Moneh, and Relie UST LAW 2B

PROPERTY CASE DIGESTS

premises until they are reimbursed. Their rights are governed by Article 1678 of the Civil Code which allows reimbursement of lessees up to one-half of the value of their improvements if the lessor so elects. Under the foregoing provision (Art 448), the landowner can choose between appropriating the building by paying the proper indemnity or obliging the builder to pay the price of the land, unless its value is considerably more than that of the structures, in which case the builder in good faith shall pay reasonable rent.[34] If the parties cannot come to terms over the conditions of the lease, the court must fix the terms thereof. The choice belongs to the owner of the land, a rule that accords with the principle of accession, i.e., that the accessory follows the principal and not the other way around. Even as the option lies with the landowner, the grant to him, nevertheless, is preclusive. The landowner cannot refuse to exercise either option and compel instead the owner of the building to remove it from the land. The raison detre for this provision has been enunciated thus: Where the builder, planter or sower has acted in good faith, a conflict of rights arises between the owners, and it becomes necessary to protect the owner of the improvements without causing injustice to the owner of the land. In view of the impracticability of creating a state of forced co-ownership, the law has provided a just solution by giving the owner of the land the option to acquire the improvements after payment of the proper indemnity, or to oblige the builder or planter to pay for the land and the sower the proper rent. He cannot refuse to exercise either option. It is the owner of the land who is authorized to exercise the option, because his right is older, and because, by the principle of accession, he is entitled to the ownership of the accessory thing.

G.R. NO.157044. OCTOBER 5, 2005 ROSALES VS. CASTELLFORT FACTS: Spouses-petitioners Rodolfo V. Rosales and Lily Rosqueta-Rosales (petitioners) are the registered owners of a parcel of land with an area of approximately 315 square meters, covered by Transfer Certificate of Title (TCT) No. 36856[4] and designated as Lot 17, Block 1 of Subdivision Plan LRC Psd-55244 situated in Los Baos, Laguna. On August 16, 1995, petitioners discovered that a house was being constructed on their lot, without their knowledge and consent, by respondent Miguel Castelltort (Castelltort). It turned out that respondents Castelltort and his wife Judith had purchased a lot, Lot 16 of the same Subdivision Plan, from respondent Lina LopezVillegas (Lina) through her son-attorney-in-fact Rene Villegas (Villegas) but that after a survey thereof by geodetic engineer Augusto Rivera, he pointed to Lot 17 as the Lot 16 the Castelltorts purchased. Negotiations for the settlement of the case thus began, with Villegas offering a larger lot near petitioners lot in the same subdivision as a replacement thereof. In the alternative, Villegas proposed to pay the purchase price of petitioners lot with legal interest. Both proposals were, however, rejected by petitioners whose counsel, by letter of August 24, 1995, directed Castelltort to stop the construction of and demolish his house and any other structure he may have built thereon, and desist from entering the lot. Petitioners subsequently filed on September 1, 1995 a complaint for recovery of possession and damages with prayer for the issuance of a restraining order and preliminary injunction against spousesrespondents Miguel and Judith Castelltort before the RTC of Calamba, Laguna, docketed as Civil Case No. 2229-95-C. ISSUE: Under Art 448, who has the right of option? HELD:

G.R. NO. 170923 JANUARY 20, 2009 SULO SA NAYON, INC. VS NAYONG PILIPINO FOUNDATION FACTS: In 1975, respondent leased a portion of the Nayong Pilipino Complex, 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

Digested and compiled by Chami, Daisy, James, Moneh, and Relie UST LAW 2B

PROPERTY CASE DIGESTS

notice in writing to respondent of the intention to renew. In 1995, petitioners sent respondent a letter notifying the latter of their intention to renew the contract for another. July of the same year, parties 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 rentals Beginning January 2001, petitioners defaulted in the payment of their monthly rental. Respondent repeatedly demanded petitioners to pay the arrears and vacate the premises. MeTC rendered its decision in favor of respondent RTC which modified the ruling of the MeTC. CA which held that the RTC erroneously applied the rules on accession, as found in Articles 448 and 546 of the Civil Code ISSUE: WON Sulo sa Nayon as builders have acted in good faith in order for Art. 448 in relation to Art. 546 of the Civil Code may apply with respect to their rights over improvements. HELD: 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. In the case at bar, petitioners have no adverse claim or title to the land. In fact, as lessees, they recognize that the respondent is the owner of the land. 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 faith that would call for the application of Articles 448 and 546 of the Civil Code. His rights are governed by Article 1678 of the Civil Code.

96 SCRA 130 February 21, 1980 FLOREZA v EVANGELISTA FACTS: The Evangelistas were the owner of a residential lot in Rizal with an area of 204.08 sq. m. assessed at P410. They borrowed P100 from Floreza. Floreza occupied the residential lot and built a house of light material (barong-barong) with the consent of the Evangelistas. Additional Loans were made by the Evangelistas. Floreza demolished the house of light material and constructed one of strong material assessed. Floreza has not been paying any rentals since the beginning of their transactions. Eventually, Evangelistas sold, with a right to repurchase within 6 years, their land to Floreza. Seven months before the expiry of the repurchase period, the Evangelistas were able to pay in full. Floreza refused to vacate the lot unless he was first reimbursed for the value of the house he built Evangelistas filed a complaint. CFI ruled based on Art, 448 of the Civil Code saying that Evangelistas have the choice between purchasing the house or selling the land to Floreza. CA ruled that Art. 448 was inapplicable and that Floreza was not entiled to the reimbursement of his house and could remove the same at his own expense. ISSUE: 1. WON Floreza was entitled to reimbursement of the cost of his house. 2. WON he (his heirs who replaced him) should pay rental of the land. HELD: 1. NO. Issue of reimbursement is not moot because if Floreza has no right of retention, then he must pay damages in the form of rentals. Agree with CA that Art. 448 is inapplicable because it applies only when the builder is in good faith (he believed he had a right to build). Art. 453 is also not applicable because it requires both of the parties to be in bad faith. Neither is Art. 1616 applicable because Floreza is not a vendee a retro. The house was already constructed in 1945 (light materials) even before the pacto de retro was entered into in 1949. Floreza cannot be classified as a builder in good faith nor a vendee a

Digested and compiled by Chami, Daisy, James, Moneh, and Relie UST LAW 2B

PROPERTY CASE DIGESTS

retro, who made useful improvements during the pacto de retro, he has no right to reimbursement of the value of the house, much less to the retention of the premises until he is paid. His rights are more akin to a usufructury under Art. 579, who may make on the property useful improvements but with no right to be indemnified thereof, He may, however, remove such improvements should it be possible to do so without damage to the property. 2. YES. From the time the redemption price was paid in January 3, 1955, Florezas right to use the residential lot without rent ceased. He should be held liable for damages in the form of rentals for the continued use of the lot for P10 monthly from January 3, 1955 until the house was removed and the property vacated by Floreza or his heirs. Judgment affirmed with modification. amicable settlement. On June 25, 1999, the barangay chairman issued a Certification to File Action. In his answer to the complaint, petitioner claimed that sometime in 1968, respondents allowed him to build his house on the lot, provided he would guard the premises to prevent landgrabbers and squatters from occupying the area. In 1995, when respondents visited this country, they agreed verbally to sell the portion on which his house was constructed. A year later, he made an offer to buy the 60 square meter portion occupied by him and to spend for its survey. But what respondents wanted to sell was the whole area containing 251 square meters. He then informed them that he would first consult his children and they said they will wait. Instead, they filed the instant complaint. ISSUE: WON petitioner is a builder in good faith. HELD: NO. Petitioner is not a builder in good faith. Considering that he occupies the land by mere tolerance, he is aware that his occupation of the same may be terminated by respondents any time.

ART. 449
DEL ROSARIO V. SPS. MANUEL FACTS: On August 12, 1999, spouses Jose and Concordia Manuel, respondents, filed with the Municipal Trial Court (MTC), San Mateo, Rizal a complaint1 for unlawful detainer against Alfredo Yasay del Rosario, petitioner, docketed as Civil Case No. 1360. They alleged that they are the true and lawful owners of a 251 square meter lot located at Sta. Ana, San Mateo, Rizal. Because of their compassion, they allowed petitioner, whose house was destroyed by a strong typhoon, to occupy their lot. They agreed that he could build thereon a temporary shelter of light materials. But without their consent, what he constructed was a house of concrete materials. In 1992, respondents asked petitioner to vacate the lot. This was followed by repeated verbal demands but to no avail, prompting them to bring the matter to the barangay. But the parties failed to reach an SPS. RASDAS VS. ESTENOR (Similar to the previous article) LUMUNGO V. USMAN 25 SCRA 255 FACTS: Dominga Usman sold and transfers her rights in and to the 3 lots in question to Jose Angeles. The latter made the purchase with the knowledge that the property was already in dispute by Atty. Usman, husband of Dominga, and by the plaintiffs. Angeles, upon taking possession of the land, planted the same with coconuts, which, together with those already planted by Dominga Usman, numbered about 3,000, most of which are now fruit-bearing. In short, Angeles was a purchaser and a builder in bad faith. ISSUE: Whether or not Angeles is entitled to reimbursement for the coconuts tree he planted on the property in litigation. HELD:

Digested and compiled by Chami, Daisy, James, Moneh, and Relie UST LAW 2B

PROPERTY CASE DIGESTS

No. It should be noted that said trees are improvements, not "necessary expenses of preservation," which a builder, planter or sower in bad faith may recover under Arts. 452 and 546, first paragraph, of the Civil Code. The facts and findings of both the trial court and the Court of Appeals leave no room for doubt that Jose Angeles was a purchaser and a builder in bad faith. The provision applicable to this case is, accordingly, Article 449 of the Civil Code, which provides that, "he who builds, plants or sows in bad faith on the land of another, loses what is built, planted or sown without right to indemnity."

ART. 458
GOVERNMENT V. COLEGIO DE SAN JOSE 53 PHIL. 423 FACTS: During the months of September to November every year, the waters of Laguna de Bay cover a long strip of land along the eastern border of the two parcels of land in question. The claimant Colegio de San Jose contends that the parcels of land are a part of the Hacienda de San Pedro Tunasan belonging it, which has been in possession thereof since time immemorial by means of its tenants or lessees and farmers. In contrast, the Government contends that the said two parcels of land belong to the public domain, and its evidence tends to prove that they have always been known as the shores of Laguna de Bay. The CFI rendered a decision in favor of Colegio de San Jose ordering the registration of the 2 parcels of land in accordance with law. Both admitted that the strip was formerly covered by water but since the Bay receded, it was now uncovered. The government tried to apply Art. 458 which states the adjoin estate (the College) does not acquire the land left dry by the natural decrease of the waters. ISSUES: Whether or not Art. 458 is applicable. Whether or not the property in question belongs to the public domain as a part of the bed of Laguna de Bay. HELD: No. Article 367 (now Art.458) provides that the owners of estates bordering on ponds or lagoons, do not acquire the land left dry by the natural decrease of the waters, nor lose those inundated by them in extraordinary floods. The provision refers to ponds and lagoons, and has therefore no application to the present case, which refers to a lake, a lagoon being legally distinct in character from a lake. Instead, Art.77 of the Spanish Law of Waters should apply, which provides: Lands accidentally inundated by the waters of lakes, or by creeks, rivers or other streams shall continue to be the property of their respective owners. Therefore, they must belong to Colegio de San Jose as part of Hacienda de San Pedro Tunasan, which was originally owned by it.

ART. 453
MUNICIPALITY OF OAS V. ROA 7 PHIL. 20 FACTS: The Municipality brought the action for the recovery of a tract of land in the pueblo of Oas, claiming that it was a part of the public square of said town, while Roa alleged that he was the owner of the property. The defendant admitted in writing that he knew that the land is owned by the Municipality and that Jose Castillo, whom he bought the property did not own the land. When Roa constructed a substantial building on the property in question after he acquired the property from Castillo, the Municipality did not oppose the construction. ISSUE: Whether or not the municipality owns the land. HELD: Yes. The defendant was not a purchaser in good faith. The plaintiff, having permitted the erection by the defendant of a building on the land without objection, acted in bad faith. The rights of the parties must, therefore, be determined as if they both had acted in good faith. To the case are applicable those provisions of the Civil Code which relate to the construction by one person of a building upon land belonging to another. Article 364 (now Art.453) of the Civil Code is as follows: "When there has been bad faith, not only on the part of the person who built, sowed, or planted on another's land, but also on the part of the owner of the latter, the rights of both shall be the same as if they had acted in good faith. The Supreme declared that the Municipality is the owner of the land and that it has the option of buying the building thereon, which is the property of the defendant, or of selling to him the land on which it stands.

Digested and compiled by Chami, Daisy, James, Moneh, and Relie UST LAW 2B