MINDANAO BUS CO. V.

CITY ASSESSOR DIGEST

G.R. No. L-17870 29 September 1962

Facts: Petitioner is a public utility company engaged in the transport of passengers and cargo by motor
vehicles in Mindanao with main offices in Cagayan de Oro (CDO). Petitioner likewise owned a land where
it maintains a garage, a repair shop and blacksmith or carpentry shops. The machineries are placed
thereon in wooden and cement platforms. The City Assessor of CDO then assessed a P4,400 realty tax
on said machineries and repair equipment. Petitioner appealed to the Board of Tax Appeals but it
sustained the City Assessor's decision, while the Court of Tax Appeals (CTA) sustained the same.
Note: This is merely a case digest to aid in remembering the important points of a case. It is still advisable
for any student of law to read the full text of assigned cases.
Issue: Whether or not the machineries and equipments are considered immobilized and thus
subject to a realty tax
Held: The Supreme Court decided otherwise and held that said machineries and equipments are not
subject to the assessment of real estate tax.
Said equipments are not considered immobilized as they are merely incidental, not esential and
principal to the business of the petitioner. The transportation business could be carried on without
repair or service shops of its rolling equipment as they can be repaired or services in another shop
belonging to another

SERG’S PRODUCTS, INC. VS. PCI LEASING AND FINANCE, INC.

GR NO. 137705. AUGUST 22, 2000

Facts:
Respondent PCI Leasing and Finance, Inc, filed with the RTC-QC a complaint for a sum of money with an
application for a writ of replevin.
Respondent Judge issued a writ of replevin directing its sheriff to seize and deliver the machineries and
equipment to PCI after 5 days and upon the payment of the necessary expenses.
In the implementation of the said writ, the sheriff proceeded to petitioner’s factory, seized one machinery
with word that he would return for the other.
Petitioners filed a motion for special protective order, invoking the power of the court to control the
conduct of its officers and amend and control its processes, praying for a directive for the sheriff to defer
enforcement of the writ of replevin.
The motion was opposed by PCI Leasing, on the ground that the properties were still personal and
therefore still subject to seizure and a writ of replevin.
The sheriff again sought to enforce the writ of seizure and take possession of the remaining properties.
He was able to take two more, but was prevented by the workers from taking the rest.

Issue:
1. Whether or not the machineries purchased and imported by Serg’s became real property by virtue of
immobilization.
2. Whether or not the contract between the parties is valid.

Ruling:
The petition is not meritorious.
1. No.
The machines that were subjects of the Writ of seizure were placed by petitioners in the factory built on
their own land. Indisputably, they(machines) were essential and principal elements of their
chocolate-making industry. Hence, although each of them was movable or personal property on
its own, all of them have become immobilized by destination because they are essential and
principal elements in the industry. In that sense petitioners are correct in arguing that the said
machines are real property pursuant to Article 415 (5) of the Civil Code.
But the Court disagrees with the submission of the petitioners that the said machines are not proper
subject of the Writ of Seizure.
The Court has held that contracting parties may validly stipulate that a real property be considered as
personal. After agreeing to such stipulation, they are consequently stopped from claiming otherwise.
Under the principle of estoppels, a party to a contract is ordinarily precluded from denying the truth of any
material fact found therein.
Clearly then, petitioners are stopped from denying the characterization of the subject machines as
personal property. Under circumstances, they are proper subjects of the Writ of Seizure.
It should be stressed, however, that the Court’s holding-that the machines should be deemed personal
property pursuant to the Lease Agreement-is good only insofar as the contracting parties are concerned.
Hence, while the parties are bound by the Agreement, third persons acting in good faith are not affected
by its stipulation characterizing the subject machinery as personal. In any event, there is no showing that
any specific third party would be adversely affected.
2. Yes.
It should be pointed out that the Court may rely on the Lease Agreement, for nothing on the record shows
that it has been nullified or annulled. In fact, petitioners assailed it first only in the RTC proceedings,
which had ironically been instituted by respondent. Accordingly, it must be presumed valid and binding as
the law between the parties.

Petition denied. Judgment affirmed.

Note:
Article 415. The following are immovable property:
(5) Machinery, receptacles, instruments or implements intended by the owner of the tenement for an
industry or works which may be carried on in a building or on a piece of land, and which tend directly to
meet the needs of the said industry or works.

BOARD OF ASSESSMENT APPEALS V. MERALCO

G.R. NO. L-15334. JANUARY 31, 1964.

Facts: On 20 October 1902, the Philippine Commission enacted Act 484 which authorized the Municipal
Board of Manila to grant a franchise to construct, maintain and operate an electric street railway and
electric light, heat and power system in the City of Manila and its suburbs to the person or persons
making the most favorable bid. Charles M. Swift was awarded the said franchise on March 1903, the
terms and conditions of which were embodied in Ordinance 44 approved on 24 March 1903. Meralco
became the transferee and owner of the franchise. Meralco’s electric power is generated by its hydro-
electric plant located at Botocan Falls, Laguna and is transmitted to the City of Manila by means of
electric transmission wires, running from the province of Laguna to the said City. These electric
transmission wires which carry high voltage current, are fastened to insulators attached on steel towers
constructed by respondent at intervals, from its hydroelectric plant in the province of Laguna to the City of
Manila. Meralco has constructed 40 of these steel towers within Quezon City, on land belonging to it.
On 15 November 1955, City Assessor of Quezon City declared the aforesaid steel towers for real
property tax under Tax Declaration 31992 and 15549. After denying Meralco’s petition to cancel these
declarations an appeal was taken by Meralco to the Board of Assessment Appeals of Quezon City, which
required Meralco to pay the amount of P11,651.86 as real property tax on the said steel towers for the
years 1952 to 1956. Meralco paid the amount under protest, and filed a petition for review in the Court of
Tax Appeals which rendered a decision on 29 December 1958, ordering the cancellation of the said tax
declarations and the City Treasurer of Quezon City to refund to Meralco the sum of P11,651.86. The
motion for reconsideration having been denied, on 22 April 1959, the petition for review was filed.
Issue: Whether or not the steel towers of an electric company constitute real property for the purposes of
real property tax.
Held: The steel towers of an electric company don’t constitute real property for the purposes of real
property tax.
Steel towers are not immovable property under paragraph 1, 3 and 5 of Article 415.
The steel towers or supports do not come within the objects mentioned in paragraph 1, because they do
not constitute buildings or constructions adhered to the soil. They are not constructions analogous to
buildings nor adhering to the soil. As per description, given by the lower court, they are removable and
merely attached to a square metal frame by means of bolts, which when unscrewed could easily be
dismantled and moved from place to place.
They cannot be included under paragraph 3, as they are not attached to an immovable in a fixed manner,
and they can be separated without breaking the material or causing deterioration upon the object to which
they are attached. Each of these steel towers or supports consists of steel bars or metal strips, joined
together by means of bolts, which can be disassembled by unscrewing the bolts and reassembled by
screwing the same.
These steel towers or supports do not also fall under paragraph 5, for they are not machineries or
receptacles, instruments or implements, and even if they were, they are not intended for industry or works
on the land.
Petitioner is not engaged in an industry or works on the land in which the steel supports or towers are
constructed.
The Supreme Court affirmed the decision appealed from, with costs against the petitioners.

VILLANUEVA V. CASTAÑEDA (G.R. NO. L-61311. SEPTEMBER 21, 1987)

FACTS:
The case involved a strip of land near public market on which stands a conglomeration of vendor stalls
known as talipapa. Said vendors was authorized by Sanggunian resolution to operate. This was protested
in a civil case causing an injunction. Pending case, municipal council adopted a new resolution which
declared the subject area “the parking space and as the public plaza of the municipality”. The CFI made
the injunction permanent. However, the decision apparently was not enforced because the occupants
were never evicted. Stall owners were even made to enter a lease agreement with the municipal
government. After some time, clamor was raised to restore the area into its public use. The office of the
mayor attempted to demolish the stalls. The stall owners filed petition for prohibition but was denied.
ISSUE:
Whether or not the stall owners may validly invoke the non-impairment clause as against the action to
restore the area for public use.
HELD:
No. Petition must be denied because the non-impairment clause does not apply here.
RATIO:
A public plaza is beyond the commerce of man and so cannot be the subject of lease or any other
contractual undertaking. This is elementary. Applying this well-settled doctrine, the Supreme Court ruled
that the petitioners had no right in the first place to occupy the disputed premises and cannot insist in
remaining there now on the strength of their alleged lease contracts. The problems caused by the
usurpation of the place by the petitioners are covered by the police power as delegated to the municipality
under the general welfare clause. In fact, every contract affecting the public interest suffers a congenital
infirmity in that it contains an implied reservation of the police power as a postulate of the existing legal
order. This power can be activated at any time to change the provisions of the contract, or even abrogate
it entirely, for the promotion or protection of the general welfare. Such an act will not militate against the
impairment clause, which is subject to and limited by the paramount police power.

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.

MANECLANG V. INTERMEDIATE APPELLATE COURT

GR L-66575 24May1988

FACTS
Petitioners Adriano Maneclang et.al. filed with the CFI a complaint for quieting of title over a certain
fishpond located within the 4 parcels of land belonging to them situated in Bugallon, Pangasinan. The trial
court dismissed the complaint upon a finding that the body of water traversing their land is a creek
constituting a tributary to Agno River and hence public in nature and not subject to private appropriation.
The Maneclangs appealed the decision to the IAC but the IAC affirmed the trial court decision. Hence,
this instant petition for review on certiorari.
However, after having been asked by the Court to comment to the case, Petitioners manifested that for
lack of interest on the part of the awardee in the public bidding, Maza, they desire to amicably settle the
case by submitting a Compromise Agreement praying that judgment be rendered recognizing their
ownership over the land and the body of water found within their titled properties. Petitioners state that
there would be no benefit on their part, but to the advantage of the municipality instead, since it is clear
that after the National Irrigation Authority built the dike over the land, no water gets in or out of the land.
 ISSUE
Whether the stipulations in the Compromise Agreement adjudicating ownership over the questioned
fishpond in favor of the Maneclangs are valid.

HELD/RATIO
NO, the stipulations in the Compromise Agreement are null and void and have no legal effect for being
contrary to law and public policy. The stipulations partake of the nature of an adjudication of ownership in
favor of the Maneclangs of the questioned fishpond that was clearly found to be originally a creek forming
a tributary of the Agno River, which belongs to the public domain and is thus not susceptible to private
appropriation and acquisitive prescription.

A creek, defined as a recess or arm extending from a river and participating in the ebb and flow of the
sea, is a property belonging to the public domain which is not susceptible to private appropriation and
acquisitive prescription, and as a public water, it cannot be registered under the Torrens System in the
name of any individual and considering further that neither the mere construction of irrigation dikes by the
National Irrigation Administration which prevented the water from flowing in and out of the subject
fishpond, nor its conversion into a fishpond, alter or change the nature of the creek as a
property of the public domain.

The finding that the subject body of water is a creek belonging to the public domain is a factual
determination binding upon the Supreme Court. The Municipality of Bugallon, acting thru its duly-
constituted municipal council is clothed with authority to pass, as it did,the two resolutions dealing with its
municipal waters, and it cannot be said that petitioners were deprived of their right to due process as
mere publication of the notice of the public bidding suffices as a constructive notice to the whole world.

DE BARRETO, ET. AL. v. VILLANUEVA, ET. AL., (1961)

Facts: Rosario Cruzado sold all her right, title, and interest and that of her children in the house and lot
herein involved to Villanueva for P19K. The purchaser paid P1,500 in advance, and executed a
promissory note for the balance. However, the buyer could only pay P5,500 On account of the note, for
which reason the vendor obtained judgment for the unpaid balance. In the meantime, the buyer
Villanueva was able to secure a clean certificate of title and mortgaged the property to appellant Barretto
to secure a loan of P30K, said mortgage having been duly recorded.

Villanueva defaulted on the mortgage loan in favor of Barretto. The latter foreclosed the mortgage in her
favor, obtained judgment, and upon its becoming final asked for execution. Cruzado filed a motion for
recognition for her "vendor's lien" invoking Articles 2242, 2243, and 2249 of the new Civil Code. After
hearing, the court below ordered the "lien" annotated on the back of the title, with the proviso that in case
of sale under the foreclosure decree the vendor's lien and the mortgage credit of appellant Barretto
should be paid pro rata from the proceeds.

Appellants insist that:

1. The vendor's lien, under Articles 2242 and 2243 of the new, Civil Code of the Philippines, can only
become effective in the event of insolvency of the vendee, which has not been proved to exist in the
instant case; and .
2. That the Cruzado is not a true vendor of the foreclosed property.

Article 2242 of the new Civil Code enumerates the claims, mortgage and liens that constitute an
encumbrance on specific immovable property, and among them are: .
(2) For the unpaid price of real property sold, upon the immovable sold; and
(5) Mortgage credits recorded in the Registry of Property."

Article 2249 of the same Code provides that "if there are two or more credits with respect to the same
specific real property or real rights, they shall be satisfied pro-rata after the payment of the taxes and
assessment upon the immovable property or real rights.

Held: Application of the above-quoted provisions to the case at bar would mean that the herein appellee
Rosario Cruzado as an unpaid vendor of the property in question has the right to share pro-rata with the
appellants the proceeds of the foreclosure sale.

Issue: Appellant’s argument: inasmuch as the unpaid vendor's lien in this case was not registered, it
should not prejudice the said appellants' registered rights over the property.

Held: There is nothing to this argument. Note must be taken of the fact that article 2242 of the new Civil
Code enumerating the preferred claims, mortgages and liens on immovables, specifically requires that.
Unlike the unpaid price of real property sold. mortgage credits, in order to be given preference, should be
 recorded in the Registry of Property. If the legislative intent was to impose the same requirement in the
case of the vendor's lien, or the unpaid price of real property sold, the lawmakers could have easily
inserted the same qualification which now modifies the mortgage credits. The law, however, does not
make any distinction between registered and unregistered vendor's lien, which only goes to show that any
lien of that kind enjoys the preferred credit status.

As to the point made that the articles of the Civil Code on concurrence and preference of credits are
applicable only to the insolvent debtor, suffice it to say that nothing in the law shows any such limitation. If
we are to interpret this portion of the Code as intended only for insolvency cases, then other creditor-
debtor relationships where there are concurrence of credits would be left without any rules to govern
them, and it would render purposeless the special laws on insolvency.

Resolution on Motion to Consider (1962)

Appellants, spouses Barretto, have filed a motion vigorously urging that our decision be reconsidered and
set aside, and a new one entered declaring that their right as mortgagees remain superior to the
unrecorded claim of herein appellee for the balance of the purchase price of her rights, title, and interests
in the mortgaged property.

We have reached the conclusion that our original decision must be reconsidered and set aside:

Under the system of the Civil Code of the Philippines, only taxes enjoy a similar absolute preference. All
the remaining thirteen classes of preferred creditors under Article 2242 enjoy no priority among
themselves, but must be paid pro-rata i.e., in proportion to the amount of the respective credits.
Thus, Article 2249 provides:
If there are two or more credits with respect to the same specific real property or real rights, they, shall be
satisfied pro-rata after the payment of the taxes and assessments upon the immovable property or real
rights."

The full application of Articles 2249 and 2242 demands that there must be first some proceedings where
the claims of all the preferred creditors may be bindingly adjudicated, such as:
1. insolvency,
2. the settlement of decedents estate under Rule 87 of the Rules of Court, or
3. other liquidation proceedings of similar import.

This explains the rule of Article 2243 of the new Civil Code that —
The claims or credits enumerated in the two preceding articles" shall be considered as mortgages or
pledges of real or personal property, or liens within the purview of legal provisions governing insolvency.

And the rule is further clarified in the Report of the Code Commission, as follows:
The question as to whether the Civil Code and the insolvency Law can be harmonized is settled by Article
2243. The preferences named in Articles 2261 and 2262 (now 2241 and 2242) are to be enforced in
accordance with the Insolvency Law."

Rule
Thus, it becomes evident that one preferred creditor's third-party claim to the proceeds of a foreclosure
sale (as in the case now before us) is not the proceeding contemplated by law for the enforcement of
preferences under Article 2242, unless the claimant were enforcing a credit for taxes that enjoy absolute
priority. If none of the claims is for taxes, a dispute between two creditors will not enable the Court to
ascertain the pro-rata dividend corresponding to each, because the rights of the other creditors likewise"
enjoying preference under Article 2242 can not be ascertained.

Held: There being no insolvency or liquidation, the claim of the appellee, as unpaid vendor, did not
require the character and rank of a statutory lien co-equal to the mortgagee's recorded encumbrance, and
must remain subordinate to the latter.

REYNANTE v. CA

FACTS:
More than 50 years ago, Reynante was taken as tenant by the late Don Cosme Carlos over a fishpond in
Meycauayan, Bulacan. Reynante subsequently built a nipa hut where he and his family lived and took
care of the nipa palms which they planted on lots 1 and 2, which was located between the fishpond and
Liputan River. Reynante’s family sold the nipa palms, and appropriated the fruits as his own, without
interference or complaint from Don Carlos.

Upon Don Carlos’ death, his heirs convinced Reynante to sign an affidavit, relinquishing his rights as a
caretaker of the fishpond. Reynante, however, continued to live in the nipa hut he had built, and he still
took care of the nipa palms, which he continued to sell.

This lead the heirs to file a complaint for forcible entry with preliminary injunction against Reynante in the
MTC. The MTC found for Reynante, but the heirs appealed to the RTC, where the decision was reversed.
The CA merely affirmed the decision of the RTC.

ISSUE:
Whether or not accretion automatically becomes registered land just because the adjoining lot is
registered in the Torrens System?

HELD:
While it is true that alluvial deposits shall belong to the owner of the lot adjoining such accretion, it does
not automatically bestow an imprescriptibility. If the owners of said land have not registered this with the
proper entity, said land will be subject to acquisition by prescription, which was what occurred in this
case.

Since the affidavits prove that Reynante has been in possession of these lands for more than 50 years,
the SC rightly held that the land belongs to him.

DEPRA v. DUMLAO

FACTS:
Dumlao is the owner of a parcel of land in Iloilo, while Depra owns the lot adjoining his. Dumlao built his
house on his own land, but the kitchen encroached about 34 sq.m on Depra’s property. Upon finding this,
Depra’s mom ordered Dumlao to move back from his encroachment, then subsequently filed an action for
unlawful detainer against Dumlao.

The lower court found that Dumlao was a builder in good faith, and ordered him to pay rent
(PhP5.00/month) – forced lease between the parties. Depra refused to accept the rentals so Dumlao
deposited this with the MTC. Neither party appealed judgment so this became final and executory.

1 year later, though, Depra filed an complaint for Quieting of Title. Dumlao contested this, stating that the
suit is barred by res judicata. But Depra averred that the lower court did not have jurisdiction to rule on
encumbrances of real property – only the CFI has jurisdiction.

ISSUE:
1. Whether or not res judicata would apply to the case at bar?
2. Whether or not the land owner can be compelled to accept rent payments by the court (with both LO
and BPS being in good faith)?

HELD:
In the first issue, res judicata would not apply should the first case be one for ejectment and the other for
quieting of title. Article 448 of the Civil Code provides that the land owner has 2 options – to buy the
building or to sell/rent his land. This is so because the rights of the owner of the land is older, and by the
principle of accession, he also has a right to the accessories.

The Court remanded the case to the RTC to determine the fair price of the land, the expenses incurred by
the BPS (Dumlao), the increase in value of the land, and whether the value of the land is considerably
more than the value of the kitchen built on it. The RTC shall then give Depra 15 days to exercise such
option.

PEDRO P. PECSON v. COURT OF APPEALS, SPS. NUGUID

FACTS:

Pedro Pecson was the owner of a commercial lot on which he built a 4-door-2-storey apartment building.
He failed to pay realty taxes amounting to P12k so the lot was sold at public auction to Mamerto
Nepomuceno who later on sold it to the Sps. Nuguid.

Pecson challenged the validity of the auction before the RTC but was dismissed but the RTC held that the
apartment bldg was not subject of the litigation. On appeal, the CA appealed in toto the decision of the
RTC that the apartment bldg was not included in the auction sale.

After an entry of judgment was made, the Sps. Nuguid filed a motion with the RTC for a motion for
delivery of possession of the lot and the apartment bldg citing Art. 546 of the CC. The RTC issued an
order declaring that the owner of the lot and apartment bldg were the Sps. Nuguid and to pay the
construction cost of the apartment before a writ of possession would be issued and to pay rent to the
spouses. Pecson moved for reconsideration but the Trial court did not act on it, instead it issued a writ of
possession. The CA affirmed in part the decision declaring the cost of construction can be offset from the
amount of rents to be collected and that since Sps. Nuguid opted to appropriate the improvement, Pecson
is entitled to be reimbursed the cost of construction at the time it was built in 1965 which is at P53k and
the right the retain the improvement until full indemnity is paid.

Thus the case at bar.

ISSUE:

Whether or not Art. 448 and 546 applies in the case at bar

HELD: YES

> With regard to Art. 448, the provision on indemnity may be applied in analogy. Whoever is the owner of
the land may appropriate whatever has been built, planted or sown after paying indemnity. However, it
does not apply when the owner of the land is also the builder of the works on his own land who later on
loses ownership by sale or donation.

> Art. 546 refers to the necessary and useful expenses which shall be refunded to the possessor in good
faith with right of retention. However, it does not state how to determine the value of the useful
improvement. The respondents [court and private respondents alike] espouses as sufficient
reimbursement the cost of construction in 1965, however, this is contrary to previous rulings which
declares that the value to the reimbursed should be the present market value of said improvements so as
not to unjustly enrich either of the parties. [the trial court erred in ordering Pecson to pay rent since the
Sps. Nuguid has yet to pay the indemnity therefore Pecson has the right to retain the improvements and
the income thereof. The case was remanded to the trial court for determination of the current market
value of the apartment bldg and ordered the Sps to pay Pecson otherwise it shall be restored to Pecson
until payment of indemnity.]

SARMIENTO v. AGANA

FACTS:

Before Ernesto Valentino and Rebecca Lorenzo wed, Rebecca’s mother offered a lot in Paranaque that
they could build their house on. In 1967, they finally built their home which cost about PhP8,000-10,000,
thinking that someday, the lot would be transferred to them in their name. It turns out, though, that the lot
was owned by the Spouses Santos who , in turn, sold the same to Leonila Sarmiento in 1974. A year
later, Sarmiento ordered the Valentinos to vacate their lot, then eventually filed and Ejection Suit against
them.

The lower court ruled in Sarmiento’s favor and ordered her to pay 20,000 as the value of the house. But
the case was then elevated to the CFI of Pasay (w/ Agana as Judge), and pursuant to Art.448 of the CC
(March 1979), the Court ordered Sarmiento to exercise the option in 60 days to pay Ernesto 40,000 as
the value of the house or to let them purchase the land for 25,000. Sarmiento was not able to exercise
this option, and the CFI allowed Ernesto to deposit the 25,000 purchase price with the Court.

ISSUE:

Whether or not the land owner is compelled to exercise either option: to buy the building or to sell the
land?

HELD:

Ernesto and his wife (BPS) were clearly in good faith as they believed that Rebecca’s mother has the
capacity to eventually transfer the title of the land to them. In line with this, Sarmiento (LO) was required
to exercise only 2 options: To purchase the house or to sell the land to them, in this case, based on the
value decided by the courts. Since Sarmiento failed to exercise the option within the allotted period, and
based on Art. 448, the LO is compelled by law to exercise either option. Not choosing either is a violation
of the law.

SPOUSES DEL CAMPO V. ABESIA 160 SCRA 379

Facts:
This case involves a parcel of land, situated at the corner of F. Flores and Cavan Streets, Cebu City. An
action for partition was filed by plaintiffs in the CFI of Cebu. Plaintiffs and defendants are co-owners pro
indiviso of this lot in the proportion of and 1/3 share each, respectively. The trial court appointed a
commissioner in accordance with the agreement of the parties. ,the Id commissioner conducted a survey,
prepared a sketch plan and submitted a report to the trial court on May 29, 1976, recommending that the
property be divided into two lots: Lot 1161-A with an area of 30 square meters for plaintiffs and Lot No.
1161-B with an area of 15 square meters for the defendants. The houses of plaintiffs and defendants
were surveyed and shown on the sketch plan. The house of defendants occupied the portion with an area
of 5 square meters of Lot 1161-A of plaintiffs. The parties manifested their conformity to the report and
asked the trial court to finally settle and adjudicate who among the parties should take possession of the
5 square meters of the land in question.

Issue: Whether or Not Article 448 of the Civil Code is applicable to a builder in good faith when the
property involved is owned in common.

Held: When the co-ownership is terminated by the partition and it appears that the house of defendants
overlaps or occupies a portion of 5 square meters of the land pertaining to plaintiffs which the defendants
obviously built in good faith, then the provisions of Article 448 of the new Civil Code should apply.
Manresa and Navarro Amandi agree that the said provision of the Civil Code may apply even when there
was co-ownership if good faith has been established.

Applying the aforesaid provision of the Civil Code, the plaintiffs have the right to appropriate said portion
of the house of defendants upon payment of indemnity to defendants as provided for in Article 546 of the
Civil Code. Otherwise, the plaintiffs may oblige the defendants to pay the price of the land occupied by
their house. However, if the price asked for is considerably much more than the value of the portion of the
house of defendants built thereon, then the latter cannot be obliged to buy the land. The defendants shall
then pay the reasonable rent to the plaintiff upon such terms and conditions that they may agree. In case
of disagreement, the trial court shall fix the terms thereof. Of course, defendants may demolish or remove
the said portion of their house, at their own expense, if they so decide.

Article 448 of the New Civil Code provides as follows:

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.

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.