PROPERTY CASE DIGESTS

Farms, could possibly exonerate it from making

ART. 447
compensation. But the Pacific Farm's stance that it is
GRN L-21783 NOVEMBER 29, 1969
an innocent purchaser for value and in good faith is
PACIFIC FARMS, INC. VS. SIMPLICIO G.
open to grave doubt because of certain facts of
ESGUERRA, CARRIED LUMBER COMPANY
substantial import (evident from the records) that
cannot escape notice.
FACTS:
In the deed of absolute sale, exhibit 1, the
On several occasions, the Company sold
Insular Farms, Inc. (vendor) was represented in the
and delivered lumber and construction materials to
contract by its president, J. Antonio Araneta. The
the Insular Farms, Inc. which the latter used in the
latter was a director of the appellee (Pacific Farms,
construction of the aforementioned six buildings at its
Inc.) and was the counsel who signed the complaint
compound in Bolinao, Pangasian. Of the total
filed by the appellee in the court below. J. Antonio
procurement price of P15,000, the sum of P4,710.18
Araneta was, therefore, not only the president of
has not been paid by the Insular Farms, Inc. The
the Insular Farms, Inc. but also a director and
Company instituted a civil case with the CIR of
counsel of Pacific Farms.
Pangasinan to recover the said unpaid balance from
During the trial of civil case the Insular
the Insular Farms, Inc. The trial court rendered
Farms, Inc. was represented by Attorney Amado
judgment in favor of the Company's claim. The
Santiago, Jr. of the law firm of J. Antonio Araneta.
corresponding writ of execution was issued because
The latter was one of the counsels of the Pacific
there was no appeal instituted by Insular, Inc.
Farms, Inc. They cannot claim ignorance of the
The Pacific Farms, Inc. filed a third-party
pendency of civil case because the Insular
claim asserting ownership over the levied buildings
Farms, Inc. was defended by the same lawyer
which it had acquired from the Insular Farms, Inc. by
from the same law firm that commenced the
virtue of a deed of absolute sale executed about
present action.
seven months before the Company filed the civil
Pacific Farms merely folded its arms in
action. Shielded by an indemnity bond put up by the
disinterest and waited, so to speak. Not until a
Company and the Cosmopolitan Insurance
decision was rendered therein in favor of the
Company, Inc., the sheriff proceeded with the
Company, a writ of execution issued, and the six
announced public auction and sold the levied
buildings levied upon by the sheriff, did it file a third-
buildings to the Company.
party claim over the levied buildings.

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
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

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.
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
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.
 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
Digested and compiled by Chami, Daisy, James, Moneh, and Relie UST
LAW 2B
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.

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.
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 two-
storey 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
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,
 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
Digested and compiled by Chami, Daisy, James, Moneh, and Relie UST
LAW 2B
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. T-
6055, 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

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.
Digested and compiled by Chami, Daisy, James, Moneh, and Relie UST
LAW 2B
PROPERTY CASE DIGESTS
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

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.
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 Lopez-
Villegas (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 spouses-
respondents 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:
Digested and compiled by Chami, Daisy, James, Moneh, and Relie UST
LAW 2B
PROPERTY CASE DIGESTS
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. 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
 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
Digested and compiled by Chami, Daisy, James, Moneh, and Relie UST
LAW 2B
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

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.
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
Digested and compiled by Chami, Daisy, James, Moneh, and Relie UST
LAW 2B
PROPERTY CASE DIGESTS
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.
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:

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. 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
PROPERTY CASE DIGESTS
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.