JOHN AUBREY JAMERO JD-1

PROPERTY AND LAND LAW WEEK 7 CASE DIGESTS

1. PNB V. DE JESUS, 411 SCRA 557, G.R. NO. 149295, SEPTEMBER 23, 2003

FACTS: Generoso De Jesus, as represented by his attorney-in-fact, Christian De Jesus filed against the
Philippine National Bank for recovery of ownership and possession, with damages, over the questioned
land he acquired situated in Mamburao, Occidental Mindoro and discovered that the northern portion of the
lot was being encroached upon by a building of petitioner to the extent of 124 square meters.

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.

RTC declared that the respondent is the rightful owner of the 124 square meter portion of the land to which
the CA sustained.

ISSUE: Whether or not the RTC and CA erred in awarding the land to the respondent.

RULING: No. The Supreme Court held that a builder in good faith can, under the foregoing provisions,
compel the landowner to make a choice between appropriating the building by paying the proper indemnity
or obliging the builder to pay the price of the land. 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. He must
choose one. He cannot, for instance, compel the owner of the building to instead remove it from the land. In
order, however, that the builder can invoke that accruing benefit and enjoy his corresponding right to
demand that a choice be made by the landowner, he should be able to prove good faith on his part.

Good faith, here understood, is an intangible and abstract quality with no technical meaning or statutory
definition, and it encompasses, among other things, an honest belief, the absence of malice and the absence
of design to defraud or to seek an unconscionable advantage.

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.
 2. BALUCANAG VS. FRANCISCO GR NO. L-33422, MAY 30, 1983

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 within 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: Whether or not the lessee is a builder in good faith?

RULING: No. The Supreme Court held that 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."
 3. PECSON vs. COURT OF APPEALS G.R. No. 115814 May 26, 1995

FACTS: Petitioner Pedro P. Pecson was the owner of a commercial lot located in Kamias Street, Quezon
City, on which he built a four-door two-storey apartment building. For his failure to pay realty taxes, the
lot was sold at public auction. In turn, the property was sold it on to the private respondents, the spouses
Juan Nuguid and Erlinda Tan-Nuguid.

The petitioner challenged the validity of the auction sale. Upon close examination of the record, it shows
that there was no mention of the building thereon. Needless to say, as it was only the land without any
building which Nepomuceno had acquired at the auction sale, it was also only that land without any building
which he could have legally sold to the Nuguids. However, the private respondents filed with the trial court
a motion for delivery of possession of the lot and the apartment building, citing article 546 of the Civil
Code.

ISSUE: Which between Articles 448 and 546 is applicable in this case?

RULING: Article 546 is the applicable rule in this case. Article 448 does not apply 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
donation.

Art. 546. Necessary expenses shall be refunded to every possessor; but only the possessor in good faith
may retain the thing until he has been reimbursed therefor.

Useful expenses shall be refunded only to the possessor in good faith with the same right of retention, the
person who has defeated him in the possession having the option of refunding the amount of the expenses
or of paying the increase in value which the thing may have acquired by reason thereof. (453a).

The trial court also erred in ordering the petitioner to pay monthly rentals equal to the aggregate rentals
paid by the lessees of the apartment building. Since the private respondents have opted to appropriate the
apartment building, the petitioner is thus entitled to the possession and enjoyment of the apartment building,
until he is paid the proper indemnity, as well as of the portion of the lot where the building has been
constructed. This is so because the right to retain the improvements while the corresponding indemnity is
not paid implies the tenancy or possession in fact of the land on which it is built, planted or sown. The
petitioner not having been so paid, he was entitled to retain ownership of the building and, necessarily, the
income therefrom.
 4. IGNACIO VS. HILARIO GR NO. L-175 APRIL 30, 1946

FACTS: Elias Hilario and his wife Dionisia Dres are involved in a civil lawsuit with Damian, Francisco,
and Luis, all with the last name Ignacio, over the ownership of a piece of property that is partially used for
rice farming and partially for residential use. The parcel of property belonged to Hilario. Later, he learned
that Ignacio had constructed a home and a granary at the lot's residential section.

The case was presided over by Hon. Alfonso Felix (Lower Courts), who issued a decision declaring Hilario
the legitimate owners of the entire property (owner in good faith) and granting Ignacio the ownership of
the houses and granaries they had constructed on the residential portion with the rights of a possessor in
good faith (builder in good faith), in accordance with Civil Code Article 361.

The case now presided over by respondent Judge Hon. Felipe Natividad, ordered to remove the structure at
the own expense of Ignacio and to restore plaintiffs in the possession of said lot.

ISSUE: Whether or not the order of Judge Natividad compelling defendants-petitioners to remove their
buildings from the land belonging to plaintiffs-respondents is null and void.

RULING: Yes. It amends substantially the judgment sought to be executed and is, furthermore, offensive
to articles 361 and 453 of the Civil Code.

The owner of the building erected in good faith on a land owned by another, is entitled to retain the
possession of the land until he is paid the value of his building, under article 453. The owner of the land,
upon the other hand, has the option, under article 361, either to pay for the building or to sell his land to the
owner of the building. But he cannot, as respondents here did, refuse both to pay for the building and to sell
the land and compel the owner of the building to remove it from the land where it is erected. He is entitled
to such remotion only when, after having chosen to sell his land, the other party fails to pay for the same.

We hold, therefore, that the order of Judge Natividad compelling defendants-petitioners to remove their
buildings from the land belonging to plaintiffs-respondents only because the latter chose neither to pay for
such buildings not to sell the land, is null and void.
 5. QUEMUELV. OLAES GR NO. L-11084, APRIL 29, 1961

FACTS: The Olaes spouses, the registered owners of a lot in Rosario, Cavite, sought the recovery of the
possession of the said lot and rentals therefor, from the Quemuel spouses, who in their verified answer
admitted plaintiffs' ownership. However, the latter contended that their occupation was gratuitous. The trial
court ordered the Quemuel spouses to return the lot and pay the rental thereof to the Olaes spouses until the
former vacated the premises. It became final and executory.
In the present case, the Quemuel spouses sought to reduce the rental fee and compel the Olaes to sell to
them the portion of the lot where the former's house was erected. They claimed that they were builders in
good faith.

ISSUE: Whether the Quemuel spouses have the right over the lot on the basis of builders in good faith.

RULING: No. It should be noted that article 448 of the new Civil Code, relied upon by plaintiffs, is
intended to apply only to a case where one builds, or sows, or plants on land in which believes himself to
have a claim of title and not to land wherein one's interest is that of tenant, under a rental co tract, which is
the present case. The tenant cannot be said to be a builder in good faith as he has no pretension to be owner.
They alleged that they are the owners of the lot and that the Quemuel spouses have been occupying the
same by Olaes' tolerance which was admitted by the former. It would, therefore, appear that plaintiffs
herein were not unaware of the flaw in their title, if any, and that their true relation with the herein
defendants was that of tenant and landlord, and that their rights are governed by Article 1573 in relation to
article 487 of the old Civil Code, which reads as follows:

Art. 1573. A lessee shall have with respect to useful a voluntary improvements, the same right which are
granted the usufructuaries.

Art. 487. The usufructuary may make on the property in usufruct any improvements, useful or recreative,
which may deem proper, provided he does not change its form or substance, but he shall have no right to
be indemnified thereof. He may, however, remove such improvements, should it possible to do so without
injury to the property.
Thus, the plaintiffs cannot compel the defendants to pay for the improvements the former made on the
property or to sell the latter's land. Plaintiffs' only right, is to remove improvements, if it is possible to do
so, without damage to the land.
 6. DEPRA VS. DUMLAO GR NO. L-57348 MAY 16, 1985

FACTS: Francisco Depra, is the owner of a parcel of land registered, situated in Dumangas Iloilo. Agustin
Dumlao owns an adjoining lot. When Dumlao constructed his house where the kitchen thereof had
encroached on an area of 34 square meters of Depra’s property. After the encroachment was discovered in
a relocation survey of Depra’s lot, his mother, Beatriz wrote a demand letter asking Dumlao to move back
from his encroachment and filed an action for Unlawful Detainer.

After trial, the Municipal Court found that Dumlao was a builder in good faith, and applying Article 448 of
the Civil Code. Depra did not accept payment of rentals so that Dumlao deposited such rentals with the
Municipal Court. In this case, the Municipal Court, acted without jurisdiction, its Decision was null and
void and cannot operate as res judicata to the subject complaint for Queting of Title. The court conceded in
the MCs decision that Dumlao is a builder in good faith.

ISSUE: Whether res judicata would apply to the case at bar?

RULING: No. The judgment in a detainer case is effective in respect of possession only (Sec. 7, Rule 70,
Rules of Court). The Municipal Court overstepped its bounds when it imposed upon the parties a situation
of “forced lease”, which like “forced co-ownership” is not favored in law. Furthermore, a lease is an interest
in real property, jurisdiction over which belongs to CFI (now RTC) (Sec. 44(b), Judiciary Act of 1948; 2
Sec. 19 (2) BP 129). Since the Municipal Court, acted without jurisdiction, its Decision was null and void
and cannot operate as res judicata to the subject complaint for Queting of Title.
Even if the Decision of the Municipal Court were valid, the rule on res judicata would not apply due to
difference in cause of action. In the Municipal Court, the cause of action was the deprivation of possession,
while in the action to quiet title, the cause of action was based on ownership. Furthermore, Sec. 7, Rule 70
of the Rules of Court explicitly provides that judgment in a detainer case “shall not bar an action between
the same parties respecting title to the land.”

The owner of the land on which improvement was built by another in good faith is entitled to removal of
improvement only after landowner has opted to sell the land and the builder refused to pay for the same.
Res judicata doesn’t apply wherein the first case was for ejectment and the other was for quieting of title.
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.
 7. REYNANTE VS. CA GR NO. 95907, APRIL 8,1992

FACTS: More than 50 years ago, petitioner Jose Reynante was taken as tenant by the late Don Cosme
Carlos, owner and father-in-law of herein private respondents, over a fishpond located at Barrio Liputan,
Meycauayan, Bulacan.

During the tenancy, petitioner Jose Reynante constructed a nipa hut where he and his family lived and took
care of the nipa palms (sasahan) he had planted on lots 1 and 2. Petitioner harvested and sold said nipa
palms without interference and prohibition from anybody. Neither did the late Don Cosme Carlos question
his right to plant the nipa palms near the fishpond or to harvest and appropriate them as his own.

After the death of Don Carlos, his heirs formally demanded that the petitioner vacate said portion but the
petitioner refused and failed to relinquish possession of lots 1 and 2. Hence, on April 22, 1988, private
respondents filed a complaint for forcible entry with preliminary mandatory injunction against petitioner.

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

RULING: "An accretion does not automatically become registered land just because the lot which receives
such accretion is covered by a Torrens Title. Ownership of a piece of land is one thing; registration under
the Torrens system of that ownership is another. Ownership over the accretion received by the land
adjoining a river is governed by the Civil Code. Imprescriptibility of registered land is provided in the
registration law. Registration under the Land Registration and Cadastral Act does not vest or give title to
the land, but merely confirms and, thereafter, protects the title already possessed by the owner, making it
imprescriptible by occupation of third parties. But to obtain this protection, the land must be placed under
the operation of the registration laws, wherein certain judicial procedures have been provided."

Assuming private respondents had acquired the alluvial deposit (the lot in question), by accretion, still their
failure to register said accretion for a period of fifty (50) years subjected said accretion to acquisition
through prescription by third persons. It is undisputed that petitioner has been in possession of the subject
lots for more than fifty (50) years and unless private respondent can show a better title over the subject lots,
petitioner’s possession over the property must be respected.
 8. FLOREZA V EVANGELISTA 96 SCRA 130

FACTS: Plaintiffs Maria de Evangelista and Sergio Evangelista, who are mother and son are the owners
of a residential lot located at Sumilang St.,Tanay, Rizal, with an area of 204.08 sq. ms., assessed at P410.00.

In May 1945, the EVANGELISTAS borrowed from FLOREZA the amount of P100.00.On or about
November 1945, with the consent of the EVANGELISTAS, FLOREZA occupied the above residential lot
and built thereon a house of light materials without any agreement as to payment for the use of said
residential lot.

Thereafter, the EVANGELISTAS again borrowed money on 5 different dates a total of P740.00 including
the first loan.The last three items are evidenced by private documents stating that the residential lot stands
as security therefor and that the amounts covered thereunder are payable within six years from date, without
mention of interest.

On January 10, 1949, FLOREZA demolished this house of light materials and in its place constructed one
of strong materials assessed in his name at P1,410.00 under Tax Declaration No. 4448. FLOREZA paid no
rental as before.On August 1, 1949, the EVANGELISTAS, for and in consideration of P1,000.00
representing the total outstanding loan of P740.00 plus P260.00 in cash, sold their residential lot to
FLOREZA, with a right to repurchase within a period of 6 years. The EVANGELISTAS paid in full the
repurchase price of P1,000.00. On April 25, 1956, the EVANGELISTAS, through their counsel, wrote
FLOREZA a letter asking him to vacate the premises as they wanted to make use of their residential lot
besides the fact that FLOREZA had already been given by them more than one year within which to move
his house to another site.

FLOREZA refused to vacate unless he was first reimbursed the value of his house.

ISSUE: Whether or not Floreza is entitled to reimbursement for the value of the house.

RULING: No. The Supreme Court held that the reimbursement of the value of the improvement erected
on the subject property has become moot. Petitioner's right of retention of subject property until he is
reimbursed for the value of his house, as he had demanded, is inextricably linked with the question of
rentals. For if the petitioner has the right to indemnity, he has the right of retention and no rentals need be
paid. Conversely, if no right of retention exists, damages in the form of rentals for the continued use and
occupation of the property should be allowed. It should be noted that petitioner did not construct his house
as a vendee a retro. The house had already been constructed as far back as 1949 (1945 for the house of light
materials) even before the pacto de retro sale in 1949. Petitioner incurred no useful expense, therefore, after
that sale. The house was already there at the tolerance of the EVANGELISTAS in consideration of the
several loans extended to them. Since petitioner cannot be classified as a builder in good faith within the
purview of Article 448 of the Civil Code, nor as a vendee a retro, who made useful improvements during
the lifetime of the pacto de retro, petitioner has no right to reimbursement of the value of the house which
he had erected on the residential lot of the EVANGELISTAS, much less to retention of the premises until
he is reimbursed.
 9. TAN QUETO VS CA G.R. NO. L-35648 FEBRUARY 27, 1987

FACTS: There is this lot 304-B received by Restituta either by way of donation or by way of purchase on
February 11, 1927. This lot is located in the Municipality of Centro, Mizamis Occidental.

The transaction took place during her mother's lifetime, her father having predeceased the mother.

The donation or sale was consummated while Restituta was already married to her husband Juan Pombuena.

On January 22, 1935, Juan filed for himself and his supposed co-owner Restituta an application for a
Torrens Title over the land.

On November 22, 1938, a decision was promulgated in a cadastral case pronouncing Juan as the owner of
the land.

On September 22, 1949 a contract of lease over the lot was entered into between Pershing Tan Queto and
Restituta, with consent of Juan, for a period of 10 years.

On December 27, 1960, Restituta sued Tan Queto for unlawful detainer, the lease contract having expired.

On April 22, 1962, an Original Certificate of Title was issued in Juan's name.

The unlawful detainer case was won by the spouses in the Municipal Court; but on appeal in the Court of
First Instance, the entire case was DISMISSED because of an understanding (barter) whereby TAN
QUETO became the owner of the disputed lot, and the spouses RESTITUTA and JUAN in turn became the
owners of a parcel of land (with the house constructed thereon) previously owned (that is, before the barter)
by TAN QUETO.

Later, Restituta sued bith Juan and Tan Queto for reconveyance of the title over the registered but disputed
lot, for annulment of the barter, and for recovery of the land with damages.

ISSUES: Whether or not Tan is a builder in good faith

RULING: Yes. Tan Queto nursed the belief that the lot was actually RESTITUTA's (making him in bad
faith), still RESTITUTA's failure to prohibit him from building despite her knowledge that construction
was actually being done, makes her also in bad faith. The net resultant of mutual bad faith would entitle
TAN QUETO to the rights of a builder in good faith (Art. 448, Civil Code.

However, TAN QUETO may be said to be the OWNER-POSSESSOR of the lot having bartered his own
lot and small house with the questioned lot with JUAN (by the OCT a conjugal owner). He is a builder-
possessor jus possidendi because he is the OWNER himself.
 10. TORBELAVS. SPS ROSARIO AND BANCO FILIPIINO GR NO. 140553 DECEMBER
7,2011

FACTS: The controversy began with a parcel of land known as Lot 356-A. It was originally part of a larger
parcel of land, known as Lot 356 registered in the name of Valeriano. Under unexplained circumstances,
Valeriano gave Lot 356-A to his sister Marta who was then married to Eugenio Torbela (spouses Torbela).
Upon the deaths of the spouses Torbela, Lot 356-A was adjudicated in equal shares among their children,
the Torbela siblings. On Dec. 12, 1965, the Torbela siblings executed a Deed of Absolute Quitclaim over
Lot 356-A in favor of Dr. Rosario. Four days later, Valeriano's name was partially cancelled as to Lot 356-
A and TCT 52751 was issued in Dr. Rosario's name covering the said property.

Another Deed of Absolute Quitclaim was subsequently executed on Dec. 28, 1964, this time by Dr. Rosario,
acknowledging that he only borrowed Lot 356-A from the Torbela siblings and was already returning the
same to the latter. The Deed was notarized but was not immediately annotated on TCT 52751. Following
the issuance of the TCT, Dr. Rosario obtained a loan from DBP secured by a mortgage constituted on Lot
356-A. The mortgage was annotated on the TCT. The proceeds of the loan were used for the construction
of improvements on the said lot. On May 17, 1967, the Torbela siblings had Dr. Rosario's Deed of Absolute
Quitclaim annotated on TCT 52751 as Entry No. 274471-274472. Eventually, the construction of a four-
storey building on Lot 356-A was completed. The building was initially used as a hospital, but was later
converted to a commercial building. Dr. Rosario was able to fully pay his loan from DBP. Consequently,
the mortgage was cancelled in favor of the former and ratified before a notary public. In the meantime, Dr.
Rosario acquired another loan from the PNB. The loan was secured by mortgages on three properties, one
of which was Lot 356-A. The amended loan agreement and mortgage on the said lot was annotated on
March 6, 1981. On Dec. 8, 1981, the spouses Rosario acquired a third loan from Banco Filipino. To secure
said loan, the spouses Rosario again constituted mortgages on the same three properties aforementioned,
one of which was Lot 356-A. Because Banco Filipino paid the balance of Dr. Rosario's loan from PNB, the
mortgage on Lot 356-A in favor of PNB was cancelled. On Feb. 13, 1986, the Torbela’s filed before the
RTC a Complaint for recovery of ownership and possession of Lot 356-A, against the spouses Rosario,
which was docketed as Civil Case U-4359. The spouses Rosario afterwards failed to pay their loan from
Banco Filipino. Consequently, the latter extrajudicially foreclosed the mortgages on the three properties.
The Certificate of Sale in favor of Banco Filipino was annotated on TCT 52751.

The Torbela siblings tried to redeem Lot 356-A from Banco Filipino, but their efforts were unsuccessful.
Upon the expiration of the one-year redemption period, the Certificate of Final Sale covering all three
foreclosed properties was executed. The Torbela’s thereafter filed before the RTC a Complaint for the
annulment of the Certificate of Final Sale against Banco Filipino. The case was docketed as Civil Case U-
4733. Meanwhile, Banco Filipino filed before the RTC a Petition for the issuance of a writ of possession,
docketed as Pet. Case U-822. The RTC jointly heard the three cases and declared that the mortgage over
Lot 356-A covered by TCT 52751 was valid and declared Banco Filipino as the owner of the said lot. The
Torbela’s and Dr. Rosario appealed before the CA but likewise met the same fate.

ISSUE: Whether or not the Torbela Siblings owns the land?

RULING: Yes. There is no dispute that the Torbela’s inherited the title to Lot 356-A from their parents,
who, in turn, acquired the same from the first registered owner of Lot 356-A, Valeriano. In contrast, Dr.
Rosario presented TCT 52751, issued in his name, to prove his purported title to Lot 356-A. However, the
Court made a clear distinction between title and the certificate of title: the certificate referred to is that
document issued by the Register of Deeds known as the TCT. By title, the law refers to ownership which
is represented by that document. Placing a parcel of land under the mantle of the Torrens system does not
mean that ownership thereof can no longer be disrupted. Ownership is different from a certificate of title.
The TCT is only the best proof of ownership of a piece of land but it cannot always be considered as
conclusive evidence of ownership. Mere issuance of the certificate of title in the name of any person does
not foreclose the possibility that the real property may be under co-ownership with persons not named in
the certificate or that the registrant may only be a trustee or that the other parties may have acquired interest
subsequent to the issuance of the certificate of title. Title as a concept of ownership should not be confused
with the certificate of title as evidence of such ownership although both are interchangeably used.
 11. COMMUNITIES CAGAYAN INC. VS SPOUSES NANOL GR NO. 176791 NOVEMBER
14, 2012

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

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

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

Article 448 of the Civil Code applies when the builder believes that he is the owner of the land or that
by some title he has the right to build thereon, or that, at least, he has a claim of title thereto.
Concededly, this is not present in the instant case. The subject property is covered by a Contract to
Sell hence ownership still remains with petitioner being the seller. Nevertheless, there were already
instances where this Court applied Article 448 even if the builders do not have a claim of title over
the property. Thus:

This Court has ruled that this provision covers only cases in which the builders, sowers or planters
believe themselves to be owners of the land or, at least, to have a claim of title thereto. It does not
apply when the interest is merely that of a holder, such as a mere tenant, agent or usufructuary. From
these pronouncements, good faith is identified by the belief that the land is owned; or that – by some
title – one has the right to build, plant, or sow thereon.
 12. DEPARTMENT OF EDUCATION (DepEd) Vs. MARIANO TULIAO, G.R. No. 205664

FACTS: Tuliao filed an action for recovery of possession and removal of structure with damages against
DepEd with the Municipal Trial Court in Tuguegarao. He alleged that he was a registered owner of the
subject of parcel of land and that a portion of said property was allowed by his predecessor-in-interest to
be used by the Atulayan Elementary School (AES) as an access road for the school children in going to and
from the school.
In March 2000, upon discovering that a structure was being constructed on the land, he demanded that
DepEd cease and desist and vacate the property. DepEd refused. Tuliao likewise demanded payment for
reasonable rent but was also ignored. Tuliao presented a certificate of title as well as tax declarations and
real property tax receipts for the years 2003-2005. Hence, the CA ruled that Tuliao has a better right of
possession.

ISSUE: Whether the CA erred in failing to consider that respondent’s claim is barred by laches due to the
uninterrupted possession of AES for at least 32 years

RULING: No, the Supreme Court affirmed CA’s decision.

The registered owner of the land is Tuliao. It must be noted that DepEd’s contention that its possession of
the land was open, continuous, exclusive, adverse, notorious and in the concept of an owner for 32 years is
untenable. DepEd’s defense of laches has no merit. DepEd’s possession was not truly adverse.
The burden of proof was not proven by DepEd since they only have testimonies while

Tuliao as the registered owner, presented tax declarations, tax receipts and certificate of title.

Mere material possession of the land was not adverse as against the owner and is insufficient to vest tile
unless such possession was accompanied by the intent to possess as an owner. At any rate, the MTC was
fair when it stated that that DepEd could not order the immediate removal of the structures and directed
Tuliao to exercise his option under Art 448
 13. SPOUSES AQUINO v. SPOUSES AGUILAR, GR NO. 182754, JUNE 29, 2015

FACTS: Teresa Vela Aquino (Teresa) and her husband, Crispin Aquino, are the owners of a house and lot
located at No. 6948, Rosal Street, Guadalupe

Since 1981, this property has been occupied by Teresa's sister, Josefina Vela Aguilar; Josefina's spouse
Eusebio; and their family. It appears from the record that respondents stayed on the property with the
consent and approval of petitioners, who were then residing in the United States.

While respondents were in possession of the property, the house previously constructed therein was
demolished, and a three-storey building built in its place. Respondents occupied half of the third floor of
this new building) for the next 20 years without payment of rental.

On 22 September 2003, petitioners sent a letter to respondents informing them that an immediate family
member needed to use the premises and demanding the surrender of the property within 10 days from
notice. Respondents failed to heed this demand, prompting petitioners to file a Complaint for ejectment
against them before the office of the barangay captain of Guadalupe Viejo. The parties attempted to reach
an amicable settlement in accordance with Section 412 of the Local Government Code, but these efforts
proved unsuccessful.

On 19 November 2003, petitioner spouses Aquino filed a Complaint with the MeTC of Makati City praying
that respondents be ordered to (a) vacate the portion of the building they were then occupying; and (b) pay
petitioner a reasonable amount for the use and enjoyment of the premises from the time the formal demand
to vacate was made.

In defense, respondents claimed that they are co-owners of the petitioners of the subject property since they
had contributed to the improvement of the same and the property since they had contributed to the
improvement of the same and the construction in exchange for the exclusive use of a portion of the building.
The MeTC ruled in favor of petitioners and ruled among others that respondents were builders in bad faith
who were not entitled to recover their purported expenses for the construction of the building.

Upon Appeal, the RTC affirmed the MeTC ruling. The CA also affirmed the lower court ruling upon
respondent’s appeal but ruled that respondents were entitled for reimbursement, hence, this petition.

ISSUE: Whether or not respondents were entitled for reimbursement for the cost of the improvements
introduced by them on the subject property?

RULING: NO. respondents as builders in bad faith, are not entitled to reimbursement of useful expenses.
The term “builder in good Faith” as used in reference to Article 448 of the Civil Code, refers to one who,
not being the owner of the land, builds on that land believing himself to be its owner and unaware of the
defect in its title or mode of acquisition. The essence of good faith lies in an honest belief in the validity of
one’s right, ignorance of a superior claim, and absence of intention to overreach another.
In the instant case, The Spouses Aguilar cannot be considered as builders in good faith on account of their
admission that the subject lot belonged to the Spouses Aquino when they constructed the building.
 14. DEPARTMENT OF EDUCATION V. CASIBANG, GR NO. 192268, JANUARY 27, 2016

FACTS: Respondents are the heirs of late Juan Cepeda, the registered owner of the property in controversy.
It is alleged that sometime in 1965, upon the request of the then Mayor Justo Cesar Caronan, Cepeda
allowed the construction and operation of a school on the western portion of his property. The school is
now known as Solana North Central School, operating under the control and supervision of the petitioner
Department of Education (DepEd). Sometime between October 31, 2000 and November 2, 2000, the
respondents entered and occupied a portion of the property. Upon discovery of the said occupation, the
teachers of the school brought the matter to the attention of the barangay captain.

The school officials demanded the respondents to vacate the property. However, the respondents refused to
vacate the property, and asserted Cepeda's ownership of the lot. DepEd filed a complaint for Forcible Entry
and Damages against respondents and the court ruled in favor of the petitioner and directed the respondents
to vacate the premises. Respondents filed an action for Recovery of Possession and/or Sum of Money
against the DepEd. Respondents averred that since their late father did not have any immediate need of the
land in 1965, he consented to the building of the temporary structure and allowed the conduct of classes in
the premises. They claimed that they have been deprived of the use and the enjoyment of the portion of the
land occupied by the school, thus, they are entitled to just compensation and reasonable rent for the use of
property.

In its Answer, the DepEd alleged that it owned the subject property because it was purchased by civic-
minded residents of Solana, Cagayan from Cepeda. It further alleged that contrary to respondents' claim
that the occupation is by mere tolerance, the property has always been occupied and used adversely,
peacefully, continuously and in the concept of owner for almost forty (40) years. It insisted that the
respondents had lost whatever right they had over the property through laches. During the trial, respondents
presented, inter alia, the OCT No. O-627 registered in the name of Juan Cepeda; Tax Declarations also in
his name and the tax receipts showing that they had been paying real property taxes on the property since
1965. They also presented the Technical Description of the lot by the Department of Environment and
Natural Resources Land Management Services showing that the subject property was surveyed in the name
of Cepeda and a certification from the Municipal Trial Court of Solana, Cagayan declaring that Lot 115
was the subject of Cad Case No. N-13 in LRC Cad. Record No. N-200 which was adjudicated to Cepeda.

On the other hand, despite notice and reset of hearing, the DepEd failed to present its evidence or witness
to substantiate its defense. Consequently, the RTC considered the case submitted for decision and rendered
a Decision dated January 10, 2008, finding that the respondents are the owners of the subject property. The
Court of Appeals then affirmed the decision of the RTC.

ISSUES: Whether or not DepEd is a builder in good faith?

RULINGS: YES, DepEd is a builder in good faith. To be deemed a builder in good faith, it is essential that
a person asserts title to the land on which he builds, i.e., that he be a possessor in the concept of owner, and
that he be unaware that there exists in his title or mode of acquisition any flaw which invalidates it.
However, there are cases where Article 448 of the Civil Code was applied beyond the recognized and
limited definition of good faith, e.g., cases wherein the builder has constructed improvements on the land
of another with the consent of the owner. The Court ruled therein that the structures were built in good faith
in those cases that the owners knew and approved of the construction of improvements on the property. In
the present case, despite being a possessor by mere tolerance, the DepEd is considered a builder in good
faith, since Cepeda permitted the construction of building and improvements to conduct classes on his
property. Hence, Article 448 may be applied in the case at bar.