Property

Respondent, therefore, must be declared to be the rightful owner of the property.

G.R. No. 151369

March 23, 2011

ANITA MONASTERIO-PE and the SPOUSES ROMULO TAN and EDITHA PE-TAN, Petitioners,
vs.
JOSE JUAN TONG, herein represented by his Attorney-in-Fact, JOSE Y. ONG, Respondent.

JOSE JUAN TONG is the registered owner of two parcels of land known as Lot Nos. 40 and 41 and covered by
Transfer Certificate of Title (TCT) Nos. T-9699 and T-9161, together with the improvements thereon, located
at Barangay Kauswagan, City Proper, Iloilo City; herein petitioners are occupying the house standing on the said
parcels of land without any contract of lease nor are they paying any kind of rental and that their occupation thereof
is simply by mere tolerance of Tong; that in a letter dated December 1, 1999, Tong demanded that respondents
vacate the house they are occupying, but despite their receipt of the said letter they failed and refused to vacate the
same; Tong referred his complaint to the Lupon of Barangay Kauswagan, to no avail.3
In their Answer with Defenses and Counterclaim, herein petitioners alleged that Tong is not the real owner of the
disputed property, but is only a dummy of a certain alien named Ong Se Fu, who is not qualified to own the said lot
and, as such, Tong's ownership is null and void; petitioners are the true and lawful owners of the property in
question and by reason thereof they need not lease nor pay rentals to anybody; a case docketed as CA-G.R. CV No.
52676 (RTC Civil Case No. 20181) involving herein petitioner Pe and respondent is pending before the Court of
Appeals (CA) where the ownership of the subject property is being litigated; respondent should wait for the
resolution of the said action instead of filing the ejectment case; petitioners also claimed that there was, in fact, no
proper barangay conciliation as Tong was bent on filing the ejectment case before conciliation proceedings could be
validly made.4
MTCC rendered judgment in favor of herein respondent
[G.R. No. 143173. March 28, 2001]
SPS. PEDRO ONG AND VERONICA ONG, petitioners, vs. SOCORRO PAREL AND HON. COURT OF
APPEALS, respondents.
DECISION
GONZAGA-REYES, J.:
The instant petition for review on certiorari seeks the annulment of the decision of the respondent Court of
Appeals[1] dated December 14, 1999 affirming the decision of the Regional Trial Court which reversed and set aside
the judgment of the Metropolitan Trial Court of Manila, Branch 15, for forcible entry, as well as the resolution dated
May 4, 2000 denying petitioners motion for reconsideration.[2]
Spouses Pedro and Veronica Ong are the registered owners of Lot No.18, Block 2 of the subdivision plan II of
Rizal Park subdivision, situated in Sta Cruz, Manila covered by TCT No. 218597, having purchased the property
from the spouses Emilio Magbag and Norma B. Pascual in 1994. Adjacent to Lot No. 18 is Lot No.17 consisting of
about 109 sq. meters covered by TCT No. 125063 registered under the name of Visitacion Beltran, grandmother of
respondent Socorro Parel.
On May 25, 1995, the Ong spouses filed an action for forcible entry against defendant Parel before the
Metropolitan Trial Court of Manila, Branch 15, docketed as Civil Case No. 148332, alleging among other things that

defendant Parel through strategy and stealth constructed an overhang and hollow block wall along the common
boundary of the parties adjoining lot, i.e., beyond Lot No. 17 owned by Parel and inside Lot No.18 owned by
plaintiffs spouses Ong, thereby illegally depriving plaintiffs of possession of the said portion of their lot; that
plaintiffs discovered respondents illegal possession of their lot on August 23, 1994 when they had the boundaries of
their lot resurveyed; that plaintiffs made various demands from the defendants to remove the constructions they
introduced in the said lot of the plaintiffs and vacate the same, the last of which demands having been made on
December 19, 1994.
Defendant Parel denied the material allegations of the complaint and alleged that the overhang and hollow
block wall had already been in existence since 1956 and that these structures are within the boundary of lot 17
owned by him.
The parties moved for an ocular inspection of the subject lot which was granted by the trial court. The trial
court designated the Branch Clerk of Court as Commissioner while defendant Parel employed the services of
Geodetic Engr. Mariano V. Flotildes who made the relocation survey on November 28, 1995 in the presence of both
parties. Thereafter, the Commissioner reported that defendants wall protrudes 1 meters into plaintiffs property and a
window sill overhangs by about meter deep into plaintiffs premises and the eaves of the main residential building
extends into the plaintiffs premises. The Geodetic Engineers Report, confirmed that the house of the defendant
encroached plaintiffs property by an area of 2.7 sq. m., and the adobe and hollow block wall by an area of 1.59 sq.
m., respectively, resulting to a total encroachment of 4.29 sq. m., more or less into the plaintiffs property.
On April 12, 1996, the Metropolitan Trial Court rendered judgment in favor of the plaintiffs spouses Ong; the
dispositive portion reads:[3]
WHEREFORE, premises considered, judgment is hereby rendered in favor of plaintiffs and against the defendants
ordering: (a) the defendants and all persons claiming rights under her to remove the overhang constructions
measuring 2.70 sq. m. and the adobe block wall measuring 1.59 sq.m. respectively on lot 18 of the plaintiffs and to
peacefully surrender its possession to the plaintiffs; (b) ordering the defendants to pay the plaintiffs the sum of Ten
Thousand Pesos (P10,000.00) as and by way of attorneys fees; plus the costs of suit.
SO ORDERED.
Respondent Parel filed an appeal with the Regional Trial Court, docketed as Civil Case No. 96-78666. On
October 3, 1996, the regional trial court[4] dismissed the case for failure of the Ong spouses to prove prior physical
possession of the subject lot, the dispositive portion reads: [5]
WHEREFORE, premises considered, the decision appealed from is hereby REVERSED and SET ASIDE. This case
is hereby DISMISSED, without prejudice to the filing of the appropriate actions, without costs.
SO ORDERED.
Spouses Ong moved for a reconsideration which was also denied in a resolution dated August 1, 1997.[6]
Aggrieved by the above decision, petitioners spouses Ong elevated the matter to the Court of Appeals by way
of a petition for review. The respondent Court of Appeals in a decision dated December 14, 1999 denied the
petition. The appellate court adopted the lower courts findings that the alleged encroachments were made by the late
Visitacion Beltran at a time when she still owned both lots or when she had all the right and the power to introduce
the improvements; thus the introduction of the said construction could not be equated with strategy and stealth
giving rise to forcible entry. It added that what is involved in a forcible entry case is merely the issue of material
possession or possession de facto which the petitioner miserably proved in their favor. It further pointed out that it
was admitted by the petitioners in their petition that this case involves a boundary dispute and not lot 18 in its
entirety, and the encroachment was discovered only upon a relocation survey of the property; such controversy could
not be threshed out in an ejectment suit in view of the summary nature of the action, and the MTC, accordingly, is

without jurisdiction to entertain the same. Petitioners moved for a reconsideration which was also denied in a
resolution dated May 4, 2000. Hence, this petition.
Petitioners assign the following issues for consideration:[7]
1. WHETHER OR NOT GAINING ENTRY WITHOUT THE KNOWLEDGE OR CONSENT OF THE OWNER
OR REMAINING RESIDENT OF ANOTHER WITHOUT PERMISSION IS DISPOSSESSION BY STEALTH;
2. WHETHER OR NOT ENTRY SECURED BY STRATEGY OR STEALTH BECOMES UNLAWFUL AND DE
FACTO POSSESSION COMMENCES ONLY UPON DEMAND;
3. WHETHER OR NOT THERE IS A DISTINCTION BETWEEN FORCIBLE ENTRY BY MEANS OF
STEALTH AND FORCIBLE ENTRY BY MEANS OF FORCE, INTIMIDATION OR THREAT;
4. WHETHER OR NOT PETITIONER CAN INVOKE SUPREME COURT RULINGS IN UNLAWFUL
DETAINER CASES;
5. WHETHER OR NOT THE PRIVATE RESPONDENT IS THE AUTHORIZED PARTY IN THE CASE OF COOWNERSHIP AS OBTAINED IN THIS CASE;
6. WHETHER OR NOT THE CHARACTER OF THE POSSESSION ACQUIRED IN BAD FAITH WAS
INHERITED BY THE PRIVATE RESPONDENT AND DID NOT CHANGE;
7. WHETHER OR NOT THE DECISION OF THE RESPONDENT COURT OF APPEALS IS BASED ON
SPECULATION SURMISE OR CONJECTURE OR MISAPPREHENSION OF FACTS.
Petitioners essentially allege that the act of entering and trespassing upon a parcel of land, or of constructing
improvements upon a parcel of land without the knowledge or permission of the person who owns or administers it
is an act of dispossession and usurpation of real property by means of strategy or stealth; that private respondent is a
usurper or encroacher who constructed a portion of her house and adobe and hollow block wall on the land of the
petitioners with no bona fide claim and without the consent of the owner.
The petition has no merit.
Section 1, Rule 70 of the Rules of Court requires that in actions for forcible entry the plaintiff is allegedly
deprived of the possession of any land or building by force, intimidation, threat, strategy, or stealth and that the
action is filed any time within one year from the time of such unlawful deprivation of possession. This requirement
implies that in such cases, the possession of the land by the defendant is unlawful from the beginning as he acquires
possession thereof by unlawful means. The plaintiff must allege and prove that he was in prior physical possession
of the property in litigation until he was deprived thereof by the defendant. The one year period within which to
bring an action for forcible entry is generally counted from the date of actual entry on the land, [8] except that when
entry was made through stealth, the one year period is counted from the time the plaintiff learned thereof. [9] If the
alleged dispossession did not occur by any of the means stated in section 1, Rule 70, the proper recourse is to file a
plenary action to recover possession with the regional trial court.[10]
In their complaint, petitioners Ong spouses aver that through stealth and strategy respondent constructed the
controversial overhang and hollow block wall along the common boundary of the parties adjoining lots
which encroached on petitioners Lot No. 18. Stealth is defined as any secret, sly, or clandestine act to avoid
discovery and to gain entrance into or remain within residence of another without permission. [11] However,
petitioners failed to establish that respondents encroached upon their property through stealth as it was not shown
when and how the alleged entry was made on the portion of their lot.

On the other hand, respondents claim that the said structures were already existing on the lot at the time
petitioners brought the same from the Magbag spouses in 1994, was sustained by the lower court since petitioners
admitted in their petition that they discovered such encroachment only after a relocation survey on their lot on
August 23, 1994. We find no reason to disturb the respondent courts factual conclusion that the alleged
encroachments were made by the late Visitacion Beltran at a time when she still owned both lots nos. 17 and 18 or
when she had all the right and power to do so. Private respondent in her affidavit submitted before the court had
affirmed that her grandmother, Visitacion Beltran, was the registered owner of the parcel of land covered by TCT
No. 125163 (Lot No. 17) with improvements which include the window sill overhang and the old adobe wall which
were constructed as early as 1956 and these improvements are adjacent to the private alley from Elias Street which
has to be opened and maintained as long as there exists building thereon; that the maintenance of such alley was
made as an encumbrance in petitioners title (TCT No. 218597) when they bought the adjacent Lot no. 18. Petitioners
failed to present evidence to the contrary.
It becomes clear that this is not a proper case for forcible entry wherein one party unlawfully deprives another
of possession of the property subject of the litigation; it is a boundary dispute wherein the adobe wall, overhang and
window grill on the respondents side of the property encroach a total of 4.29 meters, more or less, upon the
petitioners side of the property. We affirm with approval of the observations of the Regional Trial Court, in this
wise:
Let it be emphasized that the matter subject of the present action is that portion only of Lot No. 18 allegedly
encroached by the defendant-appellant and not Lot 18 in its entirety.
While there was a finding of encroachment on Lot No. 18 as per the Commissioners Report and Engineers Report
dated December 27, 1995 and December 29, 1995, respectively, plaintiff-appellees failed to recount the
circumstances as to how and when defendant-appellant allegedly forcibly entered Lot No. 18.Neither was there any
evidence ever proffered by them to prove that defendant-appellant made or at least ordered the introduction of the
said improvements or construction. According to them, the Magbag spouses gave them the right to administer,
occupy and to have physical possession in the concept of an owner, Lot No. 18 on June 17, 1994 until the title to the
said lot was transferred to their names on October 28, 1994 and they have just discovered the encroachment on Lot
No. 18 only on August 23, 1994 when they had the boundaries of Lots Nos. 17 and 18 resurveyed. Defendantappellant, on the other hand, averred that the questioned improvements and constructions encroaching on Lot No. 18
were already there since 1956, and this averment was not controverted by the plaintiff-appellees at all. Thus, the
truth is that, when defendant-appellant acquired Lot No. 18, the adobe wall, overhang and window grill were already
there encroaching on Lot No. 18 as it was the late Salvacion (sic)[12] Beltran who built the same. In fact, even up to
the present, defendant-appellant is still in possession of the herein questioned premises which means that plaintiffappellees were never in possession of the same. The latter, therefore, cannot be said to be in prior physical
possession. The demand made on the defendant-appellant is here of no moment as it is a well-entrenched
jurisprudence that demand to vacate is not necessary in forcible entry cases (Menez vs. Militante, 41 Phil. 44).
Consequently, for failure of the plaintiff-appellees to circumstantiate prior physical possession on the herein subject
premises and the fact of entry on the same by the defendant-appellant by force, intimidation, violence or stealth, the
present action for forcible entry must exigently fail. Moreover, this Court notes that at the time the improvements
were made, the late Salvacion (sic) Beltran was still the registered owner of both Lots Nos. 17 and 18. Thus while it
may be true that defendant-appellant is now the administrator of Lot No. 17, defendant-appellant cannot be made to
answer for the encroachments on Lot No. 18 for the same were done by the late Salvacion (sic) Beltran who had all
the right and power to introduce the improvements as she was then the registered owner of both Lots Nos. 17 and 18
at the time the same were made. While plaintiff-appellees can recover possession of the herein questioned premises,
they cannot do so in the guise of an action for forcible entry. For where the complaint fails to specifically aver facts
constitutive of forcible entry or unlawful detainer, as where it does not state how entry was effected or how and
when dispossession started, the action should either be ACCION PUBLICIANA or ACCION
REINVINDICATORIA for which the lower court has no jurisdiction (See Sarona, et al. vs. Villegas, et al., March
27, 1968, Banayos vs. Susana Realty, Inc. L-30336, June 30, 1976).

In view of the failure of the petitioners to allege, much less prove, with specificity that the respondents
unlawfully entered their portion of the lot either by force, intimidation, threat, strategy, or stealth this action for
forcible entry must necessarily fall. We declared in the case of Sarmiento vs. Court of Appeals:[13]
The jurisdictional facts must appear on the face of the complaint. When the complaint fails to aver facts constitutive
of forcible entry or unlawful detainer, as where it does not state how entry was effected or how and when
dispossession started, as in the case at bar, the remedy should either be an accion publicianaor an accion
reivindicatoria in the proper regional trial court.
If private respondent is indeed the owner of the premises subject of this suit and she was unlawfully deprived of the
real right of possession or the ownership thereof, she should present her claim before the regional trial court in
an accion publiciana or an accion reivindicatoria, and not before the municipal trial court in a summary proceeding
of unlawful detainer or forcible entry. For even if one is the owner of the property, the possession thereof cannot be
wrested from another who had been in the physical or material possession of the same for more than one year by
resorting to a summary action for ejectment. This is especially true where his possession thereof was not obtained
through the means or held under the circumstances contemplated by the rules on summary ejectment.
We have held that in giving recognition to the action for forcible entry and unlawful detainer, the purpose of the law
is to protect the person who in fact has actual possession, and in case of a controverted proprietary right, the law
requires the parties to preserve the status quo until one or the other sees fit to invoke the decision of a court of
competent jurisdiction upon the question of ownership."
Petitioners contention that although they denominated their complaint as one for forcible entry based on the
ground of stealth, the allegations in the body of the complaint sufficiently established a cause of action for unlawful
detainer, does not persuade us. In unlawful detainer, one unlawfully withholds possession thereof after the expiration
or termination of his right to hold possession under any contract, express or implied. In the instant case, the
complaint does not allege that the possession of respondent ever changed from illegal to legal anytime from their
alleged illegal entry before plaintiffs made the demand to vacate.There was no averment in the complaint which
recites as a fact any overt act on the part of the petitioners which showed that they permitted or tolerated respondent
to occupy a portion of their property.
After a finding that the petitioners failed to make a case for ejectment, we find it unnecessary to dwell on the
other assignments of error.
WHEREFORE, the petition is DENIED and the assailed decision of respondent Court of Appeals is hereby
AFFIRMED.
SO ORDERED.
Melo, (Chairman), Vitug, Panganiban, and Sandoval-Gutierrez, JJ., concur.

AYALA INC VS. RAY BURTON CORP

GR No. 163075
January 23, 2006

FACTS: On December 22, 1995, Ayala Inc. and Ray Burton Corp. entered into a contract denominated as a
Contract to Sell, with a Side Agreement of even date. In these contracts, petitioner agreed to sell to respondent a
parcel of land situated at Muntinlupa City. The purchase price of the land is payable as follows:
On contract date: 26%, inclusive of option money
Not later than 1-6-96: 4%
In consecutive quarterly installments for a period of 5 years: 70%
Respondent paid thirty (30%) down payment and the quarterly amortization. However in 1998, respondent notified
petitioner in writing that it will no longer continue to pay due to the adverse effects of the economic crisis to its
business. Respondent then asked for the immediate cancellation of the contract and for a refund of its previous
payments as provided in the contract.
Petitioner refused to cancel the contract to sell. Instead, it filed with the RTC Makati City, a complaint for specific
performance against respondent, demanding from the latter the payment of the remaining unpaid quarterly
installments inclusive of interest and penalties.
Respondent, in its answer, denied any further obligation to petitioner, asserting that it (respondent) notified the latter
of its inability to pay the remaining installments. Respondent invoked the provisions of paragraphs 3 and 3.1 of the
contract to sell providing for the refund to it of the amounts paid, less interest and the sum of 25% of all sums paid
as liquidated damages.
The trial court rendered a Decision in favor of Ayala and holding that respondent transgressed the law in obvious
bad faith. It ordered the defendant ordered to pay Ayala the unpaid balance, interest agreed upon, and penalties.
Defendant is further ordered to pay plaintiff for attorneys fees and the costs of suit. Upon full payment of the
aforementioned amounts by defendant, plaintiff shall, as it is hereby ordered, execute the appropriate deed of
absolute sale conveying and transferring full title and ownership of the parcel of land subject of the sale to and in
favor of defendant.
On appeal, the CA rendered a Decision reversing the trial courts Decision. Hence, the instant petition for review on
certiorari.
ISSUE:
1. WON respondents non-payment of the balance of the purchase price gave rise to a cause of action on the part of
petitioner to demand full payment of the purchase price; and
2. WON Ayala should refund respondent the amount the latter paid under the contract to sell.
HELD: The petition is denied. The CA decision is affirmed.
At the outset, it is significant to note that petitioner does not dispute that its December 22, 1995 transaction with
respondent is a contract to sell. Also, the questioned agreement clearly indicates that it is a contract to sell, not a
contract of sale. Paragraph 4 of the contract provides:
4. TITLE AND OWNERSHIP OF THE PROPERTY. The title to the property shall transfer to the PURCHASER
upon payment of the balance of the Purchase Price and all expenses, penalties and other costs which shall be due and
payable hereunder or which may have accrued thereto. Thereupon, the SELLER shall execute a Deed of Absolute
Sale in favor of the PURCHASER conveying all the SELLERS rights, title and interest in and to the Property to the
PURCHASER

1. NO. Considering that the parties transaction is a contract to sell, can petitioner, as seller, demand specific
performance from respondent, as buyer?
Blacks Law Dictionary defined specific performance as (t)he remedy of requiring exact performance of a contract
in the specific form in which it was made, or according to the precise terms agreed upon. The actual accomplishment
of a contract by a party bound to fulfill it.
Evidently, before the remedy of specific performance may be availed of, there must be a breach of the contract.
Under a contract to sell, the title of the thing to be sold is retained by the selleruntil the purchaser makes full
payment of the agreed purchase price. The non-fulfillment by the respondent of his obligation to pay, which is a
suspensive condition to the obligation of the petitioners to sell and deliver the title to the property, rendered the
contract to sell ineffective and without force and effect; failure of which is not really a breach, serious or otherwise,
but an event that prevents the obligation of the petitioners to convey title from arising, in accordance with Article
1184 of the Civil Code .
The parties stand as if the conditional obligation had never existed. Article 1191 of the New Civil Code will not
apply because it presupposes an obligation already extant. There can be no rescission of an obligation that is still
non-existing, the suspensive condition not having happened Thus, a cause of action for specific performance does
not arise.
Here, the provisions of the contract to sell categorically indicate that respondents default in the payment of the
purchase price is considered merely as an event, the happening of which gives rise to the respective obligations of
the parties mentioned therein, thus:

3. EVENT OF DEFAULT. The following event shall constitute an Event of Default under this contract: the
PURCHASER fails to pay any installment on the balance, for any reason not attributable to the SELLER, on the
date it is due, provided, however, that the SELLER shall have the right to charge the PURCHASER a late penalty
interest on the said unpaid interest at the rate of 2% per month computed from the date the amount became due and
payable until full payment thereof.

3.1. If the Event of Default shall have occurred, then at any time thereafter, if any such event shall then be
continuing for a period of six (6) months, the SELLER shall have the right to cancel this Contract without need of
court declaration to that effect by giving the PURCHASER a written notice of cancellation sent to the address of the
PURCHASER as specified herein by registered mail or personal delivery. Thereafter, the SELLER shall return to
the PURCHASER the aggregate amount that the SELLER shall have received as of the cancellation of this Contract,
less: (i) penalties accrued as of the date of such cancellation, (ii) an amount equivalent to twenty five
percent (25%) of the total amount paid as liquidated damages, and (iii) any unpaid charges and dues on the Property.
Any amount to be refunded to the PURCHASER shall be collected by the PURCHASER at the office of the
SELLER. Upon notice to the PURCHASER of such cancellation, the SELLER shall be free to dispose of the
Property covered hereby as if this Contract had not been executed. Notice to the PURCHASER sent by registered
mail or by personal delivery to its address stated in this Contract shall be considered as sufficient compliance with
all requirements of notice for purposes of this Contract.14

Therefore, in the event of respondents default in payment, petitioner, under the above provisions of the contract, has
the right to retain an amount equivalent to 25% of the total payments. As stated by the CA, petitioner having been
informed in writing by respondent of its intention not to proceed with the contract prior to incurring delay in

payment of succeeding installments, the provisions in the contract relative to penalties and interest find no
application.
2. YES. The CA is correct that with respect to the award of interest, petitioner is liable to pay interest of 12% per
annum upon the net refundable amount due from the time respondent made the extrajudicial demand upon it to
refund payment under the Contract to Sell, pursuant to our ruling in Eastern Shipping Lines, Inc. v. Court of
Appeals.

Eliseo Fajardo Jr., vs Freedom to Build Inc.

G. R. No. 134692 August 1, 2000
Facts: Freedom to Build Inc., an owner-developer and seller of low-cost housing sold to petitioner-spouses a house
and lot in the De La Costa Homes, in Barangka, Marikina, Metro Manila. The Contract to sell executed between the
parties, contained a Restrictive Covenant providing certain prohibitions, to wit:
Easements. For the good of the entire community, the homeowner must observe a two-meter easement in front. No
structure of any kind (store, garage, bodega, etc.) may be built on the front easement.
Upward expansion. A second storey is not prohibited. But the second storey expansion must be placed above the
back portion of the house and should not extend forward beyond the apex of the original building.
Front expansion: 2nd Storey: No unit may be extended in the front beyond the line as designed and implemented
by the developer in the 60 sq. m. unit. In other words, the 2nd floor expansion, in front, is 6 meters back from the
front property line and 4 meters back from the front wall of the house, just as provided in the 60 sq. m. units.
The above restrictions were also contained in Transfer Certificate of Title No. N-115384 covering the lot issued in
the name of petitioner-spouses.
The controversy arose when the petitioners despite repeated demand from the respondent, extended the roof of their
house to the property line and expanded the second floor of their house to a point directly above the original front
wall. Respondent filed before the RTC an action to demolish the unauthorized structures.
The RTC rendered a judgment against the petitioner ordering them to immediately demolish and remove the
extension of their expanded housing unit that exceeds the limitations imposed by the Restrictive Covenant,
otherwise the Branch Sheriff of this Court will execute the this decision at the expense of the defendants.
On appeal, the CA affirmed the decision of the RTC. Hence, this petition for review.
Issue: Whether or not the for the lack of a specific provision, prescribing the penalty of the demolition in the
Restrictive Covenant in the event of the breach thereof, the prayer of the respondent to demolish the structure
should fail.
Ruling:
The Court held that the argument of the petitioner-spouses has no merit; Article 1168 of the New Civil Code states
that: When the obligation consists in not doing and the obligor does what has been forbidden him, it shall be
undone at his expense.
This Court is not unaware of its ruling in Ayala Corporation vs. Ray Burton Development Corporation, which has
merely adjudged the payment of damages in lieu of demolition. In the aforementioned case, however, the elaborate
mathematical formula for the determination of compensatory damages which takes into account the current

construction cost index during the immediately preceding 5 years based on the weighted average of wholesale price
and wage indices of the National Census and Statistics Office and the Bureau of Labor Statistics is explicitly
provided for in the Deed of Restrictions entered into by the parties. This unique and peculiar circumstance, among
other strong justifications therein mentioned, is not extant in the case at bar.
In sum, the Court holds that since the extension constructed exceeds the floor area limits of the Restrictive
Covenant, petitioner spouses can be required to demolish the structure to the extent that it exceeds the prescribed
floor area limits.
Wherefore, the assailed decision of the Court of Appeals is AFFIRMED. No costs.
SO ORDERED.
ACCESSION CASES
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 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.
BALUCANAG VS. FRANCISCO
122 SCRA 344
FACTS:
The petitioner bought a lot owned by Mrs. Charvet which was then previously leased by the latter to one
Richard Stohner. The said lease contract provided that the lessee may erect structures and improvements which shall
remain as lessee's property and he may remove them at any time. It further provided that should the lessee fail to
remove the same structures or improvements withing two months after the expiration of the lease, the lessor may
remove them or cause them to be removed at the expense of the lessee. Stohner made fillings on the land and
constructed a house. When he failed to pay the rent, the petitioner, through counsel, sent Stohner a demand letter
ordering him to vacate the lot. The lessee contended that he is a 'builder in good faith.'

ISSUE:
Is the lessee a builder in good faith?

HELD:
No, the lessee cannot be considered a builder in good faith. The provision under Art. 448 of the New Civil
Code (Philippine) on a builder of good faith applies only to the owner of the land who believes he is the rightful owner
thereof, but not to a lessee who's interest in the land is derived only from a rental contract. Neither can Stohner be
considered a 'possessor in good faith'. A possessor in good faith is a party who possesses property believing that he
is its rightful owner but discovers later on a flaw in his title that could indicate that he might not be its legal owner. It
cannot apply to a lessee because he knows right from the start that he is merely a lessee and not the owner of the
premises.
As a mere lessee, he introduces improvements to the property at his own risk such that he cannot recover
from the owner the reimbursements nor he has any right to retain the premises until reimbursements. What applies in
this case is Art. 1678 (NCC) which provides that, " if the lessee, makes, in good faith, useful improvements which are
suitable to the use for which the lease is intended, without altering the form or substance of the property leased, the
lessor upon the termination of the lease shall pay the lessee 1/2 of the value of the improvements at the time. Should
the lessor refuse to reimburse said amount, the lessee may remove the improvements even though the principal
thing may suffer damage thereby. He shall not. however, cause any more impairment upon the property leased than
is necessary."

Pecson v. CA [G.R. No. 115814. May 26, 1995.]

First Division, Davide Jr (J): 3 concur, 1 on leave Facts: Pedro P. Pecson was the owner of a
commercial lot located in Kamias Street, Quezon City, on which he built a 4-door 2-storey
apartment building. For his failure to pay realty taxes amounting to P12,000.00, the lot was sold
at public auction by the City Treasurer of Quezon City to Mamerto Nepomuceno who in turn
sold it on 12 October 1983 to the spouses Juan Nuguid and Erlinda Tan-Nuguid, for
P103,000.00. Pecson challenged the validity of the auction sale in Civil Case Q-41470 before the
RTC Quezon City. In its decision of 8 February 1989, the RTC dismissed the complaint, but as to
the Nuguids claim that the sale included the apartment building, it held that the issue concerning
it was not a subject of the litigation. In resolving Nuguids motion to reconsider this issue, the
trial court held that there was no legal basis for the contention that the apartment building was
included in the sale.Both parties then appealed the decision to the Court of Appeals (CA-GR CV
293)1. In its decision of 30 April 1992, the Court of Appeals affirmed in toto the assailed
decision. It also agreed with the trial court that the apartment building was not included in the
auction sale of the commercial lot. The petition to review the said decision was subsequently
denied by the Supreme Court. Entry of judgment was made on 23 June 1993. On November
1993, Nuguid 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. Acting thereon, the trial court issued on
15 November 1993 the challenged order, ordering Nuguid to reimburse Pecson the construction

cost of P53,000 and upon such payment, Nuguid is entitled to immediate issuance of a writ of
possession over the lot and improvements thereon. The Court also held that as Nuguid has been
declared the uncontested owner of the lot in question as per Entry of Judgment of the Supreme
Court dated 23 June 1993, Pecson should pay to Nuguid rent of no less than P21,000.00 per
month from said date (as this is the very same amount paid monthly by the tenants occupying the
lot), such rent being offset against the amount pertaining to the construction cost. Pecson moved
for the reconsideration of the order but it was not acted upon by the trial court. Instead, on 18
November 1993, the trial court issued a writ of possession directing the deputy sheriff to place
Juan Nuguid in possession of subject property located at 79 Kamias Road, Quezon City, with all
the improvements thereon and to eject therefrom all occupants therein, their agents, assignees,
heirs and representatives. Pecson then filed with the Court of Appeals a special civil action for
certiorari and prohibition assailing the order of 15 November 1993 (CA-GR SP 32679). In its
decision of 7 June 1994, the Court of Appeals affirmed in part the order of the trial court citing
Articles 448 of the Civil Code. The Court of Appeals ruled that Pecsons quest to be restored in
possession of the premises is rendered moot and academic as the deputy sheriff has enforced the
writ of possession and the premises had been turned over to Nuguids possession; and ordered
Pecson to account for any and all fruits of the improvements received by him starting 23 June
1993 with the amount of P53,000 to be offset therefrom. Aggrieved by the Court of Appeals
decision, Pecson filed the petition for review on certiorari. The Supreme Court set aside the
decision of the Court of Appeals in CA-GR SP 32679 and the Order of 15 November 1993 of the
RTC, Branch 101, Quezon City in Civil Case Q-41470. The Court remanded the case to the trial
court for it to determine the current market value of the apartment building on the lot. For this
purpose, the parties shall be allowed to adduce evidence on the current market value of the
apartment building. The value so determined shall be forthwith paid by Nuguid to Pecson,
otherwise Pecson shall be restored to the possession of the apartment building until payment of
the required indemnity.
1. Pertinent provisions: Article 448 and Article 546 of the Civil Code Article 448 provides that
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. (361a) while Article
546 provides that 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)
2. Applicability of Articles 448 and 526 Article 448 refers to a land whose ownership is claimed
by two or more parties, one of whom has built some works, or sown or planted something. The
building, sowing or planting may have been made in good faith or in bad faith. The rule on good

faith laid down in Article 526 of the Civil Code shall be applied in determining whether a
builder, sower or planter had acted in good faith.
3. Strict application of Article 448: does not apply to owner who subsequently loses ownership of
land by sale or donation; Coleongco v. Regalado 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. As held in Coleongco vs. Regalado, Article 361 of the old Civil Code is not
applicable in the case, for Regalado constructed the house on his own land before he sold said
land to Coleongco. Article 361 applies only in cases where a person constructs a building on the
land of another in good or in bad faith, as the case may be. It does not apply to a case where a
person constructs a building on his own land, for then there can be no questions as to good or bad
faith on the part of the builder. 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.
4. Application of Article 448 by analogy in preventing a state of forced co-ownership The
provision on indemnity in Article 448 may be applied by analogy considering that the primary
intent of Article 448 is to avoid a state of forced co-ownership and that the parties, including the
two courts below, agree that Articles 448 and 546 of the Civil Code are applicable and indemnity
for the improvements may be paid although they differ as to the basis of the indemnity.
5. Article 546 does not state the manner to determine value of useful improvements; Value to be
based on market or present value, not the cost during time of construction Article 546 does not
specifically state how the value of the useful improvements should be determined. In Javier vs.
Concepcion, Jr., the Court pegged the value of the useful improvements consisting of various
fruits, bamboos, a house and camarin made of strong material based on the market value of the
said improvements. In Sarmiento vs. Agana, despite the finding that the useful improvement, a
residential house, was built in 1967 at a cost of between P8,000.00 to P10,000.00, the landowner
was ordered to reimburse the builder in the amount of P40,000.00, the value of the house at the
time of the trial. In De Guzman vs. De la Fuente, the landowner was required to pay the present
value of the house, a useful improvement. In the present case, the lower court erred in holding
the cost of construction of the apartment building in 1965, and not its current market value, is
sufficient reimbursement for necessary and useful improvements made by Pecson.
6. Objective of Article 546 is to administer justice between parties involved; Current
value of the property, to prevent unjust enrichment to one of the parties; Parties
right to adduce evidence on present market value of improvement The objective of
Article 546 of the Civil Code is to administer justice between the parties involved. In
this regard, as stated in Rivera vs. Roman Catholic Archbishop of Manila, the said
provision was formulated in trying to adjust the rights of the owner and possessor in
good faith of a piece of land, to administer complete justice to both of them is such
a way as neither one nor the other may enrich himself of that which does not
belong to him. Guided by this precept, it is therefore the current market value of the
improvements which should be made the basis of reimbursement. A contrary ruling
would unjustly enrich the private respondents who would otherwise be allowed to
acquire a highly valued income-yielding 4-unit apartment building for a measly
amount. Consequently, the parties should therefore be allowed to adduce evidence
on the present market value of the apartment building upon which the trial court

should base its finding as to the amount of reimbursement to be paid by the

landowner.
7. Builder in good faiths right of retention until indemnification for improvements;
no rents due The trial court erred in ordering Pecson to pay monthly rentals equal to
the aggregate rentals paid by the lessees of the apartment building. Since Nuguid
has opted to appropriate the apartment building, Pecson 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 in which it is built, planted or sown. As Pescon has not been paid, he was
entitled to retain ownership of the building and, necessarily, the income therefrom.
Ignacio v. Hilario [G.R. No. L-175. April 30, 1946.] En Banc, Moran (J): 10 concur
Facts: Elias Hilario and his wife Dionisia Dres filed a complaint Damian, Francisco
and Luis Ignacio concerning the ownership of a parcel of land, partly rice-land and
partly residential. After the trial of the case, the lower court (Judge Alfonso Felix),
rendered judgment holding Hilario and Dres as the legal owners of the whole
property but conceding to the Ignacios the ownership of the houses and granaries
built by them on the residential portion with the rights of a possessor in good faith,
in accordance with article 361 of the Civil Code; without pronouncement is made as
to damages and costs. Subsequently, in a motion filed in the same CFI (Judge Hon.
Felipe Natividad), Hilario and Dres prayed for an order of execution alleging that
since they chose neither to pay the Ignacios for the buildings nor to sell to them the
residential lot, the Ignacios should be ordered to remove the structure at their own
expense and to restore Hilario and Dres in the possession of said lot. After hearing,
the motion was granted by Judge Natividad. Hence, the petition for certiorari was
filed by the Ignacios praying for (a) a restraint and annulment of the order of
execution issued by Judge Natividad; (b) an order to compel Hilario and Dres to pay
them the sum of P2,000 for the buildings, or sell to them the residential lot for P45;
or (c) a rehearing of the case for a determination of the rights of the parties upon
failure of extra-judicial settlement. The Supreme Court set aside the writ of
execution issued by Judge Natividad and ordered the lower court to hold a hearing
in the principal case wherein it must determine the prices of the buildings and of the
residential lot where they are erected, as well as the period of time within which
Hilario and Dres may exercise their option either to pay for the buildings or to sell
their land, and, in the last instance, the period of time within which the Ignacios
may pay for the land, all these periods to be counted from the date the judgment
becomes executory or unappealable. After such hearing, the court shall render a
final judgment according to the evidence presented by the parties; with costs
against Hilarion and Dres.
1. Right of retention of builder in good faith 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. Article 453 provides
that Necessary expenses shall be refunded to every possessor; but only the
possessor in good faith may retain the thing until such expenses are made good to
him. Useful expenses shall be refunded 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 paying the increase in value
which the thing may have acquired in consequence thereof.
2. Option of the landowner to pay for the building or sell his land to the owner of
the building; Right of remotion only available if he chose the latter and the owner of
the building cannot pay 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. Article 361 provides that The owner of land on which anything has been
built, sown or planted in good faith, shall have the right to appropriate as his own
the work, sowing or planting, after the payment of the indemnity stated in articles
453 and 454, or to oblige the one who built or planted to pay the price of the land,
and the one who sowed, the proper rent. He cannot however 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.
3. Order amends judgment substantially and thus null and void The order of Judge
Natividad compelling the Ignacios to remove their buildings from the land belonging
to Hilario and Dres only because the latter chose neither to pay for such buildings
nor to sell the land, is null and void, for it amends substantially the judgment sought
to be executed and is, furthermore, offensive to articles 361 and 453 of the Civil
Code.
4. Original decision did not become final as it failed to determine the value of the
buildings and of the lot; and the time to which the option may be exercised In the
decision of Judge Felix, the rights of both parties were well defined under articles
361 and 453 of the Civil Code, but it failed to determine the value of the buildings
and of the lot where they are erected as well as the periods of time within which the
option may be exercised and payment should be made, these particulars having
been left for determination apparently after the judgment has become final. The
procedure is erroneous, for after the judgment has become final, no additions can
be made thereto and nothing can be done therewith except its execution. And
execution cannot be had, the sheriff being ignorant as to how, for how much, and
within what time may the option be exercised, and certainty no authority is vested
in him to settle these matters which involve exercise of judicial discretion. Thus, the
judgment rendered by Judge Felix has never become final, it having left matters to
be settled for its completion in a subsequent proceeding, matters which remained
unsettled up to the time the petition is filed in the present case.
Quemuel v. Olaes [G.R. No. L-11084. April 29, 1961.] En Banc, Paredes (J): 9 concur
Facts: Angel S. Olaes and his wife, Juliana Prudente, registered owners of lot 1095
of the San Francisco de Malabon Estate, located in Rosario, Cavite, sought the
recovery of the possession of the said lot and rentals therefore in Civil Case 5442
CFI Cavite, from Alejandro Quemuel and his wife Ruperta Solis, who claimed to be in
possession under the tolerance of the former. On 16 March 1954, the trial court
ordered Quemuels to return the possession of lot 1095 to the Olaes spouses and to
pay the latter P20 a month from January 1954, until they shall have vacated the
premises. The Quemuels did not appeal from said decision which became final on

22 April 1954. Thereafter, the Olaes spouses sought the execution of the decision.
To forestall ejectment, the Quemuels filed on 1 July 1954 the complaint (Civil Case
5518, CFI Cavite). The Quemuels seek to reduce the monthly rental of P20 fixed in
Civil Case 5442, and to compel the Olaes spouses to sell to them the portion of the
lot 1095 where their house is erected. The Olaes spouses filed a motion to dismiss
on 9 July 1954, alleging lack of cause of action, res adjudicata; prescription, and the
cause of action, if any, is barred by the Quemuels failure to set it up as a counterclaim in Civil Case 5442. On 17 September 1954, the trial court dismissed the
complaint, without pronouncement as to costs. An appeal was taken by the
Quemuels to the Court of Appeals (CA-GR 14837-R) which, by the agreement of the
parties, certified the case to the Court. The ex parte petition filed by the Quemuels
in the Supreme Court on 9 August 1956, asking that a writ of preliminary injunction
be issued to the Provincial Sheriff of Cavite and the Olaes, enjoining them from
demolishing the house of the Quemuels until there is a final decision in said Case
14837, was denied on 14 August 1956. The Supreme Court affirmed the order
appealed from, with costs against the Quemuels.
1. The Complaint states no cause of action; If the rent imposed by court are found
excessive, the Quemuels are free to vacate the property A cause of action
presupposes a right of the plaintiff and a violation of such right by the
defendant. According to the complaint itself, the rental of P20 monthly and the
order to vacate, were provided in a prior judgment (Civil Case 5442) which is
final and its validity is not assailed. There being no law that fixes the rental of
the same land at 7 1/2% of its alleged market value, the plaintiffs have no right
thereto, or a right which could be violated. The defendants are not compelling
the plaintiffs to rent the property but wanted them to vacate the premises (Civil
Case 5442). If the rental determined by the trial court were excessive, the
plaintiffs are free to vacate the property. For plaintiffs to insist on possessing the
property and fixing the rentals themselves, would have no legal sanction at all.
2. Builder in good faith: Right to appropriate works or improvements belong to
owner of the land, builders right to reimbursement; Builder cannot compel owner of
the land to sell land Under Article 448, the right to appropriate the works or
improvements or to oblige the one who built or planted to pay the price of the
land belongs to the owner of the land. The only right given to the builder in good
faith is the right to reimbursement for the improvements; the builder, cannot
compel the owner of the land to sell such land to the former. This is assuming that
the plaintiffs are builders in good faith.
3. Quemuels not builders in good faith; Builder builds under claim of title The
Quemuels are not builders in good faith. Article 448 of the new Civil Code,
(equivalent to Article 361 of the old Civil Code) is intended to apply only to a case
where one builds, or sows, or plants on land in which he believes himself to have a
claim of title and not to lands wherein ones only interest is that of tenant, under a
rental contract, which is the present case (Alburo vs. Villanueva, 7 Phil., 277). The
tenant cannot be said to be a builder in good faith as he has no pretension to be
owner (Rivera vs. Thailand, 48 Phil., 396; see also 3 Manresa 4th Ed. pp. 215-216).
Quemuels are lessees From the pleadings and the documentary evidence
submitted, it is indisputable that the land in question originally belonged to the
government as part of the Friar Lands Estate and the title thereto was in the name

of the government until it was purchased by Agapita Solis who applied, thru the
Bureau of Lands, to purchase the land by installments. The corresponding Sale
Certificate 531, effective 1 July 1909 was executed. In Olaes spouses complaint,
they alleged that they are the owners of lot 1095 and that the Quemuels have been
occupying southeastern half portion thereof, without any right thereto, except the
tolerance of the Olaes spouses. The Quemuels were not unaware of the flaw in their
title, if any, and that their true relation with the Olaes spouses 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. Article 1573 provides that a lessee shall have with
respect to useful and voluntary improvements, the same right which are granted
the usufructuaries. Article 487 provides that the usufructuary may make on the
property held in usufruct any improvements, useful or recreative, which he may
deem proper, provided he does not change its form or substance, but he shall have
no right to be indemnified therefor. He may, however, remove such improvements,
should it be possible to do so without injury to the property.
4. Lessee cannot compel lessor to pay for the improvements or to sell the land;
Right to remove improvements if it can be done without damage to the land From
Articles 487 and 1573, it can clearly be inferred that the Quemuels cannot even
compel the Olaes spouses to pay for the improvements the former made in the
property or to sell the latters land. The Quemuels only right, is to remove the
improvements, if it is possible to do so without damage to the land.
5. Identity of case 5442 and 5518; Assuming otherwise, covered by Res judicata In
Case 5442, the matter of the rental was in issue, and the same was considered and
decided by the trial court, which ordered the Quemuels therein to pay a reasonable
compensation of P20 a month beginning with January, 1954, until they shall have
left the premises. In the present case (5518), the parties are the identical parties in
Civil Case 5442, the same lot 1095 is the subject matter of both cases; the same
issue, namely, the amount of the rental is involved. Even assuming that Quemuels
have a cause of action, the doctrine of res judicata already operates against them.
6. Lot purchased by Agapita Solis; Assuming otherwise, covered by Prescription Lot
1095 was purchased by Agapita Solis from the Government on 1 July 1909. After full
payment of the purchase price, TCT 10771 covering said lot was issued to said
Agapita Solis on 8 June 1933. Assuming that the Quemuels or their alleged
predecessor-in-interest, had a cause of action for claiming the ownership of portions
of said lot, such cause of action accrued at the latest on 8 June 1933. The statute of
limitations provide that the Quemuels or their predecessor had 10 years from said
date, within which to file the corresponding action; which cannot be had as the
Quemuels filed the complaint after more than 21 years or on 1 July 1954.
7. Failure to set up a counterclaim in Civil Case 5442 Whether the cause of action is
for recovery of ownership or for an alleged right to purchase the property, or for
reimbursement for some improvements, the Quemuels should have set it up as a
counterclaim in Civil Case 5442, because same was necessarily connected with, or
arose out of the transactions involved in Civil Case 5442 (Section 6, Rule 10, Rules
of Court). 8. De Jesus v. Belarmino does not apply In De Jesus, et al. vs. Belarmino,
et al. (GR L-6665, 30 June 1954; OG July 1954, p. 3064), it was held that where the
complaint was dismissed not because of any evidence presented by the parties, or

as a result of a trial on the merits, but merely on a motion to dismiss filed by the
defendants, the sufficiency of the motion should be tested on the strength of the
allegation of facts contained in the complaint and no other, which has been
interpreted to apply to cases where the motion to dismiss is based solely on the
ground of lack of cause of action. Considering the fact that (1) In the present case,
documentary evidence and the records of the Civil Case 5442 were presented and
considered by the trial court; and (2) in the De Jesus case, the only ground for
dismissal was the lack of cause of action, while in the present case, aside from said
ground, plaintiffs alleged other grounds, the said ruling finds no application.

Depra v. Dumlao [G.R. No. L-57348. May 16, 1985.] First Division, Melencio-Herrera
(J): 5 concur, 1 took no part
Facts: Francisco Depra is the owner of a parcel of land registered under TCT T-3087,
known as Lot 685, situated in the municipality of Dumangas, Iloilo, with an area of
approximately 8,870 sq. m. Agustin Dumlao owns an adjoining lot, designated as
Lot 683, with an approximate area of 231 sq. ms. In 1972, when Dumlao
constructed his house on his lot, the kitchen thereof had encroached on an area of
34 sq. m. of Depras property. After the encroachment was discovered in a
relocation survey of Depras lot made on 2 November 1972, his mother, Beatriz
Derla, after writing a demand letter asking Dumlao to move back from his
encroachment, filed an action for Unlawful Detainer on 6 February 1973 against
Dumlao in the Municipal Court of Dumangas. Said complaint was later amended to
include Depra as a party plaintiff. After trial the Municipal Court found that Dumlao
was a builder in good faith, and applying Article 448 of the Civil Code, rendered
judgment on 29 September 1973, ordering that a forced lease is created between
the parties with Depra, as lessor, and the Dumlao as lessee, over the disputed
portion with an area of 34 sq. m., the rent to be paid is P5.00 a month, payable by
the lessee to the lessors within the first 5 days of the month the rent is due; and the
lease shall commence on that day that this decision shall have become final. From
the foregoing judgment, neither party appealed so that, if it were a valid judgment,
it would have ordinarily lapsed into finality. Still, Depra did not accept payment of
rentals so that Dumlao deposited such rentals with the Municipal Court. On 15 July
1974, Depra filed a Complaint for Quieting of Title against Dumlao before the then
CFI Iloilo (Branch IV), involving the same 34 sq. m., which was the bone of
contention in the Municipal Court. Dumlao, in his Answer, admitted the
encroachment but alleged, in the main, that the present suit is barred by res
judicata by virtue of the Decision of the Municipal Court, which had become final
and executory. Premised on the joint motion for judgment based on the stipulation
of facts by the parties, the Trial Court on 31 October 1974, issued the assailed
Order, decreeing that the 34 sq.m. is part and parcel of Lot 685 of the Cadastral
Survey of Dumangas of which Depra is owner as evidenced by TCT 3087 and such
plaintiff is entitled to possess the same; without pronouncement as to cost. Thus, an
appeal was filed with the then Court of Appeals, which the latter certified to the
Supreme Court as involving pure questions of law. The Supreme Court set aside the
judgment of the trial Court and ordered the case remanded to the RTC Iloilo for
further proceedings consistent with Articles 448 and 546 of the Civil Code. It
ordered (1) the trial court to determine the present fair price of Depras 34 square

meter-area of land, the amount of the expenses spent by Dumlao for the building of
the kitchen, the increase in value (plus value) which the said area of 34 square
meters may have acquired by reason thereof, and whether the value of said area of
land is considerably more than that of the kitchen built thereon; and after said
amount have been determined by competent evidence, (2) the RTC shall render
judgment, (a) granting Depra a period of 15 days within which to exercise his option
under the law (Article 448, Civil Code), whether to appropriate the kitchen a his own
by paying to Dumlao either the amount of the expenses spent by Dumlao for the
building of the kitchen, or the increase in value (plus value) which the said area of
34 square meters may have acquired by reason thereof, or to oblige Dumlao to pay
the price of said area. The amounts shall be paid by the obligor within 15 days from
notice of the option by tendering the amount to the Court in favor of the party
entitled to receive it, (b) that if Depra exercises the option to oblige Dumlao to pay
the price of the land but the latter rejects such purchase because the value of the
land is considerably more than that of the kitchen, Dumlao shall give written notice
of such rejection to Depra and to the Court within 15 days from notice of Depras
option to sell the land. In that event, the parties shall be given a period of 15 days
from such notice of rejection within which to agree upon the terms of the lease, and
give the Court formal written notice of such agreement and its provisos. If no
agreement is reached by the parties, the trial Court, within 15 days from and after
the termination of the said period fixed for negotiation, shall then fix the terms of
the lease, provided that the monthly rental to be fixed by the Court shall not be less
than P10 per month, payable within the first 5 days of each calendar month. The
period for the forced lease shall not be more than 2 years, counted from the finality
of the judgment, considering the long period of time since 1952 that Dumlao has
occupied the subject area. The rental thus fixed shall be increased by 10% for the
second year of the forced lease. Dumlao shall not make any further constructions or
improvements on the kitchen. Upon expiration of the 2-year period, or upon default
by Dumlao in the payment of rentals for 2 consecutive months, Depra shall be
entitled to terminate the forced lease, to recover his land, and to have the kitchen
removed by Dumlao or at the latters expense. The rentals herein provided shall be
tendered by Dumlao to the Court for payment to Depra, and such tender shall
constitute evidence of whether or not compliance was made within the period fixed
by the Court, (c) ordering Dumlao to pay Depra an amount computed at P10 per
month as reasonable compensation for the occupancy of Depras land for the period
counted from 1952, the year Dumlao occupied the subject area, up to the
commencement date of the forced lease, and (d) that the periods to be fixed by the
trial Court in its Decision shall be inextendible, and upon failure of the party obliged
to tender to the trial Court the amount due to the obligee, the party entitled to such
payment shall be entitled to an order of execution for the enforcement of payment
of the amount due and for compliance with such other acts as may be required by
the prestation due the obligee; Without costs.
1. Decision of the Municipal Court null and void, cannot operate as res judicata The
Decision of the Municipal Court is null and void. 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.
2. Difference in causes in detainer and action to quiet title; Judgment in detainer
case not a bar to action respecting title to land 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.
3. Court system a dispute resolving mechanism; Legal effect of agreement of
parties within context of mutual concession and stipulation Consistent with the
principles that the Court system must be a dispute resolving mechanism, the Court
accords legal effect to the agreement of the parties, within the context of their
mutual concession and stipulation. They have, thereby, chosen a legal formula to
resolve their dispute (Stipulation of Facts) to apply to Dumlao the rights of a
builder in good faith and to Depra those of a landowner in good faith as
prescribed in Article 448. The Court thus refrained from further examining whether
the factual situations of Dumlao and Depra conform to the juridical positions
respectively defined law, for a builder in good faith under Article 448, a
possessor in good faith under Article 526 and a landowner in good faith under
Article 448.
4. Builder in good faith; Article 448 Article 448 of the Civil Code provides that 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. Pursuant to the
foregoing provision, Depra has the option either to pay for the encroaching part of
Dumlaos kitchen, or to sell the encroached 34 square meters of his lot to Dumlao.
He cannot refuse to pay for the encroaching part of the building, and to sell the
encroached part of his land.
5. Right of remotion 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 (now 546). The owner of the land, upon the other
hand, has the option, under article 361 (now 448), either to pay for the building or
to sell his land to the owner of the building. But he cannot 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 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. In the present case,
Dumlao had expressed his willingness to pay for the land, but Depra refused to sell

6. Ignacio v. Hilario An order of the lower compelling the builder to remove their
buildings from the land belonging to the landowner only because the latter chose
neither to pay for such buildings nor to sell the land, is null and void, for it amends
substantially the judgment sought to be executed and is, furthermore, offensive to
articles 361 (now Article 448) and 453 (now Article 546) of the Civil Code. (Ignacio
vs. Hilario, 76 Phil. 605, 608 [1946]).
7. Article 361 of the Spanish Civil Code vis--vis Article 448 of the New Civil Code;
Benefits extended to builder but landowner retained his option The original
provision found in Article 361 of the Spanish Civil Code provides that the owner of
land on which anything has been built, sown or planted in good faith, shall have the
right to appropriate as his own the work, sowing or planting, after the payment of
the indemnity stated in Articles 453 and 454, or to oblige the one who built or
planted to pay the price of the land, and the one who sowed, the proper rent. The
Code Commission must have taken account of the objections (of some
commentators) to Article 361 of the Spanish Civil Code. Hence, the Commission
provided a modification thereof, and Article 448 of our Code has been made to
provide that the owner of the land on which 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. Additional benefits were extended to the builder but the landowner
retained his options.
8. The fairness of the rules in Article 448 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 coownership, 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 to pay for the proper
rent. 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. (3 Manresa 213; Bernardo vs. Bataclan, 37 Off.
Gaz. 1382; Co Tao vs. Chan Chico, G.R. No. 49167, April 30, 1949; Article applied:
see Cabral, et al vs. Ibaez [S.C.] 52 Off. Gaz. 217; Marfori vs. Velasco, [C.A.] 52 Off.
Gaz. 2050).
Reynante v. CA [G.R. No. 95907. April 8, 1992.] Second Division, Paras (J): 5 concur
Facts: More than 50 years ago, Jose Reynante was taken as tenant by the late Don
Cosme Carlos, over a fishpond located at Barrio Liputan, Meycauayan, Bulacan with
an area of 188.711 sq. m. (TCT 25618, Land Registry of Bulacan). During the
tenancy, 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 covering an area of

5,096 sq. m. and 6,011 sq. m. respectively. These lots are located between the
fishpond covered by TCT 25618 and the Liputan (formerly Meycauayan) River.
Reynante 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 Cosme Carlos, his heirs entered into a written agreement
denominated as Sinumpaang Salaysay ng Pagsasauli ng Karapatan dated 29
November 1984 with Reynante whereby the latter for and in consideration of the
sum of P200,000 turned over the fishpond he was tenanting to the heirs of Don
Cosme Carlos and surrendered all his rights therein as caretaker or bantay-kasama
at tagapamahala. Pursuant to the said written agreement, Reynante surrendered
the fishpond and the 2 huts located therein to the heirs of Don Cosme Carlos. The
heirs of Leoncio and Dolores Carlos, and the heirs of Gorgonio and Concepcion
Carlos thereafter leased the said fishpond to one Carlos de la Cruz. Reynante
continued to live in the nipa hut constructed by him on lots 1 and 2 and to take care
of the nipa palms he had planted therein. On 17 February 1988, the heirs formally
demanded that Reynante vacate said portion since the latter had already been
indemnified for the surrender of his rights as a tenant. Despite receipt thereof,
Reynante refused and failed to relinquish possession of lots 1 and 2. On 22 April
1988, the heirs filed a complaint for forcible entry with preliminary mandatory
injunction against Reynante with the MTC Meycauayan Bulacan (Branch 1, 3rd
Judicial Region, Civil Case 1526) alleging that the latter by means of strategy and
stealth, took over the physical, actual and material possession of lots 1 and 2 by
residing in one of the kubos or huts bordering the Liputan River and cutting off
and/or disposing of the sasa or nipa palms adjacent thereto. On 10 January 1989,
the trial court rendered its decision dismissing the complaint and finding that
Reynante had been in prior possession of lots 1 and 2. The heirs appealed to the
RTC Malolos Bulacan (Branch 8, 3rd Judicial Region) and on 8 August 1989 it
rendered its decision in favor of the heirs, and reversed the decision of the lower
court. The Court ordered Reynante to restore possession of the piece of land,
together with the sasa or nipa palms planted theron; without pronouncement as to
attorneys fees, and each party bearing their respective costs of the suit. From said
decision, Reynante filed with the Court of Appeals a petition for review. On 28
February 1990, the Court of Appeals rendered its decision (CA-GR 19171), affirming
the decision of the lower court in toto, and thus denied the petition seeking to issue
a restraining order. On 5 November 1990, the Court of Appeals denied the motion
for reconsideration filed by Reynante. Hence, the petition for review on certiorari.
The Supreme Court reversed and set aside the decision of the Court of Appeals
dated 28 February 1990 and reinstated the decision of the MTC Meycauayan,
Bulacan (Branch I).
1. Action for forcible entry An action for forcible entry is merely a quieting process
and actual title of the property is never determined. A party who can prove prior
possession can recover such possession even against the owner himself. Whatever
may be the character of his prior possession, if he has in his favor priority in time,
he has the security that entitles him to remain on the property until he is lawfully
ejected by a person having a better right by accion publiciana or accion
reinvindicatoria (German Management & Services, Inc. v. Court of Appeals, G.R. No.
76216, September 14, 1989, 177 SCRA 495, 498, 499). On the other hand, if a
plaintiff cannot prove prior physical possession, he has no right of action for forcible

entry and detainer even if he should be the owner of the property (Lizo v.
Carandang, 73 Phil. 469 [1942]). In the present case, the Court of Appeals could not
legally restore the heirs possession over lots 1 and 2 simply because Reynante has
clearly proven that he had prior possession over lots 1 and 2.
2. Reynante in prior possession Reynante was in possession of the questioned lots
for more than 50 years. He was the caretaker of the fishpond owned by the late Don
Cosme Carlos for more than 50 years and that he constructed a nipa hut adjacent to
the fishpond and planted nipa palms therein. This fact is bolstered by the
Sinumpaang Salaysay executed by Epifanio Lucero, Apolonio D. Morte, and
Carling Dumalay, all of whom are disinterested parties with no motive to falsify that
can be attributed to them, except their desire to tell the truth. Moreover, an occular
inspection was conducted by the trial court dated 2 December 1988 which was
attended by the parties and their respective counsels. The court observed that the
controversial premises is beyond the titled property of the plaintiffs but situated
along the Liputan, Meycauayan River it being a part of the public domain. On the
other hand, the heirs based their claim of possession over lots 1 and 2 simply on the
written agreement signed by petitioner whereby the latter surrendered his rights
over the fishpond. There is nothing, however, on the document that the tenant was
giving other matters not mentioned in the document. Neither was there any
mention of the hut and nipa palms for such to be included in the subsequent least
to de la Cruz, a a circumstance that gives the impression that said hut and palms do
not belong to the heirs.
3. Disputed lands not included in TCT 25618 The disputed lots involved in the
present case are not included in TCT 25618 as per verification made by the Forest
Management Bureau, Department of Environment and Natural Resources. That tract
of land situated at Barrio Liputan, Meycauayan, Bulacan containing an area of
1.1107 hectares as described in the plan prepared and surveyed by Geodetic
Engineer Restituto Buan for Reynante falls within Alienable and Disposable Land (for
fishpond development) under Project 15 per B.F.L.C. Map 3122 dated 8 May 1987.
4. Requisites of accretion Accretion benefits a riparian owner when the following
requisites are present: (1) that the deposit be gradual and imperceptible; (2) that it
resulted from the effects of the current of the water; and (c) that the land where
accretion takes place is adjacent to the bank of a river (Republic v. Court of Appeals,
G.R. No. L-61647, October 12, 1984, 132 SCRA 514, cited in Agustin v. Intermediate
Appellate Court, G.R. Nos. 66075-76, July 5, 1990, 187 SCRA 218). 5. Accretion does
not automatically become registered land Granting without conceding that lots 1
and 2 were created by alluvial formation and while it is true that accretions which
the banks of rivers may gradually receive from the effect of the current become the
property of the owner of the banks (Article 457), such accretion to registered land
does not preclude acquisition of the additional area by another person through
prescription. In Ignacio Grande, et al. v. Hon. Court of Appeals, et al. (GR L-17652,
30 June 1962, 115 Phil. 521) it was held that 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. In the present case,
assuming that the heirs had acquired the alluvial deposit (the lot in question), by
accretion, still their failure to register said accretion for a period of 50 years
subjected said accretion to acquisition through prescription by third persons.
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 notice in writing to respondent of the intention to renew.
In 1995, petitioners sent respondent a letter notifying the latter of their intention to renew the contract for
another. July of the same year, parties agreed to the renewal of the contract for another 25 years, or until 2021.
Under the new agreement, petitioner PVHI was bound to pay the monthly rentals
Beginning January 2001, petitioners defaulted in the payment of their monthly rental. Respondent repeatedly
demanded petitioners to pay the arrears and vacate the premises.
MeTC rendered its decision in favor of respondent
RTC which modified the ruling of the MeTC.
CA which held that the RTC erroneously applied the rules on accession, as found in Articles 448 and 546 of
the Civil Code
ISSUE:
WON Sulo sa Nayon as builders have acted in good faith in order for Art. 448 in relation to Art. 546 of the
Civil Code may apply with respect to their rights over improvements.
HELD:
Article 448 is manifestly intended to apply only to a case where one builds, plants, or sows on land in which
he believes himself to have a claim of title, and not to lands where the only interest of the builder, planter or sower is
that of a holder, such as a tenant.
In the case at bar, petitioners have no adverse claim or title to the land. In fact, as lessees, they recognize
that the respondent is the owner of the land. What petitioners insist is that because of the improvements, which are of
substantial value, that they have introduced on the leased premises with the permission of respondent, they should
be considered builders in good faith who have the right to retain possession of the property until reimbursement by
respondent.
We affirm the ruling of the CA that introduction of valuable improvements on the leased premises does not
give the petitioners the right of retention and reimbursement which rightfully belongs to a builder in good faith.
Otherwise, such a situation would allow the lessee to easily "improve" the lessor out of its property. We reiterate the
doctrine that a lessee is neither a builder in good faith nor in bad faith that would call for the application of Articles 448
and 546 of the Civil Code. His rights are governed by Article 1678 of the Civil Code.
96 SCRA 130 February 21, 1980
FLOREZA v EVANGELISTA
FACTS:
The Evangelistas were the owner of a residential lot in Rizal with an area of 204.08 sq. m. assessed at
P410. They borrowed P100 from Floreza. Floreza occupied the residential lot and built a house of light material
(barong-barong) with the consent of the Evangelistas. Additional Loans were made by the Evangelistas.
Floreza demolished the house of light material and constructed one of strong material assessed. Floreza
has not been paying any rentals since the beginning of their transactions. Eventually, Evangelistas sold, with a right
to repurchase within 6 years, their land to Floreza. Seven months before the expiry of the repurchase period, the
Evangelistas were able to pay in full. Floreza refused to vacate the lot unless he was first reimbursed for the value of
the house he built

Evangelistas filed a complaint. CFI ruled based on Art, 448 of the Civil Code saying that Evangelistas have
the choice between purchasing the house or selling the land to Floreza. CA ruled that Art. 448 was inapplicable and
that Floreza was not entiled to the reimbursement of his house and could remove the same at his own expense.
ISSUE:
1. WON Floreza was entitled to reimbursement of the cost of his house.
2. WON he (his heirs who replaced him) should pay rental of the land.
HELD:
1. NO.
Issue of reimbursement is not moot because if Floreza has no right of retention, then he must pay damages in the
form of rentals. Agree with CA that Art. 448 is inapplicable because it applies only when the builder is in good faith (he
believed he had a right to build). Art. 453 is also not applicable because it requires both of the parties to be in bad
faith. Neither is Art. 1616 applicable because Floreza is not a vendee a retro. The house was already constructed in
1945 (light materials) even before the pacto de retro was entered into in 1949. Floreza cannot be classified as a
builder in good faith nor a vendee a 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.

Tan Queto v. CA [G.R. No. L-35648.

February 27, 1987.]; Resolution
Jul

En Banc, Paras (J): 10 concur, 1 votes to deny reconsideration, 1 dissents, 2 took no part
Facts: Restituta Tagalinar Guangco de Pombuena received the questioned lot (Lot 304-B of
the Cadastre Survey of the Municipality of Centro, Misamis Occidental) either as a purported
donation or by way of purchase on 11 February 1927 for P50.00 as the alleged consideration
thereof. The transaction took place during her mothers lifetime (her father having
predeceased the mother) and consummated while Restituta was already married to her
husband Juan Pombuena. On 22 January 1935, Juan filed an application of Torrens title over
the land for himself and his supposed co-owner Restituta. On 22 November 1938, a decision
was promulgated (GLRC 1638, Cadastral Case 12) pronouncing Juan (married to Restituto) as
the owner of the land. On 22 September 1949 a contract of lease over the lot was entered
into between Pershing Tan Queto and Restituta (with the consent of her husband) for a
period of 10 years.

Meanwhile, On 27 December 1960 Restituta sued Tan Queto for unlawful detainer (the lease
contract having expired) before the Municipal Court of Ozamis City.
On 22 April 1962, as a consequence of the cadastral case, an OCT was issued in Juans
name. On 10 October 1962, Tan Queto and Juan entered into a barter agreement whereby
Tan Queto became the owner of the disputed lot, and the spouses 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. Thereafter, Tan Queto constructed on the disputed land a
concrete building, without any objection on the part of Restituta.
The Municipal court ruled in favor of the spouses in the unlawful detainer case; but on
appeal in the CFI, the entire case was dismissed because of an understanding (barter)
entered into by Juan and Tan Queto.
Restituta sued both 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. The CFI
and the Court of Appeals found the disputed lot as paraphernal and that Tan Queto was a
builder in bad faith. These findings were regarded by the Supreme Court as findings of facts
and thus ordinarily conclusive upon the Court. Tan Queto filed for a motion for
reconsideration of the Supreme Court decision dated 16 May 1983.
The Supreme Court set aside its decision promulgated on 16 May 1983, and rendered a new
one declaring the questioned lot together with the building thereon, as Tan Quetos exclusive
property; without costs.
1. Findings of the lower courts ordinary conclusive upon the Court; exception, if
erroneous
The findings of the Court of First Instance and the Court of Appeals were regarded by the
Supreme Court as findings of facts and thus ordinarily conclusive upon the Court. Assuming
they are factual findings, still if they are erroneous inferences from certain facts, they cannot
bind the Court.
2. Land not transferred to Restituta by donation, for it to be paraphernal
The oral donation of the lot cannot be a valid donation inter-vivos because it was not
executed in a public instrument (Art. 749, Civil Code), nor as a valid donation mortis causa
for the formalities of a will were not complied with. The allegation that the transfer was a
conveyance to Restituta of her hereditary share in the estate of her mother (or parents)
cannot be sustained for the contractual transmission of future inheritance is generally
prohibited.

3. Land is conjugal, not paraphernal; Ownership by tradition

The land is conjugal, not paraphernal. Ownership was acquired by the spouses by tradition
(delivery) as a consequence of the contract of sale (See Art. 712, Civil Code) with P50.00
(then a considerable amount) as the cause or consideration of the transaction. The lot is
therefore conjugal, having been acquired by the spouses thru onerous title (the money used
being presumably conjugal, there being no proof that Restituta had paraphernal funds of her
own).
4. Sale not fictitious nor simulated; Allegation of simulation cannot prejudice a
stranger
The sale cannot be said to be fictitious or simulated (and therefore void) as there was a valid
consideration therefor. Assuming that there had indeed been a simulation, the parties
thereto cannot use said simulation to prejudice a stranger to said strategem (like petitioner
herein).
5. Tan Queto recognized Restituta as an owner, not the owner
Tan Queto admitted Restituta was an owner (not the owner) of the lot in his Answer, and
this is true, for she was a co-owner (with Juan, and therefore an owner.) There is no
admission of Restitutas exclusive ownership.
6. Assuming Tan Queto recognized Restituta as the owner; bad faith of one
neutralizes the bad faith of the other
Even assuming that despite registration of the lot as conjugal, Tan Queto nursed the belief
that the lot was actually Restitutas (making him in bad faith), still Restitutas 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 Qyeto to
the rights of a builder in good faith (Art. 448, Civil Code), ergo, reimbursement should be
given him if Restituta decides to appropriate the building for herself (Art. 448, Civil Code).
7. Tan Queto an owner-possessor
Tan Queto having bartered his own lot and small house with the questioned lot with Juan
(who has been adverted to by a court decision and by the OCT a conjugal owner) may be
said to be the owner-possessor of the lot. Certainly he is not merely a possessor or builder in
good faith (this phrase presupposes ownership in another); much less is he a builder in bad
faith. He is a builder-possessor (jus possidendi) because he is the owner himself.
8. Jus possessionis, jus possidendi; good faith and bad faith

The Chapter on Possession (jus possessionis, not jus possidendi) in the Civil Code refers to a
possessor other than the owner. The difference between a builder (or possessor) in good
faith and one in bad faith is that the former is not aware of the defect or flaw in his title or
mode of acquisition while the latter is aware of such defect or flaw (Art. 526, Civil Code). But
in either case there is a flaw or defect. In the present case, there is no such flaw or defect
because it is Tan Queto himself (not somebody else) who is the owner of the property.
(taken from other source)