66. PLEASANTVILLE DEVELOPMENT CORPORATION V.

CA
(253 SCRA 10)
Facts
Eldred Jardinico bought the rights to Lot 9 from Edith Robillo who bought the lot from Pleasantville
Development Corporation. Upon completing payments, Jardinico secured a Transfer Certificate Title in his
name. It was then that he learned that the respondent Kee had taken possession of the said lot and had
made improvements thereon.
Kee bought on installment Lot 8 from C.T. Torres Enterprise, Inc., an exclusive real estate agent of PDC.
After receiving the lot plan, Zenaida Octaviano (a CTTEI employee) mistakenly pointed out to Kee's wife
Lot 9 instead of the lot they bought. Thereafter, Kee proceeded to construct improvements on it.
Jardenico's lawyer notified Kee of the misunderstanding and ordered removal of constructions as well as
evacuation but the latter refused. A complaint for ejectment was then filed against Kee. In turn, the latter
filed a 3rd party complaint against CTTEI.
Issue
Whether or not respondent (Mr. Kee) is a builder in good faith.
Held
Yes, Mr. Kee is a builder in good faith. At the time he made improvements on the lot, he believed that it
was what he bought from PDC, as pointed out by Ocataviano and described on the TCT of Kee. Good
faith consists in the belief of the builder that the land he is building on is his and his ignorance of any
defect or flaw in his title. PDC failed to overcome the presumption that Kee was a builder in bad faith.
If Jardinico decides to appropriate the improvements and, thereafter, remove these structures, the thirdparty defendants shall answer for all demolition expenses and the value of the improvements destroyed or
rendered useless. If he prefers Kee to buy the land, the third-party defendants shall answer for the
amount representing the value of Lot 9, which Kee should pay to Jardinico.
The principal is responsible for the acts of the agent, done within the scope of his authority and should
bear the damage caused to third persons. In addition, an agent who exceeds his authority is personally
liable for the damages.

67. BALTAZAR V. CARIDAD

(G.R. No. L-23509)
Fact
Julio Baltazar, the registered owner of Lot 8864, died. On December 6, 1961, his surviving wife and
children filed a motion, in the cadastral case praying for writ of possession against Silvina Caridad and her
daughter, Eduarda Caridad, who had been in possession of the southern portion of the said property
since 1939. On December 11, 1961, the trial court issued an order granting Baltazar's motion, and
overruled Caridads' opposition but directed the sheriff not to remove or destroy the permanent
improvements on the lot without an express command. On January 2, 1962, the order having become
final, the sheriff enforced the writ and placed Baltazar in possession of the southern portion of the lot.
Issues
1. Whether or not the Court erred in compelling Silvina and Eduarda Caridad to remove their respective
houses from the disputed lot.
2. Whether or not Silvina and Eduarda Caridad were builders in good faith.
Held
1. The order dated March 20, 1962 of the cadastral court, granting Baltazar's motion to compel the
Caridads to remove their respective houses from the disputed lot, is valid and enforceable against the
latter. This may be concluded based on the following circumstances:
a. The Caridads did not dispute that during the pendency of the cadastral proceeding (to which judgment
was rendered awarding said lot 8864, and consequent issuance of the final decree of registration of the
same, in favor of Julio Baltazar), the late Andres Caridad, his surviving spouse Silvina Caridad, and their
children, one of whom is Eduarda Caridad, were in possession of the southern portion of the disputed lot;
b. Eduarda Caridad claims right and title thereto as a mere heir and successor-in-interest of said Andres
Caridad; and
c. The Caridads did not dispute the propriety and validity of the order of the cadastral court, granting the
writ of possession in favor of Baltazar as well as its enforcement.
2. No, the Caridads cannot be regarded as builders in good faith because they are bound by the 1941
decree of registration which obligated their parents and predecessors-in-interest. Good faith must rest on
a colourable right in the builder, beyond a mere stubborn belief in one's title despite judicial adjudication.
The fact that the Caridads demolished and replaced their old house in 1959 with new and bigger ones
cannot weaken the rights of the registered owners. Otherwise, the right of the latter to enjoy full

possession of their registered property could indefinitely be defeated by an unsuccessful opponent

through the simple maneuver of replacing his old house with a new one from time to time.

68. GERMINIANO V. COURT OF APPEALS

(G.R. No. 120303)
Facts
Lot 3765-B-1 was originally owned by Paulina Amado vda. de Geminiano, the mother of Federico, Maria,
Ernesto, Asuncion, Larry and Marlyn Geminiano. On a 12-sq. m. portion of that lot stood the Geminianos'
unfinished bungalow, which they sold in November 1978 to Dominador and Mary Nicolas for the sum of
P6, 000.00, with an alleged promise to sell to the latter that portion of the lot occupied by the house.
Subsequently, Paulina Amado-Geminiano executed a contract of lease over a 126 sq. m. portion of the
lot, including that portion on which the house stood, in favor of the Nicolas spouses for P40 per month for
a period of 7 years commencing on November 15, 1978. The Nicolas spouses then introduced additional
improvements and registered the house in their names. After the expiration of the lease contract in
November 1985, however, the Paulina refused to accept the monthly rentals.
It turned out that the lot in question was the subject of a suit, which resulted in its acquisition by one Maria
Lee in 1972. In 1982, Lee sold the lot to Lily Salcedo, who in turn sold it in 1984 to the spouses Agustin
and Ester Dionisio. On February 14, 1992, the Dionisio spouses executed a Deed of Quitclaim over the
said property in favor of the Geminianos. As such, the lot was registered in the latter's names.
On February 9, 1993, the Geminianos sent, via registered mail, a letter addressed to Mary Nicolas
demanding that she vacate the premises and pay the rentals in arrears within 20 days from notice. Upon
failure of the Nicolas spouses to heed the demand, the Geminianos filed with the MTCC of Dagupan City
a complaint for unlawful detainer and damages.
Issue
Whether or not the Nicolas spouses are possessors or builder in good faith who cannot be subjected to
ejectment.
Held
No. A possessor in good faith is one who builds on the land with the belief that he is the owner thereof.
Being mere lessees, the Nicolas spouses knew that their occupation of the premises would continue only
until lease persists. Hence, they cannot be considered as possessors or builders in good faith. Article
448, in relation to Article 546, applies only to a possessor in good faith; it does not apply to a lessee. Full
reimbursement of useful improvements and retention of the premises until reimbursement is made,
applies only to such possessors. It does not apply where one's only interest is that of a lessee under a
rental contract; otherwise, it would always be in the power of the tenant to "improve" his landlord out of his
property.

69. BALUCANAG V. FRANCISCO

(G.R. No. L-33422)
Facts
Cecilia dela Cruz Charvet was the owner of a 177.50 sq.m. lot located in Pandacan, Manila. On August
21, 1952, Mrs. Charvet leased said lot to Richard Stohner for a period of 5 years at the monthly rental of
P40.00, payable in advance within the first 10 days of each month. The lease contract provided, that "the
lessee may erect such buildings upon and make such improvements to the leased land as he shall see fit.
All such buildings and improvements shall remain the property of the lessee and he may remove them at
any time, it being agreed, however, that should he not remove the said buildings and improvements within
a period of two months after the expiration of this Agreement, the Lessor may remove the said buildings
and improvements or cause them to be removed at the expense of the Lessee."
During the existence of the lease, Stohner made fillings on the land and constructed a house thereon,
said improvements being allegedly valued at P35, 000.00. On March 8, 1966, Mrs. Charvet sold the said
lot to Rosendo Balucanag. For Stohner's failure to pay the rents, Balucanag, thru counsel, wrote Stohner
a letter demanding that he vacate the premises. In reply thereto, Stohner, also thru counsel, claimed that
he was a builder in good faith of the residential house erected in the land. He offered proposals for a
possible compromise, either for Stohner to purchase the lot at 12% per annum on the value or for
Balucanag to reimburse Stohner the amount P35, 000 for the improvements and constructions he has
made on the lot. As no agreement was reached, Balucanag instituted in the City Court of Manila an
ejectment suit against Stohner and after due trial, the court rendered a decision, ordering Stohner to pay
Baculanag the sum of P360.00 as back rentals from December 1965 to August 1966, to vacate the
premises and the sum of P100 as attorney's fees.
Issue
Whether or not Stohner can be considered as a builder in good faith.
Held
No, Stohner cannot be considered a builder in good faith. Article 448 of the Civil Code, relied upon by
respondent judge, applies only to a case where one builds on land in the belief that he is the owner
thereof and it does not apply where one's only interest in the land is that of a lessee under a rental

contract. In the case at bar, there is no dispute that the relation between Balucanag and Stohner is that of
lessor and lessee, the former being the successor in interest of the original owner of the lot.

70. SPOUSES DARIO LACAP AND MATILDE LACAP V. JOUVET ONG LEE
(G.R. No. 142131)
Facts
Before 1981, a certain Victor Facundo mortgaged two parcels of land and the improvements thereon to
Monte de Piedad Savings Bank. In 1981, the petitioner spouses Dario and Matilde Lacap assumed to pay
Facundo's mortgage obligation to the bank. Due to their failure to pay their obligation, the latter foreclosed
on the mortgage. During the auction sale, the bank emerged as the highest bidder and title passed on to
it. The bank allowed the Lacap spouses to stay in the premises as lessees paying a monthly rental of
P800. Thus, they introduced improvements thereon allegedly amounting to P500,000 after relying on the
bank's assurance that the property would be sold back to them. On May 1, 1996, the spouses'
representative went to the bank to pay the monthly rental. Nonetheless, the bank refused to accept such
since the property had already been sold to another person. Consequently, they called the bank's head
office; the Vice-President of the Assets Division advised them to submit a written offer to the bank for
P1,100,000, which they complied with that same day. Yet, on May 22, 1996, the offer was rejected, and on
June 20, 1996, the spouses received a letter demanding that they vacate the premises because it was
already owned by herein respondent, Jouvet Ong Lee. The petitioner spouses instituted a civil case
against the respondent for cancellation of sale and damages with an application for preliminary
injunction.
Issue
Whether or not the Court of Appeals correctly applied Article 1678 instead of Article 448 of the Civil Code
with regards to the indemnity for the improvements introduced by the petitioners on the subject property.
Held
The applicable provision in the instant case is Article 1678 of the Civil Code. It is clearly stated in Article
546 of the Civil Code that builders in good faith are entitled to reimbursement for necessary and useful
expenses, with right of retention in both cases. The petitioners insist that they should be treated as
builders in good faith inasmuch as they stepped into the shoes of Victor Facundo, the former ownermortgagor, when the latter assigned to them the obligation to pay the bank the balance due on the

mortgage. Since then, they occupied the subject property and introduced improvements thereon. They
contend that they were not lessees and paid no rentals thereon. The Court does not agree with the
spouses' claim.
Article 528 of the Civil Code provides that possession in good faith continues to subsist until facts exist
which show that the possessor is already aware that he wrongfully possesses the thing. Although, in the
beginning, the petitioners were made to believe that they had a claim of title over the said property by
assuming the mortgage and possessing the subject property, all this changed when they started paying
monthly rentals to the mortgagee bank after the foreclosure of the said property. A conclusive
presumption arises from the fact that, during the tenancy relationship, the petitioner spouses admitted the
validity of the title of their landlord. This negated their previous claim of title. If, indeed, they believed in
good faith they had at least an imperfect title of dominion over the subject premises, they should have
tried to prevent the foreclosure and objected to the acquisition of title by the bank. In other words, their
supposed belief in good faith of their right of dominion ended when the bank foreclosed and acquired title
over the subject premises.
71. SPOUSES DEL CAMPO V. FERNANDEZ-ABESIA
(G.R. No. 49219)
Facts
Spouses Estanislao and Concepcion del Campo and Bernarda Abesia are co-owners of a lot in Cebu
City, in the proportion of 2/3 and 1/3 share each, respectively. The spouses filed an action for partition
with the CFI Cebu. The trial court appointed a commissioner in accordance with the agreement of the
parties. The said commissioner conducted a survey, prepared a sketch plan and submitted a report to the
trial court on May 29, 1976, recommending that the property be divided into two lots: Lot 1161-A (30
sq.m.) and Lot No. 1161-B (15 sq. m.).
The houses of the spouses del Campo and Abesia were surveyed and shown on the sketch plan.
Abesia's house occupied the portion with an area of 5 sq.m. of the spouses' Lot 1161-A. The parties
manifested their conformity to the report and asked the trial court to finally settle and adjudicate who
amongst the parties should take possession of the 5 sq. m. of the land in question.
The lower court held that Article 448 of the New Civil Code does not apply in the case, and ordered
Abesia to demolish at her own expense part of her house which has encroached Lot 1161-A and deliver
said area to the spouses, with 60 days upon notice. The parties were ordered to pay the commissioner's
fee (P400 in proportional share), and the cost of suit (also in proportional share). Abesia appealed to the
Court of Appeals, which certified the case to the Supreme Court.
Issue
Whether or not the provisions of Article 448 of the Civil Code are applicable in relation to a builder in good
faith when the property involved is owned in common.
Held
Applying Article 448 of the Civil Code, the spouses have the right to appropriate said portion of the house

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

72. IGNAO V. IAC

(G.R. No. 72876)
Facts
A lot situated in the Municipality of Kawit, Cavite, was originally owned by Baltazar Ignao who married
twice. In his first marriage, he had 4 children, namely Justo (the father of Florencio), Leon, Juan and
Isidro. In his second marriage, Baltazar had also 4 children but the latter waived their rights over the
controverted land in favor of Justo. As a consequence, Justo owned a total of 5/8 of the land. Thereafter,
he acquired the 1/8 share of Leon for P500.00 which he later sold to his son Florencio for the same
amount. When Justo died, Florencio inherited a total of 6/8 and Juan and Isidro, on the other hand, had
1/8 share each of the land making Florencio and his uncles Juan and Isidro co-owners of the said parcel
of land. Pursuant to an action for partition filed by Florencio Ignao, a decision directed the partition of the
aforesaid land, allotting 2/8 thereof to Juan and Isidro, and giving the remaining portion with a total area of
266.5 sq. m. to petitioner Florencio. However, no actual partition was ever effected.
On July 17, 1978, Florencio instituted a complaint for recovery of possession of real property against Juan
and Isidro. In his complaint, he alleged that the area occupied by the 2 houses built by Juan and Isidro
exceeded the 133.5 sq. m. previously allotted to them by the trial court. An ocular inspection was
conducted which found that the houses actually encroached upon a portion of the land belonging to
Florencio. Thus, the trial court ordered a licensed geodetic engineer to conduct a survey to determine the
exact area occupied by the houses of Juan and Isidro subsequently disclosing that the house of Juan
occupied 42 sq. m. while that of Isidro occupied 59 sq. m. of Florencio's land. However, the trial court
ruled that although Juan and Isidro occupied a portion of Florencio's property, they should be considered
builders in good faith. Thus, it ordered Florencio to sell to Juan and Isidro those portions of his land
respectively occupied by the latter and to execute the necessary deed of conveyance to the Juan and

Isidro.
Issue
Whether or not the remedy granted to Florencio is correct.
Held
No, the Supreme Court directed Florencio to exercise his option to either appropriate as his own the
portions of the houses of Juan and Isidro Ignao occupying his land upon payment of indemnity in
accordance with Articles 546 and 548 of the Civil Code, or sell to private respondents the 101 sq. m.
occupied by them at such price as may be agreed upon; within 30 days from entry of judgment. Should
the value of the land exceed the value of the portions of the houses that Juan and Isidro have erected
thereon, the latter may choose not to buy the land but they must pay reasonable rent for the use of the
portion of Florencio's land as may be agreed upon by the parties. In case of disagreement, the rate of
rental and other terms of the lease shall be determined by the trial court. Otherwise, Juan and Isidro may
remove or demolish at their own expense the said portions of their houses encroaching upon Florencio's
land.

73. GRANA AND TORRALBA V. CA

(109 Phil. 260)
Facts
Aurora Bongato and Jardenio Sanchez, respondents, inherited a land situated in Butuan, Agusan.
Subsequently, this land was resurveyed due to conflicts and overlapping of boundaries because
apparently petitioners Grana and Torralba constructed a house which encroached into the land of the
respondents. After the resurvey, the sketch plan showed that respondent's land should only have 230
square meters and by this, petitioners claimed that the difference of 65 sq. m. is actually a part of their
land. Respondents brought an action into the CFI for the recovery of 87 sq. m. of their land. The trial court
ruled in favor of the respondents declaring them to be the owners of the land and ordering the petitioners
to vacate and deliver said land to the former and to pay a monthly rental of P10.00 from the filing of the
complaint until they vacate the said land.
On appeal, petitioners filed a motion for new trial on the ground of newly discovered evidence. The CA
denied their motion for new trial. However, the CA found that the petitioners were actually builders in good
faith (Art 448).

Issues
Whether or not the CA erred in stating that the petitioners were builders in good faith.
Held
The SC approved the finding of the CA that petitioners were builders in good faith. However, it commented
that although respondents have the choice of appropriating the portion of petitioners' house, or selling to
petitioners that part of their land on which the improvement stands, it would be impractical to choose the
first alternative for the whole building might be rendered useless.
On the other hand, it disapproved the terms of payment of the monthly rentals if ever respondents choose
to exercise first option and petitioners are unwilling to buy. The SC held that the payment of rentals must
be from the time respondents made their choice, which is 30 days from the finality of the decision, up to
the time petitioners actually vacate the land. This is because a builder in good faith may not be required to
pay rentals. He has a right to retain the land on which he has built in good faith until he is reimbursed the
expenses incurred by him.
But if the value of the land is considerably more than the value of the improvement, then petitioners may
elect to rent the land, the terms of which to be agreed by the parties. If they cannot agree, then the CFI
may fix the terms for them and the petitioners shall pay P10.00 monthly from the time respondents
exercised their option up to the time the parties agree on the terms of the lease or until the court fixes
such terms.

74. PECSON V. COURT OF APPEALS

(G.R. No. 115814)
Facts
Petitioner Pedro P. Pecson was the owner of a commercial lot located in Quezon City, on which he built a
four-door two-storey apartment building. For his failure to pay realty taxes amounting to twelve thousand
pesos, 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 private respondents, the spouses Juan Nuguid and Erlinda
Tan-Nuguid, for one hundred three thousand pesos. The petitioner challenged the validity of the auction
sale before the RTC of Quezon City. In its decision of 8 February 1989, the RTC dismissed the complaint,
but as to the private respondents' claim that the sale included the apartment building, it held that the issue
concerning it was "not a subject of the . . . litigation." In resolving the private respondents' 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. On November 1993, the private respondents filed with the
trial court a motion for delivery of possession of the lot and the apartment building, citing article 546 of the
Civil Code. The petitioner then filed with the Court of Appeals a special civil action assailing the order of
15 November 1993. In its decision, it affirmed in part the order of the trial court citing Article 448 of the
Civil Code. Aggrieved by the Court of Appeals' decision, the petitioner filed the instant petition.
Issue
Whether or not Article 448 is pertinent to the case at bar.
Held
No, Article 448 is not apposite to the case at bar. Nevertheless, we believe that the provision therein on
indemnity 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, in the main 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.
Article 546 does not specifically state how the value of the useful improvements should be determined.
The respondent court and the private respondents espouse the belief that 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 the petitioner. The objective of Article 546 of the Civil Code is to
administer justice between the parties involved. In this regard, this Court had long ago stated that 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 in 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 four-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.

75. VICENTE M. COLEONGCO V. REGALADO AND LEONOR MONTILLA

(G.R. No. L-4529 )
Facts
Prior to September 1944, Pedro F. Regalado was the owner of lot No. 1205-A situated at barrio
Mandalagan, Bacolod, Province of Negros Occidental, of which lot No. 157 was a portion. In this lot, a
building was erected which was being occupied by the forces of the Japanese Army in September 1944.
Within that month, Regalado sold lot No. 157 to Vicente M. Coleongco who thus became the owner of the

said property. The total area of the lot was 1,000 square meters, and the land occupied by the house was
245 square meters. Until the year of 1947, the assessed value of the whole lot and the house was P1,156
and P4,500, respectively.
It appears from the records that Coleongco contended that the house erected on lot 157 was included in
the sale to him of this property, and when the City of Bacolod was liberated by the American Forces that
succeeded the Japanese and occupied said house for about two months, he received from the local office
of the AFWESPAC as rentals the sum of $93.75 or P137.50. However, after the American Forces vacated
the house, Regalado occupied the same. As a result, Coleongco instituted a case at the Court of First
Instance of Negros Occidental. On March 21, 1947, a decision was made stating that the improvement of
lot No. 157, consisting of a residential house, was the property of the defendant Regalado. From that
decision Coleongco appealed to the Court of Appeals, but on August 28, 1947, this tribunal declared the
appeal abandoned.
Issue
Whether or not Coleongco is precluded from instituting ejectment proceedings against the defendants.
Held
No. A perusal of the record discloses that the present action for ejectment was instituted on July 21, 1947,
before plaintiff's appeal in Case No. 185 was finally declared abandoned in the Court of Appeals, and the
fact that in said case Coleongco unsuccessfully claimed to be the owner of the house in litigation does not
preclude his right to depart from his former contention and to institute these ejectment proceedings to
compel the defendants to vacate his lot and to remove there from the building which at first he maintained
to be his, and to further demand payment of the corresponding rentals for the occupancy of the lot by said
building from September, 1944, when he bought the property, up to the time said building is actually
removed, except, of course, for the period that he might have occupied or used that building. But the
record is silent about such use and all indications are that from September of 1944, the house was first
occupied by the Japanese, then by the American Forces, after liberation, and right afterwards in
September of 1945 by defendant Regalado himself and by his successors in interest. The lower court,
however, sentenced the defendants to pay rents from September, 1945, and as plaintiff has not appealed
from that ruling, We can only consider the adequacy of the amount fixed by the court as rentals from
September, 1945.

76. URBANO JAVIER AND LEONILA ALBIELA V. HON. HERMOGENES CONCEPCION, JR.
(G.R. No. L-36566)
Facts
On October 17, 1959, Lim Chua, Tan Tian On (alias Tan Tian Una) and Tan Sick Tan (alias Tan Shiok
Tuan) filed against spouses, Urbano Javier and Leonila Albiela, with the Court of First Instance of the

Province of Quezon, for the reconveyance to the former of a parcel of land with improvements thereon. In
addition, they filed for an accounting and recovery of the produce of the land from the time the latter took
possession of the same in 1945 up to the time possession is returned to the former. Lot 12 is allegedly a
portion of a big parcel of land designated as Lot 6, located in Quezon Province and covered by Transfer
Certificate of Title No. 16817 issued by the Office of the Register of Deeds of Quezon Province in the
name of herein respondents. On November 11, 1959, Javier and Albiela denied the material averments of
the complaint and pointed out that Lot 12 could never be a part of Lot 6. They stated that between the two
lots, exist Guhit River which is more than fifty (50) meters wide and more than twenty (20) meters deep.
This river serves as the natural boundary between the municipalities of Dolores and Candelaria of
Quezon Province; that Lot No. 6 is situated within the jurisdiction of Dolores, Quezon while Lot No. 12 is
situated within the jurisdiction of Candelaria, Quezon.
Issue
Whether or not the Court of Appeals erred in not ordering private respondents to pay for the
improvements introduced by them on the land in question from 1945.
Held
The respondent Court of Appeals did not err in finding that petitioners did not act with evident bad faith in
occupying the land in question. As possessors in good faith, petitioners are entitled to the fruits received
before their possession was legally interrupted upon receipt of judicial summons in connection with the
filing of the complaint for reconveyance on October 17, 1959. However, the records do not show when the
summons were received by the defendants-spouses, Javier, In the absence of such proof and in the
interest of justice, We hold that possession in good faith was legally interrupted on November 11, 1959,
when their amended answer was filed,* which is less than a month from the date the summons was
apparently received. For the difference of a few days or about two (2) weeks in reckoning the starting date
of possession in bad faith will not materially affect the prevailing party's entitlement to the fruits of the
holding since the same will be reckoned seasonally. Petitioners should also be refunded the necessary
and useful expenses, with the right to retain the land until reimbursed of the same, pursuant to Article 546
of the Civil Code. Under the said provision, respondents have the option to refund the amount of useful
expenses or to pay the increase in value which the land may have acquired by reason thereof. In this
connection, petitioners have placed the market value of improvements on the property consisting of
various fruit trees, bamboos, a house and camarin made of strong materials, at P150, 000.00 and this
amount does not appear to be disputed. The average share of the owner was likewise compromised at
sixty (60) cavans per year, at an average price of seven pesos (P7.00) per cavan as of the date of the
hearing on September 23, 1960.
In view of Article 544 of the Civil Code, the petitioners shall be accountable for the fruits of subject
property only after 1959, not from 1945.

77. SARMIENTO V. AGANA

(G.R. No. 57288)
Facts
While Ernesto was still courting his wife, the latter's mother had told him the couple could build a
residential house on in Paranaque. In 1967, Ernesto did construct such at a cost of P8,000.00 to
P10,000.00. It was assumed that the wife's mother was the owner of the land and that, eventually, it would
somehow be transferred to the spouses.
Subsequently, it turned out that the land had been titled in the name of Mr. & Mrs. Jose C. Santo, Jr. who,
on September 7, 1974, sold the same to petitioner Sarmiento. The following January 6, 1975, Sarmiento
asked Ernesto and his wife to vacate and, on April 21, 1975, filed an Ejectment suit against them. In the
evidentiary hearings before the Municipal Court, Sarmiento submitted the deed of sale of the land in her
favor, which showed the price to be P15,000.00. On the other hand, Ernesto testified that the then cost of
the residential house would be from P30,000.00 to P40,000.00. The figures were not questioned by
Sarmiento.
The Municipal Court found that private respondents had built the house in good faith, and, disregarding
the testimony of Ernesto, that it had a value of P20,000.00. It then ordered Ernesto and his wife to vacate
the land after Sarmiento has paid them the mentioned sum of P20,000.00.
The Ejectment suit was elevated to the Court of First Instance of Pasay where, after the submission of
memoranda, the said Court rendered a modifying Decision under Article 448 of the Civil Code. Sarmiento
was required, within 60 days, to exercise the option to reimburse Ernesto the sum of 40,000.00 as the
value of the house, or the option to allow them to purchase the land for P25,000.00. He did not exercise
any of the two options within the indicated period, which allowed Ernesto to deposit the sum of
P25,000.00 with the Court as the purchase price for the land. Sarmiento then instituted the instant
certiorari proceedings.
Issue
Whether or not Ernesto and his wife were builders in good faith.
Held
Yes, we agree that Ernesto and his wife were builders in good faith in view of the peculiar circumstances
under which they had constructed the residential house. As far as they knew, the land was owned by
Ernesto's mother-in-law who, having stated they could build on the property, could reasonably be
expected to later on give them the land.
The value of the land, purchased for P15,000.00 on September 7, 1974, could not have been very much

more than that amount during the following January when Ernesto and his wife were asked to vacate.
However, they have not questioned the P25,000.00 valuation determined by the Court of First Instance.

78. TECNOGAS PHILIPPINES MANUFACTURING CORPORATION V. COURT OF APPEALS

(268 SCRA 5)
Facts
Tecnogas Corp owns a parcel of land in Paranaque which was purchased from Pariz Industries, Inc. with
all the buildings and improvements including a wall existing thereon. Defendant Eduardo Uy owns the
adjoining parcel of land, and subsequently, defendant purchased another adjoining lot. Because certain
portions of petitioner's buildings and wall occupy the defendant's land, Tecnogas offered to buy the
particular portions, but Uy refused. They entered instead into an agreement wherein Tecnogas agreed to
demolish the wall, giving Uy possession of a portion of his land previously enclosed by Tecnogas' wall. Uy
later filed a complaint with the Municipal Engineer of Paranaque and Office of the Provincial Fiscal against
Tecnogas in connection with the encroachment or occupation of Tecnogas' buildings and walls but such
did not prosper. Uy then dug a canal along Tecnogas' wall, a portion of which had already collapsed.
Tecnogas filed a supplemental complaint and a separate criminal complaint for malicious mischief against
Uy and his wife.
Issues
Whether or not Tecnogas is considered a builder in bad faith.
Held
No, bad faith is not imputable to a registered owner of land when a part of his building encroaches upon a
neighbor's land, simply because he is supposed to know the boundaries of his land as described in the
certificate of title. It is presumed that Pariz Industries built the buildings and other structures upon the land
since they were in existence when Tecnogas purchased the land. Article 527 presumes good faith since
no proof exists to show that encroachment over a narrow, needle-shaped portion of Uy's land was done in
bad faith by the builder. It is also presumed that possession continues to be enjoyed in the same
character in which it was acquired until the contrary is proved. Hence, good faith, or the belief of the
builder that the land he is building on is his and his ignorance of any flaw or defect in the title, by law is
passed to Pariz's successor, Tecnogas. The good faith ceases from the moment defects in the title are
made known to the possessor by evidence or by suit for recovery of property by true owner.