VILLANUEVA v. CASTAÑEDA, JR.

FACTS

Petitioners are owners of stalls in a talipapa located in a land owned by the municipal
government. They were ed to lease the said land through a municipal council resolution in 1961.

The municipal government demolished the the stalls and subsequently issued a new resolution
revoking the right previously granted to the vendor. Said resolution indicated that the said area
will be a parking space for the town plaza.

Petitioners brought an action against the municipal government alleging that they have the right
to use the said lang because the resolution allowing them to use the area constitutes a contract
between them (vendors) and the municipal government.

CFI dismissed the petition and ordered the petitioners to be evicted from the area. But such
eviction was not enforced and the number of stall owners even grew.

After a few years, the municipal again resolved to demolish the stalls

ISSUE:

1. Whether or not the resolution in 1961 conferred contractual rights to the stall owners making
them lawful lessees of the land

2. Whether or not the said area are dedicated for public use

HELD:
1. There was no dispute that the land occupied by the petitioners was previously used as a town
plaza and being such it is considered as beyond the commerce of man and cannot be the subject
of lease or any contractual undertaking. The petitioners had no right in the first place to occupy
the disputed premises.
2. The proliferation of the stalls caused several repercussions to the area such as

> the makeshift and flammable materials has made the area susceptible of fire endangering
public safety
> said stalls have obstructed the way going to the real public market
> the filthy conditions of the stalls has aggravated health and sanitation problems
> the area has contributed to the obstruction of the flow of traffic

3. Assuming that there was a valid contract (and that the land is not for public use), the
petitioners must yield to the police power exercised by the municipal government. It is a well
settled rule that any valid contract may be cancelled if it causes danger to the public
Laurel vs Garcia
GR 92013 July 25, 1990.
Facts:
Petitioners seek to stop the Philippine Government to sell the Roppongi
Property, which is located in Japan. It is one of the properties given by the
Japanese Government as reparations for damage done by the latter to the
former during the war.

Petitioner argues that under Philippine Law, the subject property is

property of public dominion. As such, it is outside the commerce of men.
Therefore, it cannot be alienated.

Respondents aver that Japanese Law, and not Philippine Law, shall apply
to the case because the property is located in Japan. They posit that the
principle of lex situs applies.

Issues and Held:

1. WON the subject property cannot be alienated.

The answer is in the affirmative.

Under Philippine Law, there can be no doubt that it is of public dominion

unless it is convincingly shown that the property has become patrimonial.
This, the respondents have failed to do. As property of public dominion, the
Roppongi lot is outside the commerce of man. It cannot be alienated.

2. WON Philippine Law applies to the case at bar.

The answer is in the affirmative.

We see no reason why a conflict of law rule should apply when no conflict of
law situation exists. A conflict of law situation arises only when: (1) There is
a dispute over the title or ownership of an immovable, such that the
capacity to take and transfer immovables, the formalities of conveyance, the
essential validity and effect of the transfer, or the interpretation and effect
of a conveyance, are to be determined; and (2) A foreign law on land
ownership and its conveyance is asserted to conflict with a domestic law on
the same matters. Hence, the need to determine which law should apply.

In the instant case, none of the above elements exists.

The issues are not concerned with validity of ownership or title. There is no
question that the property belongs to the Philippines. The issue is the
authority of the respondent officials to validly dispose of property
belonging to the State. And the validity of the procedures adopted to effect
its sale. This is governed by Philippine Law. The rule of lex situs does not
apply.

The assertion that the opinion of the Secretary of Justice sheds light on the
relevance of the lex situs rule is misplaced. The opinion does not tackle the
alienability of the real properties procured through reparations nor the
existence in what body of the authority to sell them. In discussing who are
capable of acquiring the lots, the Secretary merely explains that it is the
foreign law which should determine who can acquire the properties so that
the constitutional limitation on acquisition of lands of the public domain to
Filipino citizens and entities wholly owned by Filipinos is inapplicable.

 
GERMAN MANAGEMENT & SERVICES, INC. V
COURT OF APPEALS

FACTS:

Spouses Jose are residents of Pennsylvania, Philadelphia, USA are owners of the land situated in
sitio Inarawan, San Isidro, Antipolo, Rizal (the land being disputed in the case at bar.) The
spouses Jose executed a special power of attorney authorizing petitioner German Management
Services to develop their property. They have already acquired the proper permits to do so but
they discovered that the land was occupied by the respondent with 20 other farmers (members of
the Concerned of Farmer’s Association.) These farmers have occupied the land for the last
twelve to fifteen years prior to the issuance of the permits and they already have their crops all
over the property. In short, they are in actual possession of the land.

Petitioners tried to forcibly drive the farmers away and; demolish and bulldoze their crops and
property. The respondents filed in CFI because they were deprived of their property without due
process of law by trespassing, demolishing and bulldozing their crops and property situated in
the land. CFI and RTC denied it but CA reversed the decision. Petitioners tried to appeal the
decision in CA but were denied thus this appeal

ISSUE:

Whether or not private respondents are entitled to file a forcible entry case against petitioner?

RULING:

YES, they are entitled to file a forcible entry case! Since private respondents were in actual
possession of the property at the time they were forcibly ejected by petitioner, private
respondents have a right to commence an action for forcible entry regardless of the legality or
illegality of possession.

Private respondents, as actual possessors, can commence a forcible entry case against petitioner
because ownership is not in issue. Forcible entry is merely a quieting process and never
determines the actual title to an estate. Title is not involved, only actual possession. It is
undisputed that private respondents were in possession of the property and not the petitioners nor
the spouses Jose. Although the petitioners have a valid claim over ownership this does not in any
way justify their act of ―forcible entry.‖ It must be stated that regardless of the actual condition
of the title to the property the party in peaceable quiet possession shall not be turned out by a
strong hand, violence or terror. Thus, a party who can prove prior possession can recover such
possession even against the owner himself.Whatever may be the character of his 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
reivindicatoria. The doctrine of self help, which the petitioners were using to justify their actions,
are not applicable in the case because it can only be exercised at the time of actual or threatened
dispossession which is absent in the case at bar (in fact they are the ones who are threatening to
remove the respondents with the use of force.) Article 536 basically tells us that the owner or a
person who has a better right over the land must resort to judicial means to recover the property
from another person who possesses the land.

When possession has already been lost, the owner must resort to judicial process for the recovery
of property. As clearly stated in Article 536- ―In no case may possession be acquired through
force or intimidation as long as there is a possessor who objects thereto. He who believes that he
has an action or right to deprive another of the holding of a thing must invoke the aid of the
competent court, if holder should refuse to deliver the thing.‖
Atok Big-Wedge Company Inc vs
Gison DIGEST
DECEMBER 21, 2016  ~ VBDIAZ

Atok Big-Wedge Company Inc vs Gison

GR No.169510
Facts:
 Jesus P. Gison was engaged as part-time consultant on retainer basis by the
petitioner Atok. Petitioner did not require respondent to its office on a regular
basis, except when occasionally requested by the management to discuss
matters needing his expertise as a consultant. As payment for his services,
respondent received a retainer fee of P3,000.00 which was delivered to him at
his residence or in a local restaurant. The said arrangement continued for the
next eleven years.
 Since the respondent was getting old he requested that petitioner cause his
registration with the SSS but petitioner did not accede his request.
 Respondent filed a complaint with the SSS against petitioner for the latter’s
refusal to cause his registration with the SSS. On the same date the petitioner
issued a memo advising the termination of the respondent’s retainer contract.
Thus he filed for illegal dismissal.
Issue:
 Whether employer-employee relationship exists?
Held:
 No. To ascertain the existence of an employer-employee relationship
jurisprudence has invariably adhered to the four-fold test to wit: (1) the
selection and engagement of the employee; (2) the payment of wages; (3) the
power of dismissal; and (4) the power to control the employee’s conduct, or the
so-called “control test”.
 The commonly so called control test is commonly regarded as the most
crucial and determinative indicator of the presence or absence of an employer-
employee relationship. Under the control test, an employer-employee
 relationship exists where the person for whom the services are performed
reserves the right to control not only the end achieved, but also the manner and
means to be used in reaching that end.
 Applying the aforementioned test, an employer-employee relationship is
apparently absent in the case at bar. Among other things, respondent was not
required to report everyday during regular office hours of petitioner.
Respondent’s monthly retainer fees were paid to him either at his residence or a
local restaurant. More importantly, petitioner did not prescribe the manner in
which respondent would accomplish any of the tasks in which his expertise as a
liaison officer was needed; respondent was left alone and given the freedom to
accomplish the tasks using his own means and methods. Respondent was
assigned tasks to perform, but petitioner did not control the manner and
methods by which respondent performed these tasks. The absence of the
element of control on the part of the petitioner engenders a conclusion that he is
not an employee of the petitioner.
GR No. 196470, April 20, 2016
Rosario Victoria and Elma Pidlaoan (Petitioners) v
Normita Pidlaoan et al. (Respondents)
Second Division
Ponente: Brion, J.

Nature of Action: Complaint for reformation of contract.

FACTS:

The petitioners Rosario Victoria and Elma lived together since 1978 until Rosario left for Saudi Arabia. In
1984, Elma bought a parcel of land in Lucena City and was issued Transfer Certificate of Title. When
Rosario came home, she caused the construction of a house on the lot but she left again after the house
was built. Elma allegedly mortgaged the house and lot. When the properties were about to be
foreclosed, Elma allegedly asked for help from her sister-in-law, Eufemia Pidlaoan, to redeem the
property. On her part, Eufemia called her daughter abroad, Normita, to lend money to Elma. Normita
agreed to provide the funds. Elma allegedly sought to sell the land. When she failed to find a buyer, she
offered to sell it to Eufemia or her daughter. On March 21, 1993, Elma executed a deed of sale entitled
"Panananto ng Pagkatanggap ng Kahustuhang Bayad" transferring the ownership of the lot to Normita.
The document was signed by Elma, Normita, and two witnesses but it was not notarized. When Elma
and Normita were about to have the document notarized, the notary public advised them to donate the
lot instead to avoid capital gains tax. On the next day, Elma executed a deed of donation in Normita's
favor and had it notarized. TCT No. T-50282 was cancelled and TCT No. T-70990 was issued in Normita's
name. Since then, Normita had been paying the real property taxes over the lot but Elma continued to
occupy the house. Rosario found out about the donation and petitioners filed a complaint for
reformation of contract, cancellation of TCT, and damages with prayer for preliminary injunction against
respondents.

The petitioners argue that the deed of donation was simulated and that the parties entered into an
equitable mortgage. On the other hand, the respondents deny the claim of equitable mortgage and
argue that they validly acquired the property via sale. The RTC ruled that there was donation but only as
to half of the property. The CA agreed with the respondents that the deed of donation was not
simulated, relying on the presumption of regularity of public documents.

ISSUE:

What was the nature of the transaction entered into between Elma and Normita.
RULING:

On the nature of the transaction between Elma and Normita, the Court found that the deed of donation
was simulated and the parties' real intent was to enter into a sale.

We first dwell on the genuineness of the deed of donation. There are two types of simulated documents
— absolute and relative. A document is absolutely simulated when the parties have no intent to bind
themselves at all, while it is relatively simulated when the parties concealed their true agreement. The
true nature of a contract is determined by the parties' intention, which can be ascertained from their
contemporaneous and subsequent acts. In the present case, Elma and Normita's contemporaneous and
subsequent acts show that they were about to have the contract of sale notarized but the notary public
ill-advised them to execute a deed of donation instead. Following this advice, they returned the next day
to have a deed of donation notarized. Clearly, Elma and Normita intended to enter into a sale that
would transfer the ownership of the subject matter of their contract but disguised it as a donation. Thus,
the deed of donation subsequently executed by them was only relatively simulated. Considering that the
deed of donation was relatively simulated, the parties are bound to their real agreement. The records
show that the parties intended to transfer the ownership of the property to Normita by absolute sale.
This intention is reflected in the un-notarized document entitled "Panananto ng Pagkatanggap ng
Kahustuhang Bayad."
CCI VS NANOL (GR NO. 176791 NOVEMBER 14, 2012)

Communities Cagayan Inc. vs Spouses Nanol

GR No. 176791 November 14, 2012
Facts: Sometime in 1994, respondent-spouses Arsenio and Angeles Nanol entered into contract to Sell with
petitioner Communities Cagayan, Inc., whereby the former  agreed to sell to respondent-spouses a house and Lots
17 and 19″ locate Block 16,  Camella  Homes  Subdivision,  Cagayan de  Oro City,  for the  price  of P 368,000.00. 
Respondent-spouses,  however,  did not  avail  of petitioner’s  inhouse  financing  due  to  its high  interest  rates. 
Instead,  they obtained  a loan from Capitol  Development  Bank,  a  sister  company of petitioner,  using  the 
property  as collateral.  To  facilitate the loan,  a simulated  sale over  the property  was  executed by petitioner in
favor of respondent-spouses. Accordingly,  titles  were transferred  in the  names  of respondent-spouses  under
Transfer Certificates  of Title (TCT)  Nos.  105202  and 105203,  and  submitted  to  Capitol  Development  Bank
for loan processing.   Unfortunately,  the  bank collapsed  and closed  before it  could release  the  loan.  Thus,  on 
November  30,  1997,  respondent-spouses  entered into  another Contract to  Sell with  petitioner  over the  same
property for the  same price  of P 368,000.00.   This  time,  respondent-spouses  availed of  petitioner’s  in-house
financing  thus,  undertaking  to  pay the  loan  over  four years,  from  1997 to 2001.  Sometime in 2000, 
respondent  Arsenio demolished  the  original  house  and constructed  a three-story  house  allegedly valued at  P
3.5  million,  more  or  less.18 In July  2001,  respondent  Arsenio  died,  leaving his  wife,  herein respondent
Angeles,  to  pay for  the  monthly  amortizations.

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

Held: Yes. As  a  general  rule,  Article  448  on builders  in good faith does  not  apply where  there  is  a 
contractual  relation  between  the  parties,  such  as  in  the  instant case.   We  went  over the  records  of this  case
and we  note  that  the  parties  failed to attach  a copy of the  Contract  to Sell.   As  such,  we  are  constrained  to 
apply Article 448  of the Civil  Code,  which  provides  viz:  

ART.  448. The  owner  of  the  land  on  which anything has  been  built, sown or  planted in good  faith, shall 
have  the  right  to appropriate  as  his  own the works, sowing or  planting, after  payment  of  the  indemnity 
provided  for  in Articles  546  and 548, or  to oblige  the  one  who built  or  planted to pay the  price  of the 
land, and  the  one  who sowed, the  proper  rent. However, the  builder  or  planter cannot  be  obliged to buy
the  land if  its  value  is  considerably  more  than that  of  the building or  trees. In such  case, he  shall  pay
reasonable  rent, if  the  owner  of  the land does  not  choose  to appropriate  the  building or  trees  after 
proper  indemnity. The  parties shall  agree  upon  the terms  of  the lease  and  in  case of  disagreement, the
court  shall  fix  the terms  thereof.

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

This  Court  has  ruled  that  this  provision  covers  only  cases  in  which the builders,  sowers or  planters believe
themselves  to  be  owners  of  the  land  or,  at least,  to  have a claim  of  title thereto.   It  does not  apply  when 
the interest  is merely that  of  a  holder, such as  a  mere  tenant, agent  or  usufructuary.  From  these
pronouncements, good  faith is  identified by the  belief  that  the  land is  owned;  or that  –  by  some  title  –  one 
has  the  right  to  build,  plant,  or  sow  thereon. 
However,  in  some  special  cases,  this  Court  has used  Article 448  by recognizing  good  faith  beyond this 
limited definition.  Thus, in  Del  Campo  v. Abesia, this  provision was  applied to one  whose  house  –  despite 
having been built at the  time  he  was  still co-owner  –  overlapped with  the  land of  another.   This article  was
also  applied  to  cases wherein  a builder  had  constructed improvements  with the  consent  of  the  owner.  The 
Court  ruled that  the  law deemed the  builder  to be  in good  faith.   In  Sarmiento  v. Agana,  the  builders  were
found to  be  in good  faith  despite  their  reliance  on the  consent  of  another,  whom they had  mistakenly 
believed to  be  the  owner  of  the  land.

In fine,  the Court  applied  Article  448 by construing  good faith beyond its limited definition.   We find no reason
not  to  apply the  Court’s  ruling in  Spouses Macasaet  v.  Spouses  Macasaet  in  this case.   We  thus  hold  that 
Article  448  is also applicable  to the  instant  case.   First,  good faith  is  presumed  on the  part  of the respondent-
spouses.   Second,  petitioner  failed to rebut  this presumption.   Third, no evidence  was  presented  to  show  that 
petitioner  opposed  or  objected  to  the improvements introduced by the  respondent-spouses.   Consequently,  we 
can validly presume  that  petitioner  consented  to  the  improvements  being  constructed.   This  presumption  is 
bolstered  by  the  fact  that  as  the  subdivision developer, petitioner  must  have given  the respondent-spouses 
permits to  commence  and undertake  the  construction.    Under  Article  453  of  the  Civil  Code,  “it  is
understood  that  there  is  bad faith  on the  part  of the  landowner whenever the  act was  done  with  his 
knowledge  and without  opposition on his  part.” 
BENITEZ v. COURT OF APPEALS

FACTS:

Both pairs of spouses, Sps. Benitez and Macapagal bought parcels of land wherein the latter found that the Sps.
Benitez encroached on a portion of their land. The Sps. Macapagal filed an action to recover possession of said
portion and after which a compromise was reached wherein the Sps. Macapagal would sell the encroached portion to
the Benitez. The Sps. Macapagal bought another lot adjacent to that of the Sps. Benitez and found that the Sps.
Benitez’s house encroached a portion of their lot [again]. After refusing to vacate despite verbal and written
demands, the Sps. Macapagal filed an action for ejectment against the Sps. Benitez [within 1 year from the last
demand]. The Metropolitan Trial Court (MeTC) decided in favor of Sps. Macapagal. On appeal the RTC and the CA
affirmed in toto said decision. Thus the case at bar.

ISSUE:

(1) Whether or not an action for ejectment is the proper remedy to recover possession of the encroached portion
(2) Whether or not Sps. Benitez can be made to pay rent
(3) Whether or not the option to sell exclusively belongs to the owner

HELD:

(1) YES, Sec. 1 Rule 70 of the Revised Rules of Court allows any person unlawfully deprived of possession by
FISTS or after expiration of right to hold possession within 1 year from unlawful deprivation to bring an action to
recover possession. Forcible entry requires prior physical possession but unlawful detainer does not require prior
physical possession. Actual or physical possession is not always necessary. And possession is not only acquired
through material occupation but also when a thing is subject to the action of one’s will or by the proper acts and
legal formalities established for acquiring such right, through execution of deed of sale. [since it is a proper remedy,
the MeTC has jurisdiction to hear the matter]

(2) YES, The rent to be paid arises from the loss of the use and occupation of the property and is technically
damages. Therefore since petitioners benefited from the occupation of the property it is only just that they be made
to pay damages in the form of rent.
(3) YES, Art. 448 of the CC mandates that the option to sell the land on which another in good faith builds, plants or
sown on, belongs to the owner. The reason for this is because the owner’s right is older and by principle of
accession, he is entitled to the ownership of the accessory thing.

PEDRO P. PECSON, petitioner, vs.COURT

OF APPEALS, SPOUSES JUAN NUGUID
and ERLINDA NUGUID, respondents.
G.R. No. 115814 May 26, 1995
Facts:
Petitioner Pedro P. Pecson was the owner of a commercial
lot located in Kamias Street, Quezon City, on which he
built a four-door two-storey apartment building. For his
failure to pay realty taxes amounting to twelve thousand
pesos (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 private respondents, the spouses Juan Nuguid and
Erlinda Tan-Nuguid, for one hundred three thousand
pesos (P103,000.00).
The petitioner challenged the validity of the auction sale
in Civil Case No. Q-41470 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.
Both the RTC and CA have ruled that the sale of the lot
was valid. And both courts have also ruled that what was
sold was only the lot resulting from unpaid realty tax, but
the valid sale does not include the apartment building.
Issue:
W/N Petitioner, Pedro Pecson, while being unpaid of the
cost of the building he built, is entitled to possession of
the apartment building and its rental income thereof.
Ruling:
Yes. Since the private respondents, spouses Nuguid,
have opted to appropriate the apartment building, the
petitioner, 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 on which it is built,
planted or sown. The petitioner not having been so paid,
he was entitled to retain ownership of the building and,
necessarily, the income therefrom.
SPOUSES JUAN NUGUID AND ERLINDA T.
NUGUID VS. HON. COURT OF APPEALS AND
PEDRO P. PECSON
G.R. No. 151815. February 23, 2005
Facts: Pedro P. Pecson owned a commercial lot on which he built a 4-door 2-storey apartment building.
For failure to pay realty taxes, the lot was sold at public auction to Mamerto Nepomuceno, who in turn
sold it to the spouses Juan and Erlinda Nuguid. Pecson challenged the validity of the auction sale before
the RTC of Quezon City, which upheld the spouses’ title but declared that the apartment building was not
included in the auction sale. This was affirmed in toto by the Court of Appeals and thereafter by this
Court. On June 23, 1993, by virtue of the Entry of Judgment, the Nuguids became the uncontested owners
of the 256-square meter commercial lot. As a result, the Nuguid spouses moved for delivery of possession
of the lot and the apartment building.
The trial court, relying upon Article 546[1][7] of the Civil Code, ruled that the Spouses Nuguid were to
reimburse Pecson for his construction cost, the spouses Nuguid were entitled to immediate issuance of a
writ of possession over the lot and improvements. The RTC also directed Pecson to pay the same amount
of monthly rentals to the Nuguids as paid by the tenants occupying the apartment units. Pecson duly
moved for reconsideration, the RTC issued a Writ of Possession,directing the deputy sheriff to put the
spouses Nuguid in possession of the subject property with all the improvements thereon and to eject all
the occupants therein.Pecson then filed a special civil action for certiorari and prohibition with the Court
of Appeals, which affirmed the order of payment of construction costs but rendered the issue of
possession moot on appeal.
Frustrated by this turn of events, Pecson filed a petition for review before this Court. On May 26, 1995, the
Court handed down the decision remanding to the trial court for it to determine the current market value
of the apartment building on the lot. The value so determined shall be forthwith paid by Spouses Juan and
Erlinda Nuguid] to Pedro Pecson otherwise the petitioner shall be restored to the possession of the
apartment building until payment of the required indemnity.
On the basis of this Court’s decision, Pecson filed a Motion to Restore Possession and a Motion to Render
Accounting, praying respectively for restoration of his possession over the subject 256-square meter
commercial lot and for the spouses Nuguid to be directed to render an accounting under oath, of the
income derived from the subject four-door apartment from November 22, 1993 until possession of the
same was restored to him.

Issue: Whether or not the petitioners are liable to pay rent over and above the current market value of the
improvement and that such increased award of rentals by the RTC was reasonable and equitable.

Held: It is not disputed that the construction of the 4-door 2-storey apartment, subject of this dispute, was
undertaken at the time when Pecson was still the owner of the lot. When the Nuguids became the
uncontested owner of the lot, by virtue of entry of judgment of the Court’s decision, the apartment
building was already in existence and occupied by tenants.
Under Article 448, the landowner is given the option, either to appropriate the improvement as his own
upon payment of the proper amount of indemnity or to sell the land to the possessor in good faith.
Relatedly, Article 546 provides that a builder in good faith is entitled to full reimbursement for all the
necessary and useful expenses incurred; it also gives him right of retention until full reimbursement is
made. As we earlier held, since petitioners opted to appropriate the improvement for themselves as early
as June 1993, when they applied for a writ of execution despite knowledge that the auction sale did not
include the apartment building, they could not benefit from the lot’s improvement, until they reimbursed
the improver in full, based on the current market value of the property.
Despite the Court’s recognition of Pecson’s right of ownership over the apartment building, the petitioners
still insisted on dispossessing Pecson by filing for a Writ of Possession to cover both the lot and the
building. Clearly, this resulted in a violation of respondent’s right of retention. Worse, petitioners took
advantage of the situation to benefit from the highly valued, income-yielding, four-unit apartment
building by collecting rentals thereon, before they paid for the cost of the apartment building. It was only
4 years later that they finally paid its full value to the respondent.
Given the circumstances of the instant case where the builder in good faith has been clearly denied his
right of retention for almost half a decade, we find that the increased award of rentals by the RTC was
reasonable and equitable. The petitioners had reaped all the benefits from the improvement introduced by
the respondent during said period, without paying any amount to the latter as reimbursement for his
construction costs and expenses. They should account and pay for such benefits.
We need not belabor now the appellate court’s recognition of herein respondent’s entitlement to rentals
from the date of the determination of the current market value until its full payment. Respondent is
clearly entitled to payment by virtue of his right of retention over the said improvement.
GEMINIANO v. CA

Lessor in good faith and Builders in Good faith are not synonymous. Article 1678 may apply to
the former’s case and Art 448 may apply to the latter’s case. If a person knew that his stay
would likely end or that he knew somehow that he is not the owner of the land then he is not a
BPS in good faith.

FACTS:

The lot in question was originally owned by the mother of the petitioner. Petitioner sold their
unfinished bungalow to the respondents for P6,000, with a promise to sell the lot to the latter.
The property was later leased to the respondents for 7 years starting November 1978 for P40 a
month as evidenced by their written lease contract. The respondents built their house and
introduced some improvements in the lot. In 1985 petitioner’s mother refused receiving monthly
rentals. It turned out that the lot in question was subject to litigation which resulted to its
acquisition by Maria Lee which was sold to Salcedo, who further sold to Dionisio spouses. The
property eventually came back to the petitioner when the Dinisio spouses executed a Deed of
Quitclaim over the said property in favor of the petitioners. As such, the lot was registered in the
latter’s names. (petitioners never lost possession of the land because Lee and company never
issued a writ of possession against them).

In 1993, petitioners wrote a letter to respondents demanding them to vacate the premises and
when the latter refused, petitioners filed in court. Respondents claim that they should be entitled
to buy the land because of the promise of the petitioners to sell them the land and because they
were builders in Good faith. The courts now are deciding which one to use: Art. 448 regarding
builders and land owners in good faith or Art. 1678 regarding lessee in good faith who can be
reimbursed half of the expenses of the improvements if the LO chooses to appropriate them and
that such lessee have the right to retain in the premises until fully reimbursed.

ISSUES:

1) Whether or not the respondents were builders in Good faith?

2) Whether Art 448 or 1678 should be applied?
RULING:

1) No, they were not builders in good faith. The respondents knew that their stay would end after
the lease contract expires. They can’t bank on the promise, which was not in writing, of the
petitioners that the latter will sell the land to them. According to 1403, an agreement for the sale
of real property or an interest therein is unenforceable, unless some note or memorandum thereof
be produced. Other than the alleged promise by petitioner, respondents had no other evidence to
prove their claim.

2) They are mere lessees in good faith; therefore Art 1678 may apply if the lessor chooses to
appropriate the improvements. But since the petitioners refused to exercise that option, the
private respondents can’t compel them to reimburse the one-half value of the house and
improvements. Neither can they retain the premises until reimbursement is made. The private
respondents’ sole right then is to remove the improvements without causing any more
impairment upon the property leased than is necessary