Property Cases 12-05 Digest

PNB vs. CA et al G.R. No. 121597 June 29, 2001 FACTS: The spouses Chua were the owners of a parcel of land covered by a TCT and registered in their names. Upon the husband’s death, the probate court appointed his son, private respondent Allan as special administrator of the deceased’s intestate estate. The court also authorized Allan to obtain a loan accommodation from PNB to be secured by a real estate mortgage over the above-mentioned parcel of land, which Allan did for P450,000.00 with interest. For failure to pay the loan in full, the bank extrajudicially foreclosed the real estate mortgage. During the auction, PNB was the highest bidder. However, the loan having a payable balance, to claim this deficiency, PNB instituted an action with the RTC, Balayan, Batangas, against both Mrs. Chua and Allan. The RTC rendered its decision, ordering the dismissal of PNB’s complaint. On appeal, the CA affirmed the RTC decision by dismissing PNB’s appeal for lack of merit. Hence, the present petition for review on certiorari under Rule 45 of the Rules of Court. ISSUE: The WON it was error for the CA to rule that petitioner may no longer pursue by civil action the recovery of the balance of indebtedness after having foreclosed the property securing the same. HELD: petition is DENIED. The assailed decision of the CA is AFFIRMED. No Petitioner relies on Prudential Bank v. Martinez, 189 SCRA 612, 615 (1990), holding that in extrajudicial foreclosure of mortgage, when the proceeds of the sale are insufficient to pay the debt, the mortgagee has the right to recover the deficiency from the mortgagor. However, it must be pointed out that petitioner’s cited cases involve ordinary debts secured by a mortgage. The case at bar, we must stress, involves a foreclosure of mortgage arising out of a settlement of estate, wherein the administrator mortgaged a property belonging to the estate of the decedent, pursuant to an authority given by the probate court. As the CA correctly stated, the Rules of Court on Special Proceedings comes into play decisively. The applicable rule is Section 7 of Rule 86 of the Revised Rules of Court ( which PNB contends is not.) In the present case it is undisputed that the conditions under the aforecited rule have been complied with [see notes]. It follows that we must consider Sec. 7 of Rule 86, appropriately applicable to the controversy at hand, which in summary [and case law as well] grants to the mortgagee three distinct, independent and mutually exclusive remedies that can be alternatively pursued by the mortgage creditor for the satisfaction of his credit in case the mortgagor dies, among them: (1) to waive the mortgage and claim the entire debt from the estate of the mortgagor as an ordinary claim;

(2) to foreclose the mortgage judicially and prove any deficiency as an ordinary claim; and (3) to rely on the mortgage exclusively, foreclosing the same at any time before it is barred by prescription without right to file a claim for any deficiency. Clearly petitioner herein has chosen the mortgage-creditor’s option of extrajudicially foreclosing the mortgaged property of the Chuas. This choice now bars any subsequent deficiency claim against the estate of the deceased. Petitioner may no longer avail of the complaint for the recovery of the balance of indebtedness against said estate, after petitioner foreclosed the property securing the mortgage in its favor. It follows that in this case no further liability remains on the part of respondents and the deceased’s estate. NOTES: Section 7, Rule 86 of the Rules of Court, which states that: Sec. 7. Rule 86. Mortgage debt due from estate. — A creditor holding a claim against the deceased secured by mortgage or other collateral security, may abandon the security and prosecute his claim in the manner provided in this rule, and share in the general distribution of the assets of the estate; or he may foreclose his mortgage or realize upon his security, by action in court, making the executor or administrator a party defendant, and if there is a judgment for a deficiency, after the sale of the mortgaged premises, or the property pledged, in the foreclosure or other proceeding to realize upon the security, he may claim his deficiency judgment in the manner provided in the preceding section; or he may rely upon his mortgage or other security alone and foreclose the same at any time within the period of the statute of limitations, and in that event he shall not be admitted as a creditor, and shall receive no share in the distribution of the other assets of the estate; but nothing herein contained shall prohibit the executor or administrator from redeeming the property mortgaged or pledged by paying the debt for which it is hold as security, under the direction of the court if the court shall adjudge it to be for the interest of the estate that such redemption shall be made. To begin with, it is clear from the text of Section 7, Rule 89, that once the deed of real estate mortgage is recorded in the proper Registry of Deeds, together with the corresponding court order authorizing the administrator to mortgage the property, said deed shall be valid as if it has been executed by the deceased himself. Section 7 provides in part: Sec. 7. Rule 89. Regulations for granting authority to sell, mortgage, or otherwise encumber estate – The court having jurisdiction of the estate of the deceased may authorize the executor or administrator to sell personal estate, or to sell, mortgage, or otherwise encumber real estate, in cases provided by these rules when it appears necessary or beneficial under the following regulations: xxx (f) There shall be recorded in the registry of deeds of the province in which the real estate thus sold, mortgaged, or otherwise encumbered is situated, a certified copy of the order of the court, together with the deed of the executor or administrator for such real estate, which shall be valid as if the deed had been executed by the deceased in his lifetime.

Republic of the Philippines, Benguet & Atok vs. Court of Appeals & De La Rosa G.R. No. L-43938, April 15, 1988 Cruz, J.: Doctrine: The owner of a piece of land has rights not only to its surface but also to everything underneath and the airspace above it up to a reasonable height. The rights over the land are indivisible and the land itself cannot be half agricultural and half mineral. The classification must be categorical; the land must be either completely mineral or completely agricultural. Facts: These cases arose from the application for registration of a parcel of land filed on February 11, 1965, by Jose de la Rosa on his own behalf and on behalf of his three children, Victoria, Benjamin and Eduardo. The land, situated in Tuding, Itogon, Benguet Province, was divided into 9 lots and covered by plan Psu-225009. According to the application, Lots 1-5 were sold to Jose de la Rosa and Lots 6-9 to his children by Mamaya Balbalio and Jaime Alberto, respectively, in 1964. The application was separately opposed by Benguet Consolidated, Inc. as to Lots 1-5, Atok Big Wedge Corporation, as to Portions of Lots 1-5 and all of Lots 6-9, and by the Republic of the Philippines, through the Bureau of Forestry Development, as to lots 1-9. In support of the application, both Balbalio and Alberto testified that they had acquired the subject land by virtue of prescription Balbalio claimed to have received Lots 1-5 from her father shortly after the Liberation. Benguet opposed on the ground that the June Bug mineral claim covering Lots 1-5 was sold to it on September 22, 1934, by the successors-in-interest of James Kelly, who located the claim in September 1909 and recorded it on October 14, 1909. From the date of its purchase, Benguet had been in actual, continuous and exclusive possession of the land in concept of owner, as evidenced by its construction of adits, its affidavits of annual assessment, its geological mappings, geological samplings and trench side cuts, and its payment of taxes on the land. For its part, Atok alleged that a portion of Lots 1-5 and all of Lots 6-9 were covered by the Emma and Fredia mineral claims located by Harrison and Reynolds on December 25, 1930, and recorded on January 2, 1931, in the office of the mining recorder of Baguio. These claims were purchased from these locators on November 2, 1931, by Atok, which has since then been in open, continuous and exclusive possession of the said lots as evidenced by its annual assessment work on the claims, such as the boring of tunnels, and its payment of annual taxes thereon. The Bureau of Forestry Development also interposed its objection, arguing that the land sought to be registered was covered by the Central Cordillera Forest Reserve under Proclamation No. 217 dated February 16, 1929. Moreover, by reason of its nature, it was not subject to alienation under the Constitutions of 1935 and 1973.

The trial court denied the application, holding that the applicants had failed to prove their claim of possession and ownership of the land sought to be registered. The applicants appealed to the respondent court, which reversed the trial court and recognized the claims of the applicant, but subject to the rights of Benguet and Atok respecting their mining claims. In other words, the Court of Appeals affirmed the surface rights of the de la Rosas over the land while at the same time reserving the sub-surface rights of Benguet and Atok by virtue of their mining claims. Both Benguet and Atok have appealed to this Court, invoking their superior right of ownership. Issue: Whether respondent court’s decision, i.e. “the surface rights of the de la Rosas over the land while at the same time reserving the sub-surface rights of Benguet and Atok by virtue of their mining claim,” is correct. Held: No. Our holding is that Benguet and Atok have exclusive rights to the property in question by virtue of their respective mining claims which they validly acquired before the Constitution of 1935 prohibited the alienation of all lands of the public domain except agricultural lands, subject to vested rights existing at the time of its adoption. The land was not and could not have been transferred to the private respondents by virtue of acquisitive prescription, nor could its use be shared simultaneously by them and the mining companies for agricultural and mineral purposes. It is true that the subject property was considered forest land and included in the Central Cordillera Forest Reserve, but this did not impair the rights already vested in Benguet and Atok at that time. Such rights were not affected either by the stricture in the Commonwealth Constitution against the alienation of all lands of the public domain except those agricultural in nature for this was made subject to existing rights. The perfection of the mining claim converted the property to mineral land and under the laws then in force removed it from the public domain. By such act, the locators acquired exclusive rights over the land, against even the government, without need of any further act such as the purchase of the land or the obtention of a patent over it. As the land had become the private property of the locators, they had the right to transfer the same, as they did, to Benguet and Atok. The Court of Appeals justified this by saying there is “no conflict of interest” between the owners of the surface rights and the owners of the sub-surface rights. This is rather doctrine, for it is a well-known principle that the owner of piece of land has rights not only to its surface but also to everything underneath and the airspace above it up to a reasonable height. Under the aforesaid ruling, the land is classified as mineral underneath and agricultural on the surface, subject to separate claims of title. This is also difficult to understand, especially in its practical application. The Court feels that the rights over the land are indivisible and that the land itself cannot be half agricultural and half mineral. The classification must be categorical; the land must be either completely mineral or completely agricultural. In the instant case, as already observed, the land which was originally classified as forest land ceased to be so and became mineral — and completely mineral — once the mining claims were perfected. As long as mining operations were being undertaken thereon, or underneath, it did not cease to be so and become agricultural, even if only partly so, because it was enclosed with a fence and was cultivated by those who were unlawfully occupying the surface.

This is an application of the Regalian doctrine which, as its name implies, is intended for the benefit of the State, not of private persons. The rule simply reserves to the State all minerals that may be found in public and even private land devoted to “agricultural, industrial, commercial, residential or (for) any purpose other than mining.” Thus, if a person is the owner of agricultural land in which minerals are discovered, his ownership of such land does not give him the right to extract or utilize the said minerals without the permission of the State to which such minerals belong. The flaw in the reasoning of the respondent court is in supposing that the rights over the land could be used for both mining and non-mining purposes simultaneously. The correct interpretation is that once minerals are discovered in the land, whatever the use to which it is being devoted at the time, such use may be discontinued by the State to enable it to extract the minerals therein in the exercise of its sovereign prerogative. The land is thus converted to mineral land and may not be used by any private party, including the registered owner thereof, for any other purpose that will impede the mining operations to be undertaken therein, For the loss sustained by such owner, he is of course entitled to just compensation under the Mining Laws or in appropriate expropriation proceedings.

POWELL vs THE PHILIPPINE NATIONAL BANK G.R. No. L-31339 (November 27, 1929) Villa-Real, J.: FACTS: In order to secure payments of his debts to PNB, Severino Aldeguer executed mortage deeds in favor of the former. Failing to settle in full his balances, Aldeguer’s rights and lots were sold at a public auction wherein Asia Banking Corp. was the highest bidder. Aldeguer continued to cultivate his lots mortgaged to the PNB by buying 40 tons of fertilizer from Felipe Gomez to which he issued a promissory note in the amount of P5,000 which the latter endorsed to PNB. PNB, instead of applying the harvested sugar to the payment of the promissory notes acquired by it from Felipe Gomez, applied it to the payment of its credit against Severino P. Aldeguer secured by the two parcels of land that produced said crops. ISSUE: WON Severino Aldeguer can compel PNB to apply the sugar as payment of the promissory notes to the fertilizer being the most burdensome to him. HELD: The Court held that in accordance with the provisions of articles 1172 and 1174 of the Civil Code, suffice it to say that such application of having the sugar pay the promissory notes to the fertilizer which was the most burdensome debt to Aldeguer should have been made at the time of payment, and not afterwards, when his account with the bank had already been credited. In doing so, it waived its preferred right to said sugar for the payment of said promissory notes, because that preferred right subsisted in so far as the sugar continued to belong to the debtor. From the time the Philippine National Bank applied it to the payment of its credit against Severino P. Aldeguer, with the latter's consent, said sugar ceased to belong to said Severino P. Aldeguer, and became the property of the aforesaid Philippine National Bank.

136 SCRA 475 – Civil Law – Property – Accession Industrial – Builder in Good Faith; Owner in Good Faith – Forced Lease Remedial Law – Res Judicata – Unlawful Detainer will not bar a subsequent action for Quieting of Title The properties of Francisco Depra and Agustin Dumlao were adjoining each other. In 1972, Dumlao built his house however, he unwittingly built the kitchen portion of his house on Depra’s land. Depra then sued Dumlao for unlawful detainer. During pre-trial, the parties agreed that Dumlao was a builder in good faith. Eventually, the trial court ruled that both parties were in good faith but then a forced lease was ordered whereby Dumlao retains the kitchen but he shall pay a rental to Depra at P5.00 per month. But Depra refused to receive the rental payments from Dumlao, instead, Depra filed an action for quieting of title against Dumlao. In his defense, Dumlao raised the defense of res judicata considering that the nature and purpose of the initialunlawful detainer case and that of the subsequent quieting of title case is ejectment. ISSUES: 1. Whether or not the order of forced lease decreed in the unlawful detainer case is valid. 2. Whether or not the subsequent case of res judicata is barred by prescription due to the prior case ofunlawful detainer. HELD: 1. No. The judgment of forced lease is improper. A forced lease, just like co-ownership is not favored. It should be considered that the parties themselves stipulated that Dumlao, the builder, was in good faith and it was later found that Depra, the owner, was also in good faith. Hence, what applies is the provisions of Article 448 of the Civil Code, which provides in sum that: a. Builder in good faith – entitled to retain the possession of the land on which he built in good faith until he is paid the value of the building he built in good faith; b. Owner in good faith – has the option to either (i) pay for the building OR (ii) sell his land to the builder in good faith but builder cannot be forced to buy said land if the same is considerably more than the value of the building. Forced rent only comes in if the owner exercises his right to sell the land but the builder rejects it by reason of the price thereof being considerably more than the value of the building – in such case, the parties shall agree to the terms of the lease, if they can’t agree then they may bring the issue to court. 2. No. The action for quieting of title is not barred by reason of res judicata. The cause of action in the unlawful detainer case involves possession while the cause of action in the quieting of title case involves ownership. Furthermore, 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.

SARMIENTO v. AGANA FACTS: Before Ernesto Valentino and Rebecca Lorenzo wed, Rebecca’s mother offered a lot in Paranaque that they could build their house on. In 1967, they finally built their home which cost about PhP8,000-10,000, thinking that someday, the lot would be transferred to them in their name. It turns out, though, that the lot was owned by the Spouses Santos who , in turn, sold the same to Leonila Sarmiento in 1974. A year later, Sarmiento ordered the Valentinos to vacate their lot, then eventually filed and Ejection Suit against them. The lower court ruled in Sarmiento’s favor and ordered her to pay 20,000 as the value of the house. But the case was then elevated to the CFI of Pasay (w/ Agana as Judge), and pursuant to Art.448 of the CC (March 1979), the Court ordered Sarmiento to exercise the option in 60 days to pay Ernesto 40,000 as the value of the house or to let them purchase the land for 25,000. Sarmiento was not able to exercise this option, and the CFI allowed Ernesto to deposit the 25,000 purchase price with the Court. ISSUE: Whether or not the land owner is compelled to exercise either option: to buy the building or to sell the land? HELD: Ernesto and his wife (BPS) were clearly in good faith as they believed that Rebecca’s mother has the capacity to eventually transfer the title of the land to them. In line with this, Sarmiento (LO) was required to exercise only 2 options: To purchase the house or to sell the land to them, in this case, based on the value decided by the courts. Since Sarmiento failed to exercise the option within the allotted period, and based on Art. 448, the LO is compelled by law to exercise either option. Not choosing either is a violation of the law.

ARTICLE 454- ALVIOLA VS. CA Facts:- Victoria Tinagan bought 2 parcels of land and took possession thereof withher son, Agustin- after 10 years, Alviola occupied portions thereof, built a copra dryer and store,tolerate occupancy by Victoria and Agustin - after 15 years, Victoria and Agustin died- wife of Agustin (referred as Tinagan) filed a complaint for recovery of possessionagainst AlviolaRTC/CA: in favor of Tinagan, Alviola to vacate and remove store and dryer, payrentals until improvements are removed - Alviola contends that Victoria ceded her right over the property in favor of Alviola,Tinagans tolerated their occupancy making the landowners in bad faith and they, Alviolas in good faith, copra store and dryer are of permanent structures thus cannot be removed Issue; W/n Article 454 may be applied where the landowner is in bad faith, the BPS ingood faith? NO Held:- Tax declarations of the 2 parcels of land declared to be in the name of theTinagans- bad faith on the part of Alviola upon construction of improvements despite beingfully aware that the parcels of land belonged to Victoria Tinagan- bad faith also on the part of Tinagans (wife of Agustin and children) because they had knowledge of the constructions and still tolerated their occupancy thereon-in pari delicto, treated as if both parties acted in good faith, 448 is applicable not 454- but 448 will not apply upon the dryer and store being transferable in nature- to fall under 448, the construction must be of permanent character, attached to thesoil- if transitory, there is no accession and the builder must remove the construction- proper remedy was an action to eject the builder from the land

Balucanag v Francisco Digest Facts of the Case: 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? Ruling: 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."

DEL CAMPO V. ABESIA When land is co-owned by two parties, but the co-ownership is terminated, Article 448 governs in case real property (like a house) encroaches the land of another. This is provided that good faith exists. FACTS:The case involves two friendly parties who are co-owners of a corner lot at Flores and Cavan Streets in Cebu City. Plaintiff owns 2/3 of the lot and Defendant owns 1/3 of the same. The total size of the lot is 45 square meters (which is about the size of a typical Starbux café) Later on, the two parties decided to divide the co-owned property into two lots. 30 square meters went to the plaintiffs and 15 square meters went to the defendants. From the sketch plan, both parties discovered that the house of the defendants occupied a portion of the plaintiff’s adjacent lot, eating 5 sqm of it. The parties then requested the trial court to adjudicate who should take possession of the encroached 5 sqm. The trial court ruled that Art 448 does not apply. 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. Since art 448 does not apply, the Plaintiff cannot be obliged to pay for the portion of defendant’s house that entered into the 30 sqm lot, AND Defendant cannot be obliged to pay for the price of the 5 sqm their house occupied. Why? The RTC believed the rules of co-ownership should govern, and not that of accession. RTC then assigned the full 30sqm to Plaintiff and ordered Defendants to demolish the 5sqm part of their house encroaching the 30sqm lot of the Plaintiffs. Defendants where aghast at having to axe the family home, hence they appealed. CA affirmed the decision. So we have the SC coming to the rescue. ISSUE: w/n the rules of accession applies (and not coownership) on property that used to be co-owned, but was subdivided. HELD:The rule of accession applies because co-ownership was terminated upon the partitioning of the lot. Art 448 therefore governs. The house of Defendant overlapped that of Plaintiff, but this was built on good faith. Hence, the plaintiffs have the right to choose one of two options > Appropriate the 5sqm portion of the house of Defendants after indemnifying the Defendants; or > Obliging the Defendants to pay a portion of the land on which their home rested. ( or they can rent it)

Spouses Del Ocampo v. Abesia G.R. No. L-49219, April 15, 1998, 160 SCRA 379 Gancayco, J. FACTS: Plaintiffs – spouses Concepcion Fernandez and Estanislao Del Campo and defendant Bernarda Fernandez Abesia are co-owners of parcel of land with an area of 45 square meters and divided in the proportion of 2/3 and 1/3 share each, respectively. A commissioner, who is appointed by the court, conducted a survey and recommended that the property be divided into two lots: Lot 1161 – A with an area of 30 square meters for the plaintiffs and Lot 1161 – B with an area of 15 square meters for the defendants. However, it was shown in the sketch plan that the house of the defendant occupied the portion with an area of 5 square meters of Lot 1161 – A of plaintiffs. The parties asked the court to finally settle and adjudicate who among the parties should take possession of the 5 square meters of land. ISSUES: 1.) Whether or not Article 448 of the Civil Code, the rights of a builder in good faith, should be applied to the plaintiff-spouses Del Campo. 2.) Whether or not the house of the defendant Abesia should be removed and demolished at their expense.

HELD: 1.) Yes. Article 448 of the Civil Code cannot apply where a co-owner builds, plants or sows on the land owned in common for then, he did not build, plant or sow upon land that exclusively belongs to another but of which he is a co-owner. The co-owner is not a third person under the circumstances, and the situation is governed by the rules of co-ownership. However, when, as in this case, the co-ownership is terminated by the partition and it appears that the house of defendants overlaps or occupies a portion of 5 square meters of the land pertaining to plaintiffs which the defendants obviously built in good faith, then the provisions of Article 448 of the new Civil Code should apply. Manresa and Navarro Amandi agree that the said provision of the Civil Code may apply even when there was co-ownership if good faith has been established.

2.) It depends. Applying Article 448 of the Civil Code, the plaintiffs have the right to appropriate said portion of the house of defendants upon payment of indemnity to defendants as provided for in Article 546 of the Civil Code. Otherwise, the plaintiffs may oblige the defendants 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 house of defendants built thereon, then the latter cannot be obliged to buy the land. The defendant shall then pay the reasonable rent to the plaintiffs upon such terms and conditions that they may agree. In case of disagreement, the trial court shall fix the terms thereof. Of course, defendants may demolish or remove the said portion of their house, at their own expense, if they so decide.

Ignao v. Intermediate Appellate Court G.R. No. 72876, January 18, 1991, 193 SCRA 17 Fernan, C. J.

FACTS: Petitioner Florencio Ignao and his uncles Juan Ignao and Isidro Ignao were co-owners of a 534sqm land located in Cavite. Pursuant to an action for partition filed by petitioner, the CFI of Cavite directed the partition of the said land. A total of 133.5 sqm was allotted to the petitioner’s uncles while the remaining 266.5 was allotted to the petitioner. However, when Juan and Isidro built their houses they encroached upon a portion of land belonging to Florencio. A geodetic engineer surveyed the land and it was found out that Juan and Isidro occupied a total of 101sqm of Florencio’s lot.

The trial court which based its decision on Article 448 of the Civil Code, ruled that Florencio should have the choice to either appropriate to himself that part of the house standing on his lot or to require Juan and Isidro to pay the price of the land. But since the first option seems to be impractical, it ordered to sell to Juan and Isidro those portions occupied by them because it is the “workable solution”. Upon appeal petitioner contends that Article 448 cannot be applied because they are co-owners of he subject property. However, the appellate court affirmed in toto the decision of the trial court.

ISSUE: Whether or not Article 448 of the Civil Code is applicable in the case at bar.

HELD: Yes. It is true that Article 448 cannot be applied where a co-owner builds upon a land owned in common. However, in the case at bar, the co-ownership has already been terminated by virtue of the partition, thus, Article 448 now applies since the builder is not anymore considered as an owner of the land where the house was built.

As to the workable solution applied by the lower court, the same cannot be upheld because Article 448 clearly states that the right of choice belongs to the land owner and not upon the builder and the courts. Thus, whether it might seem impractical, the landowner may choose to appropriate the improvements.

IGNAO V. IAC When co-ownership is terminated by division of land, Art 448 applies to parties in good faith. The party whose land is encroached upon has the sole right to choose whether to sell his land encroached or to appropriate that which encroaches his land.

FACTS: The case involves Petitioner Florencio Ignao and his Uncles Juan and Isidro Ignao as Respondents. Both Petitioner and Respondents co-owned land with 534 sqm (about the size of an Olympic swimming pool.) in Cavite. The parties had a falling out (maybe the uncles had bad breath) and so attempted to partition the land, with 133 going to the uncles and 266 going to Petitioner. The attempt failed. Later, Petitioner discovered that the two houses of Respondent uncles encroached his land. Juan ate 42 sqm and Isidro ate 59 sqm… for the grand total of 101 sqm. He complained. The RTC said that uncles built in good faith therefore that exempts them from damages. Art 448 therefore applies But things didn’t go to well for the Petitioner. The RTC said that if Petitioner opted to appropriate the sections of the encroaching houses, the Uncles will be left with worthless hovels. Hence, RTC ordered Petitioner to just sell his land which was encroached. “No Good!” cried Petitioner and he appealed to the IAC. He lost again. Petitioner trooped to the SC for vindication

ISSUE: 1. Whether or not Petitioner has the right to choose whether to appropriate the house encroaching his land or to sell his land. 2. Whether or not the courts and respondents can rob Petitioner of the options provided for under Art 448.

HELD: Petitioner has the right whether to appropriate the houses or to sell his land! The ruling of the RTC and IAC contravened the explicit provisions of Art 448 which granted him the explicit right to choose. The law is clear when it bestows choice upon the aggrieved land owner and not upon the builders or the courts.

ART. 453 MUNICIPALITY OF OAS V. ROA7 PHIL. 20 FACTS:The Municipality brought the action for therecovery of a tract of land in the pueblo of Oas,claiming that it was a part of the public square of saidtown, while Roa alleged that he was the owner of theproperty. The defendant admitted in writing that heknew that the land is owned by the Municipality andthat Jose Castillo, whom he bought the property didnot own the land. When Roa constructed asubstantial building on the property in question after he “acquired” the property from Castillo, theMunicipality did not oppose the construction.ISSUE:Whether or not the municipality owns the land.HELD:Yes.

The defendant was not a purchaser ingood faith. The plaintiff, having permitted the erectionby the defendant of a building on the land withoutobjection, acted in bad faith. The rights of the partiesmust, therefore, be determined as if they both hadacted in good faith. To the case are applicable thoseprovisions of the Civil Code which relate to theconstruction by one person of a building upon landbelonging to another. Article 364 (now Art.453) of theCivil Code is as follows: "When there has been badfaith, not only on the part of the person who built,sowed, or planted on another's land, but also on thepart of the owner of the latter, the rights of both shallbe the same as if they had acted in good faith.” TheSupreme declared that the Municipality is the owner of the land and that it has the option of buying thebuilding thereon, which is the property of thedefendant, or of selling to him the land on which itstands.

LUMUNGO VS USMaN FACTS: Dominga Usman sold and transfers her rights in and to the 3 lots in question to Jose Angeles. The latter made the purchase with the knowledge that the property was already in dispute by Atty. Usman, husband of Dominga, and by the plaintiffs. Angeles, upon taking possession of the land, planted the same with coconuts, which, together with those already planted by Dominga Usman, numbered about3,000, most of which are now fruit-bearing. In short, Angeles was a purchaser and a builder in bad faith. ISSUE: Whether or not Angeles is entitled to reimbursement for the coconuts tree he planted on the property in litigation. HELD No. It should be noted that said trees are improvements, not "necessary expenses of preservation," which a builder, planter or sower in bad faith may recover under Arts. 452 and 546, first paragraph, of the Civil Code. The facts and findings of both the trial court and the Court of Appeals leave no room for doubt that Jose Angeles was a purchaser and a builder in bad faith. The provision applicable to this case is, accordingly, Article 449 of the Civil Code, which provides that, "he who builds, plants or sows in bad faith on the land of another, loses what is built, planted or sown without right to indemnity."

Metropolitan Waterworks and Sewerage System v. Court of Appeals G.R. No. L-54526, August 25, 1986, 143 SCRA 623 Martinez, J.

FACTS: Sometime in 1965, petitioner MWSS (then known as NAWASA) leased around one hundred twenty eight (128) hectares of its land (hereafter, subject property) to respondent CHGCCI (formerly the International Sports Development Corporation) for twenty five (25) years and renewable for another fifteen (15) years or until the year 2005, with the stipulation allowing the latter to exercise a right of first refusal should the subject property be made open for sale. The terms and conditions of respondent CHGCCI's purchase thereof shall nonetheless be subject to presidential approval. Pursuant to Letter of instruction (LOI) No. 440 issued on July 29,1976 by then President Ferdinand E. Marcos directing petitioner MWSS to negotiate the cancellation of the MWSS-CHGCCI lease agreement for the disposition of the subject property, Oscar Ilustre, then General Manager of petitioner MWSS, sometime in November of 1980 informed respondent CHGCCI, through its president herein respondent Pablo Roman, Jr., of its preferential right to buy the subject property which was up for sale. Valuation thereof was to be made by an appraisal company of petitioner MWSS' choice, the Asian Appraisal Co., Inc. which, on January 30, 1981, pegged a fair market value of P40.00 per square meter or a total of P53,800,000.00 for the subject property. Upon being informed that petitioner MWSS and respondent CHGCCI had already agreed in principle on the purchase of the subject property, President Marcos expressed his approval of the sale as shown in his marginal note on the letter sent by respondents Jose Roxas and Pablo Roman, Jr. dated December 20, 1982.The Board of Trustees of petitioner MWSS thereafter passed Resolution 36-83, approving the sale of the subject property in favor of respondent SILHOUETTE, as assignee of respondent CHGCCI. The MWSS-SILHOUETTE sales agreement eventually pushed through. Per the Agreement dated May 11, 1983 covering said purchase, the total price for the subject property is P50,925,200, P25 Million of which was to be paid upon President Marcos' approval of the contract and the balance to be paid within one (1) year from the transfer of the title to respondent SILHOUETTE as vendee with interest at 12% per annum. The balance was also secured by an irrevocable letter of credit. A Supplemental Agreement was forged between petitioner MWSS and respondent SILHOUETTE on August 11, 1983 to accurately identify the subject property. Subsequently, respondent SILHOUETTE, under a deed of sale dated July 26, 1984, sold to respondent AYALA about sixty-seven (67) hectares of the subject property at P110.00 per square meter. Of the total price of around P74 Million, P25 Million was to be paid by respondent AYALA directly to petitioner MWSS for respondent SILHOUETTE's account and P2 Million directly to respondent SILHOUETTE. P11,600,000 was to be paid upon the issuance of title in favor of respondent AYALA, and the remaining balance to be payable within one (1) year with 12% per annum interest. Respondent AYALA developed the land it purchased into a prime residential area now known as the Ayala Heights Subdivision. Almost a

decade later, petitioner MWSS on March 26, 1993 filed an action against all herein named respondents before the Regional Trial Court of Quezon City seeking for the declaration of nullity of the MWSS-SILHOUETTE sales agreement and all subsequent conveyances involving the subject property, and for the recovery thereof with damages. ISSUE: Whether or not MWSS failed to provide appropriate security measures over its own records; Circumstances led NBI to believe that the fraudulent encashment as an “inside job”.

HELD: Yes. The records likewise show that MWSS failed to provide appropriate security measures over its own records thereby laying confidential records open to unauthorized persons. MWSS's own Fact Finding Committee, in its report submitted to their General Manager underscored this laxity of records control. It observed that the "office of Mr. Ongtengco (Cashier VI of the Treasury Department at the NAWASA) is quite open to any person known to him or his staff members and that the check writer is merely on top of his table. Relying on the foregoing statement of Mr. Ongtengco, the NBI concluded in its Report dated 2 November 1970 that the fraudulent encashment of the 23 checks in question was an "inside job". Thus the NBI believe that the fraudulent act was an inside job or one pulled with inside connivance at NAWASA. The serial numbers of the checks in question conform with the numbers in current use of NAWASA, aside from the fact that these fraudulent checks were found to be of the same kind and design as that of NAWASA's own checks. While knowledge as to such facts may be obtained through the possession of a NAWASA check of current issue, an outsider without information from the inside can not possibly pinpoint which of NAWASA's various accounts has sufficient balance to cover all these fraudulent checks. None of these checks, it should be noted, was dishonored for insufficiency of funds.