Tan Queto v. CA [G.R. No. L-35648. February 27, 1987.

]; Resolution
Jul5
En Banc, Paras (J): 10 concur, 1 votes to deny reconsideration, 1 dissents, 2 took no
part
Facts: Restituta Tagalinar Guangco de Pombuena received the questioned lot (Lot 304B of the Cadastre Survey of the Municipality of Centro, Misamis Occidental) either as a
purported donation or by way of purchase on 11 February 1927 for P50.00 as the
alleged consideration thereof. The transaction took place during her mothers lifetime
(her father having predeceased the mother) and consummated while Restituta was
already married to her husband Juan Pombuena. On 22 January 1935, Juan filed an
application of Torrens title over the land for himself and his supposed co-owner
Restituta. On 22 November 1938, a decision was promulgated (GLRC 1638, Cadastral
Case 12) pronouncing Juan (married to Restituto) as the owner of the land. On 22
September 1949 a contract of lease over the lot was entered into between Pershing Tan
Queto and Restituta (with the consent of her husband) for a period of 10 years.
Meanwhile, On 27 December 1960 Restituta sued Tan Queto for unlawful detainer (the
lease contract having expired) before the Municipal Court of Ozamis City.
On 22 April 1962, as a consequence of the cadastral case, an OCT was issued in
Juans name. On 10 October 1962, Tan Queto and Juan entered into a barter
agreement whereby Tan Queto became the owner of the disputed lot, and the spouses
in turn became the owners of a parcel of land with the house constructed thereon
previously owned (that is, before the barter) by Tan Queto. Thereafter, Tan Queto
constructed on the disputed land a concrete building, without any objection on the part
of Restituta.
The Municipal court ruled in favor of the spouses in the unlawful detainer case; but on
appeal in the CFI, the entire case was dismissed because of an understanding (barter)
entered into by Juan and Tan Queto.

Restituta sued both Juan and Tan Queto for reconveyance of the title over the
registered but disputed lot, for annulment of the barter, and for recovery of the land with
damages. The CFI and the Court of Appeals found the disputed lot as paraphernal and
that Tan Queto was a builder in bad faith. These findings were regarded by the Supreme
Court as findings of facts and thus ordinarily conclusive upon the Court. Tan Queto filed
for a motion for reconsideration of the Supreme Court decision dated 16 May 1983.
The Supreme Court set aside its decision promulgated on 16 May 1983, and rendered a
new one declaring the questioned lot together with the building thereon, as Tan Quetos
exclusive property; without costs.
1. Findings of the lower courts ordinary conclusive upon the Court; exception, if
erroneous
The findings of the Court of First Instance and the Court of Appeals were regarded by
the Supreme Court as findings of facts and thus ordinarily conclusive upon the Court.
Assuming they are factual findings, still if they are erroneous inferences from certain
facts, they cannot bind the Court.
2. Land not transferred to Restituta by donation, for it to be paraphernal
The oral donation of the lot cannot be a valid donation inter-vivos because it was not
executed in a public instrument (Art. 749, Civil Code), nor as a valid donation mortis
causa for the formalities of a will were not complied with. The allegation that the transfer
was a conveyance to Restituta of her hereditary share in the estate of her mother (or
parents) cannot be sustained for the contractual transmission of future inheritance is
generally prohibited.
3. Land is conjugal, not paraphernal; Ownership by tradition
The land is conjugal, not paraphernal. Ownership was acquired by the spouses by
tradition (delivery) as a consequence of the contract of sale (See Art. 712, Civil Code)
with P50.00 (then a considerable amount) as the cause or consideration of the
transaction. The lot is therefore conjugal, having been acquired by the spouses thru
onerous title (the money used being presumably conjugal, there being no proof that
Restituta had paraphernal funds of her own).

4. Sale not fictitious nor simulated; Allegation of simulation cannot prejudice a

stranger
The sale cannot be said to be fictitious or simulated (and therefore void) as there was a
valid consideration therefor. Assuming that there had indeed been a simulation, the
parties thereto cannot use said simulation to prejudice a stranger to said strategem (like
petitioner herein).
5. Tan Queto recognized Restituta as an owner, not the owner
Tan Queto admitted Restituta was an owner (not the owner) of the lot in his Answer,
and this is true, for she was a co-owner (with Juan, and therefore an owner.) There is
no admission of Restitutas exclusive ownership.
6. Assuming Tan Queto recognized Restituta as the owner; bad faith of one
neutralizes the bad faith of the other
Even assuming that despite registration of the lot as conjugal, Tan Queto nursed the
belief that the lot was actually Restitutas (making him in bad faith), still Restitutas
failure to prohibit him from building despite her knowledge that construction was actually
being done, makes her also in bad faith. The net resultant of mutual bad faith would
entitle Tan Qyeto to the rights of a builder in good faith (Art. 448, Civil Code), ergo,
reimbursement should be given him if Restituta decides to appropriate the building for
herself (Art. 448, Civil Code).
7. Tan Queto an owner-possessor
Tan Queto having bartered his own lot and small house with the questioned lot with
Juan (who has been adverted to by a court decision and by the OCT a conjugal owner)
may be said to be the owner-possessor of the lot. Certainly he is not merely a
possessor or builder in good faith (this phrase presupposes ownership in another);
much less is he a builder in bad faith. He is a builder-possessor (jus possidendi)
because he is the owner himself.
8. Jus possessionis, jus possidendi; good faith and bad faith
The Chapter on Possession (jus possessionis, not jus possidendi) in the Civil Code
refers to a possessor other than the owner. The difference between a builder (or

possessor) in good faith and one in bad faith is that the former is not aware of the defect
or flaw in his title or mode of acquisition while the latter is aware of such defect or flaw
(Art. 526, Civil Code). But in either case there is a flaw or defect. In the present case,
there is no such flaw or defect because it is Tan Queto himself (not somebody else) who
is the owner of the property.

PLEASANTVILLE DEVELOPMENT CORPORATION VS. COURT OF

APPEALSG.R. NO. 79688 253 SCRA 10 FEBRUARY 1, 1996PONENTE:
PANGANIBAN, J.
Doctrine:
Good faith consists in the belief of the builder that he land he is building on is his and
his ignorance of any defect or flaw in his title. The burden of proving bad faith belongs to
the one asserting it.

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 third-party 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.

GEMINIANO v. CA

Lessor in good faith and Builders in Good faith are not synonymous. Article 1678 may
apply to the formers case and Art 448 may apply to the latters 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
petitioners 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
latters 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 cant 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 cant 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.

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 owner-mortgagor, 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

SARMIENTO V. AGANA
(G.R. No. 57288)
The land owner is required by the law to exercise only two (2) options: To purchase
thehouse or to sell the land to them. Based on Article 448, the owner of the land is
compelled by law toexercise either option. Not choosing either is a violation of the law.

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.
Whether or not the land owner is compelled to exercise either option: to buy the
building or to sell the land?
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.
Sarmiento, who owns the land, was required to exercise only two (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 owner of the land is compelled by law to
exercise either option. Not choosing either is a violation of the law. The owner of
the building erected in good faith on a land owned by another, is entitled to retain
the possession of the land until he is paid the value of his building, under Article
546. The owner of the land on the other hand, has the option, under Article 448,
either to pay for the building or to sell his land to the owner of the building
.
But he cannot, as respondents here did, refuse both to pay for the building and to
sell the land and compel the owner of the building to remove it from the land where
it is erected. He is entitled to such motion only when, after having chosen to sell
his land, the other party fails to pay for the same.

Macasaet vs Macasaet G.R. 154391

92 September 30, 2004

Facts:1.
Petitioners Ismael and Teresita Macasaet and Respondents Vicente and
RosarioMacasaet are first-degree relatives. Ismael is the son of respondents, and
Teresita is hiswife.2.
The parents alleged that they were the owners of two (2) parcels of land covered
byTransfer Certificate of Title (TCT) Nos. T-78521 and T-103141, situated
in Banay-banay,Lipa City; that by way of a verbal lease agreement, their son and his
wife occupied theselots in March 1992 and used them as their residence and the
situs of their constructionbusiness.3.

Ismael and Teresita denied the existence of any verbal lease agreement. They
claimedthat their parents had invited them to construct their residence and
business on thesubject lots. They added that it was the policy of their parents to
allot the the landowned as an advance grant of inheritance in favor of their
children. Thus, theycontended that the lot covered by TCT no. T-103141 had been
allotted to Ismael asadvance inheritance. On the other hand, the lot covered by
TCT-78521 was allegedlygiven to petitioners as payment for construction materials
used in the renovation of
their parents house.
4.
On December 10, 1997, the parents filed with the MTCC of Lipa City an ejectment
suitagainst their children for failure to pay the agreed rental despite repeated
demands.5.
The MTCC ruled in favor of the parents and ordered the children to vacate
thepremises. It opined that the children had occupied the lots, not by virtue of a
verballease agreement but by tolerance of the parents. As their stay was by mere
tolerance,the children were necessarily bound by an implied promise to vacate the
lots upondemand. The MTCC dismissed their contention that one lot had been
allotted as anadvance inheritance, on the ground that succcesional rights were
inchoate. Itdisbelieved that the other parcel had been given as payment for
construction material.6.
On appeal, the RTC upheld the findings of the MTCC. RTC allowed the parents
toappropriate the building and other improvements introduced by the
children, afterpayment by indemnity provided for bt Article 448 in relation to
Article 546 and 548 of the Civil Code.7.
On an appeal by both parties to the CA which were consolidated, the CA sustained
thefinding of the lower courts that the children had been occupying the subject
lots only bythe tolerance of their parent. Thus, possession of the subject lots by
the childrenbecame illegal upon their receipt of letter to vacate it. The CA
modified the RTC Decision
by declaring that Article 448 of the Civil Code was inapplicable. The CA opined
thatunder Article 1678 of the same Code, the children had the right to be
reimbursed forone half of the value of the improvements made.8.
No

t satisfied with the CAs ruling, the children brought the case to the Supreme
Court.
Issues:1.
WON the children can be ejected
a. Based on the parents love reasons for gratuitously allowing the children to use
the lots, it can be safely concluded that the agreement subsisted as long as the
parents and the children benefitted from the arrangement. Effectively, there is a
resolutory condition existing between the parties occurs like a change
of ownership, necessity, death of either party or unresolved conflict or animosity
the agreement may be deemed terminated. When persistent conflict and animosity
overtook the love and solidarity between the parents and the children, the purpose
of the agreement ceased. The children had any cause for continued possession of
the lots. Their right to use became untenable. It ceased upon their receipt of the
notice to vacate. And because they refused to heed the demand, ejectment was
the proper remedy against them.
b. The children had no right to retain possession. The right of the children to
inherit from their parents is merely inchoate and is vested only upon the latters
demise. Rights of succession are transmitted only from the moment of death of
the decedent. Assuming that there was an allotment of inheritance, ownership
nonetheless remained with the parents
c. The childrens allegation that the indebtness of their parent to them has been
paid through dation cannot be given credence as there were no sufficient proof of
a settlement or contract of dation to settle the alleged debt, and is inconsistent of
the separate action by the children to recover the same debt
d. As a rule, the right of ownership carries with it the right of possession.2.
Rights of a Builder in Good faith
As applied to the present case, accession refers to the right of owner to
everything that is incorporated or attached to the property. Accession industrial
building, planting and sowing on an immovable is governed by Articles 445 to 456
of the Civil Code.
b. As the court found that the children possession of the two lots was not by mere
tolerance, the applicable rule would be Article 448. This article has been applied to

cases wherein a builder had constructed improvements with the consent of the
owner.
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 and 546 are 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.

TECNOGAS PHILIPPINES MANUFACTURING CORPORATION V. COURT OF

APPEALS
(268 SCRA 5)
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 articles546 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.

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
A. Whether or not Tecnogas is considered a builder in bad faith.
B. Whether or not amicable settlement was a proper remedy
C. Whether or not respondent can opt to demolish the structure without exercising the
option to sell the land to the petitioner and the latter cannot do buy the same
Held

A. 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.
B. Where one derives title to the property from another, the act, declaration, or omission
of the latter, while holding the title, in relation to the property, is evidence against the
former. And possession in good faith does not lose this character except when the
possessor is aware of this impropriety.
C. The encroachment was very narrow which can be considered as a mere error.
Remedy the petitioner, despite being a purchaser of the original builder, can compel
the landowner to either buy the property or sell the piece of land because:

1.

He was really unaware of the encroachment basing on the fact presented by both
sides.
2.
When the petitioner bought the land, he has stepped into the rights of the original
owner (hence, the right to compel the LO to buy or sell is also transferred)

Estoppel Petitioner is not considered in estoppel only because it has previously

agreed to demolish a part of the wall. Rather, it was to be negotiated by the parties
concern. In the meantime, petitioner has to pay the rent for the property occupied by its
building only up to the date when respondent serves notice of their option. Case
remanded back to the trial court for determination of the value of the land and the
number of days to allot for the respondent to choose an option