BACHRACH VS.

SEIFERT
Facts:
The deceased E. M. Bachrach, who left no forced heir except his widow Mary McDonald Bachrach, in his last will and
testament made various legacies in cash and willed the remainder of his estate. The estate of E. M. Bachrach, as owner
of 108,000 shares of stock of the Atok-Big Wedge Mining Co., Inc., received from the latter 54,000 shares representing 50
per cent stock dividend on the said 108,000 shares. On June 10, 1948, Mary McDonald Bachrach, as usufructuary or life
tenant of the estate, petitioned the lower court to authorize the Peoples Bank and Trust Company, as administrator of the
estate of E. M. Bachrach, to transfer to her the said 54,000 shares of stock dividend by indorsing and delivering to her the
corresponding certificate of stock, claiming that said dividend, although paid out in the form of stock, is fruit or income and
therefore belonged to her as usufructuary or life tenant. Sophie Siefert and Elisa Elianoff, legal heirs of the deceased,
opposed said petition on the ground that the stock dividend in question was not income but formed part of the capital and
therefore belonged not to the usufructuary but to the remainderman. While appellants admit that a cash dividend is an
income, they contend that a stock dividend is not, but merely represents an addition to the invested capital.
Issue:
Whether or not a dividend is an income and whether it should go to the usufructuary.
Held:
The usufructuary shall be entitled to receive all the natural, industrial, and civil fruits of the property in usufruct. The
108,000 shares of stock are part of the property in usufruct. The 54,000 shares of stock dividend are civil fruits of the
original investment. They represent profits, and the delivery of the certificate of stock covering said dividend is equivalent
to the payment of said profits. Said shares may be sold independently of the original shares, just as the offspring of a
domestic animal may be sold independently of its mother. If the dividend be in fact a profit, although declared in stock, it
should be held to be income. A dividend, whether in the form of cash or stock, is income and, consequently, should go to
the usufructuary, taking into consideration that a stock dividend as well as a cash dividend can be declared only out of
profits of the corporation, for if it were declared out of the capital it would be a serious violation of the law.
Under the Massachusetts rule, a stock dividend is considered part of the capital and belongs to the remainderman; while
under the Pennsylvania rule, all earnings of a corporation, when declared as dividends in whatever form, made during the
lifetime of the usufructuary, belong to the latter. The Pennsylvania rule is more in accord with our statutory laws than the
Massachusetts rule.
BACHRACH VS TALISAY SILAY
Facts: On 22 December 1923, the Talisay-Silay Milling Co., Inc., was indebted to the PNB. To secure the payment of its
debt, it succeeded in inducing its planters, among whom was Mariano Lacson Ledesma, to mortgage their land to the
bank. And in order to compensate those planters for the risk they were running with their property under that mortgage,
the aforesaid central, by a resolution passed on the same date, and amended on 23 March 1928, undertook to credit the
owners of the plantation thus mortgaged every year with a sum equal to 2% of the debt secured according to the yearly
balance, the payment of the bonus being made at once, or in part from time to time, as soon as the central became free of
its obligations to the bank, and of those contracted by virtue of the contract of supervision, and had funds which might be
so used, or as soon as it obtained from said bank authority to make such payment.
<It seems Mariano Lacson Ledesma is indebted from Bachrach Motor; the circumstance of which is not found in the case
facts.>
Bachrach Motor Co., Inc. filed a complaint against the Talisay-Silay Milling Co., Inc., for the delivery of the amount of
P13,850 or promissory notes or other instruments of credit for that sum payable on 30 June 1930, as bonus in favor of
Mariano Lacson Ledesma. The complaint further prays that the sugar central be ordered to render an accounting of the
amounts it owes Mariano Lacson Ledesma by way of bonus, dividends, or otherwise, and to pay Bachrach Motors a sum
sufficient to satisfy the judgment mentioned in the complaint, and that the sale made by said Mariano Lacson Ledesma be
declared null and void. The PNB filed a third
party claim alleging a preferential right to receive any amount which Mariano Lacson Ledesma might be entitled from
Talisay-Silay Milling as bonus. Talisay-Silay answered the complaint that Mariano Lacson Ledesmas credit (P7,500)
belonged to Cesar Ledesma because he had purchase it. Cesar Ledesma claimed to be an owner by purchase in good
faith. At the trial all the parties agreed to recognize and respect the sale made in favor of Cesar Ledesma of the P7,500
part of the credit in question, for which reason the trial court dismissed the complaint and cross-complaint against Cesar
Ledesma authorizing the central to deliver to him the sum of P7,500. And upon conclusion of the hearing, the court held
that the Bachrach Motor Co., Inc., had a preferred right to receive the amount of P11,076.02 which was Mariano Lacson
Ledesmas bonus, and it ordered the central to deliver said sum to Bachrach Motors. PNB appealed.

The Supreme Court affirmed the judgment appealed from, as it found no merit in the appeal;, without express finding as to
costs.
1. Civil Fruits under Article 355 of the Civil Code
Article 355 of the Civil Code considers three things as civil fruits: First, the rents of buildings;
second, the proceeds from leases of lands; and, third, the income from perpetual or life annuities, or other similar sources
of revenue. According to the context of the law, the phrase u otras analogas refers only to rents or income, for the
adjectives otras and analogas agree with the noun rentas, as do also the other adjectives perpetuas and vitalicias.
The civil fruits the Civil Code understands one of three and only three things, to wit: the rent of a building, the rent of
land, and certain kinds of income.
2. Bonus not a civil fruit; not an income of the land
The amount of the bonus, according to the resolution of the central granting it, is not based upon the value, importance or
any other circumstance of the mortgaged property, but upon the total value of the debt thereby secured, according to the
annual balance, which is something quite distinct from and independent of the property referred to. As the bonus is not
obtained from the land, it is not civil fruits of that land. It is neither rent of buildings, proceeds from lease of lands, or
income under Article 355 of the Civil Code.
BERNARDO v BATACLAN (1938; Laurel)
FACTS: Plaintiff Vicente Bernardo acquired a parcel of land from Pastor Samonte thru a contract of sale.
Thereafter, Bernardo instituted a case against said vendor to secure possession of the land. Bernardo was
able to obtain a favorable decision from the court. The plaintiff found the defendant herein, Catalino
Bataclan, in the said premises. It appears that he has been authorized by former owners, as far back as
1922, to clear the land and make improvements thereon. Thus, plaintiff instituted a case against Bataclan
in the Court of First Instance of Cavite. In this case, plaintiff was declared the owner of the land but the
defendant was held to be a possessor in good faith, entitled to reimbursement in the total sum of P1,642,
for work done and improvements made. Both parties appealed the decision.
The court thereafter made some modifications by allowing the defendant to recover compensation
amounting to P2,212 and by reducing the price at which the plaintiff could require the defendant to
purchase the land in question from P300 down to P200 per hectare. Plaintiff was likewise given 30 days
from the date when the decision became final to exercise his option, either to sell the land to the
defendant or to buy the improvements from him. On January 9, 1934, the plaintiff conveyed to the
court his desire "to require the defendant to pay him the value of the land at the rate of P200
per hectare or a total price of P18,000 for the whole tract of land." The defendant indicated that
he was unable to pay the land and, on January 24, 1934, an order was issued giving the plaintiff 30 days
within which to pay the defendant the sum of P2,212.
Subsequently, on April 24, 1934, the court below, at the instance of the plaintiff and without objection on
the part of the defendant, ordered the sale of the land in question at public auction. The land was sold on
April 5, 1935 to Toribio Teodoro for P8,000.
ISSUE: WON DEFENDANT BATACLAN IS STILL ENTITLED TO RECOVER THE COURT MANDATED
COMPENSATION ARISING FROM THE SALE OF THE PROPERTY TO TORIBIO
HELD: NO. Manresa, basing on Art 448 of the NCC, where the planter, builder or sower has acted in good
faith, a conflict of rights arises between the owners and it becomes necessary to protect the owner of the
improvements without causing injustice to the owner of the land. The law provided a just and equitable
solution by giving the owner of the land the option to acquire the improvements after payment of the
proper indemnity or to oblige the builder or planter to pay for the land and the sower to pay the proper
rent. In this case, the plaintiff, as owner of the land, chose to require the defendant, as owner of the
improvements to pay for the land.
The defendant avers that he is a possessor in good faith and that the amount of P2,212 to which
he is entitled has not yet been paid to him. Defendant further claims that he has a right to retain
the land in accordance with the provisions of article 453 of the Civil Code. While the said argument is
legally tenable, the same must perforce be denied because defendant Bataclan has lost his right of
retention as he failed to pay for the land. The law, as we have already said, requires no more than
that the owner of the land should choose between indemnifying the owner of the
improvements or requiring the latter to pay for the land.
IGNACIO v HILARIO (1946; Moran)
Facts: Elias Hilario and his wife Dionisia Dres filed a complaint against Damian, Francisco and Luis Ignacio
concerning the ownership of a parcel of land, partly rice-land and partly residential. After the trial of the
case, the lower court under Judge Alfonso Felix, rendered judgment holding Hilario and Dres as the legal
owners of the whole property but conceding to the Ignacios the ownership of the houses and granaries
built by them on the residential portion with the rights of a possessor in good faith, in accordance with
article 361 of the Civil Code.
Subsequently, in a motion filed in the same CFI (now handled by respondent Judge Hon. Felipe Natividad),
Hilario and Dres prayed for an order of execution alleging that since they chose neither to pay the Ignacios
for the buildings nor to sell to them the residential lot, the Ignacios should be ordered to remove the

structure at their own expense and to restore Hilario and Dres in the possession of said lot. After hearing,
the motion was granted by Judge Natividad. Hence, the petition for certiorari was filed by the Ignacios
praying for (a) a restraint and annulment of the order of execution issued by Judge Natividad; (b) an order
to compel Hilario and Dres to pay them the sum of P2,000 for the buildings, or sell to them the residential
lot for P45; or (c) a rehearing of the case for a determination of the rights of the parties upon failure of
extra-judicial settlement.
The Supreme Court set aside the writ of execution issued by Judge Natividad and ordered the lower court
to hold a hearing in the principal case wherein it must determine the prices of the buildings and of the
residential lot where they are erected, as well as the period of time within which Hilario and Dres may
exercise their option either to pay for the buildings or to sell their land, and, in the last instance, the period
of time within which the Ignacios may pay for the land, all these periods to be counted from the date the
judgment becomes executory or unappealable. After such hearing, the court shall render a final judgment
according to the evidence presented by the parties; with costs against Hilarion and Dres.
1. Right of retention of builder in good faith
The owner of the building erected in good faith on a land owned by another, is entitled to retain the
possession of the land until he is paid the value of his building, under article 453. Article 453 provides that
Necessary expenses shall be refunded to every possessor; but only the possessor in good faith may retain
the thing until such expenses are made good to him. Useful expenses shall be refunded to the possessor in
good faith with the same right of retention, the person who has defeated him in the possession having the
option of refunding the amount of the expenses or paying the increase in value which the thing may have
acquired in consequence thereof."
2. Option of the landowner to pay for the building or sell his land to the owner of the building;
Right of remotion only available if he chose the latter and the owner of the building cannot
pay
The owner of the land, upon the other hand, has the option, under article 361, either to pay for the
building or to sell his land to the owner of the building. Article 361 provides that The owner of land on
which anything has been built, sown or planted in good faith, shall have the right to appropriate as his own
the work, sowing or planting, after the payment of the indemnity stated in articles 453 and 454, or to
oblige the one who built or planted to pay the price of the land, and the one who sowed, the proper rent.
He cannot however refuse both to pay for the building and to sell the land and compel the owner of the
building to remove it from the land where it is erected. He is entitled to such remotion only when, after
having chosen to sell his land, the other party fails to pay for the same.
3. Order amends judgment substantially and thus null and void
The order of Judge Natividad compelling the Ignacios to remove their buildings from the land belonging to
Hilario and Dres only because the latter chose neither to pay for such buildings nor to sell the land, is null
and void, for it amends substantially the judgment sought to be executed and is, furthermore, offensive to
articles 361 and 453 of the Civil Code.
4. Original decision did not become final as it failed to determine the value of the buildings
and of the lot; and the time to which the option may be exercised
In the decision of Judge Felix, the rights of both parties were well defined under articles 361 and 453 of the
Civil Code, but it failed to determine the value of the buildings and of the lot where they are erected as
well as the periods of time within which the option may be exercised and payment should be made, these
particulars having been left for determination apparently after the judgment has become final. The
procedure is erroneous, for after the judgment has become final, no additions can be made thereto and
nothing can be done therewith except its execution. And execution cannot be had, the sheriff being
ignorant as to how, for how much, and within what time may the option be exercised, and certainty no
authority is vested in him to settle these matters which involve exercise of judicial discretion. Thus, the
judgment rendered by Judge Felix has never become final, it having left matters to be settled for its
completion in a subsequent proceeding, matters which remained unsettled up to the time the petition is
filed in the present case.
Francisco Depra vs. Agustin Dumlao GR L-57348 16 May 1985
Facts: Depra is the owner of a parcel of land to which Dumlao, living in an adjoining lot, had built a kitchen
that encroached an area of 34 square meters. The encroachment was discovered in a relocation survey of
Depras property. Upon discovery, Depras mother wrote a demand letter asking Dumlao to move back
from his encroachment. She then filed a case of Unlawful Detainer against Dumlao.
In the trial court it was proven that Dumlao was a builder in good faith; thus the Municipal Court rendered
it judgment that reads:
Ordering that a forced lease is created between the parties with the plaintiffs, as lessors, and the
defendants as lessees, over the disputed portion with an area of thirty four (34) square meters, the rent to
be paid is five (P5.00) pesos a month, payable by the lessee to the lessors within the first five (5) days of
the month the rent is due; and the lease shall commence on the day that this decision shall have become
final.
Neither party appealed. However, Depra did not accept the payment of rentals so that Dumlao deposited
such rentals with the Municipal Court.

Depra then filed a Complaint for Quieting of Title against Dumlao, the latter admitted the encroachment
but alleged, that the present suit us barred by res judicate by virtue of the decision of the Municipal Court.
DEPRA claims that the Decision of the Municipal Court was null and void ab initio because its jurisdiction is
limited to the sole issue of possession, whereas decisions affecting lease, which is an encumbrance on real
property, may only be rendered by Courts of First Instance.
Issue:
I. Whether or not the Municipal Courts decision was null and void ab initio because it has no jurisdiction
over the case?
II. Whether or not the factual situations of DUMLAO and DEPRA conform to the juridical positions
respectively defined by law, for a "builder in good faith" under Article 448, a "possessor in good faith"
under Article 526 and a "landowner in good faith' under Article 448?
Held:
I.
Addressing out selves to the issue of validity of the Decision of the
Municipal Court, we hold the same to be null and void. The judgment in a detainer case is effective in
respect of possession only (Sec. 7, Rule 70, Rules of Court). The Municipal Court over-stepped its bounds
when it imposed upon the parties a situation of "forced lease", which like "forced co-ownership" is not
favored in law. Furthermore, a lease is an interest in real property, jurisdiction over which belongs to Courts
of First Instance (now Regional Trial Courts) (Sec. 44(b), Judiciary Act of 1948; Sec. 19 (2) Batas Pambansa
Blg. 129). Since the Municipal Court, acted without jurisdiction, its Decision was null and void and cannot
operate as res judicata to the subject complaint for Queting of Title. Besides, even if the Decision were
valid, the rule on res judicata would not apply due to difference in cause of action. In the Municipal Court,
the cause of action was the deprivation of possession, while in the action to quiet title, the cause of action
was based on ownership. Furthermore, Sec. 7, Rule 70 of the Rules of Court explicitly provides that
judgment in a detainer case "shall not bar an action between the same parties respecting title to the land.
"
II. 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 (Paragraphing supplied)
Pursuant to the foregoing provision, DEPRA has the option either to pay for the encroaching part of
DUMLAO's kitchen, or to sell the encroached 34 square meters of his lot to DUMLAO. He cannot refuse to
pay for the encroaching part of the building, and to sell the encroached part of his land, 5 as he had
manifested before the Municipal Court. But that manifestation is not binding because it was made in a void
proceeding.
However, the good faith of DUMLAO is part of the Stipulation of Facts in the Court of First Instance. It was
thus error for the Trial Court to have ruled that DEPRA is "entitled to possession," without more, of the
disputed portion implying thereby that he is entitled to have the kitchen removed. He is entitled to such
removal only when, after having chosen to sell his encroached land, DUMLAO fails to pay for the same. 6 In
this case, DUMLAO had expressed his willingness to pay for the land, but DEPRA refused to sell.
SARMIENTO V. AGANA
129 SCRA 122
FACTS:
While Ernesto Valentino was still courting his wife, latters mother offered a lot for the construction of
house by the spouses. It was assumed that the wifes mother was the owner of the land, which would
eventually transfer to the spouses. It turned out that Sarmiento was the owner of the land. Sarmiento filed
an ejectment suit to which the trial court found out that the spouses are possessors in good faith and
ordered Sarmiento to exercise option based on Art 448. Sarmiento did not exercise any of the options. The
spouses then consigned the amount in court.
ISSUE: Whether or not Sarmiento can refuse to exercise the given options
HELD: Negative. The landowner cannot refuse both to appropriate or sell the land, and to compel
the builder to remove it from the land on which it is located. He is entitled to such demolition only when
after having chosen to sell the land, the other party fails to pay for the same.

Filipinas Colleges Inc. vs. Garcia Timbang

Filipinas Colleges was declared to have acquired the rights of the spouses Timbang and in consideration
thereof, Filipinas Colleges was ordered to pay the spouses P15,807.90 plus other amounts. Filipinas
Colleges was required to deposit this to the court within 90 days after the decision shall have become final.
Meanwhile, Maria Gervacio Blas was declared to be a builder in good faith of the school building
constructed on the lot in question and entitled to be paid the amount of P19,000 for it. Filipinas Colleges,
purchaser of the said building, was ordered to deliver to Blas stock certificate and pay her P8,200
representing the unpaid balance of the purchase price of the house.
Filipinas Colleges failed to pay the said amounts. Spouses Timbang made known to the court that they had
chosen to compel Filipinas Colleges to acquire the land and pay them the value thereof. The spouses asked
for an order of execution, which was granted by court. Moreover, the levied on the house of the builder and
then sold the same in public auction.
The Sheriff of Manila sold the building in public auction in favor of the spouses Timbang as the highest
bidders. Personal properties of Filipinas Colleges were also auctioned in favor of the spouses.
The lower court declared the Sheriffs certificate of sale covering the school building null and void unless
within 15 days from notice of said order, the successful bidders pay Blas P5,750. It also declared Filipinas
Colleges as the owner of undivided interest in Lot 2-1 on which the building sold in the auction sale is
situated and ordered the sale in public auction of said undivided interest of the Filipinas Colleges in favor of
Blas and against Filipinas Colleges.
The appellant spouses posited that because the builder in good faith has failed to pay the price of the land
after the owners thereof exercised their option under Art 448, the builder lost his right of retention
provided in Art 546 and by operation of Art 445, the appellants as owners of the land automatically
became the owners of the building.
ISSUE: Whether or not the contention of the appellants are valid
RULING: Negative.
Under the terms of these article, it is true that the owner of the land has the right to choose between
appropriating the building by reimbursing the builder of the value thereof or compelling the builder in good
faith to pay for his land. Even this second right cannot be exercised if the value of the land is considerably
more than that of the building. In addition to the right of the builder to be paid the value of his
improvement, Article 546 gives him the corollary right of retention of the property until he is indemnified
by the owner of the land. There is nothing in the language of these two article, 448 and 546, which would
justify the conclusion of appellants that, upon the failure of the builder to pay the value of the land, when
such is demanded by the land-owner, the latter becomes automatically the owner of the improvement
under Article 445. The case of Bernardo vs. Bataclan, 66 Phil., 590 cited by appellants is no authority for
this conclusion. Although it is true it was declared therein that in the event of the failure of the builder to
pay the land after the owner thereof has chosen this alternative, the builder's right of retention provided in
Article 546 is lost, nevertheless there was nothing said that as a consequence thereof, the builder loses
entirely all rights over his own building.
The question is; what is the recourse or remedy left to the parties in such eventuality where the builder
fails to pay the value of the land? While the Code is silent on this Court in the cases of Miranda vs.
Fadullon, et al., 97 Phil., 801; 51 Off. Gaz., [12] 6226; Ignacio vs. Hilario, 76 Phil., 605 and the cited case of
Bernardo vs. Bataclan, supra.
a.
decide to leave things as they are and assume the relation of lessor and lessee, and should they
disagree as to the amount of rental then they can go to the court to fix that amount.
b.
Should the parties not agree to leave things as they are and to assume the relation of lessor and
lessee, another remedy is suggested in the case of Ignacio vs. Hilario, supra, wherein the court has ruled
that the owner of the land in entitled to have the improvement removed when after having chosen to sell
his land to the other party, i.e., the builder in good faith fails to pay for the same.
c.
A further remedy is indicated in the case of Bernardo vs. Bataclan, supra, where this Court
approved the sale of the land and the improvement in a public auction applying the proceeds thereof first
to the payment of the value of the land and the excess, if any, to be delivered to the owner of the house in
payment thereof.
Ortiz vs. Kayanan
Facts: Plaintiff used to be the legal guardian of Martin Dolorico II. When his ward died, plaintiff continued to
cultivate and possess the latters property, which was formerly a subject of homestead application. In the
said application, the wards uncle was named as his heir and successor in interest. Thus, the uncle
executed an affidavit relinquishing his rights over the property in favor of Comintan and Zamora, his
grandson and son-in-law and requested the Director of Lands to cancel the homestead application. The
homestead application was cancelled to the protest of Ortiz saying that he should be given preference to
purchase the lot inasmuch as he is the actual occupant and has been in continuous possession of the
same. Still, the lot in question was sold at a public auction wherein defendant Comintan was the only
bidder.

The plaintiffs protest was investigated upon but his claim was not given due course. On appeal,
respondent court rules that half of the portion of land should be given to the defendant, being the
successful bidder. The other half should be awarded to Zamora without prejudice to the right of Ortiz to
participate in the public bidding of the lot. If Ortiz is to be not declared the successful bidder, defendants
should reimburse jointly said plaintiff for the improvements introduced on the land, with him, having the
right to retain the property until after he has been paid for.
Plaintiff appealed the judgment. It was later found out that Ortiz collected tolls on a portion of the property
wherein he has not introduced any improvement.
The judgment became final and executory. Private respondents filed a motion for its execution requesting
that they file a bond in lieu of the amount that should be paid to Ortiz, on the condition that after the
accounting of the tolls collected by plaintiff, there is still and amount due and payable to the said plaintiff,
the bond shall be held answerable.
Petitioner thus filed the instant petition, contending that in having issued the Order and Writ of Execution,
respondent Court "acted without or in excess of jurisdiction, and/or with grave abuse of discretion, because
the said order and writ in effect vary the terms of the judgment they purportedly seek to enforce." He
argued that since said judgment declared the petitioner a possessor in good faith, he is entitled to the
payment of the value of the improvements introduced by him on the whole property, with right to retain
the land until he has been fully paid such value. He likewise averred that no payment for improvements
has been made and, instead, a bond therefor had been filed by defendants (private respondents), which,
according to petitioner, is not the payment envisaged in the decision which would entitle private
respondents to the possession of the property. Furthermore, with respect to portion "B", petitioner alleges
that, under the decision, he has the right to retain the same until after he has participated and lost in the
public bidding of the land to be conducted by the Bureau of Lands. It is claimed that it is only in the event
that he loses in the bidding that he can be legally dispossessed thereof.
It is the position of petitioner that all the fruits of the property, including the tolls collected by him from the
passing vehicles, which according to the trial court amounts to P25,000.00, belongs to petitioner and not
to defendant/private respondent Quirino Comintan, in accordance with the decision itself, which decreed
that the fruits of the property shall be in lieu of interest on the amount to be paid to petitioner as
reimbursement for improvements. Any contrary opinion, in his view, would be tantamount to an
amendment of a decision which has long become final and executory and, therefore, cannot be lawfully
done.
The issue decisive of the controvery isafter the rendition by the trial court of its judgment in Civil Case
No. C-90 on March 22, 1966 confirming the award of one-half of the property to Quirino Comintan
whether or not petitioner is still entitled to retain for his own exclusive benefit all the fruits of the property,
such as the tolls collected by him from March 1967 to December 1968, and September 1969 to March 31,
1970, amounting to about P25,000.00.
RULING: Negative
1.
No contention that the possessor in good faith is entitled to the fruits received before the
possession is legally interrupted. Possession in good faith ceases or is legally interrupted from the moment
defects in the title are made known to the possessor, by extraneous evidence or by the filing of an action
in court by the true owner for the recovery of the property. Hence, all the fruits that the possessor may
receive from the time he is summoned in court, or when he answers the complaint, must be delivered and
paid by him to the owner or lawful possessor.
2.
However, even after his good faith ceases, the possessor can still retain the property (Art 546) until
he has been fully reimbursed for all the necessary and useful expenses made by him on the property. he
principal characteristic of the right of retention is its accessory character. It is accessory to a principal
obligation. Considering that the right of the possessor to receive the fruits terminates when his good faith
ceases, it is necessary, in order that this right to retain may be useful, to concede to the creditor the right
to secure reimbursement from the fruits of the property by utilizing its proceeds for the payment of the
interest as well as the principal of the debt while he remains in possession.
3.
Petitioner cannot appropriate for his own exclusive benefit the tolls which he collected from the
property retained by him. It was his duty under the law, after deducting the necessary expenses for his
administration, to apply such amount collected to the payment of the interest, and the balance to the
payment of the obligation.
We hold, therefore, that the disputed tolls, after deducting petitioner's expenses for administration, belong
to Quirino Comintan, owner of the land through which the toll road passed, further considering that the
same was on portions of the property on which petitioner had not introduced any improvement. The trial
court itself clarified this matter when it placed the toll road under receivership. The omission of any
mention of the tolls in the decision itself may be attributed to the fact that the tolls appear to have been
collected after the rendition of the judgment of the trial court.
4.
As to the other lot, it appears that no public sale has yet been conducted by the Bureau of Lands
and, therefore, petitioner is entitled to remain in possession thereof. This is not disputed by respondent
Eleuterio Zamora. After public sale is had and in the event that Ortiz is not declared the successful bidder,
then he should be reimbursed by respondent Zamora in the corresponding amount for the improvements
on Lot 5785-B.

FLOREZA v EVANGELISTA [96 SCRA 130 (February 21, 1980)]

Nature: Petition for review on certiorari of the decision of the CA.
Ponente: J. Melencio-Herrera
Facts:

The Evangelistas were the owner of a residential lot in Rizal with an area of 204.08 sq. m. assessed
at P410.

May 1945: Evangelistas borrowed P100 from Floreza.

November 1945: Floreza occupied the residential lot and built a house of light material (barongbarong) with the consent of the Evangelistas.

Additional Loans made by the Evangelistas: Sept. 1946 P100, August 1947 P200, January 1949
P200, April 1949 P140. TOTAL = P740 (including first loan)

January 1949: Floreza demolished the house of light material and constructed one of strong
material assessed at P1400. Floreza has not been paying any rentals since the beginning of their
transactions.

August 1949: Evangelistas sold, with a right to repurchase within 6 years, their land to Floreza for
P1000.

Seven months before the expiry of the repurchase period, the Evangelistas were able to pay in full.

Floreza refused to vacate the lot unless he was first reimbursed for the value of the house he built.

Evangelistas filed a complaint. CFI ruled based on Art, 448 of the Civil Code saying that
Evangelistas have the choice between purchasing the house or selling the land to Floreza.

CA ruled that Art. 448 was inapplicable and that Floreza was not entiled to the reimbursement of his
house and could remove the same at his own expense.
Issue:
1.
WON Floreza was entitled to reimbursement of the cost of his house. NO.
2.
WON he (his heirs who replaced him) should pay rental of the land. YES.
Held/Ratio:
1.
Issue of reimbursement is not moot because if Floreza has no right of retention, then he must pay
damages in the form of rentals.
Agree with CA that Art. 448 is inapplicable because it applies only when the builder is in good faith (he
believed he had a right to build).Art. 453 is also not applicable because it requires both of the parties to be
in bad faith. Neither is Art. 1616 applicable because Floreza is not a vendee a retro. The house was already
constructed in 1945 (light materials) even before the pacto de retro was entered into in 1949.
Floreza cannot be classified as a builder in good faith nor a vendee a retro, who made useful
improvements during the pacto de retro, he has no right to reimbursement of the value of the house, much
less to the retention of the premises until he is paid.
His rights are more akin to a usufructury under Art. 579, who may make on the property useful
improvements but with no right to be indemnified thereof, He may, however, remove such improvements
should it be possible to do so without damage to the property.
2.
From the time the redemption price was paid in January 3, 1955, Florezas right to use the
residential lot without rent ceased. He should be held liable for damages in the form of rentals for the
continued use of the lot for P10 monthly from January 3, 1955 until the house was removed and the
property vacated by Floreza or his heirs.
Judgment affirmed with modification.
SPOUSES DEL CAMPO VS. ABESIA
Facts: This case involves a parcel of land with an area of only about 45 square meters. An action for
partition was filed by plaintiffs in the CFI of Cebu. Plaintiffs and defendants are co-owners pro indiviso of
this lot in the proportion of and 1/3 share each, respectively. The trial court appointed a commissioner in
accordance with the agreement of the parties. He submitted a report to the trial court recommending that
the property be divided into two lots: Lot 1161-A with an area of 30 square meters for plaintiffs and Lot No.
1161-B with an area of 15 square meters for the defendants. The houses of plaintiffs and defendants were
surveyed and shown on the sketch plan. The house of defendants occupied the portion with an area of 5
square meters of Lot 1161-A of plaintiffs. The parties manifested their conformity to the report and asked
the trial court to finally settle and adjudicate who among the parties should take possession of the 5
square meters of the land in question.
ISSUE: Whether or not Art 448 is applicable to a builder in good faith when the property involved is owned
in common
RULING: Affirmative
The court a quo correctly held that 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.
Applying the aforesaid provision 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 defendants shall
then pay the reasonable rent to the plaintiff 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 VS. IAC
FACTS: Florencio Ignao and his uncles (private respondents) were co-owners of a parcel of land. This was
originally owned by Baltazar Ignao, who married twice. In his first marriage, he had four children, including
the father of the petitioner. In his second marriage, he also had four children who waived their rights over
the controverted land.
Justo, Florencios father owned 5/8 of the land. Thereafter, Justo acquired 1/8 share of brother Leon for
P500, which was later sold to his son Florencio for the same amount. When Justo died, Florencio inherited
the 5/8 share of his father, which brought his land share to 6/8. Private respondents Juan and Isidro each
has 1/8 share on the land.
Petitioner brought an action for partition. Before it was promulgated, Florencio sol 134 sqm of his share.
The decision for partition allotted 2/8 of the land to private respondents. However, no actual partition was
effected. Thus, petitioner instituted a complaint for recovery of possession of real property against private
respondents, because the area occupied by the two houses built by private respondents exceeded the
portion allotted to them. Trial court ruled that the private respondents are builders in good faith.
ISSUE: Whether or not the provisions of Art 448 should apply on a property held in common
RULING: Affirmative
It should be noted that prior to partition, all the co-owners hold the property in common dominion but at
the same time each is an owner of a share which is abstract and undetermined until partition is effected.
As cited in Eusebio vs. Intermediate Appellate Court, "an undivided estate is co-ownership by the heirs."
As co-owners, the parties may have unequal shares in the common property, quantitatively speaking. But
in a qualitative sense, each co-owner has the same right as any one of the other co-owners. Every coowner is therefore the owner of the whole, and over the whole he exercises the right of dominion, but he is
at the same time the owner of a portion which is truly abstract, because until division is effected such
portion is not concretely determined.
Whether or not the provisions of Article 448 should apply to a builder in good faith on a property held in
common has been resolved in the affirmative in the case of Spouses del Campo vs. Abesia, wherein the
Court ruled that:
The court a quo correctly held that 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 ownership is terminated by the partition and it appears that the home
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 is a co-ownership if good faith has been established.
In other words, when the co-ownership is terminated by a partition and it appears that the house of an
erstwhile co-owner has encroached upon a portion pertaining to another co-owner which was however
made in good faith, then the provisions of Article 448 should apply to determine the respective rights of
the parties.
Petitioner's second assigned error is however well taken. Both the trial court and the Appellate Court erred
when they peremptorily adopted the "workable solution" in the case of Grana vs. Court of appeals, and

ordered the owner of the land, petitioner Florencio, to sell to private respondents, Juan and Isidro, the part
of the land they intruded upon, thereby depriving petitioner of his right to choose. Such ruling contravened
the explicit provisions of Article 448 to the effect that "(t)he owner of the land . . . shall have the right to
appropriate . . .or to oblige the one who built . . . to pay the price of the land . . . ." The law is clear and
unambiguous when it confers the right of choice upon the landowner and not upon the builder and the
courts.
Thus, in Quemuel vs. Olaes, the Court categorically ruled that the right to appropriate the works or
improvements or to oblige the builder to pay the price of the land belongs to the landowner.
PECSON VS. COURT OF APPEALS
FACTS: Pecson was the owner of a commercial lot on which he built a four-door storey-apartment building.
For his failure to pay realty taxes, the lot was sold at public auction who in turn sold it to the private
respondents. Petitioner challenges the validity of the auction sale.
ISSUE: Whether or not Art 448 finds application in the said case
RULING: Negative
By its clear language, Art 448 refers to a land whose ownership is claimed by two or more parties, one of
whom has built some works or sown or planted something. The rule on good faith laid down in Art 526 of
the Civil Code shall be applied in determining whether the builder, sower or planter had acted in good
faith.
Art 448 does not apply to a case where the owner of the land is the builder, sower or planter who then
later loses ownership of the land by sale or donation. Where the true owner himself is the builder of works
on his own land, good faith or bad faith is irrelevant. Thus, in strict point of law, Art 448 is not apposite to
the case at bar. Nevertheless, the court applied the provision therein on indemnity.
MWSS vs. CA
Facts: The City of Dagupan filed a complaint against NAWASA (now MWSS) for the recovery of the
ownership and possession of Dagupan Waterworks System. NAWASA interposed as one if its special
defenses RA 1383 which vested upon it ownership, possession, and control of all waterworks systems
throughout the Philippines. TC found that NAWASA is a possessor in bad faith and hence not entitled to
reimbursement claimed by it.
ISSUE: Whether or not a possessor in bad faith has the right to remove useful improvements
RULING: Negative. This is based on Art 449 of the NCC. As a builder in bad faith, MWSS lost whatever
useful improvements it had made without right to indemnity.
Art 546: Only a possessor in good faith shall be refunded for useful expenses with the right of retention
until reimbursed.
Art 547: Only a possessor in good faith may remove useful improvements if this can be done without
damage to the principal thing and if the person who recovers the possession does not exercise the option
of reimbursing the useful expenses. The right given to a possessor in bad faith to remove improvements
applies only to improvements for pure luxury or mere pleasure, provided the thing suffers no injury thereby
and the lawful possessor does not prefer to retain them by paying the value they have at the time he
enters into possession.
SABIDO VS. IAC
FACTS: The case originated from an action of quieting of title filed by Sps. Victor Dasal and Maria Pecunio
against petitioners Maximo Rances and Palicula Sabido over two parcels of land, Lots B and D. Trial court
declared the petitioners Sabido as owners of said lots. Decision became final but when it was being carried
out, the sheriff found 3 persons occupying portions of Lot B, including private respondent Sta. Ana. Sta.
Ana claimed ownership by purchase from one Prudencio Lagarto. Sta. Ana challenged the order of
demolition upon certiorari proceedings. The SC remanded the case to the trial court for the determination
whether or not the private respondent is privy to the spouses Dasal and Pecunio and whether or not the
petitioners and private respondents are litigating over the same parcel of land or whether there is
overlapping of boundaries of their respective lands.
It was found out that there was privity between private respondent and the spouses Dasal and Pecunio as
to the ownership of Lor C and as to the possession over the disputed Lot B. For that reason, Sta. Ana is
bound by the final decision against Dasal and thus subject to the order of execution and is bound to vacate
the land in question or subject a portion of his house and the surrounding walls to demolition.
A motion of execution was filed by petitioners Sabido but Sta. Ana appealed saying that the grant of the
motion deprived him of the alternative choice of paying the value of the disputed area.

ISSUE: Whether or not private respondent has the option of exercising the alternative choice of staying in
the disputed land
RULING: Negative. The private respondent has to remove all his constructions over Lot B and vacate the
premises. This is his only option. Being adjudged with privy with the spouses Dasals, he cannot avail
himself of the rights granted to a builder in good faith. He, therefore, must remove all his useful
improvements over Lot B at his own expense and if the same have already been removed, he cannot be
entitled to the right of retention or to any reimbursement.