Basic Principles: (GONE BAD)

1. He who is in good faith may be held responsible but will not be penalized.
2. To the owner of a thing belongs the extension or increase of such thing.
3. Bad faith of one party neutralizes the bad faith of the other.
4. There should be no unjust enrichment at the expense of others.
5. Bad faith involves liability for damages.
6. Accessory follows the principal.
7. Accession exists only if the incorporation is such that separation would either seriously damage the thing or diminish
its value.

LANDOWNER (LO) BUILDER, PLANTER, SOWER (B,P,S) OWNER OF THE MATERIALS (OM)

Good Faith Good Faith Good Faith

Acquire improvements and pay to B, P, S Right of retention for necessary and useful Collect value of materials primarily from B,
indemnity; subsidiarily liable to owner of expense P, S; subsidiarily from land owner if B, P, S
materials Pay value of materials to owner of insolvent
a. sell land to B or P except if the value of materials Remove only if without injury (455, 447)
the land is considerably more
b. rent to S (448, 546, 455)
Good Faith Good Faith Bad Faith
Acquire improvements and pay indemnity Right of retention for necessary and useful Lose them without right to indemnity (449)
to B, P, S expenses
A. Sell to B, P except if the value of land is Keep building, planting or sowing w/o
considerably more, forced lease indemnity to owner of materials and collect
Without subsidiary liability for cost of damages (546, 449)
material
Good Faith Bad Faith Bad Faith
Option to: Recover necessary expenses for Recover value from B, P, S (as if both
Acquire improvement w/o paying indemnity preservation acted in good faith)
and collect damages, or Lose improvements w/o right to indemnity If B, P, S acquires improvements, remove
Demolition or restoration, and collect from LO (452) unless the LO sells land materials if w/o injury (447)
damages, or No action versus LO
Sell to B, P or rent to S, and collect
damages
Pay necessary expenses to B, P, S (449,
450, 451)
Bad Faith
{Same as though all acted in good faith (453)}
Bad Faith Good Faith Good Faith
Acquire improvements after paying Remove improvements in any event Remove materials if w/o injury
indemnity and damages to B, P, S Be indemnified for damages Collect value of materials, primarily from B,
Subsidiarily liable to owner of materials P, S; subsidiarily from LO (447, 455)
(454, 447, 455)
Bad Faith Bad Faith Good Faith
Acquire improvements after indemnity to B, Right of retention for necessary expenses Collect value of materials primarily form B,
P, S; subsidiarily liable to owner of Pay value of materials to owner of P, S; subsidiarily from LO
materials materials and pay him damages (546, 447) 2. Collect damages
a. Sell to B, P except: if the value is 3. If B, P, S acquires improvements remove
considerably more materials in any event (447, 455)
b. Rent to S (453, 448, 546, 548, 455)
Good Faith Bad Faith Good Faith
Option to: Recover necessary expenses (452, 443) Collect value of materials and damages
Acquire w/o paying indemnity and collect Lose improvements w/o right of retention from B, P, S and subsidiarily from LO
damages from LO (452) unless LO sells the land Remove materials in any event if B, P, S
Sell to B, P and rent to S and collect acquires improvements
damages
Demolish or restore and collect damages
Pay necessary expenses to B, P, S
Subsidiarily liable to owner of materials
(449, 450, 451)
Bad Faith Good Faith Bad Faith
Acquire improvements & pay indemnity & Indemnity for damages No indemnity; lose materials (449)
damages to B, P, S (454,447) Remove improvements in any event
(454,447)
Article 448:

Application:
Applies only when the builder, planter or sower believes he has the right to build, plant or sow because he thinks he
owns the land or believes himself to have a claim of title (Morales vs. CA, GR No. 126196, January 28, 1998).
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 Art. 448 should apply to determine the respective rights of the
parties (Ignao vs. Intermediate Appellate Court GR No. 72876, January 18, 1991).
Does not apply where ones interest in the land is merely that of a holder such as a mere lessee under
a rental contract (Balucanag vs. Francisco GR No. L-33422, May 30, 1983), an agent, or a
usufructuary (Macasaet vs. Macasaet GR No. 154391, September 30, 2004).
The provision on indemnity in Art. 448 may be applied by analogy considering that the primary intent of the law is to
avoid a state of forced coownership especially where the parties agree that Arts. 448 and 546 are applicable and
indemnity for the improvements may be paid although they differ as to the basis of the indemnity. It is the current
market value of the improvements which should be made the basis of reimbursement to the builder in good faith
(Pecson vs. CA, GR No. 94033, May 29, 1995).

Options of the landowner:

The owner of the land shall have the right to appropriate as his own the building, planting or sowing, after payment of
the necessary and useful expenses. The owner of the land may also oblige the builder, planter or sower to pay the
price of the land. If the owner chooses to sell his land, the builder, etc. must purchase the land; otherwise, the owner
may remove the improvements thereon. The builder, etc. is not obliged to purchase the land if its value is
considerably more than the building. In such case, the builder, etc. must pay rent. If the parties cannot come to terms
over the conditions of the lease, the court must fix the terms thereof. (Ballatan vs. CA, GR No. 125683, March 2,
1999).
The landowner may not refuse both to pay for the building and to sell the land and instead seek to compel the owner
of the building to remove the building from the land. He is entitled to such removal ONLY when, after having chosen to
sell the land, the other party fails to pay for said land (Ignacio vs. Hilario GR No. L-175, April 30, 1946).
Should no other arrangement be agreed upon, the owner of the land does not automatically become the owner of the
improvement (Filipinas Colleges, Inc. vs. Timbang GR No. L-12812, September 29, 1959).

Right to choose:
It is the owner of the land who must exercise the option because his right is older and because, by the principle of
accession, he is entitled to the ownership of the accessory (Bernardo vs. Bataclan GR No. 44606, November 28,
1938).
The so-called workable solution, as provided in the case of Grana vs. CA (GR No. L-49219, April 18, 1988) is one
where the Court orders the owner of the land to sell to the builder, etc. the part of the land intruded upon, and thereby
depriving him of his right to choose, because it would be impractical to choose the first alternative for the whole
improvement might be rendered useless.