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Name: Kong, Marchini Sandro C.

Title: National Housing Authority V. Grace Baptist Church


Doctrine: Art. 453 “If there was bad faith, not only on the person who built, planted
or sowed on the land of another, but also on the part of the owner of such land, the
rights of one and the other shall be the same as though both had acted in good faith.

FACTS:
Grace Baptist Church wanted to buy a lot from Petitioner which was granted by the
latter. Respondents entered into possession of the lots and introduced
improvements thereon. Later on, petitioner’s board of directors passed a resolution
approving the sale of the subject lot at the price of 700 pesos per square meter or
total price of 430,500.00 pesos which said resolution was sent to respondent.
Respondents tendered a manager’s check worth 55,350.00 pesos and insisted it
was the for the full payment as the price quoted to them by the Field Officer.
Petitioner returned the check as it was insufficient. Respondent tendered the
payment to no avail. Hence respondents filed a case for specific performance with
damages. RTC ruled that there was no perfected contract of sale and ordered the
return of the lot with payment of rentals. Court of Appeals on the other hand affirmed
the non perfection of contract of sale but ordered petitioner to execute the sale of the
lots. Hence the case at bar.
ISSUE:
What is the effect of the contract of sale to the improvements made by Respondent?

RULING:
In the case at bar, the offer of the NHA to sell the subject property, was similarly not
accepted by the respondent. Thus, the alleged contract involved in this case should be
more accurately denominated as inexistent. There being no concurrence of the offer and
acceptance, it did not pass the stage of generation to the point of perfection. As such, it
is without force and effect from the very beginning or from its incipiency, as if it had never
been entered into, and hence, cannot be validated either by lapse of time or ratification.
Equity cannot give validity to a void contract, and this rule should apply with equal force
to inexistent contracts.
We note from the records, however, that the Church, despite knowledge that its intended
contract of sale with the NHA had not been perfected, proceeded to introduce
improvements on the disputed land. On the other hand, the NHA knowingly granted the
Church temporary use of the subject properties and did not prevent the Church from
making improvements thereon. Thus, the Church and the NHA, who both acted in bad
faith, shall be treated as if they were both in good faith. In this connection, Article 448 of
the Civil Code provides:
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 and 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.

Pursuant to our ruling in Depra v. Dumlao,29 there is a need to remand this case to the
trial court, which shall conduct the appropriate proceedings to assess the respective
values of the improvements and of the land, as well as the amounts of reasonable rentals
and indemnity, fix the terms of the lease if the parties so agree, and to determine other
matters necessary for the proper application of Article 448, in
relation to Articles 546 and 548, of the Civil Code.

BAR QUESTION
X wanted to buy a land from Y corporation. Y Corporation agreed without setting forth the
price. Upon hearing the agreement Y Corporation, X was allowed entered into property
and built improvements. On a later Board Resolution, Y Corporation provided for the
price. X got angry because it was higher than what was quoted by the Field Officer. Hence
there being an unperfected contract between X and Y Corporation, and both being in bad
faith, what is the legal effect?

ANSWER:
We note from the records, however, X, despite knowledge that its intended contract of
sale with the Y Corporation had not been perfected, proceeded to introduce
improvements on the disputed land. On the other hand, Y Corporation knowingly granted
the X temporary use of the subject properties and did not prevent the X from making
improvements thereon. Thus, X and Y Corporation , who both acted in bad
faith, shall be treated as if they were both in good faith. In this connection, Article 448 of
the Civil Code provides:
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 and 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.