consideration for the void sale, and the application of rules on

accession for the building.

ERLINDA DINGLASAN DELOS SANTOS ET AL. V.
ALBERTO ABEJON AND THE ESTATE OF RULING
TERESITA DINGLASAN ABEJON, G.R. NO. 215820, The Supreme Court PARTIALLY GRANTED the petition,
MARCH 20, 2017 affirming with modifications the CA Decision.
First, the Deed of Sale and the Release of Mortgage, both dated
July 8, 1992, were declared NULL and VOID [21a].
FACTS Consequently, the Register of Deeds of Makati City was
The case originated from a Complaint for Cancellation of Title ordered to CANCEL TCT No. 180286 in Teresita's name and
with collection of sum of money filed by respondents Alberto REINSTATE TCT No. 131753 in the name of Pedro and
Abejon and the estate of Teresita Dinglasan Abejon against Erlinda Delos Santos, restoring its previous state with the
petitioners Erlinda Dinglasan Delos Santos and her daughters, mortgage annotated thereon [21b].
Virginia, Aurea, and Bingbing. The complaint alleged that
Erlinda and her late husband Pedro Delos Santos borrowed Regarding the ₱100,000.00 loan obligation, the Court declared
₱100,000.00 from Teresita, Erlinda's sister, evidenced by a it as the liability of the conjugal partnership of petitioner
Promissory Note dated April 8, 1998, and secured by a Erlinda Dinglasan Delos Santos and her deceased husband
mortgage on their 43.50 square meter property in Makati City, Pedro Delos Santos, which respondents may recover [22-I]. As
covered by TCT No. 131753. After Pedro's death in 1989, Erlinda and Pedro were married before the effectivity of the
Erlinda, unable to pay the loan, purportedly agreed to sell the Family Code and absent a pre-nuptial agreement, their property
land to Teresita for ₱150,000.00 (the loan amount plus an relations were governed by the conjugal partnership of gains.
additional ₱50,000.00). Subsequently, a Deed of Sale and a Thus, the loan is chargeable to their conjugal partnership, and
Release of Mortgage were executed on July 8, 1992, leading to if insufficient, Erlinda and Pedro's estate (not directly his heirs)
the cancellation of TCT No. 131753 and the issuance of TCT would be solidarily liable for the unpaid balance with their
No. 180286 in Teresita's name. Respondents then constructed a separate properties. The Court clarified that Pedro's heirs, the
three-storey building worth ₱2,000,000.00 on the land. daughters, could not be held directly answerable for the loan.
Petitioners, however, refused to acknowledge the sale, Respondents were given the alternative option to foreclose the
asserting that Pedro's signature on the 1992 Deed of Sale was mortgage on the subject land instead of pursuing a personal
forged since he had died in 1989. Respondents thus demanded action for collection.
the ₱150,000.00 sale consideration and the ₱2,000,000.00
construction cost, but to no avail, leading them to file the As for the ₱50,000.00 additional consideration Teresita paid for
instant case. Petitioners denied involvement in the forged deed, the void sale, petitioner Erlinda Dinglasan Delos Santos was
claiming Teresita fabricated it and that they had not received ORDERED to return this amount to respondents, with legal
demands for payment, further stating that the improvements by interest of six percent (6%) per annum from the finality of the
Teresita were voluntary. Decision until fully paid. This liability fell solely on Erlinda, as
she was the only petitioner involved in the sale [13, 22-II].
During pre-trial, the parties stipulated that: (a) TCT No.
131753 was cancelled and replaced by TCT No. 180286; (b) Concerning the ₱2,000,000.00 construction cost of the
the Deed of Sale and Release of Mortgage executed on July 8, three-storey building, the Court applied the rules on accession,
1992, were forged and should be cancelled; (c) TCT No. specifically Articles 448 and 453 of the Civil Code, which
180286 should be cancelled, and TCT No. 131753 reinstated; govern situations where the landowner is different from the
(d) petitioners have been occupying the land and the owner of the improvement. The Court found that respondents
three-storey building since the spurious deed was executed; and (Teresita) were builders in bad faith because Teresita was
(e) the ₱100,000.00 loan subsists, and respondents paid for the aware of Pedro's death in 1990, yet still proceeded with the
improvements. Deed of Sale in 1992, which contained his forged signature,
before constructing the building. Simultaneously, petitioners
The Regional Trial Court (RTC) declared the Deed of Sale null (landowners) were deemed in bad faith as they knew of the
and void, ordered the cancellation of TCT No. 180286 and defect in the sale but acquiesced to the construction of the
reinstatement of TCT No. 131753. It ordered petitioners to pay building. Pursuant to Article 453 of the Civil Code, when both
respondents ₱100,000.00 plus 12% interest, ₱2,000,000.00 for the landowner and the builder act in bad faith, they are treated
the construction cost, and ₱100,000.00 for attorney's fees. The as if both had acted in good faith. Under this premise, Article
Court of Appeals (CA) affirmed the RTC ruling with 448 of the Civil Code provides the landowner (petitioners) with
modifications, cancelling the Release of Mortgage, adjusting two options: (a) appropriate the improvements after
the interest computation date for the loan, and imposing 6% reimbursing the builder (respondents) for necessary and useful
interest on the construction cost. The CA held the children expenses as provided in Articles 546 and 548 of the Civil
liable for the loan as heirs and found reimbursement for the Code, with respondents having a right of retention until
building proper due to petitioners' knowledge and occupation. reimbursement; or (b) oblige the builder to pay the price of the
The petitioners appealed to the Supreme Court. land, unless the land's value is considerably more than the
improvements, in which case the builder pays reasonable rent.
ISSUE To properly apply these rules, the case was REMANDED to
The core issue before the Supreme Court was whether the CA the Regional Trial Court to determine the necessary matters for
correctly held petitioners liable to respondents for the the proper application of Articles 448, 453, 546, and 548 of the
aggregate amount of ₱2,200,000.00, consisting of the Civil Code [20, 23-III].
₱100,000.00 loan obligation, the ₱2,000,000.00 construction
cost of the three-storey building, and ₱100,000.00 for Finally, the Court DELETED the award of attorney's fees and
attorney's fees and costs of suit. This encompassed determining litigation expenses in the amount of ₱100,000.00, finding no
the proper liability for the loan, the refund of the additional justification for such an award to either party [20, 22-IV].
DOCTRINE the conjugal partnership of gains, which dictates how debts
1. Pre-trial stipulations are binding on the parties and simplify contracted during marriage are charged. The Court's discussion
the trial and resolution of cases. also highlights the nature of a mortgage as a security for a loan
and the alternative remedies available to a creditor, which are
2. Liability for Conjugal Debts: Debts contracted by spouses fundamental principles in contract and credit transactions. The
during marriage, under the regime of conjugal partnership of declaration of nullity of the Deed of Sale reinforces the Civil
gains (applicable if married before the Family Code without a Code principle that void ab initio contracts do not produce
pre-nuptial agreement), are chargeable to the conjugal legal effects and necessitate mutual restitution (Article 1398,
partnership. If the partnership is insufficient, the spouses are though not explicitly cited, is implicitly applied through the
solidarily liable with their separate properties. However, upon general principle of restitution for void contracts). Lastly, the
the death of a spouse, the debt is passed to the deceased issue of attorney's fees directly invokes Article 2208 of the
spouse's estate, and the heirs are not directly answerable for it. Civil Code, which enumerates the specific circumstances under
3. Alternative Remedies for Secured Creditors: A creditor which such fees may be recovered, emphasizing that they are
holding a secured loan, such as one with a mortgage, has the not automatically awarded to the prevailing party.
option to either file a personal action for the collection of a sum
of money or institute a real action to foreclose on the mortgage DEPRA V. DUMALO, G.R. NO. L-57348, MAY 16, 1985
security. These remedies are alternative, meaning the choice of
one precludes the other.

4. Effects of Contract Nullity: The declaration of nullity of a FACTS

contract that is void ab initio operates to restore things to the Plaintiff-appellee, Francisco Depra, is the registered owner of
state and condition in which they were found before its Lot No. 685, a parcel of land in Dumangas, Iloilo, with an area
execution, necessitating mutual restitution. of approximately 8,870 square meters. Defendant-appellant,
Agustin Dumlao, owns an adjoining Lot No. 683. Sometime in
5. Rules on Accession (Builders in Bad Faith and 1972, when Dumlao constructed his house on his lot, the
Landowners in Bad Faith): The Civil Code provisions on kitchen encroached upon thirty-four (34) square meters of
accession (Articles 448, 453, 546, and 548) apply when the Depra's property. This encroachment was discovered after a
landowner is different from the owner of the improvement. A relocation survey of Depra's lot on November 2, 1972.
builder is in bad faith if they build with knowledge of a defect Following a demand letter, Depra's mother, Beatriz Depra,
in their title or mode of acquisition. A landowner is in bad faith initially filed an action for Unlawful Detainer against Dumlao
if the building was done with their knowledge and without in the Municipal Court of Dumangas on February 6, 1973,
opposition. When both the landowner and the builder act in bad which was later amended to include Francisco Depra as a
faith, their rights shall be the same as though both had acted in party-plaintiff.
good faith (Article 453 Civil Code). In such a scenario, the
landowner (treated as being in good faith) has two options After trial, the Municipal Court found Dumlao to be a builder
under Article 448: either appropriate the improvements after in good faith and, applying Article 448 of the Civil Code,
reimbursing the builder for necessary and useful expenses rendered judgment on September 29, 1973. The Municipal
(with the builder having a right of retention), or oblige the Court's decision ordered a "forced lease" over the disputed 34
builder to pay the price of the land (unless the land's value is square meters, with Depra as lessor and Dumlao as lessee, at a
considerably more, in which case the builder pays reasonable rent of ₱5.00 a month, commencing upon finality of the
rent). decision. Neither party appealed this judgment, but Depra
refused to accept rental payments, leading Dumlao to deposit
6. Award of Attorney's Fees: Attorney's fees are not awarded them with the Municipal Court.
merely because a party wins a suit. They require factual, legal,
and equitable justification under Article 2208 of the Civil Subsequently, on July 15, 1974, Depra filed a Complaint for
Code, as a premium should not be placed on the right to Quieting of Title against Dumlao before the Court of First
litigate. Instance of Iloilo, involving the very same 34 square meters.
Dumlao, in his Answer, admitted the encroachment but raised
Connection to Property Law or Civil Code This case intricately the defense of res judicata, asserting that the Municipal Court's
connects to several key concepts in the Civil Code of the decision was final and executory. The parties later submitted a
Philippines. Primarily, it delves into Property Law, particularly Joint Motion for Judgment based on a Stipulation of Facts,
the Law on Accession concerning immovable property which notably conceded that Dumlao was a builder in good
(Articles 448, 453, 546, and 548) [14, 18, 20, 23-III]. The faith. Based on this stipulation, the Trial Court, on October 31,
ruling provides a detailed application of these articles, 1974, issued an Order declaring Depra as the owner of the 34
emphasizing the determination of good faith and bad faith of square meters and entitled to possess the same. This Order,
both the builder (respondents) and the landowner (petitioners) however, did not address the builder in good faith aspect or the
when improvements are made on another's land. The Court's remedies under Article 448. Depra rebutted the res judicata
finding of mutual bad faith and the subsequent treatment of the claim, arguing that the Municipal Court's decision was null and
parties as if they were in good faith, as mandated by Article void ab initio for lack of jurisdiction.
453, is a crucial aspect of this connection. The options
available to the landowner under Article 448 (appropriation ISSUE
with indemnity or selling the land/collecting rent) illustrate the The central issue before the Supreme Court was the validity of
legal framework for resolving such disputes. the Municipal Court's decision imposing a "forced lease" and
its effect on the subsequent action for quieting of title,
Furthermore, the case involves principles of Obligations and particularly whether it constituted res judicata. Additionally,
Contracts. The liability for the ₱100,000.00 loan is governed the Court needed to determine the proper application of the
by contractual obligations and the provisions of the Family rights and obligations of a landowner and a builder in good
Code (Article 121) on marital property regimes, specifically
faith under Article 448 of the Civil Code, given the undisputed DOCTRINE
fact that Dumlao was a builder in good faith. 1. Jurisdiction of Courts: Municipal Courts in unlawful
detainer cases have limited jurisdiction, primarily over
RULING possession, and cannot validly impose an encumbrance on real
The Supreme Court SET ASIDE the judgment of the trial property like a "forced lease," which falls under the jurisdiction
Court and REMANDED the case to the Regional Trial Court of of Courts of First Instance (now Regional Trial Courts).
Iloilo for further proceedings consistent with Articles 448 and
546 of the Civil Code. 2. Res Judicata: A judgment rendered by a court without
jurisdiction is null and void ab initio and cannot constitute res
First, the Supreme Court ruled that the Municipal Court's judicata. Furthermore, a judgment in a detainer case does not
decision was null and void ab initio. It held that the Municipal bar an action between the same parties respecting title to the
Court overstepped its jurisdiction in an unlawful detainer case land.
by imposing a "forced lease". Jurisdiction in detainer cases is
limited to possession only (Sec. 7, Rule 70, Rules of Court), 3. Builder in Good Faith (Article 448, Civil Code): When a
while a lease, being an interest in real property, falls under the person builds on land owned by another in good faith, the
jurisdiction of Courts of First Instance (now Regional Trial landowner has specific options: (a) to appropriate the works
Courts) (Sec. 44(b), Judiciary Act of 1948; Sec. 19(2), Batas after paying indemnity as provided in Articles 546 and 548
Pambansa Blg. 129). Consequently, a void judgment cannot (value of expenses or increase in value), or (b) to oblige the
operate as res judicata. Moreover, the Court noted that res builder to pay the price of the land. The landowner cannot
judicata would not apply due to differences in the cause of refuse both options and compel the removal of the building.
action (deprivation of possession in Municipal Court vs.
ownership in CFI) and the explicit provision that a detainer 4. Limitation on Compelling Purchase: The builder cannot
judgment does not bar actions respecting title. be obliged to buy the land if its value is considerably more than
that of the building. In such a case, the builder shall pay
Second, the Court upheld the parties' stipulation that Dumlao reasonable rent if the landowner does not choose to appropriate
was a builder in good faith. It clarified that the Trial Court the building after proper indemnity, with the court fixing the
erred in simply ruling that Depra was "entitled to possession," terms of the lease in case of disagreement.
implying removal of the kitchen, without applying the options
available to the landowner under Article 448. The Court 5. Right of Retention: The owner of the building erected in
emphasized that a landowner cannot refuse both to pay for the good faith on another's land is entitled to retain possession of
building and to sell the land, and then compel removal. the land until paid the value of his building.
Therefore, the case was remanded to the Regional Trial Court
to conduct specific proceedings: Connection to Property Law or Civil Code This case is a
definitive exposition on the Law on Accession concerning
1. Determine amounts: The RTC must ascertain (a) the present immovable property, particularly the application of Article 448
fair price of Depra's 34 square meter land, (b) the expenses of the Civil Code. Article 448 governs the rights and
incurred by Dumlao for the kitchen's construction, (c) any obligations of a landowner and a builder, planter, or sower who
increase in the land's value due to the kitchen ("plus value"), acts in good faith. The ruling meticulously outlines the two
and (d) whether the land's value is considerably more than that options available to the landowner: either to appropriate the
of the kitchen. improvement (the kitchen, in this case) upon payment of
indemnity (as per Articles 546 and 548, for necessary and
2. Grant Depra the option: After these determinations, the RTC useful expenses) or to oblige the builder to purchase the land. It
must grant Depra a 15-day period to exercise his option under also elaborates on the exception where the builder cannot be
Article 448 of the Civil Code: compelled to buy the land if its value is considerably higher
◦ Appropriate the kitchen: By paying Dumlao either the than the improvement, introducing the alternative of a "forced
amount of the expenses spent or the increase in the land's lease" with court-determined terms.
value, as provided in Article 546.
◦ Oblige Dumlao to pay for the land: Depra can require MIRANDA V. FADULLON, G.R. NO. L-8220,
Dumlao to pay the price of the 34 square meters. OCTOBER 29, 1955

3. Address Dumlao's rejection/lease: If Depra chooses to sell

the land but Dumlao rejects it because the land's value is FACTS
considerably more than the kitchen's, the parties shall be given In 1939, Lucio Tio owned Lot 1589-J in Cebu, covered by TCT
15 days to agree on lease terms. If no agreement is reached, the No. 10548. A power of attorney in favor of Esteban Fadullon,
Court shall fix the terms of a forced lease, not exceeding two executed by Tio, was registered and annotated on the title on
years, with a minimum monthly rental of ₱10.00, increasing by December 29, 1939. In 1946, Fadullon, using this power of
10% for the second year. Dumlao cannot make further attorney, sold the land to spouses Dionisio Segarra and
constructions, and upon expiration or default in rental Clemencia N. de Segarra ("Segarras") with a right of
payments, Depra can terminate the lease, recover the land, and repurchase within one month. About ten days after the
have the kitchen removed at Dumlao's expense. repurchase period expired, the Segarras filed a sworn petition
for consolidation of their ownership, registering it on May 15,
4. Award past compensation: Dumlao must pay Depra ₱10.00 1946. Apprised of the sale, Lucio Tio filed a complaint (Civil
per month as reasonable compensation for the occupancy of the Case No. 181) on June 4, 1946, to annul the sale. The Segarras
land from 1952 until the commencement of the forced lease. were served with summons on June 10, 1946. The trial court
eventually annulled the sale, a decision affirmed by the Court
5. Strict compliance: The periods fixed by the trial court shall of Appeals (CA), which also required the Segarras to pay
be inextendible, with remedies for execution upon reasonable rentals on the property from the filing of the action
non-compliance. until its return to Tio.
During their possession, the Segarras introduced improvements 2. Indicators of Bad Faith: Circumstances such as dealing with
on the lot, consisting of a three-room building, a storage room, an agent under an old power of attorney, knowledge of prior
an artesian well with a tower and water tank, and cement encumbrances, an unusually short repurchase period, and hasty
flooring, which they valued at ₱5,300. After the CA decision consolidation of ownership can collectively indicate bad faith
became final, the Segarras filed a motion with the trial court, on the part of a purchaser/builder.
claiming they were possessors in good faith and had introduced
the improvements in good faith. They asked the court to order 3. Rentals as Proof of Bad Faith: Requiring a possessor or
Tio to pay for the improvements or allow them to buy the land. builder to pay rentals on the property is a clear indication that
On August 28, 1952, the trial court, "without opposition" from they are not considered to be in good faith, as a builder in good
Tio, ordered him to either pay the Segarras ₱5,300 for the faith has a right of retention and generally is not compelled to
improvements or allow them to purchase the lot. Tio filed a pay rentals.
motion for reconsideration, arguing that the Segarras were
possessors and builders in bad faith, asserting that he did not 4. No Reimbursement/Retention for Bad Faith Builder: A
oppose because he believed the court was aware of their bad builder in bad faith is not entitled to the same rights as a good
faith, and quoting portions of the previous trial court and CA faith builder, meaning they cannot demand reimbursement for
decisions that inferred such bad faith. The motion for improvements or compel the landowner to sell the land.
reconsideration was denied, leading to the present appeal.
Evidence also showed that the Segarras applied for a building Connection to Property Law or Civil Code
permit on December 4, 1946, and it was granted on January 11, This case is a direct application and interpretation of the Civil
1947, about seven months after they received the summons Code of the Philippines, particularly concerning the Law on
regarding the annulment case on June 10, 1946, indicating that Accession in immovable property. It highlights the critical
the improvements were introduced long after any possible distinction between a "builder in good faith" and a "builder in
claim of good faith as possessors had ended. bad faith" as it relates to rights over improvements made on
another's land. While Article 448 of the Civil Code grants
ISSUE specific options to a landowner when dealing with a builder in
The central issue before the Supreme Court was whether the good faith (i.e., to appropriate the improvements upon payment
Segarras were possessors and builders in good faith, entitling of indemnity, or to oblige the builder to purchase the land), this
them to reimbursement for the improvements or to compel the case clarifies that these rights do not extend to a builder found
landowner to sell the land, or if they were in bad faith, thereby to be in bad faith. The ruling implicitly refers to the principles
negating such rights. This directly questioned the validity of underlying articles on possession (e.g., Article 526 which
the trial court's order dated August 28, 1952. defines good faith possessors) and fruits/expenses (e.g.,
Articles 544, 549, 550, 552 which distinguish rights based on
RULING good or bad faith). The Court's finding that the Segarras built
The Supreme Court SET ASIDE the appealed order of August after receiving summons underscored a crucial point in
28, 1952, and the order of October 15, 1952, which denied determining the cessation of good faith, directly impacting
reconsideration. The Court agreed with the plaintiff-appellant, their entitlements under property law.
Salvacion Miranda (Lucio Tio's wife and successor), finding
that the Segarras were not possessors and builders in good IGNACIO V. HILARIO, G.R. L-175, APRIL 30, 1946
faith. The Court concluded that, although neither the original
trial court nor the Court of Appeals explicitly stated it, their
previous decisions clearly inferred that the Segarras acted with FACTS
bad faith, or at least were not in good faith, based on The case originated from a dispute over a parcel of land in
circumstances such as the old power of attorney, the prior Pangasinan, owned by respondents Elias Hilario and Dionisia
mortgage on the property, the extraordinarily short repurchase Dres, but on which petitioners Damian, Francisco, and Luis
period, and their swift move to consolidate ownership. Ignacio had built houses and granaries on the residential
portion. The Court of First Instance, presided over by Judge
Crucially, the Supreme Court pointed out that the Court of Alfonso Felix, initially ruled that the Hilarios were the legal
Appeals had previously sentenced the Segarras to pay rentals owners of the entire property, but conceded ownership of the
on the property, which is a strong indication and even proof buildings to the Ignacios as possessors in good faith, in
that they were considered possessors and builders in bad faith. accordance with Article 361 of the Civil Code. The judgment
The Court explained that a builder in good faith may not be stipulated that the Ignacios were entitled to retain possession of
required to pay rentals and has a right to retain the land until the residential lot until they were paid the market value of their
reimbursed for expenses incurred. Furthermore, the definitive buildings, unless the Hilarios preferred to sell them the
evidence showed that the improvements were introduced long residential lot at a proportionate value. If the Ignacios failed to
after the Segarras had received summons on June 10, 1946, purchase the residential lot, they were to remove their
challenging their title, as they applied for a building permit in structures within sixty (60) days after the decision became final
December 1946 and obtained it in January 1947. This and the court was informed of the parties' attitudes.
conclusively established that they built in bad faith. Importantly, the decision allowed the parties to return to court
Consequently, the orders granting them the rights of good faith to determine their respective rights under Article 361 if an
builders were erroneous and were set aside. extra-judicial settlement could not be reached, and it did not
specify the values of the buildings or the lot, nor the periods for
DOCTRINE exercising the options.

1. Builder in Bad Faith: A person who introduces Subsequently, the Hilarios, in a motion filed before Judge
improvements on land after being legally informed of a Felipe Natividad (presiding over the same court), requested an
challenge to their title (e.g., through summons in an annulment order of execution, alleging that since they chose neither to pay
case) or with knowledge of a defect in their title is considered a for the buildings nor to sell the land, the Ignacios should be
builder in bad faith. compelled to remove the structures at their own expense and
restore possession to the Hilarios. The Ignacios objected, but executed. Such a judgment is incomplete and requires further
Judge Natividad granted the motion, leading the Ignacios to judicial action to settle these particulars before it can become
petition the Supreme Court for certiorari. executory.
4. No Substantial Amendment in Execution: An order of
ISSUE execution cannot substantially amend or vary the terms of the
The central issue before the Supreme Court was whether Judge original judgment.
Natividad's order of execution, which compelled the petitioners
(Ignacios) to remove their buildings because the respondents Connection to Property Law or Civil Code
(Hilarios) chose neither to pay for the buildings nor to sell the This case is a foundational interpretation of Property Law in
land, was valid. This encompassed determining the proper the Civil Code of the Philippines, specifically dealing with
interpretation and execution of the original judgment under accession under Article 361 (now Article 448) and Article 453
Article 361 of the Civil Code, especially given that the (now Article 546). It meticulously defines the rights and
previous judgment left certain values and periods obligations of a landowner and a builder in good faith when
undetermined. improvements are made on another's property. The ruling
emphasizes the exclusive nature of the landowner's options
RULING under Article 361, clarifying that the landowner must choose
The Supreme Court SET ASIDE the writ of execution issued between paying for the improvements or selling the land, and
by Judge Natividad and ordered the lower court to hold a cannot simply demand removal of the structures. It also
hearing in the principal case. The Court ruled that Judge highlights the builder's right of retention until proper indemnity
Natividad's order compelling the Ignacios to remove their is paid, a crucial protection for good faith builders.
buildings was null and void because it substantially amended Furthermore, the case underscores vital principles of civil
the original judgment and was offensive to Articles 361 and procedure regarding the requirements for a judgment to be
453 of the Civil Code. The Court clarified that under Article considered final and executory, preventing ambiguous rulings
361, the landowner (Hilarios) has the option either to pay for from causing further delays and litigation.
the building or to sell the land to the builder (Ignacios), but the
landowner cannot refuse both options and then compel the IN BERNARDO V. BATACLAN, G.R. NO. L-44606,
builder to remove the structure. The right to compel removal NOVEMBER 28, 1938
only arises if the landowner chooses to sell the land and the
builder fails to pay for it.
FACTS
The Court further found that Judge Felix's original decision The plaintiff-appellant, Vicente Sto. Domingo Bernardo,
was procedurally erroneous because it failed to determine the became the owner of a 90-hectare parcel of land in Cavite after
actual market value of the buildings and the lot, as well as the purchasing it from Pastor Samonte and others. After
specific periods within which the options could be exercised successfully securing possession from the vendors through
and payments made, leaving these crucial particulars for future Civil Case No. 1935, Bernardo discovered the
determination. This made the judgment incomplete and defendant-appellant, Catalino Bataclan, already on the land.
prevented it from becoming truly final and executory, as a Bataclan had been authorized by former owners as far back as
sheriff could not execute a judgment lacking these specifics. 1922 to clear the land and make improvements. In a subsequent
Therefore, the case was remanded to the lower court to: case, Civil Case No. 2428, filed by Bernardo against Bataclan,
Bernardo was declared the owner of the land, but Bataclan was
1. Hold a hearing to determine the prices of the buildings and found to be a possessor in good faith, entitled to reimbursement
the residential lot. of P1,642 for his work and improvements, and further granted
2. Establish the period of time within which the Hilarios may the right to retain possession until this sum was paid. The
exercise their option to either pay for the buildings or sell their initial court decision gave Bernardo, as the landowner, a
land. 30-day option: either pay Bataclan the P1,642 for the
3. If the Hilarios choose to sell, determine the period of time improvements, thereby acquiring them, or oblige Bataclan to
within which the Ignacios may pay for the land. These periods pay for the land at P300 per hectare. Both parties appealed, and
are to be counted from the date the final judgment becomes the Supreme Court, in G.R. No. 37319, modified the decision,
executory or unappealable, after which a final judgment shall increasing Bataclan's compensation to P2,212 and reducing the
be rendered based on the evidence. land price to P200 per hectare. Bernardo was given 30 days to
exercise his option. On January 9, 1934, Bernardo chose to
DOCTRINE oblige Bataclan to pay for the land at P200 per hectare, totaling
1. Landowner's Options under Article 361: When a builder P18,000. However, Bataclan informed the lower court that he
constructs in good faith on another's land (Article 361, Civil was unable to pay for the land. Subsequently, the court ordered
Code), the landowner has two mutually exclusive options: (a) the land sold at public auction, at Bernardo's instance, and
to appropriate the building after paying indemnity (as per without objection from Bataclan. The land was sold to Toribio
Articles 453 and 454), or (b) to oblige the builder to pay the Teodoro, the highest bidder, for P8,000 on April 5, 1935. The
price of the land. The landowner cannot refuse both options lower court later ordered Teodoro to be placed in possession of
and compel the builder to remove the structure; the right to the land, but with a reservation that Bataclan could pursue an
compel removal only arises if the landowner chooses to sell the ordinary action to claim the P2,212 from Bernardo, to be
land and the builder fails to pay. deducted from the P8,000 Bernardo received from the sale.
2. Right of Retention for Good Faith Builder: A builder in Both Bernardo and Bataclan appealed this final order.
good faith is entitled to retain possession of the land until
indemnified for the value of their building (Article 453). ISSUE
3. Finality and Execution of Judgment: A judgment that The central issue before the Supreme Court was whether
leaves material details (such as specific values for indemnity or Catalino Bataclan, as a builder in good faith, still retained his
sale, and periods for exercising options) undetermined for right of retention over the land or a claim for reimbursement of
future proceedings is not truly final and cannot be properly his improvements from Vicente Sto. Domingo Bernardo, after
Bernardo had exercised his option to oblige Bataclan to pay for subsequently sold it to private respondents, spouses Juan and
the land, and Bataclan's inability to do so led to the public Erlinda Nuguid. Pecson challenged the auction sale, but the
auction and sale of the property. Regional Trial Court (RTC) and the Court of Appeals (CA)
consistently ruled that only the land, and not the apartment
RULING building, was included in the auction sale and subsequent
The Supreme Court modified the lower court's judgment by transfer to the Nuguids. This decision became final and
eliminating the reservation made in favor of Bataclan to executory on June 23, 1993. Following this, the Nuguids
recover the sum of P2,212 from Bernardo. The Court held that moved for delivery of possession of both the lot and the
Bataclan, as a possessor in good faith, lost his right of retention apartment building, stating their option to reimburse Pecson the
over the land when he declared his inability to pay for the land original construction cost of P53,000.00, as Pecson was
after Bernardo had exercised his option to sell it. The Court deemed a builder in good faith. The RTC granted the Nuguids'
reasoned that once the landowner (Bernardo) chose his option, motion, ordering reimbursement of P53,000.00, immediate
which was to require the builder (Bataclan) to pay for the land, issuance of a writ of possession, and directing Pecson to pay
and the builder failed to comply with that choice, leading to the rent of P21,000.00 per month for the lot from June 23, 1993,
public auction and the subsequent sale of the land to a third which was offset against the P53,000.00 due to Pecson. Pecson
party (Toribio Teodoro), Bataclan's right of retention against challenged this order, and the CA affirmed it in part, agreeing
Bernardo was extinguished. Since Bernardo himself initiated that the Nuguids opted to appropriate the improvement and
the public auction and received the P8,000 proceeds from the Pecson was entitled to reimbursement under Article 546 with a
sale, the Court found no justification for Bataclan to recover right of retention. However, the CA found the RTC erred in
the P2,212 from Bernardo. The judgment was affirmed in all ordering Pecson to pay rent, but upheld the offsetting of the
other respects. P53,000.00 against the rents Pecson collected from the
apartment tenants. The CA ultimately ruled that while Pecson's
DOCTRINE restoration to possession was moot (as a writ of possession had
This case clarifies the implications of the landowner's exercise been enforced), the Nuguids should pay Pecson P53,000.00,
of option under the rules of accession. It affirms that the and Pecson should account for all fruits received from June 23,
landowner's option to either appropriate the improvements or 1993, to be offset. Pecson then appealed to the Supreme Court.
oblige the builder in good faith to pay for the land (Article 361,
now Article 448, Civil Code) is binding once exercised. If the ISSUE
landowner chooses to sell the land to the builder, and the The central issue before the Supreme Court was the proper
builder is unable to pay, the builder loses the right of retention application of Articles 448 and 546 of the Civil Code to
(Article 453, now Article 546, Civil Code) and any claim for determine the basis of indemnity for the apartment building,
reimbursement for the improvements against the original and the rights of a builder in good faith (Pecson) regarding
landowner, especially when the land is subsequently sold at possession and the fruits of the improvements during the period
public auction due to the builder's default. The law requires the of retention, when the landowner (Nuguids) opts to appropriate
landowner to make a choice, but once that choice is made and the building.
the builder cannot fulfill their part, the legal relationship
evolves, terminating the builder's prior rights of retention and RULING
reimbursement against the original landowner. The Supreme Court SET ASIDE the decision of the Court of
Appeals and the Order of the Regional Trial Court. The Court
CONNECTION TO PROPERTY LAW OR CIVIL CODE clarified that while Article 448 does not strictly apply to a
This case is a landmark application of the Law on Accession in situation where the builder was the original owner of the land
the Civil Code of the Philippines, particularly Article 361 who subsequently lost ownership of the land (but not the
(which corresponds to Article 448 of the New Civil Code). It building), its provisions on indemnity may be applied by
illustrates the two mutually exclusive options available to a analogy to avoid forced co-ownership, as the parties and lower
landowner when improvements are made in good faith on their courts effectively agreed. The Court ruled that when a
property by another person: either to appropriate the landowner (Nuguids) opts to appropriate the useful
improvements upon payment of indemnity, or to oblige the improvements (the apartment building) made by a builder in
builder to purchase the land. The decision also touches upon good faith (Pecson), the reimbursement for these improvements
Article 453 (now Article 546), which grants a possessor in must be based on their current market value, not the original
good faith the right of retention until indemnified. The Court's cost of construction (P53,000.00). To rule otherwise would
ruling explicitly defines the limits of this right of retention, unjustly enrich the Nuguids. Furthermore, the Court held that
demonstrating that it is conditional upon the builder's ability to the RTC and CA erred in ordering Pecson to pay monthly
comply with the landowner's chosen option. By clarifying that rentals or to account for the rents collected from the apartment
the builder loses the right of retention and a claim for building. As a builder in good faith who had not been properly
reimbursement against the original landowner upon failure to indemnified, Pecson was entitled to retain ownership and
pay for the land (after the landowner opted to sell), the case possession of the building, and thus the income derived from it,
reinforces the principle of accession where the landowner's until the full and proper indemnity (current market value) was
right is considered older and paramount, provided they paid. Accordingly, the case was remanded to the trial court to
properly exercise their legal options. determine the current market value of the apartment building,
with parties allowed to present evidence thereon. The
PECSON V. CA, G.R. NO. 115814, MAY 26, 1995 determined value must then be forthwith paid by the Nuguids
to Pecson; otherwise, Pecson shall be restored to possession of
the apartment building until such payment is made.
FACTS
Petitioner Pedro P. Pecson owned a commercial lot in Quezon DOCTRINE
City on which he had constructed a four-door two-storey 1. Analogous Application of Article 448: Article 448 of the
apartment building. For failure to pay realty taxes, the lot only Civil Code, which deals with good faith builders on land
was sold at a public auction to Mamerto Nepomuceno, who owned by another, may be applied by analogy even when the
builder was the original owner of the land who later lost demands to accept payment, the Church filed a complaint for
ownership of the land (but not the building) through sale, to specific performance and damages with the Regional Trial
avoid a state of forced co-ownership. Court (RTC). The RTC, on February 25, 1997, declared that
there was no perfected contract of sale for Lots 4 and 17,
2. Basis of Reimbursement for Useful Expenses (Article 546): ordered the Church to return possession, and pay a reasonable
When a landowner opts to appropriate useful improvements rental of ₱200.00 per month from the time it took possession.
made by a builder in good faith, the reimbursement owed to the On appeal, the Court of Appeals (CA) affirmed the finding of
builder must be based on the current market value of the no perfected contract, but paradoxically ordered the NHA to
improvements, not their original cost of construction. This sell the lots to the Church at ₱700.00 per square meter plus 6%
principle ensures complete justice and prevents unjust interest, reasoning that NHA's Resolution No. 2126 was
enrichment. unrevoked and that, in the interest of equity, the Church,
having occupied and improved the lots, should be allowed to
3. Right of Retention for Good Faith Builder and Fruits purchase them. The NHA's motion for reconsideration was
Thereof: A builder in good faith who has not been properly denied, leading to the present petition before the Supreme
indemnified for improvements has a right to retain possession Court.
of the improvements and the portion of the land they occupy
until full indemnity (at current market value) is paid. Crucially, ISSUE
this right of retention extends to the enjoyment and ownership The sole issue presented to the Supreme Court was whether the
of the income or fruits derived from the improvements, and the National Housing Authority could be compelled to sell the
builder cannot be compelled to pay rent to the landowner subject lots to Grace Baptist Church in the absence of any
during this period. perfected contract of sale between the parties.

CONNECTION TO PROPERTY LAW OR CIVIL CODE RULING

This case is a significant interpretation of Property Law under The Supreme Court GRANTED the petition, REVERSED and
the Civil Code of the Philippines, particularly concerning the SET ASIDE the Court of Appeals' Decision and Resolution,
Law on Accession. It directly applies and clarifies Articles 448 and REINSTATED the Decision of the Regional Trial Court.
and 546 of the Civil Code. Article 448 grants the landowner the The Court found merit in the NHA's submission that it cannot
option to appropriate improvements made by a good faith be compelled to sell the property without a perfected contract
builder after paying indemnity, or to oblige the builder to buy of sale. It ruled that the NHA's Resolution No. 2126, approving
the land. This decision extends the application of Article 448 the sale at ₱700.00 per square meter, constituted an offer,
by analogy to situations where the builder was the original which was not accepted by the Church, as the Church tendered
owner of the land, demonstrating the flexibility of the Civil a different, lower amount based on an unsigned computation.
Code to achieve equitable solutions. Article 546 governs the This qualified acceptance amounted to a counter-offer, leading
reimbursement for useful expenses and grants a possessor in to no meeting of the minds and thus, no perfected contract of
good faith the right of retention until indemnified. The Court's sale. The Court characterized the alleged contract as inexistent,
ruling precisely defines the "indemnity" under Article 546 to without force and effect from its incipiency. The Court also
mean the current market value of the improvements, preventing rejected the CA's application of estoppel against the NHA,
the landowner from acquiring valuable assets for a depreciated reiterating that estoppel does not operate against the
cost and upholding the principle against unjust enrichment. Government, and clarified that while equity may be considered,
Moreover, it unequivocally states that the right of retention it cannot overrule positive provisions of law, particularly the
includes the right to the fruits or income from the law on sales and contracts.
improvements, underscoring the comprehensive protection
afforded to a good faith builder until proper compensation is However, the Court noted that both parties acted in bad faith
received. regarding the improvements. The Church, despite knowing the
contract was not perfected, proceeded to introduce
NATIONAL HOUSING AUTHORITY V. GRACE improvements. On the other hand, the NHA knowingly granted
BAPTIST CHURCH, G.R. NO. 156437, MARCH 1, 2004 the Church temporary use of the properties and did not prevent
the improvements. Applying the principle that when both the
landowner and the builder act in bad faith, they shall be treated
FACTS as if they were both in good faith, the Court cited Article 448
The dispute began on June 13, 1986, when respondent Grace of the Civil Code. Pursuant to the precedent set in Depra v.
Baptist Church (the Church) expressed interest in acquiring Dumlao, the Court REMANDED the case to the Regional Trial
Lots 4 and 17 of the General Mariano Alvarez Resettlement Court of Quezon City, Branch 90, for further proceedings
Project in Cavite from petitioner National Housing Authority consistent with Articles 448 and 546 of the Civil Code. This
(NHA). The NHA, in a letter dated July 9, 1986, informed the means the RTC must assess the respective values of the
Church that its request to apply for the lots was granted and it improvements and the land, determine reasonable rentals and
could proceed with processing its application to purchase. indemnity, fix lease terms if agreed upon, and resolve other
Following this, the Church entered into possession of the lots matters necessary for the proper application of accession rules.
and introduced improvements thereon. On February 22, 1991,
the NHA's Board of Directors passed Resolution No. 2126, DOCTRINE
approving the sale of the subject lots to the Church at a price of 1. Perfection of Contracts: A contract of sale is perfected only
₱700.00 per square meter, totaling ₱430,500.00, and the upon a clear concurrence of offer and acceptance. A qualified
Church was duly informed. However, on April 8, 1991, the acceptance constitutes a counter-offer, preventing the meeting
Church tendered a manager's check for only ₱55,350.00, of the minds and thus, the perfection of the contract.
insisting it was the price quoted by the NHA Field Office based 2. Inexistent Contracts: If there is no concurrence of offer and
on an unsigned, handwritten computation. The NHA returned acceptance, the contract is "inexistent," without force and
the check, stating the amount was insufficient as the price had effect from the beginning, and cannot be validated by time or
changed. After the NHA refused the Church's subsequent ratification; equity cannot give validity to such a contract.
3. Estoppel Against Government: The principle of estoppel for foreshore lease covering approximately 17 hectares in the
does not operate against the Government for the act or inaction same area was denied. Petitioners' predecessor-in-interest,
of its agents. Emiliano Navarro, also filed a fishpond application over a
4. Equity vs. Positive Law: While courts have equity portion of this foreshore land. The Director of Lands and
jurisdiction, equity cannot be enforced to overrule positive Director of Forestry initially opposed Pascual's application,
provisions of law. contending the land was part of the public domain as foreshore
5. Rules on Accession (Mutual Bad Faith): When a builder land. Navarro likewise opposed, claiming the land was public
introduces improvements on land and the landowner does not domain and he was a lessee of a portion. Pascual's ejectment
prevent the building, and both parties are deemed to have acted complaint against Navarro was later consolidated with the land
in bad faith concerning the unperfected sale of the land, they registration case. The Court of First Instance (CFI) ruled
shall be treated as if both had acted in good faith, and their against Pascual, finding the land to be foreshore land and part
rights shall be governed by Article 448 of the Civil Code. This of the public domain, thus denying registration. However, the
allows the landowner to choose either to appropriate the Intermediate Appellate Court (IAC) reversed the CFI, granting
improvements after paying indemnity (as provided in Articles Pascual's application for registration (excluding a 50-meter
546 and 548) or to oblige the builder to pay the price of the strip along Manila Bay), on the premise that the land was an
land (unless the land's value is considerably more, in which accretion formed by the action of the two rivers, which, it
case reasonable rent is paid). reasoned, accumulated sediments due to Pascual's land acting
as a "barricade". The Heirs of Emiliano Navarro challenged
CONNECTION TO PROPERTY LAW OR CIVIL CODE this reversal before the Supreme Court.
This case is primarily connected to Civil Law principles
governing Contracts and Property Law, specifically Accession. ISSUE
The Court extensively applied Article 1319 of the Civil Code, The central issue before the Supreme Court was whether the
defining the elements of consent, offer, and acceptance land sought to be registered was an accretion belonging to the
necessary for the perfection of a contract, and concluding that riparian owner (Pascual) under Article 457 of the Civil Code,
the absence thereof led to an inexistent contract. This principle or if it was foreshore land (or accretion caused by the sea)
falls under the general provisions on Obligations and forming part of the public domain under Article 4 of the
Contracts. Spanish Law of Waters of 1866.

Crucially, the case delves into Property Law through its RULING
application of the Law on Accession concerning immovable The Supreme Court GRANTED the petition, REVERSED and
property. Given the finding of an inexistent contract and the SET ASIDE the decision of the Intermediate Appellate Court,
Church's construction of improvements, the Court invoked and REINSTATED the decision of the Court of First Instance.
Article 453 (by referring to Boyer-Roxas v. Court of Appeals The Court held that the disputed property was formed by the
which discusses mutual bad faith) and Article 448 of the Civil withdrawal of the waters of Manila Bay and the accretion
Code. Article 453 dictates that when both the landowner and formed on the exposed foreshore land by the action of the sea,
the builder act in bad faith, their rights shall be the same as intensified by the "palapat" and "bakawan" trees planted by
though both had acted in good faith. Consequently, the Pascual in 1948. The Court found that Article 457 of the Civil
provisions of Article 448 apply, granting the landowner (NHA) Code, which pertains to accretion by rivers, was "misplaced"
the options to either appropriate the improvements after paying and inapplicable. This was because Pascual's property,
indemnity (as provided in Articles 546 and 548 of the Civil according to its title, was bounded on the north by Manila Bay,
Code, covering necessary and useful expenses) or to oblige the not a river, and if the accretion was from the rivers, it should
builder (the Church) to pay the price of the land. The Court's have been deposited on the eastern or western banks, not the
decision to remand the case for the determination of the northern portion adjoining the bay. Furthermore, the Court
respective values and the application of these articles reiterated that Manila Bay is considered a "sea" and not a river
demonstrates the intricate interplay between contractual for purposes of accretion. Pascual's own testimony confirmed
validity and the rights arising from physical improvements on that before 1948, sea water reached the disputed area, and the
land under the Civil Code. The case also touched upon Article land only rose after he planted trees, which acted as strainers
1306 of the Civil Code by noting that no contractual stipulation and blocks for sediments from the sea. Consequently, the Court
may contradict law, morals, good customs, public order or ruled that the applicable law was Article 4 of the Spanish Law
public policy. of Waters of 1866, which explicitly states that lands added to
the shores by accretions and alluvial deposits caused by the
HEIRS OF NAVARRO V. IAC, G.R. NO. 68166, action of the sea form part of the public domain. Since
FEBRUARY 12, 1997 petitioners failed to show any express authorization or
declaration by the executive or legislative departments
converting the land from public to private property, it remains
FACTS part of the public domain and cannot be appropriated by private
The case originated from an application filed by Sinforoso individuals.
Pascual (predecessor-in-interest of private respondents) in the
early 1960s to register and confirm his title over a parcel of DOCTRINE
land in Sibocon, Balanga, Bataan, measuring 146,611 square This case clarifies and reiterates doctrines concerning accretion
meters. Pascual claimed this land was an accretion to his and the public domain under Philippine Property Law. It
property, which was bounded on the east by the Talisay River, distinguishes between accretion by rivers (alluvion, governed
on the west by the Bulacan River, and on the north by Manila by Article 457 of the Civil Code), which requires the
Bay. He asserted that the Talisay and Bulacan Rivers flowed accumulation to be gradual, the result of river action, and
downstream, depositing sand and silt at their mouths, thereby deposited on land adjacent to a river bank, thereby accruing to
causing the accretion on his property. He also testified that he the riparian owner, and accretion by the sea (governed by
planted "palapat" and "bakawan" trees in 1948, after which the Article 4 of the Spanish Law of Waters of 1866). The Court
land began to rise. Prior to this, in 1946, Pascual's application firmly established that Manila Bay is a "sea", and lands formed
by the action of the sea on its shores, or its inlets like Manila
Bay, are part of the public domain. Such lands can only
become private property if the Government (executive or
legislative branches) explicitly declares them no longer
necessary for public utility or specific public services. This
highlights that the right to accretion under Article 457 of the
Civil Code does not extend to lands formed by the sea.

CONNECTION TO PROPERTY LAW OR CIVIL CODE

This case is a crucial application of Property Law in the
context of accession, specifically delineating the rules for
gaining ownership of land formed by natural causes. It directly
interprets and distinguishes between Article 457 of the Civil
Code (dealing with alluvion from rivers) and Article 4 of the
Spanish Law of Waters of 1866 (addressing accretion from the
sea). The ruling clarifies the specific requisites for Article 457
to apply, emphasizing the importance of the land being
adjacent to a river bank and the accretion being solely a result
of river action. By affirming that Manila Bay is a sea, it
reinforces the principle that lands formed along the coastline
by marine action fall under the State's ownership as part of the
public domain, intended for public uses, in line with Article 4
of the Spanish Law of Waters. This legal framework is
essential for determining the scope of private land ownership
versus the State's patrimonial property, particularly in coastal
and riparian areas.