Pacific Farms v.

Esguerra

Company sold lumber and construction materials to Insular for the construction of 6
buildings. Insular failed to pay the full purchase price so Company filed a civil case
for the recovery of the unpaid balance. In the meantime, prior to the institution of
the civil case, Insular sold the buildings to Pacific. Trial Court rendered judgment in
favor of Company. Pacific files a third-party claim over the buildings. Sheriff
however proceeded with the public auction. Pacific filed a complaint, praying that
judgment be rendered, declaring null and void the levy and judicial sale of the six
buildings.

Court applied Art 447.

The abovequoted legal provision contemplates a principal and an accessory,

the land being considered the principal, and the plantings, constructions or works,
the accessory. The owner of the land who in good faith — whether personally or
through another — makes constructions or works thereon, using materials
belonging to somebody else, becomes the owner of the said materials with the
obligation however of praying for their value. The owner of the materials, on the
other hand, is entitled to remove them, provided no substantial injury is caused to
the landowner. Otherwise, he has the right to reimbursement for the value of his
materials.

Although it does not appear from the records of this case that the land upon
which the six buildings were built is owned by the appellee, nevertheless, that the
appellee claims that it owns the six buildings constructed out of the lumber and
construction materials furnished by the appellant, is indubitable. Therefore,
applying article 447 by analogy, we perforce consider the buildings as the principal
and the lumber and construction materials that went into their construction as the
accessory. Thus, the appellee, if it does own the six buildings, must bear the
obligation to pay for the value of the said materials; the appellant — which
apparently has no desire to remove the materials, and, even if it were minded to do
so, cannot remove them without necessarily damaging the buildings — has the
corresponding right to recover the value of the unpaid lumber and construction
materials.

Well-established in jurisprudence is the rule that compensation should be

borne by the person who has been benefited by the accession. No doubt, the
appellee benefited from the accession, i.e., from the lumber and materials that
went into the construction of the six buildings. It should therefore shoulder the
compensation due to the appellant as unpaid furnisher of materials.

Traditional Definition of a Builder in Good Faith

Millagrosa v. Carmel Development

Millagrosa is the successor in interest of the previous owner of the occupied lot who
occupied the same by virtue of PD 293 which was later on rendered unconstitutional
in the Tuason case. While Millagrosa contends that he acquired the land prior to the
promulgation of the Tuason case, his evidence rests mainly on an affidavit of the
previous owner confirming his occupation executed 7 years after the promulgation
of the case.

Issue one: Whether the Tuason Case can be applied?

Yes. Petitioner’s argument that the doctrine of operative fact should be applied in
this case deserves scant consideration inasmuch as such doctrine a rule of equity.
As such, it must be applied as an exception to the general rule that an
unconstitutional law produces no effects.60 The doctrine is applicable when a
declaration of unconstitutionality will impose an undue burden on those who have
relied on the invalid law,61 but it can never be invoked to validate as constitutional
an unconstitutional act.

As a general rule, a law declared as unconstitutional produces no effect whatsoever

and confers no right on any person. It matters not whether the person is a party to
the original case, because "not only the parties but all persons are bound by the
declaration of unconstitutionality, which means that no one may thereafter invoke it
nor may the courts be permitted to apply it in subsequent cases. It is, in other
words, a total nullity."57 Thus, petitioner’s invocation of the doctrine of res inter
alios judicatae nullum aliis praejudicium faciunt cannot be countenanced. We have
categorically stated that the doctrine does not apply when the party concerned is a
"successor in interest by title subsequent to the commencement of the action, or
the action or proceeding is in rem, the judgment in which is binding against him."58
While petitioner may not have been a party to Tuason, still, the judgment is binding
on him because the declaration of P.D. 293 as a nullity partakes of the nature of an
in rem proceeding. In this case, petitioner could not be said to have been unduly
burdened by reliance on an invalid law. Petitioner merely anchored his right over
the property to an Affidavit allegedly issued by Pelagio M. Juan, a member of the
MHIA, authorizing petitioner to occupy the same.63 However, this Affidavit was
executed only sometime in 1995, or approximately seven years after the Tuason
case was promulgated.64 At the time petitioner built the structures on the
premises, he ought to have been aware of the binding effects of the Tuason case
and the subsequent unconstitutionality of P.D. 293. These circumstances
necessarily remove him from the ambit of the operative fact doctrine.

Issue two: Whether he is a builder in good faith?

Petitioner also argues that he is a builder in good faith for want of knowledge of any
infirmity in the promulgation of P.D. 293.65 Being a builder in good faith, he
believes that he is entitled to the reimbursement of his useful expenses and that he
has a right to retain possession of the premises, pending reimbursement of the
value of his improvements to be proven during trial, in accordance with Article 545
of the Civil Code.

Upon perusal of the records, however, we hold that petitioner is not a builder in
good faith. A builder in good faith is one who builds with the belief that the
land he is building on is his, or that by some title one has the right to build
thereon, and is ignorant of any defect or flaw in his title. Since petitioner only
started occupying the property sometime in 1995 (when his predecessor-in-interest
executed an Affidavit in his favor), or about seven years after Tuason was
promulgated, he should have been aware of the binding effect of that ruling. Since
all judicial decisions form part of the law of the land, its existence should be on one
hand, x x x matter of mandatory judicial notice; on the other, ignorantia. legis non
excusat. He thus loses whatever he has built on the property, without right to
indemnity, in accordance with Article 449 of the Civil Code.

Ballatan v. CA

Respondent was unaware that he was encroaching on the adjacent land of another.

The Court of Appeals found that the subject portion is actually forty-two (42)
square meters in area, not forty-five (45), as initially found by the trial court; that
this forty-two (42) square meter portion is on the entire eastern side of Lot No. 24
belonging to petitioners; that this said portion is found the concrete fence and
pathway that extends from respondent Winston Go's house on adjacent Lot No. 25;
that inclusive of the subject portion, respondents Go did not gain nor lose any
portion of Lots Nos. 25 and 26; that instead, Lot No. 27, on which respondent Li
Ching Yao built his house, encroached on the land of respondents Go, gaining in the
process thirty-seven (37) square meters of the latter's land.21

We hold that the Court of Appeals correctly dismissed the third-party complaint
against AIA. The claim that the discrepancy in the lot areas was due to AIA's fault
was not proved. The appellate court, however, found that it was the erroneous
survey by Engineer Quedding that triggered these discrepancies. And it was this
survey that respondent Winston Go relied upon in constructing his house on his
father's land. He built his house in the belief that it was entirely within the
parameters of his father's land. In short, respondents Go had no knowledge that
they encroached petitioners' lot. They are deemed builders in good faith 22 until the
time petitioner Ballatan informed them of their encroachment on her property.
In light of these rulings, petitioners, as owners of Lot No. 24, may choose to
purchase the improvement made by respondents Go on their land, or sell to
respondents Go the subject portion. If buying the improvement is impractical as it
may render the Go's house useless, then petitioners may sell to respondents Go
that portion of Lot No. 24 on which their improvement stands. If the Go's are
unwilling or unable to buy the lot, then they must vacate the land and, until they
vacate, they must pay rent to petitioners. Petitioners, however, cannot compel
respondents Go to buy the land if its value is considerably more than the portion of
their house constructed thereon. If the value of the land is much more than the
Go's improvement, the respondents Go must pay reasonable rent. If they do not
agree on the terms of the lease, then they may go to court to fix the same.

In the event that petitioners elect to sell to respondents Go the subject portion of
their lot, the price must be fixed at the prevailing market value at the time of
payment. The Court of Appeals erred in fixing the price at the time of taking, which
is the time the improvements were built on the land. The time of taking is
determinative of just compensation in expropriation proceedings. The instant case
is not for expropriation. It is not a taking by the state of private property for a
public purpose upon payment of just compensation. This is a case of an owner who
has been paying real estate taxes on his land but has been deprived of the use of a
portion of this land for years. It is but fair and just to fix compensation at the time
of payment.

Heirs of Sarili v. Lagrosa

The general rule is that every person dealing with registered land may safely rely
on the correctness of the certificate of title issued therefor and the law will in no
way oblige him to go beyond the certificate to determine the condition of the
property. Where there is nothing in the certificate of title to indicate any cloud or
vice in the ownership of the property, or any encumbrance thereon, the purchaser
is not required to explore further than what the Torrens Title upon its face indicates
in quest for any hidden defects or inchoate right that may subsequently defeat his
right thereto.34

However, a higher degree of prudence is required from one who buys from a person
who is not the registered owner, although the land object of the transaction is
registered. In such a case, the buyer is expected to examine not only the certificate
of title but all factual circumstances necessary for him to determine if there are any
flaws in the title of the transferor.35 The buyer also has the duty to ascertain the
identity of the person with whom he is dealing with and the latter’s legal authority
to convey the property.36

The strength of the buyer’s inquiry on the seller’s capacity or legal authority to sell
depends on the proof of capacity of the seller. If the proof of capacity consists of a
special power of attorney duly notarized, mere inspection of the face of such public
document already constitutes sufficient inquiry. If no such special power of attorney
is provided or there is one but there appears to be flaws in its notarial
acknowledgment, mere inspection of the document will not do; the buyer must
show that his investigation went beyond the document and into the circumstances
of its execution.

In the present case, it is undisputed that Sps. Sarili purchased the subject property
from Ramos on the strength of the latter’s ostensible authority to sell under the
subject SPA. The said document, however, readily indicates flaws in its notarial
acknowledgment since the respondent’s community tax certificate (CTC) number
was not indicated thereon. Under the governing rule on notarial acknowledgments
at that time, i.e., Section 163(a) of Republic Act No. 7160, otherwise known as the
"Local Government Code of 1991," when an individual subject to the
community tax acknowledges any document before a notary public, it shall
be the duty of the administering officer to require such individual to exhibit
the community tax certificate. Despite this irregularity, however, Sps. Sarili
failed to show that they conducted an investigation beyond the subject SPA and
into the circumstances of its execution as required by prevailing jurisprudence.

Take note: 2004 Rules on Notarial Practice Sec. 12 Rule II: In this case,
respondent, as duly found by the IBP, was remiss in the faithful observance of his
duties as a notary public when he failed to confirm the identity of the person
claiming to be Jacinto through the competent evidence of identity required by the
2004 Notarial Rules. Jurisprudence provides that a community tax certificate or
cedula is no longer considered as a valid and competent evidence of identity
not only because it is not included in the list of competent evidence of identity
under the Rules; but moreso, it does not bear the photograph and signature of the
persons appearing before them, which the Rules deem as the more appropriate and
competent means by which notaries public can ascertain the person's identity.
(Dandoy v. Edayan, AC 12084, June 2018)

Bulacanag v. Judge Francisco

Art 448 does not apply to a case of Lessee

Art 448 in relation to Art 546 provides that the possessor in GF has the right to full
reimbursement of useful improvements and retention of the premises until
reimbursement is made.

A lessee who constructed a building on the leased land cannot be characterized as a

builder in good faith because the lessee knows at the outset that he is not the
owner of the land and that his occupancy continues only during the life of the lease.
He has no pretension of being the owner of the land. A contrary rule would place it
within the power of the lessee “to improve his landlord out of his property.’

Art. 1678. If the lessee makes, in good faith, useful improvements which are
suitable to the use for which the lease is intended, without altering the form or
substance of the property leased, the lessor upon the termination of the lease shall
pay the lessee one-half of the value of the improvements at that time. Should the
lessor refuse to reimburse said amount, the lessee may remove the
improvements, even though the principal thing may suffer damage
thereby. He shall not, however, cause any more impairment upon the property
leased than is necessary

Art 448. Vis-à-vis co-ownership and partition.

A co-owner is not a third person with respect to the land owned in common for it
cannot be said that it exclusively belongs to another but of which he is a co-owner.
However, where the co-ownership is terminated by partition and “it appears that
the house of the defendant (a former co-owner) overlaps or occupies a portion of
the land pertaining to the plaintiff (another former co-owner) which the defendant
built in good faith, then Article 448 should apply even when there was a co-
ownership. (Sps Del Ocampo v. Obesia)

Land and Building encroached on a lot belonging to another

A builder in good faith can, under the foregoing provisions, compel the landowner
to make a choice between appropriating the building by paying the proper
indemnity or obliging the builder to pay the price of the land. The choice belongs
to the owner of the land, a rule that accords with the principle of
accession, i.e., that the accessory follows the principal and not the other
way around.2 Even as the option lies with the landowner, the grant to him,
nevertheless, is preclusive. He must choose one. He cannot, for instance, compel
the owner of the building to instead remove it from the land. 3 In order, however,
that the builder can invoke that accruing benefit and enjoy his
corresponding right to demand that a choice be made by the landowner, he
should be able to prove good faith on his part.

Good faith, here understood, is an intangible and abstract quality with no technical
meaning or statutory definition, and it encompasses, among other things, an
honest belief, the absence of malice and the absence of design to defraud or to
seek an unconscionable advantage. An individual’s personal good faith is a
concept of his own mind and, therefore, may not conclusively be
determined by his protestations alone. It implies honesty of intention, and
freedom from knowledge of circumstances which ought to put the holder
upon inquiry.4 The essence of good faith lies in an honest belief in the validity
of ones right, ignorance of a superior claim, and absence of intention to
overreach another.5 Applied to possession, one is considered in good faith if he is
not aware that there exists in his title or mode of acquisition any flaw which
invalidates it.6cräläwvirtualibräry

Given the findings of both the trial court and the appellate court, it should be
evident enough that petitioner would fall much too short from its claim of good
faith. Evidently, petitioner was quite aware, and indeed advised, prior to its
acquisition of the land and building from Ignacio that a part of the building sold to it
stood on the land not covered by the land conveyed to it.

Equally significant is the fact that the building, constructed on the land by Ignacio,
has in actuality been part of the property transferred to petitioner. Article 448, of
the Civil Code refers to a piece of land whose ownership is claimed by two or more
parties, one of whom has built some works (or sown or planted something) and
not 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 otherwise for,
elsewise stated, where the true owner himself is the builder of works on
his own land, the issue of good faith or bad faith is entirely irrelevant.

Possession by mere tolerance