COMMUNITIES CAGAYAN, INC., vs.

SPOUSES ARSENIO
(Deceased) and ANGELES NANOL AND ANYBODY CLAIMING
RIGHTS UNDER THEM
COMMUNITIES CAGAYAN, INC.,
vs.
SPOUSES ARSENIO (Deceased) and ANGELES NANOL AND ANYBODY
CLAIMING RIGHTS UNDER THEM
Facts
Sometime in 1994, respondent-spouses Arsenio and Angeles Nanol
entered into a Contract to Sell with petitioner Communities Cagayan, Inc.,
CCI! where"y the latter agreed to sell to respondent-spouses a house and #ots
1$ and 19 located at %loc& 1', Camella (omes Su"division, Cagayan de )ro City,
*or the price o* +,'-,...... +,'-/!. /hey o"tained a loan *rom Capitol
0evelopment %an& C0%!, using the property as collateral. /o *acilitate the loan,
a simulated sale over the property was e1ecuted "y petitioner in *avor o*
respondent-spouses. Accordingly, titles /C/ Nos. 1.23.3 and 1.23.,! were
trans*erred in the names o* respondent-spouses and su"mitted to C0% *or loan
processing. /he "an& collapsed and closed "e*ore it could release the loan.
)n Novem"er ,., 199$, respondent-spouses entered into another
Contract to Sell with petitioner over the same property *or the same price.

/his
time, they availed o* petitioner4s in-house *inancing

thus, underta&ing to pay the
loan over *our years, *rom 199$ to 3..1.
5espondent Arsenio demolished the original house and constructed
a three-story house allegedly valued at +,.2 million, more or less.
5espondent Arsenio died, leaving his wi*e, herein respondent Angeles, to
pay *or the monthly amorti6ations.!
)n Septem"er 1., 3..,, petitioner sent respondent-spouses a
notari6ed Notice o* 0elin7uency and Cancellation o* Contract to Sell

due to
the latter4s *ailure to pay the monthly amorti6ations. +etitioner *iled "e*ore
the 8unicipal /rial Court in Cities, an action *or unlaw*ul detainer against
respondent-spouses.
In her Answer, respondent Angeles averred that the 0eed o*
A"solute Sale is valid.
Iss!es
1! 9hether petitioner is o"liged to re*und to respondent-spouses all
the monthly installments paid: and
3! 9hether petitioner is o"liged to reim"urse respondent-spouses
the value o* the new house minus the cost o* the original house.
R!"#n$
/he petition is partly meritorious.
5espondent-spouses are entitled to the cash surrender value o* the
payments
on the property e7uivalent to 2.; o* the total payments made under the
8aceda #aw.
5espondent-spouses are entitled to reim"ursement o* the
improvements
made on the property.
In view o* the special circumstances o"taining in this case, we are
constrained to rely on the presumption o* good *aith on the part o* the
respondent-spouses which the petitioner *ailed to re"ut. /hus,
respondent-spouses "eing presumed "uilders in good *aith, we now rule
on the applica"ility o* Article 44- o* the Civil Code. Article 44- on "uilders
in good *aith does not apply where there is a contractual relation "etween
the parties, such as in the instant case. 9e went over the records o* this
case and we note that the parties *ailed to attach a copy o* the Contract to
Sell. As such, we are constrained to apply Article 44- o* the Civil Code,
which provides viz:
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 54 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. !owever, the builder or
planter cannot be obliged to buy the land if its value is
considerably more than that of the building or trees. "n 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 fi# the terms thereof.
/he rule that the choice under Article 44- o* the Civil Code "elongs
to the owner o* the land is in accord with the principle o* accession, i.e.,
that the accessory *ollows the principal and not the other way around.
<ven as the option lies with the landowner, the grant to him,
nevertheless, is preclusive. /he landowner cannot re*use to e1ercise either
option and compel instead the owner o* the "uilding to remove it *rom the
land. /he raison d4etre *or this provision has "een enunciated thus= 9here
the "uilder, planter or sower has acted in good *aith, a con*lict o* rights
arises "etween the owners, and it "ecomes necessary to protect the
owner o* the improvements without causing in>ustice to the owner o* the
land. In view o* the impractica"ility o* creating a state o* *orced co-
ownership, the law has provided a >ust solution "y giving the owner o* the
land the option to ac7uire the improvements a*ter payment o* the proper
indemnity, or to o"lige the "uilder or planter to pay *or the land and the
sower the proper rent. (e cannot re*use to e1ercise either option. It is the
owner o* the land who is authori6ed to e1ercise the option, "ecause his
right is older, and "ecause, "y the principle o* accession, he is entitled to
the ownership o* the accessory thing.
In con*ormity with the *oregoing pronouncement, we hold that petitioner,
as landowner, has two options. It may appropriate the new house "y reim"ursing
respondent Angeles the current mar&et value thereo* minus the cost o* the old
house. ?nder this option, respondent Angeles would have @a right o* retention
which negates the o"ligation to pay rent.@ In the alternative, petitioner may sell
the lots to respondent Angeles at a price e7uivalent to the current *air value
thereo*. (owever, i* the value o* the lots is considera"ly more than the value o*
the improvement, respondent Angeles cannot "e compelled to purchase the lots.
She can only "e o"liged to pay petitioner reasona"le rent.