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PROPERTY

ATTY. CLARO F. CERTEZA


(AY 2014-2015)

SELECTED PROPERTY SYLLABI OF


PRE-MIDTERMS CASES
II C

NOTES:
These are not digests but just syllabi lifted from SCRA.
Items in bullets and are preceded by the title ATTY CERTEZA: are lifted from the lecture-
slides of Atty. Certeza.
Syllabi under the Ownership Division are lengthy because of the Chavez vs. PEA, Malabanan
vs. Republic, and MIAA vs CA cases. Best to read the sentences in bold and with underline or
even disregard reading them completely.

CONTENTS
CLASSIFICATION OF PROPERTY: IMMOVABLE VS. MOVABLE..................................................... 1
OWNERSHIP OF PROPERTY: PUBLIC OWNERSHIP ................................................................. 12
ACCESSION ...................................................................................................................... 22

CLASSIFICATION OF PROPERTY: IMMOVABLE VS. MOVABLE


1. LAUREL VS. ABROGAR (January 13, 2009, GR 155076)

Property; The only requirement for a personal property to be the object of theft
under the Penal Code is that it be capable of appropriation. The only requirement for a
personal property to be the object of theft under the Penal Code is that it be capable of
appropriation.The only requirement for a personal property to be the object of theft under the
penal code is that it be capable of appropriation. It need not be capable of asportation, which
is defined as carrying away. Jurisprudence is settled that to take under the theft provision of
the penal code does not require asportation or carrying away. To appropriate means to deprive
the lawful owner of the thing. The word take in the Revised Penal Code includes any act
intended to transfer possession which, as held in the assailed Decision, may be committed
through the use of the offenders own hands, as well as any mechanical device, such as an access
device or card as in the instant case. This includes controlling the destination of the property
stolen to deprive the owner of the property, such as the use of a meter tampering, as held in
Natividad v. Court of Appeals, 1 SCRA 380 (1961), use of a device to fraudulently obtain gas, as
held in United States v. Tambunting, and the use of a jumper to divert electricity, as held in the

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cases of United States v. Genato, United States v. Carlos, and United States v. Menagas, 11 N.E.
2d 403 (1937). [Laurel vs. Abrogar, 576 SCRA 41(2009)].

The act of conducting International Simple Resale (ISR) operations by illegally


connecting various equipment or apparatus to private respondent Philippine Long
Distance Telephones (PLDTs) telephone system, through which petitioner is able
to resell or re-route international long distance calls using respondent Philippine
Long Distance Telephones (PLDTs) facilities constitutes all three acts of
subtraction mentioned above. The acts of subtraction include: (a) tampering with any
wire, meter, or other apparatus installed or used for generating, containing, conducting, or
measuring electricity, telegraph or telephone service; (b) tapping or otherwise wrongfully
deflecting or taking any electric current from such wire, meter, or other apparatus; and (c) using
or enjoying the benefits of any device by means of which one may fraudulently obtain any
current of electricity or any telegraph or telephone service. In the instant case, the act of
conducting ISR operations by illegally connecting various equipment or apparatus to private
respondent PLDTs telephone system, through which petitioner is able to resell or re-route
international long distance calls using respondent PLDTs facilities constitutes all three acts of
subtraction mentioned above. [Laurel vs. Abrogar, 576 SCRA 41(2009)].

Telecommunication Industry; Property; The business of providing


telecommunication or telephone service is likewise personal property which can
be the object of theft under Article 308 of the Revised Penal Code. The business of
providing telecommunication or telephone service is likewise personal property which can be
the object of theft under Article 308 of the Revised Penal Code. Business may be appropriated
under Section 2 of Act No. 3952 (Bulk Sales Law), hence, could be object of theft. [Laurel vs.
Abrogar, 576 SCRA 41(2009)].

Civil Law; Property; Interest in business was declared to be personal property


since it is capable of appropriation and not included in the enumeration of real
properties. Interest in business was not specifically enumerated as personal property in the
Civil Code in force at the time the above decision was rendered. Yet, interest in business was
declared to be personal property since it is capable of appropriation and not included in the
enumeration of real properties. Article 414 of the Civil Code provides that all things which are or
may be the object of appropriation are considered either real property or personal property.
Business is likewise not enumerated as personal property under the Civil Code. Just like interest
in business, however, it may be appropriated. Following the ruling in Strochecker v. Ramirez, 44
Phil. 933 (1922), business should also be classified as personal property. Since it is not included
in the exclusive enumeration of real properties under Article 415, it is therefore personal
property. [Laurel vs. Abrogar, 576 SCRA 41(2009)].

Electricity is personal property under Article 416(3) of the Civil Code, which
enumerates forces of nature which are brought under control by science. It was
conceded that in making the international phone calls, the human voice is converted into
electrical impulses or electric current which are transmitted to the party called. A telephone call,
therefore, is electrical energy. It was also held in the assailed Decision that intangible property
such as electrical energy is capable of appropriation because it may be taken and carried away.
Electricity is personal property under Article 416 (3) of the Civil Code, which enumerates forces
of nature which are brought under control by science. [Laurel vs. Abrogar, 576 SCRA 41(2009)]

Telecommunication Industry; It is the use of these telecommunications facilities


without the consent of Philippine Long Distance Telephone (PLDT) that
constitutes the crime of theft, which is the unlawful taking of the telephone
services and business. While it may be conceded that international long distance calls, the
matter alleged to be stolen in the instant case, take the form of electrical energy, it cannot be
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said that such international long distance calls were personal properties belonging to PLDT
since the latter could not have acquired ownership over such calls. PLDT merely encodes,
augments, enhances, decodes and transmits said calls using its complex communications
infrastructure and facilities. PLDT not being the owner of said telephone calls, then it could not
validly claim that such telephone calls were taken without its consent. It is the use of these
communications facilities without the consent of PLDT that constitutes the crime of theft, which
is the unlawful taking of the telephone services and business. [Laurel vs. Abrogar, 576 SCRA
41(2009)]

2. SOCONY VS. JARAMILLO (March 16, 1923, GR L-20329)

CHATTEL MORTGAGE; REGISTRATION; NOTICE.The efficacy of the act of recording


a chattel mortgage consists in the fact that registration operates as constructive notice of the
existence of the contract, and the legal effects of the instrument must be discovered in the
document itself, in relation with the fact of notice. Registration adds nothing to the instrument,
considered as a source of title, and affects nobody's rights except as a species of constructive
notice. [Standard Oil Co. of New York vs. Jaramillo, 44 Phil. 630(1923)].

FUNCTION OF REGISTER.The duties of a register of deeds in respect to the registration of


chattel mortgages are purely of a ministerial character, and he is clothed with no judicial or
quasi-judicial power to determine the-nature of the property, whether real or personal, which is
the subject of the mortgage. Generally speaking, he should accept the qualification of the
property adopted by the person who presents the instrument for registration and should place
the instrument on record, upon payment of the proper fee, leaving the effects of registration to
be determined by the court if such question should arise for legal determination. [Standard Oil
Co. of New York vs. Jaramillo, 44 Phil. 630(1923)]

3. LOPEZ VS. OROSA (February 28, 1958, GR L-10817-18)

PROPERTY; REAL ESTATE; MATERIALMAN'S LIEN; DOES NOT EXTEND TO THE


LAND; BUILDING SEPARATE AND DISTINCT FROM LAND.Appellant's contention
that the lien executed in favor of the furnisher of the materials used for the construction, repair
or refection of a building is also extended to land on which the construction was made is without
merit, because while it is true that generally, real estate connotes the land and the building
constructed thereon, it is obvious that the inclusion of the building, separate and distinct from
the land, in the enumeration of what constitute real properties (Art. 415 of the New Civil Code
[Art. 334 of the old]) could mean only one thing, that a building is by itself an immovable
property. (Leung Yee vs. Strong Machinery Co., 37 Phil., 644.) [Lopez vs. Orosa, Jr., and Plaza
Theatre, Inc., 103 Phil. 98(1958)].

BUILDING AS IMMOVABLE PROPERTY; IRRESPECTIVE OF OWNERSHIP OF


LAND AND BUILDING.A building is an immovable property irrespective of whether or not
said structure and the land on which it is adhered to belong to the same owner. [Lopez vs.
Orosa, Jr., and Plaza Theatre, Inc., 103 Phil. 98(1958)].

PREFERENCE AND PRIORITIES; MATERIALMAN'S LIEN AND MORTGAGE


CREDIT ON LAND WHERE BUILDING CONSTRUCTED.Materialman's lien attaches
merely to the immovable property for the construction or repair of which the obligation was
incurred and in the case at bar, the lien in favor of appellant for the unpaid value of the lumber
used in the construction of the building attaches only to said structure and to no other property
of the obligor. Thus, the interest of the mortgagee over the land is superior to and cannot be
made subject to the said materialman's lien. [Lopez vs. Orosa, Jr., and Plaza Theatre, Inc., 103
Phil. 98(1958)].

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4. PRUDENTIAL BANK VS. PANIS (August 31, 1987, GR L-50008)

Civil Law; Mortgages; Property; Under Art 415, Civil Code, the inclusion of a
building separate and distinct from the land means that a building is by itself an
immovable property.In the enumeration of properties under Article 415 of the Civil Code
of the Philippines, this Court ruled that, "it is obvious that the inclusion of 'building' separate
and distinct from the land, in said provision of law can only mean that a building is by itself an
immovable property." (Lopez vs. Orosa, Jr., et al., L-10817-18, Feb. 28, 1958; Associated Inc.
and Surety Co., Inc. vs. lya, et al., L-10837-38, May 30, 1958). [Prudential Bank vs. Panis, 153
SCRA 390(1987)].

While a mortgage of land necessarily includes buildings, a building by itself may be


mortgaged apart from the land on which it has been built; Mortgage is still a real
estate mortgage for the building would still be considered immovable property
even if dealt with separately from the land; Possessory rights over property before
title is vested on the grantee may be validly transferred as in a deed of mortgage.
Thus, while it is true that a mortgage of land necessarily includes, in the absence of stipulation of
the improvements thereon, buildings, still a building by itself may be mortgaged apart from the
land on which it has been built. Such a mortgage would be still a real estate mortgage for the
building would still be considered immovable property even if dealt with separately and apart
from the land (Leung Yee vs. Strong Machinery Co., 37 Phil. 644). In the same manner, this
Court has also established that possessory rights over said properties before title is vested on the
grantee, may be validly transferred or conveyed as in a deed of mortgage (Vda. de Bautista vs.
Marcos, 3 SCRA 438 [1961]). [Prudential Bank vs. Panis, 153 SCRA 390(1987)].

5. YEE VS, STRONG (February 15, 1918, GR L-11658)

CHATTEL MORTGAGE; REGISTRY OF MORTGAGE .COVERING REAL


PROPERTY.The sole purpose and object of the chattel mortgage registry is to provide for the
registry of "chattel mortgages," and transfers thereof, that is to say, mortgages of personal
property executed in the manner and form prescribed in the statute. Neither the original registry
in a chattel mortgage registry of an instrument purporting to be a chattel mortgage of a building
and the machinery installed therein, nor the an notation in that registry of the sale of the
mortgaged property, had any effect whatever so far as the building is concerned.

A factory building is real property, and the mere fact that it is mortgaged and sold, separate and
apart from the land on which it stands, in no wise changes its character as real property.

VENDOR AND PURCHASER; REGISTRY OF TITLE; GOOD FAITH.The rights


secured under the provisions of article 1473 of the Civil Code to that one of two purchasers of the
same real estate, who has secured and inscribed his title thereto in the Land Registry,. do not
accrue unless such inscription is made in good faith.

GOOD FAITH.One who purchases real estate with knowledge of a defect or lack of title in his
vendor cannot claim that he has acquired title thereto in good faith, as against the true owner of
the land or of an interest therein; and the same rule must be applied to one who has knowledge
of facts which should have put him upon such inquiry and investigation as might be necessary to
acquaint him with the defects in the title of his vendor.

A purchaser cannot close his eyes to facts which should put a reasonable man upon his guard
and then claim that he acted in good faith under the belief that there was no defect in the title of
the vendor.

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Good faith, or the lack of it, is in its last analysis a question of intention; but in ascertaining the
intention by which one is actuated on a given occasion, we are necessarily controlled by the
evidence as to the conduct and outward acts by which alone the inward motive may, with safety,
be determined.

Good faith, or the want of it, is not a visible, tangible fact that can be seen or touched but rather
a state or condition of mind which can only be judged of by actual or fancied tokens. or signs."
[Leung Yee vs. F. L. Strong Machinery Co. and Williamson., 37 Phil., 644(1918)]

6. SERGS VS. PCI LENDING (August 22, 2000, GR 137705)

Civil Law; Property; The machines although each of them was movable or personal
property on its own, all of them have become immobilized by destination because
they are essential and principal elements of petitioners chocolate-making
industry.In the present case, the machines that were the subjects of the Writ of Seizure were
placed by petitioners in the factory built on their own land. Indisputably, they were essential and
principal elements of their chocolate-making industry. Hence, although each of them was
movable or personal property on its own, all of them have become immobilized by destination
because they are essential and principal elements in the industry. In that sense, petitioners are
correct in arguing that the said machines are real, not personal, property pursuant to Article 415
(5) of the Civil Code. [Sergs Products, Inc. vs. PCI Leasing and Finance, Inc., 338 SCRA
499(2000)].

Contracting parties may validly stipulate that a real property be considered as


personal.The Court has held that contracting parties may validly stipulate that a real
property be considered as personal. After agreeing to such stipulation, they are consequently
estopped from claiming otherwise. Under the principle of estoppel, a party to a contract is
ordinarily precluded from denying the truth of any material fact found therein. [Sergs Products,
Inc. vs. PCI Leasing and Finance, Inc., 338 SCRA 499(2000)]

Contracting parties may validly stipulate that a real property be considered as


personal.The Court has held that contracting parties may validly stipulate that a real
property be considered as personal. After agreeing to such stipulation, they are consequently
estopped from claiming otherwise. Under the principle of estoppel, a party to a contract is
ordinarily precluded from denying the truth of any material fact found therein. [Sergs Products,
Inc. vs. PCI Leasing and Finance, Inc., 338 SCRA 499(2000)]

That the machines should be deemed personal property pursuant to the Lease
Agreement is good only insofar as the contracting parties are concerned.It should
be stressed, however, that our holdingthat the machines should be deemed personal property
pursuant to the Lease Agreementis good only insofar as the contracting parties are concerned.
Hence, while the parties are bound by the Agreement, third persons acting in good faith are not
affected by its stipulation characterizing the subject machinery as personal. In any event, there
is no showing that any specific third party would be adversely affected.

7. EVANGELISTA VS. ALTO SURETY (April 23, 1958, GR L-11139)

PROPERTY; HOUSE is NOT PERSONAL BUT REAL PROPERTY FOR PURPOSES


OF ATTACHMENT.A house is not personal property, much less a debt, credit or other
personal property capable of manual delivery, but immovable property. "A true building (not
merely superimposed on the soil), is immovable or real property, whether it is erected by the
owner of the land or by a usufructuary or lessee" (Laddera vs. Hodges, 48 Off. Gaz., 5374.) and
the attachment of such building is subject to the provisions of subsection (a) of section 7, Rule
59 of the Rules of Court. [Evangelista vs. Alto Surety & Ins. Co., Inc., 103 Phil. 401(1958)].
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8. TSAI VS. CA (October 2, 2001, GR 120098)

Property; Mortgages; The nature of the disputed machineries, i.e., that they were
heavy, bolted or cemented on the real property mortgaged, does not make them
ipso facto immovable under Article 415 (3) and (5) of the New Civil Code, as the
parties intent has to be looked into.Petitioners contend that the nature of the disputed
machineries, i.e., that they were heavy, bolted or cemented on the real property mortgaged by
EVERTEX to PBCom, make them ipso facto immovable under Article 415 (3) and (5) of the New
Civil Code. This assertion, however, does not settle the issue. Mere nuts and bolts do not
foreclose the controversy. We have to look at the parties intent. While it is true that the
controverted properties appear to be immobile, a perusal of the contract of Real and Chattel
Mortgage executed by the parties herein gives us a contrary indication. In the case at bar, both
the trial and the appellate courts reached the same finding that the true intention of PBCom and
the owner, EVERTEX, is to treat machinery and equipment as chattels.

Estoppel; Even if the properties are immovable by nature, nothing detracts the
parties from treating them as chattels to secure an obligation under the principle
of estoppel.Too, assuming arguendo that the properties in question are immovable by
nature, nothing detracts the parties from treating it as chattels to secure an obligation under the
principle of estoppel. As far back as Navarro v. Pineda, 9 SCRA 631 (1963), an immovable may
be considered a personal property if there is a stipulation as when it is used as security in the
payment of an obligation where a chattel mortgage is executed over it, as in the case at bar.

Where the facts, taken together, evince the conclusion that the parties intention is
to treat the units of machinery as chattels, a fortiori, the after-acquired properties,
which are of the same description as the units referred to earlier, must also be
treated as chattels.In the instant case, the parties herein: (1) executed a contract styled as
Real Estate Mortgage and Chattel Mortgage, instead of just Real Estate Mortgage if indeed
their intention is to treat all properties included therein as immovable, and (2) attached to the
said contract a separate LIST OF MACHINERIES & EQUIPMENT. These facts, taken together,
evince the conclusion that the parties intention is to treat these units of machinery as chattels. A
fortiori, the contested after-acquired properties, which are of the same description as the units
enumerated under the title LIST OF MACHINERIES & EQUIPMENT, must also be treated as
chattels.

A chattel mortgage shall be deemed to cover only the property described therein
and not like or substituted property thereafter acquired by the mortgagor and
placed in the same depository as the property originally mortgaged, anything in
the mortgage to the contrary notwithstanding.Accordingly, we find no reversible error
in the respondent appellate courts ruling that inasmuch as the subject mortgages were intended
by the parties to involve chattels, insofar as equipment and machinery were concerned, the
Chattel Mortgage Law applies, which provides in Section 7 thereof that: a chattel mortgage
shall be deemed to cover only the property described therein and not like or substituted
property thereafter acquired by the mortgagor and placed in the same depository as the property
originally mortgaged, anything in the mortgage to the contrary notwithstanding. And, since the
disputed machineries were acquired in 1981 and could not have been involved in the 1975 or
1979 chattel mortgages, it was consequently an error on the part of the Sheriff to include subject
machineries with the properties enumerated in said chattel mortgages.

Sales; Purchaser in Good Faith; Well-settled is the rule that the person who asserts
the status of a purchaser in good faith and for value has the burden of proving
such assertion.Petitioner Tsai also argued that assuming that PBComs title over the
contested properties is a nullity, she is nevertheless a purchaser in good faith and for value who
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now has a better right than EVERTEX. To the contrary, however, are the factual findings and
conclusions of the trial court that she is not a purchaser in good faith. Well-settled is the rule
that the person who asserts the status of a purchaser in good faith and for value has the burden
of proving such assertion. Petitioner Tsai failed to discharge this burden persuasively.

A purchaser in good faith and for value is one who buys the property of another
without notice that some other person has a right to or interest in such property
and pays a full and fair price for the same, at the time of purchase, or before he has
notice of the claims or interest of some other person in the property.A purchaser in
good faith and for value is one who buys the property of another without notice that some other
person has a right to or interest in such property and pays a full and fair price for the same, at
the time of purchase, or before he has notice of the claims or interest of some other person in the
property. Records reveal, however, that when Tsai purchased the controverted properties, she
knew of respondents claim thereon. As borne out by the records, she received the letter of
respondents counsel, apprising her of respondents claim, dated February 27, 1987. She replied
thereto on March 9, 1987. Despite her knowledge of respondents claim, she proceeded to buy
the contested units of machinery on May 3, 1988. Thus, the RTC did not err in finding that she
was not a purchaser in good faith.

9. SIBAL VS. VALDEZ (August 4, 1927, GR L-26278)

ATTACHMENT; GROWING CROPS, REAL OR PERSONAL PROPERTY.Held: Under


the facts of the record, notwithstanding the provisions of paragraph 2 of article 334 of the Civil
Code, that growing sugar cane is considered personal property and not real property and is
subject to attachment and sale. Act No. 1508, the Chattel Mortgage Law, provides that all
personal property shall be subject to mortgage. At common law all annual crops which are
raised by yearly manurance and labor and essentially owe their existence to cultivation may be
levied on as personal property. Paragraph 2 of article 334 of the Civil Code has been modified by
section 450 of the Code of Civil Procedure and by Act No. 1508 in the sense that, for the purpose
of attachment and execution and for the purposes of the Chattel Mortgage Law, "ungathered
products" have the nature of personal property. [Sibal 1. vs. Valdez, 50 Phil. 512(1927)].

10. VALDEZ VS. ALTAGRACIA (May 13, 1912, 225 U.S. 58)

Under the general law of Porto Rico, machinery placed on property by a tenant does not become
immobilized; when, however, a tenant places it there pursuant to contract that it shall belong to
the owner, it becomes immobilized as to that tenant and his assigns with notice, although it does
not become so as to creditors not having legal notice of the lease.

In this case, held that the lien of the attachment of a creditor of the tenant on machinery placed
by the tenant on a sugar Central in Porto Rico is superior to the claim of the transferee of an
unrecorded lease, even though the lease required the tenant to place the machinery on the
property.

11. DAVAO SAW MILL VS. CASTILLO (August 7, 1935, GR L-40411)

PROPERTY; MACHINERY AS PERSONAL PROPERTY; CIVIL CODE, ARTICLE 334,


PARAGRAPHS 1 and 5, CONSTRUED.A lessee placed machinery in a building erected on
land belonging to another, with the understanding that the machinery was not included in the
improvements which would pass to the lessor on the expiration or abandonment of the land
leased. The lessee also treated the machinery as personal property by executing chattel
mortgages in f favor of third persons. The machinery was levied upon by the sheriff as
personalty pursuant to a writ of execution obtained without any protest being registered. Held:
That the machinery must be classified as personal property.
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Machinery which is movable in its nature only becomes immobilized when placed in a plant by
the owner of the property or plant, but not when so placed by a tenant, a usufructuary, or any
person having only a temporary right, unless such person acted as the agent of the owner.
[Davao Saw Mill Co. vs. Castillo, 61 Phil., 709(1935)].

12. CHUA PENG HIAN VS. CA (December 19, 1984, GR L-60015)

Where the building and improvements are treated as personal properties, the
alienation in the contract of lease of improvements by the husband without the
wifes consent is valid.The contention that Chuas alienation in the contract of lease of his
improvements was tantamount to a disposition of conjugal realty without the wifes consent has
no merit. The said building and improvements on the leased land may be treated as personal
properties (Standard Oil Co. of New York vs. Jaramillo, 44 Phil. 630; Luna vs. Encarnacion, 91
Phil. 531; Manarang vs. Ofilada, 99 Phil. 108; Tumalad vs. Vicencio, L-30173, September 30,
1971, 41 SCRA 143, 152-3). [Chua Peng Hian vs. Court of Appeals, 133 SCRA 572(1984)].

13. PUNSALAN VS. LACSAMANA (March 28, 1983, GR L-55729)

Civil Law; Property; Immovable Property; Warehouse considered immovable or


real property; Building always immovable under the Civil Code; Separate
treatment by parties of building from the land in which it stood, does not change
immovable character of the building.The warehouse claimed to be owned by petitioner
is an immovable or real property as provided in article 415(1) of the Civil Code. Buildings are
always immovable under the Code. A building treated separately from the land on which it stood
is immovable property and the mere fact that the parties to a contract seem to have dealt with it
separate and apart from the land on which it stood in no wise changed its character as
immovable property. [Punsalan, Jr. vs. Vda. de Lacsamana, 121 SCRA 331(1983)]

Venue of real action is where the real property or any part thereof is situated.
While it is true that petitioner does not directly seek the recovery of title or possession of the
property in question, his action for annulment of sale and his claim for damages are closely
intertwined with the issue of ownership of the building which, under the law, is considered
immovable property, the recovery of which is petitioners primary objective. The prevalent
doctrine is that an action for the annulment or rescission of a sale of real property does not
operate to efface the fundamental and prime objective and nature of the case, which is to recover
said real property. It is a real action. Respondent Court, therefore, did not err in dismissing the
case on the ground of improper venue (Section 2, Rule 4), which was timely raised (Section 1,
Rule 16). [Punsalan, Jr. vs. Vda. de Lacsamana, 121 SCRA 331(1983)]

14. TUMALAD VS. VICENCIO (September 30, 1971, GR L-30173)

Property; Status of buildings as immovable property.It is obvious that the inclusion of


the building, separate and distinct from the land, in the enumeration of what may constitute real
properties (art. 415, New Civil Code) could only mean one thingthat a building is by itself an
immovable property irrespective of whether or not said structure and the land on which it is
adhered to belong to the same owner.

Deviations from rule.Certain deviations, however, have been allowed for various reasons.
In the case of Manarang vs. Ofilada, No. L-8133, 18 May 1956, 99 Phil. 109, this Court stated
that it is undeniable that the parties to a contract may by agreement treat as personal property
that which by nature would be real property. Again, in the case of Luna vs. Encarnacion, No. L-
4637, 30 June 1952, 91 Phil. 531, the subject of the contract designated as Chattel Mortgage was
a house of mixed materials, and this Court held therein that it was a valid Chattel mortgage
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because it was so expressly designated and specifically that the property given as security is a
house of mixed materials, which by its very nature is considered personal property.

Reason; Owner is estopped.The view that parties to a deed of chattel mortgage may agree
to consider a house as personal property for the purposes of said contract, is good only insofar
as the contracting parties are concerned. It is based, partly, upon the principle of estoppel.
Hence, if a house belonging to a person stands on a rented land belonging to another person, it
may be mortgaged as a personal property as so stipulated in the document of mortgage. It
should be noted, however, that the principle is predicated on statements by the owner declaring
his house to be a chattel, a conduct that may conceivably estop him from subsequently claiming
otherwise.

Contracts; By ceding, selling or transferring house by way of chattel mortgage,


house is treated as chattel.In the contract, the house on rented land is not only expressly
designated as Chattel Mortgage; it specifically provides that the mortgagor . . . voluntarily
CEDES, SELLS and TRANSFERS by way of Chattel Mortgage the property together with its
leasehold rights over the lot on which it is constructed and participation. . . Although there is
no specific statement referring to the subject house as personal property, yet by ceding, selling
or transferring a property by way of chattel mortgage defendants-appellants could not have
meant to convey the house as chattel, or at least, intended to treat the same as such, so that they
should not now be allowed to make an inconsistent stand by claiming otherwise. Moreover, the
subject house stood on a rented lot to which defendants-appellants merely had a temporary
right as lessee, and although this can not in itself alone determine the status of the property, it
does so when combined with other factors to sustain the interpretation that the parties,
particularly the mortgagors, intended to treat the house as personalty.

Redemption of foreclosed property.Section 6 of Act No. 3135, as amended provides that


the debtor-mortgagor may, at any time within one year from and after the date of the auction
sale, redeem the property sold at the extrajudicial foreclosure sale.

To whom rentals receivable during redemption period belong.While it is true that


the Rules of Court allow the purchaser to receive the rentals if the purchased property is
occupied by tenants, he is, nevertheless, accountable to the judgmentdebtor or mortgagor as the
case may be, for the amount so received and the same will be duly credited against the
redemption price when the said debtor or mortgagor effects the redemption. Differently stated,
the rentals receivable from tenants, although they may be collected by the purchaser during the
redemption period, do not belong to the latter but still pertain to the debtor or mortgagor. The
rationale for the Rule, it seems, is to secure for the benefit of the debtor or mortgagor, the
payment of the redemption amount and the consequent return to him of his properties sold at
public auction. [Tumalad vs. Vicencio, 41 SCRA 143(1971)]

15. MAKATI LEASING VS. WEAREVER (May 16, 1983, GR L-58469)

Where a chattel mortgage is constituted on machinery permanently attached to the


ground the machinery is to be considered as personal property and the chattel
mortgage constituted thereon is not null and void, regardless of who owns the
land.Examining the records of the instant case, We find no logical justification to exclude and
rule out, as the appellate court did, the present case from the application of the abovequoted
pronouncement. If a house of strong materials, like what was involved in the above Tumalad
case, may be considered as personal property for purposes of executing a chattel mortgage
thereon as long as the parties to the contract so agree and no innocent third party will be
prejudiced thereby, there is absolutely no reason why a machinery, which is movable in its
nature and becomes immobilized only by destination or purpose, may not be likewise treated as

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such. This is really because one who has so agreed is estopped from denying the existence of the
chattel mortgage.

In rejecting petitioners assertion on the applicability of the Tumalad doctrine, the Court of
Appeals lays stress on the fact that the house involved therein was built on a land that did not
belong to the owner of such house. But the law makes no distinction with respect to the
ownership of the land on which the house is built and We should not lay down distinctions not
contemplated by law.

Execution of chattel mortgage on machinery permanently attached to the ground


is only an equitable ground for rendering the contract voidable provided that the
mortgagor has not been benefited by the contract.Private respondent contends that
estoppel cannot apply against it because it had never represented nor agreed that the machinery
in suit be considered as personal property but was merely required and dictated on by herein
petitioner to sign a printed form of chattel mortgage which was in a blank form at the time of
signing. This contention lacks persuasiveness. As aptly pointed out by petitioner and not denied
by the respondent, the status of the subject machinery as movable or immovable was never
placed in issue before the lower court and the Court of Appeals except in a supplemental
memorandum in support of the petition filed in the appellate court. Moreover, even granting
that the charge is true, such fact alone does not render a contract void ab initio, but can only be a
ground for rendering said contract voidable, or annullable pursuant to Article 1390 of the new
Civil Code, by a proper action in court. There is nothing on record to show that the mortgage has
been annulled. Neither is it disclosed that steps were taken to nullify the same. On the other
hand, as pointed out by petitioner and again not refuted by respondent, the latter has
indubitably benefited from said contract. Equity dictates that one should not benefit at the
expense of another. Private respondent could not now therefore, be allowed to impugn the
efficacy of the chattel mortgage after it has benefited therefrom. [Makati Leasing and Finance
Corp. vs. Wearever Textile Mills, Inc., 122 SCRA 296(1983)].

16. MINDANAO BUS VS. CITY ASSESSOR (September 29, 1962, GR L-17870)

Property; Immovable Property by Destination; Two requisites before movables


may be deemed to have immobilized; Tools and equipments merely incidental to
business not subject to real estate tax.Movable equipments, to be immobilized in
contemplation of Article 415 of the Civil Code, must be the essential and principal elements of an
industry or works which are carried on in a building or on a piece of land. Thus, where the
business is one of transportation, which is carried on without a repair or service shop, and its
rolling equipment is repaired or serviced in a shop belonging to another, the tools and
equipments in its repair shop which appear movable are merely incidentals and may not be
considered immovables, and, hence, not subject to assessment as real estate for purposes of the
real estate tax. [Mindanao Bus Co. vs. City Assessor and Treasurer, 6 SCRA 197(1962)].

17. BERKENKOTTER VS. CO UNJIENG (July 31, 1935, GR L-41643)

MORTGAGE; IMPROVEMENT ON THE MORTGAGED PROPERTY, INCLUDED IN


THE MORTGAGE.The installation of a machinery and equipment in a mortgaged sugar
central, in lieu of another of less capacity, for the purpose of carrying out the industrial functions
of the latter and increasing production, constitutes a permanent improvement on said sugar
central and subjects said machinery and equipment to the mortgage constituted thereon.
(Article 1877, Civil Code.)

PERMANENT CHARACTER OF THE IMPROVEMENT.The fact that the purchaser of


the new machinery and equipment has bound himself to the person supplying him the purchase
money to hold them as security for the payment of the latter's credit, and to refrain from
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mortgaging or otherwise encumbering them does not alter the permanent character of the
incorporation of said machinery and equipment with the central.

OWNERSHIP OF THE IMPROVEMENT.The sale of the machinery and equipment in


question by the purchaser who was supplied the purchase money, as a loan, to the person who
supplied the money, after the incorporation thereof with the mortgaged sugar central, does not
vest the creditor with ownership of said machinery and equipment but simply with the right of
redemption. [Berkenkotter vs. Cu Unjieng e Hijos, 61 Phil., 663(1935)]

18. BOARD OF ASSESSMENT VS. MERALCO (January 31, 1964, GR L-15334)

Real Property Tax Code; Pipeline System of Meralco Securities classified as real
property and subject to tax they being machinery or improvements; And does not
fall within the classes of exempt real property.Meralco Securities insists that its
pipeline is not subject to realty tax because it is not real property within the meaning of article
415. This contention is not sustainable under the provisions of the Assessment Law, the Real
Property Tax Code and the Civil Code. Section 2 of the Assessment Law provides that the realty
tax is due on real property, including land, buildings, machinery, and other improvements not
specifically exempted in section 3 thereof. It is incontestable that the pipeline of Meralco
Securities does not fall within any of the classes of exempt real property enumerated in section 3
of the Assessment Law and section 40 of the Real Property Tax Code.

Petroleum Law does not exempt Meralco Securities from payment of realty taxes;
Realty tax distinguished from local tax.Meralco Securities argues that the realty tax is a
local tax or levy and not a tax of general application. This argument is untenable because the
realty tax has always been imposed by the lawmaking body and later by the President of the
Philippines in the exercise of his lawmaking powers, as shown in sections 342 et seq. of the
Revised Administrative Code, Act No. 3995, Commonwealth Act No. 470 and Presidential
Decree No. 464. The realty tax is enforced throughout the Philippines and not merely in a
particular municipality or city but the proceeds of the tax accrue to the province, city,
municipality and barrio where the realty taxed is situated (Sec. 86, P.D. No. 464). In contrast, a
local tax is imposed by municipal or city council by virtue of the Local Tax Code, Presidential
Decree No. 231, which took effect on July 1, 1973 (69 O.G. 6197). [Meralco Securities Industrial
Corporation vs. Central Board of Assessment Appeals, 114 SCRA 260(1982)]

19. CALTEX VS. CENTRAL BOARD (May 31, 1982, GR L-50466)

Gasoline station equipments and machineries are subject to the real property
tax.We hold that the said equipment and machinery, as appurtenances to the gas station
building or shed owned by Caltex (as to which it is subject to realty tax) and which fixtures are
necessary to the operation of the gas station, for without them the gas station would be useless,
and which have been attached or affixed permanently to the gas station site or embedded
therein, are taxable improvements and machinery within the meaning of the Assessment Law
and the Real Property Tax Code.

Gasoline station equipments and machineries are permanent fixtures for purposes
of realty taxation.Here, the question is whether the gas station equipment and machinery
permanently affixed by Caltex to its gas station and pavement (which are indubitably taxable
realty) should be subject to the realty tax. This question is different from the issue raised in the
Davao Saw Mill case. Improvements on land are commonly taxed as realty even though for some
purposes they might be considered personalty (84 C.J.S. 181-2, Notes 40 and 41). It is a
familiar phenomenon to see things classed as real property for purposes of taxation which on
general principle might be considered personal property (Standard Oil Co. of New York vs.

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Jaramillo, 44 Phil. 630, 633). [Caltex (Phil.) Inc. vs. Central Board of Assessment Appeals, 114
SCRA 296(1982)]

20. PRESBITERO VS. FERNANDEZ (March 30, 1963, GR L-19527)

Property; Sugar quotas deemed immovable property; Levy not valid if copy of
order and description of property is not filed with Register of Deeds.As an
improvement attached to land, by express provision of law (Section 9, Act 4166), though not
physically so united, sugar quotas are inseparable therefrom, just like servitudes and other real
rights over an immovable, and should be considered as immovable or real property under
Article 416 (10) of the Civil Code. The fact that the Philippine Trade Act of 1946 (U.S. Public Law
371-79th Congress) allows transfers of sugar quotas does not militate against their
immo-vability. There cannot be a sugar plantation owner without land to which the quota is
attached; and there can exist no quota without there being first a corresponding plantation.
Hence, a levy made by the sheriff upon a sugar quota is null and void if not in compliance with
the procedure prescribe in Section 14, Rule 39, in relation with Section 7, Rule 59, of the Rules
of Court, requiring the filing with the register of deeds of a copy of the orders together with a
description of the property. [Presbitero vs. Fernandez, 7 SCRA 625(1963)]

OWNERSHIP OF PROPERTY: PUBLIC OWNERSHIP


1. US VS. CARLOS (September 1, 1911, GR 6925)

ELECTRICITY; UNLAWFUL USE OF ELECTRIC CURRENT; LARCENY.A person to


whom an electric light company furnishes electric current for lighting purposes, and who, by
means of a "jumper," uses electricity which does not pass through the meter installed f or the
purpose of measuring the current used, thus depriving the company of such electric current, is
guilty of larceny. [United States vs. Carlos., 21 Phil., 553(1911)]

2. MALABANAN VS. REPUBLIC (April 29, 2009, GR 179987)

Civil Law; Prescription; Under the Civil Code that where lands of the public
domain are patrimonial in character, they are susceptible to acquisitive
prescription.It is clear under the Civil Code that where lands of the public domain are
patrimonial in character, they are susceptible to acquisitive prescription. On the other hand,
among the public domain lands that are not susceptible to acquisitive prescription are timber
lands and mineral lands. The Constitution itself proscribes private ownership of timber or
mineral lands.

Prescription; Alienable and disposable lands are expressly declared by the State to
be no longer intended for public service or for the development of the national
wealth that the period of acquisitive prescription can begin to run. Such
declaration shall be in the form of a law duly enacted by Congress or a Presidential
Proclamation in cases where the President is duly authorized by law.There must be
an express declaration by the State that the public dominion property is no longer intended for
public service or the development of the national wealth or that the property has been converted
into patrimonial. Without such express declaration, the property, even if classified as alienable
or disposable, remains property of the public dominion, pursuant to Article 420(2), and thus
incapable of acquisition by prescription. It is only when such alienable and disposable lands are
expressly declared by the State to be no longer intended for public service or for the
development of the national wealth that the period of acquisitive prescription can begin to run.

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Such declaration shall be in the form of a law duly enacted by Congress or a Presidential
Proclamation in cases where the President is duly authorized by law.

Prescription; Public Land Act; If a public land is declared patrimonial by law or


proclamation, can the period of possession prior to such conversion be reckoned
in counting the period of prescription? No.The limitation imposed by Article 1113
dissuades us from ruling that the period of possession before the public domain land becomes
patrimonial may be counted for the purpose of completing the prescriptive period. Possession of
public dominion property before it becomes patrimonial cannot be the object of prescription
according to the Civil Code. As the application for registration under Section 14(2) falls wholly
within the framework of prescription under the Civil Code, there is no way that possession
during the time that the land was still classified as public dominion property can be counted to
meet the requisites of acquisitive prescription and justify registration. Are we being inconsistent
in applying divergent rules for Section 14(1) and Section 14(2)? There is no inconsistency.
Section 14(1) mandates registration on the basis of possession, while Section 14(2) entitles
registration on the basis of prescription. Registration under Section 14(1) is extended under the
aegis of the Property Registration Decree and the Public Land Act while registration under
Section 14(2) is made available both by the Property Registration Decree and the Civil Code.
[Heirs of Mario Malabanan vs. Republic, 587 SCRA 172(2009)]

3. MIAA VS. CA (July 20, 2006, GR 155650)

Manila International Airport Authority; Taxation; MIAAs Airport Lands and


Buildings are exempt from real estate tax imposed by local governments.We rule
that MIAAs Airport Lands and Buildings are exempt from real estate tax imposed by local
governments. First, MIAA is not a government-owned or controlled corporation but an
instrumentality of the National Government and thus exempt from local taxation. Second, the
real properties of MIAA are owned by the Republic of the Philippines and thus exempt from real
estate tax.

While there is no dispute that a government-owned or controlled corporation is


not exempt from real estate tax, MIAA is not a government-owned or controlled
corporation; A government-owned or controlled corporation must be organized
as a stock or non-stock corporation, of which MIAA is neither; MIAA is not a stock
corporation because it has no capital stock divided into shares.There is no dispute
that a government-owned or controlled corporation is not exempt from real estate tax. However,
MIAA is not a government-owned or controlled corporation. Section 2(13) of the Introductory
Provisions of the Administrative Code of 1987 defines a government-owned or controlled
corporation as follows: SEC. 2. General Terms Defined.x x x x (13) Government-owned or
controlled corporation refers to any agency organized as a stock or non-stock corporation,
vested with functions relating to public needs whether governmental or proprietary in nature,
and owned by the Government directly or through its instrumentalities either wholly, or, where
applicable as in the case of stock corporations, to the extent of at least fifty-one (51) percent of
its capital stock: x x x. (Emphasis supplied) A government-owned or controlled corporation
must be organized as a stock or non-stock corporation. MIAA is not organized as a stock or
non-stock corporation. MIAA is not a stock corporation because it has no capital stock divided
into shares. [Manila International Airport Authority vs. Court of Appeals, 495 SCRA 591(2006)]

The Airport Lands and Buildings of the MIAA are property of public dominion and
therefore owned by the State or the Republic of the Philippines.The Airport Lands
and Buildings of MIAA are property of public dominion and therefore owned by the State or the
Republic of the Philippines. The Civil Code provides: ARTICLE 419. Property is either of public
dominion or of private ownership. ARTICLE 420. The following things are property of public
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dominion: (1) Those intended for public use, such as roads, canals, rivers, torrents, ports and
bridges constructed by the State, banks, shores, roadsteads, and others of similar character; (2)
Those which belong to the State, without being for public use, and are intended for some public
service or for the development of the national wealth. (Emphasis supplied) ARTICLE 421. All
other property of the State, which is not of the character stated in the preceding article, is
patrimonial property. ARTICLE 422. Property of public dominion, when no longer intended for
public use or for public service, shall form part of the patrimonial property of the State.

The term ports in Article 420 (1) of the Civil Code includes seaports and
airportsthe MIAA Airport Lands and Buildings constitute a port constructed by
the State.No one can dispute that properties of public dominion mentioned in Article 420 of
the Civil Code, like roads, canals, rivers, torrents, ports and bridges constructed by the State,
are owned by the State. The term ports includes seaports and airports. The MIAA Airport
Lands and Buildings constitute a port constructed by the State. Under Article 420 of the Civil
Code, the MIAA Airport Lands and Buildings are properties of public dominion and thus owned
by the State or the Republic of the Philippines.

The Airport Lands and Buildings are devoted to public use because they are used
by the public for international and domestic travel and transportation; The
charging of fees to the public does not determine the character of the property
whether it is of public dominion or not.The Airport Lands and Buildings are devoted to
public use because they are used by the public for international and domestic travel and
transportation. The fact that the MIAA collects terminal fees and other charges from the public
does not remove the character of the Airport Lands and Buildings as properties for public use.
The operation by the government of a tollway does not change the character of the road as one
for public use. Someone must pay for the maintenance of the road, either the public indirectly
through the taxes they pay the government, or only those among the public who actually use the
road through the toll fees they pay upon using the road. The tollway system is even a more
efficient and equitable manner of taxing the public for the maintenance of public roads. The
charging of fees to the public does not determine the character of the property whether it is of
public dominion or not. Article 420 of the Civil Code defines property of public dominion as one
intended for public use. Even if the government collects toll fees, the road is still intended for
public use if anyone can use the road under the same terms and conditions as the rest of the
public. The charging of fees, the limitation on the kind of vehicles that can use the road, the
speed restrictions and other conditions for the use of the road do not affect the public character
of the road.

The Airport Lands and Buildings of MIAA, as properties of public dominion, are
outside the commerce of man.The Airport Lands and Buildings of MIAA are devoted to
public use and thus are properties of public dominion. As properties of public dominion, the
Airport Lands and Buildings are outside the commerce of man. The Court has ruled repeatedly
that properties of public dominion are outside the commerce of man. As early as 1915, this Court
already ruled in Municipality of Cavite v. Rojas that properties devoted to public use are outside
the commerce of man, thus: According to article 344 of the Civil Code: Property for public use
in provinces and in towns comprises the provincial and town roads, the squares, streets,
fountains, and public waters, the promenades, and public works of general service supported by
said towns or provinces.

Property of public dominion, being outside the commerce of man, cannot be the
subject of an auction sale; Any encumbrance, levy on execution or auction sale of
any property of public dominion is void for being contrary to public policy.Again
in Espiritu v. Municipal Council, the Court declared that properties of public dominion are
outside the commerce of man: x x x Town plazas are properties of public dominion, to be
devoted to public use and to be made available to the public in general. They are outside the
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commerce of man and cannot be disposed of or even leased by the municipality to private
parties. While in case of war or during an emergency, town plazas may be occupied temporarily
by private individuals, as was done and as was tolerated by the Municipality of Pozorrubio, when
the emergency has ceased, said temporary occupation or use must also cease, and the town
officials should see to it that the town plazas should ever be kept open to the public and free
from encumbrances or illegal private constructions. (Emphasis supplied) The Court has also
ruled that property of public dominion, being outside the commerce of man, cannot be the
subject of an auction sale. Properties of public dominion, being for public use, are not subject to
levy, encumbrance or disposition through public or private sale. Any encumbrance, levy on
execution or auction sale of any property of public dominion is void for being contrary to public
policy. Essential public services will stop if properties of public dominion are subject to
encumbrances, foreclosures and auction sale. This will happen if the City of Paraaque can
foreclose and compel the auction sale of the 600-hectare runway of the MIAA for non-payment
of real estate tax.

Unless the President issues a proclamation withdrawing the Airport Lands and
Buildings from public use, these properties remain properties of public dominion
and are inalienable.Before MIAA can encumber the Airport Lands and Buildings, the
President must first withdraw from public use the Airport Lands and Buildings. Sections 83 and
88 of the Public Land Law or Commonwealth Act No. 141, which remains to this day the
existing general law governing the classification and disposition of lands of the public domain
other than timber and mineral lands, provide: x x x Thus, unless the President issues a
proclamation withdrawing the Airport Lands and Buildings from public use, these properties
remain properties of public dominion and are inalienable. Since the Airport Lands and
Buildings are inalienable in their present status as properties of public dominion, they are not
subject to levy on execution or foreclosure sale. As long as the Airport Lands and Buildings are
reserved for public use, their ownership remains with the State or the Republic of the
Philippines.

Trusts; MIAA is merely holding title to the Airport Lands and Buildings in trust for
the Republic.MIAA is merely holding title to the Airport Lands and Buildings in trust for the
Republic. Section 48, Chapter 12, Book I of the Administrative Code allows instrumentalities
like MIAA to hold title to real properties owned by the Republic.

The transfer of the Airport Lands and Buildings from the Bureau of Air
Transportation to MIAA was not meant to transfer beneficial ownership of these
assets from the Republic to MIAAthe Republic remains the beneficial owner of
the Airport Lands and Buildings.The transfer of the Airport Lands and Buildings from
the Bureau of Air Transportation to MIAA was not meant to transfer beneficial ownership of
these assets from the Republic to MIAA. The purpose was merely to reorganize a division in the
Bureau of Air Transportation into a separate and autonomous body. The Republic remains the
beneficial owner of the Airport Lands and Buildings. MIAA itself is owned solely by the
Republic. No party claims any ownership rights over MIAAs assets adverse to the Republic. The
MIAA Charter expressly provides that the Airport Lands and Buildings shall not be disposed
through sale or through any other mode unless specifically approved by the President of the
Philippines. This only means that the Republic retained the beneficial ownership of the Airport
Lands and Buildings because under Article 428 of the Civil Code, only the owner has the right
to x x x dispose of a thing. Since MIAA cannot dispose of the Airport Lands and Buildings,
MIAA does not own the Airport Lands and Buildings. At any time, the President can transfer
back to the Republic title to the Airport Lands and Buildings without the Republic paying MIAA
any consideration. Under Section 3 of the MIAA Charter, the President is the only one who can
authorize the sale or disposition of the Airport Lands and Buildings. This only confirms that the
Airport Lands and Buildings belong to the Republic.

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Local Government Code; Section 234(a) of the Local Government Code exempts
from real estate tax any real property owned by the Republic of the
Philippines.Section 234(a) of the Local Government Code exempts from real estate tax any
[r]eal property owned by the Republic of the Philippines. Section 234(a) provides: SEC. 234.
Exemptions from Real Property Tax.The following are exempted from payment of the real
property tax: (a) Real property owned by the Republic of the Philippines or any of its political
subdivisions except when the beneficial use thereof has been granted, for consideration or
otherwise, to a taxable person; x x x. (Emphasis supplied) This exemption should be read in
relation with Section 133(o) of the same Code, which prohibits local governments from imposing
[t]axes, fees or charges of any kind on the National Government, its agencies and
instrumentalities x x x. The real properties owned by the Republic are titled either in the name
of the Republic itself or in the name of agencies or instrumentalities of the National
Government. The Administrative Code allows real property owned by the Republic to be titled in
the name of agencies or instrumentalities of the national government. Such real properties
remain owned by the Republic and continue to be exempt from real estate tax.

The Republic may grant the beneficial use of its real property to an agency or
instrumentality of the national government, an arrangement which does not result
in the loss of the tax exemption; MIAA, as a government instrumentality, is not a
taxable person under Section 133(o) of the Local Government Code.The Republic
may grant the beneficial use of its real property to an agency or instrumentality of the national
government. This happens when title of the real property is transferred to an agency or
instrumentality even as the Republic remains the owner of the real property. Such arrangement
does not result in the loss of the tax exemption. Section 234(a) of the Local Government Code
states that real property owned by the Republic loses its tax exemption only if the beneficial use
thereof has been granted, for consideration or otherwise, to a taxable person. MIAA, as a
government instrumentality, is not a taxable person under Section 133(o) of the Local
Government Code. Thus, even if we assume that the Republic has granted to MIAA the
beneficial use of the Airport Lands and Buildings, such fact does not make these real properties
subject to real estate tax.

Portions of the Airport Lands and Buildings that MIAA leases to private entities
are not exempt from real estate tax.Portions of the Airport Lands and Buildings that
MIAA leases to private entities are not exempt from real estate tax. For example, the land area
occupied by hangars that MIAA leases to private corporations is subject to real estate tax. In
such a case, MIAA has granted the beneficial use of such land area for a consideration to a
taxable person and therefore such land area is subject to real estate tax. In Lung Center of the
Philippines v. Quezon City, 433 SCRA 119, 138 (2004), the Court ruled: Accordingly, we hold
that the portions of the land leased to private entities as well as those parts of the hospital leased
to private individuals are not exempt from such taxes. On the other hand, the portions of the
land occupied by the hospital and portions of the hospital used for its patients, whether paying
or non-paying, are exempt from real property taxes.

By express mandate of the Local Government Code, local governments cannot


impose any kind of tax on national government instrumentalities like the MIAA.
By express mandate of the Local Government Code, local governments cannot impose any kind
of tax on national government instrumentalities like the MIAA. Local governments are devoid of
power to tax the national government, its agencies and instrumentalities. The taxing powers of
local governments do not extend to the national government, its agencies and instrumentalities,
[u]nless otherwise provided in this Code as stated in the saving clause of Section 133. The
saving clause refers to Section 234(a) on the exception to the exemption from real estate tax of
real property owned by the Republic.

4. CHAVEZ VS. PEA (July 9, 2002, GR 133250)


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The instant petition is a case of first impression since all previous decisions of the
Court involving Section 3, Article XII of the 1987 Constitution, or its counterpart
provision in the 1973 Constitution, covered agricultural lands sold to private
corporations which acquired the lands from private parties, while in the instant
case, a private corporation seeks to acquire from a public corporation, reclaimed
lands and submerged areas for non-agricultural purposes by purchase under PD
No. 1084 (charter of PEA) and Title II of CA No. 141.The instant petition is a case of
first impression. All previous decisions of the Court involving Section 3, Article XII of the 1987
Constitution, or its counterpart provision in the 1973 Constitution, covered agricultural lands
sold to private corporations which acquired the lands from private parties. The transferors of the
private corporations claimed or could claim the right to judicial confirmation of their imperfect
titles under Title II of Commonwealth Act. 141 (CA No. 141 for brevity). In the instant case,
AMARI seeks to acquire from PEA, a public corporation, reclaimed lands and submerged areas
for nonagricultural purposes by purchase under PD No. 1084 (charter of PEA) and Title II of CA
No. 141. Certain undertakings by AMARI under the Amended JVA constitute the consideration
for the purchase. Neither AMARI nor PEA can claim judicial confirmation of their titles because
the lands covered by the Amended JVA are newly reclaimed or still to be reclaimed. Judicial
confirmation of imperfect title requires open, continuous, exclusive and notorious occupation of
agricultural lands of the public domain for at least thirty years since June 12, 1945 or earlier.
Besides, the deadline for filing applications for judicial confirmation of imperfect title expired on
December 31, 1987. [Chavez vs. Public Estates Authority, 384 SCRA 152(2002)]

The ownership of lands reclaimed from foreshore and submerged areas is rooted
in the Regalian doctrine which holds that the State owns all lands and waters of the
public domain.The ownership of lands reclaimed from foreshore and submerged areas is
rooted in the Regalian doctrine which holds that the State owns all lands and waters of the
public domain. Upon the Spanish conquest of the Philippines, ownership of all lands,
territories and possessions in the Philippines passed to the Spanish Crown. The King, as the
sovereign ruler and representative of the people, acquired and owned all lands and territories in
the Philippines except those he disposed of by grant or sale to private individuals.

After the effectivity of the 1935 Constitution, government reclaimed and marshy
disposable lands of the public domain continued to be only leased and not sold to
private parties. These lands remained sui generis, as the only alienable or
disposable lands of the public domain the government could not sell to private
parties.The State policy prohibiting the sale to private parties of government reclaimed,
foreshore and marshy alienable lands of the public domain, first implemented in 1907 was thus
reaffirmed in CA No. 141 after the 1935 Consti tution took effect. The prohibition on the sale of
foreshore lands, however, became a constitutional edict under the 1935 Constitution. Foreshore
lands became inalienable as natural resources of the State, unless reclaimed by the government
and classified as agricultural lands of the public domain, in which case they would fall under the
classification of government reclaimed lands. After the effectivity of the 1935 Constitution,
government reclaimed and marshy disposable lands of the public domain continued to be only
leased and not sold to private parties. These lands remained sui generis, as the only alienable or
disposable lands of the public domain the government could not sell to private parties.

Until now, the only way the government can sell to private parties government
reclaimed and marshy disposable lands of the public domain is for the legislature
to pass a law authorizing such sale.Since then and until now, the only way the
government can sell to private parties government reclaimed and marshy disposable lands of the
public domain is for the legislature to pass a law authorizing such sale. CA No. 141 does not
authorize the President to reclassify government reclaimed and marshy lands into other non-
agricultural lands under Section 59 (d). Lands classified under Section 59 (d) are the only
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alienable or disposable lands for non-agricultural purposes that the government could sell to
private parties. [Chavez vs. Public Estates Authority, 384 SCRA 152(2002)]

In order for PEA to sell its reclaimed foreshore and submerged alienable lands of
the public domain, there must be legislative authority empowering PEA to sell
these lands, though any legis lative authority granted to PEA to sell its reclaimed
alienable lands of the public domain would be subject to the constitutional ban on
private corporations from acquiring alienable lands of the public domain, such
legislative authority could only benefit private individuals.In order for PEA to sell its
reclaimed foreshore and submerged alienable lands of the public domain, there must be
legislative authority empowering PEA to sell these lands. This legislative authority is necessary
in view of Section 60 of CA No. 141, which statesSec. 60. x x x; but the land so granted,
donated or transferred to a province, municipality, or branch or subdivision of the Government
shall not be alienated, encumbered or otherwise disposed of in a manner affecting its title,
except when authorized by Congress; x x x. (Emphasis supplied) Without such legislative
authority, PEA could not sell but only lease its reclaimed foreshore and submerged alienable
lands of the public domain. Nevertheless, any legislative authority granted to PEA to sell its
reclaimed alienable lands of the public domain would be subject to the constitutional ban on
private corporations from acquiring alienable lands of the public domain. Hence, such
legislative authority could only benefit private individuals. [Chavez vs. Public Estates Authority,
384 SCRA 152(2002)]

The mere reclamation of certain areas by PEA does not convert these inalienable
natural resources of the State into alienable or disposable lands of the public
domainthere must be a law or presidential proclamation officially classifying
these reclaimed lands as alienable or disposable and open to disposition or
concession.Under Section 2, Article XII of the 1987 Constitution, the foreshore and
submerged areas of Manila Bay are part of the lands of the public domain, waters x x x and
other natural resources and consequently owned by the State. As such, foreshore and
submerged areas shall not be alienated, unless they are classified as agricultural lands of the
public domain. The mere reclamation of these areas by PEA does not convert these inalienable
natural resources of the State into alienable or disposable lands of the public domain. There
must be a law or presidential proclamation officially classifying these reclaimed lands as
alienable or disposable and open to disposition or concession. Moreover, these reclaimed lands
cannot be classified as alienable or disposable if the law has reserved them for some public or
quasi-public use.

PD No. 1085, coupled with President Aquinos actual issuance of a special patent
covering the Freedom Islands, is equivalent to an official proclamation classifying
the Freedom Islands as alienable or disposable lands of the public domain, open to
disposition or concession to qualified parties.PD No. 1085, issued on February 4, 1977,
authorized the issuance of special land patents for lands reclaimed by PEA from the foreshore or
submerged areas of Manila Bay. On January 19, 1988 then President Corazon C. Aquino issued
Special Patent No. 3517 in the name of PEA for the 157.84 hectares comprising the partially
reclaimed Freedom Islands. Subsequently, on April 9, 1999 the Register of Deeds of the
Municipality of Paranaque issued TCT Nos. 7309, 7311 and 7312 in the name of PEA pursuant to
Section 103 of PD No. 1529 authorizing the issuance of certificates of title corresponding to land
patents. To this day, these certificates of title are still in the name of PEA. PD No. 1085, coupled
with President Aquinos actual issuance of a special patent covering the Freedom Islands, is
equivalent to an official proclamation classifying the Freedom Islands as alienable or disposable
lands of the public domain. PD No. 1085 and President Aquinos issuance of a land patent also
constitute a declaration that the Freedom Islands are no longer needed for public service. The
Freedom Islands are thus alienable or disposable lands of the public domain, open to disposition
or concession to qualified parties.
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Under the Spanish Law of Waters, a private person reclaiming from the sea
without permission from the State could not acquire ownership of the reclaimed
land which would remain property of public dominion like the sea it replaced.
Under Article 5 of the Spanish Law of Waters of 1866, private parties could reclaim from the sea
only with proper permission from the State. Private parties could own the reclaimed land only
if not otherwise provided by the terms of the grant of authority. This clearly meant that no one
could reclaim from sea without permission from the State because the sea is property of public
dominion. It also meant that the State could grant or withhold ownership of the reclaimed land
because any reclaimed land, like the sea from which it emerged, belonged to the State. Thus, a
private person reclaiming from the sea without permission from the State could not acquire
ownership of the reclaimed land which would remain property of public dominion like the sea it
replaced. Article 5 of the Spanish Law of Waters of 1866 adopted the time-honored principle of
land ownership that all lands that were not acquired from the government, either by purchase
or by grant, belong to the public domain.

There is no legislative or Presidential act classifying the additional 592.15 hectares


submerged areas under the Amended JVA as alienable or disposable lands of the
public domain open to dispositionthese areas form part of the public domain,
and in their present state are inalienable and outside the commerce of man.The
Amended JVA covers not only the Freedom Islands, but also an additional 592.15 hectares
which are still submerged and forming part of Manila Bay. There is no legislative or Presidential
act classifying these submerged areas as alienable or disposable lands of the public domain open
to disposetion. These submerged areas are not covered by any patent or certificate of title. There
can be no dispute that these submerged areas form part of the public domain, and in their
present state are inalienable and outside the commerce of man. Until reclaimed from the sea,
these submerged areas are, under the Constitution, waters x x x owned by the State, forming
part of the public domain and consequently inalienable. Only when actually reclaimed from the
sea can these submerged areas be classified as public agricultural lands, which under the
Constitution are the only natural resources that the State may alienate. Once reclaimed and
transformed into public agricultural lands, the government may then officially classify these
lands as alienable or disposable lands open to disposition. Thereafter, the government may
declare these lands no longer needed for public service. Only then can these reclaimed lands be
considered alienable or disposable lands of the public domain and within the commerce of man.

Under EO No. 525, in relation to PD No. 3-A and PD No. 1084, PEA became the
primary implementing agency of the National Government to reclaim foreshore
and submerged lands of the public domain.Section 1 of Executive Order No. 525
provides that PEA shall be primarily responsible for integrating, directing, and coordinating all
reclamation projects for and on behalf of the National Government. The same section also
states that [A]ll reclamation projects shall be approved by the President upon recommendation
of the PEA, and shall be undertaken by the PEA or through a proper contract executed by it with
any person or entity; x x x. Thus, under EO No. 525, in relation to PD No. 3-A and PD No. 1084,
PEA became the primary implementing agency of the National Government to reclaim foreshore
and submerged lands of the public domain. EO No. 525 recognized PEA as the government
entity to undertake the reclamation of lands and ensure their maximum utilization in
promoting public welfare and interests. Since large portions of these reclaimed lands would
obviously be needed for public service, there must be a formal declaration segregating reclaimed
lands no longer needed for public service from those still needed for public service.

Section 3 of EO No. 525, by declaring that all lands reclaimed by PEA shall belong
to or be owned by PEA could not automatically operate to classify inalienable lands
into alienable or disposable lands of the public domain.Section 3 of EO No. 525, by
declaring that all lands reclaimed by PEA shall belong to or be owned by the PEA could not
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automatically operate to classify inalienable lands into alienable or disposable lands of the
public domain. Otherwise, reclaimed foreshore and submerged lands of the public domain
would automatically become alienable once reclaimed by PEA, whether or not classified as
alienable or disposable.

Absent two official actsa classification that these lands are alienable or
disposable and open to disposition and a declaration that these lands are not
needed for public service, lands reclaimed by PEA remain inalienable lands of the
public domain.The mere physical act of reclamation by PEA of foreshore or submerged
areas does not make the reclaimed lands alienable or disposable lands of the public domain,
much less patrimonial lands of PEA. Likewise, the mere transfer by the National Government of
lands of the public domain to PEA does not make the lands alienable or disposable lands of the
public domain, much less patrimonial lands of PEA. Absent two official actsa classification
that these lands are alienable or disposable and open to disposition and a declaration that these
lands are not needed for public service, lands reclaimed by PEA remain inalienable lands of the
public domain. Only such an official classification and formal declaration can convert reclaimed
lands into alienable or disposable lands of the public domain, open to disposition under the
Constitution, Title I and Title III of CA No. 141 and other applicable laws. [Chavez vs. Public
Estates Authority, 384 SCRA 152(2002)]

The grant of legislative authority to sell public lands in accordance with Section 60
of CA No. 141 does not automatically convert alienable lands of the public domain
into private or patrimonial landsthe alienable lands of the public domain must
be transferred to qualified private parties, or to government entities not tasked to
dispose of public lands, before these lands can become private or patrimonial
lands.Alienable lands of the public domain held by government entities under section 60 of
CA No. 141 remain public lands because they cannot be alienated or encumbered unless
Congress passes a law authorizing their disposition. Congress, however, cannot authorize the
sale to private corporations of reclaimed alienable lands of the public domain because of the
constitutional ban. Only individuals can benefit from such law. The grant of legislative authority
to sell public lands in accordance with Section 60 of CA No. 141 does not automatically convert
alienable lands of the public domain into private or patrimonial lands. The alienable lands of the
public domain must be transferred to qualified private parties, or to government entities not
tasked to dispose of public lands, before these lands can become private or patrimonial lands.
Otherwise, the constitutional ban will become illusory if Congress can declare lands of the public
domain as private or patrimonial lands in the hands of a government agency tasked to dispose of
public lands. This will allow private corporations to acquire directly from government agencies
limitless areas of lands which, prior to such law, are concededly public lands.

Public Estates Authority; As the central implementing agency tasked to undertake


reclamation projects nationwide, with authority to sell reclaimed lands, PEA took
the place of DENR as the government agency charged with leasing or selling
reclaimed lands of the public domain.As the central implementing agency tasked to
undertake reclamation projects nationwide, with authority to sell reclaimed lands, PEA took the
place of DENR as the government agency charged with leasing or selling reclaimed lands of the
public domain. The reclaimed lands being leased or sold by PEA are not private lands, in the
same manner that DENR, when it disposes of other alienable lands, does not dispose of private
lands but alienable lands of the public domain. Only when qualified private parties acquire these
lands will the lands become private lands. In the hands of the government agency tasked and
authorized to dispose of alienable of disposable lands of the public domain, these lands are still
public, not private lands.

The mere fact that alienable lands of the public domain are transferred to PEA and
issued land patents or certificates of title in PEAs name does not automatically
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make such lands privateto allow vast areas of reclaimed lands of the public
domain to be transferred to PEA as private lands will sanction a gross violation of
the constitutional ban on private corporations from acquiring any kind of
alienable land of the public domain.PEAs charter expressly states that PEA shall hold
lands of the public domain as well as any and all kinds of lands. PEA can hold both lands of
the public domain and private lands. Thus, the mere fact that alienable lands of the public
domain like the Freedom Islands are transferred to PEA and issued land patents or certificates
of title in PEAs name does not automatically make such lands private. To allow vast areas of
reclaimed lands of the public domain to be transferred to PEA as private lands will sanction a
gross violation of the constitutional ban on private corporations from acquiring any kind of
alienable land of the public domain. PEA will simply turn around, as PEA has now done under
the Amended JVA, and transfer several hundreds of hectares of these reclaimed and still to be
reclaimed lands to a single private corporation in only one transaction. This scheme will
effectively nullify the constitutional ban in Section 3, Article XII of the 1987 Constitution which
was intended to diffuse equitably the ownership of alienable lands of the public domain among
Filipinos, now numbering over 80 million strong. [Chavez vs. Public Estates Authority, 384
SCRA 152(2002)]

5. CHAVEZ VS. PEA AND AMARI (MR) (May 6, 2003, GR 133250)

While PEA is the central implementing agency tasked to undertake reclamation


projects nationwide. BCDA is an entirely different government entity which is
authorized by law to sell specific government lands that have long been declared
by presidential proclamations as military reservations for use by the different
service of the armed forces under the Department of NationalDefense.PEA is the
central implementing agency tasked to undertake reclamation projects nationwide. PEA took
the place of Department of Environment and Natural Resources (DENR for brevity) as the
government agency charged with leasing or selling all reclaimed lands of the public domain. In
the hands of PEA, which took over the leasing and selling functions of DENR, reclaimed
foreshore lands are public lands in the same manner that these same lands would have been
public lands in the hands of DENR. BCDA is an entirely different government entity. BCDA is
authorized by law to sell specific government lands that have long been declared by presidential
proclamations as military reservations for use by the different services of the armed forces under
the Department of National Defense. BCDAs mandate is specific and limited in area, while
PEAs mandate is general and national. BCDA holds government lands that have been granted to
end-user government entitiesthe military services of the armed forces. In contrast, under
Executive Order No. 525, PEA holds the reclaimed public lands, not as an end-user entity, but as
the government agency primarily responsible for integrating, directing, and coordinating all
reclamation projects for and on behalf of the National Government.

Well-settled is the doctrine that public land granted to an end-user government


agency for a specific public use may subsequently be withdrawn by Congress from
public use and declared patrimonial property to be sold to private parties.In
Laurel v. Garcia, cited in the Decision, the Court ruled that land devoted to public use by the
Department of Foreign Affairs, when no longer needed for public use, may be declared
patrimonial property for sale to private parties provided there is a law authorizing such act.
Well-settled is the doctrine that public land granted to an end-user government agency for a
specific public use may subsequently be withdrawn by Congress from public use and declared
patrimonial property to be sold to private parties. R.A. No. 7227 creating the BCDA is a law that
declares specific military reservations no longer needed for defense or military purposes and
reclassifies such lands as patrimonial property for sale to private parties.

Government owned lands, as long as they are patrimonial property, can be sold to
private parties, whether Filipino citizens or qualified private corporations; Once
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converted to patrimonial property, the land may be sold by the public or municipal
corporation to private parties, whether Filipino citizens or qualified private
corporations.Government owned lands, as long they are patrimonial property, can be sold
to private parties, whether Filipino citizens or qualified private corporations. Thus, the so-called
Friar Lands acquired by the government under Act No. 1120 are patrimonial property which
even private corporations can acquire by purchase. Likewise, reclaimed alienable lands of the
public domain if sold or transferred to a public or municipal corporation for a monetary consid
eration become patrimonial property in the hands of the public or municipal corporation. Once
converted to patrimonial property, the land may be sold by the public or municipal corporation
to private parties, whether Filipino citizens or qualified private corporations.

ACCESSION
1. PACIFIC FARMS VS. ESGUERRA (November 29, 1969, GR L-21783)

Property; Accession; Right of accession with respect to immovable property;


Article 447 of New Civil Cide appllied by analogy; Case at bar.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
judubitable. 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 appellantwhich apparently has no desire to remove the
materials, and, even if it were minded to do so, cannot remove them without necessarily
damaginer the buildingshas the corresponding right to recover the value of the unpaid lumber
and construction materials. Wellestablished in jurisprudence is the rule that compensation
should be borne by the person who has been benef iled by the accession. No doubt, the appellee
benefied 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. Of course, the character of a buyer in prood faith and for value, if
really possessed by the appellee, could possibly exonerate it from making compensation, But the
appellee's stance that it is an innocent purchaser for value and in good faith is open to grave
doubt because of certain facts that cannot escape notice.

The claim of the appellee that it is an innocent purchaser for value and in good faith is open to
grave doubt because of the following facts: (1) The vendor was represented in the deed of
absolute sale by its president, J. Antonio Araneta, who was also a director of the vendee and the
counsel who signed the complaint filed by vendee in the court below; (2) The vendee cannot
claim ignorance of the pendency of the suit commenced by the creditor against the vendor
because the vendor was defended by the same lawyer that commenced the present action by the
vendee; (3) Both the vendor and vendee were housed in adjacent rooms of the same building
while the suit of the creditor was filed.

Unpaid furnisher of building materials may enforce right of reimbursement


through execution of the final judgment it obtained; Case at bar.There being no
separate registry of property for buildings and no procedure provided by law for registering or
annotating the claim of an unpaid furnisher of materials, the furnisher of the building materials
(creditor) is helpless to prevent the sale of the property built from lumber construction materials
it furnished. But certainly, because it has a right, pursuant to article 447 of the New Civil Code,
to reimbursement for the value of its unpaid materials, the appellant could pursue any remedy
available to it under the law in order to enforce the said right. Thus, the creditor in question
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acted correctly in bringing an action against the debtor (owner of building) and enforcing its
right of reimbursement through the execution of the final judgment it obtained in the said case
against the six buildings in the possession 01 the vendee of debtor who now stands to benefit
therefrom. It follows, as a necessary corollary? that the sale at public auction conducted by the
defendant sheriff of the six buildings described in the certificate of sale dated February 12, 1962,
exhibit 7, was valid and effective. [Pacific Farms, Inc. vs. Esguerra, 30 SCRA 684(1969)]

ATTY. CERTEZA:
Why Art. 447 was applied by analogy
The SC made a finding that Insular Farms and Pacific Farms are owned the one and
the same beneficial owners.
Pacific Farms in BAD FAITH as it knows of the claim of Carried Lumber against its
predecessor Insular Farms
Why applied by analogy
Ordinarily Art. 447 applies only when a landowner builds on his land using the
materials of another
In this case Insular Farms built using materials of another but Art. 447 was applied
with respect to the rights of the buyer (Pacific Farms)
Can we apply Article 447 in a case where a party builds on land belonging to a third party
using the materials of another?
Yes, by analogy, the building is considered the principal and the building is the accessory.
Applying Art. 447 if a building constructed using the materials of another is sold to a third
party, who should pay for the materials?
If the buyer is in bad faith, he should pay for the materials. Well-established in
jurisprudence is the rule that compensation should be borne by the person who has been
benefited by the accession.

2. MACASAET VS. MACASAET (September 30, 2004, GR 154391-92)

Ejectment; Unlawful Detainer; In actions for unlawful detainer, possession that


was originally lawful becomes unlawful upon the expiration or termination of the
defendants right to possess, arising from an express or implied contract.In
actions for unlawful detainer, possession that was originally lawful becomes unlawful upon the
expiration or termination of the defendants right to possess, arising from an express or implied
contract. In other words, the plaintiffs cause of action comes from the expiration or termination
of the defendants right to continue possession. The case resulting therefrom must be filed
within one year from the date of the last demand.

To show a cause of action in an unlawful detainer, an allegation that the defendant


is illegally withholding possession from the plaintiff is sufficient.To show a cause of
action in an unlawful detainer, an allegation that the defendant is illegally withholding
possession from the plaintiff is sufficient. The complaint may lie even if it does not employ the
terminology of the law, provided the said pleading is couched in a language adequately stating
that the withholding of possession or the refusal to vacate has become unlawful. It is equally
settled that the jurisdiction of the court, as well as the nature of the action, is determined from
the averments of the complaint.

This court has consistently held that those who occupy the land of another at the
latters tolerance or permission, without any contract between them, are
necessarily bound by an implied promise that the occupants will vacate the
property upon demand. A summary action for ejectment is the proper remedy to
enforce this implied obligation.This Court has consistently held that those who occupy
the land of another at the latters tolerance or permission, without any contract between them,

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are necessarily bound by an implied promise that the occupants will vacate the property upon
demand. A summary action for ejectment is the proper remedy to enforce this implied
obligation. The unlawful deprivation or withholding of possession is to be counted from the date
of the demand to vacate. [Macasaet vs. Macasaet, 439 SCRA 625(2004)]

ATTY. CERTEZA:
General Rule. Art. 448 applies to builders, sowers or planters who believe themselves to be
owners of the land or, at least, to have a claim of title thereto. It does not apply when the
interest is merely that of a holder, such as a mere tenant, agent or usufructuary. From these
pronouncements, good faith is identified by the belief that the land is owned; or that -- by
some title -- one has the right to build, plant, or sow thereon.
Exceptions: However, in some special cases, this Court has used Article 448 by recognizing
good faith beyond this limited definition. Thus, in Del Campo v. Abesia, this provision was
applied to one whose house -- despite having been built at the time he was still co-owner --
overlapped with the land of another. This article was also applied to cases wherein a builder
had constructed improvements with the consent of the owner. The Court ruled that the law
deemed the builder to be in good faith. In Sarmiento v. Agana, the builders were found to be
in good faith despite their reliance on the consent of another, whom they had mistakenly
believed to be the owner of the land.
Based on the aforecited special cases, Article 448 applies to the present factual milieu. The
established facts of this case show that respondents fully consented to the improvements
introduced by petitioners. In fact, because the children occupied the lots upon their
invitation, the parents certainly knew and approved of the construction of the improvements
introduced thereon. Thus, petitioners may be deemed to have been in good faith when they
built the structures on those lots.
Observations
the stay of the children was NOT by mere tolerance but by contract
the term of the stay is for so long as the parties mutually benefitted until there is
a change in condition unresolved conflict that terminates the agreement

3. TECNOGAS VS. CA (February 10, 1997, GR 108894)

Civil Law; Property; Unless one is versed in the science of surveying, no one can
determine the precise extent or location of his property by merely examining his
paper title.We disagree with respondent Court. The two cases it relied upon do not support
its main pronouncement that a registered owner of land has presumptive knowledge of the
metes and bounds of its own land, and is therefore in bad faith if he mistakenly builds on an
adjoining land. Aside from the fact that those cases had factual moorings radically different from
those obtaining here, there is nothing in those cases which would suggest, however remotely,
that bad faith is imputable to a registered owner of land when a part of his building encroaches
upon a neighbors land, simply because he is supposedly presumed to know the boundaries of
his land as described in his certificate of title. No such doctrinal statement could have been
made in those cases because such issue was not before the Supreme Court. Quite the contrary,
we have rejected such a theory in Co Tao vs. Chico, where we held that unless one is versed in
the science of surveying, no one can determine the precise extent or location of his property by
merely examining his paper title.

Good faith consists in the belief of the builder that the land he is building on is his,
and his ignorance of any defect or flaw in his title.There is no question that when
petitioner purchased the land from Pariz Industries, the buildings and other structures were
already in existence. The record is not clear as to who actually built those structures, but it may
well be assumed that petitioners predecessor-in-interest, Pariz Industries, did so. Article 527 of
the Civil Code presumes good faith, and since no proof exists to show that the encroachment

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over a narrow, needle-shaped portion of private respondents land was done in bad faith by the
builder of the encroaching structures, the latter should be presumed to have built them in good
faith. It is presumed that possession continues to Tecnogas Philippines Manufacturing Corp. vs.
Court of Appeals be enjoyed in the same character in which it was acquired, until the contrary is
proved. Good faith consists in the belief of the builder that the land he is building on is his, and
his ignorance of any defect or flaw in his title. Hence, such good faith, by law, passed on to
Parizs successor, petitioner in this case. Further, (w)here one derives title to property from
another, the act, declaration, or omission of the latter, while holding the title, in relation to the
property, is evidence against the former. And possession acquired in good faith does not lose
this character except in case and from the moment facts exist which show that the possessor is
not unaware that he possesses the thing improperly or wrongfully. The good faith ceases from
the moment defects in the title are made known to the possessor, by extraneous evidence or by
suit for recovery of the property by the true owner.

The builder, if sued by the aggrieved landowner for recovery of possession, could
have invoked the provisions of Art. 448 of the Civil Code.Recall that the
encroachment in the present case was caused by a very slight deviation of the erected wall (as
fence) which was supposed to run in a straight line from point 9 to point 1 of petitioners lot. It
was an error which, in the context of the attendant facts, was consistent with good faith.
Consequently, the builder, if sued by the aggrieved landowner for recovery of possession, could
have invoke the provisions of Art. 448 of the Civil Code.

Builder can compel landowner to make a choice between the two options: (1) to
appropriate the building by paying the indemnity required by law, or (2) sell the
land to the builder.The obvious benefit to the builder under this article is that,
instead of being outrightly ejected from the land, he can compel the landowner to
make a choice between the two options: (1) to appropriate the building by paying
the indemnity required by law, or (2) sell the land to the builder. The landowner
cannot refuse to exercise either option and compel instead the owner of the
building to remove it from the land.

Petitioner is deemed to have stepped into the shoes of the seller in regard to all
rights of ownership over the immovable sold, including the right to compel the
private respondent to exercise either of the two options provided under Article
448 of the Civil Code.Upon delivery of the property by Pariz Industries, as seller, to the
petitioner, as buyer, the latter acquired ownership of the property. Consequently and as earlier
discussed, petitioner is deemed to have stepped into the shoes of the seller in regard to all rights
of ownership over the immovable sold, including the right to compel the private respondent to
exercise either of the two options provided under Article 448 of the Civil Code.

The supervening awareness of the encroachment by petitioner does not militate


against its right to claim the status of a builder in good faith.In the context of the
established facts, we hold that petitioner did not lose its rights under Article 448 of the Civil
Code on the basis merely of the fact that some years after acquiring the property in good faith, it
learned aboutand aptly recognizedthe right of private respondent to a portion of the land
occupied by its building. The supervening awareness of the encroachment by petitioner does not
militate against its right to claim the status of a builder in good faith. In fact, a judicious reading
of said Article 448 will readily show that the landowners exercise of his option can only take
place after the builder shall have come to know of the intrusionin short, when both parties
shall have become aware of it. Only then will the occasion for exercising the option arise, for it is
only then that both parties will have been aware that a problem exists in regard to their property
rights.

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The settlement may have recognized the ownership of private respondent but such
admission cannot be equated with bad faith.From the foregoing, it is clear that
petitioner agreed only to the demolition of a portion of the wall separating the adjoining
properties of the partiesi.e. up to the back of the building housing the machineries. But that
portion of the fence which served as the wall housing the electroplating machineries was not to
be demolished. Rather, it was to be subject to negotiation by herein parties. The settlement
may have recognized the ownership of private respondent but such admission cannot be
equated with bad faith. Petitioner was only trying to avoid a litigation, one reason for entering
into an amicable settlement. [Tecnogas Philippines Manufacturing Corp. vs. Court of Appeals,
268 SCRA 5(1997)]

ATTY. CERTEZA:
Can the successor-in-interest of the BPS benefit from Art. 448?
Yes, provided the successor did not know of the encroachment.
Is Technogas in bad faith?
No, good faith is presumed under Art. 527
When Technogas purchased the land, the buildings which encroached were already
existing. Technogas had no way of knowing about the encroachment. In fact, the
owner of the land encroached also became aware only after he had his land surveyed.
Since Technogas became aware of the encroachment subsequent to its purchase, will this not
preclude resorting to Art. 448?
No, a reading of Art. 448 will show that the landowners exercise of the option can
only take place AFTER the builder shall have come to know of the intrusion in
short, when both parties became aware of it.
One cannot be presumed to know the metes and bounds of his property simply based on the
technical description on his title unless he is well versed in the science of surveying.
Hence, one who holds title and builds beyond his property line cannot be presumed
to be in bad faith.

4. DEL CAMPO VS. ABESIA (April 15, 1988, GR L-49219)

Civil Law; Property; Builder in good faith; Co-ownership; When a co-ownership is


terminated by the partition and the house of defendants overlaps a portion of the
land of plaintiffs which defendants built in good faith, Article 448 of the Civil Code
applies; Article 448 may apply even when there was co-owner$hip if good faith has
been established.However, when, as in this case, the co-ownership is terminated by the
partition and it appears that the house of defendants overlaps or occupies a portion of 5 square
meters of the land pertaining to plaintiffs which the defendants obviously built in good faith,
then the provisionB of Article 448 of the new Civil Code should apply. Manresa and Navarro
Amandi agree that the said provision of the Civil Code may apply even when there was co-
ownership if good faith has been established.

Right of a builder in good faith under Article 546 of the Civil Code.Applying the
afore-said provision of the Civil Code, the plaintiffs have the right to appropriate said portion of
the house of defendants upon payment of indemnity to defendants as provided for in Article 546
of the Civil Code. Otherwise, the plaintiffs may oblige the defendants to pay the price of the land
occupied by their house. However, if the price asked for is considerably much more . than the
value of the portion of the house of defendants built thereon, then the latter cannot be obliged to
buy the land. The defendants shall then pay the reasonable rent to the plaintiffs upon such terms
and conditions that they may agree. In case of disagreement, the trial court shall fix the terms
thereof. Of course, defendants may demolish or remove the said portion of their house, at their
own expense, if they so decide. [Spouses Del Campo vs. Abesia, 160 SCRA 379(1988)]

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ATTY. CERTEZA:
Facts:
A co-owner built on land owned in common.
The court appointed commissioner prepared a sketch plan and it was discovered that
the house of one co-owner encroached on the part belonging to the other co-owner.
The court ruled that Art. 448 cannot be applied since a co-owner is not a third party.
The court applied the rules on co-ownership.
The court ordered the builder who encroached to remove the encroachment.
Held:
The SC agreed with the ruling of the lower court.
However, when the co-ownership is terminated by the partition and there is
encroachment of 5 sq. meters obviously made in good faith, Art. 448 may be applied
citing Manresa and Amandi.

5. SARMIENTO VS. AGANA (April 30, 1984, GR L-57288)


The landowner on which a building has been constructed in good faith by another
has the option to buy the building or sell his land to the builder, he cannot refuse
to exercise either option.The challenged decision of respondent Court based on valuations
of P25,000.00 for the LAND and P40,000.00 for the RESIDENTIAL HOUSE, cannot be viewed
as not supported by the evidence. The provision for the exercise by petitioner SARMIENTO of
either the option to indemnify private respondents in the amount of P40,000.00, or the option
to allow private respondents to purchase the LAND at P25,000.00, in our opinion, was a correct
decision.

The owner of the building erected in good faith on a land owned by another, is entitled to retain
the possession of the land until he is paid the value of his building, under article 453 (now
Article 546). The owner of the land, upon the other hand, has the option, under article 361 (now
Article 448), either to pay for the building or to sell his land to the owner of the building. But he
cannot, as respondents here did, refuse both to pay for the building and to sell the land and
compel the owner of the building to remove it from the land where it is erected. He is entitled to
such remotion only when, after having chosen to sell his land, the other party fails to pay for the
same. (italics ours) [Sarmiento vs. Agana, 129 SCRA 122(1984)]

ATTY. CERTEZA:
Facts:
Mother allowed her daughter and latters husband to build their house on a parcel of
land.
Believing that the mother owns the land, couple built their house thereon.
It turns out the mother is not the owner. It is titled to another who sold the same to
Sarmiento.
Sarmiento filed ejectment case against the couple.
Lower court ruled that couple is in good faith. It ordered the couple to vacate the
land after Sarmiento pays them the value of the house.
On appeal to RTC, decision modified:
Sarmiento was given the ff. options exercisable within 60 days
Reimburse the couple the value of the house, or
Require the couple to pay the value of the land
Sarmiento refused to exercise either option
RTC required couple to deposit the sum equal to the value of land Hence,
the appeal.
Held:
Lower court did not err in requiring landowner to exercise the 2 options under Art.
448

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Note: Since the landowner refused to exercise any of the 2 options, is it proper for
the court to decide for them?

6. JAVIER VS. JAVIER (January 2, 1907, GR 2209)


*Syllabus contains no relevant or helpful information.

Held, That under the facts stated in the opinion the house and lot in question should be
excluded from the inventory of the property of the estate of Manuel Javier and Perfecta Tagle,
and that the heirs of the latter have the right to retain the said house after indemnifying the
plaintiff in the value thereof, or to compel the plaintiff to pay to them the value of the land
occupied by the said house, the plaintiff having the right to retain the same until the value of
said land is paid. [Javier vs. Javier, 7 Phil., 261(1907)]

ATTY. CERTEZA:
The son built on land belonging to the father and with the latters consent.
Father sold land to another.
The son eventually purchased the lot.
Son considered a builder in good faith and court applied Art. 448.

7. PNB VS. DE JESUS (September 23, 2003, GR 149295)

Possession; Builders in Good Faith; A builder in good faith can 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; In order,
however, that the builder can invoke the 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.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. 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. 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 is an intangible and abstract 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; 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.
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
individuals 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. 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. 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.

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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 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.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.
[Philippine National Bank vs. De Jesus, 411 SCRA 557(2003)]

ATTY. CERTEZA:
Facts
Ignacio built on land adjoining its property belonging to De Jesus.
When PNB acquired the property from Ignacio, Ignacio offered to sell the portion
encroached upon to PNB but the sale did not materialize.
Lower court ruled that PNB is not a builder in good faith and ordered the removal of
the encroachment.
Held:
PNB was made aware that part of the building encroached upon the land of De Jesus
PNB is in bad faith.
Article 448 does not apply if the builder is also the owner of the land which he
subsequently loses by sale or other mode of transfer citing Pecson vs. CA, 244 SCRA
407. (??)

8. ROSALES VS. CASTELLTORT (October 5, 2005, GR 157044)

Civil Law; Property; Ownership; 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.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. Article 527 of the
Civil Code provides that good faith is always presumed, and upon him who alleges bad faith on
the part of a possessor rests the burden of proof.

Under Article 448 of the New Civil Code, the landowner can choose between
appropriating the building by paying the proper indemnity or obliging the builder
to pay the price of the land, unless its value is considerably more than that of the
structures, in which case the builder in good faith shall pay reasonable rent.As
correctly found by the CA, both parties having acted in good faith at least until August 21, 1995,
the applicable provision in this case is Article 448 of the Civil Code which reads: 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 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 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. Under the foregoing provision,

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the landowner can choose between appropriating the building by paying the proper indemnity
or obliging the builder to pay the price of the land, unless its value is considerably more than
that of the structures, in which case the builder in good faith shall pay reasonable rent. If the
parties cannot come to terms over the conditions of the lease, the court must fix the terms
thereof.

Possession acquired in good faith does not lose this character except in the case
and from the moment facts exist which show that the possessor is not unaware
that he possesses the thing improperly or wrongfully.Possession acquired in good
faith does not lose this character except in the case and from the moment facts exist which show
that the possessor is not unaware that he possesses the thing improperly or wrongfully. The
good faith ceases or is legally interrupted from the moment defects in the title are made known
to the possessor, by extraneous evidence or by suit for recovery of the property by the true
owner. [Rosales vs. Castelltort, 472 SCRA 144(2005)]

ATTY. CERTEZA:
Castelltort purchased Lot 16 from Lina.
The engineer of Lina pointed to Lot 17 by mistke and Catelltort built a house on Lot 17
instead of Lot 16.
Court concluded that Castelltort is in good faith and applied Art. 448.

9. DEPRA VS. DUMLAO (May 16, 1985, GR L-57348)

Owner of land on which improvement was built by another in good faith is entitled
to removal of improvement only after landowner has opted to sell the land and the
builder refused to pay for the same.However, the good faith of DUMLAO is part of the
Stipulation of Facts in the Court of First Instance. It was thus er ror for the Trial Court to have
ruled that DEPRA is entitled to possession, without more, of the disputed portion implying
thereby that he is entitled to have the kitchen removed. He is entitled to such removal only
when, after having chosen to sell his encroached land, DUMLAO fails to pay for the same. In this
case, DUMLAO had expressed his willingness to pay for the land, but DEPRA refused to sell.

Where the lands value is considerably more than the improvement, the landowner
cannot compel the builder to buy the land. In such event, a forced lease is
created and the court shall fix the terms thereof in case the parties disagree
thereon.The trial Court shall further order that if DEPRA exercises the option to oblige
DUMLAO to pay the price of the land but the latter rejects such purchase because, as found by
the trial Court, the value of the land is considerably more than that of the kitchen, DUMLAO
shall give written notice of such rejection to DEPRA and to the Court within fifteen (15) days
from notice of DEPRAs option to sell the land. In that event, the parties shall be given a period
of fifteen (15) days from such notice of rejection within which to agree upon the terms of the
lease, and give the Court formal written notice of such agreement and its provisos. If no
agreement is reached by the parties, the trial Court, within fifteen (15) days from and after the
termination of the said period fixed for negotiation, shall then fix the terms of the lease,
provided that the monthly rental to be fixed by the Court shall not be less than Ten Pesos
(P10.00) per month, payable within the first five (5) days of each calendar month. The period for
the forced lease shall not be more than two (2) years, counted from the finality of the judgment,
considering the long period of time since 1952 that DUMLAO has occupied the subject area. The
rental thus fixed shall be increased by ten percent (10%) for the second year of the forced lease.
DUMLAO shall not make any further constructions or improvements on the kitchen. Upon
expiration of the two-year period, or upon default by DUMLAO in the payment of rentals for two
(2) consecutive months, DEPRA shall be entitled to terminate the forced lease, to recover his
land, and to have the kitchen removed by DUMLAO or at the latters expense. The rentals herein

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provided shall be tendered by DUMLAO to the Court for payment to DEPRA, and such tender
shall constitute evidence of whether or not compliance was made within the period fixed by the
Court. [Depra vs. Dumlao, 136 SCRA 475(1985)]

ATTY. CERTEZA:
1. The trial Court shall determine
a. present fair price of DEPRA's 34 square meter area of land;
b. amount of the expenses spent by DUMLAO for the building of the kitchen;
c. the increase in value ("plus value") which the said area of 34 square meters may have
acquired by reason thereof, and
d. whether the value of said area of land is considerably more than that of the kitchen
built thereon.
2. 2. After said amounts shall have been determined by competent evidence, the Regional, Trial
Court shall render judgment, as follows:
a. a) The trial Court shall grant DEPRA a period of fifteen (15) days within which to
exercise his option under the law (Article 448, Civil Code), whether to appropriate
the kitchen as his own by paying to DUMLAO either the amount of tile expenses
spent by DUMLAO f or the building of the kitchen, or the increase in value ("plus
value") which the said area of 34 square meters may have acquired by reason thereof,
or to oblige DUMLAO to pay the price of said area. The amounts to be respectively
paid by DUMLAO and DEPRA, in accordance with the option thus exercised by
written notice of the other party and to the Court, shall be paid by the obligor within
fifteen (15) days from such notice of the option by tendering the amount to the Court
in favor of the party entitled to receive it;
b. The trial Court shall further order that if DEPRA exercises the option to oblige
DUMLAO to pay the price of the land but the latter rejects such purchase because, as
found by the trial Court, the value of the land is considerably more than that of the
kitchen, DUMLAO shall give written notice of such rejection to DEPRA and to the
Court within fifteen (15) days from notice of DEPRA's option to sell the land. In that
event, the parties shall be given a period of fifteen (15) days from such notice of
rejection within which to agree upon the terms of the lease, and give the Court formal
written notice of such agreement and its provisos. If no agreement is reached by the
parties, the trial Court, within fifteen (15) days from and after the termination of the
said period fixed for negotiation, shall then fix the terms of the lease, provided that
the monthly rental to be fixed by the Court shall not be less than Ten Pesos (P10.00)
per month, payable within the first five (5) days of each calendar month. The period
for the forced lease shall not be more than two (2) years, counted from the finality of
the judgment, considering the long period of time since 1952 that DUMLAO has
occupied the subject area. The rental thus fixed shall be increased by ten percent
(10%) for the second year of the forced lease. DUMLAO shall not make any further
constructions or improvements on the kitchen. Upon expiration of the two-year
period, or upon default by DUMLAO in the payment of rentals for two (2)
consecutive months, DEPRA shall be entitled to terminate the forced lease, to recover
his land, and to have the kitchen removed by DUMLAO or at the latter's expense. The
rentals herein provided shall be tendered by DUMLAO to the Court for payment to
DEPRA, and such tender shall constitute evidence of whether or not compliance was
made within the period fixed by the Court.
c. In any event, DUMLAO shall pay DEPRA an amount computed at Ten Pesos
(P10.00) per month as reasonable compensation for the occupancy of DEPRA's land
for the period counted from 1952, the year DUMLAO occupied the subject area, up to
the commencement date of the forced lease referred to in the preceding paragraph;
d. The periods to be fixed by the trial Court in its Precision shall be inextendible, and
upon failure of the party obliged to tender to the trial Court the amount due to the
obligee, the party entitled to such payment shall be entitled to an order of execution
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for the enforcement of payment of the amount due and for compliance with such
other acts as may be required by the prestation due the obligee.

10. NUGUID VS. CA (February 23, 2005, GR 151815)

Civil Law; Property; A builder in good faith cannot be compelled to pay


rentals during the period of retention nor be disturbed in his possession by
ordering him to vacate; The owner of the land is prohibited from offsetting or
compensating the necessary and useful expenses with the fruits received by the
builder-possessor in good faith.While the law aims to concentrate in one person the
ownership of the land and the improvements thereon in view of the impracticability of creating a
state of forced co-ownership, it guards against unjust enrichment insofar as the good-faith
builders improvements are concerned. The right of retention is considered as one of the
measures devised by the law for the protection of builders in good faith. Its object is to
guarantee full and prompt reimbursement as it permits the actual possessor to remain in
possession while he has not been reimbursed (by the person who defeated him in the case for
possession of the property) for those necessary expenses and useful improvements made by him
on the thing possessed. Accordingly, a builder in good faith cannot be compelled to pay rentals
during the period of retention nor be disturbed in his possession by ordering him to vacate. In
addition, as in this case, the owner of the land is prohibited from offsetting or compensating the
necessary and useful expenses with the fruits received by the builder-possessor in good faith.
Otherwise, the security provided by law would be impaired. This is so because the right to the
expenses and the right to the fruits both pertain to the possessor, making compensation
juridically impossible; and one cannot be used to reduce the other. [Nuguid vs. Court of Appeals,
452 SCRA 243(2005)]

11. MANOTOK REALTY VS. TECSON (August 19, 1988, GR L-47475)

Civil Law; Property; Builder in good faith; Issuance of writ of execution, proper
even if private respondent was adjudged a builder in good faith or peculiar
circumstances supervened; Option to retain the premises and pay for
improvements or to sell the premises to the builder in good faith belongs to the
owner of the property.Neither can the respondent judge deny the issuance of a writ of
execution because the private respondent was adjudged a builder in good faith or on the ground
of peculiar circumstances which supervened after the institution of this case, like, for instance,
the introduction of certain major repairs of and other substantial improvements x x x because
the option given by law either to retain the premises and pay for the improvements thereon or to
sell the said premises to the builder in good faith belongs to the owner of the property.

Concept of a builder in good faith.Again, in the recent case of Paz Mercado, et al. v. Hon.
Court of Appeals, et al., (G.R. No. L-44001, June 10, 1988), we said: x x x To be deemed a
builder in good faith, it is essential that a person assert title to the land on which he builds; i.e.,
that he be a possessor in concept of owner, (Art. 525, Civil Code; Lopez, Inc. v. Phil. Eastern
Trading Co., Inc., 98 Phil. 348) and that he be unaware that there exists in his title or mode of
acquisition any flaw which invalidates it. (Art. 526, Civil Code; Granados v. Monton, 86 Phil.
42; Arriola v. Gomez de la Serna, 14 Phil. 627; See also Manotok Realty, Inc. v. C.A., 134 SCRA
329, citing Caram v. Laureta, 103 SCRA 7) It is such a builder in good faith who is given the right
to retain the thing, even as against the real owner, until he has been reimbursed in full not only
for the necessary expenses but also for useful expenses. (Art. 546, Civil Code; Policarpio v. CA.,
129 SCRA 51; Sarmiento v. Agana, 129 SCRA 122; cf, Queto v. C.A. 122 SCRA 206) xxx

Good faith of private respondent ceased after the filing of the complaint below.
Furthermore, the private respondents good faith ceased after the filing of the complaint below
by the petitioner. x x x Thus, the repairs and improvements introduced by the said respondents
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after the complaint was filed cannot be considered to have been built in good faith, much less,
justify the denial of the petitioners exercise of option.

Where the improvements have been gutted by fire, the basis for private
respondents right to retain the premises has already been extinguished without
petitioners fault.Since the improvements have been gutted by fire, and therefore, the basis
for private respondents right to retain the premises has already been extinguished without the
fault of the petitioner, there is no other recourse for the private respondent but to vacate the
premises and deliver the same to herein petitioner. [Manotok Realty, Inc. vs. Tecson, 164 SCRA
587(1988)]

12. CALTEX VS. FELIAS (June 30, 1960, GR L-14309)

HUSBAND AND WlFE; PARAPHERNAL PROPERTY; LOT DONATED BY PARENTS


TO A DAUGHTER; STATUS OF BUILDING CONSTRUCTED THEREON BEFORE
THE DONATION.A lot belonging to the parents and later donated by them to their daughter
is paraphernal property, and the rule applicable with respect to the building constructed thereon
before the donation is that of accessory following the principal. The donation transmitted to her
the rights of a landowner over a building constructed on it. As such the lot and the building are
not answerable for the obligations of her husband. [Caltex (Phil.) Inc. vs. Felias, 108 Phil.
873(1960)]

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