In the Civil Code provisions governing property law, one chapter discusses Accession (Article 440, onwards). In a nutshell, the owner of the property has the right of accession (right to fruits) to everything produced by the property itself, or those which are incorporated and attached thereto, either naturally or artificially.
The chapter on Accession contains the provision on Builder/Planter/Sower, to wit:
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.
Such provision, including the meaty jurisprudence centering on such concept (e.g. Cheng vs. Donini), can be summarised as follows:
Case A: If both the owner and the builder/planter/sower (hereinafter referred to as “BPS”) are in good faith: There is no co-ownership. The owner owns the property (e.g. land), and the BPS owns that which he built or planted (e.g. building). However, the owner has the following remedies:
- To appropriate that which was built or planted (e.g. building) as his own, after paying the BPS the amount of indemnity (i.e. expenses) in Articles 546 and 548; or
- To compel the BPS to pay the price of the land (if B or P), or the rent (if S).
It is very important to note that it is the owner who makes the determination or choice. If he does not make the decision, the parties remain status quo — BPS remains the owner of that which was built/planted/sowed. Moreover, the BPS remains the possessor in good faith, and as a possessor in good faith, he has the right to fruits of the property (e.g. rentals in the building). This is so because of Article 544 of the Civil Code, to wit:
Art. 544. A possessor in good faith is entitled to the fruits received before the possession is legally interrupted.
Natural and industrial fruits are considered received from the time they are gathered or severed.
Civil fruits are deemed to accrue daily and belong to the possessor in good faith in that proportion.
BPS also has the right of retention over that which was built/planted/sowed, and such right remains until the owner reimburses him for the amount of expenses mentioned in Articles 546 and 548, to wit:
Art. 546. Necessary expenses shall be refunded to every possessor; but only the possessor in good faith may retain the thing until he has been reimbursed therefor.
Useful expenses shall be refunded only to the possessor in good faith with the same right of retention, the person who has defeated him in the possession having the option of refunding the amount of the expenses or of paying the increase in value which the thing may have acquired by reason thereof. (453a)
Art. 548. Expenses for pure luxury or mere pleasure shall not be refunded to the possessor in good faith; but he may remove the ornaments with which he has embellished the principal thing if it suffers no injury thereby, and if his successor in the possession does not prefer to refund the amount expended. (454)
A BPS in good faith is someone who possesses the property, believing the property to be his under some mode or title of acquisition. See Article 712 for the modes of acquiring ownership.
Hence, if a person knows that he is not the owner, he cannot be considered as a BPS in good faith. This is why a lessee can never be a BPS in good faith. It bears noting that there are Supreme Court decisions which gave exception to this rule, such as: a) a mother-in-law tells the spouses to build on her own property; b) an alleged landowner tells the BPS that he owns the land and that the BPS can build on it, when in fact, the land is not his; or, c) tolerance of the landowner to the acts of BPS.
The general remedy for the landowner to avoid the provision of Article 548 is for him to execute an agreement with the BPS not to build on the property. In this case, the contractual provisions will apply; and the absent of which makes the Civil Code provisions on lease applicable, such as:
Art. 1678. If the lessee makes, in good faith, useful improvements which are suitable to the use for which the lease is intended, without altering the form or substance of the property leased, the lessor upon the termination of the lease shall pay the lessee one-half of the value of the improvements at that time. Should the lessor refuse to reimburse said amount, the lessee may remove the improvements, even though the principal thing may suffer damage thereby. He shall not, however, cause any more impairment upon the property leased than is necessary.
With regard to ornamental expenses, the lessee shall not be entitled to any reimbursement, but he may remove the ornamental objects, provided no damage is caused to the principal thing, and the lessor does not choose to retain them by paying their value at the time the lease is extinguished. (n)
Case B: If the owner is in bad faith, and the BPS is in good faith: Apply Article 447.
Art. 454. When the landowner acted in bad faith and the builder, planter or sower proceeded in good faith, the provisions of article 447 shall apply.
Art. 447. The owner of the land who makes thereon, personally or through another, plantings, constructions or works with the materials of another, shall pay their value; and, if he acted in bad faith, he shall also be obliged to the reparation of damages. The owner of the materials shall have the right to remove them only in case he can do so without injury to the work constructed, or without the plantings, constructions or works being destroyed. However, if the landowner acted in bad faith, the owner of the materials may remove them in any event, with a right to be indemnified for damages.
The general rule is that the landowner is liable to pay for the value of improvements or materials used, and that the owner of materials is entitled to reimbursement or the removal of materials if it will not cause any damage to the property.
If the landowner is in bad faith, he shall be held liable for damages, plus the owner of the materials has the right to remove the materials whether or not there will be a damage to the property.
Case C: The owner is in good faith, and the BPS is in bad faith: Apply the following articles:
Art. 449. He who builds, plants or sows in bad faith on the land of another, loses what is built, planted or sown without right to indemnity.
Art. 450. The owner of the land on which anything has been built, planted or sown in bad faith may demand the demolition of the work, or that the planting or sowing be removed, in order to replace things in their former condition at the expense of the person who built, planted or sowed; or he may compel the builder or planter to pay the price of the land, and the sower the proper rent.
Art. 451. In the cases of the two preceding articles, the landowner is entitled to damages from the builder, planter or sower.
Art. 452. The builder, planter or sower in bad faith is entitled to reimbursement for the necessary expenses of preservation of the land.
In essence, the landowner is entitled to damages, plus he may:
- Appropriate what was built without need of indemnity to the BPS;
- Demand the demolition of the thing built or restoration of the land at the expense of the BPS;
- Compel the BPS to pay the land or the sower the proper rent.
Notwithstanding the bad faith on the part of BPS, he still:
- Is entitled to reimbursement for the necessary expenses of preservation of land; and,
- Has the right to remove to remove the materials as long as there will be no damage to the land.
Case D: If both owner and the BPS are in bad faith: Apply Article 453, to wit:
Art. 453. If there was bad faith, not only on the part of the person who built, planted or sowed on the land of another, but also on the part of the owner of such land, the rights of one and the other shall be the same as though both had acted in good faith.
It is understood that there is bad faith on the part of the landowner whenever the act was done with his knowledge and without opposition on his part.
This bears semblance with the in pari delicto rule.
Note: The author appreciates any feedback or constructive criticisms. He encourages the readers to correct any mistake that they find in the article above to ensure the veracity and the accuracy of the information. As the topic is a very important one in the realm of Property law, it is also important to ensure that the dissemination of such information remains correct and without any flaws.