Building on sandy land

Tess and her husband, Cris, are the owners of a house and lot located at Makati. Their property has been occupied by Tess’ sister, Josie and her husband, Eusie.

Josie, Eusie, and their children stayed on the property with the consent and approval of Tess and Cris, who were then residing in the United States.

While Josie, Eusie and her family were in possession of the property, the house previously constructed therein was demolished, and a three-storey building built in its place.

Josie and Eusie told Tess and Cris that they will introduce additional improvements on the subject building. Tess and Cris immediately advised Josie not to proceed with their proposed improvements as they intend to sell the same when the value of the property shall have increased. Just the same, Josie and Eusie proceeded with their planned improvements.

After the building was constructed, Josie and Eusie occupied half of the third floor of this new building without payment of rental.

After 20 years, Tess sent a letter to Josie informing her that they needed to use the premises, and demanded the surrender of the same within 10 days from receipt of the letter.

Shocked by the turn of events, Josie refused to heed her sister’s demand. All their efforts to settle their differences failed. With a heavy heart, Tess and Cris filed a complaint for ejectment against Josie and Eusie.

In response to the complaint, Josie and Eusie claimed that they had contributed to the improvement of the property and the construction of the building, both in terms of money and management/supervision services.

Thus, being co-owners of the building and builders in good faith, Josie and Eusie claimed that they had the right to be compensated for the current value of their contribution.

Q: What is a builder in good faith?

A: The term “builder in good faith” as used in reference to Article 448 of the Civil Code, refers to one who, not being the owner of the land, builds on that land believing himself to be its owner and unaware of the land, builds on that land, believing himself to be its owner and unaware of the defect in his title or mode of acquisition.

The essence of good faith lies in an honest belief in the validity of one’s right, ignorance of a superior claim, and absence of intention to overreach another. (Sps. Aquino vs. Sps. Aguilar, G.R. No. 182754, June 29, 2015)

Q: Are Josie and Eusie builders in good faith?

A: No, they are not. Tess and Eusie cannot be considered as builders in good faith on account of the fact that they knew that the subject lot belonged to Tess and Cris when they constructed the building.

Josie and Eusie were aware of a flaw in their title and a limit to their right to possess the property. By law, 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. (Sps. Aquino vs. Sps. Aguilar, G.R. No. 182754, June 29, 2015)

Q: Are Josie and Eusie entitled to be reimbursed for the useful improvements/expenses they introduced in the property?

A: Unlike lessees who are entitled to to be reimbursed for the useful improvements they introduced in the leased property pursuant to Art. 1678 of the Civil Code, Josie and Eusie are not entitled to reimbursement.

It bears to stress that Josie and Eusie merely occupied the property by mere tolerance of the owners and that they were expressly prohibited by Tess and Cris from building their own structure on a portion of the property. (Sps. Aquino vs. Sps. Aguilar, G.R. No. 182754, June 29, 2015)

Q: Can Josie and Eusie recover necessary expenses incurred for the preservation of the property?

A: Yes, they can. Pursuant to Article 452 of the Civil Code, a builder in bad faith is entitled to recoup the necessary expenses incurred for the preservation of the land. However, being builders in bad faith, they do not have the right of retention over the premises.

Q: What are necessary expenses? What are useful expenses?

A: Necessary expenses are those made for the preservation of the property or thing upon which they have been expanded. (Santos vs. De Guzman, G.R. No. L-11406, April 26, 1961).

Useful expenses, on the other hand, are incurred to give greater utility or productivity to the thing. (Isaguirre vs. De Lara, G.R. No. 138053 May 31, 2000, citing Tolentino, Civil Code of the Philippines II, 294 (1992).

Q: What then are the rights of Tess and Cris under the circumstances?

A: As the owners of the land, they have the right to appropriate what has been built on the property, without any obligation to pay indemnity therefor; and that Josie and Eusie have no right to a refund of any improvement built therein.

Ma. Soledad Deriquito-Mawis is currently the Dean. Lyceum of the Philippines University; president of Philippine Association of Law Schools; and Senior Partner at Gatchalian Castro & Mawis Law Office