20 May 2021
Good faith and bad faith are two concepts often discussed in the area of human relations. But even in property disputes, the importance of having good faith spells the difference between having the right to be reimbursed, or being liable for damages.
Article 448 of the Civil Code talks about a builder in good faith. Under this article, 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 paying indemnity to the person who had built on the owner’s land. The landowner may oblige the builder, planter or sower to pay 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, s/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.
This scenario presupposes both the owner and the builder are in good faith, meaning, they acted without notice on the encroachment or the fact that another person owns the land on which the structure is built or the crop is planted.
As clarified by the Supreme Court, 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, builds on that land, believing himself/herself to be its owner and unaware of the defect in his/her 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 (Spouses Aquino vs. Spouses Aguilar, G.R. No. 182754, June 29, 2015).
It must be noted that good faith is presumed, and bad faith should be established by clear and convincing evidence. After all, bad faith is not simply bad judgment or negligence, but implies a dishonest purpose or conscious doing of a wrong, usually partaking the nature of fraud.
Note that, if both parties are in bad faith, the same rules apply. It is as if they are both in good faith, and they cancel out each other’s bad faith.
But if, for instance, only the builder, planter or sower is in bad faith, the landowner may choose among these options: first, appropriating the improvement for himself without paying indemnity; or, removing the improvement at the expense of the builder, planter, sower who is in bad faith; or, compelling the latter to purchase the land regardless of whether the value of it is considerably more than that of the improvement. In any option selected, the landowner is entitled to damages.
This was illustrated in one case (Spouses Aquino, supra). Respondents owned the subject land while petitioners occupied the same with the consent of the respondents, who were then residing in the United States. Petitioners built a house on the property. Respondents eventually informed them that an immediate family member needed to use the premises and demanded the surrender of the property within 10 days from notice. When the demand was not heeded, respondents filed a claim for ejectment where petitioners counterclaimed for reimbursement for their contribution to the costs of construction of the building.
Petitioners were not considered in good faith because there was evidence that petitioners prohibited respondents from building their own structure on a portion of the property. The court found that there was a letter sent to petitioners telling them not to construct on the premises as respondents planned to sell the same eventually. Since petitioners built despite this prohibition, they were not considered builders in good faith.
The court clarified that while Article 448 has been applied to a builder who has constructed improvements on the land of another with the consent of the owner, such that the builder was compensated, in those cases, the owners knew and approved of the construction of improvements on the property.
In Spouses Mendoza vs. Spouses Mayandoc (July 3, 2017, G.R. No. 211170), the Supreme Court ruled that Article 448 of the Civil Code grants to the owner of the land the choice as to what to do with the improvements built, planted or sowed in good faith, under the principle of accession, such that the accessory follows the principal. However, the landowner cannot refuse to exercise either option and compel instead the owner of the building to remove it from the land.
First published on The Daily Tribune.
For further information, please contact:
Nilo T. Divina, Managing Partner, DivinaLaw
nilo.divina@divinalaw.com
