Building on the land of another

For a country with vast expanses of land but with ownership limited to a few, it is inevitable to have to build, plant, or sow on the land of another.

While this economic disparity is undeniable, it is not an excuse for someone to perform acts of ownership in the land of another.

Some build, plant, or sow under the wrong notion that they are the owners of the land, or that they have been authorized by the owner to introduce improvements, or that they have an existing contract of lease with an option to buy the property.

The most common problem is the overlapping of land or encroachment of one piece of land on the land of another.

In the case of Princess Rachel Development Corporation (PRDC), et al. v. Hillview Marketing Corporation (Hillview), et al., it was undisputed that PRDC is the registered owner of several parcels of land in Kalibo, Aklan; and that Hillview, which owns the adjoining property, encroached on the aforementioned pieces of land and built condominium units known as the Alargo Residences (G.R. No. 222482, June 2, 2020).

However, the Supreme Court concluded that Hillview was a builder in bad faith, “[g]iven that such encroachment is substantial, visible to the naked eye, and not merely negligible, Hillview could not feign ignorance thereof.”
In fact, Hillview was also informed of its intrusion, but proceeded nevertheless with the construction (G.R. 222482, June 2, 2020).

“Hillview also took advantage of the fact that PRDC’s adjoining property was vacant, thus, it proceeded with the construction which remained unhampered as PRDC knew nothing thereof. [H]illview was given the opportunity to… dispute the… encroachment [but] instead of doing so, Hillview submitted a mere consolidated sketch plan… without… an actual physical survey,” (G.R. 222482, June 2, 2020).

Significantly, Hillview is not an ordinary landowner, but a property developer engaged in large-scale property development projects.

The nature of its business requires it to “exercise a higher degree of diligence” since there was no noticeable mark or boundary which delineated the adjoining properties (G.R. No. 222482, June 2, 2020).

On the other hand, the registered owner, “PRDC, enjoys the indefeasibility of its titles and, thus, ‘may rest secure without necessity of waiting in the portals of the court sitting in the ‘mirador de su casa’ to avoid the possibility of losing his land. Thus, PRDC had the right to eject any person illegally occupying its property…”(G.R. 222482, June 2, 2020)
“[I]n relation to possession, a landowner may be in good faith or may be deemed in bad faith depending on the landowner’s knowledge of the fact of encroachment [see Article 453, Civil Code]. A landowner is deemed in bad faith when there are circumstances indicating that he had become aware of the encroachment and had chosen not to act on it,” (G.R. 222482, June 2, 2020).

“The circumstances of the instant case show that PRDC had become aware of Hillview’s encroachment only in 2007… because of the contemplated sale to Boracay Enclave.” x x x. “From PRDC’s discovery of Hillview’s encroachment in 2007… PRDC lost no time in asserting its right and protecting its interest by sending Hillview notices to vacate which unfortunately went unheeded… Thus, PRDC is a landowner in good faith,” (G.R. 222482, June 2, 2020).

Hence, the Supreme Court declared that PDRC has the right to appropriate what has been built on its property, without any obligation to pay indemnity therefor.

Due to its bad faith, Hillview forfeits what it has built without any right to be paid indemnity (G.R. No. 222482, June 2, 2020, see Article 449, Civil Code).

While necessary expenses of preservation of the land shall be refunded to the builder, whether he built the same in good faith or in bad, PRDC’s properties were in fact not preserved but used, and were consequently damaged, for the construction of Hillview’s project.

Hillview also does not have the right of retention over the encroached portions as the right of retention is afforded only to a possessor in good faith (G.R. 222482, June 2, 2020, see Articles 452 and 456, Civil Code).

“[If PDRC] choose not to exercise its right to appropriate the improvements as granted to it under Article 449 of the Civil Code, it may exercise either… (a) to demand the removal or demolition of what has been built at Hillview’s expense; or (b) to compel Hillview to pay the price or value of the portions it had encroached upon, whether or not the value of the land is considerably more than the value of the improvements,” (G.R. 222482, June 2, 2020, see Articles 450 and 451).

In the case of Padilla v. Malicsi, et al., Spouses Padilla discovered that Leopoldo Malicsi, Lito Casino, and Agrifino Guanes (Malicsi, et al.) constructed houses on their lot.

They made repeated verbal and written demands for Malicsi, et al. to vacate the premises and pay a monthly rental of P2,000.00, but Malicsi, et al. refused to heed Spouses Padilla’s demands (G.R. 201354, September 21, 2016).

Spouses Padilla filed a complaint for recovery of possession against Malicsi, et al., along with three others: Larry Marcelo, Diosdado dela Cruz, and Rolando Pascua.

In their Answer, Malicsi, et al. alleged that they believed in all honesty and good faith that the lot belonged to Toribia Vda. De Mossessgeld (De Mossessgeld) (G.R. 201354, September 21, 2016).

They claimed that they possessed the land and built their houses on the lot only after receiving De Mossessgeld’s permission; they also claimed that they agreed that De Mossessgeld would sell them the areas occupied by their houses, provided that pending full payment, they would pay her P40.00 per month as rent (G.R. 201354, September 21, 2016).

Malicsi, et al. stated that they first found out about Spouses Padilla’s claim of ownership sometime in 2002. They admitted to receiving the demand letters to vacate and pay rent, but they refused to leave the premises (G.R. 201354, September 21, 2016).

Malicsi, et al. said “that they believed De Mossessgeld when she told them that the lot belonged to her. Yet, the records show that De Mossessgeld was a complete stranger to them.”

If Malicsi, et al. had looked into the ownership of the lot, they would have easily discovered that it was titled to Pablo M. Padilla, Jr.’s mother as early as 1963 (G.R. 201354, September 21, 2016).

Malicsi. et al. likewise failed to present evidence that they entered into an agreement to sell with De Mossessgeld, or that they paid her P40.00 per month as rent, pending full payment of the areas they were occupying.

They could then have presented statements from disinterested third parties that De Mossessgeld owned the lot and that they had to believe her claim of ownership (G.R. 201354, September 21, 2016).

Failing to substantiate their claims, Malicsi, et al., cannot be considered as builders in good faith.

Being in bad faith, they have no right to recover their expenses over the improvements they have introduced to Spouses Padilla’s lot.

As a result, Spouses Padilla became the owners of the improvements on the lot, including the residential buildings, if they choose to appropriate the accessions (G.R. 201354, September 21, 2016).

However, they could instead choose the demolition of the improvements at Malicsi, et al.’s expense or compel them to pay the price of the land (see Article 450, Civil Code).

Whether Spouses Padilla choose to appropriate the improvements, compel their demolition, or compel the respondents to pay the price of the land, they are entitled to damages under Article 451 of the Civil Code (G.R. 201354, September 21, 2016).

In summary, the landowner has three alternative rights: (1) to appropriate what has been built without any obligation to pay indemnity thereof; (2) to demand that the builder remove what he had built; or (3) to compel the builder to pay the value of the land.

In any case, the landowner is entitled to damages under Article 451 (G.R. 201354, September 21, 2016, citing Heirs of Durano v. Spouses Uy).

With the clear provisions of the Civil Code of the Philippines and the jurisprudential pronouncements on the consequences of building on the land of another, a builder must check the title and tax declaration of the land upon which buildings or improvements are to be constructed, or secure the authority to build from the owner.

These documents will apprise the builder whether or not to proceed with the intended construction.