G.R. No. 201354 . September 21, 2016
PABLO M. PADILLA, JR. AND MARIA LUISA P. PADILLA, PETITIONERS, VS. LEOPOLDO MALICSI, LITO CASINO, AND AGRIFINO GUANES, RESPONDENTS.

FACTS

Petitioners Spouses Padilla purchased a parcel of land in Cabanatuan City in 1984. In 1998, they discovered that respondents Malicsi, Casino, and Guanes had constructed houses on their property. The Spouses Padilla made repeated demands for the respondents to vacate and pay rentals, but the latter refused. The case was referred to the Barangay for conciliation, which failed, prompting the Spouses Padilla to file a complaint for recovery of possession. In their defense, respondents claimed they were builders in good faith, asserting they entered the land and built their houses between 1980 and 1983 with the permission of a certain Toribia Vda. De Mossessgeld, whom they believed to be the owner. They alleged an agreement with her to eventually purchase the portions they occupied.
The Regional Trial Court ruled that respondents were not builders in good faith and ordered them to vacate the property and pay attorney’s fees. On appeal, the Court of Appeals reversed this decision, declaring respondents as builders in good faith. It applied Article 448 of the Civil Code, giving the landowner the option to either sell the land to the builders or to buy the improvements, unless the value of the land considerably exceeds that of the improvements, in which case a forced lease is created. The Spouses Padilla elevated the case to the Supreme Court via a Petition for Review on Certiorari.

ISSUE

Whether or not the Court of Appeals erred in declaring respondents as builders in good faith.

RULING

The Supreme Court granted the petition, reversed the Court of Appeals, and reinstated the Regional Trial Court’s decision. The Court held that respondents failed to substantiate their claim of good faith. Good faith requires a belief that the land is owned by the builder or that they have a claim of title, and it must be supported by evidence. Respondents merely alleged permission from De Mossessgeld but presented no evidence, such as a written agreement or tax receipts, to prove her ownership or their honest belief in her claim. Their possession was merely tolerated, which does not equate to a colorable title or a claim of ownership. The legal presumption of good faith was successfully rebutted by the petitioners. Since respondents were builders in bad faith, Article 448 of the Civil Code does not apply. Consequently, the landowner has the right to appropriate the improvements without obligation to reimburse, save for necessary expenses for preservation under Article 452, and may demand damages and the removal of the structures at the builders’ expense. The respondents were ordered to vacate the property and pay attorney’s fees and litigation costs.