2020-21 The Law Pertaining to Private, Personal, and Commercial Relations, Q8

Believing that a parcel of land was public land, a farmer built a two-story concrete house on it. Five years later, a person showed up bearing an original certificate of title over the lot which had been registered for more than 10 years. The person asked the farmer to vacate the parcel of land. The farmer refused to vacate unless the titled owner pays the fair market value of the house built on the parcel of land. Does the farmer have legal ground to demand payment for the house before vacating the parcel of land? Explain briefly.

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Under Article 449 of the Civil Code, what is the consequence when a person builds in bad faith on another's land?

Under Article 448 of the Civil Code, who qualifies as a builder in good faith?

How does the registration of land under the Torrens system affect a builder's claim of good faith?

Does a builder in bad faith possess a legal right of retention over the land or improvements?

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Why was the farmer's demand for payment prior to vacating the registered land legally untenable?

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1. Builder Bad Faith
Under Article 449 of the Civil Code, a person who builds, plants, or sows in bad faith on the land of another loses what is built, planted, or sown without any right to indemnity. To be classified as a builder in good faith under Article 448, one must build under a claim of title or in the honest belief that he is the owner of the land. One who constructs an improvement knowing that he does not own the property, even if he erroneously believes it to be part of the public domain, is legally a builder in bad faith.

2. Torrens Constructive Notice
Under Section 52 of Presidential Decree No. 1529, the registration of real property under the Torrens system operates as constructive notice of ownership to the whole world. A person who builds on registered land cannot validly claim good faith by asserting ignorance of the registered title. Constructive notice legally displaces any presumption of good faith, charging the builder with knowledge that the property is privately owned and rendering any construction executed without the owner's consent an act in bad faith.

3. Right of Retention
Under Article 448 in relation to Article 546 of the Civil Code, the right of retention until indemnification for necessary and useful expenses is granted exclusively to possessors and builders in good faith. A builder in bad faith possesses no right of retention over the land or the improvements built thereon. Consequently, a builder in bad faith cannot refuse to surrender possession to the registered owner or demand payment for the market value of the structure as a prerequisite to vacating the property.

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