Building in Bad Faith: When a Landowner's Silence Equals Consent

The Supreme Court recently clarified a significant point in property law: a landowner who knows about improvements built on their land and stays silent for years may be considered in bad faith, giving the builder rights to reimbursement and retention. In Agapito v. Agapito (G.R. No. 255157, July 4, 2022), the Court ruled that when both the landowner and the builder act in bad faith, the law treats them as if both acted in good faith, triggering the protections of Article 448 of the Civil Code.

The Facts of the Case

Marilyn Agapito owned a parcel of land in Bocaue, Bulacan, covered by TCT No. T-100482 (M). Her brother, Onesimo, had occupied the property for over ten years by her mere tolerance. In 2000, Onesimo built a house on the property. Marilyn later demanded that he vacate, and when he refused, she filed an unlawful detainer complaint.

Onesimo claimed he built the house with Marilyn's full knowledge and acquiescence. He argued that Marilyn, who lived just a few houses away, never objected to the construction for 14 years. He insisted he was a builder in good faith entitled to reimbursement and the right to retain the property until paid.

The Issue

The sole question before the Supreme Court was whether Onesimo was a builder in good faith entitled to reimbursement for useful expenses and retention of the premises under Articles 448 and 546 of the Civil Code.

The Court's Ruling

The Supreme Court reversed the Court of Appeals and ruled in favor of Onesimo. While the Court acknowledged that Onesimo knew the property belonged to Marilyn—which normally means he was not a builder in good faith—the case took a different turn.

The Court applied Article 453 of the Civil Code, which states that if both the builder and the landowner acted in bad faith, their rights and obligations shall be the same as though both had acted in good faith. The law clarifies that a landowner is in bad faith when the act was done with their knowledge and without opposition.

The Court found that Marilyn never raised any objection to the construction for over 14 years, despite living only a few houses away. Critically, the tax declarations for the house were in Marilyn's name as early as 2006. The Court reasoned that had she not known about or consented to the construction, she would not have declared the house under her name for taxation purposes.

When Both Are in Bad Faith

When both the landowner and builder are in bad faith, Article 448 gives the landowner two options:

1. Appropriate the improvements by reimbursing the builder for necessary and useful expenses under Articles 546 and 548; or
2. Sell the land to the builder, unless the land's value is considerably more than the improvements, in which case the builder pays reasonable rent.

If the landowner chooses the first option, the builder has a right of retention over the property until reimbursement is made.

Practical Takeaways

• Silence can be costly. A landowner who knows about unauthorized construction and does nothing for years may be deemed in bad faith under Article 453, losing the right to simply demand removal of the improvements.
• Tax declarations matter. Declaring improvements in your name can be strong evidence of knowledge and consent.
• Proximity is relevant. Courts consider whether the landowner lived near the property and could reasonably have known about the construction.
• Tolerance is not forever. Possession by mere tolerance can be terminated anytime, but it does not automatically strip the builder of all rights.
• Both-options rule. When both parties are in bad faith, the landowner cannot simply evict the builder without choosing between reimbursement or selling the land.

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.