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TodayisSunday,June21,2015

RepublicofthePhilippinesSUPREMECOURT

Manila

THIRDDIVISION

G.R.No.120303July24,1996

FEDERICO GEMINIANO, MARIA GEMINIANO, ERNESTO GEMINIANO, ASUNCION GEMINIANO, LARRYGEMINIANOandMARLYNGEMINIANO,petitioners,vs.COURTOFAPPEALS,DOMINADORNICOLAS,andMARYA.NICOLAS,respondents.

DAVIDE,JR.J.:p

ThispetitionforreviewoncertiorarihasitsoriginsinCivilCaseNo.9214ofBranch3oftheMunicipalTrialCourtinCities(MTCC)inDagupanCityforunlawfuldetaineranddamages.ThepetitionersasktheCourttosetasidethedecisionoftheCourtofAppealsaffirmingthedecisionofBranch40oftheRegionalTrialCourt(RTC)ofDagupanCity,which,inturn,reversedtheMTCCorderedthepetitionerstoreimbursetheprivaterespondentsthevalueofthehouseinquestionandotherimprovementsandallowedthelattertoretainthepremisesuntilreimbursementwasmade.

It appears that LotNo. 3765B1 containing an area of 314 squaremeterswas originally owned by thepetitioners'mother,PaulinaAmadovda.deGeminiano.Ona12squaremeterportionofthatlotstoodthepetitioners'unfinishedbungalow,which thepetitionerssold inNovember1978 to theprivate respondentsforthesumofP6,000.00,withanallegedpromisetoselltothelatterthatportionofthelotoccupiedbythehouse.Subsequently,thepetitioners'motherexecutedacontractofleaseovera126squaremeterportionof the lot, including thatportiononwhich thehousestood, in favorof theprivaterespondents forP40.00permonth foraperiodofsevenyearscommencingon15November1978.1 The private respondents thenintroducedadditionalimprovementsandregisteredthehouseintheirnames.AftertheexpirationoftheleasecontractinNovember1985,however,thepetitioners'motherrefusedtoacceptthemonthlyrentals.

Itturnedoutthatthelotinquestionwasthesubjectofasuit,whichresultedinitsacquisitionbyoneMariaLeein1972.In1982,LeesoldthelottoLilySalcedo,whointurnsolditin1984tothespousesAgustinandEsterDionisio.

On14February1992,theDionisiospousesexecutedaDeedofQuitclaimoverthesaidpropertyinfavorofthepetitioners.2Assuch,thelotwasregisteredinthelatter'sname.3

On9February 1993, thepetitioners sent,via registeredmail, a letters addressed to private respondentMaryNicolasdemanding thatshevacate thepremisesandpay the rentals inarrearswithin twentydaysfromnotice.4

Upon failure of the private respondents to heed the demand, the petitioners filed with the MTCC ofDagupanCityacomplaintforunlawfuldetaineranddamages.

During the pretrial conference, the parties agreed to confine the issues to: (1) whether there was animplied renewal of the leasewhichexpired inNovember 1985 (2)whether the lesseeswerebuilders ingoodfaithandentitledtoreimbursementofthevalueofthehouseandimprovementsand(3)thevalueofthehouse.

The parties then submitted their respective position papers and the casewas heard under theRule onSummaryProcedure.

On the first issue, thecourtheld that since thepetitioners'motherwasno longer theownerof the lot in

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questionat the time the lease contractwasexecuted in1978, in viewof its acquisitionbyMariaLeeasearlyas1972,therewasnoleasetospeakof,muchless,arenewalthereof.Andeveniftheleaselegallyexisted,itsimpliedrenewalwasnotfortheperiodstipulatedintheoriginalcontract,butonlyonamonthtomonthbasispursuanttoArticle1687oftheCivilCode.Therefusalofthepetitioners'mothertoaccepttherentalsstartingJanuary1986wasthenaclear indicationofherdesiretoterminatethemonthly lease.Asregard the petitioners' alleged failed promise to sell to the private respondents the lot occupied by thehouse, the court held that such should be litigated in a proper case before the proper forum, not anejectmentcasewheretheonlyissuewasphysicalpossessionoftheproperty.

Thecourt resolved thesecond issue in thenegative,holding thatArticles448and546of theCivilCode,whichallowpossessors ingood faith to recover thevalueof improvementsand retain thepremisesuntilreimbursed, did not apply to lessees like the private respondents, because the latter knew that theiroccupationofthepremiseswouldcontinueonlyduringthelifeofthelease.Besides,therightsoftheprivaterespondentswerespecificallygovernedbyArticle1678,whichallowreimbursementofuptoonehalfofthevalueoftheusefulimprovements,orremovaloftheimprovementsshouldthelessorrefusetoreimburse.

Onthethirdissue,thecourtdeemedasconclusivetheprivaterespondents'allegationthatthevalueofthehouseandimprovementswasP180,000.00,therebeingnocontrovertingevidencepresented.

Thetrialcourt thusorderedtheprivaterespondentstovacatethepremises,paythepetitionersP40.00amonthasreasonablecompensationfortheirstaythereonfromthefilingofthecomplainton14April1993untiltheyvacated,andtopaythesumofP1,000.00asattorney'sfees,pluscosts.5

On appeal by the private respondents, theRTC ofDagupanCity reversed the trial court's decision andrenderedanewjudgment:(1)orderingthepetitionerstoreimbursetheprivaterespondentsforthevalueofthehouseandimprovementsintheamountofP180,000.00andtopaythelatterP10,000.00asattorney'sfees and P2,000.00 as litigation expenses and (2) allowing the private respondents to remain inpossessionofthepremisesuntil theywerefullyreimbursedforthevalueofthehouse.6 It ruled that sincetheprivate respondentswereassuredby thepetitioners that the lot they leasedwouldeventuallybesold to them,theycouldbeconsideredbuilders ingood faith,andassuch,wereentitled to reimbursedof thevalueof thehouseandimprovementswiththerightofretentionuntilreimbursementandhadbeenmade.

Onappeal,thistimebythepetitioners,theCourtofAppealsaffirmedthedecisionoftheRTC7anddenied8thepetitioners'motionforreconsideration.Hence,thepresentpetition.

TheCourtisconfrontedwiththeissueofwhichprovisionoflawgovernsthecaseatbench:Article448orArticle1678oftheCivilCode?Thesaidarticlesreadasfollows:

Art448.Theownerofthelandonwhichanythinghasbeenbuilt,sownorplantedingoodfaith,shallhavetherighttoappropriateashisowntheworks,sowingorplanting,afterpaymentoftheindemnityprovidedforinarticles546and548,ortoobligetheonewhobuiltorplantedtopaythepriceoftheland,andtheonewhosowed,theproperrent.However,thebuilderorplantercannotbeobligedtobuythelandifitsvalueisconsiderablymorethanthatofthebuildingortrees.Insuchcase,heshallpay reasonable rent, if theownerof the landdoesnotchoose toappropriate thebuildingor treesafter proper indemnity. The parties shall agree upon the terms of the lease and in case ifdisagreement,thecourtshallfixthetermsthereof.

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Art1678. If the lesseemakes, ingood faith,useful improvementswhicharesuitable to theuse forwhichtheleaseisintended,withoutalteringtheformorsubstanceofthepropertyleased,thelessorupontheterminationoftheleaseshallpaythelesseeonehalfofthevalueoftheimprovementsatthat time. Should the lessor refuse to reimburse said amount, the lessee may remover theimprovements,even though theprincipal thingmaysufferdamage thereby.Heshallnot,however,causeanymoreimpairmentuponthepropertyleasedthanisnecessary.

Withregardtoornamentalexpenses,thelesseeshallnotbeentitledtoanyreimbursed,buthemayremovetheornamentalobjects,providednodamageiscausedtotheprincipalthing,andthelessordoesnotchoosetoretainthembypayingtheirvalueatthetimetheleaseisextinguished.

The crux of the said issue then is whether the private respondents are builder in good faith or merelessees.

Theprivaterespondentsclaimtheyarebuilders ingoodfaith,hence,Article448of theCivilCodeshouldapply.Theyrelyonthelackoftitleofthepetitioners'motheratthetimeoftheexecutionofthecontractoflease,aswellastheallegedassurancemadebythepetitionersthatthelotonwhichthehousestoodwouldbesoldtothem.

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Ithasbeensaidthatwhiletherighttoletpropertyisanincidentoftitleandpossession,apersonmaybelessorandoccupythepositionofalandlordtothetenantalthoughheisnottheownerofthepremiseslet.9Afterall,ownershipofthepropertyisnotbeingtransferred,10onlythetemporaryuseandenjoymentthereof.11

In thiscase,bothpartiesadmit that the land inquestionwasoriginallyownedby thepetitioners'mother.ThelandwasallegedlyacquiredlaterbyoneMariaLeebyvirtueofanextrajudicialforeclosureofmortage.Lee, however, never sought a writ of possession in order that she gain possession of the property inquestion.12Thepetitioners'motherthereforeremainedinpossessionofthelot.

Itisundisputedthattheprivaterespondentscameintopossessionof126squaremeterportionofthesaidlotbyvirtueofcontractofleaseexecutedbythepetitioners'motheraslessor,andtheprivaterespondentsaslessees,isthereforewellestablished,andcarrieswithitarecognitionofthelessor'stitle.13Theprivaterespondents,as lesseeswhohadundisturbedpossession for theentire termunder the lease,are thenestopped todeny their landlord's title,or toassertabetter titlenotonly in themselves,butalso insomethirdpersonwhile theyremain inpossessionof the leasedpremisesanduntil theysurrenderpossession to the landlord.14 This estoppelapplieseventhoughthelessorhadnotitleatthetimetherelationoflessorandlesseewascreated,15andmaybeassertednotonlybytheoriginallessor,butalsobythosewhosucceedtohistitle.16

Beingmere lessees, theprivate respondents knew that their occupationof thepremiseswould continueonlyforthelifeofthelease.Plainly,theycannotbeconsideredaspossessorsnorbuildersingoodfaith.17

Inaplethoraofcases,18 thisCourt has held thatArticle 448 of theCivilCode, in relation toArticle 546 of thesame Code, which allows full reimbursement of useful improvements and retention of the premises untilreimbursementismade,appliesonlytoapossessoringoodfaith,i.e.,onewhobuildsonlandwiththebeliefthatheistheownerthereof.Itdoesnotapplywhereone'sonlyinterestisthatofalesseeunderarentalcontractotherwise,itwouldalwaysbeinthepowerofthetenantto"improve"hislandlordoutofhisproperty.

Anenttheallegedpromiseofthepetitionerstosellthelotoccupiedbytheprivaterespondents'house,thesame was not substantiated by convincing evidence. Neither the deed of sale over the house nor thecontractofleasecontainedanoptioninfavoroftherespondentspousestopurchasethesaidlot.Andevenifthepetitionersindeedpromisedtosell,itwouldnotmaketheprivaterespondentspossessorsorbuildersingoodfaithsoastocoveredbytheprovisionofArticle448oftheCivilCode.Thelattercannotraisethemere expectancy or ownership of the aforementioned lot because the alleged promise to sell was notfulfillednoritsexistenceevenproven.Thefirstthingthattheprivaterespondentsshouldhavedonewastoreducetheallegedpromiseintowriting,becauseunderArticle1403oftheCivilCode,anagreementforthesaleofrealpropertyoraninterestthereinisunenforceable,unlesssomenoteormemorandumthereofbeproduced.Nothavingtakenanystepsinorderthattheallegedpromisetosellmaybeenforced,theprivaterespondentscannotbankonthepromiseandprofessanyclaimnorcoloroftitleoverthelotinquestion.

ThereisnoneedtoapplybyanalogytheprovisionsofArticle448onindemnityaswasdoneinPecsonvs.CourtofAppeals,19 because the situation sought to be avoided and which would justify the application of thatprovision,isnotpresentinthiscase.Sufficeittosay,"astateofforcedcoownership"wouldnotbecreatedbetweenthepetitionersand theprivate respondents.For,ascorrectlypointedoutby thepetitioners, the rightof theprivaterespondentsaslesseesaregovernedbyArticle1678oftheCivilCodewhichallowsreimbursementtotheextentofonehalfofthevalueoftheusefulimprovements.

Itmustbestressed,however,thattherighttoindemnityunderArticle1678oftheCivilCodearisesonlyifthelessoroptstoappropriatetheimprovements.Sincethepetitionersrefusedtoexercisethatoption,20theprivaterespondentscannotcompelthemtoreimbursetheonehalfvalueofthehouseandimprovements.Neithercanthey retain the premises until reimbursement is made. The private respondents' sole right then is to remove theimprovementswithoutcausinganymoreimpairmentuponthepropertyleasedthanisnecessary.21

WHEREFORE, judgment ishereby renderedGRANTING the instantpetition,REVERSINGandSETTINGASIDE the decision of the Court of Appeals of 27 January 1995 in CAG.R. SP No. 34337 andREINSTATINGthedecisionofBranch3oftheMunicipalTrialCourtinCitiesofDagupanCityinCivilCaseNo.9214entitled"FedericoGeminiano,etal.vs.DominadorNicolas,etal."

Costagainsttheprivaterespondents.

SOORDERED.

Narvasa,C.J.,Melo,FranciscoandPanganiban,JJ.,concur.

Footnotes

1Rollo,CAGR.SPNo.34337(CARollo),26.

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2Id.,25.

3Id.,24.

4

5CARollo,37PerJudgeEmilioV.Angeles.

6Id.,20.PerJudgeDeodoroJ.Sison.

7Annex"A"ofPetitionRollo,15.PerLuna,A.,J.,withBarcelona,R.,andJacinto,G.,JJ.,concurring.

8Annex"B,"Id.Id.,28.

949AmJur2d,LandlordandTenants,12,55.

10EDGARDOL.PARAS,CivilCodeofthePhilippines,vol.V[1986],258.

11Jovellanosvs.CourtofAppeals,210SCRA126,132[1992].

12Jovenvs.CourtofAppeals,212SCRA700,708[1992].

1349AmJur,op.cit.,120,150.

14 2(b), Rules of Court Borre vs. Court of Appeals, 158 SCRA 560, 566 [1988] Manuel vs. Court ofAppeals,199SCRA603,607[1991]Munarvs.CourtofAppeals,238SCRA372,380[1994]49AmJur,op.cit.,129,158.

15Manuelvs.CourtofAppeals,supranote14,at60760849AmJur,op.cit.129,158.

1649AmJur,op.cit.,122,152.

17Racazavs.SusanaRealty,Inc.,18SCRA1172[1966]Vda.deBacalingvs.Laguna,54SCRA243,250[1973]Santosvs.CourtofAppeals,221SCRA42,46[1993].

18Alburovs.Villanueva,7Phil.277,280[1907](referringtotheprovisionsoftheOldCivilCode)Racazavs.SusanaRealty,Inc.supranote17,at11771178Bulacanagvs.Francisco,122SCRA498,502[1983]Gabritovs.CourtofAppeals,167SCRA771,778779[1988]Cabangisvs.CourtofAppeals,200SCRA414,419421[1991]HeirsofthelateJaimeBinuyavs.CourtofAppeals,211SCRA761,766[1992].

19244SCRA407[1995].

20CARollo,15.

21HeirsofthelateJaimeBinuyavs.CourtofAppeals,supranote18,at768.

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