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G.R.No.120303

TodayisSunday,June21,2015

RepublicofthePhilippines
SUPREMECOURT
Manila
THIRDDIVISION

G.R.No.120303July24,1996
FEDERICO GEMINIANO, MARIA GEMINIANO, ERNESTO GEMINIANO, ASUNCION GEMINIANO, LARRY
GEMINIANOandMARLYNGEMINIANO,petitioners,
vs.
COURTOFAPPEALS,DOMINADORNICOLAS,andMARYA.NICOLAS,respondents.

DAVIDE,JR.J.:p
ThispetitionforreviewoncertiorarihasitsoriginsinCivilCaseNo.9214ofBranch3oftheMunicipalTrial
CourtinCities(MTCC)inDagupanCityforunlawfuldetaineranddamages.ThepetitionersasktheCourt
tosetasidethedecisionoftheCourtofAppealsaffirmingthedecisionofBranch40oftheRegionalTrial
Court(RTC)ofDagupanCity,which,inturn,reversedtheMTCCorderedthepetitionerstoreimbursethe
privaterespondentsthevalueofthehouseinquestionandotherimprovementsandallowedthelatterto
retainthepremisesuntilreimbursementwasmade.
It appears that Lot No. 3765B1 containing an area of 314 square meters was originally owned by the
petitioners'mother,PaulinaAmadovda.deGeminiano.Ona12squaremeterportionofthatlotstoodthe
petitioners' unfinished bungalow, which the petitioners sold in November 1978 to the private respondents
forthesumofP6,000.00,withanallegedpromisetoselltothelatterthatportionofthelotoccupiedbythe
house.Subsequently,thepetitioners'motherexecutedacontractofleaseovera126squaremeterportion
of the lot, including that portion on which the house stood, in favor of the private respondents for P40.00
per month for a period of seven years commencing on 15 November 1978.1 The private respondents then
introducedadditionalimprovementsandregisteredthehouseintheirnames.Aftertheexpirationoftheleasecontract
inNovember1985,however,thepetitioners'motherrefusedtoacceptthemonthlyrentals.

Itturnedoutthatthelotinquestionwasthesubjectofasuit,whichresultedinitsacquisitionbyoneMaria
Leein1972.In1982,LeesoldthelottoLilySalcedo,whointurnsolditin1984tothespousesAgustinand
EsterDionisio.
On14February1992,theDionisiospousesexecutedaDeedofQuitclaimoverthesaidpropertyinfavorof
thepetitioners.2Assuch,thelotwasregisteredinthelatter'sname.3
On 9 February 1993, the petitioners sent, via registered mail, a letters addressed to private respondent
Mary Nicolas demanding that she vacate the premises and pay the rentals in arrears within twenty days
fromnotice.4
Upon failure of the private respondents to heed the demand, the petitioners filed with the MTCC of
DagupanCityacomplaintforunlawfuldetaineranddamages.
During the pretrial conference, the parties agreed to confine the issues to: (1) whether there was an
implied renewal of the lease which expired in November 1985 (2) whether the lessees were builders in
goodfaithandentitledtoreimbursementofthevalueofthehouseandimprovementsand(3)thevalueof
thehouse.
The parties then submitted their respective position papers and the case was heard under the Rule on
SummaryProcedure.
On the first issue, the court held that since the petitioners' mother was no longer the owner of the lot in
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question at the time the lease contract was executed in 1978, in view of its acquisition by Maria Lee as
earlyas1972,therewasnoleasetospeakof,muchless,arenewalthereof.Andeveniftheleaselegally
existed,itsimpliedrenewalwasnotfortheperiodstipulatedintheoriginalcontract,butonlyonamonthto
monthbasispursuanttoArticle1687oftheCivilCode.Therefusalofthepetitioners'mothertoacceptthe
rentalsstartingJanuary1986wasthenaclearindicationofherdesiretoterminatethemonthlylease.As
regard the petitioners' alleged failed promise to sell to the private respondents the lot occupied by the
house, the court held that such should be litigated in a proper case before the proper forum, not an
ejectmentcasewheretheonlyissuewasphysicalpossessionoftheproperty.
The court resolved the second issue in the negative, holding that Articles 448 and 546 of the Civil Code,
which allow possessors in good faith to recover the value of improvements and retain the premises until
reimbursed, did not apply to lessees like the private respondents, because the latter knew that their
occupationofthepremiseswouldcontinueonlyduringthelifeofthelease.Besides,therightsoftheprivate
respondentswerespecificallygovernedbyArticle1678,whichallowreimbursementofuptoonehalfofthe
valueoftheusefulimprovements,orremovaloftheimprovementsshouldthelessorrefusetoreimburse.
Onthethirdissue,thecourtdeemedasconclusivetheprivaterespondents'allegationthatthevalueofthe
houseandimprovementswasP180,000.00,therebeingnocontrovertingevidencepresented.
Thetrialcourtthusorderedtheprivaterespondentstovacatethepremises,paythepetitionersP40.00a
monthasreasonablecompensationfortheirstaythereonfromthefilingofthecomplainton14April1993
untiltheyvacated,andtopaythesumofP1,000.00asattorney'sfees,pluscosts.5
On appeal by the private respondents, the RTC of Dagupan City reversed the trial court's decision and
renderedanewjudgment:(1)orderingthepetitionerstoreimbursetheprivaterespondentsforthevalueof
thehouseandimprovementsintheamountofP180,000.00andtopaythelatterP10,000.00asattorney's
fees and P2,000.00 as litigation expenses and (2) allowing the private respondents to remain in
possessionofthepremisesuntiltheywerefullyreimbursedforthevalueofthehouse.6 It ruled that since
the private respondents were assured by the petitioners that the lot they leased would eventually be sold to them,
they could be considered builders in good faith, and as such, were entitled to reimbursed of the value of the house
andimprovementswiththerightofretentionuntilreimbursementandhadbeenmade.

Onappeal,thistimebythepetitioners,theCourtofAppealsaffirmedthedecisionoftheRTC7anddenied8
thepetitioners'motionforreconsideration.Hence,thepresentpetition.

TheCourtisconfrontedwiththeissueofwhichprovisionoflawgovernsthecaseatbench:Article448or
Article1678oftheCivilCode?Thesaidarticlesreadasfollows:
Art448.Theownerofthelandonwhichanythinghasbeenbuilt,sownorplantedingoodfaith,shall
havetherighttoappropriateashisowntheworks,sowingorplanting,afterpaymentoftheindemnity
providedforinarticles546and548,ortoobligetheonewhobuiltorplantedtopaythepriceofthe
land,andtheonewhosowed,theproperrent.However,thebuilderorplantercannotbeobligedto
buythelandifitsvalueisconsiderablymorethanthatofthebuildingortrees.Insuchcase,heshall
pay reasonable rent, if the owner of the land does not choose to appropriate the building or trees
after proper indemnity. The parties shall agree upon the terms of the lease and in case if
disagreement,thecourtshallfixthetermsthereof.
xxxxxxxxx
Art 1678. If the lessee makes, in good faith, useful improvements which are suitable to the use for
whichtheleaseisintended,withoutalteringtheformorsubstanceofthepropertyleased,thelessor
upontheterminationoftheleaseshallpaythelesseeonehalfofthevalueoftheimprovementsat
that time. Should the lessor refuse to reimburse said amount, the lessee may remover the
improvements, even though the principal thing may suffer damage thereby. He shall not, however,
causeanymoreimpairmentuponthepropertyleasedthanisnecessary.
Withregardtoornamentalexpenses,thelesseeshallnotbeentitledtoanyreimbursed,buthemay
removetheornamentalobjects,providednodamageiscausedtotheprincipalthing,andthelessor
doesnotchoosetoretainthembypayingtheirvalueatthetimetheleaseisextinguished.
The crux of the said issue then is whether the private respondents are builder in good faith or mere
lessees.
Theprivaterespondentsclaimtheyarebuildersingoodfaith,hence,Article448oftheCivilCodeshould
apply.Theyrelyonthelackoftitleofthepetitioners'motheratthetimeoftheexecutionofthecontractof
lease,aswellastheallegedassurancemadebythepetitionersthatthelotonwhichthehousestoodwould
besoldtothem.
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Ithasbeensaidthatwhiletherighttoletpropertyisanincidentoftitleandpossession,apersonmaybe
lessorandoccupythepositionofalandlordtothetenantalthoughheisnottheownerofthepremiseslet.9
Afterall,ownershipofthepropertyisnotbeingtransferred,10onlythetemporaryuseandenjoymentthereof.11

In this case, both parties admit that the land in question was originally owned by the petitioners' mother.
ThelandwasallegedlyacquiredlaterbyoneMariaLeebyvirtueofanextrajudicialforeclosureofmortage.
Lee, however, never sought a writ of possession in order that she gain possession of the property in
question.12Thepetitioners'motherthereforeremainedinpossessionofthelot.
Itisundisputedthattheprivaterespondentscameintopossessionof126squaremeterportionofthesaid
lotbyvirtueofcontractofleaseexecutedbythepetitioners'motheraslessor,andtheprivaterespondents
aslessees,isthereforewellestablished,andcarrieswithitarecognitionofthelessor'stitle.13 The private
respondents, as lessees who had undisturbed possession for the entire term under the lease, are then estopped to
deny their landlord's title, or to assert a better title not only in themselves, but also in some third person while they
remain in possession of the leased premises and until they surrender possession to the landlord.14 This estoppel
applieseventhoughthelessorhadnotitleatthetimetherelationoflessorandlesseewascreated,15 and may be
assertednotonlybytheoriginallessor,butalsobythosewhosucceedtohistitle.16

Being mere lessees, the private respondents knew that their occupation of the premises would continue
onlyforthelifeofthelease.Plainly,theycannotbeconsideredaspossessorsnorbuildersingoodfaith.17
In a plethora of cases,18 this Court has held that Article 448 of the Civil Code, in relation to Article 546 of the
same Code, which allows full reimbursement of useful improvements and retention of the premises until
reimbursementismade,appliesonlytoapossessoringoodfaith,i.e.,onewhobuildsonlandwiththebeliefthathe
istheownerthereof.Itdoesnotapplywhereone'sonlyinterestisthatofalesseeunderarentalcontractotherwise,
itwouldalwaysbeinthepowerofthetenantto"improve"hislandlordoutofhisproperty.

Anenttheallegedpromiseofthepetitionerstosellthelotoccupiedbytheprivaterespondents'house,the
same was not substantiated by convincing evidence. Neither the deed of sale over the house nor the
contractofleasecontainedanoptioninfavoroftherespondentspousestopurchasethesaidlot.Andeven
ifthepetitionersindeedpromisedtosell,itwouldnotmaketheprivaterespondentspossessorsorbuilders
ingoodfaithsoastocoveredbytheprovisionofArticle448oftheCivilCode.Thelattercannotraisethe
mere expectancy or ownership of the aforementioned lot because the alleged promise to sell was not
fulfillednoritsexistenceevenproven.Thefirstthingthattheprivaterespondentsshouldhavedonewasto
reducetheallegedpromiseintowriting,becauseunderArticle1403oftheCivilCode,anagreementforthe
saleofrealpropertyoraninterestthereinisunenforceable,unlesssomenoteormemorandumthereofbe
produced.Nothavingtakenanystepsinorderthattheallegedpromisetosellmaybeenforced,theprivate
respondentscannotbankonthepromiseandprofessanyclaimnorcoloroftitleoverthelotinquestion.
ThereisnoneedtoapplybyanalogytheprovisionsofArticle448onindemnityaswasdoneinPecsonvs.
Court of Appeals,19 because the situation sought to be avoided and which would justify the application of that
provision,isnotpresentinthiscase.Sufficeittosay,"astateofforcedcoownership"wouldnotbecreatedbetween
the petitioners and the private respondents. For, as correctly pointed out by the petitioners, the right of the private
respondentsaslesseesaregovernedbyArticle1678oftheCivilCodewhichallowsreimbursementtotheextentof
onehalfofthevalueoftheusefulimprovements.

Itmustbestressed,however,thattherighttoindemnityunderArticle1678oftheCivilCodearisesonlyif
thelessoroptstoappropriatetheimprovements.Sincethepetitionersrefusedtoexercisethatoption,20the
privaterespondentscannotcompelthemtoreimbursetheonehalfvalueofthehouseandimprovements.Neithercan
they retain the premises until reimbursement is made. The private respondents' sole right then is to remove the
improvementswithoutcausinganymoreimpairmentuponthepropertyleasedthanisnecessary.21

WHEREFORE, judgment is hereby rendered GRANTING the instant petition, REVERSING and SETTING
ASIDE the decision of the Court of Appeals of 27 January 1995 in CAG.R. SP No. 34337 and
REINSTATINGthedecisionofBranch3oftheMunicipalTrialCourtinCitiesofDagupanCityinCivilCase
No.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 of
Appeals,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)Racaza
vs.SusanaRealty,Inc.supranote17,at11771178Bulacanagvs.Francisco,122SCRA498,502[1983]
Gabritovs.CourtofAppeals,167SCRA771,778779[1988]Cabangisvs.CourtofAppeals,200SCRA
414,419421[1991]HeirsofthelateJaimeBinuyavs.CourtofAppeals,211SCRA761,766[1992].
19244SCRA407[1995].
20CARollo,15.
21HeirsofthelateJaimeBinuyavs.CourtofAppeals,supranote18,at768.
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