538 Phil. 909
CARPIO MORALES, J.:
ART. 546. Necessary expenses shall be refunded to every possessor; but only the possessor in good faith may retain the thing until he has been reimbursed therefor.held that "[herein petitioners]" tolerated occupancy . . . could not be interpreted to mean . . . that they are builders or possessors in good faith"[13] and that for one to be a builder in good faith, it is assumed that he claims title to the property which is not the case of petitioners.
Useful expenses shall be refunded only to the possessor in good faith with the same right of retention, the person who has defeated him in the possession having the option of refunding the amount of the expenses or of paying the increase in value which the thing may have acquired by reason thereof[,]
Petitioners, proffering that neither respondent nor his agents or representatives performed any act to prevent them from introducing the improvements,[15] contend that the appellate court should have applied Article 453 of the New Civil Code which provides that "[i]f there was bad faith not only on the part of the person who built, planted or sowed on the land of another, but also on the part of the owner of such land, the rights of one and the other shall be the same as though both had acted in good faith."[16]I
. . . WHEN IT SET ASIDE THE DECISIONS OF THE TRIAL COURTS WHICH ORDERED THE RESPONDENT TO REIMBURSE PETITIONERS THE AMOUNT OF TWO MILLION (P2,000,000.00) PESOS FOR THE SUBSTANTIAL IMPROVEMENTS INTRODUCED BY THEM ON THE SUBJECT PREMISES.II
. . . IN NOT HOLDING THAT PETITIONERS ARE BUILDERS IN GOOD FAITH OF THE SUBSTANTIAL IMPROVEMENTS THEY HAD INTRODUCED ON THE PREMISES, HENCE, THEY ARE ENTITLED TO REIMBURSEMENT OF SUCH IMPROVEMENTS.III
. . . IN NOT HOLDING THAT THE BUILDING WHICH PETITIONERS ERECTED ON THE PREMISES WAS WORTH, AND THAT THE PETITIONERS ACTUALLY SPENT, THE AMOUNT OF TWO MILLION (P2,000,000.00) PESOS.IV
. . . IN NOT HOLDING THAT PETITIONERS HAVE THE RIGHT OF RETENTION OF THE PREMISES UNTIL THEY ARE REIMBURSED OF THE SAID AMOUNT ADJUDGED IN THEIR FAVOR BY THE COURTS A QUO.[14]
Art. 1678. If the lessee makes, in good faith, useful improvements which are suitable to the use for which the lease is intended, without altering the form or substance of the property leased, the lessor upon the termination of the lease shall pay the lessee one-half of the value of the improvements at that time. Should the lessor refuse to reimburse said amount, the lessee may remove the improvements, even though the principal thing may suffer damage thereby. He shall not, however, cause any more impairment upon the property leased than is necessary.The foregoing provision is a modification of the old Code under which the lessee had no right at all to be reimbursed for the improvements introduced on the leased property, he being entitled merely to the rights of a usufructuary – right of removal and set-off, but not of reimbursement.[19]x x x x (Emphasis supplied)
ART. 448. The owner of the land on which anything has been built, sown or planted in good faith, shall have the right to appropriate as his own the works, sowing or planting, after payment of the indemnity provided for in articles 546 and 548, or to oblige the one who built or planted to pay the price of the land, and the one who sowed, the proper rent. However, the builder or planter cannot be obliged to buy the land if its value is considerably more than that of the building or trees. In such case, he shall 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 of disagreement, the court shall fix the terms thereof.Jurisprudence is replete with cases[21] which categorically declare that Article 448 covers only cases in which the builders, sowers or planters believe themselves to be owners of the land or, at least, have a claim of title thereto, but not when the interest is merely that of a holder, such as a mere tenant, agent or usufructuary. A tenant cannot be said to be a builder in good faith as he has no pretension to be owner.[22]
ART. 546. Necessary expenses shall be refunded to every possessor; but only the possessor in good faith may retain the thing until he has been reimbursed therefor.
Useful expenses shall be refunded only to the possessor in good faith with the same right of retention, the person who has defeated him in the possession having the option of refunding the amount of the expenses or of paying the increase in value which the thing may have acquired by reason thereof.
In a plethora of cases,[23] this Court has held that Articles 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 reimbursement is made, applies only to a possessor in good faith, i.e., one who builds on land with the belief that he is the owner thereof. It does not apply where one's only interest is that of a lessee under a rental contract; otherwise, it would always be in the power of the tenant to "improve" his landlord out of his property. [24] (Underscoring supplied)Sia v. Court of Appeals,[25] which cites Cabangis v. Court of Appeals,[26] exhaustively explains the applicability of Article 1678 on disputes relating to useful improvements introduced by a lessee on leased premises, viz:
Clearly, it is Article 1678 of the New Civil Code which applies to the present case.x x x x
Second. Petitioner stubbornly insists that he may not be ejected from private respondent's land because he has the right, under Articles 448 and 546 of the New Civil Code, to retain possession of the leased premises until he is paid the full fair market value of the building constructed thereon by his parents. Petitioner is wrong, of course. The Regional Trial Court and the Court of Appeals correctly held that it is Article 1678 of the New Civil Code that governs petitioner's right vis-a-vis the improvements built by his parents on private respondent's land.
In the 1991 case of Cabangis v. Court of Appeals where the subject of the lease contract was also a parcel of land and the lessee's father constructed a family residential house thereon, and the lessee subsequently demanded indemnity for the improvements built on the lessor's land based on Articles 448 and 546 of the New Civil Code, we pointed out that reliance on said legal provisions was misplaced.
"The reliance by the respondent Court of Appeals on Articles 448 and 546 of the Civil Code of the Philippines is misplaced. These provisions have no application to a contract of lease which is the subject matter of this controversy. Instead, Article 1678 of the Civil Code applies. . . .x x x x
On the other hand, Article 448 governs the right of accession while Article 546 pertains to effects of possession. The very language of these two provisions clearly manifest their inapplicability to lease contracts. . . .x x x x
Thus, the improvements that the private respondent's father had introduced in the leased premises were done at his own risk as lessee. The right to indemnity equivalent to one-half of the value of the said improvements — the house, the filling materials, and the hollow block fence or wall — is governed, as earlier adverted to, by the provisions of Art. 1678, first paragraph of the Civil Code above quoted. But this right to indemnity exists only if the lessor opts to appropriate the improvements (Alburo v. Villanueva, supra, note 10 at 279-280; Valencia v. Ayala de Roxas, supra, note 10 at 46). The refusal of the lessor to pay the lessee one-half of the value of the useful improvements gives rise to the right of removal. On this score, the commentary of Justice Paras is enlightening.'Note that under the 1st paragraph of Art. 1678, the law on the right of REMOVAL says that 'should the lessor refuse to reimburse said amount, the lessee may remove the improvements, even though the principal thing may suffer thereby.' While the phrase 'even though' implies that Art. 1678 always applies regardless of whether or not the improvements can be removed without injury to the leased premises, it is believed that application of the Article cannot always be done. The rule is evidently intended for cases where a true accession takes place as when part of the land leased is, say, converted into a fishpond; and certainly not where as easily removable thing (such as a wooden fence) has been introduced. There is no doubt that in a case involving such a detachable fence, the lessee can take the same away with him when the lease expires (5 E. Paras, Civil Code of the Philippines Annotated 345 [11th ed., 1986]).'x x x x