338 Phil. 652
HERMOSISIMA, JR., J.:
"The facts are as follows: Atty. Rodolfo N. Pelaez was the owner of a parcel of land at the corner of Tiano Bros. Street and Cruz Taal Street, Cagayan de Oro City. He leased the land to Henry L. Sia's parents, the spouses Lim Siok Oan and Sia Bon Suan, who in 1970, constructed a building with the consent of lessor. When Rodolfo Pelaez died, the land was inherited by his son, Atty. Pacifico Pelaez, who sold it to the private respondent Torre de Oro Development Corp. On the other hand, petitioner succeeded to the rights of his parents as lessees of property, upon the latter's death.'That the LESSOR hereby leases unto the LESSEE, his property located at Corner Tiano Bros. St., and Cruz Taal St., known as Cad. Lot No. 401 (bigger portion) for a period of One (1) year counting from this date, particularly bounded as follows:
On March 22, 1988, private respondent Torre de Oro Development Corp., represented by Atty. Pacifico Pelaez, and petitioner Henry L. Sia entered into a lease contract (Exh. H) of the land in question under the following terms and conditions:
On December 22, 1988, private respondent sent a letter (Exh. I) to petitioner, informing him that it was not renewing their lease contract after its expiration, on the ground that petitioner had subleased the property without the written consent of private respondent, in violation of condition par. 2 of the lease contract. In letters dated December 26, 1988 (Annexes B-1 to B-5) the sublessees were similarly notified of the expiration of petitioner's lease and were advised that in case they wished to continue with their lease, arrangements should be made directly with private respondent.
Petitioner, through counsel, wrote a letter to private respondent dated January 20, 1989 (Exh. J), stating that the increase in rent from P2,000.00 to P8,500.00, which private respondent demanded, was excessive. He intimated that he was willing to pay an increase of P500.00 only.
Private respondent ignored the offer, but petitioner insisted on remaining in the premises. Private respondent Torre de Oro Development Corp., therefore, brought this suit in the court below for his ejectment.
On June 26, 1990, the Municipal Trial Court rendered judgment in favor of petitioner. However, on appeal, the Regional Trial Court reversed its decision."[8]
"xxx Exhibit H, the lease contract appears to be a common evidence of the parties. Exhibit H was signed by the parties on March 22, 1988 and notarized on April 5, 1988. These different dates are normal occurrences in notarial practice due to the peculiar circumstances of the parties and the notary. xxx [B]ecause the contract must have an end or "cut off" date to govern the relationship of the signatories thereto the parties agree to fix the start and the end of the contract by declaring a date clearly expressed in the contract. In this particular contract, the parties signed and agreed to the expressed terms, to wit:'That the LESSOR hereby leases unto the LESSEE, his property located at Corner Tiano Bros. St. and Cruz Taal St. known as Cad. Lot No. 401 (bigger portion) for a period of One (1) year counting from this date.' xxx
The foregoing terms were voluntarily agreed by the parties as there was no allegation of force, undue influence or intimidation that attended the signing thereof. All the three paragraphs must perforce be read and understood in its [sic] entire context as we are not allowed to emasculate any part thereof or add anything which is not found in the agreement. In short, the parties agreed that the Lessee shall pay a monthly rent to plaintiff in the sum of P2,000.00 xxx; that the lifetime of the contract is for one year; and that the one year period of the lease shall start or be 'counted from January, 1988 and renwable [sic] for another year [after] every expiration of the contract upon agreement of both the parties.'Consequently, the Regional Trial Court upheld the right of private respondent as lessor to terminate the contract of lease upon expiration thereof, regardless of the tenability of petitioner's violation of the prohibition against the sub-leasing of the leased premises which was private respondent's original ground for ejecting petitioner.
It is the strong conviction of this court that in the interpretation of contracts the entire document must be fully read, evaluated and considered, taking into consideration the intention of the parties and giving effect and force to all its provisions. xxx Every paragraph leads to one intention if taken as a whole and that is, that the rental every month is P2,000.00; that the contract is on a yearly basis renewable only if agreed by both parties, that the one year period shall be counted from January, 1988. To give the said provisions and covenants another interpretation would result in an absurd situation as the one year period was never meant to start on March 22, 1988 or April 5, 1988; otherwise the parties should have included or expressed the same within the enumeration of the terms, conditions or lifetime of the lease contract. Besides, the date of signing is not material or decisive to the present discussion because the parties had already agreed in writing as to a specific date, which is January 1988 and to end December, 1988. In view of the foregoing observation, this court finds that the contract started in January, 1988 and ended one year after, ergo, the complaint has stated a sufficient cause of action and must perforce be reinstated and given legal effect."[9]
"At the time of the filing of this case and during the execution of the Lease Contract, Exhibit H, the parties cannot deny that there was already a commercial building standing on the land in dispute since the early part of 1971 because there was a big fire in 1969 that razed down the Divisoria area including the building that used to stand on the land. After the construction of the building it cannot be denied that the purpose of the building which cost the defendant's predecessors the sum of P35,000.00 was to have it subleased to several tenants subject to the terms of their contract which expressly prohibited any sub-lease. This court finds the situation incongruous but cannot fault the defendant on this because the violation or non-violation of this prohibition is not very relevant to this resolution. Whether there was a violation or not on the sublease, the fact remains that it is the legal and contractual right of plaintiff to terminate the contract as he pleases after the expiration of the same. It is therefore the submission of this court that this issue simply has by its own nature and weight paled into insignificance and limbo."[10]The Municipal Trial Court, in the course of dismissing private respondent's complaint for ejectment, also ruled that petitioner is a builder in good faith in contemplation of Article 448 in relation to Article 546 of the New Civil Code and that as such, he cannot be ejected without being paid the fair market value of the commercial building erected on the leased premises by his parents. Again, the Regional Trial Court found this ruling by the court a quo to be erroneous. The Regional Trial Court ratiocinated, thus:
"It must always be remembered that Art. 448 of the New Civil Code comes in only when the possessor builds on the land of another believing that he is the owner of the land of another. The facts in this proceeding are very much different. Defendant Henry Sia is a tenant of plaintiff and no amount of denial or legal forensic can add or alter that status of the defendant. This being so, it must perforce be safe to uphold that the provisions of Article 1678 of the New Civil Code shall govern the respective rights of the parties herein. The Supreme Court said a mouthful in the following cases affirming the applicability of Art. 1678, as it ruled as follows:'In connection with the petitioner's contention that she be considered a builder in good faith and, therefore, entitled to reimbursement in addition to reasonable expenses that may be incurred in transferring the house to another place, the same cannot stand legal scrutiny. The rule is well-settled that lessees, like petitioner, are not possessors in good faith, the premises continues only during the life of the lease, and they cannot as a matter of right, recover the value of their improvements from the lessor, much less retain the premises until they are reimbursed. Their rights are governed by Article 1678 of the Civil Code which allows reimbursement of lessees up to one-half of the value of their improvements if the lessor so elects.' (p. 250, underlining supplied) (Bocaling vs. Laguna, et al. 54 SCRA 243).'
In this connection, this court finds that the court a quo erred in applying the provisions of Arts. 448 and 527 of the New Civil Code to the case at bar because said ruling is against the principles set by the New Civil Code and of our established jurisprudence."[11]The Regional Trial Court therefore rendered its decision on appeal setting aside the judgment of the court a quo and ordering petitioner to vacate the leased premises and to pay private respondent a monthly rental of P5,000.00 from December, 1988 until he actually vacates said premises. Petitioner was also adjudged liable for P5,000.00 as litigation expenses and P10,000.00 as attorney's fees.
"First. The contract of lease between private respondent Torre de Oro Development Corp., as lessor, and petitioner, as lessee, was for one year. This period was to be counted from January 1988, so that the lease expired on December 31, 1988. Private respondent gave notice in December 1988 of its intent not to renew the contract, by sending letters to petitioner and his sub-lessees. Private respondent, therefore, had the right to eject the lessee, in accordance with art. 1673(1) of the Civil Code, after the expiration of the contract.If the lessee makes on 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.
Petitioner contends, however, that under art. 448, in relation to art. 546 of the Civil Code, he is entitled to remain in the building until he is paid its value because he is a builder in good faith, and that art. 1678 does not apply because this provision refers to a case where the lessor is the owner of both the land and the building and the lessee makes improvements on the building. Petitioner contends that in that case, the lessee cannot be considered to be a builder in good faith because he knows he is not the owner of either the land or the building.
This contention is without merit. Art. 546 applies only to a case where a party builds or sows or plants in a land in which he believes himself to have a title and not to lands wherein his interest is merely that of tenant under a lease contract. [5 Tolentino, Civil Code of the Philippines 222 (1959); Salonga v. Farrales, 105 SCRA 359 (1981); Balacunag v. Francisco, 122 SCRA 498 (1983); Gabrito v. Court of Appeals, 167 SCRA 771 (1988); Maceda v. Court of Appeals, 176 SCRA 440 (1989)]
Petitioner, then, as a lessee, is not a builder (whether in good faith or in bad faith). His rights are governed entirely by art. 1678 of the Civil Code, which provides:
Thus, his only right is to reimbursement for his useful improvements but he has no right of retention. [Mantruste System, Inc. v. Court of Appeals, 179 SCRA 137 (1989); Vda. de Bacaling v. Laguna, 54 SCRA 243 (1973); Racaza v. Susana Realty, Inc. 18 SCRA 1172 [1966]; Lopez, Inc. vs. Phil. & Eastern Trading Co., 98 Phil. 348 [1956]"[12]The respondent appellate court, however, modified the decision of the Regional Trial Court; it computed the monthly rental of P5,000.00 from January, 1989 and not from December, 1988, and deleted the award of attorney's fees. The Court of Appeals explained the modification in this wise:
"Petitioner also contends that the RTC had no power to fix the monthly rental at P5,000.00 since the original monthly rental of P2,000.00 as stated in the lease contract was the law between the parties.Despite the categorical pronouncement of respondent Court of Appeals and of the Regional Trial Court as to private respondent's right to terminate its lease contract with petitioner upon the undisputed expiration and non-renewal thereof as well as private respondent's right under Article 1678 of the Civil Code to choose between (1) paying petitioner 50% of his building's fair market value at the time of the termination of the lease contract and (2) refusing to so pay, in which case petitioner may remove his building from private respondent's land, petitioner has persisted to draw from Article 448 in relation to Article 546 of the New Civil Code, the right to retain possession of the leased premises until petitioner has been reimbursed an amount equivalent to 100% of his building's fair market value. This is mainly his ground for seeking from us the reversal of the herein assailed decision of the Court of Appeals, although he also decries what he perceives as the lack of jurisdiction on the part of the court a quo to adjudicate the issues of (1) the applicability in the instant case of Article 448 of the New Civil Code and (2) the determination of the reasonable value of the improvements built on the leased premises.[14]
The monthly rental of P2,000.00 was fixed in the contract of lease, which expired on December 31, 1988. After that, there was no longer any agreement concerning the monthly rental. As petitioner remained in the premises over private respondent's objection, he is liable to private respondent for such reasonable compensation for the use and enjoyment of the land as may [be] fixed by the courts. [Shoemart, Inc. v. Court of Appeals, 190 SCRA 189 (1990); Felisilda v. Villanueva, 139 431 (1985)]
In this case the amount of P5,000.00 was fixed by the RTC taking into account the following factors, to wit: the realty assessment of the land, which the commissioner found to be a prime lot, the increase in realty taxes; and the prevailing rate of rentals in the vicinity. We find the amount fixed to be fair and reasonable. However, the rentals should be computed from January 1989, after the expiration of the lease contract, and not from December 1988, since it has been established that petitioner had already paid the rental for the month of December, on December 27, 1988. (Exh. J)
The award of attorney's fees should also be deleted since the RTC in its decision did not justify such award. As an award of attorney's fees is the exception rather than the rule, it should be justified in the decision of the trial court; otherwise it must be deleted on appeal. [Abrograr v. IAC, 157 SCRA 57 (1988); Buan v. Camaganacan, 16 SCRA 321 (1966)]."[13]
"As embodied in the order of this court dated March 21, 1989 and January 18, 1990, the issues to be resolved are: 1. Whether the contract of lease has not yet expired when the instant complaint was filed; 2. Whether defendant subleased the area or not; 3. Whether plaintiff owns the building upon the expiration of the contract; and 4. Whether plaintiff can legally eject defendant from the leased premises."[15]In resolving issues 3 and 4, the court a quo found it necessary to determine the good faith or bad faith of petitioner's parents in constructing the building on private respondent's land. Having agreed to the foregoing stipulation of issues and their determination having in fact been favorable to petitioner, petitioner is now estopped to assail the act of the court a quo of resolving such issues. Petitioner is bound thereby, and we cannot sanction petitioner's belated jurisdictional attack which we perceive to be motivated not by a genuine belief in the correctness of his legal posturings but by his mounting fear that the decision on appeal adverse to him, will be ultimately affirmed by this court and attain finality. As we have held in the case of Cloma v. Court of Appeals:[16]
"xxx [I]t is too late in the day for petitioners to question the jurisdiction of the trial court. xxx Voluntarily submitting to the jurisdiction of the trial court, petitioners freely participated in all the hearings of the case and adduced their own evidence. It was only after an adverse judgment that petitioners raised the trial court's alleged lack of jurisdiction. Our law and policy do not sanction such a somersault. The polestar of Tijam v. Sibonghanoy (23 SCRA 29, 35-36) still provides good guidance on the issue, viz:'It has been held that a party can not invoke the jurisdiction of a court to secure affirmative relief against his opponent and, after obtaining or failing to obtain such relief, repudiate or question that same jurisdiction (Dean v. Dean, 136 Or. 694, 86 A.L.R. 79). In the case just cited, by way of explaining the rule, it was further said that the question whether the court had jurisdiction either of the subject-matter of the action or of the parties was not important in such cases because the party is barred from such conduct not because the judgment or order of the court is valid and conclusive as an adjudication, but for the reason that such a practice can not be tolerated — obviously for reasons of public policy.
"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. We quote:'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 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.'
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. They provide:'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 obligate 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.
The petitioners do not dispute the contention of the private respondent that her father Gaspar Devis, filled the leased parcel of land with truck loads of big stones or rocks (escumbro), and enclosed or walled the same with hollow blocks before constructing a residential house thereon. All these, being in the nature of expenses which augmented the value of the land, (Manresa, 270 cited in 2, A. Tolentino Civil Code 110 [2nd ed., 1972]) or increased the income from it, or improved its productivity, are useful improvements within the purview of the law (Alburo v. Villanueva, 7 Phil. 277 [1907]; Valencia V. Roxas, 13 Phil. 45 (1909).'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]).'
But, it must be remembered, as in fact it is not controverted, that Gaspar Devis was a lessee by virtue of a lease contract between him and the City of Manila. As a mere lessee, he knew that the parcel of land in question was not his but belonged to the latter. Even the respondent court conceded this fact when it stated that the private respondent was 'not claiming prior possession much less ownership of the land as heir of her father.' (Rollo, p. 16).
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.
Now then, indeed the private respondent would have a cause of action against the petitioners for indemnity under Article 1678 of the Civil Code if the latter had chosen to appropriate the said improvements. However, there is nothing in the records to indicate that such choice was made. On the other hand, there is no showing either that the private respondent manifested her desire to remove these improvements absent any payment of the required indemnity. She, or her deceased father, should have removed the improvements at the time when the lease expired on July 26, 1968 xxx or at the time of the filing of the unlawful detainer case which was on October 19, 1968."[19]Petitioner grumbles that Article 1678 does not apply when what is leased is only the land and not also the building standing thereon. The reason for this, petitioner submits, is that Article 1678 speaks of "improvements" and that a building is not an "improvement" that is within contemplation of Article 1678. But we categorically ruled in the aforecited case of Cabangis that a building, such as a family residential house, is deemed an "improvement" for purposes of Article 1678 of the Civil Code. Moreover, petitioner's postulations are disjoined from the well-settled interrelated principles that (1) Articles 448 and 546 of the New Civil Code vest the right of retention and the right to reimbursement in a possessor of a parcel of land who believed himself to be the owner of said land and as such, built thereon and incurred expenses in so doing; (2) a lessee, being conclusively presumed to know that he is not the owner of the land that he is leasing, is not such a possessor-builder contemplated of by Articles 448 and 546 of the New Civil Code; and (3) a lessee who constructs a house or building or any other improvement or structure on the leased land, only has the right granted to him by Article 1678 of the New Civil Code to remove the same in case the lessor elects not to appropriate the building and pay 50% of its value. All these are already settled doctrines and uniformly applied in such recent cases as Guzman v. Court of Appeals,[20] Guiang v. Samano,[21] Heirs of the late Jaime Binuya v. Court of Appeals,[22] and Chua v. Court of Appeals.[23]
"It is worth stressing at this juncture that the trial court had the authority to fix the reasonable value for the continued use and occupancy of the leased premises after the termination of the lease contract, and that it was not bound by the stipulated rental in the contract of lease since it is equally settled that upon termination or expiration of the contract of lease, the rental stipulated therein may no longer be the reasonable value for the use and occupation of the premises as a result or by reason of the change or rise in values. Moreover, the trial court can take judicial notice of the general increase in rentals of real estate specially of business establishments xxx."[25]WHEREFORE, premises considered, the instant petition is hereby DISMISSED for lack of merit.