VOL.

761
211,JULY23,1992
Heirs of the Late Jaime
Binuya vs. Court of
Appeals
*
G.R. No. 100493. July 23, 1992.

HEIRS OF THE LATE JAIME BINUYA, namely: ASUNCION B. CALINAWAN, MAURINIA B.

BONIFACIO, NOEL L. BINUYA, ALFREDO L. BINUYA, FLORANTE L. BINUYA, and JAIME L.
BINUYA, JR., petitioners,  vs.  COURT OF APPEALS, HON. JUDGE ARTURO A. ROMERO,
BERNARDO CARPIO and RUSTICO DUNGAO, respondents.

Leases; Unlawful Detainer; Lessee does not have the right to be paid for the value of his improvement. He
may only remove them if lessor refuses to reimburse 1/2 of its value.—Lessee does not have the right to
demand that he be paid therefor. For if the lessor refuses “to reimburse said amount”, the only remedy
available to the lessee is to remove the improvements, even though the principal thing may suffer damage
thereby,” provided, however, that he should not “cause any more impairment upon the property leased than is
necessary”. Also, not being a possessor in good faith, and therefore, not entitled to the benefits of Article 546 of
the new Civil Code, the lessee does not have the right of retention over his improvements until he is
reimbursed one-half (1/2) of the value of the useful improvements.

PETITION to review the resolution of the Court of Appeals.

The facts are stated in the opinion of the Court.

     Orlando A. Galope for petitioners.
     Braulio C. Petalver, Jr.for private respondents.

________________
*THIRD DIVISION.

762

762 SUPREME COURT

REPORTS
ANNOTATED
Heirs of the Late Jaime
Binuya vs. Court of
Appeals

DAVIDE, JR., J.:
1
Petitioners seek to set aside the 6 June 1991 Resolution of respondent Court in C.A.-G.R. SP No.
24779, entitled “Heirs of the Late Jaime Binuya, et al. versus Honorable Arturo A. Romero, et al.”
dismissing their petition for the review of the decision of Branch 120 (Kalookan City) of the
Regional Trial Court (RTC), National Capital Judicial Region, in  Civil Cases Nos. 14662 and
14663 entitled “Jaime Binuya versus Bernardo Carpio” and Jaime Binuya versus Rustico Dungao”,
respectively, which modified the decision of Branch 50 of the Metropolitan Trial Court (MTC) of
Kalookan City in Civil Case No. 19587 and Civil Case No. 19588 for ejectment. The RTC modified
the said decision by ordering that the eviction of the defendants therein be effected only after they
shall have been reimbursed or paid by the original plaintiff, now substituted by petitioners, for the
value of their houses.
As culled from the pleadings, the following facts are not disputed:
Petitioners’ father, Jaime Binuya, was the registered owner of a parcel of land located along P.
Garcia Street, Kalookan City. He leased out a portion thereof to private respondent Dungao who
constructed thereon a residential house. The lease was to run for a period of ten (10) years,
commencing on 1 April 1968; a monthly rental of P20.00 was agreed upon. In 1973, private
respondent Carpio bought one of Jaime’s two (2) houses on the lot; after the said purchase, Carpio
leased that portion of the lot occupied by the house for a period of ten (10) years commencing on 22
June 1973 at a monthly rental of P20.00.
Both contracts of lease were in writing.
The contract with Dungao was renewed for a period of two (2) years after its expiration.
Although no further renewal or extension was agreed upon, Dungao was allowed to stay in the
premises on a month to month basis at a monthly rental of P40.00.
There was no extension or renewal of the contract of lease

_________________
1Per Associate Justice Jose A. Melo, concurred in by Associate Justices Emeterio C. Cui and Regina Ordoñez-Benitez.

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Heirs of the Late Jaime
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with Carpio after its expiration, but he, nevertheless, continued to stay on the premises, paying a
monthly rental of P30.00, which was later increased to P40.00.
Upon their failure to pay rentals after March 1989, an amicable settlement thru the conciliation
procedure prescribed under P.D. No. 1508 was attempted. This having failed, Jaime Binuya filed
the aforesaid  Civil Cases Nos. 19587 and 19588for ejectment with Branch 50 of the MTC of
Kalookan City against Bernardo Carpio and Rustico Dungao, respectively.
In their Joint-Affidavit submitted to the MTC, private respondent Carpio claimed that Jaime
agreed to reimburse him (Carpio) for the value of the improvements he would introduce on the
house and that the current value of such improvements is P80,000.00. On the other hand, private
respondent Dungao claimed that Jaime also agreed to reimburse him for the value of the
improvements he would introduce on the portion leased should Jaime decide to repossess the land.
Both private respondents further asserted that their respective contracts of lease were renewed for
a period of ten (10) years per renewal; Carpio was on his second renewal while Dungao was on his
third renewal. 2
In its Joint Decision dated 13 October 1990,   the Metropolitan Trial Court ruled for Jaime
Binuya and ordered the private respondents as follows:
“WHEREFORE, premises considered, judgment is hereby rendered, ordering:

1. Both defendants and all persons claiming rights under them to remove their respective structures
from and to vacate the subject premises and surrender peacefully the possession of said premises to
the plaintiff;
2. Both defendants to pay all their respective rentals as follows:
(a) Defendant Bernardo Carpio to pay the sum of P630.00 representing unpaid rentals at P40.00 per month from April,
1989 up to August, 1990, and furthermore, the sum of P40.00 per month beginning with the month of September, 1990
and

________________
2Annex “B” of Petition; Rollo, 32-37.

764

764 SUPREME COURT

REPORTS
ANNOTATED
Heirs of the Late Jaime
Binuya vs. Court of
Appeals

every month thereafter until said defendant finally vacates thepremises;

(b) Defendant Rustico Dungao to pay the sum of P680.00 representing unpaid rentals at P40.00 per month
from April, 1989 up to August, 1990, and furthermore, the sum of P40.00 per month beginning with the month
of September, 1990 and every month thereafter until said defendant finally vacates the premises;
3. Both defendants to pay P6,000.00 each as and for reasonable attorney’s fees, plus costs of these suits.”

The court dismissed the counterclaims of both Carpio and Dungao for lack of merit. In respect to
their claims for reimbursements for the value of improvements introduced by them, the court ruled
that:
“x x x A careful perusal of the lease contract originally entered into by the parties reveals no such agreement
to that effect. Furthermore, defendants failed to present3 any document to show that there was such an
agreement entered into between themselves and plaintiff.”

Herein private respondents appealed from said Decision to the Regional Trial Court of Kalookan,
Branch 120, which docketed their appeals as Civil Cases Nos. 14662 and 14663.
On 9 February 1991, Jaime Binuya died, prompting the herein petitioners to substitute him as
plaintiff in the appealed cases. On 4 April
4
1991, the RTC, per respondent Judge Arturo A. Romero,
rendered its decision in the said cases,  the dispositive portion of which reads as follows:

“WHEREFORE, the appealed decision is hereby AFFIRMED subject to the modification that the eviction shall
be effected after defendants shall have been reimbursed (sic) or paid by plaintiff for the value of their houses
aforementioned.”

This order requiring plaintiff to reimburse defendants for the value of the latter’s houses is founded
on its conclusion that

__________________
3Rollo, 36.
4Annex “C” of Petition; Rollo, 38-42.

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Heirs of the Late Jaime
Binuya vs. Court of
 Appeals

private respondents are builders in good faith, which in turn is anchored on the following findings:
“Worth-noting (sic) is the fact that in Civil Case No. 19587, the plaintiff sold his house then existing on the lot
in question to the defendant at the time lease (sic) agreement was entered into between plaintiff and
defendant Carpio. And in Civil Case No. 19588, the defendant Rustico Dungao erected a residential house on
the lot in question upon the lease of plaintiff’s lot with the consent of plaintiff.
Accordingly, what easily looms as the most pervasive and decisive issue for consideration is whether or not
the defendants are entitled to the reimbursement of (sic) their respective houses existing on the lots from
whence (sic) they are now being evicted.
Under the circumstances on record, the defendants are owners/ builders in good faith.
In the case of Sarmiento vs. Agana, 129 SCRA 122, it was held that: ‘A landowner on which a building has
been constructed in good faith by another has the option to buy the building or sell his land to the builder; he
cannot refuse to exercise either option’.
Since it is evident that the plaintiff prefers to take possession of both lots in question, the plaintiff should
therefore pay the defendants the value of their improvements.”

Failing to understand and unable to accept the modification, petitioners filed with the respondent
Court a petition for the review of the decision. The said petition was docketed as C.A.-G.R. SP No.
24779. 5
On 6 June 1991, respondent Court promulgated the assailed resolution  dismissing the petition,
there being no prima facie showing that the trial court judge 6committed any error of law or of fact
which may warrant a reversal or modification of the decision.  It agreed with the respondent Judge
that private respondents “are builders in good faith” and “since the original plaintiff as well as his
heirs, herein petitioners, prefer to take possession of the lot in question, reimbursement is only
proper.”
Petitioners then filed the instant petition, claiming that respondent Court and respondent
Judge erred in holding that

_________________
5Annex “A” of Petition; Rollo, 28-30.
6Id., 30.

766

766 SUPREME COURT

REPORTS
ANNOTATED
Heirs of the Late Jaime
Binuya vs. Court of
Appeals

private7 respondents are builders in good faith and 8in applying the case of  Sarmiento vs.
Agana.   After private respondents filed their Comment   in compliance with the Resolution of 7
August 1991, the Court resolved
9
to give due course to the petition and require the parties to submit
their respective Memoranda,  which both parties subsequently complied with.
We decide for the petitioners. 10
As far back as 1907, in  Alburo vs. Villanueva,   this Court already ruled that a lessee is not
entitled to indemnification for improvements as a builder in good faith, thus:
“The contention that the defendant is entitled to the benefits of the provisions of Article 361 of the Civil Code
can not be maintained because the right to indemnification secured in that article is manifestly intended to
apply only to a case where one builds or sows or plants on land in which he believes himself to have a claim of
title and not to lands wherein one’s only interest is that of tenant under a rental contract; otherwise, it would
always be in the power of the tenant to improve his landlord out of his property.”

The Civil Code mentioned therein is the old Civil Code; Article 361 provided as follows:

“The owner of land on which anything has been built, sown, or planted, in good faith, shall be entitled to
appropriate the thing so built, sown, or planted, upon paying the compensation mentioned in Article 453 and
454, or to compel the person who has built or planted to pay him the value of the land, and the person who
sowed thereon to pay the proper rent therefor.”

Article 453 referred to necessary and useful expenditures while Article 454 referred to
expenditures purely for ostentation or mere pleasure.
Articles 361, 453 and 454 of the old Civil Code are now

_________________
7129 SCRA 122 [1987].
8Rollo,op. cit., 47-49.
9Rollo, 50.
107 Phil. 277 [1907].

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211,JULY23,1992
Heirs of the Late Jaime
Binuya vs. Court of
Appeals

Articles 448 (with amendments), 546 (with amendments) and 548, respectively, of the new Civil
Code. 11
This rule was reiterated many times over in subsequent cases.  The reason12
therefore is obvious.
As stated by this Court inLopez, Inc. vs. Philippine & Eastern Trading Co.:

“x x x This principle of possessor in good faith naturally cannot apply to a lessee because as such lessee he
knows that he is not the owner of the leased property. Neither can he deny the ownership or title of the
lessor.”
13
Or, as stated in Guitarte vs. Sabaco,  lessees are “at the outset aware of the ‘precarious nature’ of
their possession.”
It must be remembered that one of the conclusive presumptions in Section 2, Rule 131 of the
Rules of Court is that “[T]he tenant is not permitted to deny the title of his landlord at the time of
the commencement of the relation of landlord and tenant between them.”
In contracts of lease, the matter of improvements introduced by the lessee is specifically
governed by Article 1678 of the new Civil Code which reads:
“If the lessee makes, in good faith, useful improvement 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,

_________________
11In Re Building and Loan Association and Peñalosa, 13 Phil. 575[1909]; Rivera vs. Trinidad, 48 Phil. 396[1925]; Fojas vs. Velasco, 51
Phil. 520[1928]; Montinola vs. Bantug, 71 Phil. 449 [1941]; Lopez, Inc. vs. Philippine & Eastern Trading Co., 98 Phil. 348[1956]; Guitarte
vs. Sabaco, 107 Phil. 437  [1960];  Cortez vs. Manimbo,  113 Phil. 363  [1961];  De Laureano vs. Adil,  72 SCRA 148  [1976];  Eusebio vs.
Intermediate Appellate Court, 144 SCRA 154 [1986]; Maceda vs. Court of Appeals, 176 SCRA 440 [1989].
12Supra.
13Supra.

768

768 SUPREME COURT

REPORTS
ANNOTATED
Heirs of the Late Jaime
Binuya vs. Court of
Appeals

cause any more impairment upon the property leased than is necessary.
With regard to ornamental expenses, the lessee shall not be entitled to any reimbursement, but he may
remove the ornamental objects, provided no damage is caused to the principal thing, and the lessor does not
choose to retain them by paying their value at the time the lease is extinguished.”
14
In the old Civil Code, the matter was governed by Article 1573 in relation to Article 487.  Article
1573 provided:
“A lessee shall have, with respect to useful and voluntary improvements, the same rights which are granted to
usufructuaries.”

while Article 487 provided as follows:

“The usufructuary may make on the property held in usufruct any improvements, useful or recreative, which
he may deem proper, provided he does not change its form or substance; but he shall have no right to be
indemnified therefor. He may, however, remove such improvements, should it be possible to do so without
injury to the property.”

It is to be noted at once that the old Civil Code allowed neither indemnity nor retention. The new
Code, however, allows indemnity, to the extent of one-half (1/2) of the value of the useful
improvements, if the lessor chooses to retain them. 15In short, it is the lessor who has the option to
pay for one-half (1/2) the value of the improvements.
The lessee does not have the right to demand that he be paid therefor. For if the lessor refuses
“to reimburse said amount”, the only remedy available to the lessee is to remove the improvements,
even though the principal thing may suffer damage thereby,” provided, however, that he should not
“cause any more impairment upon the property leased than is necessary”. Also, not being a
possessor in good faith, and therefore, not

________________
14Alburo vs. Villanueva, supra.
15Lapeña vs. Morfe, 101 Phil. 997[1957]; De Laureano vs. Adil, supra.

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VOL. 769
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Heirs of the Late Jaime
Binuya vs. Court of
Appeals
entitled to the benefits of Article 546 of the new Civil Code, the lessee does not have the right of
retention over his improvements until he is reimbursed one-half (1/2) of the value of the useful
improvements.
The above provisions of law are clear and unambiguous. The jurisprudence built upon them is
well-entrenched. Both the respondent Judge and the respondent Court should not have overlooked
or disregarded them; vigilance on their part would have aborted in due time the probability of the
cases being brought to this Court to contribute to the clogging
16
of its docket.
We agree with the petitioner that Sarmiento vs. Agana  does not apply in this case.
In that case, it was established that as far as private respondents, the spouses Ernesto
Valentino and Rebecca Lorenzo, knew, “the LAND was owned by ERNESTO’S mother-in-law who,
having stated they could build on the property, could reasonably be expected to later on give them
the LAND.” Ernesto constructed the house in 1967. It turned out, however, that the land was
registered in the name of Mr. and Mrs. Jose Santos, Jr., who sold the same in 1974 to petitioner
Sarmiento who in turn filed an ejectment suit against private respondents. This Court, taking into
account the peculiar circumstances under which they constructed the house, considered them
builders in good faith and, therefore, affirmed the modifying decision of the Court of First Instance
which applied Article 448 of the Civil Code.
Clearly, therefore, the modification made by respondent Judge directing that the ejectment of
the private respondents shall be effected only after they shall have been reimbursed or paid by
petitioners for the value of their houses finds no basis in law and disregards the overwhelming
weight of authority on the matter. He thus committed a palpable abuse of discretion amounting to
lack of jurisdiction.
In affirming the same by dismissing the petition in  C.A. G.R. SP No. 24779, the respondent
Court perpetuated the error of the respondent Judge and must, therefore, share the responsibility
for the blunder.

_________________
16Supra.

770

770 SUPREME COURT

REPORTS
ANNOTATED
People vs. Alfeche, Jr.

WHEREFORE, judgment is hereby rendered GRANTING the instant petition, SETTING ASIDE
the resolution of respondent Court in 6 June 1991 in C.A.-G.R. SP No. 24779, SETTING ASIDE the
modification in the Decision of respondent Judge of 4 April 1991 in Civil Cases Nos. 14662 and
14663; and REINSTATING in full the Decision of 12 October 1990 of Branch 50 of the
Metropolitan Trial Court of Kalookan in Civil Cases Nos. 19587 and 19588.
Costs against private respondents.
SO ORDERED.

     Gutierrez, Jr.(Chairman), Feliciano, Bidinand Romero, JJ., concur.

Petition granted; resolution set aside.

Notes.—Lessee has the right to indemnity of improvements (Cabangis vs. Court of Appeals, 200
SCRA 414).
Right to indemnity exist if the lessor opts to appropriate the improvements (Cabangis vs. Court
of Appeals, 200 SCRA 414).
——o0o——