Case Digest: SAMUEL PARILLA, et al. v. DR. PROSPERO PILAR

SAMUEL PARILLA, et al. v. DR. PROSPERO PILAR

509 SCRA 420 (2006)

A tenant cannot be said to be a builder in good faith as he has no pretension to be owner. At all events, under the Civil Code, it is the lessor who is given the option, upon termination of the lease contract, either to appropriate the useful improvements by paying one-half of their value at that time, or to allow the lessee to remove the improvements.

Spouses Samuel and Chinita Parilla and their son, as dealers of Pilipinas Shell Petroleum Corporation (Pilipinas Shell), have been in possession of a parcel of land in Bantay, Ilocos Sur which was leased to them by respondent Dr. Prospero Pilar.

When the lease contract between Pilipinas Shell and Pilar expired, and despite demands to vacate, the Parillas remained in possession of the property on which they built improvements., the Parillas and the other occupants remained in the property. Hence, Pilar filed a complaint for ejectment before the Municipal Trial Court (MTC) of Bantay, Ilocos Sur. The MTC ordered the Parillas to vacate and to pay Pilar a reasonable compensation for the use of the property. It also ordered Pilar to reimburse the

Parillas the amount Two Million Pesos representing the value of the improvements introduced on the property.
Pilar appealed to the Regional Trial Court of Vigan and the RTC affirmed the MTC‘s Decision. However, on Pilar‘s petition for review, the Court of Appeals set aside the lower courts decision.

ISSUES:

Whether or not the Parillas are entitled to reimbursement for the improvements being builders in good faith

HELD:

Jurisprudence is replete with cases 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.

The right of the lessor upon the termination of a lease contract with respect to useful improvements introduced on the leased property by a lessee is covered by Article 1678. Clearly, it is Article 1678 of the New Civil Code which applies to the present case. The Parillas claim for reimbursement of the alleged entire value of the improvements does not thus lie under Article 1678. Not even for one-half of such alleged value, there being no substantial evidence, e.g., receipts or other documentary evidence detailing costs of construction. Besides, by the Parillas‘ admission, of the structures they originally built — the billiard hall, restaurant, sari-sari store and a parking lot, only the ―bodega-like‖ sari-sari store and the parking lot now exist.

At all events, under Article 1678, it is the lessor who is given the option, upon termination of the lease contract, either to appropriate the useful improvements by paying one-half of their value at that time, or to allow the lessee to remove the improvements. This option solely belongs to the lessor as the law is explicit that ―[s]hould the lessor refuse to reimburse said amount, the lessee may remove the improvements, even though the principal thing may suffer damage thereby.‖ It appears that the lessor has opted not to reimburse.