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The contract of lease between the parties did not stipulate a fixed period.

Hence,
the parties agreed to the payment of rentals on a monthly basis. On this score,
Article 1687 of the Civil Code provides:
Art. 1687. If the period for the lease has not been fixed, it is understood to be from
year to year, if the rent agreed upon is annual; from month to month, if it is
monthly; from week to week, if the rent is weekly; and from day to day, if the rent is
to be paid daily. However, even though a monthly rent is paid, and no period for the
lease has been set, the courts may fix a longer term for the lease after the lessee
has occupied the premises for over one year. If the rent is weekly, the courts may
likewise determine a longer period after the lessee has been in possession for over
six months. In case of daily rent, the courts may also fix a longer period after the
lessee has stayed in the place for over one month. (Emphasis supplied.)
The rentals being paid monthly, the period of such lease is deemed terminated at
the end of each month. Thus, respondents have every right to demand the
ejectment of petitioners at the end of each month, the contract having expired by
operation of law. Without a lease contract, petitioner has no right of possession to
the subject property and must vacate the same. Respondents, thus, should be
allowed to resort to an action for ejectment before the MTC to recover possession of
the subject property from petition
The assessment of rentals from appellee [petitoner] for two (2) extended months
therefore came as a necessary consequence pursuant to Articles 1670 and 1687 of
the Civil Code of the Philippines in relation to the contract of lease. The rental for
the last month immediately preceding the expiration of the contract is pegged at
P97,916.67, hence the two month extension requires a rent in the amount of
P195,833.34.81avvph!1
LOPEZ vs COSME
It is well settled that where a contract of lease is verbal and on a monthly basis, the
lease is one with a definite period which expires after the last day of any given
thirty-day period.7 In the recent case of Leo Wee v. De Castro where the lease
contract between the parties did not stipulate a fixed period,8 we ruled:
The rentals being paid monthly, the period of such lease is deemed terminated at
the end of each month. Thus, respondents have every right to demand the
ejectment of petitioners at the end of each month, the contract having expired by
operation of law. Without a lease contract, petitioner has no right of possession to
the subject property and must vacate the same. Respondents, thus, should be
allowed to resort to an action for ejectment before the MTC to recover possession of
the subject property from petitioner.
The right of rescission is statutorily recognized in reciprocal obligations, such as
contracts of lease. x x x under Article 1659 of the Civil Code, the aggrieved party
may, at his option, ask for (1) the rescission of the contract; (2) rescission and
indemnification for damages; or (3) only indemnification for damages, allowing the
contract to remain in force. Payment of the rent is one of a lessees statutory
obligations, and, upon non-payment by petitioners of the increased rental in

September 1994, the lessor acquired the right to avail of any of the three remedies
outlined above. (citations omitted)
In the case at bar, it has been sufficiently established that no written contract
existed between the parties and that rent was being paid by petitioner to
respondent on a month-to-month basis.
Florentino vs Supervalue
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.
While it is true that under the above-quoted provision of the Civil Code, the lessor is
under the obligation to pay the lessee one-half of the value of the improvements
made should the lessor choose to appropriate the improvements, Article 1678
however should be read together with Article 448 and Article 546 of the same
statute, which 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
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.
xxxx
Art. 546. Necessary expenses shall be refunded to every possessor; but only
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.
Thus, to be entitled to reimbursement for improvements introduced on the property,
the petitioner must be considered a builder in good faith. Further, Articles 448 and
546 of the Civil Code, which allow full reimbursement of useful improvements and
retention of the premises until reimbursement is made, apply only to a possessor in
good faith, i.e., one who builds on land with the belief that he is the owner thereof. A
builder in good faith is one who is unaware of any flaw in his title to the land at the
time he builds on it.[35] In this case, the petitioner cannot claim that she was not

aware of any flaw in her title or was under the belief that she is the owner of the
subject premises for it is a settled fact that she is merely a lessee thereof.
In a plethora of cases, 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 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.

YUKI vs CO
Citing Article 1670 of the Civil Code,[31] petitioner contends that if at the expiration
of the contract of lease the lessee continued to enjoy the leased property for 15
days with the acquiescence of the lessor, there is an implied new lease. In this case,
the determination of whether or not his continued stay in the leased premises is
with the acquiescence of the lessor hinges on whether or not he received the notice
to vacate. And, as correctly found by the RTC, he did not receive any notice to
vacate.
We are not swayed. Under Article 1670, an implied new lease will set in if it is shown
that:
(a) the term of the original contract of lease has expired;
(b) the lessor has not given the lessee a notice to vacate; and
(c) the lessee continued enjoying the thing leased for 15 days with the
acquiescence of the lessor.
This acquiescence may be inferred from the failure of the lessor to serve notice to
vacate upon the lessee.

LBP vs AMS
Relevant articles of the Civil Code reads:
ART. 1654. The lessor is obliged:
(1) To deliver the thing which is the object of the contract in such a condition as to
render it fit for the use intended;
(2) To make on the same during the lease all the necessary repairs in order to keep
it suitable for the use to which it has been devoted, unless there is a stipulation to
the contrary;
(3) To maintain the lessee in the peaceful and adequate enjoyment of the lease for
the entire duration of the contract.

ART. 1659. If the lessor or the lessee should not comply with the obligations set
forth in articles 1654 and 1657, the aggrieved party may ask for the rescission of
the contract and indemnification for damages, or only the latter, allowing the
contract to remain in force.
ART. 1676. The purchaser of a piece of land which is under a lease that is not
recorded in the Registry of Property may terminate the lease, save when there is a
stipulation to the contrary in the contract of sale, or when the purchaser knows of
the existence of the lease.
If the buyer makes use of the right, the lessee may demand that he be allowed to
gather the fruits of the harvest which corresponds to the current agricultural year
and that the vendor indemnify him for damages suffered.
If the sale is fictitious, for the purpose of extinguishing the lease, the supposed
vendee cannot make use of the right granted in the first paragraph of this article.
The sale is presumed to be fictitious if at the time the supposed vendee demands
the termination of the lease, the sale is not recorded in the Registry of Property.
(Emphasis ours.)
It is clear that under the Civil Code, the recourse of AMS as a lessee is against its
lessor, TOTCO. Since TOTCO was unable to comply with its obligation to keep AMS in
peaceful and adequate enjoyment of the leased property for the entire duration of
the lease agreed upon in the MOA dated 8 August 1991, then AMS could rescind the
MOA (which, as the Court declared herein, is still binding between TOTCO and AMS,
but already incapable of execution considering the acquisition of the property by the
Republic under the CARP) and seek indemnification for damages. In addition, AMS,
as the lessee under an unregistered contract of lease, also had the right to demand
that it be allowed to gather the fruits of the harvest corresponding to the
agricultural year the leased property was actually acquired by the Republic under
the CARP and that it again be indemnified by TOTCO as the vendor of the property
for the damages suffered.
A lessee who made improvements on the leased property is further granted the
following rights by the Civil Code upon the termination of the lease for any reason:
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.
With regard to the 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. (Emphasis ours.)

A lessee is not treated the same way as a builder in good faith who believed himself
to be the owner of the land, and as such built thereon and incurred expenses in
doing so; and who, under Articles 448[32] and 546[33] of the New Civil Code, is
vested the rights of retention and reimbursement for necessary and useful
expenses made on the land. A lessee, being conclusively presumed to know that he
is not the owner of the land that he is leasing, and 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 Civil Code to remove the same in case the lessor elects
not to appropriate the building and pay 50% of its value.[34] Knowing that his
occupation of the premises continued only during the life of the lease contract and
that he must vacate the premises upon termination of the lease, or even earlier, if
he violated the terms thereof, the lessee is deemed to have introduced the
improvements at his own risk. He cannot recover their value, much less retain the
premises until reimbursement is made.[35]
CHENG vs VITTORIO
The relationship between petitioner and respondents was explicitly governed by the
Civil Code provisions on lease, which clearly provide for the rule on reimbursement
of useful improvements and ornamental expenses after termination of a lease
agreement. Article 1678 states:
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.
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.
Article 1678 modified the (old) Civil Code provision on reimbursement where 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 the right of
removal and set-off but not to reimbursement.[
Contrary to respondents position, Articles 448 and 546 of the Civil Code did not
apply. Under these provisions, to be entitled to reimbursement for useful
improvements introduced on the property, respondents must be considered builders
in good faith. Articles 448 and 546, which allow full reimbursement of useful
improvements and retention of the premises until reimbursement is made, apply
only to a possessor in good faith or one who builds on land in the belief that he is

the owner thereof. A builder in good faith is one who is unaware of any flaw in his
title to the land at the time he builds on it.
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 his lessor. Knowing that his occupation of the
premises continues only during the life of the lease contract and that he must
vacate the property upon termination of the lease or upon the violation by him of
any of its terms, he introduces improvements on said property at his own risk in the
sense that he cannot recover their value from the lessor, much less retain the
premises until such reimbursement. (Emphasis supplied)
Under Article 1678 of the Civil Code, the lessor has the primary right (or the first
move) to reimburse the lessee for 50% of the value of the improvements at the end
of the lease. If the lessor refuses to make the reimbursement, the subsidiary right of
the lessee to remove the improvements, even though the principal thing suffers
damage, arises. Consequently, on petitioner rests the primary option to pay for onehalf of the value of the useful improvements. It is only when petitioner as lessor
refuses to make the reimbursement that respondents, as lessees, may remove the
improvements. Should petitioner refuse to exercise the option of paying for one-half
of the value of the improvements, he cannot be compelled to do so. It then lies on
respondents to insist on their subsidiary right to remove the improvements even
though the principal thing suffers damage but without causing any more
impairment on the property leased than is necessary.
As regards the ornamental expenses, respondents are not entitled to
reimbursement. Article 1678 gives respondents the right to remove the ornaments
without damage to the principal thing. But if petitioner appropriates and retains said
ornaments, he shall pay for their value upon the termination of the lease.
The fact that petitioner will benefit from the improvements introduced by
respondents is beside the point. In the first place, respondents introduced these
improvements at their own risk as lessees. Respondents were not forced or obliged
to splurge on the leased premises as it was a matter of necessity as well as a
business strategy.[27] In fact, had respondents only complied with their obligation
to pay the deposit/rent, there would have been no dispute to begin with.