PARILLA vs.

PILAR
G.R. No. 167680
November 30, 2006

FACTS:

Petitioner-spouses Samuel and Chinita Parilla and their co-petitioner-son Deodato Parilla. As dealers
of Pilipinas Shell Petroleum Corporation have been in possession of a parcel of land located at
Poblacion of Bantay, Ilocos Sur which was leased to it by respondent Dr. Prospero Pilar under a 10-
year Lease Agreement entered into in 1990.

When the lease contract between PIlipinas Shell and respondent expired in 2000, petitioners
remained in possession of the property on which they built improvements consisting of a billiard hall,
restaurant and a sari-sari store.

Despite demands to vacate, petitioners and the other occupants remained in the property.

Hence, respondent, through his attorney-in-fact, filed a complaint for ejectment before the Bantay
MTC with prayer for the issuance of a writ of preliminary injunction with damages against petitioners
and the other occupants of the property.

After trial, the MTC ordered herein petitioners and their co-defendants and all persons claiming rights
under them to vacate the property and to pay the plaintiff-herein respondent to pay the amount of
P50,000 as reasonable compensation for the use of the property and P10,000 as attorneys fees and
to pay the cost of suit. And it ordered the plaintiff-herein respondent to reimburse defendants Parilla
the amount of P2,000,000 representing the value of the improvements introduced on the property.

Respondent appealed to the RTC of Vigan City that portion of the trial courts decision ordering him to
reimburse petitioners the amount of P2,000,000. The RTC affirmed the MTC Decision.

On respondents petition for review, the Court of Appeals set aside the questioned order for
respondent to reimburse petitioners P2,000,000, applying Article 546 of the New Civil Code.

The Court of Appeals held that herein petitioners tolerated occupancycould not be interpreted to
meanthat they are builders or possessors in good faith 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.

ISSUE:

Is Parilla entitled to reimbursement?

HELD:

Petitioners thus conclude that being builders in good faith, until they are reimbursed of the
P2,000,000-value of the improvements they had introduced on the property, they have the right of
retention or occupancy thereof pursuant to Article 448, in relation to Article 546, of the New Civil
Code, otherwise, respondent would be unjustly enriched at their expense.

The evidence shows that in 1960, a lease contract over the property was forged between Shell
Company of the Philippines Limited and respondents predecessors-in-interest. In 1990, the lease
contract was renewed by Pilipinas Shell and respondent.

Petitioners, being dealers of Pilipinas Shells petroleum products, were allowed to occupy the
property. Petitioners are thus considered agents of Pilipinas Shell. The factual milieu of the instant
case calls then for the application of the provisions on lease under the New Civil Code.
 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 which reads:

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.

The modification introduced in Article 1678 on partial reimbursement was intended to prevent unjust
enrichment of the lessor which now has to pay one-half of the value of the improvements at the time
the lease terminates because the lessee has already enjoyed the same, whereas the lessor could
enjoy them indefinitely thereafter.

As the law on lease under the New Civil Code has specific rules concerning useful improvements
introduced by a lessee on the property leased, it is erroneous on the part of petitioners to urge this
Court to apply Article 448, in relation to Article 546, regarding their claim for reimbursement and to
invoke the right of retention before reimbursement is made. Article 448 and Article 546 read:

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.

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.

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.

In a plethora of cases, 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 ones 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.
 Clearly, it is Article 1678 of the New Civil Code which applies to the present case.
Petitioners 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 petitioners 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.
 HEIRS OF DURANO vs. SPOUSES UY
G.R. No. 136456
October 24, 2000

FACTS:

This case involves a 128-hectare parcel of land located in the in the barrios of Dunga and
Cahumayhumayan, Danao City.

On December 27, 1973, petitioners instituted an action for damages against respondents before
Branch XVII of the then Court of First Instance of Cebu, Danao City.

In that case, petitioners accused respondents of officiating a hate campaign against them by lodging
complaints in the Police Department of Danao City over petitioners so-called invasion of
respondents alleged properties in Cahumayhumayan, Danao City.

This was followed by another complaint sent by respondents to the President of the Philippines which
depicted petitioners as oppressors, landgrabbers and usurpers of respondents alleged
rights. Upon the direction of the President, the Department of Justice through City Fiscal Jesus
Navarro and the Philippine Constabulary of Cebu simultaneously conducted investigations on the
matter. Respondents complaints were dismissed as baseless, and they appealed the same to the
Secretary of Justice, who called for another investigation.

During the course of said joint investigation, respondents Hermogenes Tito and Salvador Dayday
again lodged a complaint with the Office of the President, airing the same charges of
landgrabbing. The investigations on this new complaint resulted in the finding that petitioners
should not be held answerable therefor.

Petitioners further alleged in their complaint before the CFI that during the course of the above
investigations, respondents kept spreading false rumors and damaging tales which put petitioners
into public contempt and ridicule.

In their Answer, respondents lodged their affirmative defenses, demanded the return of their
respective properties, and made counterclaims for actual, moral and exemplary
damages. Respondents stated that sometime in the early part of August 1970 and months thereafter
they received mimeographed notices signed by the late Ramon Durano, Sr., informing them that the
lands which they are tilling and residing in, formerly owned by the Cebu Portland Cement Company,
had been purchased by Durano & Co., Inc. The notices also declared that the lands were needed by
Durano & Co. for planting to sugar and for roads or residences, and directed respondents to
immediately turn over the said lands to the representatives of the company. Simultaneously, tall
bamboo poles with pennants at the tops thereof were planted in some areas of the lands and metal
sheets bearing the initials RMD were nailed to posts.

As early as the first week of August 1970, and even before many of the respondents received notices
to vacate, men who identified themselves as employees of Durano & Co. proceeded to bulldoze the
lands occupied by various respondents, destroying in their wake the plantings and improvements
made by the respondents therein. On some occasions, respondents alleged, these men fired shots in
the air, purportedly acting upon the instructions of petitioner Ramon Durano III and/or Ramon Durano,
Jr. On at least one instance, petitioners Ramon Durano III and Elizabeth Hotchkiss Durano were seen
on the site of the bulldozing operations.

On September 15, 1970, Durano & Co. sold the disputed property to petitioner Ramon Durano III,
who procured the registration of these lands in his name under the Transfer Certificate of Title.
 Respondents contended that the display of force and the known power and prestige of petitioners and
their family restrained them from directly resisting this wanton depredation upon their property. During
that time, the mayor of Danao City was the wife of Ramon Durano, Sr. Finding no relief from the local
police, who respondents said merely laughed at them for daring to complain against the Duranos,
they organized themselves and sent a letter to then President Marcos reporting dispossession of their
properties and seeking a determination of the ownership of the land. This notwithstanding, the
bulldozing operations continued until the City Fiscal was requested by the Department of Justice to
conduct an investigation on the matter.

When, on July 27, 1971, the City Fiscal announced that he would be unable to conduct a preliminary
investigation, respondents urged the Department of Justice to conduct the preliminary
investigation. This was granted, and the investigations which spanned the period March 1972 to April
1973 led to the conclusion that respondents complaint was untenable.

In their counterclaim, respondents alleged that petitioners acts deprived most of them of their
independent source of income and have made destitutes of some of them. Thus, in addition to the
dismissal of the complaint, respondents demanded actual damages, moral damages, as well as
exemplary damages, attorneys fees and expenses of litigation.

Hence, the trial proceeded only on the counterclaim.

This Court issued a resolution changing the venue of trial to the Regional Trial Court of Cebu
City. The change was mainly in line with the transfer of Judge Bernardo Ll. Salas, who presided over
the case in Danao City, to Cebu City.

The parties agreed to dispense with pre-trial, and for the evidence-in-chief to be submitted by way of
affidavits together with a schedule of documentary exhibits, subject to additional direct examination,
cross examination and presentation of rebuttal evidence by the parties.

Petitioners also presented Court Commissioner, Engineer Leonidas Gicain, who was directed by the
trial court to conduct a field survey of the disputed property. Respondents, for their part, also
presented their affidavits and supporting documentary evidence, including tax declarations covering
such portions of the property as they formerly inhabited and cultivated.

On March 8, 1990, the RTC issued a decision upholding respondents counterclaim.

The RTC found that the case preponderated in favor of respondents, who all possessed their
respective portions of the property covered by Transfer Certificate of Title thinking that they were the
absolute owners thereof. A number of these respondents alleged that they inherited these properties
from their parents, who in turn inherited them from their own parents. Some others came into the
properties by purchase from the former occupants thereof. They and their predecessors were
responsible for the plantings and improvements on the property. They were the ones who sought for
the properties to be tax-declared in their respective names, and they continually paid the taxes
thereto. Respondents maintained that they were unaware of anyone claiming adverse possession or
ownership of these lands until the bulldozing operations in 1970.

Dissatisfied, petitioners appealed the RTC decision to the Court of Appeals, which, in turn, affirmed
the said decision and ordered the return of the property to all the respondents-claimants.

In its decision, the Court of Appeals upheld the factual findings and conclusions of the RTC.

From the foregoing, the Court of Appeals concluded that the issuance of the Transfer Certificate of
Title in favor of petitioner Ramon Durano III was attended by fraud; hence, petitioners could not
invoke the principle of indefeasibility of title. Additionally, the Court of Appeals found that the alleged
 Deed of Absolute Sale, undated, between Cepoc Industries, Inc. and Durano & Co. was not notarized
and thus, unregistrable.

The Court of Appeals went on to state that while, on the one hand, no valid issuance of title may be
imputed in favor of petitioners from the private Deed of Sale and the alleged reconstituted titles of
Cepoc that were not presented in evidence, respondents, in contrast --- who although admittedly had
no registered titles in their names --- were able to demonstrate possession that was public,
continuous and adverse --- or possession in the concept of owner, and which was much prior (one or
two generations back for many of respondents) to the claim of ownership of petitioners.

Thus, the Court of Appeals ordered the return of the properties to all respondents who made
respective claims thereto. Corollarily, it declared that petitioners were possessors in bad faith, and
were not entitled to reimbursement for useful expenses incurred in the conversion of the property into
sugarcane lands.

Hence, this petition.

ISSUE:

Who is the builder-planter in bad faith?

HELD:

In the instant case, respondents action for reconveyance will prosper, it being clear that the property,
wrongfully registered in the name of petitioner Durano III, has not passed to an innocent purchaser for
value.

Since petitioners knew fully well the defect in their titles, they were correctly held by the Court of
Appeals to be builders in bad faith.

The Civil Code provides:

Art. 449. He who builds, plants or sows in bad faith on the land of another, loses what is built, planted
or sown without right of indemnity.

Art. 450. The owner of the land on which anything has been built, planted or sown in bad faith may
demand the demolition of the work, or that the planting or sowing be removed, in order to replace
things in their former condition at the expense of the person who built, planted or sowed; or he may
compel the builder or planter to pay the price of the land, and the sower the proper rent.

Art. 451. In the cases of the two preceding articles, the landowner is entitled to damages from the
builder, planter or sower.

Based on these provisions, the owner of the land has three alternative rights: (1) to appropriate what
has been built without any obligation to pay indemnity therefor, or (2) to demand that the builder
remove what he had built, or (3) to compel the builder to pay the value of the land. [32] In any case, the
landowner is entitled to damages under Article 451, abovecited.

The Supreme Court sustains the return of the properties to respondents and the payment of
indemnity as being in accord with the reliefs under the Civil Code.

The right of the owner of the land to recover damages from a builder in bad faith is clearly provided
for in Article 451 of the Civil Code. Although said Article 451 does not elaborate on the basis for
damages, the Court perceives that it should reasonably correspond with the value of the properties
 lost or destroyed as a result of the occupation in bad faith, as well as the fruits (natural, industrial or
civil) from those properties that the owner of the land reasonably expected to obtain.

The Supreme Court sustains the view of the lower courts that the disparity between respondents
affidavits and their tax declarations on the amount of damages claimed should not preclude or defeat
respondents right to damages, which is guaranteed by Article 451. Moreover, under Article 2224 of
the Civil Code.
 PEOPLE vs. SEGOVIA
103 Phil. 1162
May 28, 1958

FACTS:

Appeal by the Government from the order of the Court of First Instance of Albay sustaining
defendants motion to quash on the ground that the information does not allege the necessary
elements to constitute the crime of malicious mischief and dismissing the case.

ISSUE:

Can the owner (of the plants) kill the animal that ate his plants?

HELD:

The Court finds that, as alleged, the accused willfully damaged the property of one Marbella when he
shot to death a pig owned by the latter with the felonious intent of causing an injury because of
resentment and anger.

In other words, the accused caused damage to the property of another, with the intent to cause injury,
due to an evil motive, and these are precisely the elements constituting the crime of malicious
mischief.