G.R. No. L-47896; April 8, 1941
AURELIO MONTINOLA, plaintiff-appellee, vs. JOSE P. BANTUG, defendant-appellant.

FACTS

The defendant, Jose P. Bantug, had been occupying a lot of about 376.7 square meters of the “Hacienda Vito Cruz” under a contract of lease with the Philippine Realty Corporation, a subsidiary of the Roman Catholic Archbishop. He built a house of strong materials worth P6,000 on the lot. On or about June 29, 1938, the plaintiff, Aurelio Montinola, acquired ownership of the property. On July 4, 1938, the plaintiff served notice on the defendant to either vacate the premises within thirty days or pay a new rental of ten centavos per square meter. The defendant refused to do either. The plaintiff then instituted an ejectment proceeding in the Municipal Court of Manila, which rendered judgment in his favor. On appeal to the Court of First Instance, the defendant was condemned to vacate the premises and to pay the plaintiff a monthly rental of P15 from June 29, 1938.

ISSUE

Whether the defendant, as a lessee who built a house on the leased land, is entitled, upon termination of the lease, to either retain the land or be reimbursed for the value of the house under Articles 361 and 453 of the Civil Code, as a possessor in good faith.

RULING

No. The Supreme Court affirmed the judgment of the lower court. The right of a lessee is governed not by Articles 361 and 453 of the Civil Code, but by Articles 1573 and 487. Upon termination of the lease, the lessee is entitled to remove the improvements he made, provided he leaves the property in substantially the same condition as when he entered upon it. However, the lessee has no right to indemnification for such improvements. Therefore, the defendant is not entitled to retain the land or to reimbursement of the P6,000 value of his house. He is only entitled to remove the house, subject to the condition stated.