G.R. No. 159328 ; October 5, 2011
Heirs of ANTONIO FERAREN, represented by ANTONIO FERAREN, JR., et al., Petitioners, vs. COURT OF APPEALS and CECILIA TADIAR, Respondents.

FACTS

On May 25, 1999, respondent Cecilia Tadiar (Celia) filed an Unlawful Detainer Complaint with the MTC of San Fernando, La Union against the Heirs of Antonio Feraren. Celia alleged she and her brothers were co-owners of a 1,200 sqm lot. Their father sold it to spouses Antonio and Justina Feraren on a pacto de retro sale on September 21, 1960, with a 10-year repurchase period. On August 31, 1970, Celia and her co-heirs re-acquired the property and subsequently leased it on a month-to-month basis to the spouses, who had built a residential house on it. In March 1992, Celia informed the spouses of her intent to terminate the lease. The spouses offered to sell their house or buy the lot, but Celia declined, allowing them to continue renting. After Antonio’s death in 1995, the petitioners (heirs) requested a lease extension until June 30, 1997 and volunteered to temporarily vacate, which Celia agreed to without increasing rent. Petitioners failed to vacate and refused to leave despite demands.
In their Answer, petitioners contended that a 128-sqm portion of the lot was their property. They claimed that even before the pacto de retro sale, the spouses were in possession of part of the lot under a 1949 lease contract, and their house was built by virtue of that lease. Petitioners were willing to vacate only upon payment for the improvements (house and concrete fence) as builders in good faith, or, alternatively, offered to buy the land.
The MTC dismissed the complaint, crediting petitioners’ claim that their parents built the house while they owned the lot via the pacto de retro sale, thus they could not be compelled to vacate without reimbursement. The RTC affirmed this decision. The CA reversed, finding the house was built during the lease period, declared petitioners not entitled to reimbursement, and ordered them to vacate. Petitioners’ motion for reconsideration was denied.

ISSUE

Whether the Court of Appeals erred in reversing the lower courts and ruling that the petitioners’ residential house was constructed during the lifetime of the lease contract (and not during the period of ownership under the pacto de retro sale), thereby declaring petitioners not entitled to reimbursement as builders in good faith and ordering them to vacate the property.

RULING

The Supreme Court DENIED the petition, affirming the CA Decision. The Court held that the CA correctly found the house was built when petitioners’ parents were lessees, not owners. The Court noted petitioners filed their Position Paper and affidavits beyond the 10-day reglementary period under the Rules, making them inadmissible. Consequently, the only evidence considered was petitioners’ Answer, wherein they judicially admitted that their parents’ construction of the residential house was “by virtue of a right granted under the said contract of lease” executed in 1949. A judicial admission is conclusive and requires no proof, and petitioners failed to show it was made through palpable mistake. Therefore, petitioners are not builders in good faith but mere lessees who built on the land with the owner’s tolerance. As such, they have no right to retain possession of the land or demand reimbursement for the value of the house under Article 448 of the Civil Code. The proper remedy for the landowner is an action for unlawful detainer, and the builder-lessee can only remove the improvements unless the landowner chooses to appropriate them under Article 1678. The CA correctly ordered petitioners to vacate the premises.