G.R. No. 224552, March 03, 2021
BERMON MARKETING COMMUNICATION CORPORATION, PETITIONER, VS. SPOUSES LILIA M. YACO AND NEMESIO YACO, RESPONDENTS.

FACTS

Respondent Spouses Yaco are the registered owners of a property in Mandaluyong City. On December 19, 2000, they entered into a Contract of Lease with petitioner Bermon Marketing Communications Corporation for a period of six years. The contract provided that the petitioner would construct, at its own expense, a second floor on an existing office, which would become the property of the spouses upon lease termination. In March 2001, petitioner also constructed a new building on an open space within the property, claiming it was with the spouses’ knowledge and consent and with an understanding for a lease extension. The lease expired on January 12, 2007, and converted to a month-to-month basis. After failed negotiations for a rental increase, spouses Yaco sent a demand to vacate and later filed a Complaint for ejectment. The Metropolitan Trial Court (MeTC) ruled in favor of the spouses, ordering petitioner to vacate and pay reasonable compensation. The Regional Trial Court (RTC) affirmed the MeTC decision. The Court of Appeals (CA) partially granted petitioner’s appeal, reducing the reasonable compensation but denying reimbursement for the improvements, holding that Article 1678 of the Civil Code did not apply as petitioner was not a builder in good faith and had effectively waived reimbursement rights under the lease contract.

ISSUE

1. Whether Article 1678 of the Civil Code is applicable in the present case.
2. Whether spouses Yaco are liable to pay one-half of the value of the improvements to petitioner.

RULING

1. No, Article 1678 of the Civil Code is not applicable. The Court ruled that petitioner effectively waived its right to reimbursement under the Contract of Lease. The lease contract expressly provided that the second-floor construction was at petitioner’s own expense and would become the spouses’ property upon lease termination. Under Article 1306 of the Civil Code, parties may establish stipulations provided they are not contrary to law, morals, good customs, public order, or public policy. The contractual waiver of reimbursement is valid. The Court distinguished the case from CJH Development Corporation v. Aniceto, noting that any statement therein contradicting such waiver was obiter dictum and not binding.
2. No, spouses Yaco are not liable to pay one-half of the value of the improvements. The Court affirmed the CA’s finding that petitioner could not claim good faith regarding the new building constructed on the open space, as it presented no evidence of the spouses’ consent. Consequently, petitioner is not entitled to reimbursement under Article 1678. The Court denied the petition and affirmed the CA Decision in toto, which had modified the lower courts’ decisions by reducing the reasonable compensation for use of the premises to P80,000.00 per month (from P130,000.00), deducting petitioner’s deposit, and deleting the award of attorney’s fees.