G.R. No. 3003
Date: 2 January 1907

FACTS
– The plaintiff, Loreza Alburó, inherited a lot in Manila.
– She leased the lot to Antonio S. Goenco on 23 January 1892 for six years, with a contractual right of renewal for a second six‑year term; the lease expressly allowed the tenant to build on the land but was silent on disposition of the building after the lease ends and on improvements such as filling and leveling.
– Goenco’s wife, Catalina Villanueva (defendant), occupied the lot, had the lot filled and leveled, and erected a house of hard material.
– Upon expiration of the second term, Villanueva refused to vacate. The plaintiff sued for possession; the trial court ordered surrender of the land but allowed the defendant to remove the house.
– The defendant appealed, claiming: (1) a tacit right to a third six‑year renewal; (2) reimbursement for the filling and leveling expenses; (3) entitlement to indemnity under Art. 361 Civil Code.

ISSUE
Whether the lease contract, by its terms and the applicable Civil Code provisions, grants the tenant:
1. A further (third) renewal right;
2. Compensation for the expenses incurred in filling and leveling the lot; and
3. The benefits of Art. 361 (indemnity for improvements made in good faith).

RULING
The Supreme Court affirmed the trial court:

1. No third renewal The lease expressly fixed a definite term of two six‑year periods with a single renewal clause. Articles 1281, 1282, 1288, 1289 cannot be read to create an indefinite renewal when the contract’s language is clear and explicit.

2. No reimbursement for filling/leveling Such work is not a “necessary expenditure” under Art. 1554 (repairs) nor under Art. 453 (gastos necesarios), which are limited to preservation of the leased thing, not improvements that increase its value. The tenant is not authorized to seek indemnity for these improvements.

3. Art. 361 does not apply That provision protects a person who, in good faith, believes he has title to the land on which he builds. A tenant’s interest under a lease does not meet this condition; otherwise tenants could compel landlords to finance all improvements. The tenant’s right to make improvements is governed by Art. 1573 in conjunction with Art. 487, which allows improvements but denies any right to indemnification, except that the tenant may remove them without damaging the property.

Consequently, the judgment ordering surrender of the lot and authorizing removal of the house stands. The appellate court affirmed the decision and assessed costs to the appellant.