G.R. No. L-15596 and L-15597; October 31, 1961
RUFINO M. CORTEZ, plaintiff-appellee, vs. FLORENTINO MANIMBO and TOMAS MANIMBO, defendants-appellants.

FACTS

Defendants-appellants Florentino and Tomas Manimbo were month-to-month lessees of portions of a parcel of land in Manila. The land was sold by the original owner to plaintiff-appellee Rufino M. Cortez in 1952, with Cortez aware of the defendants’ houses on the property. In 1956, Cortez filed separate ejectment complaints against the Manimbos for non-payment of rentals. The municipal court ruled for Cortez, a decision affirmed by the Court of First Instance of Manila, which ordered the defendants to vacate, remove their improvements, and pay rental arrears. The defendants appealed, but the Court of Appeals certified the cases to the Supreme Court as they raised pure questions of law. During the appeal’s pendency, a writ of execution and demolition order were issued after defendants failed to post a supersedeas bond. The defendants eventually vacated and removed their houses in April 1958.

ISSUE

Whether the defendants-appellants, as lessees ejected for non-payment of rent, are entitled to indemnity for the value of the improvements (their houses) they built on the leased land.

RULING

No. The Supreme Court affirmed the lower court’s decision, dismissing the appeal and the defendants’ counterclaim for indemnity. The Court clarified that the relationship between the parties is governed by the law on lease, not by the rules on builders in good faith. A lessee knows he is not the owner and that his possession is temporary and contingent upon lease terms, including payment of rent. Having defaulted on rentals, their ejectment was justified. Under the applicable provisions of the old Civil Code (Articles 1573 and 487), a lessee has no right to reimbursement for useful improvements introduced on the leased property. The lessor is not obliged to appropriate them; the lessee’s sole right is to remove the improvements, provided no damage is caused to the property. The appellants’ claim of an implied equitable lien based on a verbal agreement was rejected, as the trial court found no basis for such an agreement. Since the appellants had already removed their houses, there remained no improvement for the appellee to appropriate or pay for. The principle that a tenant cannot improve the landlord out of his property was upheld. Consequently, claims for nominal or exemplary damages were also denied.