G.R. No. L-33422 May 30, 1983
ROSENDO BALUCANAG, petitioner, vs. HON. JUDGE ALBERTO J. FRANCISCO and RICHARD STOHNER, respondents.

FACTS

Cecilia dela Cruz Charvet leased a lot to respondent Richard Stohner under a contract expiring on August 31, 1957. Paragraph IV of the contract stipulated that improvements made by the lessee shall remain his property and he may remove them at any time; failure to remove them within two months after the agreement’s expiration authorizes the lessor to remove them at the lessee’s expense. Stohner constructed a house on the lot. After the lease expired, Stohner remained in possession. Charvet sold the lot to petitioner Rosendo Balucanag in 1966. For non-payment of rent, Balucanag demanded that Stohner vacate. Stohner refused, claiming to be a builder in good faith and offering either to buy the lot or be reimbursed P35,000 for the improvements.
The City Court of Manila ordered Stohner to pay back rentals and vacate. On appeal, the Court of First Instance, presided by respondent Judge Alberto J. Francisco, reversed the decision and dismissed the complaint. The lower court held Stohner was a builder in good faith because he built with the original lessor’s consent and was not ejected after the lease expired. Applying Articles 448 and 546 of the Civil Code, it ruled Stohner could not be ejected without reimbursement for the improvements.

ISSUE

Whether respondent Stohner, as a lessee, can be considered a builder in good faith entitled to reimbursement for improvements under Article 448 of the Civil Code, or if his rights are governed by the lease contract and Article 1678.

RULING

The Supreme Court granted the petition and reversed the decision of the Court of First Instance. The legal logic is clear: a lessee cannot be a builder in good faith. Article 448, which provides remedies for a builder in good faith, applies only where one builds believing himself to be the owner of the land. It does not apply to a lessee, who knows he is not the owner and cannot deny the lessor’s title. The applicable law is Article 1678 of the Civil Code, governing improvements by a lessee. Furthermore, the parties’ contract specifically controlled. Paragraph IV of the lease agreement expressly stipulated that improvements remained the lessee’s property and were removable by him. By not removing them within the agreed period after the lease’s expiration, Stohner lost his right to retain them, and the lessor acquired the right to have them removed at the lessee’s expense. The contract, having the force of law between the parties, superseded the general provisions of Article 1678. Therefore, Stohner was not entitled to reimbursement and was correctly ordered by the city court to vacate and pay back rentals.