Balucanag v Francisco Digest

Facts of the Case:

The petitioner bought a lot owned by Mrs. Charvet which was then previously leased by the latter to one Richard Stohner. The said lease contract provided that the lessee may erect structures and improvements which shall remain as lessee's property and he may remove them at any time. It further provided that should the lessee fail to remove the same structures or improvements withing two months after the expiration of the lease, the lessor may remove them or cause them to be removed at the expense of the lessee. Stohner made fillings on the land and constructed a house. When he failed to pay the rent, the petitioner, through counsel, sent Stohner a demand letter ordering him to vacate the lot. The lessee contended that he is a 'builder in good faith.'

Issue: Is the lessee a builder in good faith?

Ruling: No, the lessee cannot be considered a builder in good faith. The provision under Art. 448 of the New Civil Code (Philippine) on a builder of good faith applies only to the owner of the land who believes he is the rightful owner thereof, but not to a lessee who's interest in the land is derived only from a rental contract. Neither can Stohner be considered a 'possessor in good faith'. A possessor in good faith is a party who possesses property believing that he is its rightful owner but discovers later on a flaw in his title that could indicate that he might not be its legal owner. It cannot apply to a lessee because he knows right from the start that he is merely a lessee and not the owner of the premises.

As a mere lessee, he introduces improvements to the property at his own risk such that he cannot recover from the owner the reimbursements nor he has any right to retain the premises until reimbursements. What applies in this case is Art. 1678 (NCC) which provides that, " if the lessee, makes, in good faith, useful improvements which are suitable to the use for which the lease is intended, without altering the form or substance of the property leased, the lessor upon the termination of the lease shall pay the lessee 1/2 of the value of the improvements at the time. Should the lessor refuse to reimburse said amount, the lessee may remove the improvements even though the principal thing may suffer damage thereby. He shall not. however, cause any more impairment upon the property leased than is necessary."