Heirs of Feraren v. CA

G.R. No. 159328 (October 5, 2011)

Facts:

On May 25, 1999, Celia Tadiar filed a Complaint for Unlawful Detainer against the Heirs of Antonio Feraren in the Municipal Trial Court (MTC) of San Fernando City, La Union. Celia claimed co-ownership of a 1,200 square meter parcel of land, which was sold by their father to the Spouses Antonio and Justina Feraren on a pacto de retro basis on September 21, 1960. The right to repurchase was stipulated to be exercised within ten years. Celia and her co-heirs reacquired the property on August 31, 1970, and subsequently leased it to the Spouses Feraren on a month-to-month basis.

In March 1992, Celia and her co-heirs notified the Spouses Feraren of their intention to terminate the lease. The Spouses Feraren, however, continued to occupy the property despite requests to vacate, even after Antonio's death in 1995. The petitioners contended that a portion of the land was theirs and that they had been in possession of the property since 1949 under a lease agreement. They also claimed that they were willing to vacate the property only upon reimbursement for the improvements made on it.

The MTC dismissed the unlawful detainer complaint on June 15, 2001, ruling that the petitioners were entitled to remain on the property until reimbursed for their improvements. This decision was affirmed by the Regional Trial Court (RTC) on January 28, 2002. Celia then appealed to the Court of Appeals (CA), which reversed the lower courts' decisions on May 21, 2003, declaring that the petitioners were not entitled to reimbursement and ordering them to vacate the premises.

Legal Issues:

1. Whether the petitioners were entitled to reimbursement for the improvements made on the property.
2. Whether the CA erred in reversing the decisions of the MTC and RTC.

Arguments:

• Petitioners' Arguments:

  • The petitioners argued that their parents built the house on the property while they were the owners, and thus they were entitled to reimbursement for the improvements made.
  • They contended that the house currently standing on the property was different from the one built in 1949, which had been demolished to make way for the new construction.

• Respondent's Arguments:

  • Celia argued that the house was built while the petitioners were lessees, and therefore, under Article 1678 of the Civil Code, they were not entitled to reimbursement.
  • The CA found that the petitioners had admitted in their Answer that the house was constructed during the lease period, which constituted a judicial admission.

Court's Decision and Legal Reasoning:

The Supreme Court denied the petition, affirming the CA's decision. The Court held that the issues raised were primarily factual, and the CA's findings were supported by the evidence. The Court noted that the petitioners' position paper and affidavits were submitted late and should not have been considered by the lower courts.

The Court emphasized that the petitioners' admission in their Answer—that the house was built while they were lessees—was binding and could not be contradicted without showing that it was made through palpable mistake. The petitioners failed to provide such evidence.

Furthermore, the Court reiterated the provisions of Article 1678 of the Civil Code, which stipulates that a lessee is entitled to reimbursement for useful improvements only if the lessor opts to retain them. Since Celia did not wish to retain the improvements, the petitioners could only remove them without causing further damage to the property.

Significant Legal Principles Established:

1. Judicial admissions made in the course of proceedings are binding and cannot be contradicted unless proven to be made through palpable mistake.
2. Under Article 1678 of the Civil Code, a lessee is entitled to reimbursement for improvements only if the lessor opts to retain them; otherwise, the lessee may remove the improvements without causing further damage.