Bermon Marketing Communication v. Yaco
REITERATIONFacts
The Antecedents: Spouses Lilia M. Yaco and Nemesio Yaco (spouses Yaco) are the owners of a property in Mandaluyong City. On December 19, 2000, they entered into a lease agreement with Bermon Marketing Communication Corporation (petitioner) for a period of six years, with monthly rentals starting at P50,000.00 and subject to a 10% increase every two years. The contract stipulated that the petitioner would construct a second floor at its own expense, which would automatically become the property of the spouses Yaco upon termination of the lease. The petitioner also constructed a new building on an open space within the property, allegedly with the knowledge and consent of the spouses Yaco, for its advertisement business. Procedural History: Following the expiration of the lease on January 12, 2007, the arrangement continued on a month-to-month basis. After demand letters to vacate and pay arrears were issued, the spouses Yaco filed an ejectment case against the petitioner. The Metropolitan Trial Court (MeTC) ordered the petitioner to vacate the premises, pay monthly compensation for the use of the property from June 13, 2008, and attorney's fees. The Regional Trial Court (RTC) affirmed the MeTC's decision in its entirety. Subsequently, the petitioner appealed to the Court of Appeals (CA), which affirmed the lower courts' decisions with modifications, reducing the monthly rental and deleting the award of attorney's fees. The Petition: Petitioner Bermon Marketing Communication Corporation filed a Petition for Review on Certiorari under Rule 45 of the Rules of Court, seeking to overturn the Court of Appeals' decision. The core of the petitioner's argument is that Article 1678 of the Civil Code should apply, entitling them to reimbursement for one-half of the value of the improvements made. They contend that the spouses Yaco exercised their option to appropriate the improvements by stating they would become the lessors' property, thereby triggering the obligation to pay half the value. The petitioner also argued that the construction was done with the lessors' consent. The respondents, conversely, maintained that the lease contract explicitly stated improvements would become their property without reimbursement, and that the petitioner was not in good faith regarding the construction on the open space.
Issue(s)
Whether Article 1678 of the Civil Code is applicable in the present case, considering the petitioner's waiver of reimbursement under the Contract of Lease. Whether spouses Yaco are liable to pay one-half of the amount of the improvements to petitioner, given the contractual stipulations and the principle of freedom to contract.
Ruling
The petition is DENIED. The Decision dated October 23, 2015 of the Court of Appeals in CA-G.R. SP No. 126732 is AFFIRMED in toto.
Ratio Decidendi
On the applicability of Article 1678 of the Civil Code and the waiver of reimbursement: The Court held that Article 1678 of the Civil Code, which governs improvements introduced by a lessee, is not applicable because the petitioner waived its right of reimbursement under the Contract of Lease. The contract stipulated that improvements would be at the lessee's expense and become the lessor's property upon termination without reimbursement. This stipulation is valid under Article 1306 of the Civil Code, as it is not contrary to law, morals, good customs, public order, or public policy. Therefore, the petitioner is not entitled to reimbursement. On the liability of spouses Yaco and the freedom to contract: Consequently, spouses Yaco are not liable to reimburse petitioner for the improvements. The Court reiterated that parties are free to stipulate terms and conditions in their contracts, including the waiver of rights, provided these are not unlawful. The Court distinguished this case from CJH Development Corporation v. Aniceto, noting that the latter case's pronouncement regarding a lessor's obligation to pay for improvements despite a contrary stipulation was an obiter dictum.
Main Doctrine
A lessee who introduces improvements on the leased premises is not entitled to reimbursement if the contract of lease expressly stipulates that such improvements shall become the property of the lessor without any reimbursement, as this stipulation is not contrary to law, morals, good customs, public order, or public policy, and the lessee is deemed to have waived their right to reimbursement.