Heirs of Feraren vs. Court of Appeals

A lessee cannot compel the lessor to reimburse one-half the value of useful improvements if the lessor refuses to appropriate them; the lessee's sole right is to remove the improvements. Furthermore, a judicial admission in a pleading is binding and cannot be contradicted by allegations in a position paper filed beyond the reglementary period under the Revised Rule on Summary Procedure.

Private respondent Cecilia Tadiar and her siblings co-owned a 1,200-square-meter parcel of land in San Fernando City, La Union. Their father leased the property to spouses Antonio and Justina Feraren in 1949. On September 21, 1960, the father sold the lot to the Spouses Feraren under a pacto de retro sale with a ten-year repurchase right. The Tadiar siblings exercised the right to repurchase on August 31, 1970, and subsequently leased the property back to the Spouses Feraren on a month-to-month basis. Following the death of Antonio Feraren in 1995, the petitioners-heirs requested a lease extension until June 30, 1997, which was granted, but they failed to vacate the premises upon the extended deadline despite repeated demands.

• The Lease and Pacto de Retro Sale: In 1949, the father of private respondent Cecilia Tadiar leased the subject lot to the Spouses Feraren. On September 21, 1960, the father sold the lot to the Spouses Feraren under a pacto de retro sale, stipulating a ten-year right to repurchase. On August 31, 1970, the Tadiar heirs re-acquired the property and leased it back to the Spouses Feraren on a month-to-month basis.
• Demand to Vacate: In March 1992, the Tadiar heirs informed the Spouses Feraren of their intent to terminate the lease. The Spouses Feraren offered to sell their house or buy the lot, but the Tadiars declined and allowed the lease to continue. After Antonio Feraren died in 1995, the petitioners-heirs requested an extension to stay until June 30, 1997, which was granted without rental increase. Petitioners failed to vacate on the agreed date.
• The Unlawful Detainer Action: On May 25, 1999, Cecilia Tadiar filed a complaint for unlawful detainer in the MTC.
• The Pleadings: In their Answer, petitioners claimed ownership over a 128-square-meter portion and asserted they were builders in good faith, explicitly stating that their parents built the residential house "as lessees under the authority given to them by private respondent's father in their contract of lease executed in 1949." The MTC directed the parties to submit position papers within ten days. Private respondent did not file one. Petitioners filed their Position Paper more than three months late, alleging for the first time that the house was built during their parents' pacto de retro ownership.
• Lower Court Findings: The MTC gave credence to the Position Paper, finding that the Spouses Feraren built the house while they were owners, and thus could not be compelled to vacate without reimbursement. The RTC affirmed this finding. The CA reversed, finding that the house was built during the lease and that the late Position Paper should not have been admitted.

• Factual Error on Construction Date: Petitioner argued that the CA erred in holding that they admitted the house was built during the lease, insisting that unrebutted evidence showed the present house was constructed in the late 1960s during the pacto de retro ownership, replacing the 1949 house.
• Erroneous Reversal of Lower Courts: Petitioner maintained that the CA erred in reversing the RTC and MTC, which correctly found that as builders in good faith during their ownership period, they were entitled to reimbursement of the improvements before being compelled to vacate.

• Procedural Violation: Respondent countered that the petitioners' position paper and affidavits were filed beyond the ten-day reglementary period under the Revised Rule on Summary Procedure and should have been excluded by the trial court.
• Binding Judicial Admission: Respondent argued that petitioners' statement in their Answer that the house was built under the 1949 lease constituted a judicial admission that could no longer be contradicted by a belated filing.
• No Right to Reimbursement: Respondent asserted that as lessor, she was exercising her option under Article 1678 of the Civil Code to refuse reimbursement and demand the demolition of the improvements, thereby precluding petitioners from compelling payment as a condition for vacating.

• Admissibility of Position Paper: Whether the MTC erred in admitting the petitioners' position paper and affidavits filed beyond the reglementary period under the Revised Rule on Summary Procedure.
• Judicial Admission: Whether petitioners may contradict their judicial admission in the Answer that the house was built during the lease through a subsequent claim in a belated position paper.
• Rights of a Lessee: Whether petitioners, as heirs of the lessee, can compel the lessor to reimburse the value of improvements made on the leased property when the lessor refuses to appropriate them.

• Admissibility of Position Paper: The MTC erred in admitting the belated position paper. Strict adherence to the reglementary periods under the Revised Rule on Summary Procedure is required to achieve the expeditious resolution of ejectment cases. Admitting a pleading filed more than three months late, without any motion for extension or justification, puts a premium on dilatory measures and defeats the purpose of summary procedure.
• Judicial Admission: The contradiction of the judicial admission was impermissible. Petitioners' statement in their Answer that their parents built the house as lessees under the 1949 lease contract constitutes a judicial admission under Section 4, Rule 129 of the Rules of Court. Such admission may be contradicted only by showing it was made through palpable mistake or that no such admission was made, which petitioners failed to prove. The subsequent claim in the Position Paper was a mere afterthought.
• Rights of a Lessee: Reimbursement cannot be compelled. Under Article 1678 of the Civil Code, the lessor has the option to pay one-half of the value of useful improvements or refuse reimbursement. Because the private respondent prayed for the demolition of the house, she clearly refused to appropriate the improvements. Consequently, the petitioners' sole right is to remove the improvements without causing any more impairment upon the leased property than is necessary.

• Judicial Admissions — An admission, verbal or written, made by a party in the course of the proceedings in the same case does not require proof and may be contradicted only by showing that it was made through palpable mistake or that no such admission was made. Applied to bind the petitioners to their Answer's assertion that the house was built under a lease contract, precluding them from asserting ownership/good faith construction in a later position paper without proof of palpable mistake.
• Rights of a Lessee Regarding Useful Improvements — Under Article 1678 of the Civil Code, if a lessee makes useful improvements in good faith suitable to the use for which the lease is intended, the lessor has the option upon termination to pay one-half of the value of the improvements or to refuse reimbursement. If the lessor refuses reimbursement, the lessee may remove the improvements, even if the principal thing suffers damage, provided no more impairment than necessary is caused. Applied to deny the petitioners' claim for reimbursement because the lessor's prayer for demolition constituted a refusal to appropriate the improvements.
• Strict Application of Summary Procedure Rules — The Revised Rule on Summary Procedure prohibits motions for extension of time to file pleadings; thus, the admission of late filings is illogical and incongruous, as it indirectly allows what the rules directly prohibit. Applied to exclude the petitioners' position paper filed beyond the ten-day reglementary period without any justification.

• "If the extension for the filing of these submissions cannot be allowed, we believe it illogical and incongruous to admit a pleading that is already filed late. Effectively, we would then allow indirectly what we prohibit to be done directly." — Quoting Teraña v. De Sagun to emphasize the strict prohibition against late filings in summary proceedings.
• "Under Article 1678, the lessor has the option of paying one-half of the value of the improvements that the lessee made in good faith... On the other hand, the lessee may remove the improvements should the lessor refuse to reimburse." — Summarizing the reciprocal options of the lessor and lessee regarding useful improvements.

• Teraña v. De Sagun, G.R. No. 152131 (April 29, 2009) — Followed. Held that admitting late pleadings in summary proceedings is illogical and incongruous because it indirectly allows what the Revised Rule on Summary Procedure directly prohibits, thereby frustrating the expeditious resolution of ejectment cases.
• Don Tino Realty Development Corporation v. Florentino, G.R. No. 134222 (September 10, 1999) — Cited within Teraña. Established that admitting a late answer in a summary proceeding puts a premium on dilatory measures, which the rules seek to redress.
• Sulo sa Nayon Inc. v. Nayong Pilipino Foundation, G.R. No. 170923 (January 20, 2009) — Followed. Cited for the interpretation and application of Article 1678 of the Civil Code regarding the options available to a lessor and lessee concerning useful improvements.

• Article 1678, Civil Code — Governs the rights of a lessee who makes useful improvements and the corresponding options of the lessor. Applied to determine that because the lessor refused to appropriate the house by praying for its demolition, the lessee's heirs could not compel reimbursement but retained the right to remove the improvements.
• Section 4, Rule 129, Rules of Court — Defines judicial admissions and limits their contradiction to instances of palpable mistake or denial of the admission's existence. Applied to bind the petitioners to their Answer's statement that the house was built during the lease, precluding contradiction via a late position paper.
• Section 10, Rule 70, Rules of Court / Section 9, Revised Rule on Summary Procedure — Requires the submission of affidavits and position papers within ten days from receipt of the court's order. Applied to justify the exclusion of the petitioners' position paper filed more than three months late.

Presbitero J. Velasco, Jr., Roberto A. Abad, Jose Catral Mendoza, Estela M. Perlas-Bernabe