Quevada vs. Court of Appeals

A lessor's lack of titled ownership does not defeat an action for unlawful detainer, which addresses only physical possession de facto, and a lessee who built improvements on the leased property in good faith is entitled to have the value of the leased portion of those improvements offset against accrued rentals to prevent unjust enrichment.

Juanito N. Villaverde is the lessor of a parcel of land with a residential house in Sampaloc, Manila. Marcelito D. Quevada is the lessee who occupied a 96-square-meter portion of the residential house under a series of lease contracts with Villaverde. Quevada had constructed the house on the lot beginning in 1985, before Villaverde purchased the land from its previous owner sometime in 1994. The dispute arose from Quevada's continued possession of the premises after the expiration of the extended lease contract and his refusal to vacate despite repeated demands.

Petitioner Marcelito D. Quevada began constructing a residential house on a lot in Sampaloc, Manila as early as November 1985, completing it in 1986 and occupying it as his residence. Sometime in 1994, private respondent Juanito N. Villaverde negotiated for the purchase of the lot from its previous owner. Quevada likewise offered to buy the lot but was unable to raise the ₱1,000,000 purchase price. According to Quevada, Villaverde advised him that he would proceed with the purchase but assured Quevada that once he was financially able, Villaverde would transfer the title to him. In the meantime, a lease contract was executed for Quevada to pay ₱2,500 monthly rental, but only with respect to the land, since the house belonged to him.

The first Contract of Lease covered the period from August 15, 1994 to August 15, 1995, for a 96-square-meter portion of the residential house, at ₱2,500 monthly. After its expiration, the parties entered into an extended Contract of Lease commencing August 15, 1995 to April 15, 1996. After the extended lease expired, Quevada continued occupying the premises without payment of any reasonable compensation. Villaverde made several demands to vacate, but Quevada refused without justifiable reason. The matter was referred to the barangay court for conciliation, where the parties entered into an agreement to vacate as of December 31, 1997 — an agreement Quevada subsequently repudiated.

On January 20, 1998, Villaverde served upon Quevada a written notice to vacate the leased property within fifteen days from receipt, to pay ₱5,000 rental starting May 1996, and every month thereafter until the premises were vacated. The notice was received by Quevada's wife on February 4, 1998. Quevada did not comply. Villaverde filed the ejectment complaint on March 9, 1998, after receiving a certificate to file action dated January 10, 1998 from the barangay.

Quevada contended that Villaverde refused to accept the monthly rental of ₱2,500, prompting him to open an account "in trust" for Villaverde where the monthly rentals could be deposited. He asserted that an implied trust was created by virtue of the "true agreement" whereby Villaverde would pay the purchase price and later transfer the title. He also assured Villaverde that if he could not purchase the lot after a reasonable time, he was willing to deliver possession of the house to Villaverde after payment of its cost, or ₱500,000. The MeTC, RTC, and CA all ruled in favor of Villaverde, ordering Quevada to vacate and pay reasonable compensation for continued use and occupancy.

• Implied Trust: Petitioner argued that an implied trust was created in his favor, making him the beneficial owner of the lot and entitling him to continued possession, because Villaverde allegedly purchased the lot with an assurance that title would eventually be transferred to Quevada once he could pay.
• Reimbursement for the House: Petitioner maintained that, at the very least, he ought to be reimbursed for the value of the house standing on the lot, which he had constructed and which he valued at ₱500,000.
• Jurisdiction of the MeTC: Petitioner contended that the Court of Appeals erred in sustaining the MeTC's jurisdiction, arguing that the alleged unlawful withholding occurred more than one year before the filing of the ejectment suit.
• Standing of Private Respondent: Petitioner argued that the Court of Appeals erred in upholding Villaverde's right to bring the ejectment action, considering that Villaverde is not the titled owner of the property.

• Propriety of Ejectment Action: Whether the action for unlawful detainer is proper and within the jurisdiction of the MeTC.
• Standing of Non-Titled Lessor: Whether a private respondent who is not the titled owner of the property may bring an action for ejectment.
• Reimbursement for Improvements: Whether petitioner can be reimbursed for the value of the house on the property.
• Existence of Implied Trust: Whether an implied trust was created in favor of petitioner over the lot in question.

• Propriety of Ejectment Action: Yes. The unlawful detainer action was properly filed within the one-year prescriptive period, the unlawful withholding of possession having commenced from the date the written notice to vacate was served, not from the date the lease expired.
• Standing of Non-Titled Lessor: Yes. A lessor may maintain an ejectment action even without titled ownership, as the proceeding addresses only physical possession de facto, not title.
• Reimbursement for Improvements: Yes. The value of the leased portion of the house should be determined and offset against the reasonable rent due, pursuant to equity and the principle against unjust enrichment.
• Existence of Implied Trust: No. No resulting or constructive trust was established, the conveyance having been made by the previous owner to Villaverde, not by Quevada, and no evidence of fraud, duress, or abuse of confidence was presented.

• Propriety of Ejectment Action: Under Section 1, Rule 70 of the Rules of Court, a lessor against whom possession is unlawfully withheld after expiration or termination of the right to possess may bring an action within one year from such unlawful withholding. Section 2 requires that the lessor first make a demand to pay or comply with the conditions of the lease and to vacate. The lease contract expired on April 15, 1996, and Quevada's continued possession was by mere tolerance. Possession by tolerance becomes unlawful upon refusal to vacate after demand. The unlawful deprivation started not from the lease expiration but from the date the written notice to vacate was served — February 4, 1998, when Quevada's wife received it. The complaint filed on March 9, 1998 was thus within the one-year period. Moreover, the prescriptive period was suspended during barangay conciliation pursuant to Section 410(c) of the Local Government Code, with the 60-day suspension deducted from the one-year prescriptive period. Even assuming a month-to-month renewal under Article 1687, proper notices were given after the thirty-day lease periods ended December 15, 1997 and January 15, 1998, terminating Quevada's right to stay.

• Standing of Non-Titled Lessor: Unlawful detainer has for its object the recovery of physical possession, or determination of who is entitled to possession de facto, not legal possession or ownership. Any finding on ownership is merely provisional and not conclusive. The proceedings are intended to provide an expeditious means of protecting actual possession; title is not involved. The absence of title is not a ground to withhold relief. A mere lessor may file such an action, and a lessee cannot defeat the summary action by asserting someone else's ownership. The distinction between a summary ejectment action and a plenary action for recovery of possession and/or ownership is settled.

• Reimbursement for Improvements: Article 448 of the Civil Code covers builders who believe themselves to be owners or have a claim of title, and is also applied where a builder constructed improvements with the consent of the owner. Quevada is a mere tenant, not an owner or claimant of title to the land, and no evidence showed consent from the previous owner for the construction. However, good faith should be presumed. There is no indication that Villaverde would oblige Quevada to buy the land; in fact, Villaverde refuses to sell. As a tenant, Quevada must pay reasonable rent for continued use and occupancy. It would be inequitable for Villaverde to receive both the rent and the leased portion of the house without compensating Quevada. Pursuant to equity, the principle against unjust enrichment, and Civil Code Articles 19, 1278, 1279, and 1290, the value of the leased portion of the house should be determined and offset against the rentals due. By insisting on ejecting Quevada, Villaverde in effect elects to appropriate the building.

• Existence of Implied Trust: A trust is a fiduciary relationship involving equitable duties imposed upon the titleholder to deal with property for the benefit of another. Aside from the lessor-lessee relationship, no other legal relationship shows equitable ownership in Quevada and legal title in Villaverde. No resulting trust arose under Article 1450 because the conveyance was from the previous owner to Villaverde, not from Quevada, and no evidence showed the conveyance was to secure payment of a debt. No constructive trust arose under Article 1456 because Villaverde was not alleged to have obtained title by fraud, duress, or abuse of confidence. The agreement to vacate before the barangay court further negated the existence of an implied trust. While an implied trust may be proved orally under Article 1457, the evidence must be trustworthy and received with extreme caution; it cannot rest on vague and uncertain evidence. The burden of proving the trust's existence is on the party asserting it, and such proof must be clear and satisfactory.

• Possession by Tolerance — Acts of a possessory character performed by one who holds by mere tolerance of the owner are not en concepto de dueño and do not start the running of the prescriptive period. Such possession is lawful but becomes unlawful when the possessor refuses to vacate upon demand. A person occupying land at another's tolerance, without any contract, is bound by an implied promise to vacate upon demand, failing which a summary action for ejectment is the proper remedy. Applied here: Quevada's continued possession after lease expiration was by tolerance, and his refusal to vacate after demand rendered his possession unlawful, giving rise to a cause of action for unlawful detainer.

• One-Year Prescriptive Period in Ejectment — The one-year prescriptive period for filing an unlawful detainer action is counted from the date of unlawful deprivation or withholding of possession, which starts not from the expiration of the lease but from the date the demand to vacate is served and not complied with. The prescriptive period is suspended during barangay conciliation proceedings under Section 410(c) of the Local Government Code, with the 60-day suspension deducted from the one-year period. Applied here: the notice to vacate was received on February 4, 1998, and the complaint was filed on March 9, 1998, well within the one-year period.

• Ejectment Addresses Possession De Facto, Not Title — The only issue in unlawful detainer is physical or material possession, independent of any claim of ownership. Any finding on ownership is merely provisional and not conclusive. A lessor may file an ejectment action even without titled ownership. Applied here: Villaverde's lack of title did not bar the ejectment suit, as the action sought only restoration of physical possession.

• Unjust Enrichment — The fundamental doctrine of unjust enrichment is the transfer of value without just cause or consideration. Nemo cum alterius detrimento locupletari potest — no one should be enriched at the expense of another. Applied here: Villaverde should not receive both the rent and the leased portion of the house without compensating Quevada; the value of the leased portion was ordered offset against rentals due.

• Burden of Proof in Implied Trusts — While an implied trust may be proved orally, the evidence must be trustworthy and received with extreme caution, as it may be easily fabricated. It cannot rest on vague, uncertain, loose, equivocal, or indefinite declarations. The burden of proving the existence of a trust is on the party asserting it, and the proof must be clear and satisfactory. Applied here: Quevada failed to present clear and satisfactory evidence of an implied trust; his bare assertions were insufficient.

• "Possession by tolerance is lawful, but such possession becomes unlawful when the possessor by tolerance refuses to vacate upon demand made by the owner. A person who occupies the land of another at the latter's tolerance or permission, without any contract between them, is necessarily bound by an implied promise to vacate upon demand, failing which, a summary action for ejectment is the proper remedy." — This passage articulates the doctrine of possession by tolerance and its transformation into unlawful possession upon refusal to vacate, the foundational basis for the unlawful detainer ruling.

• "The only issue to be resolved in unlawful detainer or desahucio is the actual 'physical or material possession of the property involved, independent of any claim of ownership by any of the party litigants. Ejectment cases are designed to summarily restore physical possession to one who has been illegally deprived of such possession, without prejudice to the settlement of the parties' opposing claims of juridical possession in appropriate proceedings.'" — This defines the limited scope of ejectment proceedings and explains why the lessor's lack of title was not a bar.

• "The fundamental doctrine of unjust enrichment is the transfer of value without just cause or consideration." — This states the canonical formulation of unjust enrichment relied upon to justify the offset of the house's value against accrued rentals.

• Manila Electric Co. vs. IAC, G.R. No. 71393, June 28, 1989 — Followed for the proposition that possessory acts by tolerance are not en concepto de dueño and do not start the running of prescription.
• Heirs of Rafael Magpily vs. De Jesus, G.R. No. 167748, November 8, 2005 — Followed for the rule that possession by tolerance becomes unlawful upon refusal to vacate after demand, warranting a summary ejectment action.
• Lopez vs. Fajardo, G.R. No. 157971, August 31, 2005 — Followed for the rule that a month-to-month lease under Article 1687 expires after the last day of any given thirty-day period upon proper demand and notice.
• Pajuyo vs. CA, G.R. No. 146364, June 3, 2004 — Followed for the principle that it does not even matter if a party's title to the property is questionable in an ejectment case.
• Macasaet vs. Macasaet, G.R. Nos. 154391-92, September 30, 2004 — Followed for the rule that the unlawful deprivation starts from the date the written notice to vacate is served, not from lease expiration; also cited for the principle that Article 448 does not apply to a mere tenant.
• Tala Realty Services Corp. vs. Banco Filipino Savings and Mortgage Bank, G.R. No. 137533, November 22, 2002 — Followed for the definition of a trust as a fiduciary relationship involving equitable duties.
• Ong Ching Po vs. CA, G.R. Nos. 113472-73, December 20, 1994 — Followed for the rule that evidence of an implied trust must be trustworthy and received with extreme caution, as it may be easily fabricated.

• Section 1, Rule 70, Rules of Court — Authorizes a lessor or other person against whom possession is unlawfully withheld after expiration or termination of the right to possess to bring an action within one year from such unlawful withholding. Applied to establish the MeTC's jurisdiction and the propriety of the ejectment action.
• Section 2, Rule 70, Rules of Court — Requires that a lessor's action against a lessee be commenced only after demand to pay or comply with the conditions of the lease and to vacate, with the lessee failing to comply within fifteen days in the case of land or five days in the case of buildings. Applied to confirm that proper demand was made before filing.
• Section 1.A(1), 1991 Revised Rule on Summary Procedure — Confers jurisdiction on the MeTC over ejectment cases.
• Article 1147(1), Civil Code — Relied upon for the one-year prescriptive period in filing ejectment actions.
• Section 410(c), Local Government Code — Provides for the suspension of prescriptive periods during barangay conciliation, not exceeding sixty days. Applied to toll the prescriptive period while the dispute was pending before the barangay.
• Article 1687, Civil Code — Governs implied renewal of lease on a month-to-month basis when rent is paid monthly. Applied to determine that any implied renewal was for a definite period terminable upon proper notice.
• Article 448, Civil Code — Governs the rights of a builder in good faith on land owned by another. Applied by analogy to justify reimbursement for the leased portion of the house, even though Quevada was a mere tenant.
• Article 19, Civil Code — Requires everyone to act with justice in the exercise of rights and performance of duties. Applied to support the equitable offset of the house's value against rentals.
• Articles 1278, 1279, and 1290, Civil Code — Govern compensation and extinction of obligations. Applied to authorize the legal offset of the value of the leased portion of the house against rentals due.
• Article 1450, Civil Code — Provides for resulting trust when the price of a sale is paid by one person for the benefit of another and the conveyance is made to the payer to secure payment of a debt. Held inapplicable because the conveyance was from the previous owner to Villaverde, not from Quevada, and no debt was involved.
• Article 1456, Civil Code — Creates a constructive trust when property is acquired through mistake or fraud. Held inapplicable because no fraud, duress, or abuse of confidence was shown.
• Article 1457, Civil Code — Allows implied trusts to be proved orally, but requires trustworthy evidence received with extreme caution. Applied to reject Quevada's unsupported assertions of an implied trust.

Puno (Chairperson), Sandoval-Gutierrez, Corona, and Garcia, JJ., concurred.