EVARISTA ROBLES AND HER HUSBAND ENRIQUE MARTIN, PLAINTIFFS AND APPELLEES, VS. LIZARRAGA HERMANOS, DEFENDANT AND APPELLANT.

Owing to the character of the facts in the three
above entitled cases and the intimate connection existing between them,
they Were, by agreement of the parties, tried together in the court
below, and on appeal this court was requested to try them at the same
time, which was done, and these three cases are jointly adjudged in the
present decision. The following facts are undisputed:

Anastasia de la Rama died on the 17th of October, 1916, leaving
six children, to wit, Magdalena, Jose, Evarista, Zacarias, Felix, and
Purificacion, surnamed Robles, and some properties, among which is
house No. 4 on Iznart Street in the city of Iloilo, concerning which a
controversy arose which developed into the three cases now under
consideration.

The children and heirs of Anastasia de la Rama entered into
partnership with Lizarraga Hermanos in liquidation and settlement of
their accounts, by virtue of which the competent court awarded to said
partnership the properties left by the deceased, including the
aforesaid house No. 4 on Iznart Street.

Evarista Robles, one of the aforesaid heirs, since before the death
of her mother Anastasia de la Rama, has been with her husband occupying
the aforesaid house No. 4 on Iznart Street, at the beginning, by
permission of her mother, later on by the consent of her coheirs, and
lastly by agreement with the partnership, Lizarraga Hermanos, to whom
it had been awarded, having made some improvements on the house, the
value of which is fixed at four thousand five hundred pesos (P4,500),
and paying to said partnership forty pesos (P40) monthly as rent of the
upper story.

On March 18,1918, Lizarraga Hermanos notified Evarista Robles
(Exhibit J) that beginning April next the rent of the upper story of
the house would be raised to sixty pesos (P60) a month, and that, if
she did not agree to the new rate of rent, she might vacate the house.
Evarista Robles refused to pay such a new rate of rent and to vacate
the house, and Lizarraga Hermanos brought suit against her for
ejectment. Evarista Robles sued Lizarraga Hermanos afterwards to
recover the value of the improvements, and demanded, in another action,
that said value be noted on the certificate of title as an encumbrance.

Evarista Robles contends that the understanding with Lizarraga
Hermanos by virtue of which she continued to occupy the house and made
the improvements, was a contract whereby it was agreed to -sell her the
said building on Iznart Street, the deed of sale to be executed as soon
as the title deeds of the property were transferred to the name of said
partnership; that by virtue of this contract she remained in the
occupation of the building and made the improvements; that, as one of
the stipulations in the contract of sale of the estate, Evarista Robles
assumed the liability of an encumbrance of fourteen thousand pesos
(P14,000) on the estate and another one in favor of the Agricultural
Bank and its successor, the National Bank, paying the interest thereon
as well as the land tax and the premiums of the fire insurance, all of
which payments were made through the same firm of Lizarraga Hermanos
who, as a result of the liquidation of accounts, held funds in their
possession belonging to Evarista Robles. These payments are evidenced
by Exhibits A, B, C, F, H, and I. It should here be noted that Evarista
Robles does not seek the execution of the proper instrument to evidence
this contract of sale, nor the performance thereof. She only claims the
cost of the improvements made at her expense and that this be recorded
in the corresponding certificate of title.

While the firm of Lizarraga Hermanos does not question the fact
that said improvements have been made and that their value amounts to
four thousand five hundred pesos (P4,500), it denies, however, having
entered into any agreement with Evarista Robles for the sale of the
building in question. In deciding the case No. 16736 of this court, the
court a quo found such a verbal contract of sale to have been proven
not only by Exhibit A, which leads to such a conclusion, but by the
oral evidence, which, in its opinion, had a preponderance in favor
thereof, and by the corroborative evidence consisting in the fact of
Lizarraga Hermanos having executed the deed of sale of the warehouse
mentioned in the said Exhibit A. This firm questions the right of
Evarista Robles to the improvements under consideration.

The fundamental questions upon which hinges the controversy in
these three cases are: First, whether Evarista Robles is the owner of
the aforesaid improvements and has the right to demand payment of their
value (case No. 16736); second, whether she has any right to retain the
building until the said value is paid to her (case No. 16661); and
third, whether a note for the four thousand five hundred pesos
(P4,500), the value of the above-mentioned improvements, as an
encumbrance on this estate (case No. 16662), should be made on the
title deeds thereof. Regarding the controversy in the case No. 16736,
attention is called to article 453 of the Civil Code which reads:

“Necessary expenditures shall be refunded to every
possessor, but only the possessor in good faith may retain the thing
until they are repaid to him.

“Useful expenditures shall be
paid the possessor in good faith with the same right of retention, the
person who has defeated him in his possession having the option of
refunding the amount of such expenditures or paying him the increase in
value which the thing has acquired by reason thereof.”

This provision of law is in force and applies to personal as well as real property.

The expenditures incurred in these improvements were not necessary
inasmuch as without them the house would have continued to stand just
as before, but were useful, inasmuch as with them the house better
serves the purpose for which it was intended, being used as a
residence, and the improvements consisting of the addition of a dining
room, kitchen, closet, and bathroom in the lower and upper stories of
the house, and a stable, suitable as a coach house and dwelling, it is
beyond doubt that such improvements are useful to the building. One of
the chiefs of the firm of Lizarraga Hermanos, on the occasion of a
luncheon in the house, on noting the improvements, could not refrain
from expressing that such improvements added much to the value of the
building (folio 25, stenographic notes).

Now then, was Evarista Robles a possessor in good faith when she
made those improvements? Article 434 provides that “good faith is
always presumed and thfe burden of proving bad faith on the part of the
possessor rests upon the person alleging it.” Lizarraga Hermanos did
not allege, nor prove in the first instance the bad faith
characterizing Evarista Robles’ possession, who, as shown in the
records and heretofore stated, began to occupy the house by permission
of the former owner, her mother Anastasia de la Rama, and continued
later in the occupation by the consent of her coheirs, and afterwards
by considering herself the future owner of the building by virtue of
the contract with the present owner, Lizarraga Hermanos. The evidence
shows that said improvements were begun about the end of December,
1916, after the agreement with Lizarraga Hermanos for the sale thereof
to Evarista Robles. (Folios 23, 24, 25, stenographic notes.)

We find that in the court below the presumption of good faith in
favor of Evarista Robles’ possession at the time she made the
improvements on the property was neither disputed nor discussed, but on
the contrary, there is positive evidence sufficient to support the
conclusion that when she made the improvements on the aforesaid
building she was possessing it in good faith.

If the improvements are useful and Evarista Robles’ possession was
in good faith, the conclusion set out in article If 453 of the Civil
Code, supra, is inevitable; Evarista Robles n is the owner of such
improvements, and entitled to reimbursement therefor, and to retain the
building until the same is made.

One of the proofs establishing the fact that Evarista Robles’
possession was in good faith is found iri Exhibit A, which textually is
as follows:

“Value of house	}	For Evarista………………	P16,500.00
Value of warehouse

“Evarista pays them in this way—

“Balance in h/f owing from L.
	Hnos……………………………………….		P1,424.35
Legacy to Evarista………………………….			500.00
Legacy to J. Robles………………………..			500.00
Legacy to Ambrosio……………………….			100.00
“Credit Agricultural Bank………………..			14,000.00
“Paid by Zacarias……………………………………………..				16,524.35
“Cash balance carried forward…………………………….				24.35
				___________
		“Liquidation …………………………………………..		16,500.00″

Severiano Lizarraga acknowledged having drawn this document and
admitted it to be in his own hand-writing (folios 6-8, transcript of
stenographic notes taken in case No. 16661 at the trial held December
6,1919). Taking into consideration the explanation he gives of the
contents of this exhibit, there is the inevitable conclusion which is
obviously inferred from the phrases “Value of house—of warehouse—For
Evarista P16,500—Evarista pays them in this way,” that Evarista Robles
was to become the owner of the house (which is the one in question) and
the warehouse for sixteen thousand five hundred pesos (P16,500), which
sum she was to pay by assuming the liability of all the amounts
enumerated” in the said memorandum all the way through.

But the admissibility of this document as evidence is disputed by
reference to section 335, case No. 5, of the Code of Civil Procedure,
which in the English text, which is clearer on this point, reads:

“SEC. 335. Agreements invalid unless made in writing.— In the following cases an agreement hereafter made shall be unenforceable
(Italics ours) by action unless the same, or some note or memorandum
thereof, be in writing, and subscribed by the party charged, or by his
agent; evidence, therefore, of the agreement cannot be received without
the writing, or secondary evidence of its contents:

“No. 5. An agreement for * * * the sale of real property, etc.”

It should be noted, first of all, that this rule of evidence does
not go to the extent of rendering invalid any verbal contract for the
sale of real property (Conlu vs. Araneta and Guanko, 15
Phil., 387), but declares inadmissible any evidence of such a contract
other than the document itself of the sale or some memorandum signed by
the party charged, in so far as the object of the action instituted is
to enforce performance of said contract of sale. But we are not dealing
with that phase in any of the cases now before us. This document was
introduced only to reinforce the proofs relative to the good faith
characterizing the possession of Evarista Robles when she made the
improvements in question, to the effect that if she made them, it was
because she entertained the well-founded, nay certain belief that she
was making them on a building that was to become her property by virtue
of the verbal contract of sale.

In the action wherein Evarista Robles and her husband ask that they
be adjudged owners of these improvements and that their value be paid
to them, Lizarraga Hermanos filed a general denial and a counterclaim
and cross-complaint for nineteen thousand pesos (P19,000) as
compensation for damages alleged to have been sustained by them on
account of their inability to sell the house and the warehouse, due to
the fact that the buyer imposed the condition that the house should be
vacated, which the plaintiffs refused to do.

It is a fact that the value of the improvements in question has not
as yet been paid by Lizarraga Hermanos. Wherefore, if Evarista Robles
and her husband are entitled to retain the building until the value of
such improvements is paid them, Lizarraga Hermanos have not yet any
right to oust them from the building, nor, therefore, to be indemnified
for any damages caused by the refusal of the plaintiffs founded on
their legitimate rights.

In regard to the ejectment sought in the case No. 16661, the suit
was brought by Lizarraga Hermanos in the justice of the peace court of
Iloilo on May 6, 1918, based on the failure of Evarista Robles and her
husband to pay the rent of the upper story of the house in question for
the month of April of that year, amounting to sixty pesos OP60), and on
the refusal of said spouses to quit the building. These spouses in
their answer alleged as special defense that they had never been the
tenants of Lizarraga Hermanos until November, 1917, when they became so
“under the special circumstances” under which the plaintiff partnership
sold the building, whereon they later made, with the latter’s consent,
improvements amounting to four thousand five hundred pesos (P4,500),
setting out the other stipulations and conditions hereinabove stated,
which were incorporated into the contract of sale, and prayed, under
their counterclaim, that Lizarraga Hermanos be sentenced to pay the sum
of four thousand five hundred pesos (P4,500), the value of the
improvements referred to, and under their cross-complaint, that said
partnership be ordered to pay ten thousand pesos (P10,000) as
compensation for damages alleged to have been sustained by the
aforesaid spouses due to the aforesaid partnership’s act, praying
lastly, in view of the questions raised, that the case be regarded not
as one of unlawful detainer, but for the recovery of title to real
property, and that the court of the justice of the peace abstain from
taking cognizance thereof for want of jurisdiction.

The case having been appealed to the Court of First Instance, these allegations were reproduced.

In the Court of First Instance, Lizarraga Hermanos demurred to this
counterclaim and cross-complaint, and the demurrer was sustained by the
court in its decision on the merits of the case, whereby the defendants
are sentenced to return to Lizarraga Hermanos the possession of the
building, to pay the rents thereof due from April, 1918, until they
vacate the house, at the rate of sixty pesos P60 per month, and the
costs.

From this judgment Evarista Robles and her husband have appealed,
assigning as errors of the court a quo in finding that Lizarraga
Hermanos were entitled to bring action for unlawful detainer, and
ordering them to return the possession of the building.

If Evarista Robles and her husband were mere lessees of this
building, the plaintiff’s action for unlawful detainer is obvious and
must prosper. But, were Evarista Robles and her husband mere lessees?

As above stated, we hold that there existed a contract of sale of
this building executed by Lizarraga Hermanos in favor of Evarista
Robles about November, 1916, the performance of which is not, however,
sought to be enforced, nor would it be enforceable if the evidence
offered in the action instituted for the purpose be not the document
itself of the sale, or a memorandum thereof, signed by the party bound
by the contract and required in the action to fulfill it, and objection
be made to said evidence, as was done here.

The possession of these spouses was in no way begun by virtue of
any lease whatever, since it is not disputed, and is a proven fact,
that they came to occupy the building by permission of the mother of
Evarista Robles. Upon said mother’s death, they continued to occupy the
property by the consent of the coheirs. After the assignment of the
property to Lizarraga Hermanos was concluded, but before the title
deeds were transferred to the name of this partnership, an agreement
was made for the sale of the building to Evarista Robles and her
husband, the latter agreeing in the meantime to pay to Lizarraga
Hermanos a certain sum per month—forty pesos (P40)—by way of
compensation for the occupation of the building until the execution of
the deed of sale in favor of the occupants.

Considering abstractly the naked fact that these spouses occupied
the house by paying a certain sum for its occupation, it would seem
that this is indeed a case of lease. But such was not the contract. It
was simply the sense of justice of the parties that led them to make
the stipulation that, while the conveyance of the building was being
carried into effect in due form, the future owners should pay a certain
sum for its possession. This peculiar situation continued for all the
time in which the said spouses made and completed the improvements in
question until Lizarraga Hermanos changed their resolution to sell the
building to Evarista Robles and her husband. But then all the
improvements in question had already been made, and when these spouses
were requested to vacate the building, they answered, and gave it to
understand, that they would do so as soon as the value of the
improvements was paid to them. Up to that time they were not lessees
strictly speaking. Did they become so afterwards? Neither; for since
that moment they have been, as are at present, in possession of the
building by virtue of the right that they had, and do have, to retain
it until the value of the improvements is paid to them. And it was
after these spouses had manifested their intention not to leave the
building until they were reimbursed for the improvements made thereon
that this action for unlawful detainer was instituted.

Before these improvements were made, or before these spouses
demanded payment of their value, that is, while the possession was
partly based on the stipulation with color of lease, an action for
unlawful detainer might have, in a sense, been justifiable, though not
entirely maintainable, owing to the fact that such possession was based
primarily on the well-founded belief of the occupants that they were to
become the owners of the house in their possession, that the monthly
payment being a provisional arrangement, an incidental and peremptory
stipulation, while the solemn formalities of the conveyance were being
complied with.

But after the improvements had been made and Lizarraga Hermanos had
manifested their resolution to rescind the contract of sale and not to
pay for them, then the possession of the aforesaid spouses lost all
color of lease, and turns out to be a possession based only upon the
latter’s right to retain the building. And these were all the attending
circumstances of said possession when the action for unlawful detainer
was commenced.

We are, therefore, of opinion, and so hold, that Lizarraga Hermanos
were not, and are not, entitled to maintain any action for unlawful
detainer so long as they do not pay the value of the improvements in
question.

We will now take up the case No. 16662 wherein Evarista Robles and
her husband ask that these improvements be noted on the proper
certificate of title as an encumbrance.

These spouses pray in their complaint for the cancellation of the
said certificate of title, which is the transfer certificate No. 526, a
substitute of the original No. 32 of the office of the register of
deeds of Iloilo.

If the object of these spouses is, as it cannot be otherwise, to
have such an encumbrance noted, the cancellation is not necessary, and,
of course, not justifiable. At any rate, the fraud alleged in this last
action to have been committed precisely to secure such a transfer
certificate cannot be held proven.

But it having been decided that these spouses are entitled to
demand payment of the value of the improvements and to retain the
building until such value is paid them, it only remains for us to
determine whether this right of retention has the character of a real
right to be regarded as one of the encumbrances referred to in section
70 and the following sections of the Land Registration Act.

It being a burden on the building to the extent of being
inseparably attached to the possession thereof, this right of retention
must necessarily be a real one. If so, as we regard, and find, it to
be, it is but just that such an encumbrance should be noted on the
transfer certificate No. 526 issued by the register of deeds of Iloilo
in favor of Lizarraga Hermanos, or on any substitute thereof.

As a consequence of all the foregoing, we affirm the judgments
appealed from in the three cases in so far as they are in harmony with
the conclusions herein set out, and reverse them in so far as they are
in conflict therewith, and it is hereby adjudged and decreed:

First. That Lizarraga Hermanos pay to the spouses Evarista Robles
and Enrique Martin the sum of four thousand five hundred pesos P4,500),
the value of the improvements referred to in these cases, with right or
the part of said spouses to retain the building in question until the
payment hereby ordered is made.

Second. That said spouses Evarista Robles and Enrique Martin vacate
the aforesaid building immediately after the receipt, or the legal
tender, of the payment hereby decreed.

Third. That the said spouses Evarista Robles and Enrique Martin pay
to Lizarraga Hermanos a compensation for the occupation of the building
at the rate of forty pesos (P40) a month, beginning with the month of
April, 1918, until they vacate the aforesaid building as it is ordered
herein.

Fourth. That upon payment of his lawful fees, the register of deeds
note said right of retention on the back of the transfer certificate
No. 526 issued in favor of Lizarraga Hermanos, or of any other
certificate standing in lieu thereof, concerning the said building,
which note will remain in force until the payment of the aforesaid
improvements is made as above ordered. Without pronouncement as to
costs in this instance, so ordered.

Araullo, C. J., Malcolm, Avancena, Villamor, Ostrand, and Johns, JJ., concur.