G.R. No. 167680 - Parilla vs. Pilar

Petitioners Samuel and Chinita Parilla and their son Deodato, as authorized dealers of Pilipinas Shell Petroleum Corporation, occupied a parcel of land in Bantay, Ilocos Sur under a 10-year lease with respondent Dr. Prospero Pilar executed in 1990.
During the lease, petitioners constructed a billiard hall, a restaurant, maintained a sari-sari store (managed by Leonardo Dagdag, Josefina Dagdag and Edwin Pugal), and allowed portions of the lot to serve as parking spaces for Flor Pelayo, Freddie Bringas and Edwin Pugal.

Upon lease expiration in 2000, petitioners refused to vacate despite respondent’s demands. Respondent, residing in the United States, filed an ejectment suit with prayer for preliminary injunction and damages in the Municipal Trial Court (MTC) of Bantay on February 4, 2002.
MTC Decision (Feb. 3, 2003) ordered petitioners and co-defendants to vacate, pay respondent ₱50,000 as compensation and ₱10,000 attorney’s fees, and awarded petitioners ₱2,000,000 for improvements.
The Regional Trial Court (RTC) of Vigan City affirmed the MTC Decision in its entirety.
On respondent’s appeal, the Court of Appeals (CA) reversed that portion ordering respondent to reimburse petitioners ₱2,000,000, holding petitioners were not possessors in good faith under Article 546 of the Civil Code.

Whether the Court of Appeals erred in setting aside the trial courts’ orders requiring respondent to reimburse petitioners ₱2,000,000 for improvements.
Whether petitioners qualify as builders in good faith entitled to full reimbursement under Articles 448 and 546 of the Civil Code.
Whether the improvements introduced by petitioners were worth and actually cost ₱2,000,000.
Whether petitioners have the right of retention of the premises until reimbursement is made.