G.R. No. 100963 - Santos vs. Court of Appeals

In July 1951, Margarita Tuason executed a lease contract in favor of Fortunato H. Santos (the predecessor-in-interest of the petitioners) for a parcel of land.
The lease was for three (3) years or until July 1954, with a monthly rental of P35.00.
Pursuant to the lease, Fortunato H. Santos took possession of the premises and erected improvements—a residential house and a barber shop.

In 1952, Margarita Tuason died, leaving Fortunato H. Santos in possession of the property.
Despite the lease’s expiration, Santos continued occupying the premises with the acquiescence of Asuncion Tuason (successor-in-interest of the late Margarita Tuason) at an increased rental of P65.00 per month.
At some point, Asuncion Tuason conveyed the property to private respondent Lolita Deopante Vda. de Saavedra, who secured Transfer Certificate of Title No. 30584 in her name.

In 1961, an ejectment case was initiated by private respondent against Fortunato H. Santos for non-payment of rentals; the case was eventually dismissed.
After the death of Fortunato H. Santos, the petitioners (his heirs) continued to occupy the premises.
The petitioners failed to pay the monthly rentals covering the period from March 1961 to November 1989.
Consequently, private respondent filed an ejectment case against the petitioners with the Metropolitan Trial Court of Pasig, which rendered a decision on March 30, 1990 by declaring the petitioners in default and ordering:

Payment of P22,425.00 for unpaid rentals covering March 1961 to November 1989.
A monthly rental of P1,500.00 as reasonable compensation for continued occupancy.
Payment of costs of suit.
Dismissal of the petitioners’ counterclaim due to lack of basis.

Petitioners appealed the Metropolitan Trial Court decision to the Regional Trial Court (RTC).

On July 31, 1990, the RTC affirmed the lower court’s decision and in addition ordered reimbursement by the private respondent for improvements introduced by the late Fortunato H. Santos.

Within the reglementary period, the petitioners further elevated the case to the Court of Appeals.

Private respondent did not file an appeal.
On July 11, 1991, the Court of Appeals modified the RTC decision by eliminating the ordered reimbursement for the improvements.

The decision on reimbursement was an issue not raised in the petition for review.
The awarding of affirmative relief to the private respondent, who did not appeal the RTC decision.
The affirmation of the petitioners’ obligation to pay the rentals, despite their contention that such debt was incurred by Fortunato H. Santos.

The petition for review was ultimately filed on certiorari challenging the substance of the Court of Appeals’ decision.

Whether the Court of Appeals erred in deciding, on its own motion, on the issue of reimbursement for improvements made by Fortunato H. Santos which was not raised in the petition for review.
Whether the Court of Appeals improperly granted affirmative relief to the private respondent, despite her failure to appeal the RTC decision.
Whether the petitioners should be held liable for the rental payments from March 1961 to November 1989, notwithstanding their contention that such rentals were primarily incurred by the late Fortunato H. Santos.
Whether the adjudication of reimbursement and rental liabilities was proper under the applicable law, particularly with reference to Article 1678 of the Civil Code.