Lao Chit v. Security Bank & Trust Co.

Summary

Lao Chit constructed building improvements worth P59,365 in leased commercial premises for a proposed Bank of Manila that never materialized. When the original lessees defaulted and were ejected, Lao Chit sued the building owner (lessor) and subsequent tenant bank for compensation, claiming ownership of the improvements. The Supreme Court reversed the trial court's favorable ruling, holding that the improvements became the lessor's property by operation of the law of accession and specific lease contract provisions. The Court rejected Lao Chit's claims under the Spanish Civil Code provisions for builders in good faith and unjust enrichment, finding these doctrines inapplicable since Lao Chit acted as agent of the lessee with knowledge of the lease limitations. The decision establishes that contractors who improve leased premises are bound by the lease terms regarding ownership of improvements and must seek recourse from their contracting parties, not the lessor.