In May,  1949, the Consolidated Investments, Inc., hereafter referred to as the  lessor, leased to  Domingo T. Dikit part of the lobby, on the ground floor of the Consolidated Building, at Plaza Goiti, Manila, to be  used as offices  of a proposed Bank of Manila, then being organized by  said Dikit  and one Jose Silva.   Pursuant to the  lease contract between the parties (Exhibits 2, 2-A and 2-B), the lessee undertook to construct, at the expense thereof, such walls, partitions and other improvements as may be necessary to make the leased premises  suitable for banking  purposes, and such partitions and improvements "shall become  the property" of the lessor "upon the termination and/or rescission" of said contract.  It appears that, pursuant  to another contract, entered into in June, 1949,  between Dikit and Silva on the one  hand, and plaintiff Lao Chit, on  the other (Exhibits A-1,  A-2  and A-3), the latter furnished the materials and the work for said walls, partitions and improvements,  at  a  total cost of  P59,365, payable  "as soon  as the Bank of Manila opens  for  business, and is given a permit  by the Central Bank."  This permit, however,  was never  issued.  The proposed  Bank of Manila did not open for business,  and the rentals due under said lease  contract, at the rate of P5,000 a month, beginning from  October, 1949, were not paid.  On December 3, 1949, the lessor  instituted Civil Case No. 9708  of  the Municipal Court  of  Manila, against Dikit, for  unlawful  detainer. After appropriate proceedings, said court rendered  judgment on March 27, 1950, sentencing Dikit.

"*  *  *  to vacate the premises described in the complaint, and to pay the plaintiff  the sum of P10,000.00, under the first cause of action, corresponding rentals due from October to  November, 1949, plus the sum of P227.80,  under the second cause of  action, for electric  consumption up to  November 30,  1949;  plus the  rents  that will become due from December 1, 1949, at the rate of P5,000.00 per month until the date said defendant  finally vacates and  surrenders possession to the plaintiff and costs of this suit."   (Exhibit 3.)

Dikit appealed  from this decision to the Court of First Instance of Manila, where the case  was docketed as Civil Case  No. 11214 of said court. He, likewise,  applied, in the Supreme Court in Case G.  R.  No. L-3621, entitled "Domingo  Dikit vs. Hon. Ramon Icasiano" for a writ of certiorari  against the municipal judge  who had rendered the aforementioned decision in the ejectment  case.  Said cases No. 11214 and L-3621 were soon dismissed,  however, upon agreement of  the parties,  dated May 22, 1951, whereby     Dikit,  among  other things, relinquished  whatever  rights   he might  have to  the  possession of  the leased premises  and disclaimed all rights to and over any and all improvements  introduced  therein   while he was  in  possession   thereof.

Prior  to said  decision, but after  the  commencement of said Case No. 9708, Lao Chit had filed Civil Case No. 10178 of the Court  of  First  Instance  of  Manila, against  Dikit and Silva, for the  recovery of  what  was due from  them by reason of the  aforementioned improvements introduced by Lao Chit.  On June 30, 1953, judgment was rendered in said Case No.  10178 the dispositive part of which  reads as follows:

"WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendants, sentencing the latter to pay the former, jointly and severally, the sum of P59,365.00, which  is the total  of the claim  under  the  second, third and fourth  causes of action,  the same to be paid within 15 days from notice, with legal interest from the date of  the filing  of the complaint until its full payment;  and in the  event the defendants fail to  pay within the period of  grace  herein fixed, the fixtures  herein referred to (which by express agreement of  the  parties shall remain the  plaintiff's property  until they are fully  paid for)  shall be returned to the plaintiff.  The defendants  shall also  pay jointly and severally the plaintiff by way of damages an amount  equivalent to  12% of the aforementioned sum of P59,365.00.   The  defendants shall likewise pay the plaintiff, jointly and severally, another sum equivalent to 25 % of the amounts claimed in the first and sixth causes of action, besides an amount equivalent to six (6%) of the sums due and payable under the second and  third causes of action as attorney's fees, with costs against them."   (Exhibit A.)

In due course,  the corresponding writ of execution (Exhibits  D-1 and D-3)  of this judgment  was  subsequently issued.  Later on it was returned by the sheriff unsatisfied, with the statement that neither Dikit nor Silva had any  property  registered in their  respective names, and that the whereabouts  of  Silva  was  unknown (Exhibits D-2 and  D-4).  Meanwhile, or on September 10,  1953, Lao Chit brought the present action against the Security Bank and  Trust Company (Hereafter referred to as the Bank), to  which the lessor had, since July 1,  1951, leased the premises in question (after it  had been  vacated  by Silva), together with the fixtures and improvements  introduced therein by Lao Chit.  In its complaint, Lao Chit demanded  payment of Pl,000 a month, by  way of rental for the use of said fixtures and improvements by the Bank, in  addition to expenses of litigation, attorney's fees and costs.   In  its answer, the Bank alleged that it held and used said  improvements pursuant to its contract of lease with the lessor and that it had paid the rentals due and complied with its other obligations under  said contract, and set up a counterclaim for damages.  Soon  thereafter, or  on  November 5, 1953, Lao Chit demanded payment of the aforementioned sum of P59,365, plus P1,000 a month from June, 1951, from the lessor, which did not heed the demand, whereupon the complaint herein was,  on December 18, 1953, amended to include said lessor as one of the defendants.   The latter  alleged, in its  answer, that the improvements in question were introduced at the initiative and expense of Dikit and Silva, as lessees of the premises above referred to,  and  that, as permanent fixtures, said improvements form an  integral  part of the  Consolidated Investments Building, and belong to the lessor and owner thereof, not to  plaintiff herein, who has no contractual or juridical  relation  with  the  lessor.  The lessor,  likewise, sought to recover, by way  of  counterclaim, the sum of P50,000, as damages for its inclusion as defendant herein, aside  from attorney's fees and  costs.   In due course,  the Court of First Instance of Manila rendered judgment on December 28, 1955, the dispositive part of which reads:

"WHEREFORE, judgment is  hereby  rendered,  sentencing the  defendant, Consolidated Investments, Inc., to pay to the plaintiff the value of the permanent improvements in the sum of P59,365.00, and, together with the defendant, Security Bank and Trust Company, to  pay jointly and  severally, for the use of the permanent  improvements, at the  rate of  P1 ,000.00 monthly from June, 1951 to July 31, 1954, and thereafter, until January, 1955, by the defendant, Consolidated Investments,  Inc., alone,  at  the same  rate,  and in both instances, plus  legal  interest until full payment thereof; in addition,  the defendant, Consolidated Investments,  Inc., is  further ordered to pay to the plaintiff the amount equivalent to 80% of whatever  amount is  due from it,  as reimbursement for  plaintiff's litigation  expenses, including attorney's contingent fees, aside from moral, nominal, moderate and exemplary damages in the  amount of P2,000.00, and the costs  of suit.

"Defendants' counterclaims are  hereby both  dismissed for  lack of merits and in view of the above conclusion of the Court."

Their  respective motions for reconsideration  and new trial  having been  denied, the defendants have appealed from this decision.

It is apparent to us that the lower court erred in rendering  judgment  against   the  Bank.  This  defendant had occupied and used the premises in question,  including the partitions, fixtures  and  other  improvements made therein by  Lao Chit, pursuant to a contract of lease entered into with the lessor, the right of which to enter into said contract is  not disputed.   Moreover,  the  Bank  had paid the rentals  and  fulfilled its  other  obligations under said contract.  Again, it cannot be denied that the improvements introduced by Lao Chit  became property of the lessor, not only because such  improvements are permanent in nature and cannot be removed without impairing the building to which the.y were attached, but, also, because the  contract of lease between Dikit and Silva on the one hand, and the lessor, on the other hand, provided explicitly that the latter shall own those improvements "upon the expiration and/or rescission" of  said contract,  and the same has already  been  resolved.   Although  Lao  Chit  was  not a party to said contract,  this  stipulation is binding  upon him, he having introduced said improvements pursuant to his contract with Dikit, from whom he derived, therefore, his right to enter the building and make the improvements. In  short,  insofar  as the construction  thereof, Lao  Chit was, vis-a-vis the  lessor, a mere agent  or representative of Dikit and, as such, was privy to the undertakings of Dikit under his contract of lease with  the  lessor.

The lower court held the latter liable to Lao  Chit upon the ground that Lao Chit  was  a builder in good faith, under the  provisions of the  Old Civil  Code,  and  under the theory of undue enrichment.

As regards the  first ground,  Article  361 of the  Civil Code of Spain, on  which the lower court relied, provides:

"The owner of land on which anything has been built, sown, or planted, in good faith, shall be entitled to appropriate the thing so built, sown, or planted, upon paying the compensation mentioned in Articles 453 and 454, or to compel the person who has built or planted to pay him the value of the land, and the person who sowed thereon to pay the proper rent therefor."

It  is well settled,  however, that this provisions refers to one who builds upon a land which he believes to be his property (Alburo vs. Villanueva, 7  Phil., 277; Cortes vs. Ramos, 46  Phil.,  184; Rivera vs. Trinidad,  48  Phil., 396; Fojas vs. Velasco, 51 Phil., 520; Montinola vs. Bantug, 71 Phil., 449-450; Lopez Inc. vs. Philippines & Eastern Trading Co., Inc., 98  Phil.,  348; 52 Off.  Gaz., 1452).  Neither Lao Chit, nor Dikit, claimed the Consolidated Investments Building as his own.  Dikit was a mere lessee and Lao Chit was his  agent, as such, in the construction of the improvements under consideration.   In any event, the Spanish text of said Article 361, which is the original, reads:

"El dueño del terreno en que se edificare, sembrare o  plantare de buena fe,  tendra derecho a hacer suya la obra, siembra o plantacion, previa la  indemnizacion establecida en los articulos 453 y 454, o a ofcligar al que edifico o planto a pagar el precio del terreno, y al que sembro, la renta correspondiente."  (Italics supplied.)

Clearly this provision  is  limited  in  its  application  to "buddings" constructed on another's land or "terreno", not to  partitions,  railings, counters,  shelves and  other  fixtures made in a  building  belonging to the  owner of  the land.  Although the verb  "edificar" in Spanish  is roughly synonymous with  "build"  in  English, tho latter  is broader in its connotation than  the former.   Literally,  "edificar" is to undertake the construction of an  edifice, such as a fort, castle, house, church, market, tower,  stadium, barrack, stable or other  similar structure.  Upon  the other hand, one may build a house, as well as  a( fence, partition, window, door, or even a desk or a chair, but, it would be improper to use the verb "edificar" to  describe the making of such  fence, partition, window,  door,  desk or  chair.   It is apparent,  therefore,  that  Lao  Chit  is not entitled  to the  benefits of said Article 361.

The lower court, moreover, said:

"*  *   *  convincing evidence abounds, to wit: that the improvements were made in the  presence of, and with the knowledge and consent, and even under  the personal  supervision, on the part  of the  duly  authorized representative of  the  defendant, Consolidated Investments, Inc., which owns the building.  Thus, it may even be said that it was the defendant, Consolidated  Investments Inc., which had  acted in bad faith."  (Record on  Appeal of  Consolidated Investments, Inc., p. 56,)

and quoted, in support  thereof, the second paragraph  of Article 364 of the Spanish Civil Code,  reading:

"Bad faith on the part of the owner  is deemed to exist  whenever the  act has been done in  his presence, with his knowledge  and tolerance, and without opposition  on his part."

The foregoing view is,  likewise, untenable.  To begin with, this  Article  364,  like  Article 361, involves a  person who builds, plants or sows upon  a  land not knowing that it  belongs  to another.   Inasmuch as, there  is no contractual relation between  them, their rights are  governed by law, not by contract.

Secondly, under his contract of  lease with the  lessor, Dikit had a legal right to make the improvements in question and the lessor was  legally bound  to permit Dikit and his  agent Lao Chit to enter  the leased  premises and construct said improvements.  Surely, compliance  with this valid contractual  obligation does  not, and cannot, constitute bad faith on the part of the lessor.  Upon the other hand,  the lessor could not  legally object to, or  obstruct, the work done by Lao Chit, without being chargeable with bad faith in the  performance of said contractual obligation with Dikit.

In order to justify the application of the  principle that no  one should be permitted to unjustly enrich  himself at the expense of another, His Honor the Trial Judge  cited Article 356 of the Civil Code of Spain, which provides:

"He who receives fruits is obliged to pay any expenses which may have been incurred  by  another in the  production, gathering, and preservation thereof."

We agree with the  lessor that this Article is not in point, for:

(a)  Said  provision is part of  Section I, Chapter  II, Title II, Book II,  of the/Spanish Civil Code,  which section regulates the "right of accession with respect to the  products of  property," and the work done and  the  improvements introduced by Lao  Chit are not "products" of the lessor's  property.

(b)  Said Article 356 refers to  "expenses" of production, gathering and preservation" of fruits received by the owner of a property, not to improvements, whereas the claim of Lao Chit is based upon  "improvements" introduced, not "expenses" incurred  by him for the "production, gathering  and preservation"  of  fruits.  In the  language  of Manresa:

"* *   *  el  Codigo  exige  que el  propietario pague al  tercer poseedor que fue de la cosa los gastos de produccion,  y en su caso los de recoleccion y conservacion.  El  prcpietario  no  puede excusarse alegando  la mala fe del  tercero, porque sea  de buena o de mala fe, lo cierto  es que este ha hecho un gasto, no solo util para el propietario,  sino  necesario, y sin  el  cual  el  propietario  no hubiera obtehido frutos de su fundo, resultando  ademas que, de no mediar indemnizacion, se consagraria el injusto principio de que  uno puede enriquecerse  a costa y con  dano de  otro.  Para afirmarse por completo  en esta opinion debe concordarse  el articulo que comentamos con los 452  a 456, relativos a  los efectos de la posesion de buena y mala fe, y que no examinamos ahora porque el asunto se trata luego con mas  detalles.

"Los gastos de produccion  y  demas, para  que  puedan conceptuarse reembolsables por el  propietario en el caso  que  suponemos, deben tener dos caracteres:  primero, que  esten  dedicados  a  la produccion anual; es decir, que no se trata en este  supuesto de las bonificaciones  generates del fundo. Semejantes  bonificaciones  en Iran en la categories de las mejoras, que se regulqn en otro lugar del Codigo (al tratar de la posesion), y segundo, que  no sean superfluos, excesivos o de puro lujo, sino que deben ser hechos en aquella medida natural que la condicion del  cultivo o trabajo  de que se trata exige."  (3 Manresa [6th ed.], 196; Italics supplied.)

(c)  The right to  recover  under the principle of undue enrichment is justifiable under Article 1887 of the Spanish Civil Code, reading:

"Quasi contracts  are  licit and purely voluntary acts which create an obligation  on the part of the  actor in favor of a third person, and, at times, a reciprocal obligation between  the parties concerned."

Its counterpart in the  Civil Code of the  Philippines is Article 2142,  which  we quote:

"Certain lawful,  voluntary and unilateral acts give  rise to  the juridical relation of quasi-contract to the end that  no one shall be unjustly enriched or benefited at  the expense of  another."

The former is part of Title XVI, Book IV of the Spanish Civil Code, entitled "obligations incurred without  contract", whereas  the latter is included in  Title XVII, Book IV  of the  Civil  Code of the Philippines,  regulating "extra-contractual obligations" or obligations  beyond,  outside of,  or outside the  scope of, a contract.   The  construction of the improvements  in question  was not a  "purely  voluntary act" or "unilateral act" of Lao Chit.  He introduced them in compliance with  a  bilateral "obligation"  he  undertook under his contract with Dikit.  The right of  Dikit to enter into  such contract,  in  turn, sprang from  his  lease contract with the lessor.  As a  privy to Dikit's rights under this contract, insofar as said improvements are concerned, Lao Chit's title thereto, as against the lessor, is governed, therefore, by  such contract of  lease, not by  any quasi-contract, or by the  principles of equity, as  distinguished from  law, contracts or quasi-contracts.

(d)  For the principle of undue  enrichment to apply, there must be  "enrichment" and the same must be "undue" or "unjust".

In  the  case at bar,  Dikit failed to  pay  the  agreed monthly rental of P5,000 from October, 1949.   Up to July 1, 1951, when the  premises in question were leased to the Bank,  the rentals due  from Dikit aggregated, therefore, P105,000.  Thus,  despite the fact  that  the lessor  had become  the  owner of  the improvements  in question, worth P59,365.00, it still suffered a loss of over P45,000.00.   Such "loss" negates the  idea  of "enrichment".   Neither  may the latter be deemed to have taken place in the sense that said improvements had  increased  the productive capacity of the leased premises,  for, despite said improvements, the Bank  agreed  to pay, beginning from  July 1,  1951,  only P4,000 a month,  or P1,000 a month less than the rental stipulated with Dikit.

Regardless of the foregoing, Lao Chit had no reason to believe and he does not  claim to have acted under the belief that Dikit owned the leased premises.   In fact, the circumstances surrounding the case  are such such  as to leave no room for doubt  that Lao  Chit knew that  Dikit was not the owner of said property and that the  same belonged  to  the  lessor.  Besides, Lao  Chit  should  have known that, as Dikit's  agent,  in  the construction of the improvements, he (Lao Chit)  was  subject to the limitations  imposed upon Dikit by his contract with the lessor and that  the  improvements in question became property of the owner of the building, not only by operation of law, as  accessions to said building, but, also, by specific stipulation in  the contract  of lease between Dikit and the lessor.  Inasmuch as the acquisition of said improvements by the owner of  the building and  lessor is  ordained  by law and provided for by said contract, which is admittedly valid, the resulting enrichment if any by said owner and lessor, is neither "undue"  nor "unjustly".

Upon the other hand, had  he been reasonably vigilant, Lao Chit could have demanded from Dikit a mortgage, or  a bond, or some other security, for the  protection of his  rights, yet he (Lao Chit) did  not do so.   Should the lessor  be required to pay  Lao Chit what he is entitled to recover  from Dikit, but which he (Lao  Chit) cannot due to his   oversight, carelessness or negligence collect  from Dikit, the effect would be to  relieve Lao Chit of the consequences  of his own inadvertence or negligence, and hold the lessor responsible therefor.   This would be neither fair, nor just, nor equitable.  
Lastly, the lower court declared that the improvements in question belong to Lao  Chit,  because it had been so held in Case No. 10718 instituted by him against Dikit and Silva.  Obviously, however,  the  proceedings in that case and  the  decision therein rendered are  not binding upon the lessor,  the same  being neither a party in said case, nor a successor to the interest of  the defendants therein. Besides,  the aforementioned finding  is  not borne out by Lao  Chit's  contract with Dikit  and Silva (Exhibits A-1, A-2, A-2-a and A-3).  Indeed, even  if Dikit and Silva had  agreed with Lao Chit and they had no  such  agreement that he would own the improvements until payment of the price thereof, the stipulation would be, neither valid, nor binding upon the lessor, for Dikit  and Silva had no authority whatsoever to waive the statutory right  of  accession of the  lessor to and over said improvements  (Arts. 353 and 358, Civil Code of Spain; Arts. 440 and 445, Civil Code of the Philippines).

Wherefore, the decision appealed from is hereby reversed and  another  one shall  be entered dismissing the complaint, with costs against plaintiff-appellee Lao Chit.  It is so ordered.

Paras,  C. J., Bengzon, Padilla,  Montemayor, Reyes,  A., Bautista Angelo, Labrador and Endencia, JJ., concur.