Sales cases on Lease

SALES COMPILED FULL TEXT CASES : LEASE 2014

1 KASC

FIRST DIVISION

[G.R. No. 86150. March 2, 1992.]

GUZMAN, BOCALING & CO., petitioner, vs. RAOUL

S.V. BONNEVIE, respondent.

E. Voltaire Garcia for petitioner.

Guinto Law Office for private respondent.

SYLLABUS

1. CIVIL LAW; SPECIAL CONTRACTS; LEASE; NECESSITY OF SECURING

THE APPROVAL OF PROBATE COURT; RULE; CASE AT BAR. The Court

agrees with the respondent court that it was not necessary to secure the

approval by the probate court of the Contract of Lease because it did not involve

an alienation of real property of the estate nor did the term of the lease exceed

one year so as to make it fall under Article 1878(8) of the Civil Code. Only if

Paragraph 20 of the Contract of Lease was activated and the said property was

intended to be sold would it be required of the administratrix to secure the

approval of the probate court pursuant to Rule 89 of the Rules of Court.

2. ID.; ID.; SALE; PURCHASER IN GOOD FAITH AND FOR VALUE;

CONSTRUED IN CASE AT BAR. A purchaser in good faith and for value is

one who buys the property of another without notice that some other person has

a right to or interest in such property and pays a full and fair price for the same at

the time of such purchase or before he has notice of the claim or interest of some

other person in the property. Good faith connotes an honest intention to abstain

from taking unconscientious advantage of another. Tested by these principles,

the petitioner cannot tenably claim to be a buyer in good faith as it had notice of

the lease of the property by the Bonnevies and such knowledge should have

cautioned it to look deeper into the agreement to determine if it involved

stipulations that would prejudice its own interests. The petitioner insists that it


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was not aware of the right of first priority granted by the Contract of Lease.

Assuming this to be true, we nevertheless agree with the observation of the

respondent court that: If Guzman-Bocaling failed to inquire about the terms of the

Lease Contract, which includes Par. 20 on priority right given to the Bonnevies, it

had only itself to blame. Having known that the property it was buying was under

lease, it behooved has a prudent person to have required Reynoso or the broker

to show to it the Contract of Lease in which Par. 20 is contained.

3. ID.; CONTRACTS; RESCISSIBLE CONTRACTS; MAY BE AVAILED OF BY

REASON OF INJURY TO THIRD PERSON; CASE AT BAR. The petitioner

argues that assuming the Contract of Sale to be voidable, only the parties thereto

could bring an action to annul it pursuant to Article 1397 of the Civil Code. It is

stressed that private respondents are strangers to that agreement and therefore

have no personality to seek its annulment. The respondent court correctly held

that the Contract of Sale was not voidable but rescissible. Under Article 1380 to

1381(3) of the Civil Code, a contract otherwise valid may nonetheless be

subsequently rescinded by reason of injury to third persons, like creditors. The

status of creditors could be validly accorded the Bonnevies for they had

substantial interests that were prejudiced by the sale of the subject property to

the petitioner without recognizing their right of first priority under the Contract of

Lease.

4. ID.; ID.; ID.; PURPOSES. According to Tolentino, rescission is a remedy

granted by law to the contracting parties and even to third persons, to secure

reparation for damages caused to them by a contract, even if this should be

valid, by means of the restoration of things to their condition at the moment prior

to the celebration of said contract. It is a relief allowed for the protection of one of

the contracting parties and even third persons from all injury and damage the

contract may cause, or to protect some incompatible and preferent right created

by the contract. (Aquino v. Taedo, 39 Phil. 517) Rescission implies a contract

which, even if initially valid, produces a lesion or pecuniary damage to someone

that justifies its invalidation for reasons of equity.

5. ID.; ID.; ID.; MAY BE IMPAIRED BY THE ACQUISITION OF THIRD PERSON

OF THE SUBJECT PROPERTY WHO IS SHOWN THAT HE IS IN LAWFUL

POSSESSION AND NOT ACTED IN BAD FAITH; CASE AT BAR. It is true


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that the acquisition by a third person of the property subject of the contract is an

obstacle to the action for its rescission where it is shown that such third person is

in lawful possession of the subject of the contract and that he did not act in bad

faith. However, this rule is not applicable in the case before us because the

petitioner is not considered a third party in relation to the Contract of Sale nor

may its possession of the subject property be regarded as acquired lawfully and

in good faith. Indeed, Guzman, Bocaling and Co. was the vendee in the Contract

of Sale. Moreover, the petitioner cannot be deemed a purchaser in good faith for

the record shows that it categorically admitted it was aware of the lease in favor

of the Bonnevies, who were actually occupying the subject property at the time it

was sold to it. Although the Contract of Lease was not annotated on the transfer

certificate of title in the name of the late Jose Reynoso and Africa Reynoso, the

petitioner cannot deny actual knowledge of such lease which was equivalent to

and indeed more binding than presumed notice by registration.

D E C I S I O N

CRUZ, J p:

The subject of the controversy is a parcel of land measuring six hundred (600)

square meters, more or less, with two buildings constructed thereon, belonging to

the Intestate Estate of Jose L. Reynoso.

This property was leased to Raoul S. Bonnevie and Christopher Bonnevie by the

administratrix, Africa Valdez de Reynoso, for a period of one year beginning

August 8, 1976, at a monthly rental of P4,000.00.

The Contract of lease contained the following stipulation:

20. In case the LESSOR desires or decides to sell the leased

property, the LESSEES shall be given a first priority to purchase the

same, all things and considerations being equal.

On November 3, 1976, according to Reynoso, she notified the private

respondents by registered mail that she was selling the leased premises for


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P600,000.00 less a mortgage loan of P100,000.00, and was giving them 30 days

from receipt of the letter within which to exercise their right of first priority to

purchase the subject property. She said that in the event that they did not

exercise the said right, she would expect them to vacate the property not later

than March, 1977. cdphil

On January 20, 1977, Reynoso sent another letter to private respondents

advising them that in view of their failure to exercise their right of first priority, she

had already sold the property.

Upon receipt of this letter, the private respondents wrote Reynoso informing her

that neither of them had received her letter dated November 5, 1976; that they

had advised her agent to inform them officially should she decide to sell the

property so negotiations could be initiated; and that they were "constrained to

refuse (her) request for the termination of the lease."

On March 7, 1977, the leased premises were formally sold to

petitioner Guzman, Bocaling & Co. The Contract of Sale provided for immediate

payment of P137,500.00 on the purchase price, the balance of P262,500.00 to

be paid only when the premises were vacated.

On April 12, 1977, Reynoso wrote a letter to the private respondents demanding

that they vacate the premises within 15 days for their failure to pay the rentals for

four months. When they refused, Reynoso filed a complaint for ejectment against

them which was docketed as Civil Case No. 043S51-CV in the then City Court of

Manila.

On September 25, 1979, the parties submitted a Compromise Agreement, which

provided inter alia that "the defendant Raoul S.V. Bonnevie shall vacate the

premises subject of the Lease Contract, voluntarily and peacefully not later than

October 31, 1979."

This agreement was approved by the City Court and became the basis of its

decision. However, as the private respondents failed to comply with the above-

quoted stipulation, Reynoso filed a motion for execution of the judgment by

compromise, which was granted on November 8, 1979.


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On November 12, 1979, private respondent Raoul S. Bonnevie filed a motion to

set aside the decision of the City Court as well as the Compromise Agreement on

the sole ground that Reynoso had not delivered to him the "records of payments

and receipts of all rentals by or for the account of defendants . . . ." The motion

was denied and the case was elevated to the then Court of First Instance. That

Court remanded the case to the City Court of Manila for trial on the merits after

both parties had agreed to set aside the Compromise Agreement.

On April 29, 1980, while the ejectment case was pending in the City Court, the

private respondents filed an action for annulment of the sale between Reynoso

and herein petitioner Guzman, Bocaling & Co. and cancellation of the transfer

certificate of title in the name of the latter. They also asked that Reynoso be

required to sell the property to them under the same terms and conditions agreed

upon in the Contract of Sale in favor of the petitioner. This complaint was

docketed as Civil Case No. 131461 in the then Court of First Instance of Manila.

On May 5, 1980, the City Court decided the ejectment case, disposing as

follows: cdrep

WHEREFORE, judgment is hereby rendered ordering defendants and all

persons holding under them to vacate the premises at No. 658 Gen.

Malvar Street, Malate, Manila, subject of this action, and deliver

possession thereof to the plaintiff, and to pay to the latter: (1) The sum of

P4,000.00 a month from April 1,1977 to August 8, 1977; (2) The sum of

P7,000.00 a month, as reasonable compensation for the continued

unlawful use and occupation of said premises, from August 9, 1977 and

every month thereafter until defendants actually vacate and deliver

possession thereof to the plaintiff; (3) The sum of P1,000.00 as and for

attorney's fees; and (4) The costs of suit.

The decision was appealed to the then Court of First Instance of Manila,

docketed as Civil Case No. 132634 and consolidated with Civil Case No.

131461. In due time, Judge Tomas P. Maddela, Jr. decided the two cases as

follows:


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WHEREFORE, premises considered, this Court in Civil Case No.

132634 hereby modifies the decision of the lower court as follows:

1. Ordering defendants Raoul S.V. Bonnevie and

Christopher Bonnevie and all persons holding under them to vacate the

premises at No. 658 Gen. Malvar St., Malate, Manila, subject of this

action and deliver possessions thereof to the plaintiff; and

2. To pay the latter the sum of P4,000.00 a month from April 1, 1977 up

to September 21, 1980 (when possession of the premises was turned

over to the Sheriff) after deducting whatever payments were made and

accepted by Mrs. Africa Valdez Vda. de Reynoso during said period,

without pronouncement as to costs.

As to Civil Case No. 131461, the Court hereby renders judgment in favor

of the plaintiff Raoul Bonnevie as against the defendants Africa Valdez

Vda. de Reynoso andGuzman and Bocaling & Co., declaring the deed of

sale with mortgage executed by defendant Africa Valdez Vda. de

Reynoso in favor of defendant Guzman andBocaling null and void;

cancelling the Certificate of Title No. 125914 issued by the Register of

Deeds of Manila in the name of Guzman and Bocaling & Co.,; ordering

the defendant Africa Valdez Vda. de Reynoso to execute in favor of the

plaintiff Raoul Bonnevie a deed of sale with mortgage over the property

leased by him in the amount of P400,000.00 under the same terms and

conditions should there be any other occupants or tenants in the

premises; ordering the defendants jointly and severally to pay the

plaintiff Raoul Bonnevie the amount of P50,000.00 as temperate

damages; to pay the plaintiff jointly and severally the amount of

P2,000.00 per month from the time the property was sold to

defendant Guzman and Bocaling by defendant Africa Valdez Vda. de

Reynoso on March 7,1977, up to the execution of a deed of sale of the

property by defendant Africa Valdez Vda. de Reynoso in favor of

plaintiff Bonnevie; to pay jointly and severally the plaintiff Bonnevie the

amount of P20,000.00 as exemplary damages, for attorney's fees in the

amount of P10,000.00, and to pay the costs of suit.


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Both Reynoso and the petitioner company filed with the Court of Appeals a

petition for review of this decision. The appeal was eventually resolved against

them in a decision promulgated on March 16, 1988, where the respondent court

substantially affirmed the conclusions of the lower court but reduced the award of

damages. 1

Its motion for reconsideration having been denied on December 14, 1986, the

petitioner has come to this Court, asserting inter alia that the respondent court

erred in ruling that the grant of first priority to purchase the subject properties by

the judicial administratrix needed no authority from the probate court; holding that

the Contract of Sale was not voidable but rescissible; considering the petitioner

as a buyer in bad faith; ordering Reynoso to execute the deed of sale in favor of

the Bonnevies; and not passing upon the counterclaim. Reynoso has not

appealed.

The Court has examined the petitioner's contentions and finds them to be

untenable.

Reynoso claimed to have sent the November 3, 1976 letter by registered mail,

but the registry return card was not offered in evidence. What she presented

instead was a copy of the said letter with a photocopy of only the face of a

registry return card claimed to refer to the said letter. A copy of the other side of

the card showing the signature of the person who received the letter and the date

of the receipt was not submitted. There is thus no satisfactory proof that the letter

was received by the Bonnevies.

Even if the letter had indeed been sent to and received by the private

respondents and they did not exercise their right of first priority, Reynoso would

still be guilty of violating Paragraph 20 of the Contract of Lease which specifically

stated that the private respondents could exercise the right of first priority, "all

things and conditions being equal." The Court reads this to mean that there

should be identity of the terms and conditions to be offered to the Bonnevies and

all other prospective buyers, with the Bonnevies to enjoy the right of first priority.

The selling price quoted to the Bonnevies was P600,000.00, to be only paid in

cash less only the mortgage lien of P100,000.00. 2 On the other hand, the selling

price offered to and accepted by the petitioner was only P400,000.00, and only


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P137,500.00 was paid in cash while the balance of P272,500.00 was to be paid

"when the property (was) cleared of tenants or occupants." 3

The fact that the Bonnevies had financial problems at that time was no

justification for denying them the first option to buy the subject property. Even if

the Bonnevies could not buy it at the price quoted, Reynoso could not sell it to

another for a lower price and under more favorable terms and conditions. Only if

the Bonnevies failed to exercise their right of first priority could Reynoso lawfully

sell the subject property to others, and at that only under the same terms and

conditions offered to the Bonnevies.

The Court agrees with the respondent court that it was not necessary to secure

the approval by the probate court of the Contract of Lease because it did not

involve an alienation of real property of the estate nor did the term of the lease

exceed one year so as to make it fall under Article 1878(8) of the Civil Code.

Only if Paragraph 20 of the Contract of Lease was activated and the said

property was intended to be sold would it be required of the administratrix to

secure the approval of the probate court pursuant to Rule 89 of the Rules of

Court.

As a strict legal proposition, no judgment of the probate court was reviewed and

eventually annulled collaterally by the respondent court as contended by the

petitioner. The order authorizing the sale in its favor was duly issued by the

probate court, which thereafter approved the Contract of Sale resulting in the

eventual issuance of title in favor of the petitioner. That order was valid insofar as

it recognized the existence of all the essential elements of a valid contract of

sale, but without regard to the special provision in the Contract of Lease giving

another party the right of first priority. Cdpr

Even if the order of the probate court was valid, the private respondents still had

a right to rescind the Contract of Sale because of the failure of Reynoso to

comply with her duty to give them the first opportunity to purchase the subject

property.

The petitioner argues that assuming the Contract of Sale to be voidable, only the

parties thereto could bring an action to annul it pursuant to Article 1397 of the


9 KASC

Civil Code. It is stressed that private respondents are strangers to that

agreement and therefore have no personality to seek its annulment.

The respondent court correctly held that the Contract of Sale was not voidable

but rescissible. Under Article 1380 to 1381(3) of the Civil Code, a contract

otherwise valid may nonetheless be subsequently rescinded by reason of injury

to third persons, like creditors. The status of creditors could be validly accorded

the Bonnevies for they had substantial interests that were prejudiced by the sale

of the subject property to the petitioner without recognizing their right of first

priority under the Contract of Lease.

According to Tolentino, rescission is a remedy granted by law to the contracting

parties and even to third persons, to secure reparation for damages caused to

them by a contract, even if this should be valid, by means of the restoration of

things to their condition at the moment prior to the celebration of said contract. 4 It

is a relief allowed for the protection of one of the contracting parties and even

third persons from all injury and damage the contract may cause, or to protect

some incompatible and preferent right created by the contract. 5 Rescission

implies a contract which, even if initially valid, produces a lesion or pecuniary

damage to someone that justifies its invalidation for reasons of equity. 6

It is true that the acquisition by a third person of the property subject of the

contract is an obstacle to the action for its rescission where it is shown that such

third person is in lawful possession of the subject of the contract and that he did

not act in bad faith. 7 However, this rule is not applicable in the case before us

because the petitioner is not considered a third party in relation to the Contract of

Sale nor may its possession of the subject property be regarded as acquired

lawfully and in good faith.

Indeed, Guzman, Bocaling and Co. was the vendee in the Contract of Sale.

Moreover, the petitioner cannot be deemed a purchaser in good faith for the

record shows that it categorically admitted it was aware of the lease in favor of

the Bonnevies, who were actually occupying the subject property at the time it

was sold to it. Although the Contract of Lease was not annotated on the transfer

certificate of title in the name of the late Jose Reynoso and Africa Reynoso, the

petitioner cannot deny actual knowledge of such lease which was equivalent to

and indeed more binding than presumed notice by registration.


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A purchaser in good faith and for value is one who buys the property of another

without notice that some other person has a right to or interest in such property

and pays a fill and fair price for the same at the time of such purchase or before

he has notice of the claim or interest of some other person in the

property. 8 Good faith connotes an honest intention to abstain from taking

unconscientious advantage of another. 9 Tested by these principles, the

petitioner cannot tenably claim to be a buyer in good faith as it had notice of the

lease of the property by the Bonnevies and such knowledge should have

cautioned it to look deeper into the agreement to determine if it involved

stipulations that would prejudice its own interests.

The petitioner insists that it was not aware of the right of first priority granted by

the Contract of Lease. Assuming this to be true, we nevertheless agree with the

observation of the respondent court that: cdrep

If Guzman-Bocaling failed to inquire about the terms of the Lease

Contract, which includes Par. 20 on priority right given to the Bonnevies,

it had only itself to blame. Having known that the property it was buying

was under lease, it behooved has a prudent person to have required

Reynoso or the broker to show to it the Contract of Lease in which Par.

20 is contained.

Finally, the petitioner also cannot invoke the Compromise Agreement which it

says canceled the right of first priority granted to the Bonnevies by the Contract

of Lease. This agreement was set aside by the parties thereto, resulting in the

restoration of the original rights of the private respondents under the Contract of

Lease. The Joint Motion to Remand filed by Reynoso and the private

respondents clearly declared inter alia:

That without going into the merits of instant petition, the parties have

agreed to SET ASIDE the compromise agreement, dated September

24,1979 and remand Civil Case No. 043851 of the City Court of Manila

to Branch IX thereof for trial on the merits. 10


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We find, in sum, that the respondent court did not commit the errors imputed to it

by the petitioner. On the contrary, its decision is conformable to the established

facts and the applicable law and jurisprudence and so must be sustained.

WHEREFORE, the petition is DENIED, with costs against the petitioner. The

challenged decision is AFFIRMED in toto.

It is so ordered.

Narvasa, C.J., Grio-Aquino and Medialdea, JJ., concur.

Footnotes

1.Rollo, pp. 45-60; Penned by Mendoza, J, with Paras and Limcaoco, JJ., concurring.

2.Exhibit "5," Original Records, p. 88.

3.Exhibit "B," Original Records, p. 99.

4.Tolentino, Commentaries and Jurisprudence on the Civil Code of the Philippines,

Vol. IV, p-571.

5.Aquino v. Taedo, 39 Phil. 517. Rollo, p. 182.

6.Id., p. 572.

7.Cordovero and Alcazar v. Villaruz and Borromeo, 46 Phil. 473.

8.De Santos v. IAC, 157 SCRA 295.

9.De la Cruz v. IAC, 157 SCRA 660; Cui and Joven v. Henson, 51 Phil. 606.

10.Rollo, p. 182.

||| (Guzman, Bocaling & Co. v. Bonnevie, G.R. No. 86150, March 02, 1992)


12 KASC

FIRST DIVISION

[G.R. No. 87415. January 23, 1992.]

YEK SENG CO., petitioner, vs. THE

HONORABLE COURT OF APPEALS, DEWEY VELOSO YAP,

and DAVID T. VELOSO YAP, respondents.

Ismael M. Estella for petitioner.

Jose S. Santos, Jr. & Associates for private respondents.

SYLLABUS

1. CIVIL LAW; SPECIAL CONTRACTS; LEASE; EXTENSION OF THE LEASE

CONTRACT; MATTERS TO BE CONSIDERED IN ALLOWING THEREOF;

DIVINO v. MARCOS (4 SCRA 186) CITED. In extending the lease contract it

was considered important in the case of Divino v. Marcos (4 SCRA 186) that: 1)

the plaintiff had been occupying the leased premises for more than twenty years;

2) he was assured by the defendants that he could remain in the house as long

as he continued paying the rentals; and 3) he made improvements on the house

costing P20,000.00 with the consent of the defendants.

2. ID.; ID.; ID.; ID.; ID.; NOT SUFFICIENTLY ESTABLISHED IN CASE AT BAR.

The petitioner in the case at bar has not pointed to similar circumstances other

than the claim that it has been occupying the subject premises for more than

twenty years. On this point, Judge Roberto M. Lagman of the Regional

Trial Court correctly held: On the second issue, the Court noted that the parties

did not submit any evidence on the basis of the stipulation of the facts earlier

narrated. Thus, there is nothing in the record which would show any fact or

circumstance which justifies the extension of the lease. The mere

occupancy of the premises for a number of years, by itself is not sufficient. The

circumstance that the petitioner has paid its rentals religiously during the past

twenty years is also not sufficient to justify the extension it demands. Neither are

the substantial improvements it allegedly made on the leased premises nor the


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difficulty of finding another place of business, on which it has not submitted any

evidence at all.

3. ID.; ID.; ID.; RULE WHEN RENTAL WAS PAID MONTHLY AND THE TERM

HAD NOT BEEN EXPRESSLY AGREED UPON; CASE AT BAR. We hold

that as the rental in the case at bar was paid monthly and the term had not been

expressly agreed upon, the lease was understood under Article 1687 to be

terminable from month to month. At the time the petitioner was asked to vacate

the leased premises, the lease contract had already expired and therefore, could

no longer be extended.

4. ID.; ID.; ID.; POWER OF THE COURT TO EXTEND THEREOF; MERELY A

MINISTERIAL DUTY. If the contract of lease had not yet expired, its extension

would still be subject to the sound discretion of the court and was by no means

obligatory upon it as a merely ministerial duty. To quote again from the

decision of the Regional TrialCourt: As correctly cited by the plaintiffs, "The

power of the Courts to fix a longer term for lease is protestative or discretionary,

'may' is the word to be exercised or not in accordance with the particular

circumstances of the case; a longer term to be granted where equities come into

play demanding extension, to be denied where none appears, always with due

deference to the parties freedom to contract." (Divino v. Marcos, January 31,

1962, 4 SCRA 186.) Moreover, the lease had already expired when the

extension was sought. In the case of Prieto v. Laperal, 22 SCRA 934, it was held

that "an extension of the lease may be sought by the tenant before, not after the

termination of the lease." At any rate, whatever extension the defendant may be

entitled to has already been dissipated by the length of time 2 years that

this case has been pending.

5. CONSTITUTIONAL LAW; BILL OF RIGHTS; RIGHT OF A PERSON TO A

DAY IN COURT; NOT DENIED IN CASE AT BAR. The petitioner also

contends that it was denied its day in court when judgment was rendered against

it without the benefit of a trial on the merits. This posture is likewise

unacceptable. Contrary to its submission, the case was not decided by Summary

Procedure but in accordance with Rule 20, Section 3, and Rule 30, Section

2, of the Rules of Court. There was no trial on the merits because, as the records

will show, the petitioner's counsel agreed to submit the case for decision on the


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basis of the stipulations of the parties at the pre-trial conference. Judgment was

rendered on that basis. It must be added that even if there was indeed no trial

before the Municipal Trial Court, the petitioner was heard nonetheless when it

appealed to the Regional Trial Court; when it filed its motion for

reconsideration of the decision; and when it appealed to the respondent court.

The petitioner cannot pretend that it was unable to fully argue its case before

that court, for the fact is that it did so, not only in its brief but also when it filed a

motion for reconsideration of its decision and also a motion for a hearing on that

motion.

D E C I S I O N

CRUZ, J p:

The simple question raised in the case at bar could have been definitely resolved

on the lowest level of the judiciary and did not have to reach the highest tribunal.

If we have given the petition due course, it was only for the purpose of settling it

once and for all and avoiding future needless impositions on the

time of this Court.

The subject of the petition is a verbal contract of lease over a portion of a building

belonging to the private respondents and occupied by the petitioner as lessee. It

is situated on Ylaya Street in Manila. The leased premises have been used by

the petitioner for its general merchandise business for more than twenty years.

The agreed monthly rental was P3,000.00.

On December 12, 1985, the lessors notified the petitioner that they were

terminating the lease as they intended to renovate the building and thereafter use

it themselves. The petitioner refused to vacate. The private respondents then

filed a complaint for ejectment against the petitioner in the Municipal

Trial Court of Manila on January 22, 1986. For its part, the petitioner filed a

petition for consignation of the monthly rentals which it claimed had been refused

by the lessors.

In his decision dated July 2, 1987, 1 Judge Tirso C. Briones disposed thus:


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WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and

against the defendant, ordering the latter and all persons claiming rights

under it, to vacate the premises specifically described in the amended

complaint; to pay plaintiffs the sum of P3,000.00 as rental for the

reasonable we and occupancy of the premises commencing January,

1986 and monthly thereafter, until the same shall have been finally

surrendered to the plaintiffs, less whatever payments that may have

been made during the pendency of the case; the sum of P10,000.00 as

and for attorney's fees plus costs of suit.

The petition for consignation is hereby denied for lack of merit.

This decision was affirmed by the Regional Trial Court of Manila, 2 which was in

turn sustained by the Court of Appeals. 3 In this petition for review

on certiorari, the principal submission is that the courts below erred in not giving

the petitioner an extension of its lease in accordance with Article 1687 of the Civil

Code.

This article provides as follows:

ARTICLE 1687. If the period for the lease has not been fixed, it is

understood to be from year to year, if the rent agreed upon is annual;

from month to month, if it is monthly; from week to week, if the rent is

weekly, and from day to day, if the rent is to be paid daily. However,

even though a monthly rent is paid, and no period for the lease has been

set, the courts may fix a longer term for the lease after the lessee has

occupied the premises for over one year. If the rent is weekly, the courts

may likewise determine a longer period after the lessee has been in

possession for over six months. In case of daily rent, the courts may also

fix a longer period after the lessee has stayed in the place for over one

month.

In support of its position, the petitioner cites the cases of Araneta v. De Mesa, 35

SCRA 137, and Divino v. Marcos, 4 SCRA 186.

The Court can only wonder why the petitioner has invoked the first case at all as

it is clearly inapplicable. A little study would have readily revealed this. The


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appeal was dismissed in that case simply because the question raised had

already become moot and academic; no ruling was made on the merits.

In the second case, the Court upheld the extension of the lease because of the

peculiar circumstances involved, as related thus by the trial court:

When the plaintiffs petition was called for hearing, the parties agreed

that judgment be rendered on the pleadings in connection with such

petition. According to the pleadings, there is no controversy that plaintiff

has been occupying the lot in question since May 7, 1936, when he

purchased from one Antonio Castro the house constructed thereon. It

also appears that plaintiff was assured by the defendants that the house

bought would remain thereon as long as plaintiff continues paying his

rents. It further appears that on March 19, 1947, plaintiff constructed an

addition to the house with the knowledge and consent of the defendants.

Said addition cost the plaintiff the amount of P20,000.00.

There is no written agreement as to the duration of the lease between

plaintiff and defendants. The fact remains that plaintiff entered the

premises with the knowledge and consent of the defendants and with the

assurance of the latter that the plaintiff could remain occupying the lot as

long as he pays the corresponding rents.

Sustaining this finding, this Court made the following additional observations:

The lot in question has been rented to the petitioner for about 20 years

and his predecessor in interest for more. Even though rentals had been

paid monthly, still no period for the duration of the lease had been set.

The lease had been consistently and tacitly renewed ("tacita

reconduccion") until the ejectment case was filed (CoTiam v. Diaz, 75

Phil. 672; Villanueva v. Canlas, 77 Phil. 381; Art. 1670, N.C.C.; Art.

1566, Old Civil Code). Having made substantial or additional

improvements on the lot, and considering the difficulty of looking for

another place to which petitioner could transfer such improvements, and

the length of his occupancy of the lot (since 1936), and the impression

acquired by him that he could stay on the premises, as long as he could

pay the rentals, it would seem that there exists just grounds for granting


17 KASC

the extension of lease and that the extension of two years granted by the

trial court, is both fair and equitable.

It was considered important in that case that: 1) the plaintiff had been occupying

the leased premises for more than twenty years; 2) he was assured by the

defendants that he could remain in the house as long as he continued paying the

rentals; and 3) he made improvements on the house costing P20,000.00 with the

consent of the defendants. The petitioner in the case at bar has not pointed to

similar circumstances other than the claim that it has been occupying the subject

premises for more than twenty years. On this point, Judge Roberto M.

Lagman of the Regional Trial Court correctly held:

On the second issue, the Court noted that the parties did not submit any

evidence on the basic of the stipulation of the facts earlier narrated.

Thus, there is nothing in the record which would show any fact or

circumstance which justifies the extension of the lease. The mere

occupancy of the premises for a number of years, by itself is not

sufficient.

The circumstance that the petitioner has paid its rentals religiously during the

past twenty years is also not sufficient to justify the extension it demands. Neither

are the substantial improvements it allegedly made on the leased premises nor

the difficulty of finding another place of business, on which it has not submitted

any evidence at all. The Court makes the wry observation that the petitioner has

only itself to blame if, being engaged in business, it did not take the necessary

precautions against its possible and even abrupt displacement because of the

termination of the month-to-month lease. As for the argument that the private

respondents had not yet secured a building permit for the alleged intended

renovation, it is obviously no argument at all and deserves no further comment.

In the view of the Court, the applicable case is Cruz v. Intermediate

Appellate Court, 4 where it was held:

Ricardo Cruz further maintains that the lease contract with Roman

Legarda So is one with an indefinite period, no specific term having been

agreed upon by the parties, hence the court can legally fix a longer term.


18 KASC

He invokes the second sentence of Article 1687 of the Civil Code which

states that even though a monthly rental is paid, and no period for the

lease has been set, the courts may fix a longer term for the lease after

the lessee has occupied the premises for over one year.

We reject such proposition.

As earlier stated, the contract of Ricardo Cruz, being on a month-to-

month basis, is a lease with a definite period. Since the contract of lease

is for a definite term, the lessee cannot avail of the benefits under Article

1687 which applies only if there is no definite term. And, even

assuming arguendo that Article 1687 applies, Ricardo Cruz would still

not be entitled to have the term fixed for a longer period since his action

was filed only after the contract had expired.

As held in Vda. de Prieto vs. Santos, et al. (88 Phil. 509 [1956]):

"Under this provision, if the period of a lease contract has not

been specified by the parties therein, it is understood to be from

month to month, if the rent agreed upon is monthly, as in the

cases at bar. Consequently, the contract expires at the

end of such month, unless, prior thereto, the extension of said

term has been sought by appropriate action and judgment is,

eventually, rendered therein granting said relief.

"Defendants herein maintain that their lease contracts did not,

and could not, come to an end until after the court has fixed its

lifetime and the term thus fixed has expired. This view, is, to our

mind, untenable. To begin with, defendants assume that their

contracts are without term, prior to the judicial action authorized in

said Article 1687, whereas the same provides that the

duration of lease contracts shall be yearly, monthly, weekly, or

daily depending upon whether the rental agreed upon is annual,

monthly, weekly, or daily. In other words, said contracts have a

term fixed by law, and are not indefinite in duration, before said

judicial intervention. Secondly, said Article 1687 merely gives

the court discretion to extend the period of the lease.


19 KASC

The court is not bound to extend said term. It may legally refuse

to do so, if the circumstances surrounding the case warrants such

action . . . " (Emphasis reproduced).

Conformably, we hold that as the rental in the case at bar was paid monthly and

the term had not been expressly agreed upon, the lease was understood under

Article 1687 to be terminable from month to month. At the time the petitioner was

asked to vacate the leased premises, the lease contract had already expired and

therefore, following the above-quoted decisions, could no longer be extended. In

fact, even if such contract had not yet expired, its extension would still be subject

to the sound discretion of the court and was by no means obligatory upon it as a

merely ministerial duty.

To quote again from the decision of the Regional Trial Court:

As correctly cited by the plaintiffs, "The power of the Courts to fix a

longer term for lease is protestative or discretionary, 'may' is the word

to be exercised or not in accordance with the particular

circumstances of the case; a longer term to be granted where equities

come into play demanding extension, to be denied where none appears,

always with due deference to the parties freedom to contract." (Divino v.

Marcos, January 31, 1962, 5 SCRA 186.) Moreover, the lease had

already expired when the extension was sought. In the case of Prieto v.

Santos, 98 Phil. 509 cited in Alegre v. Laperal, 22 SCRA 934, it was held

that "an extension of the lease may be sought by the tenant before, not

after the termination of the lease." At any rate, whatever extension the

defendant may be entitled to has already been dissipated by the

length of time 2 years that this case has been pending.

The petitioner also contends that it was denied its day in court when judgment

was rendered against it without the benefit of a trial on the merits. This posture is

likewise unacceptable. Contrary to its submission, the case was not decided by

Summary Procedure but in accordance with Rule 20, Section 3, and Rule 30,

Section 2, ofthe Rules of Court. There was no trial on the merits because, as the

record will show, the petitioner's counsel agreed to submit the case for decision

on the basis of the stipulations of the parties at the pre-trial conference.

Judgment was rendered on that basis.


20 KASC

It must be added that even if there was indeed no trial before the Municipal

Trial Court, the petitioner was heard nonetheless when it appealed to the

Regional TrialCourt, when it filed its motion for reconsideration of the decision,

and when it appealed to the respondent court. The petitioner cannot pretend that

it was unable to fully argue its case before that court, for the fact is that it did so,

not only in its brief but also when it filed a motion for reconsideration of its

decision and also a motion for a hearing or that motion.

The respondent court did not err in sustaining the award of attorney's fees in the

sum of P10,000.00, taking into account the fact that the petitioner unreasonably

resisted the private respondent's demand to vacate the property following the

termination of their lease contract. The petitioner's intransigence made it

necessary for the latter to litigate for the enforcement of their just and valid claim

and thus incur the expenses that must now be justly charged to it.

Judge Lagman acutely observed that the petitioner had already enjoyed a de

facto extension of two years during the period the ejectment case was pending,

first before the Municipal Trial Court and then before his court. We note with

disapproval that by appealing to the Court of Appeals and later to this Court, the

petitioner gained another extension of more than three years, for a total of almost

six years from the time the amended complaint was filed on June 17, 1986.

It is an economic fact that construction costs rose considerably during that

period, thus increasing the expenses of the renovation intended by the private

respondents. Such increase could have been also awarded against the petitioner

as part of the actual damages of the private respondents except that no

evidence of this has been presented.

Many lessees are able to defer their deserved ejectment through the simple

expedient of appealing their lost cause all the way up to even this Court. This

transparent gambit is all-too-familiar, The delay entailed in deciding

these appeals is usually unavoidable because the courts of justice are saddled

by a heavy load of cases and cannot dispose of them as fast as might be

desired. It is common knowledge of this difficulty that has encouraged the

filing of groundless appeals by "clever" lawyers who know from the start that they

are doomed to fail.


21 KASC

Counsel are admonished against abusing the judicial process by

lodging appeals intended merely to unduly prolong a case and so "buy time" for

their clients. In the future, this Court will take a sterner view of such tactics and

impose severe sanctions upon lawyers who, for money or malice, would cynically

frustrate the ends of the law and the speedy administration of justice by

deliberately delaying the final disposition of their hopeless cases. Atty. Ismael M.

Estella, the petitioner's counsel, is particularly enjoined to take serious

heed of this warning.

WHEREFORE, the petition is DENIED and the appealed decision AFFIRMED in

toto, with triple costs against the petitioner.

SO ORDERED.

Narvasa, C .J ., Grio-Aquino and Medialdea, JJ ., concur.

Footnotes

1.Rollo, p. 43.

2.Through Judge Roberto M. Lagman.

3.Penned by Justice Emeterio C. Cui, with Javellana and Elbinias, JJ., concurring.

4.180 SCRA 702.

||| (Yek Seng Co. v. Court of Appeals, G.R. No. 87415, January 23, 1992)


22 KASC

THIRD DIVISION

[G.R. No. 76656. December 11, 1992.]

SPOUSES EUTIQUIANO CLUTARIO and

ARACELI CLUTARIO, petitioners, vs. HON. COURT OF APPEAL

S, HON. GEORGE C. MACLI-ING, RTC JUDGE OFQUEZON

CITY, BRANCH C (100) and SPOUSES MELQUIADES GANDIA

and MARIA V. GANDIA, respondents.

Estratonico Aano for petitioners.

Gaudencio P. Lagua for respondents.

SYLLABUS

1. CIVIL LAW; LEASE; EJECTMENT; ACCEPTANCE BY LESSOR OF BACK

RENTALS DOES NOT CONSTITUTE ABANDONMENT OF THEIR

CAUSE OF ACTION. Case law is to the effect that the acceptance by the

lessor of the payment by the lessee of the rentals in arrears does not constitute a

waiver of the default in the payment of rentals as a valid cause of action for

ejectment. The Court notes that when petitioners paid the back rentals on May

15, 1981, private respondents had already filed the complaint for ejectment

earlier, to be specific, on March 4, 1981. The conduct of private respondents

subsequent to their acceptance of the back rentals belies any intention to waive

their right to eject petitioners as a result of the latter's failure to pay the rent for

more than three (3) months. They did not enter into an amicable settlement with

petitioners. Neither did they notify the trial court of their intention to have the

complaint dismissed. Instead, they participated actively in the proceedings before

the MTC during all the time that the case dragged on for almost three years. In

light of the surrounding circumstances of the case, as well as the prevailing

jurisprudence, the Court rules that the acceptance by private respondents of the

petitioners-lessees' back rentals did not constitute a waiver or

abandonment of their cause of action for ejectment against the latter.


23 KASC

2. ID.; ID.; ID.; PROOF OF ANY ONE OF THE FACTORS UNDER SEC.

5 OF BP Blg. 25, SUFFICIENT CAUSE FOR JUDICIAL EJECTMENT.

Proof of any one of the factors enumerated in Section 5 of B.P. Blg. 25 (1979) is

sufficient cause for judicial ejectment of a lessee. Having proved one of such

grounds, i.e., arrears in payment of rent for three (3) months at any one time,

private respondents may legally eject petitioners without having to prove the

other grounds for ejectment. Nevertheless, to bolster their action for ejectment,

private respondents invoked in their complaint a second ground for ejectment,

namely, their need for the leased premises.

3. ID.; ID.; ID.; NEED FOR THE LEASED PROPERTY, A VALID GROUND

THEREFOR. For the lessor to be able to validly eject the lessee on the

ground of need for the leased property, it must be shown that there is no other

available residential unit to satisfy that need. The non-availability must exist at

the time of the demand by the lessor on the lessee to vacate the property.

4. ID.; ID.; ID.; ID.; GIVEN A LIBERAL INTERPRETATION. The need for the

leased premises by the lessor as a valid ground for ejectment has already been

given a liberal interpretation in Caudal v. Court of Appeals, (G.R. No. 83414, July

31, 1989, 175 SCRA 798) where it was held that the conversion of the leased

property into a servants' quarters was a legitimate need within the

purview of Sec. 5 (c) of B.P. Blg. 25 (1979). In the case at bar, it appears that the

decision of private respondents to occupy both the lower and upper

portions of the property sprang, not only from mere convenience, but from

necessity as well, due to their advanced age and the poor health of respondent

Melquiades Gandia. While the upper portion of the premises may have been

sufficient to satisfy private respondents' residential needs in 1961 when they

leased the lower portion to petitioners, it no longer sufficed in 1980 or nineteen

(19) years later when they served the notice to vacate, their personal

circumstances having drastically changed.

D E C I S I O N

ROMERO, J p:


24 KASC

Private respondents, the Spouses Melquiades Gandia and Maria V. Gandia, are

the owners of a two-storey residential apartment located at No. 56 Liberty St.,

Murphy, Cubao, Quezon City. Since 1961, while private respondents have been

occupying the upper storey of the house, petitioners have been staying on the

ground floor by virtue of a verbal lease agreement for a monthly

rental of P150.00.

On May 9, 1980, private respondents, through their counsel, wrote a letter to the

petitioners giving them ninety (90) days to vacate the premises. According to

them, due to their advanced age and failing health, they have decided to occupy

the entire apartment, including the ground floor leased to petitioners. Because

petitioners did not heed the demand letter, private respondents brought the

matter to the Katarungan Pambarangay for settlement, but this did not meet with

success. Another demand letter was sent by private respondents to petitioners

on January 20, 1981.

In the meantime, it appears that from August 1980, petitioners were in arrears in

the payment of their rentals. On March 4, 1981, private respondents filed a

complaint for ejectment against petitioner Araceli Clutario 1 before the

Metropolitan Trial Court (MTC) of Quezon City citing the following two grounds:

(1) their need for the premises; and (2) non-payment of rentals by petitioners

from August 1980. Pending the proceedings before the MTC, petitioners paid the

back rentals from August 1980 until May 1981.

After trial, the MTC rendered judgment 2 on January 16, 1984 dismissing the

complaint on the ground that private respondents "failed to support their

causes of action with substantial evidence." 3

Private respondents then filed an appeal with the Regional

Trial Court (RTC) of Quezon City. On March 29, 1985, respondent Judge George

C. Macli-ing rendered a well-written decision reversing the MTC judgment.

Respondent Judge ruled that petitioners' non-payment of rentals for more than

three months and private respondents' genuine need for the leased premises are

sufficient causes for petitioners' ejectment. The dispositive portion of the RTC

decision reads: cdphil


25 KASC

"WHEREFORE, premises considered, the judgment appealed from is

hereby REVERSED and SET ASIDE, and in lieu thereof, another one is

rendered and entered in favorof the appellants and against the

appellees:

1. Ordering the defendants-appellees and all persons claiming rights

under them to vacate the premises, identified as the Ground Floor of No.

56 Liberty Avenue, Murphy, Cubao, Quezon City, and restore

possession thereof to plaintiffs-appellants.

2. Ordering defendants-appellees to pay rental arrearages from June,

1981, at the rate of P150.00 per month, until such arrearages shall have

been fully paid and the premises vacated and possession thereof

restored to plaintiffs-appellants.

3. Ordering defendants-appellees to pay P2,000.00 as and for attorney's

fees; and to pay the costs.

SO ORDERED." 4

It was then petitioners' turn to impugn this judgment by filing a petition for review

before the Court of Appeals. In a decision dated September 18, 1986, 5 the

respondent Court of Appeals affirmed the RTC judgment but deleted the

award of attorney's fees to private respondents. Petitioners elevated the case

before thisCourt, on a petition for review under Rule 45 of the Rules of Court,

seeking the reversal of the Court of Appeals' decision affirming the RTC ruling

that they can be ejected by their lessors, the private respondents.

The petition is without merit.

B.P. Blg. 25 (1979), which was the governing law at the time of the filing of the

complaint and which the parties had to rely on, provides, in section 5, six (6)

grounds for ejectment. 6 In seeking to oust petitioners from the leased premises,

private respondents invoke two of those six grounds, namely: (1) arrears in

payment of rent for three (3) months at any one time; 7 and (2) need of the

lessors to repossess their property for their own use or for the use of any

immediate member of their family as a residential unit. 8 Petitioners contend that

private respondents cannot avail of either ground.


26 KASC

No longer disputed is the rule that non-payment of rentals is a sufficient ground

for ejectment. 9 Under sec. 5 (b) of B.P. Blg. 25 (1979), the arrears in rent

payment must be for at least three (3) months. Petitioners started defaulting on

their payments in August 1980. On May 15, 1981, they paid P1,500.00 for their

rents for the period August 1980 to May 15, 1981 at the rate of P150.00 per

month. By then, they had been in arrears for nine (9) months. However,

petitioners contend that private respondents, by accepting the payment of the

back rentals, waived their non-payment of rentals for more than three (3) months

as a ground for ejectment. cdrep

The contention is without merit.

Case law is to the effect that the acceptance by the lessor of the payment by the

lessee of the rentals in arrears does not constitute a waiver of the default in the

payment of rentals as a valid cause of action for ejectment. 10 The Court notes

that when petitioners paid the back rentals on May 15, 1981, private respondents

had already filed the complaint for ejectment earlier, to be specific, on March 4,

1981. The conduct of private respondents subsequent to their acceptance of the

back rentals belies any intention to waive their right to eject petitioners as a

result of the latter's failure to pay the rent for more than three (3) months. They

did not enter into an amicable settlement with petitioners. Neither did they notify

the trial court of their intention to have the complaint dismissed. Instead, they

participated actively in the proceedings before the MTC during all the time that

the case dragged on for almost three years. 11 When the MTC decided adversely

against them, private respondents appealed the judgment to the RTC. Not only

have they participated earnestly in all subsequent proceedings even after they

obtained favorable judgments from the RTC and the Court of Appeals, but they

have likewise been consistent in their position that petitioners should be ejected,

not only because they need the leased premises, but also because of petitioners'

default in the payment of rentals for more than three (3) months.

In light of the surrounding circumstances of the case, as well as the prevailing

jurisprudence, the Court rules that the acceptance by private respondents of the

petitioners-lessees' back rentals did not constitute a waiver or

abandonment of their cause of action for ejectment against the latter.


27 KASC

Proof of any one of the factors enumerated in section 5 of B.P. Blg. 25 (1979) is

sufficient cause for judicial ejectment of a lessee. Having proved one of such

grounds, i.e., arrears in payment of rent for three (3) months at any one time,

private respondents may legally eject petitioners without having to prove the

other grounds for ejectment. Nevertheless, to bolster their action for ejectment,

private respondents invoked in their complaint a second ground for ejectment,

namely, their need for the leased premises. 12

Petitioners are bound by the established jurisprudence that under B.P. Blg.

25 (1979), the need by the lessor of the leased premises for his own use or

that of his immediate family is a valid ground for ejectment. 13 They, however,

submit that this ground for ejectment is not available to private respondents who

own, apart from the disputed premises, three other apartment units located at

Nos. 56-A, 56-B and 56-C Liberty St., Murphy, Cubao, Quezon City, at least

one of which is allegedly available for occupancy by private respondents.

Indeed, for the lessor to be able to validly eject the lessee on the ground of need

for the leased property, it must be shown that there is no other available

residential unit to satisfy that need. 14 The non-availability must exist at the

time of the demand by the lessor on the lessee to vacate the property. 15 In the

instant case, petitioners allege that the other apartment units of private

respondents are vacant and available to the latter for occupancy. 16 Private

respondents deny this allegation, claiming that the other units were occupied

when they gave notice to the petitioners to vacate the disputed premises, and

remain so occupied until now. 17 None of the three courts which have already

adjudicated on the controversy gave credence to petitioners' allegation. The MTC

which decided in petitioners' favor did not make a finding that the other apartment

units of private respondents were available for occupancy by the latter. On the

contrary, the respondent Court of Appeals ruled that "the other

apartments of private respondents were tenanted." 18 The Court finds no cogent

reason to disturb this finding.

The MTC, in deciding in favor of petitioners, ruled that private respondents did

not need the disputed premises which is the ground floor of the apartment unit

leased to petitioners, because they were already occupying the upper floor of the

unit. The relevant portion of the MTC decision reads: cdrep


28 KASC

"On this score, the evidence is clear that the plaintiffs, though

owners of the residential house identified as No. 56 Liberty Avenue,

Murphy, Quezon City, occupying the upper floor thereof, are the only

persons living on this upper floor of the house. The only reason

advanced by them for needing to repossess the ground floor or lower

part of the house occupied by the defendant, is because the plaintiffs are

aging and sickly, as according to the plaintiffs' letter (Exh. "B") to the

defendant, plaintiffs "personally need that lower portion of the house for

personal use and occupancy since they are getting older and aggravated

by their poor health, they get easily tired in going up and downstairs."

Obviously, plaintiffs' need of the lower portion of the house is for

convenience. It is the view of this Court that when the framers of Batas

Pambansa Blg. 25 included "need of the premises" as a ground for

judicial eviction, personal convenience is not intended, because the law

states clearly that the repossession of the property for the use of the

owner/lessor (or immediate member) must concur with the other

requisites, one of which is that the owner/lessor does not own any other

residential unit.

Plaintiffs' position therefore, on this ground, is not only weak but more so

not in accord with the spirit, intent and letter of Batas Pambansa Blg. 25.

It may be true that plaintiffs are sickly and aging but their physical

condition is not a legal argument to effect eviction of the defendant. 19

The need for the leased premises by the lessor as a valid, ground for ejectment

has already been given a liberal interpretation in Caudal

v. Court of Appeals, 20 where it was held that the conversion of the leased property

into a servants' quarters was a legitimate need within the purview of sec. 5 (c) of B.P.

Blg. 25 (1979). The Court, speaking through then Chief Justice Marcelo B. Fernan,

made the following statements:

Observe that the law does not strictly confine the meaning of the word

"residence" mainly for habitation purposes as restrictedly interpreted by

petitioner. In a way, the definition admits a measure of liberality, albeit

limited, since a residence may also be the site of a home industry, or a

retail store or be used for business purposes so long as it is principally


29 KASC

used for dwelling purposes. The law in giving greater importance to the

abode being used principally for dwelling purposes, has set the limitation

on the maximum amount of capitalization to P5,000.00, which is small by

present standards.

Thus, if an abode can be used for limited business purposes, we see no

reason why it cannot be used as an abode for persons rendering

services usually necessary or desirable for the maintenance and

enjoyment of a home and who personally minister to the personal

comfort and convenience of the members of the houses. 21

In the case at bar, it appears that the decision of private respondents to occupy

both the lower and upper portions of the property sprang, not only from mere

convenience, but from necessity as well, due to their advanced age and the poor

health of respondent Melquiades Gandia. While the upper portion of the

premises may have been sufficient to satisfy private respondents' residential

needs in 1961 when they leased the lower portion to petitioners, it no longer

sufficed in 1980 or nineteen (19) years later when they served the notice to

vacate, their personal circumstances having drastically changed.

WHEREFORE, the Petition is DENIED and the

Decision of the Court of Appeals AFFIRMED.

SO ORDERED.

Gutierrez, Jr., Bidin, Davide, Jr. and Melo, JJ ., concur.

Footnotes

1.Although petitioner Araceli Clutario was named sole defendant before the MTC, she

was joined by her husband, petitioner Eutiquiano Clutario, in all subsequent

proceedings.

2.Penned by Judge Pacifico L. Punzalan.

3.MTC Decision, p. 4; Rollo, p. 60.

4.RTC Decision, p. 5; Rollo, p. 65.


30 KASC

5.Penned by Justice Reynato S. Puno with the concurrence of Justice (now

Supreme Court Justice) Jose C. Campos, Jr. and Justice Venancio D. Aldecoa,

Jr. of the Twelfth (12th) Division of the Court of Appeals.

6.SEC. 5. Grounds for Judicial Ejectment. Ejectment shall be allowed on the

following grounds:

a. Subleasing or assignment of lease of residential units in whole or in part, without

the written consent of the owner/lessor: Provided, That in the case of subleases

or assignments executed prior to the approval of this Act, the

sublessor/assignor shall have sixty days from the effectivity of this Act within

which to obtain the written approvalof the owner/lessor or terminate the

sublease or assignment.

b. Arrears in payment of rent for three (3) months at any one time: Provided, That in

case of refusal by the lessor to accept payment of the rental agreed upon, the

lessee shall either deposit, by way of consignation, the amount in court, or in a

bank in the name of and with notice to the lessor.

c. Need of owner/lessor to repossess his property for his own use or for the

use of any immediate member of his family as a residential unit, such owner or

immediate member not being the owner of any other available residential

unit: Provided, however, That the period of lease has expired: Provided, further,

That the lessor has given the lessee notice three months in advance of the

lessor's intention to repossess the property: and Provided, finally, That the

owner/lessor or immediate member stays in the residential unit for at least one

year, except for justifiable cause.

d. Ownership by the lessee of another residential unit which he may use as his

residence: Provided, That the lessee shall have been notified by the

lessor of the intended ejectment three months in advance.

e. Need of the lessor to make necessary repairs of the leased premises which is the

subject of an existing order of condemnation by appropriate administrative

authorities concerned in order to make the said premises safe and

habitable: Provided, That after said repair, the lessee ejected shall have the

right of first refusal of the leaseof the same premises.


31 KASC

f. Expiration of the period of a written lease contract.

In no case shall the lessor or his successor-in-interest be entitled to eject the lessee

upon the ground that the leased premises has been sold or mortgaged to a

third person.

7.B.P. Blg. 25, sec. 5 (b).

8.B.P. Blg. 25, sec. 5 (c).

9.Uy v. Court of Appeals, G.R. No. 78538, October 25, 1989, 178 SCRA 671; Ipapo v.

Intermediate Appellate Court, 72740, January 27, 1987, 147 SCRA 342. See

also Ercillo v. Courtof Appeals, G.R. No. 55361, December 10, 1990, 192

SCRA 163 which used Art. 1673 of the Civil Code instead of B.P. Blg. 25 for its

ruling that the failure of the lessee to pay rents is a ground for ejectment.

10.Cetus Development, Inc. v. Court of Appeals, G.R. Nos. 77647, 77648, 77649,

77650, 77651, 77652, August 7, 1989, 176 SCRA 72.

11.The complaint was filed on March 4, 1981 and the MTC rendered judgment on

January 16, 1984.

12.This was initially their only ground for seeking to eject petitioners when they

brought the matter to the Katarungan Pambarangay but subsequently,

petitioners, by being in arrears in the payment of rentals, provided them another

cause for ejectment.

13.Galang v. Court of Appeals, G.R. No. 76221, July 29, 1991, 199 SCRA 683;

Pascua v. Court of Appeals, G.R. Nos. 76851, 78431, March 19, 1990, 183

SCRA 262; Mabutol v. Pascual, G.R. No. 60898, September 29, 1983, 124

SCRA 867.

14.B.P. Blg. 25, sec. 5 (c).

15.See Pascua v. Court of Appeals, supra, note 12 at pp. 269-271.

16.Petition, p. 4; Rollo, p. 8.

17.Comment, p. 2; Rollo, p. 111.

18.Court of Appeals Decision, p. 4; Rollo, p. 40.


32 KASC

19.MTC Decision, p. 3; Rollo, p. 59.

20.G.R. No. 83414, July 31, 1989, 175 SCRA 798.

21.Id., at 804-805. Emphasis supplied.

||| (Spouses Clutario v. Court of Appeals, G.R. No. 76656, December 11, 1992)


33 KASC

FIRST DIVISION

[G.R. No. 89307. May 8, 1992.]

DR. MA. WENDELYN V. YAP, EVELIA H. BADIAGAN,

TERESITA A. BALADAD and FLORENCIA C. DE

VERA, petitioners, vs. DR. VERGEL G. CRUZ, THE HON.

MARCELO R. OBIEN, as Presiding Judge of the Regional Trial

Court of Manila. Br. 44, and THE HON. COURT OF

APPEALS, respondents.

Sangco, Anastacio, Duran and Parulan for petitioners.

Wilfredo E. Dizon for private respondent.

SYLLABUS

1. CIVIL LAW; LEASE; TRANSFER OF LEASEHOLD RIGHTS IN CASE AT BAR

IS CONDITIONAL AND HAS NO FORCE AND EFFECT IF THE CONDITION IS

NOT COMPLIED. Dr. Vergel G. Cruz, the private respondent in this case was

the bonafide tenant of Amado Q. Bugayon, Jr. Sometime in the latter part of July,

1985, he offered for sale the goodwill of the veterinary clinic and some of its

equipments to Dr. Wendelyn V. Yap, Evelia H. Badiagan, Teresita A. Baladad

and Florencia C. de Vera, the petitioners herein. During the period of

negotiations, private respondent Cruz introduced to the landlord Dr. Wendelyn

V. Yap as the person interested in taking over the clinic. However, the

negotiations did not materialize but the petitioners managed to enter into a

contract of lease for the said premises at a monthly rental of P1,800.00 with the

landlord. As a result, private respondent Cruz brought an action for "Forcible

Entry with Damages" with the Metropolitan Trial Court which rendered its

decision in favor of private respondent. We rule in favor of private respondent.

When the petitioners and the landlord executed a new contract of lease, the

lease of private respondent was still valid and subsisting. There is no question

that private respondent has not effectively relinquished his leasehold rights over


34 KASC

the premises in question in view of the failure of negotiations for the sale of the

goodwill. Clearly, the transfer of the leasehold rights is conditional in nature and

has no force and effect if the condition is not complied with.

2. ID.; ID.; MONTH-TO-MONTH BASIS; ABSENT A NOTICE TO VACATE,

LEASE CONTINUES TO BE IN FORCE. True, the lease of private respondent

is on a month-to-month basis and may be terminated at the end of any month

after proper notice or demand to vacate has been given (Rivera v. Florendo, G.R.

No. 6006, July 31, 1986, 143 SCRA 278; Zablan v. CA, G.R. No. 57844,

September 30, 1987, 154 SCRA 487; Uy Hoo and Sons Realty Development

Corp. v. CA, G.R. No. 83263, June 14, 1989, 174 SCRA, 100; Palanca v. IAC,

G.R. No. 71566, December 15, 1989, 180 SCRA 119). In the case at bar,

however, the lack of proper notice or demand to vacate upon the private

respondent is clearly evident. In the absence of such notice, the lease of private

respondent continues to be in force and can not be deemed to have expired as of

the end of the month automatically. Neither can the non-payment of the rent for

the month of August, 1985 be a ground for termination of the lease without a

demand to pay and to vacate.

3. ID.; ID.; ID.; ID.; DIFFERENTIATED FROM CASE OF VDA. DE KRAUT V.

LONTOK. The instant case can easily be differentiated from the case of Vda.

de Kraut v. Lontok, G.R. No. L-18374, February 27, 1963, 7 SCRA 281, which

was cited by petitioners in support of their contention that a lease on a month-to-

month basis may be terminated at the end of any month and shall be deemed

terminated upon the lessee's refusal to pay the increased rental because here

there was neither demand on the part of the landlord to pay the rental nor refusal

on the part of the private respondent to pay the same as in fact be made a tender

of his rental payment in the latter part of August, 1985. Thus, when the landlord

and the petitioners entered into a new contract of lease effectively depriving the

private respondent of his lease, they were clearly guilty of forcible entry in view of

the subsisting lease of private respondent.

D E C I S I O N


35 KASC

MEDIALDEA, J p:

This petition seeks the reversal of the decision of respondent Court of Appeals in

CA-G.R. Sp. No. 15790 dismissing the petition for review and affirming the

decision of the Regional Trial Court of Manila, Branch 44 in Civil Case No. 86-

38296 which in turn affirmed the decision of the Metropolitan Trial Court of

Manila, Branch 27 in Civil Case No. 113298.

The facts of the case are as follows:

Dr. Vergel G. Cruz, the private respondent in this case was the bonafide tenant

of Amado Q. Bugayon, Jr. for almost five years in the premises in question just

before this controversy started. He religiously paid the monthly rentals of

P1,400.00, introduced several improvements and operated a veterinary clinic

known as Malate Veterinary Clinic. Sometime in the latter part of July, 1985, he

offered for sale the goodwill of the veterinary clinic and some of its equipments to

Dr. Wendelyn V. Yap, Evelia H. Badiagan, Teresita A. Baladad and Florencia C.

de Vera, the petitioners herein. During the period of negotiations, private

respondent Cruz introduced to the landlord Dr. Wendelyn V. Yap as the person

interested in taking over the clinic. However, the negotiations did not materialize

but the petitioners managed to enter into a contract of lease for the said premises

at a monthly rental of P1,800.00 with the landlord. As a result, private

respondent Cruz brought an action for "Forcible Entry with Damages" with the

Metropolitan Trial Court of Manila, Branch 27 against petitioners herein and the

landlord.

On June 26, 1986, the Metropolitan Trial Court of Manila, Branch 27, rendered its

decision in favor of private respondent Cruz, the dispositive portion of which

states: cdll

"WHEREFORE, judgment is hereby rendered in favor of the plaintiff and

all the defendants are ordered to vacate the premises in question and

surrender peaceful possession of the premises to plaintiff; defendants

Amado Bugayon, Jr. and Dr. Wendelyn Yap only are ordered to pay

jointly and severally the plaintiff the amount of P3,000.00 as moral

damages; the amount of P2,000.00 as exemplary damages and the sum

of P2,000.00 as attorney's fees." (Rollo, p. 22-A).


36 KASC

On May 11, 1988, the Regional Trial Court of Manila, Branch 44 affirmed the

aforesaid decision of the Metropolitan Trial Court and on April 21, 1989, the

Court of Appeals dismissed the petition for review of petitioners and affirmed the

decision of the Regional Trial Court, Branch 44. Hence, this petition was filed

raising the following assignment of errors:

"2.1. The Hon. Court of Appeals erred in ruling that the lower courts

were correct in their decision that the petitioners must vacate the

premises and turn over the possession thereof to the private respondent

despite the fact that the private respondent had already failed and

refused to pay for the rentals thereof, thus, did not have any right

thereto, and the petitioners had a valid lease agreement thereof with the

owner of the premises;

"2.2. The Hon. Court of Appeals erred in ruling that the owner of the

premises must be forced to re-lease the premises to the private

respondent even if there is already a valid and existing contract with the

petitioners and the refusal of the owner to lease the same to the private

respondent due to the latter's failure to pay the rentals therefor;

"2.3. The Hon. Court of Appeals erred in ruling that the possession by

the petitioners of the premises located at 1118 Pres. Quirino Avenue

was dependent upon the sale of the goodwill of the Malate Veterinary

Clinic by the private respondent to the petitioners."(pp. 74-75, Rollo).

There is no dispute that the petitioners gained access to the leased premises in

question by virtue of the offer of the private respondent to sell the goodwill over

his veterinary clinic to them. By one reason or another, i.e., the alleged increase

in the asking price for the goodwill from P12,000.00 to P15,000.00 and the

alleged failure of private respondent to secure the necessary permits and

licenses from the government authorities, the negotiations bogged down. What

then happens to the leasehold rights of private respondent over the premises in

question which he had already transferred to petitioners? Private respondent

claims that in view of the failure of negotiations, the petitioners should have

returned the leased premises to him but instead of so doing, they entered into a

lease contract with the landlord thereby ousting him therefrom through strategy

or stealth.


37 KASC

On the other hand, the bone of contention of petitioners is that the lease between

private respondent and the landlord was automatically terminated because while

the negotiations for the sale of the goodwill was still on-going, the private

respondent stopped paying the rentals for the leased premises which was

already on a month-to-month basis as the formal lease had long expired. They

claim that they were informed of the same and given the option by the landlord to

either vacate the premises or enter into a new lease agreement with him and to

pay an increased rental of P1,800.00 for the premises beginning the month of

August, 1985. As such, their possession of the premises has absolutely nothing

to do with the proposed sale of the goodwill by private respondent. Thus, they

claim that the decision of the lower courts is contrary to law inasmuch as it had

equated the sale of the goodwill with the possession of the premises occupied by

the petitioners.

Correctly, the petitioners claim a right to the premises in question apart from the

proposed sale of the goodwill. Precisely, private respondent's action for forcible

entry and damages recognizes such fact because he predicates his cause of

action on the deprivation of his possession by virtue of the new lease contract

executed by the petitioners with the landlord. Whether this contract is valid is the

question to be resolved here.

We rule in favor of private respondent. When the petitioners and the landlord

executed a new contract of lease, the lease of private respondent was still valid

and subsisting. There is no question that private respondent has not effectively

relinquished his leasehold rights over the premises in question in view of the

failure of negotiations for the sale of the goodwill. Clearly, the transfer of the

leasehold rights is conditional in nature and has no force and effect if the

condition is not complied with. LLjur

True, the lease of private respondent is on a month-to-month basis and may be

terminated at the end of any month after proper notice or demand to vacate has

been given (Rivera v. Florendo, G.R. No. 6006, July 31, 1986, 143 SCRA 278;

Zablan v. CA, G.R. No. 57844, September 30, 1987, 154 SCRA 487; Uy Hoo and

Sons Realty Development Corp. v. CA, G.R. No. 83263, June 14, 1989, 174

SCRA, 100; Palanca v. IAC, G.R. No. 71566, December 15, 1989, 180 SCRA


38 KASC

119). In the case at bar, however, the lack of proper notice or demand to vacate

upon the private respondent is clearly evident. In the absence of such notice, the

lease of private respondent continues to be in force and can not be deemed to

have expired as of the end of the month automatically. Neither can the non-

payment of the rent for the month of August, 1985 be a ground for termination of

the lease without a demand to pay and to vacate. The instant case can easily be

differentiated from the case of Vda. de Kraut v. Lontok, G.R. No. L-18374,

February 27, 1963, 7 SCRA 281, which was cited by petitioners in support of

their contention that a lease on a month-to-month basis may be terminated at the

end of any month and shall be deemed terminated upon the lessee's refusal to

pay the increased rental because here there was neither demand on the part of

the landlord to pay the rental nor refusal on the part of the private respondent to

pay the same as in fact be made a tender of his rental payment in the latter part

of August, 1985. Thus, when the landlord and the petitioners entered into a new

contract of lease effectively depriving the private respondent of his lease, they

were clearly guilty of forcible entry in view of the subsisting lease of private

respondent.

ACCORDINGLY, the petition is hereby DENIED and the questioned decision of

the Court of Appeals is AFFIRMED.

SO ORDERED.

Narvasa, C .J ., Cruz, Grio-Aquino and Bellosillo, JJ ., concur.

||| (Yap v. Cruz, G.R. No. 89307, May 08, 1992)


39 KASC

FIRST DIVISION

[G.R. No. 62603. March 27, 1990.]

UNITED REALTY CORPORATION, petitioner, vs. HON. COURT OF A

PPEALS and REVEREND FATHER JOSE TORRALBA

SY, respondents.

SYLLABUS

1. CIVIL LAW; CONTRACTS; LEASE ON A MONTH TO MONTH BASIS;

CONSIDERED WITH A DEFINITE PERIOD. A reading of the two

contracts of lease entered into between petitioner and private respondent

hereinabove reproduced show that its period is from month to month and that the

lease may be terminated when either party gives a 5 days notice in writing. No

doubt such a stipulation between the parties demonstrates that the

agreement of lease is for a definite period and not for an indefinite period as held

by the appellate court.

2. ID.; ID.; ID.; EXPIRATION THEREOF. In Rantael vs. CA, (97 SCRA 453

[1980]) involving a similar contract of lease between the parties this Court found

that a lease on a month to month basis expires after the last day of the 30th day

period repeating the same cycle of the 30-day period until either party express

their prerogative under their agreement to terminate the same.

3. ID.; ID.; LEASE WITH A DEFINITE PERIOD; LESSEE HAS THE RIGHT TO

JUDICIALLY EJECT LESSOR UPON EXPIRATION OF THE PERIOD. Since

the lease agreement in question is for a definite period it follows that petitioner

has a right to judicially eject private respondent from the premises as an

exception to the general rule provided for in Section 4 of P.D. No. 20 which

provides as follows: "Except when the lease is for a definite period, the

provisions of paragraph (1) of Article 1673 of the Civil Codeof the Philippines

insofar as they refer to dwelling unit or land on which another's dwelling is

located shall be suspended until otherwise provided; but other provisionsof the

Civil Code and the Rules of Court of the Philippines on lease contracts insofar as


40 KASC

they are not in conflict with the provisions of this Act, shall apply." Moreover,

under Section 5(f) of B.P. Blg. 25 one of the grounds for ejectment is the

expiration of the period of a written lease contract. In this case, because of the

failure of the private respondent to pay the increased rental demanded by

petitioner, petitioner elected to terminate the contract and asked the private

respondent to vacate the premises. A lease contract may be terminated at the

end of any month, which shall be deemed terminated upon the refusal to pay the

increased monthly rental demanded by the petitioner, provided the same is not

exorbitant.

4. ID.; ID.; ID.; Presidential Decree No. 20 AND PRESIDENTIAL DECREE NO.

25 COVERS DWELLING UNITS ONLY. There is no question in this case that

the two apartments subject of litigation if not a greater portion thereof is not used

by private respondent as his residence but for a Buddhist Temple. Thus, it is with

more reason that this lease agreement does not fall within the protective

mantle of the provision of P.D. No. 20 and B.P. No. 25 which covers only

dwelling units.

5. ID.; ID.; ID.; DEATH OF LESSEE TERMINATES LEASE AGREEMENT.

Considering that during the pendency of this appeal, the private respondent died

on August 23, 1987, thus the said lea

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