United Realty Co.

v CA
G.R. No. L-62603 March 27, 1990
Facts:

United Realty Corporation, petitioner, entered into a separate lease contract over
two apartments located at 913-E and 913-F Josefina St., Sampaloc, Manila with
private respondent, Rev. Father Jose Torralba Sy with a monthly rent of two hundred
pesos (P200.00), until termination of lease. Private respondent then after converted
the apartment units into a Buddhist Chapel.

Then on 1975, petitioner sent a letter to private respondent informing him of the
increase of his monthly rent from P200 to P500 or P1000 for the two units leased by
the private respondent, with a request that the reply be given if respondent agrees
with the rent increase. Respondent Sy however filed a complaint before the
Department of Public Information that the rental increase was in violation of PD no
20, which the latter ruled that it was not, since the place of worship is not protected
by the said decree.

Then after, petitioner demanded that respondent leave the vacate the two
premises, which the latter failed to do. Thus a complaint for unlawful detainer was
filed against Rev. Fr. Sy, the court however dismissed the petition, which was later
affirmed by the CA but with modification finding that respondent is entitled to
damages. Hence the petition.

Issue:

Whether the contract of lease is for a definite or indefinite period of time

Ruling:

The court ruled that the lease agreement is for a definite period, per the stipulation
that the agreement would be terminated when either party gives a notice in five (5)
days in writing. 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 Code of 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 provisions of the Civil Code and the Rules of Court of the
Philippines on lease contracts insofar as they are not in conflict with the provisions
of this Act, shall apply.

Moreover, under Section of 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.

Legar Management & Realty Co. v. CA

G.R. No. 117423 January 24, 1996
Facts:

Spouses Augusto and Celia Legasto entered into a written contract of lease of their
building with no definite period with private respondents Pascual and Ancheta.
Sometime in 1987, the Legasto spouses and their children organized Legar
Management & Realty Corporation, and transferred and assigned thereto all their
rights, interests, and privileges over certain properties, including the subject
apartment building.

Thereafter, petitioner allowed private respondents to continue occupying their

apartment unit by virtue of a verbal contract of lease which was renewable on a
month-to-month basis. Pursuant to their verbal lease agreement, private
respondents were to pay petitioner a monthly rental of One Thousand Five Hundred
Forty-Five Pesos (P1,545.00).

On April 21, 1992, petitioner wrote private respondent Pascual a formal notice of
termination, requesting him to vacate unit 318-T by the end of May, 1992. A similar
formal notice was sent to private respondent Ancheta on June 4, 1992, demanding
vacation of the same unit by the end of June, 1992. Both refused to heed
petitioner's demand and did not vacate the subject premises.

Thus an ejectment case was instituted against the private respondents with the MTC
that ruled that the verbal lease contract between the parties, being on a month-to-
month basis, is for a definite period, and may be terminated at the end of any
month. Upon appeal however, RTC reversed the said decision, holding that "the
mere expiration of the month-to-month lease period in accordance with Article 1687
of the New Civil Code does not automatically give rise to an ejectment in cases
governed by the Rent Control Law, in view of Section 6 of Batas Pambansa Blg. 877,
as amended. Said decision was upheld by CA ruling that under the said law, the
owner/lessor cannot eject the tenant by reason of the expiration of the period of
lease as fixed or determined under Article 1687 of the Civil Code. Even if in the
instant case the month-to-month period is deemed to have expired at the end of the
month after notice of demand to vacate . . . , (private) respondents' eviction cannot
be allowed without regard to the grounds for ejectment enumerated in Section 5 of
Batas Pambansa Blg. 877. Hence the petition.

Issue:

Whether the lessee of a residential property covered by the Rent Control Law can
be ejected on the basis alone of the expiration of the verbal lease contract under
which rentals are paid monthly.
Ruling:

The court ruled in the affirmative. "ection 6 of Batas Pambansa Blg. 877 provides
that provisions of par. 1 of the A.1673 of the Civil Code of the Philippines referring
to residential units covered by the said act shall be suspended during the effectivity
of the act, and the other provisions of the Civil Code and the Rules of Court on lease
contracts, insofar as they are not in conflict with the provisions of the Act shall
apply.

Also, Art. 1687 of the same code provides that “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 it 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 fix a longer period after the lessee has stayed in the place for over one month.'

In the case at bench, it was found by all three lower courts that the lease over the
subject property was on a month-to-month basis, and that there was proper notice
of non-renewal of contract and demand for vacation of premises made by
petitioners on private respondent. Unquestionably, therefore, the verbal lease
agreement entered into by private respondent and petitioners' father and
predecessor-in-interest has been validly terminated.
GUZMAN, BOCALING & CO. v BONNEVIE
G.R. No. 86150 March 2, 1992
Facts:
Africa Valdez de Reynoso leased a parcel of land with two buildings constructed
thereon to Raoul S. Bonnevie and Christopher Bonnevie, for a period of one year
beginning August 8, 1976, at a monthly rental of P4,000.00, with an agreement that
should Africa decide to sell the property, the respondent lessee shall be givent the
first priority to purchase the same.

Then on November 1976, Africa sent a letter to the respondents that she was selling
the property for the amount of P600,000 less a mortgage loan of P100,000, giving
them 30 days to exercise their right of first priority. Failure to exercise the said
right, respondents should vacate the property not later than March 1977. Then on
January 1977, Africa informed that the property have been sold to the petitioner,
because respondents failed to exercise their right to do such.

Respondent s on the other hand informed Africa that they have not received their
letter and refused to vacate the property. And on April of the same year, Africa
demanded that they vacate the property for failure to pay rent for four months,
which they refused. Hence a complaint for ejectment was filed against them. During
the pendency of the ejectment case, respondent filed an action for annulment of the
sale between Africa and the herein petitioner and for the cancellation of the transfer
certificate of title in the name of the latter. Asking also that Africa 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.

Then on May 1980, the City Court ruled that the respondent to vacate the premises,
and deliver possession of the property to the petitioner as well as pay the rent due
to them. Upon appeal to the Court of First Instance of Manila, affirmed the said
ejection case with modification and granted respondents petition to cancel the Deed
of Sale executed between Africa and the petitioner and ordered her to sell the
property to respondent, and for petitioner and Africa to pay respondent for
damages. CA affirmed the said decision but with modification on the amount of
damages. Hence the petition.

Issue:

WON 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;

WON the Contract of Sale executed between the parties was not voidable but
rescissible;

WON petitioner is a buyer in bad faith.

Ruling:

On the first issue, Africa failed to show that the letter sent by registered mail was
received by the respondents, only a photocopy of the letter without any receiving
signature coming from the latter. Furthermore, even if the latter received the letter
and did not exercise their right of first priority, Africa 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." Since Africa had offered a lesser amount to the petitioner and more
advantageous offer than that was offered to the respondent. Also, respondent court
is correct 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 top make it fall under
Article 1878(8) of the Civil Code.

In the second issue, private respondents have the right to rescind the contract of
sale because Africa had failed to comply with her duty to give them 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 Civil
Code. It is stressed that private respondents are strangers to the 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.

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. Recission implies a contract which, even if initially
valid, produces a lesion or pecuniary damage to someone that justifies its
invalidation for reasons of equity.

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. 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. Petitioner was aware f 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.

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.
Petitioner’s insistence that it was not aware of the right of first priority granted by
the Contract of Lease, 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 it as a prudent person to have required Reynoso or the broker to
show to it the Contract of Lease in which Par. 20 is contained.

ETCUBAN v CA
G.R. No. L-45164 March 16, 1987
Facts:
Petitioner inherited a piece of land together with his co-heirs, eleven in total, from
their deceased father. Thereafter the 11 co-heirs executed in favor of private
respondents 11 deeds of sale of their respective shares in the co-ownership for the
total sum of P26,340.00. It is not disputed that the earliest of the 11 deeds of sale
was made on December 9, 1963 and the last one in December 1967.

Petitioner filed a complaint for legal redemption against the respondents before the
Trial Court upon knowledge that his co-heirs sold the land in question to the private
respondents. Alleging that he should have been given notice first before sale to
respondents as he had informed his co-heirs his desire to buy their respective
shares. Defendant in response stated that the plaintiff has no cause of action
against them, and that the action is barred by prescription or laches, petitioners in-
action after knowledge of the said sale caused him to lose his right to redeem under
Art. 1623 of the new Civil Code because the right of redemption may be exercised
only within 30 days from notice of sale and plaintiff was definitely notified of the
sale years ago as shown by the records. Court however in favor of the petitioner,
hence the petition.
Issue:
WON lower court erred in holding that petitioner is not barred from filing a
complaint for legal redemption when the latter failed to make an offer to redeem
the property.

Ruling:

While it is true that written notice is required by the law (Art. 1623), it is equally
true that the same "Art. 1623 does not prescribe any particular form of notice, nor
any distinctive method for notifying the redemptioner. " So long, therefore, as the
latter is informed in writing of the sale and the particulars thereof, the 30 days for
redemption start running, and the redemptioner has no real cause to complain.

In the Conejero case, We ruled that the furnishing of a copy of the disputed deed of
sale to the redemptioner, was equivalent to the giving of written notice required by
law in "a more authentic manner than any other writing could have done," and that
We cannot adopt a stand of having to sacrifice substance to technicality. More so in
the case at bar, where the vendors or co-owners of petitioner stated under oath in
the deeds of sale. that notice of sale had been given to prospective redemptioners
in accordance with Art. 1623 of the Civil Code. "A sworn statement or clause in a
deed of sale to the effect that a written notice of sale was given to possible
redemptioners or co-owners might be used to determine whether an offer to
redeem was made on or out of time, or whether there was substantial compliance
with the requirement of said Art. 1623.

In resume, We find that petitioner (defendant) failed to substantially comply with

the requirements of Art. 1623 on legal redemption and We see no reason to reverse
the assailed decision of the respondent court.

SPS. CLUTARIO v CA
G.R. No. 76656 December 11, 1992
Facts:

Private respondents, Spouses Melquiades Gandia and Maria V. Gandia, owned a

two-storey residential apartment located which they leased to the petitioners
verbally for a monthly rental of P150.00 since 1961. Then on May 1980,
respondents, through their counsel, wrote a letter to the petitioners giving them
ninety (90) days to vacate the premises, in order for them to occupy the entire
apartment, due to their advanced age and failing health. Petitioner’s however did
not heed the demand letter and vacate the premises. Hence a complaint for
ejectment was filed against them, since they failed to pay the rentals since August
1980 and respondents need to occupy the premises. Pending the complaint,
petitioners paid their back rentals from August 1980 up to May 1981. MTC on the
other had dismissed the complaint on the ground they failed to support their cause
of action with substantial evidence. RTC however reversed said decision and 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. Affirmed by CA with modification. Hence the petition.

Issue:

WON CA erred in affirming RTC’s ruling.

Ruling:

Court ruled on the negative. In the case at bar, respondents invoked two of the six
grounds for ejectment provided under sec 5 of BP 25 (1979), namely: (1) arrears in
payment of rent for three (3) months at any one time; 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 residential unit.

Petitioner’s payment of the back rentals and acceptance of the respondent does not
constitute a waiver or abandonment of their cause of action for ejectment against
the latter. Respondents showed through their conduct, subsequent to the
acceptance of the back rentals, that they have no intention of to waive their right to
eject the petitioners. Since they continued on with the complaint and did not notify
the trial court of their intention to have the said complaint dismissed.

Also, the action of ejectment started before their payment to respondent, not after
payment of ejectment. Hence it falls under the said grounds for ejectment under sec
5 of BP 25.

In relation to the second ground raised by the respondent, the lessor is able to
validly eject the lessee on the ground of need for the leased property; however 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, which declared to be occupied by the RTC. MTC’s
decision ruling infavor of petitioners, was because the petitioners had already
occupied the upper floor of the unit, discounting respondents age and failing health.
However, the SC finds 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.

YEK SENG CO. v CA

G.R. No. 87415 January 23, 1992

Petitioners have entered into a verbal contract of lease over a portion of a building
owned by the respondents with an agreed monthly rental of P3,000.00. They have
been using the premises for its general merchandise business for more than twenty
years. Then after respondents informed that they are terminating the lease in order
to renovate the building and use it for themselves. Petitioner on the otherhand
refused to vacate the property. Hence a complaint for ejectment was filed against
the petitioner, while petitioner filed a petition for consignation of the monthly
rentals which it claimed had been refused by the lessors. The court ruled infavor of
the respondent and ordered petitioner to vacate the property and denied petitioners
petition for consignation for lack of merit. RTC and CA affirmed the said decision.
Hence the issue:

Issue:
WON the court erred in not giving an extension of its lease in accordance with
Article 1687 of the Civil Code.

Ruling:

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.

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 hereto maintain that the 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. 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.
YAP v CRUZ
G.R. No. 89307 May 8, 1992
Facts:

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 equipment 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 at 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, MTC ruled in favor of Cruz ordering the
petitioners to vacate the premises and surrender its possession to the respondent.
Hence the issue.

Issue:

WON CA erred in affirming the lower courts decision.

Ruling:

The court ruled that 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.

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, 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 cannot 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.