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FIRST DIVISION
[G.R. No. 122544. January 28, 1999]
REGINA P. DIZON, AMPARO D. BARTOLOME, FIDELINA D. BALZA, ESTER ABAD DIZON and
JOSEPH ANTHONY DIZON, RAYMUND A. DIZON, GERARD A. DIZON, and JOSE A.
DIZON, JR., petitioners, vs.COURT OF APPEALS and OVERLAND EXPRESS LINES,
INC., respondents.
[G.R. No. 124741. January 28, 1999]
REGINA P. DIZON, AMPARO D. BARTOLOME, FIDELINA D. BALZA, ESTER ABAD DIZON and
JOSEPH ANTHONY DIZON, RAYMUND A. DIZON, GERARD A. DIZON, and JOSE A.
DIZON, JR., petitioners, vs.COURT OF APPEALS, HON. MAXIMIANO C. ASUNCION, and
OVERLAND EXPRESS LINES, INC., respondents.
D E C I S I O N
MARTINEZ, J.:
Two consolidated petitions were filed before us seeking to set aside and annul the decisions and
resolutions of respondent Court of Appeals. What seemed to be a simple ejectment suit was juxtaposed
with procedural intricacies which finally found its way to this Court.
G. R. NO. 122544:

On May 23, 1974, private respondent Overland Express Lines, Inc. (lessee) entered into a Contract
of Lease with Option to Buy with petitioners
[1]
(lessors) involving a 1,755.80 square meter parcel of land
situated at corner MacArthur Highway and South "H" Street, Diliman, Quezon City. The term of the
lease was for one (1) year commencing from May 16, 1974 up to May 15, 1975. During this period,
private respondent was granted an option to purchase for the amount of P3,000.00 per square
meter. Thereafter, the lease shall be on a per month basis with a monthly rental of P3,000.00.
For failure of private respondent to pay the increased rental of P8,000.00 per month effective June
1976, petitioners filed an action for ejectment (Civil Case No. VIII-29155) on November 10, 1976 before
the then City Court (now Metropolitan Trial Court) of Quezon City, Branch VIII. On November 22,
1982, the City Court rendered judgment
[2]
ordering private respondent to vacate the leased premises and
to pay the sum of P624,000.00 representing rentals in arrears and/or as damages in the form of reasonable
compensation for the use and occupation of the premises during the period of illegal detainer from June
1976 to November 1982 at the monthly rental of P8,000.00, less payments made, plus 12% interest per
annum from November 18, 1976, the date of filing of the complaint, until fully paid, the sum
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of P8,000.00 a month starting December 1982, until private respondent fully vacates the premises, and to
payP20,000.00 as and by way of attorney's fees.
Private respondent filed a certiorari petition praying for the issuance of a restraining order enjoining
the enforcement of said judgment and dismissal of the case for lack of jurisdiction of the City Court.
On September 26, 1984, the then Intermediate Appellate Court
[3]
(now Court of Appeals) rendered a
decision
[4]
stating that:
"x x x, the alleged question of whether petitioner was granted an extension of the option to
buy the property; whether such option, if any, extended the lease or whether petitioner actually
paid the alleged P300,000.00 to Fidela Dizon, as representative of private respondents in
consideration of the option and, whether petitioner thereafter offered to pay the balance of the
supposed purchase price, are all merely incidental and do not remove the unlawful detainer case
from the jurisdiction of respondent court. In consonance with the ruling in the case of Teodoro,
Jr. vs. Mirasol (supra), the above matters may be raised and decided in the unlawful detainer suit
as, to rule otherwise, would be a violation of the principle prohibiting multiplicity of suits.
(Original Records, pp. 38-39)."
The motion for reconsideration was denied. On review, this Court dismissed the petition in a
resolution dated June 19, 1985 and likewise denied private respondent's subsequent motion for
reconsideration in a resolution dated September 9, 1985.
[5]

On October 7, 1985, private respondent filed before the Regional Trial Court (RTC) of Quezon City
(Civil Case No. Q-45541) an action for Specific Performance and Fixing of Period for Obligation with
prayer for the issuance of a restraining order pending hearing on the prayer for a writ of preliminary
injunction. It sought to compel the execution of a deed of sale pursuant to the option to purchase and the
receipt of the partial payment, and to fix the period to pay the balance. In an Order dated October 25,
1985, the trial court denied the issuance of a writ of preliminary injunction on the ground that the decision
of the then City Court for the ejectment of the private respondent, having been affirmed by the then
Intermediate Appellate Court and the Supreme Court, has become final and executory.
Unable to secure an injunction, private respondent also filed before the RTC of Quezon City, Branch
102 (Civil Case No. Q-46487) on November 15, 1985 a complaint for Annulment of and Relief from
Judgment with injunction and damages. In its decision
[6]
dated May 12, 1986, the trial court dismissed
the complaint for annulment on the ground of res judicata, and the writ of preliminary injunction
previously issued was dissolved. It also ordered private respondent to pay P3,000.00 as attorney's
fees. As a consequence of private respondent's motion for reconsideration, the preliminary injunction was
reinstated, thereby restraining the execution of the City Court's judgment on the ejectment case.
The two cases were thereafter consolidated before the RTC of Quezon City, Branch 77. On April
28, 1989, a decision
[7]
was rendered dismissing private respondent's complaint in Civil Case No. Q-45541
(specific performance case) and denying its motion for reconsideration in Civil Case No. 46487
(annulment of the ejectment case). The motion for reconsideration of said decision was likewise denied.
On appeal,
[8]
respondent Court of Appeals rendered a decision
[9]
upholding the jurisdiction of the
City Court of Quezon City in the ejectment case. It also concluded that there was a perfected contract of
sale between the parties on the leased premises and that pursuant to the option to buy agreement, private
respondent had acquired the rights of a vendee in a contract of sale. It opined that the payment by private
respondent of P300,000.00 on June 20, 1975 as partial payment for the leased property, which petitioners
accepted (through Alice A. Dizon) and for which an official receipt was issued, was the operative act that
gave rise to a perfected contract of sale, and that for failure of petitioners to deny receipt thereof, private
respondent can therefore assume that Alice A. Dizon, acting as agent of petitioners, was authorized by
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them to receive the money in their behalf. The Court of Appeals went further by stating that in fact, what
was entered into was a "conditional contract of sale" wherein ownership over the leased property shall not
pass to the private respondent until it has fully paid the purchase price. Since private respondent did not
consign to the court the balance of the purchase price and continued to occupy the subject premises, it had
the obligation to pay the amount of P1,700.00 in monthly rentals until full payment of the purchase
price. The dispositive portion of said decision reads:
"WHEREFORE, the appealed decision in Case No. 46487 is AFFIRMED. The appealed
decision in Case No. 45541 is, on the other hand, ANNULLED and SET ASIDE. The
defendants-appellees are ordered to execute the deed of absolute sale of the property in question,
free from any lien or encumbrance whatsoever, in favor of the plaintiff-appellant, and to deliver
to the latter the said deed of sale, as well as the owner's duplicate of the certificate of title to said
property upon payment of the balance of the purchase price by the plaintiff-appellant. The
plaintiff-appellant is ordered to payP1,700.00 per month from June 1976, plus 6% interest per
annum, until payment of the balance of the purchase price, as previously agreed upon by the
parties.
SO ORDERED."
Upon denial of the motion for partial reconsideration (Civil Case No. Q-45541) by respondent Court
of Appeals,
[10]
petitioners elevated the case via petition for certiorari questioning the authority of Alice
A. Dizon as agent of petitioners in receiving private respondent's partial payment amounting
toP300,000.00 pursuant to the Contract of Lease with Option to Buy. Petitioners also assail the propriety
of private respondent's exercise of the option when it tendered the said amount on June 20, 1975 which
purportedly resulted in a perfected contract of sale.
G. R. NO. 124741:

Petitioners filed with respondent Court of Appeals a motion to remand the records of Civil Case No.
38-29155 (ejectment case) to the Metropolitan Trial Court (MTC), then City Court of Quezon City,
Branch 38, for execution of the judgment
[11]
dated November 22, 1982 which was granted in a resolution
dated June 29, 1992. Private respondent filed a motion to reconsider said resolution which was denied.
Aggrieved, private respondent filed a petition for certiorari, prohibition with preliminary injunction
and/or restraining order with this Court (G.R. Nos. 106750-51) which was dismissed in a resolution dated
September 16, 1992 on the ground that the same was a refiled case previously dismissed for lack of
merit. On November 26, 1992, entry of judgment was issued by this Court.
On July 14, 1993, petitioners filed an urgent ex-parte motion for execution of the decision in Civil
Case No. 38-29155 with the MTC of Quezon City, Branch 38. On September 13, 1993, the trial court
ordered the issuance of a third alias writ of execution. In denying private respondent's motion for
reconsideration, it ordered the immediate implementation of the third writ of execution without delay.
On December 22, 1993, private respondent filed with the Regional Trial Court (RTC) of Quezon
City, Branch 104 a petition for certiorari and prohibition with preliminary injunction/restraining order
(SP. PROC. No. 93-18722) challenging the enforceability and validity of the MTC judgment as well as
the order for its execution.
On January 11, 1994, RTC of Quezon City, Branch 104 issued an order
[12]
granting the issuance of a
writ of preliminary injunction upon private respondent's posting of an injunction bond of P50,000.00.
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Assailing the aforequoted order after denial of their motion for partial reconsideration, petitioners
filed a petition
[13]
for certiorari and prohibition with a prayer for a temporary restraining order and/or
preliminary injunction with the Court of Appeals. In its decision,
[14]
the Court of Appeals dismissed the
petition and ruled that:
"The avowed purpose of this petition is to enjoin the public respondent from restraining
the ejectment of the private respondent. To grant the petition would be to allow the ejectment
of the private respondent. We cannot do that now in view of the decision of this Court in
CA-G.R. CV Nos. 25153-54. Petitioners' alleged right to eject private respondent has been
demonstrated to be without basis in the said civil case. The petitioners have been shown,
after all, to have no right to eject private respondents.
WHEREFORE, the petition is DENIED due course and is accordingly DISMISSED.
SO ORDERED."
[15]

Petitioners' motion for reconsideration was denied in a resolution
[16]
by the Court of Appeals stating
that:
"This court in its decision in CA-G.R. CV Nos. 25153-54 declared that the plaintiff-appellant
(private respondent herein) acquired the rights of a vendee in a contract of sale, in effect,
recognizing the right of the private respondent to possess the subject premises. Considering said
decision, we should not allow ejectment; to do so would disturb the status quo of the parties since
the petitioners are not in possession of the subject property. It would be unfair and unjust to
deprive the private respondent of its possession of the subject property after its rights have been
established in a subsequent ruling.
WHEREFORE, the motion for reconsideration is DENIED for lack of merit.
SO ORDERED."
[17]

Hence, this instant petition.
We find both petitions impressed with merit.
First. Petitioners have established a right to evict private respondent from the subject premises for
non-payment of rentals. The term of the Contract of Lease with Option to Buy was for a period of one (1)
year (May 16, 1974 to May 15, 1975) during which the private respondent was given an option to
purchase said property at P3,000.00 per square meter. After the expiration thereof, the lease was
for P3,000.00 per month.
Admittedly, no definite period beyond the one-year term of lease was agreed upon by petitioners and
private respondent. However, since the rent was paid on a monthly basis, the period of lease is
considered to be from month to month in accordance with Article 1687 of the New Civil Code.
[18]
Where
the rentals are paid monthly, the lease, even if verbal may be deemed to be on a monthly basis, expiring at
the end of every month pursuant to Article 1687, in relation to Article 1673 of the Civil Code.
[19]
In such
case, a demand to vacate is not even necessary for judicial action after the expiration of every month.
[20]

When private respondent failed to pay the increased rental of P8,000.00 per month in June 1976, the
petitioners had a cause of action to institute an ejectment suit against the former with the then City
Court. In this regard, the City Court (now MTC) had exclusive jurisdiction over the ejectment suit. The
filing by private respondent of a suit with the Regional Trial Court for specific performance to enforce
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the option to purchase did not divest the then City Court of its jurisdiction to take cognizance over the
ejectment case. Of note is the fact that the decision of the City Court was affirmed by both the
Intermediate Appellate Court and this Court.
Second. Having failed to exercise the option within the stipulated one-year period, private
respondent cannot enforce its option to purchase anymore. Moreover, even assuming arguendo that the
right to exercise the option still subsists at the time private respondent tendered the amount on June 20,
1975, the suit for specific performance to enforce the option to purchase was filed only on October 7,
1985 or more than ten (10) years after accrual of the cause of action as provided under Article 1144 of the
New Civil Code.
[21]

In this case, there was a contract of lease for one (1) year with option to purchase. The contract of
lease expired without the private respondent, as lessee, purchasing the property but remained in
possession thereof. Hence, there was an implicit renewal of the contract of lease on a monthly basis. The
other terms of the original contract of lease which are revived in the implied new lease under Article
1670 of the New Civil Code
[22]
are only those terms which are germane to the lessees right of continued
enjoyment of the property leased.
[23]
Therefore, an implied new lease does not ipso facto carry with it any
implied revival of private respondent's option to purchase (as lessee thereof) the leased premises. The
provision entitling the lessee the option to purchase the leased premises is not deemed incorporated in the
impliedly renewed contract because it is alien to the possession of the lessee. Private respondents right
to exercise the option to purchase expired with the termination of the original contract of lease for one
year. The rationale of this Court is that:
This is a reasonable construction of the provision, which is based on the presumption that when the
lessor allows the lessee to continue enjoying possession of the property for fifteen days after the
expiration of the contract he is willing that such enjoyment shall be for the entire period corresponding to
the rent which is customarily paid in this case up to the end of the month because the rent was paid
monthly. Necessarily, if the presumed will of the parties refers to the enjoyment of possession the
presumption covers the other terms of the contract related to such possession, such as the amount of
rental, the date when it must be paid, the care of the property, the responsibility for repairs, etc. But no
such presumption may be indulged in with respect to special agreements which by nature are foreign to
the right of occupancy or enjoyment inherent in a contract of lease.
[24]

Third. There was no perfected contract of sale between petitioners and private respondent. Private
respondent argued that it delivered the check of P300,000.00 to Alice A. Dizon who acted as agent of
petitioners pursuant to the supposed authority given by petitioner Fidela Dizon, the payee thereof. Private
respondent further contended that petitioners filing of the ejectment case against it based on the contract
of lease with option to buy holds petitioners in estoppel to question the authority of petitioner Fidela
Dizon. It insisted that the payment of P300,000.00 as partial payment of the purchase price constituted a
valid exercise of the option to buy.
Under Article 1475 of the New Civil Code, the contract of sale is perfected at the moment there is a
meeting of minds upon the thing which is the object of the contract and upon the price. From that
moment, the parties may reciprocally demand performance, subject to the provisions of the law governing
the form of contracts. Thus, the elements of a contract of sale are consent, object, and price in money or
its equivalent. It bears stressing that the absence of any of these essential elements negates the existence
of a perfected contract of sale. Sale is a consensual contract and he who alleges it must show its existence
by competent proof.
[25]

In an attempt to resurrect the lapsed option, private respondent gave P300,000.00 to petitioners (thru
Alice A. Dizon) on the erroneous presumption that the said amount tendered would constitute a perfected
contract of sale pursuant to the contract of lease with option to buy. There was no valid consent by the
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petitioners (as co-owners of the leased premises) on the supposed sale entered into by Alice A. Dizon, as
petitioners alleged agent, and private respondent. The basis for agency is representation and a person
dealing with an agent is put upon inquiry and must discover upon his peril the authority of the
agent.
[26]
As provided in Article 1868 of the New Civil Code,
[27]
there was no showing that petitioners
consented to the act of Alice A. Dizon nor authorized her to act on their behalf with regard to her
transaction with private respondent. The most prudent thing private respondent should have done was to
ascertain the extent of the authority of Alice A. Dizon. Being negligent in this regard, private respondent
cannot seek relief on the basis of a supposed agency.
In Bacaltos Coal Mines vs. Court of Appeals,
[28]
we explained the rule in dealing with an agent:
Every person dealing with an agent is put upon inquiry and must discover upon his peril the authority of
the agent. If he does not make such inquiry, he is chargeable with knowledge of the agents authority, and
his ignorance of that authority will not be any excuse. Persons dealing with an assumed agent, whether
the assumed agency be a general or special one, are bound at their peril, if they would hold the principal,
to ascertain not only the fact of the agency but also the nature and extent of the authority, and in case
either is controverted, the burden of proof is upon them to establish it.
For the long years that private respondent was able to thwart the execution of the ejectment suit
rendered in favor of petitioners, we now write finis to this controversy and shun further delay so as to
ensure that this case would really attain finality.
WHEREFORE, in view of the foregoing, both petitions are GRANTED. The decision dated March
29, 1994 and the resolution dated October 19, 1995 in CA-G.R. CV No. 25153-54, as well as the decision
dated December 11, 1995 and the resolution dated April 23, 1997 in CA-G.R. SP No. 33113 of the Court
of Appeals are hereby REVERSED and SET ASIDE.
Let the records of this case be remanded to the trial court for immediate execution of the judgment
dated November 22, 1982 in Civil Case No. VIII-29155 of the then City Court (now Metropolitan Trial
Court) of Quezon City, Branch VIII as affirmed in the decision dated September 26, 1984 of the then
Intermediate Appellate Court (now Court of Appeals) and in the resolution dated June 19, 1985 of this
Court.
However, petitioners are ordered to REFUND to private respondent the amount of P300,000.00
which they received through Alice A. Dizon on June 20, 1975.
SO ORDERED.