Chua v.

IAC

Facts:

 Sometime in 1950, defendant Herminigilda executed a Contract of Lease (Exhibit A) of land to Tian On. The lease was for 10
years and renewable hereinafter for 5 years. It also gave the lessee the option to buy the property within 10 years. Tian On
erected a house in said property.
 After 4 years, Tian On sold the house in question to Chua Bok (predecessor-in-interest of the current plaintiffs). The contract
stipulates that all the rights of Tian On as lessee are to be transmitted to Chua Bok. Herminigilda’s attorney-in-fact, Vicenta R.
de Reynes, signed on behalf of the former.
 When the lease expired in 1960, Chua Bok and Herminigilda (through her alleged attorney-in-fact, executed a Contract of Lease
(Exhibit C) good for 5 years. The contract provides for an option to buy and an option to renew lease.
 Chua Bok died and his successors continued to occupy the property and to pay for rent.
 On July 26, 1977 defendant Herminigilda, through her attorney-in-fact Luz Tormis, sold the property in question to the spouses
Go. The attorney-in-fact in question armed with a special power of attorney.
 On November 18, 1977, plaintiffs filed the instant case to nullify the sale between Herminigilda and the spouses Go because it
violated their right to purchase the leased properties as stipulated in their Contract to Lease. They also averred that the spouses
Go acted in bad faith for allegedly knowing, beforehand, that plaintiffs has the option to buy.
 The Court of First Instance upheld the sale between Herminigilda and the spouses Go and ordered plaintiffs to vacate the
premises. The Court also ordered defendants to pay for for damages.
 Plaintiffs appealed but the Court of Appeals affirmed the ruling of the lower court with modifications. The CA explained that the
Contract of Lease (Exhibit C) was void because the agent, Vicenta, had no Special Power of Attorney when she represented
Herminigilda during its execution. The moral damages, attorney's fees and cost of proceedings that were to be paid by the
defendants were omitted.
 Hence the petition. Plaintiffs have given up their prayer to nullify the sale between Herminigilda and spouses Go. They retained
their protestations against the ejectment ruled by the Court of First Instance, as affirmed by CA.

Issue:

WON the Contract of Lease (Exhibit C) between Chua Bok and Herminigilda, through her alleged attorney-in-fact, is valid.

Held:

No, the Contract of Lease (Exhibit C) between Chua Bok and Herminigilda, through her alleged attorney-in-fact, is not valid.

Article 1878 of the Civil Code, in pertinent part, provides:

Special Power of Attorney are necessary in the following cases:

xxx xxx xxx

(8) To lease any real property to another person for.more than one year.

In the present case, no Special Power of Attorney was evidenced during the execution of the contract in question (Contract C). This is
important as the lease was signed by the alleged attorney-in-fact of Herminigilda and not by Herminigilda herself. As the agent, Vicenta
should have secured a Special Power of Attorney in order to make the Contract of Lease valid.

It is true that defendant Herminigilda allowed plaintiffs to continue leasing after the expiration of the original period of the lease. This is
called as “Tacit Renewal”. However, it will only result in the lessee's continued enjoyment of the property. It will not extend to alien
matters such as an option to buy (Bernardo Dizon v. Ambrosio Magsaysay).

Other issues

a. On the Jurisdiction of the Court of First Instance

“Clearly the Court of First Instance had jurisdiction over actions which involve the possession of real property or any interest therein,
except forcible entry and detainer actions.”

b. On the deletion by the Court of Appeals on tue damages and fees to be paid by defendants as ruled by the Court of First Instance.

“The elimination of said award is a logical consequence of the finding that petitioners had no right of option to purchase the leased
premises that can be enforced against respondent Herrera.”