LEASE Dimaculangan prayed to the trial court that the complaint be dismissed and a favorable

G.R. No. L-68021 February 20, 1989 judgment be rendered in her favor.
HEIRS OF FAUSTA DIMACULANGAN, petitioners, Pending trial of the case, Fausta Dimaculangan died. She was substituted by her children
vs. as defendants.
THE HONORABLE INTERMEDIATE APPELLATE COURT and FELIMON After trial, the presiding judge of the City Court of Pasay found that the premises in question
UY, respondents. is partly residential and partly commercial; that defendant has no arrears and that the latter
Jerry D. Baares for petitioners. replied to plaintiff s demand letter and paid by way of money orders her rentals which were
Luis T. Tuason, Jr. for private respondent. however, returned unclaimed.
On October 16, 1980, the aforementioned court rendered a decision increasing the monthly
FERNAN, C.J.: rentals and fixing a definite period for the term of the lease, the dispositive portion of which
This is a petition for review on certiorari of the July 2, 1984 decision of the Third Special reads:
Cases Division, Intermediate Appellate Court, in AC-G.R. SP. No. 01230, entitled "Heirs of WHEREFORE, AND IN VIEW OF THE FOREGOING, the defendant is
Fausta Dimaculangan v. Hon. Baltazar R. Dizon, et al." dismissing for lack of merit the hereby ordered to pay the plaintiff the amount of P500.00 per month, as
petition for review of the Orders dated June 6, 1983 and July 13, 1983, issued by the monthly rental from August 1978 to August 1980; defendant shall be
Regional Trial Court of Pasay City, Branch CXIII in Civil Case No. 8865-P which in turn granted a Contract of Lease for two (2) years from August 1980 to August
affirmed on appeal the October 16, 1980 decision of Hon. Mariano A. Lacsamana, then 1982 of which the defendant shall pay the plaintiff a monthly rental of
presiding judge, Pasay City Court, Branch 11, in Civil Case No. 13591, entitled "Felimon Uy P750.00; the party-litigants are ordered to pay the amount of P1,500.00 to
v. Fausta Dimaculangan, for Ejectment". their respective counsels by way of attorney's fees; and the party-litigates
Fausta Dimaculangan and her children, petitioners herein, occupy by lease an apartment (sic) shall equally pay the costs of suit.
located at No. 2490 E. Zamora St., Pasay City, at a monthly rental of P260.00. They have SO ORDERED. 3
been living in said premises since 1961. To augment its income, the family maintains therein On Appeal, the Regional Trial Court, Branch CXIII, Pasay City, affirmed the aforesaid
a sari-sari store and bakes hot pan de sal to sell to the general public. The capital decision of the City Court and denied petitioner's motion for reconsideration. 4
investment involved is claimed to be P3,200.00 only. On review by certiorari, the Intermediate Appellate Court, now Court of Appeals, dismissed
On July 5, 1978, private respondent Felimon Uy sent Fausta Dimaculangan a registered the petition for lack of merit. 5
letter informing her that the property which she has been occupying has been sold to him Hence, the instant petition for review, raising the following issues for the resolution of this
and should she desire to continue occupying the same, she should sign a contract of lease Court:
for a period of two (2) years at a monthly rental of P1,500.00. Receiving no reply to his 1. May the trial court in a complaint for ejectment increase the rental
letter, the private respondent sent a second one, demanding payment of P750.00 covering agreed upon by the parties, and in the instant case, from the agreed
unpaid rentals for the months of August, September and October, 1978 but still he received P250.00 to P500.00, and then to P750.00, without violating the provisions
no answer to his-demand. Thus, he filed with the City Court of Pasay City a complaint for of existing laws;
ejectment 1 praying, among others, that said court render judgment ordering Fausta 2. May the trial court alter the agreement of the parties by shortening the
Dimaculangan and all persons claiming rights under her to vacate the leased premises. period of the lease from an indefinite period within the purview of
In her answer with compulsory counterclaim, 2 Fausta Dimaculangan admitted that she Presidential Decree No. 20, the law in force at the time, and of the
received plaintiff's letter of July 5, 1978 but claimed that she sent plaintiff a reply which was amendatory Batas Pambansa Blg. 25, to a fixed two (2) years;
however returned undelivered because plaintiff distorted his address. She denied having 3. In two dismissing the petition for review, and in effect, affirming the
been in default in her monthly rentals to the plaintiff, and alleged that she has never been in judgments of the Metropolitan Trial Court, and the Regional Trial Court,
default during the entire period of her occupancy of the premises since 1961 up to the has the Honorable Intermediate Appellate Court committed a grave abuse
present. In fact she tried to pay the plaintiff who did not want to collect the monthly rentals, of discretion amounting to lack or absence of jurisdiction, or at least a
even in the form of money orders which were however, returned unclaimed. She countered grave reversible error of a question of law, and/or of fact and law,
that the filing of the complaint was just a scheme to compel her to agree to the capricious correctible by the instant petition ? 6
and whimsical demand for an unconscionable increase in the monthly rental from P250.00 It has been established that petitioners have been occupying the leased premises on a
to P1,500.00, in clear violation of the provisions of P.D. No. 20, as amended. She further verbal contract since 1961 at a monthly rent of P250.00, and that although no fixed period
alleged that when she received the plaintiff s letter of October 3, 1978, she caused the for the duration of the lease has been agreed upon the original lessor and lessee, the
payment of the rentals for August, September and October, 1978. Defendant Fausta rentals were paid monthly.
Under the circumstances, there appears to be no dispute that subject contract of lease is At any rate, the period fixed by respondent Judge which appears acceptable to the lessor
covered by P.D. 20 and later by B.P. No. 25. has expired in 1982 and has therefore become moot and academic, aside from the fact that
The decisive issue therefore, in this case, is whether or not subject contract of lease is for with private respondent's conformity, it has become the latter's term which is well within his
an indefinite period, for the purpose of applying Presidential Decree No. 20. authority; that is, to terminate the contract and enter into a new one.
The pertinent provision of P.D. No. 20 reads: WHEREFORE, the petition is hereby dismissed for lack of merit, with costs against the
SEC. 4. Except when the lease is for a definite period, the provisions of petitioner.
paragraph (1) of Article 1673 of the Civil Code of the Philippines insofar SO ORDERED.
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.
To exempt the lease from the application of P.D. No. 20, it must be one with a definite
period.
It will be recalled that the agreement between the original lessor and lessee was unwritten,
so that it is difficult to determine with certainty the terms and conditions agreed upon.
Be that as it may, it is undisputed that the rentals are paid monthly. This Court had already
ruled that leases are deemed on a "month-to-month basis", if rentals therefore are paid
monthly. 7
Similarly, it is well settled that a lease contract "on a month-to month basis" provides for a
definite period and may be terminated at the end of any month. 8 By express exception of
P.D. No. 20, judicial ejectment lies when the lease is for a definite period or when the fixed
or definite period agreed upon has expired. 9
Even more recently, this Court clarified that "(I)n exempting from suspension ejectments on
the ground of the expiration of the lease period, Section 4 of Presidential Decree No. 20
made no distinction between oral and written lease contracts and no distinction may,
therefore, be inferred. Consequently, at the time of filing her action the private respondent
had a clear and indubitable right to eject the petitioners, the period of the latter's lease
expiring at the end of every monthly period ... 10 The Court further pointed out that the Rent
Control Law now in force, Batas Pambansa Blg. 877, has erased the distinction between
oral and written leases insofar as expiration of the lease period as a ground for judicial
ejectment in leases covered by said law, is concerned. 11
In view of the foregoing, there appears to be no necessity to discuss the other issues in this
case; more specifically whether or not the trial court may increase the rental and/or alter the
period of the lease from an indefinite period to a definite period; both issues having become
moot and academic.
Citing the case of Mabalot v. Madela Jr. 12 the Court of Appeals ruled that the petition has
been rendered moot and academic by the death of the lessee Fausta Dimaculangan, which
terminated the lease in her favor. It will be noted however, that in the aforecited case, those
seeking to continue in possession of the premises were not the heirs of the lessee but
merely members of the lessee's household, which does not apply in the case at bar, where
petitioners are the lessee's children. Authorities are of the view that lease is not essentially
personal in character, thus the right is transmissible to the heirs. 13
G.R. No. 95146 May 6, 1991 3. While in the United States of America, in October, 1980, Roberto Fermin, with
SPOUSES ROBERTO E. FERMIN and MAY LINDA FERRAREN, petitioners, marital consent from Maylinda Ferraren, executed a General Power of Attorney
vs. naming and constituting his mother, Eduviges Espinas vda de Martin as his
HON. COURT OF APPEALS and SPOUSES MELITON P. ALPAS, JR. AND LUCY D. attorney-in-fact, who was tasked, among other things, to exercise general control
ALPAS, respondents. and supervision over his property in the Philippines.
Puno, Agag & Dumlao Associates for petitioners. 4. On November 14, 1985 Eduviges E. Fermin for herself and as attorney-in-fact of
Ismael J. Andres for private respondents. her other children, including Roberto E. Fermin (plaintiff in this case), as principal,
entered into a Property Administration Agreement with AGRA & Co., Inc.,
represented by its president, Rose B. Reyes, as agent, naming and constituting
GANCAYCO, J.: and appointing the latter to be their true and lawful attorney-in-fact (Exh. "5".).
The renewal of a contract of lease is the issue addressed by this petition. 5. Before the expiration of the ten (10) year period, defendants sent plaintiffs
The facts as found by the trial court are not disputed. representative a document entitled 'Lease of Real Property' already signed by
1. On March 15, 1976, spouses Roberto E. Fermin and Maylinda Ferraren (herein them. It was never signed by plaintiffs up to this day. (Exh. "2").
plaintiffs) and spouses Meliton P. Alpas, Jr., and Lucy D. Alpas (herein defendants) 6. On May 31, 1986, AGRA & Co., Inc., as collection agent of the plaintiffs
as lessors and lessees, respectively, entered into a contract of lease covering the collected payment from the defendants the sum of One Thousand Eight Hundred
parcel of land (375 square meters) owned by the spouses Fermin at No. 157 Pesos (P1,800.00) as partial payment for the annual rental covering March 15,
Pinatubo Street, Mandaluyong, Metro Manila, for a term of ten (10) years, 1986 to March 15, 1987 (Exhibits "3" and "4").
renewable for another term of ten (10) years upon mutual agreement of the parties. 7. In a letter dated 6 February 1987, AGRA & Co., Inc., informed Mr. Alpas that
Rental was fixed at P5,000.00 yearly, to be increased by 10% at the end of each said company would no longer act in any representative capacity for the Fermins
five year period. (Exh. "A"). and advising to refer all matters to the Fermin's attorney-in-fact, Ms. Eduviges E.
The pertinent provisions of the contract of lease which lie at the core of this Fermin (Exhibit "6").
controversy are quoted hereunder: 8. Key Management Corporation in the letter dated 04 March 1987 and 09 March
1) The term of the lease shall be ten (10) years counted from the date the 1987 (Exhibits "7" and "8"), informed defendants that said company was appointed
document is registered and annotated on the Original Certificate of Title attorney-in-fact for the administration of the leased premises and to collect rentals
No. 395344 and the lease shall be renewable for another term of ten (10) due thereon.
years upon mutual agreement of the parties. 9. Key Management Corp., in another letter (Exh. "9") dated 12 March 1987
2) The rental for the property leased hereunder shall be at the rate of advised Mr. Alpas that they were unilaterally terminating the lease effective 18 April
FIVE THOUSAND PESOS per annum; provided, that the rental shall be 1987.
increased by ten (10) percent at the end of each five (5) year period, 10. Mr. Alpas, through his lawyer answered Key Management Corp., in a letter
counted from the effectivity of this lease agreement. dated March 17, 1987, advising the latter that the lease agreement had already
3) The parties hereby agree that during the renewal period after the ten been renewed for another term of ten (10) years from 16 March 1986 (Exh. "10"),
(10) year term, the LESSEE may, at its own option and discretion tendered payment of the sum of Ten Thousand Six Hundred Eighty-Two & 50/100
terminate the lease, after giving the LESSORS a previous written notice in Pesos (P10,682.50) covering balance of the annual rental from March 16, 1986 to
advance, at least one hundred eighty (180) days from the effectivity date March 15, 1988, including 12% interest per annum on rental in arrears.
of termination. 11. On April 2, 1987, Key Management Corp., received the letter together with Mr.
4) Upon termination of the lease agreement occurring after the first ten Alpas' Statement of Account, Check Vouchers and Check No. 188395 for
(10) years, all improvements which are permanent in nature that may P10,682.50 (Exhibit "11", "12", "13" and "14", respectively).
have been constructed by the LESSEE on the leased properties, shall 12. In a letter dated 20 April 1, 1987, (Exh. "15") Key Management Corporation
become properties of the LESSORS, their heirs or assigns, without any acknowledged receipt of P10,682.50, but with notice of its application.
further obligation to reimburse the LESSEES. That the LESSEE has the 13. In a letter dated 08 May 1987 Atty. Jose J. Benemerito of Key Management
priority to purchase the property if the LESSOR decides to sell said Corporation reiterated the demand to pay and to vacate.
property. 14. Defendants expressed strong exception and objection to the aforesaid lateral
2. Defendants built on the leased premises a warehouse structure of strong application of payment of their remittance of P10,682.50 by Key Management
materials worth not less than P200,000.00. Corporation in its letter dated May 14, 1987 (Exhibit "16", "16-A" and "16-B").
 15. In another letter dated May 14, 1987 addressed to Atty. Jose J. Benemerito, A reading of the lease agreement shows that it is for a term of ten (10) years and that the
Atty. Ismael Andres, defendants' counsel, reiterated his stand on the matter of lease shall be renewable for another term of 10 years upon mutual agreement of the
payment made by the defendants of the Pl0,682.50 as rental up to March 15, 1988, parties.5 The agreed rental is P5,000.00 per annum with the escalation clause that the rental
including 12% interest per annum on rental in arrears and that the contract of lease shall be increased by 10% at the end of each five-year period counted from the effectivity of
between the plaintiff and defendants had already been renewed for another ten the lease agreement.6 After the 10-year term and during the renewal period, the lessee
(10) years from 15 March 1986 (Exhibit "8", "18-A", and "18-B").1 may, at his/their own option and discretion, terminate the lease, after giving the lessors a
On August 10, 1987, petitioners filed a complaint for ejectment in the Metropolitan Trial previous written notice in advance, at least 180 days from the effective date of
Court of Mandaluyong, Metro Manila against private respondents for refusal of the latter to termination.7 Upon termination of the lease after the first 10 years, all improvements which
agree to an increased rental of P2,000.00 month for renewal of the lease. On April 14, 1988, are permanent in nature that may have been constructed by the lessee on the leased
the trial court rendered a decision dismissing the complaint with costs de officio. properties, shall become properties of the lessors, their heirs or assigns, without any further
Petitioners appealed to the Regional Trial Court (RTC) of Pasig, Metro Manila, wherein on obligation to reimburse the lessees. The lessee has the priority to purchase the property if
October 23, 1989, a decision was promulgated setting aside the appealed decision, the the lessors decide to sell said property.8
dispositive part of which reads Before the expiration of the 10 year term of the lease, private respondents manifested their
WHEREFORE, finding the instant petition to be well-taken, the Decision dated April desire to renew the lease when they sent petitioners' representative a prepared lease
14, 1989, is set aside and a new one is entered, to wit: agreement already signed by them but it was never signed nor returned by petitioners.
Defendants/appellees are ordered to vacate the premises and to pay the rentals for Nevertheless, on May 31, 1986, AGRA & Co., Inc., as collection agent of petitioners
its use at P5,500.00 the period from March 15, 1986 to March 17, 1987 and the collected from private respondents the sum of P 1,800.00 as partial payment for the annual
amount of P2,000.00 for every month thereafter until defendants/appellees shall rental covering March 15, 1986 (the expiry date of the first term of 10 years) to March 15,
have rendered the premises to plaintiffs/appellants. 1987.9 Key Management Corporation which was appointed by petitioners as attorney-in-fact
No pronouncement as to costs. for the administration of the leased premises, advised private respondent Meliton Alpas in a
SO ORDERED.2 letter dated March 12, 1987 that the lease agreement was terminated effective April 18,
A motion for reconsideration filed by private respondents was denied in an order dated 1987. Said respondent, through counsel, replied in a letter dated March 17, 1987 addressed
February 21, 1990. Private respondents then filed a petition for review with the Court of to Key Management Corporation that the lease agreement had already been renewed for
Appeals. On August 31, 1990, the appellate court rendered a decision setting aside the another term of ten (10) years from March 16, 1986 and tendered payment of the sum of
decision of the RTC and reinstating the decision rendered by the inferior court. P10,682.00 covering the balance of the annual rental from March 16, 1986 to March 15,
Hence, this petition for review where the issues raised are as follows 1988 including 12% interest per annum on rentals in arrears. 10 In a letter dated April 20,
1. WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN 1987, Key Management Corporation acknowledged receipt of P10,682.50, but with notice of
SETTING ASIDE THE DECISION OF THE REGIONAL TRIAL COURT DATED its application to accrued rentals at P2,000.00 a month leaving an outstanding balance of
OCTOBER 23, 1989. P13,900.00 as of April 15,1987.11
2. WHETHER OR NOT THE HONORABLE COURT OF APPEALS GRIEVIOUSLY In a letter of May 8, 1987, Atty. Jose J. Benemerito of Key Management Corporation
ERRED IN REINSTATING IN TOTO THE DECISION OF THE TRIAL COURT reiterated the demand that private respondents pay the accrued rentals and vacate the
DATED APRIL 14, 1989 WHICH ORDERED THE DISMISSAL OF THE premises. On May 14,1987, private respondents objected in writing to the aforesaid
COMPLAINT FOR BEING PREMATURE AND FOR LACK OF CAUSE OF application of payment of their remittance of P10,682.50 by Key Management
ACTION. Corporation.12 In another letter of same date addressed to one Atty. Benemerito private
3. WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN respondents reiterated said objection and stated that the lease had already been renewed
HOLDING THAT THE PERIOD OF THE IMPLIED NEW LEASE, ASSUMING for another 10 years.
ARGUENDO THAT ONE WAS CREATED, IS THE SAME AS THE ORIGINAL From the foregoing set of facts, it cannot be said that the lease agreement had been
TEN (10) YEAR PERIOD AS PROVIDED IN THE CONTRACT OF LEASE (EXH. effectively renewed for another 10 years.1wphi1 The stipulation of the parties is clear in
"A" OR "l") INSTEAD OF ON A YEAR-TO-YEAR BASIS AS PROVIDED IN ART. that such a renewal is subject to the mutual agreement of the parties. While there is no
1670 IN RELATION TO ARTICLE 1687, NEW CIVIL COVE.3 question that private respondents expressed their desire to renew the lease by another 10
Nothing is more settled than the rule that the terms of a written contract are binding on the years at the rate of the rental stipulated in the lease agreement, apparently petitioners would
parties thereto.1wphi1 In the interpretation of the provisions of a written contract, the courts be willing to renew said lease if the rentals are increased to P2,000.00 monthly. Obviously,
should follow the literal meaning of the stipulation. Otherwise, the evident intention of the there was no meeting of the minds as to the rate of the rental. As there was no agreement
parties must prevail.4
reached, then the term of the lease may not be considered to have been renewed for
another 10 years.
However, since after the expiration of the lease agreement, the private respondents
continued to occupy the premises for more than 15 days with the acquiescence of
petitioners, then it is understood that there is an implied new lease, not for the period of the
original contract, but from year to year. Article 1670 of the Civil Code so provides for this
situation.
Art. 1670. If at the end of the contract the lessee should continue enjoying the thing
leased for fifteen days with the acquiescence of the lessor, and unless a notice to
the contrary by either party has previously been given, it is understood that there is
an implied new lease, not for the period of the original contract, but for the time
established in articles 1682 and 1687. The other terms of the original contract shall
be revived.
There is thus an implied renewal of the lease from year to year. The extension of the lease
for one year from March 16, 1986 to March 15, 1987 shall be at the agreed monthly rental in
the contract of P6,150.00 considering the escalation clause of 10% after every five (5)
years. However, from March 16, 1987, the rate of monthly rental should be P2,000.00 as
demanded by petitioners until private respondents vacate the premises.
WHEREFORE, the petition is hereby GRANTED. The questioned decision of the Court of
Appeals dated August 31, 1990 is REVERSED and SET ASIDE, and the decision of the
Regional Trial Court dated October 23, 1989 is hereby REINSTATED and AFFIRMED with
the above modification as to rental, with costs against private respondents.
SO ORDERED.
G.R. No. L-28367 November 29, 1971 (P15.00), Philippine Currency, payable promptly at the end of every month for each lot or
PEDRO PAMINTUAN and RUPERTO D. TAN, petitioners, Thirty Pesos (P30.00), Philippine Currency for the two lots, shall be maintained, ... .' [So]
vs. clearly, said violation of lessees' ... obligation 'to pay the price of the lease according to the
COURT OF APPEALS, LORENTE O. YARISANTOS and LOURDES O. terms stipulated' (Article 1657 of the New Civil Code), entitles [private respondents] to
YARISANTOS respondents. rescind said contract of lease under Article 1659 of the same Code providing that 'If the
Rudolfo L. Gonzales for petitioners. lessor or the lessee should not comply with the obligations set forth in articles 1654 and
Cesar R. Canonizado for private respondents. 1657, the aggrieved party may ask for the rescission of the, contract and indemnification for
damages or only the latter, allowing the contract to remain in force.' " 4
FERNANDO, J.: From the decision of respondent Court of Appeals of October 30, 1967 affirming the
The question before respondent Court of Appeals, as before us, is the right of private judgment of the lower court, a petition for review was filed with this Tribunal. A careful
respondents, the lessors Llorente O. Yarisantos and Lourdes O. Yarisantos, to rescind a perusal of the records of the case and the legal grounds in support of this petition yields, the
contract of lease for nonpayment of rentals on time. The facts as found by respondent Court conclusion that no error of law could be imputed to respondent Court.
left no doubt that there was indeed such a failure to do so on the part of petitioners, Ruperto 1. Much is made in the third error assigned of private respondents being bereft of the right to
Tan and Pedro Pamintuan, respectively the lessees and sublessees Article 1659 of the Civil ask for rescission in view of their refusal to recognize the existence of the lease contract.
Code, which grants the right to the lessor in the event of the failure on the part of the lessee Such an argument was raised and rejected by respondent Court of Appeals in these words:
to comply with his obligations, is thus applicable.1 So it was held by respondent Court of "Of course, we do not overlook' ... that the defense of the appellants (against such failure to
Appeals. We cannot do otherwise. We affirm. pay every months) is that the appellees as early as May, 1958, refused to recognize the
The complaint for rescission was filed by private respondents who succeeded to the rights existence and/or binding effect of the lease contract, Exh. A and the appellees maintained
of the previous lessor, Patrocinio A. Vda. de Gaerlan from which the disputed two lots this judicial stand until final decision was had in the ejectment case, Civil Case No. 63700,
situated in Sampaloc, Manila were, purchased. The lease contract in favor of private with the Municipal Court of Manila in December, 1959 or a month after they filed their
petitioners Tan and Pamintuan provided for an agreed monthly rental of P15.00 payable complaint in these proceedings.' ... Refusal on plaintiffs' part to recognize the existence
promptly at the end of every month for each lot or P30.00 for the two, the lease entered into and/or binding effect of the said lease contract Exhibit A is only like saying that the latter
on October 10, 1951 to expire at the discretion of the lessee after twenty years. There was would not accept payment of rentals thereunder. In such a situation, defendants' remedy is
another provision that failure on the part of the lessee to pay the rental for six consecutive not to violate their own obligation under Exhibit A but to make tender of payment of such
months would automatically annul the contract.2 The complaint for rescission filed by private rentals and, if refused, to make consignation thereof in court. ... .'" 5
respondents as plaintiffs against petitioners as defendants on November 12, 1959 alleged Nor is this all that was said by respondent Court Appeals on the matter. Thus: "Defendants,
that with respect to the first lot, defendant, now petitioner, Ruperto Tan, was in arrears for however take exception to the said remedy by rescission, contending that there is
the period of twelve months and, with respect to the second lot, for a period of eight months. paragraph 3 of the said lease contract providing 'That failure on the part of the [lessee] to
The judgment was in favor of private respondents as plaintiffs, the contract of lease being pay rentals for six (6) consecutive months shall automatically annul this contract.'
rescinded by virtue of the above Civil Code provision. Defendants' argument at page 20 of their brief runs thus: 'What good is there to grant the
An appeal was then taken to respondent Court of Appeals. It considered as "the one and lessees a six-month period of grace if the lessor can rescind the lease contract anyway, with
only issue" whether defendants, now petitioners, had violated the provision in the contract of but a month's failure pay the same rentals?' The aforequoted argument was neatly
lease as to the monthly rental being promptly paid at the end of every month as claimed by answered by the lower court as follows: 'The right to rescind the contract pursuant to Article
plaintiffs, now private respondents. If they had not vioIated said provision, as claimed by 1659 of the Code is different from the automatic annulment of same contract in accordance
them in their answer to said complaint, then private respondents have no right to ask for the with the provision of paragraph 3 thereof. They arise from different cases and are based on
rescission or annulment of the said contract of lease.3 different grounds. In making deposit rentals at six-month intervals, the defendants prevent
This is how respondent Court resolved the issue: "While claiming to have committed no automatic cancellation of the contract but did not depress the owner to ask for the rescission
such violations, [petitioners] nevertheless admit that ['they] in their pleadings nor at any time of the contract failure of the lessee to pay the stipulated rentals promptly at the end of every
during the trial, never claimed to have offered to pay the rental at the end of each month month. It was never contemplated that the rentals were to be payable every six months,
beginning the month of October, 1958. On the contrary, they impliedly admitted in their otherwise, there would have been no necessity for the stipulation in paragraph 2 of the
pleadings and they do now formally admit here, no such monthly payments were ever made' contract. Indeed, the intention that the lessee should pay rentals monthly is emphasized by
... . With [their] above admission that 'no such monthly payments were ever made' by them the provision that such rentals should be paid 'promptly at the end of every month' ... ."6
to [private respondents] it stands clear that they violated the aforequoted provision of 2. It was likewise assigned as the second error that in view of a previous favorable decision
paragraph 2 of the contract of lease 'That the agreed monthly rental of [Fifteen Pesos] by the Court of First Instance of Manila of a consignation case filed by private petitioner Tan
against private respondents to compel the latter to accept the rentals at the rate of P15.00 TEEHANKEE, J., concurring:
monthly a well as another decision dismissing an ejectment suit by private respondents I concur. Failure on the part of the lessee to pay promptly at the end of every month the
against such petitioner, the principle of res adjudicata would apply. This point was, raised stipulated monthly rental constituted a violation of the obligation imposed upon him by
and decided adversely against petitioner by respondent Court of Appeals thus: "Another Article 1657, Civil Code. The lessor is therefore entitled under Article 1659, Civil Code, to
contention of defendants that the consignation and ejectment cases elsewhere referred to "ask for the rescission of the contract and indemnification for damages" and under Article
constitute res adjudicata or are a bar to the present action is also without merit because the 1673, Civil Code, to judicially eject the lessee for "lack of payment of the price stipulated."
subject-matter and causes of action in the said cases are distinct from those in the instant The special stipulation between the parties "that failure on the part of the [lessee] to pay the
case."7 Such a defense was thus unavailing. It did not suffice to preclude the operation of rentals for six (6) consecutive months shall automatically annul this contract" is not
Article 1659. An independent and separate cause of action had, as correctly stated by incompatible with the lessor's above right to rescind the lease or to judicially eject the lessee
respondent Court, already come into being. for nonpayment of the stipulated monthly rental at the and of the month, subject to such
3. It would thus appear clear that the first error assigned to the effect that the contract of period of grace as may be granted by the ejectment court.
lease could not be rescinded is devoid of merit. Article 1659 speaks in categorical language. Under the special stipulation, the parties obviously intended and contracted that non-
Private respondents, as the aggrieved parties, had the right to ask for rescission, there payment of rentals for six consecutive months was such a serious breach as to
being a failure on the part of petitioners to comply with their obligations as lessee and "automatically annul this contract." They may have even intended such automatic
sublessee respectively. With the lessors having decided to avail themselves of such a right annulment literally from a layman's viewpoint, in the sense that resort to court action would
under the law, no court can validly stand in the way of the enforcement thereof. That was not be necessary, although in reality the lessee may in bad faith refuse to honor and comply
what the lower court presided by the Honorable Judge Conrado Vasquez, and respondent therewith.
Court of Appeals did. To impute what was done by them as error would be to disregard what The appellate court therefore correctly ruled that the contractual stipulations covered
the law so plainly commands. different situations, each enforceable as the cause should arise in consonance with the
An excerpt from an opinion in Malicsi v. Carpizo,8 penned by Justice Barrera, is relevant. rule of construction that contracts should read as a whole and their specific provisions
Thus: "And, Article 1659 of the same Code expressly provides, among others, that if the harmonized and given effect accordingly.
lessee should not comply with his obligation of paying the price (rental of the lease
according to the terms stipulated), 'the aggrieved party may ask for the rescission of the Separate Opinions
contract and indemnification for damages, or only the latter, allowing the contract to remain TEEHANKEE, J., concurring:
in force'. In the instant case, appellant failed and refused to pay the monthly stipulated rental I concur. Failure on the part of the lessee to pay promptly at the end of every month the
of the property subject matter of the aforementioned lease contract for the months of stipulated monthly rental constituted a violation of the obligation imposed upon him by
January and February, 1958. Consequently, appellee had the right under said provision of Article 1657, Civil Code. The lessor is therefore entitled under Article 1659, Civil Code, to
the Civil Code to bring, as he did, the present action for rescission of said Contract of Lease, "ask for the rescission of the contract and indemnification for damages" and under Article
and the trial court correctly declared the rescission thereof. Appellant claims that she had 1673, Civil Code, to judicially eject the lessee for "lack of payment of the price stipulated."
not defaulted in the payment of said rental as no demand to make payment was made on The special stipulation between the parties "that failure on the part of the [lessee] to pay the
her by appellee. This is a question of fact which can not be raised here and the finding of rentals for six (6) consecutive months shall automatically annul this contract" is not
the lower court to this effect is binding on us.'"9 incompatible with the lessor's above right to rescind the lease or to judicially eject the lessee
That is all that need be said as to this petition for the review of the decision of respondent for nonpayment of the stipulated monthly rental at the and of the month, subject to such
Court of Appeals complained of, the last error assigned being obviously untenable, as no period of grace as may be granted by the ejectment court.
recovery would lie against private respondents and in favor of petitioners on their counter- Under the special stipulation, the parties obviously intended and contracted that non-
claim. payment of rentals for six consecutive months was such a serious breach as to
WHEREFORE, the decision of respondent Court of October 30, 1967 is affirmed. Costs "automatically annul this contract." They may have even intended such automatic
against petitioners. annulment literally from a layman's viewpoint, in the sense that resort to court action would
Concepcion, C.J., Makalintal, Zaldivar, Castro, Villamor and Makasiar, JJ., concur. not be necessary, although in reality the lessee may in bad faith refuse to honor and comply
Reyes, J.B.L. and Barredo, JJ., concur in the result. therewith.
The appellate court therefore correctly ruled that the contractual stipulations covered
different situations, each enforceable as the cause should arise in consonance with the
Separate Opinions rule of construction that contracts should read as a whole and their specific provisions
harmonized and given effect accordingly
 [G.R. No. L-8221. January 31, 1956.] parecen:chanroblesvirtuallawlibrary el primero al arrendamiento, y el segundo a la venta.
EDUARDO MANLAPAT, Plaintiff-Appellant, vs. SIMEON SALAZAR, Defendant- (Valverde, Tratado de Derecho Civil Espaol, Tomo 3, pag. 474.)
Appellee. To determine then whether a given contract constitutes an assignment of lease and not a
mere sublease, the test is whether the lessee has by said contract made an absolute
DECISION transfer of his interest as such lessee, thus dissociating himself from the original contract of
REYES, A., J.: lease, so that, as Manresa would say, his personality disappears and there remain only in
This is an appeal from a judgment of the Court of First Instance of Bulacan, the juridical relation two persons, the lessor and the assignee, who is converted into a
dismissing Plaintiffs action for the recovery of a fishpond through annulment of certain lessee.
contracts of lease and sublease. The appeal has been certified to this court on the ground The same test is applied, at common law, where the transfer of a leasehold by the lessee is
that it involves only questions of law. deemed an assignment of lease only if he cedes his entire interest in the estate; chan
The material facts are not in dispute. The fishpond in question formerly belonged to three roblesvirtualawlibrarywhereas, if he retains a reversionary interest, however small, the
co-owners who had taken turns in leasing it to the same person, Bernardo Enriquez. The transfer is deemed a mere sublease. (32 Am. Jur. 290; chan roblesvirtualawlibrary51 C.J. S.
last lease was signed in 1931 and was to last until June 1, 1967. After the death of 553.) So, if the lessee underlets for a period less than the entire term or reserves for himself
Bernardo Enriquez, his widow, Esperanza Guillen, subleased the fishpond, first, to Dr. a reversionary interest in the term, the transaction is a subletting. (51 C.J. S. 555.)
Macario Cuerpo Cruz and thereafter to the present Defendant Simeon Salazar, the With the above distinction in mind, it seems obvious from an examination of the terms of the
sublease to the latter to commence from May 31, 1947 and last until May 31, 1967. In 1952, document executed by Esperanza Guillen in favor of the Appellee identified in evidence
with the co-owners of the fishpond already dead, their sole heir, Plaintiff Eduardo Manlapat, as Exhibit 5 that the said document is one of sublease. In the first place, the original
brought the present action in the Court of First Instance of Bulacan against the subleasee lease is, as already stated, to last until June 1, 1967. On the other hand, the sublease is to
Simeon Salazar to recover possession of the fishpond, alleging that the sublease to last only until May 31 of that year. The sublease is thus for a shorter period than the original
the Defendant, as well as the leases executed by Plaintiffs predecessors in interest, was lease. A reservation of even so short a period as the last day of the term is enough to make
null and void. But the court decided that those contracts were valid and dismissed Plaintiffs the transfer a sublease. (35 C.J. 990; chan roblesvirtualawlibraryDavis vs. Morris, 36 NY
action with costs. Hence, the present appeal, which, however, involves only the sublease to 569.) Indeed, it is held that the mere fact that the lessor is to receive a surrender of the
the Appellee, the Appellant contending that the lower court erred in declaring the same valid premises on the last day of the term prevents the transfer from being an assignment.
and binding. (Murdock et al. vs. Fishel et al., 121 NYS 624; chan roblesvirtualawlibrary35 C.J. 989.) It is
The Appellant impugns the validity of the sublease to the Appellee on the theory that it is not true that the sublessor states in Exhibit 5 that her possession under the original lease
really a sublease, which, under both the old and the new Civil Code, would be valid even would last up to May 31, 1967 (tatagal pa hanggang sa Mayo 31, 1967), and from
though entered into without the consent of the lessors since there was no prohibition against this Appellant argues that in fixing the term of the sublease so that it would expire on May
it in the contract of lease but a veritable assignment of lease, which, in Appellants 31, 1967, the sublessor must have intended to transfer her entire interest in the lease. The
opinion, is void for want of such consent. argument, however, is based upon mere conjecture. Actually, the sublessor has not
The essential difference between an assignment of lease and a mere sublease is given by transferred her interest for the entire period of the original lease, and this may well be due to
Manresa thus:chanroblesvirtuallawlibrary a desire to repossess the fishpond earlier so that she could prepare it for delivery to the
cralaw En la cesion, al arrendatario transmite en absoluto su derecho, su personalidad owner.
desaparece, quedan solamente en la relacion juridica dos personas, el arrendador y el The terms of the sublease Exhibit 5, also furnish further proof that the lessee, now
cesionario, que se convierte en arrendatario. En el subarriendo no desaparece personalidad sublessor, has not dissociated herself from the original lease and that, as Manresa would
alguna; chan roblesvirtualawlibraryhay dos arriendos y dos relaciones juridicas diferentes, say, her personality has not disappeared. Condition No. 2, which binds her to respect the
aunque intimamente ligadas y relacionadas la una con la otra. (10 Manresa 1950 ed., p. sublease and to pay damages should she again sublease the fishpond to another person, is
510.) inconsistent with the idea that she had entirely given up her interest in the estate. Equally
To the same effect is the following from Valverde:chanroblesvirtuallawlibrary inconsistent with this idea are condition No. 3, in which the sublessor binds herself to pay
El subarriendo supone un nuevo arrendamiento, convirtiendo al arrendatario en the land taxes on the fishpond and such other taxes as may be exacted by the
arrendador, pero sin que el subarrendador se desligue por completo del arrendamiento Government; chan roblesvirtualawlibrarycondition No. 4, which forbids the cutting of any
primitivo; chan roblesvirtualawlibrarymientras que en la cesion del arrendamiento, el tree in the fishpond without the sublessors written consent; chan roblesvirtualawlibraryand
cesionario se coloca en luger del cedente, continuando el arrendamiento en las mismas lastly, condition No. 5, which requires the sublessee to return the fishpond upon the
condiciones y quedando el arrendatario, en virtud de la cesion de su derecho, expiration of the sublease in as good a condition as when he took possession of it. With
completamente desligado de responsabilidad con el arrendador. Estos dos contratos se regard to the condition last named, Appellantobserves that it does not specify that it is to the
sublessor that the fishpond is to be returned by the sublessee. But how could the sublessor
determine the condition of the fishpond if the same were not to be returned to her ?
Moreover, as the contract is between sublessor and sublessee, the return of the property
object of the contract would naturally, in the absence of a different stipulation, have to be
made to the sublessor.
Notice may also be taken of the fact that the sublessor has, in her contract with the
sublessee, used the Tagalog word pabubuwisan (will lease). She
says:chanroblesvirtuallawlibrary cralaw aking isasalin, ililipat at pabubuwisan ang aking
posicion at pamumuwisan sa nabanguit na palaisdaan cralaw This clause clearly means
that the lessee is transferring possession of the fishpond under lease to her and renting it
(i.e. subleasing it) to the transferee.
It being clear that the contract Exhibit 5 is a sublease, the trial court did not err in
considering it as such and in declaring it valid, there being nothing against it in the original
contract of lease.
Having arrived at this conclusion, we deem it unnecessary to go into the question of whether
the contract embodied in Exhibit 5 would be void or not if considered as an assignment of
lease.
Wherefore, the judgment appealed from is affirmed, with costs against Appellant.
G.R. No. L-54753 June 24, 1983 The defendants Laurecios cannot be considered as the lawful successor-
MARIETTA E. DAKUDAO, ANTONIETTA E. QUINTOS, ELSA E. ALMEDA, JOSE R. in- interest of the original lessee of the land occupied by the house sold.
EBRO, JR., and LUCIA E. PELAYO, petitioners, (Art. 1649 Civil Code);
vs. 2. That the demand of the plaintiffs upon the defendant Laurecios was to
HON. JUDGE FRANCISCO Z. CONSOLACION, FRANCISCO ANG SINGCO, FEDERICO vacate the premises occupied by the house they purchased from the
LAURECIO and CARMEN LAURECIO, respondents. defendant Ang Singco and to pay the reasonable compensation for the
Jose R Ebro, Jr. for petitioners. use of said premises, not back rentals.
Delante & Associates for respondents. With the foregoing facts as background, are the plaintiffs entitled to the
remedy of unlawful detainer as against the defendants? The Court does
GUTIERREZ, JR., J.: not believe so because the essence of the action for unlawful detainer is
This is a petition for review on certiorari with pre mandatory injunction seeking to reverse the the existence of a contract, expressed or implied, between the plaintiff
orders of the respondent Court of First Instance of Davao dated June 10, 1980 and July 18, and the defendant. ... (Decision of the City Court of Davao, Annex "C",
1980. The petitioners have come to this Court on pure questions of law. Rollo, p. 57).
There is no dispute over the basic facts of this case which are summarized by the Having received an adverse judgment, the petitioners elevated the case to the Court of First
respondent court as follows: Instance of Davao, Branch II. (Annex "H", Rollo, P. 69)
Plaintiffs are co-owners of a parcel of land Identified as Lot 202-F-13 On January 15, 1980, the CFI of Davao modified the abovementioned decision of the City
embraced on transfer Certificate of Title No. T-34254 of the Registry of Court of Davao City. The Court held
Deeds of Davao City. On this land stands the house of defendant This Court does not agree with the foregoing findings. When defendant
Francisco Ang Singco who had a verbal lease contract with herein Ang Singco sold his house to his co-defendants without the consent and
plaintiffs. The monthly agreed rental is P25.00. knowledge of herein plaintiffs, there was stealth employed and this
On July of 1977, without the knowledge and consent of plaintiffs, allegation is incorporated in the pleadings as well as in the trial of this
defendant Ang Singco sold his house to his CO-defendants, the case. However, an implied contract of lease was created when plaintiffs
Laurecios. When plaintiff Marietta Dakudao visited the premises in demanded of the Laurecios to pay rental over the parcel of land as
question, she was told of the transaction that transpired between Ang compensation for the occupation thereof hence an unlawful detainer case
Singco and the Laurecios. Ang Singco left the premises in July or August can be filed against the Laurecios.
of 1977 knowing that he was in arrears in his rentals for one year and On February 14, 1980, the private respondents Med a motion for reconsideration of the
seven months. decision of the CFI of Davao on the following grounds:
Since the house is at present occupied by the Laurecios, plaintiffs through I THAT THE EVIDENCE IS INSUFFICIENT TO JUSTIFY THE
Marietta Dakudao demanded that they vacate the premises and for the DECISION; and
payment of the use and occupation of the same at P100.00 a month. The II THAT THE DECISION IS AGAINST THE LAW AND/OR
Laurecios were willing to pay P50.00 a month and for failure to reach an JURISPRUDENCE.
agreement for the rental of the premises, plaintiffs filed this suit. Having In its order dated June 10, 1980, the CFI of Davao City reconsidered and set aside its
received an adverse judgment, applicants elevated the same with the decision and entered a new one affirming in toto the appealed decision of the City Court.
assignment of errors... According to the amended decision:
In its decision dated July 18, 1979, the City Court of Davao City, Branch II dismissed the xxx xxx xxx
case for unlawful detainer against the Laurecios. With respect to defendant Ang Singco, the The Court, after a thorough consideration of the pleadings filed, finds that
Court ruled that the action against him was converted into a simple one for collection of it committed an error in modifying the decision of the court a quo. The fact
back rentals since he was no longer in possession of the land leased to him. (Decision of of lease and the expiration of its are the essential elements of an unlawful
City Court, Annex "C", Rollo, p. 58) detainer case. Since no contract had been executed, either express or
As regards the respondents Federico and Carmen Laurecio, the City Court held: implied, an action for unlawful detainer win not lie against the Laurecios.
1. That there has never been a contract of lease, expressed or implied, xxx xxx xxx
between the plaintiff and the defendant Laurecios as regards that portion The petitioners moved for the reconsideration of the amended ruling. However, the CFI of
of land occupied by the house sold to them by the original lessee Davao, in its order dated July 18, 1980, denied the motion for reconsideration of the
Francisco Ang Singco. This is the contention and theory of the plaintiffs. plaintiffs-appellees for lack of merit.
The plaintiffs-appellees, therefore, filed this instant petition for review on certiorari raising 1977 but a year later, the lot owners suddenly raised the rent to P50.00 monthly and that "if
the following arguments: defendants Laurecio have failed to pay their rental, the same is due to plaintiffs'
1. That although there is no contract express or implied, between plaintiffs unreasonable and malicious refusal to receive the payments." The present claim of the
and defendants Laurecios, an action for unlawful detainer nevertheless respondents on the absence of any contract or agreement is due to their taking advantage
lies against said respondents. of the ruling of the respondent court that "since no contract had been executed, either
2. That respondents Laurecios who occupy the land of petitioners at the express or implied, an action for unlawful detainer will not lie against the Laurecios." It was
latter's tolerance, without any contract between them are necessarily not an original defense.
bound by an implied promise that they will vacate upon demand, failing The City Court found the averments of the private respondents in their answer as contrary to
which a summary action for unlawful detainer is the proper remedy the evidence. The facts are:
against them. It is established by the evidence that the plaintiffs have never consented
3. That even assuming for the sake of argument that an action for or ratified the sale of the house in question by the defendant Ang Singco
unlawful detainer win not lie against respondents Laurecios, petitioners to the Laurecios. There has never been any definite agreement between
have nevertheless alleged and proven strategy and stealth on the part of the plaintiff and the Laurecios as to the amount of rentals the latter were
said respondents regarding their entry into, and occupation of, the leased going to pay. In fact the Laurecios have not paid any amount by way of
premises sufficient to make out an action for forcible entry against them. rentals to the plaintiff except that which they deposited in Court during the
This is a good example of how persons who have failed to adduce any legal grounds for pendency of this case on February 2, 1979 in the amount of P450.00 for
their continued stay on property "I to another have nonetheless managed to stave off the period from August, 1977 to January, 1979 (Exhibit '3' and Exhibit '4').
eviction for more than four years through the improper use of procedural technicalities and Since there was no contract between the lot owners and the Laurecios, the latter's
reliance on delays caused by heavy caseloads of courts of justice. occupation of the land is only as successors of Ang Singco from whom they purchased the
In its June 18, 1979 decision, the City Court of Davao City admitted that the plaintiffs had a house built on the lot. If Article 1649 had been followed and the consent of the owners to the
right to recover possession of the land involved in the litigation but "unfortunately" for them sale secured, the Laurecios would be more than mere successors-in-interest. They would
their cause of action did not fit within an unlawful detainer case. Neither could it be a forcible have become the new lessees. The unlawful detainer case was proper.
entry case, according to the judge, because the plaintiffs failed to allege in the pleadings or If we view the failure of the petitioners to file an ejectment case from February, 1978 when
prove with evidence the fact that the defendants occupied the land through stealth and they first learned of the respondents presence on their land up to June 1, 1978 when the
strategy letter demanding that they vacate the lot was sent, as tolerance or permission by the
The primary argument of the respondents Laurecio in this petition is that they are not owners, the unlawful detainer case is still proper.
unlawfully withholding possession from the petitioners after the expiration or termination of We held in the case of Vda. de Cachuela v. Francisco (.98 SCRA 172) citing the case
the right to hold possession by virtue of any contract because there never was any contract of Calubayan v. Pascual (21 SCRA 146, 148) that a person who occupies the land of
express or implied between them and the petitioners. another at the latter's tolerance or permission, without any contract between them, is
The private respondents further claim that they cannot be considered privies or successors- necessarily bound by an implied promise that he will vacate upon demand, failing which a
in-interest of the former lessee, Francisco Ang Singco, because Article 1649 of the Civil summary action for ejectment is the proper remedy against him. The status of the defendant
Code provides that "the lessee cannot assign the lease without the consent of the lessor, is analogous to that of a lessee or tenant whose term of lease has expired but whose
unless there is a stipulation to the contrary." The respondents fail to state by what right they occupancy continued by tolerance of the owner. In such a case, the unlawful deprivation or
are occupying the land. If they have no contract, express or implied with the owners and withholding of possession is to be counted from the date of the demand to vacate. Likewise
they have no claim as successors-in-interest of the former lessee, they become mere in the case of Yu v. de Lara (6 SCRA 785), we ruled that the proper remedy against a
usurpers or squatters through their own admission. Article 1649 of the Civil Code is intended person who occupies the land of another, who has no contract with the owner, and whose
to protect the owner of the leased property. It was never intended to permit one who claims possession is merely tolerated, but who refuses to vacate despite demand, is the summary
no right to the premises to avoid ejectment by the dubious allegation that his occupation is action for ejectment.
not lawful as the Civil Code prohibits it. The respondents Laurecios argue that the tolerance by the petitioners must be present right
As a matter of fact, the respondents averred in their answer filed with the City Court of from the start of the possession sought to be recovered, to categorize a cause of action as
Davao City that the plaintiffs, now petitioners, gave their consent when the Laurecios one of unlawful detainer, not of forcible entry, citing the cases of Sarona, et al vs. Villegas,
purchased the house from Ang Singco "otherwise the defendants Laurecio could have et al. (22 SCRA 1257) and Monteblanco v. Hinigaran Sugar Plantation (63 Phil. 797, 802,
desisted from buying the subject house." The defendants averred that the Laurecios and the 803). We fail to see what advantage to the administration of justice would be served if we
petitioners agreed to maintain the P25.00 monthly rentals at the time of the sale in July, allow the private respondents to argue that, perhaps, they should be prosecuted for forcible
entry and not unlawful detainer. In their opposition dated July 9, 1979, the private
respondents alleged as ground for the opposition:
THAT PLAINTIFFS' ALLEGATIONS IN THEIR COMPLAINT AND THE
EVIDENCE THEY ADDUCED DO NOT PROVE ANY CAUSE OF
ACTION FOR FORCIBLE ENTRY AGAINST THE DEFENDANTS
LAURECIOS.
Moreover, there is no conflict between the cases abovementioned and the case of Cachuela
v. Francisco. As far as the petitioners are concerned, it may rightly be said that any
supposed tolerance of the occupation by the respondents Laurecios was from February,
1978, when they first discovered the respondents to be in possession of the premises. To
petitioners, this was the start of the respondent Laurecios' occupation since the latter's
actual entry into the premises in July or August, 1977 had been concealed from the
petitioners.
Considering the foregoing, we see no need to discuss the third "question of law" raised in
the petition.
Equitable considerations also dictate that procedural technicalities, even if valid which they
are not, should not be allowed to stand in the way of substantial justice. The certification
from the Clerk of Court of the City Court of Davao shows that no deposits for rentals have
been made from February, 1980 up to the date of the certification on March 9, 1982. The
certification of the Acting Clerk of Court of the Court of First Instance of Davao shows that
no deposits for rentals in this case are being made in that court.
WHEREFORE, the judgment of the respondent court is hereby set aside. The private
respondents are ordered to vacate the disputed premises. Respondents Laurecio are
ordered to pay the amount of Fifty Pesos (P50.00) a month as reasonable compensation for
the use and occupation of the premises beginning August, 1977 until they finally vacate the
premises, minus whatever amounts may have been deposited as rentals with the court for
delivery to the petitioners and to pay P500.00 in attorney's fees. The portion of the decisions
of the City Court and the respondent court as regards Francisco Ang Singco is affirmed.
This decision is immediately executory.
SO ORDERED.
G.R. No. L-49020 February 28, 1944 necessary in order to keep it in serviceable condition for the purpose for which it was
MANUEL ERNESTO GONZALES, petitioner, intended, the parties were at liberty to stipulate the contrary; and in the instant case it is
vs. obvious that the lessors were relieved of that duty and the lessee assumed it in their stead,
VICENTE MATEO, ET AL., respondents. considering the very moderate, if not nominal, rent he was to pay, with the obligation on the
OZAETA, J.: part of the lessors to pay the real estate taxes, and the relatively big profits the lessee was
Respondents, doing business as an unregistered partnership under the name and style to realize from the operation of the cockpit, netting P30 to P40 a week and P800 on days
"Samahang Sabungang Malaya," leased to the petitioner their cockpit situated in Malolos, on pintakasi (special holidays for cockfights), according to the Court of Appeals. We cannot
Bulacan, under a written contract entered into on January 5, 1937, for the period of six years accept the interpretation urged by the petitioner, that he was not obligated to make repairs,
ending December 31, 1942, at the agreed yearly rental of P100, upon the following but only improvements, on the building. He was clearly obligated to do all that was
conditions: necessary to put the building in serviceable condition, at his own expense. Of course, any
a. Ang lahat ng kailangan na gagawin sa bahay-sabungan ay ipagagawang work done by the lessee on the building for that purpose was necessarily an improvement
lahat ni G. Ernesto Gonzales sa kanyang sariling gugol na ang samahan ay thereof; and that was the reason why in condition (b) above quoted it was stated that all
walang sinasagot. improvements shall be for the benefit of the lessors without any obligation on their part to
b. Kung makaraan na ang anim (6) na taong pagkakabuwis or pagkaupa, ang pay therefor upon the expiration of the lease.
lahat ng mejora na nailagay ni G. Gonzales ay maiiwan sa samahan na di The collapse of the building in question on the occasion of the heavily attended cockfight of
pagbabayaran nito. September 12, 1937, was not due to any hidden defect but to the fact that thru petitioner's
c. Ang bahay-sabungan at and lupang kinatitirikan nito, ay ang samahan ang negligence in making the repairs he failed to place the posts on firm, solid, and sound
magbabayad ng buwis, at ang bayad ng arrendamiento ng lupa ang samahan din foundation in spite of one of the lessors' advertence to him on the matter.
ang magbabayad. Under article 1563 of the Civil Code, "the lessee is liable for any deterioration or loss
Before using said cockpit the petitioner as lessee made some improvements thereon. He suffered by the thing leased, unless he proves that it took place without his fault." And under
placed the posts on slabs of stone, without cementing them and without using joint-pins to article 1101 of the same Code, any person guilty of negligence in the fulfillment of his
brace them up in spite of respondent Isidro Bautista's advertence thereto. obligations, or who in any manner whatsoever shall fail to comply with the terms thereof,
On September 12, 1937, a cockfight was held in said cockpit with a large attendance. The shall be liable for any damage caused thereby.
building broke down and was thereafter never used by the petitioner. The judgment appealed from, being in accordance with law, is hereby affirmed, with costs.
The respondent lessors demanded of the petitioner that he either reconstruct the cockpit or
pay them the sum of P3,000 as damages in addition to the unpaid rentals. Petitioner refused
to comply with such demand, alleging that under his contract he was not obligated to make
repairs, but only improvements, on the building and that its collapse was due to hidden
defects which the lessors had concealed from him. Hence this suit was brought by the
lessors against the lessee, which was sustained by the Court of First Instance of Bulacan,
by which the lessee was ordered to reconstruct the cockpit or pay to the lessors its value in
the sum of P3,000 plus the rentals for the last five years amounting to P500 and the costs.
Upon appeal to the Court of Appeals the latter modified that judgment by reducing the
damages from P3,000 to P1,000. Not contended with that reduction, and insisting on
complete absolution from any liability, the defendant lessee appealed to this Court
by certiorari.
Upon the stipulations of the contract in relation to the facts found by the Court of Appeals as
above set forth, we find no reason to disturb the conclusions of that court and reverse its
judgment. It is evident that petitioner accepted the cockpit in question from respondents in
the condition in which it was found at the time under the express agreement that all that was
necessary to put it in use had to be done by the petitioner at his own expense without any
obligation on the part of the respondents to reimburse him or pay for the improvements thus
made upon the expiration of the lease. While it is true that under the law (paragraph 2 article
1554 of the Civil Code) it is the duty of the lessor to make on the building leased all repairs
CEBU BIONIC BUILDERS SUPPLY, G.R. No. 154366
INC. and LYDIA SIA, On October 28, 1981, Rudy Robles executed a contract of lease in favor of petitioner Cebu
Petitioners, Present: Bionic Builders Supply, Inc. (Cebu Bionic), a domestic corporation engaged in the
construction business, as well as the sale of hardware materials. The contract pertinently
CORONA, C.J., provides:
- versus - Chairperson,
VELASCO, JR., CONTRACT OF LEASE
LEONARDO-DE CASTRO,
DEVELOPMENT BANK OF THE PERALTA,* and
PHILIPPINES, JOSE TO CHIP, PATRICIO PEREZ, JJ. KNOW ALL MEN BY THESE PRESENTS:
YAP and ROGER BALILA,
Respondents. Promulgated: This Lease Contract made and entered into, by and between:

November 17, 2010 RUDY ROBLES, JR., Filipino, of legal age, married and resident of 173
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x Maria Cristina Ext., Cebu City, hereinafter referred to as the LESSOR,

- and -
DECISION
CEBU BIONIC BUILDER SUPPLY, represented by LYDIA SIA, Filipino, of
legal age, married and with address at 240 Magallanes St., Cebu City
LEONARDO DE CASTRO, J.: hereinafter known as the LESSEE;

This Petition for Review on Certiorari[1] under Rule 45 of the Rules of Court assails the WITNESSETH:
Resolution[2] dated February 5, 2002 and the Amended Decision[3] dated July 5, 2002 of the
Court of Appeals in CA-G.R. CV No. 57216. In the Resolution dated February 5, 2002, the The LESSOR is the owner of a commercial building along Tabunok,
Court of Appeals admitted the Motion for Reconsideration [4] of herein respondents Talisay, Cebu, known as the State Theatre Building.
Development Bank of the Philippines (DBP), Jose To Chip, Patricio Yap and Roger Balila,
notwithstanding the fact that the same was filed more than six months beyond the The LESSOR agrees to lease unto the LESSEE and the LESSEE accepts
reglementary period. Said motion prayed for the reversal of the Court of Appeals the lease from the LESSOR, a portion of the ground floor thereof,
Decision[5] dated February 14, 2001, which affirmed the Decision [6] dated April 25, 1997 of consisting of one (1) unit/store space under the following terms and
the Regional Trial Court (RTC) of Cebu, Branch 8, in Civil Case No. CEB-10104 that ruled in conditions:
favor of petitioners. In the Amended Decision of July 5, 2002, the Court of Appeals reversed
its previous Decision dated February 14, 2001 and dismissed the petitioners complaint for 1. The LESSEE shall pay a monthly rental of One Thousand
lack of merit. (P1,000.00) Pesos, Philippine Currency. The rental is payable in advance
within the first five (5) days of the month, without need of demand;
The facts leading to the instant petition are as follows:
2. That the term of this agreement shall start on
On June 2, 1981, the spouses Rudy R. Robles, Jr. and Elizabeth R. Robles entered into November 1, 1981 and shall terminate on the last day of every month
a mortgage contract[7] with DBP in order to secure a loan from the said bank in the amount thereafter; provided however that this contract shall be
of P500,000.00. The properties mortgaged were a parcel of land situated in Tabunoc, automatically renewed on a month to month basis if no notice, in
Talisay, Cebu, which was then covered by Transfer Certificate of Title (TCT) No. T- 47783 writing, is sent to the other party to terminate this agreement after
of the Register of Deeds of Cebu, together with all the existing improvements, and the fifteen (15) days from receipt of said notice;
commercial building to be constructed thereon [8] (subject properties). Upon completion, the
commercial building was named the State Theatre Building. xxxx
 2. Deposit equivalent to two (2) months rental and advance of
9. Should the LESSOR decide to sell the property during one (1) month rental, and the remaining amount for one
the term of this lease contract or immediately after the expiration of year period (equivalent to 9 months rental) shall be
the lease, the LESSEE shall have the first option to buy and shall secured by either surety bond, cash bond or assigned
match offers from outside parties.[9] (Emphases ours.) time deposit;

3. That in case there is a better offer or if the property will be

The above contract was not registered by the parties thereto with the Registry of Deeds of subject of a purchase offer, within the term, the lessor is
Cebu. given an option of first refusal, otherwise he has to
vacate the premises within thirty (30) days from date of
Subsequently, the spouses Robles failed to settle their loan obligation with notice.
DBP. The latter was, thus, prompted to effect extrajudicial foreclosure on the subject
properties.[10] On February 6, 1987, DBP was the lone bidder in the foreclosure sale and We consider, temporarily, the current monthly rental based on the
thereby acquired ownership of the mortgaged subject properties.[11] On October 13, 1988, a six-month receipts, which we require you to submit, until such time
final Deed of Sale[12] was issued in favor of DBP. when we will fix the amount accordingly.

Meanwhile, on June 18, 1987, DBP sent a letter to Bonifacio Sia, the husband of petitioner If the contract of lease is not executed within thirty (30) days from
Lydia Sia who was then President of Cebu Bionic, notifying the latter of DBPs acquisition of date hereof, it is construed that you are not interested in leasing the
the State Theatre Building. Said letter reads: premises and will vacate within the said period.

June 18, 1987 Please be guided accordingly.

Mr. Bonifacio Sia Truly yours,

Bionic Builders Inc.
State Theatre Bldg. (SGD)LUCILO S. REVILLAS
Tabunok, Talisay, Cebu Branch Head[13] (Emphases ours.)

Sir:
On July 7, 1987, the counsel of Bonifacio Sia replied to the above letter, to wit:
This refers to the commercial space you are occupying in the acquired
property of the Bank, formerly owned by Rudy Robles, Jr. July 7, 1987

Please be informed that said property has been acquired through Mr. Lucilo S. Revillas
foreclosure on February 6, 1987. Considering thereat, we require you Branch Head
to remit the rental due for June 1987. Development Bank of the Philippines

If you wish to continue on leasing the property, we request you to Dear Mr. Revillas,
come to the Bank for the execution of a Contract of Lease, the salient
conditions of which are as follows: This has reference to your letter of 18 June 1987 which you sent to my
client, Mr. Bonifacio Sia of Cebu Bionic Builders Supply the lessee of a
1. The lease will be on month to month basis, for a maximum commercial space of the State Theatre Bldg., located at Tabunok, Talisay,
period of one (1) year; Cebu.
 My client is amenable to the terms contained in your letter except the Item No. Description/Location Starting Price
following:
xxxx
1. In lieu of item no. 2 thereof, my client will deposit with your
bank the amount of P10,000.00, as assigned time deposit; II Commercial land, Lot No. 3681-C-3,
having an area of 396 sq. m., situated in
2. The 30 days notice you mentioned in your letter, (3), is too Tabunok, Talisay, Cebu and covered by
short. My client is requesting for at least 60 days notice. TCT No. T-65199 (DBP), including the
commercial building thereon. P1,838,100.00
I sincerely hope that you will give due course to this request.
xxxx
Thank you.
A pre-numbered Acknowledgment Receipt duly signed by at least
Truly yours, two (2) of the Committee members shall be issued to the offeror
acknowledging receipt of such offer.
(SGD) ANASTACIO T. MUNTUERTO, JR.[14]
Negotiated offers may be made in CASH or TERMS, the former
requiring a deposit of 10% and the latter 20% of the starting price,
Thereafter, on November 14, 1989, a Certificate of Time Deposit [15]
for P11,395.64 was either in the form of cash or cashiers/managers check to be
issued in the name of Bonifacio Sia and the same was allegedly remitted to DBP as enclosed in the sealed offer.
advance rental deposit.
xxxx
For reasons unclear, however, no written contract of lease was executed between DBP and
Cebu Bionic. Interested negotiated offerors are requested to see Atty. Apolinar K.
Panal, Jr., Acquired Asset in Charge (Tel. No. 9-63-25), in order to secure
In the meantime, subsequent to the acquisition of the subject properties, DBP copies of the Letter-Offer form and Negotiated Sale Rules and
offered the same for sale along with its other assets. Pursuant thereto, DBP published a Procedures.
series of invitations to bid on such properties, which were scheduled on January 19,
1989,[16] February 23, 1989,[17] April 13, 1989,[18] and November 15, 1990.[19] As no NOTE: If no offer is received during the above stated acceptance
interested bidder came forward, DBP publicized an Invitation on Negotiated Sale/Offer, the period, the properties described above shall be sold to the
relevant terms and conditions of which stated: first offeror who submits an acceptable proposal on a
First-Come-First-Served basis.
INVITATION ON NEGOTIATED SALE/OFFER
City of Cebu, Philippines, November 16, 1990.
The DEVELOPMENT BANK OF THE PHILIPPINES, Cebu Branch, will
receive SEALED NEGOTIATED OFFERS/PURCHASE PROPOSALS (SGD.) TIMOTEO P.
tendered at its Branch Office, DBP Building, Osmea Boulevard, Cebu City OLARTE
for the sale of its acquired assets mentioned hereinunder within the 15-
Branch Head[20] (Emphases
Day-Acceptance-Period starting from NOVEMBER 19, 1990 up to
ours.)
12:00 oclock noon of DECEMBER 3, 1990. Sealed offers submitted
shall be opened by the Committee on Negotiated Offers at exactly 2:00 In the morning of December 3, 1990, the last day for the acceptance of negotiated offers,
oclock in the afternoon of the last day of the acceptance period in order to petitioners submitted through their representative, Judy Garces, a letter-offer form, offering
determine the highest and/or most advantageous offer. to purchase the subject properties for P1,840,000.00. Attached to the letter-offer was a copy
of the Negotiated Sale Rules and Procedures issued by DBP and a managers check for the
amount of P184,000.00, representing 10% of the offered purchase price. This offer of
petitioners was not accepted by DBP, however, as the corresponding deposit therefor was Petitioners alleged, inter alia, that Cebu Bionic was the lessee and occupant of a
allegedly insufficient. commercial space in the State Theatre Building from October 1981 up to the time of the
filing of the complaint. During the latter part of 1990, DBP advertised for sale the State
After the lapse of the above-mentioned 15-day acceptance period, petitioners did Theatre Building and the commercial lot on which the same was situated. In the prior
not submit any other offer/proposal to purchase the subject properties. invitation to bid, the bidding was scheduled on November 15, 1990; while in the next, under
the 15-day acceptance period, the submission of proposals was to be made from November
On December 17, 1990, respondents To Chip, Yap and Balila presented their letter- 19, 1990 up to 12:00 noon of December 3, 1990. Petitioners claimed that, at about 10:00
offer[21] to purchase the subject properties on a cash basis for P1,838,100.00. Said offer was a.m. on December 3, 1990, they duly submitted to Atty. Apolinar Panal, Jr., Chief of the
accompanied by a downpayment of 10% of the offered purchase price, amounting Acquired Assets of DBP, the following documents, namely:
to P183,810.00. On even date, DBP acknowledged the receipt of and accepted their
offer. On December 28, 1990, respondents To Chip, Yap and Balila paid the balance of the 6.1 Letter-offer form, offering to purchase the
purchase price and DBP issued a Deed of Sale[22] over the subject properties in their favor. property advertised, for the price of P1,840,000, which was higher than
the starting price of P1,838,100.00 on cash basis. x x x;
On January 11, 1991, the counsel of respondents To Chip, Yap and Balila sent a
letter[23] addressed to the proprietor of Cebu Bionic, informing the latter of the transfer of 6.2 Negotiated Sale Rules and Procedures, duly signed
ownership of the subject properties. Cebu Bionic was ordered to vacate the premises within by plaintiff, x x x;
thirty (30) days from receipt of the letter and directed to pay the rentals from January 1,
1991 until the end of the said 30-day period. 6.3 Managers check for the amount of P184,000
representing 10% of the deposit dated December 3, 1990 and issued by
The counsel of Cebu Bionic replied[24] that his client received the above letter on January Allied Banking Corp. in favor of the Development Bank of the Philippines.
11, 1991. He stated that he has instructed Cebu Bionic to verify first the ownership of the x x x.[31] (Emphasis ours.)
subject properties since it had the preferential right to purchase the same. He likewise
requested that he be furnished a copy of the deed of sale executed by DBP in favor of Petitioners asserted that the above documents were initially accepted but later
respondents To Chip, Yap and Balila. returned. DBP allegedly advised petitioners that there was no urgent need for the same x x
x, considering that the property will necessarily be sold to [Cebu Bionic] for the reasons that
On February 15, 1991, respondent To Chip wrote a letter [25] to the counsel of Cebu Bionic, there was no other interested party and that [Cebu Bionic] was a preferred party being the
insisting that he and his co-respondents Yap and Balila urgently needed the subject lessee and present occupant of the property subject of the lease[.] [32] Petitioners then
properties to pursue their business plans. He also reiterated their demand for Cebu Bionic to related that, without their knowledge, DBP sold the subject properties to respondents To
vacate the premises. Chip, Yap and Balila. The sale was claimed to be simulated and fictitious, as DBP still
received rentals from petitioners until March 1991. By acquiring the subject properties,
Shortly thereafter, on February 27, 1991, the counsel of respondents To Chip, Yap and petitioners contended that DBP was deemed to have assumed the contract of lease
Balila sent its final demand letter[26] to Cebu Bionic, warning the latter to vacate the subject executed between them and Rudy Robles. As such, DBP was bound by the provision of the
properties within seven (7) days from receipt of the letter, otherwise, a case for ejectment lease contract, which stated that:
with damages will be filed against it.[27]
9. Should the Lessor decide to sell the property during the term
Despite the foregoing notice, Cebu Bionic still paid [28] to DBP, on March 22, 1991, the of this lease contract or immediately after the expiration of the lease, the
amount of P5,000.00 as monthly rentals on the unit of the State Theatre Building it was Lessee shall have the first option to buy and shall match offers from
occupying for period of November 1990 to March 1991. outside parties.[33]

On April 10, 1991, petitioners filed against respondents DBP, To Chip, Yap and Balila
a complaint[29] for specific performance, cancellation of deed of sale with damages, Petitioners sought the rescission of the contract of sale between DBP and
injunction with a prayer for the issuance of a writ of preliminary injunction.[30] The complaint respondents To Chip, Yap and Balila. Petitioners also prayed for the issuance of a writ of
was docketed as Civil Case No. CEB-10104 in the RTC. preliminary injunction, restraining respondents To Chip, Yap and Balila from registering the
Deed of Sale in the latters favor and from undertaking the ejectment of petitioners from the 2 of its letter dated June 18, 1987. It is also a fact on record that under
subject properties. Likewise, petitioners entreated that DBP be ordered to execute a deed of the lease contract continued by the DBP on the [petitioners], it is provided
sale covering the subject properties in their name and to pay damages and attorneys fees. in paragraph 9 thereof that the lessee shall have the first option to buy
and shall match offers from outside parties. And yet, [respondent] DBP
In its answer,[34] DBP denied the existence of a contract of lease between itself and never gave [petitioners] the first option to buy or to match offers
petitioners. DBP countered that the letter-offer of petitioners was actually not accepted as from outside parties, more specifically [respondents] To Chip, Balila
their offer to purchase was on a term basis, which therefore required a 20% deposit. The and Yap. It is also a fact on record that [respondent] DBP in its letter
10% deposit accompanying the petitioners letter-offer was declared insufficient. DBP stated dated June 18, 1987 to [petitioners] wrote in paragraph 3 thereof, that in
that the letter-offer form was not completely filled out as the Term and Mode of Payment case there is better offer or if a property will be subject of purchase offer,
fields were left blank. DBP then informed petitioner Lydia Sia of the inadequacy of her within the term, the lessee is given the option of first refusal, otherwise, he
offer. After ascertaining that there was no other offeror as of that time, Lydia Sia allegedly has to vacate the premises within thirty (30) days. Yet, [respondent]
summoned back her representative who did not leave a copy of the letter-offer and the DBP never informed [petitioners] that there was an interested party
attached documents. DBP maintained that petitioners documents did not show that the to buy the property, meaning, [respondents To Chip, Yap and Balila],
same were received and approved by any approving authority of the bank. The letter-offer thus depriving [petitioners] of the opportunity of first refusal
attached to the complaint, which indicated that the mode of payment was on a cash basis, promised to them in its letter dated June 18, 1987. x x x.[38] (Emphases
was allegedly not the document shown to DBP. In addition, DBP argued that there was no ours.)
assumption of the lease contract between Rudy Robles and petitioners since it acquired the
subject properties through the involuntary mode of extrajudicial foreclosure and its request As regards the offer of petitioners to purchase the subject properties from DBP, the RTC
to petitioners to sign a new lease contract was simply ignored. DBP, therefore, insisted that gave more credence to the petitioners version of the facts, to wit:
petitioners occupancy of the unit in the State Theatre Building was merely upon its
acquiescence. The petitioners payment of rentals on March 22, 1991 was supposedly made It is also a fact on record that when [respondent] DBP offered the property
in bad faith as they were made to a mere teller who had no knowledge of the sale of the for negotiated sale under the 15-day acceptance period[, which] ended at
subject properties to respondents To Chip, Yap and Balila. DBP, thus, prayed for the noon of December 3, 1991, [Cebu Bionic] submitted its offer, complete
dismissal of the complaint and, by way of counterclaim, asked that petitioners be ordered to with [the required documents.] x x x.
pay damages and attorneys fees.
xxxx
Respondents To Chip, Yap and Balila no longer filed a separate answer, adopting
instead the answer of DBP.[35] These requirements, however, were unceremoniously returned by
[respondent] bank with the assurance that since there was no other bidder
In an Order[36] dated July 31, 1991, the RTC granted the prayer of petitioners for of the said property, there was no urgency for the same and that [Cebu
the issuance of a writ of preliminary injunction.[37] Bionic] also, in all events, is entitled to first option being the present
lessee.
On April 25, 1997, the RTC rendered judgment in Civil Case No. CEB-10104,
finding meritorious the complaint of the petitioners. Explained the trial court: The declaration of Atty. Panal to the effect that Cebu Bionic wanted to buy
the property on installment terms, such that the deposit of P184,000.00
It is a fact on record that [petitioners] complied with the requirements of was insufficient being only 10% of the offer, could not be given much
deposit and advance rental as conditions for constitution of lease between credence as it is refuted by Exh. H which is the negotiated offer to
the parties. [Petitioners] in complying with the requirements, issued a time purchase form under the 15-day acceptance period accomplished by
deposit in the amount of P11,395.64 and remitted faithfully its monthly [petitioners] which shows clearly the written word Cash after the printed
rentals until April, 1991, which monthly rental was no longer accepted by words Term and Mode of Payment, Exhibit J, the Managers check issued
the DBP.Although there was no formal written contract executed by Allied Banking Corporation dated December 3, 1990 in the amount
between [respondent] DBP and the [petitioners], it is very clear that of P184,000.00 representing 10% of the offer showing the mode of
DBP opted to continue the old and previous contract including the payment is for cash; Exhibit K which is the application for Managers check
terms thereon by accepting the requirements contained in paragraph in the amount of P184,000.00 dated December 3, 1990 showing the
 beneficiary as DBP. If it is true that the offer of [petitioners] was for [Cebu Bionics] right of first priority to buy the property under the contract
installment payments, then in the ordinary course of human of lease. x x x The Court is convinced that [respondents To Chip, Yap and
behavior, it would not have wasted effort in securing a Managers Balila] knew that [Cebu Bionic] was the present lessee of the property
check in the amount of P184,000.00 which was insufficient for 20% before they bought the same from [respondent] bank. Common
deposit as required for installment payments. More credible is the observation, knowledge and experience dictates that as a prudent
explanation [given by] witness Judy Garces when she said that DBP businessman, it was but natural that he ask Lydia Sia what her status was
through Atty. Panal returned the documents submitted by her, in occupying the property when he went to talk to her, that he ask her if
saying that there was no urgency for the same as there was no other she was a lessee. But he said, all he asked her was whether she was
bidder of [the said] property and that Cebu Bionic was entitled to a interested to buy the property. x x x.[40]
first option to buy being the present lessee. In the letter also of
[respondent] bank dated June 18, 1987, it is important to note that aside
from requiring Cebu Bionic to comply with certain requirements of time The trial court, therefore, concluded that:
deposit and advance rental, as condition for constitution of lease between
the parties and which was complied by Cebu Bionic[,] said letter further From the foregoing facts on record, it is thus clear that [petitioner] Cebu
states in paragraph 3 thereof that in case there is [a] better offer or if the Bionic is the present lessee of the property, the lease contract having
property will be subject of a purchase offer, within the term, the lessee is been continued by [respondent] DBP when it received rental payments up
given the option of first refusal, otherwise, he has to vacate the premises to March of 1991 as well as the advance rental for one year represented
within thirty days. In answer to the Courts question, however, Atty. Panal by the assigned time deposit which is still in [respondent] banks
admitted that he did not tell [petitioners] that there was another party who possession. The provision, therefore, in the lease contract, on the right of
was willing to purchase the property, in violation of [petitioners] right of first option to buy and the right of first refusal contained in [respondent]
first refusal.[39] (Emphasis ours.) banks letter dated June 18, 1987, are still subsisting and binding up to the
present, not only on [respondent] bank but also on [respondents To Chip,
Likewise, the RTC found that respondents To Chip, Yap and Balila were aware of the lease Yap and Balila]. x x x.
contract involving the subject properties before they purchased the same from DBP.Thus:
xxxx
[Respondent] Jose To Chip lamely pretends ignorance that [petitioners]
are lessees of the property, subject matter of this case. He states that he WHEREFORE, THE FOREGOING PREMISES CONSIDERED, judgment
and his partners, the other [respondents], were given assurances by Atty. is hereby rendered:
Panal of the DBP that [Lydia Sia] is not a lessee, although he knew that
[petitioners] were presently occupying the property and that it was (1) Rescinding the Deed of Sale dated December 28, 1990
possessed by [petitioners] even before it was owned by the DBP. x x x. between [respondent] Development Bank of the Philippines
and [respondents] Roger Balila, Jose To Chip and Patricio
xxxx Yap;

[Respondent] Roger Balila, in his testimony, likewise pretended ignorance (2) Ordering the [respondent] Development Bank of the
that he knew that [Lydia Sia] was a lessee of the property. x x x. Philippines to execute a Deed of Sale over the property,
subject matter of this case upon payment by [petitioners] of
xxxx the whole consideration involved and to complete all acts or
documents necessary to have the title over said property
Upon further questioning by the Court, he admitted that [Lydia Sia] was transferred to the name of [petitioners];
not possessing the building freely; that she was a lessee of Rudy Robles,
the former owner, but cleverly insisted in disowning knowledge that [Lydia (3) Costs against [respondents].[41]
Sia] was a lessee, denying knowledge that [Lydia Sia] was paying rentals
to [respondent] bank. His pretended ignorance x x x was a way of evading
 DBP forthwith filed a Notice of Appeal.[42] Respondents To Chip, Yap and Balila whether she was interested to buy the property. x x
filed a Motion for Reconsideration[43] of the above decision, but the RTC denied the same in x.
an Order[44] dated July 4, 1997. Said respondents then filed their Notice of Appeal.[45]
Moreover, We find that the submissions presented by the
On February 14, 2001, the Court of Appeals promulgated its [respondents] in their respective briefs argue against questions of facts as
Decision,[46] pronouncing that: found and determined by the lower court. The respondents contentions
consist of crude attempts to question the assessment and evaluation of
We find nothing erroneous with the judgment rendered by the testimonies and other evidence gathered by the trial court.
trial court. Perforce, We sustain it and dismiss the [respondents]
submission. It must be remembered that findings of fact as determined by the
trial court are entitled to great weight and respect from appellate courts
The RTC determined, upon evidence on record after a careful and should not be disturbed on appeal unless for [strong] and cogent
evaluation of the witnesses and their testimonies during the trial that reasons. These findings generally, so long as supported by evidence on
indeed [petitioners] right of first option was violated and thus, rescission of record, are not to be disturbed unless there are some facts or evidence
the sale made by DBP to [respondents To Chip, Yap and Balila] are in which the trial court has misappreciated or overlooked, and which if
order. considered would have altered the results of the entire case. Sad to say
for the [respondents], We see no reason to depart from this well-settled
xxxx legal principle.

Apparently, DBP accepted [the documents submitted by WHEREFORE, in view of the foregoing, the judgment of the
petitioners] and thereafter, through Atty. Panal (of DBP), returned all of it Regional Trial Court of Cebu City, Branch 8, in Civil Case No. 10104 is
to the [petitioners] with the assurance that since there was no other bidder hereby AFFIRMED in toto.[47]
of the said property, there was no urgency for the same and that [Cebu
Bionic] also, in all events, is entitled to first option being the present
lessee. On October 1, 2001, petitioners filed a Motion for Issuance of Entry of
Judgment.[48] Petitioners stressed that, based on the records of the case, respondents were
[DBP] maintains that the return of the documents [submitted by served a copy of the Court of Appeals Decision dated February 14, 2001 sometime on
petitioners] was in order since the [petitioners] offered to buy the property March 7, 2001. However, petitioners discovered that respondents have not filed any motion
in question on installment basis requiring a higher 20% deposit. This, for reconsideration of the said decision within the reglementary period therefor, nor was
however, was correctly rejected by the trial court[.] x x x there any petition for certiorari or appeal filed before the Supreme Court.

The binding effect of the lease agreement upon the [respondents In response to the above motion, respondents To Chip, Yap and Balila filed on
To Chip, Yap and Balila] must be sustained since from existing October 8, 2001 a Motion to Admit Motion for Reconsideration. [49] Atty. Francis M. Zosa, the
jurisprudence cited by the lower court, it was determined during trial that: counsel for respondents To Chip, Yap and Balila, explained that he sent copies of the
motion for reconsideration to petitioners and DBP via personal delivery. On the other hand,
... [respondents To Chip, Yap and Balila] the copies of the motion to be filed with the Court of Appeals were purportedly sent to Mr.
knew that [Cebu Bionic] was the present lessee of Domingo Tan, a friend of Atty. Zosa in Quezon City, who agreed to file the same personally
the property before they bought the same from with the appellate court in Manila. When Atty. Zosa inquired if the motion for reconsideration
[respondent] bank.Common observation, knowledge was accordingly filed, Mr. Tan allegedly answered in the affirmative. To his surprise, Atty.
and experience dictates that as a prudent Zosa received a copy of petitioners Motion for Issuance of Entry of Judgment. Atty. Zosa,
businessman, it was but natural that he ask Lydia thus, attributed the failure of his clients to file a motion for reconsideration on the mistake,
Sia what her status was in occupying the property excusable negligence and/or fraud committed by Mr. Tan.
when he went to talk to her, that he ask her if she
was a lessee. But he said, all he asked her was
 In the assailed Resolution dated February 5, 2002, the Court of Appeals granted
the motion of respondents To Chip, Yap and Balila and admitted the motion for That the term of the agreement shall start
reconsideration attached therewith in the higher interest of substantial justice.[50] on November 1, 1981 and shall terminate on the last
day of every month thereafter, provided however,
On July 5, 2002, the Court of Appeals reversed its original Decision dated February that this contract shall be automatically renewed on
14, 2001, reasoning thus: a month to month basis if no notice in writing is
sent to the other party to determine to terminate
After a judicious review and reevaluation of the evidence and this agreement after fifteen (15) days from the
facts on record, we are convinced that DBP had terminated the Robles receipt of said notice.
lease contract. From its letter of June 18, 1987, DBP had expressly
notified [petitioners] that (I)f they wish to continue on leasing the property Here, a notice was sent to [petitioners] on June 18, 1987, informing them
x x x to come to the Bank for the execution of a Contract of Lease, the that if they wish to continue on leasing the property, we request you to
salient conditions of which are as follows: come to the Bank for the execution of a Contract of Lease x x x.

1. The lease will be on a month to month basis for a [Petitioners] failed to enter into the contract of lease required by
maximum period of one (1) year; DBP for it to continue occupying the leased premises.

2. Deposit equivalent to two (2) months rental and advance Because of [petitioners] failure to comply with the conditions
of one (1) month rental, and the remaining amount for one year embodied in the 18 June 1987 letter, it cannot be said that [petitioners]
(equivalent to 9 months rental) shall be secured by either surety entered into a new contract with DBP where they were given the first
bond, cash bond or assigned time deposit; option to buy the leased property and to match offers from outside parties.

3. That in case there is a better offer or if the property will be xxxx

subject of a purchase offer, within the term, the lessor is given an
option of first refusal, otherwise he has to vacate the premises Be that as it may, DBP continued to accept the monthly rentals
within thirty (30) days from date of notice. based on the old Robles contract despite the fact that the [petitioners]
failed to enter into a written lease contract with it.Corollarily, the relations
We consider, temporarily, the current monthly rental based on between the parties is now governed by Article 1670 of the New Civil
the six-month receipts, which we require you to submit, until such time Code, thus:
when we will fix the amount accordingly.
Art. 1670. If at the end of contract the lessee
Evidently, except for the remittance of the monthly rentals up to should continue enjoying the thing leased for fifteen
March 1991, the conditions imposed by DBP have never been complied days with the acquiescence of the lessor, and unless a
with. [Petitioners] did not go to the Bank to sign any new written contract notice to the contrary by either party has previously
of lease with DBP. [Petitioners] also did not put up a surety bond nor cash been given, it is understood that there is an implied new
bond nor assign a time deposit to secure the payment of rental for nine (9) lease, not for the period of the original contract, but for
months, although the [petitioners] opened a time deposit but did not the time established in Articles 1682 and 1687. The
assign it to DBP. other terms of the original contract shall be revived.

But even with the remittance and acceptance of the deposit xxxx
made by [petitioners] equivalent to two (2) months rental and advance of
one (1) month rental it does not necessarily follow that DBP opted to x x x [T]he acceptance by DBP of the monthly rentals does not
continue with the Robles lease. This is because the Robles contract mean that the terms of the Robles contract were revived. In the case
provides: of Dizon vs. Court of Appeals, the Supreme Court declared that:
 B) MAIN AND PRINCIPAL ISSUES IN THE INSTANT PETITION:
The other terms of the original contract of
lease which are revived in the implied new lease under I
Article 1670 of the New Civil Code are only those terms
which are germane to the lessees right [of] continued WHETHER OR NOT THE HON. COURT OF APPEALS ERRED IN
enjoyment of the property leased an implied new lease ADMITTING RESPONDENTS MOTION FOR RECONSIDERATION
does not ipso facto carry with it any implied revival of DESPITE ITS BEING FILED OUT OF TIME
any option to purchase the leased premises.

In view of the foregoing, it is clear that [petitioners] had no right

to file a case for rescission of the deed of sale executed by DBP in II
favor of [respondents To Chip, Yap and Balila] because said deed of sale
did not violate their alleged first option to buy or match offers from outside WHETHER OR NOT THE HON. COURT OF APPEALS ERRED IN
parties which is legally non-existent and which was not impliedly renewed DECLARING THAT PETITIONERS DID NOT ENTER INTO CONTRACT
under Article 1670 of the Civil Code. WITH RESPONDENT DBP CONTINUING THE TERMS OF THE
ROBLES CONTRACT
WHEREFORE, premises considered, the 14 February 2001
Decision is hereby RECONSIDERED and another one is issued III
REVERSING the 25 April 1997 Decision of the Regional Trial Court,
Branch 8, Cebu City in Civil Case No. CEB-10104 and the complaint of WHETHER OR NOT THE HON. COURT OF APPEALS ERRED WHEN
[petitioners] is DISMISSED for lack of merit.[51] IT DECLARED THAT THE CONTINUATION BY RESPONDENT DBP OF
Without seeking a reconsideration of the above decision, petitioners filed the THE LEASE CONTRACT DID NOT CONTAIN THE RIGHT OF FIRST
instant petition. In their Comment, respondents opposed the petition on both procedural and REFUSAL
substantive grounds.
IV
In petitioners Memorandum, they summarized the issues to be resolved in the
present case as follows: WHETHER OR NOT THE HON. COURT OF APPEALS ERRED WHEN
IT DECLARED THAT THE LEASE CONTRACT IS GOVERNED BY ART.
A) PRELIMINARY ISSUES: 1670 OF THE NEW CIVIL CODE

I V

WHETHER OR NOT THE VERIFICATION (AND CERTIFICATION OF WHETHER OR NOT THE HON. COURT OF APPEALS ERRED WHEN
NON-FORUM SHOPPING) IN THE INSTANT PETITION WAS PROPER IT FAILED TO RECOGNIZE PETITIONERS RIGHT OF FIRST REFUSAL
AND VALID DESPITE ITS BEING SIGNED BY ONLY ONE OF THE TWO TO WHICH RESPONDENTS WERE BOUND
PETITIONERS.
VI
II
WHETHER OR NOT THE HON. COURT OF APPEALS ERRED WHEN
WHETHER OR NOT ONLY QUESTIONS OF LAW AND NOT OF FACT IT FAILED TO DECLARE THAT RESPONDENT DBP HAD VIOLATED
CAN BE RAISED IN THE INSTANT PETITION BEFORE THIS HON. PETITIONERS RIGHTS
SUPREME COURT.
VII
 WHETHER OR NOT THE HON. COURT OF APPEALS ERRED IN
REVERSING ITS OWN JUDGMENT AND DISMISSING PETITIONERS
CLAIM FOR RESCISSION[52] Respondents To Chip, Yap and Balila next argue that the instant petition raises
questions of fact, which are not allowed in a petition for review on certiorari. They, therefore,
submit that the factual findings of the Court of Appeals are binding on this Court.
We shall first resolve the preliminary issues.
Section 1, Rule 45 of the Rules of Court categorically states that the petition filed
Respondents To Chip, Yap and Balila argue that the instant petition should be dismissed thereunder shall raise only questions of law, which must be distinctly set forth. A question of
outright as the verification and certification of non-forum shopping was executed only by law arises when there is doubt as to what the law is on a certain state of facts, while there is
petitioner Lydia Sia in her personal capacity, without the participation of Cebu Bionic. a question of fact when the doubt arises as to the truth or falsity of the alleged facts. For a
question to be one of law, the same must not involve an examination of the probative value
The Court is not persuaded. of the evidence presented by the litigants or any of them. The resolution of the issue must
rest solely on what the law provides on the given set of circumstances. Once it is clear that
Except for the powers which are expressly conferred on it by the Corporation Code the issue invites a review of the evidence presented, the question posed is one of fact. [57]
and those that are implied by or are incidental to its existence, a corporation has no
powers. It exercises its powers through its board of directors and/or its duly authorized The above rule, however, admits of certain exceptions, [58] one of which is when the
officers and agents. Thus, its power to sue and be sued in any court is lodged with the findings of the Court of Appeals are contrary to those of the trial court. As will be discussed
board of directors that exercises its corporate powers. [53] Physical acts, like the signing of further, this exception is attendant in the case at bar.
documents, can be performed only by natural persons duly authorized for the purpose by
corporate by-laws or by a specific act of the board of directors.[54] We now determine the principal issues put forward by petitioners.

In this case, respondents To Chip, Yap and Balila obviously overlooked the First off, petitioners fault the Court of Appeals for admitting the Motion for
Secretarys Certificate[55] attached to the instant petition, which was executed by the Reconsideration of its Decision dated February 14, 2001, which was filed by respondents To
Corporate Secretary of Cebu Bionic. Unequivocally stated therein was the fact that the Chip, Yap and Balila more than six months after receipt of the said decision. The motion
Board of Directors of Cebu Bionic held a special meeting on July 26, 2002 and they thereby was eventually granted and the Court of Appeals issued its assailed Amended Decision,
approved a Resolution authorizing Lydia Sia to elevate the present case to this Court in ruling in favor of respondents.
behalf of Cebu Bionic, to wit:
Indeed, the appellate courts Decision dated February 14, 2001 would have
Whereas, the board appointed LYDIA I. SIA to act and in behalf ordinarily attained finality for failure of respondents to seasonably file their Motion for
of the corporation to file the CERTIORARI with the Supreme Court in Reconsideration thereon. However, we agree with the Court of Appeals that the higher
relations to the decision of the Court of Appeals dated July 5, 2002 which interest of substantial justice will be better served if respondents procedural lapse will be
reversed its own judgment earlier promulgated on February 14, 2001 excused.
entitled CEBU BIONIC BUILDERS SUPPLY, INC. and LYDIA SIA,
(Petitioners- Appellants) versus THE DEVELOPMENT BANK OF THE Verily, we had occasion to apply this liberality in the application of procedural rules
PHILIPPINES, JOSE TO CHIP, PATRICIO YAP and ROGER BALILA in Barnes v. Padilla[59] where we aptly declared that
(Respondents- Appelles), docketed CA-G.R. NO. 57216.
The failure of the petitioner to file his motion for reconsideration within the
Whereas, on mass unanimously motion of all members of period fixed by law renders the decision final and executory. Such failure
directors present hereby approved the appointment of LYDIA I. SIA to act carries with it the result that no court can exercise appellate jurisdiction to
and sign all papers in connection of CA-G.R. NO. 57216. review the case. Phrased elsewise, a final and executory judgment can no
longer be attacked by any of the parties or be modified, directly or
Resolved and it is hereby resolve to appoint and authorized indirectly, even by the highest court of the land.
LYDIA I. SIA to sign and file with the SUPREME COURT in connection to
decision of the Court of Appeals as above mention. [56]
 However, this Court has relaxed this rule in order to serve foreclosure sale, as a rule, may terminate an unregistered lease except when it knows of the
substantial justice considering (a) matters of life, liberty, honor or property, existence of the lease.
(b) the existence of special or compelling circumstances, (c) the merits of
the case, (d) a cause not entirely attributable to the fault or negligence of In the instant case, the lease contract between petitioners and Rudy Robles was
the party favored by the suspension of the rules, (e) a lack of any showing not registered.[62] During trial, DBP denied having any knowledge of the said lease
that the review sought is merely frivolous and dilatory, and (f) the other contract.[63] It asserted that the lease was merely presumed in view of the existence of
party will not be unjustly prejudiced thereby.[60] tenants in the subject property.[64] Nevertheless, DBP recognized and acknowledged this
lease contract in its letter dated June 18, 1987, which was addressed to Bonifacio Sia, then
President of Cebu Bionic. DBP even required Sia to pay the monthly rental for the month of
In this case, what are involved are the property rights of the parties given that, June 1987, thereby exercising the right of the previous lessor, Rudy Robles, to collect the
ultimately, the fundamental issue to be determined is who among the petitioners and rental payments from the lessee. In the same letter, DBP extended an offer to Cebu Bionic
respondents To Chip, Yap and Balila has the better right to purchase the subject to continue the lease on the subject property, outlining the provisions of the proposed
properties. More importantly, the merits of the case sufficiently called for the suspension of contract and specifically instructing the latter to come to the bank for the execution of the
the rules in order to settle conclusively the rights and obligations of the parties herein. same. DBP likewise gave Cebu Bionic a 30-day period within which to act on the said
contract execution. Should Cebu Bionic fail to do so, it would be deemed uninterested in
In essence, the questions that must be resolved are: 1) whether or not there was a continuing with the lease. In that eventuality, the letter states that Cebu Bionic should vacate
contract of lease between petitioners and DBP; 2) if in the affirmative, whether or not this the premises within the said period.
contract contained a right of first refusal in favor of petitioners; and 3) whether or not
respondents To Chip, Yap and Balila are likewise bound by such right of first refusal. Instead of acceding to the terms of the aforementioned letter, the counsel of Cebu
Bionic sent a counter-offer to DBP dated July 7, 1987, suggesting a different mode of
Petitioners contend that there was a contract of lease between them and DBP, payment for the rentals and requesting for a 60-day period within which time the parties will
considering that they had been allowed to occupy the premises of the subject property from execute a new contract of lease.
1987 up to 1991 and DBP received their rental payments corresponding to the said
period. Petitioners claim that DBP were aware of their lease on the subject property when The parties, however, failed to execute a written contract of lease. Petitioners put
the latter foreclosed the same and the acquisition of the subject properties through the blame on DBP, asserting that no contract was signed because DBP did not prepare it for
foreclosure did not terminate the lease. Petitioners subscribe to the ruling of the RTC that them. DBP, on the other hand, counters that it was petitioners who did not positively act on
even if there was no written contract of lease, DBP chose to continue the existing contract of the conditions for the execution of the lease contract. In view of the counter-offer of
lease between petitioners and Rudy Robles by accepting the requirements set down by petitioners, DBP and respondents To Chip, Yap and Balila argue that there was no meeting
DBP on the letter dated June 18, 1987. Petitioners likewise posit that the contract of lease of minds between DBP and petitioners, which would have given rise to a new contract of
between them and Rudy Robles never expired, inasmuch as the contract did not have a lease.
definite term and none of the parties thereto terminated the same. In view of the
continuation of the lease contract between petitioners and Rudy Robles, petitioners submit The Court rules that, indeed, no new contract of lease was ever perfected between
that Article 1670 of the Civil Code on implied lease is not applicable on the instant case. petitioners and DBP.

We are not persuaded. In Metropolitan Manila Development Authority v. JANCOM Environmental

Corporation,[65] we emphasized that:
In Uy v. Land Bank of the Philippines,[61] the Court held that [i]n respect of the
lease on the foreclosed property, the buyer at the foreclosure sale merely succeeds to the Under Article 1305 of the Civil Code, [a] contract is a meeting of
rights and obligations of the pledgor-mortgagor subject to the provisions of Article 1676 of minds between two persons whereby one binds himself, with respect to
the Civil Code on its possible termination. This article provides that [t]he purchaser of a the other, to give something or to render some service. A contract
piece of land which is under a lease that is not recorded in the Registry of Property may undergoes three distinct stages preparation or negotiation, its perfection,
terminate the lease, save when there is a stipulation to the contrary in the contract of sale, and finally, its consummation. Negotiation begins from the time the
or when the purchaser knows of the existence of the lease. In short, the buyer at the prospective contracting parties manifest their interest in the contract and
ends at the moment of agreement of the parties. The perfection or birth of
 the contract takes place when the parties agree upon the essential
elements of the contract. The last stage is the consummation of the The so-called requirements enumerated in the above paragraph are not really
contract wherein the parties fulfill or perform the terms agreed upon in the requirements to be complied with by the petitioners for the execution of the proposed lease
contract, culminating in the extinguishment thereof (Bugatti vs. CA, 343 contract, as apparently considered by the RTC and the petitioners. A close reading of the
SCRA 335 [2000]). Article 1315 of the Civil Code, provides that a contract letter reveals that the items enumerated therein were in fact the salient terms and conditions
is perfected by mere consent. Consent, on the other hand, is manifested of the proposed contract of lease, which the DBP and the petitioners were to execute if the
by the meeting of the offer and the acceptance upon the thing and the latter were so willing. Also, the Certificate of Time Deposit in the amount of P11,395.64,
cause which are to constitute the contract (See Article 1319, Civil Code). which was allegedly paid to DBP as advance rental deposit pursuant to the said
x x x.[66] requirements, was not even clearly established as such since it was neither secured by a
security bond or a cash bond, nor was it assigned to DBP.

In the case at bar, there was no concurrence of offer and acceptance vis--vis the The contention that the lease contract between petitioners and Rudy Robles did
terms of the proposed lease agreement. In fact, after the reply of petitioners counsel dated not expire, given that it did not have a definite term and the parties thereto failed to
July 7, 1987, there was no indication that the parties undertook any other action to pursue terminate the same, deserves scant consideration. To recall, the second paragraph of the
the execution of the intended lease contract. Petitioners even admitted that they merely terms and conditions of the contract of lease between petitioners and Rudy Robles reads:
waited for DBP to present the contract to them, despite being instructed to come to the bank
for the execution of the same.[67] 2. That the term of this agreement shall start on November 1, 1981 and
shall terminate on the last day of every month thereafter; provided
Contrary to the ruling of the RTC, the Court is also not convinced that DBP opted however that this contract shall be automatically renewed on a month
to continue the existing lease contract between petitioners and Rudy Robles. to month basis if no notice, in writing, is sent to the other party to
terminate this agreement after fifteen (15) days from receipt of said
The findings of the RTC that DBP supposedly accepted the requirements the latter notice.[69] (Emphases ours.)
set forth in its letter dated June 18, 1987 is not well taken. To recapitulate, the third
paragraph of the letter reads:
Crystal clear from the above provision is that the lease is on a month-to-month
If you wish to continue on leasing the property, we request you to basis. Relevantly, the well-entrenched principle is that a lease from month-to-month is with a
come to the Bank for the execution of a Contract of Lease, the definite period and expires at the end of each month upon the demand to vacate by the
salient conditions of which are as follows: lessor.[70] As held by the Court of Appeals in the assailed Amended Decision, the above-
mentioned lease contract was duly terminated by DBP by virtue of its letter dated June 18,
1. The lease will be on month to month basis, for a maximum 1987. We reiterate that the letter explicitly directed the petitioners to come to the office of
period of one (1) year; the DBP if they wished to enter into a new lease agreement with the said bank. Otherwise, if
no contract of lease was executed within 30 days from the date of the letter, petitioners were
2. Deposit equivalent to two (2) months rental and advance of to be considered uninterested in entering into a new contract and were thereby ordered to
one (1) month rental, and the remaining amount for one vacate the property. As no new contract was in fact executed between petitioners and DBP
year period (equivalent to 9 months rental) shall be within the 30-day period, the directive to vacate, thus, took effect. DBPs letter dated June
secured by either surety bond, cash bond or assigned 18, 1987, therefore, constituted the written notice that was required to terminate the lease
time deposit; agreement between petitioners and Rudy Robles. From then on, the petitioners continued
possession of the subject property could be deemed to be without the consent of DBP.
3. That in case there is a better offer or if the property
will be subject of a purchase offer, within the term, the Thusly, petitioners assertion that Article 1670 of the Civil Code is not applicable to
lessor is given an option of first refusal, otherwise he the instant case is correct. The reason, however, is not that the existing contract was
has to vacate the premises within thirty (30) days from continued by DBP, but because the lease was terminated by DBP, which termination was
date of notice.[68] accompanied by a demand to petitioners to vacate the premises of the subject property.
 Article 1670 states that [i]f at the end of the contract the lessee should continue the care of the property, the responsibility for repairs, etc. But no such
enjoying the thing leased for fifteen days with the acquiescence of the lessor, and unless a presumption may be indulged in with respect to special agreements which
notice to the contrary by either party has previously been given, it is understood that there is by nature are foreign to the right of occupancy or enjoyment inherent in a
an implied new lease, not for the period of the original contract, but for the time established contract of lease.[73]
in Articles 1682 and 1687. The other terms of the original contract shall be revived. In view
of the order to vacate embodied in the letter of DBP dated June 18, 1987 in the event that
no new lease contract is entered into, the petitioners continued possession of the subject DBP cannot, therefore, be accused of violating the rights of petitioners when it
properties was without the acquiescence of DBP, thereby negating the constitution of an offered the subject properties for sale, and eventually sold the same to respondents To
implied lease. Chip, Yap and Balila, without first notifying petitioners. Neither were the said respondents
bound by any right of first refusal in favor of petitioners. Consequently, the sale of the
Contrary to the ruling of the RTC, DBPs acceptance of petitioners rental payments subject properties to respondents was valid. Petitioners claim for rescission was properly
of P5,000.00 for the period of November 1990 to March 1991 did not likewise give rise to an dismissed.
implied lease between petitioners and DBP. In Tagbilaran Integrated Settlers Association
(TISA) Incorporated v. Court of Appeals,[71] we held that the subsequent acceptance by the WHEREFORE, the Petition for Review on Certiorari under Rule 45 of the Rules of
lessor of rental payments does not, absent any circumstance that may dictate a contrary Court is DENIED. The Resolution dated February 5, 2002 and the Amended Decision dated
conclusion, legitimize the unlawful character of their possession. In the present case, the July 5, 2002 of the Court of Appeals in CA-G.R. CV No. 57216 are hereby AFFIRMED. No
petitioners rental payments to DBP were made in lump sum on March 22, costs.
1991. Significantly, said payments were remitted only after petitioners were notified of the
sale of the subject properties to respondents To Chip, Yap and Balila and after the SO ORDERED.
petitioners were given a final demand to vacate the properties. These facts substantially
weaken, if not controvert, the finding of the RTC and the argument of petitioners that the
latter were faithfully remitting their rental payments to DBP until the year 1991.

Thus, having determined that the petitioners and DBP neither executed a new
lease agreement, nor entered into an implied lease contract, it follows that petitioners claim
of entitlement to a right of first refusal has no leg to stand on. Furthermore, even if we were
to grant, for the sake of argument, that an implied lease was constituted between petitioners
and the DBP, the right of first refusal that was contained in the prior lease contract with
Rudy Robles was not renewed therewith. This is in accordance with the ruling in Dizon v.
Magsaysay,[72] which involved the issue of whether a provision regarding a preferential right
to purchase is revived in an implied lease under Article 1670, to wit:

[T]he other terms of the original contract which are revived in the implied
new lease under Article 1670 are only those terms which are germane to
the lessees right of continued enjoyment of the property leased. 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,