Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. 66 May 1, 1902

GEORGE M. SAUL, plaintiff-appellant,

Jose Robles Lahesa, for appellant.

ARELLANO, C.J.:

On the 8th of August, 1900, D. Canuto Rivera sold to George M. Saul a house and lot at No.
14 Aguilar Street, Iloilo, P.I., by deed recorded in the property register on September 13 of
the same year.

On the 29th of the same month Mr. Saul, in an act of conciliation with Mr. Dalton, stated that
on the 8th he had bought the said house, and "as Mr. Dalton has subleased the house, he
demands that the latter deliver to him each month the entire amount of the rental under the
sublease," to which the defendant replied that as he had a contract of lease with Mr. Canuto
Rivera he did not consider himself under any obligation to turn over the entire amount of the
monthly rental, but simply the amount which he had agreed to pay Mr. Rivera.

On October 30 of the same year Mr. Saul, invoking article 348 of the Civil Code, according to
which the owner of property is entitled to dispose of the thing owned by him without other
limitation than that established by the laws and articles 2, 23, and 27 of the Mortgage Law,
under which a lease, executed by the former owner of the property by means of a public
instrument and recorded in the register of property, is a limitation established by law with
respect to a third person who acquires by sublease, and affirming that the lease of the
property to Dalton by Rivera, because it is a mere private agreement, does not bind Mr. Saul
and can not constitute a gravamen upon the property which the purchaser is bound to
respect, prayed the court to declare "the nullity of the gravamen which Mr. Dalton claims to
have on the house purchased and to order him to deliver to Mr. Saul the total amount of the
rental received from the date on which the latter purchased the house, with the costs."

On the 28th of November following counsel for Mr. Dalton answered the complaint, and, for
the purpose of determining the issue before alleging the facts constituting his defense,
stated: "And as the gravamen which my client contends to have upon the property in
question is a contract of lease of the same entered into with Mr. Rivera, we conclude that this
action is brought for the annulment of this contract of lease." Upon this basis he alleged the
following facts as relevant to the issues: (1) That it is not true that the contract of lease in
favor of Mr. Dalton is a private agreement; (2) that if it was such originally it was
subsequently authenticated by the acknowledgment of its authenticity in court by Rivera in
an action concerning the validity of the sublease by Dalton before the justice court, in which
Dalton had won the suit; that this judgment had been preventively annotated in the property
register after Rivera had recorded in a notarial act a description of the property in question.
The contract of lease having these conditions, in his third conclusion of the law he draws the
inference that "It results that this lease is enforceable not only against the person with whom
the contract was made but also against a third person, such as is Mr. Saul." And in his fourth
conclusion of law he states that with respect to Mr. Saul, not only is the contract of lease in
question enforceable against him because the same was preventively annotated in the
property register, but also because before purchasing the house in question he had
knowledge of the existence of the contract, and he who purchases property, knowing the
same to be encumbered, is understood to take it subject to the gravamen, and therefore is
under obligation to accept the same.
The plaintiff in his replication, presenting the question in the same terms, said: "The
affirmation of the adverse party that we, in seeking to obtain a declaration of the nullity of
the gravamen of the lease which Mr. Dalton claims to have upon the house No. 14 Aguilar
Street, are also seeking to obtain the nullity of the contract of lease entered into as alleged
between his client, Mr. Dalton, and Mr. Canuto Rivera is wholly erroneous. It is apparent that
the adverse party has not perceived that these are two distinct questions and that they can
and do exist separately. The gravamen of the lease may be declared void, as prayed for by
Mr. Saul, and the contract of lease entered into between Dalton and Rivera still be valid and
binding. In no part of our complaint have we discussed the nullity of the contract of lease,
because it is our understanding that this is a matter completely distinct from the purpose of
our complaint. ... As a final argument the defendant states that the contract was ratified by
Mr. Rivera before a notary public and was afterwards preventively annotated and registered,
and that therefore it was converted into a public document, and, in consequence, Mr. Saul is
obliged to respect it. We do not deny the first paragraph of the replication of the adverse
party, but at the same time we contend that the document in question is not a public
document, and, with respect to the purchaser, Mr. Saul, is unenforceable. ... This lack of
legal efficacy is demonstrated by the dates of the acts which are alleged to make the lease
entered into with the former owner binding upon the new owner, and which are as follows:
The ratification of the notarial act, September 28; the annotation in the register, October 26,
and the date of the purchase, August 8." In the fourth paragraph of the replication the plaintiff
says: "As before stated, we do not discuss the validity or lack of validity of the contract in
question, as that is not in issue. If the adverse party had made a careful examination of the
complaint he would perhaps have seen that we take for granted the existence of some verbal
or written contract in seeking to obtain a declaration of the nullity of the gravamen of lease, a
thing which would not be asked if the lease did not exist, as the adverse party might well
have understood."

The terms of the only question put in issue by the complaint and answer are well defined.
These pleadings present the issue for all legal purposes, and the terms of the question can
not subsequently be altered. We can not take into consideration the other question,
improperly raised in the replication and rejoiner, with respect to the nullity of the contract of
lease itself, upon the ground, apparently, that the stipulation was for the use of the house for
such period as the lessee might desire to keep it. Article 531 of the Law of Civil Procedure of
1888 prohibits a variance from the claims advanced and defenses set up in the complaint
and answer, which should be the principal object of the suit. Apart from this no discussion
can be had upon a matter not involved in the case, and in this case there is no such contract
of lease.

There is no question that the position taken by the defendant before the presentation of the
complaint and still maintained is that of considering the lease executed by Rivera upon the
property purchased by Mr. Saul as an incumbrance, and of insisting upon Mr. Saul's
respecting the contract. Mr. Saul accordingly attempted to free his property from the alleged
incumbrance and asked the court to declare the property free from this gravamen in the
following words: "To declare the nullity of the lease which Mr. Dalton alleges to exist upon
the house purchased."

The court must determine whether the plaintiff has the right asserted by him and whether the
action brought is the proper one.

The existence of an unrecorded lease, executed in favor of the defendant by the grantor, is
taken for granted. There is no allegation that in the contract any agreement has been made
that it was to be respected by the purchaser or any other subsequent transferee.

A contract of lease executed by the vendor, unless recorded, ceases to have effect when the
property is sold, in the absence of a contrary agreement. The right to use the house is one of
the rights inherent in the dominiumtransferred by the vendor to the vendee. The contract
between the lessor and the lessee does not, however, cease to be binding if the term
stipulated in the contract has not expired, as the transfer of the dominium and other rights
over the thing does not free the vendor from liability under the personal actions arising from a
contract of lease.

But these personal actions do not bind the purchaser in his capacity as successor by
singular title in the absence of an express agreement between the lessor and the lessee —
an express agreement which must, in turn, become a personal obligation of the purchaser. If
the lease is recorded it is no longer merely a personal right on the part of the lessee to
continue to enjoy the property leased, even after the same is sold. It is also a real right,
made such by recordation, and constitutes an incumbrance upon the property, whoever may
be its owner or possessor, and is therefore enforceable even against third persons.

The lease in question does not constitute a real right. The subject of the preventive
annotation was a judgment which refused "to declare the nullity of the contract of sublease
entered into between the said Enrique Dalton and the present sub-lessee of the house
belonging to the said Canuto Rivera." This is not such a recordation of the lease as to
constitute a real right, and which, when inscribed in the register to give it publicity, plainly
shows to anyone intending to purchase the property the existence of an incumbrance
consisting in the deprivation of the right to use the house during the time stipulated in the
recorded lease.

Taking for granted the existence of this sublease, attested in the judgment preventively
annotated, it appears that at the date of the complaint it was not the defendant, Dalton, but
the sub-lessee who had actual possession of the property. Article 445 of the Civil Code
provides that possession de facto can not be recognized in two distinct persons, except in
cases of tenancies in common. The sub-lessee, therefore, might continue to enjoy this
possession with the toleration of the new purchaser, but it would not be a continuation of the
civil possession of Canuto Rivera; that is, it could not be considered as a possession in the
name of the owner who had conveyed away his civil possession, together with his dominion,
by executing the contract of sale. The right of the grantor being extinguished, the right
granted is extinguished. Resoluto jure dantis resolvitur jus accipientis. So that at the moment
of the transfer of the dominion and civil possession, and, at the same time, of the right to use
and enjoy the thing sold, all physical possession in the name of another was extinguished.
The civil possession of Canuto Rivera being extinguished the physical possession of the
lessee or sub-lessee was also extinguished ipso jure. In this case the only right remaining to
the lessee with respect to the purchaser is that of reaping the fruits of the crop corresponding
to the current agricultural year, and, with respect to the vendor, the right to recover from him
such damages as the lessee may have suffered. (Art. 1571, par. 2, of the Civil Code. )

What, then, was there to prevent the plaintiff from exercising his right to use and to enjoy the
thing bought?

The existing lease, argues the defendant — the lease entered into with Canuto Rivera, by
constituting an incumbrance upon the property acquired by the plaintiff which the latter is
bound to respect.

This lease would be a valid and enforceable incumbrance with respect to Canuto Rivera
during its existence, but it is not valid or binding with respect to Mr. Saul, as to whom it has
no effect, because of the extinction of the right of the person who granted it, argues in turn
the plaintiff.

The right having been extinguished ipso jure it was necessary that this be made known to
the lessee, Dalton, or to the person to whom Dalton had subleased the property, the rights of
the latter not being terminated by the mere fact of the transfer of the dominion and other real
rights. The purchaser, availing himself of his privilege under article 1571, paragraph 1, above
cited, to terminate the lease existing at the time of the sale, made use of the act of
conciliation, and this act of conciliation was opposed by the objection discussed in this suit;
that is, the existence of a real right of recorded lease.

It is unquestionable that for the reasons above stated the alleged incumbrance does not exist
as to the purchaser, the plaintiff herein; that is to say, it can not continue to be valid and
enforceable against him, as it was against his predecessor, the vendor. Is, however, an
action brought to obtain a declaration of the nullity of the alleged incumbrance the
appropriate remedy?

It would undoubtedly have been correct to have brought action for an adjudication that the
alleged incumbrance was not enforceable. But a prayer that it be declared "null" instead of
"not enforceable" is not entirely incorrect, in view of the precise terms of the issue, the
allegations of the parties, and the evidence introduced. A judgment which correctly and
explicitly passes upon the relief prayed for by the plaintiff would be congruent with the
complaint, even if the action may have been improperly designated, inasmuch as this
circumstance does not change its nature. (Judgment in cassation of April 4, 1883.)

The possessor in good faith is entitled to the fruits received until his possession is legally
interrupted. (Art. 451 of the Civil Code.) The act of conciliation produces a civil interruption
provided it is followed by a suit for the recovery of possession. (Art. 1947). The complaint in
this case for a declaration that the lease made by the former owner was not enforceable,
filed within two months following the date of the act of conciliation by which demand was
made upon the defendants for the delivery of the entire rental of the property, is equivalent to
a suit for possession.

Therefore the judgment appealed is reversed, and we hold that the lease stipulated in favor
of Enrique Dalton by Canuto Rivera upon the house No. 14 Aguilar Street, Iloilo, can not be
enforced against George M. Saul, and the said Saul is entitled to recover all rents received
or which might have been received by Dalton from the time of the celebration of the act of
conciliation, and the said Dalton is hereby ordered to pay and deliver the amount of the said
rents derived from the property, without special condemnation as to costs.

Torres, Cooper, and Willard, JJ., concur.