Sales Case Digest-lease Cases

United Realty Co. v CA G.R. No. L-62603 March 27, 1990 Facts: United Realty Corporation, petitioner, entered into a separate lease contract over two apartments located at 913-E and 913-F Josefina St., Sampaloc, Manila with private respondent, Rev. Father Jose Torralba Sy with a monthly rent of two hundred pesos (P200.00), until termination of lease. Private respondent then after converted the apartment units into a Buddhist Chapel. Then on 1975, petitioner sent a letter to private respondent informing him of the increase of his monthly rent from P200 to P500 or P1000 for the two units leased by the private respondent, with a request that the reply be given if respondent agrees with the rent increase. Respondent Sy however filed a complaint before the Department of Public Information that the rental increase was in violation of PD no 20, which the latter ruled that it was not, since the place of worship is not protected by the said decree. Then after, petitioner demanded that respondent leave the vacate the two premises, which the latter failed to do. Thus a complaint for unlawful detainer was filed against Rev. Fr. Sy, the court however dismissed the petition, which was later affirmed by the CA but with modification finding that respondent is entitled to damages. Hence the petition. Issue: Whether the contract of lease is for a definite or indefinite period of time Ruling: The court ruled that the lease agreement is for a definite period, per the stipulation that the agreement would be terminated when either party gives a notice in five (5) days in writing. Since the lease agreement in question is for a definite period it follows that petitioner has a right to judicially eject private respondent from the premises as an exception to the general rule provided for in Section 4 of P.D. No. 20 which provides as follows: Except when the lease is for a definite period, the provisions of paragraph (1) of Article 1673 of the Civil Code of the Philippines insofar as they refer to dwelling unit or land on which another's dwelling is located shall be suspended until otherwise provided; but other provisions of the Civil Code and the Rules of Court of the Philippines on lease contracts insofar as they are not in conflict with the provisions of this Act, shall apply. Moreover, under Section of 5(f) of B.P. Blg. 25 one of the grounds for ejectment is the expiration of the period of a written lease contract. In this case, because of the failure of the private respondent to pay the increased rental demanded by petitioner, petitioner elected to terminate the contract and asked the private respondent to vacate the premises. A lease contract may be terminated at the end of any month, which shall be deemed terminated upon the refusal to pay the

increased monthly rental demanded by the petitioner, provided the same is not exorbitant.

Legar Management & Realty Co. v. CA G.R. No. 117423 January 24, 1996 Facts: Spouses Augusto and Celia Legasto entered into a written contract of lease of their building with no definite period with private respondents Pascual and Ancheta. Sometime in 1987, the Legasto spouses and their children organized Legar Management & Realty Corporation, and transferred and assigned thereto all their rights, interests, and privileges over certain properties, including the subject apartment building. Thereafter, petitioner allowed private respondents to continue occupying their apartment unit by virtue of a verbal contract of lease which was renewable on a month-to-month basis. Pursuant to their verbal lease agreement, private respondents were to pay petitioner a monthly rental of One Thousand Five Hundred Forty-Five Pesos (P1,545.00). On April 21, 1992, petitioner wrote private respondent Pascual a formal notice of termination, requesting him to vacate unit 318-T by the end of May, 1992. A similar formal notice was sent to private respondent Ancheta on June 4, 1992, demanding vacation of the same unit by the end of June, 1992. Both refused to heed petitioner's demand and did not vacate the subject premises. Thus an ejectment case was instituted against the private respondents with the MTC that ruled that the verbal lease contract between the parties, being on a month-tomonth basis, is for a definite period, and may be terminated at the end of any month. Upon appeal however, RTC reversed the said decision, holding that "the mere expiration of the month-to-month lease period in accordance with Article 1687 of the New Civil Code does not automatically give rise to an ejectment in cases governed by the Rent Control Law, in view of Section 6 of Batas Pambansa Blg. 877, as amended. Said decision was upheld by CA ruling that under the said law, the owner/lessor cannot eject the tenant by reason of the expiration of the period of lease as fixed or determined under Article 1687 of the Civil Code. Even if in the instant case the month-to-month period is deemed to have expired at the end of the month after notice of demand to vacate . . . , (private) respondents' eviction cannot be allowed without regard to the grounds for ejectment enumerated in Section 5 of Batas Pambansa Blg. 877. Hence the petition. Issue: Whether the lessee of a residential property covered by the Rent Control Law can be ejected on the basis alone of the expiration of the verbal lease contract under which rentals are paid monthly.

Ruling: The court ruled in the affirmative. "ection 6 of Batas Pambansa Blg. 877 provides that provisions of par. 1 of the A.1673 of the Civil Code of the Philippines referring to residential units covered by the said act shall be suspended during the effectivity of the act, and the other provisions of the Civil Code and the Rules of Court on lease contracts, insofar as they are not in conflict with the provisions of the Act shall apply. Also, Art. 1687 of the same code provides that “If the period for the lease has not been fixed, it is understood to be from year to year, if the rent agreed upon is annual; from month to month, if it is monthly; from week to week, if it is weekly; and from day to day, if the rent is to be paid daily. However, even though a monthly rent is paid, and no period for the lease has been set, the courts may fix a longer term for the lease after the lessee has occupied the premises for over one year. If the rent is weekly, the courts may likewise determine a longer period after the lessee has been in possession for over six months. In case of daily rent, the courts may fix a longer period after the lessee has stayed in the place for over one month.' In the case at bench, it was found by all three lower courts that the lease over the subject property was on a month-to-month basis, and that there was proper notice of non-renewal of contract and demand for vacation of premises made by petitioners on private respondent. Unquestionably, therefore, the verbal lease agreement entered into by private respondent and petitioners' father and predecessor-in-interest has been validly terminated.

GUZMAN, BOCALING & CO. v BONNEVIE G.R. No. 86150 March 2, 1992 Facts: Africa Valdez de Reynoso leased a parcel of land with two buildings constructed thereon to Raoul S. Bonnevie and Christopher Bonnevie, for a period of one year beginning August 8, 1976, at a monthly rental of P4,000.00, with an agreement that should Africa decide to sell the property, the respondent lessee shall be givent the first priority to purchase the same. Then on November 1976, Africa sent a letter to the respondents that she was selling the property for the amount of P600,000 less a mortgage loan of P100,000, giving them 30 days to exercise their right of first priority. Failure to exercise the said right, respondents should vacate the property not later than March 1977. Then on January 1977, Africa informed that the property have been sold to the petitioner, because respondents failed to exercise their right to do such. Respondent s on the other hand informed Africa that they have not received their letter and refused to vacate the property. And on April of the same year, Africa demanded that they vacate the property for failure to pay rent for four months, which they refused. Hence a complaint for ejectment was filed against them. During the pendency of the ejectment case, respondent filed an action for annulment of the sale between Africa and the herein petitioner and for the cancellation of the transfer certificate of title in the name of the latter. Asking also that Africa be required to sell the property to them under the same terms and conditions agreed upon in the Contract of Sale in favor of the petitioner. Then on May 1980, the City Court ruled that the respondent to vacate the premises, and deliver possession of the property to the petitioner as well as pay the rent due to them. Upon appeal to the Court of First Instance of Manila, affirmed the said ejection case with modification and granted respondents petition to cancel the Deed of Sale executed between Africa and the petitioner and ordered her to sell the property to respondent, and for petitioner and Africa to pay respondent for damages. CA affirmed the said decision but with modification on the amount of damages. Hence the petition. Issue: WON the respondent court erred in ruling that the grant of first priority to purchase

the subject properties by the judicial administratrix needed no authority from the probate court; WON the Contract of Sale executed between the parties was not voidable but rescissible; WON petitioner is a buyer in bad faith. Ruling: On the first issue, Africa failed to show that the letter sent by registered mail was received by the respondents, only a photocopy of the letter without any receiving signature coming from the latter. Furthermore, even if the latter received the letter and did not exercise their right of first priority, Africa would still be guilty of violating Paragraph 20 of the Contract of Lease which specifically stated that the private respondents could exercise the right of first priority, "all things and conditions being equal." Since Africa had offered a lesser amount to the petitioner and more advantageous offer than that was offered to the respondent. Also, respondent court is correct that it was not necessary to secure the approval by the probate court of the Contract of Lease because it did not involve an alienation of real property of the estate nor did the term of the lease exceed one year so as top make it fall under Article 1878(8) of the Civil Code. In the second issue, private respondents have the right to rescind the contract of sale because Africa had failed to comply with her duty to give them first opportunity to purchase the subject property. The petitioner argues that assuming the Contract of Sale to be voidable, only the parties thereto could bring an action to annul it pursuant to Article 1397 of the Civil Code. It is stressed that private respondents are strangers to the agreement and therefore have no personality to seek its annulment. The respondent court correctly held that the Contract of Sale was not voidable but rescissible. Under Article 1380 to 1381 (3) of the Civil Code, a contract otherwise valid may nonetheless be subsequently rescinded by reason of injury to third persons, like creditors. The status of creditors could be validly accorded the Bonnevies for they had substantial interests that were prejudiced by the sale of the subject property to the petitioner without recognizing their right of first priority under the Contract of Lease. Rescission is a remedy granted by law to the contracting parties and even to third persons, to secure reparation for damages caused to them by a contract, even if this should be valid, by means of the restoration of things to their condition at the moment prior to the celebration of said contract. It is a relief allowed for the protection of one of the contracting parties and even third persons from all injury and damage the contract may cause, or to protect some incompatible and preferent right created by the contract. Recission implies a contract which, even if initially valid, produces a lesion or pecuniary damage to someone that justifies its invalidation for reasons of equity. It is true that the acquisition by a third person of the property subject of the

contract is an obstacle to the action for its rescission where it is shown that such third person is in lawful possession of the subject of the contract and that he did not act in bad faith. However, this rule is not applicable in the case before us because the petitioner is not considered a third party in relation to the Contract of Sale nor may its possession of the subject property be regarded as acquired lawfully and in good faith. Petitioner was aware f the lease in favor of the Bonnevies, who were actually occupying the subject property at the time it was sold to it. Although the Contract of Lease was not annotated on the transfer certificate of title in the name of the late Jose Reynoso and Africa Reynoso, the petitioner cannot deny actual knowledge of such lease which was equivalent to and indeed more binding than presumed notice by registration. A purchaser in good faith and for value is one who buys the property of another without notice that some other person has a right to or interest in such property and pays a full and fair price for the same at the time of such purchase or before he has notice of the claim or interest of some other person in the property. Good faith connotes an honest intention to abstain from taking unconscientious advantage of another. Tested by these principles, the petitioner cannot tenably claim to be a buyer in good faith as it had notice of the lease of the property by the Bonnevies and such knowledge should have cautioned it to look deeper into the agreement to determine if it involved stipulations that would prejudice its own interests. Petitioner’s insistence that it was not aware of the right of first priority granted by the Contract of Lease, If Guzman-Bocaling failed to inquire about the terms of the Lease Contract, which includes Par. 20 on priority right given to the Bonnevies, it had only itself to blame. Having known that the property it was buying was under lease, it behooved it as a prudent person to have required Reynoso or the broker to show to it the Contract of Lease in which Par. 20 is contained. ETCUBAN v CA G.R. No. L-45164 March 16, 1987 Facts: Petitioner inherited a piece of land together with his co-heirs, eleven in total, from their deceased father. Thereafter the 11 co-heirs executed in favor of private respondents 11 deeds of sale of their respective shares in the co-ownership for the total sum of P26,340.00. It is not disputed that the earliest of the 11 deeds of sale was made on December 9, 1963 and the last one in December 1967. Petitioner filed a complaint for legal redemption against the respondents before the Trial Court upon knowledge that his co-heirs sold the land in question to the private respondents. Alleging that he should have been given notice first before sale to respondents as he had informed his co-heirs his desire to buy their respective shares. Defendant in response stated that the plaintiff has no cause of action against them, and that the action is barred by prescription or laches, petitioners inaction after knowledge of the said sale caused him to lose his right to redeem under Art. 1623 of the new Civil Code because the right of redemption may be exercised only within 30 days from notice of sale and plaintiff was definitely notified of the sale years ago as shown by the records. Court however in favor of the petitioner, hence the petition.

Issue: WON lower court erred in holding that petitioner is not barred from filing a complaint for legal redemption when the latter failed to make an offer to redeem the property. Ruling: While it is true that written notice is required by the law (Art. 1623), it is equally true that the same "Art. 1623 does not prescribe any particular form of notice, nor any distinctive method for notifying the redemptioner. " So long, therefore, as the latter is informed in writing of the sale and the particulars thereof, the 30 days for redemption start running, and the redemptioner has no real cause to complain. In the Conejero case, We ruled that the furnishing of a copy of the disputed deed of sale to the redemptioner, was equivalent to the giving of written notice required by law in "a more authentic manner than any other writing could have done," and that We cannot adopt a stand of having to sacrifice substance to technicality. More so in the case at bar, where the vendors or co-owners of petitioner stated under oath in the deeds of sale. that notice of sale had been given to prospective redemptioners in accordance with Art. 1623 of the Civil Code. "A sworn statement or clause in a deed of sale to the effect that a written notice of sale was given to possible redemptioners or co-owners might be used to determine whether an offer to redeem was made on or out of time, or whether there was substantial compliance with the requirement of said Art. 1623. In resume, We find that petitioner (defendant) failed to substantially comply with the requirements of Art. 1623 on legal redemption and We see no reason to reverse the assailed decision of the respondent court.

SPS. CLUTARIO v CA G.R. No. 76656 December 11, 1992 Facts: Private respondents, Spouses Melquiades Gandia and Maria V. Gandia, owned a two-storey residential apartment located which they leased to the petitioners verbally for a monthly rental of P150.00 since 1961. Then on May 1980, respondents, through their counsel, wrote a letter to the petitioners giving them ninety (90) days to vacate the premises, in order for them to occupy the entire apartment, due to their advanced age and failing health. Petitioner’s however did not heed the demand letter and vacate the premises. Hence a complaint for ejectment was filed against them, since they failed to pay the rentals since August 1980 and respondents need to occupy the premises. Pending the complaint, petitioners paid their back rentals from August 1980 up to May 1981. MTC on the other had dismissed the complaint on the ground they failed to support their cause of action with substantial evidence. RTC however reversed said decision and ruled

that petitioners' non-payment of rentals for more than three months and private respondents' genuine need for the leased premises are sufficient causes for petitioners' ejectment. Affirmed by CA with modification. Hence the petition. Issue: WON CA erred in affirming RTC’s ruling. Ruling: Court ruled on the negative. In the case at bar, respondents invoked two of the six grounds for ejectment provided under sec 5 of BP 25 (1979), namely: (1) arrears in payment of rent for three (3) months at any one time; and (2) need of the lessors to repossess their property for their own use or for the use of any immediate member of their family as residential unit. Petitioner’s payment of the back rentals and acceptance of the respondent does not constitute a waiver or abandonment of their cause of action for ejectment against the latter. Respondents showed through their conduct, subsequent to the acceptance of the back rentals, that they have no intention of to waive their right to eject the petitioners. Since they continued on with the complaint and did not notify the trial court of their intention to have the said complaint dismissed. Also, the action of ejectment started before their payment to respondent, not after payment of ejectment. Hence it falls under the said grounds for ejectment under sec 5 of BP 25. In relation to the second ground raised by the respondent, the lessor is able to validly eject the lessee on the ground of need for the leased property; however it must be shown that there is no other available residential unit to satisfy that need. The non-availability must exist at the time of the demand by the lessor on the lessee to vacate the property, which declared to be occupied by the RTC. MTC’s decision ruling infavor of petitioners, was because the petitioners had already occupied the upper floor of the unit, discounting respondents age and failing health. However, the SC finds that the decision of private respondents to occupy both the lower and upper portions of the property sprang not only from mere convenience, but from necessity as well, due to their advanced age and the poor health of respondent Melquiades Gandia. YEK SENG CO. v CA G.R. No. 87415 January 23, 1992 Petitioners have entered into a verbal contract of lease over a portion of a building owned by the respondents with an agreed monthly rental of P3,000.00. They have been using the premises for its general merchandise business for more than twenty years. Then after respondents informed that they are terminating the lease in order to renovate the building and use it for themselves. Petitioner on the otherhand refused to vacate the property. Hence a complaint for ejectment was filed against the petitioner, while petitioner filed a petition for consignation of the monthly

rentals which it claimed had been refused by the lessors. The court ruled infavor of the respondent and ordered petitioner to vacate the property and denied petitioners petition for consignation for lack of merit. RTC and CA affirmed the said decision. Hence the issue: Issue: WON the court erred in not giving an extension of its lease in accordance with Article 1687 of the Civil Code. Ruling: As earlier stated, the contract of Ricardo Cruz, being on a month-to-month basis, is a lease with a definite period. Since the contract of lease is for a definite term, the lessee cannot avail of the benefits under Article 1687 which applies only if there is no definite term. And even assuming arguendo that Article 1687 applies, Ricardo Cruz would still not be entitled to have the term fixed for a longer period since his action was filed only after the contract had expired. Under this provision, if the period of a lease contract has not been specified by the parties therein, it is understood to be from month to month, if the rent agreed upon is monthly, as in the cases at bar. Consequently, the contract expires at the end of such month, unless, prior thereto, the extension of said term has been sought by appropriate action and judgment is eventually rendered therein granting said relief. Defendants hereto maintain that the lease contracts did not, and could not, come to an end until after the court has fixed its lifetime and the term thus fixed has expired. This view is, to our mind, untenable. To begin with, defendants assume that their contracts are without term, prior to the judicial action authorized in said Article 1687, whereas the same provides that the duration of lease contracts shall be yearly, monthly, weekly or daily depending upon whether the rental agreed upon is annual, monthly, weekly, or daily. In other words, said contracts have a term fixed by law, and are not indefinite in duration, before said judicial intervention. Secondly, said Article 1687 merely gives the court discretion to extend the period of the lease. The court is not bound to extend said term. It may legally refuse to do so, if the circumstances surrounding the case warrants such action. . . . (Emphasis reproduced) Conformably, we hold that as the rental in the case at bar was paid monthly and the term had not been expressly agreed upon, the lease was understood under Article 1687 to be terminable from month to month. At the time the petitioner was asked to vacate the leased premises, the lease contract had already expired and therefore, following the above-quoted decisions, could no longer be extended. In fact, even if such contract had not yet expired, its extension would still be subject to the sound discretion of the court and was by no means obligatory upon it as a merely ministerial duty.

YAP v CRUZ G.R. No. 89307 May 8, 1992 Facts: Dr. Vergel G. Cruz, the private respondent in this case was the bonafide tenant of Amado Q. Bugayon, Jr. for almost five years in the premises in question just before

this controversy started. He religiously paid the monthly rentals of P1,400.00, introduced several improvements and operated a veterinary clinic known as Malate Veterinary Clinic. Sometime in the latter part of July, 1985, he offered for sale the goodwill of the veterinary clinic and some of its equipment to Dr. Wendelyn V. Yap, Evelia H. Badiagan, Teresita A. Baladad and Florencia C. de Vera, the petitioners herein. During the period of negotiations, private respondent Cruz introduced to the landlord Dr. Wendelyn V. Yap at the person interested in taking over the clinic. However, the negotiations did not materialize but the petitioners managed to enter into a contract of lease for the said premises at a monthly rental of P1,800.00 with the landlord. As a result, private respondent Cruz brought an action for "Forcible Entry with Damages" with the Metropolitan Trial Court of Manila, Branch 27 against petitioners herein and the landlord, MTC ruled in favor of Cruz ordering the petitioners to vacate the premises and surrender its possession to the respondent. Hence the issue. Issue: WON CA erred in affirming the lower courts decision. Ruling: The court ruled that when the petitioners and the landlord executed a new contract of lease, the lease of private respondent was still valid and subsisting. There is no question that private respondent has not effectively relinquished his leasehold rights over the premises in question in view of the failure of negotiations for the sale of the goodwill. Clearly, the transfer of the leasehold rights is conditional in nature and has no force and effect if the condition is not complied with. True, the lease of private respondent is on a month-to-month basis and may be terminated at the end of any month after proper notice or demand to vacate has been given, however, the lack of proper notice or demand to vacate upon the private respondent is clearly evident. In the absence of such notice, the lease of private respondent continues to be in force and cannot be deemed to have expired as of the end of the month automatically. Neither can the non-payment of the rent for the month of August, 1985 be a ground for termination of the lease without a demand to pay and to vacate.