On Implied New Lease

7/27/2019 On Implied New Lease

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Republic of the Philippines

SUPREME COURTManila

FIRST DIVISION

G.R. No. 70360 March 11, 1987

AREVALO GOMEZ CORPORATION, petitioner,vs.

ANDERS LAO HIAN LIONG, doing business in the name and style of "TIONGSON BAZAAR" and The Honorable SALVADOR J.VALDEZ, JR., respondents.

Feria , Feria, Lugtu & Lao for petitioner.

Deogracia Eufemio for respondents.

CRUZ, J.:

Some agreements deteriorate into misunderstandings, turning close friends into irreconcilable adversaries and sweet harmony

into bitter discord. This is one of them.

On December 1, 1964, the petitioner through its Vice-President, Renato Arevalo, and respondent Andres Lao HIAN Liong,

executed a "Contract of Lease" covering the petitioner's property at Magsaysay Avenue, Baguio City, for a term of fifteen years,

effective September 1, 1964. The monthly rental was fixed at P2,450.00 but in addition to this the respondent agreed to

construct on the interior portion of the land leased a three-story building of strong materials without right to reimbursement

from the petitioner. The cost of the building was to be not less than P150,000.00, of which the sum of P45,000.00 would be

contributed by petitioner. 1

Prior to the expiration of the lease on August 31, 1979, and for some time thereafter, the parties entered into negotiations to

fix a new rental but could not come to any agreement. In the end, on October 2, 1979, the petitioner served on the respondenta written notice to vacate the leased premises in view of the termination of their contract.

2When the respondent refused to

comply, the petitioner filed a complaint for ejectment against him in the City Court of Baguio City.

Applying Article 1670 of Civil Code, the trial court held in favor of the defendant as follows:

In the case on hand, it is admitted that the 15-year lease contract between the parties expired on August

31, 1979. However, the defendant has continued occupying the leased premises thereafter and even to this

day. And it was only on October 2, 1979, or after more than 15 days after the expiration of the original

contract of lease, that he was given the requisite notice to vacate. It is, therefore, abundantly clear that

under the law, an implied new lease had already set in when the plaintiff commenced its action for

ejectment on November 19, 1979. ...3

The trial court also extended the period of the lease by five years from October 1, 1979, pursuant to Article 1670 in relation toArticle 1687 of the Civil Code, and fixed the new rentals at P10,406.00 a month.

4

Both parties appealed. The petitioner contended that the original lease had not been impliedly renewed but automatically

expired on August 31, 1979. The respondent, for his part, prayed for a longer extension of fifteen years, considering the nature

of his business (a bazaar) and his investment therein. He also claimed that, prior to the execution of the contract, the petitioner

had assured him he could stay indefinitely in the disputed premises.5


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The Regional Trial Court of Baguio City affirmed the implied renewal of the lease but modified the appealed judgment by

extending the lease for ten years from September 1, 1979, or until August 31, 1989. The respondent judge also increased the

new rentals to P18,600.00 per month, effective September 1, 1979.6

A motion for reconsideration and for new trial was filed by

petitioner but the same was denied. The petition then came to us with the following assignment of errors:

1) Respondent Judge, as well as the trial judge, erred in deciding the case at bar in a way not in accordance

with law or with the applicable decisions of this Honorable Court, particularly its decision in Roxas vs.

Alcantara, 113 SCRA 21.

2) Respondent judge, as well as the trial judge, erred in holding that there was implied renewal ortacita

reconduccion despite the refusal of respondent Liong to agree to the increased rental demanded by

petitioner prior to the expiration of the contract of lease.

3) Respondent judge, as well as the trial judge, erred in holding that there was implied renewal ortacita

reconduccion despite the refusal of petitioner to accept payment of rentals from respondent Liong after the

expiration of the Contract of Lease.

4) Assuming for the sake of argument that Article 1687 of the New Civil Code is applicable, the trial judge

erred and gravely abused his discretion by extending the lease for five (5) years and respondent judge erred

and compounded the grave abuse of discretion by extending the lease for ten (10) years.

5) Respondent judge, as well as the trial judge, erred in admitting parol evidence with respect to the term of

the lease.

6) Respondent judge erred in not granting a new trial for the admission in evidence of the building permit of

the new building of respondent Liong which was issued after the decision of the trial court.

7) Respondent judge erred in not admitting in evidence or taking judicial notice of the Central Bank

Certification dated August 21, 1984 showing the three successive devaluations or depreciation of the

Philippine peso after the decision of the trial court.7

We address ourselves first to the submission of the respondent that the factual findings of the court a quo cannot be reviewed

in these proceedings which have been filed under Rule 65 of the Rules of Court. That is not exactly correct. We note that, as the

caption of the petition indicates, it was filed not only under the said rule but also as an appeal by certiorari under Rule 45,

which, while generally limited to questions of law, nevertheless allows review of the judgment a quo when it is based on a

misapprehension of facts.8

We shall apply this exception and treat this petition as solely filed under the latter rule.9

It is not disputed that the original lease contract between the parties was only for fifteen years expiring on August 31, 1979.

The private respondent nonetheless continued occupying the leased premises beyond that date and it was only on October 2,

1979, that he was formally served with notice to vacate. What is in issue then is whether such continued occupancy was with or

without the implied acquiescence of the petitioner.

The applicable provisions of Civil Code are the following:

Article 1669. If the lease was made for a determinate time, it ceases upon the day fixed, without the need

of a demand.

Article 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 Article 1682 and 1687. The other terms of the original contract shall be

revived.

Under the second article, an implied new lease or tacita reconduccion will set in if it is shown that: (a) the term of the original

contract of lease has expired; (b) the lessor has not given the lessee a notice to vacate; and (c) the lessee continued enjoying


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the thing leased for fifteen days with the acquiescence of the lessor. 10 This acquiescence may be inferred from his failure toserve a notice to quit. 11

The petitioner contends that the service of an express notice to quit is not the only way to prevent the implied renewal of the

lease. Demanding a higher rental is also a manifestation of non-acquiescence if the lessee does not accept the rate demanded.

In other words, failure of agreement on the new conditions of the lease results in an automatic notice to vacate upon the

expiration of the original lease.

In support of this position, the petitioner relies on the case ofRoxas vs. Alcantara, 12 where this Court declared:

... Petitioner's letter of August 11, 1977 was a reminder to private respondent of the impending expiration

of the lease contract. Exh. "A", with a statement that was in effect an offer or proposal to renew the

contract on the terms and conditions, namely: (1) that the rental would be P4,000.00 a month; (2) that

three years advance rental should be paid by private respondent; and (3) that a 15% yearly increase in

rental would be imposed. In other words, petitioner laid down the foregoing stipulations as conditions sine

qua non for any subsequent contract that might be negotiated with private respondent. Thus clear from the

letter, Exh. "C", is that if private respondent were not agreeable to any or all of the new stipulations, there

would be no renewal of the lease. Private respondent was to communicate his reply within fifteen days

from receipt of Exh. "C", absent which petitioner would take it to mean that his conditions were acceptable

to private respondent and their contract renewed on the specified terms. However, private respondent's

letter, Exh. "F", evidently posted before the expiration of the period allowed within which to decide, did notgive a categorical affirmative or negative answer to petitioner's proposition, and merely manifested the said

lessee's desire to study the matter until end of the following month of September, 1977, or up to the

termination of the then existing contract of lease, Exh. "A". Petitioner's failure to reply to the letter, Exh.

"F", can only be taken to mean that he acceded to the request for additional time. For the obvious reason

that the lease contract (Exh. "A") was expiring, it became more imperative for private respondent to make a

final decision within and not later than the extended period which he asked for. Thus, when petitioner did

not hear from private respondent at the end of the aforesaid month of September, private respondent

ceased to have any legal right to possess and occupy the premises in question commencing the first day of

the following month of October.

As we see it, Article 1670 applies only where, before the expiration of the lease, no negotiations are held between the lessor

and the lessee resulting in its renewal. Where no such talks take place and the lessee is not asked to vacate before the lapse of

fifteen days from the end of the lease, the implication is that the lessor is amenable to its renewal.

Where the lessor is unwilling in any event to renew the lease for whatever reason, it will be necessary for him to serve on the

lessee a formal notice to vacate. As no talks have been held between the lessor and the lessee concerning the renewal of the

lease, there can be no inference that the former, by his inaction, intends to discontinue it. In such a case, no less than an

express notice to vacate must be made within the statutory 15-day period.

Applying these principles, the Court holds that the lease was not impliedly renewed in the instant case.

It is a matter of record that weeks before the deadline for the notice to vacate, the petitioner had already communicated to the

respondent its intention to increase the rental. This increase had to be accepted by the respondent if he wanted the lease to be

renewed. Significantly, in its letter to the respondent on September 18, 1979, 13 the petitioner once again rejected the latter'scounter-proposal and categorically declared that the increased rental of P35,000.00 was "no longer negotiable." Since this was

a reply to the respondent's letter of September 14, 1979, 14 it is obvious that the increase in rental was notified to therespondent on an earlier date,and before the expiration of the original lease.

As of that date, the respondent was already being informed that he would have to vacate the leased premises on August 31,

1979, unless he was willing to pay the increased rental demanded by the lessor. Stated otherwise, the respondent was on that

date which was clearly before the statutory deadline being served a conditional notice to vacate.

The formal notice to vacate sent by the petitioner to the respondent on October 2, 1984, was thus merely areiteration of the

implied demand made to him in its previous communications. The demand was that he vacate the leased premises if he could

not accept the non-negotiable increased rental of P35,000.00 a month. If the petitioner saw fit to write that letter on the said


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date, which admitt edly was beyond the 15-day statutory period, it was merely to repeat its insistence on the new rate as an

indispensable condition to the renewal of the lease. The legal consequence of its rejection by the respondent was its obligation

to vacate the leased premises because of the expiration of the lease.

Even if, as urged by the respondent, we should disregard the petitioner's letter of August 31, 1979, because it was not

submitted at the trial, there nevertheless are the other letters which were formally offered in evidence by the respondent

himself. These are Exhibit "5" and "Exhibit "6", dated September 5 and 14, 1979, respectively, in which he rejected the

petitioner's demand for the increased rental of P35,000.00. This could mean only that the demand was made earlieras the said

letters were merely a reaction to such demand. These demands, as conditional notices to vacate if the petitioner's new rental

was rejected, satisfied the requirement of Article 1670.

It should be noted that, after August 1979, the petitioner refused to accept the respondent's payments of the old rentals,

demanding, as it had the right to do, the increased rate of P35,000.00. Such a stance negates the conclusion that it was willing

to renew the lease under the original conditions and had, by its silence, impliedly agreed to the retention of all its provisions. In

fact, far from being silent, the petitioner repeatedly insisted on the new rentals, and, to suit its actions to its words, flatly

refused the tender of the old rentals by the respondent. 15

No less worthy of attention is the circumstance that in its letter of September 18, 1979, the respondent counter-proposed a

monthly rental of P27,000.00, which the petitioner rejected. 16 It could be illogical to suppose that, having done this, thepetitioner would later agree to the implied renewal of the lease for the original rental of only P2,450.00, thereby forfeiting the

amount of P24,550.00 every month

As the original lease contract expired on August 31, 1979, and was not legally renewed, it follows that the respondent has since

then been in illegal possession of the leased premises. That unlawful detainer, which has lasted more than seven years now,

during which he has retained all the rights he originally enjoyed as if the lease had been validly renewed, must be terminated

immediately.

Coming finally to the monthly rentals to be paid by the respondent, it appears that between the rate of P35,000.00 demanded

by the petitioner and the respondent's counter-proposal of P27,000.00, there is a difference of only P8,000.00. It is unfortunate

that the disagreement could not be ironed out in the spirit of friendship that used to characterize the relations of the

parties. 17 The respondent judge, for his part, using as basis a fair monthly rental value of P50.00 for every square meter of the372 square meter floor area of the property leased, fixed the monthly rental at P18,600.00. 18

Considering all the above circumstances, and by way of effecting a reasonable compromise between the parties, we hereby rulethat the rentals to be paid for the use and occupancy of the leased premises beginning September 1, 1979, and until it is

vacated by the respondent, shall be P30,000.00 per month, with interest at the legal rate. From the total amount due shall be

deducted the sums judicially deposited by the respondent. We shall also fix the attorney's fee in the sum of P30,000.00, taking

into account the efforts exerted by counsel in prosecuting this case, from the city court of Baguio and up to this Court. It is

hoped that, being an experienced businessman, and with this pending lit igation and its possible consequences in mind, he has

taken the necessary measures to minimize the other expenses of his relocation if, as it is now, ordered by this Court.

WHEREFORE, the decision of the respondent judge dated August 8, 1984, is set aside and a new decision is hereby rendered

ordering respondent Andres Lao Hian Liong to: a) vacate the leased premises immediately; b) pay the petitioner monthly

rentals in the amount of P30,000.00 plus legal interest, from September 1, 1979, until the leased premises are surrendered to

the petitioner; and c) pay an attorney's fee in the sum of P30,000.00 and the costs of this suit. The deposits made by the

respondent in court shall be deducted from the total amount due from him. This decision shall be immediately executory and

no motion for reconsideration shall stay its execution.

SO ORDERED.

Yap (Chairman), Narvasa, Feliciano, Gancayco and Sarmiento, JJ., concur.

Melencio-Herrera, J., is on leave.


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SUPREME COURTManila

First Division

G.R. No. 92540 December 11, 1992

ANIANO TORRES and JOSEFINA TORRES, petitioners,vs.

THE HON. COURT OF APPEALS, HON. REGIONAL TRIAL COURT OF NEGROS ORIENTAL, BRANCH 34, and ADELA B.FLORES, respondents.

CRUZ, J.:

The petitioners failed in the Municipal Circuit Court of Pamplona, Negros Oriental, the Regional Trial Court of Dumaguete City,

and the Court of Appeals. They are now before this Court for a fourth opinion.

The question before us is whether or not the original contracts of lease entered into between the petitioners and the private

respondent have been validly renewed.

These contracts related to ten parcels of land belonging to Adela B. Flores, the herein private respondent, that she leased to the

spouses Aniano and Josefina Torres, for a specified term of four agricultural years commencing from 1985 and at stipulated

rentals payable in piculs of sugar.

It is not disputed that before the expiration of these contracts, the parties agreed on their renewal under the original terms,

subject to the condition that the lessees would deliver to Flores the amount of P50,000.00 not later than February 15, 1989.

Flores said she would need the money for her projected trip abroad.

Flores claims that the petitioner failed to comply with this condition and that consequently she informed them on February 17,

1989, 1 that she was taking over her property upon the expiration of the contracts. She reiterated this notice one month laterand advised them not to undertake any new cultivation on the lands.

2When her subsequent demands for the surrender of her

property were disregarded, she sued the petitioners for illegal detainer.

In their answer to the complaint, the petitioners submitted that the contracts had been validly renewed because they had

complied with the above-mentioned condition. As affirmative defense, they contended that the lease had been continued

under the rule oftacita reconduccion and that the complainant was estopped from denying that she had granted them an

option to renew the contracts.

After trial under the Rule on Summary Procedure, Judge Teopisto L. Calumpang held that the contracts had not been validly

renewed because the Torreses had failed to deliver the amount of P50,000.00 in cash to Flores as promised. The total amount

raised by the petitioners by February 15, 1989, was only P11,415.89.3

This finding was affirmed on appeal to the Regional Trial

Court of Dumaguete City by Judge Rosendo B. Bandal, Jr., who added that such non-compliance had been established by the

admission of the petitioners themselves.

4

In their appeal to the respondent court, the petitioners argued that (a) what was subject to the condition was the execution of

the renewed written contract of lease; (b) granting that the condition was to be applied to the principal contract, this was

complied with as evidenced by the subsequent acts of plaintiff in withdrawing P50,000.00 worth of piculs of sugar; and (c) the

appellee was placed in estoppel and guilty of bad faith because of the previously referred withdrawal.

Again they failed. On January 25, 1990, in a perceptive decision penned by Justice Celso L. Magsino, the Court of Appeals

sustained the findings of the lower courts that the contracts had not been validly renewed.5

The petitioners' motion for

reconsideration was denied on February 19, 1990,6and they have now come to this Court as a last resort.


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The present petition faults the Court of Appeals for not holding that the contracts of lease had been impliedly renewed, that

the lessor was estopped from denying this, and that the contracts had been novated. The petitioners also complain that the

supplement to their motion for reconsideration had not been taken into account.

The petitioners must fail again.

We begin by reiterating the familiar rule that the findings of fact of the lower courts are binding on this Court unless they comewithin the specified exceptions, which are also well-known.

7None of such exceptions has been established in the case at bar.

We therefore accept that there was an oral agreement between the parties to extend the original contracts of lease provided

that the petitioners could deliver to the private respondent the sum of P50,000.00 in cash not later than February 15, 1989.

This was a suspensive condition that was not met.

It is clear from the documentary evidence submitted by both parties that the two checks paid to Flores by the spouses Torres

were in the separate amounts of only P1,686.15 and P9,729.74. They were undisputably far short of the required payment of

the P50,000.00 rentals on the land by the petitioners as a condition for the renewal of the lease. Hence, Flores as lessor was not

obliged to extend the contracts.

As correctly held by the Court of Appeals:

The evidence on record shows that when petitioner Josefina Torres came to see private respondentsometime in December, 1988, she requested that they renew their contract of lease which was to expire in

crop year 1988-1989. Private respondent told her that she may consider petitioner's request if she could

put up the amount of P50,000.00 cash to be applied to the rental of the leased sugar lands on or before

February 15, 1989, which the respondent would need for her trip abroad, otherwise, they were going to

abide by the subsisting contract of lease. When February 15, 1989 came, and petitioner Josefina Torres was

not able to comply with the aforesaid condition, on February 17, 1989, respondent wrote petitioner

Josefina that she would take over the cultivation of the subject lands. On February 20, 1989, private

respondent caused her lawyer to write the petitioners not to make any further cultivation of the subject

lands. Under the foregoing factual backdrop, the condition set up by private respondent that petitioner

Josefina Torres produce and give her cash in the amount of P50,000.00 on or before February 15, 1989 is a

suspensive conditon for said respondent to considerthe renewal, not that actual renewal yet of the

contract of lease. Definitely, what transpired between private respondent and petitioners Josefina Torres,

as found by the lower courts and which We find to be correct, is not an option given to the petitioners to

renew the lease agreement. Given the fact that private respondent served notice to the petitioners that shewas terminating the contract of lease as per their agreement, after the harvest of the canes from each

parcel of land during the crop year 1988-1989, there can arise no implied renewal of lease ( tacita

reconduccion), but that the continued possession and cultivation of the subject lands therefore by the

petitioners constitutes illegal detainer.

The petitioner's argument that they complied with the condition because the private respondent had withdrawn from

the quedans with a money value of more than P50,000.00 is not acceptable. The value of the quedanswithdrawn as of February

15, 1989, amounted to only P11,415.89. Her acceptance of the two check vouchers representing the quedans might indeed

have estopped her from arguing that the payments should have been in cash, especially so since she had encashed the checks

without objection. The obstinate fact, however, is that the cash value of the checks was undeniably below the stipulated

P50,000.00 that was to be paid before the deadline.

The invocation oftacita reconduccion is futile. The facts of this case as found by the lower courts clearly show that there was no

implied renewal but instead an express termination of the contracts of lease. This is evident from the letters of Flores to the

petitioners advising them on February 17, 1989, that she would take over her property upon the end of agricultural year 1989

and on March 8, 1989, that they should not undertake any new cultivation of the leased lands and demanding again that they

vacate the same. This demand had earlier been made by Flores's counsel on February 20, 1989. 8

The Civil Code provides:

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


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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 Art. 1682 and 1687. The other terms of the original contract shall be revived.

There was no acquiescence on the part of the lessor to the petitioners' continued stay in her property. On the contrary, she

expressly informed them that she was not renewing the lease and in fact later demanded that they vacate her property. The

private respondent's acceptance of the rentals beyond the original term did not signify that she had agreed to the implied

renewal of the lease. The simple reason is that the petitioners remained in possession of the subject lands and, regardless of

the outcome of their case, had to pay rentals to the private respondent for the use of her property.

The issue of novation does not deserve consideration in this petition as it was raised for the first time only when the case was

already in the Court of Appeals.

Finally, we must also reject the complaint that the petitioners were denied due process because the respondent court did not

take into account the supplement to their motion for reconsideration. The presumption is that such supplement was

considered but found to be undeserving of further comment. Courts are not required to expressly dispose of every single point

or argument raised by litigants, even if off-tangent, repetitive of absurb. Courts must distinguish between the substantial and

the irrelevant or trivial as a practical measure for the proper harnessing of their time.

WHEREFORE, the petition is DENIED, with costs against the petitioners. It is so ordered.

Padilla, Grio-Aquino, and Bellosillo, JJ., concur.

SECOND DIVISION

JOVEN YUKI, JR.,

G.R. No. 178527

Petitioner,

Present:


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CARPIO,* J., Chairperson,

- versus -

LEONARDO-DE CASTRO,**

BRION,

DEL CASTILLO, and

ABAD, JJ.

WELLINGTON CO,

Promulgated:

Respondent.

November 27, 2009


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x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x

D E C I S I O N

DEL CASTILLO, J.:

The lessee-petitioners attempt to hold on to the property subject of the instant unlawful detainer case, by resorting to

fraudulent machinations such as refusing to receive the notices to vacate, must not be countenanced. His stubborn refusal to

receive the notices to vacate should not prejudice the right of the lessor-respondent, to use and enjoy the fruits of his property.

This Petition for Review on Certiorari[1] assails the November 23, 2008 Decision[2] of the Court of Appeals (CA) in CA-G.R. SP

No. 89228 granting respondents Petition for Review*3+ and setting aside the March 7, 2005 Decision[4] of the Regional Trial

Court (RTC), Branch 14, Manila. The RTC reversed and set aside the Decision[5] dated September 21, 2004 of the Metropolitan

Trial Court (MeTC), Branch 15, Manila, granting respondents Complaint for unlawful detainer*6+ and ordering petitioner to

vacate the premises subject matter of this case.

Factual Antecedents

Mr. Joseph Chua was the registered owner of a parcel of land, together with a commercial building erected thereon,

situated at the corner of Espaa and Instruccion Sts., Sampaloc, Manila. In 1981, he leased a portion of the building to

petitioner Joven Yuki, Jr., who put up a business therein under the name and style Supersale Auto Supply. The contract of

lease between Mr. Chua and petitioner had a term of five years but was not reduced into writing. Thereafter, the lease was

renewed through a series of verbal and written agreements,[7] the last of which was a written Contract of Lease[8] covering the

period of January 1, 2003 to December 31, 2003 at a monthly rental of P7,000.00.

In November 2003, Mr. Chua informed petitioner that he sold the property to respondent Wellington Co and instructed

petitioner to thenceforth pay the rent to the new owner.

Proceedings before the Metropolitan Trial Court


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After the expiration of the lease contract, petitioner refused to vacate and surrender the leased premises. Thus,

respondent filed a Complaint for unlawful detainer[9] before the MeTC of Manila. The material allegations of the complaint

read as follows:

x x x x

3. Plaintiff [herein respondent] is the registered owner of that parcel of land together with the building existing thereon

situated at 2051 Espaa St. cor. Instruccion St., Sampaloc, Manila. Plaintiffs title to said property is evidenced by the Transfer

Certificate of Title No. 261682 of the Registry of Deeds of Manila, photocopy of which is attached hereto as Annex A and the

tax declarations for the lot and improvement are attached hereto as Annexes B and B-1, respectively;

x x x x

5. Prior to the sale of the lot and building by the previous owner to herein plaintiff, Joseph Chua sent a notice to defendant

[herein petitioner] informing him that the property is for sale giving the defendant the opportunity to exercise his pre-emptive

right. Copy of said Notice is attached hereto as Annex D;

6. Defendant waived his right to exercise his pre-emptive right and the real property was eventually sold to herein plaintiff;

7. Plaintiff, being the new owner of the lot and building, informed defendant that his Contract of Lease with the former lessor-owner Joseph Chua will no longer be renewed as per letter dated November 3, 2003, copy of which was left at defendants

store, for his refusal to acknowledge the receipt of the same. A copy of said Notice is attached hereto and made an integral

part hereof as Annex E;

8. For failure and refusal of the defendant to vacate and surrender the leased unit to plaintiff, plaintiffs counsel in turn sent a

formal demand upon defendant to vacate the leased premises within ten (10) days from receipt of the formal demand in view

of the expiration of the contract of lease. Copy of said letter dated January 13, 2004 is attached hereto as Annex F. A copy

was sent by registered mail but defendant failed to claim the same as evidenced by the Certification from the Central Post

Office, copy of which is attached hereto as Annex G. Another copy of the same demand letter was personally served at

defendants address as attested by the sworn statement of Wilberto Co who served the said formal demand as well as the

notice earlier sent by plaintiff. Copy of the Affidavit of Wilberto Co is attached hereto as Annex H;

x x x x


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Respondent prayed that petitioners possession of subject premises be declared unlawful and that petitioner be ordered

to vacate it. He also sought reasonable compensation for the use of the property until such time that it is surrendered to him

and for the petitioner to pay him moral damages and attorneys fees.

In his Answer with Counterclaim,[10] petitioner denied having been served with copies of the alleged notice of sale and noticeto vacate. By way of affirmative defenses, he claimed that the complaint should be dismissed for being premature as there was

no allegation therein of prior referral to the barangay. Petitioner also asserted that since he was not notified by the former

owner of the sale, he was deprived of his preemptive rights. Moreover, respondent has no cause of action against him because

respondent is not the true owner of the property but merely acts as a representative of persons whom respondent refused to

disclose. Further, petitioner argued that there was an implied renewal of lease considering that a) he did not receive a notice

to vacate, b) the two months deposit and one month advance payment he gave to Mr. Chua were never returned to him, and c)

respondent accepted his payments for the months of January and February 2004.

Petitioner also asserted that his property rights would be violated if he is evicted because he has been operating his business in

the premises for more than 20 years and has established goodwill in the area. He thus proposed that he be compensated the

amount of not less than P1 million or be allowed to dispose of his stocks within a reasonable period of t ime, before he vacates

the premises.

On September 21, 2004, the MeTC-Branch 15 rendered a Decision[11] in favor of the respondent, the dispositive portion of

which reads:

WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendant ordering the defendant and all

persons claiming right under him:

1. to VACATE and surrender the subject property peacefully to plaintiff;

2. to PAY the plaintiff reasonable compensation for the use and occupancy of the subject premises in the amount of

eight thousand (P8,000.00) pesos per month from January 1, 2004 until such time that he and all persons claiming rights under

him have fully vacated the premises;

3. to PAY the plaintiff thirty thousand (P30,000.00) pesos as attorneys fees and litigation expenses.

SO ORDERED.[12]

Proceedings before the Regional Trial Court


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In time, petitioner went on appeal to the RTC contending that

A. THE LOWER COURT ERRED WHEN IT RULED THAT THE PLAINTIFF-APPELLEE [herein respondent] HAD A CAUSE OFACTION TO EVICT HEREIN DEFENDANT-APPELLANT [herein petitioner] FROM THE PREMISES.

B. THE LOWER COURT ERRED WHEN IT RULED THAT THERE WAS NO IMPLIED NEW LEASE CREATED BY PLAINTIFF-

APPELLEES ACCEPTANCE OF THE RENTALS MADE BY DEFENDANT-APPELLANT.

C. THE LOWER COURT ERRED WHEN IT RULED THAT VALID NOTICE [TO] VACATE WAS SERVED UPON DEFENDANT-

APPELLANT BY THE PLAINTIFF-APPELLEE.

D. THE LOWER COURT GRAVELY ERRED WHEN IT RULED THAT DEFENDANT-APPELLANT WAS NOT DENIED HIS PREEMPTIVE

RIGHT TO PURCHASE THE PROPERTY HE HAS BEEN OCCUPYING.

E. THE LOWER COURT GRAVELY ERRED WHEN IT DENIED THE MOTION FOR CLARIFICATORY HEARING FILED BY

DEFENDANT-APPELLANT AS WELL AS HAVING DENIED THE MOTION FOR VOLUNTARY INHIBITION.

F. THE LOWER COURT ERRED WHEN IT AWARDED ATTORNEYS FEES AMOUNTING TO THIRTY THOUSAND (P30,000.00) INFAVOR OF PLAINTIFF-APPELLEE.

On March 7, 2005, the RTC-Branch 14 rendered a Decision[13] with the following disposition:

WHEREFORE, all premises considered, the Court finds and so holds preponderance of evidence on the part of the defendant-

appellant. Accordingly, the Decision appealed from is hereby REVERSED, and the complaint for Unlawful Detainer is dismissed.

Finally, there is on record a defendant-appellants Motion for Reconsideration as regards the amount of the supersedeas bond.

By the dismissal of the case, the resolution thereof is thereby rendered moot and academic.

SO ORDERED.[14]


13/31

In reversing the ruling of the MeTC, the RTC found no proof on record that petitioner actually received the notice to vacate,

thereby making the Complaint fatally defective. The RTC likewise opined that the resolution of the case hinges on the existence

of implied new lease, a question which is incapable of pecuniary estimation and, therefore, beyond the MeTCs jurisdiction.

Proceedings before the Court of Appeals

Respondent filed with the CA a Petition for Review[15] under Rule 42 of the Rules of Court assailing the RTC Decision. On

November 23, 2006, the CA promulgated the now assailed Decision[16] granting the petition. Its fallo reads:

WHEREFORE, the instant petition is hereby GRANTED. The Decision dated 7 March 2005 rendered by the Regional Trial Court

(RTC) of Manila, Branch 14 is SET ASIDE and the Decision dated 21 September 2004 of the Metropolitan Trial Court (MeTC) of

Manila, Branch 15 is REINSTATED.

SO ORDERED.[17]

Issues

Petitioner interposed the present recourse imputing upon the CA the following errors:

A. x x x THE COURT OF APPEALS COMMITTED GRAVE ERROR WHEN IT RULED NOT TO DISMISS THE PETITION INTERPOSED

BY RESPONDENT AND INSTEAD PROCEEDED TO REVERSE THE DECISION DATED MARCH 7, 2005 OF THE REGIONAL TRIAL

COURT, BRANCH 14 DESPITE RESPONDENT (THEN PETITIONER) HAVING FAILED TO COMPLY WITH THE PROCEDURAL

REQUIREMENTS UNDER RULE 42 OF THE 1997 RULES OF CIVIL PROCEDURE.[18]

B. THE COURT OF APPEALS ERRED WHEN IT FOUND ERRORS COMMITTED BY THE RTC IN REVERSING THE DECISION OF THE

MTC.[19]

Our Ruling


14/31

The petition lacks merit.

The allegations in respondents petition are supported by material portions of the record.

Petitioner contends that the Petition for Review[20] filed by the respondent with the CA is procedurally infirmed and

that the appellate court should have outrightly dismissed the same. Specifically, petitioner points out that while respondent

attached to the petition the parties respective position papers, he failed to attach to said position papers the annexes thereto.

This, petitioner insists, warrants the dismissal of respondents petition per Section 2, Rule 42 of the Rules of Court,*21+ in

relation to Section 3[22] of the same Rule.

We do not agree. Section 2 of Rule 42 does not require that all the pleadings and documents filed before the lower courts must

be attached as annexes to the petition. Aside from clearly legible duplicate originals or true copies of the judgments or finalorders of both lower courts, it merely requires that the petition be accompanied by copies of pleadings and other material

portions of the record as would support the allegations of the petition. As to what these pleadings and material portions of the

record are, the Rules grants the petitioner sufficient discretion to determine the same. This discretion is of course subject to

CAs evaluation whether the supporting documents are sufficient to make out a prima facie case.[23] Thus, Section 3

empowers the CA to dismiss the petition where the allegations contained therein are utterly bereft of evidentiary foundation.

Since in this case the CA gave due course to respondents Petition for Review and proceeded to decide it on the merits, it can

be fairly assumed that the appellate court is satisfied that respondent has sufficiently complied with Section 2 of Rule 42.

Besides, our own examination of the CA rollo reveals that the annexes to the position papers can be found somewhere else in

the petition. The annexes to the parties respective position papers are the same annexes attached to the Complaint and the

Answer. In fact, Annexes A to H of the Complaint respectively pertain to the same documents marked as Annexes A toH of respondents Position Paper. And while respondents Position Paper as attached to the petition does not contain any

annexes, said annexes are nonetheless appended to the Complaint which is also attached to the petition.

The same is true with Annexes 1 to 6 of petitioners Position Paper. Annexes 1, 2, and 3 are attached to the Petition

for Review as Annexes 3, 4, and 5, respectively, of the Answer. Annex 4 of petitioners Position Paper is the Contract of

Lease marked as Annex C of the Complaint, while Annexes 5 and 6 are marked and attached as Annexes 1 and 2,

respectively, of the Answer. To our mind, these are more than substantial compliance with the requirements of the rules.

Indeed, if we are to apply the rules of procedure in a very rigid and technical sense as what the petitioner suggests in this case,

the ends of justice would be defeated. In Lanaria v. Planta,[24] we emphasized that courts should not be so strict about

procedural lapses that do not really impair the proper administration of justice, for rules of procedure are intended to promote,

and not to defeat, substantial justice.[25]

Allegations of implied new lease or tacita reconduccion cannot oust the MeTC of jurisdiction over unlawful detainer cases.


15/31

Petitioner also contends that the CA grievously erred in reversing the Decision of the RTC. He maintains that the RTC

correctly held that the key issue to be resolved in this case is the existence of an implied new lease, a matter which is incapable

of pecuniary estimation and, therefore, beyond the MeTCs jurisdiction.

The argument is bereft of merit. The allegation of existence of implied new lease or tacita reconduccion will not divest theMeTC of jurisdiction over the ejectment case. It is an elementary rule that the jurisdiction of the court in ejectment cases is

determined by the allegations pleaded in the complaint[26] and cannot be made to depend upon the defenses set up in the

answer or pleadings filed by the defendant.[27] This principle holds even if the facts proved during trial do not support the

cause of action alleged in the complaint.[28] In connection with this, it is well to note that in unlawful detainer cases the

elements to be proved and resolved are the facts of lease and expiration or violation of its terms.[29]

Here, no interpretative exercise is needed to conclude that respondent has complied with such requirement. In respondents

Complaint, he specifically alleged that (1) the former owner, Mr. Chua, and petitioner entered into a contract of lease; (2)

subsequently, respondent purchased the leased premises from Mr. Chua and became the owner thereof; (3) thereafter, the

lease contract between Mr. Chua and petitioner expired; and (4) petitioner refused to vacate the premises despite the

expiration and non-renewal of the lease.

Besides, we do not agree with the RTC that the MeTC does not have jurisdiction to resolve the issue of existence of implied n ew

lease in the unlawful detainer case. Tacita reconduccion refers to the right of the lessee to continue enjoying the material or de

facto possession of the thing leased within a period of time fixed by law. During its existence, the lessee can prevent the lessor

from evicting him from the disputed premises. On the other hand, it is too well-settled to require a citation that the question

to be resolved in unlawful detainer cases is, who is entitled to de facto possession. Therefore, since tacita reconduccion is

determinative of who between the parties is entitled to de facto possession, the MeTC has jurisdiction to resolve and pass upon

the issue of implied new lease in unlawful detainer case. In Mid-Pasig Land Development Corporation v. Court of Appeals,[30]

we ruled that the MeTC is clothed with exclusive original jurisdiction over an unlawful detainer case even if the same would

entail compelling the plaintiff therein to recognize an implied lease agreement.

Respondent did not acquiesce to petitioners continued possession of subject premises.

Petitioner likewise claims that the RTC correctly held that there was no sufficient evidence on record that he received the

alleged notice to vacate. While he admits that a notice to vacate is no longer necessary when the ground for unlawful detainer

is the expiration of the lease, proof that he actually received said notice is still important in this case in view of his allegation of

implied new lease. Citing Article 1670 of the Civil Code,[31] petitioner contends that if at the expiration of the contract of lease

the lessee continued to enjoy the leased property for 15 days with the acquiescence of the lessor, there is an implied new

lease. In this case, the determination of whether or not his continued stay in the leased premises is with the acquiescence of

the lessor hinges on whether or not he received the notice to vacate. And, as correctly found by the RTC, he did not receive any

notice to vacate.

We are not swayed. Under Article 1670, an implied new lease will set in if it is shown that: (a) the term of the original contract

of lease has expired; (b) the lessor has not given the lessee a notice to vacate; and (c) the lessee continued enjoying the thing

leased for 15 days with the acquiescence of the lessor. This acquiescence may be inferred from the failure of the lessor to serve

notice to vacate upon the lessee.[32]


16/31

In the instant case, however, the MeTC and the CA correctly found that there was a valid demand to vacate. Thus:

Prior to the sale of the property by previous owner Joseph Chua to herein plaintiff, defendant was formally notified by the

previous owner in a letter dated September 1, 2003 (Annex D of Complaint, Records, p. 12) of his intention to sell the

property but herein defendant failed to exercise his pre-emptive right to purchase the property.

Thus, the subject premises was sold to plaintiff who became the registered owner thereof as evidenced by TCT No. 261682

(Annex A, Complaint, Records, p. 7). Plaintiff, as new owner/vendee, informed defendant through a letter dated November 3,

2003 (Annex E, Complaint, Records, p. 13), even prior to the expiration of the contract that he will be needing the premise s

thus the contract will not be renewed or no contract will be executed, and directed defendant to vacate the premises by

January 1, 2004. The said notice was sent by registered mail and by personal service. The notice sent by registered mail was

returned to sender for failure of the defendant to claim the same at the post office. The unclaimed letter is attached to the

plaintiffs position paper as Annex F (Records, p. 93). Despite notice given to him, defendant failed to vacate and a formal

demand letter dated January 13, 2004 was served to him personally on January 21, 2004 which he refused to acknowledge that

he received the same. A copy of that same letter was sent by registered mail but defendant refused to claim the same for

which it was returned to sender. The unclaimed letter which was returned to sender is attached to the plaintiffs position paper

as Annex G-1 (Records, p. 96) and the certification from the post office attesting to the fact that defendant failed to claim the

same is attached to the plaintiffs position paper as Annex G (Records, p. 95). The demand letter dated January 13, 2004

pertains to the premises presently occupied by defendant. The Contract of Lease (Annex C, of Complaint, Records, pp. 10-11)

which expired on December 31, 2003 speaks of only one (1) unit which is the subject matter of this case. Defendant failed to

show that the portion being occupied by him which is the subject matter of this case is covered by another lease contract.

The Court therefore finds that there was a valid demand to vacate.[33]

This finding of the MeTC, which was affirmed by the CA, is a factual matter that is not ordinarily reviewable in a petition for

review on certiorari filed under Rule 45 of the Rules of Court. It is settled that in a petition for review on certiorari, only

questions of law may be raised by the parties and passed upon by this court.

Besides, even if we do review the case, there is no cogent reason to disturb the finding of said courts. Under the rules, if the

addressee refuses to accept delivery, service by registered mail is deemed complete if the addressee fails to claim the mail from

the postal office after five days from the date of first notice of the postmaster.[34] Further, the absence of personal service of

notice to vacate in this case could only be attributed to petitioners unexplainable refusal to receive the same. In Co Keng Kian

v. Intermediate Appellate Court,*35+ we held that *t+he Court cannot countenance an unfair situation where the plaintiff in an

eviction case suffers further injustice by the unwarranted delay resulting from the obstinate refusal of the defendant to

acknowledge the existence of a valid demand.

The formal demands to vacate sent to petitioner, coupled with the filing of an ejectment suit, are categorical acts on the part of

respondent showing that he is not amenable to another renewal of the lease contract. Therefore, petitioners contention that

his stay in the subject premises is with the acquiescence of the respondent, has no leg to stand on.

Petitioners alleged preferential right to buy subject premises has no basis.


17/31

In view of the above disquisition, petitioners claim that he was deprived of his preemptive rights because he was not notified

of the intended sale, likewise crumbles. Besides, the right of first refusal, also referred to as the preferential right to buy, is

available to lessees only if there is a stipulation thereto in the contract of lease or where there is a law granting such right to

them (i.e., Presidential Decree No. 1517 (1978),[36] which vests upon urban poor dwellers[37] who merely lease the house

where they have been residing for at least ten years, preferential right to buy the property located within an area proclaimed as

an urban land reform zone). Unlike co-owners and adjacent lot owners,[38] there is no provision in the Civil Code which grants

to lessees preemptive rights. Nonetheless, the parties to a contract of lease may provide in their contract that the lessee has

the right of first refusal.

In this case, there is nothing in the Contract of Lease which grants petitioner preferential right to buy the subject premises. We

are likewise unaware of any applicable law which vests upon him priority right to buy the commercial building subject matter of

this case. In fact, aside from the sweeping statement that his preferential right to buy was violated, petitioner failed to cite in

his Petition,[39] Reply,[40] or Memorandum[41] any specific provision of a law granting him such right. In other words,

petitioner failed to lay the basis for his claim that he enjoys a preferential right to buy.

And even assuming that he has, the same will not prevent the ejectment case filed by the respondent from taking its due

course. A contract of sale entered into in violation of preemptive right is merely rescissible and the remedy of the aggrieved

party whose right was violated is to file an appropriate action to rescind the sale and compel the owner to execute the

necessary deed of sale in his favor. In Wilmon Auto Supply Corp. v. Court of Appeals,[42] we categorically held that an action

for unlawful detainer cannot be abated or suspended by an action filed by the defendant- lesseee to judicially enforce his right

of preemption.


SUPREME COURTManila

FIRST DIVISION

G.R. No. 128991 April 12, 2000

YOLANDA ROSELLO-BENTIR, SAMUEL PORMIDA and CHARITO PORMIDA, petitioners,vs.

HONORABLE MATEO M. LEANDA, in his capacity as Presiding Judge of RTC, Tacloban City, Branch 8, and LEYTE GULFTRADERS, INC., respondents.

KAPUNAN, J.:

Reformation. of an instrument is that remedy in equity by means of which a written instrument is made or construed so as toexpress or conform to the real intention of the parties when some error or mistake has been committed.

1It is predicated on

the equitable maxim that equity treats as done that which ought to be done.2Therationale of the doctrine is that it would be

unjust and unequitable to allow the enforcement of a written instrument which does not reflect or disclose the real meeting of

the minds of the parties.3However, an action for reformation must be brought within the period prescribed by law, otherwise,

it will be barred by the mere lapse of time. The issue in this case is whether or not the complaint for reformation filed by

respondent Leyte Gulf Traders, Inc. has prescribed and in the negative, whether or not it is entitled to the remedy of

reformation sought.
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18/31

On May 15, 1992, respondent Leyte Gulf Traders, Inc. (herein referred to as respondent corporation) filed a complaint for

reformation of instrument, specific performance, annulment of conditional sale and damages with prayer for writ of injunction

against petitioners Yolanda Rosello-Bentir and the spouses Samuel and Charito Pormida. The case was docketed as Civil Case

No. 92-05-88 and raffled to Judge Pedro S. Espina, RTC, Tacloban City, Branch 7. Respondent corporation alleged that it entered

into a contract of lease of a parcel of land with petitioner Bentir for a period of twenty (20) years starting May 5, 1968.

According to respondent corporation, the lease was extended for another four (4) years or until May 31, 1992. On May 5, 1989,

petitioner Bentir sold the leased premises to petitioner spouses Samuel Pormada and Charito Pormada. Respondent

corporation questioned the sale alleging that it had a right of first refusal. Rebuffed, it filed Civil Case No. 92-05-88 seeking thereformation of the expired contract of lease on the ground that its lawyer inadvertently omitted to incorporate in the contract

of lease executed in 1968, the verbal agreement or understanding between the parties that in the event petitioner Bentir leases

or sells the lot after the expiration of the lease, respondent corporation has the right to equal the highest offer.

In due time, petitioners filed their answer alleging that the inadvertence of the lawyer who prepared the lease contract is not a

ground for reformation. They further contended that respondent corporation is guilty of laches for not bringing the case for

reformation of the lease contract within the prescriptive period of ten (10) years from its execution.

Respondent corporation then filed its reply and on November 18, 1992, filed a motion to admit amended complaint. Said

motion was granted by the lower court.4

Thereafter, petitioners filed a motion to dismiss reiterating that the complaint should be dismissed on the ground of

prescription.

On December 15, 1995, the trial court through Judge Pedro S. Espina issued an order dismissing the complaint premised on its

finding that the action for reformation had already prescribed. The order reads:

ORDER

Resolved here is the defendants' MOTION TO DISMISS PLAINTIFF'S complaint on ground of prescription of action.

It is claimed by plaintiff that he and defendant Bentir entered into a contract of lease of a parcel of land on May 5,

1968 for a period of 20 years (and renewed for an additional 4 years thereafter) with the verbal agreement that in

case the lessor decides to sell the property after the lease, she shall give the plaintiff the right to equal the offers of

other prospective buyers. It was claimed that the lessor violated this tight of first refusal of the plaintiff when she

sureptitiously (sic) sold the land to co-defendant Pormida on May 5, 1989 under a Deed of Conditional Sale. Plaintiffs

right was further violated when after discovery of the final sale, plaintiff ordered to equal the price of co-defendant

Pormida was refused and again defendant Bentir surreptitiously executed a final deed of sale in favor of co-defendant

Pormida in December 11, 1991.

The defendant Bentir denies that she bound herself to give the plaintiff the right of first refusal in case she sells the

property. But assuming for the sake of argument that such right of first refusal was made, it is now contended that

plaintiffs cause of action to reform the contract to reflect such right of first refusal, has already prescribed after 10

years, counted from May 5, 1988 when the contract of lease incepted. Counsel for defendant cited Conde vs. Malaga,

L-9405 July 31, 1956 and Ramos vs. Court of Appeals, 180 SCRA 635, where the Supreme Court held that the

prescriptive period for reformation of a written contract is ten (10) years under Article 1144 of the Civil Code.

This Court sustains the position of the defendants that this action for reformation of contract has prescribed and

hereby orders the dismissal of the case.

SO ORDERED.5

On December 29, 1995, respondent corporation filed a motion for reconsideration of the order dismissing the complaint.

On January 11, 1996, respondent corporation filed an urgent ex-parte motion for issuance of an order directing the petitioners,

or their representatives or agents to refrain from taking possession of the land in question.
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19/31

Considering that Judge Pedro S. Espina, to whom the case was raffled for resolution, was assigned to the RTC, Malolos, Bulacan,

Branch 19, Judge Roberto A. Navidad was designated in his place.

On March 28, 1996, upon motion of herein petitioners, Judge Navidad inhibited himself from hearing the case. Consequently,

the case was re-raffled and assigned to RTC, Tacloban City, Branch 8, presided by herein respondent judge Mateo M. Leanda.

On May 10, 1996, respondent judge issued an order reversing the order of dismissal on the grounds that the action forreformation had not yet prescribed and the dismissal was "premature and precipitate", denying respondent corporation of its

right to procedural due process. The order reads:

ORDER

Stated briefly, the principal objectives of the twin motions submitted by the plaintiffs, for resolution are:

(1) for the reconsideration of the Order of 15 December 1995 of the Court (RTC, Br. 7), dismissing this case,

on the sole ground of prescription of one (1) of the five (5) causes of action of plaintiff in its complaint for

"reformation" of a contract of lease; and,

(2) for issuance by this Court of an Order prohibiting the defendants and their privies-in-interest, from

taking possession of the leased premises, until a final court order issues for their exercise of dominical orpossessory right thereto.

The records of this case reveal that co-defendant BENTER (Yolanda) and plaintiff Leyte Gulf Traders Incorporation,

represented by Chairman Benito Ang, entered into a contract of lease of a parcel of land, denominated as Lot No.

878-D, located at Sagkahan District, Tacloban City, on 05 May 1968, for a period of twenty (20) years, (later renewed

for an additional two (2) years). Included in said covenant of lease is the verbal understanding and agreement

between the contracting parties, that when the defendant (as lessor) will sell the subject property, the plaintiff as

(lessee) has the "right of first refusal", that is, the right to equal the offer of any other prospective third-party buyer.

This agreement (sic) is made apparent by paragraph 4 of the lease agreement stating:

4. IMPROVEMENT. The lessee shall have the right to erect on the leased premises any building or structure

that it may desire without the consent or approval of the Lessor . . . provided that any improvements

existing at the termination of the lease shall remain as the property of the Lessor without right to

reimbursement to the Lessee of the cost or value thereof.

That the foregoing provision has been included in the lease agreement if only to convince the defendant-lessor that

plaintiff desired a priority right to acquire the property (ibid) by purchase, upon expiration of the effectivity of the

deed of lease.

In the course of the interplay of several procedural moves of the parties herein, the defendants filed their motion to

admit their amended answer to plaintiff's amended complaint. Correspondingly, the plaintiff filed its opposition to

said motion. The former court branch admitted the amended answer, to which order of admission, the plaintiff

seasonably filed its motion for reconsideration. But, before the said motion for reconsideration was acted upon by

the court, the latter issued an Order on 15 December 1995, DISMISSING this case on the lone ground of prescription

of the cause of action of plaintiff's complaint on "reformation" of the lease contract, without anymore considering the

remaining cause of action, viz.: (a) on Specific Performance; (b) an Annulment of Sale and Title; (c) on Issuance of a

Writ of Injunction, and (d) on Damages.

With due respect to the judicial opinion of the Honorable Presiding Judge of Branch 7 of this Court, the undersigned,

to whom this case was raffled to after the inhibition of Judge Roberto Navidad, as acting magistrate of Branch 7, feels

not necessary any more to discuss at length that even the cause of action for "reformation" has not, as yet,

prescribed.


20/31

To the mind of this Court, the dismissal order adverted to above, was obviously premature and precipitate, thus

resulting denial upon the right of plaintiff that procedural due process. The other remaining four (4) causes of action

of the complaint must have been deliberated upon before that court acted hastily in dismissing this case.

WHEREFORE, in the interest of substantial justice, the Order of the court, (Branch 7, RTC) dismissing this case, is

hereby ordered RECONSIDERED and SET ASIDE.

Let, therefore, the motion of plaintiff to reconsider the Order admitting the amended answer and the Motion to

Dismiss this case (ibid), be set for hearing on May 24, 1996, at 8:30 o'clock in the morning. Service of notices must be

effected upon parties and counsel as early as possible before said scheduled date.

Concomitantly, the defendants and their privies-in-interest or agents, are hereby STERNLY WARNED not to enter, in

the meantime, the litigated premises, before a final court order issues granting them dominical as well as possessory

right thereto.

To the motion or petition for contempt, filed by plaintiff, thru Atty. Bartolome C. Lawsin, the defendants may, if they

so desire, file their answer or rejoinder thereto, before the said petition will be set for hearing. The latter are given

ten (10) days to do so, from the date of their receipt of a copy of this Order.

SO ORDERED.

6

On June 10, 1996, respondent judge issued an order for status quo ante, enjoining petitioners to desist from occupying the

property.7

Aggrieved, petitioners herein filed a petition for certiorarito the Court of Appeals seeking the annulment of the order of

respondent court with prayer for issuance of a writ of preliminary injunction and temporary restraining order to restrain

respondent judge from further hearing the case and to direct respondent corporation to desist from further possessing the

litigated premises and to turn over possession to petitioners.

On January 17, 1997, the Court of Appeals, after finding no error in the questioned order nor grave abuse of discretion on the

part of the trial court that would amount to lack, or in excess of jurisdiction, denied the petition and affirmed the questioned

order.8A reconsideration of said decision was, likewise, denied on April 16, 1997.

9

Thus, the instant petition for review based on the following assigned errors, viz:

6:01 THE COURT OF APPEALS ERRED IN HOLDING THAT AN ACTION FOR REFORMATION IS PROPER AND JUSTIFIED

UNDER THE CIRCUMSTANCES OF THE PRESENT CASE;

6.02 THE COURT OF APPEALS ERRED IN HOLDING THAT THE ACTION FOR REFORMATION HAS NOT YET PRESCRIBED;

6.03 THE COURT OF APPEALS ERRED IN HOLDING THAT AN OPTION TO BUY IN A CONTRACT OF LEASE IS REVIVED

FROM THE IMPLIED RENEWAL OF SUCH LEASE; AND,

6.04 THE COURT OF APPEALS ERRED IN HOLDING THAT A STATUS QUO ANTEORDER IS NOT AN INJUNCTIVE RELIEF

THAT SHOULD COMPLY WITH THE PROVISIONS OF RULE 58 OF THE RULES OF COURT.10

The petition has merit.

The core issue that merits our consideration is whether the complaint for reformation of instrument has prescribed. 1awp++i1

The remedy of reformation of an instrument is grounded on the principle of equity where, in order to express the true intention

of the contracting parties, an instrument already executed is allowed by law to be reformed. The right of reformation is

necessarily an invasion or limitation of the parol evidence rule since, when a writing is reformed, the result is that an oral

agreement is by court decree made legally effective.11

Consequently, the courts, as the agencies authorized by law to exercise
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the power to reform an instrument, must necessarily exercise that power sparingly and with great caution and zealous care.

Moreover, the remedy, being an extraordinary one, must be subject to limitations as may be provided by law. Our law and

jurisprudence set such limitations, among which is laches. A suit for reformation of an instrument may be barred by lapse of

time. The prescriptive period for actions based upon a written contract and for reformation of an instrument is ten (10) years

under Article 1144 of the Civil Code.12

Prescription is intended to suppress stale and fraudulent claims arising from transactions

like the one at bar which facts had become so obscure from the lapse of time or defective memory. 13

In the case at bar,

respondent corporation had ten (10) years from 1968, the time when the contract of lease was executed, to fi le an action for

reformation. Sadly, it did so only on May 15, 1992 or twenty-four (24) years after the cause of action accrued, hence, its causeof action has become stale, hence, time-barred.

In holding that the action for reformation has not prescribed, the Court of Appeals upheld the ruling of the Regional Trial Court

that the 10-year prescriptive period should be reckoned not from the execution of the contract of lease in 1968, but from the

date of the alleged 4-year extension of the lease contract after it expired in 1988. Consequently, when the action for

reformation of instrument was filed in 1992 it was within ten (10) years from the extended period of the lease. Private

respondent theorized, and the Court of Appeals agreed, that the extended period of lease was an "implied new lease" within

the contemplation of Article 1670 of the Civil Code, 14

under which provision, the other terms of the original contract were

deemed revived in the implied new lease.

We do not agree. First, if, according to respondent corporation, there was an agreement between the parties to extend the

lease contract for four (4) years after the original contract expired in 1988, then Art. 1670 would not apply as this provision

speaks of an implied new lease (tacita reconduccion) where at the end of the contract, the lessee continues to enjoy the thingleased "with the acquiescence of the lessor", so that the duration of the lease is "not for the period of the original contract, but

for the time established in Article 1682 and 1687." In other words, if the extended period of lease was expressly agreed upon by

the parties, then the term should be exactly what the parties stipulated, not more, not less. Second, even if the supposed 4-

year extended lease be considered as an implied new lease under Art. 1670, "the other terms of the original contract"

contemplated in said provision are only those terms which are germane to the lessee's right of continued enjoyment of the

property leased.15

The prescriptive period of ten (10) years provided for in Art. 114416

applies by operation of law, not by the

will of the parties. Therefore, the right of action for reformation accrued from the date of execution of the contract of lease in

1968.

Even if we were to assume for the sake of argument that the instant action for reformation is not time-barred, respondent

corporation's action will still not prosper. Under Section 1, Rule 64 of the New Rules of Court,17

an action for the reformation of

an instrument is instituted as a special civil action for declaratory relief. Since the purpose of an action for declaratory relief is

to secure an authoritative statement of the rights and obligations of the parties for their guidance in the enforcement thereof,

or compliance therewith, and not to settle issues arising from an alleged breach thereof, it may be entertained only before thebreach or violation of the law or contract to which it refers.

18Here, respondent corporation brought the present action for

reformation after an alleged breach or violation of the contract was already committed by petitioner Bentir. Consequently, the

remedy of reformation no longer lies.

We no longer find it necessary to discuss the other issues raised considering that the same are predicated upon our affirmative

resolution on the issue of the prescription of the action for reformation.

WHEREFORE, the petition is hereby GRANTED. The Decision of the Court of Appeals dated January 17, 1997 is REVERSED and

SET ASIDE. The Order of the Regional Trial Court of Tacloban City, Branch 7, dated December 15, 1995 dismissing the action for

reformation is REINSTATED.1wphi1.nt

SO ORDERED.

Davide, Jr., C.J., Puno, Pardo and Ynares-Santiago, JJ., concur.


SUPREME COURTManila

FIRST DIVISION
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G.R. No. L-23399 May 31, 1974

BERNARDO DIZON, substituted by his heirs, DOMININA ALVENDIA VDA. DE DIZON, BUENAVENTURANZA DIZON-AMIO, SisterMARIA FLORENCIA (MARIA DIZON), MARIANO DIZON, VICTOR DIZON, ARACELI DIZON-GOMEZ, ESTELA DIZON-LACSAMANA,

MARITA DIZON, JOSEFA DIZON-ASIDO, EUGENIA DIZON-DEL BARRIO and GLORIA DIZON, petitioners,vs.AMBROSIO MAGSAYSAY and NICANOR PADILLA, respondents.

Pompeyo Diaz for petitioners.

Oben & Oben for respondents.

MAKALINTAL, C.J.:p

On April 1, 1949 Ambrosio Magsaysay, registered owner of a 1,171.70 sq. m. of land located in Sampaloc, Manila, and the late

Bernardo M. Dizon 1 executed a written contract of lease over a portion of the above-mentioned parcel of land which the latterhad been occupying as lessee since 1937 and on which he had constructed a residential house as well as a six-lane bowling

alley. The pertinent provisions of the lease contract2

read:

xxx xxx xxx

Que el DUENO cede en arrendamiento al INQUILINO una puerta commercial No. 143 Maria Clara, Manila

una portion del terreno adjacente a dicha puerta, y en cuyo esta levantada una edificacion No. 137 Bowling

Alley.

Y se convien mutualmente por y entre las partes siguiente: .

1. EL INQUILINO se compromete a pagar al DUENO un alquiler mensual de cien pesos (P100.00), moneda

filipina, y que se pagarapor anticipado en o antes del dia 15 de cada mes an la direccion del DUENO.

2. Este arrendamiento sera por dos (2) anos desde Abril 1, 1949 y renovable por igual periodo en

condiciones expresas y specificadas que seran convenidas entre las parties.

xxx xxx xxx

9. En el caso de que el DUENO vendiera el terreno, se le dara preferencia de comprar el INQUILINO sobre

cualquier otro comprador en igualdad de precio y condiciones.

xxx xxx xxx

The two-year term of the lease contract expired on April 1, 1951 without the parties' having expressly renewed theiragreement. Bernardo Dizon, however, continued to occupy the leased premises, paying the same monthly rental of P100.00,

which Ambrosio Magsaysay accepted.

Two years later, on March 3, 1953, the counsel of Ambrosio Magsaysay formally advised Bernardo Dizon of the termination of

the existing lease at the end of that month. On March 24 Dizon learned that as early as February 19, 1953 there were

negotiations for the sale of the entire 1,171.70 sq. m. lot to Nicanor Padilla, which negotiations were concluded on March 7,

1953 with the execution of an absolute deed of sale in his favor by Ambrosio Magsaysay and of a supplementary agreement

embodying the seller's acceptance of the condition that should he fail to completely eject all the tenants on the land within, a


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stated period, so much of the agreed purchase price of P48,000.00 would be forfeited. On March 11, 1953 a new certificate of

title was issued to Nicanor Padilla pursuant to the sale.

When Dizon learned of the sale he communicated with Magsaysay and Padilla, inviting their attention to paragraph 9 of the

original written lease contract which gave him the preferential right to purchase the land under the same conditions as those

offered by other buyers. On March 25, 1953 he actually commenced suit against Magsaysay and Padilla in the Court of First

Instance of Manila (Civil Case No. 19172), praying that the deed of sale between them be declared null and void; that they be

ordered to sell the land to him and to pay him damages and attorney's fees; or in the alternative, that defendant Magsaysay be

sentenced to pay the plaintiff the sum of P20,000.00 as actual damages, P10,000.00 for alleged losses in his business,

reasonable moral damages, and attorney's fees.

The new buyer, Nicanor Padilla, was included as party-defendant in this case on the allegation that he "7. .. knew the plaintiff

had his residential building and bowling alleys on this land, and before he purchased the land, he saw said building and alleys

and under the circumstances, he was aware and/or should be aware of the consideration value thereof as well as of the

preferred right of said plaintiff to buy the land."

The trial court rendered judgment on August 18, 1955, dismissing the complaint as well as defendant Nicanor Padilla's

counterclaim. On appeal to the Court of Appeals (CA-G.R. No. 16174) the decision was affirmed on June 8, 1964. Hence this

petition for review, presenting the crucial issue, as the Court of Appeals put it, as to "whether or not at the time of the sale of

the disputed property to Nicanor Padilla on March 7, 1953 appellant Dizon had a preferential right to purchase it at the same

price and terms."

Because Dizon continued to occupy the leased premises with Magsaysay's acquiescence even after the two-year term of the

private written lease contract between them expired on April 1, 1951, petitioners contend that the implied new lease created,

although admittedly not for the period of the original contract, revived the other terms thereof, including the lessee's

preferential right of purchase, citing Article 1670 of the new Civil Code, which provides:

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.

(Emphasis supplied)

The Court of Appeals held that "the other terms of the original contract" which are revived in the implied new lease underArticle 1670 are only those terms which are germane to the lessee's 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, the care of the property, the responsibility for repairs, etc. But no such presumption may be

indulged in with respect to special agreements which by nature are foreign to the right of occupancy or enjoyment inherent in a

contract of lease.

But whatever doubt there may be on this point is dispelled by paragraph (2) of the contract of lease, which states that it was

renewable for the same period of two years (upon its expiration on April 1, 1951), "con condiciones expresas y specificadas que

seran convenidas entre las partes." This stipulation embodied the agreement of the parties with respect to renewal of the

original contract, and while there was nothing in it which was incompatible with the existence of an implied new lease from

month to month under the conditions laid down in Article 1670 of the Civil Code, such incompatibility existed with respect to

any implied revival of the lessee's preferential right to purchase, which expired with the termination of the original contract. On

this point the express agreement of the parties should govern, not the legal provision relied upon by the petitioner.

The judgment of the Court of Appeals is affirmed, with costs.

Castro, Teehankee, Makasiar, Esguerra and Muoz Palma, JJ., concur.


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SUPREME COURTManila

SECOND DIVISION

G.R. No. 93625 November 8, 1993

VICENTE J. SANTI, petitioner,vs.

HON. COURT OF APPEALS, HEIRS OF AUGUSTO A. REYES, JR., represented by ALEXANDER REYES,respondents.

Manolo L. Lazaro for petitioner.

Mario R. Gomez for private respondents.

NOCON, J.:

The sole issue of the instant case is the interpretation specifically of paragraph 3 of the Contract of Lease1executed between

Esperanza Jose, predecessor-in-interest of herein petitioner and Augusto Reyes, Jr.

The undisputed facts of the case as summarized by the trial court are as follows:

Esperanza Jose was in her lifetime the registered owner and in absolute possession of a parcel of land

known as Lot 3, Block 89, situated in Cavite City, more particularly described in TCT. No. 5508 (RT-3159)

with an area of 1,472 square meters; that sometime on July 12, 1957 she leased a portion of the property

unto spouses Eugenio Vitan and Beatriz Francisco for a period of 20 years "automatically extended" for

another 20 years but with a rental of P220.00 per month as per Lease Contract ratified before Notary Public

Abraham F. Aguilar (Exhibit "8") and on which the lessees constructed a cinema house; that sometime in

1962, the lessees sold all their rights, interest and participation over the cinema house together with the

leasehold rights on the lessor's property unto Augusto A. Reyes, Jr. and a new contract of lease was entered

between the new owner and Esperanza Jose (Exhibit "A") for a period of 20 years from and after April 1,

1962 with a monthly rental of P180.00 payable in advance, said period of lease being "extendable" for

another period of 20 years with a monthly rental increased to P220.00 also payable in advance on or about

the first day of each month (Exhibit "2-B"). In the interim, Esperanza Jose sold all her rights and participation

over the parcel of land to Vicente J. Santi and TCT No. T-3968 of the Land Records of Cavite City was issued

in his favor, on February 23, 1982 the lease having expired, plaintiff wrote Alexander Reyes as

representative of Augusto Reyes, Jr., who had died, informing him of the termination of the lease on March

31, 1982 and demanding peaceful turn-over of possession, defendant refused on the ground that after

consulting his lawyer, Atty. Gregorio R. Familiar the latter informed him that the lease was automatically

extended for another 20 years at the rate of P220.00 a month and which amount he tendered unto plaintiff

who refused and by virtue thereof, religi

On Implied New Lease

Documents

Transcript of On Implied New Lease