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[G.R. No. 122544.

January 28, 1999] private respondent fully vacates the premises, and to pay
P20,000.00 as and by way of attorney's fees.
REGINA P. DIZON, AMPARO D. BARTOLOME,
FIDELINA D. BALZA, ESTER ABAD DIZON and Private respondent filed a certiorari petition praying for
JOSEPH ANTHONY DIZON, RAYMUND A. DIZON, the issuance of a restraining order enjoining the
GERARD A. DIZON, and JOSE A. DIZON, JR., enforcement of said judgment and dismissal of the case
petitioners, vs. COURT OF APPEALS and for lack of jurisdiction of the City Court.
OVERLAND EXPRESS LINES, INC., respondents.
[G.R. No. 124741. January 28, 1999] On September 26, 1984, the then Intermediate Appellate
Court[3] (now Court of Appeals) rendered a decision[4]
REGINA P. DIZON, AMPARO D. BARTOLOME, stating that:
FIDELINA D. BALZA, ESTER ABAD DIZON and
JOSEPH ANTHONY DIZON, RAYMUND A. DIZON, "x x x, the alleged question of whether petitioner was
GERARD A. DIZON, and JOSE A. DIZON, JR., granted an extension of the option to buy the property;
petitioners, vs. COURT OF APPEALS, HON. whether such option, if any, extended the lease or
MAXIMIANO C. ASUNCION, and OVERLAND whether petitioner actually paid the alleged P300,000.00
EXPRESS LINES, INC., respondents. to Fidela Dizon, as representative of private respondents
DECISION in consideration of the option and, whether petitioner
MARTINEZ, J.: thereafter offered to pay the balance of the supposed
purchase price, are all merely incidental and do not
Two consolidated petitions were filed before us seeking remove the unlawful detainer case from the jurisdiction
to set aside and annul the decisions and resolutions of of respondent court. In consonance with the ruling in the
respondent Court of Appeals. What seemed to be a case of Teodoro, Jr. vs. Mirasol (supra), the above
simple ejectment suit was juxtaposed with procedural matters may be raised and decided in the unlawful
intricacies which finally found its way to this Court. detainer suit as, to rule otherwise, would be a violation
of the principle prohibiting multiplicity of suits.
G. R. NO. 122544: (Original Records, pp. 38-39)."

On May 23, 1974, private respondent Overland Express The motion for reconsideration was denied. On review,
Lines, Inc. (lessee) entered into a Contract of Lease with this Court dismissed the petition in a resolution dated
Option to Buy with petitioners[1] (lessors) involving a June 19, 1985 and likewise denied private respondent's
1,755.80 square meter parcel of land situated at corner subsequent motion for reconsideration in a resolution
MacArthur Highway and South "H" Street, Diliman, dated September 9, 1985.[5]
Quezon City. The term of the lease was for one (1) year
commencing from May 16, 1974 up to May 15, 1975. On October 7, 1985, private respondent filed before the
During this period, private respondent was granted an Regional Trial Court (RTC) of Quezon City (Civil Case
option to purchase for the amount of P3,000.00 per No. Q-45541) an action for Specific Performance and
square meter. Thereafter, the lease shall be on a per Fixing of Period for Obligation with prayer for the
month basis with a monthly rental of P3,000.00. issuance of a restraining order pending hearing on the
prayer for a writ of preliminary injunction. It sought to
For failure of private respondent to pay the increased compel the execution of a deed of sale pursuant to the
rental of P8,000.00 per month effective June 1976, option to purchase and the receipt of the partial payment,
petitioners filed an action for ejectment (Civil Case No. and to fix the period to pay the balance. In an Order
VIII-29155) on November 10, 1976 before the then City dated October 25, 1985, the trial court denied the
Court (now Metropolitan Trial Court) of Quezon City, issuance of a writ of preliminary injunction on the
Branch VIII. On November 22, 1982, the City Court ground that the decision of the then City Court for the
rendered judgment[2] ordering private respondent to ejectment of the private respondent, having been
vacate the leased premises and to pay the sum of affirmed by the then Intermediate Appellate Court and
P624,000.00 representing rentals in arrears and/or as the Supreme Court, has become final and executory.
damages in the form of reasonable compensation for the
use and occupation of the premises during the period of Unable to secure an injunction, private respondent also
illegal detainer from June 1976 to November 1982 at the filed before the RTC of Quezon City, Branch 102 (Civil
monthly rental of P8,000.00, less payments made, plus Case No. Q-46487) on November 15, 1985 a complaint
12% interest per annum from November 18, 1976, the for Annulment of and Relief from Judgment with
date of filing of the complaint, until fully paid, the sum injunction and damages. In its decision[6] dated May 12,
of P8,000.00 a month starting December 1982, until 1986, the trial court dismissed the complaint for

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annulment on the ground of res judicata, and the writ of payment of the balance of the purchase price, as
preliminary injunction previously issued was dissolved. previously agreed upon by the parties.
It also ordered private respondent to pay P3,000.00 as
attorney's fees. As a consequence of private respondent's SO ORDERED."
motion for reconsideration, the preliminary injunction
was reinstated, thereby restraining the execution of the Upon denial of the motion for partial reconsideration
City Court's judgment on the ejectment case. (Civil Case No. Q-45541) by respondent Court of
Appeals,[10] petitioners elevated the case via petition for
The two cases were thereafter consolidated before the certiorari questioning the authority of Alice A. Dizon as
RTC of Quezon City, Branch 77. On April 28, 1989, a agent of petitioners in receiving private respondent's
decision[7] was rendered dismissing private respondent's partial payment amounting to P300,000.00 pursuant to
complaint in Civil Case No. Q-45541 (specific the Contract of Lease with Option to Buy. Petitioners
performance case) and denying its motion for also assail the propriety of private respondent's exercise
reconsideration in Civil Case No. 46487 (annulment of of the option when it tendered the said amount on June
the ejectment case). The motion for reconsideration of 20, 1975 which purportedly resulted in a perfected
said decision was likewise denied. contract of sale.

On appeal,[8] respondent Court of Appeals rendered a G. R. NO. 124741:


decision[9] upholding the jurisdiction of the City Court
of Quezon City in the ejectment case. It also concluded Petitioners filed with respondent Court of Appeals a
that there was a perfected contract of sale between the motion to remand the records of Civil Case No. 38-
parties on the leased premises and that pursuant to the 29155 (ejectment case) to the Metropolitan Trial Court
option to buy agreement, private respondent had (MTC), then City Court of Quezon City, Branch 38, for
acquired the rights of a vendee in a contract of sale. It execution of the judgment[11] dated November 22, 1982
opined that the payment by private respondent of which was granted in a resolution dated June 29, 1992.
P300,000.00 on June 20, 1975 as partial payment for the Private respondent filed a motion to reconsider said
leased property, which petitioners accepted (through resolution which was denied.
Alice A. Dizon) and for which an official receipt was
issued, was the operative act that gave rise to a perfected Aggrieved, private respondent filed a petition for
contract of sale, and that for failure of petitioners to deny certiorari, prohibition with preliminary injunction and/or
receipt thereof, private respondent can therefore assume restraining order with this Court (G.R. Nos. 106750-51)
that Alice A. Dizon, acting as agent of petitioners, was which was dismissed in a resolution dated September 16,
authorized by them to receive the money in their behalf. 1992 on the ground that the same was a refiled case
The Court of Appeals went further by stating that in fact, previously dismissed for lack of merit. On November 26,
what was entered into was a "conditional contract of 1992, entry of judgment was issued by this Court.
sale" wherein ownership over the leased property shall
not pass to the private respondent until it has fully paid On July 14, 1993, petitioners filed an urgent ex-parte
the purchase price. Since private respondent did not motion for execution of the decision in Civil Case No.
consign to the court the balance of the purchase price 38-29155 with the MTC of Quezon City, Branch 38. On
and continued to occupy the subject premises, it had the September 13, 1993, the trial court ordered the issuance
obligation to pay the amount of P1,700.00 in monthly of a third alias writ of execution. In denying private
rentals until full payment of the purchase price. The respondent's motion for reconsideration, it ordered the
dispositive portion of said decision reads: immediate implementation of the third writ of execution
without delay.
"WHEREFORE, the appealed decision in Case No.
46487 is AFFIRMED. The appealed decision in Case On December 22, 1993, private respondent filed with the
No. 45541 is, on the other hand, ANNULLED and SET Regional Trial Court (RTC) of Quezon City, Branch 104
ASIDE. The defendants-appellees are ordered to execute a petition for certiorari and prohibition with preliminary
the deed of absolute sale of the property in question, free injunction/restraining order (SP. PROC. No. 93-18722)
from any lien or encumbrance whatsoever, in favor of challenging the enforceability and validity of the MTC
the plaintiff-appellant, and to deliver to the latter the said judgment as well as the order for its execution.
deed of sale, as well as the owner's duplicate of the
certificate of title to said property upon payment of the On January 11, 1994, RTC of Quezon City, Branch 104
balance of the purchase price by the plaintiff-appellant. issued an order[12] granting the issuance of a writ of
The plaintiff-appellant is ordered to pay P1,700.00 per preliminary injunction upon private respondent's posting
month from June 1976, plus 6% interest per annum, until of an injunction bond of P50,000.00.

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given an option to purchase said property at P3,000.00
Assailing the aforequoted order after denial of their per square meter. After the expiration thereof, the lease
motion for partial reconsideration, petitioners filed a was for P3,000.00 per month.
petition[13] for certiorari and prohibition with a prayer
for a temporary restraining order and/or preliminary Admittedly, no definite period beyond the one-year term
injunction with the Court of Appeals. In its decision,[14] of lease was agreed upon by petitioners and private
the Court of Appeals dismissed the petition and ruled respondent. However, since the rent was paid on a
that: monthly basis, the period of lease is considered to be
from month to month in accordance with Article 1687 of
"The avowed purpose of this petition is to enjoin the the New Civil Code.[18] Where the rentals are paid
public respondent from restraining the ejectment of the monthly, the lease, even if verbal may be deemed to be
private respondent. To grant the petition would be to on a monthly basis, expiring at the end of every month
allow the ejectment of the private respondent. We cannot pursuant to Article 1687, in relation to Article 1673 of
do that now in view of the decision of this Court in CA- the Civil Code.[19] In such case, a demand to vacate is
G.R. CV Nos. 25153-54. Petitioners' alleged right to not even necessary for judicial action after the expiration
eject private respondent has been demonstrated to be of every month.[20]
without basis in the said civil case. The petitioners have
been shown, after all, to have no right to eject private When private respondent failed to pay the increased
respondents. rental of P8,000.00 per month in June 1976, the
petitioners had a cause of action to institute an ejectment
suit against the former with the then City Court. In this
WHEREFORE, the petition is DENIED due course and regard, the City Court (now MTC) had exclusive
is accordingly DISMISSED. jurisdiction over the ejectment suit. The filing by private
respondent of a suit with the Regional Trial Court for
SO ORDERED."[15] specific performance to enforce the option to purchase
did not divest the then City Court of its jurisdiction to
Petitioners' motion for reconsideration was denied in a take cognizance over the ejectment case. Of note is the
resolution[16] by the Court of Appeals stating that: fact that the decision of the City Court was affirmed by
both the Intermediate Appellate Court and this Court.
"This court in its decision in CA-G.R. CV Nos. 25153-
54 declared that the plaintiff-appellant (private Second. Having failed to exercise the option within the
respondent herein) acquired the rights of a vendee in a stipulated one-year period, private respondent cannot
contract of sale, in effect, recognizing the right of the enforce its option to purchase anymore. Moreover, even
private respondent to possess the subject premises. assuming arguendo that the right to exercise the option
Considering said decision, we should not allow still subsists at the time private respondent tendered the
ejectment; to do so would disturb the status quo of the amount on June 20, 1975, the suit for specific
parties since the petitioners are not in possession of the performance to enforce the option to purchase was filed
subject property. It would be unfair and unjust to deprive only on October 7, 1985 or more than ten (10) years
the private respondent of its possession of the subject after accrual of the cause of action as provided under
property after its rights have been established in a Article 1144 of the New Civil Code.[21]
subsequent ruling.
In this case, there was a contract of lease for one (1) year
WHEREFORE, the motion for reconsideration is with option to purchase. The contract of lease expired
DENIED for lack of merit. without the private respondent, as lessee, purchasing the
property but remained in possession thereof. Hence,
SO ORDERED."[17] there was an implicit renewal of the contract of lease on
a monthly basis. The other terms of the original contract
Hence, this instant petition. of lease which are revived in the implied new lease
under Article 1670 of the New Civil Code[22] are only
We find both petitions impressed with merit. those terms which are germane to the lessees right of
continued enjoyment of the property leased.[23]
First. Petitioners have established a right to evict private Therefore, an implied new lease does not ipso facto
respondent from the subject premises for non-payment carry with it any implied revival of private respondent's
of rentals. The term of the Contract of Lease with Option option to purchase (as lessee thereof) the leased
to Buy was for a period of one (1) year (May 16, 1974 to premises. The provision entitling the lessee the option to
May 15, 1975) during which the private respondent was purchase the leased premises is not deemed incorporated

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in the impliedly renewed contract because it is alien to There was no valid consent by the petitioners (as co-
the possession of the lessee. Private respondents right to owners of the leased premises) on the supposed sale
exercise the option to purchase expired with the entered into by Alice A. Dizon, as petitioners alleged
termination of the original contract of lease for one year. agent, and private respondent. The basis for agency is
The rationale of this Court is that: representation and a person dealing with an agent is put
upon inquiry and must discover upon his peril the
This is a reasonable construction of the provision, which authority of the agent.[26] As provided in Article 1868
is based on the presumption that when the lessor allows of the New Civil Code,[27] there was no showing that
the lessee to continue enjoying possession of the petitioners consented to the act of Alice A. Dizon nor
property for fifteen days after the expiration of the authorized her to act on their behalf with regard to her
contract he is willing that such enjoyment shall be for transaction with private respondent. The most prudent
the entire period corresponding to the rent which is thing private respondent should have done was to
customarily paid in this case up to the end of the month ascertain the extent of the authority of Alice A. Dizon.
because the rent was paid monthly. Necessarily, if the Being negligent in this regard, private respondent cannot
presumed will of the parties refers to the enjoyment of seek relief on the basis of a supposed agency.
possession the presumption covers the other terms of the
contract related to such possession, such as the amount In Bacaltos Coal Mines vs. Court of Appeals,[28] we
of rental, the date when it must be paid, the care of the explained the rule in dealing with an agent:
property, the responsibility for repairs, etc. But no such
presumption may be indulged in with respect to special Every person dealing with an agent is put upon inquiry
agreements which by nature are foreign to the right of and must discover upon his peril the authority of the
occupancy or enjoyment inherent in a contract of agent. If he does not make such inquiry, he is chargeable
lease.[24] with knowledge of the agents authority, and his
ignorance of that authority will not be any excuse.
Third. There was no perfected contract of sale between Persons dealing with an assumed agent, whether the
petitioners and private respondent. Private respondent assumed agency be a general or special one, are bound at
argued that it delivered the check of P300,000.00 to their peril, if they would hold the principal, to ascertain
Alice A. Dizon who acted as agent of petitioners not only the fact of the agency but also the nature and
pursuant to the supposed authority given by petitioner extent of the authority, and in case either is controverted,
Fidela Dizon, the payee thereof. Private respondent the burden of proof is upon them to establish it.
further contended that petitioners filing of the ejectment
case against it based on the contract of lease with option For the long years that private respondent was able to
to buy holds petitioners in estoppel to question the thwart the execution of the ejectment suit rendered in
authority of petitioner Fidela Dizon. It insisted that the favor of petitioners, we now write finis to this
payment of P300,000.00 as partial payment of the controversy and shun further delay so as to ensure that
purchase price constituted a valid exercise of the option this case would really attain finality.
to buy.
WHEREFORE, in view of the foregoing, both petitions
Under Article 1475 of the New Civil Code, the contract are GRANTED. The decision dated March 29, 1994 and
of sale is perfected at the moment there is a meeting of the resolution dated October 19, 1995 in CA-G.R. CV
minds upon the thing which is the object of the contract No. 25153-54, as well as the decision dated December
and upon the price. From that moment, the parties may 11, 1995 and the resolution dated April 23, 1997 in CA-
reciprocally demand performance, subject to the G.R. SP No. 33113 of the Court of Appeals are hereby
provisions of the law governing the form of contracts. REVERSED and SET ASIDE.
Thus, the elements of a contract of sale are consent,
object, and price in money or its equivalent. It bears Let the records of this case be remanded to the trial court
stressing that the absence of any of these essential for immediate execution of the judgment dated
elements negates the existence of a perfected contract of November 22, 1982 in Civil Case No. VIII-29155 of the
sale. Sale is a consensual contract and he who alleges it then City Court (now Metropolitan Trial Court) of
must show its existence by competent proof.[25] Quezon City, Branch VIII as affirmed in the decision
dated September 26, 1984 of the then Intermediate
In an attempt to resurrect the lapsed option, private Appellate Court (now Court of Appeals) and in the
respondent gave P300,000.00 to petitioners (thru Alice resolution dated June 19, 1985 of this Court.
A. Dizon) on the erroneous presumption that the said
amount tendered would constitute a perfected contract of
sale pursuant to the contract of lease with option to buy.

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However, petitioners are ordered to REFUND to private
respondent the amount of P300,000.00 which they
received through Alice A. Dizon on June 20, 1975.

SO ORDERED.