[G.R. No. 148562. November 25, 2004.

TAGBILARAN INTEGRATED SETTLERS ASSOCIATION [TISA]

INCORPORATED THRU ITS SECRETARY-TREASURER
REPRESENTATIVE SIXTO MUMAR, SR. AS WELL AS ITS
OTHER OFFICERS AND MEMBERS, NAMELY: AURELIO
CIRUNAY, CIPRIANO GAMIL, ROBERTO MEDINA, BASILISA
PUMARES, MARIETA LUMAYNO, CRISOSA A. TAPAY,
JULIETA DURAN, RAMON RAMOS, JR., DELIO ERANA,
EMETERIA ALE, PANFILO LAWAY, CRISPIN PENASO, HADJE
MALIK, ALANGADI SULTAN, BERNARDA GULLEBAN,
MANUEL CHATTO, KABSARAN MAMACAL, PEDRO
ESTOQUE, and EULALIO SARAMOSING, petitioners, vs.
HONORABLE COURT OF APPEALS, TAGBILARAN WOMAN'S
CLUB REPRESENTED BY ITS PRESIDENT and LAMBERT' S
REPRESENTED BY ITS MANAGER, CRISPIN PENASO, SPS.
ALEX and ARLENE SANTOS, NECITA BOLATETE, CAROL
CURIBA, MAMARI BUSAR, ANTONIO BULASA, SUSAN
PANTOJA, LEONORA ESTALLO, DANIEL OMICTIN, BOBBY
BANDIANON and CARMEN CRISTALES, respondents.

DECISION

CARPIO MORALES, J : p

On petition for review on certiorari is the appellate court's Decision 1 of

February 28, 2001 affirming that of Branch 2 of the Regional Trial Court
of Tagbilaran City, Bohol. 2
Petitioner Tagbilaran Integrated Settlers Association (TISA), is an
organization founded in 1991 by individuals who have residential and business
establishments in a commercial lot located at Torralba and Parras Streets
in Tagbilaran City. The lot, which has an area of 2,726 square meters, is covered
by TCT No. (142) 21047 in the name of respondent Tagbilaran Women's Club
(TWC).
In 1986—1987, the TWC entered into separate written lease contracts for a
period of one year with individual petitioners herein, Aurelio Cirunay, Roberto
Medina, Basilisa Pumares, Marietta Lumayno, Ramon Ramos Jr., Delio Erana,
Elemeterio Ale, Alangadi Sultan, Manuel Chatto, and Cipriano Gamil. 3
 Pertinent provisions of each contract of lease included the following: (1) stall
space rented shall be exclusively used for business; (2) converting the space into
dwelling is strictly prohibited; (3) no subleasing is allowed without the knowledge
and consent of TWC; (4) all ordinances as to sanitary and building permits shall
be complied with; (5) rentals shall be paid monthly; (6) the period of lease is for
one year only; and (7) any violation of the lease contract automatically rescinds
the contract of lease. 4
The other petitioners, namely Crisosa Tapay, Julieta Duran, Panfilo Laway,
Crispin Penaso, Hadje Malik, Bernardo Gulleban, Kabsaran Mamacal, Pedro
Estoque and Eulalio Saramosing are sublessees of stalls in the lot. 5
In a letter to petitioners dated January 6, 1990, TWC demanded that they
vacate the rented premises on the following grounds: expiration of lease contracts,
non-payment of rentals, and violations of the conditions of lease including
noncompliance with sanitary and building ordinances. 6 Another letter of demand,
dated July 16, 1990, was sent to petitioners who refused to vacate the premises,
however.
On February 25, 1993, TWC entered into a lease contract on the lot with one
Lambert Lim who at once paid a total of P240,000.00 representing payment of
rentals for the first twelve (12) months. 7 Petitioners nevertheless refused to vacate
the lot, they contending that the contract of lease between TWC and Lambert Lim
is null and void because TWC impliedly extended to them new contracts of lease
when it continued collecting monthly rentals from them.
Petitioners soon filed on March 31, 1993 a petition against TWC and Lim for
prohibition, annulment of contract of lease, and damages with prayer for the
issuance of a writ of preliminary prohibitory injunction before the RTC
of Tagbilaran City, Bohol. 8
In the meantime, petitioners consigned the monthly rentals before Branch 2
of the RTC (the trial court). 9
By decision 10 of January 24, 1997, the trial court dismissed petitioners'
petition, disposing as follows:
WHEREFORE, in the light of the foregoing, judgment is hereby
rendered in favor of the defendants and against the plaintiffs and third-
party defendants:
1. Ordering the dismissal of plaintiff's complaint/petition; ESCacI

2. Declaring the lease contract between the First Defendant TWC and
Second defendant Lambert Lim to be valid and binding;
3. Ordering the plaintiffs, the third-party defendant and the herein
occupants acting for and in behalf of the plaintiffs and third-party
defendants to vacate the premises of the defendant TWC's lot
 under TCT No. (142) 21047, within three (3) months from the
finality of the Decision;
4. Declaring the rental deposits consigned by plaintiffs with the Clerk of
Court in the total sum of P176,585.00, as payment for all rentals
and damages owing to the defendants, by reason of the filing of the
suit, in the equitable and proportionate amount of P56,585.00 to
the First Defendant TWC, and P140,000 to Second Defendant
Lambert Lim; and
5. To pay the costs. 11 (Emphasis supplied)
Petitioners appealed the trial court's decision before the Court of Appeals
which, by decision 12 of February 28, 2001, affirmed that of the trial court.
Petitioner's motion for reconsideration of the appellate court's decision
having been denied by Resolution 13 of June 11, 2001, they lodged the present
petition which raises the same issues raised before the trial court and the appellate
court, to wit: (1) granting that the contracts of lease between TWC and petitioners
have expired, whether implied new lease contracts existed which justify petitioners'
continued occupation of the lot; (2) whether TWC violated its obligation under
Article 1654 (c) of the Civil Code when it entered into a lease contract with Lim on
February 25, 1993; and (3) whether the provisions of Presidential Decree No.
1517, Presidential Decree No. 20, Proclamation No. 1893, and Presidential
Decree No. 1517 apply to the case at bar. 14
The petition fails.
The lease contracts executed by TWC and petitioners in 1986/1987 were for
a period of one year. Following Article 1669 15 of the Civil Code, the lease
contracts having been executed for a determinate time, they ceased on the day
fixed, that is, a year after their execution without need of further demand.
While no subsequent lease contracts extending the duration of the original
lease were forged, it appears that TWC allowed petitioners to continue occupying
the lot as in fact it continued to demand, collect and accept monthly rentals. 16 An
implied new lease (tacita reconduccion) was thus created pursuant to Article 1670
of the New Civil Code which provides:
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.
Since the period for the tacita reconduccion was not fixed and the rentals
were paid on a monthly basis, the contract was from month-to-month. 17
 A month-to-month lease under Article 1687 18 is a lease with a definite
period, hence, it is terminable at the end of each month upon demand to vacate by
the lessor. 19
When notice to vacate dated January 6, 1990 was sent by TWC to
petitioners, followed by another dated July 16, 1990, the tacita reconduccion was
aborted. For a notice to vacate constitutes an express act on the part of the lessor
that it no longer consents to the continued occupation by the lessees of its property.
The notice required [under Article 1670] is the one given after the
expiration of the lease period for the purpose of aborting an implied
renewal of the lease. 20 (Emphasis supplied)
As thus correctly found by the Court of Appeals,
[t]he implied lease of appellants expired upon demand made by the
appellee TWC on January 1990. From then on appellee TWC had the right
to terminate the lease at the end of the term of the impliedly renewed
contracts whose expiration dates w[ere] at the end of the month of January
1990. Although appellants continued to pay rent[al]s after said date, it is
clear that they no longer have the right to continue in the possession of
the subject lot because their continued stay therein was without the
consent of appellee TWC. 21
Contrary to petitioners' contention, the subsequent acceptance by the lessor
of rental payments does not, absent any circumstance that may dictate a contrary
conclusion, legitimize the unlawful character of their possession. 22
As for petitioners' contention that TWC violated Article 1654 (c) of the Civil
Code when it entered into a lease contract with Lim on February 25, 1993 without
their previous consent, the same does not lie. For after TWC notified petitioners,
by letter of January 6, 1990, to vacate the occupied premises, the implied new
lease had been aborted and they, therefore, had no right to continue occupying
the lot. Their continued occupation of the premises had thus become unlawful.
While TWC as a lessor is obliged to, under Article 1654 of the Civil Code,
maintain the lessee in the peaceful and adequate enjoyment of the lease, the
obligation persist only for the duration of the contract. 23
As to whether petitioners are covered by P.D. No. 1517, Proclamation No.
1893, RA 7279 and Presidential Decree No. 20, this Court holds in the negative.
Under P.D. 1517, only legitimate tenants who have resided on the land for
ten years or more who have built their homes on the land and residents who have
legally occupied the lands by contract continuously for the last ten years, are given
the right of first refusal to purchase the land within a reasonable time. 24 In the case
at bar, petitioners entered into one year lease contracts with TWC for commercial
use only and conversion of the rented premises to dwelling was strictly prohibited.
On that score alone, petitioners' case does not fall under P.D. No. 1517. HDITCS

At all events, P.D. No. 1517 is indisputably applicable only in specific areas
declared to be located within the so-called urban zones. 25 As found by the trial
court, petitioners failed to show that there was a proclamation issued by the
President declaring the lot to be within the urban land reform zone, a condition sine
qua non under Section 4 26 of P.D. 1517. 27
As for Proclamation No. 1893, 28 the same covers only the Metropolitan
Manila Area.
With respect to Section 28 of R.A. 7279, it covers only lands in urban areas,
including existing areas for priority development, zonal improvement sites, slum
improvement, resettlement sites, and other areas that may be identified by the
local government units as suitable for socialized housing. footx 29 Petitioners have
not shown, nay alleged, however, that the lot falls within the coverage of said law.
Finally, with respect to Presidential Decree No. 20, 30 the same seeks to
regulate rentals of properties used for housing purposes and not for commercial
use, hence, its inapplication to petitioners' case.
Finally, with respect to the disposition of the amount consigned in court by
petitioners, there being no factual basis to conclusively determine whether a
portion thereof represents rentals accruing before the execution on February 25,
1993 of the lease contract between Lim and TWC and whether said lease contract
remains unabrogated, the matter of determining who between TWC and Lim has
the right to the consigned amount and the accrued rentals rests with the trial court.
WHEREFORE, the challenged decision of the appellate court which affirmed
that of the trial court is hereby AFFIRMED with MODIFICATION in that petitioners
and any occupants of the lot acting for and in their behalf are ordered to PAY any
unpaid and accrued monthly rentals plus legal interest until the leased premises
have been surrendered to the TWC and/or Lambert Lim.
Let the records of the case be remanded to the court of origin, Branch 2 of
the Regional Trial Court of Tagbilaran City, which is directed to determine who
between respondents herein has a right to the consigned amount in the sum of
P176,585.00 and to any accrued and unpaid rentals to due petitioners.
Cost against petitioners.
SO ORDERED.
(Tagbilaran Integrated Settlers Association, Inc. v. Court of Appeals, G.R. No.
|||

148562, [November 25, 2004], 486 PHIL 386-397)

 [G.R. No. 197722. August 14, 2019.]

JOCELYN MODOMO and DR.

ROMY MODOMO, petitioners, vs. SPOUSES MOISES P. LAYUG,
JR. and FELISARIN ** E. LAYUG; MOISES P. LAYUG, JR.,
substituted by his heirs, namely: his wife, FELISARIN E.
LAYUG, and children, MA. CELESTE LAYUG CO, EUGENE
ESPINOSA LAYUG, FRANCIS ESPINOSA LAYUG and SHERYL
ESPINOSA LAYUG, respondents.

DECISION

CAGUIOA, ** J : p

The Case
This is a petition for review on certiorari 1 (Petition) filed under Rule 45 of
the Rules of Court against the Decision 2 dated March 22, 2011 (assailed
Decision) and Resolution 3 dated July 20, 2011 (assailed Resolution) in CA-
G.R. SP No. 113807 rendered by the Court of Appeals (CA).
The assailed Decision and Resolution affirm the lower courts' uniform
rulings which ordered petitioners Dr. Romy Modomo and
Jocelyn Modomo (collectively, Spouses Modomo) to immediately surrender
possession of a certain parcel of land covered by Transfer Certificate of Title
(TCT) No. 208683 registered in the name of respondents Moises P. Layug, Jr.
and Felisarin E. Layug (collectively, Spouses Layug). 4
The Facts
The facts, as narrated by the Metropolitan Trial Court (MeTC) of Makati
City, Branch 64, and subsequently adopted by the CA, are as follows:
[Spouses Layug filed] a complaint for [e]jectment x x x before the
[MeTC], Branch 65 of Makati on July 23, 2008 which was raffled off to
[Branch 64] after a failed Mediation and Judicial Dispute Resolution
(JDR) x x x.
xxx xxx xxx
[Spouses Layug] alleged among others that[:] they are the
registered owner[s] and legal possessors of a parcel of land located at
No. 1038 A.P. Reyes Street corner Cristobal Street, Barangay Tejeros,
Makati City covered by [Transfer Certificate of Title (TCT)] No. 208683.
Aforesaid property was leased to [Spouses Modomo] for a period of
seven (7) years. Pursuant to the [Contract of Lease 5 dated February
11, 2005 (Contract of Lease), Spouses Modomo agreed to] pay the
amount of Php170,000.00 as monthly rentals subject to an escalation of
10% for the second and third year, 15% on the fourth and fifth year and
20% on the sixth and seventh year. It was also agreed by the parties
that real estate taxes on the property shall be paid by
[Spouses Modomo]. In view of [these] stipulation[s], an Addendum to
the Contract was executed by the parties [also] on February 11, 2005
regarding the terms and conditions of payment of
rentals. Subsequently, [Spouses Modomo] defaulted in the
payment of the escalation of [rental fees] commencing from the
year 2006 up to [the filing of the complaint for ejectment on July 23,
2008]. [Spouses Modomo] also failed to pay their rentals for the year
2008 which would have been paid in advance. [Spouses Layug] also
alleged, that [Spouses Modomo] failed to pay the real estate taxes due
on the property x x x which [Spouses Layug] paid in
[Spouses Modomo's] behalf. [Spouses Layug sent a] letter x x x to
[Spouses Modomo] [demanding that they] settle their unpaid monthly
rentals x x x but to no avail. Ultimately, [a] letter dated March 24, 2008
was sent to [Spouses Modomo] terminating the [C]ontract [of
Lease] and containing therein a demand for [Spouses Modomo] to
vacate the premises. To thresh out the matter, the case was referred
to the Barangay of Tejeros for conciliation but to no avail. Hence, a
certification to file action was issued. To protect [their] interest,
[Spouses Layug] instituted the present suit claiming that
[Spouses Modomo] should vacate the premises, x x x pay
[Spouses Layug] rental arrearages, attorney's fees and costs of
suit.aCIHcD

On the contrary[, Spouses Modomo] argued that[: the] parties

originally agreed that [Spouses Modomo w]ould pay the amount of
Php170,000.00 subject to an escalation of 10% for the second and third
year, 15% on the fourth and fifth year and 20% on the sixth and seventh
year. However, considering that [Jocelyn] Modomo [had] introduce[d]
improvements thereon[,] she [asked] [Spouses Layug] to change certain
provisions in the Contract of Lease. Based on their conversation[,]
[Spouses Layug] agreed to reduce the monthly rentals to
Php150,000.00 and the non-imposition of the escalation clause and
the real estate tax provision. [Spouses Modomo] religiously paid the
rentals strictly in accordance with their subsequent
agreements. [Spouses Layug], on the second year of the [C]ontract
[of Lease], imposed the 10% escalation x x x. [Spouses Modomo]
however, reminded [Spouses Layug] of their previous agreement
regarding the non-imposition of the escalation clause and the real
estate tax provision. Thereafter, [Spouses Modomo] alleged that
[Spouses Layug agreed not to] impose the escalation clause [in] the
[C]ontract of [L]ease in view of the introduction of the improvements in
the premises amounting to approximately Two Million pesos
 [Php2,000,000.00]. Again [i]n 2008[, Spouses Layug] [purportedly]
reneged on their agreements by imposing the escalation clause.
Therefore, [Spouses Modomo] pray[ed] that the case be dismissed
because the [C]ontract of [L]ease dated February 11, 2005 ha[d] been
amended by the subsequent oral agreements between the parties.
[Spouses Modomo further claimed that Spouses Layug] are in
estoppel in pais, [due to] their unconditional acceptance of the reduced
x x x monthly [rental] x x x of Php150,000.00 instead of Php170,000.00.
[Spouses Modomo] also alleged that the [C]ontract of [L]ease has been
novated in view of the subsequent oral agreements of the parties.
Hence, [Spouses Modomo] pray[ed] for the dismissal of the case and
[that] they be [declared] entitled to their counterclaim. 6 (Emphasis
supplied)
MeTC Ruling

On July 20, 2009, the MeTC issued a Decision 7 in favor of Spouses

Layug, the dispositive portion of which reads:
WHEREFORE, the [MeTC] renders judgment ordering
[Spouses Modomo] to immediately surrender the peaceful possession
of the leased property with improvements thereon located at No. 1038
A.P. Reyes Street corner Cristobal Street, Barangay Tejeros, Makati
City.
[Spouses Modomo] are likewise ordered to pay [Spouses
Layug] the amount of Php3,119,200.00 as rental arrearages. The
amount of Php208,725.00 per month as payment for the reasonable
use and occupation of the property [is also imposed], computed
from July 23, 2008 until [Spouses Modomo] actually [vacate] the
premises.
[Spouses Modomo] are also ordered to pay [Spouses Layug]
Php10,000.00 as attorney's fees. Costs against [Spouses Modomo].
The [MeTC] DISMISSES the counterclaim filed by
[Spouses Modomo].
So Ordered. 8 (Emphasis supplied)
RTC Proceedings

Spouses Modomo filed an appeal before the RTC 9 via Rule 40 of

the Rules of Court.
Therein, Spouses Modomo insisted that Spouses Layug failed to refute
the existence of their subsequent oral agreement which caused the novation of
the Contract of Lease, particularly the provisions: (i) fixing the rental fee at
Php170,000.00; (ii) imposing annual escalation on rental fees; and (iii) requiring
Spouses Layug to pay real estate tax during the lease
term. 10 Spouses Modomo further argued that Spouses Layug are estopped
from denying the existence of such oral agreement, considering that they
accepted their monthly rental payments at the reduced amount of
Php150,000.00 without protest. 11 cHaCAS

In its Decision 12 dated January 28, 2010, the RTC affirmed the findings
of the MeTC in toto, disposing the case in these words:
After a careful consideration of the pleadings and the evidence
on record, this Court finds that the court-a-quo did not commit an error
in rendering judgment in favor of [Spouses Layug].
WHEREFORE, premises considered, the appealed decision is
hereby AFFIRMED with costs against [Spouses Modomo].
SO ORDERED. 13
Like the MeTC, the RTC also harped on the Parole Evidence Rule set
forth in Rule 130 of the Rules of Court 14 and held that if the parties' real
intention was to "cancel" the original Contract of Lease, they should have
executed a new Contract of Lease expressing "their intention to eliminate the
stipulation[s] regarding the escalation clause and the provision on real estate
tax." 15
The RTC also noted that while Spouses Layug accepted
Spouses Modomo's monthly rental payments in the reduced amount of
Php150,000.00 without escalation, they did not do so unconditionally. As basis,
the RTC cited Spouses Layug's letters dated December 7, 2006, February 6,
2007 and January 9, 2008 objecting to Spouses Modomo's deficient
payments. 16
Spouses Modomo filed a motion for reconsideration, which the RTC
denied on April 6, 2010. 17
CA Proceedings

Aggrieved, Spouses Modomo filed a petition for review before the CA,
reiterating the arguments they raised before the RTC.
The CA denied said petition through the assailed Decision, 18 the
dispositive portion of which reads:
WHEREFORE, premises considered, the instant Petition for
Review is hereby DENIED DUE COURSE and
accordingly, DISMISSED for lack of merit. The assailed Decision dated
January 28, 2010 and Order dated April 6, 2010, issued by the RTC,
Branch 59, Makati, in Civil Case No. 09-981 are
hereby AFFIRMED with MODIFICATION that petitioners are
further ORDERED to pay [Spouses Layug] legal interest of twelve
percent (12%) per annum on the back rentals [amounting to
 Php3,119,200.00] from the date of judicial demand on July 23, 2008 until
fully paid.
SO ORDERED. 19
The CA held that Spouses Modomo failed to establish the concurrence
of the requisites necessary to extinguish or modify the Contract of Lease by
way of novation. 20 As well, the CA affirmed the lower courts' findings regarding
the inapplicability of the principle of estoppel. 21
Finally, considering that Spouses Modomo vacated the leased premises
on November 2009, the CA clarified that the monetary award of Php208,725.00
per month as payment for reasonable use and occupation of the leased
premises shall run from the filing of the complaint for ejectment in July 2008,
but only until the surrender of the leased premises in November 2009. 22
Spouses Modomo's subsequent motion for reconsideration was also
denied through the CA's assailed Resolution, 23 which the former received on
July 26, 2011. 24 DACcIH

On August 5, 2011, Spouses Modomo filed a Motion for Extension of

Time to File Petition for Review on Certiorari 25 (Motion for Extension), praying
for an additional period of thirty (30) days, or until September 9, 2011, to file
their Petition.
Finally, this Petition was filed on September 9, 2011, the last day of the
additional period prayed for.
On October 3, 2011, the Court issued a Resolution 26 granting
Spouses Modomo's Motion for Extension, and directing Spouses Layug to file
their comment to the Petition.
It appears, however, that the RTC issued a Writ of Execution against
Spouses Modomo for the satisfaction of the monetary award granted in
Spouses Layug's favor. Hence, Spouses Modomo's real property covered by
TCT No. T-130972 was made subject of a Notice of Sheriff's Sale on Execution
of Real Property 27 scheduled on March 5 and 9 of the following year. 28 This
prompted Spouses Modomo to file an Urgent Motion for the Issuance of a
Temporary Restraining Order/Status Quo Order 29 (Urgent Motion) on
February 21, 2012.
The Urgent Motion was opposed by Spouses Layug through their
Comment (To Petitioners' Urgent Motion) 30 filed on June 25, 2012. Appended
to this Comment is a copy of the RTC's Order 31 dated March 2, 2012 granting
the Urgent Motion to Defer Sale on Execution filed therein by
Spouses Modomo. The Order states, in part:
In this case, considering that there is a pending Urgent Motion for
the Issuance of a Temporary Restraining Order/Status Quo and Petition
 for Review on Certiorari under Rule 45 before the Honorable Supreme
Court x x x [the RTC], which is a mere lower [c]ourt, deems it wise and
appropriate to defer the scheduled auction sale on March 5 and 9, 2012,
so as not to render the issues pending before the High Court moot and
moribund. Moreover, the Court believes that the deferment of the
auction sale will not prejudice nor cause irreparable damage against
[Spouses Layug] considering that should the High Court rule on the
pending issues therein, [the RTC] can promptly act accordingly.
WHEREFORE, in view of the foregoing, [Spouses Modomo's]
Urgent Motion to Defer Sale on Execution is hereby GRANTED.
Accordingly, the auction sale scheduled on March 5 and 9, 2012 is
hereby deferred until further ordered. 32 (Italics supplied)
According to Spouses Layug, the foregoing Order rendered
Spouses Modomo's Urgent Motion before this Court moot and academic. 33
Spouses Layug's Comment on the Urgent Motion was noted by the Court
through its Resolution 34 dated September 3, 2012.
Meanwhile, Spouses Layug filed their Comment 35 to the Petition on
January 4, 2012, to which Spouses Modomo filed their Reply. 36
In this Petition, Spouses Modomo fault the CA for ruling that no novation
of the Contract of Lease had taken place. 37 In this connection,
Spouses Modomo also claim that the CA erred when it failed to apply the
principle of estoppel in pais in the present case. 38
Finally, Spouses Modomo argue that the CA erred in failing to rule upon
their claim for reimbursement for useful improvements under Article 1678 of
the Civil Code.39 HSCATc

The Issues
The issues submitted for the Court's resolution are:
1. Whether the provisions of the Contract of Lease governing rental fees,
escalation and real estate tax payment have been partially novated
by the parties' alleged subsequent verbal agreement;
2. Whether the principle of estoppel in pais applies so as to preclude
Spouses Layug from denying the partial novation of the Contract
of Lease; and
3. Whether Spouses Modomo are entitled to reimbursement for useful
improvements made upon the leased property.
The Court's Decision
The Petition is granted in part.
Partial Novation
 Spouses Modomo adamantly insist that the terms of the Contract of
Lease governing rental fees, escalation and real estate tax payments have
been modified through a subsequent verbal agreement.
Spouses Modomo alludes to the existence of a partial novation,
governed by Article 1291 of the Civil Code which states:
ART. 1291. Obligations may be modified by:
(1) Changing their object or principal conditions;
(2) Substituting the person of the debtor;
(3) Subrogating a third person in the rights of the creditor.
(Emphasis supplied)
Noted civilist Justice Eduardo P. Caguioa elucidated on the concept of
modificatory novation as follows:
x x x Novation has been defined as the substitution or alteration
of an obligation by a subsequent one that cancels or modifies the
preceding one. Unlike other modes of extinction of obligations, novation
is a juridical act of dual function, in that at the time it extinguishes an
obligation, it creates a new one in lieu of the old. x x x This is not to say
however, that in every case of novation the old obligation is
necessarily extinguished. Our Civil Code now admits of the so-
called imperfect or modificatory novation where the original
obligation is not extinguished but modified or changed in some of
the principal conditions of the obligation. Thus, article 1291
provides that obligations may be modified. 40 (Emphasis supplied)
While the Civil Code permits the subsequent modification of existing
obligations, these obligations cannot be deemed modified in the absence of
clear evidence to this effect. Novation is never presumed, and the animus
novandi, whether total or partial, must appear by express agreement of the
parties, or by their acts that are too clear and unequivocal to be mistaken. 41
Accordingly, the burden to show the existence of novation lies on the
party alleging the same.
Applying the foregoing principles, the Court finds that while there has
been a modificatory novation of the Contract of Lease through the parties'
subsequent verbal agreement, such novation relates solely to the lowering of
the monthly rental fee from Php170,000.00 to Php150,000.00.
The provisions governing escalation and real estate tax payment, as set
forth under the Contract of Lease and modified by the subsequent written
Addenda, stand.
The modification of the monthly rental
fee through the parties' subsequent
verbal agreement is confirmed by the
evidence on record, and Spouses
Layug's own submissions.

The records are replete with evidence confirming the modification of the
monthly rental fee through the subsequent verbal agreement of the parties.
Foremost, the Spouses Layug served upon Spouses Modomo several
Statements of Account 42 reflecting the latter's unpaid balance. These
statements show that Spouses Layug consistently computed
Spouses Modomo's unpaid balance on the basis of the lowered monthly rental
fee of Php150,000.00, instead of Php170,000.00. IDTSEH

In addition, Spouses Layug's Letter 43 dated March 24, 2008 (Final

Demand) also reflects a computation of Spouses Modomo's unpaid balance on
the basis of the lowered monthly rental fee.
Finally, any doubt as to the modification of the monthly rental fee is
dispelled by the statements in Spouses Layug's Comment to the Petition which
unequivocally confirm such modification:
x x x The alleged novation on the monthly rental rate of
[Php]150,000.00 from [Php]170,000.00 would not in anyway novate an
existing and valid contract whereby all its valid and enforceable
stipulations would be put to naught.
xxx xxx xxx
In fine, it may be true that the rental rate of [Php]170,000.00
was modified by the parties and a novation of the principal
condition of the [C]ontract of [L]ease was thereby effected,
nevertheless, such a modification did not render the [C]ontract of
[L]ease as totally extinguished but rather[,] merely modified. In fine,
all other conditions of the contract[,] including the escalation clause on
the monthly rental rate and the proportional payment of real property
taxes and assessments by [Spouses Modomo] remain valid and
subsisting. 44 (Emphasis supplied)
These statements, coupled with the computation in the Statements of
Account and Final Demand, confirm the parties' subsequent verbal agreement
to lower the monthly rental fee from Php170,000.00 to Php150,000.00. Notably,
even the MeTC, RTC and CA appear to have computed Spouses Layug's
award for rental arrearages based on the lowered rental fee, 45 despite the
absence of an explicit recognition of the rental fee's modification in their
respective judgments.
Spouses Modomo failed to establish
that the provisions governing
escalation and proportional payment
of real estate tax payment have been
similarly modified.

While the records bear sufficient evidence to show the subsequent

modification of the monthly rental fee, no similar evidence exists on record to
warrant the non-imposition of the provisions on annual escalation and
proportional payment of real estate tax.
To note, the parties took pains to execute two written Addenda for the
purpose of modifying the terms and conditions of the parties' Contract of Lease.
The first Addendum 46 dated February 11, 2005 sets forth a detailed
schedule of payment of rentals for the entire seven (7)-year term of the lease.
The second Addendum 47 dated February 15, 2005 reflects the following
modifications in relation to taxes and assessments, among others:
WHEREAS, the LESSORS and LESSEE thereat mutually
further agree to incorporate the following corrections to and additional
stipulations to form part of the Contract of Lease, to wit:
xxx xxx xxx
TAXES AND ASSESSMENTS
For the entire duration of this contract, including any extension
and renewal thereof, the parties agreed that the LESSEE shall pay all
taxes and assessments due the government for the portion of the above-
mentioned parcels of land occupied by the building constructed thereon
by the LESSEE which is the subject of this lease. The parties agree to
share whatever assessment of taxes for every year during the term of
this Contract on the following sharing basis, to wit:
SICDAa

Lessors Lessee

Lot 40% 60%

Building 25% 75% 48

To be sure, neither the first nor second Addendum has the effect of: (i)
waiving the imposition of escalation; or (ii) completely absolving
Spouses Modomo from real estate tax liability. On the contrary, these
Addenda reinforce the parties' intention to: (i) impose annual escalation
at the rates set forth under the Contract of Lease; and (ii) impose
proportional payment of real estate tax during the subsistence of the
lease.
If the parties truly intended to further modify the Contract of Lease by
deleting the provisions on escalation and proportional payment of real estate
tax, they would have done so through another written document, as they have
consistently done with all modifications relating to such matters. It must be
stressed that unlike the modification of the monthly rental fee which is
supported by several pieces of documentary evidence and confirmed by
Spouses Layug's own submissions, the modification of the provisions on
annual escalation and proportional payment of real estate tax is
supported solely by Spouses Modomo's own self-serving statements.
Estoppel does not apply.

Spouses Modomo also insist that Spouses Layug should be precluded

from denying the partial novation of the Contract of Lease since they accepted
Spouses Modomo's monthly rental payments without escalation and
proportional share in the real estate tax for three (3) years, starting on the
second year of the lease term. As basis, Spouses Modomo harp on the
principle of estoppel in pais.
Estoppel in pais arises when one, by his acts, representations or
admissions, or by his own silence when he ought to speak out, intentionally or
through culpable negligence, induces another to believe certain facts to exist
and such other rightfully relies and acts on such belief, so that he will be
prejudiced if the former is permitted to deny the existence of such facts. 49
For the principle of estoppel in pais to apply, there must be: (i) conduct
amounting to false representation or concealment of material facts or at least
calculated to convey the impression that the facts are otherwise than, and
inconsistent with, those which the party subsequently attempts to assert; (ii)
intent, or at least expectation that this conduct shall .be acted upon, or at least
influenced by the other party; and (iii) knowledge, actual or constructive, of the
actual facts. 50
Based on the records, Spouses Layug served upon
Spouses Modomo several letters dated December 7, 2006, 51 February 6,
2007 52 and January 9, 2008 53 expressing their objection to the latter's
deficient payments. 54 These letters belie Spouses Modomo's imputation of
silence and acquiescence on the part of Spouses Layug. It can hardly be said
that Spouses Layug falsely conveyed their acquiescence to
Spouses Modomo's deficient payments through silence, there being no
"silence" to speak of.
Spouses Modomo are not entitled to
reimbursement for the cost of
improvements made on the leased
property.

Finally, Spouses Modomo maintain that they are entitled to

reimbursement under Article 1678 of the Civil Code, which reads:
 ART. 1678. If the lessee makes, in good faith, useful
improvements which are suitable to the use for which the lease is
intended, without altering the form or substance of the property leased,
the lessor upon the termination of the lease shall pay the lessee one-
half of the value of the improvements at that time. Should the lessor
refuse to reimburse said amount, the lessee may remove the
improvements, even though the principal thing may suffer damage
thereby. He shall not, however, cause any more impairment upon the
property leased than is necessary. DHIcET

Suffice it to state that Spouses Modomo have, by their own acts,

deprived the Spouses Layug of the option to appropriate the improvements
made upon the leased premises by causing their demolition. Notably,
Spouses Modomo did not dispute that they had "vacated the leased premises
[and] left no single piece of wood or materials on the premises [and] demolished
everything." 55 Hence, they are precluded from seeking reimbursement for
improvements that are now inexistent.
The computation of rental arrearages
and compensation for reasonable use
of the leased premises, together with
applicable interest, must be corrected.

The assailed Decision awards the following amounts in Spouses Layug's

favor:
1. Rental arrearages amounting to Php3,119,200.00, with 12%
interest computed from the date of judicial demand (i.e., filing of
the complaint for ejectment on July 23, 2008);
2. Payment for reasonable use and occupation of the leased premises
amounting to Php208,725.00 per month from the filing of the
complaint for ejectment in July 2008 to November 2009, when
Spouses Modomo finally vacated the leased premises; and
3. Attorney's fees amounting to Php10,000.00.
The Court notes that the value of rental arrearages was arrived at by
applying the escalation rates stipulated under the Contract of Lease, thus:

Unpaid rental on the second floor Php56,500.00

during construction

Unpaid rental on the 10% increase for 180,000.00

the year 2006 (Php165,000.00 56 –
Php150,000.00 = Php15,000.00 x 12
months)
 Unpaid rental on the 10% increase for 378,000.00
the year 2007 (Php181,500.00 57 –
Php150,000.00 = Php31,500 x 12
months)

Unpaid rental for the entire year of 2,504,700.00

2008 payable at the beginning of the
year per first Addendum, plus 15%
escalation (Php208,725.00 58 x 12
months)

Total Php3,119,200.00 59

Considering that the provision on the proportional sharing of real estate

tax liability remains effective, the Court deems it proper to award, in addition to
rental arrearages, Spouses Modomo's unpaid share in real estate taxes
amounting to Php27,539.80. 60
As well, the Court finds that the additional award for monthly payment for
reasonable use and occupation of the leased premises should start to
run not from the filing of the complaint for ejectment on July 23, 2008, but rather
in January 2009, considering that the award for rental arrearages already
includes unpaid rental fees for the entire year of 2008, that is, until December
2008.
Finally, inasmuch as the rental arrearages and unpaid real estate taxes
do not constitute a loan or forbearance of money, 61 the proper interest
applicable thereon is not 12%, but 6% per annum.
WHEREFORE, premises considered, the Petition is GRANTED IN
PART. The Decision dated March 22, 2011 rendered by the Court of Appeals
in CA-G.R. SP No. 113807 is AFFIRMED WITH MODIFICATION. HcDSaT

Petitioners Dr. Romy Modomo and Jocelyn Modomo are ORDERED TO

PAY respondents Spouses Moises P. Layug, Jr. and Felisarin E. Layug the
following amounts:
1. Rental arrearages and unpaid real estate taxes amounting
to Php3,146,739.80, with 6% interest per annum computed from
the date of judicial demand (i.e., filing of the complaint for
ejectment on July 23, 2008) until finality of this Decision;
2. Payment for reasonable use and occupation of the leased premises at
the rate of Php208,725.00 per month from January 2009 until
November 2009, when respondents surrendered possession
of the leased premises in November 2009, amounting to a total
 of Php2,295,975.00, with 6% interest per annum from December
1, 2009 until finality of this Decision;
3. Attorney's fees amounting to Php10,000.00; and
4. The sum of the amounts in paragraphs 1, 2 and 3 herein, with 6%
interest per annum from finality of this Decision until full
satisfaction.
SO ORDERED.
||| (Spouses Modomo v. Spouses Layug, G.R. No. 197722, [August 14, 2019])
[G.R. No. 213650. June 17, 2019.]

BOOKLIGHT, INC., petitioner, vs. RUDY O. TIU, respondent.

DECISION

J.C. REYES, JR., J : p

This is a Petition for Review on Certiorari 1 under Rule 45 of the Rules of

Court, assailing the Decision 2 dated July 31, 2013, and the Resolution 3 dated
July 21, 2014 of the Court of Appeals (CA)-Cagayan De Oro City in CA-G.R.
CV No. 02154-MIN.
On February 13, 2003, Rudy O. Tiu (respondent) filed a case for
Collection of Sum of Money, Damages, Attorney's Fees, Litigation Expenses
and Attachment against Booklight, Inc. (petitioner) before the Regional Trial
Court (RTC) of Butuan City. 4
The complaint alleged that petitioner entered into a contract of lease with
respondent for a space in respondent's building to be used for petitioner's
bookstore business. The lease was for five years, which expired on September
1, 2001. It was never renewed upon expiration although petitioner continued to
occupy the premises until its business operations ceased on February 28, 2003.
Alleging unpaid rentals from December 2001, respondent filed the said
complaint. 5
Respondent's application for the issuance of a writ of attachment was
granted by the RTC. Thus, petitioner's personal properties in the bookstore
were attached and its funds in Rizal Commercial Banking Corporation were
garnished. 6
 In its Answer with Compulsory Counterclaim, petitioner alleged that there
was no prior demand made by respondent and that it fully paid its rentals up to
July 2002, among others. 7
On September 2, 2003, the RTC declared petitioner non-suited for its
failure to file a pre-trial brief and for its failure to appear during the scheduled
pre-trial. Petitioner filed a motion to lift order of non-suit, which was denied by
the RTC in its Resolution dated July 26, 2004. Petitioner's motion for
reconsideration was likewise denied by the RTC. Hence, the RTC set the
hearing for the ex parte presentation of respondent's evidence on March 21,
2005. 8
Respondent then proceeded to the presentation of his evidence ex
parte. 9
Meanwhile, the RTC's denial of petitioner's motion to lift order of non-suit
was upheld by the CA, as well as by this Court in a Resolution dated April 2,
2008 in G.R. No. 181950. 10
On April 24, 2009, the RTC rendered a Decision 11 in favor of respondent
as follows:
WHEREFORE, in the light of the foregoing, judgment is hereby
rendered in favor of [the respondent] and against [the petitioner],
directing and ordering said [petitioner] to pay [respondent] the following
sums of money, to wit:
a.) the sum of FOUR HUNDRED SIXTY FIVE THOUSAND FIVE
HUNDRED EIGHTY SEVEN PESOS and FIFTY CENTAVOS
([P]465,587.50), Philippine Currency, as unpaid rentals from August
2002 up to February 2003, plus legal interest of 6% per annum
beginning August 2002 until fully paid;
b.) the sum of ONE HUNDRED SIXTEEN THOUSAND THREE
HUNDRED NINETY SIX PESOS and EIGHTY SEVEN CENTAVOS
([P]116,396.87), Philippine Currency, as attorney's fees;
c.) the sum of FIFTY FOUR THOUSAND SIX HUNDRED NINE
PESOS and SIXTY FIVE CENTAVOS ([P]54,609.65), Philippine
Currency, as litigation expenses;
d.) the sum of EIGHTEEN THOUSAND SEVEN HUNDRED
TWELVE PESOS and NINETY EIGHT CENTAVOS ([P]18,712.98),
Philippine Currency, as unpaid electric bill;
e.) the sum of FORTY FIVE THOUSAND NINE HUNDRED
PESOS ([P]45,900.00), Philippine Currency, for expenses incurred for
security services; and
f.) to pay the costs.
SO ORDERED. 12
 On appeal, the CA affirmed the RTC's Decision with modification, as
follows:
WHEREFORE, premises considered, the Decision dated April
24, 2009 of the Regional Trial Court, Branch 33, Butuan City, in Civil
Case No. 5310, is AFFIRMED with MODIFICATION. The award of legal
interest on the amount of unpaid rentals, the expenses incurred for
security services rendered by Visa Security Services, the litigation
expense as well as attorney's fees are hereby DELETED.
SO ORDERED. 13
Petitioner's motion for partial reconsideration was denied by the CA in its
July 21, 2014 Resolution, viz.:
ACCORDINGLY, the Motion for Reconsideration is DENIED.
SO ORDERED. 14
Petitioner now questions the CA's Decision only with regard to matters
raised on appeal but were not addressed therein. 15 Petitioner avers that the
CA neglected to rule on its claim for refund of the advanced rental and deposit
it allegedly paid to respondent amounting to a total of One Hundred Nine
Thousand Four Hundred Forty Pesos (P109,440.00). 16
Petitioner also argues that the electric bills should likewise be deleted for
the same reason used by the CA in ruling for the deletion of the unpaid security
fees. According to petitioner, since the electric bills were allegedly for the month
of March 2003 and the CA found that it already ceased operations on February
28, 2003, it cannot be made liable therefor for the same reason that it was
adjudged not responsible for the security bills from February 2003 to July
2003. 17
Petitioner likewise claims for the proceeds of the alleged auction sale of
its attached goods, as well as its garnished funds, which "per [petitioner's]
recollection from its previous inquiry with the lower court" amounts to Three
Million, Three Hundred Seventy Five Thousand, One Hundred Sixty One
Pesos, and Twelve Centavos (P3,375,161.12). 18
In fine, petitioner prays for the deduction of the advanced rental and
deposit amounting to P109,440.00 and the electric bills amounting to
P18,712.98 from the adjudged unpaid rentals; and after such deductions, the
satisfaction of the resulting unpaid rentals from the proceeds of the garnished
properties allegedly valued at P3,375,161.12 and the release of the balance
thereof to the petitioner. 19
We deny the petition.
At the outset, it must be stressed that the issues raised herein are purely
factual in nature, the determination of which is generally beyond this Court's
judicial review under Rule 45 of the Rules of Court. A petition for review under
Rule 45 should only cover questions of law. It is only in exceptional
circumstances 20 that the Court admits and reviews questions of fact
considering that this Court is not a trier of facts; and the determination of factual
issues is best left to the courts below, especially the trial courts. 21 We do not
find such exceptional circumstances herein.
The instant petition requires this Court to determine the following
underlying questions, to wit: (1) whether or not there was an advanced rental
and deposit amounting to P109,440.00; (2) if there was, whether or not this
amount was already refunded or considered in the computation of the unpaid
rentals; and (3) whether or not the electric bills amounting to P18,712.98 pertain
only to March 2003. Clearly, a judicious determination of these issues
necessitates an examination of available evidence on record, making them
factual in nature, beyond the coverage of Rule 45.
Further, at this juncture, it must be remembered that the complaint herein
was decided on the basis of the evidence presented by respondent ex
parte considering that petitioner was declared non-suited for failure to file a pre-
trial brief and to appear in the pre-trial conference.
However, before proceeding to its point, this Court takes the occasion to
clarify that while it was correct to allow respondent to present his evidence ex
parte for petitioner's failure to file a pre-trial brief and to appear in the pre-trial
conference, it was not proper for petitioner, being the defendant in the case a
quo, to be declared "non-suited" under the Rules of Court. The failure of a party
to appear at the pre-trial has adverse consequences. Section 5, 22 Rule 18 of
the Rules of Court provides that if the absent party is the plaintiff, then he may
be declared non-suited and his case dismissed; if it is the defendant who fails
to appear, then the plaintiff may be allowed to present his evidence ex
parte and the court to render judgment on the basis thereof. 23
At any rate, proceeding to our point, such declaration of non-suit against
petitioner was already upheld by this Court with finality. Hence, due to its failure
to file a pre-trial brief and to appear in the pre-trial conference, petitioner lost its
right to present evidence to support its allegations. 24
It is, thus, bad enough for petitioner's case that the questions posed
before us are purely factual matters that this Court, generally, cannot review as
explained above. The fact that petitioner, for being declared non-suited, was
not able to present evidence to support its claims is surely fatal to its case. The
records are bereft of any evidence to support petitioner's claim that it paid
advanced rental and deposit and that the same have not yet been refunded or
utilized; nor was there any record to definitely show that the subject electric bills
pertain only to a month when petitioner was not occupying the premises
anymore.
 Therefore, for lack of basis, this Court finds no cogent reason to deviate
from the findings of the RTC, as affirmed by the CA, on the matters of rentals
and electric bills.
With regard to the alleged proceeds of the auction sale of the attached
properties, we find that the same is not the proper subject of this review. For
one, matters with regard to the fact of the sale of the attached properties and
the amount of its proceeds are likewise factual in nature, which this Court
cannot judiciously determine for lack of evidence. Notably, petitioner without
support alleges P3,375,161.12 as the value of said proceeds, while respondent
alleges, also, without support except an allegation that it is on record, that the
sheriff turned over to the RTC Clerk of Court the proceeds of such sale
amounting only to Three Hundred Fifty Two Thousand Twenty Eight Pesos and
Five Centavos (P352,028.05). Clearly, these are matters which should be
presented before, and determined by the trial court in the execution of the final
judgment.
That being said, while the proceeds of the sale of the attached properties
may indeed be considered by the sheriff in the satisfaction of judgment pursuant
to Section 15, Rule 57 of the Rules of Court, it is unwarrantedly premature for
this Court to rule on the matter when no writ of execution had been issued and
referred to the sheriff yet. There is no breach of the procedure in the execution
which this Court may evaluate at this point. The court's intervention may, if at
all, eventuate only if the sheriff should refuse to follow the outlined procedure
in the execution of judgment under the Rules. 25
Besides, contrary to petitioner's position, the satisfaction of judgment out
of property attached is not mandatory to warrant this Court to unconditionally
order the satisfaction of the judgment against petitioner out of the attached
properties. Section 15, Rule 57 of the Rules of Court provides:
SEC. 15. Satisfaction of judgment out of property attached; return of
officer. — If judgment be recovered by the attaching party and execution
issue thereon, the sheriff may cause the judgment to be satisfied
out of the property attached, if it be sufficient for that purpose in
the following manner: (Emphasis supplied)
(a) By paying to the judgment obligee the proceeds of all sales of
perishable or other property sold in pursuance of the order of the court,
or so much as shall be necessary to satisfy the judgment;
(b) If any balance remain due, by selling so much of the property, real or
personal, as may be necessary to satisfy the balance, if enough for that
purpose remain in the sheriffs hands, or in those of the clerk of the court;
(c) By collecting from all persons having in their possession credits
belonging to the judgment obligor, or owing debts to the latter at the time
of the attachment of such credits or debts, the amount of such credits
 and debts as determined by the court in the action, and stated in the
judgment, and paying the proceeds of such collection over to the
judgment obligee.
The sheriff shall forthwith make return in writing to the court of his
proceedings under this section and furnish the parties with copies
thereof.
The use of the word may clearly makes the procedure directory, in which
case, the sheriff may disregard the properties attached and proceed against
other properties of the judgment debtor, if necessary. 26

The proper procedure, therefore, is for the prevailing party, respondent

in this case, to move for the execution of the judgment upon finality before the
RTC, wherein the proper satisfaction thereof should be addressed. 27
WHEREFORE, premises considered, the petition is DENIED. The
Decision dated July 31, 2013, and the Resolution dated July 21, 2014 of the
Court of Appeals-Cagayan De Oro City in CA-G.R. CV No. 02154-MIN,
are AFFIRMED.
SO ORDERED.
||| (Booklight, Inc. v. Tiu, G.R. No. 213650, [June 17, 2019])
[G.R. No. 215922. October 1, 2018.]

THELMA C. MULLER, GRACE M. GRECIA, KURT FREDERICK

FRITZ C. MULLER, and HOPE C. MULLER, in substitution of the
late FRITZ D. MULLER,petitioners,vs. PHILIPPINE NATIONAL
BANK,respondent.

DECISION

DEL CASTILLO, J : p

This Petition for Review on Certiorari 1 assails the October 30, 2013
Decision 2 and November 14, 2014 Resolution 3 of the Court of Appeals (CA)
in CA-G.R. S.P. No. 03731 which respectively reversed the June 2, 2008
Decision 4 of the Iloilo City Regional Trial Court, Branch 33 (RTC) in Civil Case
No. 07-29531 and denied herein petitioners' Motion for Reconsideration. 5
Factual Antecedents

As found by the CA, the facts are as follows:

 x x x [S]pouses Fritz and Thelma Muller 6 are the occupants of
two (2) parcels of land with improvements located at Abeto Subdivision,
Brgy. Sta. Rosa, Manduriao, Iloilo City owned by [Philippine National
Bank 7 (PNB)] with an aggregate area of 1,250 sq. meters, x x x.
xxx xxx xxx
On May 26, 1987, [PNB] informed the [Mullers] that their lease x
x x will expire on June 1, 1987; that they had rental arrears for two and
a half years amounting to PhP18,000.00; x x x. 8
Seeking [to renew the lease contract for] another year, x x x Fritz
Muller wrote to [PNB 9 proposing to buy] the subject properties x x x.
[PNB] denied the request for renewal of the lease on June 13, 1987 x x
x. 10
On October 2, 1987, [PNB Iloilo] informed x x x Fritz that his x x
x offer to purchase the [subject properties] was not given due course by
the Head Office. x x x. 11
xxx xxx xxx
On March 17, 1988, [PNB] demanded for [the Mullers] to vacate
the subject properties within fifteen (15) day[s] from the said date, in view
of the expiration of the lease. 12
The demand fell [on] deaf ears. x x x.
xxx xxx xxx
Due to continued occupation of the [Mullers, PNB] x x x sent its
final demand letter 13 dated July 17, 2006, demanding [from] them the
payment [of] the rental arrears from June 1984 up to June 1, 2006, x x
x.
[The Mullers] failed to pay due attention to the written demands
against them which [prompted PNB] to institute a Complaint 14 for
Ejectment x x x.
xxx xxx xxx
On October 19, 2007, the Municipal Trial Court in Cities of Iloilo
City rendered a Decision 15 x x x viz.:
WHEREFORE, premises considered, judgment
is hereby rendered in favor of [PNB] and ordering x x
x Fritz D. Muller and Thelma Muller:
1. To vacate the subject premises x x x;
2. To pay [PNB] x x x:
a. The amount of PhP18,000.00 as rent from
June 1984 to June 1987;
 b. PhP2,000.00 a month from June 1, 1987 to
June 1, 1997; and
c. PhP2,500.00 a month from June 1, 1997 to
August 1, 2007.
No cost.
SO ORDERED.
[The Mullers] filed a Notice of Appeal x x x.
On February 1, 2008 PNB filed an Urgent Motion for Execution of
the MTCC Judgment praying for its immediate execution for failure of
the [Mullers] to file a supersedeas bond to stay the execution of the
judgment. x x x. 16 (Emphasis in the original)
Ruling of the Regional Trial Court

In its June 2, 2008 Decision, 17 the RTC declared that the reckoning point
from which a claimant in an unlawful detainer case, in this case, the PNB, may
invoke the accrual of its claims is the date of receipt of last demand; that the
MTCC cannot take judicial notice of the fair rental value of the subject
properties; and that prescription is applicable to the case. It decreed that:
x x x The receipt of the demand letter dated June 17, 2006 is the
date when [the Mullers] became deforciant for which it can be assessed
rental. While [PNB] may be entitled to a reasonable compensation from
the period [the Mullers] have been in possession of the property prior to
receipt of the June 17, 2006 demand letter, the same cannot be awarded
in an unlawful detainer suit. In unlawful detainer actions, only rental
reckoned from date of receipt of last demand may be awarded x x x.
xxx xxx xxx
[The Mullers] categorically take exception to the taking of judicial
notice by the court a quo of the fair rental value of the subject properties.
They have reason to do so. There is no showing in the judgment
appealed from that the three requisites above-mentioned [in Herrera vs.
Bollos (G.R. No. 138258, January 18, 2002)] were satisfied as the
criteria for such taking.
x x x [I]n the award of rental prior to receipt of last demand letter
in 2006, the x x x principles of prescription should be considered. x x x.
Notably, the possession from 1984 to 1987 was based on a written lease
agreement. x x x. Being an obligation based on a written contract, the
action to pay rent prescribes in 10 years pursuant to Article 1144 of
the Civil Code.For the possession from 1987 onwards, no rent can be
awarded as this has also prescribed pursuant to Article 1145, six years
after every month of possession. The possession of [the Mullers] after
1987 is based on an oral contract, hence, any action arising therefrom
prescribes within six years. x x x.
 The rental fixed by the court a quo at Php2,500.00, therefore,
cannot be sustained. x x x.
WHEREFORE,x x x the Decision of the Municipal Trial Court in
Cities, Branch 3, Iloilo City, in Civil Case No. 07-105 rendered on
October 19, 2007 is hereby MODIFIED by fixing the reasonable rental
awarded to [PNB] at Php1,000.00 per month to be reckoned only from
the date of [the Mullers'] receipt of the latest demand letter until August
1, 2007 when they vacated the subject property.
SO ORDERED.18 (Emphasis in the original)
PNB appealed before the CA.
Ruling of the Court of Appeals

On October 30, 2013, the CA issued the assailed Decision, decreeing

that (1) contrary to the RTC ruling, reasonable compensation for the use and
occupancy of the subject properties should be reckoned from receipt of initial
demand and not receipt of last demand; (2) prescription does not apply hence
PNB can collect rentals which accrued prior to receipt of last demand; and (3)
the MTCC properly fixed the rental value of the subject properties, viz.:
x x x [J]urisprudence dictates that the reasonable compensation
for the use and occupancy of the premises should reckon from the date
of initial demand for the rentals in arrears of Php18,000.00 in 1987, not
from the date of the last demand on June 17, 2006. Records of the case
show that as early as May 26, 1987, petitioner bank had demanded
rental in arrears amounting to Php18,000.00. x x x
x x x Possession, to constitute the foundation of a prescriptive
right, must be adverse. Acts of possessory character performed by one
who holds by mere tolerance of the owner are clearly not adverse, and
such possessory acts, no matter how long so continued, do not start the
running of prescription. In this case, [the Mullers],after the expiration of
the contract of lease, occupied the subject premises by mere tolerance.
Thus, the doctrine of prescription does not apply. Petitioner bank's
action to collect reasonable compensation for the use and occupation of
its properties has not prescribed.
xxx xxx xxx
It is settled that the plaintiff in an ejectment case is entitled to
damages caused by his loss of the use and possession of the premises.
Damages in the context of Section 17, Rule 70 of the 1997 Rules of Civil
Procedure is limited to "rent" or fair rental value or the reasonable
compensation for the use and occupation of the property. These
damages arise from the loss of the use and occupation of the property,
and not the damages which petitioner may have suffered but which have
no direct relation to their loss of material possession.
 Rule 70, Section 17 of the Rules of Court also authorizes the
award of an amount representing arrears of rent or reasonable
compensation for the use and occupation of the premises. x x x
The rationale for limiting the kind of damages recoverable in an
unlawful detainer case was explained in Araos v. Court of
Appeals,wherein the Court held that:
The rule is settled that in forcible entry or unlawful
detainer cases, the only damage that can be recovered is
the fair rental value or the reasonable compensation for
the use and occupation of the leased property. The reason
for this is that in such cases, the only issue raised in
ejectment cases is that of rightful possession; hence, the
damages which could be recovered are those which the
plaintiff could have sustained as a mere possessor, or
those caused by the loss of the use and occupation of the
property, and not the damages which he may have
suffered but which have no direct relation to his loss of
material possession.
Taking from the foregoing jurisprudential ruling, We can clearly
declare that the damages recoverable in unlawful detainer cases, like
the present case, are the rentals or fair rental value or the reasonable
compensation for the use and occupation of the property. In this case,
records are explicit that [the Mullers] were occupying the subject
properties since 1984 and they were not able to pay their rentals from
May 1987 to June 2006. [PNB] had been consistent in its demands to
pay the rentals but respondents continuously failed to do so. Thus,
contrary to the ruling of the RTC, We agree with the MTCC in ordering
for the payment of the rentals, not from the date of last demand on June
17, 2006, but from May 26, 1987 or the date of the first demand. It was
the time when respondent spouses used and occupied the subject
properties without paying for the reasonable compensation, which is
justly due to petitioner bank as the registered owner of the properties.
The RTC, therefore, gravely erred in granting the rentals in arrears only
from the date of last demand for being contrary to law and jurisprudence.
xxx xxx xxx
As it was undisputed that [the Mullers] were occupying the
properties under the tolerance of [PNB],they were obligated to vacate
the subject properties upon demand. This, they defied. Rather, they
continued possessing the same even without paying for the monthly
rentals. Thus, they should be made liable for damages in the form of rent
or reasonable compensation for the occupation of the properties not only
from the time of the last demand but starting from the time they have
been occupying the subject properties without paying for its rent.
 As regards the application of the doctrine of prescription in the
instant case by the RTC, We find the same erroneous.
xxx xxx xxx
In the instant case, the date of last demand was July 17, 2006,
while the Complaint was filed on March 26, 2007. Thus, it is well within
the period to file the action. Thus, the period to file the action has not
prescribed.
xxx xxx xxx
Petitioner asserts that the RTC erred in reversing the MTCC
findings as regards the latter's act of taking judicial notice of the fair
rental value of the subject properties. x x x
Jurisprudence dictates that the lower court may intervene in fixing
the rent as a matter of fairness and equity. It is not the appellate court or
RTC's function to weigh the evidence all over again, unless there was a
showing that the findings of the MTCC are clearly devoid of any support.
In fact, it is the RTC's Decision which reduced the monthly rental to
Php1,000.00 without any factual and legal bases.
[Thelma C.] Muller, for her part, declares that the MTCC
committed palpable error in merely relying on judicial notice, the
requisites of which are not attendant in the instant case.
We rule in favor of [PNB].
xxx xxx xxx
Truly, mere judicial notice is inadequate, because evidence is
required for a court to determine the proper rental value. In the instant
case, the MTCC not only [took judicial notice of the fair rental value] of
the subject properties x x x [it] also based [the award] on the evidence
on record. It is unchallenged that the [Mullers] failed to submit their
Answer to the Complaint signifying a waiver to present evidence on their
behalf. Clearly, no evidence was presented on the part of [the
Mullers].Thus, the MTCC correctly ruled on awarding the monthly rentals
based on the Complaint filed by [PNB].
We quote with approval the ruling of the MTCC, to
wit:
On the basis of the foregoing considerations, and taking
into account the nature, size and location of the property,
the Court finds the claim of PNB as reasonable
compensation for the use and occupancy of the property
to be just and equitable. The Court however takes
exception to the amount payable for the period from June
1984 to June 1987 which should be fixed at P18,000.00
only because this was the amount being claimed by PNB
in its demand letters. Furthermore, defendant-spouses are
 required to pay rent at the rate of P2,000.00 from June 1,
1987 to June 1, 1997, and P2,500.00 from June 1, 1997
to August 1, 2007 when they actually vacated the
premises.
xxx xxx xxx
Award of other reliefs
xxx xxx xxx
Additionally, the [Mullers are] liable to pay interest by way of
damages for [their] failure to pay the rentals due for the use of the subject
premises. We reiterate that [PNB's] extrajudicial demand on the
[Mullers] was made on May 26, 1987. Thus, from this date, the rentals
due from the [Mullers] shall earn interest at 6% per annum, until the
judgment in this case becomes final and executory. After the finality of
judgment, and until full payment of the rentals and interests due, the
legal rate of interest to be imposed shall be 12%.
xxx xxx xxx
WHEREFORE,premises considered, the petition is GRANTED.
The Decision dated June 2, 2008 of the Regional Trial Court
(RTC),Branch 33, Iloilo City in Civil Case No. 07-29531 is
hereby REVERSED and SET ASIDE.The Decision dated October 19,
2007 of the Municipal Trial Court in Cities, Branch 3, Iloilo City is
hereby REINSTATED with MODIFICATION that the unpaid rentals
shall earn a corresponding interest of six percent (6%) per annum, to be
computed from May 26, 1987 until the finality of this decision. After this
decision becomes final and executory, a 12% interest shall be computed
per annum from such finality on the remaining unpaid balance until its
satisfaction.
Attorney's Fees shall be awarded in the amount of ten thousand
pesos (PhP10,000.00) and judicial costs.
SO ORDERED.19 (Emphasis in the original)
Petitioners moved to reconsider, but in a November 14, 2014 Resolution,
the CA held its ground. Hence, the present Petition.

Issues

Petitioners submit the following issues to be resolved:

1. Whether x x x the award of rentals in an ejectment case may be
reckoned from a date beyond the latest demand to vacate? x x x
2. Whether x x x the Court of Appeals acted correctly when it cited the
case of Racaza v. Gozum as basis for ruling that rentals in an ejectment
 case may be retroactively reckoned beyond the latest demand to
vacate?
3. Whether x x x the award of rentals beyond the latest demand letter
has prescribed? 20
Petitioners' Arguments

Petitioners contend that the award of rentals should be reckoned from

the time of receipt of the latest demand — July 17, 2006 — and not prior
demands; that prior to said last or latest demand, PNB had no right to collect
rent, since it is only after receipt of the latest demand that they may be
considered illegal occupants of the bank's property and thus obligated to pay
rent; that prior to said latest or last demand, their possession of the subject
properties may be said to have been tolerated by PNB, and as such, they were
"not required to pay the rent within the period prior to their receipt of the latest
demand to vacate";21 that PNB's claim for the collection of rentals in arrears has
prescribed, in that more than 10 years have elapsed since 1987 — the date of
the written lease agreement — before PNB filed the ejectment case in 2007;
and that even PNB's claim for rentals in arrears after the expiration of the written
lease agreement in 1987 has prescribed, since actions arising from written
contracts prescribe in 10 years, while that for oral contracts prescribe in six
years.
Petitioners thus pray that the CA dispositions be annulled and in lieu
thereof, the RTC's June 2, 2008 Decision be reinstated.
Respondent's Arguments

Respondent PNB, on the other hand, argues in its Comment 22 that the
Petition is dismissible on account of its defective verification and certification
against forum shopping; that as owner, it is entitled to reasonable compensation
for petitioners' continued use and occupation of its properties, which thus
prevented it from enjoying the same as well as the fruits thereof; that petitioners'
occupation was not by mere tolerance, since there was an oral lease agreement
between them, and for this reason they must pay rent; and that petitioners' claim
of prescription is unavailing to prevent it from recovering damages and rentals
in arrears, because there is a continuing lease agreement between the parties
all throughout the period in issue, and because the amount demandable and
recoverable from a defendant in ejectment proceedings, regardless of its
denomination as rental or reasonable compensation or damages, flows from
the detainer or illegal occupation of the property involved and is merely
incidental thereto.

Our Ruling
 The Petition is denied.
The only issues involved here are whether respondent PNB is entitled to
rentals in arrears prior to July 17, 2006 and whether its claims therefor have
prescribed.
Petitioners argue that rentals may be awarded to respondent only from
the time of the latest demand and not prior ones; that prior to said latest
demand, PNB had no right to collect rent, since it is only after receipt thereof
that they may be considered illegal occupants of the bank's property and thus
obligated to pay rent; and that prior to said latest or last demand, their
possession of the subject properties may be said to have been tolerated by
PNB, and as such, they were "not required to pay the rent within the period prior
to their receipt of the latest demand to vacate." 23 Such arguments are,
however, fundamentally logically flawed, because if they were to be believed,
then no lessor would be compensated under a lease; the lessee's outstanding
rental obligations would simply be condoned. Any lessee would simply withhold
the payment of rent and wait until the lessor makes a demand to vacate — at
which point the former will simply vacate the premises, with no obligation to pay
rent at all.
Under Article 1670 of the Civil Code, "[i]f 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." Thus,
when petitioners' written lease agreement with respondent expired on June 1,
1987 and they did not vacate the subject properties, the terms of the written
lease, other than that covering the period thereof, were revived. The lease thus
continued. In this sense, the prescriptive periods cited by petitioners — as
provided for in Articles 1144 and 1145 of the Civil Code 24 — are inapplicable.
As far as the parties are concerned, the lease between them subsisted and
prescription did not even begin to set in.
Even then, it can be said that so long as petitioners continued to occupy
the subject properties — with or without PNB's consent — there was a lease
agreement between them. They cannot escape the payment of rent, by any
manner whatsoever. First of all, given the circumstances where liberality is
obviously not present and was never a consideration for the lease contract,
petitioners cannot be allowed to enjoy PNB's properties without paying
compensation therefor; this would be contrary to fundamental rules of fair play,
equity, and law. Basically, Article 19 of the Civil Code states that "[e]very person
must, in the exercise of his rights and in the performance of his duties, act with
justice, give everyone his due, and observe honesty and good faith," and Article
20 provides that "[e]very person who, contrary to law, wilfully or negligently
causes damage to another, shall indemnify the latter for the same."
Secondly, even when the parties' lease agreement ended and petitioners
failed or refused to vacate the premises, it may be said that a forced lease was
thus created where petitioners were still obligated to pay rent to respondent as
reasonable compensation for the use and occupation of the subject properties.
Indeed, even when there is no lease agreement between the parties, or even
when the parties — occupant and property owner — are strangers as against
each other, still the occupant is liable to pay rent to the property owner by virtue
of the forced lease that is created by the former's use and occupation of the
latter's property.
There is no question that after the expiration of the lease
contracts which respondent contracted with Aniana Galang and BPI, she
lost her right to possess the property since, as early as the actual
expiration date of the lease contract, petitioners were not negligent in
enforcing their right of ownership over the property.
While respondent was finally evicted from the leased premises,
the amount of monthly rentals which respondent should pay the
petitioners as forced lessors of said property from 20 June 1988 (for the
ground floor) and 15 August 1988 until 6 January 1998 (for the second
and third floors),or a period of almost ten years remains to be resolved.
xxx xxx xxx
At the outset, it should be recalled that there existed no
consensual lessor-lessee relationship between the parties. At most,
what we have is a forced lessor-lessee relationship inasmuch as the
respondent, by way of detaining the property without the consent of
herein petitioners, was in unlawful possession of the property belonging
to petitioner spouses.
x x x. The plaintiff in an ejectment case is entitled to damages
caused by his loss of the use and possession of the premises. Damages
in the context of Section 17, Rule 70 of the 1997 Rules of Civil Procedure
is limited to "rent" or fair rental value or the reasonable compensation for
the use and occupation of the property. x x x 25
Indeed, petitioners' obstinate refusal to pay rent and vacate the subject
properties, and their insistence that respondent sell the same to them but
without meeting respondent's price, is an underhanded maneuver that unduly
tied respondent's hand and deprived it of the use and enjoyment of its
properties. This is tantamount to holding the properties hostage and forcing
respondent to accede to whatever petitioners desired. This practice cannot be
sanctioned; on the contrary, it must be condemned.
 The CA is thus correct in ruling that petitioners "should be made liable for
damages in the form of rent or reasonable compensation for the occupation of
the properties not only from the time of the last demand but starting from the
time they have been occupying the subject properties without paying for its
rent." 26 Suffice it to state that, as correctly cited by respondent, "the amount
demandable and recoverable from a defendant in ejectment proceedings
regardless of its denomination as rental or reasonable compensation or
damages, flows from the detainer or illegal occupation of the property involved
and x x x is merely incidental thereto." 27
Finally, we agree with the CA in finding petitioners "liable to pay interest
by way of damages for [their] failure to pay the rentals due for the use of the
premises" 28 at the rate of "6% per annum,[from May 26, 1987 when PNB made
its extrajudicial demand] until the judgment in this case becomes final and
executory." 29 However, the 12% interest rate it imposed after the finality of
judgment and until full payment 30 shall be modified to 6% per annum pursuant
to Nacar v. Gallery Frames.31
WHEREFORE,the Petition is DENIED.The assailed October 30, 2013
Decision and November 14, 2014 Resolution of the Court of Appeals in CA-
G.R. S.P. No. 03731 are AFFIRMED with modification that the legal rate of
interest of 6% per annum shall be imposed after finality of this Decision until full
payment.
SO ORDERED.
||| (Muller v. Philippine National Bank, G.R. No. 215922, [October 1, 2018])
[G.R. No. 87415. January 23, 1992.]

YEK SENG CO., petitioner, vs. THE HONORABLE COURT OF

APPEALS, DEWEY VELOSO YAP, and DAVID T. VELOSO
YAP, respondents.

Ismael M. Estella for petitioner.

Jose S. Santos, Jr. & Associates for private respondents.

SYLLABUS

1. CIVIL LAW; SPECIAL CONTRACTS; LEASE; EXTENSION OF THE LEASE

CONTRACT; MATTERS TO BE CONSIDERED IN ALLOWING THEREOF;
DIVINO v. MARCOS (4 SCRA 186) CITED. — In extending the lease contract it
was considered important in the case of Divino v. Marcos (4 SCRA 186) that: 1)
the plaintiff had been occupying the leased premises for more than twenty years;
2) he was assured by the defendants that he could remain in the house as long
as he continued paying the rentals; and 3) he made improvements on the house
costing P20,000.00 with the consent of the defendants.
2. ID.; ID.; ID.; ID.; ID.; NOT SUFFICIENTLY ESTABLISHED IN CASE AT BAR.
— The petitioner in the case at bar has not pointed to similar circumstances other
than the claim that it has been occupying the subject premises for more than
twenty years. On this point, Judge Roberto M. Lagman of the Regional Trial
Court correctly held: On the second issue, the Court noted that the parties did not
submit any evidence on the basis of the stipulation of the facts earlier narrated.
Thus, there is nothing in the record which would show any fact or circumstance
which justifies the extension of the lease. The mere occupancy of the premises
for a number of years, by itself is not sufficient. The circumstance that the
petitioner has paid its rentals religiously during the past twenty years is also not
sufficient to justify the extension it demands. Neither are the substantial
improvements it allegedly made on the leased premises nor the difficulty of
finding another place of business, on which it has not submitted any evidence at
all.
3. ID.; ID.; ID.; RULE WHEN RENTAL WAS PAID MONTHLY AND THE TERM
HAD NOT BEEN EXPRESSLY AGREED UPON; CASE AT BAR. — We hold
that as the rental in the case at bar was paid monthly and the term had not been
expressly agreed upon, the lease was understood under Article 1687 to be
terminable from month to month. At the time the petitioner was asked to vacate
the leased premises, the lease contract had already expired and therefore, could
no longer be extended.
4. ID.; ID.; ID.; POWER OF THE COURT TO EXTEND THEREOF; MERELY A
MINISTERIAL DUTY. — If the contract of lease had not yet expired, its extension
would still be subject to the sound discretion of the court and was by no means
obligatory upon it as a merely ministerial duty. To quote again from the decision
of the Regional Trial Court: As correctly cited by the plaintiffs, "The power of the
Courts to fix a longer term for lease is protestative or discretionary, 'may' is the
word — to be exercised or not in accordance with the particular circumstances of
the case; a longer term to be granted where equities come into play demanding
extension, to be denied where none appears, always with due deference to the
parties freedom to contract." (Divino v. Marcos, January 31, 1962, 4 SCRA 186.)
Moreover, the lease had already expired when the extension was sought. In the
case of Prieto v. Laperal, 22 SCRA 934, it was held that "an extension of the
lease may be sought by the tenant before, not after the termination of the lease."
At any rate, whatever extension the defendant may be entitled to has already
been dissipated by the length of time — 2 years — that this case has been
pending.
5. CONSTITUTIONAL LAW; BILL OF RIGHTS; RIGHT OF A PERSON TO A
DAY IN COURT; NOT DENIED IN CASE AT BAR. — The petitioner also
contends that it was denied its day in court when judgment was rendered against
it without the benefit of a trial on the merits. This posture is likewise
unacceptable. Contrary to its submission, the case was not decided by Summary
Procedure but in accordance with Rule 20, Section 3, and Rule 30, Section 2, of
the Rules of Court. There was no trial on the merits because, as the records will
show, the petitioner's counsel agreed to submit the case for decision on the basis
of the stipulations of the parties at the pre-trial conference. Judgment was
rendered on that basis. It must be added that even if there was indeed no trial
before the Municipal Trial Court, the petitioner was heard nonetheless when it
appealed to the Regional Trial Court; when it filed its motion for reconsideration
of the decision; and when it appealed to the respondent court. The petitioner
cannot pretend that it was unable to fully argue its case before that court, for the
fact is that it did so, not only in its brief but also when it filed a motion for
reconsideration of its decision and also a motion for a hearing on that motion.

DECISION

CRUZ, J :p

The simple question raised in the case at bar could have been definitely resolved
on the lowest level of the judiciary and did not have to reach the highest tribunal.
If we have given the petition due course, it was only for the purpose of settling it
once and for all and avoiding future needless impositions on the time of this
Court.
The subject of the petition is a verbal contract of lease over a portion of a building
belonging to the private respondents and occupied by the petitioner as lessee. It
is situated on Ylaya Street in Manila. The leased premises have been used by
the petitioner for its general merchandise business for more than twenty years.
The agreed monthly rental was P3,000.00.
On December 12, 1985, the lessors notified the petitioner that they were
terminating the lease as they intended to renovate the building and thereafter use
it themselves. The petitioner refused to vacate. The private respondents then
filed a complaint for ejectment against the petitioner in the Municipal Trial Court
of Manila on January 22, 1986. For its part, the petitioner filed a petition for
consignation of the monthly rentals which it claimed had been refused by the
lessors.
In his decision dated July 2, 1987, 1 Judge Tirso C. Briones disposed thus:
 WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and
against the defendant, ordering the latter and all persons claiming rights
under it, to vacate the premises specifically described in the amended
complaint; to pay plaintiffs the sum of P3,000.00 as rental for the
reasonable we and occupancy of the premises commencing January,
1986 and monthly thereafter, until the same shall have been finally
surrendered to the plaintiffs, less whatever payments that may have
been made during the pendency of the case; the sum of P10,000.00 as
and for attorney's fees plus costs of suit.
The petition for consignation is hereby denied for lack of merit.
This decision was affirmed by the Regional Trial Court of Manila, 2 which was in
turn sustained by the Court of Appeals. 3 In this petition for review
on certiorari, the principal submission is that the courts below erred in not giving
the petitioner an extension of its lease in accordance with Article 1687 of the Civil
Code.
This article provides as follows:
ARTICLE 1687. If the period for the lease has not been fixed, it is
understood to be from year to year, if the rent agreed upon is annual;
from month to month, if it is monthly; from week to week, if the rent is
weekly, and from day to day, if the rent is to be paid daily. However,
even though a monthly rent is paid, and no period for the lease has been
set, the courts may fix a longer term for the lease after the lessee has
occupied the premises for over one year. If the rent is weekly, the courts
may likewise determine a longer period after the lessee has been in
possession for over six months. In case of daily rent, the courts may also
fix a longer period after the lessee has stayed in the place for over one
month.
In support of its position, the petitioner cites the cases of Araneta v. De Mesa, 35
SCRA 137, and Divino v. Marcos, 4 SCRA 186.
The Court can only wonder why the petitioner has invoked the first case at all as
it is clearly inapplicable. A little study would have readily revealed this. The
appeal was dismissed in that case simply because the question raised had
already become moot and academic; no ruling was made on the merits.
In the second case, the Court upheld the extension of the lease because of the
peculiar circumstances involved, as related thus by the trial court:
When the plaintiffs petition was called for hearing, the parties agreed
that judgment be rendered on the pleadings in connection with such
petition. According to the pleadings, there is no controversy that plaintiff
has been occupying the lot in question since May 7, 1936, when he
purchased from one Antonio Castro the house constructed thereon. It
also appears that plaintiff was assured by the defendants that the house
 bought would remain thereon as long as plaintiff continues paying his
rents. It further appears that on March 19, 1947, plaintiff constructed an
addition to the house with the knowledge and consent of the defendants.
Said addition cost the plaintiff the amount of P20,000.00.
There is no written agreement as to the duration of the lease between
plaintiff and defendants. The fact remains that plaintiff entered the
premises with the knowledge and consent of the defendants and with the
assurance of the latter that the plaintiff could remain occupying the lot as
long as he pays the corresponding rents.
Sustaining this finding, this Court made the following additional observations:
The lot in question has been rented to the petitioner for about 20 years
and his predecessor in interest for more. Even though rentals had been
paid monthly, still no period for the duration of the lease had been set.
The lease had been consistently and tacitly renewed ("tacita
reconduccion") until the ejectment case was filed (Co Tiam v. Diaz, 75
Phil. 672; Villanueva v. Canlas, 77 Phil. 381; Art. 1670, N.C.C.; Art.
1566, Old Civil Code). Having made substantial or additional
improvements on the lot, and considering the difficulty of looking for
another place to which petitioner could transfer such improvements, and
the length of his occupancy of the lot (since 1936), and the impression
acquired by him that he could stay on the premises, as long as he could
pay the rentals, it would seem that there exists just grounds for granting
the extension of lease and that the extension of two years granted by the
trial court, is both fair and equitable.

It was considered important in that case that: 1) the plaintiff had been occupying
the leased premises for more than twenty years; 2) he was assured by the
defendants that he could remain in the house as long as he continued paying the
rentals; and 3) he made improvements on the house costing P20,000.00 with the
consent of the defendants. The petitioner in the case at bar has not pointed to
similar circumstances other than the claim that it has been occupying the subject
premises for more than twenty years. On this point, Judge Roberto M. Lagman of
the Regional Trial Court correctly held:
On the second issue, the Court noted that the parties did not submit any
evidence on the basic of the stipulation of the facts earlier narrated.
Thus, there is nothing in the record which would show any fact or
circumstance which justifies the extension of the lease. The mere
occupancy of the premises for a number of years, by itself is not
sufficient.
The circumstance that the petitioner has paid its rentals religiously during the
past twenty years is also not sufficient to justify the extension it demands. Neither
are the substantial improvements it allegedly made on the leased premises nor
the difficulty of finding another place of business, on which it has not submitted
any evidence at all. The Court makes the wry observation that the petitioner has
only itself to blame if, being engaged in business, it did not take the necessary
precautions against its possible and even abrupt displacement because of the
termination of the month-to-month lease. As for the argument that the private
respondents had not yet secured a building permit for the alleged intended
renovation, it is obviously no argument at all and deserves no further comment.
In the view of the Court, the applicable case is Cruz v. Intermediate Appellate
Court, 4 where it was held:
Ricardo Cruz further maintains that the lease contract with Roman
Legarda So is one with an indefinite period, no specific term having been
agreed upon by the parties, hence the court can legally fix a longer term.
He invokes the second sentence of Article 1687 of the Civil Code which
states that even though a monthly rental is paid, and no period for the
lease has been set, the courts may fix a longer term for the lease after
the lessee has occupied the premises for over one year.
We reject such proposition.
As earlier stated, the contract of Ricardo Cruz, being on a month-to-
month basis, is a lease with a definite period. Since the contract of lease
is for a definite term, the lessee cannot avail of the benefits under Article
1687 which applies only if there is no definite term. And, even
assuming arguendo that Article 1687 applies, Ricardo Cruz would still
not be entitled to have the term fixed for a longer period since his action
was filed only after the contract had expired.
As held in Vda. de Prieto vs. Santos, et al. (88 Phil. 509 [1956]):
"Under this provision, if the period of a lease contract has not
been specified by the parties therein, it is understood to be from
month to month, if the rent agreed upon is monthly, as in the
cases at bar. Consequently, the contract expires at the end of
such month, unless, prior thereto, the extension of said term has
been sought by appropriate action and judgment is, eventually,
rendered therein granting said relief.
"Defendants herein maintain that their lease contracts did not,
and could not, come to an end until after the court has fixed its
lifetime and the term thus fixed has expired. This view, is, to our
mind, untenable. To begin with, defendants assume that their
contracts are without term, prior to the judicial action authorized in
said Article 1687, whereas the same provides that the duration of
lease contracts shall be yearly, monthly, weekly, or daily
depending upon whether the rental agreed upon is annual,
monthly, weekly, or daily. In other words, said contracts have a
term fixed by law, and are not indefinite in duration, before said
 judicial intervention. Secondly, said Article 1687 merely gives the
court discretion to extend the period of the lease. The court is not
bound to extend said term. It may legally refuse to do so, if the
circumstances surrounding the case warrants such action . . . "
(Emphasis reproduced).
Conformably, we hold that as the rental in the case at bar was paid monthly and
the term had not been expressly agreed upon, the lease was understood under
Article 1687 to be terminable from month to month. At the time the petitioner was
asked to vacate the leased premises, the lease contract had already expired and
therefore, following the above-quoted decisions, could no longer be extended. In
fact, even if such contract had not yet expired, its extension would still be subject
to the sound discretion of the court and was by no means obligatory upon it as a
merely ministerial duty.
To quote again from the decision of the Regional Trial Court:
As correctly cited by the plaintiffs, "The power of the Courts to fix a
longer term for lease is protestative or discretionary, 'may' is the word —
to be exercised or not in accordance with the particular circumstances of
the case; a longer term to be granted where equities come into play
demanding extension, to be denied where none appears, always with
due deference to the parties freedom to contract." (Divino v. Marcos,
January 31, 1962, 5 SCRA 186.) Moreover, the lease had already
expired when the extension was sought. In the case of Prieto v. Santos,
98 Phil. 509 cited in Alegre v. Laperal, 22 SCRA 934, it was held that "an
extension of the lease may be sought by the tenant before, not after the
termination of the lease." At any rate, whatever extension the defendant
may be entitled to has already been dissipated by the length of time — 2
years — that this case has been pending.
The petitioner also contends that it was denied its day in court when judgment
was rendered against it without the benefit of a trial on the merits. This posture is
likewise unacceptable. Contrary to its submission, the case was not decided by
Summary Procedure but in accordance with Rule 20, Section 3, and Rule 30,
Section 2, of the Rules of Court. There was no trial on the merits because, as the
record will show, the petitioner's counsel agreed to submit the case for decision
on the basis of the stipulations of the parties at the pre-trial conference.
Judgment was rendered on that basis.
It must be added that even if there was indeed no trial before the Municipal Trial
Court, the petitioner was heard nonetheless when it appealed to the Regional
Trial Court, when it filed its motion for reconsideration of the decision, and when
it appealed to the respondent court. The petitioner cannot pretend that it was
unable to fully argue its case before that court, for the fact is that it did so, not
only in its brief but also when it filed a motion for reconsideration of its decision
and also a motion for a hearing or that motion.
The respondent court did not err in sustaining the award of attorney's fees in the
sum of P10,000.00, taking into account the fact that the petitioner unreasonably
resisted the private respondent's demand to vacate the property following the
termination of their lease contract. The petitioner's intransigence made it
necessary for the latter to litigate for the enforcement of their just and valid claim
and thus incur the expenses that must now be justly charged to it.
Judge Lagman acutely observed that the petitioner had already enjoyed a de
facto extension of two years during the period the ejectment case was pending,
first before the Municipal Trial Court and then before his court. We note with
disapproval that by appealing to the Court of Appeals and later to this Court, the
petitioner gained another extension of more than three years, for a total of almost
six years from the time the amended complaint was filed on June 17, 1986.
It is an economic fact that construction costs rose considerably during that
period, thus increasing the expenses of the renovation intended by the private
respondents. Such increase could have been also awarded against the petitioner
as part of the actual damages of the private respondents except that no evidence
of this has been presented.
Many lessees are able to defer their deserved ejectment through the simple
expedient of appealing their lost cause all the way up to even this Court. This
transparent gambit is all-too-familiar, The delay entailed in deciding these
appeals is usually unavoidable because the courts of justice are saddled by a
heavy load of cases and cannot dispose of them as fast as might be desired. It is
common knowledge of this difficulty that has encouraged the filing of groundless
appeals by "clever" lawyers who know from the start that they are doomed to fail.
Counsel are admonished against abusing the judicial process by lodging appeals
intended merely to unduly prolong a case and so "buy time" for their clients. In
the future, this Court will take a sterner view of such tactics and impose severe
sanctions upon lawyers who, for money or malice, would cynically frustrate the
ends of the law and the speedy administration of justice by deliberately delaying
the final disposition of their hopeless cases. Atty. Ismael M. Estella, the
petitioner's counsel, is particularly enjoined to take serious heed of this warning.
WHEREFORE, the petition is DENIED and the appealed decision AFFIRMED in
toto, with triple costs against the petitioner.
SO ORDERED.
(Yek Seng Co. v. Court of Appeals, G.R. No. 87415, [January 23, 1992], 282
|||

PHIL 313-322)
[G.R. No. 62603. March 27, 1990.]
 UNITED REALTY CORPORATION, petitioner, vs. HON. COURT OF
APPEALS and REVEREND FATHER JOSE TORRALBA
SY, respondents.

SYLLABUS

1. CIVIL LAW; CONTRACTS; LEASE ON A MONTH TO MONTH BASIS;

CONSIDERED WITH A DEFINITE PERIOD. — A reading of the two contracts
of lease entered into between petitioner and private respondent hereinabove
reproduced show that its period is from month to month and that the lease may
be terminated when either party gives a 5 days notice in writing. No doubt such
a stipulation between the parties demonstrates that the agreement of lease is
for a definite period and not for an indefinite period as held by the appellate
court.
2. ID.; ID.; ID.; EXPIRATION THEREOF. — In Rantael vs. CA, (97 SCRA
453 [1980]) involving a similar contract of lease between the parties this Court
found that a lease on a month to month basis expires after the last day of the
30th day period repeating the same cycle of the 30-day period until either party
express their prerogative under their agreement to terminate the same.
3. ID.; ID.; LEASE WITH A DEFINITE PERIOD; LESSEE HAS THE
RIGHT TO JUDICIALLY EJECT LESSOR UPON EXPIRATION OF THE
PERIOD. — Since the lease agreement in question is for a definite period it
follows that petitioner has a right to judicially eject private respondent from the
premises as an exception to the general rule provided for in Section 4 of P.D.
No. 20 which provides as follows: "Except when the lease is for a definite
period, the provisions of paragraph (1) of Article 1673 of the Civil Code of the
Philippines insofar as they refer to dwelling unit or land on which another's
dwelling is located shall be suspended until otherwise provided; but other
provisions of the Civil Code and the Rules of Court of the Philippines on lease
contracts insofar as they are not in conflict with the provisions of this Act, shall
apply." Moreover, under Section 5(f) of B.P. Blg. 25 one of the grounds for
ejectment is the expiration of the period of a written lease contract. In this case,
because of the failure of the private respondent to pay the increased rental
demanded by petitioner, petitioner elected to terminate the contract and asked
the private respondent to vacate the premises. A lease contract may be
terminated at the end of any month, which shall be deemed terminated upon
the refusal to pay the increased monthly rental demanded by the petitioner,
provided the same is not exorbitant.
 4. ID.; ID.; ID.; PRESIDENTIAL DECREE NO. 20 AND PRESIDENTIAL
DECREE NO. 25 COVERS DWELLING UNITS ONLY. — There is no question
in this case that the two apartments subject of litigation if not a greater portion
thereof is not used by private respondent as his residence but for a Buddhist
Temple. Thus, it is with more reason that this lease agreement does not fall
within the protective mantle of the provision of P.D. No. 20 and B.P. No. 25
which covers only dwelling units.
5. ID.; ID.; ID.; DEATH OF LESSEE TERMINATES LEASE
AGREEMENT. — Considering that during the pendency of this appeal, the
private respondent died on August 23, 1987, thus the said lease agreements
were effectively terminated by the death of private respondent who is the lessee
of the premises in question.

DECISION

GANCAYCO, J : p

Whether the contract of lease is for a definite or indefinite period of time

and the applicability of the provisions of Presidential Decree No. 20 and Batas
Pambansa Bilang 25 are the issues in this case.
The facts are undisputed.
In March 1964 and December 1964 petitioner and private respondent
Rev. Father Jose Torralba Sy, entered into separate contracts of lease over two
apartments located at 913-E and 913-F Josefina Street, Sampaloc, Manila, with
the common provision covering its duration as follows: cdll

"To hold the same for one month from the (15th day of March, 1964 for
Apt. No. 913 -E and 1st day of January, 1965 for Apt. No. 913-F) and so
on from month to month at a rent of TWO HUNDRED PESOS (P200.00),
Philippine Currency, per month, payable in advance on the first TEN (10)
days of each calendar month, until the lease shall terminate, which
termination shall be determined by either party giving FIVE (5) days notice
in writing." 1
It was further stipulated in the two contracts that "in case the lessee shall
continuously withhold possession of the apartments after he or she has been
properly notified of the termination of his or her right to occupy the same, the
lessor shall be entitled to collect P400.00 every month or fraction thereof, as
reasonable compensation for the use of the place and as damages."
Private respondent removed the portion separating the two apartments
and converted the same principally for use as a Buddhist chapel.
 On August 1, 1970, petitioner leased to private respondent the apartment
at 937-E Josefina Street, Sampaloc, Manila, effective August 1, 1970 for the
monthly rental of P300.00, 2 payable in advance within the first ten (10) days of
the month for his use as residence only. It was also stipulated in said contract
that "in case the lessee shall continuously withhold possession of the
apartments after he/she has been notified of the termination of his/her right to
occupy the same, the lessor shall be entitled to collect P500.00 every month or
fraction thereof, as reasonable compensation for the use of the place and as
damages."
On September 24, 1975, petitioner sent a letter to private respondent that
effective November 1, 1975 the new rental for the two apartments will be
P500.00 per door or P1,000.00 for the two doors, likewise payable in advance
within the first ten (10) days of the calendar month, with the request that
petitioner be informed of private respondent's decision as to the new rate not
later than October 25, 1975 so that it may be guided accordingly. 3 Instead
private respondent complained to the Department of Public Information,
Malacañang, Manila. In the confrontation between the parties, the Presidential
Complaint and Action Committee found that there was no violation of P.D. No.
20 as the subject premises are being used principally as a Buddhist Temple
and therefore are not covered. Private respondent then sent a letter-complaint
thru counsel dated November 13, 1975 to then Asst. Executive Secretary
Ronaldo E. Zamora who in response issued Opinion No. 480, Series of 1975
dated November 20, 1975 signed by Deputy Executive Secretary Roberto V.
Reyes. 4 Therein it was held that the increase in rental demanded was in
violation of P.D. No. 20 and that as 1/4 of the two-door apartments is being
used likewise as a chapel incidental to the calling of the private respondent as
a monk it cannot be called as a commercial or public establishment or as a
place for the exercise of one's profession because the same is not for profit. cdll

However, on November 16, 1976, in response to the letter of petitioner,

Secretary Ronaldo E. Zamora, as Presidential Assistant for Legal Affairs,
issued Opinion No. 629, Series of 1976, as follows:
"While it may be conceded arguendo that for being used as a place for
worship, the premises may not necessarily be considered as commercial
for purposes of ruling out the applicability of Presidential Decree No. 20
dated October 12, 1972, which freezes rates of rentals of dwelling unit at
their present levels when the same do not exceed P300.00 per month, it
is equally true that the same will, as it does, not fall within the protective
mantle of the decree.
"It is to be noted that the decreed prohibition against rental increase
applies only to dwelling units or lots used for residential purposes, the
monthly rent of which does not exceed P300.00. On this point Republic
Act No. 6359 defines 'dwelling unit' as follows:
 'A dwelling unit refers to a house and lot used for
residential purposes and shall include not only buildings, dwelling
places, except motels, hotels, or hotel rooms; but also those used
for home industries or retail store if the owner thereof and his
family actually live therein and use it principally for residential
purpose; Provided, That in case of a retail store the capital
thereof does not exceed five thousand pesos.' (Emphasis
supplied.)
"Thus, if the leased apartment units are used principally for purposes of
religious worship, the incidental fact that Father Sy and/or his family live
therein will not include them in that class of tenants favored by the
emergency law on housing (Morales vs. Zamora, 31 Phil. 204). In such
case, the matter of regulating the monthly rentals become conventional
between him and the URC. This should not be understood to mean,
however, that the latter is free to demand an arbitrary amount. Equity and
justice require that both parties observe reasonable terms and conditions
in bringing about a mutual covenant.
"Under the circumstances, therefore, this Office, on equitable
considerations and for reasons of public policy, believes that rental
increases should be raised to reasonable levels only." 5
On January 3, 1977, petitioner through counsel furnished private
respondent through counsel a xerox copy of said Opinion No. 629, Series of
1976 and demanded that the private respondent vacate and surrender the two
premises within five (5) days from receipt of the same and to pay his rental
indebtedness minus the deposit made. Nevertheless, private respondent failed
to vacate the premises. LexLib

Hence, petitioner filed a complaint for unlawful detainer in the City Court
of Manila on March 7, 1977. After the issues were joined and the trial on the
merits, a decision was rendered on February 16, 1981 dismissing the complaint
and counterclaim without pronouncement as to costs. Both parties asked for a
reconsideration of the decision but the same was denied. Hence, both parties
appealed to the Court of First Instance of Manila, wherein in due course a
decision was rendered on December 28, 1981 affirming the judgment of the
City Court with the modification finding private respondent entitled to moral
damages in the amount of P4,000.00, exemplary damages in the amount of
P2,000.00 and attorney's fees of P2,000.00 and the costs of the suit. A motion
for reconsideration filed by petitioner was denied by the trial court in an order
of February 25, 1982.
Hence, a petition for review was filed by petitioner with the Court of
Appeals, wherein after the issues were joined, a decision was rendered on
October 7, 1982 dismissing the petition with costs against petitioner. 6 A motion
for reconsideration filed by petitioner of the decision was denied in a resolution
of November 17, 1982.
Thus, this petition.
A reading of the two contracts of lease entered into between petitioner
and private respondent hereinabove reproduced show that its period is from
month to month and that the lease may be terminated when either party gives
a 5 days notice in writing.
No doubt such a stipulation between the parties demonstrates that the
agreement of lease is for a definite period and not for an indefinite period as
held by the appellate court.
In Rantael vs. CA, 7 involving a similar contract of lease between the
parties this Court found that a lease on a month to month basis expires after
the last day of the 30th day period repeating the same cycle of the 30-day period
until either party express their prerogative under their agreement to terminate
the same. llcd

The only difference between Rantael and the present case is that in the
former the parties may terminate the agreement upon 30 days notice while in
this case, the agreement is that the termination by either party may be upon 5
days notice. Such difference is of no moment. And such agreement is binding
and is the law between the parties.
Since the lease agreement in question is for a definite period it follows
that petitioner has a right to judicially eject private respondent from the premises
as an exception to the general rule provided for in Section 4 of P.D. No.
20 which provides as follows:
"Except when the lease is for a definite period, the provisions of paragraph
(1) of Article 1673 of the Civil Code of the Philippines insofar as they refer
to dwelling unit or land on which another's dwelling is located shall be
suspended until otherwise provided; but other provisions of the Civil Code
and the Rules of Court of the Philippines on lease contracts insofar as
they are not in conflict with the provisions of this Act, shall apply."
(Emphasis supplied.)
Moreover, under Section 5(f) of B.P. Blg. 25 one of the grounds for
ejectment is the expiration of the period of a written lease contract. In this case,
because of the failure of the private respondent to pay the increased rental
demanded by petitioner, petitioner elected to terminate the contract and asked
the private respondent to vacate the premises. A lease contract may be
terminated at the end of any month, which shall be deemed terminated upon
the refusal to pay the increased monthly rental demanded by the petitioner,
provided the same is not exorbitant. 8
 Further, there is no question in this case that the two apartments subject
of litigation if not a greater portion thereof is not used by private respondent as
his residence but for a Buddhist Temple. Thus, it is with more reason that this
lease agreement does not fall within the protective mantle of the provision
of P.D. No. 20 and B.P. No. 25 which covers only dwelling units. LLpr

Lastly, considering that during the pendency of this appeal, the private
respondent died on August 23, 1987, thus the said lease agreements were
effectively terminated by the death of private respondent who is the lessee of
the premises in question.
WHEREFORE, the petition is GRANTED. The decision of the Court of
Appeals dated October 7, 1982 and its Resolution dated November 17, 1982
are hereby reversed and set aside and another judgment is hereby rendered
ordering private respondent and/or his heirs or successors-in-interest to
immediately vacate the premises of the property in question and to pay the
unpaid rentals thereof of P1,000.00 a month for the two apartments until they
vacate the premises, with costs against private respondent.
SO ORDERED
(United Realty Corp. v. Court of Appeals, G.R. No. 62603, [March 27, 1990],
|||

262 PHIL 790-797)

[G.R. No. 117423. January 24, 1996.]

LEGAR MANAGEMENT & REALTY

CORPORATION, petitioner, vs. COURT OF APPEALS, HON.
JUAN O. ENRIQUEZ, JR., FELIPE PASCUAL, and DIONISIO
ANCHETA, respondents.

Virgilio C. Manguera and Benito P. Fabie for petitioner.

Antonio C. Ravelo for private respondents.

SYLLABUS

1. CIVIL LAW; SPECIAL CONTRACTS; LEASE; RESIDENTIAL

PROPERTY COVERED BY THE RENT CONTROL LAW AND WHERE RENTALS
ARE PAID MONTHLY, EJECTMENT IS PROPER UPON EXPIRATION ON THE
LAST DAY OF ANY GIVEN 30-DAY PERIOD UPON PROPER DEMAND AND
NOTICE. — The issue is whether the lessee of a residential property covered by
the Rent Control Law can be ejected on the basis alone of the expiration of the
verbal lease contract under which rentals are paid monthly. We resolved this issue
in the affirmative in the case of Acab vs. Court of Appeals, G.R. No. 112285,
February 21, 1995. Section 6 of Batas Pambansa Blg. 877, which is exactly the
same as Section 6 of Batas Pambansa Blg. 25 does not suspend the effects of
Article 1687 of the New Civil Code. Thus, lease agreements with no specified
period, but in which rentals are paid monthly, are considered to be on a month-to-
month basis. . . . They are for a definite period and expire after the last day of any
given thirty-day period, upon proper demand and notice by the lessor to vacate. .
. . Where the verbal lease agreement entered into has been validly terminated,
there is sufficient cause for ejectment under Section 5(f) of Batas Pambansa Blg.
877. cdasia

DECISION

PUNO, J : p

This is an appeal from the Decision, dated July 6, 1994, of the Court of
Appeals, 1 affirming the reversal by the Regional Trial Court of Quezon City,
Branch 92, of the Decision 2 of the Metropolitan Trial Court of Quezon City, Branch
31, the dispositive portion of which reads, as follows:
"In view of the foregoing, this Court finds the plaintiff's (herein
petitioner's) claim to have been duly established against defendants
(herein private respondents) Felipe Pascual and Dionisio Ancheta, and
therefore renders judgment against (them), ordering said defendants
(private respondents), as follows:
1. Ordering the defendants (private respondents) and all persons
claiming rights under them to vacate the premises at No. 318-T E.
Rodriguez, Sr. Blvd., Quezon City and surrender possession thereof to
plaintiff (petitioner);
2. Ordering the defendants (private respondents) to pay the sum of
TWO THOUSAND PESOS (P2,000.00) as and for, attorney's fees; and
3. Ordering the defendants (private respondents) to pay the costs
of suit.
"SO ORDERED." 3
The facts are undisputed.
Spouses Augusto and Celia Legasto owned an apartment building located
along E. Rodriguez, Sr. Boulevard in Quezon City. They entered into a written
contract of lease with no definite period with private respondents Pascual and
Ancheta, covering unit 318-T of the building. Sometime in 1987, the Legasto
spouses and their children organized petitioner Legar Management & Realty
Corporation, and transferred and assigned thereto all their rights, interests, and
privileges over certain properties, including the subject apartment building.
Thereafter, petitioner allowed private respondents to continue occupying
their apartment unit by virtue of a verbal contract of lease which was renewable on
a month-to-month basis. Pursuant to their verbal lease agreement, private
respondents were to pay petitioner a monthly rental of One Thousand Five
Hundred Forty-Five Pesos (P1,545.00).
On April 21, 1992, petitioner wrote private respondent Pascual a formal
notice of termination, requesting him to vacate unit 318-T by the end of May, 1992.
A similar formal notice was sent to private respondent Ancheta on June 4, 1992,
demanding vacation of the same unit by the end of June, 1992. Both refused to
heed petitioner's demand and did not vacate the subject premises.
Petitioner instituted an ejectment case against private respondents with the
Metropolitan Trial Court of Quezon City. The case was docketed as Civil Case No.
6011, and raffled to Branch 31 of the court. 4
At the end of trial, the MTC found for petitioner and held that the verbal lease
contract between the parties, being on a month-to-month basis, is for a definite
period, and may be terminated at the end of any month. On appeal, the Regional
Trial Court of Quezon City, Branch 92, 5 reversed the MTC Decision, holding that
"the mere expiration of the month-to-month lease period in accordance with Article
1687 of the New Civil Code does not automatically give rise to an ejectment in
cases governed by the Rent Control Law, in view of Section 6 of Batas Pambansa
Blg. 877, as amended. There is need for existence of other grounds enumerated
under Section 5 of B.P. Blg. 877, as amended, in order to eject a lessee."
The RTC Decision was upheld by the Court of Appeals which ruled, inter
alia, that:
"As held in Rivera vs. Florendo . . . , reiterated in Miranda vs. Ortiz .
. ., independently of the grounds for ejectment enumerated in Batas
Pambansa Blg. 25 (now Batas Pambansa Blg. 877, extended by Republic
Act Nos. 6643 and 6828), the owner/lessor cannot eject the tenant by
reason of the expiration of the period of lease as fixed or determined under
Article 1687 of the Civil Code. Even if in the instant case the month-to-
month period is deemed to have expired at the end of the month after
notice of demand to vacate . . . , (private) respondents' eviction cannot be
allowed without regard to the grounds for ejectment enumerated in
Section 5 of Batas Pambansa Blg. 877." (Citation omitted.)
Petitioner now impugns the Decision of the Court of Appeals as against
existing law and jurisprudence.
The petition is meritorious.
 The issue is whether the lessee of a residential property covered by the Rent
Control Law can be ejected on the basis alone of the expiration of the verbal lease
contract under which rentals are paid monthly. We resolved this issue in the
affirmative in the case of Acab vs. Court of Appeals, G.R. No. 112285, February
21, 1995, 241 SCRA 546. We held:
"Section 6 of Batas Pambansa Blg. 877, which is exactly the same
as Section 6 of Batas Pambansa Blg. 25, provides that:
'Sec. 6: Application of the Civil Code and Rules of Court of
the Philippines. — Except when the lease is for a definite period,
the provisions of paragraph (1) of Article 1673 of the Civil Code of
the Philippines, insofar as they refer to residential units covered by
this Act, shall be suspended during the effectivity of this Act, but
other provisions of the Civil Code and the Rules of Court on lease
contracts, insofar as they are not in conflict with the provisions of
the Act shall apply.'
In a long line of cases, . . . beginning with Rivera v. Florendo, 143
SCRA 278 (1986), this Court has held that said provision does not
suspend the effects of Article 1687 of the New Civil Code which provides
as follows:
'Art. 1687. If the period for the lease has not been fixed, it is
understood to be from year to year, if the rent agreed upon is
annual; from month to month, if it is monthly; from week to week, if
it is weekly; and from day to day, if the rent is to be paid daily.
However, even though a monthly rent is paid, and no period for the
lease has been set, the courts may fix a longer term for the lease
after the lessee has occupied the premises for over one year. If the
rent is weekly, the courts may likewise determine a longer period
after the lessee has been in possession for over six months. In case
of daily rent, the courts may fix a longer period after the lessee has
stayed in the place for over one month.'
Thus, we have held that lease agreements with no specified period,
but in which rentals are paid monthly, are considered to be on a month-
to-month basis. . . . They are for a definite period and expire after the last
day of any given thirty-day period, upon proper demand and notice by the
lessor to vacate. . . .
"In the case at bench, it was found by all three lower courts that the
lease over the subject property was on a month-to-month basis, and that
there was proper notice of non-renewal of contract and demand for
vacation of premises made by petitioners on private respondent.
Unquestionably, therefore, the verbal lease agreement entered into by
private respondent and petitioners' father and predecessor-in-interest has
been validly terminated, in which case there is sufficient cause for
ejectment under Section 5(f) of Batas Pambansa Blg. 877 which reads:
 'Section 5: Grounds for Judicial Ejectment. — Ejectment
shall be allowed on the following grounds:
'xxx xxx xxx
(f) Expiration of the period of the lease contract.'
This is in line with Our holding in the case of Palanca v.
Intermediate Appellate Court, 180 SCRA 119 (1989), that:
'In the recently decided case of Uy Hoo and Sons Realty
Development Corporation v. Court of Appeals and Thomas Kuan ,
. . ., 7 this Court ruled that a month-to-month lease under Article
1687 is a lease with a definite period, the expiration of which upon
previous demand by the lessor to vacate, can justify ejectment.
"The Court noted that notwithstanding the fact that
the Miranda 8 case and the Rivera 9 case quoted therein involved
a need for the lessor to re-possess the leased premises for his own
use, (which fact is not present in this case), the Court applied the
ruling therein on the ground that:
'. . . the thrust of the decision in said cases appears
to be that 'the determination of the period of a lease
agreement can still be made in accordance with said Article
1687, and that in a month to month lease situation, when
petitioners (lessor) gave private respondent (lessee) notice
to vacate the premises in question, the contract of lease is
deemed to have expired as of the end of the month.' "
IN VIEW WHEREOF, the petition is GRANTED. The Decisions of the Court
of Appeals in CA-G.R. SP No. 32152, dated July 6, 1994, and of the Regional Trial
Court of Quezon City, Branch 92 in Civil Case No. Q-93-15330, dated August 26,
1993, are REVERSED AND SET ASIDE. The Decision, dated February 2, 1993,
of the Metropolitan Trial Court of Quezon City, Branch 31, is REINSTATED. No
costs.
SO ORDERED.
(Legar Management & Realty Corp. v. Court of Appeals, G.R. No. 117423,
|||

[January 24, 1996], 322 PHIL 366-373)