Dizon v.

Court of Appeals
FACTS:
Overland Express Lines, Inc. entered into a Contract of Lease with Option to Buy with
petitioners involving a 1,755.80 square meter parcel of land situated at corner MacArthur
Highway and South “H” Street, Diliman, Quezon City. The term of the lease was for 1 year
commencing from May 16, 1974 up to May 15, 1975. During this period, Overland Express
Lines was granted an option to purchase for the amount of P 3,000.00 per square meter.
Thereafter, the lease shall be on a per month basis with a monthly rental of P 3,000.00.
For failure of Overland Express Lines to pay the increased rental of P8,000.00 per month
effective June 1976, petitioners filed an action for ejectment against it. The lower court rendered
judgment ordering Overland Express Lines to vacate the leased premises and to pay the sum of P
624,000.00 representing rentals in arrears and/or as damages in the form of reasonable
compensation for the use and monthly rental of P 8,000.00 until Overland Express Lines fully
vacates the premises, and to pay P 20,000.00 as and by way of attorney’s fees.
Overland Express Lines filed before the Regional Trial Court an action for Specific
Performance to compel the execution of a deed of sale pursuant to the option to purchase and the
receipt of the partial payment and filed a complaint for Annulment of and Relief from Judgment
but the RTC dismissed both complaints.
CA upholds the decision on the ejectment case by the City Court and ordered the petitioners to
execute the deed of absolute sale of the property in question because there was a perfected
contract of sale between the parties on the leased premises and that due to the option to buy
agreement, Overland Express had acquired the rights of a vendee in a contract of sale. The
payment by them of P300,000.00 as partial payment for the leased property, which petitioners
accepted (through Alice A. Dizon) with an official receipt gave rise to a perfected contract of sale
as Overland Express can therefore assume that Alice Dizon, acting as agent of petitioners, was
authorized by them to receive the money in their behalf.
ISSUE:
WON Overland Express Lines actually paid the alleged P 300,000.00 to Alice Dizon, as
representative (agent) of petitioners in consideration of the option. - NO

RULING:
1. Petitioners have established a right to evict private respondent. The term of the Contract
of Lease with Option to Buy was for a period of one year. Admittedly, no definite period
beyond the one-year term of lease was agreed upon by petitioners and private respondent.
However, since the rent was paid on a monthly basis, the period of lease is considered to
be from month to month in accordance with Article 1687 of the New Civil Code. When
private respondent failed to pay the increased rental of P8,000.00 per month in June
 1976, the petitioners had a cause of action to institute an ejectment suit against the former
with the then City Court.
2. Having failed to exercise the option within the stipulated one-year period, private
respondent cannot enforce its option to purchase anymore. In this case, there was a
contract of lease for one year with option to purchase but contract of lease expired
without the private respondent purchasing the property but remained in possession of it.
Hence, there was an implicit renewal of the contract of lease on a monthly basis. The
other terms of the original contract of lease which are revived in the implied new lease
under Article 1670 of the New Civil Code. Therefore, an implied new lease does
not ipso facto carry with it any implied revival of private respondent's option to purchase.
3. There was no perfected contract of sale between petitioners and private respondent.
Under Article 1475 of the New Civil Code, "the contract of sale is perfected at the moment there
is a meeting of minds upon the thing which is the object of the contract and upon the price. From
that moment, the parties may reciprocally demand performance, subject to the provisions of the
law governing the form of contracts." Thus, the elements of a contract of sale are consent, object,
and price in money or its equivalent. There was no valid consent by the petitioners (as co-
owners of the leased premises) on the sale entered into by Alice Dizon, as petitioners'
alleged agent, and private respondent.

The basis for agency is representation and a person dealing with an agent is put upon
inquiry and must discover upon his peril the authority of the agent. As provided in Article
1868 of the New Civil Code, there was no showing that petitioners consented to the act of
Alice A. Dizon nor authorized her to act on their behalf with regard to her transaction
with private respondentThe most prudent thing private respondent should have done was
to ascertain the extent of the authority of Alice A. Dizon. Being negligent in this regard,
private respondent cannot seek relief on the basis of a supposed agency.