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#65 Alfredo Arquelada Vs. Philippine Veterans Bank

(Marlon)
Facts:

Arquelada, et al. (petitioners) are the lessees of a 14-door apartment located at No. 1708 M. Lazaro
corner M. Hizon Streets, Sta. Cruz, Manila. Previously, the said apartments were owned by the spouses
Ernesto Singson and Socorro Singson. The spouses Singson and the petitioners entered into a verbal
contract of lease wherein the latter undertook to pay a monthly rent on the apartments. During the
effectivity of the lease contract, the spouses Singson executed a real estate mortgage over the said
apartments as security for the loan they obtained from Philippine Veterans Bank. In view of the failure of
the spouses Singson to pay their loan to the Bank, it instituted foreclosure proceedings on the real estate
mortgage. Eventually, title to the properties owned by the spouses Singson, including the apartments,
were transferred to the name of the Bank.

Despite the change in ownership over the apartments, the Bank allowed the petitioners to continue
staying in the premises. Like the original arrangement with the spouses Singson, lease on a month-to-
month basis at a stipulated rent was agreed upon. In the meantime, petitioners incurred arrearages in the
payment of the rentals. The Bank sent to each petitioner a Statement of Account indicating their
respective outstanding back rentals. The Bank, likewise, made several demands to petitioners, asking
them to settle their debts. However, the Bank's demands fell on deaf ears. Since nothing happened, the
Bank gave to each of the petitioners a Final Notice.

For failure of petitioners to heed the final notice, the Bank filed a complaint for Unlawful Detainer with the
MTC Manila. The complaint for unlawful detainer was anchored on the ground of termination of the
month-to-month lease because the Bank needed the properties for its own use. In their answer,
petitioners argued that the MTC did not acquire jurisdiction over the unlawful detainer case since the
complaint was filed before the lapse of the five-day period from the time of demand or notice to vacate as
required in Section 2, Rule 70 of the 1997 Rules of Civil Procedure.

After trial, the MTC rendered judgment in favor of the Bank. The MTC held that valid grounds for the
ejectment of the petitioners existed, namely, the non-payment of rentals for more than three (3) months
and the expiration of the verbal contract of lease

The petitioners appealed the adverse decision of the MTC to the RTC. The RTC handed down a Decision
affirming in toto the decision of the MTC. Subsequently, petitioners filed a motion for reconsideration of
the RTC decision. The Bank, in turn, filed a motion for execution of the RTC decision. In an Order, the
RTC denied petitioners' motion for reconsideration and granted the Bank's motion for execution.

Petitioners brought their case before the CA. Initially, petitioners filed a special civil action on certiorari
under Rule 65 questioning the decision of the RTC. However, in a Resolution, the CA dismissed the
petition for review of petitioners on the ground that their recourse under Rule 65 was not the proper
remedy in the course of law. Petitioners filed anew a petition for review with the CA, this time under Rule
42, assailing the decision of the RTC. The CA, thereafter, required the Bank to file its Comment on the
petition. CA dismissed the petition. Hence, the present recourse to this Court.

Issue: whether a valid ground exist for the ejectment of petitioners.

Held: Yes.

When the case was filed on 12 February 1998, the existing rental law was B.P. Blg. 877. Since B.P. Blg.
877 was the law at the time the ejectment case arose, it must be applied to the present case and not B.P.

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Blg. 25, as petitioners insist. B.P. Blg. 25 has long been repealed at the time of the institution of the
present action.

Under B.P. 877 the grounds for judicial ejectment are as follows:

Section 5. Grounds for Judicial Ejectment. - Ejectment shall be allowed on the following grounds:

(a) Assignment of lease or subleasing of residential units in whole or in part, including the acceptance of
boarders or bedspacers, without the written consent of the owner/lessor.

(b) Arrears in payment of rent for a total of three (3) months: Provided, that in case of refusal by the lessor
to accept payment of the rental agreed upon, the lessee may either deposit, by way of consignation, the
amount in court, or with the city or municipal treasurer, as the case may be, or in a bank in the name of
and with notice to the lessor, within one month after the refusal of the lessor to accept payment.

The lessee shall thereafter deposit the rental within ten days of every current month. Failure to deposit
rentals for three months shall constitute a ground for ejectment. If an ejectment case is already pending,
the court upon proper motion may order the lessee or any person or persons claiming under him to
immediately vacate the leased premises without prejudice to the continuation of the ejectment
proceedings. At any time, the lessor may, upon authority of the court, withdraw the rentals deposited.

The lessor, upon authority of the court in case of consignation and upon joint affidavit by him and the
lessee to be submitted to the city or municipal treasurer and to the bank where deposit was made, shall
be allowed to withdraw the deposits.

(c) Legitimate need of owner/lessor to reposses his property for his own use or for the use of any
immediate member of his family as a residential unit, such owner or immediate member not being the
owner of any other available residential unit within the same city of municipality: Provided, however, That
the lease for a definite period has expired: Provided, further, That the lessor has given the lessee formal
notice three (3) months in advance of the lessor's intention to repossess the property: and Provided,
finally, That the owner/lessor is prohibited from leasing the residential unit or allowing its use by a third
party for at least one year.

(d) Absolute ownership by the lessee of another dwelling unit in the same city or municipality which he
may lawfully use as his residence: Provided, That the lessee shall have been formally notified by the
lessor of the intended ejectment three months in advance.

(e) Need of the lessor to make necessary repairs of the leased premises which is the subject of an
existing order of condemnation by appropriate authorities concerned in order to make the said premises
safe and habitable: Provided, That after said repair, the lessee ejected shall have the first preference to
lease the same premises: Provided, however, That the new rental shall be reasonably commensurate
with the expenses incurred for the repair of the said residential unit: and Provided, finally, That if the
residential is condemned or completely demolished, the lease of the new building will no longer be
subject to the provisions of this Act.

(f) Expiration of the period of the lease contract. No lessor or his successor-in-interest shall be entitled to
eject the lessee upon the ground that the leased premises has been sold or mortgaged to a third person
regardless of whether the lease or mortgage is registered or not.

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Contrary to petitioners' contention, the ground of expiration of the lease contract does not apply merely to
contracts with specific duration such as written contracts of lease. Petitioners' reliance on Section 5(f) of
the original rental law, B.P. Blg. 25, is misplaced. Section 5(f) of B.P. Blg. 877, the prevailing rent control
law, now says "expiration of the period of lease contract," thus removing any distinction between a written
and oral contract of lease. As such, regardless of the nature of the lease, whether it is verbal or written,
the termination of contract based on the expiration of the same may be availed of by the lessor in ejecting
the lessee. Hence, there is no merit in petitioners' contention that the above ground does not apply to the
oral month-to-month lease in the instant case.

It is admitted that no specific period for the duration of the lease was agreed upon between the parties.
Nonetheless, payment of the stipulated rents were made on a monthly basis and, as such, the period of
lease is considered to be from month to month in accordance with Article 1687 of the Civil Code.
Moreover, a lease from month-to-month is considered to be one with a definite period which expires at
the end of each month upon a demand to vacate by the lessor.

Petitioners submit that their failure to pay cannot be attributed to them since it was the Bank who
allegedly failed to send its representatives to collect the rents from them. The Court is not convinced.
Even assuming that their contention is correct, it fails to persuade the Court because petitioners were not
left without a remedy in case of the Bank's failure to collect or its refusal to accept the payment of rents. It
is well-settled that the failure of the owners/lessors to collect, or their refusal to accept the rentals are not
valid defenses. Article 1256 of the Civil Code provides that "if the creditor to whom tender of payment has
been made refuses without just cause to accept it, the debtor shall be released from responsibility by the
consignation of the thing or sum due." Thus, what petitioners should have done was to consign their rents
either to the court or to another bank with notice to respondent Bank if, indeed, the latter failed to collect
or refused to accept the rents. However, petitioners failed to do so and they only have themselves to
blame.

The power of the court to extend the term of a lease under the second sentence of Article 1687 of the
Civil Code is potestative, or more precisely, discretionary. As such, the Court is not bound to extend it,
and its exercise depends upon the circumstances surrounding the case. However, it may grant a longer
term where equities come to play. In Divino v. Marcos, in granting the extension of the contract of lease,
the Court considered the length of time that petitioners therein have stayed in the premises, the fact that
petitioner already made substantial or additional improvements in the property and the difficulty of looking
for another place wherein petitioner could transfer. The same guidelines may also be applied in the
present case.

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#66 Paterno vs. CA

(Mike)

Facts: Pio Paterno owns the apartment unit in San Miguel, Manila. In 1964, Paterno and Lydia Lim
entered into a written contract of lease of said apartment unit for one year, from August 1, 1964 to August
2, 1965. The contract was renewabl by mutual agreement and should Lim wish to discontinue the lease,
she should notify Paterno 30 days in advance. Upon expiration of the contract, Lydia Lim opted to
continue staying in the leased premises, paying on a monthly basis. Sometime in 1969, Lim left for the
United States as an immigrant, leaving her sister, Angelina Reyes, to stay in the apartment where the
latter paid the monthly rent. According to Paterno, he was unaware of Lim's migration and was of the
belief that Lim herself was in continuous occupation of the leased premises and that it was only in
December 1991 that he discovered that Reyes was the one occupying the premises. On January 6, 1992,
Paterno sent Reyes a notice to vacate. Reyes’ refusal to leave the apartment prompted petitioner to sue
her for forcible entry in March 1992.

The MTC found Reyes guilty of forcible entry in its Decision dated June 15, 1992. The lower court
considered Reyes’ concealment of the fact that Lim had already taken up permanent residence in the
United States, as "strategy or stealth" and thus found sufficient cause for eviction. On appeal, the RTC
reversed the decision holding that an implied new lease was created every month after August 1965, the
expiry date of the lease contract. Said lease remains effective because it has not been terminated, there
being no notice to vacate which was served on Lim. The court also held that Lim did not abandon the
leased premises because she continued paying the rent, as proved by the receipts in her name and she
intended to return to the Philippines and reside in the leased apartment.

Issue: W/N the lease had already expired on Aug 1965 (end of the period in contract)

Held: No it did not. The contract expired in August 1965, but Lim's lease continued because she stayed
on in the premises without any objection from the lessor. An implied new lease was thus created pursuant
to Article 1670 of the Civil Code which expressly 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 part 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.

An implied new lease or tacita reconduccion will set in when the following requisites are found to exist: a)
the term of the original contract of lease has expired; b) the lessor has not given the lessee a notice to
vacate; and c) the lessee continued enjoying the thing leased for fifteen days with the acquiescence of
the lessor. In the case at bar, all the requisites have been fulfilled. Paterno did not give Lim a notice to
vacate upon expiration of their contract in August 1965 and Lim continued enjoying the apartment unit
leased for more than fifteen days without objection from lessor Pio Paterno.The implied new lease had a
definite period because rents were paid on a monthly basis. Under 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. . . .

However, when Lim went to the US, she effectively abandoned the lease. Abandonment constitutes
the actual, absolute and irreversible desertion of one's right or property. Abandonment requires the
concurrence of two elements, the first being the intent to abandon a right or claim and the second, an

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external act by which that intention is expressed and carried into effect. Both elements concur in the case
at bar. It is notable that Lim has not been back since 1969. When Lim left, she relinquished her right to
the apartment in question and virtually assigned her monthly lease to her sister. The assignment of
lease involves a transfer of rights and obligations pertaining to the lease and requires the consent
of the lessor. Here, the SC said that, in all likelihood, Paterno consented to said assignment
because he should have known the real lessee after more than two decades of collecting the rent,
personally or through a representative. Feigning complete lack of knowledge of Angelina Reyes as
tenant, Paterno should in fact be charged with knowledge and implied consent of said fact.

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#67 Tamio vs. Ticson (2004)

(Nere)

Facts:

The Roman Catholic Archbishop of Manila (RCAM) is the owner of an apartment unit originally
leased to Mr. Fernando Lopez Lim. After the demise of Mr. Fernando Lim, his children became
the occupants thereof. One of them, Valentine Lim requested Encarnacion Ticson, for financial
assistance in order to purchase the apartment unit from RCAM. In exchange, Valentine Lim
executed a waiver in favor of Ticson.

Ticson executed a contract of lease in favor of Tamio, on the basis of the waiver from Valentine
Lim respecting the apartment unit, for a period of three (3) months. After signing the contract
and paying the rentals, Tamio discovered that the apartment was actually owned by RCAM.

After the expiration of the period, Ticson demanded Tamio to vacate the premises but the latter
failed to comply, giving rise to the instant case for unlawful detainer.

The MTC dismissed the complaint for unlawful detainer and found Ticson guilty of concealment
amounting to fraud when she misrepresented that she was the owner or authorized lessor of the
apartment. On appeal, the RTC found that the concealment did not amount to fraud, but was
merely due to Ticson’s honest belief that she became or will eventually become the owner of the
property by reason of the said waiver. On such basis, RTC ordered Tison to pay rental arrears
from September 1996 to June 1997, and from July 1997 to December 1997.

Meanwhile, on March 3, 1998, Tamio entered into a Contract of Lease over the same property
with RCAM for a term of one year, commencing from January 1, 1998 to December 31, 1998. In
that Contract, Tamio assumed to pay the rent corresponding to her use and occupation of the
property prior to its execution; that is, from June 1, 1996 to December 31, 1997.

The CA affirmed the decision of the RTC that the misrepresentation of Ticson as the owner or
lessor of the property did not amount to fraud. It added that Tamio herself had been negligent in
not immediately communicating with the owner of the property, RCAM, regarding her discovery,
thereby implying her acknowledgment of Ticson’s right to sublease the property.

Issues:

1. Whether there was a valid assignment of lease.

2. Whether Tamio should be held liable to pay Ticson rental arrearages from September
1996 to December 1997.

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Held:

Assignment of Lease

No.

The assignment of a lease by the lessee involves a transfer of rights and obligations
pertaining to the contract; hence, the consent of the lessor is necessary. Article 1649 of
the Civil Code is explicit:

"Art. 1649. The lessee cannot assign the lease without the consent of the lessor, unless
there is a stipulation to the contrary."

The objective of the law in prohibiting the assignment of the lease without the lessor's consent is
to protect the owner or lessor of the leased property. In the case of cession or assignment of
lease rights on real property, there is a novation by the substitution of the person of one of the
parties -- the lessee. The personality of the lessee, who dissociates from the lease, disappears;
only two persons remain in the juridical relation -- the lessor and the assignee who is converted
into the new lessee.

In the instant case, RCAM never assented to the assignment of the lease. This is apparent from
the letter of its counsel, stating that Fernando Lim was no longer its tenant for his failure to pay
the. As a rule, this letter may not necessarily result in the cessation of Mr. Fernando's right to
possess the leased premises. Under the law, mere nonpayment of rentals without the lessor's
demand to pay and vacate is not sufficient to oust the lessee from the leased premises. The
letter, however, demonstrates the lessor's lack of consent to the assignment.

As against RCAM, Ticson obtains no rights to the leased premises. The sublease between
Ticson and Tamio is not binding on it. With the abandonment of the lease by the original lessee
through his unauthorized assignment, the right to the possession of the apartment reverted to
the owner.

Rental Arrears

No. We are not unmindful of the standing rule that a lessee is estopped or prevented from
disputing the title of the landlord in an action for recovery of possession of the leased premises.
Indeed, the relation of lessor and lessee does not depend on the former's title but on the
agreement between the parties, followed by the possession of the premises by the lessee under
such agreement. As long as the latter remains in undisturbed possession, it is immaterial
whether the lessor has a valid title -- or any title at all -- at the time the relationship was entered
into. Between the present parties, the lease -- which was actually a sublease -- was effective.
And Ticson had a colorable right to lease the premises by virtue of the assignment even if, as
against the owner, both the assignment and the sublease were ineffectual.

However, considering the peculiar circumstances availing in the present case, equity demands
that such rule be relaxed. It would be grossly unjust if, after having paid the owner prior rentals
for June 1996 to December 1997, Tamio would still be required to pay again the same rental
arrearages to Lim for the latter's retention of the property after the termination of sublease
contract. A double burden would be imposed upon the Tamio, because she would be paying
twice for her use of the same premises for the same period of time.

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#68 Lopez Vs. Fajardo 
(Ning) 

Facts:

The Sobrepenas were the owners of a 2-door apartment in Sta. Cruz, Manila. One of the
apartments, the one at No. 1328, has long been occupied by respondent Leticia Fajardo under
a verbal lease agreement. The Sobrepenas sold the apartments to sisters Leticia and Cecilia
Lopez in 1999. Their Atty.-in-fact Tristan Lopez filed before the MeTC a complaint for ejectment
with damages against Fajardo for the latter’s failure to pay her monthly rentals from May 1999 to
Feb. 2000. They entered into an amicable settlement and the case was terminated on June
2000, and respondent was allowed to stay in the premises. On July 2000, it was found that
Fajardo has filed a complaint with the RTC against Tristan, the sisters Lopez and the
Sobrepenas, for the nullification of the deed of sale between the Lopez and the Sobrepenas,
and for the grant to respondent of the right of first refusal over the leased premises. Fajardo
refused to pay her July and Aug. 2000 rentals, thus Tristan sent a letter to her saying that the
sisters Lopez have already decided to terminate their monthly lease contract effective midnight
of Aug. 31, the same time their oral lease contract expires. However, she was given a grace
period of until Sept. 30, 2000 to vacate, unless the back rentals of 5K be not paid immediately.
Respondent on Sep. 21, then remitted a check to petitioners in the amount of 30K, representing
back rentals for July, August and Sept., as well as advance rentals for Oct. 2000, to July 2001.
On the same day, petitioner advised respondent that he could not accept the said check as the
rental payment due were only for the July-Sept. 2000 period, and that she was expected to
leave by Oct. 1.

Petitioner then filed a case for ejectment against respondent, before the MeTC. Fajardo
contends that she never recognized the Lopez sisters as her true lessor. She further alleges
that assuming an implied verbal lease exists between her and the sisters, petitioner’s claim of
termination is baseless in law and in fact, as she has made some payments previously which
covered several months’ worth of back rentals. This indicates that the payment of the rent was
not on a monthly basis. The MeTC found that petitioner has established his cause of action
arising from the expiration of the lease contract, the same being terminable at the end of the
month after due notice, and failure of respondent to pay the stipulated rental is a ground for
ejectment. As the rent was paid on a monthly basis, the period of the lease was considered as
on a month-to-month basis in accordance to Art. 1687. The RTC affirmed the same. But, the
CA reversed the decision of the RTC, saying that Fajardo had incurred back rentals of only two
months when petitioner sent her the demand letter, hence, the filing of the ejectment case was
premature, in accordance with BP 877 (Rent Control Law), which provides that a minimum of 3-
month arrearages is required to justify a lessor to eject a lessee.

Issue: Whether petitioner has established a valid ground for the ejectment of the respondent.

Held: YES.

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Petitioner point out that he has two grounds for ejecting respondent: failure to pay rentals for
three months, as well as expiration of the lease contract. The Rent Control Law provides both
as grounds for Judicial Ejectment.

The first ground, that is, the failure to pay rental arrearages for a total of three months, was
established by petitioner. While respondent issued a check dated Sept. 20, 2000 for rentals due
on July, Aug., and Sept., as well as advance payments for Oct. 2000-July 2001, the same was
declined by the petitioner since what is due is only for the July-Sept. 2000 rent. This was
communicated to Fajardo’s counsel on Sept. 21, 2000, thus, petitioner was already notifying
respondent that aside from the rentals for July and Aug. 2000, she had not paid rentals for Sept.
2000. There is no showing that respondent paid the rentals in arrears for July-Sept., which
should prevent the petitioner from filing the ejectment case on Oct. 25, 2000.

At all events, as to the second ground for ejectment (expiration of the lease contract), there
being no fixed period agreed upon by the parties and as the rent agreed upon was monthly, it is
understood to be from month to month, in accordance with Art. 1687. A month-to-month lease
under Art. 1687 is a lease with a definite period and expires after the last day of any given thirty-
day period, upon proper demand and notice by the lessor to vacate. Under the Rent Control
Law, the prohibition against the ejectment of a lessee by his lessor is not absolute. There are
exceptions expressly provided by law, which include the expiration of a lease for a definite
period. In the instant case, it was noted that the rentals were paid on a month-to-month basis.
Thus, the lease could be validly terminated at the end of any given month upon prior notice to
that effect on the lessee. After all, when the rentals are paid monthly, the lease is deemed to be
for a definite period as when it expires at the end of every month. The letter sent by petitioner
informing Fajardo that the lease would be terminated at the end of the month, is thus within his
rights to do.

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#69 Wheelers Club International, Inc. Vs. Jovito Bonifacio, Jr., 
(Pearl) 

Facts:

Rosario, Romeo, Virgilio, Generoso, Andres, Jovito, Jose (all surnamed Bonifacio), Zenaida B. Lafiguera,
Corazon B. Calub, and Ma. Cristina B. De Guzman are the registered co-owners of a parcel of land with
improvement situated at No. 83 EDSA, Mandaluyong City. The co-owners comprised the Board of
Directors of J & R Bonifacio Development Corporation (JRBDC).

On 5 May 1994, Bonifacio Development Associates, Inc. (“BDAI”), represented by Jaime C. Bonifacio, Sr.
as President and Chairman of its Board of Directors, entered into a Contract of Lease with Wheelers for a
term of five years from 1 June 1994 to 31 May 1999. Under the Contract of Lease, Wheelers undertook
to pay BDAI a monthly rental of P108,750 for the lease of the Property.

On 31 May 1994, JRBDC, represented by the co-owners as members of the Board of Directors and
lessors of the Property, entered into a Lease Development Agreement with BDAI. Under the Lease
Development Agreement, BDAI was authorized to renovate, manage, develop, and sublease the
Property. The term of the agreement was also for five years from 31 May 1994 to 31 May 1999. The
monthly rental was based on the actual income derived from the lease, management and development of
the Property to be shared by the co-owners and BDAI.

On the same day, the co-owners executed a General Power of Attorney in favor of Jaime granting him the
authority to administer the Property, renovate the building, introduce improvements and lease the
Property to any person.

On 16 June 1996, the co-owners demanded that BDAI submit accounting records of all income from the
Property. BDAI, in turn, demanded that the co-owners furnish it with receipts and records of cash and
check advances made by BDAI to the co-owners.

On 18 August 1996, the co-owners, as directors of JRBDC, approved a Resolution terminating the
authority of Jaime to manage and administer the Property for BDAI’s failure to submit an accounting of
the income from the Property.

On 20 August 1996, Rosario Bonifacio, as President and Chairman of the Board of JRBDC, wrote Jaime,
as President and Chairman of BDAI, a letter terminating the “agreement with JRBDC” for non-payment of
whatever was due to JRBDC under the agreement.

On 26 January 1997, the co-owners as members of the Board of Directors of JRBDC approved a
Resolution appointing Jovito as the new administrator of the Property. The following day, Rosario wrote a
letter informing Wheelers about the appointment of Jovito as the new administrator of the Property and
the termination of Jaime’s authority to manage the Property.

On 11 February 1997, BDAI, through Jaime, wrote a letter to Rosario insisting that there was no valid
reason for the termination of BDAI or Jaime’s management of the Property. BDAI claimed that Rosario’s
failure to furnish receipts hindered its submission of complete accounting records.

On 4 March 1997, Jovito wrote to Wheelers claiming that the co-owners did not authorize the Contract of
Lease between BDAI and Wheelers. Jovito gave Wheelers ten days to vacate the Property. Meanwhile,
Wheelers continued to pay BDAI the monthly rentals from February to September 1997.

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On 9 October 1997, Jovito and the other co-owners, through counsel, sent a letter to Wheelers
demanding payment of rentals in arrears from February to October 1997. The letter also demanded that
Wheelers vacate the Property within five days from receipt of the letter.

On 21 October 1997, Jovito, as a co-owner of the Property, filed with the MTC a complaint for unlawful
detainer against Wheelers. Jovito claimed that Wheelers refused to pay him, as the new administrator of
the Property, the rentals due from February to October 1997. In its Answer, Wheelers countered that it
paid to BDAI the rentals from February to September 1997. Wheelers, however, held in abeyance
payment of the rental for October 1997 because of Jovito’s demand letter and Wheelers plan to consign
the rental in Court.

MTC dismissed the petition of Jovito. The MTC ruled that while JRBDC does not own the Property, the
co-owners who comprised JRBDC’s Board of Directors signed the Lease Development Agreement
signifying the co-owners’ consent to the act of JRBDC. The MTC found that since the signing of the
Lease Development Agreement, none of the co-owners questioned the execution of the agreement. The
co-owners did not adduce any evidence to show the nullity of the Lease Development Agreement. The
MTC further ruled that one who is not a party to a contract has no personality to assail the validity of such
contract, following Jovito’s claim that he did not consent to the Lease Development Agreement.

Jovito appealed to the RTC which reversed the MTC decision. The RTC held that upon the termination of
Jaime’s management of the Property, Wheelers could not simply rely on its lease contract with BDAI and
deny Jovito and the other co-owners their right to collect rentals. The RTC ruled that Wheelers paid the
rentals at its own risk since it knew Jaime no longer had authority to receive the rentals. The RTC held
that payment to one without authority to receive the payment is void.

Wheelers filed a petition for review with the Court of Appeals which was dismissed. Meanwhile, Jovito
filed a motion for execution of the RTC decision, which the RTC granted. Hence, this petition.

Issue: Whether The Co-Owners Have A Cause Of Action For Unlawful Detainer Against Wheelers For
Non-Payment Of Rentals And Expiration Of The Term Of The Lease Agreement.

Held: No

In unlawful detainer, the possession of the defendant is inceptively lawful but it becomes illegal because
of the termination of his right to possess the property under his contract with the plaintiff. Hence, by
instituting the unlawful detainer action, Jovito and the other co-owners admit that Wheelers’ possession of
the Property was lawful at the beginning. In other words, Jovito and the other co-owners recognize the
legality of Wheelers’ occupation of the Property beginning 1 June 1994 by virtue of the Contract of Lease
it had with BDAI. In the absence of any proof to the contrary, such recognition necessarily debunks
Jovito’s claim that the co-owners did not authorize BDAI to lease the Property to Wheelers. This fact
likewise negates Jovito’s contention that the Contract of Lease between BDAI and Wheelers is void and
inexistent.

In his complaint for unlawful detainer, Jovito claimed that Wheelers disregarded its obligation to pay
rentals to the co-owners from February to October 1997. However, Wheelers’ obligation to pay the
rentals arose from its Contract of Lease with BDAI. Wheelers did not have a separate lease agreement
with Jovito or the other co-owners. Wheelers’ continued possession of the Property was by virtue of the
Contract of Lease it executed with BDAI. There is no privity of contract between Wheelers and Jovito or
the other co-owners. Since there was neither a written nor verbal lease agreement between the co-
owners and Wheelers, Jovito is mistaken in claiming that the lease contract between the co-owners and
Wheelers is on a month-to-month basis.

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What is clear from the records is that the present case involves a sublease arrangement. In a sublease
arrangement, there are two distinct leases: the principal lease and the sublease. These two juridical
relationships co-exist and are intimately related to each other but nonetheless distinct from one another.
The lessee’s rights and obligations vis-à-vis the lessor are not passed on to the sublessee.

A careful review of the Lease Development Agreement between JRBDC and BDAI reveals that the co-
owners are the actual lessors of the Property, not JRBDC. In addition, the co-owners are the registered
owners of Property. BDAI, in turn, subleased the Property to Wheelers. Therefore, the co-owners,
except only in the instances specified in the Civil Code, are strangers to the Contract of Lease between
BDAI and Wheelers.

Since the co-owners are strangers to the Contract of Lease between BDAI and Wheelers, Wheelers has
no right or authority to pay the sublease rentals to the co-owners as lessors since the rentals are payable
to BDAI as lessee-sublessor. Wheelers was, therefore, under no obligation to pay Jovito or the co-
owners the rentals.

Moreover, although Article 1652 of the Civil Code permits the lessor to proceed against the sublessee for
rent due from the lessee, this is only on a subsidiary liability basis.[32] There must be a judgment
cancelling the lessee’s principal lease contract or ousting the lessee from the premises before the sub-
lessee becomes subsidiarily liable.

The sub-lessee is not liable to the lessor under Article 1652 upon mere demand by the lessor on the sub-
lessee. The sub-lessee is primarily liable to his sub-lessor and only a court order can extinguish or
modify this primary liability if the sub-lessor contests the pre-termination of the principal lease by the
lessor. In the present case, there is no judgment cancelling BDAI’s Lease Development Contract or
ousting BDAI from the Property.

A sub-lessor is not an agent of the lessor. Hence, BDAI is not an agent of the co-owners. Even assuming
that BDAI is an agent of the co-owners, BDAI would have an interest in such agency sufficient to deprive
the co-owners the power to revoke the agency at will. Under the Lease Development Agreement, BDAI
had the authority to construct, and BDAI did construct, improvements on the Property at its expense.

A lease over the common property without the consent of all the co-owners is not void. Just as a sale of
the whole common property without the consent of the other co-owners affects only the share or interest
of the selling co-owner,[40] a lease of the entire property does not affect the interests of the non-
consenting co-owners. Therefore, a lease over the entire Property is valid insofar as the interests of the
consenting co-owners are concerned.

As things stand, BDAI is the sub-lessor of the Property. BDAI’s sub-lease agreement with Wheelers is
within the five-year term of BDAI’s principal lease with the co-owners. Until the expiration of the five-year
term of BDAI’s principal lease, the sub-lease agreement between BDAI and Wheeler remains valid,
unless the sub-lease agreement is judicially annulled in the proper case, or unless there is a judgment
cancelling BDAI’s principal lease with the co-owners or ousting BDAI from the Property. Moreover, no
lease agreement exists between the co-owners and Wheelers. Therefore, Jovito’s claim that the term of
the alleged lease agreement between the co-owners and Wheelers has expired has no legal basis.

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#70 Malayan Realty v. Uy Han Yong (2006) 
(Rhett) 

Facts:

Malayan Realty, Inc. (Malayan), is the owner of an apartment unit known as 3013 Interior No. 90 (the
property), located at Nagtahan Street, Sampaloc, Manila. In 1958, Malayan entered into a verbal lease
contract with Uy Han Yong (Uy) over the property at a monthly rental of P262.00. The monthly rental was
increased yearly starting 1989, and by 2001, the monthly rental was P4,671.65.[3]

On July 17, 2001, Malayan sent Uy a written notice informing him that the lease contract would no longer
be renewed or extended upon its expiration on August 31, 2001, and asking him to vacate and turn over
the possession of the property within five days from August 31, 2001, or on September 5, 2001.

Despite Uy’s receipt of the notice on June 18, 2001, he refused to vacate the property, prompting
Malayan to file before the MTC of Manila a complaint for ejectment.

MTC: Dismissed the complaint. The MTC said that there was no showing that the lease contract was on a
monthly basis and that it was for a definite period, given that Uy has been occupying the leased property
continuously for more than 40 years, held that Uy could not be ejected on the ground of termination of the
contract.

RTC: Entered a new judgment, which was also not favorable to Malayan. On the basis of Article 1687 of
the New Civil Code, the RTC extended the lease contract for a period of five years, taking into
consideration the fact that Uy was 75 years old and had lived in the leased property for more than half of
his life. And the RTC, finding that Malayan acted arbitrarily and with vindictiveness in instituting the
complaint, ordered Malayan to pay P100,000 as moral damages, P100,000 as exemplary damages, and
P30,000 as attorney’s fees. However, on MR, the damages were deleted.

CA: The CA modified the RTC decision by shortening the extension of the lease contract to one year from
the finality of the decision. And the CA increased the rental rate at 10% per annum starting September 6,
2002. MR was denied.

Issue:

Whether the courts may fix the period of lease if no period has been agreed upon.

Held:

Yes. In the case at bar, the lease period was not agreed upon by the parties. Rental was paid monthly,
and respondent has been occupying the premises since 1958. As earlier stated, a written notice was
served upon respondent on January 17, 2001 terminating the lease effective August 31, 2001. As
respondent was notified of the expiration of the lease, effectively his right to stay in the premises had
come to an end on August 31, 2001.

The 2nd paragraph of Article 1687 provides, however, that in the event that the lessee has occupied the
leased premises for over a year, the courts may fix a longer term for the lease. The power of the courts to
establish a grace period is potestative or discretionary, depending on the particular circumstances of the

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case. Thus, a longer term may be granted where equities come into play, and may be denied where
none appears, always with due deference to the parties’ freedom to contract.

In the end, however, the SC ordered Uy to vacate the premises and pay the rentals since this decision
was made in 2006 and five years had already passed. The SC said that by this time, Uy had reasonable
time to look for a new place.

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