Philippine Supreme Court Jurisprudence > Year 2002 > January 2002 Decisions > G.R. No. 136080 January 16, 2002 - EASTERN SHIPPING LINES v. COURT OF APPEALS, ET AL.:

The case is a petition for review on certiorari of the decision of the Court of Appeals 1 which reversed that of the Regional Trial Court, Manila 2 directing the Metropolitan Trial Court, Manila to hold in abeyance the enforcement of its decision 3 for ejectment, pending the rendition of decision in civil cases involving the same parties on the issue of ownership of the subject property.



The facts, as found by the Court of Appeals, are as follows:chanrob1es virtua1 1aw 1ibrary

"Manila Gas Corporation (petitioner), a government controlled corporation, is the owner of a parcel of land situated at the eastern side of Sanciangco Street, Paco, Manila "with two frontages on the northern side of Paz M. Guanzon Street" containing an area of 12,600 square meters, more or less.

"On November 9, 1982, petitioner entered into a contract of lease with Eastern Shipping Lines, Inc. (private respondent) whereby it leased to the latter the aforesaid property for a period of ten (10) years beginning November 15, 1982 up to November 15, 1992. The parties agreed, among other things, to the following pertinent stipulations, to wit:chanrob1es virtual 1aw library

‘1. PERIOD OF LEASE — The lease shall be for ten (10) years commencing on November 15, 1982 and shall expire on November 15, 1992, unless the same be extended for another period subject to mutual agreement of both parties. However, should the LESSOR decide to sell the leased premises during the term of the leased period, he should notify the LESSEE at least thirty (30) days from receipt of the notice under the terms and conditions as may be mutually agreed upon by the parties.

‘2. PRE-TERMINATION — Paragraph 1 above notwithstanding, the parties hereto agree after the fifth year of lease of the option/right to preterminate this Contract of Lease on any ground whatsoever without penalty provided all outstanding obligations have been settled and giving one to the other 120 days prior notice.’ (Emphasis supplied)

"On November 22, 1982, the parties amended the contract by limiting the area to be covered by the lease to 12,189 square meters only, hereinafter referred to as the leased premises.

"On January 30, 1989, learning that petitioner was among the government-owned or controlled corporations under consideration for privatization and sale, private respondent wrote petitioner of its intention to exercise its option under Clause 1 of the lease contract to purchase the leased premises.

"Responding, petitioner wrote private respondent that since the government mandate is to privatize or sell its shares or the entire interest of the National Development Company (NDC) with petitioner and not just "assets and/or land," it was the opinion of its Board of Directors that Clause 1 may not be invoked. Petitioner, however, assured private respondent that in the preparation of the bidding guidelines, it would take cognizance of the lease and present the same to the bidding public as part of NDC’s disclosures.

"On September 17, 1991, private respondent again wrote petitioner, advising it of its intention to extend the term of the lease contract for another ten (10) years after its expiration on November 15, 1992, and reiterating its previous offer to purchase the leased premises.

"On October 28, 1991, petitioner advised private respondent that it could not grant its request for a 10-year extension as it had already drawn up its final plans to sell the entire parcel which consists of 4 lots covered by 4 titles and containing a total area of 15,469.50 sq.m. (hereinafter referred to as the property in question) including the leased premises and was planning to sell it before the year ended. And petitioner invoked its right to pre-terminate the contract under Clause 2 thereof, advising private respondent, however, to participate, if it wished, in the public bidding.

"Two public biddings were later held by petitioner but failed on account of which it decided to instead sell the property in question on the bases of a negotiated sale which it announced would be held on February 10, 1992.

"On February 10, 1992, three bidders of the property in question including private respondent who made clear that its participation should not be interpreted as a waiver of its option to purchase under the contract tendered their respective offers. The law firm of Carag, Caballes, Jamora & Somera who made a bid for an undisclosed client emerged as the highest bidder at P80,218,000.00 for the property in question.

"Private respondent then informed petitioner, by letter of February 17, 1992, that it was exercising its preferential right to purchase the property in question for the same amount as that tendered by the highest bidder, enclosing therewith a cashier’s check for P5,646,404 representing 10% of the purchase price, and promising to pay the remaining 90% within 30 days from execution of the final deed of absolute sale in its favor. Private respondent at the same time reserved its right to question the offer of the highest bidder on the ground of violation of certain bidding rules and regulation and offered to purchase the property in question, in the event the said highest bidder is disqualified, at the next highest tendered price of P65,004,360.00.

"Petitioner returned the cashier’s check to private respondent and, by letter of March 16, 1992 sent by its counsel, the Office of the Government Corporate Counsel, formally demanded private respondent to vacate the leased premises within 5 days from receipt thereof, alleging that its continued occupancy beyond February 25, 1992, the expiration of the 120-day grace period from October 29, 1991 given to its in accordance with the contract had become unlawful.chanrob1es virtua1 1aw 1ibrary

"Private respondent refused to leave the leased premises, however, hence, petitioner filed on April 15, 1992 the present unlawful detainer case against it with the Metropolitan Trial Court (MTC) of Manila which was docketed as Civil Case No. 94-71393 and raffled to Branch 1 thereof.

"Private respondent, as defendant, alleged in its Answer with Counterclaim that petitioner, as plaintiff, had come to court with unclean hands, and had suppressed the true facts of the case in order to disguise it as one for ejectment when it was not as the lease contract they entered into is coupled with interest; that at the most, it is deemed to have purchased the leased premises at the terms and conditions of the highest bidder at the negotiated sale proceedings on February 10, 1992 or, at the least, it is entitled to exercise its right of first refusal; and that at the very least, it is entitled to a declaration that the lease is deemed renewed for another ten (10) years beginning November 16, 1992.

"On March 2, 1993, petitioner filed a Supplemental Complaint averring that as the 10-year lease period had already expired, the continued occupancy by private respondent of the leased premises had become unlawful and without bases irrespective of whether or not the contract of lease was preterminated. Private respondent, in its Supplemental Answer with Counterclaim, countered that petitioner is barred by estoppel and laches from invoking the automatic expiration of the contract.

"During the pendency of the ejectment case before the MTC, a certain Santiago Cua (Cua) filed a case for injunction before the Regional Trial Court (RTC) of Manila against petitioner seeking to enjoin petitioner from proceeding with its bidding of the property in question, claiming that he was the highest bidder in a previous bidding and, therefore, petitioner should award and sell the same to it. The case was docketed as Civil Case No. 92-60965 and was raffled to Branch 49 of the said court. Private respondent intervened in said case, invoking its right of first refusal. Cua later moved to dismiss the case which was granted. The dismissal was appealed by private respondent to this Court and is now pending consideration in CA-G.R. CV No. 40997.

"On April 14, 1994, private respondent filed at the RTC of Manila a case against petitioner and Cua, docketed as Civil Case No. 94-70140, seeking to annul the sale of a 3,198.80 square meter lot covered by TCT 39482 executed by petitioner in favor of Cua, which lot does not form part of the property in question.

"The pendency of the two above-mentioned cases was invoked by private respondent in its Position Paper filed on July 22, 1993 with the MTC as ground for the suspension of the ejectment proceedings."cralaw virtua1aw library

"In a decision of June 16, 1994, the MTC rejected private respondent’s position and upheld petitioner’s pretermination of the lease contract due to the absence of a mutual agreement by the parties for its extension. The MTC held that since the parties failed to reach a mutual agreement on the purchase of the leased premises, there is no basis in concluding that private respondent had purchased the same; and that the pendency of the two other civil cases was not a bar to the resolution of the ejectment case.

"The decretal part of the MTC decision reads:chanrob1es virtual 1aw library

‘Wherefore, judgment is hereby rendered in favor of plaintiff, ordering defendant, its representatives, agents, employees and assigns, to vacate the leased premises and to pay to plaintiff the following:chanrob1es virtual 1aw library

a) Payment for the use of the leased premises in the amount of One Hundred Twenty Six Thousand Pesos (P126,000.00) per month starting on February 25, 1992, until defendant vacates the leased premises;

b) Attorney’s fees in the amount of Fifty Thousand Pesos (P50,000.00);

c) Costs of suit.’

"Private respondent appealed the MTC decision to the RTC of Manila where it was docketed as Civil Case No. 94-1393.

"On June 2, 1995, respondent court, Branch 34 of the RTC of Manila to which the appeal was raffled, rendered a decision the dispositive portion of which reads:chanrob1es virtual 1aw library

‘WHEREFORE, let the record be remanded to the Court a quo with further order to hold the enforcement of the decision in abeyance pending final decision of the cases, namely, CA-G.R. CV No. 40997, entitled ‘Santiago Cua, plaintiff-appellee v. Manila Gas Corporation, Et Al., Defendant-Appellant, Eastern Shipping Lines, Inc., plaintiff-intervenor-appellant’ being considered by the Court of Appeals and Civil Case No. 94-70140, entitled ‘Eastern Shipping Lines v. Manila Gas Corporation, Et. Al.’ pending trial before Branch 47 of the Regional Trial Court of Manila. Thereafter, to render a decision on the above-captioned case." (Emphasis supplied). 4

On August 28, 1995, respondent Manila Gas Corporation filed with the Court of Appeals a petition for review of the regional trial court decision. 5 On December 1, 1993, petitioner Eastern Shipping Lines, Inc. filed an answer to the petition. 6

On March 13, 1998, the Court of Appeals promulgated a decision, 7 reversing the decision of the Regional Trial Court, Manila, Branch 34 8 and reinstating the decision of the Metropolitan Trial Court, Manila, Branch 1. 9

On April 7, 1998, petitioner ESLI filed a motion for reconsideration 10 of the decision. On October 19, 1998, the Court of Appeals denied the motion. 11

Hence, this appeal. 12



The only issue raised is whether petitioner Eastern Shipping Lines, Inc. has unlawfully withheld possession of the subject premises from respondent Manila Gas Corporation.



We deny the petition.chanrob1es virtua1 1aw 1ibrary

An action for unlawful detainer may be filed when possession by a landlord, vendor, vendee or other person against whom the possession of any land or building is unlawfully withheld, after the expiration or termination of the right to hold possession, by virtue of a contract, express or implied. 13 In Manuel v. Court of Appeals, 14 we categorically stated that:jgc:chanrobles.com.ph

"Proceedings in forcible entry and detainer are wholly summary in nature. The fact of lease and the expiration of its terms are the only elements of this kind of action. The question of ownership is unessential and should be raised by the defendant in an appropriate action. Any controversy over ownership rights could and should be settled after the party who had the prior, peaceful and actual possession is returned to the property."cralaw virtua1aw library

In the case at bar, the lease contract between the parties was effectively preterminated pursuant to the stipulations thereof. At any rate, the lease period expired on November 15, 1992. Thus, as correctly held by the Court of Appeals, even assuming that the pre-termination of the contract was not validly exercised, the contract of lease has nonetheless expire without the parties entering into a mutual agreement either extending or renewing it, thus rendering unlawful the occupation of the premises by petitioner Eastern Shipping Lines, Inc.

Consequently, having been given a demand to vacate the premises in question, petitioner Eastern Shipping Lines, Inc. is now unlawfully withholding possession of the leased property from Manila Gas Corporation, which is entitled to physical possession as the registered owner of the subject land. The age-old rule is that the person who has a torrens title over a land is entitled to possession thereof. 15

In Co Tiamco v. Diaz, 16 we emphasized that "the principle underlying the brevity and simplicity of pleadings in forcible entry and unlawful detainer cases rests upon considerations of public policy." " Cases of forcible entry and detainer are summary in nature for they involve perturbation of social order which may be restored as promptly as possible, and, accordingly, technicalities or details of procedure which may cause unnecessary delays should be carefully avoided. 17 Such cases are designed to provide for an expeditious means of protecting actual possession or the right to possession of the property involved." 18

Eastern Shipping Lines, Inc. which is occupying the premises up to the present time is clearly unlawfully withholding possession after termination of the lease period and refuses to leave the property despite demand to vacate the premises. 19 Hence, a complaint for unlawful detainer was properly filed within one (1) year therefrom. 20

In actions of forcible entry and detainer, the main issue is possession de facto, 21 independently of any claim of ownership or possession de jure that either party may set forth in his pleading. 22 As incidents of the main issue of possession de facto, the inferior court can decide the questions of (a) whether or not the relationship between the parties is one of landlord and tenant; (b) whether or not there is a lease contract between the parties, the period of such lease contract and whether or not the lease contract has already expired; (c) the just and reasonable amount of the rent 23 and the date when it will take effect; (d) the right of the tenant to keep the premises against the will of the landlord; and (e) if the defendant has built on the land a substantial and valuable building and there is no dispute between the parties as to the ownership of the land and the building, their right according to the Civil Code. Defendant’s claim of ownership of the property from which plaintiff seeks to eject him is not sufficient to divest the inferior court of its jurisdiction over the action of forcible entry and detainer. 24

In an unlawful detainer case, the only issue is whether the defendant has unlawfully withheld possession of the premises after the expiration or termination of its right to hold possession under any contract, express or implied. Thus, when the relationship of lessor and lessee is established in an unlawful detainer case, any attempt of the parties to inject the question of ownership into the case is futile, except insofar as it might throw light on the right of possession.

Petitioner, however, insists on its "right or option of first refusal" to purchase the property belonging to Manila Gas Corporation to hold tenaciously on to the premises.

As correctly ruled by the Court of Appeals, "even if (petitioner) has the right of first refusal, its exercise could not be equated with automatic ownership, given the injunction under Clause 1 (’under terms and conditions as may be mutually agreed upon by the parties’) of the contract that the parties must first arrive at terms and conditions mutually acceptable to them, but there was none."25cralaw:red

Nonetheless, any supposed issue as to petitioner Eastern Shipping Lines, Inc.’s "right or option of first refusal" is litigated before the Regional Trial Court, Manila, 26 where a case for specific performance (praying for the issuance of a "Notice of Award") was filed by Eastern Shipping Lines, Inc., as plaintiff-intervenor therein and is still pending before the trial court.

As heretofore stated, petitioner’s right of first refusal could be settled in the appropriate court hearing the case. However, in the ejectment case, it is enough that the lease earlier entered into by the parties has expired and petitioner is unlawfully withholding possession of the premises from its owner, the Manila Gas Corporation. Hence, petitioner Eastern Shipping Lines, Inc. may be evicted therefrom.

The Fallo

WHEREFORE, the Court DISMISSES the petition for lack of merit, and AFFIRMS the decision of the Court of Appeals 27 in toto.

No costs.

SO ORDERED.chanrob1es virtua1 1aw 1ibrary

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

Endnotes:

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1. In CA-G.R. SP No. 37571, promulgated on March 13, 1998, Carpio Morales, J., ponente, Garcia and Aliño-Hormachuelos, JJ., concurring.

2. In Civil Case No. 94-71393.

3. Of June 16, 1994, in Civil Case No. 138948-CV, "Manila Gas Corporation v. Eastern Shipping Lines, Incorporated."cralaw virtua1aw library

4. Petition, Annex "A", Rollo, pp. 57-70, at pp. 57-62.

5. Docketed as CA-G.R. SP No. 37571. CA Rollo, pp. 10-48.

6. Petition, Annex "V", Rollo, pp. 257-296.

7. In CA-G.R. SP No. 37571 (Petition, Annex "A", Rollo, pp. 57-70).

8. Petition, Annex "U", Rollo, pp. 241-255.

9. Petition, Annex "S", Rollo, pp. 220-227.

10. Petition, Annex "W", Rollo, pp. 407-426.

11. Petition, Annex "B", Rollo, p. 72.

12. Filed on December 14, 1998, Petition, Rollo, pp. 8-55. On November 24, 1999, we gave due course to the petition (Rollo, pp. 441-442).

13. De La Paz v. Panis, 315 Phil. 238, 245-246 (1995).

14. 199 SCRA 603, 608 (1991).

15. Pangilinan v. Aguilar, 150 Phil. 166 (1972).

16. 75 Phil. 672, 686 (1945).

17. Salvador v. Salamanca, 228 Phil. 265, 268 (1986).

18. Ganadin v. Ramos, 99 SCRA 613, 623 (1980); Galgala v. Benguet Consolidated, Inc., 177 SCRA 288, 292 (1989).

19. Jakihaca v. Aquino, 181 SCRA 67, 70 (1990).

20. Medina v. Court of Appeals, 181 SCRA 837, 843 (1990).

21. Priority of possession (Manlapaz v. Court of Appeals, 191 SCRA 795, 802 (1990); Saclolo v. Intermediate Appellate Court, 159 SCRA 63 (1988).

22. "Prior" physical possession is required only in forcible entry cases, not in unlawful detainer (Demamay v. Court of Appeals, 186 SCRA 608 (1990).

23. Disagreement as to amount of rental may be resolved in the ejectment case (Demamay v. Court of Appeals, supra, at p. 612 Note 21).

24. Dante v. Sison, 174 SCRA 517 (1989); Alvir v. Vera, 215 Phil. 309, 312 (1984); Banco de Oro v. Court of Appeals, 182 SCRA 464 (1990); Caparros v. Court of Appeals, 170 SCRA 758 (1989).

25. Rollo, p. 68.

26. Civil Case No. 92-60965.

27. In CA-G.R. SP No. 37571.