Philippine Supreme Court Jurisprudence > Year 2003 > June 2003 Decisions > G.R. No. 143675 June 9, 2003 - SPS. ROMEO and EMILY GUDA v. ALAN A. LEYNES, ET AL.:

Respondent-spouses Manuel and Haydee Peralta were the owners of a residential house and lot located at 626 Eduardo Quintos Street, Sampaloc, Manila. On 08 May 1987, they leased the property over to petitioners, the spouses Romeo and Emily Guda, for a monthly rental of two thousand pesos. The contract of lease stipulated a term of one year and that, thereafter, unless terminated by notice to that effect at least thirty days before the expiration date, the agreement would be deemed renewed on a month-to-month basis. Specifically, the agreement provided:chanrob1es virtua1 1aw 1ibrary

"1. This lease agreement shall be for a period of one (1) year commencing on May 15, 1987 up to and until May 14, 1988, it may thereafter be renewed subject to LESSORS discretion, provided however, that if LESSORS do not exercise their right to terminate this lease at least thirty (30) days before the said expiration date, this agreement shall be deemed renewed on a monthly basis." 1

And in —

". . . the event the Lessors shall desire to sell the leased premises, the LESSEES shall be given the first option to buy the said premises, if they could meet the desired price of the LESSORS, otherwise, the LESSEES shall vacate the leased premises within thirty (30) days upon notice given to them by the new owner." 2

Upon the expiration of the agreement on 14 May 1988, petitioners continued to occupy the premises and to pay rent. Close to three years later, or on 01 May 1991, the Peraltas sold the property to Alan A. Leynes, a brother of Haydee Peralta, herein spouses’ co-respondent. Insisting on exercising their "option to buy" under the contract of lease and contending that the sale to Leynes was void, petitioners refused to vacate the premises. Respondent Alan C. Leynes was thereupon prompted to file a civil case for ejectment before the Municipal Trial Court of Manila. The trial court ruled in favor of Leynes. Aggrieved, the Guda spouses filed Civil Case No. 91-58154 before the Regional Trial Court of Manila, Branch 33, for the annulment of the sale to Leynes and for specific performance pursuant to the option to buy provision of the contract of lease with the Peralta spouses. The trial court ruled in favor of the plaintiffs, declaring the sale of the property to Alan A. Leynes void and ordering the conveyance of the premises to the plaintiffs.chanrob1es virtua1 1aw 1ibrary

On appeal to it, the Court of Appeals, in its judgment of 13 June 2000, reversed the decision of the trial court.

In their instant petition, the spouses Guda would contend that when the lessors did not give notice to terminate the contract of lease thirty days at least before its expiration date and instead allowed the lessees to occupy the premises, all the terms thereof, including the provision granting them the first option to buy the leased premises, were automatically revived and that, accordingly, the sale of the property to Leynes without giving them the opportunity to exercise the option made the sale void.chanrob1es virtua1 1aw 1ibrary

The Court of Appeals responded well to the above issue; speaking through Mr. Justice Martin S. Villarama, Jr., the appellate court expounded:jgc:chanrobles.com.ph

"It must be clarified that even if the Contract of Lease was renewed upon the failure of the defendants Manuel and Haydee Peralta to exercise their right to terminate the lease within the period of thirty (30) days prior to the expiration date, May 14, 1988, such renewal was clearly qualified to be on a ‘monthly basis.’ This means that the lease was converted into a ‘month-to-month’ lease, expiring at the end of each month and renewable also every month. Otherwise, there is no definite period for the contract of lease after such expiration date. Thus it has been ruled in a number of cases that a lease on a month-to-month basis is, under Art. 1687 of the Civil Code, a lease with a definite period, upon the expiration of which upon demand by the lessor on the lessee to vacate, the ejectment of the lessee may be ordered. (Labastida v. Court of Appeals, 287 SCRA 662; De Vera v. Court of Appeals, 260 SCRA 396.) Clearly, such lease is deemed to expire at the end of the month upon notice to vacate addressed by the lessor to the lessee. (Paterno v. Court of Appeals, 272 SCRA 770.)" 3

The contract of lease allowed the lessees to continue with their occupancy of the leased premises on a month-to-month basis after its termination on 14 May 1988 if no notice of such termination were given by the lessor at least thirty days before the expiry date. The renewal clause is valid but the contract itself is not deemed renewed until after notice or positive act is made to indicate its exercise by the parties. Meanwhile, the juridical relation between the parties, constrained by the continued enjoyment of the leased premises, is one of an implied lease based on the principle of tacita reconduccion. Article 1670 of the Civil Code is thus apropos; it provides:jgc:chanrobles.com.ph

"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." chanrob1es virtua1 1aw 1ibrary

The terms of the original contract that are carried over to the implied new lease, as so aptly ruled in Dizon v. Magsaysay, 4 cover only those terms that are germane to the lessees’ enjoyment of the premises, such as the rent and terms of payment, a dictum that has been reiterated in Dizon v. Court of Appeals 5 thusly:jgc:chanrobles.com.ph

"If the presumed will of the parties refers to the enjoyment of possession the presumption covers the other terms of the contract related to such possession, such as the amount of rental, the date when it must be paid, the care of the property, the responsibility for repairs, etc. But no such presumption may be indulged in with respect to special agreements which by nature are foreign to the right of occupancy or enjoyment inherent in a contract of lease." 6

Quite significantly, the option granted to petitioners would appear to have, in fact, been abrogated when the 1987 contract of lease was ultimately superseded by an agreement executed on 22 April 1991. The Court of Appeals found and elaborated:jgc:chanrobles.com.ph

"We cannot sustain plaintiffs-appellees’ theory upon the evidence on record showing that the terms and conditions of the Contract of Lease dated May 8, 1987 were not even fully complied with and respected by the plaintiff-appellees as lessees. The evidence tends to show that plaintiffs-appellees were not residing on the leased apartment but in another place which is their dress shop located at the same street which further gave credence to defendants-appellants’ claim that the plaintiffs-appellees had converted the leased apartment into a boarding house, in violation of the provisions of the Contract of Lease. But what is significant is a subsequent written agreement signed by plaintiff-appellee Emily Guda on April 22, 1991 showing that the stipulated rental of P2,000 provided in the Contract of Lease was not complied with because as of May 1, 1991, the lessees were paying a monthly rental of only P1,500.00 for which reason they executed said new agreement providing for an increased rental of P1,800.00 starting June 1, 1991. Plaintiff-appellee Emily Guda likewise agreed therein that in case the property is sold, they will have to vacate the premises after a month’s notice. (Exhibit ‘5-PI’ for Defendant Leynes) Such is a clear indication that for all intents and purposes, the parties at that time no longer considered the Contract of Lease dated May 8, 1987 as still in force and subsisting. The fact that it was plaintiff-appellee Emily Guda who alone signed this agreement is of no moment because the latter and her husband, plaintiff-appellee Romeo Guda, had accepted benefits under this new lease agreement, in the form of a lower monthly rental than the P2,000.00 stipulated in the previous Contract of Lease. Besides, said new agreement merely reiterated the fact that the lease is on a month-to-month basis, after the expiration of the term provided under the Contract of Lease dated May 8, 1987.chanrob1es virtua1 1aw 1ibrary

"The written agreement dated April 22, 1991 is a new lease agreement and not a renewal of the original Contract of Lease between the parties. It is also a clear evidence of plaintiffs-appellees’ knowledge about the expected sale of the property to a third party. Indeed, plaintiffs-appellees cannot close their eyes to the fact that their extended stay in the premises was allowed by the lessors with the understanding that they shall vacate the premises within a month’s notice upon its sale to a third party. Plaintiff-appellee Emily Guda who was actually the one who always dealt with defendant-appellant Haydee Peralta, expressed her understanding and agreement to the lessors’ desire to sell the property to Haydee Peralta’s sibling in a letter written shortly after their agreement of April 22, 1991, as follows:jgc:chanrobles.com.ph

"Nahihiya na akong ukupahin ko pa ang apartment ninyo isasauli ko na lang . . .

‘Naintindihan ko naman ang paliwanag mo. Isa pa kapatid mo sila na gostong kumuha. Siguro kung ibang tao puwede pa ako magreklamo e kapatid mo sila yes na lang ako.

‘Mare, papuntahin mo na lang ang kapatid mo para magkausap kami tungkol sa pagsauli ko sa apartment.

‘. . .’ (Exhibit ‘6-PI’ for Defendant Leynes)

"When confronted in court by her declarations in the above-cited letter, plaintiff-appellee Emily Guda merely stated that her letter was meant to inform the defendant-appellant Haydee Peralta to send her sibling so they can talk about the sale of the property to plaintiffs-appellees. (TSN, August 14, 1991, pp. 63–65.) The clear and unmistakable terms of her letter, however, indicated the contrary as plaintiff-appellee Emily Guda therein acknowledged, understood and accepted the fact that the first option to buy, or rather, the right of first refusal granted to them under the Contract of Sale, is no longer subsisting or in force at the time when she and Haydee Peralta earlier agreed in writing for a new extended lease made subject to the condition that once the property is sold to another, they will have [to] vacate the premises within one (1) month’s notice.

"With the Contract of Lease dated May 8, 1987 having been validly terminated and superseded by a new written agreement dated April 22, 1991 which also reiterated a month-to-month lease in force between the parties, the trial court thus erred in declaring that defendants-appellants Manuel and Haydee Peralta violated the provisions of the Contract of Lease in selling the leased property to defendant-appellant Alan A. Leynes." 7

All considered, the Court finds no sufficient justification to reverse the holding of the appellate court.

WHEREFORE, the assailed decision of the Court of Appeals is AFFIRMED. No costs.chanrob1es virtua1 1aw 1ibrary

SO ORDERED.

Davide, Jr., C.J., Ynares-Santiago, Carpio and Azcuna, JJ., concur.

Endnotes:

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1. Rollo, p. 17.

2. Rollo, p. 86.

3. Rollo, pp. 17–18.

4. 57 SCRA 250.

5. 302 SCRA 288.

6. At p. 301.

7. Rollo, pp. 18–19.