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G.R. No. 122544 January 28, 1999
REGINA P. DIZON, AMPARO D. BARTOLOME, FIDELINA D. BLAZA,
ESTER ABAD DIZON and JOSEPH ANTHONY DIZON, RAYMUND A.
DIZON, GERARD A. DIZON, and JOSE A. DIZON, JR., petitioners,
vs.
COURT OF APPEALS and OVERLAND EXPRESS LINES,
INC., respondents.
G.R. No. 124741 January 28, 1999
REGINA P. DIZON, AMPARO D. BARTOLOME, FIDELINA D. BALZA,
ESTER ABAD DIZON and JOSEPH ANTHONY DIZON, RAYMUND A.
DIZON, GERARD A. DIZON, and Jose A. DIZON, JR., petitioners,
vs.
COURT OF APPEALS, HON. MAXIMIANO C. ASUNCION, and
OVERLAND EXPRESS LINES, INC., respondents.
MARTINEZ, J.:
Two consolidated petitions were filed before us seeking to set aside and annul
the decisions and resolutions of respondent Court of Appeals. What seemed to
be a simple ejectment suit was juxtaposed with procedural intricacies which
finally found its way to this Court.
G.R. No. 122544:
On May 23, 1974, private respondent Overland Express Lines, Inc. (lessee)
entered into a Contract of Lease with Option to Buy with petitioners 1 (lessors)
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 one (1) year commencing from May 16, 1974 up to May 15, 1975. During this
period, private respondent was granted an option to purchase for the amount of
P3,000.00 per square meter. Thereafter, the lease shall be on a per month basis
with a monthly rental of P3,000.00.
SALES
For failure of private respondent to pay the increased rental of P8,000.00 per
month effective June 1976, petitioners filed an action for ejectment (Civil Case
No. VIII-29155) on November 10, 1976 before the then City Court (now
Metropolitan Trial Court) of Quezon City, Branch VIII. On November 22, 1982,
the City Court rendered judgment 2 ordering private respondent to vacate the
leased premises and to pay the sum of P624,000.00 representing rentals in
arrears and/or as damages in the form of reasonable compensation for the use
and occupation of the premises during the period of illegal detainer from June
1976 to November 1982 at the monthly rental of P8,000.00, less payments made,
plus 12% interest per annum from November 18, 1976, the date of filing of the
complaint, until fully paid, the sum of P8,000.00 a month starting December
1982, until private respondent fully vacates the premises, and to pay P20,000.00
as and by way of attorney's fees.
Private respondent filed a certiorari petition praying for the issuance of a
restraining order enjoining the enforcement of said judgment and dismissal of
the case for lack of jurisdiction of the City Court.
On September 26, 1984, the then Intermidiate Appellate Court 3 (now Court of
Appeals) rendered a decision 4 stating that:
. . ., the alleged question of whether petitioner was granted an
extension of the option to buy the property; whether such option,
if any, extended the lease or whether petitioner actually paid the
alleged P300,000.00 to Fidela Dizon, as representative of private
respondents in consideration of the option and, whether
petitioner thereafter offered to pay the balance of the supposed
purchase price, are all merely incidental and do not remove the
unlawful detainer case from the jurisdiction or respondent court.
In consonance with the ruling in the case of Teodoro, Jr. vs.
Mirasol (supra), the above matters may be raised and decided in
the unlawful detainer suit as, to rule otherwise, would be a
violation of the principle prohibiting multiplicity of suits.
(Original Records, pp. 38-39).
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The motion for reconsideration was denied. On review, this Court dismissed the
petition in a resolution dated June 19, 1985 and likewise denied private
respondent's subsequent motion for reconsideration in a resolution dated
September 9, 1985. 5
On October 7, 1985, private respondent filed before the Regional Trial Court
(RTC) of Quezon City (Civil Case No. Q-45541) an action for Specific
Performance and Fixing of Period for Obligation with prayer for the issuance of
a restraining order pending hearing on the prayer for a writ of preliminary
injunction. It sought to compel the execution of a deed of sale pursuant to the
option to purchase and the receipt of the partial payment, and to fix the period
to pay the balance. In an Order dated October 25, 1985, the trial court denied
the issuance of a writ of preliminary injunction on the ground that the decision
of the then City Court for the ejectment of the private respondent, having been
affirmed by the then Intermediate Appellate Court and the Supreme Court, has
become final and executory.
Unable to secure an injunction, private respondent also filed before the RTC of
Quezon City, Branch 102 (Civil Case No. Q-46487) on November 15, 1985 a
complaint for Annulment of and Relief from Judgment with injunction and
damages. In its decision 6 dated May 12, 1986, the trial court dismissed the
complaint for annulment on the ground of res judicata, and the writ of
preliminary injunction previously issued was dissolved. It also ordered private
respondent to pay P3,000.00 as attorney's fees. As a consequence of private
respondent's motion for reconsideration, the preliminary injunction was
reinstated, thereby restraining the execution of the City Court's judgment on the
ejectment case.
The two cases were the after consolidated before the RTC of Quezon City, Branch
77. On April 28, 1989, a decision 7 was rendered dismissing private respondent's
complaint in Civil Case No. Q-45541 (specific performance case) and denying its
motion for reconsideration in Civil Case No. 46487 (annulment of the ejectment
case). The motion for reconsideration of said decision was likewise denied.
On appeal, 8 respondent Court of Appeals rendered a decision 9 upholding the
jurisdiction of the City Court of Quezon City in the ejectment case. It also
SALES
concluded that there was a perfected contract of sale between the parties on the
leased premises and that pursuant to the option to buy agreement, private
respondent had acquired the rights of a vendee in a contract of sale. It opined
that the payment by private respondent of P300,000.00 on June 20, 1975 as
partial payment for the leased property, which petitioners accepted (through
Alice A. Dizon) and for which an official receipt was issued, was the operative
act that gave rise to a perfected contract of sale, and that for failure of petitioners
to deny receipt thereof, private respondent can therefore assume that Alice A.
Dizon, acting as agent of petitioners, was authorized by them to receive the
money in their behalf. The Court of Appeals went further by stating that in fact,
what was entered into was a "conditional contract of sale" wherein ownership
over the leased property shall not pass to the private respondent until it has
fully paid the purchase price. Since private respondent did not consign to the
court the balance of the purchase price and continued to occupy the subject
premises, it had the obligation to pay the amount of P1,700.00 in monthly
rentals until full payment of the purchase price. The dispositive portion of said
decision reads:
WHEREFORE, the appealed decision in Case No. 46387 is
AFFIRMED. The appealed decision in Case No. 45541 is, on the
other hand, ANNULLED and SET ASIDE. The defendants-
appellees are ordered to execute the deed of absolute sale of the
property in question, free from any lien or encumbrance
whatsoever, in favor of the plaintiff-appellant, and to deliver to
the latter the said deed of sale, as well as the owner's duplicate
of the certificate of title to said property upon payment of the
balance of the purchase price by the plaintiff-appellant. The
plaintiff-appellant is ordered to pay P1,700.00 per month from
June 1976, plus 6% interest per annum, until payment of the
balance of the purchase price, as previously agreed upon by the
parties.
SO ORDERED.
Upon denial of the motion for partil reconsideration (Civil Case No. Q-45541) by
respondent Court of Appeals, 10 petitioners elevated the case via petition
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for certiorari questioning the authority of Alice A. Dizon as agent of petitioners
in receiving private respondent's partial payment amounting to P300,000.00
pursuant to the Contract of Lease with Option to Buy. Petitioner also assail the
propriety of private respondent's exercise of the option when it tendered the said
amount on June 20, 1975 which purportedly resulted in a perfected contract of
sale.
G.R. No. 124741:
Petitioners filed with respondent Court of Appeals a motion to remand the
records of Civil Case No. 38-29155 (ejectment case) to the Metropolitan Trial
Court (MTC), then City Court of Quezon City, Branch 38, for execution of the
judgment 11 dated November 22, 1982 which was granted in a resolution dated
June 29, 1992. Private respondent filed a motion to reconsider said resolution
which was denied.
Aggrieved, private respondent filed a petition for certiorari, prohibition with
preliminary injunction and/or restraining order with this Court (G.R. Nos.
106750-51) which was dismissed in a resolution dated September 16, 1992 on
the ground that the same was a refiled case previously dismissed for lack of
merit. On November 26, 1992, entry of judgment was issued by this Court.
On July 14, 1993, petitioners filed an urgent ex-parte motion for execution of the
decision in Civil Case No. 38-29155 with the MTC of Quezon City, Branch 38.
On September 13, 1993, the trial court ordered the issuance of a third alias writ
of execution. In denying private respondent's motion for reconsideration, it
ordered the immediate implementation of the third writ of execution without
delay.
On December 22, 1993, private respondent filed with the Regional Trial Court
(RTC) of Quezon City, Branch 104 a petition for certiorari and prohibition with
preliminary injunction/restraining order (SP. PROC. No. 93-18722) challenging
the enforceability and validity of the MTC judgment as well as the order for its
execution.
SALES
On January 11, 1994, RTC of Quezon City, Branch 104 issued an
order12 granting the issuance of a writ of preliminary injunction upon private
respondent's' posting of an injunction bond of P50,000.00.
Assailing the aforequoted order after denial of their motion for partial
reconsideration, petitioners filed a petition 13 for certiorari and prohibition with
a prayer for a temporary restraining order and/or preliminary injunction with
the Court of Appeals. In its decision, 14 the Court of Appeals dismissed the
petition and ruled that:
The avowed purpose of this petition is to enjoin the public
respondent from restraining the ejectment of the private
respondent. To grant the petition would be to allow the
ejectment of the private respondent. We cannot do that now in
view of the decision of this Court in CA-G.R. CV Nos. 25153-54.
Petitioners' alleged right to eject private respondent has been
demonstrated to be without basis in the said civil case. The
petitioners have been shown, after all, to have no right to eject
private respondents.
WHEREFORE, the petition is DENIED due course and is
accordingly DISMISSED.
SO ORDERED. 15
Petitioners' motion for reconsideration was denied in a resolution 16 by the Court
of Appeals stating that:
This court in its decision in CA-G.R. CV Nos. 25153-54 declared
that the plaintiff-appellant (private respondent herein) acquired
the rights of a vendee in a contract of sale, in effect, recognizing
the right of the private respondent to possess the subject
premises. Considering said decision, we should not allow
ejectment; to do so would disturb the status quo of the parties
since the petitioners are not in possession of the subject
property. It would be unfair and unjust to deprive the private
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respondent of its possession of the subject property after its
rights have been established in a subsequent ruling.
WHEREFORE, the motion for reconsideration is DENIED for
lack of merit.
SO ORDERED. 17
Hence, this instant petition.
We find both petitions impressed with merit.
First. Petitioners have established a right to evict private respondent from the
subject premises for non-payment of rentals. The term of the Contract of Lease
with Option to Buy was for a period of one (1) year (May 16, 1974 to May 15,
1975) during which the private respondent was given an option to purchase said
property at P3,000.00 square meter. After the expiration thereof, the lease was
for P3,000.00 per month.
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.18 Where the rentals are
paid monthly, the lease, even if verbal may be deemed to be on a monthly basis,
expiring at the end of every month pursuant to Article 1687, in relation to Article
1673 of the Civil Code. 19 In such case, a demand to vacate is not even necessary
for judicial action after the expiration of every month. 20
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. In this regard, the
City Court (now MTC) had exclusive jurisdiction over the ejectment suit. The
filing by private respondent of a suit with the Regional Trial Court for specific
performance to enforce the option to purchase did not divest the then City Court
of its jurisdiction to take cognizance over the ejectment case. Of note is the fact
SALES
that the decision of the City Court was affirmed by both the Intermediate
Appellate Court and this Court.
Second. Having failed to exercise the option within the stipulated one-year
period, private respondent cannot enforce its option to purchase anymore.
Moreover, even assuming arguendo that the right to exercise the option still
subsists at the time private respondent tendered the amount on June 20, 1975,
the suit for specific performance to enforce the option to purchase was filed only
on October 7, 1985 or more than ten (10) years after accrual of the cause of action
as provided under Article 1144 of the New Civil Code.21
In this case, there was a contract of lease for one (1) year with option to purchase.
The contract of lease expired without the private respondent, as lessee,
purchasing the property but remained in possession thereof. 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 22 are only those terms which are germane to
the lessee's right of continued enjoyment of the property leased. 23 Therefore, an
implied new lease does not ipso facto carry with it any implied revival of private
respondent's option to purchase (as lessee thereof) the leased premises. The
provision entitling the lessee the option to purchase the leased premises is not
deemed incorporated in the impliedly renewed contract because it is alien to the
possession of the lessee. Private respondent's right to exercise the option to
purchase expired with the termination of the original contract of lease for one
year. The rationale of this Court is that:
This is a reasonable construction of the provision, which is based
on the presumption that when the lessor allows the lessee to
continue enjoying possession of the property for fifteen days after
the expiration of the contract he is willing that such enjoyment
shall be for the entire period corresponding to the rent which is
customarily paid — in this case up to the end of the month
because the rent was paid monthly. Necessarily, 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
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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. 24
Third. There was no perfected contract of sale between petitioners and private
respondent. Private respondent argued that it delivered the check of
P300,000.00 to Alice A. Dizon who acted as agent of petitioners pursuant to the
supposed authority given by petitioner Fidela Dizon, the payee thereof. Private
respondent further contended that petitioners' filing of the ejectment case
against it based on the contract of lease with option to buy holds petitioners in
estoppel to question the authority of petitioner Fidela Dizon. It insisted that the
payment of P300,000.00 as partial payment of the purchase price constituted a
valid exercise of the option to buy.
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. It bears stressing that the absence of any of these
essential elements negates the existence of a perfected contract of sale. Sale is a
consensual contract and he who alleges it must show its existence by competent
proof. 25
In an attempt to resurrect the lapsed option, private respondent gave
P300,000.00 to petitioners (thru Alice A. Dizon) on the erroneous presumption
that the said amount tendered would constitute a perfected contract of sale
pursuant to the contract of lease with option to buy. There was no valid consent
by the petitioners (as co-owners of the leased premises) on the supposed sale
entered into by Alice A. 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. 26 As provided in Article 1868 of the New Civil Code, 27 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 respondent.
SALES
The 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.
In Bacaltos Coal Mines vs. Court of Appeals, 28 we explained the rule in dealing
with an agent:
Every person dealing with an agent is put upon inquiry and must
discover upon his peril the authority of the agent. If he does not
make such inquiry, he is chargeable with knowledge of the
agent's authority, and his ignorance of that authority will not be
any excuse. Persons dealing with an assumed agency, whether
the assumed agency be a general or special one, are bound at
their peril, if they would hold the principal, to ascertain not only
the fact of the agency but also the nature and extent of the
authority, and in case either is controverted, the burden of proof
is upon them to establish it.
For the long years that private respondent was able to thwart the execution of
the ejectment suit rendered in favor of petitioners, we now write finis to this
controversy and shun further delay so as to ensure that this case would really
attain finality.
WHEREFORE, in view of the foregoing, both petitions are GRANTED. The
decision dated March 29, 1994 and the resolution dated October 19, 1995 in CA-
G.R. CV No. 25153-54, as well as the decision dated December 11, 1995 and the
resolution dated April 23, 1997 in CA-G.R. SP No. 33113 of the Court of Appeals
are hereby REVERSED and SET ASIDE.
Let the records of this case be remanded to the trial court for immediate
execution of the judgment dated November 22, 1982 in Civil Case No. VIII-29155
of the then City Court (now Metropolitan Trial Court) of Quezon City, Branch
VIII as affirmed in the decision dated September 26, 1984 of the then
Intermediate Appellate Court (now Court of Appeals) and in the resolution dated
June 19, 1985 of this Court.
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However, petitioners are ordered to REFUND to private respondent the amount

of P300,000.00 which they received through Alice A. Dizon on June 20,
1975.1âwphi1.nêt

SO ORDERED.

Davide, Jr., C.J., Melo, Kapunan and Pardo, JJ., concur.

ATTY. RAQUEL R. DUJUNGCO 6