CONFIDENTIAL

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. 83736 January 15, 1992

COMMISSIONER OF INTERNAL REVENUE, petitioner,

vs.

TMX SALES, INC. and THE COURT OF TAX APPEALS, respondents.

F.R. Quiogue for private respondent.

GUTIERREZ, JR., J.:

In a case involving corporate quarterly income tax, does the two-year prescriptive period to claim a
refund of erroneously collected tax provided for in Section 292 (now Section 230) of the National
Internal Revenue Code commence to run from the date the quarterly income tax was paid, as
contended by the petitioner, or from the date of filing of the Final Adjustment Return (final payment),
as claimed by the private respondent?

Section 292 (now Section 230) of the National Internal Revenue Code provides:

Sec. 292. Recovery of tax erroneously or illegally collected. — No suit or proceeding

shall be maintained in any court for the recovery of any national internal revenue tax
hereafter alleged to have been erroneously or illegally assessed or collected, or of
any penalty claimed to have been collected without authority, or of any sum alleged
to have been excessive or in any manner wrongfully collected, until a claim for refund
or credit has been duly filed with the Commissioner of Internal Revenue; but such
suit or proceeding may be maintained, whether or not such tax, penalty, or sum has
been paid under protest or duress.

In any case no such suit or proceeding shall be begun after the expiration of two
years from the date of payment of that tax or penalty regardless of any supervening
cause that may arise after payment: . . . (Emphasis supplied)

The facts of this case are uncontroverted.

Private respondent TMX Sales, Inc., a domestic corporation, filed its quarterly income tax return for
the first quarter of 1981, declaring an income of P571,174.31, and consequently paying an income
tax thereon of P247,010.00 on May 15, 1981. During the subsequent quarters, however, TMX Sales,
Inc. suffered losses so that when it filed on April 15, 1982 its Annual Income Tax Return for the year
ended December 31, 1981, it declared a gross income of P904,122.00 and total deductions of
P7,060,647.00, or a net loss of P6,156,525.00 (CTA Decision, pp. 1-2; Rollo, pp. 45-46).
 CONFIDENTIAL

Thereafter, on July 9, 1982, TMX Sales, Inc. thru its external auditor, SGV & Co. filed with the
Appellate Division of the Bureau of Internal Revenue a claim for refund in the amount of
P247,010.00 representing overpaid income tax. (Rollo, p. 30)

This claim was not acted upon by the Commissioner of Internal Revenue. On March 14, 1984, TMX
Sales, Inc. filed a petition for review before the Court of Tax Appeals against the Commissioner of
Internal Revenue, praying that the petitioner, as private respondent therein, be ordered to refund to
TMX Sales, Inc. the amount of P247,010.00, representing overpaid income tax for the taxable year
ended December 31, 1981.

In his answer, the Commissioner of Internal Revenue averred that "granting, without admitting, the
amount in question is refundable, the petitioner (TMX Sales, Inc.) is already barred from claiming the
same considering that more than two (2) years had already elapsed between the payment (May 15,
1981) and the filing of the claim in Court (March 14, 1984). (Sections 292 and 295 of the Tax Code
of 1977, as amended)."

On April 29, 1988, the Court of Tax Appeals rendered a decision granting the petition of TMX Sales,
Inc. and ordering the Commissioner of Internal Revenue to refund the amount claimed.

The Tax Court, in granting the petition, viewed the quarterly income tax paid as a portion or
installment of the total annual income tax due. Said the Tax Court in its assailed decision:

xxx xxx xxx

When a tax is paid in installments, the prescriptive period of two years provided in
Section 306 (now Section 292) of the Revenue Code should be counted from the
date of the final payment or last installment. . . . This rule proceeds from the theory
that in contemplation of tax laws, there is no payment until the whole or entire tax
liability is completely paid. Thus, a payment of a part or portion thereof, cannot
operate to start the commencement of the statute of limitations. In this regard the
word "tax" or words "the tax" in statutory provisions comparable to section 306 of our
Revenue Code have been uniformly held to refer to the entire tax and not a portion
thereof (Clark v. U.S., 69 F. 2d 748; A.S. Kriedner Co. v. U.S., 30 F Supp. 274; Hills
v. U.S., 50 F 2d 302, 55 F 2d 1001), and the vocable "payment of tax" within statutes
requiring refund claim, refer to the date when all the tax was paid, not when a portion
was paid (Braun v. U.S., 8 F supp. 860, 863; Collector of Internal Revenue v. Prieto,
2 SCRA 1007; Commissioner of Internal Revenue v. Palanca, 18 SCRA 496).

Petitioner Commissioner of Internal Revenue is now before this Court seeking a reversal of the
above decision. Thru the Solicitor General, he contends that the basis in computing the two-year
period of prescription provided for in Section 292 (now Section 230) of the Tax Code, should be May
15, 1981, the date when the quarterly income tax was paid and not April 15, 1982, when the Final
Adjustment Return for the year ended December 31, 1981 was filed.

He cites the case of Pacific Procon Limited v. Commissioner of Internal Revenue (G.R. No. 68013,
November 12, 1984) involving a similar set of facts, wherein this Court in a minute resolution
affirmed the Court of Appeals' decision denying the claim for refund of the petitioner therein for being
barred by prescription.

A re-examination of the aforesaid minute resolution of the Court in the Pacific Procon case is
warranted under the circumstances to lay down a categorical pronouncement on the question as to
when the two-year prescriptive period in cases of quarterly corporate income tax commences to run.
 CONFIDENTIAL

A full-blown decision in this regard is rendered more imperative in the light of the reversal by the
Court of Tax Appeals in the instant case of its previous ruling in the Pacific Procon case.

Section 292 (now Section 230) of the National Internal Revenue Code should be interpreted in
relation to the other provisions of the Tax Code in order to give effect to legislative intent and to
avoid an application of the law which may lead to inconvenience and absurdity. In the case
of People vs. Rivera (59 Phil 236 [1933]), this Court stated that statutes should receive a sensible
construction, such as will give effect to the legislative intention and so as to avoid an unjust or an
absurd conclusion. INTERPRETATIO TALIS IN AMBIGUIS SEMPER FRIENDA EST, UT
EVITATUR INCONVENIENS ET ABSURDUM. Where there is ambiguity, such interpretation as will
avoid inconvenience and absurdity is to be adopted. Furthermore, courts must give effect to the
general legislative intent that can be discovered from or is unraveled by the four corners of the
statute, and in order to discover said intent, the whole statute, and not only a particular provision
thereof, should be considered. (Manila Lodge No. 761, et al. v. Court of Appeals, et al., 73 SCRA
162 [1976]) Every section, provision or clause of the statute must be expounded by reference to
each other in order to arrive at the effect contemplated by the legislature. The intention of the
legislator must be ascertained from the whole text of the law and every part of the act is to be taken
into view. (Chartered Bank v. Imperial, 48 Phil. 931 [1921]; Lopez v. El Hogar Filipino, 47 Phil. 249,
cited in Aboitiz Shipping Corporation v. City of Cebu, 13 SCRA 449 [1965]).

Thus, in resolving the instant case, it is necessary that we consider not only Section 292 (now
Section 230) of the National Internal Revenue Code but also the other provisions of the Tax Code,
particularly Sections 84, 85 (now both incorporated as Section 68), Section 86 (now Section 70) and
Section 87 (now Section 69) on Quarterly Corporate Income Tax Payment and Section 321 (now
Section 232) on keeping of books of accounts. All these provisions of the Tax Code should be
harmonized with each other.

Section 292 (now Section 230) provides a two-year prescriptive period to file a suit for a refund of a
tax erroneously or illegally paid, counted from the tile the tax was paid. But a literal application of this
provision in the case at bar which involves quarterly income tax payments may lead to absurdity and
inconvenience.

Section 85 (now Section 68) provides for the method of computing corporate quarterly income tax
which is on a cumulative basis, to wit:

Sec. 85. Method of computing corporate quarterly income tax. — Every corporation
shall file in duplicate a quarterly summary declaration of its gross income and
deductions on a cumulative basis for the preceding quarter or quarters upon which
the income tax, as provided in Title II of this Code shall be levied, collected and
paid. The tax so computed shall be decreased by the amount of tax previously paid
or assessed during the preceding quarters and shall be paid not later than sixty (60)
days from the close of each of the first three (3) quarters of the taxable year, whether
calendar or fiscal year. (Emphasis supplied)

while Section 87 (now Section 69) requires the filing of an adjustment returns and final payment of
income tax, thus:

Sec. 87. Filing of adjustment returns final payment of income tax. — On or before the
fifteenth day of April or on or before the fifteenth day of the fourth month following the
close of the fiscal year, every taxpayer covered by this Chapter shall file an
Adjustment Return covering the total net taxable income of the preceding calendar or
fiscal year and if the sum of the quarterly tax payments made during that year is not
 CONFIDENTIAL

equal to the tax due on the entire net taxable income of that year the corporation
shall either (a) pay the excess tax still due or (b) be refunded the excess amount paid
as the case may be. . . . (Emphasis supplied)

In the case at bar, the amount of P247,010.00 claimed by private respondent TMX Sales, Inc. based
on its Adjustment Return required in Section 87 (now Section 69), is equivalent to the tax paid during
the first quarter. A literal application of Section 292 (now Section 230) would thus pose no problem
as the two-year prescriptive period reckoned from the time the quarterly income tax was paid can be
easily determined. However, if the quarter in which the overpayment is made, cannot be
ascertained, then a literal application of Section 292 (Section 230) would lead to absurdity and
inconvenience.

The following application of Section 85 (now Section 68) clearly illustrates this point:

FIRST QUARTER:

Gross Income 100,000.00

Less: Deductions 50,000.00

—————

Net Taxable Income 50,000.00

=========

Tax Due & Paid [Sec. 24 NIRC (25%)] 12,500.00

=========

SECOND QUARTER:

Gross Income 1st Quarter 100,000.00

2nd Quarter 50,000.00 150,000.00

—————

Less: Deductions 1st Quarter 50,000.00

2nd Quarter 75,000.00 125,000.00

—————

Net Taxable Income 25,000.00

=========

Tax Due Thereon 6,250.00

 CONFIDENTIAL

Less: Tax Paid 1st Quarter 12,500.00

—————

Creditable Income Tax (6,250.00)

—————

THIRD QUARTER:

Gross Income 1st Quarter 100,000.00

2nd Quarter 50,000.00

3rd Quarter 100,000.00 250,000.00

—————

Less: Deductions 1st Quarter 50,000.00

2nd Quarter 75,000.00

3rd Quarter 25,000.00 150,000.00

————— —————

100,000.00

=========

Tax Due Thereon 25,000.00

Less: Tax Paid 1st Quarter 12,500.00

2nd Quarter — 12,500.00

————— =========

FOURTH QUARTER: (Adjustment Return required in Sec. 87)

Gross Income 1st Quarter 100,000.00

2nd Quarter 50,000.00

3rd Quarter 100,000.00

4th Quarter 75,000.00 325,000.00

————— —————
 CONFIDENTIAL

Less: Deductions 1st Quarter 50,000.00

2nd Quarter 75,000.00

3rd Quarter 25,000.00

4th Quarter 100,000.00 250,000.00

————— —————

Net Taxable Income 75,000.00

=========

Tax Due Thereon 18,750.00

Less: Tax Paid 1st Quarter 12,500.00

2nd Quarter —

3rd Quarter 12,500.00 25,000.00

————— —————

Creditable Income Tax (to be REFUNDED) (6,250.00)

=========

Based on the above hypothetical data appearing in the Final Adjustment Return, the taxpayer is
entitled under Section 87 (now Section 69) of the Tax Code to a refund of P6,250.00. If Section 292
(now Section 230) is literally applied, what then is the reckoning date in computing the two-year
prescriptive period? Will it be the 1st quarter when the taxpayer paid P12,500.00 or the 3rd quarter
when the taxpayer also paid P12,500.00? Obviously, the most reasonable and logical application of
the law would be to compute the two-year prescriptive period at the time of filing the Final
Adjustment Return or the Annual Income Tax Return, when it can be finally ascertained if the
taxpayer has still to pay additional income tax or if he is entitled to a refund of overpaid income tax.

Furthermore, Section 321 (now Section 232) of the National Internal Revenue Code requires that the
books of accounts of companies or persons with gross quarterly sales or earnings exceeding Twenty
Five Thousand Pesos (P25,000.00) be audited and examined yearly by an independent Certified
Public Accountant and their income tax returns be accompanied by certified balance sheets, profit
and loss statements, schedules listing income producing properties and the corresponding incomes
therefrom and other related statements.

It is generally recognized that before an accountant can make a certification on the financial
statements or render an auditor's opinion, an audit of the books of accounts has to be conducted in
accordance with generally accepted auditing standards.

Since the audit, as required by Section 321 (now Section 232) of the Tax Code is to be conducted
yearly, then it is the Final Adjustment Return, where the figures of the gross receipts and deductions
 CONFIDENTIAL

have been audited and adjusted, that is truly reflective of the results of the operations of a business
enterprise. Thus, it is only when the Adjustment Return covering the whole year is filed that the
taxpayer would know whether a tax is still due or a refund can be claimed based on the adjusted and
audited figures.

Therefore, the filing of quarterly income tax returns required in Section 85 (now Section 68) and
implemented per BIR Form 1702-Q and payment of quarterly income tax should only be considered
mere installments of the annual tax due. These quarterly tax payments which are computed based
on the cumulative figures of gross receipts and deductions in order to arrive at a net taxable income,
should be treated as advances or portions of the annual income tax due, to be adjusted at the end of
the calendar or fiscal year. This is reinforced by Section 87 (now Section 69) which provides for the
filing of adjustment returns and final payment of income tax. Consequently, the two-year prescriptive
period provided in Section 292 (now Section 230) of the Tax Code should be computed from the
time of filing the Adjustment Return or Annual Income Tax Return and final payment of income tax.

In the case of Collector of Internal Revenue v. Antonio Prieto (2 SCRA 1007 [1961]), this Court held
that when a tax is paid in installments, the prescriptive period of two years provided in Section 306
(Section 292) of the National internal Revenue Code should be counted from the date of the final
payment. This ruling is reiterated in Commission of Internal Revenue v. Carlos Palanca (18 SCRA
496 [1966]), wherein this Court stated that where the tax account was paid on installment, the
computation of the two-year prescriptive period under Section 306 (Section 292) of the Tax Code,
should be from the date of the last installment.

In the instant case, TMX Sales, Inc. filed a suit for a refund on March 14, 1984. Since the two-year
prescriptive period should be counted from the filing of the Adjustment Return on April 15, 1982,
TMX Sales, Inc. is not yet barred by prescription.

WHEREFORE, IN VIEW OF THE FOREGOING, the petition is hereby DENIED. The decision of the
Court of Tax Appeals dated April 29, 1988 is AFFIRMED. No costs.

SO ORDERED.

Narvasa, C.J., Melencio-Herrera, Cruz, Paras, Padilla, Bidin, Griño-Aquino, Medialdea, Regalado,
Davide, Jr. and Romero, JJ., concur.

Feliciano and Nocon, JJ., took no part.

 CONFIDENTIAL

G.R. No. 83414 July 31, 1989

TONY CAUDAL, petitioner,

vs.
HON. COURT OF APPEALS, HON. REMEGIO E. ZARI, PRESIDING JUDGE, REGIONAL TRIAL
COURT, NATIONAL CAPITAL JUDICIAL REGION, Branch 98, QUEZON CITY, and DIONISIO O.
CU, respondents.

Manuel M. Katapang for petitioner.

Modesto C. Juanson for private respondent.

FERNAN, C.J.:

This petition for review on certiorari seeks the reversal of the Court of Appeals decision in CA G.R.
No. 09457 entitled "Tony Caudal v. Hon. Remegio E. Zari," dated 29 January 1988 1 which affirmed
the decision of the Regional Trial Court, National Capital Judicial Region, Branch 98, Quezon City
and its resolution dated 18 May 1988 denying petitioner's motion for reconsideration.

The following are the established facts:

Private respondent Dionisio Cu, his wife and five (5) children rented first an apartment at No. 269-A
D. Tuason, Quezon City but later transferred to No. 38 Silencio St., Santol, Quezon City because the
owner of the former apartment needed it for his personal use. The period of lease of the second
apartment was from 16 September 1984 up to 16 March 1986. 1a

In February 1984, Cu in his desire to provide his family with a permanent abode acquired a parcel of
land situated at 157 E. Garcia, Quezon City, together with the existing improvements thereon,
consisting of a six (6) door apartment building from Julieta Esguerra. 2

On 2 July 1984, Cu notified petitioner who was then occupying one of the units therein, of the
termination of the lease contract by giving him until October 1984 within which to vacate the
premises.3 Yet despite the demand, petitioner refused to comply by remaining in the premises even
after October 1984, thereby compelling Cu to bring the matter to the office of the Barangay Captain
who issued a certification to file a complaint. 4

Thereafter, Dionisio Cu filed an ejectment case docketed as Civil Case No. 0047612, against
petitioner herein Tony Caudal before the Metropolitan Trial Court of Quezon City, Branch 35. In his
complaint, Cu alleged that he and his family were residing at 38 Silencio St., Santol, Quezon City
merely as tenants; that neither plaintiff nor any member of his family, namely: his wife, Juanita nor
his children — Selwyn, Anneli, Lynn, Devon, and Irma was owner of a house or dwelling unit in
Quezon City or Manila, except a, six (6) door apartment located at 157 E. Garcia St., Cubao,
Quezon City; that one of the apartment units was being leased to defendant Caudal on a monthly
basis; that plaintiff and his family were transferring to the six (6) door apartment, two (2) of which
would be merged into one dwelling unit for his son Selwyn, who planned to get married, and the
remaining apartment units would be utilized as conjugal home of plaintiff and his family. 5

In his answer, defendant alleged that he had a verbal contract with the owner Julieta B. Esguerra on
the subject premises at the monthly rate of P150.00 since July 1967; that Mrs. Esguerra failed to
claim the rental for November 1984 causing the defendant to deposit the same in a bank; that as the
 CONFIDENTIAL

subject parcel of land had an area of 1,000 sq. m. more or less he proposed that the 600 sq. m.
fronting the 6 door apartment be used for the construction of plaintiffs dwelling. 6

Summary procedure having ensued, the Metropolitan Trial Court on 26 March 1986 rendered a
decision dismissing the complaint of the plaintiff. 7

From the said decision of the MTC of Quezon City, plaintiff Dionisio Cu appealed to the Regional
Trial Court of Quezon City which docketed it as Civil Case No. 47639. 8

On 6 June 1986, the RTC of Quezon City reversed the decision of the inferior court. 9 Its decision in
favor of Cu was based mainly on the latter's right to possess the said property after Cu had bought
the 6 door apartment from vendor Esguerra.

From said decision of the RTC-Quezon City, Tony Caudal filed a petition for review with the Court of
Appeals. Petitioner argued that the RTC committed a grave abuse of discretion when it ruled in favor
of Cu despite the latter's intention of merely using (1) door as stock room, office, quarter for maids
and drivers.10 In support of his argument, petitioner cited Sec 5 (c) B.P. 877 which states:

Grounds for Judicial Ejectment:

(c) Legitimate need of owner/lessor to repossess 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 or
municipality; Provided however, 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.

On 29 January 1988, the Court of Appeals rendered a decision affirming the decision of the Regional
Trial Court of Quezon City.11 Petitioner moved to reconsider but the appellate court in its resolution
dated 18 May 1988 denied the motion. 12

Hence, this instant petition.

Petitioner raises the central argument that:13

THE HONORABLE COURT OF APPEALS ERRED IN INTERPRETING SEC. 5 (c)

BATAS PAMBANSA BLG. 25 AND 877, IN RELATION TO SEC. 2(6) (Sic), BATAS
PAMBANSA 877, TO INCLUDE THE USE OF SUBJECT APARTMENT DOOR AS
STOCKROOM, OFFICE AND QUARTER FOR MAIDS AND DRIVERS AS A
GROUND FOR EJECTMENT.

We affirm. Cu may eject petitioner from the premises. The subsequent conversion of the subject
area into a maid/driver's quarters and stockroom comes within the purview of Sec. 5(c) as a
legitimate need for residential purposes.

As an intrinsic aid in fully appreciating the term "residential unit," we must refer to the Rental Law
Batas Pambansa 877. Legislative intent must be ascertained from a consideration of the whole
statute. Clauses and phrases of the statutes should not be taken as detached and isolated
 CONFIDENTIAL

expressions, but the whole and every part thereof must be considered in fixing the meaning of any of
its parts. 14 Said law in defining the term "residential unit' states:

Sec. 2 (b):

Residential Unit — refers to an apartment, house and/or land on which another's

dwelling is located used for residential purposes and shall include not only buildings,
parts or units thereof used solely as dwelling places, except ... but also those used
for home industries, retail stores or other business purposes if the owner thereof and
his family actually live therein and use it principally for dwelling purposes: Provided,
that in the case of a retail store, home industry or business, the initial capitalization
thereof shall not exceed five thousand pesos (P5,000.00) and Provided, further, that
in the operation of the store, home industry or business, the owner thereof shall not
require the services of any person other than the members of his household. (Italics
ours.)

Observe that the law does not strictly confine the meaning of the word "residence" mainly for
habitation purposes as restrictedly interpreted by petitioner. In a way, the definition admits a
measure of liberality, albeit limited, since a residence may also be the site of a home industry, or a
retail store or be used for business purposes so long as it is principally used for dwelling purposes.
The law in giving greater importance to the abode being used principally for dwelling purposes, has
set the limitation on the maximum amount of capitalization to P5,000.00, which is small by present
standards.

Thus, if an abode can be used for limited business purposes, we see no reason why it cannot be
used as an abode for persons rendering services usually necessary or desirable for the maintenance
and enjoyment of a home and who personally minister to the personal comfort and convenience of
the members of the household.

Cu admits in his complaint that two (2) doors would be merged into one (1) dwelling for his son and
the remaining apartment units would be utilized as conjugal home for the Cu family. 15 Although they
were formerly rented to various lessees as separate units by the previous owner, Julieta Esguerra,
upon conversion of the said premises into a conjugal dwelling all doors would be considered as one.

A servants' quarter is an auxiliary part of a residence.16 Similarly, it has been held that a "dwelling
house,' a one story building annexed to the house proper, designed for a kitchen, and another
erection attached to it, designed for a wash room, is included. 17 A dwelling house is an entire thing; it
includes the buildings, and such attachments as are usually occupied and used for the family for the
ordinary purposes of a house. 18 In law it may embrace the dwelling itself and such buildings as are
used in connection with it.19 Where other structures were joined to a dwelling house by removing
partitions and consolidating the entire physical structure under one continuous roof, the dwelling
house constituted only one .20

The ejectment of petitioner should not be taken in isolation of Cu's plan. Cu has explicitly stated that
he himself would be transferring to the adjoining units and would merge the latter with petitioner's
unit to form one conjugal dwelling. Indeed, the character of Cu's occupancy is mainly for dwelling
purposes. A different conclusion would have been arrived at if a lessee like petitioner herein, was
ejected on the sole ratiocination that the premises would be exclusively used as maid/driver's
quarters autonomously of any adjoining conjugal dwelling.

The argument that the maids/drivers are not covered by the term immediate members of the family
of the lessor 21has no leg to stand on because Cu himself, his spouse and family are transferring to
 CONFIDENTIAL

the adjoining premises, of which petitioner's unit would become an auxiliary part of the main conjugal
dwelling.

It is also the belief of petitioner that he could not be ejected just because the said property was sold
to a third person as provided in the last paragraph of Sec. 5 of B.P. 877, to wit:

(N)o 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.

The prohibition in the above-quoted provision of law is obvious; that is, the law disallows the
ejectment of the lessee merely on the ground that the leased premises had been sold or mortgaged.
Aside from the fact that there is nothing under the law to prevent a vendee, who steps into the shoes
of the original owner from ejecting said lessee on grounds expressly provided for by the Rental
Laws, it has already been settled that the subsequent owner who has established that he bought the
leased premises in question for his and his family's own use may recover possession of the said
premises.22 Hence, in the case at bar Cu the present owner is within his rights in ejecting Caudal to
enable the former to use the premises, a ground undisputably allowed under Sec. 5(c) of B.P. 877.

As to the proviso under the same section of B.P. 877 that the lease for a definite period has expired,
there is no question that under existing jurisprudence, the verbal contract of lease between the
original owner and the lessee on a month-to-month basis is a lease with a definite period, 23 which
has expired upon Cu's notice given to Caudal on July 2, 1984, that the lease contract has been
terminated; and that Caudal had until October 1984 or a period of three (3) months within which to
vacate the premises. In fact, this Court has clearly ruled that an oral month to month lease is
terminable on a 30 days' notice. 24

Be that as it may, Cu's notice to Caudal has also in effect complied with the second requirement of
Sec. 5(c) of the same BP 877, to give three (3) months advance notice to the lessee.

We need not belabor the fact that Cu himself was in dire need of a place to stay since he too was
just renting an apartment at 38 Silencio St., Santol, Quezon City and had to transfer in view of the
imminent expiration of his lease on 16 March 1986.25 Indeed, there was a need to find a place he
could call his own.

Verily, the law could not have intended to prevent bona fide sales from owners/lessors who wish to
dispose of their property to third persons in need of their own residence. This would be an absurd
interpretation contrary to the basic philosophy underlying the right to property. To give preferential
right to a tenant over and above a new owner's need for the premises for his use and that of his
family as propounded in the Tan Tok Lee Case 26 is arbitrary and unreasonable.

WHEREFORE, the decision of the Court of Appeals dated 29 January 1988 is hereby affirmed.

SO ORDERED.

Gutierrez, Jr., Feliciano, Bidin and Cortes, JJ., concur.