[G.R. No. L-45164. March 16, 1987.] DOMINICO ETCUBAN, petitioner, vs.

THE HONORABLE COURT OF APPEALS, JESUS C. SONGALIA & GUADALUPE S. SONGALIA, respondents.

Basilio E. Duaban for petitioner.

DECISION

PARAS, J :
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Before Us is a petition to review the judgment of the respondent Court of Appeals 1 in CA-G.R. No. 53258-R reversing the decision of the court a quo in Civil Case No. BN-109, entitled Dominico Etcuban vs. Jesus G. Songalia, et al., by ruling that plaintiff-appellee (petitioner herein) failed to avail himself of the right of legal redemption within the period provided for by law.
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Plaintiff inherited a piece of land with an area of approximately 14.0400 hectares together with his co-heirs from their deceased father. Said piece of land was declared in their names as heirs of Eleuterio Etcuban under Tax Declaration No. 06837 and was the subject matter in dispute in SP No. 1192-R, of the Court of First Instance of Cebu, a case for the settlement of the estate of the late Eleuterio Etcuban. In said case, petitioner Dominico Etcuban, the spouse of the deceased, Demetria Initan, and Pedro, Vicente, Felicitas, Anastacio, Froilan, Alfonso, Advincula, Anunciacion, Jesus, Aguinaldo, all surnamed Etcuban were declared as co-owners of the property in question. Thereafter the 11 co-heirs executed in favor of defendants (private respondents herein) 11 deeds of sale of their respective shares in the co-ownership for the total sum of P26,340.00. It is not disputed that the earliest of the 11 deeds of sale was made on December 9, 1963 and the last one in December 1967. (Annexes "1-11"). In his complaint before the trial court, plaintiff alleged that his co-owners leased and/or sold their respective shares without giving due notice to him as a co-owner notwithstanding his intimations to them that he was willing to buy all their respective shares. He further maintained that even upon inquiry from his co-heirs/coowners, and also from the alleged buyers (defendants) he elicited nothing from them. Plaintiff discovered for the first time the existence of these 11 deeds of sale during the hearing on January 31, 1972 of Civil Case No. BN-87, entitled Jesus C. Songalia vs. Dominico Etcuban in the Court of First Instance of Cebu, Branch XI. When he verified the supposed sales with his co-owners only 3 of them admitted their respective sales. Hence, the filing of Civil Case No. BN-109 by petitioner for legal redemption. Defendants (private respondents herein) in denying the material allegations of the complaint, argued by way of affirmative and special defenses that plaintiff has no cause of action against them; that the action is barred by prescription or laches; that the complaint is barred by the pendency of Civil Case No. BN-87 involving the same parties, same subject matter and same cause of action; that the provisions of the law pertaining to legal redemption have been fully complied with in respect to the sale of the disputed land to them; that plaintiff came to know of the sale of the land in question to them in August, 1968 or sometime prior thereto; that acting on this knowledge, plaintiff thru his lawyers wrote defendants on August 15, 1968 about the matter; that Jesus Songalia personally went to the office of Atty. Vicente Faelner or counsel for plaintiff to inform him of the sale of the disputed land to them; that again another demand letter was received on May 30, 1969 by defendants from the lawyers of plaintiff but on both occasions, no action was taken by plaintiff despite the information plaintiff received from defendants thru his counsel and that consequently plaintiff lost his right to redeem under Art. 1623 of the new Civil Code because the right of

redemption may be exercised only within 30 days from notice of sale and plaintiff was definitely notified of the sale years ago as shown by the records. During the pre-trial conference, the parties failed to agree on any stipulation of facts. Judgment was rendered after due trial with the following dispositive portion:
"WHEREFORE, JUDGMENT is hereby rendered in favor of the plaintiff and against the defendants as follows. 1.Allowing the plaintiff to exercise his right of redemption over the land in question; 2.Ordering the defendants to accept the redemption price of P26,340.00 which plaintiff should deposited with this Court within 30 days from and after this decision becomes final and executory and thereafter to execute a deed of reconveyance in favor of the plaintiff and to surrender the possession and ownership of the property in question to the plaintiff; and 3.The defendants are ordered to pay the costs."

Defendants appealed to the Court of Appeals assigning several errors but the appellate court centered its dissertation on the first assignment of error as the issue to be most decisive and, therefore confined its discussion to it. Defendants in their first assignment of error assailed the lower court in not holding that the failure of the plaintiff-appellee to tender to the defendants-appellants the redemption price or to consign the same in court or to make a specific offer to redeem the property before filing the complaint for legal redemption has barred the appellee's right to redeem the property pursuant to the doctrine of the Supreme court in Conejero vs. Court of Appeals (16 SCRA 775). The appellate court in tackling this issue declared that plaintiff failed to make a valid tender of the sale price of the land paid by the defendants within the period fixed by Art. 1623 of the Civil Code which provides as follows:
ART. 1623.The right of legal pre-emption or redemption shall not be exercised except within thirty (30) days from the notice in writing by the prospective vendor, or by the vendor, as the case may be. The deed of sale shall not be recorded in the Registry of Property, unless accompanied by an affidavit of the vendor that he has given written notice thereof to all possible redemptioners. The right of redemption of co-owners excludes that of adjoining owners. (1524a)"

The respondent court found that written notice was given to plaintiff-appellee in the form of an answer with counterclaim to the complaint in Civil Case No. BN-109 which appears on the records to have been filed on March 18, 1972. Said court ruled that "this notice is sufficient to inform the plaintiff about the sale and the reckoning date for the 30-day period commenced upon receipt thereof. No other notice is needed under the premises because it is the substance conveyed rather than the form embodying it, that counts." The records reveal that on May 27, 1974, plaintiff-appellee deposited with the lower court the amount of P26,340.00 the redemption price. Since the answer with counterclaim was filed on March 18, 1972, the deposit made on May 27, 1974 was clearly outside the 30-day period of legal redemption. The period within which the right of legal redemption or pre-emption may be exercised is non-extendible.
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Petitioner contends that vendors (his co-heirs) should be the ones to give him written notice and not the vendees (defendants or private respondent herein) citing the case of Butte vs. Manuel Uy & Sons, Inc., 4 SCRA 526. Such contention is of no moment. While it is true that written notice is required by the law (Art.

1623), it is equally true that the same "Art. 1623 does not prescribe any particular form of notice, nor any distinctive method for notifying the redemptioner." So long, therefore, as the latter is informed in writing of the sale and the particulars thereof, the 30 days for redemption start running, and the redemptioner has no real cause to complain. (De Conejero et al v. Court of Appeals, et al., 16 SCRA 775). In the Conejero case, We ruled that the furnishing of a copy of the disputed deed of sale to the redemptioner, was equivalent to the giving of written notice required by law in "a more authentic manner than any other writing could have done," and that We cannot adopt a stand of having to sacrifice substance to technicality. More so in the case at bar, where the vendors or co-owners of petitioner stated under oath in the deeds of sale. (Annexes "1 to 11") that notice of sale had been given to prospective redemptioners in accordance with Art. 1623 of the Civil Code. "A sworn statement or clause in a deed of sale to the effect that a written notice of sale was given to possible redemptioners or co-owners might be used to determine whether an offer to redeem was made on or out of time, or whether there was substantial compliance with the requirement of said Art. 1623. 2 " In resume, We find that petitioner failed to substantially comply with the requirements of Art. 1623 on legal redemption and We see no reason to reverse the assailed decision of the respondent court.
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WHEREFORE, premises considered, the petition is hereby DISMISSED and the appealed decision is hereby AFFIRMED. SO ORDERED. Alampay, Gutierrez, Jr., Padilla, Bidin and Cortes, JJ., concur. Fernan, J., took no part acted as counsel for Guadalupe S. Songalia in other cases.

[G.R. No. 86150. March 2, 1992.] GUZMAN, BOCALING & CO., petitioner, vs. RAOUL S.V. BONNEVIE, respondent.

E. Voltaire Garcia for petitioner. Guinto Law Office for private respondent.
SYLLABUS 1.CIVIL LAW; SPECIAL CONTRACTS; LEASE; NECESSITY OF SECURING THE APPROVAL OF PROBATE COURT; RULE; CASE AT BAR. The Court agrees with the respondent court that it was not necessary to secure the approval by the probate court of the Contract of Lease because it did not involve an alienation of real property of the estate nor did the term of the lease exceed one year so as to make it fall under Article 1878(8) of the Civil Code. Only if Paragraph 20 of the Contract of Lease was activated and the said property was intended to be sold would it be required of the administratrix to secure the approval of the probate court pursuant to Rule 89 of the Rules of Court. 2.ID.; ID.; SALE; PURCHASER IN GOOD FAITH AND FOR VALUE; CONSTRUED IN CASE AT BAR. A purchaser in good faith and for value is one who buys the property of another without notice that some other person has a right to or interest in such property and pays a full and fair price for the same at the

time of such purchase or before he has notice of the claim or interest of some other person in the property. Good faith connotes an honest intention to abstain from taking unconscientious advantage of another. Tested by these principles, the petitioner cannot tenably claim to be a buyer in good faith as it had notice of the lease of the property by the Bonnevies and such knowledge should have cautioned it to look deeper into the agreement to determine if it involved stipulations that would prejudice its own interests. The petitioner insists that it was not aware of the right of first priority granted by the Contract of Lease. Assuming this to be true, we nevertheless agree with the observation of the respondent court that: If Guzman-Bocaling failed to inquire about the terms of the Lease Contract, which includes Par. 20 on priority right given to the Bonnevies, it had only itself to blame. Having known that the property it was buying was under lease, it behooved has a prudent person to have required Reynoso or the broker to show to it the Contract of Lease in which Par. 20 is contained. 3.ID.; CONTRACTS; RESCISSIBLE CONTRACTS; MAY BE AVAILED OF BY REASON OF INJURY TO THIRD PERSON; CASE AT BAR. The petitioner argues that assuming the Contract of Sale to be voidable, only the parties thereto could bring an action to annul it pursuant to Article 1397 of the Civil Code. It is stressed that private respondents are strangers to that agreement and therefore have no personality to seek its annulment. The respondent court correctly held that the Contract of Sale was not voidable but rescissible. Under Article 1380 to 1381(3) of the Civil Code, a contract otherwise valid may nonetheless be subsequently rescinded by reason of injury to third persons, like creditors. The status of creditors could be validly accorded the Bonnevies for they had substantial interests that were prejudiced by the sale of the subject property to the petitioner without recognizing their right of first priority under the Contract of Lease. 4.ID.; ID.; ID.; PURPOSES. According to Tolentino, rescission is a remedy granted by law to the contracting parties and even to third persons, to secure reparation for damages caused to them by a contract, even if this should be valid, by means of the restoration of things to their condition at the moment prior to the celebration of said contract. It is a relief allowed for the protection of one of the contracting parties and even third persons from all injury and damage the contract may cause, or to protect some incompatible and preferent right created by the contract. (Aquino v. Taedo, 39 Phil. 517) Rescission implies a contract which, even if initially valid, produces a lesion or pecuniary damage to someone that justifies its invalidation for reasons of equity. 5.ID.; ID.; ID.; MAY BE IMPAIRED BY THE ACQUISITION OF THIRD PERSON OF THE SUBJECT PROPERTY WHO IS SHOWN THAT HE IS IN LAWFUL POSSESSION AND NOT ACTED IN BAD FAITH; CASE AT BAR. It is true that the acquisition by a third person of the property subject of the contract is an obstacle to the action for its rescission where it is shown that such third person is in lawful possession of the subject of the contract and that he did not act in bad faith. However, this rule is not applicable in the case before us because the petitioner is not considered a third party in relation to the Contract of Sale nor may its possession of the subject property be regarded as acquired lawfully and in good faith. Indeed, Guzman, Bocaling and Co. was the vendee in the Contract of Sale. Moreover, the petitioner cannot be deemed a purchaser in good faith for the record shows that it categorically admitted it was aware of the lease in favor of the Bonnevies, who were actually occupying the subject property at the time it was sold to it. Although the Contract of Lease was not annotated on the transfer certificate of title in the name of the late Jose Reynoso and Africa Reynoso, the petitioner cannot deny actual knowledge of such lease which was equivalent to and indeed more binding than presumed notice by registration.

DECISION

CRUZ, J :
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The subject of the controversy is a parcel of land measuring six hundred (600) square meters, more or less, with two buildings constructed thereon, belonging to the Intestate Estate of Jose L. Reynoso. This property was leased to Raoul S. Bonnevie and Christopher Bonnevie by the administratrix, Africa Valdez de Reynoso, for a period of one year beginning August 8, 1976, at a monthly rental of P4,000.00. The Contract of lease contained the following stipulation:
20. In case the LESSOR desires or decides to sell the leased property, the LESSEES shall be given a first priority to purchase the same, all things and considerations being equal.

On November 3, 1976, according to Reynoso, she notified the private respondents by registered mail that she was selling the leased premises for P600,000.00 less a mortgage loan of P100,000.00, and was giving them 30 days from receipt of the letter within which to exercise their right of first priority to purchase the subject property. She said that in the event that they did not exercise the said right, she would expect them to vacate the property not later than March, 1977.
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On January 20, 1977, Reynoso sent another letter to private respondents advising them that in view of their failure to exercise their right of first priority, she had already sold the property. Upon receipt of this letter, the private respondents wrote Reynoso informing her that neither of them had received her letter dated November 5, 1976; that they had advised her agent to inform them officially should she decide to sell the property so negotiations could be initiated; and that they were "constrained to refuse (her) request for the termination of the lease." On March 7, 1977, the leased premises were formally sold to petitioner Guzman, Bocaling & Co. The Contract of Sale provided for immediate payment of P137,500.00 on the purchase price, the balance of P262,500.00 to be paid only when the premises were vacated. On April 12, 1977, Reynoso wrote a letter to the private respondents demanding that they vacate the premises within 15 days for their failure to pay the rentals for four months. When they refused, Reynoso filed a complaint for ejectment against them which was docketed as Civil Case No. 043S51-CV in the then City Court of Manila. On September 25, 1979, the parties submitted a Compromise Agreement, which provided inter alia that "the defendant Raoul S.V. Bonnevie shall vacate the premises subject of the Lease Contract, voluntarily and peacefully not later than October 31, 1979." This agreement was approved by the City Court and became the basis of its decision. However, as the private respondents failed to comply with the above-quoted stipulation, Reynoso filed a motion for execution of the judgment by compromise, which was granted on November 8, 1979. On November 12, 1979, private respondent Raoul S. Bonnevie filed a motion to set aside the decision of the City Court as well as the Compromise Agreement on the sole ground that Reynoso had not delivered to him the "records of payments and receipts of all rentals by or for the account of defendants . . . ." The motion was denied and the case was elevated to the then Court of First Instance. That Court remanded the case to the City Court of Manila for trial on the merits after both parties had agreed to set aside the Compromise Agreement. On April 29, 1980, while the ejectment case was pending in the City Court, the private respondents filed an action for annulment of the sale between Reynoso and herein petitioner Guzman, Bocaling & Co. and cancellation of the transfer certificate of title in the name of the latter. They also asked that Reynoso be

required to sell the property to them under the same terms and conditions agreed upon in the Contract of Sale in favor of the petitioner. This complaint was docketed as Civil Case No. 131461 in the then Court of First Instance of Manila. On May 5, 1980, the City Court decided the ejectment case, disposing as follows:
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WHEREFORE, judgment is hereby rendered ordering defendants and all persons holding under them to vacate the premises at No. 658 Gen. Malvar Street, Malate, Manila, subject of this action, and deliver possession thereof to the plaintiff, and to pay to the latter: (1) The sum of P4,000.00 a month from April 1,1977 to August 8, 1977; (2) The sum of P7,000.00 a month, as reasonable compensation for the continued unlawful use and occupation of said premises, from August 9, 1977 and every month thereafter until defendants actually vacate and deliver possession thereof to the plaintiff; (3) The sum of P1,000.00 as and for attorney's fees; and (4) The costs of suit.

The decision was appealed to the then Court of First Instance of Manila, docketed as Civil Case No. 132634 and consolidated with Civil Case No. 131461. In due time, Judge Tomas P. Maddela, Jr. decided the two cases as follows:
WHEREFORE, premises considered, this Court in Civil Case No. 132634 hereby modifies the decision of the lower court as follows: 1.Ordering defendants Raoul S.V. Bonnevie and Christopher Bonnevie and all persons holding under them to vacate the premises at No. 658 Gen. Malvar St., Malate, Manila, subject of this action and deliver possessions thereof to the plaintiff; and 2.To pay the latter the sum of P4,000.00 a month from April 1, 1977 up to September 21, 1980 (when possession of the premises was turned over to the Sheriff) after deducting whatever payments were made and accepted by Mrs. Africa Valdez Vda. de Reynoso during said period, without pronouncement as to costs. As to Civil Case No. 131461, the Court hereby renders judgment in favor of the plaintiff Raoul Bonnevie as against the defendants Africa Valdez Vda. de Reynoso and Guzman and Bocaling & Co., declaring the deed of sale with mortgage executed by defendant Africa Valdez Vda. de Reynoso in favor of defendant Guzman and Bocaling null and void; cancelling the Certificate of Title No. 125914 issued by the Register of Deeds of Manila in the name of Guzman and Bocaling & Co.,; ordering the defendant Africa Valdez Vda. de Reynoso to execute in favor of the plaintiff Raoul Bonnevie a deed of sale with mortgage over the property leased by him in the amount of P400,000.00 under the same terms and conditions should there be any other occupants or tenants in the premises; ordering the defendants jointly and severally to pay the plaintiff Raoul Bonnevie the amount of P50,000.00 as temperate damages; to pay the plaintiff jointly and severally the amount of P2,000.00 per month from the time the property was sold to defendant Guzman and Bocaling by defendant Africa Valdez Vda. de Reynoso on March 7,1977, up to the execution of a deed of sale of the property by defendant Africa Valdez Vda. de Reynoso in favor of plaintiff Bonnevie; to pay jointly and severally the plaintiff Bonnevie the amount of P20,000.00 as exemplary damages, for attorney's fees in the amount of P10,000.00, and to pay the costs of suit.

Both Reynoso and the petitioner company filed with the Court of Appeals a petition for review of this decision. The appeal was eventually resolved against them in a decision promulgated on March 16, 1988, where the respondent court substantially affirmed the conclusions of the lower court but reduced the award of damages. 1

Its motion for reconsideration having been denied on December 14, 1986, the petitioner has come to this Court, asserting inter alia that the respondent court erred in ruling that the grant of first priority to purchase the subject properties by the judicial administratrix needed no authority from the probate court; holding that the Contract of Sale was not voidable but rescissible; considering the petitioner as a buyer in bad faith; ordering Reynoso to execute the deed of sale in favor of the Bonnevies; and not passing upon the counterclaim. Reynoso has not appealed. The Court has examined the petitioner's contentions and finds them to be untenable. Reynoso claimed to have sent the November 3, 1976 letter by registered mail, but the registry return card was not offered in evidence. What she presented instead was a copy of the said letter with a photocopy of only the face of a registry return card claimed to refer to the said letter. A copy of the other side of the card showing the signature of the person who received the letter and the date of the receipt was not submitted. There is thus no satisfactory proof that the letter was received by the Bonnevies. Even if the letter had indeed been sent to and received by the private respondents and they did not exercise their right of first priority, Reynoso would still be guilty of violating Paragraph 20 of the Contract of Lease which specifically stated that the private respondents could exercise the right of first priority, "all things and conditions being equal." The Court reads this to mean that there should be identity of the terms and conditions to be offered to the Bonnevies and all other prospective buyers, with the Bonnevies to enjoy the right of first priority. The selling price quoted to the Bonnevies was P600,000.00, to be only paid in cash less only the mortgage lien of P100,000.00. 2 On the other hand, the selling price offered to and accepted by the petitioner was only P400,000.00, and only P137,500.00 was paid in cash while the balance of P272,500.00 was to be paid "when the property (was) cleared of tenants or occupants." 3 The fact that the Bonnevies had financial problems at that time was no justification for denying them the first option to buy the subject property. Even if the Bonnevies could not buy it at the price quoted, Reynoso could not sell it to another for a lower price and under more favorable terms and conditions. Only if the Bonnevies failed to exercise their right of first priority could Reynoso lawfully sell the subject property to others, and at that only under the same terms and conditions offered to the Bonnevies. The Court agrees with the respondent court that it was not necessary to secure the approval by the probate court of the Contract of Lease because it did not involve an alienation of real property of the estate nor did the term of the lease exceed one year so as to make it fall under Article 1878(8) of the Civil Code. Only if Paragraph 20 of the Contract of Lease was activated and the said property was intended to be sold would it be required of the administratrix to secure the approval of the probate court pursuant to Rule 89 of the Rules of Court. As a strict legal proposition, no judgment of the probate court was reviewed and eventually annulled collaterally by the respondent court as contended by the petitioner. The order authorizing the sale in its favor was duly issued by the probate court, which thereafter approved the Contract of Sale resulting in the eventual issuance of title in favor of the petitioner. That order was valid insofar as it recognized the existence of all the essential elements of a valid contract of sale, but without regard to the special provision in the Contract of Lease giving another party the right of first priority.
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Even if the order of the probate court was valid, the private respondents still had a right to rescind the Contract of Sale because of the failure of Reynoso to comply with her duty to give them the first opportunity to purchase the subject property.

The petitioner argues that assuming the Contract of Sale to be voidable, only the parties thereto could bring an action to annul it pursuant to Article 1397 of the Civil Code. It is stressed that private respondents are strangers to that agreement and therefore have no personality to seek its annulment. The respondent court correctly held that the Contract of Sale was not voidable but rescissible. Under Article 1380 to 1381(3) of the Civil Code, a contract otherwise valid may nonetheless be subsequently rescinded by reason of injury to third persons, like creditors. The status of creditors could be validly accorded the Bonnevies for they had substantial interests that were prejudiced by the sale of the subject property to the petitioner without recognizing their right of first priority under the Contract of Lease. According to Tolentino, rescission is a remedy granted by law to the contracting parties and even to third persons, to secure reparation for damages caused to them by a contract, even if this should be valid, by means of the restoration of things to their condition at the moment prior to the celebration of said contract. 4 It is a relief allowed for the protection of one of the contracting parties and even third persons from all injury and damage the contract may cause, or to protect some incompatible and preferent right created by the contract. 5 Rescission implies a contract which, even if initially valid, produces a lesion or pecuniary damage to someone that justifies its invalidation for reasons of equity. 6 It is true that the acquisition by a third person of the property subject of the contract is an obstacle to the action for its rescission where it is shown that such third person is in lawful possession of the subject of the contract and that he did not act in bad faith. 7 However, this rule is not applicable in the case before us because the petitioner is not considered a third party in relation to the Contract of Sale nor may its possession of the subject property be regarded as acquired lawfully and in good faith. Indeed, Guzman, Bocaling and Co. was the vendee in the Contract of Sale. Moreover, the petitioner cannot be deemed a purchaser in good faith for the record shows that it categorically admitted it was aware of the lease in favor of the Bonnevies, who were actually occupying the subject property at the time it was sold to it. Although the Contract of Lease was not annotated on the transfer certificate of title in the name of the late Jose Reynoso and Africa Reynoso, the petitioner cannot deny actual knowledge of such lease which was equivalent to and indeed more binding than presumed notice by registration. A purchaser in good faith and for value is one who buys the property of another without notice that some other person has a right to or interest in such property and pays a fill and fair price for the same at the time of such purchase or before he has notice of the claim or interest of some other person in the property. 8 Good faith connotes an honest intention to abstain from taking unconscientious advantage of another. 9 Tested by these principles, the petitioner cannot tenably claim to be a buyer in good faith as it had notice of the lease of the property by the Bonnevies and such knowledge should have cautioned it to look deeper into the agreement to determine if it involved stipulations that would prejudice its own interests.

The petitioner insists that it was not aware of the right of first priority granted by the Contract of Lease. Assuming this to be true, we nevertheless agree with the observation of the respondent court that:
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If Guzman-Bocaling failed to inquire about the terms of the Lease Contract, which includes Par. 20 on priority right given to the Bonnevies, it had only itself to blame. Having known that the property it was buying was under lease, it behooved has a prudent person to have required Reynoso or the broker to show to it the Contract of Lease in which Par. 20 is contained.

Finally, the petitioner also cannot invoke the Compromise Agreement which it says canceled the right of first priority granted to the Bonnevies by the Contract of Lease. This agreement was set aside by the parties

thereto, resulting in the restoration of the original rights of the private respondents under the Contract of Lease. The Joint Motion to Remand filed by Reynoso and the private respondents clearly declared inter alia:
That without going into the merits of instant petition, the parties have agreed to SET ASIDE the compromise agreement, dated September 24,1979 and remand Civil Case No. 043851 of the City Court of Manila to Branch IX thereof for trial on the merits. 10

We find, in sum, that the respondent court did not commit the errors imputed to it by the petitioner. On the contrary, its decision is conformable to the established facts and the applicable law and jurisprudence and so must be sustained. WHEREFORE, the petition is DENIED, with costs against the petitioner. The challenged decision is AFFIRMED in toto. It is so ordered.

Narvasa, C.J., Grio-Aquino and Medialdea, JJ., concur.

[G.R. No. 87415. January 23, 1992.] YEK SENG CO., petitioner, vs. THE HONORABLE COURT OF APPEALS, DEWEY VELOSO YAP, and DAVID T. VELOSO YAP, respondents.

Ismael M. Estella for petitioner. Jose S. Santos, Jr. & Associates for private respondents.
SYLLABUS 1.CIVIL LAW; SPECIAL CONTRACTS; LEASE; EXTENSION OF THE LEASE CONTRACT; MATTERS TO BE CONSIDERED IN ALLOWING THEREOF; DIVINO v.MARCOS (4 SCRA 186) CITED. In extending the lease contract it was considered important in the case of Divino v. Marcos (4 SCRA 186) that: 1) the plaintiff had been occupying the leased premises for more than twenty years; 2) he was assured by the defendants that he could remain in the house as long as he continued paying the rentals; and 3) he made improvements on the house costing P20,000.00 with the consent of the defendants. 2.ID.; ID.; ID.; ID.; ID.; NOT SUFFICIENTLY ESTABLISHED IN CASE AT BAR. The petitioner in the case at bar has not pointed to similar circumstances other than the claim that it has been occupying the subject premises for more than twenty years. On this point, Judge Roberto M. Lagman of the Regional Trial Court correctly held: On the second issue, the Court noted that the parties did not submit any evidence on the basis of the stipulation of the facts earlier narrated. Thus, there is nothing in the record which would show any fact or circumstance which justifies the extension of the lease. The mere occupancy of the premises for a number of years, by itself is not sufficient. The circumstance that the petitioner has paid its rentals religiously during the past twenty years is also not sufficient to justify the extension it demands. Neither are the substantial improvements it allegedly made on the leased premises nor the difficulty of finding another place of business, on which it has not submitted any evidence at all.

3.ID.; ID.; ID.; RULE WHEN RENTAL WAS PAID MONTHLY AND THE TERM HAD NOT BEEN EXPRESSLY AGREED UPON; CASE AT BAR. We hold that as the rental in the case at bar was paid monthly and the term had not been expressly agreed upon, the lease was understood under Article 1687 to be terminable from month to month. At the time the petitioner was asked to vacate the leased premises, the lease contract had already expired and therefore, could no longer be extended. 4.ID.; ID.; ID.; POWER OF THE COURT TO EXTEND THEREOF; MERELY A MINISTERIAL DUTY. If the contract of lease had not yet expired, its extension would still be subject to the sound discretion of the court and was by no means obligatory upon it as a merely ministerial duty. To quote again from the decision of the Regional Trial Court: As correctly cited by the plaintiffs, "The power of the Courts to fix a longer term for lease is protestative or discretionary, 'may' is the word to be exercised or not in accordance with the particular circumstances of the case; a longer term to be granted where equities come into play demanding extension, to be denied where none appears, always with due deference to the parties freedom to contract." (Divino v. Marcos, January 31, 1962, 4 SCRA 186.) Moreover, the lease had already expired when the extension was sought. In the case of Prieto v. Laperal, 22 SCRA 934, it was held that "an extension of the lease may be sought by the tenant before, not after the termination of the lease." At any rate, whatever extension the defendant may be entitled to has already been dissipated by the length of time 2 years that this case has been pending. 5.CONSTITUTIONAL LAW; BILL OF RIGHTS; RIGHT OF A PERSON TO A DAY IN COURT; NOT DENIED IN CASE AT BAR. The petitioner also contends that it was denied its day in court when judgment was rendered against it without the benefit of a trial on the merits. This posture is likewise unacceptable. Contrary to its submission, the case was not decided by Summary Procedure but in accordance with Rule 20, Section 3, and Rule 30, Section 2, of the Rules of Court. There was no trial on the merits because, as the records will show, the petitioner's counsel agreed to submit the case for decision on the basis of the stipulations of the parties at the pre-trial conference. Judgment was rendered on that basis. It must be added that even if there was indeed no trial before the Municipal Trial Court, the petitioner was heard nonetheless when it appealed to the Regional Trial Court; when it filed its motion for reconsideration of the decision; and when it appealed to the respondent court. The petitioner cannot pretend that it was unable to fully argue its case before that court, for the fact is that it did so, not only in its brief but also when it filed a motion for reconsideration of its decision and also a motion for a hearing on that motion.

DECISION

CRUZ, J :
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The simple question raised in the case at bar could have been definitely resolved on the lowest level of the judiciary and did not have to reach the highest tribunal. If we have given the petition due course, it was only for the purpose of settling it once and for all and avoiding future needless impositions on the time of this Court. The subject of the petition is a verbal contract of lease over a portion of a building belonging to the private respondents and occupied by the petitioner as lessee. It is situated on Ylaya Street in Manila. The leased premises have been used by the petitioner for its general merchandise business for more than twenty years. The agreed monthly rental was P3,000.00. On December 12, 1985, the lessors notified the petitioner that they were terminating the lease as they intended to renovate the building and thereafter use it themselves. The petitioner refused to vacate. The private respondents then filed a complaint for ejectment against the petitioner in the Municipal Trial Court

of Manila on January 22, 1986. For its part, the petitioner filed a petition for consignation of the monthly rentals which it claimed had been refused by the lessors. In his decision dated July 2, 1987,
1

Judge Tirso C. Briones disposed thus:

WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the defendant, ordering the latter and all persons claiming rights under it, to vacate the premises specifically described in the amended complaint; to pay plaintiffs the sum of P3,000.00 as rental for the reasonable we and occupancy of the premises commencing January, 1986 and monthly thereafter, until the same shall have been finally surrendered to the plaintiffs, less whatever payments that may have been made during the pendency of the case; the sum of P10,000.00 as and for attorney's fees plus costs of suit. The petition for consignation is hereby denied for lack of merit.

This decision was affirmed by the Regional Trial Court of Manila, 2 which was in turn sustained by the Court of Appeals. 3 In this petition for review on certiorari, the principal submission is that the courts below erred in not giving the petitioner an extension of its lease in accordance with Article 1687 of the Civil Code. This article provides as follows:
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. If the rent is weekly, the courts may likewise determine a longer period after the lessee has been in possession for over six months. In case of daily rent, the courts may also fix a longer period after the lessee has stayed in the place for over one month.

In support of its position, the petitioner cites the cases of Araneta v. De Mesa, 35 SCRA 137, and Divino v. Marcos, 4 SCRA 186. The Court can only wonder why the petitioner has invoked the first case at all as it is clearly inapplicable. A little study would have readily revealed this. The appeal was dismissed in that case simply because the question raised had already become moot and academic; no ruling was made on the merits. In the second case, the Court upheld the extension of the lease because of the peculiar circumstances involved, as related thus by the trial court:
When the plaintiffs petition was called for hearing, the parties agreed that judgment be rendered on the pleadings in connection with such petition. According to the pleadings, there is no controversy that plaintiff has been occupying the lot in question since May 7, 1936, when he purchased from one Antonio Castro the house constructed thereon. It also appears that plaintiff was assured by the defendants that the house bought would remain thereon as long as plaintiff continues paying his rents. It further appears that on March 19, 1947, plaintiff constructed an addition to the house with the knowledge and consent of the defendants. Said addition cost the plaintiff the amount of P20,000.00. There is no written agreement as to the duration of the lease between plaintiff and defendants. The fact remains that plaintiff entered the premises with the knowledge and consent of the defendants and with the assurance of the latter that the plaintiff could remain occupying the lot as long as he pays the corresponding rents.

Sustaining this finding, this Court made the following additional observations:
The lot in question has been rented to the petitioner for about 20 years and his predecessor in interest for more. Even though rentals had been paid monthly, still no period for the duration of the lease had been set. The lease had been consistently and tacitly renewed ("tacita reconduccion") until the ejectment case was filed (Co Tiam v. Diaz, 75 Phil. 672; Villanueva v. Canlas, 77 Phil. 381; Art. 1670, N.C.C.; Art. 1566, Old Civil Code). Having made substantial or additional improvements on the lot, and considering the difficulty of looking for another place to which petitioner could transfer such improvements, and the length of his occupancy of the lot (since 1936), and the impression acquired by him that he could stay on the premises, as long as he could pay the rentals, it would seem that there exists just grounds for granting the extension of lease and that the extension of two years granted by the trial court, is both fair and equitable.

It was considered important in that case that: 1) the plaintiff had been occupying the leased premises for more than twenty years; 2) he was assured by the defendants that he could remain in the house as long as he continued paying the rentals; and 3) he made improvements on the house costing P20,000.00 with the consent of the defendants. The petitioner in the case at bar has not pointed to similar circumstances other than the claim that it has been occupying the subject premises for more than twenty years. On this point, Judge Roberto M. Lagman of the Regional Trial Court correctly held:
On the second issue, the Court noted that the parties did not submit any evidence on the basic of the stipulation of the facts earlier narrated. Thus, there is nothing in the record which would show any fact or circumstance which justifies the extension of the lease. The mere occupancy of the premises for a number of years, by itself is not sufficient.

The circumstance that the petitioner has paid its rentals religiously during the past twenty years is also not sufficient to justify the extension it demands. Neither are the substantial improvements it allegedly made on the leased premises nor the difficulty of finding another place of business, on which it has not submitted any evidence at all. The Court makes the wry observation that the petitioner has only itself to blame if, being engaged in business, it did not take the necessary precautions against its possible and even abrupt displacement because of the termination of the month-to-month lease. As for the argument that the private respondents had not yet secured a building permit for the alleged intended renovation, it is obviously no argument at all and deserves no further comment. In the view of the Court, the applicable case is Cruz v. Intermediate Appellate Court,
4

where it was held:

Ricardo Cruz further maintains that the lease contract with Roman Legarda So is one with an indefinite period, no specific term having been agreed upon by the parties, hence the court can legally fix a longer term. He invokes the second sentence of Article 1687 of the Civil Code which states that even though a monthly rental 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. We reject such proposition. As earlier stated, the contract of Ricardo Cruz, being on a month-to-month basis, is a lease with a definite period. Since the contract of lease is for a definite term, the lessee cannot avail of the benefits under Article 1687 which applies only if there is no definite term. And, even assuming arguendo that Article 1687 applies, Ricardo Cruz would still not be entitled to have the term fixed for a longer period since his action was filed only after the contract had expired. As held in Vda. de Prieto vs. Santos, et al. (88 Phil. 509 [1956]):

"Under this provision, if the period of a lease contract has not been specified by the parties therein, it is understood to be from month to month, if the rent agreed upon is monthly, as in the cases at bar. Consequently, the contract expires at the end of such month, unless, prior thereto, the extension of said term has been sought by appropriate action and judgment is, eventually, rendered therein granting said relief. "Defendants herein maintain that their lease contracts did not, and could not, come to an end until after the court has fixed its lifetime and the term thus fixed has expired. This view, is, to our mind, untenable. To begin with, defendants assume that their contracts are without term, prior to the judicial action authorized in said Article 1687, whereas the same provides that the duration of lease contracts shall be yearly, monthly, weekly, or daily depending upon whether the rental agreed upon is annual, monthly, weekly, or daily. In other words, said contracts have a term fixed by law, and are not indefinite in duration, before said judicial intervention. Secondly, said Article 1687 merely gives the court discretion to extend the period of the lease. The court is not bound to extend said term. It may legally refuse to do so, if the circumstances surrounding the case warrants such action . . . " (Emphasis reproduced).

Conformably, we hold that as the rental in the case at bar was paid monthly and the term had not been expressly agreed upon, the lease was understood under Article 1687 to be terminable from month to month. At the time the petitioner was asked to vacate the leased premises, the lease contract had already expired and therefore, following the above-quoted decisions, could no longer be extended. In fact, even if such contract had not yet expired, its extension would still be subject to the sound discretion of the court and was by no means obligatory upon it as a merely ministerial duty. To quote again from the decision of the Regional Trial Court:
As correctly cited by the plaintiffs, "The power of the Courts to fix a longer term for lease is protestative or discretionary, 'may' is the word to be exercised or not in accordance with the particular circumstances of the case; a longer term to be granted where equities come into play demanding extension, to be denied where none appears, always with due deference to the parties freedom to contract." (Divino v. Marcos, January 31, 1962, 5 SCRA 186.) Moreover, the lease had already expired when the extension was sought. In the case of Prieto v. Santos, 98 Phil. 509 cited in Alegre v. Laperal, 22 SCRA 934, it was held that "an extension of the lease may be sought by the tenant before, not after the termination of the lease." At any rate, whatever extension the defendant may be entitled to has already been dissipated by the length of time 2 years that this case has been pending.

The petitioner also contends that it was denied its day in court when judgment was rendered against it without the benefit of a trial on the merits. This posture is likewise unacceptable. Contrary to its submission, the case was not decided by Summary Procedure but in accordance with Rule 20, Section 3, and Rule 30, Section 2, of the Rules of Court. There was no trial on the merits because, as the record will show, the petitioner's counsel agreed to submit the case for decision on the basis of the stipulations of the parties at the pre-trial conference. Judgment was rendered on that basis. It must be added that even if there was indeed no trial before the Municipal Trial Court, the petitioner was heard nonetheless when it appealed to the Regional Trial Court, when it filed its motion for reconsideration of the decision, and when it appealed to the respondent court. The petitioner cannot pretend that it was unable to fully argue its case before that court, for the fact is that it did so, not only in its brief but also when it filed a motion for reconsideration of its decision and also a motion for a hearing or that motion. The respondent court did not err in sustaining the award of attorney's fees in the sum of P10,000.00, taking into account the fact that the petitioner unreasonably resisted the private respondent's demand to vacate the property following the termination of their lease contract. The petitioner's intransigence made it

necessary for the latter to litigate for the enforcement of their just and valid claim and thus incur the expenses that must now be justly charged to it. Judge Lagman acutely observed that the petitioner had already enjoyed a de facto extension of two years during the period the ejectment case was pending, first before the Municipal Trial Court and then before his court. We note with disapproval that by appealing to the Court of Appeals and later to this Court, the petitioner gained another extension of more than three years, for a total of almost six years from the time the amended complaint was filed on June 17, 1986. It is an economic fact that construction costs rose considerably during that period, thus increasing the expenses of the renovation intended by the private respondents. Such increase could have been also awarded against the petitioner as part of the actual damages of the private respondents except that no evidence of this has been presented. Many lessees are able to defer their deserved ejectment through the simple expedient of appealing their lost cause all the way up to even this Court. This transparent gambit is all-too-familiar, The delay entailed in deciding these appeals is usually unavoidable because the courts of justice are saddled by a heavy load of cases and cannot dispose of them as fast as might be desired. It is common knowledge of this difficulty that has encouraged the filing of groundless appeals by "clever" lawyers who know from the start that they are doomed to fail. Counsel are admonished against abusing the judicial process by lodging appeals intended merely to unduly prolong a case and so "buy time" for their clients. In the future, this Court will take a sterner view of such tactics and impose severe sanctions upon lawyers who, for money or malice, would cynically frustrate the ends of the law and the speedy administration of justice by deliberately delaying the final disposition of their hopeless cases. Atty. Ismael M. Estella, the petitioner's counsel, is particularly enjoined to take serious heed of this warning. WHEREFORE, the petition is DENIED and the appealed decision AFFIRMED in toto, with triple costs against the petitioner. SO ORDERED.

Narvasa, C .J ., Grio-Aquino and Medialdea, JJ ., concur.

[G.R. No. 76656. December 11, 1992.] SPOUSES EUTIQUIANO CLUTARIO and ARACELI CLUTARIO, petitioners, vs. HON. COURT OF APPEALS, HON. GEORGE C. MACLI-ING, RTC JUDGE OF QUEZON CITY, BRANCH C (100) and SPOUSES MELQUIADES GANDIA and MARIA V. GANDIA, respondents.

Estratonico Aano for petitioners. Gaudencio P. Lagua for respondents.

SYLLABUS

1.CIVIL LAW; LEASE; EJECTMENT; ACCEPTANCE BY LESSOR OF BACK RENTALS DOES NOT CONSTITUTE ABANDONMENT OF THEIR CAUSE OF ACTION. Case law is to the effect that the acceptance by the lessor of the payment by the lessee of the rentals in arrears does not constitute a waiver of the default in the payment of rentals as a valid cause of action for ejectment. The Court notes that when petitioners paid the back rentals on May 15, 1981, private respondents had already filed the complaint for ejectment earlier, to be specific, on March 4, 1981. The conduct of private respondents subsequent to their acceptance of the back rentals belies any intention to waive their right to eject petitioners as a result of the latter's failure to pay the rent for more than three (3) months. They did not enter into an amicable settlement with petitioners. Neither did they notify the trial court of their intention to have the complaint dismissed. Instead, they participated actively in the proceedings before the MTC during all the time that the case dragged on for almost three years. In light of the surrounding circumstances of the case, as well as the prevailing jurisprudence, the Court rules that the acceptance by private respondents of the petitioners-lessees' back rentals did not constitute a waiver or abandonment of their cause of action for ejectment against the latter. 2.ID.; ID.; ID.; PROOF OF ANY ONE OF THE FACTORS UNDER SEC. 5 OF BP BLG. 25, SUFFICIENT CAUSE FOR JUDICIAL EJECTMENT. Proof of any one of the factors enumerated in Section 5 of B.P. Blg. 25 (1979) is sufficient cause for judicial ejectment of a lessee. Having proved one of such grounds, i.e., arrears in payment of rent for three (3) months at any one time, private respondents may legally eject petitioners without having to prove the other grounds for ejectment. Nevertheless, to bolster their action for ejectment, private respondents invoked in their complaint a second ground for ejectment, namely, their need for the leased premises. 3.ID.; ID.; ID.; NEED FOR THE LEASED PROPERTY, A VALID GROUND THEREFOR. For the lessor to be able to validly eject the lessee on the ground of need for the leased property, it must be shown that there is no other available residential unit to satisfy that need. The non-availability must exist at the time of the demand by the lessor on the lessee to vacate the property. 4.ID.; ID.; ID.; ID.; GIVEN A LIBERAL INTERPRETATION. The need for the leased premises by the lessor as a valid ground for ejectment has already been given a liberal interpretation in Caudal v. Court of Appeals, (G.R. No. 83414, July 31, 1989, 175 SCRA 798) where it was held that the conversion of the leased property into a servants' quarters was a legitimate need within the purview of Sec. 5 (c) of B.P. Blg. 25 (1979). In the case at bar, it appears that the decision of private respondents to occupy both the lower and upper portions of the property sprang, not only from mere convenience, but from necessity as well, due to their advanced age and the poor health of respondent Melquiades Gandia. While the upper portion of the premises may have been sufficient to satisfy private respondents' residential needs in 1961 when they leased the lower portion to petitioners, it no longer sufficed in 1980 or nineteen (19) years later when they served the notice to vacate, their personal circumstances having drastically changed.

DECISION

ROMERO, J :
p

Private respondents, the Spouses Melquiades Gandia and Maria V. Gandia, are the owners of a two-storey residential apartment located at No. 56 Liberty St., Murphy, Cubao, Quezon City. Since 1961, while private respondents have been occupying the upper storey of the house, petitioners have been staying on the ground floor by virtue of a verbal lease agreement for a monthly rental of P150.00. On May 9, 1980, private respondents, through their counsel, wrote a letter to the petitioners giving them ninety (90) days to vacate the premises. According to them, due to their advanced age and failing health,

they have decided to occupy the entire apartment, including the ground floor leased to petitioners. Because petitioners did not heed the demand letter, private respondents brought the matter to the Katarungan Pambarangay for settlement, but this did not meet with success. Another demand letter was sent by private respondents to petitioners on January 20, 1981. In the meantime, it appears that from August 1980, petitioners were in arrears in the payment of their rentals. On March 4, 1981, private respondents filed a complaint for ejectment against petitioner Araceli Clutario 1 before the Metropolitan Trial Court (MTC) of Quezon City citing the following two grounds: (1) their need for the premises; and (2) non-payment of rentals by petitioners from August 1980. Pending the proceedings before the MTC, petitioners paid the back rentals from August 1980 until May 1981. After trial, the MTC rendered judgment 2 on January 16, 1984 dismissing the complaint on the ground that private respondents "failed to support their causes of action with substantial evidence." 3 Private respondents then filed an appeal with the Regional Trial Court (RTC) of Quezon City. On March 29, 1985, respondent Judge George C. Macli-ing rendered a well-written decision reversing the MTC judgment. Respondent Judge ruled that petitioners' non-payment of rentals for more than three months and private respondents' genuine need for the leased premises are sufficient causes for petitioners' ejectment. The dispositive portion of the RTC decision reads:
cdphil

"WHEREFORE, premises considered, the judgment appealed from is hereby REVERSED and SET ASIDE, and in lieu thereof, another one is rendered and entered in favor of the appellants and against the appellees: 1.Ordering the defendants-appellees and all persons claiming rights under them to vacate the premises, identified as the Ground Floor of No. 56 Liberty Avenue, Murphy, Cubao, Quezon City, and restore possession thereof to plaintiffs-appellants. 2.Ordering defendants-appellees to pay rental arrearages from June, 1981, at the rate of P150.00 per month, until such arrearages shall have been fully paid and the premises vacated and possession thereof restored to plaintiffs-appellants. 3.Ordering defendants-appellees to pay P2,000.00 as and for attorney's fees; and to pay the costs. SO ORDERED."
4

It was then petitioners' turn to impugn this judgment by filing a petition for review before the Court of Appeals. In a decision dated September 18, 1986, 5 the respondent Court of Appeals affirmed the RTC judgment but deleted the award of attorney's fees to private respondents. Petitioners elevated the case before this Court, on a petition for review under Rule 45 of the Rules of Court, seeking the reversal of the Court of Appeals' decision affirming the RTC ruling that they can be ejected by their lessors, the private respondents. The petition is without merit. B.P. Blg. 25 (1979), which was the governing law at the time of the filing of the complaint and which the parties had to rely on, provides, in section 5, six (6) grounds for ejectment. 6 In seeking to oust petitioners from the leased premises, private respondents invoke two of those six grounds, namely: (1) arrears in payment of rent for three (3) months at any one time; 7 and (2) need of the lessors to repossess their property for their own use or for the use of any immediate member of their family as a residential unit. 8 Petitioners contend that private respondents cannot avail of either ground.

No longer disputed is the rule that non-payment of rentals is a sufficient ground for ejectment. 9 Under sec. 5 (b) of B.P. Blg. 25 (1979), the arrears in rent payment must be for at least three (3) months. Petitioners started defaulting on their payments in August 1980. On May 15, 1981, they paid P1,500.00 for their rents for the period August 1980 to May 15, 1981 at the rate of P150.00 per month. By then, they had been in arrears for nine (9) months. However, petitioners contend that private respondents, by accepting the payment of the back rentals, waived their non-payment of rentals for more than three (3) months as a ground for ejectment.
cdrep

The contention is without merit. Case law is to the effect that the acceptance by the lessor of the payment by the lessee of the rentals in arrears does not constitute a waiver of the default in the payment of rentals as a valid cause of action for ejectment. 10 The Court notes that when petitioners paid the back rentals on May 15, 1981, private respondents had already filed the complaint for ejectment earlier, to be specific, on March 4, 1981. The conduct of private respondents subsequent to their acceptance of the back rentals belies any intention to waive their right to eject petitioners as a result of the latter's failure to pay the rent for more than three (3) months. They did not enter into an amicable settlement with petitioners. Neither did they notify the trial court of their intention to have the complaint dismissed. Instead, they participated actively in the proceedings before the MTC during all the time that the case dragged on for almost three years. 11 When the MTC decided adversely against them, private respondents appealed the judgment to the RTC. Not only have they participated earnestly in all subsequent proceedings even after they obtained favorable judgments from the RTC and the Court of Appeals, but they have likewise been consistent in their position that petitioners should be ejected, not only because they need the leased premises, but also because of petitioners' default in the payment of rentals for more than three (3) months.

In light of the surrounding circumstances of the case, as well as the prevailing jurisprudence, the Court rules that the acceptance by private respondents of the petitioners-lessees' back rentals did not constitute a waiver or abandonment of their cause of action for ejectment against the latter. Proof of any one of the factors enumerated in section 5 of B.P. Blg. 25 (1979) is sufficient cause for judicial ejectment of a lessee. Having proved one of such grounds, i.e., arrears in payment of rent for three (3) months at any one time, private respondents may legally eject petitioners without having to prove the other grounds for ejectment. Nevertheless, to bolster their action for ejectment, private respondents invoked in their complaint a second ground for ejectment, namely, their need for the leased premises. 12 Petitioners are bound by the established jurisprudence that under B.P. Blg. 25 (1979), the need by the lessor of the leased premises for his own use or that of his immediate family is a valid ground for ejectment. 13 They, however, submit that this ground for ejectment is not available to private respondents who own, apart from the disputed premises, three other apartment units located at Nos. 56-A, 56-B and 56C Liberty St., Murphy, Cubao, Quezon City, at least one of which is allegedly available for occupancy by private respondents. Indeed, for the lessor to be able to validly eject the lessee on the ground of need for the leased property, it must be shown that there is no other available residential unit to satisfy that need. 14 The non-availability must exist at the time of the demand by the lessor on the lessee to vacate the property. 15 In the instant case, petitioners allege that the other apartment units of private respondents are vacant and available to the latter for occupancy. 16 Private respondents deny this allegation, claiming that the other units were occupied when they gave notice to the petitioners to vacate the disputed premises, and remain so occupied until now.17 None of the three courts which have already adjudicated on the controversy gave credence to petitioners' allegation. The MTC which decided in petitioners' favor did not make a finding that the other

apartment units of private respondents were available for occupancy by the latter. On the contrary, the respondent Court of Appeals ruled that "the other apartments of private respondents were tenanted." 18 The Court finds no cogent reason to disturb this finding. The MTC, in deciding in favor of petitioners, ruled that private respondents did not need the disputed premises which is the ground floor of the apartment unit leased to petitioners, because they were already occupying the upper floor of the unit. The relevant portion of the MTC decision reads:
cdrep

"On this score, the evidence is clear that the plaintiffs, though owners of the residential house identified as No. 56 Liberty Avenue, Murphy, Quezon City, occupying the upper floor thereof, are the only persons living on this upper floor of the house. The only reason advanced by them for needing to repossess the ground floor or lower part of the house occupied by the defendant, is because the plaintiffs are aging and sickly, as according to the plaintiffs' letter (Exh. "B") to the defendant, plaintiffs "personally need that lower portion of the house for personal use and occupancy since they are getting older and aggravated by their poor health, they get easily tired in going up and downstairs." Obviously, plaintiffs' need of the lower portion of the house is for convenience. It is the view of this Court that when the framers of Batas Pambansa Blg. 25 included "need of the premises" as a ground for judicial eviction, personal convenience is not intended, because the law states clearly that the repossession of the property for the use of the owner/lessor (or immediate member) must concur with the other requisites, one of which is that the owner/lessor does not own any other residential unit. Plaintiffs' position therefore, on this ground, is not only weak but more so not in accord with the spirit, intent and letter of Batas Pambansa Blg. 25. It may be true that plaintiffs are sickly and aging but their physical condition is not a legal argument to effect eviction of the defendant. 19

The need for the leased premises by the lessor as a valid, ground for ejectment has already been given a liberal interpretation in Caudal v. Court of Appeals, 20 where it was held that the conversion of the leased property into a servants' quarters was a legitimate need within the purview of sec. 5 (c) of B.P. Blg. 25 (1979). The Court, speaking through then Chief Justice Marcelo B. Fernan, made the following statements:
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 houses. 21

In the case at bar, it appears that the decision of private respondents to occupy both the lower and upper portions of the property sprang, not only from mere convenience, but from necessity as well, due to their advanced age and the poor health of respondent Melquiades Gandia. While the upper portion of the premises may have been sufficient to satisfy private respondents' residential needs in 1961 when they leased the lower portion to petitioners, it no longer sufficed in 1980 or nineteen (19) years later when they served the notice to vacate, their personal circumstances having drastically changed. WHEREFORE, the Petition is DENIED and the Decision of the Court of Appeals AFFIRMED. SO ORDERED.

Gutierrez, Jr., Bidin, Davide, Jr. and Melo, JJ ., concur.

[G.R. No. 89307. May 8, 1992.] DR. MA. WENDELYN V. YAP, EVELIA H. BADIAGAN, TERESITA A. BALADAD and FLORENCIA C. DE VERA, petitioners, vs. DR. VERGEL G. CRUZ, THE HON. MARCELO R. OBIEN, as Presiding Judge of the Regional Trial Court of Manila. Br. 44, and THE HON. COURT OF APPEALS, respondents.

Sangco, Anastacio, Duran and Parulan for petitioners. Wilfredo E. Dizon for private respondent.
SYLLABUS 1.CIVIL LAW; LEASE; TRANSFER OF LEASEHOLD RIGHTS IN CASE AT BAR IS CONDITIONAL AND HAS NO FORCE AND EFFECT IF THE CONDITION IS NOT COMPLIED. Dr. Vergel G. Cruz, the private respondent in this case was the bonafide tenant of Amado Q. Bugayon, Jr. Sometime in the latter part of July, 1985, he offered for sale the goodwill of the veterinary clinic and some of its equipments to Dr. Wendelyn V. Yap, Evelia H. Badiagan, Teresita A. Baladad and Florencia C. de Vera, the petitioners herein. During the period of negotiations, private respondent Cruz introduced to the landlord Dr. Wendelyn V. Yap as the person interested in taking over the clinic. However, the negotiations did not materialize but the petitioners managed to enter into a contract of lease for the said premises at a monthly rental of P1,800.00 with the landlord. As a result, private respondent Cruz brought an action for "Forcible Entry with Damages" with the Metropolitan Trial Court which rendered its decision in favor of private respondent. We rule in favor of private respondent. When the petitioners and the landlord executed a new contract of lease, the lease of private respondent was still valid and subsisting. There is no question that private respondent has not effectively relinquished his leasehold rights over the premises in question in view of the failure of negotiations for the sale of the goodwill. Clearly, the transfer of the leasehold rights is conditional in nature and has no force and effect if the condition is not complied with. 2.ID.; ID.; MONTH-TO-MONTH BASIS; ABSENT A NOTICE TO VACATE, LEASE CONTINUES TO BE IN FORCE. True, the lease of private respondent is on a month-to-month basis and may be terminated at the end of any month after proper notice or demand to vacate has been given (Rivera v. Florendo, G.R. No. 6006, July 31, 1986, 143 SCRA 278; Zablan v. CA, G.R. No. 57844, September 30, 1987, 154 SCRA 487; Uy Hoo and Sons Realty Development Corp. v. CA, G.R. No. 83263, June 14, 1989, 174 SCRA, 100; Palanca v. IAC, G.R. No. 71566, December 15, 1989, 180 SCRA 119). In the case at bar, however, the lack of proper notice or demand to vacate upon the private respondent is clearly evident. In the absence of such notice, the lease of private respondent continues to be in force and can not be deemed to have expired as of the end of the month automatically. Neither can the non-payment of the rent for the month of August, 1985 be a ground for termination of the lease without a demand to pay and to vacate. 3.ID.; ID.; ID.; ID.; DIFFERENTIATED FROM CASE OF VDA. DE KRAUT V. LONTOK. The instant case can easily be differentiated from the case of Vda. de Kraut v. Lontok, G.R. No. L-18374, February 27, 1963, 7 SCRA 281, which was cited by petitioners in support of their contention that a lease on a month-to-month basis may be terminated at the end of any month and shall be deemed terminated upon the lessee's refusal to pay the increased rental because here there was neither demand on the part of the landlord to pay the rental nor refusal on the part of the private respondent to pay the same as in fact be made a tender of his

rental payment in the latter part of August, 1985. Thus, when the landlord and the petitioners entered into a new contract of lease effectively depriving the private respondent of his lease, they were clearly guilty of forcible entry in view of the subsisting lease of private respondent.

DECISION

MEDIALDEA, J :
p

This petition seeks the reversal of the decision of respondent Court of Appeals in CA-G.R. Sp. No. 15790 dismissing the petition for review and affirming the decision of the Regional Trial Court of Manila, Branch 44 in Civil Case No. 86-38296 which in turn affirmed the decision of the Metropolitan Trial Court of Manila, Branch 27 in Civil Case No. 113298. The facts of the case are as follows: Dr. Vergel G. Cruz, the private respondent in this case was the bonafide tenant of Amado Q. Bugayon, Jr. for almost five years in the premises in question just before this controversy started. He religiously paid the monthly rentals of P1,400.00, introduced several improvements and operated a veterinary clinic known as Malate Veterinary Clinic. Sometime in the latter part of July, 1985, he offered for sale the goodwill of the veterinary clinic and some of its equipments to Dr. Wendelyn V. Yap, Evelia H. Badiagan, Teresita A. Baladad and Florencia C. de Vera, the petitioners herein. During the period of negotiations, private respondent Cruz introduced to the landlord Dr. Wendelyn V. Yap as the person interested in taking over the clinic. However, the negotiations did not materialize but the petitioners managed to enter into a contract of lease for the said premises at a monthly rental of P1,800.00 with the landlord. As a result, private respondent Cruz brought an action for "Forcible Entry with Damages" with the Metropolitan Trial Court of Manila, Branch 27 against petitioners herein and the landlord. On June 26, 1986, the Metropolitan Trial Court of Manila, Branch 27, rendered its decision in favor of private respondent Cruz, the dispositive portion of which states:
cdll

"WHEREFORE, judgment is hereby rendered in favor of the plaintiff and all the defendants are ordered to vacate the premises in question and surrender peaceful possession of the premises to plaintiff; defendants Amado Bugayon, Jr. and Dr. Wendelyn Yap only are ordered to pay jointly and severally the plaintiff the amount of P3,000.00 as moral damages; the amount of P2,000.00 as exemplary damages and the sum of P2,000.00 as attorney's fees." (Rollo, p. 22-A).

On May 11, 1988, the Regional Trial Court of Manila, Branch 44 affirmed the aforesaid decision of the Metropolitan Trial Court and on April 21, 1989, the Court of Appeals dismissed the petition for review of petitioners and affirmed the decision of the Regional Trial Court, Branch 44. Hence, this petition was filed raising the following assignment of errors:
"2.1.The Hon. Court of Appeals erred in ruling that the lower courts were correct in their decision that the petitioners must vacate the premises and turn over the possession thereof to the private respondent despite the fact that the private respondent had already failed and refused to pay for the rentals thereof, thus, did not have any right thereto, and the petitioners had a valid lease agreement thereof with the owner of the premises; "2.2.The Hon. Court of Appeals erred in ruling that the owner of the premises must be forced to release the premises to the private respondent even if there is already a valid and existing contract

with the petitioners and the refusal of the owner to lease the same to the private respondent due to the latter's failure to pay the rentals therefor; "2.3.The Hon. Court of Appeals erred in ruling that the possession by the petitioners of the premises located at 1118 Pres. Quirino Avenue was dependent upon the sale of the goodwill of the Malate Veterinary Clinic by the private respondent to the petitioners."(pp. 74-75, Rollo).

There is no dispute that the petitioners gained access to the leased premises in question by virtue of the offer of the private respondent to sell the goodwill over his veterinary clinic to them. By one reason or another, i.e., the alleged increase in the asking price for the goodwill from P12,000.00 to P15,000.00 and the alleged failure of private respondent to secure the necessary permits and licenses from the government authorities, the negotiations bogged down. What then happens to the leasehold rights of private respondent over the premises in question which he had already transferred to petitioners? Private respondent claims that in view of the failure of negotiations, the petitioners should have returned the leased premises to him but instead of so doing, they entered into a lease contract with the landlord thereby ousting him therefrom through strategy or stealth. On the other hand, the bone of contention of petitioners is that the lease between private respondent and the landlord was automatically terminated because while the negotiations for the sale of the goodwill was still on-going, the private respondent stopped paying the rentals for the leased premises which was already on a month-to-month basis as the formal lease had long expired. They claim that they were informed of the same and given the option by the landlord to either vacate the premises or enter into a new lease agreement with him and to pay an increased rental of P1,800.00 for the premises beginning the month of August, 1985. As such, their possession of the premises has absolutely nothing to do with the proposed sale of the goodwill by private respondent. Thus, they claim that the decision of the lower courts is contrary to law inasmuch as it had equated the sale of the goodwill with the possession of the premises occupied by the petitioners. Correctly, the petitioners claim a right to the premises in question apart from the proposed sale of the goodwill. Precisely, private respondent's action for forcible entry and damages recognizes such fact because he predicates his cause of action on the deprivation of his possession by virtue of the new lease contract executed by the petitioners with the landlord. Whether this contract is valid is the question to be resolved here. We rule in favor of private respondent. When the petitioners and the landlord executed a new contract of lease, the lease of private respondent was still valid and subsisting. There is no question that private respondent has not effectively relinquished his leasehold rights over the premises in question in view of the failure of negotiations for the sale of the goodwill. Clearly, the transfer of the leasehold rights is conditional in nature and has no force and effect if the condition is not complied with.
LLjur

True, the lease of private respondent is on a month-to-month basis and may be terminated at the end of any month after proper notice or demand to vacate has been given (Rivera v. Florendo, G.R. No. 6006, July 31, 1986, 143 SCRA 278; Zablan v. CA, G.R. No. 57844, September 30, 1987, 154 SCRA 487; Uy Hoo and Sons Realty Development Corp. v. CA, G.R. No. 83263, June 14, 1989, 174 SCRA, 100; Palanca v. IAC, G.R. No. 71566, December 15, 1989, 180 SCRA 119). In the case at bar, however, the lack of proper notice or demand to vacate upon the private respondent is clearly evident. In the absence of such notice, the lease of private respondent continues to be in force and can not be deemed to have expired as of the end of the month automatically. Neither can the non-payment of the rent for the month of August, 1985 be a ground for termination of the lease without a demand to pay and to vacate. The instant case can easily be differentiated from the case of Vda. de Kraut v. Lontok, G.R. No. L-18374, February 27, 1963, 7 SCRA 281, which was cited by petitioners in support of their contention that a lease on a month-to-month basis may

be terminated at the end of any month and shall be deemed terminated upon the lessee's refusal to pay the increased rental because here there was neither demand on the part of the landlord to pay the rental nor refusal on the part of the private respondent to pay the same as in fact be made a tender of his rental payment in the latter part of August, 1985. Thus, when the landlord and the petitioners entered into a new contract of lease effectively depriving the private respondent of his lease, they were clearly guilty of forcible entry in view of the subsisting lease of private respondent. ACCORDINGLY, the petition is hereby DENIED and the questioned decision of the Court of Appeals is AFFIRMED. SO ORDERED.

Narvasa, C .J ., Cruz, Grio-Aquino and Bellosillo, JJ ., concur.

[G.R. No. 62603. March 27, 1990.] UNITED REALTY CORPORATION, petitioner, vs. HON. COURT OF APPEALS and REVEREND FATHER JOSE TORRALBA SY, respondents. SYLLABUS 1.CIVIL LAW; CONTRACTS; LEASE ON A MONTH TO MONTH BASIS; CONSIDERED WITH A DEFINITE PERIOD. A reading of the two contracts of lease entered into between petitioner and private respondent hereinabove reproduced show that its period is from month to month and that the lease may be terminated when either party gives a 5 days notice in writing. No doubt such a stipulation between the parties demonstrates that the agreement of lease is for a definite period and not for an indefinite period as held by the appellate court. 2.ID.; ID.; ID.; EXPIRATION THEREOF. In Rantael vs. CA, (97 SCRA 453 [1980]) involving a similar contract of lease between the parties this Court found that a lease on a month to month basis expires after the last day of the 30th day period repeating the same cycle of the 30-day period until either party express their prerogative under their agreement to terminate the same. 3.ID.; ID.; LEASE WITH A DEFINITE PERIOD; LESSEE HAS THE RIGHT TO JUDICIALLY EJECT LESSOR UPON EXPIRATION OF THE PERIOD. Since the lease agreement in question is for a definite period it follows that petitioner has a right to judicially eject private respondent from the premises as an exception to the general rule provided for in Section 4 of P.D. No. 20 which provides as follows: "Except when the lease is for a definite period, the provisions of paragraph (1) of Article 1673 of the Civil Code of the Philippines insofar as they refer to dwelling unit or land on which another's dwelling is located shall be suspended until otherwise provided; but other provisions of the Civil Code and the Rules of Court of the Philippines on lease contracts insofar as they are not in conflict with the provisions of this Act, shall apply." Moreover, under Section 5(f) of B.P. Blg. 25 one of the grounds for ejectment is the expiration of the period of a written lease contract. In this case, because of the failure of the private respondent to pay the increased rental demanded by petitioner, petitioner elected to terminate the contract and asked the private respondent to vacate the premises. A lease contract may be terminated at the end of any month, which shall be deemed terminated upon the refusal to pay the increased monthly rental demanded by the petitioner, provided the same is not exorbitant.

4.ID.; ID.; ID.; PRESIDENTIAL DECREE NO. 20 AND PRESIDENTIAL DECREE NO. 25 COVERS DWELLING UNITS ONLY. There is no question in this case that the two apartments subject of litigation if not a greater portion thereof is not used by private respondent as his residence but for a Buddhist Temple. Thus, it is with more reason that this lease agreement does not fall within the protective mantle of the provision of P.D. No. 20 and B.P. No. 25 which covers only dwelling units. 5.ID.; ID.; ID.; DEATH OF LESSEE TERMINATES LEASE AGREEMENT. Considering that during the pendency of this appeal, the private respondent died on August 23, 1987, thus the said lease agreements were effectively terminated by the death of private respondent who is the lessee of the premises in question.

DECISION

GANCAYCO, J :
p

Whether the contract of lease is for a definite or indefinite period of time and the applicability of the provisions of Presidential Decree No. 20 and Batas Pambansa Bilang 25 are the issues in this case. The facts are undisputed. In March 1964 and December 1964 petitioner and private respondent Rev. Father Jose Torralba Sy, entered into separate contracts of lease over two apartments located at 913-E and 913-F Josefina Street, Sampaloc, Manila, with the common provision covering its duration as follows:
cdll

"To hold the same for one month from the (15th day of March, 1964 for Apt. No. 913 -E and 1st day of January, 1965 for Apt. No. 913-F) and so on from month to month at a rent of TWO HUNDRED PESOS (P200.00), Philippine Currency, per month, payable in advance on the first TEN (10) days of each calendar month, until the lease shall terminate, which termination shall be determined by either party giving FIVE (5) days notice in writing." 1

It was further stipulated in the two contracts that "in case the lessee shall continuously withhold possession of the apartments after he or she has been properly notified of the termination of his or her right to occupy the same, the lessor shall be entitled to collect P400.00 every month or fraction thereof, as reasonable compensation for the use of the place and as damages." Private respondent removed the portion separating the two apartments and converted the same principally for use as a Buddhist chapel. On August 1, 1970, petitioner leased to private respondent the apartment at 937-E Josefina Street, Sampaloc, Manila, effective August 1, 1970 for the monthly rental of P300.00, 2 payable in advance within the first ten (10) days of the month for his use as residence only. It was also stipulated in said contract that "in case the lessee shall continuously withhold possession of the apartments after he/she has been notified of the termination of his/her right to occupy the same, the lessor shall be entitled to collect P500.00 every month or fraction thereof, as reasonable compensation for the use of the place and as damages." On September 24, 1975, petitioner sent a letter to private respondent that effective November 1, 1975 the new rental for the two apartments will be P500.00 per door or P1,000.00 for the two doors, likewise payable in advance within the first ten (10) days of the calendar month, with the request that petitioner be informed of private respondent's decision as to the new rate not later than October 25, 1975 so that it may

be guided accordingly. 3 Instead private respondent complained to the Department of Public Information, Malacaang, Manila. In the confrontation between the parties, the Presidential Complaint and Action Committee found that there was no violation of P.D. No. 20 as the subject premises are being used principally as a Buddhist Temple and therefore are not covered. Private respondent then sent a lettercomplaint thru counsel dated November 13, 1975 to then Asst. Executive Secretary Ronaldo E. Zamora who in response issued Opinion No. 480, Series of 1975 dated November 20, 1975 signed by Deputy Executive Secretary Roberto V. Reyes. 4 Therein it was held that the increase in rental demanded was in violation of P.D. No. 20 and that as 1/4 of the two-door apartments is being used likewise as a chapel incidental to the calling of the private respondent as a monk it cannot be called as a commercial or public establishment or as a place for the exercise of one's profession because the same is not for profit.
cdll

However, on November 16, 1976, in response to the letter of petitioner, Secretary Ronaldo E. Zamora, as Presidential Assistant for Legal Affairs, issued Opinion No. 629, Series of 1976, as follows:
"While it may be conceded arguendo that for being used as a place for worship, the premises may not necessarily be considered as commercial for purposes of ruling out the applicability of Presidential Decree No. 20 dated October 12, 1972, which freezes rates of rentals of dwelling unit at their present levels when the same do not exceed P300.00 per month, it is equally true that the same will, as it does, not fall within the protective mantle of the decree. "It is to be noted that the decreed prohibition against rental increase applies only to dwelling units or lots used for residential purposes, the monthly rent of which does not exceed P300.00. On this point Republic Act No. 6359 defines 'dwelling unit' as follows:

'A dwelling unit refers to a house and lot used for residential purposes and shall include not only buildings, dwelling places, except motels, hotels, or hotel rooms; but also those used for home industries or retail store if the owner thereof and his family actually live therein and use it principally for residential purpose; Provided, That in case of a retail store the capital thereof does not exceed five thousand pesos.' (Emphasis supplied.)
"Thus, if the leased apartment units are used principally for purposes of religious worship, the incidental fact that Father Sy and/or his family live therein will not include them in that class of tenants favored by the emergency law on housing (Morales vs. Zamora, 31 Phil. 204). In such case, the matter of regulating the monthly rentals become conventional between him and the URC. This should not be understood to mean, however, that the latter is free to demand an arbitrary amount. Equity and justice require that both parties observe reasonable terms and conditions in bringing about a mutual covenant. "Under the circumstances, therefore, this Office, on equitable considerations and for reasons of public policy, believes that rental increases should be raised to reasonable levels only." 5

On January 3, 1977, petitioner through counsel furnished private respondent through counsel a xerox copy of said Opinion No. 629, Series of 1976 and demanded that the private respondent vacate and surrender the two premises within five (5) days from receipt of the same and to pay his rental indebtedness minus the deposit made. Nevertheless, private respondent failed to vacate the premises.
LexLib

Hence, petitioner filed a complaint for unlawful detainer in the City Court of Manila on March 7, 1977. After the issues were joined and the trial on the merits, a decision was rendered on February 16, 1981 dismissing the complaint and counterclaim without pronouncement as to costs. Both parties asked for a reconsideration of the decision but the same was denied. Hence, both parties appealed to the Court of First Instance of Manila, wherein in due course a decision was rendered on December 28, 1981 affirming the judgment of the City Court with the modification finding private respondent entitled to moral damages in the amount of P4,000.00, exemplary damages in the amount of P2,000.00 and attorney's fees of P2,000.00

and the costs of the suit. A motion for reconsideration filed by petitioner was denied by the trial court in an order of February 25, 1982.

Hence, a petition for review was filed by petitioner with the Court of Appeals, wherein after the issues were joined, a decision was rendered on October 7, 1982 dismissing the petition with costs against petitioner. 6 A motion for reconsideration filed by petitioner of the decision was denied in a resolution of November 17, 1982. Thus, this petition. A reading of the two contracts of lease entered into between petitioner and private respondent hereinabove reproduced show that its period is from month to month and that the lease may be terminated when either party gives a 5 days notice in writing. No doubt such a stipulation between the parties demonstrates that the agreement of lease is for a definite period and not for an indefinite period as held by the appellate court. In Rantael vs. CA, 7 involving a similar contract of lease between the parties this Court found that a lease on a month to month basis expires after the last day of the 30th day period repeating the same cycle of the 30-day period until either party express their prerogative under their agreement to terminate the same.
llcd

The only difference between Rantael and the present case is that in the former the parties may terminate the agreement upon 30 days notice while in this case, the agreement is that the termination by either party may be upon 5 days notice. Such difference is of no moment. And such agreement is binding and is the law between the parties. Since the lease agreement in question is for a definite period it follows that petitioner has a right to judicially eject private respondent from the premises as an exception to the general rule provided for in Section 4 of P.D. No. 20 which provides as follows:
"Except when the lease is for a definite period, the provisions of paragraph (1) of Article 1673 of the Civil Code of the Philippines insofar as they refer to dwelling unit or land on which another's dwelling is located shall be suspended until otherwise provided; but other provisions of the Civil Code and the Rules of Court of the Philippines on lease contracts insofar as they are not in conflict with the provisions of this Act, shall apply." (Emphasis supplied.)

Moreover, under Section 5(f) of B.P. Blg. 25 one of the grounds for ejectment is the expiration of the period of a written lease contract. In this case, because of the failure of the private respondent to pay the increased rental demanded by petitioner, petitioner elected to terminate the contract and asked the private respondent to vacate the premises. A lease contract may be terminated at the end of any month, which shall be deemed terminated upon the refusal to pay the increased monthly rental demanded by the petitioner, provided the same is not exorbitant. 8 Further, there is no question in this case that the two apartments subject of litigation if not a greater portion thereof is not used by private respondent as his residence but for a Buddhist Temple. Thus, it is with more reason that this lease agreement does not fall within the protective mantle of the provision of P.D. No. 20 and B.P. No. 25 which covers only dwelling units.
LLpr

Lastly, considering that during the pendency of this appeal, the private respondent died on August 23, 1987, thus the said lease agreements were effectively terminated by the death of private respondent who is the lessee of the premises in question. WHEREFORE, the petition is GRANTED. The decision of the Court of Appeals dated October 7, 1982 and its Resolution dated November 17, 1982 are hereby reversed and set aside and another judgment is hereby rendered ordering private respondent and/or his heirs or successors-in-interest to immediately vacate the premises of the property in question and to pay the unpaid rentals thereof of P1,000.00 a month for the two apartments until they vacate the premises, with costs against private respondent. SO ORDERED.

Narvasa, Cruz and Medialdea, JJ., concur. Grio-Aquino, J., took no part as I signed the CA decision.

[G.R. No. 117423. January 24, 1996.] LEGAR MANAGEMENT & REALTY CORPORATION, petitioner, vs. COURT OF APPEALS, HON. JUAN O. ENRIQUEZ, JR., FELIPE PASCUAL, and DIONISIO ANCHETA, respondents.

Virgilio C. Manguera and Benito P. Fabie for petitioner. Antonio C. Ravelo for private respondents.
SYLLABUS 1.CIVIL LAW; SPECIAL CONTRACTS; LEASE; RESIDENTIAL PROPERTY COVERED BY THE RENT CONTROL LAW AND WHERE RENTALS ARE PAID MONTHLY, EJECTMENT IS PROPER UPON EXPIRATION ON THE LAST DAY OF ANY GIVEN 30-DAY PERIOD UPON PROPER DEMAND AND NOTICE. The issue is whether the lessee of a residential property covered by the Rent Control Law can be ejected on the basis alone of the expiration of the verbal lease contract under which rentals are paid monthly. We resolved this issue in the affirmative in the case of Acab vs. Court of Appeals, G.R. No. 112285, February 21, 1995. Section 6 of Batas Pambansa Blg. 877, which is exactly the same as Section 6 of Batas Pambansa Blg. 25 does not suspend the effects of Article 1687 of the New Civil Code. Thus, lease agreements with no specified period, but in which rentals are paid monthly, are considered to be on a month-to- month basis. . . . They are for a definite period and expire after the last day of any given thirty-day period, upon proper demand and notice by the lessor to vacate. . . . Where the verbal lease agreement entered into has been validly terminated, there is sufficient cause for ejectment under Section 5(f) of Batas Pambansa Blg. 877.
cdasia

DECISION

PUNO, J :
p

This is an appeal from the Decision, dated July 6, 1994, of the Court of Appeals, 1 affirming the reversal by the Regional Trial Court of Quezon City, Branch 92, of the Decision 2 of the Metropolitan Trial Court of Quezon City, Branch 31, the dispositive portion of which reads, as follows:
"In view of the foregoing, this Court finds the plaintiff's (herein petitioner's) claim to have been duly established against defendants (herein private respondents) Felipe Pascual and Dionisio Ancheta, and therefore renders judgment against (them), ordering said defendants (private respondents), as follows: 1.Ordering the defendants (private respondents) and all persons claiming rights under them to vacate the premises at No. 318-T E. Rodriguez, Sr. Blvd., Quezon City and surrender possession thereof to plaintiff (petitioner); 2.Ordering the defendants (private respondents) to pay the sum of TWO THOUSAND PESOS (P2,000.00) as and for, attorney's fees; and 3.Ordering the defendants (private respondents) to pay the costs of suit. "SO ORDERED."
3

The facts are undisputed. Spouses Augusto and Celia Legasto owned an apartment building located along E. Rodriguez, Sr. Boulevard in Quezon City. They entered into a written contract of lease with no definite period with private respondents Pascual and Ancheta, covering unit 318-T of the building. Sometime in 1987, the Legasto spouses and their children organized petitioner Legar Management & Realty Corporation, and transferred and assigned thereto all their rights, interests, and privileges over certain properties, including the subject apartment building. Thereafter, petitioner allowed private respondents to continue occupying their apartment unit by virtue of a verbal contract of lease which was renewable on a month-to-month basis. Pursuant to their verbal lease agreement, private respondents were to pay petitioner a monthly rental of One Thousand Five Hundred Forty-Five Pesos (P1,545.00). On April 21, 1992, petitioner wrote private respondent Pascual a formal notice of termination, requesting him to vacate unit 318-T by the end of May, 1992. A similar formal notice was sent to private respondent Ancheta on June 4, 1992, demanding vacation of the same unit by the end of June, 1992. Both refused to heed petitioner's demand and did not vacate the subject premises. Petitioner instituted an ejectment case against private respondents with the Metropolitan Trial Court of Quezon City. The case was docketed as Civil Case No. 6011, and raffled to Branch 31 of the court. 4 At the end of trial, the MTC found for petitioner and held that the verbal lease contract between the parties, being on a month-to-month basis, is for a definite period, and may be terminated at the end of any month. On appeal, the Regional Trial Court of Quezon City, Branch 92, 5 reversed the MTC Decision, holding that "the mere expiration of the month-to-month lease period in accordance with Article 1687 of the New Civil Code does not automatically give rise to an ejectment in cases governed by the Rent Control Law, in view of Section 6 of Batas Pambansa Blg. 877, as amended. There is need for existence of other grounds enumerated under Section 5 of B.P. Blg. 877, as amended, in order to eject a lessee." The RTC Decision was upheld by the Court of Appeals which ruled, inter alia, that:

"As held in Rivera vs. Florendo . . . , reiterated in Miranda vs. Ortiz . . ., independently of the grounds for ejectment enumerated in Batas Pambansa Blg. 25 (now Batas Pambansa Blg. 877, extended by Republic Act Nos. 6643 and 6828), the owner/lessor cannot eject the tenant by reason of the expiration of the period of lease as fixed or determined under Article 1687 of the Civil Code. Even if in the instant case the month-to-month period is deemed to have expired at the end of the month after notice of demand to vacate . . . , (private) respondents' eviction cannot be allowed without regard to the grounds for ejectment enumerated in Section 5 of Batas Pambansa Blg. 877." (Citation omitted.)

Petitioner now impugns the Decision of the Court of Appeals as against existing law and jurisprudence. The petition is meritorious. The issue is whether the lessee of a residential property covered by the Rent Control Law can be ejected on the basis alone of the expiration of the verbal lease contract under which rentals are paid monthly. We resolved this issue in the affirmative in the case of Acab vs. Court of Appeals, G.R. No. 112285, February 21, 1995, 241 SCRA 546. We held:
"Section 6 of Batas Pambansa Blg. 877, which is exactly the same as Section 6 of Batas Pambansa Blg. 25, provides that: 'Sec. 6:Application of the Civil Code and Rules of Court of the Philippines . Except when the lease is for a definite period, the provisions of paragraph (1) of Article 1673 of the Civil Code of the Philippines, insofar as they refer to residential units covered by this Act, shall be suspended during the effectivity of this Act, but other provisions of the Civil Code and the Rules of Court on lease contracts, insofar as they are not in conflict with the provisions of the Act shall apply.' In a long line of cases, . . . beginning with Rivera v. Florendo, 143 SCRA 278 (1986), this Court has held that said provision does not suspend the effects ofArticle 1687 of the New Civil Code which provides as follows: 'Art. 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 it 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. If the rent is weekly, the courts may likewise determine a longer period after the lessee has been in possession for over six months. In case of daily rent, the courts may fix a longer period after the lessee has stayed in the place for over one month.' Thus, we have held that lease agreements with no specified period, but in which rentals are paid monthly, are considered to be on a month-to-month basis. . . . They are for a definite period and expire after the last day of any given thirty-day period, upon proper demand and notice by the lessor to vacate. . . . "In the case at bench, it was found by all three lower courts that the lease over the subject property was on a month-to-month basis, and that there was proper notice of non-renewal of contract and demand for vacation of premises made by petitioners on private respondent. Unquestionably, therefore, the verbal lease agreement entered into by private respondent and petitioners' father and predecessor-in-interest has been validly terminated, in which case there is sufficient cause for ejectment under Section 5(f) of Batas Pambansa Blg. 877 which reads: 'Section 5:Grounds for Judicial Ejectment. Ejectment shall be allowed on the following grounds:

'xxx xxx xxx (f)Expiration of the period of the lease contract.' This is in line with Our holding in the case of Palanca v. Intermediate Appellate Court, 180 SCRA 119 (1989), that: 'In the recently decided case of Uy Hoo and Sons Realty Development Corporation v. Court of Appeals and Thomas Kuan , . . ., 7 this Court ruled that a month-to-month lease under Article 1687 is a lease with a definite period, the expiration of which upon previous demand by the lessor to vacate, can justify ejectment. "The Court noted that notwithstanding the fact that the Miranda 8 case and the Rivera 9 case quoted therein involved a need for the lessor to re-possess the leased premises for his own use, (which fact is not present in this case), the Court applied the ruling therein on the ground that: '. . . the thrust of the decision in said cases appears to be that 'the determination of the period of a lease agreement can still be made in accordance with said Article 1687, and that in a month to month lease situation, when petitioners (lessor) gave private respondent (lessee) notice to vacate the premises in question, the contract of lease is deemed to have expired as of the end of the month.' "

IN VIEW WHEREOF, the petition is GRANTED. The Decisions of the Court of Appeals in CA-G.R. SP No. 32152, dated July 6, 1994, and of the Regional Trial Court of Quezon City, Branch 92 in Civil Case No. Q-9315330, dated August 26, 1993, are REVERSED AND SET ASIDE. The Decision, dated February 2, 1993, of the Metropolitan Trial Court of Quezon City, Branch 31, is REINSTATED. No costs.

SO ORDERED.

Regalado, Romero and Mendoza, JJ., concur.