Republic of the Philippines

SUPREME COURT
Manila

Private respondent filed a certiorari petition praying for the issuance of a restraining order enjoining the enforcement of said
judgment and dismissal of the case for lack of jurisdiction of the City Court.
On September 26, 1984, the then Intermidiate Appellate Court 3 (now Court of Appeals) rendered a decision 4 stating that:

FIRST DIVISION

G.R. No. 122544 January 28, 1999

REGINA P. DIZON, AMPARO D. BARTOLOME, FIDELINA D. BLAZA, ESTER ABAD DIZON and JOSEPH ANTHONY
DIZON, RAYMUND A. DIZON, GERARD A. DIZON, and JOSE A. DIZON, JR., petitioners,
vs.
COURT OF APPEALS and OVERLAND EXPRESS LINES, INC., respondents.
G.R. No. 124741 January 28, 1999
REGINA P. DIZON, AMPARO D. BARTOLOME, FIDELINA D. BALZA, ESTER ABAD DIZON and JOSEPH ANTHONY
DIZON, RAYMUND A. DIZON, GERARD A. DIZON, and Jose A. DIZON, JR., petitioners,
vs.
COURT OF APPEALS, HON. MAXIMIANO C. ASUNCION, and OVERLAND EXPRESS LINES, INC.,respondents.

MARTINEZ, J.:
Two consolidated petitions were filed before us seeking to set aside and annul the decisions and resolutions of respondent
Court of Appeals. What seemed to be a simple ejectment suit was juxtaposed with procedural intricacies which finally found
its way to this Court.
G.R. No. 122544:
On May 23, 1974, private respondent Overland Express Lines, Inc. (lessee) entered into a Contract of Lease with Option to
Buy with petitioners 1 (lessors) involving a 1,755.80 square meter parcel of land situated at corner MacArthur Highway and
South "H" Street, Diliman, Quezon City. The term of the lease was for one (1) year commencing from May 16, 1974 up to
May 15, 1975. During this period, private respondent was granted an option to purchase for the amount of P3,000.00 per
square meter. Thereafter, the lease shall be on a per month basis with a monthly rental of P3,000.00.
For failure of private respondent to pay the increased rental of P8,000.00 per month effective June 1976, petitioners filed an
action for ejectment (Civil Case No. VIII-29155) on November 10, 1976 before the then City Court (now Metropolitan Trial
Court) of Quezon City, Branch VIII. On November 22, 1982, the City Court rendered judgment 2 ordering private respondent
to vacate the leased premises and to pay the sum of P624,000.00 representing rentals in arrears and/or as damages in the
form of reasonable compensation for the use and occupation of the premises during the period of illegal detainer from June
1976 to November 1982 at the monthly rental of P8,000.00, less payments made, plus 12% interest per annum from
November 18, 1976, the date of filing of the complaint, until fully paid, the sum of P8,000.00 a month starting December
1982, until private respondent fully vacates the premises, and to pay P20,000.00 as and by way of attorney's fees.

. . ., the alleged question of whether petitioner was granted an extension of the option to buy the
property; whether such option, if any, extended the lease or whether petitioner actually paid the alleged
P300,000.00 to Fidela Dizon, as representative of private respondents in consideration of the option
and, whether petitioner thereafter offered to pay the balance of the supposed purchase price, are all
merely incidental and do not remove the unlawful detainer case from the jurisdiction or respondent court.
In consonance with the ruling in the case of Teodoro, Jr. vs. Mirasol (supra), the above matters may be
raised and decided in the unlawful detainer suit as, to rule otherwise, would be a violation of the principle
prohibiting multiplicity of suits. (Original Records, pp. 38-39).
The motion for reconsideration was denied. On review, this Court dismissed the petition in a resolution dated June 19, 1985
and likewise denied private respondent's subsequent motion for reconsideration in a resolution dated September 9, 1985. 5
On October 7, 1985, private respondent filed before the Regional Trial Court (RTC) of Quezon City (Civil Case No. Q-45541)
an action for Specific Performance and Fixing of Period for Obligation with prayer for the issuance of a restraining order
pending hearing on the prayer for a writ of preliminary injunction. It sought to compel the execution of a deed of sale
pursuant to the option to purchase and the receipt of the partial payment, and to fix the period to pay the balance. In an
Order dated October 25, 1985, the trial court denied the issuance of a writ of preliminary injunction on the ground that the
decision of the then City Court for the ejectment of the private respondent, having been affirmed by the then Intermediate
Appellate Court and the Supreme Court, has become final and executory.
Unable to secure an injunction, private respondent also filed before the RTC of Quezon City, Branch 102 (Civil Case No. Q46487) on November 15, 1985 a complaint for Annulment of and Relief from Judgment with injunction and damages. In its
decision 6 dated May 12, 1986, the trial court dismissed the complaint for annulment on the ground of res judicata, and the
writ of preliminary injunction previously issued was dissolved. It also ordered private respondent to pay P3,000.00 as
attorney's fees. As a consequence of private respondent's motion for reconsideration, the preliminary injunction was
reinstated, thereby restraining the execution of the City Court's judgment on the ejectment case.
The two cases were the after consolidated before the RTC of Quezon City, Branch 77. On April 28, 1989, a decision 7 was
rendered dismissing private respondent's complaint in Civil Case No. Q-45541 (specific performance case) and denying its
motion for reconsideration in Civil Case No. 46487 (annulment of the ejectment case). The motion for reconsideration of said
decision was likewise denied.
On appeal, 8 respondent Court of Appeals rendered a decision 9 upholding the jurisdiction of the City Court of Quezon City in
the ejectment case. It also concluded that there was a perfected contract of sale between the parties on the leased premises
and that pursuant to the option to buy agreement, private respondent had acquired the rights of a vendee in a contract of
sale. It opined that the payment by private respondent of P300,000.00 on June 20, 1975 as partial payment for the leased
property, which petitioners accepted (through Alice A. Dizon) and for which an official receipt was issued, was the operative
act that gave rise to a perfected contract of sale, and that for failure of petitioners to deny receipt thereof, private respondent
can therefore assume that Alice A. Dizon, acting as agent of petitioners, was authorized by them to receive the money in
their behalf. The Court of Appeals went further by stating that in fact, what was entered into was a "conditional contract of
sale" wherein ownership over the leased property shall not pass to the private respondent until it has fully paid the purchase
price. Since private respondent did not consign to the court the balance of the purchase price and continued to occupy the

subject premises, it had the obligation to pay the amount of P1,700.00 in monthly rentals until full payment of the purchase
price. The dispositive portion of said decision reads:
WHEREFORE, the appealed decision in Case No. 46387 is AFFIRMED. The appealed decision in Case
No. 45541 is, on the other hand, ANNULLED and SET ASIDE. The defendants-appellees are ordered to
execute the deed of absolute sale of the property in question, free from any lien or encumbrance
whatsoever, in favor of the plaintiff-appellant, and to deliver to the latter the said deed of sale, as well as
the owner's duplicate of the certificate of title to said property upon payment of the balance of the
purchase price by the plaintiff-appellant. The plaintiff-appellant is ordered to pay P1,700.00 per month
from June 1976, plus 6% interest per annum, until payment of the balance of the purchase price, as
previously agreed upon by the parties.
SO ORDERED.
Upon denial of the motion for partil reconsideration (Civil Case No. Q-45541) by respondent Court of Appeals, 10petitioners
elevated the case via petition for certiorari questioning the authority of Alice A. Dizon as agent of petitioners in receiving
private respondent's partial payment amounting to P300,000.00 pursuant to the Contract of Lease with Option to Buy.
Petitioner also assail the propriety of private respondent's exercise of the option when it tendered the said amount on June
20, 1975 which purportedly resulted in a perfected contract of sale.
G.R. No. 124741:
Petitioners filed with respondent Court of Appeals a motion to remand the records of Civil Case No. 38-29155 (ejectment
case) to the Metropolitan Trial Court (MTC), then City Court of Quezon City, Branch 38, for execution of the
judgment 11 dated November 22, 1982 which was granted in a resolution dated June 29, 1992. Private respondent filed a
motion to reconsider said resolution which was denied.
Aggrieved, private respondent filed a petition for certiorari, prohibition with preliminary injunction and/or restraining order with
this Court (G.R. Nos. 106750-51) which was dismissed in a resolution dated September 16, 1992 on the ground that the
same was a refiled case previously dismissed for lack of merit. On November 26, 1992, entry of judgment was issued by this
Court.

Assailing the aforequoted order after denial of their motion for partial reconsideration, petitioners filed a
petition 13for certiorari and prohibition with a prayer for a temporary restraining order and/or preliminary injunction with the
Court of Appeals. In its decision, 14 the Court of Appeals dismissed the petition and ruled that:
The avowed purpose of this petition is to enjoin the public respondent from restraining the ejectment of
the private respondent. To grant the petition would be to allow the ejectment of the private respondent.
We cannot do that now in view of the decision of this Court in CA-G.R. CV Nos. 25153-54. Petitioners'
alleged right to eject private respondent has been demonstrated to be without basis in the said civil
case. The petitioners have been shown, after all, to have no right to eject private respondents.
WHEREFORE, the petition is DENIED due course and is accordingly DISMISSED.
SO ORDERED. 15
Petitioners' motion for reconsideration was denied in a resolution

16

by the Court of Appeals stating that:

This court in its decision in CA-G.R. CV Nos. 25153-54 declared that the plaintiff-appellant (private
respondent herein) acquired the rights of a vendee in a contract of sale, in effect, recognizing the right of
the private respondent to possess the subject premises. Considering said decision, we should not allow
ejectment; to do so would disturb the status quo of the parties since the petitioners are not in possession
of the subject property. It would be unfair and unjust to deprive the private respondent of its possession
of the subject property after its rights have been established in a subsequent ruling.
WHEREFORE, the motion for reconsideration is DENIED for lack of merit.
SO ORDERED. 17
Hence, this instant petition.
We find both petitions impressed with merit.

On July 14, 1993, petitioners filed an urgent ex-parte motion for execution of the decision in Civil Case No. 38-29155 with the
MTC of Quezon City, Branch 38. On September 13, 1993, the trial court ordered the issuance of a third alias writ of
execution. In denying private respondent's motion for reconsideration, it ordered the immediate implementation of the third
writ of execution without delay.

First. Petitioners have established a right to evict private respondent from the subject premises for non-payment of rentals.
The term of the Contract of Lease with Option to Buy was for a period of one (1) year (May 16, 1974 to May 15, 1975) during
which the private respondent was given an option to purchase said property at P3,000.00 square meter. After the expiration
thereof, the lease was for P3,000.00 per month.

On December 22, 1993, private respondent filed with the Regional Trial Court (RTC) of Quezon City, Branch 104 a petition
for certiorari and prohibition with preliminary injunction/restraining order (SP. PROC. No. 93-18722) challenging the
enforceability and validity of the MTC judgment as well as the order for its execution.

Admittedly, no definite period beyond the one-year term of lease was agreed upon by petitioners and private respondent.
However, since the rent was paid on a monthly basis, the period of lease is considered to be from month to month in
accordance with Article 1687 of the New Civil Code. 18 Where the rentals are paid monthly, the lease, even if verbal may be
deemed to be on a monthly basis, expiring at the end of every month pursuant to Article 1687, in relation to Article 1673 of
the Civil Code. 19 In such case, a demand to vacate is not even necessary for judicial action after the expiration of every
month. 20

On January 11, 1994, RTC of Quezon City, Branch 104 issued an

order 12 granting the issuance of a writ of preliminary injunction upon private respondent's' posting of an injunction bond of
P50,000.00.

When private respondent failed to pay the increased rental of P8,000.00 per month in June 1976, the petitioners had a cause
of action to institute an ejectment suit against the former with the then City Court. In this regard, the City Court (now MTC)
had exclusive jurisdiction over the ejectment suit. The filing by private respondent of a suit with the Regional Trial Court for

specific performance to enforce the option to purchase did not divest the then City Court of its jurisdiction to take cognizance
over the ejectment case. Of note is the fact that the decision of the City Court was affirmed by both the Intermediate
Appellate Court and this Court.
Second. Having failed to exercise the option within the stipulated one-year period, private respondent cannot enforce its
option to purchase anymore. Moreover, even assuming arguendo that the right to exercise the option still subsists at the time
private respondent tendered the amount on June 20, 1975, the suit for specific performance to enforce the option to
purchase was filed only on October 7, 1985 or more than ten (10) years after accrual of the cause of action as provided
under Article 1144 of the New Civil Code. 21
In this case, there was a contract of lease for one (1) year with option to purchase. The contract of lease expired without the
private respondent, as lessee, purchasing the property but remained in possession thereof. Hence, there was an implicit
renewal of the contract of lease on a monthly basis. The other terms of the original contract of lease which are revived in the
implied new lease under Article 1670 of the New Civil Code 22 are only those terms which are germane to the lessee's right of
continued enjoyment of the property leased. 23 Therefore, an implied new lease does not ipso facto carry with it any implied
revival of private respondent's option to purchase (as lessee thereof) the leased premises. The provision entitling the lessee
the option to purchase the leased premises is not deemed incorporated in the impliedly renewed contract because it is alien
to the possession of the lessee. Private respondent's right to exercise the option to purchase expired with the termination of
the original contract of lease for one year. The rationale of this Court is that:
This is a reasonable construction of the provision, which is based on the presumption that when the
lessor allows the lessee to continue enjoying possession of the property for fifteen days after the
expiration of the contract he is willing that such enjoyment shall be for the entire period corresponding to
the rent which is customarily paid in this case up to the end of the month because the rent was paid
monthly. Necessarily, if the presumed will of the parties refers to the enjoyment of possession the
presumption covers the other terms of the contract related to such possession, such as the amount of
rental, the date when it must be paid, the care of the property, the responsibility for repairs, etc. But no
such presumption may be indulged in with respect to special agreements which by nature are foreign to
the right of occupancy or enjoyment inherent in a contract of lease. 24
Third. There was no perfected contract of sale between petitioners and private respondent. Private respondent argued that it
delivered the check of P300,000.00 to Alice A. Dizon who acted as agent of petitioners pursuant to the supposed authority
given by petitioner Fidela Dizon, the payee thereof. Private respondent further contended that petitioners' filing of the
ejectment case against it based on the contract of lease with option to buy holds petitioners in estoppel to question the
authority of petitioner Fidela Dizon. It insisted that the payment of P300,000.00 as partial payment of the purchase price
constituted a valid exercise of the option to buy.
Under Article 1475 of the New Civil Code, "the contract of sale is perfected at the moment there is a meeting of minds upon
the thing which is the object of the contract and upon the price. From that moment, the parties may reciprocally demand
performance, subject to the provisions of the law governing the form of contracts." Thus, the elements of a contract of sale
are consent, object, and price in money or its equivalent. It bears stressing that the absence of any of these essential

elements negates the existence of a perfected contract of sale. Sale is a consensual contract and he who alleges it must
show its existence by competent proof. 25
In an attempt to resurrect the lapsed option, private respondent gave P300,000.00 to petitioners (thru Alice A. Dizon) on the
erroneous presumption that the said amount tendered would constitute a perfected contract of sale pursuant to the contract
of lease with option to buy. There was no valid consent by the petitioners (as co-owners of the leased premises) on the
supposed sale entered into by Alice A. Dizon, as petitioners' alleged agent, and private respondent. The basis for agency is
representation and a person dealing with an agent is put upon inquiry and must discover upon his peril the authority of the
agent. 26 As provided in Article 1868 of the New Civil Code, 27there was no showing that petitioners consented to the act of
Alice A. Dizon nor authorized her to act on their behalf with regard to her transaction with private respondent. The most
prudent thing private respondent should have done was to ascertain the extent of the authority of Alice A. Dizon. Being
negligent in this regard, private respondent cannot seek relief on the basis of a supposed agency.
In Bacaltos Coal Mines vs. Court of Appeals, 28 we explained the rule in dealing with an agent:
Every person dealing with an agent is put upon inquiry and must discover upon his peril the authority of
the agent. If he does not make such inquiry, he is chargeable with knowledge of the agent's authority,
and his ignorance of that authority will not be any excuse. Persons dealing with an assumed agency,
whether the assumed agency be a general or special one, are bound at their peril, if they would hold the
principal, to ascertain not only the fact of the agency but also the nature and extent of the authority, and
in case either is controverted, the burden of proof is upon them to establish it.
For the long years that private respondent was able to thwart the execution of the ejectment suit rendered in favor of
petitioners, we now write finis to this controversy and shun further delay so as to ensure that this case would really attain
finality.
WHEREFORE, in view of the foregoing, both petitions are GRANTED. The decision dated March 29, 1994 and the resolution
dated October 19, 1995 in CA-G.R. CV No. 25153-54, as well as the decision dated December 11, 1995 and the resolution
dated April 23, 1997 in CA-G.R. SP No. 33113 of the Court of Appeals are hereby REVERSED and SET ASIDE.
Let the records of this case be remanded to the trial court for immediate execution of the judgment dated November 22,
1982 in Civil Case No. VIII-29155 of the then City Court (now Metropolitan Trial Court) of Quezon City, Branch VIII as
affirmed in the decision dated September 26, 1984 of the then Intermediate Appellate Court (now Court of Appeals) and in
the resolution dated June 19, 1985 of this Court.
However, petitioners are ordered to REFUND to private respondent the amount of P300,000.00 which they received through
Alice A. Dizon on June 20, 1975. SO ORDERED.