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REGINA P. DIZON v. CA

FACTS:

The case involves two consolidated petitions seeking to set aside and annul the decisions and resolutions of the Court of Appeals. The dispute originated from a contract of lease with option to buy entered into by the private respondent, Overland Express Lines, Inc., as the lessee, and the petitioners, as the lessors. The lease term was for one year, with an option to purchase for P3,000.00 per square meter. The lease was later on extended to a monthly basis, with a rental fee of P8,000.00 per month.

After private respondent failed to pay the increased rental, the petitioners filed an action for ejectment before the City Court (now the Metropolitan Trial Court) of Quezon City. The City Court rendered a judgment ordering private respondent to vacate the premises and pay rental arrears and damages.

Private respondent filed a certiorari petition before the Intermediate Appellate Court (now the Court of Appeals), challenging the jurisdiction of the City Court. The Intermediate Appellate Court upheld the jurisdiction of the City Court, stating that other related matters can be raised and decided in the unlawful detainer case to avoid multiplicity of suits.

Private respondent subsequently filed two separate cases before the Regional Trial Court (RTC) of Quezon City – one for specific performance and fixing of the period for obligation, and another for annulment of the ejectment case. The RTC initially denied the issuance of a preliminary injunction, but later reinstated it upon motion for reconsideration.

The two cases were consolidated before the RTC, which dismissed private respondent's complaint in the specific performance case. On appeal, the Court of Appeals upheld the jurisdiction of the City Court and concluded that there was a perfected contract of sale between the parties.

In another petition, petitioners sought the execution of the judgment in the ejectment case. Private respondent filed a motion to reconsider, but it was denied. Private respondent then filed a petition for certiorari, prohibition, and injunction, but it was dismissed by the Supreme Court.

Petitioners subsequently filed an urgent ex-parte motion for execution of the judgment in the ejectment case, which was granted by the trial court.

ISSUES:

  1. Whether or not petitioners have the right to evict private respondent from the subject premises for non-payment of rentals.

  2. Whether or not private respondent can still enforce its option to purchase the property.

  3. Whether there was an implied renewal of the contract of lease on a monthly basis.

  4. Whether the option to purchase the leased premises was revived in the implied new lease.

  5. Whether a contract of sale was perfected between the parties.

  6. Whether petitioners consented to the acts of Alice A. Dizon as their agent.

RULING:

  1. Yes, petitioners have established the right to evict private respondent from the subject premises for non-payment of rentals. The lease agreement between the parties was for a period of one year, with the option to purchase the property. After the expiration of the one-year period, the lease continued on a month-to-month basis in accordance with Article 1687 of the Civil Code. Since private respondent failed to pay the increased rental, petitioners had the right to institute an ejectment suit against the former. The filing of a suit for specific performance by private respondent did not divest the trial court of its jurisdiction over the ejectment case.

  2. No, private respondent cannot enforce its option to purchase anymore. Even assuming that the right to exercise the option still subsisted, private respondent filed the suit for specific performance more than ten years after the expiration of the one-year lease period. Under Article 1144 of the Civil Code, the action to enforce the option to purchase should have been filed within ten years from the accrual of the cause of action.

  3. Yes, there was an implied renewal of the contract of lease on a monthly basis.

  4. No, the option to purchase the leased premises was not revived in the implied new lease.

  5. No, there was no perfected contract of sale between the parties.

  6. No, petitioners did not consent to the acts of Alice A. Dizon as their agent.

PRINCIPLES:

  • The period of lease is considered to be from month to month when rentals are paid monthly, expiring at the end of every month. (Article 1687, in relation to Article 1673 of the Civil Code)

  • The filing of a suit for specific performance does not divest the trial court of its jurisdiction over an ejectment case. (Jurisprudence)

  • The right to exercise an option to purchase should be exercised within the agreed upon period, and in case of failure to do so, the option becomes unenforceable. (Jurisprudence)

  • The action to enforce an option to purchase should be filed within ten years from the accrual of the cause of action. (Article 1144 of the Civil Code)

  • An implied new lease on a monthly basis only carries the terms germane to the lessee's right of continued enjoyment of the property leased. It does not automatically revive any option to purchase. (Article 1670 of the New Civil Code)

  • A contract of sale is perfected at the moment there is a meeting of the minds upon the thing which is the object of the contract and upon the price. The absence of any of the essential elements, such as consent, object, and price, negates the existence of a perfected contract of sale. (Article 1475 of the New Civil Code)

  • When dealing with an agent, every person is put upon inquiry and must discover the authority of the agent. Ignorance of the agent's authority is not an excuse. It is the burden of the person dealing with the agent to establish the extent of the authority. (Article 1868 of the New Civil Code)