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ALLAN MAÑAS v. ROSALINA ROCA NICOLASORA

FACTS:

The petitioners, the Mañas Spouses, entered into a lease contract with Rosalina Roca Nicolasora for a property in Tacloban City. The lease contract included a provision that granted the Mañas Spouses the option to buy the property if the lessor desired to sell it. After the expiration of the lease contract, the Mañas Spouses continued to occupy the property and pay the rentals with no objections from Rosalina and her children. Later, the property was sold to Ma. Therese Roselle Uy-Cua with the consent of Rosalina and her children. The Mañas Spouses claimed that they were not informed of the sale and only learned about it through a letter. They filed a complaint seeking the rescission of the contract of sale, cancellation of the title, and enforcement of their right of first refusal or option to buy. Roselle filed a motion to dismiss, arguing that the complaint failed to state a cause of action and that the Mañas Spouses failed to comply with the condition precedent of barangay conciliation.

In another instance, the Mañas Spouses entered into a lease contract with Roselle Uy-Cua for a property. The contract contained a provision granting the Mañas Spouses a right of first refusal or priority to buy the property if Roselle decided to sell it. After the expiration of the contract, the Mañas Spouses continued to occupy the property with Roselle's consent. They claimed that they still had the right of first refusal despite the expiration of the contract. Roselle argued that the right of first refusal was not renewed as the contract was only impliedly renewed on a month-to-month basis. Roselle also contended that the complaint was premature as barangay conciliation was not complied with. The trial court granted Roselle's motion to dismiss, finding no cause of action and non-compliance with barangay conciliation. The Mañas Spouses filed a motion for reconsideration, which was denied. They then filed a Notice of Appeal. The Court of Appeals affirmed the trial court's rulings, stating the absence of cause of action in the Mañas Spouses' complaint.

The case involved a Contract of Lease with a one-year term and a provision for renewal at the option of the lessee. The lessees continued occupying the property after the expiration of the lease contract with the acquiescence of the lessor. The lessor argued that the continued possession constituted an implied renewal of the lease but only for the time prescribed in the relevant provisions of the New Civil Code. The lessor further asserted that the new lease was deemed to be renewed on a month-to-month basis, subject to termination by the lessor each month upon demand. The lessees filed a motion for reconsideration with the Court of Appeals, which was subsequently denied.

ISSUES:

  1. Whether or not the Complaint stated a cause of action based on the lease contract's renewal and the inclusion of the right of first refusal.

  2. Whether or not the Deed of Absolute Sale must be rescinded due to the vendee's incapacity.

  3. Whether or not the Complaint should be dismissed for failure to comply with a condition precedent.

  4. Whether the option to buy is included in the implied renewal of the lease contract.

  5. Whether there is an implied new lease from month to month and whether it includes the renewal of the right of first refusal.

  6. Whether the alleged incapacity of the buyer should be a ground for rescission or annulment of the contract.

  7. Whether the petitioners failed to comply with the condition precedent of barangay conciliation proceedings.

RULING:

  1. The issues raised in the Petition should be denied.

  2. The option to buy is not included in the implied renewal of the lease contract. Implied renewals only revive terms that are germane to the lessee's right of continued enjoyment of the leased property. Other terms, such as the option to buy, are not deemed incorporated in the implied renewal. The right to exercise the option to purchase expires with the termination of the original contract of lease. Implied renewals do not extend to all stipulations and the terms included in implied renewals are limited by law. Parties cannot presume that all conditions in the original lease contract are also revived in the implied renewal.

  3. The existence of an implied new lease from month to month does not include the renewal of the right of first refusal.

  4. The alleged incapacity of the buyer is a ground for annulment of contract, not rescission.

  5. The petitioners failed to comply with the condition precedent of barangay conciliation proceedings.

PRINCIPLES:

  • The failure to state a cause of action is based on whether the lease contract was expressly renewed and whether the renewal includes the right of first refusal. In this case, the lease contract was impliedly renewed when the lessees continued to occupy the premises and pay rentals with the acquiescence of the lessor. (Article 1670 of the Civil Code)

  • In implied renewals, the terms of the original contract are revived, not for the period of the original contract but for the time established in Articles 1682 and 1687 of the Civil Code. (Dizon v. Court of Appeals)

  • The capacity of a vendee to enter into a contract is a ground for rescission, not annulment.

  • Compliance with a condition precedent is necessary for the enforcement of contractual obligations.

  • The express agreement of the parties should govern over legal provisions.

  • Persons who are capable cannot allege the incapacity of those with whom they contracted.

  • The ground for rescission of contract depends on the nature of the defect in the contract.

  • Contracts are binding unless annulled by a proper action in court.

  • The action for annulment of contracts may be instituted by parties who are thereby obliged principally or subsidiarily.

  • Failure to comply with a condition precedent, such as barangay conciliation proceedings, may result in the dismissal of the complaint.