Ejectment case; time to file complaint

FIRST DIVISION [ G.R. No. 199215, January 16, 2019 ] SPOUSES HAYES VELASCO AND ROSALINA HERMOSO VELASCO, AND DANILO VELASCO V. MARIANO LAIGO, ALEJO LAIGO, MANUEL LAIGO, GAUDELIO LAIGO, ELPIDIO LAIGO, TEODORA LAIGO, CHRIS LAIGO-CASTILLO, REPRESENTED BY THEIR ATTORNEY-IN-FACT, ATTY. BARTOLOME R. RILLERA.

This is a petition for review on certiorari[1] under Rule 45 of the Rules of Court filed by Spouses Hayes and Rosalina Hermoso Velasco (spouses Velasco), and Danilo Velasco (collectively, petitioners), seeking to nullify the Court of Appeals' (CA) October 21, 2011 Decision[2] in CA-G.R. SP No. 114826. The CA granted respondents' petition for review under Rule 42 against the December 22, 2009 Decision[3] of Branch 33 of the Regional Trial Court (RTC) of Bauang, La Union, and reinstated the June 2, 2009 Decision[4] of the Municipal Trial Court (MTC) of Bauang, La Union in an unlawful detainer case docketed as Civil Case No. 1061-BG.[5]

Sabino and Fredisminda[6] (Fredisvinda) Laigo (spouses Laigo) owned a parcel of land in Baccuit Sur, Bauang, La Union. On August 31, 1976, they leased out a 3,243-sq.m. portion of the property (property) to spouses Velasco for a period of 20 years, commencing from September 1, 1976 to August 31, 1996, renewable for another 10 years.[7]

Spouses Velasco constructed a residential house and a warehouse (improvements) on the property, which improvements they mortaged to Development Bank of the Philippines (DBP) to secure their loan with the bank.[8] Consequently, spouses Laigo and spouses Velasco agreed, in a Supplementary Agreement[9] dated March 18, 1977, that the lease will remain in full force and effect until the full payment of the loan with DBP. Subsequently, spouses Velasco failed to pay their loan with DBP. This led DBP to extrajudicially foreclose the improvements on the property. The improvements were sold at public auction and were awarded to Bernardo Duldulao (Duldulao) as the highest bidder. Spouses Velasco, nevertheless, remained in possession of the property.[10]

When spouses Laigo died, they were succeeded by their heirs, namely, Mariano Laigo, Alejo Laigo, Manuel Laigo, Gaudelio Laigo, Elpidio Laigo, Teodora Laigo, Chris Laigo-Castillo (respondents), and Fidel Laigo (Fidel), who registered the property in their names and were issued Original Certificate of Title (OCT) No. FP-16437.[11]

Upon expiration of the original lease period on August 31, 1996, the heirs and spouses Velasco renewed the lease for another 10 years, covering the period of September 1, 1996 to August 31, 2006.[12]

On July 19, 2000, Fidel, as heir and then representative of the heirs of Sabino Laigo, filed an ejectment suit, docketed as Civil Case No. 940, against spouses Velasco with the MTC of Bauang, La Union. He sought the eviction of spouses Velasco on the ground of non¬payment of rentals.[13] After proceedings, the MTC found that spouses Velasco paid the rentals for the property to Fidel. It, thus, dismissed Civil Case No. 940 in a Decision[14] dated November 6, 2001.

On April 2, 2003, respondents, together with Fredisvinda, appointed Atty. Bartolome R. Rillera (Atty. Rillera) as their attorney-in-fact to administer the estate of their parents, including the property.[15] Thus, when the lease expired on August 31, 2006, Atty. Rillera demanded that spouses Velasco vacate the property.[16] Spouses Velasco, however, refused, claiming that the lease was extended until 2025.[17]

On March 6, 2007, respondents filed the unlawful detainer case, docketed as Civil Case No. 1061-BG, with the MTC of Bauang, La Union on the ground of expiration of the lease.[18] In their answer,[19] petitioners prayed for the dismissal of the complaint claiming respondents had no cause of action against them. They asserted that the lease was extended until 2025 because they already paid the corresponding rentals in advance, as shown by various receipts signed by Fidel. They also argued that the previous ejectment case, Civil Case No. 940, constituted res judicata on the action for unlawful detainer.

On June 2, 2009, the MTC rendered judgment in favor of respondents.[20] It ruled that: (1) the expiration of the lease agreement on August 31, 2006 ended petitioners' right to possess the leased property;[21] (2) no contract extending the period of lease until 2025 had been presented: (3) the collection of advance rentals by Fidel did not result in the extension of the lease because Fidel was not duly authorized by his co-owners to receive the advance rentals or extend the period of lease;[22] (4) the subsequent foreclosure and sale of the improvements rendered inefficacious the stipulation in the Supplementary Agreement prohibiting the termination of the lease until the loan from DBP has been paid;[23] and (5) Civil Case No. 940 is not res judicata because there is no identity of cause of action; the act or omission violative of petitioners' right in the former case was the non-payment of rentals, while in the latter case, it was the expiration of the lease period.[24]

On appeal, the RTC reversed the MTC.[25] It sustained petitioners' claim that the lease contract had been extended when they paid advance rentals to Fidel. The RTC also found that Fidel had authority to act for respondents since they recognized in Civil Case No. 940 his authority to receive the rentals from petitioners. Also, the extension of the lease contract was already decided in Civil Case No. 940 when the MTC ruled that Fidel received payment of rentals beyond 2006.[26]

The CA granted respondents' petition for review. It agreed with the MTC that petitioners failed to present any contract showing that the lease had been extended until 2025. The receipts issued by Fidel can hardly be characterized as sufficient evidence to prove that the lease had been extended. Also, Civil Case No. 940 is not res judicata as to the issue of extension of the lease. Nowhere in the Decision in Civil Case No. 940 did it state that the lease had been extended.[27] Finally, the acceptance by Fidel of the advance rentals did not give rise to an implied lease in view of the notice of demand to vacate given by respondents.[28]

In this petition, petitioners insist that Civil Case No. 940 is res judicata on this case as to the issues of authority of Fidel to accept rentals on behalf of respondents and the extension of the lease contract until 2025 by virtue of Fidel's acceptance of the advance rents.[29] They further insist that the Supplementary Agreement explicitly states that the lease cannot be terminated until the loan is paid by the debtor. Here, spouses Velasco have not yet paid DBP.[30]

In their comment,[31] respondents counter that the petition raises questions of facts that are not proper subjects of a Rule 45 petition. They reiterate that Fidel was neither authorized to renew or extend the lease, nor accept rental payments on their behalf. There was no special power of attorney executed in his favor after the expiration of the extended lease period in 2006. In fact, in 2003, they already granted authority in favor of Atty. Rillera. Civil Case No. 940 cannot be considered as res judicata because the issue in that case was not the extension of the lease but the non-payment of rentals.[32]

The issue here is whether the lease contract was extended or renewed after the expiration of the lease period in 2006.

I.

In unlawful detainer cases, the elements to be proved and resolved are the fact of lease and the expiration or violation of its terms. Specifically, the essential requisites of unlawful detainer are: (1) the fact of lease by virtue of a contract, express or implied; (2) the expiration or termination of the possessor's right to hold possession; (3) withholding by the lessee of possession of the land or building after the expiration or termination of the right to possess; (4) letter of demand upon lessee to pay the rental or comply with the terms of the lease and vacate the premises; and (5) the filing of the action within one year from the date of the last demand received by the defendant.[33]

In this case, respondents were able to prove a prima facie case in their favor when they established that: (1) spouses Velasco entered into a lease contract with their parents for the period of September 1, 1976 to August 31, 1996, renewed for another 10 years or until August 31, 2006; (2) upon expiration of the renewed lease period on August 31, 2006, respondents sent a written notice to vacate on October 4, 2006; and (3) petitioners remained in possession of the leased property even after the demand. Respondents having been able to make a prima facie case, it was incumbent upon petitioners to prove by preponderance of evidence that the lease contract was extended or renewed either expressly or impliedly.[34]

This, petitioners failed to do. No written or oral agreement between the parties to this tenor was ever presented. Instead, petitioners claim that the lease was extended on account of Fidel's acceptance of advance rentals as evidenced by several receipts bearing the signature of Fidel as well as the amounts received by him.

Fidel's acceptance of the payments of rentals beyond the lease period, however, did not cause the extension of the lease for another 19 years.

While it may be conceded that Fidel had been previously authorized to receive rentals from petitioners, this authority does not extend to renewing the lease for more than a year, let alone 19 years, in the name of his other co-owners without a special power of attorney in his favor as required under Article 1878[35] of the Civil Code. Worse, any authority previously given to Fidel was revoked when respondents appointed Atty. Rillera as the administrator of the leased property on April 2, 2003, three years before the expiration of the lease on August 31, 2006. As a co-owner not entrusted with the administration of the property, any alleged unilateral decision of Fidel to extend the lease would not bind his other co-owners, herein respondents, in whom the management of the common property lies.[36]

Neither is there merit to petitioners' view that the extension of the lease was supported by the stipulation under the Supplementary Agreement prohibiting the termination of the lease until the loan with the DBP had been paid. The loan was paid as to DBP when it successfully foreclosed and sold the improvements on the leased properties to Duldulao.

We also do not subscribe to petitioners' view that Civil Case No. 940 is res judicata on the issue of the extension of lease.

Res judicata is defined as "a matter adjudged; a thing judicially acted upon or decided; a thing or matter settled by judgment."[37] It has two concepts: (1) "bar by prior judgment" under Rule 39, Section 47(b); and (2) "conclusiveness of judgment" under Rule 39, Section 47(c). Res judicata under the first concept or as a bar against the prosecution of a second action exists when there is identity of parties, subject matter, and cause of action in the first and second actions. The judgment in the first action is final as to the claim or demand in controversy, including the parties and those in privity with them, not only as to every matter which was offered and received to sustain or defeat the claim or demand, but as to any other admissible matter which might have been offered for that purpose, and of all matters that could have been adjudged in that case. On the other hand, res judicata under the second concept or estoppel by judgment exists when there is identity of parties and subject matter but the causes of action are completely distinct. The first judgment is conclusive only as to those matters actually and directly controverted and determined and not as to matters merely involved.[38]

Here, there can be no res judicata between Civil Case No. 940 and the unlawful detainer case below under the first concept because there is no identity of cause of action. As aptly observed by the MTC, the causes of action giving rise to them are different because "the first one was for non-payment of rentals while the second is due to the expiration of the Lease Agreement."[39] There is also no res judicata under the second concept. Nowhere in the Decision in Civil Case No. 940 does it state that the lease was extended.[40] The extension of contract is not among the issues controverted or determined in the first case. In fact, it was not raised as an issue at all.[41] Thus, the statement by the MTC in Civil Case No. 940 that petitioners' advance rentals were for the period of "2006 or even more" is an obiter dictum.

II.

Nevertheless, we still find that the action for ejectment should be dismissed for lack of cause of action at the time of the filing of the complaint.

Under Article 1670[42] of the Civil Code, a new lease is implied if the lessee continues enjoying the thing leased for 15 days after the termination of the original contract, unless notice to the contrary has been previously given by either party. Conversely, if a notice of the termination of the lease is given, the fact that the lessee continues to stay for 15 more days is not a ground for inferring a new lease.[43] Thus, an implied new lease or tacita reconduccion will set in when the following requisites are found to exist: (a) the term of the original contract of lease has expired; (b) the lessor has not given the lessee a notice to vacate; and (c) the lessee continued enjoying the thing leased for 15 days with the acquiescence of the lessor.[44] This implied renewal of the lease is not for the original period of the contract, but for the periods established by Article 1682[45] and 1687[46] of the Civil Code.

In this case, petitioners occupied the property for more than 15 days following the expiration of the period in August 31, 2006. Records show that the written notice to vacate was given only on October 4, 2006, or after an implied lease already commenced. This implied lease was for a year to year period pursuant to Article 1687, because the term of the expired Lease Agreement provided for the payment of annual rents.[47]

In sum, we hold that while there was no extension of lease for a continuous period until 2025, an implied lease for a successive yearly period existed between the parties when respondents failed to timely give a written notice to vacate to petitioners. Considering this, at the time the complaint for unlawful detainer was filed on March 6, 2007,[48] respondents had no right to eject petitioners because an implied lease had already commenced. This gave petitioners the right to occupy the leased property for a year or until August 31, 2007. Hence, at the time they filed the complaint, respondents had no cause of action to eject petitioners.

To reiterate, the case is an unlawful detainer case which requires the plaintiff to prove as a key jurisdictional fact, among others, "the expiration or termination of the possessor's right to hold possession" at the time of the filing of the action. However, respondents, as plaintiffs here, failed to do so. For this reason, we cannot grant respondents any reliefs that are inconsistent with this finding. This is also consistent with the rule that unless the plaintiff has a valid and subsisting cause of action at the time his action is commenced, the defect cannot be cured or remedied by the acquisition or accrual of one while the action is pending.[49]

We nevertheless emphasize that this ruling is without prejudice to: (1) the rights of respondents, as co-owners, to institute the necessary ejectment suit after proper demand at the expiration of the term of the present lease period; and (2) any action that petitioners and/or respondents may have to recover any amount from Fidel arising from any payments made to him.

WHEREFORE, the petition is GRANTED. The Court of Appeals' Decision dated October 21, 2011 in CA-G.R. SP No. 114826 is REVERSED. Civil Case No. 1061-BG is DISMISSED. No costs.

SO ORDERED.

[1]Rollo, pp. 18-41.

[2]Id. at 42-55; penned by Associate Justice Angelita A. Gacutan, and concurred in by Associate Justices Vicente S.E. Veloso and Francisco P. Acosta.

[3]Id. at 164-171; rendered by Judge Rose Mary R. Molina-Alim.

[4]Id. at 126-133; issued by Judge Romeo V. Perez.[5]The dispositive portion of the CA Decision reads:
WHEREFORE, the petition is GRANTED. The assailed Decision and Order of the Regional Trial Court of Bauang, La Union, Branch 33 in Civil Case No. 1903-BG are REVERSED and SET ASIDE. The June 2, 2009 Decision of the Municipal Trial Court of Bauang, La Union in Civil Case No. 1061-BG is REINSTATED. No costs.

SO ORDERED. Id. at 54-55.
[6]Also spelled as Fredesvinda in some parts of the records.

[7]Rollo, pp. 43,69, 188-193.

[8]Id. at 43-44.

[9]Id. at 194-195.

[10]Id. at44.

[11]Id. at 42,44, 197.

[12]Id. at 44.

[13]Id. at 44-45.

[14]Id. at 203-216.

[15]Id. at 102-105.

[16]Id. at 114. Demand Letter to Vacate dated October 4, 2006.

[17]Id. at 46.

[18]Id.at68-71.

[19]Id. at 72-77.

[20]The dispositive portion of the MTC Decision reads:
Wherefore, judgment is hereby rendered in favor of the [respondents] and against the only remaining [petitioners], spouses Hayes and Rosalina Velasco as well as Danilo Velasco who are ordered to do the following, to wit:

1.
To vacate and peacefully turn over the possession of the subject property to [respondents] or to their duly authorized representative Atty. Bartolome R. Rillera;
2.
To declare all the buildings, improvements and machineries erected by [petitioners] on the leased premises as already owned by the Heirs of Sabino Laigo without right to reimbursement, having failed to remove the same within one (1) year from the expiration of the Lease Agreement, pursuant to par. 5 of said Lease Agreement;
3.
To pay [respondents] or their duly authorized representative Atty. Bartolome R. Rillera fair rental value for the use of the subject land in the amount of P5,000.00 a month starting from the date of the demand letter until they vacate it; and
4.
To pay [respondents] or their duly authorized representative Atty. Bartolome R. Rillera the amount of P20,000.00 as Attorney's fees as well as the cost of the suit and litigation expenses.

SO ORDERED. Id. at 133.
[21]Id. at 129.

[22]Id. at 131.

[23]Id.at 130.

[24]Id. at 131-132.

[25]The dispositive portion of the RTC Decision reads:
WHEREFORE, premises considered, this Court rules in favor of the [petitioners] and against the [respondents] and declares:

1.The June 2, 2009 assailed Decision of the Municipal Trial Court of Bauang, La Union in Civil Case No. 1061 [is] REVERSED and SET ASIDE; and

2.The [respondents] to pay the [petitioners] Php20,000.00 in attorney's fees.

No costs.

SO ORDERED. Id. at 171.
[26]Id. at 170.

[27]Id. at 53.

[28]Id. at 53-54.

[29]Id.at32-35.

[30]Id.at38.

[31]Id. at411-423.

[32]Id. at 414-421.

[33]Pasricha v. Don Luis Dison Realty, Inc., G.R. No. 136409, March 14, 2008, 548 SCRA 273, 288.

[34]See Dantis v. Maghinang, Jr., G.R. No. 191696, April 10, 2013, 695 SCRA 599, 609-610.

[35]CIVIL CODE, Art. 1878. Special powers of attorney are necessary in the following cases:
x x x x
(8) To lease any real property to another person for more than one year;
x x x x
[36]CIVIL CODE, Art. 492. For the administration and better enjoyment of the thing owned in common, the resolutions of the majority of the co-owners shall be binding.

There shall be no majority unless the resolution is approved by the co-owners who represent the controlling interest in the object of the co-ownership.

Should there be no majority, or should the resolution of the majority be seriously prejudicial to those interested in the property owned in common, the court, at the instance of an interested party, shall order such measures as it may deem proper, including the appointment of an administrator.

Whenever a part of the thing belongs exclusively to one of the co-owners, and the remainder is owned in common, the preceding provisions shall apply only to the part owned in common.

[37]Agustin v. Delos Santos, G.R. No. 168139, January 20, 2009, 576 SCRA 576, 585.

[38]See Selga v. Brar, G.R. No. 175151, September 21, 2011, 658 SCRA 108, 119-121.

[39]Rollo, p. 131. See Umale v. Canoga Park Development Corp., G.R. No. 167246, July 20,2011, 654 SCRA 155, 162.

[40]Rollo, p. 53.

[41]Id. at 208.

[42]Art. 1670. If at the end of the contract the lessee should continue enjoying the thing leased for fifteen days with the acquiescence of the lessor, and unless a notice to the contrary by either party has previously been given, it is understood that there is an implied new lease, not for the period of the original contract, but for the time established in Articles 1682 and 1687. The other terms of the original contract shall be revived.

[43]Carlos v. Court of Appeals, G.R. No. 109887, February 10, 1997, 268 SCRA 25, 31.

[44]Paterno v. Court of Appeals, G.R. No. 115763, May 29, 1997, 272 SCRA 770, 777-778.

[45]Art. 1682. The lease of a piece of rural land, when its duration has not been fixed, is understood to have been made for all the time necessary for the gathering of the fruits which the whole estate leased may yield in one year, or which it may yield once, although two or more years may have to elapse for the purpose.

[46]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 the rent is weekly; and from day to day, if the rent is to be paid daily, x x x

[47]Rollo, p. 189.

[48]Id.at45.

[49]See Lao v. Court of Appeals, G.R. No. 47013, February 17, 2000, 325 SCRA 694, 717, citing Surigao Mine Exploration Co., Inc. v. Harris, 68 Phil. 113 (1939).

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