Millare v. Hernando
REITERATIONFacts
The Antecedents: Petitioner Pacifica Millare and private respondent Elsa Co (married to Antonio Co) executed a five-year Contract of Lease for the "People's Restaurant" from June 17, 1975, to May 31, 1980, at P350.00 monthly rental. In May 1980, the Co spouses claimed Millare offered to renew the lease at P1,200.00 monthly, to which they counter-offered P700.00. Millare denied offering a renewal. On July 22, 1980, Millare demanded the Co spouses vacate as the lease expired. The Co spouses reiterated their unwillingness to pay P1,200.00, considering it excessive, and signified their intent to deposit rentals. Millare sent another demand letter on July 28, 1980. The Co spouses deposited June and July rentals at P700.00 each. Procedural History: On August 30, 1980, the Co spouses filed a complaint (Civil Case No. 1434) seeking renewal of the lease for ten years at P700.00 monthly, collection of deposited rentals, and damages. On September 1, 1980, Millare filed an ejectment case (Civil Case No. 661) in the Municipal Court. Millare moved to dismiss Civil Case No. 1434, citing lack of cause of action and lack of jurisdiction due to failure to undergo barangay conciliation under P.D. 1508. The Co spouses opposed. On October 15, 1980, the respondent judge denied the motion to dismiss and ordered the renewal of the lease, allowing deposit of accruing rentals. A motion for reconsideration was denied. Millare filed a Petition for Certiorari, Prohibition, and Mandamus with the Supreme Court, which issued a temporary restraining order. Despite the TRO, the respondent judge rendered a "Judgment by Default" on November 26, 1980, ordering renewal for five years from the original expiration date at P700.00 monthly. The Petition: Millare sought to annul the respondent judge's orders and the judgment by default, arguing lack of jurisdiction and valid cause of action. The Supreme Court gave due course to the Petition on March 18, 1981.
Issue(s)
Whether the trial court acquired jurisdiction over Civil Case No. 1434. Whether the private respondents have a valid cause of action against the petitioner for the renewal of the Contract of Lease.
Ruling
The Petition for Certiorari, Prohibition, and Mandamus is granted. The Orders of the respondent judge dated October 15, 1980, and November 4, 1980, and the "Judgment by Default" dated November 26, 1980, in Civil Case No. 1434 are annulled and set aside, and Civil Case No. 1434 is dismissed. The temporary restraining order issued by the Supreme Court is made permanent.
Ratio Decidendi
On the issue of jurisdiction: The Supreme Court held that while the respondent judge's assumption that consignment of rentals was a provisional remedy negating the need for barangay conciliation was erroneous, the requirement of P.D. 1508 is not strictly jurisdictional. The Court noted that both parties had submitted their respective complaints for conciliation to the Lupong Tagapayapa, and after attempts at conciliation proved fruitless, Certifications to File Action were issued. The initial procedural defect of filing the complaint before the issuance of the certification was cured by the subsequent issuance of the certifications, constituting substantial compliance with P.D. 1508. On the issue of valid cause of action for renewal: The Supreme Court ruled that the private respondents did not have a valid cause of action for the renewal of the lease. Paragraph 13 of the Contract of Lease stipulated that renewal would be "under the terms and conditions as will be mutually agreed upon by the parties at the time of renewal." The Court found that the parties failed to reach an agreement on the essential terms for renewal, specifically the monthly rental amount (P1,200.00 vs. P700.00) and the duration of the renewed contract. Therefore, there was no renewal, and consequently, no contract of lease to speak of that the court could order renewed. The respondent judge's reliance on Articles 1197 and 1670 of the Civil Code was found to be misplaced, as Article 1197 applies when a period is not fixed but intended, and Article 1670 pertains to implied new leases (tacite reconduccion) which require acquiescence and do not grant courts the power to fix terms of a contract. The Court emphasized that parties cannot be coerced into a contract, and courts cannot impose terms and conditions where no agreement exists, as freedom to stipulate is fundamental to contractual systems.
Main Doctrine
Courts cannot impose terms and conditions of a contract upon parties who have failed to reach an agreement, as freedom to stipulate is of the essence of contractual systems. Failure to agree on essential terms, such as rental rates and contract duration for renewal, prevents the renewal of the lease.