Cruz v. Intermediate Appellate Court
REITERATIONFacts
The Antecedents: Ricardo Cruz managed the Padre Rada Market, which was built on leased parcels of land, including one owned by Roman Legarda So. The lease agreement with So was of indefinite duration at a monthly rent of P3,500.00. So sent Cruz a letter on April 18, 1977, demanding payment of alleged rental arrears and to vacate the premises by April 30, 1977. Cruz continued operating the market and paid the May 1977 rental. Subsequently, So leased a portion of the market to Antonio Barredo, Jr. for five years and entered into another lease agreement with Antonio Gonzales, Jr. and Milagros de Leon for a three-year period ending March 31, 1982. Due to an injunction filed by So and Barredo, Cruz was compelled to stop market operations and collections from June 1977 to March 1982 (57 months). Procedural History: After the lease with Gonzales and de Leon expired, Cruz filed a case to enjoin So from leasing the market to third parties. A preliminary injunction was issued. The trial court initially declared the lease expired on March 31, 1982, ordered Cruz to vacate, and to account for collections. Upon reconsideration, the trial court rendered a new decision declaring the lease subsisting with a 15-year extended term, making the injunction permanent, and ordering So to pay Cruz P285,000.00 as damages. The Court of Appeals modified this, extending the lease for 57 months from March 31, 1982, eliminating compensatory and actual damages, and granting the injunction only for the extension period. The counterclaim of So was dismissed. The Petition: Both Cruz and So filed petitions for certiorari with the Supreme Court. Cruz argued that the CA erred in reducing the lease period and eliminating damages. So argued that the CA erred in not declaring the lease validly terminated, in not holding that the month-to-month lease could be terminated at any month's end, in applying Article 1687 to extend the lease, and in not ordering Cruz to pay rentals up to the time of relinquishment.
Issue(s)
Whether Roman Legarda So could validly terminate his contract of lease with Ricardo Cruz and enter into new contracts with third persons. Whether Ricardo Cruz is entitled to have the term of his lease fixed for another and longer period of time.
Ruling
The Supreme Court modified the decision of the Court of Appeals. It ordered Ricardo Cruz to desist from operating the market and collecting rentals from stallholders occupying Roman Legarda So's premises. Cruz was further ordered to pay a monthly rental of P3,500.00 to So from May 4, 1982, until he fully surrenders possession of the leased premises. The writ of preliminary injunction issued by the court a quo was dissolved.
Ratio Decidendi
On the validity of the lease termination and entry into new contracts: The Court held that Roman Legarda So acted well within his rights in terminating the lease contract with Ricardo Cruz and entering into new ones with third persons. This was based on Article 1687 of the Civil Code, which states that if the rent is paid monthly, the lease is understood to be from month to month and is terminable at the end of any month without need for special notice to vacate. The Court emphasized that the lessee's timely payment or willingness to continue paying does not defeat the lessor's right to terminate. Furthermore, the Court affirmed that a month-to-month lease has a definite term, expiring at the end of each month unless tacitly renewed, which exception cannot be invoked when a notice to vacate is given. The Court also cited University of the Philippines vs. De los Angeles to support the principle that a party may consider a contract rescinded extrajudicially, subject to court review, to protect its interests and minimize damages. On the entitlement of Ricardo Cruz to a fixed longer lease term: The Court rejected Ricardo Cruz's proposition that the lease had an indefinite period and that the court could fix a longer term under the second sentence of Article 1687. The Court reiterated that a month-to-month lease is a lease with a definite term and thus Article 1687, which applies only when there is no definite term, cannot be invoked. Even if it were applicable, Cruz would not be entitled to a longer term as his action was filed after the contract had expired. The Court cited Vda. de Prieto vs. Santos to clarify that Article 1687 provides for a month-to-month lease with a definite term, not an indefinite one, and that judicial intervention is discretionary and not mandatory for fixing a longer term. The Court also noted that Cruz's inaction and apparent acquiescence to So's lease with third parties in 1977 operated as an admission that his lease had been validly terminated.
Main Doctrine
A month-to-month lease contract, under Article 1687 of the Civil Code, is terminable at the end of any month without need for special notice to vacate, and the lessor may exercise this right even if the lessee has paid the rent or is willing to continue paying. The lessee cannot claim an indefinite period for such a lease, nor can they invoke Article 1687 to fix a longer term after the contract has expired.