Spouses Guzman v. Court of Appeals
REITERATIONFacts
The Antecedents: Private respondents, Spouses Guillermo and Gerarda Evangelista, had been in possession of a 184 sq. m. parcel of land since 1937 under an oral lease agreement with the late Mercedes Policarpio, paying a monthly rental of P38.00. Petitioners, Spouses Emeterio and Lolita Guzman, became the registered owners of this property on March 17, 1986, after Lolita Guzman acquired it from the Estate of Mercedes Policarpio. Shortly after the sale, petitioners demanded that the private respondents vacate the premises due to unpaid rentals and failure to pay the new owner. Procedural History: Following the private respondents' failure to comply with the demand, and an unsuccessful attempt at amicable settlement at the barangay level, petitioners filed an ejectment complaint on May 7, 1986, with the Metropolitan Trial Court (MTC). The MTC ruled in favor of the petitioners, ordering the private respondents to vacate and pay back rentals. This decision was affirmed in toto by the Regional Trial Court (RTC) on October 16, 1987. Subsequently, the private respondents filed a petition for review with the Court of Appeals (CA), which, on January 28, 1988, set aside the lower courts' decisions and dismissed the ejectment complaint, finding the ejectment baseless and improper. The Petition: Petitioners filed the instant petition for review on certiorari, assailing the Court of Appeals' decision. They contend that the CA erred in applying Section 6 of Presidential Decree No. 1517 (Urban Land Reform Law) in favor of the private respondents, disregarding Proclamation No. 1967 which specified areas of applicability. Petitioners also argue that the CA erred in holding that the private respondents were not guilty of non-payment of rentals. The Supreme Court, in its review, found merit in the petition, reversing the CA's decision and ordering the private respondents to vacate the property and pay rentals from March 1986 onwards, along with attorney's fees and costs, remanding the case for determination of improvements.
Issue(s)
Whether the Court of Appeals erred in applying Section 6 of Presidential Decree No. 1517 in favor of private respondents, considering their status as tenants and the property's location within an Urban Land Reform Zone. Whether the Court of Appeals erred in holding that private respondents were not guilty of non-payment of rentals, despite their belief that they had a right to purchase the property and the subsequent change in ownership.
Ruling
The Supreme Court reversed the decision of the Court of Appeals. Private respondents and all persons claiming rights under them were ordered to immediately vacate the subject property, surrender possession to petitioners, and pay rentals in arrears from March 1986 until they have completely vacated. They were also ordered to pay attorney's fees and costs. The case was remanded to the Regional Trial Court for determination of the value of improvements made by private respondents.
Ratio Decidendi
On the application of Section 6 of Presidential Decree No. 1517: The Court held that the sale of the subject property to petitioner Lolita Guzman was not null and void for violating the right of first refusal. Section 6 of P.D. No. 1517 grants this right only to legitimate tenants residing on land for ten years or more, who have built their homes thereon, and who reside within declared Urban Land Reform Zones or Urban Zones. At the time of the sale in March 1986, the subject property was not listed in Proclamation No. 1967, which enumerated the affected areas. Therefore, it was not covered by the Urban Land Reform Law. Furthermore, even if it were later declared an Urban Land Reform Zone (Resolution No. 1369 passed in December 1987), private respondents were not legitimate tenants as their right to occupy was under litigation, and their possession became illegal due to their refusal to pay rentals. The Court of Appeals erred in applying P.D. No. 1517. On the issue of non-payment of rentals: The Court found that the record clearly shows private respondents failed to pay monthly rentals that accrued from March 1986, when petitioner Lolita Guzman acquired ownership. Upon purchase and notice, the lessee must pay the new owner. Private respondents' belief that the property should have been sold to them did not justify withholding rental payments. They failed to comply with their obligation to pay rentals due to the new owner, despite receiving a demand letter. Their failure to pay, deposit, or consign the rentals due to the new owner constituted default. The Court found sufficient cause for ejectment under Section 5(b) of Batas Pambansa Blg. 877. The argument that the ejectment action was prematurely filed was not raised below and thus could not be passed upon for the first time on appeal. Even if it were premature, the continued non-payment of rentals would provide sufficient basis for a new complaint.
Main Doctrine
A vendee who acquires ownership of a leased property, after proper notice to the lessee, steps into the shoes of the original lessor and is entitled to collect rentals from the lessee. Failure to pay rentals to the new owner, even if the lessee believes they have a right of first refusal, constitutes default and is a ground for ejectment, provided the property is not within a declared Urban Land Reform Zone at the time of the sale and the lessee is not a legitimate tenant under the Urban Land Reform Law.