Francisco v. Intermediate Appellate Court
REITERATIONFacts
The Antecedents: The underlying dispute concerns an ejectment case filed by private respondents, Spouses Benjamin and Emiliana Bangayan, against petitioners Ramon Francisco and Cristina Manalo. The Bangayans sought to eject Francisco and Manalo from a leased property located at 1512 Antipolo St., Sta. Cruz, Manila, on the grounds of non-payment of rent and subleasing the premises in violation of the lease agreement. The property, consisting of a lot and a two-storey building, was originally leased by Ramon Francisco in 1961 from the previous owner, Antonio Chua, and used as an auto spare parts store and residence. Procedural History: The private respondents acquired ownership of the premises in 1978. Despite the change in ownership, the lease agreement, with a monthly rental of P1,000.00 initially, continued. However, disputes arose regarding rental payments, with the former owner, Antonio Chua, initially assuming responsibility for remitting the rent to the new owners. When Chua failed to remit payments, the Bangayans demanded payment from Francisco and Manalo. On March 7, 1983, the Bangayans filed an ejectment complaint before the Metropolitan Trial Court (MTC) of Manila. The MTC ruled in favor of the Bangayans, ordering the ejectment of the petitioners and payment of back rentals. This decision was affirmed with modification by the Regional Trial Court (RTC) of Manila. Subsequently, the Intermediate Appellate Court (IAC), now the Court of Appeals, denied due course to the petitioners' petition for review, upholding the lower courts' decisions. The Petition: The petitioners, Ramon Francisco and Cristina Manalo, are seeking a review of the IAC's decision through a petition for review. They contend that the appellate court erred in several aspects, including not holding that there was no contract of lease between the parties, holding that the private respondents merely stepped into the shoes of the previous owner, finding sufficient ground for ejectment due to non-payment of rentals from July 1982 to January 1983, holding that the demand letters produced the effect of notification, and not fixing a longer period of lease. The petitioners argue that no contract of lease was created because no agreement on the rental rate was reached when they were informed of the new ownership and rental increase. They also dispute the validity of the demand letters and the grounds for ejectment.
Issue(s)
Whether a contract of lease existed between the parties. Whether the private respondents merely stepped into the shoes of the previous owner. Whether the non-payment of rentals from July 1982 to January 1983 was sufficient ground for ejectment. Whether the demand letters produced the effect of notification. Whether the lower court exercised abuse of discretion in not fixing a longer period of lease.
Ruling
The petition is DENIED. The decision of the Intermediate Appellate Court is affirmed.
Ratio Decidendi
On the existence of a contract of lease: The Court held that a contract of lease existed. The property was sold by the former owner, Antonio Chua, to the private respondents while the lease was subsisting. Under Article 1676 of the New Civil Code, a purchaser of a leased property cannot terminate the lease if they knew of its existence or if there was a stipulation to the contrary in the sale contract. In this case, the private respondents allowed the lease to continue, thus stepping into the shoes of the previous owner. The contract of lease subsisted despite the change of ownership, and the petitioners retained their obligations, including rental payments, without needing a new agreement with the new owners. On whether private respondents merely stepped into the shoes of the previous owner: The Court affirmed that the private respondents, as buyers, merely stepped into the shoes of the previous owner. The change of ownership did not affect the existing contract of lease. Consequently, the petitioners' obligations, such as paying rentals, remained the same under the contract, and no new agreement was necessary with the new owners. On non-payment of rentals as a ground for ejectment: The Court ruled that the failure of the petitioners to pay rentals from July 1982 to January 1983 was a sufficient ground for ejectment. It is a basic tenet that if a lessor raises the rent at the expiration of the lease, the tenant must either accept the new rental rate or vacate the premises. The lease was on a month-to-month basis, expiring each month, allowing either party to terminate or continue under new terms. The petitioners could not excuse themselves from paying rentals altogether simply because negotiations for an increase failed, as they continued to occupy the property and derive benefit from it. On the effect of demand letters: The Court found no merit in the petitioners' argument that no demand to vacate was given. The Court of Appeals found that the private respondents' counsel sent two letters of demand, one to Ramon Francisco and another to Cristina Manalo, which were properly addressed but returned unclaimed. The Court reiterated its ruling in Gaspay vs. Hon. Sangco, et al. that a claim of non-service of notice is belied by proof of refusal to receive it, and no one should profit from their own wrong. On fixing a longer period of lease: The Court found no reason to depart from the appellate court's ruling regarding the period of lease. Article 1687 of the New Civil Code empowers courts to fix the period of lease based on sound judgment. The Court agreed with the appellate court that the petitioners' default in rental payments did not warrant extending their stay, as it would impose an unjustifiable burden on the owners.
Main Doctrine
The purchaser of a leased property, even if the lease is not recorded, may not terminate the lease if they knew of its existence or if there was a stipulation to the contrary in the contract of sale, and the lease contract subsists with the new owner, entitling the new owner to collect rentals and to eject the lessee for non-payment.