Spouses Fermin v. Spouses Alpas
REITERATIONFacts
1. The Antecedents: The underlying dispute concerns the renewal of a lease agreement between Spouses Roberto E. Fermin and May Linda Ferraren (lessors) and Spouses Meliton P. Alpas, Jr. and Lucy D. Alpas (lessees). The original ten-year lease, entered into on March 15, 1976, for a parcel of land at No. 157 Pinatubo Street, Mandaluyong, Metro Manila, included a provision for renewal for another ten years upon mutual agreement. The contract stipulated an annual rental of P5,000.00, with a 10% increase every five years. The lessees constructed a warehouse on the property valued at not less than P200,000.00. The contract also provided that upon termination after the initial ten years, permanent improvements would become the lessors' property without reimbursement, and the lessees would have priority to purchase the property if the lessors decided to sell. 2. Procedural History: The original complaint for ejectment was filed by the petitioners (Spouses Fermin) in the Metropolitan Trial Court (MTC) of Mandaluyong on August 10, 1987, due to the private respondents' (Spouses Alpas) refusal to agree to an increased rental of P2,000.00 per month for the lease renewal. The MTC dismissed the complaint on April 14, 1988. The petitioners appealed to the Regional Trial Court (RTC) of Pasig, which, on October 23, 1989, set aside the MTC decision and ordered the respondents to vacate and pay increased rentals. A motion for reconsideration by the respondents was denied. The respondents then filed a petition for review with the Court of Appeals (CA), which, on August 31, 1990, reversed the RTC decision and reinstated the MTC's dismissal of the complaint. 3. The Petition: The petitioners, Spouses Roberto E. Fermin and May Linda Ferraren, have filed this petition for review with the Supreme Court, seeking to overturn the Court of Appeals' decision. They argue that the CA erred in setting aside the RTC's ruling and in reinstating the MTC's decision, which they contend was premature and lacked a cause of action. The core of the petitioners' argument is that there was no mutual agreement for the lease renewal as required by the contract, particularly concerning the rental rate, thus preventing an automatic renewal. They contend that the CA should have upheld the RTC's finding that the lease had not been effectively renewed under the original terms and that the respondents were obligated to vacate and pay adjusted rentals.
Issue(s)
Whether the Honorable Court of Appeals erred in setting aside the Decision of the Regional Trial Court dated October 23, 1989 regarding the lease renewal and the existence of an implied new lease. Whether the Honorable Court of Appeals grievously erred in reinstating in toto the Decision of the Trial Court dated April 14, 1989 which ordered the dismissal of the complaint for being premature and for lack of cause of action, considering the application of payments and the grounds for ejectment.
Ruling
The petition is GRANTED. The questioned decision of the Court of Appeals dated August 31, 1990 is REVERSED and SET ASIDE, and the decision of the Regional Trial Court dated October 23, 1989 is hereby REINSTATED and AFFIRMED with a modification as to rental, with costs against private respondents.
Ratio Decidendi
On the issue of lease renewal and the existence of an implied new lease: The Court held that the lease agreement was not effectively renewed because there was no "mutual agreement." However, an implied new lease was created under Article 1670 of the Civil Code, based on the lessees' continued occupation with the lessors' acquiescence. The implied new lease is from year to year, with the original terms revived, but the rental rate for the first year would be P6,150.00, and for subsequent periods, P2,000.00 per month. On the issue of premature filing of the ejectment case, considering the application of payments and the grounds for ejectment: The Court found that the ejectment case was not premature. Key Management Corporation's application of the P10,682.50 remittance to accrued rentals at P2,000.00 per month was consistent with the eventual ruling on the rental rate. The dispute over renewal and rental rates, coupled with the continued occupation, established a cause of action for ejectment based on the failure to secure an express renewal and the subsequent creation of an implied lease with disputed terms regarding the increased rental.
Main Doctrine
A lease agreement, even if not expressly renewed due to a lack of mutual agreement on new terms, can be considered to have an implied new lease from year to year under Article 1670 of the Civil Code if the lessee continues to occupy the premises for fifteen days with the lessor's acquiescence, provided no notice to the contrary has been given. The other terms of the original contract are revived, except for the period.