Yek Seng Co. v. Honorable Court of Appeals
REITERATIONFacts
1. The Antecedents: The underlying dispute concerns a verbal contract of lease for a portion of a building located on Ylaya Street in Manila. The petitioner, Yek Seng Co., had occupied the premises for over twenty years for its general merchandise business, paying a monthly rental of P3,000.00. The lessors, Dewey Veloso Yap and David T. Veloso Yap, notified the petitioner of their intention to terminate the lease to renovate the building and occupy it themselves. The petitioner refused to vacate, leading to the filing of an ejectment complaint. 2. Procedural History: The private respondents initiated an ejectment case against the petitioner on January 22, 1986, in the Municipal Trial Court of Manila. Concurrently, the petitioner filed a petition for consignation of rentals, claiming the lessors refused to accept them. The Municipal Trial Court ruled in favor of the plaintiffs, ordering the petitioner to vacate and pay rentals and attorney's fees, while denying the consignation petition. This decision was affirmed by the Regional Trial Court of Manila and subsequently by the Court of Appeals. 3. The Petition: The petitioner filed a petition for review on certiorari with the Supreme Court, primarily arguing that the lower courts erred in not granting an extension of the lease period under Article 1687 of the Civil Code. The petitioner contended that due to its long occupancy and alleged improvements, a longer lease term should have been fixed. The Supreme Court, however, found that the lease was month-to-month, terminable by notice, and that the circumstances did not warrant an extension, distinguishing the case from prior rulings that allowed extensions under specific equitable conditions. The Court also addressed the petitioner's claim of denial of due process, noting that the case was decided based on stipulations agreed upon during pre-trial.
Issue(s)
Whether the courts erred in not granting the petitioner an extension of its lease under Article 1687 of the Civil Code. Whether the case was decided without the benefit of a trial on the merits.
Ruling
The petition is DENIED and the appealed decision is AFFIRMED in toto, with triple costs against the petitioner. The Supreme Court held that as the rental was paid monthly and the term was not expressly agreed upon, the lease was understood under Article 1687 to be terminable from month to month. The lease contract had already expired at the time the petitioner was asked to vacate and therefore could no longer be extended. The Court also found that the petitioner was not denied its day in court, as it agreed to submit the case for decision on the basis of stipulations made during the pre-trial conference, and had availed of appeals and motions for reconsideration.
Ratio Decidendi
On the issue of lease extension under Article 1687 of the Civil Code: The Court reiterated that under Article 1687, if the period for a lease has not been fixed and the rent is paid monthly, the lease is understood to be from month to month. This means the contract expires at the end of each month unless an extension is sought and granted. The Court emphasized that the power of the courts to fix a longer term for a lease is discretionary ('may'), not ministerial, and is to be exercised based on the equities of the case. In this instance, the petitioner failed to present circumstances justifying an extension beyond mere occupancy for over twenty years. The Court distinguished this case from Divino v. Marcos, where specific circumstances like assurances from the lessor and substantial improvements made with consent warranted an extension. The petitioner's claim of improvements and difficulty in finding another place were unsubstantiated. Furthermore, the Court noted that the lease had already expired when the extension was sought, and an extension may only be sought before the termination of the lease, citing Vda. de Prieto v. Santos. On the issue of denial of a day in court: The Court found no merit in the petitioner's contention that it was denied a trial on the merits. The records showed that the petitioner's counsel agreed to submit the case for decision based on the stipulations of the parties at the pre-trial conference. Therefore, the judgment was rendered on that agreed basis. The Court also pointed out that the petitioner had ample opportunities to be heard through its appeals to the Regional Trial Court and the Court of Appeals, and through its various motions for reconsideration, demonstrating that it was not denied its day in court.
Main Doctrine
A month-to-month lease, under Article 1687 of the Civil Code, is terminable from month to month and expires at the end of each month, unless an extension is sought and granted by the courts. The extension of a lease period is a discretionary power of the court, not a ministerial duty, and is granted only when equities warrant it. An extension cannot be sought after the lease has already expired.