Bowe v. Court of Appeals
REITERATIONFacts
The Antecedents: This case originated from a contract of lease entered into on June 27, 1979, between Luz Garcia (lessor, now deceased) and Laura Arbolario (lessee, now deceased and substituted by Lawrence Bowe), for a two-storey, 6-door apartment building. The lease was for five years, from September 1, 1979, to September 1, 1984. The contract stipulated that the lessees could sublease the premises and collect rentals, with a yearly rental payment of P30,000.00 to the lessor, to commence only after the lessees' P75,000.00 indebtedness to the lessor was fully paid from the collected rentals. Subsequently, in October 1982, the lessor's husband, Teodoro Garcia, and his son, Serafin Garcia, verbally agreed to sell the property to the lessees, Cirilo and Laura Arbolario, for P220,000.00. The petitioners made downpayments totaling P66,000.00, with the understanding that the balance would be paid upon Teodoro Garcia's return to the Philippines to execute the deed of sale. However, after the last payment in December 1983, Teodoro Garcia informed the petitioners that the sale was off. Upon the expiration of the lease contract in September 1984, the petitioners refused to vacate, claiming ownership of the property. Procedural History: Following the petitioners' refusal to vacate and surrender the premises after the lease expired, Teodoro Garcia, represented by his son Serafin Garcia, filed a complaint against Laura Arbolario and Cirilo Arbolario before the Regional Trial Court (RTC) of Olongapo City. The complaint sought the termination of the lease contract, reimbursement of rents collected by the lessees from September 2, 1984, until vacation of the premises, and payment of damages, attorney's fees, and litigation expenses. The petitioners, in their defense, admitted the lease contract but asserted that a contract of sale had been perfected and partially performed, thus giving them ownership rights and negating the lease. The RTC, in its decision dated December 17, 1987, ruled in favor of the plaintiff, terminating the lease, ordering the defendants to vacate, pay back rentals, and attorney's fees. The petitioners appealed this decision to the Court of Appeals (CA). The CA, in its decision dated December 18, 1989, and its subsequent resolution dated October 23, 1990, affirmed the RTC's ruling in full. The Petition: This case is before the Supreme Court on a petition for review on certiorari filed by Lawrence Bowe and Cirilo Arbolario, seeking to reverse the decision of the Court of Appeals. The petitioners assign several errors to the CA, primarily arguing that the CA erred in affirming the trial court's finding that the contract of sale was never consummated or was rescinded, and that the CA erred in placing undue emphasis on the novation of the lease contract when it was allegedly supplanted or abandoned. They also contend that the CA erred in not dismissing the case for lack of appellate jurisdiction, asserting it should have been treated as an ejectment case cognizable by the inferior court. The core of their argument is that the verbal agreement to sell the property in 1982, coupled with partial payments, constituted a perfected contract of sale, thereby terminating the lease agreement ipso facto. The Supreme Court, however, found the petition devoid of merit, distinguishing the agreement as a contract to sell rather than a contract of sale, due to the absence of a formal deed of conveyance and the nature of the payments as downpayments or advanced payments for an unconsummated sale, with full payment being a suspensive condition.
Issue(s)
Whether the verbal agreement to sell the property constituted a perfected contract of sale or a contract to sell. Whether the contract of lease was supplanted or abandoned by the verbal agreement to sell. Whether the RTC had jurisdiction over the case, considering the nature of the action filed. Whether there was an implied renewal of the lease contract (tacita reconduccion).
Ruling
The petition is denied. The decision and resolution of the Court of Appeals are affirmed. The contract of lease is terminated, and the defendants are ordered to vacate the premises and pay the amounts awarded by the lower court.
Ratio Decidendi
On whether the verbal agreement was a contract of sale or a contract to sell: The Court held that the verbal agreement was a contract to sell, not a contract of sale. A contract of sale is perfected by mere consent, but title passes upon delivery. In a contract to sell, ownership is reserved in the seller and passes only upon full payment of the purchase price, which serves as a positive suspensive condition. The receipts presented by the petitioners, referring to 'downpayments,' 'deductible from apartment sale,' or 'advanced payment of unconsummated sale,' indicated that title was not intended to transfer immediately. The absence of a formal deed of conveyance further supported this, as parties would likely insist on a written agreement for an absolute sale. The fact that petitioners asked for the return of advance payments when the deal allegedly fell through also contradicted their claim of ownership under an absolute sale. Therefore, title to the property never passed to the petitioners because the suspensive condition of full payment was not met. On whether the contract of lease was supplanted or abandoned: The Court found that the contract of lease was not supplanted or abandoned. The verbal agreement was determined to be a contract to sell, not a contract of sale. Consequently, the lessor-lessee relationship subsisted until the conditions for the sale were met, which they were not. The petitioners' continued occupancy after the lease expired, coupled with the private respondent's inaction and lack of notice to vacate, led to an implied new lease (tacita reconduccion). On the jurisdiction of the RTC: The contention that the case was an unlawful detainer case exclusively cognizable by the inferior court was dismissed. The Court found that an implied new lease had set in due to the lessees' continued occupancy without a notice to vacate. In such a scenario, there was no unlawful detainer to speak of. The filing of an action for termination of contract was deemed appropriate. Since the case involved the title to or possession of real property or any interest therein, the Regional Trial Court correctly exercised its jurisdiction. On the existence of an implied new lease (tacita reconduccion): The Court confirmed the existence of an implied new lease. For tacita reconduccion to set in, the term of the original lease must have expired, the lessor must not have given a notice to vacate, and the lessee must have continued enjoying the leased premises for fifteen days with the lessor's acquiescence. In this case, the lease expired on September 1, 1984. No talks of renewal occurred, and no notice to vacate was given. The earliest communication was in October 1984, well beyond the statutory 15-day period. The lessor's inaction implied acquiescence, thus creating an implied renewal of the lease contract under the same terms.
Main Doctrine
A contract to sell, unlike a contract of sale, requires full payment of the purchase price as a positive suspensive condition for the transfer of title. The absence of a formal deed of conveyance and the nature of payments (downpayments, advanced payments) indicate a contract to sell, not an absolute sale. Furthermore, the continued occupancy of the premises by the lessee after the expiration of the lease, without a notice to vacate, gives rise to an implied new lease (tacita reconduccion), which means the lessor's action for termination of contract and damages, rather than unlawful detainer, was the appropriate remedy, and the Regional Trial Court retained jurisdiction.