Chua v. Intermediate Appellate Court
REITERATIONFacts
The Antecedents: Herminigilda Herrera (lessor) executed a Contract of Lease in 1950 in favor of Sy Tian On (lessee) for Lots Nos. 620 and 7549, with a term of ten years, renewable for another five years. The contract included a stipulation granting the lessee an option to buy the property and guaranteeing the lessee's possession for ten years as long as the terms were fulfilled. Sy Tian On erected a residential house on the premises. On February 2, 1954, Sy Tian On sold the building to Chua Bok, assigning all his rights and obligations as lessee to Chua Bok. This sale was made with the knowledge and express consent of Herminigilda Herrera, represented by her attorney-in-fact, Vicenta R. de Reynes, who honored the assignment. Chua Bok and his family resided in the building and paid rentals. When the original lease expired in 1960, Chua Bok and Herminigilda Herrera, through her attorney-in-fact, executed a new Contract of Lease for five years (August 1, 1960, to August 1, 1965), with a monthly rental of P60.00. This contract also contained an option for Chua Bok to buy the premises if qualified and if Herrera decided to sell, and an option to renew the lease. It also stipulated that if the property were sold to a third party, the terms of the lease would remain valid for its duration, and the third party would be bound by the contract. After the expiration of this second lease, Chua Bok's successors-in-interest (petitioners) continued possession until April 1978, paying adjusted rentals. On July 26, 1977, Herrera, through her attorney-in-fact Luz Tormis, sold the lots to spouses Vicente and Victoria Go. The sale was registered, and titles were transferred to the Go spouses. Procedural History: On November 18, 1977, petitioners filed a case seeking the annulment of the sale to the Go spouses, alleging violation of their option to buy and bad faith on the part of the Go spouses. The trial court dismissed the complaint against the Go spouses, ordered petitioners to vacate the lots and remove their building, and awarded damages and attorney's fees against defendant Herrera. Both petitioners and Herrera appealed. The Court of Appeals affirmed the trial court's decision with modification, eliminating the awards for moral damages, attorney's fees, and costs. Petitioners appealed to the Supreme Court, abandoning their demand for the nullification of the sale and limiting their appeal to the ejectment and demolition orders. The Petition: Petitioners relied on the contract of lease (Exh. "C") and its tacit renewal for their right to possess the premises. The Supreme Court affirmed the Court of Appeals' finding that the lease contract (Exh. "C") was void because Vicenta R. de Reynes, as agent, was not armed with a special power of attorney to enter into a lease contract for more than one year, as required by Article 1878 of the Civil Code. The Court also addressed the issue of tacit renewal under Article 1670, holding that it is limited to terms germane to the lessee's enjoyment of the property and does not extend to special agreements like the option to buy.
Issue(s)
Whether the Court of Appeals erred in affirming the order for petitioners' ejectment from the premises and demolition of their improvements, considering the validity of the lease contract and the agent's authority. Whether the tacit renewal of the lease contract under Article 1670 of the Civil Code revived the option to buy, and the effect of such renewal on terms beyond the right of continued enjoyment. Whether the Court of First Instance had jurisdiction to order ejectment and demolition via a counterclaim, and the nature of the action as an accion publiciana. Whether the Court of Appeals correctly eliminated the award of moral damages, considering the absence of an enforceable right of option to purchase.
Ruling
The petition is DENIED. The decision of the Court of Appeals is AFFIRMED.
Ratio Decidendi
On the validity of the lease contract and the agent's authority: The Court affirmed the Court of Appeals' ruling that the lease contract (Exh. "C"), which involved a lease of real property for more than one year, was void. This was because the agent, Vicenta R. de Reynes, who entered into the contract on behalf of the lessor, was not armed with a special power of attorney as required by Article 1878(8) of the Civil Code. This provision explicitly states that a special power of attorney is necessary to lease any real property to another person for more than one year. Without such special power, the agent's act of entering into a lease agreement for an extended period is considered void. Therefore, the foundation of petitioners' claim, the lease contract, was invalid from its inception. On the effect of tacit renewal (Article 1670) and the revival of the option to buy: While the Court acknowledged that a tacit renewal of the lease (tacita reconduccion) might have taken place under Article 1670 of the Civil Code, as petitioners continued to occupy the premises after the lease expired and paid rentals, this renewal was limited in scope. Citing Bernardo M. Dizon v. Ambrosio Magsaysay, the Court held that a tacit renewal only revives terms of the original contract that are germane to the lessee's right of continued enjoyment of the property. This includes aspects like rental amount and payment schedule. However, it does not extend to special agreements that are foreign to the right of occupancy, such as an option to buy the leased premises. Thus, even if the lease was tacitly renewed, the option to buy was not revived. The petitioners' primary contention was that the option to buy, stipulated in the lease contracts, was revived by the tacit renewal. However, based on the established jurisprudence, particularly Bernardo M. Dizon v. Ambrosio Magsaysay, the Supreme Court clarified that Article 1670 of the Civil Code, which speaks of implied new lease, only revives terms related to the enjoyment of the leased property. The option to buy is considered a special agreement, distinct from the right of occupancy, and therefore, it is not revived by a tacit renewal. The Court reasoned that the presumption of the lessor's will in allowing continued possession pertains to the enjoyment of the property, not to extraordinary stipulations like the right to purchase. On the jurisdiction of the trial court: The petitioners questioned the jurisdiction of the trial court to order their ejectment and demolition, arguing the case was for annulment of sale. The Court found that the counterclaim filed by the defendants-spouses Go effectively constituted an accion publiciana for the recovery of possession. The Court of First Instance, under Section 44(b) of the Judiciary Act of 1948, had jurisdiction over actions involving possession of real property, except for forcible entry and detainer. Since the counterclaim was treated as an independent action, the trial court had the necessary jurisdiction to rule on the issue of possession and order ejectment and demolition. On the elimination of moral damages: The Court of Appeals eliminated the award of moral damages granted by the trial court to the petitioners. This elimination was a logical consequence of the Supreme Court's finding that the petitioners did not possess an enforceable right of option to purchase the leased premises against the respondent Herrera. Since their claim was based on a right that was not validly established or revived, the basis for claiming moral damages arising from the violation of such right was removed.
Main Doctrine
A tacit renewal of a lease contract under Article 1670 of the Civil Code is limited to terms germane to the lessee's right of continued enjoyment of the property and does not extend to special agreements like an option to buy.