Dizon v. Court of Appeals
REITERATIONFacts
1. The Antecedents: The underlying dispute originated from a contract of lease with an option to buy a parcel of land. The lessee, Overland Express Lines, Inc., failed to pay the increased monthly rental of P8,000.00, prompting the lessors, Regina P. Dizon and others, to file an ejectment suit. The City Court ordered the lessee to vacate and pay back rentals. The lessee challenged this, arguing issues of option to buy and payment, but the ejectment case's jurisdiction was upheld by the Intermediate Appellate Court and the Supreme Court. 2. Procedural History: Following the affirmed ejectment judgment, the lessee filed a separate action for specific performance to compel a sale, which was dismissed by the Regional Trial Court (RTC) due to res judicata. Another action for annulment of the ejectment judgment was also dismissed by the RTC. The Court of Appeals, however, reversed the dismissal of the specific performance case, finding a perfected contract of sale and ordering the lessors to execute a deed of sale, while affirming the dismissal of the annulment case. Subsequently, the lessors filed a petition for certiorari questioning the agency of Alice A. Dizon in receiving a partial payment. In a separate but related procedural track, the lessors sought execution of the ejectment judgment, which was initially granted but later enjoined by the RTC. The Court of Appeals dismissed the lessors' certiorari petition against the RTC's injunction, reasoning that the prior decision recognizing the lessee's rights as a vendee precluded ejectment. 3. The Petition: The petitioners (lessors) filed two consolidated petitions for certiorari before the Supreme Court. In G.R. No. 122544, they challenged the Court of Appeals' decision that recognized a perfected contract of sale and ordered the execution of a deed of sale, arguing that the option to purchase had lapsed and that Alice A. Dizon lacked authority to accept the partial payment. In G.R. No. 124741, they assailed the Court of Appeals' dismissal of their petition to enjoin the RTC from enforcing an injunction that prevented the execution of the ejectment judgment, arguing that the ejectment case had been definitively settled and that the lessee's right to possess was not established. The Supreme Court granted both petitions, reversing the Court of Appeals' decisions and remanding the case for execution of the original ejectment judgment, while ordering the refund of the P300,000.00 payment.
Issue(s)
Whether the Court of Appeals erred in ruling that a perfected contract of sale existed. Whether the option to purchase was validly exercised within the stipulated period. Whether the lease agreement was validly renewed on a month-to-month basis, and whether a demand to vacate was necessary for judicial action. Whether the City Court had jurisdiction over the ejectment case despite the pendency of a specific performance suit. Whether Alice A. Dizon had the authority to act as agent for the petitioners in receiving the partial payment, and the implications regarding the refund of the payment.
Ruling
The Supreme Court granted both petitions, reversed and set aside the decisions of the Court of Appeals, and ordered the remand of the case to the trial court for immediate execution of the ejectment judgment. However, it ordered petitioners to refund the P300,000.00 received by Alice A. Dizon.
Ratio Decidendi
On the existence of a perfected contract of sale: The Court held that there was no perfected contract of sale. A contract of sale requires consent, object, and price. The P300,000.00 payment to Alice A. Dizon, who was not shown to have the petitioners' consent or authority to act as their agent, did not constitute a valid consent from the co-owners. The private respondent was put on inquiry to discover the extent of Alice A. Dizon's authority, and its failure to do so made it negligent. Therefore, the purported sale was not perfected. On the exercise of the option to purchase: The Court ruled that private respondent failed to exercise the option to purchase within the stipulated one-year period. Even if the option were still subsisting when the P300,000.00 was tendered, the suit for specific performance was filed more than ten years after the cause of action accrued, barred by Article 1144 of the Civil Code. The right to exercise the option expired with the termination of the original one-year lease contract. On the monthly lease and ejectment: The Court affirmed that the lease was on a month-to-month basis under Article 1687 of the Civil Code, as rent was paid monthly. Consequently, the lease expired at the end of each month, and a demand to vacate was not even necessary for judicial action. The failure to pay the increased rental in June 1976 gave petitioners a valid cause of action for ejectment. On jurisdiction: The City Court had exclusive jurisdiction over the ejectment suit, and the filing of a specific performance case did not divest it of jurisdiction. The ejectment judgment, having been affirmed by the IAC and the Supreme Court, had become final and executory. On agency and refund: The Court reiterated the principle that persons dealing with an agent are put on inquiry and must discover the agent's authority at their peril. There was no showing that the petitioners consented to or authorized Alice A. Dizon to act on their behalf in the transaction with the private respondent. The private respondent's negligence in ascertaining her authority precluded it from seeking relief based on a supposed agency. While the ejectment judgment was ordered to be executed, the Court ordered the petitioners to refund the P300,000.00 received by Alice A. Dizon, recognizing that this amount was paid by the private respondent in an attempt to exercise the option to purchase, even though the sale was not perfected.
Main Doctrine
A monthly lease, even if verbal, expires at the end of each month, and a demand to vacate is not necessary for judicial action after the expiration of every month. The right to exercise an option to purchase in a lease contract expires with the termination of the original lease period, and such option is not revived in an impliedly renewed lease on a month-to-month basis, as it is alien to the right of occupancy. A perfected contract of sale requires a meeting of minds on the object and price, and a person dealing with an agent must discover the agent's authority at their peril.