Lao v. Lao
REITERATIONFacts
The Antecedents: Spouses Julian Lao and Anita Lao constructed a building on a parcel of land owned by Alfredo Alava in Balasan, Iloilo City, in 1956. They occupied and leased the premises without a written agreement. On May 12, 1982, Alava and Anita Lao executed a 35-year Contract of Lease for an annual rental of P120.00, which was not annotated on the title. Petitioner Rudy Lao also leased another portion of the same property for his business and was aware that Anita Lao and her husband owned the building, leased the portion, and that respondent Jaime Lao, their son, managed the building and business. Petitioner Rudy Lao purchased the property from Alava on March 21, 1995, and obtained TCT No. 152,097. The property was classified as commercial, but the P120.00 annual rental subsisted. Procedural History: On July 14, 1997, petitioner Rudy Lao filed an Unlawful Detainer complaint against respondent Jaime Lao with the MCTC, alleging respondent occupied the property without a lease agreement and without paying rentals, only through petitioner's tolerance. Respondent claimed his mother, Anita Lao, was the lessee, evidenced by a contract of lease, and that he was merely her designated manager. During preliminary conference, respondent admitted actual possession, and petitioner admitted knowledge of Anita Lao's lease and business. The MCTC ruled in favor of petitioner, ordering respondent to vacate, pay monthly rentals, attorney's fees, and litigation expenses. The RTC affirmed with modification, ordering respondent to pay monthly rentals, attorney's fees, and litigation expenses. The RTC reasoned that petitioner, as purchaser, could terminate the unregistered lease, and respondent, not being the lessee, could not invoke its protection. The RTC also held respondent was the real party-in-interest as he was in actual possession. The CA reversed the RTC, ruling that Anita Lao was the real party-in-interest as the lessee, and respondent was merely her administrator/manager. The Petition: Petitioner filed a petition for review on certiorari with the Supreme Court, arguing the CA erred in converting the cause of action against respondent into one against his mother, and dismissing the complaint based on the mistaken finding that the ejectment case should have been filed against Anita Lao. Petitioner contended respondent was the real party-in-interest because his possession was personal, not as caretaker, and in ejectment cases, the defendant is the person in actual physical possession.
Issue(s)
Whether the respondent, Jaime Lao, is the real party-in-interest in the unlawful detainer case filed by the petitioner. Whether the Court of Appeals erred in reversing the decision of the Regional Trial Court and dismissing the petitioner's complaint for ejectment.
Ruling
The petition is denied for lack of merit. The Court of Appeals acted in accord with law when it ordered the dismissal of the complaint.
Ratio Decidendi
On the issue of the real party-in-interest: The Court reiterated that in ejectment cases, "possession" refers to actual physical possession, not legal possession. The sole issue is who is entitled to the physical possession, irrespective of claims of ownership. The Court also affirmed that in unlawful detainer, the real party-in-interest as defendant is the person in possession without a lease and only upon the tolerance of the owner, who is bound to vacate upon demand. However, the Court found that the respondent's possession was not by mere tolerance or generosity of the petitioner, but as the manager for his mother, Anita Lao, the actual lessee. The respondent's possession was in behalf of his mother, not in his own right. The petitioner's claim of ignorance was negated by his admission during the preliminary conference that he knew of Anita Lao's lease, business, and the respondent's role as manager. Therefore, the respondent was not the real party-in-interest against whom an unlawful detainer suit could be filed independently of the lessee. On the Court of Appeals' ruling: The Court found that the CA correctly reversed the RTC's decision. While the petitioner, as the vendee, had the right to file an action for unlawful detainer against the lessee (Anita Lao) upon demand for breach of contract, he could not circumvent the subsisting lease contract by filing the suit against the lessee's son, who was merely an administrator. The Court cited Oro Cam Enterprises, Inc. v. Court of Appeals, stating that a judgment in an ejectment suit binds not only the defendants but also those not made parties if they fall under certain categories, such as agents of the defendant or members of the family, relatives, and other privies of the defendant. Filing the suit against the respondent indirectly was an attempt to get rid of Anita Lao's lease contract, which the Court found impermissible. Thus, the CA's dismissal of the complaint was in accordance with law.
Main Doctrine
In an unlawful detainer case, the real party-in-interest as defendant is the person in actual physical possession of the property, even if that possession is as an administrator or agent for the actual lessee, especially when the plaintiff has knowledge of the lease and the administrator's role.