J.

ROBERT MIRANDA GOZUN

Honor Student Awardee/Deans Lister
San Beda College of Law - Manila

NOTES on SALES and LEASE

Cases herein:

1. Effect when no redemption is made:

a. Felicen v. Orias, 1987
b. Vda. De Macoy v. CA, 1992
c. Paez v. Magno, 1949
2. Equitable Mortgage
a. Cachola v. CA, 1992
3. Legal Redemption; concepts and instances
a. Primary Structure Corp. (PSC) v. Sps. Valencia, 2003
b. Etcuban v. CA, 1987
4. LEASE; Disqualification of lessee
a. Rodriguez v. Borromeo, 43 Phil. 479
b. Melencio v. Dy Tiao Lay, 1930
c. Tipton v. Andueza, 1906
5. Assignment of Lease
a. Vda. De Hijos de Barretto v. Sevilla, Inc., 1935
6. Obligations of the lessor
a. Villaruel v. Manila Motor Co., 1958
7. Trespass made by a third person
a. Goldstein v. Roces, 1916
8. Rescission and indemnification for damages or only the latter allowing the contract
to remain in force, in case of failure of the lessor to comply with Article 1654 (Art.
1659)
a. Baens v. C.A., 1983

QA Digest.

1. FELICEN v. ORIAS, 1987

G.R. No. L-33182, December 18, 1987; J. Narvasa

Keys: Construction of Article 1606 (3); Civil action imputing the sale with pacto de retro
cannot resurrect a right which had already expired.

Facts: Spouses Orias sold to Felicen a parcel of land in Samar with a right to repurchase -
sale with pacto de retro under a deed of sale with a right to repurchase. The right to
repurchase is for two years which expired without the vendor exercising the same. 8 years
thereafter, the heirs of the vendor a retro (Orias) filed a suit to compel the vendee (Felicen)
to resell and reconvey subject property. After trial, the court rendered judgment finding the
contract to be one of sale de retro.

The heirs now claim that they have 30 days for which to redeem the subject property
invoking Article 1606 (3) of the NCC which states that the vendor may still exercise the
right to repurchase within thirty days from the time final judgement was rendered in a civil
action on the basis that the contract was a true sale with a right to repurchase. The CA
agreed with the position of the lower court. The heirs of Felicen, vigilant upon their rights,
appealed at the Supreme Court.

Question: Are the petitioners (Heirs of Felicen vendee a retro) entitled to keep the
property?

Answer:

Yes, because the right to repurchase the property under the terms of the contract
had already expired a long time ago. Obviously, as held by the Supreme Court, the law could
not allow that it would be within the power of every vendor a retro to set at naught a pacto
de retro, or resurrect an expired right of repurchase, by simply instituting an action to
reform the contract known to him to be in truth a sale with pacto de retro into an
equitable mortgage.

The application of the third paragraph of Article 1606 is predicated upon the bona
fides of the vendor a retro. It must appear that there was a belief on his part, founded on
facts attendant upon the execution of the sale with pacto de retro, honestly and sincerely
entertained, that the agreement was in reality a mortgage, one not intended to affect the
title to the property ostensibly sold, but merely to give it as security for a loan or other
obligation. In that event, if the matter of the real nature of the contract is submitted for
judicial resolution, the application of the rule is meet and proper: that the vendor a retro be
allowed to repurchase the property sold within 30 days from rendition of final judgment
declaring the contract to be a true sale with right to repurchase.

Conversely, if it should appear that the parties' agreement was really one of sale
transferring ownership to the vendee, but accompanied by a reservation to the vendor of
the right to repurchase the property and there are no circumstances that may
reasonably be accepted as generating some honest doubt as to the parties' intention, the
proviso is inapplicable.

Furthermore, there was no showing that any badge that give rise to presumption of
equitable mortgage exist under Art. 1602.
 2. Vda. De Macoy (heirs) vs. C.A. and Redillas, 1992
G.R. No. 95871 February 13, 1992, J. Medialdea

Facts: Dominga Tabora Vda. de Macoy was the owner of a rice land, with an area of 3.0082
hectares, located at Camarines Norte. She acquired the land from spouses Serrano on
January 27, 1964, for a consideration of P11,000.00. On December 28, 1970, she executed a
document which is dominated "Pabilihang Mabibili-Muli" or sale with a right to repurchase
in favor of private respondents spouses Jesus F. Redillas and Anatalia Elon (now
represented by his heirs), for the sum of P6,000.00. It was provided therein that the period
of repurchase is between December 29, 1973 and December 29, 1975. This period lapsed
without having been exercised by the vendor. Subsequently, in 1978, Redillas was able to
have the property registered under his name through a petition for Recording of
Consolidation of Ownership before the RTC of Daet. On October 4, 1978, petitioners (Heirs
of Vda. De Macoy) assailed the decision, alleging inter alia that the contract was not of sale
with a right to repurchase but in fact an equitable mortgage. Furthermore, the price was
unconscionable. Therefore, they are entitled to recover the property. The Regional Trial
Court favoured the petitioners. Redillas appealed before the Court of Appeals. The CA
reversed the ruling of the RTC and favoured Redillas. Henceforth, the Heirs of de Macoy
petitioned the Supreme to review and reverse the ruling of the CA.

Question: Are the petitioners entitled to recover the property from Redillas?

Answer:

No, because the period of repurchase had expired a long time ago. The Court culled
the records and examined the contract. It was clear that the contract was of sale with a
right to repurchase. It was also clear that the period for which to repurchase already
expired.

Furthermore, the argument of sale being unconscionable could also not stand
because based on the evidence on record, none of the instances found in Art. 1602 is
present in the case. Rather, evident manifestations of a genuine sale with right to
repurchase exist. The price of the sale is not unusually inadequate. The price fixed in
a pacto de retro sale is not necessarily the true value of the land sold.

Note that the Supreme Court relied heavily upon the ruling of Felicen v. Orias, 1987 a
precedent to this case.

Question: What are these badges that give rise to presumption that the contract
entered into was of an equitable mortage?
 These badges are, to wit:

a. When the price of a sale with a right to repurchase is unusually inadequate;

b. When the vendor remains in possession as lessee or otherwise;
c. When upon or after the expiration of the right to repurchase another
instrument extending the period of redemption or granting a new period is
executed;
d. When the purchaser retains for himself a part of the purchase price;
e. When the vendor binds himself to pay the taxes on the thing sold;
f. In any other case where it may be fairly inferred that the real intention of the
parties is that the transaction shall secure the payment of a debt or the
performance of any other obligation.

Question: Any other effect should the contract be found to be an equitable mortgage
instead of a sale with a pacto de retro arising from the aforementioned grounds?

Yes, there is. Any money, fruits, or other benefit to be received by the vendee as rent
or otherwise shall be considered as interest. (Art. 1602, last paragraph)

3. Paez v. Magno, 1949

C.J. Moran

Syllabus:

1. OBLIGATION AND CONTRACT; PAYMENT; TENDER OF PAYMENT WITHOUT

CONSIGNATION, EFFECT OF. consignation shall be made, according to article 1178, "by
delivery to a judicial authority of the things due, accompanied by proof of tender, when
required, and of notice of the deposit in other cases."cralaw library

2. TENDER OF PAYMENT IS SUFFICIENT TO COMPEL REDEMPTION BUT IS NOT IN ITSELF

A PAYMENT. Tender does not in itself relieve the vendor from his obligation to pay the
price when redemption is allowed by the court. In other words, tender of payment is
sufficient to compel redemption but is not in itself a payment that relieves the vendor from
his liability to pay the redemption price.

Facts: On October 1943, plaintiffs and appellants (Paez) borrowed from defendant
(Magno) and appellee P4,000 in Japanese Military notes, with the promise to pay within a
period of five years. As a security, a parcel of land was mortgaged in favor of the creditor.
On September 1944, payment of this debt was offered and tendered, but was rejected by
the creditor. For that reason, an action was filed on November 18, 1945 asking that the
obligation be declared as already paid and the deed of mortgage be cancelled.

Defendant filed a motion to dismiss upon the ground that plaintiffs have no cause of action,
there being no allegation that the thing due was consigned in court, as provided by law. The
motion was granted, hence, this appeal by the plaintiffs.

Question: Is the defendant (Credit) correct in moving for the dismissal of the action?

Answer:

Yes, the order of dismissal is correct because Article 1176 of the Civil Code provides
that "if a creditor to whom tender of payment has been made should refuse without reason
to accept it, the debtor may relieve himself of the liability by the deposit (consignacion) of
the thing due." According to article 1177, "in order that the deposit (consignacion) of the
thing due may release the obligor, previous notice thereof must be given to the persons
interested in the performance of the obligation." And the consignation shall be made,
according to article 1178, "by delivery to a judicial authority of the things due,
accompanied by proof of tender, when required, and of notice of the deposit in other
cases."

Furthermore, in the complaint, there is no allegation that the amount of debt was
consigned in court after tender of payment had been made and rejected. Therefore, the
debtor is not relieved of his liability.

The rule regarding payment of redemption prices is invoked. True that consignation
of the redemption price is not necessary in order that the vendor may compel the vendee to
allow the repurchase within the time provided by law or by contract. In Rosales v. Reyes and
Ordoveza, 25 Phil., 495, it was held that a mere tender of payment is enough, if made on
time, as a basis for action against the vendee to compel him to resell. However, that tender
does not in itself relieve the vendor from his obligation to pay the price when redemption is
allowed by the court. In other words, tender of payment is sufficient to compel redemption
but is not in itself a payment that relieves the vendor from his liability to pay the
redemption price.

4. Cachola v. Sps. Briones, 1992

J. Gutierrez, Jr.

Summary: In a nutshell, the Sps. Briones sold the subject property to Cachola by virtue of a
deed of sale. They now assail the sale and pray for its annulment by reason that the same
was not a real sale but one of equitable mortgage because the price was inadequate.
Consequently, they pray that the property be re-conveyed unto them with damages. The SC
held that there was a real sale and not one of equitable mortgage. There was not evidence
to support such claim.

Facts: The issue raised in this petition is whether the contract involving the real property
in this case, i.e., a house and lot, at No. 10 Langka St., Project 2, Quezon City with an area of
236.30 square meters, is one of sale or an equitable mortgage.

On July 30, 1973, the respondent spouses Federico Briones and Trinidad Encinas, as the
registered owners of the subject property mortgaged the same to Benjamin Ocampo as a
security for a loan of P15,000.00. For failure of the spouses to pay the loan, Ocampo caused
the foreclosure of the real estate mortgage and the subsequent sale of the property at
public auction. Ocampo being the highest bidder, purchased the property at the auction. A
certificate of sale was executed in his favor.

The respondents were able to exercise their right of redemption within the one-year period
from the auction sale by paying P19,876.80 plus accrued interests and taxes. Hence, the
ownership retained with the BRIONESES.

This was made possible through a loan of P40,000.00 obtained from petitioner (Cachola),
the late Mauricio Cachola and Angelina Alfaras. This second loan was evidenced by a
promissory note executed by the spouses BRIONES duly signed by them dated March 11,
1975, but subscribed before a notary public on March 13, 1975.

The (Loan) Kasunduan recognized the full ownership by the respondents. There was also a
stipulation that after the properties shall have been redeemed from Ocampo, the title
should be placed in the hands of Cachola for the purpose of securing the loan.

Hence, another real estate mortgage was entered into by virtue of the Kasunduan over the
same house and lot in favor of petitioner Cachola. TCT No. 72398 was placed under the
custody of Angelina Alfaras on behalf of the petitioner.

The respondent spouses BRIONES failed to pay any amount within the stipulated six month
period and even afterwards.

On January 30, 1976, petitioner executed a Release of Mortgage. A Deed of Absolute Sale
of the properties was entered into by the parties for P60,000.00, on the same date.
TCT No. 72398 in the name of Federico Briones was cancelled and TCT No. 216104
was issued by the Register of Deeds of Quezon City in favor of Mauricio Cachola.

Sometime in 1977, the petitioner (Cachola) filed an unlawful detainer suit against the
respondents-spouses BRIONES before the City Court of Quezon City, Br. III. In February of
1978, the latter were ejected by the court sheriff on the strength of a writ of execution.
In June 1979, the respondents BRIONES filed a suit for annulment of the deed of absolute
sale and annulment of the unlawful detainer judgment before the Court of First Instance
Rizal, Quezon City, Br. XVIII. This case was dismissed, without prejudice on February 24,
1981 for failure to prosecute.

On November 9, 1981, the subject property was conveyed by Cachola to his son Ebenezer
Cachola by way of donation inter vivos. The transfer by donation was registered with the
Register of Deeds of Quezon City so that TCT No. 216104 of Mauricio Cachola was canceled
and a new one, TCT No. 339434 in the name of Ebenezer Cachola was issued.

On June 10, 1985, the respondents filed the instant case, Civil Case No. Q-45163 against the
petitioner CACHOLA and Angelina Alfaras before the Regional Trial Court, Quezon City,
Branch 76 again for: annulment of the deed of absolute sale, cancellation of TCT No.
216104 of the petitioner and annulment of the unlawful detainer judgment.

The trial court ruled that the action for annulment of the deed of sale on the ground of
fraud had already prescribed, and that the contract entered into was not one of absolute
sale but an equitable mortgage because of the gross inadequacy of the price of the sale.
Thus, it ordered the cancellation of TCT No. 216104 issued in the name of Mauricio Cachola
and the subsequent deed of donation, and the revival of TCT No. 72398. The court also
ordered Cachola to reimburse the balance of rentals received from the lease on the
property after the respondents vacated it.

On appeal, the decision of the trial court was affirmed with modifications. Hence, the
petition for review on certiorari.

Question: Was it correct for the RTC and CA to order the annulment of the deed of
sale and declare the same as equitable mortgage?

Answer:

No, because there was no sufficient evidence to support this decision. The Supreme
Court exercised its power to look upon the evidences presented and found out that there
was no inadequacy upon the price.

After a careful re-examination of the records as well as the decisions of the two
courts below, the Court was convinced that the evidence was wanting in order to
substantiate the conclusion that a contract which in form and substance is a deed of sale is
actually an equitable mortgage. There was no evidence presented whatsoever that the
property amounted to Php. 400,000 in 1976 (236.30 square-meter), as what was claimed
by the Sps. Briones.

The inference deduced by the trial court would have been convincing and plausible
had there been a standard or guide with which a person can reasonably determine the
contract price to be truly abnormally inadequate. Without that standard, a judgment
attaching great weight to the lone testimony of Federico Briones on that point stands on
shaky grounds.

The Court holds that even assuming that the consideration was below standard, it
was not unusually inadequate during that time. Besides, inadequacy of the price does not
by itself support the conclusion that the property was not at all sold to the petitioner or
that the contract was a loan. Inadequacy is not sufficient to set aside a sale unless it is
purely shocking to the conscience (Vda. de Cruzo v. Carriaga, 174 SCRA 330 [1989]; and
Prudential Bank v. Martinez, 189 SCRA 612 [1990]).

An equitable mortgage is "one which although it lacks some formality, form of

words or other requisites prescribed by a statute, show(s) the intention of the parties to
charge a real property as security for a debt and contains nothing impossible or contrary to
law." (Vda. de Zulueta v. Octaviano, 121 SCRA 314 [1983], quoting Outline of Civil Law,
J.B.L. Reyes. and R.C. Puno)

The words of the contract are clear and leave no doubt as to the desire of the
spouses to transfer the property by way of sale to the petitioner. No other meaning could
be given to the terms and stipulations of the contract but their literal meaning. (Article
1370, New Civil Code).

5. PSC v. Valencia, 2003

J. Vitug

Facts: Petitioner is a private corporation based in Cebu City. Adjacent to the lot of
petitioner are 3 parcels of land, identified to be Lot 4527, Lot 4528, and Lot 4529 with a
total combined area of 3,751 square meters. The three lots, aforenumbered, have been sold
by Hermogenes Mendoza to respondent spouses sometime in December 1994. Petitioner
learned of the sale of the lots only in January, 1996, when Hermogenes Mendoza sold to
petitioner Lot No. 4820, a parcel also adjacent to Lot 4523 belonging to the
latter. Forthwith, it sent a letter to respondents, on 30 January 1996, signifying its intention
to redeem the three lots. On 30 May 1996, petitioner sent another letter to
respondents tendering payment of the price paid to Mendoza by respondents for the
lots. Respondents, in response, informed petitioner that they had no intention of selling the
parcels. Thereupon, invoking the provisions of Articles 1621 and 1623, petitioner filed an
action against respondents to compel the latter to allow the legal redemption. Petitioner
claimed that neither Mendoza, the previous owner, nor respondents gave formal or even
just a verbal notice of the sale of the lots as so required by Article 1623 of the Civil Code.

Question: Are the petitioners entitled to redeem subject property?

Answer:

Yes. On the first issue, there has been no evidence proffered to show that
respondents are not themselves owners of rural lands for the exclusionary clause of the
law to apply. Therefore, the petitioner is not precluded from exercising his right to redeem.

Under 1621, whenever a piece of rural land not exceeding one hectare is alienated,
the law grants to the adjoining owners a right of redemption except when the grantee or
buyer does not own any other rural land. In order that the right may arise, the land sought
to be redeemed and the adjacent property belonging to the person exercising the right of
redemption must both be rural lands. Verily, if one or both are urban lands, the right
cannot be invoked. In this case, subject lands are all rural lands.

On the second issue, the requirement of mandatory notice was not followed by the
vendor. The written notice of sale is mandatory. Article 1623 of the Civil Code provides that
the right of legal pre-emption or redemption shall not be exercised except within thirty
days from notice in writing by the prospective vendor, or by the vendor, as the case may
be. Notwithstanding actual knowledge of a co-owner, the petitioner is still entitled to a
written notice from the selling co-owner in order to remove all uncertainties about the sale,
its terms and conditions, as well as its efficacy and status. Hence, the petitioner still has the
right to be sent notice for it to exercise its 30-day redemption period.

6. Etcuban v. CA & Songalia, 1987

J. Paras

Facts: Plaintiff inherited a piece of land with an area of approximately 14.0400 hectares
together with his co-heirs from their deceased father. A case for the settlement of the estate
of the late Eleuterio Etcuban In said case, petitioner Dominico Etcuban the spouse of the
decease Demetria Initan and Pedro, Vicente, Felicitas, Anastacio, Froilan, Alfonso,
Advincula, Anunciaciori Jesus, Aguinaldo, surnamed Etcuban were declared as co-owners
of the property in question. Thereafter the 11 co-heirs executed in favor of defendants
(private respondents herein) 11 deeds of sale of their respective shares in the co-
ownership for the total sum of P26,340.00. It is not disputed that the earliest of the 11
deeds of sale was made on December 9, 1963 and the last one in December 1967.

Subsequently, Dominico Etcuban discovered that these lots were sold to defendants-
appellee (Songalia). He now invokes his right to be notified of the sale in order for him to
exercise his right under Article 1623 of the NCC. He now sued to compel the vendors and
vendees to sell him the subject lots. Now, in their affirmative defenses, included inter alia
the descriptions of the sale and that the deed of sale was furnished by the defendants to
plaintiff Etcuban. The answer with counterclaim was filed on March 18, 1972. Plaintiff
deposited to the Court the amount covering what was paid by the defendants to the
vendors on May 27, 1974.

Question: Is the plaintiff entitled to exercise his right to buy the subject properties?

Answer:

No, he is not entitled to exercise this right under Article 1623 because the 30-day
period for which to exercise the right of redemption already lapsed.

The Court ruled that the answer with counterclaim which included the furnishment
of a copy of deed of sale, the same shall also serve as notice to possible redemptioners was
enough to serve as written notice to plaintiff Etcuban.

Notably, the Court ruled that there is no particular form as to what the notice should
be presented to possible redemptioners because for as long as the notice is in writing, the
same shall suffice for its purpose under the law. Verily, this ruling is not of first impression
because in the case of Conejero vs. Court of Appeals (16 SCRA 775), it was ruled that the
furnishing of a copy of the disputed deed of sale to the redemptioner, was equivalent to the
giving of written notice required by law.

7. Rodriguez v. Borromeo, 1922

J. Villamor

Syllabus: 1. DlSSOLUTION OF CONJUGAL PARTNERSHIP; LEASE OF CONJUGAL

PROPERTY.Upon the dissolution of the conjugal partnership by the death of the wife, the
husband becomes the administrator of the conjugal property, and continues in that
capacity until the said partnership is finally liquidated, and as such an administrator, he
may, before said liquidation, lease without judicial authority, the conjugal property
for a period not exceeding six years, even if a portion of the property so leased may
possibly belong to the deceased wife. Article 1548 of the (old) Civil Code, which fixes in
six years the maximum period for which an administrator may lease conjugal property, is
general and applies to a judicial administrator, or an administrator of a deceased's
property, as well as to one of conjugal property. (NOTE: Now, in our present CIVIL CODE
[NCC] it should not exceed 1 year)

2. ID.; LIQUIDATION OF CONJUGAL PARTNERSHIP; INVENTORY OF PART OF CONJUGAL

PROPERTY.From the fact that when the husband applied to the court for letters of
administration over the estate of his deceased wife, he included in the inventory, attached
by him to the application, certain properties which he claimed belonged to her, it does not
follow that the conjugal partnership has already been finally liquidated, if notwithstanding
that fact, the properties remained subject to the payment of the partnership debts, and the
court does not appear to have finally approved the accounts of the administrator, or
adjudicated to each member of the conjugal partnership his share of the property of said
partnership to which he is entitled.

Facts:

On August 30, 1919, the parties in this case entered into a contract of lease of some rural
properties known as Hacienda Felicidad in the municipality of La Carlota, Occidental
Negros, used for the cultivation of sugar cane. According to the terms of the contract the
lessor, the herein plaintiff (Rodriguez), leased to the defendant the lands in question for a
period of five years, subject to extension at the option of the lessee at the rate of P3,800 per
year, which rent was payable at the end of the harvest which should be not later than the
month of May of each year.

At the time of entering into the contract by virtue of which the lessor delivered
the Hacienda Felicidad to the lessee (Borromeo), it was planted with sugar cane and it was
agreed between the parties that the lessee would take charge of milling the cane and would
pay the lessor the sum of P4.50 per picul of sugar.

One-half of three of the properties belong to the estate of Julia Guillas, deceased wife of the
lessor, necessary authority approving the contract of lease of these portions of land
belonging to the deceased, of which property he was the judicial administrator. Indeed,
here requested the court to approve the lease, but the court denied October 1919 the
authority requested.

In December, 1919 the defendant (Rodriguez) began to mill the sugar cane of hacienda and
on March 10, 1920, the plaintiff commenced this action for the purpose of annulling the
contract of lease on the ground that the object thereof was impossible of performance. The
lower court ruled that the contract was entered into sans legal authority hence null and
void.

Question:

Is the plaintiff in its argument and the lower correct in its ruling that the contract is
null and void?

Answer:

No. The contract is valid because under Art. 1548 of the (old) Civil Code (now 1647
but already amended in the NCC), no lease for a term of more than six years shall be made
by then husband with respect to the property of his wife. Hence, a lease contract entered
into by the husband as regards the paraphernal property of his wife.
 Affirmatively, the court established the method of administering the property of a
conjugal partnership when it is dissolved by the death of the wife. The method established
is that when a conjugal partnership is dissolved by the death of the wife the husband is the
administrator of the affairs of the partnership until they are liquidated.

Furthermore, in the event of a dissolution by the death of the husband or in case of

the demise of the husband after the dissolution by the death of the wife, his administrator is
also the administrator of the partnership affairs and is the legal representative of the
partnership.

8. Melencio v. Dy Tiao Lay, 1930

J. Ostrand

Syllabus:

I. CIVIL CODE; COMMUNITY OF PROPERTY; ALTERATIONS.Article 397 of the Civil Code

provides: "None of the owners shall, without the consent of the others, make any
alterations in the common property even though such alterations might be advantageous to
all." While the property referred to in this case was leased, without the consent of all the
co-owners, building thereon one house and three warehouses, it cannot be considered that
the alterations are of sufficient importance to nullify the lease, especially so since none of
the co-owners objected to such alterations until over twenty years after the execution of
the contract of lease.

2.ID.; ID.; CONTRACT OF LEASE; RESCISSION.The provision in the contract that the
lessee, at any time before he erected any building on the land, might rescind the lease, can
hardly be regarded as a violation of article 1256 of the Civil Code.

3.ID.; ID.; ID.; ANNULMENT.In this case only a small majority of the co-owners executed
the lease here in question, and according to the terms of the contract the lease might be
given a duration of sixty years. This is an open violation of article 1548 of the Civil Code
and the contract of lease herein in question should therefore be declared null and void.

Summary: A contract entered into without concurrence of the majority of the co-owners.
The period of the contract is beyond what is allowed under Article 1548 (old) Civil Code.
Hence the contract was declared null and void.

Facts:

On August 1, 1927, the plaintiffs, Manuel, Mariano, Pura and Caridad Melencio, brought the
present action against the defendant-appellee, Dy Tiao Lay for the recovery of the
possession of a parcel of land situated in the town of Cabanatuan, Nueva Ecija, and
containing an area of 4,628.25 square meters. The plaintiffs further demand a monthly
rental of P300 for the use and occupation of the parcel from May, 1926, until the date of the
surrender to them of the possession thereof; and that if it is found that the said appellee
was occupying the said parcel of land by virtue of a contract of lease, such contract should
be declared null and void for lack of consent, concurrence, and ratification by the owners
thereof.

Ramon Melencio died in 1914, and his widow, Liberata Macapagal, was appointed
administratrix of his estate. In 1913 the land which includes the parcel in question was
registered under the Torrens system. The lease was not mentioned in the certificate of title,
but it was stated that one house and three warehouses on the land were the property of
Yap Kui Chin.

Shortly after the execution of the lease, the lessee took possession of the parcel in question
and erected the mill as well as the necessary buildings, and it appears that in matters
pertaining to the lease, he dealt with Pedro R. Melencio, who from 1905 until his death in
1920, acted as manager of the property held in common by the heirs of Julian Melencio and
Ruperta Garcia. The original lessee, Yap Kui Chin, died in 1912, and the lease, as well as the
other property, was transferred to Uy Eng Jui who again transferred it to Uy Eng Jui & Co.,
an unregistered partnership. Finally the lease came into the hands of Dy Tiao Lay, the
herein defendant-appellee.

In 1920 the heirs of Julian Melencio made an extrajudicial partition of parts of the
inheritance, and among other things, the land here in question fell to the share of the
children of Ramon Melencio, who are the original plaintiffs in the present case. Their
mother, Liberata Macapagal, as administratrix of the estate of her deceased husband,
Ramon, collected the rent for the lease at the rate of P20.20 per month until the month of
May,1926, when she demanded of the lessee that the rent should be increased to P300 per
month, and she was then informed by the defendant that a written lease existed and that
according to the terms thereof, the defendant was entitled to an extension of the lease at
the original rental. The plaintiffs insisted that they never had any knowledge of the
existence of such a contract of lease and maintained that in such case the lease was
executed without their consent and was void. It may be noted that upon careful search,
a copy of the contract of lease was found among the papers of the deceased Pedro R,
Melencio. Thereafter the present action was brought to set aside the lease and to recover
possession of the land. Upon trial, the court below rendered judgment in favor of the
defendant declaring the lease valid and ordering the plaintiffs to pay the P272 demanded
by the defendant in his counterclaim. From this judgment the plaintiffs appealed.

Question: Is the contract of lease null and void?

Answer:

Yes. The Contract was in violation of Art. 1548 which allows only a period not
exceeding six years should the same be entered into by and behalf of the person with
respect to the property of the deceased.
 Article 1548 (now 1647 but already amended in the NCC) provides: No lease for a
term of more than six years shall be made by then husband with respect to the property of
his wife, by the father with respect to that of his children, by the guardian with respect to
that of his ward, or by a manager in default of special power with respect to the property
intrusted to him for management.

As regards Article 398 (now Article 492) Civil Code, the same provides that for
administration and better enjoyment of the thing owned in common the decision of the
majority of the co-owners shall be binding. Therefore, there being no concurrence of the
majority as regards the lease entered into, there can be no valid contract that should bind
the property.

9. W.H. Tipton (Chief of the Bureau of Lands and Administrator of the Estate of the San
Lazaro Hospital) v. Andueza, 1906
J. Mapa

On the 30th day of October, 1899, Vicente Aguirre y Flores, as administrator of the San
Lazaro Hospital, leased to the defendant in this case a tract of land belonging to the
hospital. It was stipulated in the contract that the lease should run for a period of ten years
from the 1st day of January, 1899. Aguirre, the administrator, was duly authorized to
execute such contracts, but his power was general in terms and contained no provision
specially authorizing him to make leases with respect to the hospital property for a period
of ten years or any other specific term.chanroblesvirtualawlibrary chanrobles virtual law
library

The plaintiff, as the present administrator of the hospital property, claims that the
contract made by his predecessor, Aguirre, was null and void for want of power on his part
to make such contract, basing his contention upon the provisions of article 1548 of the Civil
Code. That article reads as follows:

The husband with respect to the property of his wife, the father and
guardian with regard to that of his children or minor, and the administrator
of property without a special power giving him such authority, can not
execute a lease for a period exceeding six years.

Question: Is the plaintiff correct in averring that 1548 applicable to the case?

Answer:

Yes, it is correct that 1548 is applicable to the case. This provision plainly shows
that Aguirre could not, as administrator, have validly executed a lease of the land in
question for a period of ten years in the absence of special authority to that effect.
 However, this defect, did not affect the contract in its entirety, but only in so far as it
exceeded the six-year limit fixed by law as the maximum period for which an administrator
can execute a lease without special power. The contract in question was perfectly valid in
so far as it did not exceed that limit.

Aguirre, within the scope of the legal authority he had under his general power to
lease. That general power carried with it, under the article above quoted, the authority to
lease the property for a period not exceeding six years. There was no excess of authority
and consequently no cause for nullification arising therefrom, as to the first six years of the
lease. As to the last four, the contract was, however, void, the administrator having acted
beyond the scope of his powers.

The trial court construed article 1548 of the Civil Code as applying only to
administrators of estates of deceased persons. This construction is manifestly erroneous.
The provisions of that article are general and apply as well to administrators of
property of living as of deceased persons.

10. Vda. De Hijos de Barretto Inc., v. Sevilla, Inc., 1935

J. Imperial

(Assignment of rights. Novated upon new terms with consent of creditor)

Syllabus:

1.CONTRACTS; NOVATION; IMPLIED CONSENT OF THE CREDITOR.In the quoted

clauses from the duly registered chattel mortgage Exhibit C, executed on August 15,
1931, by A. G. and B. del R., wherein the plaintiff directly intervened and took part
through its manager J. G. B., who signed in its name, appear statements of the
contracting parties clearly and logically compelling the deduction that, under its
terms, the plaintiff knew of the conveyance made by V. A. and E. S. in favor of A. G.
and B. del R., and virtually approved of and consented to the substitution of the new
lessees. In the face of such circumstances, we believe the only logical and reasonable
deduction is that in view of the second mortgage, the plaintiff was apprized of and
acquiesced in the change of lessees. Under articles 1203 and 1205 of the Civil Code,
the substitution of the debtor in an obligation with the creditor's consent, produces
novation by bringing into being a new obligation in place of the old. Applied to the
case under consideration, the result is, that if the plaintiff consented to the
substitution of A. G. and B. del R. in lieu of the original lessees, it has exhausted all its
right of action against the latter and can only enforce the same against the new
lessees.

Note:
Under the facts, the only question perhaps which we must resolve is whether the contract
of lease was novated by the substitution of lessees, and, if so, whether the, substitution was
consented to by the plaintiff lessor.

Articles 1203 and 1205 of the Civil Code provide:

ART. 1203. Obligations may be modified:

1. By the change of their object or principal conditions;

2. By substituting another in place of the debtor;

3. By subrogating a third person to the rights of the creditor.

ART. 1205. Novation which consists in the substitution of the of a new debtor in the place
of the original one may be made without the knowledge of the latter, but not without the
consent of the creditor.

11. Villaruel v. Manila Motors Co.,

J. Reyes J.B.L.

Quick Summary: Parties entered into a contract, Villaruel being the lessor, Manila Motors
Co., the lessee. The period started, lessee made use of the property. Japanese occupation
came and during the same, the lessee was not able to occupy said property. Dr. Villaruel,
after liberation, insists that he is entitled to back rentals during the time the property was
occupied by the belligerent occupant.

Question: Is he correct?

Answer: No, because the same inter alia is considered not a mere trespass but in fact an
event outside the control of both lessor and lessee.

12. M. Goldstein v. Roces, 1916

C.J. Arellano

Trespass made by third persons.

Syllabus:

1. LANDLORD AND TENANT; TRESPASS ON RIGHT OF POSSESSION; TRESPASS IN FACT

ONLY ON THE USE OF THE PROPERTY LEASED.If, by reason of the obligation imposed by
article 1554 of the Civil Code upon the lessor to maintain the lessee in the peaceful
enjoyment of the lease during all the time covered by the contract, the lessor must answer
to the lessee for all kinds of trespass which the latter may suffer, whether it be on the
possession, or the enjoyment, or the use of the demised property, there would be no
purpose in that provision of article 1560 which provides that: "The lessor shall not be
obliged to answer for trespass in fact only (de mero hecho) made by a third person in the
use of the tenement lcased, but the lessee shall have a direct action against the trespasser."

2 .ID.; ID.; DAMAGES.In order that the lessee may recover damages by reason of trespass
by a third person on his possession, in accordance with article 1554, he must bring suit
against the lessor to -warrant the lease as provided in article 1553 of the same code.

Facts: Defendants leased to plaintiff the first floor of a building belonging to them. They
leased the rest of the promised to the proprietor of the Hotel de Francia. The proprietor of
this hotel requested permission of defendants to add another story to the building.
Defendants gave him permission to do so. The proprietor of the hotel covenanted with a
contractor for the construction of the new upper story. The contractor having taken charge
of the work, it was found necessary to open holes in the roof for the insertion of uprights.
When it rained, the water leaked through these holes. Plaintiff conducted a saloon business,
known as the "Luzon Cafe," in the premises leased by him and the water stained the walls
and furniture, making his place unattractive to his customers. As a consequence, it became
necessary to make certain repairs and his receipts fell off during the progress of this work.
The trial court, basing his action on the provisions of article 1554 of the Civil Code,
rendered judgment in plaintiffs behalf.

Question: Is the lower court correct in favoring plaintiff?

Answer: No. While 1554 (old) Civil Code guarantees that lessor should provide peaceful
enjoyment of the property being leased, Art. 1560 provides for the exception: "The lessor
shall not be obliged to answer for the mere fact of a trespass (perturbacion de mero hecho)
made by a third person in the use of the estate leased, but the lessee shall have a direct
action against the trespasser."

13. Baens v. Court of Appeals, 1983

Remedial Law; Special Proceedings; Forcible entry and detainer; Interpretation; Damages;
Scope of damages that may be recovered in an action for forcible entry and the reasonable
compensation for theuse and occupation of the premises.Reyes v. Court of Appeals (38
SCRA 138), interprets the scope of damages that may be recovered in an action for forcible
entry, It states: On the last issue of whether temperate damages may be awarded in favor
of respondent landlord, it has been held that while damages may be adjudged in forcible
entry and detainer cases, these damages mean rents or the reasonable compensation for
the use and occupation of the premises, (Mitschiener v. Barrios, 76 Phil. 55, cited in Garcia
v. Pea, 77 Phil. 1011) or fair rental value of the property. (Sparrevohn v. Fisher, 2 Phil.
676; Mitschiener v. Barrios, supra; Castueras v. Bayona, 106 Phil. 340). Profits which the
plaintiff might have received were it not for the forcible entry or detainer do not represent
a fair rental value. (Sparrevhon v. Fisher, 2 Phil. 676; supra; Igama v. Soria, 42 Phil. 11)
Although Section 1 of Rule 70 uses the word damages, the authors of the Rules of Court,
in drafting Section 6 of Rule 70 on the judgment to be pronounced, eliminated the word
damages, placing in lieu thereof, the words reasonable compensation for the use and
occupation of the premises.

Same; Same; Same; Same; Same; Damages to be obtained from the business to be located in
the premises or for material injury caused to the premises cannot be claimed in connection
with or as incidental to an action of illegal detainer or forcible entry.The damages which
a plaintiff expects to obtain from his business to be located in the premises, or for material
injury caused to the premises cannot also be claimed in connection with or as incidental to
an action of illegal detainer or forcible entry. (Torres v. Ocampo, 80 Phil. 36)

Same; Same; Same; Same; Same; Moral, exemplary and actual damages, not considered as
rents nor reasonable compensation for the use and occupation of the premises nor fair
rental value.Since moral, exemplary, and actual damages are neither rents nor
reasonable compensation for the use and occupation of the premises, nor fair rental
value as abovestated, we are constrained to deny the P3,000.00 moral damages and
P2,000.00 exemplary damages awarded by the respondent Court of Appeals and the
P1,000.00 actual damages awarded by the City Court of Manila.

Same; Same; Same; Same; Civil Law; Human Relations; Interpretation; Personal freedoms
protected by Art. 32 of the Civil Code, scope of.The private respondents reliance on Art.
32 of the Civil Code is inappropriate. The personal freedoms protected by that provision
refer to the right to transfer from one place to another and to choose ones residence, It is a
recognition of the freedom of a person to have his home in a place chosen by him and,
thereafter, to change it without interference from Government except upon lawful orders of
the court, or when necessary in the interest of national security, public safety, or public
health.

Same; Same; Same; Civil Law; Leases; Ejectment; PD 20, scope and coverage of.
Presidential Decree No. 20 basically covers two distinct matters. First is the prohibition
against the increase of the monthly rental agreed upon between the lessor and the lessee
when said rental does not exceed P300.00 a month and second is the suspension of
Paragraph I, Article 1673 of the Civil Code insofar as it refers to dwelling units or land on
which anothers dwelling is located. Paragraph I of Article 1673 of the Civil Code governs
the termination of contracts of lease which are on a year to year, month to month, week to
week, or day to day basis.

Same; Same; Same; Same; Same; Same; Doctrines under Rantael vs. Court of Appeals (97
SCRA 453) and Crisostomo vs. Court of Appeals, 116 SCRA 199); When the month-to-month
lease is verbal, but the lessor needs the premises for his own use or that of his family, the
lease is considered terminated as of the end of the month after proper notice or demand to
vacate has been given.In Rantael v. Court of Appeals, et al. (97 SCRA 453), although the
lease was on a month to month basis, we ordered the surrender of the premises to the
lessor because the duration of the lease was fixed in a written agreement between the
parties. However, even if the month to month arrangement is on a verbal basis, if it is
shown that the lessor needs the property for his own use or for the use of an immediate
member of the family or for any of the other statutory grounds to eject under Section 5 of
Batas Pambansa Blg. 25, which happens to be applicable, then the lease is considered
terminated as of the end of the month, after proper notice or demand to vacate has been
given. (See Crisostomo v. Court of Appeals, 116 SCRA 199).

Same; Same; Same; Same; Same; Same; BP Blg, 25; Subject matter of BP Blg. 25 is the
regulation of rentals; Law intended only for dwelling units with specified monthly rentals
and constructed before the law became effective.The definition does not provide a rental
ceiling beyond which the law no longer applies. Are all residential units as defined above
covered by the suspension of Paragraph I, Article 1673 of the Civil Code irregardless of how
much are the monthly rentals of the units? We answer this question in the negative. The
title of Batas Pambansa Blg. 25An Act Regulating Rentals Of Dwelling Units Or Of Land
On Which Anothers Dwelling Is Located And For Other Purposesshows that the subject
matter of the law is the regulation of rentals. The definition must, therefore, be related to
the subject matter as stated in the title. Moreover, Sections 1 and 7 of Batas Pambansa Blg.
25 x x x clearly show that the law is intended only for dwelling units with specified monthly
rentals and constructed before the law became effective. Baens vs. Court of Appeals, 125
SCRA 634, No. L-57091 November 23, 1983

Facts:

Chua Seng and Dra. Paz Baens are lessee and lessor, respectively, bound by oral contract of
lease over the premises subject of the controversy. Chua began his tenure as lessee since
1952. On October 5, 1975 Chua left the premises to be treated by a hilot in Valenzuela,
Bulacan. He brought with him his clothes and other belongings but left in the premises the
paraphernalia of his store, his appliances, furnitures, kitchen utensils, tools, and
memorabilia like picture frames, diplomas and certificate of merit and his credentials as
guerilla veteran. Before he left, he padlocked the steel door of the premises. Next day,
October 6, 1975, Chua Seng and his brother-in-law, Ong Hai returned to the premises. They
found that in addition to the padlock of Chua placed, other padlocks were placed at the
door of the premises at the instance of Dra. Baens. Chua Seng learned that Dra. Baens
caused the padlocking of the premises because when he inquired from his neighbor Mrs.
Asuncion asking the latter gave him a note sent by Dra. Baens to Mrs. Asuncion Lim, asking
the latter to padlock the premises to prevent loss or damage to the things inside the
premises. Chua Seng, Ong Hai and their spouses sought the audience of Dra. Baens at St.
Paul Hospital; in that meeting, Dra. Baens refused to remove the padlocks on the premises.
They also went to Dra. Baens' lawyer; but still the premises were not opened.
Subsequently, Chua Seng thru Atty. Mariano, wrote a letter dated November 17, 1975 to
Dra. Baens tendering the rentals for October and November, 1975 by means of a check and
requesting the removal of the Dra. Baens' padlocks from the premises. To this letter, Atty.
Guillermo Ilagan, the lawyer of Dra. Baens, replied on November 20, 1975. In such reply,
the check tendered by Chua Seng was returned with the following request:

We would appreciate if you could advise your client to remove whatever belonging he has
on the premises in question within ten (10) days from receipt of this letter; otherwise, we
shall be constrained to have it opened because he has absolutely no right to deprive my
client of the use of the property.

Atty. Mariano in turn, replied on November 25, 1975 (Exhibit "C"), requesting that the
padlock placed by Dra. Baens be removed; otherwise, legal measures shall be taken. Since
nothing happened after this exchange of communications, the controversy was brought to
Court. (Annex H, pp. 5-7).

Chua Seng filed Civil Case No. 007466-CV for forcible entry with the City Court of Manila
against Dra. Baens. Chua Seng alleged that Dra. Baens' refusal to remove the padlocks was a
breach of the contract of lease consisting in the deprivation of plaintiff's right to occupy and
use the leased premises.

On February 10, 1976, lessor Dra. Baens (herein petitioner) expressed her assent to restore
Chua Seng to the possession of the disputed premises.

On February 12, 1976, petitioner Baens filed her answer to the complaint for forcible entry
alleging inter alia that Chua Seng right to occupy said premises had long expired and that
the respondent failed to pay the rentals due and had voluntarily vacated the premises.

On February 18, 1976, the petitioner filed with the City Court of Manila her own complaint
for unlawful detainer against lessee Chua Seng, alleging the same facts raised in her answer
to Chua Seng's complaint for forcible entry.

On March 10, 1976, private respondent Chua Seng filed his answer to the petitioner's
complaint for unlawful detainer setting forth the same allegations averred in his own
complaint for forcible entry.