[G.R. No. 122544.
January 28, 1999] private respondent fully vacates the premises, and to pay
REGINA P. DIZON, AMPARO D. BARTOLOME,
FIDELINA D. BALZA, ESTER ABAD DIZON and
JOSEPH ANTHONY DIZON, RAYMUND A. DIZON,
GERARD A. DIZON, and JOSE A. DIZON, JR.,
petitioners, vs. COURT OF APPEALS and
OVERLAND EXPRESS LINES, INC., respondents.
[G.R. No. 124741. January 28, 1999]
REGINA P. DIZON, AMPARO D. BARTOLOME,
FIDELINA D. BALZA, ESTER ABAD DIZON and
JOSEPH ANTHONY DIZON, RAYMUND A. DIZON,
GERARD A. DIZON, and JOSE A. DIZON, JR.,
petitioners, vs. COURT OF APPEALS, HON.
MAXIMIANO C. ASUNCION, and OVERLAND
EXPRESS LINES, INC., respondents.
DECISION
MARTINEZ, J.:
Two consolidated petitions were filed before us seeking
to set aside and annul the decisions and resolutions of
respondent Court of Appeals. What seemed to be a
simple ejectment suit was juxtaposed with procedural
intricacies which finally found its way to this Court.
G. R. NO. 122544:
On May 23, 1974, private respondent Overland Express
Lines, Inc. (lessee) entered into a Contract of Lease with
Option to Buy with petitioners[1] (lessors) involving a
1,755.80 square meter parcel of land situated at corner
MacArthur Highway and South "H" Street, Diliman,
Quezon City. The term of the lease was for one (1) year
commencing from May 16, 1974 up to May 15, 1975.
During this period, private respondent was granted an
option to purchase for the amount of P3,000.00 per
square meter. Thereafter, the lease shall be on a per
month basis with a monthly rental of P3,000.00.
For failure of private respondent to pay the increased
rental of P8,000.00 per month effective June 1976,
petitioners filed an action for ejectment (Civil Case No.
VIII-29155) on November 10, 1976 before the then City
Court (now Metropolitan Trial Court) of Quezon City,
Branch VIII. On November 22, 1982, the City Court
rendered judgment[2] ordering private respondent to
vacate the leased premises and to pay the sum of
P624,000.00 representing rentals in arrears and/or as
damages in the form of reasonable compensation for the
use and occupation of the premises during the period of
illegal detainer from June 1976 to November 1982 at the
monthly rental of P8,000.00, less payments made, plus
12% interest per annum from November 18, 1976, the
date of filing of the complaint, until fully paid, the sum
of P8,000.00 a month starting December 1982, until
P20,000.00 as and by way of attorney's fees.
Private respondent filed a certiorari petition praying for
the issuance of a restraining order enjoining the
enforcement of said judgment and dismissal of the case
for lack of jurisdiction of the City Court.
On September 26, 1984, the then Intermediate Appellate
Court[3] (now Court of Appeals) rendered a decision[4]
stating that:
"x x x, the alleged question of whether petitioner was
granted an extension of the option to buy the property;
whether such option, if any, extended the lease or
whether petitioner actually paid the alleged P300,000.00
to Fidela Dizon, as representative of private respondents
in consideration of the option and, whether petitioner
thereafter offered to pay the balance of the supposed
purchase price, are all merely incidental and do not
remove the unlawful detainer case from the jurisdiction
of respondent court. In consonance with the ruling in the
case of Teodoro, Jr. vs. Mirasol (supra), the above
matters may be raised and decided in the unlawful
detainer suit as, to rule otherwise, would be a violation
of the principle prohibiting multiplicity of suits.
(Original Records, pp. 38-39)."
The motion for reconsideration was denied. On review,
this Court dismissed the petition in a resolution dated
June 19, 1985 and likewise denied private respondent's
subsequent motion for reconsideration in a resolution
dated September 9, 1985.[5]
On October 7, 1985, private respondent filed before the
Regional Trial Court (RTC) of Quezon City (Civil Case
No. Q-45541) an action for Specific Performance and
Fixing of Period for Obligation with prayer for the
issuance of a restraining order pending hearing on the
prayer for a writ of preliminary injunction. It sought to
compel the execution of a deed of sale pursuant to the
option to purchase and the receipt of the partial payment,
and to fix the period to pay the balance. In an Order
dated October 25, 1985, the trial court denied the
issuance of a writ of preliminary injunction on the
ground that the decision of the then City Court for the
ejectment of the private respondent, having been
affirmed by the then Intermediate Appellate Court and
the Supreme Court, has become final and executory.
Unable to secure an injunction, private respondent also
filed before the RTC of Quezon City, Branch 102 (Civil
Case No. Q-46487) on November 15, 1985 a complaint
for Annulment of and Relief from Judgment with
injunction and damages. In its decision[6] dated May 12,
1986, the trial court dismissed the complaint for
1
annulment on the ground of res judicata, and the writ of
preliminary injunction previously issued was dissolved.
It also ordered private respondent to pay P3,000.00 as
attorney's fees. As a consequence of private respondent's
motion for reconsideration, the preliminary injunction
was reinstated, thereby restraining the execution of the
City Court's judgment on the ejectment case.
The two cases were thereafter consolidated before the
RTC of Quezon City, Branch 77. On April 28, 1989, a
decision[7] was rendered dismissing private respondent's
complaint in Civil Case No. Q-45541 (specific
performance case) and denying its motion for
reconsideration in Civil Case No. 46487 (annulment of
the ejectment case). The motion for reconsideration of
said decision was likewise denied.
On appeal,[8] respondent Court of Appeals rendered a
decision[9] upholding the jurisdiction of the City Court
of Quezon City in the ejectment case. It also concluded
that there was a perfected contract of sale between the
parties on the leased premises and that pursuant to the
option to buy agreement, private respondent had
acquired the rights of a vendee in a contract of sale. It
opined that the payment by private respondent of
P300,000.00 on June 20, 1975 as partial payment for the
leased property, which petitioners accepted (through
Alice A. Dizon) and for which an official receipt was
issued, was the operative act that gave rise to a perfected
contract of sale, and that for failure of petitioners to deny
receipt thereof, private respondent can therefore assume
that Alice A. Dizon, acting as agent of petitioners, was
authorized by them to receive the money in their behalf.
The Court of Appeals went further by stating that in fact,
what was entered into was a "conditional contract of
sale" wherein ownership over the leased property shall
not pass to the private respondent until it has fully paid
the purchase price. Since private respondent did not
consign to the court the balance of the purchase price
and continued to occupy the subject premises, it had the
obligation to pay the amount of P1,700.00 in monthly
rentals until full payment of the purchase price. The
dispositive portion of said decision reads:
"WHEREFORE, the appealed decision in Case No.
46487 is AFFIRMED. The appealed decision in Case
No. 45541 is, on the other hand, ANNULLED and SET
ASIDE. The defendants-appellees are ordered to execute
the deed of absolute sale of the property in question, free
from any lien or encumbrance whatsoever, in favor of
the plaintiff-appellant, and to deliver to the latter the said
deed of sale, as well as the owner's duplicate of the
certificate of title to said property upon payment of the
balance of the purchase price by the plaintiff-appellant.
The plaintiff-appellant is ordered to pay P1,700.00 per
month from June 1976, plus 6% interest per annum, until
payment of the balance of the purchase price, as
previously agreed upon by the parties.
SO ORDERED."
Upon denial of the motion for partial reconsideration
(Civil Case No. Q-45541) by respondent Court of
Appeals,[10] petitioners elevated the case via petition for
certiorari questioning the authority of Alice A. Dizon as
agent of petitioners in receiving private respondent's
partial payment amounting to P300,000.00 pursuant to
the Contract of Lease with Option to Buy. Petitioners
also assail the propriety of private respondent's exercise
of the option when it tendered the said amount on June
20, 1975 which purportedly resulted in a perfected
contract of sale.
G. R. NO. 124741:
Petitioners filed with respondent Court of Appeals a
motion to remand the records of Civil Case No. 38-
29155 (ejectment case) to the Metropolitan Trial Court
(MTC), then City Court of Quezon City, Branch 38, for
execution of the judgment[11] dated November 22, 1982
which was granted in a resolution dated June 29, 1992.
Private respondent filed a motion to reconsider said
resolution which was denied.
Aggrieved, private respondent filed a petition for
certiorari, prohibition with preliminary injunction and/or
restraining order with this Court (G.R. Nos. 106750-51)
which was dismissed in a resolution dated September 16,
1992 on the ground that the same was a refiled case
previously dismissed for lack of merit. On November 26,
1992, entry of judgment was issued by this Court.
On July 14, 1993, petitioners filed an urgent ex-parte
motion for execution of the decision in Civil Case No.
38-29155 with the MTC of Quezon City, Branch 38. On
September 13, 1993, the trial court ordered the issuance
of a third alias writ of execution. In denying private
respondent's motion for reconsideration, it ordered the
immediate implementation of the third writ of execution
without delay.
On December 22, 1993, private respondent filed with the
Regional Trial Court (RTC) of Quezon City, Branch 104
a petition for certiorari and prohibition with preliminary
injunction/restraining order (SP. PROC. No. 93-18722)
challenging the enforceability and validity of the MTC
judgment as well as the order for its execution.
On January 11, 1994, RTC of Quezon City, Branch 104
issued an order[12] granting the issuance of a writ of
preliminary injunction upon private respondent's posting
of an injunction bond of P50,000.00.
2

Assailing the aforequoted order after denial of their
motion for partial reconsideration, petitioners filed a
petition[13] for certiorari and prohibition with a prayer
for a temporary restraining order and/or preliminary
injunction with the Court of Appeals. In its decision,[14]
the Court of Appeals dismissed the petition and ruled
that:
"The avowed purpose of this petition is to enjoin the
public respondent from restraining the ejectment of the
private respondent. To grant the petition would be to
allow the ejectment of the private respondent. We cannot
do that now in view of the decision of this Court in CA-
G.R. CV Nos. 25153-54. Petitioners' alleged right to
eject private respondent has been demonstrated to be
without basis in the said civil case. The petitioners have
been shown, after all, to have no right to eject private
respondents.
WHEREFORE, the petition is DENIED due course and
is accordingly DISMISSED.
SO ORDERED."[15]
Petitioners' motion for reconsideration was denied in a
resolution[16] by the Court of Appeals stating that:
"This court in its decision in CA-G.R. CV Nos. 25153-
54 declared that the plaintiff-appellant (private
respondent herein) acquired the rights of a vendee in a
contract of sale, in effect, recognizing the right of the
private respondent to possess the subject premises.
Considering said decision, we should not allow
ejectment; to do so would disturb the status quo of the
parties since the petitioners are not in possession of the
subject property. It would be unfair and unjust to deprive
the private respondent of its possession of the subject
property after its rights have been established in a
subsequent ruling.
WHEREFORE, the motion for reconsideration is
DENIED for lack of merit.
SO ORDERED."[17]
Hence, this instant petition.
We find both petitions impressed with merit.
First. Petitioners have established a right to evict private
respondent from the subject premises for non-payment
of rentals. The term of the Contract of Lease with Option
to Buy was for a period of one (1) year (May 16, 1974 to
May 15, 1975) during which the private respondent was
given an option to purchase said property at P3,000.00
per square meter. After the expiration thereof, the lease
was for P3,000.00 per month.
Admittedly, no definite period beyond the one-year term
of lease was agreed upon by petitioners and private
respondent. However, since the rent was paid on a
monthly basis, the period of lease is considered to be
from month to month in accordance with Article 1687 of
the New Civil Code.[18] Where the rentals are paid
monthly, the lease, even if verbal may be deemed to be
on a monthly basis, expiring at the end of every month
pursuant to Article 1687, in relation to Article 1673 of
the Civil Code.[19] In such case, a demand to vacate is
not even necessary for judicial action after the expiration
of every month.[20]
When private respondent failed to pay the increased
rental of P8,000.00 per month in June 1976, the
petitioners had a cause of action to institute an ejectment
suit against the former with the then City Court. In this
regard, the City Court (now MTC) had exclusive
jurisdiction over the ejectment suit. The filing by private
respondent of a suit with the Regional Trial Court for
specific performance to enforce the option to purchase
did not divest the then City Court of its jurisdiction to
take cognizance over the ejectment case. Of note is the
fact that the decision of the City Court was affirmed by
both the Intermediate Appellate Court and this Court.
Second. Having failed to exercise the option within the
stipulated one-year period, private respondent cannot
enforce its option to purchase anymore. Moreover, even
assuming arguendo that the right to exercise the option
still subsists at the time private respondent tendered the
amount on June 20, 1975, the suit for specific
performance to enforce the option to purchase was filed
only on October 7, 1985 or more than ten (10) years
after accrual of the cause of action as provided under
Article 1144 of the New Civil Code.[21]
In this case, there was a contract of lease for one (1) year
with option to purchase. The contract of lease expired
without the private respondent, as lessee, purchasing the
property but remained in possession thereof. Hence,
there was an implicit renewal of the contract of lease on
a monthly basis. The other terms of the original contract
of lease which are revived in the implied new lease
under Article 1670 of the New Civil Code[22] are only
those terms which are germane to the lessees right of
continued enjoyment of the property leased.[23]
Therefore, an implied new lease does not ipso facto
carry with it any implied revival of private respondent's
option to purchase (as lessee thereof) the leased
premises. The provision entitling the lessee the option to
purchase the leased premises is not deemed incorporated
3
in the impliedly renewed contract because it is alien to
the possession of the lessee. Private respondents right to
exercise the option to purchase expired with the
termination of the original contract of lease for one year.
The rationale of this Court is that:
This is a reasonable construction of the provision, which
is based on the presumption that when the lessor allows
the lessee to continue enjoying possession of the
property for fifteen days after the expiration of the
contract he is willing that such enjoyment shall be for
the entire period corresponding to the rent which is
customarily paid in this case up to the end of the month
because the rent was paid monthly. Necessarily, if the
presumed will of the parties refers to the enjoyment of
possession the presumption covers the other terms of the
contract related to such possession, such as the amount
of rental, the date when it must be paid, the care of the
property, the responsibility for repairs, etc. But no such
presumption may be indulged in with respect to special
agreements which by nature are foreign to the right of
occupancy or enjoyment inherent in a contract of
lease.[24]
Third. There was no perfected contract of sale between
petitioners and private respondent. Private respondent
argued that it delivered the check of P300,000.00 to
Alice A. Dizon who acted as agent of petitioners
pursuant to the supposed authority given by petitioner
Fidela Dizon, the payee thereof. Private respondent
further contended that petitioners filing of the ejectment
case against it based on the contract of lease with option
to buy holds petitioners in estoppel to question the
authority of petitioner Fidela Dizon. It insisted that the
payment of P300,000.00 as partial payment of the
purchase price constituted a valid exercise of the option
to buy.
Under Article 1475 of the New Civil Code, the contract
of sale is perfected at the moment there is a meeting of
minds upon the thing which is the object of the contract
and upon the price. From that moment, the parties may
reciprocally demand performance, subject to the
provisions of the law governing the form of contracts.
Thus, the elements of a contract of sale are consent,
object, and price in money or its equivalent. It bears
stressing that the absence of any of these essential
elements negates the existence of a perfected contract of
sale. Sale is a consensual contract and he who alleges it
must show its existence by competent proof.[25]
In an attempt to resurrect the lapsed option, private
respondent gave P300,000.00 to petitioners (thru Alice
A. Dizon) on the erroneous presumption that the said
amount tendered would constitute a perfected contract of
sale pursuant to the contract of lease with option to buy.
There was no valid consent by the petitioners (as co-
owners of the leased premises) on the supposed sale
entered into by Alice A. Dizon, as petitioners alleged
agent, and private respondent. The basis for agency is
representation and a person dealing with an agent is put
upon inquiry and must discover upon his peril the
authority of the agent.[26] As provided in Article 1868
of the New Civil Code,[27] there was no showing that
petitioners consented to the act of Alice A. Dizon nor
authorized her to act on their behalf with regard to her
transaction with private respondent. The most prudent
thing private respondent should have done was to
ascertain the extent of the authority of Alice A. Dizon.
Being negligent in this regard, private respondent cannot
seek relief on the basis of a supposed agency.
In Bacaltos Coal Mines vs. Court of Appeals,[28] we
explained the rule in dealing with an agent:
Every person dealing with an agent is put upon inquiry
and must discover upon his peril the authority of the
agent. If he does not make such inquiry, he is chargeable
with knowledge of the agents authority, and his
ignorance of that authority will not be any excuse.
Persons dealing with an assumed agent, whether the
assumed agency be a general or special one, are bound at
their peril, if they would hold the principal, to ascertain
not only the fact of the agency but also the nature and
extent of the authority, and in case either is controverted,
the burden of proof is upon them to establish it.
For the long years that private respondent was able to
thwart the execution of the ejectment suit rendered in
favor of petitioners, we now write finis to this
controversy and shun further delay so as to ensure that
this case would really attain finality.
WHEREFORE, in view of the foregoing, both petitions
are GRANTED. The decision dated March 29, 1994 and
the resolution dated October 19, 1995 in CA-G.R. CV
No. 25153-54, as well as the decision dated December
11, 1995 and the resolution dated April 23, 1997 in CA-
G.R. SP No. 33113 of the Court of Appeals are hereby
REVERSED and SET ASIDE.
Let the records of this case be remanded to the trial court
for immediate execution of the judgment dated
November 22, 1982 in Civil Case No. VIII-29155 of the
then City Court (now Metropolitan Trial Court) of
Quezon City, Branch VIII as affirmed in the decision
dated September 26, 1984 of the then Intermediate
Appellate Court (now Court of Appeals) and in the
resolution dated June 19, 1985 of this Court.
4
However, petitioners are ordered to REFUND to private
respondent the amount of P300,000.00 which they
received through Alice A. Dizon on June 20, 1975.

SO ORDERED.