LYDIA J. VILA AND ALL PERSONS CLAIMING RIGHTS UNDER HER, PETITIONER, VS. PURCEL DEVELOPMENT CORPORATION, RESPONDENT.

Vila versus Purcel Development Corporation

The Case

This is a petition for review filed by Lydia Vila against Purcel Development Corporation, the sublessor of a market stall in the Masinag Market in Antipolo City. Purcel sued Vila for unlawful detainer after her written contract of sublease expired and she refused to vacate. The case matters because it teaches the distinction between failure to state a cause of action and lack of cause of action, and because it shows how the Supreme Court treats a signed but unnotarized and unfurnished contract of lease when the tenant denies its existence yet keeps paying rent under it.

Procedural History

Purcel filed a complaint for unlawful detainer before the Municipal Trial Court in Cities of Antipolo City, Branch 2. The trial court rendered judgment in favor of Purcel, ordering Vila and all persons claiming rights under her to vacate the stall, to pay rental arrears, to pay the value-added tax for the period from December 15, 2004 to December 14, 2009, to pay attorney's fees of 10,000 pesos, and to pay the costs of suit. Vila appealed to the Regional Trial Court of Antipolo City, Branch 95. The Regional Trial Court affirmed the ruling but modified it, deleting the awards of rental arrears and value-added tax and retaining only the order to vacate, the attorney's fees of 10,000 pesos, and the costs of suit. Both parties sought reconsideration, and both motions were denied in a consolidated order. Vila then filed this petition for review under Rule 42 of the 1997 Rules of Civil Procedure, and the case reached the Supreme Court by that petition.

Facts

Purcel held leasehold rights over a commercial building in Antipolo City known as the Masinag Market, which it divided into market stalls and subleased to individual tenants. One of these stalls, Space Number V-32, was subleased to Lydia Vila under a Contract of Sublease for a term of five years, commencing on December 15, 2004 and ending on December 14, 2009, with a daily rental of 75 pesos. The contract was not notarized.

On November 25, 2009, Purcel sent Vila a notice reminding her that the sublease would expire on December 14, 2009 and requiring her to vacate and surrender possession on or before that date, warning that continued stay would be treated as against its will and would make her liable for 50 percent more than her rental rate. Vila did not vacate. On December 15, 2009, Purcel's counsel sent a final demand to vacate and to pay within five days, stating that as of December 14, 2009 the amount due was 15,309 pesos, inclusive of value-added tax. Vila still refused to surrender possession, so Purcel filed the ejectment complaint.

In her answer, Vila admitted that she was a sublessee of the stall but claimed that upon expiration of the contract she was made to sign a set of blank documents represented to her as copies of a new lease contract, and that she was never furnished a copy. She also alleged that the tenants had formed an organization called Samahan ng Mga Vendors at Tenants sa Masinag, Inc., that Purcel refused to deal with it, and that rentals were increased to cover value-added and withholding taxes. She never denied the authenticity of her signature on the contract of sublease.

Issues

• Whether or not the Regional Trial Court committed grave abuse of discretion amounting to lack or excess of jurisdiction in finding that Purcel had a cause of action and in affirming the ejectment of Vila on the basis of a written contract she claims does not exist.
• Whether or not the Regional Trial Court committed grave abuse of discretion amounting to lack or excess of jurisdiction in not fixing the term of Vila's occupancy of the stall.

Applicable Provisions

Section 1, paragraph (g) of Rule 16 of the Rules of Court, on failure to state a cause of action, is the provision the Court distinguishes from lack of cause of action:

Section 1. Grounds for dismissal. Within the time for but before filing the answer to the complaint or pleading asserting a claim, a motion to dismiss may be made on any of the following grounds: x x x (g) That the pleading asserting the claim states no cause of action.

This ground concerns the sufficiency of the pleading, not the sufficiency of the evidence, and the Court uses it to classify Vila's objection.

Section 5 of Rule 10 of the Rules of Court, on the effect of an amended pleading, is the provision the Court cites in explaining where the old remedy of demurrer to evidence now belongs:

Section 5. Supplemental pleadings. Upon motion of a party, the court may, upon such terms as are just, permit him to serve a supplemental pleading setting forth transactions, occurrences or events which have happened since the date of the pleading sought to be supplemented.

The Court notes that reference to this provision was eliminated from the rule on dismissal, so that failure to prove a cause of action is raised through a demurrer to evidence at trial.

Ruling

On the first issue, the Court held that Vila's objection was really a claim of lack of cause of action, not failure to state a cause of action. Failure to state a cause of action refers to the insufficiency of the pleading and is a ground for dismissal, while lack of cause of action refers to a situation where the evidence does not prove the cause of action alleged in the pleading. Because Vila was questioning the trial court's finding on the existence of the written contract, she was attacking the sufficiency of the evidence, which requires a closer look at the evidence and the credence given to it by the trial court. On the merits, the Court found that the case was one of unlawful detainer, where possession was inceptively lawful by virtue of a contract but became illegal when the tenant continued possession after the termination of her right. Vila never denied the authenticity of her signature on the contract, and her claim that she signed blank documents was not sufficient to prove she had no knowledge that the sublease would expire on December 14, 2009, since the term was part of the uniform template she should have read before signing. The Court agreed with the Regional Trial Court that it could not help but wonder where Vila relied for her right to occupy the stall and why she kept paying rent for so many years if not on the contract she now claims not to exist, and that the lack of notarization did not affect the validity of the contract's contents or its effectivity between the parties.

On the second issue, the Court held that the term of occupancy was unquestionably provided in the contract signed by Vila, and that the court cannot alter the terms of a contract. The Court quoted its own ruling:

Time and again, we have stressed the rule that a contract is the law between the parties, and courts have no choice but to enforce such contract so long as it is not contrary to law, morals, good customs or public policy. Otherwise, courts would be interfering with the freedom of contract of the parties. Simply put, courts cannot stipulate for the parties or amend the latter's agreement, for to do so would be to alter the real intention of the contracting parties when the contrary function of courts is to give force and effect to the intention of the parties.

Since the term was fixed in the contract, there was nothing for the court to fix.

Doctrine

Failure to state a cause of action and lack of cause of action are distinct. The first refers to the insufficiency of the pleading and is a ground for dismissal under Rule 16; the second refers to the situation where the evidence does not prove the cause of action alleged, and it is raised by demurrer to evidence at trial. A contract is the law between the parties, and courts have no choice but to enforce it so long as it is not contrary to law, morals, good customs or public policy; courts cannot stipulate for the parties or amend their agreement. The lack of notarization of a contract does not affect the validity of its contents or its effectivity between the parties. Unlawful detainer lies where possession was inceptively lawful by virtue of a contract but became illegal when the tenant continued possession after the termination of her right.

Disposition

The petition for review was denied, and the decision of the Regional Trial Court of Antipolo City, Branch 95 was affirmed. Purcel won; Vila and all persons claiming rights under her were ordered to vacate the stall, to pay attorney's fees of 10,000 pesos, and to pay the costs of suit.

Remember This

Memorize the line that a contract is the law between the parties and courts cannot stipulate for them or amend their agreement. Examiners like to use this case to test the distinction between failure to state a cause of action and lack of cause of action, and the effect of non-notarization on a contract's validity between the parties.