F. S. DIVINAGRACIA AGRO-COMMERCIAL, INC., PETITIONER, VS. HONORABLE COURT OF APPEALS AND RUFINO FERNANDEZ, RESPONDENTS.

This is a petition for certiorari to review the decision
of the Court of Appeals in CA-G.R. No. S.P. 06585 entitled “Rufino Q. Fernandez vs. Hon. Ricardo M. Ilarde,
et al.,” promulgated on September
22, 1977.

The facts of this case are clear,
undisputed and may be summarized briefly as follows:

Private respondent’s father was the original lessee of the
building and lot owned by the late Doña Concepcion Gay de Loring and the
spouses Mercedes Van Kauffman and Jaime Ibañez de Aldecoa.  This lease
dates back to 1899.  After his father’s
demise, private respondent continued the lease. 
The building and lot subject of the lease was bought by petitioner
herein from the intestate-estate of the original owners for the sum of P250,000.00 on July 9,
1974.  Before its purchase,
private respondent was a lessee of the said owners and was paying them a rental
of P1,250.00 a month. 
After the purchase, the rental corresponding to the first half of the
month of July, 1974 in the sum of P625.00 was paid by private respondent to the original owners and
that of the second half in the sum of P625.00 to the new owner, petitioner
herein.  In the continuance of the lease,
it was verbally agreed by and between the petitioner and private respondent
that the rental for the succeeding months would be increased to P2,000.00 starting
August, 1974.  This went on until
September, 1975.  About the second week
of October, 1975, private respondent was informed by a representative of
petitioner, Atty. Santiago Divinagracia, that his contract of lease would terminate on October 31, 1975.  When private respondent refused to vacate the
premises on October 31, 1975, petitioner reiterated the advice earlier made in
a letter dated November 4, 1975 formally advising him of the termination of the
lease on October 31, 1975 and giving him, the private respondent, a final
extension to occupy the premises up to the end of November, 1975, for which
reason petitioner refused to accept further payment of rentals for December,
1975.  Private respondent in turn
informed petitioner that he was depositing his rentals for the succeeding
months with the Clerk of Court.

A complaint for unlawful detainer was
filed by herein petitioner against private respondent before the City Court of
Iloilo, Branch I, which rendered a decision in favor of private respondent, the
dispositive portion of which reads:

“WHEREFORE, this court hereby renders its decision ?

a.     Dismissing the complaint;

b.     Ordering defendant to pay the plaintiff the
sum of P3,000.00 a month as the reasonable rent for
the use of the premises, beginning January, 1976;

c.     Fixing the duration of the lease of
defendant which, since 1899 to the present, is 76 years, at one year for every
10 years, i.e., that defendant may continue to lease the premises for seven and
a half (7-1/2) years to commence from finality of the decision;

without
pronouncement as to the costs.”

From the decision, petitioner appealed to the Court of First
Instance which modified the City Court’s decision by:

“(a)  Dismissing the
complaint;

 (b)  Ordering
defendant to pay plaintiff the sum of P3,000.00 a month, as the reasonable rent
for the use of the premises, beginning January, 1976; and

 (c)  Extending
the duration of the lease by defendant of plaintiff’s property to one (1) year
to commence from finality of the decision,

without pronouncement as to costs.”

From the latter decision, private respondent filed a petition for
review before the Court of Appeals which modified the previous decision.  The dispositive portion
of the Appellate Court’s decision states:

“WHEREFORE, and as thus modified, in the sense that the lease
should be as it is hereby extended for another five (5) years, the judgment of
the court a quo is affirmed in all other
respects.  Without
pronouncement as to costs.”

From the judgment of the Court of Appeals, petitioner herein
appealed by certiorari to this Court, assigning a single error involving
a legal issue, to wit:

The respondent Court of Appeals committed a grave error in the
correct application of Article 1687 of the New Civil Code by extending the
lease for another five (5) years which is a grave abuse of discretion amounting
to lack or in excess of its
jurisdiction.

Petitioner, in support of the foregoing assigned error, argues
upon the following considerations:

I.      The
Court of Appeals practically made a contract between the parties which is
contrary to the spirit and intent of Article 1687 of the New Civil Code;

II.      The
Court of Appeals did not show that the Court of First Instance of Iloilo, Branch V, presided by the Hon. Judge
Ricardo M. Ilarde to which this case was originally
appealed, gravely abused its discretion by reducing the term of the lease to
only one (1) years;

III.     The
conclusion arrived at by the Court of Appeals are contrary to law, the admitted
facts and admission of the parties;

IV.    The
Court of Appeals did not observe the criteria set out by this Honorable Court
in the application of Article 1687 of the New Civil Code in the exercise of its
discretion.

The first and fourth arguments of the petitioner relate solely to
the proper application of Article 1687 of the New Civil Code, hence We are constrained to consider and resolve them
together.  Petitioner alleges that there
was grave abuse of discretion by the Court of Appeals in reckoning the
occupancy of the lessee from 1899 when his predecessor-in-interest was the
occupant of the premises.  It should have
been reckoned only from his personal occupancy of the premises.  Petitioner further alleges that the Court of
Appeals was oblivious of the following facts: 
(1) There was a change of ownership – the lessor
became owner only on July 9, 1974; (2) The leased premises is a commercial lot;
(3) The private respondent was made to understand that in the future, the
petitioner may need the premises for its own use; (4) The private respondent
has admitted that he has two stores, one at the premises subject of this case
and the other store located at his own commercial building; and (5) The
petitioner herein was the one who filed the unlawful detainer
case.  It could have been another matter
had the private respondent filed an independent action asking for the fixing of
the period of the lease.

Withal, petitioner concluded that the decision of the respondent Court is most
unfair, arbitrary and inequitable.  It is
unjust and authoritarian.  The Court
practically made a contract between the parties.  It curtailed the basic human right of the
parties of their freedom to contract.

Petitioner’s contention is devoid of merit.  In the first place, it is beyond dispute that
Article 1687 of the New Civil Code is applicable, which article states:

“Art. 1687.  If the
period for the lease has not been fixed, it is understood to be from year to
year, if the rent agreed upon is annual; from month to month, if it is monthly;
from week to week, if the rent is weekly; and from day to day, if the rent is
to be paid daily.  However, even
though a monthly rent is paid, and no period for the lease has been set, the
court may fix a longer term for the lease after the lessee has occupied the premises
for over one year.  x x x“

Article 1687 of the New Civil Code must be correlated with
Article 1197 of the New Civil Code which provides:

“Art. 1197.  If the
obligation does not fix a period, but from its nature and circumstances it can
be inferred that a period was intended, the court may fix the duration
thereof.  x x x“

Considering both Articles together, it is at once clear and
evident that the court is accorded the power to fix a longer term for the
lease, which power is potestative or discretionary in
nature.  This prerogative is addressed to
the court’s sound judgment and is controlled by equitable considerations.
“The court may fix a longer term where equities come into play demanding
an extension.” (Divino v. Fabie
de Marcos, 4 SCRA 186).

It may not, therefore, be contended that the Court of Appeals in the exercise of its discretionary
power under Article 1687 in relation with Article 1197 made a contract between
the parties, since the very purpose of the law is not the fixing of a longer term
for the lease, but to make the indefinite period of lease definite by fixing
once and for all the remaining duration of the lease.

Neither can We sustain the factors
assigned by the petitioner herein, which the Court of Appeals refused to
appreciate.  Squarely resolving these
factors, that there was a change of ownership, the lessor
became the owner only on July 9, 1974,
and that the lease is not recorded in the Registry of Property, is of no
moment.  In the first place, that
purchaser is bound to continue the lease is explicit under Article 1676 of the
Civil Code, more specifically the same article provides:  “The purchaser of a piece of land which
is under a lease that is not recorded in the Registry of Property may terminate
the lease, save when there is a stipulation to the contrary in the contract of
sale, or when the purchaser knows of the existence of the lease.”
Such knowledge of the lease was established in the findings of the Court of
Appeals, thus:

“x
x x that private
respondent knew of the existence of such lease is eloquently shown by the fact
that when the private respondent bought the property on July 9, 1974, the
private respondent received only the rental corresponding to the second half of
the month of July, or the sum of P625.00. 
The rental for the first half of the same month was in fact paid to the
former owner.  This circumstance not only
shows that private respondent know of the existence of such prior lease, but
also that they knew the monthly rental fixed for the lease of the premises.  x x x
we therefore entertain no doubt that private respondent knew of the
existence of such lease and that from its actuation from August 1974 to
September 1975, it allowed the herein petitioner to continue with the lease
indefinitely x
x x.”

Secondly, that the leased premises is a commercial lot finds no legal
significance.  Article 1687 does not make
any qualification nor distinction as to its
application.  Under the principle of expressio unius est exclusio
alterius, the law applies to both residential and
commercial lands as well.  Thirdly, that
private respondent was made to understand that in the future the petitioner may
need the premises for its own use is without importance in the case at
bar.  Whether or not there was such an
understanding would not affect the lease contract existing between the
parties.  Such knowledge is not
sufficient to terminate an existing contract in compliance with the provisions
of Article 1687.  To hold otherwise would
be making a fetish of a technicality which the law abominates.  Besides, every owner is precisely interested
in his own property and the fact that he may need the property at some future
time is beyond human scruples.  But then
the question of when such future time will arise is potestative
in nature and will depend on the prevailing circumstances and conditions as
well as the acquiescence of the parties, so that by reason of equity, justice
and fairness, Article 1687 supplies the remedy in the event the parties decide
to terminate their contract.  Fourthly,
that private respondent admitted that he has two stores, one at the subject
premises and the other at his own commercial establishment, does not alter the appplicability of Article 1687, considering the fact that
the private respondent’s other store is also tenanted and as the Court of
Appeals correctly pointed out, “x x x It would be most
difficult for him to eject the tenants of his property for him to move in.  x x x Moreover, petitioner established his hardware business in
the premises since 1946.  Any sudden
transfer would certainly affect his business x x x.” Finally, the fact that petitioner herein was the
one who filed the unlawful detainer case instead of
the private respondent is immaterial considering that private respondent had in
his counterclaim prayed that “the Court fix the term of the lease to ten
(10) years from the final termination of the case.” The provision of
Article 1687 may be interposed as a defense in the answer (Imperial Insurance
Inc. v. Simon, 14 SCRA 855), or as a counterclaim therein.  The exercise of the power given to the Court
in Article 1687 to extend the period of the lease when the defendant has been
in occupancy of the premises for more than a year, does not contemplate a
separate action for that purpose.  That
power may be exercised as an incident in the action for ejectment
itself and by the court having jurisdiction over it (Ramirez vs. Sy Chit, 21 SCRA 1364). 
Moreover, We cannot lose sight of the fact that
it would be an idle and costly procedure to require the lessee to file another
action to have the term of the lease fixed, with all the possible delays and
inconveniences attendant upon a lawsuit.

Apropos the second argument that the Court of Appeals did not show that the Court of First
Instance of Iloilo to which this case was originally appealed, gravely abused
its discretion, the petitioner maintains that since it is the lower court which
is familiar with the reigning conditions of each locality, its judgment on the
additional term to be granted to the lessee in each case should not be
interfered with on appeal, absent a clear abuse of discretion.

It is well to stress that in a petition for review, the appellate
court has the discretion to alter, modify or affirm the decision brought to it
on appeal.  In the exercise of such
discretion, it may either increase or decrease the extension of the lease
period granted by the lower court.

The onus probandi that the
respondent Court committed grave abuse of discretion is upon the petitioner
himself, and not the court reviewing the decision.  The petitioner must show on certiorari
that the appellate Court exercised its discretion arbitrarily or
despotically.  We have examined the
records and We find nothing of importance to
warrant a disturbance of the conclusions reached by the respondent Court of
Appeals.  In view of Our settled and
established jurisprudence, that when the lower court has jurisdiction over the
subject matter of the case, its actuation in the exercise of such jurisdiction
is not correctible by certiorari (Matanog v.
Alejandro, G.R. Nos. L-22502-03, June
30, 1964).

The final argument of the petitioner faults the Court of Appeals’
findings as contrary to law, admitted facts and admission of the parties.  The advocation is
without merit.  It is a legal rule that
not every error in the proceeding or every erroneous conclusion of law or of
fact is abuse of discretion.  In the
absence of any indication 
and cogent reason, We will not encroach upon the respondent
Court’s prerogative.  After a careful
perusal of the judgment of the Court of Appeals, We find no reversible error
committed that would warrant the reversal of the present case.  We are in full accord with the findings and
conclusions of the respondent Court as the same are final and binding upon Us.  Hence, We again reiterate the voluminous jurisprudence to the effect that “findings of facts of
the Court of Appeals are binding on the Supreme Court and cannot be
reviewed.  (Torres v.
People, 39 SCRA 28; Heirs of Francisco Pasco v. Han Pia,
45 SCRA 164; Tolentino v. De Jesus, 56 SCRA 167; Tiongco v. De la Merced, 58 SCRA 89).

We
are not unmindful that the foregoing established rule admits of
exceptions, such that the findings of fact of the Court of Appeals may be
reviewed by Us:

(1)    When the same are grounded entirely on
speculation, surmises or conjectures;

(2)    When the inference made is manifestly
mistaken, absurd or impossible;

(3)    When there is grave abuse of discretion;

(4)    When the judgment is based on misapprehension
of facts; and

(5)    When the Court of Appeals, in making its
findings, went beyond the issues of the case and the same are contrary to the
admissions of both appellant and appellee.  (Ramos v. CA, 63 SCRA 331; Napolis v. CA, 43 SCRA 301).

We find that not
one of the exceptional circumstances aforementioned is present in the case at
bar.  The findings of facts of the
appealed decision are sufficiently supported by substantial evidence, and the
conclusions drawn therefrom are not against the law
or jurisprudence.  The decision of the Court
of Appeals rests on cited doctrinal jurisprudence, justice and equity as it
stated that:

“Considering the doctrine laid down in the said decisions
(Gregorio Araneta, Inc. vs. Dolores de Mesa, 35 SCRA
137, and Divino vs. Marcos, et al., 4 SCRA 186), and
the fact that the petitioner had been in the occupancy of the premises since
1899, petitioner’s occupancy has gone for no less than 70 years, We, therefore,
find in the broader interest of justice and equity the extension of the lease
should be for a period of five (5) years.”

After having gone at length over the records of the present case,
and in the light of the above pronouncements, We are positively convinced that the petitioner is not entitled to
the writ of certiorari.  There is
absolutely no showing that the respondent Court acted so
“arbitrarily”, “despotically”, or “capriciously”
as to amount to lack of jurisdiction in reviewing the appealed decision.  It is settled to the point of being
elementary that the only question involved in certiorari is jurisdiction,
either want of jurisdiction or excess thereof, and abuse of discretion shall
warrant the issuance of the extraordinary remedy of certiorari when the
same is so grave “as when the power is exercised in an arbitrary or
despotic manner by reason of passion, prejudice or personal hostility, and it
must be so patent and gross as to amount to an evasion of positive duty, or to
a virtual refusal to perform a duty enjoined, or to act at all, in
contemplation of law (Abig v. Constantino,
2 SCRA 299; Abad Santos v. Province of Tarlac, 67 Phil. 480; Alafriz v. Wable, 72 Phil. 278). 
Even mere abuse of discretion is not sufficient by itself to justify the
issuance of a writ of certiorari. 
For that purpose, the abuse of discretion must be grave and patent and
it must be shown that it was exercised arbitrarily or despotically (Travera Luna, Inc. v. Nable, 72
Phil. 278; Villa Rey Transit, Inc. v. Bello, 75 SCRA 735) which is not the case made out by the
present petition.

WHEREFORE, IN VIEW OF THE FOREGOING, the decision of the
Court of Appeals is hereby AFFIRMED, with costs against the petitioner.

SO ORDERED.

Makasiar, Fernandez, and Melencio-Herrera,
JJ., concur.

Teehankee, Acting C.J., files a separate concurrence.