VIRGILIO C. AQUINO AND JULIANA D. AQUINO, PETITIONERS, VS. HON. REGIONAL TRIAL COURT, BRANCH 40, DAGUPAN CITY, PRESIDED BY HON. JUDGE EMMA TORIO FELIPE DE VENECIA AND LUISA A. D…

Aquino versus De Venecia

The Case

This is a petition for review brought by Spouses Virgilio and Juliana Aquino against Spouses Felipe and Luisa De Venecia, arising from an action for unlawful detainer over a three-storey building in Dagupan City. The tenants had held over after their one-year lease expired, and they defended on the ground that an implied new lease had arisen because the landlords kept accepting monthly rentals. The case matters because it fixes the exact mechanics of tacita reconduccion, the implied new lease, and settles that a notice to vacate given after the lease expires is what aborts it.

Procedural History

The landlords, the De Venecias, commenced the action for unlawful detainer in the Municipal Trial Court of Dagupan City, Branch 3. That court rendered judgment for the landlords, ordering the tenants to vacate and restore possession, to pay ten thousand pesos in attorney's fees, to pay monthly rentals from October 2004 until they vacate, and to pay five thousand pesos in litigation expenses plus the costs of suit. The tenants appealed to the Regional Trial Court of Dagupan City, Branch 40, which affirmed the Municipal Trial Court in full. The Regional Trial Court denied their motion for reconsideration. The tenants then came to the Supreme Court by petition for review.

Facts

The De Venecias owned a three-storey building erected on their registered land. They leased the property to the Aquino spouses at a monthly rental of thirty thousand pesos, for one year, from January 6, 2003 to January 6, 2004. The lease expired on January 6, 2004 and was not renewed.

On January 7, 2004, the day after expiry, the landlords made oral demands to vacate. On January 8, 2004, through counsel, they served a formal written notice to vacate. The tenants refused to leave and continued paying monthly rentals, the last payment being on August 3, 2005. The landlords then sued for unlawful detainer.

At the preliminary conference, the parties admitted the identity of the building, that the lease term had expired on January 6, 2004, and that rentals had been received even after expiry. The tenants argued that the acceptance of rentals created an implied new lease and that the landlords were estopped from ejecting them.

Issues

• Whether or not an implied new lease, or tacita reconduccion, arose between the parties after the lease expired.
• Whether or not the landlords were estopped from ejecting the tenants by their acceptance of monthly rentals.
• Whether or not the award of damages, attorney's fees, and litigation expenses was proper.

Applicable Provisions

Article 1670 of the Civil Code governs the implied new lease and provides:

Article 1670. If at the end of the contract the lessee should continue enjoying the thing leased for fifteen days with the acquiescence of the lessor, and unless a notice to the contrary by either party has previously been given, it is understood that there is an implied new lease not for the period of the original contract, but for the time established in Articles 1682 and 1687. The other terms of the original contract shall be revived.

This is the provision the tenants invoked, and its requirement of the lessor's acquiescence is the pivot of the ruling.

Article 2208 of the Civil Code governs the recovery of attorney's fees and provides:

Article 2208. In the absence of stipulation, attorney's fees and expenses of litigation, other than judicial costs, cannot be recovered, except:

(2) When the defendant's act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect his interest;

(11) In any other case where the court deems it just and equitable that attorney's fees and expenses of litigation should be recovered.

In all cases, the attorney's fees and expenses of litigation must be reasonable.

This is the basis for the attorney's fees awarded to the landlords, and the reason the unexplained litigation expenses were struck down.

Ruling

On the first issue, the Court held that no implied new lease arose. An implied new lease sets in only if three elements concur: the term of the original lease has expired; the lessor has not given the lessee a notice to vacate; and the lessee has continued enjoying the thing for fifteen days with the acquiescence of the lessor. Here, the lease was for a determinate period and ceased on the day fixed, without need of demand. More decisively, the landlords served a written notice to vacate on January 8, 2004, only two days after expiry. That notice was an express act showing the lessor no longer consented to the tenant's continued occupation. The Court clarified that the notice need not precede expiry; it is given after the lease period to abort an implied renewal. Continued possession beyond fifteen days, where a notice to vacate had already been given, did not amount to an implied renewal.

On the second issue, the Court held that the receipt of rentals did not constitute recognition of a continuing lease. The tenants' refusal to heed the demands made them deforciant, and their possession was merely tolerated. The Court quoted its own ruling:

The mere subsequent payment of rentals by the lessee and the receipt thereof by the lessor does not, absent any other circumstance that may dictate a contrary conclusion, legitimize the unlawful character of the possession.

With no implied new lease, there was no basis for estoppel.

On the third issue, the Court sustained the ten thousand pesos in attorney's fees, finding it conformed to Article 2208, but deleted the five thousand pesos in litigation expenses because the Municipal Trial Court gave no explanation for fixing that amount.

Doctrine

An implied new lease, or tacita reconduccion, requires three elements: expiry of the original term; absence of a notice to vacate from the lessor; and continued enjoyment by the lessee for fifteen days with the lessor's acquiescence. A notice to vacate given after expiry aborts the implied renewal; it need not be given before the lease with a definite period ends. A lease for a determinate time ceases on the day fixed, without need of demand. The lessor's mere acceptance of rentals after expiry does not legitimize an unlawful possession, and absent other circumstances, does not create estoppel.

Disposition

The Supreme Court affirmed the decision of the Regional Trial Court, with the modification that the award of five thousand pesos for expenses of litigation was deleted. The landlords won.

Remember This

Memorize the three elements of tacita reconduccion and the rule that a notice to vacate given after expiry defeats it. Examiners use this case to test implied new lease, holdover tenants, and estoppel by acceptance of rentals.