MARIANO TORIO, MARIA BAUTISTA, FLORENTINA BAUTISTA AND RENATO BAUTISTA, PETITIONERS, VS. THE COURT OF APPEALS AND MEDEL COMPOUND TENANTS ASSOCIATION, INC., RESPONDENTS.

was the observation by the Metropolitan
Trial Court^[2]
in its joint decision dated October 30,
1990 in Civil Case Nos. 12961-63,
affirmed by the Regional Trial Court^[3] and
reaffirmed by the Court of Appeals.^[4]

The defendants referred to above are the very petitioners in the
present case. They were ordered by the
MTC to vacate the premises they were leasing at Medel Compound, a thickly
populated tenanted 5-parcel residential land in Mandaluyong with an area of
31,052.5 square meters.

The lower courts were consistent in their finding of facts. In 1986, the tenants of Medel Compound,
desirous of owning the land they were leasing, which some of them have been
occupying since their birth, organized themselves to form the Medel Compound
Tenants Association, Inc. The
Association was later registered with the Securities and Exchange Commission
with some 300 or so original members, including herein petitioners.

With the full support and assistance of the Mandaluyong Municipal Government and the National Home
Mortgage Finance Corp (NHMFC), the land was finally acquired and its five
titles were transferred in favor of the Association in February 1989. The land was subdivided among the
Association members pursuant to the guidelines set by the NHMFC in relation to
the Community Mortgage Program of the government.

In October 27, 1989, spouses Mariano Torio and Maria Bautista,
Florentina Bautista, and Renato Bautista, were sent a letter by the
Association, through its lawyer, demanding that they vacate Lot Nos. 135, 145
and 147, which were respectively held by them as tenant-lessees. When petitioners refused to do so,
respondent filed a complaint for “Unlawful Detainer with Damages.”
Respondent alleged that petitioners never became active members and refused to
participate in the acquisition of the lot; that although they were one of the
incorporators of the Association, they did not pay a single centavo of the
membership dues, other assessments, the critical downpayment for the respective
lots they were leasing and rentals despite demands and grace period given them.

On the other hand, petitioners raised as defense that they never
relinquished their membership. However,
they could not immediately pay their obligation to the Association because they
allegedly had to put up the money to pay their dues. When they were ready to pay, the Association allegedly ignored
them. They further claimed that they
never received any formal notices of deadline for payment of membership dues as
most of the time they were staying in
Wawa, Baras, Rizal.

Ruling in favor of the respondent Association, the MTC rejected
petitioners’ proposition that they were protected by Sec. 5, 2^nd paragraph, of B.P. Blg. 877^[5],
noting that the complaint was based on termination of the lease^[6]
and need of the premises^[7]. Likewise, the trial court dismissed
petitioners’ reliance on P.D. 1517, Sec. 6^[8] on
the rationale the said provision prohibits the Medels from selling their
property to third person without giving the tenants the right of first
refusal. In this case, however, the
Medels sold the property to the tenants’ association and not to anybody else.^[9]

On appeal, petitioners questioned the MTC’s jurisdiction over the
case, arguing that since the controversy is between the Association and its
members, the case should have been adjudicated before the Securities and
Exchange Commission (SEC) pursuant to P.D. 902-A.^[10]
The RTC, however, upheld the MTC stating that jurisdiction over the subject
matter is determined by the allegations in the complaint and not the facts
averred in the answer or opposition of the adverse party. The case filed being for unlawful detainer,
the MTC was sustained in assuming jurisdiction.

The RTC also agreed with the MTC that respondent can rightly
demand for petitioners to vacate the premises on the strength of Article 1687^[11]
of the Civil Code, considering that the period of the lease was on a month to
month basis. The RTC, however, rejected
MTC’s application of Sec. 5(c) of B.P. Blg. 877, on the need of the premises by
the immediate member of the family of the lessor, as this particular provision
is intended to cover only natural persons.^[12]

In their appeal to the appellate court, petitioners raised as
issues RTC’s reliance on Article 1687 of the Civil Code and its failure to
apply P.D. 2016^[13]
which prohibits the eviction of occupant families from land identified as areas
for priority development.

Anent the first issue, said court referred to the case of Rivera
v. Florendo^[14]
where it was held that the determination of the period of the lease can still
be made in accordance with Article 1687, because what is suspended by Section 6
of B.P. Blg. 25 is Article 1673 and not Article 1687.^[15]
As to the application of P.D. 2016, the Court of Appeals cited with approval
the ratiocination of the MTC, as follows:

“This (provision) is an injunction against the owner, in this
case the Medels, to sell the lot to others without giving the tenants the right
of first refusal. But the Medels sold
it to the tenants’ association and to nobody else. The provision aforequoted has not been violated…”^[16]

The court a quo further observed that:

“Finally, petitioners were not bona fide occupants of
the lots in question because, admittedly, they were most of the time residing
at Baras, Rizal. And what is worse,
petitioners were renting out their houses erected on subject lots to other
people.”^[17]

In a vain hope to get a reversal of the referred decisions,
petitioners now filed this present petition for review on certiorari on
the same arguments they have raised in the lower courts, as follows:

“The respondent court seriously erred in not dismissing the
complaints for ejectment for lack of jurisdiction.

“Assuming such jurisdiction, the respondent court seriously
erred and gravely abused its discretion amounting to lack or excess of
jurisdiction in upholding the ejectment of petitioners based on the expiration
of the period of the lease contract.

“The respondent court seriously erred and gravely abused its
discretion amounting to lack or excess of jurisdiction in disregarding the
prohibition against the ejectment of petitioners by the lessor’s
successor-in-interest to whom the property was sold.”^[18]

We find the petition unmeritorious.

On the question of jurisdiction, we cite the decision in Viray v. Court of Appeals,^[19] penned by Mr. Justice Isagani Cruz,
which states that:

“It should be obvious that not every
conflict between a corporation and its stockholders involves corporate matters
that only the SEC can resolve in the exercise of its adjudicatory or quasi
judicial powers. If for example, a
person leases an apartment owned by a corporation of which he is a stockholder,
there should be no question that a complaint for his ejectment for non-payment
of rentals would still come under the jurisdiction of the regular courts and
not of the SEC.”^[20]

Indeed a contrary interpretation would distort the meaning and
intent of P.D. 902-A, the law reorganizing the Securities and Exchange
Commission. The better policy in
determining which body has jurisdiction over a case would be to consider not
only the relationship of the parties but also the nature of the question that
is the subject of their controversy.

Petitioners tried to substantiate their second argument with the
proposition that the contract between the Association and its members is not a
lease contract, but a contract of sale on installment and presented as proof a
purported contract signed by the Association President and one of its members.^[21]
Petitioners specifically pointed out the provision in the said contract which
states:

“SECTION 11. SPECIAL CONDITIONS

It is hereby agreed by the parties that all rental payments shall
be considered as installment payment of the purchase price of the unit awarded
to the LESSEE. Upon expiration of the
lease term, and payment by the LESSEE of all rentals due and payable including
penalties and surcharges, full title and ownership shall vest unto the
LESSEE. The LESSOR or its Assignee
shall execute the necessary Deed of Absolute Sale, and all rental payments
shall be credited against the purchase price.”^[22]

The contract, however, also provides as follows:

“SECTION 2. TERM

X X X

“2.2 Subject to
the LESSOR’s right of termination under Section 4 and other
applicable provisions hereunder and the LESSEE’s exercise of his/her right of option
to purchase under Section 11 hereof, it being understood that the
payment of the aggregate rental for the full period of this lease is the very
essence and special consideration of this Agreement. (emphasis ours)

X X X

“SECTION 10. EVENTS OF DEFAULT

“a. failure of the LESSEE to pay the
equivalent of at least three (3) consecutive monthly rentals.

X X X

“10.2. Effects of Default. Upon default by the LESSEE, each of the following remedies shall accrue
immediately to the LESSOR . . .

“b. The lease shall
be terminated and the LESSEE shall voluntarily surrender
possession of the PROPERTY to the LESSOR/ITS ASSIGNEE and if the LESSEE fails
to do so, the LESSEE may be summarily ejected and the LESSOR/ITS ASSIGNEE may
enter the premises where the property is located . . .”^[23]
(emphasis ours)

We are not persuaded by petitioners’ second argument for the
following reasons: 1) the alleged
contract was not presented in the trial court thus its genuineness,
authenticity and due execution was not established; 2) if petitioners had
entered into such a Lease/Purchase Agreement with the respondent, they should
have attached to the complaint said document which they allegedly signed, but
this they did not do; and 3) the document presented to sustain their allegation
is a pro-forma lease/purchase agreement which does not even name the lessor and
is bare of other essential facts.^[24]

In short, there is nothing in the record to show that petitioners
entered into a Lease/Purchase Agreement with the Association and that
petitioners never paid their rent to the Association, despite demands and grace
period given them. Hence, even if, for
the sake of argument, we are to apply the provisions of the purported contract
to petitioners, as they want us to do, it is but right to evict them having
defaulted in their payments.

Petitioners’ third argument is a mere reiteration of their
argument in the trial court to apply Section 5, 2^nd paragraph, of
B.P. Blg. 877 which we have previously disposed of.

As aptly observed by the MTC:

“. . . But then, where were they (petitioners) when their help
was most needed. Had they put in their
share into the concerted communal effort of the membership toward the
attainment of the association’s goal? Should their indifference be rewarded? Understandably, defendants having transferred their residence to Baras,
Rizal long before the acquisition process had reached its peak, they could be
the least concerned. To them, the
project would not really mean land for the poor. Having rented out their houses, it is more of the entrepreneur’s
instinct that moved them to hold on to the premises.”^[25]

WHEREFORE, the petition is hereby DISMISSED for want of
merit. The decision of the court a quo
is AFFIRMED in toto.

SO ORDERED.

Narvasa, C.J., (Chairman), Padilla, Regalado, and Puno, JJ.,
concur.

^[1]
pp. 6-7 of the MTC’s decision.

^[2]
Judge Hilario L. Laqui, presiding judge, Branch LIX, Mandaluyong.

^[3]
Judge Fernando L. Gerona, presiding judge, Branch CLV, National Capital Region,
Pasig.

^[4]
Justice Segundino G. Chua, ponente; Justices
Emeterio C. Cui and Jainal D. Rasul, concurring.

^[5]
Batas Pambansa Blg. 877

Sec. 5 – x x x

No lessor or his
succesor-in-interest shall be entitled to eject the lessee upon the ground that
the leased premises has been sold or mortgaged to a third person regardless of
whether the lease or mortgage is registered or not.

^[6]
Sec. 5(f) Batas Pambansa Blg. 877.

^[7]
Sec. 5(c) Batas Pambansa Blg. 877,

^[8]
P.D. 1517

Sec. 6. Land Tenancy in Urban
Land Reform Areas. Within
the Urban Zones legitimate tenants who have resided on the land for ten years
or more who have built their homes on the land and residents who have legally
occupied the lands by contract, continuously for the last ten years shall not
be dispossessed of the land and shall be allowed the right of first refusal to
purchase the same within a reasonable time and at reasonable prices, under
terms and conditions to be determined by the Urban Zone Expropriation and Land
Management Committee created by Section 8 of this Decree.

^[9]
MTC decision, pp. 5-6.

^[10]
P.D. 902-A, Sec. 5

– In addition to the regulatory and
adjudicative functions of the Securities and Exchange Commission over
corporations, partnerships and other forms of associations registered with it
as expressly granted under existing laws and decrees, it shall have original
and exclusive jurisdiction to hear and decide cases involving:

X          X          X

(b) Controversies arising out of
intra-corporate or partnership relations, between and among stockholders,
members, or associates; between any or all of them and the corporation,
partnership or association of which they are stockholders, members or
associates, respectively; and between such corporation, partnership or
association and the state insofar as it concerns their individual franchise or
right to exist as such entity.

^[11]
Sec. 1687 of the Civil Code

– 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.

^[12]
RTC decision, p. 3.

^[13]
P.D. 2016, Section 2

– No tenant or occupant family,
residing for ten years or more reckoned from the date of issuance of
Presidential Decree 1517 otherwise known as the Urban Land Reform Law, in land
proclaimed as Areas for Priority Development or Urban Land Reform Zones or is a
project for development under the ZIP in Metro Manila and the SIR Program in
the regional cities shall be evicted from the land or otherwise dispossessed.

(The related provision is found in
P.D. 1517, Sec. 6 [see footnote # 8 for the full text of the provision]).

^[14]
143 SCRA 278.

^[15]
Batas Pambansa Blg. 25, Sec. 6

– Application of the Civil Code and Rules of Court of the Philippines
– Except when the lease is for a definite period, the provisions of
paragraph (1) of Article 1673 of the Civil Code of the Philippines insofar as
they refer to residential units covered by this Act shall be suspended during
the effectivity of this Act, but other provisions of the Civil Code and the
Rules of Court on lease contracts, insofar as they are not in conflict with the
provisions of this Act, shall apply.

(This provision is restated in
Section 6, B.P. Blg. 877.)

^[16]
MTC’s decision, pp. 5-6.

^[17]
C.A. decision, p. 8.

^[18]
Petitioners’ Memorandum, p. 7.

^[19]
G.R. No. 92481, 191 SCRA 308 (1990).

^[20]
Id at p. 323.

^[21]
Petitioners’ Memorandum at p. 11-12.

^[22]
Annex “E” of the Petition; Rollo, p. 61.

^[23]
Ibid.

^[24]
the Lease/Purchase Agreement attached with the petition as Exhibit
“E” does not name a lessor, nor does it contain the term of the lease
or the rental price.

^[25]
MTC’s decision, p. 7.