RODOLFO GUIANG, PETITIONER, VS. RICARDO C. SAMANO, JUDGE SERAFIN E. CAMILON, AND HONORABLE COURT OF APPEALS, RESPONDENTS.

Guiang versus Samano

The Case

This is a petition for review on certiorari brought by Rodolfo Guiang against Ricardo Samano, the presiding judge of the Court of First Instance of Rizal, and the Court of Appeals. It grows out of an ejectment suit over a small residential lot in Makati. The case matters to a reviewee because it gathers in one decision four recurring bar topics: the bar of res judicata in ejectment, the discretionary power of courts to fix a longer lease period, the month-to-month lease implied from monthly rentals, and the rights of a lessee who builds in good faith under Article 1678 of the Civil Code.

Procedural History

Ricardo Samano, the owner of the lot, filed an ejectment complaint against Rodolfo Guiang before the Municipal Court of Makati. That court rendered judgment for Samano, ordering Guiang to vacate the premises, to pay forty pesos a month from November 1977 until he vacates, plus attorney's fees and costs. Guiang appealed to the Court of First Instance of Rizal, which affirmed the municipal court in all respects. Guiang then filed a petition for review with the Court of Appeals, assigning four errors. The Court of Appeals dismissed the petition and affirmed the trial court. Guiang came to the Supreme Court by petition for review on certiorari, and the First Division gave the petition due course.

Facts

Sometime in 1961, Rodolfo Guiang verbally leased a portion of a parcel of land at Lacuna Street, Bangkal, Makati, belonging to Ricardo Samano, at an agreed monthly rental of forty pesos. Immediately after occupying the lot, Guiang constructed a house on it, spending eight thousand pesos.

On December 18, 1975, Samano filed an ejectment case against Guiang before the Municipal Court of Makati for failure to pay rentals from July to December 1975, totaling two hundred forty pesos. Before trial on the merits, the parties filed a joint motion to dismiss, and the case was dismissed on August 20, 1976 on the ground that it had been settled amicably.

Barely a month later, on September 14, 1976, Samano filed a second ejectment case against Guiang, alleging arrears since August 1975 and a written demand dated August 21, 1976. Guiang answered that he had religiously paid the rent until July 1975, when Samano asked to raise the rental from forty to one hundred twenty pesos a month; that he declined for financial reasons; and that Samano then refused his tenders of forty pesos, so he deposited the rentals in a bank. The municipal court ruled for Samano, and the affirmance by the Court of First Instance and the Court of Appeals led to this petition.

Issues

• Whether or not the dismissal of the first ejectment case operates as res judicata barring the second ejectment case.
• Whether or not the Court of Appeals erred in refusing to fix a longer period for the verbal lease.
• Whether or not the owner must reimburse the lessee the value of the house built on the leased premises before the lessee may be ejected.

Applicable Provisions

Article 1687 of the Civil Code provides:

Article 1687. If the period for the lease has not been fixed, it is presumed 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. Even though a monthly rent is paid, and no period for the lease has been set, the courts may fix a longer term for the lease after the lessee has occupied the premises for over one year. If the rent is weekly, the courts may likewise determine a longer period after the lessee has been in possession for over six months. In case of daily rent, the courts may also fix a longer period after the lessee has stayed in the place for over one month.

This provision supplies the month-to-month period of the verbal lease and is the source of the court's discretionary power to extend the term.

Article 1678 of the Civil Code provides:

Article 1678. If the lessee makes, in good faith, useful improvements which are suitable to the use for which the lease is intended, without altering the form or substance of the property leased, the lessor upon the termination of the lease shall pay the lessee one-half of the value of the improvements at that time. Should the lessor refuse to reimburse said amount, the lessee may remove the improvements even though the principal thing may suffer damage thereby. He shall not however, cause any more impairment upon the property leased than is necessary. With regard to ornamental expenses, the lessee shall not be entitled to any reimbursement, but he may remove the ornamental objects, provided no damage is caused to the principal thing, and the lessor does not choose to retain them by paying their value at the time the lease is extinguished.

This provision governs Guiang's claim for the value of the house he built on the lot.

Ruling

On the first issue, the Court held that the dismissal of the first ejectment case did not bar the second. The question of res judicata and the non-payment of rentals were purely factual, and the findings of the Court of Appeals, supported by substantial evidence, are beyond the Supreme Court's power of judicial review. The Court also relied on its earlier ruling that although a first ejectment action was dismissed by a final judgment, such dismissal does not preclude the owner from making a new demand upon the tenant to vacate should the tenant again fail to pay the rents due. Even assuming the first case was dismissed, Guiang's possession became unlawful and a new cause of action for ejectment accrued after the written demand of August 21, 1976 was served and he failed to comply.

On the second issue, the Court held that the power to fix a longer term under Article 1687 is discretionary, not mandatory. The Court quoted its earlier ruling that the power of the courts to fix a longer term for lease is discretionary, to be exercised or not in accordance with the particular circumstances of the case, a longer term to be granted where equities come into play demanding extension, and to be denied where none appear. Guiang never sought an extension below, and his failure to pay rentals since August 1975 hardly justified extending his occupancy. Since the rent was paid monthly, the lease was from month to month, and when notice to vacate was given on August 21, 1976, the lease was deemed to have expired at the end of that month.

On the third issue, the Court held that the lessor has the option to pay the lessee one-half of the value of the improvements upon termination of the lease. If the lessor does not exercise that option, the lessee's remedy is to remove the improvements. The lessee cannot compel reimbursement, nor retain possession until reimbursement; his right is removal should the lessor refuse to pay one-half of their value.

Doctrine

First, the dismissal of an ejectment case does not bar a subsequent ejectment action where the tenant again fails to pay rent and a new written demand is served, for a new cause of action then accrues. Second, the power of courts to fix a longer term of lease under Article 1687 is discretionary, not mandatory, and is denied where the lessee's own default creates no equity in his favor. Third, a verbal lease with monthly rentals is a month-to-month lease that expires at the end of the month upon proper notice to vacate. Fourth, under Article 1678, the lessor may elect to pay one-half of the value of the improvements; if he refuses, the lessee's only remedy is to remove them, and he may not demand reimbursement or retain the premises.

Disposition

The Supreme Court dismissed the petition, affirmed the decision of the Court of Appeals, and imposed treble costs against Guiang, with the decision immediately executory.

Remember This

Memorize this line: the dismissal of a first ejectment suit does not preclude a new demand to vacate should the tenant again fail to pay rent. Examiners use this case for the res judicata exception in ejectment, the discretionary extension under Article 1687, and the lessor's option and the lessee's removal remedy under Article 1678.