UY HOO AND SONS REALTY DEVELOPMENT CORPORATION, PETITIONER, VS. COURT OF APPEALS AND THOMAS KUAN, RESPONDENTS.

This is a petition for review on certiorari of the
decision* of
the Court of Appeals in CA-G.R. Sp. No. 13654, promulgated on 9 May 1988.

The antecedent facts are as follows:

Private respondent Thomas Kuan is the
lessee of a residential apartment situated at Room 301, 938 Murillo St. Quiapo, Manila, owned by petitioner Uy
Hoo and Sons Realty Development Corporation.  Earlier, respondent and herein petitioner’s predecessor-in-interest, Dy Siat, had executed a written
contract of lease, with respondent as lessee and Dy Siat as lessor, for a period of
one (1) year commencing on 1 July 1966 and ending on 1 July 1967, over the same
premises.  The contract expressly
provided that it was binding on the parties, their heirs, successors and
assigns.^[1]
Upon the expiration of the period (1 July 1967), herein respondent continued to
occupy the premises.  In 1974 Dy Siat died, but respondent
remained in the premises with the acquiesence of the
petitioner.  As of January 1986, the
monthly rental for the use of the premises remained at P187.00 as originally
agreed upon.

On 11 July 1986, private respondent was informed by petitioner
that his month to month occupancy was to termi­nate effective 31 July
1986.  In the same letter, demand was
made for payment of back rentals from January 1982 to June 1986, amounting to
P10,098.00.  Earlier, or on 2 May
1979, the MTC of Manila, Branch V in Civil Case No. 031792-CV initiated by
herein respondent himself, ordered him to depo­sit in court the rentals for the
premises in dispute.  Respondent had been
depositing said rentals.^[2]

Due to respondent’s refusal to vacate and alleged failure to pay
back rentals, a complaint for unlawful detainer
was filed by petitioner before the MTC of Manila on 22 October 1986.  In due course, the MTC ruled in favor of therein plaintiff (herein
petitioner) ordering therein defendant (herein respondent) to vacate the
premises and pay plaintiff (herein petitioner) the sum of P2,244.00 repre­senting
back rentals from January to December 1984, and to pay subsequent and current
rentals at P187.00 monthly until he vacates, plus attorney’s fees of P1,000.00.** The dispo­sitive
part of said MTC judgment reads –

“WHEREFORE, judgment is hereby rendered:

1.  ordering the defendant
and all persons claiming right and title under him to vacate the premises known
as Room 301 Uy Hoo Building,
938 Murillo Street, Quiapo, Manila and peacefully
surrender possession thereof to plaintiff;

2.  ordering the defendant to
pay plaintiff the amount of P2,244.00 representing back rentals covering the
period from January to December, 1984 and to pay the current monthly rentals at P187.00 onward until he shall have
vacated the premises;

3.  ordering
the defendant to pay attorney’s fees in the amount of P1,000.00, and, the costs
of suit.

The counterclaim is accordingly dismissed.”^[3]

On appeal by respondent to the RTC,*** the decision of the MTC was
affirmed with the modification that the lessee (respondent herein) was not
obliged to pay plaintiff (peti­tioner herein) the amount of P2,244.00 as back
rentals for January to December 1984.^[4]
The dispositive part of the RTC judgment dated 3
November 1987, reads?

“WHEREFORE, the decision appealed from is hereby affirmed with
the modification that the defendant
is not obliged to pay plaintiff the amount of P2,244.08 representing back
rentals covering the period from January to December, 1984.  With costs against defendant-appellant.”^[5]

Private respondent filed a petition for review with the Court of
Appeals attributing two (2) errors to the RTC of Manila –

“I      THE COURT A QUO ERRED IN RULING THAT THE
LEASE IS WITH A FIXED OR DEFINITE TERM

II      THE COURT A QUO ERRED IN NOT EXTENDING TO
THE PETITIONER (DEFENDANT) THE BENEFIT AND PROTECTION OF THE RENT CONTROL LAWS.”^[6]

As
aforestated, in a decision promulgated on 9 May 1988, the Court of Appeals
reversed and set aside the decision of the RTC for failure to apply the
provisions of the rent control law, but the Court of Appeals ordered
payment of back rentals, holding that the lessor was
entitled thereto.

Petitioner thereupon filed this petition for review alleging that
the Court of Appeals committed an error of law in applying the general rule,
and not the exception, in Sec. 6 of BP Blg. 877 (now RA 6643 – The Rent Control Law).

Petitioner contends that despite the absence of a written
contract between lessor and lessee, the lease in dispute is for a definite period, expiring
at the end of every month:  hence, it comes within the exception and not
to general rule in Sec. 6 of BP Blg. 877, which
provides:

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 provision of this Act
shall apply.” (emphasis supplied)

Paragraph (1), Article 1673 of the Civil Code which Sec. 6 BP Blg. 877 suspends (unless the lease is for a definite
period) provides:

“The lessor may judicially eject the
lessee for any of the following causes:

(1) When the period
agreed upon, or that which is fixed for the duration of leases under articles 1682 and 1687, has
expired.”

Petitioner submits that the effectivity
of par. 1, Art. 1673 of the Civil Code is not suspended insofar as the
lease in question
is concerned because the lease is for a definite period of one month, and that
petitioner, as lessor, can upon prior demand or
notice terminate the lease at the end of every month, contrary to the CA’s
ruling that, even if the implied lease expires every month, this fact cannot be
a ground for judicial ejectment.

On the other hand, lessee-respondent Thomas Kuan’s
stand is:  that the month to month lease
here involved is not for a definite period and, therefore, the general rule in
Section 6 of BP 877 applies.  In effect,
under B.P. 877, judicial ejectment cannot, according
to respondent, be enforced- as the same has been expressly suspended-in case of
leases for which no definite
period has been stipulated.

Private respondent further claims that petitioner wrongly assumed
that in the absence of any formal or written contract, the lease would be on a
month to month basis, expiring at the end of every month.  It is, according to respondent, unavoidable
that the present controversy is governed by Art. 1670 on tacita reconduccion:  and that the period which governs the lease
is that provided in Art. 1687 of the Civil Code, the expiration of which as a
ground for ejectment has, been suspended by Section 6
of BP 877.

Art. 1670 of the Civil Code states:

“Art. 1670.  If at the
end of the contract the lessee should continue enjoying the thing leased for
fifteen days with the acquiesence 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.”

Art. 1687 of the Civil Code, in turn, provides:

“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 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.”

According to respondent, to construe the
lease in dispute as one with a
definite period would completely close the door for the application of Section
6 of BP 25 (now BP 877 and RA 6643).

The issue raised in this petition has been resolved in Miranda v. Ortiz^[7]
where the Court held:

“x x x.  In Rivera v. Florendo
promulgated on July 31, 1986, this Court made the following pronouncement, viz:

‘What is suspended under
Section 6 of Batas Pambansa Blg.
25 is Article 1673 of the Civil Code of the Philippines and not Article 1687 of
the same Code.  The effect of said
suspension is that independently of the grounds for ejectment
enumerated in Batas Pambansa Blg.
25, the owner/lessor cannot eject the tenant by
reason of the expiration of the period of a lease as fixed or determined under Article 1687.  It does not mean that the provisions of Article 1687 itself had been
suspended.  Thus, the determination of the period of a lease
agreement can still be made in accordance with said Article 1687.

‘Admittedly, no definite period for the lease was agreed upon by
petitioners and private respondent. 
However, as the rent was paid on a monthly basis, the period of lease is
considered to be from month to month in accordance with Article 1687. 
When petitioners gave private respondent notice to vacate the premises in question, the contract of lease is deemed to have expired
as of the end of the month.  As we have ruled in Baen
v. Court of Appeals, supra, even if the month to month
arrangement is on a verbal
basis, if it is shown that the lessor needs the property for his own use
or for the use of any immediate member of the family or for any of the other statutory grounds to eject under Section 5 of Batas Pambansa Blg. 25, which happens
to be applicable, then the lease is considered terminated as
of the end of the month, after proper notice or demand to vacate has been given.  (See Crisostomo v. Court Appeals, 116 SCRA 199).

‘x x x x.

‘The law x x, Batas Pambansa
Blg. 25, (in
its Section 5[c]) x x allows ejectment
on the ground of need by the
owner/lessor of
the leased premises for his own use or that of a member of his immediate
family.  The inclusion of this ground was
obviously intended to correct the inequity and hardship imposed by P.D. 20 on small landowners/lessors, whose property
rights, protected as they are by the fundamental law itself, We upheld even
during the effectivity of P.D. No. 20.  To adopt,
therefore, the construction given by
respondent court is to render Section 5 (c) of Batas Pambansa
Blg. 25 illusory in cases where the lease agreement is verbal and for an indefinite period, because in this case, the owner/lessor,
notwithstanding his pressing and urgent need for the premises could never
successfully eject the tenant as the
period of lease would never expire during the effectivity
of Batas Pambansa Blg. 25.

“The ruling was reiterated in Zablan
v. C.A., et al., G.R. No. 57844, September 30, 1987, in which it was further pointed out that (1) if the verbal lease
agreement on a month-to-month
basis were held to be for an indefinite period and not terminable at the end of
any given month, ‘the law would be rendered illu­sory’ in the sense that ‘the
owner/lessor, notwithstanding his pressing need for
the premises, could never successfully eject the tenant because the period of
lease would never expire during the effectivity of Batas Pambansa Blg. 25,’ and (2) that (i)n view
of subsequent cases x x there no longer appears to be
any need nor reason to rely
solely on our ruling in Rantael v. Court of Appeals x
x.’ (emphasis supplied).

While it is true that the factual situations in the Miranda
case and in the Rivera case it cites involved a need by the lessor of the leased premises for his own use or that of an
immediate member of his family, yet, the thrust of the decisions in said cases
appears to be that “the determination of the period of a lease agreement
can still be made in accordance with said Article 1687” and that, in a
month to month lease situation, “when petitioners (lessor)
gave private respondent (lessee) notice to vacate the premises in question, the
contract of lease is deemed to have expired as of the end of the month.”

Besides, while Sec. 5 (f) of BP Blg. 25
originally stated that “expiration of the period of a written lease
contract” is one of the grounds for judicial ejectment
(like need of the leased premises by the lessor under
Sec. 5 [c]), BP Blg. 877 amended Sec. 5 (f) of BP Blg. 25 into stating that “expiration of the period of
the lease contract” is a ground for judicial ejectment:  thus
further bolstering peti­tioner’s contention that a month to month lease under
Art. 1687 is a lease with definite period, the expiration of which, upon
previous demand to vacate, can justify judicial ejectment.

WHEREFORE, the petition is GRANTED. 
The Court of Appeals decision appealed from is REVERSED and SET ASIDE.  The decision of the
Regional Trial Court of Manila, Branch X, dated 3 November 1987, in Civil Case No.
87-40109 is reinstated, with cost
against private respondent.

SO ORDERED.

Melencio-Herrera, (Chairman), Paras, and Regalado, JJ., concur.

Sarmiento, J., on leave.

*
Eighth Division J. Bonifacio
A. Cacdac, Jr. ponente, JJ.  Floreliana Castro-Bartolome and Ricardo L. Pronove,
Jr., concurring

^[1] Rollo,
at p.12

^[2] Rollo,
at p. 10

**
Judgment of 28 January 1987.  Metropolitan Trial Court of Manila, Br. XII

^[3] Rollo, at p. 11

***
Hon. Josefina C. Rodil
– Presiding, Regional Trial Court of Manila, Br. X – docketed as Civil
Case No. 87-40109

^[4] Evidently because respondent had deposited
said rentals in court in Civil
Case No. 031792-CV

^[5] Rollo, at p. 11

^[6] Rollo, at p. 12

^[7] G.R. No. L-59783, December 1,
1987, 156 SCRA 10