In Emiliana G. Peña, Amelia C. Mar, and Carmen Reyes v. Spouses Armando Tolentino and Leticia Tolentino, the Supreme Court affirmed that a lease agreement with no specified period, where rent is paid monthly, is considered a lease with a definite period, expiring at the end of each month upon proper notice. The Court ruled that the lessors were justified in ejecting the lessees after giving due notice of termination, even if the lessees had occupied the premises for an extended period. This decision underscores the importance of adhering to the terms of lease agreements and reinforces the rights of property owners to regain possession of their property upon the expiration of such agreements, as long as proper notice is given.

Lease Termination Tango: Can Lengthy Tenancy Trump Landlord’s Rights?

This case revolves around three lessees, Emiliana G. Peña, Amelia C. Mar, and Carmen Reyes, who had been renting separate parcels of land from Spouses Armando and Leticia Tolentino in Manila. The lease agreements were oral, with monthly rental payments. In August 1995, the Tolentinos sent letters to each lessee, informing them that their month-to-month lease contracts would be terminated effective September 15, 1995, and demanding they vacate the premises. When the lessees refused to leave, the Tolentinos filed ejectment suits, which were eventually consolidated. The heart of the legal matter was whether the Tolentinos could legally eject the lessees, considering the absence of a written lease and the lessees’ long-term occupancy.

The lessees argued that they could not be summarily ejected because their leases should be considered indefinite under Presidential Decree (P.D.) No. 20, which suspended certain provisions of the Civil Code related to lease terms. However, the Supreme Court clarified that P.D. No. 20 had already been repealed by Batas Pambansa Blg. 25. Furthermore, the Court emphasized that while Batas Pambansa Blg. 877, the controlling rental law at the time the complaints were filed, suspended paragraph 1 of Article 1673 of the Civil Code (concerning expiration of lease period as a ground for ejectment), it did not suspend Article 1687. This meant that the determination of the lease period could still be made according to Article 1687, which states that if the rent is paid monthly and no period is fixed, the lease is considered to be from month to month.

Building on this principle, the Court cited De Vera v. Court of Appeals, which established that such month-to-month leases are considered to have a definite period, terminating at the end of each month. In this case, because the Tolentinos had notified the lessees of the termination of their leases effective September 15, 1995, the lessees’ right to occupy the premises ended on that date. Therefore, the Tolentinos were legally entitled to seek their ejectment. The Court also addressed the lessees’ argument that they had a right of first refusal to purchase the properties under P.D. 1517 (Urban Land Reform Code) and R.A. 3516. The Court found that the lessees had failed to raise this issue in the lower courts and were thus precluded from raising it for the first time on appeal.

Moreover, the Court noted that the lessees had been aware of their alleged right of first refusal even before the Tolentinos purchased the properties, yet they did not assert this right in their initial pleadings. The Court viewed this as a change in the theory of the case on appeal, which is impermissible. Changing the theory of the case at this late stage would be unfair to the respondents and deprive the lower courts of the opportunity to decide the merits of the case fairly. As stated in Carantes v. Court of Appeals:

The settled rule is that defenses not pleaded in the answer may not be raised for the first time on appeal. A party cannot, on appeal, change fundamentally the nature of the issue in the case. When a party deliberately adopts a certain theory and the case is decided upon that theory in the court below, he will not be permitted to change the same on appeal, because to permit him to do so would be unfair to the adverse party.

In addition, the Court emphasized that the issue of whether the leased premises were covered by P.D. 1517 was a factual question that should have been determined by the trial court. This Court is not a trier of facts and cannot make such a determination on appeal. The Court also addressed the Court of Appeals’ modification of the Metropolitan Trial Court’s (MeTC) decision regarding the payment for the use and occupancy of the premises. The CA had ordered the lessees to pay their “respective agreed rentals which shall be gradually increased in accordance with the Rent Control Law” instead of the reasonable compensation set by the MeTC. The Supreme Court found this modification to be inconsistent, as it was more appropriate to award reasonable compensation, not rentals, given that the leases had expired.

Therefore, the Court reinstated the MeTC’s decision without qualification. This ruling reinforces the principle that even long-term occupancy does not override the fundamental terms of a lease agreement, particularly when the agreement is on a month-to-month basis. Proper notice of termination is crucial, and failure to assert legal rights in a timely manner can preclude a party from raising them on appeal. In essence, the Supreme Court’s decision underscores the importance of adhering to the legal framework governing lease agreements and respecting the rights of property owners to regain possession of their property when those agreements expire. The decision also reminds litigants to raise all relevant issues and defenses in the lower courts to ensure they are properly considered and preserved for appeal.

FAQs

What was the central issue in this case?	The central issue was whether the lessors could legally eject the lessees from their properties after terminating a month-to-month lease agreement, despite the lessees’ long-term occupancy.
What is a month-to-month lease agreement?	A month-to-month lease agreement is a rental agreement that automatically renews each month until either the landlord or the tenant provides notice of termination, typically 30 days.
What laws govern lease agreements in the Philippines?	Lease agreements in the Philippines are primarily governed by the Civil Code, as well as specific rental laws like Batas Pambansa Blg. 877 and Republic Act No. 9161, which regulate rental rates and eviction procedures.
Can a tenant be evicted if the lease agreement expires?	Yes, a tenant can be evicted if the lease agreement expires, provided the landlord gives proper notice of termination as required by law or the lease agreement itself.
What is the right of first refusal?	The right of first refusal is a contractual right that gives a party the first opportunity to purchase a property if the owner decides to sell it, before the owner can sell to anyone else.
Why did the lessees lose their claim to the right of first refusal?	The lessees lost their claim to the right of first refusal because they failed to raise this issue in the lower courts and only brought it up on appeal, which is generally not allowed.
What is the significance of Article 1687 of the Civil Code?	Article 1687 of the Civil Code specifies the duration of lease agreements when no fixed period is agreed upon, stating that if rent is paid monthly, the lease is considered to be from month to month.
What does “reasonable compensation” mean in the context of this case?	In this case, “reasonable compensation” refers to the amount the lessees are required to pay for the use and occupancy of the premises after the lease has expired, as determined by the court.

This case serves as a crucial reminder of the importance of understanding and asserting one’s legal rights in a timely manner. By failing to raise the issue of the right of first refusal in the lower courts, the petitioners effectively waived their opportunity to have it considered on appeal. The decision reinforces the principle that procedural rules are in place to ensure fairness and order in legal proceedings, and that parties must diligently pursue their claims to avoid forfeiting them.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: EMILIANA G. PEÑA, ET AL. VS. SPOUSES ARMANDO TOLENTINO, G.R. No. 155227-28, February 09, 2011