FIRST DIVISION

[G.R. No. 122544. January 28, 1999.]

REGINA P. DIZON, AMPARO D. BARTOLOME, FIDELINA D. BALZA, ESTER ABAD DIZON and JOSEPH
ANTHONY DIZON, RAYMUND A. DIZON, GERARD A. DIZON, and JOSE A. DIZON, JR., petitioners, vs.
COURT OF APPEALS and OVERLAND EXPRESS LINES, INC., respondents.
[G.R. No. 124741. January 28, 1999.]
REGINA P. DIZON, AMPARO D. BARTOLOME, FIDELINA D. BALZA, ESTER ABAD DIZON and JOSEPH
ANTHONY DIZON, RAYMUND A. DIZON, GERARD A. DIZON, and JOSE A. DIZON, JR., petitioners, vs.
COURT OF APPEALS, HON. MAXIMIANO C. ASUNCION, and OVERLAND EXPRESS LINES, INC.,
respondents.
DECISION
MARTINEZ, J p:
Two consolidated petitions were filed before us seeking to set aside and annul the decisions and resolutions
of respondent Court of Appeals. What seemed to be a simple ejectment suit was juxtaposed with procedural
intricacies which finally found its way to this Court.
G.R. No. 122544:
On May 23, 1974, private respondent Overland Express Lines, Inc. (lessee) entered into a Contract of Lease
with Option to Buy with petitioners 1 (lessors) involving a 1,755.80 square meter parcel of land situated at
corner MacArthur Highway and South "H" Street, Diliman, Quezon City. The term of the lease was for one
(1) year commencing from May 16, 1974 up to May 15, 1975. During this period, private respondent was
granted an option to purchase for the amount of P3,000.00 per square meter. Thereafter, the lease shall be
on a per month basis with a monthly rental of P3,000.00.
For failure of private respondent to pay the increased rental of P8,000.00 per month effective June 1976,
petitioners filed an action for ejectment (Civil Case No. VIII-29155) on November 10, 1976 before the then
City Court (now Metropolitan Trial Court) of Quezon City, Branch VIII. On November 22, 1982, the City Court
rendered judgment 2 ordering private respondent to vacate the leased premises and to pay the sum of
P624,000.00 representing rentals in arrears and/or as damages in the form of reasonable compensation for
the use and occupation of the premises during the period of illegal detainer from June 1976 to November
1982 at the monthly rental of P8,000.00, less payments made, plus 12% interest per annum from November
18, 1976, the date of filing of the complaint, until fully paid, the sum of P8,000.00 a month starting December
1982, until private respondent fully vacates the premises, and to pay P20,000.00 as and by way of attorney's
fees.
Private respondent filed a certiorari petition praying for the issuance of a restraining order enjoining the
enforcement of said judgment and dismissal of the case for lack of jurisdiction of the City Court.
On September 26, 1984, the then Intermediate Appellate Court 3 (now Court of Appeals) rendered a
decision 4 stating that:
". . ., the alleged question of whether petitioner was granted an extension of the option to
buy the property; whether such option, if any, extended the lease or whether petitioner
actually paid the alleged P300,000.00 to Fidela Dizon, as representative of private
respondents in consideration of the option and, whether petitioner thereafter offered to pay
the balance of the supposed purchase price, are all merely incidental and do not remove
the unlawful detainer case from the jurisdiction of respondent court. In consonance with
the ruling in the case of Teodoro, Jr. vs. Mirasol (supra), the above matters may be raised
and decided in the unlawful detainer suit as, to rule otherwise, would be a violation of the
principle prohibiting multiplicity of suits. (Original Records, pp. 38-39)."
The motion for reconsideration was denied. On review, this Court dismissed the petition in a resolution dated
June 19, 1985 and likewise denied private respondent's subsequent motion for reconsideration in a
resolution dated September 9, 1985. 5

On October 7, 1985, private respondent filed before the Regional Trial Court (RTC) of Quezon City (Civil
Case No. Q-45541) an action for Specific Performance and Fixing of Period for Obligation with prayer for the
issuance of a restraining order pending hearing on the prayer for a writ of preliminary injunction. It sought to
compel the execution of a deed of sale pursuant to the option to purchase and the receipt of the partial
payment, and to fix the period to pay the balance. In an Order dated October 25, 1985, the trial court denied
the issuance of a writ of preliminary injunction on the ground that the decision of the then City Court for the
ejectment of the private respondent, having been affirmed by the then Intermediate Appellate Court and the
Supreme Court, has become final and executory.
Unable to secure an injunction, private respondent also filed before the RTC of Quezon City, Branch 102
(Civil Case No. Q-46487) on November 15, 1985 a complaint for Annulment of and Relief from Judgment
with injunction and damages. In its decision 6 dated May 12, 1986, the trial court dismissed the complaint for
annulment on the ground of res judicata, and the writ of preliminary injunction previously issued was
dissolved. It also ordered private respondent to pay P3,000.00 as attorney's fees. As a consequence of
private respondent's motion for reconsideration, the preliminary injunction was reinstated, thereby
restraining the execution of the City Court's judgment on the ejectment case.
The two cases were thereafter consolidated before the RTC of Quezon City, Branch 77. On April 28, 1989, a
decision 7 was rendered dismissing private respondent's complaint in Civil Case No. Q-45541 (specific
performance case) and denying its motion for reconsideration in Civil Case No. 46487 (annulment of the
ejectment case). The motion for reconsideration of said decision was likewise denied.
On appeal, 8 respondent Court of Appeals rendered a decision 9 upholding the jurisdiction of the City Court
of Quezon City in the ejectment case. It also concluded that there was a perfected contract of sale between
the parties on the leased premises and that pursuant to the option to buy agreement, private respondent had
acquired the rights of a vendee in a contract of sale. It opined that the payment by private respondent of
P300,000.00 on June 20, 1975 as partial payment for the leased property, which petitioners accepted
(through Alice A. Dizon) and for which an official receipt was issued, was the operative act that gave rise to a
perfected contract of sale, and that for failure of petitioners to deny receipt thereof, private respondent can
therefore assume that Alice A. Dizon, acting as agent of petitioners, was authorized by them to receive the
money in their behalf. The Court of Appeals went further by stating that in fact, what was entered into was a
"conditional contract of sale" wherein ownership over the leased property shall not pass to the private
respondent until it has fully paid the purchase price. Since private respondent did not consign to the court
the balance of the purchase price and continued to occupy the subject premises, it had the obligation to pay
the amount of P1,700.00 in monthly rentals until full payment of the purchase price. The dispositive portion
of said decision reads:
"WHEREFORE, the appealed decision in Case No. 46487 is AFFIRMED. The appealed
decision in Case No. 45541 is, on the other hand, ANNULLED and SET ASIDE. The
defendants-appellees are ordered to execute the deed of absolute sale of the property in
question, free from any lien or encumbrance whatsoever, in favor of the plaintiff-appellant,
and to deliver to the latter the said deed of sale, as well as the owner's duplicate of the
certificate of title to said property upon payment of the balance of the purchase price by
the plaintiff-appellant. The plaintiff-appellant is ordered to pay P1,700.00 per month from
June 1976, plus 6% interest per annum, until payment of the balance of the purchase
price, as previously agreed upon by the parties.
SO ORDERED."
Upon denial of the motion for partial reconsideration (Civil Case No. Q-45541) by respondent Court of
Appeals, 10 petitioners elevated the case via petition for certiorari questioning the authority of Alice A. Dizon
as agent of petitioners in receiving private respondent's partial payment amounting to P300,000.00 pursuant
to the Contract of Lease with Option to Buy. Petitioners also assail the propriety of private respondent's
exercise of the option when it tendered the said amount on June 20, 1975 which purportedly resulted in a
perfected contract of sale.
G.R. No. 124741:
Petitioners filed with respondent Court of Appeals a motion to remand the records of Civil Case No. 3829155 (ejectment case) to the Metropolitan Trial Court (MTC), then City Court of Quezon City, Branch 38, for
execution of the judgment 11 dated November 22, 1982 which was granted in a resolution dated June 29,
1992. Private respondent filed a motion to reconsider said resolution which was denied.

Aggrieved, private respondent filed a petition for certiorari, prohibition with preliminary injunction and/or
restraining order with this Court (G.R. Nos. 106750-51) which was dismissed in a resolution dated
September 16, 1992 on the ground that the same was a refiled case previously dismissed for lack of merit.
On November 26, 1992, entry of judgment was issued by this Court.
On July 14, 1993, petitioners filed an urgent ex-parte motion for execution of the decision in Civil Case No.
38-29155 with the MTC of Quezon City, Branch 38. On September 13, 1993, the trial court ordered the
issuance of a third alias writ of execution. In denying private respondent's motion for reconsideration, it
ordered the immediate implementation of the third writ of execution without delay.
On December 22, 1993, private respondent filed with the Regional Trial Court (RTC) of Quezon City, Branch
104 a petition for certiorari and prohibition with preliminary injunction/restraining order (SP. PROC. No. 9318722) challenging the enforceability and validity of the MTC judgment as well as the order for its execution.
On January 11, 1994, RTC of Quezon City, Branch 104 issued an order 12 granting the issuance of a writ of
preliminary injunction upon private respondent's posting of an injunction bond of P50,000.00.
Assailing the aforequoted order after denial of their motion for partial reconsideration, petitioners filed a
petition 13 for certiorari and prohibition with a prayer for a temporary restraining order and/or preliminary
injunction with the Court of Appeals. In its decision, 14 the Court of Appeals dismissed the petition and ruled
that:
"The avowed purpose of this petition is to enjoin the public respondent from restraining the
ejectment of the private respondent. To grant the petition would be to allow the ejectment
of the private respondent. We cannot do that now in view of the decision of this Court in
CA-G.R. CV Nos. 25153-54. Petitioners' alleged right to eject private respondent has been
demonstrated to be without basis in the said civil case. The petitioners have been shown,
after all, to have no right to eject private respondents.
WHEREFORE, the petition is DENIED due course and is accordingly DISMISSED.
SO ORDERED." 15
Petitioners' motion for reconsideration was denied in a resolution 16 by the Court of Appeals stating that:
"This court in its decision in CA-G.R. CV Nos. 25153-54 declared that the plaintiffappellant (private respondent herein) acquired the rights of a vendee in a contract of sale,
in effect, recognizing the right of the private respondent to possess the subject premises.
Considering said decision, we should not allow ejectment; to do so would disturb the
status quo of the parties since the petitioners are not in possession of the subject property.
It would be unfair and unjust to deprive the private respondent of its possession of the
subject property after its rights have been established in a subsequent ruling.
WHEREFORE, the motion for reconsideration is DENIED for lack of merit.
SO ORDERED." 17
Hence, this instant petition.
We find both petitions impressed with merit.
First. Petitioners have established a right to evict private respondent from the subject premises for nonpayment of rentals. The term of the Contract of Lease with Option to Buy was for a period of one (1) year
(May 16, 1974 to May 15, 1975) during which the private respondent was given an option to purchase said
property at P3,000.00 per square meter. After the expiration thereof, the lease was for P3,000.00 per month.
Admittedly, no definite period beyond the one-year term of lease was agreed upon by petitioners and private
respondent. However, since 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 of the New Civil Code. 18 Where the rentals are paid
monthly, the lease, even if verbal may be deemed to be on a monthly basis, expiring at the end of every
month pursuant to Article 1687, in relation to Article 1673 of the Civil Code. 19 In such case, a demand to
vacate is not even necessary for judicial action after the expiration of every month. 20

When private respondent failed to pay the increased rental of P8,000.00 per month in June 1976, the
petitioners had a cause of action to institute an ejectment suit against the former with the then City Court. In
this regard, the City Court (now MTC) had exclusive jurisdiction over the ejectment suit. The filing by private
respondent of a suit with the Regional Trial Court for specific performance to enforce the option to purchase
did not divest the then City Court of its jurisdiction to take cognizance over the ejectment case. Of note is the
fact that the decision of the City Court was affirmed by both the Intermediate Appellate Court and this Court.
Second. Having failed to exercise the option within the stipulated one year period, private respondent cannot
enforce its option to purchase anymore. Moreover, even assuming arguendo that the right to exercise the
option still subsists at the time private respondent tendered the amount on June 20, 1975, the suit for
specific performance to enforce the option to purchase was filed only on October 7, 1985 or more than ten
(10) years after accrual of the cause of action as provided under Article 1144 of the New Civil Code. 21
In this case, there was a contract of lease for one (1) year with option to purchase. The contract of lease
expired without the private respondent, as lessee, purchasing the property but remained in possession
thereof. Hence, there was an implicit renewal of the contract of lease on a monthly basis. The other terms of
the original contract of lease which are revived in the implied new lease under Article 1670 of the New Civil
Code 22 are only those terms which are germane to the lessee's right of continued enjoyment of the
property leased. 23 Therefore, an implied new lease does not ipso facto carry with it any implied revival of
private respondent's option to purchase (as lessee thereof) the leased premises. The provision entitling the
lessee the option to purchase the leased premises is not deemed incorporated in the impliedly renewed
contract because it is alien to the possession of the lessee. Private respondent's right to exercise the option
to purchase expired with the termination of the original contract of lease for one year. The rationale of this
Court is that:
"This is a reasonable construction of the provision, which is based on the presumption that
when the lessor allows the lessee to continue enjoying possession of the property for
fifteen days after the expiration of the contract he is willing that such enjoyment shall be
for the entire period corresponding to the rent which is costumarily paid in this case up
to the end of the month because the rent was paid monthly. Necessarily, if the presumed
will of the parties refers to the enjoyment of possession the presumption covers the other
terms of the contract related to such possession, such as the amount of rental, the date
when it must be paid, the care of the property, the responsibility for repairs, etc. But no
such presumption may be indulged in with respect to special agreements which by nature
are foreign to the right of occupancy or enjoyment inherent in a contract of lease." 24
Third. There was no perfected contract of sale between petitioners and private respondent. Private
respondent argued that it delivered the check of P300,000.00 to Alice A. Dizon who acted as agent of
petitioners pursuant to the supposed authority given by petitioner Fidela Dizon, the payee thereof. Private
respondent further contended that petitioners' filing of the ejectment case against it based on the contract of
lease with option to buy holds petitioners in estoppel to question the authority of petitioner Fidela Dizon. It
insisted that the payment of P300,000.00 as partial payment of the purchase price constituted a valid
exercise of the option to buy.
Under Article 1475 of the New Civil Code, "the contract of sale is perfected at the moment there is a meeting
of minds upon the thing which is the object of the contract and upon the price. From that moment, the parties
may reciprocally demand performance, subject to the provisions of the law governing the form of contracts."
Thus, the elements of a contract of sale are consent, object, and price in money or its equivalent. It bears
stressing that the absence of any of these essential elements negates the existence of a perfected contract
of sale. Sale is a consensual contract and he who alleges it must show its existence by competent proof. 25
In an attempt to resurrect the lapsed option, private respondent gave P300,000.00 to petitioners (thru Alice
A. Dizon) on the erroneous presumption that the said amount tendered would constitute a perfected contract
of sale pursuant to the contract of lease with option to buy. There was no valid consent by the petitioners (as
co-owners of the leased premises) on the supposed sale entered into by Alice A. Dizon, as petitioners'
alleged agent, and private respondent. The basis for agency is representation and a person dealing with an
agent is put upon inquiry and must discover upon his peril the authority of the agent. 26 As provided in
Article 1868 of the New Civil Code, 27 there was no showing that petitioners consented to the act of Alice A.
Dizon nor authorized her to act on their behalf with regard to her transaction with private respondent. The
most prudent thing private respondent should have done was to ascertain the extent of the authority of Alice
A. Dizon. Being negligent in this regard, private respondent cannot seek relief on the basis of a supposed
agency.

In Bacaltos Coal Mines vs. Court of Appeals, 28 we explained the rule in dealing with an agent:
"Every person dealing with an agent is put upon inquiry and must discover upon his peril
the authority of the agent. If he does not make such inquiry, he is chargeable with
knowledge of the agent's authority, and his ignorance of that authority will not be any
excuse. Persons dealing with an assumed agent, whether the assumed agency be a
general or special one, are bound at their peril, if they would hold the principal, to
ascertain not only the fact of the agency but also the nature and extent of the authority,
and in case either is converted, the burden of proof upon them to establish it."
For the long years that private respondent was able to thwart the execution of the ejectment suit rendered in
favor of petitioners, we now write finis to this controversy and shun further delay so as to ensure that this
case would really attain finality.
WHEREFORE, in view of the foregoing, both petitions are GRANTED. The decision dated March 29, 1994
and the resolution dated October 19, 1995 in CA-G.R. CV No. 25153-54, as well as the decision dated
December 11, 1995 and the resolution dated April 23, 1997 in CA-G.R. SP No. 33113 of the Court of
Appeals are hereby REVERSED and SET ASIDE.
Let the records of this case be remanded to the trial court for immediate execution of the judgment dated
November 22, 1982 in Civil Case No. VIII-29155 of the then City Court (now Metropolitan Trial Court) of
Quezon City, Branch VIII as affirmed in the decision dated September 26, 1984 of the then Intermediate
Appellate Court (now Court of Appeals) and in the resolution dated June 19, 1985 of this Court.
However, petitioners are ordered to REFUND to private respondent the amount of P300,000.00 which they
received through Alice A. Dizon on June 20, 1975.
SO ORDERED.
Davide, Jr., C .J ., Melo, Kapunan and Pardo, JJ ., concur.

Footnotes
1.
2.
3.
4.
5.

6.
7.
8.
9.
10.
11.
12.

The original petitioners were Fidela P. Dizon, Regina Dizon, Amparo D. Bartolome, Ester A. Dizon, Alice A Dizon
and Fidelina D. Balza.
Per Judge Fernando Gorospe, Jr.
The Intermediate Appellate Court took cognizance over the case after it was referred by the Supreme Court.
Penned by Justice Simeon M. Gopengco and concurred in by Justices Lino M. Patajo, Jose F. Racela, Jr. and
Fidel P. Purisima; Annex "A" of Petition; Rollo, p. 60.
"Whatever claims petitioner (private respondent herein) may have as to what it allegedly paid to and received
by private respondent Fidela Dizon, under the receipt issued by Mrs. Alicia Dizon, or with regard to the
enforceability or non-enforceability of its stated option to buy, against the private respondents (petitioners
herein), which were matters merely raised as defenses of the petitioner in the unlawful detainer suit filed against
it may be better presented for ultimate resolution in a separate suit and before the proper forum"; Annex "A" of
Petition in G.R. No. 124741; Rollo, p. 48.
Per Judge Wilhelmo C. Fortun.
Per Judge Ignacio L. Salvador.
Docketed as CA-G.R. CV No. 25153-54, entitled "OVERLAND EXPRESS LINES, INC., Plaintiff-Appellant vs.
FIDELA P. DIZON, ET AL., Defendants-Appellees."
CA Decision (Eight Division) dated March 29, 1994, penned by Justice Eubulo G. Verzola, and concurred in by
Justice Ricardo J. Francisco, Chairman and Justice Serafin V.C. Guingona; Annex "A" of Petition; Rollo, pp. 5772.
CA Resolution (Thirteenth Division) dated October 19, 1995, penned by Justice Eubulo G. Verzola, and
concurred in by Justice Justo P. Torres, Jr., Chairman and Justice Oswaldo D. Agcaoili; Annex "B" of Petition;
Rollo, pp. 74-78.
See note 2.
Per Judge Maximiano C. Asuncion, ruling that:
"After evaluating the evidence and arguments presented by the parties during the hearing
of this case, the Court believes that the petitioner (herein private respondent) will suffer an
irreparable injury unless a writ of preliminary injunction be issued enjoining the respondents
(herein petitioners) or any person acting in their behalf from implementing the execution of
the Judgment and the Resolution of the MTC, Br. 38 of Quezon City. Likewise, in view of
the pendency of cases before the Court of Appeals under CA-G.R. No. 25153-54 for

Specific Performance and for Annulment and Relief of Judgment, following the ruling of
Supreme Court in the case of Vda de Sayman vs. Court of Appeals, 121 SCRA 650. "That it
is the rule when a petition for relief is filed, the Court may issue preliminary injunction as
may be necessary for the preservation of the rights of the parties'. Further, it said that "The
judgment of the trial court, the enforcement of which is sought to be restrained has not yet
attained the status of being beyond modification or reversal. Hence, the enforcement of the
same at this stage of the proceedings is premature'"(Annex "A" of Petition, Rollo, pp. 5051)
13.
14.

Docketed as CA-G.R. SP. No. 33113, entitled "AMPARO DIZON, ET AL., Petitioners vs. HON. MAXIMIANO C.
ASUNCION, as RTC Judge of Quezon City, Branch 104 and OVERLAND EXPRESS LINES INC.,
Respondents."
CA Decision (Thirteenth Division) dated December 11, 1995, penned by Justice Eubulo G. Verzola and
concurred in by Justice Justo P. Torres, Jr., Chairman and Justice Oswaldo D. Agcaoili, Annex "A" of Petition;
Rollo, pp. 46-53.
NOTE: CA-G.R. SP No. 33113 was transferred to the Thirteenth Division by virtue of the Resolution from the
Fifteenth Division dated January 16, 1994 (pursuant to Section 7, Rule 3 of the Revised Internal Rules of the
Court of Appeals) which states that a Special Case may be consolidated to the Justice to whom the civil case is
assigned for study or report when the cases involve the same parties and/or related questions of fact and/or
law.

15.
16.
17.
18.
19.

Ibid., Rollo, p. 52.

CA Resolution (Special Former Thirteenth Division) dated April 23, 1997, penned by Justice Eubulo G. Verzola,
and concurred in by Justice Jaime M. Lantin (New member vice J. Torres, Jr.) and Justice B.A. Adefuin-dela
Cruz (Vice J. Agcaoili, pursuant to Office Order No. 19-96-DP); Annex "B" of Petition, Rollo, pp. 55-57.
Ibid., Rollo, pp. 56-57.
Article 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."
Heirs of Manuel T. Suico vs. Court of Appeals, 266 SCRA 444, 456 [1997]; citing Rantael vs. Court of Appeals,
97 SCRA 453, 460 [1989]; Cruz vs. Puno, 120 SCRA 497, 502 [1983]; Lesaca vs. Cuevas, 125 SCRA 384, 388
[1983]; Baens vs. Court of Appeals, 125 SCRA 634, 644 [1983]; Zablan vs. Court of Appeals, 154 SCRA 487,
493 [1987].
"Article 1637. The lessor may judicially eject the lessee for any of the following causes:
(1)

20.
21.

When the period agreed upon, or that which is fixed for the duration of lease
under Articles 1682 and 1687, has expired: . . ."

Ibid., citing Racaza vs. Susan Realty, Inc., 18 SCRA 1172, 1176-1177 [1966].
"Article 1144. The following actions must be brought within ten years from the time the right of action accrues:
(1)

Upon a written contract:

xxx

22.

23.
24.
25.
26.
27.
28.

xxx

xxx

"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."
Dizon vs. Magsaysay, 57 SCRA 250, 254 [1974].
Ibid.
Villanueva vs. Court of Appeals, 267 SCRA 89, 101 [1997].
See Bordador vs. Luz, 283 SCRA 374, 382 [1997].
"Article 1868. By the contract of agency, a person binds himself to render some service or to do something in
representation or on behalf of another, with the consent or authority of the latter."
245 SCRA 460, 467 citing the cases of Pineda vs. Court of Appeals, 226 SCRA 754 [1993], Veloso vs. La
Urbana, 58 Phil. 681 [1933]. Harry E. Keller Co. vs. Rodriguez, 44 Phil. 19 [1922], Deen vs. Pacific Commercial
Co., 42 Phil. 738 [1922], and Strong vs. Repide, 6 Phil. 680 [1906].