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FATHER SATURNINO URIOS UNIVERSITY (FSUU) INC., AND/OR REV. FR. JOHN
CHRISTIAN U. YOUNG - PRESIDENT, PETITIONERS, VS. ATTY. RUBEN B. CURAZA,
RESPONDENT.

CATHOLIC EDUCATIONAL ASSOCIATION OF THE PHILIPPINES, PETITIONER-IN-

INTERVENTION.

DECISION

LEONEN, J.:

FACTS:

Atty. Curaza is a part-time employee of Father Saturnino Urios University who have been
teaching to the university for 11 years, since 1979 until 2009, with different loads and some
breaks in between semesters.

On November 21, 2008, Atty. Curaza wrote a letter to the university for an early retirement
pursuant to the University's Personnel Policy and Procedure and the Retirement Pay Law. His
request was not approved stating that the university is not granting retirement benefits to part-
time teachers. He reiterated his claim to the university but to no avail. He filed a complaint against
the University, its president and vice president for retirement benefits, damages, and attorney's
fees before the National Labor Relations Commission.

The University argued in its position paper that Atty. Curaza was only a part-time instructor, and
not a permanent employee. The Labor Arbirter ruled in favor of Atty. Curaza which was affirmed
by the NLRC and the Court of Appeals. When the case reached the Supreme Court, the Catholic
Educational Association of the Philippines filed a motion for leave to intervene. The organization
stated that it has 667 member schools, with more than 35,000 personnel, that will be adversely
affected by a precedent declaring that part-time faculty are entitled to retirement benefits, which
"would be the death knell to most" of its member schools. Hence this petition.

ISSUE:

This Court resolves the Petition for Review on Certiorari1 filed by Father Saturnino Urios
University, Inc. and Rev. Fr. John Christian U. Young, assailing the Court of Appeals
Decision2 with regard to part-time employee Atty. Ruben B. Curaza's (Atty. Curaza) eligibility for
retirement benefits under Republic Act No. 7641.

Father Saturnino Urios University (the University) hired Atty. Curaza to teach commercial law
subjects in the Commerce Department during the second semester of school year 1979 to 1980.
He was subsequently given teaching loads in the College of Engineering and the College of Arts
and Sciences. He later taught subjects as a pioneering professor in the College of Law.3

On November 21, 2008, Atty. Curaza wrote a letter applying for early retirement, pursuant to the
University's Personnel Policy and Procedure and the Retirement Pay Law.4 Having received no
response, he followed-up his request with the University's Human Resource Management and
Development Office, where he was informed that his retirement application could not be
approved as the University did not grant retirement benefits to its part-time teachers. Atty. Curaza
thus wrote another letter on March 5, 2009, reiterating his application, together with a copy of the
Labor Advisory on Retirement Pay Law. By the time Atty. Curaza had turned 60 years old, the
application remained unacted upon.5

Thus, on June 25, 2010, Atty. Curaza filed a complaint against the University, its president and
vice president for retirement benefits, damages, and attorney's fees before the National Labor
Relations Commission Regional Arbitration Branch XIII in Butuan City.6

The University then submitted a position paper asserting that Atty. Curaza was only a part-time
instructor, and not a permanent employee. He was paid monthly, on a per hour, per teaching
load, and per semester basis. His last teaching load was only a three-unit subject in the College
of Engineering, during the second semester of school year 2008 to 2009, and his last gross
salary was P1,400.00.7

It was pointed out in the position paper that the Collective Bargaining Agreement between the
University and its Faculty and Employees Association expressly excludes part-time faculty from
its coverage. The University further argued that Republic Act No. 7641, or the Retirement Pay
Law, similarly excludes part-time instructors in private educational institutions from its coverage.8

Moreover, the University officials remarked in the position paper that even if part-time instructors
were entitled to retirement benefits under Republic Act No. 7641, Atty. Curaza was still not
entitled to the same benefits, considering that he had no teaching load during the school years
1991 to 1992 and 1992 to 1993, and did not teach at all from school years 1990 to 1991 until
2000 to 2001, as well as school years 2002 to 2003 until 2008 to 2009. Finally, Atty. Curaza was
not entitled to damages, as he had not been illegally dismissed.9

In a December 28,2010 Decision, the Executive Labor Arbiter held that under Republic Act No.
7641, part-time employees are entitled to retirement benefits. He held that the law prevails over
provisions of company policy. Thus, having reached 60 years of age, and having rendered more
than five (5) years of service with the University, Atty. Curaza is entitled to retirement benefits
under the law.10 The dispositive portion of the Decision states:

WHEREFORE, in view of the foregoing, judgment is hereby rendered ordering the respondent
Father Saturnino Urios University (FSUU) to pay complainant his retirement benefits to be
computed based on his average monthly pay for the last Five (5) years of his employment with
respondent multiplied by twenty four (24) years.

Plus 10% of whatever amount that may be computed as attorney's fees.

All other claims are hereby ordered dismissed for lack of merit.

SO ORDERED.11

On appeal, the National Labor Relations Commission affirmed the Labor Arbiter's Decision in its
December 29, 2011 Resolution.12

In turn, the Court of Appeals13 affirmed the National Labor Relations Commission and the Labor
Arbiter's rulings. It found that the National Labor Relations Commission correctly held that
Republic Act No. 7641 applies. As a part-time employee, Atty. Curaza is not among the
employees exempted from the coverage of the law, and since the University does not have an
applicable agreement or retirement plan intended for part-time employees, the provisions of
Republic Act No. 7641 apply to him.14

The Court of Appeals reasoned that although parties to a Collective Bargaining Agreement may
establish such stipulations, clauses, terms, and conditions as they may deem convenient, these
must not be contrary to law. It held that the exclusion of part-time faculty from the coverage of the
Collective Bargaining Agreement is contrary to the provisions and intendment of Republic Act No.
7641 and its Implementing Rules.15

Thus, it was correct to apply the Labor Advisory on Retirement Pay issued on October 24, 1996,
which specifically provides that the coverage of Republic Act No. 7641 "shall include part-time
employees, employees of service and other job contractors and domestic helpers or persons in
the personal service of another."16

However, the Court of Appeals modified the computation of the length of service to be credited in
computing Atty. Curaza's retirement pay, and decreased it to 22 years, based on his teaching
load. The Court of Appeals discussed the basis on record for this figure:

On the other hand, since the teaching load summary of Curaza that FSUU submitted as evidence
covers only the period from S.Y. 1990-1991 to S.Y. 2008-2009, FSUU is already estopped from
denying that Curaza had rendered service for more than six (6) months during S.Y. 1979-1980
until S.Y. 1989-1990, or for a period of 11 years. In addition, his teaching load summary shows
that he was able to teach for two (2) semesters or a period of more than six (6) months during
S.Y. 1996-1997, 1998-1999, 1999-2000, 2000-2001, 2001-2002, 2002-2003, 2003-2004, 2004-
2005, 2006-2007, 2007-2008 and 2008-2009, which is equivalent to 11 years. Thus, Curaza's
total creditable years of service for the purpose of computing his retirement pay is 22 years.17

The dispositive portion of the Court of Appeals Decision reads:

WHEREFORE, the petition is DENIED and the Resolutions dated December 29, 2011 and March
30, 2012 in NLRC MAC-03-011932-2011 (RAB-XIII-06-00164-2010) are hereby AFFIRMED with
the MODIFICATION that private respondent Atty. Ruben B. Curaza shall be entitled to retirement
pay for 22 years of service to petitioner Father Saturnino Urios University.

SO ORDERED.18

Thus, the University, together with its president, Rev. Fr. John Christian U. Young, filed a Petition
for Review on Certiorari, which this Court initially denied for failure to show any reversible error in
the Court of Appeals Decision and Resolution.19

Petitioners then filed a Motion for Reconsideration,20 to which respondent filed an Opposition
and Comment,21 responding to both the Motion for Reconsideration and the Petition.

This Court reinstated petitioners' Petition for Review on Certiorari, after which the Catholic
Educational Association of the Philippines filed a Motion for Leave to Intervene22 together with
an attached Petition-in-Intervention.23 Respondent then filed a Comment to the Petition-in-
Intervention,24 and both petitioners and the Catholic Educational Association of the Philippines
(Petitioner-Intervenor) filed their respective Replies.25

To justify its interest in this case, petitioner-intervenor explains that it is a national association of
1,252 Catholic educational institutions in the Philippines, of which the University is a
member.26 Petitioner-intervenor has a Retirement Plan, in which 667 member schools are
enrolled, with more than 35,000 personnel. Petitioner-intervenor asserts that the intention of the
Retirement Plan was to cover only "regular full-time employees, who have reached the age of
sixty years old, in conjunction with relevant administrative policies in view of the special
employment status of the teaching and academic non-teaching personnel."27

Petitioner-intervenor maintains that it will be adversely affected by a precedent declaring that

part-time faculty are entitled to retirement benefits, which "would be the death knell to most" of its
member schools.28
As for the substance of the case, petitioners and petitioner-intervenor insist that Republic Act No.
7641 does not apply to part-time teachers, because they cannot acquire regular permanent
status. They maintain that "regular permanent status" is a precondition to being entitled to
retirement benefits.29

Petitioners point out that in Lacuesta v. Ateneo de Manila University,30 this Court held that the
Manual of Regulations for Private Schools determines whether a faculty member has attained
regular or permanent status. They cite Section 117 of the Manual of Regulations for Private
Higher Education of 2008, which states that a "part-time employee cannot acquire regular
permanent status." They point out that in UST v. NLRC,31 this Court cited the Manual of
Regulations as basis to find that a teacher had not become a permanent employee despite three
(3) years of service.32

Petitioner-intervenor argues that it is impossible for part-time teachers to meet the number of
years necessary to qualify for retirement pay,33 and that expanding the coverage of Republic Act
No. 7641 to include part-time teachers is contrary to the purpose of the law, which is to "reward
the loyalty, dedication and hard work of employees."34

Petitioner-intervenor further asserts that the intention of the legislators was to provide benefits for
permanent employees who have rendered continued service to the company and not to
employees who merely work as part-timers, citing legislative deliberations.35 It also cites a book
on the Employee Retirement Income Security Act of 1974 to explain the pension system in the
United States of America, wherein "retirement pay is intended to benefit the employee who spent
most of their prime years giving their employer a 'proper career.'"36

Petitioner-intervenor also argues that the five-year service requirement must be interpreted to
mean five (5) continuous years. It maintains that because schools are not required to re-hire part-
time teachers after the period of their fixed contracts, each separate semester of employment
must stand on its own without relation to any other previous contract.37 It insists that to interpret it
otherwise would lead to absurd situations, and that it is ludicrous to require an employer to
"reward" an employee who renders service for several employers, or who may pursue other
businesses.38

Furthermore, petitioner-intervenor asserts that the formula used to compute respondent's

retirement benefits is baseless, and that he cannot claim to have served petitioners for 29
years.39

The main issue for this Court's resolution is whether or not part-time employees may be entitled
to retirement benefits under Republic Act No. 7641.

The Petition and Petition-in-Intervention are denied.

The Court of Appeals correctly held that part-time employees with fixed-term employment are
among the employees entitled to retirement benefits under Republic Act No. 7641.

Republic Act No. 7641 specifically states that "any employee may be retired upon reaching the
retirement age[,]" and that in case of retirement, in the absence of a retirement agreement, an
employee who reaches the retirement age "who has served at least five (5) years... may retire
and shall be entitled to retirement pay[.]" No exception is made for part-time employees.

In De La Salle Araneta University v. Bernardo,40 this Court saliently outlined and analyzed the
legal provisions which lead to this sound conclusion. It pointed out that Republic Act No. 7641
enumerates certain exemptions from coverage, and that this enumeration provides no basis to
exempt petitioners from paying retirement benefits to qualified part-time employees. This Court
noted that the coverage of the law and exemptions thereto were further elaborated upon by the
Rules Implementing the Labor Code and an October 24, 1996 Labor Advisory, neither of which
suggest that part-time employees could be considered excluded from being entitled to retirement
pay:

Book VI, Rule II of the Rules Implementing the Labor Code clearly describes the coverage of
Republic Act No. 7641 and specifically identifies the exemptions from the same, to wit:

Sec. 1. General Statement on Coverage. — This Rule shall apply to all employees in the private
sector, regardless of their position, designation or status and irrespective of the method by which
their wages are paid, except to those specifically exempted under Section 2 hereof. As used
herein, the term "Act" shall refer to Republic Act No. 7641, which took effect on January 7, 1993.

Section 2. Exemptions. — This Rule shall not apply to the following employees:

2.1 Employees of the National Government and its political subdivisions, including Government-
owned and/or controlled corporations, if they are covered by the Civil Service Law and its
regulations.

2.2 Domestic helpers and persons in the personal service of another. (Deleted by Department
Order No. 20 issued by Secretary Ma. Nieves R. Confessor on May 31, 1994.)

2.3. Employees of retail, service and agricultural establishments or operations regularly

employing not more than ten (10) employees. As used in this sub-section:

(a) "Retail establishment" is one principally engaged in the sale of goods to end-users for
personal or household use. It shall lose its retail character qualified for exemption if it is
engaged in both retail and wholesale of goods.

(b) "Service establishment" is one principally engaged in the sale of service to individuals
for their own or household use and is generally recognized as such.

(c) "Agricultural establishment/operation" refers to an employer which is engaged in

agriculture. This term refers to all farming activities in all its branches and includes,
among others, the cultivation and tillage of the soil, production, cultivation, growing and
harvesting of any agricultural or horticultural commodities, dairying, raising of livestock or
poultry, the culture of fish and other aquatic products in farms or ponds, and any activities
performed by a farmer or on a farm as an incident to or in conjunctions with such farming
operations, but does not include the manufacture and/or processing of sugar, coconut,
abaca, tobacco, pineapple, aquatic or other farm products. (Emphases ours.)

Through a Labor Advisory dated October 24, 1996, then Secretary of Labor, and later Supreme
Court Justice, Leonardo A. Quisumbing (Secretary Quisumbing), provided Guidelines for the
Effective Implementation of Republic Act No. 7641, The Retirement Pay Law, addressed to all
employers in the private sector. Pertinent portions of said Labor Advisory are reproduced below:

A. COVERAGE

RA 7641 or the Retirement Pay Law shall apply to all employees in the private sector, regardless
of their position, designation or status and irrespective of the method by which their wages are
paid. They shall include part-time employees, employees of service and other job contractors and
domestic helpers or persons in the personal service of another.

The law does not cover employees of retail, service and agricultural establishments or operations
employing not more than [ten] (10) employees or workers and employees of the National
Government and its political subdivisions, including Government-owned and/or controlled
corporations, if they are covered by the Civil Service Law and its regulations.
....

C. SUBSTITUTE RETIREMENT PLAN

Qualified workers shall be entitled to the retirement benefit under RA 7641 in the absence of any
individual or collective agreement, company policy or practice... (Emphasis ours.)

Republic Act No. 7641 states that "any employee may be retired upon reaching the retirement
age...;" and "[i]n case of retirement, the employee shall be entitled to receive such retirement
benefits as he may have earned under existing laws and any collective bargaining agreement
and other agreements." The Implementing Rules provide that Republic Act No. 7641 applies to
"all employees in the private sector, regardless of their position, designation or status and
irrespective of the method by which their wages are paid, except to those specifically
exempted..." And Secretary Quisumbing's Labor Advisory further clarifies that the employees
covered by Republic Act No. 7641 shall "include part-time employees, employees of service and
other job contractors and domestic helpers or persons in the personal service of another."

The only exemptions specifically identified by Republic Act No. 7641 and its Implementing Rules
are: (1) employees of the National Government and its political subdivisions, including
government-owned and/or controlled corporations, if they are covered by the Civil Service Law
and its regulations; and (2) employees of retail, service and agricultural establishments or
operations regularly employing not more than 10 employees.41

Relying on the foregoing provisions, this Court held that Republic Act No. 7641 encompasses all
private sector employees, save for those specifically exempted. This Court also invoked the
principle of expressio unius est exclusio alterius and concluded that part-time employees, not
being among those exempted from coverage, may qualify for retirement benefits under Republic
Act No. 7641.

The same reasoning used in De La Salle Araneta University42 applies to respondent, who is
entitled to retirement benefits notwithstanding his status as a part-time employee.

Citing legislative deliberations, petitioner-intervenor insists that the legislative intent was for the
law to cover only permanent and continuous employees,43 that a distinction must be made in the
law between part-time employees and regular, permanent employees. It asserts that retirement
benefits are a reward for loyalty, and that part-time employees are not as loyal as regular,
permanent employees, and thus not deserving of the reward.

This is unconvincing. The cited deliberations were not as clear and unequivocal as petitioner-
intervenor maintains. However, even granting that one legislator mentioned "permanent
employment" during deliberations, and granting that part-time employees do not attain permanent
status, the text of the law as passed nonetheless makes no distinction between permanent and
non-permanent employees. Thus, the exclusion of non-permanent employees from the coverage
of Republic Act No. 7641 has no legal basis.

On the issue of the computation, the Court of Appeals explained its basis for reducing the number
of years of service, for which respondent is entitled to retirement benefits to 22 years instead of
24 years, as concluded by the Labor Arbiter, and instead of 29 years as insisted by respondent,
as follows:

A perusal of Curaza's leaching load summary from S.Y. 1990-1991 to S.Y. 2008-2009 shows that
he had not rendered teaching services at FSUU during S.Y. 1991-1992 and 1992-1993 and only
taught for one (1) semester or a period of five (5) months during S.Y. 1990-1991, 1993-1994,
1994-1995, 1995-1996 and 2005-2006. Also, in S.Y. 1997-1998, he only taught summer classes.
Consequently, such school years cannot be included in the computation of his length of service.
On the other hand, since the teaching load summary of Curaza that FSUU submitted as evidence
covers only the period from S.Y. 1990-1991 to S.Y. 2008-2009, FSUU is already estopped from
denying that Curaza had rendered service for more than six (6) months during S.Y. 1979-1980
until S.Y. 1989-1990, or for a period of 11 years. In addition, his teaching load summary shows
that he was able to teach for two (2) semesters or a period of more than six (6) months during
S.Y. 1996-1997, 1998-1999, 1999-2000, 2000-2001, 2001-2002, 2002-2003, 2003-2004, 2004-
2005, 2006-2007, 2007-2008 and 2008-2009, which is equivalent to 11 years. Thus, Curaza's
total creditable years of service for the purpose of computing his retirement pay is 22 years.44

Although petitioner-intervenor insists that respondent did not work for 22 years for petitioners,45 it
failed to show how the Court of Appeals committed an error in the foregoing computation, or to
submit a sound formula for computing his length of service. Petitioner-intervenor relied mainly on
its assertion that each semester of respondent's employment must be considered independent of
the other, and not cumulative. Again, this Court must reject this assertion for lack of legal basis.
Since no cogent reason has been submitted to revisit the computation of the number of
respondent's creditable years of service, the Court of Appeals' findings must be affirmed.

WHEREFORE, the Petition and the Petition-in-Intervention are DENIED. The Court of Appeals'
Decision and Resolution in CA-G.R. SP No. 04973-MIN are AFFIRMED.

SO ORDERED.
G.R. No. 210845

SPOUSES DANILO AND CLARITA GERMAN, PETITIONERS, VS. SPOUSES BENJAMIN

AND EDITHA SANTUYO AND HELEN S. MARIANO, DECEASED, SUBSTITUTED BY HER
HEIRS, NAMELY, JOSE MARIO S. MARIANO, MA. CATALINA SAFIRA S. MARIANO, MA.
LEONOR M. HUELGAS, MARY THERESA IRENE S. MARIANO AND MACARIO S. MARIANO,
RESPONDENTS.

DECISION

LEONEN, J:.

When circumstances are present that should prompt a potential buyer of registered real property
to be on guard, it is expected that they inquire first into the status of the property and not merely
rely on the face of the certificate of title.

This is a Petition for Review on Certiorari1 under Rule 45 of the Rules of Court, assailing the
Decision2 and Resolution3 of the Court of Appeals, Manila, in CA-G.R. CV. No. 93628. The Court
of Appeals reversed and set aside a Decision4 rendered by the Regional Trial Court of Naga City,
Branch 61 in Civil Case No. 2001-0200, and held that Spouses Benjamin and Editha Santuyo
were purchasers in good faith of a 400-square meter parcel of land in Naga City.

Francisco and Basilisa Bautista (the Bautista Spouses) were the registered owners of a 400-
square meter parcel of land in Barangay Balatas, Naga City, under Transfer Certificate of Title
No. 11867.5

Allegedly, since 1985, Danilo and Clarita German (the German Spouses) had been occupying the
property as the lessees of Soledad Salapare, the caretaker for Jose and Helen Mariano (the
Mariano Spouses). On April 22, 1986, the Bautista Spouses sold the property to the Mariano
Spouses. On the same day, the Mariano Spouses sold the property to the German Spouses on
the condition that Helen Mariano would sign the Deed of Sale upon the the German Spouses'
payment of the full purchase price.6

On July 28, 1992, Benjamin and Editha Santuyo (the Santuyo Spouses) filed a case for Recovery
of Ownership and Damages against the German Spouses before the Naga City Regional Trial
Court, docketed as Civil Case No. RTC-92-2620. There, the Santuyo Spouses alleged that they
and the Bautista Spouses entered into a sale of the property on December 27, 1991, and that
they became the registered owners of the property under Transfer Certificate of Title No. 22931
as of April 28, 1992.7

The case was dismissed, but afterwards, the Santuyo Spouses filed a case for Unlawful Detainer
and Damages against the German Spouses with the Naga City Metropolitan Trial Court, docketed
as Civil Case No. 10575. While the Metropolitan Trial Court and the Regional Trial Court both
dismissed the unlawful detainer case for lack of jurisdiction, in 2000, the Court of Appeals in ruled
that the first-level courts had jurisdiction and held that the Santuyo Spouses had the right to
possess the property as they were its registered owners. The Court of Appeals' Decision became
final and executory on August 13, 2000.8
On January 12, 2001, the German Spouses filed a case for Declaration of Nullity of Sale,
Recovery of Ownership, Reconveyance with Damages against the Santuyo Spouses and Helen
Mariano before the Naga City Regional Trial Court. The case was docketed as Civil Case No.
2001-0200.9

The German Spouses claimed that, despite their payment of the full purchase price in 1988, the
Mariano Spouses failed to execute the final Deed of Sale. Instead, the property was sold to Helen
Mariano's sister, Editha Santuyo, and Editha's husband.10

The Regional Trial Court ruled in favor of the German Spouses. The dispositive pmiion of its
January 30, 2009 Decision11 stated:

WHEREFORE, in the [sic] light of the foregoing considerations, judgment is hereby rendered:

1. Making permanent the preliminary injunction issued by this Court in its Order of
February 21, 2001.

2. Declaring as null and void the deed of sale purportedly executed by Francisco
Bautista in favor of Benjamin Santuyo over Lot 6, Block 6 of the Consolidation
Subdivision [P]lan (LRC) Pcs-758, being a portion of the consolidation of Lot 3 ,
Pcs-4257 and Lot 5-A, (LRC) Psd-2672, LRC (GRRO Record No. 33067) situated
in Naga City and covered by [Transfer Certificate of Title] No. 11867.

3. Ordering the cancellation of [Transfer Certificate of Title] No. 22931 issued in

the name of Benjamin Santuyo by virtue of the deed of sale, and declaring the
same to be without force and effect.

4. Declaring plaintiffs spouses Danilo and Clarita German as the rightful owners of
the lot in question covered by [Transfer Certificate of Title] No. 11867.

5. Ordering defendants Heirs of Helen Mariano to execute in favor of plaintiffs

spouses Danilo and Clarita German, a deed of absolute sale covering the lot in
question covered by [Transfer Certificate of Title] No. 11867; and once
accomplished to immediately deliver the said document of sale to plaintiffs
Germans.

No pronouncement as to costs.

SO ORDERED.12

The Regional Trial Court found that the sale of the property to the German Spouses was valid
and enforceable, despite Helen Mariano's failure to sign the Deed of Sale.13 As the German
Spouses fully paid the price, the Mariano Spouses or their heirs were obliged to convey title to
them. The Bautista Spouses could not transfer ownership to the Santuyo Spouses in a
subsequent sale because they were no longer the owners of the property at the
time.14 Moreover, the Santuyo Spouses were not purchasers in good faith, as the trial court was
unconvinced that Editha Santuyo did not know about the prior sale to the German Spouses. It
held that the German Spouses' continued possession of the property was known by the Santuyo
Spouses even before they bought the property.15

In its October 29, 2012 Decision,16 the Court of Appeals reversed and set aside the Regional
Trial Court's Decision, dismissing the German Spouses' complaint.

First, the Court of Appeals noted that both the marriage of the Mariano Spouses and their April
22, 1986 sale of the property to the German Spouses were governed by the New Civil Code. As
such, the Mariano Spouses' property regime is that of conjugal partnership of gains. While Jose
was the sole administrator of the conjugal property, he could not sell the property without Helen's
consent. However, any sale he made without her consent was not void, but only voidable.
Pursuant to Article 173 of the New Civil Code, Helen had 10 years from the date of the sale to
annul it. Thus, since there was no proof that she sought to annul the April 22, 1986 sale, it was
still valid and enforceable.17

Second, the Court of Appeals did not give credence to the German Spouses' claim that the rules
on double sale under Article 1544 of the Civil Code applied. The April 22, 1986 Deed of Sale was
a contract to sell, as the Mariano Spouses reserved ownership over the property despite its
delivery to the German Spouses. Moreover, the transactions were made by two (2) different
sellers: (1) the April 22, 1986 sale between the Mariano Spouses and the German Spouses; and
(2) the December 27, 1991 sale between the Bautista Spouses and the Santuyo Spouses.18

Third, the Court of Appeals held that the contract between the Mariano Spouses and the German
Spouses was a contract to sell, not a contract of sale. The Mariano Spouses reserved ownership
of the property and would only execute the deed of sale after full payment of the sale price. Thus,
since the deed of sale was not executed, the German Spouses did not have any right to file a
case for reconveyance of the property, or to have the sale between the Bautista Spouses and the
Santuyo Spouses nullified.19

Finally, even if the sale to the German Spouses was not under a contract to sell, the Court of
Appeals held that they were unable to prove that the Santuyo Spouses were purchasers in bad
faith. It noted that the property's certificate of title did not have any liens or encumbrances that the
Santuyo Spouses should have been aware of.20

The Court of Appeals denied the German Spouses' Motion for Reconsideration21 in its
December 18, 2013 Resolution.22

On February 18, 2014, the German Spouses filed with this Court a Petition for Review on
Certiorari23 under Rule 45 of the Rules of Court, assailing the October 29, 2012 Decision and
December 18, 2013 Resolution of the Court of Appeals. In their Petition for Review, they argue
that the Court of Appeals erred in finding that the Santuyo Spouses bought the property in good
faith.

They point out that the Regional Trial Court found that they were in actual possession of the
property, which was known to respondent Editha Santuyo at the time of the 1991 sale, especially
because she regularly passed by the property when she went to work. Further, the Santuyo
Spouses bought the prope1iy despite never being in possession of it. These should have further
prompted them to closely inspect the property they were buying.24

Petitioners also claim that Helen Mariano conspired with the Santuyo Spouses in order to acquire
the property. Respondent Helen Mariano assisted the Santuyo Spouses despite knowing that the
property had been previously sold to her and her spouse, Jose Mariano; even going so far as to
execute a deed of guarantee, freeing the Bautista Spouses from liability in the sale transaction
with the Santuyo Spouses.25

Because of these circumstances, petitioners claim that the Santuyo Spouses could not have been
in good faith when they registered the property in their names.

On June 30, 2014, the Santuyo Spouses filed their Comment26 to the Petition for Review,
claiming that the German Spouses did not have the right to assert ownership over the property
because their transaction with the Mariano Spouses was only a contract to sell. Since the
German Spouses failed to pay the full purchase price, they could not compel the Mariano
Spouses to execute a Deed of Sale in their favor.27 Moreover, they argue that they have a better
right of ownership over the property, because unlike the 1986 sales, they were able to register
their title.28 According to them, their registration was in good faith because, at the time the
property was sold to them, the certificate of title was still in the name of the seller, and there was
no defect in the title which would require them to go beyond it. They claim that, since Francisco
Bautista was Editha Santuyo's godfather, there was no reason to doubt his title.29

The issues to be resolved by this Court are as follows:

First, whether or not Article 1544 of the Civil Code applies; and

Second, whether or not respondents the Santuyo Spouses were purchasers in good faith.

Article 1544 of the Civil Code states:

ARTICLE 1544. If the same thing should have been sold to different vendees, the ownership shall
be transferred to the person who may have first taken possession there o f in good faith, if it
should be movable property.

Should it be immovable property , the ownership shall belong to the person acquiring it who in
good faith first recorded it in the Registry of Property. ·

Should there be no inscription , the ownership shall pertain to the person who in good faith was
first in the possession; and, in the absence thereof, to the person who presents the oldest title,
provided there is good faith.

For A11icle 1544 to apply , the following requisites must concur:

. . . This provision connotes that the following circumstances must concur:

(a) The two (or more) sales transactions in the issue must pertain to exactly the same
subject matter, and must be valid sales transactions.

(b) The two (or more) buyers at odds over the rightful ownership of the subject matter
must each represent conflicting interests; and

(c) The two (or more) buyers at odds over the rightful ownership of the subject matter
must each have bought from the very same seller. 30 (Emphasis in the original)

The rule on double sales applies when the same thing is sold to multiple buyers by one seller, but
not to sales of the same thing by multiple sellers.31

Contrary to the finding of the Court of Appeals, there was a double sale. The Bautista Spouses
sold the same property: first, to the Mariano Spouses in 1986; and second, to the respondents
Santuyo Spouses in 1991. Neither of the parties contest the existence of these two (2)
transactions. The lower courts made no findings that put into doubt the respective validities of the
sales. Clearly, there are conflicting interests in the ownership, because if title over the property
had already been transferred to the Mariano Spouses, then no right could be passed on to
respondents Santuyo Spouses in the second sale.

Pursuant to Article 1544, ownership of immovable property subject of a double sale is transferred
to the buyer who first registers it in the Registry of Property in good faith. Undisputedly, the
respondents Santuyo Spouses were the ones who were able to register the property in their
names with the Registry of Deeds for Naga City under Transfer Certificate of Title No. 22931.

Nonetheless, the Regional Trial Court was correct in finding that respondents Santuyo Spouses
were not in good faith when they registered the property.
Generally, persons dealing with registered land may safely rely on the correctness of the
certificate of title, without having to go beyond it to determine the property's condition.32

However, when circumstances are present that should prompt a potential buyer to be on guard, it
is expected that they inquire first into the status of the land. One such circumstance is when there
are occupants or tenants on the property, or when the seller is not in possession of it. In Spouses
Vallido v. Spouses Pono: 33

Moreover , although it is a recognized principle that a person dealing on a registered land need
not go beyond its certificate of title, it is also a firmly settled rule that where there a re
circumstances which would put a party on guard and prompt him to investigate or inspect the
property being sold to him, such as the presence of occupants/tenants thereon, it is expected
from the purchaser of a valued piece of land to inquire first into the status or nature of possession
of the occupants. As in the common practice in the real estate industry, an ocular inspection of
the premises involved is a safeguard that a cautious and prudent purchaser usually takes. Should
he find out that the land he intends to buy is occupied by anybody else other than the seller who,
as in this case, is not in actual possession, it would then be incumbent upon the purchaser to
verify the extent of the occupant's possessory rights. The failure of a prospective buyer to take
such precautionary steps would mean negligence on his part and would preclude him from
claiming or invoking the rights of a "purchaser in good faith. " It has been held that " the
registration of a later sale must be done in good faith to entitle the registrant to priority in
ownership over the vendee in an earlier sale."34 (Citations omitted )

Here, as pointed out by the Regional Trial Court, petitioners had continuously possessed the land
even prior to the 1986 sales:

At the time of the sale between Jose Mariano and spouses German, the latter were already in
possession of t h e land way back in 1985 and after the sale in 1986, with the permission of the
spouses Mariano, plaintiffs German renovated their residential house therein which was
completed in 1987. Since then they have been in actual physical possession of the land and
residing therein. The plaintiffs ' possession thereof was known to the defendants Santuyo even
before the execution of the deed of sale in their favor on December 27, 1991. The claim of
defendants Santuyo cannot prevail upon the plaintiffs Germans who first acquired and possessed
the property from spouses Mariano after the latter has bought the land from the Bautistas.

....

This court is not convinced by what defendant Editha has declared that before she bought the
land from the Bautistas , she had not yet seen the land but she knows that it is located inside
Mariano Subdivision; that in 1986, she does not know where it is located. That even in 1990
when she was already employed by the Mariano spouses at the Sto. Nińo Memorial park, she did
not visit the land. And that before the land was sold to her in 1991, she did not investigate or
determine what was the physical condition of the land[.]35

Respondent Santuyo Spouses' claim that it is enough that the title is in the name of the seller is
unavailing. To buy real property while having only a general idea of where it is and without
knowing the actual condition and identity of the metes and bounds of the land to be bought, is
negligent and careless. Failure to take such ordinary precautionary steps, which could not have
been difficult to undertake for respondents Santuyo Spouses, as they were situated near where
the property is located, precludes their defense of good faith in the purchase.

Likewise, the involvement and cooperation of respondent Helen Mariano in the 1991 sale casts
doubt on respondents Santuyo Spouses' good faith. According to the Regional Trial Court:

Despite the denial of defendants spouses Santuyo knowledge of the presence of the plaintiffs on
the land in question and claim of ownership thereof, their evidence failed to show good faith in
their purchase and registration of the land. Defendant Editha presented the alleged down
payment receipt she made on October 2, 1986 (Exh. "4") for the lot in question she purchased
from Francisco M. Bautista. The document however, which is quoted hereunder:

RECEIPT

Received from Mrs. Editha Santuyo, the amount of Twenty Thousand Pesos (P20,000.00)
covered by PNB Check No. 0000038345 (Demand Draft) dated August 19, 1986, representing
payment for a parcel of land located at

Naga City, sold to her by Jose Mariano.

Quezon City, October 2, 1986.

(SGD) FRANCISCO M BAUTISTA

speaks differently. If the lot was sold to defendant Editha, by Jose Mariano, why would Francisco
Bautista sign the receipt? If the her could have been his, what is the necessity of stating that the
lot was sold by Jose Mariano when it was registered in the name of Francisco Bautista?

If indeed the registered owner Bautista has sold the lot in question to defendants Santuyo, why
should defendant Helen sign a letter of guarantee (Exh. "2") before Bautista signed the deed of
sale. Defendant Editha claimed that Bautista allegedly told her that the lot was previously
mortgaged to him (Bautista) by Jose Mariano. If it was the reason then why was it not told to
defendant Helen? Why would also defendant Helen sign a letter of guarantee without any
question? Or probably, this letter of guarantee gives relevance to the receipt (Exh. "4")
mentioning about the "lot sold to her by Jose Mariano"? These foregoing documents give
semblance on the verified answer of Francisco Bautista (Exh. "H") to the third party compliant in
the case docketed as Civil case No. 92-2620 before Branch 27 of RTC Naga City, for the
"Recovery of Ownership with Damages" filed by defendants Santuyo as against the herein
plaintiffs German. In the said pleading , the Bautistas claimed that the sale between them and the
Santuyos is fictitious since the former did not receive any payment or consideration thereon.
There is likewise an allegation in the Answer to the Amended Complaint in the same case (Exh.
"I") by Bautista which alleged in paragraph 6 thereof the following:

6. Answering defendants specifically deny the allegations of paragraph 15 of the complaint, the
truth of matter being that they were tricked and deceived into signing the alluded Deed of Sale
between them. Actually such deceitful machination and/or manipulation supervened when the
plaintiff and their co-third party defendants Heirs of Jose Mariano prevailed upon them to sign the
Deed of Absolute Sale referred to in paragraph 4 hereof This was accomplished through the joint
effort of plaintiff Editha S. Santuyo and Third Party Defendant Helen S. Mariano, who are sisters,
upon their representation that the letter has not sold or conveyed the subject parcel of land to any
party. According to them if the sale would have to be made from the herein defendants to the
plaintiffs, and not from the Marianas to the plaintiffs, there would be no assessment of penalty
charges by Bureau of Internal Revenue for the registration of the sale. Relying on the foregoing
representation of plaintiff Editha Santuyo and third party defendant Helen S. Mariano, the herein
defendants acceeded [sic] to the former's request.36 (Emphasis in the original)

The second buyer who has actual or constructive knowledge of the prior sale cannot be a
registrant in good faith.37 The totality of documents executed by all of the respondents show that
the respondents Santuyo Spouses knew or should have known that there is some cloud or doubt
over the seller's title. Moreover, the Regional Trial Court correctly pointed to the dubious
circumstance by which one of parties to the 1986 sales, respondent Helen Mariano, actively
participated in the 1991 sale, especially in light of her familial relationship with respondent Editha
Santuyo.
Due to respondents' lack of good faith, they cannot rely on the indefeasibility of their Transfer
Certificate of Title. Thus, in accordance with Article 1544 of the Civil Code, it is the first buyer,
namely the Mariano Spouses, who had a better right of ownership, and no ownership could pass
on to the respondents Santuyo Spouses as a result.

WHEREFORE, the Petition for. Review is GRANTED. The Decision and Resolution of the Court
of Appeals, Manila, in CA-G.R. CV. No. 93628 are REVERSED AND SET ASIDE. The January
30, 2009 Decision of the Regional T rial Court of Naga City, Branch 61 in Civil Case No. 2001-
0200 is REINSTATED.
ALLAN MAÑAS, JOINED BY WIFE LENA ISABELLE Y. MAÑAS, PETITIONERS, V.
ROSALINA ROCA NICOLASORA, JANET NICOLASORA SALVA, ANTHONY NICOLASORA,
AND MA. THERESE ROSELLE UY-CUA, RESPONDENTS.

DECISION

LEONEN, J.:

Dizon v. Court of Appeals1 instructs us that a lease contract's implied renewal does not mean
that all the terms in the original contract are deemed revived. Only the terms that affect the
lessee's continued use and enjoyment of the property would be considered part of the implied
renewal. Indeed, the right of first refusal has nothing to do with the use and enjoyment of
property.2

Before this Court is a Petition for Review on Certiorari3 filed by Spouses Allan and Lena Isabelle
Y. Mañas (the Mañas Spouses). They assail the Court of Appeals Decision4 that affirmed the
Regional Trial Court's dismissal of their Complaint for Rescission of Contract of Sale and
Cancellation of the Certificates of Title and Enforcement of the Right of First Refusal.5

On April 18, 2005, the Mañas Spouses entered into a Lease Contract with Rosalina Roca
Nicolasora (Rosalina) over a property in Tacloban City that was owned by Rosalina's husband,
Chy Tong Sy Yu (now deceased).6

The Lease Contract partly stated:

WHEREAS, the LESSEE is also interested in buying the same real property, during the existence
of the lease or thereafter, upon notice, from the LESSOR under mutually acceptable terms and
conditions;

WHEREOF, premises considered, the parties hereto have covenanted and agreed on the
following:

1 That the duration of this Agreement is for one (1) year from the date of execution hereof, unless
sooner revoked or cancelled by either party upon serious violation of any of the terms and
conditions hereof; Provided, that this lease may be renewed for like period at the option of the
LESSEE;

....

6 That parties agree also that in case of any conflict or dispute that may subsequently arise out of
this covenant, to refer the matter to the Philippine Mediation Center, Bulwagan ng Katarungan,
for Mediation and settlement, before any Accredited Mediator who is a Lawyer; Provided, further,
that in the remote event that no such settlement is reached before the said Mediator, that the
venue of any litigation that may arise, shall be in a competent court in Tacloban City.

....

8 Finally, should the LESSOR desire to sell the subject real property, he shall notify first the
LESSEE about such intent, and the latter is given Thirty (30) days within which to accept the
offer, or make a [counter]-offer, in writing; Provided, that the LESSOR may reject the Counter-
offer in writing, within the same period of time, in which case, he shall have the right to sell the
same to any interested party.7

It appears that the Lease Contract lapsed in 2006, with no express renewal. However, the Mañas
Spouses continued using the premises and paying the rentals, without any objections from
Rosalina and her children, Janet and Anthony.8

On February 14, 2008, Chy Tong Sy Yu sold several parcels of land, including the property being
leased to the Mañas Spouses, to Ma. Therese Roselle Uy-Cua (Roselle). The sale was made
"with the conformity"9 of Rosalina, Janet, and Anthony. The titles to the properties were
subsequently transferred to Roselle.10

However, the Mañas Spouses claimed that they were neither informed of the sale nor offered to
purchase the property.11 They said that only upon receiving a letter12 dated June 2, 2008 from
RMC Trading did they learn of the sale of the property.13 The letter from RMC Trading stated:

Dear Mr. Manias (sic):

Kindly be informed that we are now the new owners of the land where your business/residence is
situated, particularly Lot No. 546 B. In this connection we are going to occupy and build
something on said land, for our own use and benefit. May we therefore request that you kindly
relocate your business/residence to give way to our construction, within 30 days from your receipt
hereof Thank you for your compliance hereof.

I am

Very truly Yours,

(Sgd.) RUPERTO E. CUA, JR14

According to the Mañas Spouses, their right of first refusal embodied in the Lease Contract was
violated.15

Thus, before the trial court, the Mañas Spouses filed a Complaint praying that the contract of sale
be rescinded, the relevant title be canceled, and their right of first refusal or option to buy be
enforced.16

To this, Roselle filed a Motion to Dismiss17 on the ground that the Complaint stated no cause of
action18 and that the Mañas Spouses failed to comply with a condition precedent, specifically,
barangay conciliation.19 She also averred that because the contract was only impliedly renewed,
the spouses' right of first refusal was not renewed:

4 Defendant-movant [Roselle] submits that the plaintiffs [the Mañas Spouses] have no right of
first refusal or priority to buy the leased property for the following reasons:

a.) he never exercised the option to renew the lease contract as provided for under the
Contract of Lease. Due to the failure to exercise the option to renew the contract, the
 same became a month-to-month contract since the manner of payment is made on a
monthly basis as shown by the contract itself, thus:

"2. [T]hat the monthly rental shall be SIX THOUSAND PESOS (P 6,000.00) which
shall be payable on or before the 15th of the succeeding month, . . ."

b.) Since the contract of lease was not renewed, there was an impliedly renewed contract
considering that despite of the same (sic), the lessee remained in possession for at least
a period of 15 days after expiration and that no prior demand to vacate the premises was
made by the lessor. . . .

....

c.) The implicit renewal of the contract of lease however, did not likewise renew the right
of first refusal or priority to buy as granted in the original contract of lease because the
only provisions of a contract of lease which are impliedly renewed are those that are
germane to possession. The priority to buy or right of first refusal is not germane to
possession, rather, it is strange to possession.20

Meanwhile, Rosalina, Janet, and Anthony filed an Answer with Counterclaim.21 Akin to Roselle,
they argued that the right of first refusal was "granted only during the original term of the contract
of lease,"22 and that the Complaint was prematurely filed.23

In their Opposition to the Motion to Dismiss, the Mañas Spouses claimed that the sale was invalid
owing to Roselle's alleged incapacity; that is, she was a minor when the sale was made.24

On January 7, 2009,25 the Regional Trial Court granted Roselle's Motion to Dismiss, effectively
dismissing the Mañas Spouses' case. It discussed:

Defendant Uy-Cua argues that the plaintiffs never exercised the option to renew the lease
contract after its expiration, thus the condition thereof granting the latter the right of first refusal
(Priority to Buy), was never renewed. Although there was an implied renewal of the contract of
lease in (sic) a month-to-month basis, in accordance with Article 1670 of the New Civil Code, the
plaintiffs' right of first refusal was never renewed for the reason that the said condition is not
germane to possession.

Furthermore, defendant Uy-Cua asserted that the filing of the case is premature. The case did not
undergo the required Barangay Conciliation, pursuant to RA 7160, a condition precedent before
resort to the courts is initiated.

....

. . . Nothing in the questioned contract of lease provides for an extension of the life after the term
thereof had expired. Verily, the continued occupation by the plaintiffs of th e leased premises
after the term has expired, but with the consent of the defendants, constitutes an implied renewal .
...

....

It may be amiss to consider plaintiffs' reliance on the "whereases" narrated in the contract of
lease, of which one of them stated that: "whereas, the lessee is also interested in buying the
same real property during the existence of the lease or thereafter." According to the plaintiffs, the
word "THEREAFTER" bestowed upon them to exercise the Right of First Refusal even after the
term of the contract has expired. This is absurd. To consider and to give effect to this contention
is to create an infinite contractual relationship between the parties. More so, the "whereases"
mentioned in the contract are only considered premises and/or introduction, and definitely does
not form part of the terms and conditions of the subject contract of lease.

Lastly, on the issue of barangay conciliation, clearly, Section 412 of RA 7160, is controlling.
Unless, it is shown that the subject legal process is being availed of in order to pave way for a
procedural shortcut.26 (Emphasis in the original)

The Mañas Spouses filed a Motion for Reconsideration, but this was denied in a March 16, 2009
Order.27 The trial court stated:

The issue that the subject Deed of Absolute Sale is a simulated contract and therefore void was
raised by the plaintiffs in their Opposition to the Motion to Dismiss. Although this issue was not
threshed out in the assailed Order, this Court believes that to attack the validity of [the] Deed of
Absolute Sale for being simulated should be made in an action for Annulment of Contracts, not in
an action for Rescission.

This Court had already ruled that the expiration of the subject Contract of Lease carries with it the
termination of the Plaintiffs' Right of First Refusal. Such being the case, to notify the Plaintiffs of
the defendants' intention to sell the property in question is no longer necessary and has no legal
effect; and a suit instituted in order to compel the latter to allow the former to exercise the said
right, states no cause of action.28

Hence, the Mañas Spouses filed a Notice of Appeal.29

In their Brief, they again alleged that Roselle was a minor at the time of sale; hence, the Deed of
Absolute Sale was void.30 They also faulted the trial court for ruling that their Complaint stated no
cause of action.31 They asserted that the trial court incorrectly found that they had no right of first
refusal because the contract was not expressly renewed.32

In its April 17, 2013 Decision,33 the Court of Appeals affirmed the Regional Trial Court's rulings,
and also made the following findings:

A closer scrutiny of the records reveals that even on the face of the Complaint alone, there is
absent a cause of action. The Contract of Lease expressly provides for a term/duration for its
validity, that is, one (1) year from the date of execution of the said Lease Contract on April 18,
2005. Likewise, provided in the said Contract was that the renewal of the said lease at the option
of the lessee. In this case, the continued possession of plaintiffs-appellants as lessees of the
leased premises is evidence of his exercise of the option to extend the lease.

In such a case, their continued possession of the leased premises after the end or expiration of
the time fixed in the Contract of Lease, with the acquiescence of the lessor, constitutes an implied
renewal of the lease, not for the period of the original contract, but for the time established in
Articles 1682 and 1687 of the New Civil Code, so that if rentals were stipulated to be paid
monthly, the new lease is deemed to have been renewed from month to month and may be
terminated each month upon demand by the lessor.34

The Mañas Spouses filed a Motion for Reconsideration, which was denied by the Court of
Appeals through its July 24, 2013 Resolution.35

Thus, the Mañas Spouses filed this Petition for Review on Certiorari,36 arguing that the trial court
erred in granting the Motion to Dismiss based on "respondent's defenses and not on the ultimate
facts alleged in the Complaint."37

On October 23, 2013, this Court required respondents to file their comment.38
In her Comment,39 respondent Roselle maintains that the Lease Contract was not expressly
renewed because petitioners had never notified the lessor that they intended to renew the
contract.40 Instead, she explains, the contract was only impliedly renewed, the manner of
payment having been made on a monthly basis.41

On the allegation that the sale is void due to her incapacity, respondent Roselle counters that
petitioners cannot assail its validity since they stopped being the real parties-in-interest after
failing to expressly renew the contract.42 In addition, she points out that the action filed is for
rescission of contract but what petitioners are asking for is the annulment of contract.43

In an October 2, 2017 Resolution,44 this Court required respondents Rosalina, Janet, and

Anthony to show cause why they should not be cited in contempt for failing to comply with this
Court's April 26, 2017 Resolution requiring them to file their comment.

Respondents Rosalina, Janet, and Anthony later filed an Explanation with Manifestation45 stating
that after their counsel had withdrawn, they did not get the services of another lawyer due to
financial constraints.46 In any case, they stated that they were adopting respondent Roselle's
Comment.47 This Court accepted their explanation and dispensed with the filing of their
comment.48

On July 30, 2018, this Court required petitioners to file a reply.49

In their Reply,50 petitioners argue that the Lease Contract was expressly renewed, along with all
the terms in the original contract, including the right of first refusal.51

The issues for this Court's resolution are the following:

First, whether or not the Court of Appeals erred in affirming the Complaint's dismissal on the
ground that it stated no cause of action. Subsumed here are the issues of whether or not the
lease was impliedly renewed, and whether or not the renewal includes the right of first refusal;

Second, whether or not the Court of Appeals erred in not ruling that the Deed of Absolute Sale
must be rescinded due to the incapacity of the vendee, respondent Ma. Therese Roselle Uy-Cua,
at the time of the sale; and

Finally, whether or not the Court of Appeals erred in affirming the Complaint's dismissal for failure
to comply with a condition precedent.

The Petition should be denied.

The issue on the failure to state a cause of action is premised on whether the Lease Contract
was expressly renewed, and if so, whether the renewal included the right of first refusal. Thus, we
first discuss the issue on the lease contract's renewal.

Based on the terms of the Lease Contract, renewal would be at the option of the
lessee.52 However, petitioners did not appear to have expressly informed the lessor of their
intent to renew. Instead, after the original Lease Contract had expired, they continued to pay
rentals to the lessor.53 This constitutes an implied lease contract renewal, as the trial court and
the Court of Appeals correctly found.54 Article 1670 of the Civil Code states:

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 v. Court of Appeals55—a 1999 case that similarly delved into which terms in a lease
contract would be revived in implied renewals—is enlightening. In that case, Overland Express
Lines, Inc. (Overland) entered into a one-year Contract of Lease with Option to Buy with the
Dizons, the property owners. Per the agreement, Overland would pay a monthly rental of
P3,000.00, while the purchase price was pegged at P3,000.00 per square meter.56

The lease contract was not expressly renewed after a year had lapsed, though Overland
continued to occupy the premises. However, when the monthly rental rate eventually rose to
P8,000.00, Overland was unable to pay. This prompted the Dizons to file an ejectment suit, which
resulted in the trial court ordering Overland to vacate the property and pay reasonable
compensation and attorney's fees. Overland went to the Court of Appeals and subsequently to
this Court, questioning the trial court's jurisdiction, but its petitions were dismissed.57

Insisting on its option to buy, Overland filed a suit for specific performance seeking that a deed of
sale be executed, and later, another suit seeking to annul the judgment in the ejectment case.
These cases were consolidated and later dismissed. On appeal, the Court of Appeals affirmed
the trial court's jurisdiction, but it also ruled that Overland had acquired the rights of a vendee
upon a perfected contract of sale.58

Meanwhile, as the Dizons were already moving to have the judgment in the ejectment case
executed, Overland contested the enforceability of the judgment. Its effort yielded much success:
the trial court granted a writ of preliminary injunction, and later, the Court of Appeals found that
the Dizons' alleged right to eject Overland had no basis.59

Hence, both parties came to this Court. Ruling on the consolidated petitions, this Court discussed
that the issue on whether the Dizons could eject Overland was based on whether the option to
buy in the lease contract was included in the contract's implied renewal.

This Court ruled:

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 are only those terms which are germane to the lessee's
right of continued enjoyment of the property leased. 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:

. . . 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.60 (Citations omitted)

Simply put, this Court ruled that implied renewals do not include the option to buy, as it is not
germane to the lessee's continued use of the property. Moreover, since Overland failed to avail of
the option to buy within the stipulated period, it no longer had any right to enforce this option after
that period had lapsed.

Similarly, in this case, petitioners can only invoke the right to ask for the rescission of the contract
if their right to first refusal, as embodied in the original Lease Contract, is included in the implied
renewal.

Article 1643 of the Civil Code provides:

ARTICLE 1643. In the lease of things, one of the parties binds himself to give to another the
enjoyment of use of a thing for a price certain, and for a period which may be definite or
indefinite. However, no lease for more than ninety-nine years shall be valid.

Based on Article 1643, the lessee's main obligation is to allow the lessee to enjoy the use of the
thing leased. Other contract stipulations unrelated to this—or instance, the right of first refusal—
cannot be presumed included in the implied contract renewal. The law itself limits the terms that
are included in implied renewals. One cannot simply presume that all conditions in the original
contract are also revived; after all, a contract is based on the meeting of the minds between
parties.

In Arevalo Gomez Corporation v. Lao Hian Liong:61

Article 1670 applies only where, before the expiration of the lease, no negotiations are held
between the lessor and the lessee resulting in its renewal. Where no such talks take place and
the lessee is not asked to vacate before the lapse of fifteen days from the end of the lease, the
implication is that the lessor is amenable to its renewal.62

The concept of implied renewal is a matter of equity recognized by law. Technically, no contract
between a lessor and a lessee exists from the end date of a lease contract to its renewal. But if
there is no notice to vacate and the lessee remains in possession of the property leased, it would
only be proper that the lessor is still paid for the use and enjoyment of the property.

Thus, implied renewal does not extend to all stipulations.  Without any express contract renewal,
1âшphi1

this Court cannot presume that both parties agreed to revive all the terms in the previous lease
contract.

Dizon v. Court of Appeals finds support in Dizon v. Magsaysay,63 in which this Court also
resolved whether an implied renewal of a lease contract includes a renewal of the option to
purchase. It held:

But whatever doubt there may be on this point is dispelled by paragraph (2) of the contract of
lease, which states that it was renewable for the same period of two years (upon its expiration on
April 1, 1951), "con condiciones expresas y specificadas que seran convenidas entre las partes."
This stipulation embodied the agreement of the parties with respect to renewal of the original
contract, and while there was nothing in it which was incompatible with the existence of an
implied new lease from month to month under the conditions laid down in Article 1670 of the Civil
Code, such incompatibility existed with respect to any implied revival of the lessee's preferential
right to purchase, which expired with the termination of the original contract. On this point the
express agreement of the parties should govern, not the legal provision relied upon by the
petitioner.64

Since the implied renewal of the Lease Contract did not include the renewal of the right of first
refusal, petitioners have no basis for their claim that the property should have been offered to
them before it was sold to respondent Roselle. The Court of Appeals did not err in affirming the
trial court's ruling that petitioners failed to state their cause of action.
II

Additionally, petitioners made a claim on respondent Roselle's alleged incapacity65 due to her

age, as raised for the first time in their Opposition to her Motion to Dismiss.66 In their appeal
brief, they alleged:

14. Appellants [referring to petitioners] later found out, after appellee Ma. Therese Roselle Uy-
Cua filed a Motion to Dismiss and after the other appellees filed their Answer, that the named
vendee, Ma. Therese Roselle Uy-Cua, is the minor daughter of Ruperta E. Cua, Jr. At the time of
the sale, Ma. Therese Roselle Uy-Cua was a minor, being only 14 years old, and even to this
day, Ma. Therese Roselle Uy-Cua is still a minor.67

Assuming that this allegation was true, petitioners are not the proper parties to raise it. Article
1397 of the Civil Code provides that "persons who are capable cannot allege the incapacity of
those with whom they contracted[.]"68 Even if they were, they still filed the wrong action. The
contracting party's incapacity is a ground for annulment of contract, not rescission. Article 1390 of
the Civil Code states:

ARTICLE 1390. The following contracts are voidable or annullable, even though there may have
been no damage to the contracting parties:

(1) Those where one of the parties is incapable of giving consent to a contract;

(2) Those where the consent is vitiated by mistake, violence, intimidation, undue influence
or fraud.

These contracts are binding, unless they are annulled by a proper action in court. They are
susceptible of ratification.

Petitioners pray for the rescission of the contract, but the ground they raised is one for annulment
of contract. Article 1397 of the Civil Code specifies who may institute such action:

ARTICLE 1397. The action for the annulment of contracts may be instituted by all who are
thereby obliged principally or subsidiarily. However, persons who are capable cannot allege the
incapacity of those with whom they contracted; nor can those who exerted intimidation, violence,
or undue int1uence, or employed fraud, or caused mistake base their action upon these flaws of
the contract.

Thus, even if this Court were to consider petitioners' action as one for annulment of contract, they
are still not the proper parties to file such action. They are not parties to the Deed of Absolute
Sale, and neither are they obliged principally or subsidiarity with regard to the Deed of Absolute
Sale. Thus, the trial court's dismissal of their Complaint would still be proper.

III

Finally, the Court of Appeals also correctly affirmed the trial court's ruling that petitioners failed to
comply with a condition precedent. Section 412 of Republic Act No. 7160 provides:

SECTION 412. Conciliation. — (a) Pre-condition to Filing of Complaint in Court. — No complaint,

petition, action, or proceeding involving any matter within the authority of the lupon shall be filed
or instituted directly in court or any other government office for adjudication, unless there has
been a confrontation between the parties before the !upon chairman or the pangkat, and that no
conciliation or settlement has been reached as certified by the lupon secretary or pangkat
secretary as attested to by the lupon or pangkat chairman or unless the settlement has been
repudiated by the parties thereto.
(b) Where Parties May Go Directly to Court. —The parties may go directly to court in the following
instances:

(1) Where the accused is under detention;

(2) Where a person has otherwise been deprived of personal liberty calling
for habeas corpus proceedings;

(3) Where actions are coupled with provisional remedies such as preliminary
injunction, attachment, delivery of personal property and support pendente lite;
and

(4) Where the action may otherwise be barred by the statute of limitations.

Generally, all parties must first undergo barangay conciliation proceedings before filing a
complaint in court. None of the exceptions under the law are present in this case. Thus, assuming
that petitioners had stated a cause of action, their Complaint would still be dismissed for their
failure to comply with a condition precedent.

WHEREFORE, the Petition is DENIED. The April 17, 2013 Decision of the Court of Appeals in CA
G.R. CV No. 03402 is AFFIRMED.

FIRST DIVISION

G.R. No. 222785, March 02, 2020

ANITA C. BUCE, PETITIONER, v. SPOUSES GEORGE GALEON AND ERLINDA TIONGCO

GALEON, SPOUSES HONESTO CABRERA, JR. AND GENEROSA TIONGCO CABRERA,
SPOUSES LEO SANDS AND MARIA TERESA TIONGCO SANDS, JOSE M. TIONGCO, AND
MARIA CORAZON M. TIONGCO, RESPONDENTS.

DECISION

REYES, J. JR., J.:

Before this Court is a Petition for Review on Certiorari, assailing the Decision1 dated February 27,
2015 and the Resolution2 dated January 29, 2016 of the Court of Appeals (CA) in CA-G.R. CV No.
97195.

The Relevant Antecedents

The case stemmed from a civil action for recovery of possession filed by the spouses George
Galeon and Erlinda Tiongco Galeon, the spouses Honesto Cabrera, Jr. and Generosa Tiongco
Cabrera, the spouses Leo Sands and Maria Teresa Tiongco Sands, Jose M. Tiongco and Maria
Corazon M. Tiongco (collectively referred to as respondents) against Anita Buce (petitioner)
involving a parcel of land located at Quirino Avenue, Pandacan, Manila (subject land).3

Respondents are the heirs of their father, Bernardo Tiongco (Bernardo) and their uncle, Dionisio
Tiongco (Dionisio) who left the subject land upon their demise. The subject land was covered by
Transfer Certificate of Title (TCT) No. 92195 registered in the names of Bernardo and Dionisio.4

Subsequently, TCT No. 167461 cancelled TCT No. 92195, as the former was issued in the names of
the respondents.5

The records of the case reveal that Bernardo and Dionisio entered into a contract of lease with the
spouses Rogelio and Anita Buce (spouses Buce) over the subject land. Under the terms of the lease
contract, the same shall be effective for a period of 15 years effective June 1, 1979, subject to
renewal for another 10 years under the same terms and conditions. The lessees agreed to pay the
lessors a monthly rental of P200.00 starting June 1979. Pursuant also to the terms of the contract,
the lessees were allowed to construct improvements thereon at their own expense.6

The monthly lease rental of P200.00 ballooned into P400.00 in 1985 and into P1,000.00 in July and
August 1991. Before the end of the year 1991, respondents informed petitioner of the impending
increase of rental to P1,576.58 effective January 1992. Despite such information, petitioner
tendered checks in the amount of P400.00 for the rental payment for October to December 1991,
January and May 1992, and January 1993. As these checks were insufficient to cover the total
amount of monthly rental payments due, respondents refused to accept the checks drawn in their
names.7

Petitioner, thus, filed a complaint for specific performance with prayer for consignation against the
respondents. During the pendency of said case, respondents sent a letter to petitioner which
reminded her that their lease contract expired on June 1, 1994. 8

On August 29, 1995, the trial court declared that the lease contract between the petitioner and the
respondents was automatically renewed for another 10 years. The trial court accordingly fixed the
rental payment at P400.00 from June 1, 1990 to June 1, 1994 and P1,000.00 from June 1, 2000 to
June 1 , 2004.9

On appeal, the CA reversed the decision of the trial court and ordered the petitioner to immediately
vacate the leased premises on the ground of the lease contract's expiration on June 1, 1994. 10

The matter reached this Court in GR. No. 136913, entitled Buce v. Court of Appeals.11 In said case,
this Court limited its resolution on the issue of the correct interpretation of the lease contract, that
is, whether it is subject to automatic renewal or not. Ruling in the negative, this Court maintained
that the lease contract was not automatically renewed in the absence of any mutual agreement
between the parties. The fallo thereof reads:

WHEREFORE, the instant petition is partly GRANTED. The assailed decision of the Court of Appeals
is REVERSED insofar as it ordered the petitioner to immediately vacate the leased premises,
without prejudice, however, to the filing by the private respondents of an action for the recovery of
possession of the subject property.

No costs.

SO ORDERED.12

Acting contrary to the ruling of this Court, the petitioner still failed to restore the possession of the
subject property to the respondents. 13

On July 13, 2002, respondents sent a notice to the petitioner, reiterating the turn-over of the
possession of the subject property and payment of rentals in arrearages of P46,000.00 and
P10,000.00 as reasonable rental for the use of the premises until petitioner vacates the same.
However, petitioner failed to heed the said letter. 14

Respondents brought the complaint before the barangay; but no settlement was arrived at as the
petitioner failed to appear during the scheduled hearings. Hence, a Certificate to File Action was
issued by the barangay captain.15

Subsequently, the respondents lowered the amount of the rental payment from P10,000.00 to
P5,000.00. However, the petitioner still refused to pay and instead made partial payments of
P1,000.00 a month.16

As the petitioner refused to turn over the premises and failed to pay proper monthly rentals, the
respondents instituted a complaint for recovery of possession before the Regional Trial Court of
Manila, Branch 10 (RTC).

In her Answer, petitioner averred that the filing of the complaint is premature in view of
respondents' acquiescence in allowing her to continue her occupation of the subject property
despite the expiration of the lease contract. In other words, petitioner insisted an implied renewal
of the lease contract.17

In a Decision18 dated May 28, 2010, the RTC ordered the petitioner to vacate the premises, to
remove the improvements thereon should the respondents refuse to pay the same, and to pay
rental arrearages and monthly rentals. The RTC found that petitioner is no longer entitled to
remain in the premises of the subject property by virtue of the expiration of the lease contract. The
fact that the petitioner paid the P1,000.00 partial payment to respondents does not amount to an
implied renewal of the lease contract nor to an acquiescence to the continued occupation of the
subject property because there was nothing which indicated that respondents voluntarily waived
their right to recover their property. Thus:

WHEREFORE, based on the evidence presented, judgment is hereby rendered in favor of the
plaintiffs and against the defendant as follows:

a) Ordering defendant Anita C. Buce and all persons claiming right under her to restore and turn
over possession of the 56[-]square [meter] parcel of land, subject of this case, to the plaintiffs;

b) Ordering defendant Anita C. Buce to remove the two (2) storey building erected on the premises
should the plaintiffs refuse to pay her ½ of the value of said improvements;

c) Ordering defendant Anita C. Buce to pay plaintiffs the amount of P46,000.00 as rental
arrearages and to pay plaintiff P1,000.00 as monthly rental for the period of June 1, 1994 to June
1, 2004;

d) Ordering defendant Anita C. Buce to pay the amount of P5,000.00 as reasonable rental for the
use of the premises starting June 1, 2004 until the plaintiffs are restored by the defendant of the
premises;

e) Ordering defendant to pay plaintiff the sum of P50,000.00 as attorney's fees; and

f) To pay the costs of the suit.

SO ORDERED.19

A Motion for Reconsideration was filed by petitioner. However, it was denied in a Resolution dated
January 14, 2011.

On appeal, petitioner insisted that she cannot be evicted from the subject land without proper
reimbursement as regards the two-storey building which she introduced therein. Nevertheless,
petitioner reiterated that there was an implied renewal of the lease contract. Petitioner likewise
denied her liability to pay rental in arrears because the increase of monthly rental payment from
P1,000.00 to P5,000.00 is exorbitant, among others.

In a Decision20 dated February 27, 2015, the CA denied the appeal and affirmed with modification
the ruling of the RTC.

On the issue of reimbursement, the CA held that petitioner has no right of retention because she,
being a lessor, knew very well that she has no claim of title over the subject land. Hence, she
cannot be considered as a builder in good faith.

On the issue of implied renewal of the lease contract, the CA ruled that the same was already
settled in G.R. No. 136913, holding that the lease contract was not renewed based on the terms
thereof. However, petitioner's continued possession of the subject property resulted in an implied
new lease under Article 1670 and Article 1687 of the New Civil Code. Nevertheless, respondents'
act of sending a formal demand to vacate constitutes an express act on their part, as lessors, to
withdraw their consent to the continued occupation of the subject land; hence, terminating the
implied lease.

On the payment of arrears, the CA declared that petitioner is liable to pay for the same because of
her use and occupation of the subject land. The CA discussed that petitioner is liable to pay
P1,000.00 monthly rental after June 1, 1994 (or the expiration of the contract) to the time that
petitioner was given five days after receipt of the demand to vacate the property or on July 13,
2002. Furthermore, the petitioner is ordered to pay 5,000.00 as reasonable amount of
compensation for the use and occupation of the subject land.

The dispositive portion of which provides:

WHEREFORE, the appeal is DENIED. The decision rendered by the Regional Trial Court of Manila,
Br. 10 dated May 28, 2010 in Civil Case No. 02-104849 is Affirmed with Modification. Defendant-
appellant Anita C. Buce is ordered to pay plaintiffs-appellees Sps. Erlinda Tiongco Galcon & George
Galeon, Sps. Generosa Tiongco Cabrera and Honesto Cabrera. Jr., Sps. Maria Teresa Tiongco Sands
& Leo Sands, Jose M. Tiongco and Maria Corazon M. Tiongco the amount of PhP 1,000.00 as
monthly rental from June 1, 1994 until the time that defendant-appellant was given five days from
receipt of the letter of demand elated July 13, 2002. and further. the amount of P5,000.00
thereafter, as reasonable amount or con1pensation for the use of the premises until defendant-
appellant surrenders the possession of the subject property to the plaintiffs-appellees.

SO ORDERED.21

Petitioner filed a motion for reconsideration, which was likewise denied in a Resolution 22 dated
January 29, 2016.

Echoing the arguments set forth in her appeal before the CA, the petitioner filed a Petition for
Review on Certiorari before this Court.

In a Resolution23 dated June 8, 2016, this Court resolved to deny the petition and affirm the
February 27, 2015 Decision and the January 29, 2016 Resolution of the CA.

Undaunted, petitioner filed a Motion for Reconsideration 24 on July 28, 2016.

In a Resolution 25 dated August 30, 2016, this Court granted the reconsideration of the motion.
Accordingly, the petition was reinstated and the respondents were required to file their comment
thereto.

In their Comment,26 respondents reiterated that petitioner has no right to any reimbursement on

the two-storey building and to remain in possession of the subject land. Also, the respondents
averred that petitioner is liable to pay rental arrearages and reasonable compensation for the use
of the same.

Considering the pronouncement of this Court, the reexamination and reevaluation of the case is
deemed proper.

The Issues

Summarily, the petitioner puts forth the following matters as subject of this Court's power of
review: (a) whether or not she has a right to retention over the subject land until she is
reimbursed for the costs of the building she constructed therein; (b) whether or not there was an
implied new lease contract between her and the respondents; and (c) whether or not payment of
attorney's fees is proper.

The Court's Ruling

On petitioner's right to retention

Whether a lessee is a builder in good faith is already settled in the case of Geminiano v. Court of
Appeals,27 to wit:

Being mere lessees, the private respondents knew that their occupation of the premises would
continue only for the life of the lease. Plainly, they cannot be considered as possessors nor builders
in good faith.
In a plethora of cases, this Court has held that Article 448 of the Civil Code, in relation to Article
546 of the same Code, which allows full reimbursement of useful improvements and retention of
the premises until reimbursement is made, applies only to a possessor in good faith, i.e., one who
builds on land with the belief that he is the owner thereof. It does not apply where one's only
interest is that of a lessee under a rental contract; otherwise, it would always be in the power of
the tenant to "improve" his landlord out of his property.

Plainly, a lessee is not a builder in good faith. What is applicable in such case is Article 1678 of the
Civil Code:

ART. 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.

Alternatively put, the right to reimbursement arises only if the lessen opts to appropriate the
improvements introduced by the lessee.

In this case, there was no indication that respondents chose to appropriate the improvements.
They, thus, cannot be compelled to pay one-half of its value. However, respondents cannot retain
possession of the improvement, without reimbursing the petitioner. In case they refuse to pay the
same, petitioner has the right to remove the building without causing any more impairment upon
the property leased than is necessary. Thus, respondents cannot demand the possession of the
improvements on the subject land without properly reimbursing petitioner.

On the implied new lease under

Article 1670 of the New Civil Code of
the Philippines

The provision on implied new lease or tacita reconduccion is found in Article 1670 of the Civil Code:

ART. 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.

From the foregoing, it is clear that there is an implied renewal of the contract when the following
elements concur: (a) the term of the original contract of lease has expired; (b) the lessor has not
given the lessee a notice to vacate; and c) the lessee continued enjoying the thing leased for 15
days with the acquiescence of the lessor.28

Article 1687 of the same Code provides for the determination of the period for which such implied
lease is considered as valid, to wit:

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.
In other words, the terms of such contract depend on the period that the lessee made the rental
payments.

Reference to the records reveal that the aforementioned elements are not extant in this case.
However, respondents sent a notice to petitioner informing her of their intention not to renew the
lease way back in 1993 after the filing of the specific performance case by petitioner. At this point,
such notice constitutes a notice to vacate on the part of respondents as they were categorical in
reminding petitioner that the contract had indeed expired; and by sending the same, it is clear that
respondents intended to discontinue the juridical tie between them and petitioner as lessors and
lessee. Such intention is further manifested by the filing of the case for recovery of possession
following the ruling of this Court in G.R. No. 136913. 29 In obvious terms, respondents did not
consent to petitioner's continued stay in the premises of the subject property. Her occupation
therefore is by mere tolerance; deficient, however, of all the elements to constitute an implied new
lease.

Moreover, the petitioner's contention that she failed to receive such notice was belied by the
factual findings of the RTC and the CA. Neither can respondents' act of accepting rental payments
be construed as their consent to the renewal of the lease. The simple reason is that the petitioner
remained in possession of the subject land and, regardless of the outcome of their case, had to pay
rentals to respondents for the use of the same. 30

As the petitioner continued to occupy and possess the subject property without a contract of lease,
she is liable to pay for the reasonable use and possession thereof. Both the RTC and the CA found
that the reasonable compensation for such use and occupation shall be pegged at P5,000.00 per
month.

On the issue of rental payment

The Court agrees with petitioner that she is not liable to pay rental arrearages.

The increment from P1,000.00 to P1,576.58 which respondents demanded to take effect on
January 1992 nor the increase of monthly rental from P1,000.00 to P5,000.00 which respondents
demanded on July 2002 cannot be considered by this Court in holding the petitioner liable for
deficient rental payment as there was no sufficient evidence which proved that the petitioner
indeed received the notices signifying the intended rental increase by respondents and that the
parties mutually agreed thereto. In fact, the respective rulings of the RTC and the CA failed to
uphold the increments demanded by the respondents and brushed aside the respondents'
averment that the increased rental payment was already established among the parties.

As respondents admitted that they received P1,000.00 per month from the petitioner as rental
payment,31 the rental arrearages computed on the basis of the aforementioned increase has no
basis.

On payment of attorneys fees

It is settled that the award of attorney's fees is the exception rather than the general rule;
counsel's fees are not awarded every time a party prevails in a suit because of the policy that no
premium should be placed on the right to litigate. Attorney's fees, as part of damages, are not
necessarily equated to the amount paid by a litigant to a lawyer. 32

Article 220833 of the Civil Code specifically provides for the instances when attorney's fees may be
recovered. The power of the court to award attorney's fees under Article 2208 demands factual,
legal, and equitable justification.34

The Court sustains the award of attorney's fees.

First. Even after this Court's ruling in GR. No. 136913, the petitioner still refused to surrender the
possession of the subject land despite the categorical declaration that the lease contract was not
renewed. Second. The petitioner disregarded respondents' notice to vacate the premises. Third.
This case was elevated to this Court for the second time because of petitioner's insistence that she
has a better right to possess the subject land.

Verily, the RTC and the CA are correct in that they found that petitioner's unjustified failure to turn
over the possession of the subject land amounted to bad faith; hence, entitlement of respondents
to attorney's fees shall ensue as a consequence.

WHEREFORE, premises considered, the petition is PARTLY GRANTED. Accordingly, the Decision

dated February 27, 2015 and the Resolution dated January 29, 2016 are AFFIRMED with
MODIFICATION in that petitioner Anita C. Buce is ORDERED to PAY reasonable compensation
for the use and occupation of the subject property in the amount of P5,000.00 from the expiration
of the contract of lease which was on June 1, 1994 until she vacates the premises. The petitioner's
liability to pay rental arrearages is hereby DELETED.

ALL OTHERS STAND.

SO ORDERED.