1987 – Millare v. Hernando, G.R. No. L-55480 (People’s Restaurant Lease, Renewal, Fixing the Period, PD1508)

3.1. DATE OF PROMULGATION

• June 30, 1987

3.2. DECIDING COURT

• Supreme Court of the Philippines

3.3. DIVISION

• First Division

3.4. PONENTE

• Feliciano, J.

3.5. CONCURRENCE AND ATTENDANCE

3.5.3. ABSENT/OTHERS

• None

3.6. SEPARATE OPINIONS

3.7.PARTIES

3.8. COUNSEL

3.8.1. PETITIONER/S

• N/A

3.8.2 RESPONDENT/S

• N/A

3.9. NATURE OF ACTION

• Petition for Certiorari, Prohibition, and Mandamus

3.10. LAWS AND PROVISIONS CITED

• New Civil Code Article 1670
• Article 1197

3.11. CASES CITED

• Ebol v. Amin, 135 SCRA 438 (1985)
• Royales v. Intermediate Appellate Court, 127 SCRA 438 (1984)
• Republic v. Philippine Long Distance Telephone Co., 26 SCRA 620 at 628 (1969)

4.1. FACTS

• 1975, June 17
  • a five-year Contract of Lease was executed between petitioner Pacifica Millare as lessor and private respondent Elsa Co, married to Antonio Co, as lessee renting out to the lessee the “People’s Restaurant”, located in Bangued, Abra for a monthly rate of P350, to expire on 1980, May 31.
  • A stipulation which would be question in the case reads as follows: “13. This contract of lease is subject to the laws and regulations of the government; and that this contract of lease may be renewed after a period of five (5) years (under the terms and conditions as win be mutually agreed upon by the parties at the time of renewal;) . . .”
• 1980, May
  • on the last week of said month, the lessor informed respondents Co that for P1,200 month, they can continue leasing the People’s Restaurant.
  • A counteroffer of P700 was issued.
  • Allegedly, the lessor said that raise of rent can be resolved at the latter time. The respondents took this to mean the renewal of the Contract of Lease. The lessor denies such allegations.
• 1980, July, 22
  • The petitioner requested respondents Co to vacate the premises due to the expired lease. The respondent spouses refused to pay the new monthly rentals, and intend to deposit such an amount in court.
• 1980, July 28
  • The petitioner issued another letter of demand. The respondents deposited the rentals at P700 a month for June and July in court.

4.2. PROCEDURAL HISTORY

• CFI Abra
  • 1980, August 30
    • the respondent spouses filed a complaint, praying for the following:
      • the renewal of the Contract of lease at P700 a month for ten years
      • the defendant Millare to collect the sum of P1,400 deposited by plaintiffs with the court
      • the defendant to pay damages in the amount of P50,000
    • the defendant filed an Omnibus Motion to Dismiss on the following grounds
      • lack of cause of action due to plaintiff’s failure to establish a valid renewal of the Contract of Lease
      • lack of jurisdiction by the trial court over the complaint for failure of plaintiffs to secure a certification from the Lupong Tagapayapa of the barangay wherein both disputants reside attesting that no amicable settlement between them had been reached despite efforts to arrive at one, as required by PD 1508
    • the respondent spouses opposed the motion to dismiss
  • 1980, October 15
    • respondent judge ruled for the respondent spouses, denying the motion to dismiss, ordering the renewal of lease, allowing the spouses to deposit all accruing monthly rentals in court, and for the defendant to submit her answer.
    • A motion to reconsideration was filed by defendant. It was denied.
• Supreme Court
  • Defendant filed a Petition for Certiorari, Prohibition, and Mandamus against the Order issued by the respondent judge.
  • 1980, November 21, the Supreme Court issued a temporary restraining order enjoining respondent judge from further proceedings in Civil Case No. 1434.
  • 1980, November 26, before the TRO was received, the respondent judge issued a ‘judgment by default’ ordering:
    • the renewal of the lease contract for a 5-year term from expiration date of the original lease contract
    • fixing monthly rentals at P700.00 a month, payable in arrears
  • 1981, March 18, the Court gave due course to the petition.

4.3. ISSUES

• Whether PD 1508 is a jurisdictional requirement?
• Whether the respondent judge erred in ruling over the lease stipulation in question?
• Whether Articles 1197 and 1670 of the Civil Code are sufficient bases for the ‘Judgment by Default?’

4.4. HELD

• Whether the trial court acquired jurisdiction over said case?
  • Yes.
  • We would note firstly that the conciliation procedure required under P.D. 1508 is not a jurisdictional requirement in the sense that failure to have prior recourse to such procedure would not deprive a court of its jurisdiction either over the subject matter or over the person of the defendant.
  • Secondly, the record shows that two complaints were submitted to the barangay authorities for conciliation — one by petitioner for ejectment and the other by private respondents for renewal of the Contract of Lease. It appears further that both complaints were, in fact, heard by the Lupong Tagapayapa in the afternoon of 30 August 1980. After attempts at conciliation had proven fruitless, Certifications to File Action authorizing the parties to pursue their respective claims in court were then issued at 5:20 p.m. of that same afternoon, as attested to by the Barangay Captain in a Certification presented in evidence by petitioner herself.
  • Petitioner would, nonetheless, assail the proceedings in the trial court on a technicality, i.e., private respondents allegedly filed their complaint at 4:00 p.m. of 30 August 1980, or one hour and twenty minutes before the issuance of the requisite certification by the Lupong Tugapayapa. The defect in procedure admittedly initially present at that particular moment when private respondents first filed the complaint in the trial court, was cured by the subsequent issuance of the Certifications to File Action by the barangay LupongTagapayapa. Such certifications in any event constituted substantial compliance with the requirement of P.D. 1508.
• Whether the respondent judge erred in ruling over the lease stipulation in question?
  • Yes.
  • Clearly, the respondent judge’s grasp of both the law and the English language is tenuous at best. We are otherwise unable to comprehend how he arrived at the reading set forth above. Paragraph 13 of the Contract of Lease can only mean that the lessor and lessee may agree to renew the contract upon their reaching agreement on the terms and conditions to be embodied in such renewal contract. Failure to reach agreement on the terms and conditions of the renewal contract will of course prevent the contract from being renewed at all. In the instant case, the lessor and the lessee conspicuously failed to reach agreement both on the amount of the rental to be payable during the renewal term, and on the term of the renewed contract.
• Whether Articles 1197 and 1670 of the Civil Code are sufficient bases for the ‘Judgment by Default?’
  • No.
  • Article 1197 of the Civil Code provides as follows:
    • “If the obligation does not fix a period, but from its nature and the circumstances it can be inferred that a period was intended, the courts may fix the duration thereof.
    • The courts shall also fix the duration of the period when it depends upon the will of the debtor.
    • In every case, the courts shall determine such period as may, under the circumstances, have been probably contemplated by the parties. Once fixed by the courts, the period cannot be changed by them.”
  • The first paragraph of Article 1197 is clearly inapplicable, since the Contract of Lease did in fact fix an original period of five years, which had expired. It is also clear from paragraph 13 of the Contract of Lease that the parties reserved to themselves the faculty of agreeing upon the period of the renewal contract. The second paragraph of Article 1197 is equally clearly inapplicable since the duration of the renewal period was not left to the will of the lessee alone, but rather to the will of both the lessor and the lessee. Most importantly, Article 1197 applies only where a contract of lease clearly exists. Here, the contract was not renewed at all, there was in fact no contract at all the period of which could have been fixed.
  • Article 1670 of the Civil Code reads thus:
    • “If at the end of the contract the lessee should continue enjoying the thing left for 15 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 tenus of the original contract shall be revived.”
  • The respondents themselves, public and private, do not pretend that the continued occupancy of the leased premises after 31 May 1980, the date of expiration of the contract, was with the acquiescence of the lessor. Even if it be assumed that tacita reconduccion had occurred, the implied new lease could not possibly have a period of five years, but rather would have been a month-to-month lease since the rentals (under the original contract) were payable on a monthly basis. At the latest, an implied new lease (bad one arisen) would have expired as of the end of July 1980 in view of the written demands served by the petitioner upon the private respondents to vacate the previously leased premises.
  • It follows that the respondent judge’s decision requiring renewal of the lease has no basis in law or in fact. Save in the limited and exceptional situations envisaged in Articles 1197 and 1670 of the Civil Code, which do not obtain here, courts have no authority to prescribe the terms and conditions of a contract for the parties. As pointed out by Mr. Justice J.B.L. Reyes in Republic vs, Philippine Long Distance Telephone, Co.,
    • “[P]arties cannot be coerced to enter into a contract where no agreement is had between them as to the principal term and conditions of the contract. Freedom to stipulate such terms and conditions is of the essence of our contractual system, and by express provision of the statute, a contract may be annulled if tainted by violence, intimidation or undue influence (Article 1306, 1336, 1337, Civil Code of the Philippines).
  • Contractual terms and conditions created by a court for two parties are a contradiction in terms. If they are imposed by a judge who draws upon his own private notions of what “morals, good customs, justice, equity and public policy” demand, the resulting “agreement” cannot, by deHnition, be consensual or contractual in nature. It would also follow that such coerced terms and conditions cannot be the law as between the parties themselves. Contracts spring from the volition of the parties. That volition cannot be supplied by a judge and a judge who pretends to do so, acts tyrannically, arbitrarily and in excess of his jurisdiction.

4.5. DISPOSITION

• Petition granted
• The order denying petitioner’s motion to dismiss, the order denying petitioner’s motion for reconsideration, and the judgment by default annulled
• Civil Case No. 1434 dismissed
• The TRO issued made permanent.

4.6. SEPARATE OPINION

• None