G.R. No. 72313 & 72326. December 29, 1989.
RICARDO CRUZ, petitioner, vs. HON. INTERMEDIATE APPELLATE COURT and ROMAN LEGARDA SO, respondents. ROMAN LEGARDA SO, petitioner, vs. RICARDO CRUZ, respondent.

FACTS

Ricardo Cruz, as manager of the unregistered Padre Rada Market Operators Association, leased a parcel of land from Roman Legarda So for market operations under a contract of indefinite duration at a monthly rent of P3,500.00. In April 1977, So demanded Cruz vacate the premises due to alleged rental arrearages. Cruz continued operations and paid the May 1977 rental. Subsequently, in June 1977, So and another lessee, Antonio Barredo, Jr., secured a temporary restraining order from the Court of First Instance, compelling Cruz to stop his market operations and collection of fees. This injunction lasted until March 1982, a period of fifty-seven (57) months. After the expiration of a separate lease So had entered into with other parties for the same property, Cruz filed an action in March 1982 to enjoin So from leasing to third parties and to recognize his continued leasehold rights.
The trial court initially ruled against Cruz but later reconsidered, declaring the lease subsisting and extended for 15 years, awarding Cruz damages, and making permanent a preliminary injunction in his favor. The Intermediate Appellate Court modified this, extending the lease for only 57 months (the period of the injunction) and eliminating the award of damages. Both parties elevated the case to the Supreme Court via certiorari.

ISSUE

The core issue is whether the lease contract between Cruz and So was validly terminated by So’s demand to vacate in 1977, and consequently, whether Cruz had a right to continue the lease or to claim damages for the period he was enjoined from operating.

RULING

The Supreme Court ruled that the lease contract was validly terminated. The Court applied Article 1673 of the Civil Code, which allows the lessor to terminate a lease of indefinite period by giving notice one month in advance. So’s letter of April 18, 1977, advising Cruz to pay arrears and vacate by April 30, 1977, constituted a valid notice of termination. Cruz’s act of paying the rental for May 1977 without protest did not constitute a renewal or waiver of the termination; it was treated merely as compensation for his use of the premises during the period he remained after the notice. The Court emphasized that a lessee has no preferential right to re-lease the premises after termination, and Cruz’s prolonged inaction after So leased the property to others in 1977 amounted to an admission that his lease had ended.
The Court found the 57-month extension granted by the Appellate Court moot, as Cruz had already recovered possession via a preliminary injunction since May 1982 and remained in possession beyond that period without paying rent. On equitable grounds, the Supreme Court modified the decision, ordering Cruz to immediately desist from operating the market and to surrender possession to So. Cruz was further ordered to pay So a monthly rental of P3,500.00 from May 4, 1982, until he fully surrenders the premises, thereby dissolving the injunction in Cruz’s favor. The ruling balanced the property rights of the lessor against the lessee’s claims, ultimately upholding the lessor’s prerogative to terminate a lease of indefinite duration upon proper notice.