G.R. No. 108245 November 25, 1994
MANOLO P. SAMSON, petitioner, vs. COURT OF APPEALS, SANTOS & SONS, INC., and ANGEL SANTOS, respondents.

FACTS

Petitioner Manolo P. Samson offered to buy the store of Santos & Sons, Inc. and its right to lease a commercial unit at the Madrigal Building from private respondent Angel Santos. The building was owned by Susana Realty Corporation, and Santos & Sons had occupied the premises for almost twenty years on a yearly lease. The lease contract in force was to expire on July 31, 1984, but was extended until December 31, 1984. On February 5, 1985, the lessor informed Santos of a rental increase retroactive to January 1985, pending renewal of the contract. On February 15, 1985, Santos presented Samson with a letter-proposal stating that the lease contract was “impliedly renewed” and would be formally renewed upon the arrival of a Madrigal representative. Samson accepted and they agreed on a consideration of P300,000.00. Samson paid P150,000.00 on February 20, 1985, with the balance due upon the formal renewal and transfer of the leasehold right. Samson occupied the store in March 1985. In July 1985, Samson received a notice from Susana Realty directing Santos & Sons to vacate the premises by July 15, 1985, as the lease was not renewed. Samson vacated and filed an action for damages against Santos, alleging fraud and bad faith in the representation of an implied renewal of the lease.

ISSUE

Whether private respondent Angel Santos committed fraud or bad faith in representing to petitioner that his contract of lease had been impliedly renewed, thereby inducing petitioner to enter into the contract of sale.

RULING

No. The Supreme Court sustained the finding of the Court of Appeals that private respondent was not guilty of fraud or bad faith. Bad faith imports a dishonest purpose, moral obliquity, or conscious doing of wrong, and is synonymous with fraud designed to mislead or deceive. The representation of an “implied renewal” was not made with a sinister motive. The lessor’s letter of February 5, 1985, which notified Santos of a rental increase pending renewal, provided a factual basis for Santos’s belief that the lease would be renewed. Furthermore, the agreement between the parties was essentially a conditional sale of a future leasehold right (a mere hope or expectancy), with the balance of P150,000.00 payable only upon the formal renewal and transfer of the lease. Since the condition did not occur, the obligation to pay the balance did not arise. The Court affirmed the modified decision of the Court of Appeals, ordering Santos & Sons, Inc. and Angel Santos to reimburse Samson the P150,000.00 advance payment with legal interest, and ordering Samson to return certain items to the respondents.