GR 140249; (March, 2001) (Digest)
G.R. No. 140249 & 140363; March 6, 2001
DANILO S. YAP, petitioner, vs. COURT OF APPEALS, ALEJANDRO DY JUANCO, UNIVERSAL MILL SUPPLY CO. INC. AND BEE QUEEN RESTAURANT, INC., respondents. MARTINEZ LEYBA, INC., petitioner, vs. COURT OF APPEALS, ALEJANDRO DY JUANCO, UNIVERSAL MILL SUPPLY CO. INC. AND BEE QUEEN RESTAURANT, INC., respondents.
FACTS
Martinez Leyba, Inc. (MLI) owned a commercial building. In 1960, it entered into an unwritten, month-to-month lease with Alejandro Dy Juanco for his business, Universal Mill Supply. This entity was later incorporated, with Dy Juanco as majority stockholder. In 1978, Dy Juanco incorporated Bee Queen Restaurant, Inc., which then occupied the premises and paid rent. In 1986, Bee Queen subleased the first floor and mezzanine to Danilo S. Yap under a five-year contract, which stipulated it would be co-terminus with Bee Queen’s own lease. In October 1990, MLI sent a letter to Dy Juanco terminating their oral lease effective November 5, 1990, citing that the premises were subleased without MLI’s consent. Dy Juanco and his corporations did not vacate. In December 1990, Yap entered into a direct lease contract with MLI.
ISSUE
Whether the Court of Appeals erred in extending the lease contract between Dy Juanco’s corporations and MLI for three years under Article 1687 of the Civil Code.
RULING
The Supreme Court reversed the Court of Appeals and reinstated the trial court’s dismissal of the complaint. The legal logic is anchored on the nature of the original lease and the inapplicability of Article 1687. The lease between MLI and Dy Juanco (and later his corporations) was an unwritten, month-to-month agreement. Such a lease is considered to be for a definite period—one month, renewable every month by the payment and acceptance of rent. A lease with a definite period expires upon its term and is not terminable at will, but it is not indefinite. Article 1687, which allows courts to fix a longer term, applies only to leases with no fixed period, not to leases with a definite but recurring period like a month-to-month arrangement. Since the lease here had a definite period (one month), the court could not fix a longer term under Article 1687. MLI validly terminated the lease by notifying the lessee before the end of a monthly period. Furthermore, equity could not justify an extension for the respondents, who subleased the property at a substantial profit without informing MLI and who had already enjoyed over ten years of occupancy after the initial demand to vacate. The petitions were granted.