G.R. No. 188057, July 12, 2017
HILLTOP MARKET FISH VENDORS’ ASSOCIATION, INC., Petitioner vs. HON. BRAULIO YARANON, City Mayor, Baguio City, HON. GALO WEYGAN, City Councilor and Chairman Anti-Vice Coordinating Task Force, and the CITY GOVERNMENT OF BAGUIO, Respondents

FACTS

On June 22, 1974, petitioner Hilltop Market Fish Vendors’ Association, Inc. (Hilltop) and respondent City of Baguio entered into a 25-year Contract of Lease, renewable for another 25 years, over a city-owned lot at Hilltop Market. The contract stipulated that the annual rental of ₱25,000 would commence upon the City Engineer’s Office issuing a Certificate of full occupancy for a building Hilltop was to construct. Upon lease termination, ownership of the building would vest in the city without reimbursement. Hilltop constructed the “Rillera building” in 1975, and its members occupied it and conducted business therein, even though the required Certificate was never issued due to the building’s incomplete state and failure to meet sanitary and safety standards.
Over the years, the City Council passed resolutions rescinding the lease due to Hilltop’s failure to complete the building. In 2005, then Mayor Braulio Yaranon issued Administrative Order No. 030, ordering the closure, cleaning, and enclosure of the Rillera building to address illegal activities and prepare it for commercial use. Hilltop filed a complaint seeking to enjoin the order and compel the issuance of the Certificate, arguing the lease period had not begun without it.

ISSUE

The core issue is whether the Contract of Lease was already perfected and operative, such that its 25-year term had expired, justifying the city’s closure order.

RULING

The Supreme Court denied the petition and affirmed the lower courts’ rulings. The Court held that a contract of lease is a consensual contract, perfected from the moment there is a meeting of the minds upon the thing and the price. The issuance of the Certificate of Occupancy was not a condition for the perfection or effectivity of the contract itself. Rather, it was a suspensive condition imposed only on the performance of the obligation to pay the annual rental; payment was to commence upon the Certificate’s issuance. The contract was perfected in 1974 upon mutual agreement.
Consequently, the 25-year lease period commenced on June 22, 1974, and automatically expired on June 22, 1999. The Court ruled that Hilltop was estopped from claiming the lease period had not begun, as it had enjoyed the use and possession of the property since 1975, deriving business benefits without paying the stipulated rent, all while aware the Certificate had not been issued. The city’s right to rescind due to Hilltop’s non-compliance with building standards and its subsequent closure order for public safety were upheld as valid exercises of police power and as the act of the property owner after the lease term had expired.