G.R. No. L-19376; August 3, 1966
TE ATTA UY VDA. DE CAJUCOM, petitioner, vs. MANILA REMNANT CO., INC., and THE HON. COURT OF APPEALS, respondents.

FACTS

Petitioner Te Atta Uy Vda. de Cajucom was the lessee of a parcel of land in Binondo, Manila, upon which she had erected a building. The lease was unrecorded. Respondent Manila Remnant Co., Inc. purchased the land in April 1957 and demanded that the petitioner vacate. Subsequently, the parties entered into a written agreement in October 1957. The agreement authorized A. U. Valencia & Co. to sell the entire property (land and improvements) for P370,000, with proceeds apportioned P310,000 to the lessor and P60,000 to the lessee. It stipulated that “until and after the property… shall have been actually sold and the price thereof paid, the LESSEE shall pay the LESSOR by way of rentals the sum of P1,750.00 a month.” The petitioner also paid rental arrears. About three months later, broker Valencia resigned the commission, citing the unreasonable price fixed for the improvements. One month after that, in February 1958, the respondent demanded that the petitioner vacate and remove her improvements within 60 days. The petitioner refused, claiming the demand violated their contract. The respondent filed an action for illegal detainer. The Municipal Court dismissed the action, but the Court of First Instance reversed this and ordered the petitioner to vacate. The Court of Appeals affirmed this decision.

ISSUE

Whether the 1957 contract gave the petitioner the right to remain in possession at a monthly rental of P1,750.00 until the property was sold, making the sale a condition precedent for the respondent’s recovery of possession.

RULING

No. The Supreme Court affirmed the decision of the Court of Appeals. Construing the agreement in its entirety, the stipulation allowing the lessee to remain in possession at a monthly rental was only of an ad interim character, effective until the appointed agent could make the sale at the specified price or until it became clear the property could not be sold. Since broker Valencia resigned and manifested his inability to sell the property on the agreed terms, the 1957 contract became functus officio and its binding force terminated, its objective having become impossible. Consequently, the situation of the parties reverted to what it was before the agreement: the respondent, as owner, became entitled to terminate the lease. The petitioner’s original lease was without a definite period and on a month-to-month basis due to the monthly rental, under Article 1687 of the Civil Code. The Court of First Instance had already exercised its power under that article by granting the petitioner three months to vacate, which period had already elapsed. The petition was untenable. Costs were imposed on the petitioner.