G.R. No. L-23399. May 31, 1974.
BERNARDO DIZON, substituted by his heirs, petitioners, vs. AMBROSIO MAGSAYSAY and NICANOR PADILLA, respondents.

FACTS

On April 1, 1949, Ambrosio Magsaysay, as owner, and Bernardo Dizon, as lessee, executed a two-year lease contract for a portion of land in Sampaloc, Manila, where Dizon had constructed a house and a bowling alley. The contract contained a clause (paragraph 9) granting Dizon a preferential right to purchase the land should Magsaysay decide to sell it. The lease expired on April 1, 1951, without an express renewal. Dizon continued occupying the premises and paying the monthly rental, which Magsaysay accepted. On March 3, 1953, Magsaysay’s counsel notified Dizon of the lease’s termination by month’s end. Dizon later discovered that Magsaysay had already sold the entire lot to Nicanor Padilla on March 7, 1953.
Dizon sued Magsaysay and Padilla in the Court of First Instance of Manila, invoking his preferential right to purchase under paragraph 9 of the 1949 lease contract. He sought to annul the sale to Padilla and compel its sale to him instead. The trial court dismissed his complaint, a decision affirmed by the Court of Appeals. Dizon’s heirs elevated the case to the Supreme Court via petition for review.

ISSUE

Whether an implied new lease, arising after the expiration of the original fixed-term contract, revives a lessee’s preferential right to purchase the property.

RULING

No. The Supreme Court affirmed the Court of Appeals’ decision, holding that the implied new lease did not revive the preferential right to purchase. The Court applied Article 1670 of the Civil Code, which provides that if a lessee continues enjoying the leased property for fifteen days after contract expiration with the lessor’s acquiescence, an implied new lease arises, reviving the “other terms of the original contract.” The Court adopted a reasonable construction of this provision, limiting the revived terms to those germane to the lessee’s right of continued enjoyment and possession of the property, such as the amount of rent, payment dates, and responsibilities for repairs.
The preferential right to purchase is a special and collateral agreement foreign to the essential consideration of occupancy and enjoyment inherent in a lease contract. No presumption arises that such a special privilege was intended to continue under an implied periodic lease. This interpretation was reinforced by paragraph 2 of the original contract, which stipulated that any renewal would be “upon express and specified conditions to be agreed upon by the parties.” This clause indicated that renewal terms, especially significant ones like a right of first refusal, required fresh mutual agreement and were not automatically incorporated into an implied new lease. Consequently, the preferential right expired with the original two-year term and was not revived thereafter. The sale to respondent Padilla was therefore valid.