ICO A. ZARAGOZA, Petitioner, v. ILOILO SANTOS TRUCKERS, INC., Respondent.

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

    June 25, 2014

N OFFICE (ATO), Petitioner,

EALS (NINETEENTH DIVISION) and BERNIE G. MIAQUE, Respondents.

DECISION

RO, J.:

ri and prohibition of the Air Transportation Office (ATO) seeks the nullification of the Court of Appeals' Resolution  dated March 29, 20
1

30, 2006 in CA-G.R. CEB-SP No. 01603. The Resolution dated March 29, 2006 granted the application for temporary restraining orde
the Resolution dated May 30, 2006 issued a writ of preliminary injunction enjoining the implementation of the writ of execution issued
TC) of Iloilo despite Miaque's alleged continued failure and refusal to make current the supersedeas bond and to pay to the A TO the
s.

main case of ejectment

l Case No. 01 (38)

led a complaint for unlawful detainer against Miaque in the Municipal Trial Court in Cities (MTCC) of Iloilo City, Branch 3. It was docke
ATO sought the following, among others:

be ordered to permanently vacate and peacefully return to the ATO possession of:

00-square meter Refreshment Parlor fronting the New Terminal Building-Iloilo Airport;

10-square meter Restaurant/Gift Shop inside the Iloilo Airport Terminal; and

eas occupied or otherwise utilized by Miaque incident to his operation of the Porterage Service within the Iloilo Airport; and

be ordered to immediately pay the ATO the amount of not less than ₱1,296,103.10, representing unpaid space rental and concessio
of October 15, 2000 plus interest and additional rental and fees which may be proven during the trial. 3

y rendered a Decision  dated May 27, 2002 the dispositive part of which reads:
4
nt is rendered finding [Miaque] to be unlawfully detaining the following premises and orders [him], his men and privies to:

0[-]square meter Refreshment Parlor fronting the New Terminal Building-Iloilo Airport. [Miaque] is further ordered to pay [the ATO] the
privilege fee[s] accruing from November 1986 to October 2000, totaling ₱460,060.70, plus differential billings from January 1990 to Ju
nterest charges from January 2000 to October 2000 for ₱2,678.38 or a total amount of ₱467,397.68 as of October 2000, less the pay
er Official Receipt No. 4317842 dated December 1998, and the monthly current lease/concession privilege fee from November 2000
ave vacated the premises;

10[-]square meter Restaurant/Gift Shop inside the Iloilo Terminal Building which was reduced to a total of 183 square meters in 1998
nside the pre-departure area and 126.72 square meters outside the pre-departure area). [Miaque] is also ordered to pay [the ATO]
onaire’s privilege fee[s] from January 16, 1992 to October 15, 2000 in the total amount of ₱719,708.43 and from October 16, 2000, to
lease/concessionaire privilege fees until [Miaque] shall have vacated the premises; and

ea occupied or used by [Miaque] incident to his operation of the Porterage Service within the Iloilo Airport. [Miaque] is further ordered
e due from March 1992 to October 2000 in the total amount of ₱108,997.07. [Miaque] is further ordered to pay the current monthly co
m October 2000 until such time that [Miaque] shall have vacated the premises.

Case No. 02-27292

TCC Decision to the RTC of Iloilo City, Branch 24. It was docketed as Civil Case No. 02-27292. The RTC, in its Decision  dated June
6

ision in its entirety. Miaque’s motion for reconsideration was denied.  Court of Appeals: CA-G.R. SP No. 79439 Miaque questioned th
7

Appeals by filing a petition for review, docketed as CA-G.R. SP No. 79439, on September 25, 2003. In a Decision  dated April 29, 20
8

sed the petition and affirmed the RTC Decision. Miaque moved for reconsideration but it was denied in a Resolution dated January 5

o. 171099

e to this Court in a petition for review, docketed as G.R. No. 171099. In a Resolution  dated February 22, 2006, the petition was denie
10

ourt of Appeals Decision was sufficiently shown. The motion for reconsideration of Miaque was denied with finality. 11

The proceedings on execution

R. SP No. 79439, the Court of Appeals issued on February 27, 2004 a temporary restraining order (TRO) effective for a period of 60 d
a bond in the amount of ₱100,000.00.  After the lapse of the TRO, the ATO filed an urgent motion for the execution of the RTC Deci
12

Rule 70 of the Rules of Court. This was opposed by Miaque. 13

ust 2, 2004, the RTC granted the ATO’s motion:

e above consideration, the court finds merit [i]n the reasons given in the motion of [the ATO] and hereby Grants the issuance of a Wri

Rule 70 of the 1997 Rules of Civil Procedure, which mandates that the judgment of this Court being immediately executory in cases o
ution shall issue, ordering the sheriff of this Court to effect its Decision dated June 7, 2003, affirming the Decision of the MTCC, Bran

der to the Asst. Solicitor Almira Tomampos of the Office of the Solicitor General and Atty. Rex Rico, counsel for [Miaque]. 15

eration of the above Order but the RTC denied the motion in an Order  dated August 13, 2004. Thereafter, the RTC issued a Writ of
16
 7

ppeals issued a Resolution  dated August 18, 2004 ordering the issuance of a writ of preliminary injunction and enjoining the ATO an
18

half from enforcing the respective Decisions of the MTCC and the RTC while CA-G.R. SP No. 79439 is pending. Thus, after the dismi
iew in CA-G.R. SP No. 79439, the ATO filed another urgent motion for execution of the RTC Decision. In its motion, the ATO pointed
by Miaque had lapsed and was not renewed and that the rental and concessionaire privilege fees have not been paid at all in violatio
of Court.  Miaque again opposed the ATO’s urgent motion for execution,  while the ATO filed a supplemental urgent motion for execu
19 20

the Court of Appeals had been dismissed. 21

e 1, 2005, the RTC granted the ATO’s urgent motion for execution and issued a Writ of Execution  dated June 2, 2005. On the basis o
23

was given to Miaque.  On June 3, 2005, Miaque filed a motion for reconsideration of the Order dated June 1, 2005, with prayer to set
24

tice to vacate.  At the same time, he filed a motion in CA-G.R. SP No. 79439 praying that the Court of Appeals order the RTC judge a
25

sist from implementing the writ of execution.  Thereafter, the Court of Appeals issued a Resolution  dated June 14, 2005 ordering th
26 27

e Decisions of the MTCC and the RTC while CA-G.R. SP No. 79439 is still pending. However, on June 15, 2005, before the concerne
Resolution dated June 14, 2005, the said sheriffs implemented the writ of execution and delivered the possession of the following prem

nt/Gift Shop inside the Iloilo Terminal Building in the reduced area of 183 square meters; and

ch Miaque occupied or used incident to his operation of the Porterage Service within the Iloilo Airport.

mented the writ then filed a return of service  and issued reports of partial delivery of possession.  However, Miaque subsequently reg
28 29

premises on the strength of the Court of Appeals’ Resolution dated June 14, 2005. 30

ter the Court of Appeals issued its Resolution dated January 5, 2006 denying Miaque’s motion for reconsideration of the Decision dat
. 79439, the ATO filed with the RTC a motion for the revival of the writs of execution dated August 16, 2004 and June 2, 2005.  This w
31

ter the RTC heard the parties, it issued an Order  dated March 20, 2006 granting the ATO’s motion and revived the writs of execution
33

ne 2, 2005. Miaque filed a motion for reconsideration but the RTC denied it. 34

of Appeals: CA-G.R. CEB-SP No. 01603

aque filed a petition  for certiorari (with prayer for issuance of TRO and/or writ of preliminary injunction) in the Court of Appeals, docke
35

3, where he assailed the RTC’s Order dated March 20, 2006. He prayed, among others, that the implementation of the writs of execu
e the Court of Appeals issued the Resolutions being challenged in this case, namely, the Resolution dated March 29, 2006 issuing a
d Resolution dated May 30, 2006 issuing a writ of preliminary injunction enjoining the implementation of the writs of execution dated A
In particular, the Resolution dated May 30, 2006 reads: Before us for resolution is [Miaque]’s application for the issuance of a writ of p
strain the respondent judge, Sheriffs Marcial B. Lambuso, Winston T. Eguia, Camilo I. Divinagracia, Jr. and Eric George S. Luntao and
n their behalves, from enforcing the orders issued by the respondent judge on March 20, 2006 and March 24, 2006, including the writ
ant thereto, while the petition in the case at bench is still pending with us.

sly the record in this case, together with the submissions and contentions of the parties, we have come up with a finding and so hold
Miaque] that the grounds for the issuance of a writ of preliminary injunction enumerated in Section 3 of Rule 58 of the 1997 Revised R
[Miaque] has a right in esse to be protected and the acts against which the injunction is sought to be directed are violative of said rig
to have a clear legal right to hold on to the premises leased by him from ATO at least until such time when he shall have been duly e
xecution of judgment caused to be issued by the MTCC in Iloilo City, which is the court of origin of the decision promulgated by this Co
April 29, 2005. Under the attendant circumstances, it appears that the respondent judge orthe RTC in Iloilo City has no jurisdiction to o
execution because we gave due course to the petition for review filed with us in CA-G.R. SP No. 79439 and, in fact, rendered a decis
by divesting the RTC in Iloilo City of jurisdiction over the case as provided for in the third paragraph of Section 8(a) of Rule 42of the 1
In City of Manila vs. Court of Appeals, 204 SCRA 362, as cited in Mocles vs. Maravilla, 239 SCRA 188, the Supreme Court held as f
udgment of the metropolitan trial court is appealed to the RTC and the decision of the latter itself is elevated to the CA whose decision
should be remanded through the RTC to the metropolitan trial court for execution."

of the foregoing premises, a WRIT OF PRELIMINARY INJUNCTION is hereby ordered or caused to be issued by us enjoining the res
B. Lambuso, Winston T. Eguia, Camilo I. Divinagracia, Jr. and Eric George S. Luntao and all other persons acting for and in their beha
ued by the respondent judge on March 20, 2006 and March 24, 2006, including the writ[s] of execution issued pursuant thereto, while
still pending with us.

titioner’s putting up of a bond in the sum of ONE HUNDRED THOUSAND PESOS(₱100,000.00) to the effect that he will pay to the re
said office may sustain by reason of the injunctive writ if we should finally decide that [Miaque] is not entitled thereto.
36

The present petition

e Court of Appeals acted with grave abuse of discretion amounting to lack or excess of jurisdiction in issuing the TRO and the subseq
rough the Order dated March 29, 2006 and the Resolution dated May 30,2006, respectively. According to the ATO, the Court of Appe
under the law, Rules of Court, jurisprudence and equity to the possession as well as to the payment of rental and concession privilege
f this petition, already amounted to ₱2 Million. Such right had already been decided with finality by this Court, which affirmed the Dec
urt of Appeals in CA-G.R. SP No. 79439, but the Court of Appeals has repeatedly thwarted it. The RTC acted properly and pursuant t
s of Court when it issued the writs of execution.  Moreover, the ATO asserts that a TRO cannot restrain an accomplished fact, as the
37

1, 2005 had already been partially implemented. 38

at, by his admission that the issues in CAG.R. SP No. 79439 and CA-G.R. CEB-SP No. 01603 are exactly the same, Miaque has com
connection, the ATO points out that, in his opposition to the ATO’s motion for additional period of time to file its comment on Miaque’s
1603, Miaque pointed out the similarity of the core issues in CA-G.R. SP No. 79439 and CA-G.R. CEB-SP No. 01603, to wit:

ues raised by the petition [in CA-G.R. CEBSP No. 01603] are very simple and not complicated. In fact, the threshold issue, i.e., wheth
t (RTC) has jurisdiction to issue the writ of execution after the appeal over its decision had been perfected and the petition for review
given due course, is exactly the same one earlier raised by [the ATO itself in its] "Motion for Reconsideration" of the Resolution dated
R. No. 79439, entitled "Bernie G. Miaque vs. Hon. Danilo P. Galvez and Air Transportation Office (ATO)", (same parties in this proceed
he 20th Division, Court of Appeals, Cebu City.

has] to do is simply to reiterate [its] said arguments, the law and jurisprudence [it has] earlier invoked and, if [it wishes], add some m
prudence thereto. Such an exercise would definitely not require a sixty (60) day period. A ten (10) day period is more than sufficient. 3

ds that the subject premises form part of a public utility infrastructure and, pursuant to Presidential Decree No. 1818, the issuance of
frastructure is prohibited.
40

que’s petition for certiorari in CA-G.R. CEBSP No. 01603 introduces a new matter which is the alleged novation of the MTCC Decision
f ₱319,900.00 to the Land Bank of the Philippines account of the ATO in February 2006. At any rate, the ATO asserts that its tenacity
gment against Miaque belies its consent to the alleged novation. 41

ues that this Court has no jurisdiction to dismiss a petition still pending with the Court of Appeals. Thus, the ATO cannot properly pray
CEB-SP No. 01603. According to Miaque, the jurisdiction of this Court is limited only to the determination of whether or not the Court
etion in issuing a TRO and, subsequently, a preliminary injunction in CA-G.R. CEB-SP No. 01603. In this connection, Miaque insists t
well within its jurisdiction in the issuance of both the Order dated March 29, 2006 granting a TRO and the Resolution dated May 30, 2
nction in CA-G.R. CEB-SP No. 01603. As this Court has effectively affirmed the MTCC Decision, then it is the MTCC and not the RTC
e execution of the MTCC Decision. Moreover, the RTC had no jurisdiction to issue the writs of execution dated August 16, 2004 and J
already lost its jurisdiction when Miaque filed an appeal to the Court of Appeals on September 25, 2003, which appeal was given due

t the ATO’s claim that the RTC’s writ of execution had been partially implemented is not true and that he is in possession of the entire
rt of Appeals issued the TRO and writ of preliminary injunction being challenged in this case.

that no writ may be issued to enforce the MTCC Decision as the said decision had already been novated by his deposit of ₱319,000.0
Land Bank of the Philippines in February 2006. 43

on  dated August 14, 2006, issued a TRO enjoining the Court of Appeals, Miaque, and his agents and representatives from impleme
44

29, 2006 and the Resolution dated May 30, 2006 in CA-G.R. CEB-SP No. 01603.

The Court’s ruling

us.

notes that the challenge to the Order dated March 29, 2006 granting a TRO, effective for 60 days, is moot as its effectivity had alread

gled web of issues presented by the contending parties, the basic question in this petition is whether or not the Court of Appeals comm
unting to lack or excess of jurisdiction in issuing the Resolution dated May 30, 2006 which granted petitioner’s application for the issu
ction in CA-G.R. CEB-SP No. 01603.

he Rules of Court provides the key to that question: Sec. 21. Immediate execution on appeal to Court of Appeals or Supreme Court. –
al Trial Court against the defendant shall be immediately executory, without prejudice to a further appeal that may be taken therefrom

of the Revised Rule on Summary Procedure:

udgment or final order shall be appealable to the appropriate Regional Trial Court which shall decide the same in accordance with Se
29. The decision of the Regional Trial Court in civil cases governed by this Rule, including forcible entry and unlawful detainer, shall b
without prejudice to a further appeal that may be taken therefrom. Section 10 of Rule 70 shall be deemed repealed. (Emphasis and u

e supplemented and reinforced by Section 4, Rule 39 and Section 8(b), Rule 42 of the Rules of Court which respectively provide:

stayed by appeal. – Judgments in actions for injunction, receivership, accounting and support, and such other judgments as are now o
be immediately executory, shall be enforceable after their rendition and shall not be stayed by an appeal taken therefrom, unless oth
t. On appeal therefrom, the appellate court in its discretion may make an order suspending, modifying, restoring or granting the injunc
g, or award of support.

hall be upon such terms as to bond or otherwise as may be considered proper for the security or protection of the rights of the adverse

xxxx

peal; effect thereof.–

g of a petition for review and the payment of the corresponding docket and other lawful fees, the appeal is deemed perfected as to the

t loses jurisdiction over the case upon the perfection of the appeals filed in due time and the expiration of the time to appeal of the oth

urt of Appeals gives due course to the petition, the Regional Trial Court may issue orders for the protection and preservation of the rig
olve any matter litigated by the appeal, approve compromises, permit appeals of indigent litigants, order execution pending appeal in
 9, and allow withdrawal of the appeal.

decided under the Rules on Summary Procedure, the appeal shall stay the judgment or final order unless the Court of Appeals, the la
rwise. (Emphases supplied.)

visions above shows the following significant characteristics of the RTC judgment in an ejectment case appealed to it:

nt of the RTC against the defendant-appellant is immediately executory, without prejudice to a further appeal that may be taken theref

ent of the RTC is not stayed by an appeal taken therefrom, unless otherwise ordered by the RTC or, in the appellate court’s discretion

- the judgment of the RTC is immediately executory -- is emphasized by the fact that no resolutory condition has been imposed that w
the RTC’s judgment.  The significance of this may be better appreciated by comparing Section 21 of Rule 70 with its precursor, Sect
45

Court which provided:

on on appeal to Court of Appeals or Supreme Court. – Where defendant appeals from a judgment of the Court of First Instance, exec
o the restoration of possession, shall not be stayed unless the appellant deposits the same amounts and within the periods referred t
sed of in the same manner as therein provided.

the procedure on appeal from the RTC’s judgment to the Court of Appeals was, with the exception of the need for a supersedeas bo
ally the same as the procedure on appeal of the MTC’s judgment to the RTC. Thus, in the contemplated recourse to the Court of App
ng his appeal, could also prevent the immediate execution of the judgment by making the periodic deposit of rentals during the pende
espondingly prevent restitution of the premises to the plaintiff who had already twice vindicated his claim to the property in the two low
er the amendatory procedure introduced by the present Section 21 of Rule 70, the judgment of the RTC shall be immediately executo
forthwith. It shall not be stayed by the mere continuing deposit of monthly rentals by the dispossess or during the pendency of the ca
Court, although such execution of the judgment shall be without prejudice to that appeal taking its due course. This reiterates Section
ary Procedure which replaced the appellate procedure in, and repealed, the former Section 10, Rule 70 of the 1964 Rules of Court.   46

nc. v. Sheriff Hatab  states:

47

64 Revised Rules of Court where the defendant, after perfecting his appeal, could prevent the immediate execution of the judgment b
riodic deposit of monthly rentals during the pendency of the appeal thereby preventing the plaintiff from taking possession of the prem
wording of Section 21, Rule 70 explicitly provides that the judgment of the regional trial court in ejectment cases appealed to it shall be
and can be enforced despite the perfection of an appeal to a higher court.  (Emphasis supplied.)
48

a writ of execution under Section 21 of Rule 70 is ministerial and may be compelled by mandamus.  Section 21 of Rule 70 presuppo
49

ntry or unlawful detainer case is unsatisfied with the RTC’s judgment and appeals to a higher court. It authorizes the RTC to immedia
prejudice to the appeal taking its due course.  The rationale of immediate execution of judgment in an ejectment case is to avoid inju
50

ertheless, it should be stressed that the appellate court may stay the writ of execution should circumstances so require. 52

ic -- the judgment of the RTC is not stayed by an appeal taken therefrom – reinforces the first.  The judgment of the RTC in an ejectm
1âwphi1

ndition and, upon motion, immediately executory notwithstanding an appeal taken therefrom. The execution of the RTC’s judgment is
under Section 2, Rule 39 of the Rules of Court which provides:

execution. –

ment or a final order pending appeal. – On motion of the prevailing party with notice to the adverse party filed in the trial court while it h
e and is in possession of either the original record or the record on appeal, as the case may be, at the time of the filing of such motion
der execution of a judgment or final order even before the expiration of the period to appeal.
 ost jurisdiction, the motion for execution pending appeal may be filed in the appellate court.

may only issue upon good reasons to be stated in a special order after due hearing.

, separate or partial judgments. – A several, separate or partial judgment may be executed under the same terms and conditions as e
r pending appeal.

is authorized while the trial court, which rendered the judgment sought to be executed, still has jurisdiction over the case as the perio
s in possession of either the original record or the record on appeal, as the case may be, at the time of the filing of the motion for exe
esidual powers, or those powers which it retains after losing jurisdiction over the case as a result of the perfection of the appeal.  As a
53

ndered in the exercise of its appellate jurisdiction, being sought to be executed in a discretionary execution is stayed by the appeal to
Section 8(b), Rule 42 of the Rules of Court. On the other hand, execution of the RTC’s judgment under Section 21, Rule 70 is not disc
ial duty of the RTC.  It is not governed by Section 2, Rule 39 of the Rules of Court but by Section 4, Rule 39 of the Rules of Court on
54

this connection, it is not covered by the general rule, that the judgment of the RTC is stayed by appeal to the Court of Appeals under
es of Court, but constitutes an exception to the said rule. In connection with the second characteristic of the RTC judgment in an eject
equence of the above distinctions between discretionary execution and the execution of the RTC’s judgment in an ejectment case on
hat the former may be availed of in the RTC only before the Court of Appeals gives due course to the appeal while the latter may be
the appeal to the Court of Appeals. But then again, in the latter case, the Court of Appeals may stay the writ of execution issued by t
o require.  City of Naga v. Hon. Asuncion  explains:
55 56

e losing defendant in an ejectment case is without recourse to avoid immediate execution of the RTC decision. The defendant may x
urt of Appeals and therein apply for a writ of preliminary injunction. Thus, as held in Benedicto v. Court of Appeals, even if RTC judgm
are immediately executory, preliminary injunction may still be granted. (Citation omitted.)

immediately executory nature of the judgment of the RTC in ejectment cases, which judgment is not stayed by an appeal taken there
sue a writ of preliminary injunction that will restrain or enjoin the execution of the RTC’s judgment. In the exercise of such authority, th
tly be aware that the grant of a preliminary injunction in a case rests on the sound discretion of the court with the caveat that it should

nction is an extraordinary event which must be granted only in the face of actual and existing substantial rights. The duty of the court
or a writ of preliminary injunction is to determine whether the requisites necessary for the grant of an injunction are present in the cas
me, and where facts are shown to be wanting in bringing the matter within the conditions for its issuance, the ancillarywrit must be str
d in grave abuse of discretion. 58

ns of the MTCC in Civil Case No. 01 (38), of the RTC in Civil Case No. 02-27292, and of the Court of Appeals in CAG.R. SP No. 7943
d the right of the ATO to possession of the property and the corresponding obligation of Miaque to immediately vacate the subject pre
he RTC, and the Court of Appeals all ruled that Miaque does not have any right to continue in possession of the said premises. It is th
of Appeals justified its issuance of the writ of preliminary injunction with the sweeping statement that Miaque "appears to have a clear
es leased by him from ATO at least until such time when he shall have been duly ejected therefrom by a writ of execution of judgmen
in Iloilo City, which is the court of origin of the decision promulgated by this Court in CA-G.R. SP No. 79439." Unfortunately, in its Re
nting a writ of preliminary injunction in Miaque’s favor, the Court of Appeals did not state the source or basis of Miaque’s "clear legal r
s." This is fatal.

CI Bank, Inc.,  this Court stated that, in granting or dismissing an application for a writ of preliminary injunction, the court must state in
59

s based on the evidence and the law. This is to enable the appellate court to determine whether the trial court committed grave abuse
excess or lack of jurisdiction in resolving, one way or the other, the plea for injunctive relief. In the absence of proof of a legal right an
eeks an injunctive writ, an order for the issuance of a writ of preliminary injunction will be nullified. Thus, where the right of one who se
or disputed, a preliminary injunction is not proper. The possibility of irreparable damage without proof of an actual existing right is not
ourt of Appeals in issuing its Resolution dated May 30, 2006 is its view that the RTC "has no jurisdiction to order the issuance of [the]
en it gave due course to the petition for review in CA-G.R. SP No. 79439, the RTC was already divested of jurisdiction over the case
ection 8(a), Rule 42 of the Rules of Court. The Court of Appeals is mistaken. It disregards both (1) the immediately executory nature o
ejectment cases, and (2) the rule that such judgment of the RTC is not stayed by an appeal taken there from. It ignores the nature of
of execution of its judgment in an ejectment case as ministerial and not discretionary.

ercising its jurisdiction pursuant to Section 21, Rule 70 of the Rules of Court when it issued the writs of execution dated August 16, 20
Court of Appeals in CA-G.R. SP No. 79439 enjoined the execution of the RTC’s judgment during the pendency of CA-G.R. SP No. 79
execution dated August 16, 2004 and June 1, 2005 in its Order dated March 20, 2006, after the Court of Appeals denied Miaque’s m
smissal of the petition in CA-G.R. SP No. 79439. Indeed, the said writs of execution need not even be revived because they continue
which the judgment may be enforced by motion, that is within five years from entry of judgment, pursuant to Section 14,  Rule 39 of t
60

on 6  of the same Rule.

61

discretion when an act is (1) done contrary to the Constitution, the law or jurisprudence, or (2) executed whimsically, capriciously or a
ersonal bias.  In this case, the Court of Appeals issued the Resolution dated May 30, 2006 granting Miaque’s prayer for a writ of prel
62

ection 21, Rule 70 and other relevant provisions of the Rules of Court, as well as this Court’s pronouncements in Teresa T. Gonzales
the Court of Appeals committed grave abuse of discretion when it issued the Resolution dated May 30, 2006 in CA-G.R. CEB-SP No

e controversy between the parties in this case has been unduly protracted, considering that the decisions of the MTCC, the RTC, the
in favor of the ATO and against Miaque on the ejectment case are already final and executory. The Court of Appeals should therefore
g CA-G.R. CEBSP No. 01603.

ion is hereby GRANTED. The Resolution dated May 30, 2006 of the Court of Appeals in CA-G.R. CEB-SP No. 01603 is ANNULLED
ve abuse of discretion. The Court of Appeals is directed to conduct its proceedings in CA-G.R. CEB-SP No. 01603 expeditiously and w

DO-DE CASTRO

MARIA LOURDES P. A. SERENO

Chief Justice
Chairperson

LUCAS P. BERSAMIN MARTIN S. VILLARAMA, JR.

Associate Justice Associate Justice
BIENVENIDO L. REYES
Associate Justice

CERTIFICATION

Article VIII of the Constitution, I certify that the conclusions in the above Decision had been reached in consultation before the case w
the opinion of the Court's Division.

. SERENO
6; penned by Associate Justice Isaias P. Dicdican with Associate Justices Vicente L. Yap and Apolinario D. Bruselas, Jr., concurring.

nned by Associate Justice Isaias P. Dicdican with Associate Justices Ramon M. Sato, Jr. and Apolinario D. Bruselas, Jr., concurring.

n finality, entry of judgment was made on July 10, 2006.

 FIRST DIVISION

G.R. No. 224022, June 28, 2017

TEODORICO A. ZARAGOZA, Petitioner, v. ILOILO SANTOS TRUCKERS, INC., Respondent.

DECISION

PERLAS-BER

on for review on certiorari1 are the Decision2 dated July 22, 2015 and the Resolution3 dated April 8, 2016 of the Cour
G.R. CEB-SP No. 07839 which affirmed the Decision 4 dated July 5, 2013 of the Regional Trial Court of Iloilo City, Bran
Case No. 12-31294, and accordingly, held,  inter alia, that petitioner Teodorico A. Zaragoza (petitioner) could not eje
ntos Truckers, Inc. (respondent) from the leased premises as the latter complied with its obligation to pay monthly re

The Facts

etitioner Teodorico A. Zaragoza (petitioner) bought a 3,058-square meter (sq. m.) parcel of land located at Cabatuan
No. 937-A, from his parents, Florentino and Erlinda Zaragoza, 5 and eventually, had the same registered under his na
f Title No. 090-2010009190. 6 Petitioner claimed that unknown to him, his father leased7 a 1,000-sq. m. portion of Lo
pondent Iloilo Santos Truckers, Inc. (respondent), for a period of eight (8) years commencing on December 5, 2003
r eight (8) years at the sole option of respondent. 8 This notwithstanding, petitioner allowed the lease to subsist and
diligent in paying its monthly rent amounting to P10,000.00 per month 9 (P11,200.0010 including value added tax11)
.

at when Florentino died, respondent stopped paying rent. On the other hand, respondent maintained that it was willi
ain as to whom payment should be made as it received separate demands from Florentino's heirs, including petitione
nterpleader case before the Regional Trial Court of Iloilo City, Branch 24 (RTC-Br. 24), docketed as Civil Case No. 07
s, RTC-Br. 24 issued: (a) Order 13 dated June 22, 2010 dismissing the action for interpleader, but at the same time, s
avail of the remedy of consignation; and (b) Order 14 dated August 17, 2010 which, inter alia, reiterated that respon
mounts with it in order to do away with unnecessary expenses and delay. Pursuant thereto, respondent submitted a
5
 dated January 26, 2011 and a Manifestation and Notice 16 dated May 30, 2011 informing petitioner that it had consi
P521,396.8917 before RTC-Br. 24.18

, petitioner sent respondent a letter 19 dated May 24, 2011, stating that granting without conceding the propriety of
me did not extinguish the latter's obligation to pay rent because the amount consigned was insufficient to cover the u
from February 2007 to May 2011 in the amount of P752,878.72. In this regard, petitioner demanded that responde
he same time, vacate the subject land within fifteen (15) days from receipt of the letter. In its reply, 20 respondent re
aid rent by consigning the amount of P521,396.89 with RTC-Br. 24 representing monthly rentals from February 2007
d that it is not obligated to pay interests under the lease contract. In a letter 21 dated June 9, 2011, petitioner clarifie
nsigned by respondent was insufficient to cover monthly rentals from February 2007 to March 2011 which already am
interest. He likewise reiterated that his earlier demand to pay was for the period of February 2007 to May 2011. Th
at respondent had continuously failed and refused to comply with the terms and conditions of the lease contract conc
rental, with or without consignation. 22 As his demands went unheeded, petitioner filed on June 21, 2011 a suit 23 for u
ondent before the Municipal Trial Court in Cities, Iloilo City, Branch 10 (MTCC), docketed as Civil Case No. 32-11. 24

ndent maintained,  inter alia, that its consignation of rental amounts with RTC-Br. 24 constituted compliance with the
e contract concerning the monthly rental payments. As such, petitioner has no cause of action against it, and accord
om the subject land. 25

detainer suit, respondent sent petitioner a letter 26 dated September 29, 2011 expressing its intention to renew the
e, petitioner sent letters dated October 10, 2011 27 and October 11, 201128 rejecting respondent's intent to renew in v
ely pay its monthly rentals.

The MTCC Ruling

December 29, 2011, the MTCC ruled in petitioner's favor, and accordingly, ordered respondent to: (a) vacate the su
titioner back rentals in the amount of P10,000.00 a month from February 2007 and the succeeding months thereafte
and, plus legal interest of twelve percent (12%) per annum from extrajudicial demand until full payment, P20,000.0
000.00 as litigation expenses, and the costs of suit. 30

petitioner's complaint properly makes out a case for unlawful detainer as it alleged that respondent defaulted in its
uary 2007 to May 2011 in the total amount of P752,878.72 and that the latter failed to pay the same and to vacate t
s to do so.31 Further, the MTCC opined that respondent's consignation with RTC-Br. 24 is void, and thus, did not serv
rom paying its obligation to pay rentals. As there was no valid consignation, respondent was held liable to pay unpai
as justified in terminating the lease contract. 32

nt appealed33 to the RTC-Br. 23, docketed as Civil Case No. 12-31294.

The RTC-Br. 23 Ruling

July 5, 2013, the RTC-Br. 23 reversed and set aside the MTCC ruling, and accordingly, dismissed petitioner's compla
C's findings, the RTC-Br. 23 ruled,  inter alia, that respondent's consignation of the rental amounts was proper, consi
e pursuant to RTC-Br. 24's order, which had jurisdiction over the interpleader case, consignation being an ancillary re
ade even before petitioner's filing of the unlawful detainer case and that petitioner knew of such fact; and (c) petitio
ned amounts. Thus, the consignation effectively released respondent from its obligation to pay rent, and hence, petit
ul detainer must necessarily fail. 35

er appealed to the CA via a petition for review, 36 docketed as CA-G.R. CEB-SP No. 07839.

The CA Ruling

July 22, 2015, the CA affirmed the RTC-Br. 23 ruling. It held, inter alia, that while petitioner's complaint for unlawfu
ause of action on its face, petitioner, however, failed to substantiate his allegation that respondent violated the term
e contract by intentionally failing to pay the monthly rentals. 38 In this regard, the CA found that respondent was act
with its obligation to pay rent, but was in a quandary as to whom it should remit its payment. 39 Hence, it showed g
tal payments to RTC-Br. 24, which was properly made and was acknowledged by petitioner by withdrawing the cons
ere being no violation of the lease contract, petitioner could not validly eject respondent from the subject land. 40

r moved for reconsideration, 41 which was, however, denied in a Resolution42 dated April 8, 2016; hence, this petition

The Issue Before the Court

urt's resolution is whether or not the CA correctly ruled that petitioner could not eject respondent from the subject la
with its obligation to pay monthly rent thru consignation.

The Court's Ruling

orious.

a v. Waterfields Industries Corporation,43 the Court discussed the requisites of an unlawful detainer suit in instances
lease contract between the plaintiff-lessor and defendant-lessee, to wit:

bringing an unlawful detainer suit, two requisites must concur: (1) there must be failure to pay rent or c
s of the lease, and (2) there must be demand both to pay or to comply and vacate.  The first requisite refers
e of action for unlawful detainer, while the second refers to the jurisdictional requirement of demand in order that sa
sued. Implied in the first requisite, which is needed to establish the cause of action of the plaintiff in an unlawful det
f the contract of lease entered into by the plaintiff and the defendant, the same being needed to establish the lease c
violated. Thus, in Bachrach Corporation v. Court of Appeals  [(357 Phil. 483, 492 [1998])], the Court held that the e
h the cause of action in an unlawful detainer case is (1) a lease contract and (2) the violation of that leas
ases and underscoring supplied)

n unlawful detainer suit to prosper, the plaintiff-lessor must show that: first, initially, the defendant-lessee lega
ed premises by virtue of a subsisting lease contract;  second, such possession eventually became illegal,
violation of the provisions of the said lease contract or the termination thereof;  third, the defendant-less
ssion of the leased premises, thus, effectively depriving the plaintiff-lessor enjoyment thereof; and  fourt
both to pay or to comply and vacate and that the suit is brought within one (1) year from the last deman

, third, and fourth requisites have been indubitably complied with, considering that at the time the suit was institute
was a subsisting lease contract46 between petitioner and respondent; (b) respondent was still in possession of the su
filed within one (1) year from petitioner's letter 47 dated May 24, 2011 demanding that respondent pay monthly rent
e the subject land. Thus, the crux of the controversy is whether or not the second requisite has been satisfied, that
ndent violated the terms and conditions of the lease contract, specifically with regard to the payment of monthly ren

-Br. 23 and the CA, respondent did not breach its obligation to pay rent as its consignation of its monthly rentals wit
ent compliance thereof.

the CA are mistaken.

letter48 dated May 24, 2011, petitioner demanded payment for, among others, monthly rentals for the period of Fe
In response thereto,49 respondent claimed that it had already complied with its obligation to pay monthly rentals via
C-Br. 24, as evidenced by the Manifestation and Notice 50 dated May 30, 2011 it filed before said court. However, a c
r-reply and Manifestation and Notice reveals that the amount consigned with RTC-Br. 24 represents monthly rentals
ry 2007 to March 2011, which is two (2) whole months short of what was being demanded by petitioner. In fact,
in his letter51 dated June 9, 2011 to respondent, but the latter still refused to make any additional payments, by eit
gnations with RTC-Br. 24 or directly paying petitioner.

t appears that even assuming arguendo that respondent's consignation of its monthly rentals with RTC-Br. 24 was m
it still failed to comply with its obligation under the lease contract to pay monthly rentals. It is apparent that at the
nlawful detainer suit on June 21, 2011, respondent was not updated in its monthly rental payments, as there is no e
e months of April, May, and even June 2011. Irrefragably, said omission constitutes a violation of the lease contract

he requisites of a suit for unlawful detainer have been complied with, petitioner is justified in ejecting respondent fro
he rulings of the RTC-Br. 23 and the CA must be reversed and set aside, and accordingly, the MTCC ruling must be r
prevailing jurisprudence, the rental arrearages due to petitioner shall earn legal interest of twelve percent (12%) per
demand on May 24, 2011 to June 30, 2013, and six percent (6%) per annum from July 1, 2013 until fully paid. The
the MTCC,  i.e., P20,000.00 as attorney's fees, P50,000.00 as litigation expenses, and the costs of suit) shall likewis
ercent (6%) per annum from finality of the Decision until fully paid. 52

etition is GRANTED. The Decision dated July 22, 2015 and the Resolution dated April 8, 2016 of the Court of Appeal
39 are hereby REVERSED and SET ASIDE. Accordingly, the Decision dated December 29, 2011 of the Municipal Tr
nch 10 in Civil Case No. 32-11 is hereby REINSTATED with MODIFICATION in that the rental arrearages due to p
a shall earn legal interest of twelve percent (12%) per annum, computed from first demand on May 24, 2011 to Jun
t (6%) per annum from July 1, 2013 until full satisfaction. The other amounts awarded in favor of petitioner Teodori
e P20,000.00 as attorney's fees, P50,000.00 as litigation expenses, and the costs of suit shall also earn legal interes
num from finality of the decision until fully paid.

erson), Leonardo-De Castro, Del Castillo, and Caguioa, JJ., concur.

d by Associate Justice Germano Francisco D. Legaspi with Associate Justices Pamela Ann Abella Maxino and Jhosep Y
ned by Judge Edgardo L. Catilo.

te Sale, id. at 47.

, id. at 50-53.

however, varied: from February-May 2007, rent fee was P11,700.00 and on June 2007, rent fee was P11,325.00. Se

dated November 19, 2011; id. at 263-275. See also Statement of Account on Unpaid Rentals, id. at 281-284.

ed by Judge Danilo P. Galvez.

211.

and 219.

FIRST DIVISION

Ju

GOZA, Petitioner

CKERS, INC., Respondent

 DECISION

.:

for review on certiorari  are the Decision  dated July 22, 2015 and the Resolution  dated April 8, 2016 of the Court of Appeals (CA) in
1 2 3

ch affirmed the Decision  dated July 5, 2013 of the Regional Trial Court of Iloilo City, Branch 23 (RTC-Br. 23) in Civil Case No. 12-312
4

alia, that petitioner Teodorico A. Zaragoza (petitioner) could not eject respondent Iloilo Santos Truckers, Inc. (respondent) from the le
omplied with its obligation to pay monthly rent thru consignation.

The Facts

oner Teodorico A. Zaragoza (petitioner) bought a 3,058-square meter (sq. m.) parcel of land located at Cabatuan, Iloilo, denominated
Florentino and Erlinda Zaragoza,  and eventually, had the same registered under his name in Transfer Certificate of Title No. 090-
5

claimed that unknown to him, his father leased  a 1,000-sq. m. portion of Lot 937-A (subject land) to respondent Iloilo Santos Trucke
7

od of eight (8) years commencing on December 5, 2003 and renewable for another eight (8) years at the sole option of respondent.   T 8

ner allowed the lease to subsist and respondent had been diligent in paying its monthly rent amounting to Pl 0,000.00 per month  (Pl 9

e added tax  ) pursuant to the lease contract.

11

when Florentino died, respondent stopped paying rent. On the other hand, respondent maintained that it was willing to pay rent, but w
ould be made as it received separate demands from Florentino's heirs, including petitioner.   Thus, respondent filed an interpleader c
12

of Iloilo City, Branch 24 (RTC-Br. 24), docketed as Civil Case No. 07- 29371. After due proceedings, RTC-Br. 24 issued: (a) Order   13

action for interpleader, but at the same time, stating that respondent may avail of the remedy of consignation; and (b) Order  dated A
14

eiterated that respondent may consign the rental amounts with it in order to do away with unnecessary expenses and delay. Pursuant
Consolidated Report  dated January 26, 2011 and a Manifestation and Notice   dated May 30, 2011 informing petitioner that it had c
15 16

f ₱521,396.89  before RTC-Br. 24. 

17 18

etitioner sent respondent a letter  dated May 24, 2011, stating that granting without conceding the propriety of consignation, the same
19

bligation to pay rent because the amount consigned was insufficient to cover the unpaid rentals plus interests from February 2007 to M
. 72. In this regard, petitioner demanded that respondent pay said amount and at the same time, vacate the subject land within fifteen
. In its reply,   respondent reiterated that it had already paid rent by consigning the amount of P521,396.89 with RTC-Br. 24 represen
20

007 to March 2011, and maintained that it is not obligated to pay interests under the lease contract. In a letter  dated June 9, 2011, p
21

id amount consigned by respondent was insufficient to cover monthly rentals from February 2007 to March 2011 which already amou
erest. He likewise reiterated that his earlier demand to pay was for the period of February 2007 to May 2011. Thus, petitioner posited
ously failed and refused to comply with the terms and conditions of the lease contract concerning the payment of monthly rental, with
emands went unheeded, petitioner filed on June 21, 2011 a suit  for unlawful detainer against respondent before the Municipal Trial C
23

h 10 (MTCC), docketed as Civil Case No. 32-11. 24

nt maintained, inter alia, that its consignation of rental amounts with RTC-Br. 24 constituted compliance with the provisions of the lea
rental payments. As such, petitioner has no cause of action against it, and accordingly, it cannot be ejected from the subject land. 25

tainer suit, respondent sent petitioner a letter  dated September 29, 2011 expressing its intention to renew the lease contract. In resp
26

ted October 10, 2011   and October 11, 2011 28 rejecting respondent's intent to renew in view of the latter's failure to timely pay its m
27

The MTCC Ruling

ecember 29, 2011, the MTCC ruled in petitioner's favor, and accordingly, ordered respondent to: (a) vacate the subject land; and (b) 
n the amount of ₱l0,000.00 a month from February 2007 and the succeeding months thereafter until it vacates the subject land, plus l
 per annum from extrajudicial demand until full payment, ₱20,000.00 as attorney's fees, ₱50,000.00 as litigation expenses, and the co
etitioner's complaint properly makes out a case for unlawful detainer as it alleged that respondent defaulted in its rental payments from
e total amount of ₱752,878.72 and that the latter failed to pay the same and to vacate the subject land despite demands to do so.   Fu 31

ondent's consignation with RTC-Br. 24 is void, and thus, did not serve to release respondent from paying its obligation to pay rentals.
on, respondent was held liable to pay unpaid rentals and that petitioner was justified in terminating the lease contract.  32

appealed   to the RTC-Br. 23, docketed as Civil Case No. 12-31294.
33

y 5, 2013, the RTC-Br. 23 reversed and set aside the MTCC ruling, and accordingly, dismissed petitioner's complaint. Contrary to the
3 ruled, inter alia, that respondent's consignation of the rental amounts was proper, considering that: (a) it was made pursuant to RTC
ction over the interpleader case, consignation being an ancillary remedy thereto; (b) it was made even before petitioner's filing of the u
petitioner knew of such fact; and (c) petitioner even withdrew the consigned amounts. Thus, the consignation effectively released resp
, and hence, petitioner's complaint for unlawful detainer must necessarily fail. 
35

ppealed to the CA via a petition for review,  docketed as CA-G.R. CEB-SP No. 07839.
36

The CA Ruling

y 22, 2015, the CA affirmed the RTC-Br. 23 ruling. It held, inter alia, that while petitioner's complaint for unlawful detainer sufficiently
ce, petitioner, however, failed to substantiate his allegation that respondent violated the terms and conditions of the lease contract by
y the monthly rentals.   In this regard, the CA found that respondent was actually ready and willing to comply with its obligation to pay
38

whom it should remit its payment.   Hence, it showed good faith by consigning its rental payments to RTC-Br. 24, which was properl
39

etitioner by withdrawing the consigned amounts in court. There being no violation of the lease contract, petitioner could not validly eje
bject land.
40

oved for reconsideration,   which was, however, denied in a Resolution  dated April 8, 2016; hence, this petition. The Issue Before th
41 42

olution is whether or not the CA correctly ruled that petitioner could not eject respondent from the subject land as the latter fully comp
y rent thru consignation.

ourt

s resolution is whether or not the CA correctly ruled that petitioner could not eject respondent from the subject land as the latter fully c
monthly rent thru consignation.

The Court's Ruling

us.

v. Waterfields Industries Corporation,   the Court discussed the requisites of an unlawful detainer suit in instances where there is a su
43

the plaintiff-lessor and defendant-lessee, to wit:

ing an unlawful detainer suit, two requisites must concur: (1) there must be failure to pay rent or comply with the conditions of the lea
both to pay or to comply and vacate. The first requisite refers to the existence of the cause of action for unlawful detainer, while the se
irement of demand in order that said cause of action may be pursued. Implied in the first requisite, which is needed to establish the c
an unlawful detainer suit, is the presentation of the contract of lease entered into by the plaintiff and the defendant, the same being ne
ditions alleged to have been violated. Thus, in Bachrach Corporation v. Court of Appeals [(357 Phil. 483, 492 [1998])], the Court held
ablish the cause of action in an unlawful detainer case is (1) a lease contract and (2) the violation of that lease by the defendant.  (Em
44
nlawful detainer suit to prosper, the plaintiff-lessor must show that: first, initially, the defendant-lessee legally possessed the leased pr
ase contract; second, such possession eventually became illegal, either due to the latter's violation of the provisions of the said lease
third, the defendant-lessee remained in possession of the leased premises, thus, effectively depriving the plaintiff-lessor enjoyment th
be a demand both to pay or to comply and vacate and that the suit is brought within one (1) year from the last demand. 45

rd, and fourth requisites have been indubitably complied with, considering that at the time the suit was instituted on June 21, 2011: (a
act   between petitioner and respondent; (b) respondent was still in possession of the subject land; and (c) the case was filed within o
46

dated May 24, 2011 demanding that respondent pay monthly rentals and at the same time, vacate the subject land. Thus, the crux of
or not the second requisite has been satisfied, that is, whether or not respondent violated the terms and conditions of the lease contra
o the payment of monthly rentals.

r. 23 and the CA, respondent did not breach its obligation to pay rent as its consignation of its monthly rentals with RTCBr. 24 constitu
ereof.

CA are mistaken.

ter   dated May 24, 2011, petitioner demanded payment for, among others, monthly rentals for the period of February 2007 to May 20
48

ondent claimed that it had already complied with its obligation to pay monthly rentals via consignation with RTC-Br. 24, as evidenced
e  dated May 30, 2011 it filed before said court. However, a closer reading of such letter-reply and Manifestation and Notice reveals t
50

RTC-Br. 24 represents monthly rentals only for the period of February 2007 to March 2011, which is two (2) whole months short of wh
tioner. In fact, petitioner pointed out such fact in his letter  dated June 9, 2011 to respondent, but the latter still refused to make any a
51

king further consignations with RTC-Br. 24 or directly paying petitioner.

ppears that even assuming arguendo that respondent's consignation of its monthly rentals with RTC-Br. 24 was made in accordance
h its obligation under the lease contract to pay monthly rentals. It is apparent that at the time petitioner filed the unlawful detainer suit o
not updated in its monthly rental payments, as there is no evidence of such payment for the months of April, May, and even June 201
on constitutes a violation of the lease contract on the part of respondent.

requisites of a suit for unlawful detainer have been complied with, petitioner is justified in ejecting respondent from the subject land. T
3 and the CA must be reversed and set aside, and accordingly, the MTCC ruling must be reinstated. However, in light of prevailing ju
e to petitioner shall earn legal interest of twelve percent (12%) per annum, computed from first demand on May 24, 2011 to June 30,
num from July 1, 2013 until fully paid. The other amounts awarded by the MTCC, i.e., ₱20,000.00 as attorney's fees, ₱50,000.00 as l
s of suit) shall likewise earn legal interest of six percent (6%) per annum from finality of the Decision until fully paid. 
52

ion is GRANTED. The Decision dated July 22, 2015 and the Resolution dated April 8, 2016 of the Court of Appeals in CA-G.R. CEB-
ERSED and SET ASIDE. Accordingly, the Decision dated December 29, 2011 of the Municipal Trial Court in Cities, Iloilo City, Branch
by REINSTATED with MODIFICATION in that the rental arrearages due to petitioner Teodorico A. Zaragoza shall earn legal interest o
m, computed from first demand on May 24, 2011 to June 30, 2013, and six percent (6%) per annum from July 1, 2013 until full satisfa
in favor of petitioner Teodorico A. Zaragoza, such as the ₱20,000.00 as attorney's fees, ₱50,000.00 as litigation expenses, and the c
erest of six percent (6%) per annum from finality of the decision until fully paid.

BERNABE

MARIA LOURDES P.A. SERENO

 Chief Justice

TERESITA J. LEONARDO-DE CASTRO MARIANO C. DEL CASTILLO

Associate Justice Associate Justice
ALFREDO BENJAMIN S. CAGUIOA
Associate Justice

CERTIFICATION

13, Article VIII of the Constitution and the Division Chairperson’s Attestation, I certify that the conclusions in the above Decision had b
before the case was assigned to the writer of the opinion of the Court’s Division.

SERENO

pp. 8-20.

5-33. Penned by Associate Justice Germano Francisco D. Legaspi with Associate Justices Pamela Ann Abella Maxino and Jhosep Y
ng.

6-37.

97-309. Penned by Judge Edgardo L. Catilo.

ed of Absolute Sale, id. at 47.

4.

ase Contract, id. at 50-53.

6.

onthly rent, however, varied: from February-May 2007, rent fee was Pl 1,700.00 and on June 2007, rent fee was Pl 1,325.00. See CA

osition Paper dated November 19, 2011; id. at 263-275. See also Statement of Account on Unpaid Rentals, id. at 281-284.

p. 26.

0-81. Penned by Judge Danilo P. Galvez.

4-115.

o, pp. 208-211.

16-218.

at212-214and219.

llo, p. 26.

o, p. 285.

ter dated June 7, 2011, id. at 286.

87-288.

omplaint for Unlawful Detainer with Damages dated June 13, 2011; rollo, pp. 38-43.

pp. 26-27.

nswer with Counterclaim dated July 22, 2011; CA rollo, pp. 224-239.

89-290.

91.

92.

pp. 195-228. Penned by Presiding Judge Enrique Z. Trespeces.

27-228.

at 217-220.

at 220-224.

emorandum-On-Appeal dated March 30, 2012; id. at 232-271.

97-309.

at 303-307.

July 31, 2013. CA rollo, pp. 22-47.

pp. 25-33.
 0.

at 32.

at31-33.

otion for reconsideration dated September 2, 2015; CA rollo, pp. 504-517.

pp. 36-37.

hil. 94 (2014).

06, citing Fideldia v. Spouses Mulato, 586 Phil. I, I 4 (2008).

acarias v. Anacay, 744 Phil. 201, 208-209 (2014), citing Cabrera v. Getaruela, 604 Phil. 59, 66 (2009).

pp. 50-53.

o, p. 285.

ter dated June 7, 20 I I, id. at 286.

16-218.

87-288.

acar v. Gallery Frames, 716 Phil. 267 (2013).

ellano Law Foundation

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 170509               June 27, 2012

VIEGELY SAMELO, represented by Attorney-in-Fact CRISTINA SAMELO, Petitioner,
vs.
MANOTOK SERVICES, INC., allegedly represented by PERPETUA BOCANEGRA
(deceased), Respondent.

DECISION

BRION, J.:

Before us is the petition for review on certiorari filed by Viegely Samelo (petitioner), represented by
1 

her attorney-in-fact Cristina Samelo, to challenge the decision dated June 21, 2005 and the
2 

resolution dated November 10, 2005 of the Court of Appeals (CA) in CA-G.R. SP No. 85664.
3 

Background Facts

Manotok Services, Inc. (respondent) alleged that it is the administrator of a parcel of land known as
Lot 9-A, Block 2913, situated at 2882 Dagupan Extension, Tondo, Manila. On January 31, 1997, the
respondent entered into a contract with the petitioner for the lease of a portion of Lot 9-A, Block
2913, described as Lot 4, Block 15 (subject premises). The lease contract was for a period of one (1)
year, with a monthly rental of ₱3,960.00. After the expiration of the lease contract on December 31,
1997, the petitioner continued occupying the subject premises without paying the rent. On August 5,
4 

1998, the respondent, thru its President Rosa Manotok, sent a letter to the petitioner demanding that
she vacate the subject premises and pay compensation for its use and occupancy. The petitioner,
5 

however, refused to heed these demands.

On November 18, 1998, the respondent filed a complaint for unlawful detainer against the petitioner
before the Metropolitan Trial Court (MeTC), Branch 3, Manila. The case was docketed as Civil Case
6 

No. 161588-CV. The respondent prayed, among others, that the petitioner and those claiming rights
under her be ordered to vacate the subject premises, and to pay compensation for its use and
occupancy.

In her answer, the petitioner alleged that the respondent had no right to collect rentals because the
subject premises are located inside the property of the Philippine National Railways (PNR). She also
added that the respondent had no certificate of title over the subject premises. The petitioner further
claimed that her signature in the contract of lease was obtained through the respondent’s
misrepresentation. She likewise maintained that she is now the owner of the subject premises as
she had been in possession since 1944. 7

The MeTC Ruling

The MeTC, in its judgment of March 28, 2002, decided in favor of the respondent, and ordered the
8 

petitioner to vacate the subject premises and to deliver their peaceful possession to the respondent.
The MeTC held that the only issue to be resolved in an unlawful detainer case is physical
possession or possession de facto, and that the respondent had established its right of possession
over the subject premises. It added that the petitioner’s right under the lease contract already
ceased upon the expiration of the said contract. It further ruled that the petitioner is already estopped
from questioning the right of the respondent over the subject premises when she entered into a
contract of lease with the respondent. The dispositive portion of the MeTC judgment reads:

WHEREFORE, premises considered, judgment is hereby rendered for the plaintiff and against
defendant, ordering the latter and all persons claiming rights under her:
 1. To vacate the premises located at 2882 Dagupan Extension, Tondo, Manila, and deliver
the peaceful possession thereof to the plaintiff[;]

2. To pay plaintiff the sum of ₱40,075.20 as compensation for the use and occupancy of the
premises from January 1, 1998 to August 30, 1998, plus ₱4,554.00 a month starting
September 1, 1998, until defendant and all person[s] claiming rights under her to finally
vacate the premises[;]

3. To pay plaintiff the sum of ₱5,000.00 for and as attorney’s fees; and

4. To pay the cost of suit. 9

The RTC Decision

The petitioner filed an appeal with the Regional Trial Court (RTC), Branch 50, Manila. The RTC, in
10 

its decision of July 1, 2004, set aside the MeTC’s decision, and dismissed the complaint for unlawful
11 

detainer. The RTC held, among others, that the respondent had no right to collect rentals as it failed
to show that it had authority to administer the subject premises and to enter into a contract of lease
with the petitioner. It also ruled that the subject premises, which were formerly owned by the PNR,
are now owned by the petitioner by virtue of her possession and stay in the premises since 1944.

The CA Decision

Aggrieved by the reversal, the respondent filed a petition for review with the CA, docketed as CA-
G.R. SP No. 85664. The CA, in its decision of June 21, 2005, reversed and set aside the RTC
12 

decision, and reinstated the MeTC judgment. The CA held that the petitioner is now estopped from
questioning the right of the respondent over the subject property. It explained that in an action
involving the possession of the subject premises, a tenant cannot controvert the title of his landlord
or assert any rights adverse to that title, without first delivering to the landlord the premises acquired
by virtue of the agreement between themselves. The appellate court added that the petitioner cannot
claim that she repudiated the lease contract, in the absence of any unequivocal acts of repudiation.

The CA further held that the only issue in an ejectment suit is physical or material possession,
although the trial courts may provisionally resolve the issue of ownership for the sole purpose of
determining the issue of possession. It explained that the issue of ownership is not required to
determine the issue of possession since the petitioner tacitly admitted that she is a lessee of the
subject premises. 13

The petitioner moved to reconsider this decision, but the CA denied her motion in its resolution dated
November 10, 2005. 14

In presenting her case before this Court, the petitioner argued that the CA erred in ruling that a
tenant is not permitted to deny the title of his landlord. She maintained that the respondent is not the
owner or administrator of the subject premises, and insisted that she had been in possession of the
land in question since 1944. She further added that she repudiated the lease contract by filing a
case for fraudulent misrepresentation, intimidation, annulment of lease contract, and quieting of title
with injunction before another court. 15

The Court’s Ruling

We find the petition unmeritorious.

Respondent has a better right of possession over the subject premises

"An action for unlawful detainer exists when a person unlawfully withholds possession of any land or
building against or from a lessor, vendor, vendee or other persons, after the expiration or termination
of the right to hold possession, by virtue of any contract, express or implied." "The only issue to be
16 

resolved in an unlawful detainer case is physical or material possession of the property involved,
independent of any claim of ownership by any of the parties involved." "Thus, when the relationship
17 

of lessor and lessee is established in an unlawful detainer case, any attempt of the parties to inject
the question of ownership into the case is futile, except insofar as it might throw light on the right of
possession." 18

In the present case, it is undisputed that the petitioner and the respondent entered into a contract of
lease. We note in this regard that in her answer with affirmative defenses and counterclaim before
the MeTC, the petitioner did not deny that she signed the lease contract (although she maintained
that her signature was obtained through the respondent’s misrepresentations). Under the lease
contract, the petitioner obligated herself to pay a monthly rental to the respondent in the amount of
₱3,960.00. The lease period was for one year, commencing on January 1, 1997 and expiring on
December 31, 1997. It bears emphasis that the respondent did not give the petitioner a notice to
vacate upon the expiration of the lease contract in December 1997 (the notice to vacate was sent
only on August 5, 1998), and the latter continued enjoying the subject premises for more than 15
days, without objection from the respondent. By the inaction of the respondent as lessor, there can
be no inference that it intended to discontinue the lease contract. An implied new lease was
19 

therefore created pursuant to Article 1670 of the Civil Code, which expressly provides:

Article 1670. If at the end of the contract the lessee should continue enjoying the thing leased for
fifteen days with the acquiescence of the lessor, and unless a notice to the contrary by either party
has previously been given, it is understood that there is an implied new lease, not for the period of
the original contract, but for the time established in Articles 1682 and 1687. The other terms of the
original contract shall be revived.

"An implied new lease or tacita reconduccion will set in when the following requisites are found to
exist: a) the term of the original contract of lease has expired; b) the lessor has not given the lessee
a notice to vacate; and c) the lessee continued enjoying the thing leased for fifteen days with the
acquiescence of the lessor." As earlier discussed, all these requisites have been fulfilled in the
20 

present case.

Article 1687 of the Civil Code on implied new lease provides:

Article 1687. If the period for the lease has not been fixed, it is understood to be from year to year, if
the rent agreed upon is annual; from month to month, if it is monthly; from week to week, if the rent
is weekly; and from day to day, if the rent is to be paid daily.

Since the rent was paid on a monthly basis, the period of lease is considered to be from month to
month, in accordance with Article 1687 of the Civil Code. "[A] lease from month to month is
considered to be one with a definite period which expires at the end of each month upon a demand
to vacate by the lessor." When the respondent sent a notice to vacate to the petitioner on August 5,
21 

1998, the tacita reconduccion was aborted, and the contract is deemed to have expired at the end of
that month. "[A] notice to vacate constitutes an express act on the part of the lessor that it no longer
consents to the continued occupation by the lessee of its property." After such notice, the lessee’s
22 

right to continue in possession ceases and her possession becomes one of detainer. 23

Estoppel of tenant
We find no merit in the petitioner’s allegation that the respondent had no authority to lease the
subject premises because the latter failed to prove that it is its owner or administrator.

The Rules of Court protects the respondent, as lessor, from being questioned by the petitioner, as
lessee, regarding its title or better right of possession over the subject premises. Section 2(b), Rule
131 of the Rules of Court states that the tenant is not permitted to deny the title of his landlord at the
time of the commencement of the relation of landlord and tenant between them. Article 1436 of the
Civil Code likewise states that a lessee or a bailee is estopped from asserting title to the thing leased
or received, as against the lessor or bailor.

These provisions bar the petitioner from contesting the respondent’s title over the subject premises.
"The juridical relationship between x x x [a] lessor and x x x [a lessee] carries with it a recognition of
the lessor's title. As [lessee, the petitioner is] estopped [from denying the] landlord's title, or to assert
a better title not only in [herself], but also in some third person while [she remains] in possession of
the subject premises and until [she surrenders] possession to the landlord. This estoppel applies
even though the lessor had no title at the time the relation of [the] lessor and [the] lessee was
created, and may be asserted not only by the original lessor, but also by those who succeed to his
title." Once a contact of lease is shown to exist between the parties, the lessee cannot by any proof,
24 

however strong, overturn the conclusive presumption that the lessor has a valid title to or a better
right of possession to the subject premises than the lessee.

The Court thus explained in Tamio v. Ticson: 25

Indeed, the relation of lessor and lessee does not depend on the former’s title but on the agreement
between the parties, followed by the possession of the premises by the lessee under such
agreement. As long as the latter remains in undisturbed possession, it is immaterial whether the
lessor has a valid title – or any title at all – at the time the relationship was entered into. [citations
omitted]

The issue of ownership

We are likewise unpersuaded by the petitioner’s claim that she has "acquired possessory rights
leading to ownership" over the subject premises, having been in possession thereof since 1944. We
26 

emphasize that aside from her self-serving allegation, the petitioner did not present any
documentary evidence to substantiate her claim that she stayed on the subject premises since 1944.
That the petitioner presented certificates of title of the Manila Railroad Company over certain
properties in Tondo, Manila, which allegedly cover the subject premises, is of no moment. One
cannot recognize the right of another, and at the same time claim adverse possession which can
ripen to ownership, thru acquisitive prescription. "For prescription to set in, the possession must be
adverse, continuous, public, and to the exclusion of [others]." Significantly, the RTC decision failed
27 

to state its basis for concluding that the petitioner stayed in the subject premises since 1944.

At any rate, we hold that no need exists to resolve the issue of ownership in this case, since it is not
required to determine the issue of possession; the execution of the lease contract between the
petitioner, as lessee, and the respondent, as lessor, belies the former’s claim of ownership.  We 1âwphi1

reiterate that the fact of the lease and the expiration of its term are the only elements in an action for
unlawful detainer. "The defense of ownership does not change the summary nature of [this] action. x
x x. Although a wrongful possessor may at times be upheld by the courts, this is merely temporary
and solely for the maintenance of public order. The question of ownership is to be settled in the
proper court and in a proper action." 28

Interest on rentals due

Additionally, the petitioner is liable to pay interest by way of damages for her failure to pay the
rentals due for the use of the subject premises. We reiterate that the respondent’s extrajudicial
29 

demand on the petitioner was made on August 5, 1998. Thus, from this date, the rentals due from
the petitioner shall earn interest at 6% per annum, until the judgment in this case becomes final and
executory. After the finality of judgment, and until full payment of the rentals and interests due, the
legal rate of interest to be imposed shall be 12%.

WHEREFORE, in light of all the foregoing, we DENY the petition. The decision and the resolution of
the Court of Appeals dated June 21, 2005 and November 10, 2005, respectively, in CA-G.R. SP No.
85664 are AFFIRMED with the MODIFICATION that the unpaid rentals shall earn a corresponding
interest of six percent (6%) per annum, to be computed from August 5, 1998 until the finality of this
decision. After this decision becomes final and executory, the rate of legal interest shall be computed
at twelve percent (12%) per annum from such finality until its satisfaction.

SO ORDERED.

ARTURO D. BRION
Associate Justice

WE CONCUR:

ANTONIO T. CARPIO
Senior Associate Justice
Chairperson

JOSE PORTUGAL PEREZ MARIA LOURDES P. A. SERENO

Associate Justice Associate Justice

BIENVENIDO L. REYES
Associate Justice

CERTIFICATION

I certify that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Court’s Division.

ANTONIO T. CARPIO
Senior Associate Justice
(Per Section 12, R.A. 296, The Judiciary Act of 1948, as amended)

Footnotes

Under Rule 45 of the Revised Rules of Court; rollo, pp. 11-19.

1 

Id. at 24-32; penned by Associate Justice Rosmari D. Carandang, and concurred in by

2 

Associate Justices Remedios A. Salazar-Fernando and Monina Arevalo-Zenarosa.

 Id. at 34-37.
3 

Id. at 53-55.
4 

Id. at 60.
5 

Supra note 4.
6 

Rollo, pp. 61-63.

7 

Dated March 28, 2002; id. at 50-52.

8 

Id. at 52.
9 

10 
Docketed as Civil Case No. 02-103656.

11 
Rollo, pp. 44-49.

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 171365               October 6, 2010

ERMELINDA C. MANALOTO, AURORA J. CIFRA, FLORDELIZA J. ARCILLA, LOURDES J.

CATALAN, ETHELINDA J. HOLT, BIENVENIDO R. JONGCO, ARTEMIO R. JONGCO, JR. and
JOEL JONGCO, Petitioners,
vs.
ISMAEL VELOSO III, Respondent.

DECISION

LEONARDO-DE CASTRO, J.:

Before Us is a Petition for Review on Certiorari of the Decision 1 dated January 31, 2006 of the Court
Appeals in CA-G.R. CV No. 82610, which affirmed with modification the Resolution 2 dated
September 2, 2003 of Branch 227 of the Regional Trial Court (RTC-Branch 227) of Quezon City in
Civil Case No. Q-02-48341.

We partly reproduce below the facts of the case as culled by the Court of Appeals from the records:

This case is an off-shoot of an unlawful detainer case filed by [herein petitioners] Ermelinda C.
Manaloto, Aurora J. Cifra, Flordeliza J. Arcilla, Lourdes J. Catalan, Ethelinda J. Holt, Bienvenido R.
Jongco, Artemio R. Jongco, Jr. and Joel Jongco against [herein respondent]. In said complaint for
unlawful detainer, it was alleged that they are the lessors of a residential house located at No. 42 Big
Horseshoe Drive, Horseshoe Village, Quezon City [subject property] which was leased to
[respondent] at a monthly rental of ₱17,000.00. The action was instituted on the ground of
[respondent's] failure to pay rentals from May 23, 1997 to December 22, 1998 despite repeated
demands. [Respondent] denied the non-payment of rentals and alleged that he made an advance
payment of ₱825,000.00 when he paid for the repairs done on the leased property.

After trial, the Metropolitan Trial Court (MeTC) decided in favor of [petitioners] by ordering
[respondent] to (a) vacate the premises at No. 42 Big Horseshoe Drive, Horseshoe Village, Quezon
City; (b) pay [petitioners] the sum of ₱306,000.00 corresponding to the rentals due from May 23,
1997 to November 22, 1998, and the sum of ₱17,000.00 a month thereafter until [respondent]
vacates the premises; and (c) pay [petitioners] the sum of ₱5,000.00 as attorney's fees.

On appeal to the Regional Trial Court (RTC) [Branch 88, Quezon City], the MeTC decision was
reversed. [Respondent] was ordered to pay arrearages from May 23, 1997 up to the date of the
decision but he was also given an option to choose between staying in the leased property or
vacating the same, subject to the reimbursement by [petitioners] of one-half of the value of the
improvements which it found to be in the amount of ₱120,000.00. [Respondent] was also given the
right to remove said improvements pursuant to Article 1678 of the Civil Code, should [petitioners]
refuse to pay ₱60,000.00.

When both parties moved for the reconsideration of the RTC decision, the RTC issued an Order
dated February 23, 2001 modifying its previous ruling by increasing the value of the improvements
from ₱120,000.00 to ₱800,000.00.

After successive appeals to the Court of Appeals and the Supreme Court, the decision of the RTC
dated November 29, 2000 which reversed the decision of the MeTC, became final and executory. 3

Whilst respondent's appeal of the Metropolitan Trial Court (MeTC) judgment in the unlawful detainer
case was pending before the RTC-Branch 88, respondent filed before the RTC-Branch 227 on
November 26, 2002 a Complaint for Breach of Contract and Damages 4 against the petitioners,
docketed as Civil Case No. Q-02-48341. The said complaint alleged two causes of action. The first
cause of action was for damages because the respondent supposedly suffered embarrassment and
humiliation when petitioners distributed copies of the above-mentioned MeTC decision in the
unlawful detainer case to the homeowners of Horseshoe Village while respondent's appeal was still
pending before the Quezon City RTC-Branch 88. The second cause of action was for breach of
contract since petitioners, as lessors, failed to make continuing repairs on the subject property to
preserve and keep it tenantable. Thus, respondent sought the following from the court a quo:

PRAYER

WHEREFORE, premises considered, it is respectfully prayed that after hearing the court render a
decision against the [herein petitioners] and in favor of the [herein respondent] by -

1. Ordering [petitioners] to pay [respondent] the following amounts:

a) ₱1,500,000.00 as moral damages and consequential damages;

b) ₱500,000.00 as exemplary damages;

c) ₱425,000.00 representing the difference of the expenses of the improvements of

₱825,000.00 and ₱400,000.00 pursuant to Art. 1678 of the Civil Code;
 d) ₱594,000.00 representing interest for three (3) years from 1998 to 2000 on the
₱825,000.00 advanced by the [respondent] at the rate of 24% per annum;

e) ₱250,000.00 as compensation for the [respondent's] labor and efforts in overseeing and
attending the needs of contractors the repair/renovation of the leased premises;

f) ₱250,000.00, plus 20% of all recoveries from [petitioners] and ₱2,500.00 per hearing as
attorney's fees;

g) Cost of suit.

[Respondent] further prays for such other reliefs and remedies which are just and equitable under
the premises.5

The petitioners filed an Omnibus Motion6 on February 18, 2003 praying for, among other reliefs, the
dismissal of respondent's complaint in Civil Case No. Q-02-48341. Petitioners argued that
respondent had no cause of action against them because the MeTC decision in the unlawful
detainer case was a matter of public record and its disclosure to the public violated no law or any
legal right of the respondent. Moreover, petitioners averred that the respondent's present Complaint
for Breach of Contract and Damages was barred by prior judgment since it was a mere replication of
respondent's Answer with Compulsory Counterclaim in the unlawful detainer case before the MeTC.
The said unlawful detainer case was already judicially decided with finality.

On September 2, 2003, the RTC-Branch 227 issued a Resolution dismissing respondent's complaint
in Civil Case No. Q-02-48341 for violating the rule against splitting of cause of action, lack of
jurisdiction, and failure to disclose the pendency of a related case. The RTC-Branch 227 adjudged
that Civil Case No. Q-02-48341 involved the same facts, parties, and causes of action as those in
the unlawful detainer case, and the MeTC had already properly taken cognizance of the latter case.

Respondent received a copy of the RTC-Branch 227 decision in Civil Case No. Q-02-48341 on
September 26, 2003. He filed a Motion for Reconsideration7 of said judgment on October 10, 2003,
which RTC-Branch 227 denied in an Order8 dated December 30, 2003.

Respondent received a copy of the RTC-Branch 227 order denying his Motion for Reconsideration
on February 20, 2004, and he filed his Notice of Appeal 9 on March 1, 2004. However, the RTC-
Branch 227, in an Order10 dated March 23, 2004, dismissed respondent's appeal for being filed out of
time.

Respondent received a copy of the RTC-Branch 27 order dismissing his appeal on April 30, 2004
and he filed a Motion for Reconsideration11 of the same on May 3, 2004. The RTC-Branch 227, in
another Order12 dated May 31, 2004, granted respondent's latest motion because it was "convinced
that it is but appropriate and fair to both parties that this matter of whether or not the Appeal was
filed on time, be resolved by the appellate court rather than by this Court." The RTC-Branch 227
then ordered that the records of the case be forwarded as soon as possible to the Court of Appeals
for further proceedings.

The Court of Appeals, in a Resolution 13 dated February 8, 2005, resolved to give due course to
respondent's appeal. Said appeal was docketed as CA-G.R. CV No. 82610.

On January 31, 2006, the Court of Appeals rendered its Decision in CA-G.R. CV No. 82610. The
Court of Appeals fully agreed with the RTC-Branch 227 in dismissing respondent's second cause of
action (i.e., breach of contract) in Civil Case No. Q-02-48341. The appellate court, however, held
that RTC-Branch 227 should have proceeded with the trial on the merits of the first cause of action
(i.e., damages) in Civil Case No. Q-02-48341, because "[a]lthough [herein respondent] may have
stated the same factual antecedents that transpired in the unlawful detainer case, such allegations
were necessary to give an overview of the facts leading to the institution of another case between
the parties before the RTC acting in its original jurisdiction." 14

The Court of Appeals then went on to find that petitioners were indeed liable to respondent for
damages:

No doubt, distributing the copies was primarily intended to embarrass [herein respondent] in the
community he mingled in. We are not unmindful of the fact that court decisions are public documents
and the general public is allowed access thereto to make inquiries thereon or to secure a copy
thereof. Nevertheless, under the circumstances of this case, although court decisions are public
documents, distribution of the same during the pendency of an appeal was clearly intended to cause
[respondent] some form of harassment and/or humiliation so that [respondent] would be ostracized
by his neighbors. The appeal may have delayed the attainment of finality of the determination of the
rights of the parties and the execution in the unlawful detainer case but it did not justify [herein
petitioners'] pre-emption of the outcome of the appeal. By distributing copies of the MeTC decision,
[petitioners] appeared to have assumed that the MeTC decision would simply be affirmed and
therefore they tried to cause the early ouster of [respondent] thinking that a humiliated [respondent]
would scurry out of the leased premises. Clearly, there was evident bad faith intended to mock
[respondent's] right to appeal which is a statutory remedy to correct errors which might have been
committed by the lower court.

Thus, moral damages may be awarded since [petitioners] acted in bad faith. Bad faith does not
simply connote bad judgment or negligence, it imports a dishonest purpose or some moral obliquity
and conscious doing of a wrong, a breach of known duty through some motive or interest or ill will
that partakes of the nature of fraud. However, an award of moral damages would require certain
conditions to be met, to wit: (1) first, there must be an injury, whether physical, mental or
psychological, clearly sustained by the claimant; (2) second, there must be culpable act or omission
factually established; (3) third, the wrongful act or omission of the defendant is the proximate cause
of the injury sustained by the claimant; and (4) fourth, the award of damages is predicated on any of
the cases stated in Article 2219 of the Civil Code.

But it must again be stressed that moral damages are emphatically not intended to enrich a plaintiff
at the expense of the defendant. When awarded, moral damages must not be palpably and
scandalously excessive as to indicate that it was the result of passion, prejudice or corruption on the
part of the trial court judge. For this reason, this Court finds an award of ₱30,000.00 moral damages
sufficient under the circumstances.

On the other hand, to warrant the award of exemplary damages, the wrongful act must be
accompanied by bad faith, and an award of damages would be allowed only if the guilty party acted
in a wanton, fraudulent, reckless or malevolent manner. Accordingly, exemplary damages in the
amount of ₱10,000.00 is appropriate. 15

In the end, the Court of Appeals decreed:

WHEREFORE, the decision of the Regional Trial Court is AFFIRMED with the MODIFICATION that
the case is dismissed only as to the second cause of action. As to the first cause of action, [herein
petitioners] are ordered to pay [herein respondent] moral damages of ₱30,000.00 and exemplary
damages of ₱10,000.00.16
Hence, the instant Petition for Review.

Petitioners assert that respondent's appeal of the RTC-Branch 227 Resolution dated September 2,
2003, which dismissed the latter's complaint in Civil Case No. Q-02-48341, was filed out of time.
Respondent received a copy of the said resolution on September 26, 2003, and he only had 15 days
from such date to file his appeal, or until October 11, 2003. Respondent, instead, filed a Motion for
Reconsideration of the resolution on October 10, 2003, which left him with only one more day to file
his appeal. The RTC-Branch 227 subsequently denied respondent's Motion for Reconsideration in
an Order dated December 30, 2003, which the respondent received on February 20, 2004.
Respondent only had until the following day, February 21, 2004, to file the appeal. However,
respondent filed his Notice of Appeal only on March 1, 2004. Hence, petitioners conclude that the
dismissal of respondent's complaint in Civil Case No. Q-02-48341 already attained finality.

Petitioners argue in the alternative that the award of damages in respondent's favor has no factual
and legal bases. They contend that the Court of Appeals erred in awarding moral and exemplary
damages to respondent based on the bare and unproven allegations in the latter's complaint and
without the benefit of any hearing or trial. While the appellate court declared that RTC-Branch 227
should have proceeded with the trial on the merits involving the action for damages, it surprisingly
went ahead and ruled on petitioners' liability for said damages even without trial. Even assuming for
the sake of argument that respondent's allegations in his complaint are true, he still has no cause of
action for damages against petitioners, for the disclosure of a court decision, which is part of public
record, did not cause any legal and compensable injury to respondent.

Respondent, on the other hand, maintains that his appeal of the September 2, 2003 Resolution of
the RTC-Branch 227 to the Court of Appeals was timely filed and that the same was aptly given due
course. In addition, respondent asserts that the appellate court was correct in holding petitioners
liable for damages even without any hearing or trial since petitioners, in filing their omnibus motion
praying for the dismissal of respondent's complaint on the ground of "no cause of action," were
deemed to have hypothetically admitted as true the allegations in said complaint.

The petition is partly meritorious.

We note, at the outset, that the propriety of the dismissal by the RTC-Branch 227 of respondent's
second cause of action against petitioners (e.g., for breach of contract) was no longer disputed by
the parties. Thus, the present appeal pertains only to respondent's first cause of action (e.g., for
damages), and in connection therewith, we are called upon to resolve the following issues: (1)
whether respondent timely filed his appeal of the Resolution dated September 2, 2003 of the RTC-
Branch 227 before the Court of Appeals; and (2) whether respondent is entitled to the award of
moral and exemplary damages.

We answer the first issue on the timeliness of respondent's appeal affirmatively.

Jurisprudence has settled the "fresh period rule," according to which, an ordinary appeal from the
RTC to the Court of Appeals, under Section 3 of Rule 41 of the Rules of Court, shall be taken within
fifteen (15) days either from receipt of the original judgment of the trial court or from receipt of the
final order of the trial court dismissing or denying the motion for new trial or motion for
reconsideration. In Sumiran v. Damaso,17 we presented a survey of the cases applying the fresh
period rule:

As early as 2005, the Court categorically declared in Neypes v. Court of Appeals that by virtue of the
power of the Supreme Court to amend, repeal and create new procedural rules in all courts, the
Court is allowing a fresh period of 15 days within which to file a notice of appeal in the RTC, counted
from receipt of the order dismissing or denying a motion for new trial or motion for reconsideration.
This would standardize the appeal periods provided in the Rules and do away with the confusion as
to when the 15-day appeal period should be counted. Thus, the Court stated:

To recapitulate, a party-litigant may either file his notice of appeal within 15 days from receipt of the
Regional Trial Court's decision or file it within 15 days from receipt of the order (the "final order")
denying his motion for new trial or motion for reconsideration. Obviously, the new 15-day period may
be availed of only if either motion is filed; otherwise, the decision becomes final and executory after
the lapse of the original appeal period provided in Rule 41, Section 3.

The foregoing ruling of the Court was reiterated in Makati Insurance Co., Inc. v. Reyes, to wit:

Propitious to petitioner is Neypes v. Court of Appeals, promulgated on 14 September 2005 while the
present Petition was already pending before us. x x x.

xxxx

With the advent of the "fresh period rule" parties who availed themselves of the remedy of motion for
reconsideration are now allowed to file a notice of appeal within fifteen days from the denial of that
motion.

The "fresh period rule" is not inconsistent with Rule 41, Section 3 of the Revised Rules of Court
which states that the appeal shall be taken "within fifteen (15) days from notice of judgment or final
order appealed from." The use of the disjunctive word "or" signifies disassociation and independence
of one thing from another. It should, as a rule, be construed in the sense which it ordinarily implies.
Hence, the use of "or" in the above provision supposes that the notice of appeal may be filed within
15 days from the notice of judgment or within 15 days from notice of the "final order," x x x.

xxxx

The "fresh period rule" finally eradicates the confusion as to when the 15-day appeal period should
be counted - from receipt of notice of judgment or from receipt of notice of "final order" appealed
from.

Taking our bearings from Neypes, in Sumaway v. Urban Bank, Inc., we set aside the denial of a
notice of appeal which was purportedly filed five days late. With the fresh period rule, the 15-day
period within which to file the notice of appeal was counted from notice of the denial of the therein
petitioner's motion for reconsideration.

We followed suit in Elbiña v. Ceniza, wherein we applied the principle granting a fresh period of 15
days within which to file the notice of appeal, counted from receipt of the order dismissing a motion
for new trial or motion for reconsideration or any final order or resolution.

Thereafter, in First Aqua Sugar Traders, Inc. v. Bank of the Philippine Islands, we held that a party-
litigant may now file his notice of appeal either within fifteen days from receipt of the original decision
or within fifteen days from the receipt of the order denying the motion for reconsideration.

In De los Santos v. Vda. de Mangubat, we applied the same principle of "fresh period rule,"
expostulating that procedural law refers to the adjective law which prescribes rules and forms of
procedure in order that courts may be able to administer justice. Procedural laws do not come within
the legal conception of a retroactive law, or the general rule against the retroactive operation of
statutes. The "fresh period rule" is irrefragably procedural, prescribing the manner in which the
appropriate period for appeal is to be computed or determined and, therefore, can be made
applicable to actions pending upon its effectivity, such as the present case, without danger of
violating anyone else's rights.18 (Emphases supplied.)

Also in Sumiran, we recognized the retroactive application of the fresh period rule to cases pending
and undetermined upon its effectivity:

The retroactivity of the Neypes rule in cases where the period for appeal had lapsed prior to the date
of promulgation of Neypes on September 14, 2005, was clearly explained by the Court in Fil-Estate
Properties, Inc. v. Homena-Valencia, stating thus:

The determinative issue is whether the "fresh period" rule announced in Neypes could retroactively
apply in cases where the period for appeal had lapsed prior to 14 September 2005 when Neypes
was promulgated. That question may be answered with the guidance of the general rule that
procedural laws may be given retroactive effect to actions pending and undetermined at the time of
their passage, there being no vested rights in the rules of procedure. Amendments to procedural
rules are procedural or remedial in character as they do not create new or remove vested rights, but
only operate in furtherance of the remedy or confirmation of rights already existing. 19 (Emphases
supplied.)

In the case before us, respondent received a copy of the Resolution dated September 2, 2003 of the
RTC-Branch 227 dismissing his complaint in Civil Case No. Q-02-48341 on September 26, 2003.
Fourteen days thereafter, on October 10, 2003, respondent filed a Motion for Reconsideration of
said resolution. The RTC-Branch 227 denied respondent's Motion for Reconsideration in an Order
dated December 30, 2003, which the respondent received on February 20, 2004. On March 1, 2004,
just after nine days from receipt of the order denying his Motion for Reconsideration, respondent
already filed his Notice of Appeal. Clearly, under the fresh period rule, respondent was able to file his
appeal well-within the prescriptive period of 15 days, and the Court of Appeals did not err in giving
due course to said appeal in CA-G.R. CV No. 82610.

We likewise agree with the Court of Appeals that the RTC-Branch 227 should not have dismissed
respondent's complaint for damages on the ground of failure to state a cause of action.

According to Rule 2, Section 2 of the Rules of Court, a cause of action is the act or omission by
which a party violates a right of another.

When the ground for dismissal is that the complaint states no cause of action, such fact can be
determined only from the facts alleged in the complaint and from no other, and the court cannot
consider other matters aliunde. The test, therefore, is whether, assuming the allegations of fact in
the complaint to be true, a valid judgment could be rendered in accordance with the prayer stated
therein.20

Respondent made the following allegations in support of his claim for damages against petitioners:

FIRST CAUSE OF ACTION

28. After the promulgation of the Metropolitan Trial Court of its Decision dated August 3, 1999,
ordering the [herein respondent] and all person claiming rights under him to -

(a) Vacate the leased premises;

 (b) pay the [herein petitioners] the sum of ₱306,000.00 as unpaid rentals from May 23, 1997
to November 22, 1998; and

(c) pay the sum of ₱5,000.00 as attorneys fees;

But while said Decision was still pending appeal with the Regional Trial Court, the [petitioners],
through [petitioner] Manaloto, already distributed copies of said Decision to some of the
homeowners of Horseshoe Village, who personally know the [respondent]. This act is a direct
assault or character assassination on the part of the [respondent] because as stated in the said
decision, [respondent] has been staying in the premises but did not or refused to pay his monthly
rentals for a long period of time when in truth and in fact was untrue.

29. That from the time the said decision was distributed to said members homeowners, the
[respondent] became the subject of conversation or talk of the town and by virtue of which
[respondent's] good name within the community or society where he belongs was greatly damaged;
his reputation was besmirched; [respondent] suffered sleepless night and serious anxiety.
[Respondent], who is the grandson of the late Senator Jose Veloso and Congressman Ismael
Veloso, was deprived of political career and to start with was to run as candidate for Barangay
Chairman within their area which was being offered to him by the homeowners but this offer has
started to fade and ultimately totally vanished after the distribution of said Decision. Damages to his
good names and reputations and other damages which he suffered as a consequence thereof, may
be reasonably compensated for at least ₱1,500,000.00 as moral and consequential damages.

30. In order to deter [petitioners] and others from doing as abovementioned, [petitioners] should
likewise be assessed exemplary damages in the amount of ₱500,000.00. 21

A cause of action (for damages) exists if the following elements are present: (1) a right in favor of the
plaintiff by whatever means and under whatever law it arises or is created; (2) an obligation on the
part of the named defendant to respect or not to violate such right; and (3) an act or omission on the
part of such defendant violative of the right of the plaintiff or constituting a breach of the obligation of
defendant to the plaintiff for which the latter may maintain an action for recovery of damages. 22 We
find that all three elements exist in the case at bar. Respondent may not have specifically identified
each element, but it may be sufficiently determined from the allegations in his complaint.

First, respondent filed the complaint to protect his good character, name, and reputation. Every man
has a right to build, keep, and be favored with a good name. This right is protected by law with the
recognition of slander and libel as actionable wrongs, whether as criminal offenses or tortuous
conduct.23

Second, petitioners are obliged to respect respondent's good name even though they are opposing
parties in the unlawful detainer case. As Article 19 of the Civil Code requires, "[e]very person must,
in the exercise of his rights and in the performance of his duties, act with justice, give everyone his
due, and observe honesty and good faith." A violation of such principle constitutes an abuse of
rights, a tortuous conduct. We expounded in Sea Commercial Company, Inc. v. Court of
Appeals24 that:

The principle of abuse of rights stated in the above article, departs from the classical theory that "he
who uses a right injures no one." The modern tendency is to depart from the classical and traditional
theory, and to grant indemnity for damages in cases where there is an abuse of rights, even when
the act is not illicit.
Article 19 was intended to expand the concept of torts by granting adequate legal remedy for the
untold number of moral wrongs which is impossible for human foresight to provide specifically in
statutory law. If mere fault or negligence in one's acts can make him liable for damages for injury
caused thereby, with more reason should abuse or bad faith make him liable. The absence of good
faith is essential to abuse of right. Good faith is an honest intention to abstain from taking any
unconscientious advantage of another, even through the forms or technicalities of the law, together
with an absence of all information or belief of fact which would render the transaction
unconscientious. In business relations, it means good faith as understood by men of affairs.

While Article 19 may have been intended as a mere declaration of principle, the "cardinal law on
human conduct" expressed in said article has given rise to certain rules, e.g. that where a person
exercises his rights but does so arbitrarily or unjustly or performs his duties in a manner that is not in
keeping with honesty and good faith, he opens himself to liability. The elements of an abuse of rights
under Article 19 are: (1) there is a legal right or duty; (2) which is exercised in bad faith; (3) for the
sole intent of prejudicing or injuring another. 25

Petitioners are also expected to respect respondent's "dignity, personality, privacy and peace of
mind" under Article 26 of the Civil Code, which provides:

ART. 26. Every person shall respect the dignity, personality, privacy and peace of mind of his
neighbors and other persons. The following and similar acts, though they may not constitute a
criminal offense, shall produce a cause of action for damages, prevention and other relief:

(1) Prying into the privacy of another's residence;

(2) Meddling with or disturbing the private life or family relations of another;

(3) Intriguing to cause another to be alienated from his friends;

(4) Vexing or humiliating another on account of his religious beliefs, lowly station in life, place
of birth, physical defect, or other personal condition.

Thus, Article 2219(10) of the Civil Code allows the recovery of moral damages for acts and actions
referred to in Article 26, among other provisions, of the Civil Code.

In Concepcion v. Court of Appeals,26 we explained that:

The philosophy behind Art. 26 underscores the necessity for its inclusion in our civil law. The Code
Commission stressed in no uncertain terms that the human personality must be exalted. The
sacredness of human personality is a concomitant consideration of every plan for human
amelioration. The touchstone of every system of law, of the culture and civilization of every country,
is how far it dignifies man. If the statutes insufficiently protect a person from being unjustly
humiliated, in short, if human personality is not exalted - then the laws are indeed defective. Thus,
under this article, the rights of persons are amply protected, and damages are provided for violations
of a person's dignity, personality, privacy and peace of mind.

It is petitioner's position that the act imputed to him does not constitute any of those enumerated in
Arts. 26 and 2219. In this respect, the law is clear. The violations mentioned in the codal provisions
are not exclusive but are merely examples and do not preclude other similar or analogous acts.
Damages therefore are allowable for actions against a person's dignity, such as profane, insulting,
humiliating, scandalous or abusive language. Under Art. 2217 of the Civil Code, moral damages
which include physical suffering, mental anguish, fright, serious anxiety, besmirched reputation,
wounded feelings, moral shock, social humiliation, and similar injury, although incapable of
pecuniary computation, may be recovered if they are the proximate result of the defendant's
wrongful act or omission.27

And third, respondent alleged that the distribution by petitioners to Horseshoe Village homeowners
of copies of the MeTC decision in the unlawful detainer case, which was adverse to respondent and
still on appeal before the RTC-Branch 88, had no apparent lawful or just purpose except to humiliate
respondent or assault his character. As a result, respondent suffered damages - becoming the talk
of the town and being deprived of his political career.1avvphi1

Petitioners reason that respondent has no cause of action against them since the MeTC decision in
the unlawful detainer case was part of public records.

It is already settled that the public has a right to see and copy judicial records and
documents.28 However, this is not a case of the public seeking and being denied access to judicial
records and documents. The controversy is rooted in the dissemination by petitioners of the MeTC
judgment against respondent to Horseshoe Village homeowners, who were not involved at all in the
unlawful detainer case, thus, purportedly affecting negatively respondent's good name and
reputation among said homeowners. The unlawful detainer case was a private dispute between
petitioners and respondent, and the MeTC decision against respondent was then still pending
appeal before the RTC-Branch 88, rendering suspect petitioners' intentions for distributing copies of
said MeTC decision to non-parties in the case. While petitioners were free to copy and distribute
such copies of the MeTC judgment to the public, the question is whether they did so with the intent
of humiliating respondent and destroying the latter's good name and reputation in the community.

Nevertheless, we further declare that the Court of Appeals erred in already awarding moral and
exemplary damages in respondent's favor when the parties have not yet had the chance to present
any evidence before the RTC-Branch 227. In civil cases, he who alleges a fact has the burden of
proving it by a preponderance of evidence. It is incumbent upon the party claiming affirmative relief
from the court to convincingly prove its claim. Bare allegations, unsubstantiated by evidence are not
equivalent to proof under our Rules. In short, mere allegations are not evidence. 29

At this point, the finding of the Court of Appeals of bad faith and malice on the part of petitioners has
no factual basis. Good faith is presumed and he who alleges bad faith has the duty to prove the
same. Good faith refers to the state of the mind which is manifested by the acts of the individual
concerned. It consists of the intention to abstain from taking an unconscionable and unscrupulous
advantage of another. Bad faith, on the other hand, does not simply connote bad judgment to simple
negligence. It imports a dishonest purpose or some moral obliquity and conscious doing of a wrong,
a breach of known duty due to some motive or interest or ill will that partakes of the nature of fraud.
Malice connotes ill will or spite and speaks not in response to duty. It implies an intention to do
ulterior and unjustifiable harm.30

We cannot subscribe to respondent's argument that there is no more need for the presentation of
evidence by the parties since petitioners, in moving for the dismissal of respondent's complaint for
damages, hypothetically admitted respondent's allegations. The hypothetical admission of
respondent's allegations in the complaint only goes so far as determining whether said complaint
should be dismissed on the ground of failure to state a cause of action. A finding that the complaint
sufficiently states a cause of action does not necessarily mean that the complaint is meritorious; it
shall only result in the reinstatement of the complaint and the hearing of the case for presentation of
evidence by the parties.
WHEREFORE, in view of all the foregoing, the petition is PARTIALLY GRANTED. The Decision
dated January 31, 2006 of the Court of Appeals in CA-G.R. CV No. 82610 is AFFIRMED WITH
MODIFICATIONS. The award of moral and exemplary damages made by the Court of Appeals in
favor of respondent Ismael Veloso III is DELETED. The complaint of respondent Ismael Veloso III in
Civil Case No. Q-02-48341 is hereby REINSTATED before Branch 227 of the Regional Trial Court of
Quezon City only in so far as the first cause of action is concerned. The said court is DIRECTED to
hear and dispose of the case with dispatch.

SO ORDERED.

TERESITA J. LEONARDO-DE CASTRO

Associate Justice

WE CONCUR:

RENATO C. CORONA
Chief Justice
Chairperson

PRESBITERO J. VELASCO, JR. ANTONIO EDUARDO B. NACHURA*

Associate Justice Associate Justice

JOSE PORTUGAL PEREZ

Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above
Decision had been reached in consultation before the case was assigned to the writer of the opinion
of the Court's Division.

RENATO C. CORONA
Chief Justice

Footnotes

* Per Raffle dated September 27, 2010.

1
 Rollo, pp. 5-13; penned by Associate Justice Magdangal M. de Leon with Associate
Justices Conrado M. Vasquez, Jr. and Mariano C. del Castillo (now a member of this Court),
concurring.

2
 Records, pp. 186-187.

3
 Rollo, pp. 6-7.

4
 Records, pp. 1-109.
 5
 Id. at 16-17.

6
 Id. at 112-130.

7
 Id. at 189-196.

8
 Id. at 205.

9
 Id. at 209-210.

10
 Id. at 214.

11
 Id. at 215-217.

12
 Id. at 224-225.

13
 CA rollo, pp. 158-159.

14
 Rollo, pp. 11-12.

15
 Id.

16
 Id. at 12.

17
 G.R. No. 162518, August 19, 2009, 596 SCRA 450, 455-459.

18
 Id. at 455-457.

19
 Id. at 457-458.

D E C I S I O N

DEL CASTILLO, J.:

This Petition for Review on Certiorari[1] assails the October 30, 2013 Decision[2] and
November 14, 2014 Resolution[3] of the Court of Appeals (CA) in CA-G.R. S.P. No.
03731 which respectively reversed the June 2, 2008 Decision[4] of the Iloilo City Regional
Trial Court, Branch 33 (RTC) in Civil Case No. 07-29531 and denied herein petitioners'
Motion for Reconsideration.[5]

Factual Antecedents

As found by the CA, the facts are as follows:

x x x [S]pouses Fritz and Thelma Muller[6] are the occupants of two (2) parcels of land
with improvements located at Abeto Subdivision, Brgy. Sta. Rosa, Manduriao, Iloilo City
owned by [Philippine National Bank[7] (PNB)] with an aggregate area of 1,250 sq. meters,
x x x.

xxxx

On May 26, 1987, [PNB] informed the [Mullers] that their lease x x x will expire on June
1, 1987; that they had rental arrears for two and a half years amounting to PhP18,000.00;
x x x.[8]

Seeking [to renew the lease contract for] another year, x x x Fritz Muller wrote to
[PNB[9] proposing to buy] the subject properties x x x. [PNB] denied the request for
renewal of the lease on June 13, 1987 x x x.[10]

On October 2, 1987, [PNB Iloilo] informed x x x Fritz that his x x x offer to purchase the
[subject properties] was not given due course by the Head Office. x x x. [11]

xxxx

On [March 17, 1988, [PNB] demanded for [the Mullers] to vacate the subject properties
within fifteen (15) day[s] from the said date, in view of the expiration of the lease. [12]

The demand fell [on] deaf ears. x x x.

xxxx

Due to continued occupation of the [Mullers, PNB] x x x sent its final demand
letter[13] dated July 17, 2006, demanding [from] them the payment [of] the rental arrears
from June 1984 up to June 1, 2006, x x x.

[The Mullers] failed to pay due attention to the written demands against them which
[prompted PNB] to institute a Complaint[14] for Ejectment x x x.

xxxx

On October 19, 2007, the Municipal Trial Court in Cities of Iloilo City rendered a
Decision[15] x x x viz.:
WHEREFORE, premises considered, judgment is hereby rendered in favor of
[PNB] and ordering x x x Fritz D. Muller and Thelma Muller:

1. To vacate the subject premises x x x;

2. To pay [PNB] x x x:

a. The amount of PhP18,000.00 as rent from June 1984 to June 1987;

b. PhP2,000.00 a month from June 1, 1987 to June 1, 1997; and

c. PhP2,500.00 a month from June 1, 1997 to August 1, 2007.

No cost.

SO ORDERED.
[The Mullers] filed a Notice of Appeal x x x.

On February 1, 2008 PNB filed an Urgent Motion for Execution of the MTCC Judgment
praying for its immediate execution for failure of the [Mullers] to file a supersedeas bond
to stay the execution of the judgment. x x x.[16] (Emphasis in the original)
Ruling of the Regional Trial Court

In its June 2, 2008 Decision,[17] the RTC declared that the reckoning point from which a
claimant in an unlawful detainer case, in this case, the PNB, may invoke the accrual of its
claims is the date of receipt of last demand; that the MTCC cannot take judicial notice of
the fair rental value of the subject properties; and that prescription is applicable to the
case. It decreed that:
x x x The receipt of the demand letter dated June 17, 2006 is the date when [the Mullers]
became deforciant for which it can be assessed rental. While [PNB] may be entitled to a
reasonable compensation from the period [the Mullers] have been in possession of the
property prior to receipt of the June 17, 2006 demand letter, the same cannot be awarded
in an unlawful detainer suit. In unlawful detainer actions, only rental reckoned from date
of receipt of last demand may be awarded x x x.

xxxx

[The Mullers] categorically take exception to the taking of judicial notice by the court a
quo of the fair rental value of the subject properties. They have reason to do so. There is
no showing in the judgment appealed from that the three requisites above-mentioned
[in Herrera vs. Bollos (G.R. No. 138258, January 18, 2002)] were satisfied as the criteria
for such taking.

x x x [I]n the award of rental prior to receipt of last demand letter in 2006, the x x x
principles of prescription should be considered. x x x. Notably, the possession from 1984
to 1987 was based on a written lease agreement. x x x. Being an obligation based on a
written contract, the action to pay rent prescribes in 10 years pursuant to Article 1144 of
the Civil Code. For the possession from 1987 onwards, no rent can be awarded as this has
also prescribed pursuant to Article 1145, six years after every month of possession. The
possession of [the Mullers] after 1987 is based on an oral contract, hence, any action
arising therefrom prescribes within six years. x x x.

The rental fixed by the court a quo at Php2,500.00, therefore, cannot be sustained. x x x.

WHEREFORE, x x x the Decision of the Municipal Trial Court in Cities, Branch 3,

Iloilo City, in Civil Case No. 07-105 rendered on October 19,2007 is hereby MODIFIED
by fixing the reasonable rental awarded to [PNB] at Php1,000.00 per month to be
reckoned only from the date of [the Mullers'] receipt of the latest demand letter until
August 1, 2007 when they vacated the subject property.

SO ORDERED.[18] (Emphasis in the original)

PNB appealed before the CA.

Ruling of the Court of Appeals

On October 30, 2013, the CA issued the assailed Decision, decreeing that (1) contrary to
the RTC ruling, reasonable compensation for the use and occupancy of the subject
properties should be reckoned from receipt of initial demand and not receipt of last
demand; (2) prescription does not apply hence PNB can collect rentals which accrued
prior to receipt of last demand; and (3) the MTCC properly fixed the rental value of the
subject properties, viz.:
x x x [J]urisprudence dictates that the reasonable compensation for the use and
occupancy of the premises should reckon from the date of initial demand for the rentals
in arrears of Php18,000.00 in 1987, not from the date of the last demand on June 17,
2006. Records of the case show that as early as May 26, 1987, petitioner bank had
demanded rental in arrears amounting to Php18,000.00. x x x

x x x Possession, to constitute the foundation of a prescriptive right, must be adverse.

Acts of possessory character performed by one who holds by mere tolerance of the owner
are clearly not adverse, and such possessory acts, no matter how long so continued, do
not start the running of prescription. In this case, [the Mullers], after the expiration of the
contract of lease, occupied the subject premises by mere tolerance. Thus, the doctrine of
prescription does not apply. Petitioner bank's action to collect reasonable compensation
for the use and occupation of its properties has not prescribed.

xxxx

It is settled that the plaintiff in an ejectment case is entitled to damages caused by his loss
of the use and possession of the premises. Damages in the context of Section 17, Rule 70
of the 1997 Rules of Civil Procedure is limited to "rent" or fair rental value or the
reasonable compensation for the use and occupation of the property. These damages arise
from the loss of the use and occupation of the property, and not the damages which
petitioner may have suffered but which have no direct relation to their loss of material
possession.

Rule 70, Section 17 of the Rules of Court also authorizes the award of an amount
representing arrears of rent or reasonable compensation for the use and occupation of the
premises x x x

The rationale for limiting the kind of damages recoverable in an unlawful detainer case
was explained in Araos v. Court of Appeals, wherein the Court held that:
The rule is settled that in forcible entry or unlawful detainer cases, the only damage that
can be recovered is the fair rental value or the reasonable compensation for the use and
occupation of the leased property. The reason for this is that in such cases, the only issue
raised in ejectment cases is that of rightful possession; hence, the damages which could
be recovered are those which the plaintiff could have sustained as a mere possessor, or
those caused by the loss of the use and occupation of the property, and not the damages
which he may have suffered but which have no direct relation to his loss of material
possession.
Taking from the foregoing jurisprudential ruling, We can clearly declare that the damages
recoverable in unlawful detainer cases, like the present case, are the rentals or fair rental
value or the reasonable compensation for the use and occupation of the property. In this
case, records are explicit that [the Mullers] were occupying the subject properties since
1984 and they were not able to pay their rentals from May 1987 to June 2006. [PNB] had
been consistent in its demands to pay the rentals but respondents continuously failed to
do so. Thus, contrary to the ruling of the RTC, We agree with the MTCC in ordering for
the payment of the rentals, not from the date of last demand on June 17, 2006, but from
May 26, 1987 or the date of the first demand. It was the time when respondent spouses
used and occupied the subject properties without paying for the reasonable compensation,
which is justly due to petitioner bank as the registered owner of the properties. The RTC,
therefore, gravely erred in granting the rentals in arrears only from the date of last
demand for being contrary to law and jurisprudence.

xxxx

As it was undisputed that [the Mullers] were occupying the properties under the tolerance
of [PNB], they were obligated to vacate the subject properties upon demand. This, they
defied. Rather, they continued possessing the same even without paying for the monthly
rentals. Thus, they should be made liable for damages in the form of rent or reasonable
compensation for the occupation of the properties not only from the time of the last
demand but starting from the time they have been occupying the subject properties
without paying for its rent.
As regards the application of the doctrine of prescription in the instant case by the RTC,
We find the same erroneous.

xxxx

In the instant case, the date of last demand was July 17, 2006, while the Complaint was
filed on March 26, 2007. Thus, it is well within the period to file the action. Thus, the
period to file the action has not prescribed.

xxxx

Petitioner asserts that the RTC erred in reversing the MTCC findings as regards the
latter's act of taking judicial notice of the fair rental value of the subject properties x x x

Jurisprudence dictates that the lower court may intervene in fixing the rent as a matter of
fairness and equity. It is not the appellate court or RTC's function to weigh the evidence
all over again, unless there was a showing that the findings of the MTCC are clearly
devoid of any support. In fact, it is the RTC's Decision which reduced the monthly rental
to Php1,000.00 without any factual and legal bases.

[Thelma C.] Muller, for her part, declares that the MTCC committed palpable error in
merely relying on judicial notice, the requisites of which are not attendant in the instant
case.

We rule in favor of [PNB].

xxxx

Truly, mere judicial notice is inadequate, because evidence is required for a court to
determine the proper rental value. In the instant case, the MTCC not only [took judicial
notice of the fair rental value] of the subject properties x x x [it] also based [the award] on
the evidence on record. It is unchallenged that the [Mullers] failed to submit their Answer
to the Complaint signifying a waiver to present evidence on their behalf. Clearly, no
evidence was presented on the part of [the Mullers]. Thus, the MTCC correctly ruled on
awarding the monthly rentals based on the Complaint filed by [PNB].
We quote with approval the ruling of the MTCC, to wit:

On the basis of the foregoing considerations, and taking into account the nature, size and
location of the property, the Court finds the claim of PNB as reasonable compensation for
the use and occupancy of the property to be just and equitable. The Court however takes
exception to the amount payable for the period from June 1984 to June 1987 which
should be fixed at P18,000.00 only because this was the amount being claimed by PNB in
its demand letters. Furthermore, defendant-spouses are required to pay rent at the rate of
P2,000.00 from June 1, 1987 to June 1, 1997, and P2,500.00 from June 1, 1997 to August
1, 2007 when they actually vacated the premises.

xxxx
Award of other reliefs

xxxx

Additionally, the [Mullers are] liable to pay interest by way of damages for [their] failure
to pay the rentals due for the use of the subject premises. We reiterate that [PNB's]
extrajudicial demand on the [Mullers] was made on May 26, 1987. Thus, from this date,
the rentals due from the [Mullers] shall earn interest at 6% per annum, until the judgment
in this case becomes final and executory. After the finality of judgment, and until full
payment of the rentals and interests due, the legal rate of interest to be imposed shall be
12%.

xxxx

WHEREFORE, premises considered, the petition is GRANTED. The Decision dated

June 2, 2008 of the Regional Trial Court (RTC), Branch 33, Iloilo City in Civil Case No.
07-29531 is hereby REVERSED and SET ASIDE. The Decision dated October 19,
2007 of the Municipal Trial Court in Cities, Branch 3, Iloilo City is
hereby REINSTATED with MODIFICATION that the unpaid rentals shall earn a
corresponding interest of six percent (6%) per annum, to be computed from May 26,
1987 until the finality of this decision. After this decision becomes final and executory, a
12% interest shall be computed per annum from such finality on the remaining unpaid
balance until its satisfaction.

Attorney's Fees shall be awarded in the amount of ten thousand pesos (PhP10,000.00)
and judicial costs.

SO ORDERED.[19] (Emphasis in the original)

Petitioners moved to reconsider, but in a November 14, 2014 Resolution, the CA held its
ground. Hence, the present Petition.

Issues

Petitioners submit the following issues to be resolved:

1. Whether x x x the award of rentals in an ejectment case may be reckoned from a date
beyond the latest demand to vacate x x x

2. Whether x x x the Court of Appeals acted correctly when it cited the case of Racaza v.
Gozum as basis for ruling that rentals in an ejectment case may be retroactively reckoned
beyond the latest demand to vacate?

3. Whether x x x the award of rentals beyond the latest demand letter has prescribed? [20]
Petitioners' Arguments

Petitioners contend that the award of rentals should be reckoned from the time of receipt
of the latest demand - July 17, 2006 - and not prior demands; that prior to said last or
latest demand, PNB had no right to collect rent, since it is only after receipt of the latest
demand that they may be considered illegal occupants of the bank's property and thus
obligated to pay rent; that prior to said latest or last demand, their possession of the
subject properties may be said to have been tolerated by PNB, and as such, they were
"not required to pay the rent within the period prior to their receipt of the latest demand to
vacate";[21] that PNB's claim for the collection of rentals in arrears has prescribed, in that
more than 10 years have elapsed since 1987 - the date of the written lease agreement -
before PNB filed the ejectment case in 2007; and that even PNB's claim for rentals in
arrears after the expiration of the written lease agreement in 1987 has prescribed, since
actions arising from written contracts prescribe in 10 years, while that for oral contracts
prescribe in six years.

Petitioners thus pray that the CA dispositions be annulled and in lieu thereof, the RTC's
June 2, 2008 Decision be reinstated.

Respondent's Arguments

Respondent PNB, on the other hand, argues in its Comment[22] that the Petition is
dismissible on account of its defective verification and certification against forum
shopping; that as owner, it is entitled to reasonable compensation for petitioners'
continued use and occupation of its properties, which thus prevented it from enjoying the
same as well as the fruits thereof; that petitioners' occupation was not by mere tolerance,
since there was an oral lease agreement between them, and for this reason they must pay
rent; and that petitioners' claim of prescription is unavailing to prevent it from recovering
damages and rentals in arrears, because there is a continuing lease agreement between the
parties all throughout the period in issue, and because the amount demandable and
recoverable from a defendant in ejectment proceedings, regardless of its denomination as
rental or reasonable compensation or damages, flows from the detainer or illegal
occupation of the property involved and is merely incidental thereto.

Our Ruling

The Petition is denied.

The only issues involved here are whether respondent PNB is entitled to rentals in arrears
prior to July 17, 2006 and whether its claims therefor have prescribed.

Petitioners argue that rentals may be awarded to respondent only from the time of the
latest demand and not prior ones; that prior to said latest demand, PNB had no right to
collect rent, since it is only after receipt thereof that they may be considered illegal
occupants of the bank's property and thus obligated to pay rent; and that prior to said
latest or last demand, their possession of the subject properties may be said to have been
tolerated by PNB, and as such, they were "not required to pay the rent within the period
prior to their receipt of the latest demand to vacate."[23] Such arguments are, however,
fundamentally logically flawed, because if they were to be believed, then no lessor would
be compensated under a lease; the lessee's outstanding rental obligations would simply be
condoned. Any lessee would simply withhold the payment of rent and wait until the
lessor makes a demand to vacate - at which point the former will simply vacate the
premises, with no obligation to pay rent at all.

Under Article 1670 of the Civil Code, "[i]f at the end of the contract the lessee should
continue enjoying the thing leased for fifteen days with the acquiescence of the lessor,
and unless a notice to the contrary by either party has previously been given, it is
understood that there is an implied new lease, not for the period of the original contract,
but for the time established in Articles 1682 and 1687. The other terms of the original
contract shall be revived." Thus, when petitioners' written lease agreement with
respondent expired on June 1, 1987 and they did not vacate the subject properties, the
terms of the written lease, other than that covering the period thereof, were revived. The
lease thus continued. In this sense, the prescriptive periods cited by petitioners - as
provided for in Articles 1144 and 1145 of the Civil Code[24] - are inapplicable. As far as
the parties are concerned, the lease between them subsisted and prescription did not even
begin to set in.

Even then, it can be said that so long as petitioners continued to occupy the subject
properties - with or without PNB's consent - there was a lease agreement between them.
They cannot escape the payment of rent, by any manner whatsoever. First of all, given
the circumstances where liberality is obviously not present and was never a consideration
for the lease contract, petitioners cannot be allowed to enjoy PNB's properties without
paying compensation therefor; this would be contrary to fundamental rules of fair play,
equity, and law. Basically, Article 19 of the Civil Code states that "[e]very person must,
in the exercise of his rights and in the performance of his duties, act with justice, give
everyone his due, and observe honesty and good faith," and Article 20 provides that
"[e]very person who, contrary to law, wilfully or negligently causes damage to another,
shall indemnify the latter for the same."

Secondly, even when the parties' lease agreement ended and petitioners failed or refused
to vacate the premises, it may be said that a forced lease was thus created where
petitioners were still obligated to pay rent to respondent as reasonable compensation for
the use and occupation of the subject properties. Indeed, even when there is no lease
agreement between the parties, or even when the parties occupant and property owner -
are strangers as against each other, still the occupant is liable to pay rent to the property
owner by virtue of the forced lease that is created by the former's use and occupation of
the latter's property.
There is no question that after the expiration of the lease contracts which respondent
contracted with Aniana Galang and BPI, she lost her right to possess the property since,
as early as the actual expiration date of the lease contract, petitioners were not negligent
in enforcing their right of ownership over the property.

While respondent was finally evicted from the leased premises, the amount of monthly
rentals which respondent should pay the petitioners as forced lessors of said property
from 20 June 1988 (for the ground floor) and 15 August 1988 until 6 January 1998 (for
the second and third floors), or a period of almost ten years remains to be resolved.

xxxx

At the outset, it should be recalled that there existed no consensual lessor-lessee

relationship between the parties. At most, what we have is a forced lessor-lessee
relationship inasmuch as the respondent, by way of detaining the property without the
consent of herein petitioners, was in unlawful possession of the property belonging to
petitioner spouses.

x x x. The plaintiff in an ejectment case is entitled to damages caused by his loss of the
use and possession of the premises. Damages in the context of Section 17, Rule 70 of the
1997 Rules of Civil Procedure is limited to "rent" or fair rental value or the reasonable
compensation for the use and occupation of the property. x x x[25]
Indeed, petitioners' obstinate refusal to pay rent and vacate the subject properties, and
their insistence that respondent sell the same to them but without meeting respondent's
price, is an underhanded maneuver that unduly tied respondent's hand and deprived it of
the use and enjoyment of its properties. This is tantamount to holding the properties
hostage and forcing respondent to accede to whatever petitioners desired. This practice
cannot be sanctioned; on the contrary, it must be condemned.

The CA is thus correct in ruling that petitioners "should be made liable for damages in the
form of rent or reasonable compensation for the occupation of the properties not only
from the time of the last demand but starting from the time they have been occupying the
subject properties without paying for its rent."[26] Suffice it to state that, as correctly cited
by respondent, "the amount demandable and recoverable from a defendant in ejectment
proceedings regardless of its denomination as rental or reasonable compensation or
damages, flows from the detainer or illegal occupation of the property involved and x x x
is merely incidental thereto."[27]
Finally, we agree with the CA in finding petitioners "liable to pay interest by way of
damages for [their] failure to pay the rentals due for the use of the premises" [28] at the rate
of "6% per annum, [from May 26, 1987 when PNB made its extrajudicial demand] until
the judgment in this case becomes final and executory."[29] However, the 12% interest rate
it imposed after the finality of judgment and until full payment[30] shall be modified to
6% per annum pursuant to Nacar v. Gallery Frames.[31]

WHEREFORE, the Petition is DENIED. The assailed October 30, 2013 Decision and
November 14, 2014 Resolution of the Court of Appeals in CA-G.R. S.P. No. 03731
are AFFIRMED with modification that the legal rate of interest of 6% per annum shall
be imposed after finality of this Decision until full payment.

SO ORDERED.

Leonardo-De Castro, C. J., Jardeleza, and Tijam, JJ., concur.

Bersamin, J., on official leave.

[1]
 Rollo, pp. 13-43.
[2]
 Id. at 46-64; penned by Associate Justice Cannelita Salandanan-Manahan and
concurred in by Associate Justices Ramon Paul L. Hernando and Gabriel T. Ingles.
[3]
 Id. at 65-71; penned by Associate Justice Gabriel T. Ingles and concurred in by
Associate Justices Ramon Paul L. Hernando and Marilyn B. Lagura-Yap.
[4]
 Id. at 159-166; penned by Judge Narciso M. Aguilar.
[5]
 Id. at 438-450.
[6]
 Herein petitioners.
[7]
 Herein respondent.
[8]
 Rollo, p. 90; Letter of PNB Acting AVP and Manager Edilberto G. Castro (Castro) to
Fritz Muller (Fritz) dated May 26, 1987.
[9]
 Id. at 91.
[10]
 Id. at 92; Letter of Castro to Fritz dated July 13, 1987.
[11]
 Id. at 94; Letter of Castro to Fritz dated October 2, 1987.
[12]
 Id. at 97; Letter of PNB Branch Attorney Manuel Javato to Fritz dated March 17,
1988.
[13]
 Id. at 103.
[14]
 Id. at 72-81.
[15]
 Id. at 115-125; penned by Assisting Judge Ma. Theresa N. Enriquez-Gaspar.
[16]
 Id. at 47-53.
[17]
 Id. at 159-166; penned by Judge Narciso M. Aguilar.
[18]
 Id. at 164-166.
[19]
 Id. at 54-63.
[20]
 Id. at 24.
[21]
 Id. at 32.
[22]
 Id. at 474-495.
[23]
 Id. at 32.
[24]
 Art. 1144. The following actions must be brought within ten years from the time the
right of action accrues:

(1) Upon a written contract;

(2) Upon an obligation created by law;

(3) Upon a judgment

Art. 1145. The following actions must be commenced within six years:

(1) Upon an oral contract;