IMPORTANT CASES IN LEASE

Nava v. Yaptinchay, 44 O.G. No. 9

Commenting on the essential difference between a contract of cession of lease and a contract of
sublease, in their juridical consequences, Manresa said: “In the case of cession, the lessee
transmits absolutely his rights, his personality disappears, there only remains in the juridical
relation two persons, the lessor and the assignee, who is converted into a lessee. In the case of
sublease, no personality disappears; there are two leases and two distinct juridical relations,
although intimately connected and related to each other.

In the contract of sublease the personality of the lessee does not disappear; the lessee does not
transmit absolutely his rights and obligations to the sub-lessee; and the sub-lessee does not have
any direct against the owner of the premises as lessor, to require the compliance of the
obligations contracted with the lesee, or vice-versa. Moreover, the alleged assignment or cession
could not have been valid in this case, because the owner of the premises did not give his
express consent to the substitution of the sub-lessee in lieu of the lessee.

In order that prohibition to sublease may be held binding upon the lessee, the same must be
contained expressly in the contract of lease (Art. 1550 NCC), which, in the instant case, did not
appear; and if it did, was waived by the owner of the premises in question when he allowed the
sub-lesee to stay in the said premises and accepted the rentals from him.

Sime Darby v. Goodyear, 2011.

In an assignment of a lease, there is a novation by the substitution of the person of one of the
parties—the lessee. The personality of the lessee, who dissociates from the lease, disappears.
Thereafter, a new juridical relation arises between the two persons who remain—the lessor and
the assignee who is converted into the new lessee. The objective of the law in prohibiting the
assignment of the lease without the lessor’s consent is to protect the owner or lessor of the
leased property.

A review of the lease contract between Sime Darby and Macgraphics discloses no stipulation that
Sime Darby could assign the lease without the consent of Macgraphics. Moreover, contrary to the
assertions of Sime Darby, the records are bereft of any evidence that clearly shows that
Macgraphics consented to the assignment of the lease.

The consent of the lessor to an assignment of lease may indeed be given expressly or impliedly.
It need not be given simultaneously with that of the lessee and of the assignee. Neither is it
required to be in any specific or particular form. It must, however, be clearly given. In this case, it
cannot be said that Macgraphics gave its implied consent to the assignment of lease.

Aludos v. Suerte, 2012

The assignment of the leasehold rights over the two market stalls was void since it was made
without the consent of the lessor, the Baguio City Government, as required under Article 1649 of
the Civil Code.

VSD Realty v Uniwide, GR No. 170677, Oct. 24, 2012

It is noted that when the contract of lease was executed, Uniwide was unaware that the property
leased by it was owned by another person other than Dolores Baello. Nevertheless, Uniwide
cannot avail of the rights of a builder in good faith under Article 448 of the Civil Code, in relation
to Article 546 of the same Code, which provides for full reimbursement of useful improvements
and retention of the premises until reimbursement is made, as the said provisions apply only to a
possessor in good faith who builds on land with the belief that he is the owner thereof. It does not
apply where one’s only interest is that of a lessee under a rental contract.

Inocencion vs. Hospicio de San Jose, G.R. No. 201787, September 25, 2013

The general rule, is lease contracts survive the death of the parties and continue to bind the heirs
except if the contract states otherwise. In Sui Man Hui Chan v. Court of Appeals, 424 SCRA 127
(2004) we held that: A lease contract is not essentially personal in character. Thus, the rights and
obligations therein are transmissible to the heirs. The general rule, therefore, is that heirs are
bound by contracts entered into by their predecessors-in-interest except when the rights and
obligations arising therefrom are not transmissible by (1) their nature, (2) stipulation or (3)
provision of law. In the subject Contract of Lease, not only were there no stipulations prohibiting
any transmission of rights, but its very terms and conditions explicitly provided for the
transmission of the rights of the lessor and of the lessee to their respective heirs and successors.
The contract is the law between the parties. The death of a party does not excuse non-
performance of a contract, which involves a property right, and the rights and obligations
thereunder pass to the successors or representatives of the deceased. Similarly, nonperformance
is not excused by the death of the party when the other party has a property interest in the
subject matter of the contract.

Assignment or transfer of lease, which is covered by Article 1649 of the Civil Code, is different
from a sublease arrangement, which is governed by Article 1650 of the same Code. In a
sublease, the lessee becomes in turn a lessor to a sublessee. The sublessee then becomes
liable to pay rentals to the original lessee. However, the juridical relation between the lessor and
lessee is not dissolved. The parties continue to be bound by the original lease contract. Thus, in a
sublease arrangement, there are at least three parties and two distinct juridical relations.

The lease of a building includes the lease of the lot and consequently, the rentals of the building
include the rentals of the lot [Inocencio vs. Hospicio De San Jose, 706 SCRA 388(2013)]

Locsin II v. Mekeni Food Corporation, G.R. No. 192105, December 9, 2013

Installments made on the car plan may be treated as rentals only when there is an express
stipulation in the car plan agreement to such effect. It was therefore patent error for the appellate
court to assume that, even in the absence of express stipulation, petitioner’s payments on the car
plan may be considered as rentals which need not be returned.

Indeed, the Court cannot allow that payments made on the car plan should be forfeited by Mekeni
and treated simply as rentals for petitioner’s use of the company service vehicle. Nor may they be
retained by it as purported loan payments, as it would have this Court believe. In the first place,
there is precisely no stipulation to such effect in their agreement. Secondly, it may not be said
that the car plan arrangement between the parties was a benefit that the petitioner enjoyed; on
the contrary, it was an absolute necessity in Mekeni’s business operations, which benefited it to
the fullest extent: without the service vehicle, petitioner would have been unable to rapidly cover
the vast sales territory assigned to him, and sales or marketing of Mekeni’s products could not
have been booked or made fast enough to move Mekeni’s inventory.

Jusayan v. Sombilla, January 21, 2015.

Issue: Whether or not the relationship between Timoteo and Jorge was that of an agency or a
tenancy, an analysis of the concepts of agency and tenancy is in order?

The claim of Timoteo that Jorge was his agent contradicted the verbal agreement he had
fashioned with Jorge. By assenting to Jorge’s possession of the land sans accounting of the
cultivation expenses and actual produce of the land provided that Jorge annually delivered to him
110 cavans of palay and paid the irrigation fees belied the very nature of agency, which was
representation.
On the other hand, to prove the tenancy relationship, Jorge presented handwritten receipts
indicating that the sacks of palay delivered to and received by one Corazon Jusayan represented
payment of rental. In this regard, rental was the legal term for the consideration of the lease.
Consequently, the receipts substantially proved that the contractual relationship between Jorge
and Timoteo was a lease.

In the civil law lease, one of the parties binds himself to give to another the enjoyment or use ofa
thing for a price certain, and for a period that may be definite or indefinite. In the agricultural
lease, also termed as a lease hold tenancy, the physical possession of the land devoted to
agriculture is given by its owner or legal possessor (landholder) to another (tenant) for the
purpose of production through labor of the latter and of the members of his immediate farm
household, in consideration of which the latter agrees to share the harvest with the landholder, or
to pay a price certain or ascertainable, either in produce or in money, or in both.

Specifically, in Gabriel v. Pangilinan, this Court differentiated between a leasehold tenancy and a
civil law lease in the following manner, namely: (1) the subject matter of a leasehold tenancy is
limited to agricultural land, but that of a civil law lease may be rural or urban property; (2) as to
attention and cultivation, the law requires the leasehold tenant to personally attend to and
cultivate the agricultural land; the civil law lessee need not personally cultivate or work the thing
leased; (3) as to purpose, the landholding in leasehold tenancy is devoted to agriculture; in civil
law lease, the purpose may be for any other lawful pursuits; and(4) as to the law that governs, the
civil law lease is governed by the Civil Code, but the leasehold tenancy is governed by special
laws.

The sharing of the harvest in proportion to the respective contributions of the landholder and
tenant, otherwise called share tenancy, was abolished on August 8, 1963 under Republic Act No.
3844. To date, the only permissible system of agricultural tenancy is leasehold tenancy, a
relationship wherein a fixed consideration is paid instead of proportionately sharing the harvest as
in share tenancy.

It can be gleaned that in both civil law lease of an agricultural land and agricultural lease, the
lessor gives to the lessee the use and possession of the land for a price certain. Although the
purpose of the civil law lease and the agricultural lease may be agricultural cultivation and
production, the distinctive attribute that sets a civil law lease apart from an agricultural lease is the
personal cultivation by the lessee. An agricultural lessee cultivates by himself and with the aid of
those of his immediate farm household. Conversely, even when the lessee is in possession of the
leased agricultural land and paying a consideration for it but is not personally cultivating the land,
he or she is a civil law lessee.

Spouses Aquino v. Spouses Aguilar, June 29, 2015.

Article 1678 is not applicable to this case. By its express provision, Article 1678 of the Civil Code
applies only to lessees who build useful improvements on the leased property. It does not apply
to those who possess property by mere tolerance of the owners, without a contractual right.

A careful reading of the statement made by this Court in Calubayan would show that it did not, as
it could not, modify the express provision in Article 1678, but only noted an "analogous" situation.
According to the Court, the analogy between a tenant whose term of lease has expired and a
person who occupies the land of another at the latter's tolerance lies in their implied obligation to
vacate the premises upon demand of the owner.

In this case, there is absolutely no evidence of any lease contract between the parties. In fact,
respondents themselves never alleged that they were lessees of the lot or the building in
question. Quite the opposite, they insisted that they were co-owners of the building and builders
in good faith under Article 448 of the Civil Code. For that reason, respondents argue that it was
erroneous for the CA to consider them as lessees and to determine their rights in accordance
with Article 1678.