Lu v. Intermediate Appellate Court

PARAS, J.:

Before Us is a Petition for Review by way of appeal by certiorari of the 1) judgment1dated October 4, 1984 of the Intermediate Appellate Court (IAC, for brevity, now known as the Court of Appeals) in AC-G.R. CV. No. 570202 and 2) its Resolution of February 22, 19853 denying petitioner Lu's Motion for Reconsideration, which reversed the decision4 dated December 23, 1974 of the Court of First Instance of Pangasinan in Civil Case No. 144-R, entitled Santiago Bustos vs. Eusebio C. Lu and Josefina Alberto. The undisputed background facts of the case are aptly summarized by the trial court in its decision as follows: "Defendant Josefina Alberto was the owner of a parcel of land containing an area of 1,760 square meters situated at Barrio Carmen, Resales, Pangasinan, as evidenced by TCT No. 45787 (13622-P) of the land records of Pangasinan.

This property was subsequently subdivided into several lots, one of which is designated as Lot 6, PLA LRC Pcs-7703, consisting of 102 square meters, more or less, to which TCT No. 74567 was issued by the Register of Deeds of Pangasinan, in the name of Alberto. This is the subject matter of the instant controversy between the parties. "In the version of the plaintiff, the whole lot covered by TCT No. 74567 was leased some twenty five (25) years ago to several tenants, each covering a definite portion of said lot, among whom is the plaintiff who has been occupying that disputed portion of 102 square meters.

"On February 3, 1967, defendant Alberto leased the entire 1,760 square meters to her co-defendant Lu by virtue of a 'Contract of Lease Agreement' ratified by Notary Public Valeriano V. Santos in Manila (Exhibit 'l-Lu', par. 11, Stipulation of Facts). The lease agreement contains the following salient provisions; the lease was to extend for a period of 25 years commencing on February 2, (Exhibit 'l, Lu'); the annual rental was fixed at P12,000.00 (par.

3, supra), the rental for the first year having been advanced by the lessee (par. 1, supra); that the old building and/or improvements existing on the lease property shall be demolished and a new two-storey building of strong materials shall be constructed by the lessee at his own expense (par. 4, supra); the lessor is given one year within which to eject all present tenants on the premises and pending their ejection, all rentals collected thereon shall be turned over to the lessee (par.

5, supra); that after the expiration of the lease agreement, all buildings and/or improvements introduced by the lessee shall automatically belong to the lessor without the obligation of reimbursing the amounts spent for said building or improvements (par. 6, supra); and finally, in the event that the lessor desires to sell the leased property, the lessee shall be given the priority right therefor (par. 8, supra).

This lease agreement was duly annotated on TCT No. 45787 (13622-P) as Entry No. 301258 (Exhibit '11-a Lu'). "The period of one year mentioned in par. 5 of the Contract of Lease Agreement (Exhibit 'l-Lu) expired without the tenants on the leased property being ejected because they refused to vacate the respective portions of the property occupied by them.

By reason of this refusal, the projected demolition of the existing improvements on the property and the eventual construction of a two-storey building by the lessee were not pushed through (t.s.n., pp. 5-6, Sept. 23, 1974.) "On July 12, 1967, Alberto granted to Lu 'the sole disposition in matters relating to tenants of the apartment to be constructed as well as the authority to collect rentals thereon (Exhibit '1-Pabalan').

On April 27, 1968, Alberto had the leased property surveyed and subdivided into several small lots and one of the resulting lots is Lot No. 6 of PLAN LRC Pcs-7703 consisting of 102 square meters, more or less. "On June 8, 1968, Alberto wrote plaintiff Bustos the following note: ' June 8, 1968 'Mr. Santiago Bustos, 'Kailangan ko ang tulong mo pahiramin mo ako ng P2,000 dos mil pesos, aawasin sa bayad ng lote na binibili mo sa akin dian sa Carmen. 15,450 2,000