Case Digest: MALAYAN REALTY, INC. v. UY HAN YONG

MALAYAN REALTY, INC. v. UY HAN YONG

467 SCRA 411, (2006)

The power of the courts to establish a grace period is potestative or discretionary, depending on the particular circumstances of the case.

Malayan Realty Inc., entered into a verbal lease contract with Uy Han Yong over an apartment unit located in Manila. After several years, Malayan sent Uy a written notice informing him that the lease contract would no longer be renewed or extended. Despite Uy‘s receipt of the notice, he refused to vacate the property, prompting Malayan to file before the Metropolitan Trial Court (MeTC) of Manila a complaint for ejectment.

MeTC held that Uy could not be ejected on the ground of termination of the contract. The MeTC dismissed Malayan‘s complaint. Malayan appealed to the Regional Trial Court (RTC) which set aside the judgment of the MeTC. On the basis of Article 1687 of the New Civil Code, the RTC extended the lease contract for a period of five years.

Malayan asserts that an extension of the period of a lease may be sought by the tenant before, and not after the termination of the lease; and that Uy had sufficient time to request for extension, given that the notice of termination of the lease was served upon him more than 30 days before its effectivity, but that Uy did not so request even after the complaint was filed in court. Malayan thus maintains that no “equitable reason” justifies Uy‘s continued possession of the property for more than four years from the time the complaint for ejectment was filed.

The Court of Appeals (CA) modified the RTC decision by shortening the extension of the lease contract to one year from the finality of the decision.

ISSUES:

Whether or not CA erred in granting a one year extension of the lease reckoned from the finality of the decision

HELD:

Under Article 1687 of the New Civil Code if the period of a lease contract has not been specified by the parties, it is understood to be from month to month, if the rent agreed upon is monthly. The lease contract thus expires at the end of each month, unless prior thereto, the extension of said term has been sought by appropriate action and judgment is eventually rendered therein granting the relief.

In the case at bar, the lease period was not agreed upon by the parties. Rental was paid monthly, and Uy Han Yong has been occupying the premises since 1958. As earlier stated, a written notice was served upon respondent on January 17, 2001 terminating the lease effective August 31, 2001. As Uy han Yong was notified of the expiration of the lease, effectively his right to stay in the premises had come to an end on August 31, 2001. 24

The 2nd paragraph of Article 1687 provides, however, that in the event that the lessee has occupied the leased premises for over a year, the courts may fix a longer term for the lease.

The power of the courts to establish a grace period is potestative or discretionary, depending on the particular circumstances of the case. Thus, a longer term may be granted where equities come into play, and may be denied where none appears, always with due deference to the parties‘ freedom to contract.

In the present case, Uy has remained in possession of the property from the time the complaint for ejectment was filed on September 18, 2001 up to the present time. Effectively, Uy‘s lease has been extended for more than five years, which time is, under the circumstances, deemed sufficient as an extension and for him to find another place to stay.