No estoppel on tenant when lessor loses ownership after commencement of lease


Here is one case that should be given the widest dissemination to all first level courts.

Notwithstanding Borre v. Court of Appeals, 242 Phil 345, 352 (1988), where the Supreme Court ruled that estoppel against tenants is subject to a qualification, and that it does not apply if the landlord’s title has expired, or has been conveyed to another, or has been defeated by a title paramount, subsequent to the commencement of lessor-lessee relationship [VII Francisco, The Revised Rules of Court in the Philippines 87 (1973)], the conclusive presumption against the tenant in Sec. 2(b), Rule 131, Rules of Court, is often strictly applied without taking note of the qualification.

It is good that once more in  Santos v. NSO, G.R. No. 171129, April 6, 2011, the Supreme Court chose to emphasize the significance of the qualification. Santos owned a parcel of land which he leased to the National Statistics Office. On the third renewal of the lease, NSO refused to pay rentals and refused to vacate despite notice. Santos filed an unlawful detainer case. In its answer, NSO stated that the property of Santos was already foreclosed by China Bank and title was already consolidated in the name of the bank. Since Santos was neither the owner, co-owner, legal representative or assignee of China Bank, landlord or a person entitled to the physical possession of the subject property, he has no legal personality to institute the complaint.

The MTC ruled that NSO’s admission that it was a lessee who failed to pay rent effectively removed its right to question Santos’ title and ownership. On appeal, the Regional Trial Court sustained the MTC. However, the Court of Appeals reversed on review and ruled that Borre applies.

The Supreme Court sustained the CA. The NSO demonstrated by the following documentary exhibits: (1) the Promissory Note executed by petitioner and his spouse in favor of China Bank for a loan of P20 million and the (Real Estate) Mortgage over the subject property; (2) the Petition for Extrajudicial Foreclosure of said Real Estate Mortgage; (3) the Notice of Auction Sale By Notary Public, Certificate of Posting, Affidavit of Publication and Certificate of Sale in favor of China Bank, all in connection with the extrajudicial foreclosure sale of the leased premises; (4) the Affidavit of Consolidation executed by China Bank’s Vice-President to inform the Registry of Deeds of Meycauayan, Bulacan that the one-year period of redemption has expired without petitioner redeeming the property and to request said office to issue the corresponding TCT under the bank’s name; and (5) TCT No. T-370128 (M) issued on August 21, 2000 in the name of China Bank covering the leased property, that the owner of the property is no longer Santos but China Bank. Consequently, following Borre, the conclusive presumption in Sec. 2(b), Rule 131, Rules of Court, does not apply.

Santos v. NSO, G.R. No. 171129, April 6, 2011, First Division.

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