G.R. No. 183232 , April 30, 2009
Gilbert T. de la Paz, Petitioner, vs. Marikina Footwear Development Cooperative, Inc. (MAFODECO), represented by its chairman Rodolfo de Guzman, Respondent.

FACTS

Petitioner Gilbert T. de la Paz, operator of a water-refilling station, entered into a Contract of Lease with respondent MAFODECO on May 7, 1998, for a commercial space (Stall No. 25, New Marikina Trade Fair Building) for one year at a monthly rental of ₱8,000. The property was owned by Bayani Vergara, who allowed MAFODECO to use it as its office for free. Upon Bayani’s death on October 16, 1993, ownership passed to his spouse, Severina Vergara. Petitioner, MAFODECO’s chairman, and Severina executed an “Agreement on Advance Rental,” wherein petitioner agreed to pay Severina’s real estate taxes and MAFODECO’s association dues, to be deducted from his rental payments. Severina later agreed to split petitioner’s rental payments between herself and MAFODECO starting May 1998.
The lease was renewed for another year from May 9, 1999, to May 9, 2000. Upon its expiration, Severina advised petitioner she was exercising her ownership rights and discontinuing the split rental arrangement. Petitioner and Severina then executed a lease contract for the period January 1, 2001, to December 31, 2001, renewable yearly, at a monthly rental of ₱12,000.
MAFODECO later demanded via letter dated October 12, 2001, that petitioner pay at least ₱78,000 (rent from August 2000 to July 2001) and vacate the property. Upon petitioner’s refusal, MAFODECO filed a complaint for unlawful detainer on February 11, 2002, alleging it was the “OWNER and LESSOR” under a verbal lease and that petitioner had unpaid rents since August 2000 amounting to at least ₱156,000. Petitioner countered that MAFODECO had no cause of action as his possession was based on an existing lease contract with Severina, the owner.
The Metropolitan Trial Court (MeTC) ruled in favor of MAFODECO, ordering petitioner to vacate, pay ₱8,000 monthly rent from September 2000 until vacated, and pay attorney’s fees and costs. The MeTC held that while Severina was the owner, she had not recovered possession from MAFODECO and thus lacked capacity to lease the property to petitioner. The Regional Trial Court (RTC) and the Court of Appeals affirmed the MeTC decision.

ISSUE

Whether the Court of Appeals erred in affirming the lower courts’ decisions ordering petitioner to vacate the leased premises and pay rent to MAFODECO, despite: (a) MAFODECO leasing the property without the consent of Severina, the owner after her husband’s death; and (b) petitioner having a valid lease contract with and having fully paid rent to Severina beginning September 2000, after his contract with MAFODECO expired in May 2000.

RULING

The Supreme Court GRANTED the petition, SET ASIDE the assailed Decision and Resolution of the Court of Appeals, and DISMISSED MAFODECO’s complaint for unlawful detainer.
The Court found for petitioner. MAFODECO misrepresented in its complaint that it was the “OWNER” of the property, attaching only a “Pahintulot Sa Paghahanap-buhay” (a business permit), to falsely claim a right to lease. When MAFODECO filed the complaint in 2002, it could not anchor its right on the “tolerance” of the previous owner, Bayani, as his act of tolerance automatically ceased upon his death in 1993.
More importantly, when Severina, the registered owner since July 29, 1999, entered into a lease contract with petitioner on January 1, 2001, she severed any authority previously given to MAFODECO to lease the property and split rentals. To compel petitioner to vacate and pay rent to MAFODECO, despite his existing lease contract with the true owner Severina, would constitute unjust enrichment in favor of MAFODECO and cause unjust poverty to petitioner.