G.R. No. 72313 & 72326. December 29, 1989.
RICARDO CRUZ, petitioner, vs. HON. INTERMEDIATE APPELLATE COURT and ROMAN LEGARDA SO, respondents. ROMAN LEGARDA SO, petitioner vs. RICARDO CRUZ, respondent.

FACTS

Ricardo Cruz, as manager of the unregistered Padre Rada Market Operators Association, leased a parcel of land from Roman Legarda So for market operations under a contract of indefinite duration at a monthly rent of P3,500.00. In April 1977, So demanded payment of rental arrearages and for Cruz to vacate by April 30, 1977. Cruz continued operations and paid the May 1977 rental. However, in June 1977, So, having leased portions of the market to third parties, secured a temporary restraining order from the Court of First Instance, which compelled Cruz to stop his market operations and collections from June 1977 to March 1982—a period of 57 months. After the lease of So’s other lessees expired on March 31, 1982, Cruz immediately filed an action to enjoin So from leasing to third parties and obtained a preliminary injunction on May 4, 1982, allowing him to retake possession.
The trial court initially ruled against Cruz but, on reconsideration, declared the lease subsisting and extended for 15 years, awarded Cruz damages, and made the injunction permanent. The Intermediate Appellate Court modified this, extending the lease for 57 months from March 31, 1982 (to compensate for the period Cruz was ousted), eliminating the award of damages, and limiting the injunction to that extension period. Both parties elevated the case to the Supreme Court via certiorari.

ISSUE

The core issue is whether the lease contract between Cruz and So was validly terminated by So’s demand to vacate in 1977, and consequently, whether Cruz had a right to resume possession and continue the lease after March 1982.

RULING

The Supreme Court ruled that the lease contract was validly terminated. The Court emphasized that a contract of lease with no definite period is considered a lease from month to month, terminable at the end of each month by demand to vacate by the lessor. So’s letter of April 18, 1977, demanding payment of arrears and to vacate by April 30, 1977, constituted a valid notice of termination. Cruz’s subsequent payment for May 1977 without protest did not negate this termination; it merely constituted a holdover tenancy, which did not renew the contract for another fixed period. The Court found Cruz’s prolonged inaction after So leased the premises to third parties in 1977 as an admission that his lease had ended.
Therefore, Cruz had no subsisting leasehold right to reclaim possession in 1982. The Court of Appeals’ grant of a 57-month extension, intended as equitable compensation for his earlier ouster, was rendered moot because Cruz had already recovered and retained possession since May 1982 under the trial court’s injunction, far exceeding the 57-month period. The Supreme Court modified the appellate decision, ordering Cruz to immediately desist from operating the market and to pay So a monthly rental of P3,500.00 from May 4, 1982, until he fully surrenders possession, thereby dissolving the preliminary injunction. The ruling reinstates the lessor’s fundamental right to possess and dispose of his property upon valid termination of a lease.