Caudal vs. Court of Appeals

The "legitimate need of owner to repossess his property for his own use or for the use of any immediate member of his family as a residential unit" under Sec. 5(c) of BP 877 includes the conversion of a leased apartment unit into an auxiliary part of the owner's conjugal dwelling, such as a servants' quarters or stockroom, where the owner is physically merging the unit with adjoining units to form one continuous residence.

Private respondent Dionisio Cu and his family were tenants at an apartment on Silencio St., Santol, Quezon City, under a lease expiring on 16 March 1986. In February 1984, Cu purchased a parcel of land at 157 E. Garcia St., Quezon City, together with a six-door apartment building thereon, from Julieta Esguerra. Petitioner Tony Caudal occupied one of the six units under a verbal month-to-month lease with the previous owner dating back to July 1967 at a monthly rental of ₱150.00. The dispute arose from Cu's desire to take possession of all six units to serve as his family's permanent residence, including the unit leased to Caudal.

Private respondent Dionisio Cu, his wife Juanita, and their five children initially rented an apartment at No. 269-A D. Tuason, Quezon City, but later transferred to No. 38 Silencio St., Santol, Quezon City, because the owner of the first apartment needed it for personal use. The lease on the Silencio St. apartment ran from 16 September 1984 to 16 March 1986. In February 1984, while still a tenant, Cu purchased a parcel of land at 157 E. Garcia St., Quezon City, together with a six-door apartment building thereon, from Julieta Esguerra, intending to provide his family with a permanent abode.

Petitioner Tony Caudal occupied one of the six apartment units under a verbal month-to-month lease with Esguerra dating back to July 1967, paying ₱150.00 monthly. On 2 July 1984, Cu notified Caudal of the termination of the lease contract, giving him until October 1984 to vacate. Caudal refused, remaining on the premises even after October 1984. Cu brought the matter to the Barangay Captain, who issued a certification to file a complaint.

Cu thereafter filed an ejectment case against Caudal before the Metropolitan Trial Court of Quezon City, Branch 35, docketed as Civil Case No. 0047612. In his complaint, Cu alleged that neither he nor any member of his family owned any other dwelling in Quezon City or Manila; that he intended to merge two of the apartment doors into one dwelling unit for his son Selwyn, who planned to get married; and that the remaining units, including Caudal's, would be utilized as the conjugal home of the Cu family. Caudal, in his answer, asserted a verbal contract with Esguerra since July 1967 at ₱150.00 monthly, claimed Esguerra failed to collect rent for November 1984 causing him to deposit it in a bank, and proposed that the 600 sq. m. fronting the apartment be used for construction of Cu's dwelling instead.

The MTC dismissed Cu's complaint on 26 March 1986. Cu appealed to the RTC of Quezon City, which on 6 June 1986 reversed the MTC and ruled in favor of Cu, recognizing his right to possess the property as purchaser-owner. Caudal elevated the case to the Court of Appeals, arguing that the RTC committed grave abuse of discretion in ruling for Cu despite the latter's intention to use one door merely as a stockroom, office, and quarters for maids and drivers. The Court of Appeals affirmed the RTC on 29 January 1988 and denied Caudal's motion for reconsideration on 18 May 1988, prompting the present petition.

• Scope of "Residential Unit": Petitioner argued that the Court of Appeals erred in interpreting Sec. 5(c) of BP 877, in relation to Sec. 2(b) of the same law, to include the use of the subject apartment door as a stockroom, office, and quarters for maids and drivers as a ground for ejectment. He maintained that such uses do not fall within the legitimate need of the owner to repossess the property for his own use or for the use of any immediate family member as a residential unit.
• Immediate Members of Family: Petitioner contended that maids and drivers are not covered by the term "immediate members of the family of the lessor" as defined in Sec. 2(c) of BP 877, which limits the term to the lessor's spouse, direct descendants, or ascendants by consanguinity or affinity.
• Prohibition on Ejectment Upon Sale: Petitioner argued that he could not be ejected merely because the property was sold to a third person, citing the last paragraph of Sec. 5 of BP 877, which prohibits a lessor or successor-in-interest from ejecting a lessee on the ground that the leased premises had been sold or mortgaged to a third person.

• Scope of "Residential Unit" Under Sec. 5(c) BP 877: Whether the legitimate need of an owner to repossess a leased apartment unit for conversion into a servants' quarters and stockroom, as part of a plan to merge adjoining units into one conjugal dwelling, constitutes a ground for ejectment under Sec. 5(c) of BP 877.
• Effect of Sale on Ejectment Rights: Whether the prohibition in the last paragraph of Sec. 5 of BP 877 against ejecting a lessee upon sale of the leased premises bars a vendee from ejecting the lessee on grounds expressly provided by the Rental Laws.
• Termination of Month-to-Month Lease: Whether the verbal month-to-month lease between the original owner and petitioner constituted a lease with a definite period that had expired upon the notice to vacate.

• Scope of "Residential Unit" Under Sec. 5(c) BP 877: Yes. The conversion of the subject unit into a maid/driver's quarters and stockroom comes within the purview of Sec. 5(c) as a legitimate need for residential purposes, because Cu was merging the unit with adjoining units to form one conjugal dwelling, making the unit an auxiliary part of the residence.
• Effect of Sale on Ejectment Rights: No, the prohibition does not bar ejectment. The prohibition disallows ejectment merely on the ground of sale; a vendee who establishes a legitimate need for own use under the Rental Laws may recover possession.
• Termination of Month-to-Month Lease: Yes. A verbal month-to-month lease is a lease with a definite period, terminable upon notice; Cu's 2 July 1984 notice giving Caudal until October 1984 to vacate effectively terminated the lease and complied with the three-month advance notice requirement.

• Scope of "Residential Unit" Under Sec. 5(c) BP 877: The Court construed "residential unit" by reference to Sec. 2(b) of BP 877, which defines the term to include not only buildings used solely as dwelling places but also those used for home industries, retail stores, or other business purposes, provided the owner and his family actually live therein and use it principally for dwelling purposes. If an abode can be used for limited business purposes under the law, there is no reason it cannot be used as an abode for persons rendering services necessary or desirable for the maintenance and enjoyment of a home. A servants' quarter is an auxiliary part of a residence; a dwelling house includes buildings and attachments used by the family for ordinary purposes. Where structures are joined to a dwelling by removing partitions and consolidating under one continuous roof, the dwelling constitutes only one. Cu explicitly stated he would transfer to the adjoining units and merge them with petitioner's unit to form one conjugal dwelling, making the unit an auxiliary part of the main residence. A different conclusion would obtain only if a lessee were ejected on the sole basis that the premises would be exclusively used as maid/driver's quarters autonomously of any adjoining conjugal dwelling.

• Effect of Sale on Ejectment Rights: The last paragraph of Sec. 5 of BP 877 prohibits ejectment of a lessee merely on the ground that the leased premises had been sold or mortgaged. The Court clarified that nothing in the law prevents a vendee, who steps into the shoes of the original owner, from ejecting a lessee on grounds expressly provided by the Rental Laws. It was already settled that a subsequent owner who bought the leased premises for his and his family's own use may recover possession. Cu, as present owner, was within his rights in ejecting Caudal to enable the former to use the premises—a ground expressly allowed under Sec. 5(c). The law could not have intended to prevent bona fide sales from owners who wish to dispose of property to persons in need of their own residence, as that would be contrary to the basic philosophy underlying the right to property.

• Termination of Month-to-Month Lease: Under existing jurisprudence, a verbal month-to-month lease is a lease with a definite period, terminable on notice. Cu's notice to Caudal on 2 July 1984, giving him until October 1984 to vacate, effectively terminated the lease and complied with the three-month advance notice requirement of Sec. 5(c). Cu's own need for housing was pressing, as he was merely renting at Silencio St. with a lease expiring on 16 March 1986.

• Legitimate Need to Repossess — Auxiliary Use as Part of Conjugal Dwelling — Under Sec. 5(c) of BP 877, an owner may eject a lessee on the ground of legitimate need to repossess the property for residential use where the leased unit is to be merged with adjoining units to form one conjugal dwelling, even if the specific intended use of the unit is as servants' quarters or stockroom. A servants' quarter is an auxiliary part of a residence, and a dwelling house includes buildings and attachments used by the family for ordinary purposes. The doctrine would not apply if the unit were to be used exclusively as maid/driver's quarters autonomously of any adjoining conjugal dwelling.

• Ejectment Upon Sale — Vendee's Right to Eject on Statutory Grounds — The prohibition in the last paragraph of Sec. 5 of BP 877 against ejecting a lessee upon sale or mortgage of the leased premises applies only when sale is the sole ground for ejectment. A vendee who steps into the shoes of the original owner may still eject the lessee on any ground expressly provided by the Rental Laws, including legitimate need for own residential use.

• Month-to-Month Lease as Lease with Definite Period — A verbal contract of lease on a month-to-month basis is a lease with a definite period, terminable upon notice. The notice to vacate given by the lessor serves both to terminate the lease and to satisfy the three-month advance notice requirement under Sec. 5(c) of BP 877.

• "Thus, if an abode can be used for limited business purposes, we see no reason why it cannot be used as an abode for persons rendering services usually necessary or desirable for the maintenance and enjoyment of a home and who personally minister to the personal comfort and convenience of the members of the household." — This passage articulates the ratio decidendi for expanding the concept of "residential unit" to include servants' quarters as an auxiliary part of a conjugal dwelling.

• "A different conclusion would have been arrived at if a lessee like petitioner herein, was ejected on the sole ratiocination that the premises would be exclusively used as maid/driver's quarters autonomously of any adjoining conjugal dwelling." — This qualifies the holding and establishes the limiting principle: auxiliary use is permissible only when integrated into a unified residential plan.

• "The law could not have intended to prevent bona fide sales from owners/lessors who wish to dispose of their property to third persons in need of their own residence. This would be an absurd interpretation contrary to the basic philosophy underlying the right to property." — This passage explains why the sale-prohibition provision must be read narrowly and cannot override statutory grounds for ejectment available to a vendee.

• Tan Tok Lee vs. CFI of Kalookan City, 121 SCRA 438 (1983) — Cited for the proposition that a subsequent owner who bought leased premises for his and his family's own use may recover possession; the Court distinguished this case to the extent that giving preferential right to a tenant over a new owner's need would be arbitrary and unreasonable.
• Barosi vs. C.A., et al., 125 SCRA 798 (1983) — Cited alongside Tan Tok Lee for the rule that a vendee who establishes legitimate need for own use may eject a lessee notwithstanding the sale.
• Rantael vs. CA, 97 SCRA 453 (1980) — Cited as leading authority for the doctrine that a verbal month-to-month lease constitutes a lease with a definite period.
• Dionio vs. IAC, 147 SCRA 243 (1987) — Cited for the rule that an oral month-to-month lease is terminable on 30 days' notice.
• Gaanan vs. IAC, 145 SCRA 112 (1986) — Cited for the principle that legislative intent must be ascertained from consideration of the whole statute, and clauses should not be taken as detached and isolated expressions.

• Sec. 5(c), Batas Pambansa Blg. 877 — Provides that the legitimate need of the owner/lessor to repossess his property for his own use or for the use of any immediate member of his family as a residential unit is a ground for judicial ejectment, provided the owner does not own any other available residential unit within the same city or municipality, the lessor gives three months' formal advance notice, and the owner is prohibited from leasing the unit to a third party for at least one year. The Court applied this provision to hold that Cu's need to merge the subject unit into a conjugal dwelling, including auxiliary use as servants' quarters, constituted legitimate need for residential purposes.
• Sec. 2(b), Batas Pambansa Blg. 877 — Defines "residential unit" to include not only buildings used solely as dwelling places but also those used for home industries, retail stores, or other business purposes, provided the owner and his family actually live therein and use it principally for dwelling purposes. The Court used this definition as an intrinsic aid in construing the scope of "residential unit" under Sec. 5(c), reasoning that if business use is permitted, auxiliary residential use for household staff should likewise be permitted.
• Sec. 2(c), Batas Pambansa Blg. 877 — Defines "immediate members of family" as limited to the lessor's spouse, direct descendants, or ascendants by consanguinity or affinity. Petitioner invoked this to argue that maids and drivers are not immediate family members; the Court rejected the argument because Cu himself and his family were transferring to the adjoining premises, making the unit an auxiliary part of the main conjugal dwelling rather than a standalone unit for non-family members.
• Last paragraph, Sec. 5, Batas Pambansa Blg. 877 — Prohibits a lessor or successor-in-interest from ejecting a lessee on the ground that the leased premises had been sold or mortgaged to a third person. The Court construed this provision narrowly, holding that the prohibition applies only when sale is the sole ground for ejectment and does not bar a vendee from invoking other statutory grounds such as legitimate need for own residential use.

Gutierrez, Jr., Feliciano, Bidin, and Cortes, JJ., concurred.