G.R. No. 147377 - Vera vs. Rigor

Petitioner Midway Maritime and Technological Foundation (Midway) leases two parcels of land in Cabanatuan City; its president, Dr. Sabino Manglicmot, is married to Adoracion Cloma, the registered owner under TCT Nos. T-71321 and T-71322.
On the leased land stands a residential building owned by respondents Marissa E. Castro et al., children of the original owner, Louis Castro Sr.

On August 15, 1974, Louis Castro Sr. mortgaged the two parcels to Bancom Development Corporation to secure a loan; during the mortgage, the board of Cabanatuan City Colleges (CCC) leased a portion to the Castro children for 15 years (until 1992), upon which they built the disputed residence.
CCC defaulted; Bancom foreclosed and acquired the property at public auction in 1979, assigned the credit to Union Bank of the Philippines (UB), which consolidated ownership in 1984 after CCC’s failure to redeem.

UB sought a writ of possession including the residential house; respondents opposed. In Castro, Jr. v. CA (G.R. No. 97401, Dec. 6, 1995), the Supreme Court held that the house was not owned by mortgagor CCC and should not have been included in the writ.
On July 13, 1993, Tomas Cloma (Adoracion’s father) bought the two parcels at UB’s auction, leased them to Midway, then sold the parcels (but allegedly not the improvements) to Adoracion Cloma.

Respondents’ Amended Complaint (Apr. 19, 2000) alleges ownership of the residential house (used 1977–1985, thereafter occupied by caretaker Josefino Castro), lease of the building (minus caretaker’s portion) to petitioner in June 1993 at P6,000/month, increased to P10,000 in October 1995, and nonpayment of rent from August 1995.
Petitioner denies respondents’ ownership, claiming Adoracion owns both the land and building; it relies on a separate ejectment ruling (Civ. Case No. 2939 (AF), RTC Branch 26) that auction sale included improvements.

RTC Branch 28 (July 2, 2001) declared respondents absolute owners of the building and ordered petitioner to pay P672,000 in unpaid rentals; moral damages and attorney’s fees were dismissed.
CA (Oct. 29, 2008 Decision; Aug. 3, 2009 Resolution) affirmed the RTC judgment in toto; this petition followed.

Whether a valid lease agreement existed between petitioner and respondents covering the residential building.
Whether, as lessee, petitioner is estopped from denying respondents’ ownership of the building.
Whether the auction sale to Tomas Cloma in 1993 included the residential improvements.
Whether the lease between CCC and respondents had expired, affecting respondents’ right to lease to petitioner.
Whether successive purchasers (Bancom, Union Bank, Tomas, Adoracion) could terminate the respondents’ unrecorded lease.