Facts:

The case revolves around Unicane Food Products Manufacturing, Inc. (hereinafter referred to as "Unicane") as the petitioner, and Felisa Feliciano Manese, her daughters Lutgarda and Ciceron Manese, and her husband Pablo Manese as respondents. On June 6, 1975, Felisa and Roberto Regala Keh Yung signed a lease agreement for a parcel of land in San Fernando, Pampanga, with a term of 15 years at an annual rental of PHP 10,000. Following this lease signing, an amendment was made to recognize Unicane as the actual lessee, while the other terms of the lease remained unchanged. The amendments were duly recorded. During the lease period, an agreement was made to extend the lease until December 7, 1997, with Unicane paying PHP 20,000 in advance for this extension. However, in 1978, Felisa sold her property to Lutgarda and Ciceron without her husband’s consent, intending to support her financially distressed daughters, who later mortgaged the property to a bank. After discovering

...

Facts:

Lease Contract and Amendment

• On June 6, 1975, Felisa Feliciano Manese and Roberto Regala Keh Yung executed a contract of lease with an option to buy a parcel of land covered by Transfer Certificate of Title No. 121058-R. The land, valued as Felisa’s paraphernal property, measured approximately 38,027 square meters and was located at Bo. San Isidro, San Fernando, Pampanga.
• The lease was set for fifteen (15) years (June 6, 1975 to June 7, 1990) with an annual rental of P10,000.
• Three days after the execution of the original lease, an amendment was agreed upon whereby the parties mutually designated UNICANE FOOD PRODUCTS MANUFACTURING, INC. as the real and actual LESSEE of the premises, while keeping the other terms unchanged.
• Both the original lease and its amendment were duly registered in the memorandum of encumbrance on TCT No. 121058-R as separate entries.

Advance Payment and Verbal Extension

• UNICANE consistently complied with the contractual terms by paying its yearly rentals in advance.
• During the course of the lease, UNICANE and Felisa Manese verbally agreed to extend the lease term up to December 7, 1997.
• On July 3, 1987, UNICANE paid an advance amounting to P20,000 for the extended term, while Felisa promised to execute an extended lease contract.

Simulated Sale and Subsequent Mortgage

• On September 6, 1978, influenced by her two daughters, Lutgarda and Ciceron Manese, Felisa sold three parcels of her land for P15,000 without the consent of her husband Pablo.
• The sale was executed with the undertaking that the land would revert to Felisa once her daughters overcame their financial difficulties.
• A new certificate of title (TCT No. 265688-R) was later issued in the names of Lutgarda and Ciceron Manese.
• Subsequently, on January 25, 1989, the daughters mortgaged the property with the Planters Development Bank to secure a loan, though none of the proceeds benefited Felisa.

Dispute Over Lease Extension and Option to Buy

• UNICANE, upon discovering Felisa’s reluctance to issue the extended lease contract, sought to have its receipts for advance rentals registered as an encumbrance on the property.
• At this point, UNICANE also learned of the deed of absolute sale executed by Felisa in favor of Lutgarda and Ciceron, and that the new title had been obtained over ten years after the sale.
• UNICANE demanded that the deed of absolute sale be disregarded on the ground that it violated its preferential option to buy provided under the lease, specifically the provision granting UNICANE the right to purchase at the same price.

Litigation and Court Decisions

• On July 10, 1989, UNICANE filed a complaint with the Regional Trial Court (San Fernando, Pampanga, Branch 46) for annulment of the deed of absolute sale.
• On September 8, 1992, the trial court ruled in favor of UNICANE, effectively:
• Extending the lease up to December 7, 1997;
• Rescinding or nullifying the deed of absolute sale;
• Directing Felisa to execute a deed of absolute sale in favor of UNICANE at the same purchase price as that of the simulated sale; and
• Ordering respondents to pay attorney’s fees and costs.
• Respondents filed their notice of appeal on September 15, 1992, and on February 29, 1996, the Court of Appeals reversed the trial court decision.
• The Court of Appeals held that:
• The advance rental receipts did not evidence a valid extension of the lease since Felisa, an elderly and illiterate woman, did not fully understand the content of those receipts;
• The deed of absolute sale was simulated due to the lack of genuine intent and absence of consideration; and
• With notice from Lutgarda and Ciceron, the lease extension was effectively denied, thereby nullifying UNICANE’s preferential option after the lease expired in 1990.
• UNICANE’s subsequent motion for reconsideration filed on March 26, 1996, was denied on June 28, 1996, which led to the filing of the petition for review.

Issue:

• Whether the advance rental receipts could be construed as evidence of an extension of the lease agreement, given the circumstances under which they were executed by Felisa Manese.
• Whether the deed of absolute sale executed by Felisa in favor of Lutgarda and Ciceron Manese constitutes a genuine sale or is merely a simulated transaction lacking the essential elements of a real sale.
• Whether UNICANE retains the right to invoke its option to buy the leased premises after the expiration of the lease period, particularly in light of the non-renewal of the lease.

Ruling:

• (Subscriber-Only)

Ratio:

• (Subscriber-Only)

Doctrine:

• (Subscriber-Only)