A.M. No. P-09-2632 - Office of the Court Administrator vs. Caya

Case Digest (A.M. No. P-09-2632)
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Facts:

Parties and the subject property
Wheelers Club International, Inc. (Wheelers) entered into lease and sublease arrangements involving a parcel of land with improvement situated at No. 83 EDSA, Mandaluyong City, covered by Transfer Certificate of Title No. 5350 (Property).
Rosario Bonifacio (Rosario), Romeo Bonifacio (Romeo), Virgilio Bonifacio (Virgilio), Generoso Bonifacio (Generoso), Andres Bonifacio (Andres), Jovito Bonifacio, Jr. (Jovito), Jose Bonifacio (Jose), Zenaida B. Lafiguera (Zenaida), Corazon B. Calub (Corazon), and Ma. Cristina B. De Guzman (Ma. Cristina) (collectively, co-owners) were registered co-owners of the Property.
The co-owners comprised the Board of Directors of J & R Bonifacio Development Corporation (JRBDC).

The lease and development documents executed in 1994
On 5 May 1994, Bonifacio Development Associates, Inc. (BDAI), represented by Jaime C. Bonifacio, Sr. (Jaime) as President and Chairman of its Board of Directors, entered into a Contract of Lease with Wheelers.
Under the Contract of Lease, the term ran for five years from 1 June 1994 to 31 May 1999.
Under the Contract of Lease, Wheelers undertook to pay BDAI a monthly rental of PHP 108,750 for the lease of the Property.
On 31 May 1994, JRBDC, represented by the co-owners as members of the Board of Directors and lessors of the Property, entered into a Lease Development Agreement with BDAI.
Under the Lease Development Agreement, BDAI was authorized to renovate, manage, develop, and sublease the Property.
The term of the Lease Development Agreement also ran for five years from 31 May 1994 to 31 May 1999.
The monthly rental in the Lease Development Agreement was based on the actual income derived from the lease, management and development of the Property, to be shared by the co-owners and BDAI.
On the same day, the co-owners executed a General Power of Attorney (power of attorney) in favor of Jaime, granting him authority to administer the Property, renovate the building, introduce improvements, and lease the Property to any person.

Developments in 1996 to 1997: accounting demand, termination of authority, and appointment of Jovito
On 16 June 1996, the co-owners demanded that BDAI submit accounting records of all income from the Property.
BDAI, in turn, demanded that the co-owners furnish receipts and records of cash and check advances made by BDAI to the co-owners.
On 18 August 1996, the co-owners, as directors of JRBDC, approved a Resolution terminating Jaime’s authority to manage and administer the Property for BDAI’s failure to submit an accounting of the income from the Property.
On 20 August 1996, Rosario, as President and Chairman of the Board of JRBDC, wrote Jaime, as President and Chairman of BDAI, terminating the agreement with JRBDC for non-payment of whatever was due to JRBDC under the agreement.
On 26 January 1997, the co-owners, as members of the Board of Directors of JRBDC, approved a Resolution appointing Jovito as the new administrator of the Property.
On the next day, Rosario wrote a letter informing Wheelers of Jovito’s appointment as the new administrator and the termination of Jaime’s authority to manage the Property.
On 11 February 1997, BDAI, through Jaime, wrote to Rosario insisting that there was no valid reason for the termination of BDAI or Jaime’s management of the Property.
BDAI claimed that Rosario’s failure to furnish receipts hindered BDAI’s submission of complete accounting records.
On 4 March 1997, Jovito wrote to Wheelers claiming that the co-owners did not authorize the Contract of Lease between BDAI and Wheelers and giving Wheelers ten days to vacate the Property.
Meanwhile, Wheelers continued to pay BDAI the monthly rentals from February to September 1997.
On 9 October 1997, Jovito and the other co-owners, through counsel, sent Wheelers a letter demanding payment of rentals in arrears from February to October 1997 and demanding that Wheelers vacate within five days from receipt of the letter.

Filing of the unlawful detainer case and Wheelers’ response
On 21 October 1997, Jovito, as a co-owner of the Property, filed with the Metropolitan Trial Court (MTC) a complaint for unlawful detainer against Wheelers, docketed as Civil Case No. 15760.
Jovito claimed that Wheelers refused to pay him, as the new administrator of the Property, the rentals due from February to October 1997.
In its Answer dated 19 November 1997, Wheelers countered that it paid BDAI the rentals from February to September 1997.
Wheelers held in abeyance payment of the rental for October 1997 due to Jovito’s demand letter and Wheelers’ plan to consign the rental in Court.

Lower court proceedings
The MTC ruled that although JRBDC does not own the Property, the co-owners who comprised JRBDC’s Board of Directors signed the Lease Development Agreement, signifying co-owners’ consent to JRBDC’s act.
The MTC found that since the signing of the Lease Development Agreement, none of the co-owners questioned the execution of the agreement and that the co-owners adduced no evidence to show the nullity of the Lease Development Agreement.
The MTC further ruled that one who is not a party to a contract had no personality to assail the validity of such contract, rejecting Jovito’s claim that he did not consent to the Lease Development Agreement.
By Joint Decision dated 5 June 1998, the MTC dismissed the unlawful detainer complaint(s) for lack of cause of action.

Appeal to the RTC and its reversal
Respondent appealed to the Regional Trial Court (RTC), which reversed the MTC decision.
The RTC held that after termination of Jaime’s management authority over the Property, Wheelers could not simply rely on its lease contract with BDAI and deny Jovito and the other co-owners their right to collect rentals.
The RTC ruled that Wheelers paid rentals at its own risk because it knew Jaime no longer had authority to receive the rentals.
Citing Aranas v. Tutaan, the RTC held that payment to one without authority to receive payment was void.
The RTC’s dis...(Subscriber-Only)

Issues:

Unlawful detainer cause of action for non-payment of rentals
Whether the co-owners, through Jovito, had a cause of action for unlawful detainer against Wheelers for non-payment of rentals, given Wheelers’ payments to BDAI after termination of Jaime’s management authority.

Expiration of the term as a ground for ejectment
Whether the expiration of the term of the lease agreements supported ejectment, considering the Contract of Lease term and the Lease Development Agreement term, and the claim that the alleged lease of the co-owners to Wheelers had expired.

Character of the contractual relationships and privity
Whether the co-owners had privity with Wheelers that created obligations directly enforceable in unlawful detainer.
Whether Wheelers’ status involved a sublease arrangement and the legal consequence of co-owners being strangers to the BDAI–Wheelers Contract of Lease.

Effect of revocation of authority and agency on the validity and enforceability of the lease relations
Whether the co-owners could revoke BDAI’s authority to administer/manage the Property at will and thereby terminate Wheelers’ lawful possession.

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Ruling:

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