Expiration of Lease Agreements: Understanding Ejectment Rights in the Philippines

When a lease agreement has no fixed term but rent is paid monthly, the law treats it as a month-to-month lease that expires at the end of each month. This means a lessor may eject the tenant upon proper demand, as the Supreme Court clarified in Peña v. Spouses Tolentino (G.R. No. 155227-28, February 9, 2011). The case also underscores an important procedural rule: defenses not raised in the lower courts cannot be raised for the first time on appeal.

The Facts of the Case

Three lessees occupied separate parcels of land in Tondo, Manila under oral lease agreements. They paid monthly rents ranging from P480.00 to P840.00. On August 15, 1995, the lessors sent demand letters terminating the month-to-month leases effective September 15, 1995, and requiring the lessees to vacate. When the lessees refused, the lessors filed ejectment complaints.

The lessees argued they could not be summarily ejected because of Presidential Decree No. 20 and related laws. The Metropolitan Trial Court ruled in favor of the lessors, ordering the lessees to vacate and pay reasonable compensation. On appeal, the Regional Trial Court modified the decision, fixing a two-year lease term under Article 1687 of the Civil Code. The Court of Appeals reinstated the MeTC's ejectment order, and the lessees appealed to the Supreme Court.

The Issue: Expiration of a Month-to-Month Lease

The central question was whether the lessees could be ejected on the ground that their verbal lease contracts had expired.

The lessees relied on P.D. No. 20, which suspended paragraph 1 of Article 1673 of the Civil Code—the provision allowing ejectment when the lease period expires. However, the Court noted that P.D. No. 20 had been expressly repealed by Batas Pambansa Blg. 25 in 1979. By the time the ejectment complaints were filed in 1995, the controlling law was B.P. Blg. 877.

Under Section 6 of B.P. Blg. 877, the suspension of Article 1673(1) applied only when the lease was not for a definite period. The Court held that a month-to-month lease, where rent is paid monthly, is a lease with a definite period under Article 1687 of the Civil Code. Therefore, the lease expires at the end of every month, and the lessor may eject the lessee upon the expiration of that period.

The Issue: Raising New Defenses on Appeal

The lessees also attempted to invoke, for the first time on appeal, their alleged right of first refusal under P.D. No. 1517 (the Urban Land Reform Law) and R.A. No. 3516. The Court rejected this.

The settled rule is that a party cannot change his theory of the case on appeal. Defenses not pleaded in the answer may not be raised for the first time on appeal. The lessees had ample opportunity to assert this right earlier—they knew of it even before the lessors purchased the property—yet they remained silent throughout the proceedings in the lower courts. Raising it only before the Supreme Court would be unfair to the adverse party and would deprive the lower courts of the opportunity to decide the issue.

The Ruling on Rentals

The Court also addressed the matter of payments after lease expiration. Once a lease expires, the lessor is entitled to reasonable compensation for the use and occupancy of the premises, not the old rental rate. The MeTC's award of reasonable compensation was sustained because the lessees did not raise any issue against it on appeal.

Practical Takeaways

• A month-to-month lease, even if oral, is a lease with a definite period under Article 1687 of the Civil Code. It expires at the end of each month.
• A lessor may eject a lessee upon the expiration of the lease period, provided there is proper demand to vacate, under Section 5(f) of B.P. Blg. 877 (now Section 7(e) of R.A. No. 9161).
• P.D. No. 20 is no longer in effect. It was repealed by B.P. Blg. 25 in 1979. The applicable rent control law depends on when the case is filed.
• After lease expiration, the lessor may charge reasonable compensation for continued use and occupancy, not the old rental rate.
• Raise all defenses in the trial court. A party cannot change theories or raise new defenses for the first time on appeal.

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.