A more appropriate action

If there are two cases pending in court involving the same parties or such as representing the same interest in both actions, with identity of rights asserted and relief prayed for, the relief being founded on the same facts, and the judgment in either case would be conclusive on the parties (res judicata), one of them will have to be dismissed on the ground of litis pendencia. But which of the cases should be dismissed, the first or the second case filed? This is the question resolved in this case of MPLDC and ECRM.

The subject matter of the case was two lots with an approximate area of one hectare which MPLDC leased to ECRM for three months from December 15, 1999 to March 15, 2000 at P550,000 per month payable in advance. The lease contract stipulated that upon expiration of the lease ECRM shall, without delay or need of prior demand turn over the property to MPLDC in the same or improved condition with all temporary improvements removed by ECRM at its own expense.

About one week prior to the expiration of the contract or on March 6, 2000, ECRM irrevocably and absolutely assigned to RCC Inc. all its rights under the lease agreement for P1,650,000 and declared that henceforth, RCC would have full control of the leased property including the right to the extension of the lease period. Pursuant to this assignment, RCC verbally requested MPLDC for a renewal of the lease for three years, at the same time paying the three month rental from April 15, 2000 to July 15, 2000.This was followed by a formal letter explaining that the three year term would enable it to plan its activities more efficiently. MPLDC accepted the payment of three months rental and issued a receipt, but before acting on the request, it increased the rental to P770,000 a month retroactive April. RCC agreed to the increased rate and paid MPLDC the rent differential.

Thereafter, RCC erected a building on the leased area and subleased portions thereof. However in January 2001, the sub-lessees received notices to vacate the property from MPLDC. Even if it did not receive a similar notice, RCC wrote MPLDC requesting for execution of a formal three year contract. In reply, MPLDC wrote RCC that it had not entered into any form of agreement with the latter and that it had already taken steps to evict RCC and other possessors from the premises. MPLDC also claimed that the assignment of lease was not valid as it was without its consent and the provisions of lease were violated.

But RCC jumped the gun on MPLDC and filed an action in the RTC for specific performance, merely three days after receiving said communication, praying for the issuance of an order prohibiting MPLDC from instituting any action for its ejectment from the leased premises. RCC argued that by unqualifiedly and continuously accepting rental payments and allowing them to remain in the property, MPLDC effectively accepted and ratified its offer of a three year lease despite the absence of a categorical acceptance and a written agreement. Thus it asked the court to compel MPLDC to execute an agreement.

MPLDC filed a motion to dismiss RCC’s complaint on the ground that it is anticipatory in nature and unenforceable under the statute of frauds. Resolution on this motion was deferred for possible settlement. But when the parties failed to reach a compromise, MPLDC proceeded with the filing of the case for ejectment on August 22, 2001 before the Metropolitan Trial Court (MeTC). Then MPLDC also filed a supplemental motion to dismiss RCC’s action for specific performance in the RTC on the ground of litis pendencia or the pendency of the ejectment case. MPLDC claimed that all the elements of litis pendencia were present and that it is the complaint for specific performance which should be dismissed notwithstanding the fact that it was filed ahead of the unlawful detainer case.

Was MPLDC correct?

Yes.

Although the complaint in the RTC for specific performance seeks to compel MPLDC to execute a formal lease contract, its ultimate intent is to preclude MPLDC from filing a complaint for unlawful detainer and for RCC to maintain possession of the property. The right to the execution of a formal agreement hinges upon the more fundamental issue of whether RCC has a right to the possession of the property under the alleged implied lease contract. In other words the central issue to be resolved in the specific performance case unmistakably boils down to RCC’s alleged right to continued possession of the premises, which issue is essentially similar if not identical, to the one raised in the unlawful detainer case before the MeTC.

Since the question of possession of the subject property is at the core of the two actions, it can be said that the parties are actually litigating over the same subject matter which is the leased site, and on the same issue – RCC’s right of possession by virtue of the alleged contract.

The prior case for specific performance should be the one dismissed. If RCC has any right to the extension of the lease at all, such right is a proper and legitimate issue that could be raised in the unlawful detainer case because it may be raised as a defense to the action. And the mere fact that the unlawful detainer case was filed later is no bar to the dismissal of the action for specific performance. Where there are two pending cases, the general rule is that the second case filed should be dismissed under the priority in time rule. However the rule is not a hard and fast one as it may give way to the criterion of more appropriate action (Mid Pasig Land Development Corp. vs. Court of Appeals et.al., G.R. 153751 Oct. 8, 2003).