Chua v. Victorio : 157568 : May 18, 2004 : J. Ynares-Santiago : First
Division : Decision
[G.R. NO. 157568 : May 18, 2004]
LEONARDO CHUA and HEIRS OF YONG TIAN, Petitioners, v. MUTYA B. VICTORIO, herein represented by her
Attorney-in-Fact ARMANDO Z. COSME, Respondent.
D E C I S I O N
The instant Petition for Review on Certiorari has its
genesis in Civil Cases Nos. 21-2761 and 21-2762, entitled Mutya Victorio v. Yong Tian and Mutya Victorio v. Leonardo Chua, respectively.
These were ejectment cases filed by
respondent Mutya Victorio, the owner of certain commercial units located on
Panganiban Street, Santiago City, Isabela, against petitioners herein. Leonardo
Chua is currently the occupant of one unit, while petitioners Heirs of Yong
Tian are the occupants of two units.1 cralawred
It appears that these were not the first ejectment cases filed by
respondent against petitioners.
earlier ejectment case ended in a compromise between the parties,2 approved by the trial court, whereby they agreed as follows:chanroblesvirtua1awlibrary
1.That the present
rental on the leased premises shall be increased by 100 (100%) Percent
effective August 1990;chanroblesvirtuallawlibrary
increases shall be reviewed every after (sic)
four (4) years based on the then prevailing rental rates at commercial
establishments along Panganiban Street, Santiago, Isabela, but in no case shall
be increased by more than twenty-five (25%) percent;chanroblesvirtuallawlibrary
shall pay to plaintiffs their respective accrued rental differentials within a
period of one (1) year to be covered by postdated checks in equal amounts
beginning November 30, 1991, and every end of the month thereafter;chanroblesvirtuallawlibrary
4.That this compromise
agreement amends the compromise agreement embodied in the Decision, Annex C
to the complaint with respect to paragraph (2) above; and all other terms and
conditions not inconsistent of (sic)
this compromise agreement shall remain and continue to be in full force and
Sometime in September of 1994, respondent (through her
made a rental survey of other commercial establishments
along Panganiban Street.
On the basis
of this survey, a 25% rental increase was demanded from petitioners.4 cralawred
Petitioners refused to pay the increased rentals which compelled
respondent to file unlawful detainer cases against both lessees, docketed as
Civil Cases Nos. II-370 and II-371.
However, both complaints were dismissed by the Municipal Trial Court in
Branch II, Santiago City.
The dismissal was affirmed by the Regional Trial Court (RTC),
reversed by the Court of Appeals, which ordered petitioners to vacate the
leased premises.5 cralawred
The decision of the Court of Appeals became final and executory, and, upon motion filed by respondent, the MTCC issued writs of execution
ordering the ejectment of petitioners from respondents property.6 cralawred
Petitioners filed motions to quash the writs of execution,
contending that there were supervening events which rendered the execution
unjust or impossible.
petitioners claimed that they had acceded to the request for an increase in
rentals, and had paid respondent the amount demanded.7 cralawred
The MTCC found that petitioners had indeed paid to respondent the
increased monthly rental even before the Court of Appeals decision attained
finality.8 In fact, petitioners offered to pay the increased rentals as early as January
1996, while the cases were still pending with the RTC.9 The increased monthly rentals were accepted by respondent without reservation, and monthly payment of the rentals at the increased rate continued throughout
the pendency of the suits.10 Accordingly, the MTCC quashed the writs of execution that it earlier issued.11 cralawred
Respondent assailed the quashal of the writ of execution directly
to the Supreme Court via a Petition for Review on Certiorari .
This petition was dismissed by the Supreme
Court on procedural grounds.12 Petitioners thus remained in possession of respondents properties.
Subsequently, on October 10, 1998, respondent wrote a letter to
petitioners informing them of her intention to increase the monthly rentals effective
November 1, 1998, from P6,551.25 per unit to a sum more than double that,
namely, P15,000.00 per unit.13 Petitioners refused to pay this amount, contending that it was beyond the
allowable rental increase embodied in the compromise agreement.14 cralawred
Respondent thus instituted Civil Cases Nos. 21-2761 and 21-2762
seeking the ejectment of petitioners.
In a joint decision dated May 10, 1999, the MTCC, Branch II, Santiago
City dismissed these complaints for lack of merit.15 On appeal, the RTC initially reversed the MTCC,16 but later reversed its earlier decision.
On March 9, 2000, the RTC issued an order affirming the MTCCs dismissal
of the complaints.17 cralawred
Respondent filed a Petition for Review with the Court of Appeals,
which was docketed as CA-G.R. SP No. 157568.
On May 31, 2001,18 the Court of Appeals reversed the March 9, 2000 Order of the RTC affirming the
MTCCs dismissal of the complaints.
Court of Appeals ruled that the compromise agreement, which set a definite
period of four years for the lease contract, had been abrogated by petitioners
refusal to pay the increased rentals in 1994.
Accordingly, in 1994, the juridical relation between the parties was
When respondent accepted
payment of the increased monthly amount, an entirely new contract of lease was
entered into between the parties.
payment of rent was made on a monthly basis, and pursuant to Article 1687 of
the Civil Code, the period of this lease contract was monthly.
Upon the expiration of every month, the
lessor could increase the rents and demand that the lessee vacate the premises
upon non-compliance with increased terms.
In exercise of equity, however, the Court of Appeals granted petitioners
an extension of one year from finality of the decision within which to vacate
Petitioners motion for reconsideration was denied on March 11,
2003.19 Hence, this petition.
The petition lacks merit.
Petitioners case centers on the interpretation of the compromise
agreement, which, they claim, continues to govern the juridical relation
between the parties.
petitioners invoke the second clause of the compromise agreement, referring to
the allowable increase in the rentals of respondents premises.
Petitioners contend that that they have a
continued right of occupancy, paying monthly rentals which may be increased
only by 25% every four years.
argue that the increase demanded by respondent was in excess of the allowable
amount, and, therefore, is invalid.
Petitioners contention is bereft of merit.
The right of rescission is statutorily recognized in reciprocal
obligations, such as contracts of lease.
In addition to the general remedy of rescission granted under Article
1191 of the Civil Code,20 there is an independent provision granting the remedy of rescission for breach
of any of the lessor or lessees statutory obligations. Under Article 1659 of
the Civil Code, the aggrieved party may, at his option, ask for (1) the
rescission of the contract; (2) rescission and indemnification for damages; or
(3) only indemnification for damages, allowing the contract to remain in force.21 cralawred
Payment of the rent is one of a lessees statutory obligations,22 and, upon non-payment by petitioners of the increased rental in September 1994,
the lessor acquired the right to avail of any of the three remedies outlined
Ordinarily, an obligees remedies upon breach of an obligation
are judicial in nature.
implicit in the third paragraph of Article 1191, and in Article 1659 of the
Thus, the mere failure by the
lessees to comply with the increased rental did not ipso jure produce the rescission of the contract of lease.
However, although the lessor did not resort to judicial action to
specifically avail of any of the three remedies in Article 1659, this does not
mean that the compromise agreement continues in force.
In certain exceptional cases, the law
recognizes the availability of extrajudicial remedies, which exist in addition
to the judicial remedies given above.
In the case of lease agreements, Article 1673 of the Civil Code
The lessor may
judicially eject the lessee for any of the following causes:chanroblesvirtua1awlibrary
(1) When the period
agreed upon, or that which is fixed for the duration of leases under articles
1682 and 1687, has expired;chanroblesvirtuallawlibrary
(2) Lack of payment of
the price stipulated;chanroblesvirtuallawlibrary
(3) Violation of any of
the conditions agreed upon in the contract;chanroblesvirtuallawlibrary
(4) When the lessee
devotes the thing leased to any use or service not stipulated which causes the
deterioration thereof; or if he does not observe the requirement in No. 2 of
article 1657, as regards the use thereof.
The ejectment of tenants of agricultural lands is governed by
The above provision must be read in conjunction with Rule 70,
Section 2 of the Rules of Court, which provides that a demand to pay or to
comply with the conditions of the lease and to vacate the premises is a
condition precedent for the institution of an ejectment suit against the lessee.
The import of these provisions is to grant the lessor the option
of extrajudicially terminating the contract of lease by simply serving a
written notice upon the lessee.
extrajudicial termination has the same effect as rescission.
Indeed, as early as the 1929 case of Vda. de Pamintuan v. Tiglao,23 we ruled in this wise:chanroblesvirtua1awlibrary
Upon non-payment of rent by the lessee, the lessor may elect to
treat the contract as rescinded and thereby determine the right of the lessee
to continue in possession; and this right to recover possession may be
enforced in an action of unlawful detainer.
It is not necessary, in such situation, that an independent action for
the rescission of the lease should first be instituted in the CFI [now RTC],
for the purpose of putting an end to the right of the tenant to remain in
possession under the lease.24 (Underscoring supplied)cralawlibrary
More recently, in the 1998 case of Dio v. Concepcion,25 we reiterated this ruling and explained that rescission of lease contracts
under Article 1659 of the Civil Code is not one that requires an independent
action, unlike resolution of reciprocal obligations under Article 1191 of said
When, in 1994, the petitioners refused to pay the rentals, and
respondent initiated the earlier ejectment suits, the juridical bond between
the parties was severed.
were no longer connected by the link of a lessor-lessee relation.
The compromise agreement ceased to be the
law between the parties and ceased to govern their legal relationship.
No amount of subsequent payment by the
lessees could automatically restore the parties to what they once were.
The lessors acceptance of the increased rentals did not have the
effect of reviving the earlier contract of lease.Upon the moment of acquiescence by respondents to the increased
amount, an entirely new contract of lease was entered into, forging an entirely
new juridical relation.
The new contract of lease did not have a fixed period.
As such, Article 1687 of the Civil Code is
If the period for
the lease has not been fixed, it is understood to be from year to year, if the
rent agreed upon is annual; from month to month, if it is monthly; from week to
week, if the rent is weekly; and from day to day, if the rent is to be paid
daily. However, even though a monthly rent is paid, and no period for the lease
has been set, the courts may fix a longer term for the lease after the lessee
has occupied the premises for over one year. If the rent is weekly, the courts
may likewise determine a longer period after the lessee has been in possession
for over six months. In case of daily rent, the courts may also fix a longer
period after the lessee has stayed in the place for over one month.
Since the payment of the rentals was made
on a monthly basis, respondents contention, that the contract of lease was on
a monthly term, is correct.
Hence, respondent was well within her rights to increase the
rental of her properties each month as she desired, subject to existing
Petitioners were similarly within
their rights to refuse to acquiesce.
Upon this refusal, the contract of lease between the parties was once
Respondent thus has
the right to demand that petitioners vacate her properties.
Petitioners seek to restore the compromise agreement, allegedly
because this Court has already made a definitive pronouncement interpreting
paragraph 2 thereof.
a Resolution issued by this Court dated September 5, 2001, in G.R. No. 148262,
entitled Mutya B. Victorio v. Rodolfo Sy,
which had a similar factual milieu as the instant case, involving the same
lessor, the same commercial property, and a similarly worded compromise
A perusal of the aforecited Resolution, however, indicates that
the same contains no definitive pronouncement as to the continued validity of
the compromise agreement.
rejected the contention that the compromise agreement provided a fixed
four-year term for the contract of lease, and said:chanroblesvirtua1awlibrary
The contention has no merit.
The compromise agreement in question primarily dealt with the amount and
frequency of the increase of the rent of the leased premises and not with the
duration of the lease itself.
clear not only from the terms of the agreement but also from paragraph 4 which
provides that all other terms and conditions not inconsistent with this
compromise agreement shall remain and continue to be in full force and
Needless to say, petitioner
cannot be allowed to unilaterally change the lease contract between her and
respondent based on her reading of a court ruling.Indeed, there is nothing in the decision of the Court of Appeals
in CA G.R. SP No. 41560 to justify petitioners contention.
At any rate, CA G.R. SP No. 59482, by
petitioners own admission, is not yet final and executory as it is the subject
of a motion for reconsideration.27 cralawred
We correctly pointed out that the compromise agreement did not
deal with the duration of the original lease contract; but we did not
categorically state that the compromise agreement continues to be valid between
the parties thereto.
The earlier contract of lease was terminated not because
the term expired.
As stated, the
compromise agreement did not fix any specific period for the lease.
Rather, the earlier contract of lease was
terminated because respondent chose to exercise a right granted by law to an
aggrieved lessor, which statutory right is deemed written into the contract of
Moreover, it must be pointed out that the aforecited Resolution
has absolutely no relevance to the parties herein.The parties to this case are bound by res judicata in the concept of conclusiveness of judgment, as
found under paragraph (c) of Rule 39, Section 4728 of the Rules of Court.
doctrine of conclusiveness of judgment, which is also known as preclusion of
issues or collateral estoppel, issues actually and directly resolved in a
former suit cannot again be raised in any future case between the same parties
involving a different cause of action.29 cralawred
The said concept is explained in this manner:chanroblesvirtua1awlibrary
A] fact or question which was in issue in a former suit and was
there judicially passed upon and determined by a court of competent
jurisdiction, is conclusively settled by the judgment therein as far as the
parties to that action and persons in privity with them are concerned and cannot
be again litigated in any future action between such parties or
their privies, in the same court or any other court of concurrent jurisdiction
on either the same or different cause of action, while the judgment remains
unreversed by proper authority. It has been held that in order that a judgment
in one action can be conclusive as to a particular matter in another action
between the same parties or their privies, it is essential that the issue be
identical. If a particular point or question is in issue in the second
action, and the judgment will depend on the determination of that particular
point or question, a former judgment between the same parties or their privies
will be final and conclusive in the second if that same point or question was
in issue and adjudicated in the first suit.30 (Citations omitted, underscoring supplied.)
The Court of Appeals final and executory decisions ordering
ejectment in the earlier cases, Civil Cases No.II-370 and II-371, were premised on the severance of the
lessor-lessee relationship between the parties.This lessor-lessee relationship was based on the contract of
lease embodied in the compromise agreement.
The Court of Appeals could not have ordered the ejectment of the
petitioners unless it conclusively passed on the issue of the continued
effectivity of the compromise agreement, and made the determination that the
compromise agreement no longer governed the parties relation.
Thus, when the Court of Appeals ordered the
ejectment of the Petitioners, it did so on the basis of a finding that the
earlier lessor-lessee relation, embodied in the compromise agreement, was terminated.
The particular point or question in this case is the
determination of the continued validity of the compromise agreement, which
issue has already been decisively settled.
This finding has become conclusive on the parties.
Finally, although the Court of Appeals, in the exercise of equity
jurisdiction,31 granted petitioners an extension of one year to vacate the premises,32 we do not consider that such an extension is necessary.
The Court of Appeals decision which was
unfavorable to petitioners was promulgated almost three years ago, on May 31,
In the interim, petitioners have
had ample time to seek other premises where they can operate their business
A period of one month
should suffice to wrap up their remaining business affairs.
WHEREFORE, in view of
the foregoing, the instant Petition for Review is DENIED.
The decision of the Court of Appeals dated
May 31, 2001 in CA-G.R. SP No. 59482, is AFFIRMED with the MODIFICATION that
petitioners are ordered to vacate the leased premises one month after the
finality of this decision.
Leonardo Chua is also ORDERED to pay respondent the sum of P15,000.000 a month
as reasonable compensation for the use of the premises from November 1, 1998
until he finally vacates the premises.
Petitioners, Heirs of Yong Tian, are ORDERED to pay respondent the
monthly sum of P15,000.00 per unit, or P30,000.00 per month from November 1,
1998 until they finally vacate the premises.
Costs against petitioners.
Panganiban (Working Chairman),
Carpio, and Azcuna, JJ., concur.
Davide, Jr., C.J., on official
20 Said provision reads:
The power to rescind obligations
is implied in reciprocal ones, in case one of the obligors should not comply
with what is incumbent upon him.
The injured party may choose between the fulfillment and the
rescission of the obligation, with the payment of damages in either case. He
may also seek rescission, even after he has chosen fulfillment, if the latter
should become impossible.
The court shall decree the rescission claimed, unless there
be just cause authorizing the fixing of a period.
This is understood to be without prejudice to the rights of
third persons who have acquired the thing, in accordance with articles 1385 and
1388 and the Mortgage Law.
21 Civil Code,art. 1659,which reads:
If the lessor or the lessee should not
comply with the obligations set forth in articles 1654 and 1657, the aggrieved
party may ask for the rescission of the contract and indemnification for
damages, or only the latter, allowing the contract to remain in force.
22 Civil Code,art. 1657, par. (1),
which reads: The lessee is obliged: (1) To pay the price of the lease
according to the terms stipulated; x x x.
24 Vda. de Pamintuan v. Tiglao, 53 Phil. 1, 4 (1929).
26 Dio v. Concepcion, 357 Phil. 578, 587 (1998).
28 Rules of Court, Rule 39, sec. 47.
Effect of judgments or final orders.
(c) In any other litigation
between the parties or their successors in interest, that only is deemed to
have been adjudged in a former judgment or final order which appears upon its
face to have been so adjudged, or which was actually and necessarily included
therein or necessary thereto.
29 Kilosbayan v. Morato, 316 Phil. 652, 692-693 (1995),
citing Penalosa v.
Tuason, 22 Phil. 303 (1912); and Heirs of Roxas v. Galido, 108 Phil. 582
30 Calalang v. Register of Deeds of Quezon City, G.R. No. 76265, 11 March
1994, 231 SCRA 88, 99.
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