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[G.R. No. 135425-26. November 14, 2000]
HEIRS OF THE LATE EX-JUSTICE JOSE B.L. REYES, et al. vs. CA, et al.
EN BANC
Gentlemen:
Quoted hereunder, for your information is a resolution of this Court dated NOV 14 2000.
G.R. No. 135425-26 (Heirs of the late Ex-Justice Jose B.L. Reyes, et. al. represented by Adoracion Reyes, et al. vs. Court of Appeals and Metro Manila Builders, Inc.)
We now resolve the Motion for Reconsideration of respondent Metro Manila Builders, Inc. of the decision of the Court promulgated on August 16, 2000.
The motion for reconsideration is anchored on the submission of respondent that there is a need for judicial rescission of the lease agreement between MMB, Inc. and the Heirs of J. B. L. Reyes before the contract can be terminated. The reasons forwarded by respondent are as follows: 1. The rule is that rescission is not allowed where the breach is not substantial and fundamental to the fulfillment of the obligation; 2. There is a law which provides for rescissible contract, that is, Article 1385 of the Civil Code, and the causes for rescission are under Articles 1381 and 1382 of the Civil Code and the cases at bar do not fall under those enumerated; and 3. The right to rescind is reciprocal and can not be done if the other party objects thereto.
On the first issue raised by the private respondent, we find that the breach that occurred is substantial. MMB, Inc. failed to insure the property; the property was not kept in good sanitary condition and worse, MMB, Inc. sub-let the property. The lessor heirs of J. B. L. Reyes, as primary conditions to the lease agreement specifically placed all these conditions breached by MMB, Inc. in the lease contract. The lessor would not have entered into the lease agreement if these conditions were not agreed upon. The breach is substantial.
Exceptionally under the law and to a limited degree, by agreement of the parties, extra-judicial remedies may become available where an option to rescind or terminate a contract is provided upon violation of a resolutory facultative condition such as the one provided under Section 18 paragraph 4 (a) and (b) of the lease agreement between MMB, Inc. and the Heirs of J. B. L. Reyes.
In his concurring opinion in Dio vs. Concepcion, Justice Vitug discussed in detail the inter-relation between Article 1673 of the Civil Code and Sec 2, Rule 70 of the 1997 Rules on Civil Procedure, which we believe will put to rest any doubt as to the validity of an extrajudicial rescission of a lease agreement.
He states:
"In the case of lease agreements, despite the absence of an explicit stipulation, that option is reserved by law in favor of a lessee under article 1673 of the Civil Code by providing that the lessor may judicially eject the lessee for, among other grounds violation of any of the conditions agreed upon in the contract. The provision, read in conjunction with section 2 of Rule 70, of the 1997 Rules of Civil Procedure, would, absent a contrary stipulation, merely require a written demand on the lessee to pay or comply with the conditions of the lease and to vacate the premises prior to the institution of an action for ejectment. The above provisions in effect, authorizes the lessor to terminate extra-judicially the lease (with the same effect as rescission) by simply serving due notice to the lessee,"
In this case, there is a written lease agreement specifying that in case of breach, the lessor may rescind the lease agreement extra-judicially. So, with more reason in this case, the lessor may effect an extra-judicial rescission of the lease agreement. If it is allowed in cases with no written agreement, with more reason it is allowed when there is a written agreement among the parties to the lease agreement.
In the case of Subic Bay Metropolitan Authority v. Universal International Group of Taiwan, we held that "A stipulation authorizing a party to extrajudicially rescind a contract and to recover possession of the property in case of contractual breach is lawful. But when a valid objection is raised, a judicial determination of the issue is still necessary before takeover may be allowed." In the case at bar, respondents do not deny that there is a breach of the agreement, they merely argue that the stipulation allowing rescission and recovery of possession is void. Hence, the heirs of J. B. L. Reyes may validly enforce the stipulation, which the parties freely agreed upon at the start of the lease agreement. It was even made an integral part of the lease agreement that the conditions stipulated must be strictly followed, if not, the lessor may extra-judicially rescind the lease agreement upon written demand. There are no valid objections on the part of the respondent MMB, Inc. There was no effort on their part to disprove the allegations regarding the breach of the stipulations in the lease contract. The only issue they raised is the validity of the extra-judicial rescission.
We have held in the case Dayao v. Shell Co. of the Philippines, Ltd. that "a lessor is not required by law to bring first an action for rescission but could ask the Court to do so and simultaneously seek the ejection of the lessee in a single action for illegal (unlawful) detainer," as what was done by petitioners Heirs of J. B. L. Reyes.
On the second issue raised by the respondent that the contract of lease is not one of those enumerated as rescissible contracts, the same deserves no further consideration.
On the third issue that the right of rescission of a party to an obligation under Article 1191 of the Civil Code is predicated on a breach of faith by the other party that violates the reciprocity, hence if the other party objects to rescission there is need for judicial intervention, the contention is not tenable. As held in the case of Subic Bay Metropolitan Authority v. Universa International Group of Taiwan, the objection raised must be a valid objection. In the case at bar, respondents do not deny the breach of the stipulation in the lease agreement but merely questions the extra-judicial rescission.
IN VIEW WHEREOF, we DENY the motion for reconsideration for lack of merit. This denial is FINAL. Mendoza, J., is abroad on leave.
Very truly yours,
LUZVIMINDA D. PUNO
Clerk of Court
(Sgd.) MA. LUISA D. VILLARAMA
Asst. Clerk of Court
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