Lao v. Suarez
REITERATIONFacts
The Antecedents: Spouses Alejandro Suarez and Dimtoy T. Suarez (Lessors) leased a parcel of land in Tulay, Jolo, Sulu, to Puahay Lao (Lessee) under a written contract. The contract stipulated that the Lessee would construct a two-story building, pay a monthly rental of P54.00, and that failure to pay rental for three consecutive months would incur 20% liquidated damages. It also provided that any violation of the terms would be sufficient ground for termination of the lease, with the Lessee agreeing to pay P600.00 as liquidated damages and P500.00 for attorney's fees. The Lessee failed to pay monthly rentals from July to October 1960, amounting to P216.00. The Lessors issued notices of termination on November 7 and 14, 1960. The Lessee claimed to have tendered rentals for September and October 1960, and upon refusal, consigned them in court on November 6, 1960, and continued to consign subsequent rentals. Procedural History: On December 14, 1961, the Lessors filed suit against the Lessee in the Justice of the Peace Court of Jolo for non-payment of rentals, termination of lease, and ejectment. The Justice of the Peace Court rendered judgment in favor of the Lessors. The Lessee appealed to the Court of First Instance, which affirmed the judgment, upholding the Lessors' right to rescind the lease and recover the land. The Lessee then appealed to the Court of Appeals, which also affirmed the lower court's decision. The Petition: The Lessee, Puahay Lao, brought the case to the Supreme Court on certiorari. He argued two main points: 1) that the Lessors could not eject him under Section 2, Rule 70 of the Revised Rules of Court because he had deposited the overdue rentals in court on November 6, 1960, and no 15-day period after demand had elapsed without payment; and 2) that the lease, being expressly for an indefinite period, entitled him to continue in possession as long as he paid the rentals on time.
Issue(s)
Whether the lessors could eject the tenant under Section 2, Rule 70 of the Revised Rules of Court, given the lessee's consignation of overdue rentals. Whether the lease, being for an indefinite period, granted the tenant the right to continue in possession so long as he paid the rentals on time.
Ruling
The Supreme Court affirmed the judgments appealed from, holding that the lessors had the right to terminate the lease and eject the lessee. Costs were assessed against the appellant in all instances.
Ratio Decidendi
On Issue 1: The Supreme Court held that the Lessee's failure to pay the 20% liquidated damages, which became due hic et nunc (here and now) upon his failure to pay rentals from July to October 1960, constituted a breach of the contract of lease. The Court of Appeals found that the Lessee never tendered or consigned these 20% damages in court. This failure was deemed a sufficient breach that entitled the Lessors to rescind (more properly, to resolve) the contract and terminate the lease, as expressly provided in paragraph (j) of the contract. Furthermore, the Court clarified that even without such a specific stipulation, Article 1673, paragraph 3 of the Civil Code of the Philippines grants the lessor the right to judicially eject the lessee for violation of any of the conditions agreed upon in the contract. The Lessors were not legally required to first bring a separate action for rescission, but could simultaneously seek rescission and the ejection of the lessee in a single action for illegal detainer, as established in Pamintuan vs. Tiglao. Therefore, the Lessors acted within their strict rights when they notified the Lessee of the termination of the contract. On Issue 2: The Supreme Court found it unnecessary to extensively consider the issue predicated on the alleged indefinite duration of the lease. The Court reasoned that whether the lease was for a definite or indefinite period, the Lessors retained the right to terminate the contract upon the Lessee's violation of its terms or conditions. Parenthetically, the Court observed that in Singson vs. Baldelomar, it had previously rejected the theory that a lease could continue for an indefinite term solely at the lessee's will, as long as the rent was paid. Such a theory would make the continuance and fulfillment of the contract depend solely on the free and uncontrolled choice of the tenant, thereby depriving the lessors of any say in the matter. This would be contrary to the spirit of Article 1256 of the Civil Code of 1889 (now Article 1308 of the Civil Code of the Philippines), which mandates that the validity or compliance of contracts cannot be left to the will of one of the parties.
Main Doctrine
The primary legal doctrine established and applied in this case is that a lessor possesses the unequivocal right to terminate a lease agreement and initiate judicial ejectment proceedings against a lessee upon the latter's violation of any of the stipulated terms and conditions of the contract. This right extends beyond mere non-payment of basic rentals to include the failure to pay accessory obligations such as liquidated damages, which become due upon the occurrence of a breach. Furthermore, the case reinforces the fundamental principle of mutuality of contracts, enshrined in Article 1308 of the Civil Code of the Philippines, which prohibits the validity or compliance of a contract from being left to the sole will of one of the contracting parties, thereby precluding the notion of a perpetually indefinite lease solely dependent on the lessee's discretion to pay rent.