Cruz v. Puno
REITERATIONFacts
The Antecedents: Plaintiff Felipe V. Cruz, as lessor, filed a complaint for ejectment against defendants Rogelio and Erlinda Gundayao, lessees of a one-door apartment. The lease was on a month-to-month basis, with a stipulation allowing termination by either party upon thirty days' written notice. Plaintiff demanded the defendants vacate the premises within thirty days from receipt of notice, but they failed and refused to do so. Procedural History: The City Court ruled in favor of the plaintiff, ordering the defendants to vacate and pay rent and attorney's fees. On appeal, the Court of First Instance (CFI) of Manila set aside the City Court's decision. The Petition: The case was elevated to the Supreme Court on a purely legal issue, certified by the Court of Appeals, concerning the applicability of Presidential Decree No. 20 to the lease agreement.
Issue(s)
Whether a month-to-month lease agreement, containing a stipulation for termination by either party upon thirty days' written notice, is considered a lease for a definite period for the purpose of applying Presidential Decree No. 20. Whether Presidential Decree No. 20 can impair the contractual right of a lessor to terminate a lease agreement that was validly entered into prior to the decree's effectivity.
Ruling
The petition is granted, and the appealed decision of the Court of First Instance is reversed. The decision of the City Court in favor of the petitioner is reinstated.
Ratio Decidendi
On the issue of whether a month-to-month lease with a termination clause constitutes a lease for a definite period under PD 20: The Court held that a lease agreement, even if on a month-to-month basis, which explicitly contains a stipulation allowing termination by either party upon thirty days' written notice, must be considered a lease with a definite period. This is because the parties, through their agreement, have established a clear mechanism for the termination of the lease, thereby defining its duration in practical terms. The Court referenced the case of Rantael vs. Court of Appeals where a similar month-to-month agreement with a thirty-day notice for termination was held to provide a definite period. The stipulation in the contract between the parties, allowing termination by either party upon thirty days' notice, was deemed a valid undertaking at the time of its execution. This contractual provision, being not contrary to law, public policy, or morals, became the law between the parties, as mandated by Article 1159 of the New Civil Code. Therefore, the lease in question falls under the express exception provided in Section 4 of Presidential Decree No. 20, which suspends the provisions of Article 1673(1) of the Civil Code, except when the lease is for a definite period. On the issue of whether PD 20 can impair the contractual right to terminate the lease: The Court ruled that Presidential Decree No. 20 cannot impair the contractual right of the lessor to terminate the lease agreement. The Constitution, under Article IV, Section 11 of the 1973 Constitution (now Article III, Section 10 of the 1987 Constitution), prohibits the passage of any law impairing the obligation of contracts. While PD 20 was enacted with the laudable intent of social justice to protect tenants, it cannot override this constitutional injunction. To hold that the lessor may not exercise a right validly stipulated in the contract, and which was existing with full enforceability prior to the decree's effectivity, would be to do violence to the Constitution. The decree, to be constitutionally valid, must be construed as regulating or restricting the exercise of proprietary rights prospectively, but not as impairing existing contractual obligations. The enforcement of the termination clause in the lease contract, which was a valid and binding obligation at the time of its inception, is protected from impairment by the Constitution. Thus, the decree could not divest the parties of their pre-existing contractual right to terminate the lease under the agreed terms.
Main Doctrine
A month-to-month lease agreement, which explicitly allows termination by either party upon thirty days' notice, is considered a lease with a definite period for the purpose of Presidential Decree No. 20, and the lessor's right to terminate such a lease, being a valid contractual undertaking, cannot be impaired by the decree without violating the Constitution.