Caleon v. Agus Development Corporation
REITERATIONFacts
The Antecedents: Private respondent Agus Development Corporation leased a parcel of land to petitioner Rita Caleon for a monthly rental of P180.00. Petitioner constructed a four-door apartment on this land. Without the consent of the private respondent, Caleon sub-leased two of the apartment doors to third parties for P350.00 each per month. Upon discovering the unauthorized sub-lease, Agus Development Corporation demanded that Caleon vacate the premises. Procedural History: Following Caleon's failure to comply with the demand, Agus Development Corporation filed an ejectment case against her with the Metropolitan Trial Court of Manila, Branch XII, citing the unauthorized sub-lease as grounds under Batas Pambansa Blg. 25. The Metropolitan Trial Court ruled in favor of the private respondent, ordering Caleon to vacate, remove improvements, pay attorney's fees, and costs. Caleon appealed to the Regional Trial Court of Manila, Branch 34, which affirmed the Metropolitan Trial Court's decision in its entirety. Caleon then appealed to the Court of Appeals, which, by decision dated January 28, 1987, dismissed her petition for review. The Petition: This case is a petition for review on certiorari filed by Rita Caleon with the Supreme Court, seeking to reverse the decision of the Court of Appeals. Caleon argues that the sub-lease of her apartment units does not constitute a sub-lease of the land itself, and therefore, Batas Pambansa Blg. 25 is not applicable. She further contends that applying Batas Pambansa Blg. 25 to her existing lease contract would be unconstitutional as it impairs the obligation of contracts. The primary issue presented to the Supreme Court is whether the lease of an apartment includes a sub-lease of the lot on which it is constructed, as would constitute a ground for ejectment under Batas Pambansa Blg. 25.
Issue(s)
Whether the lease of an apartment includes a sublease of the lot on which it is constructed, constituting a ground for ejectment under Batas Pambansa Blg. 25. Whether Batas Pambansa Blg. 25, applied to a lease contract existing prior to its enactment, constitutes an unconstitutional impairment of the obligation of contracts.
Ruling
The Supreme Court denied the petition for lack of merit and affirmed the decision of the Court of Appeals. The Court ruled that the lease of a building includes the lease of the lot, and subleasing the building constitutes subleasing the lot, which is a ground for ejectment under Batas Pambansa Blg. 25. The Court also held that Batas Pambansa Blg. 25, as an exercise of police power, can modify or abrogate existing contracts in the interest of public welfare, and thus does not violate the impairment of contract clause.
Ratio Decidendi
On the issue of whether the lease of an apartment includes a sublease of the lot: The Court held that the lease of a building naturally includes the lease of the lot on which it is constructed, and the rentals of the building include those of the lot. This principle is rooted in the Civil Code, where the occupancy of a building implies the tenancy or possession of the land it stands on. Therefore, when petitioner subleased two doors of the apartment building she constructed on the leased lot, she effectively subleased a portion of the lot itself without the lessor's consent. This act constituted a violation of Section 5 of Batas Pambansa Blg. 25, which enumerates subleasing of residential units as a ground for judicial ejectment. The Court reiterated that the lease of a building inherently encompasses the lease of the land, making the sublease of the former a sublease of the latter. On the issue of impairment of contract: The Court found petitioner's argument that Batas Pambansa Blg. 25, when applied to pre-existing contracts, is unconstitutional as an impairment of the obligation of contracts to be untenable. It is a well-settled principle that all presumptions favor the constitutionality of a statute, and any party alleging its invalidity must prove it beyond a reasonable doubt. Furthermore, the constitutional guaranty of non-impairment of contracts is not absolute and is subject to the exercise of the State's police power for the protection of public health, safety, morals, and general welfare. Batas Pambansa Blg. 25, regulating rentals of dwelling units and land, was enacted in the exercise of this police power to address the plight of lessees. Therefore, legislation enacted under police power, even if it modifies existing contracts, does not violate the impairment clause, as it serves a paramount public interest. The Court emphasized that social justice, while a guiding principle, cannot be invoked to unjustly deprive property owners of their rights.
Main Doctrine
The lease of a building naturally includes the lease of the lot on which it is constructed, and the sublease of the building constitutes a sublease of the lot, which is a ground for ejectment under Batas Pambansa Blg. 25. The exercise of police power through legislation like Batas Pambansa Blg. 25 is a valid limitation on the impairment of contract clause.