A.M. No. RTJ-93-1062 - De la Cruz vs. Concepcion

The plaintiff, Corporacion de los PP. Dominicos de Filipinas, is the owner of a house located at No. 651-A Invernes, Sta. Ana, Manila.
The property was initially leased to Esteban Garcia at a monthly rent of P75.

Esteban Garcia, as the primary lessee, subsequently sub-leased two rooms in the house to the spouses, Domingo R. Acasio and Vicenta Tengco Acasio, for a total monthly rent of P25.
The arrangement was based on the understanding that the sublease was subordinate to the lease agreement between the corporation and Esteban Garcia.

In 1950, Esteban Garcia gave notice to the sublessees to vacate the premises, and upon their refusal, filed an action for illegal detainer.
Owing to certain equitable circumstances established in that case, the court dismissed the illegal detainer complaint.
Esteban Garcia eventually vacated the premises at the end of January 1952.

On February 5, 1952, Mrs. Acasio approached Jose A. Francisco, Trust Officer of the Bank of the Philippine Islands (the administrator of the plaintiff’s properties), to negotiate leasing the house.

She was informed that the rent would be increased from P75 to P100.
Although she expressed the need to consult with her husband, Mrs. Acasio paid the increased rent for February “with a certain degree of reluctance.”

On the same day, Domingo Acasio, the husband, formally protested the rent increase by writing to the Bank’s President.

His letter, received on February 11, reflected his dissatisfaction with the new terms.
A reply was later sent on February 19 stating that the rent rise was justified by the increased assessed value of the property and improvements made on it.

Due to their refusal to remit the increased rent (P100), insisting instead on continuing with P75, an ejectment complaint was filed against Domingo Acasio on September 18, 1952 in the Municipal Court of Manila.
The Court of First Instance, rendering judgment on March 21, 1953, ruled:

The defendant (Domingo Acasio) could remain in possession until July 31, 1953, contingent upon paying a monthly rent of P75.
Thereafter, he was to pay P100 per month; failure to do so would result in his eviction.
The counterclaim raised by Acasio was dismissed.

On appeal, the Court of Appeals held that Acasio’s refusal to pay P100 amounted to a breach of the lease terms.

It declared that Acasio was required to vacate the premises and to commence payment of P100 monthly starting March 1, 1952.
The appellate court based its decision also on its finding that since the Japanese occupation, the Acasios had been mere occupants, and after their detention in April 1945 by the Counter Intelligence Corps of the U.S. Army, the actual lease relationship was between Esteban Garcia and the owner, with the Acasios as sublessees.

Petitioner Domingo R. Acasio insisted he was the principal lessee despite evidence that:

The appellate court held that beginning April 1945, Esteban Garcia was the contractual lessee.
The Acasios were, in fact, sublessees who paid their rents to Garcia.

The controversy also centered on the application of Article 1687 of the New Civil Code, which allows the court to “fix a longer term for the lease” in cases where the period is indeterminate.

Acasio argued that his status as a longstanding occupant since 1945 entitled him to the benefit of this provision.
The court clarified, however, that Article 1687 was meant to protect a bona fide lessee (with a direct contract with the owner) rather than sublessees or mere occupants.

Whether Domingo R. Acasio can be considered the principal lessee, despite his detention in 1945, rather than merely a sublessee.
Whether Acasio, as a sublessee (or even as an alleged lessee), is entitled to the benefit of Article 1687 of the New Civil Code concerning the extension of the lease.
Whether the increase in monthly rent from P75 to P100 was justifiable in view of the property’s increased assessed value and improvements.
Whether the circumstances surrounding Mrs. Acasio’s reluctant payment of the increased rent negated her consent and thus invalidated the formation of a new lease agreement.