G.R. No. L-2090 - Facturan vs. Sabanal

The petitioners are various long-term lessees—TEODORO ARAOS, ALEJANDRO LANGCAUAN, EUGENIA PITOY, SPOUSES PERFECTO REYES and ROSARIO REYES, RUTH RAYCO, PROSPERO PERALTA, MYRNA MENDOZA, and SPOUSES REDENTOR COMINTAN and LUCY COMINTAN—who have occupied a ten-door apartment building in Manila for about 25 years.
The property is located at No. 2222 Pedro Gil Street, Sta. Ana, Manila, and was originally owned by Vivien B. Bernardino.
A written lease contract existed between Bernardino and the petitioners but expired on 31 January 1988; despite the expiration, the parties continued with a month-to-month arrangement, and regular monthly rental payments were made.

On 11 July 1991, the apartment building was sold to the private respondent, Jovan Land, Inc.
On 15 July 1991, shortly after the sale, both the former owner (Bernardino) and Jovan Land, Inc. simultaneously demanded that the petitioners and other lessees vacate the premises.
Following the unheeded demands, ten separate unlawful detainer cases were filed by the private respondent before the Metropolitan Trial Court (MeTC) of Manila, specifically in Branch 26.

The MeTC rendered a joint judgment ordering the petitioners to vacate the premises and imposed monetary awards consisting of:

Rental arrearages covering the period from August to October 1991.
Reasonable compensation for the use and occupation of the premises, with specific increased amounts for each lessee.
An order that each defendant also pay P2,500.00 as attorney’s fees and costs.

The MeTC rejected the petitioners’ invocation of P.D. No. 1517 (regarding Urban Land Reform) by ruling that the property was outside an Area of Priority Development (APD) Zone.
The petitioners, contesting the MeTC decision, appealed to the Regional Trial Court (RTC) of Manila where the cases were reassigned to Branch 38.
During the pendency of the RTC appeal, certain petitioners (the Tapel spouses and Florencio Javier) vacated, and their cases were dismissed.

In its Decision on 7 April 1992, the RTC reversed the MeTC ruling, basing its decision on B.P. Blg. 25 as amended by B.P. Blg. 877:

It held that even though the month-to-month lease under Article 1687 had expired, such expiration could not alone justify judicial ejectment due to the suspension provided by the amended rent control law.
The RTC critiqued the increase in rental rates awarded by the MeTC as iniquitous and unconscionable, arguing that any increase should not exceed 20% per year, in line with R.A. No. 6828.

The private respondent, dissatisfied with the RTC ruling, filed a petition for review with the Court of Appeals.
The Court of Appeals reversed the RTC decision, re-affirming the MeTC judgment by holding that:

An oral month-to-month lease is equivalent to a lease with a definite period that expires upon demand by the lessor.
In line with established jurisprudence and precedents (such as Uy Hoo and Sons Realty Development Corporation vs. Court of Appeals), judicial ejectment is justified when the lease has expired.

Central to the controversy was the propriety and legality of the increased monthly rental rates.

The MeTC had increased the monthly rental rates for each petitioner from their former amounts to higher amounts, with figures detailed for each individual or couple.
The MeTC’s basis for the increase included the commercialized nature of the area; however, no evidence in the record indicated that any valid demand for a rental increase had been made to the petitioners.
The controversy centered on whether the lessor had the authority to unilaterally effectuate a rental increase without proper demand, considering that in cases of forcible entry or unlawful detainer the damages recoverable are limited to the fair rental value or reasonable compensation for the use of the premises.

Whether an oral month-to-month lease is legally equivalent to a lease for a definite period that can expire upon a proper demand by the lessor.
How the expiration of the lease under Article 1687, considering the continued possession after the written contract’s expiration, affects the right to judicial ejectment.

Whether the increased rental amounts ordered by the MeTC were proper and justified given that no formal demand for an increased rent was made by the lessor.
The issue of whether, in cases of forcible entry or unlawful detainer, only damages directly related to the loss of use and occupation (the fair rental value) should be recoverable, not additional amounts.