G.R. No. L-2997 - People vs. San Juan

Plaintiff-Appellant: Chua Gui Seng, owner of the leased property.
Defendant-Appellee: General Sales Supply Co., Inc., lessee of the corner door of a house located at No. 674 Rizal Avenue, Manila.
The parties entered into a lease agreement for a term of one year commencing June 1, 1948, with a monthly rental of P1,500 payable within the first five days of each month.

The lease contract required the defendant to deposit P3,000 upon execution.
The deposit was designated to cover the monthly rental for the last six months of the lease at a rate of P500 per month.
A stipulation in the contract provided that if the lessee failed to complete the term of the lease, the deposit would be forfeited as a penalty.

The defendant paid the initial deposit and commenced rental payments, but failed to pay the monthly rentals for September and October 1948.
On October 8, 1948, Atty. Jesus B. Santos, representing the plaintiff, sent a letter to the defendant:

The letter noted the defendant’s default in rental payments amounting to two months’ rent (P3,000 total).
It demanded payment of the arrears at the rate of P1,500 per month.
The letter granted a grace period of fifteen days for vacating the premises, indicating that if the defendant paid the back rentals within that period, the forfeiture of the deposit might be avoided.
However, the offer simultaneously reinforced that failing to comply would result in the enforcement of the lease terms, including the forfeiture of the deposit.

On October 18, 1948, the plaintiff filed a complaint for ejectment in the Municipal Court of Manila.
The Municipal Court rendered judgment in favor of the plaintiff on October 29, 1949.
The defendant appealed the judgment, and the case was brought before the Court of First Instance of Manila.

The parties entered into the contract as evidenced by Exhibit D, with the defendant acknowledging its authenticity.
The defendant confirmed receipt of Atty. Santos’ letter (Exhibit 1) and acknowledged vacating the premises on October 31, 1948—after the Municipal Court judgment but before its notice was received by the Court of First Instance.
The defendant’s deposit of P3,000, made in accordance with the lease contract (Exhibit 2), was undisputed.

The Court of First Instance rendered a decision dismissing the complaint based on:

The interpretation that Atty. Santos’ letter effectively amended the lease, thereby allowing the defendant to vacate the property and obliging the deposit to be applied as payment for the accrued rental arrears.
The fact that the ejectment complaint was filed before the expiration of the fifteen-day grace period.

Whether the letter sent by Atty. Jesus B. Santos constituted an amendment to the original lease contract such that the defendant-appellee was entitled to:

Vacate the leased premises without being held liable for the remaining monthly rentals.
Apply the full P3,000 deposit toward the unpaid rents instead of forfeiting it.

Whether the filing of the ejectment complaint before the expiration of the grace period invalidated the defendant’s chance to remedy the breach by:

Whether, given the defendant’s premature vacation and failure to pay the back rentals, any modification to the lease terms (as purportedly offered in the letter) could be validly invoked to avoid the penalty of forfeiture of the deposit.