Case Digest (G.R. No. 174632)
Facts:
Felicidad T. Martin, Melissa M. Isidro, Grace M. David, Caroline M. Garcia, Victoria M. Roldan, and Benjamin T. Martin, Jr. v. DBS Bank Philippines, Inc., G.R. Nos. 174632 and 174804, June 16, 2010, Supreme Court Second Division, Abad, J., writing for the Court.The lessors, Felicidad T. Martin, Melissa M. Isidro, Grace M. David, Caroline M. Garcia, Victoria M. Roldan, and Benjamin T. Martin, Jr. (the Martins), leased to DBS Bank Philippines, Inc. (DBS, the lessee) a commercial warehouse and lots for office, warehouse and parking of repossessed vehicles for a five‑year term beginning March 1, 1997, with graduated monthly rents and payment of a P1,200,000 deposit and P600,000 in advance rentals. The lease contained a rescission clause (Paragraph VIII) allowing either party to rescind if the property became untenantable from natural causes unless the lessor repaired or reconstructed the premises.
Heavy rains on May 25 and August 13, 1997 flooded the premises and submerged DBS’s offices and 326 repossessed vehicles. DBS demanded repairs (including improved drainage or raising the ground level) and the Martins filled the grounds with soil and rocks and later contracted for reconstruction of the perimeter fence. DBS contended the works did not level and compact the ground sufficiently for vehicle parking and that the dumped fill caused portions of the perimeter fence to collapse; the City Engineer warned the walls posed a danger. DBS vacated the premises in June 1998 but continued paying rent and on September 11, 1998 made a final demand giving the Martins until September 30, 1998 to restore the premises or DBS would rescind; on October 13, 1998 DBS formally demanded rescission and, after further delay, filed suit for rescission and return of its deposit on July 7, 1999.
At the Regional Trial Court of Makati, Branch 141 (Civil Case No. 99‑1266), the trial court on November 12, 2001 dismissed DBS’s complaint, finding the premises remained tenantable, the Martins had started repairs and DBS unjustifiably abandoned the premises; the RTC ordered the deposit applied to unpaid rents and held DBS liable for unpaid rents. On appeal, the Court of Appeals (CA) in CA‑G.R. CV 76210 (April 26, 2006) reversed the RTC, holding the floods rendered the premises untenantable and that the lease’s rescission clause entitled DBS to rescind; the CA applied the deposit to rents only u...(Subscriber-Only)
Issues:
- Did the Court of Appeals err in holding that the Martins allowed the leased premises to remain untenantable after the floods, thereby justifying DBS’s rescission of the lease?
- If rescission was justified, did the Court of Appeals err in fixing the effective date of rescission on July 7, 1999 (the filing of DBS’s complaint) ra...(Subscriber-Only)
Ruling:
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Ratio:
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Doctrine:
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