Title
Army and Navy Club of Manila, Inc. vs. Court of Appeals
Case
G.R. No. 110223
Decision Date
Apr 8, 1997
The Army and Navy Club breached a lease agreement with Manila by failing to construct a hotel, pay rent, and settle taxes, leading to eviction. Historical landmark status did not prevent eviction, and courts upheld the validity of the lease.
eviction
historical landmark
possessory rights

Case Summary (G.R. No. 110223)

Initiation of the Ejectment Case and Allegations

On November 29, 1989, the City of Manila filed an action for ejectment with the Metropolitan Trial Court. The complaint alleged that the City of Manila was the owner of the land covered by TCT No. 156868/1059, together with the improvements known as the Army and Navy Club of Manila. It further alleged that petitioner occupied the property pursuant to a Contract of Lease executed in January 1983.

The complaint specified petitioner’s contractual undertakings. Under paragraph 1 of the lease, the lessee was obliged, at its own expense, to construct a modern multi-storey hotel with a specified cost, to commence within one year and to complete as far as practicable within five years, subject to approval of plans and specifications by the lessor, and with the hotel to automatically belong to the lessor upon expiration or termination of the lease without reimbursement to the lessee.

Under paragraph 3, petitioner was obliged to pay annual rent of P250,000.00, payable in monthly installments, with rental adjustments after the first five years and thereafter at a stated maximum increase and/or based on the market value criteria described in the lease. Under paragraph 4, petitioner was obliged to pay realty taxes due on the land and improvements and to shoulder government licenses, permits, fees and charges prescribed by law, including those for the establishment and operation of the hotel and related constructions and modifications.

The complaint alleged multiple breaches. It stated that petitioner failed and/or refused to construct the required hotel even after the stipulated periods, notwithstanding demands of the City of Manila. It also alleged failure to pay rent and realty taxes, and it described petitioner’s rental arrears as of May 1989 and its aggregated realty tax liability as of December 1989. The City of Manila alleged that after repeated demands it rescinded the lease and demanded petitioner vacate, citing a letter dated May 24, 1989. It further averred a reasonable rental value for continued occupancy.

Proceedings Before the Metropolitan Trial Court

Petitioner filed its answer on December 29, 1989. On February 22, 1990, petitioner filed a motion for leave to file and for admission of an amended answer, purportedly introducing additional special and affirmative defenses. On May 23, 1990, the City of Manila moved for summary judgment, asserting the absence of any genuine triable issue.

On July 27, 1990, the Metropolitan Trial Court denied petitioner’s motion for leave to admit the amended answer for lack of merit. On October 5, 1990, it rendered judgment, ordering petitioner and all persons claiming rights under it to vacate the premises. It also ordered petitioner to pay rental arrearages, plus legal interest, computed at P250,000.00 per year with a corresponding increase every two years from January 1983 until final surrender, and to pay the costs of suit.

Appeal to the Regional Trial Court and the Court of Appeals

Petitioner appealed to the Regional Trial Court, which affirmed the Metropolitan Trial Court’s summary judgment in toto. Petitioner then elevated the case to the Court of Appeals. On October 30, 1992, the Court of Appeals dismissed the appeal. On May 18, 1996, it denied petitioner’s motion for reconsideration of the October 30, 1992 decision. The same resolution also denied the City of Manila’s motion for issuance of a writ of execution pending appeal.

Issues Raised by Petitioner

In the petition, petitioner assigned several errors. It argued that the ouster from the premises violated the formal declaration of the site as a historical landmark. It questioned the denial of its motion to admit its amended answer and the propriety of summary judgment. It also invoked alleged denial of due process on account of the summary judgment procedure. Finally, as an incident to the main issue, petitioner asserted that the property was of public domain and that the lease contract executed by the City of Manila was void.

The Court’s Characterization of the Case

The Court treated the controversy as a “simple ejectment suit”. It emphasized that the action was grounded on the City of Manila’s ownership of the subject property and petitioner’s possession under the lease. It noted that petitioner’s lease agreement reflected obligations to pay rent and realty taxes and to construct a modern multi-storey hotel within the contractually fixed period, with ownership of the hotel to revert to the City upon expiration or termination without reimbursement.

The Court observed that petitioner failed to pay rent for seven consecutive years and that rental arrears had ballooned by the time the action was filed. It also noted the accumulation of realty tax obligations and petitioner’s failure to construct the stipulated hotel. It concluded that after several demands, the City of Manila had recourse to judicial ejectment and eviction for breach of the lease.

Substantive Basis for Ejectment Under the New Civil Code

The Court cited Article 1673 of the New Civil Code, holding it to be explicit on judicial ejectment. Under Article 1673, the lessor may eject the lessee for, among others, lack of payment of the price stipulated and violation of the conditions agreed upon in the contract. The Court rejected petitioner’s attempt to avoid eviction by reference to the later historical-landmark designation, stating that even if the property had historical significance, eviction remained warranted if contractual breaches existed.

Petitioner's Historical Landmark Argument and the Court’s Response

Petitioner relied on the claim that the Army and Navy Club had been declared a national historical landmark by the National Historical Commission on June 29, 1992. It argued that the lower courts allegedly failed to give due consideration and insisted that all parties were legally enjoined to preserve its existence and site.

In support, petitioner presented a Certificate of Transfer and Acceptance of Historical Marker, dated June 29, 1992, issued through the National Historical Institute. The Court acknowledged that the declaration itself was not objectionable. However, it characterized the recognition as specious and treated petitioner’s reliance as legally insufficient to defeat an ejectment suit. The Court reasoned that the procedure for designating historical and cultural properties under Republic Act No. 4846, as amended by Presidential Decree No. 374, involved specific classifications and safeguards, including census and expert panels for designation, notice to the owner if privately owned, the opportunity to be heard, publication requirements, and finality and appeal procedures. It held that petitioner failed to show compliance with the statutory procedure. It further found it significant that the designation came only in 1992, about three years after the ejectment action had been instituted, which suggested an afterthought to thwart legal action.

The Court also emphasized that the laws on cultural-property preservation did not confer ownership or possessory rights on a private party solely by reason of historical recognition. It stated that the National Historical Commission’s authority was limited to supervising restoration, reconstruction, or preservation related to the architectural design of the identified historical building, and did not include authority to vest rights of ownership or possession over private property. Consequently, even assuming validity of the historical recognition, the historical significance of the club would not be affected by enforcement of a lawful lease termination and eviction where contractual performance had been breached.

Lease Obligations and the Court’s Rejection of Repudiation

The Court further reasoned that petitioner was only a lessee under the lease agreement. It held that petitioner could not use the historical-landmark certification as a shield to remain in possession or to escape lease obligations. It concluded that petitioner had indeed violated the lease terms and conditions, making eviction inevitable.

On the procedural and relational aspect of the dispute, the Court referenced that in its original answer petitioner had admitted the City of Manila’s status as the registered owner and that it leased the property from the City. It held petitioner could not later deny ownership at a later stage. It also endorsed the Court of Appeals’ observation that petitioner could not “double deal,” by dealing with the lessor as owner, obtaining benefits under the lease for a long period, and then repudiating the lessor’s title when eviction became an issue.

Summary Judgment and the Absence of a Genuine Triable Issue

The Court addressed petitioner’s claim that summary judgment was improper and that it was denied due process. It de

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