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Lease

common carrier (Art. 1732) to do or perform a service for Duellowe v. Gotoco, (1963). The lease of a building naturally
Chapter I: General Provisions the head of a family, or master, employer, or passenger or includes the lease of the lot on which it stands, and the rentals of
shipper of goods, respectively, in consideration of the buildings include those of the land.
compensation.
Art. 1642. The contract of lease may be of things, or of work and
(2) Subject-Matter of Lease
service.
Under the CC, this kind of lease covers household service (Art.
1689-1699), contract of labor (Art. 1700-1712), contract for a  Art. 1643 applies to lease of things, whether movable or
Concept and Nature of Contract of Lease piece of work (Art. 1713-1731) and common carriers (Art. 1732- immovable.
1766)  The CC makes no special provision for lease of movables.
(1) Contract of lease is an agreement whereby one person
Nevertheless, the provisions of the Code on leases of lands
(lessor) binds himself to grant temporarily the enjoyment or Characteristics and Elements of the Contract are also applicable to leases of personal property except
use of a thing or to render some work or service to another
those provisions which by their nature and intent, can only
(lessee) who undertakes to pay rent, compensation or price (1) It is consensual, bilateral, onerous, commutative, nominate be applied where the object of the lease is immovable.
therefor and principal (CBO-CNP)
(2) GR: Lease is only a personal right
National Labor Union v. Dinglasan, (1956). In a lease of chattels,
 In lease as in sale, there is an exchange of equivalent values. the lessor loses complete control over the chattel leased although
XPN: It is a real right only as in the case of lease of real estate
 The use by the lessee of the thing, work, or service is the lessee would be responsible to the lessor should he make bad
recorded in the Registry of Property which makes it binding upon
considered the equivalent to the rent, compensation, or use thereof
third persons, like a purchaser. In the absence of registration, the
price paid to the lessor.
purchaser may terminate the lease, save when there is a
(3) Ownership of Thing
stipulation in the contract of sale, or when the purchaser knows of
(2) As in ordinary contracts, a contract of lease has three (3)
the existence of the lease. (Art. 1676), actual knowledge being
elements, namely:  The lessor need not be the owner of the thing leased as long
equivalent to registration. (Art. 1648)
as he can transmit its enjoyment or use to the lessee since
(a) Consent of the contracting parties; ownership is not being transferred.
(3) Sui Man Hui Chan v. CA, (2004). A lease contract is not
(b) Object certain which is the subject matter of the contract;  The usufructuary may personally enjoy the thing in usufruct
essentially personal in character in the sense that the rights
and or he may lease it to another but the lease contract shall
and obligations therein are transmissible to the heirs. The
(c) Cause of the obligation which is established. (Art. 1318) terminate upon the expiration of the usufruct saving only
death of a party does not excuse non-performance of a
leases of rural lands, which shall be considered as subsisting
contract, which involves a property right, and the rights and
Art. 1643. In the lease of things, one of the parties binds himself during the agricultural year. (Art. 572)
obligations thereunder pass to the successors or
representatives of the deceased. to give to another the enjoyment or use of a thing for a price  But an easement cannot be leased independently of the
certain, and for a period which may be definite or indefinite. estate to which it actively or passively belongs as it is
inseparable therefrom (Art. 617), being an accessory thing
1997 Bar, Q. XVII(a): Stating briefly the thesis to support your
However, no lease for more than ninety-nine years shall be valid. whose very existence depends upon the principal thing
answer to each of the following cases, will the death - of the
(immovable).
lessee extinguish the lease agreement?
Lease of Things  Even the lessee himself may lease the property to another;
in such case, a sublease results (Art. 1650)
A: No. The death of the lessee will not extinguish the lease
agreement, since lease is not personal in character and the right is Gutierrez v. Santos, (1960). In legal parlance and in ordinary
usage, the term “landlord’’ means lessor or owner and the word (4) Consideration of Lease
transmissible to the heirs. (Heirs of Dimaculangan v. IAC).
“tenant’’ means lessee.
 The cause of a contract of lease of things must be a price
Kinds of Lease According to Subject Matter certain generally called “rent’’ or “rental’’ in money or its
(1) Essence of Lease
equivalent, such as products, fruits, or other useful things, or
(1) Lease of Things – real or personal, involving an obligation on some other prestation or labor which the lessee binds
Yngson v. Sec. of Agriculture and Natural Resources, (1983). The
the part of the lessor to deliver the thing which is the object himself to undertake.
essence or essential purpose of the lease of things is the
thereof and the correlative right of the lessee to the
transmission of the temporary enjoyment or use by the lessee of a  The important thing is that what is given by the lessee has
peaceful and adequate enjoyment thereof for a price certain
thing for a certain period in consideration of the undertaking to value.
(Art. 1654);
pay rent therefor. Hence, the object of the lease must be within
(2) Lease of Work - refers to a contract for a piece of work,
the commerce of man (Art. 1374); otherwise, it is void. Thus, a (a) Arroyo v. Azur, (1946). The phrase “price certain” means
involving an obligation on the part of the contractor (lessor) lease of property belonging to the public domain such as a road or that the price of the lease or rent has been determined by
to execute a piece of work for the employer (lessee) in a public plaza is void ab initio. the parties or is at least capable of determination under the
consideration of a certain price or compensation) (Art.1713); contract. A price certain exists when the same can be
(3) Lease of service involving an obligation on the part of the ascertained according to the usage or customs of the place
housekeeper (Art. 1689), laborer or employee (Art. 1700), or
(b) The amount must not be nominal or so insignificant as to pay rentals, the lessor would never be able to terminate the option to continue and the lessor accepts, both parties are
indicate an intention to enter into a contract of lease. On the other hand, if the lessor should desire to thereafter bound by the new lease agreement. Their rights and
commodatum which is essentially gratuitous. (Art. 1933) continue the lease, the lessee could thwart his purpose by obligations become mutually fixed, and the lessee is entitled to
(c) Vda. de Roxas v. CA, (1975). Since lease is essentially a the simple expedient of stopping the payment of rentals. retain possession of the property for the duration of the new
consensual contract, in the absence of a law fixing a ceiling Such an arrangement is contrary to Art. 1308 which prohibits lease, and the lessor may hold him liable for the rent therefor. The
on rentals, the lessor has the right to fix the amount of the the validity or compliance with a contract to be left to the lessee cannot thereafter escape liability even if he should
rent, and upon the expiration of the contract, to demand an will of one of the parties. subsequently decide to abandon the premises.
increase thereof. The lessee may agree with the rent or not
consent to the lease. Illustrative Cases: Mutuality obtains in such a contract and equality exists between
(d) Ledesma v. Javellana, (1983). During the period fixed in the the lessor and the lessee since they remain with the same
contract where there is a stipulated rent, the lessor cannot Allied Banking Corp. v. CA, (1998). The lease contract expressly faculties in respect to fulfillment.’’
increase the rental without the consent of the lessee. gives the lessor the sole option to renew the lease.
Neither can the court fix a different rental, even where there (3) Lessor Bound by the Option He Has Conceded to Lessee
is an increase in realty taxes. (1) Principle of Mutuality of Contracts
“The case of Lao Lim vs. CA (1990) relied upon by the trial court is
(5) Period of Lease “Art. 1308, CC expresses what is known in law as the principle of not applicable here. In that case, the stipulation in the disputed
mutuality of contracts. It provides that ‘the contract must bind compromise agreement was to the effect that the lessee would be
 The period may be definite or indefinite. In any case, the both the contracting parties; its validity or compliance cannot be allowed to stay in the premises ‘as long as he needs it and can pay
period is temporary, not perpetual. left to the will of one of them.’ This binding effect of a contract on the rents.’ In the present case, the questioned provision states
both parties is based on the principle that the obligations arising that the lease ‘may be renewed for a like term at the option of the
(a) When the period is definite or fixed – the longest is 99 years from contracts have the force of law between the contracting lessee.’ The lessor is bound by the option he has conceded to the
parties, and there must be mutuality between them based lessee. The lessee likewise becomes bound only when he
Report of Code Commission. Art. 1643 “limits a lease to 99 years essentially on their equality under which it is repugnant to have exercises his option and the lessor cannot thereafter be excused
because it is an unsound economic policy to allow ownership and one party bound by the contract while leaving the other free from performing his part of the agreement.
enjoyment to be separated for a very long time. A similar therefrom.
limitation applies in Philippine law to sales with a right of Likewise, reliance by the trial court on the 1967 case of Garcia v.
redemption, fideicommerssary substitutions, and other cases.’’ The ultimate purpose is to render void a contract containing a Rita Legarda, Inc. (1976), is misplaced. In that case, what was
condition which makes its fulfillment dependent solely upon the involved was a contract to sell involving residential lots, which
(b) In case the period fixed is more than 99 years – the lease uncontrolled will of one of the contracting parties.’’ gave the vendor the right to declare the contract cancelled and of
should be considered as having expired after the end of said no effect upon the failure of the vendee to fulfill any of the
term. Where is an implied new lease (Art. 1670), the lease (1) Sole Option of Lessee to Renew, An Integral Part of the conditions therein set forth. In the instant case, we are dealing
will be for an indefinite time. Agreement with a contract of lease which gives the lessee the right to renew
(c) If a term is fixed but it is indefinite but from the the same.’’
circumstances it can be inferred that a period was intended “An express agreement which gives the lessee the sole option to
– the court may fix the duration thereof. (Art. 1196). A renew the lease is frequent and subject to statutory restrictions, (4) Meaning of Clause “May be Renewed for A Like Term at the
contract established to be a lease can only be for a valid and binding on the parties. This option, which is provided in Option of the Lessee”
determinate period for a lease, by its very nature, must be the same lease agreement, is fundamentally part of the
temporary consideration in the contract and is no different from any other “With respect to the meaning of the clause ‘may be renewed for a
(d) If no term is fixed – Art. 1682 applies for lease of rural lands, provision of the lease carrying an undertaking on the part of the like term at the option of the lessee,’ we sustain petitioner’s
and Art. 1687, for lease of urban lands lessor to act conditioned on the performance by the lessee. It is a contention that its exercise of the option resulted in the
(e) Evangelista v. Alvarez, (CA). A verbal contract of lease “for purely executory contract and at most confers a right to obtain a automatic extension of the contract of lease under the same
as long as the lessees are doing business and as long as they renewal if there is compliance with the conditions on which the terms and conditions. The subject contract simply provides that
can pay just rents” has been held to be a lease from month right is made to depend. ‘the term of this lease shall be fourteen (14) years and may be
to month under Art. 1687 and not one of indefinite duration, renewed for a like term at the option of the lessee.’ As we see it,
terminable without necessity of a special notice upon the The right of renewal constitutes a part of the lessee’s interest in the only term on which there has been a clear agreement is the
expiration of any month. the land and forms a substantial and integral part of the period of the new contract, i.e., fourteen (14) years, which is
(f) Elizegui v. Lawn Tennis Club, (1903). A lease of things during agreement.’’ evident from the clause ‘may be renewed for a like term at the
the lifetime of one of the parties is for an indefinite period. A option of the lessee,’ the phrase ‘for a like term’ referring to the
lease for such time as the lessor or the lessee may please, is (2) Mutuality Obtains in the Contract period. It is silent as to what the specific terms and conditions of
one for life, ending upon the death of either party. the renewed lease shall be. Shall it be the same terms and
(g) Singson Encarnacion v. Baldomar, (1946). The continuance “The fact that such option is binding only on the lessor and can be conditions as in the original contract, or shall it be under the
and fulfillment of a lease of a house cannot be made to exercised only by the lessee does not render it void for lack of terms and conditions as may be mutually agreed upon by the
depend solely upon the uncontrolled choice of the lessee on mutuality. After all, the lessor is free to give or not to give the parties after the expiration of the existing lease?”
whether or not the lessee would pay rentals, thus depriving option to the lessee. And while the lessee has a right to elect
the lessor of any say on the matter. If the lessee elected to whether to continue with the lease or not, once he exercises his
(5) Where Contract Failed to Specify the Terms and Conditions that every man’s grant is to be taken most strongly against rentals or not, thereby depriving the lessors of all say in the
to be Embodied in Renewed Contract himself.’ (50 Am Jur. 2d, Sec. 1162, p. 48; see also 51 C.J.S. 599.)’’ matter as it would be contrary to the spirit of Art. 1256 of the Old
Civil Code, now Art. 1308, NCC which provides that validity or
In Ledesma vs. Javellana (1983), this Court was confronted with a (6) Terms and Conditions No Longer Subject to Mutual compliance of contracts cannot be left to the will of one of the
similar problem. In that case, the lessee was given the sole option Agreement parties.’
to renew the lease, but the contract failed to specify the terms
and conditions that would govern the new contract. When the “Besides, if we were to adopt the contrary theory that the terms A review of the Puahay and Singson cases shows that the factual
lease expired, the lessee demanded an extension under the same and conditions to be embodied in the renewed contract were still backgrounds therein are not the same as in the case at bar. In
terms and conditions. The lessor expressed conformity to the subject to mutual agreement by and between the parties, then those cases, the lessees were actually in arrears with their rental
renewal of the contract but refused to accede to the claim of the the option — which is an integral part of the consideration for the payments. The Court, in the Puahay case, ruled that the lessor had
lessee that the renewal should be under the same terms and contract — would be rendered worthless. For then, the lessor the right to terminate the lease under par. 3, Art. 1673, CC,
conditions as the original contract. In sustaining the lessee, this could easily defeat the lessee’s right of renewal by simply declaring that the lessor may judicially eject the lessee for
Court made the following pronouncement: imposing unreasonable and onerous conditions to prevent the violation of any of the conditions agreed upon in the contract. In
parties from reaching an agreement, as in the case at bar. the case of Singson, the lease contract was expressly on a month-
In the case of Hicks vs. Manila Hotel Company, a similar issue was to-month basis.’’
resolved by this Court. It was held that ‘such a clause relates to As in a statute no word, clause, sentence, provision or part of a
the very contract in which it is placed, and does not permit the contract shall be considered surplusage or superfluous, (3) Stipulation Not Contrary to Art. 1308, CC
defendant upon the renewal of the contract in which the clause is meaningless, void, insignificant or nugatory, if that can be
found, to insist upon different terms than those embraced in the reasonably avoided. To this end, a construction which will render “The contention of the petitioner that a provision in a contract
contract to be renewed’; and that ‘a stipulation to renew always every word operative is to be preferred over that which would that the lease period shall subsist for ‘an indefinite period
relates to the contract in which it is found and the rights granted make some words idle and nugatory.’’ provided the lessee is up-to-date in the payment of his monthly
thereunder, unless it expressly provides for variations in the terms rentals’ is contrary to Art. 1308, CC is not plausible. As expounded
of the contract to be renewed. Jespajao Realty Corp. v. CA, (2002). The lease contract stipulates by the Court in the case of Philippine Banking Corporation vs. Lui
an indefinite period, the lease to continue for as long as the lessee She (1967): ‘We have had occasion to delineate the scope and
The same principle is upheld in American Law regarding the is paying the rent application of Art. 1308 in the early case of Taylor vs. Uy Tieng
renewal of lease contracts. In 50 Am. Jur. 2d, Sec. 1159, at p. 45, Piao (1922) We said in that case:
we find the following citations: ‘The rule is well-established that a (1) Article 1687 NOT applicable
general covenant to renew or extend a lease which makes no ‘Art. 1256 [now Art. 1308] of the Civil Code in our opinion creates
provision as to the terms of a renewal or extension implies a “We agree with the ruling of the CA. Art. 1687 finds no application no impediment of the insertion in a contract for personal service
renewal or extension upon the same terms as provided in the in the case at bar. of a resolutory condition permitting the cancellation of the
original lease.’ contract by one of the parties. Such a stipulation, as can be readily
The lease contract between petitioner and respondents is with a seen, does not make either the validity or the fulfillment of the
In the lease contract under consideration, there is no provision to period subject to a resolutory condition. The wording of the contract dependent upon the will of the party to whom is
indicate that the renewal will be subject to new terms and agreement is unequivocal: ‘The lease period xxx shall continue for conceded the privilege of cancellation; for where the contracting
conditions that the parties may yet agree upon. It is to renewal an indefinite period provided the lessee is up-to-date in the parties have agreed that such option shall exist, the exercise of
provisions of lease contracts of the kind presently considered that payment of his monthly rentals.’ The condition imposed in order the option is as much in the fulfillment of the contract as any
the principles stated above squarely apply. We do not agree with that the contract shall remain effective is that the lessee is up-to other act which may have been the subject of agreement. xxx’
the contention of the appellants that if it was intended by the date in his monthly payments. It is undisputed that the lessees
parties to renew the contract under the same terms and Gutierrez and Co Tong religiously paid their rent at the increasing Also held in the recent case of Allied Banking Corp. vs. CA (1998)
conditions stipulated in the contract of lease, such should have rate of 20% annually. where this Court upheld the validity of a contract provision in
expressly so stated in the contract itself. The same argument favor of the lessee.
could easily be interposed by the appellee who could likewise The agreement between the lessor and the lessees are therefore
contend that if the intention was to renew the contract of lease still subsisting, with the original terms and conditions agreed As correctly ruled by the MTC in its decision, the grant of benefit
under such new terms and conditions that the parties may agree upon, when the petitioners unilaterally increased the rental of the period in favor of the lessee was given in exchange for no
upon, the contract should have so specified. Between the two payment to more than 20% or P3,500.00 a month.’’ less than an automatic 20% yearly increase in monthly rentals.
assertions, there is more logic in the latter. This additional condition was not present in the Puahay and
(2) Factual Backgrounds in Cases Cited by Petitioner NOT the Singson cases.
The settled rule is that in case of uncertainty as to the meaning of Same as in the Case at Bar
a provision granting extension to a contract of lease, the tenant is Moreover, the express provision in the lease agreement of the
the one favored and not the landlord. ‘As a general rule, in “Petitioner cites Puahay Lao vs. Suarez (1968) where it said that parties that violation of any of the terms and conditions of the
construing provisions relating to renewals or extensions, where ‘the Court in the earlier case of Singson vs. Baldomar (1946), contract shall be sufficient ground for termination thereof by the
there is any uncertainty, the tenant is favored, and not the rejected the theory that a lease could continue for an indefinite lessor, removes the contract from the application of Article 1308.’’
landlord, because the latter, having the power of stipulating in his term so long as the lessee paid the rent, because then its
own favor, has neglected to do so; and also upon the principle continuance and fulfillment would depend solely on the free and (4) Lessor in Estoppel
uncontrolled choice of the tenant between continuing to pay
Lastly, after having the lessees believe that their lease contract is the State while he remains in possession of the leased property and not a lease, because in contracts of lease, as distinguished
one with an indefinite period subject only to prompt payment of and until he surrenders possession to the lessor. from those sale, it is plain redundancy to fix or make any mention
the monthly rentals by the lessees, we agree with private of the price of the thing which is the subject matter thereof.
respondents that the lessor is estopped from claiming otherwise. Geminiano v. CA, (1996). This estoppel applies even though the
lessor had no title at the time the relation of lessor and lessee was Conditional Sales of Goods
In the case of Opulencia vs. CA (1998), this Court held that created. It may be asserted not only by the original lessor, but also
petitioner is estopped from backing out of her representations in by those who succeed to his title. Vda. De Jose v. Veloso Barruesco, (1939). A lease of personalty
the contract with respondent, that is, she may not renege on her with option to buy is an installment sale and not a lease. Sellers
own acts and representations, to the prejudice of the respondents Tamio v. Ticson, (2004). Indeed, the relation of lessor and lessee desirous of making conditional sales of their goods, but who do
who relied on them. We have held in a long line of cases that does not depend on the former’s title but on the agreement not wish openly to make a bargain in that form, for one reason or
neither the law nor the courts will extricate a party from an between the parties as long as the lessee remains in undisturbed another, have frequently resorted to the device of making
unwise or undesirable contract he or she entered into with all the possession, it is immaterial whether the lessor has a valid title — contracts in the form of leases either with option to the buyer to
required formalities and willfull awareness of its consequences.’’ or any title at all — at the time the relationship was entered into. purchase for a small consideration at the end of term, provided
However, due to the peculiar circumstances availing in a case, the the so-called rent has been duly paid, or with stipulation that if
(5) Petitioner’s Allegation of Respondents’ Non-payment is rule may be relaxed to avoid unjust enrichment in favor of the the rent throughout the term is paid, title shall thereupon vest in
False lessor at the expense of the lessee such as in a case where the the lessee.
lessee would, in effect, be paying in rental twice for the use of the
Anent the second issue, we likewise hold that the contention of same property for the same period of time — to the real It is obvious that such transactions are leases only in name. The
petitioner is without merit. The Court of Appeals found that the owner if he were to still pay the lessor. so-called rent must necessarily be regarded as payment of the
petitioner’s allegation of respondents’ non-payment is false. This price in installments since the due payment of the agreed amount
is a finding of fact which we respect and uphold, absent any Heirs of Florencio v. Heirs of De Leon, (2004). Under the Rules of results, by the terms of the bargain, in the transfer of title to the
showing of arbitrariness or grave abuse on the part of the court. Court, conclusive presumptions include: “(b) The tenant is not lessee.
Furthermore, the statement of petitioner that the correct amount permitted to deny the title of his landlord at the time of the
of rents cannot be considered in a consignation case but only in commencement of the relation of landlord and tenant between Lease Distinguished from Commodatum
the ejectment case is misleading because nowhere in the decision them.” (Sec. 3-b, Rule 131, ROC) A judgment rendered in
of the appellate court did it state otherwise. This second issue is ejectment cases, however, shall not bar an action between the Lease Commodatum
clearly just a futile attempt to overthrow the appellate court’s same parties respecting title to land and shall not be conclusive as Onerous contract, although Essentially gratuitous (Art.
ruling. to the facts found therein in a case between the same parties the rent may subsequently be 1933)
upon a different cause of action involving possession of the same condoned or remitted
(6) Rationale for Consignation property. In ejectment cases, the issue is the physical or material Not essentially personal in Purely personal in character,
possession and any pronouncement made by the trial court on character and, therefore, the and consequently, the death
“Nevertheless, suffice it to be stated that under Article 1258 of the question of ownership is provisional in nature. right may be transmitted to of either the bailor or the
the Civil Code which provides: the heirs bailee extinguishes the
Lease Distinguished from Sale contract (Art. 1939)
Art. 1258. Consignation shall be made by depositing the things Consensual contract Real contract as it is
due at the disposal of judicial authority, before whom to tender of Lease Sale perfected only upon delivery
payment shall be proved, in a proper case, and the announcement Only the enjoyment or use is Ownership is transferred of the object thereof (Art.
of the consignation in other cases. The consignation having been transferred 1934)
made, the interested parties shall also be notified thereof.’ Transfer is temporary Transfer is permanent, unless Both contracts consist in the transmission of the enjoyment or
subject to a resolutory use of a thing to another (Art. 1933)
the rationale for consignation is to avoid the performance of an condition (Art. 1465)
obligation becoming more onerous to the debtor by reason of The lessor need not be the The seller must be the owner Lease Distinguished from Mutuum
causes not imputable to him. Whether or not petitioner has a owner or at least authorized by the
cause of action to eject private respondents from the leased owner to transfer ownership, Lease Mutuum
premises due to refusal of the lessees to pay the increased of the thing sold at the time it The owner of the property The lender or creditor loses
monthly rentals had been duly determined in the ejectment case is delivered (Art. 1459) does not lose his ownership ownership of the thing
by the Municipal Trial Court which was correctly upheld by the The price of the subject The price of the thing is loaned which becomes the
Court of Appeals. matter, is usually not usually fixed in the contract property of the borrower or
mentioned, being immaterial (Art. 1473) debtor (Art. 1953)
Estoppel Against Lessee
The relationship is one of The relationship is that of
H.E. Heacock Co. v. Buntal Mfg. Co., (1937). In case of doubt, the lessor and lessee creditor or obligee and
VSC Commercial Enterprises, Inc. v. CA, (2002). A lessee is intention of the parties is an important factor in determining the debtor or obligor (Art. 1953)
stopped from asserting title to the thing leased as against the contract entered into. Thus, the fact that the price of the thing The subject matter may be It is only money or any other
lessor (Art. 1436), or to deny the lessor’s title, or to assert a better (machine) was fixed in the contract, makes said contract a sale real and/or personal property fungible thing
title not only in himself, but also in some third person, including
Governed by the statute of Not governed by the Statute other some service for a price certain, but the relation of
frauds where the thing leased of Frauds (Art. 1403) Lease of Chattels Distinguished from Employment principal and agent does not exist between them.
is real property for more than
one year (Art. 1403(e)) Lease of Chattels Employment  In a lease of work, the object is the execution of a piece
Not governed by the Usury Governed by Usury Law (Art. The relationship is that of It is one of employer- work for an employer by an independent contractor (Art.
Law 1175, 1961) lessor and lessee employee 1713)
The lessor loses control or The employer retains control  In a lease of service, it is the performance of some service or
Lease Distinguished from Usufruct management over the chattel or management over his an employer by a househelper (Art. 1689) or laborer (Art.
leased chattel 1700) or for a passenger or owner of goods by a common
Lease Usufruct The lessor has no control or The employer exercises carrier. (Art. 1732)
A real right only in the case of Always a real right (Art. 567, supervision over the lessee control and supervision over  In both kinds of lease, the employer or passenger or owner
the lease of real property par. 3) his employee of goods binds himself to pay some remuneration or
where the lease is registered The lessee pays rent to the The employer pays wage or compensation in favor of the independent contractor,
Lessor may or may not be the The creator of the right must lessor for the enjoyment or salary for the services of the employee, or common carrier and the relation of principal
owner be the owner or one duly use of the chattel employee and agent does not exist between the parties.
authorized by him (Art. 563)
The lessor has the active The owner has the passive Service as Driver Under the Boundary System Lease of Work or Service Distinguished from Agency
obligation to maintain the duty to allow the
lessee in the enjoyment or usufructuary to enjoy or use National Labor Union v. Dinglasan, (1955). Under the boundary Lease of Work or Service Agency
use of the property the same (Art. 562) system, the relation between the driver and the jeepney owner is The basis is employment The basis is representation
The lessee generally pays no Usufructuary pays the annual that of employer and employee, not lessor and lessee. The lessor performs a The agent executes a juridical
taxes charges and taxes on the material act for the benefit of act for and in behalf of his
fruits (Art. 596) Thus, in a case, where the respondent is the owner and operator his employer without principal (Art. 1868)
The lessee generally has no The usufructuary is obliged to of TPU jeepneys, while the petitioners are drivers who had an oral representation of the latter
obligation to pay for repairs make the ordinary repairs contract with the respondent for the use of his jeepneys in (Art. 1644)
needed by the thing given in consideration of P7.50 for 10 hours’ use, the drivers receiving no The work or service must be It is presumed for a
usufruct (Art. 592) salaries or wages, their days’ earnings being the excess over the for a price or compensation compensation (Art. 1875)
The lessee cannot constitute The usufructuary may lease P7.50 that they paid for the use of the jeepneys, and the The will of both parties is The will of one is sufficient
a usufruct on the property the thing in usufruct to respondent’s supervision over the drivers consisted only in necessary for the for the extinguishment of the
another (Art. 581) inspection of the jeepneys when they passed his gasoline station extinguishment of the relationship (Art. 1919(1)(2),
As a rule, may be created May be created by law, for water, and checking the route prescribed by the Public Service relationship (Art. 1159) 1920, 1928)
only by contract contract, last will and Commission (now Land Transportation Franchising and Regulatory Only two persons are Three persons are involved:
testament, or prescription Board), the Supreme Court held: involved: the lessor and the the principal, the agent, and
(Art. 563) lessee the third person with whom
Generally covers particular As a rule, covers all possible “The only features that would make the relationship of lessor and the agent has contracted
uses limited by the contract uses of the property (Art. lessee between the respondent, owner of the jeeps, and the The risk of loss before The risk is borne by the
562, 564, 566) drivers, members of the petitioner union, are the fact that he delivery is borne by the principal since the agent acts
does not pay them any fixed wage but their compensation is the independent contractor, merely as his representative
Lease Distinguished from Deposit excess of the total amount of fares earned or collected by them especially in the lease of
over and above the amount of P7.50 which they agreed to pay to work for a fixed price (Art.
the respondent, and the fact that the gasoline burned by the jeeps 1717, 1718)
Lease Deposit
is for the account of the drivers. These two features are not, The independent contractor The agent is not personally
The enjoyment or use of the The safekeeping of the thing
however, sufficient to withdraw the relationship between them is personally liable for his liable for his contracts with
thing leased is the essential delivered is the principal
from that of employer-employee, because the estimate earnings contracts with third persons third persons, unless he
purpose purpose
for fares must be over and above the amount they agreed to pay expressly binds himself or
The lessor cannot demand The depositor can demand
to the respondent for a ten-hour shift or ten-hour a day operation exceeds the limits of his
the thing leased before the the return of the subject
of the jeeps. Not having any interest in the business because they authority (Art. 1897)
expiration of the contract matter at will (Art. 1972)
did not invest anything in the acquisition of the jeeps and did not
Both movable and If it is extrajudicial, only The lessor (like a servant or The agent exercises
participate in the management thereof, their service as drivers of
immovable property may be movable (corporeal) things laborer) ordinarily performs discretionary powers (Art.
the jeeps being their only contribution to the business, the
the object may be the object (Art. 1966) only ministerial duties 1876, 1877, 1881, 1882,
relationship of lessor and lessee cannot be sustained.
Onerous May be gratuitous (Art. 1565) 1884, 1887, 1888)
Consensual Real Contract perfected only
Art. 1644. In the lease of work or service, one of the parties Illustrative Case:
upon delivery of the object
binds himself to execute a piece of work or to render to the
thereof (Art. 1963)
Nielson & Co., Inc. v. Lepanto Consolidated Mining Co., (1968). approval of Lepanto. Nielson, then, was to act only as an
Respondent corporation claims that the management contract it intermediary, not as an agent. Lease of Work or Service Distinguished from Partnership
entered into with petitioner corporation is a contract of agency
such that it has the right to revoke and terminate the said (3) Contract NOT Terminable at Will Lease of Work or Service Partnership
contract, as it did terminate the same. There is no principle of Every partner is an agent of
Lepanto contends that the management contract in question representation the partnership for the
(1) Distinctions Between Agency and Lease of Services being one of agency it had the right to terminate the contract at purpose of its business (Art.
will pursuant to the provision of Article 1733 of the old Civil Code. 1818)
In both agency and lease of services one of the parties binds We find, however, a proviso in the management contract which The lessor performs a The partners into commercial
himself to render some service to the other party. Agency, militates against this stand of Lepanto. Paragraph XI of the material act for the benefit of or business transactions for
however, is distinguished from lease of work or services in that contract provides: the employer the realization of profits (Art.
the basis of agency is representation, while in the lease of work or 1767)
services the basis is employment. The lessor of services does not ‘Both parties to this agreement fully recognize that the terms of Only two persons are A juridical personality
represent his employer, while the agent represents his principal. this Agreement are made possible only because of the faith or involved (partnership) separate and
confidence that the Officials of each company have in the other; distinct from that of each of
There is another obvious distinction between agency and lease of therefore, in order to assure that such confidence and faith shall the partner is formed (Art.
services. Agency is a preparatory contract, as agency ‘does not abide and continue, Nielson agrees that Lepanto may cancel this 1768)
stop with the agency because the purpose is to enter into other Agreement at any time upon ninety (90) days written notice, in The work or service is The partners perform acts
contracts.’ The most characteristic feature of an agency the event that Nielson for any reason whatsoever, except acts of dependent upon the ends or conducive to their own
relationship is the agent’s power to bring about business relations God, strike and other causes beyond its control, shall cease to purposes of the lessee business purposes (Art. 1767)
between his principal and third persons. ‘The agent is destined to prosecute the operation and development of the properties The work or service must be The partners share in the
execute juridical acts (creation, modification or extinction of herein described in good faith and in accordance with approved for a price or compensation profits or losses (Art. 1797)
relations with third parties). Lease of services contemplate only mining practice.’ The will of both parties is The will of any partner is
material (non-juridical) acts. necessary for the sufficient for the
It is thus seen, from the above-quoted provision of paragraph XI extinguishment of the extinguishment of the
(2) Principal and Paramount Undertaking of Nielson of the management contract, that Lepanto could not terminate relationship (Art. 1159) relationship (Art. 1830(1)(a),
the agreement at will. Lepanto could terminate or cancel the (2))
In the light of the interpretations we have mentioned in the agreement by giving notice of termination ninety days in advance
The independent contractor A partner is generally not
foregoing paragraphs, let us now determine the nature of the only in the event that Nielson should prosecute in bad faith and is personally liable for his liable for his contracts with
management contract in question. not in accordance with approved mining practice the operation contracts with third persons third persons
and development of the mining properties of Lepanto. Lepanto
The lessor (like a servant) Every partner as an agent of
It thus appears that the principal and paramount undertaking of could not terminate the agreement if Nielson should cease to
ordinarily performs only the partnership, exercises
Nielson under the management contract was the operation and prosecute the operation and development of the mining
ministerial duties discretionary powers.
development of the mine and the operation of the mill. All the properties by reason of acts of God, strike and other causes
other undertakings mentioned in the contract are necessary or beyond the control of Nielson.’’
Compensation in Lease of Work or Service
incidental to the principal undertaking — these other
undertakings being dependent upon the work on the (4) Cause for Revocation of Contract
(1) Where There is an Agreement
development of the mine and the operation of the mill. In the
performance of this principal undertaking Nielson was not in any “There is no showing that Nielson had ceased to prosecute the
Arroyo v. Hospital de San Pedro, (1948). The lessee must be
way executing juridical acts for Lepanto, destined to create, operation and development of the mines in good faith and in
compelled to pay the agreed price unless it is found to be
modify or extinguish business relations between Lepanto and accordance with approved mining practice which would warrant
iniquitous or unreasonable in which case the courts may fix a
third persons. In other words, in performing its principal the termination of the contract upon ninety-days written notice.
reasonable and just remuneration. Where the compensation is
undertaking Nielson was not acting as an agent of Lepanto, in the In fact, there was no such written notice of termination. It is an
renounced or waived after the service has been rendered, there is
sense that the term agent is interpreted under the law of agency, admitted fact that Nielson ceased to operate and develop the
still a lease of service although it has become gratuitous
but as one who was performing material acts for an employer, for mines because of the war — a cause beyond the control of
a compensation. Nielson.
(2) Where the Agreement May Be Implied
It is true that the management contract provides that Nielson Indeed, if the management contract in question was intended to
Arroyo v. Azur, (1946). On principle one who performs work or
would also act as purchasing agent of supplies and enter into create a relationship of principal and agent between Lepanto and
service in favor of another who impliedly consents thereto and
contracts regarding the sale of mineral, but the contract also Nielson, paragraph XI of the contract should not have been
who benefits thereby, is entitled to compensation by virtue of an
provides that Nielson could not make any purchase, or sell the inserted because as provided in Art. 1733 [now Art. 1920], agency
innominate contract (Art. 1307) of facio ut des (I give that you
minerals, without the prior approval of Lepanto. It is clear, is essentially revocable at the will of the principal — that means
may do) or of the case of services tacitly contracted in which case
therefore, that even in these cases Nielson could not execute with or without cause. But precisely said paragraph XI was
the courts will fix the reasonable worth of the services rendered.
juridical acts which would bind Lepanto without first securing the inserted in the management contract to provide for the cause of
revocation. The provision of paragraph XI must be given effect.
Reguera v. Tanodra, (1948). No one should be enriched by the recover provided that the contract by its terms, furnishes a
work of another unless the services are expressly stated to be basis or measure of ascertaining the amount agreed upon. Persons Disqualified to Become Lessees (Art. 1646)
gratuitous.
In this case, the contracting parties fixed the maintenance of the  Art. 1490 refers to the relative incapacity of husband and
(a) Perez v. Pomar, (1903). The tacit agreement of both parties plaintiff and her family as the price for the services required for wife to sell property to each other
with respect to the services of interpreter rendered by the her. Said maintenance is the specific and determinate thing that in  Art. 1491, to the incapacity of the persons enumerated
plaintiff to the defendant and reciprocal benefits accruing to its turn fixes the price, inasmuch as its cost determines the price therein who, by the special relations they have with the
each, are the best evidence that there was an implied according to the agreement of the parties to the contract. There property under their charge or peculiar control, are
contract sufficient to be binding. Art. 1644 is applicable might be a question as to the actual cost of the plaintiff’s prohibited from purchasing said property.
(b) G. Urrutia & Co. v. Pasig Steamer and Lighter Co. (1912). maintenance, but this is a matter of fact which in such a case  The prohibition is adopted in Article 1646 because of the
When a vessel has been disabled by the breaking of its shaft would have to be proven. Be it as it may, whatever might be the similarity between the contract of lease and that of sale.
at sea and hoists signals for aid, and another vessel goes to cost of said subsistence, it would constitute the price for the
its relief and takes it in tow, such service is one of salvage services rendered by the plaintiff. Lease of Real Property by Aliens
and not merely towage, and must be remunerated
Art. 1645. Consumable goods cannot be the subject matter of a  Foreigners are prohibited by the Constitution, except only in
(3) Where NO Rate or Amount is Fixed in the Contract contract of lease, except when they are merely to be exhibited cases of hereditary succession, to acquire lands in the
or when they are accessory to an industrial establishment. Philippines. (Secs. 7, 2, par. 1, Art. XII, Constitution.)
Perez v. Pomar, (1906). Although no exact amount may have Nevertheless, they can lease real or immovable property in
been expressly determined by the parties as the consideration for Lease of Consumable Goods (Art. 1645) the Philippines.
the contract of hiring, the contract is nevertheless valid if the
amount can be ascertained in the light of the customs and usages  The essence of a lease of things is the enjoyment or use of Smith Bell & Co., Ltd. V. Register of Deeds, (1953). It is true that
of the place, or by findings of fact on the basis of evidence the property (Art. 1643) with the obligation on the part of there is a similarity between the one and the other but it is only
submitted in case of disagreement. the lessee to return the same upon the expiration of the apparent, superficial. The lessee has apparently the same rights
lease (Art. 1665) as the owner; but between the one and the other, there exists
Arroyo v. Azur. A price certain exists when the same can be  Ownership is not transferred to the lessee. Hence, things an important, substantial difference as regards ownership. The
ascertained according to the customs and usages of the place. which by their nature cannot be used without being lessor does not have the possession of the thing but he preserves
consumed, cannot be the subject matter of lease. the title, the ownership. The lessee enjoys the use of the
(a) Imperial v. Alejandre, (1909). When no rate has been fixed immovable, nothing, more; he does not exercise any proprietary
in a contract of hire of services, such as those rendered by a right. The foreigner who buys a land becomes the owner,
Chapter II: Lease of Rural and Urban Lands
physician to a sick person, the court, in case of exercises ownership over the same; but a lessee does not obtain
disagreement, shall determine a reasonable and equitable more than the possession or use of the land; there is no danger
compensation according to usages and customs of the place Section 1: General Provisions that a lessee be converted into an owner of the land; the
and the evidence in the case, with or without the testimony ownership is preserved in the lessor.
of experts Art. 1646. The persons disqualified to buy referred to in Articles
(b) Perez v. Pomar. With respect to the value of the services 1490 and 1491, are also disqualified to become lessees of the Krivenko v. Register of Deeds, (1947). Since the residence of
rendered on different occasions, the most important of things mentioned therein. aliens in the Philippines is temporary, they may be granted
which was the first, as it does not appear that any salary was temporary rights such as a lease contract which is not forbidden
fixed upon by the parties at the time the services were Rural Lands Distinguished from Urban Lands by the Constitution.
accepted, it devolves upon the court to determine, upon the
evidence presented, the value of such services, taking into Fabia v. IAC, (1984). The focal or determining factor is generally Phil. Banking Corp. v. Lui She, (1967). The parties, however, will
consideration the few occasions on which they were the location of the property. The word “rural’’ has been defined not be permitted to resort to another transaction for the purpose
rendered. The fact that no fixed or determined as relating to, or associated with, or typical of, the country, the of disguising the transfer in violation of the Constitution.
consideration for the rendition of the services was agreed word being derived from the Latin word “ruralis’’ meaning
upon does not necessarily involve a violation of the country. It pertains to a country as distinguished from a city or Accordingly, it has been held that a contract whereby an alien is
provisions of Article 1644, because at the time of the town. However, it is the legal definition of the word with which given not only a lease but also an option to buy a parcel of land by
agreement this consideration was capable of being made we are concerned. Thus, a construction of the word “rural’’ that is virtue of which the Filipino owner cannot sell or otherwise dispose
certain. an consonance with the legislative purpose must be followed. of her property, this to last for 50 years, is a virtual transfer of
(c) Majarabas v. Leonardo, (1908). Where it was stipulated that ownership and circumvents the constitutional ban against alien
the plaintiff would be liberally compensated by “providing Having in view the legislative objective, the word “rural’’ has been landholding; which qualifies the ruling laid down in Rellosa vs.
for the maintenance of herself, her husband, and their child defined as relating to or constituting tenement in land adopted Gaw Chee Hun (1953), and subsequent similar cases. Incidentally,
during all the time that the services of the plaintiff were and used for agricultural or pastoral purposes. It is one which, under P.D. 471, the maximum period allowable for the duration of
required’’ as wet nurse and governess of defendant’s infant regardless of site, is principally used for the purpose of obtaining leases of private lands to aliens or alien-owned entities not
daughter, the fact that the exact amount to be paid for the products from the soil as opposed to urban lands, which are qualified to acquire private lands under the Constitution is 25
hired services is not precisely fixed is no bar to an action to principally for the purpose of residence years, renewable for another period of 25 years upon mutual
agreement of both lessor and lessee.
cannot be enforced by action for non-compliance with the although it is not entered upon the certificate of title. The
Art. 1647. If a lease is to be recorded in the Registry of Property, statute of frauds. (Art. 1403(2)(e)) lease, in effect, became a part of the contract of sale.
the following persons cannot constitute the same without  To affect or bind third persons, a lease of real property (2) Sayo v. Manila Railroad Co., (1922). Where the plaintiff
proper authority: should be registered in the Registry of Property. Unless so (lessee) was in open possession of the land at the time the
recorded, an innocent purchaser for value is not bound to condemnation proceedings were instituted and that long
(a) the husband with respect to the wife's paraphernal real respect the existing lease and he may terminate the same. before the railroad company bought the land from the
estate, (Art. 1676) A contract of lease of land must be in a public Archbishop of Manila, the plaintiff presented his claim in the
(b) the father or guardian as to the property of the minor or instrument so that it may be recorded. condemnation proceedings asking that he be allowed to
ward, and intervene therein, but that his motion for intervention was
(c) the manager without special power. Report of Code Commission. Art. 1648 “is intended to protect the resisted by the railroad company and, therefore, denied by
lessee, who cannot be ousted by the buyer if the lease is the court, the railroad company cannot be regarded as a
Proper Authority Required If Lease to be Recorded in Registry of recorded. The right of the buyer to terminate the lease should be third party within the meaning of Art. 1648, CC and Article
Property (Art. 1647) curbed as much as possible because it is unjust to the lessee, and 34 of the Mortgage Law.
practically sanctions a violation of the contract of lease by the (3) Quimson v. Suarez, (1924). Where at the time of the
 If a lease is to be recorded in the Registry of Property, the lessor. execution of the contract of lease the plaintiff knew that the
persons mentioned in Art. 1647 cannot constitute the same defendant was in possession of the land, but was told by the
without proper authority (i.e., power of attorney) to Domestic Savings and Loan Assoc v. Villafenia-Caguioa, (1982). landlords that defendant’s lease would expire before the
constitute the same The lessor may be compelled by the court to deliver to the lessee beginning of term of the plaintiff’s lease, by virtue of its
 Art. 1647 does not specify the term of the lease. Every lease the certificate of title over the property leased so that the lease registration, the plaintiff’s lease held priority over the
of real estate may be recorded, and if recorded, creates a may be annotated therein defendant’s unregistered lease and the plaintiff’s knowledge
real right binding upon third persons. (Arts. 1648, 1676) of the fact that the defendant was in possession of the land
(2) As Between the Parties was not sufficient to charge him with notice of the duration
 The registration of the lease is, therefore, an act of strict
of the term of the defendant’s lease, but that he had a right
ownership; hence, a special power of attorney is necessary.
 But if the lease is not to be recorded, the lease entered into  Lease is a mere personal right. Its inscription in the Registry to rely on the certificate of title and was not bound to make
of Property to bind third persons does not in any way alter further inquiries. Here, the plaintiff believed in good faith
by said persons is valid even without a special power
or modify the rights and obligations of the parties under the the representation of the landlords, which was not true. His
 Under Art. 1878(8), a special power of attorney is necessary
contract which has a life of its own independent of the information was that the lease had expired. He was
“to lease any real property to another person for more than
registration. considered an innocent third person.
one year.’’ This requirement is imposed whether or not the
lease will be recorded. In the absence of a special power, a  Thus, where the instrument registered is invalid or legally
lease for than one (1) year executed by the persons defective, registration will not render it valid or cure its Art. 1649. The lessee cannot assign the lease without the
mentioned in Art. 1647 is valid only for one (1) year but void defect. Lease partakes of the nature of a real right when it is consent of the lessor, unless there is a stipulation to the
as to the excess recorded on the title of the lessor (regardless of duration) contrary.
only in the sense that it is binding even as against third
 The word “administrator” in the Old Civil Code is changed to
persons without actual notice of the transaction. Manlapat v. Salazar, (1956). In an assignment of lease, the
“manager” in Art. 1647. Said word has been held to apply:
personality of the lessee (assignor/debtor) disappears. The lessee
Lease of Personal Property makes an absolute transfer of his lease, involving not only his
(a) To an administrator of conjugal property
(b) Property owned in common rights but also obligations as such lessee and thus, dissociates
(c) Property of a decedent  Art. 1648 applies only to lease of real estate; hence, leases himself from the original contract of lease. There arises the new
(d) Patrimonial or private property of the State of personal or movable property cannot be registered. juridical relation between the lessor and the assignee who is
 Under Art. 1625, an assignment of a credit, right, or action converted into a new lessee. There is, in effect, a novation by
shall affect third persons if the assignment appears in a substituting the person of the debtor (Art. 1291(2)) and novation
Art. 1648. Every lease of real estate may be recorded in the
public instrument. By analogy with said rule, leases of cannot take place without the consent of the creditor. (Art. 1293)
Registry of Property.
personal property shall be binding on third persons if they Hence, the lessee cannot assign the lease without the consent of
appear in a public instrument. the lessor (creditor), unless there is a stipulation granting him that
Unless a lease is recorded, it shall not be binding upon third
right.
persons.
Effect of Actual Notice of Unregistered Lease by Purchaser
Dakudao v. Consolacion, (1983). The objective of the prohibition
Effect of Registration of Lease of Real Estate GR: Where the contract of lease entered into by the lessee with is to protect the lessor owner of the leased property.
the former owner was not recorded, said contract cannot bind a
(1) As Against Third Persons purchaser of the property. Caco v. CA, (1977). An assignment of lease without the consent of
the lessor is a ground for rescission of the lease.
 A lease contract is valid and binding between the parties, (1) Gustillo v. Maravilla, (1925). Where a purchaser of land at
their privies, and their heirs (Art. 1311), unless it be an oral the time of the purchase has full knowledge of the fact that 2005 Bar, Q. XIV(b): Under a written contract dated December 1,
lease for a longer period than one (1) year in which case it the land has been leased to a third person and is informed of 1989, Victor leased his land to Joel for a period of five (5) years
the terms of such lease, he is bound to respect said lease,
at a monthly rental of P1,000.00, to be increased to P1.200.00 On January 1, 1991, Joel subleased the land to Conrad for a
and P1,500.00 on the third and fifth year, respectively. period of two (2) years at a monthly rental of P1,500.00. Art. 1650. When in the contract of lease of things there is no
express prohibition, the lessee may sublet the thing leased, in
On January 1, 1991, Joel subleased the land to Conrad for a On December 31, 1992, Joel assigned the lease to his compadre, whole or in part, without prejudice to his responsibility for the
period of two (2) years at a monthly rental of P1,500.00. Ernie, who acted on the belief that Joel was the rightful owner performance of the contract toward the lessor.
and possessor of the said lot Joel has been faithfully paying the
On December 31, 1992, Joel assigned the lease to his compadre, stipulated rentals to Victor. Sublease by Lessee of Thing Leased
Ernie, who acted on the belief that Joel was the rightful owner
and possessor of the said lot Joel has been faithfully paying the When Victor learned on May 15, 1992 about the sublease and (1) Filoil Refinery Corp. v. Mendoza, (1987). Unlike in
stipulated rentals to Victor. assignment, he sued Joel, Conrad and Ernie for rescission of the assignment of a lease, a lessee may sublease the property in
contract of lease and for damages. the absence of express prohibition.
When Victor learned on May 15, 1992 about the sublease and
assignment, he sued Joel, Conrad and Ernie for rescission of the Will the action prosper? If so, against whom? Explain.  A violation of the prohibition entitles the lessor to rescission
contract of lease and for damages. of the contract and indemnification for damages or only the
A: Yes, the action for rescission of the lease will prosper because latter allowing the contract to remain in force. (Art. 1659)
In case of rescission, discuss the rights and obligations of the Joel cannot a ssign the lease to Ernie without the consent of  That the sublessee is financially solvent is not a defense. If
parties. Victor. (Art. 1649, CC). But Joel may sublet to Conrad because the prohibition is merely implied, a sublease is still allowed.
there is no express prohibition (Art. 1650, CC; Alipio v. CA, 2000). The contract of lease must expressly stipulate the
A: In case of rescission, the rights and obligations of the parties prohibition on subletting.
should be as follows: Victor can rescind the contract of lease with Joel, and the
assignment of the lease to Ernie, on the ground of violation of law (2) A. Maluenda & Co. v. Enriquez, (1924). In sublease, the
(a) At the time that Victor filed suit on May 15, 1992, the and of contract. The sub-lease to Conrad remained valid for two lessee remains a party to the contract. The personality of the
assignment had not yet lapsed. It would lapse on December (2) years from January 1, 1991, and had not yet lapsed when the lessee does not disappear. There are two leases and two
1, 1994, the very same date that the 5-year basic lease action was filed on May 15, 1992. distinct juridical relations: between the lessor and the
would expire. Since the assignment is void, Victor can get lessee, and between the sublessor (lessee) and the
the property back because of the violation of the lease. 1990 Bar, Q. VI(b): A leased a parcel of land to B for a period of sublessee, although intimately related to each other. The
(b) Both Joel and Ernie have to surrender possession and are two (2) years. sublessee generally does not have any direct action against
liable for damages. the lessor to require compliance with his or lessee’s
(c) But Conrad has not yet incurred any liability on the sublease The lease contract did not contain any express prohibition obligations, or vice versa. The sublessor is the one directly
which still subsisted at the time of the filing of the action on against the assignment of the leasehold or the subleasing of the liable to the sublessee whose damages are included in
May 15, 1992. leased premises. whatever damages the former may recover from the lessor.
(d) Ernie can file a cross-claim against Joel for damages on (3) Celis v. De Vera, (CA). The sublease of a leased property
account of the rescission of the contract of assignment. During the third year of the lease, B subleased the land to C. cannot affect the efficacy of the contract of lease which
(e) Conrad can file a counter-claim against Victor for damages subsists with all its legal consequences notwithstanding said
for lack of causes of action at the time of the filing of the In turn, C, without A’s consent, assigned the sublease to D. sublease.
suit. (4) Ng Sui Tian v. Amparo, (1948). A judgment of eviction
A then filed an action for the rescission of the contract of lease against the lessee affects the sublessee even if the latter is
Rohde Shotwell v. Manila Motor Co. Inc., (1956). What is on the ground that B has violated the terms and conditions of not sued in the ejectment case. This is so because the
contemplated by Art. 1649 is a transfer whereby the original the lease agreement. sublessee can invoke no right superior to that of the
lessee is released from his obligations under the contract. In other sublessor from which his own right is derived, and the
words, there must be transfer of the contract itself, not merely of If you were the judge, how would you decide the case, moment the sublessor is duly ousted from the premises, the
the rights of the lessee. Where the assignee of the lessee did not particularly with respect to the validity of: C's assignment of the sublessee has no leg to stand on. His possession is entirely
assume the liabilities and obligations of the lessee under an sublease to D? dependent on the lessee. His right, if any, is to demand
express stipulation that the assignment “does not carry with it any reparation for damages from his sublessor, should the latter
of the liabilities and obligations’’ of the lessee-assignor, the Explain your answer. be at fault
assignee cannot be held liable for the rentals unpaid by the
lessee-assignor. Here, the lessor’s consent is not required and he A: C’s assignment of the sublease to D is not valid. Under Art. Illustrative Case:
has no right of action against the assignee. 1649, CC, the lessee cannot assign the lease without the consent
of the lessor, unless there is a stipulation to the contrary. There is Malasarte v. CA, (1989). The lessee, without the written consent
2005 Bar, Q. XIV(a): Under a written contract dated December 1, no such stipulation in the contract. If the law prohibits assignment of the lessors, accepted boarders in their apartment, the latter
1989, Victor leased his land to Joel for a period of five (5) years of the lease without the consent of the lessor, all the more would alleging that the lessee violated the prohibition against subleasing
at a monthly rental of P1,000.00, to be increased to P1,200.00 the assignment of a sublease be prohibited without such consent. any portion of the premises without their written consent
and P1,500.00 on the third and fifth year, respectively. This is a violation of the contract and is a valid ground for
rescission by A. (1) Accepting Boarders NOT Equivalent to Subleasing
countenanced for defeating them.’ (49 Am. Jur. 2d Sec. 485, pp. thing leased; advise the owner the need for all repairs; to return
The taking in of boarders by the petitioner in the leased premises, 472-473.) the thing leased upon the termination of the lease just as he
without the consent of the lessors, did not violate the lease received it, save what has been lost or impaired by the lapse of
agreement, for a prohibition against subleasing may not embrace ‘Permitting lodgers or boarders to occupy rooms in a demised time or by ordinary wear and tear or from an inevitable cause;
the taking in of boarders. Accepting boarders is not equivalent to building is not a subletting.’ (White v. Maynard, 111 Mass 250, 15 responsible for the deterioration or loss of the thing leased, unless
subleasing the premises. The lessee, by accepting boarders and Am. Rep. 28; 32 Am. Jur., pp. 331-332.)’’ he proves that it took place without his fault.
assigning rooms or bed spaces for them in the leased premises,
does not relinquish or surrender his lease to them. He did not (3) Lease Contract Has Not Been Violated 1994 Bar, Q. VIII(2): In January 1993, Four-Gives Corporation
cease to become the actual occupant and possessor of the leased the entire twelve floors of the GQS Towers Complex, for a
demised premises. He did not surrender the possession and Since neither the law (B.P. 25, as amended.) nor his contract with period of ten years at a monthly rental of P3,000,000.00. There is
control of the leased premises or a part thereof. the property owner prohibits the petitioner from accepting a provision in the contract that the monthly rentals should be
roomers, bed spacers, or boarders in the leased apartment, the paid within the first five days of the month. For the month of
The word ‘sublet’ has a clear and distinct meaning, that is, it lease has not been violated. The lessors have no cause of action March, May, June, October and December 1993, the rentals
means to make a sublease, accompanied by a surrender of the for the judicial ejectment of petitioner-lessee. were not paid on time with some rentals being delayed up to ten
possession and control of the premises, or at least a part thereof. days. The delay was due to the heavy paper work involved in
2014 Bar, Q. XXVI: Isaac leased the apartment of Dorotea for two processing the checks.
(2) Boarders Merely Provided with Meals and Lodging for a (2) years, six (6) months after; Isaac subleased a portion of the
Price apartment due to financial difficulty. Is the sublease contract Four-Gives Corporation also subleased five of the twelve floors
valid? to wholly-owned subsidiaries. The lease contract expressly
By accepting boarders in the apartment, the petitioner did not prohibits the assignment of the lease contract or any portion
sublease portions of the apartment to the boarders, but only (a) Yes, it is valid for as long as all the elements of a valid thereof. The rental value of the building has' increased by 50%
agreed to provide them with meals and/or lodging for a price. sublease contract are present. since its lease to FourGives Corporation.
(b) Yes, it is valid if there is no express prohibition for
To this effect are the following rulings: subleasing in the lease contract. Can the building owner ask for the cancellation of the contract
(c) No, it is void if there is no written consent on the part of the for violation of the provision against assignment?
‘Letting a room for personal occupation to a lodger does not lessor.
constitute a subletting’ (51C C.J.S., citing Pembrook vs. Goldman, (d) No, it is void because of breach of the lease contract. A:
App., 176 So. 888).
1999 Bar, Q. XIV(a): May a lessee sublease the property leased (a) No. Sublease is different from assignment of lease. Sublease,
‘Since a roomer or lodger is not a tenant in the strict legal sense, it not being prohibited by the contract of lease is therefore
without the consent of the lessor, and what are the respective
has generally been held that the taking in of roomers or lodgers allowed and cannot be invoked as a ground to cancel the
liabilities of the lessee and sub-lessee to the lessor in case of
by a lessee does not constitute a violation of a covenant or lease.
such sublease?
provision against subletting. However, where the lease of one of (b) No, the lessor cannot have the lease cancelled for alleged
the two houses of a double brick dwelling contained a provision violation of the provision against assignment. The lessee did
A: Yes, provided that there is no express prohibition against
that there should be no subletting of the leased premises, it was not assign the lease, or any portion thereof, to the
subleasing.
held that there was a technical violation of the lease where the subsidiaries. It merely subleased some floors to its
lessees rented one of the rooms of such house to a person who subsidiaries. Since the problem does not state that the
Under the law, when in the contract of Iease of things there is no
was not related to the lessees in any way, and who, in addition to contract of lease contains a prohibition against sublease, the
express prohibition, the lessee may sublet the thing leased
having a room and private bath, had breakfast with the lessees, sublease is lawful, the rule being that in the absence of an
without prejudice to his responsibility for the performance of the
and who was certified by such lessees as a tenant to the Price express prohibition a lessee may sublet the thing leased, in
contract toward the lessor. (Art. 1650).
Administration.’ (49 Am. Jur. 2d Section 490, pp. 476.) whole or in part, without prejudice to his/its responsibility to
In case there is a sublease of the premises being leased, the the lessor for the performance of the contract.
A sublease is a grant by a tenant of an interest in the demised
sublessee is bound to the lessor for all the acts which refer to the
premises less than his own, retaining to himself a reversion, and a
use and preservation of the thing leased in the manner stipulated 1990 Bar, Q. VI(a): A leased a parcel of land to B for a period of
subtenant is a person who rents all or a portion of leased
between the lessor and the lessee. (Art. 1651) two (2) years.
premises from the lessee for a term less than the original one,
leaving a reversionary interest in the first lessee.’ (49 Am. Jur. 2d
The sublessee is subsidiarily liable to the lessor for any rent due The lease contract did not contain any express prohibition
Sec. 480, p. 469.)
from the lessee. However, the sublessee shall not be responsible against the assignment of the leasehold or the subleasing of the
beyond the amount of the rent due from him. (Art. 1652) leased premises.
‘A lessee’s common-law right to sublet may be expressly
restricted by a covenant or stipulation against subletting, but
As to the lessee, the latter shall still be responsible to the lessor During the third year of the lease, B subleased the land to C.
since such restriction are in restraint of alienation, they are not
for the rents; bring to the knowledge of jthe lessor every
looked upon with favor by the courts; they are construed with the
usurpation or untoward act which any third person may have In turn, C, without A’s consent, assigned the sublease to D.
utmost jealousy, and very easy modes have always been
committed or may be openly preparing to carry out upon the
A then filed an action for the rescission of the contract of lease A then filed an action for ejectment against C, who raised the
on the ground that B has violated the terms and conditions of defense that there is no privity of contract between him and A, Celis v. De Vera, (CA). Art. 1651 and 1652 impose upon the
the lease agreement. and that he has not been remiss in the payment of rent. sublessee certain obligations which imply the grant of a direct
action in favor of the lessor against the former. Under the second
If you were the judge, how would you decide the case, Will the action prosper? paragraph of Art. 1652, payments of rent in advance by the
particularly with respect to the validity of: B’s sublease to C? sublessee shall be deemed not to have been made, so far as the
A: Yes. the action will prosper. Under Art. 1651, CC, the sublessee lessor’s claim is concerned, unless said payments were effected in
Explain your answer. is bound to the lessor for all acts which refer to the use and virtue of the custom of the place. The sublessee continues to be
preservation of the thing leased in the manner stipulated between subsidiarily liable to the lessor for any rent unpaid by the lessee.
A: B’s sublease to C is valid. Although the original period of two the lessor and the lessee. The rule is a precaution to avoid collusion between the lessee and
years for the lease contract has expired, the lease continued with lessee. With the insolvency of the sublessee and the supposed
the acquiescence of the lessor during the third year. Hence, there Art. 1652. The sublessee is subsidiarily liable to the lessor for any advance payment by the sublessee, the rights of the lessor might
has been an implied renewal of the contract of lease. Under Art. rent due from the lessee. However, the sublessee shall not be be rendered nugatory
1650, CC, the lessee may sublet the thing leased, in whole or in responsible beyond the amount of rent due from him, in
part, when the contract of lease does not contain any express accordance with the terms of the sublease, at the time of the Art. 1653. The provisions governing warranty, contained in the
prohibition. (Art. 1650, 1670, CC). extra-judicial demand by the lessor. Title on Sales, shall be applicable to the contract of lease.

A’s action for rescission should riot prosper on this ground. Payments of rent in advance by the sublessee shall be deemed In the cases where the return of the price is required, reduction
not to have been made, so far as the lessor's claim is concerned, shall be made in proportion to the time during which the lessee
Art. 1651. Without prejudice to his obligation toward the unless said payments were effected in virtue of the custom of enjoyed the thing.
sublessor, the sublessee is bound to the lessor for all acts which the place.
refer to the use and preservation of the thing leased in the Warranty of Lessor (Art. 1653)
manner stipulated between the lessor and the lessee Subsidiary Liability of Sublesee to Lessor
 In a lease contract, the lessor likewise warrants that he has a
Direct Liability of Sublessor to Lessor (1) Remedy to Collect Rents from The Sublessee right to lease the thing, that the lessee shall enjoy the legal
and peaceful possession of the thing, and that the thing is fit
GR: The sublessee is not a party to the contract between the  Although the sublessee has assumed no direct obligation to for the use for which it is intended and free from any hidden
lessor and the lessee; hence, under the general rule in contracts answer for the rents due from the lessee to the lessor, the fault or defect. (Art. 1654)
(Art. 1311), the sublessee can only be held liable directly to the law grants the lessor the right to demand payment from the  In case of eviction of the lessee, and the return of the rents
sublessor sublessee the rents which the sublessor failed to pay the paid is required, a reduction shall be made taking into
lessor. account the period during, which the lessee enjoyed the
XPN: Art. 1651  The evident purpose of the remedy is to prevent a situation thing. The lessee has also the right to ask for the
where the lessee collects rents from the sublessee but does proportionate reduction of the rents agreed upon where the
Ortiz v. Balgos, (1929). The lessor may bring an action directly not pay his rents to the lessor. area or number of the object of the lease is less than that
against the sublessee if he does not use and preserve the thing stated in the contract. (Art. 1542)
leased in accordance with the agreement between the lessor and Vera v. Fisher, (CA). Art. 1652 does not annul the contractual
the lessee or with the nature of the property. (Art. 1657(2)) It is relations between the lessee and sublessee but simply helps the Lessor’s Warranty Distinct from His Liability for Damages
not necessary that the sublessor be joined as a defendant. owner of the property to collect the rentals on the same. The
demand to pay rents made by the lessor on the sublessee does  In connection with a lease, warranty is the obligation to
 The duty of the sublessee insofar as the use and not exempt the latter from his obligation to pay the sublessor the repair or correct any fault or defect existing when the lessee
preservation of the thing leased is concerned is without rents which said sublessee failed to pay the lessor. took over the property leased, but when the law declares
prejudice to his obligation towards the sublessor. that the lessor must warrant the thing leased; it is not to be
(2) Amount of Rent Recoverable understood that he must also indemnify the lessee. Liability
2000 Bar, Q. XIX(a): A leased his house to B with a condition that for the warranty is not equivalent to liability in damages, as
the leased premises shall be used for residential purposes only.  The liability of the sublessee is limited to the amount of rent the latter is an obligation distinct from the former
due from him to the sublessor under the terms of the
B subleased the house to C who used it as a warehouse for sublease at the time of the extrajudicial demand by the Yap Kim Chuan v. Tiaoqui, (1915). The lessor’s obligation to
fabrics. lessor. warrant the thing leased, whether or not he knew of the existence
 Future rents cannot be recovered. therein of defects that rendered it unsuitable for the use for
Upon learning this, A demanded that C stop using the house as a which the lessee intended it, is distinct from his liability for
warehouse, but C ignored the demand. Note: The liability of the sublessee is subsidiary, i.e., he is liable to damages, which only attaches when he knew about such defects
the lessor only for rents the lessee failed to pay the lessor. and failed to reveal them to the lessee or concealed them, in
which case fraud and bad faith may be presumed on his part.
(3) Liability Fore Rents Paid in Advance
U.S. Lines Co. v. San Miguel Brewert, Inc. (1964). In a lease of a lessor based upon the latter’s failure to comply his obligation to cracks or defects, the lessor cannot be held liable for
cold storage plant for foodstuffs, the lessor is understood as deliver the same. damages in the absence of express agreement to that effect.
having warranted that the leased premises would be free from
rats. In this warranty, fraud or bad faith on the part of the lessor is (2) Making of Necessary Repairs Note: While the lessor is not liable for damages due to a
not a necessary element. A lessor of a cold storage plant may be fortuitous event or force majeure, he must make the repairs after
held liable for the deterioration of the foodstuffs stored therein  Art. 1654 speaks of necessary repairs to keep the thing he has been advised by the lessee of the necessity thereof within
by the lessee because some foodstuffs were gnawed by rodents. leased suitable for the use to which it has been devoted the shortest time possible.
unless there is a stipulation to the contrary.
Section II: Rights and Obligations of the Lessor and the Lessee  In default of a special stipulation, the custom of the place 2010 Bar, Q. II(A): A had a 4-storey building which was
shall be observed as to the kind of repairs. (Art. 1686) constructed by Engineer B. After five years, the building
Art. 1654. The lessor is obliged:  If the lessor fails in the performance of this duty, the lessee developed cracks and its stairway eventually gave way and
may suspend the payment of rent (Art. 1658) or avail himself collapsed, resulting to injuries to some lessees. Who should the
(1) To deliver the thing which is the object of the contract in of the other remedies provided in the law. The lessor is not lessees sue for damages?
such a condition as to render it fit for the use intended; liable for repairs for damages or deterioration caused by the
(2) To make on the same during the lease all the necessary lessee himself. 1. A, the owner
repairs in order to keep it suitable for the use to which it 2. B, the engineer
has been devoted, unless there is a stipulation to the (a) Gonzales v. Mateo, (1944). The lessee may agree to do 3. both A & B
contrary; repairs and relieve the lessor of the duty, as where the
(3) To maintain the lessee in the peaceful and adequate lessee is to pay only a very moderate if not nominal, rent. A: (3). The lessee may proceed against A for breach of contract,
enjoyment of the lease for the entire duration of the (b) Albano v. Villanueva, (1906). The word “repairs’’ implies the and against B for tort or statutory liability.
contract. putting back of something in the condition in which it was
originally, while an “improvement’’ is the adding of Under Art. 1654(2), NCC, the lessor is obliged to make all the
something new thereto; hence, the filling of a vacant lot is necessary repairs in order to keep the leased property suitable for
Obligations of the Lessor
not a repair, nor the construction of a house. the use to which it has been devoted. Consequently, under Art.
(c) Lizares v. Alunan, (1920). The word “repairs,’’ in its ordinary 1659, NCC, the proprietor of a building or structure is resppnsible
 Another obligation of the lessor is that he cannot alter the
acceptation, must be understood to apply to the restoration for the damages resulting from its total or partial collapse, if it is
form of the thing leased (Art. 1661)
of things after injury or partial destruction, without due to the lack of necessary repairs.
complete loss of identity in the thing repaired.
(1) Delivery of the Property
Under Art. 1723, NCC, the engineer or architect who drew up the
The obligation to make repairs is very different from plans and specifications for a building is liable for damages if
 The thing leased must be delivered in order that the lessee
reconstruction in case of total loss. Thus, the lessor’s obligation to within 15 years from the completion of the structure, the same
may enjoy or use the same. Delivery, may, of course, be
make repairs does not extend to the obligation to reconstruct a should collapse by reason of a defect in those plans and
actual or constructive. (Art. 1496)
camarin which has been totally destroyed by fire. Repairs mean specifications, or due to the defects in the ground. This liability
the restoration of the camarin which had deteriorated from use or may be enforced against the architect or engineer even by a third
(a) At the time of delivery, the thing must be in a condition fit
has been partially destroyed without total loss of identity. party who has no privity of contract with the architect or engineer
for the use intended. The contract, however, may validly
under Art. 2192, NCC.
provide that the thing, when delivered, shall be in the same
(d) Donato v. Lack, (1911). When the lessor agrees to keep a
condition in which it might be at the time of the perfection
building under lease in a proper condition but fails to do so, Alternative: The lessee can sue only the lessor for breach of
of the contract. The parties may stipulate regarding the
and the lessee vacates the building before the expiration of contract under Art. 1659 in relation to Art. 1654, NCC. The lessee
fitness of the thing and the particular use to which it will be
the lease, the lessor cannot recover damages nor rent for cannot sue the architect or the engineer because there was no
devoted by the lessee.
the unexpired term privity of contract between them. When sued, however, the lessor
(b) Republic v. De Los Angeles, (1971). When a lessee rents a
(e) Gregorio Araneta, Inc. v. Lyric Film Exchange, Inc. (1933). may file a third party claim against the architect or the engineer.
building which turns out, however, to be occupied by
There are no authorities to the effect that it is incumbent
another person, and the former cannot obtain possession,
upon the owner to constantly inspect the premises and that Alternative: Under Art. 1723, NCC, the engineer or architect who
his (the lessee’s) cause of action is against the lessor for
if he fails to do so or through error of judgment fails to make drew up the plans and specifications for a building is liable for
breach of contract in that the latter violated the obligation
repairs before the damage is material, the lessee has a cause damages if within 15 years from the completion of the structure,
of delivering to him the peaceful possession of the leased
of action. As the lessee is in possession and if repairs are the same should collapse by reason of a defect in those plans and
premises. The lessee has no cause of action against the
necessary, which it is the duty of the owner to make, the specifications, or due to the defects in the ground. Under Art.
possessor because he has no relation, contractual or ex
lessee should call upon the owner to make the necessary 2192, NCC, however, if the damages should be the result of any of
delicto, with the latter.
repairs. If the owner then fails to perform his duty, action the defect in the construction mentioned in Art. 1723, NCC, the
would lie third person suffering damages may proceed only against the
Rivera v. Halili, (1963). A lessee who fails to take possession of
(f) Yap Kim Chuan v. Tiaoqui, (1915). Where the lessee’s goods engineer or architect or contractor within the period fixed therein.
the leased premises on account of the presence of third persons
got wet as a result of torrential rain even though the roof of The damages suffered by the lessee in the problem are clearly
unwilling to vacate the premises because of some previous act or
the building occupied by the lessee was in good condition
transaction of the lessor, should institute the action against the
and there was no proof that the lessor knew that it had
those resulting from defects in the construction plans or rescission of the lease. Once the choice of the lessee has
specifications. If the destruction is partial, the lessee may choose between a been communicated to the lessor, the former cannot change
proportional reduction of the rent and a rescission of the lease. it. (Art. 1201)
(3) Keeping Lessee in Peaceful and Adequate Enjoyment  If reduction of rent is chosen, the same shall be retroactive
Effect of Destruction of Thing Leased by Fortuitous Event to the date the partial destruction occurred. In case of
Liwayway Publications, Inc. v. Permanent Concrete Workers rescission, the general rule is that it will not be granted for
Union, (1981). The lessor’s obligation to maintain the lessee arises (1) Destruction Total slight or trivial causes.
when acts termed “legal trespass’’ disturb, dispute, or place  The partial destruction, under the circumstances, should be
difficulties in the lessee’s peaceful and adequate enjoyment of the Roces v. Rickards, (CA). In this case, the lease is extinguished, important or substantial as to defeat the purpose of the
leased premises that in some manner or other cast doubt upon because of the absence of the object of the contract. The lessee of lessee in entering into the contract of lease.
the right of the lessor to execute the lease. The lessor must a room in a building which is subsequently destroyed cannot
answer for such legal trespass consider himself a lessee of the land on which said building was Art. 1656. The lessor of a business or industrial establishment
constructed and from which he is sought to be ousted, just may continue engaging in the same business or industry to
(a) De La Cruz v. Seminary of Manila, (1911). The lessor who because he was a lessee of one of the rooms of said buildings. His which the lessee devotes the thing leased, unless there is a
fails in the performance of his obligations shall be subject to lease came to an end when the building was destroyed, so that, to stipulation to the contrary.
indemnity for the losses and damages caused thereby. The make him lessee of the land thereafter, a new contract of lease
true measure of damages for the breach of such a contract is would have to be made. Right of Lessor to Continue Same Business or Industry Engaged
what the plaintiff has lost by the breach. in by Lessee
(b) Bobol v. Torres. The warranty of the lessor is that the lessee Rohde Shotwell v. Manila Motors Co. Inc., (1957). Where the
shall not be disturbed in his legal, not physical possession buildings and the land, which formed part of the causa or City of Naga v. CA, (1954). Art. 1656 permits the lessor of a
consideration of the lease contract, constituted an indivisible unit, business or industrial establishment to continue engaging in the
Heirs of Ormaechea v. Cu Chee Gan & Co. (CA). The lessor is not the destruction of the buildings extinguished the obligation or same business or industry to which the lessee has devoted the
liable for physical trespass, but is liable when his non-payment of terminated the lease contract. thing leased. A lease is no warranty by the lessor to the lessee that
his real estate tax results in the eviction of the lessee. the latter’s business would be successful. Even if the lessee should
1993 Bar, Q. IX: A is the owner of a lot on which he constructed a suffer losses, he would still be bound to fulfill the terms of the
Sayo v. Manila Railroad Co., (1922). The lessor, however, is not building in the total cost of P10,000,000.00. lease.
responsible for his lessee’s eviction through condemnation
proceedings for the reason that expropriation is involuntary. Of that amount B contributed P5,000,000.00 provided that the  Neither does a lease create a right in favor of the lessee to
building as a whole would be leased to him (B) for a period of be free from competition offered by the lessor or other
(c) Vda. De Villareal v. Manila Motor Co. (1958). The act of the ten years from January 1, 1985 to December 31, 1995 at a rental persons.
Japanese Armed Forces in evicting the lessee from the of P10,000.00 a year. To such condition, A agreed.  It is submitted that the lessor may engage or continue to
leased premises constituted not merely an act of trespass engage in the same business of the lessee, unless there is a
(pertubacion de mero hecho) but a trespass under a color of On December 20, 1990, the building was totally burned. stipulation to the contrary.
title (perturbacion de derecho) chargeable to the lessor. The
lessee’s obligation to pay rentals ceased during such Soon thereafter, A’s workers cleared the debris and started Art. 1657. The lessee is obliged:
deprivation. construction of a new building.
(d) Ninoy Aquino International Airport Authority v. CA, (2003). (1) To pay the price of the lease according to the terms
In a case where the agreement of the parties is for the lease B then served notice upon A that he would occupy the building stipulated;
of an entire area and “the term of the lease shall be being constructed upon completion, for the unexpired portion of (2) To use the thing leased as a diligent father of a family,
considered as extended for a period equal to that during the lease term, explaining that he had spent partly for the devoting it to the use stipulated; and in the absence of
which the lessee was not in possession of the leased construction of the building that was burned. stipulation, to that which may be inferred from the nature
premises’’, the failure of the lessee to use a portion of the of the thing leased, according to the custom of the place;
leased premises was held equivalent to a dispossession from A rejected B’s demand. (3) To pay expenses for the deed of lease
the entire area in question, for there was incomplete
performance by the lessor of its principal prestation, thereby Did A do right in rejecting B’s demand?
Obligations of the Lessee (Art. 1657)
calling for the application of the contractual provision on
A: Yes, A was correct in rejecting the demand of B. As a result of
extension of term  Another obligation of the lessee is to notify the lessor of
(e) Tagbilaran Integrated Sellers Assoc. v. CA, (2004). The the total destruction of the building by fortuitous event, the lease
every usurpation or untoward act by any third person and of
obligation of the lessor to maintain the lessee in the was extinguished. (Art. 1655, CC)
the necessity of urgent repairs. (Art. 1663)
peaceful and adequate enjoyment of the lease persists only
for the duration of the contract (2) Destruction Partial (1) Payment of Agreed Price of Lease

Art. 1655. If the thing leased is totally destroyed by a fortuitous  In this case, the lessee is given the option to choose Sugar Estates v. Iribar, (1905). The obligation of the lessee to pay
event, the lease is extinguished. between a proportionate reduction of the rent and the rent agreed upon arises only when the thing leased has been
delivered to the lessee for the purposes stipulated in the contract.  He must devote the thing to the use stipulated, and if none for which the lessor is not liable. The lessee has a direct against
Thus, where the agreement to lease a vessel was never was stipulated, to that which may be inferred from the the trespasser.
consummated for the reason that the defendant did not accept nature of the thing leased according to the custom of the
delivery of the same because it was not what it was represented place.  If the cause for suspending payment has ceased to exist, the
to him, the lessee was not liable for rent  The use of the thing for an illegal purpose entitles the lessor lessee has no liability to pay the rents, for the intervening
to terminate the contract. period unless the lessor can prove that the suspension was
(a) Lim Si v. Lim, (1960). Only the lessor has the right to fix the not legally justifiable.
rents. The court cannot determine the rent and compel the Tolentino. When a thing by its nature is susceptible of various
lessor to conform thereto and allow the lessee to enjoy the uses, the lessee may use it for any of the purposes for which it Art. 1659. If the lessor or the lessee should not comply with the
premises on the basis of the rents fixed by it. may be suitable. The lessee need limit himself to the use to which obligations set forth in Articles 1654 and 1657, the aggrieved
the thing was devoted at the time of the lease. Thus, a lot may at party may ask for the rescission of the contract and
Imperial Insurance, Inc. v. Simon, (1965). It is error for the court the time of the contract may have been used as a depositary for indemnification for damages, or only the latter, allowing the
to fix a monthly rental at an amount which is lower than what the lumber; the lessee may use it as a motor compound or even for contract to remain in force.
lessee is willing to pay for the leased premises. purposes of constructions suitable to the place. But when the
lease is of a commercial establishment dedicated to a particular Alternative Remedies of Aggrieved Party (Art. 1659)
(b) Bulahan v. Tuason, (1960). The lessor has not only the right business, such as a bakery or grocery, the lessee cannot change
to terminate the lease upon the expiration of the term but the purpose of such establishment. (1) Mina v. Rodriguez, (CA). Art. 1659 follows the general rule
also to increase the rent in case of renewal. The lessee has in obligations contained in Art. 1191 with the difference that
to option to accept the new rate or vacate the premises; (3) Payment of Expenses for Deed of Sale while the courts are granted by said article the discretion to
otherwise, he will be considered a possessor in bad faith of grant an obligor additional time for performance (par. 3
the property.  In sale, the expenses for the execution and registration of thereof), under Art. 1659, there is no such discretion granted
(c) Camus v. Price, Inc., (1962). Where the lessee was in the deed of sale shall be borne by the vendor, unless there is to courts.
continuous possession of the leased building and lot during a stipulation to the contrary. (Art. 1487) (2) A violation of the lease contract entitles the aggrieved party
the pendency of the case, operating its business therein and  In lease, the law imposes the obligation to pay expenses for to demand indemnity for damages
making profits thereby, whereas the lessor was not only the deed of lease on the lessee. By agreement, the
deprived of the possession of his property but also of the obligation may be assumed by the lessor. (a) Yunti v. Dy Yco, (1906). An action which has for its object
rental therefor, said lessee must be required to compensate the recovery of damages is quite different from an action for
the lessor for such occupancy until it vacates the premises. Art. 1658. The lessee may suspend the payment of the rent in ejectment which has for its object the recovery of the
case the lessor fails to make the necessary repairs or to maintain possession of the leased property
M&M Management Aids, Inc. v. CA, (1985). The lessee is obliged the lessee in peaceful and adequate enjoyment of the property (b) Maluenda & Co. v. Enriquez, (1924). As to the amount of
to pay rentals during the pendency of the action for rescission of leased. damages recoverable by the lessor, it is the difference
the lease. between the rental actually obtained and that stipulated in
Suspension of the Payment of Rent (Art. 1658) the contract of lease.
(d) Filoil Refinery Corp. v. Mendoza, (1987). Where on few
occasions the lessee paid late the rentals due, but the delay
 A similar rule in sales permit the vendee to suspend the Rios v. Jacinto, (1926). The indemnity for damages does not
was only for a few days, such breaches are not so substantial include rents for the future where the termination of the lease
payment of the price should he be disturbed in the
and fundamental to warrant the rescission of the lease. abrogated liability for future rents.
possession or ownership of the thing bought, by a
(e) Beech v. Jimenez, (1908). The fact that the vendor-lessee
vindicatory action or foreclosure of mortgage. (Art. 1590)
has a right to repurchase the lots sold by him under a pacto
 In the case of sale, however, the rule is justified for the (c) Hernaez v. Montelibano, (1916). Where the lessee fails to
de retro sale and leased to him by the vendee, is no excuse pay on time the stipulated rents, the lessor has the right to
vendee may lose the price he paid and the thing bought.
for failure to pay rentals. The sale and the lease are rescind the contract, recover the unpaid rents, and eject the
independent of each other.  In lease, there is no risk that the lessee will lose both his
rental payment and his possession of the thing leased except lessee.
(f) Lim v. Lim. The disagreement between a lessor and a lessee
as to the amount of rent to be paid cannot be decided in an where the rentals have been paid in advance.
Rescission of Lease Contract
action of consignation (Art. 1256) but in that of forcible
entry and unlawful detainer that the lessor institutes when (1) In the case of repairs, the lessee may suspend payment from
the time demand is made upon the lessor and the latter fails (1) Chua v. Victorio, (2005). In addition to the general remedy
the lessee refuses to pay the rents that the lessor has fixed of rescission granted under Art. 1191, CC, Art. 1659 grants
for the property to perform his obligation.
(2) Heirs of Ormachea v. Cu Chee Gan & Co., (CA). In case of the remedy of rescission for breach of any of the lessor’s or
(g) The place for the payment of rental is governed by the same lessee’s statutory obligation. Ordinarily, an obligee’s
rules regarding payment of obligation in general (Art. 1251) eviction, the lessee is released form the obligation to pay
rents from the time he is unlawfully disposed remedies upon breach of an obligation are judicial in nature.
This is implicit in the third paragraph of Art. 1191, and in Art.
(2) Proper Use of the Thing Leased 1659. In certain exceptional cases, the law recognizes the
Madamba v. Araneta, (1958). Where the disturbance in the
lessee’s possession is caused by mere intruder who acted without availability of extrajudicial remedies, which exist in addition
 The lessee must exercise the diligence of a good father of a to the judicial remedies given in the above provisions.
any color of title or right, the disturbance is a mere act of trespass
family.
allegation of non-performance of lessee’s obligation to pay Art. 1660. If a dwelling place or any other building intended for
(a) Pamintuan v. Tiglao, (1929). Upon nonpayment of rent by the rental agreed upon made in lessor’s complaint is human habitation is in such a condition that its use brings
the lessee, the lessor may elect to treat the contract as obviously not a ground to annul the lease but to rescind it. imminent and serious danger to life or health, the lessee may
rescinded and thereby determine the right of the lessee to (3) Veloso v. Avila, (CA). In an action for rescission of a contract terminate the lease at once by notifying the lessor, even if at the
continue in possession; and his right to recover possession of lease and indemnity for losses and damages, the time the contract was perfected the former knew of the
may be enforced in an action for unlawful detainer. It is not withdrawal made by the lessor of the amounts deposited dangerous condition or waived the right to rescind the lease on
necessary, in such situation, that an independent action for with the Clerk of Court by the lessee for rentals due, does account of this condition.
the rescission of the lease should first be instituted for the not constitute a waiver of the right of action for ejectment in
purpose of putting an end to the right of the tenant to which the complaint of said lessor is based and with more Dwelling Place or Building Dangerous to Life or Health (Art.
remain in possession under the lease, unlike resolution of reason when such withdrawal was made with the authority 1660)
reciprocal obligations under Art. 1191 of the court
(b) Pamintuan v. CA, (1971). The lessor may rescind the lease (4) Song & Co. v. Hawaiian-Philippine Co., (1925). Rescission Report of Code Commission. This right of the lessee is a
for the lessee’s failure to pay the rentals. If the lessor does will not be permitted for a slight or casual breach of the precaution for public safety which is above any stipulation. It
not accept the rentals, the lessee’s remedy is tender of contract, but only for such breaches as are so substantial cannot be waived (Art. 6, CC)
payment and consignation. Rescission under Art. 1659 is and fundamental as to defeat the object of the parties in
different from the automatic rescission if the lessee failed to making the agreement
Art. 1661. The lessor cannot alter the form of the thing leased in
make the required deposit of rentals. In making the deposit,
such a way as to impair the use to which the thing is devoted
the lessee prevents the automatic cancellation of the lease Delta Motor Corp. v. Genuino, (1989). The question of whether a
under the terms of the lease.
but does not preclude the lessor from suing for rescission of breach is substantial depends upon the attendant circumstances
the lease for the lessee’s failure to pay the stipulated
rentals. (a) Phil. Amusement Enterprises, Inc. v. Natividad, (1967). Alteration of Form of Lease
(c) Luna v. Carandang, (1968). A judgment rescinding a lease Where the defendant leased a jukebox for a stipulated
should order the lessee to vacate and return the premises to period for 75% of the gross receipts per week, and once in a (1) By The Lessor (Art. 1661)
the lessor. The court has no discretion under Article 1659 to while coins would be stuck but such sticking-up of the coins
grant the lessee a longer period for performance. The lessee was a normal occurrence, the defendant was held not Banate v. Cunada, (CA). To constitute an alteration within the
should pay the accrued rent. justified in trying to return the jukebox and considering the purview of the law, the modification must be in such a manner
(d) Hernaez v. Montelibano, (1916). A lessee cannot take contract automatically rescinded, for in order that an action that it would destroy the substance of the thing leased or change
advantage of his own wrong to rescind the lease. He cannot of rescission to prosper, the breach must be substantial, not its conditions in such a way to render the thing leased
refuse to pay rent and then declare the lease rescinded. A like the stick-up in this case, which happened only unserviceable for the use intended. Under the facts presented in a
stipulation allowing the lessor to rescind the lease for occasionally. case, it was held that the conversion of the main gate into a
nonpayment of rentals does not mean that the lessee may (b) Filoil Refinery Corp. v. Mendoza, (1987). Where time is not concrete culvert did not at all alter the form of the thing leased in
refuse to pay the rentals and thereby produce the of the essence of the contract, a slight delay on the part of such a way as to impair the use of the thing leased and render it
abrogation of the lease the lessor or lessee in the performance of his obligation is unserviceable.
not a sufficient ground for the rescission of the contract.
Fernandez Hermanos v. Pitt, (1916). Rescission is a remedy Thus, it has been held that delay on four (4) occasions in the (2) By the Lessee
granted only to the injured party and cannot be availed of by the payment of rentals for a few days did not constitute
wrongdoer. If a person could rescind an obligation by the simple substantial breaches in a contract of lease because the law is  The lessee may alter the form of the lease so long as the
act of refusing to fulfill it, then contracts would be a worthless not concerned with trifles. De minimis non curat lex. value of the property is not impaired by the alteration.
thing and if one may take advantage of his own wrong then there (c) Carciller v. CA, (1999). The lessee sent a letter on January
is no inducement to do right. 15, 1986 to the lessor manifesting his intent to exercise the Enriquez v. Watson & Co., (1912). The lessee of a building under
option to purchase the leased property subject of the option an 18-year lease had the right to make such changes as the
(e) Rios v. Jacinto, (1926). Where the lessor takes possession of within the lease period ending January 30, 1986 but business established therein required, provided that neither the
the leased land for nonpayment of rentals and the lessee requesting for a six-month extension of the lease contract value nor the solidity of the building was impaired. Said lessee
voluntarily surrenders it, the lessor has no right to recover for the alleged purpose of raising funds intended to undertook to remove a thick masonry wall and substitute therefor
the rent accruing subsequently. purchase the property. The request was denied by the lessor a reinforced concrete wall, which would add materially to the
(f) Dayao v. Shell Co., (1980). A lessor may seek rescission of a on February 14, 1986. By a letter dated February 18, 1986, floor space, which he needed in his business, and at the same
lease contract and ejectment of the lessee simultaneously in the lessee notified the lessor of his desire to exercise the time strengthen the building and add materially to the value of
a single action for unlawful detainer. option formally. It was held that the delay of 18 days was the building. The lessors claimed the lease should be rescinded
neither “substantial’’ nor “fundamental’’ and did not because the form and substance of the leased premises had been
(2) Vda. De Santi v. Alcid, (CA). An action to annul a lease and amount to breach that would defeat the intention of the changed.
the grounds therefor provided by law, and an action for parties when they executed the lease contract with option
rescission thereof and the grounds upon which the same to purchase. Held: Not such alteration of the form and substance under the
may be based, should not be confused. Failure on the part of circumstances of the leased premises as to entitle the lessor to
the lessor or lessee to comply with their contract gives rise rescission of the lease.
to an action to rescind the same and not one to annul it. The
In re: Building and Loan Association and Penaloza, (1909). If the  If the repairs did not last 40 days, the lessee cannot ask for constantly inspect the premises to see if there is a need to make
object leased were a house, the lessee might effect such reduction in the absence of a provision in the contract giving repairs.
improvements for use, recreation or comfort as would not change him such right.
its form or substance as he deemed fit; he could build a bower or Johnson-Pickett Rope Co. v. Grey, (CA). The last paragraph is
luxurious pavilion more expensive than the house itself, to which, (3) Rescission of the Lease (Art. 1662, par. 3) new, adopting the principle laid down in a Court of Appeals case,
at the expiration of the lease, the owner of the house would have to wit:
no right whatever, unless the lessee could not remove the same Art. 1663. The lessee is obliged to bring to the knowledge of the
without injury to the house to which it was attached as an proprietor, within the shortest possible time, every usurpation “We believe that this provision does not deprive the lessee of the
improvement, excepting, of course, the right to cause the same to or untoward act which any third person may have committed or right to adopt certain measures to protect his interests and avoid
be demolished so that the house might be returned to him in the may be openly preparing to carry out upon the thing leased. losses and damages or minimize them, making for his account the
same condition that the lessee received it as provided in Art. repairs of the nature mentioned in Article 1554, paragraph 2, and
1665. He is also obliged to advise the owner, with the same urgency, of to later claim against the lessor what he spent for them so long as
the need of all repairs included in No. 2 of Art. 1654. having advised him of the necessity of said repairs the lessor
Art. 1662. If during the lease it should become necessary to should fail to make them. Such right becomes clearer above all
make some urgent repairs upon the thing leased, which cannot In both cases the lessee shall be liable for the damages which, when the repairs are urgent which cannot be delayed without
be deferred until the termination of the lease, the lessee is through his negligence, may be suffered by the proprietor. serious damage to the lessee or to the public.
obliged to tolerate the work, although it may be very annoying
to him, and although during the same, he may be deprived of a If the lessor fails to make urgent repairs, the lessee, in order to It appears unjust to us to impose upon the lessee interested in the
part of the premises. avoid an imminent danger, may order the repairs at the lessor's continuance of the lease the attitude of resigning to bear the
cost. losses and damages and satisfying himself with the hope of
If the repairs last more than forty (40) days the rent shall be claiming them afterwards from the lessor. To interpret Article
reduced in proportion to the time - including the first forty (40) Obligation of Lessee to Notify Lessor 1556 in this manner is to give it a limited sense that it would not
days - and the part of the property of which the lessee has been only diminish its practical utility but it would make it an
deprived.  To the obligations of the lessee under Art. 1657, Art. 1663 anachronism in this modern age of progress and advancement in
adds the obligation to notify the lessor of any usurpation which we live. And it cannot be said that to grant the lessee the
When the work is of such a nature that the portion which the and of the need for repairs. In both cases, the lessee shall be right which we mention is to open to him the way of taking the
lessee and his family need for their dwelling becomes liable for the damages which, through his negligent failure to law into his own hands since it is only a means of protection, a
uninhabitable, he may rescind the contract if the main purpose give the required notice, may be suffered by the lessor. defense, always justified when they are prompted by culpable and
of the lease is to provide a dwelling place for the lessee. negligent acts of him who in the last analysis would have to
(1) Usurpation or Untoward Act by A Third Person answer for losses and damages if they are not avoided.’’
Rule in Case of Urgent Repairs
Simpao v. Dizon, (1901). The purpose of the notice is to enable Art. 1664. The lessor is not obliged to answer for a mere act of
(1) Need to Make Repairs (Art. 1662, par. 1) the owner to maintain his civil possession, by suit if necessary. A trespass which a third person may cause on the use of the thing
possessor must be respected in his possession. leased; but the lessee shall have a direct action against the
 The lessor has the obligation to make necessary repairs (Art. intruder.
1654[2]) and the lessee is obliged to notify the lessor of the Roxas v. Mijares, (1907). The owner is entitled to defend his
urgency of such repair. (Art. 1663, par. 2) property from any aggression in order to prevent serious injury to There is a mere act of trespass when the third person claims no
 If the repairs are not urgent, the lessee can refuse to be his interests which would happen if this was left to the lessee who right whatever.
disturbed in the enjoyment of the thing leased. But if the has no interest and has no real right in the property leased.
repairs are so urgent that they cannot be deferred until the Whatever may be the nature of the disturbance occurring, so long Rule in Case of Mere Act of Trespass
termination of the lease, the lessee has no choice but to as it may affect the possession or the right of the owner over the
bear the burden of whatever inconvenience they may cause. leased property, he is entitled to institute the proper action. It There are two (2) kinds of trespass with respect to property:
 The burden is on the lessor to prove the urgency of the would be a judicial absurdity to deny him such a right and trust
repair. and the defense of his interests to the lessee whose obligations (a) Mere act of trespass (disturbance in fact) where a third
and rights are entirely different. person claims no right whatever, as in forcible entry; and
Note: Art. 1662 speaks of repairs. Modifications or improvements (b) Trespass in law (disturbance in law) where a third person
which the lessor may want to make on the property during the (2) Need of Repairs claims a legal right to the property, such as an action to
period of the lease cannot be done against the objection of the recover possession based on ownership.
lessee. Gregorio Araneta, Inc. v. Lyric Film Exchange, Inc., (1933). As the
lessee is in possession and if repairs are necessary, which it is the  In case of a mere act of trespass by a third person upon the
(2) Length of Time for the Repairs (Art. 1662, par. 2) duty of the owner to make, the lessee should call upon the owner leased property, the lessor is not liable to the lessee for the
to make the necessary repairs. If the owner then fails to perform disturbance of the latter’s possession. The lessee shall have
his duty, action would lie. It is not the duty of the lessor to a direct action against the usurper or intruder.
 In case of trespass in law, the real party in interest is the executed the lease and, strictly speaking, it is this right that the Art. 1667. The lessee is responsible for the deterioration or loss
lessor who becomes liable to the lessee. The lessor may lessor should guarantee to the lessee. of the thing leased, unless he proves that it took place without
maintain an action to recover title (accion reinvindicatoria) his fault.
or to establish his better right of possession (accion Briefly, if the act of the trespass is not accompanied or preceded
publiciana). by anything which reveals a really juridic intention on the part of This burden of proof on the lessee does not apply when the
the trespasser, in such wise that the lessee can only distinguish destruction is due to earthquake, flood, storm or other natural
Vda. De Villaruel v. Manila Motor Co., (1958). The act of the the material fact, stripped of all legal forms or reason, we calamity.
Japanese armed forces in evicting the lessee from the leased understand it to be trespass in fact only (de mero becho).’’
premises and occupying the same was a trespass in law under the Responsibility of Lessee for Deterioration or Loss of Thing Leased
rules of “belligerent occupation.’’ Our Constitution (Sec. 2, Art. II.) Art. 1665. The lessee shall return the thing leased, upon the
adopts the generally accepted principles of international law as termination of the lease, as he received it, save what has been GR: The lessee is responsible on the presumption that he is guilty
part of the law of the land. lost or impaired by the lapse of time, or by ordinary wear and of fault or negligence. Hence, the burden of proof is upon the
tear, or from an inevitable cause. lessee to overcome the presumption.
Sayo v. Manila Railroad Co., (1922). A lessor is not responsible for
his lessee’s eviction through condemnation proceedings and Return of Thing Leased Upon Expiration of Lease (Art. 1665) XPN: There is no presumption when the destruction is due to a
cannot be held liable for damages therefor. The lessee must look natural calamity. In such case, it is unjust to impose upon the
to the expropriating plaintiff for his compensation. (1) Arevalo v. Llantos, (CA). Such obligation to return the leased lessee the burden of proving due diligence. It is more probable
premises is not deemed fulfilled if the lessor cannot resume that the lessee was not negligent. The burden of proving that the
Manresa. Reason for the non-liability of the lessor in trespass in possession because of some impediment for which the lessee was negligent lies on the lessor.
fact only: lessee is responsible, or when there is an occupant, placed
by the lessee, who refuses to leave. In such instance, the (1) Santos v. Villegas, (CA). In the absence of proof that the
“A necessary condition of the enjoyment of the lessee, the chief relation of landlord and tenant is not dissolved, and the current of the river was so swift that the collision was
feature of the lease, is the possession he must have to the thing; lessee will be considered as holding over and held liable for unavoidable, or that the wind that blew was strong and
without that, there can be no enjoyment. True it is that the lessee the injuries resulting from the lessor’s inability to have unexpected which carried inevitably the craft to the scow
does not hold such possession in the capacity of owner and that, dominion of the property subject-matter of the lease causing one to collide with the other, we cannot accept the
therefore, he cannot and should not derive from it the effects (2) Godoy v. Ramirez, (1988). As a general rule, the whole of theory that the sinking was caused by a fortuitous event.
which, under other circumstances, would ensue; but, after all, he the property subject to the lease and not only a part thereof, The burden is upon the defendants to show that there was
is a possessor. If we carefully examine that relation of possession, must be returned to the lessor. no negligence on their part or on the part of their agent, for
we shall see that it is double; on the one hand, he possesses the (3) Maceda v. Pedraza, (CA). There is no legal obstacle for the such negligence is presumed from the mere sinking of the
thing as a condition of enjoying it while, on the other, he owner to allow a defaulting tenant to remain in the rented craft.
possesses his right to the enjoyment of the thing. In certain property one month, one year or even more. That consent, (2) Lizares v. Hernaez, (1920). When a question arises as to the
respects, he holds possession of the thing in the name of its no matter how long it may last, makes the tenant’s responsibility of a lessee for the loss of the thing leased
owner, in so far as this latter has not ceased to hold it for the possession lawful. Only when that consent is withdrawn and resulting from fire, and the trial court finds that reasonable
purpose of prescription, for example, because he leases the the owner demands the tenant to leave the property is precautions were taken by the lessee to prevent fires, but
property; but the possession of his right of use pertains to him in when the owner’s right of possession is asserted and the that nevertheless a fire did occur, of inscrutable origin which
his own name, as acquired by virtue of a just title, that is, the tenant’s refusal or failure to move out makes his possession destroyed the property in spite of all reasonable efforts that
contract of lease. If then, the trespass in fact only refers to the use unlawful, because it is violative of the owner’s preferential could be put forth to prevent it, this is equivalent to a
of the thing who but the lessee can have the personality to right of possession. finding that lessee was without fault and that the loss was
oppose it? due to an inevitable cause.
Art. 1666. In the absence of a statement concerning the
It must be carefully noted that Article 1560 [now Art. 1664]  Ordinarily, fire is not a natural calamity. It is not mentioned
condition of the thing at the time the lease was constituted, the
speaks of trespass in fact only in the use of the property leased in Art. 1667. The lessee must prove he was without fault.
law presumes that the lessee received it in good condition,
and that if such trespass is translated into anything material which unless there is proof to the contrary.
affects the property itself, then only so far as it is a disturbance of (3) Lizares v. Hernaez, (1920). When a loss of leased property
the use of the property is it incumbent upon the lessee to repel it. occurs, there is a presumption against the lessee, which
Presumption of Receipt of thing Leased in Good Condition (Art.
1666) makes him responsible, in the absence of proof that the loss
True it is that, pursuant to paragraph 3, of Article 1554 [now happened without his fault. But the question whether there
1654], the lessor must maintain the lessee in the peaceful has been fault on his part must be determined in relation
enjoyment of the lease during all of the time covered by the  The presumption is merely prima facie. The lessee may
prove the contrary. with other provisions of the Civil Code as well as in the light
contract, and that, in consequence thereof, he is obliged to of the general principles of jurisprudence. Under Art. 1665,
remove such obstacles as impede said enjoyment, but, as in  No such presumption arises where there is a statement or
representation, written or oral, concerning the actual the lessee of lands is not responsible for a loss resulting from
warranty in a case of eviction, the obstacles to enjoyment which inevitable cause: and in Art. 1174 the general rule is
the lessor must remove are those that in some manner or order condition of the thing at the time the lease was constituted.
declared that, in the absence of express provision to the
cast doubt upon the right by virtue of which the lessor himself
contrary, no one is liable for events which cannot be (3) De Santos v. Vivas, (1955). Under Rule 71, Sec. 2, ROC, a qualification in a contract of lease means that the term of the
foreseen or which, if foreseen, were inevitable. demand on the lessee is a prerequisite to an action for lease may be extended and is equivalent to a promise by the
(4) Gonzales v. Mateo, (1942). Under a stipulation in a lease unlawful detainer, when the action is ‘for failure to pay rent lessor to extend and as a unilateral stipulation obliges the lessor
contract that the lessee would be responsible for necessary due or to comply with the conditions of his lease,’ and not to fulfill his promise. As a general rule, in construing such a
repairs on the building leased, the failure of the lessee to where the action is to terminate the lease because of the provision, where there is an uncertainty or doubt, the lessee is
make the repairs which caused the eventual destruction of expiration of its term. favored, and not the lessor, because the latter, having the power
the building, renders him liable to the lessor. (4) Laguda v. Javellana, (CA). In a contract of lease of urban of stipulating in his favor, has neglected to do so; and upon the
property for an indefinite period, a notice to increase the principle that a grant should be taken most strongly against the
Art. 1668. The lessee is liable for any deterioration caused by rent is equivalent to a notice of the termination of the grantor.
members of his household and by guests and visitors. contract.
(5) Ducusin v. CA, (1983). Where a lease contract expressly (4) Lease Renewable at Option of Both Parties
Deterioration Caused by Others (Art. 1668) stipulates that the lessor may terminate the lease when his
children shall need the same, the lease shall be deemed Fernandez v. CA, (1988). A stipulation that the lease of a parcel of
 He is made legally responsible for their acts as in quasi- terminated when the condition happens. land will be “renewable for another 10 years at the option of both
delicts (Arts. 2176, 2180.) under the principle of “command parties under such terms, conditions and rentals reasonable at the
responsibility.’’ Madriaga v. CA, (1988). When the agreement between the lessor time,’’ means that there should be mutual agreement as to the
and the lessee is that the lease is only temporary and that it may renewal of the lease.
Tolentino. The liability of the lessee for the acts of third persons is be terminated in case the former needs the same for business, the
based on the contract itself, under which the lessee has assumed lease is deemed terminated when the lessee is notified (5) Option to Renew Given to Lessor
custody of the thing of which the lessor has been dispossessed. accordingly.
There is no need of proving that he was negligent in selecting and Ong Ching v. Ramolete, (1973). In Cruz and Koh, the option to
supervising his household helpers, visitors and guests. He is liable Extension or Renewal of Lease renew the lease was given to the lessee. If the option is given to
from the mere fact of having allowed them into the immovable the lessor, the lessee cannot renew the lease against the former’s
leased. (1) Authority of Court refusal. The lease is deemed terminated.

 The law makes no distinction between intentional and Gindoy v. Tapucar, (1977). A court is without authority to extend (6) Extension Exclusively for The Benefit of Lessor
negligent acts of the third persons. The lessee, however, a lease where the stipulated period of the contract has already
may recover from them what he has paid in satisfaction of expired, especially if the lessor is unwilling to extend the same. Litao v. National Assoc. of Retired Civil Employees, (1963). The
the claim of the lessor. Such extension is completely devoid of legal basis stipulation in a lease contract extending the lease term beyond
that originally agreed upon, in order to save the lessor the trouble
(2) Lease NOT to be Deemed Extended or Renewed by of reimbursing the lessee in cash for the expenses incurred on the
Art. 1669. If the lease was made for a determinate time, it ceases
Implication leased premises was exclusively for the benefit of the lessor;
upon the day fixed, without the need of a demand.
hence, the latter has the right to terminate the lease upon the
Ramon Magsaysay Award Foundation v. CA, (1985). Where a expiration of the original period, or at any other time thereafter,
Lease Made for a Determinate Time (Art. 1669) by tendering to the lessee, or consigning to the court, the
lease contract expressly stipulates that the lease shall not be
deemed extended or renewed by implication beyond the outstanding balance of his expenditures. The lessor should be
(1) Bulahan v. Tuason, (1960). When the lessee refuses to pay given the option to either reimburse the balance of the
the new rent but continues in his possession of the contractual period for any cause or reason whatsoever but only by
negotiations, the mere fact that the lessee was willing to pay what expenditures or demand that the lessee should account for and
premises, he becomes a deforciant withholding the property credit the lessor for the fruits of the properties since the
unlawfully. he claimed to be a reasonable rent — which was less than that
demanded by the lessor — did not operate in any sense to extend expiration of the lease against the balance due to the lessee,
the lease. To hold that there had been such implied renewal of turning over any excess to the lessor.
Vda v. De Nunga v. Chan, (1968). But if he agrees to pay the
increased rent, he cannot be ejected until he fails to comply with the lease simply because the lessee continued to occupy the
premises after the expiration of the fixed period of the lease, (7) Option to Renew Given to Lessee
said obligation.
would lead to the absurd consequence that all that an overstaying
lessee would have to do to defeat the right of the lessor to change Gustillo v. CA, (1983). Where a lessee is given the option to
(2) Ramon Catholic Archbishop of Manila v. De Ocampo, (CA). continue or renew the contract of lease and is silent upon the
The continuous possession of the leased premises after the the prevailing rentals would be to resist and delay the ejectment
action rentals, the old terms are to be followed in the renewed lease.
end or expiration of the time fixed in the contract, with the
acquiescence of the lessor, constitutes an implied renewal of Ledesma v. Javellana. A covenant to renew a lease which makes
the lease, not for the period of the original contract, but for (3) Lease Extendible for a Similar Period
no provision as to the terms of the extension or renewal implies
the time established in Art. 1682 and 1687, so that if rentals an extension or renewal upon the same terms as provided in the
were stipulated to be paid monthly, the new lease is Cruz v. Alberto, (1919). A stipulation that a lease is “extendible’’
for a further similar period is to be understood as giving the lessee original lease.
deemed to have been renewed from month to month and
may be terminated each month upon demand. the right to the additional period or to quit upon the expiration of
the first term. The word “extendible’’ standing without The continued possession of the lessee is evidence of his exercise
of the option to extend the lease. There is no necessity to notify
the lessor of the extension in the absence of stipulation to the Likewise, the cases of Peligrino vs. General Base Metals, Inc., We do not agree. Petitioner’s letter of August 11, 1977 was a
contrary. (1971) Teresa Realty, Inc. vs. Sison (1962), and the five Tuason reminder to private respondent of the impending expiration of
cases in (1960), cited by respondent Court of First Instance, do not the lease contract, with a statement that was in effect an offer or
Illustrative Case: support its ruling that the court has the authority to fix a proposal to renew the contract on the terms and conditions,
reasonable rental when the lessor tries to demand, after the namely: (1) that the rental would be P4,000.00 a month; (2) that
Roxas v. Alcantara, (1982). Before the expiration of the lease, the termination of a lease contract, an exorbitant rental for the three years advance rental should be paid by private respondent;
lessor communicated to the lessee the terms and conditions renewal of the lease. and (3) that a 15% yearly increase in rental would be imposed. In
under which the lease shall be renewed but after the lease other words, petitioner laid down the foregoing stipulations as
expired, the lessor accepted a month’s payment of rent sent by In Peligrino, the contract of lease was for an indefinite period and conditions sine qua non for any subsequent contract that might
the lessee, which is less than the amount the lessor had indicated the rents agreed upon were payable on a monthly basis. The be negotiated with private respondent. Thus clear from the letter,
to the lessee. company that acquired the lease-hold rights of the original lessee is that if private respondent were not agreeable to any or all of
refused to pay the increased rental demanded by the lessor. This the new stipulations, there would be no renewal of the lease.
(1) Right of Lessor to Fix Rents Court held that the company was entitled to have its right of Private respondent was to communicate his reply within fifteen
possession extended for one year, and reduced the increased (15) days from receipt of Exh. C, absent which petitioner would
In the case of Lim Si vs. Lim (1956), this Tribunal categorically rental which it found to be excessive. In the instant case, on the take it to mean that his conditions were acceptable to private
stated: ‘Only the owner has the right to fix the rents. The court other hand, the contract of lease is for a definite term of ten (10) respondent and their contract renewed on the specified terms.
cannot determine the rents and compel the lessor or owner to years which had already expired, and respondent-lessee has not However, private respondent’s letter, Exh. F, evidently posted
conform thereto and allow the lessee to occupy the premises on shown any right to continue in possession of the premises owned before the expiration of the period allowed within which to
the basis of the rents fixed by it. by petitioner. decide, did not give a categorical affirmative or negative answer
to petitioner’s proposition, and merely manifested the said
A subsequent case, that of Bulahan, et al. vs. Tuason (1960), is In the case of Teresa Realty, Inc., this Court affirmed the trial lessee’s desire to study the matter until the end of the following
almost on all fours with the case at bar. There, the lease contracts court’s finding that the increased rental demanded by the lessor month of September, 1977, or up to the termination of the then
were to expire on December 31, 1953. As early as January of the was reasonable for it represented only 12% of the assessed value existing contract of lease.
same year, therein lessors sent letters to the lessees reminding of the leased property. Such a finding was, however, made by the
them of the expiry date of their lease contracts and offering to Court only for the purpose of determining how much therein Petitioner’s failure to reply to the letter, Exh. F, can only be taken
renew the same at an increased rental. The lessees, however, lessee Sison should pay the lessor Teresa Realty, Inc. as rental for to mean that he acceded to the request for additional time. For
ignored the proposed terms for the renewal of the lease the period during which the case remained pending final decision, the obvious reason that the lease contract was expiring, it became
contracts, and after the expiration thereof, they continued to and not for the purpose, as in the case at bar, of fixing the rent to more imperative for private respondent to make a final decision
occupy the premises but refused to pay the new rent fixed by the be paid by the lessee during a supposed extension or renewal of within and not later than the extended period which he asked for.
lessors. The lessees filed an action for the court to fix a reasonable the lease contract. Thus, when petitioner did not hear from private respondent at the
rental and a reasonable duration for the lease of the properties end of the aforesaid month of September, private respondent
there in question. Holding for the lessors, this Court ruled as The aforementioned Tuason cases are inapplicable for ceased to have any legal right to possess and occupy the premises
follows: substantially the same reason as the Peligrino case, i.e., the in question commencing the first day of the following month of
Tuason lease contracts were not for a fixed period but from year October.
‘The rule is settled that the owner of the land leased has the right to year. This Court held that “if at the end of the year, the owner
not only to terminate the lease at the expiration of the term, but demands a rental which is exorbitant, the courts may determine That the petitioner did not lease the property to another is
also to demand a new rate of rent. The tenant or lessee has the what is a reasonable rental and allow the lessee to continue with understandable, as he had no idea as to when private respondent
option either to accept the new rent or vacate the premises. As the lease. (1960) intended to vacate the premises. Thus, although petitioner might
(lessees), after the termination of their lease, refused either to have had offers from third persons, circumstances beyond his
pay the new rent or to vacate the lots after the termination of According to [the] Court, petitioner’s statement in his letter to control held him back from finalizing any kind of agreement
their lease, they have evidently become deforciants, and can be private respondent dated August 11, 1977, Exh. C, that ‘If I will not involving the property in question.’’
ousted judicially without the need of a demand.’ receive a reply within 15 days from date of your receipt, it is
understood that you are amenable, and I will no longer accept any (2) Effect of acceptance of the P500.00 check
The Bulahan ruling is reiterated in the more recent case of Gindoy other offers for the lease of the building,’ coupled with the
vs. Hon. Tapucar. (1977) circumstance that petitioner in fact did not lease the property to “Likewise, petitioner’s acceptance of the P500.00 check
another person after September 30, 1977, and further, that supposedly to answer for the rental for the month of October,
The case of Velasco vs. Court of Agrarian Relations and Domingo private respondent paid P550.00, the monthly rental paid for the 1977, cannot be taken against him. As in the case of Hautea vs.
(1960) cited by respondent Court of First Instance is not in point. month of October, 1977, taken together all lead to the conclusion Magallon and Soriano (1964), such acceptance is irrelevant to the
It involved a contract of lease of a parcel of agricultural land, the that the ten-year lease contract entered into on October 16, 1967 issue. This is an ejectment case premised on the expiration of the
existence of which agreement was not disputed by the parties. It was tacitly renewed. The Court of First Instance also stated thus: lease contract between the parties, and not on any alleged
was a case of reformation of such contract voluntarily entered ‘(that petitioner) did not return the check to the (private violation of a lease contract for non-payment of rent. Moreover,
into on the ground that the rental agreed upon was excessive. It respondent) . . . shows he was agreeable to the renewal of the petitioner had no other choice but to keep the check sent to him.
had nothing to do with the right of a lessor to demand an increase terms of the lease contract for another ten (10) years.’ Private respondent, after all, continued to stay in the premises
in rental as a condition for a renewal of a lease contract. and use the same for his hardware and construction materials
business.’’
possession for 15 days or more; and there must be no prior with reservation or condition cannot be considered as evidence of
Art. 1670. If at the end of the contract the lessee should demand to vacate. an implied new lease.
continue enjoying the thing leased for fifteen days with the
acquiescence of the lessor, and unless a notice to the contrary by (2) Terms Which Are Revived (3) Acceptance of Rentals Beyond Original Term
either party has previously been given, it is understood that
there is an implied new lease, not for the period of the original Dizon v. Magsaysay, (1974). The original terms of the original Torres v. CA, (1992). The acceptance of rentals beyond the
contract, but for the time established in Articles 1682 and 1687. contract which are revived are only those which are germane to original term by the lessor who had previously informed the
the lessee’s right of continued enjoyment of the property leased lessee that she was not renewing the lease and, in fact, later
The other terms of the original contract shall be revived. or related to such possession, such as the amount of rental, the demanded the lessee to vacate the property, did not signify that
date when it must be paid, the care of the property, the she had agreed to the implied renewal of the lease where the
Implied New Lease responsibility for repairs, etc. No such presumption may be lessee remained in possession and had to pay rentals for the use
indulged in with respect to special agreements (e.g., preferential of the property. Instead of implied renewal, there was an express
(1) When It Takes Place right given to lessee to purchase leased property) which by their termination of the contract of lease.
nature are foreign to the right of occupation or enjoyment
 An implied new lease (tacita reconduccion) arises when the inherent in a contract of lease. (4) Acceptance of Rentals Less Than Amounts Stipulated
lessee, with the acquiescence of the lessor, holds over after
the expiration of the contract of lease, under the same (3) Requisites Uichangco v. Laurilla, (1960). The fact that the lessor had
terms and conditions except that instead of the original accepted partial payments from the lessee, in amounts less than
period, the period of the new lease will be according to the (a) The term of the original contract of lease are: the stipulated monthly rentals, may not be considered as a
character of the property and mode of payment of the rent, (b) The lessee continues enjoying the thing leased for at least 15 renewal of lease contract. While a lessor may tolerate the
i.e., that established in Art. 1682 (rural lease) whose period days; continued default of the lessee, hoping that the latter would
extends to one (1) year or period necessary to gather the (c) The continuation of the occupation by the lessee is with the eventually pay all his back rentals, said lessor could not very well
fruits or in Art. 1687 (urban lease) whose period depends acquiescence of the lessor; and refuse to accept payments by the lessee just because they did not
upon the periods of payment. (d) The lessor or lessee has not previously given a notice to cover full unpaid rentals. That would have been unwise and
 Thus, where the rent for a 10-year period lease which has vacate unbusiness-like. If he did that, he might get nothing from his
expired was paid monthly, the implied new lease must be delinquent lessee.
deemed from month to month and may be terminated after Tagbilaran Integrated Settlers Assoc. v. CA, (2004). The notice
each month. required under Art. 1670 is the one given after the expiration of 2001 Bar, Q. XIV: On January 1, 1980, Nestor leased the fishpond
the lease period for the purpose of aborting an implied renewal of of Mario for a period of three (3) years at a monthly rental of
2011 Bar, Q. (46): The term of a 5-year lease contract between X lease. The notice to vacate constitutes an express act on the part P1,000.00, with an option to purchase the same during the
the lessor and Y the lessee, where rents were paid from month of the lessor that he no longer consents to the continued period of the lease for the price of P500,000.00.
to month, came to an end. Still, Y continued using the property occupation by the lessee of the leased property.
with X’s consent. In such a case, it is understood that they After the expiration of the three-year period, Mario allowed
impliedly renewed the lease  A lessor who gives notice after the 15-day period has no Nestor to remain in the leased premises at the same rental rate.
cause of action for unlawful detainer as there is already an
(a) from month to month under the same conditions as to the implied new lease. On June 15, 1983, Nestor tendered the amount of P500,000.00
rest. to Mario and demanded that the latter execute a deed of
(b) under the same terms and conditions as before. Instances When Implied Renewal NOT Applicable absolute sale of the fishpond in his favor.
(c) under the same terms except the rent which they or the
court must fix. (1) Stipulation Against Implied Renewal Mario refused, on the ground that Nestor no longer had an
(d) for only a year, with the rent raised by 10% pursuant to the option to buy the fishpond. Nestor filed an action for specific
rental control law. Ramon Magsaysay Award Foundation v. CA, (1985). There can be performance.
no implied renewal of the lease where the parties stipulated that
there would be no renewal by implication. Will the action prosper or not? Why?
1999 Bar, Q. XIV(b): Under what circumstances would an implied
new lease or a tacita reconduccion arise? Agaloos v. IAC, (1985). There can be no implied renewal where A: No, the action will not prosper. The implied renewal of the
the renewal requires mutual consent. lease on a month-to-month basis did not have the effect of
A: An implied new lease or tacita reconduccion arises if at the end extending the life of the option to purchase which expired at the
of the contract the lessee should continue enjoying the thing (2) Invalidity of Original Lease end of the original lease period. The lessor is correct in refusing to
leased for 15 days with the acquiescence of the lessor, and unless sell on the ground that the option had expired.
a notice to the contrary by either parties has previously been Estate of J. Santos v. De Veyra, (1969). Where the original lease
given (Art. 1670). was declared void for being repugnant to the Constitution and the Art. 1671. If the lessee continues enjoying the thing after the
lessor and the lessee could not agree on the rental to be paid, the expiration of the contract, over the lessor's objection, the former
In short, in order that there may be tacita reconduccion there acceptance by the former of monthly payments from the latter
must be expiration of the contract; there must be continuation of shall be subject to the responsibilities of a possessor in bad faith.
Art. 1672. In case of an implied new lease, the obligations violation of any of the conditions of the lease. In such
Continuous Possession by Lessee Over Lessor’s Objection contracted by a third person for the security of the principal situations, notice to vacate is crucial. A demand is a
contract shall cease with respect to the new lease. prerequisite to an action for unlawful detainer where the
 The lessee may, with the acquiescence of the lessor, action is based on either ground but not where the action is
continue enjoying the thing leased after the expiration of the Effect of Implied New Lease on Accessory Obligations Contracted to terminate the lease because of the expiration of its term.
contract and thereby create an implied new lease. (Art. by a Third Person
1670) Expiration of the Period
 If he continues the lease over the objection of the lessor, he  The renewal of the lease is, in effect, a novation of the
becomes a possessor in bad faith and subjects himself to the original contract of lease. (Art. 1291) The period in a contract of lease may be:
liabilities of such possessor.  The renewal of lease is considered a new lease. The general
 The remedy of the lessor is to bring an action of unlawful rule is that when the principal obligation is extinguished in (a) Conventional or that fixed by agreement of the parties;
detainer to recover possession of the premises and the rents consequence of a novation, accessory obligations (e.g., (b) Legal or that fixed by law in accordance with Art. 1682 in
or fair rental value of the premises. guaranty) are also extinguished. (Art. 1296) case of rural leases and Art. 1687 in case of urban leases

Damages in Forcible Entry and Unlawful Detainer Cases (1) Santos v. CA, (1984). Ejectment lies without the need of a
Art. 1673. The lessor may judicially eject the lessee for any of the
demand, when the period of the lease has expired. The
following causes:
(1) While damages may be adjudged in forcible and detainer notice of the lessor is immaterial.
cases, these damages mean “rents’’ or “the reasonable
(1) When the period agreed upon, or that which is fixed for the
compensation for the use and occupation of the premises,’’ Zarroga v. Sleeper, (1913). He is free to dispose of the leased
duration of leases under Articles 1682 and 1687, has
or “fair rental value of the property.” property to another lessee.
expired;
(2) Lack of payment of the price stipulated;
(a) Profits which the plaintiff might have received were it not (2) Lesaca v. Cuevas, (1983). A lease on a month-to-month basis
(3) Violation of any of the conditions agreed upon in the
for the forcible entry or detainer do not represent a fair is for a definite period and may be terminated at the end of
contract;
rental value. Although Section 1 of Rule 70 uses the word any month.
(4) When the lessee devotes the thing leased to any use or
“damages,’’ the authors of the Rules of Court in drafting
service not stipulated which causes the deterioration
Section 6 (now Sec. 17) of Rule 70 on the judgment to be Cruz v. Puno, (1983). It is valid for the parties to stipulate that
thereof; or if he does not observe the requirement in No. 2
pronounced, eliminated the word “damages,’’ placing in lieu either party may terminate a month-to-month lease on a 30-day
of Art. 1657, as regards the use thereof.
thereof, the word “reasonable compensation for the use and notice.
occupation of the premises.’’
The ejectment of tenants of agricultural lands is governed by
(b) Baens v. CA, (1983). The damages which a plaintiff expects (3) Dakudao v. Consolacion, (1983). The lessee must restore
special laws.
to obtain from his business to be located in the premises, or possession of the leased property after the expiration of the
for material injury caused to the premises cannot also be stipulated period. The unlawful holding or deprivation of
Causes for Judicial Ejectment of Lessee (Art. 1673) possession is to be counted from the date of the demand to
claimed in connection with or as incidental to an action of
illegal detainer or forcible entry. Actual moral and exemplary vacate.
damages are different from rentals or “reasonable  With respect to tenants of agricultural lands, their ejectment
compensation for the use and occupation of the premises,’’ is governed by special laws. (Art. 1684) Pharma Industries, Inc. v. Pajarilla, (1980). Prior possession of the
hence, they cannot be awarded. plaintiff is not necessary in an unlawful detainer case.
(1) Chua v. Victorio, (2004). Art. 1673 must be read in
(2) Asian Transmission Corp. v. Canlubang Sugar Estates, conjunction with Section 2, Rule 70, ROC, which provides (4) Prieto v. Reyes, (1965). Possession of land by tolerance
(2003). Fair rental value is recoverable in the concept of that a demand to pay or to comply with the conditions of becomes an unlawful detainer, from the time a demand to
actual damages. It is clear from Section 17 of Rule 70 that the lease and to vacate the premises is a condition vacate is made.
the trial court is empowered to award reasonable precedent for the institution of an ejectment suit against the (5) Murga v. Chan, (1968). A notice giving the lessee the
compensation only if the claim is true. In fixing the lessee. The import of these provisions is to grant the lessor alternative either to pay the increased rental or otherwise to
reasonable amount of rent, the court must base its action on the option of extrajudicially terminating the lease by simply vacate the leased premises is not the demand contemplated
the evidence adduced by the parties. Fair rental value has serving a written notice upon the lessee. This extrajudicial in an unlawful detainer case. The demand to vacate must be
been defined as the amount at which a willing lessee would termination has the same effect as rescission. Thus, in Dio definite, subject to no condition; otherwise, the lessor
pay and a willing lessor would receive, for the use of certain vs. Concepcion (1998), reiterating the ruling in Vda. De cannot bring the action of unlawful detainer.
property neither being under compulsion and both parties Pamintuan vs. Tiglao (1929), it was explained that the (6) Golden Gate Realty Corp. v. IAC, (1987). A lessor’s letter to
having a reasonable knowledge of all facts, such as the rescission of lease of contracts under Art. 1659 is not one the lessee demanding payment of back rentals, and that if
extent character and utility of the property, sales and that requires an independent action, unlike resolution of the latter failed to pay, an ejectment suit would be filed
holding prices of similar land and the highest and best use of reciprocal obligations under Art. 1191, CC. against him is a sufficient notice. The omission of the word
the property. (2) Lanuza v. Munoz, (2004). Section 2, Rule 70 is applicable “vacate’’ in the notice is immaterial.
only where there is a lessor-lessee relationship under a (7) Magen v. Avelino, (1984). It is not a valid defense in
contract of lease and only in instances where the grounds ejectment cases that the lessor refused to receive the rent.
relied upon for ejectment is non-payment of rentals or The lessee must consign in court the rent due from him.
were not paid on time with some rentals being delayed up to ten improvements without the consent of the lessor, is enough
Lack of Payment of Stipulated Rental days. The delay was due to the heavy paper work involved in ground to eject the lessee.
processing the checks. (2) A demand is a prerequisite in an action of unlawful
 The lessee is obliged to pay the price of the lease according detainer when it is for failure to comply with any of the
to the terms stipulated. (Art. 1657(1)) Four-Gives Corporation also subleased five of the twelve floors conditions of the lease, but not when that action is to
 His failure to comply with this principal duty entitles the to wholly-owned subsidiaries. The lease contract expressly terminate the lease because of the expiration of the term.
lessor to ask for rescission of the lease or fulfillment, with prohibits the assignment of the lease contract or any portion (Art. 1669)
right to damages in either case. (Art. 1659) thereof. The rental value of the building has' increased by 50% (3) Consing v. Jamadre, (1975). A lease contract may validly
since its lease to FourGives Corporation. stipulate that the lessor may take possession of the leased
(1) Zobel v. Abreu, (1955). Mere failure to pay rents, or a premises without resorting to judicial action, upon failure
breach of contract to pay rents, does not render the Can the building owner eject Four-Gives Corporation on grounds of the lessee to comply with any of the terms and
possession of the lessee per se unlawful, nor may the action of the repeated delays in the payment of the rent? conditions of the contract.
for his ejectment from the land accrue upon such failure or (4) Intramuros Administration v. Contacto, (2003). When a
breach. In accordance with Section 2, Rule 70 of the Rules of A: lease provides for the payment of the rent in installments,
Court, the right to bring the action of ejectment or unlawful each failure to pay an installment is a separate cause of
detainer must be counted from the time the defendant has (a) The “repeated delays" in the payment of rentals would, at action. In an action upon such a lease for the recovery of
failed to pay rents as agreed upon in a contract, but it is the best, be a slight or casual breach which does not furnish a rent, all installments due and demandable at the time the
failure to pay the rents after a demand therefor is made that ground for ejectment especially because the delays were action is brought, should be pleaded, and failure to do so will
entitles the lessor to bring an action of unlawful detainer. only due to heavy paper work. Note that there was not even constitute a bar to a subsequent action for the payment of
(2) Belmonte v. Marin, (1946). If the default in the payment of a demand for payment obviously because the delay lasted that rent.
rent is based on the fact that the rent sought to be collected for only-a few days (10 days being the longest), at the end of
is not that agreed upon, an action for ejectment will not lie. which time payments were presumably made and were Improper Use of the Leased Property
(3) Iturralde v. Garduno, (1907). A lessor has the right to accepted. There was, therefore, no default. Note also that
increase the rent from and after the expiration of the period there was no demand made upon the lessee to vacate the  The second principal duty of the lessee is to use the thing
of lease, and if the tenant thereafter remains in possession premises for non-payment of the monthly rent.” There is, leased, exercising the diligence of a good father of a family,
without agreeing to the increase, he is bound to pay the therefore no cause of action for ejectment arising from the according to the terms of the contract, or in the absence of
reasonable value of the use and occupation of the property “repeated delays” stipulation, the nature of the thing leased. (Art. 1657[2])
leased. This reasonable amount is a question of evidence (b) The buildipg owner cannot eject Four-Gives Corporation on  It is his duty to return the thing, upon the termination of the
(4) Cortez v. Ramos, (1924). The lessor has the right not only to the ground of repeated delays in the payment of rentals. The lease, just as he received it. (Art. 1665)
terminate the lease at the expiration of the term, but to delay in the payment of the rentals is minimal and cannot be  The law presumes that he received it in good condition. (Art.
demand a new rate of rent. The question whether or not the made the basis of an ejectment suit. The delay was due to 1666)
new rate of rent fixed by the owner is reasonable must be the heavy paper work involved in processing the checks. It  Without the duty to take care of the thing, the lessee would
decided according to the evidence. The testimony of the would be otherwise if the lease contract stated that in the not be liable even if it is lost or destroyed through his fault
owner that another person was willing to lease the property payment of rentals within the first five days of the month, or negligence, thus rendering illusory the obligation to
at an annual rent equal to that demanded by the plaintiff of time is of the essence or that the lessee will be indelay if he return.
the defendant, is prima facie proof that the new rate of rent fails to pay within the agreed period without need of
demanded by him is reasonable. demand. In this case he can judicially eject the tenant on the Regulation of Rentals of Certain Residential Units
(5) Chua v. Victorio, (2004). Where the lessee refuses to pay ground of lack of payment of the price stipulated after a
the stipulated rentals and the lessor initiates an ejectment demand to vacate. (Art. 1673(2), CC).  A number of laws have been enacted freezing rentals for a
suit, the juridical bond between the parties is severed. They (c) No. Resolution of a contract will not be permitted for a slight certain period of time at their current level for the benefit of
cease to be connected by the link of a lessor-lessee relation. or casual breach, but only for such substantial and the lower income group.
No amount of subsequent payment by the lessee can fundamental breach as would defeat the very object of the  The common feature of these laws is the suspension of the
automatically restore the parties to what they once were. parties in making the agreement. (Zepeda v. CA). The delay application of par. (1) of Art. 1673, CC (except when the
Nor will the lessor’s acceptance of the increased rentals of ten (10) days is not such a substantial and fundamental lease is for a definite period) during the period of their
have the effect of reviving the earlier contract of lease. Upon breach to warrant the resolution of the contract of lease effectivity, to lease of a dwelling unit or of land on which
the moment of acquiescence by the lessor to the increased specially so when the delay was due to the heavy paperwork another’s dwelling is located.
amount, an entirely new contract of lease is entered into, in processing the checks.
forging an entirely new juridical relation. (1) P.D. 20 (Oct. 12, 1972) which amended R.A. No. 6359,
Violation of Any Condition Agreed Upon prohibits the increase of the monthly rental agreed upon
1994 Bar, Q. VIII(1): In January 1993, Four-Gives Corporation between the lessor and the lessee when said monthly rental
leased the entire twelve floors of the GQS Towers Complex, for a (1) A violation of any such conditions, etc. agreed upon would does not exceed P300.00.
period of ten years at a monthly rental of P3,000,000.00. There is constitute breach of the lease contract. Thus, a violation by (2) B.P. Blg. 25 (April 10, 1979) prohibits for a duration of five
a provision in the contract that the monthly rentals should be the lessee of the prohibition against devoting the property (5) years from its effectivity, the increase of monthly rentals
paid within the first five days of the month. For the month of to a use not stipulated in the contract, or introducing of all residential units not exceeding P300.00, for any one (1)
March, May, June, October and December 1993, the rentals
year period, by more than 10% of the monthly rentals (b) “Residential unit” shall refer to an apartment, house and/or the lessee or any person or persons claiming under him to
existing at the time of the approval of the Act. land on which another’s dwelling is located and used for immediately vacate the leased premises without prejudice to the
(3) B.P. Blg. 877 (June 6, 1985) provides that beginning July 1, residential purposes and shall include not only buildings, continuation of the ejectment proceedings. At any time, the lessor
1985 and for a duration of two and half years thereafter parts or units thereof used solely as dwelling places, may, upon the authority of the court, withdraw the rentals
ending December 31, 1987, monthly rentals of all residential boarding houses, dormitories, rooms and bedspaces offered deposited.
units not exceeding P480 shall not be increased by the lessor for rent by their owners, except motels, motel rooms,
by more than 10% in 1985, 20% in 1986 and 20% in 1987, hotels, hotel rooms, but also those used for home industries, The lessor, upon authority of the court in case of consignation or
which increases shall be cumulative and compounded. retail stores or other business purposes if the owner thereof upon joint affidavit by him and the lessee to be submitted to the
(4) R.A. No. 6643 (Dec. 28, 1987) extends the effectivity of B.P. and his or her family actually live therein and use it city or municipal treasurer and to the bank where deposit was
Blg. 877 for another two (2) years, fixing the allowable principally for dwelling purposes. made, shall be allowed to withdraw the deposits;
maximum increase for the two-year period to not more than (c) “Immediate members of family of the lessee or lessor” for
20% in 1988 and 20% in 1989, which increases shall be purposes of repossessing the leased premises, shall be (c) Legitimate need of the owner/lessor to repossess his or her
cumulative and compounded. limited to his or her spouse, direct descendants or property for his or her own use or for the use of any
(5) R.A. No. 7644 (Dec. 28, 1992) extends the effectivity of B.P. ascendants, by consanguinity or affinity. immediate member of his or her family as a residential unit:
Blg. 877 for five (5) years, fixing the allowable maximum (d) “Lessee” shall mean the person renting a residential unit. Provided, however, That the lease for a definite period has
increase for the five-year period from 1993 to 1997 at 20% (e) “Owner/Lessor” shall include the owner or administrator or expired: Provided, further, That the lessor has given the
yearly, which increases shall be cumulative and agent of the owner of the residential unit. lessee formal notice three (3) months in advance of the
compounded. (f) “Sublessor” shall mean the person who leases or rents out a lessor’s intention to repossess the property and: Provided,
(6) R.A. No. 8437 (Dec. 22, 1997) extends the effectivity of B.P. residential unit leased to him by an owner. finally, That the owner/lessor is prohibited from leasing the
Blg. 877 for four (4) years, fixing the allowable maximum (g) “Sublessee” shall mean the person who leases or rents out a residential unit or allowing its use by a third party for a
increase for the four-year period from 1998 to 2001 at 15% residential unit from a sublessor. period of at least one year from the time of repossession;
yearly, which increases shall be cumulative and (h) “Assignment of lease” shall mean the act contemplated in (d) Need of the lessor to make necessary repairs of the leased
compounded. Article 1649 of the Civil Code of the Philippines. premises which is the subject of an existing order of
condemnation by appropriate authorities concerned in order
R.A. 9161: Rental Reform Act of 2002 Sec. 5. Rental and Deposit – Rental shall be paid in advance within to make the said premises safe and habitable: Provided, That
the first five (5) days of every current month or the beginning of after said repair, the lessee ejected shall have the first
the lease agreement unless the contract of lease provides for a preference to lease the same premises: Provided, however,
Sec. 1. Short Title – This Act shall be known and cited as the
later date of payment. The lessor cannot demand more than one That the new rental shall be reasonably commensurate with
“Rental Reform Act of 2002.’’
(1) month advance rental and two (2) months deposit. the expenses incurred for the repair of the said residential
unit and: Provided, finally, That if the residential unit is
Sec. 2. Declaration of Policy – The State shall, for the common
Sec. 6. Assignment of Lease or Subleasing – Assignment of lease condemned or completely demolished, the lease of the new
good, undertake a continuing program of urban land reform and
or subleasing of the whole or any portion of the residential unit, building will no longer be subject to the aforementioned
housing which will make available at affordable cost decent
including the acceptance of boarders or bedspacers, without the first-preference rule in this subsection; and
housing and basic services to underprivileged and homeless
written consent of the owner/lessor is prohibited. (e) Expiration of the period of the lease contract.
citizens in urban centers and resettlement areas.
Sec. 7. Grounds for Judicial Ejectment – Ejectment shall be Sec. 8. Prohibition Against Ejectment by Reason of Sale or
Toward this end, the State shall establish reforms in the regulation
allowed on the following grounds: Mortgage – No lessor or his successor-in-interest shall be entitled
of rentals of certain residential units.
to eject the lessee upon the ground that the leased premises have
(a) Assignment of lease or subleasing of residential units in been sold or mortgaged to a third person regardless of whether
Sec. 3. Monthly Rentals and Maximum Increases – Beginning 01
whole or in part, including the acceptance of boarders or the lease or mortgage is registered or not.
January 2002 and for a duration of three (3) years thereafter
bedspacers, without the written consent or the
ending on 31 December 2004, the monthly rentals of all
owner/lessor; Sec. 9. Rent-to-Own Scheme – At the option of the lessor, he or
residential units in the National Capital Region and other highly
(b) Arrears in payment of rent for a total of three (3) months: she may engage the lessee in a written rent-to-own agreement
urbanized cities not exceeding Seven thousand five hundred pesos
Provided, that in the case of refusal by the lessor to accept that will result in the transfer of ownership of the particular
(P7,500.00) and the monthly rentals of all residential units in all
payment of the rental agreed upon, the lessee may either dwelling in favor of the latter. Such an agreement shall be exempt
other areas not exceeding Four thousand pesos (P4,000.00) shall
deposit, by way of consignation, the amount in court, or from the coverage of Section 3 of this Act.
not be increased annually by the lessor, without prejudice to
with the city or municipal treasurer, as the case may be, or
existing contracts, by more than ten percent (10%).
in a bank in the name of and with notice to the lessor, within Sec. 10. Application of the Civil Code and Rules of Court of the
one (1) month after the refusal of the lessor to accept Philippines – Except when the lease is for a definite period, the
Sec. 4. Definition of Terms – The following terms as used in this
payment. provisions of paragraph (1) of Article 1673 of the Civil Code of the
Act shall be understood as:
Philippines, insofar as they refer to residential units covered by
The lessee shall thereafter deposit the rental within ten (10) days this Act, shall be suspended during the effectivity of this Act, but
(a) “Rental” shall mean the amount paid for the use or
of every current month. Failure to deposit the rentals for three (3) other provisions of the Civil Code and the Rules of Court on lease
occupancy of a residential unit whether payment is made on
months shall constitute a ground for ejectment. If an ejectment contracts, insofar as they are not in conflict with the provisions of
a monthly or other basis.
case is already pending, the court upon proper motion may order this Act shall apply.
Montemayor v. Bermejo, Jr., (2004). Actions for forcible entry Art. 1675. Except in cases stated in Art. 1673, the lessee shall
Sec. 11. Coverage of this Act – All residential units in the National and unlawful detainer involve perturbation of social order which have a right to make use of the periods established in Articles
Capital Region and other highly urbanized cities the total monthly must be resolved as promptly as possible and accordingly, 1682 and 1687.
rental for each of which does not exceed Seven thousand five technicalities or details of procedure which may cause
hundred pesos (P7,500.00) and all residential units in all other unnecessary delay are carefully avoided. Use by Lessee of Legal Period
areas the total monthly rental for each of which does not exceed
Four thousand pesos (P4,000.00) as of the effectivity date of this (3) Rationale GR: The lessee is entitled to make use of the (conventional) period
Act shall be covered, without prejudice to existing contracts. agreed upon (Art. 1669) or the (legal) period established in Art.
Report of Code Commission. The remedy is intended “to put an 1682 and 1687
Sec. 12. Penalties – A fine of not less than Five thousand pesos end to the present state of the law which unjustly allows the
(P5,000.00) nor more than Fifteen thousand pesos (P15,000.00) or lessee to continue in possession during an appeal.’’ XPN: Unless there is a proper ground for his ejectment (Art. 1673)
imprisonment of not less than one (1) month and one (1) day to
not more than six (6) months or both shall be imposed on any Abellana v. Gomez, (CA). The ordinary action to revindicate
Art. 1676. The purchaser of a piece of land which is under a lease
person, natural or juridical, found guilty of violating any provision ownership or to recover possession as a right is not expeditious;
that is not recorded in the Registry of Property may terminate
of this Act. yet in such action where judgment is rendered in favor of the
the lease, save when there is a stipulation to the contrary in the
plaintiff, the trial court may, under Section 2, Rule 39, ROC, “upon
contract of sale, or when the purchaser knows of the existence
good reasons,’’ order immediate execution of the judgment. This
Art. 1674. In ejectment cases where an appeal is taken the of the lease.
being so, there is more reason to order immediate execution of
remedy granted in Art. 539, second paragraph, shall also apply, if
the judgment in a case of unlawful detainer with respect to the
the higher court is satisfied that the lessee's appeal is frivolous If the buyer makes use of this right, the lessee may demand that
restoration of possession where it is obvious that the defendant
or dilatory, or that the lessor's appeal is prima facie meritorious. he be allowed to gather the fruits of the harvest which
has no valid defense and that his appeal is dilatory or frivolous.
corresponds to the current agricultural year and that the vendor
The period of ten days referred to in said Art. shall be counted indemnify him for damages suffered.
(4) Remedy Given to Lessor
from the time the appeal is perfected.
If the sale is fictitious, for the purpose of extinguishing the lease,
De la Cruz v. Bocar. The remedy is available to the lessor in
Preliminary Mandatory Injunction to Restore Possession Pending the supposed vendee cannot make use of the right granted in
unlawful detainer cases but only in case of an appeal. In the
Appeal the first paragraph of this Article The sale is presumed to be
original case, the possession of the lessee is presumed to be
fictitious if at the time the supposed vendee demands the
lawful. In forcible entry case, the writ may be granted even when
Sycip v. Soriano, (CA). Chapter 2, although entitled “Lease of termination of the lease, the sale is not recorded in the Registry
there is no appeal. (par. 2, Art. 539.) The 10-day period for filing a
Rural and Urban Lands,’’ refers not only to the lease of lands but of Property.
motion to secure the writ shall be counted from the date when
also to the buildings standing thereon on the principle that the the petitioning party (lessor) is notified of the perfection of the
accessory follows the principal. While Art. 539 seems to refer only appeal Termination of Lease by Purchaser of Leased Land
to forcible entry actions, Art. 1674 expressly refers to ejectment
cases or those in which there is a pre-existing relationship of (5) Issuance Vested in “Higher Court” Tolentino. Although 1676 makes express reference only to sales,
lessor and lessee. its intent and reason justify its application to any other form of
Sycip v. Soriano. The issuance of the writ is expressly vested by alienation, like donation.
(1) Ground (Art. 1674) Art. 1674 in the “higher court’’ or appellate court. Thus, the
Regional Trial Court in ejectment cases, being an appellate court, Rivera v. Trinidad, (1925). It applies only to lease for a fixed term
De la Cruz v. Bocar, (1956). For the purpose of Art. 1674, it is may grant the writ. and not to those from month to month. Where the lease is on a
enough that the plaintiff is the owner of the land and the month to month basis and the purchaser seeks to recover from
defendant is in temporary occupancy thereof whether under a (6) Supersedeas Bond and Monthly Deposit by Lessee the lessee property which said lessee had leased from the vendor,
lease contract or on mere tolerance or under a temporary permit. the purchaser’s right of action is not based on the provisions of
Where, after the termination of the lease contract or the De Laureano v. Adil, (1976). The preliminary mandatory Art. 1676 authorizing him to terminate the lease but is based on
revocation of the permit, the lessee or occupant unlawfully injunction refers to the possession of the realty in litigation. The his right as the owner or vendee to recover possession from a
prolongs his occupation of the premises, there is unlawful superdeas bond and monthly deposit are primarily designed to tenant holding over after the termination of the right to hold
detainer. insure that the lessor would be paid back the back rentals. possession. In such a case, the vendee’s action is governed by the
provisions of the Rules of Court, Rule 70, on forcible entry and
(2) Summary Character detainer.
 Should the lessee fail to make the payments from time to
time during the pendency of the appeal, execution shall
Mara, Inc. v. Estrella, (1975). Art. 1674 is an consonance with the
issue. (Sec. 19, Rule 70, ROC.)  Lease binds only the parties, their assigns and heirs. (Art.
summary character of an ejectment suit which is an expeditious 1311). It does not create a real right unless recorded in the
 Art. 1674 provides an additional ground for execution before
means for recovering possession of realty but the effectiveness of Registry of Property in which case it shall be binding upon
judgment.
which is often frustrated by the lessee’s dilatory tactics often third persons. (Art. 1648)
tolerated by Municipal Trial Courts.  The purchaser is not entitled to terminate the lease even if
he has no actual knowledge of its existence. He has
constructive knowledge which is equivalent to actual redemption recover the property, the lessee would again be The lessor is to pay only one-half of the value of the
knowledge. entitled to the enjoyment of the lease; wherefore, the limitation improvements at the time the lease terminates because the
of the purchaser’s right is proper and just lessee has enjoyed the same. On the other hand, the lessor will
Unrecorded Lease enjoy them indefinitely thereafter.’’
Gonzales v. Salas, (1926). Art. 1677 is not applicable to a case
GR: The purchaser may terminate the lease: where the vendor, on disposing of real property under right of (2) Requirements
repurchase, continues nevertheless in possession thereof by
XPN: virtue of a special agreement, not as owner, but as a tenant of the Susana Realty, Inc. v. Hernandez, (CA). With respect to useful
purchaser by the payment of rent. So, a vendor who remains in improvements, to be entitled to reimbursement, there are three
(1) There is a stipulation in the contract of sale he must respect possession as a lessee and violates any of the conditions agreed (3) requisites:
the existing lease; upon in the contract of lease (Art. 1673) may be evicted by the
(2) He knows of the existence of the lease; or vendee even before the end of the redemption period. (a) The lessee should make useful improvements in good faith;
(3) The property is sold fictitiously just to terminate the lease (b) The improvements must be suitable to the use for which the
Art. 1678. If the lessee makes, in good faith, useful lease is intended; and
 An innocent purchaser for value without notice of an improvements which are suitable to the use for which the lease (c) The form and substance of the property leased should not
unrecorded lease has a right to rely on the certificate of title. is intended, without altering the form or substance of the be altered
If the lease is not annotated thereon, the lessee does not property leased, the lessor upon the termination of the lease
deserve to be protected. shall pay the lessee one-half of the value of the improvements at  The improvements can be considered made in good faith if
 A purchaser with full knowledge of the existence of an that time. Should the lessor refuse to reimburse said amount, they are not in violation of the lease contract.
unrecorded lease is bound to respect it because actual the lessee may remove the improvements, even though the
knowledge is equivalent to registration. The lease, in effect, principal thing may suffer damage thereby. He shall not, Lopez v. Sarabia, (2004). The right to indemnity under Article
becomes a part of the contract of sale. however, cause any more impairment upon the property leased 1678 (par. 1.) arises only if the lessor opts to appropriate the
than is necessary. improvements.
Manila Building and Loan Assoc. v. Green, (CA). The right granted
in the second paragraph of Article 1676 to a lessee to gather the With regard to ornamental expenses, the lessee shall not be Lapena v. Morfe, (1995). Under Art. 1678 (par. 2.), the lessor, not
fruits of the crop corresponding to the current agricultural year, entitled to any reimbursement, but he may remove the the lessee, is given the option provided for therein.
does not extend to the gathering of fishes, which require two ornamental objects, provided no damage is caused to the
years before they are of any commercial value principal thing, and the lessor does not choose to retain them by Chua Beng She v. Lee Chy Kao, (CA). The lessee cannot compel
paying their value at the time the lease is extinguished. the lessor to appropriate the improvements and pay him one-half
Report of Code Commission. The last paragraph states when the of their value.
sale is presumed to be fictitious. It “is calculated to discourage the Right of Lessee with Regard to Useful Improvements and
practice which has developed in recent years of fictitiously selling Ornamental Expenses PNB v. Pineda, (1969). Certainly, the lessee has no right to
the premises in order to oust the lessee before the termination of reimbursement by the lessor of improvements made after the
the lease.’’ (1) Reimbursement or Removal as to Useful Improvements termination of the lease

Art. 1677. The purchaser in a sale with the right of redemption Report of Code Commission. The first paragraph is intended to 2013 Bar, Q. IV: Anselmo is the registered owner of a land and a
cannot make use of the power to eject the lessee until the end of prevent the unjust enrichment of the lessor, which is allowed by house that his friend Boboy occupied for a nominal rental and on
the period for the redemption. Article 1573 of the present Code. Expenses for useful the condition that Boboy would vacate the property on demand.
improvements are reimbursed to a possessor in good faith, under With Anselmo's knowledge, Boboy introduced renovations
Where Sale Subject to Right of Redemption Articles 453 [now Art. 456] and 361 [now Art. 448] of the Code consisting of an additional bedroom, a covered veranda, and a
now in force. True, the lessee is not a possessor in good faith in concrete block fence, at his own expense.
 In case of sale with right of repurchase by the vendor (Art. the sense that he believes himself to be the owner, but neither is
1601), the vendee cannot terminate an existing lease he a possessor in bad faith. He is in possession by virtue of a Subsequently, Anselmo needed the property as his residence
entered into between the vendor and a third person until contract, so his possession is lawful. The reform requires: (1) that and thus asked Boboy to vacate and turn it over to him. Boboy,
after the period for redemption has expired. lessee should make the improvements in good faith; (2) that the despite an extension, failed to vacate the property, forcing
 He may, however, make use of the power to oust the lessee improvements be suitable to the use for which the lease is Anselmo to send him a written demand to vacate.
if any of the grounds for ejectment under Art. 1673 is intended; and (3) that the form and substance of the property
present. leased be not altered. These requisites will prevent the lessee In his own written reply, Boboy signified that he was ready to
from making such valuable improvements that the lessor may leave but Anselmo must first reimburse him the value of the
Dorado v. Virina, (1916). This limitation contained in said article never recover the property leased. improvements he introduced on the property as he is a builder
refers to the tenant or lessee who has contracted with the vendor in good faith. Anselmo refused, insisting that Boboy cannot ask
and who has had no relation whatever with the purchaser under Moreover, the lessee has a right to make reasonable for reimbursement as he is a mere lessee. Boboy responded by
an agreement of redemption. Such tenant is a third person with improvements to attain his purpose in entering upon the lease. removing the improvements and leaving the building in its
respect to said vendor and purchaser. If the vendor should by original state.
(a) Resolve Boboy's claim that as a builder in good faith, he Upon the expiration of the term of the lease, the landowner This issue is now before the court for resolution in a pending
should be reimbursed the value of the improvements he asked B to vacate the premises and remove his building and litigation.
introduced. other improvements.
(b) Can Boboy be held liable for damages for removing the What are the rights of the landowner?
improvements over Anselmo’s objection? B refused unless he was reimbursed for necessary and useful
expenses. A: The landowner/lessor may refuse to reimburse 1/2 of the value
of the improvements and require the lessee to remove the
A: B claimed that he was a possessor and builder in good faith, with improvements. (Art. 1678, CC).
right of retention.
(a) Boboy’s claim that he is a builder in good faith has no basis. 1996 Bar, Q. VII(4): Bartolome constructed a chapel on the land
A builder in good faith is someone who occupies the This issue is now before the court for resolution in a pending of Eric. What are Bartolome's rights if he were: A usufructuary of
property in concept of an owner. The provisions on builder- litigation. the land?
planter-sower under the Civil Code cover cases in which the
builder, planter and sower believe themselves to be owners What are the rights of B? A: Lessee – The owner of the land, as lessor, can acquire the
of the land, or at least, to have a claim of title thereto. improvement by paying for one-half of its value. Should the lessor
A: B has the right to remove the building and other improvements refuse to reimburse said amount, the lessee may remove the
As Boboy is a lessee of the property, even if he was paying unless the landowner decides to retain the building at the time of Improvement, even though the principal thing may suffer damage
nominal rental, Art. 1678, CC, is applicable. Under this provision, if the termination of the lease and pay the lessee one-half of the thereby (Art. 1678, CC)
the lessee makes, in good faith, useful improvements which are value of the improvements at that time. The lessee may remove
suitable to the use for which the lease is intended, without the building even though the principal thing may suffer damage
(3) With Regard to Ornamental Expenses (Art. 1678, par. 2)
altering the form or substance of the property leased, the lessor but B should not cause any more impairment upon the property
upon the termination of the lease, shall pay the lessee one-half of leased than is necessary. The claim of B that he was a possessor
 The rule is similar to the expenses for pure luxury of a
the value of improvements at that time. Should the lessor refuse and builder in good faith with the right of retention is not tenable.
possessor in good faith.
to reimburse said amount, the lessee may remove the B is not a builder in good faith, because as lessee he does not
improvements, even though the principal thing may suffer claim ownership over the property leased.
Right of Lessee Over Necessary Repairs
damage thereby.
1990 Bar, Q. I(b): A vacant lot several blocks from the center of Alburo v. Villanueva, (1906). Necessary repairs are those made
(b) No. Boboy cannot be held liable for damages. the town was leased by its owner to a young businessman B, for for the preservation of the thing upon which they have been
a term of fifteen (15) years renewal upon agreement of the expended. When a repair is essential to preserve the thing rented
The lessor, Anselmo, refused to reimburse one-half of the value of parties. in a condition suitable to the use agreed upon, it is, in law deemed
the improvements, so the lessee, Boboy, may remove the same, a necessary repair.
even though the principal thing may suffer damage thereby. If in After taking possession of the lot, the lessee built thereon a
removing the useful improvements Boboy caused more building of mixed materials and a store.  Repairs, for example, made on the plumbing system and
impairment in the property leased than is necessary he will be electrical wiring are necessary repairs, and the lessee is
liable for damages (Art. 1678, CC) As the years passed, he expanded his business, earning more entitled to full reimbursement of the total amount spent
profits. therefor.
1990 Bar, Q. I(a): A vacant lot several blocks from the center of
the town was leased by its owner to a young businessman B, for By the tenth (10th) year of his possession, he was able to build a Ty v. Acuna, (CA). Repairs of the window screens, kitchen cabinets
a term of fifteen (15) years renewal upon agreement of the three (3)-storey building worth at least P300,000.00. and wooden fixtures in the house constitute useful improvements
parties. only, for which the lessee, under Article 1678 is entitled to claim
Before the end of the term of the lease, B negotiated with the one half the value thereof at the termination of the lease
After taking possession of the lot, the lessee built thereon a landowner for its renewal, but despite their attempts to do so,
building of mixed materials and a store. they could not agree on the new conditions for the renewal. Valencia v. Ayala de Roxas, (1909). The construction of a garage,
as well as the filling and fencing of a lot, are not necessary
As the years passed, he expanded his business, earning more Upon the expiration of the term of the lease, the landowner expenses.
profits. asked B to vacate the premises and remove his building and
other improvements. Art. 1679. If nothing has been stipulated concerning the place
By the tenth (10th) year of his possession, he was able to build a and the time for the payment of the lease, the provisions or Art.
three (3)-storey building worth at least P300,000.00. B refused unless he was reimbursed for necessary and useful 1251 shall be observed as regards the place; and with respect to
expenses. the time, the custom of the place shall be followed.
Before the end of the term of the lease, B negotiated with the
landowner for its renewal, but despite their attempts to do so, B claimed that he was a possessor and builder in good faith, with
Place and Time for Payment of Lease
they could not agree on the new conditions for the renewal. right of retention.
(1) Art. 1251 applies to the obligation of a lessee to pay rent landlord to evict the tenant. That article does not refer to a
which is usually in the form of money, an indeterminate (a) on account of the sterility of the land leased; contract of this nature
thing. Payment should be at the place designated in the least (b) by reason of the loss of the fruits due to ordinary fortuitous (b) Sibug v. Municipality of Hagonoy, (1956). Where a bidding
contract; in the absence of stipulation, at the domicile of the events, regardless of the extent of the loss; was held by a municipality for the lease of the municipal
lessee or the place where the leased premises are located, (c) by reason of the loss of less than one-half of the fruits even fishponds, and the lease was awarded by lot and by area of
or if the rent is payable in the form of a determinate thing, though extraordinary and unforeseen events; the fishponds involved, reduction of the rent is not proper
wherever the thing might be at the moment the contract (d) by reason of the loss of the fruits through extraordinary but although it turns out that the areas of the fishponds were
was entered into. foreseen events, regardless of the extent of the loss; actually smaller than those given in the notice of bid. Since
(2) As regards the time of payment, the custom of the place (e) by reason of the loss of more than one-half of the fruits the lessee undertook to make all the necessary repairs and
shall be followed unless there is a contrary stipulation in the through extraordinary and unforeseen events, where there maintain the dikes at all times, he is not entitled to
lease contract. is a specific stipulation to the contrary; and reimbursement for the repairs of the damages due to
(f) where the loss of the fruits occurred after they have already typhoon and action of the sea
Section III: Special Provisions for Leases of Rural Lands been gathered, regardless of the extent of the loss.
Fortuitous Events
Art. 1680. The lessee shall have no right to a reduction of the 2000 Bar, Q. XIX(b): In 1995, Mark leased the rice land of Narding
in Nueva Ecija for an annual rental of P1,000.00 per hectare.  Under Art. 1680, the fortuitous event must not only be
rent on account of the sterility of the land leased, or by reason of
extraordinary or uncommon but also one which the
the loss of fruits due to ordinary fortuitous events; but he shall
In 1998, due to the El Nino phenomenon, the rice harvest fell to contracting parties could not have reasonably foreseen.
have such right in case of the loss of more than one-half of the
fruits through extraordinary and unforeseen fortuitous events, only 40% of the average harvest for the previous years. Mark  One of the essential characteristics of fortuitous events is
save always when there is a specific stipulation to the contrary. asked Narding for a reduction of the rental to P500.00 per that “the cause of the unforeseen and unexpected
hectare for that year but the latter refused. Is Mark legally occurrence or of the failure of the debtor to comply with his
Extraordinary fortuitous events are understood to be: fire, war, entitled to such reduction? obligation must be “independent of the human will.’’
pestilence, unusual flood, locusts, earthquake, or others which  The phrase must be given the meaning of “independent of
are uncommon, and which the contracting parties could not A: No, Mark is not entitled to a reduction. Under Art. 1680, CC, the will of the debtor or his agents.’’
have reasonably foreseen. the lessee of a rural land is entitled to a reduction of the rent only
in case of loss of more than 1/2 of the fruits through extraordinary (1) Reyes v. Crisostomo, (CA). War, although dependent upon
and unforeseen fortuitous events. While the drought brought the will of the combatants, is recognized in the second
Art. 1681. Neither does the lessee have any right to a reduction about by the “El Nino" phenomenon may be classified as paragraph of Art. 1680 as an extraordinary fortuitous event;
of the rent if the fruits are lost after they have been separated extraordinary, it is not considered as unforeseen. and violence of robbers, while not independent of the
from their stalk, root or trunk. human will, is recognized as caso fortuito that excused non-
Alternative: Yes, Mark is entitled to a reduction of the rent. His performance and has been always so recognized in the
Reduction of Rent in Rural Areas loss was more than 1 /2 of the fruits and the loss was due to an ancient law (“fuerza de ladrones,’’ in Law II, Tit. 33, Partida
extraordinary and unforeseen fortuitous event. The “El Nino" VII). The will of a third person who prevents performance of
(1) Application phenomenon is extraordinary because it is uncommon; it does not the obligation is an inevitable cause, fuerza mayor, which
occur with regularity. And neither could the parties have foreseen comes under the general description of caso fortuito in Art.
Laguna Tayabas Co. v. Manabat, (1974). Art. 1680 is a special its occurrence. The event should be foreseeable by the parties so 1174, CC.
provision for leases of rural lands. It cannot be applied that the lessee can change the time for his planting, or refrain (2) Estrada v. Hermogeno, (CA). War, already existing when the
analogously to ordinary leases, for precisely because of its special from planting, or take steps to avoid the loss. To be foreseeable, contract was entered does not come under category of
character, it was meant to apply only to a special specie of lease. the time and the place of the occurrence, as well as the fortuitous event contemplated in the article. Neither are
It is a provision of social justice designed to relieve poor farmers magnitude of the adverse effects of the fortuitous event must be typhoons because in this country it cannot be said that they
from the harsh consequences of their contracts, with rich capable of being predicted. Since the exact place, the exact time, are extraordinary or uncommon and cannot be reasonably
landowners. In this light, the article provides no refuge to lessees and the exact magnitude of the adverse effects of the “El Nino" foreseen by the contracting parties.
whose financial standing or social position is equal to, or even phenomenon are still unpredictable despite the advances in
better than the lessor. science, the phenomenon is considered unforeseen. Cuyugan v. Dizon, (1947). When the cause already existed when
the contract was executed, the same cannot be ascribed to a
(2) Requisites (4) Other Cases fortuitous event or circumstance beyond the control of the lessee.

(a) The land leased is rural (a) Hijos de I. De La Rama v. Benedicto, (1902). Where by the (3) Panayotti v. Tan Lim Te, (CA). Fire is not ordinary a
(b) More than one-half of the fruits have been lost; terms of the contract of lease the rent is fixed at an aliquot fortuitous event. Floods must be unusual. Typhoons and
(c) The loss occurred through extraordinary and unforeseen part of the crops, the tenant cannot demand a reduction on floods submerging the land under water lasting for about a
fortuitous event; and account of loss of more than half of the crop by fortuitous day or two and the water receding immediately after, are
(d) There is no specific stipulation that the lessee is nevertheless events under Article 1680, and the failure to deliver the conditions that could be foreseen. But when the depth of
not entitled to reduction stipulated proportion of the crop gathered entitles the the water was from 6 to 8 feet, the inundation of the
ricefields lasting from two to three weeks, and after the
(3) Cases That Do NOT Justify Reduction water had receded the ricefields were infested by rodents
causing destruction on the crops, the occurrence were defendant or his ancestors had built a house and planted fruit Art. 1685. The tenant on shares cannot be ejected except in
extraordinary and unforeseen fortuitous events, that even trees on the land in question, which impressed upon the contract cases specified by law.
granting they could have been foreseen, they were, the character of an indefinite term and implied long duration,
however, inevitable. Such condition of the floods is, would not affect the stipulated duration, for the reason that the Rules Governing Law Tenancy on Shares
“unusual’’ as contemplated in Art. 1680 which could justify duration of lease contracts depends on what many have been
the reduction of rents. stipulated by the parties at the time when the same were entered Report of Code Commission. Land tenancy should be governed by
into, and not on the more or less importance of the improvements special laws because agrarian problems need legislative solution
Percentage of Reduction introduced or effected by the tenant on the leased property from time to time, as changing conditions may warrant. Only
those laws of a more or less permanent nature should be included
 Art. 1680 does not determine the percentage of reduction of Art. 1683. The outgoing lessee shall allow the incoming lessee or in a Civil Code. It goes without saying that the customs of the
the rental to which the lessee becomes entitled. It is logical the lessor the use of the premises and other means necessary for place, referred to in the article should not be contrary to law or to
that the rent stipulated be reduced in the same ratio that the preparatory labor for the following year; and, reciprocally, public policy, such as social justice
the actual receipts bear to the normal income obtainable the incoming lessee or the lessor is under obligation to permit
from the land leased. The rent must be reduced the outgoing lessee to do whatever may be necessary for the Special Laws on Land Tenancy
proportionately. gathering or harvesting and utilization of the fruits, all in Agricultural tenancy is now governed by:
 Manresa’s formula: Normal fruits are to fruits actually accordance with the custom of the place.
received as rent stipulated is to X. (1) R.A. No. 3844, as amended, otherwise known as the Code of
Obligation of Outgoing/Incoming Lessee or Lessor Agrarian Reforms of the Philippines;
Reyes v. Crisostomo. It appeared from the record that the (2) P.D. 27, as amended (particularly by E.O. 228.), otherwise
appellant obtained during the first year P28,000 for the sale of fish Even before the end of the lease, in the absence of a contrary known as the Tenants Emancipation Decree
and P7,000 for the sale of nipa leaves, or a total of P35,000, in stipulation, a reciprocal obligation/privilege is given by the (3) E.O. 229 which provides the mechanisms needed initially to
Japanese currency which, at the proved exchanged rate of 14 to present article as follows: implement the Comprehensive Agrarian Reform Program
one, represented around P2,500 in Philippine currency. But for (CARP) as instituted by Proclamation No. 131
the second year appellant only obtained P800. The testimony of (1) The outgoing lessee shall allow the incoming lessee or lessor (4) R.A. 6657, otherwise known as the Comprehensive Agrarian
the appellant’s witness about the receipts of the lessee was not to make the necessary work preparatory for the crop the Reform Law (CARL) of 1988, which institutes a new
found credible, since he was not placed in charge of the fishpond following year; and Comprehensive Agrarian Reform Program, and
until 1947. In consequence, the rent for the second year, was (2) The incoming lessee and lessor shall permit the outgoing (5) Other existing laws and regulations related to agrarian
reduced to 8/ 25ths of P14,000 (the rent originally stipulated), i.e., lessee to gather or harvest and utilize the fruits he has reform insofar as they are not inconsistent with the CARL of
P4,480. For the third year (1946-1947), no rental was due since produced. 1988.
the lessee was dispossessed completely and received nothing on
account of the products. Escay v. Teodoro, (1959). Where the lease of a sugar hacienda Agricultural tenancy is classified into:
was to expire with the 1953-1954 crop-year and the lessor sued
Art. 1682. The lease of a piece of rural land, when its duration the lessee in November 27, 1953 to allow him to cultivate the (a) Share tenancy, where the produce is divided between the
has not been fixed, is understood to have been for all the time fields already harvested, a writ of injunction secured by the lessor landholder and the tenant in proportion to their respective
necessary for the gathering of the fruits which the whole estate to restrain the lessee from preventing him to enter the land was contributions (abolished)
leased may yield in one year, or which it may yield once, held properly issued. The action is not for unlawful detainer to (b) Leasehold tenancy, where rent is paid by the tenant either
although two or more years have to elapse for the purpose. eject the lessee before the expiration of the lease but one based in percentage of the production or a fixed amount in money,
on Art. 1683. or both.
Duration of Rural Lease
Jison v. Hernaez, (1942). Where the lease of a sugar hacienda Extinguishment of Leasehold Relation
(1) The duration is that fixed in the contract of lease between with an area of 192 hectares was to expire with the 1938-1939
the parties. crop-year, the lessee was required to allow the lessor to take The following are the causes or modes by which the agricultural
(2) In the absence of stipulation, the duration is fixed by law, to possession in August, 1938 of 80 hectares of the hacienda which leasehold relation may be extinguished:
wit: was not cultivated to enable him to cultivate it for the 1939-1940
crop-year. (1) Abandonment of the landholding without the knowledge of
(a) The time necessary to gather the fruits which ordinarily the lessor;
would cover one (1) year in case of agricultural crops; or  The privilege given to the outgoing lessee to harvest the (2) Voluntary surrender of the landholding by the lessee,
(b) More than one (1) year in case the land may yield only once fruits evidently indicates that existing crops at the written notice of which shall be served three (3) months in
and two or more years may have to elapse for the purpose. termination of the lease shall belong to him. advance;
(3) Absence of a successor or heir in the event of death or
Iturralde v. Garduno, (1906). Since the duration of a lease Art. 1684. Land tenancy on shares shall be governed by special permanent incapacity (such as total blindness, insanity, etc.)
depends upon the stipulations in the contract of lease, it cannot laws, the stipulations of the parties, the provisions on of the lessee (Sec. 8, R.A. No. 3844, as amended by R.A. No.
be affected by the more or less valuable improvements voluntarily partnership and by the customs of the place. 6839.);
made by the lessee upon the property. Thus, the fact that the (4) Termination of the leasehold by the lessee under Section 28;
(5) Acquisition of the land in question by the lessee;  The right to repair may be waived by the lessee or he may dismiss the ejectment suit on the ground that the action is
(6) Mutual consent of the parties; and assume the duty to repair. already extinguished.
(7) Judicial ejectment of the lessee under Section 36.
Art. 1687. If the period for the lease has not been fixed, it is Is BD’s contention correct? Why or why not? Reason.
Causes for Dispossession of Leasehold Tenant understood to be from year to year, if the rent agreed upon is
annual; from month to month, if it is monthly; from week to A: BD’s contention is not correct. TX can still maintain the suit for
(1) Declaration of suitability for non-agricultural purposes. — week, if the rent is weekly; and from day to day, if the rent is to ejectment. The acceptance by the lessor of the payment by the
Declaration of the landholding by the Department of be paid daily. lessee of the rentals in arrears even during the pendency of the
Agrarian Reform (now Land Reform) to be suited for ejectment case does not constitute a waiver or abandonment of
residential, commercial, industrial or some other urban However, even though a monthly rent is paid, and no period for the ejectment case. (Sps. Clutario v. CA, 1992).
purposes; the lease has been set, the courts may fix a longer term for the
(2) Non-compliance with obligations. — Failure of the lessee to lease after the lessee has occupied the premises for over one (b) Lim v. Legarda Vda. De Prieto. A lease stipulating that the
substantially comply with his contractual and legal year. lessee will vacate as soon as the lessor needed the premises,
obligations except if caused by fortuitous event; fixes a period.
(3) Use of land contrary to stipulations. — Planting crops or If the rent is weekly, the courts may likewise determine a longer
using the landholdings for a purpose other than what had period after the lessee has been in possession for over six Junson v. Martinez. If it is shown that the lessor needs the
been previously agreed upon; months. property, the lease is considered terminated as of the end of the
(4) Non-adoption of proven farm practices. — Failure of the month after proper notice or demand to vacate is given.
lessee to adopt proven farm practices; In case of daily rent, the courts may also fix a longer period after
(5) Wrongful injury to land. — Substantial damage or the lessee has stayed in the place for over one month. (c) Jespayo Realty Corp. v. CA, (2002). Art. 1687 finds no
destruction or unreasonable deterioration of the land or application in the case of a lease contract with a period
other substantial improvements thereon through the fault Duration of Lease Depending on Period at Which Rent Payable subject to a resolutory condition, i.e., “the lease period shall
or negligence of the lessee; continue for an indefinite period provided the lessee is up-
(6) Non-payment of rental. — Failure of the lessee to pay the (1) Application of Provisions to-date in the payment of his monthly rentals.’’
lease rental; and
(7) Employment of sub-lessee. — Employing a sub-lessee except Acasion v. Corporacion de los PP Dominicos de Filipinas, (1956). Chua v. Victorio, (2004). The lessor is within his right to increase
if the lessee is ill or temporarily incapacitated. Art. 1687 is based on the presumed intention of the parties. It the rental each period (year, month, or day, as the case may be)
applies only to a lease without a fixed period (Art. 1669) and to a subject to existing laws; and the lessee is similarly within his right
Section IV: Special Provisions for the Lease of Urban Lands lessee, that is, one who has a contract of lease with the owner. to refuse to acquiesce. Upon this refusal, the contract of lease
Hence, a sublessee, much less a mere occupant, is not entitled to between the parties is terminated. The lessor thus has the right to
Art. 1686. In default of a special stipulation, the custom of the its benefits. demand that the lessee vacate the leased property.
place shall be observed with regard to the kind of repairs on
urban property for which the lessor shall be liable.  Art. 1687 does not apply where there is a fixed period, (2) Two Distinct Provisions
whether such period is definite or indefinite.
In case of doubt it is understood that the repairs are chargeable (a) If the contract has no fixed duration, the law fixes the term
against him. (a) Sy Yong Gim v. Sia Song Peck, (CA). A lease contract on a according as the parties have agreed to pay the rentals
month-to-month basis is a lease with a definite period; it annually, monthly, weekly, or daily; and
expires at the end of each month without the need of a (b) Even if the parties have agreed as to the periodical payment
Kinds of Repairs on Urban Property by Lessor
demand. of rentals, the law empowers the courts, nevertheless, to
exercise their discretion in fixing the term, if the lessee has
 The lessor is obliged to make the necessary repairs on the
Junson v. Martinez, (2003). A previous demand by the lessor to stayed in the premises for a certain length of time. It should
property leased. (Art. 1654(2))
vacate can justify ejectment be noted that the second portion gives the court discretion
 The kind of repairs he is required to make is that provided in
and does not compel it to fix the duration of the contract.
the lease agreement, and in the absence of a special
stipulation, the same must be determined in accordance Chua v. CA, (1995). The lease is terminable at the end of each
month upon demand to vacate by the lessor. The subsequent Susana Realty, Inc. v. Hernandez, (CA). Art. 1687 contemplates a
with the custom of the place.
acceptance by the lessor of rental payments does not, absent any situation where neither of the parties being at fault, the lessor
circumstance that may indicate a contrary conclusion, legitimize decided to terminate the contract of lease.
Gonzales v. Mateo, (1942). In case of doubt as to who shall bear
the cost of the repairs, it is understood that it is chargeable the unlawful character of the lessee’s possession.
(3) Implied New Lease
against the lessor. While it is the duty of the lessor to make on the
property leased all repairs necessary in order to keep it in 2005 Bar, Q. I(B): TX filed a suit for ejectment against BD for non-
payment of condominium rentals amount to P150,000. During  A lease whose duration is dependent upon the mode of
serviceable condition for the purpose for which it was intended,
the pendency of the case, BD offered and TX accepted the full payment of the rental may also arise, where at the
the parties are at liberty to stipulate the contrary, in which case,
amount due as rentals from BD, who then filed a motion to expiration of a lease for a fixed term, the lessee should
the lessor is relieved of that duty.
continue to enjoy the thing leased for at least 15 days with
the acquiescence of the lessor, not for the period of the
original contract, but for the time established in Art. 1687. by the manner in which the humblest servant is dealt with, for no
(Art. 1670) (j) Cajucom v. Manila Remnant Co. Inc., (1966). A subsequent social system can rise above its lowliest class any more than a
agreement between the parties to a lease contract over a chain is stronger than its weakest link. Consequently, under the
(4) Discretion of Court to Fix a Longer Period parcel of land, authorizing an agent to sell the land owned heading of ‘Household Service,’ there are provisions to strengthen
by the lessor and the improvements thereon, owned by the the right of domestic servants.
Prieto v. Santos, (1956). The court is authorized to fix a longer lessee, and fixing the rental a month until the property shall
term if the lessee who is not at fault has been in occupation of the have been actually sold, does not make the purported sale a Art. 1689. Household service shall always be reasonably
premises for a certain period and the lessor decided to terminate condition precedent for the termination of the lease. Rather, compensated.
the lease. It may, however, legally refuse to do so, if the it merely authorizes the lessee to remain in possession until
circumstances surrounding the case warrants such action. the sale is effected, or it becomes clear that the property Any stipulation that household service is without compensation
could not be sold. Where the agent resigns his commission shall be void.
(a) Gregorio Araneta, Inc. v. De Mesa, (1970). The extension of because of his expressed inability to sell the property on the
the lease should be commensurate with the period during terms specified, then said agreement becomes functus Such compensation shall be in addition to the house helper's
which the lessee had been occupying the premises. Where officio and its binding force is terminated. The consequence lodging, food, and medical attendance.
the lessee had stayed for 50 years, an extension of three (3) is that the situation of the parties reverted to what it was
years was held reasonable. before said agreement. Since the former agreement did not Scope of Household Service
(b) Imperial Insurance, Inc. v. Simon, (1965). Art. 1687 does not specify the period of lease, then it was on a month-to-month
contemplate an unwarrant extension of the period of the basis because the rental was monthly. Rosales v. Tan Que, (CA). Household or domestic service is that
lease as to make the period indefinite. The court may not (k) Hunniecutt v. Flores, (CA). There is no law conferring on a rendered by a domestic servant, who works in the house or with
grant an extension beyond the period sought by the lessee lessee the preferential right to occupy the premises over the family with whom the helper usually lives.
himself. Thus, if the lessee asked for a one-year extension, other prospective lessees after the termination of the lease.
the court should not grant two (2) years. To compel the owner to grant the lessee that concession Balolong v. Uy, (CA). The family he serves is that of his master and
(c) Elizegui v. Lawn Tennis Club, (1903). Art. 1687 does not would be sheer intrusion on the right of ownership which is no one else. The term includes service performed by a family
apply to a lease whose termination is expressly left to the violative of the due process clause of the Constitution driver
lessee. In such a case, a term may be fixed under the general
provisions of Art.1197. Art. 1688. When the lessor of a house, or part thereof, used as a Zamora v. Sy, (CA). A laborer, worker, or employee in a
(d) Melotindos v. Tobias, (2002). Art. 1687 does not grant a dwelling for a family, or when the lessor of a store, or industrial commercial, or industrial enterprise is not a domestic servant.
lessee an absolute right to an extension of the lease term establishment, also leases the furniture, the lease of the latter Thus, a waiter and any person employed in a hotel, club,
but merely gives the courts the discretion to allow additional shall be deemed to be for the duration of the lease of the corporation, or society, to serve its members, are not “domestic
time for the lessee to prepare for his eventual ejection. premises. servants,’’ in the proper sense of this term under Art. 1689
(e) Lim v. Legarda Vda. De Prieto. Art. 1197 is not applicable
where the duration of the lease is left to the will of the Lease of Premises Together with Furniture Reasonable Compensation for Household Service
lessor. In a lease, the lessor is the creditor and the lessee,
the debtor.  Art. 1688 does not say that the lease of the premises is  A house helper or domestic servant is entitled to reasonable
(f) Fernandez v. CA, (1988). The stipulation that the lease can presumed to include the furniture, but that the lessor also compensation in addition to suitable lodging, food and
be renewed at the option of both parties implies that the leases the furniture. The lease of the furniture shall be medical attendance. Household service cannot be
lease cannot be renewed without the lessor’s consent. deemed to be for the duration of the lease of the premises gratuitous.
(g) Ramon Magsaysay Award Foundation v. CA, (1985). The because the former is considered as an accessory to the
lessee cannot be granted an extension of the lease when the latter. De los Reyes v. Alojado, (1910). Any stipulation that household
parties stipulated that the lease shall not be renewed or  Nevertheless, under the attendant circumstances, it may be service is without compensation is against public morals and void.
extended by implication. inferred that the intention of the parties is that the lease of No agreement may subsist in law in which it is stipulated that any
(h) The mere fact that Art. 1687 does not authorize the court to the premises also covers the furniture contained therein domestic service shall be absolutely gratuitous, unless it be
fix the term of the lease when the rental is payable yearly, although not expressly included by the terms of the lease admitted that slavery may be established in this country through a
would not prevent it from fixing the period of the lease agreement. covenant entered into between the interested parties.
under Art. 1197.
(i) Ramirez v. Sy Chit. It is not necessary for the lessor to file an
Chapter III: Work and Labor Art. 1690. The head of the family shall furnish, free of charge, to
independent action. The power to extend the period of lease
the house helper, suitable and sanitary quarters as well as
may be exercised by the court as an incident of the
Section I: Household Services adequate food and medical attendance.
ejectment suit.

Legarda Vda. De Prieto v. Lim, (CA). It would be an idle and costly New Provisions Obligations of Head of the Family
procedure to require a lessor to file one action to have the term of
the lease fixed, with all the possible delays attendant upon a Report of Code Commission. There is a section ‘Household  The term “head of family,’’ as used in the law, may refer to
lawsuit, and then file another action for ejectment on the ground Service.’ The domestic servants in the Philippines have not, as a the husband or father, the wife or mother, or any person
that the period fixed in the first one has expired general rule, been fairly treated. Social justice is to be measured
who lives alone or with another or other persons, but has Opportunity for at Least Elementary Education (Art. 1691) whatever doubt there may be should be resolved in favor of the
servant/s in his or her employ. house helper. This rule of construction in case of doubt is
 Some of the obligations imposed on the head of the family  Literally, construed, a house helper under 18 years of age is necessary lest the law be made a refuge of unscrupulous heads of
are also applicable to the other members of the family, to not entitled to secondary education at the head of the the family.
wit: family’s expense; if 18 years or above, not even to
elementary education. Zamora v. Sy, (CA). The househelper cannot demand payment of
(1) To furnish, free of charge, to the house helper, suitable and compensation for overtime work done, unless such overtime work
sanitary quarters as well as adequate food and medical Art. 1692. No contract for household service shall last for more be required by the employer, or is demanded by the nature of the
attendance (Art. 1690); than two years. However, such contract may be renewed from work.
(2) To give an opportunity to the house helper who is under the year to year.
age of 18, for at least elementary education (Art. 1691.); Vacation Leave
(3) To provide the house helper suitable clothing (Art. 1693); Duration of Household Service (Art. 1692)
(4) To treat the house helper in a just and humane manner (Art. Zamora v. Sy, (CA). Such vacation leave with pay, if not enjoyed,
1693);  A contract for more than two (2) years is void as to the could not be accumulated. The house helper is not entitled to
(5) To allow the house helper four (4) days’ vacation each excess payment for such leave, unless he had asked therefor and his
month, with pay, and not to require him/her to work more employer refused his request, for in such case there is an implied
than 10 hours a day; agreement on the part of the employer to pay for such vacation
Art. 1693. The house helper's clothes shall be subject to
(6) To bear the funeral expenses in case of death of the house
stipulation. However, any contract for household service shall be
helper (Art. 1696); Art. 1696. In case of death of the house helper, the head of the
void if thereby the house helper cannot afford to acquire
(7) To terminate the contract before that expiration of the term family shall bear the funeral expenses if the house helper has no
suitable clothing.
only for a just cause (Art. 1697); relatives in the place where the head of the family lives, with
(8) To pay the house helper unjustly dismissed compensation sufficient means therefor.
already earned plus that for 15 days by way of indemnity Clothes of the House Helper (Art. 1693)
(Ibid.); and Funeral Expenses (Art. 1696)
(9) To give the house helper, upon demand, a written statement  If the house helper cannot afford to acquire suitable
on the nature and duration of the service and the conduct clothing, the house helper cannot waive this right by
stipulation. Any such stipulation is void.  The head of the family must bear the funeral expenses
and efficiency of the house helper. (Art. 1699) where the relatives, although with sufficient means, do not
live in the same locality.
Medical Attendance Art. 1694. The head of the family shall treat the house helper in
a just and humane manner. In no case shall physical violence be
Art. 1697. If the period for household service is fixed neither the
 The right of house helpers to medical attendance — used upon the house helper.
head of the family nor the house helper may terminate the
exclusive of hospitalization — is purely statutory in
contract before the expiration of the term, except for a just
character, and where specifically conferred by statute, is Treatment of House Helper (Art. 1694)
cause. If the house helper is unjustly dismissed, he shall be paid
deemed subject to the “rule of necessity,’’ in the sense that
the compensation already earned plus that for fifteen days by
it is dependent upon the need for said medical attendance.  A house helper shall be treated by the head of the family in a
way of indemnity. If the house helper leaves without justifiable
 Hence, the determination of the question whether just and humane manner. Whatever the infractions he/she reason, he shall forfeit any salary due him and unpaid, for not
“expenses of hospitalization’’ are included in “medical may have committed, will not justify the use of physical exceeding fifteen days.
attendance’’ must depend upon the circumstances violence upon his/her person.
surrounding each case.  A similar provision is contained in Art. 147 of the Labor
Termination of Household Service
Code, except that the obligation is imposed on an employer.
Cuajao v. Chua Lo Tan, (1962). Even assuming that house helpers’ (P.D. 442, as amended.)
(1) If no period for household service is fixed, the head of the
expenses of hospitalization can, in proper cases, be deemed to be
family may terminate the same at any time by giving notice
within the purview of “medical attendance,’’ it will only be fair Art. 1695. House helpers shall not be required to work more (Art. 1698) but he must act in good faith and under
that, except in cases of extreme urgency, the party who may have than ten hours a day. Every house helper shall be allowed four circumstances to avoid undue prejudice to the house helper.
to defray the cost of medical attendance and/or hospitalization, days' vacation each month, with pay. (2) If a period is fixed, neither party may terminate the contract
be given a say in the choice of the physician who will treat the
before the expiration of the term, except for a just cause.
patient and/or the hospital in which he will be confined. Ten-Hour A Day Work
(a) In case of unjust dismissal, the house helper is entitled to be
Art. 1691. If the house helper is under the age of eighteen years, Balolong v. Uy, (CA). The prohibition contained in Art. 1695 is paid the compensation already earned plus 15 days wages as
the head of the family shall give an opportunity to the house against requiring house helpers to work more than the prescribed indemnity.
helper for at least elementary education. The cost of such period. What is unlawful is for house helpers to be compelled by (b) If the house helper leaves without justifiable reason, he
education shall be a part of the house helper's compensation, their employers to do so, but not for both parties to agree forfeits any salary earned and unpaid, for not more than 15
unless there is a stipulation to the contrary. otherwise upon payment of additional compensation. However, days.
unless the existence of such agreement is clearly established
Art. 1698. If the duration of the household service is not
determined either by stipulation or by the nature of the service, Art. 1702. In case of doubt, all labor legislation and all labor Section III: Contract of Piece of Work
the head of the family or the house helper may give notice to contracts shall be construed in favor of the safety and decent
put an end to the service relation, according to the following living for the laborer. Art. 1713. By the contract for a piece of work the contractor
rules: binds himself to execute a piece of work for the employer, in
Art. 1703. No contract which practically amounts to involuntary consideration of a certain price or compensation. The contractor
(1) If the compensation is paid by the day, notice may be given servitude, under any guise whatsoever, shall be valid. may either employ only his labor or skill, or also furnish the
on any day that the service shall end at the close of the material.
following day;
(2) If the compensation is paid by the week, notice may be Art. 1704. In collective bargaining, the labor union or members
of the board or committee signing the contract shall be liable for Contract for a Piece of Work Distinguished from Lease of Service
given, at the latest on the first business day of the week,
that the service shall be terminated at the end of the non-fulfillment thereof.
Contract for a Piece of Work Lease of Service
seventh day from the beginning of the week;
Art. 1705. The laborer's wages shall be paid in legal currency. Locatio operis Locatio operarum
(3) If the compensation is paid by the month, notice may be
given, at the latest, on the fifth day of the month, that the The direct object of the The direct object of the
service shall cease at the end of the month. contract is the result, the contract is the service itself
Art. 1706. Withholding of the wages, except for a debt due, shall complete and finished work by the hired servant or
not be made by the employer. done by the independent laborer/employee
Notice To Terminate Service Relation Where No Period Fixed
contractor (lessor or
Art. 1707. The laborer's wages shall be a lien on the goods promissor)
 The head of the family or the house helper, as the case may manufactured or the work done. The person for whom the The person for whom the
be, may give the notice to put an end to the service relation
services are to be performed services are to be performed
according to the rule provided in the present article,
Art. 1708. The laborer's wages shall not be subject to execution controls only the result or also controls the manner and
depending as to whether the compensation is paid by the
or attachment, except for debts incurred for food, shelter, end to be accomplished means to be used to produce
day, by the week, or by the month.
clothing and medical attendance. the stipulated result
The risk is upon the Even if the result intended is
Balolong v. Uy, (CA). In lieu of the required notice, the monetary
independent contractor not accomplished without
value may be given by the head of the family. Thus, where a Art. 1709. The employer shall neither seize nor retain any tool or
fault of the lessor,
house helper, being paid by the month, is dismissed without other Articles belonging to the laborer.
remuneration is still due for
notice by the head of the family, the latter is liable to pay the
the service rendered
former the equivalent of one (1) month’s pay. Art. 1710. Dismissal of laborers shall be subject to the The price is generally not It is after the service has
supervision of the Government, under special laws. payable until the work is been performed
Art. 1699. Upon the extinguishment of the service relation, the
completed and accepted
house helper may demand from the head of the family a written Art. 1711. Owners of enterprises and other employers are There is no relation of Employer-employee exists
statement on the nature and duration of the service and the obliged to pay compensation for the death of or injuries to their employer-employee
efficiency and conduct of the house helper.
laborers, workmen, mechanics or other employees, even though (although the contract is
the event may have been purely accidental or entirely due to a referred to in the law as
Written Statement from Head of the Family fortuitous cause, if the death or personal injury arose out of and employer)
in the course of the employment. The employer is also liable for In both, there is a price certain or compensation and the
 The written statement mentioned in Art. 1699 may become compensation if the employee contracts any illness or disease relation of principal and agent does not exist between the
necessary in case the house helper applies for employment caused by such employment or as the result of the nature of the lessor and the lessee. (Art. 1644)
in another household or even in other kinds of work. employment. If the mishap was due to the employee's own
notorious negligence, or voluntary act, or drunkenness, the  There is also no employer-employee relation between a
Section II: Contract of Labor employer shall not be liable for compensation. When the common carrier and the passenger, or owner or shipper of
employee's lack of due care contributed to his death or injury, goods. (Art. 1722)
Art. 1700. The relations between capital and labor are not the compensation shall be equitably reduced.
merely contractual. They are so impressed with public interest Art. 1714. If the contractor agrees to produce the work from
that labor contracts must yield to the common good. Therefore, Art. 1712. If the death or injury is due to the negligence of a material furnished by him, he shall deliver the thing produced to
such contracts are subject to the special laws on labor unions, fellow worker, the latter and the employer shall be solidarily the employer and transfer dominion over the thing. This contract
collective bargaining, strikes and lockouts, closed shop, wages, liable for compensation. If a fellow worker's intentional or shall be governed by the following Articles as well as by the
working conditions, hours of labor and similar subjects. malicious act is the only cause of the death or injury, the pertinent provisions on warranty of title and against hidden
employer shall not be answerable, unless it should be shown defects and the payment of price in a contract of sale.
Art. 1701. Neither capital nor labor shall act oppressively against that the latter did not exercise due diligence in the selection or
the other, or impair the interest or convenience of the public. supervision of the plaintiff's fellow worker. Material Furnished by the Contractor
survey rejecting the offer to make a subdivision survey, and  Art. 1716 is similar to Art. 1553 which declares void any
Report of Code Commission. The contractor furnishes both the discrepancies arose as a result of the absence of the latter survey. stipulation exempting the vendor from the obligation to
material and his labor. “Some jurists consider this as a contract of answer for eviction if he acted in bad faith.
sale. Indeed, it is very similar to sale.’’ (1) Use of Topographic Map Which is Not Linearly Plotted
Art. 1717. If the contractor bound himself to furnish the
Hence, he has the obligation: “When a topographic map which is not linearly plotted and whose material, he shall suffer the loss if the work should be destroyed
boundaries are consequently not accurate is used in sketching the before its delivery, save when there has been delay in receiving
(1) To deliver the thing produced to the employer; road lay-out and other parts of the subdivision scheme, such it.
(2) To transfer dominion over the thing; and procedure would be improper unless the sketch is intended to be
(3) To warrant against eviction and hidden defects. (Art. 1545) merely a preliminary lay-out, subject to final adjustment after a Risk of Loss Where Material Furnished by Contractor
fixed boundary survey has been made.
Accordingly, the contract shall be governed not only by the Tuason v. Zamora, (1903). Here, the contractor furnishes both his
provisions of Section 3 but also by the pertinent provisions on In planning a scheme for a new housing project, there should be labor and material. He shall suffer the loss if the work should be
warranty of title and against hidden defects and the payment of not only a topographic survey of the entire project area but also destroyed even if due to a fortuitous event, before its delivery,
price in a contract of sale. an accurate planimetric survey of the same indicating the exact unless the lessee-owner is guilty of mora accipiendi, in which case
boundaries thereof.’’ the risk is shifted to him. Thus, where the contractor of a building
Art. 1715. The contract shall execute the work in such a manner completed its construction and the owner wrongfully refused to
that it has the qualities agreed upon and has no defects which (2) Obligation of Contractor Under Article NOT Absolute accept delivery, the latter must bear the loss although there has
destroy or lessen its value or fitness for its ordinary or stipulated been no actual delivery by reason of the loss of the building by
use. Should the work be not of such quality, the employer may Petitioner would have us construe the obligation of the contractor fire.
require that the contractor remove the defect or execute to execute the work in such a manner that it had the qualities
another work. If the contract fails or refuses to comply with this agreed upon and was free from defects which destroyed or  The contract is not extinguished, and, therefore, the
obligation, the employer may have the defect removed or lessened its value or fitness as well-nigh absolute. It would impose contractor may be required to do the work again, unless
another work executed, at the contractor's cost. the duty on the party thus bound to perform such work to attain, there is a stipulation to the contrary or a repetition of the
in each and every case, a degree of perfectibility on pain of being work has become impossible.
Remedy of Employer in Case of Defects visited with a liability for damages. That is to misread Art. 1715. It
is to give it an interpretation at war with the demands of reason.
Art. 1718. The contractor who has undertaken to put only his
Report of Code Commission. The contractor must execute the It might have been otherwise if the work agreed upon to be
work or skill, cannot claim any compensation if the work should
work in accordance with the qualities stipulated and without performed consisted of machinery, which must be constructed
be destroyed before its delivery, unless there has been delay in
defects which destroy or lessen its value or fitness for the use according to specification, otherwise it would not serve the
receiving it, or if the destruction was caused by the poor quality
intended. purpose contemplated. Such is not the case, however. As Justice
of the material, provided this fact was communicated in due
Holmes noted, there is no such principle ‘against using common
time to the owner. If the material is lost through a fortuitous
If the contractor does not comply with his contract, the employer sense in construing laws.’
event, the contract is extinguished.
may:
Petitioner, however, appears to be of a different mind. Ignoring
the vital circumstance that precluded respondent Santamaria’s Risk of Loss Where Contractor Furnished Only His Work
(1) Require the contractor to remove the defect or execute
another; or work from being as satisfactory as was hoped for, for which it
could not escape responsibility as it rejected his offer to conduct Under Art. 1718, the contractor has undertaken to put only his
(2) Have the defect removed or another work executed, at the work or skill and the work is destroyed by a fortuitous event
expense of the contractor if fails or refuses to do so. both a topographic and a subdivision survey, it would interpret
this codal provision without any thought of the canons of fairness. before its delivery. He cannot claim any compensation for his
It would stretch its meaning in an unwarranted manner. No legal labor or work unless:
The above rules arise from the nature of the contract.
norm should be susceptible to such a reproach.’’
(1) He lessee-owner is guilty of mora accipiendi; or
Ramcar, Inc. v. Garcia, (1962). Art. 1715 may be available only (2) The destruction was caused by the poor quality of the
when there is proof of defects in the work. In the absence of proof Art. 1716. An agreement waiving or limiting the contractor's
material furnished by the owner, provided the contractor
to the contrary the work is presumed satisfactory. liability for any defect in the work is void if the contractor acted
communicated this fact in due time to the owner.
fraudulently.
Marker v. Garcia, (1905). The measure of damages for failure to If the material is lost through a fortuitous event, the contract is
complete a construction, is the amount spent by the owner to Agreement Waiving or Limiting Contractor’s Liability for Defects extinguished. The contractor is not liable for damages or for the
complete it and correct its defects. value of the materials. If the loss or destruction is due to the
Report of Code Commission. The agreement or “stipulation, if the contractor’s fault, he may be obliged to do the work all over again.
Illustrative Case: contractor acted fraudulently is contrary to public policy’’ and is
void.
Art. 1719. Acceptance of the work by the employer relieves the
Philam Life Insurance Co. v. Santamaria, (1970). Petitioners
contractor of liability for any defect in the work, unless:
accepted only the offer of respondent to make a topographic
(1) The defect is hidden and the employer is not, by his special P20,000.00 upon approval of the plans by the Engineering the parties to the compromise contemplated a divisible obligation
knowledge, expected to recognize the same; or Department of Ayala Securities Corporation. Gonzales is entitled necessitating therefore a performance bond ‘in proportion to’ the
(2) The employer expressly reserves his rights against the to those payments by the very terms of the contract. He had uncompleted work.’’
contractor by reason of the defect. performed the services required and had earned his fees.
(2) Performance Bond to Cover Only Remaining Cost of Next
Effect of Acceptance by the Employer (Art. 1719) (2) Effect of Abandonment of Project for Payments Received Stage of Work to be Done
for Services Already Rendered
(1) Choy v. Heredia, (1908). The acceptance of the building “What is crucial in sub-paragraph B of paragraph 1 of the
without objecting with reference to the work or material The fact that the condominium project was later abandoned compromise agreement are the words “in proportion.’’ If the
furnished in the construction of the house has the effect of should not result in the forfeiture by Gonzales of those payments. parties really intended the legal rate of 20% performance bond to
acknowledging that the work and material had been Nor the fact that the contract has been rescinded and would refer to the whole unfinished work, then the provision should
performed and furnished substantially as agreed upon. This ordinarily create the obligation to return the things which were have required the plaintiff contractor to submit and file a new
acceptance, of course, would not prevent the defendant the object of the contract, and the price with its interest. Upon a performance bond to cover the remaining value/cost of the
from subsequently raising the objection that there existed showing that an architect has fully performed services relating to unfinished work of the construction. Using the words in
hidden defects in the construction of said house. the completion of specifications and general working drawings, he proportion then significantly changed the meaning of the
(2) Ang Toa v. Alvarez, (1908). The acceptance of a building is entitled to recover payments specified for such services even paragraph to ultimately mean a performance bond equal to 20%
under protest is not a waiver of any claim for damages for though the project is thereafter abandoned so as to prevent of the next stage of work to be done.’’
defects in its construction. performance of other services for which additional compensation
(3) Limjap v. J. Machuca & Co., (1918). From the very nature of has been provided. Art. 1721. If, in the execution of the work, an act of the employer
things, it is impossible to determine by the simple inspection is required, and he incurs in delay or fails to perform the act, the
of a concrete wall, floor, or platform whether it has been (3) Delay Only with Submission of Working Drawings and contractor is entitled to a reasonable compensation.
made of reinforced concrete, for the reason that this work is Specifications
done by embedding iron or steel rods in the concrete in such The amount of the compensation is computed, on the one hand,
manner as to increase its strength While it may be true that Gonzales incurred in delay, as found by by the duration of the delay and the amount of the
both the Trial and Appellate Courts, which finding is binding on us, compensation stipulated, and on the other hand, by what the
that delay was only with respect to the submission of working contractor has saved in expenses by reason of the delay or is
Art. 1720. The price or compensation shall be paid at the time
drawings and specifications as provided in item 5(c) of the letter- able to earn by a different employment of his time and industry.
and place of delivery of the work, unless there is a stipulation to
agreement. By reason of that delay, Gonzales is not entitled to the
the contrary. If the work is to be delivered partially, the price or
compensation provided therefor, or P20,000.00, even though he Default of Employer
compensation for each part having been fixed, the sum shall be
may have already submitted those drawings and specifications to
paid at the time and place of delivery, in the absence if
Endel. Besides, the delay in the presentation of those working If the employer incurs in delay or fails to perform an act required
stipulation.
drawings are not the only cause for the failure of the contract. of him under the contract, the contractor is entitled to reasonable
Endel itself had decided to abandon the project for other reasons. compensation to be determined by considering the following:
Time and Place of Payment of Price or Compensation (Art. 1720) If time were, indeed, of the essence of the contract, as Endel
alleges, it could have cancelled it in April, 1972 and it should not (1) The duration of the delay;
Illustrative Cases: have allowed Gonzales to continue working further on the (2) The amount of compensation stipulated;
drawings and specifications under item 5(c) of the agreement. (3) Expenses saved by the contractor by reason of the delay;
Gonzales v. CA, (1983). Architect/contractor who was guilty of Neither do we deem it just and equitable that Endel should
delay in the submission of working drawings and specifications of and
recover attorney’s fees under Article 2208 of the Civil Code. (4) The amount he would have earned by a different
a proposed condominium building, was ordered by the Court of
Appeals to return the amount paid to him for the building plans employment of his time and industry.
Pasay City Government v. CFI, (1984). Petitioner requires
which he submitted on time as per contract, and attorney’s fees. respondent (contractor) to file a new performance bond equal to The general rule is that an obligor incurs in delay from the time
the cost of the entire unfinished work instead of 20% of the cost the obligee judicially or extrajudicially demands from him the
(1) Compensation Apportioned According to Stage of Services of the next stage of the construction to be undertaken by
to be Rendered fulfillment of his obligation. (Art. 1169)
respondent.
It is fundamental that contracts are to be interpreted according to Art. 1722. If the work cannot be completed on account of a
(1) Stage by stage construction and payment approach
their liberal meaning when the terms and conditions are clear and defect in the material furnished by the employer, or because of
leave no doubt as to the intention of the contracting parties. An orders from the employer, without any fault on the part of the
An sub-paragraph H of paragraph 1 and paragraph 2 of the
examination of the contract reveals that the compensation of contractor, the latter has a right to an equitable part of the
compromise agreement also reiterated the stage by stage
Gonzales was apportioned in accordance with the stage of compensation proportionally to the work done, and
construction and payment as follows: [2].
services to be rendered. reimbursement for proper expenses made.
Subparagraph B of paragraph 1 of the compromise agreement, to
Upon his being commissioned. Gonzales received P10,000.00 wit: [3] read together with the stage-by-stage construction and Non-Completion Attributable to Employer
under item 5(a) of the contract. And under item 5 (b), he was paid payment approach, would inevitably lead to the conclusion that
 Art. 1722 grants the contractor the right to an equitable part (3) Solidary Liability collapse was only partial and the building could still be restored at
of the compensation due him under the contract and to the expense of P900,000.00. But after the subsequent
reimbursement for his expenses, if the work cannot be  In case the engineer or architect supervised or directed the earthquakes on April 7, 9, and 12, 1970, there was no question
completed because the materials furnished by the employer construction he shall be solidarily liable (Arts 1207, 1216.) that further damage was caused to the property resulting in an
are defective or because of orders from the employer. with the contractor. eventual and unavoidable collapse or demolition (complete
 The amount of compensation to which the contractor shall collapse). In fact, on April 30, 1970, the building was authorized by
be proportional to the work already done. Bosque v. Chipco, (1909). Note that Art. 1723 speaks of a building the trial court to be demolished at the expense of the plaintiff.
that should “collapse’’ or edifice that “falls’’; hence, it does not Note that a needed demolition is in fact a form of ‘collapse’.
Art. 1723. The engineer or architect who drew up the plans and apply to minor defects.
specifications for a building is liable for damages if within fifteen The bone of contention is, therefore, not on the fact of collapse
years from the completion of the structure, the same should However, a third person suffering damage as a result of any but on who should shoulder the damages resulting from the
collapse by reason of a defect in those plans and specifications, defect in the construction may proceed, against the engineer or partial and eventual collapse. As ruled by this Court in said
or due to the defects in the ground. The contractor is likewise architect or contractor. (Art. 2192) decision, there should be no question that the NAKPILS and
responsible for the damages if the edifice falls, within the same UNITED are liable for the damage.
period, on account of defects in the construction or the use of (4) Effect of Acceptance of Work
materials of inferior quality furnished by him, or due to any Citing the case of Tucker v. Milan (49 O.G. 4379, 4380) as the case
violation of the terms of the contract. If the engineer or architect GR: In a contract for a piece of work is that acceptance of the in point, the pertinent portion of the decision reads:
supervises the construction, he shall be solidarily liable with the work by the employer relieves the contractor of liability for any
contractor. defect in the work. (Art. 1719) But mere acceptance of the ‘One who negligently creates a dangerous condition cannot
building after competition, does not imply waiver of any of the escape liability for the natural and probable consequences
Acceptance of the building, after completion, does not imply causes of action arising from any defect in the construction. thereof, although the act of a third person, or an act of God for
waiver of any of the cause of action by reason of any defect which he is not responsible, intervenes to precipitate the loss.’’’
mentioned in the preceding paragraph. Hospicio de San Jose v. Findley Miller Timber Co., (1926). The
owner of a building is not estopped from claiming damages for (2) Charging PBA with Full Supervision of Construction Without
The action must be brought within ten years following the defective construction by the circumstance that the cost of Legal or Contractual Basis
collapse of the building. construction has been paid to the contractor, before discovery of
the defects, upon certificates as to the progress of the work United argues that it is the legal duty of PBA to provide full-time
Liability of Engineer or Architect/Contractor for Collapse of issued by the architect representing the owner. and active supervision in the construction of subject building.
Building Constructed Failing to cite any provision of law to support its arguments,
Koster v. Zulueta, (1956). A contractor’s engagement is to build United insists on the inherent legal duty of the owner, reinforced
(1) Liability of Engineer or Architect according to plans and specifications. Since the designs are made by practice, usage and custom, to exercise such supervision. Apart
by the architect, the builder-contractor is not responsible as to the from the fact that United seems to have completely contradicted
The engineer or architect who drew up the plans and sufficiency or inadequacy of the structure carrying the weight of its own view that this construction involves highly technical
specifications shall be liable for damages, if: the building. matters and, therefore, beyond the ambit of ordinary
understanding and experience, the contrary appears to be more in
(a) The collapse took place within 15 years from the completion Illustrative Case: accord with ordinary practice, which is to avail oneself of the
of the structure; services of architects and engineers whose training and expertise
(b) It took place by reason of a defect in the plans and Nakpil & Sons v. CA, (1988). After an earthquake, the building in make them more qualified to provide effective supervision of the
specifications, or due to the defects in the ground; and question sustained major damage, but after three subsequent construction. In fact, it was on the suggestion of Juan F. Nakpil,
(c) The action for damages is brought within 10 years following earthquakes, the damage caused resulted in its eventual one of the petitioners herein, that the construction was
the collapse of the building. demolition for which the architect and the builder-contractor undertaken on an administration basis. Thus, the trial court did
were sought to be held liable. not err in holding that charging the owner with full time
(2) Liability of Contractor supervision of the construction has no legal or contractual basis.’’
(1) After partial collapse, there was unavoidable collapse
The contractor is likewise responsible for the damages if: (3) Wanton Negligence of United and Nakpil Equivalent to Bad
United gave considerable emphasis on the fact that the PBA Faith
(a) The edifice falls within the same period; building did not collapse as found by the trial court and affirmed
(b) The collapse took place on account of defects in the by the Court of Appeals. Otherwise stated, United wishes to stress United points out that bad faith is a question of fact which was
construction or the use of materials of inferior quality that subject building did not disintegrate completely as the term not established. The Commissioner, the trial court, and the Court
furnished by him, or due to any violation of the terms of the ‘collapse’ is supposed to connote. of Appeals, all of which are triers of fact, allegedly concede that
contract; and there was negligence but not bad faith.
(c) The action for damages is brought within 10 years following Be that as it may, it will be observed that in the assailed decision,
the collapse of the building. this Court is in complete accord with the findings of the trial court A careful study of the decision will show that there is no
and affirmed by the Court of Appeals, that after the April 2, 1968 contradiction between the above finding of negligence by the trial
earthquake, the building in question was not totally lost, the court which was affirmed by the Court of Appeals and the ruling
of this Court. On the contrary, on the basis of such finding, it was specifications were not in writing. The contractor who has no such
held that such wanton negligence of both the defendant and the written authorization cannot recover additional price and is not The change must have been authorized by the proprietor in
third-party defendants in effecting the plans, designs, justified in suspending the construction upon the refusal of the writing, and the additional price to be paid the contractor must
specifications, and construction of the PBA building is equivalent owner. have been determined in writing by both parties.
to bad faith in the performance of their respective tasks.
(3) Purpose of Written Authorization Alternative: It appearing that the additional work was done upon
Note: United and Nakpils were held solidarily liable for damages verbal request and authority of a duly authorized representative
under Article 1723 Report of Code Commission. The two (2) conditions have been of Lino, and the benefits have been received by Lino in
added “to avoid a misunderstanding between the parties consequence of the actual repair and the additional work, the
Art. 1724. The contractor who undertakes to build a structure or defense put up by Lino is not valid on the ground that no person
any other work for a stipulated price, in conformity with plans The evident purpose is to prohibit oral testimony and prevent may unjustly enrich himself at the expense of another.
and specifications agreed upon with the land-owner, can neither litigation for additional costs incurred by reason of additions or
withdraw from the contract nor demand an increase in the price changes in the original plan. Art. 1725. The owner may withdraw at will from the
on account of the higher cost of labor or materials, save when construction of the work, although it may have been
there has been a change in the plans and specifications, Diego v. Sayson, (1961). The requirement for a written commenced, indemnifying the contractor for all the latter's
provided: authorization is not merely to prohibit admission of oral testimony expenses, work, and the usefulness which the owner may obtain
against the objection of the adverse party. This can be inferred therefrom, and damages.
(1) Such change has been authorized by the proprietor in from the fact that the provision is not included among those
writing; and specified in the Statute of Frauds (Art. 1403). As it does not
Right of Owner to Withdraw
(2) The additional price to be paid to the contractor has been appear to have been intended as an extension of the Statute of
determined in writing by both parties. Frauds, it must have been adopted as a substantive provision or a
 Art. 1725 provides an exception to the general rule in
condition precedent to recovery
contracts, that after a contract is perfect, the parties are
Right of Contractor to Withdraw or Ask for Increase in Price bound by their agreement and neither party may withdraw
Marquez v. Cruz, (CA). This is true even if the changes have
therefrom (Arts. 1159, 1345.); otherwise, the aggrieved
 An owner may withdraw at will from the construction of the benefited the owner. The contractor cannot recover.
party is entitled to demand for specific performance or
work (Art. 1725) but not the contractor. rescission with damages in either case. (Arts. 1170, 1191.)
(4) Applicability of Art. 1724
 It grants the owner the exceptional right to withdraw from a
(1) General Rule building contract, provided he indemnifies the contractor for
Arenas v. CA, (1989). The provision refers to contractors who
all the latters’ expenses, work, and the usefulness he
 If the building of a structure or any other work is for a undertake “to build a structure or any other work’’ and
obtained therefrom, plus damages.
stipulated price in accordance with agreed plans and contemplates disputes arising from increased cost of labor and
specifications, the contractor cannot withdraw from the materials. It does not apply to an architect claiming payment for
Adams v. Sociedad v. Naton, (1919). The right of the owner to
contract, or demand an increase in the contract price even if his professional services as such.
withdraw from a building contract is absolute. The contractor
the cost of labor or materials should increase. cannot insist upon completing the contract and enforcing
Royal Lines, Inc. v. CA, (1986). It cannot apply to work done upon
 Neither can he claim a reasonable value of the work done payment of the full amount of the contract price. The right of the
a vessel, which is not erected on a piece of land, like the
based on quantum meruit. owner to desist being absolute, it follows that its exercise cannot
conversion of a yatch into a passenger and cargo vessel. The
 The contract being for a definite work at a stipulated price be made to depend upon whether the contract price has or has
additional work done on the vessel may be orally authorized.
for the cost of the construction, the contractor assumes the not been paid in advance, wholly or partially. If the total amounts
Regarding this matter, the applicable rules are the general rules
risk that the cost might go up arising from increase in cost of paid the builder at the time the owner elects to abandon the
on contract. As a general rule, a contract may be oral or written
labor and materials. projected building are more than sufficient to reimburse him for
his outlay and to indemnify him for the loss of his prospective
(2) When Increase in Price Justified 1987 Bar, Q. X: Lino entered into a written agreement for the profit, the builder must be subject to an action for the recovery of
repair of his private plane with Airo Repair Works, Inc. for the difference between the amounts received by him and those
It is justified when there has been a change in the plans and P500,000. which he would have been entitled to recover under Article 1728
specifications, subject to two (2) conditions: had no payment been made him at the time of the abandonment
Additional work was done upon the verbal request and authority of the project by the owner.
(a) The change has been authorized in writing by the proprietor; of a duly recognized representative of Lino.
and Art. 1726. When a piece of work has been entrusted to a person
(b) The additional price to be paid to the contractor has been Lino refused to pay for the additional work, interposing as a
by reason of his personal qualifications, the contract is rescinded
agreed upon by both parties, also in writing. defense the absence of a written contract for the additional
upon his death.
work done.
Santos v. Cruz, (CA). Art. 1724 apparently revokes the ruling in In this case the proprietor shall pay the heirs of the contractor in
Hamano vs. Papa (1929]) that the contractor may recover for Is the defense put up by Lino valid? Explain?
proportion to the price agreed upon, the value of the part of the
extra labor and materials although the changes in the plans and
A: The defense put up by Lino is valid under Art. 1724, CC.
work done, and of the materials prepared, provided the latter (2) Act No. 3959 makes it obligatory for any person, company,
yield him some benefit. Art. 1729. Those who put their labor upon or furnish materials firm or corporation owning any work of any kind executed
for a piece of work undertaken by the contractor have an action by contract to require the contractor to furnish a bond
The same rule shall apply if the contractor cannot finish the work against the owner up to the amount owing from the latter to the guaranteeing the payment of the laborers and provides
due to circumstances beyond his control. contractor at the time the claim is made. However, the following penalties for its violation. Where the builder did not require
shall not prejudice the laborers, employees and furnishers of the contractor to furnish a bond in an amount equivalent to
Rescission of Contract materials: the cost of labor and to execute an affidavit showing that
the wages of the laborers employed in the work have been
(1) Death of Contractor (1) Payments made by the owner to the contractor before they paid, he is solidarily liable with the contractor for the
are due; payment of such wages.
Javier Security Special Agency v. Shell Craft & Bulton, Corp., (2) Renunciation by the contractor of any amount due him
(1963). When a piece of work has been entrusted to a person by from the owner. U.P. v. Gabriel, (1987). Art. 1729 which provides that its
reason by his personal qualifications, and that person dies before provisions are subject to special laws, is not applicable to the
the completion of the work, the contract is rescinded. This Article is subject to the provisions of special laws. University of the Philippines (U.P.) which is subject to Act No.
3688, a special law for the protection of persons furnishing
The obligation arising out of such contract is personal in nature; Subsidiary Liability of Owner to Laborers and Materialmen materials and labor for the construction of public works.
hence, it is not transmissible to the heirs but is extinguished by
death. (Art. 1311) In this case, the proprietor shall pay the heirs of  The contractor is primarily liable for the payment of the Art. 1730. If it is agreed that the work shall be accomplished to
the contractor as provided in the second paragraph of Art. 1726 compensation of his laborers and the price of materials he the satisfaction of the proprietor, it is understood that in case of
the proportionate value of the work done. uses. The owner has no direct contractual relation with the disagreement the question shall be subject to expert judgment.
contractor’s laborers and suppliers of materials.
(2) Unavoidable Circumstances (Art. 1726, par. 2) If the work is subject to the approval of a third person, his
Velasco v. CA, (1954). Art. 1729 gives two (2) instances when decision shall be final, except in case of fraud or manifest error.
Art. 1727. The contractor is responsible for the work done by laborers and materialmen have a right of action not only against
persons employed by him. the contractor but also directly against the owner. It is intended to Satisfactory Completion of Work
protect the laborers and materialmen from being taken advantage
Liability of Contractor for Work Done by His Workers of by unscrupulous contractors and from possible connivance (1) If the work is to be performed to the “satisfaction of the
between the owner and the contractor. Under Art. 2242(3) and proprietor,’’ the question shall be referred to a person who
Manila Railroad v. Compania Translantica, (1918). The contractor (4), the claims of laborers and materialmen enjoy preference is an expert on the matter for decision in case of
is liable for any damage to the work caused by persons employed among the creditors of the owner disagreement.
by him. For breach of contract (culpa contractual), the defense of (2) If the work is subject to the approval of a third person, his
due diligence in the selection and supervision of his employees Special Laws Regarding Contractor’s Bond decision shall be final except in case fraud or manifest
charged to do the work is not available to the contractor although error.
it may mitigate his damages (1) Act No. 3688 provides that “any person, * * * or corporation
entering into a formal contract with the Government of the (a) Takao v. Belando, (1926). The certificate of the architect,
 The fact that the contractor failed to comply with his Philippine Islands for * * * the prosecution and completion who had been appointed by and represented the owner of
contractual obligation, is sufficient basis for affixing liability of any public work, * * * shall be required, before the buildings, that the buildings had been completed, was
for damages. commencing such work, to execute the usual penal bond, sufficient to show the completion of the contract and to
with good and sufficient sureties, with the additional entitle the builder to the right to recover the balance due
Art. 1728. The contractor is liable for all the claims of laborers obligation that such contractor or his or its sub-contractors under his contract. The owner of the buildings was bound by
and others employed by him, and of third persons for death or shall promptly make payments to all persons supplying him the certificate of his own architect as to the completion of
physical injuries during the construction. or them with labor and materials in the prosecution of the the buildings.
work provided for in such contract.’’ (b) Taylor v. Pierce, (1911). When it is not expressly agreed in
the contract that the materials furnished and the labor
Liability of Contractor for Death or Physical Injuries (Art. 1728)
Bautista v. Auditor General, (1955). The claim of the government performed shall, before acceptance, be passed upon by a
under the Act enjoys priority over other claims. third person, such approval by a third person cannot be
Note: The liability is limited to death or injuries “during the
insisted upon. Thus, where an ordinance of the City of
construction.
New Manila Lumber Co. v. Republic, (1960). The remedy of a Manila provides that before a steam boiler shall be
person who furnished materials in the construction of a public permitted to operate within the city limits, it shall be passed
 Under Art. 1711, employers are obliged to pay
building is to intervene in the action of the Government on the upon and approved by a particular city official, the approval
compensation for the death of, or injuries to, their laborers,
contactor’s bond. If the government does not institute such suit, of such official is not a condition precedent to the
workmen, mechanics or other employees, if such death or
he may file an action in the name of the Government against said enforcement of the contract with respect to the collection of
personal injury arose out of and in the course of the
bond. the amount due under the agreement for the materials
employment, even though the event may have been purely
furnished and the labor performed, unless the terms of the
accidental or entirely due to a fortuitous event.
contract expressly provide therefor. If it was not agreed that Art. 1738. The extraordinary liability of the common carrier
a third person had to approve the work, no third person may Art. 1732. Common carriers are persons, corporations, firms or continues to be operative even during the time the goods are
decide upon the fulfillment of the contract. associations engaged in the business of carrying or transporting stored in a warehouse of the carrier at the place of destination,
passengers or goods or both, by land, water, or air, for until the consignee has been advised of the arrival of the goods
Art. 1731. He who has executed work upon a movable has a right compensation, offering their services to the public. and has had reasonable opportunity thereafter to remove them or
to retain it by way of pledge until he is paid. otherwise dispose of them.
Art. 1733. Common carriers, from the nature of their business and
Mechanic’s Lien for reasons of public policy, are bound to observe extraordinary Art. 1739. In order that the common carrier may be exempted
 The right of a worker to be paid for work done on a movable diligence in the vigilance over the goods and for the safety of the from responsibility, the natural disaster must have been the
is in the nature of a mechanic’s lien. He has a right to retain passengers transported by them, according to all the proximate and only cause of the loss. However, the common
it by way of pledge until he is paid. The laborer’s wages shall circumstances of each case. carrier must exercise due diligence to prevent or minimize loss
be a lien on the goods manufactured or the work done. (Art. before, during and after the occurrence of flood, storm or other
1707) Such extraordinary diligence in the vigilance over the goods is natural disaster in order that the common carrier may be
further expressed in Articles 1734, 1735, and 1745, Nos. 5, 6, and exempted from liability for the loss, destruction, or deterioration
(1) Bachrach Motor Co. v. Mendoza, (1922). Where the vendee 7, while the extraordinary diligence for the safety of the of the goods. The same duty is incumbent upon the common
of a truck brought it to the vendor’s shop for repairs, the passengers is further set forth in Articles 1755 and 1756. carrier in case of an act of the public enemy referred to in Art.
latter has the right to retain the truck until the cost of the 1734, No. 2.
repair had been paid.
Subsection II: Vigilance Over Goods
(2) Bachrach v. Mantel, (1913). Where the mortgagee in a
Art. 1740. If the common carrier negligently incurs in delay in
chattel mortgage covering an automobile personally delivers
Art. 1734. Common carriers are responsible for the loss, transporting the goods, a natural disaster shall not free such
the automobile, which has suffered great damage by reason
destruction, or deterioration of the goods, unless the same is due carrier from responsibility.
of an accident, to a mechanic for repairs, requests that they
be made and superintends and advises at various times to any of the following causes only:
during the progress of the repairs, he is personally liable for Art. 1741. If the shipper or owner merely contributed to the loss,
the value of the repairs made. (1) Flood, storm, earthquake, lightning, or other natural disaster destruction or deterioration of the goods, the proximate cause
(3) BPI v. Walter A. Smith & Co., (1931). Where the mortgagor or calamity; thereof being the negligence of the common carrier, the latter
of a chattel retains possession of the property with the right (2) Act of the public enemy in war, whether international or shall be liable in damages, which however, shall be equitably
to use the same, the cost of any repairs made thereon by an civil; reduced.
artisan, to the extent reasonably necessary to the continued (3) Act or omission of the shipper or owner of the goods;
use of the chattel, will, under Article 1731, constitute a lien (4) The character of the goods or defects in the packing or in the Art. 1742. Even if the loss, destruction, or deterioration of the
on the chattel superior to the mortgage, so long as the containers; goods should be caused by the character of the goods, or the
person making such repairs retains the chattel in his (5) Order or act of competent public authority. faulty nature of the packing or of the containers, the common
possession. A person who buys the chattel at a sale made to carrier must exercise due diligence to forestall or lessen the loss.
enforce this lien will obtain a valid title. Art. 1735. In all cases other than those mentioned in Nos. 1, 2, 3,
(4) Phil. Trust Co. v. Smith Navigation Co., (1937). The repair 4, and 5 of the preceding Article, if the goods are lost, destroyed Art. 1743. If through the order of public authority, the goods are
man is not a party to the terms and provisions in a chattel or deteriorated, common carriers are presumed to have been at seized or destroyed, the common carrier is not responsible,
mortgage to the effect that the mortgagor cannot encumber fault or to have acted negligently, unless they prove that they provided said public authority had power to issue the order.
the auto for subsequent repairs without the written consent observed extraordinary diligence as required in Art. 1733.
of the mortgagee, and in the absence of personal knowledge
of their existence, he is not legally bound by such provisions Art. 1744. A stipulation between the common carrier and the
Art. 1736. The extraordinary responsibility of the common carrier shipper or owner limiting the liability of the former for the loss,
in the chattel mortgage. lasts from the time the goods are unconditionally placed in the
(5) Chartered Bank v. Constantino, (1932). Art. 1731 is not destruction, or deterioration of the goods to a degree less than
possession of, and received by the carrier for transportation until extraordinary diligence shall be valid, provided it be:
applicable to salaried employees. Where a lumber company the same are delivered, actually or constructively, by the carrier to
sold and delivered lumber to a bank, which attempts to the consignee, or to the person who has a right to receive them,
export it but is prevented by the employees of the lumber (1) In writing, signed by the shipper or owner;
without prejudice to the provisions of Art. 1738. (2) Supported by a valuable consideration other than the
company who have done work on the lumber and have not
been paid for their work, the bank has a right to an service rendered by the common carrier; and
injunction to restrain the employees of the lumber company Art. 1737. The common carrier's duty to observe extraordinary (3) Reasonable, just and not contrary to public policy.
from interfering or impeding the bank in the exportation of diligence over the goods remains in full force and effect even
lumber. when they are temporarily unloaded or stored in transit, unless Art. 1745. Any of the following or similar stipulations shall be
the shipper or owner has made use of the right of stoppage in considered unreasonable, unjust and contrary to public policy:
transitu.
Section IV: Common Carriers
(1) That the goods are transported at the risk of the owner or
shipper;
Subsection I: General Provisions
(2) That the common carrier will not be liable for any loss, A: The airline Is liable. In case of death of a passenger, common
destruction, or deterioration of the goods; Art. 1753. The law of the country to which the goods are to be carriers are presumed to have been at fault or to have acted
(3) That the common carrier need not observe any diligence in transported shall govern the liability of the common carrier for negligently, unless they prove that they observed extraordinary
the custody of the goods; their loss, destruction or deterioration. diligence (Art. 1756, CC). The failure of the airline to take extra
(4) That the common carrier shall exercise a degree of diligence precautions despite a police warning that an attempt to hijack the
less than that of a good father of a family, or of a man of Art. 1754. The provisions of Articles 1733 to 1753 shall apply to plane would be made, was negligence on the part of the airline.
ordinary prudence in the vigilance over the movables the passenger's baggage which is not in his personal custody or in Being negligent, it is liable for the death of the passenger. The
transported; that of his employee. As to other baggage, the rules in Articles defense of force majeure is not tenable since the shooting
(5) That the common carrier shall not be responsible for the 1998 and 2000 to 2003 concerning the responsibility of hotel- incident would not have happened had the airline taken steps that
acts or omission of his or its employees; keepers shall be applicable. could have prevented the hijacker from boarding the plane.
(6) That the common carrier's liability for acts committed by
thieves, or of robbers who do not act with grave or Alternative: Under Art. 1763, CC, the common carrier is not
irresistible threat, violence or force, is dispensed with or Subsection III: Safety of Passengers required to observe extraordinary diligence in preventing injury to
diminished; its passengers on account of the willful acts or negligence of other
(7) That the common carrier is not responsible for the loss, Art. 1755. A common carrier is bound to carry the passengers passengers or of strangers. The common carrier, in that case, is
destruction, or deterioration of goods on account of the safely as far as human care and foresight can provide, using the required to exercise only the diligence of a good father of a family;
defective condition of the car, vehicle, ship, airplane or other utmost diligence of very cautious persons, with a due regard for hence, the failure of the airline to take EXTRA precautions in flying
equipment used in the contract of carriage. all the circumstances. the passengers and by leaving that matter to the security
personnel of the airport, does not constitute a breach of that duty
Art. 1756. In case of death of or injuries to passengers, common so as to make the airline liable. Besides, the use of irresistible
Art. 1746. An agreement limiting the common carrier's liability
carriers are presumed to have been at fault or to have acted force by the hijackers was force majeure that could not have been
may be annulled by the shipper or owner if the common carrier
negligently, unless they prove that they observed extraordinary prevented even by the observance of extraordinary diligence
refused to carry the goods unless the former agreed to such
stipulation. diligence as prescribed in Articles 1733 and 1755.
Art. 1757. The responsibility of a common carrier for the safety of
1992 Bar, Q. X(a)(b): As the result of a collision between a public passengers as required in Articles 1733 and 1755 cannot be
Art. 1747. If the common carrier, without just cause, delays the
service passenger bus and a cargo truck owned by D. X sustained dispensed with or lessened by stipulation, by the posting of
transportation of the goods or changes the stipulated or usual
physical injuries and Y died. Both X and Y were passengers of the notices, by statements on tickets, or otherwise.
route, the contract limiting the common carrier's liability cannot
be availed of in case of the loss, destruction, or deterioration of bus. Both drivers were at fault, and so X and Z, the only heir and
the goods. legitimate child of the deceased Y, sued the owners of both Art. 1758. When a passenger is carried gratuitously, a stipulation
vehicles. limiting the common carrier's liability for negligence is valid, but
not for willful acts or gross negligence.
Art. 1748. An agreement limiting the common carrier's liability for
(a) May the owner of the bus raise the defense of having
delay on account of strikes or riots is valid.
exercised the diligence of a good father of a family? The reduction of fare does not justify any limitation of the
(b) May D raise the same defense? common carrier's liability.
Art. 1749. A stipulation that the common carrier's liability is
limited to the value of the goods appearing in the bill of lading, A: Art. 1759. Common carriers are liable for the death of or injuries
unless the shipper or owner declares a greater value, is binding.
to passengers through the negligence or willful acts of the
(a) No. The owner of the bus cannot raise the defense because former's employees, although such employees may have acted
Art. 1750. A contract fixing the sum that may be recovered. by the the carrier's liability is based on breach of contract. beyond the scope of their authority or in violation of the orders of
owner or shipper for the loss, destruction, or deterioration of the (b) Yes. D can raise the defense because his liability is based on the common carriers.
goods is valid, if it is reasonable and just under the circumstances, a quasi-delict.
and has been fairly and freely agreed upon. This liability of the common carriers does not cease upon proof
2000 Bar, Q. XX(b): Despite a warning from the police that an that they exercised all the diligence of a good father of a family in
Art. 1751. The fact that the common carrier has no competitor attempt to hijack a PAL plane will be made in the following the selection and supervision of their employees.
along the line or route, or a part thereof, to which the contract week, the airline did not take extra precautions, such as frisking
refers shall be taken into consideration on the question of of passengers, for fear of being accused of violating human Art. 1760. The common carrier's responsibility prescribed in the
whether or not a stipulation limiting the common carrier's liability rights. Two days later, an armed hijacker did attempt to hijack a preceding Article cannot be eliminated or limited by stipulation,
is reasonable, just and in consonance with public policy. PAL flight to Cebu. Although he was subdued by the other by the posting of notices, by statements on the tickets or
passengers, he managed to fire a shot which hit and killed a otherwise.
Art. 1752. Even when there is an agreement limiting the liability of female passenger. The victim’s parents sued the airline for
the common carrier in the vigilance over the goods, the common breach of contract, and the airline raised the defense of force
majeure. Is the airline liable or not? Art. 1761. The passenger must observe the diligence of a good
carrier is disputably presumed to have been negligent in case of father of a family to avoid injury to himself.
their loss, destruction or deterioration.
Art. 1762. The contributory negligence of the passenger does not
bar recovery of damages for his death or injuries, if the proximate
cause thereof is the negligence of the common carrier, but the
amount of damages shall be equitably reduced.

Art. 1763. A common carrier is responsible for injuries suffered by


a passenger on account of the willful acts or negligence of other
passengers or of strangers, if the common carrier's employees
through the exercise of the diligence of a good father of a family
could have prevented or stopped the act or omission.

Subsection IV: Common Provisions

Art. 1764. Damages in cases comprised in this Section shall be


awarded in accordance with Title XVIII of this Book, concerning
Damages. Art. 2206 shall also apply to the death of a passenger
caused by the breach of contract by a common carrier.

Art. 1765. The Public Service Commission may, on its own motion
or on petition of any interested party, after due hearing, cancel
the certificate of public convenience granted to any common
carrier that repeatedly fails to comply with his or its duty to
observe extraordinary diligence as prescribed in this Section.

Art. 1766. In all matters not regulated by this Code, the rights and
obligations of common carriers shall be governed by the Code of
Commerce and by special laws.