VICTORIA N. RACELIS, IN HER CAPACITY AS ADMINISTRATOR vs. SPOUSES GERMIL JAVIER AND REBECCA JAVIER G.R. No. 189609 January 29, 2018

Before his death, the late Pedro Nacu, Sr. appointed his daughter, Racelis, to administer his properties, among which was a residential house and lot located in Marikina City. In August 2001, the Spouses Javier offered to purchase the Marikina property. Since they could not afford to pay the price of P3,500,000.00, they offered instead to lease the property while they raise enough money.

On July 2002, the Spouses Javier reassured Racelis of their commitment and even promised to pay P100,000.00 to buy them more time within which to pay the purchase price. However, the Spouses tendered by the end of 2003, a total of P78,000.00 only.

Racelis then wrote to inform them that her family had decided to terminate the lease agreement and to offer the property to other interested buyers. In the same letter, Racelis demanded that they vacate the property by May 30, 2004.

Unfortunately, the parties failed to reach a settlement. Spouses Javier insisted that the sum of P78,000.00 was advanced rent and proposed that this amount be applied to their outstanding liability until they vacate the premises. They refused to give up possession of the property and even refused to pay rent for the succeeding months. Racelis caused the disconnection of the electrical service over the property. She then filed a complaint for ejectment against the Spouses Javier before the Metropolitan Trial Court (MeTC).

During trial, the Spouses Javier vacated the property and moved to their new residence at Greenheights Subdivision. The MeTC dismissed the complaint. It ruled that the Spouses Javier were entitled to suspend the payment of rent under Article 1658 of the Civil Code due to Racelis' act of disconnecting electric service over the property. The MeTC declared that the Spouses Javier's obligation had been extinguished. Their advanced rent and deposit were sufficient to cover their unpaid rent.

On appeal, the Regional Trial Court (RTC) rendered a Decision reversing the MeTC’s decision. The RTC held that the Spouses Javier were not justified in suspending rental payments.  The Spouses Javier appealed to the Court of Appeals (CA). The CA granted the petition of Spouses Javier and reversed and set aside the RTC decision.

Q1: Can respondents Spouses Germil and Rebecca Javier invoke their right to suspend the payment of rent under Article 1658 of the Civil Code?

No, respondents Spouses Germil and Rebecca Javier cannot invoke their right to suspend the payment of rent under Article 1658 of the Civil Code.

Article 1658 of the Civil Code allows a lessee to postpone the payment of rent if the lessor fails to either (1) "make the necessary repairs" on the property or (2) "maintain the lessee in peaceful and adequate enjoyment of the property leased."

In this case, the lease had already expired when petitioner requested for the temporary disconnection of electrical service, hence, the rule in Article 1658 will not apply. Petitioner demanded respondents to vacate the premises. Instead of surrendering the premises to petitioner, respondents unlawfully withheld possession of the property. At that point, petitioner was no longer obligated to maintain respondents in the "peaceful and adequate enjoyment of the lease for the entire duration of the contract." Therefore, respondents cannot use the disconnection of electrical service as justification to suspend the payment of rent. Lessees who exercise their right under Article 1658 of the Civil Code are not freed from the obligations imposed by law or contract. Respondents are liable for a reasonable amount of rent for the use and continued occupation of the property upon the expiration of the lease. To hold otherwise would unjustly enrich respondents at petitioner's expense.

 

Q2: Can the initial payment of P78,000.00 be used to offset Spouses Germil and Rebecca Javier's accrued rent.

 

No, the initial payment of P78,000 cannot be used to offset Spouses Germil and Rebecca Javier’s accrued rent.

In a contract of sale, the non-payment of the purchase price is a resolutory condition that entitles the seller to rescind the sale. In a contract to sell, the payment of the purchase price is a positive suspensive condition that gives rise to the prospective seller's obligation to convey title.

 

Based on the evidence on record, petitioner and respondents executed a contract to sell, not a contract of sale. Since respondents failed to deliver the purchase price at the end of 2003, the contract to sell was deemed cancelled. The contract's cancellation entitles petitioner to retain the earnest money given by respondents. Earnest money, under Article 1482 of the Civil Code, is ordinarily given in a perfected contract of sale. However, earnest money may also be given in a contract to sell. In a contract to sell, earnest money is a show of commitment on the part of the party who intimates his or her willingness to go through with the sale after a specified period or upon compliance with the conditions stated in the contract to sell. There is no unjust enrichment on the part of the seller should the initial payment be deemed forfeited. After all, the owner could have found other offers or a better deal. The earnest money given by respondents is the cost of holding this search in abeyance.