G.R. No. 158526 , December 16, 2004
D.O. PLAZA MANAGEMENT CORP., petitioner, vs. CO-OWNERS HEIRS OF ANDRES ATEGA, respondents.

FACTS

Respondent Heirs of Andres Atega filed an unlawful detainer complaint against petitioner D.O. Plaza Management Corporation (DOPMC) before the MTCC of Butuan City. The parties had entered into a five-year lease contract from December 16, 1986, to December 15, 1991, over two parcels of land. The contract stipulated graduated monthly rentals and provided that improvements made by the lessee would accrue to the lessors upon termination. It also obligated the lessee to surrender possession free from occupants and damages. After the contract expired, the respondents, through communications, agreed to a reduced leased area but demanded an increased monthly rental of P32,217.50. Petitioner failed to accept this new term but remained in possession. Respondents then demanded payment of accrued rentals and to vacate, which petitioner refused.
Petitioner, in its answer, admitted the lease but denied proposing an extension. It contested the MTCC’s jurisdiction, arguing the land was within a 30-meter river bank protection zone belonging to the government. It also claimed the demanded rental was unconscionable and attached affidavits to prove the land’s smaller area and poor condition. The MTCC ruled for the respondents, ordering petitioner to vacate and pay the increased rental from December 1991. The RTC affirmed the MTCC decision. The Court of Appeals dismissed petitioner’s petition for review, prompting this appeal to the Supreme Court.

ISSUE

The primary issue is whether the Court of Appeals erred in affirming the lower courts’ decisions which upheld the respondents’ right to eject the petitioner and to demand the increased rental.

RULING

The Supreme Court dismissed the petition and affirmed the Court of Appeals’ decision. On jurisdiction, the Court held that the MTCC properly exercised jurisdiction over the unlawful detainer case. The sole issue for resolution in such a proceeding is physical or material possession, independent of any claim of ownership. Petitioner’s allegation that the property is within a river bank protection zone and belongs to the state involves a question of title, which is beyond the scope of an ejectment suit and does not divest the MTCC of its jurisdiction over the possessory action.
On the matter of the increased rental, the Court ruled that the respondents’ demand was valid and not unconscionable. Upon the expiration of the original lease contract, the petitioner became a lessee on a month-to-month basis under Article 1670 of the Civil Code. The lessors, therefore, had the right to increase the rental upon proper notice, and the lessee could either accept or reject the new rate. By choosing to remain in possession without consenting to the new terms, petitioner became liable for the reasonable rental value for its continued use. The burden of proving that a demanded rental is exorbitant rests on the lessee. Petitioner failed to present sufficient evidence to discharge this burden and demonstrate that the increased rate was unreasonable. The preponderance of evidence supported the reasonableness of the respondents’ demand.