G.R. No. L-10394, December 13, 1958
CLAUDINA VDA. DE VILLARUEL, ET AL., plaintiffs-appellees, vs. MANILA MOTOR CO., INC. and ARTURO COLMENARES, defendants-appellants.

FACTS

On May 31, 1940, plaintiffs-appellees (the Villaruels) and defendant-appellant Manila Motor Co., Inc. entered into a five-year lease contract for certain buildings in Bacolod, with an option to renew for another five years. The lease commenced on October 31, 1940. During the Japanese occupation, from June 1, 1942, to March 29, 1945, the Japanese military forces ousted the lessee and occupied the premises. No rentals were paid during this period. After liberation, the U.S. Army occupied the buildings until October 31, 1945, and paid rentals directly to the owners at the contract rate. Thereafter, Manila Motor Co. exercised its option to renew the lease for five more years, agreeing with the lessors that the U.S. Army’s seven-month occupancy would not count towards the new term. The company then sublet the premises (except the manager’s residence) to co-defendant Arturo Colmenares.
The lessors, upon legal advice, demanded payment of rentals for the period of Japanese occupation. The lessee refused. The lessors then gave notice seeking rescission of the lease and payment of the P11,900 in arrears for that period, which was rejected. In July 1946, the lessee’s manager offered to pay the current monthly rental of P350, but the parties could not agree on the wording of the receipt (the lessors wanted it “without prejudice” to their other claims). No payment was made until December 4, 1946, when the company remitted P350, for which the lessors issued a receipt stating it was “without prejudice” to their demands.
The lessors filed an action on April 26, 1947, for rescission and recovery of unpaid rentals. During the pendency of the case, a fire destroyed the leased buildings. The lessors filed a supplemental complaint to include a third cause of action for recovery of the value of the burned buildings (P30,000). The trial court initially dismissed the first two causes of action based on the Debt Moratorium but reinstated them after the moratorium was declared invalid in Rutter vs. Esteban. The trial court rendered judgment in favor of the plaintiffs, ordering Manila Motor Co. to pay P11,900 for the Japanese occupation period, P38,395 for post-liberation rentals (from the filing of the complaint), and both defendants to pay jointly and severally P30,000 for the burned buildings. Defendants appealed.

ISSUE

The primary issues revolve around the lessee’s liability for rent during the period it was deprived of possession by a superior force (the Japanese military) and the consequences of the parties’ actions regarding the tender and refusal of current rentals.

RULING

The Supreme Court modified the trial court’s decision. The Court ruled that the lessee, Manila Motor Co., was exempt from paying rent for the period (June 1, 1942, to March 29, 1945) when it was completely deprived of the use and enjoyment of the leased premises by the Japanese military forces, a casus fortuitous or force majeure. The lessors’ insistence on collecting these rents was unwarranted. Furthermore, the lessors were not justified in refusing to accept the tender of current rentals (P350 per month) from July to November 1946 merely because the lessee would not recognize the lessors’ claim for back rents. By improperly refusing these tenders, the lessors incurred in delay (mora accipiendi). This delay made them responsible for the subsequent accidental loss (the fire) of the leased premises under Article 1169 of the old Civil Code. The lessee’s failure to consign the rejected rentals in court did not cure the lessors’ delay, but the lessee remained obligated to pay the amounts it had tendered.
Consequently, the Court held it was reversible error to sentence the appellants to pay P2,165 monthly as reasonable rental value from July 1946 and the P30,000 value of the destroyed buildings. The decision was modified to order appellant Manila Motor Company to pay the appellees only the rents for July to November 1946, at the contract rate of P350 per month, totaling P1,750. Costs were awarded against the appellees.