G.R. No. L-5331 May 13, 1953
NG YOUNG, petitioner, vs. ANA VILLA, ET AL., respondents.

FACTS

The respondents, Ana Villa, Lorenzo M. Villanueva, Antonio Villa, and Oscar Villa, were the registered owners of four parcels of land. They leased the property to Benito Cosiquien, who constructed a building on it. Cosiquien then leased the entire second floor of this building to petitioner Ng Young for three years at a monthly rental of P1,200. On February 8, 1949, Cosiquien sold the building to the Villas and assigned to them the existing lease contracts, including the right to collect rentals from Ng Young. The Villas notified Ng Young of this conveyance and demanded payment of the February 1949 rental. Ng Young, through his attorney, claimed that Cosiquien had verbally agreed to reduce the rent to P700 per month due to business losses and offered to surrender the premises at the end of February, paying only P700 for that month. The Villas, through their lawyer, replied that they would accept the P700 and the surrender of the premises but explicitly reserved their right to collect the balance of P500 for February and to insist on full payment of rentals for the entire unexpired lease term up to September 1950, unless they could re-lease the premises to a third party. Ng Young filed a case to compel acceptance of the P700 rent and deposited the money in court, then vacated the premises and surrendered the keys. The Villas filed a separate case to recover the unpaid rental for February and future rentals. They later advertised and leased the premises to the International Food Supply Co. for P400 a month. The trial court held Ng Young liable only for the February 1949 rent, declaring the lease voluntarily rescinded as of March 1949. The Court of Appeals modified this decision, holding Ng Young liable for damages for the unexpired lease period.

ISSUE

Whether the conduct of the Villas in accepting the surrendered keys and subsequently re-leasing the premises to another tenant constituted a voluntary rescission of the lease contract, thereby barring them from collecting future rents as damages from Ng Young.

RULING

No. The Supreme Court affirmed the modified decision of the Court of Appeals, holding that Ng Young was liable for damages. The Court ruled that a contract of lease has the force of law between the parties and cannot be unilaterally rescinded. Ng Young’s offer to terminate the lease was a mere proposal, which the Villas did not accept; their letter expressly reserved all rights under the original contract. The act of the Villas in re-leasing the premises after Ng Young’s unlawful abandonment was justified as an obligation to minimize damages and did not constitute an acceptance of Ng Young’s proposal to rescind. The Supreme Court modified the damages awarded by the Court of Appeals from P16,900 to P16,400 and affirmed the decision with costs against Ng Young.