G.R. No. 93474 October 7, 1992
VIRGINIA OCAMPO JUAREZ, petitioner, vs. THE HON. COURT OF APPEALS and CETUS DEVELOPMENT, INC., respondents.

FACTS

The subject is a lot at 502 Quezon Boulevard, Manila, originally leased to Servillano Ocampo, who built a house thereon. Upon his death in 1956, his sister Angela Ocampo took over the lease and lived there with her children, including petitioner Virginia Ocampo Juarez. In 1976, Angela moved to Pasay City and subleased the house to Roberto Capuchino, reserving one room for her belongings. The lot was eventually sold to Susanna Realty, Inc., and then to private respondent Cetus Development Corporation in 1985. Cetus filed an ejectment complaint against Virginia Juarez, alleging she subleased the property without consent in violation of Batas Pambansa Blg. 877. The Municipal Court dismissed the case, ruling BP 877 did not apply retroactively to a sublease made prior to its effectivity. The Regional Trial Court affirmed, adding that the law applied only where the lessor constructed the building and that Angela Ocampo was the real party in interest. The Court of Appeals reversed, holding that the original lease, being without a fixed term and with monthly rentals, was terminable monthly. When renewed in July 1985, it became subject to BP 877, which took effect on June 12, 1985. The appellate court also found the property covered under the law’s definition of a residential unit and that Virginia Juarez was a proper party defendant as she was paying the rentals when the complaint was filed.

ISSUE

Whether BP 877 applies to the sublease contract, thereby justifying the ejectment of Virginia Juarez, and whether she is the proper party defendant.

RULING

The Supreme Court ruled for the respondents. The original lease contract, having no fixed period and with monthly rentals, was renewable from month to month under Article 1687 of the Civil Code. The sublease to Capuchino, also without a fixed period and with monthly rentals, was similarly terminable monthly. When the sublease was renewed in July 1985, it became subject to BP 877, which had already taken effect. The law prohibits subleasing without the written consent of the lessor. Even if the sublease had a fixed period extending beyond the law’s effectivity, BP 877 could retroactively affect existing contracts. The retroactive application does not violate the constitutional prohibition against impairment of contracts, as the contract involves public interest—specifically, housing—which is subject to the state’s police power. The Court noted the petitioner was charging Capuchino a rental of P400.00 monthly while paying the lessor only P69.70, exemplifying an unconscionable practice the law seeks to prevent. Regarding the proper party, Virginia Juarez, as the one paying rentals and in legal possession, was correctly sued. The non-joinder of Angela Ocampo was not fatal under the Rules of Court, and the Court ordered her inclusion if insisted upon. The petition was denied.