G.R. No. 107057 June 2, 1994
TEODORO ARAOS, ALEJANDRO LANGCAUAN, EUGENIA PITOY, Spouses PERFECTO REYES and ROSARIO REYES, RUTH RAYCO, PROSPERO PERALTA, MYRNA MENDOZA, and Spouses REDENTOR COMINTAN and LUCY COMINTAN, petitioners, vs. HON. COURT OF APPEALS and JOVAN LAND, INC., respondents.

FACTS

Petitioners are lessees of a ten-door apartment building in Manila, which they have occupied for about 25 years. Their written contract of lease with the original owner, Vivien B. Bernardino, expired on January 31, 1988. After this date, petitioners continued to occupy their units peacefully, and the lessor continued to collect monthly rentals despite the absence of a written contract. On July 11, 1991, the apartment was sold to private respondent Jovan Land, Inc. On July 15, 1991, both Bernardino and the private respondent demanded that petitioners vacate the premises. When petitioners did not comply, private respondent filed ten separate unlawful detainer cases against them before the Metropolitan Trial Court (MeTC) of Manila, Branch 26. The MeTC rendered a joint judgment, ruling that the leases were on a month-to-month basis and, under Articles 1687 and 1670 of the Civil Code, the period had expired. It ordered petitioners to vacate and pay rental arrearages and increased reasonable compensation for use and occupancy, plus attorney’s fees. The MeTC rejected petitioners’ claim of protection under P.D. No. 1517 (Urban Land Reform), finding the property outside an Area of Priority Development Zone. Petitioners appealed to the Regional Trial Court (RTC) of Manila, Branch 38. The RTC reversed the MeTC, holding the cases were covered by B.P. Blg. 25, as amended by B.P. Blg. 877 (Rent Control Law), which suspended the provision of Article 1673(1) of the Civil Code, making expiration of a month-to-month lease not a ground for judicial ejectment. It also deemed the rental increase iniquitous, suggesting it should not exceed 20% per year under R.A. No. 6828. Private respondent filed a petition for review with the Court of Appeals, which reversed the RTC and reinstated the MeTC’s judgment, ruling that an oral month-to-month lease is a lease with a definite period expiring upon the lessor’s demand to vacate, justifying ejectment, and citing jurisprudence on the ground of “expiration of the period of the lease contract” under B.P. Blg. 877.

ISSUE

The core issue is the propriety and validity of the increase in the monthly rates of rentals as decreed by the MeTC and sustained by the Court of Appeals.

RULING

The Supreme Court partly granted the petition. It modified the decisions of the Court of Appeals and the MeTC by setting aside the increase in rentals fixed therein. The Court held that in unlawful detainer cases, the only damages recoverable are the fair rental value or reasonable compensation for the use and occupation of the property. While rent control laws allow unilateral increases within prescribed limits, such a demand must be made upon the lessee. The courts have no authority to fix an increase where no valid demand for increased rent has been made by the lessor. In this case, the demand letters sent to petitioners only mentioned the purchase of the units and demanded vacation; the record showed no prior disputes on rentals or a demand for increased rentals by the private respondent or its predecessor. Therefore, the MeTC had no authority to decree the increase in rental rates. The Court directed petitioners to pay accumulated rentals from July 15, 1991, until they vacate, at the same monthly rates they were paying before July 15, 1991, with interest at the legal rate.