GR No. 123456, *Santos v. Reyes* (2020)

FACTS: Juan Santos filed a complaint for ejectment against Maria Reyes before the Metropolitan Trial Court (MeTC), alleging that Reyes failed to pay rent for six months on a residential property. Reyes, in her Answer, admitted the lease but claimed she withheld payment because Santos refused to make necessary repairs to the leaking roof, which rendered a portion of the unit uninhabitable. The MeTC ruled in favor of Santos, ordering Reyes to vacate the premises and pay back rent. The Regional Trial Court (RTC) affirmed the decision on appeal. Reyes then filed a Petition for Review with the Court of Appeals (CA), which reversed the lower courts. The CA held that Reyes’s defense of “legal compensation” (set-off) between her unpaid rent and Santos’s unfulfilled repair obligations was valid, thereby extinguishing her rental debt. Santos now appeals to the Supreme Court via a Petition for Review on Certiorari.

ISSUE

Whether or not the Court of Appeals erred in ruling that the tenant’s (Reyes) obligation to pay rent was extinguished by legal compensation based on the landlord’s (Santos) alleged breach of his repair obligations.

RULING

Yes, the Court of Appeals erred. The defense of legal compensation is not available in an ejectment case based on failure to pay rent.

An ejectment action (unlawful detainer) is a summary proceeding designed to provide a swift and expeditious means to restore physical possession of a property. Its primary issue is the de facto physical possession by one whose right to possess has expired or been unlawfully withheld. The tenant’s obligation to pay rent and the landlord’s obligation to make repairs are not the kind of obligations that can be extinguished by legal compensation under Article 1279 of the Civil Code in the context of an ejectment suit. For legal compensation to apply, the debts must be liquidated and demandable. Here, the amount claimed by Reyes for damages due to the unrepaired roof is unliquidated and contested; it requires full trial on the merits for precise determination. Such a claim cannot be set off against the liquidated and demandable debt for unpaid rent in a summary ejectment proceeding. Reyes’s remedy is to file a separate action for damages against Santos for breach of his repair obligations, but she cannot withhold payment of rent as a countermeasure without risking ejectment. The MeTC and RTC decisions are reinstated.