G.R. No. 28230 , September 17, 1928
SANTIAGO SY JUCO and JOSE DEL R. JEUQUECO, plaintiffs-appellants, vs. DONATA MONTEMAYOR, CLODUALDO VITUG, AMBROSIA SALAO, JUAN and JOSEFA EVANGELISTA, defendants-appellants.

JOHNSON, J.:

FACTS

The spouses Donata Montemayor and Clodualdo Vitug (Montemayor and Vitug) owned a fishery in Pampanga. They leased it to Ambrosia Salao, Juan Salao, and Josefa Evangelista (Salao and Evangelista) for a term ending October 2, 1923. The lease contract (Exhibit A) stipulated, among others, that the lessors were responsible for repairs and for any damages resulting from a litigation with a third party, Simeon Blas, who was claiming a portion of the fishery.

On June 25, 1920, Salao and Evangelista entered into a contract (Exhibit B) with Santiago Sy Juco and Jose del R. Jeuqueco (Sy Juco and Jeuqueco) concerning the same fishery for a term ending October 1, 1923. Sy Juco and Jeuqueco paid the full rental of P17,700 in advance.

During their possession, Sy Juco and Jeuqueco spent on repairs. Montemayor and Vitug failed to make necessary repairs as stipulated, causing fish to escape. Furthermore, a portion of the fishery was adjudicated to Simeon Blas by court order, and the fish therein were lost to Sy Juco and Jeuqueco. The parties mutually agreed to rescind the lease and Sy Juco and Jeuqueco vacated the fishery on May 1, 1923, before the lease term ended.

Sy Juco and Jeuqueco sued all defendants (Montemayor, Vitug, Salao, and Evangelista) to recover: (1) expenses for repairs, (2) damages for fish lost due to lack of repairs, (3) damages for fish lost in the portion taken by Blas, and (4) the unaccrued portion of the rental paid to Salao and Evangelista. They also prayed for rescission of the contract.

The trial court ruled in favor of Sy Juco and Jeuqueco, holding Montemayor and Vitug liable for the repair costs and the two categories of fish losses, and holding Salao and Evangelista liable for the refund of the unaccrued rental. All parties appealed.

ISSUES:
1. Whether the contract between Salao and Evangelista and Sy Juco and Jeuqueco (Exhibit B) is a sublease or an assignment of lease.
2. Whether Montemayor and Vitug are liable for damages arising from their breach of the lease contract’s terms (repairs and warranty against eviction).
3. Whether Salao and Evangelista are liable to refund the unaccrued rental and/or are solidarily liable with Montemayor and Vitug for the other damages.
4. Whether Sy Juco and Jeuqueco are entitled to damages resulting from the rescission of the contract.

RULING

1. On the Nature of the Contract (Exhibit B): The Supreme Court ruled that the contract between Salao and Evangelista and Sy Juco and Jeuqueco was an assignment of lease, not a sublease. The assignors (Salao and Evangelista) completely transferred all their rights and obligations under the original lease to the assignees (Sy Juco and Jeuqueco), who thereby became the direct lessees of Montemayor and Vitug by substitution.

2. On the Liability of Montemayor and Vitug: The Court affirmed the trial court’s finding that Montemayor and Vitug were liable for breach of their contractual obligations as lessors under Exhibit A. They were ordered to pay:
* P8,550 as reimbursement for repairs made by Sy Juco and Jeuqueco.
* P12,000 as damages for fish that escaped due to their failure to make repairs.
* P4,000 as damages for the value of fish in the portion of the fishery taken by Simeon Blas.

3. On the Liability of Salao and Evangelista: The Court reversed the trial court’s decision holding Salao and Evangelista liable. As assignors who had fully performed their obligation by validly transferring the lease, they incurred no further liability to the assignees for subsequent damages caused by the original lessors (Montemayor and Vitug). They were not liable to refund the unaccrued rental (P7,833.90).

4. On Damages from Rescission: The Court modified the trial court’s judgment. It found that the rescission on May 1, 1923, was justified due to the fault and negligence of Montemayor and Vitug. Therefore, Sy Juco and Jeuqueco were entitled to damages for the lost use of the fishery for the unexpired term (5 months). The Court awarded them P10,000 as damages resulting from the rescission, to be paid by Montemayor and Vitug.

DISPOSITIVE PORTION:
The judgment of the lower court was modified. A new judgment was rendered:
* In favor of Sy Juco and Jeuqueco and against Montemayor and Vitug for the sums of P8,550, P12,000, P4,000, and P10,000.
* Absolving Ambrosia Salao, Juan Salao, and Josefa Evangelista from all liability under the complaint.
* No costs were awarded.