G.R. No. 71566, December 15, 1989
FRANCISCO D. PALANCA, petitioner, vs. THE HONORABLE INTERMEDIATE APPELLATE COURT and REYNALDO INCOMIO, respondents.

FACTS

Petitioner Francisco Palanca leased a Quezon City apartment unit to respondent Reynaldo Incomio in 1965 under a verbal, month-to-month agreement. The rental was initially P160.00. By mutual agreement, it was increased to P500.00 starting November 1979. Palanca later demanded the execution of a written contract, but Incomio refused. Consequently, Palanca terminated the lease and sent a demand to vacate by December 15, 1981. Incomio refused to leave, prompting Palanca to file an ejectment case.
In his defense, Incomio claimed the rental increase to P500.00 was forced and violated Batas Pambansa Blg. 25 (BP 25), which regulated rental increases. He argued the law prohibited such an increase from the original P160.00. The Metropolitan Trial Court dismissed Palanca’s complaint, ruling the increase violated BP 25 and that a month-to-month lease was for an indefinite period, making ejectment unavailable under the law. The Regional Trial Court reversed, holding the increase was valid by mutual agreement and the lease was for a definite period terminable at month’s end. The Intermediate Appellate Court reinstated the MTC’s dismissal.

ISSUE

The core issues were: (1) whether the rental increase from P160.00 to P500.00 was valid under BP 25; and (2) whether a verbal, month-to-month lease under Article 1687 of the Civil Code is for a definite period, allowing its termination and judicial ejectment under BP 25.

RULING

The Supreme Court reversed the Appellate Court and reinstated the RTC decision, ruling in favor of the lessor, Palanca. On the first issue, the Court held the rental increase was valid. It cited the opinion of the Minister of Justice, which clarified that BP 25 (and its precursor, PD 20) only prohibited unilateral increases by the lessor. An increase by mutual agreement of the parties was permissible. Incomio’s consistent payment of the P500.00 rental from November 1979 until the ejectment suit in 1982 constituted voluntary acquiescence and proof of mutual consent, negating any claim of coercion.
On the second issue, the Court ruled that a verbal, month-to-month lease is a lease with a definite period. Applying Article 1687 of the Civil Code, the period is fixed at one month, renewable each month. Upon the lessor’s demand to vacate, the contract is deemed terminated at the end of that monthly period. This interpretation aligns with the amendment under BP 877, which made “expiration of the period of the lease contract” a ground for ejectment without distinguishing between written or verbal contracts. To hold otherwise would render the law illusory, as a lessor could never eject a tenant if the period were considered indefinite. Therefore, Palanca validly terminated the lease and was entitled to judicially eject Incomio.