G.R. No. 82813 December 14, 1989
EMILIA S. BLAS, petitioner, vs. THE COURT OF APPEALS and ARTHUR YAO, respondents.

FACTS

Petitioner Emilia S. Blas was the lessee of the Premier Theater Building under a five-year contract (1980-1984) with owner Alfonso Bichara, which granted her the right to sublease. She orally sublet a portion to private respondent Arthur Yao for a monthly rental of P5,000.00. After the principal lease expired on December 31, 1984, Bichara filed an ejectment suit against Blas. During the pendency of this suit, Bichara demanded that Yao pay rentals directly to him starting January 1985, which Yao complied with. The Metropolitan Trial Court eventually decided in favor of Blas, extending her principal lease for another five years (1985-1989), a decision which became final.
Upon the finality of the judgment extending her lease, Blas demanded that Yao pay her the accrued sublease rentals. Yao refused, continuing to pay Bichara. Blas then filed an ejectment suit against Yao. The Metropolitan Trial Court ruled in favor of Blas, ordering Yao to vacate and pay compensation. The Regional Trial Court reversed this decision, a ruling affirmed by the Court of Appeals. The appellate court held the sublease was automatically renewed for five years alongside the principal lease and that Yao was not in default as he paid Bichara, who credited Blas.

ISSUE

The core issues are: (1) Whether the oral sublease contract between Blas and Yao was automatically renewed for five years upon the renewal of the principal lease; and (2) Whether Yao incurred default in the payment of sublease rentals by paying Bichara instead of Blas.

RULING

The Supreme Court reversed the Court of Appeals and reinstated the Metropolitan Trial Court’s decision. On the first issue, the Court held the sublease was not automatically renewed. The clause in the principal lease stating the sublease term “shall only be coterminous with the terms of this principal lease” merely set a maximum limit; it did not prohibit the lessee from creating a sublease for a shorter period or on different terms. The oral sublease between Blas and Yao, being indefinite, was deemed a month-to-month arrangement under Article 1687 of the Civil Code, terminable upon demand by either party. It did not acquire a fixed five-year term upon the renewal of the principal lease.
On the second issue, the Court ruled Yao was in default. Articles 1651 and 1652 of the Civil Code establish that the sublessee’s primary obligation to pay rent is to the sublessor (Blas), not the lessor (Bichara). The lessor’s right to collect from the sublessee is merely subsidiary and presupposes default by the lessee in the principal contract. Here, Blas was not in default to Bichara, as evidenced by the court decision extending her lease. Yao’s payment to Bichara, without Blas’s consent, did not extinguish his obligation to Blas. If Yao was uncertain due to the pending litigation between Blas and Bichara, his remedy was to consign the rentals in court. His failure to do so constituted a breach of the sublease contract, justifying ejectment.