G.R. No. 86956 October 1, 1990
SHOEMART, INC., petitioner, vs. THE HONORABLE COURT OF APPEALS and ANSON EMPORIUM CORPORATION, respondents.

FACTS

On August 1, 1971, Shoemart, Inc. leased a portion of the Makati Arcade to Anson Emporium Corporation for two years at a monthly rental of P18,842.00. The contract stipulated that any holding over after the term would be on a month-to-month basis. Anson remained in possession after the lease expired, paying an increased rental of P34,622.00. On August 1, 1977, Shoemart terminated the month-to-month lease and demanded that Anson vacate by August 31, 1977. Anson refused, prompting Shoemart to file an ejectment suit. During the proceedings, Shoemart filed a supplemental complaint alleging a further rental increase to P45,142.00 effective January 1, 1979, which Anson also refused to pay.
The Metropolitan Trial Court dismissed the complaint. On appeal, the Regional Trial Court reversed, ordering Anson to vacate and pay reasonable compensation for use and occupation at specified rates, including subsequent increases up to P99,120.00 per month. The RTC also awarded attorney’s fees and reimbursement for electricity costs. The Court of Appeals modified this decision by eliminating the awards for electricity costs and the 1% monthly interest on unpaid rentals, while affirming the ejectment and the reasonableness of the rental increases. Shoemart elevated the case to the Supreme Court.

ISSUE

The primary issues were: (1) whether the rental increases demanded by Shoemart were reasonable; (2) whether the award of 1% interest on unpaid rentals was proper; and (3) whether the reimbursement for electricity costs could be awarded in the ejectment suit.

RULING

The Supreme Court reversed the Court of Appeals and reinstated the RTC decision with modification regarding the interest and electricity costs. On the reasonableness of rentals, the Court held that the burden of proving that a demanded rental is unconscionable rests on the lessee. Anson failed to present any evidence to controvert Shoemart’s submission of the fair rental value, which was consistent with rates paid by other tenants in the same building. Absent proof of exorbitance, the courts will not interfere, and the increases were deemed reasonable.
Regarding the 1% interest, the Court affirmed its deletion. Article 1956 of the Civil Code requires that interest must be expressly stipulated in writing. The original lease contract, which contained such a stipulation, had already terminated. The subsequent month-to-month arrangement was not governed by a written agreement providing for interest; therefore, its imposition was invalid.
Concerning the electricity costs, the Court agreed with the Court of Appeals that such reimbursement could not be awarded in the ejectment suit. Citing precedent, the Court ruled that the only damages recoverable in an ejectment case are the fair rental value or reasonable compensation for the use and occupation of the property. Other damages, like utility reimbursements, must be pursued in a separate ordinary action. Thus, the award was excluded without prejudice to Shoemart filing a proper collection case.