G.R. No. L‑2541
December 26 1906

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FACTS
1. Ignacio Icaza et al. (plaintiffs) leased a hotel building in Manila to Ricardo Flores and Jose Flores (defendants) on 9 April 1900 for five years, with a conditional sale of the building’s furniture.
2. A security deposit of ₱1,800 was given; the lease stipulated that, upon full performance, title to the furniture would pass to the lessee.
3. On 3 May 1900 the parties amended the agreement, transferring absolute title to the furniture to the lessees in exchange for a further deposit of ₱3,905 as additional security.
4. The Floreses subsequently assigned the lease and the furniture to the “Manila Hotel Company” (MHC) and later, on 7 June 1901, transferred the lease to Messrs. Brockman, Oppenheim, Nelle, Hermann & Jehrling (operating as MHC).
5. In August 1903 the Manila Board of Health ordered repairs to the hotel’s plumbing and related facilities, giving a 45‑day compliance period, later extended repeatedly to 31 January 1904.
6. MHC began the required work on 10 January 1904 and completed it about 25 January 1904.
7. On 12 January 1904 the plaintiffs’ agent, Miguel Velasco, was convicted in municipal court for failing to comply with the health order and fined ₱100 (gold).
8. The plaintiffs filed suit in the Justice of the Peace to (a) recover possession of the premises, (b) forfeit the ₱5,705 security deposit, and (c) claim damages, asserting breach of Paragraph 6 of the lease (which imposed various maintenance and tax obligations on the lessee).
9. The lower courts found a breach of the lease but held that the lease did not require compliance with the health‑order obligations within any specific time, and consequently favored the defendants.

ISSUE
Whether the lessees (the Floreses and their sub‑lessee, Manila Hotel Company) breached Paragraph 6 of the lease by failing to timely comply with the Board of Health’s repair order, thereby forfeiting their right to the ₱3,905 deposit (value of the furniture) and subjecting them to liability for damages and the plaintiffs’ claim for possession.

RULING
The Supreme Court reversed the judgment of the Court of First Instance:

1. The lease expressly imposed upon the lessee the obligations listed in Paragraph 6, including the duty to make necessary repairs and to satisfy health‑authority requirements within the time fixed by such authority.
2. The evidence showed that the lessee (through MHC) did not commence the mandated repairs within the original period, and only began work after the conviction of the plaintiffs’ agent; the extensions granted were not a waiver of the contractual deadline.
3. Consequently, a clear breach of the lease occurred, triggering the forfeiture clause and entitling the lessors to retain the full ₱3,905 security deposit (or, at minimum, two‑thirds thereof, per Article 1154 of the Civil Code).
4. The lower court’s finding that the lease imposed no timely compliance obligation was erroneous and contrary to the plain terms of the contract.
5. Accordingly, the plaintiffs are awarded the forfeited amount and the relief sought in their complaint; the defendants’ claim to the furniture’s value is denied.

Opinion of J. Johnson, concurring J. Mapa.