G.R. No. L-2625
January 16, 1908
JOSE ITURRALDE, plaintiff-appellant, vs. RAMON MAGCAUAS, defendant-appellee.

FACTS:

Jose Iturralde (plaintiff-appellant) filed a complaint on March 19, 1904, seeking to eject Ramon Magcauas (defendant-appellee) from a building lot due to non-payment of rentals for 1902 and 1903. Magcauas had been leasing the lot for over sixteen years, paying an annual rent of P2.50.

In 1902, Iturralde’s administrator proposed a new contract, increasing the rent to P12.50 per annum starting in 1903. Magcauas refused to agree to this new lease. Magcauas attempted to pay the P2.50 rent for 1902, but Iturralde refused to accept it unless Magcauas signed the new contract. Consequently, the rents for 1902 and 1903 remained unpaid when the complaint was filed.

The lower court decided in favor of Magcauas, dismissing the ejectment complaint. It ordered Magcauas to pay P2.50 for 1902 and reserved Iturralde’s right to terminate the contract upon giving the prior notice required by law. The lower court reasoned that there was no agreement on the increased rent, and Magcauas was willing to pay the original rent, thus no failure to comply with the original contract. It also noted the absence of proof of one year’s prior notice for termination of the indefinite lease.

Iturralde appealed the decision.

ISSUE:

1. Did the landlord’s request for a new lease contract with an increased rent, which the tenant refused, constitute a valid termination of the original indefinite lease?
2. If so, was the tenant’s failure to pay the increased rent demanded by the landlord (or any rent beyond the old rate) a valid ground for ejectment?

RULING:

Yes, the Supreme Court reversed the lower court’s decision.

1. The Court held that a request by the owner for a new lease contract, especially one that alters the conditions like increasing the rent, made to the person occupying his property, constitutes a “real statement of his intent to put an end to the previous lease executed for an indefinite period.” This has the legal character of an “ejectment” or notice to terminate. The Court found that this request was made in 1902, providing the necessary one-year prior notice (or 40 days if considered an urban lot, which the Court suggested it was due to the presence of a house). Therefore, the original contract, fixing the rent at P2.50 per annum, was effectively terminated by 1903.

2. Since the original contract was terminated, Magcauas had no right to insist on paying the old rent of P2.50 for 1903 and subsequent years. By continuing to occupy the land without agreeing to the new contract, Magcauas was obligated to pay a just and reasonable rent for his occupation and enjoyment of the property. As Magcauas did not allege in his defense that the P12.50 per annum demanded by Iturralde was excessive, and in the absence of proof to the contrary, the Court deemed P12.50 per annum to be a just and reasonable rent for 1903 onwards. Magcauas’s failure to pay this just and reasonable rent for 1903 (and subsequent years) constituted a valid ground for ejectment.

Accordingly, the Supreme Court sentenced Ramon Magcauas to place Jose Iturralde in possession of the land. Magcauas was also ordered to pay P2.50 as rent for 1902 (the last year under the old contract) and P12.50 for each succeeding year beginning with 1903 until the sentence is executed. The complaint was ordered to be amended to include rentals for years following 1903. Costs were assessed against Magcauas.