G.R. No. L-5944 November 26, 1954
THE CITY OF NAGA, petitioner, vs. THE COURT OF APPEALS and MARTIN SALES, respondents.

FACTS

The respondent, Martin Sales, was the successful bidder for a stall (Stall 1-B) in the market pavilion of the City of Naga, granting him the right to possess and occupy it beginning January 25, 1949, for a monthly rental of P80. He paid rentals up to May 1949 but thereafter refused to pay from June 1949 to March 1950. His refusal was due to the City’s failure to clear the sidewalk and alley surrounding his stall of vendors who had been driven away from Zamora Street, despite his demands to the city treasurer, mayor, and council. He claimed this failure caused him damages amounting to P8,185.50 in unrealized profits from his grocery and dry goods business. The vendors were cleared on March 28, 1950, after which Sales resumed paying rentals. The City filed a detainer complaint. The Court of First Instance dismissed the complaint, allowed Sales to remain in possession, ordered him to pay P800 in back rentals, but dismissed his counterclaim for damages. The Court of Appeals affirmed the dismissal of the detainer complaint and the payment of back rentals but reversed the dismissal of the counterclaim, awarding Sales P8,185.50 as damages. The City of Naga did not appeal the dismissal of its detainer complaint but sought certiorari to review the award of damages.

ISSUE

Whether the City of Naga, as lessor, breached its obligation under the lease contract by failing to clear the sidewalk and alley surrounding the lessee’s stall of vendors, thereby entitling the lessee, Martin Sales, to damages for unrealized profits.

RULING

No. The Supreme Court reversed the Court of Appeals’ award of damages to Martin Sales. The contract of lease, governed by the Civil Code of 1889, created a lessor-lessee relationship. Under Article 1554, the lessor’s duties are: (1) to deliver the thing leased; (2) to make necessary repairs during the lease; and (3) to maintain the lessee in peaceful enjoyment of the lease. The City fulfilled these obligations: it delivered the stall, no repairs were needed as it was newly constructed, and it maintained Sales in peaceful enjoyment as there was no juridical disturbance (perturbacion de derecho) of his possession. The presence of competing vendors on the sidewalk and alley constituted at most a mere trespass (perturbacion de mero hecho), which is not included in the lessor’s warranty of peaceful enjoyment. The lease contract does not guarantee the lessee’s business profits. Even if the city treasurer issued permits to vendors, such acts, if beyond authority or in violation of ordinances, cannot bind the City. Since the City committed no breach of the lease contract, Sales’ counterclaim for damages lacked legal foundation.