G.R. No. L-68357 September 26, 1988
SAMAHAN NG MGA NANGUNGUPAHAN SA AZCARRAGA TEXTILE MARKET, INC., ET AL., petitioners-appellants, vs. COURT OF APPEALS and ANTONIO LIM, respondents-appellees.

FACTS

Respondent Antonio Lim became the new lessee of the entire building housing the Azcarraga Textile Market from the owner, Goodland Company, Inc., on February 10, 1978. The individual petitioners, who were stallholders, had prior lease agreements with Goodland that expired on December 31, 1977. Lim demanded that the stallholders execute new lease contracts with him at increased rental rates. The stallholders, acting through their association (Samahan), proposed a different rental scheme, which Lim rejected. As no new contracts were executed, Lim filed forty-four consolidated ejectment cases against the individual stallholders in the City Court of Manila.
The City Court initially ordered the stallholders to vacate and pay back rentals and attorney’s fees, but later deleted the order to vacate. The Court of First Instance set aside the city court’s decision upon a petition for certiorari. However, the Intermediate Appellate Court (now Court of Appeals) reversed the CFI and reinstated the city court’s decision, leading to this petition.

ISSUE

The core issues are: (1) whether the rentals demanded by Lim were reasonable, and (2) whether the Samahan (the association) was a real party-in-interest and an indispensable party to the ejectment suits.

RULING

The Supreme Court dismissed the petition and affirmed the appellate court’s decision with modification. On the first issue, the Court found the demanded rentals to be reasonable. The determination of reasonableness considers factors like the lessee’s ability to pay, the premises’ location and nature, and the lessor’s return on investment. Lim’s evidence showed his net monthly income from the market was less than ten percent of his gross rental income after deducting substantial operating expenses. The Court held that the increase, though significant compared to the old rates, was justified by increased operational costs and economic conditions, and was not unconscionable.
On the second issue, the Court ruled that the Samahan was not a real party-in-interest or an indispensable party in the ejectment cases. A real party-in-interest is one who stands to be benefited or injured by the judgment. The Samahan had no lease contract with Lim; it merely acted as an agent for the stallholders in paying rentals to the previous owner. It had no direct, material interest in the subject matter of the ejectment suits, which were disputes between Lim and the individual stallholders over their right to possess the stalls. The suits were correctly prosecuted against the individual tenants.
However, the Supreme Court modified the appellate court’s decision by deleting its affirmance of the city court’s order which had removed the directive for the stallholders to vacate. The Court clarified that the essence of an ejectment case is the restoration of possession to the prevailing lessor. Since no new contracts were executed, the stallholders had no right to remain. Therefore, the original city court decision ordering them to vacate was reinstated to be executed upon finality of this judgment.