TERESA REALTY, INC., PETITIONER VS. MAXIMA BLOUSE DE POTENCIANO, RESPONDENT.

Teresa Realty, Inc, a Philippine corporation, seeks reversal of the
amended decision of the Court of Appeals, dated August 2, 1960,
rendered In its case C. A.-G. R. No. 16768-R, whereby said Court,
modifying the judgment of the Court of First Instance, authorized the
ejectment of respondent Maxima Blouse de Potenciano, but reduced the
demandable rental of the premises from January 1, 1954 to not more than
8% of the assessed value of the occupied lot as of December 31, 1953.

The facts are uncontested, and the original decision of the Court of
Appeals, dated July 16, 1960, narrates them succinctly, as follows:

“By virtue of a lease contract (exhibit A), the
defendant took possession of a residential lot owned by the plaintiff
and constructed a house thereon. The lot with an area of 865 square
meters, is situated at 80 Buenos Aires, Sta. Mesa, Manila, and is
embraced in transfer certificate of title 30062 of the registry of
deeds of Manila, tinder the contract, the lessee paid an annual rental
of P76.60 plus P213 by way of real estate taxes. The lease was to
expire on December 31, 1953. Prior to December 31, 1953, the plaintiff
notified the defendant of the expiry date of the lease, and required
her to vacate the premises after that dote, or pay an increased rental
of P127,30 a month. The defendant; refused to pay the new rental; she
likewise refused to vacate the premises.”

On July 20,1954, the lessor filed a detainer suit in the Municipal
Court of Manila, which in due course rendered judgment, ordering
respondent Blouse, and all persons claiming” under her, to vacate the
lot occupied, and to pay P127.30 a month by way of reasonable rental
value from January 1, 1954 until possession was surrendered to the
plaintiff, plus costs. Defendant Blouse appealed to the Court of First
Instance and there invoked the benefits of Republic Act 1162. Thisdefense was rejected by the Court of First Instance on the ground that
the Republic Act was not applicable, and the decision of the Municipal
Court was affirmed. Defendant again appealed, this time to the Court of
Appeals; and by decision of July 10, 1960, the Third Division of said
Court, speaking through Mr. Justice Ruiz Castro, affirmed in toto
the Judgment of the Court of First Instance of Manila. But upon motion
for reconsideration, the same division, by resolution of August
29,1960, modified its original decision by reducing the recoverable
rental to not more than 8% of the assessed value, as provided by
section 5 of Republic Act 1599, amendatory of Republic Act No. 1162.

Upon denial of its motion to reconsider, the landlord, Teresa
Realty, Inc., resorted to this Court for review, claiming that the
amended decision of the Court of Appeals contradicted the rulings of
the Supreme Court in the cases of Tuason vs. Be Asis, Tuason vs.
Earnshaw, Tuason vs. Cacho, Tuason vs. Barcelon, and Tuason vs.
Limlingan, (107 Phil., 131; 60 Off. Gaz., [33] 4942), as well as the
doctrine in Teresa Realty, Inc. vs. State Construction & Supply
Co., 105 Phil., 353 since in all of these cases, the Supreme Court
authorized collection of a rental (by way of damages) amounting to 12
per cent of the assessed value. We granted certiorari.

In holding that the limit of 8 per cent of the assessed value, provided in Republic Act No. 1599,^[1]
applied to the parties in these proceedings, the Third Division of the
Court of Appeals, in its amended decision (also per Castro, Associate
Justice), reasoned out that our rulings above-referred to only applied
the provisions of Republic Act No. 1162, notwithstanding that rentals
authorized by said Act had already been reduced from 12 percent to 8
per cent of the assessed value of the land by Republic Act No. 1599,
section 5, reading as follows:

SEC. 5. From the approval of this Act, and even
before the commencement of the expropriation herein provided, ejectment
proceedings against any tenant or occupant of any landed estates or
haciendas or lands herein authorized to be expropriated, shall be
suspended for a period of two years, upon motion of the defendant, if
he pays his current rentals,and such suspension shall continue upon the
filing of exropriation proceedings until the final determination of the
latter: Provided, however, That if any tenant or occupant is in arrears
in the payment of rentals or any amounts due in favor of the owners of
said landed estates or haciendas or lands, the amount legally due shall
be liquidated and shall be payable in eighteen equal months monthly
installments from the time of liquidation, but this payment of rentals
in arrears shall not be a condition precedent to the suspension of
ejectment proceedings; Provided, further, That the rentals being
collected from the tenants of the landed estates or haciendas, or lands
herein authored to be expropriated, shall not be incased above the
amounts of rentals being charged as of December thirty-one, nineteen
hundred and fifty-three, except in cases where there are existing
rental contracts for a fixed period which expired on said date, in
which case the court shall fix a reasonable rental not exceeding eight
per centum of the assesed value on December thirty-one, nineteen
hundred and fifty-three, but in any case if after said date there has
been an increase in assessment, the rental may also be increased by the
corresponding amount of actual increase in the land tax: Provided,
further more, That no lot or portion thereof actually, occupied by a
tenant or occupant shall be sold by the landowner to any other person
than such tenant or occupant, unless the latter renounce in a public
instrument his right tinder this Act: Provided, finally, That if there
shall be tenants who have constructed bona fide improvements
on the lots leased by them, the rights of these tenants should be
recognized in the sale or in the lease of the lots, the limitation as
to area in section three notwithstanding.”

The Third Division aforesaid considered that this section of
Republic Act 1599 should have been applied in the cases decided by us,
and made the following remark:

“Neither the decision of the Supreme Court in the
Tuason cases nor its previous decision in Teresa Realty vs. State
Construction, supra, sheds any light on why the Supreme Court
did not apply the pertinent amendatory provisions of Republic Act 1599.
We well realize that the Supreme Court is the ultimate arbiter from
which all other judicial tribunals must take their bearings, it is
therefore with utmost deference that we venture the opinion that the
only logical explanation for tile Supreme Court’s failure to apply the
provisions of Sec. 6 of B. A. 1162, as amended by R. A. 1599, is that
it was an unintentional oversight.”

This rash conjecture dearly proves that the Court of Appeals, Third
Division, has neither inquired into the facts of record in the cases
referred to nor understood their ratio decidendi.

In Teresa Realty, Inc. vs. State Construction & Supply Co., supra
this Supreme Court, far from unintentionally overlooking Republic Act
No. 1599, as recklessly asserted by the Court of Appeals, actually
considered and refused to apply said Act, because the case arose and
was submitted for decision before the effectivity of that statute. This
is apparent from our resolution of April 22, 1959, issued in the same
case:

‘”In G. R. No. No. 10883 (Teresa Realty, Inc. w.
State Construction Co., et al.), appellants filed a motion for
reconsideration on the ground that this Court failed to consider in the
decision Republic Act No, 1599, which amended Republic Act 1162.

‘”It
appearing that this case was submitted for decision on May 28, 1956
while Republic Act No. 1699 was approved on June 18, 1956; that the
contract of lease entered into between appellant and appellee expired
on December 31, 1953, and appellee refused to renew the lease because
appellants were not agreeable to pay the new rental fixed by appellee
which this Court found to be reasonable; and that there is no evidence
showing that the property in question forms part of a landed estate
within the meaning of the law, the Court decided to deny the motion for
reconsideration.”‘

On the other hand, in Ike five Tuason cases, supra, this Supreme Court expressly ruled as follows:

“In conclusion, we hold. * * * Fourth, that Republic
Act No. 1162, as amended by Republic Act No. 1599, about the suspension
of proceedings for the ejectment of tenants, has no application to a case where expropriation proceedings by She Government have not been commenced.” (Dec., p. 9; italics supplied)

This doctrine is squarely in point in the case now before us, for
the Court of Appeals, in its original decision, expressly found that—

“The lot in litigation is not an estate within the
purview of Republic Act 1162, even though 16 was originally a part of
the Hacienda de Sta. Mesa de Diliman. At all events, as there is no
proof of pending expropriation proceedings over the land, or that one
is contemplated or planned, we hold that the court a quo, even if its sympathies were with the applicant, was without legal authority to suspend1 the ejectment proceedings * * * “;

and these findings were not altered nor modified in the amendatory decision of August 29, I960.

If neither Republic Act No. 1162 nor Republic Act No. 1599 is
applicable to the case at bar and the decision of the Court of
Appeals has so recognized by upholding the refusal of the inferior
courts to suspend the ejectanent proceedings). Then we can see no
reason for applying the second proviso of section 5 of said Acts, which
prescribe a limit of 8 per cent for the rentals demandable. The
mosicursory examination of section 5, heretofore quoted in full, will readily
show that the limitation under the second proviso (“Provided
further………………” ) applies only, by express wording of the
statute, to rentals collectible from landed estates to be expropriated
under the said Acts. Since the lot here involved is not being subjected
to expropriation under Republic Act No. 1162 or Act No. 1599, it stands
to reason that none of the remedies provided in their section 5 can
apply, whether it be suspension of ejectment suits, payment in
installments of rentals due, or rental ceilings.

The restriction on rentals prescribed in section 5 may not be deemed
an independent legislation, enforceable in every case even if the
remainder of the section should not be applicable; for in that event,
the Act would cover two different and unrelated subjects; authority to
expropriate estates, and a general regulation of collectible rentals
from estates whether subject to expropriation or not. Thus construed,
it would violate the constitutional inhibition that “no bill which may
be exacted into law shall embrace more than one subject which shall be
expressed in the title of the bin” (Section 21, par. 2, Act VI). The
title^[2] certainly gives no inkling that a general ceiling on rentals was being established.

While in Case Supra, Teresa Realty, Inc. vs. State Construction
& Supply Co., our decision made reference to the 12% rental ceiling
prescribed by section 3 of Republic Act No. 1102, it did somerely to
emphasize, by comparison, the reasonableness of the rental fixed by the
Court of First Instance, saying:

“This rental can hardly be considered excessive
considering that section 8 of Republic Act 1162 expressly provides that
in the event of lease the rentals that may be charged by the Government
shall not exceed 12 of the assessed valuation of the property leased.
This is an express recognition that a rental not exceeding 15% per
annum of the assessed value of the property is not excessive.”

This reference to section 3 of Republic Act 1162 can in no wise simply that this Court ever recognized or ruled that the 12% limitation on rentals in section 5
of the Act was applicable or compulsory whether or not the property is
subject to expropriation under Act 1162 or its amendments. Nor does the
fact that Act 1599 has lowered the rental ceilings for estates to be
expropriated from 12 to 8 per centum of the assessed value prove that
12% no longer is reasonable rental for properties not being
expropriated. Reasonableness depends on the surrounding circumstances
in each case and may not be exclusively predicated upon statutory
ceilings imposed in the exercise of the coercive power of the State.

In resume, the factual basis in the present case being practically
identical to this of the Tuason cases decided on February 29, 1960 we
reiterate that the remedies granted to tenants under section 5 of
Republic Act No. 1162 or its amendments, Republic Act No. 1599, whether
by way of suspension of ejectment actions, payment of rent by
installments, or rental ceilings, do not and can not apply where
expropriation proceeding have not been commenced, under pain of
unconstitutionality, as declared in our rulings heretofore cited. And
there being no proof that the value of the properties has gone down
between the enactment of Repute Act 1162 and that of Republic Act No.
1599, the rental of 12% of the assessed value authorized in our
previous rulings remains reasonable

Wherefore, the amended decision of the Ckmrtof Appeals (Third
Division), now appealed from, is reversed and set aside ; and its
original decision of July 16,1960, confirming that of the Court of
First Instance of Manila, is affirmed.

Cost against respondent-appellee Maxima Blouse.

Padilla, Bautista Angelo, Labrador, Concepcion, Barrera, Paredes, and Dizon, JJ., concur.

^[2] “An Act Providing For The
Expropriation of Landed Estates Or Haciendas Or Lands Which Formed Part
Thereof In The City Of Manila, Their Subdivision Into Small lots, And
The Sale Of Such Lots At Cost Or Their Lease On Reasonable Terms, And
For Other Purposes.”